Kandy Press Releases

    Ribbon Communications Inc. Releases Fourth Quarter and Full Year 2019 Financial Results

    by Kandy, io

    Revenue was $161 million for the fourth quarter of 2019

    Full year 2019 software sales grew 23 percent compared with 2018

    WESTFORD, Mass., Feb. 19, 2020 /PRNewswire/ -- Ribbon Communications Inc. (Nasdaq: RBBN), a global software leader in secure and intelligent cloud communications, today announced its financial results for the fourth quarter and full year 2019.

    "We are pleased with our 2019 financial results and our solid finish in the fourth quarter.  We continue to see benefits from our investments in software solutions with our 2019 software sales growing 23 percent compared to the prior year," said Kevin Riley, Interim Co-President and Chief Executive Officer and Chief Technology Officer.  "Now that we have obtained stockholder approval, we are looking forward to completing our combination with ECI Telecom Group Ltd., which we expect to occur during the first quarter of 2020 once we receive the remaining regulatory approval.  The Ribbon and ECI teams are excited to come together, integrate as one and unlock global sales expansion.  This is an important step in our journey towards market diversification and growth."

    Financial Highlights1,2
    The following table summarizes the consolidated fourth quarter and full year financial highlights for 2019 and 2018 (in millions, except per share amounts).

     

    Three months
    Ended

    Twelve months
    ended

     

    December 31,

    December 31,

     

    2019

    2018

    2019

    2018

    GAAP Total revenue

    $  161

    $  167

    $  563

    $  578

    GAAP Net loss

    $ (150)

    $     (2)

    $ (130)

    $   (77)

    Non-GAAP Net income

    $    30

    $    24

    $    51

    $    39

    GAAP Loss per share

    $(1.36)

    $(0.02)

    $(1.19)

    $(0.74)

    Non-GAAP Diluted earnings per share

    $ 0.27

    $ 0.22

    $ 0.47

    $  0.37

    Non-GAAP Adjusted EBITDA

    $    43

    $    29

    $    86

    $     62

    Cash flow from operations

    $    33

    $    14

    $    56

    $    (10)

    ______________

    1 For all periods presented, the Company no longer adjusts the non-GAAP measures of net income, diluted earnings per share and Adjusted EBITDA for revenue lost from the application of purchase accounting and the adoption in 2018 of the new revenue standard.

    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" and in the press release appendix.

    2019 Results and 2020 Business Outlook1
    "Our full year 2019 Adjusted EBITDA grew 39 percent year-over-year to $86 million, and we generated positive cash flow from operations of $56 million," said Daryl Raiford, Chief Financial Officer. "For full year 2020, we expect continued growth in profitability and cash flow with our outlook for Adjusted EBITDA to be between $90 million and $95 million, excluding the pending ECI acquisition.  We expect low single-digit revenue growth in 2020 compared with 2019 and believe that quarterly seasonality in 2020 will be comparable to 2019."

    ______________

    1 Please see the reconciliation of non-GAAP and GAAP financial measures, and additional information about non-GAAP measures in the press release appendix.

    Annual Goodwill Evaluation
    During the fourth quarter of 2019, the Company evaluated the carrying value of its goodwill balance, which resulted in a reduction to goodwill of $164 million, reflected as a non-cash charge to GAAP net income in its Consolidated Statement of Operations for the year ended December 31, 2019.

    Upcoming First Quarter 2020 Investor Conference Schedule

    • March 10, 2020 – SunTrust Technology, Internet & Services Conference, New York, NY (one-on-one institutional investor meetings).
    • March 10, 2020 – Optical Fiber Conference (OFC), San Diego, CA (group meeting open to sell-side analysts and institutional investors).

    Conference Call Details
    Conference call to discuss its financial results for the fourth quarter and year ended December 31, 2019 on February 19, 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:
    Date: February 19, 2020
    Time:  4:30 p.m. (ET)
    Dial-in number (Domestic): 877-407-2991
    Dial-in number (Intl): 201-389-0925
    Instant Telephone Access: Call me™

    Replay information:
    A telephone playback of the call will be available following the conference call until March 4, 2020 and can be accessed by calling 877-660-6853 or 201-612-7415 for international callers. The reservation number for the replay is 13698377.

