BAND 10-K & 10-Q changes, risk factors and insider trading

Our growth and financial health are impacted by a number of risks, including uncertain capital markets, political and economic instability in a number of regions, the imposition of widespread tariffs, unfavorable macroeconomic conditions, recessionary fears, high rates of inflation and higher interest rates.

In addition, we are vulnerable to changes in market preferences or other market changes, suchas well as general economicmacroeconomic conditions, reduced growth rates, interest rates, tax rates and policies, inflation, a significant shift in U.S., state and foreign government policies and the deterioration of economic relations between countries or regions, including potential negative consumer sentiment toward non-local products or sources. In recent years, the United States has experienced higher rates of inflation and as a result, we may experience a compression in our gross margins. These inflationary pressures could affect wages, the cost of and our ability to obtain necessary components, the price of our products and services, our ability to meet customer demand, and our gross margins and operating profit. Inflation may further exacerbate other risks discussed in this “Risk Factors” section, such as risks related to our sales and marketing efforts and our ability to attract, motivate and retain sales, engineering and other key personnel. If we are unable to successfully manage the effects of inflation, our business, operating results, cash flows and financial condition may be adversely affected.

The U.S. and global economies have in the past, and will in the future, experience recessionary periods and periods of economic instability.instability, which could affect the rate of technology spending generally. During such periods, our existing and potential customers may choose not to expend the amounts that we anticipate based on our expectations with respect to the addressable market for the services we offer. Customers may also suffer financial hardships due to economic conditions such that their accounts become uncollectible or are subject to longer collection cycles. There could also be a number of other effects from adverse general business and economic conditions on our business, including insolvency of any of our third-party suppliers or contractors, decreased market confidence, decreased interest in communications solutions, decreased discretionary spending and reduced customer demand for the services we offer, any of which could have a material adverse effect on our business, financial condition and results of operations and exacerbate some of the other risk factors contained in this Annual Report on Form 10-K.

Some of our competitors and potential competitors are larger and have greater name recognition, longer operating histories, more established customer relationships, greater penetration into the enterprise space, a larger global reach, larger budgets and significantly greater resources than we do. In addition, they have the operating flexibility to bundle competing products and services at little or no incremental cost, including by offering them at a lower price as part of a larger sales transaction. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, technical and commercial standards or customer requirements and preferences. In addition, some competitors may offer services that address one or a limited number of functions at lower prices, with greater depth than our servicesservices, or in different geographies. Our current and potential competitors may develop and market new services with comparable functionality to our services, which may force us to compete on price in order to remain competitive and therefore erode our profit margins. In addition, some of our competitors have lower list prices than us, which may be attractive to certain customers even if those services have different or lesser functionality. If we are unable to maintain our current pricing due to competitive pressures, our revenue and margins will be reduced and our business, results of operations and financial condition will be adversely affected. Customers utilize our services in many ways and use varying levels of functionality that our services offer or are capable of supporting or enabling our services within their applications. Customers using only limited functionality may be able to more easily replace our services with competitive offerings. By contrast, customers using many of the features of our services or using our services to support or enable core functionality for their applications may find it difficult or impractical to replace our services with a competitor’s services.

With the introduction of new services and new market entrants, we expect competition to intensify in the future. In addition, some of our customers choose to use both our services and our competitors’ services in order to provide redundancy in their ability to deliver their own product offerings. Moreover, as we expand the scope of our services, we may face additional competition. If one or more of our competitors were to merge or partner with another of our competitors, this change in the competitive landscape could further adversely affect our ability to compete effectively.

If we are unable to attract new customers in a cost-effective manner, then our businessbusiness, results of operations and financial condition wouldcould be adversely affected.

Our ability to realize our goals for anticipatedachieve revenue growth, cash flowcashflow, and operating performance depends on retaining customers and increasing their use of our services, and any loss of customers or decline in their use of our services could materially and adversely affect our business, results of operations and financial condition.services.

Our ability to attract new customers and increase revenue from existing customers depends in part on our ability to increase adoption and usage of our services, enhance and improve functionality of our existing services, and introduce new services and features. The success of any enhancements or new services or features depends on several factors, including timely completion, adequate quality testing, actual performance quality, market-accepted pricing levels and overall market acceptance. Enhancements and new services or features that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, may have interoperability difficulties with our communications platform, network or other services, or may not achieve the broad market acceptance necessary to generate significant revenue. We also must integrate with a variety of network, hardware, mobile and software platforms and technologies, which requires us to adapt our communications platform and product offerings to changes and innovation in these technologies. Wireline and wireless telephone providers, as well as cell-phone operating system providers such as Apple and Google, have developed, and may in the future develop, new applications, functions or technologies intended to filter illegal robocalls or other unwanted phone calls or messages. Such applications, functions or technologies may inadvertently filter legal and desired calls or messages to or from our customers. In certain instances, we may need to update our services and technology or work with these providers to ensure customer success in the face of these applications, functions or technologies. Any failure to operate effectively with evolving or new technologies could reduce the demand for our services. If we cannot respond to these changes in a cost-effective manner, our services may become less competitive or obsolete, and our business, results of operations and financial condition could be adversely affected. The introduction of new features for existing products may require new technology and services, which we may procure from third party vendors. The success of these upgrades may be dependent on reaching mutually acceptable terms with vendors, on vendors meeting their obligations in a timely manner, and on the financial and operational stability of selected vendors.

