Ribbon Communications Inc. Releases Second Quarter 2018 Financial Results
WESTFORD, Mass., July 31, 2018 /PRNewswire/ -- Ribbon Communications Inc. (Nasdaq: RBBN), a global leader in secure and intelligent cloud communications, today announced its financial results for the second quarter 2018.
"Our second quarter results demonstrate the progress we are making in firmly establishing Ribbon as a recognized leader in our industry," said Fritz Hobbs, President and Chief Executive Officer of Ribbon. "From our agreement to acquire Edgewater Networks, to further wins based on our NFV technology, we are intent on broadening our portfolio and helping our customers migrate their legacy networks to the cloud."
Second Quarter 2018 Financial Highlights(1,2)
-- GAAP total revenue was $137 million, compared with $121 million in the
first quarter of 2018 and $56 million in the comparable period a year
ago.
-- Non-GAAP total revenue was $145 million, compared with $135 million in
the first quarter of 2018 and $56 million in the comparable period a
year ago.
-- GAAP net loss was $20 million, compared with a net loss of $45 million
in the first quarter of 2018 and a net loss of $12 million in the
comparable period a year ago.
-- Non-GAAP net income was $14 million, compared with a net loss of $4
million in the first quarter of 2018 and a net loss of $1 million in the
comparable period a year ago.
-- GAAP loss per share was $0.20, compared with a loss per share of $0.44
in the first quarter of 2018 and a loss per share of $0.25 in the
comparable period a year ago.
-- Non-GAAP diluted earnings per share was $0.14, compared with a loss per
share of $0.04 in the first quarter of 2018 and a loss per share of
$0.02 in the comparable period a year ago.
-- Non-GAAP Adjusted EBITDA was $20 million, compared with $1 million in
the first quarter of 2018 and $1 million in the comparable period a year
ago.
-- Cash and investments were $55 million at June 30, 2018, compared with
$85 million at the end of the first quarter of 2018 and $83 million at
fiscal year-end 2017.
"Non-GAAP Revenue of $145 million and Adjusted EBITDA of $20 million in second quarter 2018 demonstrates solid business execution by the Ribbon team, including a focus on successfully concluding our ongoing integration efforts", said Daryl Raiford, Chief Financial Officer of Ribbon. "At this stage, we have operationalized over $75 million of integration synergies and, coupled with our first half business execution, we remain confident in our full year 2018 guidance of Adjusted EBITDA of $75 million and an end-of-year Adjusted EBITDA exit velocity of at least $100 million."
Second Quarter 2018 Customer and Company Highlights
-- Ribbon signed an agreement to acquire Edgewater Networks, and upon
closing of the acquisition, Ribbon is projected to become the market
share leader(3) for enterprise Session Border Controllers (SBCs) and
Network Edge Orchestration. This acquisition allows Ribbon to offer its
global customer base a complete core-to-edge product portfolio,
unrivaled end-to-end service assurance and analytics solutions, and a
fully integrated SD-WAN service. The acquisition is expected to close in
the third quarter of 2018.
-- Ribbon powered a North American Tier One service provider's major fixed
network transformation and interconnect projects leveraging Ribbon's
softswitch, media gateways, SBCs and professional services.
-- Ribbon and Verizon announced that they recently completed one of the
largest VoIP (Voice over Internet Protocol) deployments in the
Department of Defense's history, migrating more than 60,000 users to
Ribbon's Joint Interoperability Test Command (JITC)-certified
Application Server technology.
-- The city of Los Angeles, which includes more than 40 departments and
50,000-plus employees, signed an agreement to upgrade its Unified
Communications (UC) capabilities and voicemail system with Ribbon's
Kandy Business Solutions (KBS), replacing its legacy PBX and key systems
with state-of-the-art, cloud-based UCaaS capabilities. A large segment
of the end users covered under the agreement has already been migrated
to the cloud as of the end of the second quarter.
-- Ribbon continues to gain market share in Japan, a country in the early
stages of IP migration, with multiple Tier One service provider wins.
SoftBank accelerated its IP migration project and replacement of legacy
equipment with Ribbon's SBCs. Another Tier One service provider selected
Ribbon's SBC for network interconnection to other Japanese carriers.
-- Ribbon extended its lead in the virtual SBC market with a win for a
Cloud-based SBC for a new Web 2.0 mobile provider in the Asia/Pacific
region. Ribbon, through its partnership with Verizon, signed a second
customer, a large Enterprise, for Verizon's SBCaaS.
(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.
