Financial Data and Key Metrics Changes - Revenue reached an all-time high of $221 million in Q2 2025, representing a 15% increase year over year and exceeding guidance [15][23] - Adjusted EBITDA increased by 47% year over year to $32 million, aligning with the high end of guidance [17][23] - Non-GAAP gross margin was 52.1%, slightly below guidance due to a higher mix of hardware and professional services [16][23] Business Line Data and Key Metrics Changes - Cloud and Edge business revenue grew by 24% year over year to $137 million, with adjusted EBITDA for the segment increasing by 43% [18][19] - IP Optical Networks revenue was $84 million, a 2% increase year over year, with adjusted EBITDA showing a loss of $5 million [19][20] - Sales to service providers increased by 18% year over year, while enterprise revenue rose by 7% year over year [8][19] Market Data and Key Metrics Changes - Strong demand in North America, particularly from service providers and enterprise markets, including U.S. federal agencies [6][7] - IP Optical sales in North America grew over 45% year over year, driven by critical infrastructure projects [13] - Sales in Asia Pacific, particularly India, saw over 40% growth year over year, supported by major operators investing in network modernization [12][13] Company Strategy and Development Direction - The company is in a multi-year investment period to modernize communication networks across service providers and enterprise verticals [24][25] - Focus on leveraging the entire voice and IP networking portfolio to differentiate offerings against larger competitors [24][25] - Continued innovation in cloud-native voice and edge routing solutions to capture market share [6][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a robust demand picture for the second half of the year, projecting revenue growth of 15% to 20% compared to the first half [23][30] - Anticipated strong performance in Q4, similar to previous years, due to timing of enterprise deals and service provider projects [23][30] - Potential pressure on operating expenses and gross margins due to a weakening U.S. dollar [25][26] Other Important Information - The company announced a new stock repurchase program to buy back up to $50 million of common stock [22] - Cash from operations was a usage of $1 million, with a closing cash balance of $62 million [20] - The company expects a cash tax saving of approximately $15 million to $20 million for 2025 due to recent tax legislation [21] Q&A Session Summary Question: Clarification on gross margins being below expectations - Management explained that the lower gross margins were primarily due to a shift towards more hardware in the cloud and edge segment and increased professional services [34][35] Question: Insights on revenue guidance for Q3 - Management indicated that while Q3 revenue is expected to be flat sequentially, it will still show year-over-year growth [36][38] Question: Outlook on the separation of cloud and edge businesses - Management expressed confidence in the synergy between the two business segments, highlighting successful integration in projects with Verizon [39][40] Question: Commentary on classified replacement opportunities - Management noted a correlation between fiber upgrades and modernization of voice services, emphasizing cost savings from parallel upgrades [46][47] Question: CapEx spending environment - Management acknowledged a positive outlook for CapEx due to recent tax legislation allowing for immediate expensing of R&D investments [49][50] Question: FX impact on operations - Management confirmed that the weakening U.S. dollar had a minor impact in Q2 but could pose a headwind of approximately $2 million per quarter moving forward [60][61] Question: Details on Verizon's contribution to revenue - Management confirmed that Verizon accounted for over 20% of total sales in Q2, with expectations for continued strong performance [70][71] Question: Deferred revenue trends - Management explained that the increase in deferred revenue is indicative of future revenue growth, particularly from maintenance contracts [92][94] Question: Gross margin expectations for Q3 - Management projected an increase in gross margin for Q3 due to a favorable mix of software over hardware [62][63]