Ribbon Communications Inc. Releases First Quarter 2018 Financial Results

GAAP revenue was $121 million and non-GAAP revenue was $135 million for the first quarter
April 26, 2018

WESTFORD, Mass., -- Ribbon Communications Inc. (Nasdaq: RBBN), a global leader in secure and intelligent cloud communications, today announced its financial results for the first quarter 2018.

"We are pleased with our first quarter results continuing the momentum we established at the end of last year.  We've quickly established Ribbon as an innovative technology provider meeting the customers' demand for secure, real-time communications," said Fritz Hobbs, President and Chief Executive Officer of Ribbon. "Announcing our first tier one customer for our recently launched Ribbon Protect security platform and strengthened partnerships with leading companies like Verizon and Microsoft, all serve as strong validation of the great progress we are continuing to make on our strategic initiatives."    

First Quarter 2018 Financial Highlights1,2

  • GAAP total revenue was $121.2 million, compared to $53.4 million in the first quarter of 2017.

  • Non-GAAP total revenue was $135.3 million, compared to $53.4 million in the first quarter of 2017.

  • GAAP net loss was $44.9 million, compared to $10.6 million in the first quarter of 2017.

  • Non-GAAP net loss was $4.0 million, compared to $4.5 million in the first quarter of 2017.

  • GAAP loss per share was $0.44, compared to $0.22 in the first quarter of 2017.

  • Non-GAAP loss per share was $0.04, compared to $0.09 in the first quarter of 2017.

  • Non-GAAP Adjusted EBITDA was $1.0 million, compared to negative $2.8 million in the first quarter of 2017.

  • Cash and investments were $84.5 million at the end of the first quarter of 2018, compared to $83.3 million at the end of the fourth quarter of 2017.

Daryl Raiford, Chief Financial Officer of Ribbon, added, "We delivered solid first quarter results driven by the positive impact of our integration-related cost synergies.  Our revenue performance disproportionally benefited profitability demonstrating the significant operating leverage we are building in our business. We remain fully committed to delivering $75 million of adjusted EBITDA in 2018 and exiting 2018 with an adjusted EBITDA run rate of at least $100 million."   

First Quarter 2018 Customer and Company Highlights

  • Ribbon announced a virtualized Session Border Controller as a Service (SBCaaS) solution with Verizon. The Verizon SBCaaS, powered by Ribbon, enables enterprises to dynamically respond to seasonal demands in a truly elastic operating expense model, helping them better manage their costs, adjust to changing business needs, and reduce their reliance on dedicated network hardware and potential points of network failure. 

  • The Company successfully completed a multi-site trial of its cloud unified communications offer in conjunction with one of its global channel partners for a large retail company in the US.  Ribbon expects the agreement to be completed early in the second quarter of 2018.  The company selected Ribbon because of its extensive experience in providing reliable cloud-based, multi-site business communications services.

  • Ribbon completed the delivery of core products (softswitches and media gateways) for a tier one service provider in Asia that plans to significantly expand network capacity to accommodate its growing mobile subscriber base.

  • Ribbon signed its first tier one service provider customer in the Asia/Pacific region for Ribbon Protect, the company's recently launched security product that provides advanced network analytics. Ribbon Protect provides visibility into networks and a large data behavioral analytics platform for real time communications networks and applications. The Company expects to recognize revenue from this customer in the second half of 2018. 

  • Microsoft selected the Ribbon Session Border Controller (SBC) portfolio to deliver secure, integrated voice services to Office 365's newest offering, Microsoft Direct Routing for Teams. As the migration to Teams ramps up late in the year and into next year, Ribbon expects a positive impact in its SBC portfolio.

  • Leading market research firm IHS Markit ranked key solutions from Ribbon's core network modernization product set as market leaders in their respective categories. Ribbon's session border controller, media gateways and softswitch solutions all ranked either first or second in global market share according to IHS Markit.

1  The Sonus-GENBAND merger occurred on October 27, 2017.  The consolidated financial results included in this press release represent the consolidated financial results of Sonus Networks, Inc., prior to October 27, 2017, and the consolidated financial results of Ribbon, on and after such date.  The financial results of GENBAND are included in Ribbon's consolidated financial results beginning October 27, 2017.
2  Please see the reconciliation of non-GAAP and GAAP financial measures, and additional information about non-GAAP measures, in the press release appendix.

