Projecting significant improvement in full
year company profitability
IP Optical Networks Sales up 14% Year to Date
– on track to achieve profitability in Fourth Quarter 2023
PLANO,
Texas, Oct. 25, 2023 /PRNewswire/ -- Ribbon
Communications Inc. (Nasdaq: RBBN), a global provider of real time
communications technology and IP optical networking solutions to
many of the world's largest service providers, enterprises, and
critical infrastructure operators to modernize and protect their
networks, today announced its financial results for the third
quarter of 2023.
Revenue for the third quarter of 2023 was $203 million, compared to $207 million for the third quarter of 2022 and
$211 million for the second quarter
of 2023.
"Ribbon delivered solid earnings in the third quarter as GAAP
Income from Operations improved by $4
million and Non-GAAP Adjusted EBITDA increased 21% year over
year. IP Optical Networks sales have increased 14% year-to-date and
were up 6% in the third quarter with approximately 50% sales growth
in India, the U.S., and
Japan. However, IP Optical
Networks sales in the EMEA region were approximately 20% lower in
the quarter. Strategically, we went into live commercial service
with our Neptune IP Router at a U.S. Tier One Service Provider this
quarter. Cloud & Edge sales were lower primarily due to reduced
spending from U.S. Tier One Service Providers, offset by additional
voice modernization sales to U.S. Federal agencies," stated
Bruce McClelland, President and
Chief Executive Officer of Ribbon Communications.
"For the fourth quarter, we anticipate a strong finish to the
year led by sequential growth in both the IP Optical Networks and
Cloud & Edge segments. We expect to achieve our goal of
positive Non-GAAP Adjusted EBITDA for the IP Optical Networks
segment in the fourth quarter," continued Mr. McClelland.
Financial
Highlights1
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
September 30,
|
|
September 30,
|
In millions, except per share
amounts
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
GAAP Revenue
|
|
$
203
|
|
$
207
|
|
$
600
|
|
$
586
|
GAAP Net income
(loss)
|
|
$
(14)
|
|
$
(18)
|
|
$
(73)
|
|
$
(119)
|
Non-GAAP Net income
(loss)
|
|
$
9
|
|
$
4
|
|
$
14
|
|
$
2
|
Non-GAAP Adjusted
EBITDA
|
|
$
28
|
|
$
23
|
|
$
48
|
|
$
35
|
GAAP diluted earnings
(loss) per share
|
|
$
(0.08)
|
|
$
(0.12)
|
|
$
(0.43)
|
|
$
(0.78)
|
Non-GAAP diluted
earnings (loss) per share
|
|
$
0.05
|
|
$
0.02
|
|
$
0.08
|
|
$
0.01
|
Weighted average shares
outstanding basic
|
|
171
|
|
159
|
|
170
|
|
153
|
Weighted average shares
outstanding diluted
|
|
176
|
|
163
|
|
176
|
|
157
|
|
1 Please see
the reconciliations of non-GAAP financial measures to the most
directly comparable GAAP measures and additional information about
non-GAAP measures in the section entitled "Discussion of Non-GAAP
Financial Measures" in the attached schedules.
|
"Our strong Adjusted EBITDA of $28
million for the third quarter 2023, or 14% of revenue, was
driven by improved margins and continued spending controls. Gross
margins increased for both segments due to positive mix and lower
product royalties and costs," said Mick
Lopez, Chief Financial Officer of Ribbon Communications. "We
believe the continued sales growth and improving margins in IP
Optical Networks, combined with continued solid performance from
the Cloud & Edge segment, will result in an approximately 40%
overall improvement in consolidated profitability for the full
year."
Business Outlook1
For the fourth
quarter of 2023, the Company projects revenue of $230 million to $240
million, Non-GAAP gross margin is projected in a range of
54.5% to 55.5%, and Adjusted EBITDA is projected in a range of
$40 million to $46 million. The current outlook assumes no
worsening of geopolitical conditions and related sanctions
activities in regions that the Company operates in, including the
ongoing wars in Israel and
Ukraine. The Company does not
anticipate a significant impact to ongoing operations in
Israel as a result of the war.
1 Please see the reconciliations of
non-GAAP financial measures to the most directly comparable GAAP
measures and additional information about the non-GAAP measures in
the section entitled "Discussion of Non-GAAP Financial Measures" in
the attached schedules.
|
Upcoming Conference Schedule
- November 14, 2023: 17th
Annual Needham Virtual Security, Networking, & Communications
Conference
- November 16, 2023:
Craig-Hallum 14th Annual Alpha Select Conference
- January 17-18, 2024: 26th
Annual Needham Growth Conference
About Ribbon
Ribbon Communications (Nasdaq: RBBN) delivers communications
software, IP and optical networking solutions to service providers,
enterprises and critical infrastructure sectors globally. We engage
deeply with our customers, helping them modernize their networks
for improved competitive positioning and business outcomes in
today's smart, always-on and data-hungry world. Our innovative,
end-to-end solutions portfolio delivers unparalleled scale,
performance, and agility, including core to edge software-centric
solutions, cloud-native offers, leading-edge security and analytics
tools, along with IP and optical networking solutions for 5G. We
maintain a keen focus on our commitments to Environmental, Social
and Governance (ESG) matters, offering an annual Sustainability
Report to our stakeholders. To learn more about Ribbon
visit rbbn.com.
