Earnings call transcript: Ribbon Communications Q1 2025 misses EPS forecast, stock drops

Ribbon Communications Inc. (RBBN) reported its first-quarter 2025 earnings, revealing a miss in earnings per share (EPS) against market expectations. The company posted an EPS of -$0.03, falling short of the forecasted $0.02. Revenue came in at $181 million, also below the anticipated $194.52 million. Following the announcement, Ribbon’s stock experienced an 8.8% drop in aftermarket trading, closing at $3.42. According to InvestingPro data, while the company wasn’t profitable over the last twelve months, analysts expect it to turn profitable this year with a forecasted EPS of $0.26.

Key Takeaways

• Ribbon’s Q1 2025 EPS of -$0.03 missed the forecast by $0.05.
• Revenue was $181 million, below the expected $194.52 million.
• Stock price fell by 8.8% in aftermarket trading.
• Cloud and Edge segment revenue increased by 6%.
• IP Optical segment revenue decreased by 6%.

Company Performance

Ribbon Communications reported a mixed performance for Q1 2025, with a modest 1% year-over-year increase in revenue to $181 million. Despite growth in the Cloud and Edge segment, the company’s overall financial performance was dampened by a decline in the IP Optical segment. The company’s adjusted EBITDA also decreased by $6 million year-over-year, reflecting ongoing challenges. InvestingPro analysis shows the company maintains a "Fair" overall financial health score, with particularly strong metrics in growth potential and price momentum.

Financial Highlights

• Revenue: $181 million, up 1% YoY
• Non-GAAP Gross Margin: 48.6%
• Adjusted EBITDA: $6 million, down $6 million YoY
• Non-GAAP Net Loss: $5 million
• Cash Balance: $74 million

Earnings vs. Forecast

Ribbon’s Q1 2025 EPS of -$0.03 was significantly below the forecasted $0.02, marking a miss of $0.05. Revenue also fell short of expectations, coming in $13.52 million below the forecast. The earnings miss and lower-than-expected revenue contributed to the negative market reaction.

Market Reaction

Following the earnings announcement, Ribbon’s stock price fell by 8.8% in aftermarket trading, settling at $3.42. This decline reflects investor disappointment with the company’s earnings miss and revenue shortfall. The stock’s performance remains within its 52-week range, with a low of $2.75 and a high of $5.38. Despite the recent decline, analyst consensus remains bullish, with price targets ranging from $6.00 to $7.50, suggesting significant upside potential. InvestingPro subscribers can access over 30 additional financial metrics and insights about Ribbon Communications through the platform’s comprehensive Pro Research Report.

Outlook & Guidance

Looking ahead, Ribbon Communications projects Q2 2025 revenue between $210 million and $220 million, representing a 12% year-over-year increase. The company anticipates adjusted EBITDA in the range of $28 million to $32 million. Ribbon expects significant growth in the Cloud and Edge segment, forecasting a 20% year-over-year increase. This aligns with InvestingPro data showing a healthy 5-year revenue CAGR of 8% and expectations for 6% revenue growth in FY2025.

Executive Commentary

CEO Bruce McCollin expressed optimism about the company’s future, stating, "Building on the momentum from last year, we continue to see very good demand as both service providers and enterprises invest in modernizing their voice and data networks." McCollin also highlighted the industry’s shift towards cloud technologies, which he believes will be a "great tailwind for our business for years to come."

Risks and Challenges

• Potential impacts from ongoing global supply chain disruptions.
• Competitive pressures from established players like Nokia and Infinera.
• Economic uncertainties that could affect customer spending.
• Fluctuations in demand for network modernization solutions.

Q&A

During the earnings call, analysts inquired about Ribbon’s network modernization projects, including those with Verizon. Executives addressed concerns about potential tariff impacts and discussed strategies for replacing copper networks. They also highlighted growth opportunities in regions such as Southeast Asia and North America.

Full transcript - Ribbon Communications Inc (RBBN) Q1 2025:

Conference Operator: Greetings, and welcome to the Ribbon Communications First Quarter twenty twenty five Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Joni Roberts, Chief Marketing Officer.

Please go ahead.

