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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________

FORM 10-Q

__________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38285

BANDWIDTH INC.

(Exact name of registrant as specified in its charter)

__________________________________


Delaware						56-2242657
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

2230 Bandmate Way

Raleigh, NC 27607

(Address of principal executive offices) (Zip Code)

(800) 808-5150

(Registrant’s telephone number, including area code)

__________________________________

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.001 per share

BAND

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 2, 2025, 27,804,887 shares of the registrant’s Class A common stock and 1,958,028 shares of registrant’s Class B common stock were outstanding.

Table of Contents


		Page
Special Note Regarding Forward-Looking Statements		3

	PART I - FINANCIAL INFORMATION	5
Item 1.	Financial Statements	5
	Unaudited Condensed Consolidated Balance Sheets as of Ma rch 31 , 202 5 and December 31, 20 2 4	5
	Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31 , 202 5 and 202 4	6
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31 , 202 5 and 20 2 4	7
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity	8
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 3 1 , 202 5 and 202 4	10
	Notes to Unaudited Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	47

	PART II - OTHER INFORMATION	48
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90
Item 5.	Other Information	90
Item 6.	Exhibits	90
	Signatures	92

Table of Contents

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. Forward-looking statements generally can be identified by the words “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “estimate,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our beliefs regarding the impact of macroeconomic conditions, including inflationary and/or recessionary pressures, on our business and financial condition;

•our ability to attract and retain customers, including large enterprises;

•our approach to identifying, attracting and keeping new and existing customers, as well as our expectations regarding customer turnover;

•our beliefs regarding network traffic growth and other trends related to the usage of our products and services;

•the impact of our customers’ violation of applicable laws, our policies or other misuse of our platform;

•our ability to successfully defend our network, systems and data against ever-evolving cybersecurity threats, including denial-of-service and ransomware attacks;

•our expectations regarding revenue, costs, expenses, gross margin, net retention rate, Adjusted EBITDA, non-generally accepted accounting principles in the United States of America (“GAAP”) net income and capital expenditures;

•our beliefs regarding the growth of our business and how that impacts our liquidity and capital resources requirements;

•our expectations about the impact of public health epidemics, such as COVID-19, or natural disasters on the global economy and our business, results of operations and financial condition;

•the sufficiency of our cash and cash equivalents to meet our liquidity needs;

•our ability to attract, train, and retain qualified employees and key personnel;

•our beliefs regarding the expense and productivity of and competition for our sales force;

•our expectations regarding headcount;

•our ability to maintain and benefit from our corporate culture;

•our plans to further invest in and grow our business, including international offerings, and our ability to effectively manage our growth and associated investments;

•our ability to introduce new products and services and enhance existing products and services;

•our ability to successfully integrate and benefit from any strategic acquisitions, including our acquisition of Voxbone, or future strategic acquisitions or investments;

•our ability to effectively manage our international operations and expansion;

•our ability to compete successfully against current and future competitors;

Table of Contents

•the evolution of technology affecting our products, services and markets;

•the impact of certain new accounting standards and guidance, as well as the time and cost of continued compliance with existing rules and standards;

•our beliefs regarding the use of Non-GAAP financial measures;

•our ability to comply with modified or new industry standards, laws and regulations applicable to our products, services and business, including the General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act of 2018 and other privacy regulations that may be implemented in the future, and Secure Telephone Identity Revisited and Signature-based Handling of Asserted Information Using toKENs (“STIR/SHAKEN”), and other robocalling prevention and anti-spam standards and increased costs associated with such compliance;

•our ability to manage fees that have been or may be instituted by network providers that increase our costs;

•our ability to maintain, protect and enhance our intellectual property;

•our expectations regarding litigation and other pending or potential disputes;

•our ability to service the interest on our Convertible Notes (as defined herein) and repay such Convertible Notes, to the extent required; and

•other risks related to our indebtedness.

We caution you that the foregoing list may not contain all the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

BANDWIDTH INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)


	As of March 31,		As of December 31,

	2025		2024
Assets
Current assets:
Cash and cash equivalents	$	35,933	$	81,812

Marketable securities	5,758		1,975

Accounts receivable, net of allowances	86,991		86,455
Deferred costs	4,012		3,729
Prepaid expenses and other current assets	18,718		13,841


Total current assets	151,412		187,812
Property, plant and equipment, net	176,616		176,823
Operating right-of-use asset, net	153,421		153,601
Intangible assets, net	145,375		145,355
Deferred costs, non-current	3,996		4,355
Other long-term assets	4,290		3,977
Goodwill	329,264		317,243


Total assets	$	964,374	$	989,166
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	16,566	$	28,362
Accrued expenses and other current liabilities	81,281		101,819
Current portion of deferred revenue	7,039		7,031

Operating lease liability, current	3,255		3,111
Current portion of convertible senior notes	7,598		—




Total current liabilities	115,739		140,323
Other liabilities	575		576
Operating lease liability, net of current portion	221,577		219,191

Deferred revenue, net of current portion	7,965		7,955

Deferred tax liability	26,356		27,304
Convertible senior notes	246,756		281,284
Total liabilities	618,968		676,633











Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock: $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding	—		—
Class A voting common stock: $0.001 par value; 100,000,000 shares authorized; 27,754,915 and 26,588,688 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively	28		27
Class B voting common stock: $0.001 par value; 20,000,000 shares authorized; 1,958,028 shares issued and outstanding as of March 31, 2025 and December 31, 2024	2		2



Additional paid-in capital	457,077		435,927
Accumulated deficit	(75,154)		(71,414)
Accumulated other comprehensive loss	(36,547)		(52,009)
Total stockholders’ equity	345,406		312,533
Total liabilities and stockholders’ equity	$	964,374	$	989,166

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BANDWIDTH INC.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)


	Three months ended March 31,
		2025		2024




Revenue		$	174,241	$	171,033



Cost of revenue		102,729		105,549


Gross profit		71,512		65,484
Operating expenses
Research and development		30,632		28,912
Sales and marketing		26,456		29,139
General and administrative		19,111		17,849
Total operating expenses		76,199		75,900


Operating loss		(4,687)		(10,416)
Other income
Net gain on extinguishment of debt		1,082		—

Interest (expense) income, net		(488)		633
Other income, net		283		350



Total other income		877		983


Loss before income taxes		(3,810)		(9,433)
Income tax benefit		70		200


Net loss		$	(3,740)	$	(9,233)






Net loss per share, basic and diluted		$	(0.13)	$	(0.35)







Weighted average number of common shares outstanding, basic and diluted		28,982,432		26,493,802

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BANDWIDTH INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)


	Three months ended March 31,
		2025		2024
Net loss		$	(3,740)	$	(9,233)
Other comprehensive income (loss)
Unrealized gain on marketable securities, net of income taxes		53		9
Foreign currency translation, net of income taxes		15,409		(9,340)


Total other comprehensive income (loss)		15,462		(9,331)
Total comprehensive income (loss)		$	11,722	$	(18,564)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BANDWIDTH INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)


	Class A voting common stock			Class B voting common stock			Additional paid-in capital	Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount




























































































































































































































































































Balance at December 31, 2023	24,206,140	$	24	1,958,028	$	2		$	391,048	$	(28,794)	$	(64,890)	$	297,390
Exercises of vested stock options	10,849	—		—	—			103		—		—		103
Vesting of restricted stock units	920,435	1		—	—			—		—		—		1
Equity awards withheld for tax liability	(116,747)	—		—	—			(2,267)		—		—		(2,267)

Unrealized gain on marketable securities	—	—		—	—			—		9		—		9
Foreign currency translation	—	—		—	—			—		(9,340)		—		(9,340)

Stock-based compensation	—	—		—	—			21,536		—		—		21,536
Net loss	—	—		—	—			—		—		(9,233)		(9,233)
Balance at March 31, 2024	25,020,677	25		1,958,028	2			410,420		(38,125)		(74,123)		298,199
Exercises of vested stock options	1,625	—		—	—			16		—		—		16
Vesting of restricted stock units	251,015	—		—	—			—		—		—		—
Equity awards withheld for tax liability	(1,351)	—		—	—			(24)		—		—		(24)