We have experienced substantial expansion in our business, including internationally through our acquisition of Voxbone in late 2020. We believe that our corporate culture has been a critical component of our success. We have invested substantial time and resources in building our team and nurturing our culture. As we further expand our business and continue to grow internationally, we may find it difficult to maintain our corporate culture. Any management of organizational changes in a manner that fails to preserve the key aspects of our culture could hurt our chance for future success, including our ability to recruit and retain personnel, and effectively focus on and pursue our corporate objectives. This, in turn, could adversely affect our business, results of operations and financial condition.

In addition, our organizational structure has become more complex. In order to manage these increasing complexities, we will need to continue to scale and adapt our operational, financial and management controls, and our reporting systems and procedures. The expansion or, if we deem appropriate, consolidation of our systems and infrastructure will require us to commit substantial financial, operational and management resources before our revenue increases and without any assurances that our revenue will increase. This expansion or consolidation could strain our ability to maintain reliable service levels for our customers.

ThisIf expansionwe orare consolidationunable couldto straineffectively maintain our abilitycorporate toculture maintain reliable service levels for our customers. If weor fail to achieve the necessary level of efficiency in our organization as we grow, then our business, results of operations and financial condition could be adversely affected.

Many of our customers depend on our customer support team to help them deploy or use our services effectively, to help them resolve post-deployment issues quickly and to provide ongoing support. If we do not devote sufficient resources to, or are otherwise unsuccessful in, assisting our customers effectively, it could adversely affect our ability to retain existing customers and could prevent prospective customers from adopting our services. We may be unable to respond quickly enough to accommodate short-term increases in demand for customer support. We also may be unable to modify the nature, scope and delivery of our customer support to compete with changes in the support services provided by our competitors. Increased demand for customer support, without corresponding revenue, could increase costs and adversely affect our business, results of operations and financial condition.costs. Our sales are highly dependent on our business reputation and on positive recommendations from existing customers. Any failure to deliver and maintain high-quality customer support, or a market perception that we do not maintain high-quality customer support, could adversely affect our reputation, business, results of operations and financial condition.

We operate internationally, which exposes us to significantrisks risks.that are incremental to those experienced by a company operating only domestically.

Operating in international markets requires significant resources and management attention, and subjects us to legal, regulatory, economic and political risks in addition to those we face in the United States. We have limitedOur experience with international operations,operations is more limited than our domestic experience, and further international expansion efforts may not be successful.

In addition,particular, we face risks in doing business internationally that could adversely affect our business, including:

•the need to adapt and localize our products for specific countries;countries.

•challenges in keeping abreast of, understanding and complying with local laws, regulations and customs in multiple foreign jurisdictions, particularly in the areas of telecommunications andtelecommunications, data privacy and securitysecurity, and artificial intelligence;

•public health epidemics, such as COVID-19, or natural disasters, which could have an adverse impact on our employees, contractors, customers, partners, travel and the global economy; and

•political or social unrest, acts of war or economic instability in a specific country or region in which we operate, which could have an adverse impact on our operations in that location.location; and

A significant portion of our revenue is concentrated in a limited number of large customers.

A significant portion of our revenue is concentrated among a limited number of large customers. If we lost one or moreseveral of our top ten customers, or, if one or moreseveral of these major customers significantly decreased orderstheir forusage of our services, our business would be materially and adversely affected.

We, along with many other communications service providers, are subject to litigation regarding our billing, collection and remittance of non-income-based taxes and other similar charges regarding 911 services alleged to apply in certain states, counties, and municipalities located in California and Illinois. See “Item 3. Legal Proceedings,” in this Annual Report on Form 10-K. We may face similar litigation in other jurisdictions in the future. While we are vigorously defending these lawsuits, litigation is inherently uncertain. Tax assessments, penalties and interest or future requirements arising from these lawsuits, the settlement of any such lawsuit or any other lawsuits that may arise in other jurisdictions, may adversely affect our business, results of operations and financial condition. We have also filed a lawsuit against the city of San Francisco with respect to its assessment of certain 911-related taxes and charges.

