Bandwidth Inc.
For the period ended Dec 31, 2025. Filed Feb 19, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 19, 2026
BAND$40.34+6.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-20.
0001514416-25-000024
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-19.
0001514416-26-000017
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 173 previous paragraphs and 149 current paragraphs.
97 unchanged; 41 reworded; 8 added; 31 removed; 4 previous and 3 current paragraphs rearranged.
Tables are not compared: 13 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
This Item generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. 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.
Current report
Bandwidth is strategically positioned at the intersection of enterprise communications and AI. 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. 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.
Current report
For the years ended December 31, 2025, 2024 and 2023, our effective tax rate was 22.2%, 27.1%, and 15.3%, respectively. For the years ended December 31, 2025, 2024 and 2023, our income tax benefit was$4 million, $2 million, and $3 million, respectively. The increase in the income tax benefit from 2024 to 2025 is primarily due to favorable U.S. federal and state tax law changes as a result of the One Big Beautiful Bill Act (“OBBBA”).
Current report
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.
Current report
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:
Current report
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:
Current report
The following table shows a reconciliation of net loss to Adjusted EBITDA for the periods presented:
Current report
The following table presents free cash flow for the periods presented:
Removed paragraphs (31)
Previous report
Credit Agreement Amendment
Previous report
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.
Previous report
On October 28, 2024, we entered into a second amendment (the “Second Amendment”) to the Credit Agreement, which increased the aggregate revolving credit commitments to $150 million; modified the applicable margin for loans based on SOFR to between 2.0% and 2.5%, and modified the applicable margin for loans based on the base rate to between 1.0% and 1.50%; modified the quarterly commitment fee to between 0.2% and 0.25% on the unused portion of the borrowing commitment; replaced existing financial covenants to certain customary covenants; and modified the maturity date 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 the outstanding convertible senior notes due 2028.
Previous report
As of December 31, 2024, we did not have any outstanding borrowings under the Credit Facility (as defined below), and we were in compliance with all financial and non-financial covenants for all periods presented. As of December 31, 2024, the available borrowing capacity under the Credit Facility was $150 million.
Previous report
For the years ended December 31, 2024, 2023 and 2022, our effective tax rate was 27.1%, 15.3%, and(13.1)%, respectively. The increase in the effective tax rate from 2023 to 2024 is primarily due to increased tax deductions from research expenditures which decreased U.S. cash tax liabilities when compared to an increase of $7 million in income before income taxes within the U.S. 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.
Previous report
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.
Previous report
As a percentage of revenue, total operating expensesfor the years ended December 31, 2024 and 2023 were 40% and 45%, respecti vely.
Previous report
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 theyear ended December 31, 2024 was 27.1%, compared with 15.3% in 2023.
Previous report
Most of the permanent tax adjustments within our effective tax rate are offset by a valuation allowance. These adjustments include state taxes, federal research tax credits under Section 41 of the Code, equity compensation in the U.S. and other non-deductible expenditures in the U.S. Excluding the impact of the valuation allowance, we realized an estimated state effective tax rateof 4.2% for theyear ended December 31, 2024. In addition, exclusive of the valuation allowance, we continue to generate income tax benefits in the current period related to income tax credits recognized for qualified research activities in the U.S. The applicable federal tax laws and regulations define qualified research activities as research and development activities conducted in the U.S. that involve a process of experimentation designed to discover new information intended to develop a new or improved business component. Absent the valuation allowance, equity compensation also impacts the effective tax rate to the extent the income tax deduction exceeds or is below the related book expense, as required under ASC 718-740-35-2. Other U.S. non-deductible expenses that are offset by the valuation allowance consist primarily of non-deductible executive compensation under Section 162(m) of the Code.
Previous report
Permanent tax adjustments within our effective tax rate that are not offset by the valuation allowance include federal and state tax payable, foreign tax benefits and foreign rate differentials. As we continue to scale our international business, any changes to foreign business activity may impact our effective tax rate in the future.
Previous report
Revenue
Previous report
In 2023, our cloud communications revenue increased by$4 million, or 1%, compared with the same period in 2022. This growth was the result of higher sales in commercial messaging, which more than offset the absence of cyclical campaign messaging revenue in the prior year, and higher revenue from phone number and 911-enabled phone number services, which was partially offset by lower revenue from voice offerings.