(3 )Leadership placement derived by combining Edgewater Networks, GENBAND, Sonus and Ribbon E-SBC revenue positions for FY2017. Source: IHS, Enterprise SBCs and VoIP Gateways, Market Tracker, March 7, 2018.
Upcoming Third Quarter 2018 Investor Non Deal Roadshow and Conference Schedule
-- August 7, 2018 - Northland Capital Markets Non Deal Roadshow, Boston
-- August 8, 2018 - The Oppenheimer 21(st) Annual Technology, Internet &
Communications Conference, Four Seasons Hotel, Boston
-- August 9, 2018 - D.A. Davidson 10(th) Annual Technology Forum, Grand
Hyatt, New York City
-- August 28, 2018 - Jefferies 2018 Semiconductor, Hardware and
Communications Infrastructure Summit, Ritz Carlton, Chicago
Conference Call Details and Replay Information
Ribbon will offer a live, listen-only webcast of the conference call to discuss the complete financial results for the second quarter ended June 30, 2018 on July 31, 2018, via the investor section of its website at http://investors.ribboncommunications.com/events.cfm, where a replay will also be available shortly following the conference call.
Date: July 31, 2018
Time: 8:30 a.m. (ET)
Dial-in number: 800-699-3715 - International callers: +1-312-281-1202
A telephone playback of the call will be available following the conference call until August 14, 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 21892287.
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
The information in this release contains forward-looking statements regarding future events that involve risks and uncertainties. All statements other than statements of historical facts contained in this release are forward-looking statements, including statements regarding plans and projections about our business; our future market position; pending acquisitions; and anticipated financial results. Our actual results may differ materially from those contemplated by the forward-looking statements due to various risks, uncertainties and other important factors, including our ability to successfully complete pending acquisitions in the timeframe expected or at all; 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. For further information regarding risks and uncertainties associated with Ribbon Communications' business, please refer to the "Risk Factors" section of Ribbon Communications' most recent annual or quarterly report 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. While Ribbon Communications may elect to update forward-looking statements at some point, Ribbon Communications specifically disclaims any obligation to do so.
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, restructuring and the gain on the sale of an intangible asset. 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 of 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 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 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 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. We recorded $0.7 million and $1.9 million in the first and second quarters of 2018, respectively, 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 required 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.
Gain on Sale of Intangible Assets
In the second quarter of 2017, we sold an intangible asset that we had acquired in connection with a previous acquisition. This amount is included as a component of other income (expense), net. We believe that such gains are not part of our core business or ongoing operations, we had not used the intangible asset in connection with revenue-producing activities and would not have used it as such in the future. Accordingly, we believe that excluding from our results the other income arising from this sale 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; settlement expense; certain litigation costs; acquisition-related facilities adjustments; acquisition- and integration-related expense; restructuring; and other income (expense), 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 2214
dwatson@rbbn.com
International Press
Catherine Berthier
+1.646.741.1974
cberthier@rbbn.com
Analyst Relations
Michael Cooper
+1 (708) 383-3387
mcooper@rbbn.com
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
Three months ended
------------------
June 30, March 31, June 30,
2018 2018 2017
---- ---- ----
Revenue:
Product $63,123 $51,531 $28,790
Service 74,238 69,649 26,943
-------
