Ribbon Communications Inc. Reports Second Quarter 2019 Financial Results

WESTFORD, Mass., July 31, 2019 /PRNewswire/ -- Ribbon Communications Inc. (Nasdaq: RBBN), a global software leader in secure and intelligent cloud communications, today announced its financial results for the second quarter of 2019.

"Our second quarter financial results and improving profitability demonstrate the progress we are making," said Fritz Hobbs, President and Chief Executive Officer of Ribbon Communications. "We are seeing good progress and early validation of our business strategy, which is focused on closely aligning to the needs of our customers and partners with our comprehensive suite of software product and service offerings."

Second Quarter 2019 Financial Highlights(1, 2)

    --  GAAP revenue was $145 million, compared with $137 million in the second
        quarter of 2018.
    --  GAAP net income was $49 million, compared with a net loss of $20 million
        in the second quarter of 2018.
    --  Non-GAAP net income was $16 million, compared with $14 million in the
        second quarter of 2018.
    --  GAAP diluted earnings per share was $0.45, compared with a loss per
        share of $0.20 in the second quarter of 2018.
    --  Non-GAAP diluted earnings per share was $0.14 in both the second quarter
        of 2019 and 2018.
    --  Non-GAAP Adjusted EBITDA was $22 million, compared with $20 million in
        the second quarter of 2018.

The Company resolved an intellectual property infringement dispute with a competitor, resulting in a $63 million settlement that was excluded from non-GAAP financial results.

    --  The Company repurchased and retired approximately 976,000 shares of
        common stock at an average price of $4.65 for a total of $5 million in
        the second quarter of 2019.
    --  Cash was $51 million at June 30, 2019, compared with cash and
        investments of $46 million at March 31, 2019.

"Revenue was $145 million and Adjusted EBITDA was $22 million in the second quarter of 2019," said Daryl Raiford, Chief Financial Officer of Ribbon Communications. "Our 12 percent year-over-year growth in profitability was driven by improving software revenue mix coupled with our cost reduction efforts."

Second Quarter 2019 Customer and Company Highlights

    --  A national telecommunications service provider in Asia selected Ribbon
        to transform its nationwide communication services network using
        Ribbon's portfolio of core and session software solutions and services.
    --  VOD Communications, a value-added distributor of technology and
        converged communications solutions focusing on the enterprise, SMB and
        consumer markets in Southern Africa, added Ribbon's Network Edge
        Orchestration, a hybrid Cloud/Edge solution to its distribution
        portfolio.
    --  Ribbon extended its partnership with Neustar, a leading global
        information services provider and the exclusive host of the ATIS
        Robocalling Testbed, to deliver a comprehensive solution designed to
        combat robocalling and call spoofing.
    --  A major service provider in the US continued deployments of Ribbon's
        session software, transformation solutions and services associated with
        its mobile, fixed and business network service offerings.
    --  A major global financial institution began deploying Ribbon's session
        software and Kandy CPaaS(3) solutions to secure and enhance its Unified
        Communications environments with an intelligent session layer for its
        network.
    --  A service provider and a public sector enterprise customer chose Ribbon
        Analytics solutions and applications for enhanced network visibility and
        security.

Business Outlook(1,2
)
Effective as of the second quarter of 2019, the Company no longer increases non-GAAP results by adding back revenue lost in purchase accounting. The Company's Adjusted EBITDA guidance, taking into account this change in practice, is approximately $92 million for the full year 2019.

(1)Please see the reconciliation of non-GAAP and GAAP financial measures, and additional information about non-GAAP measures in the press release appendix.
(2)Effective as of the second quarter of 2019, the Company no longer increases non-GAAP revenue for the impact of purchase accounting on revenue; effective as of the first quarter of 2019, the Company no longer increases non-GAAP revenue for the impact of the adoption in 2018 of the new revenue standard.
(3)CPaaS is defined as communications platform as a service.

