Bandwidth Inc. Class A Common Stock 2026 Q3 Earnings Call

Good morning, and welcome to Bandwidth's Third Quarter 2026 Earnings Conference Call. I am joined today by David Morken, Chief Executive Officer, and Daryl Raiford, Chief Financial Officer. We will begin with prepared remarks and then open up the call for Q&A. During this call, we will make forward-looking statements, including statements related to our future financial performance, expectations regarding the growth of our business. These forward-looking statements are subject to certain risks, uncertainties, and assumptions, and actual results may differ materially. These forward-looking statements represent our beliefs and assumptions only as of today, and we undertake no obligation to revise or update any statements to reflect changes that occur after this call.

Further information on factors and other risks that could cause actual results to differ materially from these forward-looking statements is included in our reports filed with the SEC, including our most recent Form 10-K and our forthcoming Form 10-Q, and in our third quarter earnings press release and earnings presentation that were issued this morning. During the call, we refer to certain metrics including non-GAAP financial measures. Definitions of these non-GAAP metrics and other operating metrics, as well as reconciliations with the most comparable historical GAAP measures, are available in our earnings press release and our earnings presentation, both of which can be found on the investor relations page of our website at investors.bandwidth.com. With that, I will now turn the discussion over to David.

Thank you, and welcome everyone. We are pleased to report solid third quarter results with record revenue of $234 million, up 22%, and record adjusted EBITDA of $35 million. Daryl will walk through the financial details shortly. I want to start by thanking our customers. The trust you place in us grows with every call and message we carry together. To our bandmates, thank you for the craft and care you put into serving others so well, and I thank God for the gift of serving alongside our exceptional team. Now, we would like to kick off this call with a few words about where Bandwidth is headed. Today, we are raising the midpoint of our full year 2026 outlook across all of our guidance metrics.

Just as important, we have growing confidence in achieving double-digit cloud communications revenue growth in fiscal 2027, even as we lap this year's contributions from political messaging revenue. We see the fourth quarter of 2026 as the turning point in our growth rates this year, with momentum building throughout 2027, and that confidence rests on what is already in hand. Specifically, we have signed 11 deals greater than $1 million of ACV since the start of the year, and they are deploying in phases and will layer into our results over the next 12 months. We are also seeing early traction with Salesforce, which, while not in our 2026 outlook, we expect will be a contributor next year. That is the near term picture. The question then is why we believe it lasts, and that brings me to the topic of AI or super intelligence, SI, to use the new official terminology.

Across the technology sector this year, the same questions keep coming up about super intelligence. Who wins? Does the layer beneath the models become a commodity? How does SI turn into revenue, and when? We think the answers are structural, favorable, and durable for Bandwidth, and come down to three things. First, ownership. We own and operate a global communications network. That gives us the licensed ability to connect, to attest who is calling, and to do it with the speed a real-time conversation demands. An SI model cannot replicate that, and SI makes it more valuable, not less. Second, economics. We monetize interactions, not seats. The industry is still working out how to price SI and what it costs to train and run models. Our revenue follows the conversation, whether a person or an agent is having it, and SI creates more conversations. Third, reliance. Every SI voice or messaging agent needs a number, a trusted identity, and access to a human being.

That is what we provide, and it is why customers find us easy to deploy and hard to leave. I will take each of these structural advantages in turn and show you where it is becoming visible in our results. Let us start with ownership. Software is going headless. Vendors are opening their platforms to third-party agents and giving up the interface, and the fair question is what stays differentiated beneath it? For application vendors, the answer is context. For Bandwidth, it is execution authority. That means a licensed, owned, and operated network, number inventory, caller identity attestation, direct carrier interconnections, and local regulatory expertise in nearly 70 countries. These are regulated network assets, not API features.

