Bandwidth (BAND) review and Q4 results

Market cap approx $4bn, EV/(latest Q Revx4) 9.

Q4 results PR: https://investors.bandwidth.com/news-releases/news-release-d…
Nov 2020 PR on Voxbone acquisition: https://investors.bandwidth.com/news-releases/news-release-d…
Q3 results PR: https://investors.bandwidth.com/news-releases/news-release-d…
Oct 2020 - great write-up by Beth Kindig on SA: https://seekingalpha.com/article/4378234-bandwidth-leading-t…

WHAT BANDWIDTH DOES

Bandwidth is a CPaaS company. They sell software APIs for voice and messaging, using their own IP voice network. A bit like Twilio but then with their own network.

BANDWIDTH HISTORY

Founded in 1999 by CEO David Morken (50). He has 6 kids and believes in “family and fitness first” and is an ardent athlete. Prior to founding Bandwidth in 1999, he served on active duty in the Marine Corps as a Judge Advocate and Headquarters Company Commander. He received a B.A. in Political Science from Oral Roberts University and a J.D. from the University of Notre Dame Law School.

Morken strikes me as a deeply religious person - see his LinkedIn profile pic here: https://www.linkedin.com/in/dmorken/ and he sprinkles his investor calls with religious commentary.

His religious views are also instilled in the company. Quote from this interview: https://www.faithdrivenentrepreneur.org/podcast-inventory/ep…

“In Part Two with David Morken, the team discusses more thoroughly about what it means to be mission ready both individually and corporately. David talks about the importance of obedience to God and avoiding the pitfalls of both willfulness and passivity and Henry leads the discussion into practical applications of how their company’s HR policies intentionally reflected kingdom values as they target the whole person for impact. This commitment led them to institute chaplaincy roles as a force multiplier to help them steward the whole person policies they wanted to instill. David shares further on a few other ways the company has and continues to innovate in the area of ensuring the whole team is mission ready.”

Bandwidth IPO’d in Nov 2017.

Big change in Nov 2020 when Bandwidth acquired Voxbone. In the Q4 call the CEO stated that “with the Voxbone acquisition bandwidth expanded its reach to more than 60 countries that represent 93% of the world’s GDP, Bandwidth’s ambition is nothing less than to be the world’s dominant cloud communications provider.”

→ so the Voxbone acquisition is a really critical deal, meaning good integration will be important to fully reap the benefits.

VOXBONE HISTORY

Voxbone was founded in Brussels, Belgium, in 2005 by CEO Rodrigue Ullens and Francois Struman. Ullens is French-Belgian.

Life at Voxbone from LinkedIn page https://www.linkedin.com/company/voxbone/life/lifeatvoxbone/…

“They say variety is the spice of life. And life at Voxbone is very spicy indeed. We’re proud of our cosmopolitan outlook and the international flavor of our team.”

From their diversity & inclusion report 2019 https://www.voxbone.com/diversity/:

“The average age of the team is 33.4 years, again the same as last year. We are made up of 39 nationalities, with 65.2% speaking more than one language proficiently.”

→ Not sure how the European culture at Voxbone will gel with the US and very religious culture (and chaplains) and CEO at Bandwidth. Certainly one to watch for the integration efforts

REVENUE


**Rev $m	Q1	Q2	Q3	Q4**
2018	53	48.3	50.5	52.3
2019	53.3	56.8	60.5	62
2020	68.5	76.8	84.7	113


**QoQ	Q1	Q2	Q3	Q4**
2018		-9%	5%	4%
2019	2%	7%	7%	2%
2020	10%	12%	10%	33%


**YoY	Q1	Q2	Q3	Q4**
2019	1%	18%	20%	19%
2020	29%	35%	40%	82%

->Revenue growth picked up tremendously this year - Q4 had 2 months of Voxbone contribution in there; excluding Voxbone yoy Rev growth was 63% which is still great. They’re guiding to a paltry $108-$109m for Q1, so a slight decline vs Q4. I’m thinking that they may be sandbagging a bit much - they guided for $96.5-97m in Q3 for Q4 and came in at $113m so a 16.8% beat. Key thing to watch will be what the growth turns out to be in Q1 - big beat (my thesis) or mediocre.

