BANDWIDTH INC. of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" in this Quarterly Report on Form 10-Q. Our fiscal year ends onDecember 31 .
Overview
We are a leading cloud-based communications platform for enterprises inthe United States . Our solutions include a broad range of software APIs for voice and text functionality and our owned and managed, purpose-built IP voice network, one of the largest in the nation. Our sophisticated and easy-to-use software APIs allow enterprises to enhance their products and services by incorporating advanced voice and text capabilities. Companies use our platform to more frequently and seamlessly connect with their end users, add voice calling capabilities to residential IoT devices, offer end users new mobile application experiences and improve employee productivity, among other use cases. By owning and operating a capital-efficient, purpose-built IP voice network, we are able to offer advanced monitoring, reporting and analytics, superior customer service, dedicated operating teams, personalized support, and flexible cost structures. Over the last ten years, we have pioneered the CPaaS space through our innovation-rich culture and focus on empowering enterprises with end-to-end communications solutions. Our voice software APIs allow enterprises to make and receive phone calls and create advanced voice experiences. Integration with our purpose-built IP voice network ensures enterprise-grade functionality and secure, high-quality connections. Our messaging software APIs provide enterprises with advanced tools to connect with end users via messaging. Our customers also use our solutions to enable 911 response capabilities, real-time provisioning and activation of phone numbers and toll-free number messaging. We are the only CPaaS provider in the industry with our own nationwide IP voice network, which we have purpose-built for our platform. Our network is capital-efficient and custom-built to support the applications and experiences that make a difference in the way enterprises communicate. Since a communications platform is only as strong as the network that backs it, we believe our network provides a significant competitive advantage in the control, quality, pricing power and scalability of our offering. We are able to control the quality and provide the support our customers expect, as well as efficiently meet scalability and cost requirements. For the three months endedSeptember 30, 2019 and 2020, total revenue was$60.5 million and$84.8 million , respectively. CPaaS revenue for the three months endedSeptember 30, 2019 and 2020 was$51.5 million and$73.8 million , respectively, representing an increase of 43% in 2020. Net loss for the three months endedSeptember 30, 2019 was$1.0 million and net loss for the three months endedSeptember 30, 2020 was$2.4 million . For the three months endedSeptember 30, 2019 and 2020, the number of active CPaaS customer accounts was 1,610 and 2,015, respectively, representing a year over year increase of 25% in 2020. Proposed Acquisition of Voxbone OnOctober 12, 2020 , we entered into a Share Purchase Agreement (the "Share Purchase Agreement") to acquire all of the A Ordinary Shares, B Ordinary Shares and C Ordinary Shares ofVoice Topco Limited , ("Voice Topco").Voice Topco directly or indirectly holds all of the issued and outstanding shares ofVoxbone S.A. , ("Voxbone"), which (with its subsidiaries) is the operating subsidiary ofVoice Topco . The transaction contemplated by the Share Purchase Agreement provides the Company will acquire all of the A Ordinary Shares, B Ordinary Shares and C Ordinary Shares ofVoice Topco (the "Share Purchase") in a transaction valued at €446 million. As consideration for the Share Purchase, the Company will (i) pay the Selling Stockholders approximately$400 million (or approximately €338 million based on prevailing exchange rates at the 32
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Management's Discussion and Analysis
close of business on October 9, 2020 ) (subject to customary working capital and
certain other adjustments) at the closing of the Share Purchase (the "Closing")
and (ii) issue to the Sellers at the Closing shares of the Company's Class A
common stock, with an aggregate value of approximately €108 million (or
approximately $128 million based on prevailing exchange rates at the close of
business on October 9, 2020 )).
The proposed transaction is expected to close in the fourth quarter of 2020. The
closing of this transaction is subject to certain customary closing conditions
and approvals. During the nine months ended September 30, 2020 , we incurred $1.7
million in expenses related to this proposed transaction. If consummated, the
acquisition of Voxbone may have a significant impact on our liquidity, financial
condition and results of operations. The following discussion and analysis of
our results of operations and our liquidity and capital resources focuses on our
existing operations exclusive of the impact of the proposed acquisition of
Voxbone. Any forward-looking statements contained herein do not take into
account the impact of such proposed acquisition.