We face a risk of litigation and/or regulatory enforcement actions resulting from customer or end user misuse of our services and software to make or send unauthorized and/or unsolicited calls and/or messages, including those in violation of the TCPA,Telephone Consumer Protection Act of 1991 (the “TCPA”), the TSR,Telemarketing Sales Rule (the “TSR”), and other state and federal laws. Customer or end user misuse of our services and software also could damage our reputation.

The misuse of our offerings by our customers, or customers of our customers, may result in civil claims and/or agency enforcement actions against us, including those arising due to misuse of our platform or offerings, and requests for information through third-party subpoenas or regulatory investigations. For example, we have received correspondence from the FTC relating to customers using our network to transit “robocall” traffic. We have received similar correspondence from the FCC relating to our role as a gateway provider. Additionally, we are in regular communication with numerous state attorneys general regarding efforts to curb illegal robocalling. Internationally, we also may become subject to similar laws imposing limitations on marketing calls to wireline and wireless numbers. The scope and interpretation of the laws and regulations that are or may be applicable to the making and/or delivery of calls and/or messages are continuously evolving and developing. If we do not comply with these laws or regulations, or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by taking mandatory actions such as obtaining proper customer consent, we could become subject to costly lawsuits, fines, civil penalties, potentially significant statutory damages, consent decrees, injunctions, adverse publicity, loss of user confidence in our services, loss of users and other adverse consequences, which could materially harm our business.

If current or future regulations change, the Federal Communications Commission (the “FCC”),FCC, state or local regulators or regulators in jurisdictions abroad may not grant us required regulatory authorizations or may take action against us if they determine we are found to have provided services without obtaining the necessary authorizations,authorizations or tothat we have violated other requirements of their rules and orders. Delays in receiving required regulatory approvals or the enactment of new adverse or burdensome regulation or regulatory requirements may slow our growth and have a material adverse effect on our business, results of operations and financial condition.

Proceedings before the FCC or regulators from international jurisdictions could limit our access to various network services or further increase the rates we must pay for such services. For example, proceedingsa proposed proceeding before the FCC as of February 2026 could result in ana increasechange in the amount we pay to other carriers or a reduction in the revenue we derive from other carriers in, or retroactive liability for, access charges and reciprocal compensation. OnA Decembernumber 17,of 2019,states also have proceedings pending that could impact our access to and the FCCrates issuedwe anpay orderfor thatnetwork revisedservices. itsOther interpretationstate ofproceedings thecould Voice-overlimit Internetour Protocolpricing (“VoIP”)and symmetrybilling rule. The FCC now concludes that LECs may assess end office switched access charges only if the LEC or its VoIP partner provides a physical connection to the last-mile facilities used to serve an end user.flexibility. Other recent proceedings before the FCC have produced new rules in the areas of IP Interconnection, cybersecurity compliance, emergency services, robocalling and robotexting, and others that could result in increases in the cost of regulatory compliance. For example, the FCC continues to examine how to improve the delivery of emergency 911 services and whether to expand requirements to include communications services not currently subject to emergency calling obligations. Specifically,As inof 2024,March 25, 2025, providers must work with 911 authorities to establish NG911 connectivity within tight timelines as NG911 authorities declare readiness, and this process is often different from one 911 authority to the FCCnext adoptedand rulescan tocreate supportcomplexity theand deploymentresource burdens. As of advanced 911 capabilities, which requires network infrastructure updates. In addition, by April 15, 2025, providers will beare required by FCC rules to provide a 911 outage notification to a potentially affected 911 special facility no later than within 30 minutes of discovering such an outage. Conversely, the continued lack of regulatory certainty in the messaging ecosystem and marketplace has created considerable operational challenges that increase our operating costs and ability to support services. A number of states also have proceedings pending that could impact our access to and the rates we pay for networkthese services. Other state proceedings could limit our pricing and billing flexibility. Our business would be substantially impaired if the FCC, the courts, state commissions, or interconnected carriers eliminated our access to the facilities and services we use to serve our customers, substantially increased the rates we pay for facilities and services, increased the costs or complexity associated with providing emergency 911 services or adversely affected the revenue we receive from other carriers or our customers. In addition, congressional legislative efforts to rewrite the Telecommunications Act of 1996 or enact other legislation impacting our operations, including but not limited to, legislation focused around issues of telecommunications, cybersecurity, and AI, as well as various state legislative initiatives, may cause major industry and regulatory changes. We cannot predict the outcome of these proceedings or legislative initiatives or the effects, if any, that these proceedings or legislative initiatives may have on our business and operations.

Our operations are subject to regulation at the regional bloc (e.g., the European Union), country, state and local levels. Changes to existing regulations or rules, or the failure of regulatory agencies to regulate in areas historically regulated on matters such as network neutrality, licensing fees, environmental, health and safety, privacy, intercarrier compensation, emergency services, interconnection, illegal robocalling, extraterritorial use of telephone numbers, cybersecurity, AI and other areas, in general or particular to our industry, may increase uncertainty and costs and restrict operations or decrease revenue.