Conference Call Details
Ribbon will offer a live, listen-only webcast of the conference call to discuss the complete financial results for the first quarter ended March 31, 2018 on April 26, 2018, via the investor section of its website at http://investors.ribboncommunications.com, where a replay will also be available shortly following the conference call.

Conference call details:
Date:  April 26, 2018
Time:  8:30 a.m. (ET)
Dial-in number:  800-705-8289  - International callers:  +1-303-223-2689

Replay information:
A telephone playback of the call will be available following the conference call until May 10, 2018 and can be accessed by calling 800-633-8284 or +1-402-977-9140 for international callers. The reservation number for the replay is 21887546. 

About Ribbon Communications
Ribbon Communications Inc. (Nasdaq: RBBN) is a company with two decades of market leadership experience in providing secure real-time communications solutions to the top service providers and enterprises around the globe.  Built on world-class technology and intellectual property, Ribbon delivers highly reliable, unified and embedded real-time communications capabilities to customers in more than 25 countries and on 6 continents.  The Company transforms fixed, mobile and enterprise networks from legacy environments to all IP and fully virtualized, secure, cloud-based architectures, enabling highly productive communications for consumers and businesses.  Ribbon's market-leading communications security solutions are based on a big data behavioral analytics platform and offer customers enhanced network intelligence and security.  The Company's Kandy Communications Platform as a Service (CPaaS) enables rapid service creation and digital transformation by delivering customers a comprehensive set of advanced embedded and unified communications capabilities.  To learn more, visit ribboncommunications.com.

Important Information Regarding Forward-Looking Statements

This press 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 press release, including statements made by our executive officers in the introductory paragraphs, and statements regarding expected cost synergies, completion of agreements with customers, earnings and cash flow from operations, future results of operations and financial position, timing of anticipated revenue generation, integration efforts and opportunities, business strategy, strategic position, plans and objectives of management for future operations and plans for future product development and manufacturing are forward-looking statements.  Without limiting the foregoing, the words "anticipates", "believes", "could", "estimates", "expects", "expectations", "intends", "may", "plans", "seeks", "projects" and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Forward-looking statements are based on our current expectations and assumptions regarding our 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 could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, our success integrating the respective businesses of Sonus Networks, Inc. ("Sonus") and GENBAND Holdings Company ("GENBAND"); achievement of the anticipated synergies of the transaction between Sonus and GENBAND (the "Transaction"); our ability to realize the benefits from the Transaction; the effects of disruption from the Transaction, making it more difficult to maintain relationships with employees, customers, business partners or government entities; the timing of customer purchasing decisions and our recognition of revenues; economic conditions; our ability to recruit and retain key personnel; difficulties supporting our strategic focus on channel sales; difficulties retaining and expanding our customer base; difficulties leveraging market opportunities; the impact of restructuring and cost-containment activities; litigation; actions taken by significant stockholders; difficulties providing solutions that meet the needs of customers; market acceptance of our products and services; rapid technological and market change; our ability to protect our intellectual property rights; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; higher risks in international operations and markets; the impact of increased competition; currency fluctuations; changes in the market price of our common stock; and/or failure or circumvention of our controls and procedures.

Our forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.  We caution you against relying on any of these forward-looking statements.  Important factors that could cause actual results to differ materially from these forward-looking statements are discussed in Part I, Item IA "Risk Factors", Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in Ribbon Communications' most recent Annual Report on Form 10-K filed with the SEC.  Any forward-looking statement made by us in this presentation speaks only as of the date of this presentation.  Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.  We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Discussion of Non-GAAP Financial Measures

