Ribbon Communications Inc. · NASDAQ:RBBN
Ribbon Communications — Q1 2023 Earnings Presentation
37 slides from Ribbon Communications's earnings presentation, Apr 26, 2023
Slide 1: Ribbon Communications First Quarter 2023 Results
Ribbon Communications First Quarter 2023 Results April 26, 2023 1 Ribbon Communications Confidential and Proprietary - rbbn.com
Slide 2: Note Regarding Forward-Looking Statements and Non-GAAP Financial Measures
Note Regarding Forward-Looking Statements and Non-GAAP Financial Measures This presentation 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 state
Slide 3: First Quarter 2023 Business Overview
First Quarter 2023 Business Overview Bruce McClelland, President & CEO Mick Lopez, Executive Vice President & CFO
Slide 4: First Quarter 2023 Business Highlights | Consolidated
First Quarter 2023 Business Highlights | Consolidated Strength in Financial Performance Ramping New Products Neptune XDR 2100 +7% Neptune Cell Site Router Growth in Revenue YoY Apollo Long Haul DWDM Enterprise Edge SBC EM2900 Growth in EBITDA YoY +$6M Global Customer Momentum Increase in Gross Profi
Slide 5: First Quarter 2023 Business Highlights | IP Optical
First Quarter 2023 Business Highlights | IP Optical Improving Financial Performance Key Trends Growth in Revenue YoY +13% Optical: + 14% Growing Backlog - Book to Revenue of 1.6x Defense and Critical Infrastructure IP: + 20% New Customer Wins New Product Ramp +78% YoY Overall Growth in U.S. U.S. Rur
Slide 6: First Quarter 2023 Business Highlights | Cloud & Edge
First Quarter 2023 Business Highlights | Cloud & Edge Strong Financial Performance Key Trends Growth in Revenue YoY Recurring Maintenance Revenue +4% Enterprise: + 62% Strong multi-year renewal base (90% Under Contract or Backlog) SBC: + 24% Growth Areas Improvement in YoY EBITDA +28% Enterprise 61%
Slide 7: First Quarter 2023 Financial Highlights
First Quarter 2023 Financial Highlights 1Q23 Revenue Balance Sheet Profitability Metrics $186M up 7% YoY $46M Ending Cash ($2M) Adjusted EBITDA1 International 56% of Sales Senior Debt Reduction of $80M ($0.02) Non-GAAP EPS1 Service Provider 71% of Sales $55M Preferred Stock / Warrant Capital Raise C
Slide 8: First Quarter 2023 GAAP Financial Summary
First Quarter 2023 GAAP Financial Summary 1Q22 4Q22 1Q23 Revenue $173M $234M $186M Gross Margin 45% 49% 44% OpEx $117M $113M $117M Income (loss) from ($39M) $1M ($35M) operations Other (expense) ($33M) ($8M) ($2M) income, net1 Net income (loss) ($70M) $20M ($38M) Diluted EPS ($0.47) $0.12 ($0.23) No
Slide 9: Total Revenue and Adjusted EBITDA
Total Revenue and Adjusted EBITDA1 $234M $206M $207M $186M $173M $97 $69 $82 $72 $63 $137 $137 $114 $125 $110 $23 $29 $21 ($9) ($2) 1Q22 2Q22 3Q22 4Q22 1Q23 Cloud and Edge Revenue IP Optical Networks Revenue Adjusted EBITDA Note: 1. Please see the discussion of non-GAAP financial measures in the app
Slide 10: First Quarter 2023 Non-GAAP Financial Summary
First Quarter 2023 Non-GAAP Financial Summary 1Q22 4Q22 1Q23 Revenue $173M $234M $186M Non-GAAP Gross Margin1 50% 52% 48% Non-GAAP OpEx1 $99M $97M $95M Non-GAAP Operating (7%) 11% (3%) Margin1 Non-GAAP Adjusted ($9M) $29M ($2M) EBITDA1 Non-GAAP Diluted EPS1 ($0.08) $0.09 ($0.02) Note: 1. Please see
Slide 11: First Quarter 2023 Non-GAAP Segment Summary
First Quarter 2023 Non-GAAP Segment Summary 1Q23 1Q23 Cloud & IP Optical 1Q23 Edge Networks Consolidated Revenue $114M $72M $186M vs Prior Year +4% +13% +7% Non-GAAP Gross Margin1 61% 27% 48% Non-GAAP Adjusted $21M ($23M) ($2M) EBITDA1 Non-GAAP Adjusted EBITDA Margin1 18% -32% -1% Note: 1. Please se