In addition, in order to procure, distribute and retain telephone numbers in certain foreign jurisdictions, we will be required to register with the local telecommunications regulatory authorities, some of which have been increasingly monitoring and regulating the categories of phone numbers that are eligible for provisioning to our customers, including geographical, regional, local and toll-free phone numbers. We have obtained telecommunications regulatory licenses or are obtaining those licenses in various countries in which we do business, but in some countries, the regulatory regime around provisioning of phone numbers is unclear, subject to change, and may conflict from jurisdiction to jurisdiction. Furthermore, these regulations and government-specific approaches to their enforcement, as well as our products and services, are evolving and we may be unable to maintain compliance with applicable regulations, or enforce compliance by our customers, on a timely basis or without significant or prohibitive cost. Also, compliance with these regulations may require changes in products or business practices that result in reduced revenue. If we or our customers use or assign phone numbers in these countries in a manner that violates applicable rules and regulations, we may also be subject to significant penalties or governmental action, including government-initiated audits and, in extreme cases, may be precluded from doing business in that particular country. In the event of non-compliance, we may be forced to reclaim phone numbers from our customers, which could result in loss of customers, breach of contract claims, loss of revenue and reputational harm, all of which could have a material adverse effect on our business, results of operations and financial condition.

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, workwork, and play. Backed by the Bandwidth Communications Cloud, aour 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, messagingmessaging, emergency services, and emergency servicesAI 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 solvetransform complextheir communications challenges every day.

Bandwidth’s business benefitscontinues to benefit from multiplethe globalapplication megatrends,of includingAI 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, and application of AI technologies to cloud communications use cases.consumers. We believe these megatrends,market which have created sizable total addressable markets,trends are secular, long-lastinglong-lasting, and still early in the adoption curve.

With the combination of our software APIs, our global Communications CloudCloud, 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 20242025 GartnerⓇ Magic Quadrant Leaders in the key cloud communications categories of UCaaS and CCaaS.CCaaS, along with leading hyperscalers and SaaS platforms.

OurWe long-term vision isaim to continue strengthening this position asbe the key enabling platform for communications transformation.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 footprintfootprint, powerful APIs, and powerfulAI APIsorchestration 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) aim to 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.

For the years ended December 31, 2024,2025, 20232024 and 2022,2023, total revenue was $748$754 million, $601$748 million and $573$601 million, respectively, representing an increase of 1% in 2025 and an increase of 25% in 2024, and 5% in 2023.2024. Net loss in 20242025, 2024, and 2023 was $13 million, $7 millionmillion, and $16 million, respectively. Net income in 2022 was $20 million.

During MayFebruary 2024,2025, we entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2026 Convertible Notes (the “20242025 Repurchases”) to repurchase approximately $140$27 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $128$26 million. The 20242025 Repurchases closed on MayFebruary 9,24, 2024.2025. Following the 20242025 Repurchases and previous repurchases of the 2026 Convertible Notes, approximately $35$8 million aggregate principal amount of the 2026 Convertible Notes remainremains outstanding.

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.

We believe net retention rate is useful in evaluating our business. For the years ended December 31, 2024,2025, 20232024 and 2022,2023, theour net retention rate was 122%,98%, 101%122% and 112%,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.

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%, 56%, and 45%56% of outstanding accounts receivable, net of allowance for doubtful accounts,allowances, as of December 31, 2024,2025, 20232024 and 2022,2023, respectively.

In 2024,2025, our cloud communications revenue increased by $61$22 million, or 13%,4%, compared with the same period in 2023.2024. Within cloud communications revenue, our Global Voice Plans revenue grew by 3%8% and was driven by higher voice traffic on our network. Our Programmable Messaging revenue increaseddecreased by 46%13% andlargely wasfrom primarily fueled by higherlower political messaging relatedactivity tofollowing the U.S. presidential election in November 2024. Our Enterprise Voice revenue grew by 29%21%, reflecting strong momentum as the flexibility from our Maestro productplatform’s flexibility and ourvendor-agnostic UCaaS/CCaaS vendor agnostic approachstrategy continues to resonateattract withnew customers.

In 2024,2025, our messaging surcharges revenue increaseddecreased by $87$16 million, or 71%,8%, compared with the same period in 2023.2024. This growthdecline was primarily driven by higher messaging volumes from higherlower political messaging relatedactivity tofollowing the U.S. presidential election.election in November 2024.