Important Information Regarding Forward-Looking
Statements
The information in this release contains
"forward-looking statements" within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995, which are subject to a
number of risks and uncertainties. All statements other than
statements of historical facts contained in this release, including
without limitation statements regarding the Company's projected
financial results for the fourth quarter of 2023 and beyond; the
impact of the wars in Israel and
Ukraine; customer engagement and
momentum; plans and objectives for future operations, including
cost reductions; capital structure changes and plans for future
product development and manufacturing and the expected benefits
therefrom, are forward-looking statements. Without limiting the
foregoing, the words "believes", "estimates", "expects",
"expectations", "intends", "may", "plans", "projects" and other
similar language, are intended to identify forward-looking
statements.
Forward-looking statements are based on the Company's current
expectations and assumptions regarding its business, the economy
and other future conditions. Because forward-looking statements
relate to the future, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to
predict. Actual results may differ materially from those
contemplated in these forward-looking statements due to various
risks, uncertainties and other important factors, including, among
others, the effects of geopolitical instabilities and wars,
including in Israel and
Ukraine (and the impact of
sanctions and trade restrictions imposed as a result thereof);
operational disruptions at facilities located in Israel including as a result of military
call-ups of the Company's employees in Israel, closure of the offices there or the
temporary or long-term closure of contract manufacturing in the
region; the potential impact of litigation; risks related to supply
chain disruptions, including as a result of component availability;
risks that the Company will not realize the estimated cost savings
and/or anticipated benefits from its strategic restructuring
efforts; the impact of restructuring and cost-containment
activities; unpredictable fluctuations in quarterly revenue and
operating results; risks related to the terms of the Company's
credit agreement including compliance with the financial covenants;
risks resulting from rising interests rates and inflationary
pressures; risks related to cybersecurity and data intrusion;
failure to compete successfully against telecommunications
equipment and networking companies; failure to grow the Company's
customer base or generate recurring business from existing
customers; credit risks; the timing of customer purchasing
decisions and the Company's recognition of revenues; macroeconomic
conditions, including inflation; market acceptance of the Company's
products and services; rapid technological and market change; the
ability to protect Company intellectual property rights and obtain
necessary licenses; the ability to maintain partner, reseller,
distribution and vendor support and supply relationships; the
potential for defects in the Company's products; increases in
tariffs, trade restrictions or taxes on the Company's products; and
currency fluctuations.
These factors are not intended to be an all-encompassing list of
risks and uncertainties that may affect the Company's business and
results from operations. Additional information regarding these and
other factors can be found in the Company's reports filed with the
Securities and Exchange Commission, including, without limitation,
its Form 10-K for the year ended December
31, 2022 and its Form 10-Q for the quarter ended
June 30, 2023. In providing
forward-looking statements, the Company expressly disclaims any
obligation to update these statements publicly or otherwise,
whether as a result of new information, future events or otherwise,
except as required by law.
Discussion of Non-GAAP Financial Measures
The
Company's management uses several different financial measures,
both GAAP and non-GAAP, in analyzing and assessing the overall
performance of its business, making operating decisions, planning
and forecasting future periods, and determining payments under
compensation programs. The Company considers the use of non-GAAP
financial measures helpful in assessing the core performance of its
continuing operations and when planning and forecasting future
periods. The Company's annual financial plan is prepared on a
non-GAAP basis and is approved by its board of directors. In
addition, budgeting and forecasting for revenue and expenses are
conducted on a non-GAAP basis, and actual results on a non-GAAP
basis are assessed against the annual financial plan. The Company
defines continuing operations as the ongoing results of its
business adjusted for certain expenses and credits, as described
below. The Company believes that providing non-GAAP information to
investors will allow investors to view the financial results in the
way its management views them and helps investors to better
understand the Company's core financial and operating performance
and evaluate the efficacy of the methodology and information used
by its management to evaluate and measure such performance.
While the Company's management uses non-GAAP financial measures
as tools to enhance its understanding of certain aspects of the
Company's financial performance, its management does not consider
these measures to be a substitute for, or superior to, GAAP
measures. In addition, the Company's presentations of these
measures may not be comparable to similarly titled measures used by
other companies. These non-GAAP financial measures should not be
considered alternatives for, or in isolation from, the financial
information prepared and presented in accordance with GAAP.