    Investor Relations
    Monica Gould
    +1 (212) 871-3927
    IR@rbbn.com

    Lindsay Savarese
    1 (212) 331-8417
    IR@rbbn.com

    US Press
    Dennis Watson
    +1 (214) 695-2224
    dwatson@rbbn.com

    International Press
    Catherine Berthier
    +1 (646) 741-1974
    cberthier@rbbn.com 

    Industry Analyst Relations
    Michael Cooper
    +1 (708) 383-3387
    mcooper@rbbn.com

    About Ribbon Communications
    Ribbon Communications Inc. (Nasdaq: RBBN) delivers market-leading software solutions that secure and power many of the world's leading service provider and enterprise communications environments.  Built on world-class technology and intellectual property, the Company's cloud-native solutions deliver intelligent and secure real-time communications solutions for the cloud, network and enterprise edge.  Ribbon's Kandy Cloud real-time communications software platform delivers advanced and embedded CPaaS and UCaaS capabilities enabling service providers to rapidly create and deploy high-value communications services.  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 interim co-president and chief executive officer and our chief financial officer regarding our anticipated financial performance, the expected closing of our acquisition of ECI Telecom Group Ltd. ("ECI"), statements in the sections "Financial Highlights," "2019 Results and 2020 Business Outlook," and "Upcoming First Quarter 2020 Investor Conference Schedule," statements regarding our future expenses, results of operations and financial position, 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", "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 failure to consummate the proposed transaction with ECI; failure to make or take any filing or other action required to consummate the proposed transaction with ECI in a timely manner or at all; failure to obtain applicable regulatory approval or satisfy other closing conditions in a timely manner or otherwise in connection with the proposed transaction with ECI; failure to satisfy other closing conditions to the proposed transaction with ECI; failure to obtain debt financing to fund the cash consideration of the merger; risks that the new businesses will not be integrated successfully or that the combined companies will not realize estimated cost savings; failure to realize anticipated benefits of the proposed transaction with ECI; potential litigation relating to the proposed transaction and disruptions from the proposed transaction that could harm Ribbon's or ECI's business; our ability to recruit and retain key personnel; reductions in customer spending; a slowdown in customer payments and changes in customer requirements, including the timing of customer purchasing decisions and our recognition of revenues; the potential impact of the consummation of the proposed transaction on relationships with third parties, including customers, employees and competitors; conditions in the credit markets, credit risks and risks related to the terms of our credit agreement; risks associated with assumptions the parties make in connection with the parties' critical accounting estimates and legal proceedings; the parties' international operations, which are subject to the risks of currency fluctuations and foreign exchange controls; ability to attract new customers and retain existing customers in the manner anticipated; reliance on and integration of information technology systems; changes in legislation or governmental regulations affecting the companies; international, national or local economic, social, health or political conditions that could adversely affect the companies or our customers; our successful integration activities with respect to our acquisitions; our ability to realize benefits from other mergers and acquisitions; the effects of disruption from acquisitions, making it more difficult to maintain relationships with employees, customers, business partners or government entities; unpredictable fluctuations in quarterly revenue and business from our existing customers; failure to compete successfully against telecommunications equipment and networking companies; failure to grow our customer base or generate recurring business from existing customers; consolidation in the telecommunications industry; 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 and obtain necessary licenses; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; our negotiation position relative to our large customers; the limited supply of certain components of our products; the potential for defects in our products; higher risks in international operations and markets; the impact of increased competition; increases in tariffs, trade restrictions or taxes on our products; currency fluctuations; data privacy and cyber security risks; changes in the market price of our common stock; and/or failure or circumvention of our controls and procedures.  The foregoing list is not exhaustive.

    All of our forward-looking statements involve known and unknown risks, uncertainties (some of which are significant or beyond our control) and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements express or implied by the forward-looking statements and such assumptions could cause actual results to differ materially from our historical experience and our present expectations or projections.  Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.  Therefore, we caution you against relying on any of these forward-looking statements.  For further information regarding risks and uncertainties associated with Ribbon Communications' business and important factors that could cause actual results to differ materially from these forward-looking statements, 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.  Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.  While Ribbon Communications may elect to update forward-looking statements at some point, Ribbon Communications specifically disclaims any obligation to do so, except as may be 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.  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.  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.  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 certain expenses and credits, including, but not limited to, stock-based compensation; amortization of intangible assets; acquisition-related facilities adjustments; certain litigation costs; impairment of goodwill; settlement expense; cancelled debt offering costs; acquisition- and integration-related expense; restructuring and related expense; the gain on the settlement of litigation; the gain on the reduction to deferred purchase consideration; the tax effect of these adjustments; and the income tax benefit arising from purchase accounting.  Effective for the first quarter of 2019 and for subsequent reporting periods, we no longer adjust for the impact of the adoption of the new revenue standard in 2018.  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 our financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

