RBBN - Earnings call transcript Q1 2018 | Ribbon Communications Inc.

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Ribbon Communications First Quarter 2018 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded on Thursday, April 26, 2018. I would now like to turn the conference over to Sara Leggat, Head of Investor Relations. ma'am. ahead, go Please

Sara Leggat

morning Conference to Call. Good XXXX First Financial Results and Sarah. our welcome Quarter Thanks,

Today's and and leveraging and all available affect our opportunities Form to customer results timing the XX-Q without supplemental On that our of to as during statements available each Fritz successfully and including, IR and A efforts. shortly strategy, this our from this we'll may are conditions, integrate CEO; CFO. website recognition, Please ability XK, limitation, impact call Hobbs, call of IR products and contained IR after President release the of and forward-looking in reports discussion earnings with A transcript market and today's and me website latest at such our and call. Daryl recording differ our subject market statements Ribbon be uncertainties, GENBAND various outlook. are and or XX-K, opportunities posted regarding factors market may a have note items, Communications' these is of on financial annual, on and and future difficulties been Actual risks of the quarterly data acceptance business, of services, that which the future today, ribboncommunications.com. making cost-containment materially are company's financial release, purchasing forward-looking press to call, the these and in of events other revenue Raiford, current be website. decisions, economic Sonus, will results on

from forward-looking actual the results statements. of risks could many and to differ cause materially these Additionally, uncertainties

some specifically update may statements forward-looking any to point, elect obligation we revise or so. do While we disclaim to at

non-GAAP Reconciliations With Officer, issued our website President are me financial Fritz Hobbs. financial that presentation During turn we'll historical it and press in measures Chief to our certain release GAAP over today. included earnings our Executive and be referring of in measures comparable non-GAAP to measures. our our GAAP call, to on let and

Franklin Hobbs

to today. the call Thank Sara, and good morning you, everyone on

operating EBITDA established First quarter was adjusted million. provider, non-GAAP pleased our Communications. of We and We're revenue full demand our as including $XXX meeting $X of first an million, innovative for quickly with real-time performance customers' Ribbon as the secure, technology communications. Ribbon quarter

manner believe increased ensure to that we profitability of market and leading for highly Ribbon the Specifically, that solutions integration priority driving runs in both cost shareholder the modernization a merger process. synergies value. last providers stated to top I manner, capabilities network our trend our a that have brought enterprises. and efficient our -- efficient to that and in and service will lead On meaningful for call, part is highly turns we XXXX are We capture the as directly

We have at target $XX the in we cost merger. shared over the all date, annualized exceeds you time operationalized of million which the synergies with to

first for our to on who guidance strategic our other then greater call million over the will first detail. the -- solid integration to business you in fiscal we quarter we provided deliver update discuss call. to last and priorities I outlined will during turn our in financial the Daryl, results quarter positioned our EBITDA previously This against are $XX like well Following adjusted of believe I'd of morning, XXXX. our performance,

and track are our has have been for team on to possible seamless integration necessary already integration efforts. actions of operationalized our as partners. customers and ensure efforts that with many our tirelessly as Our remaining worked our We've

We cost are efficiencies driving our realizing and structure. synergies across

we eliminating the operations investment, R&D services. levels are streamline including investments but growth are offering. our In optimizing our of and and chain, the product of in goods increased as resources maintaining areas, cost we On we sold area, front, supply healthy redundancies

Finally, synergies [Technical joining inherent our and the we where administrative duplication SG&A together. two areas, combined in we're realizing already meaningful Difficulty] removed companies in we've