Unrealized gain on marketable securities	—	—		—	—			—		117		—		117
Foreign currency translation	—	—		—	—			—		(3,007)		—		(3,007)

Stock-based compensation	—	—		—	—			8,091		—		—		8,091
Net income	—	—		—	—			—		—		4,055		4,055
Balance at June 30, 2024	25,271,966	25		1,958,028	2			418,503		(41,015)		(70,068)		307,447
Exercises of vested stock options	1,030	—		—	—			10		—		—		10
Vesting of restricted stock units	276,855	1		—	—			—		—		—		1
Equity awards withheld for tax liability	(181)	—		—	—			(3)		—		—		(3)

Unrealized loss on marketable securities	—	—		—	—			—		(78)		—		(78)
Foreign currency translation	—	—		—	—			—		20,538		—		20,538

Stock-based compensation	—	—		—	—			8,247		—		—		8,247
Net income	—	—		—	—			—		—		413		413
Balance at September 30, 2024	25,549,670	26		1,958,028	2			426,757		(20,555)		(69,655)		336,575
Exercises of vested stock options	3,801	—		—	—			38		—		—		38
Vesting of restricted stock units	1,035,295	1		—	—			—		—		—		1
Equity awards withheld for tax liability	(78)	—		—	—			(2)		—		—		(2)

Unrealized loss on marketable securities	—	—		—	—			—		(109)		—		(109)
Foreign currency translation	—	—		—	—			—		(31,497)		—		(31,497)
Unrealized gain on employee benefit pension plan	—	—		—	—			—		152		—		152
Stock-based compensation	—	—		—	—			9,134		—		—		9,134
Net loss	—	—		—	—			—		—		(1,759)		(1,759)
Balance at December 31, 2024	26,588,688	27		1,958,028	2			435,927		(52,009)		(71,414)		312,533

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BANDWIDTH INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)


	Class A voting common stock			Class B voting common stock			Additional paid-in capital	Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount
Exercises of vested stock options	925	—		—	—			9		—		—		9
Vesting of restricted stock units	1,348,320	1		—	—			—		—		—		1
Equity awards withheld for tax liability	(183,018)	—		—	—			(2,932)		—		—		(2,932)

Unrealized gain on marketable securities	—	—		—	—			—		53		—		53
Foreign currency translation	—	—		—	—			—		15,409		—		15,409

Stock-based compensation	—	—		—	—			24,073		—		—		24,073
Net loss	—	—		—	—			—		—		(3,740)		(3,740)
Balance at March 31, 2025	27,754,915	$	28	1,958,028	$	2		$	457,077	$	(36,547)	$	(75,154)	$	345,406

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BANDWIDTH INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three months ended March 31,
	2025		2024
Cash flows from operating activities
Net loss	$	(3,740)	$	(9,233)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Depreciation and amortization	12,503		12,414
Non-cash reduction to the right-of-use asset	753		1,141



Amortization of debt discount and issuance costs	365		525
Stock-based compensation	13,575		12,339

Deferred taxes and other	(1,776)		(1,373)


Net gain on extinguishment of debt	(1,082)		—


Changes in operating assets and liabilities:
Accounts receivable, net of allowances	(253)		(11,464)



Prepaid expenses and other assets	(5,366)		1,230
Accounts payable	(10,932)		(8,640)
Accrued expenses and other liabilities	(8,072)		6,707

Operating right-of-use liability	942		(1,181)



Net cash (used in) provided by operating activities	(3,083)		2,465
Cash flows from investing activities
Purchase of property, plant and equipment	(7,368)		(3,316)


Capitalized software development costs	(2,844)		(3,556)



Purchase of marketable securities	(4,717)		(21,764)
Proceeds from sales and maturities of marketable securities	987		1,422



Proceeds from sale of business	103		208





Net cash used in investing activities	(13,839)		(27,006)
Cash flows from financing activities
Borrowings on line of credit	15,000		—
Repayments on line of credit	(15,000)		—

Payments on finance leases	(15)		(17)







Net cash paid for debt extinguishment	(26,120)		—



Proceeds from exercises of stock options	9		103

Value of equity awards withheld for tax liabilities	(2,907)		(1,893)

Net cash used in financing activities	(29,033)		(1,807)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(124)		(394)
Net decrease in cash, cash equivalents, and restricted cash	(46,079)		(26,742)
Cash, cash equivalents, and restricted cash, beginning of period	82,234		132,307
Cash, cash equivalents, and restricted cash, end of period	$	36,155	$	105,565

Reconciliation of cash, cash equivalents, and restricted cash, end of period
Cash and cash equivalents	$	35,933	$	105,390
Restricted cash included in prepaid expenses and other current assets	222		175
Total cash, cash equivalents, and restricted cash, end of period	$	36,155	$	105,565

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BANDWIDTH INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three months ended March 31,
	2025		2024
Supplemental disclosure of cash flow information
Cash received from interest	$	(232)	$	(1,113)
Cash (refunded) paid for taxes, net	$	(4)	$	440
Right-of-use assets obtained in exchange for new operating lease liabilities	$	567	$	—


Supplemental disclosure of noncash investing and financing activities
Purchase of property, plant and equipment, accrued but not paid	$	2,107	$	1,069
Purchase of property and equipment through lease incentive	$	1,014	$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

BANDWIDTH INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

Bandwidth Inc. (together with its subsidiaries, “Bandwidth” or the “Company”) was founded in July 2000 and incorporated in Delaware on March 29, 2001. The Company’s headquarters are located in Raleigh, North Carolina. The Company is a global cloud-based, software-powered communications platform-as-a-service (“CPaaS”) provider that enables enterprises to create, scale and operate voice or messaging communications services across any mobile application or connected device.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 20, 2025.

The condensed consolidated balance sheet as of December 31, 2024, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures, including certain notes required by GAAP on an annual reporting basis.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive income (loss) and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year 2025 or any future period.

Reclassification

The Company reclassified certain prior year amounts to conform to the current year presentation. These reclassifications had no impact on the previously reported total assets, liabilities, stockholders’ deficit or net income.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Bandwidth Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the amounts reported in these financial statements and accompanying notes. These estimates in the condensed consolidated financial statements include, but are not limited to, allowance for doubtful accounts, reserve for expected credit losses, reserve for sales credits, recoverability of long lived and intangible assets, fair value of acquired intangible assets and goodwill, discount rates used in the valuation of right-of-use assets and lease liabilities, the fair value of the liability of the Company’s Convertible Notes (as defined herein), estimated period of benefit, valuation allowances on deferred tax assets, certain accrued expenses and contingencies, economic and demographic actuarial assumptions related to pension

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

and other postretirement benefit costs and liabilities. Although the Company believes that the estimates it uses are reasonable, due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ from those estimates.

Marketable Securities

The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. The Company may sell these securities at any time for use in current operations even if they have not yet reached maturity. As a result, the Company classifies investments with maturities greater than 90 days as marketable securities in the accompanying condensed consolidated balance sheets. The Company evaluates its investments to assess whether the amortized cost basis is in excess of estimated fair value and determines what amount of that difference, if any, is caused by expected credit losses. Allowances for credit losses are recognized as a charge in other income, net on the condensed consolidated statements of operations, and any remaining unrealized losses are included in accumulated other comprehensive loss on the condensed consolidated balance sheets. Due to the nature and investment grade of the Company’s marketable securities, there were no credit losses recorded for the three months ended March 31, 2025. There have been no impairment charges for any unrealized losses during the period.

Accounts Receivable and Current Expected Credit Losses

Accounts receivable are stated at realizable value, net of allowances, which includes an allowance for doubtful accounts and a reserve for expected credit losses. The allowance for doubtful accounts is based on management’s assessment of the collectability of its customer accounts. The Company regularly reviews the composition of the accounts receivable aging, historical credit losses, changes in payment patterns, customer creditworthiness, current economic trends, and reasonable and supportable forecasts about the future. Relevant risk characteristics include customer size and historical loss patterns. Management has evaluated the expected credit losses related to trade accounts receivable and determined that an allowance of approximately $2.6 million and $2.2 million for uncollectible accounts and customer balances that are disputed was required as of March 31, 2025 and December 31, 2024, respectively. Refer to Note 4, “Financial Statement Components” to these condensed consolidated financial statements, for a rollforward of the components of the allowances for the three months ended March 31, 2025 and 2024.

