Bandwidth Inc. (NASDAQ:BAND) Q2 2023 Earnings Conference Call August 2, 2023 5:00 PM ET
Sarah Walas – Vice President of Investor Relations
David Morken – Co-Founder, Chief Executive Officer & Chairman
Daryl Raiford – Executive Vice President & Chief Financial Officer
Conference Call Participants
Ryan MacWilliams – Barclays
Meta Marshall – Morgan Stanley
Will Power – Baird
Matt Stotler – William Blair
Tom Blakey – KeyBanc Capital Markets
Good day. And welcome to the Bandwidth Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Sarah Walas, Vice President of Investor Relations. Please go ahead.
Thank you. Good afternoon, and welcome to Bandwidth’s second quarter 2023 earnings call. Today, we’ll discuss the results announced in our press release issued after the market close. The press release and an earnings presentation with historical financial highlights can be found on the Investor Relations page at investors.bandwidth.com.
With me on the call this afternoon is David Morken, our CEO; and Daryl Raiford, our CFO. They will begin with prepared remarks, and then we will open up the call for Q&A.
During the call, we will make statements related to our business that may be considered forward-looking, including statements concerning our financial guidance for the third quarter and full year of 2023. We caution you not to put undue reliance on these forward-looking statements as they may involve risks and uncertainties that may cause actual results to vary materially from any future results or outcomes expressed or implied by the forward-looking statements. Any forward-looking statements made on this call and in the presentation slides reflect our analysis as of today, and we have no plans or obligation to update them. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our latest 10-K filing as updated by other SEC filings, all of which are available on the Investor Relations section of our website at bandwidth.com and on the SEC’s website at sec.gov.
During the course of today’s call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issued after the close of market today as well as in the earnings presentation, which are located on our website at investors.bandwidth.com.
With that, let me turn the call over to David.
Thank you, Sarah, and welcome to everyone joining our call this afternoon. I am delighted with the progress we made during our last quarter and am pleased with our financial results. Before I share some of the successes of the last quarter, please let me start by thanking God for all he has done for us. Our mission is to develop and deliver the power to communicate and we are motivated to serve customers together day in and day out.
The profound technological change in how we communicate is accelerating and bandwidth remains in the forefront. No company has our unique combination of assets to meet emerging and dynamic communications needs, a powerful global communications cloud, deep expertise, longstanding closely embedded customer relationships and a culture of exceptional service and innovation. Thank you to our customers for trusting us with your mission and critical communications and to all the Band mates around the world whose hard work drives our success.
Just as we had projected at the start of this year, the macroeconomic environment remains uncertain. We’ve observed continuing cautious behavior from our customers who are shrewdly evaluating the environment and making investment decisions where it makes most sense and for the greatest returns. We are likewise operating our business through the same environment by scrutinizing product and investment strategies while balancing growth and profitability. We expected this season and thus far it has played out as we projected.
Given the macroeconomic choppiness, I’m so pleased with our business execution and our outperformance in the second quarter. We exceeded both our revenue and profitability guidance. With a view toward the remainder of the year, we have raised our revenue outlook to reflect the overperformance in the quarter and we remain on track to achieve our 2023 financial targets, including growing profitability by 30% for the full year.
We’re focused on the second half of 2023 as well as building our business for sustainable leadership with our medium and long-term targets in mind. It was fitting that IDC again named us a leader in their worldwide CPaaS marketscape for the third consecutive time. We believe it’s a strong validation from the market of our long-term strategy and the enduring value we’re providing within the global cloud communications space.
As we described at our Investor Day in February, our enterprise-grade consumable APIs, global owned and operated network and deep regulatory experience position us well in large and growing global markets.
We’ve focused our go-to-market around three distinct customer categories: global communications plans, programmable services and direct to enterprise. Each of these delivered solid customer momentum in the second quarter. Let me highlight a few examples from each.
In our largest customer category, Global Communications plans, we are honored to count as our customers, all 20 of the leading power platforms that comprise the Gartner Magic Quadrants for both UCaaS and CCaaS.
