Bandwidth Inc.

Welcome to Bandwidth's inaugural Investor Day. Thank you for joining us virtually today. I'm Sarah Wallace, Bandwidth's Vice President of Investor Relations. We have an exciting agenda focused on Bandwidth's key differentiators, our long-term strategy, and the opportunity ahead. In a moment, you'll hear from David Morkin, our Co-Founder, Chairman, and Chief Executive Officer. He'll share bandwidth's origin story, vision, and strategy. Anthony Bartolo, Chief Operating Officer, will elaborate on operationalizing our vision. And Daryl Rayford, our Chief Financial Officer, will discuss our recent financial performance, our capital allocation strategy, and how it all comes together in our long-range plan. At the end of our speaker presentations and closing remarks, we will have a live question and answer session with today's presenters covering the investor day content, as well as our fourth quarter and full year 2022 earnings, which we released earlier today. All of the materials we'll present today, including the speaker video presentations and the accompanying slides will be available on our website shortly after the event. Before we begin the presentations, I would like to remind you that statements made today, including any statements regarding goals for our financial performance over the next three years, may contain forward-looking information, so typical safe harbor and risk factors apply. Please review the slide you now see that provides additional details about risks related to those forward-looking statements and where to obtain additional information about risk factors in our SEC filings. All financial measures are presented on a non-GAAP basis, except for revenue, which is a GAAP measure, unless otherwise specified. Reconciliations between our GAAP and non-GAAP results for historical periods can be found at the end of this investor presentation. Please be aware that similar to our prior quarters, details related to our fourth quarter and full year 2022 performance are provided in a separate earnings presentation specifically that may be accessed on our investor relations website. So now let's get started. It's my pleasure to introduce you to Bandwidth.

In the global economy, delivering exceptional experiences is how businesses compete and how they communicate is at the heart of their customer experience. Bandwidth is a communications cloud that simplifies how you deliver integrated global experiences. It's flexible and robust, ready to connect across your entire communication stack. Built on our own global network for unmatched reliability. It's grounded in telecom, regulatory, and real-world software expertise so you can create exceptional experiences for whatever you're building, wherever you're going, and however you want to communicate.

Welcome to Bandwidth Investor Day. My name is David Morkan, and I serve our team as co-founder, CEO, and chairman. You are joining us here in our Raleigh, North Carolina office, one of several we have around the world, and this is where the magic happens. Many of you are new to our story. Thank you for joining us. You've chosen an amazing moment in time to get to know us. We've chosen the famous movie Back to the Future to capture this moment, a rare opportunity to climb into a time machine. It was actually an 80s car called a DeLorean. Buckle in next to Michael J. Fox and travel back to the future. Are you with me? Our first destination is the year 2017 when bandwidth IPO'd. In 2017, our revenue is one-third of today. Gross margins are seven points less than today. We only offer one primary service in a single country, and messaging is a new product. Spin the dial on the DeLorean dashboard from 2017 to 2026, and when we land, you will see we provide service in over 60 countries, serve billions of messages and voice calls, expect 60% non-GAAP gross margins, 20% EBITDA margins, and approximately 125 million in total free cash flow from the prior three years, all while growing annual revenue 15 to 20% on average. Set the year in the DeLorean one more time to get back to 2023, and you suddenly realize as you get out of the car that you can invest in bandwidth today at a price close to that of 2017. Yes, it really is like being able to go back to the future. We believe that after today, you will want to join us on the road ahead. Actually, as Doc said in the movie, roads, where we are going, we don't need roads. We are more confident about our mission to develop and deliver the power to communicate than when we started the company or at any time since. So why are we so motivated today? bandwidth is leading in the front ranks of a worldwide cloud communications revolution. Migrating voice, text messaging, and emergency calling to the cloud is the fastest way for enterprises in today's economy to build a better brand experience, reduce operating costs, leverage emerging AI technologies, lighten regulatory burdens, and simplify digital transformation company-wide. And they're doing it with bandwidth because we believe our rare global footprint, powerful cloud platform, and scalable offerings have become the most compelling route to the cloud. How do we know this to be true? Global 2000 enterprises are either growing their usage with us or coming to us directly for the first time. We believe the move away from on-premise and national incumbent wireline telephone providers to our powerful global communications cloud is part of a secular, long-lasting trend that will help drive future profitable growth through all seasons and for years to come. Well, what about the challenging near-term macro environment? There are two key reasons we expect to do well. First, we were bootstrapped almost entirely until our IPO in 2017. Since then, we have demonstrated responsible growth and profitability discipline exhibited by few others. Second, communications are essential and represent durable demand for our services. These are key reasons why we weathered the last two macro storms. Before we talk about what's next at Bandwidth, let's take a moment for those new to our journey to understand what we do, how far we've come, and how hard it would be for others to follow. Bandwidth helped launch the era of cloud communications. This is a space with a current total addressable market of $12 billion. In 2022, our revenue was 573 million with a 55% gross margin. We are ranked a leader in CPaaS by the influential