Q1 2024 Bandwidth Inc Earnings Call
Speaker Change: [music].
Operator: Good day, and welcome to the Bandwidth Inc. first quarter 2024 earnings conference call. All participants will be in listen-only mode.
Good day and welcome to the bandwidth Inc. First quarter of 'twenty 'twenty four earnings conference call.
Participants will be in listen only mode should you need assistance. Please signal conference that's specialist by pressing the star key followed by zero.
Operator: Should you need assistance, please signal 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 a touchtone phone. To withdraw your question, if needed, please press star, then 2. Please note this event is being recorded. Now, I would like to turn the conference over to Sarah Walas. Vice President of Investor Relations. Please, go ahead.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on the Dutch don't sell them.
To withdraw your question if needed. Please press Star then two.
Please note this event is being recorded.
And now I would like to turn the conference over to Sarah Walas, Vice President of Investor Relations. Please go ahead.
Sarah Walas: Thank you. Good morning, and welcome to Bandwidth's first quarter 2024 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 Raiford, our CFO. They will begin with prepared remarks, and then we will open up the call for Q&A.
Sarah Walas: Thank you good morning, and welcome to bandwidth first quarter 'twenty 'twenty four earnings call.
Sarah Walas: They will discuss the results announced in our press release issued earlier this morning.
Sarah Walas: Press release and earnings presentation with historical financial highlights can be found on the Investor Relations page at investors <unk> bandwidth Dot com.
Sarah Walas: With me on the call. This morning is David Morgan, our CEO and Daryl Raiford our CFO.
David Andrew Morken: They will begin with prepared remarks, and then we will open up the call for Q&A.
Sarah Walas: 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 second 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 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 them.
David Andrew 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 second quarter and full year of 'twenty 'twenty four.
David Andrew Morken: Caution you not to put in.
David Andrew Morken: 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 Andrew 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 Walas: 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 today, as well as in the earnings presentation, which is located on our website at investors.bandwidth.com. With that, I will turn the call over to David.
David Andrew 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 SEC filings all of which are available on the Investor Relations section of our website at bandwidth dot com and on the edge.
David Andrew Morken: He sees website at S E C dot Gov.
David Andrew Morken: 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 today as well as in the earnings presentation, which are located on our website at investors dot bandwidth dot com.
David Andrew Morken: That let me turn the call over to David.
David Andrew Morken: Sarah, welcome to Bandwidth's first quarter 2024 earnings call. We had an impressive start to the year, exceeding first quarter guidance with record quarterly revenue and our highest ever adjusted EBITDA result for a first quarter. Given the overperformance, we are raising our full-year outlook on top and bottom lines. The team is grateful for the trust our customers place in us every day and for our bandmates who go the extra mile to support them, and I thank God for the opportunities he's given us. This morning, I asked Daryl to first walk through our quarterly results and our updated outlook for 2024, along with our recent capital structure achievements. I'll then use the rest of the call to provide a broader perspective, highlighting our fast-growing customer category, direct-to-enterprise, where we are seeing very encouraging progress. Daryl.
David Andrew Morken: Sara welcome to bandwidth first quarter 2024 earnings call.
David Andrew Morken: We had an impressive start to the year exceeding first quarter guidance with record quarterly revenue and our highest ever adjusted EBITDA results for our first quarter.
David Andrew Morken: Given the over performance, we are raising our full year outlook on top and bottom lines.
David Andrew Morken: The team is grateful for the trust our customers place in US every day and for our Bandmates, who go the extra mile to support them and I. Thank God for the opportunities he has given us.
David Andrew Morken: This morning, I'll ask Darrell to first walk through our quarterly results and our updated outlook for 2024, along with our recent capital structure achievements and then use the rest of the call to provide a broader perspective, highlighting our fast growing customer category direct to enterprise, where we are seeing very encouraging progress Daryl.
Daryl E. Raiford: Thank you, David, and good morning, everyone. We're off to a solid start in 2024. Beating Guidance for the First Quarter, raising our full-year outlook, and dramatically strengthening our capital structure. First quarter revenue of $171 million grew 24% year over year, exceeding the midpoint of guidance by six million dollars. Within that result, cloud communications revenue grew 12% year over year. Adjusted EBITDA of $16 million was up 215% year-over-year, exceeding the midpoint of our guidance by $4 million, reflecting the top line beat and good cost control.
Darrell: Thank you David and good morning, everyone.
Darrell: We're off to a solid start in 2024.
Darrell: Beating guidance for the first quarter raise.
Darrell: Raising our full year outlook and dramatically strengthening our capital structure.
Darrell: First quarter revenue of $171 million grew 24% year over year.
Darrell: Exceeding the midpoint of guidance by $6 million.
Darrell: Within that result, cloud communications revenue grew 12% year over year.
Darrell: Adjusted EBITDA of $16 million was up 215% year over year exceeding the midpoint of our guidance by $4 million.
Darrell: Reflecting the top line beat and good cost control.
Daryl E. Raiford: Just a few days ago, we strengthened our capital structure by expanding our existing undrawn revolving credit facility to $100 million with a new five-year term. This facility, led by Bank of America and Wells Fargo, improves our flexibility by doubling the previous available revolver amount from that established last August with our banking partners. Yesterday, we entered into agreements with certain convertible note holders to repurchase $140 million of our 2026 convertible notes at a discount to their face value. This leverage-reducing, yield-accretive repurchase exercise reduced the outstanding balance of these notes to just $35 million from an initial issued principal balance of $400 million.
Darrell: Just a few days ago, we strengthened our capital structure by expanding our existing undrawn revolving credit facility to $100 million with a new five year term.
Darrell: This facility led by Bank of America, and Wells Fargo improves our flexibility by doubling the previous available revolver amount from that established last August with our banking partners.
Darrell: Yesterday, we entered into agreements with certain convertible note holders to repurchase $140 million of our 2026 convertible notes at a discount to their face value.
Darrell: This leverage reducing yield accretive repurchase exercise reduced the outstanding balance of these notes to just $35 million from an initial issued principal balance of $400 million.
Daryl E. Raiford: I'd like to take a moment and talk about our capital structure strategy. We're proud to deliver growth, profit, and to be prudent with our capital structure. In November 2022, we repurchased $160 million of these notes at a very large discount, recognizing a $40 million gain. We then repurchased an additional mount in March 2023 at a discount, recognizing another $40 million gain. And now, in early 2024, we have essentially eliminated the subject and the maturity of these notes through yesterday's repurchase exercise.
Speaker Change: I'd like to take a moment and talk about our capital structure strategy.
Speaker Change: We're proud to deliver gross profit and to be judicial with our capital structure.
Speaker Change: In November 2022 we repurchased $160 million of these notes at a very large discount.
Speaker Change: Recognizing a $40 million game.
Speaker Change: We then repurchased an additional amount in March 2023 at a discount and recognizing another game.
Speaker Change: And now in early 'twenty 'twenty four we have essentially eliminated the subject in the maturity of these notes through yesterday's repurchase exercise.