In 2024,2025, our average annual customer revenue was $0.2 million, which increased lessby than $0.1 million3% compared with the same period in 2023,2024, primarilyas froma higherresult politicalof messagingour relatedstrategy to theattract U.S.and presidentialretain electionlarger incustomers Novemberwho 2024.provide revenue scale and enhanced profitability.

In 2024,2025, total cost of revenue increaseddecreased by $104$10 million, compared with the same period in 2023,2024, driven by higher pass-throughlower messaging surchargescost of $84revenue of $14 million largely from higherless political messaging fromfollowing the 2024 U.S. presidential election. The combination of changes in total revenue and total cost of revenue yielded an increase in total gross profit of $280$15 million, whichor increased $44 million5% from the same period in 2023,2024, driven by higherongoing salesefficiencies and improved unit economics as we successfully scale larger volumes of election-relatedvoice politicaltraffic messaging.on our network.

Our total gross margin percentage of 37%39% in 2024 declinedincreased by 2%, compared with the same period in 2023,2024, driven by higherlower pass-through messaging surcharges within the total revenue mix.

As a percentage of revenue, total operating expenses for the years ended December 31, 20242025 and 2023December 31, 2024 were 40%41% and 45%,40%, respectively.

In 2024,2025, generalresearch and administrativedevelopment expenses increased by $6$14 million, or 10%,12%, compared with the same period in 2023,2024. drivenOur bycontinued higherinvestment headcountin expenses.evolving our network infrastructure was the key driver behind this increase.

In 2024,2025, interest expense, net of interest income increased by less than $1 million, or 130%,million compared with the same period in 2023,2024, primarily from higheran increase in interest expense resulting from a draw on our Credit Facility to partially fund the 20242025 Repurchases in MayFebruary 2024.2025 that slightly outpaced interest income from cash.

In 2024,2025, we recognized an income tax benefit of $2$4 million, aan decreaseincrease of $1 million,million compared with the same period in 2023.2024. The resulting effective tax rate for the year ended December 31, 20242025 was 27.1%,22.2%, compared with 15.3%27.1% in 2023.2024. 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.

For the years ended December 31, 20242025 and 2023,2024, the effective tax rate of 27.1%22.2% and 15.3%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.assets, as well as differences in statutory income tax rates across foreign jurisdictions.

OnIn August 1, 2023, we entered into a credit agreement (as amended to date, the “Credit Agreement,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 $50$150 million revolving 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, 2024,2025, we had no outstanding borrowings under the Credit Facility and the available borrowing capacity was $150 million. See Note 8,7, “Debt,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information onregarding the Credit Agreement.Agreement, including a summary of the current terms of the Credit Facility.

During MayFebruary 2024,2025, thewe Company entered into the 2024 Repurchases to repurchaserepurchased approximately $140.0$27 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $128.5$26 million. Following the 20242025 Repurchases and previous repurchases, approximately $35.0$8 million aggregate principal amount of the 2026 Convertible Notes remainremains 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.

Our principal future commitments consist of (i) an aggregate of $285$258 million in Convertible Notes, (ii) $471$452 million in future minimum rent payments for our current office space, including a $464$445 million non-cancelable lease for our new corporate headquarters, which commenced in the third quarter of 2023 and which will continue for an initial twenty (20) year term, and (iii) $15$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 8,7, “Debt,” and Note 12,11, “Commitments and Contingencies,” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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

We currently use AI in our business primarily with a focus on driving operational efficiencies for greater productivity, including in customer service, internal operations and network management, and we continue to expand our exploration of such capabilities. We also offer our customers the ability to integrate certain AI technologies developed by third parties into certain of our offerings, and this integration capability is a prominent feature of our Maestro offering. Certain other features of our products are also supported by third-party AI technologies. Certain capabilities within our products incorporate agentic AI (systems that autonomously execute multi-step tasks with reduced human intervention). The deployment of such agentic AI introduces risks that are distinct from those of traditional AI features, including risks of unintended or unauthorized actions, overstepping its intended boundaries, or straying from their original business goals.

AI is an emerging technology for which the legal and regulatory landscape is evolving rapidly, which may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality, privacy, intellectual property or security risks, ethical concerns, legal liability or other complications that could adversely affect our business, reputation and financial results. Laws and regulations applicable to AI are emerging and evolving, and the ultimate legal framework remains uncertain and may be inconsistent from jurisdiction to jurisdiction, including internationally. For example, we expect increased global regulation in the use of AI such as the European Union Artificial Intelligence Act, which imposes onerous obligations related to the development, placement on the market, and use of AI systems. We may not always be able to anticipate how to respond to these legal frameworks, and our obligation to comply with the laws and regulations could entail significant costs, negatively affect our business, or entirely limit our ability to incorporate certain AI capabilities into our offerings. If we cannot use AI or if that use is restricted, our business may be less efficient or we may be at a competitive disadvantage.