Previous report
In 2023, our revenue from messaging surcharges increased by$24 million, or 24%, compared with the same period in 2022. This growth was driven by higher pass-through messaging surcharges imposed by certain carriers related to higher sales of commercial messaging.
Previous report
In 2023, total cost of revenue increased by$30 million, compared with the same period in 2022, driven byhigher pass-through messaging surcharges of $25 million. Thecombination of changes in total revenue and total cost of revenue yielded gross profit of$236 million, which decreased$2 million from the same period in 2022, driven by higher network costs.
Previous report
In 2023, research and development expenses increased by $6 million, or 6%, compared with the same period in 2022. This increase was primarily due to higher information technology and facilities expenses in support of our expanding research and development capabilities.
Previous report
In 2023, sales and marketing expenses increased by$5 million, or 6%, compared with the same period in 2022, primarily due to higher labor and certain discretionary expenses along with higher information technology and facilities expenses in support of our expanding capabilities.
Previous report
In 2023, general and administrative expenses decreased by $3 million, or 4%, compared with the same period in 2022, driven by lower corporate administrative expenses.
Previous report
Interest Expense, Net
Previous report
In 2023, interest expense, net of interest income decreased by$2 million, compared with the same period in 2022, due to lower interest expense of$1 million as a result of the 2026 Convertible Notes repurchases of approximately$65 million in March 2023 and $160 million in November 2022, in addition to higher interest income of $1 million from higher interest rates on invested cash.
Previous report
Income Tax Benefit
Previous report
For the years ended December 31, 2023 and 2022, the effective tax rates of 15.3% and (13.1)%, respectively, 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.
Previous report
Most of the permanent tax adjustments within our effective tax rate are offset by a valuation allowance. These adjustments include state taxes, federal research tax credits under Internal Revenue Code Section 41, equity compensation in the U.S. and other non-deductible expenditures in the U.S. Excluding the impact of the valuation allowance, we realized an estimated state effective tax rate of 4.3% for the year ended December 31, 2023. In addition, exclusive of the valuation allowance, we continue to generate income tax benefits in the current period related to income tax credits recognized for qualified research activities in the U.S. The applicable federal tax laws and regulations define qualified research activities as research and development activities conducted in the U.S. that involve a process of experimentation designed to discover new information intended to develop a new or improved business component. Absent the valuation allowance, equity compensation also impacts the effective tax rate to the extent the income tax deduction exceeds or is below the related book expense, as required under ASC 718-740-35-2. Other U.S. non-deductible expenses that are offset by the valuation allowance consist primarily of non-deductible executive compensation under Internal Revenue Code Section 162(m).
Previous report
Permanent tax adjustments within our effective tax rate that are not offset by the valuation allowance include minimum state taxes, foreign tax benefits and foreign rate differentials. As we continue to scale our international business, any changes to foreign business activity may impact our effective tax rate in the future.
Previous report
In 2022, net cash provided by operating activities was $35 million and was generated by our aggregate results of $40 million during the period, net of 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 tax expense and other and net gain on extinguishment of debt and a $14 million cash inflow from increased operating liabilities, partially offset by a net cash outflow from operating assets aggregating $19 million. The net gain on extinguishment of debt was a result of the repurchase of $160 million aggregate principal amount of the 2026 Convertible Notes. Within operating liabilities, the net cash provided as a result of higher accounts payable of $17 million during 2022 was primarily related to the timing and amounts of purchases of both services and tangible goods and their related payment arrangements. The cash provided as a result of higher accrued expenses and other liabilities of $3 million during 2022 primarily related to higher accruals for lease incentives and higher advanced billings. This was partially offset by a cash outflow related to the operating right-of-use liability of $8 million. 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. The cash used as a result of higher prepaid expenses and other assets of $6 million during 2022 was driven by higher VAT receivables and the timing of advance payments for software and other services.
Previous report
In 2022, net cash used in investing activities was $133 million. Cash used in investing activities included the purchase of marketable securities of $180 million partially offset by proceeds from the sales and maturities of marketable securities of $109 million. Cash used for deposits for construction in progress and the purchase of property, plant and equipment, primarily for our Raleigh, NC headquarters, was $60 million.
