Q4 2023 Bandwidth Inc Earnings Call
Operator: Hello and welcome to the Bandwidth Inc. fourth quarter and full year 2023 earnings conference call. All participants will be in listen only mode. Would you like a...
Hello, and welcome to the bandwidth, Inc, fourth quarter and full year 2023 earnings conference call.
Participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your telephone keypad and to withdraw from the question queue. Please press star.
Operator: I will personalize a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone. And to withdraw from the question... Star, I would now like to hand the call to Sarah Wallace. Thank you. Good morning, and welcome to Bandwidth's fourth quarter 2023 earnings call. Today we'll discuss the results announced in our press release issued earlier this morning. The press release and an earnings presentation with historical financial highlights can be found on the investor relations page at investors.bandwidth.com. With me on the call this morning are David Morken, our CEO, and Daryl Rayford, our CFO. They will begin with prepared remarks, and then we will open up the call for Q&A.
I N T L I.
I'd now like to hand, the call to Sarah Wallace. Please go ahead.
Sarah Wallace: Thank you good morning, and welcome to bandwidth fourth quarter 2023 earnings call.
Sarah Wallace: Today, we'll discuss the results announced in our press release issued earlier this morning.
Sarah Wallace: Press release and earnings presentation with historical financial highlights can be found on the Investor Relations page at investors got bandwidth dotcom.
Sarah Wallace: With me on the call. This morning is David Martin, our CEO and Daryl Raiford our CFO.
David Morken: I will begin with prepared remarks, and then we will open up the call for Q&A.
Operator: 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 quarter and full year of 2024. We caution you not to put undue reliance on these forward-looking statements, as 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 statement.
David Morken: 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 quarter and full year 2024.
David Morken: We caution you not to put undue reliance on these forward looking statements as 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.
David Morken: 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 them.
Sarah Wallace: 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 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.com and on the SEC's website at sec.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 earlier this morning, as well as in the earnings presentation, which can be found on our website at investors.bandwidth.com. With that, let me turn the call over to David. Thank you, Sarah.
David Morken: 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 S. E. SEC filings all of which are available on the Investor Relations section of our website at bandwidth dotcom and on the S E T.
David Morken: These websites in 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 earlier this morning as well as in the earnings presentation, which we are located on our website at investors that bandwidth dotcom.
David Morken: With that let me turn the call over to David.
David: Thank you Sarah.
David Morken: Welcome to Bandwidth's Q4 2023 earnings call. We're pleased to report we exceeded our guidance for the fourth quarter, capping off a full year of solid execution. We grew and diversified our revenue by adding a number of significant customers across our commercial messaging and direct-to-large enterprise categories. We invested in our business and introduced new products like our next-generation Maestro platform and AI Bridge. And we grew profitability 39% year-over-year, delivering record-adjusted EBITDA in the fourth quarter and yielding record second-half free cash flow. The team is grateful and honored by our customers' trust in Bandwidth to provide their business-critical communication services around the world. Thank you to our Bandmates for serving our customers, executing our mission, and delivering these strong results.
David: Welcome to bandwidth Q4, 2023 earnings call. We're pleased to report we exceeded our guidance for the fourth quarter capping off a full year of solid execution.
David: We grew and diversified our revenue by adding a number of significant customers across our commercial messaging and direct to large enterprise categories. We invested in our business and introduce new products like our next generation Maestro platform and AI Bridge, and we grew profitability, 39% year over year.
David: We're delivering a record adjusted EBITDA in the fourth quarter and yielding a record second half free cash flow.
David: The team is grateful and honored by our customers' trust and bandwidth to provide their business critical communication services around the world.
Speaker Change: Thank you to our band mates for serving our customers executing our mission and delivering these strong results and I. Thank God as we charge into our 25th year as a company.
David Morken: And I thank God as we charge into our 25th year as a company. Last year, during our Investor Day, we laid out a four-year plan and said we were more confident about our mission to develop and deliver the power to communicate than when we started the company or at any time since. After exceeding our plans for the first year, we are even more confident today. That's because bandwidth is leading in the front ranks of the worldwide cloud communications revolution, which is a secular trend still in its early stages. Automating voice, text messaging, and emergency calling through cloud software is the fastest way for enterprises to build a better brand experience, reduce operating costs, leverage emerging AI technologies, and simplify and de-risk digital transformation company-wide.
Speaker Change: Last year during our Investor day, we laid out a four year plan and said we were more confident about our mission to develop and deliver the power to communicate than when we started the company or at any time since.
Speaker Change: After exceeding our plans for the first year, we are even more confident today.
Speaker Change: That's because bandwidth is leading in the front ranks of the worldwide Cloud Communications Revolution, which is a secular trend still in its early stages.
Speaker Change: Automating voice text messaging and emergency calling through cloud software is the fastest way for enterprises to build a better brand experience reduce operating cost leverage emerging AI technologies, and simplify and Derisk digital transformation companywide and they're doing it with bandwidth.
David Morken: And they're doing it with bandwidth because we are the only provider in our space with a unique combination of a global owned and operated cloud network, AI-ready capabilities, programmable software APIs, and deep regulatory insight. Today, we are the only CPaaS provider with our own global communications cloud. The depth and breadth of our competitive moat is evidenced by the fact that we serve all the world's leading power platforms in cloud communications, as recognized by Gartner Research. Whether it's iconic hyperscalers like Microsoft, Google, or Zoom for hybrid work, customer experience pioneers like AWS, Genesys, and Five9 for cloud contact centers, or the many innovative SaaS and application companies building text messaging into everything from healthcare to conversational e-commerce, Bandwidth is their communications cloud.
Speaker Change: Because we are the only provider in our space with a unique combination of global owned and operated cloud network AI ready capabilities programmable software API and deep regulatory insight.
Speaker Change: Today, we are the only see past provider with our own global communications cloud the depth and breadth of our competitive moat is evidenced by the fact that we serve all of the world's leading power platforms in cloud communications as recognized by Gartner research, whether its iconic hyper scaler like micra.
Speaker Change: Soft Google or zoom for hybrid work customer experience pioneers like AWS Genesis and five nine for cloud contact centers or the many innovative SaaS and application companies building text messaging into everything from health care to conversational ecommerce bandwidth is their communications.
Speaker Change: Cloud all of these players count on us for global reach scale reliability security, leading edge innovation and incredible customer support that is always available 24 seven.
David Morken: All these players count on us for global reach, scale, reliability, security, leading-edge innovation, and incredible customer support that is always available 24-7. During the past year, we continued to expand our investment in innovation with the launch of many new features and capabilities. In our global communications plans category, we improved our already best-in-class customer experience with expansive new self-service capabilities. That's why TNS, a provider serving 27,000 separate businesses, switched to Bandwidth from a key competitor, placing their trust in us as the sole provider for their mission-critical toll-free calling and other programmable voice services. In our Enterprise category, we launched 10 new products, including Bandwidth Maestro, our AI-ready next-gen software platform, which was judged by our peers to be such a game changer that it won Best of Show at Enterprise Connect. In fact, industry recognition for Maestro continues, as it won a Product of the Year award from Internet Telephony just last week.