Daryl E. Raiford: We estimate our third gain from yesterday's repurchase will be roughly $12 million. Going forward, our on-hand cash and securities balances, our revolver access to undrawn liquidity, and our cash flow generating potential position us very well to seize the market opportunities that are before us while growing our business profitably. Rounding out our first quarter results, as I noted, cloud communications revenue of $128 million was up 12% from last year. From a product standpoint, messaging continued to be a strong driver, growing 50% year over year and resulting in messaging now reaching 21% of cloud communications revenue.
Speaker Change: We estimate our third gained from yesterday's repurchase will be roughly $12 million.
Daryl E. Raiford: Within that result, commercial messaging grew 34%. While it is difficult to differentiate cyclical political campaign-related usage from the ongoing commercial civic engagement usage derived from the same cohort of customers, we estimate that political campaign messaging revenue from the U.S. primary elections contributed approximately $3 million in the first quarter. Customer demand from political campaigns did appear earlier than we had expected, attributed to presidential primary spend.
Speaker Change: Going forward, our on hand cash and securities balances.
Speaker Change: Our revolver access to Undrawn liquidity, and our cash flow generating potential positions us very well to seize the market opportunities that are before us while growing our business profitably.
Speaker Change: Yeah.
Speaker Change: Rounding out our first quarter results as I noted cloud communications revenue of $128 million was up 12% from last year.
Speaker Change: From a product standpoint messaging continues to be a strong driver growing 50% year over year, and resulting in messaging now reaching 21% of cloud communications revenue.
Within that result, commercial messaging grew 34%.
Speaker Change: While it is difficult to differentiate cyclical political campaign related usage from the ongoing commercial civic engagement usage derived from the same cohort of customers.
Speaker Change: We estimate the political campaign messaging revenue from the U S primary elections contributed approximately $3 million in the first quarter.
Speaker Change: Customer demand from political campaigns did appear earlier than we had expected attributed to presidential primary spend.
Daryl E. Raiford: Turning to our three market categories, first quarter global communications plans revenue growth was 4% year-over-year, as we expected, reflecting an improvement from last year's usage trend. Our programmable services category grew 49% year over year, reflecting the strong demand for messaging, driven by continued healthy demand from commercial customers in e-commerce, financial services, and healthcare, as well as the previously mentioned $3 million tailwind from cyclical political campaign messages. In our direct to enterprise customer category, we grew revenue 20% year over year, reflecting Bandwidth's ability to solve the complex communications challenges of global enterprises and the continued execution of our enterprise go-to-market strategy.
Speaker Change: Turning to our three market categories first quarter Global Communications plans revenue growth was 4% year over year as we expected, reflecting an improvement from last year's usage trends.
Speaker Change: Our programmable services category grew 49% year over year.
Speaker Change: Reflecting the strong demand for messaging driven by continued healthy demand from commercial customers in E Commerce financial services and health care.
Speaker Change: As well as the previously mentioned $3 million tailwind from cyclical political campaign messaging.
Speaker Change: In our direct to enterprise customer category, we grew revenue, 20% year over year, reflecting bandwidth the ability to solve the complex communications challenges of global enterprises, and the continued execution of our enterprise go to market strategy.
Daryl E. Raiford: Our pipeline remains full of new opportunities across verticals and geographies. In terms of operating metrics, our first quarter net retention rate was 107%, an improvement of six percentage points from the fourth quarter of 2023. Our customer name retention rate once again remained in excess of 99 percent.
Speaker Change: Our pipeline remains full of new opportunities across verticals and geographies.
Speaker Change: In terms of operating metrics, our first quarter net retention rate was 107% and.
Speaker Change: An improvement of six percentage points from the fourth quarter of 2023.
Speaker Change: Our customer name retention rate once again remained in excess of 99%.
Daryl E. Raiford: This is evidence of the reliability and breadth of our global communications cloud, paired with our unwavering focus on customer success and continuous innovation. Our average annual revenue per customer climbed to a record $190,000, reflecting our continued focus on attracting and serving large enterprises. Our non-GAAP gross margin was 57% for the first quarter, up 300 basis points from the prior year's quarter. This is a really great gross margin result for the company. And it's worth reminding you that gross margin can fluctuate by a small amount quarter to quarter.
Speaker Change: Evidence of the reliability and breadth of our global communications cloud paired.
Speaker Change: Paired with our unwavering focus on customer success and continuous innovation.
Speaker Change: Our average annual revenue per customer climbed to a record $190000 rich.
Reflecting our continued focus on attracting and serving large enterprises.
Speaker Change: Our non-GAAP gross margin was 57% for the first quarter up 300 basis points from the prior year's quarter.
Speaker Change: This is a really great gross margin result for the company.
Speaker Change: And it's worth reminding that gross margin can fluctuate a small amount quarter to quarter.
Daryl E. Raiford: We continue to expect our full year 2024 gross margin to grow roughly 100 basis points in line with our previously provided expectation. The first quarter free cash flow result reflects a $4 million use of cash due to seasonal timing of working capital.
Speaker Change: We continue to expect our full year 2020 for gross margin to grow roughly 100 basis points in line with our previously provided expectations.
Speaker Change: The first quarter free cash flow result reflects a $4 million use of cash due to seasonal timing of working capital.
Speaker Change: We remain on track to achieve greater than $50 million free cash flow in 2024, which draws us closer to our 15% free cash flow margin medium term target.
Daryl E. Raiford: We remain on track to achieve greater than $50 million in free cash flow in 2024, which draws us closer to our 15% free cash flow margin medium-term target. We're raising our full year guidance to pass through the first quarter beat on top and bottom lines. For the full year 2024, we expect revenue to now be $715 million at the midpoint of our range, reflecting a $15 million raise to our previous guidance, and Adjusted EBITDA to be $74 million at the midpoint, also reflecting the beaten rate. Importantly...
Speaker Change: Yeah.
Speaker Change: We're raising our full year guidance to pass through the first quarter beat on top and bottom lines.
Speaker Change: For the full year 2024, we expect revenue to now be $715 million at the midpoint of our range.
Speaker Change: <unk>, a $15 million raised to our previous guidance.
Speaker Change: And adjusted EBITDA to be $74 million at the midpoint also reflecting the beat and raise.
Speaker Change: Importantly, while the timing of campaign revenue has somewhat accelerated.
Daryl E. Raiford: While the timing of campaign revenue has somewhat accelerated, our full-year outlook for 2024 continues to project a $40 million contribution from political campaign messaging and associated search articles. That means, at this point, our full-year guidance raise is driven by our commercial customers as opposed to our political campaign customers. In terms of sequencing political campaign revenue across the remaining three quarters of the year, While it's difficult to discern and predict, based on conversations with our customers, we expect the second quarter to reflect a relative lull in political campaign messages, with activity ramping up in the third quarter and peaking in the fourth quarter with the election concluding in November.
Speaker Change: Our full year outlook for 2024 continues to project, a 40 million dollar contribution from political campaign messaging and associated surcharges.
