UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

February 20, 2019

Date of Report (Date of earliest event reported)

 


 

RIBBON COMMUNICATIONS INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

001-38267

 

82-1669692

(State or Other Jurisdiction
of Incorporation)

 

(Commission File Number)

 

(IRS Employer
Identification No.)

 

4 TECHNOLOGY PARK DRIVE, WESTFORD, MASSACHUSETTS 01886

(Address of Principal Executive Offices) (Zip Code)

 

(978) 614-8100

(Registrant’s telephone number, including area code)

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

 

 

 


 

Item 2.02.                                        Results of Operations and Financial Condition.

 

The information under this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), otherwise subject to the liabilities of that Section or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

On February 20, 2019, Ribbon Communications Inc. issued a press release reporting its financial results for the quarter and year ended December 31, 2018, a copy of which is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

Item 9.01.                                        Financial Statements and Exhibits.

 

(d)                                 Exhibits

 

The following exhibit relating to Item 2.02 shall be deemed furnished, and not filed:

 

99.1

Press release of Ribbon Communications Inc. dated February 20, 2019, reporting its financial results for the quarter and year ended December 31, 2018, furnished hereto.

 

2


 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: February 20, 2018

RIBBON COMMUNICATIONS INC.

 

 

 

 

By:

/s/ Daryl E. Raiford

 

 

Daryl E. Raiford

 

 

Executive Vice President and Chief Financial Officer

 

3


Exhibit 99.1

 

 

Ribbon Communications Inc. Releases

Fourth Quarter 2018 Financial Results

 

GAAP Revenue was $167 Million and Non-GAAP Revenue

was $173 Million for the Fourth Quarter 2018

 

WESTFORD, Mass. — Ribbon Communications Inc. (Nasdaq: RBBN), a global leader in secure and intelligent cloud communications, today announced its financial results for the fourth quarter 2018.

 

“Ribbon Communications delivered a very successful 2018, exceeding our strategic and financial objectives for the year.  During 2018, we extended our leadership in virtualized software solutions and expanded our addressable enterprise market.  We further completed a major milestone to integrate our business, thereby reducing our cost structure and significantly improving our profitability,” said Fritz Hobbs, President and Chief Executive Officer of Ribbon Communications.  “We are excited to enter 2019 with a strong software product line-up, numerous new market opportunities and a robust financial profile.”

 

Fourth Quarter 2018 Financial Highlights(1),(2),(3)

 

·                  GAAP total revenue was $167 million, compared with $152 million in the third quarter of 2018 and $146 million in the comparable period a year ago.

·                  Non-GAAP total revenue was $173 million, compared with $159 million in the third quarter of 2018 and $169 million in the comparable period a year ago.

·                  GAAP net loss was $2 million, compared with $10 million in the third quarter of 2018 and $16 million in the comparable period a year ago.

·                  Non-GAAP net income was $28 million, compared with $23 million in the third quarter of 2018 and $23 million in the comparable period a year ago.

·                  GAAP loss per share was $0.02, compared with $0.10 in the third quarter of 2018 and $0.18 in the comparable period a year ago.

·                  Non-GAAP diluted earnings per share was $0.26, compared with $0.21 in the third quarter of 2018 and $0.27 in the comparable period a year ago.

·                  Non-GAAP Adjusted EBITDA was $34 million, compared with $29 million in the third quarter of 2018 and $28 million in the comparable period a year ago.

·                  Cash and investments were $51 million at December 31, 2018, compared with $43 million at the end of the third quarter of 2018 and $83 million at fiscal year-end 2017.

 

FY 2018 Financial Highlights(1),(2),(3)

 

·                  GAAP total revenue was $578 million, compared to $330 million in 2017.

·                  Non-GAAP total revenue was $612 million, compared to $353 million in 2017.

·                  GAAP net loss was $77 million, compared to $35 million in 2017.

·                  GAAP loss per share was $0.74, compared to $0.60 in 2017.

·                  Non-GAAP diluted earnings per share was $0.58, compared to $0.51 in 2017.

·                  Non-GAAP Adjusted EBITDA was $84 million, compared to $41 million in 2017.

 

“Fourth quarter non-GAAP Revenue was $173 million and Adjusted EBITDA was $34 million, which represented a growth of 9 percent and 18 percent, respectively, compared with the third quarter of 2018. Full year 2018 non-GAAP Revenue grew to $612 million and Adjusted EBITDA increased to $84 million,” said Daryl E. Raiford, Chief Financial Officer of Ribbon Communications.  “For 2019, we expect Adjusted EBITDA to be between $100 million and $110 million, or approximately 25 percent growth from 2018.”(3)

 


 

Looking to 2019, we are confident that we have the products, market position, expansive global reach and proven team and we believe we can capture share in both our service provider and enterprise markets.”

 

Fourth Quarter 2018 Customer and Company Highlights

 

·                  Transformation footprint at a large U.S.-based service provider grew to enable web-scale performance and high mobile traffic, using our SBC virtualized session software solution on its mobile VoLTE network.  Additionally, such provider modernized its legacy network elements with our network transformation software solutions.

·                  Large deployment of an SBC session software solution at a Tier one U.S.-based service provider to handle the growth of IP-to-IP traffic and the conversion of TDM customers to IP in support of integration and product rationalization following its acquisition of another large service provider.

·                  Major North American MSO purchased additional session software capacity to expand its geographic footprint for interconnect, supporting the collapse of three disparate networks onto a common infrastructure that is fully based on Ribbon software solutions.

·                  Major e-commerce provider in Japan deployed a combination of Ribbon network transformation solutions in support of its mobile network build-out.

·                  British Telecom Global Services, a large GENBAND SBC customer, deployed Ribbon session software solutions, which provide security and routing functions, for evolution of SIP-based conferencing services.

 


(1)  The Sonus-GENBAND merger occurred on October 27, 2017.  The consolidated financial results included in this press release represent the consolidated financial results of Sonus Networks, Inc. prior to October 27, 2017, and the consolidated financial results of Ribbon Communications on and after such date.  The financial results of GENBAND are included in Ribbon Communications’ consolidated financial results beginning October 27, 2017.

(2)  The acquisition of Edgewater Networks Inc. was completed on August 3, 2018.  The financial results of Edgewater Networks are included in Ribbon Communications’ consolidated financial results beginning August 3, 2018.

(3)  Please see the reconciliation of non-GAAP and GAAP financial measures and additional information about non-GAAP measures in the press release appendix.

