Ribbon Communications Releases First Quarter 2019 Financial Results

Announces $75 Million Stock Repurchase Program | Amends its Senior Secured Credit Facility | Retires Acquisition Debt
May 2, 2019

WESTFORD, Mass., May 2, 2019 /PRNewswire/ -- Ribbon Communications Inc. (Nasdaq: RBBN), a global software leader in secure and intelligent cloud communications, today announced its financial results for the first quarter of 2019, the authorization by its Board of Directors to repurchase up to $75 million of the Company's common stock, the amendment and restatement of its senior secured credit facility, and the retirement   of its GENBAND acquisition debt.

"We continued to make solid progress on delivering our core solutions for our session software products while expanding market share. We also had a number of accomplishments during the quarter involving some of the world's largest telecom service providers that validate the traction we are making with our cloud solutions," said Fritz Hobbs, President and Chief Executive Officer of Ribbon Communications. "We are pleased that our balance sheet and cash flow will enable us to return value to stockholders through a stock repurchase program, while at the same time  continue to invest in internal and external opportunities that we believe will further drive long-term growth."

First Quarter 2019 Financial Highlights1

  • GAAP total revenue was $119 million, compared with $121 million in the first quarter of 2018.
  • Non-GAAP total revenue was $122 million, compared with $135 million in the first quarter of 2018.
  • GAAP net loss was $31 million, compared with a net loss of $45 million in the first quarter of 2018.
  • Non-GAAP net loss was $6 million, compared with a net loss of $4 million in the first quarter of 2018.
  • GAAP loss per share was $0.29, compared with a loss per share of $0.44 in the first quarter of 2018.
  • Non-GAAP loss per share was $0.05, compared with a loss per share of $0.04 in the first quarter of 2018.
  • Non-GAAP Adjusted EBITDA was break-even, compared with $1 million in the first quarter of 2018.
  • Cash and investments were $46 million at the end of the first quarter of 2019, compared with $51 million at the end of the fourth quarter of 2018.

1 Please see the reconciliation of non-GAAP and GAAP financial measures, and additional information about non-GAAP measures, in the press release appendix.

"First quarter 2019 results were in line with our expectations that took into account seasonality and relatively soft service provider market conditions," said Daryl Raiford, Chief Financial Officer of Ribbon Communications. "Looking forward, we believe we are well positioned with a strong software product line-up and a solid distribution system around the world, and we remain focused on managing the business to improve efficiencies and increase cash flow. Our amended and restated senior secured credit facility increases our borrowing capacity, lowers our borrowing costs and extends the term through April 2024."

First Quarter 2019 Customer and Company Highlights

  • ExactVentures ranked Ribbon as the number one global market share leader for session border controllers based on fourth quarter 2018 sales, amplifying its existing number one position in the global small and medium enterprise session border controller market.
  • AT&T launched its AT&T API Marketplace offering for businesses built on Ribbon's Kandy Cloud platform, enabling AT&T to offer turnkey applications and self-service application programming interfaces (APIs) for developers to create custom applications.
  • KPN, a leading telecom provider in the Netherlands, is also using the Kandy Cloud platform to offer web-based voice and video capabilities in its API store.
  • Vodafone New Zealand selected Ribbon solutions and services for a two- year network transformation project to modernize its network.
  • A leading service provider in Japan chose Ribbon session software for interconnecting networks and voice traffic.
  • One of our tier one U.S.-based service provider customers continued to transform and modernize its network using Ribbon software solutions and services. This customer also continued to expand Ribbon session deployments for network interconnects.
  • Three major managed service providers continued to deploy Ribbon edge solutions to enterprises that enhance end users' quality of experience for unified communications.

Stock Repurchase Program
Ribbon's Board of Directors has authorized a stock repurchase program for up to $75 million of its common stock, effective immediately. Repurchases under the program may be made in the open market, in  privately  negotiated  transactions, block trades, accelerated stock repurchase transactions, or any combination of such methods,  with the amount and timing of repurchases depending  on market conditions and corporate discretion. Open market repurchases will be structured to occur within the pricing and volume requirements of Rule 10b-18.  This program does not obligate Ribbon to acquire any particular amount of common stock and the program may be extended, modified, suspended or discontinued at any time at the Board of Directors' discretion. This is a two-year program and is effective until April 18, 2021.