Ribbon management uses several different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, making operating decisions, planning and forecasting future periods, and determining payments under compensation programs.  Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and the non-GAAP annual financial plan is approved by our board of directors.  Continuous budgeting and forecasting for revenue and expenses are conducted on a non-GAAP basis (in addition to GAAP) and actual results on a non-GAAP basis are assessed against the annual financial plan.  We consider the use of non-GAAP financial measures helpful in assessing the core performance of our continuing operations and when planning and forecasting future periods.  By continuing operations, we mean the ongoing results of the business adjusted for acquisition-related revenue as a result of purchase accounting and the related cost of revenue, the impact of the new revenue standard, and excluding certain expenses and credits, including, but not limited to stock-based compensation, amortization of intangible assets, settlement expense, certain litigation costs, acquisition-related facilities adjustments; acquisition- and integration-related expense and restructuring.  While our management uses non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, GAAP measures.  In addition, our 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 as an analytical tool.  In particular, many of the adjustments to Ribbon's financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

Acquisition-Related Revenue and Cost of Revenue; Impact of New Revenue Standard
We provide the supplementary non-GAAP financial measures, non-GAAP Product revenue, non-GAAP Service revenue and non-GAAP Total revenue, which include revenue related to the acquisition of GENBAND that we would have recognized but for the purchase accounting treatment of these transactions and eliminated revenue as a result of our adoption in 2018 of the new revenue recognition standard.  Because GAAP accounting requires the elimination of this revenue, as well as the impact on future revenue of our adoption in 2018 of the new revenue standard, GAAP results alone do not fully capture all of our economic activities.  These non-GAAP adjustments are intended to reflect the full amounts of such revenue and the related cost of revenue.  We include these adjustments to allow for more complete comparisons to the financial results of our historical operations, forward-looking guidance and the financial results of peer companies.  We believe these adjustments are useful to management and investors as a measure of the ongoing performance of the business.  These adjustments do not accelerate revenue, but instead include revenue (and the related cost of revenue) that would have been recognized in our 2017 results, and included in our 2018 guidance and results, but for the purchase accounting and new revenue standard adjustments required by GAAP.

Stock-Based Compensation
Stock-based compensation expense is different from other forms of compensation, as it is a non-cash expense.  For example, a cash salary generally has a fixed and unvarying cash cost.  In contrast, the expense associated with an equity-based award is generally unrelated to the amount of cash ultimately received by the employee, and the cost to us is based on a stock-based compensation valuation methodology, subjective assumptions and the variety of award types, all of which may vary over time.  We evaluate performance without these measures because stock-based compensation expense is influenced by the Company's stock price and other factors such as volatility and interest rates that are beyond our control.  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.  As such, we do not include such charges in our operating plans, and we believe that presenting non-GAAP operating results that exclude stock-based compensation provides investors with visibility and insight into our management's method of analysis and the Company's core operating performance.  It is reasonable to expect that stock-based compensation will continue in future periods.

Amortization of Intangible Assets
We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures.  These amortization amounts are inconsistent in frequency and amount and are significantly impacted by the timing and size of acquisitions.  Although we exclude amortization of acquired intangible assets from our non-GAAP expenses, we believe that it is important for investors to understand that intangible assets contribute to revenue generation.  We believe that excluding the non-cash amortization of intangible assets facilitates the comparison of our financial results to our historical operating results and to other companies in our industry as if the acquired intangible assets had been developed internally rather than acquired.  Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. 

Settlement Expense
In March 2018, we recorded $1.7 million of expense related to settlements, comprised of $1.4 million for the settlement of litigation in connection with our acquisition of Taqua LLC and $0.3 million of patent litigation settlement expense. These amounts are included as components of general and administrative expense.  We believe that such settlement costs are not part of our core business or ongoing operations, are unplanned and generally not within our control.  Accordingly, we believe that excluding costs such as the SEC potential fines and patent litigation settlement expense facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

Litigation Costs
In connection with certain ongoing litigation between GENBAND, as plaintiff, and one of its competitors, we incurred litigation costs in the fourth quarter of 2017.  In March 2018, we filed litigation on behalf of Sonus against the same competitor asserting additional intellectual property infringement and recorded $0.7 million of expense in connection with this litigation.  We expect to incur significant future litigation costs related to these matters.  These costs are included as a component of general and administrative expense.  We believe that such costs are not part of our core business or ongoing operations, are unplanned and generally not within our control.  Accordingly, we believe that excluding the litigation costs related to this specific legal matter facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