A model layer or an application layer cannot replicate them any more than a generic connector can recreate a CRM. Context tells an agent what to say. The network decides whether a call connects, whether the customer trusts it, and whether it is delivered. We are the trusted infrastructure layer that enables the entire voice ecosystem. SI is raising the value of that layer. For most of its history, the legacy carrier network was a means of connecting two people on a call, and all the network had to do was put them in contact with one another. An SI conversation is different. There is an agent listening and responding. Other applications are, at the same time, transcribing, translating, checking for fraud, or pulling up a customer record, and all while the caller is talking. Many applications are now part of the conversation and acting on it in real time.

That puts new demands on the underlying network. The network has to take part in the call. On Bandwidth's network, a caller's live audio can be streamed to an agent and any other applications surrounding it, and the responses stream back in real time. A legacy carrier connection cannot do that. The network has to keep pace. An agent has much less than a second to hear, think, and answer. We can't make the model faster, but because we own the path, we can make sure the network never spends more milliseconds than the model needs. The network has to be trusted. As SI drives more outbound calling, enterprises will need to prove their calls are legitimate, and consumers will need to know who is calling. Voice SI raises the bar for latency, trust, and compliance. We're deploying compute in our points of presence to deliver all three.

You can see evidence of this in the growing number of enterprises that are choosing Bandwidth, all of whom have adopted Maestro, enabling them to take further advantage of our orchestration layer to solve complex integration, routing, and communication workflows. It has an intuitive UX that allows enterprises to plug into conversational SI engines and to swap or add SI tools without custom middleware code. Maestro's pre-built integrations and network-level security and fraud defenses are without equal, and they were a significant factor in winning a key $1 million-plus financial services customer this quarter. This rapidly expanding all-digital banking platform sought to modernize its customer contact center while integrating an SI agent. The bank needed low-latency connectivity for real-time SI interactions, a native integration with Genesys, and resilient toll-free calling that could scale to support its growing customer base.

These requirements highlighted the advantage of direct control over the underlying network and call routing rather than relying on a virtual provider's third-party carrier infrastructure. Bandwidth displaced a major CPaaS competitor, winning on the strength of our low-latency owned network, our 5X redundant toll-free solution with Maestro advanced routing and observability, our longstanding Genesys partnership, and expert support. This win will translate into high-value enterprise voice traffic on our network with the opportunity to grow alongside the bank as it scales its SI-powered customer interactions. The second structural advantage we have is economics. Application vendors are still working out price. They're moving from seats to consumption to outcomes, and most will tell you they don't yet know the end state. Our price is set by network value and trust, not seat count. Our model is usage based. Usage has always been our model, and SI is driving more of it.

Every call or text runs across our network. Whether a person or an SI agent is on the other end doesn't change that, and agentic voice adds legs to many interactions. Sentiment analysis, transcription, translation, orchestration between systems. Each leg is expected to be new usage. Fewer human agents doesn't mean fewer conversations. SI agents answer calls human teams never could, and they place outbound calls that were never economic before. Our network is built for humans and agents without exposure to the economics of the models. We run no freemium, and there is no inference cost to us. That is also why falling inference costs are a volume story for us. As models get cheaper, more SI voice use cases become economic, and more use cases means more minutes. We are model agnostic. Maestro works whether a customer runs a cascaded or a speech-to-speech model, and we do not compete with our customers.

Maestro gives us a strategic advantage. As enterprises adopt more AI, we can capture both the communications usage they generate and the value of orchestrating those interactions. Third and finally, reliance. There are two parties to every call, and agents are now showing up on both ends. On the enterprise end, agents answer calls and place calls on behalf of business. That is where the growth is today, and it is what the Maestro adoption and the wins I will describe reflect. On the consumer end, the large consumer platforms have just begun giving their personal agents the ability to pick up the phone and call a business on a person's behalf. It is early. It is in limited testing, and the volumes will be small for a while, but every one of those calls is an inbound call to a business, into a toll-free number or a contact center, and we carry those calls for many of the enterprises and platforms that will answer them.

When consumers delegate the dialing, we are on the receiving end. Whichever end an agent is on, it needs a number, an identity the other side will actually trust, and a path to a human. The business answering needs to know whose agent is calling. That is what we provide, and it is why customers find us easy to deploy with and hard to leave. We built for that. Our network is a global licensed infrastructure that took decades to build.