We remain focused on leveraging our global footprint to drive upsell and cross-sell within our existing customer base as well as attracting new customers. This quarter, we want to highlight two new customers in this category that have sustainable and substantial business outside the U.S. and chose Bandwidth for our resiliency and our country coverage reaching over 90% of global GDP.
Our first example is a contact center services provider that has relied on for business-critical operations by thousands of customers across a wide range of industry verticals worldwide. After a major outage that severely disrupted their business, their incumbent provider was unable to give answers or honor their SLAs, resulting in a loss of several major accounts. Bandwidth’s reliability, resiliency and premium support concierge experience convince them to move their portfolio to Bandwidth.
They are now using nearly our complete service offering, including telephone numbers and local and international calling in Europe, South America and Asia Pac in addition to North America, along with E911 and global emergency services, text messaging and U.S. toll-free calling. This customer signed over 200 new international customers in the past year. So our global reach, regulatory experience and ability to scale are key to their future growth plans.
Another large contact center service provider chose Bandwidth’s voice APIs to serve their customers in 30-plus countries across the EMEA region. This rapidly growing customer was looking to expand into new geographies from their home base in Central Europe, but their collection of incumbent providers couldn’t handle the complexity.
Bandwidth solve their challenges with our global reach and regulatory expertise, while at the same time, enabling new capabilities to allow customized local services. The value proposition bandwidth offers is clear. We solve our customers’ communications complexity. We lower our customers’ cost and we create capabilities allowing our customers to benefit from new revenue streams, and we do it globally.
In our programmable services customer category, which primarily powers the leading text messaging platforms, we continue to benefit from a steadily rising baseline of activity to support commercial use cases, including banking and financial services, retail and e-commerce health care, patient engagement as well as ongoing civic engagement about breaking news and issues of the day.
For example, One of our existing programmable services customers scaling on the bandwidth communications cloud pioneered the use of automated text messaging for patient engagement across a variety of health care practices.
Bandwidth’s messaging APIs enable appointment reminders and 2-way texting to connect with patients through customizable, personalized touch points at every step of the care journey. Bandwidth is becoming a provider of choice for these use cases because customers know their text messages will be delivered.
Our platform is seen as a gold standard of enterprise-grade support scalability, reliability and throughput. Finally, our direct to enterprise customer category delivered a strong performance in this dynamic and growing space. We’re seeing a greater urgency from larger enterprises to begin migrating their on-premises contact center collaboration services and internal communications to the cloud because of the operational savings and also the cloud-enabled capabilities that build greater customer engagement and retention.
This is a large and durable long-term opportunity with 75% of global enterprises planning to migrate communications to the cloud, but having not yet begun according to IDC Research. Maestro our award-winning next-generation communications platform that we announced in March is becoming a catalyst for our direct-to-enterprise strategy.
Maestro enables enterprises to achieve faster time to value through rapid cloud deployment and configuration while reducing complexity and ensuring future flexibility. It provides the crucial technology bridge enterprises need to create a modern communication stack solving the difficulties of interoperability and deployment of all the best-in-class cloud contact centers, unified communications platforms and artificial intelligence and machine learning environments.
Just one example of Maestro’s newest capability is our integration with Cisco WebEx calling, which we announced generally available in June. This opens up a large new opportunity for bandwidth and Cisco to provide cloud connectivity for over 10 million users at any stage of the enterprise migration journey, whether on-premise, hybrid or pure cloud.
In fact, we just won our first customer for this new Cisco integration with Maestro, a Texas-based children’s hospital network widely regarded as one of the most prestigious in the United States. This large health care provider was eager to move its contact center and collaboration communications to the cloud but needed to do it in stages to avoid business disruptions with their complex on-premise legacy system.
Bandwidth’s number management API and flexible call routing were able to maintain both their old on-prem and new cloud environments at the same time, preserving critical business continuity. It’s another example of how our deep experience in digital transformation supports customers every step of the way on their journey to the cloud.
In another example of how we solve complexity for the enterprise — this past quarter, we closed one of our largest ever Microsoft Teams direct routing contracts. A Fortune 200 energy technology company was exhausted from their legacy providers failing to keep up with their usage growth and badly needed a modern communications provider to enable their team’s deployment globally.
