Ribbon munications (RBBN) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial Results Overview This section provides a comprehensive overview of Ribbon Communications' financial performance and key business achievements for the second quarter of 2025 Second Quarter 2025 Financial and Business Highlights Ribbon Communications achieved strong financial performance in Q2 2025, with revenue and adjusted EBITDA exceeding expectations, robust demand in service provider and enterprise markets, and announced a new stock repurchase program 2025 Second Quarter Key Financial Data (Compared to Q2 2024) | Metric | Q2 2025 | Q2 2024 | Year-over-Year Change | | :--------------------------------- | :-------- | :-------- | :----------- | | GAAP Revenue | $221M | $193M | +15% | | GAAP Operating Income (Loss) | $4M | $(2)M | N/A | | Non-GAAP Adjusted EBITDA | $32M | $22M | +47% | | GAAP Gross Margin | 49.6% | 50.8% | -1.2 pp | | Non-GAAP Gross Margin | 52.1% | 54.4% | -2.3 pp | | GAAP Net Income (Loss) | $(11)M | $(17)M | N/A | | Non-GAAP Net Income (Loss) | $10M | $9M | +11.1% | | GAAP Diluted EPS (Loss) | $(0.06) | $(0.10) | N/A | | Non-GAAP Diluted EPS (Loss) | $0.05 | $0.05 | 0% | - The company announced a $50 million stock repurchase program, expected to utilize future free cash flow to repurchase common stock over the next few years[2][7] - AI-powered optical innovations were showcased at OFC, with the NPT 2714 router and Apollo ADM 400/800 optical transport products receiving Lightwave recognition[7] - Assisted Kerala in deploying the Kerala Fiber Optic Network (KFON), providing high-speed internet to rural areas in India[7] - Strong demand was observed in North American service provider and enterprise markets, with IP Optical business performing well in India and North America[2] Business Outlook (Q3 2025 and Full Year) The company projects Q3 2025 revenue between $213 million and $227 million, with specific guidance for non-GAAP gross margin and adjusted EBITDA, while the full-year outlook remains unchanged 2025 Third Quarter Financial Forecast | Metric | Forecast Range | Midpoint | | :------------------ | :------------------ | :-------- | | Revenue | $213M - $227M | $220M | | Non-GAAP Gross Margin | 53.5% - 54.0% | 53.75% | | Adjusted EBITDA | $28M - $34M | $31M | 2025 Full Year Financial Forecast | Metric | Forecast Range | Midpoint | | :------------------ | :------------------ | :-------- | | Revenue | +/-$10M | $880M | | Non-GAAP Gross Margin | +/-0.5% | 54.5% | | Adjusted EBITDA | +/-$5M | $135M | - The company did not provide GAAP profitability guidance[5] Company Information This section provides an overview of Ribbon Communications, its core business, solutions, ESG commitments, and important information regarding forward-looking statements About Ribbon Communications Ribbon Communications is a global provider of communication software, IP, and optical networking solutions, dedicated to modernizing networks for service providers, enterprises, and critical infrastructure sectors, with a focus on ESG matters - Core business: Provides communication software, IP, and optical networking solutions, serving global service providers, enterprises, and critical infrastructure sectors[9] - Solution characteristics: Innovative, end-to-end, offering unparalleled scale, performance, and agility, including software-centric solutions, cloud-native products, leading security and analytics tools, and IP and optical networking solutions for 5G and broadband internet[9] - ESG commitment: Publishes an annual sustainability report, with a strong focus on environmental, social, and governance (ESG) matters[9] Important Information Regarding Forward-Looking Statements This press release contains forward-looking statements subject to risks and uncertainties, based on current expectations and assumptions, where actual results may differ materially, and the company undertakes no obligation to update them - Definition: Includes projections for the company's financial results, business strategy, and market share growth for Q3 2025 and beyond, identified by words such as "anticipates," "believes," "expects," and similar expressions[10] - Risk factors: Include, but are not limited to, fluctuations in quarterly revenue and operating results, restructuring impacts, increased tariffs, supply chain disruptions, litigation, interest rate volatility, cybersecurity incidents, competitive failures, customer base growth, macroeconomic conditions, technological and market changes, intellectual property