# EDGAR Filing Document

**Accession Number:** 0001514416
**File Stem:** 0001514416-23-000046
**Filing Date:** 2023-2
**Character Count:** 57793
**Document Hash:** 23a1f296094db15218bc41b27f2e64af
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001514416-23-000046.hdr.sgml**: 20230223

**ACCESSION NUMBER**: 0001514416-23-000046

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20230221

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers

**ITEM INFORMATION**: Regulation FD Disclosure

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230223

**DATE AS OF CHANGE**: 20230223

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Bandwidth Inc.
- **CENTRAL INDEX KEY:** 0001514416
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-PREPACKAGED SOFTWARE [7372]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38285
- **FILM NUMBER:** 23655960

**BUSINESS ADDRESS:**
- **STREET 1:** 900 MAIN CAMPUS DRIVE
- **CITY:** RALEIGH
- **STATE:** NC
- **ZIP:** 27606
- **BUSINESS PHONE:** 888-969-5009

**MAIL ADDRESS:**
- **STREET 1:** 900 MAIN CAMPUS DRIVE
- **CITY:** RALEIGH
- **STATE:** NC
- **ZIP:** 27606

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Bandwidth.com, Inc.
- **DATE OF NAME CHANGE:** 20110303

?xml version="1.0" ? band-20230221

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549** 

**___________________________________________________**

**FORM 8-K**

**___________________________________________________**

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d)**

**of the Securities Exchange Act of 1934**

**Date of Report (Date of earliest event reported) February 21, 2023**

**___________________________________________________**

**BANDWIDTH INC.**

**(Exact name of registrant as specified in its charter)**

**___________________________________________________**

---

| | | |
|:---|:---|:---|
| **Delaware** | **001-38285** | **56-2242657** |
| **(State or other jurisdiction**<br>**of incorporation)** | **(Commission**<br>**File Number)** | **(IRS Employer**<br>**Identification No.)** |

---

**900 Main Campus Drive**

**Raleigh, NC 27606**

**(Address of principal executive offices) (Zip Code)**

**(800) 808-5150**

**Registrant's telephone number, including area code**

**Not Applicable**

**(Former name or former address, if changed since last report)**

**___________________________________________________**

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **<u>Title of each class</u>** | **<u>Trading Symbol(s)</u>** | **<u>Name of each exchange on which registered</u>** |
| Class A Common Stock, par value $0.001 per share | BAND | NASDAQ Global Select Market |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

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**Item 2.02 Results of Operations and Financial Condition.** 

On February 23, 2023, Bandwidth Inc. ("Bandwidth") issued a press release reporting its financial results for the fourth quarter ended December 31, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information furnished with this Item 2.02, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the "Securities Act"), except as expressly set forth by specific reference in such a filing.

**Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.**

On February 21, 2023, the board of directors of Bandwidth appointed Devin M. Krupka, Bandwidth's Controller, as Bandwidth's principal accounting officer. Daryl E. Raiford, who had previously been designated as Bandwidth's principal accounting officer, will continue in his role as Bandwidth's Chief Financial Officer and principal financial officer.

Mr. Krupka, age 36, joined Bandwidth in August 2016 and served in various internal audit and accounting roles until March 2022, when he was named as Senior Vice President, Corporate Controller. From 2008 to 2012, Mr. Krupka was an Associate and then Senior Associate with PricewaterhouseCoopers in its external audit practice. Mr. Krupka obtained a Bachelor of Arts from Cedarville University in dual majors of Accounting and Finance, and is a Certified Public Accountant.

There are no arrangements or understandings between Mr. Krupka and any other person pursuant to which Mr. Krupka was named as principal accounting officer. There are no transactions between Mr. Krupka and Bandwidth that would be reportable under Item 404(a) of Regulation S-K.

**Item 7.01 Regulation FD Disclosure.**

As previously announced through a press release, dated February 2, 2023, issued by Bandwidth, on February 23, 2023, representatives of Bandwidth's management team will hold a virtual investor day from 8:30 am to 10:00 am ET. The investor presentation will be posted at 8:30 am on February 23, 2023 on Bandwidth's investor relations website at investors.bandwidth.com.

**Item 9.01 Financial Statements and Exhibits.**

(d) Exhibits

---

| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| <u>[99.1](q420228kexh991.htm)</u> | Bandwidth Inc. press release, dated February 23, 2023 |
| 104 | Cover Page Interactive File (the cover page tags are embedded within the Inline XBRL document) |

---

------

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | |
|:---|:---|:---|
| | BANDWIDTH INC. | BANDWIDTH INC. |
| Date: February 23, 2023 | By: | /s/ Daryl E. Raiford |
|  | Name: | Daryl E. Raiford |
|  | Title: | Chief Financial Officer |

---

## Exhibit 99.1

![image1.jpg](image1.jpg)

**Bandwidth Announces Fourth Quarter and Full Year 2022 Financial Results** 

*Quarterly and full year revenue exceeded mid-point of guidance ranges by $10 million*