NRR


**NRR %	Q1	Q2	Q3	Q4**
2018	115%	119%	117%	121%
2019	111%	113%	116%	113%
2020	126%	133%	131%	133%

->NRR is great, and has been trending up sharply this year. Clearly this is impacted by COVID; how much is permanent and how much transitory remains to be seen but it seems safe to assume that NRR will not drop down to 2018 levels.

MARGINS

Gross profit margins


**GP %	Q1	Q2	Q3	Q4**
2018	52%	45%	46%	45%
2019	46%	47%	45%	50%
2020	47%	45%	46%	49%

→ GP margins have been trending up slightly to just under 50%, and it sounds like they have a credible path to their ambition of around 60% as CPaaS and the Voxbone business becomes a bigger part of their total revenue mix.

EBITDA


**%	Q1	Q2	Q3	Q4**
2018	19.2%	5.2%	3.0%	-3.1%
2019	-6.8%	-3.0%	-3.8%	1.9%
2020	0.6%	4.0%	6.1%	7.3%

→ EBITDA margin has been trending up nicely; with the addition of Voxbone and some cost synergies which are probably to be extracted there, things seem to point to an improvement going forward on the profitability front.

FREE CASH FLOW


**FCF $m	Q1	Q2	Q3	Q4**
2018	9.8	2.6	3.1	-5.4
2019	-10.9	-4.1	-4.4	-7.7
2020	-12.0	2.7	9.3	-10

→ Still burning cash to capitalise on the opportunity, it looks like. Cash burn is not excessive and improved from -$27m in 2019 to -$10m this year.

CUSTOMERS

Bandwidth customers include Google, Microsoft, Zoom and Voxbone’s the likes of Uber and Telefonica.

Total customers


**Cust	Q1	Q2	Q3	Q4**
2018	965	1,092	1,155	1,230
2019	1,351	1,467	1,610	1,728
2020	1,808	1,900	2,015	2,848


**QoQ	Q1	Q2	Q3	Q4**
2018		13%	6%	6%
2019	10%	9%	10%	7%
2020	5%	5%	6%	41%

→ Customer growth seems to have gone through the roof. However Q4 includes 700 Voxbone customers. Excluding those, the qoq growth in Q4 is 7%, which is still up nicely vs prior Q’s.

Q4 CONF CALL

CEO

70% of companies say the pandemic has accelerated their shift to the cloud.
They seek the extraordinary efficiency economic advantage and enhanced innovation made possible by cloud-based communication solutions. But it is no small task to break free of antiquated premise-based analog telecom infrastructure.??First, we provide a software platform rich with APIs, automation and analytics. Second, we operate our own IP voice network that provides world-class quality at scale. We proved this when we were able to rapidly scale the network to keep pace with the 30% surge in concurrent calls caused by lockdowns last March. Third, we offer world-class support collectively, the Bandwidth team has centuries’ worth of deep expertise in software, voice and messaging. And we put this expertise to work providing solutions to our customers’ most difficult communication challenges.

During the fourth quarter and throughout 2020, we found continued success in serving cloud-based contact centers.

In the fourth quarter, we also signed a deal with one of the fastest-growing providers of cloud contact center software. This company headquartered in the US, is the first and only cloud contact center platform for the smartphone era customer experience that delivers global support.

In the fourth quarter, we welcome to our platform a large pharmaceutical company with operations in 90 countries. This company is in the process of overhauling its entire communications suite as part of its migration to the cloud. This company chose Bandwidth to power internal communications as well as inbound and outbound calling for their customer contact center in a dozen countries.

As many of you know, with the Voxbone acquisition bandwidth expanded its reach to more than 60 countries that represent 93% of the world’s GDP, Bandwidth’s ambition is nothing less than to be the world’s dominant cloud communications provider.

->Pretty bold and ambitious statement there!

Instead of cobbling together agreements with multiple providers around the globe for piecemeal solutions, enterprises will be able to get reliable, compliant, flexible solutions on a global scale from one source, Bandwidth.

We’ve got a massive sales enablement effort underway to ensure that we’re pursuing global opportunities in a coherent, coordinated way.

Additionally, we began offering local phone numbers in Hong Kong and enabled toll free number porting in Switzerland. We also enabled full stack services in Cyprus, paving the way for us to be the only provider offering full to a cloud-based voice services across the European Union. Each of these is an important step in our efforts to be the world’s only one stop shop for global cloud communications.

