0001514416-26-000035
SEC filingRevenue grew 20% YoY to $209M, net income turned positive to $4M, driven by messaging surcharges and AI voice momentum.
For the three months ended March 31, 2026, Bandwidth reported total revenue of $208.8 million, a 20% increase compared to $174.2 million in the prior-year period. The growth was driven by a 13% rise in cloud communications revenue to $150.2 million and a 44% surge in messaging surcharge revenue to $58.6 million. Gross profit increased 9% to $77.9 million, but gross margin contracted from 41% to 37% due to higher pass-through messaging surcharges. Operating loss narrowed slightly to $4.6 million from $4.7 million, as operating expenses as a percentage of revenue improved from 44% to 40%. Net income turned positive to $4.1 million, compared to a net loss of $3.7 million in the prior year, benefiting from a $7.3 million gain on extinguishment of debt and a $1.5 million income tax benefit. Basic EPS was $0.13, while diluted EPS was ($0.08) due to the dilutive effect of convertible notes.
Cloud communications revenue grew 13% YoY, with strong contributions from Global Voice Plans (+12%) on higher voice traffic, Programmable Messaging (+15%) from civic engagement messaging, and Enterprise Voice (+14%) driven by Maestro platform adoption. Messaging surcharges grew 44% YoY, reflecting increased civic engagement messaging and higher carrier surcharge fees. The net retention rate fell from 116% to 102%, primarily due to lower political messaging volume over the trailing four quarters.
The MD&A did not provide specific forward guidance. Management highlighted strategic priorities: cross-selling/up-selling existing customers, direct-to-enterprise growth, and becoming the preferred provider for AI voice orchestration. The company expects operating expenses to increase in absolute dollars driven by business growth. Liquidity remains adequate with $47 million cash and $3 million marketable securities, plus $99 million available under the credit facility. Capital allocation priorities include investing in network infrastructure and potential share repurchases ($75 million remaining authorization).
As of March 31, 2026, Bandwidth held $47.3 million in cash and cash equivalents and $3.0 million in marketable securities, totaling $50.3 million in liquid assets. Total debt stood at $199.2 million, comprising $50.5 million drawn on the $150.0 million revolving credit facility and $148.7 million net carrying value of the 2028 Convertible Notes. The 2026 Convertible Notes were fully settled on March 1, 2026. Shareholders' equity was $405.7 million, up from $399.9 million at year-end 2025, driven by net income and stock-based compensation partially offset by share repurchases and foreign currency translation losses.
Bandwidth reported $20.0 million in non-cancellable purchase obligations as of March 31, 2026, primarily for network equipment maintenance and software license contracts, with $8.8 million due within one year. Operating lease commitments total $447.0 million in future minimum rent payments, with $224.0 million recognized as lease liabilities (current portion $4.1 million). The company also disclosed a sublease receivable of $9.8 million from Relay, Inc. through 2029.
During Q1 2026, Bandwidth repurchased $100.0 million aggregate principal of its 2028 Convertible Notes for $92.0 million, recording a $7.3 million gain on extinguishment. The company also initiated an $80.0 million share repurchase program, buying back 313,936 shares for $5.0 million at an average price of $15.93, leaving $75.0 million remaining authorization. Capital expenditures totaled $9.4 million (4.5% of revenue), including $7.1 million in property, plant and equipment and $2.3 million in capitalized software development costs. No dividends were declared or paid.
Bandwidth operates as a single operating segment. Revenue by geography: United States $181.6 million (87.0% of total) and International $27.2 million (13.0%), compared to $151.8 million and $22.4 million respectively in Q1 2025. No individual customer exceeded 10% of revenue or accounts receivable.
Operating cash flow (CFO) of $8.8 million in Q1 2026 reversed a prior-year use of $3.1 million, driven by net income of $4.1 million (versus a net loss of $3.7 million in Q1 2025) and non-cash add-backs (depreciation/amortization of $17.4 million, stock-based compensation of $13.0 million). A net gain on debt extinguishment of $7.3 million reduced CFO. Working capital was a net use of $17.5 million, primarily from an increase in accounts receivable ($10.0 million) and a decrease in accounts payable ($9.2 million), partly offset by higher accrued expenses.
Capital expenditures (PP&E of $7.1 million plus capitalized software of $2.3 million) totaled $9.4 million, representing a capex intensity of 107% of CFO. Free cash flow was not explicitly stated but would be negative if computed as CFO minus capex. Financing activities included $84 million in borrowings and $33.5 million in repayments on the line of credit, along with $99.6 million in net cash paid for debt extinguishment and $5.0 million in share repurchases. No dividends were paid. The company ended the period with $47.5 million in cash, cash equivalents, and restricted cash, down from $103.2 million at the start of the quarter.