Q4 2021 Bandwidth Inc Earnings Call
Thank you for standing ball, but this is the conference operator.
Welcome to the bandwidth fourth quarter 2021 earnings conference call.
As a reminder, all participants are in a listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask a question.
I joined the question you May Press Star then one on your telephone keypad.
Should you need assistance during the conference calls them, if they know an operator by pressing star zero.
I would now like to turn the conference over to Sarah wallet VP Investor Relations.
Go ahead thank.
Thank you good afternoon, and welcome to bandwidth fourth quarter 2021 earnings call.
Today, we'll be discussing the results announced in our press release issued after the market closed.
The press release, and then earnings presentation with historical financial highlights can be found on the Investor Relations page at investors Dot bandwidth dotcom.
With me on the call. This afternoon is David Morgan, our CEO and Daryl Raiford our CFO .
We'll begin with prepared remarks, and then we will open up the call for Q&A during.
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 first fiscal quarter and full year 2022.
We caution you not to put undue reliance on these forward looking statements that 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 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-K filing as updated by other SEC filings all of which are available on the Investor Relations section of our website at bandwidth dot com and on the SEC's.
Website at S E C dot Gov.
During the course of today's call, we will refer to certain non-GAAP financial measures 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 slide deck, which are located on our website at investors that bandwidth dotcom.
With that let me turn the call over to David.
Thank you Sarah.
Hello, everyone. Thank you for joining us today.
I want to begin by thanking our customers for growing with us through 2021 for trusting us with their mission critical communications and for believing in our vision to serve them globally and faithfully in the decades ahead second.
Thank you to all our Bandmates for another remarkable year I mean, all of how you sacrificial we serve our customers well selflessly supporting each other.
You help new customers move to the cloud for the first time strengthened our existing relationships and physically came together as one global team serving in 90% of the world's economy.
Last and definitely not least I, thank god for providing for us and blessing us with 23rd year together.
As we opened the year I'm excited about two new leaders stepping up at bandwidth first as we announced yesterday, we are looking forward to Anthony Bartolo, joining the band next Monday, as our new Chief operating officer.
Anthony has 30 years of experience in cloud communications at World Class companies at Avaya. He was chief product officer, and led their transition to a SaaS based business model at Tata Communications. He was president of mobility, and Chief product officer based in Singapore.
Anthony is that native Australian who has managed billion dollar p&l's around the world.
She O O is a new one for us.
Anthony will be leading our sales marketing and product operations development and technology teams, which completes our alignment as one global bandwidth. We are excited about the leadership and new perspective. He brings welcome Anthony.
I also want to welcome our longtime Chief people Officer, Rebecca Bosworth to bandwidth board of directors.
Bandwidth culture has always set us apart and disappointment is yet another commitment to our most treasured asset our people.
As we welcome amazing Bandmates around the World I am grateful to have Rebecca has deep expertise and experience at the board level and I am proud that bandwidth is once again ahead of the curve as only 3% of Fortune 1000, and board members have an HR background. According to Korn ferry.
Rebecca will continue to serve as our chief people officer Congratulations Rebecca.
Finally, I want to acknowledge that we recently divested two heritage bandwidth businesses, our broadband dot com business and our phone Booth business. These businesses were born and raised in bandwidth and I would like to say, thank you to their customers and all of our bandmates over the years, who contributed to their success.
Yes.
In 2020 one.
We delivered another year of solid financial results, including 43% year over year revenue growth.
Fueled by broad based demand across our portfolio of voice messaging and emergency services Api's that are powering the global digital transformation.
Fourth quarter and full year total revenue she pass revenue and non-GAAP EPS all came in above their corresponding guidance ranges in the fourth quarter. The financial impact of Ddos was in line with our estimates and Daryl speak to all of this in greater detail shortly.
Our platform is stronger than ever and we believe it is best positioned to deliver mission critical communications for the enterprise.
Looking toward 2022, I am pleased to say that while we have not lost a single customer due to the incident. Some customers have returned traffic Jordan at work at lower volume levels indicative of a desire for additional redundancy options. This group of customers is expected to gradually increase usage over the next year as we provide.
Additional resiliency options for critical use cases, but even as we build trust with this cohort we are expecting revenue growth in 2022 to be dampened by this incident, putting it into perspective. This cohort includes approximately 40 customers that represent the bulk of the revenue impact out of over 3000 total customers.
