Q3 2022 Bandwidth Inc Earnings Call

Welcome to the bandwidth third quarter G fast.

Earnings Conference call.

All participants will be in most of them.

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Oh, Great Conference.

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After todays presentation, there will be at all for children.

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Your wallet right.

A lot of Investor relations.

Please go ahead.

Thank you good afternoon, and welcome to bandwidth third quarter 2022 earnings call.

Today, we'll be discussing the results and other matters announced in our press release issued after the market close.

Press release, and an 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 Morken, our CEO and Daryl Raiford, our CFO . They will begin with prepared remarks, and then we will open up the call for Q&A.

During the call we will make statements related to our business that may be considered forward looking.

<unk> statements concerning our financial guidance for the fourth quarter and full year 2022.

We caution you not to put undue reliance on these forward looking statements.

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 that.

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 S. E. C 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 earnings presentation, which are located on our website at investors dot bandwidth Doc.

Com.

With that let me turn the call over to David.

Thank you Sara.

And thanks to everyone for joining us.

Today I am pleased to share that we exceeded guidance for the third quarter and are raising our full year outlook on top and bottom lines.

During this last quarter, we achieved our highest non-GAAP gross margin ever a testament to our commitment to growing profitably.

Before we look ahead I want to thank our bandmates for another outstanding performance this quarter, providing us the opportunity to serve our customers and support each other and our global mission to connect people and I, Thank god for watching over us and blessing our work together.

Going forward, we remain confident and optimistic about our operating plans for three key reasons first we power essential services throughout the world.

Our customers are established and their demand is durable they rely on us for mission critical communications that are the bedrock of their business second.

In an environment, where everyone is looking for cost savings, we help customers cut their communications spend nearly in half thanks to the owner economics of our platform.

Third and finally, the world is only in the early stages of a massive shift to digital communications as this secular trend plays out over many years to come bandwidth is uniquely positioned to win through the powerful combination of our global network platform or enterprise.

A P eyes, and our deep regulatory expertise.

Now, let's turn to the outstanding highlights of the third quarter.

Adding to our portfolio of essential services, we raised the bar with new product innovations like our recent launches of send two and call of shore send two is a new messaging app for Microsoft teams and the latest co creation in our decade long partnership with Microsoft send to.

Spans bandwidth duet for teams beyond voice and E 911 to create a truly unified communications experience with send to deployed within an enterprise teams environment teams users have full native messaging capability within their teams application.

We are thrilled to offer our duet customers this new native messaging capability within teams.

Call. It sure is the only comprehensive disaster recovery solution for toll free business calls and the first of its kind in our space.

Oh sure expands bandwidth already highly resilient toll free offering by adding the new capability in the case of an extraordinary event.

Bandwidth customers, new and old are responding positively to call a sure. It is a concrete example of how we've innovated toward our goal to create the most hardened reliable and resilient network in our space.

Our reputation for redundancy and resilience led the nations well known largest security fire and alarm monitoring service to go all in with Us.

This customer vowed to implement a more robust network platform to eliminate their vulnerabilities. After a detailed competitive review they chose bandwidth for our five fold level of toll free call redundancy with automatic failure rerouting, an additional differentiator was our backend analytics, which help the customer.

More efficiently manage their high traffic volume and the tens of thousands of telephone numbers that are the lifeblood of their business.

As our new customer put it so eloquently quote if you care about the integrity of your network you use bandwidth.

Another new enterprise that chose us to power their mission critical services is a global cloud platform specializing in health care and hospitality.

Reliability security and scalability are all vital to their business model. This customer consolidated 20 different carrier relationships by choosing bandwidth, while gaining quality reliability cost savings and faster speed to market. They also future proof.

Their growth footprint around the world as they look to add new customers in EMEA APAC and Latin America. This is the powerful value proposition, we deliver when our customers go global with bandwidth and is gaining momentum among our enterprise prospects.

Resilience and scalability also drove the expansion of our partnership with five nine the rapidly growing cloud contact center platform.

They came to us with a huge challenge help them manage hundreds of thousands of telephone numbers and associated features while providing backup assurance for mission critical services, our solution accelerated their migration tenfold compared to alternatives, enabling five nine to take advantage of bandwidth Nextgen case.

