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Why Is Bandwidth (BAND) Up 31.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Bandwidth (BAND). Shares have added about 31.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Bandwidth due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Bandwidth Tops Q3 Earnings Estimates, Revises View

Bandwidth reported solid third-quarter 2022 results, beating both the top-line and bottom-line estimates and well exceeding its guided range. The strong performance was backed by enterprises increasingly relying on Bandwidth’s platform for communications in the cloud. In order to drive growth, the company plans to focus on winning large enterprises and becoming the best global CPaaS platform for scaling digital engagement.

Quarter Details

On a GAAP basis, the net loss during the quarter was $0.8 million or a loss of 3 cents per share compared with a loss of $6.9 million or a loss of 28 cents per share in the prior-year quarter. Non-GAAP net income during the reported quarter was $8 million or 27 cents per share compared with net income of $6.5 million or 25 cents per share in the prior-year quarter. Non-GAAP earnings beat the Zacks Consensus Estimate by 24 cents.

Revenues improved to $148.3 million from $130.6 million in the prior-year quarter and exceeded the consensus estimate of $141 million. The growth was backed by high demand for digital engagement and strong contributions from monthly recurring charges for phone numbers and emergency services.

Operating Details

Non-GAAP gross margin during the quarter was 57%, reflecting growth of 3 percentage points, primarily due to efficient pricing and product mix and continued excellent execution within the cloud operations and service groups. Adjusted EBIDTA was $12.8 million compared with $14.2 million a year ago.

Cash Flow & Liquidity

In the first nine months of 2022, net cash from operating activities was $24.3 million compared with $23.7 million in the prior-year quarter. Cash and cash equivalents at the end of the quarter were $166.4 million, with accrued expenses and other current liabilities of $75.1 million.

Guidance Up

Backed by robust quarterly results, Bandwidth revised its outlook for 2022. It currently expects revenues in the band of $562 million to $564 million, up from prior expectations of $551 million to $557 million. Non-GAAP earnings per share are expected in the band of 35 cents to 37 cents per share, up from the prior range of 10 cents to 14 cents per share.

For the fourth quarter, revenues are expected to be in the band of $146 million to $148 million. Non-GAAP earnings are expected to be within 3-5 cents per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Bandwidth has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Bandwidth has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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