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Bandwidth Inc. BAND reported healthy fourth-quarter 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Higher Communications Platform-as-a-Service (CPaaS) revenues on the back of dynamic fundamentals drove the financial performance.
On a GAAP basis, net loss in the December quarter was $19.9 million or a loss of 81 cents per share compared with net loss of $1.9 million or a loss of 8 cents per share in the prior-year quarter. The year-over-year deterioration despite top-line growth was primarily caused by higher operating expenses.
On an adjusted basis, quarterly net income was $3.5 million or 13 cents per share against net loss of $0.5 million or a loss of 2 cents per share in the year-ago quarter. The bottom line beat the consensus estimate by 9 cents.
Bandwidth Inc. Price, Consensus and EPS Surprise
Bandwidth Inc. price-consensus-eps-surprise-chart | Bandwidth Inc. Quote
For 2020, net loss was $44 million or a loss of $1.83 per share against net income of $2.5 million or 10 cents per share in 2019. On an adjusted basis, net income for 2020 was $14.2 million or 55 cents per share against net loss of $5.3 million or a loss of 23 cents per share in 2019.
Quarterly revenues came in at $113 million compared with $62 million in the year-ago quarter. The 82.3% year-over-year increase was primarily driven by higher CPaaS revenues. The top line was further augmented by increased messaging due to the Presidential elections and higher work-from-home trend owing to the virus outbreak. The top line surpassed the consensus estimate of $97 million. Total revenues in 2020 were $343.1 million, up from $232.6 million in 2019.
Quarterly Segment Results
CPaaS revenues surged 83.7% to $98.1 million from $53.4 million in the year-ago quarter. Accounting for 86.8% of total revenues, the improvement was primarily backed by higher demand for work-from-home connectivity solutions amid coronavirus-induced lockdowns. Elevated volumes of political messaging traffic was a contributing factor as well. With a resilient business model, the segment witnessed 109 CPaaS customer additions and 700 new Voxbone customer accounts during the reported quarter. Markedly, the dollar-based net retention rate was 133% compared with 113% in the prior-year quarter.
Adjusted CPaaS gross profit jumped to $50 million from $26.3 million in the year-ago quarter, with respective margins of 51% and 49%. Notably, Bandwidth ended the quarter with 2,848 active CPaaS customers.
Contributing 13.2% to total revenues, Other revenues increased 73.3% to $14.9 million from $8.6 million in the year-ago quarter.
Total operating expenses were $63.9 million compared with $32.5 million in the prior-year quarter, primarily due to higher research and development, and general & administrative expenses.
Operating loss came in at $12.2 million compared with an operating loss of $3.5 million in the year-ago quarter. Adjusted gross profit in the quarter improved to $55.8 million from $31.1 million with respective margins of 49% and 50%. Adjusted EBITDA totaled $8.3 million compared with $1.2 million in the year-ago quarter.
Cash Flow & Liquidity
In 2020, Bandwidth generated $4.5 million of net cash from operating activities against net cash utilization of $1.3 million in 2019. As of Dec 31, 2020, the company had $72.2 million in cash and equivalents with total current liabilities of $92.2 million compared with respective tallies of $184.4 million and $45.7 million in the prior-year period.
Q1 and 2021 Guidance
Bandwidth provided the outlook for first quarter and 2021. For the first quarter, revenues are expected in the range of $108-$109 million. Adjusted earnings are anticipated to be 0-2 cents per share. CPaaS revenues are expected in the band of $96.6-$97.6 million.
For 2021, revenues are anticipated in the range of $460.4-$464.4 million. Adjusted earnings are estimated in the range of 2-12 cents. CPaaS revenues are projected in the band of $413.3-$417.3 million.
Zacks Rank & Stocks to Consider
Bandwidth currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader industry are Knowles Corporation KN, sporting a Zacks Rank #1 (Strong Buy), and Corning Incorporated GLW and Viavi Solutions Inc. VIAV, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Knowles has a long-term earnings growth expectation of 10%. It delivered an earnings surprise of 19.3%, on average, in the trailing four quarters.
Corning has a long-term earnings growth expectation of 2%. It delivered an earnings surprise of 41.6%, on average, in the trailing four quarters.
Viavi has a trailing four-quarter earnings surprise of 20.2%, on average.
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