Ribbon Communications Inc. Reports First Quarter 2023 Financial Results
Ribbon Communications reported 7% revenue growth year-over-year, with first-quarter 2023 revenue of $186 million compared to $173 million in Q1 2022.
Notable increases include a 62% rise in Cloud & Edge sales to enterprises and a 13% increase in IP Optical Networks revenue.
The company maintains a positive outlook for 2023, anticipating second-quarter revenue between $205 million and $215 million, alongside improved gross margins and EBITDA projections.
Despite a net loss of $38 million for the quarter, Ribbon made strides in enhancing its capital structure with an $80 million debt repayment and a 4% reduction in operating expenses. Cash reserves stood at $46 million.
- 7% revenue growth year-over-year
- 62% increase in Cloud & Edge sales to Enterprises
- 13% increase in IP Optical Networks revenue
- Positive guidance for Q2 2023 revenue of $205 million to $215 million
- Operating expenses reduced by 4% year-over-year
- $80 million debt repayment enhancing capital structure
- GAAP net loss of $38 million
- Non-GAAP net loss of $3 million
- GAAP diluted earnings per share loss of $0.23
IP Optical Networks Sales up
Continued Strong Bookings Momentum
Revenue for the first quarter of 2023 was
"I'm pleased to report that we generated
Financial Highlights1 | ||||
Three months ended | ||||
In millions, except per share amounts | 2023 | 2022 | ||
GAAP Revenue | $ 186 | $ 173 | ||
GAAP Net income (loss) | $ (38) | $ (70) | ||
Non-GAAP Net income (loss) | $ (3) | $ (12) | ||
Non-GAAP Adjusted EBITDA | $ (2) | $ (9) | ||
GAAP diluted earnings (loss) per share | $ (0.23) | $ (0.47) | ||
Non-GAAP diluted earnings (loss) per share | $ (0.02) | $ (0.08) | ||
Weighted average shares outstanding basic | 169 | 149 | ||
Weighted average shares outstanding diluted | 175 | 154 | ||
1 Please see the reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures and additional information | ||||
Cash, cash equivalents, and restricted cash totaled
"In the first quarter of 2023, we made progress on two of our key financial objectives. First, we enhanced our capital structure with an
Business Outlook1
For the second quarter of 2023, the Company projects revenue of
1 Please see the reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures and additional information about the non-GAAP measures in the section entitled "Discussion of Non-GAAP Financial Measures" in the attached schedules.
Upcoming Conference Schedule
May 31-June 1, 2023 : TD Cowen 51st AnnualTechnology, Media & Telecom Conference September 19, 2023 :Northland Capital Markets Institutional Investor Conference
About Ribbon
Important Information Regarding Forward-Looking Statements
The information in this release contains "forward-looking statements" within the meaning of the
Forward-looking statements are based on the Company's current expectations and assumptions regarding its 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. 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, the effects of geopolitical instabilities and disputes, including between
These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the Company's business and results from operations. Additional information regarding these and other factors can be found in the Company's reports filed with the
Discussion of Non-GAAP Financial Measures
The Company's management uses several different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of its business, making operating decisions, planning and forecasting future periods, and determining payments under compensation programs. The Company considers the use of non-GAAP financial measures helpful in assessing the core performance of its continuing operations and when planning and forecasting future periods. The Company's annual financial plan is prepared on a non-GAAP basis and is approved by its board of directors. In addition, budgeting and forecasting for revenue and expenses are conducted on a non-GAAP basis, and actual results on a non-GAAP basis are assessed against the annual financial plan. The Company defines continuing operations as the ongoing results of its business adjusted for certain expenses and credits, as described below. The Company believes that providing non-GAAP information to investors will allow investors to view the financial results in the way its management views them and helps investors to better understand the Company's core financial and operating performance and evaluate the efficacy of the methodology and information used by its management to evaluate and measure such performance.
