A month has gone by since the last earnings report for Bandwidth (BAND Quick QuoteBAND - Free Report) . Shares have added about 1.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Bandwidth due for a pullback? 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's Q1 Earnings Beat on Higher Revenues

Bandwidth reported solid first-quarter 2023 results, beating both the top-line and bottom-line estimates and well exceeding its guided range. The strong performance was backed by enterprises increasingly relying on Bandwidth’s platform for communications in the cloud. In order to drive growth, the company plans to focus on winning large enterprises and becoming the best global CPaaS platform for scaling digital engagement.

Quarter Details

On a GAAP basis, net income during the quarter was $3.6 million or 14 cents per share against a loss of $6.8 million or a loss of 27 cents per share in the prior-year quarter. Non-GAAP net income during the reported quarter was $1.2 million or 5 cents per share compared with $2.5 million or 9 cents per share in the prior-year quarter. Non-GAAP earnings beat the Zacks Consensus Estimate by 3 cents.

Quarterly revenues improved to $137.8 million from $131.4 million in the prior-year quarter and exceeded the consensus estimate of $133 million. The growth was backed by high demand for digital engagement and strong contributions from messaging services across a variety of use cases, including health care, retail and e-commerce shopping, fintech and civic engagement.

Operating Details

Non-GAAP gross margin during the quarter was 54%, reflecting growth of 1 percentage point, primarily due to efficient pricing and product mix, global coverage, economies of scale and diligent execution of operational plans within the cloud operations and service groups. Adjusted EBITDA was $5.1 million – well within the guidance but down from $8.4 million in the prior-year period.

Cash Flow & Liquidity

In the first quarter of 2023, net cash utilized for operating activities was $6.4 million compared with $6.7 million in the prior year. Cash and cash equivalents as of Mar 31, 2023, were $85.3 million, with convertible senior notes of $417.1 million.

Guidance

For 2023, Bandwidth reiterated its earlier guidance and expects revenues in the band of $576 million to $584 million. Adjusted EBITDA is expected in the range of $43 million to $47 million.

For the second quarter, revenues are expected to be within 140 million to $142 million. Adjusted EBITDA is expected in the band of $4 million to $6 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -83.33% due to these changes.

VGM Scores

Currently, Bandwidth has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Bandwidth has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.