    Impact of New Revenue Standard
    For periods prior to the first quarter of 2019, we adjusted our non-GAAP financial measures for eliminated revenue resulting from our adoption of the new revenue recognition standard in 2018 and related cost of revenue.  Effective for the first quarter of 2019 and for subsequent reporting periods, we no longer adjust our non-GAAP financial measures for the 2018 revenue standard adoption.

    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 an 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 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.

    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 a 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 included this adjustment, which related to the acquisition of GENBAND, through the fourth quarter of 2018, to allow for more complete comparisons to the financial results of our historical operations and the financial results of peer companies.

    Litigation Costs
    We were involved in litigation with a certain competitor with whom we reached a settlement in the second quarter of 2019, under which the competitor agreed to pay us an aggregate amount of $63 million (see also "Gain on Litigation Settlement" below).  In connection with this litigation, we incurred litigation costs beginning in the fourth quarter of 2017.  These costs are included as a component of general and administrative expense.  In the third quarter of 2019, we received $1.5 million of insurance proceeds in connection with this litigation, which reduced the expense reported in both the third quarter of and full year 2019.  In addition, we are currently the plaintiff in litigation with a former business partner of GENBAND regarding amounts loaned to this former business partner that were never repaid.  During the fourth quarter of 2019, we incurred $1.7 million of legal costs in connection with this litigation.  We believe that such costs are not part of our core business or ongoing operations.  Accordingly, we believe that excluding the litigation costs related to these specific legal matters facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

    Annual Goodwill Evaluation
    We performed our annual testing for impairment of goodwill in the fourth quarter of 2019.  We operate as a single operating segment with one reporting unit and consequently we evaluate goodwill for impairment based on an evaluation of the fair value of the Company as a whole.  Upon completion of the goodwill impairment test, we determined that it was necessary to reduce our goodwill carrying amount and recorded a non-cash impairment charge in the fourth quarter of 2019.  We believe that such non-cash costs are not part of our core business or ongoing operations.  Accordingly, we believe that excluding the goodwill impairment charge facilitates the comparison of our financial results to our historical operating results and to other companies in our industry.

    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.  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 these costs facilitates the comparison of our financial results to our historical operating results and other companies in our industry.

    Cancelled Debt Offering Costs
    In the fourth quarter of 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.  Subsequent to the announcement, we determined the 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 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.

    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.  In addition, the size, complexity and/or volume of an acquisition, which often drive 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, we believe that our management is better able to evaluate our ability to utilize our existing assets and estimate the long-term value that the 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 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 review our restructuring accruals and facilities requirements regularly and record adjustments to these estimates as required.  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 Litigation Settlement
    We were involved in litigation with a certain competitor with whom we reached a settlement in the second quarter of 2019, under which such competitor agreed to pay us an aggregate amount of $63 million (see "Litigation Costs" above).  This gain is included as a component of other income (expense), net.  We believe that such gains are not part of our core business or ongoing operations.  Accordingly, we believe that excluding the gain on litigation settlement related to this specific legal matter facilitates the comparison of our financial results to our historical results and to other companies in our industry.

    Reduction to Deferred Purchase Consideration
    We recorded $8.1 million in other income (expense), net, in the first quarter of 2019 related to the reduction of cash deferred purchase consideration for Edgewater.  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.  Accordingly, we believe that excluding such reductions related to acquisition transactions facilitates the comparison of our financial results to our historical results and to other companies in our industry.

    Tax Effect of Non-GAAP Adjustments
    Beginning with the second quarter of 2019, 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 as a result 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.

    Tax Benefit Arising from Purchase Accounting
    In 2018, we assessed our ability to use our tax benefits and determined that it was more likely than not that some of these benefits will be recognized.  As a result, we reduced our deferred tax asset valuation allowance, resulting in an income tax benefit of $0.7 million and a reduction to our income tax provision in 2018.  We believe that such a benefit is not part of our core business or ongoing operations, as it was the result of an acquisition and was unrelated to our revenue-producing activities.  Accordingly, we believe that excluding the benefit arising from this adjustment 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 provision; depreciation; and amortization of intangible assets.  In addition, we exclude from net income (loss):  historical adjustments to revenue and cost of revenue related to our adoption of the new revenue standard (for periods prior to the first quarter of 2019); stock-based compensation expense; acquisition-related facilities adjustments; certain litigation costs; impairment of goodwill; settlement expense; cancelled debt offering costs; acquisition- and integration-related expense; restructuring and related expense; and other income (expense), 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 our 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.

