Ribbon Communications (RBBN) 29 Jul 212021 Q2 Earnings call transcript

Greetings, and welcome to the Ribbon Communications Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference call is being recorded. I will now turn the conference over to, Tom Berry, Investor Relations for Ribbon Communications. you. Thank

begin. may You

documents Bruce are of subject our slides welcome Form I financial and These refer matters second Relations am on included Chief will Communications. and in uncertainties and live release ribboncommunications.com, Executive results at and where Lopez, to full Mick for of in conference uncertainties projections XXXX conference the will results safe quarter harbor supplemental third our X Also Ribbon's that be press year today call being could call. Tom Officer. our Today's be the today, business Ribbon's on discussed to afternoon, Chief quarter on website and and Officer; cause Ribbon's beyond of differ Financial call call. financial Ribbon webcast XX-K contained statements. this XXXX forward-looking with Form those actual statement materially McClelland, from Good including slide Barry, including is Certain the risks XXXX, our are archived of risks our outlook are currently supplemental be are discussing slides XX-Q. to to these and the recent and will statements our we and Investor the filed SEC, statements. for available. you Relations section the both forward-looking Such Investor and I most

in our for call, this are afternoon available GAAP Investor In release issued earnings are well on the on of again, call. website. as included press section we this Reconciliations to addition, present measure which the the this applicable non-GAAP Relations will both information slides financial we the conference supplemental as in

XXXX. on over quarter XXXX, on businesses. of XXXX, Networks X, March As acquisition IP to prior we completed to Bruce? ECI comparisons Cloud of sale Communications These reporting I'd noted, Bruce. to & our for call Optical began and December in Edge X, Kandy periods. the Further, the our segment And the items we we Telecom of like completed and previously fourth now, impact turn

quarter Thanks, to up for and chain a XX% six degree lesser That year-over-year thank for adjusted year. and our guidance from remainder you earnings our as today results And of and XX% IP had share management. second disciplined quarter discuss India and in earnings growth. us the above a quarter ranges, year, segment, impacted to in we our good second the profitability non-GAAP a the Great. cash and negatively challenges. perspective, margins, up per situation we with EBITDA sales said outlook strong We in Revenue achieved XXX% EBITDA is XXXX of months supply both afternoon, In Adjusted COVID non-GAAP generation. benefit the Good revenue for continue product is our the had quarter well Tom. we was expense by and everyone. stronger XX% joining grew year-over-year. the from share the per to first Optical

efficiency. optical in and leading the with We Rogers Our initial had long DWDM haul Rogers by diversified metro We in media new upgrade first quarter our our important the and the Latin increase to Orchestrator deploy very take XXX Plus optical selected network, market of network, at strategy services, this to their week ZR automate the applications. and also platform were is earlier announcement for our ensure peak starting with to half to this Rogers with a Muse shipments new a design creation first North really transport in the is have exciting Canada. provider were analyze all this Communications, customer national will region. We new XXXX shape, technology communications revenue service gigs, to to SDN presence both for planned. of and and leveraging and a their is America running exceeding in network America

with customer in points outside IP had we awarded, enterprise also of network. examples focused of optical mobile Metro and in broadband network, and on At access Singtel increasing their grow Rogers program share gain addressable market. Optus new support are foundation America new cross-sell of access and from Singtel, and demand North built portion the significant mobile DWDM At by were our strategy, of were and Singapore to backhaul Australia. capacity DWDM a Australia's to growing a to with supporting wins We Ribbon fixed the awarded to our networks. strong backhaul we interconnection Optus office, great national large leveraging the their

which once In funding, in Telehouse [ph] Cooperative added for customers is leverage we to optical IP the new including addition, France roster center our in it's Alabama, second XX to interconnect, our the expected Electric quarter, Tombigbee released. in data

win as well significant an to system. As existing with US wireless a DWDM provider Huawei replace a

resonating combined after for solutions XX% quarter our native the open and XX% are led were in strong transformation year-over-year adjusted Kandy winning platform by orchestration with second and Media across in growth such our strong is margins as regions new In and combination. Demand second with consistent XX% network XXXX. sale. this reduction our EBITDA very increased adjusting non-GAAP Gross combined products. with to the expenses, the Softswitch technologies was of quarter with compared particularly business, our Our operating last all for a when quarter Cloud Gateway were XXX cloud really on networks emphasis sales our interoperable customers year Managed gigs ZR+,

