Ribbon Communications Inc. · NASDAQ:RBBN
Ribbon Communications — B. Riley 22nd Annual Institutional Investor Conference (May 2022)
47 slides from Ribbon Communications's conference presentation, May 25, 2022
Slide 1: B. Riley 22nd Annual Institutional Investor Conference
B. Riley 22nd Annual Institutional Investor Conference May 25, 2022 1
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: Ribbon at a Glance
Ribbon at a Glance A unique Company providing open cloud-centric solutions spanning multiple network layers to enable secure communications and deliver disruptive optical networking innovations Headquarters: Plano, Texas • NASDAQ: RBBN 1000+ $845M 3,685 140 1000+ Customers1 Year Ended 2021 Employees
Slide 4: Rich History of Innovation Brought Together as Ribbon
Rich History of Innovation Brought Together as Ribbon Ribbon has completed several meaningful transactions over the last few years that have streamlined the business, expanded its market scope and added a transformational second leg to its strategic positioning New Management Team Session Border Con
Slide 5: Product Strategy Builds on Key Technology Trends
Product Strategy Builds on Key Technology Trends Unified Service Migration IP + Optical Open Networking Communications to the Cloud • 4.5X growth in global mobile • Best-of-breed agile solutions • Broad adoption of cloud-based • Pre-integrated friction-free traffic from 2020-20261 driving unified co
Slide 6: Servicing Multiple Segments Across the Network
Servicing Multiple Segments Across the Network 2020 Serviceable Market Education Utilities Enterprises Health Res Transportation IP Routing Mobile Access $6B Aggregation Dell’Oro Service Provider Edge Router minus China Optical Transport Metro $8B Dell’Oro Metro & Long Haul minus China and DCI Core
Slide 7: IP Optical Networks Business Overview
IP Optical Networks Business Overview The acquisition of ECI in 2020 provided Ribbon a strong IP Optical product portfolio with offerings that address access, metro, regional and long-haul geographies for service providers and private networks Ribbon IP Optical Portfolio Neptune IP Networking Apollo
Slide 8: IP Optical Networking Portfolio Delivering Multi-layer Optimization
IP Optical Networking Portfolio Delivering Multi-layer Optimization Higher Level Services User Orchestration Interface Controller - Muse MuseTM Domain Orchestration Multi-layer Optimization Increase in automation Network Controller Improved asset utilization Platform Admin Network Service Slice Netw
Slide 9: IP Optical Global Strategic Accounts Pipeline
IP Optical Global Strategic Accounts Pipeline Expanding Tier One IP Optical Wins and Pipeline Engagement Evaluation New Wins Telkomsel (last 9 months) Scaled Deployments $$ $$ $$$$ $$$$$ 9
Slide 10: Cloud & Edge Business Overview
Cloud & Edge Business Overview The Cloud and Edge business (formed with 2017 merger from Genband and Sonus Networks) provides solutions for secure Voice Over IP (VoIP) and cloud collaboration communications applications, as well as carrier grade voice services Ribbon Cloud and Edge Portfolio Session
Slide 11: Secure VoIP Portfolio Applications Across Networks and the Cloud
Secure VoIP Portfolio Applications Across Networks and the Cloud Session Border Controllers & Policy/Routing Session Border Controller Enterprise Secure Unified Communications and Teams and Zoom Calling VoIP Application Server and Call Controller Secure Contact Center Network Transformation Cloud Me
Slide 12: Network Evolution to Telco Cloud Provides Growth Opportunity
Network Evolution to Telco Cloud Provides Growth Opportunity Cloudification and modernization of fixed and mobile networks to Telco Cloud $2B Serviceable Market for Cloud & Edge Segment $2.0B $1.8B NFV Cloud-Native Hypervisor Infrastructure Infrastructure Virtual Machines Virtual Network Cloud-Nativ
Slide 13: Cloud & Edge Enterprise Market Expansion
Cloud & Edge Enterprise Market Expansion Strategy Products Go To Market • Target high-growth Unified • Session Border Controllers, Application • High touch, direct touch sales Communications, Contact Center, and Edge Devices, Call Control, Security, engagement for Enterprise organizations Desktop Ap
Slide 14: Ribbon Connect – Platform Evolution to Support Medium / SMB
