Ribbon Communications Inc.

Greetings and welcome to the Ribbon Communications First Quarter 2021 Financial Results Conference Call. At this time, all participants are in the listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Tom Berry. Tom Berry. Investor Relations for Ribbon Communications. Thank you. You may begin.

Good afternoon and welcome to Ribbon's first quarter 2021 financial results conference call. I'm Tom Berry, Investor Relations of Ribbon Communications. Also on the call today will be Bruce McClelland, Ribbon's Chief Executive Officer, and Mick Lopez, Ribbon's Chief Financial Officer. Today's call is being webcast live and will be archived on the Investor Relations section of our website at ribboncommunications.com. where both our press release and our supplemental slides are currently available. Certain matters we will be discussing today, including the business outlook and financial projections for the second quarter and full year 2021, 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-K. I refer you to our safe harbor statement included on slide two of the supplemental slides for this conference call. In addition, we will present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measure are included in the earnings press release we issued this afternoon, as well as in the supplemental slides we prepared for this conference call, which again, are both available on the investor relations section of our website. As previously noted, we completed our acquisition of ECI Telecom on March 3rd, 2020, and completed the sale of Candy Communications on December 1st, 2020. These transactions affect comparisons to prior periods. Further, in the fourth quarter of 2020, we began segment reporting for our Cloud and Edge and IP Optical Networks businesses. And now, I'd like to turn the call over to Bruce. Bruce?

Great. Thanks, Tom. Good afternoon, everyone, and thank you for joining us today to discuss our first quarter 2021 results and our outlook for the remainder of the year. We had a strong start to 2021 from a profitability perspective with both adjusted EBITDA and non-GAAP earnings per share at or above the high end of our guidance ranges. We also had very good bookings in the quarter with the book to revenue ratio excluding maintenance of 1.14 times and the maintenance bookings for the year now at nearly 80%. This gives us very good momentum towards our financial targets for the year. In our cloud and edge business, we posted strong gross margins along with an 18% reduction in our non-GAAP operating expenses year over year, resulting in EBITDA nearly tripling compared to first quarter 2020. Sales were essentially flat after adjusting for the sale of the candy business. Demand for our core SBC portfolio remained strong, growing 12% year over year, offset by continued weaker demand for the on-premise enterprise edge platforms during this prolonged work-from-home environment. Last month, Microsoft announced a new Operator Connect service, which we already support with our session border controller products. We believe this new service offering will reduce the friction for enterprises to easily deploy high-quality voice capability via the Teams platform and plays to our strength given our broad deployment base with mobile and fixed service providers. This new service will complement the current direct routing alternatives already available, including our new ribbon connect as a service offering that includes support for legacy PBX interoperability in partnership with our channel partners. We have a growing pipeline of partners embracing this new platform and are currently onboarding more than 60 resellers to the program. This is an important initiative as we build our base of recurring revenue. Last week, we announced that our partner program received a five-star rating in the 2021 CRN channel reseller network partner program guide. When dealing with ribbon, our customers expect innovative products and strong collaboration. And this announcement offers further proof that we're meeting those standards. We had strong bookings in our network transformation business in the first quarter with multiple intelligent network modernization projects in North America and Asia Pacific. including expansion orders with three of the largest North American Tier 1 carriers, totaling over $40 million during the quarter. We were also awarded a three-country multi-year deal in Europe to replace a legacy Huawei system, building on our momentum from last quarter. And we signed over $3 million in stir-shaken robocalling deals in the quarter. In our IP optical segment, sales grew 22% year-over-year on a pro forma basis, adding 13 new customers in the quarter. Bookings were strong in Europe with both service providers and critical infrastructure organizations. Sales in India were very consistent with the last several quarters, although unfortunately India is suffering through another significant wave of COVID infections and continues to experience a very slow recovery. Deployment levels are roughly 60% of where they were prior to COVID, and we look forward to a strong second half recovery. We had new wins in other regions, including in the Middle East, where we signed an incumbent carrier to completely replace products from their current supplier, and with Sinia, a network operator based in Finland that operates a fiber optic network in Northern Europe, providing secure connections for international businesses and government organizations. In the United States, we continued to leverage our existing ribbon relationships to earn four new IP optical wins in the U.S. rural infrastructure market. Globally, we have a very active pipeline of opportunities and are currently finalizing contract negotiations on a meaningful Huawei WDM replacement deal. We are also in the final stages of several significant mobile and fixed operator cross-sell opportunities in North America, Russia, and Asia Pacific. We completed 19 large-scale proofs of concept in the first quarter, a mix of both WDM transport and IP networking opportunities. We continue to introduce new innovative products with the successful deployment of the Apollo 9901 access OTN switch in the first quarter and a new high density dual 400 gig MUX ponder that received high scores in the 2021 LightWave innovation reviews. In our IP transport Neptune portfolio, we introduced two new access products that are directly focused on the 5G cell site router and critical infrastructure markets. Available in both fully redundant and non-redundant versions, these products address the operator's needs to rebuild backhaul networks to handle 5G traffic, leveraging pluggable coherent optics. The platforms also support the precision timing requirements of 5G networks, as well as Flexi hard slicing to reliably segment different types of traffic. And I'll turn it over to Mick to provide additional detail on our results for the quarter. And I'll come back on to review our guidance and provide additional details on our plans for the remainder of the year.