Speaker Change: That means at this point, our full year guidance raise is driven by our commercial customers as opposed to our political campaign customers.
Speaker Change: In terms of sequencing political campaign revenue across the remaining three quarters of the year, while its difficult to discern and predict based on conversations with our customers. We expect the second quarter to reflect a relative lull and political campaign messages with activity ramping into the third quarter and peaking in the fourth.
Speaker Change: Quarter with the election, concluding in November.
Speaker Change: In closing.
Daryl E. Raiford: Our excitement about 2024 remains high, and we're pleased that we were able to raise our full-year guidance on the top and bottom lines while improving our balance sheet and capital structure flexibility. Two years ago, we told you of our plans to grow our business profitably, and we are delivering. These results and our recent capital structure achievements give us comfort in achieving both our near-term and medium-term targets. Now I'd like to turn the call back to David. Thank you, Daryl.
Speaker Change: Our excitement about 'twenty 'twenty four remains high.
Speaker Change: We're pleased that we're able to raise our full year guidance on the top and bottom lines, while improving our balance sheet and capital structure flexibility.
Speaker Change: Yeah.
Speaker Change: Two years ago, we told you all of our plans to grow our business profitably and we are delivering.
Speaker Change: These results and our recent capital structure achievements give us comfort in achieving both our near term and medium term targets.
Speaker Change: Now I'd like to turn the call back to David.
David Andrew Morken: Thank you Darryl.
David Andrew Morken: A little over a month ago at Enterprise Connect, we met with a number of customers, partners, prospects, and investors. These conversations show the strength of our direct-to-enterprise strategy.
David Andrew Morken: A little over a month ago at enterprise connect we met with a number of customers partners prospects and investors. These conversations show the strength of our direct to enterprise strategy.
David Andrew Morken: The enterprise category, with year-over-year revenue growth of 20% in the first quarter following a year of 21% growth in 2023, is driven by innovations we have brought to market and the opportunity that our award-winning maestro platform provides. Global 2000 organizations know that moving their communications to the cloud is the fastest way to leverage relevant new AI technologies and deliver the rich new customer and employee experiences that are key to staying competitive. At the same time, these enterprises are dealing with enormous complexity from past implementations and legacy tech debt that has built up over time.
David Andrew Morken: The enterprise category with year over year revenue growth of 20% in the first quarter. Following a year of 21% growth in 2020 three is driven by innovations we have brought to market and the opportunity that our award winning Maestro platform provides.
David Andrew Morken: Global 2000 organizations know that moving their communications to the cloud is the fastest way to leverage relevant new AI technologies and deliver the rich new customer and employee experiences that are key to staying competitive.
David Andrew Morken: At the same time. These enterprises are dealing with enormous complexity from past implementations and legacy tech debt that have built up over time.
David Andrew Morken: Maestro solves this complexity and provides a smooth enterprise route to the cloud. It is software automation, and it's central to our portfolio of offerings that are aligned with what Global 2000 customers tell us they need and value most, interoperability, freedom of choice, and solutions to their global communications challenges. Formally announced at last year's Enterprise Connect, where it won best of show, Maestro was quickly welcomed with significant client and industry excitement. As the name suggests, Maestro is an orchestration software platform complementing the offerings of our cloud communications customers to facilitate seamless integration capabilities for enterprises to deploy and manage best-in-class, real-time voice apps across unified communications, cloud contact centers, and AI platforms.
David Andrew Morken: Maestro solves this complexity and provides a smooth enterprise route to the cloud it is software automation and it's central to our portfolio of offerings that are aligned with what global 2000 customers tell us they need and value most interoperability freedom of choice.
David Andrew Morken: This and solutions to their global communications challenges.
David Andrew Morken: Formally announced at last year's Enterprise connect where it won best of show Maestro was quickly welcomed with significant client and industry excitement as the name suggests maestro is an orchestration software platform complementing the offerings of our cloud communications.
David Andrew Morken: Customers to facilitate seamless integration capability for enterprises to deploy and manage best in class real time voice apps across unified Communications cloud.
David Andrew Morken: <unk> contact centers and AI platforms.
David Andrew Morken: Our global 2,000 customers are finding Maestro can dramatically reduce the complexity of moving to the cloud while optimizing costs and increasing control of contact center and employee communications in the cloud. These capabilities enable enterprises to achieve faster time to value and a better customer and employee experience across a wide range of industry verticals.
David Andrew Morken: Our global 2000 customers are finding maestro can dramatically reduce the complexity of moving to the cloud, while optimizing cost and increasing control of contact center and employee communications in the cloud these capabilities enable enterprises to achieve faster time to value and a better customer and employee experience across.
David Andrew Morken: A wide range of industry verticals for example.
David Andrew Morken: In financial services, Maestro serves as the foundational element for vendor-agnostic cloud communications for both cloud-first fintechs and mature giants both looking to modernize. They can unlock the power of Teams, Genesys, 5.9, and more, along with best-in-class fraud and AI tools, while simultaneously lowering costs and simplifying vendor management, and they view Bandwidth as a partner with established expertise to help them navigate As another Maestro example, in the hospitality and retail verticals, a customer may have a complex global system of independent franchises and want to add new customer experience applications and AI.
David Andrew Morken: In financial services Maestro serves as the foundational element for vendor agnostic cloud communications for both cloud first fin techs and mature Giants, both looking to modernize they can unlock the power of teams Genesis five nines and more.
David Andrew Morken: Along with best in class fraud, and AI tools, while simultaneously lowering cost and simplifying vendor management and they view bandwidth as a partner with established expertise to help them navigate a competitive and highly regulated global landscape.
David Andrew Morken: As another Maestro example, in the hospitality and retail verticals a customer may have a complex global system of independent franchises and want to add new customer experience applications and AI now they can build once with maestro integrating all of their locations to deliver a unified <unk>.
David Andrew Morken: Now they can build once with Maestro, integrating all their locations to deliver a unified customer experience everywhere in the world. Some enterprises are choosing to use system integrators and managed service providers to map and build their new cloud-based communications. Our growing channel strategy creates partnerships with the largest players doing these enterprise transformations. For example, we recently worked with NWN Carousel, a leading managed service provider, to transform the customer experience platform for the largest U.S. domestic airline.
David Andrew Morken: Experience everywhere in the world.
David Andrew Morken: Some enterprises are choosing to use system integrators and managed service providers to map and build their new cloud based communications, our growing channel strategy creates partnerships with the largest players doing these enterprise transformations. For example, we recently worked with N W. N.
David Andrew Morken: Carousel, a leading managed service provider to transform the customer experience platform for the largest U S domestic airline.
David Andrew Morken: Bandwidth replaced a legacy telecom carrier to power the airline's new, cloud-based, high-capacity customer call center, as well as integrate their customer and employee communications platform. The airline is also rolling out Bandwidth's text messaging API to enable its service representatives to easily send text messages to customers as part of its multi-channel communication strategy. We completed the project with NWN in a short time frame and are pleased to report flawless performance during the peak holiday season.
