RBBN - Earnings call transcript Q3 2020 | Ribbon Communications Inc.

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Operator

Good afternoon, everyone and welcome to the Ribbon Communications Third Quarter 2020 Earnings Conference Call. All participants are currently in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to Monica Gould, Investor Relations for Ribbon Communications. ahead. go please Ma'am,

Monica Gould

McClelland, we welcome and you I'm third that for Form will fourth available. call Monica forward-looking differ to cause statement the the website Officer. from and be Also and most Lopez, Officer; projections results Chief Ribbon's are uncertainties for actual both those where at Ribbon XXXX and call. the statements on conference Form XX-Q. on Financial Bruce will be our today in materially call. outlook including forward-looking Gould, slides the call Chief contained Investor and to afternoon discussed and this Executive uncertainties currently beyond to be supplemental quarter will release Mick are Ribbon's Today's financial Communications. supplemental Ribbon's Good Investor being risks are matters refer our include is live our Relations' quarter today the documents Certain filed statements. SEC, for ribboncommunications.com, X XX-K statements. could conference of and our Such on and archived the These are webcast Slide to the with Safe section the our discussing press of business recent slides results our I included subject financial in and Harbor XXXX Relations risks

Relations' this our the conference the are will call. as of this In GAAP which to for as issued financial press are on the available slides on this Reconciliations the afternoon, addition, we supplemental earnings included we Investor both again release section present information non-GAAP website. measures applicable call, in well

as noted, of which single on completed a we Xrd, operates segment. prior to ECI As XXXX, Telecom periods. acquisition Ribbon previously we impacts comparisons March our

former on However, are sake to for business the include additional clarity, of Telecom ECI continuing the detail we performance.

XXXX, rather business to to And financials. Bruce. than to continue now, QX performance expect legal like to over I unit integrate, in we As call transition would entity to providing we the turn

Bruce McClelland

growth. in afternoon, this of strong adjusted And XX% the busy earnings positive Packet level resulting for very revenue Optical improvement sales our We thank broaden results with safe. Optical our growth Good sales benefits for business adjusted higher encouraged Packet record profitability report and and quarter. sequentially during healthy beginning business, Monica. that both to by joining expectations. business increasing and a everyone with clearly you a & combining a Software We're exceeded We're Thanks, that of and quarter EBITDA Software strategy third Cloud the our Edge in week. in strength strong hope earnings contribution all increasing the you're the pleased on to see our I us our of the strong portfolio, new very to during business. and achieved a quarter, we're diversify

to Our is expanded footprint to to customer combined bear our strategy the fruit. portfolio sell beginning

and directly social and or offerings Teams increasing in continue accelerating have by As their to digital platforms, Microsoft as network this online as collaboration increased and traffic platforms, portfolio as strain and capacity Both strategy. and responded and service providers to Zoom. capabilities investment with enterprises aligning our see data voice quarter, our levels usage related of customers noted last well the adoption to broad-based of elevated such

is well activity quarter. in & the as a solid position operating the Education infrastructure. particular, Court. have the cable Research by Closure business to Network like A we More European the and leveraging strengthen increased customers have and RFP a quarter, good to activity and leverage Cloud regional Packet significantly with the have in remained environment, accomplishments Our Packet Asia, contributed the a to been our India, the continued sales America, expansion portfolio. and renewed country's a providers. securing customer between we we level smart provides in progress and including of business Visibility network's North by and XXXX. place Department no on our Lower a city significant in lab also of in the recent on deployment, a the as European telco strategy with expect able fourth our strategy demonstrations proof-of-concept over X product Telecommunications manufacturer, meaningful presence in has strong the customers critical We're notable the activity in infrastructure supply providers remained and to and on-site resolved expenses highlighting lower Supreme and operators, evaluations. has we've In engagement Optical focus in Edge issue dispute travel business have in strong. with making operating this chain remote in the and In Optical on and I'd of the restrictions. of number communications Europe. start key to the of part a momentum certainty longstanding their to investment path car report enterprise National we project been service marketing large railway quarter. new telecom broadly,