Total
revenue 137,361 121,180 55,733
------- ------- ------
Cost of revenue:
Product 30,278 33,014 9,287
Service 31,972 32,893 10,044
-------
Total cost
of
revenue 62,250 65,907 19,331
------ ------ ------
Gross profit 75,111 55,273 36,402
------ ------ ------
Gross margin:
Product 52.0% 35.9% 67.7%
Service 56.9% 52.8% 62.7%
Total
gross
margin 54.7% 45.6% 65.3%
Operating expenses:
Research and
development 35,604 39,049 20,064
Sales and
marketing 30,738 31,926 15,720
General and
administrative 15,028 15,601 8,141
Acquisition-
and
integration-
related 4,280 4,412 4,679
Restructuring 6,097 6,668 501
Total
operating
expenses 91,747 97,656 49,105
------ ------ ------
Loss from operations (16,636) (42,383) (12,703)
Interest income (expense), net (735) (599) 254
Other income (expense), net (2,052) 248 575
------ --- ---
Loss before income taxes (19,423) (42,734) (11,874)
Income tax provision (499) (2,170) (471)
---- ------ ----
Net loss $(19,922) $(44,904) $(12,345)
======== ======== ========
Loss per share:
Basic $(0.20) $(0.44) $(0.25)
Diluted $(0.20) $(0.44) $(0.25)
Shares used to compute loss per share:
Basic 102,160 101,917 49,543
Diluted 102,160 101,917 49,543
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
Six months ended
----------------
June 30, June 30,
2018 2017
---- ----
Revenue:
Product $114,654 $54,185
Service 143,887 54,916
-------
Total revenue 258,541 109,101
------- -------
Cost of revenue:
Product 63,292 19,040
Service 64,865 19,911
-------
Total cost of revenue 128,157 38,951
------- ------
Gross profit 130,384 70,150
------- ------
Gross margin:
Product 44.8% 64.9%
Service 54.9% 63.7%
Total gross margin 50.4% 64.3%
Operating expenses:
Research and development 74,653 40,273
Sales and marketing 62,664 30,396
General and administrative 30,629 17,160
Acquisition- and integration-
related 8,692 4,735
Restructuring 12,765 1,071
Total operating
expenses 189,403 93,635
------- ------
Loss from operations (59,019) (23,485)
Interest income (expense), net (1,334) 512
Other income (expense), net (1,804) 576
------ ---
Loss before income taxes (62,157) (22,397)
Income tax provision (2,669) (594)
------ ----
Net loss $(64,826) $(22,991)
======== ========
Loss per share:
Basic $(0.64) $(0.47)
Diluted $(0.64) $(0.47)
Shares used to compute loss per share:
Basic 102,039 49,330
Diluted 102,039 49,330
RIBBON COMMUNICATIONS INC.
Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, December 31,
2018 2017
---- ----
Assets
Current assets:
Cash and cash equivalents $33,411 $57,073
Marketable securities 21,924 17,224
Accounts receivable, net 136,395 165,156
Inventory 19,036 21,303
Other current assets 22,014 21,463
------------
Total current assets 232,780 282,219
Property and equipment, net 23,835 24,780
Intangible assets, net 220,141 244,414
Goodwill 335,716 335,716
Investments - 9,031
Deferred income taxes 7,643 8,434
Other assets 7,587 6,289
$827,702 $910,883
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Revolving credit facility $20,000 $20,000
Accounts payable 34,172 45,851
Accrued expenses and other 61,003 76,380
Deferred revenue 87,935 100,571
------------
Total current liabilities 203,110 242,802
Long-term debt, related party 22,922 22,500
Deferred revenue, net of current 17,464 14,184
Deferred income taxes 3,291 2,787
Other long-term liabilities 13,665 13,189
------ ------
Total liabilities 260,452 295,462
------- -------
Commitments and contingencies
Stockholders' equity:
Common stock 10 10
Additional paid-in capital 1,688,966 1,684,768
Accumulated deficit (1,124,799) (1,072,426)
Accumulated other comprehensive
income 3,073 3,069
567,250 615,421
Total stockholders' equity
$827,702 $910,883
======== ========
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six months ended
----------------
June 30, June 30,
2018 2017
---- ----
Cash flows from operating activities:
Net loss $(64,826) $(22,991)
Adjustments to reconcile net loss to cash flows (used in) provided by operating activities:
Depreciation and amortization of property and equipment 5,318 3,595
Amortization of intangible assets 24,273 4,552
Stock-based compensation 4,905 7,500
Deferred income taxes 817 446
Foreign exchange (gains) losses 2,079 (67)
Other - (570)
Changes in operating assets and liabilities:
Accounts receivable 28,752 11,317
Inventory 2,077 829
Other operating assets (275) (994)
Accounts payable (13,872) (535)
Accrued expenses and other long-term liabilities (15,203) (8,089)
