Bandwidth Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 2, 2023

There are 11 speakers on the call.

Operator

Good day, and welcome to the Bandwidth Second Quarter 2023 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Sarah Wallace, Vice President of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you. Good afternoon, and welcome to Bandwidth's Q2 2023 earnings call. Today, we'll discuss the results announced in our press release issued after the market closed. The press release and an earnings presentation With me on the call this afternoon is David Morken, our CEO and Daryl Raiford, our CFO. They will begin with prepared remarks and then we will open up the call for Q and A.

Speaker 1

During the call, we will make statements related to our business that may be considered forward looking, including statements concerning our financial guidance for the Q3 and full year of 2023. We caution you not to put undue reliance on these forward looking statements as they may involve risks and uncertainties that may cause actual results to vary materially from any future results or outcomes expressed or implied by the forward looking statements. Any forward looking statements made on this call and in the presentation slides reflect our analysis as of today, and we have no plans or obligation to update them. For a discussion of material risks and other important factors that could affect our actual results, Please refer to those contained in our latest 10 ks filing as updated by other SEC filings, all of which are available on the Investor Relations section of our website at bandwidth.com and on the SEC's website at sec.gov. During the course of today's call, we will refer to certain non GAAP financial measures.

Speaker 1

A reconciliation of GAAP to non GAAP measures is included in our press release issued after the close of market today as well as in the earnings presentation, which are located on our website at investors. Bandwidth.com. With that, let me turn the call over to David.

Speaker 2

Thank you, Sarah, and welcome to everyone joining our call this afternoon. I am delighted with the progress we made during our last quarter and I'm pleased with our financial results. Before I share some of the successes of the last quarter, please let me start by thanking God for all he has done for us. Our mission is just To develop and deliver the power to communicate and we are motivated to serve customers together day in and day out. The profound technological change in how we communicate is accelerating and Bandwidth remains in the forefront.

Speaker 2

No company has our unique combination of assets To meet emerging and dynamic communications needs, a powerful global communications cloud, deep expertise, Longstanding closely embedded customer relationships and a culture of exceptional service and innovation. Thank you to our customers for trusting us with your mission critical communications and to all the bandmates around the world whose hard work drives our success. Just as we had projected at the start of this year, the macroeconomic environment remains uncertain. We've observed continuing cautious behavior from We are likewise operating our business through the same environment by scrutinizing product and investment strategies, while balancing growth and profitability. We expected this season and thus far it has played out as we projected.

Speaker 2

Given the macroeconomic choppiness, I'm so pleased with our business execution and our outperformance in the Q2. We exceeded both our revenue and profitability guidance. With a view toward the remainder of the year, we have raised our revenue outlook to reflect the over performance in the quarter and we remain on track to achieve our 2023 financial targets, including growing profitability by 30% for the full year. We're focused on the second half of twenty twenty three as well as building our business for sustainable leadership with our medium and long term targets in mind. It was fitting that IDC again named us a leader in their worldwide CPaaS marketscape For the 3rd consecutive time, we believe it's a strong validation from the market of our long term strategy and the enduring value we're providing within the global cloud communications space.

Speaker 2

As we described at our Investor Day in February, Our enterprise grade consumable APIs, global owned and operated network and deep regulatory experience position us well In large and growing global markets, we focused our go to market around 3 distinct customer categories: Global communications plans, programmable services and direct to enterprise. Each of these delivered solid customer momentum in the second quarter. Let me highlight a few examples from each. In our largest customer category, Global Communications Plans, We are honored to count as our customers all 20 of the leading power platforms that comprise the Gartner Magic Quadrants for both UCaaS and CCaaS. We remain focused on leveraging our global footprint to drive up sell and cross sell within our existing As well as attracting new customers.

Speaker 2

This quarter, we want to highlight 2 new customers in this category that have sustainable and substantial business outside the U. S. And chose Bandwidth for our resiliency and our country coverage reaching over 90% of global GDP. Our first example is a contact center services provider that is relied on for business critical operations by thousands of customers across a wide range of industry verticals worldwide. After a major outage It severely disrupted their business.

Speaker 2

Their incumbent provider was unable to give answers or honor their SLAs, resulting in a loss of several major accounts. Bandwidth's reliability, resiliency and premium support concierge experience convinced them to move their portfolio to Bandwidth. They are now using nearly our complete service offering, including telephone numbers and local and international calling in Europe, South America and Asia Pac in addition to North America along with E911 and Global Emergency Services, text messaging and U. S. Toll free calling.