Investors are cautioned that there are material limitations
associated with the use of non-GAAP financial measures. In
particular, many of the adjustments to the Company's financial
measures reflect the exclusion of items that are recurring and will
be reflected in its financial results for the foreseeable
future.
Stock-Based Compensation
The expense related to
stock-based awards is generally not controllable in the short-term
and can vary significantly based on the timing, size and nature of
awards granted. The Company believes that presenting non-GAAP
operating results that exclude stock-based compensation provides
investors with visibility and insight into its management's method
of analysis and its core operating performance.
Amortization of Acquired Technology (including software
licenses); Amortization of Acquired Intangible
Assets
Amortization amounts are inconsistent in frequency
and amount and are significantly impacted by the timing and size of
acquisitions. Amortization of acquired technology is reported
separately within Cost of revenue and Amortization of acquired
intangible assets is reported separately within Operating expenses.
These items are reported collectively as Amortization of acquired
intangible assets in the accompanying reconciliations of non-GAAP
and GAAP financial measures. The Company believes that excluding
non-cash amortization of these intangible assets facilitates the
comparison of its financial results to its historical operating
results and to other companies in its industry as if the acquired
intangible assets had been developed internally rather than
acquired.
Litigation Costs
In connection with a certain ongoing
contract litigation where Ribbon is defendant (as described in Note
25 to the Company's Consolidated Financial Statements included in
its Annual Report on Form 10-K for the year ended December 31, 2022), the Company has incurred
litigation costs beginning in the first quarter of 2023. These
costs are included as a component of general and administrative
expense. The Company believes that such costs are not part of its
core business or ongoing operations, are unplanned and generally
not within its control. Accordingly, the Company believes
that excluding the litigation costs related to this specific legal
matter facilitates the comparison of the Company's financial
results to its historical operating results and to other companies
in its industry.
Acquisition-, Disposal- and
Integration-Related
The Company considers certain
acquisition-, disposal- and integration-related costs to be
unrelated to the organic continuing operations of its acquired
businesses and the Company. Such costs are generally not relevant
to assessing or estimating the long-term performance of the
acquired assets. The Company excludes such acquisition-, disposal-
and integration-related costs to allow more accurate comparisons of
its financial results to its historical operations and the
financial results of less acquisitive peer companies and allows
management and investors to consider the ongoing operations of the
business both with and without such expenses.
Restructuring and Related
The Company has
recorded restructuring and related expense to streamline operations
and reduce operating costs by closing and consolidating certain
facilities and reducing its worldwide workforce. The Company
believes that excluding restructuring and related expense
facilitates the comparison of its financial results to its
historical operating results and to other companies in its
industry, as there are no future revenue streams or other benefits
associated with these costs.
Decrease in Fair Value of Investments
The Company
calculated the fair values of the debentures (the "Debentures") and
the warrants to purchase shares of AVCT common stock (the "AVCT
Warrants") it received as consideration in connection with the
Kandy Sale (prior to September 8, 2021) and the 13,700,421
shares of AVCT common stock received upon the conversion of the
Debentures and AVCT Warrants (effective September 8, 2021) and
at each quarter-end until their disposal on August 29, 2022 when they were used as partial
consideration in connection with the Company's acquisition of
perpetual software licenses from AVCT. The Company recorded any
adjustments to their fair values in Other (expense) income, net.
The Company excluded these gains and losses from the change in fair
value of this investment because it believes that such gains or
losses were not part of its core business or ongoing
operations.
Preferred Stock and Warrant Liability Mark-to-Market
Adjustment
The Company recorded adjustments to the fair
value of its Series A Preferred Stock and warrants in Other
(expense) income, net. Both instruments issued in March 2023 are classified as liabilities and
marked to market each reporting period. The Company excluded these
gains and losses from the change in the fair value of these
liabilities because it believes that such gains or losses were not
part of its core business or ongoing operations.
Preferred Stock and Warrant Liability Issuance
Costs
The Company incurred $3.5
million of investment banking, advisory and legal fees in
its March 2023 Private Placement of
Series A Preferred Stock and warrants to purchase shares of the
Company's common stock, both of which are classified by the Company
as liabilities that are marked to market each reporting period. The
Company excludes these issuance costs to allow more accurate
comparisons of its financial results to its historical operations
and the financial results of other companies in its industry, and
it allows management and investors to consider the ongoing
operations of the business both with and without such expenses.
Tax Effect of Non-GAAP Adjustments
The Non-GAAP income
tax provision is presented based on an estimated tax rate applied
against forecasted annual non-GAAP income. The Non-GAAP income tax
provision assumes no available net operating losses or valuation
allowances for the U.S. because of reporting significant cumulative
non-GAAP income over the past several years. The Company is
reporting its non-GAAP quarterly income taxes by computing an
annual rate for the Company and applying that single rate (rather
than multiple rates by jurisdiction) to its consolidated quarterly
results. The Company expects that this methodology will provide a
consistent rate throughout the year and allow investors to better
understand the impact of income taxes on its results. Due to the
methodology applied to its estimated annual tax rate, the Company's
estimated tax rate on non-GAAP income will differ from its GAAP tax
rate and from its actual tax liabilities.
