Bandwidth at Morgan Stanley Conference: Embracing AI for Growth

On Tuesday, 04 March 2025, Bandwidth Inc. (NASDAQ: BAND) participated in the Morgan Stanley Technology, Media & Telecom Conference. The discussion, led by Morgan Stanley analyst Meta Marshall, showcased Bandwidth’s strategic focus on AI-driven voice solutions and the expansion of its enterprise business. The company highlighted its strong financial performance but also acknowledged challenges related to political campaign revenue fluctuations.

Key Takeaways

• Bandwidth is focusing on AI-driven voice-centric solutions and its Maestro platform for enterprise cloud integration.
• The company projects 8% to 11% organic revenue growth for 2025, despite flat reported revenue due to reduced political campaign income.
• Strategic partnerships with CCaaS and UCaaS providers like Five9s and Zoom are central to its agnostic approach.
• AI investments are aimed at enhancing enterprise solutions, with a focus on voice agent onboarding and the Maestro AI Bridge.
• Bandwidth maintains a strong balance sheet, with significant debt repurchase and robust free cash flow.

Financial Results

• Revenue Growth: Achieved 25% revenue growth last year.
• 2025 Revenue Guidance: Anticipating flat reported revenue growth due to the absence of $62 million in political campaign revenue.
• Organic Growth: Projecting 8% to 11% organic revenue growth for 2025.
• Enterprise Business Growth: Experienced 29% growth in the enterprise business last year, with similar or higher growth expected.
• Gross Margin: Achieved a record 57% non-GAAP margin last year, with further growth anticipated.
• EBITDA: Expecting EBITDA margin to exceed 20% in the medium term.
• Free Cash Flow: Increased by 206% to $59 million last year, with continued growth expected.
• Debt: Net debt stands at two times the last twelve months’ EBITDA, indicating a strong balance sheet.

Operational Updates

• Global Expansion: Active in over 65 countries, focusing on cross-selling and upselling in existing markets.
• Maestro Platform: Supports cloud migration and third-party app integration for enterprises.
• Direct Connect Aggregator: Became a direct connect aggregator in the fourth quarter, enhancing deliverability and reliability.
• Technology: Utilizes AI for fraud prevention and campaign registration.
• Channel Effectiveness: Improved channel effectiveness, leading to larger opportunities.
• Net Retention: Net revenue retention rates of 124%, 122%, and 112% in previous periods.
• Customer Retention: Maintains a high logo retention rate of over 99%.

Future Outlook

• Medium-Term Targets: Aiming for a 15% to 20% revenue CAGR through 2026.
• AI Investments: Focused on supporting voice agents and the Maestro AI Bridge, especially for enterprise customers.
• Gross Margin: Striving to drive gross margins towards or above 60%.
• Key Growth Drivers: Enterprise business growth, international expansion, and increased software platform fees.
• Capital Allocation: Committed to maintaining a healthy balance sheet with no plans for dividends.

Q&A Highlights

• Voice Agents: Increasing deployment of voice agents by enterprises is creating new revenue opportunities.
• Maestro Monetization: Platform fee model with usage-based revenue, maintaining SaaS-like gross margins.
• Competitive Landscape: Thrives as an agnostic partner preferred by CCaaS and UCaaS providers.
• Direct Connect Benefits: Reduces wholesaler costs and improves gross margins.

In conclusion, Bandwidth’s strategic focus on AI and enterprise growth positions it well for the future. For a detailed understanding, readers are encouraged to refer to the full transcript.

Full transcript - Morgan Stanley Technology, Media & Telecom Conference:

Meta Marshall, Analyst, Morgan Stanley: Have any questions, please reach out to your Morgan Stanley sales representative. For everybody, I’m Meta Marshall. I cover the communication software space here at Morgan Stanley. We’re delighted to have Dan with us here today. David Morgan, CEO and Founder and Daryl Raiford, CFO.

All right, perfect. David and Daryl, great to have you guys back at TMT. Since your IPO, you guys have been fairly focused on voice as the great communication channel, an idea that seems to be kind of regaining more traction as we look to AI and kind of voice assistance. Can you speak to how bandwidth can best meet the needs of a voice centric world?