It includes a tier one communication service provider that represents approximately 20% of the projected Ddos revenue impact in 2022, we previously served as tier one exclusively and now this customer has moved us to primary provider as they add a secondary provider for redundancy option well, we are focused on winning the trust of.
These 40 customers. It is important to note that our hyperscale customers never left our platform. They were in the situation room with us standing shoulder to shoulder with our team to help expedite our mitigation efforts and stayed with us throughout.
In addition to Ddos impact in 2022 we are facing headwinds in our outlook related to changing dynamics. Among two large customers first we have a longstanding relationship with a global leader in video conferencing, a customer who we have partnered with and served exclusively for new product launches and during periods of explore.
Cost of growth across our global footprint during the pandemic in.
In recognition of this long standing relationship we have agreed to provide future price concessions that reflect anticipated size and speed of their usage on our platform. This reset solidifies our position to partner with this customer on their product roadmap and serve their recalibrated and global growth.
Second.
We are expecting lower usage from a large global technology customers cloud contact Center service following a year of exceptional growth on our platform in 2021.
This customer scale this offering across international in developing markets by prioritizing frictionless onboarding to deliver the best experience for their customers. Our discussions with this customer lead us to believe they will now focus on enforcement of terms of service with their end users. We expect this to result volume step down this year.
But we remain positive on our relationship and large global opportunity in our multiple lines of business. We serve for this customer dash.
<unk> will speak to the estimated revenue impact in the first quarter and full year.
As we launch into 2022, we are motivated by our rule powering the global communications transformation.
Our vision is to be the platform of choice for mission critical Enterprise communications with our box bone integration, we have now aligned our entire global business around this opportunity.
We will achieve this vision by focusing on three priorities number one.
By growing our relationships with existing customers, we will do this by cross selling and up selling our global footprint and our powerful API is to automate and scale their cloud communications platforms number two.
By winning new enterprise customers, we intend to become the platform of choice selling directly to large enterprise teams building exceptional experiences on our best of breed Communications Tech stack and number three becoming the best Global Sea pass platform for App developers to scale digital customer engagement.
We've been pursuing these priorities and we will continue to do so with particular focus on enterprises moving to the cloud and software companies using programmable voice and messaging to create powerful experiences for their end users.
I'm pleased that our growing margins and profitability afford us the opportunity to fully drive our continued growth as these three priorities are the foundation of the durable business. We are building. Let me give you examples of how we are winning in each from this past quarter.
One of our longtime customers continues to rely on us every step of the way as they expand their business last may this customer launched a new unified Ucas and see cash solution. Their goal is to create not only a better customer experience, but also a better customer service agent experience that's incredibly important.
And given the pivotal role these employees play on the front lines.
Last year this customer significantly expanded our long term relationship by replacing an incumbent vendors after deciding that bandwidth was best in class.
Now I'm excited to report that we've expanded the relationship and yet again with an immediate 50% increase in international spend along with the opportunity to gain even more.
This is another example of how bandwidth is driving our first priority growing with our customers, both geographically and into new lines of business.
In the fourth quarter. There was continued strong momentum in our second priority, helping new enterprise customers move to the cloud and.
And especially dynamic area here is the contact center space. The most innovative contact centers are migrating to the cloud to offer many new and powerful timesaving and value, adding experiences for the agent and the customer and the bandwidth platform is uniquely capable of supporting these complicated migrations.
That's why Genesis one of the leading see cash platforms in the world is working so closely with bandwidth to create the contact center of the future. We recently announced bandwidth duet for Genesis, which is our third duet partnership after Microsoft and ring Central and the first in the contact center space.
<unk> duet for Genesis lets customers capture the power and feature set of Genesis cloud, while maintaining the flexibility service and savings that come from a direct relationship with bandwidth. This unbundling of the software from the Telecom provides enterprises with the best of both worlds as they use the bandwidth plaid.
For them to enable rich call data and third party integrations that make possible a more satisfying customer experience.
Another example of how we're powering a game changing enterprise <unk> provider is a customer in San Francisco with people living more and more of their lives from their smartphones. This customer is providing exceptional user experiences like the ability to take a picture of a product's serial number during our customer service call in order to.
Solve problems faster and more accurately.
A year ago. The company shows our international business to power their contact center platform for inbound calling across more than a dozen countries primarily in Europe now based on our proven call quality and ability to scale their activating outbound, calling and expanding to additional countries with us including for the first time, the U S and <unk>.