*Guiding to 30% increase in Adjusted EBITDA for full year 2023*

*Hosting inaugural Investor Day*

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **February 23, 2023**<br>**Investor Day Details**<br>Bandwidth is hosting a virtual Investor Day webcast today, February 23, 2023 and will host a Q&A session at the end of the event.<br>The Investor Day will begin at 8:30 am ET and investors and analysts can register at investorday.bandwidth.com. The presentation materials will be available at the start of the event at investors.bandwidth.com.<br>**Replay information**<br>Following the event, a replay of the webcast along with the presentation materials will be available on Bandwidth's investor relations website at investors.bandwidth.com. | **Raleigh, NC** - Bandwidth Inc. (NASDAQ: BAND), a leading global enterprise cloud communications company, today announced financial results for the fourth quarter and full year ended December 31, 2022.<br>"We are pleased with our solid fourth quarter performance despite the broader macro-market uncertainties," said David Morken, Bandwidth's Chief Executive Officer. "Our success highlights the resilience and increasing diversification of our revenue streams, and our expanding direct-to-enterprise strategy. Enterprises can upgrade their brand experience, lower operational costs, take advantage of AI technologies, reduce regulatory burdens and streamline digital transformation by migrating voice, text messages and emergency calling to the cloud — all with Bandwidth."<br>"Our fourth quarter results surpassed both our top and bottom line guidance, driven by customer demand for our communications cloud. Revenue further benefited by $23 million and $37 million in our fourth quarter and full year from strong campaign messaging demand," said Daryl Raiford, Bandwidth's Chief Financial Officer. "Looking ahead to 2023, we expect revenue growth to be constrained in the current macroeconomic environment and also impacted by campaign messaging cyclicality. We have a disciplined operating team and expect to grow Adjusted EBITDA by 30%, driving profitability through operating leverage. We remain confident in the potential of enterprise cloud migration and the capabilities of our business model to drive profitable growth."<br>**Fourth Quarter and Full Year 2022 Financial Highlights** <br>The following table summarizes the consolidated financial highlights for the three and twelve months ended December 31, 2022 and 2021 (in millions, except per share amounts).<sup>(1)</sup> | **Raleigh, NC** - Bandwidth Inc. (NASDAQ: BAND), a leading global enterprise cloud communications company, today announced financial results for the fourth quarter and full year ended December 31, 2022.<br>"We are pleased with our solid fourth quarter performance despite the broader macro-market uncertainties," said David Morken, Bandwidth's Chief Executive Officer. "Our success highlights the resilience and increasing diversification of our revenue streams, and our expanding direct-to-enterprise strategy. Enterprises can upgrade their brand experience, lower operational costs, take advantage of AI technologies, reduce regulatory burdens and streamline digital transformation by migrating voice, text messages and emergency calling to the cloud — all with Bandwidth."<br>"Our fourth quarter results surpassed both our top and bottom line guidance, driven by customer demand for our communications cloud. Revenue further benefited by $23 million and $37 million in our fourth quarter and full year from strong campaign messaging demand," said Daryl Raiford, Bandwidth's Chief Financial Officer. "Looking ahead to 2023, we expect revenue growth to be constrained in the current macroeconomic environment and also impacted by campaign messaging cyclicality. We have a disciplined operating team and expect to grow Adjusted EBITDA by 30%, driving profitability through operating leverage. We remain confident in the potential of enterprise cloud migration and the capabilities of our business model to drive profitable growth."<br>**Fourth Quarter and Full Year 2022 Financial Highlights** <br>The following table summarizes the consolidated financial highlights for the three and twelve months ended December 31, 2022 and 2021 (in millions, except per share amounts).<sup>(1)</sup> | **Raleigh, NC** - Bandwidth Inc. (NASDAQ: BAND), a leading global enterprise cloud communications company, today announced financial results for the fourth quarter and full year ended December 31, 2022.<br>"We are pleased with our solid fourth quarter performance despite the broader macro-market uncertainties," said David Morken, Bandwidth's Chief Executive Officer. "Our success highlights the resilience and increasing diversification of our revenue streams, and our expanding direct-to-enterprise strategy. Enterprises can upgrade their brand experience, lower operational costs, take advantage of AI technologies, reduce regulatory burdens and streamline digital transformation by migrating voice, text messages and emergency calling to the cloud — all with Bandwidth."<br>"Our fourth quarter results surpassed both our top and bottom line guidance, driven by customer demand for our communications cloud. Revenue further benefited by $23 million and $37 million in our fourth quarter and full year from strong campaign messaging demand," said Daryl Raiford, Bandwidth's Chief Financial Officer. "Looking ahead to 2023, we expect revenue growth to be constrained in the current macroeconomic environment and also impacted by campaign messaging cyclicality. We have a disciplined operating team and expect to grow Adjusted EBITDA by 30%, driving profitability through operating leverage. We remain confident in the potential of enterprise cloud migration and the capabilities of our business model to drive profitable growth."<br>**Fourth Quarter and Full Year 2022 Financial Highlights** <br>The following table summarizes the consolidated financial highlights for the three and twelve months ended December 31, 2022 and 2021 (in millions, except per share amounts).<sup>(1)</sup> | **Raleigh, NC** - Bandwidth Inc. (NASDAQ: BAND), a leading global enterprise cloud communications company, today announced financial results for the fourth quarter and full year ended December 31, 2022.