Bandwidth Inc.

Welcome to the Bandwidth Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Sarah Wallace, Vice President of Investor Relations.

Please go ahead.

Thank you. Good afternoon and welcome to Bandwidth's third quarter 2022 earnings call. Today we'll be discussing the results and other matters 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 fourth 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 in 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 earnings presentation, which are located on our website at investors.bandwidth.com. With that, let me turn the call over to David.

Thank you, Sarah, and thanks to everyone for joining us. Today, I am pleased to share that we exceeded guidance for the third quarter and are raising our full year outlook on top and bottom lines. During this last quarter, we achieved our highest non-GAAP gross margin ever, a testament to our commitment to growing profitably. Before we look ahead, I want to thank our bandmates for another outstanding performance this quarter. providing us the opportunity to serve our customers and support each other in our global mission to connect people. And I thank God for watching over us and blessing our work together. Going forward, we remain confident and optimistic about our operating plan for three key reasons. First, we power essential services throughout the world. Our customers are established and their demand is durable. They rely on us for mission-critical communications that are the bedrock of their business. Second, in an environment where everyone is looking for cost savings, we help customers cut their communications spend nearly in half thanks to the owner economics of our platform. Third and finally, the world is only in the early stages of a massive shift to digital communications. As this secular trend plays out over many years to come, Bandwidth is uniquely positioned to win through the powerful combination of our global network platform, our enterprise-grade APIs, and our deep regulatory expertise. Now let's turn to the outstanding highlights of the third quarter. Adding to our portfolio of essential services, we raised the bar with new product innovations like our recent launches of SendTo, and Call Assure. SendTo is a new messaging app for Microsoft Teams and the latest co-creation in our decade-long partnership with Microsoft. SendTo expands bandwidths duet for Teams beyond voice and E911 to create a truly unified communications experience. With SendTo deployed within an enterprise Teams environment, Teams users have full native messaging capability within their Teams application. We are thrilled to offer our Duet customers this new native messaging capability within Teams. Call Assure is the only comprehensive disaster recovery solution for toll-free business calls and the first of its kind in our space. Call Assure expands bandwidth's already highly resilient toll-free offering by adding the new capability in the case of an extraordinary event. Bandwidth customers, new and old, are responding positively to Call Assure. It is a concrete example of how we've innovated toward our goal to create the most hardened, reliable, and resilient network in our space. Our reputation for redundancy and resilience led the nation's well-known largest security, fire, and alarm monitoring service to go all in with us. This customer vowed to implement a more robust network platform to eliminate their vulnerabilities. After a detailed competitive review, they chose bandwidth for our five-fold level of toll-free call redundancy with automatic failure rerouting. An additional differentiator was our back-end analytics, which helped the customer more efficiently manage their high traffic volume and the tens of thousands of telephone numbers that are the lifeblood of their business. As our new customer put it so eloquently, quote, if you care about the integrity of your network, you use bandwidth. Another new enterprise that chose us to power their mission-critical services is a global cloud platform specializing in healthcare and hospitality. Reliability, security, and scalability are all vital to their business model. This customer consolidated 20 different carrier relationships by choosing bandwidth while gaining quality, reliability, cost savings, and faster speed to market. They also future-proofed their growth footprint around the world as they look to add new customers in EMEA, APAC, and Latin America. This is the powerful value proposition we deliver when our customers go global with bandwidth and is gaining momentum among our enterprise prospects. Resilience and scalability also drove the expansion of our partnership with Five9, the rapidly growing cloud contact center platform. They came to us with a huge challenge. Help them manage hundreds of thousands of telephone numbers and associated features while providing backup assurance for mission-critical services. Our solution accelerated their migration tenfold compared to alternatives. enabling Five9 to take advantage of bandwidth's next-gen capabilities much sooner. On top of that, Five9 is now positioned to offer its customers more self-service solutions using bandwidth's platform comprehensively. It is another example of our success landing and expanding with existing customers and a strong proof point of our ongoing momentum with the world's leading contact center platforms. Continuing with our theme of essential services, messaging is proving to be a mission critical use case in more and more ways. Messaging increased to 14% of our revenue mix this quarter. Due to its urgency, its visibility and convenience, messaging is now a first line channel for both commercial and civic engagement. Political campaign messaging is a key driver for civic engagement and we saw a meaningful benefit from political messaging this quarter, as Darrell will detail in a moment. Our ability to reliably deliver at scale with easy-to-use APIs and regulatory know-how for campaign registration has all resulted in bandwidth becoming a go-to messaging platform across the entire political spectrum this U.S. election season. We are also seeing organizations of all stripes now embracing messaging for a higher level of issues awareness, and rapid response to actionable news throughout the entire calendar year. Civic engagement joins the growing chorus of commercial messaging that we power from retail point of sale and loyalty programs to shopping and e-commerce to financial services, identity authentication, and healthcare patient engagement. Our business continues to grow steadily with customers like the one we announced last quarter a leading text messaging commerce platform that is now ramping up for Black Friday. Before I wrap up, I want to share two key leadership changes. First, our president, Marina Carriker, has decided to depart after nearly seven wonderful years of outstanding service to bandwidth. Two years ago, I asked Marina to assume the role of president to help shepherd our team and critical partners through global expansion. She met that challenge head on. Her passion for our customers and her business acumen have been essential in helping us advance our vision while staying true to our first principles. She has been critical in orchestrating and unlocking new revenue among Fortune 500 customers and in enabling the recent growth of our messaging portfolio. Having contributed so much to the foundation for our future growth, Marina recently shared that it is the right time for her to step away toward new and different challenges. She has graciously agreed to stay through the end of the year to provide a smooth transition. Marina has blessed all of us and our customers beyond measure, and we wish her the very best. Thank you, Marina. Fair winds and following seas to the Carriker family. As we say farewell to Marina, I am thrilled to welcome aboard a new senior leader on the team. Devesh Agarwal has joined Bandwidth in the newly created role of Chief Software Strategy Officer. With over 30 years in communications and 25 patents to his name, Devesh is a proven technology leader. Devesh led a team of over 1,100 software developers at Oracle to build new 5G products that became the industry standard for Tier 1 providers worldwide. Welcome to the band, Devesh. In closing, I'm very pleased with the team's solid progress against our strategic priorities and proud of how we're navigating through the current environment. We believe we will continue to benefit from the mission-critical nature of our business, the stability of our customer base, and the relentless enterprise move to the cloud. Looking ahead, we will continue to manage our business prudently by further extending and embracing our long-standing commitment to profitability. We expect to thrive during this uncertain time. I'll now turn it over to Darrell to walk through the details of our financial results and outlook for the final quarter of the year.