Speaker Change: During the past year, we continued to expand our investment in innovation with the launch of many new features and capabilities in our global Communications plans category, we improved our already best in class customer experience with expansive new self service capabilities, that's why T N S.
Speaker Change: Provider, serving 27000 separate businesses switched the bandwidth from a key competitor, placing their trust in us as the sole provider for their mission critical toll free calling and other programmable voice services.
Speaker Change: In our enterprise category, we launched 10, new products, including bandwidth Maestro, our AI ready Nextgen software platform, which was judged by our peers to be such a game changer, but it's won best of show at Enterprise connect in fact industry recognition for Maestro continues.
Speaker Change: Is it one a product of the year award from Internet telephony, just last week.
David Morken: These new offerings, each substantial in their own right, drove our opportunity pipeline to new highs, accelerated our enterprise revenue growth 21% year over year, and led to new customer wins like Ally Financial, Western Union, Children's Health, Fabletics, and so many others, all chose Bandwidth to improve their customer experiences and to adopt conversational AI. In our programmable services category, we are adding new global two-way messaging capabilities in more markets around the world, which we expect to continue to fuel our growth. Last year, we grew commercial messaging 32% year-over-year. The most demanding, high-volume senders are using our global messaging API for diverse commercial use cases across FinTech, healthcare patient engagement, civic engagement, conversational e-commerce, and more. Like WellSky, for example, a premier health and community care technology provider in North America, which in Q4 moved the rest of its HIPAA-compliant messaging and voice to bandwidth from a competitor, trusting us to deliver vital communications between its more than 600,000 caregivers and 4,000 personal care agencies across the U.S. and Canada.
Speaker Change: These new offerings each substantial in their own right drove our opportunity pipeline to new highs accelerated our enterprise revenue growth, 21% year over year and led to new customer wins like ally financial Western Union Children's Health Phablet X and so many others.
Speaker Change: All chose bandwidth to improve their customer experiences and to adopt conversational AI.
Speaker Change: In our programmable services category, we are adding new global two way messaging capabilities in more markets around the world, which we expect to continue to fuel our growth last year, we grew commercial messaging, 32% year over year. The most demanding high volume centers are used.
Speaker Change: Our global messaging API for diverse commercial use cases across Fintech health care patient engagement civic engagement conversational ecommerce and more like well Sky for example, a premier health and community care technology provider in North America, which in Q4 move.
Speaker Change: The rest of it's HIPAA compliant messaging and voice to bandwidth from a competitor trusting us to deliver vital communications between their more than 600000, caregivers and 4000 personal care agencies across the U S and Canada.
David Morken: In 2024, we expect our growth in commercial messaging to be joined by further benefit from the U.S. election season, where our capabilities uniquely serve many longstanding customers. Each one of these examples demonstrates the growth and rapid, innovative capabilities of the Bandwidth Communications Cloud. As we reflect on the past year, we are pleased with our execution and forward momentum through any crosswinds in the current macro environment. For example, we hosted more in-person visits in 2023 from large Global 2000 Enterprise customers and prospects than in any other year by far. We launched Maestro and AIBridge, our biggest innovations ever. And, as you would expect from a durable franchise, our profitability has shown remarkable growth, significantly outpacing our revenue increases as we deliver on our promise to grow revenue profitably. Thank you. Thank you.
In 2024, we expect our growth in commercial messaging to be joined by further benefit from the U S election season, where our capabilities uniquely serve many long standing customers. Each one of these examples demonstrates the growth and rapid innovative capabilities of the bandwidth communications cloud.
Speaker Change: As we reflect on the past year, we are pleased with our execution and forward momentum through any cross wins in the current macro environment.
Speaker Change: For example, we hosted more in person visits in 2023 from a large global 2000 enterprise customers and prospects than in any other year by far.
Speaker Change: We launched the Maestro and AI bridge, our biggest innovations ever and as you would expect from a durable franchise. Our profitability has shown remarkable growth significantly outpacing our revenue increases as we deliver on our promise to grow revenue profitably.
Speaker Change: As we enter our milestone 25th year as a company we are more confident in our mission and our opportunity than ever before.
David Morken: As we enter our milestone 25th year as a company, we are more confident in our mission and our opportunity than ever before. I'll now turn it over to Daryl to walk through the details of our financial results and outcomes. Thank you, David, and good morning, everyone.
I'll now turn it over to Daryl to walk through the details of our financial results and outlook.
Daryl Raiford: Thank you David and good morning, everyone.
Daryl Rayford: Our team performed exceptionally well in the fourth quarter, rounding out a solid year of consistent performance and positioning us to reach our 2026 medium-term target. We're proud of what we've accomplished and confident that our dedication, hard work, and unwavering commitment to excellence will continue to drive us forward. The team's laser focus on accelerating sustainable, profitable growth is evident in our results once again, with fourth quarter and full year revenue and adjusted EBITDA both exceeding the high end of the guidance range, as we benefited from strong usage in commercial messaging and operating data. Fourth quarter total revenue of $165 million increased 5% year over year.
Our team performed exceptionally well in the fourth quarter rounding out a solid year of consistent performance and positioning us to reach our 2026 medium term targets.
Daryl Raiford: We're proud of what we've accomplished and confident that our dedication hard work and unwavering commitment to excellence, we will continue to drive us forward.
Daryl Raiford: The team's laser focus on accelerating sustainable profitable growth is evident in our results once again.
Daryl Raiford: With fourth quarter, and full year revenue and adjusted EBITDA, both exceeding high end of guidance ranges.
Daryl Raiford: As we benefited from strong usage in commercial messaging and operating discipline.
Daryl Raiford: Fourth quarter total revenue of $165 million increased 5% year over year.
Daryl Rayford: Cloud Communications Revenue, which is total revenue, excluding pass-through messaging surcharges, was $126 million, up 12% when excluding the year-over-year effect of $11 million of cyclical political campaign messaging revenue in 2022. Our full year 2023 revenue was $601 million, up 5% year-over-year. Cloud communications revenue was $479 million, also up 5% year over year when excluding last year's political campaign messaging benefits.
Daryl Raiford: Cloud communications revenue.
Daryl Raiford: Which is total revenue excluding pass through messaging surcharges was $126 million up 12% when excluding the year over year effect of $11 million of cyclical political campaign messaging revenue in 2022.
Daryl Raiford: Okay.
Daryl Raiford: Our full year 2023 revenue was $601 million up 5% year over year.
Daryl Raiford: Cloud Communications revenue was $479 million also up 5% year over year, when excluding last year's political campaign messaging benefit.
Daryl Raiford: Messaging continues to be a valuable tool business is used to engage with customers and differentiate themselves in the market.