David Andrew Morken: Bandwidth replaced a legacy telecom carrier to power the airlines, new cloud based high capacity customer call center as well as integrate their customer and employee communications platforms.
David Andrew Morken: The airline is also rolling out bandwidth text messaging API to enable its service representatives to easily send text to customers as part of its multichannel communications strategy.
David Andrew Morken: We completed the project with N W. N in a short time frame and are pleased to report flawless performance during peak holiday season.
David Andrew Morken: In examples like all of these, Maestro can be a real differentiator and a valuable addition to our enterprise customers' communications deployments. Its software automation, interoperability, and AI enablement capabilities uniquely distinguish Bandwidth as a leader in cloud communications. As the largest enterprises come to us to help them navigate complexity, we're also investing in our legendary customer support offering, which includes new predictive AI-enhanced analytics to identify and solve potential incidents before they escalate.
David Andrew Morken: And examples like all of these maestro it can be a real differentiator and valuable addition to our enterprise customers communications deployments, it's software automation interoperability and AI enablement capabilities uniquely distinguished bandwidth as a leader in cloud communications.
David Andrew Morken: As the largest enterprises come to us to help them navigate complexity. We're also investing in our legendary customer support offering. This includes new predictive AI enhanced analytics to identify and solve potential incidents before they escalate. We believe this is a significant differentiator and.
David Andrew Morken: We believe this is a significant differentiator, and it was honored last month with a gold Stevie Award for Customer Service Innovation. Congratulations to everyone on our operations team for this achievement. At a time when many of our competitors have made it harder to get help, much less to talk to a real person, we are distinguished by our customer support, and it remains a true competitive advantage for Bandwidth. So again, very encouraging progress in our fast-growing category of direct-to-enterprise.
David Andrew Morken: It was honored last month with a gold Stevie award for customer service innovation, Congratulations to everyone on our operations team for this achievement at a time when many of our competitors have made it harder to get help much less to talk to a real person we are distinguished by our customer support and it remains a.
David Andrew Morken: True competitive advantage for bandwidth so again <unk>.
David Andrew Morken: Very encouraging progress in our fast growing category of direct to enterprise at the same time, our other two market categories are also performing very well as you heard just now from Darryl.
David Andrew Morken: At the same time, our other two market categories are also performing very well, as you heard just now from Daryl. In our programmable services business, we saw earlier than expected demand for political messaging related to the U.S. election season. Meanwhile, we are consistently expanding our customer base in commercial, with notable contract wins, such as a premier digital vehicle presentation provider in the automotive industry. This customer transitioned to Bandwidth's toll-free messaging solution
David Andrew Morken: In our programmable services business, we saw earlier than expected demand in political messaging related to the U S election season.
David Andrew Morken: Meanwhile, we are consistently expanding our customer base and commercial messaging with notable contract wins, such as a premier digital vehicle presentation provider in the automotive industry. This customer transition to bandwidth toll free messaging solution or specialized support and deep expertise.
David Andrew Morken: Our specialized support and deep expertise were instrumental in helping them navigate the intricate and evolving messaging landscape, significantly enhancing the deliverability of their communication. In our Global Communication Plans category, we benefit from expanding WalletShare with existing customers as well as new customer additions. For example, in Q1, a leader in healthcare engagement and payment solutions selected Bandwidth as the sole provider for their inbound voice traffic, valuing our exceptional customer support, network reliability, and automated number provisioning and porting process. Before we wrap up,
David Andrew Morken: These were instrumental in helping them navigate the intricate and evolving messaging landscape significantly enhancing the deliverability of their communications.
David Andrew Morken: In our global communication plans category, we benefit from expanding wallet share with existing customers as well as new customer additions for example.
David Andrew Morken: In Q1, a leader in health care engagement and payment solutions selected bandwidth as the sole provider for their inbound voice traffic valuing our exceptional customer support network reliability and automated number provisioning importing processes.
Speaker Change: Before we wrap up.
David Andrew Morken: I want to comment on the leadership change we announced today. Anthony Bartolo, our Chief Operating Officer, is leaving to pursue other opportunities. He will stay until later this year to ensure a smooth transition. Anthony joined us a little over two years ago to scale our global growth, and his accomplishments are clearly evident in our strong operating results. He radically improved our strategic planning process, overhauled our product segmentation, brought in excellent new leadership, and executed with outstanding day-to-day rigor and discipline.
Speaker Change: I want to remark on the leadership change, we announced today Anthony Bartolo, our Chief operating officer is leaving to pursue other opportunities. He will stay until later this year to ensure a smooth transition Anthony joined us a little over two years ago to ski.
Speaker Change: Rail our global growth and his accomplishments are clearly evident in our strong operating results. He radically improved our strategic planning process overhauled our product segmentation brought in excellent new leadership and executed with outstanding day to day rigor and discipline.
Speaker Change: Alan.
David Andrew Morken: We were fortunate to have Anthony with us at a time important for bandwidth evolution, and we're a much better company as a result. He is a world-class global leader, and I'm confident that someday soon, you'll see him leading a company that's fortunate to have him on its team. I will always count him as a friend.
Speaker Change: We were fortunate to have Anthony with us at a time important in bandwidth evolution.
Speaker Change: We are a much better company as a result, he is a world class global leader and I'm confident that someday soon you'll see him leading a company that is fortunate to have him on point I will always count him as a friend I know all Bandmates worldwide join me in thanking Anthony for his excellent leadership.
David Andrew Morken: I know all Bandmates worldwide join me in thanking Anthony for his excellent leadership and in wishing him all the best in the future, fair winds and following seas to the entire Bartolo family. In closing, as we reflect on a quarter marked by strategic achievements and solid growth, I want to reiterate our unwavering commitment to innovation and customer excellence. The advancements we've made with our Maestro platform, our expanding partnerships, our award-winning customer service, and our disciplined operating team are all pivotal elements in our mission to lead the worldwide cloud communications revolution.
Speaker Change: And in wishing him all the best in the future fair winds and following seas to the entire Bartolo family.
Speaker Change: In closing as.
Speaker Change: As we reflect on a quarter marked by a strategic achievements and solid growth I want to reiterate our unwavering commitment to innovation and customer excellence. The advancements we've made with our maestro platform, our expanding partnerships our award winning customer service and our disciplined operating team are all pivotal element.
Speaker Change: And our mission to lead the worldwide Cloud Communications Revolution.
David Andrew Morken: Our team has demonstrated the ability to deliver on our core operating principles of profitable growth, operating leverage, and cash flow generation from the foundation of a durable franchise as a leader in our space. I'm incredibly proud of what we've accomplished together this quarter, and I'm even more excited about the opportunities that lie ahead. I'll now turn the call over to the operator to begin the question and answer portion of our call. Thank you.
Our team has demonstrated the ability to deliver on our core operating principles of profitable growth operating leverage and cash flow generation from the foundation of a durable franchise as a leader in our space I'm incredibly proud of what we've accomplished together this quarter and I'm even.