Today, to position that large significant footprint like a talk previously. opportunities our I'd strong great business. diverse has initiatives and is progress about will which to Now global Ribbon with base. our we and scale. continue towards A our market This a and outlined foundation I on develop strategic a customer market

investment is Our into of first modernization. products next initiative phase the lead the solutions and core our to continue in customers our network to

legacy share enterprises by to opportunity Our characterized to solutions transition service presents leadership allow This our an virtualization, us, given position. network modernization attractive for existing technology. virtualization IP-based networks transition and is providers their network market which

priority Software quickly virtualization and more controller, that to Recall R&D we continue we demands. Verizon announced business consumer that momentum to customers. border help session January, as as gain a been to in an providers Ribbon power solutions respond selected and enterprise enterprises investment has its solution its for These for us. virtualized service service

an hardware-based seeing city are opportunity gain to Verizon center share data providers. from up metropolitan signed SBCs SBCs service SBC major services, the a utilize this is solution. market As innovative evolved emerging from with has to to market we

area We as from this and SBC transition ramp over activity, providers expect deployments. other as to continues hardware-based to its away be time Verizon service a growth

enterprise largest X of our continue competitive deployments bid ever our the IP see in over Defense. U.S. also before we Voice We federal to a Shortly companies, traction the Department government in merging solutions. won of one for with communication

As forward. that Ribbon, us I'm solutions, communications Department offer to GENBAND comprehensive certifications U.S. the both many We with potential could opportunities core to likely required more this provide the and either which Sonus standalone unified we Overall, going new signature win our encouraged have than allows or door as will network from transformation for SBC military. solutions the the a about open believe the of Defense, up provide JITC companies. with

initiative expand of second is adjacent markets Our applications. to related into

the coming cloud-based see years. for Kandy areas service security a X and we platform meaningful Ribbon as Protect Specifically, our communications growth offering, as offering our

a their one of partner successfully serving -- with rental car concept major channel proof global as sites are locations progress communications in pleased communication airports, communications at to car and and a multisite They migrating the United Kandy They providing our services. continue our experience to cloud Kandy our are sale reliable car We for make serving company report, platform. neighborhood business major rental of in with Ribbon to selected a we completed States.

expansion definitive in expected the agreement be quarter. completed We to second

-- planned more So far, migrated communications future. been XX in have XX locations Kandy, to and are their the

based portfolio to are manage announced their Ribbon detection the threat to behavioral Protect provides at threats Tier enterprises We is market, Asia-Pacific contract with and This announce to Ribbon one security win strong excited these our and February. in for -- region. and provides the end-to-end analytics in about future our pleased significant Congress reference which service a World the visibility, first providers We're of recent for of extremely a beachhead security Protect as we a point and our Protect, in service Ribbon networks. very provider enhancing are it launch continually profile help us and a X customers, establishes mitigation existing Mobile customers.

year moves business as of potential in We phase follow-on the the expect customer into to generate second half security. with next this in XXXX, of revenue this

is and of growing Tier footprint a we completed initiative our gateway competed third ability demonstrate our core global that meet delivery our mentioned base. the products Protect softswitch The This broaden -- our Ribbon and our to to win, initiative our rapidly base. utilize the media strategic leverage first installed capabilities installed the collaborate offerings leverage to the across is to In and acquire, And capacity It customers. fourth quarter, are its capacity believe in to plans has X contract Asia, of to their since to We customer which relationships large-scale connect earlier, networks. and there and number I expand large, to alliances. needs. provider and for other our been carrier XXXX. significantly both opportunities distribution first in were our to industry a network partner networks or our selected ability has service pursue for our We global

relationship to we strengthen our with continue Microsoft. example, For

Microsoft newest selected Direct offering, teams. services Ribbon -- During the for controller Microsoft voice offices deliver Routing to session office the border to XXX's secure, quarter, integrated, portfolio

merger As the a segment. In first for very was later our X portfolio expect against we in against SBC positive year, progress near-term great ramps made next as our year, executed cost us in in our which strategic we busy up migration realizing of and synergies. total, we it this priorities, quarter, this integration priority the ongoing positioned first same the time, to the future. for -- At teams a and impact well

continue operational execution a the global strong that our strategic offerings, focus firm enhance of that and and our demonstrates our our progress company advantage. this gives scale believe footprint. suite to We operational quarter competitive first The

are we secular on to virtualization, Daryl partners, trusted focused share to market detail. over on of gaining We customers market move to leadership. in innings believe cloud. to help financial XXXX count their shift our virtualization them the and our results Our in a in call us Daryl? discuss and I'll to Ribbon early more outlook turn in expanding the as is now