Border first platforms operators solution the many sales modernizing consistent year. voice virtualized Session are quarter choice with the networks. controllers for their the second were really quarter, new from quarter down in of Our but last the

had see Teams deployments. Our office. a enterprise a of to several begin as our customers COVID Ribbon SBC as begun recovery several further returning height edge to during this in wins Microsoft support large of with enterprise provider year. we SBC capacity XXXX, expect Connect added service in platform, demand significant important We've we've new our customers the to businesses later service growth by adoption including the And and

applications Verizon. of advanced rampant demand additional bookings business, mitigation a maintain trust half. another implemented the rate complete. year services By to our second continue strong had Our for sense we reoccurring high to we the the our the busy on had is our approached now US, XX And The the come provide June remainder solutions the starting deadline to back we Mick XXXX. team of the have quarter to prevent at for solutions we're to at carriers maintenance and increased on over other to the in I'll calling. carriers Robo see results call urgency our countries. and review third And definitely implement And And end in quarter, as of in for calling our plan finally, it shaking very first details renewal XX% a quarter. including additional detail for provide bookings nuisance FCC for revenue guidance turn and over I'll with deployment

Thanks.

share earnings EBITDA range call. well were quarter. from and We As pleased the per provided each guidance stated, a in adjusted $XX above diluted in perspective earnings we in million $X.XX generated performance the first profitability and quarter we non-GAAP our with Bruce the

expense compensate robust with in to were our able gross we continued generation. substantially came to cash profitability below slightly revenue management and While margins expectations, improve and

graphs please financial historical always, our As Relations our with performance. website to supplemental for refer quarter summarizing Investor second slides tables and XXXX and

the of with quarter. GAAP commentary start for our results Let's

the included quarter this result closed during gain the a QualiTech GAAP Our our sale on $X.X quarter. of business, which million

As our from result the we our also that them, gain had of cash call had the non earnings Communications in and a in the sale when part we ECI mark compliance AVCT testing a business $XX that company's of associated market business quarterly small February QualiTech, last to Kandy mentioned is of product acquired reliability year. Investment million was

$X.X million share $X.XX $XX we earned for to the the convertible on the transaction share. from in for of kind gain a income and net $XX to from GAAP impact including Additionally, income debt paid the income positive QualiTech is per million received the or net net AVCT, GAAP same sale, impact $X.XX per million in interest

million over quarter gross quarter part geographic AVCT sale management the and $XXX operating and second fluctuations margin mix. our were up non-GAAP estate for guided real were As gap above Non-GAAP million the expense our revenue some points gross difference basis, have in related for investment. price when we product amortization these year items quarter excluded of line the from and our compensation. between million, and and non-GAAP the to of adjusted mark XX% XXXX benefits. the factors margin expenses $X past, organic above was results. volatility, On have and income affect non-cash in $X the expenses X% due XX$ in adjustments of include and market one-time and quarter favorable to expense an range adjusted restructuring as other non-GAAP mostly we results of the follows; intangible due integration for million in Non-GAAP Kandy. total percentage results our downsizing stock to assets ’XX, in our continued XX%. in Other second expenses our mentioned to usual second Due to footprint the $XX quarter X we year the in as continued in to this was XXXX contributing of

quarter. would Excluding million approximately $XX have the operating one-time these for adjustments, been expenditures

to and revenue quarter We second compensation. million recorded base up XXXX, quarter driven we share of expenses the half double the beneficial EBITDA XXXX as was XXXX. modest was XX mix. gross million, mainly we by of $XX continue adjusted with well from diluted in of investments product profit $X.XX improvement, $X.XX per the and in quarter expect as second second the in earnings operating optical the IP to in variable as Non-GAAP in increases due more Non-GAAP in of year than geographic second increase

non-GAAP for diluted $XXX earnings Our and the count million in quarter. share was GAAP

business, turn two was an down and X% $XXX segments. of on the results to million our quarter Now revenue basis. our business organic cloud let's In edge second