Speaker Change: More excited about the opportunities that lie ahead, I'll now turn the call over to the operator to begin the question and answer portion of our call. Thank you.
Speaker Change: Yeah.
Operator: Thank you very much, and we will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. And again, it's the star, one. If at any time your question has been addressed and you would like to withdraw your question, please press star 2. And at this time, we'll start with a question from Ryan MacWilliams from Barkley. Diane, please go ahead.
Speaker Change: Thank you very much and we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys and again its star one.
Speaker Change: He said anytime your question has been addressed and you would like to withdraw your question. Please press star two.
Speaker Change: And at this time well start with a question from Ryan.
Ryan Patrick MacWilliams: Mcwilliams from Barclays.
Ryan Patrick MacWilliams: Please go ahead.
Ryan Patrick MacWilliams: Yeah.
Ryan Patrick MacWilliams: Thanks for taking the question. I wanted to say that while I'm sad to see Anthony Bartolo moving on, I know he did a lot to improve the business, and to use a bandwidth expression, I'm glad he's moving on on a high note. So, for David, it looks like 1Q saw improving net retention and stronger average annual customer spend. Are your customers feeling better from a macro standpoint? And how are upsells like Maestro helping support you?
Ryan Patrick MacWilliams: Maybe taking the question wanted to say that while I'm sad to see Anthony Bartolo moving on I know, we did a lot of the business and you have a bandwidth expression I'm glad he's moving on on a high note.
Ryan Patrick MacWilliams: So for David looks like once you saw improving net retention and stronger average annual customer spend.
Ryan Patrick MacWilliams: Are your customers feeling better from a man.
Christine Quinn.
And her up sells like maestro, helping support these meters.
David Andrew Morken: Thanks, Ryan. I just want to reiterate what you said at the outset. Indeed, Anthony is a master conductor and has left us and is leaving us on a very high note. We are sorry to see him go and so, so grateful for the 10 quarters during which he conducted flawlessly.
Speaker Change: Thanks, Ryan and I, just want to reiterate what you said at the outset Indeed Anthony.
Ryan: Is a master conductor and has left us and is leaving us on a very high note and.
Speaker Change: We are sorry to see him go and so so grateful for the 10 quarters during which he executed.
David Andrew Morken: So, thanks for mentioning that. In terms of the macro, we talk to customers in all of our segments consistently about their plans and outlooks, and we do factor that into the guidance and the results from the first quarter. Notwithstanding, there are always concerns in these days that we live in about macro and policy and international events, but all that said, we increased our guide on the top and bottom according to the overarching sentiment that we pick up across all segments with our customer base. So, we're excited about executing throughout the rest of this year.
Speaker Change: Flawlessly, so thanks for mentioning that.
Speaker Change: In terms of the macro we talk to customers in all of our segments consistently about their plans and outlooks and we do factor that into the guide and the results from the first quarter notwithstanding there are always concerns.
Speaker Change: And these days that we live in about.
Speaker Change: Macro and policy and international events, but all that said, we increased our guide on the top and bottom. According to the overarching sentiment that we pick up across all segments with our customer base. So we're excited about executing throughout the rest of this year.
Daryl E. Raiford: And then for Daryl, glad to see continued debt paydown. How are you thinking about the four-year guide here after a stronger raise in the top line compared to the bottom line? And mostly, you just pass through the commentary around the strength that you're seeing in your commercial messaging business. There is a lot more detail there. Thanks. Yeah. Hey, good morning, Ryan. We raised our we raised
Speaker Change: Okay, and then so Dell glad to see continued debt pay down how are you thinking about the full year guide here. After a stronger reason the top line compared to the bottom line is this mostly just pet food commentary around the strength that you're seeing in your commercial messaging business, just a little more detail there.
Daryl E. Raiford: Hey, good morning, Ryan. We raised our revenue guidance by $15 million at the two midpoints. Roughly two-thirds of that is related to surcharges, and a third is related to commercial cloud communications revenue. And so that, you know, roughly one-third is falling through at the margin represents the increase in the, approximate increase in the EBITDA increase to the four-year balance.
Dell: Yeah, Hey, good morning, Ryan.
We raised our we raised our revenue guidance by $15 million.
Dell: That's the two mid points.
Dell: Fully two thirds of that is related to surcharges and a third is related to commercial.
Dell: Cloud communications revenue.
Dell: And so that roughly one third is falling through at margin as the represents the increase in the approximate increase in the EBITDA raise to the full year.
Speaker Change: We just got it okay.
Speaker Change: Yeah.
Operator: And our next question comes from Meta Marshall from Morgan Stanley. Meta, please go ahead.
Speaker Change: And our next question comes from meta Marshall from Morgan Stanley Madam. Please go ahead.
Jamie: Hey, good morning, everyone. You've got Jamie on for Meta.
Jamie: I guess just two quick questions from my end. One, is there any sort of way we can kind of track the progress that you guys are making with Maestro, either a number of customers on the platform or that sort of thing? And then, as a follow-up, it looks like capital investment has picked up a little bit over the past couple of quarters. Should we look at recent trends as the new run rate?
Speaker Change: Hey, good morning, everyone, you've got Jamie odd for me to I guess, just two quick questions from my end I guess, one is there any sort of way we can kind of track. The progress that you guys are getting with maestro either you know a number of customers on the platform or that sort of thing and then as a follow up it looks like capital investment has picked up a little bit over the past couple of core.
Speaker Change: Orders should we look at recent trends as the new run rate.
David Andrew Morken: Yeah, thanks for your question. Enterprise customers and maestro adoption continue to go really, really well. And while we haven't called out specific numbers on our customers, the growth percentage-wise in these early days since going general availability back in August has been substantial. So we've talked in the past about that growth, and it is actually continuing to grow at that same rate or faster. So we haven't decided if we're going to call out maestro adoption as a particular KPI, but enterprise customer additions and maestro adoption continue to really be favorable.
Speaker Change: Yeah. Thanks for your question enterprise customers and Maestro adoption continues.
Speaker Change: Really really well and while we haven't called out specific numbers on our customers the growth percentage wise in these early days since going general availability back in August has been substantial so we've talked in the past.
Speaker Change: About that growth and it is actually continuing to grow at that same rate or faster. So.
Speaker Change: We haven't decided if we're going to call out maestro adoption as a particular kpis, but enterprise customer additions and <unk> adoption continues to really be favorable.
Speaker Change: Yeah.
Daryl E. Raiford: On the, hey, and good morning, Jamie, it's nice to speak with you, and please give our regards to META. On the capital expenditures for the first quarter, traditionally, we have incurred more in the first quarter or the first part of the year versus the last part of the year. I think it's a natural business phenomenon. Everyone has zeal and zest when it comes to the first part of the year and getting on with their investment plans.
Speaker Change: On the Hey, and good morning.
Speaker Change: Jamie nice to speak with you and please give our regards to meter.
Speaker Change: On the capital expenditures for the first quarter traditionally we have we have incurred more.