Acquisition-Related Facilities Adjustments
GAAP accounting requires that the deferred rent liability of an acquired company be written off as part of purchase accounting and that the combined company's rent expense on a straight-line basis begin as of the acquisition date.  As a result, we recorded more rent expense than would have been recognized but for the purchase accounting treatment of GENBAND's assumed deferred rent liability.  We include this adjustment, which relates to the acquisition of GENBAND, to allow for more complete comparisons to the financial results of our historical operations, forward-looking guidance and the financial results of peer companies.  We believe these adjustments provide an indication of the rent expense that would have been recognized, but for the purchase accounting in connection with the acquisition of GENBAND.

Acquisition- and Integration-Related Expense
We consider certain acquisition- and integration-related costs to be unrelated to the organic continuing operations of our acquired businesses and the Company and they are generally not relevant to assessing or estimating the long-term performance of the acquired assets.  In addition, the size, complexity and/or volume of an acquisition, which often drives the magnitude of acquisition- and integration-related costs, may not be indicative of future acquisition- and integration-related costs.  By excluding these acquisition- and integration-related costs from our non-GAAP measures, management is better able to evaluate our ability to utilize our existing assets and estimate the long-term value that acquired assets will generate for us.  We exclude certain acquisition- and integration-related costs to allow more accurate comparisons of our financial results to our historical operations, forward-looking guidance and the financial results of less acquisitive peer companies.  In addition, we believe that providing supplemental non-GAAP measures that exclude these items allows management and investors to consider the ongoing operations of the business both with and without such expenses.

Restructuring
We have recorded restructuring expense to streamline operations and reduce operating costs by closing and consolidating certain facilities and reducing our worldwide workforce.  We review our restructuring accruals regularly and record adjustments (both expense and credits) to these estimates as required.  We believe that excluding restructuring expense and credits facilitates the comparison of our financial results to our historical operating results and to other companies in our industry, as there are no future revenue streams or other benefits associated with these costs.

Adjusted EBITDA
We use Adjusted EBITDA as a supplemental measure to review and assess our performance.  We calculate Adjusted EBITDA by excluding from net income (loss): interest income (expense), net; income tax benefit (provision); depreciation; and amortization of intangible assets.  In addition, we exclude from net income (loss):  adjustments to revenue and cost of revenue related to revenue reductions resulting from purchase accounting and adoption of the new revenue standard; stock-based compensation expense; settlement expense; certain litigation costs; acquisition-related facilities adjustments; acquisition- and integration-related expense; restructuring; and other income, net.  In general, we add back the expenses that we consider to be non-cash and/or not part of our ongoing operations.  Adjusted EBITDA is a non-GAAP financial measure that is used by our investing community for comparative and valuation purposes.  We disclose this metric to support and facilitate our dialogue with research analysts and investors.  Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

We believe that providing non-GAAP information to investors, in addition to the GAAP presentation, will allow investors to view the financial results in the way management views them.  We further believe that providing this information helps investors to better understand our core financial and operating performance and evaluate the efficacy of the methodology and information used by our management to evaluate and measure such performance.

Investor Relations:
Sara Leggat
+1 (978) 614-8841
sleggat@rbbn.com       

US Press
Dennis Watson
+1 (214) 695 2224
dwatson@rbbn.com

International Press
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

       

March 31,

 

March 31,

       

2018

 

2017

Revenue:

     
 

Product

$             51,531

 

$             25,395

 

Service

69,649

 

27,973

   

Total revenue

121,180

 

53,368

             

Cost of revenue:

     
 

Product

33,014

 

9,753

 

Service

32,893

 

9,867

   

Total cost of revenue

65,907

 

19,620

             

Gross profit

55,273

 

33,748

             

Gross margin:

     
 

Product

35.9%

 

61.6%

 

Service

52.8%

 

64.7%

   

Total gross margin

45.6%

 

63.2%

             

Operating expenses:

     
 

Research and development

39,049

 

20,209

 

Sales and marketing

31,926

 

14,676

 

General and administrative

15,601

 

9,019

 

Acquisition- and integration-related

4,412

 

56

 

Restructuring

6,668

 

570

   

Total operating expenses

97,656

 