Our services, including our communications platform, incorporate open source software, and we expect to continue to incorporate open source software in our services in the future. Few of the licenses applicable to open source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our services, including our communications platform. Moreover, although we have implemented policies to regulate the use and incorporation of open source software into our services, we cannot be certain that we have not incorporated open source software in our services in a manner that is inconsistent with such policies. If we fail to comply with open source licenses, we may be subject to certain requirements, including requirements that we offer our services that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of applicable open source licenses. If an author or other third-party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from generating revenue from customers using services that contained the open source software and required to comply with onerous conditions or restrictions on these services. In any of these events, we and our customers could be required to seek licenses from third parties in order to continue offering our services and to re-engineer our services or discontinue offering our services to customers in the event re-engineering cannot be accomplished on a timely basis. Any of the foregoing could require us to devote additional R&D resources to re-engineer our services, could result in customer dissatisfaction and may adversely affect our business, results of operations and financial condition.

Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel, and our inability to do so could adversely affect our business, results of operations and financial condition. Competition for talent in the technology industry has become increasingly intense, and the market to recruit, retain and motivate talent has become even more competitive. Many key individual contributors, particularly in software development, artificial intelligence, sales and cloud computing and telecommunications infrastructure, are critical to our success and can attract very significant compensation packages. In addition, we believe that there is, and will continue to be, intense competition for highly skilled management, technical, sales and other personnel with experience in our industry in the Raleigh, North Carolina area, where our corporate headquarters are located, and in other geographic locations where we maintain offices.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our consolidated financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Class A common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NASDAQ Global Select Market.

In connection with the pricing of our 0.25% Convertible Notes due March 1, 2026 (the “2026 Convertible Notes”) and 0.50% Convertible Notes due April 1, 2028 (the “2028 Convertible Notes” and, together with the 20262032 Convertible Notes, the “Convertible Notes”), and the 2032 Convertible Notes, we entered into privately negotiated capped call transactions (the “20262028 Capped Calls” and the “20282032 Capped Calls,” respectively and, collectively, the “Capped Calls”) with certain financial institutions (the “option counterparties”). The 2028 Capped Calls are expected generally to reduce the potential dilution upon any conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.

Prior to our initial public offering, there was no public market for shares of our Class A common stock. On November 10, 2017, we sold shares of our Class A common stock to the public at $20.00 per share. From November 10, 2017, the date that our Class A common stock began trading on the NASDAQ Global Select Market, through MarchJune 31,30, 2026, the trading price of our Class A common stock has ranged from $9.20 per share to $198.61 per share. The trading price of our Class A common stock may continue to be volatile and could fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

For the three months ended MarchJune 31,30, 2026 and 2025, total revenue was $209$220 million and $174$180 million, respectively, representing an increase of 20%22% between periods. For the three months ended MarchJune 31,30, 2026 and 2025, net income was $4$2 million and net loss was $4$5 million, respectively. For the six months ended June 30, 2026 and 2025, total revenue was $429 million and $354 million, respectively, representing an increase of 21% between periods. For the six months ended June 30, 2026 and 2025, net income was $7 million and net loss was $9 million, respectively.

During the three months ended MarchJune 31,30, 2026, we repurchased 313,936262,858 shares of our Class A common stock at an average price of $15.93$57.06 per share, excluding commissions, for an aggregate purchase price of $5$15 million. During the six months ended June 30, 2026, we repurchased 576,794 shares of our Class A common stock at an average price of $34.67 per share, excluding commissions, for an aggregate purchase price of $20 million. As of MarchJune 31,30, 2026, approximately $75$60 million remained available for repurchases under the share repurchase program.

Repurchase of 2026 and 2028 Convertible Notes

On March 1, 2026, the 2026 Convertible Notes matured and the related 2026 Capped Calls expired. The aggregate remaining outstanding principal amount of $7.6$8 million of 2026 Convertible Notes, along with all accrued and unpaid interest, was settled in full in cash. As of MarchJune 31,30, 2026, no 2026 Convertible Notes remain outstanding.

During March 2026, we entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2028 Convertible Notes (the “March 2026 Repurchases”) to repurchase approximately $100 million aggregate principal amount of the 2028 Convertible Notes for an aggregate cash price of approximately $92 million. The March 2026 Repurchases closed on March 4, 2026. Following the 2026 Repurchases, approximately $150 million aggregate principal amount of the 2028 Convertible Notes remains outstanding.

TheIn the aggregate, the difference between the consideration used for the March 2026 Repurchases and June 2026 Repurchases, and the carrying value of the 2028 Convertible Notes resulted in a gain of $7$12 million recorded within net gain on extinguishment of debt on our condensed consolidated statements of operations for the threesix months ended June 30, 2026. Following the March 31,2026 2026.Repurchases and June 2026 Repurchases, approximately $28 million aggregate principal amount of the 2028 Convertible Notes remains outstanding.