Speaker 2

This customer signed over 200 new international customers in the past year, so our global reach, regulatory experience and ability to scale are key to their future growth plans. Another large contact center service Provider chose Bandwidth's voice APIs to serve their customers in 30 plus countries across the EMEA region. This rapidly growing customer was looking to expand into new geographies from their home base in Central Europe, but their collection of incumbent providers couldn't handle the complexity. Bandwidth solved their challenges with our global reach and regulatory expertise, while at the same time enabling new capabilities to allow customized local services. The value proposition Bandwidth offers is clear.

Speaker 2

We solve our customers' communications complexity, we lower our customers' cost and we create capabilities allowing our customers to benefit from new revenue streams and we do it globally. In our Programmable Services customer category, which primarily powers the leading text messaging platforms, we continue to benefit from a steadily rising baseline of activity To support commercial use cases including banking and financial services, retail and e commerce, healthcare, Patient engagement as well as ongoing civic engagement about breaking news and issues of the day. For example, one of our existing programmable services customers scaling on the Bandwidth Communications Cloud pioneered the use of automated text messaging for patient engagement across a variety of healthcare practices. Bandwidth's messaging APIs enable appointment reminders and two way texting to connect with patients through Customizable personalized touch points at every step of the care journey. Bandwidth is becoming a provider of choice for these use cases Because customers know their text messages will be delivered.

Speaker 2

Our platform is seen as a gold standard of enterprise grade support, Scalability, reliability and throughput. Finally, our direct to enterprise customer category delivered a strong performance in this Dynamic and growing space. We're seeing a greater urgency from larger enterprises to begin migrating their on premises contact center, Collaboration services and internal communications to the cloud because of the operational savings and also the cloud enabled capabilities This is a large and durable long term opportunity with 75% of Global Enterprise is planning to migrate communications to the cloud, but having not yet begun according to IDC Research. Maestro, our award winning next generation communications platform that we announced in March is becoming a catalyst for our direct to enterprise Maestro enables enterprises to achieve faster time to value through rapid cloud deployment and configuration, While reducing complexity and ensuring future flexibility, it provides the crucial technology bridge enterprises need to create a modern communications stack, Solving the difficulties of interoperability and deployment of all the best in class cloud contact centers, Unified communications platforms and artificial intelligence and machine learning environments. Just one example Of Maestro's newest capability is our integration with Cisco WebEx Calling, which we announced generally available in June.

Speaker 2

This opens up a large new opportunity for Bandwidth and Cisco to provide cloud connectivity for over 10,000,000 users At any stage of the enterprise migration journey, whether on premise, hybrid or pure cloud. In fact, We just won our first customer for this new Cisco integration with Maestro, a Texas based children's hospital network widely regarded as one of the most prestigious in the United States. This large healthcare provider was eager to move its Contact center and collaboration communications to the cloud, but needed to do it in stages to avoid business disruptions with their complex On premise legacy system. Bandwidth's number management API and flexible call routing were able to maintain both their old on prem And new cloud environments at the same time, preserving critical business continuity. It's another example of how our deep in digital transformation supports customers every step of the way on their journey to the cloud.

Speaker 2

In another example of how we solve complexity for the enterprise, this past quarter we closed one of our largest ever Microsoft Teams direct routing contracts. A Fortune 200 energy technology company was exhausted from their legacy providers failing to keep up with their usage growth and badly needed a modern communications provider to enable their Teams deployment globally. The customer and our deep experience as a Microsoft direct routing provider. To accelerate onboarding, our team worked with the customer to align their tech stack, ensuring they could maximize their team's deployment and be up and running rapidly with Bandwidth. In summary, I'm pleased with our progress through the first half of twenty twenty three.

Speaker 2

Looking forward, we will continue to navigate the current commercial environment, Maintaining our strong focus on disciplined execution and expanded profitability, while leveraging our global reach, Regulatory experience, enterprise grade APIs and breakthrough innovations like Maestro, all for the benefit of our customers. I'll now turn it over to Daryl to walk through the details of our Q2 financial results.