COVID-19 Update
In December 2019 , a novel coronavirus disease ("COVID-19") was reported and in
January 2020 , the World Health Organization ("WHO") declared it a Public Health
Emergency of International Concern. On February 28, 2020 , the WHO raised its
assessment of the COVID-19 threat from high to very high at a global level due
to the continued increase in the number of cases and affected countries, and on
March 11, 2020 , the WHO characterized COVID-19 as a pandemic.
The circumstances caused by COVID-19 resulted in increased use of our services
during the three and nine months ended September 30, 2020 because of more
reliance on our offerings to connect people during a time of physical distancing
and work from home environments. Increased usage was mostly driven by large
enterprise customers that offer unified communications as a service ("UCaaS")
and meeting solutions. We anticipate significant usage of these services and
solutions to continue until the effects of COVID-19 abate. We believe that usage
of many of these services and solutions will continue after the effects of
COVID-19 abate as employees and enterprises utilize work from home arrangements
more prevalently. The broader implications of COVID-19 on our results of
operations and overall financial performance remain uncertain. As a result of
the COVID-19 pandemic, nearly all of our employees in the United States and
Europe worked from home during the calendar quarter ending on September 30, 2020
and we implemented certain travel restrictions, neither of which disrupted our
operations. The COVID-19 pandemic and its adverse effects have become more
prevalent in the locations where we, our customers, suppliers and third-party
business partners conduct business and, as a result, we may experience
disruptions in our operations. We may experience curtailed customer demand that
could materially adversely impact our business, results of operations and
overall financial performance in future periods. Specifically, we may experience
impact from enterprises reducing usage of our services, delaying decisions to
implement our services, and reducing marketing spend. The effect of the COVID-19
pandemic will not be fully reflected in our results of operations and overall
financial performance until future periods. See "Item 1A. Risk Factors" for
further discussion of the possible impact of the COVID-19 pandemic on our
business.
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Management's Discussion and Analysis
Key Performance Indicators
We monitor the following key performance indicators ("KPIs") to help us evaluate
our business, identify trends affecting our business, formulate business plans,
and make strategic decisions. We believe the following KPIs are useful in
evaluating our business:
Three months ended September Nine months ended
30, September 30,
2019 2020 2019 2020
(Dollars in thousands)
Number of active CPaaS customers
(as of period end) 1,610 2,015 1,610 2,015
Dollar -based net retention rate 116 % 131 % 113 % 130 %
Adjusted EBITDA $ (638) $ 9,275 $ (2,277) $ 17,896
Free cash flow $ (4,386) $ 9,313 $ (19,317) $ (51)
Number of Active CPaaS Customer Accounts
We believe the number of active CPaaS customer accounts is an important
indicator of the growth of our business, the market acceptance of our platform
and our future revenue trends. We define an active CPaaS customer account at the
end of any period as an individual account, as identified by a unique account
identifier, for which we have recognized at least $100 of revenue in the last
month of the period. We believe that the use of our platform by active CPaaS
customer accounts at or above the $100 per month threshold is a stronger
indicator of potential future engagement than trial usage of our platform at
levels below $100 per month. A single organization may constitute multiple
unique active CPaaS customer accounts if it has multiple unique account
identifiers, each of which is treated as a separate active CPaaS customer
account. Customers who pay after using our platform and customers that have
credit balances are included in the number of active CPaaS customer accounts.
Customers from our Other segment are excluded in the number of active CPaaS
customer accounts, unless they are also CPaaS customers.
For the three and nine months ended September 30, 2019 and 2020, revenue from
active CPaaS customer accounts represented approximately 99% of total CPaaS
revenue.