The Company includes unbilled receivables in its accounts receivable balance. Generally, these receivables represent earned revenue from services provided to customers, which will be billed in the next billing cycle. All amounts are considered collectible and billable. As of March 31, 2025 and December 31, 2024, unbilled receivables were $49.2 million and $46.8 million, respectively.

Concentration of Credit Risk

Financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents, marketable securities and trade accounts receivable. The Company maintains its cash, cash equivalents and marketable securities with high credit-quality financial institutions. Certain balances held by such financial institutions exceed insured limits.

With regard to customers, credit evaluation and account monitoring procedures are used to minimize the risk of loss. The Company believes that no additional credit risk beyond amounts provided for by the allowance for doubtful accounts are inherent in accounts receivable. As of March 31, 2025 and December 31, 2024, no individual customer represented more than 10% of the Company’s accounts receivable, net of allowance for doubtful accounts.

For the three months ended March 31, 2025 and 2024, no individual customer represented more than 10% of the Company’s revenue.

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Notes to Condensed Consolidated Financial Statements (continued)

Recently Adopted Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a certain quantitative threshold. The amendments also require entities on an annual basis to disclose disaggregated amounts of income taxes paid. The Company adopted ASU 2023-09 effective January 1, 2025, and the required disclosures will be included in the Company’s Annual Report on Form 10-K that will be filed for the annual period ending December 31, 2025. ASU 2023-09 will have no impact on the Company’s financial position or results of operations.

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires public entities to disclose disaggregated information about certain costs and expenses on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with the option to apply the guidance prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2024-03 on its financial statements.

In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments (“ASU 2024-04”), which provides additional guidance to stakeholders about how to determine whether a settlement of convertible debt (particularly, cash convertible instruments) at terms that differ from the original conversion terms should be accounted for under the induced conversion or extinguishment guidance. ASU 2024-04 is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. The Company, which has adopted ASU 2020-06, is currently evaluating the impact of adopting ASU 2024-04 on its financial statements and expects to adopt the guidance upon its effective date.

3. Fair Value Measurements

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires use of observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows:

•Level 1. Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;

•Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

•Level 3. Unobservable inputs for which there is little or no market data, which requires the Company to develop its own assumptions.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

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Notes to Condensed Consolidated Financial Statements (continued)

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value as of March 31, 2025 and December 31, 2024 because of the relatively short duration of these instruments. Marketable securities consist of commercial paper not otherwise classified as cash equivalents. All marketable securities are considered to be available-for-sale and are recorded at their estimated fair values. Unrealized gains and losses for available-for-sale securities are recorded in accumulated other comprehensive loss.

The Company evaluated its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. The following tables summarize the Company’s financial assets measured at fair value as of March 31, 2025 and December 31, 2024:


	Amortized cost or carrying value		Unrealized gains		Unrealized losses		Fair value measurements on a recurring basis March 31, 2025
							Level 1		Level 2		Level 3		Total

	(In thousands)
Financial assets:
Cash and cash equivalents:
Money market account	$	20,149	$	—	$	—	$	20,149	$	—	$	—	$	20,149





Commercial paper	5,913		—		—		5,913		—		—		5,913

Total included in cash and cash equivalents	26,062		—		—		26,062		—		—		26,062
Marketable securities:



Commercial paper	5,700		58		—		5,758		—		—		5,758
Total marketable securities	5,700		58		—		5,758		—		—		5,758



Total financial assets	$	31,762	$	58	$	—	$	31,820	$	—	$	—	$	31,820


	Amortized cost or carrying value		Unrealized gains		Unrealized losses		Fair value measurements on a recurring basis December 31, 2024
							Level 1		Level 2		Level 3		Total

	(In thousands)
Financial assets:
Cash and cash equivalents:
Money market account	$	57,759	$	—	$	—	$	57,759	$	—	$	—	$	57,759





Commercial paper	18,489		—		—		18,489		—		—		18,489

Total included in cash and cash equivalents	76,248		—		—		76,248		—		—		76,248
Marketable securities:



Commercial paper	1,970		5		—		1,975		—		—		1,975
Total marketable securities	1,970		5		—		1,975		—		—		1,975



Total financial assets	$	78,218	$	5	$	—	$	78,223	$	—	$	—	$	78,223

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Notes to Condensed Consolidated Financial Statements (continued)

The Company classifies its marketable securities as current assets as they are available for current operating needs. The following table summarizes the contractual maturities of marketable securities as of March 31, 2025:


	Amortized cost		Aggregate fair value

	(In thousands)
Financial assets:
Less than one year	$	5,700	$	5,758

Total	$	5,700	$	5,758

As of March 31, 2025, the marketable securities were in an unrealized gain position. The Company has determined that (i) it does not have the intent to sell any of these investments and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. As of March 31, 2025, the Company anticipates that it will recover the entire amortized cost basis of its marketable securities before maturity.

During the three months ended March 31, 2025 and 2024, there were $1.0 million and $1.4 million, respectively, in maturities of marketable securities. There were no proceeds from sales of marketable securities for the three months ended March 31, 2025 and 2024. The Company determines realized gains and losses on sale of marketable securities using the specific identification method and records such gains and losses in other income, net on the condensed consolidated statements of operations. Interest earned on marketable securities was less than $0.1 million and $0.4 million for the three months ended March 31, 2025 and 2024, respectively. The interest is recorded in other income, net, on the accompanying condensed consolidated statements of operations. Accrued interest receivable is recorded in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

As of March 31, 2025, the fair value of the 2026 Convertible Notes and 2028 Convertible Notes, as further described in Note 8, “Debt,” to these condensed consolidated financial statements, was approximately $7.0 million and $202.5 million, respectively. As of December 31, 2024, the fair value of the 2026 Convertible Notes and the 2028 Convertible Notes was approximately $31.8 million and $199.0 million, respectively. The fair value was determined based on the closing price for the Convertible Notes on the last trading day of the reporting period and is considered as Level 2 in the fair value hierarchy.

4. Financial Statement Components

Accounts receivable, net of allowances consist of the following:


	As of March 31,		As of December 31,

	2025		2024

	(In thousands)
Trade accounts receivable	$	40,436	$	41,727
Unbilled accounts receivable	49,160		46,795
Allowance for doubtful accounts and reserve for expected credit losses	(2,644)		(2,172)
Other accounts receivable	39		105
Total accounts receivable, net	$	86,991	$	86,455

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

Components of the allowance for expected credit losses are as follows:


	Three months ended March 31,
		2025		2024

		(In thousands)
Balance, beginning of period		$	(2,172)	$	(1,128)
Charged to credit loss expense, net of reversals		(887)		(1,457)
Deductions (1)		460		60
Impact of foreign currency translation		(45)		17
Balance, end of period		$	(2,644)	$	(2,508)

________________________

(1) Write-off of uncollectible accounts after all collection efforts have been exhausted.

Accrued expenses and other current liabilities consisted of the following:


	As of March 31,		As of December 31,

	2025		2024

	(In thousands)
Accrued expense	$	58,856	$	63,665
Accrued compensation and benefits	9,948		25,992
Accrued sales, use, VAT and telecommunications related taxes	7,856		7,898




Customer deposits	3,688		3,710
Other accrued expenses	933		554
Total accrued expenses and other current liabilities	$	81,281	$	101,819

5. Leases

The Company primarily leases facilities for office space under non-cancelable operating leases for its U.S. and international locations. As of March 31, 2025, non-cancelable leases expire on various dates between 2025 and 2043, some of which include options to extend the leases for up to 20 years.

On January 1, 2025, the Company commenced a sublease of a portion of its corporate headquarters to Relay, Inc., a Delaware corporation (f/k/a Republic Wireless, Inc.) (“Relay”), a related party. See Note 15, “Related Parties” to these condensed consolidated financial statements, for additional details. The sublease expires on December 31, 2029 and does not include any option to renew or purchase, nor does it include any residual value guarantees. During the three months ended March 31, 2025, the Company received approximately $0.2 million in rental payments from Relay under the sublease. Total future minimum rent payments to the Company under this sublease were $10.7 million as of March 31, 2025. Sublease income was $0.5 million for the three months ended March 31, 2025 and is recorded as an offset to operating lease expense in the Company’s condensed consolidated financial statements.

