Ribbon Communications Inc. Reports Third Quarter 2020 Financial Results

Positive Net Income and Record Adjusted EBITDA — Revenue Grew 10% Sequentially
October 29, 2020

WESTFORD, Mass., Oct. 29, 2020 /PRNewswire/ -- Ribbon Communications Inc. (Nasdaq: RBBN), a global provider of converged communications software and network solutions to Service Providers, Enterprises, and critical infrastructure sectors, today announced its financial results for the third quarter of 2020.

Revenue for the third quarter of 2020 was $231 million, compared to $138 million for the third quarter of 2019, an increase of 68%. Approximately $78 million of the year-over-year revenue increase was attributable to the acquisition of ECI Telecom Group, Ltd. (ECI), which closed on March 3, 2020.

"We are pleased to report strong third quarter results that exceeded our previous outlook," noted Bruce McClelland, President and Chief Executive Officer of Ribbon Communications. "We have continued on our path of improved profitability, demonstrated by our record Adjusted EBITDA during the third quarter. Our Cloud & Edge business continues to benefit from strong software sales and improved operating expenses. We are encouraged by the continued recovery we are seeing in our Packet Optical business and, based on our current pipeline, we expect to see further improvement in the fourth quarter and a solid finish to the year."

Financial Highlights1,2

The following table summarizes the consolidated financial highlights for the three and nine months ended September 30, 2020 and 2019 (in millions, except per share amounts).

 

Three months ended

Nine months ended

 

September 30,

September 30,

 

2020

2019

2020

2019

GAAP Revenue

$   231

$  138

$  600

$   402

GAAP Net income (loss)

$       6

$      2

$   (35)

$     20

Non-GAAP Net income

$     24

$    15

$    33

$     22

GAAP diluted earnings per share or (loss) per share

$  0.04

$ 0.01

$(0.26)

$  0.18

Weighted average GAAP shares

152

111

137

110

Non-GAAP Diluted earnings per share

$  0.16

$ 0.13

$ 0.23

$  0.20

Weighted average diluted shares

152

111

141

110

Non-GAAP Adjusted EBITDA

$     43

$    23

$    82

$     42

Cash was $111 million at September 30, 2020, compared with $94 million at June 30, 2020 and $40 million at September 30, 2019.


1 Results for the three months ended September 30, 2020 represent three months of Ribbon and ECI. Results for the nine months ended September 30, 2020 represent nine months of Ribbon and the period March 3, 2020 to September 30, 2020 for ECI. Results for the nine months ended September 30, 2019 represent nine months of Ribbon.

2 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 press release appendix.

"Our performance in the third quarter demonstrated continued strong execution amidst a challenging environment," said Mick Lopez, Chief Financial Officer of Ribbon Communications. "We achieved record Adjusted EBITDA of $43 million due to record software product sales and continued operational efficiencies. Packet Optical Networks contributed $78 million in revenue with positive profitability."

Customer and Company Highlights

  • Secured eight new Packet Optical wins with critical Infrastructure and Enterprise customers
  • Indian telecom AGR resolution provides certainty over the operating environment in the country and provides path to improved 2021 outlook
  • Strong year-to-date growth of 25%+ in high performance Enterprise and Service Provider SBC platform sales (7K,5K, SWe and customized software)
  • Large software order from a major US-based multi-national bank to support their migration to Microsoft Teams and to increase call center capacity
  • Expanded cloud-native voice session security offers including the certification of intelligent edge SBCs by Zoom Phone Services, and the introduction of our SBC SWe Lite on AWS
  • Secured wins with six Tier 1 and Tier 2 Service Providers for our Call Trust™ solution, which mitigates robocalls and fraudulent calls

Business Outlook

The Company's outlook is based on current indications for its business, which are subject to change. For the fourth quarter of 2020, the Company projects revenue of $235 million to $245 million, non-GAAP operating expenses of approximately $105 million, non-GAAP earnings per share of $0.12 to $0.14, and Adjusted EBITDA of $36 million to $40 million. The current outlook provided excludes any potential effects of the proposed sale of Kandy and assumes existing COVID-19 conditions.