Joni Roberts, Chief Marketing Officer, Ribbon Communications: Good afternoon, and welcome to Ribbon’s first quarter twenty twenty five financial results conference call. I’m Joni Roberts, Chief Marketing Officer at Ribbon Communications. Also on the call today, Bruce McCollin, Ribbon’s Chief Executive Officer and John Townsend, Ribbon’s Chief Financial Officer. Today’s call is being webcast live and will be archived on our Investor Relations section of our website, rbbn.com, where both the press release and supplemental slides are currently available. Certain matters we’ll be discussing today, including the business outlook and financial projections for second quarter twenty twenty five and beyond, are forward looking statements.

Such statements are subject to the risks and uncertainties that could cause actual results to differ materially from those contained in these forward looking statements. These risks and uncertainties are discussed in our documents filed with the SEC, including our most recent Form 10 ks. I refer you to our Safe Harbor statement included in the supplemental financial information posted on our website. In addition, we’ll present non GAAP financial information on this call. Reconciliations to the applicable GAAP measure are included in the earnings press release we issued earlier today, as well as supplemental financial information we prepared for this conference call, which again both are available on the Investor Relations section of our website.

And now I’d like to turn the call over to Bruce. Bruce?

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Great. Thanks, Joni. Good afternoon, everyone, and thanks for joining us today to discuss our outlook for 2025 and our first quarter results. Building on the momentum from last year, we continue to see very good demand as both service providers and enterprises invest in modernizing their voice and data networks. In particular, the momentum in our cloud and edge business continues to build and is now a growth engine for the company, contrasting with the market perspective on this business several years ago.

Our portfolio is the best in the industry and supports a broad number of use cases, including carrier grade telco voice services, enterprise unified communications, large scale contact centers, and resilient secure defense command and control. The industry focus on eliminating legacy copper networks and adoption of cloud technologies that can be deployed on premise or in the cloud is a great tailwind for our business for years to come. As with many companies, we expect AI to be a growing opportunity for us and have two projects directly tied to increasing AI deployments. The first is a new nationwide fiber network being built in The Philippines to significantly add capacity to keep up with the growing demand and data center expansion. And the second is a Fortune 500 company leveraging AI in unique ways to enhance their contact center effectiveness.

A great leading indicator of our continued momentum is the growth in our backlog, up 35% from the same point last year. Book to bill in the first quarter was 1.2 times, and we continue to expect a strong first half with sales projected to grow 5% to 8% year over year, all the more impressive as we overcome the difficult compare to first half of ’twenty four after suspending shipments in Eastern Europe midway through last year. In fact, our IP Optical business, excluding Eastern Europe grew by 25% in the first quarter. So the demand picture remains strong, and we continue to expect good growth this year. Sales in the first quarter were flat year over year and lower than expected, but was entirely related to the timing of two enterprise projects, one with the U.

S. Federal agency and one with a critical infrastructure customer in The U. S. We’ve already received orders for the vast majority of the shortfall and much has now been shipped recognized in the second quarter. Business with service providers was robust in the first quarter, with sales increasing more than 10% year over year with significantly higher sales in The U.

S. And in India. And if you adjust for the significant reduction of sales due to suspension of shipments to Eastern Europe last year, service provider sales increased more than 30% year over year in the first quarter. Margins in the first quarter were lower than we projected, primarily due to the mix of shipments and the lower sales volume. Our sales in India were particularly strong in our IP Optical segment, reducing the overall gross margin.

The mix of Cloud and Edge sales in the quarter were more concentrated in hardware products higher professional services revenue, both of which contribute a lower gross margin than our software products. In the second quarter, we have a stronger mix of software and better regional profile that we expect will improve consolidated gross margins by more than 400 basis points sequentially. The lower sales and margin contributed to a reduction in adjusted EBITDA year over year, which again we expect to largely catch up in the second quarter. Now a little more detail on each of our operating segments. We had a good quarter in our Cloud and Edge segment with sales growing approximately 6% year over year.

Excluding maintenance revenue, product and services sales increased approximately 17% year over year. Adjusted EBITDA for the segment increased 17% year over year on higher sales and continued improvement in operating expenses. Sales to global service providers were the primary driver behind the year over year growth, with total cloud and edge revenue increasing approximately 20% year over year. Large voice network transformation projects were once again the main catalyst behind the good momentum this quarter. As expected, total Cloud and Edge sales to Verizon increased significantly and were up approximately 50% year over year as we continue to make very good progress on our multi year project to decommission and replace legacy switching equipment in hundreds of Central’s offices.