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

The components of operating lease expense recorded in the condensed consolidated statements of operations were as follows:


	Three months ended March 31,
		2025		2024

		(In thousands)
Operating lease cost		$	5,660	$	6,030





Sublease income		(545)		—
Total net lease cost		$	5,115	$	6,030

Other supplemental information related to operating leases were as follows:


	Three months ended March 31,
		2025		2024









Weighted average remaining lease term (in years)		18.04		19.12



Weighted average discount rate		8.76	%	8.76	%

Maturities of operating lease liabilities were as follows:


	As of March 31,
	2025


	(In thousands)

2025 (remaining)	$	17,063
2026	22,637
2027	23,048
2028	23,398
2029	23,818

Thereafter	357,115
Total lease payments	467,079
Less: imputed interest	(241,387)
Less: accrued lease incentive	(860)
Total lease obligations	224,832
Less: current obligations	(3,255)
Long-term lease obligations	$	221,577

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

6. Property, Plant and Equipment

Property, plant and equipment, net consisted of the following:



	As of March 31,		As of December 31,
	2025		2024

	(In thousands)
Furniture and fixtures	$	15,958	$	15,925
Computer and office equipment	14,415		13,967
Telecommunications equipment	85,080		82,608
Leasehold improvements	77,310		76,054
Software	26,191		24,916
Internal-use software development	38,304		35,499
Automobile	464		447
Land	27,636		27,636
Land Improvements	1,065		1,065
Total cost	286,423		278,117
Less—accumulated depreciation	(109,807)		(101,294)
Total property, plant and equipment, net	$	176,616	$	176,823

The Company capitalized $2.8 million and $3.6 million of software development costs for the three months ended March 31, 2025 and 2024, respectively.

Amortization expense related to capitalized software development costs was $1.3 million and $1.0 million for the three months ended March 31, 2025 and 2024, respectively.

The Company recognized depreciation expense, which includes amortization of capitalized software development costs, as follows:


	Three months ended March 31,
		2025		2024

		(In thousands)
Cost of revenue		$	4,678	$	4,778
Research and development		1,710		1,598
Sales and marketing		1,172		1,136
General and administrative		656		541
Total depreciation expense		$	8,216	$	8,053

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

7. Goodwill and Intangible Assets

Goodwill

The changes in carrying amount of goodwill were as follows:


	Total

	(In thousands)




Balance as of December 31, 2024	$	317,243


Foreign currency translation adjustments	12,021
Balance as of March 31, 2025	$	329,264

Intangible Assets

Intangible assets, net consisted of the following:


	As of March 31,						As of December 31,

	2025						2024

	Gross Amount		Accumulated Amortization		Net Carrying Value		Gross Amount		Accumulated Amortization		Net Carrying Value

	(In thousands)
Customer relationships	$	149,392	$	(48,247)	$	101,145	$	145,625	$	(44,754)	$	100,871



Developed technology	78,101		(34,495)		43,606		75,189		(31,329)		43,860
Other, definite lived	2,828		(2,828)		—		2,828		(2,828)		—
Licenses, indefinite lived	624		—		624		624		—		624







Total intangible assets, net	$	230,945	$	(85,570)	$	145,375	$	224,266	$	(78,911)	$	145,355

The Company recognized amortization expense as follows:


	Three months ended March 31,
		2025		2024

		(In thousands)
Cost of revenue		$	1,897	$	1,959

Sales and marketing		2,390		2,402

Total amortization expense		$	4,287	$	4,361

The remaining weighted average amortization period for definite lived intangible assets is 8.8 years.

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

Future estimated amortization expense for definite lived intangible assets is as follows:


	As of March 31,
	2025

	(In thousands)
2025 (remaining)	$	13,198
2026	17,596
2027	17,596
2028	17,596
2029	17,596


Thereafter	61,169
	$	144,751

8. Debt

Revolving Credit Facility

In August 2023, the Company entered into a credit agreement (the “Credit Agreement”) among the Company, as borrower, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent, swingline lender and letters of credit issuer. The Credit Agreement provided for a $50.0 million revolving credit facility (the “Credit Facility”), including a $15.0 million sublimit for the issuance of letters of credit and a swingline subfacility of up to $5.0 million. The Credit Facility has an accordion feature that allows for an increase in the total borrowing size up to $25.0 million, subject to certain conditions. The Credit Agreement was subsequently amended in 2024 to increase the Credit Facility to $150.0 million and increase the swingline sublimit to $10.0 million. The Credit Facility matures on the earlier of (a) May 1, 2029 or (b) the date that is 91 days prior to the scheduled maturity date or mandatory conversion date of any of the Company’s outstanding convertible notes due 2028. The Credit Agreement requires that the Company maintain (a) (i) for each fiscal quarter ending on or prior to June 30, 2025, a consolidated senior secured leverage ratio not to exceed 2.75 to 1.00, and (ii) for each fiscal quarter thereafter, a consolidated senior secured leverage ratio not to exceed 2.50 to 1.00; and (b) a consolidated fixed charge coverage ratio not less than 2.00 to 1.00, in each case tested as of the end of any fiscal quarter. Exceptions to certain customary negative covenants require a pro forma consolidated senior secured leverage ratio of at least 0.50 to 1.00 inside the maximum then-applicable consolidated senior secured leverage ratio, and exceptions to the restriction on additional convertible indebtedness requires a pro forma consolidated total leverage ratio over the most recent four fiscal quarters not to exceed 4.50 to 1.00.

Interest on borrowings under the Credit Facility accrues at an annual rate tied to a base rate or the Secured Overnight Financing Rate (“SOFR”), at the Company’s election. Loans based on SOFR bear interest at a rate equal to term SOFR for the applicable interest period plus 10 basis points plus an applicable margin between 2.00% and 2.50%, and loans based on the base rate bear interest at a rate equal to the base rate plus an applicable margin between 1.00% and 1.50%, in each case of the foregoing, depending upon the Company’s consolidated total leverage ratio for the most recent fiscal quarter for which financial statements have been delivered under the Credit Agreement. The Company is required to pay a quarterly commitment fee equal to between 0.20% and 0.25% on the unused portion of the borrowing commitment, depending upon the Company’s consolidated total leverage ratio for the most recent fiscal quarter for which financial statements have been delivered under the Credit Agreement.

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

The obligations under the Credit Agreement are secured by a lien on substantially all of the Company’s tangible and intangible property and by a pledge of all of the equity interests of the Company’s direct domestic subsidiaries and 65% of the voting capital stock and 100% of the non-voting capital stock of any first-tier foreign subsidiaries, subject to limited exceptions. In addition, the Company’s direct domestic subsidiaries guarantee the obligations under the Credit Agreement and grant a lien and pledge, as applicable, on substantially all of their tangible and intangible property to secure the obligations under the Credit Agreement.

As of March 31, 2025, unamortized debt issuance costs were $0.9 million, of which $0.3 million were included in prepaid expenses and other current assets and $0.6 million were included in other long-term assets. As of December 31, 2024, unamortized debt issuance costs were $1.0 million, of which $0.2 million were included in prepaid expenses and other current assets and $0.8 million were included in other long-term assets.

As of March 31, 2025, the Company had no outstanding borrowings under the Credit Facility and was in compliance with all financial and non-financial covenants for all periods presented. As of March 31, 2025, the available borrowing capacity under the Credit Facility was $150.0 million.

Convertible Senior Notes and Capped Call Transactions

2026 Convertible Notes

In February 2020, the Company issued $400.0 million aggregate principal amount of 0.25% Convertible Notes due 2026 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act (the “2026 Convertible Notes”). The interest on the 2026 Convertible Notes is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2020. The 2026 Convertible Notes will mature on March 1, 2026, unless earlier repurchased, redeemed by the Company, or converted pursuant to their terms. The total net proceeds from the 2026 Convertible Notes, after deducting initial purchaser discounts, costs related to the 2026 Capped Calls (as defined herein), and debt issuance costs, paid by the Company, were approximately $344.7 million. The excess of the principal amount of the liability component over its carrying amount, or the debt discount, was amortized to interest expense at an annual effective interest rate of 0.510% over the contractual terms of the 2026 Convertible Notes.