We believe net retention rate is useful in evaluating our business. For the three months ended MarchJune 31,30, 2026 and 2025, our net retention rate was 102%107% and 116%,112%, respectively. The decrease in our net retention rate was driven by less political messaging over the previous four quarters relative to the prior year.

For the three months ended MarchJune 31,30, 2026 and 2025, we generated 74% and 73%, respectively, of our cloud communications revenue from reoccurring sources. For the six months ended June 30, 2026 and 2025, we generated 74% 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.

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 61%59% and 57%,55%, of outstanding accounts receivable, net of allowance, as of MarchJune 31,30, 2026 and 2025, respectively.

For the three months ended MarchJune 31,30, 2026 and 2025, our effective tax rate was (58.9)%693.8% and 1.8%,(2.8)%, respectively. For the three months ended MarchJune 31,30, 2026 and 2025, our income tax benefit was $2$3 million and our income tax expense was less than $1 million, respectively. The increase in tax benefit is primarily due to favorable U.S. federal and state tax law changes as a result of the One Big Beautiful Bill Act (“OBBBA”).

Judgment is required in determining whether deferred tax assets will be realized in full or in part. Management assesses the available positive and negative evidence on a jurisdictional basis to estimate if deferred tax assets will be recognized and when it is more likely than not that all or some deferred tax assets will not be realized, and a valuation allowance must be established. As of MarchJune 31,30, 2026, we continue to maintain a valuation allowance against our U.S. federal and state net deferred tax assets.

Comparison of the three months ended MarchJune 31,30, 2026 and 2025

For the three months ended MarchJune 31,30, 2026, our cloud communications revenue increased by $17$16 million, or 13%,12%, compared with the same period in 2025. Within cloud communications revenue, our Global Voice Plans revenue grew by 12%10% and was driven by higher voice traffic on our network. Our Programmable Messaging revenue increased by 15%22% largelybenefiting from higher civic engagement relatedelevated commercial messaging activity during the quarter. Our Enterprise Voice revenue grew by 14%,8%, reflectingremaining strong momentumconstructive as customers increasingly choosechose Maestro for its flexibilitysoftware-driven andorchestration vendor-agnosticlayer UCaaS/CCaaSthat model.enables resilient, scalable global voice communications.

For the three months ended MarchJune 31,30, 2026, our messaging surcharges revenue increased by $18$24 million, or 44%,54%, compared with the same period in 2025. This increase was primarily driven by higher civic engagement related commercial messaging andactivity, higheras surchargewell feesas imposedincreased bycarrier certain carrierssurcharges within the messaging ecosystem.

For the three months ended MarchJune 31,30, 2026, our average annual customer revenue was $0.2$0.3 million, which increased by 7%11% compared with the same period in 2025, as a result of our strategy to attract and retain larger customers who provide revenue scale and enhanced profitability.

For the three months ended MarchJune 31,30, 2026, total cost of revenue increased by $28$33 million, compared with the same period in 2025, driven by higher pass-through messaging surcharges of $18$23 million primarily from carrierhigher surchargecommercial ratemessaging increases.activity. The combination of changes in total revenue and total cost of revenue yielded an increase in total gross profit of $6$7 million, or 9%10% from the same period in 2025, driven by ongoinghigher efficienciescloud andcommunications improved unit economics as we successfully scale larger volumes of voice traffic on our network.revenue.

For the three months ended MarchJune 31,30, 2026, our total gross margin percentage of 37%36% decreased by 4%, compared with the same period in 2025, driven by higher pass-through messaging surcharges within the total revenue mix.

As a percentage of revenue, total operating expenses for the three months ended MarchJune 31,30, 2026 and 2025 were 40%38% and 44%,42%, respectively.

For the three months ended MarchJune 31,30, 2026, research and development expenses increased by $8$6 million, or 26%,18%, compared with the same period in 2025. OurThe increase was primarily from higher personnel-related expenses associated with increased research and development headcount to support continued investment in evolvingproduct ourinnovation networkand infrastructureplatform was the key driver behind this increase.development.

For the three months ended MarchJune 31,30, 2026, sales and marketing expenses decreasedincreased by $2$1 million, or 7%,2%, compared with the same period in 2025, primarily due to lowerprimarily headcountdue expensesto fromhigher lowernon-headcount averageoperating headcount during the period.expenses.

For the three months ended MarchJune 31,30, 2026, general and administrative expenses increased by less than $1$2 million, or 2%,8%, compared with the same period in 2025.2025, driven by higher headcount expenses in connection with ongoing operational support needs.

For the three months ended MarchJune 31,30, 2026, interest expense, net of interest income increased by less than $1 million compared with the same period in 2025, primarily from an increase in interest expense resulting from borrowing on our Credit Facility.Facility (as defined herein).

