Erik Suppiger

Erik Suppiger asked about the discrepancy between the 10% cloud communication growth outlook and the 16% total revenue growth, and whether Bandwidth is observing increased competition from Twilio in the CPaaS voice market.

Answer

Daryl Raiford, CFO, and David Morken, CEO, clarified that the difference is primarily due to carrier messaging surcharges, with two major carriers announcing price increases factored into the 2026 guidance. Mr. Morken emphasized these are pass-through surcharges, not impacting margins. Regarding competition, Mr. Morken stated they are not seeing increased competitiveness from Twilio, noting recent wins against legacy carriers like Verizon and AT&T.

Erik Suppiger asked about the significant difference between the 2026 cloud communication growth outlook of 10% and the total revenue growth outlook of 16%. He also inquired if Bandwidth is observing increased competitiveness from Twilio in the voice side of the CPaaS market, given Twilio's reported increase in voice traffic.

Answer

Daryl Raiford, CFO, and David Morken, Chairman and CEO, explained that the difference in growth rates is primarily due to carrier messaging surcharges. They noted that two major carriers have announced price increases for 2026, which are passed through and do not impact margins. David Morken stated that Bandwidth is not seeing increased competition from Twilio, citing recent wins against Verizon, AT&T, and other smaller carriers.

Erik Suppiger from B. Riley Securities sought clarification on the budget dynamics that led to customers pulling orders from NETSCOUT's March quarter into the December quarter, given typical calendar year-end budget cycles. He also asked for detailed insights into the specific AI use cases driving the strong performance in NETSCOUT's service assurance business, particularly within the enterprise segment.

Answer

Anil Singhal, President and CEO of NETSCOUT, clarified that customer fiscal year differences often result in budget utilization at their calendar year-end (NETSCOUT's Q3), leading to pull-ins from NETSCOUT's subsequent quarter. He detailed that service assurance growth is driven by traditional IT troubleshooting with NETSCOUT's Smart Data and emerging AI use cases, where this enhanced data is leveraged by third-party applications for diverse business purposes. Singhal estimated the AI use case contribution for the first nine months of the fiscal year to be approximately $15 million.

Erik Suppiger inquired about the mechanics of budget pull-ins from the March quarter into December, and sought details on the AI use cases driving the strong service assurance business, particularly within the enterprise segment.

Answer

Anil Singhal, President and CEO, explained that budget pull-ins occur due to customers' differing fiscal year ends, allowing them to utilize remaining budgets. He detailed two main AI use cases for NETSCOUT's Smart Data in service assurance: traditional service triage and leveraging enhanced data for external applications like Splunk or agentic AI, noting a $15 million contribution from AI use cases over the past nine months.

Erik Suppiger asked for an update on the deployment status at JPMorgan Chase & Co. and inquired about logical low-hanging fruit for enterprise opportunities beyond customer experience. He also sought clarification on whether recent wins were greenfield or displacements, and what types of insufficient solutions customers were currently using for knowledge management.

Answer

Ashu Roy, CEO, confirmed the JPMorgan Chase & Co. deployment is halfway rolled out and expected to be fully completed later this year as planned. He mentioned that new enterprise use cases would be shared at the eGain Solve customer event in May, with initial expansion focusing on broader customer operations. Roy stated that most wins involve replacing tactical solutions or legacy systems lacking innovation or AI readiness. He identified three common insufficient solutions: fragmented SharePoint repositories with failed RAG attempts, knowledge stuck in Salesforce with unfulfilled commitments, and outdated point knowledge management solutions.

Erik Suppiger asked for an update on the full rollout status of the JPMorgan Chase & Co. deployment, identified logical low-hanging fruit for enterprise expansion beyond customer experience (CX), and clarified whether recent wins were greenfield opportunities or displacements of existing solutions, specifically addressing the insufficiency of CRM platforms for knowledge management.

Answer

CEO Ashu Roy confirmed the JPMorgan Chase & Co. deployment is halfway rolled out and expected to be fully completed later this year. He indicated that initial enterprise expansion would be concentric around broader customer operations, with more details to be shared at an upcoming customer event. Ashu Roy stated that most wins involve replacing tactical solutions or large, innovation-stalled systems, often due to existing CRM solutions or point knowledge management tools failing to keep pace with AI expectations, or companies struggling with RAG on scattered SharePoint repositories.

Erik Suppiger asked for the contribution from the federal business and the on-premises federal business, and whether there was a difference in the decline of renewal rates between federal and non-federal on-premises categories.

Answer

Guy Melamed (CFO & COO) stated that the federal business typically accounts for about 5% of total ARR. Q3 experienced a headwind of several million dollars from federal renewals. He confirmed that the renewal rate decline was observed in both the federal and non-federal on-premises segments, which led to the reduction in Q4 guidance.

Erik Suppiger asked for the contribution from the federal business (total and on-premises) and if there was a difference in the decline of renewal rates between federal and non-federal on-premises categories.

Answer

CFO Guy Melamed stated that the federal business typically accounts for about 5% of total ARR. He confirmed a headwind of several million dollars from federal renewals in Q3. The decline in renewal rates was observed in both the federal and non-federal on-premises segments, indicating it was not solely a federal issue.

Erik Suppiger of JMP Securities asked about the company's plans regarding potential tariffs and whether they would raise prices. He also inquired about inventory, specifically the percentage of U.S. shipments from the new warehouse and if finished goods inventory would continue to grow.

Answer

Robert Pera, Founder, CEO and Chairman, stated that a decent percentage of U.S. revenue now flows through the domestic inventory center. He emphasized that his primary focus is meeting demand and resolving chronic stock-outs, which will dictate business decisions rather than a specific inventory level on the balance sheet.

Erik L. Suppiger asked for an update on the company's goals for its aggressive share buyback program and how it measures the return on investment for these repurchases.

Answer

Robert J. Pera, Founder, CEO and Chairman, stated the goal is to use capital efficiently, noting that past buybacks have yielded a better return than holding cash. He explained that while acquisitions are considered, the company's unique culture makes organic growth preferable. Therefore, using cash to retire undervalued shares and improve future EPS is an easy decision.

Erik Suppiger asked about the flat revenue outlook for the December quarter, which typically sees a seasonal uptick, and inquired about the progress of migrating distributors to new warehouses and adjusting their inventory levels.

Answer

Robert Pera (Chairman and CEO) stated that quarter-to-quarter variations are not a good reflection of long-term objectives and announced the company would stop giving quarterly guidance next fiscal year. He emphasized that operational and supply chain execution is the company's weakest area and a top priority for improvement, which currently causes a mismatch between quarterly results and true business demand.