Thank you for standing by and this is the conference operator. Welcome to the Bandwidth Fourth Quarter 2021 Earnings Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Sarah Walas, VP of Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome to Bandwidth's fourth quarter 2021 earnings call. Today, we'll be discussing the results announced in our press release issued after the market closed. The press release and earnings presentation with historical financial highlights can be found on the Investor Relations page at investors.bandwidth.com. With me on the call this afternoon is David Morken, our CEO, and Daryl Raiford, our CFO. They will begin with prepared remarks and then we will open up the call for Q&A. During the call, we will make statements related to our business that may be considered forward-looking, including statements concerning our financial guidance for the first fiscal quarter and full year of 2022. We caution you not to put undue reliance on these forward-looking statements as they may involve risks and uncertainties that may cause actual results to vary materially from any future results or outcomes expressed or implied by the forward-looking statements. Any forward-looking statements made on this call and the presentation slides reflect our analysis as of today, and we have no plans or obligation to update them. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our latest 10-K filing as updated by other SEC filings, all of which are available on the Investor Relations section of our website at bandwidth.com and on the SEC's website at sec.gov. During the course of today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issued after the close of the market today, as well as in the slide deck which are located on our website at investors.bandwidth.com. With that, let me turn the call over to David.

Thank you, Sarah, and hello everyone. Thank you for joining us today. I want to begin by thanking our customers for growing with us through 2021 for trusting us with their mission-critical communications and for believing in our vision to serve them globally and faithfully in the decades ahead. Second, thank you to all our bandmates for another remarkable year. I am in awe of how you sacrificially serve our customers while selflessly supporting each other. You helped new customers move to the cloud for the first time, strengthened our existing relationships, and physically came together as one global team serving in 90% of the world's economy. Last and definitely not least, I thank God for providing for us and blessing us with a 23rd year together. As we open the year, I'm excited about two new leaders stepping up at Bandwidth. First, as we announced yesterday, we are looking forward to Anthony Bartolo joining the Band next Monday as our new Chief Operating Officer. Anthony has 30 years of experience in cloud communications at world-class companies. At Avaya, he was Chief Product Officer and led their transition to a SaaS-based business model. At Tata Communications, he was President of Mobility and Chief Product Officer based in Singapore. Anthony is a native Australian who has managed billion dollar P&Ls around the world. The COO role is a new one for us. Anthony will be leading our sales, marketing, product, operations, development, and technology teams, which completes our alignment as one global Bandwidth. We are excited about the leadership and new perspective he brings. Welcome Anthony. I also want to welcome our longtime Chief People Officer Rebecca Bottorff to Bandwidth’s Board of Directors. Bandwidth culture has always set us apart and this appointment is yet another commitment to our most treasured asset, our people. As we welcome amazing bandmates around the world, I am grateful to have Rebecca's deep expertise and experience at the Board level. And I am proud that Bandwidth is once again ahead of the curve as only 3% of Fortune 1000 Board Members have an HR background according to Korn Ferry. Rebecca will continue to serve as our Chief People Officer. Congratulations, Rebecca. Finally, I want to acknowledge that we recently divested two heritage Bandwidth businesses, our broadband.com business and our phone booth business. These businesses were born and raised at Bandwidth, and I would like to say thank you to their customers and all of our bandmates over the years who contributed to their success. In 2021, we delivered another year of solid financial results, including 43% year-over-year revenue growth fueled by broad-based demand across our portfolio of voice, messaging, and emergency services APIs that are powering the global digital transformation. Fourth quarter and full year total revenue, CPaaS revenue and non-GAAP EPS all came in above their corresponding guidance ranges. In the fourth quarter, the financial impact of DDoS was in line with our estimates, and Daryl will speak to all this in greater detail shortly. Our platform is stronger than ever, and we believe it is best positioned to deliver mission-critical communications for the enterprise. Looking forward to 2022, I am pleased to say that while we have not lost a single customer due to the incident, some customers have returned traffic to our network at lower volume levels indicative of a desire for additional redundancy options. This group of customers is expected to gradually increase usage over the next year as we provide additional resiliency options for critical use cases. But even as we build trust with this cohort, we are expecting revenue growth in 2022 to be dampened by this incident. Putting it into perspective, this cohort includes approximately 40 customers that represent the bulk of the revenue impact out of over 3,000 total customers. It includes a Tier-1 communication service provider that represents approximately 20% of the projected DDoS revenue impact in 2022. We previously served this Tier-1 exclusively, and now this customer has moved us to a primary provider as they add a secondary provider for redundancy options. While we are focused on winning the trust of these 40 customers, it is important to note that our hyperscale customers never left our platform. They were in the Situation Room with us, standing shoulder-to-shoulder with our team to help expedite our mitigation efforts and stayed with us throughout. In addition to the DDoS impact in 2022, we are facing headwinds in our outlook related to changing dynamics among two large customers. First, we have a longstanding relationship with a global leader in video conferencing, a customer who we have partnered with and served exclusively for new product launches and during periods of explosive growth across our global footprint during the pandemic. In