Each $1,000 principal amount of the 2026 Convertible Notes is initially convertible into 10.9857 shares of the Company’s Class A common stock, par value $0.001 per share, which is equivalent to an initial conversion price of approximately $91.03 per share.

During February 2025, the Company entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2026 Convertible Notes (the “2025 Repurchases”) to repurchase approximately $27.4 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $26.1 million. The 2025 Repurchases closed on February 24, 2025. Following the 2025 Repurchases and previous repurchases, approximately $7.6 million aggregate principal amount of the 2026 Convertible Notes remains outstanding. The difference between the consideration used for the 2025 Repurchases and the carrying value of the 2026 Convertible Notes resulted in a gain of $1.1 million recorded within net gain on extinguishment of debt on the Company’s condensed consolidated statements of operations for the three months ended March 31, 2025. The Company had previously entered into capped call transactions with certain financial institutions in connection with the 2026 Convertible Notes. All of these transactions are expected to remain in effect notwithstanding the repurchases.

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

2028 Convertible Notes

In March 2021, the Company issued $250.0 million aggregate principal amount of 0.50% Convertible Notes due 2028 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act (the “2028 Convertible Notes” and, together with the 2026 Convertible Notes, the “Convertible Notes”). The interest on the 2028 Convertible Notes is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2021. The 2028 Convertible Notes will mature on April 1, 2028, unless earlier repurchased, redeemed by the Company, or converted pursuant to their terms. The total net proceeds from the 2028 Convertible Notes, after deducting initial purchaser discounts, costs related to the 2028 Capped Calls (as defined herein), and debt issuance costs, paid by the Company, were approximately $217.0 million. The excess of the principal amount of the liability component over its carrying amount, or the debt discount, was amortized to interest expense at an annual effective interest rate of 0.442% over the contractual terms of the 2028 Convertible Notes.

Each $1,000 principal amount of the 2028 Convertible Notes is initially convertible into 5.5781 shares of the Company’s Class A common stock, par value $0.001 per share, which is equivalent to an initial conversion price of approximately $179.27 per share.

Other Terms of the Convertible Notes

The Convertible Notes are effectively subordinated to the Company’s future senior secured indebtedness to the extent of the value of the collateral securing that indebtedness. The Convertible Notes are the senior, unsecured obligations of the Company and are equal in right of payment with the Company’s future senior unsecured indebtedness, if any, senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Convertible Notes and the Convertible Notes will be structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and preferred equity, if any, of the Company’s subsidiaries. The Convertible Notes may bear special interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the indenture governing the applicable Convertible Notes (each, a “Notes Indenture” and collectively, the “Notes Indentures”) or if the Convertible Notes are not freely tradeable as required by the applicable Notes Indenture.

The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (which includes the calling of any Convertible Notes for redemption), as defined in the applicable Notes Indenture, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change or during the relevant redemption period.

The Company may redeem the Convertible Notes, in whole or in part, at its option at any time, and from time to time, on or after (i) March 6, 2023 for the 2026 Convertible Notes, or (ii) after April 6, 2025 for the 2028 Convertible Notes, in each case, on or before the fortieth (40th) scheduled trading day immediately before the maturity date, at a cash redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding the redemption date, if the last reported sale price of the Class A common stock has exceeded 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading date immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading days ending on, and including, the trading date immediately before the date on which the Company provides the related redemption notice. No sinking fund is provided for the Convertible Notes.

The Convertible Notes will be convertible at certain times and upon the occurrence of certain events in the future. Further, on or after September 1, 2025 for the 2026 Convertible Notes, and on or after October 1, 2027 for the 2028 Convertible Notes, in each case, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Convertible Notes may convert all or a portion of their Convertible Notes regardless of these conditions. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Class A common stock, or a combination of cash and shares of Class A common stock, at

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

the Company’s election. It is the Company’s current intent to settle the principal amount of the Convertible Notes with cash.

During the three months ended March 31, 2025, the conditions allowing the holders of the 2026 Convertible Notes and the 2028 Convertible Notes to convert were not met. The Convertible Notes may be convertible thereafter if one or more of the conversion conditions specified in each respective Notes Indenture are satisfied during future measurement periods. The Company classifies the 2026 Convertible Notes as a current liability and the 2028 Convertible Notes as a long-term liability in its condensed consolidated balance sheets as of March 31, 2025, based on contractual settlement provisions.

Upon the occurrence of a fundamental change (as defined in the applicable Notes Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2026 Convertible Notes or 2028 Convertible Notes for cash at a price equal to the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The net carrying amount of the liability components of the Convertible Notes were as follows:


	As of March 31,		As of December 31,

	2025		2024

2026 Convertible Notes:	(In thousands)
Principal	$	7,633	$	35,000

Unamortized debt issuance costs	(35)		(205)
2026 Convertible Notes net carrying amount	7,598		34,795

2028 Convertible Notes:
Principal	250,000		250,000

Unamortized debt issuance costs	(3,244)		(3,511)
2028 Convertible Notes net carrying amount	246,756		246,489
Total net carrying amount	$	254,354	$	281,284

The following table sets forth the interest expense recognized related to the Convertible Notes:


	Three months ended March 31,
		2025		2024

2026 Convertible Notes:		(In thousands)
Contractual interest expense		$	21	$	109

Amortization of debt issuance costs		30		217
Total interest expense related to the 2026 Convertible Notes		51		326

2028 Convertible Notes:
Contractual interest expense		313		313

Amortization of debt issuance costs		268		268
Total interest expense related to the 2028 Convertible Notes		581		581
Total interest expense		$	632	$	907

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

Capped Calls

In connection with the offering of the 2026 Convertible Notes and the 2028 Convertible Notes, the Company entered into privately negotiated capped call transactions with certain counterparties (the “2026 Capped Calls” and the “2028 Capped Calls,” respectively and, collectively, the “Capped Calls”). The initial strike price of the Convertible Notes corresponds to the initial conversion price of the 2026 Convertible Notes and the 2028 Convertible Notes. The Capped Calls are generally intended to reduce or offset the potential dilution to the Class A common stock upon any conversion of the 2026 Convertible Notes and 2028 Convertible Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. The Capped Calls expire on the earlier of (i) the last day on which any convertible securities remain outstanding and (ii) March 1, 2026 for the 2026 Capped Calls and April 1, 2028 for the 2028 Capped Calls, subject to earlier exercise. The Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event, a tender offer, and a nationalization, insolvency or delisting involving the Company. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including changes in law, insolvency filings, and hedging disruptions. The Capped Call transactions are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost to purchase the Capped Calls was recorded as a reduction to additional paid-in capital in the accompanying condensed consolidated balance sheets.

The following table sets forth key terms and costs incurred for the Capped Calls related to the Convertible Notes as of March 31, 2025:


	2026 Convertible Notes		2028 Convertible Notes

	(In thousands, except share and per share amounts)
Initial approximate strike price per share, subject to certain adjustments	$	91.03	$	179.27
Initial cap price per share, subject to certain adjustments	$	137.40	$	260.76
Net costs incurred	$	43,320	$	25,500
Class A common stock covered, subject to anti-dilution adjustments	83,854		1,394,525

All of the Capped Calls were outstanding as of March 31, 2025.

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

9. Revenue

Geographic Information

The following table summarizes the Company’s revenue by geographic region, which is apportioned based on the destination of the service:


	Three months ended March 31,
		2025		2024

		(In thousands)
United States		$	151,792	$	149,462
International		22,449		21,571
Total		$	174,241	$	171,033

For the three months ended March 31, 2025 and 2024, no country outside of the United States represented 10% or more of the Company’s total revenues.

The following table summarizes the Company’s long-lived assets by geographic region:


	As of March 31,		As of December 31,

	2025		2024

	(In thousands)
United States	$	325,284	$	326,634
International	4,753		3,790
Total	$	330,037	$	330,424

Contract Assets and Liabilities

The following table provides information about the Company’s receivables and contract liabilities from contracts with customers:


	As of March 31,		As of December 31,

	2025		2024

	(In thousands)
Receivables (1)	$	86,991	$	86,455
Contract liabilities (2)	15,004		14,986

________________________

(1) Included in accounts receivable, net of allowance for doubtful accounts on the consolidated balance sheets.

