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Why Is Bandwidth (BAND) Down 28.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Bandwidth (BAND - Free Report) . Shares have lost about 28.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Bandwidth due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Bandwidth Tops Q4 Earnings Estimates on Revenue Growth

Bandwidth reported healthy fourth-quarter 2020 results, with the top and the bottom lines surpassing the Zacks Consensus Estimate. Higher Communications Platform-as-a-Service (CPaaS) revenues on the back of dynamic fundamentals drove the financial performance.

Bottom Line

On a GAAP basis, net loss in the December quarter was $19.9 million or a loss of 81 cents per share compared with net loss of $1.9 million or a loss of 8 cents per share in the prior-year quarter. The year-over-year deterioration despite top-line growth was primarily caused by higher operating expenses.

On an adjusted basis, quarterly net income was $3.5 million or 13 cents per share against net loss of $0.5 million or a loss of 2 cents per share in the year-ago quarter. The bottom line beat the consensus estimate by 9 cents.

For 2020, net loss was $44 million or a loss of $1.83 per share against net income of $2.5 million or 10 cents per share in 2019. On an adjusted basis, net income for 2020 was $14.2 million or 55 cents per share against net loss of $5.3 million or a loss of 23 cents per share in 2019.

Revenues

Quarterly revenues came in at $113 million compared with $62 million in the year-ago quarter. The 82.3% year-over-year increase was primarily driven by higher CPaaS revenues. The top line was further augmented by increased messaging due to the Presidential elections and higher work-from-home trend owing to the virus outbreak. The top line surpassed the consensus estimate of $97 million. Total revenues in 2020 were $343.1 million, up from $232.6 million in 2019.

Quarterly Segment Results

CPaaS revenues surged 83.7% to $98.1 million from $53.4 million in the year-ago quarter. Accounting for 86.8% of total revenues, the improvement was primarily backed by higher demand for work-from-home connectivity solutions amid coronavirus-induced lockdowns. Elevated volumes of political messaging traffic was a contributing factor as well. With a resilient business model, the segment witnessed 109 CPaaS customer additions and 700 new Voxbone customer accounts during the reported quarter. Markedly, the dollar-based net retention rate was 133% compared with 113% in the prior-year quarter.

Adjusted CPaaS gross profit jumped to $50 million from $26.3 million in the year-ago quarter, with respective margins of 51% and 49%. Notably, Bandwidth ended the quarter with 2,848 active CPaaS customers.

Contributing 13.2% to total revenues, Other revenues increased 73.3% to $14.9 million from $8.6 million in the year-ago quarter.

Other Details

Total operating expenses were $63.9 million compared with $32.5 million in the prior-year quarter, primarily due to higher research and development, and general & administrative expenses.

Operating loss came in at $12.2 million compared with an operating loss of $3.5 million in the year-ago quarter. Adjusted gross profit in the quarter improved to $55.8 million from $31.1 million with respective margins of 49% and 50%. Adjusted EBITDA totaled $8.3 million compared with $1.2 million in the year-ago quarter.

Cash Flow & Liquidity

In 2020, Bandwidth generated $4.5 million of net cash from operating activities against net cash utilization of $1.3 million in 2019. As of Dec 31, 2020, the company had $72.2 million in cash and equivalents with total current liabilities of $92.2 million compared with respective tallies of $184.4 million and $45.7 million in the prior-year period.

Q1 and 2021 Guidance

Bandwidth provided the outlook for first quarter and 2021. For the first quarter, revenues are expected in the range of $108-$109 million. Adjusted earnings are anticipated to be 0-2 cents per share. CPaaS revenues are expected in the band of $96.6-$97.6 million.

For 2021, revenues are anticipated in the range of $460.4-$464.4 million. Adjusted earnings are estimated in the range of 2-12 cents. CPaaS revenues are projected in the band of $413.3-$417.3 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 12.73% due to these changes.

VGM Scores

Currently, Bandwidth has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Bandwidth has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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