<br>"We are pleased with our solid fourth quarter performance despite the broader macro-market uncertainties," said David Morken, Bandwidth's Chief Executive Officer. "Our success highlights the resilience and increasing diversification of our revenue streams, and our expanding direct-to-enterprise strategy. Enterprises can upgrade their brand experience, lower operational costs, take advantage of AI technologies, reduce regulatory burdens and streamline digital transformation by migrating voice, text messages and emergency calling to the cloud — all with Bandwidth."<br>"Our fourth quarter results surpassed both our top and bottom line guidance, driven by customer demand for our communications cloud. Revenue further benefited by $23 million and $37 million in our fourth quarter and full year from strong campaign messaging demand," said Daryl Raiford, Bandwidth's Chief Financial Officer. "Looking ahead to 2023, we expect revenue growth to be constrained in the current macroeconomic environment and also impacted by campaign messaging cyclicality. We have a disciplined operating team and expect to grow Adjusted EBITDA by 30%, driving profitability through operating leverage. We remain confident in the potential of enterprise cloud migration and the capabilities of our business model to drive profitable growth."<br>**Fourth Quarter and Full Year 2022 Financial Highlights** <br>The following table summarizes the consolidated financial highlights for the three and twelve months ended December 31, 2022 and 2021 (in millions, except per share amounts).<sup>(1)</sup> | **Raleigh, NC** - Bandwidth Inc. (NASDAQ: BAND), a leading global enterprise cloud communications company, today announced financial results for the fourth quarter and full year ended December 31, 2022.<br>"We are pleased with our solid fourth quarter performance despite the broader macro-market uncertainties," said David Morken, Bandwidth's Chief Executive Officer. "Our success highlights the resilience and increasing diversification of our revenue streams, and our expanding direct-to-enterprise strategy. Enterprises can upgrade their brand experience, lower operational costs, take advantage of AI technologies, reduce regulatory burdens and streamline digital transformation by migrating voice, text messages and emergency calling to the cloud — all with Bandwidth."<br>"Our fourth quarter results surpassed both our top and bottom line guidance, driven by customer demand for our communications cloud. Revenue further benefited by $23 million and $37 million in our fourth quarter and full year from strong campaign messaging demand," said Daryl Raiford, Bandwidth's Chief Financial Officer. "Looking ahead to 2023, we expect revenue growth to be constrained in the current macroeconomic environment and also impacted by campaign messaging cyclicality. We have a disciplined operating team and expect to grow Adjusted EBITDA by 30%, driving profitability through operating leverage. We remain confident in the potential of enterprise cloud migration and the capabilities of our business model to drive profitable growth."<br>**Fourth Quarter and Full Year 2022 Financial Highlights** <br>The following table summarizes the consolidated financial highlights for the three and twelve months ended December 31, 2022 and 2021 (in millions, except per share amounts).<sup>(1)</sup> |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | | **Three months ended<br>December 31,** | **Three months ended<br>December 31,** | **Year ended<br>December 31,** | **Year ended<br>December 31,** |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com |  | **2022** | **2021** | **2022** | **2021** |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | Total Revenue | $157 | $126 | $573 | $491 |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | Gross Margin <sup>(1)</sup> | 41% | 41% | 42% | 44% |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | Non-GAAP Gross Margin <sup>(1)</sup> | 56% | 53% | 55% | 52% |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | Net Income (Loss) | $33 | $(8) | $20 | $(27) |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | Non-GAAP Net Income | $5 | $2 | $15 | $26 |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | Net income (loss) per share: |  |  |  |  |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic | $1.32 | $(0.33) | $0.77 | $(1.09) |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted | $(0.16) | $(0.33) | $(0.48) | $(1.09) |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | Non-GAAP net income per Non-GAAP share | $0.19 | $0.09 | $0.54 | $0.97 |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | Adjusted EBITDA | $8 | $8 | $35 | $50 |
| <br>**Investor Contact**<br>Sarah Walas <br>Vice President of Investor Relations, Bandwidth<br>919-504-6585<br>ir@bandwidth.com | <br><sup>(1)</sup> Prior period has been conformed to the current period presentation. Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated, is included below under the heading "Non-GAAP Financial Measures." A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below.  | <br><sup>(1)</sup> Prior period has been conformed to the current period presentation. Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated, is included below under the heading "Non-GAAP Financial Measures." A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below.  | <br><sup>(1)</sup> Prior period has been conformed to the current period presentation. Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated, is included below under the heading "Non-GAAP Financial Measures." A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below.  | <br><sup>(1)</sup> Prior period has been conformed to the current period presentation. Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated, is included below under the heading "Non-GAAP Financial Measures." A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below.  | <br><sup>(1)</sup> Prior period has been conformed to the current period presentation. Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated, is included below under the heading "Non-GAAP Financial Measures." A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below.  |

