Ribbon munications (RBBN) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q2 2024 was $193 million, a decrease of 8.5% year-over-year and below the guidance range [49][88] - Non-GAAP gross margin was 54.4%, a 240 basis point improvement over the prior year [88] - Adjusted EBITDA for the quarter was$ 22 million, slightly down from the prior year but up $10 million from Q1 [62][56] - Year-to-date profitability increased 65% on an adjusted EBITDA basis compared to 2023 [56] Business Line Data and Key Metrics Changes - IP Optical revenue in Q2 was$ 82 million, a 4% decrease year-over-year, primarily due to lower sales in Eastern Europe [63][82] - Cloud & Edge revenue was $111 million, a decrease of 12% year-over-year, mainly due to a delayed U.S. Federal defense deal [90] - Non-GAAP adjusted EBITDA for IP Optical was negative$ 4 million, showing significant improvement year-over-year [91] Market Data and Key Metrics Changes - Sales to India in the first half of 2024 were down approximately 20% year-over-year, but significant growth is expected in the second half [50] - EMEA region, excluding Eastern Europe, saw a 30% year-over-year increase in IP Optical sales [57] - Asia Pacific region outside of India experienced a 32% year-over-year sales increase [57] Company Strategy and Development Direction - The integration of Ribbon and ECI is progressing, creating a strong foundation for growth in 2025 and beyond [4] - The company is focusing on achieving sustainable profitability in the IP Optical business and diversifying sales in enterprise market verticals [71] - Recent industry consolidations, such as the Nokia-Infinera deal, present opportunities for Ribbon to capture market share [54][70] Management's Comments on Operating Environment and Future Outlook - Management expects significant growth in the second half of the year, projecting revenue to increase approximately 25% compared to the first half [66] - The company anticipates a strong second half driven by enterprise and U.S. Federal contracts, with revenue expected to grow more than 50% versus the first half [69] - The suspension of shipments to Eastern Europe is expected to impact revenue by approximately $20 million to$ 25 million in the second half [28][98] Other Important Information - The company successfully refinanced its credit facility, enhancing its capital structure and liquidity [64][93] - The backlog is currently higher than the total amount shipped in the first half of the year, indicating strong future demand [58] Q&A Session All Questions and Answers Question: What was the impact of Eastern Europe on the second quarter results? - The shortfall from Eastern Europe was approximately $20 million to$ 25 million, which is expected to be offset by other tailwinds in the second half [102] Question: Can you elaborate on the Verizon and Brightspeed deals? - The Verizon program is off to a great start, and the company expects significant growth from the Brightspeed partnership as they modernize their infrastructure [95][70] Question: How does the company plan to maintain R&D while managing expenses? - The company is focused on sustaining engineering and optimizing costs while ensuring that R&D remains a priority for future growth [104]