The pace of installation and migrations is typically slower in the first quarter of the year, and we’re now back at the same level as we were in the fourth quarter and expect to accelerate further as the year progresses. Cloud of Edge sales to all other service providers, also increased approximately 10% year over year, highlighting the broad base of interest in network modernization and improving efficiency. Cloud and Edge sales to enterprise customers were down approximately 23% year over year, largely due to the timing of U. S. Federal shipments I mentioned earlier.

We’ve already shipped and recognized revenue on the remaining portion of these orders we received late in Q1. We’re expecting a strong second quarter with several U. S. Federal agencies, including an initial phase of a project with a new DoD agency. While we’re seeing elongated decision making due to the additional scrutiny on spending in the government, the voice modernization projects have a very clear ROI and significant reduction in operating expenses.

So we expect these investments to remain a high priority as reflected in the 150% growth we experienced in 2024. Overall, CloudNet gross margin was below our expectations in the quarter due to a higher mix of hardware shipments. This included a significant number of media gateways to support the replacement of legacy TDM switches and a higher demand for enterprise edge gateways. We expect a rebound in gross margin in the second quarter to the more typical mid-60s for the segment with a higher mix of software and continued improved services margins. In our IP Optical segment, sales in the first quarter were approximately 6% year over year.

This continues to be a tough comparison due to the suspension of shipments to Eastern Europe beginning partway through the second quarter last year. This accounted entirely for the drop year over year. We remain hopeful there’s a path to resolution of the conflict in the region and a resumption of trade. Asia Pac was once again the highlight of the quarter for our IP optical business. Sales in India increased 80% year over year and were up 6% sequentially to the highest level in the last five years.

We continue to have a strong business with Barty and benefited from the renewed network investment being made by Vodafone Idea to expand mobile network capacity and coverage. Sales in Southeast Asia were also very strong and increased over 2% year over year with multiple new projects across the region. As an example, we announced a great project win with our customer Converge ICT in The Philippines to build a new nationwide fiber backbone supporting customers such as Starlink as they grow their presence in the region and add significant capacity for expanding data center traffic. We also announced a new subsea cable project with Moratel in Indonesia as they add 20 terabits of new capacity to the islands using our latest Apollo transport platform and Muse automation management system. We continue to see new opportunities across this region, partially due to vendor consolidation as well as the need to build networks that have no Chinese OEM equipment.

Sales in North America were also very solid in the quarter, more than doubling year over year. This included a nice mix of rural broadband projects, growth in critical infrastructure with providers such as AEP and major service providers such as Bright Speed. Gross margins for the segment were impacted due to the regional mix of higher sales in Asia Pac and lower sales in the EMEA region. We also had several projects where the initial shipments of optical line equipment and low cost access routers weighed on margins. We expect a sizable improvement in gross margins in the second quarter and substantially lower EBITDA loss for this segment.

With that, I’ll turn it over to John to provide additional financial details on our first quarter results and then come back on to discuss outlook for the second quarter. John?

John Townsend, Chief Financial Officer, Ribbon Communications: Thanks, Bruce. Good afternoon, everyone. Let’s begin with financial results at the consolidated level. In the first quarter of twenty twenty five, Ribbon generated revenues of $181,000,000 an increase of 1% from the prior year. First quarter non GAAP gross margin was 48.6%, lower than expected due to higher sales in India and higher cloud and edge hardware shipments that Bruce mentioned.

Non GAAP operating expenses were $86,000,000 in the quarter, a $5,000,000 reduction versus the first quarter of twenty twenty four and down $8,000,000 sequentially. This reflects the seasonality in expenses such as sales commissions and variable employee compensation, as well as the benefit related cost actions implemented in 2024. First quarter adjusted EBITDA was $6,000,000 a decrease of $6,000,000 year over year. This was driven by the tighter margins we experienced across both segments due to the product mix and notably the regional mix in the IP Optical segment. Our non GAAP tax rate for the quarter was 32%, and our interest expense was $11,000,000 including amortization of debt issuance costs.