Slide 12: Quarterly Performance: Revenue & Non-GAAP Gross Margins
Quarterly Performance: Revenue & Non-GAAP Gross Margins IP Optical Networks Cloud & Edge $137M $137M $125M $114M $110M $97M $82M $69M $72M $63M 68% 65% 62% 64% 61% 38% 36% 29% 29% 27% 1Q22 2Q22 3Q22 4Q22 1Q23 1Q22 2Q22 3Q22 4Q22 1Q23 Note: 1. Please see the discussion of non-GAAP financial measures
Slide 13: First Quarter 2023 Key Metrics
First Quarter 2023 Key Metrics Pipeline Revenue Mix Balance Sheet Cash Flow Cash Balance $46M 1Q23 Book to Revenue1 Ratio Enterprise 29%2 $11M Cash from Operations of 1.23x Service Provider 71%2 (Includes $18M from sale of Fixed Senior Term Loan Debt4 $250M Rate Swap) 38% Maintenance Revenue3 Total
Slide 14: Cash Flow 2023 First Quarter
Cash Flow 2023 First Quarter $M Cash 12/31 Cash 3/31 Opening Non- Preferred Sale of Debt Transaction Cash Cash Working Ending Cash GAAP Stock & Fixed Rate Reduction Fees Interest Taxes & Capital & Cash EBITDA1 Warrants Swap CapEx Other Placement Note: 1. Please see the discussion of non-GAAP financi
Slide 15: Key Trends & Outlook
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Slide 16: 2023 Customer Investment Priorities
2023 Customer Investment Priorities Surge in Investment Relentless Pursuit Mobile Remains a Digital Broadband Access to Lower Total Cost Top Priority Transformation (Fiber, HFC, Fixed Wireless) of Ownership Cell site Router IP routing Analytics Telco Cloud Aggregation Metro and Access Enhanced Secur
Slide 17: Growing momentum in 2023 as investments provide profitable growth
Growing momentum in 2023 as investments provide profitable growth Growth and Value Operating Efficiencies IP Routing $20M In-Year Cost Savings Implemented • New XDR 2000 Series portfolio and rNOS ~6% Headcount Reduction DWDM Optical Transport Continued Operating Expense Optimization • Next-gen compa
Slide 18: Extensive US Federal Investment to Expand Internet Access
Extensive US Federal Investment to Expand Internet Access $42.4B to expand High-speed internet access funded by US Dept. of Commerce $20B to provide fixed broadband and voice services to unserved homes and small businesses in rural America $10B as part of the American Rescue Plan Act (ARPA) to provi
Slide 19: Projecting Significant YoY Improvement in Profitability
Projecting Significant YoY Improvement in Profitability On track to meet and exceed cost savings goals EBITDA ($ in millions) $25–$30M Gross / $20M Net Expenditure Reduction 2022 Increased Higher Reduced Lower R&D Lower Other (Inflation, 2023 Actual Sales Product Services Investment SG&A Inc. Comp,
Slide 20: Second Quarter and Full Year 2023 Business Outlook
Second Quarter and Full Year 2023 Business Outlook 1Q23 2Q23 FY23 (Actual) (Outlook) (Outlook Unchanged) Revenue $186M $205M to $215M $840M to $870M Non-GAAP Gross Margin1 48% 50.5% to 51.5% 53% to 54% Non-GAAP Adjusted EBITDA1 ($2M) $17M to $24M $95M to $110M Note: 1. Please see non-GAAP reconcilia
Slide 21: Appendix
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Slide 22: Ribbon Accounting Summary for 23Q1 Transactions
Ribbon Accounting Summary for 23Q1 Transactions Preferred Stock and Warrants Accounting Illustration: Interest Expense and Other Income • $55M notional value of offering, after 3% OID, is net $53.4M • Offering is a “Liability” due to redeemable features • $5.5M attributable to “Warrant Liability” ba
Slide 23: Ribbon Condensed Statements of Operations