Speaker Change: In the first quarter or the first part of the year versus the last year.
Speaker Change: It's I think it's a natural business phenomenon, everyone at Zealand zest when it comes to the first part of the year and getting on with their investment plans.
Daryl E. Raiford: With that said, we are, you know, we hold our guidance at around 3% of revenue for CapEx, and that's what y'all should be considering. I don't think, I don't take anything with the slightly higher amount in the first quarter. Great, thanks so much for the detail.
Speaker Change: With that said we are.
Speaker Change: We hold our guidance at around 3% of revenue for Capex and Thats. What you all should be considering I don't I don't take anything with the slightly higher amount in the first quarter.
Jamie: Great, thanks so much for the detail, and congratulations on the strong results.
Speaker Change: Great. Thanks, so much for the detail and congrats on the strong results.
Speaker Change: Thank you.
Operator: Our next question comes from Ryan Koontz from Needham and Company. Ryan, please proceed.
Speaker Change: Our next question comes from Ryan Koontz from Needham and company. Please proceed.
Speaker Change: Okay.
Ryan Boyer Koontz: Thanks for the question. I'm going to ask you about the messaging business. Sounds like that was broad-based in terms of your strength there, really strong growth on the cloud comms piece there. I assume that's mostly U.S.-based, first question. And second here, as it relates to international and your presence you gained from Voxphone, can you expand on your thoughts about how that market develops for you going forward? Thank you.
Ryan Boyer Koontz: Hey, Thanks for the question.
Ryan Boyer Koontz: I would ask you about the messaging business sounds like that was.
Ryan Boyer Koontz: Our broad based in terms of your strength, there really strong growth on the cloud Tom's piece, there I assume that's mostly U S. Based first question and second here as it relates to international and your your your presence your Gainesville box phone can you.
Ryan Boyer Koontz: And on your your thoughts about how that market develops for you going forward. Thank you.
David Andrew Morken: Thank you, thanks for the good question. Total messaging is up 50% year-over-year, commercials showed strong growth of 34% year-over-year, and enterprise momentum is also really solid. So, your question about domestic versus international, we recently announced international, which is part of our solution selling to large enterprises globally. And that's a really positive and strong addition that rounds out our offer portfolio.
Speaker Change: Thank you. Thanks for the good question total messaging is up 50% year over year commercial showed strong growth of 34% year over year and enterprise momentum.
Speaker Change: Also really solid.
Speaker Change:
Speaker Change: So your question about domestic versus international we recently announced the international which is part of our solution selling to large enterprise globally, and that's a really positive and strong addition that round out our offer portfolio. However, these results do reflect the preponderance of the messaging growth domestically. So international is strong.
David Andrew Morken: However, these results do reflect the preponderance of messaging growth domestically, so international is a strong growth upside for us going forward. The second part of your question about international business generally continues to be a very real differentiator for us in both voice and now messaging footprint. Globally, our voice footprint is unsurpassed, and enterprises really value that single partner solution, and now with messaging coming on alongside it globally, we expect international business to continue to outperform our expectations, and we're pleased with how it's doing. Got it. So maybe I didn't understand it.
Speaker Change: Growth upside for us going forward. The second part of your question about International business generally continues to be a very real differentiator for us on both voice and now messaging footprint globally. Our voice footprint is unsurpassed and enterprises really value that single partner solution and now with messaging coming.
Speaker Change: Alongside that globally, we expect the international business to continue to outperform our expectations and we're pleased with how it's doing.
David Andrew Morken: So maybe I can interpret that. Sounds like your global presence has given you a lot of strength to win domestic deals, and you have an international reach, and you're planning to pivot more to direct international sales now, a little harder?
Speaker Change: So.
Speaker Change: Interpret that sounds like your global presence has given you a lot of strength to win domestic deals to have an international reach.
Speaker Change: Planning to pivot more to direct international sales now are a little harder.
Speaker Change: Well said.
Speaker Change: Thank you.
Operator: Our next question comes from Patrick Walravens from Citizens JMP. Patrick, please go ahead.
Speaker Change: Our next question comes from Patrick well, we'll wait and see from citizens J M D.
Patrick D. Walravens: Oh, great. Thank you.
Patrick: Patrick Please go ahead.
Patrick D. Walravens: So, David, this question is going to seem a little unusual, but I think the context will be super helpful. So, can you just step back and help people who don't know this story that well understand what's been going on in this business over the last couple of years? and how you're positioned now, and, you know, just for context. I mean, this stock peaked at almost $190 in March 2021. Last year it went all the way down to nine and change, and you know that now at 42% year-to-date plus pre-market is up another 9%. So just help us understand the big picture in terms of what has been going on, why there's so much volatility, and where we're headed from here, not commenting on the stock but where the business is headed.
Patrick: Oh, great. Thank you.
Patrick: So David's question. It does seem a little unusual but I think the context will be will be super helpful.
Patrick: So can you just step back and and help people, who don't know the story that well understand what's been going on in this business over the last couple of years and how you are positioned now and just for context I mean, the stock peaked at almost $190 in March 2021.
Patrick: Last year, when all the way down to nine and change.
Patrick: And.
Patrick: Now at 42% year to date, plus pre market is up another 9%. So just help us understand the big picture in terms of what has been going on why there's so much volatility.
Patrick: And where we're headed from here not commenting on the stock where we're headed from here, but where the business is headed from here.
David Andrew Morken: Thank you, Pat. Thanks for the opportunity to speak to the longer term and the background. So we enjoyed COVID tailwinds, as did many in our space, when remote work seemed to be the foreseeable future. And those tailwinds certainly dissipated after the COVID era ended.
Speaker Change: Thank you Pat Thanks for the opportunity to speak to the longer term in the background. So we enjoyed COVID-19 tailwind as did many in our space when remote work seemed to become the foreseeable future and there is tailwind certainly dissipated.
Speaker Change: After the Covid era ended.
David Andrew Morken: Our whole space and peers were similarly affected as valuations plummeted, but executing is really what matters, and I can't answer the question about the last two years without appropriately tipping my hat to my bandmate, Anthony Bartolo, who is going to be the CEO someday soon of a powerful company somewhere. We can't wait to see where that might be, and there's certainly nothing to announce, but I want to say this. Anthony came on board and, with Daryl Raiford, our CFO, articulated, excellently, our mid and longer term plans at our first ever Investor Day, and we've executed ever since.
Speaker Change: Our whole space and peers were similarly impacted as valuations plummeted.
Speaker Change: But executing.
Speaker Change: Is really what matters and I can't answer the question about the last two years without appropriately tipping my hat to my bandmate Anthony Bartolo, who is going to be the CEO of someday soon of a powerful company somewhere we can't wait to see where that might be and there's certainly nothing to announce but I want to say this Anthony K.
Speaker Change: Onboard and with Daryl Raiford, our CFO articulated.
Speaker Change: Excellently, our mid and longer term plans at our first ever Investor day.