Abilities much sooner on top of that five nine is now positioned to offer its customers more self service solutions using bandwidth platform comprehensively. It is another example of our success landing and expanding with existing customers and a strong proof point of our ongoing momentum with the worlds.

Leading contact center platforms.

Continuing with our theme of essential services messaging is proving to be a mission critical use case in more and more ways messaging increased to 14% of our revenue mix this quarter due to its urgency its visibility and convenience messaging is now a first line channel for both.

Commercial and civic engagement.

Political campaign messaging is a key driver for civic engagement and we saw a meaningful benefit from political messaging this quarter as Daryl will detail in a moment.

Our ability to reliably deliver at scale with easy to use a P eyes and regulatory know how for campaign registration has all resulted in bandwidth, becoming a go to messaging platform across the entire political spectrum. This U S. Election season. We are also seeing organizations of all stripes now embracing messaging.

A higher level of issues awareness and rapid response to actionable news throughout the entire calendar year.

Civic engagement joins the growing chorus of commercial messaging that we power from a retail point of sale and loyalty programs to shopping and e-commerce to financial services identity authentication and health care patient engagement, our business continues to grow step.

Lee with customers like the one we announced last quarter, a leading text messaging commerce platform, but it is now ramping up for Black Friday.

Yeah.

Before I wrap up I want to share two key leadership changes first our president to Marina character has decided to depart after nearly seven wonderful years of outstanding service to bandwidth two years ago I asked Marina to assume the role of president to help Shepherd, our team and Chris.

Partners through global expansion, she met that challenge head on her passion for our customers and her business acumen have been essential in helping us advance our vision, while staying true to our first principles. She has been critical in orchestrating and unlocking new revenue among fortune 500 customers and an enabling the res.

The growth of our messaging portfolio, having contributed so much to the foundation for our future growth Marina recently shared but it is the right time for her to step away towards new and different challenges. She has graciously agreed to stay through the end of the year to provide a smooth transition Marina has blessed all of us.

And our customers beyond measure and we wish her the very best Thank you Marina fair winds and following seas to the character family.

As we say farewell to Marina.

I'm thrilled to welcome aboard a new senior leader on the team diverse agar wall has joined bandwidth in the newly created role of Chief software strategy officer with over 30 years in communications and 25 patents to his name diverse is a proven technology leader.

Or does that she led a team of over 1100 software developers at Oracle to build new five G products that became the industry standard for tier one providers worldwide welcome to the ban diverse.

In closing I'm very pleased with the team's solid progress against our strategic priorities and proud of how we're navigating through the current environment. We believe we will continue to benefit from the mission critical nature of our business the stability of our customer base and their relentless enterprise move to the cloud looking ahead, we will continue to man.

Our business prudently by further extending and embracing our long standing commitment to profitability, we expect to thrive. During this uncertain time I'll now turn it over to Daryl to walk through the details of our financial results and outlook for the final quarter of the year.

Thank you David and good afternoon, everyone. As a reminder, details related to our third quarter performance are provided in an earnings presentation that may be accessed on our investor Relations website.

We had a very strong third quarter with significant beats against guidance.

Revenue of $148 million and non-GAAP net income of $8 million, both exceeded the midpoint of our guidance by $7 million.

We are raising our full year guidance to pass through the third quarter beat.

And reflect an improved full year outlook on top and bottom lines.

For the full year 2022.

We expect revenue to now be $563 million at the midpoint of our range, reflecting a $9 billion raised to our previous guidance.

And non-GAAP EPS to be 36 cents also reflecting the beat and raise.

As David mentioned, we serve a large diverse set of enterprise customers across many verticals and business critical use cases and continue to expect this usage to be durable.

We are an experienced operating team with a demonstrable track record of profitable growth and prudent execution that will continue to serve us well, especially in this season of uncertainty.

Yesterday.

We strengthened our balance sheet by agreeing to repurchase $160 million of 'twenty 'twenty six convertible notes at a meaningful discount to par value.

We expect this transaction to close on November 28, 2022.

Upon completion, the outstanding borrowings of our convertible debt maturity in 2026 will be reduced to $240 million.

We continuously evaluate options for the best use of our balance sheet to stay opportunistic in the current capital market environment.

With our resolute focus on profitability, while sustaining growth.

We create the option to fully repay our remaining convertible note obligations in full upon their respective maturities with our earnings and available cash if we so choose.

Rounding out our third quarter results revenue of $148 million was up 14% from last year.