Previous report
In 2023, net cash used in financing activities was$53 million, consisting primarily of$51 millionnet cash paid to repurchase$65 million aggregate principal amount of the 2026 Convertible Notes.
Previous report
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.
Previous report
•depreciation and amortization;
Previous report
•amortization of acquired intangible assets related to acquisitions; and
Previous report
•stock-based compensation;
Previous report
As of December 31, 2023, we completed a quantitative assessment under ASC 350 and determined that there was not an impairment of goodwill. The estimated fair value of our one reporting unit was based on the income approach and the market approach. Significant assumptions used within the discounted cash flow method under the income approach included estimated revenue projections and a risk adjusted discount rate. Significant assumptions used with the market approach included estimated revenue projections and an appropriate risk adjusted earnings multiple. A hypothetical 10% decrease in the estimated fair value of our one reporting unit used in the quantitative assessment would not have changed our conclusion.
Reworded paragraphs (41)
Previous wording
A global communications transformation is underway, and we believe Bandwidth is at the center. Our mission is to develop and deliver the power to communicate. We enable innovative organizations—from startup app developers to the world’s largest enterprises—to engage their end-users and deliver exceptional experiences everywhere people live, learn, work and play. Backed by the Bandwidth Communications Cloud, a global owned-and-operated network spanning more than 65 countries reaching over 90 percent of 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. Our award-winning support teams help businesses around the world solve complex communications challenges every day.
Current wording
A global communications transformation is underway, and we believe Bandwidth is at the center. Our mission is to develop and deliver the power to communicate. We enable innovative organizations—from startup app developers to the world’s largest enterprises—to engage their end-users and deliver exceptional experiences everywhere people live, learn, work, and play. Backed by the Bandwidth Communications Cloud, 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. Our award-winning support teams help businesses around the world transform their communications every day.
Previous wording
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. We believe these megatrends, which have created sizable total addressable markets, are secular, long-lasting and still early in the adoption curve.
Current wording
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. We believe these market trends are secular, long-lasting, and still early in the adoption curve.
Previous wording
With the combination of our software APIs, our global Communications Cloud and our broad range of experience with global regulatory frameworks, we believe Bandwidth is one of the best-positioned providers in our space to deliver mission-critical communications for global enterprises. In fact, Bandwidth already powers all the 2024 Gartner Ⓡ Magic Quadrant Leaders in the key cloud communications categories of UCaaS and CCaaS.
Current wording
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. 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.
Previous wording
Our long-term vision is to continue strengthening this position as the key enabling platform for communications transformation. We will seek to do this in three ways: (1) cross-sell and up-sell our existing customers as they benefit from our global footprint and powerful APIs to automate and scale cloud communications; (2) focus on direct-to-enterprise growth to serve Global 2000 enterprises that directly leverage Bandwidth services to accelerate their digital transformations, and (3) aim to be the preferred provider for SaaS platforms that use conversational voice and messaging to create digital engagements that enhance the customer experience. These three strategies are the foundation of the durable business we seek to build.
Current wording
We aim to be the key enabling platform for communications transformation in the AI era. 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. These three strategies are the foundation of the durable business we seek to build.
Previous wording
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. Net income in 2022 was$20 million.
Current wording
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. Net loss in 2025, 2024, and 2023 was$13 million, $7 million, and $16 million, respectively.
Previous wording
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. The 2024 Repurchases closed on May 9, 2024. Following the 2024 Repurchases and previous repurchases of the 2026 Convertible Notes, approximately$35 million principal amount of the 2026 Convertible Notes remain outstanding.
Current wording
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 2025 Repurchases closed on February 24, 2025. Following the 2025 Repurchases and previous repurchases of the 2026 Convertible Notes, approximately $8 million aggregate principal amount of the 2026 Convertible Notes remains outstanding.
Previous wording
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 theyear ended December 31, 2024.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
We believe net retention rate is useful in evaluating our business. For the years ended December 31, 2024, 2023 and 2022, the net retention rate was 122%, 101% and 112%, respectively.