recognition of this longstanding relationship, we have agreed to provide future price concessions that reflect the anticipated size and speed of their usage on our platform. This reset solidifies our position to partner with this customer on their product roadmap and serve their recalibrated global growth. Second, we are expecting lower usage from a large global technology customer's Cloud Contact Center Service following a year of exceptional growth on our platform in 2021. This customer scaled its offering across international and developing markets by prioritizing frictionless onboarding to deliver the best experience for their customers. Our discussions with this customer lead us to believe they will now focus on the enforcement of Terms of Service with their end users. We expect this to result in a volume step down this year. But we remain positive on the relationship and large global opportunity in the multiple lines of business we serve for this customer. Daryl will speak to the estimated revenue impact in the first quarter and full year. As we launch into 2022, we are motivated by our role powering the global communications transformation. Our vision is to be the platform of choice for mission-critical enterprise communications. With our Voxbone integration, we have now aligned our entire global business around this opportunity. We will achieve this vision by focusing on three priorities. First, by growing our relationships with existing customers. We'll do this by cross-selling and upselling our global footprint and our powerful APIs to automate and scale their cloud communications platforms. Second, by winning new enterprise customers. We intend to become the platform of choice selling directly to large enterprise teams building exceptional experiences on our best-of-breed communications tech stack. And third, becoming the best global CPaaS platform for app developers to scale digital customer engagement. We've been pursuing these priorities and will continue to do so with a particular focus on enterprises moving to the cloud and software companies using programmable voice and messaging to create powerful experiences for their end users. I'm pleased that our growing margins and profitability afford us the opportunity to fully drive our continued growth as these three priorities are the foundation of the durable business we are building. Let me give you examples of how we are winning in each from this past quarter. One of our longtime customers continues to rely on us every step of the way as they expand their business. Last May, this customer launched a new unified UCaaS and CaaS solution. Their goal is to create not only a better customer experience, but also a better customer service agent experience. That's incredibly important given the pivotal role these employees play on the front lines. Last year, this customer significantly expanded our long-term relationship by replacing incumbent vendors after deciding that Bandwidth was best-in-class. Now, I'm excited to report that we've expanded the relationship yet again, with an immediate 50% increase in international spend, along with the opportunity to gain even more. This is another example of how Bandwidth is driving our first priority, growing with our customers both geographically and into new lines of business. In the fourth quarter, there was continued strong momentum in our second priority, helping new enterprise customers move to the cloud. An especially dynamic area here is the contact center space. The most innovative contact centers are migrating to the cloud to offer many new and powerful time-saving and value-adding experiences for the agent and the customer. And the Bandwidth platform is uniquely capable of supporting these complicated migrations. That's why Genesys, one of the leading CaaS platforms in the world, is working so closely with Bandwidth to create the contact center of the future. We recently announced Bandwidth Duet for Genesys, which is our third Duet partnership after Microsoft and RingCentral and the first in the contact center space. Duet for Genesys lets customers capture the power and feature set of Genesys Cloud while maintaining the flexibility, service, and savings that come from a direct relationship with Bandwidth. This unbundling of the software from the telecom provides enterprises with the best of both worlds as they use the Bandwidth platform to enable rich call data and third-party integrations that make possible a more satisfying customer experience. Another example of how we are powering a game-changing enterprise CaaS provider is a customer in San Francisco. With people living more and more of their lives from their smartphones, this customer is providing exceptional user experiences, like the ability to take a picture of a product serial number during a customer service call in order to solve problems faster and more accurately. A year ago, the company chose our international business to power their contact center platform for inbound calling across more than a dozen countries, primarily in Europe. Now, based on our proven call quality and ability to scale, they're activating outbound calling and expanding to additional countries with us including for the first time the U.S. and Canada. This is an important example of how we are successfully winning North American business from international customers. We expect to be the primary provider to this customer as they continue to scale and add new functionality. Customer experience is also a key driver in our third strategic priority, which is to enable the global innovators in digital customer engagement. Bandwidth's robust messaging emergency and voice APIs help developers build better digital experiences for the brands that rely on them. As an indicator of our traction in this customer category, messaging accounted for about 13% of our CPaaS revenue in 2021. And we're now seeing a new consistently higher level of messaging activity, regardless of time of year, as political groups, retailers, and brands continue to evolve this channel to communicate one-on-one with their customers to build engagement and loyalty. An example win I want to highlight from this quarter is an app developer that provides marketing and advertising software to nearly 10,000 small businesses in the United States, Canada, Europe, and Australia. As they continue to scale, this customer made the decision to leave the big CPaaS provider they started with and turned to Bandwidth for a better level of service and deliverability. So in conclusion, good momentum in each of these three long-term priorities. I'll now turn it over to Daryl to walk through our financial results and outlook.