While the Company's management uses non-GAAP financial measures as tools to enhance its understanding of certain aspects of the Company's financial performance, its management does not consider these measures to be a substitute for, or superior to, GAAP measures. In addition, the Company's presentations of these measures may not be comparable to similarly titled measures used by other companies. These non-GAAP financial measures should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures. In particular, many of the adjustments to the Company's financial measures reflect the exclusion of items that are recurring and will be reflected in its financial results for the foreseeable future.
Stock-Based Compensation
The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. The Company believes that presenting non-GAAP operating results that exclude stock-based compensation provides investors with visibility and insight into its management's method of analysis and its core operating performance.
Amortization of Acquired Technology (including software licenses); Amortization of Acquired Intangible Assets
Amortization amounts are inconsistent in frequency and amount and are significantly impacted by the timing and size of acquisitions. Amortization of acquired technology is reported separately within Cost of revenue and Amortization of acquired intangible assets is reported separately within Operating expenses. These items are reported collectively as Amortization of acquired intangible assets in the accompanying reconciliations of non-GAAP and GAAP financial measures. The Company believes that excluding non-cash amortization of these intangible assets facilitates the comparison of its financial results to its historical operating results and to other companies in its industry as if the acquired intangible assets had been developed internally rather than acquired.
Litigation Costs
In connection with a certain ongoing contract litigation where Ribbon is defendant (as described in Note 25 to the Company's Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended
Acquisition-, Disposal- and Integration-Related
The Company considers certain acquisition-, disposal- and integration-related costs to be unrelated to the organic continuing operations of its acquired businesses and the Company. Such costs are generally not relevant to assessing or estimating the long-term performance of the acquired assets. The Company excludes such acquisition-, disposal- and integration-related costs to allow more accurate comparisons of its financial results to its historical operations and the financial results of less acquisitive peer companies and allows management and investors to consider the ongoing operations of the business both with and without such expenses.
Restructuring and Related
The Company has recorded restructuring and related expense to streamline operations and reduce operating costs by closing and consolidating certain facilities and reducing its worldwide workforce. The Company believes that excluding restructuring and related expense facilitates the comparison of its financial results to its historical operating results and to other companies in its industry, as there are no future revenue streams or other benefits associated with these costs.
Decrease in Fair Value of Investments
The Company calculated the fair values of the debentures (the "Debentures") and the warrants to purchase shares of AVCT common stock (the "AVCT Warrants") it received as consideration in connection with the Kandy Sale (prior to
Preferred Stock and Warrant Liability Issuance Costs
The Company incurred
Tax Effect of Non-GAAP Adjustments
The Non-GAAP income tax provision is presented based on an estimated tax rate applied against forecasted annual non-GAAP income. The Non-GAAP income tax provision assumes no available net operating losses or valuation allowances for the
Adjusted EBITDA
The Company uses Adjusted EBITDA as a supplemental measure to review and assess its performance. The Company calculates Adjusted EBITDA by excluding from income (loss) from operations: depreciation; amortization of acquired intangible assets; stock-based compensation; impairment of goodwill; acquisition-, disposal- and integration-related expense; certain litigation costs; and restructuring and related expense. In general, the Company excludes the expenses that it considers to be non-cash and/or not part of its ongoing operations. The Company may exclude other items in the future that have those characteristics. Adjusted EBITDA is a non-GAAP financial measure that is used by the investing community for comparative and valuation purposes. The Company discloses this metric to support and facilitate dialogue with research analysts and investors. Other companies may calculate Adjusted EBITDA differently than the Company does, limiting its usefulness as a comparative measure.