Both of these were in line with our expectations. Quarterly non GAAP net loss was $5,000,000 compared to a $1,000,000 loss in the prior year. This generated a non GAAP diluted loss per share of $03 which compares to a $01 per share loss in the prior year. Our basic share count was 176,000,000 shares, and our fully diluted share count was 180,000,000 shares for the quarter. Now let’s look at the results of our two business segments.

Our Cloud and Edge business had revenues in the first quarter of $108,000,000 an increase of 6% year over year, with product and professional services revenue increasing 17% year over year. Cloud and edge non GAAP gross margins were 62.5%, down three fifty basis points from the prior year. The reduction is a result of higher professional services and hardware revenue and lower software sales compared to the prior year. Adjusted EBITDA was $20,000,000 or 19% of revenue in the quarter, a 17% improvement year over year. Now on to our IP optical networks results.

We recorded first quarter revenue of $74,000,000 a 6% decrease versus the prior year. Excluding Eastern Europe, sales in the segment were actually up 25% year over year. First quarter non GAAP gross margin for IP Optical was 28%, which is below our expectations. As Bruce noted, the higher sales in India impacted the overall gross margin for the segment and were further compounded by the unfavorable mix of products this quarter. IP Optical Networks adjusted EBITDA was a loss of $15,000,000 versus a $6,000,000 loss in the prior year, again mostly driven by the regional mix of revenues.

Revenues. As Bruce mentioned earlier, we expect significant improvement in the second quarter and continuing throughout the year with increased sales in North America and Europe and improved product mix. Moving on to cash and capital expenditure. Cash from operations was a usage of $4,000,000 in the quarter, with a closing cash balance of $74,000,000 versus $90,000,000 at the end of twenty twenty four. The reduction in cash was primarily a result of annual employee incentive compensation payments and the completion of the build out of our new R and D facility in Israel, which drove the higher capital expenditure.

Total CapEx in the quarter was $12,000,000 Excluding the R and D facility, we expect our full year capital expenditures to be consistent with prior years in the 12,000,000 to $13,000,000 range. Our net debt leverage at the end of the quarter was 2.4 times, up slightly sequentially. And now I’ll turn the call back to Bruce.

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Great. Thanks, John. Following the last several quarters of strong bookings, our outlook and visibility for the second quarter is very good with substantially higher backlog than in previous years, even as we continue to optimize expenses. In our Cloud and Edge segment, we’re projecting approximately 20% sales growth in the second quarter year over year. Key trends underpinning this increase include the following areas.

First, we expect another very good quarter with Verizon, similar to our record level in fourth quarter last year, as the voice network modernization program continues to perform well and other network upgrades continue. We’re in the first year of this three year program with significant opportunity for multiple years beyond this, as well as a large potential opportunity as Verizon completes their acquisition of Frontier. Second, in addition to the deals delayed from Q1, we have a very good funnel of U. Federal network modernization opportunities with several sizable deals expected to close this quarter that include both expansion of current projects and new project wins. Despite some delays in decision making, these programs look very solid for the quarter.

Third, we’re projecting several new enterprise wins in the quarter, including the Fortune five hundred customer I mentioned, that’s at the forefront of leveraging AI to enhance contact center effectiveness. Another obvious area of focus for us is related to Metaswitch replacement opportunities, with a primary focus around the top 25% larger installed base. In the first quarter, we closed new replacement deals in The UK and in The US, serving both residential and commercial customers. Similarly, we also had a very nice win and award with a Tier one provider in Central America to replace a high profile Cisco BroadSoft government services deployment. So I’m pleased with the progress we’re making to grow our share in multiple markets.

In the IP Optical segment, we’re projecting 5% to 10% sequential growth in the second quarter, which would result in revenue similar to the second quarter last year, which still included a partial quarter of sales to Eastern Europe. The key trends in this business include the following areas. We expect continued momentum in Asia with strong sales in India and Southeast Asia, similar to the last several quarters, but with a better mix from a margin perspective. Vardy, Vodafone Idea, Tata and others continue capacity, and we see additional opportunities related to expansion of rural internet access and data center interconnect. We have a lot of activity in Europe and in The Middle East with both critical infrastructure and defense agency projects expanding secure command and control networks.