Canada. This is an important example of how we are successfully winning north American business from international customers, we expect to be the primary provider to this customer as they continue to scale and add new functionality.
Customer experience is also a key driver in our third strategic priority, which is to enable the global innovators in digital customer engagement.
Bandwidth robust messaging emergency and voice API is help developers build better digital experiences for the brands that rely on them.
As an indicator of our traction in this customer category messaging accounted for about 13% of our C pass revenue in 2021 and we're now seeing a new consistently higher level of messaging activity, regardless of time every year as political groups retailers and brands continue to evolve this channel to communicate.
Indicate one on one with their customers to build engagement and loyalty.
An example, when I want to highlight from this quarter is an app developer that provides marketing and advertising software to nearly 10000 small businesses and in the United States, Canada, Europe and Australia.
As they continue to scale this customer made the decision to leave the big she passed provider they started with and turns to bandwidth for a better level of service and deliverability.
So in conclusion.
Good momentum in each of these three long term priorities.
I'll now turn it over to Daryl to walk through our financial results and outlook.
Yeah.
Thank you David and good afternoon, everyone.
I'm proud of our team who delivered another strong performance in the fourth quarter.
<unk> fourth quarter and full year total revenue see pads revenue and non-GAAP EPS all came in above their corresponding guidance ranges.
Let me take a moment to walk through our reported fourth quarter and full year results as well as give you insight into the normalized organic results you can find all these details and normalized calculations and the earnings presentation located on our website.
Fourth quarter revenue was $126 million up 12% year over year.
This includes the negative impact to revenue in the fourth quarter from Ddos, which was approximately $9 million in line with our estimated range.
On an organic basis.
Meaning excluding the box bone contribution and normalized for Covid political messaging and Ddos in 2020 , one our year over year fourth quarter revenue growth was 24%.
Full year revenue was $491 million up 43% year over year on a reported basis.
Again, this was lowered by approximately $10 million, representing the full year impact from the Ddos incident, and again was in line with our estimates.
On an organic basis, and using similar normalization or year over year full year revenue growth was 38%.
Within our C pass segment fourth quarter, and full year see pads revenue was $101 million and $414 million respectively.
On an organic basis, and applying similar normalization or surpass revenue growth was 16% for the quarter and 33% for the full year.
We're very proud of our revenue performance for the year.
Your line that performance with strong execution by our entire global team.
And that exceptional performance led to non-GAAP see past gross margins of 53% for both the fourth quarter and full year.
Up two percentage points from the prior year's quarter, despite lower revenue, resulting from Ddos.
And setting a full year record margin exceeding 2020 by three percentage points.
EBITDA for the full year was $50 million.
non-GAAP net income for the year came in at $26 million delivering on our commitment to grow profitably and stronger than expected due to operating expense favorability experienced throughout the year.
Full year non-GAAP EPS was <unk> 97 cents per share and.
An increase of 42 cents year over year.
Yes.
In terms of our operating metrics our dollar based net retention rate was 110% for the full year.
Our normalized net retention rate was 117%.
C pass customers count reached 3228.
In summary, our financial and operating performance in 2020 . One represents another strong year in progressing our long term goals.
Before turning to our 2022 financial outlook.
I'd like to note that in conjunction with the addition of the Chief operating Officer role. We've also strategically organized our go to market operating and development functions in first quarter 2022 .
And recently completed noncore business divestments.
As a result.
Beginning with the first quarter of 2022 .
We will report one revenue segment, representing our global see pads market focus.
Yeah.
Now turning to 2022 as David said, the lingering effects of those customers moving traffic back to our network at lower volumes. Following the Ddos attack has affected our top line outlook.
We estimate an impact of approximately $4 million to $6 million per quarter or approximately $16 million to $24 million in 2022.
We expect the impact to diminish throughout the year as customers, who have returned to our platform gain additional comfort with contingency measures and increase their usage over time.
The other factor in forming our outlook as David described is the changing dynamics with two of our largest customers representing an approximate $15 million decrease to our 2022 revenue outlook.
So taking into account the lingering ddos impact of these changes with two of our strategic customers. We expect our full year revenue to be in the range of 547 million to $555 million.
This full year revenue guidance is inclusive of pass through messaging surcharges that we believe will be mostly consistent with the annualized run rate of surcharges experienced in the fourth quarter.