Ribbon Condensed Statements of Operations USD Millions except percentages and EPS 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 GAAP FINANCIAL MEASURES Product Revenue 82 113 111 137 443 93 Service Revenue 91 93 96 97 377 93 Total Revenue 173 206 207 234 820 186 Gross Profit 78 105 104 114 401 81 Gross Margin % 45%
Slide 24: Ribbon Condensed Balance Sheets
Ribbon Condensed Balance Sheets USD Millions 1Q22 2Q22 3Q22 4Q22 1Q23 ASSETS 1 Cash and cash equivalents 95 38 56 67 46 Accounts receivable, net 221 258 238 267 255 Inventory 62 65 70 75 76 Property and equipment, net 48 49 46 45 43 Intangible assets, net and Goodwill 636 621 611 596 581 Investment
Slide 25: Ribbon Condensed Statements of Cash Flows
Ribbon Condensed Statements of Cash Flows USD Millions 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 Cash from Operations 15 (39) (18) 16 (26) 11 Purchases of property and equipment (3) (3) (7) (1) (14) (2) Proceeds from sale of business - - - 1 1 - Sale of Fixed Assets - - - - - - Borrowings, net (21) (16) (5) (5)
Slide 26: Ribbon Key Revenue Statistics
Ribbon Key Revenue Statistics USD Millions except for percentages 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 Revenue Product 82 113 111 137 443 93 Service 91 93 96 97 377 93 Total Revenue 173 206 207 234 820 186 % of Total Revenue: Revenue Mix Product 47% 55% 54% 59% 54% 50% Services 53% 45% 46% 41% 46% 50% Reve
Slide 27: Discussion of Non-GAAP Financial Measures
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 unde
Slide 28: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) 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 op
Slide 29: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) 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 ge
Slide 30: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) Preferred Stock and Warrant Liability Issuance Costs The Company incurred $3.5 million of investment banking, advisory and legal fees in its March 2023 Private Placement of Series A Preferred Stock and warrants to purchase shares of the Company’s
Slide 31: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) 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 intang
Slide 32: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $000's 1Q22 2Q22 3Q22 4Q22 FY22 Cloud and IP Optical Consolidated Cloud and IP Optical Consolidated Cloud and IP Optical Consolidated Cloud and IP Optical Consolidated Cloud and IP Optical Consolidated Edge Networks Edge Networks Edge Networks Edge Networks Edge Netwo
Slide 33: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) $000's 1Q23 Cloud and IP Optical Consolidated Edge Networks Revenue $ 114,480 $ 71,679 $ 186,159 GAAP Gross profit $ 66,077 $ 15,325 $ 81,402 GAAP Gross margin (Gross profit/Revenue) 57.7% 21.4% 43.7% Stock-based compensation 0.3% 0.4% 0.4% Amortization of
Slide 34: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) $000s 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 GAAP Operating expenses $ 117,109 $ 111,789 $ 107,614 $ 112,748 $ 449,260 $ 116,591 Stock-based compensation (3,675) (3,798) (4,116) (4,490) (16,079) (5,164) Amortization of acquired intangible assets (7,275) (7,513) (7,
Slide 35: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 GAAP Diluted earnings (loss) per share $ (0.47) $ (0.20) $ (0.12) $ 0.12 $ (0.63) $ (0.23) Stock-based compensation 0.03 0.03 0.03 0.03 0.12 0.04 Amortization of acquired intangible assets 0.11 0.10 0.09 0.09 0.39 0.08 Litigat
Slide 36: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) Three months ending Year ending June 30, 2023 December 31, 2023 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
Slide 37: Thank You
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