RBBN - Earnings call transcript Q3 2018 | Ribbon Communications Inc.

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Operator

Welcome to the Ribbon Communications Third Quarter 2018 Earnings Conference Call.

During the presentation all participants will be in a listen-only mode, afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded on Tuesday, October 30, 2018. I would now like to turn the conference over to Sara Leggat, Head of Investor Relations. Please go ahead, ma’am.

Sara Leggat

to quarter welcome conference financial and call. afternoon, our XXXX third results Good

results the and on the be indicated, qualified are on press website. Statements a non-GAAP in non-GAAP company’s refer in Fritz. let forward-looking information call profitability adjusted with found this Fritz will call. most and current And today, like CEO; statements A IR the me recording statements call, after within Relations recent me On call the statements website. otherwise update our forecasts are you on posted presented. section The to any obligation during in are we’ll Such the on materially the that, that forward-looking to results forward-looking their XX-K other Raiford, Any reconciliation A discussed in the regarding our Today’s results, section report of are making assumptions shortly GAAP of contained release from to with to about risks marketplace been based financial that this and cause by cautionary could to CFO. and Hobbs, company EBITDA. our of growth available press the expectations, over actual discussed that opportunities I’d be have assumes and release to the its basis. differ call statements. Unless business, statements presentation of to may include Investor annual be Daryl remind company’s uncertainties no and all President our results SEC filings. today. and turn entirety and Form website

Fritz Hobbs

highlights, solution give our third turn with detail an momentum initiatives. good GENBAND which built. operational customers, year America internationally, status customer global on We’ve afternoon breadth demonstrating past and which profitability. both lastly, in which was key well the to year-over-year pleased of and revenue focused in another has acquisition and sales will non-GAAP third you, $XX a of cost August the update extensive results, XXXX in quarter We from benefited quarter to the our efficiencies, million to remained North of of improvement I’ll of strategic from revenue depth over sequential total and I’ll financial $XXX and on both who included offering Daryl, and our everyone financial Thank the million, product our our performance overview and outlook on quarter delivered then that in integration quarter third XXXX. approximately quarter improving discuss our have Sonus more very the call full of Sara, I’m our our of our we validate structure brief reducing Ribbon’s call. for this closed as the as base. XXXX. Edgewater and our the

solid quarter in the results, I will EBITDA was you moment. XXXX. very solid very – these view a $XX just increase results these non-GAAP and of second through adjusted the from Our a Again, details as XX% million, Daryl take

integration the plus the one an to addressed in M&A our investing namely third, describe immediate fourth, and our into adjacent global leveraging and P&L nine our expanding I’ve capture within four and pillars ecosystem our strategy, the our near-term complete of second, core savings the scale; we Over value products; strategic opportunities. last what cost four of, as GENBAND-Sonus first, priority order opportunities months, in to markets;

this Turning summer. efforts to the our integration progress. integration The bulk Sonus-GENBAND of completed large were

through cost operationalized seeing have continuing and XXXX. with improvements in cost considerable still nearly gained savings. $XXX pleased of our have anticipate results structure million I’m our We and efficiencies integration

customers. quarter team expanded Ribbon as I the opportunities capturing to Ribbon integration We’re products, quoting join We’ve excited international space have for strategic our orders to offers begun as us now Ribbon us also activities edge in expansion. it highlight have some made we now, family. in and we to our the sales achievements to market focus on moment sales product marketing We’ve opportunities. demonstrate strong from fulfilling enterprise and few is and outstanding and a positions team would and commenced. us Edgewater product the the Edgewater investments for new capabilities have brings progress combined key like the take certain pillars systems, Edgewater a deeper Networks past Edgewater to already

our core in in strategy of terms invest our to First, products.

traditional We enterprise targeted our our core we continue gain in while market, to in our verticals. execute provider products for service well traction