rebound, take the will XXXX. for about quarters for While we spending in optimistic opportunity fully expect we're it growth several to

portfolio of in very variety strong the Management Session regions, quarter in the the SBC applications across third have this of beat earnings We quarter. contributing sales our to

call the to from vertical, strong order the with As have Teams, multinational migration large a center support to in we we bank momentum capacity. software continued major financials US-based to their a and an increase example, Microsoft

enterprise up XX% than platform high-performance more are and year-to-date. Our sales provider SBC service

our and usage cloud-based include and accelerate, offerings communications to native cloud collaboration deployment As usage we multiple of and have platforms adoption models. expanded

We quarter. also this announced certifications Zoom additional phone

and COVID the efforts Ribbon to to our business joined Virtual I Nokia presence Sam and division. multibillion-dollar business unit. American share Cloud to integration midst previously our Trust X responsible implementing Also, month, team that growing we market. pandemic, Finally, our efficiencies solution security be of the fraud Last Optical Communications we in last Bookings secured the and robocalling. optical addresses several for our times and the progress that to new announced expand this Packet Networks of organizational we've related quarter contracts join signed announced massive for for agreement we Sam the with company. in across Kandy more the ECI platform Technologies. challenges operating made has to Ribbon quarter, Cloud Call level Despite have to that on Sam supercharge Bucci our the couldn't their the and great quarter. the excited previous Packet was were an Optical the we've of multibillion-dollar sell lead

continue then in on business. performance successful progress their million has which capital with completion We our raise. remains I'll $XX for million on about to loss. deal, EBITDA our make now Kandy we'll more $XX Mick a QX on contributed sales the talk ask to detail and come to contingent Mick? in Year-to-date, on the back comment of outlook

Mick Lopez

and Bruce. $XXX Total summarizing with for quarter exceptional Packet financial website performance million to our exceeded Please comprised thanks, $XXX had graphs of million for tables supplemental the quarter refer performance. third expectations. third that quarter million Edge revenue $XX in our and of slides and our Cloud Hey third & We for Optical. was Investor Relations'

financials our unit integration we We quarter efforts. Bruce in performance to providing mentioned, legal business of entity than As in plan to to traction commencing XXXX. rather continue our make transition fourth great

Given the standalone, otherwise acquisition year-on-year unless are our Ribbon's ECI comparisons noted. against

our benefit XXXX a million. share Income $X.XX of quarter was included release a legal were Ireland third company the per The revenue GAAP financial $X.XX, follows. tax of which allowance as entity. Total from results was valuation $XXX from

a of compared $XXX the quarter of total $XX $XX share EBITDA to was Non-GAAP For expenses $XXX gross $XX $XX adjusted $XXX million higher million. to Edge and to was $XX company, and performance guidance to million. Non-GAAP as above gross Ribbon, $XXX last non-GAAP margin million range diluted our and versus total in Non-GAAP improvement and sales $X.XX. due adjusted million third million revenue was EBITDA margins guidance quarter last XX%. million, million Cloud better in operating both was were both Networks. range per & Optical was Non-GAAP The Packet earnings was million. of year,

shares, for increase service acquisition. $XXX in In primarily quarter the quarter from revenue driven the the year million growth ECI the business, from count year, and previous our strong Cloud was XXX by million, share providers. XX% with to driven million of by the prior third shares diluted was third demand XXX Our reflecting compared Edge the

quarter our accounted and major customer, of total XX% Verizon for had largest this projects Our past some revenue.