Conference Call Details
Ribbon will offer a live, listen-only webcast of the conference call to discuss its financial results for the second quarter ended June 30, 2019 on July 31, 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: July 31, 2019
Time: 4:30 p.m. (ET)
Dial-in number (Domestic): 877-407-2991
Dial-in number (Intl): 201-389-0925
Instant Telephone Access: Call me(TM)

Replay information:
A telephone playback of the call will be available following the conference call until August 14, 2019 and can be accessed by calling 877-660-6853 or 201-612-7415 for international callers. The reservation number for the replay is 13692597.

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 "Second Quarter 2019 Financial Highlights" and "Business Outlook" statements regarding our future expenses, results of operations and financial position, potential stock repurchases, business strategy, strategic position, 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 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 certain expenses and credits, including, but not limited to stock-based compensation, amortization of intangible assets, acquisition-related facilities adjustments, certain litigation costs, acquisition- and integration-related expense, restructuring and related expense, the gain on the settlement of litigation, the reduction in deferred purchase consideration and the tax effect of these adjustments. Effective for the second quarter of 2019 and for subsequent reporting periods, we no longer adjust for the impact of purchase accounting on revenue and, effective for the first quarter of 2019 and for subsequent reporting periods, we no longer adjust for the impact of the adoption of the new revenue standard in 2018. 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 historical supplementary non-GAAP financial measure of non-GAAP Total revenue, which, for periods prior to the second quarter of 2019, included revenue related to our acquisitions that we would have recognized but for the purchase accounting treatment of these transactions, and which, for periods prior to the first quarter of 2019, included eliminated revenue resulting from our adoption of the new revenue recognition standard in 2018. Effective for the second quarter of 2019 and for subsequent reporting periods, we no longer include any increases to non-GAAP revenue arising from the purchase accounting treatment of assumed deferred revenue. Effective for the first quarter of 2019 and for subsequent reporting periods, we no longer include any increases to non-GAAP revenue arising from the 2018 revenue standard adoption. Therefore, for the second quarter of 2019 and for subsequent reporting periods, our non-GAAP revenue is equivalent to our GAAP revenue.

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 included this adjustment, which related to the acquisition of GENBAND, through the fourth quarter of 2018, to allow for more complete comparisons to the financial results of our historical operations and the financial results of peer companies.

Litigation Costs
We were involved in litigation with a certain competitor with whom we reached a settlement in the second quarter of 2019, under which the competitor agreed to pay us an aggregate amount of $63.0 million (see also "Litigation Settlement" below). In connection with this litigation, we have incurred litigation costs beginning in the fourth quarter of 2017. 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. 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- 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 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 review our restructuring accruals and facilities requirements regularly and record adjustments to these estimates as required. 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.

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, under which the competitor agreed to pay us an aggregate amount of $63.0 million (see "Litigation Costs" above). This gain 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. Accordingly, we believe that excluding the gain on litigation settlement 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.

Reduction in Deferred Purchase Consideration
We recorded $8.1 million in other income (expense), net, in the first quarter of 2019 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.

Tax Effect of Non-GAAP Adjustments
Beginning with the second quarter of 2019 and for subsequent reporting periods, non-GAAP income tax expense is calculated 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 as a result of reporting significant cumulative non-GAAP income over the past several years. Due to the methodology applied to our estimated annual tax rate as described above, 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 income (expense), net; income tax provision; depreciation; and amortization of intangible assets. In addition, we exclude from net income (loss): historical adjustments to revenue and cost of revenue related to revenue reductions resulting from purchase accounting (for periods prior to the second quarter of 2019 only) and adoption of the new revenue standard (for periods prior to the first quarter of 2019 only); stock-based compensation expense; acquisition-related facilities adjustments; certain litigation costs; acquisition- and integration-related expense; restructuring and related expense; 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.


