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What changed in Bandwidth Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Bandwidth Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+391 added−433 removedSource: 10-K (2026-02-19) vs 10-K (2025-02-20)

Top changes in Bandwidth Inc.'s 2025 10-K

391 paragraphs added · 433 removed · 315 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

70 edited+20 added−25 removed52 unchanged
Biggest changeOn G2, a customer review platform, Bandwidth has been a Leader in CPaaS Platforms for 26 consecutive quarters. A unique culture focused on people: At Bandwidth, we are mission first. To accomplish that mission, we’ve created a unique, service-oriented culture, centered on meaningful work, lifting each other up, and investing in the bodies, minds, and spirits of our Bandmates.
Biggest changeTo accomplish that mission, we’ve created a unique, service-oriented culture, centered on meaningful work, lifting each other up, and investing in the bodies, minds, and spirits of our Bandmates. For our customers, this means there’s always a smiling, world-class Bandmate on the other end of the line who will go the extra mile for them.
Market Offering 1: Global Voice Plans Through our Global Voice Plans market offering, we power all the leaders in UCaaS and CCaaS, as recognized by the research firm Gartner, including Microsoft, Google, Zoom, RingCentral, Genesys, and Five9. We have been co-creating with many of these customers for more than a decade.
Market Offering 1: Global Voice Plans Through our Global Voice Plans market offering, we power all the leaders in UCaaS and CCaaS, as recognized by the research firm Gartner, including Microsoft, Google, Zoom, Cisco, RingCentral, Genesys, and Five9. We have been co-creating with many of these customers for more than a decade.
We believe that we compete favorably based on the factors listed above and believe that none of our competitors currently competes directly with us across the combination of our global scale, all-IP Communications Cloud, enterprise-grade APIs, and broad regulatory experience gained through our service offerings.
We believe that we compete favorably based on the factors listed above and believe that none of our competitors currently competes directly with us across the combination of our global scale, all-IP Communications Cloud, enterprise-grade APIs, and broad experience with regulatory frameworks gained through our service offerings.
These benefits, which vary based on country location and applicable laws, include: robust medical benefits in which we pay 100% of the premiums for medical, dental and vision insurance; 401(k); industry leading parental leave; and access to mental health resources.
These benefits, which vary based on country location and applicable laws, include: robust medical benefits in which we pay 100 percent of the premiums for medical, dental, and vision insurance; 401(k); industry leading parental leave; and access to mental health resources.
Automation and Workflow The Bandwidth Communication Cloud’s command over our own numbering resources enables real-time porting, provisioning and number ordering en masse, and includes: • coverage in more than 65 countries, serving over 90 percent of global GDP; 8 Table of Contents • network platform paired with peering relationships with major global networks ensure our customers are never more than one hop away from the public switched telephone network (“PSTN”); • 5x resilient U.S. toll-free network, with interconnections to four toll-free networks in addition to our own, designed for best-in-class resiliency from a single provider; • public safety connectivity purpose-built for today’s dynamic, increasingly remote workforce, interconnected with emergency calling networks worldwide; • A2P messaging designed to support best-in-class deliverability and insight; • a broad range of experience with global regulatory frameworks earned through offering communications services in more than 60 countries and territories; • modernized connections with incumbents and partners in Europe by migrating to an end-to-end all-IP architecture delivering increased consistency and reliability; and • Bandwidth-patented anomaly detection models that proactively generate alerts directly into our Network Operations Center for immediate triage, across both voice and messaging.
Other features include: Automation and Workflow The Bandwidth Communication Cloud’s command over our own numbering resources enables real-time porting, provisioning and number ordering en masse, and includes: • coverage in more than 65 countries, serving over 90 percent of global GDP; • network platform paired with peering relationships with major global networks ensure our customers are never more than one hop away from the public switched telephone network (“PSTN”); 8 Table of Contents • 5x resilient U.S. toll-free network, with interconnections to four toll-free networks in addition to our own, designed for best-in-class resiliency from a single provider; • public safety connectivity purpose-built for today’s dynamic, increasingly remote workforce, interconnected with emergency calling networks worldwide; • A2P messaging designed to support best-in-class deliverability and insight; • a broad range of experience with global regulatory frameworks earned through offering communications services in more than 65 countries and territories; • modernized connections with incumbents and partners in Europe by migrating to an end-to-end all-IP architecture delivering increased consistency and reliability; and • Bandwidth-patented anomaly detection models that proactively generate alerts directly into our Network Operations Center for immediate triage, across both voice and messaging.
Bandwidth Insights gives customers a detailed view of their voice and messaging performance to make data-driven decisions and ensure quality of service. • Understand and solve for deliverability issues: Real-time error codes and alerting allows enterprises to understand and solve for SMS deliverability challenges in an ever-changing text messaging environment. • Real-time call quality analytics: We provide our customers with real-time call analytics including data such as call duration, customer sentiment and other attributes to better understand call performance and customer experience. • Track trends, benchmarks and usage: Our Insights API shows trends, delivery rates and usage patterns by product and carrier.
Bandwidth Insights gives customers a detailed view of their voice and messaging performance to make data-driven decisions and ensure quality of service. • Understand and solve for deliverability issues: Real-time error codes and alerting allows enterprises to understand and solve for messaging deliverability challenges in an ever-changing messaging environment. • Real-time call quality analytics: We provide our customers with real-time call analytics including data such as call duration, customer sentiment, and other attributes to better understand call performance and customer experience. • Track trends, benchmarks, and usage: Our Insights API shows trends, delivery rates, and usage patterns by product and carrier.
These marketing initiatives enhance awareness, preference and adoption of our services, and help us cross-sell opportunities with existing customers. We engage potential customers and existing customers through an enterprise-focused sales approach.
These marketing initiatives enhance awareness, preference, and adoption of our services, and help us cross-sell and up-sell opportunities with existing customers. We engage potential customers and existing customers through an enterprise-focused sales approach.
See “Risk Factors–Risks Related to Our Business” elsewhere in this Annual Report on Form 10-K for additional information on our intellectual property rights and risks related thereto. Employees As of December 31, 2024, we had approximately 1,100 employees, who are primarily located in the United States, Europe and Asia Pacific.
See “Risk Factors–Risks Related to Our Business” elsewhere in this Annual Report on Form 10-K for additional information on our intellectual property rights and risks related thereto. Employees As of December 31, 2025, we had approximately 1,100 employees, who are primarily located in the United States, Europe, and Asia Pacific.
The FCC has imposed regulatory requirements on VoIP providers that previously applied only to traditional telecommunications providers, such as obligations to provide 911 functionality, to contribute to the federal universal service fund, to comply with regulations relating to local number portability, to abide by the FCC’s service discontinuance rules, to contribute to the Telecommunications Relay Services fund and to abide by the regulations concerning Customer Proprietary Network Information (“CPNI”), outage reporting, access for persons with disabilities, the Communications Assistance for Law Enforcement Act and 15 Table of Contents expanded obligations with respect to the transmission of emergency calls.
The FCC has imposed regulatory requirements on VoIP providers that previously applied only to traditional telecommunications providers, such as obligations to provide 911 functionality, to contribute to the federal universal service fund, to comply with regulations relating to local number portability, to abide by the FCC’s service discontinuance rules, to contribute to the Telecommunications Relay Services fund and to abide by the regulations concerning Customer Proprietary Network Information (“CPNI”), outage reporting, access for persons with disabilities, the Communications Assistance for Law Enforcement Act and expanded obligations with respect to the transmission of emergency calls.
Our sales and marketing executives work to educate these decision makers and their teams about the benefits of using the Bandwidth Communications Cloud to engage their end-users and deliver exceptional experiences everywhere people live, learn, work and play. Our sales team includes a full stack of sales development, inside sales, field sales, revenue enablement and sales engineering functions.
Our sales and marketing executives work to educate these decision makers and their teams about the benefits of using the Bandwidth Communications Cloud to engage their end-users and deliver exceptional experiences everywhere people live, learn, work, and play. Our sales team includes a full stack of sales development, inside sales, field sales, and sales engineering functions.
We believe that the principal competitive factors in our market are: • platform scalability, reliability, deliverability, security and performance; • network control and quality; • global reach; • completeness of offering; • ease of integration and programmability; • product features; • customer support; • ability to deliver measurable value and savings; • the cost of deploying and using our service offerings; 13 Table of Contents • the strength of sales and marketing efforts; • brand awareness and reputation; and • credibility with product executives and developers.
We believe that the principal competitive factors in our market are: • platform scalability, reliability, deliverability, security, and performance; • network control and quality; • global reach; • completeness of offering; • ease of integration and programmability; • product features; • customer support; • ability to deliver measurable value and savings; • the cost of deploying and using our service offerings; • the strength of sales and marketing efforts; • brand awareness and reputation; and • credibility with product executives and developers.
Backed by the Bandwidth Communications Cloud, our global owned-and-operated network spanning more than 65 countries reaching over 90 percent of global gross domestic product (“GDP”), innovative enterprises use Bandwidth’s Application Programming Interfaces (“APIs”) to easily embed voice, messaging and emergency services capabilities into software and applications.
Backed by the Bandwidth Communications Cloud, our global owned-and-operated network spanning more than 65 countries reaching over 90 percent of global gross domestic product (“GDP”), innovative enterprises use Bandwidth’s Application Programming Interfaces (“APIs”) to easily embed voice, messaging, emergency services, and artificial intelligence (“AI”) capabilities into software and applications.
Our easy-to-use APIs and proven track record for deliverability have made Bandwidth a top choice for many leading platforms in text messaging. 7 Table of Contents Our messaging customers are powering digital engagements across many of the major brands of products people wear, eat, drive and use every day.
Our easy-to-use APIs and proven track record for deliverability have made Bandwidth a top choice for many leading platforms in text messaging. Our messaging customers are powering digital engagements across many of the major brands of products people wear, eat, drive, and use every day.
We expect that the ePrivacy Regulation coming into effect will impact our business, but cannot predict the extent of that impact at this time. 17 Table of Contents Corporate Information Bandwidth Inc. was founded in July 2000 and incorporated in Delaware on March 29, 2001.
We expect that the ePrivacy Regulation coming into effect will impact our business, but cannot predict the extent of that impact at this time. Corporate Information Bandwidth Inc. was founded in July 2000 and incorporated in Delaware on March 29, 2001.
Our near-term roadmap includes a range of solutions to help enterprises create a better total experience for consumers and employees whether through the contact center, hybrid work, text messaging engagement, intelligent emergency services, new AI technologies or a combination thereof. Competition The CPaaS market is rapidly evolving and increasingly competitive.
Our near-term roadmap includes a range of solutions to help enterprises create a better total experience for consumers and employees–whether through the contact center, hybrid work, messaging engagement, intelligent emergency services, new AI technologies, or a combination thereof. 13 Table of Contents Competition The CPaaS market is rapidly evolving and increasingly competitive.
Bandwidth’s unique Call Assure TM solution provides hands-free alternative routing that is fully insulated from the core network to protect against an extraordinary disruption, such as a fire, natural disaster or cyberattack.
Bandwidth’s unique Call Assure TM solution provides further redundancy with hands-free alternative routing that is fully insulated from the core network, to protect against an extraordinary disruption, such as a fire, natural disaster or cyberattack.
While the Code provides a harmonized framework, laws of each jurisdiction of the EU and the EEA, and related regulations, will differ from country to country (e.g., rules around suballocation of numbering resources), which can increase operational costs and, at times, prevent us from serving certain jurisdictions.
While the Code provides a harmonized framework, laws of each jurisdiction of the EU and the EEA, and related regulations, will differ from country to country (e.g.0, rules around suballocation of numbering resources), which can increase operational costs 17 Table of Contents and, at times, prevent us from serving certain jurisdictions.
The information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this report.
The information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this report. 18 Table of Contents
Market Offering 2: Programmable Messaging Our Programmable Messaging market offering is aimed at large messaging customers that use Bandwidth to deliver digital engagement experiences, primarily through our text messaging solutions. With a significantly higher open rate by end users than email, text messaging has become a key channel to reach consumers.
Market Offering 3: Programmable Messaging Our Programmable Messaging market offering is aimed at large messaging customers that use Bandwidth to deliver digital engagement experiences, primarily through our text messaging solutions. With a significantly higher open rate by end users than email, text messaging is a key channel to reach consumers.
Customers order specific services in separate service order forms that incorporate the applicable MSA. Each service order form details the minimum contract duration, any 12 Table of Contents applicable monthly recurring charge and applicable non-recurring charges. The terms and conditions for each order are also specified in the applicable service order form.
Customers order specific services in separate service order forms that incorporate the applicable MSA. Each service order form details the minimum contract duration, any applicable monthly recurring charge and applicable non-recurring charges. The terms and conditions for each order are also specified in the applicable service order form.
Among other things, the TRACED Act directs the FCC to conduct a number of different rulemaking proceedings and increases the FCC’s enforcement authority. As a result, the FCC continues to conduct proceedings to understand and address fraud and abuse in the form of illegal robocalling.
In December 2019, Congress adopted the TRACED Act. Among other things, the TRACED Act directs the FCC to conduct a number of different rulemaking proceedings and increases the FCC’s enforcement authority. As a result, the FCC continues to conduct proceedings to understand and address fraud and abuse in the form of illegal robocalling.
Bandwidth’s capacity, high deliverability, regulatory know-how and exceptional human-based support has positioned us as a leading provider for messaging platforms. We believe we will continue to win high-volume contracts from customers that have run out of capacity with our competitors or who seek the robustness, reliability and resilience of our service.
Bandwidth’s capacity, high deliverability, messaging campaign registration and monitoring tools, regulatory know-how, automated support tools, and exceptional human-based support have positioned us as a leading provider for messaging platforms. We believe we will continue to win high-volume contracts from customers that have run out of capacity with our competitors or who seek the robustness, reliability, and resilience of our service.
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.
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, powerful APIs, and AI orchestration capabilities 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) be the preferred provider for enterprises and SaaS platforms that use conversational voice and messaging to create digital engagements that enhance the customer experience.
The Bandwidth App is Bandwidth’s user-friendly interface for a comprehensive number management solution.
Phone Numbers. The Bandwidth App is Bandwidth’s user-friendly interface for a comprehensive number management solution.
Our competitors fall into two primary categories: • CPaaS companies that may offer a broader set of software APIs and services, but may have more limited global reach, less robust customer support or fewer other features while relying on third-party networks and physical infrastructure; and • Incumbent network operators that offer limited geographical reach and limited developer functionality on top of their networks and physical infrastructure.
Our competitors fall into two primary categories: • CPaaS companies that may offer a broader set of software APIs and services, but may be limited by a higher messaging concentration, have more limited global reach, less robust customer support or fewer other features while relying on third-party networks and physical infrastructure; and • Incumbent telecommunications operators that offer limited geographical reach and limited developer functionality on top of their networks and physical infrastructure.
This helps enterprises meet compliance requirements and enable increasingly remote workforces. • Emergency calling API: One global API that connects apps to the public safety infrastructure without the need for on-premise technology or telephony expertise. • Emergency notification API: Enables a multi-channel notification sent to on-site security personnel when an emergency call takes place within a large enterprise. Phone Numbers.
This helps enterprises meet compliance requirements and enable increasingly remote workforces. 9 Table of Contents • Emergency calling API: One global API that connects apps to the public safety infrastructure without the need for on-premises technology or telephony expertise. • Emergency notification API: Enables a multi-channel notification sent to on-site security personnel when an emergency call takes place within a large enterprise.
This competitive differentiator has enabled Bandwidth to power the forces behind successive waves of the cloud communications revolution–from the growth of unified communications hyperscalers, to the acceleration of messaging platform leaders, and to directly powering global enterprise communications.
This competitive differentiator has enabled Bandwidth to power the forces behind successive waves of the cloud communications revolution–from the growth of unified communications hyperscalers, to the acceleration of messaging platform leaders, to directly powering global enterprise communications, and now to the adoption of AI voice services.
Our marketing team generates marketing qualified leads and pipeline for sales through a number of demand-generating channels, including our website, marketing campaigns, webinars, sponsored virtual and live events, white papers and blogs, public relations, social media, analyst relations, paid search and search engine optimization and outbound lead development efforts.
Our marketing team generates marketing qualified leads and pipeline that converts to revenue through a number of demand-generating channels, including our website, marketing integrated campaigns, webinars, sponsored virtual and live events, white papers and blogs, public relations, social media, analyst relations, paid search, AI and search engine optimization, and outbound lead development efforts.
While we provide a wide range of functionalities, some of the common use cases are: • Automated real-time notification and alerts: Our APIs empower product leaders and enterprise developers with predefined functionalities to send and receive A2P messages, uniquely integrated with their own business processes or tech stacks. • Two-factor authentication: We enable enterprises to verify the identity and maintain security of end users through our software-based, multi-channel verification service that sends unique codes to end users to log in to mobile and web applications. 9 Table of Contents • Group messaging: Product owners utilize our platform to build messaging applications that enable their end-users to share SMS and MMS messages, videos, carry out polls and surveys amongst other uses without leaving the application.
While we provide a wide range of functionalities, some of the common use cases are: • Automated real-time notification and alerts: Our APIs empower product leaders and enterprise developers with predefined functionalities to send and receive A2P messages, uniquely integrated with their own business processes or tech stacks. • Branded messaging experiences: Bandwidth supports RCS for Business, enabling enterprises to deliver richer, more interactive branded messaging experiences that increase end-user engagement and trust. 10 Table of Contents • Two-factor authentication: We enable enterprises to verify the identity and maintain security of end users through our software-based, multi-channel verification service that sends unique codes to end users to log in to mobile and web applications. • Group messaging: Product owners utilize our platform to build messaging applications that enable their end-users to share SMS and MMS messages, share videos, and carry out polls and surveys, among other uses, without leaving the application.
