Ribbon Communications Inc. Reports Second Quarter 2020 Financial Results
WESTFORD, Mass., Aug. 5, 2020 /PRNewswire/ -- Ribbon Communications Inc. (Nasdaq: RBBN), a global provider of converged communications software and network solutions to Service Providers, Enterprises, and critical infrastructure sectors, today announced its financial results for the second quarter of 2020.
Revenue for the second quarter of 2020 was $210 million, compared to $145 million for the second quarter of 2019, an increase of 45%. Approximately $64 million of the year-over-year revenue increase was attributable to the acquisition of ECI Telecom Group, Ltd. (ECI), which closed on March 3, 2020.
"We are pleased with our second quarter financial results during these challenging times. Demand for our industry leading voice-over-IP real-time communications solutions was strong as service providers and enterprises continue to increase capacity to support work-from-home communication and collaboration needs. We also began to see a recovery in our Packet Optical business compared to our first quarter 2020 as customers restarted delayed projects and initiated new deployments," said Bruce McClelland, President and Chief Executive Officer of Ribbon Communications.
Mr. McClelland added, "We were especially proud of the confidence that Bharti Airtel has demonstrated in Ribbon to support the upgrade of their packet optical network that will readily support deployment of 5G enabled services."
Financial Highlights(1,2
)The following table summarizes the consolidated financial highlights for the three and six months ended June 30, 2020 and 2019 (in millions, except per share amounts).
Three months ended Six months
ended
June 30, June 30,
2020 2019 2020 2019
GAAP Revenue $210 $145 $368 $264
GAAP Net (loss) income $(8) $49 $(41) $19
Non-GAAP Net income $8 $16 $9 $7
GAAP (loss) per share or diluted earnings per share $(0.06) $0.45 $(0.31) $0.17
Weighted average GAAP shares 144 111 133 110
Non-GAAP Diluted earnings per share $0.06 $0.14 $0.07 $0.06
Weighted average diluted shares 151 111 136 110
Non-GAAP Adjusted EBITDA $30 $22 $39 $20
Cash was $94 million at June 30, 2020, compared with $110 million at March 31, 2020 and $51 million at June 30, 2019.
(1) Results for the three months ended June 30, 2020 represent three months of Ribbon and ECI. Results for the three months ended June 30, 2019 represent three months of Ribbon only.
Results for the six months ended June 30, 2020 represent six months of Ribbon and the period March 3, 2020 to June 30, 2020 for ECI.
(2) Please see the reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures and additional information about non-GAAP measures in the section
entitled "Discussion of Non-GAAP Financial Measures" in the press release appendix.
"Revenue was $210 million and Adjusted EBITDA was $30 million in the second quarter of 2020," said Mick Lopez, Chief Financial Officer of Ribbon Communications. "Our 31 percent year-over-year growth in profitability was driven by improving software revenue mix coupled with our cost reduction efforts."
Customer and Company Highlights
-- In addition to Bharti Airtel's network expansion with Ribbon's 5G-native
packet optical solution, eight new packet optical customers were added
across various industries and geographies.
-- Ribbon secured an order with a major US mobile carrier for a new VoLTE
voice transcoding platform to support both 4G AMR wideband voice codec
and NextGen 5G Enhanced Voice Services (EVS) codecs.
-- Ribbon partnered with Bandwidth to rapidly increase network capacity
leveraging a cloud-based deployment on the AWS public cloud platform to
address significant traffic growth. In all, Ribbon supported eight new
carriers to increase capacity to address unforeseen demand.
-- Ribbon's packet optical networking portfolio was ranked "very strong" in
a recent GlobalData report that focused specifically on 5G Transport
solutions.
-- This week, the Company launched Ribbon Connect, a portfolio of
subscription based "as-a-service" offerings. The first offer supports
Microsoft Teams Direct Routing and enables carrier-grade voice calling
capabilities in minutes.