We're estimating our full year non-GAAP earnings per share to be in the range of three to nine cents per share.
Assuming approximately $31 3 million weighted average diluted shares outstanding.
This guide reflects staffing at target levels that maintain operating expenses consistent with the last several years on a percent of revenue basis.
We're committed to our core financial principle of profitable growth.
We've been clearly following that path and in 2022 we will continue to do so <unk>.
Consistent with this past, we will maintain investments in sales and marketing as well as R&D to address the enormous market opportunity.
For the first quarter, we expect revenue to be in the range of $125 million to $127 million.
First quarter non-GAAP earnings per share is expected to be in the range of a seven cent loss to <unk> 11 loss per share using $31 2 million weighted average diluted shares outstanding.
Looking at the growth trajectory throughout the year, we expect growth to be disproportionately weighted towards the second half of the year.
Now I'd like to turn the call back over to David for a few closing remarks.
Thank you Darryl.
While the Ddos event has affected customer demand and we are sobered by that the situation has strengthened our ability to provide our customers with unparalleled enterprise grade service around the globe.
Continue to feel optimistic about the market opportunity within the enterprise communications journey to the cloud the power of our global footprint and enterprise grade API is to capture the cross selling opportunity within our customer base and to attract new customers looking to build experiences that customers love and I believe bandwidth is uniquely positioned in our spa.
Base to provide the solution to the global communications transformation with that I'll turn it back to the operator for questions.
Thank you.
We will now begin the question and answer session.
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We will pause for a moment at callers join the queue.
The first question comes from Buck on Siri with William Blair.
Please go ahead.
Hi, This is Holly on for Bhavan, Suri and Matt Stotler, Thanks for taking the questions.
Just on a high level here your solutions, obviously power a large portion of the leading communications SaaS providers in the market.
Including Internet Giants, you pass the cast and meetings providers and the likes so moving up the stack to you would potentially risk coming into direct competition with some of these core customers.
So just kind of thinking through as a network owner that's supporting these providers how do you provide value as you move up the stack without directly competing with these customers.
Thank you for the Great question. This is David as we endeavor to serve enterprises globally. There is an enormous amount of complexity both in the contact center and in Ucas, where we add tremendous value up stack, we do enjoy a robust IP voice network globally and have extraordinarily wrote.
Bust API on top of that.
We won't compete with many of the customers that we serve by moving up stack and offering a full fledged contact centers suite that is agent facing or customer facing but there are enormous challenges to be solved in the migration to the cloud for enterprises and that really begins with moving away from an incumbent globally and port.
In your numbers and moving your large inbound numbers in the contact center to the cloud we've got many many innings left to add value throughout the world. When we think about the global migration of enterprise to the cloud.
And lots of work to do.
Great. Thanks, and then maybe just a quick follow up for me could.
Could you remind us of the complexity of what you saw then why the telcos continue to fail to do this or why they don't address the fact that they are being disrupted by bandwidth.
I mean any color on what you expect to see from them in the future how we might think about what they might do thank you.
Worldwide for really the last century communications providers globally in each country have offered dial tone, what they have failed to do is keep up with the pace of innovation is software has really begun to eat the world and what I mean by that is that whether you're an app developer or an enterprise or a product team at a global company.
You want to use software API is in order to activate phone numbers to initiate a call to move a call if youre doing a contact center and you're using an incumbent in America or elsewhere in the world often you're having to do something as arcane as faxing a change order to move a number. In addition, you might have to wait for weeks for what can ease.
Italy happen with a click of a button, if youre integrated to a provider like bandwidth and there aren't many of us and that's really important because one of the values. We offer is that a global enterprise can work with bandwidth instead of dozens of individual providers, who don't have software API is on top of their networks at all so those are.
Just some examples of the <unk>.
Services, we provide and why incumbents are frankly, such wonderful competitors to have.
Great. Thanks.
Yeah.
<unk> question comes from Mark Murphy with J P. Morgan. Please go ahead.
Yeah. Thank you so David coming off of Q3, you seem pretty confident that the impact of the Ddos attack would be mostly felt in Q4 and I think that it would be far less in Q1, and so now it looks like the we're finding out that it's mostly going to be felt.
In 2022, so can you just help us understand what what are the new learnings or what changed since the prior assessment in November .
November .
Another way of saying it or is it is it is it are you surprised that some of the customers are going to dual source.