Speaker 3

Thank you, David, and good afternoon, everyone. We completed the first half of the year with another solid quarter, exceeding expectations on both the top and bottom lines. 2nd quarter revenue of $146,000,000 exceeded the midpoint of our guidance by $5,000,000 Adjusted EBITDA of $11,000,000 exceeded the midpoint of guidance by $6,000,000 2nd quarter revenue compared with last year benefited from higher usage up 11% and higher monthly recurring charges for phone numbers and emergency services, which combined were up 8% year over year. Messaging in the quarter represented 17% of total revenue excluding surcharges. Our commercial messaging growth was driven by solid demand across a variety of use cases including healthcare, Retail and e Commerce, FinTech and Civic Engagement.

Speaker 3

The pass through surcharges associated with messaging We're $27,000,000 in the 2nd quarter. In terms of our market results, our global communications plans revenue performance, Excluding surcharges was in line with our expectations essentially unchanged year over year as its large voice component continued to see softness from macroeconomic conditions. Programmable services and direct to enterprise customer categories grew 15% 21% respectively year over year. Programmable services continued to strengthen from the aforementioned broad based demand in messaging. Direct to enterprise benefited from new customer additions.

Speaker 3

The Global 2000 migration to cloud communications Evident in the enterprise customer wins that David just highlighted and coupled with a strong enterprise pipeline, we have confidence this market It will be a key contributor to driving future profitable growth. Rounding out our 2nd quarter results. Non GAAP gross margin was 55%, up 2 percentage points from the prior year's quarter. We continue to benefit from economies of scale, a richer mix of higher margin products, Global coverage and operating improvements as we continue to march towards our medium term targets of greater than 60%. A favorable combination of increased non GAAP gross margin and operating leverage produced adjusted EBITDA of $11,000,000 In terms of operating metrics, our first quarter net dollar retention rate was 106%.

Speaker 3

For larger customers with greater than $100,000 annual revenue, our net dollar retention was 108%, 2 percentage points higher than the total customer metric and clearly demonstrating the benefits of focusing on large customers and direct to enterprise opportunities. Customer logo retention remained well above 99%. Average annual revenue per customer, which has steadily increased over the past 6 quarters, reached $176,000 in the 2nd quarter, again demonstrating our success in securing larger customer opportunities. We ended the quarter with a cash and securities balance of 1 $123,000,000 a more than sufficient amount to meet our business needs and sustain a great deal of financial flexibility. Following quarter end in July, we received $4,000,000 in proceeds from our insurance carrier As reimbursement of lost profits related to the cyber incident experienced in September 2021.

Speaker 3

And recently, We established an undrawn $50,000,000 revolving credit facility with Bank of America and Wells Fargo as co lead agents to round out our working capital profile. This new facility replaces the undrawn facility we previously maintained with SVB. You'll recall we unilaterally terminated the SVB facility in March. Turning to our full year outlook, We're increasing our revenue guidance to approximately $590,000,000 to reflect our first half revenue over achievement and higher than expected messaging surcharges. We will strengthen our operating flexibility by maintaining our outlook for full year adjusted EBITDA of approximately $45,000,000 representing a projected growth of 30% from last year.

Speaker 3

For the Q3, we expect revenue of approximately $149,000,000 and adjusted EBITDA of approximately $11,000,000 In summary, we're pleased with our first half twenty twenty in operating performance, especially in light of the choppy commercial environment over that same period. As we move into the second half, We'll continue to focus on what we can control, serving and delighting our customers every day, growing our margin, Being disciplined with our cost and increasing our profitability. Now I'll turn the call back over to the operator for questions.

Operator

We will now begin the question and answer session. Our first question comes from Ryan McWilliams with Barclays. Please go ahead.

Speaker 4

Thanks for taking the question. Pleased to see the reacceleration of revenue growth in the quarter. David, as it stands today, How do you see the macro outlook impacting Dan's results in the second half? Like did you see improving signs from customers at the end of the second quarter or since? Thanks.

Speaker 2

Hey, thanks Ryan. I think the macro environment remains as we've thought about the year in the first half and think it will continue throughout the second half. There are Customers making shrewd and intelligent optimizing decisions across their businesses. There are some deal cycle concerns, but these are things that we've thought about All year and reflected in both the results in the first half and how we're forecasting the rest of the year.