    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,

           

    2019

     

    2019

     

    2018

    Revenue:

             
     

    Product

    $            81,339

     

    $            61,152

     

    $             87,077

     

    Service

    79,770

     

    76,501

     

    79,819

       

    Total revenue

    161,109

     

    137,653

     

    166,896

                     

    Cost of revenue:

             
     

    Product

    32,291

     

    31,476

     

    40,002

     

    Service

    27,873

     

    27,300

     

    31,180

       

    Total cost of revenue

    60,164

     

    58,776

     

    71,182

                     

    Gross profit

    100,945

     

    78,877

     

    95,714

                     

    Gross margin:

             
     

    Product

    60.3%

     

    48.5%

     

    54.1%

     

    Service

    65.1%

     

    64.3%

     

    60.9%

       

    Total gross margin

    62.7%

     

    57.3%

     

    57.3%

                     

    Operating expenses:

             
     

    Research and development

    35,604

     

    34,222

     

    36,406

     

    Sales and marketing

    30,783

     

    28,227

     

    34,124

     

    General and administrative

    13,037

     

    9,673

     

    19,465

     

    Impairment of goodwill

    164,300

     

    -

     

    -

     

    Acquisition- and integration-related

    6,092

     

    1,697

     

    2,689

     

    Restructuring and related

    (49)

     

    2,372

     

    1,853

       

    Total operating expenses

    249,767

     

    76,191

     

    94,537

                     

    (Loss) income before operations

    (148,822)

     

    2,686

     

    1,177

    Interest expense, net

    (525)

     

    (726)

     

    (1,476)

    Other income (expense), net

    316

     

    (507)

     

    (714)

                     

    (Loss) income before income taxes

    (149,031)

     

    1,453

     

    (1,013)

    Income tax (provision) benefit

    (1,332)

     

    197

     

    (813)

                     

    Net (loss) income

    $         (150,363)

     

    $               1,650

     

    $             (1,826)

                     

    (Loss) earnings per share

             
     

    Basic

     

    $               (1.36)

     

    $                 0.01

     

    $              (0.02)

     

    Diluted

    $               (1.36)

     

    $                 0.01

     

    $              (0.02)

                     

    Shares used to compute (loss) earnings per share:

             
     

    Basic

     

    110,269

     

    110,080

     

    106,607

     

    Diluted

    110,269

     

    110,756

     

    106,607

     

     

    RIBBON COMMUNICATIONS INC.

    Consolidated Statements of Operations

    (in thousands, except percentages and per share amounts)

    (unaudited)

                 
                 
           

    Year ended

           

    December 31,

     

    December 31,

           

    2019

     

    2018

    Revenue:

         
     

    Product

    $          262,030

     

    $          279,014

     

    Service

    301,081

     

    298,891

       

    Total revenue

    563,111

     

    577,905

                 

    Cost of revenue:

         
     

    Product

    133,347

     

    142,185

     

    Service

    112,680

     

    127,388

       

    Total cost of revenue

    246,027

     

    269,573

                 

    Gross profit

    317,084

     

    308,332

                 

    Gross margin:

         
     

    Product

    49.1%

     

    49.0%

     

    Service

    62.6%

     

    57.4%

       

    Total gross margin

    56.3%

     

    53.4%

                 

    Operating expenses:

         
     

    Research and development

    141,060

     

    145,462

     

    Sales and marketing

    117,962

     

    128,276

     

    General and administrative

    53,870

     

    66,036

     

    Impairment of goodwill

    164,300

     

    -

     

    Acquisition- and integration-related

    12,953

     

    16,951

     

    Restructuring and related

    16,399

     

    17,015

       

    Total operating expenses

    506,544

     

    373,740

                 

    Loss from operations

    (189,460)

     

    (65,408)

    Interest expense, net

    (3,877)

     

    (4,230)

    Other income (expense), net

    70,444

     

    (3,772)

                 

    Loss before income taxes

    (122,893)

     

    (73,410)

    Income tax provision

    (7,182)

     

    (3,400)

                 

    Net loss

     

    $         (130,075)

     

    $           (76,810)

                 

    Loss per share:

         
     

    Basic

     

    $               (1.19)

     

    $               (0.74)

     

    Diluted

    $               (1.19)

     

    $               (0.74)

                 

    Shares used to compute loss per share:

         
     

    Basic

     

    109,734

     

    103,916

     

    Diluted

    109,734

     

    103,916

     

     

    RIBBON COMMUNICATIONS INC.