David Morgan, CEO and Founder, Bandwidth: I can and I will, but I just want to start by saying thank you for having us back. We’re delighted to be here and love working with our Morgan Stanley team. It is fast becoming a more voice centric world. As you’re pointing out with the advent of voice agents, it’s exciting to have a universal platform and our Maestro product ready to embrace the emerging trend. But there’s really five reasons why, if you’re an enterprise building a voice agent, why you want to come to Bandwidth.

It’s because of the high fidelity of our service, the low latency, the intelligent routing, the seamless app integration and the great customer service. Those five elements are fundamental to why we’re a good platform. We’re also global, which is helpful. So 65 plus countries, if you bring a voice agent to our Maestro platform, you are available instantly all over. So So that’s a very good thing.

Enterprises

Meta Marshall, Analyst, Morgan Stanley: that

David Morgan, CEO and Founder, Bandwidth: are doing cloud migrations between CCaaS providers and UCaaS providers, it’s really helpful to them to already be on our platform. So those are some of the reasons why in a voice centric world for an enterprise right now, we are a great fit.

Meta Marshall, Analyst, Morgan Stanley: And do you see it kind of becoming this voice centric world? So we

David Morgan, CEO and Founder, Bandwidth: have majored in voice for a long time. In fact, I remember something long ago, Alexa, in the earliest days, we supported the launch of it. And gosh, was that ahead of its time. Extraordinary to think back on that time. But yes, things are moving in our direction regarding voice.

And it feels almost like when work from home was happening, it just benefited us suddenly and fundamentally and pulled a lot of demand forward. And what we’re seeing among enterprises now is that same pull to migrate to the cloud if they haven’t already or to launch a voice agent is pulling demand in a similar fashion. Now certainly that was a phenomenon that came and went quickly, thank God, in my opinion. But I think voice agents are really an exciting dynamic that’s similar.

Meta Marshall, Analyst, Morgan Stanley: Got it. The voice focus of the platform has always been there and kind of those five things you laid out. The platform has evolved a lot over the past couple of years. Can you just kind of speak to kind of how that platform that may have started as voice centric has kind of expanded? When we began, it was domestic, it

David Morgan, CEO and Founder, Bandwidth: was U. S. That’s all. And so now we’re global. So that would be the first thing that’s important to understand if you’re a team out there.

The platform has also now supported lots of pre integrations. So Five9s, Genasys, all the UCaaS, CCaaS that are relevant and what we’re seeing are migrations between them. So if you’re already on the platform, you can very elegantly move and that’s vital. If you’ve got a hybrid engagement or you’re still premise based, the platform now supports very quickly onboarding, deep analytics once you’re onboard and super high touch professional customer support. So the platform has gotten much better at all those things over the years.

Meta Marshall, Analyst, Morgan Stanley: Okay, got it. And then how is it maybe at the time of the IPO, which is now a while back, there was a lot of focus on kind of these the UCaaS, CCaaS kind of customer base or kind of the cloud customer base. So you’ve expanded a lot to kind of help enterprise customers. And just can you say one kind of the success that you’ve seen there, but kind of what tailoring you did to better go after that opportunity?

David Morgan, CEO and Founder, Bandwidth: So every enterprise customer has an international component to the conversation. And so the global reach of the universal platform is part and parcel of the value prop for all of the major enterprise solutions that we’ve offered. Having messaging side by side, so that there’s both messaging and voice would be the second component that’s made us more attractive to enterprise and will grow from 5% of revenue to 10% by 2026 enterprise. It’s growing very quickly. But the expansion of the footprint and the capabilities to include messaging are the two that really jump out that have attracted large enterprise.