Hey, Mark first of all I think that the team should get good credit for nailing and exceeding the estimates of the Ddos impact in Q4 that was not an easy exercise we were.
Working very hard to make sure that we bracketed and revised what we're going to do in Q4 and I'm proud that we nailed that I think we've got a firm grip on.
What the rest of 2022 looks like relative to Ddos and earning that business back over time, while there are some who have dual sourced in the case of one large customer that we're working with we have moved from exclusive to primary. So it is not just dual source we're still enjoying.
The majority of the traffic, but this is about relationships and earning that trust back throughout the year should we over perform against that headwind certainly, but we think that this is the right view to provide based on what we're working through with all of our customers coming out of Q4 and.
And looking at what we are hoping to grow through this year. So your question was I surprised.
I was delighted that we were able to be accurate with what happened in Q4, I would like it to be less of an impact throughout the rest of this year, but have line of sight to the impacted we've discovered that we've communicated and the guidance.
Okay.
And as a follow up I guess I'm wondering to what extent is your ability to land new customers.
<unk> Bye bye the Ddos attacks is that something.
Is there a new learning along those lines I'm kind of in terms of what happened in the rest of November December January and so far in February where should we be should we be modeling do customer at lower.
I don't you should not.
And let me just remind you about one comment in.
Our prepared remarks, we did not lose a single one of our Internet giant hyperscale ing customers those relationships are stronger than ever and I think our reference customers for new enterprises coming onboard who speak to what it was like to work with bandwidth through this issue and why they remain.
Such ardent supporters and customers of ours. So I don't believe that you should guide or expect the pipeline to change.
At all because of how we handled the Ddos event, we communicated very transparently with the entire base, we preserved and improved the largest hyperscale of relationships, we had and so our sales teams are in the marketplace active and they have reference customers that are strong.
Yeah.
Thank you.
The next question comes from Ryan Macwilliams with Barclays.
Please go ahead.
Hey, guys. Thanks for taking my question and kudos on that doing what you can on the fourth quarter I know, it's difficult, but you know the one thing we were looking at here is just on the net new customer additions.
Looks like that stepped down.
From the prior quarter. This might have just been asked I've been jumping around on earnings calls, but anything any differences from the third to fourth quarter that it's worth calling out just on net new customers than anything.
Anything like how would you think about that over the next few quarters.
Thanks.
Yeah.
Hey, Hey, there Ron this is Daryl.
You know we've said before it's always good to preface by saying not all customers are the same right in terms of size and.
Expected demand patterns and things like that so it's difficult to generalize, but we did we did.
We report 55, net new logos in the quarter, which is up and it is a little lower than what we had.
Reported historically in the last several quarters preceding that there was some effect in terms of our pipeline related to ddos in the four quarter, you'll recall that Ddos was right at the beginning of the quarter and the effective selling season before the holidays is shortened just seasonally in the fourth quarter. So there was some pipeline effect.
Yes.
Okay.
Great and then just on <unk>. It seems like a timely acquisition given you know the acceleration of cloud contact Center and the addition, there.
Just when it comes to going forward via phone growth is there any way to think about.
What it did in the fourth quarter and then how we should think about that growth rate for fiscal point to thanks guys.
Well.
Brian . This is darrel again, we have you know thinking about vascular and going forward. We're managing as David said, we've organized strategically are and our entire global platform across the dimensions of our customer service sales marketing R&D and the like so we think of our businesses.
One business, serving an entire customer base.
With our global footprint, so thinking about vocs bone individually going forward, we don't necessarily think about that but in terms of the contribution and the like how.
The Voc.
Vox bone contributed $8 million Inorganically to our reported results in the fourth quarter for the month of October that is if you start to do intra quarter.
Linearization and things along those lines to calculate there was a comparable issue a comparable matter in the fourth quarter of 'twenty 'twenty that we did call out where there was $4 million of AV testing anomaly testing revenue that was not going to be repeating so taken altogether, we're real pleased.
<unk> with how vocs bone came out in the quarter and thinking about going forward as part of our guide.
Appreciate the color thanks, guys.
The next question comes from meta Marshall with Morgan Stanley . Please.
Please go ahead.
Hi, This is crown jewel of a car on for me to so first question from our end I guess you noted a few cash customer expansion into U S and Canada from Europe . So I guess just at a higher level could you speak to maybe the timing of when you would see some of these other cross sell opportunities starting to take place and overall traction you're seeing there.