                                                                        
            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,


                                                                                         2019                                                2019                              2018




     Revenue:


                              Product                 $72,059                                       $47,480                                        $63,123


                              Service                  73,362                                        71,448                                         74,238



                              Total
                               revenue                145,421                                       118,928                                        137,361






     Cost of revenue:


                              Product                  36,433                                        33,147                                         30,278


                              Service                  28,315                                        29,192                                         31,972



                              Total cost
                               of
                               revenue                 64,748                                        62,339                                         62,250






     Gross profit                                                                  80,673                                              56,589                            75,111






     Gross margin:


                              Product                   49.4%                                        30.2%                                         52.0%


                              Service                   61.4%                                        59.1%                                         56.9%


                              Total
                               gross
                               margin                   55.5%                                        47.6%                                         54.7%





     Operating expenses:


                              Research and
                               development             35,301                                        35,933                                         35,604


                              Sales and
                               marketing               28,893                                        30,059                                         30,738


                              General and
                               administrative          12,466                                        18,694                                         15,028


                              Acquisition-
                               and
                               integration-
                               related                  1,965                                         3,199                                          4,280


                              Restructuring
                               and related              9,144                                         4,932                                          6,097


                              Total
                               operating
                               expenses                87,769                                        92,817                                         91,747






     Loss from operations                                                         (7,096)                                           (36,228)                         (16,636)



     Interest expense, net                                                        (1,262)                                            (1,364)                            (735)


      Other income (expense), net                                                   62,861                                               7,774                           (2,052)





      Income (loss) before income
       taxes                                                                        54,503                                            (29,818)                         (19,423)



     Income tax provision                                                         (5,033)                                            (1,014)                            (499)






     Net income (loss)                                                            $49,470                                           $(30,832)                        $(19,922)

                                                                                                                                                                           ===




     Earnings (loss) per share:


                              Basic                                                     $0.45                                             $(0.29)                          $(0.20)


                              Diluted                   $0.45                                       $(0.29)                                       $(0.20)





     Shares used to compute earnings (loss) per share:


                              Basic                                                   110,394                                             108,167                           102,160


                              Diluted                 110,698                                       108,167                                        102,160


                                        
              RIBBON COMMUNICATIONS INC.


                                   
              Consolidated Statements of Operations


                         
              (in thousands, except percentages and per share amounts)


                                                
              (unaudited)






                                                                           Six months ended



                                                                    
              June 30,               
     June 30,


                                                                                       2019                     2018




     Revenue:


                              Product                $119,539                                $114,654


                              Service                 144,810                                 143,887



                              Total
                               revenue                264,349                                 258,541






     Cost of revenue:


                              Product                  69,580                                  63,292


                              Service                  57,507                                  64,865



                              Total cost
                               of
                               revenue                127,087                                 128,157






     Gross profit                                                               137,262                  130,384






     Gross margin:


                              Product                   41.8%                                  44.8%


                              Service                   60.3%                                  54.9%


                              Total
                               gross
                               margin                   51.9%                                  50.4%





     Operating expenses:


                              Research and
                               development             71,234                                  74,653


                              Sales and
                               marketing               58,952                                  62,664


                              General and
                               administrative          31,160                                  30,629


                              Acquisition-
                               and
                               integration-
                               related                  5,164                                   8,692


                              Restructuring
                               and related             14,076                                  12,765


                              Total
                               operating
                               expenses               180,586                                 189,403






     Loss from operations                                                      (43,324)                (59,019)


      Interest expense, net                                                      (2,626)                 (1,334)


      Other income (expense), net                                                 70,635                  (1,804)





      Income (loss) before income
       taxes                                                                      24,685                 (62,157)



     Income tax provision                                                       (6,047)                 (2,669)






     Net income (loss)                                                          $18,638                $(64,826)

                                                                                                             ===




     Earnings (loss) per share:


                              Basic                                                   $0.17                  $(0.64)


                              Diluted                   $0.17                                 $(0.64)




      Shares used to compute earnings (loss) per share:


                              Basic                                                 109,239                  102,039


                              Diluted                 109,672                                 102,039


                                                                  
              RIBBON COMMUNICATIONS INC.