Daryl Raiford

slides everyone. morning, financial XXXX. first IR provide have XXXX our our I'm results review details performance. our to and on going The the good quarter the and financial of Fritz, for on our website remainder the commentary historical Thanks, non-GAAP then for outlook regarding

website. we framework what get reporting to in you IR these have prior materials our with encourage Our I is presented periods. consistent from

the effect a non-GAAP reminder, a these purchase accounting of items to in and in As with financial when detailed materials. I our metric, exclude conjunction other metrics financial earnings refer

our today's for and available Our of on the end you the earnings Investor non-GAAP and press are financial both metrics website. Relations both at presentation, are our reconciled release

performance produced a Turning Ribbon solid that to financial expectations. quarter, the exceeded first our

in from and EBITDA non-GAAP $XXX of large initial non-GAAP these benefited million. $X year a software, products revenue adjusted accelerated We revenue professional results first initial believe real-time first million performance proposition with pleased completions. our new installed summary revenue solutions. unique directed quarter cloud-native of our first team the hardware was stronger indication a we order as performance. the outlook EBITDA loss full project view terms, a with our communication both as offering combined Ribbon's product first kicked from This follows, are quarter was non-GAAP million. Ribbon's of at non-GAAP was outlook We margin our quarter and $XXX customer exceeded $X.XX; rich offering exceeded solutions $XX and pipeline sales higher total new positive of prospects. XX%; of was by quarter XXXX million adjusted as was in solid have services our value we base and million. Ribbon by as $X were financial products gross In share to our sales due our sales volume We and million; $XX results XXXX of improved per armed business

margin earnings benefited higher with accelerated revenue cost from coupled Our mix synergies.

in the our profitability, demonstrating revenue incremental are business. we that leverage quarter disproportionally building We within grow, pleased are improved the

unchanged to Borrowings Cash quarter Turning balance credit at exceeding were from operations, quarter, was investments flow at were up of $X line capital $XX the sheet. from year-end, our unchanged under million, $XX as and availability well undrawn fourth and XXXX. level million we million. generated $XX million, In of cash the slightly from revolving in million investment. remained which slightly $XX the of

our I outlook. Now XXXX would to like to turn

I'd to on do of a to to adjusted intend annual so, We numeric do new our We EBITDA basis. last guide basis. investment Ribbon's community the I on to with not policy provide Before we guidance full guidance mainly, earnings quarterly formal everyone generally that remind call. year on profitability, shared a like plan

continue we XXXX, year some overall conditions caution. full the approach with to market For

product maintain approximately will XX% compared coupled the our we full this revenue. our be view year Given with non-GAAP streamline process offerings, with pro that revenue lower to ongoing XXXX outlook, XXXX by forma do

XXXX EBITDA, on of year operating terms we activities, improvement capturing focused merger our savings. adjusted expense to In completing margin full aggressively integration and continue

savings. for closing adjusted positions that, turn XXXX already of confident stated, like back an I EBITDA in $XX EBITDA call over remain in With adjusted non-GAAP importantly, adjusted full least this our year cost to million. Ribbon As Fritz velocity, at million XXXX remarks. rate would previously operationalized to $XXX to million. $XX EBITDA the And we run guidance therefore of annualized have at exit Fritz We XXXX

Franklin Hobbs

with Thank for for customers. Ribbon a integration, on we you, many by year worldwide will forward our foundation improved solutions, sound to reputation Daryl. provide have our service In financial provide and meaningfully representation summary, fronts. innovative going a profile This moving forward our executing commitment outstanding business while

we them industry, navigate customers help our in products, succeed. and commitment to As resources continue the the trends have to the

would for All Ribbon questions-and-answers. of to excited about us ask future. call up at the to are open the the now I operator like

Operator

Instructions]. [Operator

Company. & the with William from Dmitry comes question line first Netis Blair Our of

Dmitry Netis

My kind of question is twofold.

choppiness go you sort I the kind bit view us but year? how how give give quarterly, here? kind to well, Is suppose Do Was go but as we you next expect of as First, QX, the of get know you sequential -- that in in to don't I'm I of a steady built project the off any quarters? a of into revenue it's can us little guide the there about sorry, think seasonality revenue? through a progression sense you of sequential X a any through you