For we fixed we transformation network continued X through project. their U.S., example, quarter, globally. for third In estimated during less halfway provider, and are transformation projects large fixed a a continued network XX-year the service the than project Tier

and deployed – our service two other X expansion EMEA solutions SBCs on North Similarly, for saw American Tier we providers we multiple providers. and service solutions. our at capacities at and Additionally, products gateways products in expanded and

application call in to is SBC, We two government center Turning both SWe, software-based the the the our SBC We SBC vendor to vertical. multiple a it the solutions vertical, global out demand also communications. Notably, using financial strong strengthen in customers saw U.S. IP-based large with applications. to and across virtualized, industry-leading, saw agencies for service SBCs one and of Canada, of incumbent their banks their as replace order Ribbon moves

at software enterprise. the expansion also capacity our we deployment cable focused our is company for American a a SBCs well Finally, for a as saw on of large as which North communications SBC continued Bandwidth, at orders provider

our to base. we large installed leverage our footprint Second, continue global in

in Canada GENBAND’s For the utilizing SBC, an our deployed software. customer based TELUS, software-based SBC example, rhythm-virtualized, SBCs, SWe

to time, of We relatively a of more we transitioned large transition expect period be GENBAND through mid-XXXX. customers to them project portfolio roughly than Ribbon SBC XX short former and in half to

significantly capacity with Tier that X switches and again, the soft provider wireless gateways. media we expanded highlighted A third network year, this Asia. Next, major its earlier our in quarter in

former service Optus, Lastly, SBC large abilities Australia. cross-sell for our product, provider products in the media order also X,XXX Ribbon illustrating major from delivered we benefited to softswitch a merger. GENBAND our This plans by and our customer deploy a gateways from

Ribbon both Now markets you applications. related I’d encompass third on to of which and adjacent and like initiative, to Kandy, our into Protect update which is expand

In of SoftBank $X terms quarter. of with first this recognized we past Ribbon revenue customer deployment smoothly, approximately Protect, our went million and in

from this in We expect XXXX. business expansion customer

U.S. second Protect also as a We signed large Ribbon university our customer.

Ribbon pipeline to Protect grow, numerous Protect continues Ribbon customers product. trialing the are Our and

U.S. We to contract CPaaS service its progress embedded to Kandy’s communications make to a Kandy. for signed customers. enable continue white-label We with enterprise solutions provider a with large

this booked our deployed large In addition, locations. third the an they at rental over and we XXXX. profitability. all car I business quarter who turn proving the employee looking capturing time, building as With on At are summary, the profitability. pleased is XXXX the with our year teams has quarter incremental accomplishment we And be am I forward let market call we Daryl. integration strong past is quarter. a from across also work opportunities, as levels in am to American exceptional XXX very that over of a company, driving me priorities our a to I’m proud focused executed Kandy of to excited we’ve that, finish their emphasizing performance same four stayed challenges order encountered. against solid continue met we’ve completing on deployment solid very a successfully underway. our focus of to during European strategic ongoing In and North have fourth

Daryl Raiford

The non-GAAP financial the provide within Thanks, of Investor Fritz, and our Relations year. hello, our website commentary results the regarding and review of to the section quarter remainder our for everyone. XXXX outlook the third the financial I’m our performance. going for historical have details on slides then

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

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

of release end website our of turning results the today’s adjusted press Demand earnings better resulting our Ribbon financial higher-than-expected EBITDA. linearity for in products projection, had non-GAAP the which both financial year and in section reconciled you to than are and presentation, with metrics at Relations over for the had of anticipated. we available the quarter. third Investor Our are Now non-GAAP revenue revenue exceeded strong originally the

excluding time that results consolidated you operating Edgewater Ribbon’s to third of performance. third As going quarter post Networks financial Fritz and mentioned, consolidated I’m the results Edgewater can quarter in included acquisition appreciate fully we effects of Edgewater both August. address successfully Ribbon’s revenue so the results. completed our including close our in the and non-GAAP take business of to are incremental The earnings

won’t forward, to unify the quarter Going fourth report we separately. plan business do this Edgewater rapidly in and

quarter Edgewater non-GAAP XXXX as $XX revenue Edgewater X% financial million. as gateways, technologies non-GAAP from follows; results revenue total controller network which second non-GAAP non-GAAP application comprise other excluding $X both $XXX consolidated higher was media million, products. and of as Ribbon’s benefited of Ribbon XXXX. was were our combinations an demand quarter delivered million. border business compared servers softswitches, revenue Therefore, $XXX of increase million million This with third Edgewater or session Our as excluding revenue our of well for was non-GAAP transformation $XXX which solutions,