Thank you, David, and good afternoon, everyone. I'm proud of our team who delivered another strong performance in the fourth quarter. Fourth quarter and full year total revenue, CPaaS revenue, and non-GAAP EPS all came in above their corresponding guidance ranges. Let me take a moment to walk through our reported fourth quarter and full year results, as well as give you insight into the normalized organic results. You can find all these details in normalized calculations in the earnings presentation located on our website. Fourth quarter revenue was $126 million, up 12% year-over-year. This includes the negative impact to revenue in the fourth quarter from DDoS, which was approximately $9 million in line with our estimated range. On an organic basis, meaning excluding the Voxbone contribution and normalized for COVID political messaging and DDoS in 2021, our year-over-year fourth quarter revenue growth was 24%. Full year revenue was $491 million, up 43% year-over-year on a reported basis. Again, this was lowered by approximately $10 million, representing the full year impact from the DDoS incident, and again, was in line with our estimates. On an organic basis and using similar normalization, our year-over-year full year revenue growth was 38%. Within our CPaaS segment, fourth quarter and full year CPaaS revenue was $101 million and $414 million, respectively. On an organic basis and applying similar normalization, our CPaaS revenue growth was 16% for the quarter and 33% for the full year. We're very proud of our revenue performance for the year. Underlying that performance is strong execution by our entire global team. That exceptional performance led to non-GAAP CPaaS gross margins of 53% for both the fourth quarter and full year, up two percentage points from the prior year's quarter despite lower revenue resulting from DDoS and setting a full year record margin exceeding 2020 by three percentage points. EBITDA for the full year was $50 million, non-GAAP net income for the year came in at $26 million delivering on our commitment to grow profitably and stronger than expected due to operational expense favorability experienced throughout the year. Full year non-GAAP EPS was $0.97 per share, an increase of $0.42 year-over-year. In terms of our operating metrics, our dollar-based net retention rate was 110% for the full year. Our normalized net retention rate was 117%. CPaaS customers count reached 3,228. In summary, our financial and operating performance in 2021 represents another strong year in progressing our long-term goals. Before turning to our 2022 financial outlook, I'd like to note that in conjunction with the addition of the Chief Operating Officer role, we've also strategically organized our go-to-market, operating, and development functions in the first quarter of 2022 and recently completed non-core business divestments. As a result, beginning with the first quarter of 2022, we will report one revenue segment representing our global CPaaS market focus. Now turning to 2022, as David said, the lingering effects of those customers moving traffic back to our network at lower volumes following the DDoS attack has affected our top-line outlook. We estimate an impact of approximately $4 million to $6 million per quarter, or approximately $16 million to $24 million in 2022. We expect the impact to diminish throughout the year as customers who have returned to our platform gain additional comfort with contingency measures and increase their usage over time. The other factor in forming our outlook, as David described, is the changing dynamics with two of our largest customers, representing an approximate $15 million decrease to our 2022 revenue outlook. So taking into account the lingering DDoS impact and these changes with two of our strategic customers, we expect our full year revenue to be in the range of $547 million to $555 million. This full year revenue guidance is inclusive of passthrough messaging surcharges that we believe will be mostly consistent with the annualized run rate of surcharges experienced in the fourth quarter. For estimating our full year non-GAAP earnings per share to be in the range of $0.03 to $0.09 per share, assuming approximately 31.3 million weighted average diluted shares outstanding. This guide reflects staffing at target levels that maintain operating expenses consistent with the last several years on a percentage of revenue basis. We're committed to our core financial principle of profitable growth. We've been clearly following that path and in 2022, we will continue to do so. Consistent with this past, we will maintain investments in sales and marketing as well as R&D to address the enormous market opportunity. For the first quarter, we expect revenue to be in the range of $125 million to $127 million. First quarter non-GAAP earnings per share is expected to be in the range of a $0.07 loss to $0.11 loss per share using 31.2 million weighted average diluted shares outstanding. Looking at the growth trajectory throughout the year, we expect growth to be disproportionately weighted towards the second half of the year.