Upcoming Fourth Quarter 2020 Virtual Investor Conference Schedule

  • November 17, 2020 - Needham Security, Networking, and Communications Conference (presentation and one-on-one institutional investor meetings).
  • November 30, 2020 - Credit Suisse 24th Annual Technology Conference (one-on-one institutional investor meetings).
  • December 9, 2020 – Barclays Global Technology, Media and Telecommunications Conference (one-on-one institutional investor meetings).
  • December 14, 2020 - Cowen 7th Annual Networking Summit (one-on-one institutional investor meetings).
  • December 16, 2020 – MKM Partners Conference: "The Road Ahead, Preparation for 2021" (presentation and one-on-one institutional investor meetings).

Conference Call Details

Conference call to discuss the Company's financial results for the third quarter ended September 30, 2020 on October 29, 2020, 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: October 29, 2020

Time: 4:30 p.m. (ET)
Dial-in number (Domestic): 877-300-8521
Dial-in number (Intl): 412-317-6026
Instant Telephone Access: Call me™ Password: 5835757

Replay information:

A telephone playback of the call will be available following the conference call until November 12, 2020 and can be accessed by calling 844-512-2921 or 412-317-6671 for international callers. The reservation number for the replay is 10149289.

About Ribbon

Ribbon Communications (Nasdaq: RBBN) delivers global communications software and packet and optical network solutions to service providers, enterprises and critical infrastructure sectors. 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 IP solutions, cloud-native offers, leading-edge software security and analytics tools, as well as 5G-ready packet and optical networking solutions acquired via our recent merger with ECI Telecom. 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 several risks and uncertainties. All statements other than statements of historical facts contained in this release, including without limitation statements regarding, projected financial results for the fourth quarter 2020 and beyond, recovery in sales of certain products, the proposed sale of the Kandy business, and plans and objectives of management for future operations are forward-looking statements. Without limiting the foregoing, the words "believes", "estimates", "expects", "expectations", "intends", "may", "plans", "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. Our 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, risks related to the COVID-19 pandemic; risks that the businesses of ECI will not be integrated successfully or that the combined companies will not realize estimated cost savings; failure to realize anticipated benefits of the merger with ECI; disruptions from the integration efforts that could harm our business; failure to consummate the proposed sale of the Kandy Communications platform; failure to satisfy closing conditions to the Kandy transaction; failure to realize anticipated benefits from the Kandy transaction; disruptions from the proposed Kandy transaction that could harm our business; our ability to recruit and retain key personnel; reductions in customer spending; geopolitical tensions, including those in India, that could disrupt shipments to customers; a slowdown in customer payments and changes in customer requirements, including the timing of customer purchasing decisions and our recognition of revenues; conditions in the credit markets, credit risks and risks related to the terms of our credit agreement; our international operations, which are subject to the risks of currency fluctuations and foreign exchange controls; unpredictable fluctuations in quarterly revenue and business from our existing customers; increases in tariffs, trade restrictions or taxes on our products; and currency fluctuations.

These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect our business and results from operations. Additional information regarding these and other factors can be found in our reports filed with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2019 and our Form 10-Q for the quarter endedJune 30, 2020. 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

Ribbon Communications' 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. 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. Our annual financial plan is prepared on a non-GAAP basis and is approved by our 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. By continuing operations, we mean the ongoing results of the business adjusted for certain expenses and credits, as described below. We believe that providing non-GAAP information to investors will allow investors to view the financial results in the way our management views them and 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.

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. In particular, many of the adjustments to our financial measures reflect the exclusion of items that are recurring and will be reflected in our 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.  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.

Amortization of Intangible Assets
Amortization amounts are inconsistent in frequency and amount and are significantly impacted by the timing and size of acquisitions.  We believe that excluding 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.

Acquisition-Related Inventory Adjustment
Acquisition-related inventory adjustment amounts are inconsistent in frequency and amount and are significantly impacted by the then-current market prices of such inventory items.  We believe that excluding non-cash inventory adjustments arising from acquisitions facilitates the comparison of our financial results to our historical operating results and to other companies in our industry as if the inventory had been acquired by us through our normal channels rather than acquired.

Litigation Costs
We have been involved in litigation with a certain competitor and with a former GENBAND business partner, and reached settlements in both cases.    We believe that such costs of such litigation are not part of our core business or ongoing operations. 