Notably messaging continues to be a strong driver at 14% of our total revenue and grew 50% over last year.

Political messaging revenue from the U S midterm elections contributed approximately $7 million in the third quarter.

Our revenue result included $27 million of pass through messaging surcharges compared to $14 million in the prior year quarter.

If we exclude the contribution from surcharges revenue grew 4% year over year.

Overall exceeding our expectations, but affected by continuing cross currents.

Namely we saw 14 points of growth across our broad base of customers driven by strong contributions from both usage based and monthly recurring charges.

This growth was partially offset by nearly 10 points from the headwinds described the last couple of quarters, which were in line with our expectations and illustrated on slide eight of our earnings presentation.

Our non-GAAP gross margin was 57% for the third quarter up 300 basis points from the prior year's quarter and a record for our business.

We continued to benefit from economies of scale network effects, a richer mix of higher margin products and operating improvements.

This quarter's 57% non-GAAP gross margin again demonstrates.

<unk> progress towards our 60 plus percent long term margin ambitions.

EBITA for the third quarter was $13 million and free cash flow was $13 million.

In terms of operating metrics, our third quarter net retention rate was 109%.

Active customer count was 3380 or.

Our average annual revenue per customer increased from last quarter to $163000.

Consistent with last quarter, we continue to sharpen our sales focus on attracting and serving large enterprises.

In summary, our growing market and consistent execution through isolated headwinds combined with a relentless focus to serve our customers and improve profitability have yielded measurable near term progress while driving us towards our long term goals, especially in this season of macroeconomic uncertainty.

Now I'd like to turn the call back over to the operator for questions.

Well now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

If you are using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Okay.

Yeah.

And our first question will come from Matt Stotler of William Blair. Please go ahead.

Okay.

Hey, David It's Daryl Thank you for taking the questions maybe just to start with a kind of a broad macro question right, obviously, our results much better than expected.

You know kind of balancing the current uncertainty with the long term drivers and then some seasonal political messaging going on well, let's maybe just dig into what you're seeing in.

In terms of the impact that the current macro environment has on our overall usage trends spending behavior buying patterns pricing or anything you're seeing from customers in terms of changing behavior in this environment.

Hey, Matt This is David.

We've noted that contract customer term lengths have ticked up average annual customer spend has ticked up our enterprise focus is squarely centered on larger global 5000 companies and we're working with them in all kinds of different verticals in the macro secular trend.

The digital transformations and in our case, specifically moving to the cloud with what used to be premise based equipment and solutions and so that trend I think is a much more powerful.

Of course at the moment than the macro uncertainty and we're certainly seeing that in our results whether it's the contract term length of the average spend on the sales desk, we've got pipeline management expertise that.

That understands how to both nurture and then close long term enterprise engagements, but don't have anything specifically to share about elong gating contract closed cycles in a way thats of concern right now.

Got you that's very helpful and good to see good to hear.

In terms of maybe the gross margin performance, obviously, a pretty nice step up year over year and sequentially compared to Q2.

Any further commentary you can give in terms of whats driving that adjusted non-GAAP gross margin expansion of 57% I mean is.

Is that are you know.

Partially being driven by what Youre seeing in the messaging side of the business is that primarily an increase in on net traffic any additional color there would be helpful.

Hi, there Hey, this is Daryl product mix did play a important role messaging continues to be accretive to overall margin and is now 14% of total revenues.

And we do continually benefit from scale as we've talked about before on our network with more traffic yields volume savings from our vendors. Our teams have actually been doing a really great job of optimizing spin and securing discounts at scale and that was part of the operating execution that I referred to earlier.

Got it very helpful. Thanks again.

Our next question comes from Ryan Macwilliams of Barclays. Please go ahead.

Thanks for taking my question and congrats on the quarter great to see you on the strongest free cash flow quarters from bandwidth in recent years. So after buying back a $103 million in converts how are you thinking about addressing the additional converts going forward in light of your growth opportunities.

Thank you Hey, this is Earl again, we did strengthen our balance sheet by agreeing to repurchase $160 million of our 2026 convertible notes at a really meaningful discount to par value.

That will complete in November at the end of November and we're going to be left with our first debt maturity to eventually occur in 2026 of around $240 million.

