Ribbon Communications Inc. · NASDAQ:RBBN
Ribbon Communications — Q4 2023 Earnings Presentation
33 slides from Ribbon Communications's earnings presentation, Feb 14, 2024
Slide 1: Fourth Quarter and Full Year 2023 Results
Ribbon Communications Fourth Quarter and Full Year 2023 Results February 14, 2024 © 2024 Ribbon | Public 1
Slide 2: Note Regarding Forward-Looking Statements and Non-GAAP Financial Measures
Note Regarding Forward-Looking Statements and Non-GAAP Financial Measures The information in 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 statemen
Slide 3: Fourth Quarter and Full Year 2023 Business Overview
Fourth Quarter and Full Year 2023 Business Overview Bruce McClelland, President & CEO Mick Lopez, Executive Vice President & CFO
Slide 4: 2023 Highlights | Consolidated
2023 Highlights | Consolidated IP Optical Networks Growth Diversification 12% Revenue Growth Enterprise Segment Expansion North America Growth >50% VoIP Network Transformation 2nd Half 2023 Profitability New Product Launches +$8M Q4 Adj. EBITDA IP and Optical Growth +41% U.S. Rural Expansion Federal
Slide 5: Fourth Quarter and 2023 Business Highlights | Consolidated
Fourth Quarter and 2023 Business Highlights | Consolidated Profitable Growth Driven by Portfolio Diversification and Efficiencies +41% FY 23 Adjusted EBITDA YoY Growth $8M IP Optical Networks Adjusted EBITDA $91M Adjusted EBITDA 6% Reduction in Operating Expenses +440bps Gross Margin Improvement YoY
Slide 6: Key Financial Trends
Key Financial Trends1 Cloud and Edge Revenue IP Optical Networks Revenue Adjusted EBITDA1 2023 $91M $234M $226M $206M $207M $211M $203M 2022 $64M $186M $173M $97 $69 $104 $82 $85 $87 $72 1Q 2Q 3Q 4Q $63 $137 $125 $122 Gross Margin % $137 $114 $116 $125 $110 Gross Margin Improvement 65% 66% YoY in Bo
Slide 7: Non-GAAP Segment Financial Highlights | IP Optical Networks
Non-GAAP1 Segment Financial Highlights | IP Optical Networks 8% Q4 2023 EBITDA Margin (vs -8% in 2022) Adjusted EBITDA1 EBITDA $8M IP Optical Achieves Goal of 2nd Half Profitability Q4 +34% Growth in N. America YoY U.S. Rural: +26% 2023 2022 >$100M Exceeded $100M in Revenue 1Q 2Q 3Q 4Q Growth in Ful
Slide 8: Non-GAAP Segment Financial Highlights | Cloud & Edge
Non-GAAP1 Segment Financial Highlights | Cloud & Edge Adjusted EBITDA1 +400bps 2023 Gross Margin Improvement YoY 2022 $121M Higher Software Mix (59% -> 69%) 2023 Q4 Adj. EBITDA Margin 28% Up more than 150bps YoY Gross Margin at 68% 1Q 2Q 3Q 4Q 5% Reduction in Operating Expenses YoY -6% Full Year Rev
Slide 9: Fourth Quarter 2023 Key Metrics | Consolidated
Fourth Quarter 2023 Key Metrics | Consolidated Revenue Mix Profitability Balance Sheet Cash Flow Enterprise 33%2 57% Gross Margin Senior Term Loan Debt4 $235M Cash Balance $27M Service Provider 67%2 Operating Expenses 8% Lower Outstanding Revolver Loan4 $0M 31% Maintenance Revenue3 than Q4 2022 +$20
Slide 10: Fourth Quarter and Full Year 2023 Non-GAAP Financial Summary
Fourth Quarter and Full Year 2023 Non-GAAP1 Financial Summary 4Q22 3Q23 4Q23 2022 2023 Revenue $234M $203M $226M $820M $826M Non-GAAP Gross Margin1 52% 55% 57% 53% 53% Non-GAAP Opex1 $97M $87M $90M $386M $363M Non-GAAP Operating 11% 12% 17% 6% 9% Margin1 Non-GAAP Adjusted $29M $28M $43M $64M $91M EB
Slide 11: Key Trends & Outlook
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Slide 12: Positive Long Term Demand Drivers
Positive Long Term Demand Drivers Exponential traffic Game changing AI Growing adoption Increased Fiber TCO and Network growth, wireless Analytics and of Unified Investment Modernization broadband growth Generative AI Communications ▪ Unprecedented ▪ Consumption drives ▪ AI in its infancy on the ▪ D
Slide 13: 2024 Operating Environment: Improving Trends
2024 Operating Environment: Improving Trends The Strategy is Diversification Regional Outlook Investment Strategy Working! 2023 sets the Foundation for Expand Fiber Reach U.S. Rural Broadband R&D Investments Focused on Continued Growth and Margin Expansion Middle Mile Opportunity and Government Fund
Slide 14: First Quarter and Full Year 2024 Business Outlook
First Quarter and Full Year 2024 Business Outlook 1Q23 FY23 1Q24 FY24 (Actual) (Actual) (Outlook) (Outlook) Revenue $186M $826M $180M to $190M $840M to $870M Non-GAAP Gross Margin1 48% 53% 51% to 52% 53% to 54% Non-GAAP Adjusted EBITDA1 ($2M) $91M $5M to $10M $110M to $120M Note: 1. Please see the d
Slide 15: Appendix