We seek to empower enterprises to create, scale and operate mission-critical services across any mobile application or connected device, and this capability reinforces our customer relationships. The majority of our customers sign master service agreements (“MSAs”) containing standard terms and conditions, including billing and payment, default, termination, limitations of liability, confidentiality, assignment and notification, and other key terms and conditions.
We seek to empower enterprises to create, scale, and operate mission-critical services, and the significance of this capability for enterprises reinforces our customer relationships. The majority of our customers sign master service agreements (“MSAs”) containing standard terms and conditions, including billing and payment, default, termination, limitations of liability, confidentiality, assignment and notification, and other key terms and conditions.
We cannot predict the outcome of these proceedings or legislative initiatives or the effects, if any, that these proceedings or legislative initiatives may have on our business and operations. Anti-Fraud and Abuse Regulation. Among the challenges are fraud and abuse in the form of illegal robocalling and unwanted text messaging. In December 2019, Congress adopted the TRACED Act.
We cannot 15 Table of Contents predict the outcome of these proceedings or legislative initiatives or the effects, if any, that these proceedings or legislative initiatives may have on our business and operations. Anti-Fraud and Abuse Regulation. Among the challenges are fraud and abuse in the form of illegal robocalling and unwanted text messaging.
Bandwidth’s business benefits from multiple global megatrends, including enterprise migration to the cloud, adoption of Contact Center as a Service 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.
Bandwidth’s business continues to benefit from the application of AI technologies to cloud communications use cases, the enterprise migration to the cloud, adoption of Contact Center as a Service platforms, the need to be able to work from anywhere, the reinvention of customer experience, and the growth in messaging applications to engage directly with consumers.
Sales and Marketing Our sales and marketing teams are part of a single revenue organization and work closely together to identify and acquire new customers, expand relationships with existing enterprises, and integrate them with the Bandwidth Communications Cloud.
Sales and Marketing Our sales and marketing teams work closely together to identify and acquire new customers, expand relationships with existing enterprises, and integrate them with the Bandwidth Communications Cloud.
We are authorized to provide competitive local exchange telecommunications services in 49 states and the District of Columbia, and thus are subject to these additional regulatory regimes. Changes in applicable state regulations could affect our business.
A portion of our traffic may be classified as intrastate telecommunications and therefore subject to state regulation. We are authorized to provide competitive local exchange telecommunications services in 49 states and the District of Columbia, and thus are subject to these additional regulatory regimes. Changes in applicable state regulations could affect our business.
Our programmable voice API enables many use cases including call notifications and surveys, advertising campaigns, etc. • Transitioning from traditional premise focused communications to cloud based services: As enterprises migrate from on-premises equipment to the cloud, Bandwidth can fuel their digital transformation with our software-driven SIP trunking services designed to integrate in hybrid or full cloud deployments. Messaging API.
Our programmable voice API enables many use cases including call notifications and surveys, and advertising campaigns. • Transitioning from traditional premises-focused communications to cloud based services: As enterprises migrate from on-premises equipment to the cloud, Bandwidth can fuel their digital transformation with our software-driven SIP trunking services designed to integrate in hybrid or full cloud deployments. • Mitigating fraud with Trust Services: Our number reputation management solution enables enterprises to protect call answer rates, mitigate fraud, and maintain customer trust.
It drives real results. Our Bandmate engagement and satisfaction scores are consistently ranked higher than our peers. At Bandwidth, we say, “Your music matters to the BAND.” We celebrate differences and encourage our team members to be their authentic selves.
Making work-life balance possible is not just something to feel good about. It drives real results. Our Bandmate engagement and satisfaction scores are consistently ranked higher than our peers. At Bandwidth, we say, “Your music matters to the BAND.” We celebrate differences and encourage our team members to be their authentic selves.
For our employees, this means we make a “whole person promise” to offer meaningful work and programs that ensure Bandmates can find the work/life balance necessary to enjoy a healthy and fulfilling life. Our culture is focused on helping each other succeed in our mission. Making work-life balance possible is not just something to feel good about.
We often hear from our customers that Bandwidth just cares more. For our employees, this means we make a “whole person promise” to offer meaningful work and programs that ensure Bandmates can find the work/life balance necessary to enjoy a healthy and fulfilling life. Our culture is focused on helping each other succeed in our mission.
We seek to bring this body of experience and knowledge to all our customer engagements. 11 Table of Contents Growing relationships with low customer churn: We address the complex needs of the customers we serve, and as a result, these enterprises have continued to innovate and grow with our platform over many years.
Growing relationships with low customer churn: We address the complex needs of the customers we serve, and as a result, these enterprises have continued to innovate and grow with our platform over many years.
In its 2011 Universal Service Fund/Intercarrier Compensation Transformation Order (the “USF/ICC Transformation Order”) and subsequent related FCC orders, most terminating switched access charges and all reciprocal compensation charges were capped at then-current levels, and were reduced to zero over, as relevant to us, generally a six-year transition period that began July 1, 2012.
In its 2011 Universal Service Fund/Intercarrier Compensation Transformation Order (the “USF/ICC Transformation Order”) and subsequent related FCC orders, most terminating switched access charges and all reciprocal compensation charges were capped at then-current levels, and were reduced to zero over, as relevant to us, generally a six-year transition period that began July 1, 2012. 16 Table of Contents Pursuant to the USF/ICC Transformation Order, VoIP, while remaining unclassified as either an information or a telecommunications service, was prospectively categorized as either local or non-local traffic.
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.
We believe these market trends are secular, long-lasting, and still early in the adoption curve. With the combination of our software APIs, our global Communications Cloud, our AI orchestration capabilities, 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.
These three strategies are the foundation of the durable business we seek to build. Operating Segments We currently operate in one operating segment.
These three strategies are the foundation of the durable business we seek to build. We operate in a single reportable segment.
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 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 transform their communications every day. Bandwidth is strategically positioned at the intersection of enterprise communications and AI.
We benefit from long-standing relationships with some of the largest technology companies, well-recognized enterprise customers, and innovative SaaS platforms. Many of our customers have multi-year contracts, with no single customer representing 10% or more of total revenue for the year ended December 31, 2024. Our management is highly focused on creating and maintaining strategic partnerships beyond standard transactional customer relationships.
Many of our customers have multi-year contracts, with no single customer representing 10 percent or more of total revenue for the year ended December 31, 2025. Our management is highly focused on creating and maintaining strategic partnerships beyond standard transactional customer relationships.
This allows for a more reliable end-user experience with controlled scheduling and triggered porting activation. Insights.
This allows for a more reliable end-user experience with controlled scheduling and triggered porting activation. Bring your own carrier ( “ BYOC ” ) Integrations.
These platforms are global in nature, and they expect a communications partner who can provide direct global coverage and regulatory insight. We believe our leadership in this market continues to expand with our global footprint. We believe Bandwidth’s toll-free voice solution is a major reason contact center platforms build with Bandwidth for their North American business.
We believe our leadership in this market continues to expand with our global footprint and the addition of new capabilities. We believe Bandwidth’s toll-free voice solution is a major reason contact center platforms build with Bandwidth for their North American business.
There is some ambiguity in the rules as to the specific obligations of each party involved in the service delivery chain and the rules have not yet been further interpreted by the FCC or a court.
There is some ambiguity in the rules as to the specific obligations of each party involved in the service delivery chain and the rules have not yet been further interpreted by the FCC or a court. By April 15, 2025, Bandwidth and its service provider customers will be required to comply with the FCC’s new 911 outage reporting requirements.
Use cases include retail and eCommerce promotions, financial services identity authentication, healthcare patient engagement, and many more. Bandwidth offers a full suite of messaging products, including Application to Person (“A2P”) messaging solutions supporting both SMS and MMS on Local Numbers (“10DLC”), Toll Free Numbers, and Short Codes. All our solutions support bi-directional unicode, including emojis.
Use cases include retail and eCommerce promotions, financial services identity authentication, healthcare patient engagement, and many more. Bandwidth’s suite of Application to Person (“A2P”) messaging solutions include SMS and MMS on Local Numbers (“10DLC”), Toll Free Numbers, Short Codes, and rich communication services (“RCS”) for Business.
State Regulation The 1996 Act was intended to increase competition in the telecommunications industry, especially in the local market. With respect to local services, incumbent local exchange carriers (“ILECs”) such as AT&T are required to allow interconnection to their incumbent networks and to provide access to network facilities, as well as several other pro-competitive measures.
With respect to local services, incumbent local exchange carriers (“ILECs”) such as AT&T are required to allow interconnection to their incumbent networks and to provide access to network facilities, as well as several other pro-competitive measures. State regulatory agencies have jurisdiction when our facilities and services are used to provide intrastate telecommunications services.
A number of our largest enterprise customers have been on our platform for more than ten years. Our relationship with each of the enterprises we serve often spans product suites, divisions and use cases over time. Based on surveys conducted after customer interactions in 2024, our customers have expressed a greater than 97% satisfaction rate.
At the end of 2025, our twelve-month customer retention rate stood at greater than 98.8 percent, with a number of our largest enterprise customers having been on our platform for more than ten years. Our relationship with each of the enterprises we serve often spans product suites, divisions, and use cases over time.
This includes: • UCaaS integrations: We have BYOC partnerships with leading UCaaS platforms, including Microsoft Teams Direct Routing and Operator Connect, Zoom Phone Provider Exchange, Webex Calling by Cisco and Google Voice for Google Workspace. 10 Table of Contents • CCaaS Integrations: We have BYOC partnerships with leading CCaaS platforms, including Five9, Genesys, Webex Contact Center by Cisco and Zoom Contact Center. • Conversational AI Integrations: We have BYOC partnerships with leading conversational AI platforms, including Cognigy and Google Cloud’s Dialogflow. • Speech-to-Text/Text-to-Speech: Our BYOC partnership with Pindrop enables enterprises to utilize Pindrop’s voice bio-authentication and anti-fraud services.
Our BYOC Integrations include: • UCaaS Integrations: We have BYOC partnerships with leading UCaaS platforms, including Microsoft Teams Direct Routing and Operator Connect, Zoom Phone Provider Exchange, Webex Calling by Cisco, and Google Voice for Google Workspace. • CCaaS Integrations: We have BYOC partnerships with leading CCaaS platforms, including Five9, Genesys, Webex Contact Center by Cisco, and Zoom Contact Center. • Conversational AI Integrations: We have BYOC partnerships with leading conversational AI platforms.
As of December 31, 2024, we had 34 U.S. patents and six U.S. patent applications pending. In addition, as of December 31, 2024, we had 18 registered trademarks and three trademark applications pending in the United States and elsewhere.
We also rely on registered and unregistered trademarks to protect our brand. As of December 31, 2025, we had 38 U.S. patents and four U.S. patent applications pending. In addition, as of December 31, 2025, we had 16 registered trademarks and three trademark applications pending in the United States and elsewhere.
As each of these customer categories uses services on the Bandwidth Communications Cloud in its own unique way, we have designed three key market offerings to power digital communications transformation: 6 Table of Contents • Market Offering 1: Global Voice Plans. This category serves the leading power platforms at the forefront of the communications transformation in UCaaS and CCaaS.
Each of our customer categories uses services on the Bandwidth Communications Cloud in its own unique way, and we have designed three key market offerings to power digital communications transformation.
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 Contact Center as a Service (“CCaaS”). Our long-term vision is to continue strengthening this position as the key enabling platform for communications transformation.
In fact, Bandwidth already powers all the 2025 Gartner Ⓡ Magic Quadrant Leaders in the key cloud communications categories of Unified Communications as a Service (“UCaaS”) and Contact Center as a Service (“CCaaS”), along with leading hyperscalers and Software as a Service (“SaaS”) platforms. We aim to be the key enabling platform for communications transformation in the AI era.
Go-to-Market Strategy Bandwidth’s go-to-market strategy is designed around the global shift from on-premises based technology to cloud-based communications. We believe we are the only global Communications Platform as a Service (“CPaaS”) provider that also owns and operates our own cloud communications network.
We believe we are the only Communications Platform as a Service (“CPaaS”) provider that also owns and operates a cloud communications network with our global reach.
Our voice services are used to build voice calling in applications and platforms, orchestrate call flows between users or machines, record and bridge calls, initiate text-to-speech for interactive voice response and more. Enterprises can customize high-quality call routing for business voice use cases and global reach.
We offer customers the ability to interact with our voice services through SIP, WebRTC, and programmable voice API. Our voice services are used to build voice calling in applications and platforms, orchestrate call flows between users or machines, utilize AI voice agents for interactive voice response, conversational AI, and other use cases, record and bridge calls, initiate text-to-speech, and more.
Bandwidth Maestro TM ( “ Maestro ” ), launched in 2023, is a first-of-its-kind, next-generation enterprise cloud communications platform that enables customers to solve the key challenge of integrating best-in-class, real-time voice applications across their UCaaS, CCaaS, AI and machine learning platforms.
We believe Ba ndwidth’s history as an enabler to the platform leaders creates additional competitive benefits, such as deep automation of communications services, enterprise-grade quality and support, as well as deep operational relationships with the largest UCaaS and CCaaS platforms. 7 Table of Contents Bandwidth Maestro TM ( “ Maestro ” ) is a first-of-its-kind, next-generation enterprise cloud communications platform that enables customers to solve the key challenge of integrating best-in-class, real-time voice applications across their UCaaS, CCaaS, AI, and fraud mitigation platforms.
Intellectual Property We rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology. We also rely on registered and unregistered trademarks to protect our brand.
See “Risk Factors–Risks Related to Our Business” elsewhere in this Annual Report on Form 10-K, for additional information on the competitive environment in which we operate, and risks related thereto. 14 Table of Contents Intellectual Property We rely on a combination of patent, copyright, trademark, and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology.
None of our employees are represented by a labor union or covered by a collective bargaining agreement.
None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider our relations with our employees to be good.
Bandwidth’s compensation philosophy embraces transparency and educates all Bandmates on our benchmarking process, pay structure design and logical approach to compensation strategy. Research has shown that rigorously-designed compensation strategies like ours are one of the best ways to combat pay disparity and ensure fairness for every team member. Our Customers We have a broad and diversified customer base.
Research has shown that rigorously-designed compensation strategies like ours are one of the best ways to combat pay disparity and ensure fairness for every team member. 12 Table of Contents Our Customers We have a broad and diversified customer base. We benefit from long-standing relationships with some of the largest technology companies, well-recognized enterprise customers, and innovative SaaS platforms.
In this category, Global 2000 enterprises engage directly with us to leverage our voice, global number management, emergency services and other services in their digital transformation.
Market Offering 2: Enterprise Voice In this category, Global 2000 enterprises engage directly with Bandwidth to leverage our voice, global number control, emergency services, pre-built integrations with leading UCaaS and CCaaS platforms, easy-to-build call flows, AI voice orchestration, and other services in their digital transformation.
We believe Maestro ’ s open approach, designed to accommodate technologies developed by third parties, is unique in the cloud communications space. It provides a critical technology bridge that enterprises need to orchestrate a modern customer experience stack without months of costly integration work, which results in faster time to value and enhanced customer and employee experiences and loyalty.
It provides a critical technology bridge and software orchestration layer that enterprises need to build a modern customer experience stack without complex and costly integration, which results in faster time to value, and enhanced customer and employee experiences and loyalty. Our Maestro platform is key to Bandwidth ’ s AI innovation strategy.
Experience & expertise: Our senior leadership team consists of both new and long-tenured leaders – each an expert with deep and proven experience in the telecommunications and SaaS space. W e regularly interact with local regulators in more than 30 countries, and we currently power all the 2024 Gartner Magic Quadrant Leaders in UCaaS and CCaaS.
W e regularly interact with local regulators in more than 30 countries, and we currently power all the 2025 Gartner Magic Quadrant Leaders in UCaaS and CCaaS. We seek to bring this body of experience and knowledge to all our customer engagements.
These laws and regulations govern telecommunications activities, but also govern privacy, data protection, cybersecurity, AI, intellectual property, competition, consumer protection, taxation or other subjects.
Regulatory General We and the communications services that we provide through our Communications Cloud and software APIs are subject to many U.S. federal and state, and foreign, laws and regulations. These laws and regulations govern telecommunications activities, but also govern privacy, data protection, cybersecurity, AI, intellectual property, competition, consumer protection, taxation or other subjects.
The Bandwidth Communications Cloud We believe one of our key competitive differentiators is the Bandwidth Communications Cloud. It provides a communications developer platform on top of an all-IP, owned-and-operated network with global reach. We believe the benefits to our customers include reliability, scalability, and usage-based control for global business-critical communications.
The Bandwidth Communications Cloud Our Bandwidth Communications Cloud is the foundation of our business. It provides a communications developer platform on top of an all-IP, owned-and-operated network with global reach. With programmable access to voice and messaging, our Communications Cloud enables enterprises to deploy AI voice and orchestrate complex communications workflows.
By partnering with Bandwidth, global enterprises can reduce complexity, gain greater control, centralize communication resources and operational workloads, and better prepare for future scale.
By partnering with Bandwidth, global enterprises can simplify their migrations to the cloud, as well as cloud-to-cloud migrations, while reducing complexity, gaining greater control, centralizing communication resources and operational workloads, adding new AI voice services, and better preparing for future scale.
Our customers can meet compliance commitments using a single provider in multiple markets where they do business—across North America, Europe and Asia-Pacific. Moreover, our dynamic geospatial routing capability can route emergency calls over our E911 network based on a real-time location of the caller to produce industry-leading results.
In many countries, it is a legal obligation to ensure on-premises access to local emergency services. Our customers can meet compliance commitments using a single provider in multiple markets where they do business—across North America, Europe, and Asia-Pacific.
Emergency Services. We provide complete communications solutions (full PSTN replacement) with integrated local emergency services in 38 countries around the globe.