    Consolidated Balance Sheets

    (in thousands)

    (unaudited)

                 
                 
           

    December 31,

     

    December 31,

           

    2019

     

    2018

    Assets

         

    Current assets:

         
     

    Cash and cash equivalents

    $            44,643

     

    $            43,694

     

    Marketable securities

    -

     

    7,284

     

    Accounts receivable, net

    192,706

     

    187,853

     

    Inventory

    14,800

     

    22,602

     

    Other current assets

    27,146

     

    17,002

       

    Total current assets

    279,295

     

    278,435

                 

    Property and equipment, net

    28,976

     

    27,042

    Intangible assets, net

    213,366

     

    251,391

    Goodwill

     

    224,896

     

    383,655

    Deferred income taxes

    4,959

     

    9,152

    Operating lease right-of-use assets

    36,654

     

    -

    Other assets

    26,762

     

    7,484

           

    $           814,908

     

    $           957,159

                 

    Liabilities and Stockholders' Equity

         

    Current liabilities:

         
     

    Current portion of long-term debt

    $               2,500

     

    $                      -

     

    Revolving credit facility

    8,000

     

    55,000

     

    Accounts payable

    31,412

     

    45,304

     

    Accrued expenses and other

    56,700

     

    84,263

     

    Operating lease liabilities

    7,719

     

    -

     

    Deferred revenue

    100,406

     

    105,087

       

    Total current liabilities

    206,737

     

    289,654

                 

    Long-term debt, net of current

    45,995

     

    -

    Long-term debt, related party

    -

     

    24,100

    Operating lease liabilities, net of current

    37,202

     

    -

    Deferred revenue, net of current

    20,482

     

    17,572

    Deferred income taxes

    4,648

     

    4,738

    Other long-term liabilities

    16,589

     

    30,797

         

    Total liabilities

    331,653

     

    366,861

                 

    Commitments and contingencies

         
                 

    Stockholders' equity:

         
     

    Common stock

    11

     

    11

     

    Additional paid-in capital

    1,747,784

     

    1,723,576

     

    Accumulated deficit

    (1,267,067)

     

    (1,136,992)

     

    Accumulated other comprehensive income

    2,527

     

    3,703

         

    Total stockholders' equity

    483,255

     

    590,298

           

    $           814,908

     

    $           957,159

     

     

    RIBBON COMMUNICATIONS INC.

    Consolidated Statements of Cash Flows

    (in thousands)

    (unaudited)

                   
                   
             

    Year ended

             

     December 31, 

     

     December 31, 

             

    2019

     

    2018

    Cash flows from operating activities:

         
     

    Net loss

     

    $         (130,075)

     

    $           (76,810)

     

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

         
       

    Depreciation and amortization of property and equipment

    11,949

     

    11,200

       

    Amortization of intangible assets

    49,225

     

    49,723

       

    Stock-based compensation

    12,601

     

    11,072

       

    Impairment of goodwill

    164,300

     

    -

       

    Deferred income taxes

    5,299

     

    513

       

    Reduction in deferred purchase consideration

    (8,124)

     

    -

       

    Foreign currency exchange losses

    1,090

     

    4,611

       

    Changes in operating assets and liabilities:

         
         

    Accounts receivable

    (3,936)

     

    (13,017)

         

    Inventory

    7,776

     

    993

         

    Other operating assets

    (17,489)

     

    5,036

         

    Accounts payable

    (16,282)

     

    (6,057)

         

    Accrued expenses and other long-term liabilities

    (18,538)

     

    (13,422)

         

    Deferred revenue

    (2,111)

     

    16,563

           

    Net cash provided by (used in) operating activities

    55,685

     

    (9,595)

                   

    Cash flows from investing activities:

         
     

    Purchases of property and equipment

    (10,824)

     

    (7,907)