Thank you, David, and good afternoon, everyone. As a reminder, details related to our third quarter performance are provided in an earnings presentation that may be accessed on our investor relations website. We had a very strong third quarter with significant beats against guidance. Revenue of $148 million and non-GAAP net income of $8 million both exceeded their midpoints of our guidance by $7 million. We are raising our full year guidance to pass through the third quarter beat and reflect an improved full year outlook on top and bottom lines. For the full year 2022, we expect revenue to now be $563 million at the midpoint of our range reflecting a $9 million raise to our previous guidance, and non-GAAP EPS to be 36 cents, also reflecting the beat and raise. As David mentioned, we serve a large, diverse set of enterprise customers across many verticals and business-critical use cases and continue to expect this usage to be durable. We are an experienced operating team with a demonstrable track record of profitable growth and prudent execution that will continue to serve us well, especially in this season of uncertainty. Yesterday, we strengthened our balance sheet by agreeing to repurchase $160 million of 2026 convertible notes at a meaningful discount to par value. We expect this transaction to close on November 28, 2022. Upon completion, the outstanding borrowings of our convertible debt maturity in 2026 will be reduced to $240 million. We continuously evaluate options for the best use of our balance sheet to stay opportunistic in the current capital market environment. With our resolute focus on profitability while sustaining growth, we create the option to fully repay our remaining convertible note obligations in full upon the respective maturities with our earnings and available cash if we so choose. Rounding out our third quarter results, revenue of $148 million was up 14% from last year. Notably, messaging continued to be a strong driver at 14% of our total revenue and grew 50% over last year. Political messaging revenue from the U.S. midterm elections contributed approximately $7 million in the third quarter. Our revenue result included $27 million of pass-through messaging surcharges compared to $14 million in the prior year quarter. If we exclude the contribution from surcharges, revenue grew 4% year-over-year, overall exceeding our expectations but affected by continuing cross-currents. Namely, we saw 14 points of growth across our broad base of customers driven by strong contributions from both usage-based and monthly recurring charges. This growth was partially offset by nearly 10 points from the headwinds described the last couple quarters, which were in line with our expectations and illustrated on slide eight of our earnings presentation. Our non-GAAP gross margin was 57% for the third quarter, up 300 basis points from the prior year's quarter, and a record for our business. We continue to benefit from economies of scale, network effects, a richer mix of higher margin products, and operating improvements. This quarter's 57% non-GAAP gross margin again demonstrates continued progress towards our 60-plus percent long-term margin ambitions. EBITDA for the third quarter was $13 million, and free cash flow was $13 million. In terms of operating metrics, our third quarter net retention rate was 109%. Active customer count was 3,380. Our average annual revenue per customer increased from last quarter to $163,000. Consistent with last quarter, we continue to sharpen our sales focus on attracting and serving large enterprises. In summary, our growing market and consistent execution through isolated headwinds combined with a relentless focus to serve our customers and improve profitability have yielded measurable near-term progress while driving us towards our long-term goals, especially in this season of macroeconomic uncertainty. Now I'd like to turn the call back over to the operator for questions.