Our Trust Services portfolio also includes STIR/SHAKEN attestation, voice bio-authentication, inbound call verification, campaign registration support, and fraud monitoring capabilities . Emergency Services. We provide complete communications solutions (full PSTN replacement) with integrated local emergency services in 42 countries around the globe.
Core Product Domains Bandwidth is continually investing in new domains in our Communications Cloud. Below are some of the major product offerings and use cases supported: Voice. We offer customers the ability to interact with our voice services through SIP or programmable voice API.
Core Product Domains Bandwidth is continually investing in new domains in our Communications Cloud. Below are some of the major product offerings and use cases supported: Voice. Approximately 60% of our consolidated revenue for the year ended December 31, 2025 was earned from our Voice domain serving the Global Voice Plans and Enterprise Voice customer categories.
Our software APIs for messaging deliver a full suite of A2P messaging capabilities, designed to help brands engage with their customers. Bandwidth’s North American messaging services are enabled for local and toll-free phone numbers as well as short codes.
Bandwidth’s North American messaging services are enabled for local and toll-free phone numbers, short codes, and RCS for Business.
Third, we have a broad range of experience with global regulatory frameworks informed by our communications services offerings. We believe customers view Bandwidth as a trusted resource, helping them navigate constant change in the global regulatory landscape.
Broad experience with global regulatory frameworks: Bandwidth has broad regulatory experience as a global network owner and national operator, which positions us as a trusted resource with customers to navigate constant change in the global regulatory landscape. CPaaS-based emergency calling capabilities: We believe we are one of the only CPaaS providers with a full suite of emergency service capabilities.
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We believe these megatrends, which have created sizable total addressable markets, are secular, long-lasting and still early in the adoption curve.
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As global enterprises adopt AI-driven tools to modernize customer experiences, we believe AI voice will become a critical new layer of value creation. Our Maestro™ platform and Communications Cloud are designed to support this evolution, enabling the orchestration of AI voice agents across diverse environments with superior quality, reliability, and scale.
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Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker, who is our Chief Executive Officer, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker allocates resources and assesses performance based upon consolidated financial information.
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We see our emerging leadership in AI Voice as a natural extension of our long-term strategy to power trusted, mission-critical communications for the world’s largest enterprises.
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We enable these customers to rapidly automate voice, global number management, emergency services, and many other services on a scalable, global basis. • Market Offering 2: Programmable Messaging. This comprises our text messaging solutions, through which we support innovative SaaS platforms with use cases like retail and eCommerce promotions, financial services identity authentication, and healthcare patient engagement.
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Refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and Part II, Item 8, “Financial Statements” in this Annual Report on Form 10-K, for a discussion of the results of our operations. 6 Table of Contents Go-to-Market Strategy Bandwidth’s go-to-market strategy is designed around the global shift from on-premises based technology to cloud-based communications.
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Programmable Messaging customers come to our Bandwidth Communications Cloud because we offer high capacity, volume and deliverability.
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These platforms are global in nature, and they expect a communications partner who can provide direct global coverage and regulatory insight. In many cases, these partners are embedding conversational AI capabilities into their own platforms, and they rely on Bandwidth’s Communications Cloud to support those next-generation experiences.
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We believe this category represents a significant opportunity for future growth due to our ability to scale with customer demand, and innovative products and features such as the emergence of Rich Communication Services (“RCS”) in the U.S. market. • Market Offering 3: Enterprise Voice.
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Bandwidth provides enterprises a fully or hybrid cloud-based communications solution to transition from their on-premises communications infrastructure to a software-enabled digital environment.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeBribery Act 2010; • international trade policies, tariffs and other non-tariff barriers, such as quotas; • more limited protection for intellectual property rights in some countries; • adverse consequences relating to the complexity of operating in multiple international jurisdictions with differing tax frameworks; • fluctuations in currency exchange rates, which could increase the price of our products outside of the United States, increase the expenses of our international operations and expose us to foreign currency exchange rate risk; • currency control regulations, which might restrict or prohibit our conversion of other currencies into U.S. dollars; • restrictions on the transfer of funds from or between international jurisdictions; • deterioration of political relations between the United States and other countries; • public health epidemics, such as COVID-19, or natural disasters, which could have an adverse impact on our employees, contractors, customers, partners, travel and the global economy; and • political or social unrest, acts of war or economic instability in a specific country or region in which we operate, which could have an adverse impact on our operations in that location.
Biggest changeBribery Act 2010; 27 Table of Contents • international trade policies, tariffs and other non-tariff barriers, such as quotas; • more limited protection for intellectual property rights in some countries; • adverse consequences relating to the complexity of operating in multiple international jurisdictions with differing tax frameworks; • fluctuations in currency exchange rates, which could increase the price of our products outside of the United States, increase the expenses of our international operations and expose us to foreign currency exchange rate risk; • currency control regulations, which might restrict or prohibit our conversion of other currencies into U.S. dollars; • restrictions on the transfer of funds from or between international jurisdictions; • deterioration of political relations between the United States and other countries; • public health epidemics, such as COVID-19, or natural disasters, which could have an adverse impact on our employees, contractors, customers, partners, travel and the global economy; • political or social unrest, acts of war or economic instability in a specific country or region in which we operate, which could have an adverse impact on our operations in that location; and • exposure to geopolitical conflicts and related government actions, such as the military conflict between Russia and Ukraine and the resulting sanctions and export controls imposed by the U.S., U.K., EU, and others, which led us to terminate our services in Russia and Belarus; although these countries did not constitute a material portion of our business, continued or expanded conflict in the region, or similar conflicts in other regions, could disrupt our operations in affected areas (including locations such as our office in Romania), impact customer demand or cause broader volatility in global markets.
Our failure to comply with the obligations imposed upon license and permit holders, including the payment of fees or the filing of required reports, may cause sanctions or additional costs, including the revocation of authority to provide services. Our operations are subject to regulation at the regional bloc (e.g., European Union), country, state and local levels.
Our failure to comply with the obligations imposed upon license and permit holders, including the payment of fees or the filing of required reports, may cause sanctions or additional costs, including the revocation of authority to provide services. Our operations are subject to regulation at the regional bloc (e.g., the European Union), country, state and local levels.
Our Class A common stock has one vote per share, and our Class B common stock has ten votes per share. Substantially all of our Class B common stock continues to be held by our co-Founder, Chairman and CEO, David Morken, and our co-Founder Henry Kaestner.
Our Class A common stock has one vote per share, and our Class B common stock has ten votes per share. Substantially all of our Class B common stock continues to be held by our co-Founder, Chairman and CEO, David A. Morken, and our co-Founder Henry Kaestner.
The integration of any acquired businesses involves a number of risks, including, but not limited to: • demands on management related to any significant increase in size after the acquisition; • the disruption of ongoing business and the diversion of management’s attention from the management of daily operations to management of integration activities; • failure to fully achieve expected synergies and costs savings; • unanticipated impediments in the integration of departments, systems, including accounting systems, technologies, books and records and procedures, as well as in maintaining uniform standards, controls, including internal control over financial reporting required by the Sarbanes-Oxley Act, procedures and policies; • difficulty establishing and maintaining appropriate governance, reporting relationships, policies, controls, and procedures for the acquired business, particularly if it is based in a country or region where we did not previously operate; • new or more stringent regulatory compliance obligations and costs by virtue of the acquisition, including risks related to international acquisitions that may operate in new jurisdictions or geographic areas where we may have no or limited experience; • loss of customers or the failure of customers to order incremental services that we expect them to order; • difficulty and delays in integrating the products, technology platforms, operations, systems, and personnel of the acquired business with our own, particularly if the acquired business is outside of our core competencies and current geographic markets; • failure to provision services that are ordered by customers during the integration period; • higher integration costs than anticipated; 47 Table of Contents • difficulties in the assimilation and retention of highly qualified, experienced employees, many of whom may be geographically dispersed; • litigation, investigations, proceedings, fines, or penalties arising from or relating to the transaction or the acquired business, and any resulting liabilities may exceed our forecasts; • acquisition of businesses with different revenue models, different contractual relationships, and increased customer concentration risks; • assumption of long-term contractual obligations, commitments, or liabilities (for example, the costs associated with leased facilities), which could adversely impact our efforts to achieve and maintain profitability and impair our cash flow; • failure to successfully evaluate or utilize the acquired business’ technology and accurately forecast the financial impact of an acquisition, including accounting charges; and • drag on our overall revenue growth rate or an increase of our net loss, which could cause analysts and investors to reduce their valuation of our company.
The integration of any acquired businesses involves a number of risks, including, but not limited to: • demands on management related to any significant increase in size after the acquisition; • the disruption of ongoing business and the diversion of management’s attention from the management of daily operations to management of integration activities; • failure to fully achieve expected synergies and costs savings; • unanticipated impediments in the integration of departments, systems, including accounting systems, technologies, books and records and procedures, as well as in maintaining uniform standards, controls, including internal control over financial reporting required by the Sarbanes-Oxley Act, procedures and policies; • difficulty establishing and maintaining appropriate governance, reporting relationships, policies, controls, and procedures for the acquired business, particularly if it is based in a country or region where we did not previously operate; • new or more stringent regulatory compliance obligations and costs by virtue of the acquisition, including risks related to international acquisitions that may operate in new jurisdictions or geographic areas where we may have no or limited experience; • loss of customers or the failure of customers to order incremental services that we expect them to order; • difficulty and delays in integrating the products, technology platforms, operations, systems, and personnel of the acquired business with our own, particularly if the acquired business is outside of our core competencies and current geographic markets; • failure to provision services that are ordered by customers during the integration period; • higher integration costs than anticipated; • difficulties in the assimilation and retention of highly qualified, experienced employees, many of whom may be geographically dispersed; • litigation, investigations, proceedings, fines, or penalties arising from or relating to the transaction or the acquired business, and any resulting liabilities may exceed our forecasts; 48 Table of Contents • acquisition of businesses with different revenue models, different contractual relationships, and increased customer concentration risks; • assumption of long-term contractual obligations, commitments, or liabilities (for example, the costs associated with leased facilities), which could adversely impact our efforts to achieve and maintain profitability and impair our cash flow; • failure to successfully evaluate or utilize the acquired business’ technology and accurately forecast the financial impact of an acquisition, including accounting charges; and • drag on our overall revenue growth rate or an increase of our net loss, which could cause analysts and investors to reduce their valuation of our company.
Delays in receiving required regulatory approvals or the enactment of new adverse regulation or regulatory requirements may slow our growth and have a material adverse effect on our business, results of operations and financial condition. In addition, Loper Bright Enterprises v. Raimondo and other U.S. Supreme Court cases such as Corner Post, Inc. v.
Delays in receiving required regulatory approvals or the enactment of new adverse or burdensome regulation or regulatory requirements may slow our growth and have a material adverse effect on our business, results of operations and financial condition. In addition, Loper Bright Enterprises v. Raimondo and other U.S. Supreme Court cases such as Corner Post, Inc. v.
The trading price of our Class A common stock may continue to be volatile and could fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • general market volatility caused by epidemics, endemics and pandemics such as COVID-19, acts of war, or other significant domestic or international events; • price and volume fluctuations in the overall stock market from time to time; • volatility in the trading prices and trading volumes of technology stocks; • volatility in the trading volumes of our Class A common stock; 50 Table of Contents • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • sales of shares of our Class A common stock by us or our stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both; • regulatory actions or developments affecting our operations, those of our competitors or our industry more broadly; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses, products, services or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • new rules adopted by certain index providers, such as S&P Dow Jones, that limit or preclude inclusion of companies with multi-class capital structures in certain of their indices; • any significant change in our management; and • general economic conditions and slow or negative growth of our markets.
The trading price of our Class A common stock may continue to be volatile and could fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • general market volatility caused by epidemics, endemics and pandemics, acts of war, or other significant domestic or international events; • price and volume fluctuations in the overall stock market from time to time; • volatility in the trading prices and trading volumes of technology stocks; • volatility in the trading volumes of our Class A common stock; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • sales of shares of our Class A common stock by us or our stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; 51 Table of Contents • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both; • regulatory actions or developments affecting our operations, those of our competitors or our industry more broadly; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses, products, services or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • new rules adopted by certain index providers, such as S&P Dow Jones, that limit or preclude inclusion of companies with multi-class capital structures in certain of their indices; • any significant change in our management; and • general economic conditions and slow or negative growth of our markets.
Among other things, our second amended and restated certificate of incorporation and third amended and restated bylaws include provisions: • authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our Class A and Class B common stock; • limiting the liability of, and providing indemnification to, our directors and officers; • limiting the ability of our stockholders to call and bring business before special meetings; • providing for a dual class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • providing that our board of directors is classified into three classes of directors with staggered three-year terms; • prohibiting stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • requiring super-majority voting to amend some provisions in our second amended and restated certificate of incorporation and third amended and restated bylaws; • requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors; and • controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings.
Among other things, our second amended and restated certificate of incorporation and third amended and restated bylaws include provisions: • authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our Class A and Class B common stock; 53 Table of Contents • limiting the liability of, and providing indemnification to, our directors and officers; • limiting the ability of our stockholders to call and bring business before special meetings; • providing for a dual class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • providing that our board of directors is classified into three classes of directors with staggered three-year terms; • prohibiting stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • requiring super-majority voting to amend some provisions in our second amended and restated certificate of incorporation and third amended and restated bylaws; • requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors; and • controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings.
Nearly all of our operating cash is maintained in deposit accounts at various financial institutions and is not insured by the FDIC. We believe we employ a reasonable strategy to diversify our cash deposits among financial institutions.
Nearly all of our operating cash is maintained in deposit accounts with various financial institutions and is not insured by the FDIC. Nearly all of our operating cash is maintained in deposit accounts at various financial institutions and is not insured by the FDIC. We believe we employ a reasonable strategy to diversify our cash deposits among financial institutions.
Any failure to comply with these obligations and restrictions or our own posted privacy policies and notices, or any security incident that results in a personal data breach or the unauthorized access to, or the acquisition, release or transfer of, other customer data, could subject us to investigations, proceedings or actions 33 Table of Contents against us by governmental entities or others, lawsuits, fines, criminal penalties, statutory damages, consent decrees, injunctions, adverse publicity, contractual liability, civil liabilities, loss of customer confidence, damage to our brand and reputation or a loss of customers, any of which could materially harm our business.
Any failure to comply with these obligations and restrictions or our own posted privacy policies and notices, or any security incident that results in a personal data breach or the unauthorized access to, or the acquisition, release or transfer of, other customer data, could subject us to investigations, proceedings or actions against us by governmental entities or others, lawsuits, fines, criminal penalties, statutory damages, consent decrees, injunctions, adverse publicity, contractual liability, civil liabilities, loss of customer confidence, damage to our brand and reputation or a loss of customers, any of which could materially harm our business.
For example: • Our 911 calling and other emergency calling services are different, in significant respects, from the 911 and other emergency calling services associated with traditional wireline and wireless telephone providers and, in certain cases, with other VoIP providers. • In the event of a power loss or Internet access interruption experienced by a customer, our service may be interrupted. • Our customers’ end users may experience lower call quality than they are used to from traditional wireline or wireless telephone companies, including static, echoes and delays in transmissions. • Our customers’ end users may not be able to call premium-rate telephone numbers such as 1-900 numbers and 976 numbers.
For example: • Our 911 calling and other emergency calling services are different, in significant respects, from the 911 and other emergency calling services associated with traditional wireline and wireless telephone providers and, in certain cases, with other VoIP providers. • In the event of a power loss or Internet access interruption experienced by a customer, our service may be interrupted. 38 Table of Contents • Our customers’ end users may experience lower call quality than they are used to from traditional wireline or wireless telephone companies, including static, echoes and delays in transmissions. • Our customers’ end users may not be able to call premium-rate telephone numbers such as 1-900 numbers and 976 numbers.
Changes to existing regulations or rules, or the failure of regulatory agencies to regulate in areas historically regulated on matters such as network neutrality, licensing fees, environmental, health and safety, privacy, 32 Table of Contents intercarrier compensation, emergency services, interconnection, illegal robocalling, extraterritorial use of telephone numbers, cybersecurity, AI and other areas, in general or particular to our industry, may increase uncertainty and costs and restrict operations or decrease revenue.
Changes to existing regulations or rules, or the failure of regulatory agencies to regulate in areas historically regulated on matters such as network neutrality, licensing fees, environmental, health and safety, privacy, intercarrier compensation, emergency services, interconnection, illegal robocalling, extraterritorial use of telephone numbers, cybersecurity, AI and other areas, in general or particular to our industry, may increase uncertainty and costs and restrict operations or decrease revenue.
In addition, we face risks in doing business internationally that could adversely affect our business, including: • exposure to international political developments that may cause instability for businesses and volatility in global financial markets and the value of foreign currencies, any of which could disrupt trade and the sale of our services in international markets; 26 Table of Contents • difficulties in managing and staffing international operations, including difficulties related to the increased operations, travel, infrastructure, employee attrition and legal compliance costs associated with numerous international locations; • our ability to effectively price our products in competitive international markets; • new and different sources of competition; • costs associated with network service providers outside of the United States; • the need to adapt and localize our products for specific countries; • challenges in keeping abreast of, understanding and complying with local laws, regulations and customs in multiple foreign jurisdictions, particularly in the areas of telecommunications and data privacy and security; • complexities related to differing technical standards, certification requirements and audit requirements outside the United States, which could prevent customers from deploying our products or limit their usage; • export controls and economic sanctions administered by the Bureau of Industry and Security of the U.S.