     

    Business acqusitions, net of cash acquired

    -

     

    (46,389)

     

    Sale and maturities of marketable securities

    7,295

     

    18,919

           

    Net cash used in investing activities

    (3,529)

     

    (35,377)

                   

    Cash flows from financing activities:

         
     

    Borrowings under revolving line of credit

    117,000

     

    197,500

     

    Principal payments on revolving line of credit

    (164,000)

     

    (162,500)

     

    Proceeds from issuance of long-term debt

    50,000

     

    -

     

    Principal payment of debt, related party

    (24,716)

     

    -

     

    Principal payments of long-term debt

    (1,250)

     

    -

     

    Payment of deferred purchase consideration

    (21,876)

     

    -

     

    Principal payments of finance leases

    (913)

     

    (652)

     

    Payment of debt issuance costs

    (891)

     

    (624)

     

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

    863

     

    -

     

    Proceeds from the exercise of stock options

    235

     

    73

     

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

    (1,193)

     

    (2,024)

     

    Repurchase of common stock

    (4,536)

     

    -

           

    Net cash (used in) provided by financing activities

    (51,277)

     

    31,773

                   

    Effect of exchange rate changes on cash and cash equivalents

    70

     

    (180)

                   

    Net increase (decrease) in cash and equivalents

    949

     

    (13,379)

    Cash and cash equivalents, beginning of year

    43,694

     

    57,073

    Cash and cash equivalents, end of period

    $             44,643

     

    $             43,694

     

     

    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 

     

     Year ended 

           

    December 31,

     

    September 30,

     

    December 31,

     

    December 31,

     

    December 31,

           

    2019

     

    2019

     

    2018

     

    2019

     

    2018

    Stock-based compensation

                     

    Cost of revenue - product

    $                    14

     

    $                    26

     

    $                    23

     

    $                    76

     

    $                  114

    Cost of revenue - service

    111

     

    124

     

    81

     

    478

     

    345

     

    Cost of revenue

    125

     

    150

     

    104

     

    554

     

    459

                             

    Research and development expense

    539

     

    521

     

    433

     

    1,898

     

    1,797

    Sales and marketing expense

    763

     

    721

     

    991

     

    3,028

     

    2,935

    General and administrative expense

    3,020

     

    1,093

     

    2,123

     

    7,121

     

    5,881

     

    Operating expense

    4,322

     

    2,335

     

    3,547

     

    12,047

     

    10,613

                             
       

    Total stock-based compensation

    $               4,447

     

    $               2,485

     

    $               3,651

     

    $             12,601

     

    $             11,072

                             
                             

    Amortization of intangible assets

                     

    Cost of revenue - product

    $               8,314

     

    $               9,522

     

    $               9,521

     

    $             37,573

     

    $             38,976

    Sales and marketing expense

    4,082

     

    2,738

     

    2,481

     

    11,652

     

    10,747

                             
     

    Total amortization of intangible assets

    $             12,396

     

    $             12,260

     

    $             12,002

     

    $             49,225

     

    $             49,723

     

     

    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,

     

    2019

     

    2019

     

    2018

               

    GAAP Net (loss) income

    $         (150,363)

     

    $               1,650

     

    $             (1,826)

    Adjustment to revenue for new revenue standard**

    -

     

    -

     

    1,903

    Stock-based compensation

    4,447

     

    2,485

     

    3,651

    Amortization of intangible assets

    12,396

     

    12,260

     

    12,002

    Acquisition-related facilities adjustment

    -

     

    -

     

    252

    Litigation costs

    1,767

     

    (1,534)

     

    1,961

    Impairment of goodwill

    164,300

     

    -

     

    -

    Cancelled debt offering costs

    -

     

    -

     

    1,003

    Acquisition- and integration-related expense

    6,092

     

    1,697

     

    2,689

    Restructuring and related expense

    (49)

     

    2,372

     

    1,853

    Tax effect of non-GAAP adjustments

    (8,929)

     

    (4,256)

     

    -

    Reversal of tax benefit arising from purchase accounting

    -

     

    -

     

    123

    Non-GAAP net income***

    $             29,661

     

    $             14,674

     

    $             23,611

               

    Earnings (loss) per share****

             

    GAAP (loss) per share or diluted earnings per share

    $               (1.36)

     

    $                 0.01

     

    $               (0.02)

    Adjustment to revenue for new revenue standard**

    -

     

