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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

 

October 27, 2021

 

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.)

 

6500 Chase Oaks Blvd., Suite 100, Plano, TX 75023

(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):

 

	¨	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
Common Stock, par value $0.0001		RBBN		The Nasdaq Global Select Market

 

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 27, 2021, Ribbon Communications Inc. issued a press release reporting its financial results for the quarter and nine months ended September 30, 2021, 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 27, 2021, reporting financial results of the quarter ended September 30, 2021.

104

Cover Page Interactive 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 27, 2021	Ribbon Communications Inc.
	By:	/s/ Patrick Macken
		Name:	Patrick W. Macken
		Title:	Executive Vice President, Chief Legal Officer and Secretary

 

 

 

Exhibit 99.1

 

 

 

Ribbon Communications Inc. Reports
Third Quarter 2021 Financial Results

 

IP Optical Networks new customer wins and strong profitability in Cloud & Edge

Global supply chain constraints affected in-quarter revenue

 

  

 

 

Cash, cash equivalents and restricted cash was $104 million at September 30, 2021, compared with $115 million at June 30, 2021, due in part to an increase of $16 million in accounts receivable. The GAAP Net loss of $59 million in the third quarter of 2021 includes a $56 million non-cash loss associated with the quarterly mark-to-market of our investment in AVCT from the sale of our Kandy Communications business.

 

“Our Cloud & Edge business continued to generate strong profitability in the quarter, while we expand our investment in our IP Optical Networks portfolio to address the growing tier 1 service provider opportunity pipeline. We believe this investment will generate future returns as we execute on our cross-sell strategy. We remain confident in the Company’s direction as we navigate the impact of supply chain constraints,” said Mick Lopez, Chief Financial Officer of Ribbon Communications.

 

Customer and Company Highlights

▪

Solid performance despite supply chain disruptions

o

2% year-to-date YoY revenue growth

o

14% year-to-date YoY Adj. EBITDA growth

o

Approximately $9.5 million of shipments delayed to 4Q21 and approximately $3 million in expedited shipping and cost increases in 3Q21

▪

Building momentum with new IP Optical Networks wins and 1.17x product book to revenue in the quarter

o

Viaero Wireless and Viaero Fiber Networks (top 10 mobile network operator) have selected Ribbon's IP Optical portfolio to upgrade their network from microwave and leased services to fiber connectivity

o

Dakota Central deployed Apollo and Neptune platform to upgrade their broadband network with increased capacity and 5G backhaul capabilities

o

Megafon (2nd largest mobile operator in Russia) selected Apollo DWDM platform

o

Leading Swiss utility provider selected Ribbon products including Muse platform and network slicing technology

o

Largest European rail network operator implemented Apollo DWDM based backbone

o

Introduced new version of Muse featuring enhanced traffic optimization capability and zero-touch provisioning

▪

Cloud & Edge continues to generate strong and steady profitability with 32% Adjusted EBITDA margin

o

Strong demand for Voice over IP Network Transformation solutions growing 25% year-to-date YoY

o

Higher software mix (68% of product revenue) contributed to segment gross margin of 67% in 3Q21

 

Business Outlook¹

The Company’s outlook is based on current indications for its business, which are subject to change. For the fourth quarter of 2021, the Company projects revenue of $240 million to $260 million, non-GAAP gross margin of 58%, non-GAAP diluted earnings per share of $0.13 to $0.17, and Adjusted EBITDA of $45 million to $51 million. The current outlook assumes no worsening of conditions related to the COVID-19 pandemic or supply chain disruptions.

 

¹ Please see the reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures and additional information about the non-GAAP measures in the section entitled “Discussion of Non-GAAP Financial Measures” in the attached schedules.

 

Upcoming Investor Conference Schedule

•

November 18, 2021 - Ribbon Spotlight virtual event series to showcase the latest strategic growth opportunities and technology: “IP Wave” for IP Optical Networks and “Telco Cloud” for Cloud and Edge

•

November 15 –18, 2021 – Needham Virtual Security, Networking & Communications Conference (virtual presentation and one-on-one institutional investor meetings).

•

December 7 – 8, 2021 – Barclays Global Technology, Media and Telecommunications Conference (virtual one-on-one institutional investor meetings).

•

December 13, 2021 – Cowen’s 12 Days of Networking Series (virtual one-on-one institutional investor meetings).

•

January 10 – 14, 2022 – Needham Growth Conference (virtual presentation and one-on-one institutional investor meetings).