 

Upcoming First Quarter 2019 Investor Conference Schedule

 

Ribbon is pleased to meet its customers and other interested parties at MWC Barcelona (formerly Mobile World Congress) in Barcelona, Spain on February 25 through 28, 2019.  In addition:

 

·                  February 21, 2019 — Non-Deal Roadshow, hosted by National Securities, New York, New York

·                  March 6, 2019 — Non-Deal Roadshow, hosted by Northland Capital Markets, St. Louis, Missouri

 

Conference Call Details and Replay Information

 

Ribbon Communications will offer a live, listen-only webcast of the conference call to discuss its financial results for the fourth quarter ended December 31, 2018 on February 20, 2019, via the investor section of its website at http://investors.ribboncommunications.com/press-and-events/events-and-presentations, where a replay will also be available shortly following the conference call.

 

Date:  February 20, 2019
Time:  4:30 p.m. (ET)
Dial-in number:  888-221-6224  - International callers:  +1-303-223-4367

 

A telephone playback of the call will be available following the conference call until March 6, 2019 and can be accessed by calling 800-633-8284 or +1-402-977-9140 for international callers.  The reservation number for the replay is 21914807.

 

About Ribbon Communications

 

Ribbon Communications is a software company with two decades of leadership in real-time communications. Built on world-class technology and intellectual property, the company delivers

 


 

intelligent, secure, embedded real-time communications for today’s world.  The company’s software  transforms fixed, mobile and enterprise networks from legacy environments to secure IP and cloud-based architectures, enabling highly productive communications for consumers and businesses.  With a global footprint, Ribbon’s innovative, market-leading software portfolio empowers service providers and enterprises with rapid service creation in a fully virtualized environment.  The company’s Kandy Cloud real-time communications software platform delivers a comprehensive set of advanced embedded and unified (CPaaS and UCaaS) communications capabilities that enables this transformation.  To learn more, visit ribboncommunications.com.

 

Important Information Regarding Forward-Looking Statements

 

The information in this release contains “forward-looking” statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are subject to a number of risks and uncertainties.  All statements other than statements of historical facts contained in this release, including without limitation statements made by our chief executive officer and our chief financial officer regarding our anticipated financial performance, the future results of operations, financial position, integration efforts and opportunities for the Company, business strategy, strategic position, and plans and objectives of management for future operations are forward-looking statements.  Without limiting the foregoing, the words “believes”, “estimates”, “expects”, “expectations”, “intends”, “may”, and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

 

Forward-looking statements are based on our current expectations and assumptions regarding our 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.  Our actual results may differ materially from those contemplated in these forward-looking statements due to various risks, uncertainties and other important factors, including our ability to realize benefits from acquisitions that we have completed; the effects of disruption from the acquisitions we have completed as well as pending acquisitions, making it more difficult to maintain relationships with employees, customers or business partners; the timing of customer purchasing decisions and our recognition of revenues; economic conditions; our ability to recruit and retain key personnel; difficulties supporting our strategic focus on channel sales; difficulties retaining and expanding our customer base; difficulties leveraging market opportunities; the impact of restructuring and cost-containment activities; litigation; actions taken by significant stockholders; difficulties providing solutions that meet the needs of customers; market acceptance of our products and services; rapid technological and market change; our ability to protect our intellectual property rights; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; higher risks in international operations and markets; the impact of increased competition; increases in tariffs, trade restrictions or taxes on our products; currency fluctuations; changes in the market price of our common stock; and/or failure or circumvention of our controls and procedures.  For further information regarding risks and uncertainties associated with Ribbon Communications’ business, please refer to the “Risk Factors” section of Ribbon Communications’ most recent annual and quarterly reports filed with the SEC.  Any forward-looking statements represent Ribbon Communications’ views only as of the date on which such statement is made and should not be relied upon as representing Ribbon Communications’ views as of any subsequent date.  While Ribbon Communications may elect to update forward-looking statements at some point, Ribbon Communications specifically disclaims any obligation to do so.

 

Discussion of Non-GAAP Financial Measures

 

Ribbon Communications management uses several different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, making operating decisions, planning and forecasting future periods, and determining payments under compensation programs.  Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and the non-GAAP annual financial plan is approved by our board of directors.  Continuous budgeting and forecasting for revenue and expenses are conducted on a non-GAAP basis (in addition to GAAP) and actual results on a non-GAAP basis are assessed against the annual financial plan.  We consider the use of non-GAAP financial measures helpful in assessing the core performance of our continuing operations and when planning and

 


 

forecasting future periods.  By continuing operations, we mean the ongoing results of the business adjusted for acquisition-related revenue as a result of purchase accounting and the related cost of revenue, the impact of the new revenue standard, and excluding certain expenses and credits, including, but not limited to stock-based compensation, amortization and impairment of intangible assets, acquisition-related facilities adjustments, settlement expense, certain litigation costs, cancelled debt offering costs, merger integration costs, acquisition- and integration-related expense, restructuring, the gains on the sales of intangible assets and tax benefits arising from purchase accounting and tax reform.  While our management uses non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, GAAP measures.  In addition, our 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 as an analytical tool.  In particular, many of the adjustments to Ribbon’s financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

 

Acquisition-Related Revenue and Cost of Revenue; Impact of New Revenue Standard

 

We provide the supplementary non-GAAP financial measures, non-GAAP Product revenue, non-GAAP Service revenue and non-GAAP Total revenue, which include revenue related to the acquisitions of GENBAND and Edgewater that we would have recognized but for the purchase accounting treatment of these transactions.  We also include eliminated revenue resulting from our adoption in 2018 of the new revenue recognition standard.  Because GAAP accounting requires the elimination of this revenue, as well as the impact on future revenue of our adoption in 2018 of the new revenue standard, GAAP results alone do not fully capture all of our economic activities.  These non-GAAP adjustments are intended to reflect the full amounts of such revenue and the related cost of revenue.  We include these adjustments to allow for more complete comparisons to the financial results of our historical operations, forward-looking guidance and the financial results of peer companies.  We believe these adjustments are useful to management and investors as a measure of the ongoing performance of the business.  These adjustments do not accelerate revenue, but instead include revenue (and the related cost of revenue) that would have been recognized in our 2017 and 2018 results, but for the purchase accounting and new revenue standard adjustments required by GAAP.

