UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
(Exact Name of Registrant as Specified in its Charter)
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
(
(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):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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
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. ¨
| Item 2.02. | Results of Operations and Financial Condition. |
The information in 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 October 29, 2020, Ribbon Communications Inc. issued a press release reporting its financial results for the quarter ended September 30, 2020, 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. | |
| 99.1 | Press Release of Ribbon Communications, Inc., dated October 29, 2020, reporting financial results for the quarter ended September 30, 2020. | |
| 104 | Cover Page lnteractive Data File (embedded within the Inline XBRL document). | |
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: October 29, 2020 | Ribbon Communications Inc. | |
| By: | /s/ Miguel Lopez | |
| Name: Miguel A. Lopez | ||
| Title: Executive Vice President and Chief Financial Officer | ||
Exhibit 99.1
Ribbon Communications Inc. Reports
Third Quarter 2020 Financial Results
Positive Net Income and Record Adjusted EBITDA
Revenue Grew 10% Sequentially
October 29, 2020
Conference Call Details Conference call to discuss the Company’s financial results for the third quarter ended September 30, 2020 on October 29, 2020, via the investor section of its website at http://investors.ribboncommunications.com, where a replay will also be available shortly following the conference call.
Conference Call Details: Dial-in number (Intl): 412-317-6026 Instant Telephone Access: Call me™ Password: 5835757
Replay information:
|
WESTFORD, Mass. – Ribbon Communications Inc. (Nasdaq: RBBN), a global provider of converged communications software and network solutions to Service Providers, Enterprises, and critical infrastructure sectors, today announced its financial results for the third quarter of 2020.
Revenue for the third quarter of 2020 was $231 million, compared to $138 million for the third quarter of 2019, an increase of 68%. Approximately $78 million of the year-over-year revenue increase was attributable to the acquisition of ECI Telecom Group, Ltd. (ECI), which closed on March 3, 2020.
“We are pleased to report strong third quarter results that exceeded our previous outlook,” noted Bruce McClelland, President and Chief Executive Officer of Ribbon Communications. “We have continued on our path of improved profitability, demonstrated by our record Adjusted EBITDA during the third quarter. Our Cloud & Edge business continues to benefit from strong software sales and improved operating expenses. We are encouraged by the continued recovery we are seeing in our Packet Optical business and, based on our current pipeline, we expect to see further improvement in the fourth quarter and a solid finish to the year.”
Financial Highlights1,2
The following table summarizes the consolidated financial highlights for the three and nine months ended September 30, 2020 and 2019 (in millions, except per share amounts). |
Investor Relations |
Three months ended | Nine months ended | |||||||||||||||
Monica Gould |
September 30, | September 30, | |||||||||||||||
| +1 (212) 871-3927 | 2020 | 2019 | 2020 | 2019 | |||||||||||||
IR@rbbn.com |
GAAP Revenue | $ | 231 | $ | 138 | $ | 600 | $ | 402 | ||||||||
| GAAP Net income (loss) | $ | 6 | $ | 2 | $ | (35 | ) | $ | 20 | ||||||||
North American Press |
Non-GAAP Net income | $ | 24 | $ | 15 | $ | 33 | $ | 22 | ||||||||
Dennis Watson |
GAAP diluted earnings per share or (loss) per share | $ | 0.04 | $ | 0.01 | $ | (0.26 | ) | $ | 0.18 | |||||||
+1 (214) 695-2224 |
Weighted average GAAP shares | 152 | 111 | 137 | 110 | ||||||||||||
dwatson@rbbn.com |
Non-GAAP Diluted earnings per share | $ | 0.16 | $ | 0.13 | $ | 0.23 | $ | 0.20 | ||||||||
| Weighted average diluted shares | 152 | 111 | 141 | 110 | |||||||||||||
APAC, CALA & EMEA Press |
Non-GAAP Adjusted EBITDA | $ | 43 | $ | 23 | $ | 82 | $ | 42 | ||||||||
Catherine Berthier +1 (646) 741-1974 cberthier@rbbn.com
Analyst Relations Michael Cooper +1 (708) 212-6922 mcooper@rbbn.com |
Cash was $111 million at September 30, 2020, compared with $94 million at June 30, 2020 and $40 million at September 30, 2019.