We will now begin the question and answer session.

To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2.

At this time, we will pause momentarily to assemble our roster. And our first question will come from Matt Stottler of William Blair. Please go ahead.

Hey, David. Hey, Daryl. Thank you for taking the questions. Maybe just to start with kind of a broad macro question, right? Obviously, results much better than expected. You know, kind of balancing the current uncertainty with the long-term drivers and then some, you know, seasonal political messaging going on. A little time to just dig into what you're seeing in terms of the impact that the current macro environment has on overall usage trends, spending behavior, buying patterns, pricing, anything you're seeing from customers in terms of changing behavior in this environment.

Hey, Matt, this is David. We've noted that contract customer term lengths have ticked up. Average annual customer spend has ticked up. Our enterprise focus is squarely centered on larger global 5,000 companies, and we're working with them in all kinds of different verticals in the macro secular trend of digital transformations, and in our case specifically, moving to the cloud with what used to be premise-based equipment and solutions. And so that trend, I think, is a much more powerful force at the moment than the macro uncertainty, and we're certainly seeing that in our results, whether it's the contract term length or the average spend. On the sales desk, we've got pipeline management expertise that understands how to both nurture and then close long-term enterprise engagements, but don't have anything specifically to share about elongating contract close cycles in a way that's a concern right now.

Got you. That's very helpful and good to see and good to hear. In terms of maybe the gross margin performance, obviously a pretty nice step up year-over-year and sequentially compared to Q2. Any further commentary you can give in terms of what's driving that adjusted non-GAAP gross margin expansion, 57%? I mean, is that partially being driven by what you're seeing in the messaging side of the business? Is that primarily an increase in on-net traffic? Any additional color that would be helpful?

Hi there. Hey, this is Daryl. Product mix did play a important role. Messaging continues to be accretive to overall margin and is now 14% of total revenues. And we do continually benefit from scale, as we've talked about before on our network, with more traffic yields, volume savings from our vendors. Our teams have actually been doing a really great job of optimizing spend and securing discounts at scale, and that was part of the operating execution that I referred to earlier.

Got it. Very helpful. Thanks again.

Our next question comes from Ryan McWilliams of Barclays. Please go ahead.

Thanks for taking the question, and congrats on the quarter. Great to see one of the strongest free cash flow quarters from bandwidth in recent years. So after buying back $160 million in converts, how are you thinking about addressing the additional converts going forward and later for your growth opportunities? Thanks.

Thank you. Hey, this is Daryl again. We did strengthen our balance sheet by agreeing to repurchase $160 million of our 2026 convertible notes at a really meaningful discount to par value. That will complete in November, at the end of November, and we're going to be left with our first debt maturity to eventually occur in 2026 of around $240 million. We think with our profitable growth, we right now create the option to fully repay our remaining convertible note obligations in full upon their respective maturities through both our earnings and our available cash if we choose. As I said in the prepared remarks, we're going to remain opportunistic around our capital structure and take the necessary actions, but we're very confident in the path that we've chosen and in the optionality we've created.