We think with our profitable growth, we right now create the option to fully repay our remaining convertible note obligations in full upon their respective maturities through both our earnings and our available cash if we choose we're going as I said in the prepared remarks, we're going to remain opportunistic around our capital structure.

And take the necessary actions, but we're very confident in the in the path that we've chosen and in the.

The Optionality we've created.

Uh huh.

Perfect and then Darryl I appreciate it you detailing the benefit from political messaging in the quarter do you have any expectations on how political could benefit for Q on the topline and was there any material benefit to gross margin this quarter from political messaging. Thanks.

We do you that hey, we you're right. We do expect some similar trends we saw in the in the last presidential election, and increased political contribution in the fourth quarter with usage, peaking about now and leading up into next week into the elections. It is captured in our guidance messaging of all stripes.

David referred to whether it's for civic engagement political or commerce for it for the benefit of our customers that all all that messaging is accretive to our gross to our company gross margin.

Excellent I appreciate the color thanks, guys.

Thanks Ryan.

Yeah.

The next question comes from Mike Walkley of Canaccord Genuity. Please go ahead.

Great. Thank you and my congrats also on the strong quarter.

I guess, Dan I'll, just just to follow up on the last question you know with the flattish sequential revenue guidance another strong political messaging.

Just kind of talk about the lower non-GAAP EPS in the guidance is that just lack of leverage from ongoing operating expense investments or is there a change in the gross margin mix, we should think about going forward or any other one time items.

Well, we did raise our we did raise our outlook from our previous view for the fourth quarter.

There are some time ago from third quarter to fourth quarter, we do have some timing of operating expenses as it shifts to fourth quarter. We also have to take into account the normal seasonality that occurs with the holidays in the fourth quarter as well that's something the company has experienced for a number of years. So that's embedded in our guidance as well when looking at the fourth quarter.

Great. Thanks, and then just for my follow up.

Where are you guys maybe in terms of churning some lower end customers I mean, it's great to see the arps going up and you're doing well with the large customers, but it is does that mainly behind you or is that still in this year. So turning some lower end customers that are hitting the net adds of new customers.

Absolutely that did continue or the net new logos that we spoke to in just a moment ago were up 18. This quarter. We did have strong customer adds of 157 customers and that was offset by removing the churning and architected churn of <unk>.

<unk> de focusing from the very smallest customers you can see that the average annual revenue per customer did increase again and we are more much more sharpened our focus on enterprise customers.

Great. Thanks for taking my questions.

Yeah.

Yeah.

Our next question comes from meta Marshall of Morgan Stanley . Please go ahead.

Great. Thanks, I'm looking back at the Q2 transcript you noted you expected a lot more of that political to be kind of a Q4 driver. So just wondering what you had embedded for political and in Q3, and then you know.

Building on the last question it seems as if you're saying that there's opex that picks up in Q4, just trying to get a sense of you know whether you think some of the gross margin strength that you saw in Q3 should translate to Q4 and that really most of the increase in expenses should come from the Opex line item.

<unk>.

Hi, meta, it's nice to say Hello, the in terms of the.

Political contribution we did experience the political campaign contribution messaging, we did experienced $7 million in the third quarter, excluding surcharges and we do expect in the six weeks of Q4 that really represent the political campaign season that contribution is going to be slightly higher the $7 million in the third quarter was in line with our expectations.

<unk>.

A slight increase in the first six weeks of the fourth quarter that we're looking at it is in line with our previous expectations as well.

In terms of operating expense.

We do believe that.

We do believe that the.

Re sequence the operating expenses and that the expense shift to the fourth quarter.

We will be just a slight increase over Q3.

But just to clarify the gross margin should stay as strong as Q3 or.

Is there anything that we should be considering about Q3.

Being stronger than Q4 would've been on the gross margin line item considering the political contribution margin.

Thanks margin does fluctuate truly margin does can and does fluctuate from quarter to quarter. We've been really focused on our annual progression over the last three years and progressing into the future.

It is it is very possible that margin will be in.

In line or could deviate up or down a point or two.

Okay. Thank you.

Yeah.

The next question will come from will power of Baird. Please go ahead.

Oh, great. Thank you I guess.

A couple of questions great to see the a better financial performance.

As you look at the.

Question for David I guess as you look at you know the revenue upside relative to maybe where expectations had been I mean, it sounds like you know messaging as a piece of that there, but anything else you'd call out I mean, either U S internationally, I guess kind of a.