 

Stock-Based Compensation

 

Stock-based compensation expense is different from other forms of compensation, as it is a non-cash expense.  For example, a cash salary generally has a fixed and unvarying cash cost.  In contrast, the expense associated with an equity-based award is generally unrelated to the amount of cash ultimately received by the employee, and the cost to us is based on a stock-based compensation valuation methodology, subjective assumptions and the variety of award types, all of which may vary over time.  We evaluate performance without these measures because stock-based compensation expense is influenced by the Company’s stock price and other factors such as volatility and interest rates that are beyond our control.  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.  As such, we do not include such charges in our operating plans, and we believe that presenting non-GAAP operating results that exclude stock-based compensation provides investors with visibility and insight into our management’s method of analysis and the Company’s core operating performance.  It is reasonable to expect that stock-based compensation will continue in future periods.

 

Amortization of Intangible Assets

 

We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures.  These amortization amounts are inconsistent in frequency and amount and are significantly impacted by the timing and size of acquisitions.  Although we exclude amortization of acquired intangible

 


 

assets from our non-GAAP expenses, we believe that it is important for investors to understand that intangible assets contribute to revenue generation.  We believe that excluding the non-cash amortization of intangible assets facilitates the comparison of our financial results to our historical operating results and to other companies in our industry as if the acquired intangible assets had been developed internally rather than acquired.  Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized.

 

Impairment of Intangible Assets

 

In the fourth quarter of 2017, we discontinued our ongoing development of certain intangible assets that we had previously acquired, as we had determined that there were no alternative uses of the technology within either our existing or future product lines.  As a result, we recorded an impairment charge of $5.5 million to write down the carrying value of the assets to zero.  Had we developed those intangible assets internally and made the decision to discontinue their ongoing development, we would have ceased work on such development projects and eliminated the related future costs.  Because we do not capitalize these costs, there would have been no asset to write off.  As a result, we believe that excluding non-cash impairment charges from our non-GAAP operating results as if these impaired intangible assets had been developed internally rather than acquired facilitates a comparison to our historical operating results and to other companies in our industry.

 

Acquisition-Related Facilities Adjustments

 

GAAP accounting requires that the deferred rent liability of an acquired company be written off as part of purchase accounting and that the combined company’s rent expense on a straight-line basis begin as of the acquisition date.  As a result, we recorded more rent expense than would have been recognized but for the purchase accounting treatment of GENBAND’s assumed deferred rent liability.  We include this adjustment, which relates to the acquisition of GENBAND, to allow for more complete comparisons to the financial results of our historical operations, forward-looking guidance and the financial results of peer companies.  We believe these adjustments provide an indication of the rent expense that would have been recognized, but for the purchase accounting in connection with the acquisition of GENBAND.

 

Settlement Expense

 

In the first quarter of 2018, we recorded $1.7 million of expense related to settlements, comprised of $1.4 million for the settlement of litigation in connection with our acquisition of Taqua LLC and $0.3 million of patent litigation settlement expense.  In the third quarter of 2017, we recorded $1.6 million of expense related to potential fines in connection with the then-ongoing SEC investigation, which we paid to the SEC, along with an additional $0.3 million recorded in the fourth quarter of 2017, in the third quarter of 2018.  These amounts are included as components of general and administrative expense.  We believe that such settlement costs are not part of our core business or ongoing operations, are unplanned and generally not within our control.  Accordingly, we believe that excluding costs such as the SEC potential fines and patent litigation settlement expense facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

 

Litigation Costs

 

In connection with certain ongoing litigation between GENBAND, as plaintiff, and one of its competitors, we have incurred litigation costs beginning in the fourth quarter of 2017.  In March 2018, we filed litigation on behalf of Sonus against the same competitor asserting additional intellectual property infringement.  We expect to incur significant future litigation costs related to these matters.  These costs are included as a component of general and administrative expense.  We believe that such costs are not part of our core business or ongoing operations, are unplanned and generally not within our control.  Accordingly, we believe that excluding the litigation costs related to this specific legal matter facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

 

Cancelled Debt Offering Costs

 

In November 2018, we announced that we intended to offer, subject to market conditions and other factors, $150 million aggregate principal amount of convertible senior notes due 2023 in a private offering to qualified institutional buyers.  We expected to grant the initial purchasers a 30-day option to purchase up to an additional $25 million aggregate principal amount of such notes, solely to cover over-allotments,

 


 

if any.  On the same day as our announcement, we decided not to proceed with this offering, as we believed that then-current market conditions were not conducive for an offering on terms that would be in the best interests of our stockholders.  In connection with this offering, we incurred $1.0 million of expense.  We do not consider these debt offering costs to be related to the continuing operations of the Company.  We believe that excluding these cancelled debt offering costs facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

 

Merger Integration Costs

 

We consider certain merger integration costs to be unpredictable and dependent on a significant number of factors that may be outside of our control.  These amounts represent costs related to the Sonus-GENBAND merger initially recorded as a component of General and administrative expense in the third quarter of 2017.  In the fourth quarter of 2017, we reclassified these merger integration costs, aggregating $0.2 million, to Acquisition- and integration-related expense.  We do not consider these merger integration costs to be related to the continuing operations of the combined business or the Company.  We believe that excluding merger integration costs facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

 

Acquisition- and Integration-Related Expense

 

We consider certain acquisition- and integration-related costs to be unrelated to the organic continuing operations of our acquired businesses and the Company and they are generally not relevant to assessing or estimating the long-term performance of the acquired assets.  In addition, the size, complexity and/or volume of an acquisition, which often drives the magnitude of acquisition- and integration-related costs, may not be indicative of future acquisition- and integration-related costs.  By excluding these acquisition- and integration-related costs from our non-GAAP measures, management is better able to evaluate our ability to utilize our existing assets and estimate the long-term value that acquired assets will generate for us.  We exclude certain acquisition- and integration-related costs to allow more accurate comparisons of our financial results to our historical operations, forward-looking guidance and the financial results of less acquisitive peer companies.  In addition, we believe that providing supplemental non-GAAP measures that exclude these items allows management and investors to consider the ongoing operations of the business both with and without such expenses.

 

Restructuring

 

We have recorded restructuring expense to streamline operations and reduce operating costs by closing and consolidating certain facilities and reducing our worldwide workforce.  We review our restructuring accruals regularly and record adjustments (both expense and credits) to these estimates as required.  We believe that excluding restructuring expense and credits facilitates the comparison of our financial results to our historical operating results and to other companies in our industry, as there are no future revenue streams or other benefits associated with these costs.

