Bandwidth Tops Q3 Expectations; Shares Rise


Cloud-based communications services provider Bandwidth Inc. (BAND) delivered outstanding third-quarter results, pushing shares up 2.7% during the extended trading session on November 8.

Despite facing network interruptions related to a cyber-attack, the company managed to strengthen its defenses, retain customers, exceed both earnings and revenue expectations and provide upbeat guidance.

Outstanding Q3 Results

The company reported earnings of $0.25 per share, up 4.2% year-over-year, significantly higher than the consensus estimate of $0.08 per share.

Similarly, total revenue grew 54% year-over-year to $130.64 million, outpacing the consensus estimate of $124.58 million. The company’s Communications Platform-as-a-Service (CPaaS) revenue, a major revenue contributor, grew 46% year-over-year to $107.4 million.

Further, while the active CPaaS customers increased to 3,173 during the quarter, the company’s dollar-based net retention rate declined to 108%.

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Management Comments

Happy with the results, David Morken, the CEO of Bandwidth, said, “We delivered another solid quarter, with a number of important customer wins, strong momentum from cross-selling on our global network, and continued growth in our API-driven CPaaS products. The DDoS (distributed denial-of-service) attacks on our network have sharpened our defenses and made us stronger than ever, and we’re in a position to leverage what we’ve learned to help make the ecosystem safer for enterprise communications.”

Guidance

Based on the current business momentum and the estimated impact from the DDoS attacks, Bandwidth forecasts fourth-quarter revenue to fall in the range of $115.7million to $120.7 million. The company anticipates a loss of $0.15 per share to $0.11 per share.

Similarly, the full-year fiscal 2021 revenue is projected to be between $480.5 million and $485.5 million against the consensus estimate of $485 million. Meanwhile, FY21 earnings are expected to fall in the range of $0.74 per share to $0.78 per share against the consensus estimate of $0.71 per share.

Analyst Recommendations

Responding to Bandwidth’s quarterly performance, JMP Securities analyst Patrick Walravens said, “The company reported its full 3Q21 results that were generally in line or better than its October 26 preannouncement.”

Walravens reiterated a Buy rating on the stock with a price target of $206, which implies 147.4% upside potential to current levels.

According to the analyst, the most important news in the third quarter was the DDoS attack that impacted Bandwidth’s network for five days, albeit, he also noted that the company successfully adjusted its defenses. Despite service disruption, Walravens believes BAND is well-positioned to withstand similar future attacks while maintaining customer relationships.

Overall, the stock has a Strong Buy consensus rating based on 7 Buys and 1 Hold. The average Bandwidth price target of $165.14 implies 98.37% upside potential to current levels. However, shares of the company have lost 42% over the past year.

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