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| | | |
|:---|:---|:---|
| | **Year ended<br>December 31,** | **Year ended<br>December 31,** |
| | **2022** | **2021** |
| Number of active customers <sup>(1)</sup> | 3405 | 3300 |
| Dollar-based net retention rate <sup>(1)</sup> | 112% | 117% |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> As a result of the change in revenue segment reporting effective January 1, 2022, our key performance indicators of active customers and dollar-based net retention rates disclosed in previous SEC filings, press releases and presentations prior to reporting periods ended March 31, 2022, will not be directly comparable to our key performance indicators reported going forward. To facilitate comparison between the periods presented in the table above, number of active customers and dollar-based net retention rate have been conformed to the current period methodology. Additional information regarding our number of active customers and dollar-based net retention rate and how each is calculated are included below.

**Fourth Quarter Customer Highlights** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A healthcare leader in diabetes care chose Bandwidth as the cloud provider for their Genesys contact center. Our new Call Assure<sup>TM</sup> product delivering toll-free calling redundancy was a key differentiator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• An IT managed services provider with a complex organization spanning 23,000 customers in 50,000 locations chose Bandwidth because we addressed their unique needs for emergency 911 calling compliance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A leader in B2B text messaging chose Bandwidth for high-volume text messaging. They chose Bandwidth for the scalability, reliability and deliverability they need to support rapid growth.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Bandwidth's outstanding customer support solved difficult international routing issues in Japan and other countries for a large unified communications platform that led to incremental toll-free business.

**Financial Outlook** 

Bandwidth's outlook is based on current indications for its business, which are subject to change. Bandwidth is providing guidance for its first quarter and full year 2023 as follows:

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| | | |
|:---|:---|:---|
| | **Q1 2023 Guidance** | **Full Year 2023 Guidance** |
| Total Revenue (millions) | $132 - $134 | $576 - $584 |
| Adjusted EBITDA (millions) | $4 - $6 | $43 - $47 |

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Bandwidth has not reconciled its first quarter and full year 2023 guidance related to Adjusted EBITDA to GAAP net income or loss, because stock-based compensation cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.

**Upcoming Investor Conference Schedule**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**• JMP Securities Technology Conference** in San Francisco, CA. Fireside chat on Tuesday, March 7th at 10:00AM Pacific Time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**• Morgan Stanley Technology, Media & Telecom Conference** in San Francisco, CA. Fireside chat on Wednesday, March 8th at 10:25AM Pacific Time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **William Blair Tech Innovators Conference** virtual investor meetings hosted on Tuesday, March 14th.

Live webcasts and replays of the presentation will be available on the Investor Relations section of the Bandwidth's website at https://investors.bandwidth.com.

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**About Bandwidth Inc.**

Bandwidth (NASDAQ: BAND) is a global cloud communications software company that helps enterprises deliver exceptional experiences through voice calling, text messaging and emergency services applications. Our solutions and our Communications Cloud, covering 60+ countries and over 90 percent of global GDP, are trusted for business-critical communications by all the leaders in unified communications and cloud contact centers–including Cisco, Google, Microsoft, RingCentral, Zoom, Genesys and Five9–as well as Global 2000 enterprises and SaaS builders like Docusign, Uber and Yosi Health. As a founder of the cloud communications revolution, we are the first and only global Communications Platform-as-a-Service (CPaaS) to offer a unique combination of composable APIs, owner-operated network and broad regulatory experience. Our award-winning support teams help businesses around the world solve complex communications challenges to reach anyone, anywhere. For more information, visit <u>www.bandwidth.com</u>.

**Forward-Looking Statements** 

This press release includes forward-looking statements. All statements contained in this press release other than statements of historical facts, including, without limitation, future financial and business performance for the quarter ending March 31, 2023 and year ending December 31, 2023, the success of our product offerings and our platform, the value proposition of our products, and our assessment of the impact of the distributed denial of service ("DDoS") attacks discussed herein and in previous press releases are forward-looking statements. The words "anticipate," "assume," "believe," "continue," "estimate," "expect," "intend," "guide," "may," "will" and similar expressions and their negatives are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including, without limitation, risks related to our rapid growth and ability to sustain our revenue growth rate, competition in the markets in which we operate, market growth, our ability to innovate and manage our growth, our ability to expand effectively into new markets, macroeconomic conditions both in the U.S. and globally, legal, reputational and financial risks which may result from the DDoS attacks or other cybersecurity incidents, risks that the anticipated benefits of the acquisition of Voxbone may not be fully realized or may take longer to realize than expected, our ability to operate in compliance with applicable laws, as well as other risks and uncertainties set forth in the "Risk Factors" section of our latest Form 10-K filed with the Securities and Exchange Commission (the "SEC") and any subsequent reports that we file with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no obligation to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.

