Bandwidth Inc. Q3 FY2024 earnings call

• Hosted Reverb24, a successful user conference, announcing innovations like a nomadic emergency services solution, number reputation management, and a centralized message registration center. • Unveiled enhancements to the next generation Bandwidth universal platform, including faster onboarding, automated workflow management, etc. • Maestro platform has the largest ecosystem of bring your own carrier integrations. • AIBridge product enables integration of conversational AI providers, with partnerships announced at Reverb. • Launched number reputation management solution to tackle spam and fraudulent calls. • Enhanced multichannel messaging with being a directly connected aggregator and progress on RCS/RBM. • Centralized Bandwidth registration center simplifies messaging compliance for customers.

Total revenue for Q3 2024 was $194 million, a 28% increase. Cloud communications revenue was $139 million, up 15% year-over-year. Direct enterprise customer category grew 30% year-over-year. Programmable services category grew 55% year-over-year. Global communications plans revenue grew 5% year-over-year. Cloud communications revenue is broken down into direct enterprise, programmable services, and global communications plans customers, with each showing respective growth rates.

• Raised full-year revenue outlook to $742 million midpoint, a $27 million increase from previous guidance. • Adjusted EBITDA outlook raised to $79 million midpoint. • Political campaign messaging is estimated to contribute $25 million to cloud communications revenue, less than 5% of cloud communications revenue. • Expect to achieve greater than $50 million free cash flow in 2024.

Q: On the RCS side, how does it impact gross margins moving forward?

A: John Bell stated it's early days for RCS and RBM, with uncertainty about how different channels will balance out over time.

Q: What caused voice to be higher than expected?

A: David Morken said broad usage in voice across enterprise verticals and categories, with contact center being a focus both then and going forward.

Q: Which product announcements will move the needle soonest?

A: David Morken said removing friction from porting and single universal user experience across expanding country footprint are actionable and relevant.

Q: Response to investors skeptical about political messaging being a one-time benefit?

A: Daryl Raiford noted commercial revenue growth twice the nearest competitor, growth across market engagements, and intention to continue profit growth regardless of political campaign tailwind.

Q: On messaging growth excluding political, key drivers?

A: David Morken mentioned deliverability and insights from the universal platform API as key drivers, and Daryl Raiford added commercial messaging ex surcharges/ex political grew 18% in Q3 off 18% in Q2.

Q: On generative AI use cases and Bandwidth's edge?

A: David Morken and John Bell said vertical integration, universal footprint, and ability to handle regulatory compliance give an edge for AI use cases.

Q: Political messaging expectations for 4Q?

A: John Bell said they recognized $8 million in Q3 and expect more in Q4 with the remaining $11 million expected in the fourth quarter.

Q: On messaging growth and incremental share, where from?

A: David Morken and Daryl Raiford said it's a combination of existing and new customers, with existing customers contributing and use cases evolving.

Q: On AI drive in voice, is it already happening?

A: David Morken said it is already a launched, adopted, and growing part of the Maestro platform with AIBridge having five partner integrations.