EBITDA We in XX up edge adjusted trend adjusted year points and basis. with was over expense continued on $XX the leading margin year, was gross product and million EBITDA of basis cloud industry sale, million, to an restructuring second sequential discretionary of higher over that change Kandy by year margins for Non-GAAP year $XX increasing The gross quarter driven savings. strong from margins, XX%. a and by year both savings last

cloud are Here edge additional in $XX points quarter, product in million. revenue performance few was and the a the

which the While our comes $XX business. from revenue maintenance million, service majority reoccurring contributed of strong

product of quarter. percentage from up revenue for total XX% X points first accounted Software the

increase were of prior an software Optical million Now, million, XX%. result non-GAAP and IP strong one this had level at adjustments. Margins business. from benefited We turning of to margins warranty the accounting lower from $XX revenue costs. million of second Expenses quarter as $X recorded time several revenue a lower roughly higher margin of by We $XX with sales gross period.

a roughly quarter. EBITDA adjusted Our loss generated IP small Optical of for million the business $X.X

in our accounted the in Now the approximately second second of $X customers, XX% quarter million second International key and in of company. the for Service revenue here quarter, represented quarter, XXXX. the metrics of with for revenue some the XX% enterprise customers from in total our total revenue revenue of the of XX% by represented quarter total XXX. are second provided quarter providers consolidated XX%. Maintenance increasing line

excludes which for was second revenue, quarter. to book X.XX Our maintenance, the times

cash of of This $X profitability million Turning $X $XXX improve cash million We to to is million, in sheet. from in due with the the and balance the including cash. an quarter quarter. ended restricted the quarter, increase previous equivalents

financial again, loan. Our met term remained undrawn. our $XXX our revolver million still covenants quarterly for Once we comfortably

of points times, a will ratio leverage that $X From were of estate perspective, million leasehold $XX in per is This really quarter. operations investors. and which reduce of margin X%, team expenditures real earnings quarter proud rate plus facility quarter; following generated for cash the improvements. XX by LIBOR our our strong basis for ratio another the cash Our bank quarter, the company performance interest for for this the million the had the million from leverage which We're X.X% below credit a was of $X.X the the financial times. from terms delivered in cash threshold capital X.XX X.XX to

outlook our Now, of the to back I'd for discuss turn like to to call the rest the Bruce year.

Great. Thanks, Mick.

market. networking, the significant as like gain guidance, our growth as with a momentum, and include, and this a strongest contender XXX trends XG and created and discussing mobile and satisfying I'd that a provide channel to in IP effectively. have and and we further to commentary and suppliers Optical a product environment. Networking share both our the XXXX broader a crucial gain that in focusing and market this more gig network XG technology slicing, plan four on products our strategy market well some providers believe challenge Ribbon networks, our there to increases and perspective, pipeline momentum technology fixed two small leveraging in where more growth Optus our for unified significant and contrast such It's operating on the beyond. IP to From also growth in service industry. are want to with on address by and in target addressable the opportunity and partners and optical of large meeting Chinese see Before there and and The share other better competitive disruptive partner communications technology to restructured opportunities Ribbon and end, and enterprise significant Singtel status dedicated IP are both that To to current in higher recently portfolio results. in Establishing partnerships, establish a in We the investment We gain very see exponential impacting organization share legacy the disaggregated mission. will as in we edge Ribbon like Rogers, many issues significant macro presence companies technologies, space. revenue Wins create of for ZR+, and environment, to an share distribution already others a such applications, the strategy global networking incumbent pillars markets bandwidth cloud the to team focused new we go clearly of industry, to we addressable the SBC are and for is have enabled as as telecommunications with delivering favorable pressure on opportunity enterprise networking markets. Huawei large us suppliers. as provider trusted the growth of competing There's expand enabled are

half while cases not customers not the yet rates First, the seen impacted. is we of in this key second in our with back our the recent to the levels specifically, COVID drop some many concerning. to the for regions in recovery the plans resurgence in in growth significantly quarter we we're Deployment levels. highly are in region. year And earlier July, India back And have saw in certainly year, pre-COVID and second

I more still it As is a stabilized. share the remains strong, region is that our it's country but to operationally prudent think until capacity becomes we're the and for adjust clear struggling. result, expectations winning Demand