Kandy Communications Platform Sale
Earlier today, Ribbon announced that it has entered into a definitive agreement with AVCtechnologies to sell the Kandy Communications Platform in an all-stock transaction. The proposed transaction combines AVCtechnologies' 30+ years of experience delivering exceptional white-glove customer service to enterprise customers across a range of managed IT solutions with Kandy's pure-play, industry-leading, proprietary UCaaS, CPaaS, and CCaaS platform to provide a best-in-class, end-to-end communication experience for channel partners, their customers and end users.
Under the agreement, AVCtechnologies will issue thirteen million shares of its common stock to Ribbon Communications. The transaction is expected to close in the second half of 2020 and is subject to receipt of the approval of AVCtechnologies' stockholders, AVCtechnologies' completion of necessary financing, approval of the lenders under Ribbon's credit facility, as well as other customary closing conditions.
Business Outlook
The Company's outlook is based on current indications for its business, which are subject to change. For the third quarter of 2020, the Company projects revenue of $210 million to $220 million, non-GAAP earnings per share of $0.05 to $0.07, and Adjusted EBITDA of $25 million to $29 million. The current outlook provided does not include the effect of the proposed sale of Kandy.
Upcoming Third Quarter 2020 Virtual Investor Conference Schedule
-- August 11, 2020 - Oppenheimer Virtual Technology, Internet &
Communications Conference (one-on-one institutional investor meetings).
-- September 1, 2020 - Jefferies Semiconductor, IT Hardware and
Communications Infrastructure Summit (one-on-one institutional investor
meetings).
-- September 14, 2020 - Jefferies Software Conference (presentation and
one-on-one institutional investor meetings).
Conference Call Details
Conference call to discuss its financial results for the second quarter ended June 30, 2020 on August 5, 2020, via the investor section of its website at http://investors.ribboncommunications.com, where a replay will also be available shortly following the conference call.
Conference Call Details:
Date: August 5, 2020
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 19, 2020 and can be accessed by calling 877-660-6853 or 201-612-7415 for international callers. The reservation number for the replay is 13706972.
Investor Relations
Monica Gould
+1 (212) 871-3927
IR
@rbbn.com
North American Press
Dennis Watson
+1 (214) 695-2224
dwatson@rbbn.com
APAC, CALA & EMEA Press
Catherine Berthier
+1 (646) 741-1974
cberthier@rbbn.com
Analyst Relations
Michael Cooper
+1 (708) 212-6922
mcooper@rbbn.com
About Ribbon
Ribbon Communications (Nasdaq: RBBN), which recently merged with ECI Telecom Group, delivers global communications software and network solutions to service providers, enterprises and critical infrastructure sectors. We engage deeply with our customers, helping them modernize their networks for improved competitive positioning and business outcomes in today's smart, always-on and data-hungry world. Our innovative, end-to-end solutions portfolio delivers unparalleled scale, performance, and agility, including core to edge IP solutions, UCaaS/CPaaS cloud offers, leading-edge software security and analytics tools, as well as packet and optical networking leveraging ECI's Elastic Network technology. To learn more about Ribbon visit rbbn.com. For more information about our Elastic Network technology packet optical portfolio visit ecitele.com.
Important Information Regarding Forward-Looking Statements
The information in this release contains "forward-looking" statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are subject to several risks and uncertainties. All statements other than statements of historical facts contained in this release, including without limitation statements regarding the proposed sale of the Kandy Communications platform, projected revenues, earnings and Adjusted EBITDA for the third quarter 2020 and beyond, the anticipated impact of COVID-19 on our business, the expected benefits from our acquisition of ECI, and plans and objectives of management for future operations are forward-looking statements. Without limiting the foregoing, the words "believes", "estimates", "expects", "expectations", "intends", "may", "plans", "projects" and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated in these forward-looking statements due to various risks, uncertainties and other important factors, including, among others, risks related to the COVID-19 pandemic and its impact on the global economy and financial markets, as well as on the Company, our customers, and suppliers, which may impact our sales, gross margin, customer demand and our ability to supply our products to our customers; risks that the businesses of ECI will not be integrated successfully or that the combined companies will not realize estimated cost savings; failure to realize anticipated benefits of the merger with ECI; disruptions from the integration efforts that could harm our business; failure to consummate the proposed sale of the Kandy Communications platform; failure to make or take any filing or other action required to consummate the proposed Kandy transaction in a timely matter or at all; failure to satisfy other closing conditions to the Kandy transaction; failure to realize anticipated benefits from the Kandy transaction; potential litigation relating to the proposed Kandy transaction and disruptions from the proposed transaction that could harm our business; the potential impact of announcement or consummation of the proposed Kandy transaction on relationships with third parties, including customers, employees and competitors; our ability to recruit and retain key personnel; reductions in customer spending; geopolitical tensions, including those in India, that could disrupt shipments to customers; a slowdown in customer payments and changes in customer requirements, including the timing of customer purchasing decisions and our recognition of revenues; conditions in the credit markets, credit risks and risks related to the terms of our credit agreement; the parties' international operations, which are subject to the risks of currency fluctuations and foreign exchange controls; ability to attract new customers and retain existing customers in the manner anticipated; unpredictable fluctuations in quarterly revenue and business from our existing customers; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; increases in tariffs, trade restrictions or taxes on our products; and currency fluctuations.