Daryl Rayford: Messaging continues to be a valuable tool businesses use to engage with customers and differentiate themselves in the market. The strong demand for messaging and bandwidth software's automated ability to deliver at scale drove 32% revenue growth year-over-year in commercial messaging, driven by increasing usage in conversational e-commerce, conversational marketing, and financial services. Total messaging for the full year reached 18% of cloud communication revenue. And on Investor Day one year ago, we provided a new view of our revenue by market and shared our expectations and market growth rates for those three categories in our global communications plans category. Revenue growth for 2023 was roughly flat, as expected, due to usage patterns in the macro environment last year.
Daryl Raiford: The strong demand for messaging and bandwidth software automated ability to deliver at scale drove 32% revenue growth year over year in commercial messaging.
Daryl Raiford: Driven by increasing usage and conversational e-commerce, conversational marketing and financial services sectors.
Daryl Raiford: Total messaging for the full year reached 18% of cloud communication revenue.
Daryl Raiford: At Investor Day, one year ago, we provided a new view of our revenue by market offer and shared our expectations and market growth rates for those three categories.
Daryl Raiford: And our global Communications plans category.
Daryl Raiford: Revenue growth for 2023 was roughly flat as expected due to usage patterns in the macro environment last year.
Daryl Raiford: In 2023, our programmable services category, which primarily utilizes our messaging portfolio deliver.
Daryl Rayford: In 2023, our programmable services category, which primarily utilizes our messaging portfolio, delivered commercial revenue growth of 31% year-over-year. This growth in our programmable services category far outpaced the expected market growth CAGR of 21% we cited at our investor day one year ago. We're very pleased with this performance, which provides meaningful support towards our 2026 medium-term revenue and gross margin targets. Last year, in our direct-to-enterprise customer category, we grew 21% year-over-year, handily exceeding the estimated market growth rate of 14% shared at Investor Day. Our customers love bandwidth software automation.
Daryl Raiford: <unk> delivered commercial revenue growth of 31% year over year.
Daryl Raiford: This growth in our programmable services category far outpaced the expected market growth CAGR of 21%, we decided at our Investor day, one year ago.
Daryl Raiford: We're very pleased with this performance, which provides meaningful support towards our 2026 medium term revenue and gross margin targets.
Daryl Raiford: Last year in our direct to enterprise customer category, we grew 21% year over year handily exceeding the estimated market growth CAGR of 14% shared at Investor Day.
Daryl Raiford: Our customers love bandwidth software automation.
Daryl Rayford: Our capabilities to simplify global communications, facilitate migration to the cloud, enable conversational AI experiences, and orchestrate call flows between best-in-breed platforms align perfectly with the goals and objectives of the Global 2000. I'd also like to remind you that Programmable Services and Direct to Enterprise enjoy gross margins in excess of our aggregate company gross margin of 55%. We're thrilled with the trajectory of the programmable and enterprise categories and expect them to be consistent contributors to achieving our 2026 medium-term gross margin target of greater than $6 billion. Now turning to operating metrics, average annual revenue per customer continued to climb, reaching $178,000 in the fourth quarter, reflecting our continued focus on and ability to serve large customer opportunities. Our customer name retention rate once again remained at more than 99%, a result that speaks to the loyalty and durability of our customers. Our 2023 net retention rate, which understandably reflected downward pressure from the absence of 2022 campaign revenue not present in 2023, was 101%. However, after accounting for that app.
Daryl Raiford: Our capabilities to simplified global communications facilitate migration to the cloud enable conversational AI experiences and orchestrate call flows between best in breed platforms aligns perfectly with the goals and objectives of the global 2000.
Daryl Raiford: I'd also like to remind you that programmable services direct to enterprise enjoys gross margins in excess of our aggregate company gross margin of 55%.
Daryl Raiford: We're thrilled with the trajectory of the programmable and enterprise categories and expect them to be consistent contributors to achieving our 2026 medium term gross margin target of greater than 60%.
Daryl Raiford: Now turning to operating metrics average annual revenue per customer continued to climb.
Daryl Raiford: Reaching $178000 in the fourth quarter.
Daryl Raiford: Reflecting our continued focus on and ability to serve large customer opportunities.
Daryl Raiford: Our customer name retention rate once again remained in excess of 99%.
Daryl Raiford: A result that speaks to the loyalty and durability of our customer base.
Daryl Raiford: Our 2023 net retention rate, which.
Daryl Raiford: Which understandably reflected downward pressure from the absence of 2022 campaign revenue not present in 2023 was 101%.
Daryl Raiford: Adjusting for that absence, our net retention rate achieved 109% an excellent growth result from our commercial customers for a year characterized by macro cross wins.
Daryl Rayford: Our net retention rate achieved 109%, an excellent growth result from our commercial customers for a year characterized by macro cross-cutting. I'm especially proud of our outstanding progress in accelerating profitability and generating cash. We achieved a record 39% growth in adjusted EBITDA in 2023 and reached an inflection point in free cash, generating a record $31 million in the second half of the year. We ended the year with a cash and securities balance of $153 million, far exceeding our business needs and providing us with a great deal of financial flexibility.
Daryl Raiford: I'm, especially proud of our outstanding progress and accelerating profitability and generating cash.
We achieved a record 39% growth in adjusted EBITDA in 2023 and reached an inflection point in free cash flow.
Daryl Raiford: Generating a record $31 million in the second half of the year.
Daryl Raiford: We ended the year with a cash and securities balance of $153 million far exceeding our business needs and providing us with a great deal of financial flexibility.
Daryl Raiford: We're excited as we look ahead to 2024.
Daryl Rayford: We're excited as we look ahead to 2024, where we're expecting continued accelerating growth in commercial revenue and a tailwind from cyclical political campaign messaging related to the U.S. election season. Revenue in 2024 is expected to grow 16% to approximately $700 million and assumes a projected $40 million contribution from political campaign messaging and associated surcharges from the U.S. elections. We expect to continue our acceleration in profitability with adjusted EBITDA growth of 50% year-over-year, achieved through a combination of higher revenue and continued operating and spending efficiency. We also expect 2024 free cash flow margins to make further progress towards our medium-term target of 15% margin and provide the flexibility to address our 2026 convertible notes and fully fund our business. I'd like to put a fine point on our healthy balance. As I said, we ended 2023 with $153 million in cash and security. Our March 2026 debt maturity has an outstanding face value of $175 million, with our adjusted EBITDA projection of approximately $72 million in 2024, a relatively light capital expenditures outlook of 3% of revenue, and modest working capital.
Daryl Raiford: Where we're expecting continued accelerating growth in commercial revenue and a tailwind from cyclical political campaign messaging related to the U S election season.
Daryl Raiford: Revenue in 'twenty 'twenty four is expected to grow 16% to approximately $700 million and assumes a projected $40 million contribution from political campaign messaging and associated surcharges from the U S election season.
Daryl Raiford: We expect to continue our acceleration in profitability with adjusted EBITDA growth of 50% year over year.
Daryl Raiford: Accomplished through a combination of higher revenue and continued operating and spending discipline.