Speaker 4

Excellent. I appreciate the color. And then lots of questions from investors on how generative AI could impact the CPaaS market. So I know it's early, right? And but I'd love to hear at least from your seat, David, how you think bandwidth together with generative AI could fit together for some new opportunities?

Speaker 2

Thanks for asking. All of our voice and messaging customers, enterprise customers, contact center customers are looking for the real Force multiplier that is generative AI certainly within call flows where you have the opportunity to put the attributes of the call to large data sets To add value to resolve a question in a contact center or to route a call accordingly, there are many, many opportunities. And so we've got 2 approaches To adding value to our customers in AI, one involves our Maestro orchestration product that we announced earlier this year and that will be generally available right now in this month. And that product Is open in that it allows a customer to avoid just locking into a walled garden AI approach of a particular vendor and instead select The ideal AI tools that they're bringing to bear on their call flow or on their messaging experiences for customers and to do it in a very elegant Within our Maestro user experience. The other is just being an ecosystem historically that has really specialized In being open and that means API integrations with best of breed providers in the contact center and UCaaS, we've been very successful in that regard.

Speaker 2

And I think that our platform generally We'll embrace all the emerging AI tools that are available for both voice and messaging experiences. So we're excited about What it means for our customers and the fact that our platform has been architected now for several years to embrace the change that is generative AI.

Speaker 4

Here's the color. Thanks guys.

Operator

Our next question comes from Meta Marshall with Morgan Stanley. Please go ahead.

Speaker 5

Great. Thanks. Maybe kind of following up on that. I mean, just what do you see as the Trigger project or trigger event that would make customers evaluate Maestro, is it something like they're evaluating their contact center solutions and AI solutions or just what do you think will be that insertion point? And then maybe as a second question, You've talked about kind of customers being more budget conscious.

Speaker 5

I just want to get a sense of is that they're Limiting some of their interaction activity or is it just kind of lengthening sales cycles on evaluating new opportunities? Thanks.

Speaker 2

Thanks, Meta. I think that Maestro's inflection point has a lot to do with the complexity that is In both the contact center environment and in the enterprise operating environment, there are so many emerging voice and messaging experiences Internally for teams, externally to customers and customer bases. And so what's needed is an orchestration layer that rests upon a global high fidelity owned and operated network and has All the favorable attributes that we provide now in so many different countries, but on top of that fundamental carrying capacity of voice, calls and text messages, enterprises are engaging in the most complex environment That a decision maker has ever seen. And so what an orchestration layer provides is an elegant user experience allowing you to select best of breed, configure, Provision, activate, assign, and pay for elegant experiences across your enterprise or in your contact Taking advantage of the latest developments in AI or the latest developments in authentication or fraud prevention, but to be able to do it in a user interface That's manageable. And without this kind of a layer, which we've seen elsewhere in software, we've seen it in Login and password management within enterprise.

Speaker 2

We've seen it elsewhere. We think it's a natural analog for what we're doing with Maestro and the inflection point really has everything to do with the complexity that these decision makers are grappling with today. And regarding the macro environment and different aspects of decision making Affected by the economy, we just continue to see choppiness generally and we're cautious as we look forward toward the rest of this year As we have been in the first half.

Speaker 5

Great. Thank you.

Operator

Our next question comes from Will Power with Baird. Please go ahead.

Speaker 6

Okay, great. Thanks. Yes, it looked like nice results in the quarter. I guess a couple of questions. I wonder if you could provide any further Kind of color on sources of upside to revenue in the quarter.

Speaker 6

I know that the messaging business remains strong. Maybe that was a contributor, but in the areas of surprise, and I guess just within messaging, if you could kind of help break down kind of the key drivers there that you're seeing right now.

Speaker 3

Hi. This is Daryl. We did see good results in the quarter with revenue exceeding our guidance. That was driven, as I said, in part by messaging and in part by monthly recurring charges from phone numbers at 911, so essentially half and half. Messaging was up 11%.

Speaker 3

We saw that broadly across all commercial messaging. You'll recall we Some political last year that was in the 3rd Q4 of last year. So on a compare, our commercial messaging grew nicely over this time last year. Also monthly recurring charges, which is subscription based for phone numbers and emergency services within the enterprise Grew nicely as well. Those do contribute to overall company performance As the gross margin profiles of those products are very rich indeed.