44,530

             

Loss from operations

(42,383)

 

(10,782)

Interest income (expense), net

(599)

 

258

Other income, net

248

 

1

             

Loss before income taxes

(42,734)

 

(10,523)

Income tax provision

(2,170)

 

(123)

             

Net loss

 

$           (44,904)

 

$           (10,646)

             

Loss per share:

     
 

Basic

 

$               (0.44)

 

$               (0.22)

 

Diluted

$               (0.44)

 

$               (0.22)

             

Shares used to compute loss per share: 

     
 

Basic

 

101,917

 

49,114

 

Diluted

101,917

 

49,114

 

 

 

RIBBON COMMUNICATIONS INC.

Consolidated Balance Sheets

(in thousands)

(unaudited)

             
             
       

March 31,

 

December 31,

       

2018

 

2017

Assets

     

Current assets:

     
 

Cash and cash equivalents

$             58,589

 

$             57,073

 

Marketable securities

23,724

 

17,224

 

Accounts receivable, net

125,504

 

165,156

 

Inventory

21,422

 

21,303

 

Other current assets

22,192

 

21,463

   

Total current assets

251,431

 

282,219

             

Property and equipment, net

24,002

 

24,780

Intangible assets, net

232,105

 

244,414

Goodwill

 

335,716

 

335,716

Investments

2,225

 

9,031

Deferred income taxes

8,154

 

8,434

Other assets

7,445

 

6,289

       

$           861,078

 

$           910,883

             

Liabilities and Stockholders' Equity

     

Current liabilities:

     
 

Revolving credit facility

$             20,000

 

$             20,000

 

Accounts payable

37,119

 

45,851

 

Accrued expenses and other

62,749

 

76,380

 

Deferred revenue

103,162

 

100,571

   

Total current liabilities

223,030

 

242,802

             

Long-term debt, related party

22,500

 

22,500

Deferred revenue, net of current

14,218

 

14,184

Deferred income taxes

3,092

 

2,787

Other long-term liabilities

13,203

 

13,189

     

Total liabilities

276,043

 

295,462

             

Commitments and contingencies

     
             

Stockholders' equity:

     
 

Common stock

10

 

10

 

Additional paid-in capital

1,687,231

 

1,684,768

 

Accumulated deficit

(1,105,366)

 

(1,072,426)

 

Accumulated other comprehensive income

3,160

 

3,069

     

Total stockholders' equity

585,035

 

615,421

       

$           861,078

 

$           910,883

 

 

 

RIBBON COMMUNICATIONS INC.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

               
               
         

Three months ended

         

 March 31, 

 

 March 31, 

         

2018

 

2017

Cash flows from operating activities:

     
 

Net loss

 

$           (44,904)

 

$           (10,646)

 

Adjustments to reconcile net loss to cash flows provided by operating activities:

     
   

Depreciation and amortization of property and equipment

2,507

 

1,823

   

Amortization of intangible assets

12,309

 

2,259

   

Stock-based compensation

2,824

 

3,263

   

Deferred income taxes

528

 

238

   

Changes in operating assets and liabilities:

     
     

Accounts receivable

39,763

 

14,324

     

Inventory

(412)

 

315

     

Other operating assets

(2,182)

 

(405)

     

Accounts payable

(8,976)

 

(651)

     

Accrued expenses and other long-term liabilities

(12,820)

 

(10,530)

     

Deferred revenue

14,755

 

3,614

       

Net cash provided by operating activities

3,392

 

3,604

               

Cash flows from investing activities:

     
 

Purchases of property and equipment

(1,827)

 

(998)

 

Purchases of marketable securities

-

 

(18,632)

 

Sale/maturities of marketable securities

245

 

15,693

       

Net cash used in investing activities

(1,582)

 

(3,937)

               

Cash flows from financing activities:

     
 

Borrowings under revolving line of credit

10,000

 

-

 

Principal payments on revolving line of credit

(10,000)

 

-

 

Principal payments of capital lease obligations

(118)

 

(10)

 

Payment of debt issuance costs

(22)

 

-

 

Proceeds from the sale of common stock in connection with employee purchase plan and
exercise of stock options

10

 

644

 

Payment of tax withholding obligations related to net share settlements of restricted stock
awards

(370)

 

(496)

       

Net cash (used in) provided by financing activities

(500)

 

138

               

Effect of exchange rate changes on cash and cash equivalents

206

 

203

               

Net increase in cash and cash equivalents

1,516

 

8

Cash and cash equivalents, beginning of year

57,073

 

31,923

Cash and cash equivalents, end of period

$             58,589

 

$             31,931

 

 

 

RIBBON COMMUNICATIONS INC.