**Non-GAAP Financial Measures** 

To supplement our consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles in the United States, or GAAP, we provide investors with certain non-GAAP financial measures and other business metrics, which we believe are helpful to our investors. We use these Non-GAAP financial measures and other business metrics for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. We believe that these Non-GAAP financial measures and other business metrics provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.

The presentation of Non-GAAP financial information and other business metrics is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. While our Non-GAAP financial measures and other business metrics are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, we urge investors to review the reconciliation of these financial measures to the comparable GAAP financial measures included above, and not to rely on any single financial measure to evaluate our business.

We define Non-GAAP gross profit as gross profit after adding back depreciation, amortization of acquired intangible assets related to acquisitions and stock-based compensation. We add back depreciation, amortization of acquired intangible assets

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related to acquisitions and stock-based compensation because they are non-cash items. We eliminate the impact of these non-cash items, because we do not consider them indicative of our core operating performance. Their exclusion facilitates comparisons of our operating performance on a period-to-period basis. Therefore, we believe that showing gross margin, as adjusted to remove the impact of these non-cash expenses, such as depreciation, amortization of acquired intangible assets related to acquisitions and stock-based compensation, is helpful to investors in assessing our gross profit and gross margin performance in a way that is similar to how management assesses our performance. We calculate Non-GAAP gross margin by dividing Non-GAAP gross profit by revenue less pass-through messaging surcharges, expressed as a percentage of revenue.

We define Non-GAAP net income as net income or loss adjusted for certain items affecting period to period comparability. Non-GAAP net income excludes stock-based compensation, amortization of acquired intangible assets related to acquisitions, amortization of debt discount and issuance costs for convertible debt, acquisition related expenses, impairment charges of intangibles assets, net cost associated with early lease terminations and leases without economic benefit, (gain) loss on sale of business, net (gain) loss on extinguishment of debt, non-recurring items not indicative of ongoing operations and other, and estimated tax impact of above adjustments, net of valuation allowances.

We define Adjusted EBITDA as net income or losses from continuing operations, adjusted to reflect the addition or elimination of certain statement of operations items including, but not limited to: income tax (benefit) provision, interest (income) expense, net, depreciation and amortization expense, acquisition related expenses, stock-based compensation expense, impairment of intangible assets, (gain) loss on sale of business, net cost associated with early lease terminations and leases without economic benefit, net (gain) loss on extinguishment of debt, and non-recurring items not indicative of ongoing operations and other. We have presented Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, generate future operating plans, and make strategic decisions regarding the allocation of capital. In particular, we believe that the exclusion of certain items in calculating Adjusted EBITDA can produce a useful measure for period-to-period comparisons of our business.

We define free cash flow as net cash provided by or used in operating activities less net cash used in the acquisition of property, plant and equipment and capitalized development costs for software for internal use. We believe free cash flow is a useful indicator of liquidity and provides information to management and investors about the amount of cash generated from our core operations that can be used for investing in our business. Free cash flow has certain limitations in that it does not represent the total increase or decrease in the cash balance for the period, it does not take into consideration investment in long-term securities, nor does it represent the residual cash flows available for discretionary expenditures. Therefore, it is important to evaluate free cash flow along with our consolidated statements of cash flows.

We believe that these Non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.

While a reconciliation of Non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis as a result of the uncertainty regarding, and the potential variability of, many of these costs and expenses that we may incur in the future, we have provided a reconciliation of Non-GAAP financial measures and other business metrics to the nearest comparable GAAP measures in the accompanying financial statement tables included in this press release.

We define an active customer account at the end of any period as an individual account, as identified by a unique account identifier, for which we have recognized at least $100 of revenue in the last month of the period. We believe usage of our platform by an active customer at or above the $100 per month threshold is a stronger indicator of potential future engagement than trial usage at levels below $100 per month. A single organization may constitute multiple unique active customer accounts if it has multiple unique account identifiers, each of which is treated as a separate active customer account. Customers who pay after using our platform and customers that have credit balances are included in the number of active customer accounts.

To calculate the dollar-based net retention rate, we first identify the cohort of customers that generate revenue and that were customers in the same quarter of the prior year. The dollar-based net retention rate is obtained by dividing the revenue generated from that cohort in a quarter, by the revenue generated from that same cohort in the corresponding quarter in the prior year. The dollar-based net retention rate reported in a quarter is then obtained by averaging the result from that quarter by the corresponding results from each of the prior three quarters. Customers of acquired businesses are included in the subsequent year's calendar quarter of acquisition. Our dollar-based net retention rate increases when such customers increase usage of a product, extend usage of a product to new applications or adopt a new product. Our dollar-based net retention rate decreases when such customers cease or reduce usage of a product or when we lower prices on our solutions. For comparative purposes, the dollar-based net retention rate presented herein has been updated to reflect the change in our reporting segments effective January 1, 2022.

------

**Cost Alignment**

During the quarter ended March 31, 2022, Bandwidth changed its presentation of certain costs to align with the definitions of cost of revenue, research and development, sales and marketing, and general and administrative expenses used by many of our peers. As part of the benchmarked definitions, Bandwidth has included allocations of facilities and shared IT costs based on employee headcount within the cost of revenue, research and development, sales and marketing, and general and administrative expense categories.