protection, partnerships, product defects, international operational risks, exchange rate fluctuations, and changes in laws and regulations[11] - Disclaimer: Forward-looking statements represent the situation only as of the date of publication, and the company undertakes no obligation to publicly update them, unless required by law[12] Non-GAAP Financial Measures This section discusses the company's use of non-GAAP financial measures, their rationale, limitations, and specific adjustments made to provide a clearer view of core business performance Discussion of Non-GAAP Financial Measures Company management uses non-GAAP financial measures to assess business performance, make operational decisions, and forecast, believing these metrics help investors understand core business performance, but emphasizes they are not substitutes for GAAP metrics and may not be comparable - Purpose of use: Management uses these for analyzing and evaluating overall business performance, making operational decisions, planning and forecasting future periods, and determining compensation plans[13] - Investor value: Helps investors understand the company's core financial and operational performance from management's perspective and evaluate the methods and information management uses to assess performance[14] - Limitations: Non-GAAP measures should not be considered a substitute for or superior to GAAP measures, may not be comparable to similar metrics from other companies, and many adjustments are recurring[15] Rationale and Limitations Company management utilizes non-GAAP metrics for internal assessment and planning, believing they aid investors in understanding core business performance, but explicitly states these metrics are not GAAP substitutes and have inherent limitations, such as the recurring nature of many adjustments - Management use: Used for analysis, evaluation, decision-making, planning, and forecasting, with annual financial plans and budgets based on a non-GAAP foundation[13] - Investor perspective: Provides a financial perspective consistent with management, helping to understand core financial and operational performance[14] - Important caution: Non-GAAP measures should not be considered a substitute for or superior to GAAP measures, may not be comparable to other companies, and many adjustments are recurring[15] Specific Adjustments Explained The company excludes stock-based compensation, amortization of acquired technology and intangible assets, litigation costs, acquisition/disposal/integration-related expenses, restructuring charges, preferred stock and warrant liability mark-to-market adjustments, and the tax effect of non-GAAP adjustments when calculating non-GAAP metrics to better reflect core operating performance - Stock-Based Compensation: Uncontrollable in the short term and highly variable in amount, its exclusion helps provide insight into core operating performance[16] - Amortization of Acquired Technology and Intangible Assets: Inconsistent in frequency and amount, influenced by the timing and scale of acquisitions, its exclusion aids comparison with historical performance and other companies in the industry[17] - Litigation Costs: Unrelated to core business or ongoing operations, unplanned and generally uncontrollable, its exclusion helps compare financial performance[18] - Acquisition-, Disposal- and Integration-Related Expenses: Unrelated to the organic ongoing operations of the company and its acquired businesses, its exclusion helps provide a more accurate comparison with historical operations and peer companies with fewer acquisitions[19] - Restructuring and Related Expenses: Used to streamline operations and reduce costs, its exclusion helps compare with historical performance and other companies in the industry, as these costs do not generate future revenue streams[20] - Preferred Stock and Warrant Liability Mark-to-Market Adjustment: These gains and losses are not part of core business or ongoing operations[21] - Tax Effect of Non-GAAP Adjustments: Based on an estimated tax rate applied to projected annual non-GAAP income, differing from GAAP tax rates and actual tax burdens[22] - Adjusted EBITDA: Calculated by excluding depreciation, stock-based compensation, amortization of acquired intangibles, specific litigation costs, acquisition/disposal/integration-related expenses, and restructuring-related expenses from operating income (loss), used for comparison and valuation[23] Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated statements of operations, balance