Ribbon Connect – Platform Evolution to Support Medium / SMB User / Service Data Move to include Fully Managed Account / Subscription / Service / Billing Management Analytics Network Management Offerings Cloud Native SBC Services Trunk Aggregation PSTN BYOC Enterprise PBX / Contact Centre Call Screen
Slide 15: Significant Revenue from Services and Recurring Maintenance
Significant Revenue from Services and Recurring Maintenance Professional Services Presence and Scale ($106M revenue in 2021) Network analysis & Engineering design Integration & consulting & installation validation Transformation & Managed network migration operation Maintenance Provides Durable Recu
Slide 16: Large and Diverse Service Provider and Enterprise Customer Base
Large and Diverse Service Provider and Enterprise Customer Base Telco and Mobile Multi-System Operators Enterprise Verticals Utilities Transportation Government Finance Healthcare Education 16
Slide 17: Experienced Leadership Team
Experienced Leadership Team Bruce McClelland Tony Scarfo Mick Lopez Patrick Macken Sam Bucci Steven Bruny Steve McCaffery Petrena Ferguson President, CEO EVP, GM Cloud EVP & Chief EVP, General EVP, GM IP Optical EVP., Sales, EVP, Sales, EMEA SVP Human & Director & Edge BU Financial Officer Counsel N
Slide 18: Disruptive Strategy to Achieve Outsized Growth
Disruptive Strategy to Achieve Outsized Growth Key Investments Differentiators + For Market Disruption = Growing Confidence “Open and Optimized” Recent Customer Wins Longstanding Ribbon IP and Optical Networks Relationships with Tier 1 Service Providers Disaggregated Networking World-Class VoIP and
Slide 19: First Quarter 2022 Business Overview
First Quarter 2022 Business Overview Bruce McClelland, President & CEO Mick Lopez, Executive Vice President & CFO
Slide 20: Investing in 2022 to capture share and drive growth
Investing in 2022 to capture share and drive growth Investing for 2021 Growth in 2022 2023 and Beyond Accomplishments • 10%+ IP Optical growth target Significant player in IP Optical • Major new IP Optical wins • Growth in Enterprise Cloud and • Optical Transport Edge secure VoIP market share • IP N
Slide 21: First Quarter 2022 New Market Activity
First Quarter 2022 New Market Activity Customers & Partners Awards IP and Optical Cloud & Edge Enterprise Cloud & Edge Telco Cloud Active IP Optical RFPs with 12 major mobile and telecom carriers around the globe 21
Slide 22: First Quarter 2022 Business Highlights
First Quarter 2022 Business Highlights Ribbon now supports Microsoft’s Operator Connect using our Ribbon Connect platform by extending our multi-tenant SaaS Ribbon Connect capability to support service provider deployments of Operator Connect. Our first customer, Switch Connect in Australia, now off
Slide 23: First Quarter 2022 Financial Highlights
First Quarter 2022 Financial Highlights 1Q22 Revenue Balance Sheet Profitability Metrics $173M; down 10% YoY $95M Ending Cash ($9M) Adjusted EBITDA International 56% of Sales Amended credit facility ($0.08) Non-GAAP EPS Enterprise 27% of Sales Average interest rate 3.40% Cloud and Edge IP Optical Ne
Slide 24: First Quarter 2022 GAAP Financial Summary
First Quarter 2022 GAAP Financial Summary 1Q21 4Q21 1Q22 Revenue $193M $231M $173M Gross margin 52% 50% 45% 4Q21 Opex includes $116 million impairment against our IP Optical Networks goodwill OPEX $113M $235M $117M carrying value Loss from operations ($13M) ($120M) ($39M) 1Q22 includes a $27M non-ca
Slide 25: First Quarter 2022 Non-GAAP Financial Summary
First Quarter 2022 Non-GAAP Financial Summary 1Q21 4Q21 1Q22 Revenue $193M $231M $173M Gross margin 57% 54% 50% OPEX $95M $102M $99M Operating margin 8% 9% (7%) Adjusted EBITDA $20M $26M ($9M) Diluted EPS $0.03 $0.01 ($0.08) 25
Slide 26: First Quarter 2022 Non-GAAP Segment Summary
First Quarter 2022 Non-GAAP Segment Summary Cloud and Edge IP Optical Networks Consolidated Revenue $110M $63M $173M Gross margin 62% 29% 50% Adjusted EBITDA $16M ($25M) ($9M) 26
Slide 27: Quarterly Performance: Revenue & Non-GAAP Gross Margins
Quarterly Performance: Revenue & Non-GAAP Gross Margins IP Optical Networks Cloud and Edge $141M $142M $147M $125M $110M $83M $67M $70M $68M $63M 67% 68% 67% 64% 39% 48% 62% 37% 36% 29% 1Q21 2Q21 3Q21 4Q21 1Q22 1Q21 2Q21 3Q21 4Q21 1Q22 27
Slide 28: First Quarter 2022 Key Metrics
First Quarter 2022 Key Metrics Pipeline Revenue Mix Balance Sheet Cash Flow 1Q22 Book to Revenue1 Ratio 26% Software Revenue2 Cash Balance $95M $15M Cash from Operations of 1.20, up 5% YoY 40% Maintenance Revenue3 Debt5 $355M $20M principal debt paydown 80% of 2022 maintenance Top 10 Customers Reven
