UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-38267 RIBBON COMMUNICATIONS INC. (Exact name of Registrant as specified in its charter) (State or other jurisdiction of incorporati ...

Ribbon Communications, Inc. (NASDAQ:RBBN) Q1 2023 Earnings Conference Call April 26, 2023 4:30 PM ET Company Participants Bita Milanian - SVP, Global Marketing Bruce McClelland - President, CEO & Director Miguel Lopez - EVP & CFO Conference Call Participants Erik Suppiger - JMP Securities Timothy Savageaux - Northland Capital Markets Ku Kang - B. Riley Securities Gregory Mesniaeff - WestPark Capital Operator Greetings, and welcome to the Ribbon Communications First Quarter 2023 Financial Results Conference ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Ribbon Communications provides secure data and voice communication technology to service providers and enterprises, driven by 5G, fiber, and cloud communication trends [Company Overview and History](index=5&type=section&id=Item%201.%20Business-Company%20Overview%20and%20History) Ribbon Communications, formed by the 2017 Sonus and GENBAND merger, provides global communication technology and expanded its portfolio with the 2020 ECI Telecom acquisition - Ribbon is a global provider of communications technology, offering a wide range of software and hardware products for secure data and voice communications to service providers and enterprises[12](index=12&type=chunk) - The company was formed through the merger of Sonus Networks, Inc and GENBAND US LLC in October 2017[13](index=13&type=chunk) - A key acquisition was ECI Telecom Group Ltd in March 2020, expanding Ribbon's portfolio into optical transport and IP networking[15](index=15&type=chunk) [Industry Background](index=5&type=section&id=Item%201.%20Business-Industry%20Background) The communications industry is transforming due to 5G deployment, surging fiber demand, cloud communication adoption, and CSP network modernization for efficiency and critical infrastructure - The deployment of 5G mobile technology is a major investment cycle, driving needs for enhanced capacity, coverage, and new applications like VR, cloud gaming, and IoT[15](index=15&type=chunk)[16](index=16&type=chunk) - Exponential data traffic growth is fueling investment in fiber access networks to address broadband bottlenecks, with government initiatives like the RDOF in the U.S. providing significant funding[17](index=17&type=chunk)[18](index=18&type=chunk) - The shift to cloud communications (e.g., Microsoft Teams, Zoom) has accelerated, requiring secure and scalable solutions[20](index=20&type=chunk) - CSPs are modernizing their networks towards software-centric, cloud-native architectures to reduce costs and improve efficiency, sometimes replacing incumbent vendors due to security concerns[21](index=21&type=chunk)[22](index=22&type=chunk) [Strategy Overview](index=7&type=section&id=Item%201.%20Business-Strategy%20Overview) Ribbon's strategy focuses on operational integration, cross-selling its IP and Optical portfolio, growing North American market share, capitalizing on 5G, and transitioning to software-centric as-a-Service models - Re-organized the company in 2023 under a Chief Operating Officer and a single Global Sales Leader to enhance collaboration and operational efficiency under the "Ribbon 3.0" program[27](index=27&type=chunk) - Focus on cross-selling the combined portfolio to its global customer base, with a particular emphasis on penetrating the largest service providers[27](index=27&type=chunk) - Prioritizing growth in the North American IP Optical Networks market by leveraging its existing service provider and enterprise relationships[27](index=27&type=chunk) - Significant R&D investment to address opportunities in the 5G rollout, including recent wins with Bharti Airtel in India and Rogers in Canada[32](index=32&type=chunk) - Aggressively transitioning its product portfolio towards software, cloud-native offerings, and as-a-Service models to improve profitability[32](index=32&type=chunk) [Customers](index=8&type=section&id=Item%201.%20Business-Customers) Ribbon serves a diverse global customer base across 140+ countries, including service providers and enterprises, with Verizon accounting for **15%** and the top five customers for **34%** of 2022 revenue - Verizon Communications Inc accounted for approximately **15% of total revenue** in the year ended December 31, 2022[30](index=30&type=chunk) - The top five customers represented approximately **34% of total revenue** in the year ended December 31, 2022[30](index=30&type=chunk) [Segment Information](index=8&type=section&id=Item%201.%20Business-Segment%20Information) The company operates two segments: Cloud and Edge for voice communications, and IP Optical Networks for IP networking, switching, routing, and optical transport solutions - Effective in Q4 2020, following the ECI Acquisition, the company began assessing performance based on two segments: Cloud and Edge, and IP Optical Networks[31](index=31&type=chunk) [Cloud and Edge Business Segment](index=8&type=section&id=Item%201.%20Business-Cloud%20and%20Edge%20Business%20Segment) The Cloud and Edge segment provides software and hardware for VoIP, VoLTE, and UC&C services, focusing on SBCs and network transformation, competing with major telecom and tech firms - Provides software and hardware for VoIP, VoLTE, VoNR, and UC&C services, with a focus on cloud-native deployments[32](index=32&type=chunk) - The portfolio includes Session Border Controller (SBC) products for securing voice traffic and Network Transformation products for modernizing legacy voice networks[33](index=33&type=chunk)[35](index=35&type=chunk) - Key competitors include major telecommunications equipment companies like Ericsson, Huawei, Nokia, and technology firms like Oracle and Cisco[35](index=35&type=chunk)[37](index=37&type=chunk) [IP Optical Networks Business Segment](index=11&type=section&id=Item%201.%20Business-IP%20Optical%20Networks%20Business%20Segment) The IP Optical Networks segment provides high-performance hardware and software for IP networking, switching, routing, and optical transport, including Apollo, Neptune, and Muse SDN, competing with Ciena, Cisco, and Nokia - Provides solutions for IP networking, switching, routing, and optical transport for service providers and critical infrastructure[38](index=38&type=chunk) - The product portfolio includes the Apollo line for optical transport, the Neptune line for IP/MPLS switching and routing, and the Muse SDN software for orchestration[40](index=40&type=chunk)[41](index=41&type=chunk) - Competes with Ciena, Cisco, Nokia, and Infinera, among others, and believes its integrated multi-layer IP optical solutions are a key differentiator[42](index=42&type=chunk) [Services and Support](index=12&type=section&id=Item%201.%20Business-Services%20and%20Support) Ribbon's Global Services offers comprehensive support including professional services, maintenance, managed services, and education to complement its product offerings - Offers a broad range of services including professional services, maintenance support, managed services, and education services to help customers reduce costs and improve productivity[43](index=43&type=chunk) [Sales and Marketing](index=12&type=section&id=Item%201.%20Business-Sales%20and%20Marketing) The company employs a dual sales strategy with direct sales for service providers and indirect channels for enterprises, supported by marketing focused on brand awareness and demand generation - Employs a direct sales force for service providers and indirect channels (resellers, distributors) for enterprises[44](index=44&type=chunk) - Marketing is responsible for brand building, corporate messaging, and demand generation campaigns in conjunction with the sales force[45](index=45&type=chunk)[46](index=46&type=chunk) [Manufacturing and Sourcing](index=13&type=section&id=Item%201.%20Business-Manufacturing%20and%20Sourcing) Ribbon outsources manufacturing to global contract manufacturers, manages a strategic supply chain for key components, and mitigates disruptions through inventory investment and product redesigns - Relies on global contract manufacturers for product manufacturing, assembly, and testing, with a flexible manufacturing landscape to mitigate risks[47](index=47&type=chunk)[48](index=48&type=chunk) - Manages supply chain for key components and has been implementing actions like inventory investment and redesigns to manage disruptions that began in mid-2020[49](index=49&type=chunk)[52](index=52&type=chunk) [Research and Development](index=13&type=section&id=Item%201.