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 such costs are generally not relevant to assessing or estimating the long-term performance of the acquired assets.    We exclude such acquisition- and integration-related costs to allow more accurate comparisons of our financial results to our historical operations 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 and Related Expense
We have recorded restructuring and related expense to streamline operations and reduce operating costs by closing and consolidating certain facilities and reducing our worldwide workforce.  We believe that excluding restructuring and related expense 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.

Reduction to Deferred Purchase Consideration
We reached an agreement related to the outstanding cash deferred purchase consideration for Edgewater in the first quarter of 2019 and recorded the gain on the reduction in other (expense) income, net.  We believe that such reductions to cash deferred purchase consideration are not part of our core business or ongoing operations, as they relate to specific acquisitive transactions and  that excluding such reductions facilitates the comparison of our financial results to our historical results and to other companies in our industry.

Gain on Litigation Settlement
We were involved in litigation with a certain competitor with whom we reached a settlement in the second quarter of 2019.  We believe that such gains are not part of our core business or ongoing operations and that excluding such gains facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

Tax Effect of Non-GAAP Adjustments
Non-GAAP income tax expense is presented based on an estimated tax rate applied against forecasted annual non-GAAP income.  The non-GAAP income tax expense assumes no available net operating losses or any valuation allowances for the U.S. because of reporting significant cumulative non-GAAP income over the past several years.  Due to the methodology applied to our estimated annual tax rate, our estimated tax rate on non-GAAP income will differ from our GAAP tax rate and from our actual tax liabilities.

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 expense, net; income tax provision; depreciation; and amortization of intangible assets.  In addition, we exclude from net income (loss):  stock-based compensation expense; acquisition-related inventory adjustments; certain litigation costs; acquisition- and integration-related expense; restructuring and related expense; and other (expense) 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.

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,

       

2020

 

2020

 

2019

Revenue:

           
 

Product

 

$         128,926

 

$    120,862

 

$           61,152

 

Service

 

102,192

 

89,631

 

76,501

   

Total revenue

 

231,118

 

210,493

 

137,653

                 

Cost of revenue:

           
 

Product

 

70,188

 

61,529

 

31,476

 

Service

 

37,619

 

36,647

 

27,300

   

Total cost of revenue

 

107,807

 

98,176

 

58,776

                 

Gross profit

 

123,311

 

112,317

 

78,877

                 

Gross margin:

           
 

Product

 

45.6%

 

49.1%

 

48.5%

 

Service

 

63.2%

 

59.1%

 

64.3%

   

Total gross margin

 

53.4%

 

53.4%

 

57.3%

                 

Operating expenses:

           
 

Research and development

 

49,113

 

51,796

 

34,222

 

Sales and marketing

 

41,604

 

37,617

 

28,227

 

General and administrative

 

16,021

 

15,094

 

9,673

 

Acquisition- and integration-related

 

1,366

 

857

 

1,697

 

Restructuring and related

 

3,290

 

5,361

 

2,372

   

Total operating expenses

 

111,394

 

110,725

 

76,191

                 

Income from operations

 

11,917

 

1,592

 

2,686

Interest expense, net

 

(6,854)

 

(5,400)

 

(726)

Other income (expense), net

 

407

 

(2,407)

 

(507)

                 

Income (loss) before income taxes

 

5,470

 

(6,215)

 

1,453

Income tax benefit (provision)

 

782

 

(2,036)

 

197

                 

Net income (loss)

 

$             6,252

 

$      (8,251)

 

$             1,650

                 

Earnings (loss) per share:

           
 

Basic

 

$               0.04

 

$        (0.06)

 

$               0.01

 

Diluted

 

$               0.04

 

$        (0.06)

 

$               0.01

                 

Weighted average shares used to compute earnings (loss) per share:

           
 

Basic

 

144,948

 

144,483

 

110,080

 

Diluted

 

151,680

 

144,483

 

110,756

 

RIBBON COMMUNICATIONS INC.

Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

             
             
       

Nine months ended

       

September 30,

 

September 30,

       

2020

 

2019

Revenue:

       
 

Product

 

$        325,687

 

$        180,691

 

Service

 

273,906

 

221,311

   

Total revenue

 

599,593

 

402,002

             

Cost of revenue:

       
 

Product

 

176,650

 

101,056

 

Service

 

105,745

 

84,807

   

Total cost of revenue

 

282,395

 

185,863

             

Gross profit

 

317,198

 

216,139

             

Gross margin:

       
 

Product

 

45.8%

 

44.1%

 

Service

 

61.4%

 

61.7%

   

Total gross margin

 

52.9%

 

53.8%

             

Operating expenses:

       
 

Research and development

 

143,204

 

105,456

 

Sales and marketing

 

115,572

 

87,179

 

General and administrative

 

48,320

 

40,833

 

Acquisition- and integration-related

 

14,607

 

6,861

 

Restructuring and related

 

10,726

 

16,448

   

Total operating expenses

 

332,429

 

256,777

             

Loss from operations

 

(15,231)

 

(40,638)

Interest expense, net

 

(15,649)

 

(3,352)

Other (expense) income, net

 

(2,844)

 

70,128

             

(Loss) income before income taxes

 

(33,724)

 

26,138

Income tax provision

 

(1,445)

 

(5,850)

             

Net (loss) income

 

$        (35,169)

 

$          20,288

             

(Loss) earnings per share:

       
 

Basic

 

$            (0.26)

 

$              0.19

 

Diluted

 

$            (0.26)

 

$              0.18

             

Weighted average shares used to compute (loss) earnings per share:

       
 

Basic

 

136,837

 

109,523

 

Diluted

 

136,837

 

110,100

 

RIBBON COMMUNICATIONS INC.

Consolidated Balance Sheets

(in thousands)

(unaudited)

             
             
       

September 30,

 

December 31,

       

2020

 

2019

Assets

     

Current assets:

     
 

Cash and cash equivalents

$          103,698

 

$           44,643

 

Restricted cash

7,198

 

-

 

Accounts receivable, net

207,813

 

192,706

 

Inventory

50,974

 

14,800

 

Other current assets

33,159

 

27,146

   

Total current assets

402,842

 

279,295

             

Property and equipment, net

48,432

 

28,976

Intangible assets, net

432,914

 

213,366

Goodwill

416,892

 

224,896

Deferred income taxes

8,750

 

4,959

Operating lease right-of-use assets

61,648

 

36,654

Other assets

34,600

 

26,762

       

$       1,406,078

 

$         814,908

             

Liabilities and Stockholders' Equity

     

Current liabilities:

     
 

Current portion of term debt

$            13,909

 

$             2,500

 

Revolving credit facility

-

 

8,000

 

Accounts payable

60,784

 

31,412

 

Accrued expenses and other

133,875

 

56,700

 

Operating lease liabilities

17,757

 

7,719

 

Deferred revenue

93,447

 

100,406

   

Total current liabilities

319,772

 

206,737

             

Long-term debt, net of current

373,026

 

45,995

Operating lease liabilities, net of current

51,328

 

37,202

Deferred revenue, net of current

21,285

 

20,482

Deferred income taxes

17,532

 

4,648

Other long-term liabilities

67,694

 

16,589

     

Total liabilities

850,637

 

331,653

             

Commitments and contingencies

     
             

Stockholders' equity:

     
 

Common stock

15

 

11

 

Additional paid-in capital

1,866,961

 

1,747,784

 

Accumulated deficit

(1,302,236)

 

(1,267,067)

 

Accumulated other comprehensive (loss) income

(9,299)

 

2,527

     

Total stockholders' equity

555,441

 

483,255

       

$       1,406,078

 

$         814,908

 

RIBBON COMMUNICATIONS INC.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

               
               
         

Nine months ended

         

 September 30, 

 

 September 30, 

         

2020

 

2019

Cash flows from operating activities:

     
 

Net (loss) income

$            (35,169)

 

$              20,288

 

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

     
   

Depreciation and amortization of property and equipment

12,754

 

8,824

   

Amortization of intangible assets

45,352

 

36,829

   

Amortization of debt issuance costs

4,915

 

268

   

Stock-based compensation

10,167

 

8,154

   

Deferred income taxes

(2,455)

 

4,559

   

Reduction in deferred purchase consideration

(69)

 

(8,124)

   

Foreign currency exchange losses

3,162

 

1,042

   

Changes in operating assets and liabilities:

     
     