Franklin Hobbs

that expect chunky stronger. second Well, it. historically don't in that, we good many to that, so going business been our basically, that pattern regards will But history that's think about half way would that have it's see again, be second -- a or a indicates is but we half. the beyond to we the suspect it's anything stronger has that we a change, And feel

Dmitry Netis

Okay. QX? fair Is better assumption? QX a And that usually -- than is typically your

Daryl Raiford

true this true is is seasonally quarter quarter -- Daryl. the the It typically is is the that It first first that lowest Dmitry, quarter. is

Dmitry Netis

I Okay. to good. was you margin It about see little, move thinking on how the second estimate, below that but And wanted year. as Very through then I gross a gross margins. suppose, my you're question

tell could well. that you us would That it If move and double-click forward? out great be plays as as you on how

Daryl Raiford

like with themselves OpEx other we happy will that. that, the with we our synergies like quarter, and improving this Well, be and cost that are our as year things do metrics margin conjunction gross that in financial believe through manifest

Dmitry Netis

COGS went the was give Some little else? specific a Can of December volume of leverage but as bit XX%. XX.X%, color anything anything was -- the some margin? product what get you lower there the kind top you in -- I it drove line was of lines... built to us What you that elements revenue, and of or gross

Daryl Raiford

no... is there No,

Dmitry Netis

the to as to you decline or there your through up that's there? anything -- the us going as XX% go you that of give lower on rationalize revenue, to year margin portfolio. kind cleanup Is us the of you kind contributed a some maybe take give that as given products build That you as intend anything on out of sort you can margin else will confidence of

Daryl Raiford

revenue I and and we a think fourth that was the the is very on in leverage million. fourth factor, Seasonally the hit non-GAAP major of you $XXX is the which quarter margin did contributive get you lot our that, always yield high quoted. quarter reported across do that

of basis This quarter, we're reporting which in $XXX million or nearly -- is $XXX revenue million fixed we on reduction, terms factor. a contributing principal the coverage And base the that sequential seasonality. across expected cost

Dmitry Netis

sort higher million again, couple maybe $XX the or you there progress as On about is may. into this that in of And as than in get progression, thinking kind in it gives more, buildup have guidance, you EBITDA and you you benefit most be you should that a better kind $XX QX? a through that the EBITDA, choppiness a as if I of of million far target came -- Anything year view which anything we the year. for steady is

Daryl Raiford

building EBITDA, very that said demonstrating that in are with ago, higher initial and then that. did moments we're with we we're leverage benefit from I the business. our we're revenue Well, than scale is EBITDA, the That expected the delighted -- and pleased the disproportionally outlook as the

-- guidance for progress million would that quarters as seasonally, the continue and the $XX forward, we we -- a backward would look not expect not we Moving take expect our step we towards on million I year. take full just the I $XX that that to firm a over on

Dmitry Netis

doing I may. -- related, border of question product your want I talk if suppose, more that get growth? relative sort sense is but trajectory to it, session to wanted be way understand, are to sequentially or media can legacy I on trying basis? how a Okay. good, you that'll to how a a year-over-year of you maybe product a controllers just of versus Anything is whichever address to doing gateway last My business.

Daryl Raiford

what do SBCs and is we before network or at solution transformations up. network products as sell were the that as just -- our With overview, transformation solutions of network this mix the time the solution. customers I on and customers, flat to to may part and specific media pro configurations an a need, delivering highly individual softswitch and were dependent types they upon network year, modernization that. we last of said, forma Right, maintain understand and in the still gateways slightly said we that, and We basis space,

Operator

with Our Latimore next Northland Markets. comes Mike line the Capital of question from

Michael Latimore

mix, revenue or the you mix, can of on just think it's and about this guidance give whether you terms how general products longer term? in Just some service, that year

Daryl Raiford

General in were guidance and revenue think a on recognition year and we to million, of the line less $XX related of completion slightly prior year's services pro mix. last non-GAAP just timing the quarter to professional period. a and reported basis achieved This is that's and forma, how just compared and about services that with the

mix, the roughly drive that factor what There's material line companies the substantial experienced mix in in remain the have a change. nothing we So to -- would no expect with past.

