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Bandwidth Inc. (BAND)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $174.241M, above guidance and Street consensus; Non-GAAP diluted EPS was $0.36 vs $0.27 consensus; Adjusted EBITDA was $22.213M, reflecting strong execution and margin expansion . Estimates marked with an asterisk are from S&P Global: Revenue consensus $168.962M*, EPS consensus $0.27*, EBITDA consensus $17.2M*.
  • Non-GAAP gross margin expanded to 59% (from 57% YoY), and GAAP gross margin reached 41%; management highlighted resilience in Enterprise Voice and Global Voice Plans, and disciplined OpEx timing that aided profitability .
  • Guidance raised: FY25 revenue to $745–$760M and Adjusted EBITDA to $84–$91M; Q2 2025 guidance set at revenue $178–$180M and Adjusted EBITDA $18–$20M. Management now targets ~10% organic growth at the FY25 midpoint and sees operating leverage from the model .
  • Strategic highlights: strong enterprise pipeline with record $1M+ deals, Maestro/AI Bridge traction across health care, auto club, and hybrid environments; NRR 116%, customer retention >99%, ARPU a record $228K (or $211K ex 2024 political benefit) .
  • Catalyst: clear top/bottom-line beat and raised FY guide, plus visible enterprise AI voice adoption and channel progress—key stock-moving narratives in this set-up .

What Went Well and What Went Wrong

What Went Well

  • Revenue and profitability beat with margin expansion: Non-GAAP gross margin 59% (+2 pts YoY) and Adjusted EBITDA up ~40% YoY to $22M; CFO: “We delivered an approximately 40 percent increase in Adjusted EBITDA and expanded non-GAAP gross margin by two points” .
  • Enterprise voice momentum and pipeline strength: signed more $1M+ annual deals than ever; “Our pipeline for enterprise voice customers is strong… we signed more $1 million-plus annual revenue deals… than we ever have” .
  • AI voice strategy resonating, Maestro/AI Bridge driving adoption: “Over half of our enterprise customers are now utilizing our Maestro or AI Bridge platforms” and live deployments improving efficiency and costs (e.g., new IVR via AI Bridge) .

What Went Wrong

  • Free cash flow negative due to capex and working capital timing: FCF was $(13.295)M and operating cash flow $(3.083)M in Q1; management flagged timing of capex and working capital as drivers .
  • Messaging exposed to macro/retail softness: management cautioned programmable messaging (19% of cloud communications revenue) is the most macro-exposed cohort, watching retail/e-commerce trends .
  • Sequential revenue decline vs Q4 seasonal strength: Q1 revenue $174.241M vs Q4 $209.969M; normalizes for 2024 political messaging and surcharge mix, but the sequential step-down underscores seasonality and mix effects .

Financial Results

Quarterly Performance vs Prior Periods

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$193.883 $209.969 $174.241
GAAP Gross Margin (%)38% 36% 41%
Non-GAAP Gross Margin (%)58% 58% 59%
GAAP Diluted EPS ($)$0.01 $(0.06) $(0.13)
Non-GAAP Diluted EPS ($)$0.43 $0.37 $0.36
Adjusted EBITDA ($USD Millions)$23.971 $23.423 $22.213
Free Cash Flow ($USD Millions)$14.245 $30.345 $(13.295)

Q1 2025 Actual vs Street Consensus (S&P Global)

MetricConsensus (Q1 2025)Actual (Q1 2025)
Revenue ($USD Millions)$168.962M*$174.241M
Primary/Normalized EPS ($)$0.27*$0.36
EBITDA ($USD Millions)$17.2M*$22.213M

Values retrieved from S&P Global (*).

Segment/Cohort Highlights (growth/share)

Segment/CohortQ3 2024Q4 2024Q1 2025
Enterprise Voice+30% YoY revenue +29% YoY revenue +26% YoY revenue
Global Voice Plans+5% YoY revenue +3% YoY revenue +4% YoY revenue; management expects ~6% in FY25
Programmable Messaging24% of cloud comms; $8M political in Q3 +46% YoY (incl. political) 19% of cloud comms; +9% YoY normalized for 2024 political

KPIs

KPIQ3 2024Q4 2024Q1 2025
Net Retention Rate (%)117% (quarter) 122% (FY 2024) 116% (quarter)
Customer Name Retention (%)n/a>99% (FY) >99%
ARPU ($)$212K; $201K ex political $226K (record) $228K (record); $211K ex 2024 political benefit
Capex ($USD Millions)$(6.219) Q3 cash basis $(6.173) Q4 cash basis $10 (capex spend)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 2025n/a$178–$180M New
Adjusted EBITDAQ2 2025n/a$18–$20M New
RevenueFY 2025$740–$760M $745–$760M Raised lower end
Adjusted EBITDAFY 2025$82–$90M $84–$91M Raised both ends
Organic Growth (midpoint)FY 2025~9–10% normalized ~10% normalized Raised midpoint tone