Dollar-Based Net Retention Rate
Our ability to drive growth and generate incremental revenue depends, in part,
on our ability to maintain and grow our relationships with our existing
customers that generate CPaaS revenue and seek to increase their use of our
platform. We track our performance in this area by measuring the dollar-based
net retention rate for our customers who generate CPaaS revenue. Our
dollar-based net retention rate compares the CPaaS revenue from customers in a
quarter to the same quarter in the prior year. To calculate the dollar-based net
retention rate, we first identify the cohort of customers that generate CPaaS
revenue and that were customers in the same quarter of the prior year. The
dollar-based net retention rate is obtained by dividing the CPaaS revenue
generated from that cohort in a quarter, by the CPaaS revenue generated from
that same cohort in the corresponding quarter in the prior year. When we
calculate dollar-based net retention rate for periods longer than one quarter,
we use the average of the quarterly dollar-based net retention rates for the
quarters in such period. Our dollar-based net retention rate increases when such
customers increase usage of a product, extend usage of a product to new
applications or adopt a new product. Our dollar-based net retention rate
decreases when such customers cease or reduce usage of a product or when we
lower prices on our solutions.
As our customers grow their business and extend the use of our platform, they
sometimes create multiple customer accounts with us for operational or other
reasons. As such, when we identify a significant customer organization (defined
as a single customer organization generating more than 1% of CPaaS revenue in a
quarterly reporting period) that has created a new CPaaS customer, this new
customer is tied to, and CPaaS revenue from this new customer is included with,
the original CPaaS customer for the purposes of calculating this metric.
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Management's Discussion and Analysis
Key Components of Statements of Operations
Revenue
We generate a majority of our revenue from our CPaaS segment. CPaaS revenue is
derived from voice usage, phone number services, 911-enabled phone number
services, messaging services and other services. We generate a portion of our
CPaaS revenue from usage-based fees, which include voice calling and messaging
services.
For the three months ended September 30, 2019 and 2020, we generated 68% and 75%
of our CPaaS revenue, respectively, from usage-based fees. We also earn monthly
fees from services such as phone number services and 911 access service. For the
three months ended September 30, 2019 and 2020, we generated 30% and 23% of our
CPaaS revenue, respectively, in each period from monthly per unit fees. The
remaining 2% of our CPaaS revenue is generated from other miscellaneous
services.
For the nine months ended September 30, 2019 and 2020, we generated 66% and 74%
of our CPaaS revenue, respectively, from usage-based fees. We also earn monthly
fees from services such as phone number services and 911 access service. For the
nine months ended September 30, 2019 and 2020, we generated 31% and 24% of our
CPaaS revenue, respectively, in each period from monthly per unit fees. The
remaining 3% and 2% of our CPaaS revenue is generated from other miscellaneous
services.
The remainder of our revenue is generated by our Other segment. Other revenue is
composed of revenue earned from our legacy services and indirect revenue. Other
revenue as a percentage of total revenue is expected to continue to decline over
time.
We recognize accounts receivable at the time the customer is invoiced.
Additionally, we record a receivable and revenue for unbilled revenue if the
services have been delivered and are billable in subsequent periods. Unbilled
revenue made up 54% and 56% of outstanding accounts receivable, net of allowance
for doubtful accounts as of September 30, 2019 and 2020, respectively.
Cost of Revenue and Gross Margin
CPaaS cost of revenue consists primarily of fees paid to other network service
providers from whom we buy services such as minutes of use, phone numbers,
messages, porting of customer numbers and network circuits. Cost of revenue also
contains costs related to support of our IP voice network, web services, cloud
infrastructure, capacity planning and management, rent for network facilities,
software licenses, hardware and software maintenance fees and network
engineering services. Personnel costs (including non-cash stock-based
compensation expenses) associated with personnel who are responsible for the
delivery of services, operation and maintenance of our communications network,
and customer support, as well as, third-party support agreements and
depreciation of network equipment, amortization of internally developed software
and gain (loss) on disposal of property and equipment are also included in cost
of revenue.
Other cost of revenue consists of costs supporting non-CPaaS services including
leased circuit costs paid to third party providers, internet connectivity
expenses, minutes of use, direct operations, contractors, regulatory fees,
surcharges and other pass-through costs and software and hardware maintenance
fees.
Gross margin is calculated by subtracting cost of revenue from revenue, divided
by total revenue, expressed as a percentage. Our cost of revenue and gross
margin have been, and will continue to be, affected by several factors,
including the timing and extent of our investments in our network, our ability
to manage off-network minutes of use and messaging costs, the product mix of
revenue, the timing of amortization of capitalized software development costs
and the extent to which we periodically choose to pass on any cost savings to
our customers in the form of lower usage prices.