These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect our business and results from operations. Additional information regarding these and other factors can be found in our reports filed with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2019 and our Form 10-Q for the quarter ended March 31, 2020. In providing forward-looking statements, the Company expressly disclaims any obligation to update these statements publicly or otherwise, whether as a result of new information, future events or otherwise, except as required by law.
Discussion of Non-GAAP Financial Measures
Ribbon Communications' management uses several different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, making operating decisions, planning and forecasting future periods, and determining payments under compensation programs. Our annual financial plan is prepared on a non-GAAP basis and is approved by our board of directors. Budgeting and forecasting for revenue and expenses are conducted on a non-GAAP basis and actual results on a non-GAAP basis are assessed against the annual financial plan. 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; certain litigation costs; acquisition- and integration-related expense; restructuring and related expense; a reduction to deferred purchase consideration; the gain on a litigation settlement; and the tax effect of these adjustments. 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 our financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.
Stock-Based Compensation
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 an 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 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.
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 incurred litigation costs beginning in the fourth quarter of 2017. In addition, we reached a settlement with a former business partner of GENBAND regarding amounts loaned to this former business partner that were never repaid. The credit to litigation expense in the second quarter of 2020 represents discounts on certain legal invoices and insurance reimbursements related to litigation aggregating $0.9 million. These litigation costs and credits are included as components 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 these specific legal matters 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 such costs are generally not relevant to assessing or estimating the long-term performance of the acquired assets. The size, complexity and/or volume of an acquisition, which often drive 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, we believe that our management is better able to evaluate our ability to utilize our existing assets and estimate the long-term value that the 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 (expense) income, net. We believe that such gains are not part of our core business or ongoing operations. Accordingly, we believe that excluding the gain on the 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 to Deferred Purchase Consideration
We recorded $8.1 million in other (expense) income, net, in the first quarter of 2019 related to the reduction of cash deferred purchase consideration for Edgewater. We believe that such reductions to cash deferred purchase consideration are not part of our core business or ongoing operations, as they relate to specific acquisitive transactions. Accordingly, we believe that excluding such reductions related to acquisition 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, non-GAAP income tax expense is presented based on an estimated tax rate applied against forecasted annual non-GAAP income. The non-GAAP income tax expense assumes no available net operating losses or any valuation allowances for the U.S. because of reporting significant cumulative non-GAAP income over the past several years. Due to the methodology applied to our estimated annual tax rate, our estimated tax rate on non-GAAP income will differ from our GAAP tax rate and from our actual tax liabilities.
