Ribbon Communications Inc. Reports First Quarter 2022 Financial Results
North American IP Optical Networks Sales Up 190% YOY
Projecting Strong Q2 Sequential Total Company Revenue Growth
Revenue for the first quarter of 2022 was
"The Ribbon team delivered financial results directly in-line with our guidance for the quarter despite continued supply chain constraints. Our continued growth in IP Optical sales in
McClelland continued, "The increased investment we are making in product development is accelerating the pace of new product and service introductions in order to deliver on our strategy to generate both near-term and longer-term revenue growth. Partnerships such as our recent Cloud & Edge announcement with Microsoft to accelerate deployment of Teams further differentiate our solutions and expand our market reach."
In millions, except per share amounts |
Three months ended |
|||
|
||||
2022 |
2021 |
|||
GAAP Revenue |
$ 173 |
$ 193 |
||
GAAP Net loss |
$ (70) |
$ (45) |
||
Non-GAAP Net income / (loss) |
$ (12) |
$ 5 |
||
Non-GAAP Adjusted EBITDA |
$ (9) |
$ 20 |
||
GAAP diluted loss per share |
$ (0.47) |
$ (0.31) |
||
Non-GAAP diluted earnings / (loss) per share |
$ (0.08) |
$ 0.03 |
||
Weighted average shares outstanding basic |
149 |
146 |
||
Weighted average shares outstanding diluted |
154 |
155 |
||
1 The Company's results include the impact of changes in the fair value of the consideration received from the sale of its |
2 Please see the reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures and additional information about non-GAAP measures in the section entitled "Discussion of Non-GAAP Financial Measures" in the attached schedules. |
Cash, cash equivalents and restricted cash totaled
"In the first quarter of 2022, we had good cash flow from operations enabling an additional term loan payment of
The Company's outlook is based on current indications for its business, which are subject to change. For the second quarter of 2022, the Company projects revenue of
1 Please see the reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures and additional information about the non-GAAP measures in the section entitled "Discussion of Non-GAAP Financial Measures" in the attached schedules. |
May 10, 2022 –Oppenheimer Emerging Growth Conference (virtual one-on-one institutional investor meetings).May 26, 2022 – B. Riley Securities AnnualInstitutional Investor Conference (one-on-one institutional investor meetings).June 1-2, 2022 – Cowen 50th AnnualTechnology, Media & Telecom Conference (presentation and one-on-one institutional investor meetings).
The information in this release contains "forward-looking statements" within the meaning of the
Forward-looking statements are based on the Company's current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results may differ materially from those contemplated in these forward-looking statements due to various risks, uncertainties and other important factors, including, among others, risks related to supply chain disruptions resulting from component availability; the effects of geopolitical instabilities and disputes, including between
These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the Company's business and results from operations. Additional information regarding these and other factors can be found in the Company's reports filed with the
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 under compensation programs. The Company considers the use of non-GAAP financial measures helpful in assessing the core performance of its continuing operations and when planning and forecasting future periods. The Company's annual financial plan is prepared on a non-GAAP basis and is approved by its board of directors. In addition, budgeting and forecasting for revenue and expenses are conducted on a non-GAAP basis, and actual results on a non-GAAP basis are assessed against the annual financial plan. The Company defines continuing operations as the ongoing results of its business adjusted for certain expenses and credits, as described below. The Company believes that providing non-GAAP information to investors will allow investors to view the financial results in the way its management views them and helps investors to better understand the Company's core financial and operating performance and evaluate the efficacy of the methodology and information used by its management to evaluate and measure such performance.
While the Company's management uses non-GAAP financial measures as tools to enhance its understanding of certain aspects of the Company's financial performance, its management does not consider these measures to be a substitute for, or superior to, GAAP measures. In addition, the Company's presentations of these measures may not be comparable to similarly titled measures used by other companies. These non-GAAP financial measures should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures. In particular, many of the adjustments to the Company's financial measures reflect the exclusion of items that are recurring and will be reflected in its financial results for the foreseeable future.
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 operating results that exclude stock-based compensation provides investors with visibility and insight into its management's method of analysis and its core operating performance.
Amortization amounts are inconsistent in frequency and amount and are significantly impacted by the timing and size of acquisitions. Amortization of acquired technology is reported separately within Cost of revenue and Amortization of acquired intangible assets is reported separately within Operating expenses. These items are reported collectively as Amortization of acquired intangible assets in the accompanying reconciliations of non-GAAP and GAAP financial measures. The Company believes that excluding non-cash amortization of these intangible assets facilitates the comparison of its financial results to its historical operating results and to other companies in its industry as if the acquired intangible assets had been developed internally rather than acquired.
