Ribbon Communications Inc. · NASDAQ:RBBN
Ribbon Communications — Q4 2022 Earnings Presentation
37 slides from Ribbon Communications's earnings presentation, Feb 15, 2023
Slide 1: Fourth Quarter and Full Year 2022 Results
Ribbon Communications Fourth Quarter and Full Year 2022 Results February 15, 2023 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: Fourth Quarter 2022 Business Overview
Fourth Quarter 2022 Business Overview Bruce McClelland, President & CEO Mick Lopez, Executive Vice President & CFO
Slide 4: Fourth Quarter 2022 Business Highlights | Consolidated
Fourth Quarter 2022 Business Highlights | Consolidated Strength in Financial Performance Pipeline of New Products XDR 2100 / 2300 +13% Apollo 9400 Growth in Revenue QoQ Edge 8000 Ribbon Connect supporting Google SipLink & Cisco Webex +25% Growth in EBITDA QoQ Global Customer Momentum Product/PS book
Slide 5: Fourth Quarter 2022 Business Highlights | IP Optical
Fourth Quarter 2022 Business Highlights | IP Optical Improving Financial Performance Building Customer Momentum Optical Transport Growth in Revenue QoQ +18% Optical: + 16% IP: + 21% IP Networking Growth in Revenue YoY +17% Optical: + 6% IP: + 34% 5
Slide 6: Fourth Quarter 2022 Business Highlights | Cloud and Edge
Fourth Quarter 2022 Business Highlights | Cloud and Edge Strong Financial Performance Enterprise Growth +10% Growth in Revenue QoQ Enterprise: + 67% SBC: + 59% Improvement in +117bp EBITDA Margin YoY Recurring Maintenance Revenue 11% Opex Reduction Strong multi-year renewal base 64% Gross Margin 6
Slide 7: Fourth Quarter 2022 Financial Highlights
Fourth Quarter 2022 Financial Highlights 4Q22 Revenue Balance Sheet Profitability Metrics $234M up 13% QoQ $67M Ending Cash $29M Adjusted EBITDA International 61% of Sales Average interest rate 5.40% $0.09 Non-GAAP EPS Service Provider 65% of Sales Cloud & Edge IP Optical Networks Steady Contributio
Slide 8: Fourth Quarter and Full Year 2022 GAAP Financial Summary
Fourth Quarter and Full Year 2022 GAAP Financial Summary 4Q21 3Q22 4Q22 2021 2022 Revenue $231M $207M $234M $845M $820M Gross Margin 50% 50% 49% 53% 49% Opex1 $235M $108M $113M $562M $449M Income (loss) from ($120M) ($3M) $1M ($118M) ($48M) operations Other (expense) ($9M) ($4M) ($2M) ($75M) ($44M)
Slide 9: Total Revenue and Adjusted EBITDA
Total Revenue and Adjusted EBITDA1 $231M $234M $211M $210M $206M $207M $193M $70 $68 $83 $173M $97 $69 $82 $67 $63 $147 $137 $137 $141 $142 $110 $125 $125 $43 $32 $26 $29 $20 $21 $23 ($9) 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 Cloud and Edge Revenue IP Optical Networks Revenue Adjusted EBITDA Note:
Slide 10: Fourth Quarter and Full Year 2022 Non-GAAP Financial Summary
Fourth Quarter and Full Year 2022 Non-GAAP Financial Summary 4Q21 3Q22 4Q22 FY21 FY22 Revenue $231M $207M $234M $845M $820M Non-GAAP Gross 54% 54% 52% 57% 53% Margin1 Non-GAAP Opex1 $102M $94M $97M $381M $386M Non-GAAP 9% 9% 11% 12% 6% Operating Margin1 Non-GAAP $26M $23M $29M $120M $64M Adjusted EB
Slide 11: Fourth Quarter and Full Year 2022 Non-GAAP Segment Summary
Fourth Quarter and Full Year 2022 Non-GAAP Segment Summary 4Q22 4Q22 FY22 FY22 Cloud and IP Optical 4Q22 Cloud and IP Optical FY22 Edge Networks Consolidated Edge Networks Consolidated Revenue $137M $97M $234M $508M $312M $820M vs Prior Year (7%) +17% +1% (9%) +8% (3%) Non-GAAP Gross Margin1 64% 36%
Slide 12: Quarterly Performance: Revenue & Non-GAAP Gross Margins
Quarterly Performance: Revenue & Non-GAAP Gross Margins IP Optical Networks Cloud & Edge $142M $147M $137M $137M $97M $125M $110M $83M $82M $68M $69M $63M 67% 64% 68% 65% 64% 62% 37% 36% 38% 36% 29% 29% 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 Note: 1. Please see the discussion of
Slide 13: Fourth Quarter 2022 Key Metrics
Fourth Quarter 2022 Key Metrics Pipeline Revenue Mix Balance Sheet Cash Flow Cash Balance $67M 4Q22 Book to Revenue1 Ratio Enterprise 35%2 $16M Cash from Operations of 1.10x Service Provider 65%2 Debt5 $330M $5M principal debt paydown 31% Maintenance Revenue3 Current Annualized Weighted Cloud & Edge
Slide 14: Key Trends & Outlook
Key Trends & Outlook &) rioddon
Slide 15: 2023 Operating Environment
2023 Operating Environment Healthy Telecom ‘Digital mobile lifestyle’ Efficiency and Quest for new revenue Environment ROIC generating services Geopolitical impact on Inflation Energy Security competitive environment Imperative for our customers to innovate and to invest! 15