Supplemental Information

(in thousands)

(unaudited)

             
             

The following tables provide the details of stock-based compensation, amortization of intangible assets, acquisition-related facilities adjustments, settlement expense and litigation costs 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 

       

March 31,

 

March 31,

       

2018

 

2017

Stock-based compensation

     
 

Cost of revenue - product

$                     51

 

$                    99

 

Cost of revenue - service

132

 

317

   

Cost of revenue

183

 

416

             
 

Research and development expense

900

 

1,317

 

Sales and marketing expense

874

 

(88)

 

General and administrative expense

867

 

1,618

   

Operating expense

2,641

 

2,847

             
     

Total stock-based compensation

$                2,824

 

$               3,263

             
             

Amortization of intangible assets

     
 

Cost of revenue - product

$                9,592

 

$               1,566

             
 

Sales and marketing expense

2,717

 

693

   

Operating expense

2,717

 

693

             
     

Total amortization of intangible assets

$              12,309

 

$               2,259

             
             

Acquisition-related facilities adjustment

     
 

Cost of revenue - product

$                     17

 

$                      -

 

Cost of revenue - service

51

 

-

   

Cost of revenue

68

 

-

             
 

Research and development expense

82

 

-

 

Sales and marketing expense

38

 

-

 

General and administrative expense

23

 

-

   

Operating expense

143

 

-

             
     

Total acquisition-related facilities adjustment

$                   211

 

$                      -

             
             

Settlement expense

     
 

General and administrative expense

$                1,730

 

$                      -

             
             

Litigation costs

     
 

General and administrative expense

$                   673

 

$                      -

 

 

 

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures - Historical

(in thousands, except percentages)

(unaudited)

       
       
 

Three months ended

 

March 31,

 

March 31,

 

2018

 

2017

       

GAAP Product revenue

$             51,531

 

$             25,395

Acquisition-related revenue adjustment

5,499

 

-

Adjustment for new revenue standard

2,540

 

-

Non-GAAP Product revenue

$             59,570

 

$             25,395

       

GAAP Service revenue

$             69,649

 

$             27,973

Acquisition-related revenue adjustment

5,619

 

-

Adjustment for new revenue standard

475

 

-

Non-GAAP Service revenue

$             75,743

 

$             27,973

       

GAAP Total revenue

$           121,180

 

$             53,368

Acquisition-related revenue adjustment

11,118

 

-

Adjustment for new revenue standad

3,015

 

-

Non-GAAP Total revenue

$           135,313

 

$             53,368

       

GAAP Gross margin - product

35.9%

 

61.6%

Acquisition-related revenue adjustment

4.2%

 

0.0%

Acquisition-related cost of revenue adjustment

*

 

0.0%

Adjustment for new revenue standard

1.9%

 

0.0%

Adjustment to cost of revenue for new revenue standard

-0.1%

 

0.0%

Stock-based compensation

0.1%

 

0.4%

Amortization of intangible assets

18.6%

 

6.2%

Acquisition-related facilities adjustment

*

 

0.0%

Non-GAAP Gross margin - product

60.6%

 

68.2%

       

GAAP Gross margin - service

52.8%

 

64.7%

Acquisition-related revenue adjustment

3.6%

 

0.0%

Acquisition-related cost of revenue adjustment

-2.8%

 

0.0%

Adjustment for new revenue standard

0.3%

 

0.0%

Adjustment to cost of revenue for new revenue standard

*

 

0.0%

Stock-based compensation

0.2%

 

1.2%

Acquisition-related facilities adjustment

0.1%

 

0.0%

Non-GAAP Gross margin - service

54.2%

 

65.9%

       