Meta Marshall, Analyst, Morgan Stanley: Got it. And then maybe kind of going back to that core group that we had talked a lot about over the years, which are these kind of communication software vendors or the cloud vendors and kind of providing the underlying connectivity services. Just where are you we’ve gone through some digestion as you noted, but where

David Morgan, CEO and Founder, Bandwidth: are you kind of seeing continued traction with these customers? They were flat two years ago, then last year we’re now at single digit growth and we’ll grow more this year than we did in 2024 with those customers. And so they will contribute to our growth as we’ve guided and we’ll continue to grow with them. They are also engaging in lots of great innovation around voice agents in their contact centers, in their UCaaS solutions. So it’ll be interesting to see how we support those from a usage based model perspective.

But we do love those customers and innovating with them and supporting them.

Meta Marshall, Analyst, Morgan Stanley: Why are you I mean, those customers in general are not accelerating. So why

David Morgan, CEO and Founder, Bandwidth: are you kind of accelerating if they’re not? So share is good and the particular use cases we support at them may be growing more than others that are supported by others, but we’re excited about having grown with them and what we do with them. International also contributes, so we have unique footprint where others may not.

Meta Marshall, Analyst, Morgan Stanley: Okay, okay, perfect. And then how Maestro has been another great product for you kind of providing that vendor agnostic layer and kind of integration layer. Maybe for the audience, you could just kind of explain the Maestro platform to start.

David Morgan, CEO and Founder, Bandwidth: So Maestro is an orchestration layer. It sits on top of our universal global platform. And what it represents to an enterprise is the ability to get from a premise based solution to the cloud. And then once you’re there, have the flexibility to plug in third party apps. If you’re using Verizon and you’re plugging into a premise based piece of equipment, you’re not going to be able to if you build a voice agent, you literally can’t plug it in.

So Maestro has a solution called AI Bridge, which lets you take advantage in three different ways of pre integrations with Google Dialogflow, with Cognigy, with things that are already available in the Maestro platform. But if you want to engage with VoIP protocols directly, whether that’s SIP or else or otherwise, you can. If you want to consume an API at Maestro, you can.

Daryl Raiford, CFO, Bandwidth: Or if you

David Morgan, CEO and Founder, Bandwidth: want to take advantage of the pre integrations, you can. The flexibility of consuming and providing voice and messaging through Maestro means you can intelligently route calls without hardcoded or premise based solutions. And so most of the time, the enterprises that we win are leaving Verizon for the first time in the case of like Southwest Airlines. That was a thirty five year relationship. And Maestro is what they moved to.

Meta Marshall, Analyst, Morgan Stanley: Okay. I mean, how are you choosing you mentioned Google, you mentioned Cognigy. Just how are you choosing who to partner with for Maestro or to do these integrations with? And how much of that is your decision versus kind of customers asking you for it?

David Morgan, CEO and Founder, Bandwidth: So two different parts of your question. The first part, whether it’s Genesis or Five9s or Zoom, those integrations are just best of breed Gartner Magic Quadrant, folks we already work with. They need to already be integrated with. So an enterprise doesn’t have to go through all that work when they come to Maestro. The second part of your question in terms of go to market, we’re targeting the large enterprise with our value prop.

And so we’re a direct outbound sales motion, but we will take anybody that wants what we offer for the right reasons. And so we’re excited about having a channel that’s just been recently successful in adding more larger opportunities than we’ve ever seen before. But we love leading our customers. We love being collaborative with our customers. And that includes integrating with them if they have something to offer Maestro, but that it also means welcoming aboard any Global two thousand customer that wants to be a part of what we’re doing.

Meta Marshall, Analyst, Morgan Stanley: Got it. Yes. I mean, I guess the question is more from a perspective of there’s a lot of AI startups that would love for you to kind of give them this integration platform so that then they can go to customers. Just how are you deciding there’s hundreds of them, there’s one of you, you guys have so many resources kind of how to make that decision?

David Morgan, CEO and Founder, Bandwidth: That’s a fair question and thanks for clarifying that. So the bias is to triage toward the biggest first, most known. That said, enterprises are building voice agents and they come to Maestro to give that agent a real voice globally. But yes, there’s no question we don’t have the smallest emerging AI startups as part of the ecosystem out of the gate.