The customer chose Bandwidth over their multiple legacy telecom providers because of our incredible support capability, global reach and our deep experience as a Microsoft direct routing provider to accelerate onboarding our team worked with the customer to align their tech stack, ensuring they could maximize their team’s deployment and be up and running rapidly with bandwidth.
In summary, I’m pleased with our progress through the first half of 2023. Looking forward, we will continue to navigate the current commercial environment maintaining our strong focus on disciplined execution and expanded profitability while leveraging our global reach, regulatory experience, enterprise-grade APIs and breakthrough innovations like Maestro all for the benefit of our customers.
I’ll now turn it over to Daryl to walk through the details of our Q2 financial results.
Thank you, David, and good afternoon, everyone. We completed the first half of the year with another solid quarter, exceeding expectations on both the top and bottom lines. Second quarter revenue of $146 million exceeded the midpoint of our guidance by $5 million.
Adjusted EBITDA of $11 million exceeded the midpoint of guidance by $6 million. Second quarter revenue compared with last year benefited from higher messaging usage, up 11% and higher monthly recurring charges for phone numbers and emergency services, which combined were up 8% year-over-year. Messaging in the quarter represented 17% of total revenue, excluding surcharges. .
Our commercial messaging growth was driven by solid demand across a variety of use cases, including health care, retail and e-commerce, fintech and civic engagement. The pass-through surcharges associated with messaging were $27 million in the second quarter. In terms of our market results, our global communications plans revenue performance, excluding surcharges, was in line with our expectations, essentially unchanged year-over-year as this large voice component continued to see softness from current macroeconomic conditions. Programmable services and direct to enterprise customer categories grew 15% and 21%, respectively, year-over-year.
Programmable services continued to strengthen from the aforementioned broad-based demand in messaging. Direct enterprise benefited from new customer additions. The Global 2000 migration to cloud communications is evident in the enterprise customer wins that David just highlighted and coupled with a strong enterprise pipeline, we have confidence this market will be a key contributor to driving future profitable growth.
Rounding out our second quarter results. Non-GAAP gross margin was 55%, and up two percentage points from the prior year’s quarter. We continue to benefit from economies of scale, a richer mix of higher-margin products global coverage and operating improvements as we continue to march towards our medium-term targets of greater than 60%. A favorable combination of increased non-GAAP gross margin and operating leverage produced adjusted EBITDA of $11 million. In terms of operating metrics, our first quarter net dollar retention rate was 106%.
For larger customers with greater than $100,000 annual revenue, our net dollar retention was 108%, two percentage points higher than the total customer metric and clearly demonstrating the benefits of focusing on large customers and direct to enterprise opportunities. Customer logo retention remained well above 99%. Average annual revenue per customer which has steadily increased over the past six quarters, reached $176,000 in the second quarter, again demonstrating our success in securing larger customer opportunities.
We ended the quarter with a cash and securities balance of $123 million, a more than sufficient amount to meet our business needs and sustain a great deal of financial flexibility. Following quarter end in July, we received $4 million in proceeds from our insurance carrier as reimbursement of lost profits related to the cyber incident experienced in September 21.
And recently, we established an undrawn $50 million revolving credit facility with Bank of America and Wells Fargo as co-lead agents to round out our working capital profile. This new facility replaces the undrawn facility we previously maintained with SVB. You’ll recall we unilaterally terminated the SVB facility in March.
Turning to our full year outlook. We are increasing our revenue guidance to approximately $590 million to reflect our first half revenue overachievement and higher-than-expected messaging surcharges. We will strengthen our operating flexibility by maintaining our outlook for full year adjusted EBITDA of approximately $45 million, representing a projected growth of 30% from last year. For the third quarter, we expect revenue of approximately $149 million and adjusted EBITDA of approximately $11 million.
In summary, we’re pleased with our first half 2023 financial and operating performance, especially in light of the choppy commercial environment over that same period. As we move into the second half, we’ll continue to focus on what we can control, serving and delighting our customers every day, growing our margin, being disciplined with our cost and increasing our profitability.
Now I’ll turn the call back over to the operator for questions.