Deferred revenue 3,264 7,848
Net cash (used in) provided by operating activities (22,691) 2,841
------- -----
Cash flows from investing activities:
Purchases of property and equipment (3,492) (2,593)
Purchases of marketable securities - (28,731)
Sale/maturities of marketable securities 4,278 29,067
Proceeds from the sale of intangible assets - 576
Net cash provided by (used in) investing activities 786 (1,681)
--- ------
Cash flows from financing activities:
Borrowings under revolving line of credit 25,000 -
Principal payments on revolving line of credit (25,000) -
Principal payments of capital lease obligations (293) (20)
Payment of debt issuance costs (624) -
Proceeds from the sale of common stock in connection with employee purchase
plan and exercise of stock options 10 683
Payment of tax withholding obligations related to net share settlements of
restricted stock (716) (1,406)
awards
Net cash used in financing activities (1,623) (743)
------ ----
Effect of exchange rate changes on cash and cash equivalents (134) 266
---- ---
Net (decrease) increase in cash and cash equivalents (23,662) 683
Cash and cash equivalents, beginning of year 57,073 31,923
------ ------
Cash and cash equivalents, end of period $33,411 $32,606
======= =======
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, litigation costs and the gain on the sale of an intangible asset
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
------------------
June 30, March 31, June 30,
2018 2018 2017
---- ---- ----
Stock-based compensation
Cost of revenue - product $19 $51 $87
Cost of revenue - service 67 132 261
---
Cost of revenue 86 183 348
--- --- ---
Research and development expense 151 900 1,238
Sales and marketing expense 485 874 907
General and administrative expense 1,359 867 1,744
-----
Operating expense 1,995 2,641 3,889
----- ----- -----
Total stock-based compensation $2,081 $2,824 $4,237
====== ====== ======
Amortization of intangible assets
Cost of revenue - product $9,270 $9,592 $1,601
------
Sales and marketing expense 2,694 2,717 692
-----
Operating expense 2,694 2,717 692
----- ----- ---
Total amortization of intangible assets $11,964 $12,309 $2,293
======= ======= ======
Acquisition-related facilities adjustment
Cost of revenue - product $20 $17 $ -
Cost of revenue - service 61 51 -
---
Cost of revenue 81 68 -
--- --- ---
Research and development expense 98 82 -
Sales and marketing expense 45 38 -
General and administrative expense 28 23 -
---
Operating expense 171 143 -
--- --- ---
Total acquisition-related facilities adjustment $252 $211 $ -
==== ==== ========================
Settlement expense
General and administrative expense $ - $1,730 $ -
========================
Litigation costs
General and administrative expense $1,901 $673 $ -
======
Gain on the sale of intangible asset
Other income (expense), net $ - $ - $576
========================
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, litigation costs and the
gain on the sale of an intangible asset 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.
Six months ended
----------------
June 30, June 30,
2018 2017
---- ----
Stock-based compensation
Cost of revenue - product $70 $186
Cost of revenue - service 199 578
---
Cost of revenue 269 764
--- ---
Research and development expense 1,051 2,555
Sales and marketing expense 1,359 819
General and administrative expense 2,226 3,362
-----
Operating expense 4,636 6,736
----- -----
Total stock-based compensation $4,905 $7,500
====== ======
Amortization of intangible assets
Cost of revenue - product $18,862 $3,167
-------
Sales and marketing expense 5,411 1,385
-----
Operating expense 5,411 1,385
----- -----
Total amortization of intangible assets $24,273 $4,552
======= ======
Acquisition-related facilities adjustment
Cost of revenue - product $37 $ -
Cost of revenue - service 112 -
---
Cost of revenue 149 -
--- ---
Research and development expense 180 -
Sales and marketing expense 83 -
General and administrative expense 51 -
---
Operating expense 314 -
--- ---
Total acquisition-related facilities adjustment $463 $ -
==== ========================
Settlement expense
General and administrative expense $1,730 $ -
======
Litigation costs
General and administrative expense $2,574 $ -
======
Gain on the sale of intangible asset
Other income (expense), net $ - $576
========================
RIBBON COMMUNICATIONS INC.