Meta Marshall, Analyst, Morgan Stanley: Okay. All right. Perfect. How particularly with so many CCaaS customers, you mentioned Genesis, Five9, Zoom, anybody. Can you continue to kind of play that agnostic partner who is making no decisions?

Or do customers sometimes try to call your hand, see kind of where your bias is? Just you’ve done it in the past of being able to be those agnostic layer, but how do you kind of continue to do that?

David Morgan, CEO and Founder, Bandwidth: We thrive being agnostic. Five nines or Genesis love when a customer wants to bring bandwidth to the solution as opposed to Verizon

Daryl Raiford, CFO, Bandwidth: or

David Morgan, CEO and Founder, Bandwidth: as opposed to AT and T or Lumen for obvious reasons. So they love the fact that we have an agnostic approach. We don’t go up stack and have our own CCaaS offering. We value our role as a platform. But make no mistake about it, bring your own carrier, bring bandwidth to the integration is something that the largest CCaaS and UCaaS partners prefer.

Meta Marshall, Analyst, Morgan Stanley: Yes. Okay. You noted kind of having evolved kind of the go to market over time to better target enterprise customers. Just how has that taken place? And are just are there different initiatives for landing customers versus expanding customers?

David Morgan, CEO and Founder, Bandwidth: Yes. So like net revenue retention was one hundred and twenty four percent one hundred and twenty two percent one hundred and twelve percent I think net of political. So we do expand really well with the customers we have and our logo retention rate is insane. I mean, it’s still like 99% plus year over year. The direct motion of our outbound sales team has been consistent for years, but the channel is really only grown over the last two years.

And so we haven’t had strong ISV or SI support until very recently. And so on the last earnings callbacks, I said, we’ve got more larger opportunities than we’ve ever had before. And that’s really from the channel effectiveness. Southwest, which I mentioned was SI that brought us to the table to displace an incumbent. And think what you should expect of us is a channel that continues to grow and a direct enterprise focused outbound sales motion at much larger opportunities than some of the other CPaaS folks.

Meta Marshall, Analyst, Morgan Stanley: Okay, got it. You’ve noted the net retention. You also have just kind of one of the highest average customer sizes. And you’ve noted your Maestro customers are even larger. Just what is it about that platform that’s just better suited for kind of larger customers?

David Morgan, CEO and Founder, Bandwidth: I think it’s flexibility. Again, these large enterprises are bringing into a call flow 10 to 15 different AI use cases from third party vendors. And so if you’re trying to do that with Verizon or 18 tier Lumen, it’s just insane. So you’re trying to do sentiment, you’re trying to do transcription, you’re trying to do recording, you’re doing forwarding in an intelligent way. You just can’t do that with an incumbent.

And you’re going to so I’ll give you a quick example from our earnings call. We’ve got a large hotel chain that has gotten a voice agent, that’s an artificial voice agent. And we used to make $0.01 0 point 5 0 dollars for a five minute call to the front desk. That’s now making us $0.045 because instead of just connecting you to the front desk, we’re simultaneously doing sentiment recording, transcription and forwarding all at the same time in a way that the AI agent, the voice agent resolves your call as a guest for far less OpEx than the hotel used to have to pay, but are paying us $0.045 for that five minute call instead of $0.015

Meta Marshall, Analyst, Morgan Stanley: Okay, got it. Maybe turning back to today, kind of given the expected cyclical reduction in political campaign messaging revenue, what specific growth drivers will offset kind of the headwinds to achieve the 8% to 11% normalized revenue growth rate for 2025?

Daryl Raiford, CFO, Bandwidth: Daryl, you want to take that? Yes, certainly. Thank you, Meta. And it’s a pleasure. Thank you again for having us.

It’s a pleasure.

Meta Marshall, Analyst, Morgan Stanley: Pleasure to have you.

Daryl Raiford, CFO, Bandwidth: We achieved 25% revenue growth last year. We’re very pleased with that. We’ve guided essentially flat revenue growth at the reported line because of the cyclical nature of the political campaign revenue of $62,000,000 that will be absent. We expect to be absent in 2025. That leads to 9.5%, ten % organic growth at the midpoint 8% to 11% as you said.