[Operator Instructions] Our first question comes from Ryan MacWilliams with Barclays. Please go ahead.
Pleased to see the reacceleration of revenue growth in the quarter. David, as I said today, how do you see the macro outlook impacting Dan’s results in the second half? Like did you see improving signs from customers at the end of the second quarter or since?
Thanks, Ryan. I think the macro environment remains as we’ve thought about the year in the first half and I think it will continue throughout the second half. There are customers making shrewd and intelligent optimizing decisions across their businesses. There are some deal cycle concerns, but these are things that we’ve thought about all year and are reflected in both the results in the first half and how we’re forecasting the rest of the year.
Excellent. Appreciate the color. And then last questions from investors on how Geneva could impact the CPaaS market. So I know it’s early, right? And — but I’d love to hear, at least from your seat, David, how do you think bandwidth together with Generative AI could fit together for some new opportunities.
Thanks for asking. All of our voice and messaging customers, enterprise customers, contact center customers are looking for the real force multiplier that is generative AI. Certainly, within call flows, where you have the opportunity to put the attributes of the call to large data sets to add value to resolve a question in a contact center — we’re a router call accordingly.
There are many, many opportunities. And so we’ve got two approaches to adding value to our customers in AI. One involves our Maestro orchestration product that we announced earlier this year and that we’ll be generally available right now in this month.
And that product is open in that it allows a customer to avoid just locking into a walled garden AI approach of a particular vendor and instead select the ideal AI tools that they’re bringing to bear on their call flow or on their messaging experiences for customers and to do it in a very elegant way within our Maestro user experience.
The other is just being an ecosystem historically that has really specialized in being open. And that means API integrations with best-of-breed providers in the contact center and UCaaS. We’ve been very successful in that regard. And I think that our platform generally will embrace all the emerging AI tools that are available for both voice and messaging experiences. So we’re excited about what it means for our customers and the fact that our platform has been architected now for several years to embrace the change that is generative AI. .
Next question comes from Meta Marshall with Morgan Stanley.
Maybe kind of following up on that. I mean just what do you see as the trigger trigger project or trigger event that would make customers evaluate Maestro? Is it something like they’re evaluating their contact center solutions and AI solutions or just what do you think will be that insertion point?
And then maybe as a second question, you talked about kind of customers being more budget conscious. I just want to get a sense of is that there are limiting some of their interaction activity? Or is it just kind of lengthening sales cycles on evaluating new opportunities.
I think — thanks, Meta. I think that Mastro’s inflection point has a lot to do with the complexity that is in both the contact center environment and in the enterprise operating environment. There are so many emerging voice and messaging experiences, both internally for teams, externally to customers and customer bases. And so what’s needed is an orchestration layer that rests upon a global high-fidelity owned and operated network and has all the favorable attributes that we provide now in so many different countries.
But on top of that fundamental carrying capacity of voice calls and text messages, enterprises are engaging in the most complex environment that that a decision maker has ever seen. And so what an orchestration layer provides is an elegant user experience, allowing you to select best of breed, configure, provision, activate, assign and pay for elegant experiences across your enterprise or in your contact center, taking advantage of the latest developments in AI or the latest developments in authentication or fraud prevention, but to be able to do it in user interface that’s manageable.
And without this kind of a layer, which we’ve seen elsewhere in software, we’ve seen it in log-in and password management within enterprise — we’ve seen it elsewhere. We think it’s a natural analogue for what we’re doing with Maestro. And the inflection point really has everything to do with the complexity that these decision makers are grappling with today.
And regarding the macro environment and different aspects of decision-making affected by the economy. We just continue to see choppiness generally, and we’re cautious as we look forward towards the rest of this year as we have been in the first half.
Our next question comes from Will Power with Baird. Please go ahead.
Okay. Great. Yes, it looked like a nice results in the quarter. I guess a couple of questions. I wonder if you could provide any further kind of color on sources of upside to revenue in the quarter. I know that the messaging business remains strong. Maybe that was a contributor, but any areas of surprise. And I guess just within messaging, if you kind of help break down kind of the key drivers there that you’re seeing right now.