Current wording
We believe net retention rate is useful in evaluating our business. For the years ended December 31, 2025, 2024 and 2023, our net retention rate was 98%, 122% and 101%, respectively. Our net retention rate in 2024 benefited from higher volumes of political messaging driven by the U.S. presidential election in November 2024. The lower net retention rate in 2023 and 2025 was primarily driven by lower political messaging revenue following the conclusion of the 2022 and 2024 U.S. election cycles.
Previous wording
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. The large bulk of our remaining cloud communications revenue is generated from recurring monthly charges.
Current wording
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. The large bulk of our remaining cloud communications revenue is generated from recurring monthly charges.
Previous wording
We recognize accounts receivable at the time the customer is invoiced. Additionally, we record a receivable for unbilled revenue if services have been delivered and are billable in subsequent periods. Unbilled revenue made up 54%, 56%, and 45% of outstanding accounts receivable, net of allowance for doubtful accounts, as of December 31, 2024, 2023 and 2022, respectively.
Current wording
We recognize accounts receivable at the time the customer is invoiced. Additionally, we record a receivable for unbilled revenue if services have been delivered and are billable in subsequent periods. Unbilled revenue made up 63%, 54%, and 56% of outstanding accounts receivable, net of allowances, as of December 31, 2025, 2024 and 2023, respectively.
Previous wording
In 2024, our cloud communications revenue increased by$61 million, or 13%, compared with the same period in 2023. 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. Our Enterprise Voice revenue grew by 29% as theflexibility from our Maestro product and our UCaaS/CCaaS vendor agnostic approach continues to resonate with customers.
Current wording
In 2025, our cloud communications revenue increased by$22 million, or 4%, compared with the same period in 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. 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.
Previous wording
In 2024, our messaging surcharges revenue increased by$87 million, or 71%, compared with the same period in 2023. This growth was primarily driven by higher messaging volumes from higher political messaging related to the U.S. presidential election.
Current wording
In 2025, our messaging surcharges revenue decreased by$16 million, or 8%, compared with the same period in 2024. This decline was primarily driven by lower political messaging activity following the U.S. presidential election in November 2024.
Previous wording
In 2024, total cost of revenue increased by$104 million, compared with the same period in 2023, driven byhigher pass-through messaging surcharges of$84 million largely from higher political messaging from the U.S. presidential election. Thecombination of changes in total revenue and total cost of revenue yielded gross profit of $280 million, which increased$44 million from the same period in 2023, driven by higher sales of election-related political messaging.
Current wording
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. Thecombination of changes in total revenue and total cost of revenue yielded an increase in total gross profit of$15 million, or 5% from the same period in 2024, driven byongoing efficiencies and improved unit economics as we successfully scale larger volumes of voice traffic on our network.
Previous wording
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.
Current wording
Our total gross margin percentage of 39% increased by 2%, compared with the same period in 2024, driven by lower pass-through messaging surcharges within the total revenue mix.
Previous wording
As a percentage of revenue, total operating expenses for the years ended December 31, 2023 and 2022 were 45% and 46%, respecti vely.
Current wording
As a percentage of revenue, total operating expenses for the years ended December 31, 2025 and December 31, 2024 were 41% and 40%, respectively.
Previous wording
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.
Current wording
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.
Previous wording
In 2024, sales and marketing expenses increased by $8 million, or 7%, compared with the same period in 2023, primarily due to higher facilities expenses in support of our sales force.
Current wording
In 2025, sales and marketing expenses decreased by $8 million, or 7%, compared with the same period in 2024, primarily due to lower headcount expenses from our resource optimization efforts.
Previous wording
In 2024, general and administrative expenses increased by$6 million, or 10%, compared with the same period in 2023, driven by higher headcount expenses.
Current wording
In 2025, general 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.
Previous wording
In 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.
Current wording
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.
Previous wording
In 2023, we recognized an income tax benefit of$3 million, an increase of less than$1 million, compared with the same period in 2022. The resulting effective tax rate for the year ended December 31, 2023 was 15.3% compared with (13.1)% in 2022. For the year ended December 31, 2023, the change to the effective tax rate was primarilydue to increased operating losses outside of the U.S., where tax benefits are recognized and are not offset by a valuation allowance.
Current wording
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 increase in income tax benefit was primarily due to favorable U.S. federal and state tax law changes as a result of the OBBBA.
