Ribbon Communications Inc.

Greetings and welcome to the Ribbon Communications third quarter 2021 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Tom Berry, Investor Relations.

Good afternoon, and welcome to Riven's third quarter 2021 financial results conference call. I'm Tom Berry, investor relations of Riven Communications. Also on the call today will be Bruce McClelland, Riven's chief executive officer, and Mick Lopez, Riven's chief financial officer. Today's call is being webcast live and will be archived on the investor relations section of our website at rivencommunications.com, where both our press release and our supplemental slides are currently available. Certain matters we will be discussing today include business outlook and financial projections for the fourth quarter of 2021 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 the forward-looking statements. These risks and uncertainties are discussed in our documents filed with the SEC, including our most recent Form 10-K and Form 10-Q. I refer you to our safe harbor statement included on slide two of the supplemental slides for this conference call. In addition, we'll present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measures are included in the earnings press release we issued this afternoon, as well as in the supplemental slides for this commerce call, which, again, are both available on the investor relations section of our website. 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 third quarter 2021 results and our outlook for the fourth quarter. The third quarter played out almost exactly as we expected, with the exception of increasing supply chain constraints. Revenue in the quarter was $210 million, with approximately $9.5 million moving to the fourth quarter due to supply chain-related constraints. Profitability was very solid, with both adjusted EBITDA, a non-gap earnings per share within our guided range, despite the lower sales and increased costs related to component pricing, transportation, and logistics. Without these issues, we would have been at the midpoint of our guidance on the revenue range, and we would have exceeded our guidance for both adjusted EBITDA and non-GAAP earnings for sharing. In our IP optical network segment, we continue to add new customers with 12 new logos this quarter, and to build our presence in the critical North American market, where sales in this region have increased 270% on a year-to-date basis. We had an exciting new win in the quarter with Viero Wireless and Fiber Networks, a top 10 mobile network operator in the U.S. Viero is deploying our entire IP optical solution set, Apollo for DWDM transport, Neptune for IPM PLS networking, and Muse for domain orchestration and network management. The deployment will support 1 gig and 10 gig client-side aggregation over a 200 gig optical transport network. that easily scales up to 400 gig wavelengths. The converged IP optical network supports both broadband backhaul and 5G X-haul services. We also announced a new win with Dakota Central, a longtime Ribbon Cloud and Edge customer based in North Dakota. They chose our IP optical solution to increase broadband speeds and provide the ability to backhaul 5G mobile traffic. Outside of the U.S., we added a major new customer, Megaphone, the second largest mobile phone operator in Russia. After an extensive RFP and trial process, they selected our Apollo DWDM solution for long-haul transport. We're in the early stages of deployment with this new Tier 1 customer. Similarly, we had a great win with Moritel, the second largest fixed broadband provider in Indonesia. They're adding capacity to their network as well as adding a new sub-C cable and will utilize our Apollo DWDM platform. In Europe, we continue to win new critical infrastructure customers, signing deals with a large Swiss utility company and a major rail operator in Germany. These are all great examples of the strength of our IP optical portfolio and our ability to compete and win against the installed incumbents. Our product bookings to revenue in the quarter was 1.17 times, signaling growing demand into the end of the year. Sales in India continued to be impacted by environmental factors, and while shipments in the quarter were consistent with the second quarter, this is still down approximately 20% from the run rate in the second half of 2020 and well below 2019. While the market is slowly improving, we now only anticipate modest improvements in the fourth quarter. We remain well-positioned to capture significant business once the market rebounds in 2022. In our cloud net business, Sales were down approximately 5% from the third quarter last year, excluding candy. When we benefited from higher session border controller spending from both service providers and large enterprise during the peak of COVID, gross margins in the third quarter were very strong with a high mix of software. And when combined with a 14% reduction in our non-GAAP operating expenses, the adjusted EBITDA in this segment increased 7% compared to the third quarter of 2020. Demand for our voice over IP network transformation solutions was exceptionally strong again this quarter, growing 78% year over year, with higher shipments of our soft switch and media gateway platforms. We have early visibility on several new major projects beginning in 2022 that will continue the momentum in this business, and we see growing interest in the adoption of cloud-centric technologies, what we're calling telco cloud. This trend is definitely breathing new life into this very important product segment. Session border controller sales decreased from the third quarter of last year, primarily due to a very large wireless transcoding deal last year and strong sales in our 5K and 7K products to large enterprise. I'm very encouraged by the growing pipeline of opportunities following the creation of a dedicated enterprise sales team earlier this summer. We have new opportunities across a range of different verticals, healthcare, insurance, industrial, state and local government, financials, and expect meaningful improvement in sales this quarter. Our Ribbon Connect SBC-as-a-Service solution supporting Microsoft Teams continues to gain traction with over 100 distributors and partners now onboarded. We also added a top three US MSO to the platform in the quarter to support their growing business services offering and had several large international carriers evaluating the service. While it's still early, paid subscriptions have more than doubled over the last 90 days and we expect to continue to see sizable growth from this new recurring revenue service offering. And finally, in our reoccurring revenue maintenance business, we had another strong bookings quarter and continue to maintain a very high renewal rate, with bookings for the year now essentially at 100%. I'll now 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 detail on our plans for the remainder of 2021 and comment on 2022.