1 Results for the three months ended September 30, 2020 represent three months of Ribbon and ECI. Results for the nine months ended September 30, 2020 represent nine months of Ribbon and the period March 3, 2020 to September 30, 2020 for ECI. Results for the nine months ended September 30, 2019 represent nine months of Ribbon. 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 press release appendix. |
1
“Our performance in the third quarter demonstrated continued strong execution amidst a challenging environment,” said Mick Lopez, Chief Financial Officer of Ribbon Communications. “We achieved record Adjusted EBITDA of $43 million due to record software product sales and continued operational efficiencies. Packet Optical Networks contributed $78 million in revenue with positive profitability.”
Customer and Company Highlights
| · | Secured eight new Packet Optical wins with critical Infrastructure and Enterprise customers | |
| · | Indian telecom AGR resolution provides certainty over the operating environment in the country and provides path to improved 2021 outlook |
| · | Strong year-to-date growth of 25%+ in high performance Enterprise and Service Provider SBC platform sales (7K,5K, SWe and customized software) |
| · | Large software order from a major US-based multi-national bank to support their migration to Microsoft Teams and to increase call center capacity | |
| · | Expanded cloud-native voice session security offers including the certification of intelligent edge SBCs by Zoom Phone Services, and the introduction of our SBC SWe Lite on AWS | |
| · | Secured wins with six Tier 1 and Tier 2 Service Providers for our Call Trust™ solution, which mitigates robocalls and fraudulent calls |
Business Outlook
The Company’s outlook is based on current indications for its business, which are subject to change. For the fourth quarter of 2020, the Company projects revenue of $235 million to $245 million, non-GAAP operating expenses of approximately $105 million, non-GAAP earnings per share of $0.12 to $0.14, and Adjusted EBITDA of $36 million to $40 million. The current outlook provided excludes any potential effects of the proposed sale of Kandy and assumes existing COVID-19 conditions.
Upcoming Fourth Quarter 2020 Virtual Investor Conference Schedule
| · | November 17, 2020 - Needham Security, Networking, and Communications Conference (presentation and one-on-one institutional investor meetings). |
| · | November 30, 2020 - Credit Suisse 24th Annual Technology Conference (one-on-one institutional investor meetings). |
| · | December 9, 2020 – Barclays Global Technology, Media and Telecommunications Conference (one-on-one institutional investor meetings). |
| · | December 14, 2020 - Cowen 7th Annual Networking Summit (one-on-one institutional investor meetings). |
| · | December 16, 2020 – MKM Partners Conference: “The Road Ahead, Preparation for 2021” (presentation and one-on-one institutional investor meetings). |
About Ribbon
Ribbon Communications (Nasdaq: RBBN) delivers global communications software and packet and optical network solutions to service providers, enterprises and critical infrastructure sectors. We engage deeply with our customers, helping them modernize their networks for improved competitive positioning and business outcomes in today’s smart, always-on and data-hungry world. Our innovative, end-to-end solutions portfolio delivers unparalleled scale, performance, and agility, including core to edge IP solutions, cloud-native offers, leading-edge software security and analytics tools, as well as 5G-ready packet and optical networking solutions acquired via our recent merger with ECI Telecom. To learn more about Ribbon visit rbbn.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 several risks and uncertainties. All statements other than statements of historical facts contained in this release, including without limitation statements regarding, projected financial results for the fourth quarter 2020 and beyond, recovery in sales of certain products, the proposed sale of the Kandy business, 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”, “plans”, “projects” 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.
2
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, among others, risks related to the COVID-19 pandemic; risks that the businesses of ECI will not be integrated successfully or that the combined companies will not realize estimated cost savings; failure to realize anticipated benefits of the merger with ECI; disruptions from the integration efforts that could harm our business; failure to consummate the proposed sale of the Kandy Communications platform; failure to satisfy closing conditions to the Kandy transaction; failure to realize anticipated benefits from the Kandy transaction; disruptions from the proposed Kandy transaction that could harm our business; our ability to recruit and retain key personnel; reductions in customer spending; geopolitical tensions, including those in India, that could disrupt shipments to customers; a slowdown in customer payments and changes in customer requirements, including the timing of customer purchasing decisions and our recognition of revenues; conditions in the credit markets, credit risks and risks related to the terms of our credit agreement; our international operations, which are subject to the risks of currency fluctuations and foreign exchange controls; unpredictable fluctuations in quarterly revenue and business from our existing customers; increases in tariffs, trade restrictions or taxes on our products; and currency fluctuations.
These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect our business and results from operations. Additional information regarding these and other factors can be found in our reports filed with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2019 and our Form 10-Q for the quarter ended June 30, 2020. In providing forward-looking statements, the Company expressly disclaims any obligation to update these statements publicly or otherwise, whether as a result of new information, future events or otherwise, except as required by law.