In particular, we face risks in doing business internationally that could adversely affect our business, including: • exposure to international political developments that may cause instability for businesses and volatility in global financial markets and the value of foreign currencies, any of which could disrupt trade and the sale of our services in international markets; • difficulties in managing and staffing international operations, including difficulties related to the increased operations, travel, infrastructure, employee attrition and legal compliance costs associated with numerous international locations; • our ability to effectively price our products in competitive international markets; • new and different sources of competition; • costs associated with network service providers outside of the United States; • the need to adapt and localize our products for specific countries. • challenges in keeping abreast of, understanding and complying with local laws, regulations and customs in multiple foreign jurisdictions, particularly in the areas of telecommunications, data privacy and security, and artificial intelligence; • complexities related to differing technical standards, certification requirements and audit requirements outside the United States, which could prevent customers from deploying our products or limit their usage; • export controls and economic sanctions administered by the Bureau of Industry and Security of the U.S.
We have obtained licenses or are obtaining licenses in various countries in which we do business, but in some countries, the regulatory regime around provisioning of phone numbers is unclear, subject to change, and may conflict from jurisdiction to jurisdiction.
We have obtained telecommunications regulatory licenses or are obtaining those licenses in various countries in which we do business, but in some countries, the regulatory regime around provisioning of phone numbers is unclear, subject to change, and may conflict from jurisdiction to jurisdiction.
From November 10, 2017, the date that our Class A common stock began trading on the NASDAQ Global Select Market, through December 31, 2024, the trading price of our Class A common stock has ranged from $9.20 per share to $198.61 per share.
From November 10, 2017, the date that our Class A common stock began trading on the NASDAQ Global Select Market, through December 31, 2025, the trading price of our Class A common stock has ranged from $9.20 per share to $198.61 per share.
The term of these contractual provisions often survives termination or expiration of the applicable agreement. Large indemnity payments or damage claims from contractual breach could harm our business, results of operations and financial condition. Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them.
The term of these contractual provisions often survives termination or expiration of the applicable agreement. Large indemnity payments or damage claims from contractual breach could harm our business, results of operations and financial condition. Although we normally contractually limit our liability with respect to such 36 Table of Contents obligations, we may still incur substantial liability related to them.
Certain popular area code prefixes and specialized numbers have limited availability, and we may not be able to obtain those prefixes and specialized numbers in desired quantities. Our inability to acquire or retain such numbers would make our services, including our communications platform, less attractive to potential customers that desire assignments of particular numbering resources.
Certain popular area code prefixes and specialized numbers have limited availability, and we may not be able to obtain those prefixes and specialized numbers in desired quantities. Our inability to acquire or retain such numbers would make our services, including our communications platform, less attractive to potential customers that desire 34 Table of Contents assignments of particular numbering resources.
Because such patent holding companies, commonly referred to as patent “trolls,” do not provide services or use technology, the assertion of our own patents by way of counter-claim would be largely ineffective. 35 Table of Contents Our use of open source software could negatively affect our ability to sell our services and subject us to possible litigation.
Because such patent holding companies, commonly referred to as patent “trolls,” do not provide services or use technology, the assertion of our own patents by way of counter-claim would be largely ineffective. Our use of open source software could negatively affect our ability to sell our services and subject us to possible litigation.
Despite these precautions, it may be possible for a third-party to copy or otherwise obtain and use our technology without authorization. In addition, others may independently 36 Table of Contents discover trade secrets and proprietary information, and in such cases we could not assert any rights against such party. Policing unauthorized use of our technology is difficult.
Despite these precautions, it may be possible for a third-party to copy or otherwise obtain and use our technology without authorization. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any rights against such party. Policing unauthorized use of our technology is difficult.
The expansion or, if we deem appropriate, consolidation of our systems and infrastructure will require us to commit substantial financial, operational and management resources before our revenue increases and without any assurances that our revenue will increase. 24 Table of Contents This expansion or consolidation could strain our ability to maintain reliable service levels for our customers.
The expansion or, if we deem appropriate, consolidation of our systems and infrastructure will require us to commit substantial financial, operational and management resources before our revenue increases and without any assurances that our revenue will increase. This expansion or consolidation could strain our ability to maintain reliable service levels for our customers.
Other recent proceedings before the FCC have produced new rules in the areas of cybersecurity compliance, emergency services, robocalling and robotexting, and others that could result in increases in the cost of regulatory compliance.
Other recent proceedings before the FCC have produced new rules in the areas of IP Interconnection, cybersecurity compliance, emergency services, robocalling and robotexting, and others that could result in increases in the cost of regulatory compliance.
In the event of non-compliance, we 34 Table of Contents may be forced to reclaim phone numbers from our customers, which could result in loss of customers, breach of contract claims, loss of revenue and reputational harm, all of which could have a material adverse effect on our business, results of operations and financial condition.
In the event of non-compliance, we may be forced to reclaim phone numbers from our customers, which could result in loss of customers, breach of contract claims, loss of revenue and reputational harm, all of which could have a material adverse effect on our business, results of operations and financial condition.
Many investment funds are precluded from investing in companies that are not included in such indices, and these funds would be unable to purchase our Class A common stock if we were not included in such indices. We cannot assure you that other stock indices will not take a similar approach to S&P Dow Jones in the future.
Many investment funds are precluded from investing in companies that are not included in such indices, and these funds are unable to purchase our Class A common stock if we are not included in such indices. We cannot assure you that other stock indices will not take a similar approach to S&P Dow Jones in the future.
For example, to provide the emergency calling services required by the FCC’s rules to our IP telephony consumers, we may use components of both the wireline and wireless 39 Table of Contents infrastructure in unique ways that can result in failed connections and calls routed to incorrect emergency call centers.
For example, to provide the emergency calling services required by the FCC’s rules to our IP telephony consumers, we may use components of both the wireline and wireless infrastructure in unique ways that can result in failed connections and calls routed to incorrect emergency call centers.
In the case of new A2P fees, we currently pass, and expect to continue to pass, these fees on to our customers who send A2P messages to the carrier's subscribers. This is expected to increase our revenue and cost of goods sold, but is not expected to impact the gross profit received for sending these messages.
In the case of new A2P fees, we currently pass, and expect to continue to pass, these fees on to our customers who send A2P messages to the carrier's subscribers. This is expected to increase our 42 Table of Contents revenue and cost of goods sold, but is not expected to impact the gross profit received for sending these messages.
In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NASDAQ Global Select Market. Our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting.
In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NASDAQ Global Select Market. 46 Table of Contents Our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting.
The Capped Calls are expected generally to reduce the potential 49 Table of Contents dilution upon any conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.
The Capped Calls are expected generally to reduce the potential dilution upon any conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.
In addition, responding to any governmental action will likely result in a diversion of management’s attention and resources and an increase in professional fees. Our operations are subject to significant regulation and require us to obtain and maintain numerous governmental licenses and permits in the United States and internationally.
In addition, responding to any governmental action will likely result in a diversion of management’s attention and resources and an increase in professional fees. 32 Table of Contents Our operations are subject to significant regulation and require us to obtain and maintain numerous governmental licenses and permits in the United States and internationally.
Shares of Class A common stock issued upon the exercise of outstanding options and upon the vesting of restricted stock unit awards under our equity incentive plans, and the shares reserved for future issuance under our equity incentive plans, will become eligible for sale in the public market upon issuance and will 51 Table of Contents result in dilution to existing holders of our Class A common stock.
Shares of Class A common stock issued upon the exercise of outstanding options and upon the vesting of restricted stock unit awards under our equity incentive plans, and the shares reserved for future issuance under our equity incentive plans, will become eligible for sale in the public market upon issuance and will result in dilution to existing holders of our Class A common stock.
Any decreased use of our products and services or limitation on our ability to export our products and provide our services could adversely affect our business, results of operations and financial condition. Intellectual property and proprietary rights of others could prevent us from using necessary technology to provide our services or subject us to expensive intellectual property litigation.
Any decreased use of our products and services or limitation on our ability to export our products and provide our services could adversely affect our business, results of operations and financial condition. 35 Table of Contents Intellectual property and proprietary rights of others could prevent us from using necessary technology to provide our services or subject us to expensive intellectual property litigation.
These estimates include several key assumptions including, but not limited to, the taxability of our services, the jurisdictions in which we believe we have nexus, and the sourcing of revenue to those jurisdictions. In the event 43 Table of Contents these jurisdictions challenge our assumptions and analysis, our actual exposure could differ materially from our current estimates.
These estimates include several key assumptions including, but not limited to, the taxability of our services, the jurisdictions in which we believe we have nexus, and the sourcing of revenue to those jurisdictions. In the event these jurisdictions challenge our assumptions and analysis, our actual exposure could differ materially from our current estimates.
In addition, any of our future debt agreements may contain restrictive covenants that may prohibit us 48 Table of Contents from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our indebtedness.
In addition, any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our indebtedness.
If any of our key vendors fail to continue to provide us with the materials or services that we rely upon to operate, we may not be able to replace them without disruptions to, or deterioration of, our services and we also may incur higher costs associated with new vendors.
If any of our key suppliers fail to continue to provide us with the materials or services that we rely upon to operate, we may not be able to replace them without disruptions to, or deterioration of, our services and we may incur higher costs associated with new suppliers.
The future utilization of our net operating loss and tax credit carryforwards (collectively, “Tax Attributes”) may be limited due to changes in ownership as defined under Section 382 of the Internal Revenue Code of 1986, as 44 Table of Contents amended (the “Code”).
The future utilization of our net operating loss and tax credit carryforwards (collectively, “Tax Attributes”) may be limited due to changes in ownership as defined under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).
Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation 45 Table of Contents reports regarding the effectiveness of our internal control over financial reporting.
Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting.
AI is an emerging technology for which the legal and regulatory landscape is evolving rapidly, which may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality, privacy, intellectual 23 Table of Contents property or security risks, ethical concerns, legal liability or other complications that could adversely affect our business, reputation and financial results.
AI is an emerging technology for which the legal and regulatory landscape is evolving rapidly, which may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality, privacy, intellectual property or security risks, ethical concerns, legal liability or other complications that could adversely affect our business, reputation and financial results.
In addition, some of our customers choose to use both our services and our competitors’ services in order to 20 Table of Contents provide redundancy in their ability to deliver their own product offerings. Moreover, as we expand the scope of our services, we may face additional competition.
In addition, some of our customers choose to use both our services and our competitors’ services in order to provide redundancy in their ability to deliver their own product offerings. Moreover, as we expand the scope of our services, we may face additional competition.
The court, citing Loper Bright , found that the FCC exceeded its statutory authority under the TCPA by imposing the new consent restrictions. Proceedings before the FCC or regulators from international jurisdictions could limit our access to various network services or further increase the rates we must pay for such services.
The court, citing Loper Bright , found that the FCC exceeded its statutory authority under the TCPA by imposing the new consent restrictions. 31 Table of Contents Proceedings before the FCC or regulators from international jurisdictions could limit our access to various network services or further increase the rates we must pay for such services.
Competition for talent in the technology industry has become increasingly intense, and the market to recruit, retain 42 Table of Contents and motivate talent has become even more competitive. Many key individual contributors, particularly in software development, sales and cloud computing and telecommunications infrastructure, are critical to our success and can attract very significant compensation packages.
Competition for talent in the technology industry has become increasingly intense, and the market to recruit, retain and motivate talent has become even more competitive. Many key individual contributors, particularly in software development, sales and cloud computing and telecommunications infrastructure, are critical to our success and can attract very significant compensation packages.
Although our service agreements generally limit our liability for service failures and generally exclude 38 Table of Contents any liability for “consequential” damages such as lost profits, a court might not enforce these limitations on liability, which could expose us to financial loss. We also sometimes provide our customers with committed service levels.
Although our service agreements generally limit our liability for service failures and generally exclude any liability for “consequential” damages such as lost profits, a court might not enforce these limitations on liability, which could expose us to financial loss. We also sometimes provide our customers with committed service levels.
To the extent we hire personnel from competitors, we also may be subject to allegations that they have been improperly solicited or hired, or that they divulged proprietary or other confidential information. Volatility or declines in our stock price may also affect our ability to attract and retain key personnel.
To the extent we hire personnel from competitors, we also may be subject to allegations that they have been improperly solicited or hired, or that they divulged proprietary or other confidential information. 43 Table of Contents Volatility or declines in our stock price may also affect our ability to attract and retain key personnel.
The success of any enhancements or new services or features depends on 22 Table of Contents several factors, including timely completion, adequate quality testing, actual performance quality, market-accepted pricing levels and overall market acceptance.
The success of any enhancements or new services or features depends on several factors, including timely completion, adequate quality testing, actual performance quality, market-accepted pricing levels and overall market acceptance.
In the event the conditional conversion feature of the Convertible Notes is triggered, holders of Convertible Notes will be entitled to convert the Convertible Notes at any time during specified periods at their option as described in the indentures governing the Convertible Notes.
In addition, if the conditional conversion feature of the Convertible Notes is triggered, holders of Convertible Notes will be entitled to convert the Convertible Notes at any time during specified periods at their option as described in the indentures governing the Convertible Notes.
In July 2017, S&P Dow Jones, a provider of widely followed stock indices, announced that companies with multiple share classes, such as ours, will not be eligible for inclusion in certain of their indices. As a result, our Class A common stock will likely not be eligible for these stock indices.
In July 2017, S&P Dow Jones, a provider of widely followed stock indices, announced that companies with multiple share classes, such as ours, would not be eligible for inclusion in certain of their indices. As a result, our Class A common stock is not eligible for these stock indices.
If a significant portion of our third-party suppliers fail to provide these services to us on a cost-effective basis or otherwise terminate or interrupt these services, the delay caused by qualifying and switching to other providers could be time consuming and costly and could adversely affect our business, results of operations and financial condition. Our customer churn rate may increase.
If a significant portion of our third-party suppliers fail to provide these services to us on a cost-effective basis or otherwise terminate or interrupt these services, the delay caused by qualifying and switching to other providers could be time consuming and costly and could adversely affect our business, results of operations and financial condition.
Such applications, functions or technologies may inadvertently filter legal and desired calls or messages to or from our customers. In certain instances, we may need to update our services and technology or work with these providers to ensure customer success in the face of these applications, functions or technologies.
Such applications, functions or technologies may inadvertently filter legal and desired calls or messages to or from our customers and in some cases, we may need to update our services and technology or work with these providers to ensure customer success in the face of these applications, functions or technologies.
We may require more capital in the future from equity or debt financings to fund our operations, finance investments in equipment and infrastructure, acquire complementary businesses and technologies, and respond to 54 Table of Contents competitive pressures and potential strategic opportunities.
We may require more capital in the future from equity or debt financings to fund our operations, finance investments in equipment and infrastructure, acquire complementary businesses and technologies, and respond to competitive pressures and potential strategic opportunities.
Lower prices offered by our competitors could contribute to an increase in customer churn. We cannot predict the timing, duration or magnitude of any deteriorated economic conditions or its impact on our target of customers. Higher customer churn rates could adversely affect our revenue growth. Higher customer churn rates could cause our net retention rate to decline.
Lower prices offered by our competitors could contribute to an increase in customer churn. We cannot predict the timing, duration or magnitude of any deteriorated economic conditions or its impact on our target of customers. Higher customer churn rates could adversely affect our revenue growth.
Because of the ten-to-one voting ratio between our Class B and Class A common stock, these holders of our Class B common stock collectively control approximately 45% of the combined voting power of our common stock and therefore would be able to exert significant influence over all matters submitted to our stockholders for approval.
Because of the ten-to-one voting ratio between our Class B and Class A common stock, these holders of our Class B common stock collectively control approximately 42% of the combined voting power of our common stock and therefore would be able to exert significant influence over all 52 Table of Contents matters submitted to our stockholders for approval.
Delays, errors or network equipment or facility failures could result from natural disasters, pandemics, such as COVID-19, disease, accidents, terrorist acts, acts of war, power losses, security breaches, vandalism or other illegal acts, computer viruses or other causes.
Delays, errors or network equipment or facility failures could result from natural disasters, pandemics, disease, accidents, terrorist acts, acts of war, power losses, security breaches, vandalism or other illegal acts, computer viruses or other causes.
And even if they recognize the need for and benefits of our services and platform, they may decide to adopt alternative services and/or develop the necessary services in-house to satisfy their business needs.
For example, developers and organizations may not recognize the need for, or benefits of, our services and platform. And even if they recognize the need for and benefits of our services and platform, they may decide to adopt alternative services and/or develop the necessary services in-house to satisfy their business needs.
In addition, we are vulnerable to changes in market preferences or other market changes, such as general economic conditions, reduced growth rates, interest rates, tax rates and policies, inflation, a significant shift in government policies and the deterioration of economic relations between countries or regions, including potential negative consumer sentiment toward non-local products or sources.
In addition, we are vulnerable to changes in market preferences or other market changes, as well as general macroeconomic conditions, reduced growth rates, interest rates, tax rates and policies, inflation, a significant shift in U.S., state and foreign government policies and the deterioration of economic relations between countries or regions, including potential negative consumer sentiment toward non-local products or sources.
Operating in international markets requires significant resources and management attention, and subjects us to legal, regulatory, economic and political risks in addition to those we face in the United States. We have limited experience with international operations, and further international expansion efforts may not be successful.
Operating in international markets requires significant resources and management attention, and subjects us to legal, regulatory, economic and political risks in addition to those we face in the United States. Our experience with international operations is more limited than our domestic experience, and further international expansion efforts may not be successful.
These delays, errors or failures could significantly impair our business due to: • service interruptions; • malfunction of our communications platform on which our enterprise users rely for voice, messaging or emergency service functionality; • exposure to customer liability; • the inability to install new service; • the unavailability of employees necessary to provide services; • the delay in the completion of other corporate functions such as issuing bills and the preparation of financial statements; or • the need for expensive modifications to our systems and infrastructure.
These delays, errors or failures could significantly impair our business due to: • service interruptions; • malfunction of our communications platform on which our enterprise users rely for voice, messaging or emergency service functionality; • exposure to customer liability; • the inability to install new service; • the unavailability of employees necessary to provide services; • the delay in the completion of other corporate functions such as issuing bills and the preparation of financial statements; or • the need for expensive modifications to our systems and infrastructure. 39 Table of Contents Defects or errors in our services could diminish demand for our services, harm our business and results of operations and subject us to liability.