 

About Ribbon
Ribbon Communications (Nasdaq: RBBN) delivers communications software, IP and optical networking solutions to service providers, enterprises and critical infrastructure sectors globally. 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 software-centric solutions, cloud-native offers, leading-edge security and analytics tools, along with IP and optical networking solutions for 5G. 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 2021 and beyond, sales trends, 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.

 

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 supply chain disruptions resulting from component availability and/or geopolitical instabilities and disputes; risks related to the continuing COVID-19 pandemic, including delays in customer deployments as a result of rises in cases; risks that we will not realize estimated cost savings and/or anticipated benefits from the acquisition of ECI; failure to realize anticipated benefits from the sale of our Kandy Communications business (“Kandy”) or declines in the value of our ongoing investment in AVCT, the purchaser of the Kandy Communications business; unpredictable fluctuations in quarterly revenue and operating results; risks related to cybersecurity and data intrusion; failure to compete successfully against telecommunications equipment and networking companies; failure to grow our customer base or generate recurring business from our existing customers; credit risks; the timing of customer purchasing decisions and our recognition of revenues; macroeconomic conditions; the impact of restructuring and cost-containment activities; litigation; market acceptance of our products and services; rapid technological and market change; our ability to protect our intellectual property rights and obtain necessary licenses; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; the potential for defects in our products; risks related to the terms of our credit agreement; higher risks in international operations and markets; increases in tariffs, trade restrictions or taxes on our products; currency fluctuations; and failure or circumvention of our controls and procedures.

 

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, 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

Our management uses several different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our 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 our 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 tools 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.

 

 

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 in connection with our acquired businesses.

 

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 our core operating performance.

 

Amortization of Acquired 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.

 

Litigation Costs

We have been involved in litigation with a former GENBAND business partner and have reached settlement with the other party. We exclude the costs of such litigation because we believe such costs are not part of our core business or ongoing operations.

 

Acquisition-, Disposal- and Integration-Related Expense

We consider certain acquisition-, disposal- 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-, disposal- 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 and 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.

 

Gain on Sale of Business

On May 12, 2021, we sold our Qualitech business, which we had acquired as part of the ECI Acquisition, to Hermon Laboratories, Ltd. As consideration, we received $2.9 million of cash and recorded a gain on the sale of $2.8 million. We exclude this gain because we believe that such gains are not part of our core business or ongoing operations.

 

 

Interest Income on Debentures

We recorded paid-in-kind interest income on the debentures received as consideration from the sale of our Kandy Communications business (the “Debentures”), which increased their fair value. We exclude this interest income because we believe that such a gain is not part of our core business or ongoing operations.

 

Decrease (Increase) in Fair Value of Investments

We calculate the fair values of the Debentures and the Warrants received as consideration from the sale of our Kandy Communications business (the “Warrants”) (prior to September 8, 2021) and the shares of AVCT common stock and Warrants (effective September 8, 2021) at each quarter-end and record any adjustments to their fair values in Other (expense) income, net. We exclude these and any subsequent gains and losses from the change in fair value of this investment because we believe that such gains or losses are not part of our core business or ongoing operations.

 

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. Non-GAAP income tax expense assumes no available net operating losses or valuation allowances for the U.S. because of reporting significant cumulative non-GAAP income over the past several years. We are reporting our non-GAAP quarterly income taxes by computing an annual rate for the Company and applying that single rate (rather than multiple rates by jurisdiction) to our consolidated quarterly results. We expect that this methodology will provide a consistent rate throughout the year and allow investors to better understand the impact of income taxes on our results. 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.

 

Adjusted EBITDA

We use Adjusted EBITDA as a supplemental measure to review and assess our performance. We calculate Adjusted EBITDA by excluding from Income (loss) from operations: depreciation; amortization of acquired intangible assets; stock-based compensation; acquisition-related inventory adjustments; certain litigation costs; acquisition-, disposal- and integration-related expense; and restructuring and related expense. In general, we exclude the expenses that we consider to be non-cash and/or not part of our ongoing operations. We may exclude other items in the future that have those characteristics. 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.