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Management's Discussion and Analysis
Operating Expenses
The most significant components of operating expenses are personnel costs, which
consist of salaries, benefits, bonuses, and stock-based compensation expenses.
We also incur other non-personnel costs related to our general overhead
expenses, including facility expenses, software licenses, web services,
depreciation and amortization of assets unrelated to delivery of our services.
We expect that our operating expenses will increase in absolute dollars.
Research and Development
Research and development ("R&D") consists primarily of personnel costs
(including non-cash stock-based compensation expenses), outsourced software
development and engineering service and cloud infrastructure fees for staging
and development of outsourced engineering services. We capitalize the portion of
our software development costs in instances where we invest resources to develop
software for internal use. We plan to continue to invest in R&D to enhance
current product offerings and develop new services.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel costs, including
commissions for our sales employees and non-cash stock-based compensation
expenses. Sales and marketing expenses also include expenditures related to
advertising, marketing, our brand awareness activities, sales support and
professional services fees.
We focus our sales and marketing efforts on creating sales leads and
establishing and promoting our brand. We plan to continue to invest in sales and
marketing in order to expand our CPaaS customer base by growing headcount,
driving our go-to-market strategies, building brand awareness, advertising and
sponsoring additional marketing events.
General and Administrative
General and administrative expenses consist primarily of personnel costs,
including stock-based compensation, for our accounting, finance, legal, human
resources and administrative support personnel and executives. General and
administrative expenses also include costs related to product management and
reporting, customer billing and collection functions, information services,
professional services fees, credit card processing fees, rent associated with
our headquarters in Raleigh, North Carolina and our other offices, and
depreciation and amortization. We expect that we will incur increased costs
associated with supporting the growth of our business and to meet the increased
compliance requirements associated with our transition to, and operation as, a
public company.
Income Taxes
For the three months ended September 30, 2019 and 2020, our effective tax rate
was 73.5% and (0.4)%, respectively. The decrease in our effective tax rate is
primarily due to the change in judgment related to the realizability of certain
deferred tax assets and the resulting valuation allowance.
For the nine months ended September 30, 2019 and 2020, our effective tax rate
was 135.5% and (134.2)%, respectively. The decrease in our effective tax rate is
primarily due to the change in judgment related to the realizability of certain
deferred tax assets and the resulting valuation allowance.
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 September 30, 2020 , the Company continues to maintain a valuation allowance
for its U.S. federal and state net deferred tax assets.
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Management's Discussion and Analysis
On March 27, 2020 , the Coronavirus Aid, Relief, and Economic Security (CARES)
Act (the "Act") was enacted. The Act includes multiple income tax provisions
that impact our tax expense, such as relaxing limitations on the deductibility
of interest and the use of net operating losses arising in taxable years
beginning after December 31, 2017 . We have accounted for the estimated impact of
the Act.
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Management's Discussion and Analysis
Non-GAAP Financial Measures
We use Non-GAAP gross profit, Non-GAAP gross margin, Non-GAAP net (loss) income,
Adjusted EBITDA and free cash flow for financial and operational decision making
and to evaluate period-to-period differences in our performance. Non-GAAP gross
profit, Non-GAAP gross margin, Non-GAAP net (loss) income, Adjusted EBITDA and
free cash flow are non-GAAP financial measures, which we believe are useful for
investors in evaluating our overall financial performance. We believe these
measures provide useful information about operating results, enhance the overall
understanding of past financial performance and future prospects and allow for
greater transparency with respect to key performance indicators used by
management in its financial and operational decision making. See below for a
reconciliation of each of the non-GAAP financial measures described below.
Non-GAAP Gross Profit and Non-GAAP Gross Margin
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 Statement of
Operations-Cost of Revenue and Gross Margin." We define Non-GAAP gross profit as
gross profit after adding back the following items:
•depreciation and amortization; and
•stock-based compensation.
We add back depreciation and amortization, and stock-based compensation, because
they are non-cash items. We eliminate the impact of these non-cash items because
we do not consider them indicative of our core operating performance. Their
exclusion facilitates comparisons of our operating performance on a
period-to-period basis. We believe showing gross margin, as Non-GAAP to remove
the impact of these non-cash expenses, such as depreciation and amortization and
stock-based compensation, is helpful to investors in assessing our gross profit
and gross margin performance in a way that is similar to how management assesses
our performance.