    -

     

    0.02

    Stock-based compensation

    0.04

     

    0.02

     

    0.03

    Amortization of intangible assets

    0.10

     

    0.11

     

    0.11

    Acquisition-related facilities adjustment

    -

     

    -

     

     * 

    Litigation costs

    0.02

     

    (0.01)

     

    0.02

    Impairment of goodwill

    1.49

     

    -

     

    -

    Cancelled debt offering costs

    -

     

    -

     

    0.01

    Acquisition- and integration-related expense

    0.06

     

    0.02

     

    0.03

    Restructuring and related expense

     * 

     

    0.02

     

    0.02

    Tax effect of non-GAAP adjustments

    (0.08)

     

    (0.04)

     

    -

    Reversal of tax benefit arising from purchase accounting

    -

     

    -

     

     * 

    Non-GAAP Diluted earnings per share****

    $                 0.27

     

    $                 0.13

     

    $                 0.22

               

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

             

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

    110,269

     

    110,756

     

    106,607

      Non-GAAP Shares used to compute diluted earnings per share

    110,491

     

    110,756

     

    107,363

               

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

    **     Effective Q1 2019, the Company no longer adjusts for the impact of the adoption in 2018 of the new revenue standard.

    ***   A non-cash amount benefitting Non-GAAP Net income for revenue lost from purchase accounting of $4.6 million for the three months
           
    ended December 31, 2018 has been removed to conform prior periods with the current period presentation.

    ****  A non-cash amount benefitting Non-GAAP Diluted earnings per share for revenue lost from purchase accounting of $0.04 for
           
    the three months ended December 31, 2018 has been removed to conform prior periods with the current period presentation.

     

     

    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,

     

    2019

     

    2019

     

    2018

    Adjusted EBITDA*

             

    GAAP Net (loss) income

    $         (150,363)

     

    $               1,650

     

    $             (1,826)

    Interest expense, net

    525

     

    726

     

    1,476

    Income tax (benefit) provision

    1,332

     

    (197)

     

    813

    Depreciation

    3,125

     

    2,933

     

    2,930

    Amortization of intangible assets

    12,396

     

    12,260

     

    12,002

    Adjustment to revenue for new revenue standard**

    -

     

    -

     

    1,903

    Stock-based compensation

    4,447

     

    2,485

     

    3,651

    Acquisition-related facilities adjustment

    -

     

    -

     

    252

    Litigation costs

    1,767

     

    (1,534)

     

    1,961

    Impairment of goodwill

    164,300

     

    -

     

    -

    Cancelled debt offering costs

    -

     

    -

     

    1,003

    Acquisition- and integration-related expense

    6,092

     

    1,697

     

    2,689

    Restructuring and related expense

    (49)

     

    2,372

     

    1,853

    Other (income) expense, net

    (316)

     

    507

     

    714

    Non-GAAP Adjusted EBITDA*

    $             43,256

     

    $             22,899

     

    $             29,421

               

    *    A non-cash amount benefitting Adjusted EBITDA of $4.6 million for revenue lost from purchase accounting for the three months ended

          December 31, 2018 has been removed to conform prior periods with the current period presentation.

    **   Effective Q1 2019, the Company no longer adjusts for the impact of the adoption in 2018 of the new revenue standard.

     

     

    RIBBON COMMUNICATIONS INC.

    Reconciliation of Non-GAAP and GAAP Financial Measures

    (in thousands, except per share amounts)

    (unaudited)

           
           
     

    Year ended

     

    December 31,

     

    December 31,

     

    2019

     

    2018

           

    GAAP Net loss

    $         (130,075)

     

    $           (76,810)

    Adjustment to revenue for new revenue standard**

    -

     

    10,045

    Adjustment to cost of revenue for new revenue standard**

    -

     

    (110)

    Stock-based compensation

    12,601

     

    11,072

    Amortization of intangible assets

    49,225

     

    49,723

    Acquisition-related facilities adjustment

    -

     

    966

    Litigation costs

    7,734

     

    7,682

    Impairment of goodwill

    164,300

     

    -

    Settlement expense

    -

     

    1,730

    Cancelled debt offering costs

    -

     

    1,003

    Acquisition- and integration-related expense

    12,953

     

    16,951

    Restructuring and related expense

    16,399

     

    17,015

    Gain on litigation settlement

    (63,000)

     

