Ribbon Communications Inc. · NASDAQ:RBBN
Ribbon Communications — Q4 2019 Earnings Presentation
34 slides from Ribbon Communications's earnings presentation, Feb 19, 2020
Slide 1: Fourth Quarter and Full Year 2019 Results
Ribbon Communications Fourth Quarter and Full Year 2019 Results February 19, 2020
Slide 2: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements 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 statements of historical f
Slide 3: Cautionary Note Regarding Forward-Looking Statements (continued)
Cautionary Note Regarding Forward-Looking Statements (continued) All of our forward-looking statements involve known and unknown risks, uncertainties (some of which are significant or beyond our control) and other important factors that may cause our actual results, performance or achievements to be
Slide 4: Company Introduction
Company Introduction gg fateyeresal
Slide 5: Introduction to Ribbon
Introduction to Ribbon Key Statistics • Ribbon is a global leader in secure real-time communications, providing software and cloud network solutions to communications service providers and enterprises 1,000+ 2,209 Customers (1) Global Employees (1) • Serving 1,000+ customers located in over 100 coun
Slide 6: Ribbon's Strategic Direction
Ribbon’s Strategic Direction Invest In Core Products with Balanced Investments Broaden Solution Offers to Global Installed Base Expand Into New Adjacent Markets and Applications Scale With Acquisitions and Alliances 6
Slide 7: Where You Will Find Ribbon
Where You Will Find Ribbon The World's Leading Tier One More than 350 Service Providers and U.S. Department Independent Software of Defense Locations Vendors The Largest Banks, Airlines, Retailers and Manufacturers across the Globe $ 7
Slide 8: 2019 Results
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Slide 9: 4Q19 and 2019 Highlights
4Q19 and 2019 Highlights Growing Accelerating Improving Cash Flow and Software and Gross Margin Profitability Margin Balance Sheet Enterprise Sales Revenue from pure Record quarterly Non-GAAP Record Adjusted EBITDA Operating Cash Flow of software products Gross Margin2,3 of 68% in Margin2,3 of 27% i
Slide 10: Fourth Quarter and Full Year 2019 Financial Results
Fourth Quarter and Full Year 2019 Financial Results 4Q18 4Q19 FY18 FY19 Revenue $169 million $161 million $588 million $563 million Non-GAAP Gross 68% 61% 64% 63% Margin1 Non-GAAP Operating Margin1 16% 25% 9% 13% Non-GAAP $0.22 $0.27 $0.37 $0.47 Diluted EPS1 Non-GAAP $29 million $43 million $62 mill
Slide 11: Revenue Components
Revenue Components $M’s 180 150 Pure software revenue in 4Q19 120 12% accounted for 90 51% of product $161M 38% revenue as 60 compared to 35% 50% in 4Q18 30 0 4Q18 1Q19 2Q19 3Q19 4Q19 Product Maintenance Professional Services 11
Slide 12: Product Revenue by Market
Product Revenue by Market $M’s Enterprise 100 revenue in 4Q19 accounted for 29% of total 75 21% product revenue as compared to 29% 50 23% in 4Q18 $81M 58% 79% 22% 71% Enterprise 25 revenue grew sequentially 33% in 4Q19 0 4Q18 1Q19 2Q19 3Q19 4Q19 Service Provider Enterprise 12
Slide 13: Ribbon Condensed Statements of Operations
Ribbon Condensed Statements of Operations USD Millions except percentages and EPS 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 GAAP FINANCIAL MEASURES Product Revenue 52 63 77 87 279 47 72 61 81 262 Service Revenue 70 74 75 80 299 71 73 77 80 301 Total Revenue 121 137 152 167 578 119 145 138 16
Slide 14: Ribbon Condensed Balance Sheets
Ribbon Condensed Balance Sheets USD Millions 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 ASSETS Cash and Investments1 85 55 43 51 46 51 40 45 Accounts Receivable, Net 126 136 151 188 135 155 163 193 Inventory, Net 21 19 22 23 19 17 14 15 Property Plant Equipment, Net 24 24 26 27 28 28 27 29 Goodwill and
Slide 15: Ribbon Condensed Statements of Cash Flows
Ribbon Condensed Statements of Cash Flows USD Millions 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 Cash from Operations 3 (26) (1) 14 (10) 20 10 (6) 33 56 Purchases of PP&E (2) (2) (2) (2) (8) (4) (2) (2) (2) (11) Stock Repurchase - - - - - - (5) - - (5) Business Acquisitions - - (46) - (46) (
Slide 16: Ribbon Revenue Key Statistics
Ribbon Revenue Key Statistics USD Millions except for percentages 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 GAAP Revenue Product 52 63 77 87 279 47 72 61 81 262 Service 70 74 75 80 299 71 73 77 80 301 Total Revenue 121 137 152 167 578 119 145 138 161 563 % of Total GAAP Revenue: GAAP Revenue
Slide 17: Business Outlook
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Slide 18: Business Outlook
Business Outlook Full Year 2020 Adjusted EBITDA1 The Company expects full year 2020 Adjusted EBITDA to be approximately $90 million to $95 million, excluding the pending acquisition of ECI Telecom Group Ltd. 1) Ribbon has not provided a reconciliation of Adjusted EBITDA or Adjusted EBITDA margin for
Slide 19: Appendix
APPENDIX g} rioddon
Slide 20: TAM and Market Share References