Speaker Change: And we've executed ever since in this space is in the very early days of a transformation of taking 100 years of business telephony that has been premise based and migrating to the cloud and doing so with platforms like maestro, which allow them to abandoned incumbent carriers and instead go compete.
David Andrew Morken: And this space is in the very early days of a transformation of taking 100 years of business telephony that has been premise-based and migrating it to the cloud, and doing so with platforms like Maestro, which allow them to abandon incumbent carriers and instead go completely software-driven with how they move calls and messages around the world. We are at the vanguard of companies that have helped these enterprises globally do that. And so I think we're going to look back and see the COVID-era spikes in valuation as but an anomaly in a much longer period of growth that fundamentally changes the way enterprise businesses do communications, voice, and text.
Speaker Change: The software driven with how they move calls and messages around the world. We are in the vanguard of companies that have helped.
Speaker Change: To help these enterprises globally do that and so I think we're going to look back and see the Covid era spikes in valuation as butter, an anomaly and a much longer.
Speaker Change: Period of growth that fundamentally changes the way enterprise businesses, do communications and voice and text and again the platform approach that we've taken the leadership that Anthony and myself and Darryl has had in place over the last two years has contributed to the outperformance that you see today and if I'm an investor.
David Andrew Morken: And again, the platform approach that we've taken, and the leadership that Anthony and myself and Daryl have had in place over the last two years have contributed to the outperformance that you see today. And if I'm an investor and I'm looking at that pattern that you mentioned over time where we shot up and then cratered and now we're crawling our way back out of that basement to a bright horizon, it would be with confidence that the macro technological shifts that we are a part of are going to persist, and the team and the technology that we've built are durable for that future.
Speaker Change: And I'm looking at that pattern that you mentioned over time, where we shot up and then cratered in our Crawley our way back out of that basement to a bright horizon.
Speaker Change: It would be with confidence that the macro technology shifts that we are a part of our going to persist and the team and the technology that we've built our durable for that future. So this is our 27th quarter of achieving the guidance that we put out to the world and we.
David Andrew Morken: So this is our 27th quarter of achieving the guidance that we put out to the world, and we hope and pray that we continue to do that against the backdrop of a very real technological shift in communication. So I hope that answers the question, Pat. Yeah, that was great. Thanks Dave.
Speaker Change: I hope and pray that we continue to do that against the backdrop of a very real technology shift in communications I hope that answers the question Pat.
Patrick D. Walravens: Yeah, that was great. Thanks, Dave.
Pat: Yeah that was great. Thanks, Dave.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Operator: And our next question comes from Arjun Bhatia from William Blair. Arjun, please go ahead.
Speaker Change: And our next question comes from Arjun Bhatia from William Blair.
Arjun Rohit Bhatia: Origin. Please go ahead.
Arjun Rohit Bhatia: Alright, Thank you guys and great job on the quarter here.
Arjun Rohit Bhatia: Maybe first to start with, I noticed that the net retention rate had a nice uptick from Q4 to Q1. It sounds like some of the usage growth is coming back. Messaging is strong. Enterprise is strong. Can you maybe just give us a sense of how net retention might progress through the year? And embedded in that, I assume there's also some magic, but I would love to hear how that might benefit that net retention figure as we progress through the year here.
Arjun Rohit Bhatia: Maybe first to start with I noticed that the net retention rate.
Arjun Rohit Bhatia: Had a nice uptick from Q4 to Q1 it sounds like.
Arjun Rohit Bhatia: Some of the usage growth.
Arjun Rohit Bhatia: Just coming back mastering a strong enterprise and strong can you maybe just give us a sense of how that retention might progress through the year and embedded in that I assume there's also some maestro.
Arjun Rohit Bhatia: Would love to hear how that might.
Arjun Rohit Bhatia: Benefits that net retention bigger.
Arjun Rohit Bhatia: As we as of course through the year here.
Daryl E. Raiford: Good morning, Arjun. This is Daryl.
Arjun Rohit Bhatia: Good morning, RJ. This is Darrell it's nice to hear from you. Let me just plainly say that we expect net retention to continue to grow.
Daryl E. Raiford: It's nice to hear from you. Let me just plainly say that we expect net retention to continue to grow. Over the last 18 months, we've spoken each quarter about churning small, inconsequential customers from our customer base and replacing them each quarter with larger enterprise customers. On net retention, when we remove existing customers, there is no more net retention, and so that will lower the rate. But when, in that same quarter, we replace them with other customers, it's a year in the formula before net retention is reflected.
Darrell: Over the last 18 months, we've we've spoke each quarter about churning small inconsequential customers from our customer base and replacing them each quarter with <unk>.
Darrell: Larger enterprise customers.
Darrell: On net retention when we remove existing customers. There is no more net retention and so that will lower the rate, but when in that same quarter. We replace them with other customers is a year in the formula before net retention is reflected is.
Daryl E. Raiford: It's now been a year and going. We're very happy with our enterprise customer outcome. Our average annual revenue for customers grew to a record $190,000. And we're expecting, through the year, net retention will be growing, back to what a normal rate would have been, should have been, had we not architected the churn over the last 18 months.
Darrell: It's now been a year and growing we're very happy with our enterprise customer.
Darrell: Customer outcome, our average annual revenue for customer grew to the record $190000 and we're expecting through the year net retention will be growing back to what a normal rate would've been should have been had we not architected the churn over the last 18 months.
Daryl E. Raiford: Okay, perfect, that's very helpful. And then the other one I just wanted to touch on is gross margins. Again, I think you've called out that there will be about a 100 basis point improvement there year over year, but when I look at the Q1 performance, especially, it seems like there's been some outperformance there. Again, can you just give us a sense for the puts and takes on gross margin? I guess when I'm looking at this year and Q1 performance, maybe I'm extrapolating too much, but why can't it be higher than a 100 basis point improvement as we're looking at 2024?
Speaker Change: Okay perfect. That's that's very helpful. And then the other one I just wanted to touch on gross margins.
Darrell: I think you've called out but there'll be a.
Darrell: About 100 basis point improvement there year over year, but when I look at the Q1 performance, especially it seems like.
Darrell: Theres been some outperformance there.
Darrell: Again can you just give us a sense for the puts and takes on gross margin and I guess, what I'm looking at this year and Q1 performance, maybe I'm extrapolating too much but why can't it be higher than 100 basis point improvement that's what we're looking at 2024.
Daryl E. Raiford: It is a real, you know, the first quarter was, as I said, a really great performance. It touched the record that we set about five quarters ago in terms of quarterly gross margin performance. We are still expecting it, as you said, to be 100 basis points higher for the full year over last year. And we, Product Mix, certainly help. We're also driving for cost efficiencies, which we continue to do. And as our international business grows, it will improve margin as well.
Darrell: It is a real you know the first quarter was as I said are really great performance. It touches the record that we set.
Darrell: Five quarters ago in terms of quarterly gross margin performance, we are still expecting it as you said to be 100 basis points higher for the full year over last year.
Darrell: We product mix certainly helps.