Conference Call Details
Conference call to discuss the Company's financial results for the first quarter ended
Conference Call Details:
Date: April 26, 2023
Time: 4:30 p.m. (ET)
Dial-in number (
Dial-in number (Intl): 201-389-0925
Instant Telephone Access: Call me™
Replay information:
A telephone playback of the call will be available following the conference call until
Investor Relations
+1 (978) 614-8050
ir@rbbn.com
Media Contact
+1 (646) 741-1974
cberthier@rbbn.com
Consolidated Statements of Operations | ||||||||
(in thousands, except percentages and per share amounts) | ||||||||
(unaudited) | ||||||||
Three months ended | ||||||||
2023 | 2022 | 2022 | ||||||
Revenue: | ||||||||
Product | $ 93,318 | $ 136,871 | $ 81,990 | |||||
Service | 92,841 | 96,768 | 91,208 | |||||
Total revenue | 186,159 | 233,639 | 173,198 | |||||
Cost of revenue: | ||||||||
Product | 62,063 | 75,919 | 51,209 | |||||
Service | 35,305 | 36,088 | 35,667 | |||||
Amortization of acquired technology | 7,389 | 7,619 | 8,267 | |||||
Total cost of revenue | 104,757 | 119,626 | 95,143 | |||||
Gross profit | 81,402 | 114,013 | 78,055 | |||||
Gross margin | 43.7 % | 48.8 % | 45.1 % | |||||
Operating expenses: | ||||||||
Research and development | 51,304 | 50,517 | 52,690 | |||||
Sales and marketing | 35,399 | 37,939 | 37,619 | |||||
General and administrative | 14,045 | 13,172 | 12,862 | |||||
Amortization of acquired intangible assets | 7,264 | 7,350 | 7,275 | |||||
Acquisition-, disposal- and integration-related | 1,642 | 1,914 | 1,849 | |||||
Restructuring and related | 6,937 | 1,856 | 4,814 | |||||
Total operating expenses | 116,591 | 112,748 | 117,109 | |||||
Income (loss) from operations | (35,189) | 1,265 | (39,054) | |||||
Interest expense, net | (6,422) | (5,911) | (4,001) | |||||
Other expense, net | 4,772 | (1,735) | (28,800) | |||||
Loss before income taxes | (36,839) | (6,381) | (71,855) | |||||
Income tax benefit (provision) | (1,466) | 26,869 | 1,880 | |||||
Net income (loss) | $ (38,305) | $ 20,488 | $ (69,975) | |||||
Income (loss) per share: | ||||||||
Basic | $ (0.23) | $ 0.12 | $ (0.47) | |||||
Diluted | $ (0.23) | $ 0.12 | $ (0.47) | |||||
Weighted average shares used to compute income (loss) per share: | ||||||||
Basic | 168,541 | 168,163 | 149,167 | |||||
Diluted | 168,541 | 172,213 | 149,167 | |||||
Consolidated Balance Sheets | ||||||
(in thousands) | ||||||
(unaudited) | ||||||
2023 | 2022 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ 45,858 | $ 67,101 | ||||
Restricted cash | 176 | 161 | ||||
Accounts receivable, net | 255,146 | 267,244 | ||||
Inventory | 75,641 | 75,423 | ||||
Other current assets | 52,815 | 68,057 | ||||
Total current assets | 429,636 | 477,986 | ||||
Property and equipment, net | 43,412 | 44,832 | ||||
Intangible assets, net | 280,075 | 294,728 | ||||
300,892 | 300,892 | |||||
Deferred income taxes | 65,902 | 53,649 | ||||
Operating lease right-of-use assets | 43,378 | 44,888 | ||||
Other assets | 28,365 | 38,589 | ||||
$ 1,191,660 | $ 1,255,564 | |||||
Liabilities and Stockholders' Equity | ||||||
Current liabilities: | ||||||
Current portion of term debt | $ 20,058 | $ 20,058 | ||||
Accounts payable | 84,008 | 95,810 | ||||
Accrued expenses and other | 102,000 | 85,270 | ||||
Operating lease liabilities | 14,973 | 15,416 | ||||
Deferred revenue | 121,761 | 113,939 | ||||
Total current liabilities | 342,800 | 330,493 | ||||
Long-term debt, net of current | 225,764 | 306,270 | ||||
Warrant liability | 5,496 | - | ||||
Preferred stock liability | 47,854 | - | ||||