We look to 2021 and beyond with enormous optimism and the courage of our convictions, bandwidth, the opportunity to develop and deliver the power to communicate globally, is larger and more important now than ever before.

CFO

We have two months of Voxbone contribution in the fourth quarter

Fourth quarter total revenue was $113 million, up at 82% year-over-year. Within total revenue, CPaaS revenue was $98.1 million, up 84% year-over-year. Other revenue contributed the remaining $14.9 million of total revenue, which was up 74% from the same period a year ago.

Voxbone contributed approximately $17 million to CPaaS revenue in the quarter […] and just under $1m to other revenue in the quarter.

Excluding Voxbone, Bandwidth’s standalone CPaaS fourth quarter year-over-year revenue growth was 53%. Bandwidth’s standalone contribution to other revenue was $14 million, yielding a growth rate of 63% in the fourth quarter.

Combined, political messaging and COVID-related usage added 19 points to our fourth quarter year-over-year growth rate.

We ended the fourth quarter with 2,848 active CPaaS customer accounts, including the net addition of 109 customer accounts in the quarter and more than 700 new Voxbone customer accounts.

Guidance

->They exclude political messaging and covid - this year’s tailwinds - from guidance:

CPaaS revenue, including Voxbone: $96.6 million to $97.6 million or up 64% year-over-year at the midpoint.
Total revenue: $108 million to $109 million or up 58% year-over-year at the midpoint.

→ Guiding for a revenue slow-down, despite having only 2 months of Voxbone in Q4 and 3 month in Q1…I don’t buy it; I think they are massively sandbagging.

Q&A

Q: View on returning to the office?
A: David: Leading is an in-person dynamic. And culture is an in-person dynamic. So we’re convinced and focused on a full return to an in-person culture. I know that’s quite different from some Silicon Valley companies who are declaring that folks never will return. I think that flies in the face of millennia of human experience.

Q: Guidance?
A: Jeff: Built in COVID benefit [for last year] but won’t break it out in future. But, you know, I agree with what David said, I think there to some extent, the hybrid work environment is the new norm, and our business will benefit from that.

→ Feels to me he’s saying they’re sandbagging.

Q: Competitive environment?
A: David: We are very familiar with our competitors and don’t see any fundamental change or shift in the marketplace, other than the fact that we singularly and uniquely have now been able to address the entire world on behalf of US headquartered companies, enterprises, large tech, no one else on the competitive field has that worldwide footprint of network and platform in the way that we do. And that is a distinguishing characteristic of our strategy and addresses a much larger marketplace. And so that’s been the real change. It’s a change that we initiated.

Q: Cross-sell opportunity with Voxbone?
A: David: Only about 5 of the top 20 customers of each company were shared. And that’s important because the cross-sell opportunity is robust. The chance to go into the customer bases of each company and provide the portfolio of product in new jurisdictions or a new capabilities is rich. And so we’ve got great integration, leadership, identifying sales leaders who are on point with each of the largest customers, broader than just the top 20. So the cross-sell opportunity is manifest to us. And we’re attacking it, I think, with good vigilance.

Q: GP impact of Voxbone (Voxbone had better GP% than Bandwidth)?
A: Jeff: we expect CPaaS margins continue to grow, they will be aided, as you pointed out, by Voxbone, who comes in with accretive gross margins. But there’s interplay still with, as you know, we’ve had a lot of success with messaging. And with messaging, oftentimes comes more SMS surcharges, which we’re passing through to our customers, which actually compresses our margin. So I think net-net, we should see an uptick in our margins in '21, as we continue our climb to our long-term goal of 60%.

Q: Microsoft Direct routing opportunity?
A: Jeff: the Microsoft Teams Duet product was something that we launched as really a pioneer in the space, among the very first to do direct routing with the UCaaS solution like Microsoft Teams. What’s been incredibly gratifying since is the interest and the progress among other UCaaS platforms that are eager to integrate with Bandwidth to do Duet product. And while we don’t have any specific announcements that we’re making now, to your point on what has been the direct routing response in the space, what’s been the progress, it is exciting to see that there are other platforms that are doing collaboration, that are wanting to utilize our Duet product

Q: Drivers of Q4 growth?
A: David: It was really a strong performance across the board. We posted a dollar-based net retention of 133%. So obviously, our existing customers are trusting us and growing more and we’re deepening those relations, but we’re also continuing to attract and scale new customers.
Now the things that really amplified the results that we called out in our prepared remarks. The political messaging volumes were much higher. COVID contributed about $2 million, as we said, based on the methodology, but across the Board, just a great performance.

