Bandwidth Inc.

Thank you for standing by. This is the conference operator. Welcome to the bandwidth fourth quarter 2021 earnings conference call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Sarah Wallace, VP, Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome to Bandwidth's fourth quarter 2021 earnings call. Today, we'll be discussing the results announced in our press release issued after the market closed. The press release and an earnings presentation with historical financial highlights can be found on the investor relations page at investors.bandwidth.com. With me on the call this afternoon is David Morkan, our CEO, and Darrell Rayford, our CFO. 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 first fiscal quarter and full year of 2022. We caution you not to put undue reliance on these forward-looking statements, as they may involve risks and uncertainties that may cause actual results to vary materially from any future results or outcomes expressed or implied by the forward-looking statements. Any forward-looking statements made on this call and the presentation slides reflect our analysis as of today, and we have no plans or obligation to update them. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our latest 10-K filing 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, as well as in the slide deck, which are located on our website at investors.bandwidth.com. With that, let me turn the call over to David.

Thank you, Sarah. And hello, everyone. Thank you for joining us today. I want to begin by thanking our customers. for growing with us through 2021, for trusting us with their mission critical communications, and for believing in our vision to serve them globally and faithfully in the decades ahead. Second, thank you to all our bandmates for another remarkable year. I am in awe of how you sacrificially serve our customers while selflessly supporting each other. You helped new customers move to the cloud for the first time strengthened our existing relationships, and physically came together as one global team serving in 90% of the world's economy. Last and definitely not least, I thank God for providing for us and blessing us with a 23rd year together. As we open the year, I'm excited about two new leaders stepping up at Bandwidth. First, as we announced yesterday, We are looking forward to Anthony Bartolo joining the band next Monday as our new Chief Operating Officer. Anthony has 30 years of experience in cloud communications at world-class companies. At Avaya, he was Chief Product Officer and led their transition to a SaaS-based business model. At Tata Communications, he was President of Mobility and Chief Product Officer based in Singapore. Anthony is a native Australian who has managed billion-dollar P&Ls around the world. The COO role is a new one for us. Anthony will be leading our sales, marketing, product, operations, development, and technology teams, which completes our alignment as one global bandwidth. We are excited about the leadership and new perspective he brings. Welcome, Anthony. I also want to welcome our longtime Chief People Officer, Rebecca Bottorf, to Bandwidth's Board of Directors. Bandwidth's culture has always set us apart, and this appointment is yet another commitment to our most treasured asset, our people. As we welcome amazing bandmates around the world, I am grateful to have Rebecca's deep expertise and experience at the board level. And I am proud that Bandwidth is once again ahead of the curve as only 3% of Fortune 1000 board members have an HR background according to Korn Ferry. Rebecca will continue to serve as our Chief People Officer. Congratulations, Rebecca. Finally, I want to acknowledge that we recently divested two heritage bandwidth businesses, our broadband.com business and our phone booth business. These businesses were born and raised at bandwidth, And I would like to say thank you to their customers and all of our bandmates over the years who contributed to their success. In 2021, we delivered another year of solid financial results, including 43% year-over-year revenue growth, fueled by broad-based demand across our portfolio of voice, messaging, and emergency services APIs that are powering the global digital transformation. fourth quarter and full year total revenue, CPAS revenue, and non-GAAP EPS all came in above their corresponding guidance ranges. In the fourth quarter, the financial impact of DDoS was in line with our estimates, and Daryl will speak to all this in greater detail shortly. Our platform is stronger than ever, and we believe it is best positioned to deliver mission-critical communications for the enterprise. Looking toward 2022, I am pleased to say that while we have not lost a single customer due to the incident, some customers have returned traffic to our network at lower volume levels, indicative of a desire for additional redundancy options. This group of customers is expected to gradually increase usage over the next year as we provide additional resiliency options for critical use cases. But even as we build trust with this cohort, we are expecting revenue growth in 2022 to be dampened by this incident. Putting it into perspective, this cohort includes approximately 40 customers that represent the bulk of the revenue impact out of over 3,000 total customers. It includes a Tier 1 communication service provider that represents approximately 20% of the projected DDoS revenue impact in 2022. We previously served this Tier 1 exclusively, and now this customer has moved us to primary provider as they add a secondary provider for a redundancy option. While we are focused on winning the trust of these 40 customers, it is important to note that our hyperscale customers never left our platform. They were in the situation room with us, standing shoulder to shoulder with our team to help expedite our mitigation efforts and stayed with us throughout. In addition to DDoS impact in 2022, we are facing headwinds in our outlook related to changing dynamics among two large customers. First, We have a longstanding relationship with the global leader in video conferencing, a customer who we have partnered with and served exclusively for new product launches and during periods of explosive growth across our global footprint during the pandemic. In recognition of this longstanding relationship, we have agreed to provide future price concessions that reflect anticipated size and speed of their usage on our platform. This reset solidifies our