%20Business-Research%20and%20Development) The company's R&D focuses on technology leadership, with Cloud and Edge R&D transitioning to cloud-native solutions, and IP Optical R&D improving performance and investing in open networking - Cloud and Edge R&D focuses on moving customers to virtualized, cloud-native, and as-a-Service (aaS) solutions[56](index=56&type=chunk) - IP Optical Networks R&D focuses on improving performance, cost-per-bit, and operational efficiency, with investment in open and disaggregated solutions[57](index=57&type=chunk) [Intellectual Property](index=14&type=section&id=Item%201.%20Business-Intellectual%20Property) Ribbon considers intellectual property fundamental, holding **669 U.S. patents** and **276 foreign patents** as of December 31, 2022, and actively manages its IP rights including licensing and defending against infringement Intellectual Property Portfolio as of Dec 31, 2022 | Jurisdiction | Issued Patents | In-Process Applications | Registered Trademarks | | :--- | :--- | :--- | :--- | | U.S. | 669 | 44 | 34 | | Foreign | 276 | 16 | 118 | [Our Employees and Corporate Responsibility](index=15&type=section&id=Item%201.%20Business-Our%20Employees%20and%20Corporate%20Responsibility) As of December 31, 2022, Ribbon had **3,394 employees** globally, with a **13.3%** voluntary turnover rate, focusing on DEI and ESG principles, including ISO 9001 and ISO 14001 certifications Employee Distribution as of Dec 31, 2022 | Region | Number of employees | Percentage of total | | :--- | :--- | :--- | | Asia | 1,276 | 38% | | North America | 943 | 28% | | EMEA | 1,056 | 31% | | LATAM | 119 | 3% | | **Total** | **3,394** | **100%** | - In 2022, the company hired 407 employees, and the global voluntary employee turnover rate was **13.3%**[70](index=70&type=chunk) - As of December 31, 2022, **23%** of employees identified as female[69](index=69&type=chunk) - The company has a strategic focus on ESG practices, aligning with standards like RoHS and holding ISO 9001 and ISO 14001 certifications[80](index=80&type=chunk)[81](index=81&type=chunk) [Seasonality](index=17&type=section&id=Item%201.%20Business-Seasonality) The company's business experiences seasonality, with higher order volume in the fourth quarter due to customer spending and lower volume and revenue in the first quarter - Typically experiences higher order volume in the fourth quarter due to customer spending cycles[84](index=84&type=chunk) - Typically experiences lower order volume and revenue in the first quarter as customers operationalize annual budgets[84](index=84&type=chunk) [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business, operational, and financial risks, including unpredictable results, intense competition, supply chain issues, geopolitical instability, regulatory compliance, and debt covenant management - **Business Risks:** Unpredictable quarterly revenue, intense competition from large and small players, reliance on key customers like Verizon (**15% of 2022 revenue**), and risks associated with restructuring activities[89](index=89&type=chunk)[92](index=92&type=chunk)[95](index=95&type=chunk)[99](index=99&type=chunk) - **Supply Chain & Manufacturing Risks:** Reliance on a small number of contract manufacturers and single or limited sources for some components, which can lead to delays and increased costs[120](index=120&type=chunk)[122](index=122&type=chunk) - **International Risks:** International operations account for **57% of revenue** and are subject to geopolitical instability (e.g., Russia-Ukraine conflict, conditions in Israel), currency fluctuations, and trade tariffs[142](index=142&type=chunk)[144](index=144&type=chunk)[146](index=146&type=chunk)[149](index=149&type=chunk) - **Regulatory & Security Risks:** Compliance with complex data privacy laws (e.g., GDPR), anti-bribery laws (FCPA, UKBA), and export controls; vulnerability to cybersecurity breaches[158](index=158&type=chunk)[160](index=160&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - **Financial Risks:** The company's credit agreement imposes operating limitations and requires meeting financial covenants, with a risk of goodwill or intangible asset impairment, which has occurred in prior years[170](index=170&type=chunk)[171](index=171&type=chunk)[174](index=174&type=chunk) [Properties](index=34&type=section&id=Item%202.%20Properties) The company consolidated facilities, relocating headquarters to Plano, Texas, with other principal leased facilities in Westford, Ottawa, and Petah Tikva, some of which are being subleased as part of restructuring Principal Leased Facilities | Location | Principal Use | Lease Expiration | | :--- | :--- | :--- | | Plano, Texas | Corporate headquarters, R&D, Sales, etc. | September 2032 | | Westford, Massachusetts | R&D, Customer Support, etc. | August 2028 | | Ottawa, Canada | R&D, Customer Support, etc. | December 2029 | | Petah Tikva, Israel (Main) | R&D, Sales, etc. | January 2025 | - The company initiated a plan in 2019 to consolidate facilities, relocating its corporate headquarters to a new office in Plano, Texas in Q1 2021[192](index=192&type=chunk) [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) The company is subject to ordinary course legal proceedings, with material details in Note 25, and management does not anticipate a material adverse effect on financial condition - The company is subject to legal proceedings and claims that have arisen in the ordinary course of business[197](index=197&type=chunk) - Material legal proceedings are described in Note 25, "Commitments and Contingencies"[197](index=197&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[199](index=199&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Ribbon's common stock trades on Nasdaq under "RBBN", with **374 holders of record** as of March 28, 2023, and the company repurchased **35,857 shares** in Q4 2022 for tax withholding obligations - The company's common stock trades on The Nasdaq Global Select Market under the symbol "RBBN"[202](index=202&type=chunk) - During Q4 2022, **35,857 shares** were repurchased from employees to satisfy tax withholding obligations related to vested restricted stock[205](index=205&type=chunk) Stock Performance vs. Indices (Dec 31, 2017 - Dec 31, 2022) | Index | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Ribbon Communications Inc. | $100.00 | $62.35 | $40.10 | $84.86 | $78.27 | $36.09 | | Nasdaq Composite | $100.00 | $97.16 | $132.81 | $192.47 | $235.15 | $158.65 | | Russell 2000 | $100.00 | $88.99 | $111.70 | $134.00 | $153.85 | $122.41 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, Ribbon's revenue decreased **3%** to **$819.8 million**, resulting in a **$98.1 million** net loss, driven by Cloud and Edge decline and lower gross margins, while navigating economic headwinds and managing debt [Overview and Key Trends](index=38&type=section&id=Item%207-Overview%20and%20Key%20Trends) The company's performance is influenced by global supply chain impacts from COVID-19, customer purchase delays due to the Ukraine conflict, and rising costs from inflation and interest rates - The military conflict in Ukraine has led to customer purchase delays and sanctions that prohibit the sale of certain products and services to Russia[214](index=214&type=chunk) - Inflation is causing near-term impacts, including higher component costs, freight premiums, and other operating costs[215](index=215&type=chunk) [Key Corporate and Financial Events](index=39&type=section&id=Item%207-Key%20Corporate%20and%20Financial%20Events) In 2022, Ribbon completed a **$52.1 million** equity offering, initiated a restructuring plan incurring **$10.2 million** in expenses, and settled its AVCT investment, acquiring a perpetual software license - On August 12, 2022, the company completed an equity offering, raising aggregate gross proceeds of approximately **$52.1 million**[219](index=219&type=chunk) - A 2022 Restructuring Plan was approved, resulting in **$10.2 million** of restructuring expenses in 2022, with an additional **$8 million** anticipated[221](index=221&type=chunk)[222](index=222&type=chunk) - On August 29, 2022, the company settled with AVCT, canceling its investment in AVCT shares and warrants (fair value **$2.6 million**) and acquiring a perpetual license for **$2.5 million** cash[232](index=232&type=chunk) [Results of Operations (2022 vs. 2021)](index=47&type=section&id=Item%207-Results%20of%20Operations) In 2022, total