Speaker 6

Okay. That's helpful. I appreciate it. Maybe just one other financial question, nice upside to EBITDA In the quarter, I think full year guidance was unchanged. Is that just a function of plans to perhaps reinvest some of the upside, Services, any further color on that front?

Speaker 3

You're right. We were pleased with the over performance in terms of profitability for the quarter. We see in terms of going forward in the guide, we did raise our revenue, the $10,000,000 as we've noted. We're holding to the full year guide of $45,000,000 at the midpoint. We did collapse the range.

Speaker 3

We've brought up the lower end of that range, taking into account the revenue over performance. But on the whole, we think that it's important to De risk to continue to de risk the year and to be prudent and cautious in the environment. And so we're holding with the midpoint guidance of 45.

Speaker 7

Okay. Thank you.

Operator

Our next question comes from Jim Fish with Piper Sandler. Please go ahead.

Speaker 7

Hey, this is Quintin on for Jim Fish. Thanks for taking our questions. Maybe first, another player in the space has talked up concerns with messaging traffic volumes, mainly due to enterprises evaluating other options for 2 factor authentication, but you guys continue to post pretty strong messaging growth.

Speaker 4

First, can

Speaker 7

you remind us your Exposure to 2 factor authentication or one time passwords? And then secondly, are you seeing any changing dynamics within 2 factor authentication where Maybe that could benefit your voice solution if they're moving away from SMS based?

Speaker 2

Hey Quintin, we don't have any exposure at all to 2 factor authentication. We don't have customers that generate any meaningful revenue from it. So that's not a concern of ours at all. And so don't really have any insight as to what's driving folks to utilize other alternatives.

Speaker 7

Got it. Makes sense. And then maybe more of a financial question for you. We continue to see a declining number of total customers, which I get is Part of the strategy of training these lower end payers. As we think about the gross adds here, what was that number?

Speaker 7

And then are we starting Any impact on maybe margins or an improvement in customer stickiness as we continue to move up in the enterprise? Or is the churn kind of still Too early where we're going to see kind of continued improvement throughout this year and next.

Speaker 3

Quintin, this is Darryl. We did see a modest decline in total customer count. We've said in the past in February and then again in May, and we've been consistent that Customer count as a leading indicator of our business is not particularly relevant any longer in our minds as we continue to grow Into the larger enterprise category and indeed our average customer revenue It has continues to grow. It's grown to $176,000 over something like $161,000 at This time last year. So we're really pleased with that growth.

Speaker 3

With that said, we did add 70 new Customer logos during the quarter, these are we consider high quality customers. We did in terms of Contributing to our average revenue per customer growth and then we that if you do the math, we removed 91 customers Or churn 91 customers in the quarter. It's worth mentioning that the median of those 91 customers, the ARR It was $3,000 So again, not really focused on the customer count any longer As more focused on the profitability potential of the customers that we acquire.

Speaker 7

Makes sense. Thank you.

Operator

Our next question comes from Austin Ko with Citizens. Please go ahead.

Speaker 7

Yes. Thanks for taking my question and congrats on the good quarter. My question is just With regards to the cash flow generation, you guys mentioned $123,000,000 in cash. And then with the balance sheet, is there any Kind of updated thinking on the long term debt on there, and how you guys are thinking about that. It looks like Cash flow turned out pretty good this quarter.

Speaker 7

Thanks.

Speaker 3

Yes. The cash flow was basically in line with Our expectations, we finished the quarter with $123,000,000 of cash and marketable securities. As I said in the prepared remarks, we think that that's In terms of our capital structure, we did as I said, we did replace our That we had terminated in March with a new undrawn revolving credit facility. It's just all part of the blocks that Contribute to building our capital structure. In terms of going forward, we've said before, we'll continue to monitor The convertible debt market and be opportunistic on any repurchases if we think that's wise to do so.

Speaker 3

Our first convertible Maturity is still remains quite a ways away in 2026, and we feel like we have a lot of time to evaluate that going

Speaker 8

Awesome. Thanks. And if I

Speaker 7

could just throw in a quick follow-up. Just since last quarter, just with the kind of Overarching conversation about AI and seat reduction in the CCaaS space. Is there any kind of updated thinking since then? I know you guys are More on the usage based side. So is there any just kind of any takeaways with some of what the larger players are doing there?