This is Daryl. We did see good results in the quarter with revenue exceeding our guidance. That was driven, as I said, in part by messaging and in part by monthly recurring charges from phone numbers at 911. So essentially half and half. messaging was up 11%. We saw that broadly across all commercial messaging.
You’ll recall, we experienced some political last year that was in the third and fourth quarter of last year, in compare, our commercial messaging grew nicely over this time last year. Also monthly recurring charges, which is subscription-based or phone numbers and emergency services within the enterprise grew nicely as well. Those do contribute to overall company performance as the gross margin profiles of those products are very rich indeed. .
Okay. That’s helpful. I appreciate it. And maybe just one other financial question. Nice upside to EBITDA in the quarter, full year guidance was unchanged. Is that just a function of plans to perhaps reinvest some of that upside, conservatism? Any further color on that front? .
You’re right. We were pleased with the overperformance in terms of profitability for the quarter. we see in terms of going forward in the guide, we did raise our revenue, the $10 million as we’ve noted. We’re holding to the full year guide of $45 million at the midpoint, we did collapse the range.
We’ve brought up the lower end of that range. taking into account the revenue overperformance. But on the whole, we think that it’s important to derisk to continue to derisk the year and to be prudent and cautious in the environment. And so we’re holding with the midpoint guidance of $45 million. .
Our next question comes from Jim Fish with Piper Sandler.
This is Quinton [ph] on for Jim Fish. Maybe first, another player in the space has talked up concerns with messaging traffic volumes, mainly due to enterprises evaluating other options for 2-factor authentication, but you guys continue to post pretty strong messaging growth. First, can you remind us your exposure to two factor authentication or onetime passwords. And then secondly, are you seeing any changing dynamics within 2-factor authentication where maybe that could benefit your voice solution if they’re moving away from SMS space?
Quinton, we don’t have any exposure at all to 2-factor authentication. We don’t have customers that generate any meaningful revenue from it. So that’s not a concern of ours at all. And so I don’t really have any insight as to what’s driving folks to utilize other alternatives.
Got it. Makes sense. And then maybe more of a financial question for you. We continue to see a declining number of total customers, which I get is a part of the strategy of turning these lower end payers. As we think about the gross adds here, what was that number? And then are we starting to see any impact on maybe margins or an improvement in customer stickiness as we continue to move up the enterprise? Or is the churn kind of still too early where we’re going to see kind of continued improvement throughout this year and next?
Quinton, this is Daryl. We did see a modest decline in total customer count — we’ve said in the past in February, then again in May, and we’ve been consistent that customer count as a leading indicator of our business is not particularly relevant any longer in our minds as we continue to grow into the larger enterprise category and indeed, our average customer revenue has — continues to grow.
It’s grown to 176,000 over something like $161,000 at this time last year. So we’re really pleased with that growth. With that said, we did — we did add 70 customers — 70 new customer logos during the quarter. These are — we consider high-quality customers. We did in terms of contributing to our average revenue per customer growth.
And then we — if you do the math, we removed 91 customers or churn 91 customers in the quarter. It’s worth mentioning that the median of those 91 customers, the ARR was $3,000. So again, not really focused on the customer count any longer as more focused on the profitability potential of the customers that we acquire. .
Our next question comes from Austin Ko [ph] with Citizens.
Congrats on — my question is just with regards to the cash flow generation you guys mentioned $123 million in cash. And then with the balance sheet, is there any kind of updated thinking on the long-term debt on there and how you guys are thinking about that? It looks like cash flow turned out pretty good this quarter.
Yes. The cash flow was basically in line with our expectations. We finished the quarter with $123 million of cash and marketable securities. — as I said in the prepared remarks, we think that, that’s sufficient for our business. In terms of our capital structure, we did — as I said, we did replace our SBB facility that we had terminated in March with a new undrawn revolving credit facility.
It’s just all part of the blocks that contribute to building our capital structure. In terms of going forward, we’ve said before, we’ll continue to monitor the convertible debt market and be opportunistic on any repurchases if we think that’s wise to do so. our first convertible maturity is still remains quite a ways away in 2026, and we feel like we have a lot of time to evaluate that going forward.