Additionally, expense related to our product management function is now included in research and development rather than general and administrative, as previously reported, and the customer billing and collections function and amortization of acquired customer relationship intangible assets is now included in sales and marketing rather than general and administrative as previously reported. Management believes use of the benchmarked definitions will enhance the comparability of our performance to that of our peers. Financial data from prior periods have been conformed to the current definitions of cost of revenue, research and development, sales and marketing, and general and administrative expenses. There was no impact to revenue or net income for any periods presented due to the change in presentation. The consolidated balance sheets, consolidated statements of changes in stockholders' equity, and consolidated statements of cash flows are not affected by these changes.

------

**BANDWIDTH INC.**

**Condensed Consolidated Statements of Operations**

**(In thousands, except share and per share amounts)**

**(Unaudited)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three months ended December 31,** | **Three months ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| Revenue | $156974 | $126132 | $573152 | $490907 |
| Cost of revenue | 92903 | 74023 | 334799 | 277094 |
| Gross profit | 64071 | 52109 | 238353 | 213813 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development | 26255 | 19469 | 97990 | 69505 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing | 26995 | 21875 | 96658 | 82333 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 17838 | 14837 | 68029 | 64212 |
| Total operating expenses | 71088 | 56181 | 262677 | 216050 |
| Operating loss | (7017) | (4072) | (24324) | (2237) |
| Other income (expense), net | 39348 | (8190) | 41630 | (28958) |
| Income (loss) before income taxes | 32331 | (12262) | 17306 | (31195) |
| Income tax benefit | 1103 | 4088 | 2264 | 3833 |
| Net income (loss) | $33434 | $(8174) | $19570 | $(27362) |
| Net income (loss) per share: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic | $1.32 | $(0.33) | $0.77 | $(1.09) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted | $(0.16) | $(0.33) | $(0.48) | $(1.09) |
| Numerator used to compute net income (loss) per share: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic | $33434 | $(8174) | $19570 | $(27362) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted | $(4946) | $(8174) | $(14897) | $(27362) |
| Weighted average number of common shares outstanding: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic | 25326063 | 25135355 | 25282796 | 25090916 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted | 30465279 | 25135355 | 30907869 | 25090916 |

---

The Company recognized total stock-based compensation expense as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three months ended December 31,** | **Three months ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| Cost of revenue | $121 | $89 | $404 | $364 |
| Research and development | 2225 | 789 | 7523 | 3681 |
| Sales and marketing | 589 | 378 | 2808 | 2225 |
| General and administrative | 2661 | 1689 | 9920 | 8267 |
| Total | $5596 | $2945 | $20655 | $14537 |

---

------

**BANDWIDTH INC.**

**Condensed Consolidated Balance Sheets**

**(In thousands)**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
| | **As of December 31,** | **As of December 31,** |
| | **2022** | **2021** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $113641 | $331453 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted cash | 981 | 836 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marketable securities | 71231 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net of allowance for doubtful accounts | 74465 | 61572 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred costs | 3566 | 3204 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 15724 | 15820 |
| Total current assets | 279608 | 412885 |
| Property, plant and equipment, net | 99753 | 69604 |
| Operating right-of-use asset, net | 9993 | 14061 |
| Intangible assets, net | 177370 | 211217 |
| Deferred costs, non-current | 4938 | 4676 |
| Other long-term assets | 31251 | 8673 |
| Goodwill | 326405 | 344423 |
| Total assets | $929318 | $1065539 |
| **Liabilities and stockholders' equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | $26750 | $9142 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities | 62577 | 65921 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of deferred revenue | 7181 | 6248 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advanced billings | 10049 | 6380 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liability, current | 7450 | 5807 |
| Total current liabilities | 114007 | 93498 |
| Other liabilities | 11176 | 6018 |
| Operating lease liability, net of current portion | 4640 | 10958 |
| Deferred revenue, net of current portion | 8306 | 7634 |
| Deferred tax liability | 38466 | 48396 |
| Convertible senior notes | 480546 | 486440 |
| Total liabilities | 657141 | 652944 |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class A and Class B common stock | 25 | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital | 364913 | 502477 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | (48547) | (76867) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | (44214) | (13040) |
| Total stockholders' equity | 272177 | 412595 |
| Total liabilities and stockholders' equity | $929318 | $1065539 |