Speaker 2

Nothing new to add to the perspective that we shared in the most recent period. We think that AI ultimately is going to enhance the user experience or contact Our experience for lots of our customers for good reasons and we see that we see contact centers focused on AI When they're talking to us about the flexibility of our platform and the utility of our Maestro product. And so it's a catalyst Moment in terms of the technology innovation and ultimately I don't think that it will be a zero sum game in UCaaS or CCaaS or elsewhere, but I certainly understand the anxiety when anything like this comes out.

Speaker 8

Awesome. Thank you.

Operator

The next question comes from Ryan Coons with Needham. Please go ahead.

Speaker 9

Thanks for the question. I want to ask about your exposure or your perceived exposure to the big growth drivers in the cloud space, General, CCaaS, which sounds like you're pleased with your progress. I wanted to see how you viewed Your penetration of the CCaaS market and then similarly Teams phone, which obviously is kind of the remaining big UCaaS driver out there. How do you view your exposure? Do you see direct routing as still the primary vehicle?

Speaker 9

And how do you view the take up in operator connect for the Teams phone side? Thank you.

Speaker 2

I'll take those in reverse order. So we've got continuing good growth and traction with our awesome Microsoft partner. So that the Teams phone product is still a very good Path to market for us, direct routing and bring your own carrier continue to contribute to our enterprise wins In the examples that we cited in this most recent quarter just now, they were very material in each of those. Operator Connect has been fantastic for international growth in particular. So that's been a vital improvement in our path to market with Microsoft.

Speaker 2

And in terms of our exposure to contact center and penetration, we've got lots of progress we can still make in capturing share in the contact center from a usage base We've got great relationships with most of the leaders in contact center, but a long way to go to Placing the incumbents like Verizon and AT and T, Lumen and then internationally other incumbents. And so there's a long way to go, Which is both it's a wonderful problem for us to have a space like CCaaS where we've got lots that we can still do for a lot of new customers.

Speaker 9

That's great to hear, David. And can you give us any idea of kind of where you are in penetration of Fortune 500 Major wins right now? Obviously, it's pretty early days, but do you think you're in the like couple dozen range? Or are you guys kind of moving up above that yet?

Speaker 2

Yes. We've not shared a particular number of the Fortune 500 or Fortune 200 although we did So win within the Fortune 200 in this period which we're proud of, but expect that as we grow enterprise between now 2026 from 5% of our Revenue up to 10% of our total revenue. You're going to see many, many more Fortune 500 logos. And we really think more of a Global 2,000 Focus just because we've got footprint in so many different countries. And so you'll think of us best I think is focused on the Global 2,000 not just the Fortune 500, but we will continue to share Wins in those categories and believe that they'll continue to grow.

Speaker 4

All right. Thanks, David.

Operator

Our next question comes from Matt Stottler with William Blair. Please go ahead.

Speaker 10

Hey there. Thank you for taking the questions. Maybe just one more on Meister to start. Obviously, it's still early, but would love to Kind of get your thoughts on how the Cisco relationship kind of opens up the go to market for that product with you. And then how you're thinking about monetization of Maestro from here?

Speaker 2

Hey, Matt. We did talk about the Cisco innovation that we announced with Maestro We're excited about and it allows somebody that has had a premise based solution historically to engage in the cloud and to do so with Maestro And to begin their journey to the cloud in a very elegant way from an administrative point of view. So we're excited about that. In particular with Maestro, I just forgot the second part of your question.

Speaker 10

So the monetization of Maestro going forward?

Speaker 2

Yes. So it is a software application. And as an orchestration tool, we Our planning for Maestro to be a revenue enhancing product that we offer that is You should understand to be in the revenue model with SaaS based, cloud based software. There will be usage associated with it, But the platform fee element will be what you're used to when you think about cloud based software charges and billing.

Speaker 10

That's very helpful. And then maybe just one more broader question on the on your Partner investments, we made a number of announcements this quarter, right? Cisco, obviously, Miratek, expanded your relationship with Ribbon. Let's just get A broader update on the partner ecosystem, your investments there and what you're prioritizing at this point.