We think that that is we know, we can tell by published reports from others that it’s outpacing the market of our peers, of our competitors. And we feel really good about that number in the sense that our enterprise business grew 29% last year and we’re expecting likewise growth, if not slightly more embedded in our guide. Our global voice communications plans customers, which is our largest customers, is 70% of our revenue grew at 3% last year off of flat, off of essentially being flat the prior year from that from ’23 into ’24, we’re expecting nearly doubling. And that doubling, there was an earlier question on that, that doubling is coming from usage patterns, as well as the software fees that are involved in along with the Maestro platform and things along those lines. So we’re really we feel like the growing mix, the growing of say customer category and the growing richness of the underlying revenue itself with the software fees and the platform fees allows us to grow it above market or at least above our peers in terms of that 8% or 11%.

Meta Marshall, Analyst, Morgan Stanley: Got it. I mean, you mentioned kind of additional software content. Just can you give a sense of how you’re monetizing Maestro?

David Morgan, CEO and Founder, Bandwidth: So the platform fee and that software platform fee then has usage revenue on top of it. But it’s a software platform fee with gross margins that are consistent with what you would expect in SaaS.

Daryl Raiford, CFO, Bandwidth: What we like about it is we’re not there’s not a

David Morgan, CEO and Founder, Bandwidth: strong

Daryl Raiford, CFO, Bandwidth: thrusted strategy to say, let’s monetize to the maximum extent a software fee, but let’s use it as a let’s use our Maestro platform and our capabilities in the orchestration layer to attract and onboard new one plus multiple one plus million dollar accounts, which our enterprise customers turn into and drive the usage across the platform. And you see that in our gross margin. You see that’s why our gross margin keeps expanding with that as well.

Meta Marshall, Analyst, Morgan Stanley: Got it. I mean, you guys laid out kind of the 8% to 11% as we just kind of talked about for 2025. Just how do we think about this kind of versus the 15% to 20% annualized targets from the Analyst Day in 2023, understanding kind of 2024 being a growth year beyond that?

Daryl Raiford, CFO, Bandwidth: Yes, absolutely. So the ’50 and at the end of twenty twenty two for the very first to 2023 Analyst Day, we set out medium term targets over the next four years from that point of 15% to 20% CAGR revenue CAGR growth and that would take us through the end of twenty twenty six. Last year, we experienced 25% revenue growth. This year, we’ll experience less. We certainly understand in 2026, the recurring nature of the or the cyclical political campaign revenue.

And so taking all that into account, I think that we’re on track for that. I recently saw a published report. I didn’t do the calculation myself. I saw a published report that through ’24, our CAGR was 16% or something on the top line. I think we’re kind of in that zip code and we expect to achieve our medium term targets.

Meta Marshall, Analyst, Morgan Stanley: All right, perfect. One of the things you highlighted last year kind of at your customer event or product event was that you’re now kind of a directly connected aggregator. Just how is this enhancing your kind of positioning and messaging and kind of changing the structure or P and L structure of the business?

David Morgan, CEO and Founder, Bandwidth: So deliverability goes up, reliability goes up, costs go down, scale goes up. So we had a season in political, for example, media that made it made Black Friday and Cyber Monday look quaint. So like the presidential election was bonkers. Direct Connects help you scale infinitely really, really high.

Daryl Raiford, CFO, Bandwidth: You saw a little bit of that occurring in 2024. We became a Direct Connect aggregator at the front end of the fourth quarter. We achieved a record margin of 57% non GAAP margin of 57% last year. It’s implied in our guide this year with the Umeda, you had said the eight percent to 11% organic revenue growth. We’re guiding up our EBITDA and EBITDA margin higher than that.

It’s implied that gross margin is growing. One of the gross margin drivers is the Direct Connect relationship we have with the Tier one in The United States, which essentially removes wholesaler costs, completely eliminates it on that side of the business and that just accrues to our benefit.

Meta Marshall, Analyst, Morgan Stanley: Is there a path to kind of add additional relationships there?

David Morgan, CEO and Founder, Bandwidth: There is a path. Okay.