Slide 29: Key Trends and Outlook
Key Trends and Outlook &) riddon
Slide 30: New Product Highlights
New Product Highlights Cloud & Edge IP Optical Networks • Ribbon Automation & Management Platform (RAMP) • IP Routing Protocols Suite • Ribbon SBC Software Edition Edge (SWe Edge) • Apollo Gen2 400G ZR+ OpenROADM Transponder • Enterprise Edge 8000 Voice & Data SBC • Neptune 2000 Series IP Routers •
Slide 31: Second Quarter and Full Year 2022 Business Outlook
Second Quarter and Full Year 2022 Business Outlook FY21 2Q22 FY22 (Actual) Revenue $845M $200M to $215M $850M to $880M Non-GAAP Gross Margin 57% 53.5% to 54.5% 55% to 56% Non-GAAP Adjusted EBITDA $120M $17M to $23M $110M to $120M Non-GAAP Diluted EPS $0.32 $0.03 to $0.06 $0.30 to $0.34 Interest & Ot
Slide 32: Appendix
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Slide 33: Ribbon Condensed Statements of Operations
Ribbon Condensed Statements of Operations USD Millions except percentages and EPS 1Q21 2Q21 3Q21 4Q21 FY21 1Q22 GAAP FINANCIAL MEASURES Product Revenue 98 113 112 130 453 82 Service Revenue 95 98 99 100 392 91 Total Revenue 193 211 210 231 845 173 Gross Profit 100 119 111 115 445 78 Gross Margin % 5
Slide 34: Ribbon Condensed Balance Sheets
Ribbon Condensed Balance Sheets USD Millions 1Q21 2Q21 3Q21 4Q21 1Q22 ASSETS Cash and cash equivalents1 109 115 104 106 95 Accounts receivable, net 209 220 236 283 221 Inventory 45 47 45 54 62 Property and equipment, net 49 49 49 48 48 Intangible assets, net and Goodwill 818 801 784 652 636 Investme
Slide 35: Ribbon Condensed Statements of Cash Flows
Ribbon Condensed Statements of Cash Flows USD Millions 1Q21 2Q21 3Q21 4Q21 FY21 1Q22 Cash from Operations (6) 14 - 11 19 15 Purchases of property and equipment (5) (5) (4) (3) (17) (3) Proceeds from sale of business - 3 - - 3 - Borrowings, net (4) (5) (5) (5) (19) (21) Other (12) (1) (2) (1) (15) (2
Slide 36: Ribbon Key Revenue Statistics
Ribbon Key Revenue Statistics USD Millions except for percentages 1Q21 2Q21 3Q21 4Q21 FY21 1Q22 Revenue Product 98 113 112 130 453 82 Service 95 98 99 100 392 91 Total Revenue 193 211 210 231 845 173 % of Total Revenue: Revenue Mix Product 51% 54% 53% 57% 54% 47% Services 49% 46% 47% 43% 46% 53% Rev
Slide 37: 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 38: 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 39: 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 40: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) Gain on Sale of Business On May 12, 2021, the Company sold its QualiTech business, which it had acquired as part of the ECI Acquisition, to Hermon Laboratories, Ltd. As consideration, the Company received $2.9 million of cash and recorded a gain
Slide 41: 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 42: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $000's 1Q21 2Q21 3Q21 4Q21 FY21 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 43: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) $000's 1Q22 Cloud and IP Optical Consolidated Edge Networks Revenue $ 109,806 $ 63,392 $ 173,198 GAAP Gross profit $ 62,732 $ 15,323 $ 78,055 GAAP Gross margin (Gross profit/Revenue) 57.1% 24.2% 45.1% Stock-based compensation 0.4% 0.0% 0.3% Amortization of
Slide 44: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) $000s 1Q21 2Q21 3Q21 4Q21 FY21 1Q22 GAAP Operating expenses $ 113,090 $ 105,775 $ 108,662 $ 234,929 $ 562,456 $ 117,109 Stock-based compensation (4,798) (4,228) (3,973) (4,422) (17,421) (3,675) Amortization of acquired intangible assets (5,762) (7,481) (7,
Slide 45: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) 1Q21 2Q21 3Q21 4Q21 FY21 1Q22 GAAP Diluted (loss) earnings per share $ (0.31) $ 0.15 $ (0.40) $ (0.65) $ (1.20) $ (0.47) Stock-based compensation 0.03 0.03 0.03 0.03 0.14 0.03 Amortization of acquired intangible assets 0.11 0.11 0.12 0.12 0.44 0.11 Impairm
Slide 46: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) Three months ending Year ending June 30, 2022 December 31, 2022 Outlook Range Range Revenue ($ millions) $ 200 $ 215 $ 850 $ 880 Gross margin: GAAP outlook 49.2% 50.5% 51.1% 52.2% Stock-based compensation 0.3% 0.3% 0.3% 0.3% Amortization of acquired techno
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