Even if claims asserted against us do not 30 Table of Contents result in liability, we may incur substantial costs to investigate and defend such claims.
Even if claims asserted against us do not result in liability, we may incur substantial costs to investigate and defend such claims.
Customers generally are charged based on the usage of our services. Most of our customers do not have long-term contractual financial commitments to us and, therefore, most of our customers may reduce or cease their use of our services at any time without penalty or termination charges.
Most of our customers do not have long-term contractual financial commitments to us and, therefore, most of our customers may reduce or cease their use of our services at any time without penalty or termination charges.
It is also possible that we could be held liable for intellectual property, privacy, or other legal violations of third-party AI that we use, and that we may not have full recourse for any damages that we suffer (for example, our use of third-party AI may be subject to limitations of liability or provide no liability coverage (e.g., free or open-source technology)).
It is also possible that we could be held liable for intellectual property, privacy, or other legal violations of third-party AI that we use, and that we may not have full recourse for any damages that we suffer (for example, our use of third-party AI may be subject to limitations of liability or provide no liability coverage (e.g., free or open-source technology)). 24 Table of Contents The algorithms or training methodologies used in the AI we use or offer may be flawed.
A significant event, such as an earthquake, hurricane, a fire, a flood, a pandemic, such as COVID-19, a power outage, terrorist attack, act of war, such as the ongoing Russia-Ukraine or Middle East conflicts, or civilian 46 Table of Contents unrest could have a material adverse effect on our business, results of operations or financial condition.
A significant event, such as an earthquake, hurricane, a fire, a flood, a pandemic, a power outage, terrorist attack, act of war, such as the ongoing Russia-Ukraine conflict, or civilian unrest could have a material adverse effect on our business, results of operations or financial condition.
As a result, we may be required to spend significantly more than planned on sales and marketing efforts to maintain or increase revenue from customers, which could adversely affect our business, results of operations and financial condition then we may be unable to increase or maintain our revenue at acceptable margins.
As a result, we may be required to spend significantly more than planned on sales and marketing efforts to maintain or increase revenue from customers, which could adversely affect our business, results of operations and financial condition then we may be unable to increase or maintain our revenue at acceptable margins. 22 Table of Contents If we are unable to increase the revenue that we derive from enterprises, our business, results of operations and financial condition may be adversely affected.
New 911 outage notification rules promulgated by the FCC will go into effect on April 15, 2025, which will require us to deliver 911 outage notifications to PSAPS. The rules and laws that govern emergency calling services are subject to change as communications technologies and consumer use cases continue to evolve.
New 911 outage notification rules promulgated by the FCC in 2024 went into effect on April 15, 2025, which require us to deliver 911 outage notifications to Public Safety Answering Points. The rules and laws that govern emergency calling services are subject to change as communications technologies and consumer use cases continue to evolve.
If we fail to achieve the necessary level of efficiency in our organization as we grow, then our business, results of operations and financial condition could be adversely affected. Our pricing and billing systems are complex, and errors could adversely affect our results of operations. Our pricing and billing systems are complex to develop and challenging to implement.
If we are unable to effectively maintain our corporate culture or fail to achieve the necessary level of efficiency in our organization as we grow, then our business, results of operations and financial condition could be adversely affected. Our pricing and billing systems are complex, and errors could adversely affect our results of operations.
As a result, if we earn net taxable income, our ability to use our pre-change Tax Attributes to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.
As a result, if we earn net taxable income, our ability to use our pre-change Tax Attributes to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. If we redeem or repurchase shares of our stock in the future, we could be subject to an excise tax.
During the course of an audit, a taxing authority may, as a matter of policy, question our interpretation and/or application of their rules in a manner that, if we were not successful in substantiating our position, could potentially result in a significant financial impact to us.
During the course of an audit, a taxing authority may, as a matter of policy, question our interpretation and/or application of their rules in a manner that, if we were not successful in substantiating our position, could potentially result in a significant financial impact to us. See also “Part I, Item 3. Legal Proceedings” in this Annual Report.
Failure to comply with these requirements, or failure of our communications platform such that 911 and other emergency calls did not complete or were misrouted, may result in FCC, foreign regulatory or other enforcement action, state attorneys’ general investigations, potential exposure to significant monetary penalties, cease and desist orders, civil liability to our users and their customers, loss of user confidence in our services, loss of users, and other adverse consequences, which could materially harm our business.
Failure to comply with these requirements, or failure of our communications platform such that 911 and other emergency calls did not complete or were misrouted, may result in FCC, foreign regulatory or other enforcement action, state attorneys’ general investigations, potential exposure to significant monetary penalties, cease and desist orders, civil liability to our users and their customers, loss of user confidence in our services, loss of users, and other adverse consequences, which could materially harm our business. 40 Table of Contents National regulations, including the FCC’s rules, also require that we timely report certain 911 and other emergency service outages.
If current or future regulations change, the Federal Communications Commission (the “FCC”), state or local regulators or regulators in jurisdictions abroad may not grant us required regulatory authorizations or may take action against us if we are found to have provided services without obtaining the necessary authorizations, or to have violated other requirements of their rules and orders.
If current or future regulations change, the FCC, state or local regulators or regulators in jurisdictions abroad may not grant us required regulatory authorizations or may take action against us if they determine we have provided services without obtaining the necessary authorizations or that we have violated other requirements of their rules and orders.
In addition, our organizational structure has become more complex. In order to manage these increasing complexities, we will need to continue to scale and adapt our operational, financial and management controls, and our reporting systems and procedures.
In order to manage these increasing complexities, we will need to continue to scale and adapt our operational, financial and management controls, and our reporting systems and procedures.
If we lost one or more of our top ten customers, or, if one or more of these major customers significantly decreased orders for our services, our business would be materially and adversely affected.
If we lost several of our top ten customers, or, if several of these major customers significantly decreased their usage of our services, our business would be materially and adversely affected.
We face a risk of litigation and/or regulatory enforcement actions resulting from customer or end user misuse of our services and software to make or send unauthorized and/or unsolicited calls and/or messages, including those in violation of the TCPA, the TSR, and other state and federal laws.
We face a risk of litigation and/or regulatory enforcement actions resulting from customer or end user misuse of our services and software to make or send unauthorized and/or unsolicited calls and/or messages, including those in violation of the Telephone Consumer Protection Act of 1991 (the “TCPA”), the Telemarketing Sales Rule (the “TSR”), and other state and federal laws.
Even though we may not control the security measures of these vendors, we may be responsible for any breach of such measures. 28 Table of Contents Cyber-attacks, including through the use of malware, computer viruses, distributed denial of service (“DDoS”) attacks, credential harvesting and other means for obtaining unauthorized access to or disrupting the operation of our networks and systems and those of our suppliers, vendors and other service providers, could cause harm to our business, including by misappropriating our proprietary information or that of our customers, employees and business partners or to cause interruptions of our services and our communications platform.
Cyber-attacks, including through the use of malware, computer viruses, distributed denial of service (“DDoS”) attacks, credential harvesting and other means for obtaining unauthorized access to or disrupting the operation of our networks and systems and those of our suppliers, vendors and other service providers, could cause harm to our business, including by misappropriating our proprietary information or that of our customers, employees and business partners or to cause interruptions of our services and our communications platform.
Our growth and financial health are impacted by a number of risks, including uncertain capital markets, political and economic instability in a number of regions, recessionary fears, high rates of inflation and higher interest rates.
Risks Related to Our Business Our growth and financial health are impacted by a number of risks, including uncertain capital markets, political and economic instability in a number of regions, the imposition of widespread tariffs, unfavorable macroeconomic conditions, recessionary fears, high rates of inflation and higher interest rates.
If we do not comply with these laws or regulations, or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by taking mandatory actions such as obtaining proper customer consent, we could become subject to costly lawsuits, fines, civil penalties, potentially significant statutory damages, consent decrees, injunctions, adverse publicity, loss of user confidence in our services, loss of users and other adverse consequences, which could materially harm our business.
If we do not comply with these laws or regulations, or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by taking mandatory actions such as obtaining proper customer consent, we could become subject to costly lawsuits, fines, civil penalties, potentially significant statutory damages, consent decrees, injunctions, adverse publicity, loss of user confidence in our services, loss of users and other adverse consequences, which could materially harm our business. 30 Table of Contents Some of our customers, or customers of our customers, may use our platform to transmit illegal, offensive, unsolicited and/or unauthorized calls and messages, including spam, phishing scams, and links to harmful applications.
If we are not able to maintain and enhance our brand and increase market awareness of our company and services, then our business, results of operations and financial condition may be adversely affected.
Any such issues could negatively affect customer satisfaction, increase our costs and harm our business, results of operations and financial condition. If we are not able to maintain and enhance our brand and increase market awareness of our company and services, then our business, results of operations and financial condition may be adversely affected.
For example, proceedings before the FCC could result in an increase in the amount we pay to other carriers or a reduction in the revenue we derive from other carriers in, or retroactive liability for, access charges and reciprocal compensation.
For example, a proposed proceeding before the FCC as of February 2026 could result in a change in the amount we pay to other carriers or a reduction in the revenue we derive from other carriers in, or retroactive liability for, access charges and reciprocal compensation.
In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions from time to time prior to the maturity of the Convertible Notes (and are likely to do so during any observation period related to a conversion of Convertible Notes).
We have been advised that, in connection with establishing their initial hedges of the Capped Calls, the option counterparties or their respective affiliates entered into various derivative transactions with respect to our Class A common stock concurrently with or shortly after the pricing of the Convertible Notes. 50 Table of Contents In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions from time to time prior to the maturity of the Convertible Notes (and are likely to do so during any observation period related to a conversion of Convertible Notes).
The algorithms or training methodologies used in the AI we use or offer may be flawed. Datasets may be overly broad, insufficient, or contain inappropriately biased information. Generative AI may also generate outputs that are inaccurate, misleading, harmful, or otherwise flawed.
Datasets may be overly broad, insufficient, or contain inappropriately biased information. Generative AI may also generate outputs that are inaccurate, misleading, harmful, or otherwise flawed.
National regulations, including the FCC’s rules, also require that we timely report certain 911 and other emergency service outages. The FCC or other applicable regulatory authorities may make inquiries regarding matters related to any reported 911 or other emergency service outage. Any inquiry could result in regulatory enforcement action, potential monetary penalties and other adverse consequences.
The FCC or other applicable regulatory authorities may make inquiries regarding matters related to any reported 911 or other emergency service outage. Any inquiry could result in regulatory enforcement action, potential monetary penalties and other adverse consequences.
A sustained and significant growth in the churn rate could have a material adverse effect on our business. The market prices for certain of our services have decreased in the past and may decrease in the future, resulting in lower revenue than we anticipate. Market prices for certain of our services have decreased over recent years.
Higher 41 Table of Contents customer churn rates could cause our net retention rate to decline. A sustained and significant growth in the churn rate could have a material adverse effect on our business. The market prices for certain of our services have decreased in the past and may decrease in the future, resulting in lower revenue than we anticipate.
Any management of organizational changes in a manner that fails to preserve the key aspects of our culture could hurt our chance for future success, including our ability to recruit and retain personnel, and effectively focus on and pursue our corporate objectives. This, in turn, could adversely affect our business, results of operations and financial condition.
Any management of organizational changes in a manner that fails to preserve the key aspects of our culture could hurt our chance for future success, including our ability to recruit and retain personnel, and effectively focus on and pursue our corporate objectives. In addition, our organizational structure has become more complex.
If we do not successfully maintain and enhance our brand, then our business may not grow, we may see our pricing power reduced relative to competitors and we may lose customers, all of which would adversely affect our business, results of operations and financial condition.
If we do not successfully maintain and enhance our brand, then our business may not grow, we may see our pricing power reduced relative to competitors and we may lose customers, all of which would adversely affect our business, results of operations and financial condition. 26 Table of Contents Any failure to deliver and maintain high-quality customer support may adversely affect our relationships with our customers and prospective customers, and could adversely affect our reputation, business, results of operations and financial condition.
We use a variety of marketing channels to promote our services and our communications platform and we periodically adjust the mix of our marketing programs. If the costs of the marketing channels we use increase dramatically, then we may choose to use alternative and less expensive channels, which may not be as effective as the channels we currently use.
If the costs of the marketing channels we use increase dramatically, then we may choose to use alternative and less expensive channels, which may not be as effective as the channels we currently use.
Costs of obtaining service from other communications carriers comprise a significant proportion of the operating expenses of long distance carriers. Changes in regulation, particularly the regulation of telecommunication carriers and local access network owners, could indirectly, but significantly, affect our competitive position. These changes could increase or decrease the costs of providing our services.
Changes in regulation, particularly the regulation of telecommunication carriers and local access network owners, could indirectly, but significantly, affect our competitive position. These changes could increase or decrease the costs of providing our services.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur team of cybersecurity professionals collaborates with legal, technical and business stakeholders to further analyze the risks to the company and form detection, mitigation and remediation strategies. As part of the processes described above, we regularly engage external auditors and consultants to assess our cybersecurity programs and compliance with applicable practices and standards.
Biggest changeFrom time to time, we also conduct exercises to simulate responses to cybersecurity incidents. Our team of cybersecurity professionals collaborates with legal, technical and business stakeholders to further analyze the risks to the company and form detection, mitigation and remediation strategies.
Our CIO and our Vice President, Information Security lead our global information security organization and are responsible for overseeing our information security program. Our Vice President, Information Security has over 25 years of industry experience, including serving in similar roles, building, leading and overseeing cybersecurity 56 Table of Contents programs at other private and public companies.
Our CIO and our Vice President, Information Security lead our global information security organization and are responsible for overseeing our information security program. Our Vice President, Information Security has over 25 years of industry experience, including serving in similar roles, building, leading and overseeing cybersecurity programs at other private and public companies.
We regularly remind employees of the importance of handling and protecting customer and employee data, and our policies require each of our employees to undergo annual privacy and information security training designed to enhance employee awareness of how to detect and respond to cybersecurity threats.
We regularly remind employees of the importance of handling and protecting customer and employee data, and our 57 Table of Contents policies require each of our employees to undergo annual privacy and information security training designed to enhance employee awareness of how to detect and respond to cybersecurity threats.
With respect to cybersecurity threats, we use various security tools that help prevent, identify, escalate, investigate, resolve and recover from identified vulnerabilities and security incidents in a timely manner with continuous monitoring from our Security Operations Center.
In addition, we perform vulnerability scans daily on our systems and assets. 56 Table of Contents With respect to cybersecurity threats, we use various security tools that help prevent, identify, escalate, investigate, resolve and recover from identified vulnerabilities and security incidents in a timely manner with continuous monitoring from our Security Operations Center.
We have implemented incident response and breach management processes, which have four overarching and interconnected workflows: (1) detection and analysis of a security or privacy incident, (2) investigation, mitigation and remediation, (3) reporting and notification, and (4) post-incident analysis.
We have implemented incident response and breach management processes, which have four overarching and interconnected workflows: (1) detection and analysis of a security or privacy incident, (2) investigation, mitigation and remediation, (3) reporting and notification, and (4) post-incident analysis. These processes may involve participants from our information security, network, information technology, software development, executive and legal teams.
Our Information Security Management System has been certified to conform to the requirements of ISO/IEC 27001:2013 and AICPA SOC 2 Type II, which includes all five of the Trust Services Criteria.
As part of the processes described above, we regularly engage external auditors and consultants to assess our cybersecurity programs and compliance with applicable practices and standards. Our Information Security Management System has been certified to conform to the requirements of ISO/IEC 27001:2013 and AICPA SOC 2 Type II, which includes all five of the Trust Services Criteria.
Our Application Security program performs static and dynamic scanning of systems and software code. In addition, we perform vulnerability scans daily on our systems and assets.
Our Application Security program performs static and dynamic scanning of systems and software code.
Removed
These processes may involve participants from our information security, network, information technology, software development, executive and legal teams. 55 Table of Contents From time to time, we also conduct exercises to simulate responses to cybersecurity incidents.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFuture litigation may be necessary to defend ourselves, our partners and our customers by determining the scope, 57 Table of Contents enforceability and validity of third-party proprietary rights, or to establish our proprietary rights or to recover amounts owed to us.
Biggest changeFuture litigation may be necessary to defend ourselves, our partners and our customers by determining the scope, enforceability and validity of third-party proprietary rights, or to establish our proprietary rights or to recover amounts owed to us. The results of any current or future litigation in which we engage cannot be predicted with certainty.
We have received, and may in the future continue to receive, claims from third parties relating to number management and billing, employment-related claims, claims arising from customer misuse of our offerings, and claims asserting, among other things, infringement of their intellectual property rights.
In addition to the litigation referenced above, we have received, and may in the future continue to receive, claims from third parties relating to number management and billing, employment-related claims, claims arising from customer misuse of our offerings, and claims asserting, among other things, infringement of their intellectual property rights.
The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Item 4. Mine Safety Disclosures Not applicable. 58 Table of Contents PART II - OTHER INFORMATION
Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Item 4. Mine Safety Disclosures Not applicable. 58 Table of Contents PART II - OTHER INFORMATION
Removed
Legal Proceedings Phone Recovery Services, LLC and Phone Administrative Services, Inc. acting or purporting to act on behalf of applicable jurisdictions, or the applicable county or city itself, have filed multiple lawsuits against us and/or one of our subsidiaries alleging that we failed to bill, collect and remit certain taxes and surcharges associated with the provision of 911 services.
Added
Item 3. Legal Proceedings Information with respect to this item may be found in Note 11, “Commitments and Contingencies,” in the accompanying notes to the consolidated financial statements contained in Part II, Item 8 of this Annual Report on Form 10-K, under “Legal Matters”, which is incorporated herein by reference.