 

Gain on the Sale of Intangible Asset

 

In the second quarter of 2017, we sold an intangible asset that we had acquired in connection with a previous acquisition.  This amount is included as a component of other income, net.  We believe that such gains are not part of our core business or ongoing operations, we had not used the intangible asset in connection with revenue-producing activities and would not have used it as such in the future.  Accordingly, we believe that excluding from our results the other income arising from this sale facilitates the comparison of our financial results to our historical results and to other companies in our industry.

 

Tax Benefits Arising from Purchase Accounting and Tax Reform

 

In the third quarter of 2018, we reduced our valuation allowance in connection with our acquisition of Edgewater, resulting in an income tax benefit of $0.8 million.  In the fourth quarter of 2018, we recorded an adjustment to that amount, resulting in income tax expense of $0.1 million for a net tax benefit of $0.7 million related to this acquisition.  In the fourth quarter of 2017, we reduced our valuation allowance in connection with the GENBAND transaction, resulting in an income tax benefit of $16.4 million.  In addition, we recognized an income tax benefit of $4.8 million related to the Tax Cut and Jobs Act of 2017.  We believe that such benefits are not part of our core business or ongoing operations, as they are either the result of acquisitions or new tax legislation, neither of which relates to our revenue-producing

 


 

activities.  Accordingly, we believe that excluding the net benefits arising from these adjustments to our income tax provision facilitates the comparison of our financial results to our historical results and to other companies in our industry.

 

Adjusted EBITDA

 

We use Adjusted EBITDA as a supplemental measure to review and assess our performance.  We calculate Adjusted EBITDA by excluding from net income (loss): interest income (expense), net; income tax benefit (provision); depreciation; and amortization of intangible assets.  In addition, we exclude from net income (loss):  adjustments to revenue and cost of revenue related to revenue reductions resulting from purchase accounting and adoption of the new revenue standard; stock-based compensation expense; settlement expense; certain litigation costs; merger integration costs; acquisition-related facilities adjustments; acquisition- and integration-related expense; restructuring; and other income, net.  In general, we add back the expenses that we consider to be non-cash and/or not part of our ongoing operations.  Adjusted EBITDA is a non-GAAP financial measure that is used by our investing community for comparative and valuation purposes.  We disclose this metric to support and facilitate our dialogue with research analysts and investors.  Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

 

We believe that providing non-GAAP information to investors, in addition to the GAAP presentation, will allow investors to view the financial results in the way management views them.  We further believe that providing this information helps investors to better understand our core financial and operating performance and evaluate the efficacy of the methodology and information used by our management to evaluate and measure such performance.

 

Investor Relations

Monica Gould

+1 (212) 871-3927

IR@rbbn.com

 

US Press

Dennis Watson

+1 (214) 695-2214

dwatson@rbbn.com

 

International Press

Catherine Berthier

+1 (646) 741-1974

cberthier@rbbn.com

 

Analyst Relations

Michael Cooper

+1 (708) 383-3387

mcooper@rbbn.com

 


 

RIBBON COMMUNICATIONS INC.

Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

 

 

 

Three months ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

 

 

2018

 

2018

 

2017

 

Revenue:

 

 

 

 

 

 

 

Product

 

$

87,077

 

$

77,283

 

$

82,814

 

Service

 

79,819

 

75,185

 

63,398

 

Total revenue

 

166,896

 

152,468

 

146,212

 

 

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

 

 

Product

 

40,002

 

38,891

 

41,502

 

Service

 

31,180

 

31,343

 

27,911

 

Total cost of revenue

 

71,182

 

70,234

 

69,413

 

 

 

 

 

 

 

 

 

Gross profit

 

95,714

 

82,234

 

76,799

 

 

 

 

 

 

 

 

 

Gross margin:

 

 

 

 

 

 

 

Product

 

54.1

%

49.7

%

49.9

%

Service

 

60.9

%

58.3

%

56.0

%

Total gross margin

 

57.3

%

53.9

%

52.5

%

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

36,406

 

34,403

 

40,410

 

Sales and marketing

 

34,124

 

31,488

 

35,553

 

General and administrative

 

19,465

 

15,942

 

19,649

 

Acquisition- and integration-related

 

2,689

 

5,570

 

8,485

 

Restructuring

 

1,853

 

2,397

 

8,365

 

Total operating expenses

 

94,537

 

89,800

 

112,462

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

1,177

 

(7,566

)

(35,663

)

Interest expense, net

 

(1,476

)

(1,420

)

(509

)

Other (expense) income, net

 

(714

)

(1,254

)

697

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(1,013

)

(10,240

)

(35,475

)

Income tax (provision) benefit

 

(813

)

82

 

19,761

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,826

)

$

(10,158

)

$

(15,714

)

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

Basic

 

$

(0.02

)

$

(0.10

)

$

(0.18

)

Diluted

 

$

(0.02

)

$

(0.10

)

$

(0.18

)

 

 

 

 

 

 

 

 

Shares used to compute loss per share:

 

 

 

 

 

 

 

Basic

 

106,607

 

104,918

 

86,567

 

Diluted

 

106,607

 

104,918

 

86,567

 

 


 

RIBBON COMMUNICATIONS INC.

Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

 

 

 

Year ended

 

 

 

December 31,

 

December 31,

 

 

 

2018

 

2017

 

Revenue:

 

 

 

 

 

Product

 

$

279,014

 

$

181,119

 

Service

 

298,891

 

148,823

 

Total revenue

 

577,905

 

329,942

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

Product

 

142,185

 

70,250

 

Service

 

127,388

 

58,196

 

Total cost of revenue

 

269,573

 

128,446

 

 

 

 

 

 

 

Gross profit

 

308,332

 

201,496

 

 

 

 

 

 

 

Gross margin:

 

 

 

 

 

Product

 

49.0

%

61.2

%

Service

 

57.4

%

60.9

%

Total gross margin

 

53.4

%

61.1

%

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Research and development

 

145,462

 

101,481

 

Sales and marketing

 

128,276

 

83,403

 

General and administrative

 

66,036

 

47,642

 

Acquisition- and integration-related

 

16,951

 

14,763

 

Restructuring

 

17,015

 

9,436

 

Total operating expenses

 

373,740

 

256,725

 

 

 

 

 

 

 

Loss from operations

 

(65,408

)

(55,229

)

Interest (expense) income, net

 

(4,230

)

263

 

Other (expense) income, net

 

(3,772

)

1,274

 

 

 

 

 

 

 

Loss before income taxes

 

(73,410

)

(53,692

)

Income tax (provision) benefit

 

(3,400

)

18,440

 

 

 

 

 

 

 

Net loss

 

$

(76,810

)

$

(35,252

)

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

Basic

 

$

(0.74

)

$

(0.60

)

Diluted

 

$

(0.74

)

$

(0.60

)

 

 

 

 

 

 

Shares used to compute loss per share:

 

 

 

 

 

Basic

 

103,916

 

58,822

 

Diluted

 

103,916

 

58,822

 

 


 

RIBBON COMMUNICATIONS INC.

Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

December 31,

 

December 31,

 

 

 

2018

 

2017

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

43,694

 

$

57,073

 

Marketable securities

 

7,284

 

17,224

 

Accounts receivable, net

 

187,853

 

165,156

 

Inventory

 

22,602

 

21,303

 

Other current assets

 

17,002

 

21,463

 

Total current assets

 

278,435

 

282,219

 

 

 

 

 

 

 

Property and equipment, net

 

27,042

 

24,780

 

Intangible assets, net

 

251,391

 

244,414

 

Goodwill

 

383,655

 

335,716

 

Investments

 

 

9,031

 

Deferred income taxes

 

9,152

 

8,434

 

Other assets

 

7,484

 

6,289

 

 

 

$

957,159

 

$

910,883

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Revolving credit facility

 

$

55,000

 

$

20,000

 

Accounts payable

 

45,304

 

45,851

 

Accrued expenses and other

 

84,263

 

76,380

 

Deferred revenue

 

105,087

 

100,571

 

Total current liabilities

 

289,654

 

242,802

 

 

 

 

 

 

 

Long-term debt, related party

 

24,100

 

22,500

 

Deferred revenue, net of current

 

17,572

 

14,184

 

Deferred income taxes

 

4,738

 

2,787

 

Other long-term liabilities

 

30,797

 

13,189

 

Total liabilities

 

366,861

 

295,462

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

11

 

10

 

Additional paid-in capital

 

1,723,576

 

1,684,768

 

Accumulated deficit

 

(1,136,992

)

(1,072,426

)

Accumulated other comprehensive income

 

3,703

 

3,069

 

Total stockholders’ equity

 

590,298

 

615,421

 

 

 

$

957,159

 

$

910,883

 

 


 

RIBBON COMMUNICATIONS INC.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Year ended

 

 

 

December 31,

 

December 31,

 

 

 

2018

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(76,810

)

$

(35,252

)

Adjustments to reconcile net loss to cash flows (used in) provided by operating activities:

 

 

 

 

 

Depreciation and amortization of property and equipment

 

11,200

 

8,486

 

Amortization of intangible assets

 

49,723

 

17,112

 

Stock-based compensation

 

11,072

 

25,657

 

Impairment of intangible assets

 

 

5,471

 

Deferred income taxes

 

513

 

(20,361

)

Other

 

4,611

 

(1,340

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(13,017

)

(30,759

)

Inventory

 

993

 

5,786

 

Other operating assets

 

5,036

 

269

 

Accounts payable

 

(6,057

)

13,415

 

Accrued expenses and other long-term liabilities

 

(13,422

)

(4,263

)

Deferred revenue

 

16,563

 

23,859

 

Net cash (used in) provided by operating activities

 

(9,595

)

8,080

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(7,907

)

(3,999

)

Business acquisitions, net of cash acquired

 

(46,389

)

(42,951

)

Purchases of marketable securities

 

 

(28,731

)

Sale/maturities of marketable securities

 

18,919

 

96,112

 

Proceeds from the sale of intangible assets

 

 

576

 

Net cash (used in) provided by investing activities

 

(35,377

)

21,007

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Borrowings under revolving line of credit

 

197,500

 

15,500

 

Principal payments on revolving line of credit

 

(162,500

)

(13,500

)

Principal payments of capital lease obligations

 

(652

)

(99

)

Payment of debt issuance costs

 

(624

)

(731

)

Proceeds from the sale of common stock in connection with employee purchase plan

 

 

1,252

 

Proceeds from the exercise of stock options

 

73

 

617

 

Payment of tax withholding obligations related to net share settlements of restricted stock awards

 

(2,024

)

(7,523

)

Net cash provided by (used in) financing activities

 

31,773

 

(4,484

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(180

)

547

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(13,379

)

25,150

 

Cash and cash equivalents, beginning of year

 

57,073

 

31,923

 

Cash and cash equivalents, end of period

 

$

43,694

 

$

57,073

 

 


 

RIBBON COMMUNICATIONS INC.

Supplemental Information

(in thousands)

(unaudited)

 

The following tables provide the details of stock-based compensation, amortization of intangible assets, impairment of intangible assets, acquisition-related facilities adjustments, settlement expense, litigation costs, cancelled debt offering costs and merger integration costs included as components of other line items in the Company’s Consolidated Statements of Operations and the line items in which these amounts are reported.

 

 

 

Three months ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

 

 

2018

 

2018

 

2017

 

Stock-based compensation

 

 

 

 

 

 

 

Cost of revenue - product

 

$

23

 

$

21

 

$

253

 

Cost of revenue - service

 

81

 

65

 

671

 

Cost of revenue

 

104

 

86

 

924

 

 

 

 

 

 

 

 

 

Research and development expense

 

433

 

313

 

3,687

 

Sales and marketing expense

 

991

 

585

 

3,195

 

General and administrative expense

 

2,123

 

1,532

 

6,464

 

Operating expense

 

3,547

 

2,430

 

13,346

 

 

 

 

 

 

 

 

 

Total stock-based compensation

 

$

3,651

 

$

2,516

 

$

14,270

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

 

 

 

Cost of revenue - product

 

$

9,521

 

$

10,593

 

$

8,119

 

 

 

 

 

 

 

 

 

Sales and marketing expense

 

2,481

 

2,855

 

2,148

 

Operating expense

 

2,481

 

2,855

 

2,148

 

 

 

 

 

 

 

 

 

Total amortization of intangible assets

 

$

12,002

 

$

13,448

 

$

10,267

 

 

 

 

 

 

 

 

 

Impairment of intangible assets

 

 

 

 

 

 

 

Cost of revenue - product

 

$

 

$

 

$

5,471

 

 

 

 

 

 

 

 

 

Acquisition-related facilities adjustments

 

 

 

 

 

 

 

Cost of revenue - product

 

$

20

 

$

20

 

$

 

Cost of revenue - service

 

60

 

60

 

 

Cost of revenue

 

80

 

80

 

 

 

 

 

 

 

 

 

 

Research and development expense

 