Perfect. And then, Daryl, I appreciated you detailing the benefit from political messaging in the quarter. Do you have any expectations on how political could benefit 4Q on the top line? And was there any material benefit to gross margin in this quarter from political messaging?

Thanks. Hey, you're right. We do expect some similar trends we saw in the last presidential election and increased political contribution in the fourth quarter with usage peaking about now and leading up into next week into the elections. is captured in our guidance. Messaging of all stripes, as David referred to, whether it's for civic engagement, political, or commerce for the benefit of our customers, all that messaging is accretive to our company gross margin.

Excellent. Appreciate the cover. Thanks, guys.

Thanks, Ryan.

The next question comes from Mike Walkley of Canaccord Genuity. Please go ahead.

Great. Thank you, and my congrats also on the strong quarter. I guess, Darrell, just to follow up on the last question, you know, with the flat sequential revenue guidance and other strong political messaging, can you just kind of talk about the lower non-GAAP VPS in the guidance? Is that just lack of leverage from ongoing operating expense investments, or is there a change in the gross margin mix we should think about going forward, or any other one-time items?

Well, we did raise our outlook from our previous view for the fourth quarter. There are some timing from third quarter to fourth quarter. We do have some timing of operating expenses as it shifts to fourth quarter. We also have to take into account the normal seasonality that occurs with the holidays in the fourth quarter as well. That's something the company's experienced for a number of years. So that's embedded in our guidance as well when looking at the fourth quarter.

Great, thanks. And then just for my follow-up, where are you guys maybe in terms of churning some lower spend customers? I mean, it's great to see the ARPU going up and you're doing well with the large customers, but is that mainly behind you or is that still in this year still churning some lower end customers that are hitting the net ads of new customers?

Absolutely. That did continue. The net new logos that we spoke to just a moment ago were up 18 this quarter. We did have strong customer ads of 157 customers, and that was offset by removing the churning, an architected churn of defocusing from the very smallest customers. You can see that the average annual revenue per customer did increase again, and we are much more sharpened our focus on enterprise customers.

Great.

Thanks. Take my questions.

The next question comes from Meta Marshall of Morgan Stanley. Please go ahead.

Great. Thanks. Looking back at the Q2 transcript, you noted you expected a lot more of the political to be kind of a Q4 driver. wondering what you had embedded for political in Q3. And then kind of building on the last question, it seems as if you're saying that there's OPEX that picks up in Q4, just trying to get a sense of whether you think some of the gross margin strength that you saw in Q3 should translate to Q4 and that really most of the increase in expenses should come from the OPEX line item. Thanks.

Hey, Mita, it's nice to say hello. In terms of the political contribution, we did experience the political campaign contribution messaging, we did experience $7 million in the third quarter, excluding surcharges. And we do expect in the six weeks of Q4 that really represent the political campaign season, that contribution is going to be slightly higher. The $7 million in the third quarter was in line with our expectations. the slight increase in the first six weeks of the fourth quarter that we're looking at, it is in line with our previous expectations as well. In terms of operating expense, we do believe that we've resequenced the operating expenses and that the expense shift to the fourth quarter will be just a slight increase over the Q3.

But just to clarify, the growth margin should stay as strong as Q3, or is there anything that we should be considering about Q3 being stronger than Q4 would have been on the growth margin line item, considering the political contribution? Thanks.

Thanks. Margin does fluctuate. Truly, margin can and does fluctuate from quarter to quarter. We've been really focused on our annual progression over the last three years and progressing into the future. It is very possible that margin will be in line or could deviate up or down by a point or two.

Thank you.

The next question will come from Will Power of Baird.

Please go ahead.