Previous wording
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.
Current wording
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.
Previous wording
Our liquidity is provided by our cash flow from operations less expenditures for capital equipment, and supplemented by financing activities from time to time. Our cash flow from operations is driven by monthly payments from customers for communication services consumed during the period. Our primary uses of cash include operating costs, such as fees paid to other network service providers, network operations costs, personnel costs and facility expenses, as well as the purchase of property, plant and equipment to support growth on our communications platform. As of December 31, 2024, we had cash and cash equivalents of $82 million and marketable securities of $2 million.
Current wording
Our liquidity is provided by our cash flow from operations less expenditures for capital equipment, and supplemented by financing activities from time to time. Our cash flow from operations is driven by monthly payments from customers for communication services consumed during the period. Our primary uses of cash include operating costs, such as fees paid to other network service providers, network operations costs, personnel costs and facility expenses, as well as the purchase of property, plant and equipment to support growth on our communications platform. As of December 31, 2025, we had cash and cash equivalents of $103 million and marketable securities of $8 million.
Previous wording
On August 1, 2023, we entered into the Credit Agreement, which provides for a $50 million credit facility (the “Credit Facility”), including a $15 million sublimit for the issuance of letters of credit and a swingline subfacility of up to $5 million. The Credit Facility has an accordion feature that allows for an increase in the total borrowing size up to $25 million, subject to certain conditions. On May 1, 2024, we amended the Credit Agreement by, among other things, upsizing the Credit Facility to $100 million. On October 28, 2024, we entered into the Second Amendment to further increase the aggregate revolving credit commitments to $150 million. As of December 31, 2024, we had no outstanding borrowings under the Credit Facility and the available borrowing capacity was $150 million. See Note 8, “Debt,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on the Credit Agreement.
Current wording
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”). 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.
Previous wording
During May 2024, the Company entered into the 2024 Repurchases to repurchase approximately $140.0 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $128.5 million. 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. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Current wording
During February 2025, we repurchased approximately$27 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately$26 million. Following the 2025 Repurchases and previous repurchases, approximately$8 million aggregate principal amount of the 2026 Convertible Notes remains outstanding. We may, at any time and from time to time, seek to retire or purchase our 2026 Convertible Notes or 2028 Convertible Notes through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Previous wording
Our principal future commitments consist of (i) an aggregate of $285 million in Convertible Notes, (ii) $471 million infuture minimum rent payments for ourcurrent office space, including a $464 millionnon-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. For additional information on these future contractual obligations, see Note 8,“Debt,” and Note 12,“Commitments and Contingencies,” to theconsolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Current wording
Our principal future commitments consist of (i) an aggregate of $258 million in Convertible Notes, (ii) $452 million infuture minimum rent payments for ourcurrent office space, including a $445 millionnon-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. For additional information on these future contractual obligations, see Note 7,“Debt,” and Note 11,“Commitments and Contingencies,” to theconsolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Previous wording
The table below summarizes our cash flow information:
Current wording
The table below summarizes our cash flow information for the periods presented:
Previous wording
In 2023, net 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. The net gain on extinguishment of debt was a result of the repurchase of$65 million aggregate principal amount of the 2026 Convertible Notes in March 2023. 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. The cash outflow related to the operating right-of-use liability was $10 million. This was partially offset by cash provided by accounts payable of$5 million andwas primarily related to the timing and amounts of purchases of both services and tangible goods and their related payment arrangements. Within operating assets, the net cash used as a result of higher accounts receivable of$3 million during 2023 was driven by higher unbilled receivables balances arising from higher usage amounts in the last month of 2023. This was partially offset by cash provided as a result of lower prepaid expenses and other assets of $2 million during 2023 from timing throughout the year.
Current wording
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. 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. 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.
Previous wording
In 2023, net cash provided by investing activities was$31 million. Cash provided by investing activities was driven by proceeds from the sales and maturities of marketable securities of$130 million to partially fund the repurchase of $65 million aggregate principal amount of the 2026 Convertible Notes. 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.
Current wording
In 2025, net cash used in investing activities was $39 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.
Previous wording
GAAP defines gross profit as revenue less cost of revenue. 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:
Current wording
GAAP defines gross profit as revenue less cost of revenue. 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.”
