Bandwidth Inc.

Greetings and welcome to the Bandwidth, Inc. first quarter 2020 earnings results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Sarah Walas, Vice President of Investor Relations for Bandwidth. Thank you. You may begin.

Thank you. Good afternoon and welcome to Bandwidth's first quarter 2020 earnings call. Today we'll be discussing the results announced in our press release issued after the market closed. With me on the call this afternoon is David Morken, Bandwidth's Chief Executive Officer, and Jeff Hoffman, Chief Financial Officer of Bandwidth. They will begin with prepared remarks and then we will open up the call for Q&A. During the call, we will make statements related to our business that may be considered forward-looking, including statements concerning our financial guidance for the second fiscal quarter and full year of 2020 and to the extent provided, future periods, our plans to execute on our growth strategy, our ability to maintain existing and acquire new customers, and other statements regarding our plans and prospects. Forward-looking statements may often be identified with words such as we expect, We anticipate or upcoming. These statements reflect our views only as of today and should not be considered our views as of any subsequent date. We undertake no obligation to update or revise these forward-looking statements. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our 10-K filing on February 21, 2020 as updated by other SEC filings, all of which are available on the Investor Relations section of our website at bandwidth.com and on the SEC's website at sec.gov. During the course of today's call, We will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issued after the close of market today, which is located on our website at bandwidth.com. Finally, in the interest of transparency in these unprecedented times, within our prepared remarks, we have estimated the revenue impact of COVID-19 for this quarter and for our second quarter outlook which therefore affects our 2020 outlook, although we have not estimated any impact for our third or fourth quarters. Our methodology attributes significantly elevated platform usage above and beyond expected thresholds to quantify current and estimate any future financial impacts as a result of COVID-19. Accordingly, identifying any potential impacts in future periods may become challenging As Sarah said, we are living in unprecedented times.

Thank you so much for joining us. to deliver the power to communicate during this season of great loss and sacrifice. We are making sure that healthcare systems, governments, businesses, teachers, and students remain connected with those they need and serve. Our team has been working around the clock and from locations around the country to serve our customers 24 hours each day, seven days a week. Our enterprise customers play a pivotal role in our communities and increasingly rely on our software and network platform to both develop and deliver robust voice calling, audio conferencing, text messaging, and emergency 911 services whether they are working remotely or in the office. Our robust platform and nationwide network scaled in days to meet the 30% surge in concurrent call demand caused by so many Americans working from home. Owning and operating our own nationwide all IP voice network proved to be critical. Our technology teams were able to quickly augment capacity and optimize existing network assets to support millions of audio calls into video conferences, Voice conference calls, text messages, and individual conversations, and all without any interruption of any kind. The agility required to add capacity to our network in real time during unprecedented volume increases was only possible by owning and operating our network. We benefit from visibility into all network traffic, ensuring the utmost reliability and quality Thank you all for joining us today. Bandwidth has joined the Keep Americans Connected pledge. We promise for 60 days to not terminate service to residential or small business customers because of their inability to pay their bills due to disruptions caused by the pandemic. We also plan to waive any late fees a customer may incur because of their economic circumstances related to the pandemic. We will remain vigilant in our efforts to mitigate and guard against Thank you for joining us today. With first quarter CPAS revenue increasing 31% year-over-year, driving total revenue of $68.5 million while achieving non-GAAP net income of positive $1.1 million. The acceleration in our CPAS revenue was driven by the fundamental strength of our business and by our ability to serve the increased demand from the customers who offer UCAS services and many more. Thank you. Thank you. Thank you. Thank you for joining us. Our top five meeting solutions customers experienced an aggregate 66% increase in usage in March as compared to the average of the first two months of the quarter. Similarly, we experienced an aggregate 45% increase in usage from our top 10 UCAS customers in March as compared to the average of the first two months of the quarter. I'd like to briefly revisit some of the services we power for this group of customers that are being heavily utilized. We provide voice, messaging, and emergency service to the greatest productivity experiences for knowledge workers and now increasingly more to healthcare workers, teachers and students, among others, needing to connect remotely. If you dial into most video conferences these days and use your phone for audio, you're likely using a bandwidth number and the call is likely delivered on our network. If you use Zoom phone or have a Google voice number for life, both are from bandwidth. If you use a UCAS interface like Dialpad or RingCentral in lieu of desktop phones and PBXs, our platform and networks likely power the voice and messaging components. Relative to our peers, bandwidth disproportionately serves these types of large and innovative enterprise customers who demand quality and value. Our unique combination of software, network, and amazing customer support delivers a value proposition that resonates deeply with enterprises operating at scale. We do expect usage from UCAS and Meeting Solutions customers to continue to contribute meaningfully to our results given the trajectory of the current circumstances. We are cognizant that the tailwind in performance for these UCAS and Meeting Solutions customer cohorts will be partially offset by the contraction and usage from small and medium-sized businesses that are adversely impacted. Jeff will provide more detail about the first quarter results and expected go-forward contributions to our performance. On the international front, we continue to progress toward meeting existing customer demand by extending our world-class network and platform into 13 European countries via the same APIs and user experience that we offer domestically today. In the first quarter we continue to have meaningful discussions with our largest customers about our network capabilities in various regions and how we can best serve their voice and messaging needs. I'm also proud to report that we added two new international messaging customers in the quarter. We will pursue our international mission and objectives consistent with our profitability principle and subject to global economic conditions. As a business, we are entering a period where fundamentals matter most. Our business fundamentals are strong and lifting our business to new heights. We have had a longstanding commitment to return to profitability by 2021. Given the current environment, we have decided to accelerate this commitment to non-GAAP net income profitability for full year 2020 and have begun by achieving $1.1 million in the first quarter, as I mentioned. We will achieve positive non-GAAP net income this Thank you for joining us. to expand and build a new headquarters here in Raleigh. This is a unique opportunity to realize our vision for the growth of our company and to impact our community. We are humbled to be in a position to commit to long-term growth and grateful that our commitment was reciprocated by the state with tax incentives which substantially offset land costs over time. We expect to develop the headquarters in concert with the developer, who will bear the majority of the future capital investments with bandwidth committing to a multiyear lease on terms similar to our existing lease agreements. Founded in 1999, we have endured multiple periods of uncertainty and economic lows. Our focus during such times has been and always will be to serve our customers. Every challenge we face in serving our customers is an opportunity to contribute more to their success than we ever have before. Our platform and network are resilient and under times of duress emerge stronger and larger. Our team is operating at the highest level, serving each other first and our customers always. We will emerge from this challenge with increased network capacity and redundancy, strengthened partnerships, innovative teams and loyal customers, some hopefully for life. The passion and perseverance of our people embody all that is anti-fragile. In summary, we are humbled that our mission at Bandwidth is vital and proud of our team for its execution. I want to end especially by thanking our world-class technology and network engineering teams who have committed days, nights, and weekends to do our part in keeping America connected. We are the greatest country that the world has ever seen. We will emerge from this season with many lessons learned. More resilient to threats and more capable of providing opportunities for our future generations. With that, let me turn it over to Jeff.