99

 

98

 

 

Sales and marketing expense

 

46

 

45

 

 

General and administrative expense

 

27

 

28

 

 

Operating expense

 

172

 

171

 

 

 

 

 

 

 

 

 

 

Total acquisition-related facilities adjustments

 

$

252

 

$

251

 

$

 

 

 

 

 

 

 

 

 

Settlement expense

 

 

 

 

 

 

 

General and administrative expense

 

$

 

$

 

$

300

 

 

 

 

 

 

 

 

 

Litigation costs

 

 

 

 

 

 

 

General and administrative expense

 

$

1,961

 

$

3,147

 

$

373

 

 

 

 

 

 

 

 

 

Cancelled debt offering costs

 

 

 

 

 

 

 

General and administrative expense

 

$

1,003

 

$

 

$

 

 

 

 

 

 

 

 

 

Merger integration costs (A)

 

 

 

 

 

 

 

General and administrative expense

 

$

 

$

 

$

(178

)

 


(A)  Represents the reclassification of the amount recorded in Q3 2017  to “Acquisition- and integration-related expense.”

 


 

RIBBON COMMUNICATIONS INC.

Supplemental Information

(in thousands)

(unaudited)

 

The following tables provide the details of stock-bsed compensation, amortization of intangible assets, impairment of intangible assets, acquisition-related facilities adjustments, settlement expense, litigation costs, cancelled debt offering costs and gains on the sale of intangible assets included as components of other line items in the Company’s Consolidated Statements of Operations and the line items in which these amounts are reported.

 

 

 

Year ended

 

 

 

December 31,

 

December 31,

 

 

 

2018

 

2017

 

Stock-based compensation

 

 

 

 

 

Cost of revenue - product

 

$

114

 

$

514

 

Cost of revenue - service

 

345

 

1,448

 

Cost of revenue

 

459

 

1,962

 

 

 

 

 

 

 

Research and development expense

 

1,797

 

7,337

 

Sales and marketing expense

 

2,935

 

4,885

 

General and administrative expense

 

5,881

 

11,473

 

Operating expense

 

10,613

 

23,695

 

 

 

 

 

 

 

Total stock-based compensation

 

$

11,072

 

$

25,657

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

 

Cost of revenue - product

 

$

38,976

 

$

12,887

 

 

 

 

 

 

 

Sales and marketing expense

 

10,747

 

4,225

 

Operating expense

 

10,747

 

4,225

 

 

 

 

 

 

 

Total amortization of intangible assets

 

$

49,723

 

$

17,112

 

 

 

 

 

 

 

Impairment of intangible assets

 

 

 

 

 

Cost of revenue - product

 

$

 

$

5,471

 

 

 

 

 

 

 

Acquisition-related facilities adjustments

 

 

 

 

 

Cost of revenue - product

 

$

77

 

$

 

Cost of revenue - service

 

232

 

 

Cost of revenue

 

309

 

 

 

 

 

 

 

 

Research and development expense

 

377

 

 

Sales and marketing expense

 

174

 

 

General and administrative expense

 

106

 

 

Operating expense

 

657

 

 

 

 

 

 

 

 

Total acquisition-related facilities adjustment

 

$

966

 

$

 

 

 

 

 

 

 

Settlement expense

 

 

 

 

 

General and administrative expense

 

$

1,730

 

$

1,900

 

 

 

 

 

 

 

Litigation costs

 

 

 

 

 

General and administrative expense

 

$

7,682

 

$

373

 

 

 

 

 

 

 

Cancelled debt offering costs

 

 

 

 

 

General and administrative expense

 

$

1,003

 

$

 

 

 

 

 

 

 

Gain on the sale of intangible asset

 

 

 

 

 

Other (expense) income, net

 

$

 

$

576

 

 


 

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures

(in thousands, except percentages)

(unaudited)

 

 

 

Three months ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

 

 

2018

 

2018

 

2017

 

 

 

 

 

 

 

 

 

GAAP Product revenue

 

$

87,077

 

$

77,283

 

$

82,814

 

Acquisition-related revenue adjustment

 

1,629

 

2,178

 

3,230

 

Adjustment for new revenue standard

 

1,529

 

1,778

 

 

Non-GAAP Product revenue

 

$

90,235

 

$

81,239

 

$

86,044

 

 

 

 

 

 

 

 

 

GAAP Service revenue

 

$

79,819

 

$

75,185

 

$

63,398

 

Acquisition-related revenue adjustment

 

2,984

 

1,885

 

20,050

 

Adjustment for new revenue standard

 

374

 

400

 

 

Non-GAAP Service revenue

 

$

83,177

 

$

77,470

 

$

83,448

 

 

 

 

 

 

 

 

 

GAAP Total revenue

 

$

166,896

 

$

152,468

 

$

146,212

 

Acquisition-related revenue adjustment

 

4,613

 

4,063

 

23,280

 

Adjustment for new revenue standard

 

1,903

 

2,178

 

 

Non-GAAP Total revenue

 

$

173,412

 

$

158,709

 

$

169,492

 

 

 

 

 

 

 

 

 

GAAP Gross margin - product

 

54.1

%

49.7

%

49.9

%

Acquisition-related revenue adjustment

 

0.8

%

1.0

%

1.9

%

Acquisition-related cost of revenue adjustment

 

0.0

%

0.0

%

-1.4

%

Adjustment for new revenue standard

 

0.8

%

0.8

%

0.0

%

Adjustment to cost of revenue for new revenue standard

 

0.0

%

0.0

%

0.0

%

Stock-based compensation

 

*

 

*

 

0.3

%

Amortization of intangible assets

 

10.6

%

13.7

%

9.4

%

Impairment of intangible assets

 

0.0

%

0.0

%

6.4

%

Acquisition-related facilities adjustment

 

*

 

*

 

0.0

%

Non-GAAP Gross margin - product

 

66.3

%

65.2

%

66.5

%

 

 

 

 

 

 

 

 

GAAP Gross margin - service

 

60.9

%

58.3

%

56.0

%

Acquisition-related revenue adjustment

 

1.4

%

1.0

%

10.5

%

Acquisition-related cost of revenue adjustment

 

0.0

%

0.0

%

-11.0

%

Adjustment for new revenue standard

 

0.2

%

0.2

%

0.0

%

Adjustment to cost of revenue for new revenue standard

 

0.0

%

0.0

%

0.0

%

Stock-based compensation

 

0.1

%

0.1

%

0.8

%

Acquisition-related facilities adjustment

 

