Communications platform as a service company Bandwidth (NASDAQ: BAND) reported Q1 FY2022 results topping analyst expectations, with revenue up 15.7% year on year to $131.3 million. Guidance for next quarter's revenue was $133.5 million at the midpoint, which is 1.39% above the analyst consensus. Bandwidth made a GAAP loss of $6.81 million, down on its loss of $5.31 million, in the same quarter last year.
Is now the time to buy Bandwidth? Access our full analysis of the earnings results here, it's free.
Bandwidth (BAND) Q1 FY2022 Highlights:
- Revenue: $131.3 million vs analyst estimates of $125.7 million (4.43% beat)
- EPS (non-GAAP): $0.09 vs analyst estimates of -$0.08 ($0.17 beat)
- Revenue guidance for Q2 2022 is $133.5 million at the midpoint, above analyst estimates of $131.6 million
- The company reconfirmed revenue guidance for the full year, at $554 million at the midpoint
- Free cash flow was negative $12.6 million, down from positive free cash flow of $8.26 million in previous quarter
- Net Revenue Retention Rate: 114%, up from 110% previous quarter
- Customers: 3,372, up from 3,228 in previous quarter
- Gross Margin (GAAP): 42.1%, down from 45.9% same quarter last year
"I am very pleased with our first quarter accomplishments," said David Morken, Bandwidth's Chief Executive Officer.
Started in 1999 by David Morken who was later joined by Henry Kaestner as co-founder in 2001, Bandwidth (NASDAQ:BAND) provides thousands of customers with a software platform that uses its own global network to provide phone numbers, voice, and text connectivity.
The first shift towards voice communication over the internet (VOIP), rather than traditional phone networks, happened when the enterprises started replacing business phones with the cheaper VOIP technology. Today, the rise of the consumer internet has increased the need for two way audio and video functionality in applications, driving demand for software tools and platforms that enable this utility.
As you can see below, Bandwidth's revenue growth has been very strong over the last year, growing from quarterly revenue of $113.4 million, to $131.3 million.
This quarter, Bandwidth's quarterly revenue was once again up 15.7% year on year. On top of that, revenue increased $5.23 million quarter on quarter, a strong improvement on the $4.5 million decrease in Q4 2021, and a sign of acceleration of growth, which is very nice to see indeed.
Guidance for the next quarter indicates Bandwidth is expecting revenue to grow 10.6% year on year to $133.5 million, slowing down from the 57.1% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 12.4% over the next twelve months.
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You can see below that Bandwidth reported 3,372 customers at the end of the quarter, an increase of 144 on last quarter. That is a little better customer growth than last quarter and quite a bit above the typical customer growth we have seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.
Key Takeaways from Bandwidth's Q1 Results
With a market capitalization of $581.4 million Bandwidth is among smaller companies, but its more than $316 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.
We were very impressed by Bandwidth’s very strong acceleration in customer growth this quarter. And we were also glad to see the improvement in net revenue retention rate. On the other hand, revenue growth is overall a bit slower these days. Overall, we think this was still a really good quarter, that should leave shareholders feeling positive. The company is flat on the results and currently trades at $26.03 per share.
Should you invest in Bandwidth right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.