Adjusted EBITDA
We use Adjusted EBITDA as a supplemental measure to review and assess our performance. We calculate Adjusted EBITDA by excluding from net income (loss): interest expense, net; income tax provision; depreciation; and amortization of intangible assets. In addition, we exclude from net income (loss): stock-based compensation expense; certain litigation costs; acquisition- and integration-related expense; restructuring and related expense; and other (expense) income, net. In general, we add back the expenses that we consider to be non-cash and/or not part of our ongoing operations. Adjusted EBITDA is a non-GAAP financial measure that is used by our investing community for comparative and valuation purposes. We disclose this metric to support and facilitate our dialogue with research analysts and investors. Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
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 our 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,
2020 2020 2019
Revenue:
Product $120,862 $75,899 $72,059
Service 89,631 82,083 73,362
Total
revenue 210,493 157,982 145,421
Cost of revenue:
Product 61,529 44,933 36,433
Service 36,647 31,479 28,315
Total cost
of
revenue 98,176 76,412 64,748
Gross profit 112,317 81,570 80,673
Gross margin:
Product 49.1% 40.8% 49.4%
Service 59.1% 61.6% 61.4%
Total
gross
margin 53.4% 51.6% 55.5%
Operating expenses:
Research and
development 51,796 42,295 35,301
Sales and
marketing 37,617 36,351 28,893
General and
administrative 15,094 17,205 12,466
Acquisition-
and
integration-
related 857 12,384 1,965
Restructuring
and related 5,361 2,075 9,144
Total
operating
expenses 110,725 110,310 87,769
Income (loss) from operations 1,592 (28,740) (7,096)
Interest expense, net (5,400) (3,395) (1,262)
Other (expense) income, net (2,407) (844) 62,861
(Loss) income before income
taxes (6,215) (32,979) 54,503
Income tax provision (2,036) (191) (5,033)
Net (loss) income $(8,251) $(33,170) $49,470
===
(Loss) earnings per share:
Basic $(0.06) $(0.27) $0.45
Diluted $(0.06) $(0.27) $0.45
Weighted average shares used to compute (loss) earnings per share:
Basic 144,483 120,992 110,394
Diluted 144,483 120,992 110,698
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
Six months ended
June 30,
June 30,
2020 2019
Revenue:
Product $196,761 $119,539
Service 171,714 144,810
Total
revenue 368,475 264,349
Cost of revenue:
Product 106,462 69,580
Service 68,126 57,507
Total cost
of
revenue 174,588 127,087
Gross profit 193,887 137,262
Gross margin:
Product 45.9% 41.8%
Service 60.3% 60.3%
Total
gross
margin 52.6% 51.9%
Operating expenses:
Research and
development 94,091 71,234
Sales and
marketing 73,968 58,952
General and
administrative 32,299 31,160
Acquisition-
and
integration-
related 13,241 5,164
Restructuring
and related 7,436 14,076
Total
operating
expenses 221,035 180,586
Loss from operations (27,148) (43,324)
Interest expense, net (8,795) (2,626)
Other (expense) income, net (3,251) 70,635
(Loss) income before income
taxes (39,194) 24,685
Income tax provision (2,227) (6,047)
Net (loss) income $(41,421) $18,638
===
(Loss) earnings per share:
Basic $(0.31) $0.17
Diluted $(0.31) $0.17
Weighted average shares used to compute (loss) earnings per share:
Basic 132,737 109,239
Diluted 132,737 109,672
RIBBON COMMUNICATIONS INC.
Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30,
December 31,
2020 2019
Assets
Current assets:
Cash and cash
equivalents $80,992 $44,643
Restricted cash 13,052
Accounts
receivable, net 204,601 192,706
Inventory 58,047 14,800
Other current
assets 52,121 27,146
Total current
assets 408,813 279,295
Property and equipment, net 48,004 28,976
Intangible assets, net 449,263 213,366
Goodwill 416,892 224,896
Deferred income taxes 6,416 4,959
Operating lease right-of-use assets 63,938 36,654
Other assets 34,736 26,762
$1,428,062 $814,908
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of
term debt $14,850 $2,500
Revolving credit
facility 8,000
Accounts payable 73,066 31,412
Accrued expenses
and other 130,727 56,700
Operating lease
liabilities 18,300 7,719
Deferred revenue 105,694 100,406
Total current
liabilities 342,637 206,737
Long-term debt, net of current 377,302 45,995
Operating lease liabilities, net of
current 53,122 37,202
Deferred revenue, net of current 23,844 20,482
Deferred income taxes 17,720 4,648
Other long-term liabilities 68,660 16,589
Total liabilities 883,285 331,653
Commitments and contingencies
Stockholders' equity:
Common stock 14 11
Additional paid-in
capital 1,863,374 1,747,784
Accumulated deficit (1,308,488) (1,267,067)
Accumulated other
comprehensive
(loss) income (10,123) 2,527
Total stockholders' equity 544,777 483,255
$1,428,062 $814,908
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six months ended
June 30,
June 30,
2020 2019
Cash flows from operating activities:
Net (loss) income $(41,421) $18,638
Adjustments to
reconcile net
(loss) income to
cash flows
provided by
operating
activities:
Depreciation and
amortization of
property and
equipment 8,260 5,891
Amortization of
intangible
assets 29,003 24,569
Amortization of
debt issuance
costs 2,554 175
Stock-based
compensation 6,198 5,669
Deferred income
taxes 97 4,358
Reduction in
deferred
purchase
consideration (69) (8,124)
Foreign currency
exchange losses 3,463 521
Changes in
operating
assets and
liabilities:
Accounts
receivable 45,422 33,121
Inventory 773 6,159
Other
operating
assets 14,282 (21,026)
Accounts
payable (41,515) (12,763)
Accrued
expenses and
other long-
term
liabilities 9,111 (17,129)
Deferred
revenue 554 (10,940)
Net cash provided by
operating activities 36,712 29,119
Cash flows from investing activities:
Purchases of
property and
equipment (14,891) (6,153)
Business
acqusitions, net
of cash acquired (346,852) -
Maturities of
marketable
securities 7,295
Proceeds from the
sale of fixed
assets 43,500 -
Net cash (used in)
provided by investing
activities (318,243) 1,142
Cash flows from financing activities:
Borrowings under
revolving line of
credit 615 92,000
Principal payments
on revolving line
of credit (8,615) (112,000)
Proceeds from
issuance of term
debt 403,500 50,000
Principal payments
of long-term debt (52,400) -
Payment of deferred
purchase
consideration (21,876)
Principal payment
of debt, related
party (24,716)
Principal payments
of finance leases (668) (500)
Payment of debt
issuance costs (10,573) (884)
Proceeds from the
sale of common
stock in
connection with
employee stock
purchase plan 506
Proceeds from the
exercise of stock
options 23 190
Payment of tax
withholding
obligations
related to net
share settlements
of restricted
stock awards (808) (1,080)
Repurchase of
common stock (4,536)
Net cash provided by
(used in) financing
activities 331,074 (22,896)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash (142) 127
Net increase in cash, cash equivalents and
restricted cash 49,401 7,492
Cash and cash equivalents, beginning of
year 44,643 43,694
Cash, cash equivalents and restricted
cash, end of period $94,044 $51,186
===
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,
2020 2020 2019 2020 2019
Stock-based compensation
Cost of revenue - product $39 $27 $22 $66 $36
Cost of revenue - service 159 130 151 289 243
Cost of revenue 198 157 173 355 279
Research and development expense 738 558 331 1,296 838
Sales and marketing expense 1,011 752 560 1,763 1,544
General and administrative expense 1,275 1,509 466 2,784 3,008