Thank you, Daryl. While the DDoS event has affected customer demand, and we are sobered by that, the situation has strengthened our ability to provide our customers with unparalleled enterprise-grade service around the globe. I continue to feel optimistic about the market opportunity within the enterprise communications journey to the cloud, the power of our global footprint and enterprise-grade APIs to capture the cross-selling opportunity within our customer base, and to attract new customers looking to build experiences that customers love. I believe Bandwidth is uniquely positioned in our space to provide the solution to the global communications transformation. With that, I'll turn it back to the operator for questions.

Thank you. We will now begin the question-and-answer session. The first question comes from Bhavan Suri with William Blair. Please go ahead.

Hi. This is Halle Mogk on for Bhavan Suri and Matt Stotler. Thanks for taking the questions. Just on a high level here, your solutions obviously power a large portion of the leading communication SaaS providers in the market, including internet giants, UCaaS, CaaS, and meetings providers and the likes. So moving up the stack for you would potentially risk coming into direct competition with some of these core customers. So just kind of thinking through as a network owner that's supporting these providers, how do you provide value as you move up the stack without directly competing with these customers?

Thank you for the great question. This is David. As we endeavor to serve enterprises globally, there's an enormous amount of complexity both in the contact center and in UCaaS, where we add tremendous value up stack. We do enjoy a robust IP voice network globally and have extraordinarily robust APIs on top of that. We won't compete with many of the customers that we serve by moving up stack and offering a full-fledged contact center suite that is agent-facing or customer-facing. But there are enormous challenges to be solved in the migration to the cloud for enterprises. And that really begins with moving away from an incumbent globally and porting your numbers and moving your large inbound numbers in the contact center to the cloud. We've got many, many innings left to add value throughout the world when we think about the global migration of enterprise to the cloud, and lots of work to do.

Great. Thanks. And then maybe just a quick follow up from me. Could you remind us of the complexity of what you saw and why the telcos continue to fail to do this or why they don't address the fact that they're being disrupted by Bandwidth, and any color on what you expect to see from them in the future, how we might think about what they might do? Thank you.

Worldwide for really the last century, communications providers globally in each country have offered dial tone; what they have failed to do is keep up with the pace of innovation as software has really begun to eat the world. And what I mean by that is that whether you're an app developer or an enterprise, or a product team at a global company, you want to use software APIs in order to activate phone numbers to initiate a call to move a call. If you're doing a contact center, and you're using an incumbent in America or elsewhere in the world, often, you're having to do something as arcane as faxing a change order to move a number. In addition, you might have to wait for weeks for what can easily happen with the click of a button if you're integrated to a provider like Bandwidth. And there aren't many of us. And that's really important because one of the values we offer is that a global enterprise can work with Bandwidth instead of dozens of individual providers who don't have software APIs on top of their networks at all. So those are just some examples of the services we provide and why incumbents are frankly such wonderful competitors to have.

