Bandwidth (NASDAQ:BAND) Q2 Sales Beat Estimates, Provides Optimistic Guidance For Next Quarter

Jabin Bastian /
2021/08/06 4:05 am EDT
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Communications platform as a service company Bandwidth (NASDAQ: BAND) reported Q2 FY2021 results topping analyst expectations, with revenue up 57.1% year on year to $120.6 million. Bandwidth made a GAAP loss of $6.92 million, improving on its loss of $20.6 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) Q2 FY2021 Highlights:

  • Revenue: $120.6 million vs analyst estimates of $116.4 million (3.63% beat)
  • EPS (non-GAAP): $0.32 vs analyst estimates of $0.09 ($0.23 beat)
  • Revenue guidance for Q3 2021 is $124.1 million at the midpoint, above analyst estimates of $118.5 million
  • The company lifted revenue guidance for the full year, from $474.6 million to $485.8 million at the midpoint, a 2.35% increase
  • Free cash flow was negative -$18.95 million, down from positive free cash flow of $2.12 million in previous quarter
  • Net Revenue Retention Rate: 114%, down from 125% previous quarter
  • Customers: 3,051, up from 2,959 in previous quarter
  • Gross Margin (GAAP): 45.2%, down from 45.9% previous quarter

"The continued successful execution of our long term strategy is evident in the 57% year-over-year increase in CPaaS revenue, fueled by broad-based demand across all of our services and expanded global footprint," stated David Morken, Chief Executive Officer of Bandwidth.

Founded in 1999, 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 shift towards communication over the internet (VOIP), rather than traditional phone networks, is a big tailwind behind the demand for services like Bandwith.

Sales Growth

As you can see below, boosted by the acquisition of Voxbone, Bandwidth's revenue growth has been incredible over the last year, growing from quarterly revenue of $76.7 million, to $120.6 million.

Bandwidth Total Revenue

This was another standout quarter with the revenue up a splendid 57.1% year on year. On top of that, revenue increased $7.17 million quarter on quarter, a very strong improvement on the $432 thousand increase in Q1 2021, and a sign of acceleration of growth, which is very nice to see indeed.

Analysts covering the company are expecting the revenues to grow 20.4% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Customer Growth

You can see below that Bandwidth reported 3,051 customers at the end of the quarter, an increase of 92 on last quarter. That is a bit slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.

Bandwidth Customers

Key Takeaways from Bandwidth's Q2 Results

With market capitalisation of $3.13 billion Bandwidth is among smaller companies, but its more than $309.6 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 impressed by the exceptional revenue growth Bandwidth delivered this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, it was less good to see the deterioration in revenue retention rate and there was a slowdown in customer growth. Overall, this quarter's results still seemed pretty positive and shareholders can feel optimistic. The company is up 4.59% on the results and currently trades at $130.5 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 full report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.