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. 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. Our annual financial plan is prepared on a non-GAAP basis and is approved by our 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. By continuing operations, we mean the ongoing results of the business adjusted for certain expenses and credits, as described below. We believe that providing non-GAAP information to investors will allow investors to view the financial results in the way our management views them and 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.
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. In particular, many of the adjustments to our financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.
Stock-Based Compensation
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. 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.
3
Amortization of Intangible Assets
Amortization amounts are inconsistent in frequency and amount and are significantly impacted by the timing and size of acquisitions. We believe that excluding 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.
Acquisition-Related Inventory Adjustment
Acquisition-related inventory adjustment amounts are inconsistent in frequency and amount and are significantly impacted by the then-current market prices of such inventory items. We believe that excluding non-cash inventory adjustments arising from acquisitions facilitates the comparison of our financial results to our historical operating results and to other companies in our industry as if the inventory had been acquired by us through our normal channels rather than acquired.
Litigation Costs
We have been involved in litigation with a certain competitor and with a former GENBAND business partner, and reached settlements in both cases. We believe that such costs of such litigation are not part of our core business or ongoing operations.
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 such costs are generally not relevant to assessing or estimating the long-term performance of the acquired assets. We exclude such acquisition- and integration-related costs to allow more accurate comparisons of our financial results to our historical operations 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 and Related Expense
We have recorded restructuring and related expense to streamline operations and reduce operating costs by closing and consolidating certain facilities and reducing our worldwide workforce. We believe that excluding restructuring and related expense 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.
Reduction to Deferred Purchase Consideration
We reached an agreement related to the outstanding cash deferred purchase consideration for Edgewater in the first quarter of 2019 and recorded the gain on the reduction in other (expense) income, net. We believe that such reductions to cash deferred purchase consideration are not part of our core business or ongoing operations, as they relate to specific acquisitive transactions and that excluding such reductions facilitates the comparison of our financial results to our historical results and to other companies in our industry.
Gain on Litigation Settlement
We were involved in litigation with a certain competitor with whom we reached a settlement in the second quarter of 2019. We believe that such gains are not part of our core business or ongoing operations and that excluding such gains facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.
Tax Effect of Non-GAAP Adjustments
Non-GAAP income tax expense is presented based on an estimated tax rate applied against forecasted annual non-GAAP income. The non-GAAP income tax expense assumes no available net operating losses or any valuation allowances for the U.S. because of reporting significant cumulative non-GAAP income over the past several years. Due to the methodology applied to our estimated annual tax rate, our estimated tax rate on non-GAAP income will differ from our GAAP tax rate and from our actual tax liabilities.
4