Oh, great. Thank you. I guess a couple of questions. Great to see the better financial performance. As you look at the – probably a question for David, I guess. As you look at the revenue – upside relative to maybe where expectations had been. I mean, it sounds like, you know, messaging is a piece of that, but, but anything else you'd call out? I mean, either us internationally, I guess, kind of a aligned with that. We'd love to just get any perspective on us results versus what you saw outside the U S. Hey, well, uh, first and foremost, I think that, um,

Going into what we've described as an uncertain future, we are extremely well positioned for three reasons, as I mentioned. We've got a mission critical service and solution that we're providing to large and established customers. That's a broad, attractive focus for us. Number two, we also, because we've got owner economics, as you know, we have the added advantage of offering cost savings as an additional benefit beyond just capabilities. And in this season, that's vital. And so that's driving adoption and additional usage to your specific question. And then third, it's still early days. Certainly COVID accelerated the digital transformation of communications based on capabilities that had to happen when everyone had to work from home. Now we're in a recession and we believe that our value prop, our addressable market, our customer base, what we do resonates with them right now because of cost savings, which not everyone can offer in this season. Uniquely, we have an installed asset base as you know that has taken years and years and years if not over a decade in some cases globally. And that owner economic platform has particular resonance right now. International, as you asked at the very end, continues to be a customer experience that we're building toward with a single pane of glass. Every enterprise conversation that we're having right now on the sales desk has an international component. The original value proposition that was represented by the addition of of 60 countries outside the United States is still very much alive and flourishing. We have an appetite to serve globally, and you'll see us continue to grow globally. And so we're making very good progress.

Okay, that's great. Maybe if I could sneak in one for Daryl. Just the free cash flow looked good in the quarter. It would be great to kind of understand how you're thinking about free cash flow kind of framework from here, level of focus there, how we should think about that over the next couple of years?

We do expect, driving towards our target gross margin, along with our operating expense efficiency, we do expect, while not thinking about 2023 in specific, we do expect over the next several years to be growing our profitability and the resulting free cash flow. CapEx, we've always called it around 4% to 5%, possibly 6% of sales, depending on the particular needs of the business. I view that as becoming more flat versus scaling with revenue as the business continues to grow and will provide more free cash flow leverage fall through on EBITDA as we go through those years.

Thank you.

The next question comes from Pat Walravens of JMP Security.

Please go ahead.

Great, thank you, and let me add my congratulations. So, Daryl, for you first, I mean, it's great to see you buy back $160 million of debt at a 29% discount yesterday, right? So I'm just curious, why yesterday?

Well, that's when we were able to complete it. We did start the process last week. is something that we've been monitoring. We felt the time was right in advance of other macro items that are going on, not one of them being the election and life. We felt it was the perfect timing, and that's something we wanted to do.

Great. And then why $160 million?

Well, it was oversubscribed. You have to build a book, and we felt like that was the right amount. the right balance between the face amount, the discount, and the cash, leaving the business with more than suitable reserves and wherewithal to face any uncertainty in the future.

Okay, awesome. And then, so, David, you guys are back to the office five days a week, right? Yes, we are, Pat. How is that going? What are the pros and what are the cons?

Pros are things like morale, camaraderie, esprit de corps, a spirit week that was off the hook, and collective creativity and vibrancy among our rank and file and leadership that we haven't seen in a long time. People initially may have a period where they're adjusting and adapting, but ultimately the respect, admiration, energy, love, and human dynamic across teams is manifest, I think also being here when an analyst happens to drop by is another big-time pro.

Yeah, that's a good one. Okay, and then the other thing investors worry about is they're like, oh, they're building this big campus. They're not going to be able to use it. Are you going to be able to use that campus efficiently?

I believe we'll be the envy of many teams that may take a different path, and we are excited about both the usage of it, but also, and this is really important, It's economically savvy. It's shrewd over the lease term. It has multiples as to our productivity and morale, but that manifests in really concrete ways on retention and recruiting and productivity. And so, yes, we're going to be able to use it. We're going to be able to thrive. And it was one of the most economically shrewd things when we looked back and realized what was available at the time and what we'd have to do now if we were deciding to do this at this point. in a very hot market, including here in Raleigh.

Awesome. Thank you both.

The next question comes from Harry Wilmerding of Needham. Please go ahead.

Hey, how's it going? This is Harry from Needham. I'm stepping in for Ryan Coons. One quick question on OpEx. Can you highlight some of your strategic OpEx investments, please, on the R&D front or the new SMS features, global reach for SMS videos, robocall, mitigation, or other entirely new products? And on the sales front, how is development of your direct to enterprise sales motion developing?