Removed
The following county or municipal governments have named us in lawsuits that remain unresolved and are associated with the collection and remittance of 911 taxes and surcharges: (a) the City and County of San Francisco, California; and (b) the following Illinois jurisdictions, collectively: Cook and Kane Counties, Illinois, the City of Chicago, Illinois, and the State of Illinois.
Removed
The complaints allege that we failed to bill, collect and remit certain taxes and surcharges associated with 911 services pursuant to applicable laws. We intend to vigorously defend these lawsuits and believe we have meritorious defenses to each.
Removed
However, litigation is inherently uncertain, and any judgment or injunctive relief entered against us or any adverse settlement could negatively affect our business, results of operations and financial condition. In addition to the litigation discussed above, from time to time, we may be subject to legal actions and claims in the ordinary course of business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePrior to that date, there was no public trading market for our Class A common stock. Stockholders As of February 14, 2025, we had 23 holders of record of our Class A and Class B common stock.
Biggest changePrior to that date, there was no public trading market for our Class A common stock. Stockholders As of February 13, 2026, we had 18 holders of record of our Class A and Class B common stock.
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item is incorporated by reference to our Proxy Statement relating to our 2025 Annual Meeting of Stockholders. The Proxy Statement will be filed with the SEC within 120 days of the fiscal year ended December 31, 2024.
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item is incorporated by reference to our Proxy Statement relating to our 2026 Annual Meeting of Stockholders. The Proxy Statement will be filed with the SEC within 120 days of the fiscal year ended December 31, 2025.
The graph assumes $100 was invested in our Class A common stock and in each index from December 31, 2019 to December 31, 2024, and assumes reinvestment of any dividends. 59 Table of Contents The comparisons in the graph below are based on historical data and are not indicative of, nor intended to forecast, the future performance of our Class A common stock.
The graph assumes $100 was invested in our Class A common stock and in each index from December 31, 2020 to December 31, 2025, and assumes reinvestment of any dividends. 59 Table of Contents The comparisons in the graph below are based on historical data and are not indicative of, nor intended to forecast, the future performance of our Class A common stock.
Removed
Recent Sales of Unregistered Securities From January 1, 2024 through December 31, 2024, we did not sell any securities on an unregistered basis. Item 6. [Reserved] 60 Table of Contents Management ’ s Discussion and Analysis
Added
Recent Sales of Unregistered Securities From January 1, 2025 through December 31, 2025, we did not sell any securities on an unregistered basis. Share Repurchase Program On February 19, 2026, our Board of Directors authorized a share repurchase program of up to $80.0 million of our outstanding Class A common stock, subject to market conditions, contractual restrictions and other factors.
Added
Under the share repurchase program, we may purchase shares from time to time at the discretion of management through open market purchases, block trades, accelerated or other structured share repurchase programs, privately negotiated transactions, Rule 10b5-1 plans or other means.
Added
Open market repurchases will be structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended.
Added
The manner, timing, pricing and amount of any transactions will be subject to the discretion of management and may be based upon market conditions, regulatory requirements and alternative opportunities that we may have for the use or investment of our capital.
Added
The program does not obligate us to acquire any particular amount of Class A common stock, and the program may be extended, modified, suspended or terminated at any time at our discretion. Item 6. [Reserved] 60 Table of Contents Management ’ s Discussion and Analysis

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

76 edited+14 added−50 removed47 unchanged
Biggest changeAs a result of the adoption of ASU No. 2020-06 on January 1, 2022, we add back cash interest expense on the Convertible Notes, as if converted at the beginning of the period, if the impact is dilutive for the purposes of calculating diluted Non-GAAP net income or loss per Non-GAAP share. 75 Table of Contents Management ’ s Discussion and Analysis Year ended December 31, 2024 2023 2022 ( In thousands, except share and per share amounts ) Net (loss) income $ (6,524) $ (16,343) $ 19,570 Stock-based compensation 48,362 36,992 20,655 Amortization of acquired intangibles 17,503 17,274 17,180 Amortization of debt discount and issuance costs for convertible debt 1,492 2,004 2,977 Gain on sale of business — — (3,777) Net cost associated with early lease terminations and leases without economic benefit 2,387 3,954 — Net gain on extinguishment of debt (10,267) (12,767) (40,205) Gain on business interruption insurance recoveries — (4,000) — Non-recurring items not indicative of ongoing operations and other (1) (571) 1,171 1,992 Estimated tax effects of adjustments (2) (11,486) (5,525) (3,396) Non-GAAP net income $ 40,896 $ 22,760 $ 14,996 Interest expense on Convertible Notes (3) 1,118 1,287 1,666 Numerator used to compute Non-GAAP diluted net income per share $ 42,014 $ 24,047 $ 16,662 Net (loss) income per share Basic $ (0.24) $ (0.64) $ 0.77 Diluted $ (0.24) $ (0.64) $ (0.48) Non-GAAP net income per Non-GAAP share Basic $ 1.50 $ 0.89 $ 0.59 Diluted $ 1.34 $ 0.83 $ 0.54 Weighted average number of shares outstanding Basic 27,209,698 25,612,724 25,282,796 Diluted 27,209,698 25,612,724 30,907,869 Non-GAAP basic shares 27,209,698 25,612,724 25,282,796 Convertible debt conversion 2,321,106 3,442,229 5,625,073 Stock options issued and outstanding 29,731 39,152 100,088 Nonvested RSUs outstanding 1,822,530 — — Non-GAAP diluted shares 31,383,065 29,094,105 31,007,957 ________________________ (1) Non-recurring items not indicative of ongoing operations and other include (i) $0.4 million, $0.8 million, and $0.5 million of losses on disposals of property, plant and equipment during the years ended December 31, 2024, 2023 and 2022, respectively, (ii) $1.0 million gain on the sale of an intangible asset during the year ended December 31, 2024, (iii) $0.4 million of expense resulting from the early termination of our undrawn SVB credit facility during the year ended December 31, 2023, and (iv) $0.9 million of foreign currency losses on the settlement of intercompany borrowings, which were repatriated in conjunction with the repurchase of a portion of the 2026 Convertible Notes and $0.6 million of nonrecurring litigation expense for the year ended December 31, 2022. 76 Table of Contents Management ’ s Discussion and Analysis (2) The estimated tax-effect of adjustments is determined by recalculating the tax provision on a Non-GAAP basis.
Biggest changeAs a result of the adoption of ASU No. 2020-06 on January 1, 2022, we add back cash interest expense on the Convertible Notes, as if converted at the beginning of the period, if the impact is dilutive for the purposes of calculating diluted Non-GAAP net income or loss per Non-GAAP share. 72 Table of Contents Management ’ s Discussion and Analysis The following table shows a reconciliation of net loss to non-GAAP net income and net loss per share to non-GAAP net income per non-GAAP share for the periods presented: Year ended December 31, 2025 2024 2023 ( In thousands, except share and per share amounts ) Net loss $ (12,912) $ (6,524) $ (16,343) Stock-based compensation 52,332 48,362 36,992 Amortization of acquired intangibles 18,094 17,503 17,274 Amortization of debt discount and issuance costs for convertible debt 1,133 1,492 2,004 Net cost associated with early lease terminations and leases without economic benefit — 2,387 3,954 Net gain on extinguishment of debt (1,082) (10,267) (12,767) Gain on business interruption insurance recoveries — — (4,000) Non-recurring items not indicative of ongoing operations and other (1) 2,813 (571) 1,171 Estimated tax effects of adjustments (2) (14,460) (11,486) (5,525) Non-GAAP net income $ 45,918 $ 40,896 $ 22,760 Interest expense on Convertible Notes (3) 964 1,118 1,287 Numerator used to compute Non-GAAP diluted net income per share $ 46,882 $ 42,014 $ 24,047 Net loss per share, basic and diluted $ (0.43) $ (0.24) $ (0.64) Non-GAAP net income per Non-GAAP share Basic $ 1.53 $ 1.50 $ 0.89 Diluted $ 1.43 $ 1.34 $ 0.83 Weighted average number of shares outstanding, basic and diluted 29,996,861 27,209,698 25,612,724 Non-GAAP basic shares 29,996,861 27,209,698 25,612,724 Convertible debt conversion 1,522,858 2,321,106 3,442,229 Stock options issued and outstanding 20,526 29,731 39,152 Nonvested RSUs outstanding 1,313,572 1,822,530 — Non-GAAP diluted shares 32,853,817 31,383,065 29,094,105 ________________________ (1) Non-recurring items not indicative of ongoing operations and other include (i) $1.3 million of foreign exchange charges primarily related to balance sheet revaluations during the year ended December 31, 2025, (ii) $0.9 million, $0.4 million, and $0.8 million of losses on disposals of property, plant and equipment during the years ended December 31, 2025, 2024 and 2023, respectively, (iii) $0.5 million of nonrecurring litigation expense and $0.1 million of losses on sale of business during the year ended December 31, 2025, (iv) $1.0 million gain on the sale of an intangible asset during the year ended December 31, 2024, and (v) $0.4 million of expense resulting from the early termination of our undrawn SVB credit facility during the year ended December 31, 2023.
Backed by the Bandwidth Communications Cloud, a global owned-and-operated network spanning more than 65 countries reaching over 90 percent of GDP, innovative enterprises use Bandwidth’s 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.
Backed by the Bandwidth Communications Cloud, our global owned-and-operated network spanning more than 65 countries reaching over 90 percent of GDP, innovative enterprises use Bandwidth’s APIs to easily embed voice, messaging, emergency services, and AI 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.
In our calculation of Non-GAAP gross profit and Non-GAAP gross margin, we eliminate the impact of depreciation and amortization, amortization of acquired intangible assets related to acquisitions, stock-based compensation, pass-through messaging surcharges, and all non-cash items, because we do not consider them indicative of our core operating performance.
In our calculation of Non-GAAP gross profit and Non-GAAP gross margin, we eliminate the impact of depreciation and amortization, amortization of acquired intangible assets related to acquisitions, stock-based compensation, pass-through messaging surcharges, and all significant non-cash items, because we do not consider them indicative of our core operating performance.
Key Performance Indicator We monitor the following key performance indicator (“KPI”) 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.
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.
As of December 31, 2024, we continue to maintain a valuation allowance against our U.S. federal and state net deferred tax assets. 64 Table of Contents Management ’ s Discussion and Analysis Results of Operations The following table sets forth selected consolidated statements of operations data for the periods indicated.
As of December 31, 2025, we continue to maintain a valuation allowance against our U.S. federal and state net deferred tax assets. 64 Table of Contents Management ’ s Discussion and Analysis Results of Operations The following table sets forth selected consolidated statements of operations data for the periods indicated.
As of December 31, 2024, we completed a qualitative assessment under ASC 350 to determine whether the existence of events or circumstances indicated that it was more likely than not that the fair value of our one reporting unit was less than its respective carrying value.
As of December 31, 2025 and 2024, we completed a qualitative assessment under ASC 350 to determine whether the existence of events or circumstances indicated that it was more likely than not that the fair value of our one reporting unit was less than its respective carrying value.
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 SaaS platforms that use conversational voice and messaging to create digital engagements that enhance the customer experience.
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, powerful APIs, and AI orchestration capabilities 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) be the preferred provider for enterprises and SaaS platforms that use conversational voice and messaging to create digital engagements that enhance the customer experience.
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 years ended December 31, 2024, 2023 and 2022, we generated 74%, 72%, and 73%, respectively, of our cloud communications revenue from reoccurring sources.
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 years ended December 31, 2025, 2024 and 2023, we generated 74%, 74%, and 72%, respectively, of our cloud communications revenue from reoccurring sources.
Using the aforementioned approach, we recorded $70 million and $68 million in valuation allowance on our deferred tax assets in 2024 and 2023, respectively. We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is more likely than not that the position will be sustained upon examination.
Using the aforementioned approach, we recorded $71 million and $70 million in valuation allowance on our deferred tax assets in 2025 and 2024, respectively. We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is more likely than not that the position will be sustained upon examination.
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 years ended December 31, 2024, 2023 and 2022, our effective tax rate was 27.1%, 15.3% , and (13.1)% , respectively.
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 years ended December 31, 2025, 2024 and 2023, our effective tax rate was 22.2%, 27.1%, and 15.3%, respectively.
See Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on our accounting policies. Revenue Recognition and Deferred Revenue We generate revenue primarily from the sale of communications services to enterprise customers.
See Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on our accounting policies. Revenue Recognition and Deferred Revenue We generate revenue primarily from the sale of communications services to enterprise customers.
Our principal future commitments consist of (i) an aggregate of $285 million in Convertible Notes , (ii) $471 million in future minimum rent payments for our current office space, including a $464 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) $15 million in non-cancelable purchase obligations and future minimum payments under contracts to various service providers.
Our principal future commitments consist of (i) an aggregate of $258 million in Convertible Notes , (ii) $452 million in future minimum rent payments for our current office space, including a $445 million non-cancelable lease for our corporate headquarters , which commenced in the third quarter of 2023 and which will continue for an initial twenty (20) year term , and (iii) $24 million in non-cancelable purchase obligations and future minimum payments under contracts to various service providers.
Recently Issued Accounting Guidance See Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a summary of recently adopted accounting standards and recent accounting pronouncements not yet adopted, if applicable. 81 Table of Contents
Recently Issued Accounting Guidance See Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a summary of recently adopted accounting standards and recent accounting pronouncements not yet adopted, if applicable. 77 Table of Contents
Bandwidth’s business benefits from multiple global megatrends, including enterprise migration to the cloud, adoption of 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 AI technologies to cloud communications use cases.
Bandwidth’s business continues to benefit from the application of AI technologies to cloud communications use cases, the enterprise migration to the cloud, adoption of CCaaS platforms, the need to be able to work from anywhere, the reinvention of customer experience, and the growth in messaging applications to engage directly with consumers.
Within operating assets, the net cash used as a result of higher accounts receivable of $9 million during 2024 was driven by higher unbilled receivables balances, primarily from higher messaging sales.
Within operating assets, the net cash used as a result of higher accounts receivable of $9 million during 2024 was driven by higher unbilled receivables balances, primarily from higher messaging sales. Cash Flows from Investing Activities In 2025, net cash used in investing activities was $39 million.
In 2023, n et cash provided by operating activities was $39 million and was generated by our aggregate results of $55 million during the period, net of (1) non-cash items comprising depreciation and amortization, non-cash reduction to the right-of-use asset, amortization of debt discount and issuance costs, stock-based compensation, deferred taxes and other, and net gain on extinguishment of debt and (2) a $16 million cash outflow from lower operating liabilities and higher operating assets.
In 2024, net cash provided by operating activities was $84 million and was generated by our aggregate results of $81 million during the period, net of (1) non-cash items comprising depreciation and amortization, non-cash reduction to the right-of-use asset, amortization of debt discount and issuance costs, stock-based compensation, deferred taxes and other, gain on sale of intangible asset, net gain on extinguishment of debt and (2) a $3 million cash inflow from higher operating liabilities and lower operating assets.
Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net 80 Table of Contents Management ’ s Discussion and Analysis cash flows expected to be generated by the asset or asset group.
Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group.
Cash used in investing activities was primarily driven by (1) cash used for the purchase of property, plant and equipment of $14 million and cash used for capitalized software development costs of $11 million, driven by investments in the communications platform, (2) cash provided by the maturities of marketable securities, net of purchases, of $19 million to partially fund the 2024 Repurchases and (3) net cash provided by the refund of construction in progress deposits of $3 million related to the completion of construction for our Raleigh, NC headquarters.
Cash used in investing activities was primarily driven by (1) cash used for the purchase of property, plant and equipment of $14 million and cash used for capitalized software development costs of $11 million, driven by investments in the communications platform, (2) cash provided by the maturities of marketable securities, net of purchases, of $19 million to partially fund the 2024 Repurchases and (3) net cash provided by the refund of construction in progress deposits of $3 million related to the completion of construction for our Raleigh, NC headquarters. 69 Table of Contents Management ’ s Discussion and Analysis Cash Flows from Financing Activities In 2025, net cash used in financing activities was $29 million , consisting primarily of $26 million of cash used to complete the 2025 Repurchases.
Income Tax Benefit In 2024, we recognized an income tax benefit of $2 million , a decrease of $1 million , compared with the same period in 2023 . The resulting effective tax rate for the year ended December 31, 2024 was 27.1%, compared with 15.3% in 2023 .
Income Tax Benefit In 2025 , we recognized an income tax benefit of $4 million , an increase of $1 million compared with the same period in 2024 . The resulting effective tax rate for the year ended December 31, 2025 was 22.2%, compared with 27.1% in 2024 .
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.
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.
Year ended December 31, 2024 2023 2022 (In thousands) Net (loss) income $ (6,524) $ (16,343) $ 19,570 Income tax benefit (2,429) (2,960) (2,264) Interest expense, net 1,861 808 3,048 Depreciation 31,739 24,443 18,419 Amortization 17,503 17,274 17,180 Stock-based compensation 48,362 36,992 20,655 Gain on sale of business — — (3,777) Net cost associated with early lease terminations and leases without economic benefit 2,387 3,954 — Net gain on extinguishment of debt (10,267) (12,767) (40,205) Gain on business interruption insurance recoveries — (4,000) — Non-recurring items not indicative of ongoing operations and other (1) (571) 769 1,992 Adjusted EBITDA $ 82,061 $ 48,170 $ 34,618 ________________________ (1) Non-recurring items not indicative of ongoing operations and other include (i) $0.4 million, $0.8 million, and $0.5 million of losses on disposals of property, plant and equipment during the years ended December 31, 2024, 2023 and 2022, respectively, (ii) $1.0 million gain on the sale of an intangible asset during the year ended December 31, 2024, and (iii) $0.9 million of foreign currency losses on the settlement of intercompany borrowings, which were repatriated in conjunction with the repurchase of a portion of the 2026 Convertible Notes and $0.6 million of nonrecurring litigation expense for the year ended December 31, 2022. 78 Table of Contents Management ’ s Discussion and Analysis Free Cash Flow Free cash flow represents net cash provided by or used in operating activities less net cash used in the acquisition of property, plant and equipment and capitalized development costs of software for internal use.