revenue decreased **3.0%** to **$819.8 million**, driven by Cloud and Edge decline, while gross margin fell to **48.9%**; operating expenses decreased due to the absence of a **$116.0 million** goodwill impairment, leading to a net loss of **$98.1 million** Revenue by Type (in thousands) | Revenue Type | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Product | $442,680 | $453,042 | $(10,362) | (2.3)% | | Service | $377,080 | $391,915 | $(14,835) | (3.8)% | | **Total Revenue** | **$819,760** | **$844,957** | **$(25,197)** | **(3.0)%** | Revenue by Segment (in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Cloud and Edge | $508,137 | $556,656 | | IP Optical Networks | $311,623 | $288,301 | | **Total Revenue** | **$819,760** | **$844,957** | Gross Profit and Margin | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Gross Profit | $400.9M | $444.7M | | Gross Margin | 48.9% | 52.6% | | Cloud and Edge Gross Margin | 61.1% | 61.7% | | IP Optical Networks Gross Margin | 29.1% | 35.1% | - Operating expenses were **$449.3 million** in 2022 compared to **$562.5 million** in 2021, with 2021 including a significant **$116.0 million** goodwill impairment charge that did not recur in 2022[240](index=240&type=chunk) - Net loss improved to **$98.1 million** in 2022 from a net loss of **$177.2 million** in 2021[238](index=238&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Item%207-Liquidity%20and%20Capital%20Resources) Cash and restricted cash decreased to **$67.3 million** at year-end 2022, with **$26.4 million** net cash used in operations, while the company maintains a **$500 million** credit facility with **$330.4 million** outstanding debt Cash Flow Summary (in thousands) | Cash Flow | 2022 | 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(26,364) | $19,182 | | Net cash used in investing activities | $(12,136) | $(14,188) | | Net cash provided by (used in) financing activities | $931 | $(33,683) | - Cash and restricted cash totaled **$67.3 million** at Dec 31, 2022, down from **$106.5 million** at Dec 31, 2021[317](index=317&type=chunk) - As of Dec 31, 2022, the outstanding balance under the 2020 Term Loan was **$330.4 million**, and the company was in compliance with all debt covenants[333](index=333&type=chunk) - The company uses an interest rate swap to manage exposure to interest rate movements on its variable-rate debt, selling portions of the swap notional amount for a total of **$3.1 million** in 2022[335](index=335&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate and foreign currency risks, using an interest rate swap to mitigate variable-rate debt volatility, with hypothetical changes impacting 2022 interest expense by **$2 million** and net loss by **$16 million** - The company uses an interest rate swap to manage interest rate risk on its variable-rate debt; the derivative had a fair value of **$25.4 million** at Dec 31, 2022[355](index=355&type=chunk)[356](index=356&type=chunk) - A hypothetical +/- **50 basis point** change in interest rates would have changed 2022 interest expense by approximately **$2 million** (excluding the impact of the interest rate swap)[357](index=357&type=chunk) - A hypothetical **10%** adverse movement in foreign currency exchange rates would have adversely affected 2022 revenue by ~**$21 million** and net loss by ~**$16 million**[358](index=358&type=chunk) [Financial Statements and Supplementary Data](index=59&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal year 2022, including the auditor's report, balance sheets, income statements, cash flows, and detailed notes on accounting policies and financial matters Consolidated Financial Highlights (Year Ended Dec 31, 2022) | Metric | Amount (in thousands) | | :--- | :--- | | Total Revenue | $819,760 | | Gross Profit | $400,936 | | Loss from Operations | $(48,324) | | Net Loss | $(98,083) | | Diluted Loss Per Share | $(0.63) | | Total Assets | $1,255,564 | | Total Liabilities | $737,137 | | Total Stockholders' Equity | $518,427 | - The Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP, provides an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting[363](index=363&type=chunk)[364](index=364&type=chunk) - Critical Audit Matters identified by the auditor include Revenue Recognition (specifically the estimation of standalone selling price) and the impairment testing of Goodwill for the IP Optical Networks reporting unit[367](index=367&type=chunk)[368](index=368&type=chunk)[370](index=370&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=115&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes in or disagreements with accountants on accounting and financial disclosure were reported during the period - None reported[671](index=671&type=chunk) [Controls and Procedures](index=115&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with Deloitte & Touche LLP issuing an unqualified opinion - Management concluded that disclosure controls and procedures were effective as of December 31, 2022[672](index=672&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on the COSO 2013 framework[674](index=674&type=chunk) - The independent registered public accounting firm, Deloitte & Touche LLP, issued an unqualified opinion on the company's internal control over financial reporting[678](index=678&type=chunk) [Other Information](index=117&type=section&id=Item%209B.%20Other%20Information) No other information is reported for this item - None[685](index=685&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=117&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement - Required information is incorporated by reference from the company's 2023 Proxy Statement[689](index=689&type=chunk) [Executive Compensation](index=117&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2023 Proxy Statement - Required information is incorporated by reference from the company's 2023 Proxy Statement[690](index=690&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=117&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of beneficial owners, management, and related stockholder matters is incorporated by reference from the 2023 Proxy Statement - Required information is incorporated by reference from the company's 2023 Proxy Statement[691](index=691&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=117&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2023 Proxy Statement - Required information is incorporated by reference from the company's 2023 Proxy Statement[692](index=692&type=chunk) [Principal Accountant Fees and Services](index=117&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement - Required information will be included in the company's 2023 Proxy Statement and is incorporated by reference[693](index=693&type=chunk) Part IV [Exhibit and Financial Statement Schedules](index=118&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists financial statements included in Item 8 and provides an index of all exhibits filed with the Form 10-K, with financial statement schedules omitted as not applicable - The consolidated financial statements are listed under Item 8[695](index=695&type=chunk) - All financial statement schedules are omitted as they are not applicable or the information is included elsewhere[696](index=696&type=chunk) - A list of exhibits filed with the report is provided in the Exhibit Index[697](index=697&type=chunk) [Form 10-K Summary](index=118&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary is provided - None[698](index=698&type=chunk)

Ribbon Communications Inc. (NASDAQ:RBBN) Q4 2022 Earnings Conference Call February 15, 2023 4:30 PM ET Company Participants Bita Milanian - Senior Vice President, Global Marketing Bruce McClelland - Chief Executive Officer Mick Lopez - Chief Financial Officer Conference Call Participants Tim Savageaux - Northland Capital Markets Greg Mesniaeff - WestPark Capital Dave Kang - B. Riley Erik Suppiger - JMP Securities Operator Greetings, and welcome to the Ribbon Communications Fourth Quarter 2022 Financial Resu ...

| --- | --- | |-------|-------| | FY21 | FY22 | | $845M | $820M | | 57% | 53% | | $381M | $386M | | 12% | 6% | | $120M | $64M | | $0.32 | $0.11 | 37% 36% 29% 29% 38% 36% 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 $63M $83M $82M $69M $97M $68M Product —Non-GAAP Gross Margin Cloud & Edge 12 | --- | --- | --- | --- | |------------------------------------------|-----------------------------------------|---------------------------------------------------------------------------------------|----------------------------------- ...