TAM and Market Share References 1. TAM & Market Share IHS Markit, Service Provider VoIP and IMS Equipment and Subscribers, (Quarterly) [TAM] (SS, SP-SBC, MGW, VAS) August 23, 2018, Edition: Q2-2018 (for the quarter ended 30 June 2018) [Market Share] (SP-SBC, MGW, VAS) May 22, 2019, Q3-2019 (for the
Slide 21: Basis of Presentation
Basis of Presentation Totals may not sum due to rounding. For all 2018 periods presented, the Company increases its non-GAAP Adjusted EBITDA and other relevant non-GAAP measures for the 2018 adoption effect of the new revenue standard. Effective January 1, 2019 and for each subsequent period present
Slide 22: Discussion of Non-GAAP Financial Measures
Discussion of Non-GAAP Financial Measures Discussion of Non-GAAP Financial Measures Ribbon Communications’ management uses several different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, making operating decisions, planning and foreca
Slide 23: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) Impact of New Revenue Standard For periods prior to the first quarter of 2019, we adjusted our non-GAAP financial measures for eliminated revenue resulting from our adoption of the new revenue recognition standard in 2018 and related cost of reve
Slide 24: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) Acquisition-Related Facilities Adjustments GAAP accounting requires that the deferred rent liability of an acquired company be written off as part of purchase accounting and that a combined company’s rent expense on a straight-line basis begin as
Slide 25: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) Settlement Expense In the first quarter of 2018, we recorded $1.7 million of expense related to settlements, comprised of $1.4 million for the settlement of litigation in connection with our acquisition of Taqua LLC and $0.3 million of patent lit
Slide 26: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) Restructuring and Related Expense We have recorded restructuring and related expense to streamline operations and reduce operating costs by closing and consolidating certain facilities and reducing our worldwide workforce. We review our restructu
Slide 27: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) Tax Effect of Non-GAAP Adjustments Beginning with the second quarter of 2019, non-GAAP income tax expense is presented based on an estimated tax rate applied against forecasted annual non-GAAP income. The non-GAAP income tax expense assumes no av
Slide 28: Discussion of Non-GAAP Financial Measures (continued)
Discussion of Non-GAAP Financial Measures (continued) Adjusted EBITDA We use Adjusted EBITDA as a supplemental measure to review and assess our performance. We calculate Adjusted EBITDA by excluding from net income (loss): interest income (expense), net; income tax provision; depreciation; and amort
Slide 29: Annual and Quarterly GAAP to Non-GAAP Reconciliation
Annual and Quarterly GAAP to Non-GAAP Reconciliation $000's Q118 Q218 Q318 Q418 FY18 Q119 Q219 Q319 Q419 FY19 GAAP Gross margin - total 45.6% 54.7% 53.9% 57.3% 53.4% 47.6% 55.5% 57.3% 62.7% 56.3% Adjustment for new revenue standard** 1.2% 0.8% 0.5% 0.5% 0.8% 0.0% 0.0% 0.0% 0.0% 0.0% Adjustment to co
Slide 30: Annual and Quarterly GAAP to Non-GAAP Reconciliation (continued)
Annual and Quarterly GAAP to Non-GAAP Reconciliation (continued) $000s Q118 Q218 Q318 Q418 FY18 Q119 Q219 Q319 Q419 FY19 GAAP Operating expenses $ 97,656 $ 91,747 $ 89,800 $ 94,537 $ 373,740 $ 92,817 $ 87,769 $ 76,191 $ 249,767 $ 506,544 Stock-based compensation (2,641) (1,995) (2,430) (3,547) (10,6
Slide 31: Annual and Quarterly GAAP to Non-GAAP Reconciliation (continued)
Annual and Quarterly GAAP to Non-GAAP Reconciliation (continued) $000s Q118 Q218 Q318 Q418 FY18 Q119 Q219 Q319 Q419 FY19 GAAP Diluted earnings per share or (loss) per share $ (0.44) $ (0.20) $ (0.10) $ (0.02) $ (0.74) $ (0.29) $ 0.45 $ 0.01 $ (1.36) $ (1.19) Adjustment to revenue for new revenue sta
Slide 32: Annual and Quarterly GAAP to Non-GAAP Reconciliation (continued)
Annual and Quarterly GAAP to Non-GAAP Reconciliation (continued) $000's Q118 Q218 Q318 Q418 FY18 Q119 Q219 Q319 Q419 FY19 Adjusted EBITDA GAAP Net income (loss) $ (44,904) $ (19,922) $ (10,158) $ (1,826) $ (76,810) $ (30,832) $ 49,470 $ 1,650 $ (150,363) $ (130,075) Interest (income) expense, net 59
Slide 33: Annual and Quarterly GAAP to Non-GAAP Reconciliation (continued)
Annual and Quarterly GAAP to Non-GAAP Reconciliation (continued) $000's Q118 Q218 Q318 Q418 FY18 Q119 Q219 Q319 Q419 FY19 Adjusted EBITDA as a percentage of revenue ("Adjusted EBITDA margin") GAAP Net income (loss) as a percentage of revenue -37.1% -14.5% -6.7% -1.1% -13.3% -25.9% 34.0% 1.2% -93.3%
Slide 34: Annual and Quarterly GAAP to Non-GAAP Reconciliation (continued)
Annual and Quarterly GAAP to Non-GAAP Reconciliation (continued) $000's Q118 Q218 Q318 Q418 FY18 Q119 Q219 Q319 Q419 FY19 Unlevered Free Cash Flow GAAP Net cash provided by (used in) operating activities $ 3,392 $ (26,083) $ (850) $ 13,946 $ (9,595) $ 19,579 $ 9,540 $ (6,488) $ 33,054 $ 55,685 Inter
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