We calculate Non-GAAP gross margin by dividing Non-GAAP gross profit by revenue,
expressed as a percentage of revenue.
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 as we do.
Consolidated
Three months ended September 30, Nine months ended September 30,
2019 2020 2019 2020
(In thousands)
Consolidated Gross Profit $ 27,387 $ 39,231 $ 78,611 $ 106,171
Consolidated Gross Profit Margin % 45 % 46 % 46 % 46 %
Depreciation 1,700 2,284 4,523 6,958
Stock-based compensation 52 46 158 161
Non-GAAP Gross Profit $ 29,139 $ 41,561 $ 83,292 $ 113,290
Non-GAAP Gross Margin % 48 % 49 % 49 % 49 %
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Management's Discussion and Analysis
By Segment
CPaaS
Three months ended September 30, Nine months ended September 30,
2019 2020 2019 2020
(In thousands)
CPaaS Gross Profit $ 22,202 $ 34,416 $ 63,431 $ 91,492
CPaaS Gross Profit Margin % 43 % 47 % 44 % 46 %
Depreciation 1,700 2,284 4,523 6,958
Stock-based compensation 52 46 158 161
Non-GAAP CPaas Gross Profit $ 23,954 $ 36,746 $ 68,112 $ 98,611
Non-GAAP CPaaS Gross Margin % 47 % 50 % 47 % 49 %
Other
There are no Non-GAAP adjustments to gross profit for the Other segment.
Non-GAAP Net (Loss) Income
We define Non-GAAP net (loss) income as net income or loss adjusted for certain
items affecting period-to-period comparability. Non-GAAP net (loss) income
excludes:
•stock-based compensation;
•amortization of acquired intangible assets related to the acquisition of Dash
Carrier Services, LLC ;
•amortization of debt discount and issuance costs for convertible debt;
•acquisition related expenses;
•impairment charges of intangibles assets, if any;
•loss (gain) on disposal of property and equipment;
•estimated tax impact of above adjustments;
•income tax benefit resulting from excess tax benefits associated with the
exercise of stock options, vesting of restricted stock units and equity
compensation; and
•expense resulting from recording the valuation allowance on our deferred tax
assets.
We calculate Non-GAAP basic and diluted shares by adding the weighted average of
outstanding Series A redeemable convertible preferred stock, if any, to the
weighted average number of outstanding basic and diluted shares, respectively.
The tax-effect of non-gaap adjustments is determined using a blended rate of
statutory tax rates in the jurisdictions where the Company has tax filings. When
the Company has a valuation allowance recorded and no tax benefits will be
recognized, the rate is considered to be zero.
We believe Non-GAAP net (loss) income is a meaningful measure because by
removing certain non-cash and other expenses we are able to evaluate our
operating results in a manner we believe is more indicative of the current
period's performance. We believe the use of Non-GAAP net (loss) income may be
helpful to investors because it provides consistency and comparability with past
financial performance, facilitates period-to-period comparisons of results of
operations and assists in comparisons with other companies, many of which may
use similar non-GAAP financial information to supplement their GAAP results.