Reconciliation of Non-GAAP and GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three months ended
------------------
June 30, March 31, June 30,
2018 2018 2017
---- ---- ----
GAAP Product revenue $63,123 $51,531 $28,790
Acquisition-related revenue adjustment 1,741 5,499 -
Adjustment for new revenue standard 2,437 2,540 -
Non-GAAP Product revenue $67,301 $59,570 $28,790
======= ======= =======
GAAP Service revenue $74,238 $69,649 $26,943
Acquisition-related revenue adjustment 2,547 5,619 -
Adjustment for new revenue standard 512 475 -
Non-GAAP Service revenue $77,297 $75,743 $26,943
======= ======= =======
GAAP Total revenue $137,361 $121,180 $55,733
Acquisition-related revenue adjustment 4,288 11,118 -
Adjustment for new revenue standard 2,949 3,015 -
Non-GAAP Total revenue $144,598 $135,313 $55,733
======== ======== =======
GAAP Gross margin - product 52.0% 35.9% 67.7%
Acquisition-related revenue adjustment 0.9% 4.2% 0.0%
Acquisition-related cost of revenue adjustment 0.0% * 0.0%
Adjustment for new revenue standard 1.2% 1.9% 0.0%
Adjustment to cost of revenue for new revenue standard 0.0% -0.1% 0.0%
Stock-based compensation * 0.1% 0.3%
Amortization of intangible assets 14.7% 18.6% 5.6%
Acquisition-related facilities adjustment * * 0.0%
Non-GAAP Gross margin - product 68.8% 60.6% 73.6%
==== ==== ====
GAAP Gross margin - service 56.9% 52.8% 62.7%
Acquisition-related revenue adjustment 1.4% 3.6% 0.0%
Acquisition-related cost of revenue adjustment 0.0% -2.8% 0.0%
Adjustment for new revenue standard 0.3% 0.3% 0.0%
Adjustment to cost of revenue for new revenue standard 0.0% * 0.0%
Stock-based compensation 0.1% 0.2% 1.0%
Acquisition-related facilities adjustment 0.1% 0.1% 0.0%
Non-GAAP Gross margin - service 58.8% 54.2% 63.7%
==== ==== ====
GAAP Total gross margin 54.7% 45.6% 65.3%
Acquisition-related revenue adjustment 1.1% 3.9% 0.0%
Acquisition-related cost of revenue adjustment 0.0% -1.6% 0.0%
Adjustment for new revenue standard 0.8% 1.0% 0.0%
Adjustment to cost of revenue for new revenue standard 0.0% -0.1% 0.0%
Stock-based compensation 0.1% 0.2% 0.6%
Amortization of intangible assets 6.7% 7.9% 2.9%
Acquisition-related facilities adjustment 0.1% 0.1% 0.0%
Non-GAAP Total gross margin 63.5% 57.0% 68.8%
==== ==== ====
GAAP Total gross profit $75,111 $55,273 $36,402
Acquisition-related revenue adjustment 4,288 11,118 -
Acquisition-related cost of revenue adjustment - (1,977) -
Adjustment for new revenue standard 2,949 3,015 -
Adjustment to cost of revenue for new revenue standard - (110) -
Stock-based compensation 86 183 348
Amortization of intangible assets 9,270 9,592 1,601
Acquisition-related facilities adjustment 81 68 -
--- --- ---
Non-GAAP Total gross profit $91,785 $77,162 $38,351
======= ======= =======
GAAP Research and development expense $35,604 $39,049 $20,064
Stock-based compensation (151) (900) (1,238)
Acquisition-related facilities adjustment (98) (82) -
--- --- ---
Non-GAAP Research and development expense $35,355 $38,067 $18,826
======= ======= =======
GAAP Sales and marketing expense $30,738 $31,926 $15,720
Stock-based compensation (485) (874) (907)
Amortization of intangible assets (2,694) (2,717) (692)
Acquisition-related facilities adjustment (45) (38) -
--- --- ---
Non-GAAP Sales and marketing expense $27,514 $28,297 $14,121
======= ======= =======
* Less than 0.1% impact on gross margin.
RIBBON COMMUNICATIONS INC.
Reconciliation of Non-GAAP and GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three months ended
------------------
June 30, March 31, June 30,
2018 2018 2017
---- ---- ----
GAAP General and administrative expense $15,028 $15,601 $8,141
Stock-based compensation (1,359) (867) (1,744)
Settlement expense - (1,730) -
Litigation costs (1,901) (673) -
Acquisition-related facilities adjustment (28) (23) -
--- --- ---
Non-GAAP General and administrative expense $11,740 $12,308 $6,397
======= ======= ======
GAAP Operating expenses $91,747 $97,656 $49,105
Stock-based compensation (1,995) (2,641) (3,889)
Amortization of intangible assets (2,694) (2,717) (692)
Settlement expense - (1,730) -
Litigation costs (1,901) (673) -
Acquisition-related facilities adjustment (171) (143) -
Acquisition- and integration-related expense (4,280) (4,412) (4,679)
Restructuring (6,097) (6,668) (501)
------ ------ ----
Non-GAAP Operating expenses $74,609 $78,672 $39,344
======= ======= =======
GAAP Loss from operations $(16,636) $(42,383) $(12,703)
Acquisition-related revenue adjustment 4,288 11,118 -
Acquisition-related cost of revenue adjustment - (1,977) -
Adjustment for new revenue standard 2,949 3,015 -
Adjustment to cost of revenue for new revenue standard - (110) -
Stock-based compensation 2,081 2,824 4,237
Amortization of intangible assets 11,964 12,309 2,293
Settlement expense - 1,730 -
Litigation costs 1,901 673 -
Acquisition-related facilities adjustment 252 211 -
Acquisition- and integration-related expense 4,280 4,412 4,679
Restructuring 6,097 6,668 501
----- ----- ---
Non-GAAP income (loss) from operations $17,176 $(1,510) $(993)
======= ======= =====
GAAP Loss from operations as a percentage of revenue -12.1% -35.0% -22.8%
Acquisition-related revenue adjustment 3.6% 11.9% 0.0%
Acquisition-related cost of revenue adjustment 0.0% -1.5% 0.0%
Adjustment for new revenue standard 2.0% 2.2% 0.0%
Adjustment to cost of revenue for new revenue standard 0.0% -0.1% 0.0%
Stock-based compensation 1.4% 2.1% 7.6%
Amortization of intangible assets 8.3% 9.1% 4.1%
Settlement expense 0.0% 1.3% 0.0%
Litigation costs 1.3% 0.5% 0.0%
Acquisition-related facilities adjustment 0.2% 0.2% 0.0%
Acquisition- and integration-related expense 3.0% 3.3% 8.4%
Restructuring 4.2% 4.9% 0.9%
Non-GAAP Income (loss) from operations as a percentage of revenue 11.9% -1.1% -1.8%
==== ==== ====
RIBBON COMMUNICATIONS INC.