Aligned with that would love to just get your perspective on U S results versus what you saw outside the U S.

Hey, well.

First and foremost I hint that.

Going into what we've described as an uncertain future. We are extremely well positioned for three reasons as I mentioned, we've got a.

A mission critical service and solution that we're providing to large and established customers. That's a broad attractive focus for us and number two we also because we've had owner economics. As you know we have the added advantage of offer of offering cost savings as an additional benefit beyond just capabilities.

And this season that is vital and so that's driving adoption and additional usage to your specific question and then third it.

It's still early days, certainly COVID-19 accelerated the digital transformation of communications based on capabilities that had to happen when everyone had to work from home now we're in a recession and we believe that.

Our value prop our addressable market, our customer base, what we do resonates with them right now because of cost savings, which not everyone can offer in this season uniquely we have an installed asset base. As you know that has taken years and years and years, if not over a decade and in some cases globally.

And that owner economic platform has particular residents right now international as you asked at the very end continues to be a customer experience that we're building toward with a single pane of glass every enterprise conversation that we're having right now on the sales desk has an international component the original value proposition that was represented by.

The addition of 60 countries outside the United States is still very much alive and flourishing we have an appetite to serve globally and and Youll see us continue to grow globally, and so we're making very good progress.

Okay, No that's great and maybe if I could sneak in one for Daryl just the free cash flow looked good in the quarter it'd be great to kind of understand how youre thinking about the free cash flow kind of framework you know from here level of focus there how we should think about that.

Over the next couple of years.

We do expect driving towards our target gross margin.

Along with our operating expense efficiency, we do expect well not thinking about 'twenty 'twenty three specific we do expect over the next several years to be growing our profitability and the resulting free cash flow Capex, we've always called it around four to five possibly 6% of sales depending on the particular needs of the business.

View that is becoming more flat.

Versus scaling with revenue as the business continues to grow and we will provide more.

Free cash flow leverage fall through on EBITDA as we go through those years.

Thank you.

Our next question comes from Wall Ravens of JMP Securities. Please go ahead.

Great. Thank you and let me add my congratulations.

So Darryl you first I mean, it's great to see you buy back 160 million of debt at a 29% discount.

Yesterday right.

No.

I'm just curious why yesterday.

Well, that's when we were able to complete it we did start the process last week is something that we've been monitoring we felt the time was right in advance of other macro items that are going on now.

Being one of them being the election life. We felt it was it was the perfect timing and that's something we wanted to do.

Great and then why $160 million.

Yeah.

Well there is you have to it was it was oversubscribed do you have to build a book and we felt like that was the right amount the right balance between the face amount.

<unk>.

Discount.

And the cash, leaving the business with more of the suitable reserves and wherewithal to face any uncertainty in the future.

Okay Awesome and then so David you guys are back to the office five days a week right.

Yes, we are Pat.

How is that going what are the pros and what are the Collins.

Pros are things like <unk>.

Morale camaraderie Esprit de corps of Spirit week that was off the hook and collective creativity and vibrancy, among our rank and file and leadership that we haven't seen in a long time people. Initially may have a period, where they are adjusting and adapting but ultimately the.

Respect admiration energy love and human dynamic across teams is manifest.

And we celebrate it.

I think also being here when an analyst happens to drop by as another big time pro.

[laughter] Yeah, that's a good one okay and then the other thing investors worry about is they're like Oh, they're building. This big campus, they're not gonna be able to use it or are you going to be able to use that campus efficiency efficiently.

I believe will be the envy of many teams that may take a different path.

And we are excited about both the usage of it but also and this is really important it's economically savvy its shrewd over the lease term it has multiples as to our productivity and morale, but that manifest in really concrete ways on retention.

And recruiting.

And productivity and so yes, we're gonna be able to use it we're going to be able to thrive and it was one of the most economically sure things when we look back and realize what was available at the time and what we have to do now if we were deciding to do this at this point in a very hot market, including here in Raleigh.

Awesome. Thank you Bob.

Our next question comes from Harry Wilmar Gang of Needham. Please go ahead.

Hey, Scott This is Harry from Needham I'm stepping in for Ryan Tunis.

Just one quick question on Opex can you highlight some of your strategic got back investments. Please on the R&D front or the new SMS features global reach for SNS videos Robocall mitigation.