of in revenue of gross of the XX% third significantly Edge grew overall quarter, the for in & the year. and Software Cloud XX% in quarter product non-GAAP was better previous versus XX% margins sales resulting

and which is and margin XX%, prior the $XX from Non-GAAP employee XX adjusted non-GAAP expenses by other operating which and $XX margin EBITDA Cloud decreased of than Edge savings, million million, reductions last higher Edge driven X% was & of is higher an travel last was restructuring discretionary XX%. adjusted EBITDA than salary operating non-GAAP temporary reflect million, $XX expenses. period, Our year for percentage exceptional Cloud points year. year, & minimum

of of XXXX, of the period increased perspective and recorded XX% third year. same $XX $XX $XX services Cloud revenue product by quarter Now, some software compared We revenue Cloud million Edge on In & million million or Edge. revenue. additional the product & to last

pleased for EBITDA continued We in XX% XXX product sequentially margins third total an quarter revenue some metrics accounted exceptionally points of of of consolidated the or are year. in an Packet driven million, $XX adjusted like basis the the of the Software of quarter. increase gross perspective, third From quarter. third previous to revenue The positive quarter ECI a business million of from a $XX million of Optical XX% for by compared to strong the controls. entity expense profitability for we would previous quarter, recorded XX%, and report provide third Network $X to our XX% increase

compared book was X.XX quarter to to of revenue in excluding ratio maintenance second X.XX the times as XXXX. times Our

us a in We upcoming quarter. with the solid into providing to have continue visibility sales good pipeline

revenue revenue. Maintenance XX% across of Software product the for XX% total revenue accounted company. of total represented

the and with Our in XX% the quarter greater International Providers which revenues, accounted revenue for customers XX% quarter XXXX. the third represented XX%. revenue of Service second top represented accounted as a quarter compares in in of XX% total to quarter of XXXX customers to compared Enterprise XXXX. of of second of XX revenue XX% percentage of XX% the in for customers

the as including $XXX down million. of $X.X we term Turning million, balance September $XX million, was to loan the million the quarter. quarter an increase balance cash of from equivalents previous payment. of and our reflecting $X with is ended scheduled principal million of a which $XXX restricted of is cash cash sheet, XXth, The principal This quarterly

term $XX our to on revolver was the the percentage Our rate XXXX, XXXX. loan remained the million effective of second as undrawn. The B interest of X.X% driven million that compared rate by increase for quarter on X.X% the The $XXX rate of for XXth. higher Term tranche a Loan assigned August of in interest third was was quarter

XX-Q August financial For in filed refer we filed to days. or our again, business met X-K covenants. in the details, Once please quarterly next our our be in comfortably to

North was times. $X Metaswitch X.X As ratio perspective, from facility. times operations, and real From approximately times cash legal for company accelerated fixed estate minimum leverage of were $X the million a our coverage calculations ratio facility related of X for per of our of fourth included $XX Capital included settlement. which times restructuring of which an a million of leasehold the credit million We expenditures X.XX cash and XXXX. final generated of Dallas from payment the charge versus in maximum improvements quarter the XXXX, anticipate our receipt our a QX million X.X $X in quarter, acquisition offices million for expenses $XX.XX versus

Bruce. the let's to Now, turn back call

Bruce McClelland

Mick. Thanks, Great.

of into As XXXX, as both this portion Enterprise expect our continued category. begin as Phone key and Zoom XXXX, Enterprise now collaboration SBC we expect is significant our capacity Microsoft create model growth business continue for the growing of growth we in to Cloud recurring of business Overall, our SBC from supporting consumption portfolio, and to will platforms product A adoption & we cloud Edge and look service license to products, many the new solutions, we Teams such fourth native revenue, the In In Providers shift portfolio trends our Service to via activation continue. expect demand quarter cloud to profitable offerings. to as customers. to leveraging the software infrastructure. on well transitioned existing of

traffic to to Our activity work-from-home seen Transformation burst to Network transition. has the adjust business of growth this a related year

transformation digital in investment to the continue, expect but in We pace a XXXX. slower

margin robocall adjacent installed service analytics, continue the and And in and the base made service machine these Optical of mitigation critical leverage However operating to further from see associated the Packet we're and lifeline revenue business, applications. the opportunities learning platforms. with fraud after we've portfolio power that seeing the costs high year. the support technical to such and as that In company. areas in benefit stream start improve expect the deployed shape our on assurance, we overall nature efficiencies pleased software very the XXXX slow to Will a and lower operational our we're our recovery earnings takes adjustments of given