Income Tax Benefit (Provision)

For the three months ended MarchJune 31,30, 2026, we recognized an income tax benefit of $2$3 million, an increase of $1$3 million compared with the same period in 2025. The resulting effective tax rate for the three months ended MarchJune 31,30, 2026 was (58.9)%,693.8%, compared with 1.8%(2.8)% for the three months ended MarchJune 31,30, 2025. 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.

For the three months ended MarchJune 31,30, 2026, the effective tax rate of (58.9)%693.8% differed from the federal statutory rate of 21% in the U.S. primarily due to the valuation allowance recorded against our U.S. federal and state net deferred tax assets, as well as differences in statutory income tax rates across foreign jurisdictions.

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 and repurchases of shares of our Class A common stock under our share repurchase program. As of MarchJune 31,30, 2026, we had cash and cash equivalents of $47$170 million and marketable securities of $3$4 million.

In August 2023, we entered into a credit agreement (as amended to date, the “Credit Agreement”), among the Company, as borrower, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent, swingline lender and letters of credit issuer, which provides for a $150 million revolving credit facility (the “Credit Facility”). As of MarchJune 31,30, 2026, we had $51 millionno outstanding borrowings under the Credit Facility and the available borrowing capacity was $99$150 million. See Note 7, “Debt,” to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding the Credit Agreement, including a summary of the current terms of the Credit Facility.

DuringIn MarchJune 2026, we repaidissued the remaining $8$316 million aggregate principal amount of the 20262032 Convertible Notes. Additionally,The duringtotal Marchnet 2026,proceeds we entered intofrom the 20262032 RepurchasesConvertible Notes, after deducting initial purchaser discounts, costs related to the 2032 Capped Calls (as defined herein), and debt issuance costs, paid by us, were approximately $282 million. We used approximately $122 million of those proceeds to repurchase $100 million aggregate principal amount for an aggregate cash price of $92 million. The 2026 Repurchases closed on March 4, 2026. Following the 2026 Repurchases, approximately $150 million aggregate principal amount of theadditional 2028 Convertible NotesNotes, remainsreducing outstanding.the outstanding principal balance to approximately $28 million. We may, at any time and from time to time, seek to retire or purchase our 2028 Convertible Notes or 2032 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.

For the threesix months ended MarchJune 31,30, 2026, net cash provided by operating activities was $9$38 million and was generated by our aggregate results of $26$52 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 $18$14 million cash outflow, primarily from lower operating liabilities and higher operating assets. Within operating liabilities, net cash usedprovided of $4$9 million was drivenprimarily byattributable $9to millionan of outflows from decreasesincrease in accounts payable,payable partiallyas offseta by $7 millionresult of cash generated by increases in accrued expenses and other liabilities. The increase in accrued expenses and other liabilities was largely driven by the timing of payments andat correlatedquarter with higher network usage.end. Within operating assets, the net cash used of $14$23 million was primarily driven by higher unbilled receivables balances of $10$19 million from higher usage amounts in the last month of the quarter ended MarchJune 31,30, 2026 and changes in prepaid expenses and other current assets of $4 million.

For the threesix months ended MarchJune 31,30, 2026, net cash used in investing activities was $4$10 million. Cash used in investing activities wasmillion, primarily drivenreflecting by$10 cashmillion usedof capital expenditures for the purchase of property, plant and equipment ofand $7$5 million and cash used forof capitalized software development costs ofrelated $2 million, driven byto investments in theour communications platform, partially offset by cash$4 generatedmillion of net proceeds from proceeds of marketable securities, net of purchases, of $5 million.securities.

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,compensation and related payroll taxes, 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.

(1) Calculated by dividing Non-GAAP gross profit by cloud communications revenue of $150$152 million and $133$302 million for the three and six months ended MarchJune 31,30, 20262026, respectively, and $136 million and $269 million for the three and six months ended June 30, 2025, respectively.

•stock-based compensation and related payroll taxes;

(1) Non-recurring items not indicative of ongoing operations and other include (i) $(0.60.8) million and $(1.4) million of foreign exchange charges primarily related to balance sheet revaluations during the three and six months ended MarchJune 31,30, 2026, respectively, (ii) $0.2 million and less than $0.1 million and $0.2 million of losses on disposals of property, plant and equipment during the three and six months ended MarchJune 31,30, 20262026, respectively, (iii) $0.2 million of losses on disposals of property, plant and equipment during the three and six months ended June 30, 2025, respectively,(iv) $0.1 million of losses on sale of business during the three and six months ended June 30, 2025, and (iiiv) $0.5 million of nonrecurring litigation expense during the threesix months ended MarchJune 31,30, 2025.