Adjusted EBITDA
The Company uses Adjusted EBITDA as a
supplemental measure to review and assess its performance. The
Company calculates Adjusted EBITDA by excluding from income (loss)
from operations: depreciation; stock-based compensation;
amortization of acquired intangible assets; impairment of goodwill;
acquisition-, disposal- and integration-related expense; certain
litigation costs; and restructuring and related expense. In
general, the Company excludes the expenses that it considers to be
non-cash and/or not part of its ongoing operations. The Company may
exclude other items in the future that have those characteristics.
Adjusted EBITDA is a non-GAAP financial measure that is used by the
investing community for comparative and valuation purposes. The
Company discloses this metric to support and facilitate dialogue
with research analysts and investors. Other companies may calculate
Adjusted EBITDA differently than the Company does, limiting its
usefulness as a comparative measure.
Conference Call Details
Conference call to discuss the
Company's financial results for the third quarter ended
September 30, 2023 on October 25, 2023, via the investor section of its
website at investors.ribboncommunications.com, where a replay will
also be available shortly following the conference call.
Conference Call Details:
Date: October 25, 2023
Time: 4:30 p.m. (ET)
Dial-in number (USA):
877-407-2991
Dial-in number (Intl): 201-389-0925
Instant Telephone Access: Call me™
Replay information:
A telephone playback of the call will be available following the
conference call until November 8,
2023 and can be accessed by calling 877-660-6853 or
201-612-7415 for international callers. The reservation number for
the replay is 13741778.
Investor Relations
+1 (978) 614-8050
ir@rbbn.com
Media Contact
Catherine Berthier
+1 (646) 741-1974
cberthier@rbbn.com
RIBBON COMMUNICATIONS
INC.
Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
|
|
|
|
|
|
Three months
ended
|
|
|
|
|
September
30,
|
|
June 30,
|
|
September
30,
|
|
|
|
|
2023
|
|
2023
|
|
2022
|
Revenue:
|
|
|
|
|
|
|
Product
|
$
108,501
|
|
$
117,347
|
|
$
111,152
|
|
Service
|
94,660
|
|
93,271
|
|
95,975
|
|
|
Total
revenue
|
203,161
|
|
210,618
|
|
207,127
|
|
|
|
|
|
|
|
|
|
Cost of
revenue:
|
|
|
|
|
|
|
Product
|
59,436
|
|
67,927
|
|
59,866
|
|
Service
|
33,065
|
|
33,782
|
|
35,175
|
|
Amortization of
acquired technology
|
7,157
|
|
7,439
|
|
7,768
|
|
|
Total cost of
revenue
|
99,658
|
|
109,148
|
|
102,809
|
|
|
|
|
|
|
|
|
|
Gross profit
|
103,503
|
|
101,470
|
|
104,318
|
|
|
|
|
|
|
|
|
|
Gross margin
|
50.9 %
|
|
48.2 %
|
|
50.4 %
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
Research and
development
|
46,229
|
|
47,776
|
|
49,366
|
|
Sales and
marketing
|
32,795
|
|
33,905
|
|
36,365
|
|
General and
administrative
|
12,885
|
|
14,346
|
|
12,118
|
|
Amortization of
acquired intangible assets
|
7,216
|
|
7,260
|
|
7,508
|
|
Acquisition-, disposal-
and integration-related
|
842
|
|
498
|
|
988
|
|
Restructuring and
related
|
2,680
|
|
4,307
|
|
1,269
|
|
|
Total operating
expenses
|
102,647
|
|
108,092
|
|
107,614
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
856
|
|
(6,622)
|
|
(3,296)
|
Interest expense,
net
|
(7,143)
|
|
(6,766)
|
|
(5,266)
|
Other expense,
net
|
(2,620)
|
|
(2,688)
|
|
(3,732)
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(8,907)
|
|
(16,076)
|
|
(12,294)
|
Income tax
provision
|
(4,594)
|
|
(5,403)
|
|
(6,122)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
(13,501)
|
|
$
(21,479)
|
|
$
(18,416)
|
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
Basic
|
|
$
(0.08)
|
|
$
(0.13)
|
|
$
(0.12)
|
|
Diluted
|
$
(0.08)
|
|
$
(0.13)
|
|
$
(0.12)
|
|
|
|
|
|
|
|
|
|
Weighted average shares
used to compute loss per share:
|
|
|
|
|
|
|
Basic
|
|
171,190
|
|
170,103
|
|
158,921
|
|
Diluted
|
171,190
|
|
170,103
|
|
158,921
|
RIBBON COMMUNICATIONS
INC.
Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
|
|
|
|
|
|
Nine months
ended
|
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
|
2023
|
|
2022
|
Revenue:
|
|
|
|
|
Product
|
$
319,166
|
|
$
305,809
|
|
Service
|
280,772
|
|
280,312
|
|
|
Total
revenue
|
599,938
|
|
586,121
|
|
|
|
|
|
|
|
Cost of
revenue:
|
|
|
|
|
Product
|
189,426
|
|
169,226
|
|
Service
|
102,152
|
|
106,049
|
|
Amortization of
acquired technology
|
21,985
|
|
23,923
|
|
|
Total cost of
revenue
|
313,563
|
|
299,198
|
|
|
|
|
|
|
|
Gross profit
|
286,375
|
|
286,923
|
|
|
|
|
|
|
|
Gross margin
|
47.7 %
|
|
49.0 %
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Research and
development
|
145,309
|
|
153,159
|
|
Sales and
marketing
|
102,099
|
|
109,827
|
|
General and
administrative
|
41,276
|
|
37,881
|
|
Amortization of
acquired intangible assets
|
21,740
|
|
22,296
|
|
Acquisition-, disposal-
and integration-related
|
2,982
|
|
4,372
|
|
Restructuring and
related
|
13,924
|
|
8,977
|
|
|
Total operating
expenses
|
327,330
|
|
336,512
|
|
|
|
|
|
|
|
Loss from
operations
|
(40,955)
|
|
(49,589)
|
Interest expense,
net
|
(20,331)
|
|
(13,869)
|
Other expense,
net
|
(536)
|
|
(42,760)
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(61,822)
|
|
(106,218)
|
Income tax
provision
|
(11,463)
|
|
(12,353)
|
|
|
|
|
|
|
|
Net loss
|
|
$
(73,285)
|
|
$
(118,571)
|
|
|
|
|
|
|
|
Loss per
share
|
|
|
|
|
Basic
|
|
$
(0.43)
|
|
$
(0.78)
|
|
Diluted
|
$
(0.43)
|
|
$
(0.78)
|
|
|
|
|
|
|
|
Weighted average shares
used to compute loss per share:
|
|
|
|
|
Basic
|
|
169,955
|
|
152,795
|
|
Diluted
|
169,955
|
|
152,795
|
RIBBON COMMUNICATIONS
INC.
Consolidated Balance Sheets
(in thousands)
(unaudited)
|
|
|
|
|
|
September
30,
|
|
December 31,
|
|
|
|
|
2023
|
|
2022
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
24,501
|
|
$
67,262
|
|
Accounts receivable,
net
|
242,183
|
|
267,244
|
|
Inventory
|
70,184
|
|
75,423
|
|
Other current
assets
|
53,620
|
|
68,057
|
|
|
Total current
assets
|
390,488
|
|
477,986
|
|
|
|
|
|
|
|
Property and equipment,
net
|
42,319
|
|
44,832
|
Intangible assets,
net
|
251,053
|
|
294,728
|
Goodwill
|
|
300,892
|
|
300,892
|
Deferred income
taxes
|
63,422
|
|
53,649
|
Operating lease
right-of-use assets
|
39,167
|
|
44,888
|
Other assets
|
34,274
|
|
38,589
|
|
|
|
|
$
1,121,615
|
|
$
1,255,564
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of term
debt
|
$
30,087
|
|
$
20,058
|
|
Revolving credit
facility
|
10,000
|
|
-
|
|
Accounts
payable
|
73,873
|
|
95,810
|
|
Accrued expenses and
other
|
89,076
|
|
85,270
|
|
Operating lease
liabilities
|
14,901
|
|
15,416
|
|
Deferred
revenue
|
107,536
|
|
113,939
|
|
|
Total current
liabilities
|
325,473
|
|
330,493
|
|
|
|
|
|
|
|
Long-term debt, net of
current
|
206,908
|
|
306,270
|
Warrant
liability
|
5,052
|
|
-
|
Preferred stock
liability
|
49,855
|
|
-
|
Operating lease
liabilities, net of current
|
38,282
|
|
46,183
|
Deferred revenue, net
of current
|
17,865
|
|
19,254
|
Deferred income
taxes
|
3,729
|
|
3,750
|
Other long-term
liabilities
|
30,523
|
|
31,187
|
|
|
|
Total
liabilities
|
677,687
|
|
737,137
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Common stock
|
17
|
|
17
|
|
Additional paid-in
capital
|
1,954,586
|
|
1,941,569
|
|
Accumulated
deficit
|
(1,527,029)
|
|
(1,453,744)
|
|
Accumulated other
comprehensive income
|
16,354
|
|
30,585
|
|
|
|
Total stockholders'
equity
|
443,928
|
|
518,427
|
|
|
|
|
$
1,121,615
|
|
$
1,255,564
|
RIBBON COMMUNICATIONS
INC.