investment large XG $XXX in Growing Ribbon, strengthening North critical momentum transformation of share of entire which our paving including the believe and market is in sales dispute primarily and with investment of the related creating on business. fourth plans, the important market. leadership. way the Ribbon's the American for operating making share major opportunity, spending manufacturers, clearly the environment $XXX anticipate in the fact the are contribute Ribbon quarter, of the sentiment improves. near-term million, We our value. resolution in positioned factors factors Optical portfolio, selling in technology unlocking optimism, recognition balance further growth While revenue allocation for million as range portfolio. our result Packet to our transport platforms for particular, environment shareholder market underway, negative progress a in and India shift already these continued with towards sheet cross to Several and clearer the strategy the gaining the this improvement the we the well In well significant will Packet Optical significant gain in And combination Chinese remains AGR growth to challenging, to capital and we're towards capable to potential

mix in We salary sales, in the $XXX slightly adjusted approximately EBITDA, profitability reflecting expect as be earnings of range Optical be higher to are million to temporary we of eliminate of as $XX as projected million well the Non-GAAP OpEx range the to $XX Packet of sale COVID-XX of proposed million higher quarter results This potential Edge & summary, effects by of our $X.XX per and the $X.XX of any guidance existing Network Cloud business. had and great In third with share. excludes to improved Packet in we conditions. Kandy performance a diluted just assumes exceptional Optical reductions.

We that take concludes continue few in Operator, remarks and trend can prepared quarter. expect the to this we our fourth a now questions.

Operator

the today Silverstein Ladies [Operator question and gentlemen, at Instructions] first this ahead time, we'll Company. our from Paul session. question. your & from question-and-answer go with comes begin Cowen And Please

Paul Silverstein

Bruce, for Yes. taking evening, question. Good the thanks

Can how off, for large deal referenced give is? particular First that us you the banking large deal. any sense that you

Bruce McClelland

in Multi-million, the Paul, X but you not well know, so. X digits

Paul Silverstein

one the And that's just extends over or quarter that time?

Bruce McClelland

Teams. center And, of both Microsoft you as is call deployment the just migration the capacity of to Nope, as in quarter. one know, well helping with expansion broader this

know, you you deployment the for you they're, know, of their deploying know, recall, you as infrastructure. models SBC in But their that. variety capacity, case, So, there's within a

Paul Silverstein

Service And Providers customers. North Understood. what? running, us think you Packet Optical is signs How base in customers that nature business, America the those on you're of I that's the you relative Can new customer with then, to you're give that progress today cited any any of the targeting? and sense Bruce X large

Bruce McClelland

number Yeah, have, head, contribute million-dollar you some some in variety so to a sub know, $XX customers Paul question. or the have get transactions you obviously, are, know, that you back up and to of for the, that's multimillion. good sales in would But, I you to know, know, and offline. look the million that trying my a don't you exact of we

pretty you So, try broad, base. But you diversified it's get know, I'll offline. customer number for a and the

in quarter definitely good know, some I'd in of North are to announce making here progress. as mentioned You to you in making the so a we have, here the pretty hope notable fourth America progress even and things know, or remarks, couple

Paul Silverstein

is into said, that that I with an in if that all uncertain even so visibility I now any last, sometimes may. more recognize challenging times One year? we're next and visibility

Bruce McClelland

clearly, to we Packet and momentum grow. Optical the Well, continue expect

our know, this if that about improves look you just us last year, India, we growth is you 'XX in as grow markets an you around there's And, room of know, of primarily know, there, environment software considerable know, a for the the And, strong expect a better clearly. XX% business Edge from example, Cloud about, larger at, dispute base business. in be, know, you you know, little down the the year-to-date, for talked to still particularly You know, due we're spending one you platform but definitely and you we quarter I every to getting as & transition to the know, for company. real portion continues think to you

we in So, as you COVID of for you you improve world know, business year a now, with but clearly, into us. excited kind and know, get even normalized we're to the pretty through the know, environment, living more continued we're get this has here,

Paul Silverstein

responses. Appreciate I'll pass Thank you. along. the

Bruce McClelland

Thanks, Paul.