Speaker 2

So you've known us to go to market well with some great brands and names historically. We've continued I think through the leadership of the senior executive team to reach out to And more ecosystem partners whether the ones that you just mentioned whether it's distribution related, whether it's folks that we buy from and integrate with, whether it's folks like Cisco who we go to market with And the early innings of our channel strategy also, you do have lots of new folks that we're engaging with. And I don't have any others in particular to announce on this call, but whether it's go to market, whether it's collaboration with other application providers, We are being approached by lots of ecosystem names to help them navigate the complexity of global Regulatory landscape of technology changes like AI and so it's a wonderful time to collaborate in our space. Everybody's talking to each other about how they can add value And CCaaS and UCaaS and with enterprise. So we like the announcements and we like the conversations going on right now, Upstack and downstack and around the world.

Speaker 10

Got it. Thank you very much.

Speaker 2

Thank you, Matt.

Operator

Our next question comes from Tom Blakey with KeyBanc Capital Markets. Please go ahead.

Speaker 8

Hi. Thanks for taking my question and congratulations on the results. Maybe David, starting with you on the many CIOs we talk to about consolidating spend. You mentioned that a little bit in your prepared remarks. Wondering how those conversations have maybe evolved through the year here as more CIOs are looking to cut spend or consolidate spend, especially given kind of the go to market kind of mission or messaging from Bandwidth is we can do more for less.

Speaker 8

I just wanted to know if there's in terms of and this is all in the context of your strong commentary about enterprise direct or direct enterprise in the prepared remarks.

Speaker 2

Yes. Thank you, Tom. We did call out During the prepared remarks, the contact services provider that consolidated 30 plus country needs with us and we save them 20% when we did so. We talked about another one that took 7 partners and consolidated them down into using bandwidth. And in each case, those are incumbents.

Speaker 2

And ultimately, you have among those CIOs and decision makers in a very complex and cost sensitive world, A need to optimize mission critical communications and to really bet on a trusted partner. And Before us, there weren't many you could consolidate geographically with. So we've Had the advantage of expanding footprint to allow a CIO or a decision maker to say, wow, I can use bandwidth instead of 8, 9, 10 or even 20 partners, why wouldn't they do that? In addition to that, you now have with Maestro, the opportunity to consolidate, optimize and trust With an orchestration layer for both your voice, your messaging and your 3rd party apps in the communication space. So you've got geography driving As we've seen historically consolidation and betting on Bandwidth as a trusted partner and now you have our software platform That is also driving an opportunity for those CIOs to say it's time for us to believe in Bandwidth as our primary partner to reduce complexity, to reduce costs.

Speaker 2

And these are conversations not just about unit volumes or price. These are very Deep conversations about being architectural partners, production partners globally and that relationship that we have is indeed in the C suite Among the senior most executives at the very largest companies in the Global 2,000 and I'm excited about how those conversations have developed And we should we expect more of them going forward.

Speaker 8

That was a perfect segue, David, to my second question. Thank you. In terms of the more strategic architectural partnership that you're kind of like seeing in some of these conversations, what's

Speaker 2

I think you've made a

Speaker 8

comment in the past that you're comfortable or maybe members of your team in my conversations that you're comfortable with the infrastructure, Lack of better way, your sales and marketing go to market expenses that you have in place to attack this G2K opportunity. Could you just maybe update us That and maybe in the probability or potential for Dow to have to like spend a little bit more to attack this opportunity if it takes off from here. And Thank you very much for the questions again.

Speaker 2

Yes, you bet Tom. The opportunity to invest will be behind success. We will reinforce success if we see it And if the opportunity for yield from that additional sales investment to materialize within our profitability discipline, that's what you would see us reinforce. But we are Very happy with the sales leadership that we have, with the global sales team that we have, with the enterprise team that's focused on the G2K as you mentioned. They're staffed, they're building pipeline, they're executing.

Speaker 2

We've got strong senior leadership in sales operations globally. So we like our approach. We've got a channel that's developing and emerging in a really promising way that we've never had before. So you've seen investment made in the past. You've seen current leadership focused on it.

Speaker 2

The way that you would see us invest in any additional manner is again if the yield from doing so was Clearly within the profitability discipline that we've outlined in our midterm guidance.

Speaker 8

Very clear.

Speaker 2

Thank you. Thank you, Tom.

Operator

This concludes our question and answer session. The conference has also now concluded. Thank you for attending today's presentation. You may all now disconnect.

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Bandwidth Q2 2023
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