Q: DBNRR going forward?
A: David: Yeah, so it’s certainly, Rich was impacted if you normalize for that political messaging increase and COVID, the 133% dollar-based net retention would normalize to 125%

Q: Contact centre focus going forward?
A: David: You bet. It has been a segment that we have focused on in the past and a pipeline that we are building and have been clear about that in the future and are as excited as ever with these most recently announced results, providing some of the evidence of what’s possible in that segment for the platform and network that we have, especially now that we’re international and around the world. It just opens up an entirely new set of customers that have international contact center requirements.

Q: x-sell opportunity - how long to roll out?
A: David: So we have factored aspects like cross-sell, up-sell into our guidance. Some of these opportunities take longer than others to integrate and roll out into jurisdictions. But that said, our original international thesis was entirely driven by existing customers who, at the time that we began building internationally had significant spend for existing product and service outside of the United States. Voxbone accelerated our ability to serve those existing customers tremendously. And we are focused on serving those customers in these new markets, and are identifying where the Voxbone platform can do that more quickly for some than others, but haven’t guided specifically an average on ramp or onboarding timeframe during '21 within which we would expect those 15 to come on.

My take

I think they stand a good chance to continue to continue growing at 40%+ for the foreseeable future and to surprise on the upside if their customers (the likes of Zoom Microsoft, Google) do not see a sharp slowdown. I do not see the world returning to pre-pandemic ways any time soon and therefore increased my position today.

Would be very interested to hear others’ opinions and/or the bear case on this one.

-WSM (Long BAND 5%)

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I think they stand a good chance to continue to continue growing at 40%+ for the foreseeable future and to surprise on the upside if their customers (the likes of Zoom Microsoft, Google) do not see a sharp slowdown. I do not see the world returning to pre-pandemic ways any time soon and therefore increased my position today.

Would be very interested to hear others’ opinions and/or the bear case on this one.

-WSM (Long BAND 5%)

Thanks for the summary.

I recently initiated a position in BAND based on the comments here and others who are bullish on its prospects. There appear to be significant catalysts ahead with its international expansion after acquiring Voxbone and the continued expansion of cloud communications. Expansion of services such as the Zoom phone should increase its use.

They had a great earnings report and raised guidance. Their guidance seems to be for 42% revenue growth this coming year. That seems quite good but I also suspect that is a low bar/sandbagging. I am curious about the projected organic revenue growth for next year after the Voxbone acquisition. Have you figured that out?

It does seem very undervalued at less than 9 times this year’s likely conservative revenue guidance. So I was puzzled when it drifted lower today. Perhaps the market is assuming revenue growth will slow post-pandemic.

Dave

So here is roughly why I’m not buying their guide and what I think Bandwidth and Voxbone can do together. I’m just going to look at the first Q of the coming year.

QoQ absolute $ revenue increases

looked like this the last 2 years:


2019	1	3.5	3.7	1.5
2020	6.5	8.3	7.9	28.3

The CFO stated that Voxbone was in for 2 months in Q4, and contributed $17m to CPaaS and just under $1m to other revenue. So reversing that out gives, for Bandwidth standalone:


2019	1	3.5	3.7	1.5
2020	6.5	8.3	7.9	10.3

→ So Bandwidth standalone has shown increasing underlying growth without Voxbone

What drove those increases were customer growth and ARPU increases which includes the Covid impact.

Looking at customers and Q Revenue per customer, it looks like this:

Customers


2019	1,351	1,467	1,610	1,728
2020	1,808	1,900	2,015	2,848

Customer growth


2019	40%	34%	39%	40%
2020	34%	30%	25%	65%

That Q4 growth drops to 24% yoy and 7% qoq for Bandwidth standalone - still very decent growth.