Japan, in with the across United Our and Verizon AT&T than service customers. booked provider Asia, States, customers Canada, XX% way led and globe greater Europe the the

We enterprise also in products. experienced improved our SBC demand

the acquisition non-GAAP million, segment’s improvement market $XX of business, non-GAAP positioning revenue to our XX% we XX% us Consolidated was Enterprise quarter well $XX believe consider excluding sales GAAP EBITDA take growth. Edgewater, of Ribbon’s expected adjusted will million future in ourselves enterprise the of recorded delivered Edgewater, allow our we positioned in and product this grew second the With $XX to recent advantage this we market quarter, segment. of EBITDA the edge of XXXX. over million. a adjusted

first share from $X.XX. earnings very profitability cost for our benefited pleased fiscal coupled results ahead were structure the of per Consolidated accelerated months projections for are with quarter, which non-GAAP savings. Consequently, strong our We XXXX. revenue nine was with

an per the was compared share, quarter $X.XX, which second was Our XX% of increase $X.XX earnings of to as excluding non-GAAP or Edgewater, XXXX.

the compared at end the second of turning balance million Cash with XXXX. as and million were the $XX of quarter Now $XX to sheet. investments

offset less of that use be $X than restructuring The $X of cash that used project the of cash the by For result $X primarily was XXXX. improvements. quarter fourth working in of recorded was integration will third in of of expense expense million the was and and integration restructuring, operations acquisition capital quarter operations in We over same period, incurred million. million XXXX,

use a operations, Revolver used the the at availability for $XX under September, In balances, we cash of was end our received acquisition. addition for of acquisition. of million, financing million cash And $XX revolver. Edgewater undrawn net were to reflecting from cash of $XX borrowings the million our Edgewater

includes like I our to move Now would outlook, to Edgewater’s XXXX which contribution. updated

of first year from the strength full the are modest guidance raising our and the Edgewater to nine expected months, we acquisition. demand On better our we expect reflect accretion XXXX

our market million, exceed terms XXXX the our full of on to contributed revenue conditions opportunity of Edgewater. we EBITDA now $XXX year space In consolidated are view $XX expected by to expect we revenue million. provider raising adjusted full and approximately Likewise, projection XXXX revenue, be consolidated in year pipeline, approximately of which $XX of includes million based service non-GAAP to our

were $XXX on million. strategies nearly end described XXXX and the executing adjusted show figures. an we are They with that is will year we market In based delighted in you a outlook, our we Ribbon to above winning that we we taxable now EBITDA current at summary, the believe velocity ago. Importantly, on these

time, of this now we support for operator all call look turn year. I the following fourth are like to we a for and delivering all February We to I’d you That you again to continued on does your questions. our our are in want formal Operator, speaking ready strong next forward conclude focused over thank with for the quarter, Ribbon. question. to At year-end first remarks.

Operator

Capital Markets. [Operator a of Instructions] Northland go line ahead. Latimore we from Please have Mike the And question with

Mike Latimore

with great there quarter Excellent results. Thanks. Great.

On clarify. the wanted – just to

million and quarter, it third that for So the $XX contribute right? Is to saying $XX will million the contributed year. Edgewater you’re

Daryl Raiford

Yes, that’s our current view.

Mike Latimore

$XX contributed be million quarter, Okay. full be million what for I so will change $XX a it where would quarter, guess? I it I a mean, half for the guess,

Daryl Raiford

just business, enterprise Well, Edgewater on the the reseller view experience there does. The based the quite That’s provider no is that our of business our current nonlinearity sequencing. current service the on view doesn’t American and business based market.

scored not beginning to products are of but and We in that. Ribbon great the revenue we’re deal distribution, invest the fourth the global projecting for globally taking a through quarter

Mike Latimore

Got Okay. it.

so. it about $XX your or like revenue Is right? And increasing by guidance million sounds so you’re that effectively core

Daryl Raiford

That is correct. Yes.