0.1

%

0.1

%

0.0

%

Non-GAAP Gross margin - service

 

62.7

%

59.7

%

56.3

%

 

 

 

 

 

 

 

 

GAAP Total gross margin

 

57.3

%

53.9

%

52.5

%

Acquisition-related revenue adjustment

 

1.1

%

1.0

%

6.6

%

Acquisition-related cost of revenue adjustment

 

0.0

%

0.0

%

-6.1

%

Adjustment for new revenue standard

 

0.5

%

0.5

%

0.0

%

Adjustment to cost of revenue for new revenue standard

 

0.0

%

0.0

%

0.0

%

Stock-based compensation

 

0.1

%

0.1

%

0.5

%

Amortization of intangible assets

 

5.5

%

6.9

%

4.8

%

Impairment of intangible assets

 

0.0

%

0.0

%

3.2

%

Acquisition-related facilities adjustment

 

*

 

0.1

%

0.0

%

Non-GAAP Total gross margin

 

64.5

%

62.5

%

61.5

%

 

 

 

 

 

 

 

 

GAAP Total gross profit

 

$

95,714

 

$

82,234

 

$

76,799

 

Acquisition-related revenue adjustment

 

4,613

 

4,063

 

23,280

 

Acquisition-related cost of revenue adjustment

 

 

 

(10,364

)

Adjustment for new revenue standard

 

1,903

 

2,178

 

 

Adjustment to cost of revenue for new revenue standard

 

 

 

 

Stock-based compensation

 

104

 

86

 

924

 

Amortization of intangible assets

 

9,521

 

10,593

 

8,119

 

Impairment of intangible assets

 

 

 

5,471

 

Acquisition-related facilities adjustment

 

80

 

80

 

 

Non-GAAP Total gross profit

 

$

111,935

 

$

99,234

 

$

104,229

 

 

 

 

 

 

 

 

 

GAAP Research and development expense

 

$

36,406

 

$

34,403

 

$

40,410

 

Stock-based compensation

 

(433

)

(313

)

(3,687

)

Acquisition-related facilities adjustment

 

(99

)

(98

)

 

Non-GAAP Research and development expense

 

$

35,874

 

$

33,992

 

$

36,723

 

 

 

 

 

 

 

 

 

GAAP Sales and marketing expense

 

$

34,124

 

$

31,488

 

$

35,553

 

Stock-based compensation

 

(991

)

(585

)

(3,195

)

Amortization of intangible assets

 

(2,481

)

(2,855

)

(2,148

)

Acquisition-related facilities adjustment

 

(46

)

(45

)

 

Non-GAAP Sales and marketing expense

 

$

30,606

 

$

28,003

 

$

30,210

 

 


*  Less than 0.1% impact on gross margin.

 


 

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures

(in thousands, except percentages)

(unaudited)

 

 

 

Three months ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

 

 

2018

 

2018

 

2017

 

 

 

 

 

 

 

 

 

GAAP General and administrative expense

 

$

19,465

 

$

15,942

 

$

19,649

 

Stock-based compensation

 

(2,123

)

(1,532

)

(6,464

)

Acquisition-related facilities adjustment

 

(27

)

(28

)

 

Settlement expense

 

 

 

(300

)

Litigation costs

 

(1,961

)

(3,147

)

(373

)

Cancelled debt offering coss

 

(1,003

)

 

 

Merger integration costs (A)

 

 

 

178

 

Non-GAAP General and administrative expense

 

$

14,351

 

$

11,235

 

$

12,690

 

 

 

 

 

 

 

 

 

GAAP Operating expenses

 

$

94,537

 

$

89,800

 

$

112,462

 

Stock-based compensation

 

(3,547

)

(2,430

)

(13,346

)

Amortization of intangible assets

 

(2,481

)

(2,855

)

(2,148

)

Acquisition-related facilities adjustment

 

(172

)

(171

)

 

Settlement expense

 

 

 

(300

)

Litigation costs

 

(1,961

)

(3,147

)

(373

)

Cancelled debt offering costs

 

(1,003

)

 

 

Merger integration costs (A)

 

 

 

178

 

Acquisition- and integration-related expense

 

(2,689

)

(5,570

)

(8,485

)

Restructuring

 

(1,853

)

(2,397

)

(8,365

)

Non-GAAP Operating expenses

 

$

80,831

 

$

73,230

 

$

79,623

 

 

 

 

 

 

 

 

 

GAAP Income (loss) from operations

 

$

1,177

 

$

(7,566

)

$

(35,663

)

Acquisition-related revenue adjustment

 

4,613

 

4,063

 

23,280

 

Acquisition-related cost of revenue adjustment

 

 

 

(10,364

)

Adjustment for new revenue standard

 

1,903

 

2,178

 

 

Adjustment to cost of revenue for new revenue standard

 

 

 

 

Stock-based compensation

 

3,651

 

2,516

 

14,270

 

Amortization of intangible assets

 

12,002

 

13,448

 

10,267

 

Impairment of intangible assets

 

 

 

5,471

 

Acquisition-related facilities adjustment

 

252

 

251

 

 

Settlement expense

 

 

 

300

 

Litigation costs

 

1,961

 

3,147

 

373

 

Cancelled debt offering costs

 

1,003

 

 

 

Merger integration costs (A)

 

 

 

(178

)

Acquisition- and integration-related expense

 

2,689

 

5,570

 

8,485

 

Restructuring

 

1,853

 

2,397

 

8,365

 

Non-GAAP Income from operations

 

$

31,104

 

$

26,004

 

$

24,606

 

 

 

 

 

 

 

 

 

GAAP Income (loss) from operations as a percentage of revenue

 

0.7

%

-5.0

%

-24.4

%

Acquisition-related revenue adjustment

 

2.6

%

2.7

%

17.1

%

Acquisition-related cost of revenue adjustment

 

0.0

%

0.0

%

-6.1

%

Adjustment for new revenue standard

 

1.1

%

1.4

%

0.0

%

Adjustment to cost of revenue for new revenue standard

 

0.0

%

0.0

%

0.0

%

Stock-based compensation

 

2.1

%

1.6

%

8.4

%

Amortization of intangible assets

 

6.9

%

8.5

%

6.1

%

Impairment of intangible assets

 

0.0

%

0.0

%

3.2

%

Acquisition-related facilities adjustment

 

0.1

%

0.2

%

0.0

%

Settlement expense

 

0.0

%

0.0

%

0.2

%

Litigation costs

 

1.1

%

2.0

%

0.2

%

Cancelled debt offering costs

 

0.6

%

0.0

%

0.0

%

Merger integration costs (A)

 

0.0

%

0.0

%

-0.1

%

Acquisition- and integration-related expense

 

1.6

%

3.5

%

5.0

%

Restructuring

 

1.1

%

1.5

%

4.9

%

Non-GAAP Income from operations as a percentage of revenue

 

17.9

%

16.4

%

14.5

%

 


(A)  Represents the reclassification of the amount recorded in Q3 2017  to “Acquisition- and integration-related expense.”