Accounts receivable

42,489

 

25,598

     

Inventory

6,285

 

8,387

     

Other operating assets

36,416

 

(20,510)

     

Accounts payable

(54,489)

 

(20,260)

     

Accrued expenses and other long-term liabilities

10,143

 

(21,535)

     

Deferred revenue

(14,253)

 

(20,889)

       

Net cash provided by operating activities

65,248

 

22,631

               

Cash flows from investing activities:

     
 

Purchases of property and equipment

(18,685)

 

(8,594)

 

Business acquisitions, net of cash acquired

(346,852)

 

-

 

Maturities of marketable securities

-

 

7,295

 

Proceeds from the sale of fixed assets

43,500

 

-

       

Net cash used in investing activities

(322,037)

 

(1,299)

               

Cash flows from financing activities:

     
 

Borrowings under revolving line of credit

615

 

109,000

 

Principal payments on revolving line of credit

(8,615)

 

(130,000)

 

Proceeds from issuance of term debt

478,500

 

50,000

 

Principal payments of term debt

(131,279)

 

(625)

 

Payment of deferred purchase consideration

-

 

(21,876)

 

Principal payment of debt, related party

-

 

(24,716)

 

Principal payments of finance leases

(971)

 

(698)

 

Payment of debt issuance costs

(14,065)

 

(891)

 

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

-

 

506

 

Proceeds from the exercise of stock options

29

 

233

 

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

(1,196)

 

(1,082)

 

Repurchase of common stock

-

 

(4,536)

       

Net cash provided by (used in) financing activities

323,018

 

(24,685)

               

Effect of exchange rate changes on cash, cash equivalents and restricted cash

24

 

56

               

Net increase (decrease) in cash, cash equivalents and restricted cash

66,253

 

(3,297)

Cash and cash equivalents, beginning of year

44,643

 

43,694

Cash, cash equivalents and restricted cash, end of period

$            110,896

 

$              40,397

 

RIBBON COMMUNICATIONS INC.

Supplemental Information

(in thousands)

(unaudited)

                         
                         

The following tables provide the details of stock-based compensation and amortization of intangible assets 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,

       

2020

 

2020

 

2019

 

2020

 

2019

Stock-based compensation

                 

Cost of revenue - product

$                 57

 

$         39

 

$                 26

 

$               123

 

$                 62

Cost of revenue - service

204

 

159

 

124

 

493

 

367

 

Cost of revenue

261

 

198

 

150

 

616

 

429

                         

Research and development expense

868

 

738

 

521

 

2,164

 

1,359

Sales and marketing expense

1,189

 

1,011

 

721

 

2,952

 

2,265

General and administrative expense

1,651

 

1,275

 

1,093

 

4,435

 

4,101

 

Operating expense

3,708

 

3,024

 

2,335

 

9,551

 

7,725

                         
   

Total stock-based compensation

$            3,969

 

$    3,222

 

$            2,485

 

$          10,167

 

$            8,154

                         
                         

Amortization of intangible assets

                 

Cost of revenue - product

$          11,643

 

$  10,950

 

$            9,522

 

$          31,547

 

$          29,259

Sales and marketing expense

4,706

 

3,719

 

2,738

 

13,805

 

7,570

                         
 

Total amortization of intangible assets

$          16,349

 

$  14,669

 

$          12,260

 

$          45,352

 

$          36,829

 

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,

 

2020

 

2020

 

2019

           

Revenue

$           231,118

 

$      210,493

 

$           137,653

Less revenue attributable to ECI

(77,588)

 

(63,586)

 

-

Ribbon standalone revenue

$           153,530

 

$      146,907

 

$           137,653

           

GAAP Total gross margin

53.4%

 

53.4%

 

57.3%

Stock-based compensation

0.1%

 

0.1%

 

0.1%

Amortization of intangible assets

5.0%

 

5.2%

 

6.9%

Acquisition-related inventory adjustment

0.9%

 

0.0%

 

0.0%

Non-GAAP Total gross margin

59.4%

 

58.7%

 

64.3%

           

GAAP Total gross profit

$           123,311

 

$      112,317

 

$             78,877

Less total gross profit attributable to ECI

(29,647)

 

(21,611)

 

-

Ribbon standalone gross profit

$             93,664

 