(2) Included in current portion of deferred revenue and deferred revenue, net of current portion on the consolidated balance sheets.

During the three months ended March 31, 2025, the Company recognized revenue of $2.0 million that was included in the deferred revenue balances at the beginning of the year. The Company expects to recognize $7.0 million in revenue over the next 12 months related to its contract liabilities as of March 31, 2025.

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

10. Stockholders’ Equity

The Company had reserved shares of Class A common stock for issuance under stock-based award agreements as follows:


	As of March 31,	As of December 31,

	2025	2024
Stock options issued and outstanding	78,313	79,238
Nonvested restricted stock units issued and outstanding	3,954,231	4,364,486
Stock-based awards available for grant under the 2017 Plan	2,452,677	1,878,290
Total	6,485,221	6,322,014

11. Stock-Based Compensation

Stock Options

The following summarizes the stock option activity for the three months ended March 31, 2025:


	Number of options outstanding	Weighted- average exercise price (Per share)		Weighted- average remaining contract life (In years)	Aggregate intrinsic value (In thousands)
Outstanding as of December 31, 2024	79,238	$	13.31	2.12	$	377
Granted	—	—
Exercised	(925)	9.60
Forfeited or expired	—	—
Outstanding as of March 31, 2025	78,313	$	13.36	1.88	$	175

Options vested and exercisable at March 31, 2025	78,313	$	13.36	1.88	$	175
Options vested and expected to vest as of March 31, 2025	78,313	$	13.36	1.88	$	175

As of March 31, 2025, the Company had no unrecognized compensation cost related to non-vested stock options. All outstanding stock options were fully vested prior to December 31, 2022.

Restricted Stock Units

The following summarizes the restricted stock unit (“RSU”) activity for the three months ended March 31, 2025:


	Number of awards outstanding	Weighted-average grant date fair value (Per share)
Nonvested RSUs as of December 31, 2024	4,364,486	$	19.25
Granted	1,022,795	15.89
Vested	(1,348,320)	20.11
Forfeited	(84,730)	17.59
Nonvested RSUs as of March 31, 2025	3,954,231	$	18.12

As of March 31, 2025, total unrecognized compensation cost related to non-vested RSUs was $56.7 million, which will be amortized over a weighted-average period of 1.99 years.

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

Stock-Based Compensation Expense

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


	Three months ended March 31,
		2025		2024

		(In thousands)
Cost of revenue		$	525	$	396
Research and development		5,557		5,316
Sales and marketing		2,274		2,166
General and administrative		5,219		4,461
Total		$	13,575	$	12,339

12. Commitments and Contingencies

Operating Leases

The Company leases office space under non-cancelable operating lease agreements that expire on various dates through July 2043. As of March 31, 2025, the Company has $467.8 million in future minimum rent payments for its current office space. See Note 5, “Leases,” to the condensed consolidated financial statements, for additional details on the Company’s operating lease commitments.

Contractual Obligations

As of March 31, 2025, the Company has $19.0 million in non-cancellable purchase obligations, consisting of primarily network equipment maintenance and software license contracts, of which $6.4 million will be fulfilled within one year.

Legal Matters

The Company is involved as a defendant in various litigation, including, but not limited to, lawsuits alleging that the Company failed to bill, collect and remit certain taxes and surcharges associated with the provision of 911 services pursuant to applicable laws in various jurisdictions.

The Company intends to vigorously defend these lawsuits and believes that it has meritorious defenses to each. However, litigation is inherently uncertain, and any judgment or injunctive relief entered against the Company or any adverse settlement could adversely affect the Company’s business, results of operations and financial condition.

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

13. Segment Reporting

The Company manages its business activities on a consolidated basis and operates in one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Chief Operating Decision Maker (the “CODM”) in deciding how to make operating decisions, allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer. The CODM utilizes the Company’s budgeted and forecasted expense information, as a key input to resource allocation. The CODM makes decisions on resource allocation, assesses performance of the business and monitors budget versus actual results using net loss, as reported in the accompanying condensed consolidated statements of operations.

Significant expenses within net loss include cost of revenue, research and development, sales and marketing, and general and administrative expenses, which are each separately presented on the Company’s condensed consolidated statements of operations. Other segment items within net loss include net gain on extinguishment of debt, interest (expense) income, net, other income, net, and income tax benefit.

14. Income Taxes

At the end of each interim reporting period, the Company determines the income tax provision by using an estimate of the annual effective tax rate, adjusted for discrete items occurring in the quarter. The effective income tax rate reflects the effect of federal, international, and state income taxes and the permanent impacts of differences in book and tax accounting.

The Company’s effective tax rate was 1.8% and 2.1% for the three months ended March 31, 2025 and 2024, respectively. The decrease in the effective tax rate is primarily due to increased earnings within the U.S., resulting in additional tax payable. This increased U.S. tax liability offsets the benefit being recognized on losses outside of the U.S., resulting in a lower effective tax rate.

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its deferred tax assets. The Company primarily considered its historic performance, the nature of its deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. Based on an analysis of these factors, the Company determined that as of March 31, 2025, a valuation allowance against U.S. federal and state deferred tax assets was required.

The Company’s effective tax rate for the three months ended March 31, 2025 differed from the federal statutory tax rate of 21% in the U.S. primarily due to a valuation allowance recorded against U.S. federal and state net deferred tax assets.

15. Related Parties

On April 20, 2015, the Company created a wholly owned subsidiary, Relay. On November 30, 2016, the Company completed a pro-rata distribution of the common stock of Relay to its stockholders of record as of the close of business. Due to the level of ownership of the Company’s CEO in Relay, Relay is considered a related party to the Company.

Table of Contents

Notes to Condensed Consolidated Financial Statements (continued)

16. Basic and Diluted Loss per Common Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. The Company is in a net loss position for the three months ended March 31, 2025 and 2024, and therefore diluted shares equals basic shares.

The components of basic and diluted loss per share are as follows:


	Three months ended March 31,
		2025		2024

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


Net loss attributable to common stockholders		$	(3,740)	$	(9,233)
Net loss income per share, basic and diluted		$	(0.13)	$	(0.35)







Weighted average number of common shares outstanding, basic and diluted		28,982,432		26,493,802

The following common share equivalents were excluded from the weighted average shares used to calculate diluted net loss per common share because their effects would have been anti-dilutive:


	As of March 31,
	2025	2024
Stock options issued and outstanding	78,313	86,631
Restricted stock units issued and outstanding	3,954,231	4,725,103
Convertible senior notes	1,658,767	3,317,023
Total	5,691,311	8,128,757

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Management’s Discussion and Analysis

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” in this Quarterly Report on Form 10-Q. Our fiscal year ends on December 31.

Overview

A global communications transformation is underway, and we believe Bandwidth is at the center. Our mission is to develop and deliver the power to communicate. We enable innovative organizations—from startup app developers to the world’s largest enterprises—to engage their end-users and deliver exceptional experiences everywhere people live, learn, work and play. Backed by the Bandwidth Communications Cloud, a global owned-and-operated network spanning more than 65 countries reaching over 90 percent of gross domestic product, innovative enterprises use Bandwidth’s Application Programming Interfaces (“APIs”) to easily embed voice, messaging and emergency services capabilities into software and applications. Bandwidth was the first cloud communications provider to offer a robust selection of APIs built on our own cloud platform. Our award-winning support teams help businesses around the world solve complex communications challenges every day.

Bandwidth’s business benefits from multiple global megatrends, including enterprise migration to the cloud, adoption of Contact Centers as a Service (“CCaaS”) platforms, the need to be able to work from anywhere, reinvention of customer experience, growth in messaging applications to engage directly with consumers, and application of artificial intelligence (“AI”) technologies to cloud communications use cases. We believe these megatrends, which have created sizable total addressable markets, are secular, long-lasting and still early in the adoption curve.

With the combination of our software APIs, our global Communications Cloud and our broad range of experience with global regulatory frameworks, we believe Bandwidth is one of the best-positioned providers in our space to deliver mission-critical communications for global enterprises. In fact, Bandwidth already powers all the 2024 GartnerⓇ Magic Quadrant Leaders in the key cloud communications categories of Unified Communications as a Service (“UCaaS”) and CCaaS.