Bandwidth noted it has not reconciled forward Adjusted EBITDA to GAAP due to variability in stock-based compensation .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
AI Voice & Maestro/AI BridgeLaunched Universal Platform; Maestro largest BYOC ecosystem; AI Bridge integrations (Dialogflow, Cognigy), adding Kore.ai and Amelia Over half of enterprise customers using Maestro/AI Bridge; live AI agent deployments; CEO used AI voice agents in prepared remarks Accelerating adoption and proof points
Messaging (commercial vs political; RCS/RBM)Commercial messaging growth; RBM partner with Google; centralized registration center; $8M political in Q3 Programmable messaging +9% YoY normalized; expanding to RCS RBM; macro-exposed cohort (~19% of cloud comms) Steady core growth; watching macro; feature expansion
Global Voice Plans+5% YoY (Q3); stabilization and momentum; footprint expansion via Universal Platform +4% YoY; expected to double growth to ~6% in FY25; AI use cases driving minutes Improving growth trajectory
Tariffs/MacroMacro prudence in FY25 outlook; surcharge mix effects noted for Q1’25 “Communication services are not currently subject to tariffs”; contingency retained for macro volatility Neutral to supportive
Capital StructureIncreased revolver to $150M; active note repurchases Repurchased 2026 converts leaving $7M; cash & securities $42M; no LOC borrowings Strengthened; leverage ~manageable per prior commentary
Emergency Services & Reg/ComplianceNomadic emergency services (global) and compliance tooling Continued cross-vertical traction; Maestro control improves compliance posture Ongoing innovation and sales enablement

Management Commentary

  • CEO: “We’re pleased to report a solid start to 2025, with results exceeding both our top- and bottom-line expectations… As enterprises increasingly adopt AI-powered communications, our Maestro platform is enabling them to integrate the providers of their choice” .
  • CFO: “We delivered an approximately 40 percent increase in Adjusted EBITDA and expanded non-GAAP gross margin by two points… we’re raising the lower end of our full-year revenue outlook… and increasing our EBITDA guidance for 2025” .
  • CFO on macro/tariffs: “Our communication services are not currently subject to tariffs… we do not anticipate that the current environment will materially affect our operating costs or service delivery” .
  • CEO illustrating AI voice: “My voice agent read my section… voice agents are coming or are already here… next new 100 million voice users… are going to be voice agents” .

Q&A Highlights

  • Enterprise pipeline and go-to-market: record $1M+ deals; dual motion (direct and expanding MSP/channel) compresses deal cycles and addresses larger, complex opportunities .
  • Margin durability: non-GAAP gross margins implied to be similar to Q1 through FY25; management reiterates path to 60%+ medium-term target by 2026 .
  • Messaging share and RCS: low double-digit commercial messaging growth expected in FY25; expanding to RCS RBM; premium support and deliverability are differentiators vs competitors .
  • Global voice growth: FY25 growth rate expected to ~double to ~6%, benefiting from AI-driven usage and prior customer onboarding/channel initiatives .
  • Guidance context: contingency for macro volatility; programmable messaging is most macro-exposed, but only ~19% of cloud comms; confident in voice resilience .

Estimates Context

  • Q1 2025 beat: Revenue $174.241M vs $168.962M* consensus; Non-GAAP diluted EPS $0.36 vs $0.27* consensus; Adjusted EBITDA $22.213M vs $17.2M* consensus . Values retrieved from S&P Global (*).
  • Implications: Street likely to raise FY25 revenue and EBITDA models reflecting raised guidance (revenue $745–$760M; EBITDA $84–$91M) and margin trajectory; mix shifts and surcharge normalization should be incorporated in messaging assumptions .

Key Takeaways for Investors

  • Clear beat-and-raise quarter: outperformed revenue/EPS/EBITDA vs consensus and raised FY guide—supportive for near-term sentiment and potential estimate revisions .
  • Margin story intact: non-GAAP gross margin at 59% with management signaling similar levels through FY25—key for medium-term EBITDA leverage and 2026 20% EBITDA margin target .
  • Enterprise AI voice adoption is tangible: Maestro/AI Bridge wins across health care, public sector, hospitality; expect sustained minutes growth and wallet share expansion .
  • Global Voice Plans growth improving: management guiding ~6% for FY25, aided by AI initiatives and prior onboarding/channel activity—adds resiliency to top-line .
  • Messaging steady but macro-exposed: plan for low double-digit commercial growth; watch retail/e-commerce cycles and surcharge normalization; RCS RBM could be an upside lever over time .
  • Cash/Balance sheet improving: converts repurchased; modest remaining 2026 tranche; cash/securities $42M; no revolver draw—reduces capital structure overhang .
  • Trading setup: upside catalysts include continued enterprise deal flow, Q2 print vs guide ($178–$180M/$18–$20M), and incremental AI voice case studies; watch FCF cadence given Q1 working capital/capex timing .