sheets, and cash flows, offering a detailed view of the company's financial position and performance Consolidated Statements of Operations Total revenue for Q2 2025 increased by 15% year-over-year to $221 million, but GAAP net loss was $11.1 million; for the first half, total revenue grew 7.9% to $402 million, with a GAAP net loss of $37.3 million 2025 Second Quarter Operating Results (Compared to Q2 2024) (USD Thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | | :----------------------- | :------------- | :------------- | :----- | | Total Revenue | 220,583 | 192,620 | +14.5% | | Product Revenue | 115,057 | 99,133 | +16.1% | | Service Revenue | 105,526 | 93,487 | +12.9% | | Gross Profit | 109,307 | 97,867 | +11.7% | | Gross Margin | 49.6% | 50.8% | -1.2 pp | | Operating Income (Loss) | 4,226 | (1,935) | N/A | | Net Income (Loss) | (11,093) | (16,816) | N/A | | Diluted EPS (Loss) | (0.06) | (0.10) | N/A | 2025 First Half Operating Results (Compared to H1 2024) (USD Thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | | :----------------------- | :------------- | :------------- | :----- | | Total Revenue | 401,862 | 372,284 | +7.9% | | Product Revenue | 197,048 | 186,743 | +5.5% | | Service Revenue | 204,814 | 185,541 | +10.4% | | Gross Profit | 191,677 | 189,822 | +1.0% | | Gross Margin | 47.7% | 51.0% | -3.3 pp | | Operating Income (Loss) | (15,384) | (15,421) | N/A | | Net Loss | (37,320) | (47,177) | N/A | | Diluted Loss Per Share | (0.21) | (0.27) | N/A | Consolidated Balance Sheets As of June 30, 2025, total assets were $1.142 billion, a slight decrease from year-end 2024, with cash and cash equivalents declining, while total liabilities slightly increased, leading to a reduction in total stockholders' equity Balance Sheet Key Data (USD Thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :----------------------- | :------------- | :------------- | :----- | | Cash and Cash Equivalents | 60,450 | 87,770 | -31.1% | | Total Current Assets | 433,940 | 463,662 | -6.5% | | Total Assets | 1,142,172 | 1,162,554 | -1.75% | | Total Current Liabilities | 313,619 | 328,873 | -4.79% | | Long-Term Debt (Net) | 327,625 | 330,726 | -0.94% | | Total Liabilities | 771,737 | 757,933 | +1.82% | | Total Stockholders' Equity | 370,435 | 404,621 | -8.45% | Consolidated Statements of Cash Flows In the first half of 2025, cash flow from operating activities was an outflow of $4.33 million, compared to an inflow of $3.32 million in the prior year, with increased cash outflow from investing activities and significant outflow from financing activities, resulting in a net decrease in cash and cash equivalents 2025 First Half Cash Flows (Compared to H1 2024) (USD Thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | | :----------------------- | :------------- | :------------- | :----- | | Net Cash from Operating Activities | (4,330) | 3,322 | N/A (Flow to Outflow) | | Net Cash Outflow from Investing Activities | (17,831) | (5,876) | +203.5% | | Net Cash Outflow from Financing Activities | (7,393) | 43,456 | N/A (Inflow to Outflow) | | Net (Decrease) Increase in Cash and Cash Equivalents | (28,205) | 40,778 | N/A (Increase to Decrease) | | Cash, Cash Equivalents, and Restricted Cash at Period End | 62,274 | 67,408 | -7.5% | - Key reasons for cash flow changes: Operating cash outflow primarily influenced by net loss, decrease in accounts receivable, increase in inventory, increase in accounts payable, and increase in deferred revenue; investing cash outflow significantly increased due to higher property and equipment purchases; financing cash outflow mainly included principal payments on term debt and common stock repurchases[31] Supplemental Financial Data This section provides additional financial details, including stock-based compensation breakdowns and comprehensive reconciliations of non-GAAP to GAAP financial measures Stock-Based Compensation Details Total stock-based compensation for Q2 2025 was $4.477 million, an increase of 28.1% from Q2 2024, and for the first half, it totaled $8.775 million, up 9.5% year-over-year 2025 Second Quarter Stock-Based Compensation (USD Thousands) | Item | June 30, 2025 | June 30, 2024 | Change | | :----------------------- | :------------- | :------------- | :----- | | Cost of Sales | 231 | 338 | -31.6% | | Research and Development Expenses | 455 | 616 | -26.1% | | Selling and Marketing Expenses | 1,066 | 954 | +11.7% | | General and Administrative Expenses | 2,725 | 1,586 | +71.8% | | Total | 4,477 | 3,494 | +28.1% | 2025 First Half Stock-Based