The question comes from Mark Murphy with JPMorgan. Please go ahead.

Yes, thank you. So, David, coming off of Q3, you seem pretty confident that the impact of the DDoS attack would be mostly felt in Q4. And I think that it would be far less in Q1. And so now it looks like we're finding out that it's mostly going to be felt actually, in 2022. So can you just help us understand what are the new learnings or what changed since that prior assessment in November? Or another way of saying, is it, are you surprised that some of the customers are going to dual source?

Hey, Mark, first of all, I think that the team should get good credit for nailing and exceeding the estimates of the DDoS impact in Q4, that was not an easy exercise. We were working very hard to make sure that we bracket it and revise what we were going to do in Q4, I'm proud that we nailed that. I think we've got a firm grip on what the rest of 2022 looks like relative to DDoS and earning that business back over time. While there are some who have dual sourced, in the case of one large customer that we're working with, we have moved from exclusive to primary. So it's not just dual source, we're still enjoying the majority of the traffic. But this is about relationships and earning that trust back throughout the year. Could we overperform against that headwind? Certainly. But we think that this is the right view to provide based on what we're working through with all of our customers coming out of Q4 and looking at what we're hoping to grow through this year. So your question was I surprised? I was delighted that we were able to be accurate with what happened in Q4. I would like it to be less of an impact throughout the rest of this year but have line of sight to the impact that we've communicated in the guidance.

Okay. As a follow up, I've guess I'm wondering to what extent is your ability to land new customers impacted by the DDoS attacks? Is that something? Is there a new learning along those lines kind of in terms of what happened in the rest of November, December, January and so far in February? Should we be bottling new customer adds lower than?

I don't, you should not. And let me just remind you about one comment in our prepared remarks. We did not lose a single one of our Internet giant hyperscaling customers; those relationships are stronger than ever. And I think our referenceable customers for new enterprises coming on board who speak to what it was like to work with Bandwidth through this issue and why they remain such ardent supporters and customers of ours. So I don't believe that you should guide or expect the pipeline to change at all, because of how we handled the DDoS event. We communicated very transparently with the entire base. We preserved and improved the largest hyperscaler relationships we had and so our sales teams are in the marketplace active and they have referenceable customers that are strong.

The next question comes from Ryan MacWilliams with Barclays. Please go ahead.

Hey, guys, thanks for taking the question. And kudos on doing what you can on the fourth quarter. I know. It's difficult. But the one thing we're looking at here is just on the net new customer additions. It looks like that step down from the prior quarter, this might have just been asked, I have been jumping on earnings calls, but any differences from the third to fourth quarter it's worth calling out just on net new customers and anything, like how we should think about that over the next few quarters? Thanks.

Hey there, Ryan. This is Daryl. We said before, it's always good to preface by saying not all customers are the same, right in terms of size and expected demand patterns and things like that. So it's difficult to generalize. But we did report 55 net new logos in the quarter, which is up. And it is a little lower than what we had reported historically in the last several quarters preceding that. There was some effect in terms of our pipeline related to DDoS in the fourth quarter. You recall that DDoS was right at the beginning of the quarter and the effective selling season before the holidays is shortened just seasonally in the fourth quarter. So there was some pipeline effect.

Great. And then just on Voxbone, seems like a timely acquisition given the acceleration of Cloud Contact Center and emerging use cases. Just when it comes to going forward Voxbone growth, is there a way to think about what it did in the fourth quarter? And then how we should you think about that growth rate for fiscal ‘22? Thanks guys.

Ryan, this is Daryl again. Looking ahead at Voxbone, as David mentioned, we have strategically organized our entire global platform across various functions such as customer service, sales, marketing, and R&D. We view our operations as a unified business serving a diverse customer base globally. Regarding Voxbone's individual performance moving forward, our focus isn’t solely on that. However, I can share that Voxbone contributed $8 million organically to our reported results in the fourth quarter for October. If you account for inter-quarter linearization, there was a similar occurrence in the fourth quarter of 2020 where we noted $4 million in testing revenue that wouldn't recur. Overall, we are very pleased with Voxbone's performance in the quarter and are optimistic about its future as part of our guidance.

The next question comes from Meta Marshall with Morgan Stanley. Please go ahead.