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Slide 16: Quarterly Non-GAAP Segment Trend | Cloud & Edge
Quarterly Non-GAAP1 Segment Trend | Cloud & Edge CLOUD & EDGE – 2022 CLOUD & EDGE – 2023 1Q 2Q 3Q 4Q FY22 1Q 2Q 3Q 4Q FY23 Revenue $110M $137M $125M $137M $508M $114M $125M $116M $122M $478M vs Prior Year (12%) (3%) (12%) (7%) (9%) +4% (9%) (7%) (11%) (6%) Non-GAAP Gross 62% 68% 65% 64% 65% 61% 67%
Slide 17: Quarterly Non-GAAP Segment Trend | IP Optical Networks
Quarterly Non-GAAP1 Segment Trend | IP Optical Networks IP OPTICAL NETWORKS – 2022 IP OPTICAL NETWORKS – 2023 1Q 2Q 3Q 4Q FY22 1Q 2Q 3Q 4Q FY23 Revenue $63M $69M $82M $97M $312M $72M $85M $87M $104M $349M vs Prior Year (6%) (2%) +21% +17% +8% +13% +24% +6% +7% +12% Non-GAAP Gross 29% 29% 38% 36% 34%
Slide 18: Fourth Quarter and Full Year 2023 GAAP Financial Summary
Fourth Fourth Quarter Quarter and and Full Year2023 Full Year 2023GAAP GAAPFinancial FinancialSummary Summary 4Q22 3Q23 4Q23 2022 2023 Revenue $234M $203M $226M $820M $826M Gross Margin 49% 51% 54% 49% 49% OpEx $113M $103M $105M $449M $432M Income (loss) from $1M $1M $17M ($48M) ($24M) operations Ot
Slide 19: Ribbon Condensed Statements of Operations
Ribbon Condensed Statements of Operations USD Millions except percentages and EPS 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 2Q23 3Q23 4Q23 FY23 GAAP FINANCIAL MEASURES Product Revenue 82 113 111 137 443 93 117 109 126 445 Service Revenue 91 93 96 97 377 93 93 95 100 381 Total Revenue 173 206 207 234 820 186 211
Slide 20: Ribbon Condensed Balance Sheets
Ribbon Condensed Balance Sheets USD Millions 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 ASSETS 1 Cash and cash equivalents 95 38 56 67 46 35 25 27 Accounts receivable, net 221 258 238 267 255 253 242 268 Inventory 62 65 70 75 76 74 70 78 Property and equipment, net 48 49 46 45 43 42 42 42 Intangible as
Slide 21: Ribbon Condensed Statements of Cash Flows
Ribbon Condensed Statements of Cash Flows USD Millions 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 2Q23 3Q23 4Q23 FY23 Cash from Operations 15 (39) (18) 16 (26) 11 (3) (12) 20 17 Purchases of property and equipment (3) (3) (7) (1) (14) (2) (2) (3) (3) (9) Proceeds from sale of business - - - 1 1 - - - - 0 Borrowi
Slide 22: Ribbon Key Revenue Statistics
Ribbon Key Revenue Statistics USD Millions except for percentages 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 2Q23 3Q23 4Q23 FY23 Revenue Product 82 113 111 137 443 93 117 109 126 445 Service 91 93 96 97 377 93 93 95 100 381 Total Revenue 173 206 207 234 820 186 211 203 226 826 % of Total Revenue: Revenue Mix Pro
Slide 23: 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 24: 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 25: 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 the Company and its acquired businesses. Such costs are ge
Slide 26: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) Preferred Stock and Warrant Liability Mark-to-Market Adjustment The Company recorded adjustments to the fair value of its Series A Preferred Stock and warrants to purchase shares of the Company’s common stock in Other (expense) income, net. Both
Slide 27: 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; stock-based compensation; amort
Slide 28: 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 29: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) $000's 1Q23 2Q23 3Q23 4Q23 FY23 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 30: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) $000s 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 2Q23 3Q23 4Q23 FY23 GAAP Operating expenses $ 117,109 $ 111,789 $ 107,614 $ 112,748 $ 449,260 $ 116,591 $ 108,092 $ 102,647 $ 105,038 $ 432,368 Stock-based compensation (3,675) (3,798) (4,116) (4,490) (16,079) (5,164) (5
Slide 31: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 2Q23 3Q23 4Q23 FY23 GAAP Diluted earnings (loss) per share $ (0.47) $ (0.20) $ (0.12) $ 0.12 $ (0.63) $ (0.23) $ (0.13) $ (0.08) $ 0.04 $ (0.39) Stock-based compensation 0.03 0.03 0.03 0.03 0.12 0.04 0.03 0.03 0.03 0.13 Amorti
Slide 32: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) Three months ending Year ending March 31, 2024 December 31, 2024 Midpoint¹ Range Midpoint¹ Range Revenue ($ millions) $ 185 +/- $5M $ 855 +/- $15M Gross margin: GAAP outlook 47.7% 50.3% Stock-based compensation 0.3% 0.3% Amortization of acquired technology
Slide 33: Thank You
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