The Company performs its annual testing for impairment of goodwill in the fourth quarter each year. For the purpose of testing goodwill for impairment, all goodwill has been assigned to one of the Company's two operating segments. The Company performs a fair value analysis using both an income and market approach, which encompasses a discounted cash flow analysis and a guideline public company analysis using selected multiples. Based on the results of its recently completed impairment test, the Company determined that the carrying value of its IP Optical Networks segment exceeded its fair value, and accordingly, recorded a non-cash impairment charge of
The Company considers certain acquisition-, disposal- and integration-related costs to be unrelated to the organic continuing operations of its acquired businesses and the Company. Such costs are generally not relevant to assessing or estimating the long-term performance of the acquired assets. The Company excludes such acquisition-, disposal- and integration-related costs to allow more accurate comparisons of its financial results to its historical operations and the financial results of less acquisitive peer companies and allows management and investors to consider the ongoing operations of the business both with and without such expenses.
The Company has recorded restructuring and related expense to streamline operations and reduce operating costs by closing and consolidating certain facilities and reducing its worldwide workforce. The Company believes that excluding restructuring and related expense facilitates the comparison of its financial results to its historical operating results and to other companies in its industry, as there are no future revenue streams or other benefits associated with these costs.
The Company recorded paid-in-kind interest income on the AVCT Series A-1 convertible debentures (the "Debentures") it received as consideration in connection with the Kandy Sale through
The Company calculates the fair values of the Debentures and the warrants to purchase shares of AVCT common stock (the "Warrants") it received as consideration in connection with the Kandy Sale (prior to
The Non-GAAP income tax benefit (provision) is presented based on an estimated tax rate applied against forecasted annual non-GAAP income. The Non-GAAP income tax benefit (provision) assumes no available net operating losses or valuation allowances for the
The Company uses Adjusted EBITDA as a supplemental measure to review and assess its performance. The Company calculates Adjusted EBITDA by excluding from loss from operations: depreciation; amortization of acquired intangible assets; stock-based compensation; impairment of goodwill; acquisition-, disposal- and integration-related expense; and restructuring and related expense. In general, the Company excludes the expenses that considers to be non-cash and/or not part of its ongoing operations. The Company may exclude other items in the future that have those characteristics. Adjusted EBITDA is a non-GAAP financial measure that is used by the investing community for comparative and valuation purposes. The Company discloses this metric to support and facilitate dialogue with research analysts and investors. Other companies may calculate Adjusted EBITDA differently than the Company does, limiting its usefulness as a comparative measure.
Conference call to discuss the Company's financial results for the first quarter ended
Date: April 27, 2022
Time: 4:30 p.m. (ET)
Dial-in number (
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Investor Relations
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Analyst Relations
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|
||||||||