|
Consolidated Statements
of Cash Flows
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended
|
|
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
|
Net loss
|
|
$
(73,285)
|
|
$
(118,571)
|
|
Adjustments to
reconcile net loss to cash flows used in operating
activities:
|
|
|
|
|
|
Depreciation and
amortization of property and equipment
|
10,603
|
|
11,688
|
|
|
Amortization of
intangible assets
|
43,725
|
|
46,219
|
|
|
Amortization of debt
issuance costs
|
2,517
|
|
1,697
|
|
|
Amortization of
accumulated other comprehensive gain related to interest rate
swap
|
(3,818)
|
|
-
|
|
|
Stock-based
compensation
|
16,914
|
|
13,495
|
|
|
Deferred income
taxes
|
(3,617)
|
|
(19,071)
|
|
|
Realized gain on swap
sale
|
(7,301)
|
|
-
|
|
|
Decrease in fair value
of investments
|
-
|
|
41,291
|
|
|
Change in fair value of
warrant liability
|
(444)
|
|
-
|
|
|
Change in fair value of
preferred stock liability
|
(572)
|
|
-
|
|
|
Dividends accrued on
preferred stock liability
|
2,573
|
|
-
|
|
|
Foreign currency
exchange loss
|
1,174
|
|
830
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
31,345
|
|
44,604
|
|
|
|
Inventory
|
(4,327)
|
|
(24,002)
|
|
|
|
Other operating
assets
|
27,785
|
|
6,066
|
|
|
|
Accounts
payable
|
(22,276)
|
|
(22,311)
|
|
|
|
Accrued expenses and
other long-term liabilities
|
(16,255)
|
|
(6,983)
|
|
|
|
Deferred
revenue
|
(7,793)
|
|
(17,414)
|
|
|
|
|
Net cash used in
operating activities
|
(3,052)
|
|
(42,462)
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Purchases of property
and equipment
|
(6,620)
|
|
(9,744)
|
|
Purchases of software
licenses
|
-
|
|
(3,300)
|
|
|
|
|
Net cash used in
investing activities
|
(6,620)
|
|
(13,044)
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Borrowings under
revolving line of credit
|
67,000
|
|
58,625
|
|
Principal payments on
revolving line of credit
|
(57,000)
|
|
(58,625)
|
|
Principal payments of
term debt
|
(90,044)
|
|
(40,044)
|
|
Principal payments of
finance leases
|
-
|
|
(433)
|
|
Payment of debt
issuance costs
|
(1,572)
|
|
(1,046)
|
|
Proceeds from equity
offering
|
-
|
|
52,067
|
|
Payment of equity
offering issuance costs
|
-
|
|
(1,654)
|
|
Proceeds from issuance
of preferred stock and warrant liabilities
|
53,350
|
|
-
|
|
Proceeds from the
exercise of stock options
|
15
|
|
1
|
|
Payment of tax
withholding obligations related to net share settlements of
restricted stock awards
|
(3,912)
|
|
(2,684)
|
|
|
|
|
Net cash (used in)
provided by financing activities
|
(32,163)
|
|
6,207
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents
|
(926)
|
|
(1,251)
|
|
|
|
|
|
|
|
|
Net decrease in cash
and cash equivalents
|
(42,761)
|
|
(50,550)
|
Cash and cash
equivalents, beginning of year
|
67,262
|
|
106,485
|
Cash and cash
equivalents, end of period
|
$
24,501
|
|
$
55,935
|
|
|
RIBBON COMMUNICATIONS
INC.
Supplemental Information
(in thousands)
(unaudited)
|
|
|
|
The following tables
provide the details of stock-based compensation included as
components of other line items in the Company's
Consolidated Statements of Operations and the line items in which
these amounts are reported.
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
|
|
September
30,
|
|
June 30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
|
|
|
2023
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
Cost of revenue -
product
|
$
121
|
|
$
115
|
|
$
133
|
|
$
385
|
|
$
339
|
Cost of revenue -
service
|
536
|
|
526
|
|
592
|
|
1,597
|
|
1,567
|
|
Cost of
revenue
|
657
|
|
641
|
|
725
|
|
1,982
|
|
1,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
1,259
|
|
1,300
|
|
1,289
|
|
3,821
|
|
3,735
|
Sales and
marketing
|
1,402
|
|
2,142
|
|
1,567
|
|
5,673
|
|
4,418
|
General and
administrative
|
1,632
|
|
2,033
|
|
1,260
|
|
5,438
|
|
3,436
|
|
Operating
expense
|
4,293
|
|
5,475
|
|
4,116
|
|
14,932
|
|
11,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based
compensation
|
$
4,950
|
|
$
6,116
|
|
$
4,841
|
|
$
16,914
|
|
$
13,495
|
RIBBON COMMUNICATIONS
INC.