Our long-term vision is to continue strengthening this position as the key enabling platform for communications transformation. We will seek to do this in three ways: (1) cross-sell and up-sell our existing customers as they benefit from our global footprint and powerful APIs to automate and scale cloud communications; (2) focus on direct-to-enterprise growth to serve Global 2000 enterprises that directly leverage Bandwidth services to accelerate their digital transformations, and (3) aim to be the preferred provider for Software as a Service (“SaaS”) platforms that use conversational voice and messaging to create digital engagements that enhance the customer experience. These three strategies are the foundation of the durable business we seek to build.

For the three months ended March 31, 2025 and 2024, total revenue was $174 million and $171 million, respectively, representing an increase of 2%. For the three months ended March 31, 2025 and 2024, net loss was $4 million and $9 million, respectively.

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Management’s Discussion and Analysis

Repurchase of 2026 Convertible Notes

During February 2025, we entered into the 2025 Repurchases to repurchase approximately $27 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $26 million. The 2025 Repurchases closed on February 24, 2025. Following the 2025 Repurchases and previous repurchases of the 2026 Convertible Notes, approximately $8 million aggregate principal amount of the 2026 Convertible Notes remains outstanding.

The difference between the consideration used for the 2025 Repurchases and the carrying value of the 2026 Convertible Notes resulted in a gain of $1 million recorded within net gain on extinguishment of debt on our condensed consolidated statements of operations for the three months ended March 31, 2025.

Key Performance Indicator

We monitor the following key performance indicator to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions.

Net Retention Rate

We believe net retention rate is useful in evaluating our business. For the three months ended March 31, 2025 and 2024, the net retention rate was 116% and 107%, respectively.

Our ability to drive growth and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with our existing customers that generated revenue and seek to increase their use of our platform. We track our performance in this area by measuring the net retention rate for our customers who generate revenue. To calculate the net retention rate, we first identify the cohort of customers that generated revenue in the same quarter of the prior year. The 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 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 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 net retention rate decreases when such customers cease or reduce usage of a product or when we lower prices on our solutions.

As our customers grow their businesses and increase usage of our platform, they sometimes create multiple customer accounts with us for operational or other reasons. As such, when we identify a significant customer organization (defined as a single customer organization generating more than 1% of revenue in a quarterly reporting period) that has created a new customer, this new customer is tied to, and revenue from this new customer is included with, the original customer for the purposes of calculating this metric.

Key Components of Statements of Operations

Revenue

Cloud communications revenue is derived from (i) reoccurring sources such as per minute voice usage and voice calling, per text message usage and other usage services and fees, and (ii) monthly recurring charges arising from phone number services, 911-enabled phone number services, messaging services and other services. Messaging surcharge revenue is derived from fees imposed by certain carriers within the messaging ecosystem, which are subsequently invoiced and passed through to customers.

For the three months ended March 31, 2025 and 2024, we generated 73% and 74%, respectively, of our cloud communications revenue from reoccurring sources. The large bulk of our remaining cloud communications revenue is generated from recurring monthly charges.

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Management’s Discussion and Analysis

We recognize accounts receivable at the time the customer is invoiced. Additionally, we record a receivable for unbilled revenue if services have been delivered and are billable in subsequent periods. Unbilled revenue made up 57% and 54% of outstanding accounts receivable, net of allowance for doubtful accounts, as of March 31, 2025 and 2024, respectively.

Cost of Revenue and Gross Margin

Cost of revenue consists of fees paid to other network service providers, network operations costs, personnel costs, allocated costs of facilities and information technology, amortization of acquired technology intangibles and depreciation.

Fees paid to other network service providers arise when we purchase services such as minutes of use, phone numbers, messages, porting of customer numbers and network circuits.

Network operations costs are incurred for web services and cloud infrastructure, capacity planning and management, software licenses, hardware and software maintenance fees, customer support and network-related facility rents.

Personnel costs (including non-cash stock-based compensation expenses) arise for employees who are responsible for the delivery of services and the operations and maintenance of the communications network.

Gross margin is calculated by subtracting cost of revenue from revenue, divided by revenue, expressed as a percentage. Our cost of revenue and gross margin have been, and will continue to be, affected by several factors, including the timing and extent of our investments in our network, our ability to manage off-network minutes of use and messaging costs, changes to the mix or amount of personnel-related costs included in our cost of revenue, the product mix of revenue, the timing of amortization of capitalized software development costs and fluctuations in the price we charge our customers for services.

Operating Expenses

The most significant components of operating expenses are personnel costs, which consist of salaries, benefits, bonuses, and stock-based compensation expenses. We also incur other non-personnel costs related to our general overhead expenses, including facility expenses, software licenses, web services, depreciation and amortization of assets unrelated to delivery of our services. We expect that our operating expenses will increase in absolute dollars driven by the growth in our business.

Research and Development

Research and development expenses consist of salaries and related personnel costs for the design, development, testing and enhancement of our cloud network and software products. Research and development expenses include depreciation and allocated costs of facilities and information technology utilized by our research and development staff.

Sales and Marketing

Sales and marketing expenses consist of salaries and related personnel costs, commissions, and costs related to advertising, marketing, brand awareness activities, sales support and professional services fees, and customer billing and collections functions. Sales and marketing expenses include depreciation, amortization of acquired customer relationship intangible assets, and allocated costs of facilities and information technology utilized by our sales and marketing staff.

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Management’s Discussion and Analysis

General and Administrative

General and administrative expenses consist of salaries and related personnel costs for accounting, legal, human resources, corporate, and other administrative and compliance functions. General and administrative expenses include depreciation, expenditures for third party professional services, and allocated costs of facilities and information technology utilized by our corporate and administrative staff.

Income Taxes

For the three months ended March 31, 2025 and 2024, our effective tax rate was 1.8% and 2.1% respectively. The decrease in the effective tax rate from 2024 to 2025 is primarily due to increased earnings within the U.S., resulting in additional tax payable. This increased U.S. tax liability offsets the benefit we are recognizing on losses outside of the U.S., resulting in a lower effective tax rate. While we continue to recognize a valuation allowance in the U.S. against our deferred tax assets, changes to our current U.S. cash tax liabilities will cause effective tax rate fluctuations between financial periods.

Judgment is required in determining whether deferred tax assets will be realized in full or in part. Management assesses the available positive and negative evidence on a jurisdictional basis to estimate if deferred tax assets will be recognized and when it is more likely than not that all or some deferred tax assets will not be realized, and a valuation allowance must be established. As of March 31, 2025, we continue to maintain a valuation allowance against our U.S. federal and state net deferred tax assets.

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Management’s Discussion and Analysis

Results of Operations

The following table sets forth selected condensed consolidated statements of operations data for the periods indicated.


	Three months ended March 31,
		2025		2024

		(In thousands)
Revenue		$	174,241	$	171,033
Cost of revenue		102,729		105,549
Gross profit		71,512		65,484
Operating expenses
Research and development		30,632		28,912
Sales and marketing		26,456		29,139
General and administrative		19,111		17,849
Total operating expenses		76,199		75,900
Operating loss		(4,687)		(10,416)
Other income:
Net gain on extinguishment of debt		1,082		—

Interest (expense) income, net		(488)		633
Other income, net		283		350


Total other income		877		983
Loss before income taxes		(3,810)		(9,433)
Income tax benefit		70		200


Net loss		$	(3,740)	$	(9,233)

The following table sets forth selected condensed consolidated statements of operations data as a percentage of our total revenue for the periods presented. *


	Three months ended March 31,
		2025		2024
Revenue		100	%	100	%
Cost of revenue		59	%	62	%
Gross profit		41	%	38	%
Operating expenses
Research and development		18	%	17	%
Sales and marketing		15	%	17	%
General and administrative		11	%	10	%
Total operating expenses		44	%	44	%
Operating loss		(3)	%	(6)	%
Other income:
Net gain on extinguishment of debt		1	%	—	%

Interest (expense) income, net		—	%	—	%
Other income, net		—	%	—	%


Total other income		1	%	1	%
Loss before income taxes		(2)	%	(6)	%
Income tax benefit		—	%	—	%


Net loss		(2)	%	(5)	%

(*) Columns may not foot due to rounding.