Hi, this is Karan Juvekar on for Meta. So first question from our end, I guess you noted a CaaS customer expansion into U.S. and Canada from Europe. I guess it’s at a higher level. Could you speak to maybe the timing of when you would see some of these other cross-sell opportunities starting to take place and overall traction you're seeing there?

This is David. We did talk about how growth accelerates toward the back half of this year. And that reflects contribution from cross-sell opportunities, like the one that we discussed in our remarks. You'll see those contributing throughout the year. But as things accelerated, we'll be back half and beyond. But this was just a great call out to celebrate cross-selling success by a global sales team. Does that answer your question?

That answers it. And then I guess just a follow up from Aaron and I know this is touched on earlier in the call, but sort of given the earnings guide, I guess just where are the OpEx investments that you're making focused? Anyway, we should be thinking about that?

So we've got OpEx investments in areas you would expect to propel growth that's responsible. That includes R&D, development, technology, sales, and marketing. We do have a principled approach which balances bottom-line as an important positive result annually for the operating team. But we are investing in a way that we think is both responsible and effective to drive growth pretty broadly in the areas you would expect. And I'll just ask Daryl if he wants to add to that.

I would just add that, the investment is a normal outcome of the path that we've been on. There's not anything extraordinary being invested. But we are maintaining our line of sight in terms of the percent of revenue for OpEx. And we're managing within that kind of those long-term targets. And so as revenue grows, you would expect also that to support that revenue, we would be developing more software features and moving up stack as one of our earlier callers had remarked upon.

The next question comes from Steve Enders with KeyBanc. Please go ahead.

Hi, this is George on for Steve. Wanted to ask about the 2022 guide. What assumptions are built in around return to office related volume impacts? And where do you see the biggest areas for potential upside relative to your guide? Thank you.

Hey, Steve, I think your question is regarding return to office globally by knowledge workers and how that affects, I think you said volumes of usage. We've watched the fits and starts of return to office over the past two years. It does seem that we're getting closer to an all-clear country-by-country and state-by-state. Certainly, that might have a positive impact. The assumptions that we've made regarding return to office and the usage volumes and revenue are captured in the guide. I would describe them as conservative, if not reasonable, so not making any overly aggressive assumptions that would take us anywhere close to what occurred during COVID. Just to clarify.

Got it. Thank you, that's helpful. And then one quick follow up, you talked about contingency measures that you're hoping will drive a return to volume for some of the customers that return their volume to your network on the DDoS attack. Can you maybe give us a kind of a tangible example of which of these contingency measures are you hoping will trigger a return of some of those volumes? Thank you.

When you've got a high volume contact center, and the toll-free number that feeds into a really large high volume contact center, any amount of outage can be very devastating to one of our enterprise customers. The example that I have in mind, while we were very effective in helping them move to an incumbent provider during the attack, we've realized we can shorten the time for that to take by adding to our platform capabilities that let them egress really quickly, like with a push of a button. And that's something that we didn't quite have. We hadn't gone through something like that. But with that kind of reliable, instantaneous egress and ingress return option, it really provides enterprise customers with another reason to stay with Bandwidth because they have that security and confidence that if there is a nation-state attack or similar, and we were unable to stop it, that they could immediately migrate up there and back again. So it's kind of ironic or counterintuitive that you want to enable your platform to support that kind of flexibility and not have lock-in just so that the enterprise customer can stay with you confidently. And so that's what we meant by that resiliency or that additional capability.

The next question comes from Tyler Radke with Citi. Please go ahead.

Hey, thanks. And good evening. I wanted to follow up on the resiliency point that was raised earlier. I guess specifically, can you kind of talk through specifically some of the things you're doing on the product side to increase that resiliency? And I guess what are your conversations like with customers that wants to develop that capability that maybe they come back more in earnest and in the single source on your platform?