|
Reconciliation of
Non-GAAP and GAAP Financial Measures
|
(in thousands, except
per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
Three months
ended
|
|
September
30,
|
|
June 30,
|
|
September
30,
|
|
2023
|
|
2023
|
|
2022
|
|
|
|
|
|
|
GAAP Gross
margin
|
50.9 %
|
|
48.2 %
|
|
50.4 %
|
Stock-based
compensation
|
0.3 %
|
|
0.3 %
|
|
0.4 %
|
Amortization of
acquired technology
|
3.6 %
|
|
3.5 %
|
|
3.7 %
|
Non-GAAP Gross
margin
|
54.8 %
|
|
52.0 %
|
|
54.5 %
|
|
|
|
|
|
|
GAAP Net
loss
|
$
(13,501)
|
|
$
(21,479)
|
|
$
(18,416)
|
Stock-based
compensation
|
4,950
|
|
6,116
|
|
4,841
|
Amortization of
acquired intangible assets
|
14,373
|
|
14,699
|
|
15,276
|
Litigation
costs
|
478
|
|
114
|
|
-
|
Acquisition-, disposal-
and integration-related
|
842
|
|
498
|
|
988
|
Restructuring and
related
|
2,680
|
|
4,307
|
|
1,269
|
Decrease in fair value
of investments
|
-
|
|
-
|
|
1,881
|
Preferred stock and
warrant liability mark-to-market adjustment
|
148
|
|
1,410
|
|
-
|
Tax effect of non-GAAP
adjustments
|
(615)
|
|
2,083
|
|
(1,881)
|
Non-GAAP Net
income
|
$
9,355
|
|
$
7,748
|
|
$
3,958
|
|
|
|
|
|
|
GAAP Diluted loss
per share
|
$
(0.08)
|
|
$
(0.13)
|
|
$
(0.12)
|
Stock-based
compensation
|
0.03
|
|
0.03
|
|
0.03
|
Amortization of
acquired intangible assets
|
0.08
|
|
0.09
|
|
0.09
|
Litigation
costs
|
*
|
|
*
|
|
-
|
Acquisition-, disposal-
and integration-related
|
*
|
|
0.01
|
|
0.01
|
Restructuring and
related
|
0.02
|
|
0.02
|
|
0.01
|
Decrease in fair value
of investments
|
-
|
|
-
|
|
0.01
|
Preferred stock and
warrant liability mark-to-market adjustment
|
*
|
|
0.01
|
|
-
|
Tax effect of non-GAAP
adjustments
|
*
|
|
0.01
|
|
(0.01)
|
Non-GAAP Diluted
earnings per share
|
$
0.05
|
|
$
0.04
|
|
$
0.02
|
|
|
|
|
|
|
Weighted average
shares used to compute diluted earnings per share
|
|
|
|
|
|
Shares used to
compute GAAP diluted loss per share
|
171,190
|
|
170,103
|
|
158,921
|
Shares used to
compute Non-GAAP diluted earnings per share
|
176,298
|
|
175,220
|
|
163,463
|
|
|
|
|
|
|
GAAP Income (loss)
from operations
|
$
856
|
|
$
(6,622)
|
|
$
(3,296)
|
Depreciation
|
3,544
|
|
3,549
|
|
3,915
|
Stock-based
compensation
|
4,950
|
|
6,116
|
|
4,841
|
Amortization of
acquired intangible assets
|
14,373
|
|
14,699
|
|
15,276
|
Litigation
costs
|
478
|
|
114
|
|
-
|
Acquisition-, disposal-
and integration-related
|
842
|
|
498
|
|
988
|
Restructuring and
related
|
2,680
|
|
4,307
|
|
1,269
|
Non-GAAP Adjusted
EBITDA
|
$
27,723
|
|
$
22,661
|
|
$
22,993
|
|
|
|
|
|
|
* Less than $0.01
impact on earnings (loss) per share.
|
|
|
|
|
|
RIBBON COMMUNICATIONS
INC.