$        90,706

 

$             78,877

           

Ribbon standalone gross margin (Ribbon standalone gross profit/Ribbon standalone revenue)

61.0%

 

61.7%

 

57.3%

Stock-based compensation

0.1%

 

0.1%

 

0.1%

Amortization of intangible assets

5.3%

 

5.4%

 

6.9%

Non-GAAP Ribbon standalone gross margin

66.4%

 

67.2%

 

64.3%

           

GAAP Net income (loss)

$               6,252

 

$        (8,251)

 

$               1,650

Stock-based compensation

3,969

 

3,222

 

2,485

Amortization of intangible assets

16,349

 

14,669

 

12,260

Acquisition-related inventory adjustment

2,000

 

-

 

-

Litigation costs

-

 

(937)

 

(1,534)

Acquisition- and integration-related expense

1,366

 

857

 

1,697

Restructuring and related expense

3,290

 

5,361

 

2,372

Gain on litigation settlement

-

 

-

 

-

Tax effect of non-GAAP adjustments

(9,346)

 

(6,626)

 

(4,256)

Non-GAAP Net income

$             23,880

 

$          8,295

 

$             14,674

           

Earnings (loss) per share

         

GAAP Diluted earnings per share or (loss) per share

$                 0.04

 

$          (0.06)

 

$                 0.01

Stock-based compensation

0.03

 

0.02

 

0.02

Amortization of intangible assets

0.11

 

0.10

 

0.11

Acquisition-related inventory adjustment

0.01

 

-

 

-

Litigation costs

-

 

(0.01)

 

(0.01)

Acquisition- and integration-related expense

0.01

 

0.01

 

0.02

Restructuring and related expense

0.02

 

0.04

 

0.02

Gain on litigation settlement

-

 

-

 

-

Tax effect of non-GAAP adjustments

(0.06)

 

(0.04)

 

(0.04)

Non-GAAP Diluted earnings per share

$                 0.16

 

$            0.06

 

$                 0.13

           

Weighted average shares used to compute diluted earnings per share or (loss) per share

       

110,756

  GAAP Shares used to compute diluted earnings per share or (loss) per share

151,680

 

144,483

 

110,756

  Non-GAAP Shares used to compute diluted earnings per share

151,680

 

150,512

   
           

Adjusted EBITDA

         

GAAP Net income (loss)

$               6,252

 

$        (8,251)

 

$               1,650

Interest expense, net

6,854

 

5,400

 

726

Income tax (benefit) provision

(782)

 

2,036

 

(197)

Depreciation

4,494

 

4,786

 

2,933

Amortization of intangible assets

16,349

 

14,669

 

12,260

Stock-based compensation

3,969

 

3,222

 

2,485

Acquisition-related inventory adjustment

2,000

 

-

 

-

Litigation costs

-

 

(937)

 

(1,534)

Acquisition- and integration-related expense

1,366

 

857

 

1,697

Restructuring and related expense

3,290

 

5,361

 

2,372

Other expense (income), net

(407)

 

2,407

 

507

Non-GAAP Adjusted EBITDA

$             43,385

 

$        29,550

 

$             22,899

 

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,

 

2020

 

2019

       

Revenue

$        599,593

 

$        402,002

Less revenue attributable to ECI

(171,125)

 

-

Ribbon standalone revenue

$        428,468

 

$        402,002

       

GAAP Total gross margin

52.9%

 

53.8%

Stock-based compensation

0.1%

 

0.1%

Amortization of intangible assets

5.3%

 

7.3%

Acquisition-related inventory adjustment

0.3%

 

0.0%

Non-GAAP Total gross margin

58.6%

 

61.2%

       

GAAP Total gross profit

$        317,198

 

$        216,139

Less total gross profit attributable to ECI

(61,909)

 

-

Ribbon standalone gross profit

$        255,289

 

$        216,139

       

Ribbon standalone gross margin (Ribbon standalone gross profit/Ribbon standalone revenue)

59.6%

 

53.8%

Stock-based compensation

0.1%

 

0.1%

Amortization of intangible assets

5.6%

 

7.3%

Non-GAAP Ribbon standalone gross margin

65.3%

 

61.2%

       

GAAP Net (loss) income

$        (35,169)

