SEC Comment Letter for Bandwidth Inc. (BAND) (CIK 0001514416) (BAND) — Oct 25, 2017
Bandwidth Inc. (BAND) (CIK 0001514416)
Date: Oct. 25, 2017 · CIK: 0001514416 · Accession: 0000000000-17-037797
AI Filing Summary & Sentiment
File numbers found in text: 333-220945
Letter
Mail Stop 4561 October 25, 2017 David A. Morken Chairm an and Chief Executive Officer Bandwidth Inc. 900 Main Campus Drive Raleigh, NC 27606
Re: Bandwidth Inc. Amendment No. 1 to Registration Statement on Form S -1 Filed October 23, 2017 File No.: 333-220945
Dear Mr. Morken :
We have reviewed your amended registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.
Please respond to this letter by amending your registration statement and providing the requested information. If you do not believe our comments apply to your facts and circumstances or do not bel ieve an amendment is appropriate, please tell us why in your response.
After reviewing any amendment to your registration statement and the information you provide in response to these comments, we may have additional comments . Unless we note otherwise , our references to prior comments are to comments in our October 19, 2017 letter .
Prospectus Summary
The Offering, page 9
1. You state in response to prior comment 1 that the Series A preferred stock will convert to 2.5 shares of Old Class A common stock prior to the effectiveness of your Second Amended and Restated Certificate of Incorporation. However, your disclosures on page 48 indicate that you “expect” this event to happen. Please clarify whether your preferred shareholders have formally agreed to convert their holdings to Class A common stock. Also, if the preferred shareholders do not convert to Old Class A common stock, tell us how that impacts the terms of your Second Amended and Restated Certificate of Incorporation.
David A. Morken Bandwidth Inc. October 25, 2017 Page 2
2. We have reviewed your re sponse to prior comments 1 and 2. Please tell us the basis for your statement that you expect Carmichael Investment Partners LLC to distribute the Class B common stock to its limited partners. Tell us whether there are agreement s in place that ensure this will happen. If not, please clarify your disclosures that you expect a sufficient number of shares of Class B common stock will be converted into Class A common stock in order for you to become a controlled company.
3. Further, it appears that a substantial percentage of the Class B common stock is held by holders who are subject to lockup agreements that prevent them from converting their shares of Class B common stock to Class A common stock. Please tell us the basis for your st atement that you expect Mr. Morken to become your controlling shareholder in light of these limitations.
4. You state that the holders of the Class B common stock are not required to convert their shares of Class B common stock to Class A common stock. Please add disclosure to the cover page that t hese holders are not required to convert their shares of Class B common stock to Class A common stock and there can be no assurance that they will convert their shares or advise .
Management’s Discussion and A nalysis of Financial Condition and Results of Operations
Key Performance Indicators, page 64 5. In your response to prior comment 5 you state that the company’s Chief Operating Decision Maker assesses performance primarily based on revenue and gross profit rather than usage metrics when reviewing the company’s operating performance or making business decisions. Please clarify for us whether management uses usage metrics in managing the business. If so, tell us why you believe usage metrics would not be key indicators of the company’s operating performance considering the majority of your CPaaS reven ues are based on usage. Refer to Item 303(a)(3) of Regulation S -K and Section III.B.1 of SEC Release No. 33 -8350 .
David A. Morken Bandwidth Inc. October 25, 2017 Page 3
You may contact Joyce Sweeney, Staff Accountant, at (202) 551 -3449 or Kathleen Collins, Accounting Branch Chief, at (202) 551 -3499 if you ha ve questions regarding comments on the financial statements and related matters. Please contact Jeff Kauten , Staff Attorney, at (202) 551 -3447 or me at (202) 551-3730 with any other questions.
Sincerely,
/s/ Barbara C. Jacobs
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Mail Stop 4561 October 25, 2017 David A. Morken Chairm an and Chief Executive Officer Bandwidth Inc. 900 Main Campus Drive Raleigh, NC 27606 Re: Bandwidth Inc. Amendment No. 1 to Registration Statement on Form S -1 Filed October 23, 2017 File No.: 333-220945 Dear Mr. Morken : We have reviewed your amended registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter by amending your registration statement and providing the requested information. If you do not believe our comments apply to your facts and circumstances or do not bel ieve an amendment is appropriate, please tell us why in your response. After reviewing any amendment to your registration statement and the information you provide in response to these comments, we may have additional comments . Unless we note otherwise , our references to prior comments are to comments in our October 19, 2017 letter . Prospectus Summary The Offering, page 9 1. You state in response to prior comment 1 that the Series A preferred stock will convert to 2.5 shares of Old Class A common stock prior to the effectiveness of your Second Amended and Restated Certificate of Incorporation. However, your disclosures on page 48 indicate that you “expect” this event to happen. Please clarify whether your preferred shareholders have formally agreed to convert their holdings to Class A common stock. Also, if the preferred shareholders do not convert to Old Class A common stock, tell us how that impacts the terms of your Second Amended and Restated Certificate of Incorporation. David A. Morken Bandwidth Inc. October 25, 2017 Page 2 2. We have reviewed your re sponse to prior comments 1 and 2. Please tell us the basis for your statement that you expect Carmichael Investment Partners LLC to distribute the Class B common stock to its limited partners. Tell us whether there are agreement s in place that ensure this will happen. If not, please clarify your disclosures that you expect a sufficient number of shares of Class B common stock will be converted into Class A common stock in order for you to become a controlled company. 3. Further, it appears that a substantial percentage of the Class B common stock is held by holders who are subject to lockup agreements that prevent them from converting their shares of Class B common stock to Class A common stock. Please tell us the basis for your st atement that you expect Mr. Morken to become your controlling shareholder in light of these limitations. 4. You state that the holders of the Class B common stock are not required to convert their shares of Class B common stock to Class A common stock. Please add disclosure to the cover page that t hese holders are not required to convert their shares of Class B common stock to Class A common stock and there can be no assurance that they will convert their shares or advise . Management’s Discussion and A nalysis of Financial Condition and Results of Operations Key Performance Indicators, page 64 5. In your response to prior comment 5 you state that the company’s Chief Operating Decision Maker assesses performance primarily based on revenue and gross profit rather than usage metrics when reviewing the company’s operating performance or making business decisions. Please clarify for us whether management uses usage metrics in managing the business. If so, tell us why you believe usage metrics would not be key indicators of the company’s operating performance considering the majority of your CPaaS reven ues are based on usage. Refer to Item 303(a)(3) of Regulation S -K and Section III.B.1 of SEC Release No. 33 -8350 . David A. Morken Bandwidth Inc. October 25, 2017 Page 3 You may contact Joyce Sweeney, Staff Accountant, at (202) 551 -3449 or Kathleen Collins, Accounting Branch Chief, at (202) 551 -3499 if you ha ve questions regarding comments on the financial statements and related matters. Please contact Jeff Kauten , Staff Attorney, at (202) 551 -3447 or me at (202) 551-3730 with any other questions. Sincerely, /s/ Barbara C. Jacobs Barbara C. Jacobs Assistant Director Office of Information Technologies and Services cc: Michael Benjamin, Esq. Latham & Watkins LLP