Meta Marshall, Analyst, Morgan Stanley: Another big opportunity that you alluded to earlier, David, was kind of the international opportunity for bandwidth. Just what specific regions or markets are you prioritizing for expansion in 2025?

David Morgan, CEO and Founder, Bandwidth: So we’re in 65 plus for full PSTN replacement. And what we’re focused on right now is really cross selling and upselling into those markets more than greenfield new countries. The opportunity to have our existing customers really involved in each one of those is the focus for ’25. And we’ve come through seasons of adding additional countries, but we’re really focused right now on maximizing each of them. And we don’t see anybody else following us around the world in a way that makes us feel like we need to continue outer regions as much as maximizing the impact with our existing customer base in countries where we already are.

Meta Marshall, Analyst, Morgan Stanley: Is there an effective sales motion? I mean, it seems like a natural kind of area where you would be able to kind of cross sell with customers, but is there is it just kind of the amount of time and making sure that you’re making contact or kind of what are those is

David Morgan, CEO and Founder, Bandwidth: a natural upsell cross sell motion and you can align incentives with your sales team to go after it. So yes, it’s what we think is the right thing to do in this season with the footprint that we have.

Meta Marshall, Analyst, Morgan Stanley: All right, perfect. Maybe Daryl, coming back to you on the profitability outlook. Just where do you expect to kind of see the most leverage in the cost structure this year? And kind of what are you doing to make where are you kind of making those incremental investments?

Daryl Raiford, CFO, Bandwidth: The leverage is going to continue from 24% to 25% with gross margin providing the largest benefit. We grew gross margin two percentage points last year to that 57%. It’s clearly implied in our guide, it will grow again. The dollar volume of that causes us to be able to afford OpEx growth. We grew OpEx 6% last year.

We would expect that we’re going to grow OpEx again this year. Half of that last year and half of it again this year is on R and D and innovation. AI is one of those investment areas and that still allows us to disproportionately grow our profit to our revenue. Last year, while our revenue grew 25%, our EBITDA grew seventy percent and five points of margin of EBITDA margin. So we expect that to continue.

You mentioned our long our medium term targets, our revenue targets, our EBITDA target has us above 20% EBITDA margin and we believe we’re on track for that through the end of twenty twenty six.

Meta Marshall, Analyst, Morgan Stanley: Got it. I mean, David, when it comes to AI and just kind of making investments, how do you measure kind of where to make those investments? What type of ROI you’re expecting to see?

David Morgan, CEO and Founder, Bandwidth: We think voice agents are the area and supporting onboarding of voice agents, especially from enterprise is the right focus. And so Maestro AI Bridge and what will support the emergence of highly vertical voice agents is where we’re putting our money and our time and the developments are happening at light speed and are really exciting. The intuitive, effective voice agent in the enterprise is giving knowledge workers in verticals like an Ironman suit to do their jobs more effectively. It’s extraordinary and it’s happening fast. So that’s our focus right now.

We’re a voice focused company, so it aligns really well with what we already know. But that’s where the preponderance of our time and attention and money is going in the AI realm.

Meta Marshall, Analyst, Morgan Stanley: Okay, got it. Daryl, maybe back to you. Just kind of what underpins the confidence towards driving gross margins towards or above 60% and EBITDA margins above 20%?

David Morgan, CEO and Founder, Bandwidth: Well, let me circle back to

Daryl Raiford, CFO, Bandwidth: what David just said and then I’ll get to that, which is, it is really exciting when we talk about our AI investments that we’ll get to the end result. I will answer your question. When we talk about the AI investments, all the building blocks are falling into place. We’ve invested and released Maestro. We’ve invested and released AI Bridge.

We’ve invested and released Universal Platform. All these building blocks are necessary to enable what we’re doing when David talks about AI investment. And those elements then get to your question of what we’ve been doing in terms of our cloud architecture to allow for improved gross margin lower cost improved gross margin along with growing revenue and scale, along with international growth and along with product mix where of course, we’ve been very clear over the last eighteen, twenty four months. We enjoy we had 46% growth in messaging revenue last year. We enjoy that to the extent that it’s a higher margin business than what we’re doing versus the overall aggregate business.