Secondly, in our other silicon especially availability challenging and of has in become for core semiconductors components IP increasingly products. recent networking months,

situation in limiting diversified the our improving near-term these really year. to this don't to rapidly in the changes anticipate respond While demand. for disruptions this issues, macro we Despite material our ability we supply strength is have of mitigation strategies good highlighted place, portfolio year,

and We has strong by generate have proven situation in to while very the revenue improve profitability, been limited growth our ability primarily India. even earnings

without anticipating a For to is expenses. in projections significant the revenue for margins we're our below target and more reaffirming higher revenue India, full achieve the with previous year, guidance, operating and The we lower challenging are gross recovery guidance. now earnings modestly

of $X.XX. Non-GAAP are of non-GAAP million quarter, range gross XX% million. the to adjusted to $XXX diluted to million for of $XX For Non-GAAP EBITDA revenue in third our per $X.XX a earnings and share XX%. $XX million to $XXX of expectations margins

out further look XXXX. I As into

a have of number tailwinds. growing We

results prepared we market, see new questions. that a and concludes total that to now base. spot broader ahead. we I and plan in strategy our to can begin to from great excited And the benefit As take few a Operator, a we in of our a wins more have customer path our the very about a proven global be addressable We're repeat. large couldn't share grow remarks.

B from Dave Our with [Operator question Kang Please is Riley. proceed. Instructions] first

you. Thank Yes, afternoon. Good

question regarding as in about what was macro if no First remained there your concerns of and have much what revenue issues. shortages, impact been How is second quarter impacted COVID have guidance component mild? would as were about quarter revenue would third well

Yes, Dave. hey, Bruce here.

and million So kind in did the perspective million range second in quarter, to a the second quarter to just quarter. you that our running of in India think a million we've $XX like something been give India, in I business we in $XX $XX

quarter little India. a expected of second growth in in bit we've and So, the

the So that's in impact kind balance quarter. of, certainly, second the

to able again, diversification and being the quarter the we the resulted business. achieve model to the, in were power we just think of expectations, stronger above the that did and shows Fortunately, of that in here of mix able kind earnings a I have -- the the business and

look into of be it's remarks, year, second timing As about the pretty the point. I in India of recovery the half mentioned this to in at scaling I cautious kind as prudent think deployment, of we and the

not impact product for shift I And where lot revenue growth it not a From accounts as third of how we anticipating, most a that of move lot so perspective, flexible but so second a supply it's impacted whatnot. of kind for projection part. for quarter, chain in we that we're to much it and could mentioned lower the which ship did of the off base, -- the quarter the really

more a line, just but quickly. to We have not for one components react it's product difficult another, for little

outlook about plays certainly for was just able and the in the more And pretty we're of second pretty fourth finish got the year the half still Obviously, to in and think we've on being I prudent funnel that for the except the revenue into there. quarter. -- for So strong cautious certainly is recover Particularly, a third to little quarter that around the strong really second limit opportunities and half. guidance a year. expecting the strong of a really, I think, second the quarter, being

your So about second revenue quarters, regarding million. quarter out just three half fourth Got it? you can of of you're $XXX implying back the first

million $XX growth that's sequential mean, sequential So expecting Are you big what $XX that of third that's I million, from a that most -- uptake case, about increase. to fourth conservative to quarter. pretty the that C&E expecting then if more of Or I'm And maybe the optical? assumptions? drive and from that's shouldn’t gross maybe growth? wrong be we margin come most with to

Yes.

math that, your is So right. is about

You know, little more really or fourth It's the businesses. a a really it's about of XX% it's growth things. of number off last of both year. strength across quarter And

You critical come Israel know, variety as fruition with formed, more we expect We're Europe of to new and business been come in in to business government's a fourth projects expecting the budgets to our the fruition. quarter. infrastructure the in IDF

stronger expect We enterprise spending.

commented and I on, largest the by know, -- quarter utilized enterprise. capacity some in You being being customers our larger and enterprise down of

to that increase. expect we So

we the completion, are to year. not in duration a have modernization months as we And and expecting months little that variety come network year call which revenue progresses, more in India, of but business nine what six dramatically. end to towards were the We the programs, a we can of recognize

things variety really of come that, that of kind year. to fruition in of the the different second it's So half a

