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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________

FORM 10-Q
__________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to
Commission File Number: 001-38285 
BANDWIDTH INC.
(Exact name of registrant as specified in its charter)
__________________________________
 
Delaware56-2242657
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
900 Main Campus Drive
Raleigh, NC 27606
(Address of principal executive offices) (Zip Code) 
(800) 808-5150
(Registrant’s telephone number, including area code)
__________________________________

Securities Registered Pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001 per shareBANDNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 
As of October 31, 2022, 23,359,265 shares of the registrant’s Class A common stock and 1,965,170 shares of registrant’s Class B common stock were outstanding, respectively.




BANDWIDTH INC.
Table of Contents
Page



Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. Forward-looking statements generally can be identified by the words “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “estimate,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our beliefs regarding the impact of macroeconomic conditions, including inflationary and/or recessionary pressures, on our business and financial condition;
our ability to attract and retain customers, including large enterprises;
our approach to identifying, attracting and keeping new and existing customers, as well as our expectations regarding customer turnover;
our beliefs regarding network traffic growth and other trends related to the usage of our products and services;
the impact of our customers’ violation of applicable laws, our policies or other misuse of our platform;
our ability to successfully defend our network, systems and data against ever-evolving cybersecurity threats, including denial-of-service and ransomware attacks;
our expectations regarding revenue, costs, expenses, gross margin, dollar based net retention rate, adjusted EBITDA, non-generally accepted accounting principles in the United States of America (“GAAP”) net income and capital expenditures;
our beliefs regarding the growth of our business and how that impacts our liquidity and capital resources requirements;
our expectations about the impact of public health epidemics, such as COVID-19 (as defined herein), or natural disasters on the global economy and our business, results of operations and financial condition;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
our ability to attract, train, and retain qualified employees and key personnel;
our beliefs regarding the expense and productivity of and competition for our sales force;
our expectations regarding headcount;
our ability to maintain and benefit from our corporate culture;
our plans to further invest in and grow our business, including international offerings, and our ability to effectively manage our growth and associated investments;
our ability to introduce new products and services and enhance existing products and services;
our ability to successfully integrate and benefit from any strategic acquisitions, including our acquisition of Voxbone (as defined herein), or future strategic acquisitions or investments;
our ability to effectively manage our international operations and expansion;
our ability to compete successfully against current and future competitors;
3

the evolution of technology affecting our products, services and markets;
the impact of certain new accounting standards and guidance, as well as the time and cost of continued compliance with existing rules and standards;
our beliefs regarding the use of Non-GAAP financial measures;
our ability to comply with modified or new industry standards, laws and regulations applicable to our products, services and business, including the General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act of 2018 and other privacy regulations that may be implemented in the future, and Secure Telephone Identity Revisited and Signature-based Handling of Asserted Information Using toKENs and other robocalling prevention and anti-spam standards and increased costs associated with such compliance;
our ability to manage fees that have been or may be instituted by network providers that increase our costs;
our ability to maintain, protect and enhance our intellectual property;
our expectations regarding litigation and other pending or potential disputes;
our ability to service the interest on our Convertible Notes (as defined herein) and repay such Convertible Notes, to the extent required; and
other risks related to our indebtedness.
We caution you that the foregoing list may not contain all the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

4

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

BANDWIDTH INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
As of September 30,As of December 31,
20222021
Assets
Current assets:
Cash and cash equivalents$166,384 $331,453 
Restricted cash918 836 
Marketable securities145,171  
Accounts receivable, net of allowance for doubtful accounts76,597 61,572 
Deferred costs3,772 3,204 
Prepaid expenses and other current assets24,273 15,820 
Total current assets417,115 412,885 
Property, plant and equipment, net73,205 69,604 
Operating right-of-use asset, net11,251 14,061 
Intangible assets, net170,498 211,217 
Deferred costs, non-current5,145 4,676 
Other long-term assets32,293 8,673 
Goodwill298,892 344,423 
Total assets$1,008,399 $1,065,539 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$21,034 $9,142 
Accrued expenses and other current liabilities75,053 65,921 
Current portion of deferred revenue6,233 6,248 
Advanced billings7,672 6,380 
Operating lease liability, current7,166 5,807 
Total current liabilities117,158 93,498 
Other liabilities9,601 6,018 
Operating lease liability, net of current portion6,426 10,958 
Deferred revenue, net of current portion8,155 7,634 
Deferred tax liability35,215 48,396 
Convertible senior notes637,248 486,440 
Total liabilities813,803 652,944 
Stockholders’ equity:
Class A and Class B common stock25 25 
Additional paid-in capital359,465 502,477 
Accumulated deficit(81,981)(76,867)
Accumulated other comprehensive loss(82,913)(13,040)
Total stockholders’ equity194,596 412,595 
Total liabilities and stockholders’ equity$1,008,399 $1,065,539 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