 

 

 

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

 

		Three months ended
		September 30,				June 30,				September 30,
		2021				2021				2020
Revenue:
Product		$	111,726			$	113,129			$	128,926
Service			98,672				98,081				102,192
Total revenue			210,398				211,210				231,118
Cost of revenue:
Product			53,494				46,641				58,545
Service			36,576				36,142				37,619
Total cost of revenue			90,070				82,783				96,164
Gross profit			120,328				128,427				134,954
Gross margin:
Product			52.1	%			58.8	%			54.6	%
Service			62.9	%			63.2	%			63.2	%
Total gross margin			57.2	%			60.8	%			58.4	%
Operating expenses:
Research and development			49,132				46,797				49,113
Sales and marketing			36,113				34,881				36,898
General and administrative			12,148				12,734				16,021
Amortization of acquired intangible assets			17,221				17,181				16,349
Acquisition-, disposal- and integration-related expense			1,955				1,052				1,366
Restructuring and related expense			1,767				2,830				3,290
Total operating expenses			118,336				115,475				123,037
Income from operations			1,992				12,952				11,917
Interest expense, net			(2,969	)			(3,048	)			(6,854	)
Other (expense) income, net			(57,702	)			17,180				407
(Loss) income before income taxes			(58,679	)			27,084				5,470
Income tax (provision) benefit			(752	)			(3,843	)			782
Net (loss) income		$	(59,431	)		$	23,241			$	6,252
(Loss) earnings per share:
Basic		$	(0.40	)		$	0.16			$	0.04
Diluted		$	(0.40	)		$	0.15			$	0.04
Weighted average shares used to compute (loss) earnings per share:
Basic			148,184				147,467				144,948
Diluted			148,184				154,160				151,680

 

 

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

 

		Nine months ended
		September 30,				September 30,
		2021				2020
Revenue:
Product		$	322,744			$	325,687
Service			291,636				273,906
Total revenue			614,380				599,593
Cost of revenue:
Product			144,580				145,103
Service			110,498				105,745
Total cost of revenue			255,078				250,848
Gross profit			359,302				348,745
Gross margin:
Product			55.2	%			55.4	%
Service			62.1	%			61.4	%
Total gross margin			58.5	%			58.2	%
Operating expenses:
Research and development			143,339				143,204
Sales and marketing			108,212				101,767
General and administrative			40,435				48,320
Amortization of acquired intangible assets			50,225				45,352
Acquisition-, disposal- and integration-related expense			4,204				14,607
Restructuring and related expense			10,547				10,726
Total operating expenses			356,962				363,976
Income (loss) from operations			2,340				(15,231	)
Interest expense, net			(11,836	)			(15,649	)
Other expense, net			(65,970	)			(2,844	)
Loss before income taxes			(75,466	)			(33,724	)
Income tax provision			(5,411	)			(1,445	)
Net loss		$	(80,877	)		$	(35,169	)
Loss per share:
Basic		$	(0.55	)		$	(0.26	)
Diluted		$	(0.55	)		$	(0.26	)
Weighted average shares used to compute loss per share:
Basic			147,204				136,837
Diluted			147,204				136,837

 

 

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

		September 30,				December 31,
		2021				2020
Assets
Current assets:
Cash and cash equivalents		$	101,212			$	128,428
Restricted cash			2,543				7,269
Accounts receivable, net			235,710				237,738
Inventory			44,789				45,750
Other current assets			34,399				28,461
Total current assets			418,653				447,646
Property and equipment, net			48,557				48,888
Intangible assets, net			367,131				417,356
Goodwill			416,892				416,892
Investments			50,439				115,183
Deferred income taxes			10,673				10,651
Operating lease right-of-use assets			54,446				69,757
Other assets			19,834				20,892
		$	1,386,625			$	1,547,265
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of term debt		$	20,058			$	15,531
Accounts payable			63,253				63,387
Accrued expenses and other			94,021				134,865
Operating lease liabilities			17,848				17,023
Deferred revenue			89,553				96,824
Total current liabilities			284,733				327,630
Long-term debt, net of current			354,778				369,035
Operating lease liabilities, net of current			58,609				72,614
Deferred revenue, net of current			21,618				26,010
Deferred income taxes			13,477				16,842
Other long-term liabilities			39,862				48,281
Total liabilities			773,077				860,412
Commitments and contingencies
Stockholders' equity:
Common stock			15				15
Additional paid-in capital			1,870,711				1,870,256
Accumulated deficit			(1,259,353	)			(1,178,476	)
Accumulated other comprehensive income (loss)			2,175				(4,942	)
Total stockholders' equity			613,548				686,853
		$	1,386,625			$	1,547,265

 

 