GAAP Total gross margin

45.6%

 

63.2%

Acquisition-related revenue adjustment

3.9%

 

0.0%

Acquisition-related cost of revenue adjustment

-1.6%

 

0.0%

Adjustment for new revenue standard

1.0%

 

0.0%

Adjustment to cost of revenue for new revenue standard

-0.1%

 

0.0%

Stock-based compensation

0.2%

 

0.8%

Amortization of intangible assets

7.9%

 

3.0%

Acquisition-related facilities adjustment

0.1%

 

0.0%

Non-GAAP Total gross margin

57.0%

 

67.0%

       

GAAP Total gross profit

$             55,273

 

$             33,748

Acquisition-related revenue adjustment

11,118

 

-

Acquisition-related cost of revenue adjustment

(1,977)

 

-

Adjustment for new revenue standard

3,015

 

-

Adjustment to cost of revenue for new revenue standard

(110)

 

-

Stock-based compensation

183

 

416

Amortization of intangible assets

9,592

 

1,566

Acquisition-related facilities adjustment

68

 

-

Non-GAAP Total gross profit

$             77,162

 

$             35,730

       

GAAP Research and development expense

$             39,049

 

$             20,209

Stock-based compensation

(900)

 

(1,317)

Acquisition-related facilities adjustment

(82)

 

-

Non-GAAP Research and development expense

$             38,067

 

$             18,892

       

GAAP Sales and marketing expense

$             31,926

 

$             14,676

Stock-based compensation

(874)

 

88

Amortization of intangible assets

(2,717)

 

(693)

Acquisition-related facilities adjustment

(38)

 

-

Non-GAAP Sales and marketing expense

$             28,297

 

$             14,071

       

  *  Less than 0.1% impact on gross margin.

     

 

 

 

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures - Historical

(in thousands, except percentages)

(unaudited)

       
       
 

Three months ended

 

March 31,

 

March 31,

 

2018

 

2017

       

GAAP General and administrative expense

$             15,601

 

$               9,019

Stock-based compensation

(867)

 

(1,618)

Settlement expense

(1,730)

 

-

Litigation costs

(673)

 

-

Acquisition-related facilities adjustment

(23)

 

-

Non-GAAP General and administrative expense

$             12,308

 

$               7,401

       

GAAP Operating expenses

$             97,656

 

$             44,530

Stock-based compensation

(2,641)

 

(2,847)

Amortization of intangible assets

(2,717)

 

(693)

Settlement expense

(1,730)

 

-

Litigation costs

(673)

 

-

Acquisition-related facilities adjustment

(143)

 

-

Acquisition- and integration-related expense

(4,412)

 

(56)

Restructuring

(6,668)

 

(570)

Non-GAAP Operating expenses

$             78,672

 

$              40,364

       

GAAP Loss from operations

$            (42,383)

 

$            (10,782)

Acquisition-related revenue adjustment

11,118

 

-

Acquisition-related cost of revenue adjustment

(1,977)

 

-

Adjustment for new revenue standard

3,015

 

-

Adjustment to cost of revenue for new revenue standard

(110)

 

-

Stock-based compensation

2,824

 

3,263

Amortization of intangible assets

12,309

 

2,259

Settlement expense

1,730

 

-

Litigation costs

673

 

-

Acquisition-related facilities adjustment

211

 

-

Acquisition- and integration-related expense

4,412

 

56

Restructuring

6,668

 

570

Non-GAAP Loss from operations

$              (1,510)

 

$              (4,634)

       

GAAP Loss from operations as a percentage of revenue

-35.0%

 

-20.2%

Acquisition-related revenue adjustment

11.9%

 

0.0%

Acquisition-related cost of revenue adjustment

-1.5%

 

0.0%

Adjustment for new revenue standard

2.2%

 

0.0%

Adjustment to cost of revenue for new revenue standard

-0.1%

 

0.0%

Stock-based compensation

2.1%

 

6.1%

Amortization of intangible assets

9.1%

 

4.2%

Settlement expense

1.3%

 

0.0%

Litigation costs

0.5%

 

0.0%

Acquisition-related facilities adjustment

0.2%

 