We also have very good momentum with customers like MTN in Africa, where there’s a lack of fiber infrastructure and significant projects underway to improve connectivity across the continent. And finally, we expect a stronger quarter in North America with both critical infrastructure and regional service providers. Longer term, innovation and new product development is the key to our future growth. We have several important areas in focus for this year, including enhancements to our routing platforms to support an expanding set of TDM elimination use cases. This has become a great entry point for us in The U.

Market and an area where we’re proving to be very differentiated and highly synergistic with our Cloud and Edge voice portfolio. We’re also investing in additional routing platforms and features to support the growing trend of IP directly over optical networks. We have a great example of this with a significant new IP over DWDM win in Africa to support data center expansion. We recently launched our latest new routing platform at Mobile World Congress, the MPT2714, that is a metro core router supporting up to 14 terabit per second traffic levels. At the OFC Optical Show last month, we received the Lightwave Innovation Award for the platform and are seeing increased customer interest.

And finally, automation has become table stakes for managing complex networks and for improving the delivery of new capabilities. For the Cloud and Edge portfolio, this means adoption of cloud native technologies and processes, which is the key focus behind the project I mentioned last quarter with the Tier one service provider in Europe. As we indicated earlier, we’re expecting improved gross margins for both segments in the second quarter. The first quarter was unusually low given customer and product mix, and the mix for the second quarter is expected to be much better. There remains a lot of uncertainty on where U.

S. Tariffs will settle and any reciprocal trade barriers that may be implemented. At the current time, we’re not expecting a material impact on our business, but it’s a dynamic situation. We have some agility to change the manufacturing location for our optical products, and we benefit from the USMCA free trade agreement for the cloud and edge products we currently manufacture in Mexico. We’re working closely with our manufacturing partners to anticipate multiple scenarios and react quickly and hope to minimize the cost impact passed on to our customers.

Also, given the substantial amount of revenue that is tied to software and services, we believe we’re relatively immune at a more macro level. Now on to guidance. As already mentioned, we expect a strong second quarter with sales growing more than 10% year over year as we complete enterprise deals delayed from Q1 and the continued momentum in our Cloud and Edge business. Based on the assumptions I’ve outlined, we’re projecting revenue in a range of 110,000,000 to $220,000,000 a year over year increase of approximately 12% at the midpoint and adjusted EBITDA in a range of $28,000,000 to $32,000,000 a year over year increase of 38% at the midpoint. We remain positive on our outlook for the remainder of the year and continue to maintain our full year outlook.

Operator, that concludes our prepared remarks, and we can now take a few questions.

Conference Operator: Thank And the first question comes from the line of Dave Kang with B. Riley Securities. Please proceed.

Dave Kang, Analyst, B. Riley Securities: Yes. Thank you. Good afternoon. My first question is regarding your book to bill of 1.2, fairly strong. Just wondering if there were any pull ins because of tariff uncertainty?

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Hey, Dave. No, I don’t think we saw any strong evidence of that. Bookings were pretty consistent across the quarter and really spread pretty evenly between the businesses and geographies. So nothing that I would flag directly associated with trying to pull in equipment early or anything like that.

Dave Kang, Analyst, B. Riley Securities: Okay. And regarding the tariff situation, just wondering what your customers are telling you regarding assuming third quarter, if reciprocal tariffs are back on again, what the plans are as far as your customers versus you picking up that extra cost, as well as your suppliers too.

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Yeah, guess a few thoughts and kind of expanding on my comments earlier. So far, we haven’t seen customers indicate changes on their strategy or their plans for the year at this point in time. And I think you’ve seen a lot of the public commentary through the earnings calls that you know, most of the service providers service providers are not expecting, you know, significant impacts to their business from this. In the case of our business, of course, we’re in a couple different areas of their operation. A lot of what we’re selling is software and services in many cases, which don’t have an impact really at all from a tariff perspective kind of immediately associated with it.

And then the products that we are manufacturing internationally, some of them coming out of Mexico that are, subject to The US free trade agreement really exempt at this point. Others coming out of Asia, where we’ve been working with our manufacturers to mitigate the cost, to share some of the expense and expect that anything that we have to pass on to customers is relatively modest at this stage, given the current situation, at least anyway.