Reconciliation of Non-GAAP and GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)
Three months ended
------------------
June 30, March 31, June 30,
2018 2018 2017
---- ---- ----
GAAP Net loss $(19,922) $(44,904) $(12,345)
Acquisition-related revenue adjustment 4,288 11,118 -
Acquisition-related cost of revenue adjustment - (1,977) -
Adjustment for new revenue standard 2,949 3,015 -
Adjustment to cost of revenue for new revenue standard - (110) -
Stock-based compensation 2,081 2,824 4,237
Amortization of intangible assets 11,964 12,309 2,293
Settlement expense - 1,730 -
Litigation costs 1,901 673 -
Acquisition-related facilities adjustment 252 211 -
Acquisition- and integration-related expense 4,280 4,412 4,679
Restructuring 6,097 6,668 501
Gain on the sale of intangible asset - - (576)
--- --- ----
Non-GAAP Net income (loss) $13,890 $(4,031) $(1,211)
======= ======= =======
Earnings (loss) per share:
GAAP Loss per share $(0.20) $(0.44) $(0.25)
Acquisition-related revenue adjustment 0.04 0.11 -
Acquisition-related cost of revenue adjustment - (0.02) -
Adjustment for new revenue standard 0.03 0.03 -
Adjustment to cost of revenue for new revenue standard - * -
Stock-based compensation 0.02 0.03 0.09
Amortization of intangible assets 0.13 0.11 0.05
Settlement expense - 0.02 -
Litigation costs 0.02 0.01 -
Acquisition-related facilities adjustment * * -
Acquisition- and integration-related expense 0.04 0.04 0.09
Restructuring 0.06 0.07 0.01
Gain on the sale of intangible asset - - (0.01)
Non-GAAP Diluted earnings per share or (loss) per share $0.14 $(0.04) $(0.02)
===== ====== ======
Shares used to compute diluted earnings per share or (loss) per share
GAAP Shares used to compute loss per share 102,160 101,917 49,543
Non-GAAP Shares used to compute diluted earnings per share or (loss) per share 102,334 101,917 49,543
Adjusted EBITDA:
GAAP Net loss $(19,922) $(44,904) $(12,345)
Interest (income) expense, net 735 599 (254)
Income tax provision 499 2,170 471
Depreciation 2,811 2,507 1,772
Amortization of intangible assets 11,964 12,309 2,293
Acquisition-related revenue adjustment 4,288 11,118 -
Acquisition-related cost of revenue adjustment - (1,977) -
Adjustment for new revenue standard 2,949 3,015 -
Adjustment to cost of revenue for new revenue standard - (110) -
Stock-based compensation 2,081 2,824 4,237
Settlement expense - 1,730 -
Litigation costs 1,901 673 -
Acquisition-related facilities adjustment 252 211 -
Acquisition- and integration-related expense 4,280 4,412 4,679
Restructuring 6,097 6,668 501
Other (income), net 2,052 (248) (575)
Non-GAAP Adjusted EBITDA $19,987 $997 $779
======= ==== ====
* Less than $0.01 impact on earnings (loss) per share
RIBBON COMMUNICATIONS INC.
