A month has gone by since the last earnings report for Bandwidth (BAND). Shares have lost about 9.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Bandwidth due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Bandwidth Q2 Earnings Outpace Estimates, Guidance Up
Bandwidth reported solid second-quarter 2023 results, beating the top-line and bottom-line estimates and well exceeding its guided range. The strong performance was backed by enterprises increasingly relying on Bandwidth’s platform for communications in the cloud. In order to drive growth, the company plans to focus on winning large enterprises and becoming the best global CPaaS platform for scaling digital engagement.
On a GAAP basis, net loss during the quarter was $3.9 million or a loss of 15 cents per share compared with a loss of $6.2 million or a loss of 25 cents per share in the prior-year quarter. The narrower loss was primarily attributable to top-line growth and gain on business interruption insurance recoveries.
Excluding non-recurring items, non-GAAP net income during the reported quarter was $4.4 million or 16 cents per share against non-GAAP net loss of $0.9 million or a loss of 4 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 10 cents.
Quarterly revenues improved to $145.9 million from $136.5 million in the prior-year quarter and exceeded the consensus estimate of $141 million. The growth was backed by high demand for digital engagement and strong contributions from messaging services across a variety of use cases, including health care, retail and e-commerce shopping, fintech and civic engagement.
Non-GAAP gross margin during the quarter was 55%, reflecting growth of 2 percentage points, primarily due to efficient pricing and product mix, global coverage, economies of scale and diligent execution of operational plans within the cloud operations and service groups. Adjusted EBITDA was $10.6 million, well above the guidance and up from $5.1 million in the prior-year period.
Cash Flow & Liquidity
In the first six months of 2023, net cash utilized for operating activities was $3.3 million against an operating cash flow of $0.3 million in the prior year. Cash and cash equivalents as of Jun 30, 2023, were $91.8 million, with convertible senior notes of $417.6 million.
For 2023, Bandwidth increased its revenue guidance with superior first-half performance and currently expects revenues in the band of $588 million to $592 million, up from $576 million to $584 million expected earlier. Adjusted EBITDA is expected in the range of $44 million to $46 million.
For the third quarter, revenues are expected to be within 148 million to $150 million. Adjusted EBITDA is expected in the band of $10 million to $12 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -36.11% due to these changes.
Currently, Bandwidth has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Bandwidth has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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