Dave Kang, Analyst, B. Riley Securities: Got it. And my last question is just wondering if you can provide an update on AT and T’s Neptune ramp. I guess it’s still early. And also wondering if you’ve got any wins or should we expect any wins this year?

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Yeah. So again, I apologize. I can’t comment too much on AT and T’s plans, particularly around their voice network. As you know, they’ve indicated a strategy that they’re implementing, and I’ll just say we remain a really strategic partner to them and involved in their network deployments. I do think we’re going to grow this year in IP optical in North America.

You know, as I mentioned, the the progress around rural broadband has been strong. Our first quarter was up considerably year over year, and some of the new products we’ve launched are getting a lot of So I’m pretty bullish on the progress we’ll make this year.

Dave Kang, Analyst, B. Riley Securities: Got it. Thank you.

Conference Operator: Thanks, Dave. The next question comes from the line of Christian Schwab with Craig Hallum. Please proceed.

Christian Schwab, Analyst, Craig Hallum: Great. Thanks for taking my question. Bruce, could you explain quickly how you benefit as people retire copper in their phone networks here in The United States and that may get more aggressive?

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Yeah. Hey, Christian. So, I think there’s kind of two different methodologies, if you will, around copper replacement. One is obviously to move, lines or services completely onto a fiber or an IP backbone and eliminate the copper completely. In those cases, we might be involved in the network from a call server, perspective or an application server.

But on the access side, obviously, we’re not as as they remove the copper completely, we wouldn’t be involved in that. That’s kind of the natural attrition of legacy lines. But there’s a large installed base that are not migrating. And so there’s really a couple different methods to eliminate the copper, but still maintain the service. And so, in one case, the media gateway or the transition from copper to IP would happen at the central office, and, we provide a lot of gateways and then the software that enables that to happen.

That’s kind of a, you know, I’ll call it a Verizon strategy around, you know, eliminating a lot of the complexity in the core of the network, but maintaining some of the copper local loop. The second approach is to put the media gateways basically right at the edge and preserve basically all of the legacy services that might be implemented, at the enterprise, and yet be able to eliminate all of the copper, all of the legacy SONET infrastructure, etcetera, and really simplify the operation of the network. So we’re involved in both of those use cases, providing both the software that goes in the core as well as the media gateways that sit at the edge.

Christian Schwab, Analyst, Craig Hallum: Great. Thank you. And then I kind of missed it. Apologize. Your clouded edge products business, I think you said what you expected your growth rates, you know, 24 in ’25 versus ’24 for both cloud and edge and IP optical.

Could you repeat that for me, please?

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Yeah, sure. So as I was kind of going through the guidance section, know, as we think about the second quarter, at least anyway, we’re expecting the cloud and edge portion to be up approximately 20% year over year. Obviously, a pretty strong growth number in the second quarter and continuing that momentum throughout the rest of the year. In the IP Optical segment, we’re projecting 5% to 10% growth in the second quarter year over year. Again, we are adjusting or having to make up for any of the shipments in Eastern Europe in the second quarter a year ago, that I’ll call it the organic growth rate is higher than that.

And just to give you one last stat, as I mentioned in the first quarter, if you excluded the Eastern Europe revenue, we actually grew 25% year over year in the first quarter for IP optical.

Christian Schwab, Analyst, Craig Hallum: Great. Thank you again for that clarity. No other questions. Thanks, guys.

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Thanks, Christian.

Conference Operator: The next question comes from the line of Tim Savageaux with Northland Capital Markets. Please proceed.

Tim Savageaux, Analyst, Northland Capital Markets: Okay. Whoops. Sorry about that. Can you hear me?

Bruce McCollin, Chief Executive Officer, Ribbon Communications: We got you, Tim.

Tim Savageaux, Analyst, Northland Capital Markets: Okay. Great. My first question is on Verizon. And just to clarify, although I think these, no, they won’t be similar. You expect Verizon to move back toward Q4 levels on an absolute dollar basis.

Is that what you’re saying?

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Yes, correct.

Tim Savageaux, Analyst, Northland Capital Markets: Just want to clarify that. Okay. Yes, correct. Well, I think you’ve said a couple of times maybe last quarter and maybe just on this call that you’re sort of still in the process of scaling here with Verizon. And I don’t know whether that Q2 guide represents that scaling.