Condensed Consolidated Statements of Operations |
||||||||
(in thousands, except percentages and per share amounts) |
||||||||
(unaudited) |
||||||||
Three months ended |
||||||||
|
|
|
||||||
2022 |
2021 |
2021 |
||||||
Revenue: |
||||||||
Product |
$ 81,990 |
$ 130,298 |
$ 97,889 |
|||||
Service |
91,208 |
100,279 |
94,883 |
|||||
Total revenue |
173,198 |
230,577 |
192,772 |
|||||
Cost of revenue: |
||||||||
Product |
51,209 |
70,165 |
44,445 |
|||||
Service |
35,667 |
36,711 |
37,780 |
|||||
Amortization of acquired technology |
8,267 |
8,908 |
10,061 |
|||||
Total cost of revenue |
95,143 |
115,784 |
92,286 |
|||||
Gross profit |
78,055 |
114,793 |
100,486 |
|||||
Gross margin |
45.1% |
49.8% |
52.1% |
|||||
Operating expenses: |
||||||||
Research and development |
52,690 |
51,609 |
47,410 |
|||||
Sales and marketing |
37,619 |
42,067 |
37,218 |
|||||
General and administrative |
12,862 |
13,226 |
15,553 |
|||||
Amortization of acquired intangible assets |
7,275 |
7,493 |
5,762 |
|||||
Impairment of goodwill |
- |
116,000 |
- |
|||||
Acquisition-, disposal- and integration-related |
1,849 |
3,428 |
1,197 |
|||||
Restructuring and related |
4,814 |
1,106 |
5,950 |
|||||
Total operating expenses |
117,109 |
234,929 |
113,090 |
|||||
Loss from operations |
(39,054) |
(120,136) |
(12,604) |
|||||
Interest expense, net |
(4,001) |
(3,995) |
(5,819) |
|||||
Other expense, net |
(28,800) |
(8,546) |
(25,448) |
|||||
Loss before income taxes |
(71,855) |
(132,677) |
(43,871) |
|||||
Income tax benefit (provision) |
1,880 |
36,369 |
(816) |
|||||
Net loss |
$ (69,975) |
$ (96,308) |
$ (44,687) |
|||||
Loss per share: |
||||||||
Basic |
$ (0.47) |
$ (0.65) |
$ (0.31) |
|||||
Diluted |
$ (0.47) |
$ (0.65) |
$ (0.31) |
|||||
Weighted average shares used to compute loss per share: |
||||||||
Basic |
149,167 |
148,675 |
145,936 |
|||||
Diluted |
149,167 |
148,675 |
145,936 |
|
||||||
Condensed Consolidated Balance Sheets |
||||||
(in thousands) |
||||||
(unaudited) |
||||||
|
|
|||||
2022 |
2021 |
|||||
Assets |
||||||
Current assets: |
||||||
Cash and cash equivalents |
$ 92,838 |
$ 103,915 |
||||
Restricted cash |
2,627 |
2,570 |
||||
Accounts receivable, net |
220,964 |
282,917 |
||||
Inventory |
61,578 |
54,043 |
||||
Other current assets |
44,723 |
37,545 |
||||
Total current assets |
422,730 |
480,990 |
||||
Property and equipment, net |
48,043 |
47,685 |
||||
Intangible assets, net |
335,188 |
350,730 |
||||
|
300,892 |
300,892 |
||||
Investments |
16,904 |
43,931 |
||||
Deferred income taxes |
53,843 |
47,287 |
||||
Operating lease right-of-use assets |
49,549 |
53,147 |
||||
Other assets |
37,006 |
23,075 |
||||
$ 1,264,155 |
$ 1,347,737 |
|||||
Liabilities and Stockholders' Equity |
||||||
Current liabilities: |
||||||
Current portion of term debt |
$ 20,058 |
$ 20,058 |
||||
Accounts payable |
97,837 |
97,121 |
||||
Accrued expenses and other |
94,584 |
100,752 |
||||
Operating lease liabilities |
16,622 |
17,403 |
||||
Deferred revenue |
109,084 |
109,119 |
||||
Total current liabilities |
338,185 |
344,453 |
||||
Long-term debt, net of current |
330,353 |
350,217 |
||||
Operating lease liabilities, net of current |
51,599 |
55,196 |
||||
Deferred revenue, net of current |
19,312 |
20,619 |
||||
Deferred income taxes |
8,104 |
8,116 |
||||
Other long-term liabilities |
42,190 |
41,970 |
||||
Total liabilities |
789,743 |
820,571 |
||||
Commitments and contingencies |
||||||
Stockholders' equity: |
||||||
Common stock |
15 |
15 |
||||
Additional paid-in capital |
1,877,677 |
1,875,234 |
||||
Accumulated deficit |
(1,425,636) |
(1,355,661) |
||||
Accumulated other comprehensive income |
22,356 |
7,578 |
||||
Total stockholders' equity |
474,412 |
527,166 |
||||
$ 1,264,155 |