---

------

**BANDWIDTH INC.**

**Condensed Consolidated Statements of Cash Flows**

**(In thousands)**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** |
| **Cash flows from operating activities** |  |  |
| Net income (loss) | $19570 | $(27362) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 35599 | 36642 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-cash reduction to the right-of-use asset | 6977 | 5722 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt discount and issuance costs | 3082 | 26754 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 20655 | 14537 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred taxes and other | (5557) | (7486) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net gain on extinguishment of debt | (40205) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net of allowances | (13341) | (6711) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | (5795) | (6751) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 17210 | 1992 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other liabilities | 4291 | 9693 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating right-of-use liability | (7580) | (6227) |
| Net cash provided by operating activities from continuing operations | 34906 | 40803 |
| **Cash flows from investing activities** |  |  |
| Purchase of property, plant and equipment | (41661) | (17686) |
| Deposits for construction in progress | (18674) | (3000) |
| Capitalized software development costs | (3755) | (3926) |
| Purchase of land |  | (30017) |
| Proceeds from sale of land |  | 17462 |
| Purchase of marketable securities | (179598) |  |
| Proceeds from sales and maturities of marketable securities | 108681 |  |
| Proceeds from sales and maturities of other investments |  | 40000 |
| Proceeds from sale of business | 1558 |  |
| Net cash (used in) provided by investing activities | (133449) | 2833 |
| **Cash flows from financing activities** |  |  |
| Payments on finance leases | (190) | (212) |
| Proceeds from issuance of convertible senior notes |  | 250000 |
| Net cash paid for debt extinguishment | (117286) |  |
| Purchase of Capped Call |  | (25500) |
| Payment of Acquisition holdback |  | (6689) |
| Payment of debt issuance costs | (553) | (7544) |
| Proceeds from exercises of stock options | 163 | 926 |
| Value of equity awards withheld for tax liabilities | (2139) | (3954) |
| Net cash (used in) provided by financing activities | (120005) | 207027 |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 881 | 189 |
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (217667) | 250852 |
| Cash, cash equivalents, and restricted cash, beginning of period | 332289 | 81437 |
| Cash, cash equivalents, and restricted cash, end of period | $114622 | $332289 |

---

------

**BANDWIDTH INC.**

**Reconciliation of Non-GAAP Financial Measures**

**(In thousands, except share and per share amounts)**

**(Unaudited)**

***Non-GAAP Gross Profit and Non-GAAP Gross Margin***

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three months ended December 31,** | **Three months ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| **Gross Profit** | $64071 | $52109 | $238353 | $213813 |
| **Gross Profit Margin %** | 41% | 41% | 42% | 44% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation | 3461 | 3261 | 13602 | 12606 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of acquired intangible assets | 1860 | 2064 | 7657 | 8543 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 121 | 89 | 404 | 364 |
| **Non-GAAP Gross Profit** | $**69513** | $**57523** | $**260016** | $**235326** |
| **Non-GAAP Gross Margin %** <sup>(1)</sup> | **56%** | **53%** | **55%** | **52%** |

---

**________________________**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> Calculated by dividing Non-GAAP gross profit by revenue less pass-through messaging surcharges of $33.3 million and $16.8 million for the three months ended December 31, 2022 and 2021, respectively, and $98.6 million and $41.3 million for the years ended December 31, 2022 and 2021, respectively.

------

**BANDWIDTH INC.**

**Reconciliation of Non-GAAP Financial Measures**

**(In thousands, except share and per share amounts)**

**(Unaudited)**

***Non-GAAP Net Income***

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three months ended December 31,** | **Three months ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| **Net income (loss)** | $33434 | $(8174) | $19570 | $(27362) |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 5596 | 2945 | 20655 | 14537 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of acquired intangibles | 4162 | 4624 | 17180 | 19119 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt discount and issuance costs for convertible debt | 693 | 7279 | 2977 | 26672 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of business |  |  | (3777) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net gain on extinguishment of debt | (40205) |  | (40205) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-recurring items not indicative of ongoing operations and other <sup>(1)</sup> | 1702 | 475 | 1992 | 832 |
| &nbsp;&nbsp;&nbsp;&nbsp;Estimated tax effects of adjustments <sup>(2)</sup> | (36) | (4800) | (3396) | (8087) |
| **Non-GAAP net income** | $**5346** | $**2349** | $**14996** | $**25711** |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense on Convertible Notes <sup>(3)</sup> | 414 |  | 1666 |  |
| **Numerator used to compute Non-GAAP diluted net income per share** | $**5760** | $**2349** | $**16662** | $**25711** |
| **Net income (loss) per share** |  |  |  |  |
| Basic | $1.32 | $(0.33) | $0.77 | $(1.09) |
| Diluted | $(0.16) | $(0.33) | $(0.48) | $(1.09) |
| **Non-GAAP net income per Non-GAAP share** |  |  |  |  |
| Basic | $0.21 | $0.09 | $0.59 | $1.02 |
| Diluted | $0.19 | $0.09 | $0.54 | $0.97 |
| *Weighted average number of shares outstanding* |  |  |  |  |
| **Basic** | **25326063** | **25135355** | **25282796** | **25090916** |
| **Diluted** | **30465279** | **25135355** | **30907869** | **25090916** |
| **Non-GAAP basic shares** | **25326063** | **25135355** | **25282796** | **25090916** |
| Convertible debt conversion | 5139216 |  | 5625073 | 987149 |
| Stock options issued and outstanding | 71202 | 157658 | 100088 | 180318 |
| Nonvested RSUs outstanding |  | 70650 |  | 197538 |
| **Non-GAAP diluted shares** | **30536481** | **25363663** | **31007957** | **26455921** |