 


 

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three months ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

 

 

2018

 

2018

 

2017

 

 

 

 

 

 

 

 

 

GAAP Net loss

 

$

(1,826

)

$

(10,158

)

$

(15,714

)

Acquisition-related revenue adjustment

 

4,613

 

4,063

 

23,280

 

Acquisition-related cost of revenue adjustment

 

 

 

(10,364

)

Adjustment for new revenue standard

 

1,903

 

2,178

 

 

Adjustment to cost of revenue for new revenue standard

 

 

 

 

Stock-based compensation

 

3,651

 

2,516

 

14,270

 

Amortization of intangible assets

 

12,002

 

13,448

 

10,267

 

Impairment of intangible assets

 

 

 

5,471

 

Acquisition-related facilities adjustment

 

252

 

251

 

 

Settlement expense

 

 

 

300

 

Litigation costs

 

1,961

 

3,147

 

373

 

Cancelled debt offering costs

 

1,003

 

 

 

Merger integration costs (A)

 

 

 

(178

)

Acquisition- and integration-related expense

 

2,689

 

5,570

 

8,485

 

Restructuring

 

1,853

 

2,397

 

8,365

 

Tax benefits arising from purchase accounting and tax reform

 

123

 

(841

)

(21,155

)

Non-GAAP Net income

 

$

28,224

 

$

22,571

 

$

23,400

 

 

 

 

 

 

 

 

 

Earnings (loss) per share

 

 

 

 

 

 

 

GAAP Loss per share

 

$

(0.02

)

$

(0.10

)

$

(0.18

)

Acquisition-related revenue adjustment

 

0.04

 

0.04

 

0.27

 

Acquisition-related cost of revenue adjustment

 

 

 

(0.12

)

Adjustment for new revenue standard

 

0.02

 

0.02

 

 

Adjustment to cost of revenue for new revenue standard

 

 

 

 

Stock-based compensation

 

0.03

 

0.02

 

0.16

 

Amortization of intangible assets

 

0.11

 

0.14

 

0.12

 

Impairment of intangible assets

 

 

 

0.06

 

Acquisition-related facilities adjustment

 

*

 

*

 

 

Settlement expense

 

 

 

*

 

Litigation costs

 

0.02

 

0.03

 

*

 

Cancelled debt offering costs

 

0.01

 

 

 

Merger integration costs (A)

 

 

 

*

 

Acquisition- and integration-related expense

 

0.03

 

0.05

 

0.10

 

Restructuring

 

0.02

 

0.02

 

0.10

 

Tax benefits arising fromk purchase accounting and tax reform

 

*

 

(0.01

)

(0.24

)

Non-GAAP Diluted earnings per share

 

$

0.26

 

$

0.21

 

$

0.27

 

 

 

 

 

 

 

 

 

Shares used to compute diluted earnings per share or (loss) per share

 

 

 

 

 

 

 

GAAP Shares used to compute loss per share

 

106,607

 

104,918

 

86,567

 

Non-GAAP Shares used to compute diluted earnings per share

 

107,363

 

105,726

 

87,207

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

GAAP Net loss

 

$

(1,826

)

$

(10,158

)

$

(15,714

)

Interest expense, net

 

1,476

 

1,420

 

509

 

Income tax provision (benefit)

 

813

 

(82

)

(19,761

)

Depreciation

 

2,930

 

2,952

 

3,231

 

Amortization of intangible assets

 

12,002

 

13,448

 

10,267

 

Impairment of intangible assets

 

 

 

5,471

 

Acquisition-related revenue adjustment

 

4,613

 

4,063

 

23,280

 

Acquisition-related cost of revenue adjustment

 

 

 

(10,364

)

Adjustment for new revenue standard

 

1,903

 

2,178

 

 

Adjustment to cost of revenue for new revenue standard

 

 

 

 

Stock-based compensation

 

3,651

 

2,516

 

14,270

 

Acquisition-related facilities adjustment

 

252

 

251

 

 

 

Settlement expense

 

 

 

300

 

Litigation costs

 

1,961

 

3,147

 

373

 

Cancelled debt offering costs

 

1,003

 

 

 

 

Merger integration costs (A)

 

 

 

(178

)

Acquisition- and integration-related expense

 

2,689

 

5,570

 

8,485

 

Restructuring

 

1,853

 

2,397

 

8,365

 

Other expense (income), net

 

714

 

1,254

 

(697

)

Non-GAAP Adjusted EBITDA

 

$

34,034

 

$

28,956

 

$

27,837

 

 


*  Less than $0.01 impact on earnings (loss) per share

 

(A)  Represents the reclassification of the amount recorded in Q3 2017  to “Acquisition- and integration-related expense.”

 


 

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures

(in thousands, except percentages)

(unaudited)

 

 

 

Year ended

 

 

 

December 31,

 

December 31,

 

 

 

2018

 

2017

 

 

 

 

 

 

 

GAAP Product revenue

 

$

279,014

 

$

181,119

 

Acquisition-related revenue adjustment

 

11,047

 

3,230

 

Adjustment for new revenue standard

 

8,284

 

 

Non-GAAP Product revenue

 

$

298,345

 

$

184,349

 

 

 

 

 

 

 

GAAP Service revenue

 

$

298,891

 

$

148,823

 

Acquisition-related revenue adjustment

 

13,035

 

20,050

 

Adjustment for new revenue standard

 

1,761

 

 

Non-GAAP Service revenue

 

$

313,687

 

$

168,873

 

 

 

 

 

 

 

GAAP Total revenue

 

$

577,905

 

$

329,942

 

Acquisition-related revenue adjustment

 

24,082

 

23,280

 

Adjustment for new revenue standard

 

10,045

 

 

Non-GAAP Total revenue

 

$

612,032

 

$

353,222

 

 

 

 

 

 

 

GAAP Gross margin - product

 

49.0

%

61.2

%

Acquisition-related revenue adjustment

 

1.9

%

0.6