Ave revenue per customer for the Q


2019	39,452	38,718	37,578	35,880
2020	37,887	40,421	42,035	39,677

I’m using simple end of period customers to calculate this, not the average base over the period (so what I’m doing will yield a slightly lower ave than the actual, real one but it’s close).

And ARPU growth yoy


2019	-28%	-12%	-14%	-16%
2020	-4%	4%	12%	11%

→ So the key thing that has accelerated Bandwidth’s rev growth this year is higher average per customer revenue. The key then is to take a view on whether that will fall off in the coming years (or quarter for this analysis). As I said above I think not.

But perhaps Voxbone is hugely ARPU dilutive?

Was Voxbone ARPU dilutive to Bandwidth?

Voxbone contributed $18m in 2 months, so let’s say about $27m in 3; perhaps a bit less - let’s say $26m. And they had 700 customers, so roughly $37k per customer - slightly less than the combined numbers ($39k) but still very much in the ballpark. So the ave Voxbone customer has about the same spend as the ave Bandwidth customer, at slightly higher margins as per the CC.

Putting it together

  1. Is it fair to assume roughly the same QoQ customer growth for Bandwidth standalone as in Q4? QoQ customer growth was lower in 2020 (5% in Q1 up to 7% Q4) than 2019 (when it was about 9% per Q) so I think assuming a repeat of Q4 QoQ growth is the lowest assumption that I would make. I actually think that they have tailwinds here, but let’s be conservative and pencil in 7% for bandwidth standalone. That will yield 2,300 for bandwidth alone.
  2. Let’s pencil in half of that % QoQ for Voxbone, so let’s say Voxbone grows their customer base from 700 to 730.
  3. What’s a reasonable Average revenue to assume? Given my reasoning above about continuing strength in their customers’ usage, combined with some increased pricing power due to their bigger footprint and unique positioning, I would argue that something around the $39k per customer mark is not too far off. So let’s keep it stable for Q1. So what does that yield?

3,030 customers generating $39,677 each for the quarter = $120m, giving 75% yoy and 6% qoq growth vs their guide of $108-109m or 58% yoy / -4% qoq.

I think this is the low end of what’s possible; if they execute well and capitalise on some of those customer x-sells earlier, or ARPU continues up for another Q, or the combined customer growth continues on the upward trajectory, then we could be looking at 80% yoy revenue growth in Q1.

Of course the integration could hit hiccups and cause customer growth to stall, x-sell to fail…

BUT - If growth indeed comes in above 70% as I think it will, and there is also some continued upward movement on that GP% (ditto) then the stock could rerate nicely.

-WSM

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To be consistent with what I just this morning encouraged Aphalite to do (that is, to try and get the braintrust of this board interested in a company in which I have an increasingly significant position), I want to discuss Bandwidth (BAND). This thread which I’m replying to, started by WSM007, is phenomenal. Allow me to build on one of his many interesting points:


Here's the dollar increase in revenue each quarter:

2019	1	3.5	3.7	1.5
2020	6.5	8.3	7.9	28.3

Voxbone (which BAND acquired) was included for about 2 months in Q4, and contributed $17.5m. So reversing that out gives, for Bandwidth standalone:

2019	1	3.5	3.7	1.5
2020	6.5	8.3	7.9	10.8

So, as WSM points out, Bandwidth standalone has shown increasing underlying growth without Voxbone. To build on what he started, I’ll back out the additional revenue BAND’s management attributed to Covid and to political spend, which if my notes are correct are:

 Q1: 1.8m    Q2: 5m    Q3: 9m    Q4: 10m

That leaves us with this:
2019	1	3.5	3.7	1.5
2020	4.7	5.1     4.0     9.7

This highlights the strength of the momentum they showed in Q4…even when you back out the 27.5m from Voxbone, Covid, and Political.

WSM went on to discuss ARPU and ended up predicting 120m for Q1 revenue, which would be 75% (non-organic, of course) growth YoY. Let me see if I can get there another way. In 2020 Q1 revenue was 10.5% higher than Q4 2019. If we back out the Q1 covid bump, revenue was still about 8% higher than Q4.

Q4 2020 revenue was 113m. Without Voxbone, Covid and Political it was 85.5m. But then you have to add Voxbone back in, since it will be there in Q1 2021. If it had been around for 3 months at the same rate, Voxbone would have contributed just over 26m (instead of 17.5m) in Q4. So now we’re back at 111.5m for the combined company. 111.5m plus 8% sequentially would be…just over 120m So I think WSM’s estimate is good.