---

**________________________**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> Non-recurring items not indicative of ongoing operations and other include $0.9 million of foreign currency losses on the settlement of intercompany borrowings, which were repatriated in conjunction with the repurchase of a portion of the 2026 Convertible Notes, $0.6 million of nonrecurring litigation expense and $0.2 million of losses on disposals of property, plant and equipment during the three months ended December 31, 2022, and $0.5 million of losses on disposals of property, plant and equipment during the three months ended December 31, 2021. Non-recurring items not indicative of ongoing operations and other include $0.9 million of foreign currency losses on the settlement of intercompany borrowings, which were repatriated in conjunction with the repurchase of a portion of the 2026 Convertible Notes, $0.6 million of nonrecurring litigation expense and $0.5 million of losses on disposals of property, plant and equipment during the year ended December 31, 2022, and $0.8 million of losses on disposals of property, plant and equipment during the year ended December 31, 2021.

------

**BANDWIDTH INC.**

**Reconciliation of Non-GAAP Financial Measures**

**(In thousands, except share and per share amounts)**

**(Unaudited)**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(2)</sup> The estimated tax-effect of adjustments is determined by recalculating the tax provision on a Non-GAAP basis. The Non-GAAP effective income tax rate was 7.0% and 14.2% for the years ended December 31, 2022 and 2021, respectively. For the year ended December 31, 2022, the Non-GAAP effective income tax rate differed from the federal statutory tax rate of 21% in the U.S. primarily due to research and development tax credits generated in 2022. For the year ended December 31, 2021, the effective income tax rate differs from the federal statutory tax rate of 21% in the U.S. primarily due to the valuation allowance recognized against federal and state deferred tax assets in the U.S. We analyze the Non-GAAP valuation allowance position on a quarterly basis. In the fourth quarter of 2022, we removed the valuation allowance against all U.S. deferred tax assets for Non-GAAP purposes as a result of cumulative Non-GAAP U.S. income over the past three years and a significant depletion of net operating loss and tax credit carryforwards on a Non-GAAP basis. As of December 31, 2022, we have no valuation allowance against our remaining deferred tax assets for Non-GAAP purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(3)</sup> Upon the adoption of Accounting Standards Update 2020-06 ("ASU 2020-06"), net income is increased for interest expense as part of the calculation for diluted Non-GAAP earnings per share. See Note 2, "Summary of Significant Accounting Policies" to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, for additional details on the adoption of ASU 2020-06.

***Adjusted EBITDA***

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three months ended December 31,** | **Three months ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| **Net income (loss)** | $33434 | $(8174) | $19570 | $(27362) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax benefit | (1103) | (4088) | (2264) | (3833) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense, net | 187 | 7960 | 3048 | 28784 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation | 4571 | 4540 | 18419 | 17523 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization | 4162 | 4624 | 17180 | 19119 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 5596 | 2945 | 20655 | 14537 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of business |  |  | (3777) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net gain on extinguishment of debt | (40205) |  | (40205) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-recurring items not indicative of ongoing operations and other <sup>(1)</sup> | 1702 | 475 | 1992 | 832 |
| **Adjusted EBITDA** | $**8344** | $**8282** | $**34618** | $**49600** |

---

**________________________**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> Non-recurring items not indicative of ongoing operations and other include $0.9 million of foreign currency losses on the settlement of intercompany borrowings, which were repatriated in conjunction with the repurchase of a portion of the 2026 Convertible Notes, $0.6 million of nonrecurring litigation expense and $0.2 million of losses on disposals of property, plant and equipment during the three months ended December 31, 2022, and $0.5 million of losses on disposals of property, plant and equipment during the three months ended December 31, 2021. Non-recurring items not indicative of ongoing operations and other include $0.9 million of foreign currency losses on the settlement of intercompany borrowings, which were repatriated in conjunction with the repurchase of a portion of the 2026 Convertible Notes, $0.6 million of nonrecurring litigation expense and $0.5 million of losses on disposals of property, plant and equipment during the year ended December 31, 2022, and $0.8 million of losses on disposals of property, plant and equipment during the year ended December 31, 2021.

***Free Cash Flow***

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three months ended December 31,** | **Three months ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| Net cash provided by operating activities | $10566 | $17115 | $34906 | $40803 |
| Net cash used in investing in capital assets <sup>(1) (2)</sup>  | (24626) | (8848) | (45416) | (37167) |
| **Free cash flow** | $**(14060)** | $**8267** | $**(10510)** | $**3636** |

---

**________________________**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> Represents the acquisition cost of property, plant and equipment and capitalized development costs for software for internal use.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(2)</sup> Includes the net cash used from the purchase of land of $(30.0) million offset by the proceeds from sale of land of $17.5 million from investing activities of the statement of cash flows for the year ended December 31, 2021.