research firm IDC as global businesses use our software APIs to deliver communications workloads through our global platform as voice calls, text messages, and emergency services calls and notifications. You could say that we are the bandwidth inside for some of the most compelling digital communications experiences wherever people live, learn, work, and play. In fact, chances are you've already used bandwidth this morning, maybe to text an appointment confirmation to your doctor through one of our healthcare messaging customers, or maybe you called your bank about a suspicious charge on your credit card which routed through one of our contact center customers like Genesis or Five9. Did you dial into a meeting this morning on Teams or on Meet, Cisco, or Zoom, just to name a few? If you did, you likely used bandwidth. And while we are proud of having one of the most robust emergency services solutions in the world, let's hope you haven't had to call 911 yet. But seriously, if you did, our newest technology could show the exact floor and location you were calling from if your firm is compliant with Raybaum's Act. Our expertise in 911 regulations like Raybaum's Act is a strong source of new customers, like the IT-managed services provider we closed last quarter. They have a highly complex organization with 23,000 customers in 50,000 locations, and they chose Bandwidth because we solve their unique needs for E911 compliance. As a company, analysts put us in the CPaaS space. That stands for Communications Platform as a Service. We win customers away from incumbent telecom network operators around the world. Our key competitive differentiator is the Bandwidth Communications Cloud, which we believe is one of the most comprehensive and connected platforms for digital communications on the planet. We envision the Bandwidth Communications Cloud to be for global enterprise communications what Microsoft Azure or Amazon Web Services are for enterprise computing. Just as they provide secure developer frameworks on top of their owned and operated storage and computing hardware at their own data centers, Our communications cloud provides a communications developer platform on top of a bandwidth-operated all-IP network with global reach that is enterprise-grade. Just like AWS and Azure, we aim to provide unmatched reliability, scalability, and pay-as-you-use control for business-critical communications worldwide. And just like in cloud computing, what used to be on-prem, high-cost, inelastic, and incapable of orchestration is now an always-on, accessible everywhere cloud solution where communication service can be provisioned globally and instantly. And it's usage-based, so it's dynamic and scalable. Here's why this matters. In the CPaaS space, our competitors have software interfaces, but they don't own the network. They rent it. Can you imagine AWS running on Rackspace hardware or Azure relying on IBM? Quality scale and innovation is severely diminished, and they are forever chasing terminal gross margins with profitability always out of reach. In contrast, our owner economics create a flywheel effect. Every incremental revenue dollar, instead of paying rent or underlying infrastructure, includes higher and higher gross margins, available for reinvestment in innovation. Our competitors among incumbent carriers are slow and lack the innovation to keep up with the enterprise migration to the cloud. And they're limited to very specific geographies. So enterprises cannot use them as a single trusted partner for global coverage. The bandwidth communications cloud is available virtually everywhere global enterprises are today and where they want to expand in the future. And here's the kicker. The barrier to entry is magnificent. We estimate that if you tried to build the bandwidth global communications cloud starting today, it would take over 15 years and at least $500 million. And the level of difficulty would be extreme because regulators in each country move at the speed of government. So... Just like the pioneers in the enterprise cloud computing world, Bandwidth has built a unique and highly scalable cloud for voice, for messaging, and for emergency communications. That's our moat, and it's why we believe we're the best positioned CPaaS provider in our space. You will hear a lot more about this from Anthony in a few moments. The depth and breadth of our competitive moat or barrier to entry is further illustrated by the fact that we now serve all the leading power platforms in cloud communications recognized by the Gartner Research Firm. Whether it's iconic hyperscalers like Microsoft, Google, or Zoom for hybrid work, Customer experience pioneers like Genesis and Five9 for cloud contact centers. The many innovative SaaS companies building text messaging into everything from healthcare to conversational e-commerce. Bandwidth is their communications cloud. All these power platforms know they can count on us for global reach, scale, reliability, security, and customer support. Let me focus in on an example of how co-creation with our customers has fueled our success up until today and how it will drive our momentum in the future. This story begins in 2004 when Google needed a partner to power cutting edge experiences like Google Voice. Their options were large telecom incumbents who knew nothing about software APIs. Bandwidth answered their call. In what seemed audacious at the time, we built out a nationwide platform for Google that was cloud native and also available to all innovative companies to use to create the next generation of communications. In doing so, we broke through a 100-year-old wall of telecom with cloud software, making exciting new experiences possible everywhere. This was the beginning of the Bandwidth Communications Cloud, and it started our fruitful innovation partnership with Google. Over the past decade and a half, we've helped them build on our platform with AdWords, emergency services for Google Fiber, and Google Meet. Then we supported Google Home, G Suites, Google Voice for Business, and we are now supporting their global expansion into new geographies. On top of this voice network, we then added 911 emergency services and rode the next rising tide of text messaging as the first use cases for identity authentication, civic engagement, and e-commerce began to emerge. By the time of our IPO in 2017, we powered the full suite of