It may well. But I guess the overall question is, do you think you can continue to increase revenue with Verizon from that Q2 level in Q3 and Q4?

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Yeah, I think that’s fairly good planning level for the second half of the year. I’ll say, Tim, there are kinda two pieces or two phases to the migrations. The first is getting the equipment procured, installed, commissioned, powered up, kinda ready to go. And then the second piece is actually the the migration or the the the conversion of lines, etcetera. The first part, you know, we can move pretty quickly on the second part, but more complex operation.

And so what we’re really scaling is that second part. The first part moves pretty quickly. The second part, more manual labor involved. Gotta be careful as you migrate these lines, coordinate with customers, etcetera. And, you know, what from a revenue perspective, we’re able to recognize most of the product revenue kinda upfront as it gets deployed.

And then there’s a lot of service revenue involved with the actual migration efforts, and so the timing of revenue on that, is a little different. So I think, you know, we’re scaling up the service portion of the revenue, but the product portion will be a little lumpy depending on which quarter we’re shipping in and those sorts of things. So it’s a long answer to your question, but I think the the velocity from a revenue perspective we’re at in the second quarter is a nice planning level for the rest of the year. The actual migration rate’s going to speed up. And as we look into next year, we’re expected to do more next year.

So the volume needs to increase as we exit the year and go into next year. It’ll be a bigger year. That’s without adding in the potential for similar programs at Frontier as that business starts to be operated by Verizon.

Tim Savageaux, Analyst, Northland Capital Markets: Great. And I think you might have given us some metrics about the pace of installation or I don’t know if it was a switch a week or something like that, or, you know, the the total that you’ve done so far. But love it if you might update that. Is that a pace you expect to return to or exceed in Q2 or the second half of the year? Are there other metrics to gauge kind of where we are with Verizon, which still seems you know, fairly early days, but any comment on that as well?

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Yeah. You know, we we definitely have a a long pipeline ahead of us here for sure. The metric I mentioned last quarter was basically doing one which migration per week. You know, all of that prep work I talked about that leads up to the migration and then final completion of the switchover when you start to see the cost savings. That’s why that’s an important milestone is when the, you know, the cost savings start to benefit, the customer.

We were at one per week as we went through Q4. That velocity came down in the first quarter, kind of a natural pause during the holiday season, etcetera. And then we’re back at that rate again at this point. And, you know, we basically wanna try and double that migration rate as the year progresses. That’s where we’d like to be.

Tim Savageaux, Analyst, Northland Capital Markets: Okay, great. And then another question over on the optical side. And it looks like what we’ve seen from some of your larger competitors that an even similar size that by and large inventories that carriers have sort of burned off and we’re starting to see growth again in optical transport in the broader service provider universe. I wonder if you and I know you’ve got some one offs here on the compares, I wonder if you have any observations on that front on the one hand and then anything incremental on what you’re seeing out of opportunities stemming from Nokia and Finera or any overall commentary on Tier one carrier pipeline in IP optical? And that’s it for me.

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Yes, great. Thanks, Tim. So from a I’ll call it from a geographical perspective or regional perspective, we’ve seen good growth and continue to see that here in the second quarter in several regions. India, I called out, obviously, that’s a strong, market for us and continues to be, you know, a a good growth area. Part of that’s with Vodafone Idea coming back and investing in the network.

But as I mentioned, I think we had our our best quarter ever since, you know, acquiring ACI five years ago here in the first quarter in India, so that was very strong. The second region that continues to be a strong contributor is the rest of Asia Pac or Southeast Asia. In fact, I was just in, in The Philippines and in Taiwan back a few weeks ago. We had a nice announcement in The Philippines with, with Converge, one of our key customers there, building out a nationwide fiber backbone, that’s serving both their internal needs, as well as data center interconnectivity, as well as, the launch of Starlink in the region and supporting their downlink stations. So that’s a great example of growth for us with a major operator in that region.

That region also tends to be the area we’re seeing the most opportunities, I think, from a Nokia Infinera integration perspective. You know, we’re a great, I’ll call it, western alternative in the region, and, you know, they’re looking for, you know, alternatives as as that integration happens. And so good momentum in particular, competitively there. The third region I’ll mention, you know, that we had good growth in the first quarter, again, was in The US domestic market here. You know, year over year growth, it was very strong, and that that today is with, I’ll call it, the regional or rural, operators, building out broadband infrastructure.