Daryl Raiford: We also expect 2020 for free cash flow margins to make further progress towards our medium term target of 15% margin and provide the flexibility to address our 2026 convertible notes and fully fund our business needs.
Daryl Raiford: I'd like to put a fine point on our healthy balance sheet.
Daryl Raiford: As I said, we ended 2023 with $153 million in cash and securities.
Our March 2026 debt maturity has an outstanding face value of $175 million.
Daryl Raiford: With our adjusted EBITDA projection of approximately $72 million in 2024.
Daryl Raiford: A relatively light capital expenditures outlook of 3% of revenue and modest working capital its reasonable to project, we could generate approximately $50 million of cash yielding a year end cash and securities balance clearly in excess of our 2026 debt requirements.
Daryl Rayford: It's reasonable to project we could generate approximately $50 million of cash, yielding a year in cash and securities balance clearly in excess of our 2026 debt requirement, a full 14 months in advance of that maturity. All of this gives us confidence in reiterating our 2026 medium-term targets of 15 to 20 percent revenue capacity, greater than 60% non-GAAP gross margin, greater than 20% adjusted EBITDA margin, and greater than 15% free cash flow. In closing, I want to emphasize the remarkable journey Bandwidth has embarked upon this past year. Our record-breaking performance in profitability and free cash flow, alongside the successful launch of our groundbreaking Maestro platform, underscore our unwavering commitment to innovation and excellence. The trust and partnership of our global customer base, powered by our unique blend of software automation.
Daryl Raiford: A full 14 months in advance of that maturity.
Daryl Raiford: All of this gives us confidence in reiterating our 2026 medium term targets of 15% to 20% revenue CAGR.
Daryl Raiford: Greater than 60% non-GAAP gross margins.
Daryl Raiford: Greater than 20% adjusted EBITDA margins.
Daryl Raiford: And greater than 15% free cash flow margins.
Speaker Change: In closing I want to emphasize the remarkable journey bandwidth has embarked upon this past year.
Speaker Change: Our record breaking performance in profitability and free cash flow.
Speaker Change: Alongside the successful launch of our groundbreaking maestro platform.
Speaker Change: Underscore our unwavering commitment to innovation and excellence.
The trust and partnership of our global customer base.
Powered by our unique blend of software automation and global network.
Daryl Rayford: Global Network, AI-Ready Capabilities, and Regulatory Expertise solidify our leadership in the cloud communications revolution. Looking ahead, we remain focused on leveraging our competitive strengths to drive sustainable growth, enhance customer experiences, and deliver long-term value to our shareholders. I am incredibly proud of our team's hard work and dedication, confident in our clear and focused strategic direction, and excited about how we are executing the vision we outlined at Investor Day one year ago. Thank you again for your continued support of Bandwidth. I'd now like to turn the call over to the operator to begin the question and answer portion. Thank you very much. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone. If you are using a speakerphone, please pick up your handset before pressing the button to turn on the dryer star.
Speaker Change: Ready capabilities and regulatory expertise.
Speaker Change: <unk> our leadership in the cloud Communications Revolution.
Speaker Change: Looking ahead, we remain focused on leveraging our competitive strengths to drive sustainable growth enhanced customer experiences and deliver long term value to our shareholders.
I am incredibly proud of our team's hard work and dedication confident and our clear and focused strategic direction and excited about how we're executing the vision, we outlined at Investor day, one year ago.
Yeah.
Speaker Change: Thank you again for your continued support of bandwidth.
Speaker Change: I would now like to turn the call over to the operator to begin the question and answer portion.
Speaker Change: Thank you very much we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: We will now pause momentarily to assemble our roster.
Operator: We will now pause momentarily to assemble our. Today's first question- Arjun Bhatia with William Blair. Please go ahead. It's perfect. Thank you and congratulations on the strong results here and the positive outlook for 24. I want to start maybe just on some of the traction that you're seeing both in the enterprise and programmable services, but I certainly wanted to maybe think about it a little bit from a new customer perspective. I know you mentioned there was a pretty strong pipeline going into Q4, and it sounds like you've actually hit that. But if we kind of calibrate the net retention rate versus the top-line growth that you're delivering, it seems like there was quite a bit of traction. Maybe can you just talk a little bit about what you're seeing on that front and whether you're seeing more opportunities from competitors coming in into Q4 and going into 24 here? Thanks, Arjun. This is David.
Speaker Change: Today's first question comes from Arjun Bhatia with William Blair. Please go ahead.
Arjun Bhatia: Perfect. Thank you.
Arjun Bhatia: Congrats on the strong results here in a more positive outlook for 'twenty four.
Arjun Bhatia: I wanted to start maybe just on <unk>.
Arjun Bhatia: Some of the traction that you're seeing both.
Arjun Bhatia: Both in the enterprise program well servicing.
Arjun Bhatia: A lot of time, maybe think about it a little bit from a new customer perspective.
Arjun Bhatia: You mentioned, there was a pretty strong pipeline.
Arjun Bhatia: Going into Q4, and it sounds like Youre executing on that but if we can kind of calibrate the net retention rate versus the topline growth, but youre delivering it seems like there was quite a bit of traction maybe can you just talk a little bit about what you're seeing on that front and whether.
Arjun Bhatia: You're seeing more opportunities some competitors come in.
Into Q4, and going with one follow up on Fort Hill.
Arjun Bhatia: Thanks Arjun. This is David we are enjoying strong success in both enterprise and programmable services. The success is across different verticals and from different competitors as well as greenfield opportunities. So the pipeline is.
David Morken: We are enjoying strong success in both enterprise and programmable services. The success is across different verticals and from different competitors as well as from greenfield opportunities. So the pipeline is deep with large opportunities, and so we're benefiting from that. We called out a number of different specific customer cases. And in those, again, we're winning across competitors and across verticals based on the efficiency and the uniqueness of the platforms that we offer on the global network. So the pipeline has been not just... The ending 23, but it looks robust going into 24. Okay, that's very helpful.
David: It's deep in large opportunities and so we're benefiting from that we called out a number of different specific customer cases, and then in those again, we're winning across competitors and across verticals based on the efficiency and the uniqueness of the platforms that we offer in our global network. So the pipeline has been not just.
David: A successful ending 23, but it looks robust going into 'twenty four.
David: Okay.
Speaker Change: Very helpful. And then just when you're when you're thinking about maestro and add bridge can you give us a platform, where you are and adoption, but it certainly seemed like a perpetual game changing products.
David Morken: And then, just when you're thinking about Maestro and AI Bridge, can you give us a sense of where you are in adoption? Because those certainly seem like, you know, potential game-changing products. And, you know, is that still kind of a little bit in the exploratory phase with customers? Are we starting to see real adoption of those solutions?
Speaker Change: Is that still kind of a little bit and Thats for a party claims with customers or are we seeing starting to see real adoption of our solutions.