This is David we did talk about how growth accelerates towards the back half of this year and that reflects contribution from cross sell opportunities like the one that we discussed in our remarks youll see those contributing throughout the year, but as things accelerated it'll be back half and beyond but this was just a great callout to seller.
Great Cross selling success by our global sales team.
Does that answer your question.
No that answers it and then I guess just fall off from R. R and I know this was touched on earlier in the call, but sort of given the earnings guide I guess, just where the opex investments that you're making focused anyway, we should be thinking about that.
So we've got Opex investments in areas you would expect to propel growth. That's responsible that includes R&D development technology sales and marketing, we do have a principled approach, which balances bottom line is an important positive result any.
Really for the operating team, but we are investing in a way that we think is both responsible and effective to drive growth pretty broadly in the areas you would expect and I'll just ask Darryl if he wants to add to that I would just add that.
The investment is a normal outcome of the path that we've been on.
There's not anything extraordinary.
<unk> invested but we are maintaining our line of sight in terms of the percent of revenue for Opex and we're managing within that.
One of those long term targets and so as revenue grows you would expect also that to support that revenue we would be developing more software features and moving up stack is one of our earlier callers had remarked upon.
Got it thank you.
The next question comes from Andrew with Keybanc.
Please tell at home.
Hi, This is George on for Steve.
Ask about the 2022 guide what assumptions are built in around return to office and related volume impacts and where do you see the biggest areas for potential upside relative to your guide. Thank you.
Hey, Steve I think your question is regarding return to office globally by knowledge workers and how that affects you I think you said volumes of usage.
We've watched the fits and starts of returned to office over the past two years and it does seem that were getting closer to an all clear country by country and state by state and certainly that might have a positive impact the assumptions that we've made regarding return to office and their usage volumes and revenue are captured in the guide and I would describe them as.
<unk>.
Not reasonable so not making any overly aggressive assumptions that would take us anywhere close to what occurred during COVID-19 .
Just to.
To clarify.
Yeah.
Got it. Thank you that's helpful. And then one quick follow up you talked about contingency measures that you're hoping will drive a return to volume for some of the customers there.
<unk> returned their volume to your network on the Ddos attack you, maybe give us a kind of a tangible example of which of these contingency measures are you, hoping will trigger a return of some of those volumes. Thank you.
When you've got a high volume contact center and the toll free number that feeds into a really large high volume contact center any amount of outage can be very devastating.
Two one of our enterprise customers and the example that I have in mind, while we were very effective in helping them move to an incumbent provider. During the attack. We've realized we can shorten the time for that to take by adding to our platform capabilities.
Let them egress really quickly like with the push of a button.
And that's something that we didn't quite have we hadn't gone through something like that but with that kind of reliable instantaneous ingress and egress return option. It really provides enterprise customers with another reason to stay with bandwidth because they have that security and confidence that if there is a nation state attacks.
Similar.
And we were in unable to stop it that they could immediately migrate there and back again, so it's kind of ironic or counterintuitive that you want to enable your platform to support that kind of flexibility and not have lock in just so that the enterprise customer can stay with you confidently and so that's what we meant by that resiliency or that additional <unk>.
Billy.
Got it thank you for taking my questions.
Thanks, Steve.
Our next question comes from Tyler Radke with Citi.
Go ahead.
Hey, Thanks, and good evening.
I wanted to follow up on the resiliency point that was raised earlier I guess specifically.
Can you kind of talk through specifically some of the things you're doing on the product side to increase that resiliency and.
I guess, what what are your conversations like with customers that want to develop that capability that maybe they come back more in earnest in and single source on on your platform.
Yeah.
I'll take you back to the week of the Ddos outage.
During that week, when we were successful in helping customers move quickly away, while we successfully be back the attack we did move some of them to incumbent providers.
Ironically that same week, one of the largest incumbent providers in the country had a toll free outage when we declared all cleared bandwidth and that we were.
Moving forward expecting to never have another issue like this.
Many of those customers wanted to come back as quickly as possible because the incumbent that we had moved them to had had an unrelated outage, here's where it gets interesting relative to your question on resiliency.
While we had been effective in helping them egress and migrate to the incumbent at very very high.
Fast speed.
They were told by the incumbent that to return to bandwidth would take three weeks.
So.
Large enterprise providers and the leaders of contact centers.