Thank it. you. Got

Dave. Thanks,

proceed. Co. Paul is question & from with Our Please Cowen next Silverstein

us wins taking of particular. what Optus, these for the of revenue Singtel associated Rogers, at time? any give Thanks opportunity Can with you sense local Bruce, questions. period the in

Yes.

just These in us. our pretty expect So the we share don't particularly forward for of for a are Obviously, in more Rogers. in with here these strategy amount I it's able a I'm And lot detail release with major wins. in deals revenue significant a us. than press big a step had significant little to being cautious XXXX.

in see process we'll I material And probably competitive in win multi-year year, of size pretty obviously to the the some end think towards these. these but and a duration. are

customers. the with really of these work about proud excited team's there really, So and partnering

super common is each meaningful. each one one And a that individually applause

That's correct.

particularly without are understand they're Are size and confidence, larger or same same I they others one that size? all customer the than but the all in is it's the one vicinity about

pretty Yes, Rogers so in and of I Canada. and the course, of significant. going with Shaw think is own they're larger both And mobile is certainly up through footprint their merger fixed number connections

footprint will that So the there. don't just scale

I So probably that's think the largest.

betray is, these Or with meaningful you without there have customer to did get margins associated again is discounts give confidence And in into? to asking you deals? to order reasonable

And what obviously, think do and and portfolio. with cost I And in total it at, product particular, business with everything Ribbon both multi-year that office, is on beyond they're customers the are of so process. the ownership. Yes, of these considerable the was rest technology and we a in looking the ultimately Rogers competitive existing the

tell are profitability an And from And looking for good these I that so I'm account us. can businesses at this you all perspective. just

be and And these we're talking Mick of you the of looking out, not hearing of we're roll safety they roll to out big to as deals. going because meaningful, your margin about

only Well, it's about Paul. that's else. be with on the And that, blended going in this everything at with can provide you point I color to

Right. you not Or down is correctly, revenue broad, on. you're not vendors expecting respect zero, it's to other one because Understood. allowing there sites is to to shutting heard your more project With it's that expecting But you project that that in. I me let it move go particular not and happen? you're not they're India,

a so sounds rate, quarterly expecting unless be It impacting there's of your so you're to no terms COVID issue, to I get issue the is some beyond other in million site, assume above equipment And you what the run which the that? informs and like for and into there's a broad the ability had? revenue how more, if users at quarter XX not least

described deeply and extensive they deployment team professional Yes. products pretty throughout actual the pretty in go have are network. couple the I as times the think I with And we region management the the That's service past, and a involved correct. of into a

country. as on a volumes basis. timeframe, daily the weekly good down, got in get half rate what deployment into I five back And difficult we May move in mean, we late daily or on and in the in And four a And to second on know, had the and early a the weeks. May, the we went April, I it's a discussion the just actual earnings bit late call around of so do got quarter, things lot deployment of second changed a saw we so visibility this

we for go saw rate was down zero, of few the there. what several but recovery, it zero didn't What what close was we've So was deployment weeks the full a certainly weeks. not to for go level it back it considerably, to better seen earlier the in year, in July it as a but to was than

again, visibility. so And we consumption good get we

And able demand, received so in anticipate we July. we've were additional orders to

know, anticipated But, So steady started year. but and in progresses not as increasing this not certainly, COVID you to only as as the spending I increase it's going to the year zero. to wind business, being started down

at cautious more point, obviously. little a being I'm this so And

head. scratching Bruce, my I'm

them they're So revenue nor at all open shutting your all shutting otherwise, won't But talking be access you run sites, sites. down are and this not customers about all not are free rate. giving they

they are So of they're some access, get restricting the staff can but allowing limiting not that what access exactly are sites, the is factor? what number others to They're doing?