David Morken: We went GA mid-year and are experiencing real, genuine adoption and scaling across enterprise customers. Again, our AI strategy is one that we embarked upon long ago, and we have a very strong conviction that it's early days in terms of picking winners in AI, and what's more vital to the enterprise global customer is having a platform that allows them to integrate leading AI opportunities as they emerge into their existing environments, and to do so easily, and to do so quickly with integrations that are already done on Maestro, and so both of our product initiatives All right.
Speaker Change: We went G. A mid year and are experiencing real genuine adoption and scaling across enterprise customers again, our AI strategy is one that we embarked upon long ago, and we have a very strong conviction that it's early days in terms of picking winners and AI and what's more vital to the enterprise global customers having a.
Speaker Change: But for them that allows them to integrate leading AI opportunities as they emerge into their existing environments and to do so easily to do so quickly with integrations that are already done on maestro and so.
Speaker Change: Both of our product initiatives in the in the AI space are bearing fruit already even though we only went general release mid year.
Speaker Change: Yeah.
Speaker Change: Alright, perfect great to hear congrats again, and well talk to you soon.
Arjun Bhatia: Perfect. Great to hear. Congratulations again.
David Morken: We'll talk to you soon. Thank you, Arjun. Thank you. The next question is from Ryan McWilliams with Barclays. Please go ahead. David, how are your enterprise customers talking about 2024 at this point? Do they feel better?
Speaker Change: Thank you <unk>.
Speaker Change: The next question is from Ryan Macwilliams with Barclays. Please go ahead.
Ryan Macwilliams: Thanks for taking the question David how are your enterprise customers talking about 2024 at this point like they feel better they expect to grow like 23 and for Darryl how should we think about some of the drivers of the solid four key revenue grew up these on a quarter.
Daryl Rayford: Do they expect to grow off 2023? And for Daryl, how should we think about some of the drivers of the solid 4Q revenue growth that you saw? You bet.
Speaker Change: Right.
David: You bet. So when we think about our enterprise customers that we work with today and how they were talking about their business of course. It varies widely we have tremendous customers in hyperscale or <unk>.
David Morken: So when we think about our enterprise customers that we work with today and how they're talking about their business, of course, it varies widely. We have tremendous customers in hyperscaler examples among our internet giants. We've got financial enterprise customers. Everyone's experiencing a different variable depending upon the vertical that they're in.
David: Examples of our Internet Giants, we've got financial enterprise customers everyone's experiencing a different variable depending upon the vertical that they're in certainly are.
Daryl Rayford: Certainly, we have always tuned into and projected in a usage-based model how our customers are doing in real time and factored that into our guide. So as we think about the broader macro, we've executed and navigated across different choppier occurrences in 23 and think that 24, as our strong guide indicates, is filled with even more promise than last year. Thank you. Thanks, David. And Ryan, to your question, you're right. We did finish 2023 very strong in the fourth quarter.
David: We are always tuned into and projected in a usage based model how our customers are doing in real time and factoring that into our guidance. So as we think about the broader macro we've executed and navigated across different choppy or occurrence in 'twenty, three and think that 'twenty four as our strong guide indicates is filled with even more promise than last year.
Speaker Change: Thank you Ryan and thanks, David and Ryan to your question you're right. We did finish 2023 very strong in the fourth quarter.
Daryl Rayford: We grew cloud communications revenue sequentially by $6 million. Part of that is related to, you know, we grew our commercial messaging business, commercial meaning, not with the political campaign effect. We grew commercial messaging 32% for the year, and we grew it 66% in the fourth quarter off of a 51% growth in the third quarter. So, of course, that helped. We also had the seasonal benefit of Black Friday and Cyber Monday, which we had included in our guide. But the overachievement of Black Friday and Cyber Monday also shines through in these.
Speaker Change: We grew our cloud communications revenue sequentially $6 million.
Speaker Change: Part of that is related to we grew our commercial messaging commercial meaning not with the political campaign effect, we grew commercial messaging, 32% for the year.
Speaker Change: And we grew at 66% in the fourth quarter off of the 51% growth in the third quarter. So that of course that helped we also had the seasonal benefit.
Speaker Change: That Friday, cyber Monday, which we had included in our guide, but the <unk>.
Speaker Change: Over achievement Black Friday, Cyber Monday also.
Speaker Change: Shines through in these results.
Daryl Rayford: Excellent. Last one for me, I'm really impressed by the profitability improvement this year before and especially with the guide going forward. How can we see bandwidth achieve better leverage?
Speaker Change: Excellent well that's one for me I'm really impressed by the profitability improvement.
Speaker Change: And especially with the guide going forward, how can we see bandwidth.
Speaker Change: You better leverage like besides revenue growth like what are some of the line items or one of the things that you're doing.
Daryl Rayford: Like, besides revenue growth, what are some of the line items, or what are things that you're doing to just be able to put some of these things through better, or just to be able to figure out some numbers? Well, that points to our medium-term targets where we've set out through 2026 the 15 to 20% revenue CAGR growing to above 60% growth margin and growing to above 20% EBITDA margin, yielding an above 15% free cash flow margin. So how are we doing on that? Well, yes, revenue growth. We have the four drivers for gross margin, which include scale, product mix, our international growth, and operating efficiencies, and we're on track to do that.
Speaker Change: Youre doing it and just be able to put through some of these better adjusted EBITDA figure out some numbers.
Speaker Change: Well that points to our medium term targets, where we set out through 2026th the 15% to 20% revenue CAGR growing to above 60% gross margin and growing to above 20% EBITDA margin, yielding an above 15% free cash flow margin. So how are we doing that well, yes revenue growth.
Speaker Change: We are in the we have the four drivers for gross margin, which includes scale product mix, our international growth and operating efficiencies and we are on track to do that and we are and we said at Investor Day, and we'll continue to focus on that are as a.
Daryl Rayford: And we are, and we said it yesterday, and we're continuing to focus on that, our operating expenses last year were above 40, down from 2022 as a percent, but still above 40%. We're going to be scaling to something at 40% or slightly less. And so we don't expect, while we're, we do expect our operating expenses to continue to increase, led primarily by our innovation investments. We expect to get scale out of our operating expenses, and we have been doing that, and that will yield us our 20, above 20% and above 15% free cash. I appreciate that, Keller. That was great.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: Cloud Communications revenue, our operating expenses last year was above 40% was down from 2022 as a percent, but it's still above 40%, we're going to be scaling to something at 40% or slightly less and so we don't while we do expect our operating expenses to continue to increase led primarily by our innovation.
Speaker Change: <unk>, we expect to get scale out of operating expenses, we have been doing that and that will yield. This R 20 above 20% and above 15% free cash flow.
Speaker Change: Okay.
Okay, that's great.
Meta A. Marshall: Thank you. The next question comes from meta Marshall with Morgan Stanley. Please go ahead.