$ 1,347,737 |
|
|||||||
Condensed Consolidated Statements of Cash Flows |
|||||||
(in thousands) |
|||||||
(unaudited) |
|||||||
Three months ended |
|||||||
March 31, |
March 31, |
||||||
2022 |
2021 |
||||||
Cash flows from operating activities: |
|||||||
Net loss |
$ (69,975) |
$ (44,687) |
|||||
Adjustments to reconcile net loss to cash flows provided by (used in) operating activities: |
|||||||
Depreciation and amortization of property and equipment |
3,885 |
4,226 |
|||||
Amortization of intangible assets |
15,542 |
15,823 |
|||||
Amortization of debt issuance costs |
527 |
3,141 |
|||||
Stock-based compensation |
4,255 |
5,060 |
|||||
Deferred income taxes |
(6,773) |
293 |
|||||
Decrease in fair value of investments |
27,027 |
22,441 |
|||||
Foreign currency exchange losses |
1,105 |
1,716 |
|||||
Changes in operating assets and liabilities: |
|||||||
Accounts receivable |
60,461 |
28,083 |
|||||
Inventory |
(11,837) |
(330) |
|||||
Other operating assets |
(423) |
979 |
|||||
Accounts payable |
540 |
(3,800) |
|||||
Accrued expenses and other long-term liabilities |
(7,962) |
(41,480) |
|||||
Deferred revenue |
(1,342) |
2,323 |
|||||
Net cash provided by (used in) operating activities |
15,030 |
(6,212) |
|||||
Cash flows from investing activities: |
|||||||
Purchases of property and equipment |
(3,471) |
(5,357) |
|||||
Net cash used in investing activities |
(3,471) |
(5,357) |
|||||
Cash flows from financing activities: |
|||||||
Proceeds from issuance of term debt |
- |
74,625 |
|||||
Principal payments of term debt |
(20,015) |
(77,132) |
|||||
Principal payments of finance leases |
(198) |
(272) |
|||||
Payment of debt issuance costs |
(370) |
(789) |
|||||
Proceeds from the exercise of stock options |
- |
24 |
|||||
Payment of tax withholding obligations related to net share settlements of restricted stock awards |
(1,812) |
(11,233) |
|||||
Net cash used in by financing activities |
(22,395) |
(14,777) |
|||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
(184) |
(464) |
|||||
Net decrease in cash, cash equivalents and restricted cash |
(11,020) |
(26,810) |
|||||
Cash, cash equivalents and restricted cash, beginning of year |
106,485 |
135,697 |
|||||
Cash, cash equivalents and restricted cash, end of period |
$ 95,465 |
$ 108,887 |
|
||||||||
Supplemental Information |
||||||||
(in thousands) |
||||||||
(unaudited) |
||||||||
The following tables provide the details of stock-based compensation included as components of other line items in the Company's Condensed Consolidated Statements of Operations and the line items in which these amounts are reported. |
||||||||
Three months ended |
||||||||
|
|
|
||||||
2022 |
2021 |
2021 |
||||||
Stock-based compensation |
||||||||
Cost of revenue - product |
$ 99 |
$ 97 |
$ 27 |
|||||
Cost of revenue - service |
481 |
488 |
235 |
|||||
Cost of revenue |
580 |
585 |
262 |
|||||
Research and development |
1,206 |
1,243 |
627 |
|||||
Sales and marketing |
1,371 |
2,011 |
1,874 |
|||||
General and administrative |
1,098 |
1,168 |
2,297 |
|||||
Operating expense |
3,675 |
4,422 |
4,798 |
|||||
Total stock-based compensation |
$ 4,255 |
$ 5,007 |
$ 5,060 |
|
|||||
Reconciliation of Non-GAAP and GAAP Financial Measures |
|||||
(in thousands, except per share amounts) |
|||||
(unaudited) |
|||||
Three months ended |
|||||
|
|
|
|||
2022 |
2021 |
2021 |
|||
GAAP Gross margin |
45.1% |
49.8% |
52.1% |
||
Stock-based compensation |
0.3% |
0.3% |
0.2% |
||
Amortization of acquired technology |
4.8% |
3.8% |
5.2% |
||
Non-GAAP Gross margin |
50.2% |
53.9% |
57.5% |
||
GAAP Net loss |
$ (69,975) |
$ (96,308) |
$ (44,687) |
||
Stock-based compensation |
4,255 |
5,007 |
5,060 |
||
Amortization of acquired intangible assets |
15,542 |