0.0%

Acquisition- and integration-related expense

3.3%

 

0.1%

Restructuring

4.9%

 

1.1%

Non-GAAP Loss from operations as a percentage of revenue

-1.1%

 

-8.7%

 

 

 

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures - Historical

(in thousands, except percentages and per share amounts)

(unaudited)

       
       
 

Three months ended

 

March 31,

 

March 31, 

 

2018

 

2017

       

GAAP Net loss

$            (44,904)

 

$           (10,646)

Acquisition-related revenue adjustment

11,118

 

-

Acquisition-related cost of revenue adjustment

(1,977)

 

-

Adjustment for new revenue standard

3,015

 

-

Adjustment to cost of revenue for new revenue standard

(110)

 

-

Stock-based compensation

2,824

 

3,263

Amortization of intangible assets

12,309

 

2,259

Settlement expense

1,730

 

-

Litigation costs

673

 

-

Acquisition-related facilities adjustment

211

 

-

Acquisition- and integration-related expense

4,412

 

56

Restructuring

6,668

 

570

Non-GAAP Net loss

$              (4,031)

 

$             (4,498)

       

Loss per share:

     

GAAP loss per share

$                (0.44)

 

$               (0.22)

Acquisition-related revenue adjustment

0.11

 

-

Acquisition-related cost of revenue adjustment

(0.02)

 

-

Adjustment for new revenue standard

0.03

 

-

Adjustment to cost of revenue for new revenue standard

 * 

 

-

Stock-based compensation

0.03

 

0.07

Amortization of intangible assets

0.11

 

0.05

Settlement expense

0.02

 

-

Litigation costs

0.01

 

-

Acquisition-related facilities adjustment

 * 

 

-

Acquisition- and integration-related expense

0.04

 

 * 

Restructuring

0.07

 

0.01

Non-GAAP Loss per share 

$                (0.04)

 

$               (0.09)

       

Shares used to compute loss per share:

     

  GAAP Shares used to compute loss per share

101,917

 

49,114

  Non-GAAP Shares used to compute loss per share

101,917

 

49,114

       

Adjusted EBITDA:

     

GAAP Net loss

$            (44,904)

 

(10,646)

Interest (income) expense, net

599

 

(258)

Income tax provision

2,170

 

123

Depreciation

2,507

 

1,823

Amortization of intangible assets

12,309

 

2,259

Acquisition-related revenue adjustment

11,118

 

-

Acquisition-related cost of revenue adjustment

(1,977)

 

-

Adjustment for new revenue standard

3,015

 

-

Adjustment to cost of revenue for new revenue standard

(110)

 

-

Stock-based compensation

2,824

 

3,263

Settlement expense

1,730

 

-

Litigation costs

673

 

-

Acquisition-related facilities adjustment

211

 

-

Acquisition- and integration-related expense

4,412

 

56

Restructuring

6,668

 

570

Other (income), net

(248)

 

(1)

Non-GAAP Adjusted EBITDA

$                   997

 

$             (2,811)

       

*  Less than $0.01 impact on earnings (loss) per share

     

 

 

 

RIBBON COMMUNICATIONS INC.

 

Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook

 

(in millions)

 

(unaudited)

 
         
         
 

Year

     
 

ending

     
 

December 31,

     
 

2018

     
         

Non-GAAP Revenue

$                 580.0

     

Less acquisition-related adjustments and impact of new revenue standard

(31.5)

     

GAAP Revenue

$                 548.5

     
         
         

Adjusted EBITDA:  Ribbon has not provided a reconciliation of Adjusted EBITDA for the year ending December 31, 2018, as it is unable to project without unreasonable efforts the comparable GAAP net loss figure, which includes interest expense, net; income tax provision; depreciation; amortization of intangible assets; acquisition-related revenue and related cost of revenue adjustments; adjustments for the impact of the new revenue standard; stock-based compensation; settlement expense; litigation costs; acquisition-related facilities adjustments; acquisition- and integration-related expense; restructuring; and other income (expense), net.

 

 

 

 
 

 

Ask Us Anything!

Ribbon's team of professionals are ready to answer your questions, guide you to the right solution or help you with your network design.