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 expense, net; income tax provision; depreciation; and amortization of intangible assets. In addition, we exclude from net income (loss): stock-based compensation expense; acquisition-related inventory adjustments; certain litigation costs; acquisition- and integration-related expense; restructuring and related expense; and other (expense) 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.
-Tables follow-
5
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
| Three months ended | ||||||||||||
| September 30, | June 30, | September 30, | ||||||||||
| 2020 | 2020 | 2019 | ||||||||||
| Revenue: | ||||||||||||
| Product | $ | 128,926 | $ | 120,862 | $ | 61,152 | ||||||
| Service | 102,192 | 89,631 | 76,501 | |||||||||
| Total revenue | 231,118 | 210,493 | 137,653 | |||||||||
| Cost of revenue: | ||||||||||||
| Product | 70,188 | 61,529 | 31,476 | |||||||||
| Service | 37,619 | 36,647 | 27,300 | |||||||||
| Total cost of revenue | 107,807 | 98,176 | 58,776 | |||||||||
| Gross profit | 123,311 | 112,317 | 78,877 | |||||||||
| Gross margin: | ||||||||||||
| Product | 45.6 | % | 49.1 | % | 48.5 | % | ||||||
| Service | 63.2 | % | 59.1 | % | 64.3 | % | ||||||
| Total gross margin | 53.4 | % | 53.4 | % | 57.3 | % | ||||||
| Operating expenses: | ||||||||||||
| Research and development | 49,113 | 51,796 | 34,222 | |||||||||
| Sales and marketing | 41,604 | 37,617 | 28,227 | |||||||||
| General and administrative | 16,021 | 15,094 | 9,673 | |||||||||
| Acquisition- and integration-related | 1,366 | 857 | 1,697 | |||||||||
| Restructuring and related | 3,290 | 5,361 | 2,372 | |||||||||
| Total operating expenses | 111,394 | 110,725 | 76,191 | |||||||||
| Income from operations | 11,917 | 1,592 | 2,686 | |||||||||
| Interest expense, net | (6,854 | ) | (5,400 | ) | (726 | ) | ||||||
| Other income (expense), net | 407 | (2,407 | ) | (507 | ) | |||||||
| Income (loss) before income taxes | 5,470 | (6,215 | ) | 1,453 | ||||||||
| Income tax benefit (provision) | 782 | (2,036 | ) | 197 | ||||||||
| Net income (loss) | $ | 6,252 | $ | (8,251 | ) | $ | 1,650 | |||||
| Earnings (loss) per share: | ||||||||||||
| Basic | $ | 0.04 | $ | (0.06 | ) | $ | 0.01 | |||||
| Diluted | $ | 0.04 | $ | (0.06 | ) | $ | 0.01 | |||||
| Weighted average shares used to compute earnings (loss) per share: | ||||||||||||
| Basic | 144,948 | 144,483 | 110,080 | |||||||||
| Diluted | 151,680 | 144,483 | 110,756 | |||||||||
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
| Nine months ended | ||||||||
| September 30, | September 30, | |||||||
| 2020 | 2019 | |||||||
| Revenue: | ||||||||
| Product | $ | 325,687 | $ | 180,691 | ||||
| Service | 273,906 | 221,311 | ||||||
| Total revenue | 599,593 | 402,002 | ||||||
| Cost of revenue: | ||||||||
| Product | 176,650 | 101,056 | ||||||
| Service | 105,745 | 84,807 | ||||||
| Total cost of revenue | 282,395 | 185,863 | ||||||
| Gross profit | 317,198 | 216,139 | ||||||
| Gross margin: | ||||||||
| Product | 45.8 | % | 44.1 | % | ||||
| Service | 61.4 | % | 61.7 | % | ||||
| Total gross margin | 52.9 | % | 53.8 | % | ||||
| Operating expenses: | ||||||||
| Research and development | 143,204 | 105,456 | ||||||
| Sales and marketing | 115,572 | 87,179 | ||||||
| General and administrative | 48,320 | 40,833 | ||||||
| Acquisition- and integration-related | 14,607 | 6,861 | ||||||
| Restructuring and related | 10,726 | 16,448 | ||||||
| Total operating expenses | 332,429 | 256,777 | ||||||
| Loss from operations | (15,231 | ) | (40,638 | ) | ||||
| Interest expense, net | (15,649 | ) | (3,352 | ) | ||||
| Other (expense) income, net | (2,844 | ) | 70,128 | |||||
| (Loss) income before income taxes | (33,724 | ) | 26,138 | |||||
| Income tax provision | (1,445 | ) | (5,850 | ) | ||||
| Net (loss) income | $ | (35,169 | ) | $ | 20,288 | |||
| (Loss) earnings per share: | ||||||||
| Basic | $ | (0.26 | ) | $ | 0.19 | |||
| Diluted | $ | (0.26 | ) | $ | 0.18 | |||
| Weighted average shares used to compute (loss) earnings per share: | ||||||||
| Basic | 136,837 | 109,523 | ||||||
| Diluted | 136,837 | 110,100 | ||||||
RIBBON COMMUNICATIONS INC.