Michael Latimore

percent of that as And categories us growth on bookings? -- -- those a as or some kind called maybe services, and service, time? the over then on of carry Got you Can sort on Kandy then the it. rate group you a areas. growth of then expect SBC little out you percent of color give were from as a revenue, a what color what And the

Daryl Raiford

contract concept of to and be XXXX, -- encouraged of that we The [indiscernible] opportunities we're within Fritz Protect. Ribbon or the moving that funnel terms in the immaterial with and Kandy in expect Well, under and forward revenue proof are with. are we out, set

we we're those. the robustness rate our closure on evaluating rates the the from But a the we customers. half or percentage funnel XXXX, to do a rate the of those material and of -- material and to total those as growth -- be the expect Our It deploy -- to watching on during not revenue. the and are revenues -- depends the from to total both less in of company the second

Michael Latimore

Do a on of last growing it's revenue that of enterprise or kind staying percent the roughly where of segment. kind just as been? And see you

Daryl Raiford

our We do. Investor as it's in basis, an as reported On Day. reported -- non-GAAP, our

to service and business. GENBAND our see that to reduce. business the so We to of compare for a as enterprise You'll as mix addition percent expect back GENBAND naturally grow be we doing to do without legacy within the and with of our that enterprise the XX% provider that's financial Well, some, did metric continue we're to pursue that -- strategy. of enterprise revenue a

Operator

[Operator Instructions].

of comes D.A. with next Kelleher Our the question from Davidson. line Mark

Mark Kelleher

to If play you how your it look and does Is X? revenue? those key out in How at partnership Microsoft Verizon partnerships, between couple of revenue consistent Is the out growth? Is it Microsoft, the lumpy? play it seasonal? a and Verizon does

Daryl Raiford

Verizon product approximately -- sale the software software of million XXXX, product occur. and extent Microsoft a with in did to from SBC partnership is quarter lower SBCs, to steady more more company that and capacity different a situation, sales report the SBCs, the supplying is around third of they Verizon and $XX our the that Sonus primarily The virtualized legacy -- like that is related channel software SBC relationship. to

material deployments could that be really then as they channel software of more -- know It's could business, sale. that occur, not more a and they would lumpy. -- You be a be it's are

other related more very Verizon more related deployment. So it's channel to well, each not -- provider being really being and Microsoft service with they're

Mark Kelleher

SBCs Is relates overlap talked to GENBAND product you the rationalizing of right? portfolio. I about and your between Sonus. that that in And the some guess

Daryl Raiford

be SBCs on it component looking that. our and Yes, evaluating -- of And We customers quarter, example. is not that to that would or that say product good size do is to -- portfolio working contribute GENBAND undertaken with last reduce products profitability. a of we as a that we've did process are that at and meaningfully streamlining ongoing. a that eliminate an SBCs

Mark Kelleher

talked you've thoughts Okay. And update I on opportunity industry for us Can consolidation. just you know about in the the past maybe there? your

Franklin Hobbs

doing broader development larger broader Well, new that -- and is, and is to want this uniquely line, customers, the of reach who's reach, I someone years that that many an companies. there's that really both the the as the we think prior because are broader becoming is and product we actually to positioned regard, me really larger we relatively they interesting is a broader which going on there think of been what's in on for -- industry, geographical here increasingly have and clear

So we think to be relevant. our global footprint going is very

there'll across along built-in think to some anywhere we there that may and of way the be be really is industry opportunities with really relevant there'll in -- going. be means acquisition I is think because companies, discussion we some of for are the those that lines, collaborate world do asset I open our the think, So of either midsized opportunities, but involved this increasingly any being -- relevant maybe

Operator

are over turn There the call questions registered. further back the presenters. no to I'll

Daryl Raiford

you thank our this for everyone, Well, call morning. joining

very at different June. able we've then. conferences a we and Ribbon as said, look will be our progress May I and number we forward to As and with months to with you. both be of you Fritz results. see Thank of you the to speaking into We hope through pleased is

Operator

lines. gentlemen, that and conference your conclude thank all that please and you your Ladies for you does today. disconnect call We for ask the participation,

Ribbon Communications (RBBN) 26 Apr 182018 Q1 Earnings call transcript