Bandwidth (BAND) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Oct. 29, 2026

CALL PARTICIPANTS

• Senior Vice President of Investor Relations – Nils Erdmann
• Chief Executive Officer – David Morken
• Chief Financial Officer – Daryl Raiford
• Chief Product Officer – John Bell

TAKEAWAYS

• Total Revenue — $234 million, representing a 22% increase year over year driven by record cloud communications performance.
• Cloud Communications Revenue — $158 million, growing 12% due to expansion in enterprise voice and programmable messaging.
• Adjusted EBITDA — $35 million, reflecting 43% growth and reaching a record 22% margin due to business model scalability.
• Non-GAAP Gross Margin — 60.6%, improving nearly 300 basis points reflecting an 86% gross profit yield on cloud communications growth.
• Free Cash Flow — $33 million, increasing over 150% resulting from strong operational execution and top-line expansion.
• Programmable Messaging Revenue — $33 million, growing 26% driven by 14% commercial messaging growth and $3 million in political revenue.
• Voice Revenue — $125 million, rising 9% through a 15% increase in Enterprise Voice and 8% growth in Global Voice Plans.
• Software Services Revenue — $7 million, increasing 68% and exiting the quarter at an annual recurring revenue rate over $30 million.
• Net Retention Rate — 113%, or 114% when adjusted to normalize for cyclical political campaign revenue impacts.
• Average Annual Revenue Per Customer — $273,000, reaching a record level due to customer expansion and larger enterprise acquisitions.
• Share Repurchases — $10 million, used to buy back 225,000 shares at an average price of $44.20 during the third quarter.
• Net Leverage — 1.3x, reduced from 1.6x in the previous quarter while improving the debt maturity profile.
• Full-Year Revenue Guidance — $905 million to $910 million, narrowed to reflect third quarter results and sustained demand.
• Full-Year Cloud Communications Guidance — $624 million to $626 million, representing 11% growth at the midpoint.
• Enterprise Deal Pipeline — 11 deals exceeding $1 million in annual contract value signed year to date, which will layer into results over the next 12 months.
• Capital Expenditures — $24 million to $26 million, projected for the full year 2026 to support capacity expansion.
• Political Campaign Revenue — $10 million total expected for the full year, representing a $3 million reduction from previous projections.
• Quarterly Debt Reduction — $21 million in principal of 2028 convertible notes repurchased at a discount to par.
• Enterprise Voice Growth — Expected to exceed 20% in the fourth quarter, supported by usage demand and recent customer onboarding.
• Aggregate Deal Value — $30 million in annual contract value closed since the start of 2025 across 17 large-scale implementations.

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RISKS

• Raiford reported that the company is “trimming our expectation for political campaign revenue by $3 million to a total of $10 million for the year.”
• Morken noted that while consumer personal agents are beginning to make calls to businesses, the initial volume of these interactions will be small for a multiyear period.

SUMMARY

Bandwidth Inc. (BAND +7.92%) reported record quarterly revenue and adjusted EBITDA while raising its full-year 2026 outlook across all core guidance metrics. Management expressed confidence in achieving double-digit cloud communications revenue growth in fiscal 2027, despite the expected lapping of political messaging revenue from the current cycle. The company’s strategic focus centers on owning and operating a global communications network to provide the low-latency connectivity required by artificial intelligence (AI) agents. Management stated that the fourth quarter of 2026 will serve as a turning point for growth rates as high-value enterprise deals signed throughout the year begin their phased deployment.

• CEO Morken indicated that the company generates revenue through interaction volume rather than seat-based licensing, which management expects will benefit from the increased frequency of AI-driven conversations.
• Management expanded its relationship with Salesforce, becoming the first certified carrier to support the global rollout of its native contact center across more than 25 countries.
• The company upsized its revolving credit facility to $200 million and extended its maturity to Oct. 26, 2031, to increase financial flexibility.
• Morken noted that the network acts as a trusted infrastructure layer for voice AI, stating, “Voice SI raises the bar for latency, trust, and compliance.”
• Management reported a customer name retention rate above 99%, which CFO Raiford attributed to the mission-critical nature of the communications cloud.
• The company is deploying compute capabilities in its points of presence to ensure network latency does not exceed the processing time required by AI models.

INDUSTRY GLOSSARY

• ACV: Annual Contract Value, representing the total value of a customer contract over a 12-month period.
• BYOC: Bring Your Own Carrier, a model where enterprises use their preferred telecommunications provider within a third-party software platform.
• CPaaS: Communications Platform as a Service, a cloud-based platform that allows developers to add real-time communications features to applications.
• Maestro: Bandwidth’s orchestration platform that allows enterprises to integrate and manage various AI and communication tools.
• SI (Super Intelligence): The terminology used by management to describe advanced artificial intelligence agents and their interactions.
• SIP Trunking: A method of delivering voice and other unified communications services over the internet to an IP-capable private branch exchange.
• WebRTC: Web Real-Time Communication, a technology that enables web browsers and mobile applications to conduct real-time communication via APIs.

Full Conference Call Transcript

Operator: Good day, and welcome to the Bandwidth Inc. Third Quarter 2026 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 Nils Erdmann, Senior Vice President of Investor Relations. Please go ahead.

Nils Erdmann: Thank you, operator. Good morning, and welcome to Bandwidth’s Third Quarter 2026 Earnings Conference Call. I am joined today by David Morken, Chief Executive Officer, and Daryl Raiford, Chief Financial Officer. We will begin with prepared remarks and then open up the call for Q&a

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