New Amended and Restated Credit Agreement and Retirement of Acquisition Debt 
On April 29, 2019, the Company amended and extended its credit agreement to provide for $150 million of committed availability in the form of a $50 million term loan facility and a $100 million facility available for revolving loans. Such facilities are scheduled to mature in April 2024. Interest rates on the facilities were reduced from the Company's former borrowing rates. Concurrent with its entry into the amended and extended credit agreement, Ribbon retired its GENBAND acquisition debt,  which had an original principal amount of $22.5 million, and terminated all obligations under such debt.

Business Outlook
Ribbon expects non-GAAP Adjusted EBITDA of approximately $100 million for full year 2019.2

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 its financial results for the first quarter ended March 31, 2019 on May 2, 2019, 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: May 2, 2019 
Time: 4:30 p.m. (ET)
Dial-in number (Domestic): 888-227-5857 
Dial-in number (Intl): +1-303-223-4373

Replay information:
A telephone playback of the call will be available following the conference call until May 16, 2019 and can be accessed by calling 800-633-8284 or +1-402-977-9140 for international callers. The reservation number for the replay is 21920224.

Investor Relations 
Monica Gould
+1 (212) 871-3927
IR@rbbn.com

US Press 
Dennis Watson
+1 (214) 695-2214
dwatson@rbbn.com

International Press
Catherine Berthier
+1 (646) 741-1974
cberthier@rbbn.com

Industry Analyst Relations 
Michael Cooper
+1 (708) 383-3387
mcooper@rbbn.com

About Ribbon Communications
Ribbon Communications Inc. (Nasdaq: RBBN) delivers market-leading software solutions that secure and power many of the world's leading service provider and enterprise communications environments. Built on world-class technology and intellectual property, the company's cloud-native solutions deliver intelligent and secure real-time communications solutions for the cloud, network and enterprise edge. Ribbon's Kandy Cloud real-time communications software platform delivers advanced and embedded CPaaS and UCaaS capabilities enabling service providers to rapidly create and deploy high-value communications services. To learn more, visit ribboncommunications.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 made by our chief executive officer and our chief financial officer regarding our anticipated financial performance, statements in the sections "First Quarter 2019 Financial Highlights", "Stock Repurchase Program", "New Amended and Restated Credit Agreement and Retirement of Acquisition Debt", and "Business Outlook" statements regarding our future expenses, results of operations and financial position, integration activities, potential stock repurchases, 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 "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 our ability to realize benefits from acquisitions that we have completed; the effects of disruption from acquisitions, 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;  increases  in  tariffs,  trade restrictions  or taxes on our products; 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 express or implied by the forward-looking statements. We caution you against relying on any of these forward-looking statements. For further information regarding risks and uncertainties associated with Ribbon Communications' business and important factors that could cause actual results to differ materially from these forward- looking statements, please refer to the "Risk Factors" section of Ribbon Communications' most recent annual and quarterly reports filed with the SEC. Any forward-looking statements represent Ribbon Communications' views only as of the date on which such statement is made and should not be relied upon as representing Ribbon Communications' views as of any subsequent date. 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. While Ribbon Communications may elect to update forward-looking statements at some point, Ribbon Communications specifically disclaims any obligation to do so, except as may be 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.  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, acquisition-related facilities adjustments, settlement expense,  certain  litigation  costs,  cancelled  debt  offering  costs, acquisition-  and  integration-related  expense,  restructuring,  the  reduction  in  deferred  purchase  consideration  and  income  tax adjustments arising from purchase accounting. 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 measure of non-GAAP Total revenue, which includes revenue related to the acquisitions of GENBAND and Edgewater that we would have recognized but for the purchase accounting treatment of these transactions. Because GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. We also include eliminated revenue resulting from our adoption in 2018 of the new revenue recognition standard. Following the 2018 year of adoption of the ASC 606 revenue standard, we are no longer required by GAAP to disclose the adoption effect of such standard. We will no longer include any further increase to non- GAAP revenue arising from the 2018 revenue standard adoption commencing with our first quarter 2019 financial results. 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 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.

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.

Settlement Expense
In the first quarter of 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 these costs 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 have incurred litigation costs beginning 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. 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.

