Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ribbon Communications Inc (NASDAQ:RBBN) reported the highest levels of revenue and earnings in the company's history for Q4 2024.
• Sales of the cloud and edge portfolio doubled year over year for US Tier One service providers and increased by more than 60% for global enterprises.
• The company achieved a gross margin of 58% in Q4, exceeding expectations, and overall profitability increased by 30% year over year.
• Ribbon Communications Inc (NASDAQ:RBBN) secured significant contracts, including a cloud migration project with a European Tier One service provider and a new IMS Mobile Core win.
• The company ended the year with a strong cash position of $90 million and a bookings rate of 1.1 times sales, indicating a solid foundation for future growth.

Negative Points

• The IP optical networks segment saw a 17% decrease in Q4 revenue compared to the prior year, impacted by the suspension of shipments to Eastern Europe.
• Non-GAAP operating expenses increased by $4 million year over year in Q4, partly due to additional employee expenses.
• The IP optical segment recorded a loss of $4 million in adjusted EBITDA for Q4.
• The company projects a gross margin decrease of approximately 100 basis points for 2025 due to increased revenue from lower-margin professional services.
• The Eastern European market remains uncertain due to geopolitical tensions, affecting potential revenue recovery in that region.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with RBBN.

Q: Can you elaborate on the impact of Eastern Europe on the first quarter guidance and whether the year will improve as it progresses? A: The biggest factor affecting the first quarter is the Eastern European comparison. Excluding that, we're seeing double-digit growth. This will be the toughest comparison of the year, and it should get easier as the year progresses. (Bruce McCollin, CEO)

Q: If there were positive developments in Ukraine, could you quickly restart business in Eastern Europe? A: Yes, it's a possibility. While current restrictions prevent us from shipping new hardware, we continue to support customers and are prepared to restart business quickly if allowed. (Bruce McCollin, CEO)

Q: What are the key drivers for the cloud and edge and IP optical segments in the coming year? A: For cloud and edge, the focus is on executing large contracts and maintaining a strong backlog. In IP optical, growth is expected in North America, India, and Europe, with a focus on expanding broadband and critical infrastructure. (Bruce McCollin, CEO)

Q: How significant is the opportunity with AT&T's plan to eliminate copper networks by 2028? A: While I can't provide specific details, we see good traction with service providers, including AT&T, as they modernize networks. Our solutions support both copper elimination and modernization of switching infrastructure. (Bruce McCollin, CEO)

Q: Can you provide more details on the international opportunities for cloud and edge, and how does competition differ internationally? A: Internationally, we're seeing good traction, though it's not as large as in North America. We have wins in Europe and Africa, and our cloud-native products are strategic in these markets. Competitors vary, but the challenges are similar globally. (Bruce McCollin, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.