The mitigation or other entirely new products and on the sales front.

The development of your direct to enterprise sales motion developing.

Hey, Gary This is David on your first question, what we did announce for the quarter included two really innovative product developments that we launched send two which is the new messaging app for Microsoft teams and what it represents is a truly native user experience to be able to do text messaging right from your productivity suites in Microsoft.

That was one example of great R&D investment that's come to market as a new product. The second one was call. It sure. It's the only comprehensive toll free zastrow recovery solution in this space and we already had a really industry, leading redundancy solution for toll free.

Calling but for a really high volume enterprise contact center.

You can't afford to be down and we learned some really hard one lessons from our experiences in the recent past and and took those lessons and the engineering work that we did.

To create something that is so innovative we believe it's one of a kind and color sure allows the very largest enterprise contact centers to do their toll free contact center, calling with absolute assurance of continuity. So that's another example of extraordinary investment coming to market in a product.

We also are spending time in the contact center doing really important behind the scenes work to integrate what has really become a cambrian explosion as I've said in the past of contact center AI integrations with third parties. There is so much complexity among solutions and complementary solutions and you have a call flow, which can only afford millisecond delays.

When you are handing off to AI engines or sentiment analysis or transcription and we're doing really important work in R&D to make that contact center handoff of the live call really high quality and reliable. So those are some examples on the messaging side of our business, we have really focused on that.

The capacity challenges and the reliability challenges in messaging during a really intense season and so that's another area of investment and I have forgotten. The second part of your question Harry can you remind me.

Yeah, just on the sales front.

How is it development.

Your direct to enterprise sales motion going.

It's going well.

Anthony Bartolo, our Chief operating officer has brought onboard sandy who's our chief revenue Officer, and Sandy continues to lead a team stepping into more and more enterprise opportunity globally, and we believe that we've got the right leader for the right time doing the right things with this team for enterprise business among the global five.

<unk> thousand and that's for both voice and messaging.

Again, our value prop in this uncertain season resonates both because of the capability, but also the cost savings and that's relative to the incumbent solutions that we compete against most of the time, so thats domestic Verizon AT&T or lumen not only do we have a software platform that they don't but we have owner economics that allows us to compete and compete favorably.

Awesome. Thank you so much.

The next question comes from James Fish of Piper Sandler. Please go ahead.

Hey, guys nice quarter, thanks for the questions Daryl.

Daryl maybe for you if I exclude the $7 million from a messaging overall for the political messaging it doesn't imply that the messaging business was down actually sequentially.

Can you confirm that and if so was that due to the pricing changes you guys made in the last quarter or two or what are you guys seeing with messaging excellent local messaging contribution this quarter.

Messaging to clarify messaging growth without political without political messaging was up 10% year over year.

Yeah now in terms of price overall, we experienced a price increase or price improvement during the quarter and that's driven by obviously all always driven in part by mix, but again quarter after quarter, our C pass pricing.

Good across our solutions has improved.

Fair enough and it does seem like net retention is starting to stabilize a bit here I'm not looking for 2023 necessarily but I guess as you guys are kind of planning out here in the next few years, especially around you know thinking about what growing at a reasonable kind of right here.

Level of expansion do you think is appropriate for this business and just a housekeeping question does that net retention rate include or not include carrier fees as well as political messaging here this quarter.

I'll take the first first part of the question.

Youre looking at our dollar based net retention I think when you say net retention and we had a one O nine number in this period.

We've got a strong enterprise base of customers and while you said stabilized I think that it's important to understand the focus and emphasis with our large customers and the spend annually. This increasing you should expect us to continue to grow dubner.

And we wouldn't expect it to be stable in terms of being flat, we expect to add additional enterprise customers and to grow with them and as they succeed that will continue to grow.

So it can fluctuate from period to period, but we've got a strong conviction that the work that we're doing in the enterprise space will yield strong dubner consistent with past periods and so I wouldn't hang your hat on this number being fixed.

Yeah.

Yeah.

Yeah.

And just one clarification.

Clarification does not retention rate include the carrier fee incremental as well as political messaging or is that excluded from the calculation here.

Our dollar based net retention rate does include it.

Okay. Thanks, Doug.

Yeah.

This concludes our question and answer session as well as today's conference call.

Thank you for attending today's presentation and you may now disconnect.

Yeah.

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