Meta A. Marshall: The next question comes from Meta Marshall with Morgan. Please go ahead. Great, thanks. Maybe a couple questions. You know, you guys laid out that political messaging would be about 40 million in 2024. So what would be the biggest contributor to the rest of the kind of growth that you're expecting? Considering that it'll only be about half of the growth, so is it kind of a continued growth in commercial messaging? Is it some of, you know, Maestro? Or is it some of the other products kicking in?
Meta A. Marshall: Great. Thanks.
Meta A. Marshall: Maybe a couple of questions. So.
Meta A. Marshall: You guys laid out the political messaging would be about 40 million are in 'twenty 'twenty four so what would be the biggest contributor to the rest of kind of the growth that you're expecting that's really not our only be about half of that growth. So is it kind of continued growth in commercial messaging is that some of you know meister.
Meta A. Marshall: Or is it some of the other products kicking in just a sense of where you're seeing the rest of that growth coming from and then maybe just second any update on kind of a dusty Cas relationships are they that you joined or kind of that channel as a driver of growth.
David Morken: Just a sense of where you're seeing the rest of that growth come from. And then maybe just a second, you know, any update on kind of the CCAS relationships that you joined or that channel as a driver of growth? Thanks, Meta.
David Morken: To answer the first part of your question, we are seeing our strongest growth among enterprise customers in our enterprise segment that's growing fastest. Commercial messaging turns out to be quite durable, even among customers that do participate in cyclical campaign-related activities, and so they're diversifying their practice and their business. So, yes, commercial messaging is going to continue to be buoyant, and as we look for the medium-term targets to be achieved in 2025 and 2026, both enterprise and commercial messaging, and global messaging, which we just launched, will all contribute significantly toward us doing what we've consistently done, which is achieve the guidance that we lay out. And then the update on the contact center, yeah. Yeah, I think so.
Speaker Change: Thanks, Peter to answer the first part of your question, we are seeing our strongest growth among enterprise customers in our enterprise segment that is growing fastest commercial messaging turns out to be quite durable even among customers that do participate in cyclical.
Peter: Campaign related activities and so they're diversifying their practice and their business. So yes commercial messaging is going to continue to be blend and as we look for the medium term targets to be achieved in 2005 and 2006, both enterprise commercial messaging global messaging, which we just launched will all contribute significantly.
Peter: Toward us doing what we've consistently done which has achieved the guidance that we laid out.
Peter: Okay.
Peter: That sounds like a contact center yeah yeah.
Peter: Yeah.
Peter: Hey.
David Morken: Yeah, I think, and just to be sure, can you repeat the question so I understand what part of the contact center dynamic you're focusing in on? So I think you have some relationships with Five9 and others, so I just kind of wanted to get a sense of that as a channel of growth. Yeah, you bet.
Speaker Change: Yes, I think and just to make sure can you repeat the question. So I understand what part of the contact center dynamic you're focusing it on so I think you had done some relationships with five nine and others. So I just kind of wanted to get a sense on that as a channel of growth.
David Morken: I think what I would call out is the customer case that we mentioned for the quarter. Contact Center is healthy, and we, with Fabletics, were chosen to power their Genesys cloud experience and did that by winning away that business from an incumbent. So we're hand-in-glove with Genesys in that contact center with that customer, which is a tremendous opportunity that we took away from an incumbent. So we're seeing more and more conquest opportunities against incumbents in our pipeline in Contact Center. So for us, as a challenger, we're seeing great success that may separate us and distinguish us from others in CCAS and those of us powering the Contact Center in Enterprise. Great. The next question comes from James Fish with Piper Sandler. Please go ahead. Hey, guys, nice, nice end of the year here and I appreciate the morning call. Actually, I'm just going back to a question a little bit ago.
Speaker Change: Yes, you bet I think what I would call out is the customer case that we mentioned for the quarter contact center is healthy and we with <unk> were chosen to power their Genesis cloud experience and did that by winning away that business from an incumbent so we're hand in glove with Genesis and that contact center.
Speaker Change: With that customer, which is a tremendous opportunity that we took away from an incumbent and so we're seeing more and more conquest opportunities against incumbents in our pipeline and contact center. So for us as a challenger we're seeing great success that may separate us and distinguish us from others in <unk> and those of US powering the contact center and.
Speaker Change: Rise.
Great. Thanks.
Speaker Change: The next question comes from James Fish with Piper Sandler. Please go ahead.
James Fish: Hey, guys nice end of the year here and I appreciate the morning call actually like it.
James Fish: Just going back to a question a little bit ago. What are you guys seeing for maestro attach or how should we think about micro sizing at this point and I know, we've talked about different monetization strategies with it which which strategy is kind of gaining the most traction at this point.
David Morken: What are you guys seeing for maestro attach, or how should we think about maestro sizing at this point? And I know we've talked about different monetization strategies with it, but which strategy is kind of gaining the most traction at this point? So in terms of attached chains, it's the catalyst or the inflection point for enterprise conversations regarding how they're doing voice and messaging for their constituencies, even with their employees. Because it's a platform that allows them to orchestrate voice and messaging elegantly across different solutions, it is the catalyst for the conversation. You have to have a vision and an execution path forward regarding AI, and if you don't have one that's both effective and takes into account how fluid things are, you're not going to win.
James Fish: So in terms of attach changed it's the catalyst or the inflection for enterprise conversations regarding how they're doing voice and messaging for their constituencies, even with our employees because it's a platform that allows them to orchestrate voice and messaging elegantly across different solutions.
James Fish: It is the catalyst conversation you have to have.
James Fish: Our vision and execution path forward regarding AI and if you don't have one that both effective and takes into account how fluid things are youre not going to win right now what we are seeing across incumbents, we compete with and win from is a complete lack of vision for supporting any of that create.
David Morken: Right now, what we are seeing across incumbents we compete with and win from is a complete lack of vision for supporting any of the creative emerging opportunities for enterprises using voice and messaging with AI. And so our orchestration tool, Maestro, was generally released for availability mid-year. It is already being engaged by dozens of enterprise customers successfully at GA. And the monetization strategy, to address the second part of your question, what is getting the most traction is what we've consistently maintained, which is, in addition to the usage-based model that we have, this for us is a very real new opportunity to serve customers in a software platform model that monetizes as you would expect SaaS software to happen. So a platform fee and gross margins that you would expect from SaaS software make sense, and Daryl will explain them to you in the guide.
James Fish: Emerging opportunities for enterprises, using voice and messaging with AI and so our orchestration tool Maestro was generally released for availability in mid year. It is already being engaged by dozens of enterprise customers successfully at GAA and the monetization strategy to address the second part of your question.
James Fish: What is getting the most traction is what we have.
James Fish: Consistently maintained which is in addition to the usage based model that we have this for US is a very real new opportunity to serve customers and a software platform model that monetize as you would expect SaaS software to happen. So a platform fee and gross margins that you would expect from SaaS software.
Speaker Change: Makes sense and Daryl for you on the guide.