I will take you back to the week of the DDoS outage. During that week, when we were successful in helping customers move quickly away while we successfully beat back the attack. We did move some of them to incumbent providers. Ironically, that same week, one of the largest incumbent providers in the country had a toll-free outage. When we declared all cleared Bandwidth and that we were moving forward expecting to never have another issue like this. Many of those customers wanted to come back as quickly as possible because the incumbent that we had moved on to had had an unrelated outage. Here's where it gets interesting relative to your question on resiliency. While we had been effective in helping them egress and migrate to the incumbent at very, very fast speed, they were told by the incumbent that to return to Bandwidth would take three weeks. So large enterprise providers and the leaders of contact centers are thrilled that our platform will support instantaneous API-driven, configurable migration out and back if needed. And that gives them confidence working with us that they simply cannot get from an analog, old-school, century-old incumbent that says instead, it'll be three weeks before we can do what Bandwidth was able to do for you, in a matter of hours, and is telling you they can now do instantaneously. So that's a huge step forward for customers.

Great. And just wanted to follow up on the point you made earlier around price concessions with one of your larger customers, maybe just help us understand was this kind of unexpected. And just as I'm sure others out there may be dealing with kind of more normalized demand patterns, anything else that you're keeping an eye on or we should watch out for from the concession perspective for the rest of the year? Thank you.

You bet. In particular, I think that was Tyler in particular, this customer is the world's leading video conferencing provider, and grew spectacularly during the season that we're all coming out of and is in the middle of quite a significant reset in terms of volumes. We are a terrific partner for them, we have been a partner on which they've exclusively launched product. We are a partner that they expect will grow with us in the years to come. And we hope that that will be many years to come. So when they're coming out of a stratospheric growth pattern back to Earth, we want them to return and land in one piece and grow with us in the future. So doing a reset with them was a no-brainer as a partner. We have the opportunity to grow with them through new product launches and as they grow worldwide going forward. So it was really a no-brainer as a partner and the right thing to do. Sometimes partners are going up and you go with them. Other times you need to accommodate where they're at in their business cycle or their business journey. In this case, it was the right thing to do, and we're really excited if I have to fast forward five years hence and look back, I would believe and fully expect that making partnership decisions like this would result in them contributing to that 20% to 25% growth that we aspire to year-after-year-after-year and they will be critical to that.

Great. And maybe just a final one for me. You mentioned this just in your last response to my question, but just around kind of your aspirations and vision for long-term growth. I mean, I guess that 20%, 25% range, do you still feel pretty confident in that number? And I guess is that something we should kind of expect once you normalize, it's kind of the one-time headwinds this year?

We've got about a 30-something percent CAGR looking back to our IPO in ‘17. And believe that true north pole star of 20% to 25% growth is the right thing. You'll have years where you may fall short. You'll have years like we just came out of where you exceed. But if you are an innovative team that pays attention to what customers need, and you match that with innovative technology and tremendous product and technology people on your team, you should be able to aspire to that. And we've got a total addressable market that's going to be $74 billion here in a couple of years. So that supports that ambitious but I think reasonable objective. Now keep in mind, we also temper that with a bottom-line sensibility regarding non-GAAP net income positivity. So we're not incinerating the balance sheet to achieve that number. We've got a dual challenge of a really great growth target, but with profitability near and dear. So we're reconciling that tension doing it well and expect that we'll continue to have that objective going forward.

The next question comes from Catherine Trebnick with Colliers. Please go ahead.

Yes, thanks for taking my question. Of the $15 million that you said you would take it headwind with two big customers. Could you detail what activities you're going to do in your go-to-market motion such that you could possibly make up for that and hit this 25% year-over-year that you're talking about? Are you adding sales capacity, you changing around any strategic accounts, anything you can detail around that would be helpful? Thank you.

Hey, Catherine. This is David. So our guide for '22 falls short of '20. And we aren't suggesting in our guide that we are going to overcome the $15 million headwind by these two long-term strategic customers that remain great partners with us. Where we need to be able to do that? And I think we will with each, we will be able to return to a level of growth with them that we've had in the past that would occur outside of 2022.

Yes. That's part of the question. The second half is, still that's the case but aren't you going to make some changes in your sales organization and what are they?

