Why Is Bandwidth (BAND) Down 16% Since Last Earnings Report?

A month has gone by since the last earnings report for Bandwidth (BAND). Shares have lost about 16% in that time frame, underperforming the S&P 500.

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

Bandwidth Reports Narrower Q2 Loss, Beats on Revenues

Bandwidth reported relatively healthy second-quarter 2022 results, beating both the top-line and bottom-line estimates. The strong performance during the quarter was backed by enterprises increasing their reliability on Bandwidth’s platform for communications in the cloud. In order to drive growth, the company plans to focus on winning new large enterprises and becoming the best global CPaaS platform for scaling digital engagement.

Quarter Details

Revenues in the reported quarter were $136.5 million compared with $120.7 million in the prior-year quarter. Revenues beat the Zacks Consensus Estimate of $133 million. The growth was backed by high demand for digital engagement and strong contributions from monthly recurring charges for phone numbers and emergency services.

On a GAAP basis, the net loss during the quarter was $6.2 million or a loss of 25 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 loss during the reported quarter was $0.9 million or a loss of 4 cents per share against net income of $8.6 million or 32 cents per share in the prior-year quarter. Non-GAAP loss was narrower than the Zacks Consensus Estimate of a loss of 7 cents per share.

Operating Details

Non-GAAP gross margin during the quarter was 53%, reflecting growth of 2 percentage points, primarily due to efficient pricing and product mix and continued excellent execution within the cloud operations and service groups. Adjusted EBIDTA was $5.1 million compared with $13.8 million a year ago.

Cash Flow & Liquidity

In the first six months of 2022, net cash from operating activities was $0.3 million compared with $8.8 million in the prior-year quarter. Cash and cash equivalents at the end of the quarter were $165.3 million, with accrued expenses and other current liabilities of $62.3 million.

Guidance

The company has reiterated its outlook for 2022 and expects revenues in the band of $551 million to $557 million and non-GAAP earnings per share in the band of 10 cents to 14 cents per share.

For the third quarter, revenues are expected to be in the band of $140 million and $142 million. Non-GAAP earnings are expected to be in the band of 2 cents to 4 cents per share.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted 20% due to these changes.

VGM Scores

Currently, Bandwidth has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Bandwidth has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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