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Why Is Bandwidth (BAND) Down 11.1% 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 11.1% 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 catalysts.

Bandwidth Tops Q4 Earnings Estimates on Solid Revenues

Bandwidth reported solid fourth-quarter 2023 results, beating 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 (Communications Platform as a Service) platform for scaling digital engagement.

Quarter Details

On a GAAP basis, net loss during the quarter was $10.9 million or a loss of 42 cents per share compared with a loss of $4.9 million or a loss of 16 cents per share in the prior-year quarter. The wider loss, despite top-line growth, was primarily attributable to higher cost of revenues.

Excluding non-recurring items, non-GAAP net income during the reported quarter was $11.1 million or 38 cents per share compared with $5.8 million or 19 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 14 cents. For 2023, GAAP net loss was $16.3 million or a loss of 64 cents per share compared with a loss of $14.9 million or a loss of 48 cents per share in 2022. Non-GAAP net income for 2023 was $24 million or 83 cents per share compared with $16.7 million or 54 cents per share in 2022.

Quarterly revenues improved to $165.4 million from $157 million in the prior-year quarter and exceeded the consensus estimate of $154 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. For 2023, revenues improved to $601.1 million from $573.2 million in 2022.

Operating Details

Non-GAAP gross margin during the quarter was 55% down from 56% a year ago, primarily due to higher cost of revenues. However, the company made solid progress toward its goal of improving profits and achieved record profitability of 39% for the quarter. Adjusted EBITDA was $18.8 million, well above the guidance and up from $8.3 million in the prior-year period.

Cash Flow & Liquidity

In 2023, net cash from operating activities was $39 million compared with an operating cash flow of $34.9 million in the prior year. Cash and cash equivalents as of Dec 31, 2023, were $132 million, with convertible senior notes of $418.5 million compared with respective tallies of $113.6 million and $480.5 million a year ago.

Guidance

For 2024, Bandwidth expects revenues in the band of $695 million to $705 million, with adjusted EBITDA in the range of $70 million to $74 million.

For the first quarter, revenues are expected to be within $164 million to $166 million. Adjusted EBITDA is anticipated in the band of $11 million to $13 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -189.29% due to these changes.

VGM Scores

At this time, Bandwidth has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 C. 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.


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