position to partner with this customer on their product roadmap and serve their recalibrated global growth. Second, we are expecting lower usage from a large global technology customer's cloud contact center service following a year of exceptional growth on our platform in 2021. This customer scaled its offering across international and developing markets by prioritizing frictionless onboarding to deliver the best experience for their customers. Our discussions with this customer lead us to believe they will now focus on enforcement of terms of service with their end users. We expect this to result in a volume step down this year, but we remain positive on the relationship and large global opportunity in the multiple lines of business we serve for this customer. Darrell will speak to the estimated revenue impact in the first quarter and full year. As we launch into 2022, we are motivated by our role powering the global communications transformation. Our vision is to be the platform of choice for mission-critical enterprise communications. With our VoxBone integration, we have now aligned our entire global business around this opportunity. We will achieve this vision by focusing on three priorities. Number one, by growing our relationships with existing customers. We'll do this by cross-selling and up-selling our global footprint and our powerful APIs to automate and scale their cloud communications platforms. Number two, by winning new enterprise customers. We intend to become the platform of choice selling directly to large enterprise teams building exceptional experiences on our best of breed communications tech stack. And number three, becoming the best global CPaaS platform for app developers to scale digital customer engagement. We've been pursuing these priorities and will continue to do so with particular focus on enterprises moving to the cloud and software companies using programmable voice and messaging to create powerful experiences for their end users. I'm pleased that our growing margins and profitability afford us the opportunity to fully drive our continued growth as these three priorities are the foundation of the durable business we are building. Let me give you examples of how we are winning in each from this past quarter. One of our long-time customers continues to rely on us every step of the way as they expand their business. Last May, this customer launched a new unified UCaaS and CCaaS solution. Their goal is to create not only a better customer experience, but also a better customer service agent experience. That's incredibly important given the pivotal role these employees play on the front lines. Last year, this customer significantly expanded our long-term relationship by replacing incumbent vendors after deciding that bandwidth was best in class. Now, I'm excited to report that we've expanded the relationship yet again with an immediate 50% increase in international spend along with the opportunity to gain even more. This is another example of how bandwidth is driving our first priority growing with our customers both geographically and into new lines of business. In the fourth quarter, there was continued strong momentum in our second priority, helping new enterprise customers move to the cloud. An especially dynamic area here is the contact center space. The most innovative contact centers are migrating to the cloud to offer many new and powerful time-saving and value-adding experiences for the agent and the customer. And the bandwidth platform is uniquely capable of supporting these complicated migrations. That's why Genesys, one of the leading CCaaS platforms in the world, is working so closely with bandwidth to create the contact center of the future. We recently announced Bandwidth Duet for Genesys, which is our third duet partnership after Microsoft and RingCentral, and the first in the contact center space. Duet for Genesys lets customers capture the power and feature set of Genesys Cloud while maintaining the flexibility, service, and savings that come from a direct relationship with bandwidth. This unbundling of the software from the telecom provides enterprises with the best of both worlds as they use the bandwidth platform to enable rich call data and third party integrations that make possible a more satisfying customer experience. Another example of how we are powering a game-changing enterprise CCaaS provider is a customer in San Francisco. With people living more and more of their lives from their smartphones, this customer is providing exceptional user experiences like the ability to take a picture of a product serial number during a customer service call in order to solve problems faster and more accurately. A year ago, the company chose our international business to power their contact center platform for inbound calling across more than a dozen countries, primarily in Europe. Now, based on our proven call quality and ability to scale, they're activating outbound calling and expanding to additional countries with us, including, for the first time, the US and Canada. This is an important example of how we are successfully winning North American business from international customers. We expect to be the primary provider to this customer as they continue to scale and add new functionality. Customer experience is also a key driver in our third strategic priority, which is to enable the global innovators in digital customer engagement. Bandwidth's robust messaging, emergency, and voice APIs help developers build better digital experiences for the brands that rely on them. As an indicator of our traction in this customer category, Messaging accounted for about 13% of our CPaaS revenue in 2021, and we're now seeing a new consistently higher level of messaging activity, regardless of time of year, as political groups, retailers, and brands continue to evolve this channel to communicate one-on-one with their customers to build engagement and loyalty. An example win I want to highlight from this quarter is is an app developer that provides marketing and advertising software to nearly 10,000 small businesses in the United States, Canada, Europe, and Australia. As they continued to scale, this customer made the decision to leave the big CPaaS provider they started with and turned to bandwidth for a better level of service and deliverability. So in conclusion, good momentum in each of these three long-term priorities. I'll now turn it over to Darrell to walk through our financial results and outlook.