So you take all those kind of important voice investments and then the product mix, the international mix and the like, and you put that together and it gives us good confidence in gross margin growth.

Meta Marshall, Analyst, Morgan Stanley: And I know we talked a little bit about go to market earlier, but with a richer sale, this is not necessarily saying, hey, I bet you didn’t like who you used before. We could be kind of this great service agent. As it becomes a more platform sale and there’s more products, does that change who that bandwidth sales rep is? Or does that change the go to market? Or has it really been the land is the same and then we can hand it off to a different team and kind of scale it over time?

David Morgan, CEO and Founder, Bandwidth: We have focused on large enterprise. And once they’re on board, we have handed them to a team that focuses on supporting them well, upselling, cross selling, increasing the net revenue retention accordingly. And we’ve watched that grow from 140,000 a year on average when Daryl joined to now $218,000 So that’s been really effective. The team that goes out and identifies appropriate customers that can benefit from Maestro is not the team that then grows necessarily with that customer over time, over two years on average to get to the share of wallet that we would expect to persist going forward. But I think that the channel and the direct team do have an opportunity as we expand the platform to go mid market to certainly target a broader swath, but we really do well with enterprise teams and with getting them to the scale and reliability and quality, whether that’s large healthcare or large finance, that’s been our effective path to market and we’re good at that.

And I think the AI moment that we’re in with voice agents scales massively. When I talk about the per minute charge we’re paid in that example, the impact of enterprises deploying AI, I think, is going to be meaningful. And so we should continue to focus there.

Meta Marshall, Analyst, Morgan Stanley: Got it. Daryl, you guys have gotten the balance sheet to a much improved position. Just how are you thinking about whatever last overhang there are just kind of explaining that to investors and then just how you’re thinking about kind of capital allocation going forward?

Daryl Raiford, CFO, Bandwidth: Yes. Thank you. The state of the balance sheet is very strong. We just recently essentially completed the final repurchase of nearly all $450,000,000 of our 04/01/2026 convertible notes. We have outstanding $250,000,000 due right at the April 1 in 2028.

We have, if you take our net debt calculation of around $250 ish million and take out about $100 ish million of cash, say just doing a quick calculation, $150,000,000 over last twelve months EBITDA of $82,000,000 leaves us at two times, which is a very, very good net debt ratio for a company of our size, a mature company of our size. Our cash flow last year grew 200 our free cash flow grew 206% to $59,000,000 is implied again in our guidance this year that it will continue to grow. We’re looking forward to improving the balance sheet. We have sufficient cash on hand. We have access to $150,000,000 undrawn line of credit with Bank of America and Wells Fargo and we are looking forward to cash flow generation.

So we don’t think there’s any issue in several more years with the $250,000,000 and carrying two times leverage is very reasonable. We have no other capital allocation strategy other than to keep the company healthy. We are not proposing any dividends or anything like that.

Meta Marshall, Analyst, Morgan Stanley: Okay, perfect. And then just the last question we’ve been asking everybody this week is just, are there any ways in which you’re using AI internally and just any productivity that you’ve seen from those?

David Morgan, CEO and Founder, Bandwidth: Yes. So fraud prevention, campaign registration. So when a customer is coming on board and having to qualify with a carrier for a messaging campaign, AI has been fantastic in pre qualifying campaigns rather than submitting them all the way through and getting rejected. So those are two areas that are already underway that are exciting. On the go to market side, the SDR activity, increasing the productivity there has been fun.

The targets that we have are areas where we have repetitive, uncreative knowledge work that you can improve the quality of life of the bandmate, make them more effective. And we’re excited about it. It’s early, but it’s exciting.

Meta Marshall, Analyst, Morgan Stanley: All right, perfect. All right. Well, David, Daryl, thank you so much for being here today and sharing the Bandwidth story.

David Morgan, CEO and Founder, Bandwidth: Thank you, Nina. Delighted.

Daryl Raiford, CFO, Bandwidth: Thank you, Nina.

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