```markdown [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section provides a cautionary note regarding forward-looking statements, emphasizing inherent risks and uncertainties [Forward-Looking Statements](index=3&type=page&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to various risks and uncertainties, including supply chain disruptions, litigation, COVID-19 impacts, acquisition integration failures, and macroeconomic conditions. It cautions against undue reliance on these statements and notes that actual results may differ materially - The report contains forward-looking statements regarding future expenses, results of operations, financial position, integration activities, capital structure, credit facility compliance, restructuring, and impacts from geopolitical events (Ukraine war) and the COVID-19 pandemic[9](index=9&type=chunk) - Key risks and uncertainties include supply chain disruptions (component availability, geopolitical instabilities), litigation, COVID-19 impacts on sales and demand, failure to realize ECI acquisition benefits, unpredictable revenue fluctuations, credit facility compliance, cybersecurity risks, and macroeconomic conditions like inflation[9](index=9&type=chunk) - The company cautions against relying on forward-looking statements, as inherent uncertainties and risks may cause actual results to differ materially[9](index=9&type=chunk) [PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial information for the company [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Ribbon Communications Inc.'s unaudited condensed consolidated financial statements for the period ended September 30, 2022, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, significant transactions, and financial positions [Condensed Consolidated Balance Sheets](index=4&type=page&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, including assets, liabilities, and equity Selected Balance Sheet Data (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Cash and cash equivalents | $55,670 | $103,915 | | Total current assets | $422,399 | $480,990 | | Total assets | $1,224,635 | $1,347,737 | | Total current liabilities | $298,093 | $344,453 | | Long-term debt, net of current | $310,770 | $350,217 | | Total liabilities | $735,466 | $820,571 | | Total stockholders' equity | $489,169 | $527,166 | - Cash and cash equivalents decreased by **$48.2 million (46.4%)** from December 31, 2021, to September 30, 2022[13](index=13&type=chunk) - Total assets decreased by **$123.1 million (9.1%)** and total liabilities decreased by **$85.1 million (10.4%)** over the nine-month period[13](index=13&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=page&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net loss for the periods presented Selected Statements of Operations Data (in thousands) | Metric (in thousands) | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenue | $207,127 | $210,398 | $586,121 | $614,380 | | Gross profit | $104,318 | $110,654 | $286,923 | $329,867 | | (Loss) income from operations | $(3,296) | $1,992 | $(49,589) | $2,340 | | Net loss | $(18,416) | $(59,431) | $(118,571) | $(80,877) | | Basic loss per share | $(0.12) | $(0.40) | $(0.78) | $(0.55) | - Total revenue decreased by **1.6%** for the three months and **4.6%** for the nine months ended September 30, 2022, compared to the prior year periods[15](index=15&type=chunk) - The company reported an operating loss of **$3.3 million** for the three months and **$49.6 million** for the nine months ended September 30, 2022, a **significant decline** from operating income in the prior year periods[15](index=15&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=page&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This section presents the company's net loss and other comprehensive income components Selected Comprehensive Loss Data (in thousands) | Metric (in thousands) | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(18,416) | $(59,431) | $(118,571) | $(80,877) |\n| Other comprehensive income, net of tax | $1,724 | $1,053 | $19,349 | $7,117 |\n| Comprehensive loss, net of tax | $(16,692) | $(58,378) | $(99,222) | $(73,760) | - Other comprehensive income **significantly increased** for the nine months ended September 30, 2022, primarily due to unrealized gains on interest rate swaps[18](index=18&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=page&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in stockholders' equity, including common stock and accumulated deficit Selected Stockholders' Equity Data (in thousands, except shares) | Metric (in thousands, except shares) | September 30, 2022 | December 31, 2021 | | :----------------------------------- | :----------------- | :---------------- | | Common stock shares outstanding | 168,093,446 | 148,895,308 | | Additional paid-in capital | $1,936,457 | $1,875,234 |\n| Accumulated deficit | $(1,474,232) | $(1,355,661) |\n| Accumulated other comprehensive income | $26,927 | $7,578 |\n| Total stockholders' equity | $489,169 | $527,166 | - Total stockholders' equity decreased by **$38.0 million** from December 31, 2021, to September 30, 2022, primarily due to net loss, partially offset by an equity offering and other comprehensive income[21](index=21&type=chunk)[23](index=23&type=chunk) - The company issued **17,071,311 shares** of common stock in an equity offering, contributing **$52.1 million** to additional paid-in capital[21](index=21&type=chunk)[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=page&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports cash inflows and outflows from operating, investing, and financing activities Selected Cash Flow Data (in thousands) | Metric (in thousands) | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(42,462) | $7,899 |\n| Net cash used in investing activities | $(13,044) | $(11,335) |\n| Net cash provided by (used in) financing activities | $6,207 | $(28,017) |\n| Net decrease in cash, cash equivalents and restricted cash | $(50,550) | $(31,942) |\n| Cash, cash equivalents and restricted cash, end of period | $55,935 | $103,755 | - Operating activities shifted from providing **$7.9 million** in cash in 2021 to using **$42.5 million** in 2022, primarily due to net loss, higher inventory, and lower accounts payable[31](index=31&type=chunk) - Financing activities provided **$6.2 million** in 2022, driven by **$52.1 million** from an equity offering, partially offset by **$40.0 million** in debt principal payments[31](index=31&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=page&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, transactions, and financial positions [(1) BASIS OF PRESENTATION](index=11&type=page&id=(1)%20BASIS%20OF%20PRESENTATION) This note describes Ribbon Communications Inc.'s business as a global provider of communications technology, the basis for preparing its unaudited condensed consolidated financial statements, details of an August 2022 equity offering, and the reclassification of amortization of acquired intangible assets to cost of revenue for improved comparability. It also outlines the company's two operating segments: Cloud and Edge, and IP Optical Networks, and discusses significant accounting policies, estimates, restricted cash, financial asset transfers, going concern considerations, and recent accounting pronouncements - Ribbon Communications Inc. is a global provider of communications technology, offering software and hardware products, network solutions, and services for secure data and voice communications[36](index=36&type=chunk) - On August 12, 2022, the company completed an Equity Offering, selling **17,071,311 shares** of common stock at **$3.05 per share**, generating approximately **$52.1 million** in gross proceeds, intended for general corporate purposes including debt repayment[39](index=39&type=chunk) - The company reclassified amortization of certain acquired intangible assets from 'Total operating expenses' to 'Cost of revenue' (Amortization of acquired technology) in Q4 2021 to enhance comparability with industry peers[42](index=42&type=chunk) - The company's operations are assessed based on two segments: Cloud and Edge (VoIP, VoLTE, VoNR, UC&C solutions) and IP Optical Networks (IP networking, optical transport for 5G, metro, edge aggregation)[41](index=41&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - The company projects **compliance with financial covenants** for at least one year from the financial statements' issuance date, partly due to using a portion of the Equity Offering capital in covenant ratio calculations[54](index=54&type=chunk) [(2) EARNINGS (LOSS) PER SHARE](index=14&type=page&id=(2)%20EARNINGS%20(LOSS)%20PER%20SHARE) This note details the calculation of basic and diluted earnings (loss) per share, noting that for periods with net loss, potential dilutive common shares are excluded as their effect would be antidilutive Weighted Average Shares Outstanding (in thousands) | Metric (in thousands) | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Weighted average shares outstanding - basic | 158,921 | 148,184 | 152,795 | 147,204 |\n| Weighted average shares outstanding - diluted | 158,921 | 148,184 | 152,795 | 147,204 | - Options and unvested restricted/performance-based stock units totaling **14.4 million shares (2022)** and **10.9 million shares (2021)** were excluded from diluted EPS calculations due to their antidilutive effect during periods of net loss[61](index=61&type=chunk) [(3) INVENTORY](index=15&type=page&id=(3)%20INVENTORY) This note provides a breakdown of the company's inventory, showing an increase in on-hand final assemblies and finished goods, as well as