Hey, Harry. This is David. On your first question, what we did announce for the quarter included two really innovative product developments that we launched, Send2, which is a new messaging app for Microsoft Teams. And what it represents is a truly native user experience to be able to do text messaging right from your productivity suite in Microsoft. That was one example of great R&D investment that's come to market as a new product. The second one was CallSure. It's the only comprehensive toll-free disaster recovery solution in the space. And we already had a really industry-leading redundancy solution for toll-free disaster calling, but for a really high-volume enterprise contact center, you can't afford to be down. And we learned some really hard-won lessons from our experiences in the recent past and took those lessons and the engineering work that we did to create something that is so innovative, we believe it's one of a kind. And Call Assure allows the very largest enterprise contact centers to do their toll-free contact center calling with absolute assurance of continuity. So that's another example of extraordinary investment coming to market in a product. We also are spending time in the contact center doing really important behind the scenes work to integrate what has really become a Cambrian explosion, as I've said in the past, of contact center AI integrations with third parties. There's so much complexity among solutions and complementary solutions. And you have a call flow which can only afford millisecond delays when you're handing off to AI engines or sentiment analyses or transcription. And we're doing really important work in R&D to make that contact center handoff of a live call really high quality and reliable. So those are some examples. On the messaging side of our business, we have really focused on the capacity challenges and the reliability challenges in messaging during a really intense season. And so that's another area of investment. And I have forgotten the second part of your question. Harry, can you remind me?

Yeah, just on the sales front, how is the development of your direct enterprise sales motion going?

It's going well. Anthony Bartolo, our chief operating officer, has brought on board Sandy, who's our chief revenue officer. And Sandy continues to lead a team stepping into more and more enterprise opportunity globally. And we believe that we've got the right leader for the right time doing the right things with this team for enterprise business among the global 5,000, and that's for both voice and messaging. Again, our value prop in this uncertain season resonates both because of the capability but also the cost savings, and that's relative to the incumbent solutions that we compete against most of the time. So if that's domestic, Verizon AT&T, or Lumen, not only do we have a software platform that they don't, but we have owner economics that allows us to compete and compete favorably.

Awesome. Thank you so much.

The next question comes from James Fish of Piper Sandler. Please go ahead.

Hey, guys. Thanks for the questions. Daryl, maybe for you, if I exclude the $7 million from messaging overall for the political messaging, it does imply that the messaging business was down actually sequentially. Can you confirm that? And if so, was that due to the pricing changes you guys made in the last quarter or two? Or what are you guys seeing with messaging, extra political messaging contribution this quarter?

To clarify, messaging growth without political messaging was up 10% year over year. Now, in terms of price, overall, we experienced a price increase or price improvement during the quarter, and that's always driven in part by mix. But again, quarter after quarter, our CPAS pricing aggregate across our solutions has improved.

Fair enough. It does seem like net retention is starting to stabilize a bit here, not looking for 2023 necessarily, but I guess As you guys are kind of planning out here the next few years, especially around, you know, thinking about what growing at a reasonable kind of rate here, what level of expansion do you think is appropriate for this business? And just a housekeeping question, does that net retention rate include or not include carrier fees as well as political messaging here this quarter?

I'll take the first part of the question. Sure. You're looking at our dollar-based net retention, I think, when you say net retention, and we had a 109 number this period. We've got a strong enterprise base of customers, and while you said stabilize, I think that it's important to understand the focus and emphasis with our large customers and the spend annually that's increasing. You should expect us to continue to grow Dubner. and we wouldn't expect it to be stable in terms of being flat. We expect to add additional enterprise customers and to grow with them, and as they succeed, it will continue to grow. So it can fluctuate from period to period, but we've got a strong conviction that the work that we're doing in the enterprise space will yield strong Dubner consistent with past periods, and so I wouldn't hang your hat on this number being fixed.

And just on the clarification, Does net retention rate include the carrier fee incremental as well as political messaging, or is that excluded from the calculation here?

Our dollar-based net retention rate does include it.

Okay. Thanks, guys.

This concludes our question and answer session as well as today's conference call.

Thank you for attending today's presentation, and you may now disconnect.