Reconciliation of Non-GAAP and GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Six months ended
----------------
June 30, June 30,
2018 2017
---- ----
GAAP
Product
revenue $114,654 $54,185
Acquisition-
related
revenue
adjustment 7,240 -
Adjustment
for
new
revenue
standard 4,977 -
Non-
GAAP
Product
revenue $126,871 $54,185
======== =======
GAAP
Service
revenue $143,887 $54,916
Acquisition-
related
revenue
adjustment 8,166 -
Adjustment
for
new
revenue
standard 987 -
Non-
GAAP
Service
revenue $153,040 $54,916
======== =======
GAAP
Total
revenue $258,541 $109,101
Acquisition-
related
revenue
adjustment 15,406 -
Adjustment
for
new
revenue
standard 5,964 -
Non-
GAAP
Total
revenue $279,911 $109,101
======== ========
GAAP
Gross
margin
-
product 44.8% 64.9%
Acquisition-
related
revenue
adjustment 2.1% 0.0%
Adjustment
for
new
revenue
standard 1.5% 0.0%
Adjustment
to
cost
of
revenue
for
new
revenue
standard * 0.0%
Stock-
based
compensation 0.1% 0.3%
Amortization
of
intangible
assets 16.5% 5.8%
Acquisition-
related
facilities
adjustment * 0.0%
Non-
GAAP
Gross
margin
-
product 65.0% 71.0%
==== ====
GAAP
Gross
margin
-
service 54.9% 63.7%
Acquisition-
related
revenue
adjustment 2.5% 0.0%
Acquisition-
related
cost
of
revenue
adjustment -1.4% 0.0%
Adjustment
for
new
revenue
standard 0.3% 0.0%
Stock-
based
compensation 0.1% 1.1%
Acquisition-
related
facilities
adjustment 0.1% 0.0%
Non-
GAAP
Gross
margin
-
service 56.5% 64.8%
==== ====
GAAP
Total
gross
margin 50.4% 64.3%
Acquisition-
related
revenue
adjustment 2.4% 0.0%
Acquisition-
related
cost
of
revenue
adjustment -0.8% 0.0%
Adjustment
for
new
revenue
standard 0.9% 0.0%
Adjustment
to
cost
of
revenue
for
new
revenue
standard * 0.0%
Stock-
based
compensation 0.1% 0.7%
Amortization
of
intangible
assets 7.3% 2.9%
Acquisition-
related
facilities
adjustment 0.1% 0.0%
Non-
GAAP
Total
gross
margin 60.4% 67.9%
==== ====
GAAP
Total
gross
profit $130,384 $70,150
Acquisition-
related
revenue
adjustment 15,406 -
Acquisition-
related
cost
of
revenue
adjustment (1,977) -
Adjustment
for
new
revenue
standard 5,964 -
Adjustment
to
cost
of
revenue
for
new
revenue
standard (110) -
Stock-
based
compensation 269 764
Amortization
of
intangible
assets 18,862 3,167
Acquisition-
related
facilities
adjustment 149 -
--- ---
Non-
GAAP
Total
gross
profit $168,947 $74,081
======== =======
GAAP
Research
and
development
expense $74,653 $40,273
Stock-
based
compensation (1,051) (2,555)
Acquisition-
related
facilities
adjustment (180) -
---- ---
Non-
GAAP
Research
and
development
expense $73,422 $37,718
======= =======
GAAP
Sales
and
marketing
expense $62,664 $30,396
Stock-
based
compensation (1,359) (819)
Amortization
of
intangible
assets (5,411) (1,385)
Acquisition-
related
facilities
adjustment (83) -
--- ---
Non-
GAAP
Sales
and
marketing
expense $55,811 $28,192
======= =======
* Less than 0.1% impact on
gross margin.
RIBBON COMMUNICATIONS INC.