deferred cost of goods sold, from December 31, 2021, to September 30, 2022 Inventory Breakdown (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | On-hand final assemblies and finished goods inventories | $77,244 | $57,360 |\n| Deferred cost of goods sold | $3,887 | $1,474 |\n| Current portion of inventory | $70,286 | $54,043 | - Current inventory increased by **$16.2 million (30.1%)** from December 31, 2021, to September 30, 2022[63](index=63&type=chunk) [(4) INTANGIBLE ASSETS AND GOODWILL](index=15&type=page&id=(4)%20INTANGIBLE%20ASSETS%20AND%20GOODWILL) This note details the company's intangible assets and goodwill, including their cost, accumulated amortization, and net carrying value. It also provides estimated future amortization expense and the allocation of goodwill by operating segment, noting no changes to goodwill carrying value in the nine months ended September 30, 2022 Intangible Assets Net Carrying Value (in thousands) | Intangible Asset (in thousands) | September 30, 2022 Net Carrying Value | December 31, 2021 Net Carrying Value | | :------------------------------ | :------------------------------------ | :----------------------------------- | | In-process research and development | $34,000 | $34,000 |\n| Developed technology | $101,186 | $124,987 |\n| Customer relationships | $168,895 | $190,487 |\n| Trade names | $552 | $1,256 |\n| Software licenses | $5,064 | — |\n| Total Intangible Assets, net | $309,697 | $350,730 | Goodwill by Segment (in thousands) | Goodwill by Segment (in thousands) | September 30, 2022 | September 30, 2021 | | :--------------------------------- | :----------------- | :----------------- | | Cloud and Edge | $224,896 | $224,896 |\n| IP Optical Networks | $75,996 | $191,996 |\n| Total Goodwill | $300,892 | $416,892 | - Total intangible assets, net, decreased by **$41.0 million (11.7%)** from December 31, 2021, to September 30, 2022[64](index=64&type=chunk) - Goodwill for the IP Optical Networks segment decreased by **$116.0 million** due to accumulated impairment losses, while Cloud and Edge goodwill **remained stable**[68](index=68&type=chunk) [(5) INVESTMENTS AND FAIR VALUE HIERARCHY](index=16&type=page&id=(5)%20INVESTMENTS%20AND%20FAIR%20VALUE%20HIERARCHY) This note details the company's investment in AVCT, which was comprised of debentures and warrants, later converted to common stock. It explains the settlement agreement with AVCT in August 2022, resulting in the cancellation of the investment and the acquisition of a perpetual software license. The note also outlines the fair value hierarchy used for financial instruments - The company's investment in AVCT, valued at **$43.9 million** as of December 31, 2021, was **fully canceled** on August 29, 2022, through a settlement agreement[72](index=72&type=chunk) - As part of the settlement, Ribbon acquired a non-exclusive perpetual license for WebRTC gateway technology from AVCT for **$2.5 million cash**, recorded as an intangible asset of **$4.4 million**[70](index=70&type=chunk) Losses from AVCT Investment (in thousands) | Metric (in thousands) | Three months ended Sep 30, 2022 | Nine months ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :----------------------------- | | Losses from change in fair value of AVCT Investment | $1,900 | $41,300 | [(6) ACCRUED EXPENSES AND OTHER](index=17&type=page&id=(6)%20ACCRUED%20EXPENSES%20AND%20OTHER) This note provides a breakdown of accrued expenses, showing a slight decrease in total accrued expenses from December 31, 2021, to September 30, 2022, primarily due to lower employee compensation and related costs Accrued Expenses and Other (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Employee compensation and related costs | $29,460 | $38,040 |\n| Professional fees | $15,564 | $14,365 |\n| Other | $54,237 | $48,347 |\n| Total Accrued expenses and other | $99,261 | $100,752 | - Total accrued expenses and other decreased by **$1.5 million (1.5%)** from December 31, 2021, to September 30, 2022[78](index=78&type=chunk) [(7) WARRANTY ACCRUALS](index=18&type=page&id=(7)%20WARRANTY%20ACCRUALS) This note outlines the changes in the company's warranty accrual balance, showing a slight decrease from January 1, 2022, to September 30, 2022, due to settlements exceeding current period provisions Warranty Accrual Activity (in thousands) | Metric (in thousands) | Nine months ended Sep 30, 2022 | | :-------------------- | :----------------------------- | | Balance at January 1, 2022 | $13,120 |\n| Current period provisions | $3,970 |\n| Settlements | $(4,318) |\n| Balance at September 30, 2022 | $12,772 | - The warranty accrual balance decreased by **$0.3 million (2.6%)** over the nine months ended September 30, 2022[80](index=80&type=chunk) [(8) RESTRUCTURING AND FACILITIES CONSOLIDATION INITIATIVES](index=18&type=page&id=(8)%20RESTRUCTURING%20AND%20FACILITIES%20CONSOLIDATION%20INITIATIVES) This note details the company's restructuring and facilities consolidation initiatives, including the 2022 Restructuring Plan. It outlines the types of expenses incurred, such as severance, variable facilities-related costs, and accelerated amortization of lease assets, and provides a summary of accrual activity Restructuring and Related Expense (in thousands) | Metric (in thousands) | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Restructuring and related expense | $1,269 | $1,767 | $8,977 | $10,547 | - The 2022 Restructuring Plan, approved in February 2022, aims to streamline operations through facility consolidation and workforce reduction, with **$8.3 million** in related expenses incurred in the nine months ended September 30, 2022[85](index=85&type=chunk)[87](index=87&type=chunk) - The 2022 plan included **$4.7 million** for severance for approximately **60 employees**, **$2.0 million** for variable facilities-related costs, and **$1.6 million** for accelerated amortization of lease assets[87](index=87&type=chunk) [(9) DEBT](index=19&type=page&id=(9)%20DEBT) This note provides a comprehensive overview of the company's 2020 Credit Facility, including its structure, covenants, and amendments. It details the Term Loan and Revolving Credit Facility, interest rates, and compliance with financial covenants, as well as information on letters of credit and performance bonds - The 2020 Credit Facility provides **$500 million** in commitments, including a **$400 million** Term Loan Facility and a **$100 million** Revolving Credit Facility[90](index=90&type=chunk) - The company entered into a Fifth Amendment on June 30, 2022, which increased the Maximum Consolidated Net Leverage Ratio and reduced the minimum Consolidated Fixed Charge Coverage Ratio for 2022, and included a **$10.0 million** voluntary prepayment[106](index=106&type=chunk)[108](index=108&type=chunk) Debt and Guarantees (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Outstanding balance under 2020 Term Loan | $335,500 | $375,500 |\n| Average interest rate (Term Loan) | 5.4% | 3.4% |\n| Letters of credit outstanding | $3,300 | $4,300 |\n| Total Guarantees outstanding | $9,500 | $30,100 | - The company was in **compliance with all covenants** of the 2020 Credit Facility at both September 30, 2022, and December 31, 2021[109](index=109&type=chunk) [(10) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES](index=22&type=page&id=(10)%20DERIVATIVE%20INSTRUMENTS%20AND%20HEDGING%20ACTIVITIES) This note describes the company's use of derivative financial instruments, specifically an interest rate swap, to manage exposure to interest rate risk on its variable-rate debt. It details the notional amount adjustments, the accounting treatment for cash flow hedges, and the fair value of the derivative - The company uses an interest rate swap to convert its variable-rate term loan (based on one-month LIBOR) to an aggregate fixed rate of 0.904% plus a leverage-based margin[114](index=114&type=chunk) - In July and August 2022, the company sold **$60 million** of the notional amount of its interest rate swap, reducing it to **$340 million**, which approximates the current term loan debt[115](index=115&type=chunk) Fair Value of Interest Rate Derivative (in thousands) | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Fair value of interest rate derivative (asset) | $26,283 | $1,811 | - The company estimates that **$11 million** may be reclassified as a decrease to interest expense over the next twelve months from accumulated other comprehensive income related to the derivative[118](index=118&type=chunk) [(11) REVENUE RECOGNITION](index=24&type=page&id=(11)%20REVENUE%20RECOGNITION) This note explains the company's revenue recognition policies and provides disaggregated revenue data - Revenue is derived from two primary sources: products (hardware and software) and services (customer support, consulting, design, installation, training)[122](index=122&type=chunk) - Product revenue is typically recognized upon transfer of control (e.g., software download, hardware delivery), while service revenue is recognized ratably over the contract term (maintenance) or as work is performed (professional services)[124](index=124&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) Revenue by Type (in thousands) | Revenue Type (in thousands) | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Product revenue | $111,152 | $111,726 | $305,809 | $322,744 |\n| Service revenue | $95,975 | $98,672 | $280,312 | $291,636 |\n| Total revenue | $207,127 | $210,398 | $586,121 | $614,380 | Deferred Revenue (in thousands) | Deferred Revenue (in thousands) | September 30, 2022 | December 31, 2021 | | :------------------------------ | :----------------- | :---------------- | | Deferred revenue (current) | $90,139 | $109,119 |\n| Deferred revenue (long-term) | $22,185 | $20,619 | - Deferred revenue primarily relates to customer support contracts, with approximately **$85 million** recognized in the nine months ended September 30, 2022, from balances at December 31, 2021[139](index=139&type=chunk)[142](index=142&type=chunk) [(12) OPERATING SEGMENT INFORMATION](index=28&type=page&id=(12)%20OPERATING%20SEGMENT%20INFORMATION) This note provides financial information for the company's reportable operating segments Segment Revenue (in thousands) | Segment Revenue (in thousands) | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :----------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cloud and Edge | $124,685 | $142,437 | $371,571 | $409,280 |\n| IP Optical Networks | $82,442 | $67,961 | $214,550 | $205,100 |\n| Total Revenue | $207,127 | $210,398 | $586,121 | $614,380 | Segment Adjusted Gross Profit (in thousands) | Segment Adjusted Gross Profit (in thousands) | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cloud and Edge | $81,524 | $95,998 | $243,196 | $276,170 |\n| IP Optical Networks | $31,287 | $24,918 | $69,556 | $84,544 |\n| Total Segment Adjusted Gross Profit | $112,811 | $120,916 | $312,752 | $360,714 | - Cloud and Edge segment revenue decreased by **12.5%** for the three months and **9.2%** for the nine months ended September 30, 2022, while IP Optical Networks revenue increased by **21.3%** and **4.6%** respectively[151](index=151&type=chunk) [(13) MAJOR CUSTOMERS](index=29&type=page&id=(13)%20MAJOR%20CUSTOMERS) This note identifies major customers contributing significantly to the company's revenue Major Customer Revenue Contribution | Customer | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Verizon Communications Inc. | 13% | 18% | 16% | 17% |\n| AT&T | 10% | <10% | <10% | <10% | - Verizon Communications Inc. remained a major customer, contributing **13%** and **16%** of revenue for the three and nine months ended September 30, 2022, respectively[152](index=152&type=chunk) - AT&T became a major customer in the three months ended September 30, 2022, contributing **10%** of total revenue[152](index=152&type=chunk) [(14) STOCK-BASED COMPENSATION PLANS](index=30&type=page&id=(14)%20STOCK-BASED%20COMPENSATION%20PLANS) This note details the company's stock-based compensation plans and related expenses - The 2019 Plan allows for various equity awards to employees, officers, and directors, with an additional **10.0 million shares** authorized in May 2022[155](index=155&type=chunk)[156](index=156&type=chunk) Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total stock-based compensation expense | $4,841 | $4,561 | $13,495 | $14,411 | - As of September 30, 2022, there was **$26.7 million** of unrecognized stock-based compensation expense, expected to be recognized over approximately two years[174](index=174&type=chunk) [(15) LEASES](index=33&type=page&id=(15)%20LEASES) This note outlines the company's accounting for operating and finance leases - The company has operating and finance leases for corporate offices, R&D facilities, and equipment, with operating leases reported separately on the balance sheet[175](index=175&type=chunk) Lease Liabilities (in thousands) | Lease Liabilities (in thousands) | September 30, 2022 | December 31, 2021 | | :------------------------------- | :----------------- | :---------------- | | Total lease liabilities | $64,917 | $73,166 | Lease Expense (in thousands) | Lease Expense (in thousands) | Three months ended Sep 30, 2022 | Nine months ended Sep 30, 2022 | | :--------------------------- | :------------------------------ | :----------------------------- | | Operating lease cost | $5,233 | $15,401 |\n| Short-term lease cost | $3,610 | $10,451 |\n| Variable lease costs | $1,424 | $3,283 |\n| Net lease cost | $9,831 | $27,952 | - Restructuring plans led to accelerated amortization of lease assets (**$0.6 million** for Q3 2022, **$1.6 million** for YTD Q3 2022) and accruals for future variable lease costs (**$0.7 million** for Q3 2022, **$1.0 million** for YTD Q3 2022)[181](index=181&type=chunk)[188](index=188&type=chunk) [(16) INCOME TAXES](index=36&type=page&id=(16)%20INCOME%20TAXES) This note discusses the company's income tax provisions, effective tax rates, and valuation allowances Income Tax Provision (in thousands) | Metric (in thousands) | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :-------------------- | :----------------------------- | :----------------------------- | | Income tax provision | $(12,353) | $(5,411) | - The company recognized a **$6.8 million** tax benefit in Q3 2022 from releasing a valuation allowance on a capital loss deferred tax asset related to its AVCT investment[192](index=192&type=chunk) - The Tax Cuts and Jobs Act of 2017 (TCJA) requires amortization of R&D expenditures over a minimum of **five years** starting in **2022**, which could materially reduce operating cash flows if not repealed or modified[193](index=193&type=chunk) [(17) COMMITMENTS AND CONTINGENCIES](index=36&type=page&id=(17)%20COMMITMENTS%20AND%20CONTINGENCIES) This note details the company's commitments, including royalty payments and ongoing legal proceedings - The company has a maximum possible future royalty commitment of **$31.0 million** to the IIA, including **$4.6 million** of unpaid accrued royalties, for products developed with Israeli government R&D grants[194](index=194&type=chunk) - The Miller Complaint, a class action securities lawsuit alleging misleading forward-looking statements, had its motion to dismiss **denied on October 20, 2022**[199](index=199&type=chunk) - Charter Communications filed two breach of contract complaints against Ribbon subsidiaries in September 2022, seeking monetary damages related to indemnification obligations[200](index=200&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Ribbon Communications Inc.'s financial condition and results of operations for the three and nine months ended September 30, 2022, compared to the prior year. It covers an overview of the business, the impact of COVID-19, details of the equity offering, reclassification of amortization, segment performance, financial results, restructuring initiatives, critical accounting policies, and a detailed analysis of revenue, costs, and expenses. It also discusses liquidity, capital resources, cash flows, and recent accounting pronouncements [Overview](index=38&type=page&id=Overview) This overview introduces Ribbon Communications Inc. as a global provider of communications technology - Ribbon Communications Inc. is a leading global provider of communications technology, offering secure data and voice solutions for service providers and enterprises, with a mission to be a cloud-centric technology leader[203](index=203&type=chunk) - The COVID-19 pandemic continues to **negatively affect** the global economy, supply chains, and may cause customers to restrict spending, impacting the company's revenue and ability to deliver solutions[204](index=204&type=chunk) - An equity offering in August 2022 raised approximately **$52.1 million** gross proceeds from the sale of **17,071,311 common shares**, intended for general corporate purposes including debt repayment[206](index=206&type=chunk) - The reclassification of amortization of acquired intangible assets to 'Amortization of acquired technology' within cost of revenue decreased gross margin by approximately **five percentage points** in both the three and nine months ended September 30, 2021[210](index=210&type=chunk) [Financial Overview](index=39&type=page&id=Financial%20Overview) This section summarizes the company's financial performance, reporting operating losses for the periods presented Key Financial Metrics (in millions) | Metric (in millions) | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $207.1 | $210.4 | $586.1 | $614.4 |\n| Gross profit | $104.3 | $110.7 | $286.9 | $329.9 |\n| Gross margin | 50.4% | 52.6% | 49.0% | 53.7% |\n| Operating expenses | $107.6 | $108.7 | $336.5 | $327.5 |\n| (Loss) income from operations | $(3.3) | $2.0 | $(49.6) | $2.3 | - The company reported an operating loss of **$3.3 million** for Q3 2022 and **$49.6 million** for YTD Q3 2022, compared to operating income in the prior year periods, mainly due to lower sales, higher supply chain costs, and increased R&D in IP Optical Networks[212](index=212&type=chunk) - The 2022 Restructuring Plan incurred **$8.3 million** in expenses for the nine months ended September 30, 2022, including severance for approximately **60 employees** and accelerated amortization of lease assets[221](index=221&type=chunk) [Results of Operations](index=41&type=page&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's revenue, costs, and expenses Revenue by Type (in thousands) | Revenue (in thousands) | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :--------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Product | $111,152 | $111,726 | $305,809 | $322,744 |\n| Service | $95,975 | $98,672 | $280,312 | $291,636 |\n| Total Revenue | $207,127 | $210,398 | $586,121 | $614,380 | - Product revenue slightly decreased by **0.5%** for the three months and **5.2%** for the nine months ended September 30, 2022, primarily due to lower Cloud and Edge network transformation and SBC sales, partially offset by higher IP Optical Networks sales[224](index=224&type=chunk) - Service revenue decreased by **2.7%** for the three months and **3.9%** for the nine months ended September 30, 2022, mainly due to fewer Cloud and Edge VoIP Network Transformation projects completing[224](index=224&type=chunk)[230](index=230&type=chunk) Expense Breakdown (in thousands) | Expense (in