                                                                  
              Consolidated Balance Sheets


                                                                        
              (in thousands)


                                                                          
              (unaudited)






                                                                                           
              June 30,                       
     December 31,


                                                                                                               2019                                2018



                                      
            
                Assets



     Current assets:


                         Cash and cash
                          equivalents                                      $51,186                                           $43,694


                         Marketable
                          securities                                                                                          7,284


                         Accounts
                          receivable, net                                  155,415                                           187,853


                         Inventory                                          16,509                                            22,602


                         Other current
                          assets                                            27,484                                            17,002



                         Total current
                          assets                                           250,594                                           278,435





     Property and equipment, net                                                                         28,297                              27,042



     Intangible assets, net                                                                             238,022                             251,391



     Goodwill                                                                                           389,196                             383,655



     Deferred income taxes                                                                                5,785                               9,152


      Operating lease right-of-use assets                                                                 40,029                                   -



     Other assets                                                                                        25,021                               7,484


                                                                                                           $976,944                            $957,159





                       
              
              Liabilities and Stockholders' Equity



     Current liabilities:


                         Current portion of
                          long-term debt                                    $2,500                                  
     $            -


                         Revolving credit
                          facility                                          35,000                                            55,000


                         Accounts payable                                   33,499                                            45,304


                         Accrued expenses
                          and other                                         54,693                                            84,263


                         Operating lease
                          liabilities                                        7,800


                         Deferred revenue                                   96,944                                           105,087



                         Total current
                          liabilities                                      230,436                                           289,654





     Long-term debt, net of current                                                                      47,215                                   -



     Long-term debt, related party                                                                            -                             24,100


      Operating lease liabilities, net of
       current                                                                                            40,247                                   -


      Deferred revenue, net of current                                                                    15,115                              17,572



     Deferred income taxes                                                                                5,031                               4,738



     Other long-term liabilities                                                                         12,331                              30,797



                                             
              Total liabilities                                   350,375                             366,861






     Commitments and contingencies





     Stockholders' equity:


                         Common stock                                           11                                                11


                         Additional paid-in
                          capital                                        1,740,563                                         1,723,576


                         Accumulated deficit                           (1,118,354)                                      (1,136,992)


                         Accumulated other
                          comprehensive
                          income                                             4,349                                             3,703


                                                        Total stockholders' equity                          626,569                             590,298



                                                                                                           $976,944                            $957,159


                                                     
              RIBBON COMMUNICATIONS INC.


                                                 
            Consolidated Statements of Cash Flows


                                                           
              (in thousands)


                                                            
              (unaudited)






                                                                                  
              Six months ended



                                                                                     
               June 30,                       
     June 30,


                                                                                                               2019                              2018




     Cash flows from operating activities:


                         Net income (loss)                     $18,638                                              $(64,826)


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


                         Depreciation and
                          amortization of
                          property and
                          equipment                              5,891                                                  5,318


                         Amortization of
                          intangible
                          assets                                24,569                                                 24,273


                         Stock-based
                          compensation                           5,669                                                  4,905


                         Deferred income
                          taxes                                  4,358                                                    817


                         Foreign currency
                          exchange losses                          521                                                  2,079


                         Reduction in
                          deferred
                          purchase
                          consideration                        (8,124)


                         Changes in
                          operating
                          assets and
                          liabilities:


                                   Accounts
                                    receivable                    33,121                                                 28,752


                                   Inventory                       6,159                                                  2,077


                                   Other
                                    operating
                                    assets                      (20,851)                                                 (275)


                                   Accounts
                                    payable                     (12,763)                                              (13,872)


                         Accrued
                                    expenses and
                                    other long-
                                    term
                                    liabilities                 (17,129)                                              (15,203)


                                   Deferred
                                    revenue                     (10,940)                                                 3,264


                                                   Net cash provided by
                                                    (used in) operating
                                                    activities                                               29,119                          (22,691)






     Cash flows from investing activities:


                         Purchases of
                          property and
                          equipment                            (6,153)                                               (3,492)