This leaves a lot of interesting questions. Is this growth rate just not enough to be interesting to Wall Street? If not, why is BAND so cheap? The trailing PS ratio is around 10 right now. I’d love to hear the opinion of anyone else who’s looked into BAND. If it doesn’t interest you, why not? If you’re interested but have concerns, what are they?

BAND is no tiny company. They had $343m of revenue in 2020 and will have a lot more this year. And the market cap is just $3.5 billion. This is either a huge opportunity, or I’m missing something. Please let me know what you think.

Bear

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Hi Bear,

I really appreciate your following up on this thread re BAND. I know several here are taking another look at Twilio.
I read the recent Q Earnings and a few articles on BAND at SA.

I’m going to continue researching BAND because the arguments in this thread here for positive momentum in Revenue Growth with and without the inorganic add of Voxbone are, in my opinion, compelling.

I do see at least one reason not to start a position quite yet. Of particular interest to me from the BAND Q4 Confernce Call:
Non-GAAP gross margins came in at 49% for the quarter, Bandwidth’s standalone CPaaS margins continued their upward trend, and was further enhanced by the inclusion of higher margin Voxbone. However, these positive factors continue to be partially offset by higher carrier SMS surcharges, which we pass through to our customers. These same dynamics are expected to continue going forward with CPaaS margins continuing to expand including the lip from the fox phone business. But we also anticipate that other carriers may add messaging surcharges in 2021 that could create further potential drag on our overall gross margin.

In an earlier post last month regarding Twilio Muji wrote this:
CRITICAL to see margins rising to assure this company can get more profitable as it scales. Snowflake is showing this; Twilio is not?

For the expanding margins and because of my trying to buy only category crushers, I did buy more Snowflake yesterday.

Best,

Jason

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Thanks, Jason. BAND’s gross margin is actually one thing that doesn’t bother me at all. Like you said, it’s around 50% like Twilio’s (maybe Twilio’s is a few points higher than 50%), but what’s really reassuring is that BAND turned profitable in 2020! They made 55 cents per share in non-GAAP profit! Sure the top end guide is 12 cents for 2021, but I’m certain that’s just a major sandbag.

And philosophically speaking, 50% gross margin is far from a problem. Sure 70% or 80% is nice, but remember that Alteryx (AYX) had, maybe still has, the best margins of all: almost 90%. That didn’t help them. Growth is far more important.

If I had to give two concerns for BAND they would relate to growth:

  • The acquisition is helping revenue growth rate for now (82% last Q and I think it will be close to that the next few quarters – but again, this is not organic), but what will revenue growth rate look like in 2022? I would be ok with 40% or so, and still see this as a major bargain. But if it’s under 30%, that would be pretty disappointing.

  • Twilio is the 1,000 lb gorilla in this space. Yes BAND has some impressive customers, but will they have any trouble growing because companies/developers tend to default to Twilio, the household name?

Thanks again for the discussion. I hope others will add their thoughts.

Bear

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Hi Bear

I had a good look at Bandwidth last summer.

My understanding was that they had a revenue break out in 2020 due to Covid and their very large VOIP customers exploding in usage ie Zoom, Skype, Microsoft. Its also important to note their biggest competitor is actually AT&T due to them being a tier 1 network.

I would be concerned that they could see a slowdown as video usage reduces this year? I haven’t looked at their recent earnings calls though so that may not be central to their growth going forward. I know that they are the backbone of Zoom Phone so that could be a nice catalyst but probably won’t show up for a fair while.

Interesting stock for sure.

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What is the growth rate contribution from Voxbone expected to be? Sure, it’s added revenue, but for doing real “growth rate” analysis, we need to know if Voxbone business will be growing slower or faster than BAND by itself.

2 Likes

Good question MFChips. I went through the October Earnings Report for BAND, when Voxbone was being brought into the band. And I didn’t see Voxbones Revenue growth rate. I’ll keep looking.

I did see that according to Gartner, Bandwidth’s direct competitor is AT&T, as was stated by HorseplayAndrew. Bandwidth is a network provider with APIs, such as 911 access. Bandwidth recently brought a new product, Duet, to Microsoft Teams, which provides direct routing with 911. Bandwidth is one of two providers with E911. The other being AT&T.