Cancelled Debt Offering Costs
In November 2018, we announced that we intended to offer, subject to market conditions and other factors, $150 million aggregate principal amount of convertible senior notes in a private offering to qualified institutional buyers. We decided not to proceed with our offering, as we believed that then-current market conditions were not conducive for an offering on terms that would be in the best interests of our stockholders. In connection with this offering, we incurred $1.0 million of expense. We do not consider these debt offering costs to be related to the continuing operations of the Company, and accordingly, we believe that excluding these cancelled debt offering costs facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

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 losing and consolidating certain facilities and reducing our worldwide workforce. We review our restructuring accruals regularly and record adjustments to these estimates as required. We believe that excluding restructuring 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 in Deferred Purchase Consideration
We recorded $8.1 million in other income, net, related to the reduction of deferred purchase consideration for Edgewater. We believe that such reductions to deferred purchase consideration are not part of our core business or ongoing  operations, as they relate to specific acquisitive transactions. Accordingly, we believe that excluding such reductions related to acquisitive transactions facilitates the comparison of our financial results to our historical results and to other companies in our industry.

Income Tax Adjustments Arising from Purchase Accounting
In the fourth quarter of 2018, we recorded an adjustment of $0.1 million of income tax expense to previously recorded amounts related to tax benefits arising from our acquisition of Edgewater. We believe that such adjustments are not part of our core business or ongoing operations, as they are the result of acquisitions and do not relate to our revenue-producing activities. Accordingly, we believe that excluding the impact of these adjustments to our income tax provision facilitates the comparison of our financial results to our historical results and to other companies in our industry.

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; acquisition-related facilities adjustments; settlement expense; certain litigation costs; 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.

RIBBON COMMUNICATIONS INC.

Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

                 
                 
       

Three months ended

       

March 31,

 

December 31,

 

March 31,

       

2019

 

2018

 

2018

Revenue:

         
 

Product

$            47,480

 

$            87,077

 

$            51,531

 

Service

71,448

 

79,819

 

69,649

   

Total revenue

118,928

 

166,896

 

121,180

                 

Cost of revenue:

         
 

Product

33,147

 

40,002

 

33,014

 

Service

29,192

 

31,180

 

32,893

   

Total cost of revenue

62,339

 

71,182

 

65,907

                 

Gross profit

56,589

 

95,714

 

55,273

                 

Gross margin:

         
 

Product

30.2%

 

54.1%

 

35.9%

 

Service

59.1%

 

60.9%

 

52.8%

   

Total gross margin

47.6%

 

57.3%

 

45.6%

                 

Operating expenses:

         
 

Research and development

35,933

 

36,406

 

39,049

 

Sales and marketing

30,059

 

34,124

 

31,926

 

General and administrative

18,694

 

19,465

 

15,601

 

Acquisition- and integration-related

3,199

 

2,689

 

4,412

 

Restructuring

4,932

 

1,853

 

6,668

   

Total operating expenses

92,817

 

94,537

 

97,656

                 

Income (loss) from operations

(36,228)

 

1,177

 

(42,383)

Interest expense, net

(1,364)

 

(1,476)

 

(599)

Other income (expense), net

7,774

 

(714)

 

248

                 

Loss before income taxes

(29,818)

 

(1,013)

 

(42,734)

Income tax provision

(1,014)

 

(813)

 

(2,170)

                 

Net loss

 

$           (30,832)

 

$             (1,826)

 

$           (44,904)

                 

Loss per share:

         
 

Basic

 

$               (0.29)

 

$               (0.02)

 

$               (0.44)

 

Diluted

$               (0.29)

 

$               (0.02)

 

$               (0.44)

                 

Shares used to compute loss per share:

         
 

Basic

 

108,167

 

106,607

 

101,917

 

Diluted

108,167

 

106,607

 

101,917

RIBBON COMMUNICATIONS INC.