Awesome. And if I could just throw in a quick follow-up. Just since last quarter, just with the kind of overarching conversation about AI and seed reduction in the CCS space. Is there any kind of updated thinking since then? I know you guys are more on the usage-based side. So is there any just kind of any takeaways with some of what the larger players are doing that?
Nothing new to add to the perspective that we shared in the most recent period. We think that AI ultimately is going to enhance the user experience or contact center experience for lots of our customers for good reasons. And we see that — we see contact centers focused on AI when they’re talking to us about the flexibility of our platform and the utility of our Maestro product. And so it’s a catalyst moment in terms of the technology innovation. And ultimately, I don’t think that it will be a zero-sum game in UCaaS or CCaaS or elsewhere, but I certainly understand the anxiety when anything like this comes out. .
The next question comes from Ryan Cole [ph].
When you ask about your exposure or your perceived exposure to the big growth drivers in the cloud space, general CCaaS, which sounds like you’re pleased with your progress. I wanted to see how you view your penetration of the CCaaS market. And then similarly, Teams phone, which obviously is kind of the remaining big UCaaS driver out there. How do you view your exposure? Do you see direct routing as still the primary vehicle? And how do you view the take-up and operator Connect for the team phones .
I’ll take those in reverse order. So we’ve got continuing good growth and traction with our awesome Microsoft partner so that the team’s phone product is still a very good path to market for us. Direct routing and bring your own carrier continue to contribute to our enterprise wins and the examples that we cited in this most recent quarter just now, they were very material in each of those.
Operator Connect has been fantastic for international growth, in particular. So that’s been a vital improvement in our path to market with Microsoft — and in terms of our exposure to contact center and penetration, we’ve got lots of progress we can still make in capturing share in the contact center from a usage-based perspective.
We’ve got great relationships with most of the leaders in contact center, but a long way to go to displacing the incumbents like Verizon and AT&T, Lumen and then internationally other incumbents. And so there’s a long way to go which is — it’s a wonderful problem for us to have a space like CCaaS where we’ve got lots that we can still do for a lot of new customers.
That’s great to hear, David. And can you give us any idea of kind of where you are in penetration of Fortune 500 major wins right now? Obviously, it’s pretty early days, but do you think you’re in the like does a couple of dozen range? Are you guys kind of moving up above that yet? .
Yes. We’ve not shared a particular number of the Fortune 500 or Fortune 200, although we did announce a win within the Fortune 200 in this period, which we’re proud of, but expect that as we grow enterprise between now and 2026 from 5% of our total revenue, up to 10% of our total revenue, you’re going to see many, many more Fortune 500 logos.
And we really think more of a Global 2000 focus just because we’ve got footprint in so many different countries. And so you’ll think of us best, I think is focused on the Global 2000, not just the Fortune 500, but we will continue to share wins in those categories and believe that they’ll continue to grow. .
Our next question comes from Matt Stotler with William Blair.
Maybe just one more on Mike to start. Obviously, still early, but would love to kind of get your thoughts on how the Cisco relationship kind of opens up the go-to-market for that product with you. And then how you’re thinking about monetization of Maestro from here?
Matt, we did talk about the Cisco innovation that we announced with Maestro that we’re excited about. And it allows somebody that has had a premise-based solution historically to engage in the cloud and to do so with Maestro and to begin their journey to the cloud in a very elegant way from an administrative point of view. So we’re excited about that. In particular, with Mister I just forgot the second part of your question.
So the monetization of muster going forward. .
Yes. So it is a software application. And as an orchestration tool, we are planning for Maestro to be a revenue-enhancing product that we offer that is — that you should understand to be in the revenue model with SaaS-based cloud-based software. There will be usage associated with it, but the platform fee element will be what you’re used to when you think about cloud-based software charges and billing.
Got it. It’s very helpful. And then maybe just one more broader question on the — on your partner investments, a number of announcements this quarter, right? Cisco, obviously, Miratec, expanded relationship with Ribbon. — let’s just get a broader update on the partner ecosystem, your investments there and what you’re prioritizing at this point.