Are thrilled that our platform will support instantaneous API driven configurable migration out in back if needed and that gives them confidence working with us that they simply cannot get from an analog old school century old incumbent that says instead it'll be three weeks before we.
You can do what bandwidth was able to do for you in a matter of hours and is telling you. They can now do instantaneously. So that's a huge step forward for customers.
Great and.
Just wanted to follow up on.
The point you made earlier around the price concessions with one of your larger customers. Maybe just help US understand was was this unexpected and just as I'm sure the.
Others out there may be dealing with kind of more normalized demand patterns do you know anything else like that youre, keeping an eye on or we should watch out for from a concession perspective for the rest of the year. Thank you.
You bet in particular and I think it was Tyler in particular this customer is the world's leading video conferencing provider and grew spectacularly.
During the season that were all coming out of and is in the middle of a quite a significant reset in terms of volumes and we are a terrific partner for them. We have been a partner on which they've exclusively launched product. We are a partner that we have.
They expect will grow with us in the years to come and we hope that that will be many years to come so when they're coming out of.
A stratospheric.
Growth pattern back to Earth, we want them to return and land in one piece and grow with us in the future. So they're doing a reset with them was a no brainer as a partner and we have the opportunity to grow with them through new product launches and as they grow worldwide going forward. So it was really a no brainer as a partner and the right thing to do sometimes partner.
<unk>.
<unk> are going up and you can go with them other times, you need to accommodate where they're at in their business cycle or their business journey and in this case. It was the right thing to do and we're really excited if I if I had to fast forward five years, hence and look back I would believe and fully expect that making partnership decisions like this.
Would result in them contributing to that 20%, 25% growth that we aspire to year after year after year, they will be critical to that.
Yeah.
Great and maybe just a final one for me.
You mentioned this just in your last response to my question, but just around kind of your your aspirations and envisioned for long.
Long term growth I mean, I guess, you know the 20% to 25%.
Range do you still feel pretty confident in that number and I.
I guess is that something we should kind of expect.
Once you normalize as kind of a onetime headwinds this year.
We've.
We've got about a 30 something percent CAGR looking back to our IPO in 17, and believe that our true North pole star of 20% to 25% growth.
Is the right thing you'll have years, where you may fall short you'll have years like we just came out of where you exceed but if you were an innovative team that pays attention to what customers need and you match that with innovative technology and tremendous product and technology people on your team you should be able to aspire to that and.
We've got a total addressable market, that's going to be 74 billion.
Here in a couple of years, so that supports that ambitious but I think reasonable objective now keep in mind. We also temper that with our bottom lines sensibility regarding non-GAAP net income positivity. So we're not incinerating the balance sheet to achieve that number we've got a dual challenge of a really.
A really great growth target, but with profitability near and Dear. So we're reconciling that tension doing it well and expect that we'll continue to have that objective going forward.
Great. Thanks, so much.
The next question comes from Katherine Travnik with colleagues.
Please go ahead.
Yeah. Thanks for taking my question on the $15 million that you said you would take it right.
Headwind with but the two big customers could you detail.
What.
What activities, you're going to do in your go to market motion such that you could possibly make up for that and hit the 25% year over year that you're talking about are you, adding sales capacity, you're changing around any strategic accountants anything you can detail around that would be helpful.
Thank you.
Hey, Catherine this is David So our guide for 'twenty to fall short of 'twenty, and we aren't suggesting in our guide that we're going to overcome the $15 million headwind by these two long term strategic customers that remain great partners with us.
Where are we need to be able to do that and I think we will with each we will be able to return to a level of growth with them that we've had in the past that would occur outside of 2022.
Okay.
Yes, that's part of the question the second half is.
Still that's the case, but aren't you going to make some changes in your sales organization and what are they.
We have fully integrated the vocs bone sales team with the bandwidth sales team and now have a global go to market motion for all product and service globally. That's a fundamental difference from having the two teams separated last year and the results we believe.
<unk> are going to be around three primary areas. The first is that we're going to grow with our existing customers globally and we talk to evidence of that from customer growth that we cited in our prepared remarks. The second is this global sales team are already building an enterprise pipeline.
Larger than we've had in the past so we will add new enterprise customers by our global sales team with our direct model. That's been successful for US and then last we're going to have a terrific customer journey for App developers and emerging use cases and user experiences, whether it's messaging or voice globally and so that area is the.