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Management's Discussion and Analysis
Three months ended September 30, Nine months ended September 30,
2019 2020 2019 2020
(In thousands)
Net (loss) income $ (1,014) $ (2,352) $ 4,450 $ (24,051)
Stock-based compensation 1,654 2,382 4,960 7,306
Amortization of acquired intangibles 130 130 390 390
Amortization of debt discount and
issuance costs for convertible debt - 4,575 - 10,852
Acquisition-related expenses - 1,745 - 1,745
Loss on disposal of property and
equipment 3 3 354 263
Estimated tax effects of adjustments (1) (451) - (1,440) -
Valuation allowance (2) - - - 14,173
Income tax benefit of equity compensation (1,749) - (13,488) -
Non-GAAP net (loss) income $ (1,427) $ 6,483 $ (4,774) $ 10,678
Net (loss) income per share
Basic $ (0.04) $ (0.10) $ 0.20 $ (1.01)
Diluted $ (0.04) $ (0.10) $ 0.19 $ (1.01)
Non-GAAP net (loss) income per Non-GAAP
share
Basic $ (0.06) $ 0.27 $ (0.21) $ 0.45
Diluted $ (0.06) $ 0.24 $ (0.21) $ 0.42
Non-GAAP weighted average number of
shares outstanding
Non-GAAP basic shares 23,426,455 24,175,762 22,353,097 23,905,322
Convertible debt conversion - 1,692,546 - 708,073
Stock options issued and outstanding - 273,681 - 507,530
Nonvested RSUs outstanding - 367,790 - 333,329
Non-GAAP diluted shares 23,426,455 26,509,779 22,353,097 25,454,254
________________________
(1) The Non-GAAP tax-effect is determined using a blended rate of statutory tax
rates in the jurisdictions where the Company has tax filings. When the Company
has a valuation allowance recorded and no tax benefits will be recognized, the
rate is considered to be zero. The rate was 25.2% for the three and nine months
ended September 30, 2019 .
(2) The company recognized a tax expense of $0 and $14,173 to record a valuation
allowance on U.S. deferred tax assets in the three and nine months ended
September 30, 2020 .
Adjusted EBITDA
We define Adjusted EBITDA as net income or losses from continuing operations,
adjusted to reflect the addition or elimination of certain income statement
items including, but not limited to:
•income tax provision (benefit);
•interest (income) expense, net;
•depreciation and amortization expense;
•acquisition related expenses;
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Management's Discussion and Analysis
•stock-based compensation expense;
•impairment of intangible assets, if any; and
•loss (gain) on disposal of property and equipment, if any.
Adjusted EBITDA is a key measure used by management to understand and evaluate
our core operating performance and trends, to generate future operating plans
and to make strategic decisions regarding the allocation of capital. In
particular, the exclusion of certain expenses in calculating Adjusted EBITDA
facilitates comparisons of our operating performance on a period-to-period
basis.
Three months ended September 30, Nine months ended September 30,
2019 2020 2019 2020
(In thousands)
Net (loss) income $ (1,014) $ (2,352) $ 4,450 $ (24,051)
Income tax (benefit) provision (1) (2) (2,810) 10 (16,971) 13,783
Interest (income) expense, net (778) 4,200 (1,698) 8,923
Depreciation 2,177 3,157 6,238 9,537
Amortization 130 130 390 390
Acquisition-related expenses - 1,745 - 1,745
Stock-based compensation 1,654 2,382 4,960 7,306
Loss on disposal of property and
equipment 3 3 354 263
Adjusted EBITDA $ (638) $ 9,275 $ (2,277) $ 17,896
________________________
(1) Includes excess tax benefits (reversals) associated with the exercise of
stock options and vesting of restricted stock units of $1,749 and $13,488 in the
three and nine months ended September 30, 2019 , respectively, and $0 in the
three and nine months ended September 30, 2020 , respectively.
(2) Includes $0 and $14,173 of tax expense to record a valuation allowance on
U.S. deferred tax assets in the three and nine months ended September 30, 2020 .
Free Cash Flow
Free cash flow represents net cash provided by or used in operating activities
less net cash used in the acquisition of property and equipment and capitalized
development costs of software for internal use. We believe free cash flow is a
useful indicator of liquidity and provides information to management and
investors about the amount of cash generated from our core operations that can
be used for investing in our business. Free cash flow has certain limitations in
that it does not represent the total increase or decrease in the cash balance
for the period, it does not take into consideration investment in long-term
securities, nor does it represent the residual cash flows available for
discretionary expenditures. Therefore, it is important to evaluate free cash
flow along with our consolidated statements of cash flows.
Three months ended September 30, Nine months ended September 30,
2019 2020 2019 2020
(In thousands)
Net cash provided by (used in)
operating activities $ 1,932 $ 11,647 $ (3,480) $ 11,331
Net cash used in investing in
capital assets (1) (6,318) (2,334) (15,837) (11,382)
Free cash flow $ (4,386) $ 9,313 $ (19,317) $ (51)
________________________(1) Represents the acquisition cost of property, equipment and capitalized development costs for software for internal use.
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