The following table shows a reconciliation of net loss to Adjusted EBITDA for the periods presented: Year ended December 31, 2025 2024 2023 (In thousands) Net loss $ (12,912) $ (6,524) $ (16,343) Income tax benefit (3,679) (2,429) (2,960) Interest expense, net 2,028 1,861 808 Depreciation 35,670 31,739 24,443 Amortization 18,094 17,503 17,274 Stock-based compensation 52,332 48,362 36,992 Net cost associated with early lease terminations and leases without economic benefit — 2,387 3,954 Net gain on extinguishment of debt (1,082) (10,267) (12,767) Gain on business interruption insurance recoveries — — (4,000) Non-recurring items not indicative of ongoing operations and other (1) 2,813 (571) 769 Adjusted EBITDA $ 93,264 $ 82,061 $ 48,170 ________________________ (1) Non-recurring items not indicative of ongoing operations and other include (i) $1.3 million of foreign exchange charges primarily related to balance sheet revaluations during the year ended December 31, 2025, (ii) $0.9 million, $0.4 million, and $0.8 million of losses on disposals of property, plant and equipment during the years ended December 31, 2025, 2024 and 2023, respectively, (iii) $0.5 million of nonrecurring litigation expense and $0.1 million of losses on sale of business during the year ended December 31, 2025, (iv) $1.0 million gain on the sale of an intangible asset during the year ended December 31, 2024. 74 Table of Contents Management ’ s Discussion and Analysis Free Cash Flow Free cash flow represents net cash provided by or used in operating activities less net cash used in the acquisition of property, plant and equipment and capitalized development costs of software for internal use.
Year ended December 31, 2024 2023 2022 (In thousands) Net cash provided by operating activities $ 83,883 $ 39,001 $ 34,906 Net cash used in investing in capital assets (1) (25,380) (19,899) (45,416) Free cash flow $ 58,503 $ 19,102 $ (10,510) ________________________ (1) Represents the acquisition cost of property, plant and equipment and capitalized development costs for software for internal use.
The following table presents free cash flow for the periods presented: Year ended December 31, 2025 2024 2023 (In thousands) Net cash provided by operating activities $ 89,491 $ 83,883 $ 39,001 Net cash used in investing in capital assets (1) (32,941) (25,380) (19,899) Free cash flow $ 56,550 $ 58,503 $ 19,102 ________________________ (1) Represents the acquisition cost of property, plant and equipment and capitalized development costs for software for internal use.
Year ended December 31, 2024 2023 2022 (Dollars in thousands) Gross Profit $ 279,958 $ 236,157 $ 238,353 Gross Profit Margin % 37 % 39 % 42 % Depreciation 18,532 16,273 13,602 Amortization of acquired intangible assets 7,811 7,810 7,657 Stock-based compensation 1,638 1,136 404 Non-GAAP Gross Profit $ 307,939 $ 261,376 $ 260,016 Non-GAAP Gross Margin % (1) 57 % 55 % 55 % ________________________ (1) Calculated by dividing Non-GAAP gross profit by cloud communications revenue of $540 million, $479 million, and $475 million for the years ended December 31, 2024, 2023 and 2022, respectively. 74 Table of Contents Management ’ s Discussion and Analysis Non-GAAP Net Income We define Non-GAAP net income as net income or loss adjusted for certain items affecting period-to-period comparability.
The following table shows a reconciliation of gross profit to non-GAAP gross profit and gross profit margin to non-GAAP gross margin for the periods presented: Year ended December 31, 2025 2024 2023 (Dollars in thousands) Gross Profit $ 295,051 $ 279,958 $ 236,157 Gross Profit Margin % 39 % 37 % 39 % Depreciation 20,673 18,532 16,273 Amortization of acquired intangible assets 8,142 7,811 7,810 Stock-based compensation 2,159 1,638 1,136 Non-GAAP Gross Profit $ 326,025 $ 307,939 $ 261,376 Non-GAAP Gross Margin % (1) 58 % 57 % 55 % ________________________ (1) Calculated by dividing Non-GAAP gross profit by cloud communications revenue of $561 million, $540 million, and $479 million for the years ended December 31, 2025, 2024 and 2023, respectively. 71 Table of Contents Management ’ s Discussion and Analysis Non-GAAP Net Income We define Non-GAAP net income as net income or loss adjusted for certain items affecting period-to-period comparability.
For the years ended December 31, 2024 and 2023, the effective tax rate of 27.1% and 15.3% 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.
For the years ended December 31, 2025 and 2024, the effective tax rate of 22.2% and 27.1% 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, as well as differences in statutory income tax rates across foreign jurisdictions.
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 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.
In 2022, net cash used in financing activities was $120 million, consisting primarily of $117 million net cash paid to repurchase $160 million aggregate principal amount of the 2026 Convertible Notes. 73 Table of Contents Management ’ s Discussion and Analysis Non-GAAP Financial Measures We use Non-GAAP gross profit, Non-GAAP gross margin, Non-GAAP net income, Adjusted EBITDA and free cash flow for financial and operational decision making and to evaluate period-to-period differences in our performance.
In 2024, net cash used in financing activities was $131 million, consisting primarily of $129 million of cash used to complete the 2024 Repurchases. 70 Table of Contents Management ’ s Discussion and Analysis Non-GAAP Financial Measures We use Non-GAAP gross profit, Non-GAAP gross margin, Non-GAAP net income, Adjusted EBITDA and free cash flow for financial and operational decision making and to evaluate period-to-period differences in our performance.
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.
We believe these market trends are secular, long-lasting, and still early in the adoption curve. With the combination of our software APIs, our global Communications Cloud, our AI orchestration capabilities, 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.
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. 63 Table of Contents Management ’ s Discussion and Analysis Operating Expenses The most significant components of operating expenses are personnel costs, which consist of salaries, benefits, bonuses, and stock-based compensation expenses.
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.
Unbilled revenue made up 54%, 56%, and 45% of outstanding accounts receivable, net of allowance for doubtful accounts, as of December 31, 2024, 2023 and 2022, respectively.
Unbilled revenue made up 63%, 54%, and 56% of outstanding accounts receivable, net of allowances, as of December 31, 2025, 2024 and 2023, respectively.
Adjusted EBITDA We define Adjusted EBITDA as net income or losses from continuing operations, adjusted to reflect the addition or elimination of certain income statement items including, but not limited to: • income tax (benefit) provision; • interest (income) expense, net; • depreciation and amortization expense; • acquisition related expenses; • stock-based compensation expense; • impairment of intangible assets, if any; • (gain) loss on sale of business; • net cost associated with early lease terminations and leases without economic benefit; • net (gain) loss on extinguishment of debt; • gain on business interruption insurance recoveries; and • non-recurring items not indicative of ongoing operations and other. 77 Table of Contents Management ’ s Discussion and Analysis Adjusted EBITDA is a key measure u sed by management to understand and evaluate our core operating performance and trends, to generate future operating plans and to make strategic decisions regarding the allocation of capital.
(3) Non-GAAP net income is increased for interest expense as part of the calculation for diluted Non-GAAP earnings per share. 73 Table of Contents Management ’ s Discussion and Analysis Adjusted EBITDA We define Adjusted EBITDA as net income or losses from continuing operations, adjusted to reflect the addition or elimination of certain income statement items including, but not limited to: • income tax (benefit) provision; • interest (income) expense, net; • depreciation and amortization expense; • acquisition related expenses; • stock-based compensation expense; • impairment of intangible assets, if any; • (gain) loss on sale of business; • net cost associated with early lease terminations and leases without economic benefit; • net (gain) loss on extinguishment of debt; • gain on business interruption insurance recoveries; and • non-recurring items not indicative of ongoing operations and other.
Following the 2024 Repurchases and previous repurchases, approximately $35.0 million principal amount of the 2026 Convertible Notes remain 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.
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.
Year ended December 31, 2024 2023 2022 (In thousands) Revenue $ 748,487 $ 601,117 $ 573,152 Cost of revenue 468,529 364,960 334,799 Gross profit 279,958 236,157 238,353 Operating expenses Research and development 118,627 104,188 97,990 Sales and marketing 109,698 102,063 96,658 General and administrative 71,692 65,363 68,029 Total operating expenses 300,017 271,614 262,677 Operating loss (20,059) (35,457) (24,324) Other income: Net gain on extinguishment of debt 10,267 12,767 40,205 Gain on business interruption insurance recoveries — 4,000 — Interest expense, net (1,861) (808) (3,048) Other income, net 2,700 195 4,473 Total other income 11,106 16,154 41,630 (Loss) income before income taxes (8,953) (19,303) 17,306 Income tax benefit 2,429 2,960 2,264 Net (loss) income $ (6,524) $ (16,343) $ 19,570 The following table sets forth selected consolidated statements of operations data as a percentage of our total revenue for the periods presented. * Year ended December 31, 2024 2023 2022 Revenue 100 % 100 % 100 % Cost of revenue 63 % 61 % 58 % Gross profit 37 % 39 % 42 % Operating expenses Research and development 16 % 17 % 17 % Sales and marketing 15 % 17 % 17 % General and administrative 10 % 11 % 12 % Total operating expenses 40 % 45 % 46 % Operating loss (3) % (6) % (4) % Other income: Net gain on extinguishment of debt 1 % 2 % 7 % Gain on business interruption insurance recoveries — % 1 % — % Interest expense, net — % — % (1) % Other income, net — % — % 1 % Total other income 1 % 3 % 7 % (Loss) income before income taxes (1) % (3) % 3 % Income tax benefit — % — % — % Net (loss) income (1) % (3) % 3 % (*) Columns may not foot due to rounding. 65 Table of Contents Management ’ s Discussion and Analysis Comparison of the Years Ended December 31, 2024 and 2023 Revenue Year ended December 31, 2024 2023 Change (Dollars in thousands) Cloud communications $ 539,753 $ 478,892 $ 60,861 13 % Messaging surcharges 208,734 122,225 86,509 71 % Revenue $ 748,487 $ 601,117 $ 147,370 25 % In 2024, our cloud communications revenue increased by $61 million , or 13%, compared with the same period in 2023.
Year ended December 31, 2025 2024 2023 (In thousands) Revenue $ 753,817 $ 748,487 $ 601,117 Cost of revenue 458,766 468,529 364,960 Gross profit 295,051 279,958 236,157 Operating expenses: Research and development 132,517 118,627 104,188 Sales and marketing 101,683 109,698 102,063 General and administrative 75,220 71,692 65,363 Total operating expenses 309,420 300,017 271,614 Operating loss (14,369) (20,059) (35,457) Other (expense) income, net: Net gain on extinguishment of debt 1,082 10,267 12,767 Gain on business interruption insurance recoveries — — 4,000 Interest expense, net (2,028) (1,861) (808) Other (expense) income, net (1,276) 2,700 195 Total other (expense) income, net (2,222) 11,106 16,154 Loss before income taxes (16,591) (8,953) (19,303) Income tax benefit 3,679 2,429 2,960 Net loss $ (12,912) $ (6,524) $ (16,343) The following table sets forth selected consolidated statements of operations data as a percentage of our total revenue for the periods presented. * Year ended December 31, 2025 2024 2023 Revenue 100 % 100 % 100 % Cost of revenue 61 % 63 % 61 % Gross profit 39 % 37 % 39 % Operating expenses: Research and development 18 % 16 % 17 % Sales and marketing 13 % 15 % 17 % General and administrative 10 % 10 % 11 % Total operating expenses 41 % 40 % 45 % Operating loss (2) % (3) % (6) % Other (expense) income, net: Net gain on extinguishment of debt — % 1 % 2 % Gain on business interruption insurance recoveries — % — % 1 % Interest expense, net — % — % — % Other (expense) income, net — % — % — % Total other (expense) income, net — % 1 % 3 % Loss before income taxes (2) % (1) % (3) % Income tax benefit — % — % — % Net loss (2) % (1) % (3) % (*) Columns may not foot due to rounding. 65 Table of Contents Management ’ s Discussion and Analysis Comparison of the Years Ended December 31, 2025 and 2024 Revenue Year ended December 31, 2025 2024 Change (Dollars in thousands) Cloud communications $ 561,379 $ 539,753 $ 21,626 4 % Messaging surcharges 192,438 208,734 (16,296) (8) % Revenue $ 753,817 $ 748,487 $ 5,330 1 % In 2025, our cloud communications revenue increased by $22 million , or 4%, compared with the same period in 2024.
As of December 31, 2024, we had cash and cash equivalents of $82 million and marketable securities of $2 million.
As of December 31, 2025, we had cash and cash equivalents of $103 million and marketable securities of $8 million.
If such evaluation indicates that the carrying amount of the asset or the asset group is not recoverable, any impairment loss would be equal to the amount the carrying value exceeds the fair value. No indicators of impairment were identified for the years ended December 31, 2024, 2023 and 2022.
If such evaluation indicates that the carrying amount of the asset or the asset group is not recoverable, any impairment loss would be equal to the amount the carrying value exceeds the fair value.
Net income in 2022 was $20 million . Repurchase of 2026 Convertible Notes During May 2024, we entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2026 Convertible Notes (the “2024 Repurchases”) to repurchase approximately $140 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $128 million.
Repurchase of 2026 Convertible Notes During February 2025, we 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 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $26 million .
The tax benefit recognized is measured as the largest amount of benefit determined on a cumulative probability basis that we believe is more likely than not to be realized upon ultimate settlement of the position. We recognize potential accrued interest and penalties associated with unrecognized tax positions in income tax benefit in the accompanying consolidated statements of operations.
The tax benefit recognized is measured as the largest amount of benefit determined on a cumulative probability basis that we believe is more likely than not to be realized upon ultimate settlement of the position.
Within cloud communications revenue, our Global Voice Plans revenue grew by 3% and was driven by higher voice traffic on our network. Our Programmable Messaging revenue increased by 46% and was primarily fueled by higher political messaging related to the U.S. presidential election in November 2024.
Within cloud communications revenue, our Global Voice Plans revenue grew by 8% and was driven by higher voice traffic on our network. Our Programmable Messaging revenue decreased by 13% largely from lower political messaging activity following the U.S. presidential election in November 2024.
These three strategies are the foundation of the durable business we seek to build. For the years ended December 31, 2024, 2023 and 2022, total revenue was $748 million, $601 million and $573 million, respectively, representing an increase of 25% in 2024, and 5% in 2023. Net loss in 2024 and 2023 was $7 million and $16 million , respectively.
These three strategies are the foundation of the durable business we seek to build. 61 Table of Contents Management ’ s Discussion and Analysis For the years ended December 31, 2025, 2024 and 2023, total revenue was $754 million, $748 million and $601 million, respectively, representing an increase of 1% in 2025 and an increase of 25% in 2024.
We concluded that based on the relevant events and circumstances, it was more likely than not that the reporting unit’s fair value exceeded its related carrying value and therefore no quantitative assessment was required. As of December 31, 2023, we completed a quantitative assessment under ASC 350 and determined that there was not an impairment of goodwill.
We concluded that based on the relevant events and circumstances, it was more likely than not that the reporting unit’s fair value exceeded its related carrying value and therefore no quantitative assessment was required. We completed our annual goodwill impairment analysis in each of the years ended December 31, 2025, 2024 and 2023 and no impairment charges were recorded.
Access to the communications platform is considered a series of distinct services, with continuous transfer of control to the customer, comprising one performance obligation. Usage-based fees are recognized in revenue in the period the traffic traverses our network.
Access to the communications platform is considered a series of distinct services, with continuous transfer of control to the customer, comprising one performance obligation.
When required as part of providing service, revenues and associated expenses related to nonrefundable, upfront service activation and setup fees are deferred and recognized over the longer of the associated service contract period or estimated period of benefit.
We enter into arrangements with customers that are typically 2 to 3 years in length with an auto-renewal feature. When required as part of providing service, revenues and associated expenses related to nonrefundable, upfront service activation and setup fees are deferred and recognized over the longer of the associated service contract period or estimated period of benefit.
Cash Flows The table below summarizes our cash flow information: Year ended December 31, 2024 2023 2022 (In thousands) Net cash provided by operating activities $ 83,883 $ 39,001 $ 34,906 Net cash (used in) provided by investing activities (1,442) 30,849 (133,449) Net cash used in financing activities (131,273) (52,775) (120,005) Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,241) 610 881 Net (decrease) increase in cash, cash equivalents, and restricted cash $ (50,073) $ 17,685 $ (217,667) 71 Table of Contents Management ’ s Discussion and Analysis Cash Flows from Operating Activities In 2024, net cash provided by operating activities was $84 million and was generated by our aggregate results of $81 million during the period, net of (1) non-cash items comprising depreciation and amortization, non-cash reduction to the right-of-use asset, amortization of debt discount and issuance costs, stock-based compensation, deferred taxes and other, gain on sale of intangible asset, net gain on extinguishment of debt and (2) a $3 million cash inflow from higher operating liabilities and lower operating assets.
For additional information on these future contractual obligations, see Note 7, “Debt,” and Note 11, “Commitments and Contingencies,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K . 68 Table of Contents Management ’ s Discussion and Analysis Cash Flows The table below summarizes our cash flow information for the periods presented: Year ended December 31, 2025 2024 2023 (In thousands) Net cash provided by operating activities $ 89,491 $ 83,883 $ 39,001 Net cash (used in) provided by investing activities (39,057) (1,442) 30,849 Net cash used in financing activities (29,068) (131,273) (52,775) Effect of exchange rate changes on cash, cash equivalents and restricted cash (440) (1,241) 610 Net increase (decrease) in cash, cash equivalents, and restricted cash $ 20,926 $ (50,073) $ 17,685 Cash Flows from Operating Activities In 2025 , net cash provided by operating activities was $89 million and was generated by our aggregate results of $95 million during the period, net of (1) non-cash items comprising depreciation and amortization, non-cash reduction to the right-of-use asset, amortization of debt discount and issuance costs, stock-based compensation, deferred taxes and other, net gain on extinguishment of debt and (2) a $5 million cash outflow, primarily from lower operating liabilities and higher operating assets.