Operating expense 3,024 2,819 1,357 5,843 5,390
Total stock-based
compensation $3,222 $2,976 $1,530 $6,198 $5,669
Amortization of intangible assets
Cost of revenue - product $10,950 $8,954 $10,092 $19,904 $19,737
Sales and marketing expense 3,719 5,380 2,555 9,099 4,832
Total amortization of intangible
assets $14,669 $14,334 $12,647 $29,003 $24,569
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,
2020 2020 2019
Revenue $210,493 $157,982 $145,421
Less revenue
attributable to ECI (63,586) (29,951) -
Ribbon standalone
revenue $146,907 $128,031 $145,421
===
GAAP Total gross
margin 53.4% 51.6% 55.5%
Stock-based
compensation 0.1% 0.1% 0.1%
Amortization of
intangible assets 5.2% 5.7% 6.9%
Non-GAAP Total
gross margin 58.7% 57.4% 62.5%
GAAP Total gross
profit $112,317 $81,570 $80,673
Less total gross
profit attributable
to ECI (21,611) (10,651) -
Ribbon standalone
gross profit $90,706 $70,919 $80,673
===
Ribbon standalone
gross margin
(Ribbon standalone
gross profit/
Ribbon standalone
revenue) 61.7% 55.4% 55.5%
Stock-based
compensation 0.1% 0.1% 0.1%
Amortization of
intangible assets 5.4% 6.2% 6.9%
Non-GAAP Ribbon
standalone gross
margin 67.2% 61.7% 62.5%
GAAP Net (loss)
income $(8,251) $(33,170) $49,470
Stock-based
compensation 3,222 2,976 1,530
Amortization of
intangible assets 14,669 14,334 12,647
Litigation costs (937) 3,038 1,315
Acquisition- and
integration-
related expense 857 12,384 1,965
Restructuring and
related expense 5,361 2,075 9,144
Gain on litigation
settlement - (63,000)
Tax effect of non-
GAAP adjustments (6,626) (764) 2,625
Non-GAAP net income $8,295 $873 $15,696
===
(Loss) earnings per share
GAAP (loss) per
share or diluted
earnings per share $(0.06) $(0.27) $0.45
Stock-based
compensation 0.02 0.02 0.01
Amortization of
intangible assets 0.10 0.13 0.12
Litigation costs (0.01) 0.02 0.01
Acquisition- and
integration-
related expense 0.01 0.10 0.02
Restructuring and
related expense 0.04 0.02 0.08
Gain on litigation
settlement - (0.57)
Tax effect of non-
GAAP adjustments (0.04) (0.01) 0.02
Non-GAAP Diluted
earnings per share $0.06 $0.01 $0.14
===
Weighted average shares used to compute (loss)
per share or diluted earnings per share
GAAP Shares used to
compute (loss) per
share or diluted
earnings per share 144,483 120,992 110,698
Non-GAAP Shares
used to compute
diluted earnings
per share 150,512 121,603 110,698
Adjusted EBITDA
GAAP Net (loss)
income $(8,251) $(33,170) $49,470
Interest expense,
net 5,400 3,395 1,262
Income tax provision 2,036 191 5,033
Depreciation 4,786 3,474 2,970
Amortization of
intangible assets 14,669 14,334 12,647
Stock-based
compensation 3,222 2,976 1,530
Litigation costs (937) 3,038 1,315
Acquisition- and
integration-
related expense 857 12,384 1,965
Restructuring and
related expense 5,361 2,075 9,144
Other expense
(income), net 2,407 844 (62,861)
Non-GAAP Adjusted
EBITDA $29,550 $9,541 $22,475
===
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RIBBON COMMUNICATIONS INC.
Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook
(unaudited)
Three months ending
September 30, 2020
Range
Revenue $210 $220
===
(Loss) earnings per share
GAAP outlook $(0.04) $(0.02)
Stock-based
compensation 0.02 0.02
Amortization
of intangible
assets 0.11 0.11
Acquisition-
and
integration-
related
expense 0.01 0.01
Restructuring
and related
expense 0.02 0.02
Tax effect of
non-GAAP
adjustments (0.07) (0.07)
Non-GAAP outlook $0.05 $0.07
Weighted average shares used to compute (loss)
per share or diluted earnings per share (in
thousands)
GAAPShares
used to
compute loss
per share 145,000 145,000
Non-
GAAPShares
used to
compute
diluted
earnings per
share 150,000 150,000
Adjusted EBITDA (in $ millions)
GAAP net loss
outlook $(6.8) $(2.8)
Interest
expense, net 5.6 5.6
Income tax
benefit (3.9) (3.9)
Depreciation 4.3 4.3
Amortization
of intangible
assets 16.3 16.3
Stock-based
compensation 3.6 3.6
Acquisition-
and
integration-
related
expense 1.2 1.2
Restructuring
and related
expense 3.1 3.1
Other expense,
net 1.6 1.6
Non-GAAP outlook $25.0 $29.0
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SOURCE Ribbon Communications Inc.