Consolidated Balance Sheets
(in thousands)
(unaudited)
| September 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 103,698 | $ | 44,643 | ||||
| Restricted cash | 7,198 | - | ||||||
| Accounts receivable, net | 207,813 | 192,706 | ||||||
| Inventory | 50,974 | 14,800 | ||||||
| Other current assets | 33,159 | 27,146 | ||||||
| Total current assets | 402,842 | 279,295 | ||||||
| Property and equipment, net | 48,432 | 28,976 | ||||||
| Intangible assets, net | 432,914 | 213,366 | ||||||
| Goodwill | 416,892 | 224,896 | ||||||
| Deferred income taxes | 8,750 | 4,959 | ||||||
| Operating lease right-of-use assets | 61,648 | 36,654 | ||||||
| Other assets | 34,600 | 26,762 | ||||||
| $ | 1,406,078 | $ | 814,908 | |||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of term debt | $ | 13,909 | $ | 2,500 | ||||
| Revolving credit facility | - | 8,000 | ||||||
| Accounts payable | 60,784 | 31,412 | ||||||
| Accrued expenses and other | 133,875 | 56,700 | ||||||
| Operating lease liabilities | 17,757 | 7,719 | ||||||
| Deferred revenue | 93,447 | 100,406 | ||||||
| Total current liabilities | 319,772 | 206,737 | ||||||
| Long-term debt, net of current | 373,026 | 45,995 | ||||||
| Operating lease liabilities, net of current | 51,328 | 37,202 | ||||||
| Deferred revenue, net of current | 21,285 | 20,482 | ||||||
| Deferred income taxes | 17,532 | 4,648 | ||||||
| Other long-term liabilities | 67,694 | 16,589 | ||||||
| Total liabilities | 850,637 | 331,653 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity: | ||||||||
| Common stock | 15 | 11 | ||||||
| Additional paid-in capital | 1,866,961 | 1,747,784 | ||||||
| Accumulated deficit | (1,302,236 | ) | (1,267,067 | ) | ||||
| Accumulated other comprehensive (loss) income | (9,299 | ) | 2,527 | |||||
| Total stockholders' equity | 555,441 | 483,255 | ||||||
| $ | 1,406,078 | $ | 814,908 | |||||
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Nine months ended | ||||||||
| September 30, | September 30, | |||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | (35,169 | ) | $ | 20,288 | |||
| Adjustments to reconcile net (loss) income to cash flows provided by operating activities: | ||||||||
| Depreciation and amortization of property and equipment | 12,754 | 8,824 | ||||||
| Amortization of intangible assets | 45,352 | 36,829 | ||||||
| Amortization of debt issuance costs | 4,915 | 268 | ||||||
| Stock-based compensation | 10,167 | 8,154 | ||||||
| Deferred income taxes | (2,455 | ) | 4,559 | |||||
| Reduction in deferred purchase consideration | (69 | ) | (8,124 | ) | ||||
| Foreign currency exchange losses | 3,162 | 1,042 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 42,489 | 25,598 | ||||||
| Inventory | 6,285 | 8,387 | ||||||
| Other operating assets | 36,416 | (20,510 | ) | |||||
| Accounts payable | (54,489 | ) | (20,260 | ) | ||||
| Accrued expenses and other long-term liabilities | 10,143 | (21,535 | ) | |||||
| Deferred revenue | (14,253 | ) | (20,889 | ) | ||||
| Net cash provided by operating activities | 65,248 | 22,631 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (18,685 | ) | (8,594 | ) | ||||
| Business acqusitions, net of cash acquired | (346,852 | ) | - | |||||
| Maturities of marketable securities | - | 7,295 | ||||||
| Proceeds from the sale of fixed assets | 43,500 | - | ||||||
| Net cash used in investing activities | (322,037 | ) | (1,299 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Borrowings under revolving line of credit | 615 | 109,000 | ||||||
| Principal payments on revolving line of credit | (8,615 | ) | (130,000 | ) | ||||
| Proceeds from issuance of term debt | 478,500 | 50,000 | ||||||
| Principal payments of term debt | (131,279 | ) | (625 | ) | ||||
| Payment of deferred purchase consideration | - | (21,876 | ) | |||||
| Principal payment of debt, related party | - | (24,716 | ) | |||||
| Principal payments of finance leases | (971 | ) | (698 | ) | ||||
| Payment of debt issuance costs | (14,065 | ) | (891 | ) | ||||
| Proceeds from the sale of common stock in connection with employee stock purchase plan | - | 506 | ||||||
| Proceeds from the exercise of stock options | 29 | 233 | ||||||
| Payment of tax withholding obligations related to net share settlements of restricted stock awards | (1,196 | ) | (1,082 | ) | ||||
| Repurchase of common stock | - | (4,536 | ) | |||||
| Net cash provided by (used in) financing activities | 323,018 | (24,685 | ) | |||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 24 | 56 | ||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 66,253 | (3,297 | ) | |||||
| Cash and cash equivalents, beginning of year | 44,643 | 43,694 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 110,896 | $ | 40,397 | ||||
RIBBON COMMUNICATIONS INC.