Following the 2024 Repurchases and previous repurchases of the 2026 Convertible Notes, approximately $35 million principal amount of the 2026 Convertible Notes remain outstanding. 61 Table of Contents Management ’ s Discussion and Analysis The difference between the consideration used for the 2024 Repurchases and the carrying value of the 2026 Convertible Notes resulted in a gain of $10 million recorded within net gain on extinguishment of debt on our consolidated statements of operations for the year ended December 31, 2024 .
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 consolidated statements of operations for the year ended December 31, 2025 .
For the years ended December 31, 2024, 2023 and 2022, the net retention rate was 122%, 101% and 112%, 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.
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.
Interest Expense, Net I n 2024, interest expense, net of interest income increased by $1 million , or 130%, compared with the same period in 2023, primarily from higher interest expense from a draw on our Credit Facility to partially fund the 2024 Repurchases in May 2024.
Interest Expense, Net In 2025 , interest expense, net of interest income increased by less than $1 million compared with the same period in 2024, primarily from an increase in interest expense resulting from a draw on our Credit Facility to partially fund the 2025 Repurchases in February 2025 that slightly outpaced interest income from cash.
Revenue from service-based fees, such as the provision and management of phone numbers and emergency services access, is recognized on a ratable basis as the service is provided, which is typically one month. 79 Table of Contents Management ’ s Discussion and Analysis We enter into arrangements with customers that are typically 2 to 3 years in length with an auto-renewal feature.
Usage-based fees are recognized in revenue in the period the traffic traverses our network. 75 Table of Contents Management ’ s Discussion and Analysis Revenue from service-based fees, such as the provision and management of phone numbers and emergency services access, is recognized on a ratable basis as the service is provided, which is typically one month.
This was partially offset by cash used for the purchase of marketable securities of $81 million. Cash used for the purchase of property, plant and equipment was $9 million and cash used for capitalized software development costs was $11 million, driven by investments in the communications platform. In 2022, net cash used in investing activities was $133 million.
Cash used in investing activities was primarily driven by (1) cash used for the purchase of property, plant and equipment of $22 million and cash used for capitalized software development costs of $11 million , driven by investments in the communications platform, and (2) cash used for purchases of marketable securities, net of maturities, of $6 million from diversifying into higher yielding investments.
Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that are included in the financial statements.
No indicators of impairment were identified for the years ended December 31, 2025, 2024 and 2023. 76 Table of Contents Management ’ s Discussion and Analysis Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that are included in the financial statements.
Long-Lived Assets Long-lived assets, including intangible assets with definite lives, are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. We evaluate the recoverability of our long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable.
We evaluate the recoverability of our long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable.
Cost of revenue includes all expenses associated with our various service offerings as more fully described under the caption “Key Components of Statements of Operations-Cost of Revenue and Gross Margin.” We define Non-GAAP gross profit as gross profit after adding back the following items: • depreciation and amortization; • amortization of acquired intangible assets related to acquisitions; and • stock-based compensation.
Cost of revenue includes all expenses associated with our various service offerings as more fully described under the caption “Key Components of Statements of Operations-Cost of Revenue and Gross Margin.” We calculate Non-GAAP gross margin by dividing Non-GAAP gross profit by cloud communications revenue.
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 cash flow from operations is driven by monthly payments from customers for communication services consumed during the period.
The Non-GAAP effective income tax rate was 18.1%, 10.1%, and 7.0% for the years ended December 31, 2024, 2023 and 2022, respectively. For the year ended December 31, 2024, the Non-GAAP effective income tax rate differed from the federal statutory tax rate of 21% in the U.S. primarily due to the research and development tax credits generated in 2024.
For the year ended December 31, 2025, the Non-GAAP effective income tax rate differed from the federal statutory tax rate of 21% in the U.S. primarily due to the research and development tax credits generated in 2025. We analyze the Non-GAAP valuation allowance position on a quarterly basis.
Sales and Marketing S ales 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.
Research and development expenses include depreciation and allocated costs of facilities and information technology utilized by our research and development staff. 63 Table of Contents Management ’ s Discussion and Analysis Sales and Marketing S ales 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.
Our Enterprise Voice revenue grew by 29% as the flexibility from our Maestro product and our UCaaS/CCaaS vendor agnostic approach continues to resonate with customers. In 2024, our messaging surcharges revenue increased by $87 million , or 71%, compared with the same period in 2023 .
Our Enterprise Voice revenue grew by 21%, reflecting strong momentum as our Maestro platform’s flexibility and vendor-agnostic UCaaS/CCaaS strategy continues to attract new customers. In 2025, our messaging surcharges revenue decreased by $16 million , or 8%, compared with the same period in 2024 .
Our total gross margin percentage of 37% in 2024 declined by 2% , compared with the same period in 2023, driven by higher pass-through messaging surcharges within the total revenue mix. 66 Table of Contents Management ’ s Discussion and Analysis Operating Expenses Year ended December 31, 2024 2023 Change (Dollars in thousands) Research and development $ 118,627 $ 104,188 $ 14,439 14 % Sales and marketing 109,698 102,063 7,635 7 % General and administrative 71,692 65,363 6,329 10 % Total operating expenses $ 300,017 $ 271,614 $ 28,403 10 % As a percentage of revenue, total operating expenses for the years ended December 31, 2024 and 2023 were 40% and 45% , respecti vely.
Our total gross margin percentage of 39% increas ed by 2%, compared with the same period in 2024, driven by lower pass-through messaging surcharges w ithin the total revenue mix. 66 Table of Contents Management ’ s Discussion and Analysis Operating Expenses Year ended December 31, 2025 2024 Change (Dollars in thousands) Research and development $ 132,517 $ 118,627 $ 13,890 12 % Sales and marketing 101,683 109,698 (8,015) (7) % General and administrative 75,220 71,692 3,528 5 % Total operating expenses $ 309,420 $ 300,017 $ 9,403 3 % As a percentage of revenue, total operating expenses for the years ended December 31, 2025 and December 31, 2024 were 41% and 40%, respectively.
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.
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 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.
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. 67 Table of Contents Management ’ s Discussion and Analysis 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.
Research and Development R esearch 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.
We expect that our operating expenses will increase in absolute dollars driven by the growth in our business. Research and Development R esearch and development expenses consist of salaries and related personnel costs for the design, development, testing and enhancement of our cloud network and software products.
As of December 31, 2024, we have no valuation allowance against our remaining deferred tax assets for Non-GAAP purposes. (3) Non-GAAP net income is increased for interest expense as part of the calculation for diluted Non-GAAP earnings per share.
As of December 31, 2025, we have no valuation allowance against our deferred tax assets for Non-GAAP purposes.
Cost of Revenue and Gross Margin Year ended December 31, 2024 2023 Change (Dollars in thousands) Cost of revenue $ 468,529 $ 364,960 $ 103,569 28 % Gross profit $ 279,958 $ 236,157 $ 43,801 19 % Total gross margin 37 % 39 % In 2024, total cost of revenue increased by $104 million , compared with the same period in 2023, driven by higher pass-through messaging surcharges of $84 million largely from higher political messaging from the U.S. presidential election .
Cost of Revenue and Gross Margin Year ended December 31, 2025 2024 Change (Dollars in thousands) Cost of revenue $ 458,766 $ 468,529 $ (9,763) (2) % Gross profit $ 295,051 $ 279,958 $ 15,093 5 % Total gross margin 39 % 37 % In 2025, total cost of revenue decreased by $10 million , compared with the same period in 2024, driven by lower messaging cost of revenue of $14 million from less political messaging following the 2024 U.S. presidential election .
As we continue to scale our international business, any changes to foreign business activity may impact our effective tax rate in the future. 67 Table of Contents 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 continue to expect recurring changes to the valuation allowance as deferred tax assets within the U.S. increase or decrease in subsequent periods.
In fact, Bandwidth already powers all the 2024 Gartner Ⓡ Magic Quadrant Leaders in the key cloud communications categories of UCaaS and CCaaS. Our long-term vision is to continue strengthening this position as the key enabling platform for communications transformation.
In fact, Bandwidth already powers all the 2025 Gartner Ⓡ Magic Quadrant Leaders in the key cloud communications categories of UCaaS and CCaaS, along with leading hyperscalers and SaaS platforms. We aim to be the key enabling platform for communications transformation in the AI era.
Our net retention rate decreases when such customers cease or reduce usage of a product or when we lower prices on our solutions. 62 Table of Contents Management ’ s Discussion and Analysis 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 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.
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. 62 Table of Contents Management ’ s Discussion and Analysis 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.
This growth was primarily driven by higher messaging volumes from higher political messaging related to the U.S. presidential election. In 2024, our average annual customer revenue was $0.2 million, which increased less than $0.1 million compared with the same period in 2023, primarily from higher political messaging related to the U.S. presidential election in November 2024.
This decline was primarily driven by lower political messaging activity following the U.S. presidential election in November 2024 . In 2025, our average annual customer revenue was $0.2 million, which increased by 3% compared with the same period in 2024, as a result of our strategy to attract and retain larger customers who provide revenue scale and enhanced profitability.
In 2024, research and development expenses increased by $14 million , or 14% , compared with the same period in 2023. This increase was primarily due to higher facilities expenses in support of our expanding research and development capabilities.
In 2025, research and development expenses increased by $14 million , or 12% , compared with the same period in 2024. Our continued investment in evolving our network infrastructure was the key driver behind this increase.
In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis.
Adjusted EBITDA is a key measure u sed by management to understand and evaluate our core operating performance and trends, to generate future operating plans and to make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis.
In 2024, sales and marketing expenses increased by $8 million, or 7% , compared with th e same period in 2023, primarily due to higher facilities expenses in support of our sales force. In 2024, g eneral and administrative expenses increased by $6 million , or 10% , compared with the same period in 2023, driven by higher headcount expenses.
In 2025, sales and marketing expenses decreased by $8 million, or 7% , compared with th e same period in 2024, primarily due t o lower headcount expenses from our resource optimization efforts.
Within operating assets, cash used as a result of higher accounts receivable of $13 million during 2022 was driven by higher unbilled receivables balances of $2 million arising from higher usage amounts in the last month of 2022 and $11 million from timing of collection of invoiced amounts.
Within operating assets, the net cash used of $6 million was primarily driven by higher unbilled receivables balances of $4 million from higher usage amounts in the last month of the quarter ended December 31, 2025 and changes in prepaid expenses and other current assets of $2 million.
We recorded $7 million in unrecognized tax benefits for the year ended December 31, 2024 and $6 million for the year ended December 31, 2023.
We recognize potential accrued interest and penalties associated with unrecognized tax positions in income tax benefit in the accompanying consolidated statements of operations.We recorded $9 million, $7 million and $6 million in unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023, respectively.
In 2023, g eneral and administrative expenses decreased by $3 million, or 4%, compared with the same period in 2022, driven by lower corporate administrative expenses.
In 2025, g eneral and administrative expenses increased by $4 million , or 5% , compared with the same period in 2024, driven largely by expanded headcount for day-to-day business support activities.
Credit Agreement Amendment On May 1, 2024, we entered into an amendment (the “Amendment”) to the credit agreement (the “Credit Agreement”), dated August 1, 2023, 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 Credit Agreement, which increased the aggregate revolving credit commitments from $50 million to $100 million; increased the swingline sublimit from $5 million to $10 million; increased the minimum liquidity from $75 million to $83 million; and extended the maturity date from August 1, 2028 to 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 our outstanding convertible notes.
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 million revolving credit facility (the “Credit Facility”).
For additional information on these future contractual obligations, see Note 8, “Debt,” and Note 12, “Commitments and Contingencies,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K .
As of December 31, 2025, we had no outstanding borrowings under the Credit Facility and the available borrowing capacity was $150 million. See Note 7, “Debt,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding the Credit Agreement, including a summary of the current terms of the Credit Facility.
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.
Judgment is required in determining whether deferred tax assets will be realized in full or in part.
The combination of changes in total revenue and total cost of revenue yielded gross profit o f $236 million , which decreased $2 million from the same period in 2022, driven by higher network costs.
The combination of changes in total revenue and total cost of revenue yielded an increase in total gross profit of $15 million, or 5% f rom 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.
Within operating liabilities, the net cash used as a result of lower accrued expenses and other liabilities of $11 million during 2023 was driven by less advanced billings from customers utilizing their credit balances for invoice payments. T he cash outflow related to the operating right-of-use liability was $10 million.
Within operating liabilities, net cash provided of less than $1 million was driven by $13 million of cash generated from increases in accounts payable, partially offset by $11 million of cash from decreases in accrued expenses and other liabilities, largely from the timing of year-end payments and changes in the operating right-of-use liability of $2 million.
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Our award-winning support teams help businesses around the world solve complex communications challenges every day.
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This Item generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
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We believe these megatrends, which have created sizable total addressable markets, are secular, long-lasting and still early in the adoption curve.
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Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 are not included, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 20, 2025.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDue to the short‑term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. On August 1, 2023, we entered into the Credit Agreement, which provided for a $50 million Credit Facility.
Biggest changeDue to the short‑term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. Interest on borrowings under our Credit Facility accrues at an annual rate tied to a base rate or the SOFR, at our election.
Gains or losses due to transactions in foreign currencies are included in other income, net in our consolidated statements of operations. We do not currently engage in any hedging activity to reduce our potential exposure to currency fluctuations, although we may choose to do so in the future.
Gains or losses due to transactions in foreign currencies are included in other (expense) income, net in our consolidated statements of operations. We do not currently engage in any hedging activity to reduce our potential exposure to currency fluctuations, although we may choose to do so in the future.
Under the terms of the Second Amendment, 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 2.0% and 2.5% , and loans based on the base rate bear interest at a rate equal to the base rate plus an applicable margin between 1.0% and 1.50% , in each case of the foregoing, depending upon our consolidated total leverage ratio for the most recent fiscal quarter for which financial statements have been delivered under the Credit Agreement.
Under the terms of the Credit Agreement, 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 2.0% and 2.5% , and loans based on the base rate bear interest at a rate equal to the base rate plus an applicable margin between 1.0% and 1.50% , in each case of the foregoing, depending upon our consolidated total leverage ratio for the most recent fiscal quarter for which financial statements have been delivered under the Credit Agreement.
A hypothetical 10% change in interest rates would not have had a material impact on our financial results included elsewhere in this Annual Report on Form 10-K. 82 Table of Contents Foreign Currency Risk The functional currencies of our foreign subsidiaries are the respective local currencies of the jurisdictions in which they operate, which are primarily the Euro and the British Pound.
A hypothetical 10% change in interest rates would not have had a material impact on our financial results included elsewhere in this Annual Report on Form 10-K. 78 Table of Contents Foreign Currency Risk The functional currencies of our foreign subsidiaries are the respective local currencies of the jurisdictions in which they operate, which are primarily the Euro and the British Pound.
We carry the Convertible Notes at face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only. S ee Note 8, “Debt,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on the Revolving Credit Facility and the Convertible Notes .
We carry the Convertible Notes at face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only. S ee Note 7, “Debt,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on the Credit Facility and the Convertible Notes .
To the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currencies result in increased revenue and operating expenses for our rest of world operations. Similarly, our revenue and operating expenses for our rest of world operations decrease if the U.S. dollar strengthens against foreign currencies.
To the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currencies results in increased revenue and operating expenses for our rest of world operations. Similarly, our revenue and operating expenses for our rest of world operations decrease if the U.S. dollar strengthens against foreign currencies.
Approximately 12%, 14%, and 16% of our total revenue was generated outside North America for the years ended December 31, 2024, 2023 and 2022, respectively. The majority of our revenues and operating expenses are denominated in U.S. dollars, and therefore are not currently subject to significant foreign currency risk.
Approximately 13%, 12%, and 14% of our total revenue was generated outside North America for the years ended December 31, 2025, 2024 and 2023, respectively. The majority of our revenues and operating expenses are denominated in U.S. dollars, and therefore are not currently subject to significant foreign currency risk.
As a result, we are exposed to interest rate risk as we make draws on the Credit Facility. As of December 31, 2024 , there were no outstanding borrowings. As of December 31, 2024, we had gross carrying amounts of $35 million and $250 million outstanding from our 2026 Convertible Notes and 2028 Convertible Notes, respectively.
As a result, we are exposed to interest rate risk as we make draws on the Credit Facility. As of December 31, 2025 , there were no outstanding borrowings under the Credit Facility. As of December 31, 2025, we had gross carrying amounts of $8 million and $250 million outstanding from our 2026 Convertible Notes and 2028 Convertible Notes, respectively.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. Interest Rate Risk We had cash and cash equivalents of $82 million and marketable securities of $2 million as of December 31, 2024, which were held for working capital purposes.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. Interest Rate Risk We had cash and cash equivalents of $103 million and marketable securities of $8 million as of December 31, 2025, which were held for working capital purposes.
A hypothetical 10% adverse change in foreign currency exchange rates would have adversely impacted our net loss for the year ended December 31, 2024 by approximately $3.1 million. 83 Table of Contents
A hypothetical 10% adverse change in foreign currency exchange rates would have adversely impacted our net loss for the year ended December 31, 2025 by approximately $4 million. 79 Table of Contents
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On May 1, 2024, we entered into the Amendment, which, among other things, increased our Credit Facility to $100 million, and on October 28, 2024, we entered into the Second Amendment, which further increased our Credit Facility to $150 million.
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Interest on borrowings under the Credit Facility accrues at an annual rate tied to a base rate or the SOFR, at our election.

Other BAND 10-K year-over-year comparisons