Consolidated Balance Sheets

(in thousands)

(unaudited)

             
             
       

March 31,

 

December 31,

       

2019

 

2018

Assets

     

Current assets:

     
 

Cash and cash equivalents

$           43,938

 

$           43,694

 

Marketable securities

1,998

 

7,284

 

Accounts receivable, net

134,801

 

187,853

 

Inventory

18,870

 

22,602

 

Other current assets

20,444

 

17,002

   

Total current assets

220,051

 

278,435

             

Property and equipment, net

27,630

 

27,042

Intangible assets, net

250,669

 

251,391

Goodwill

 

389,196

 

383,655

Deferred income taxes

8,969

 

9,152

Operating lease right-of-use assets

42,166

 

-

Other assets

7,368

 

7,484

       

$           946,049

 

$           957,159

             

Liabilities and Stockholders' Equity

     

Current liabilities:

     
 

Revolving credit facility

$            57,000

 

$            55,000

 

Accounts payable

37,989

 

45,304

 

Accrued expenses and other

58,454

 

84,263

 

Operating lease liabilities

7,214

 

-

 

Deferred revenue

109,283

 

105,087

   

Total current liabilities

269,940

 

289,654

             

Long-term debt, related party

24,716

 

24,100

Operating lease liabilities, net of current

39,151

 

-

Deferred revenue, net of current

15,793

 

17,572

Deferred income taxes

4,861

 

4,738

Other long-term liabilities

12,525

 

30,797

     

Total liabilities

366,986

 

366,861

             

Commitments and contingencies

     
             

Stockholders' equity:

     
 

Common stock

11

 

11

 

Additional paid-in capital

1,743,136

 

1,723,576

 

Accumulated deficit

(1,167,824)

 

(1,136,992)

 

Accumulated other comprehensive income

3,740

 

3,703

     

Total stockholders' equity

579,063

 

590,298

       

$           946,049

 

$           957,159

RIBBON COMMUNICATIONS INC.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

               
               
         

Three months ended

         

 March 31, 

 

 March 31, 

         

2019

 

2018

Cash flows from operating activities:

     
 

Net loss

 

$          (30,832)

 

$          (44,904)

 

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

     
   

Depreciation and amortization of property and equipment

2,921

 

2,507

   

Amortization of intangible assets

11,922

 

12,309

   

Stock-based compensation

4,139

 

2,824

   

Deferred income taxes

347

 

528

   

Foreign currency exchange losses

352

 

23

   

Reduction in deferred purchase consideration

(8,124)

 

-

   

Changes in operating assets and liabilities:

     
     

Accounts receivable

53,854

 

39,740

     

Inventory

3,692

 

(412)

     

Other operating assets

(674)

 

(2,182)

     

Accounts payable

(6,999)

 

(8,976)

     

Accrued expenses and other long-term liabilities

(13,095)

 

(12,820)

     

Deferred revenue

2,076

 

14,755

       

Net cash provided by operating activities

19,579

 

3,392

               

Cash flows from investing activities:

     
 

Purchases of property and equipment

(3,766)

 

(1,827)

 

Sale/maturities of marketable securities

5,295

 

245

       

Net cash provided by (used in) investing activities

1,529

 

(1,582)

               

Cash flows from financing activities:

     
 

Borrowings under revolving line of credit

37,000

 

10,000

 

Principal payments on revolving line of credit

(35,000)

 

(10,000)

 

Payment of deferred purchase consideration

(21,876)

 

-

 

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

(968)

 

(370)

 

Other

(79)

 

(130)

       

Net cash used in financing activities

(20,923)

 

(500)

               

Effect of exchange rate changes on cash and cash equivalents

59

 

206

               

Net increase in cash and cash equivalents

244

 

1,516

Cash and cash equivalents, beginning of year

43,694

 

57,073

Cash and cash equivalents, end of period

$            43,938

 

$            58,589

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures

(in thousands, except per share amounts)

(unaudited)

           
           
 

Three months ended

 

March 31,

 

December 31,

 

March 31,

 

2019

 

2018

 

2018

           

GAAP Total revenue

$          118,928

 

$          166,896

 

$          121,180

Acquisition-related revenue adjustment

2,798

 

4,613

 

11,118

Adjustment for new revenue standard**

-

 

1,903

 

3,015

Non-GAAP Total revenue

$          121,726

 

$          173,412

 

$          135,313

           
           

GAAP Net loss

$          (30,832)

 

$            (1,826)

 

$          (44,904)

Acquisition-related revenue adjustment

2,798

 

4,613

 

11,118

Acquisition-related cost of revenue adjustment

-

 

-

 

(1,977)

Adjustment for new revenue standard**

-

 

1,903

 

3,015

Adjustment to cost of revenue for new revenue standard**

-

 

-

 

(110)

Stock-based compensation

4,139

 

3,651

 

2,824

Amortization of intangible assets

11,922

 