Supplemental Information
(in thousands)
(unaudited)
The following tables provide the details of stock-based compensation and amortization 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.
| Three months ended | Nine months ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Cost of revenue - product | $ | 57 | $ | 39 | $ | 26 | $ | 123 | $ | 62 | ||||||||||
| Cost of revenue - service | 204 | 159 | 124 | 493 | 367 | |||||||||||||||
| Cost of revenue | 261 | 198 | 150 | 616 | 429 | |||||||||||||||
| Research and development expense | 868 | 738 | 521 | 2,164 | 1,359 | |||||||||||||||
| Sales and marketing expense | 1,189 | 1,011 | 721 | 2,952 | 2,265 | |||||||||||||||
| General and administrative expense | 1,651 | 1,275 | 1,093 | 4,435 | 4,101 | |||||||||||||||
| Operating expense | 3,708 | 3,024 | 2,335 | 9,551 | 7,725 | |||||||||||||||
| Total stock-based compensation | $ | 3,969 | $ | 3,222 | $ | 2,485 | $ | 10,167 | $ | 8,154 | ||||||||||
| Amortization of intangible assets | ||||||||||||||||||||
| Cost of revenue - product | $ | 11,643 | $ | 10,950 | $ | 9,522 | $ | 31,547 | $ | 29,259 | ||||||||||
| Sales and marketing expense | 4,706 | 3,719 | 2,738 | 13,805 | 7,570 | |||||||||||||||
| Total amortization of intangible assets | $ | 16,349 | $ | 14,669 | $ | 12,260 | $ | 45,352 | $ | 36,829 | ||||||||||
RIBBON COMMUNICATIONS INC.
Reconciliation of Non-GAAP and GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)
| Three months ended | ||||||||||||
| September 30, | June 30, | September 30, | ||||||||||
| 2020 | 2020 | 2019 | ||||||||||
| Revenue | $ | 231,118 | $ | 210,493 | $ | 137,653 | ||||||
| Less revenue attributable to ECI | (77,588 | ) | (63,586 | ) | - | |||||||
| Ribbon standalone revenue | $ | 153,530 | $ | 146,907 | $ | 137,653 | ||||||
| GAAP Total gross margin | 53.4 | % | 53.4 | % | 57.3 | % | ||||||
| Stock-based compensation | 0.1 | % | 0.1 | % | 0.1 | % | ||||||
| Amortization of intangible assets | 5.0 | % | 5.2 | % | 6.9 | % | ||||||
| Acquisition-related inventory adjustment | 0.9 | % | 0.0 | % | 0.0 | % | ||||||
| Non-GAAP Total gross margin | 59.4 | % | 58.7 | % | 64.3 | % | ||||||
| GAAP Total gross profit | $ | 123,311 | $ | 112,317 | $ | 78,877 | ||||||
| Less total gross profit attributable to ECI | (29,647 | ) | (21,611 | ) | - | |||||||
| Ribbon standalone gross profit | $ | 93,664 | $ | 90,706 | $ | 78,877 | ||||||
| Ribbon standalone gross margin (Ribbon standalone gross profit/Ribbon standalone revenue) | 61.0 | % | 61.7 | % | 57.3 | % | ||||||
| Stock-based compensation | 0.1 | % | 0.1 | % | 0.1 | % | ||||||
| Amortization of intangible assets | 5.3 | % | 5.4 | % | 6.9 | % | ||||||
| Non-GAAP Ribbon standalone gross margin | 66.4 | % | 67.2 | % | 64.3 | % | ||||||
| GAAP Net income (loss) | $ | 6,252 | $ | (8,251 | ) | $ | 1,650 | |||||
| Stock-based compensation | 3,969 | 3,222 | 2,485 | |||||||||
| Amortization of intangible assets | 16,349 | 14,669 | 12,260 | |||||||||
| Acquisition-related inventory adjustment | 2,000 | - | - | |||||||||
| Litigation costs | - | (937 | ) | (1,534 | ) | |||||||
| Acquisition- and integration-related expense | 1,366 | 857 | 1,697 | |||||||||
| Restructuring and related expense | 3,290 | 5,361 | 2,372 | |||||||||
| Gain on litigation settlement | - | - | - | |||||||||
| Tax effect of non-GAAP adjustments | (9,346 | ) | (6,626 | ) | (4,256 | ) | ||||||
| Non-GAAP Net income | $ | 23,880 | $ | 8,295 | $ | 14,674 | ||||||
| Earnings (loss) per share | ||||||||||||
| GAAP Diluted earnings per share or (loss) per share | $ | 0.04 | $ | (0.06 | ) | $ | 0.01 | |||||
| Stock-based compensation | 0.03 | 0.02 | 0.02 | |||||||||