|
Reconciliation of
Non-GAAP and GAAP Financial Measures
|
(in thousands, except
per share amounts)
|
(unaudited)
|
|
|
|
|
|
Nine months
ended
|
|
September
30,
|
|
September
30,
|
|
2023
|
|
2022
|
|
|
|
|
GAAP Gross
Margin
|
47.7 %
|
|
49.0 %
|
Stock-based
compensation
|
0.3 %
|
|
0.3 %
|
Amortization of
acquired technology
|
3.7 %
|
|
4.1 %
|
Non-GAAP Gross
Margin
|
51.7 %
|
|
53.4 %
|
|
|
|
|
GAAP Net
loss
|
$
(73,285)
|
|
$
(118,571)
|
Stock-based
compensation
|
16,914
|
|
13,495
|
Amortization of
acquired intangible assets
|
43,725
|
|
46,219
|
Litigation
costs
|
769
|
|
-
|
Acquisition-, disposal-
and integration-related
|
2,982
|
|
4,372
|
Restructuring and
related
|
13,924
|
|
8,977
|
Decrease in fair value
of investments
|
-
|
|
41,292
|
Preferred stock and
warrant liability mark-to-market adjustment
|
1,558
|
|
-
|
Preferred stock and
warrant liability issuance costs
|
3,545
|
|
-
|
Tax effect of non-GAAP
adjustments
|
4,144
|
|
6,075
|
Non-GAAP Net
income
|
$
14,276
|
|
$
1,859
|
|
|
|
|
GAAP Diluted loss
per share
|
$
(0.43)
|
|
$
(0.78)
|
Stock-based
compensation
|
0.10
|
|
0.09
|
Amortization of
acquired intangible assets
|
0.26
|
|
0.30
|
Litigation
costs
|
*
|
|
-
|
Acquisition-, disposal-
and integration-related
|
0.02
|
|
0.03
|
Restructuring and
related
|
0.08
|
|
0.06
|
Decrease in fair value
of investments
|
-
|
|
0.27
|
Preferred stock and
warrant liability mark-to-market adjustment
|
0.01
|
|
-
|
Preferred stock and
warrant liability issuance costs
|
0.02
|
|
-
|
Tax effect of non-GAAP
adjustments
|
0.02
|
|
0.04
|
Non-GAAP Diluted
earnings per share
|
$
0.08
|
|
$
0.01
|
|
|
|
|
Weighted average
shares used to compute diluted earnings per share
|
|
|
|
Shares used to
compute GAAP diluted loss per share
|
169,955
|
|
152,795
|
Shares used to
compute Non-GAAP diluted earnings per share
|
175,986
|
|
157,412
|
|
|
|
|
GAAP Loss from
operations
|
$
(40,955)
|
|
$
(49,589)
|
Depreciation
|
10,603
|
|
11,688
|
Stock-based
compensation
|
16,914
|
|
13,495
|
Amortization of
acquired intangible assets
|
43,725
|
|
46,219
|
Litigation
costs
|
769
|
|
-
|
Acquisition-, disposal-
and integration-related
|
2,982
|
|
4,372
|
Restructuring and
related
|
13,924
|
|
8,977
|
Non-GAAP Adjusted
EBITDA
|
$
47,962
|
|
$
35,162
|
|
|
|
|
* Less than $0.01
impact on earnings (loss) per share.
|
|
|
|
RIBBON COMMUNICATIONS
INC.
|
Reconciliation of
Non-GAAP and GAAP Financial Measures - Outlook
|
(unaudited)
|
|
|
|
|
|
|
|
Three months
ending
|
|
Year
ending
|
|
|
|
December 31,
2023
|
|
December 31,
2023
|
|
|
|
Range
|
|
Range
|
|
|
|
|
|
|
|
|
|
|
Revenue ($
millions)
|
$
230
|
|
$
240
|
|
$
830
|
|
$
840
|
|
|
|
|
|
|
|
|
|
|
Gross
margin:
|
|
|
|
|
|
|
|
|
GAAP
outlook
|
51.5 %
|
|
52.6 %
|
|
48.8 %
|
|
49.3 %
|
|
Stock-based
compensation
|
0.3 %
|
|
0.3 %
|
|
0.3 %
|
|
0.3 %
|
|
Amortization of
acquired technology
|
2.7 %
|
|
2.6 %
|
|
3.4 %
|
|
3.4 %
|
|
|
Non-GAAP
outlook
|
54.5 %
|
|
55.5 %
|
|
52.5 %
|
|
53.0 %
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA ($
millions):
|
|
|
|
|
|
|
|
|
GAAP income (loss)
from operations
|
$
14.6
|
|
$
20.6
|
|
$
(27.2)
|
|
$
(21.2)
|
|
Depreciation
|
3.4
|
|
3.4
|
|
14.0
|
|
14.0
|
|
Stock-based
compensation
|
6.0
|
|
6.0
|
|
24.0
|
|
24.0
|
|
Amortization of
acquired intangible assets
|
13.2
|
|
13.2
|
|
56.9
|
|
56.9
|
|
Litigation
costs
|
0.6
|
|
0.6
|
|
1.3
|
|
1.3
|
|
Acquisition-, disposal-
and integration-related
|
0.1
|
|
0.1
|
|
3.0
|
|
3.0
|
|
Restructuring and
related
|
2.1
|
|
2.1
|
|
16.0
|
|
16.0
|
|
|
Non-GAAP
outlook
|
$
40.0
|
|
$
46.0
|
|
$
88.0
|
|
$
94.0
|
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SOURCE Ribbon Communications Inc.