David Morken: You know, can you help frame it up a little bit more in terms of what you're expecting for expansion rates and back in 2022? Appreciate the political messaging color there. But back in 22, you guys had just about 40 million, if my numbers are right here, and it wasn't really the major election cycle. So why wouldn't it be higher, given it's kind of a bigger stage at this point?
Daryl Raiford: Can you help frame it up a little bit more in terms of what youre expecting for expansion rates.
Daryl Raiford: And back in 2022 appreciate the political messaging co.
Daryl Raiford: Color there, but back in 'twenty. Two you guys had just about $40 million. If my numbers are right here.
Daryl Raiford: And it wasn't really the major election cycles or why wouldn't it be higher given it's kind of a bigger stage at this point in any way to think about the three product segments for the year and I know a loaded question appreciate the detail. Thanks guys.
Daryl Rayford: And anyway, to think about the three product segments for the year-end, I know a loaded question, but I appreciate the detail. Thanks, guys. No, I love 18-part questions.
No I Love 18 part questions. Thank you gentlemen, appreciate you I appreciate all of that let me start with walking through just the breakdown of the guidance I think there'll be helpful. We're projecting were called in our outlook essentially a $100 million of revenue growth and 24 over 23, you can think of that breaking in.
Daryl Rayford: Thank you, Jim, and I appreciate you, appreciate all that. Let me start by walking through just a breakdown of the guidance. I think that'll be helpful.
Daryl Rayford: We're projecting, we're called in our outlook, essentially $100 million of revenue growth in 24 over 23. You can think of that breaking into $50 million in cloud communications revenue and $50 million in search. Of the $50 million in increase in cloud communications revenue, that's essentially two-thirds coming from, in our view, in our outlook, two-thirds coming from our commercial, which means non-political, our commercial revenue growth, and We did experience, taken all together, around $37 million of revenue off the 22 election cycle. We're calling it around $40 million for this. So you're right. So about, what is that, a little less, about 10%, something a little less than that, in that whole thing? We think it is possible, it is certainly possible it could be higher, but we're calling for it to be around $40 million right now.
Daryl Raiford: 50, $50 million in cloud communications revenue and $50 million in surcharges.
Daryl Raiford: Of the $50 million in increase in cloud communications revenue that is essentially two thirds coming from in our view and our outlook two thirds coming from our commercial.
Daryl Raiford: Which means non political our commercial revenue growth and a third coming from political.
Daryl Raiford: We did experience taken altogether around $37 million of.
Daryl Raiford: Revenue after 'twenty two election cycle, we're calling in our guide around $40 million.
Daryl Raiford: So you are right about what is the list of about 10% something a little less in that up.
Daryl Raiford: It is possible.
Daryl Raiford: It is certainly possible it could be higher.
Daryl Raiford: But we're calling for it to be around $40 million right now.
Daryl Rayford: Now, in terms of the second part of the question, which was related to the categories, and the categories, I believe, driving our 24 view, we are calling for each one of the categories, it's embedded in our guide, to have a revenue increase. Our largest revenue category is global communications plans; it will likewise have an increase, although the revenue will probably be more muted because of its large base. We just experienced 32% revenue growth for commercial messaging in the 2023 full year. But again, that was 51% in Q3 and 66% in Q4. So we see accelerating growth in terms of our commercial messaging, which is driving principally the programmable services growth. Those are the commercial use cases that are not political and are related to the use cases that David and I had called out on the call.
Daryl Raiford: Now in terms of the second part of the question, which was related to the categories and the categories I believe driving twinned. Our 24 view, we are calling for each one of the categories. It's embedded in our guide to.
Daryl Raiford: Two to have a revenue increase.
Daryl Raiford: Our largest our largest revenue category as global communications plans.
Daryl Raiford: It will likewise increase the revenue will likely will probably be more muted because of its large base. We just experienced 31, 33%, 32% revenue growth for commercial messaging in the 2023 full year, but again that was 51% in Q.
Daryl Raiford: Three and 66% in Q4.
Daryl Raiford: So we see accelerating growth in terms of our.
Daryl Raiford: Commercial messaging, which is driving principally the programmable services growth. Those are the commercial use cases that are not political and are related to the one the use cases that David and I had called out on the call and in enterprise we.
Daryl Rayford: And in enterprise, we did grow 21% in enterprise for the year. Our pipeline looks really good. Enterprise is a very profitable growth for us, given the dynamic. And of course, it's also a major player once it has adopted a very sticky and very loyal, very durable customer base. And so we are expecting that to well outgrow the 16% overall guide that we've given on the $100 million increase to $700 million for 2024. Does that help, Jim? Did I, did I, did I catch everything?
Daryl Raiford: We did grow.
Daryl Raiford: 21% enterprise for the year, our pipeline looks really good enterprise is a very profitable growth for us given the dynamic of course is also a major.
Daryl Raiford: It's a.
Daryl Raiford: Once once adopted a very sticky and very loyal very durable customer base and so we are expecting that to.
Daryl Raiford: Well outgrow the 16% overall guide that we've given on the $100 million increase 272 <unk>.
Daryl Raiford: $700 million for 2024.
Speaker Change: Does that help Jim did I.
Speaker Change: Yes.
Daryl Rayford: Yeah, yeah. Apologies for the loaded question. We just had a lot of details there that we needed to understand. So thanks, guys. Awesome. Thank you, Jim.
Jim: Yeah Yeah.
Speaker Change: I apologize for the loaded question just had a lot of.
Speaker Change: Details there that we needed to understand so thanks guys awesome.
Speaker Change: Thank you Jim.
James Fish: Thank you. The next question comes from Mike Walkley with Canaccord Genuity. Please go ahead.
Speaker Change: Thank you. The next question comes from Mike Walkley with Canaccord Genuity. Please go ahead.
Mike Walkley: All right, thanks for taking my questions, and congrats on the strong results. First question for me, just going back to the political messaging, you know, I live in a state that's already had primaries and received a lot of political messaging. So for that 40 million, is it still kind of a Q3, Q4 heavyweighted? Or how does that kind of ramp throughout the year?
Mike Walkley: Great. Thanks for taking my questions and congrats on the strong.
Mike Walkley: The strong results I guess first question for me just going back to the political messaging I live in a state that's already had primaries and received a lot of political messaging. So for that $40 million is it still kind of a Q3 Q4 heavily weighted or how does that kind of ramp throughout the year.
David Morken: Hey, Mike, I think that it's rational to expect increased activity throughout the year. Super Tuesday is actually an inflection point earlier than the back half. But yes, I think post-primary, with the candidates selected for both sides, you'll see accelerated growth throughout the back half. Great. That's helpful for modeling.
Speaker Change: Hey, Mike I think that it's rational to expect increased activity throughout the year Super Tuesday is actually an inflection point earlier than the back half, but yes, I think post primary with with the candidate selected for both sides Youll see accelerating growth throughout the back half.
Speaker Change: Okay, Great that's helpful for modeling and then.