 

$          20,288

Stock-based compensation

10,167

 

8,154

Amortization of intangible assets

45,352

 

36,829

Acquisition-related inventory adjustment

2,000

 

-

Litigation costs

2,101

 

5,967

Acquisition- and integration-related expense

14,607

 

6,861

Restructuring and related expense

10,726

 

16,448

Reduction to deferred purchase consideration

-

 

(8,124)

Gain on litigation settlement

-

 

(63,000)

Tax effect of non-GAAP adjustments

(16,736)

 

(1,631)

Non-GAAP net income

$          33,048

 

$          21,792

       

(Loss) earnings per share

     

GAAP (loss) per share or diluted earnings per share

$            (0.26)

 

$              0.18

Stock-based compensation

0.07

 

0.07

Amortization of intangible assets

0.33

 

0.34

Acquisition-related inventory adjustment

0.01

 

-

Litigation costs

0.01

 

0.05

Acquisition- and integration-related expense

0.10

 

0.06

Restructuring and related expense

0.08

 

0.15

Reduction to deferred purchase consideration

-

 

(0.07)

Gain on litigation settlement

-

 

(0.57)

Tax effect of non-GAAP adjustments

(0.11)

 

(0.01)

Non-GAAP Diluted earnings per share

$              0.23

 

$              0.20

       

Weighted average shares used to compute (loss) per share or diluted earnings per share

     

  GAAP Shares used to compute (loss) per share or diluted earnings per share

136,837

 

110,100

  Non-GAAP Shares used to compute diluted earnings per share

141,498

 

110,100

       

Adjusted EBITDA

     

GAAP Net (loss) income

$        (35,169)

 

$          20,288

Interest expense, net

15,649

 

3,352

Income tax provision

1,445

 

5,850

Depreciation

12,754

 

8,824

Amortization of intangible assets

45,352

 

36,829

Stock-based compensation

10,167

 

8,154

Acquisition-related inventory adjustment

2,000

 

-

Litigation costs

2,101

 

5,967

Acquisition- and integration-related expense

14,607

 

6,861

Restructuring and related expense

10,726

 

16,448

Other expense (income), net

2,844

 

(70,128)

Non-GAAP Adjusted EBITDA

$          82,476

 

$          42,445

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook

(unaudited)

           
       
     

 Three months ending 

     

 December 31, 2020 

     

 Range 

           

Revenue

$       235

 

$       245

           

Operating expenses (in $ millions)

     
 

GAAP outlook

$    117.6

 

$    117.6

 

Stock-based compensation

(3.7)

 

(3.7)

 

Amortization of intangible assets

(4.8)

 

(4.8)

 

Acquisition- and integration-related expense

(2.1)

 

(2.1)

 

Restructuring and related expense

(2.0)

 

(2.0)

   

Non-GAAP outlook

$    105.0

 

$    105.0

           

(Loss) earnings per share

     
 

GAAP outlook

$     (0.01)

 

$      0.02

 

Stock-based compensation

0.03

 

0.03

 

Amortization of intangible assets

0.10

 

0.10

 

Acquisition- and integration-related expense

0.01

 

0.01

 

Restructuring and related expense

0.01

 

0.01

 

Tax effect of non-GAAP adjustments

(0.02)

 

(0.03)

   

Non-GAAP outlook

$      0.12

 

$      0.14

           

Weighted average shares used to compute (loss) per share or diluted earnings per share (in thousands)

     
 

GAAP Shares used to compute loss per share or diluted earnings per share

145,300

 

151,700

 

Non-GAAP Shares used to compute diluted earnings per share

151,700

 

151,700

           

Adjusted EBITDA (in $ millions)

     
 

GAAP net loss (income) outlook

$       (2.1)

 

$        1.9

 

Interest expense, net

6.5

 

6.5

 

Income tax provision

2.3

 

2.3

 

Depreciation

4.3

 

4.3

 

Amortization of intangible assets

15.5

 

15.5

 

Stock-based compensation

3.9

 

3.9

 

Acquisition- and integration-related expense

2.1

 

2.1

 

Restructuring and related expense

2.0

 

2.0

 

Other expense, net

1.5

 

1.5

   

Non-GAAP outlook

$      36.0

 

$      40

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