                         Maturities of
                          marketable
                          securities                             7,295                                                  4,278


                                                   Net cash provided by
                                                    investing activities                                      1,142                               786






     Cash flows from financing activities:


                         Borrowings under
                          revolving line of
                          credit                                92,000                                                 25,000


                         Principal payments
                          on revolving line
                          of credit                          (112,000)                                              (25,000)


                         Proceeds from
                          issuance of long-
                          term debt                             50,000                                                      -


                         Principal payment
                          of debt, related
                          party                               (24,716)                                                     -


                         Payment of deferred
                          purchase
                          consideration                       (21,876)                                                     -


                         Principal payments
                          on financing
                          leases                                 (500)                                                 (293)


                         Payment of debt
                          issuance costs                         (884)                                                 (624)


                         Proceeds from the
                          exercise of stock
                          options                                  190                                                     10


                        Proceeds from the
                          sale of common
                          stock in
                          connection with
                          employee stock
                          purchase plan                            506                                                      -


                        Payment of tax
                          withholding
                          obligations
                          related to net
                          share settlements
                          of restricted
                          stock awards                         (1,080)                                                 (716)


                         Repurchase of
                          common stock                         (4,536)                                                     -


                                                   Net cash used in
                                                    financing activities                                   (22,896)                          (1,623)





      Effect of exchange rate changes on cash
       and cash equivalents                                                                                 127                             (134)





      Net increase (decrease) in cash and cash
       equivalents                                                                                        7,492                          (23,662)


      Cash and cash equivalents, beginning of
       year                                                                                              43,694                            57,073



      Cash and cash equivalents, end of period                                                          $51,186                           $33,411

                                                                                                                                             ===


                                                                                                                          
              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                                            
               Six months ended



                                                                            
              June 30,                           
              March 31,                                               
              June 30,                         
     June 30,                   
     June 30,


                                                                                                  2019                                           2019                                                                2018                                2019                          2018




     
                Stock-based compensation



     Cost of revenue - product                                                                 $22                                            $14                                                                 $19                                 $36                           $70



     Cost of revenue - service                                                                 151                                             92                                                                  67                                 243                           199



                            Cost of revenue                    173                                            106                                                                  86                                            279                              269





      Research and development expense                                                          331                                            507                                                                 151                                 838                         1,051



     Sales and marketing expense                                                               560                                            984                                                                 485                               1,544                         1,359


      General and administrative expense                                                        466                                          2,542                                                               1,359                               3,008                         2,226



                            Operating expense                1,357                                          4,033                                                               1,995                                          5,390                            4,636





                            Total stock-
                             based
                             compensation                   $1,530                                         $4,139                                                              $2,081                                         $5,669                           $4,905








     
                Amortization of intangible assets



     Cost of revenue - product                                                             $10,092                                         $9,645                                                              $9,270                             $19,737                       $18,862



     Sales and marketing expense                                                             2,555                                          2,277                                                               2,694                               4,832                         5,411





                            Total
                             amortization of
                             intangible
                             assets                        $12,647                                        $11,922                                                             $11,964                                        $24,569                          $24,273


                                                                      
              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,


                                                                                 2019                                                  2019                  2018





                   GAAP Total revenue                                        $145,421                                              $118,928              $137,361


      Acquisition-related
       revenue
       adjustment**                                                                 -                                                2,798                 4,288


      Adjustment for new
       revenue standard***                                                          -                                                                     2,949


                   Non-GAAP Total
                    revenue                                                  $145,421                                              $121,726              $144,598

                                                                                                                                                            ===



                   GAAP Net income
                    (loss)                                                    $49,470                                             $(30,832)            $(19,922)


      Acquisition-related
       revenue
       adjustment**                                                                 -                                                2,798                 4,288


      Adjustment for new
       revenue standard***                                                          -                                                                     2,949


      Stock-based
       compensation                                                             1,530                                                 4,139                 2,081