Reconciliation of Non-GAAP and GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Six months ended
----------------
June 30, June 30,
2018 2017
---- ----
GAAP General and administrative expense $30,629 $17,160
Stock-based compensation (2,226) (3,362)
Settlement expense (1,730) -
Litigation costs (2,574) -
Acquisition-related facilities adjustment (51) -
--- ---
Non-GAAP General and administrative expense $24,048 $13,798
======= =======
GAAP Operating expenses $189,403 $93,635
Stock-based compensation (4,636) (6,736)
Amortization of intangible assets (5,411) (1,385)
Settlement expense (1,730) -
Litigation costs (2,574) -
Acquisition-related facilities adjustment (314) -
Acquisition- and integration-related expense (8,692) (4,735)
Restructuring (12,765) (1,071)
------- ------
Non-GAAP Operating expenses $153,281 $79,708
======== =======
GAAP Loss from operations $(59,019) $(23,485)
Acquisition-related revenue adjustment 15,406 -
Acquisition-related cost of revenue adjustment (1,977) -
Adjustment for new revenue standard 5,964 -
Adjustment to cost of revenue for new revenue standard (110) -
Stock-based compensation 4,905 7,500
Amortization of intangible assets 24,273 4,552
Settlement expense 1,730 -
Litigation costs 2,574 -
Acquisition-related facilities adjustment 463 -
Acquisition- and integration-related expense 8,692 4,735
Restructuring 12,765 1,071
------ -----
Non-GAAP Income (loss) from operations $15,666 $(5,627)
======= =======
GAAP Loss from operations as a percentage of revenue -22.8% -21.5%
Acquisition-related revenue adjustment 7.1% 0.0%
Acquisition-related cost of revenue adjustment -0.7% 0.0%
Adjustment for new revenue standard 2.1% 0.0%
Adjustment to cost of revenue for new revenue standard * 0.0%
Stock-based compensation 1.8% 6.8%
Amortization of intangible assets 8.7% 4.2%
Settlement expense 0.6% 0.0%
Litigation costs 0.9% 0.0%
Acquisition-related facilities adjustment 0.2% 0.0%
Acquisition- and integration-related expense 3.1% 4.3%
Restructuring 4.6% 1.0%
Non-GAAP Income (loss) from operations as a percentage of revenue 5.6% -5.2%
=== ====
* Less than 0.1% impact on income (loss) from operations as a percentage of revenue
RIBBON COMMUNICATIONS INC.
Reconciliation of Non-GAAP and GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)
Six months ended
----------------
June 30, June 30,
2018 2017
---- ----
GAAP Net loss $(64,826) $(22,991)
Acquisition-related revenue adjustment 15,406 -
Acquisition-related cost of revenue adjustment (1,977) -
Adjustment for new revenue standard 5,964 -
Adjustment to cost of revenue for new revenue standard (110) -
Stock-based compensation 4,905 7,500
Amortization of intangible assets 24,273 4,552
Settlement expense 1,730 -
Litigation costs 2,574 -
Acquisition-related facilities adjustment 463 -
Acquisition- and integration-related expense 8,692 4,735
Restructuring 12,765 1,071
Gain on the sale of intangible asset - (576)
--- ----
Non-GAAP Net income (loss) $9,859 $(5,709)
====== =======
Earnings (loss) per share:
GAAP Loss per share $(0.64) $(0.47)
Acquisition-related revenue adjustment 0.16 -
Acquisition-related cost of revenue adjustment (0.02) -
Adjustment for new revenue standard 0.06 -
Adjustment to cost of revenue for new revenue standard * -
Stock-based compensation 0.05 0.15
Amortization of intangible assets 0.24 0.09
Settlement expense 0.02 -
Litigation costs 0.03 -
Acquisition-related facilities adjustment * -
Acquisition- and integration-related expense 0.08 0.10
Restructuring 0.12 0.02
Gain on the sale of intangible asset - (0.01)
Non-GAAP Diluted earnings per share or (loss) per share $0.10 $(0.12)
===== ======
Shares used to compute diluted earnings per share or (loss) per share
GAAP Shares used to compute loss per share 102,039 49,330
Non-GAAP Shares used to compute diluted earnings per share or (loss) per share 102,268 49,330
Adjusted EBITDA:
GAAP Net loss $(64,826) (22,991)
Interest (income) expense, net 1,334 (512)
Income tax provision 2,669 594
Depreciation 5,318 3,595
Amortization of intangible assets 24,273 4,552
Acquisition-related revenue adjustment 15,406 -
Acquisition-related cost of revenue adjustment (1,977) -
Adjustment for new revenue standard 5,964 -
Adjustment to cost of revenue for new revenue standard (110) -
Stock-based compensation 4,905 7,500
Settlement expense 1,730 -
Litigation costs 2,574 -
Acquisition-related facilities adjustment 463 -
Acquisition- and integration-related expense 8,692 4,735
Restructuring 12,765 1,071
Other (income), net 1,804 (576)
Non-GAAP Adjusted EBITDA $20,984 $(2,032)
======= =======
* 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
Less acquisition-related adjustments
and impact of new revenue standard (32)
GAAP Revenue $548
====
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
benefit (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.
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SOURCE Ribbon Communications Inc.