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

		Nine months ended
		September 30,				September 30,
		2021				2020
Cash flows from operating activities:
Net loss		$	(80,877	)		$	(35,169	)
Adjustments to reconcile net loss to cash flows provided by operating activities:
Depreciation and amortization of property and equipment			12,684				12,754
Amortization of intangible assets			50,225				45,352
Amortization of debt issuance costs			4,227				4,915
Stock-based compensation			14,411				10,167
Deferred income taxes			(3,295	)			(2,455	)
Gain on sale of business			(2,772	)			-
Decrease in fair value of investments			64,745				-
Reduction in deferred purchase consideration			-				(69	)
Foreign currency exchange losses			3,235				3,162
Changes in operating assets and liabilities:
Accounts receivable			1,892				42,489
Inventory			253				6,285
Other operating assets			11,303				36,416
Accounts payable			2,194				(54,489	)
Accrued expenses and other long-term liabilities			(58,661	)			10,143
Deferred revenue			(11,665	)			(14,253	)
Net cash provided by operating activities			7,899				65,248
Cash flows from investing activities:
Purchases of property and equipment			(14,279	)			(18,685	)
Business acqusitions, net of cash acquired			-				(346,852	)
Proceeds from sale of business			2,944				-
Proceeds from the sale of fixed assets			-				43,500
Net cash used in investing activities			(11,335	)			(322,037	)
Cash flows from financing activities:
Borrowings under revolving line of credit			-				615
Principal payments on revolving line of credit			-				(8,615	)
Proceeds from issuance of term debt			74,625				478,500
Principal payments of term debt			(87,161	)			(131,279	)
Principal payments of finance leases			(736	)			(971	)
Payment of debt issuance costs			(789	)			(14,065	)
Proceeds from the exercise of stock options			24				29
Payment of tax withholding obligations related to net share settlements of restricted stock awards			(13,980	)			(1,196	)
Net cash (used in) provided by financing activities			(28,017	)			323,018
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(489	)			24
Net (decrease) increase in cash, cash equivalents and restricted cash			(31,942	)			66,253
Cash and cash equivalents, beginning of year			135,697				44,643
Cash, cash equivalents and restricted cash, end of period		$	103,755			$	110,896

 

  

RIBBON COMMUNICATIONS INC.

Supplemental Information

(in thousands)

(unaudited)

 

The following tables provide the details of stock-based compensation included as components of other line items in the Company's Condensed Consolidated Statements of Operations and the line items in which these amounts are reported.  

 

		Three months ended												Nine months ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2021				2021				2020				2021				2020
Stock-based compensation
Cost of revenue - product		$	96			$	93			$	57			$	216			$	123
Cost of revenue - service			492				469				204				1,196				493
Cost of revenue			588				562				261				1,412				616
Research and development			1,223				1,160				868				3,010				2,164
Sales and marketing			1,581				1,752				1,189				5,207				2,952
General and administrative			1,169				1,316				1,651				4,782				4,435
Operating expense			3,973				4,228				3,708				12,999				9,551
Total stock-based compensation		$	4,561			$	4,790			$	3,969			$	14,411			$	10,167

 

 

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,
		2021				2021				2020
GAAP Total gross margin			57.2	%			60.8	%			58.4	%
Acquisition-related inventory adjustment			0.0	%			0.0	%			0.9	%
Stock-based compensation			0.3	%			0.3	%			0.1	%
Non-GAAP Total gross margin			57.5	%			61.1	%			59.4	%
GAAP Net (loss) income		$	(59,431	)		$	23,241			$	6,252
Acquisition-related inventory adjustment			-				-				2,000
Stock-based compensation			4,561				4,790				3,969
Amortization of acquired intangible assets			17,221				17,181				16,349
Acquisition-, disposal- and integration-related expense			1,955				1,052				1,366
Restructuring and related expense			1,767				2,830				3,290
Gain on sale of business			-				(2,772	)			-
Interest income on debentures			(901	)			(1,196	)			-
Decrease (increase) in fair value of investments			56,475				(12,074	)			-
Tax effect of non-GAAP adjustments			(5,294	)			(6,205	)			(11,409	)
Non-GAAP Net income		$	16,353			$	26,847			$	21,817
(Loss) earnings per share
GAAP (Loss) diluted earnings per share		$	(0.40	)		$	0.15			$	0.04
Acquisition-related inventory adjustment			-				-				0.01
Stock-based compensation			0.03				0.03				0.03
Amortization of acquired intangible assets			0.12				0.11				0.11
Acquisition-, disposal- and integration-related expense			0.01				0.01				0.01
Restructuring and related expense			0.01				0.02				0.02
Gain on sale of business			-				(0.02	)			-
Interest income on debentures			(0.01	)			(0.01	)			-
Decrease (increase) in fair value of investments			0.38				(0.08	)			-
Tax effect of non-GAAP adjustments			(0.03	)			(0.04	)			(0.08	)
Non-GAAP Diluted earnings per share		$	0.11			$	0.17			$	0.14
Weighted average shares used to compute (loss) diluted earnings per share
Shares used to compute GAAP (loss) diluted earnings per share			148,184				154,160				151,680
Shares used to compute Non-GAAP diluted earnings per share			154,061				154,160				151,680
Adjusted EBITDA
GAAP Income from operations		$	1,992			$	12,952			$	11,917
Depreciation			4,209				4,249				4,494
Amortization of acquired intangible assets			17,221				17,181				16,349
Stock-based compensation			4,561				4,790				3,969
Acquisition-related inventory adjustment			-				-				2,000
Acquisition-, disposal- and integration-related expense			1,955				1,052				1,366
Restructuring and related expense			1,767				2,830				3,290
Non-GAAP Adjusted EBITDA		$	31,705			$	43,054			$	43,385