Operating lease liabilities, net of current | 43,367 | 46,183 | ||||
Deferred revenue, net of current | 18,356 | 19,254 | ||||
Deferred income taxes | 3,757 | 3,750 | ||||
Other long-term liabilities | 31,338 | 31,187 | ||||
Total liabilities | 718,732 | 737,137 | ||||
Commitments and contingencies | ||||||
Stockholders' equity: | ||||||
Common stock | 17 | 17 | ||||
Additional paid-in capital | 1,945,525 | 1,941,569 | ||||
Accumulated deficit | (1,492,049) | (1,453,744) | ||||
Accumulated other comprehensive income | 19,435 | 30,585 | ||||
Total stockholders' equity | 472,928 | 518,427 | ||||
$ 1,191,660 | $ 1,255,564 | |||||
Consolidated Statements of Cash Flows | |||||||
(in thousands) | |||||||
(unaudited) | |||||||
Three months ended | |||||||
March 31, | March 31, | ||||||
2023 | 2022 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ (38,305) | $ (69,975) | |||||
Adjustments to reconcile net loss to cash flows provided by operating activities: | |||||||
Depreciation and amortization of property and equipment | 3,510 | 3,885 | |||||
Amortization of intangible assets | 14,653 | 15,542 | |||||
Amortization of debt issuance costs | 1,065 | 527 | |||||
Stock-based compensation | 5,848 | 4,255 | |||||
Deferred income taxes | (6,048) | (6,773) | |||||
Realized gain on swap sale | (7,301) | - | |||||
Decrease in fair value of investments | - | 27,027 | |||||
Foreign currency exchange (gains) losses | (2,185) | 1,105 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 19,742 | 60,461 | |||||
Inventory | (2,917) | (11,837) | |||||
Other operating assets | 15,031 | (423) | |||||
Accounts payable | (10,405) | 540 | |||||
Accrued expenses and other long-term liabilities | 11,521 | (7,962) | |||||
Deferred revenue | 6,924 | (1,342) | |||||
Net cash provided by operating activities | 11,133 | 15,030 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (2,413) | (3,471) | |||||
Net cash used in investing activities | (2,413) | (3,471) | |||||
Cash flows from financing activities: | |||||||
Principal payments of term debt | (80,015) | (20,015) | |||||
Principal payments of finance leases | - | (198) | |||||
Payment of debt issuance costs | (1,562) | (370) | |||||
Proceeds from issuance of preferred stock and warrant liabilities | 53,350 | - | |||||
Proceeds from the exercise of stock options | 1 | - | |||||
Payment of tax withholding obligations related to net share settlements of restricted stock awards | (1,893) | (1,812) | |||||
Net cash used in by financing activities | (30,119) | (22,395) | |||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 171 | (184) | |||||
Net decrease in cash, cash equivalents and restricted cash | (21,228) | (11,020) | |||||
Cash, cash equivalents and restricted cash, beginning of year | 67,262 | 106,485 | |||||
Cash, cash equivalents and restricted cash, end of period | $ 46,034 | $ 95,465 | |||||
Supplemental Information | ||||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
The following tables provide the details of stock-based compensation included as components of | ||||||||
Three months ended | ||||||||
2023 | 2022 | 2022 | ||||||
Stock-based compensation | ||||||||
Cost of revenue - product | $ 149 | $ 132 | $ 99 | |||||
Cost of revenue - service | 535 | 590 | 481 | |||||
Cost of revenue | 684 | 722 | 580 | |||||
Research and development | 1,262 | 1,373 | 1,206 | |||||
Sales and marketing | 2,129 | 1,656 | 1,371 | |||||
General and administrative | 1,773 | 1,461 | 1,098 | |||||
Operating expense | 5,164 | 4,490 | 3,675 | |||||