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Management’s Discussion and Analysis

Comparison of the three months ended March 31, 2025 and 2024

Revenue


	Three months ended March 31,

	2025		2024		Change

	(Dollars in thousands)
Cloud communications	$	133,458	$	128,485	$	4,973	4	%
Messaging surcharges	40,783		42,548		(1,765)		(4)	%
Revenue	$	174,241	$	171,033	$	3,208	2	%

For the three months ended March 31, 2025, our cloud communications revenue increased by $5 million, or 4%, compared with the same period in 2024. Within cloud communications revenue, our Global Voice Plans revenue grew by 4% and was driven by higher voice traffic on our network. Our Programmable Messaging revenue decreased by 4% largely from reduced political messaging following the U.S. presidential election in November 2024. Our Enterprise Voice revenue grew by 26% as the flexibility of our Maestro product and UCaaS/CCaaS vendor agnostic approach continues to resonate with and attract new customers.

For the three months ended March 31, 2025, our messaging surcharges revenue decreased by $2 million, or 4%, compared with the same period in 2024. This growth was primarily driven by lower messaging volumes from less political messaging following the U.S. presidential election in November 2024.

For the three months ended March 31, 2025, our average annual customer revenue was $0.2 million, which increased less than $0.1 million compared with the same period in 2024, as a result of our strategy to attract and retain larger average customers who provide revenue scale and enhanced profitability.

Cost of Revenue and Gross Margin


	Three months ended March 31,

	2025			2024			Change

	(Dollars in thousands)
Cost of revenue	$	102,729		$	105,549		$	(2,820)	(3)	%
Gross profit	$	71,512		$	65,484		$	6,028	9	%
Total gross margin	41		%	38		%

For the three months ended March 31, 2025, total cost of revenue decreased by $3 million, compared with the same period in 2024, driven by lower messaging cost of revenue of $2 million from less political messaging following the U.S. presidential election. The combination of changes in total revenue and total cost of revenue yielded gross profit of $72 million, which increased $6 million from the same period in 2024, driven by ongoing efficiencies and improved unit economics as we successfully scale larger volumes of voice traffic on our network.

Our total gross margin percentage of 41% in 2025 increased by 3%, compared with the same period in 2024, driven by lower pass-through messaging surcharges within the total revenue mix.

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Management’s Discussion and Analysis

Operating Expenses


	Three months ended March 31,

	2025		2024		Change

	(Dollars in thousands)
Research and development	$	30,632	$	28,912	$	1,720	6	%
Sales and marketing	26,456		29,139		(2,683)		(9)	%
General and administrative	19,111		17,849		1,262		7	%
Total operating expenses	$	76,199	$	75,900	$	299	—	%

As a percentage of revenue, total operating expenses for the three months ended March 31, 2025 and 2024 were 44%.

For the three months ended March 31, 2025, research and development expenses increased by $2 million, or 6%, compared with the same period in 2024. This increase was primarily due to higher headcount expenses in support of our expanding research and development capabilities.

For the three months ended March 31, 2025, sales and marketing expenses decreased by $3 million, or 9%, compared with the same period in 2024, primarily due to lower headcount expenses.

For the three months ended March 31, 2025, general and administrative expenses increased by $1 million, or 7%, compared with the same period in 2024, driven by higher headcount expenses.

Interest (Expense) Income, Net

For the three months ended March 31, 2025, interest expense, net of interest income increased by $1 million, compared with the same period in 2024, primarily from less interest income resulting from cash being utilized to fund the 2024 Repurchases in May 2024 and the 2025 Repurchases in February 2025.

Income Tax Benefit

For the three months ended March 31, 2025, we recognized an income tax benefit of less than $1 million, a decrease of less than $1 million, compared with the same period in 2024. The resulting effective tax rate for the three months ended March 31, 2025 was 1.8%, compared with 2.1% in 2024.

For the three months ended March 31, 2025, the effective tax rate of 1.8% differed from the federal statutory rate of 21% in the U.S. primarily due to the valuation allowance recorded against our U.S. federal and state net deferred tax assets.

Most of the permanent tax adjustments within our effective tax rate are offset by a valuation allowance. These adjustments include state taxes, federal research tax credits under Section 41 of the Code, equity compensation in the U.S. and other non-deductible expenditures in the U.S. Excluding the impact of the valuation allowance, we realized an estimated state effective tax rate of 4.4% for the three months ended March 31, 2025. In addition, exclusive of the valuation allowance, we continue to generate income tax benefits in the current period related to income tax credits recognized for qualified research activities in the U.S. The applicable federal tax laws and regulations define qualified research activities as research and development activities conducted in the U.S. that involve a process of experimentation designed to discover new information intended to develop a new or improved business component. Absent the valuation allowance, equity compensation also impacts the effective tax rate to the extent the income tax deduction exceeds or is below the related book expense, as required under ASC 718-740-35-2. Other U.S. non-deductible expenses that are offset by the valuation allowance consist primarily of non-deductible executive compensation under Section 162(m) of the Code.

Permanent tax adjustments within our effective tax rate that are not offset by the valuation allowance include federal and state tax payable, foreign tax benefits and foreign rate differentials. As we continue to scale our international business, any changes to foreign business activity may impact our effective tax rate in the future.

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Management’s Discussion and Analysis

We continue to expect recurring changes to the valuation allowance as deferred tax assets within the U.S. increase or decrease in subsequent periods. We will maintain a valuation allowance against all U.S. federal and state deferred tax assets until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized.

Liquidity and Capital Resources

Our liquidity is provided by our cash flow from operations less expenditures for capital equipment, and supplemented by financing activities from time to time. Our cash flow from operations is driven by monthly payments from customers for communication services consumed during the period. Our primary uses of cash include operating costs, such as fees paid to other network service providers, network operations costs, personnel costs and facility expenses, as well as the purchase of property, plant and equipment to support growth on our communications platform. As of March 31, 2025, we had cash and cash equivalents of $36 million and marketable securities of $6 million.

In August 2023, we entered into a credit agreement (as amended to date, the “Credit Agreement”), among the Company, as borrower, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent, swingline lender and letters of credit issuer, which provides for a $150.0 million revolving credit facility (the “Credit Facility”). As of March 31, 2025, we had no outstanding borrowings under the Credit Facility and the available borrowing capacity was $150 million. See Note 8, “Debt,” to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding the Credit Agreement, including a summary of the current terms of the Credit Facility.

During February 2025, we repurchased approximately $27 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $26 million. Following the 2025 Repurchases and previous repurchases, approximately $8 million aggregate principal amount of the 2026 Convertible Notes remains outstanding. We may, at any time and from time to time, seek to retire or purchase our 2026 Convertible Notes or 2028 Convertible Notes through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

We believe that our cash, cash equivalents and marketable securities balances, and the cash flows generated by our operations, will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. However, our belief may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section titled “Risk Factors.” We may be required to seek additional equity or debt financing in order to meet these future capital requirements. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, results of operations and financial condition would be adversely affected.

Our principal future commitments consist of (i) an aggregate of $258 million in Convertible Notes, (ii) $468 million in future minimum rent payments for our current office space, including a $461 million non-cancelable lease for our new corporate headquarters, which commenced in the third quarter of 2023 and which will continue for an initial twenty (20) year term, and (iii) $19 million in non-cancelable purchase obligations and future minimum payments under contracts to various service providers. For additional information on these future contractual obligations, see Note 8, “Debt,” and Note 12, “Commitments and Contingencies,” to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Management’s Discussion and Analysis

Cash Flows

The table below summarizes our cash flow information for the periods presented:


	Three months ended March 31,
		2025		2024

		(In thousands)
Net cash (used in) provided by operating activities		$	(3,083)	$	2,465
Net cash used in investing activities		(13,839)		(27,006)
Net cash used in financing activities		(29,033)		(1,807)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(124)		(394)
Net decrease in cash, cash equivalents, and restricted cash		$	(46,079)	$	(26,742)

Cash Flows from Operating Activities

For the three months ended March 31, 2025, net cash used in operating activities was $3 million and was generated by our aggregate results of $21 million during the period, net of (1) non-cash items comprising depreciation and amortiz

Bandwidth Inc. 10-Q