It’s also with the interconnect carriers that, are basically replacing legacy TDM networks. Could be copper. It could be SONET networks, p networks, and then using our routing platform as that circuit emulation capability. And so we’ve been growing pretty nicely in that, mid market, if you will, in The U. S, around our IP routing platforms.

Tim Savageaux, Analyst, Northland Capital Markets: Okay. Thanks very much.

Rustam Conga, Analyst, Citizens: Appreciate it.

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Yeah. Thank you, Tim.

Conference Operator: The next question comes from the line of Rustam Conga with Citizens. Please proceed.

Rustam Conga, Analyst, Citizens: Good afternoon. Thank you for taking the question. Just touching on the recent launch of the NPT2714 and broader enhancements to the IP optical portfolio. Could you help qualify the early customer reception there? And do you expect that to be a meaningful contributor in the back half of the year?

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Yeah. Hey, great question. So we launched the product at Mobile World Congress in February, and then also highlighted it at the OFC conference here recently where we won an award with it. It’s pretty strategic for us. It basically is the metro core router.

It’s the highest capacity, densest platform that we’ve got in the portfolio, And it allows us to expand from just the access layer aggregation layer where we have a lot of business today, into the more the core of the network. So one, it allows us to provide a complete end to end solution with customers that are building out a metro IP network. And two, and it allows us more strategically to be further in the network, so not just at the access layer, but but really in the core. So it’s it’s a pretty important element of being able to provide a fulsome kinda complete solution to customers. It’s committed already with a a variety of customers that are building out the access layer and then wanna insert the, you know, the core router, next step of of their network upgrade.

So good pipeline, good opportunities. You know, I think it’s a it’s a next class, product for us that really moves us beyond the access layer. So, yeah, pretty important.

Rustam Conga, Analyst, Citizens: That’s fantastic. Thank you for that color. Just one more for me regarding the CONVERGE expansion. Could you talk a bit about what that does for the performance and optimization of that regional network and maybe how that deployment impacts kind of your share within APAC and perhaps touching on the vendor consolidation and elimination of the Chinese parts that you’ve mentioned in your prepared remarks.

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Yeah, great question. Thank you. The Philippines region is pretty strategic for us. In fact, we service a lot of Southeast Asia out of The Philippines. It’s our kind of our central headquarters in the region for technical support and sales.

In the country itself, we’re doing business with really, I think, four of the top five, service providers, and so have built a really good reputation in the region. This new network is being built as basically an overlay to the current network, and it’s being built, you know, completely with, Western providers, to make it. As they provide services to, large hyperscalers or or regional cloud providers, there’s no concern over having Chinese equipment in that work. And so it’s a deliberate decision to build a new network with a partner and expand their reach in the region. So, you know, it’s a great reference point for us.

Other countries were pretty active, with as well. You know, we mentioned, a win with Moritel in the region. In that case, we’re putting a new subsea cable in 20 terabits of additional capacity into the island. So that was a very nice win. And then other countries such as Taiwan, Vietnam, we’re all active in today with, new wins in the last three months.

So, getting a lot of focus from is the reason I, you know, I did a trip over to spend time with customers and really grow our presence in the region. The last country I’ll mention that’s strategic for us in the region is Japan. We’ve had a long, history and kind of presence there and, with our cloud and edge portfolio. And then we’ve been able to cross sell and and build into some of these networks from an IP and optical perspective into names like Sony and SoftBank and those sorts of names. So it’s a strategic area for us to grow, in the Asia Pac region as well.

So great. Appreciate all the questions.

Conference Operator: Thank you. This concludes the question and answer session. I would like to turn the call back to Bruce McClellan for closing remarks.

Bruce McCollin, Chief Executive Officer, Ribbon Communications: Okay, great. Well, thanks very much. Thanks for being on the call and the interest in Ribbon. We really look forward to meeting with many of you in the upcoming investor conferences over the next few months and keeping you updated on our progress. Operator, thanks to you as well, and and that concludes our call.

Conference Operator: Thank you. This concludes today’s conference. You may now disconnect your lines at this time. Enjoy the rest of your

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