voice, messaging, and emergency services that remain our foundation today. Another key milestone was our acquisition of VoxBone at the end of 2020 that took the bandwidth communications cloud global, giving us the capability to serve our customers everywhere they need or want to be. More recently, our innovations in the text messaging space have ignited demand for our capabilities, making this the fastest growing part of our business today. Bandwidth's capacity, high deliverability, and regulatory know-how have positioned us as the provider of choice for three growing categories. First, we began by serving high-volume enterprise customer experiences like point-of-sale message confirmation for customers like Block, e-commerce engagement for customers like Wish, two-factor authentication for financial services customers, and contact center use cases as well. And we continue to win high volume contracts from enterprises who have run out of capacity with our competitors, such as a leader in B2B text messaging that just signed with Bandwidth last quarter. The reliability and scale of our commercial messaging soon led us to be a leader in messaging for those doing civic engagement with various constituencies like schools, congregations, and memberships. And finally, and most recently, our same robust and reliable capabilities attracted a broad spectrum of customers in the political campaign messaging segment. This segment is predictably cyclical with larger and larger growth waves every two years in connection with the U.S. election cycle. That's why, coming off a year where we exceeded expectations, in 2022 and benefited from messaging related to the U.S. midterm elections, we expect low single-digit revenue growth in 2023. Excluding the contribution of 2022 campaign messaging from year-over-year comparison, we actually expect core growth in the high single digits for 2023. You'll hear more detail on our growth expectations and progression from Daryl in his presentation. In a few moments, he and Anthony will walk through the strategy, business model, and financial framework that we believe will increase our momentum. But first, I want to share some thoughts on where we've been and where we're going. The role we play at the center of cloud communications has driven incredible growth as we've expanded the capabilities and scale of our platform. Just five years ago, when we launched our IPO, bandwidth had less than a third of the revenue that we have today. Our total addressable market was about a quarter of our total addressable market today. our reach was limited to North America, compared to the vast global footprint we enjoy today, spanning 60-plus countries and more than 90% of the world's gross domestic product. And our product offers have more than doubled, while significantly expanding in scope and capabilities. The race to the communications cloud is now underway among the largest enterprises. So once again, our TAM is expanding. Throughout our history, we've been so focused on our customers that they've always led us to the next step we needed to take in our journey. In 2004, it was Google asking us to build out a software-driven network. Now it's global 2000 enterprises seeking to leverage the bandwidth communications cloud as the essential component of their business. That's why we are at another key inflection point, both in the growth of bandwidth and our space. A new era of artificial intelligence is beginning, not just in computing, but in enterprise voice and messaging as well. We are already developing ways to apply AI models to improve call routing and resolution in the enterprise contact center and other exciting use cases. It's early days, but incredibly exciting to see how adding artificial intelligence and machine learning at the core of our communications cloud can yield higher and higher value for the global 2000. We are investing to be a strong leader in this new and growing market. And AI is just one of the technologies we are bringing to our growing momentum with cloud contact centers. Last quarter, a healthcare leader in diabetes care chose bandwidth as the network provider for their Genesis contact center. The peace of mind our new Call Assure product delivers in toll-free calling redundancy was the differentiator that won the sale. The enterprise race to the cloud is on. But even in this latest wave, rest assured that the core operating principles that carried us here will be the same that take us into the future. Profitable growth, operating leverage, and cash flow generation have been the bedrock of our business and will continue to drive our financial goals. Our long-term ambition includes growing annual revenue at an average 15% to 20%. And with continued operating discipline, we expect to deliver greater than 60% gross margin, greater than 20% EBITDA margin, and a greater than 15% free cash flow margin over the next three years. We also have the team to accomplish our mission. We are blessed with a tremendous team of both new and long-tenured leaders, each an expert with deep and proven experience in our space. In the past year, we've brought aboard a new chief operating officer, chief revenue officer, chief innovation officer, and chief software strategy officer These new leaders have strong track records leading billion-dollar portfolios and scaling growth at high-profile global technology companies. As I said when we began, we are more confident in our future than we have ever been before. We believe that there is a remarkable opportunity for investors to go back in time or back to the future and invest with us at a price close to our IPO five years ago. The most compelling difference is that we are now a team with larger assets, larger revenues, more customers, higher profits, more R&D, and larger global total addressable market. Now, we're going to show you how we are operationalizing our vision and competitive advantage. First up is our Chief Operating Officer, Anthony Bartolo. Anthony joined us almost exactly a year ago after spending his distinguished career at some of the biggest global players in cloud communications. He has been a tremendous leader for us, putting in place a new multi-year operating plan and expanding our market offers to meet our customer needs. Following Anthony will be Daryl Rayford, our CFO, who will cover our 2022 results, 2023 outlook, and longer-term financial targets. Take it away, Anthony.