being everything get approvals, takes get these able of I it think just longer to to site programs. are the to access, to think some construction navigate as way of

longer. just takes everything -- So it's just

is it view an to this able a hour-by-hour again, on were where from was. there. happening in because see we basis, so velocity almost good your And what's we And on down get

recovers -- in know was a like or year it's not yet. I that three said so to happens I you've country? there. it's not It's months timing zero, fast the don't seen how earlier the the but been what this what And it's news. exactly for And where I all two back it's last mean, it yet just the even environment on is and difficult

activity characterize last forward particular one by would Putting RFQ's, demand revenue, your demand aside optical in how Understood RFI's RFP's, business? by you metrics opportunities looking measured in question me. at

on where say would I this late pretty I intensive. Yeah. it's to it earlier pretty year, last commented similar being year

out is end I having which fantastic. think And the now [Technical we're that Obviously, of I that some back continues. Difficulty] pipeline, success of

[Operator Instructions] Please proceed.

about sorry Paul. that, Yes,

No worries.

apologize, about what I out? was you say, the when were So, you activity like cut to

got We've sorry. here a I'm issues couple today.

of think what them When We they're and support commented of this references I significant lot our talking provide key in new when been RFP to into to last these engagement months in pretty now customers variety pretty many And of we've and where new -- the of these we through intensive, get more some wins it I of pretty can end earlier I deployment. think the back two going going being go ones the we drive we to as there's things all work has on as successful on the been that got one say a activity. check, like activity process an some intensive process, at of saw on, the Obviously, just pretty them. a a similar of is channel year. areas. even extensive

regions leverage to going wins And these in important these new forward. really so references really, become

Got on. Thank the it responses. pass Appreciate it. you. I'll

Paul. so Thanks much,

question final proceed. Capital from Latimore our Mike Markets. is Northland Please And with

profitability and at Great thanks. great Yes, there. win Rogers

it like, and expected? year, as In this cloud terms there's of change -- the -- real tracking fair look in is much agile that's pretty that sounds Bruce, no your

that when our The one know really see that is the of financial business. need that numbers time And them side go to What portion better of provider our doing larger which of accounts, it. around to through it's a seen chance for capacity we in that of I've more is get additional we've to that piece capacity. the enterprise times, for last do and you lot Mike, several I on some still, absorbed you took can et taking really, The a be well. of year, is probably multiple said enterprise business service on some can institutions, cetera in

done better got and back so mentioned is in business our enablement. get we've our Theory We've more channels, as down and quarter as-a-service channel in mid-market do enterprise certainly outlook focused needed. continue I even the great year-over-year. the as around come in our quarter sales remarks, of the second to restructuring need package. to on to And is a we more portion that is launched We've the new third That'll some capacity that portfolio.

And do where We've how the variety to a we better I little different know there's so be point. I we deploy better of at product. there's to this want part serve to can ways on a and that And just the of not get probably market. -- we're got

you then about completed in revenue be of of those being revenue quarter, that talked Is that in getting And the What type modernization might software recognize? there recognize? you'd terms of you completed. deal Okay. network the do more some fourth

Well, when they hardware. we're of our generating as being seen margins, But and way priced software even platforms. a higher, with our on mix the good now you've up margins combination end hardware we've is

modernization sizable margins. platform that element switching generation we're So, with class software are providing next typically on, a virtualized that as you're even central four if well. typically, to upgrading platforms, a projects, class these And the where the these five running there's professional good into service a these pretty are comes and compute that going office complex you're is

realizing revenue you're the that some recognized some cases. the -- then year of is, in And throughout expense the was and gets

as margins that can help So well. out on

wireless replacement Was provider. a wireless just – that smaller? a kind then of provider Tier a or X U.S. mentioned with last And one, you Yeah. Huawei

of infrastructure. Tier that probably louder would we're and that. pretty if the smaller X. it's it obviously a size it's the example operator the solution have a great It's to No, the than that meaningful shouted platform, of a leveraged win competitiveness That for a power was Huawei of was here. competitive had wireless meaningful us market I bringing

right. All

Okay. Thank you.

Great. Mike. Thanks,

We have end our I for of reached management the like session. turn conference to remarks. back closing to over would the question-and-answer

work. the really and is are I here Yeah. like a company. get new strategy we're winds you. the mentioned feel wins remarks, spot in the to and the business to I tail we some these real really significant pretty in Thank Well, a in as starting great customer for

excited to investor apprised about our path our With that the you call. thank at look and that, of conferences of ahead, you, with operator, upcoming really connecting virtual progress. concludes So our you keeping forward many

Thank you.

disconnect and may this your time participation. You for you your at thank lines