 

 

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,
		2021				2020
GAAP Total gross margin			58.5	%			58.2	%
Acquisition-related inventory adjustment			0.0	%			0.3	%
Stock-based compensation			0.2	%			0.1	%
Non-GAAP Total gross margin			58.7	%			58.6	%
GAAP Net loss		$	(80,877	)		$	(35,169	)
Acquisition-related inventory adjustment			-				2,000
Stock-based compensation			14,411				10,167
Amortization of acquired intangible assets			50,225				45,352
Litigation costs			-				2,101
Acquisition-, disposal- and integration-related expense			4,204				14,607
Restructuring and related expense			10,547				10,726
Gain on sale of business			(2,772	)			-
Interest income on debentures			(3,556	)			-
Decrease in fair value of investments			68,301				-
Tax effect of non-GAAP adjustments			(12,379	)			(15,335	)
Non-GAAP Net income		$	48,104			$	34,449
(Loss) earnings per share
GAAP Loss per share		$	(0.55	)		$	(0.26	)
Acquisition-related inventory adjustment			-				0.01
Stock-based compensation			0.09				0.07
Amortization of acquired intangible assets			0.33				0.33
Litigation costs			-				0.01
Acquisition-, disposal- and integration-related expense			0.03				0.10
Restructuring and related expense			0.07				0.08
Gain on sale of business			(0.02	)			-
Interest income on debentures			(0.02	)			-
Decrease in fair value of investments			0.45				-
Tax effect of non-GAAP adjustments			(0.07	)			(0.10	)
Non-GAAP Diluted earnings per share		$	0.31			$	0.24
Weighted average shares used to compute (loss) diluted earnings per share
Shares used to compute GAAP loss per share			147,204				136,837
Shares used to compute Non-GAAP diluted earnings per share			154,573				141,498
Adjusted EBITDA
GAAP Income (loss) from operations		$	2,340			$	(15,231	)
Depreciation			12,684				12,754
Amortization of acquired intangible assets			50,225				45,352
Acquisition-related inventory adjustment			-				2,000
Stock-based compensation			14,411				10,167
Litigation costs			-				2,101
Acquisition-, disposal- and integration-related expense			4,204				14,607
Restructuring and related expense			10,547				10,726
Non-GAAP Adjusted EBITDA		$	94,411			$	82,476

 

 

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook

(unaudited)

 

		Three months ending
		December 31, 2021
		Range
Revenue ($ millions)		$	240			$	260
Gross margin
GAAP outlook			57.8	%			57.8	%
Stock-based compensation			0.2	%			0.2	%
Non-GAAP outlook			58.0	%			58.0	%
Earnings per share
GAAP outlook		$	0.04			$	0.08
Stock-based compensation			0.03				0.03
Amortization of acquired intangible assets			0.11				0.11
Acquisition-, disposal- and integration-related expense			0.01				0.01
Restructuring and related expense			0.01				0.01
Tax effect of non-GAAP adjustments			(0.07	)			(0.07	)
Non-GAAP outlook		$	0.13			$	0.17
Weighted average shares used to compute diluted earnings per share (GAAP and Non-GAAP) (in thousands)			154,000				154,000
Adjusted EBITDA ($ millions)
GAAP income from operations		$	16.2			$	22.2
Depreciation			4.3				4.3
Amortization of acquired intangible assets			16.3				16.3
Stock-based compensation			5.0				5.0
Acquisition-, disposal- and integration-related expense			1.8				1.8
Restructuring and related expense			1.4				1.4
Non-GAAP outlook		$	45.0			$	51.0