That all may be old information; but, I’m putting together an investment thesis that also takes into account something else related. Bear with me here.

If in the near future the influence of AI and primarily ML will focus the benefits of Cloud multi-tenancy, and some of these benefits will be more pronounced in verticals (multi-tenancy providing the ability to update everyone with best practices creating virtuous circles of feedback loops within a customer cohort) then the focused approach, that of the turn-key solutions, will offer benefits moreso than the platforms themselves. Therefore the vertices on the platforms may be the primary growth areas to invest in going forward.

My point is when verticalization occurs over the growing MSTeams platform and OnZoom. I see BAND as one of the big winners.

Beth Kindig is not my favorite analyst; but, She can turn a phrase. She wrote last August-
Major customers for Bandwidth include Zoom, Google, Cisco, Microsoft, Skype, RingCentral and Square. In this case, we do not need to predict or speculate who will take market share from the telecom hardware systems as all of the bigger players use Bandwidth. With that said, I’m an early Zoom bull and eager to capitalize further on this trend. She sees the verticalization of the above platforms, OnZoom being one of them, as a ‘mega-trend’.

Do you? And if so will Bandwidth, being a uniquely independent tier 1 network provider…with how they asserted themselves in their Quarterly CC:
we singularly and uniquely have now been able to address the entire world on behalf of US headquartered companies, enterprises, large tech, no one else on the competitive field has that worldwide footprint of network and platform in the way that we do.…will Bandwidth capture this 30 Billion dollar Tam?

Jason

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Band’s Tier-1 Network offers a phone line with global reach and the necessary 911 enablement as cheap as $0.35. I’m assuming here that Bandwidth is appealing to those that don’t want or need a prepackaged API library (eg Twilio who, I think I remember, charges $1 per line);but, instead BAND customers are able to develop their own customized offerings.

But does BAND only provide the singularly and uniquely global independent network and…operate an IP voice network that provides world-class quality at scale . No.

From the Q4 Bandwidth confernce call,
we provide a software platform rich with APIs, automation and analytics.

Also per the Bandwidth Q4CC,
During the fourth quarter and throughout 2020, we found continued success in serving cloud-based contact centers. Our platform is being used to enable incredible end-user experiences in this critical segment, both by CCaaS providers and by enterprises we work with directly. This year, we significantly expanded our relationship with a long-standing customer who provides a cloud-based contact center platform and works with established midsized market leaders to help them create transformative customer experiences utilizing voice, chat and text.

Maybe someone here could explain how these ‘rich APIs’ are unique to Bandwidth and different than Twilio, because the above example of enabling contact centers sounds like Twilio’s Flex?

Even without knowing the answer to the above questions, I did take a 3% position in Band this morning. Thanks all.

Best,

Jason

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Jason,

I only have a cursory knowledge of the space but will divulge my general understanding between Twilio and Bandwidth.

Bandwidth should be your preferred provider if: 1)cost is your primary concern and/or you have a lower (relative) volume, 2)a good customer support experience is a priority, and 3)have the ability/time to build your solutions.

Twilio should be your preferred provider if: 1)You want to focus your resources elsewhere and want quick integration, 2)you have a wider range of needs, and 3)you prefer a “pay-as-you-go” model rather than signing an annual contract.

“Rich API’s” is a general term here and I don’t think it means their API’s are in any way “better” than what Twilio is providing; on a fundamental level, they are the same (I’m sure there is some nuance as there is with any software comparisons).

On a side note, I appreciate all the writeups in this thread and this finally helped me solve the “what to do with my small Zoom position.” While I still believe in the Zoom phone thesis, I could see the growth in Zoom phone not moving the revenue needle enough for Zoom the company, but I could see it moving the needle with BAND.

-Redeemed
LONG BAND 2%

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For a company growing 35-40% with 45-50% gross margins and growing customers plus getting close to FCF positive and with a TTM EV/S of 10 (omg), it seems incredibly undervalued compared to its peers with a TON of room for multiple expansion (that type of growth should be 20-30 EV/S, so it looks like huge share price appreciation potential).

Definitely curious what the missing key here? Is it fear of Twilio?

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