thousands) | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :--------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $49,366 | $49,132 | $153,159 | $143,339 |\n| Sales and marketing | $36,365 | $36,113 | $109,827 | $108,212 |\n| General and administrative | $12,118 | $12,148 | $37,881 | $40,435 |\n| Interest expense, net | $(5,266) | $(2,969) | $(13,869) | $(11,836) |\n| Other expense, net | $(3,732) | $(57,702) | $(42,760) | $(65,970) | - R&D expenses increased by **6.9%** for the nine months ended September 30, 2022, driven by a **$16 million** increase in the IP Optical Networks segment for portfolio expansion and next-gen SDN management[240](index=240&type=chunk)[241](index=241&type=chunk) - Other expense, net, **significantly decreased** for both periods, primarily due to lower losses from the change in fair value of the AVCT Investment, which was canceled in August 2022[256](index=256&type=chunk) [Off-Balance Sheet Arrangements](index=47&type=page&id=Off-Balance%20Sheet%20Arrangements) The company states that it has no off-balance sheet arrangements that have a material effect on its financial position - The company has no off-balance sheet arrangements that are expected to have a material effect on its financial condition or results[259](index=259&type=chunk) [Liquidity and Capital Resources](index=48&type=page&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's liquidity and capital resources, including cash balances and cash flow activities Cash Flow Summary (in thousands) | Cash Flow (in thousands) | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :----------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(42,462) | $7,899 |\n| Net cash used in investing activities | $(13,044) | $(11,335) |\n| Net cash provided by (used in) financing activities | $6,207 | $(28,017) |\n| Net decrease in cash, cash equivalents and restricted cash | $(50,550) | $(31,942) |\n| Cash, cash equivalents and restricted cash, end of period | $55,935 | $103,755 | - Cash and restricted cash decreased from **$106 million** at December 31, 2021, to **$56 million** at September 30, 2022[261](index=261&type=chunk) - Operating activities used **$42.5 million** in cash in the nine months ended September 30, 2022, primarily due to net loss, higher inventory, and lower accounts payable[276](index=276&type=chunk) - Financing activities provided **$6.2 million** in cash, driven by **$50.4 million** net proceeds from the equity offering, partially offset by **$40.0 million** in debt principal payments[280](index=280&type=chunk) - The company projects **compliance with its financial covenants** for at least one year, leveraging the capital raised from the equity offering in covenant ratio calculations[283](index=283&type=chunk)[284](index=284&type=chunk) [Recent Accounting Pronouncements](index=51&type=page&id=Recent%20Accounting%20Pronouncements) This section discusses recent FASB Accounting Standards Updates and their potential impact on financial statements - ASU 2022-02 (Credit Losses), effective January 1, 2023, is not expected to have a material impact on consolidated financial statements[286](index=286&type=chunk) - ASU 2021-08 (Business Combinations), effective January 1, 2023, could have a material impact on consolidated financial statements for periods including significant business acquisitions[287](index=287&type=chunk) - ASU 2021-01 (Reference Rate Reform), effective prospectively through December 31, 2022, did not have a material impact on consolidated financial statements[288](index=288&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=page&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the company's exposure to financial market risks, including foreign currency and interest rates - The company is exposed to financial market risk from foreign currency fluctuations and changes in interest rates[289](index=289&type=chunk) - Derivative financial instruments, specifically an interest rate swap, are used to manage interest rate volatility and stabilize interest expense[290](index=290&type=chunk) - The fair value of the derivative was an asset of **$26.3 million** at September 30, 2022, with an estimated **$11.0 million** expected to be reclassified as a decrease to interest expense over the next twelve months[291](index=291&type=chunk) [Item 4. Controls and Procedures](index=52&type=page&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures and reports no material changes - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2022[292](index=292&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended September 30, 2022[293](index=293&type=chunk) [PART II OTHER INFORMATION](index=53&type=section&id=PART%20II%20OTHER%20INFORMATION) This part includes legal proceedings, risk factors, equity sales, and other disclosures [Item 1. Legal Proceedings](index=53&type=page&id=Item%201.%20Legal%20Proceedings) This section refers to the detailed discussion of legal proceedings and claims in Note 17 - The company is involved in routine legal disputes and claims, with material proceedings detailed in Note 17 of the financial statements[295](index=295&type=chunk) - The outcome of litigation is inherently uncertain, and adverse resolutions could materially affect the company's financial condition and operating results[295](index=295&type=chunk) [Item 1A. Risk Factors](index=53&type=page&id=Item%201A.%20Risk%20Factors) This section outlines significant business risks and uncertainties, as detailed in the Annual Report on Form 10-K - The company's business is subject to significant risks and uncertainties, as detailed in its Annual Report on Form 10-K[296](index=296&type=chunk) - No material changes to the previously described risk factors occurred in the nine months ended September 30, 2022[296](index=296&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=page&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details issuer purchases of equity securities to satisfy tax withholding obligations Shares Repurchased (Number of Shares) | Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | | :------------------------------ | :----------------------------------- | :--------------------------- | | July 1, 2022 to July 31, 2022 | 6,748 | $3.18 |\n| August 1, 2022 to August 31, 2022 | 1,643 | $3.33 |\n| September 1, 2022 to September 30, 2022 | 234,043 | $3.02 |\n| Total | 242,434 | $3.03 | - The company repurchased **242,434 shares** of common stock during Q3 2022 at an average price of **$3.03 per share**, primarily to satisfy tax withholding obligations upon the vesting of restricted stock awards[297](index=297&type=chunk) [Item 5. Other Information](index=53&type=page&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report under this item [Item 6. Exhibits](index=54&type=page&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including agreements and certifications - The report includes various exhibits such as merger agreements, purchase agreements, certificates of incorporation, by-laws, securities purchase agreements, registration rights agreements, and Sarbanes-Oxley Act certifications[299](index=299&type=chunk) [Signatures](index=55&type=section&id=Signatures) This section contains the required signatures certifying the submission of the Form 10-Q [Signatures](index=55&type=page&id=Signatures) This section contains the required signatures certifying the submission of the Form 10-Q - The report is signed by Miguel A. Lopez, Executive Vice President and Chief Financial Officer, on behalf of Ribbon Communications Inc. on October 28, 2022[304](index=304&type=chunk)[305](index=305&type=chunk) ```

Financial Data and Key Metrics Changes - Ribbon generated revenues of $207 million in Q3 2022, slightly below guidance, with non-GAAP gross margin at 54.5% [14][15] - Non-GAAP adjusted EBITDA was $23 million, and non-GAAP diluted earnings per share was $0.02 [14] - Cash and cash equivalents increased by $18 million to $56 million, primarily due to a successful $50 million capital raise [17] Business Line Data and Key Metrics Changes - The Cloud and Edge business reported Q3 revenue of $125 million, down 12% year-over-year and 9% quarter-over-quarter, while IP Optical networks revenue was $82 million, up 21% year-over-year and 20% quarter-over-quarter [15][16] - Non-GAAP gross margin for the Cloud and Edge segment was 65%, while IP Optical gross margin improved to 38%, a 9 percentage point increase from the previous quarter [15][16] Market Data and Key Metrics Changes - Sales in Europe increased by over 40% compared to Q2, while North America saw over a 15% increase; however, IP Optical sales in India were down about 6% due to component supply issues [6][15] - International customers accounted for 58% of total revenue, reflecting a higher percentage from the increase in IP Optical business [16] Company Strategy and Development Direction - The company is focusing on the large service provider IP routing market and expanding its portfolio of IP routing solutions, with significant bookings for Neptune IP routing products [6][19] - Ribbon plans to implement additional expense reductions and functional integration to improve profitability and cash generation in 2023 [21][55] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the outlook for diversified business and the momentum from the expanded product portfolio, despite caution regarding macroeconomic conditions affecting capital investments [20][32] - The company anticipates revenue growth in both IP routing and optical transport segments in Q4, supported by a strong backlog [19][22] Other Important Information - The company has made significant progress in its pipeline of major Tier 1 mobile and telecom carrier opportunities, with initial purchase orders from several RFPs [7][60] - Ribbon's focus on added value applications received a boost with significant deals in the US and France, leading to a doubling of application revenue [11] Q&A Session Summary Question: Can you provide the book-to-revenue ratio for the overall company? - The book-to-revenue ratio for the overall company was 1.28 [26] Question: What are the demand trends in a macro weakness, especially outside the US? - Demand for IP Optical improved significantly, while Cloud and Edge business faced declines due to previous quarter's strong performance with Verizon [28][29] Question: Is the caution regarding federal and European markets due to macro concerns? - The caution is based on longer decision-making times in the current macro environment, not necessarily due to direct communication from customers [32] Question: How much of the increase in bookings is attributed to Airtel? - Airtel contributed to the growth, but it was not the dominant factor; strength was seen across other regions as well [33] Question: What is the current status of the supply chain? - Supply chain conditions have improved incrementally, but specific component shortages still exist [66][67]