Previous wording
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. The exclusion of these items facilitates comparisons of our operating performance on a period-to-period basis. Management uses Non-GAAP gross profit and Non-GAAP gross margin to evaluate operating performance and to determine resource allocation among our various service offerings. We believe Non-GAAP gross profit and Non-GAAP gross margin provide useful information to investors and others to understand and evaluate our operating results in the same manner as our management and board of directors and allows for better comparison of financial results among our competitors. Non-GAAP gross profit and Non-GAAP gross margin may not be comparable to similarly titled measures of other companies because other companies may not calculate Non-GAAP gross profit and Non-GAAP gross margin or similarly titled measures in the same manner we do.
Current wording
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. The exclusion of these items facilitates comparisons of our operating performance on a period-to-period basis. Management uses Non-GAAP gross profit and Non-GAAP gross margin to evaluate operating performance and to determine resource allocation among our various service offerings. We believe Non-GAAP gross profit and Non-GAAP gross margin provide useful information to investors and others to understand and evaluate our operating results in the same manner as our management and board of directors and allows for better comparison of financial results among our competitors. Non-GAAP gross profit and Non-GAAP gross margin may not be comparable to similarly titled measures of other companies because other companies may not calculate Non-GAAP gross profit and Non-GAAP gross margin or similarly titled measures in the same manner we do.
Previous wording
(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.
Current wording
(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.
Previous wording
(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.
Current wording
(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.
Previous wording
(2) The estimated tax-effect of adjustments is determined by recalculating the tax provision on a Non-GAAP basis. The Non-GAAP effective income tax rate was 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. We analyze the Non-GAAP valuation allowance position on a quarterly basis. In the fourth quarter of 2022, we removed the valuation allowance against all U.S. deferred tax assets for Non-GAAP purposes as a result of cumulative Non-GAAP U.S. income over the past three years and a significant depletion of net operating loss and tax credit carryforwards on a Non-GAAP basis. As of December 31, 2024, we have no valuation allowance against our remaining deferred tax assets for Non-GAAP purposes.
Current wording
(2) The estimated tax-effect of adjustments is determined by recalculating the tax provision on a Non-GAAP basis. The Non-GAAP effective income tax rate was 19.0%, 18.1%, and 10.1% for the years ended December 31, 2025, 2024 and 2023, respectively. 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. As of December 31, 2025, we have no valuation allowance against our deferred tax assets for Non-GAAP purposes.
Previous wording
(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.
Current wording
(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.
Previous wording
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.
Current wording
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.
Previous wording
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. 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.
Current wording
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 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.
Previous wording
We completed our annual goodwill impairment analysis in each of the years ended December 31, 2024, 2023 and 2022 and no impairment charges were recorded. As of December 31, 2024, goodwill was $317 million.
Current wording
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. As of December 31, 2025, goodwill was $357 million.
Previous wording
Using the aforementioned approach, we recorded $70 million and $68 million in valuation allowance on our deferred tax assets in 2024 and 2023, respectively.
Current wording
Using the aforementioned approach, we recorded $71 million and $70 million in valuation allowance on our deferred tax assets in 2025 and 2024, respectively.
Previous wording
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. 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.
Current wording
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. 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.We recorded $9 million, $7 million and $6 million in unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023, respectively.
Showing the first 40 of 41 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Cost of Revenue and Gross Margin
Current report — wording carried from elsewhere
Cost of Revenue and Gross Margin
Current report — wording carried from elsewhere
In 2025, net cash used in financing activities was$29 million, consisting primarily of$26 million of cash used to complete the 2025 Repurchases.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Comparison of the Years Ended December 31, 2023 and 2022
Previous report — wording carried elsewhere
Our total gross margin percentage of 39% in 2023 declined by 3%, compared with the same period in 2022, driven by higher network costs and higher pass-through messaging surcharges within the total revenue mix.
Previous report — wording carried elsewhere
We continue to expect recurring changes to the valuation allowance as deferred tax assets within the U.S. increase or decrease in subsequent periods. We will maintain a valuation allowance against all U.S. federal and state deferred tax assets until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized.
Previous report — wording carried elsewhere
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.