BANDWIDTH INC.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
Three months ended September 30,Nine months ended September 30,
2022202120222021
Revenue$148,325 $130,638 $416,178 $364,775 
Cost of revenue84,861 73,573 241,896 203,071 
Gross profit63,464 57,065 174,282 161,704 
Operating expenses:
Research and development25,044 16,857 71,735 50,036 
Sales and marketing23,184 21,143 69,663 60,458 
General and administrative16,623 18,127 50,191 49,375 
Total operating expenses64,851 56,127 191,589 159,869 
Operating (loss) income(1,387)938 (17,307)1,835 
Other (expense) income, net(338)(7,567)2,282 (20,768)
Loss before income taxes(1,725)(6,629)(15,025)(18,933)
Income tax benefit (provision)923 (315)1,161 (255)
Net loss$(802)$(6,944)$(13,864)$(19,188)
Net loss per share, basic and diluted$(0.03)$(0.28)$(0.55)$(0.77)
Weighted average number of common shares outstanding, basic and diluted25,304,057 25,114,762 25,268,216 25,075,941 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6


BANDWIDTH INC.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
Three months ended September 30,Nine months ended September 30,
2022202120222021
Net loss$(802)$(6,944)$(13,864)$(19,188)
Other comprehensive loss
Unrealized gain on marketable securities, net of income taxes458  120  
Foreign currency translation, net of income taxes(29,702)(12,512)(69,993)(29,682)
Other comprehensive loss(29,244)(12,512)(69,873)(29,682)
Total comprehensive loss$(30,046)$(19,456)$(83,737)$(48,870)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7


BANDWIDTH INC.
Condensed Consolidated Statements of Changes in Stockholders Equity
(In thousands, except share amounts)
(Unaudited)
Class A voting
common stock
Class B voting
common stock
Additional paid-in capitalAccumulated other comprehensive income (loss)Accumulated deficitTotal stockholders’ equity
SharesAmountSharesAmount
Balance at December 31, 202022,413,004 $22 2,496,125 $2 $451,463 $27,941 $(49,505)$429,923 
Issuance of debt conversion option— — — — 66,908 — — 66,908 
Debt conversion option issuance costs, net of tax— — — — (2,049)— — (2,049)
Capped call option purchase price— — — — (25,500)— — (25,500)
Exercises of vested stock options57,817 — — — 753 — — 753 
Vesting of restricted stock units141,707 — — — — — — — 
Equity awards withheld for tax liability(19,879)— — — (3,187)— — (3,187)
Conversion of Class B voting common stock to Class A voting common stock280,955 1 (280,955)— — — — 1 
Foreign currency translation— — — — — (23,185)— (23,185)
Stock-based compensation— — — — 4,390 — — 4,390 
Net loss— — — — — — (5,316)(5,316)
Balance at March 31, 202122,873,604 23 2,215,170 2 492,778 4,756 (54,821)442,738 
Debt conversion option issuance costs, net of tax— — — — 30 — — 30 
Exercises of vested stock options4,406 — — — 46 — — 46 
Vesting of restricted stock units15,605 — — — — — — — 
Equity awards withheld for tax liability(1,948)— — — (265)— — (265)
Foreign currency translation— — — — — 6,015 — 6,015 
Stock-based compensation— — — — 3,377 — — 3,377 
Net loss— — — — — — (6,928)(6,928)
Balance at June 30, 202122,891,667 23 2,215,170 2 495,966 10,771 (61,749)445,013 
Exercises of vested stock options8,700 — — — 101 — — 101 
Vesting of restricted stock units16,383 — — — — — — — 
Equity awards withheld for tax liability(1,631)— — — (154)— — (154)
Conversion of Class B voting common stock to Class A voting common stock250,000 — (250,000)— — — —  
Foreign currency translation— — — — — (12,512)— (12,512)
Stock-based compensation— — — — 3,825 — — 3,825 
Net loss— — — — — — (6,944)(6,944)
Balance at September 30, 202123,165,119 23 1,965,170 2 499,738 (1,741)(68,693)429,329 
Exercises of vested stock options3,062 — — — 23 — — 23 
Vesting of restricted stock units12,807 — — — — — — — 
Equity awards withheld for tax liability(3,000)— — — (229)— — (229)
Foreign currency translation— — — — — (11,468)— (11,468)
Unrealized gain/loss on employee benefit pension plan— — — — — 169 — 169 
Stock-based compensation— — — — 2,945 — — 2,945 
Net loss— — — — — — (8,174)(8,174)
8