Financial Performance - Total revenue for Q2 2022 was $205.8 million, a decrease of 2.0% compared to $211.2 million in Q2 2021[15] - Net loss for Q2 2022 was $30.2 million, compared to a net income of $23.2 million in Q2 2021[15] - Gross profit for Q2 2022 was $104.6 million, a decline of 11.9% from $118.7 million in Q2 2021[15] - For the six months ended June 30, 2022, Ribbon Communications reported a net loss of $100.155 million, compared to a net loss of $21.446 million for the same period in 2021, indicating a significant increase in losses[27] - The gross profit for the six months ended June 30, 2022, was $182.605 million, down 16.6% from $219.213 million for the same period in 2021[15] Revenue Breakdown - Product revenue for the first half of 2022 was $194.7 million, down 7.8% from $211.0 million in the same period of 2021[15] - Service revenue for the three months ended June 30, 2022, was $93.129 million, down from $98.081 million in the same period of 2021, representing a decline of approximately 5%[126] - Product revenue for the three months ended June 30, 2022, was $112.667 million, slightly down from $113.129 million in the same period of 2021[126] - Revenue from indirect sales through the channel partner program for the three months ended June 30, 2022, was $28.453 million, compared to $27.114 million in 2021, reflecting an increase of 5%[126] - The Cloud and Edge segment generated $137.080 million in revenue for the three months ended June 30, 2022, down from $141.421 million in 2021, a decrease of about 3%[139] Expenses and Costs - Research and development expenses increased to $51.1 million in Q2 2022, up 9.8% from $46.8 million in Q2 2021[15] - The company incurred stock-based compensation expenses of $8.654 million for the six months ended June 30, 2022, compared to $9.850 million for the same period in 2021[27] - The company reported depreciation and amortization expenses of $7.773 million for property and equipment and $30.943 million for intangible assets for the six months ended June 30, 2022[27] Cash and Assets - Cash and cash equivalents were $36.2 million as of June 30, 2022, significantly down from $103.9 million at the end of 2021[13] - Total current assets decreased to $415.4 million as of June 30, 2022, down from $481.0 million at the end of 2021[13] - The total stockholders' equity as of June 30, 2022, was $451.344 million, a decrease from $669.281 million as of June 30, 2021[24] - The company experienced a decrease in fair value of investments amounting to $39.411 million for the six months ended June 30, 2022[27] Liabilities and Debt - Total liabilities decreased to $779.3 million as of June 30, 2022, compared to $820.6 million at the end of 2021[13] - The outstanding balance of the 2020 Credit Facility was $340.5 million as of June 30, 2022[45] - The Company is required to make quarterly principal payments of approximately $10 million in the first year, increasing to $30 million in the last year of the 2020 Credit Facility[80] Future Outlook and Challenges - The company anticipates ongoing challenges due to supply chain disruptions and geopolitical instabilities, which may impact future performance[9] - The company projects it may not maintain compliance with its financial covenants under the 2020 Credit Facility for the quarter ended September 30, 2022, due to market conditions[45] Stock and Shares - The company had a total of 150,459,784 shares outstanding as of June 30, 2022, an increase from 148,895,308 shares at the beginning of the year[27] - The weighted average shares used to compute basic loss per share was 150.2 million for Q2 2022, compared to 147.5 million for Q2 2021[15] Restructuring and Strategic Plans - The company plans to streamline operations through the 2022 Restructuring Plan, which includes workforce reductions and facility consolidations[74] - The company recorded restructuring expenses of $2.90 million and $7.70 million for the three and six months ended June 30, 2022, respectively, as part of its strategic restructuring plan[72]

Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $206 million, down 3% year-over-year but up 19% quarter-over-quarter, aligning with guidance of $200 million to $215 million [24][25] - Adjusted EBITDA was $21 million, slightly above the midpoint of guidance [24] - Non-GAAP gross margin was 54.9%, exceeding the guidance range of 53.5% to 54.5% [27] - Non-GAAP adjusted EBITDA was $21 million, with diluted earnings per share at $0.06, at the top of the guided range [30] Business Line Data and Key Metrics Changes - Cloud & Edge revenue was $137 million, down 3% year-over-year but up 25% quarter-over-quarter, driven by large network transformation projects [31] - IP Optical Networks revenue was $69 million, a decrease of $1 million year-over-year but an increase of 8% quarter-over-quarter [33] - Software sales accounted for 58% of total revenue, with Cloud & Edge non-GAAP gross margins at 68% [31][32] Market Data and Key Metrics Changes - North America saw a 33% sequential increase in Cloud & Edge product sales, particularly strong with Verizon [7][8] - International customers contributed 52% of total revenue, with significant growth opportunities in Europe and India [35][43] - The company anticipates continued growth in North America, Europe, and India, particularly with upcoming 5G investments [43][44] Company Strategy and Development Direction - The company is focusing on significant investments in R&D to capture a larger share of CapEx from Tier 1 service providers [19] - A large pipeline of new products is expected to be introduced over the next several quarters, including the Neptune XDR 2000 series [20][21] - The company aims to leverage its combined portfolio of optical and IP technology to strengthen its market position [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a stronger second half of 2022, driven by a robust pipeline of opportunities and customer activity [42] - The company expects to see improvements in IP optical margins in the second half of the year, despite ongoing supply chain challenges [34][60] - Management noted that customer investments remain strong, with no signs of macroeconomic pullback affecting project commitments [62] Other Important Information - The company ended the quarter with cash and cash equivalents of $38 million, a decrease of $68 million from the beginning of the year [36] - The leverage ratio was 4.83 times, with a maximum of 5.25 times, indicating financial stability [37] - The company is adjusting its full-year revenue guidance to a range of $840 million to $870 million, reflecting ongoing supply chain costs and inflation pressures [48] Q&A Session Summary Question: Insights on IP Optical Business Demand Trends - Management expects both IP and optical segments to grow in the second half, with a focus on increasing IP revenue share [52][53] Question: Margin Structure Between IP and Optical - IP products are expected to have stronger margins compared to traditional optical products, though margins can vary based on project specifics [53][54] Question: Visibility on Optical Margins Improvement - Management is confident that margins will improve to the mid- to upper-30 range in the second half due to higher volume and product mix [60] Question: Macro Environment Impact on Projects - Customers are continuing to invest in long-term projects, with no signs of pulling back on investments despite macroeconomic concerns [62] Question: Price Increases and Margin Structure - Price increases are being implemented, but their impact on margins will depend on competitive dynamics and contract renewals [64][66] Question: Opportunities Related to Huawei Displacement - The company has secured wins related to Huawei displacement, with significant opportunities still ahead [68] Question: India Revenue and Growth Expectations - India currently represents about 10% of total sales, with expectations for continued growth driven by 5G deployments and Huawei replacements [107][110] Question: Tax Rate Expectations - The non-GAAP tax rate is expected to normalize to around 35% next year as profitability improves in other jurisdictions [113]

Ribbon Communications 1 Second Quarter 2022 Results July 27, 2022 Note Regarding Forward-Looking Statements and Non-GAAP Financial Measures This presentation 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 presentation, including without limitation statements regarding the projected financial results for th ...