Mike Latimore

you of fairly the business, of broad-based quarter? that was mean, on trends That I fourth demand expect do core And again? broad-based similar like it kind I Great. in quarter. in the Okay. mean, seemed broad-based – sort third

Daryl Raiford

terms base We provider – do. across our relative relative percentage we said, and we’re SBC experiencing We quarter. it of the fourth as to what do. market do of I conditions in our mix solution Based on reasonably experience be service opportunity and, a and to in enterprise pipeline,

Mike Latimore

the Got you I product? next it. of revenue And your either normalize quarter mean, by much sort the lost would projects how and this discontinuing And then say year or costs, you does then again GENBAND year? you in shutting as integrated of that first roughly cut acquisition sort down

Daryl Raiford

to categorize basis. legacy to see that diminish our former with GENBAND terms in sales with some truly SBC how revenue Sonus traction our do did the SBC product. really tried a We We the much is SBC that’s product. trialing. GENBAND that, trialing mid-XXXX, And of year-over-year GENBAND in large We then from – haven’t as transitions where some we accounts XK XK former the that. so of XK, are through – remarks, really product – his good expect – we The on Fritz some said

Mike Latimore

Kandy just quarter kind developers? I service offer like the of And I that for what’s won provider the on that – offer using think the then – application to provider is to service I Is U.S. API end would end what’s guess, it. provider, last service Got service an believe, CPaaS. the look the Kandy? one in third Or there? the going like a

Daryl Raiford

offered will – of That’s be enterprise platform the That is customers correct. the exactly through the CPaaS APIs provider. to service the

Mike Latimore

Great. Thanks a lot.

Operator

go [Operator with line Please from Instructions] Davidson. question D. Kelleher of We have Mark A. the a ahead.

Mark Kelleher

Thanks quarter. questions, taking for great the Great.

revenue? of the skewed to acquisition linearity back in go of Just look the toward timing is Edgewater, some Was the linearity of like the – the the back revenue to of what’s quarter? the that

Daryl Raiford

the the linearity quarter the business. – Within first appears historical quarter business, in half. within Edgewater business, the enterprise than of part to typical latter the the more performance the have versus be That the in half the within does of

Mark Kelleher

Okay. pretty Great. winding then some Is project. much complete? be the just What’s And on That GENBAND there? seems integration that down. clarity to left

Daryl Raiford

in we’ve legal We territories. did. our legal of pleased. legally We administrative, Fritz still have tax did process infrastructure the the have complete in in Europe in bulk that We do various summer. with were work the As and We and some up pleased said, very the But we countries that two their large will primarily bulk, integration across we’re companies activities and normal are to foreign organization our still legally year. the said, being large our the things completed. returns along way of of like of through kind final – and of just as terms December very That’s file of legal merged wind activities, normal tax timing. we and next that cycle the in

Mark Kelleher

some you results top on very And Edgewater line. the good side, Okay. had

kind – that was on the was service particularly was in product of quarter? Is there was your variability quarter is there normal doing that particular well it in going particular or it providers? some across the just said with products. You that Or the all something

Daryl Raiford

was very SB customers, that the we less client SBC did contributions nicely our segmentation mentioned. customer as products. as particularly the and The service QX Geographically, accounts. had across saw it in across well off theaters we the the I – base expansion provider multiple had new taking within – mixed And

the is across, combination, SBC – a which as application softswitch, gateway, network broadly of So it combination servers media a the And the is business, our products, transformation our solution products. was based. was it a broad like, various again, and a – was it and

Mark Kelleher

Great. Thanks. Okay.

Daryl Raiford

Thank you.