Total stock-based compensation | $ 5,848 | $ 5,212 | $ 4,255 | |||||
Reconciliation of Non-GAAP and GAAP Financial Measures | |||||
(in thousands, except per share amounts) | |||||
(unaudited) | |||||
Three months ended | |||||
2023 | 2022 | 2022 | |||
GAAP Gross margin | 43.7 % | 48.8 % | 45.1 % | ||
Stock-based compensation | 0.4 % | 0.3 % | 0.3 % | ||
Amortization of acquired technology | 4.0 % | 3.3 % | 4.8 % | ||
Non-GAAP Gross margin | 48.1 % | 52.4 % | 50.2 % | ||
GAAP Net (loss) income | $ (38,305) | $ 20,488 | $ (69,975) | ||
Stock-based compensation | 5,848 | 5,212 | 4,255 | ||
Amortization of acquired intangible assets | 14,653 | 14,969 | 15,542 | ||
Litigation costs | 177 | - | - | ||
Acquisition-, disposal- and integration-related | 1,642 | 1,914 | 1,849 | ||
Restructuring and related | 6,937 | 1,856 | 4,814 | ||
Decrease in fair value of investments | - | - | 27,027 | ||
Preferred stock and warrant liability issuance costs | 3,545 | - | - | ||
Tax effect of non-GAAP adjustments | 2,676 | (28,950) | 4,531 | ||
Non-GAAP Net (loss) income | $ (2,827) | $ 15,489 | $ (11,957) | ||
GAAP Diluted (loss) earnings per share | $ (0.23) | $ 0.12 | $ (0.47) | ||
Stock-based compensation | 0.04 | 0.03 | 0.03 | ||
Amortization of acquired intangible assets | 0.08 | 0.09 | 0.11 | ||
Litigation costs | - | - | - | ||
Acquisition-, disposal- and integration-related | 0.01 | 0.01 | 0.01 | ||
Restructuring and related | 0.04 | 0.01 | 0.03 | ||
Decrease in fair value of investments | - | - | 0.18 | ||
Preferred stock and warrant liability issuance costs | 0.02 | - | - | ||
Tax effect of non-GAAP adjustments | 0.02 | (0.17) | 0.03 | ||
Non-GAAP Diluted (loss) earnings per share | $ (0.02) | $ 0.09 | $ (0.08) | ||
Weighted average shares used to compute diluted earnings per share | |||||
Shares used to compute GAAP diluted loss per share | 168,541 | 168,163 | 149,167 | ||
Shares used to compute Non-GAAP diluted earnings per share | 168,541 | 172,213 | 149,167 | ||
GAAP (Loss) income from operations | $ (35,189) | $ 1,265 | $ (39,054) | ||
Depreciation | 3,510 | 3,607 | 3,885 | ||
Amortization of acquired intangible assets | 14,653 | 14,969 | 15,542 | ||
Stock-based compensation | 5,848 | 5,212 | 4,255 | ||
Litigation costs | 177 | - | - | ||
Acquisition-, disposal- and integration-related | 1,642 | 1,914 | 1,849 | ||
Restructuring and related | 6,937 | 1,856 | 4,814 | ||
Non-GAAP Adjusted EBITDA | $ (2,422) | $ 28,823 | $ (8,709) | ||
Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook | |||||||||
(unaudited) | |||||||||
Three months ending | Year ending | ||||||||
Range | Range | ||||||||
Revenue ($ millions) | $ 205 | $ 215 | $ 840 | $ 870 | |||||
Gross margin: | |||||||||
GAAP outlook | 46.4 % | 47.5 % | 49.3 % | 50.4 % | |||||
Stock-based compensation | 0.5 % | 0.5 % | 0.3 % | 0.3 % | |||||
Amortization of acquired technology | 3.6 % | 3.5 % | 3.4 % | 3.3 % | |||||
Non-GAAP outlook | 50.5 % | 51.5 % | 53.0 % | 54.0 % | |||||
Adjusted EBITDA ($ millions): | |||||||||
GAAP loss from operations | $ (13.7) | $ (6.7) | $ (17.3) | $ (2.3) | |||||
Depreciation | 4.0 | 4.0 | 15.4 | 15.4 | |||||
Stock-based compensation | 7.9 | 7.9 | 22.0 | 22.0 | |||||
Amortization of acquired intangible assets | 14.7 | 14.7 | 56.9 | 56.9 | |||||
Acquisition-, disposal- and integration-related | 0.1 | 0.1 | 0.6 | 0.6 | |||||
Restructuring and related | 4.0 | 4.0 | 17.4 | 17.4 | |||||
Non-GAAP outlook | $ 17.0 | $ 24.0 | $ 95.0 | $ 110.0 | |||||
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