| Amortization of intangible assets | 0.11 | 0.10 | 0.11 | |||||||||
| Acquisition-related inventory adjustment | 0.01 | - | - | |||||||||
| Litigation costs | - | (0.01 | ) | (0.01 | ) | |||||||
| Acquisition- and integration-related expense | 0.01 | 0.01 | 0.02 | |||||||||
| Restructuring and related expense | 0.02 | 0.04 | 0.02 | |||||||||
| Gain on litigation settlement | - | - | - | |||||||||
| Tax effect of non-GAAP adjustments | (0.06 | ) | (0.04 | ) | (0.04 | ) | ||||||
| Non-GAAP Diluted earnings per share | $ | 0.16 | $ | 0.06 | $ | 0.13 | ||||||
| Weighted average shares used to compute diluted earnings per share or (loss) per share | 110,756 | |||||||||||
| GAAP Shares used to compute diluted earnings per share or (loss) per share | 151,680 | 144,483 | 110,756 | |||||||||
| Non-GAAP Shares used to compute diluted earnings per share | 151,680 | 150,512 | ||||||||||
| Adjusted EBITDA | ||||||||||||
| GAAP Net income (loss) | $ | 6,252 | $ | (8,251 | ) | $ | 1,650 | |||||
| Interest expense, net | 6,854 | 5,400 | 726 | |||||||||
| Income tax (benefit) provision | (782 | ) | 2,036 | (197 | ) | |||||||
| Depreciation | 4,494 | 4,786 | 2,933 | |||||||||
| Amortization of intangible assets | 16,349 | 14,669 | 12,260 | |||||||||
| Stock-based compensation | 3,969 | 3,222 | 2,485 | |||||||||
| Acquisition-related inventory adjustment | 2,000 | - | - | |||||||||
| Litigation costs | - | (937 | ) | (1,534 | ) | |||||||
| Acquisition- and integration-related expense | 1,366 | 857 | 1,697 | |||||||||
| Restructuring and related expense | 3,290 | 5,361 | 2,372 | |||||||||
| Other expense (income), net | (407 | ) | 2,407 | 507 | ||||||||
| Non-GAAP Adjusted EBITDA | $ | 43,385 | $ | 29,550 | $ | 22,899 | ||||||
RIBBON COMMUNICATIONS INC.
Reconciliation of Non-GAAP and GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)
| Nine months ended | ||||||||
| September 30, | September 30, | |||||||
| 2020 | 2019 | |||||||
| Revenue | $ | 599,593 | $ | 402,002 | ||||
| Less revenue attributable to ECI | (171,125 | ) | - | |||||
| Ribbon standalone revenue | $ | 428,468 | $ | 402,002 | ||||
| GAAP Total gross margin | 52.9 | % | 53.8 | % | ||||
| Stock-based compensation | 0.1 | % | 0.1 | % | ||||
| Amortization of intangible assets | 5.3 | % | 7.3 | % | ||||
| Acquisition-related inventory adjustment | 0.3 | % | 0.0 | % | ||||
| Non-GAAP Total gross margin | 58.6 | % | 61.2 | % | ||||
| GAAP Total gross profit | $ | 317,198 | $ | 216,139 | ||||
| Less total gross profit attributable to ECI | (61,909 | ) | - | |||||
| Ribbon standalone gross profit | $ | 255,289 | $ | 216,139 | ||||
| Ribbon standalone gross margin (Ribbon standalone gross profit/Ribbon standalone revenue) | 59.6 | % | 53.8 | % | ||||
| Stock-based compensation | 0.1 | % | 0.1 | % | ||||
| Amortization of intangible assets | 5.6 | % | 7.3 | % | ||||
| Non-GAAP Ribbon standalone gross margin | 65.3 | % | 61.2 | % | ||||
| GAAP Net (loss) income | $ | (35,169 | ) | $ | 20,288 | |||
| Stock-based compensation | 10,167 | 8,154 | ||||||
| Amortization of intangible assets | 45,352 | 36,829 | ||||||
| Acquisition-related inventory adjustment | 2,000 | - | ||||||
| Litigation costs | 2,101 | 5,967 | ||||||
| Acquisition- and integration-related expense | 14,607 | 6,861 | ||||||
| Restructuring and related expense | 10,726 | 16,448 | ||||||
| Reduction to deferred purchase consideration | - | (8,124 | ) | |||||
| Gain on litigation settlement | - | (63,000 | ) | |||||
| Tax effect of non-GAAP adjustments | (16,736 | ) | (1,631 | ) | ||||
| Non-GAAP net income | $ | 33,048 | $ | 21,792 | ||||