Daryl Rayford: And then, just in terms of the success you're having with your larger enterprise customers, are you still in the process of churning some lower-spend customers? And how are you seeing ARC and Trends building with the larger customer base? You know, our customer base remained relatively stable, like exactly steady at the 3300 figure and change. We removed or churned 80 customers in that figure, and right at the exact same number, we added customers, so it remained flat. I'm really excited about the 80 ads.
Speaker Change: Just in terms of the success, you're having with your with your larger enterprise customers are you still in the process of churning some lower spend customers in and how are you seeing articles trends building, but with a larger customer base.
Speaker Change: Yeah.
Speaker Change: We are our customer hi, Mike our customer base remained relatively steady like exactly steady at the 3300 figure and change.
Speaker Change: We removed returned 80 customers in that figure and the nearly right. The exact same number we added customers. So it remained flat.
Speaker Change: I'm really excited about the Ada and I'm excited about the fact that our <unk> <unk>.
Daryl Rayford: I'm excited about the fact that our ARR per customer once again increased, now reaching $178,000, because it's exactly on strategy to where we wanted to be with our global 2,000 and our larger customer opportunities. And the 80 that we churned are something around $2,500 annual revenue, and so that's just really not a concern for us. It's right on strategy to where we think we need to be. Great, that's helpful. Thanks for taking my questions. Thanks, Mike. Thank you. The next question comes from Ryan Kuntz with Needham. Please go ahead.
Speaker Change: For customer once again increased now reaching $178000 because it is exactly on strategy to where we want it to be with our global 2000, and our larger customer opportunities in the AAV that we the 80 that we churned or something around $2500 annual revenue annual revenue.
Speaker Change: And so that's just really not a concern for US is right on strategy to where we think we need to be.
Speaker Change: Great. That's helpful. Thanks for taking my questions.
Speaker Change: Thanks, Mike Thank you.
Speaker Change: The next question comes from Ryan Koontz with Needham <unk> Company. Please go ahead.
Ryan Kuntz: Thanks for the question. Sorry about my voice here. Nice to see the voice business returning to growth. Can you walk us through, maybe, David, how your go-to-market is developing for enterprise? Any metrics there you can share in terms of, you know, headcount, where you've been, and where you're going in terms of that team? Thanks so much.
Ryan Koontz: Thanks for the question sorry about my voice here.
Ryan Koontz: Nice to see the voice business returned to growth.
Ryan Koontz: Can you walk us through maybe.
Ryan Koontz: David how your go to market developing for enterprise any metrics that you can share in terms of head count where you've been and where you go in terms of that team. Thanks. So much.
David: Okay. Great question. Unlike so many of our competitors our go to market team.
David Morken: Unlike so many of our competitors, our go-to-market team is as large or larger going into 24 than it was going into 23. So we have only continued to put the fuel on the fire that we have consistently used going forward. So many in so many different spaces have eviscerated go-to-market teams in sales and marketing, and sales ops, and we haven't. We haven't done any layoffs.
Hi.
David: Is as large or larger going into 'twenty four than it was going into 'twenty. Three so we have only continued to put the fuel on the fire that we have consistently used going forward. So many and so many different spaces have eviscerated go to market teams and sales and marketing sales ops and we haven't we haven't done any layoffs.
David Morken: And so we are fully loaded for bear in the enterprise space, going out and prospecting new customers, and we're also fully staffed to support existing customers. So again, unlike so many other company profiles, we've held the line on growing our team, and the benefits are manifest in the 23 report and also in the 24 guide. Thanks, that's great to hear. Thank you. The next question comes from Patrick Walravens with Citizens JNC. Go ahead.
David: And so we are fully loaded for bear.
David: In the enterprise space going out and prospecting new customers and we're also fully staffed supporting existing customers. So again. Unlike so many other company profiles.
David: <unk> held the line on growing our team and the benefits are manifest in the 'twenty three reported and also in the 'twenty four guys.
Speaker Change: Thanks, that's great to hear.
Speaker Change: Thank you. The next question comes from Patrick Wall Ravens with citizens JMP. Please go ahead.
Patrick Walravens: Oh, great. Thank you. And congratulations. Hey, Dave, can we go back in time a little bit and talk about how the internationals worked out. So you acquired VoxBone in 2020. And I remember originally you had Lighthouse customers that were pushing bandwidth to provide the kind of great communication services in Europe that they had in the U.S., and then COVID made the integration really challenging, but how did that all work out? How is it international versus the U.S.?
Speaker Change: Oh, great. Thank you and congratulations.
Speaker Change: Hey, Dave can we go back in time, a little bit and.
Speaker Change: Talk about how international has worked out so you acquired box phone in 2020 and I remember originally you had lighthouse customers that were pushing bandwidth to provide.
Speaker Change: Great communication services in Europe, they had.
Speaker Change: In the U S. And then Covid made the integration really challenging but so how is that all worked out how is the international versus the U S.
David Morken: Hey, thanks, Pat. It is 18% of our total business, but much more meaningful than that reflects. Every conversation with a Global 2000 customer includes 65 countries where we have full PSTN replacement, emergency service, inbound, outbound, and now, just recently, international messaging. So it has been vital for our customers that they can use us as a single partner globally, and that role is essential in a world that's become very fragmented where the regulatory pace of approvals has, if anything, slowed down. So international strategy was an essential component.
Speaker Change: Hey, Thanks Pat.
Speaker Change: It is 18% of our total business, but much more meaningful than that reflects.
Speaker Change: Every conversation with a global 2000 cut.
Speaker Change: Customer includes our.
Pat: Our 65 countries, where we have full PSTN replacement emergency service inbound outbound and now just recently includes international messaging. So it has been vital.
For our customers that they can use us as a single partner globally and that role is essential in a world that's big.
Very fragmented where regulatory pace of approvals if anything slowed down.
Pat: So international strategically was an essential component you're right. It was slow for us during COVID-19 doing the integration but.
David Morken: You're right, it was slow for us during COVID doing the integration, but heroic efforts by the teams to unify, and indeed, we are coming to the end of having a single global platform and experience for our customers post-VoxBone acquisition. We're thrilled about it. Our team has worked long to get there.
Pat: Heroic efforts by the teams to unify and indeed, we are coming to the end of having a single global platform and experience for our customers Postbox own acquisition, we're thrilled about it our team has worked long to get there.
David Morken: But back to the crux of your question, 18% of our business and growing, and we expect it to continue to grow with the addition of global messaging, right now, but vital for every single enterprise conversation. All right, great. Thank you. Yes, sir. Thank you. This concludes our question and answer session, and the conference has now concluded. Thank you for attending today. You may now disconnect your line. BF-WATCH TV 2021, Copyright 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.
Pat: Back to the crux of your question, 18% of our business and growing and we expect it to continue to grow with the addition of global messaging right now but.
Pat: But vital for every single enterprise conversation.
Alright, great. Thank you.
Speaker Change: Yes, Sir.
Speaker Change: Okay.
Speaker Change: Thank you. This concludes our question and answer session and the conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Speaker Change: [music].