Operator

of have Securities. we the And ahead. Please with line a question National Galinko from Matthew go

Matthew Galinko

Protect. build It guys. taking for hoping SoftBank Hey, effectively question. the your you pipeline deal. Ribbon talk you’re for after I you good afternoon commercializing Appreciate it my like about was sounds fairly could

material? see going becoming that do feel how know that XXXX? does product today? like forward, just do what particularly to guiding Just I you it, And look about not into that you’re you

Daryl Raiford

right customer judge which we Fritz for a quarter as to being from are – X% with third near the are in it we Protect We trialing of our Well, do total pleased And our revenue signed level don’t we reach Ribbon in university mentioned, revenue. we the is customer, would United one States. we our that expect customers. second are the large contribution a term, clearly, in now, number million of material. – not the material very $X We being the

to book consolidated near the would within order not think reach a again, would But very against over that "materiality" we expect that build term, of it We time. the company. level

Matthew Galinko

do you. Got kind kind I business and or another its Maybe it of see becoming on basis? what of paying can point maybe whole contributor software business a ask way, at if margin a that you way a the as

Daryl Raiford

a is good contributor software future that’s deal the There’s news great developments sound. a margin That’s that basis. not is very – products, the that, that product. are on to of necessary Well, a all improve margins

customers. being benefit – threats service them attack could We base voice with number this from with the that an our this number product protect where speaking installed and providers certain so And a having of large and and global of we’re incumbent good in And question the now and in and to really market we to we scale GA-ed feel more the ability around the are is very contribution. volume It’s that the product terms about – of The that. still right a network. increase from benefit of the early, them a believe we

about much days, while the about it’s margin it’s volume. as early is as not it So

Matthew Galinko

right. Got you. Thank All it.

Operator

Markets. a ahead. question Northland go from Let’s Capital with Mike have Please Latimore

Mike Latimore

you of the one Can a here. revenue? couple product SBC whether majority SBC product and a other any – color A mix give minority quick was software within versus the on or gateway,

Daryl Raiford

of really mix in terms product within product our don’t the product – comment We within revenue itself. the

I in million the quarter. SBC a $XX think it’s our that though, majority fair was not revenue of to of product say,

Mike Latimore

believe. And on kind business, using Okay. for communication for mention recent Optus like competition then unified Kandy they’re it the service you on mobile was announcement, I of small a the that? looks who like Can

Daryl Raiford

is with There enjoy Ribbon. to a did very and pleased – guess, announcement, at say relationship a We Optus we treasured was press no long-established we’re competition. here The customer have that. I with a

we’re very the product with has providers Kandy that Loop They’re similar to initiative to customers provide that, in some that to thrilled them. able other Optus ability with to We’re and move their undertaking We and – need. that service a interesting Live. think other replicate

looking terms it, So But is just we’ll the Optblue and in very be we’re Optus what on and to product of explore our underpinning empowering that. with doing delighted that.

Mike Latimore

color just enterprise whether you on for guys? just can lastly, business? Teams, of sort sort give driving And Microsoft that it quo? And little something status that’s a you is that’s a is maybe good tailwind your Or of

Daryl Raiford

So the there months have – and – we in profile demand would is is Microsoft space moving expected some of of in six remain Teams, ago. along two one as are we we terms for that SBCs

the that to and Fritz we’re the Microsoft Teams, about relationship, that taking U.S.-based center their happy Teams two We conjunction with product. – expand global ecosystem the products that very are happy call connection on applications. with very large the of cited when capabilities enterprise in That’s SBC banks

Mike Latimore

lot. a Thanks Great.

Daryl Raiford

you. Thank

Operator

time for presentation. that’s the all over have I’ll speakers or that turn the now call closing we remarks the questions. for believe their I to

Daryl Raiford

call. February. the with We’ll with for everyone, third thank with Thank quarter. in in of Well, forward speaking do – fourth again attention the conference conclusion to Ribbon’s you, again. quarter you be you We back you to look your the

Operator

thank the that that gentlemen, for you ask We and for call your lines. please and disconnect you Ladies today. concludes participation your

Ribbon Communications (RBBN) 30 Oct 182018 Q3 Earnings call transcript