    -

    Reduction to deferred purchase consideration

    (8,124)

     

    -

    Tax effect of non-GAAP adjustments

    (10,560)

     

    -

    Tax benefit arising from purchase accounting

    -

     

    (718)

    Non-GAAP net income***

    $             51,453

     

    $             38,549

           

    Earnings (loss) per share****

         

    GAAP Loss per share

    $               (1.19)

     

    $               (0.74)

    Adjustment to revenue for new revenue standard**

    -

     

    0.10

    Adjustment to cost of revenue for new revenue standard***

    -

     

     * 

    Stock-based compensation

    0.11

     

    0.11

    Amortization of intangible assets

    0.46

     

    0.48

    Acquisition-related facilities adjustment

    -

     

    0.01

    Litigation costs

    0.07

     

    0.07

    Impairment of goodwill

    1.49

     

    -

    Settlement expense

    -

     

    0.02

    Cancelled debt offering costs

    -

     

    0.01

    Acquisition- and integration-related expense

    0.12

     

    0.16

    Restructuring and related expense

    0.15

     

    0.16

    Gain on litigation settlement

    (0.57)

     

    -

    Reduction to deferred purchase consideration

    (0.07)

     

    -

    Tax effect of non-GAAP adjustments

    (0.10)

     

    -

    Tax benefit arising from purchase accounting

    -

     

    (0.01)

    Non-GAAP Diluted earnings per share****

    $                 0.47

     

    $                 0.37

           

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

         

      GAAP Shares used to compute loss per share

    109,734

     

    103,916

      Non-GAAP Shares used to compute diluted earnings per share

    110,271

     

    104,438

           

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

       

    **    Effective Q1 2019, the Company no longer adjusts for the impact of the adoption in 2018 of the new revenue standard.

    ***   Non-cash amounts benefitting Non-GAAP Net income for revenue lost from purchase accounting of $22.1 million 
           for the year ended December 31, 2018 have been removed to conform prior periods with the current presentation.

    **** A non-cash amount benefitting Non-GAAP Diluted earnings per share for revenue lost from purchase accounting of
          $0.21 for the year ended December 31, 2018 has been removed to conform prior periods with the current period
         
    presentation.

     

     

    RIBBON COMMUNICATIONS INC.

    Reconciliation of Non-GAAP and GAAP Financial Measures

    (in thousands, except per share amounts)

    (unaudited)

           
           
     

    Year ended

     

    December 31,

     

    December 31,

     

    2019

     

    2018

    Adjusted EBITDA*

         

    GAAP Net loss

    $         (130,075)

     

    $           (76,810)

    Interest expense, net

    3,877

     

    4,230

    Income tax provision

    7,182

     

    3,400

    Depreciation

    11,949

     

    11,200

    Amortization of intangible assets

    49,225

     

    49,723

    Adjustment to revenue for new revenue standard**

    -

     

    10,045

    Adjustment to cost of revenue for new revenue standard**

    -

     

    (110)

    Stock-based compensation

    12,601

     

    11,072

    Acquisition-related facilities adjustment

    -

     

    966

    Litigation costs

    7,734

     

    7,682

    Impairment of goodwill

    164,300

     

    -

    Settlement expense

    -

     

    1,730

    Cancelled debt offering costs

    -

     

    1,003

    Acquisition- and integration-related expense

    12,953

     

    16,951

    Restructuring and related expense

    16,399

     

    17,015

    Other (income) expense, net

    (70,444)

     

    3,772

    Non-GAAP Adjusted EBITDA*

    $             85,701

     

    $             61,869

           

    *    A non-cash amount benefitting Adjusted EBITDA of $22.1 million for revenue lost from purchase accounting for the year
        
    ended December 31, 2018 has been removed to conform prior periods with the current period presentation.

    **  Effective Q1 2019, the Company no longer adjusts for the impact of the adoption in 2018 of the new revenue standard.

     

     

    RIBBON COMMUNICATIONS INC.

    Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook

     
         
         

    Adjusted EBITDA:  Ribbon has not provided a reconciliation of Adjusted EBITDA for the year ending December 31, 2020, as it is unable to project without unreasonable efforts the comparable GAAP net income (loss) figure, which includes interest expense, net; income tax (benefit) provision; depreciation; amortization of intangible assets; stock-based compensation; certain litigation costs; acquisition- and integration-related expense; restructuring and related expense; and other income (expense), net.