      Amortization of
       intangible assets                                                       12,647                                                11,922                11,964


      Acquisition-related
       facilities
       adjustment                                                                   -                                                                       252


      Litigation costs                                                          1,315                                                 6,186                 1,901


      Acquisition- and
       integration-
       related expense                                                          1,965                                                 3,199                 4,280


      Restructuring and
       related expense                                                          9,144                                                 4,932                 6,097


      Gain on litigation
       settlement                                                            (63,000)                                                                         -


      Reduction in
       deferred purchase
       consideration                                                                -                                              (8,124)


      Tax effect of non-
       GAAP adjustments                                                         2,625                                                                          -



                   Non-GAAP net income
                    (loss)                                                    $15,696                                              $(5,780)              $13,890

                                                                                                                                                            ===




     
                Earnings (loss) per share


                   GAAP Diluted
                    earnings per share
                    or (loss) per share                                         $0.45                                               $(0.29)              $(0.20)


      Acquisition-related
       revenue
       adjustment**                                                                 -                                                 0.03                  0.04


      Adjustment for new
       revenue standard***                                                          -                                                                      0.03


      Stock-based
       compensation                                                              0.01                                                  0.04                  0.02


      Amortization of
       intangible assets                                                         0.12                                                  0.11                  0.13


      Acquisition-related
       facilities
       adjustment                                                                   -                                                              
              *


      Litigation costs                                                           0.01                                                  0.06                  0.02


      Acquisition- and
       integration-
       related expense                                                           0.02                                                  0.03                  0.04


      Restructuring and
       related expense                                                           0.08                                                  0.05                  0.06


      Gain on litigation
       settlement                                                              (0.57)                                                                         -


      Reduction in
       deferred purchase
       consideration                                                                -                                               (0.08)


      Tax effect of non-
       GAAP adjustments                                                          0.02                                                                          -


                   Non-GAAP Diluted
                    earnings per share
                    or (loss) per share                                         $0.14                                               $(0.05)                $0.14

                                                                                                                                                            ===



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


                     GAAP Shares used to
                      compute diluted
                      earnings per share
                      or (loss) per share                                     110,698                                               108,167               102,160


                     Non-GAAP Shares
                      used to compute
                      diluted earnings
                      per share or (loss)
                      per share                                               110,698                                               108,167               102,334





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



     **    Effective Q2 2019, the Company no longer adjusts for the impact of purchase accounting on revenue



     ***  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



                                          
              June 30,                         
              March 31,                    
     June 30,


                                                           2019                                                  2019                          2018




     
                Adjusted EBITDA:


                   GAAP Net income
                    (loss)                              $49,470                                             $(30,832)                    $(19,922)


      Interest expense,
       net                                                1,262                                                 1,364                           735


      Income tax provision                                5,033                                                 1,014                           499


      Depreciation                                        2,970                                                 2,921                         2,811


      Amortization of
       intangible assets                                 12,647                                                11,922                        11,964


      Acquisition-related
       revenue adjustment*                                    -                                                2,798                         4,288


      Adjustment for new
       revenue standard**                                     -                                                                             2,949


      Stock-based
       compensation                                       1,530                                                 4,139                         2,081


      Acquisition-related
       facilities
       adjustment                                             -                                                                               252


      Litigation costs                                    1,315                                                 6,186                         1,901


      Acquisition- and
       integration-
       related expense                                    1,965                                                 3,199                         4,280


      Restructuring and
       related expense                                    9,144                                                 4,932                         6,097


      Other (income)
       expense, net                                    (62,861)                                              (7,774)                        2,052


                   Non-GAAP Adjusted
                    EBITDA                              $22,475                                                $(131)                      $19,987

                                                                                                                                              ===






     *    Effective Q2 2019, the Company no longer adjusts for the impact of purchase accounting on revenue



     **  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










                            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;
                             stock-based compensation; settlement expense;
                             certain litigation costs; restructuring and
                             related expense; and other income (expense), net.

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SOURCE Ribbon Communications Inc.