16,401 |
15,823 |
||
Impairment of goodwill |
- |
116,000 |
- |
||
Acquisition-, disposal- and integration-related |
1,849 |
3,428 |
1,197 |
||
Restructuring and related |
4,814 |
1,106 |
5,950 |
||
Interest income on debentures |
- |
- |
(1,459) |
||
Decrease in fair value of investments |
27,027 |
6,508 |
23,900 |
||
Tax effect of non-GAAP adjustments |
4,531 |
(50,830) |
(880) |
||
Non-GAAP Net (loss) income |
$ (11,957) |
$ 1,312 |
$ 4,904 |
||
GAAP Diluted loss per share |
$ (0.47) |
$ (0.65) |
$ (0.31) |
||
Stock-based compensation |
0.03 |
0.03 |
0.03 |
||
Amortization of acquired intangible assets |
0.11 |
0.12 |
0.11 |
||
Impairment of goodwill |
- |
0.77 |
- |
||
Acquisition-, disposal- and integration-related |
0.01 |
0.02 |
0.01 |
||
Restructuring and related |
0.03 |
0.01 |
0.05 |
||
Interest income on debentures |
- |
- |
(0.01) |
||
Decrease in fair value of investments |
0.18 |
0.04 |
0.16 |
||
Tax effect of non-GAAP adjustments |
0.03 |
(0.33) |
(0.01) |
||
Non-GAAP Diluted (loss) earnings per share |
$ (0.08) |
$ 0.01 |
$ 0.03 |
||
Weighted average shares used to compute diluted (loss) earnings per share |
|||||
Shares used to compute GAAP diluted loss per share |
149,167 |
148,675 |
145,936 |
||
Shares used to compute Non-GAAP diluted (loss) earnings per share |
149,167 |
153,898 |
155,032 |
||
GAAP Loss from operations |
$ (39,054) |
$ (120,136) |
$ (12,604) |
||
Depreciation |
3,885 |
4,278 |
4,226 |
||
Amortization of acquired intangible assets |
15,542 |
16,401 |
15,823 |
||
Stock-based compensation |
4,255 |
5,007 |
5,060 |
||
Impairment of goodwill |
- |
116,000 |
- |
||
Acquisition-, disposal- and integration-related |
1,849 |
3,428 |
1,197 |
||
Restructuring and related |
4,814 |
1,106 |
5,950 |
||
Non-GAAP Adjusted EBITDA |
$ (8,709) |
$ 26,084 |
$ 19,652 |
|
|||||||||
Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook |
|||||||||
(unaudited) |
|||||||||
Three months ending |
Year ending |
||||||||
|
|
||||||||
Range |
Range |
||||||||
Revenue ($ millions) |
$ 200 |
$ 215 |
$ 850 |
$ 880 |
|||||
Gross margin: |
|||||||||
GAAP outlook |
49.2% |
50.5% |
51.1% |
52.2% |
|||||
Stock-based compensation |
0.3% |
0.3% |
0.3% |
0.3% |
|||||
Amortization of acquired technology |
4.0% |
3.7% |
3.6% |
3.5% |
|||||
Non-GAAP outlook |
53.5% |
54.5% |
55.0% |
56.0% |
|||||
Earnings per share: |
|||||||||
GAAP outlook |
$ (0.14) |
$ (0.09) |
$ (0.52) |
$ (0.46) |
|||||
Stock-based compensation |
0.03 |
0.03 |
0.13 |
0.13 |
|||||
Amortization of acquired intangible assets |
0.10 |
0.10 |
0.39 |
0.39 |
|||||
Acquisition-, disposal- and integration-related |
0.01 |
0.01 |
0.02 |
0.02 |
|||||
Restructuring and related |
0.01 |
0.01 |
0.13 |
0.13 |
|||||
Decrease in fair value of investments |
- |
- |
0.17 |
0.17 |
|||||
Tax effect of non-GAAP adjustments |
0.02 |
- |
(0.02) |
(0.04) |
|||||
Non-GAAP outlook |
$ 0.03 |
$ 0.06 |
$ 0.30 |
$ 0.34 |
|||||
Weighted average shares used to compute GAAP diluted loss per share (in thousands) |
150,000 |
150,000 |
151,000 |
151,000 |
|||||
Weighted average shares used to compute Non-GAAP diluted earnings per share (in thousands) |
156,000 |
156,000 |
157,000 |
157,000 |
|||||
Adjusted EBITDA ($ millions): |
|||||||||
GAAP loss from operations |
$ (10.1) |
$ (4.1) |
$ (10.5) |
$ (0.5) |
|||||
Depreciation |
4.1 |
4.1 |
16.5 |
16.5 |
|||||
Amortization of acquired intangible assets |
15.4 |
15.4 |
60.4 |
60.4 |
|||||
Stock-based compensation |
4.7 |
4.7 |
19.8 |
19.8 |
|||||
Acquisition-, disposal- and integration-related |
1.2 |
1.2 |
3.8 |
3.8 |
|||||
Restructuring and related |
1.7 |
1.7 |
20.0 |
20.0 |
|||||
Non-GAAP outlook |
$ 17.0 |
$ 23.0 |
$ 110.0 |
$ 120.0 |
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