We have fully integrated the Voxbone sales team with the Bandwidth sales team and now have a global go-to-market motion for all product and service globally. That's a fundamental difference from having the two teams separated last year. And the results we believe are going to be around three primary areas. The first is that we're going to grow with our existing customers globally. And we talked to evidence of that from customer growth that we cited in our prepared remarks. The second is this global sales team are already building an enterprise pipeline larger than we've had in the past. So we'll add new enterprise customers by a global sales team with our direct model that's been successful for us. And then last, we're going to have a terrific customer journey for app developers and emerging use cases and user experiences, whether it's messaging or voice globally. And so that area is the third focus for our global sales team as we look to achieve our growth objective year-after-year-after-year.

The next question comes from Charlie Erlikh with Baird. Please go ahead.

Hey, guys, thanks for taking the question. I was hoping you can expand a little bit on the 40 customers that bought back the lower level of traffic. David, you talked about the egress solution that you're working on. I guess I'm just wondering, is that the main capability that all or most of these customers are asking for, or is that just one of many things that they're asking for in order to return back to the level of traffic they had previously?

Hey, Charles. Some value that very highly, others simply want it to be a matter of time and pace in returning. So for example, one of the 40 accounts for about 20% of the total headwind from the DDoS impact during this next year. With them, it's both the resiliency technology that is a part of our platform and coming back over time in a planned and orderly return. So it's both valuable, additional capability. And then in other cases, it's time what I think is at the heart of your question, however, is, are there other requirements or things that are a high degree of difficulty that need to be done for them to return? And the short answer is we've captured in our guide, any additional elements necessary and that are within our control; there isn't some unsaid heavy lift that you need to worry about regarding us winning those 40 customers back.

Got it. That's very helpful. And then just one really quick follow up on Voxbone. Given I believe you said before, there was $8 million of inorganic contribution, I think that might imply that the Voxbone revenue is actually down sequentially. If that's true, is there anything to call out there the timing related and because it seems like the cross-sell is going fairly well, so anything to talk about there?

Thanks. This is Daryl. Don't want to necessarily imply things like that. But we are pleased with the way Voxbone came out. The fourth quarter is usually seasonally a bit lower than the second and third quarters, even with a growth curve up into the right given the larger holidays that occur across Europe. But we were pleased with the outcome exceeded our expectations. As we pointed out in terms of our fourth quarter full year, we came out above our guidance and Voxbone did contribute to that.

The next question comes from Pat Walravens with JMP Securities. Please go ahead.

Hi, this is Joe on for Pat. I was just wondering, does 8YY charges won’t impact Bandwidth at all?

Hey, Joe. I am not sure exactly what you're asking.

So there's an FCC rule that was for toll-free calls for 1800 numbers, called 8YY access charge reform issue. One of your competitors pointed in their recent earnings report. So I was just wondering if there's any impact that we expected there for you guys.

I will have to follow up with you. I have a suspicion that that's regulation related to carrier-to-carrier traffic and not to enterprise customers that we do. But let me follow up with you offline.

Awesome. Yes. Thank you. And then, I guess just another question outside of this large customer that you're providing a pricing concession? How was pricing holding up more broadly? Or how would you characterize it?

I would characterize it as healthy and part of the reason or the evidence for that is within our gross margin and the overperformance on gross margin last year and the discipline that we have there, as we focus on both growth and profitability. We've got opportunities to improve gross margin and would reiterate our long-term guide for terminal gross margins at 60% or above as we enjoy the economies of scale benefit of having a vertically integrated model. So we certainly accelerated some of that gross margin growth in 2021. And we're proud of the team for doing that and think that pricing is a direct contribution to that. And we'll continue to see the benefit of our model and get closer and closer to that objective.

The next question comes from James Fish with Piper Sandler. Please go ahead.

Hey, guys. This is Quinton on for Jim. Thanks for taking our questions. A lot of our questions have already been answered here. But maybe a quick one on the messaging side, what level of political messaging contribution does the company expect to see with a midterm election? And maybe how should we compare that to a full presidential election? And then, are those kind of expectations embedded into guide at this point? Thank you.

We do expect to see significant growth in political messaging as we head into the midterms. We have captured the benefit of that in our guide. Is there upside? Potentially, certainly, but we've got good visibility into the pipeline for political messaging, having worked with some of these customers in prior election cycles. Certainly, the intensity and ferocity of these competitions is increasing. But the way that we're modeling is to be consistent with some of the past experiences we've had and we do believe that's captured in the guide.

This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.