So you’ve known us to go to market well with some great brands and names historically. We’ve continued, I think, through the leadership of the senior executive team to reach out to more and more ecosystem partners, whether the ones that you just mentioned, whether it’s distribution related whether it’s folks that we buy from and integrate with, whether it’s folks like Cisco, who we go to market with and the early innings of our channel strategy also, you do have lots of new folks that we’re engaging with.
And I don’t have any others in particular to announce on this call, but whether it’s go to market, whether it’s a collaboration with other application providers, we are being approached by lots of ecosystem names to help them navigate the complexity of global regulatory landscape of technology changes like AI. And so it’s a wonderful time to collaborate in our space. Everybody is talking to each other about how they can add value in CCaaS and UCaaS and with enterprise. So we like the announcements, and we like the conversations going on right now, upstacking down stack and around the world. .
[Operator Instructions] Our next question comes from Tom Blakey with KeyBanc Capital Markets.
Congratulations on the results. Maybe, David, starting with you on the many CIOs, we talked to you about consolidating spend, you mentioned that a little bit in your prepared remarks. Wondering how those conversations have maybe evolved through the year here as more CIOs are looking to cut spend or consolidate spend, especially given kind of the go-to-market kind of mission or messaging from bandwidth is we can do more for less. I just wanted to know if there’s — in terms of — and this is all in the context of your strong commentary about enterprise direct or direct enterprise in the prepared remarks.
Yes. Thank you, Tom. We did call out during the prepared remarks, the contact services provider that consolidated 30-plus country needs with us and we saved them 20% when we did so. We talked about another one that took seven partners and consolidated them down into using bandwidth. And in each case, those are incumbents.
And ultimately, you have among those CIOs and decision-makers in a very complex and cost-sensitive world, a need to optimize mission-critical communications and to really bet on a trusted partner. And before us, there weren’t many you could consolidate geographically with.
So we’ve had the advantage of expanding footprint to allow a CIO or a decision maker to say, Wow, I can use bandwidth instead of eight, nine, 10 or even 20 partners, why wouldn’t I do that? In addition to that, you now have with Maestro, the opportunity to consolidate, optimize and trust us with an orchestration layer for both your voice, your messaging and your third-party apps in the communications space.
So you’ve got geography driving, as we’ve seen historically, consolidation and bedding on bandwidth as a trusted partner. And now you have our software platform that is also driving an opportunity for those CIOs to say it’s time for us to believe and bandwidth is our primary partner to reduce complexity, to reduce costs.
And these are conversations not just about unit volumes or price — these are very deep conversations about being architectural partners production partners globally, and that relationship that we have is indeed in the C-suite and among the senior-most executives at the very largest companies in the Global 2000. And I’m excited about how those conversations have developed and we should — we expect more of them going forward.
That was a perfect segue, David, to my second question. In terms of the more strategic architectural partner, ship that you’re kind of like seeing in some of these conversations. What’s — I think you’ve made the comment in the past that you’re comfortable or maybe members of your team in my conversations that you’re comfortable with the with the infrastructure, lack of a better way, our sales and marketing go-to-market expenses that you have in place to attack this G2K opportunity. Could you just maybe update us that and maybe in the probability of potential for — now they have to like spend a little bit more to attack this opportunity if it takes off from here. And thank you very much for the questions again.
Yes. You bet, Tom. The opportunity to invest will be behind success. We will reinforce success if we see it and if the opportunity for yield from that additional sales investment to materialize within our profitability discipline. That’s what you would see us reinforce. But we are very happy with the sales leadership that we have with the global sales team that we have with the enterprise team that’s focused on the G2K, as you mentioned, they’re staffed — they’re building pipeline, they’re executing.
We’ve got strong senior leadership and sales operations globally. So we like our approach. We’ve got a channel that’s developing and emerging in a really promising way that we’ve never had before. So you’ve seen investments made in the past. You’ve seen current leadership focused on it. The way that you would see us invest in any additional manner is, again, if the yield from doing so was clearly within the profitability discipline that we’ve outlined in our midterm guidance. Very clear. .
This concludes our question-and-answer session. The conference has also now concluded. Thank you for attending today’s presentation. You may all now disconnect.