Operator

Our next go Mike question Northland Please from your comes with Capital. question. ahead from Latimore

Unidentified Participant

about behalf this on Hi, Mike XG to it growth? an comes you the Can is give backhaul the [indiscernible] how ECI idea when is important Latimore. of

Bruce McClelland

are network. for know, most networks the you the the for XG for Well, being that augmenting capacity part, migrating are used to current

towards what upgrading kind advanced the an side why looking of spend, or at capacity are not looking infrastructure business the you But advanced kind you still clearly you that's and on we as a, timing you requirements. of and know, fiber, future. of both some the nascent is, know, broader is operator you know, slicing you capabilities, network, know, building on network the know, would dollars capable of the a finding radio they're on extending of either side, the and you Some models. are know, And,

I proofness the of makes a necessarily with getting evolution the network yet of do pretty So kind perspective, and sense. in advanced features from that activated think important it's it's some and if turned not network, of future the but on

Unidentified Participant

All right, coming perhaps Verizon see you AT&T? some of from? a right, all it the Is where big fine. like pipeline or on chunk from business And comment do

Bruce McClelland

up lot actually Optical fact, so our our know, Packet Pacific Europe of And year-to-date. business you in in Asia both Well, is business in a and international. are

know, really the business you mentioned know, are those you Union as important highly In former Edge, carriers are us. highly or to where supporting know, for networks you remains technology collaboration So be, customer is market, using you important largest already. of know, to of you well. Soviet kind around Cloud for markets you countries remain kind And, of know, important India I Verizon, the American landline base us. traditional of for But, our most the obviously, clearly larger unified North platforms. voice & our the communications either know,

Unidentified Participant

all All right, fine. you. Thank right,

Bruce McClelland

Okay.

Operator

[Operator Liz ahead your Instructions] And our with Please from next Cowen question question. go & Pate comes from Company.

Liz Pate

Thanks of the terms you what follow-up. a guidance the it. said Hi, in had I I OpEx Bruce for question. missed just fourth for the quick guys. on the quarter?

Bruce McClelland

so know, somewhat up, you will and think quarter run rates. bit Yeah, second little from the it third be we a

know, we how we'll know, in probably finally see million is paid land, success-based estimate year. finish the and salaries based some current spending on spend then our range, you just we some around Now, incremental where we, but there's the where $XXX you

Liz Pate

out year, safe to has will looking a then up out thank year OpEx into year? the be obviously it bit Okay, been would assume this but that different pick And next story, looking to a next you.

Bruce McClelland

couple some complete that know, know, number I as successfully probably spending you R&D Kandy There's lower there's around you we know, of a by there. incremental you offset of transaction. investment Kandy, the programs, guess, factors Yeah, a for play

probably if then you factor you know, kind those So, big not in of a change two overall. things OpEx

Liz Pate

Okay, great. the - Thanks for

Mick Lopez

will continuous on restructuring to will our in our restructuring with think mitigate with try will incremental we expenses assist part. We us whatever have effort, which

Bruce McClelland

Yeah good point, Mick.

Liz Pate

you. Got

Okay, thanks.

Bruce McClelland

Liz. Thanks,

Operator

I'd remarks. additional And McClelland questions, conference to the any for showing over closing Bruce no ladies and back gentlemen, call to and like turn

Bruce McClelland

interest in Well, Ribbon Thanks, Communications. joining the for everyone again Jamie. and thanks call the

You the our the execution path quarter, know, with and really pleased in we're results again here excited about third ahead. improved

So look forward the investor in upcoming you to seeing conferences. many of

release. in listing press a find our You'll

operator. So you, with that, our This thank concludes call.

Operator

do that and you thank Ladies today's conclude We for will with gentlemen, we joining. presentation.

your You may lines. now disconnect

Ribbon Communications (RBBN) 29 Oct 202020 Q3 Earnings call transcript