12,002

 

12,309

Acquisition-related facilities adjustment

-

 

252

 

211

Settlement expense

-

 

-

 

1,730

Litigation costs

6,186

 

1,961

 

673

Cancelled debt offering costs

-

 

1,003

 

-

Acquisition- and integration-related expense

3,199

 

2,689

 

4,412

Restructuring

4,932

 

1,853

 

6,668

Reduction in deferred purchase consideration

(8,124)

 

-

 

-

Tax benefits arising from purchase accounting and tax reform

-

 

123

 

-

Non-GAAP net income (loss)

$            (5,780)

 

$            28,224

 

$            (4,031)

           
           

Earnings (loss) per share

         

GAAP Loss per share

$              (0.29)

 

$              (0.02)

 

$              (0.44)

Acquisition-related revenue adjustment

0.03

 

0.04

 

0.11

Acquisition-related cost of revenue adjustment

-

 

-

 

(0.02)

Adjustment for new revenue standard**

-

 

0.02

 

0.03

Adjustment to cost of revenue for new revenue standard**

-

 

-

 

 * 

Stock-based compensation

0.04

 

0.03

 

0.03

Amortization of intangible assets

0.11

 

0.11

 

0.11

Acquisition-related facilities adjustment

-

 

 * 

 

 * 

Settlement expense

-

 

-

 

0.02

Litigation costs

0.06

 

0.02

 

0.01

Cancelled debt offering costs

-

 

0.01

 

-

Acquisition- and integration-related expense

0.03

 

0.03

 

0.04

Restructuring

0.05

 

0.02

 

0.07

Reduction in deferred purchase consideration

(0.08)

 

-

 

-

Tax benefits arising from purchase accounting and tax reform

-

 

 * 

 

-

Non-GAAP Diluted earnings per share or (loss) per share

$              (0.05)

 

$                0.26

 

$              (0.04)

           

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

         

  GAAP Shares used to compute loss per share

108,167

 

106,607

 

101,917

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

108,167

 

107,363

 

101,917

           

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

         

** Effective Q1 2019, the Company no longer adjusts for the impact of the adoption in 2018 of the new revenue standard

   

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures

(in thousands, except per share amounts)

(unaudited)

           
           
 

Three months ended

 

March 31,

 

December 31,

 

March 31,

 

2019

 

2018

 

2018

           

Adjusted EBITDA:

         

GAAP Net loss

$          (30,832)

 

$             (1,826)

 

$          (44,904)

Interest expense, net

1,364

 

1,476

 

599

Income tax provision (benefit)

1,014

 

813

 

2,170

Depreciation

2,921

 

2,930

 

2,507

Amortization of intangible assets

11,922

 

12,002

 

12,309

Acquisition-related revenue adjustment

2,798

 

4,613

 

11,118

Acquisition-related cost of revenue adjustment

-

 

-

 

(1,977)

Adjustment for new revenue standard*

-

 

1,903

 

3,015

Adjustment to cost of revenue for new revenue standard*

-

 

-

 

(110)

Stock-based compensation

4,139

 

3,651

 

2,824

Acquisition-related facilities adjustment

-

 

252

 

211

Settlement expense

-

 

-

 

1,730

Litigation costs

6,186

 

1,961

 

673

Cancelled debt offering costs

-

 

1,003

 

-

Acquisition- and integration-related expense

3,199

 

2,689

 

4,412

Restructuring

4,932

 

1,853

 

6,668

Other expense (income), net

(7,774)

 

714

 

(248)

Non-GAAP Adjusted EBITDA

$                (131)

 

$            34,034

 

$                997

           

* Effective Q1 2019, the Company no longer adjusts for the impact of the adoption in 2018 of the new revenue standard

   

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook

(in millions)

(unaudited)

     
     
     
     
     

Adjusted EBITDA:  Ribbon has not provided a reconciliation of Adjusted EBITDA for the year ending December 31, 2019, 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; stock-based compensation; settlement expense; certain litigation costs; acquisition-related facilities adjustments; acquisition- and integration-related expense; restructuring and other income (expense), net. The 2019 full year guidance does not take into account the benefit of the anticipated $63 million in payments related to a recently resolved litigation matter as written is currently evaluating the accounting treatment of such payments.

SOURCE Ribbon Communications Inc.

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