Compensation (USD Thousands) | Item | June 30, 2025 | June 30, 2024 | Change | | :----------------------- | :------------- | :------------- | :----- | | Cost of Sales | 583 | 916 | -36.3% | | Research and Development Expenses | 1,180 | 1,684 | -29.9% | | Selling and Marketing Expenses | 2,239 | 2,111 | +6.1% | | General and Administrative Expenses | 4,773 | 3,305 | +44.4% | | Total | 8,775 | 8,016 | +9.5% | Reconciliation of Non-GAAP and GAAP Financial Measures The company provides detailed reconciliations of non-GAAP to GAAP financial measures for quarterly, half-yearly, trailing twelve months, and future outlook, with key adjustments including stock-based compensation, intangible asset amortization, litigation costs, acquisition-related expenses, and restructuring charges, to offer a clearer view of core business performance - Common impact of non-GAAP adjustments: Stock-based compensation, amortization of intangible assets, litigation costs, acquisition/disposal/integration-related expenses, and restructuring-related expenses are primary non-GAAP adjustments, which typically result in non-GAAP metrics (e.g., net income, EBITDA) being higher than GAAP metrics[36][38][40] Quarterly Reconciliations In Q2 2025, non-GAAP net income was $9.609 million, non-GAAP diluted EPS was $0.05, and non-GAAP adjusted EBITDA was $31.801 million, significantly higher than corresponding GAAP metrics, primarily due to several non-cash and non-core business adjustments 2025 Second Quarter Non-GAAP to GAAP Reconciliation (USD Thousands) | Metric | GAAP | Total Adjustments | Non-GAAP | | :--------------------------------- | :-------- | :-------- | :-------- | | Net Income (Loss) | (11,093) | 20,702 | 9,609 | | Diluted EPS (Loss) | (0.06) | 0.11 | 0.05 | | Adjusted EBITDA | 4,226 (Operating Income) | 27,575 | 31,801 | - Key adjustments (Q2 2025, USD Thousands): Stock-based compensation 4,477, amortization of intangible assets 11,252, litigation costs 2,314, acquisition-related expenses 3,898, restructuring expenses 1,346[36] Half-Year Reconciliations For the first half of 2025, non-GAAP net income was $5.03 million, non-GAAP diluted EPS was $0.03, and non-GAAP adjusted EBITDA was $37.642 million, demonstrating better profitability compared to GAAP net loss and operating loss 2025 First Half Non-GAAP to GAAP Reconciliation (USD Thousands) | Metric | GAAP | Total Adjustments | Non-GAAP | | :--------------------------------- | :-------- | :-------- | :-------- | | Net Income (Loss) | (37,320) | 42,350 | 5,030 | | Diluted EPS (Loss) | (0.21) | 0.24 | 0.03 | | Adjusted EBITDA | (15,384) (Operating Income) | 53,026 | 37,642 | - Key adjustments (H1 2025, USD Thousands): Stock-based compensation 8,775, amortization of intangible assets 22,795, litigation costs 3,114, acquisition-related expenses 3,898, restructuring expenses 6,687[38] Trailing Twelve Months Reconciliations For the trailing twelve months ended June 30, 2025, non-GAAP adjusted EBITDA was $123 million, an 18.7% increase from the prior year, indicating sustained growth in profitability after excluding non-core items Trailing Twelve Months Non-GAAP Adjusted EBITDA (USD Thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | | :----------------------- | :------------- | :------------- | :----- | | GAAP Operating Income (Loss) | 16,909 | 2,105 | N/A | | Non-GAAP Adjusted EBITDA | 122,993 | 103,636 | +18.7% | - Key adjustments (TTM 2025, USD Thousands): Depreciation 14,526, stock-based compensation 16,845, amortization of intangible assets 47,360, litigation costs 11,593, acquisition-related expenses 3,898, restructuring expenses 11,862[40] Outlook Reconciliations The company provided reconciliation tables for its Q3 and full-year 2025 non-GAAP outlook, projecting non-GAAP gross margin and adjusted EBITDA to remain at high levels, reflecting management's confidence in future core business performance 2025 Third Quarter Outlook Non-GAAP to GAAP Reconciliation (USD Thousands) | Metric | GAAP Midpoint | Total Adjustments | Non-GAAP Midpoint | | :--------------------------------- | :-------- | :-------- | :-------- | | Gross Margin | 51.25% | 2.50% | 53.75% | | Operating Income (Loss) | 10,800 | 20,200 | 31,000 (Adjusted EBITDA) | 2025 Full Year Outlook Non-GAAP to GAAP Reconciliation (USD Thousands) | Metric | GAAP Midpoint | Total Adjustments | Non-GAAP Midpoint | | :--------------------------------- | :-------- | :-------- | :-------- | | Gross Margin | 52.0% | 2.5% | 54.5% | | Operating Income (Loss) | 42,300 | 92,700 | 135,000 (Adjusted EBITDA) |