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 2022 Profitable Growth 2024 Accomplishments in 2023 and Beyond • Strong momentum in 2H22 - 36% • 10%+ IP Optical Transport revenue • Investment in Tier One Service IP Optical sales growth vs. 1H22 growth target with path to profitabil
Slide 18: 2023 Growth Areas
2023 Growth Areas Cloud & Edge IP Optical Networks Enterprise Optical Major Accounts Target F1000 Customers in key verticals Expand on recent major account wins Expand adoption of Cloud Services - Ribbon Convert Tier One pipeline in 1H23 Connect, Identity Management, Analytics Leapfrog with new Apol
Slide 19: 2023 Organization / Efficiencies
2023 Organization / Efficiencies Ribbon 3.0 Organization Operating Efficiencies Business Unit Re-alignment 5% Annualized Cost Cloud & Edge and IP Optical Business units Savings for 2023 combined under Sam Bucci as COO Growing number of opportunities to leverage solutions across entire portfolio Glob
Slide 20: Ribbon 3.0 – the next phase of growth and profitability
Ribbon 3.0 – the next phase of growth and profitability Ribbon / ECI merge Ribbon 3.0 Mar-2020 Cloud & Edge Ribbon acquires IP Optical Networks Anova Data Mar-2019 Ribbon 2.5% - 6.0% Growth Target Revenue Ribbon acquires Edgewater Aug-2018 Sonus / GENBAND merge Oct-2017 2018 2019 2020 2021 2022 2023
Slide 21: First Quarter and Full Year 2023 Business Outlook
First Quarter and Full Year 2023 Business Outlook FY22 1Q23 FY23 (Actual) Revenue $820M $180M to 190M $840M to $870M Non-GAAP Gross Margin1 53% 46% to 48% 53% to 54% Non-GAAP Adjusted EBITDA1 $64M ($6M) to $1M $95M to $110M Interest and Other Expense ($23M) ~($6M) ~($23M) Note: 1. Please see non-GAA
Slide 22: Appendix
Appendix &) rioddon
Slide 23: Ribbon Condensed Statements of Operations
Ribbon Condensed Statements of Operations USD Millions except percentages and EPS 1Q21 2Q21 3Q21 4Q21 FY21 1Q22 2Q22 3Q22 4Q22 FY22 GAAP FINANCIAL MEASURES Product Revenue 98 113 112 130 453 82 113 111 137 443 Service Revenue 95 98 99 100 392 91 93 96 97 377 Total Revenue 193 211 210 231 845 173 206
Slide 24: Ribbon Condensed Balance Sheets
Ribbon Condensed Balance Sheets USD Millions 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 ASSETS Cash and cash equivalents1 109 115 104 106 95 38 56 67 Accounts receivable, net 209 220 236 283 221 258 238 267 Inventory 45 47 45 54 62 65 70 75 Property and equipment, net 49 49 49 48 48 49 46 45 Intangible
Slide 25: Ribbon Condensed Statements of Cash Flows
Ribbon Condensed Statements of Cash Flows USD Millions 1Q21 2Q21 3Q21 4Q21 FY21 1Q22 2Q22 3Q22 4Q22 FY22 Cash from Operations (6) 14 - 11 19 15 (39) (18) 16 (26) Purchases of property and equipment (5) (5) (4) (3) (17) (3) (3) (7) (1) (14) Proceeds from sale of business - 3 - - 3 - - - 1 1 Borrowing
Slide 26: Ribbon Key Revenue Statistics
Ribbon Key Revenue Statistics USD Millions except for percentages 1Q21 2Q21 3Q21 4Q21 FY21 1Q22 2Q22 3Q22 4Q22 FY22 Revenue Product 98 113 112 130 453 82 113 111 137 443 Service 95 98 99 100 392 91 93 96 97 377 Total Revenue 193 211 210 231 845 173 206 207 234 820 % of Total Revenue: Revenue Mix Pro
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) Gain on Sale of Business On May 12, 2021, the Company sold its QualiTech business, which it had acquired as part of its acquisition of ECI Telecom Group Ltd., to Hermon Laboratories, Ltd. As consideration, the Company received $2.9 million of cas
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 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 33: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) $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 Network
Slide 34: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) $000s 1Q21 2Q21 3Q21 4Q21 FY21 1Q22 2Q22 3Q22 4Q22 FY22 GAAP Operating expenses $ 113,090 $ 105,775 $ 108,662 $ 234,929 $ 562,456 $ 117,109 $ 111,789 $ 107,614 $ 112,748 $ 449,260 Stock-based compensation (4,798) (4,228) (3,973) (4,422) (17,421) (3,675) (3
Slide 35: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) 1Q21 2Q21 3Q21 4Q21 FY21 1Q22 2Q22 3Q22 4Q22 FY22 GAAP Diluted (loss) earnings per share $ (0.31) $ 0.15 $ (0.40) $ (0.65) $ (1.20) $ (0.47) $ (0.20) $ (0.12) $ 0.12 $ (0.63) Stock-based compensation 0.03 0.03 0.03 0.03 0.14 0.03 0.03 0.03 0.03 0.12 Amorti
Slide 36: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) Three months ending Year ending March 31, 2023 December 31, 2023 Range Range Revenue ($ millions) $ 180 $ 190 $ 840 $ 870 Gross margin: GAAP outlook 42.5% 43.7% 49.3% 50.4% Stock-based compensation 0.4% 0.4% 0.3% 0.3% Amortization of acquired technology 4.
Slide 37: Thank You
Thank You &) rioddon
Ribbon Communications — Q4 2022 Earnings Presentation on 6ix