BANDWIDTH INC.
Condensed Consolidated Statements of Changes in Stockholders Equity
(In thousands, except share amounts)
(Unaudited)
Class A voting
common stock
Class B voting
common stock
Additional paid-in capitalAccumulated other comprehensive income (loss)Accumulated deficitTotal stockholders’ equity
SharesAmountSharesAmount
Balance at December 31, 202123,177,988 23 1,965,170 2 502,477 (13,040)(76,867)412,595 
Exercises of vested stock options16,095 — — — 125 — — 125 
Vesting of restricted stock units144,977 — — — — — — — 
Equity awards withheld for tax liability(30,029)— — — (1,751)— — (1,751)
Adjustment to opening retained earnings due to adoption of ASU 2020-06— — — — (156,248)— 8,750 (147,498)
Foreign currency translation— — — — — (10,516)— (10,516)
Stock-based compensation— — — — 5,346 — — 5,346 
Net loss— — — — — — (6,814)(6,814)
Balance at March 31, 202223,309,031 23 1,965,170 2 349,949 (23,556)(74,931)251,487 
Exercises of vested stock options4,287 — — — 37 — — 37 
Vesting of restricted stock units28,351 — — — — — — — 
Equity awards withheld for tax liability(7,005)— — — (145)— — (145)
Unrealized loss on marketable securities— — — — — (338)— (338)
Foreign currency translation— — — — — (29,775)— (29,775)
Stock-based compensation— — — — 4,821 — — 4,821 
Net loss— — — — — — (6,248)(6,248)
Balance at June 30, 202223,334,664 23 1,965,170 2 354,662 (53,669)(81,179)219,839 
Vesting of restricted stock units30,395 — — — — — — — 
Equity awards withheld for tax liability(6,856)— — — (89)— — (89)
Unrealized gain on marketable securities— — — — — 458 — 458 
Foreign currency translation— — — — — (29,702)— (29,702)
Stock-based compensation— — — — 4,892 — — 4,892 
Net loss— — — — — — (802)(802)
Balance at September 30, 202223,358,203 $23 1,965,170 $2 $359,465 $(82,913)$(81,981)$194,596 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9


BANDWIDTH INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine months ended September 30,
20222021
Cash flows from operating activities
Net loss$(13,864)$(19,188)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization26,866 27,478 
Non-cash reduction to the right-of-use asset5,308 4,251 
Amortization of debt discount and issuance costs2,343 19,475 
Stock-based compensation15,059 11,592 
Deferred taxes and other(5,496)686 
Changes in operating assets and liabilities:
Accounts receivable, net of allowances(18,311)(20,610)
Prepaid expenses and other assets(13,389)(4,173)
Accounts payable14,305 7,122 
Accrued expenses and other liabilities17,142 1,590 
Operating right-of-use liability(5,623)(4,535)
Net cash provided by operating activities24,340 23,688 
Cash flows from investing activities
Purchase of property and equipment(18,669)(9,552)
Deposits for construction in progress(14,545)(3,000)
Capitalized software development costs(2,121)(3,212)
Purchase of land (30,017)
Proceeds from sale of land 17,462 
Purchase of marketable securities(178,153) 
Proceeds from sales and maturities of marketable securities33,102  
Proceeds from sales and maturities of other investments 40,000 
Net cash (used in) provided by investing activities(180,386)11,681 
Cash flows from financing activities
Payments on finance leases(162)(161)
Proceeds from issuance of convertible senior notes 250,000 
Purchase of Capped Call (25,500)
Payment of debt issuance costs(553)(7,544)
Proceeds from exercises of stock options162 886 
Value of equity awards withheld for tax liabilities(2,047)(3,720)
Net cash (used in) provided by financing activities(2,600)213,961 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(6,341)291 
Net (decrease) increase in cash, cash equivalents, and restricted cash(164,987)249,621 
Cash, cash equivalents, and restricted cash, beginning of period332,289 81,437 
Cash, cash equivalents, and restricted cash, end of period$167,302 $331,058