| (Loss) earnings per share | ||||||||
| GAAP (loss) per share or diluted earnings per share | $ | (0.26 | ) | $ | 0.18 | |||
| Stock-based compensation | 0.07 | 0.07 | ||||||
| Amortization of intangible assets | 0.33 | 0.34 | ||||||
| Acquisition-related inventory adjustment | 0.01 | - | ||||||
| Litigation costs | 0.01 | 0.05 | ||||||
| Acquisition- and integration-related expense | 0.10 | 0.06 | ||||||
| Restructuring and related expense | 0.08 | 0.15 | ||||||
| Reduction to deferred purchase consideration | - | (0.07 | ) | |||||
| Gain on litigation settlement | - | (0.57 | ) | |||||
| Tax effect of non-GAAP adjustments | (0.11 | ) | (0.01 | ) | ||||
| Non-GAAP Diluted earnings per share | $ | 0.23 | $ | 0.20 | ||||
| Weighted average shares used to compute (loss) per share or diluted earnings per share | ||||||||
| GAAP Shares used to compute (loss) per share or diluted earnings per share | 136,837 | 110,100 | ||||||
| Non-GAAP Shares used to compute diluted earnings per share | 141,498 | 110,100 | ||||||
| Adjusted EBITDA | ||||||||
| GAAP Net (loss) income | $ | (35,169 | ) | $ | 20,288 | |||
| Interest expense, net | 15,649 | 3,352 | ||||||
| Income tax provision | 1,445 | 5,850 | ||||||
| Depreciation | 12,754 | 8,824 | ||||||
| Amortization of intangible assets | 45,352 | 36,829 | ||||||
| Stock-based compensation | 10,167 | 8,154 | ||||||
| Acquisition-related inventory adjustment | 2,000 | - | ||||||
| Litigation costs | 2,101 | 5,967 | ||||||
| Acquisition- and integration-related expense | 14,607 | 6,861 | ||||||
| Restructuring and related expense | 10,726 | 16,448 | ||||||
| Other expense (income), net | 2,844 | (70,128 | ) | |||||
| Non-GAAP Adjusted EBITDA | $ | 82,476 | $ | 42,445 | ||||
RIBBON COMMUNICATIONS INC.
Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook
(unaudited)
| Three months ending | ||||||||
| December 31, 2020 | ||||||||
| Range | ||||||||
| Revenue | $ | 235 | $ | 245 | ||||
| Operating expenses (in $ millions) | ||||||||
| GAAP outlook | $ | 117.6 | $ | 117.6 | ||||
| Stock-based compensation | (3.7 | ) | (3.7 | ) | ||||
| Amortization of intangible assets | (4.8 | ) | (4.8 | ) | ||||
| Acquisition- and integration-related expense | (2.1 | ) | (2.1 | ) | ||||
| Restructuring and related expense | (2.0 | ) | (2.0 | ) | ||||
| Non-GAAP outlook | $ | 105.0 | $ | 105.0 | ||||
| (Loss) earnings per share | ||||||||
| GAAP outlook | $ | (0.01 | ) | $ | 0.02 | |||
| Stock-based compensation | 0.03 | 0.03 | ||||||
| Amortization of intangible assets | 0.10 | 0.10 | ||||||
| Acquisition- and integration-related expense | 0.01 | 0.01 | ||||||
| Restructuring and related expense | 0.01 | 0.01 | ||||||
| Tax effect of non-GAAP adjustments | (0.02 | ) | (0.03 | ) | ||||
| Non-GAAP outlook | $ | 0.12 | $ | 0.14 | ||||
| Weighted average shares used to compute (loss) per share or diluted earnings per share (in thousands) | ||||||||
| GAAP Shares used to compute loss per share or diluted earnings per share | 145,300 | 151,700 | ||||||
| Non-GAAP Shares used to compute diluted earnings per share | 151,700 | 151,700 | ||||||
| Adjusted EBITDA (in $ millions) | ||||||||
| GAAP net loss (income) outlook | $ | (2.1 | ) | $ | 1.9 | |||
| Interest expense, net | 6.5 | 6.5 | ||||||
| Income tax provision | 2.3 | 2.3 | ||||||
| Depreciation | 4.3 | 4.3 | ||||||
| Amortization of intangible assets | 15.5 | 15.5 | ||||||
| Stock-based compensation | 3.9 | 3.9 | ||||||
| Acquisition- and integration-related expense | 2.1 | 2.1 | ||||||
| Restructuring and related expense | 2.0 | 2.0 | ||||||
| Other expense, net | 1.5 | 1.5 | ||||||
| Non-GAAP outlook | $ | 36.0 | $ | 40.0 | ||||