Darrell: We have we're also driving for cost efficiencies, which we continue to do and as our international grows it will improve margin as well, but for now for the full year, taking all things together and our investments that we're considering as well in terms of our network costs and the like we're calling for 100 basis point improvement.
Daryl E. Raiford: But for now, for the full year, taking all things together and our investments that we're considering as well in terms of our network costs and the like, we're calling for a hundred basis point improvement. Is that conservative? Possibly. But that's what we're calling for right now.
Darrell: Is it conservative, possibly but that's what we're calling for right now.
Arjun Rohit Bhatia: All right, understood. Fair enough.
Speaker Change: Alright understood fair enough. Thank you guys Congrats again.
Speaker Change: Congrats to Anthony as well hopefully will reconnect soon.
Arjun Rohit Bhatia: Thank you guys. Congratulations again and congratulations to Anthony as well. Hopefully, we'll reconnect soon.
Speaker Change: Thank you thank you Aman.
Speaker Change: Okay.
David Andrew Morken: Thank you, Arjun. Thank you, Arjun.
Speaker Change: And now we have a question from Quentin <unk>.
Speaker Change: Ali from Piper Sandler Quentin. Please go ahead.
Operator: And now we have a question from Quinton Gabrielli on behalf of Piper Sandler. Quinton, please go ahead.
Quinton Amedeo Gabrielli: Hey, thanks, guys. Yeah, I'm on from Jim Fish here at Piper Sandler.
Quentin: Hey, Thanks, guys, Yeah, I'm on for Jim Fish here at Piper Sandler.
James Edward Fish: Just one question for us, you know, as we think about your core use cases, really specifically in messaging, you're seeing strong messaging growth. Is there any material change in those kind of core use cases you're seeing or providing for customers? Or should we think about it, as you know, similar use cases as the historical kind provided by bandwidth, it's just you're gaining more share in these kinds of deployments. Thank you. It's broad, Quinton; we have a lot.
Quentin: Just one question for US you know as we think about your core use cases really specifically in messaging. We're seeing strong messaging growth is there any material change in those kind of core use cases, you're seeing or providing for customers or should we think about it as you know similar use cases as historical kind of provided by bandwidth. It's just you're gaining.
Speaker Change: More share in these kind of appointments. Thank you.
David Andrew Morken: It's broad, Quinton. We have adoption across FinTech, healthcare, large enterprise, and retail. The messaging need for engagement is very, very broad, and we expect that to continue. The share that we'll take, both domestic and international, is from incumbent providers as well as some of our competitors. But the emerging use cases that displace conventional email or even snail mail are significant, and so there's lots of upside once you're into a large enterprise account. So you should consider the success that we've had in messaging in enterprise, which has been broad, to continue.
Speaker Change: It's broad Quentin we have adoption across fintech healthcare large enterprise retail.
Speaker Change: The messaging need for engagement is very very broad and we expect that.
Speaker Change: To continue the share that will take both domestic and international.
Speaker Change: Is from incumbent providers as well as some of our competitors, but the emerging use cases that displace conventional email or even snail mail or.
Speaker Change: Our significant and so there's lots of upside once youre into a large enterprise accounts. So you should consider the success that we've had in messaging in enterprise, which has been broad to continue.
Speaker Change: Yeah.
Speaker Change: Understood. Thank you.
Speaker Change: Okay.
Operator: And we have a question from Will Power from Baird. Well, please go ahead.
Speaker Change: And we have a question from will power from Baird.
William Verity Power: Oh. Please go ahead.
Yanni Stamoulis: Hi, this is Yanni Stamoulis. I'm from Willpower. Thanks for taking the question. So, could you just walk us through the drivers of your enterprise business in Q1, and how some of those drivers, like some of that upside, might have changed here versus last quarter?
William Verity Power: The most notable willpower, thanks for taking the question.
David Andrew Morken: I think the drivers are similar. Our maestro product adoption is accelerating. It hasn't yet been a year since general availability, so we have more awareness of our solution and our AI approach to enabling enterprises to easily get to the cloud, and that transition is not easy if you're working with an incumbent. You've got lots of use cases around AI that require orchestration of your voice and messaging services. And so I think the enterprise adoption that we've seen in recent quarters continues to pick up speed, and I think it's a function of the product strategy and our path to market. We've got great sales leadership, and again, I'd be remiss if I didn't call out Anthony Bartolo, our COO, and his leadership during this past period driving the results that you see today.
William Verity Power: So could you just walk us through the drivers of your enterprise business in Q1, and how those some of those drivers.
William Verity Power: Or is that upside might have changed here versus last quarter.
William Verity Power: I think the drivers are similar or maestro product adoption is accelerating it hasn't yet been a year since general availability, we have more awareness of our solution and our AI approach to enabling enterprises to easily get to.
William Verity Power: The cloud and that transition is not easy if you're working with an incumbent you've got lots of use cases around AI that require orchestration of your voice and messaging services and so I think the enterprise adoption that we've seen in past quarters continues to pick up speed and I think it's a function of the product.
William Verity Power: <unk> and our path to market, you've got great sales leadership, and again I'd be remiss if I didn't.
William Verity Power: Callout, Anthony Bartolo, our CMO and his leadership during this past period driving the results that you see today.
David Andrew Morken: Okay, awesome. Thanks. And then, looking at messaging, I was hoping you could discuss the messaging outlook for the balance of the year, maybe just, you know, a framework for some of the growth expectations there, or I guess, you know, what some key drivers could be there on any drivers website you call out.
Speaker Change: Okay Awesome. Thanks, and then just looking at messaging I was I was hoping you could discuss the messaging outlook for the balance of the year, maybe a framework for some of the growth expectations, there or I guess, you know what the key drivers could be there to any drivers of upside you call out.
David Andrew Morken: Messaging grew 50% in the first quarter, 34% in commercial messaging. I think our outlook for the second quarter would have similar growth for commercial messaging. And then in messaging, in total, with the additional 40 million, less 3 million, 37 million that would be called for in our projections in the second quarter, you can expect messaging to definitely pick up in the second half of the year. That would be driven by continued robust commercials and the increased wedge of political campaigns. Awesome. Thanks so much.
Speaker Change: Messaging grew messaging group of 50% in the first quarter, 34% and commercial messaging I think our outlook for the second quarter would have a similar growth for commercial messaging and then in messaging in total with the.
Speaker Change: With the additional $40 million with 3 million $37 million that would be called for in our projections in the second quarter. You can expect messaging to definitely pick up in the second half of the year that would be driven by continued robust commercial and the increased wedge of political campaign.
Yanni Stamoulis: Awesome. Thanks so much. I'll pass it on.
Speaker Change: Awesome. Thanks, so much I'll pass it back.
Speaker Change: Yeah.
Operator: And this concludes our question and answer session, as well as the conference. Thank you very much for attending today's presentation. You may now disconnect, and have a great day.
Speaker Change: And this concludes our question and answer session as well as the conference. Thank you very much for attending today's presentation. You may now disconnect and have a great day.