Third focus for our global sales team as we look to achieve our growth objective year after year after year.
Alright, thank you.
Thanks Catherine.
Okay.
The next question comes from Charles <unk> with Baird.
Please go ahead.
Hey, guys. Thanks for taking the question.
I was hoping you can expand a little bit on the 40 customers that bought back the lower level of traffic Dave.
David you talked about the egress solution that Youre working on I guess I'm. Just wondering is it that the main capability that all or most of those customers are asking for or are there. Other areas that just one of many things that they're asking for in order to return back to the level of traffic they had previously.
Hey, Charles.
Some value that very highly others simply want it to be a matter of time and pace in returning so for example, one of the 40 accounts for about 20% of the total headwind from the Ddos impact during this next year with them.
It's both the resiliency technology that is a part of our platform and.
Coming back over time in a planned and orderly return. So it's both valuable additional capability and then in other cases, it's time, what I think is at the heart of your question. However is are there other.
Requirements or things that are a high degree of difficulty that need to be done for them to return and the short answer is we've captured in our guide any additional elements necessary and that are within our control there isn't some unsaid heavy lift that that you need to worry about regarding us.
Winning those 40 customers back.
Got it that's very helpful. And then just one really quick follow up on box bone.
Given.
I believe you said before that was $8 million of inorganic contribution I think that might imply that the box on revenue was actually down sequentially. If that's true is there anything to call out there the timing related because it seems like the cross sell is going fairly well so anything to talk about there.
Thanks. This is Daryl you know don't want to necessarily imply things like that but we.
We are pleased with the way vocs bone came out.
The fourth quarter issues, we seasonally a bit lower than the second and third quarters, just even with the growth curve up into the right given the the larger holidays that occur in <unk>.
Cross Europe , but we were pleased with the outcome it exceeded our expectations.
As we pointed out in terms of our fourth quarter and full year, we came out above our guidance and box bone did contribute to that.
Got it thanks very much.
The next question comes from Pat Walraven with JMP Securities.
Please go ahead.
Hi, This is Joe on for Pat.
I was just wondering does the eight.
Why why charge with one impulse bandwidth at all.
Hey, Joe.
Okay.
I I am not sure.
Exactly what you're asking.
Well, so there's a there's an FCC.
Rule that was for toll free calls 800 numbers.
Called eight Y O y axis drugs with cool and actually one of your competitors.
Blocker and some voice network pointed to in there.
As an earnings report so I'm just wondering if there's any.
We expect a better for you guys.
I am I will have to follow up with you I have a suspicion and thats regulation related to carrier to carrier traffic and not to enterprise customers that we do but let me follow up with you offline.
Awesome Yeah. Thank you and then I guess just another question outside of this large customer that you are providing a price concession.
Is pricing holding up more broadly how would you characterize it.
Yeah.
I would characterize it as healthy and part of the reason or the evidence for that is within our gross margin and the over performance on gross margin last year and the discipline that we have there as we focus on both growth and profitability, we've got opportunities to improve gross margin.
I would reiterate our long term guide for terminal gross margins at 60% or above as we enjoy the economies of scale benefit of having a vertically integrated model. So we certainly accelerated some of that gross margin growth in 2021, and we're proud of the team for doing that and think that pricing is a direct contribution to that.
And we'll continue to see the benefit of our model and get closer and closer to that objective.
Yeah.
Thank you.
Yeah.
The next question comes from James Fish with Piper Sandler.
Please go ahead.
Hey, guys. This is quint on for Jim Thanks for taking my questions.
You know a lot of our questions have already been answered here, but maybe a quick one on the messaging side what level of political messaging contribution does the company expect to see with a midterm election, and maybe how should we compare that to a full presidential election.
And then are those kind of expectations embedded into your guide at this point. Thank you.
We do expect to see significant growth in political messaging as we head into the mid terms, we have captured the benefit of that in our.
Our guide is there upside potentially certainly, but we've got good good visibility into the pipeline for political messaging, having worked with some of these customers in prior election cycles.
The intensity and ferocity of these competitions is increasing but the way that we're modeling is to be consistent with some of the past experience. We have had and we do believe that that's captured in the guidance.
Okay.
Makes sense. Thank you.
This concludes our question and answer session and today's conference call.
You may disconnect your lines.
Thank you for participating and have a pleasant day.
Okay.
[music].
Yes.