Ribbon Communications Inc.

Greetings and welcome to the Ribbon Communications second quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joni Roberts. Thank you. You may begin.

Good afternoon and welcome to Riven's second quarter 2024 financial results conference call. I'm Joni Roberts, Chief Marketing Officer at Riven Communications. Also on the call today, Bruce McCollin, 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, rvbn.com, where both our press release and supplemental slides are currently available. Certain matters we'll be discussing today, including the business outlook and financial projections for third quarter of 2024 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-K. 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 the supplemental financial information we prepared for this conference call, which, again, are both available on the investor relations section of our website. Now I'd like to turn the call over to Bruce. Bruce?

Great. Thanks, Joni. Good afternoon, everyone, and thanks for joining us today to discuss our Q2 results and outlook for the rest of the year. I'd like to start this afternoon with a short recap on the progress we've made over the last 18 months, executing against our strategic goals and improving the foundation of the company. In early 2023, we initiated the final phase of integration of the ECI acquisition. by restructuring the organization and integrating common functions such as R&D, operations, customer support, and deployment services. This allowed us to capture significant savings and better execute on programs that leverage products and technologies from both our business units, such as the significant investment being made in expanding broadband to more rural regions across the U.S. that will only accelerate with the $42 billion allocated in the Inflation Reduction Act for World Broadband. The investment that we've made in new products allowed us to capture additional share in regions such as India with the long-haul and sell-side router programs with Bharti Airtel, increasing our revenue in India by 30 percent last year. We expect to continue to see these benefits of the new operating structure for years to come. We've also been very successful in growing our business with enterprise customers, as they modernize their communication infrastructure and leverage public cloud platforms. Similarly, we've won a series of significant multi-year voice modernization projects with U.S. federal defense agencies that are now underway and will continue well into the future. Financial results have improved significantly, particularly in the IP optical business where we have now had eight straight quarters of year-over-year higher earnings contribution from the business. resulting in trailing 12-month adjusted EBITDA for the company once again above $100 million in 2024. This allowed us to go to market in the second quarter and complete the refinancing of our credit facility, giving us the financial foundation to continue to execute on our strategy. We couldn't be more delighted with our new financial relationship with HPS and Whitehorse and their interest in supporting our growth initiatives. As we look forward to the second half of the year and beyond, we have multiple strong tailwinds supporting the business. The recently announced three-year Verizon voice network modernization contract and the potential for similar projects with other service providers, such as BrightSpeed, which we announced last week, along with growth in enterprise and US Federal, give us high confidence that the Cloud and Edge business will return to growth. In addition, the recent announcement by Microsoft to suspend development on the MetaSwitch portfolio creates an excellent opportunity to further expand ribbon share in the global carrier voice infrastructure and unified communication space. Similarly, recent industry announcements, including the Nokia Infinera combination and the HPE Juniper deal, create disruptions that we intend to capitalize on. These types of consolidations create significant distraction for their businesses and inevitable roadmap realignment changes that open the door for alternative solutions. The one area that will create a near-term headwind is business we have in Eastern Europe, supporting telecom operators in the deployment of internet access in this troubled region. As the war in Ukraine continues into its third year, it's become increasingly challenging to operate in Russia and continue to provide products. We've therefore suspended new shipments and lowered our expectations with a more conservative outlook for the region for the rest of the year. This also had an impact at the end of the second quarter. In order to offset the profit contribution shortfall, we're phasing in additional cost-saving actions over the next several months, and we continue to target profitability for the IP optical business, although it will take a little longer than originally projected. 2024 is still expected to be a significant improvement over 2023. Now on the Q2 results. Revenue came in below our guidance range for the quarter at $193 million. In addition to lower shipments to Eastern Europe, the largest shortfall was a significant cloud and edge deal with a U.S. federal agency that was expected to close in Q2 but slipped out of the quarter. That deal alone would have put us in the revenue guidance range for the quarter and well above the top end of guidance on earnings. Predicting the timing of these U.S. federal projects continues to be challenging, but we are expecting this deal to close this week and is included in our outlook for the third quarter. We are building momentum in this large and critical market segment where we have leadership and substantial differentiation. We did close and ship an additional large project in the second quarter to another U.S. defense agency. Despite the lower sales, earnings were very solid in the quarter with adjusted non-gap EBITDA of $22 million. Gross margins were at the high end of our guidance with strength in both business units. Our continued focus on driving down expenses also contributed to the solid earnings result. Year-to-date profitability for the company increased 65 percent on an adjusted EBITDA basis as compared to 2023. Now a little more detail on each of our operating segments. As a result of lower sales to Eastern Europe, IP optical revenue in the second quarter was down $3 million year-over-year to $82 million. The first year-over-year decline we've had in eight quarters Excluding sales to Eastern Europe, revenue from all other customers was up 4% year-over-year and up 35% quarter-over-quarter. Book-to-bill was positive at 1.09 times. Excluding Eastern Europe, the EMEA region was the strongest market for IP optical solutions again this quarter, increasing 30% year-over-year and 9% quarter-over-quarter. This includes significant deals with defense agencies such as the Israeli Defense Forces and the Swiss Armed Forces. The Asia-Pac region outside of India was also strong in the quarter, with sales increasing 32% year-over-year. This includes a number of projects we announced this week with long-standing customer Converge ICT in the Philippines, the leading fiber broadband provider in the region. The new deployment leverages our new 1.2 terabit per second Apollo 9400 to expand fiber network capacity to support exponential traffic growth from hyperscale and AI applications. Sales to India in the first half of 2024 were down approximately 20 percent year-over-year following strong shipments last year when we ramped supply of cell site routers and initial long-haul optical deployments. However, we expect significant growth in the second half of the year with continued better margins. IP optical sales in the U.S. were down this quarter as we worked closely with customers and engineering firms to deploy products shipped in previous quarters. but we have a very strong pipeline of U.S. rural broadband opportunities in the second half. In fact, backlog is currently higher than the entire amount we shipped in the first half of the year. The overall customer mix, along with continued improvement in supply chain costs, resulted in gross margins in line with our expectations at 39 percent, up year-over-year and down just slightly from the first quarter. Non-GAAP adjusted EBITDA for IP Optical was negative 4 million in the quarter, a significant improvement year-over-year and sequentially better than the first quarter. In our cloud and edge segment, sales were down year-over-year primarily due to the timing of the large U.S. federal deal that moved to Q3. Sales to service providers, including U.S. Tier 1 carriers, stabilized and were down only slightly year-over-year. We expect strong growth from service providers in the second half of the year. The team is fully engaged in operationalizing the new Verizon Advanced Voice Network Platform project. We received initial product orders and shipped a small quantity in the quarter and started some of the advanced network engineering and planning effort for the initial switch locations. This will accelerate rapidly over the next two quarters and we are on track to achieve our $100 million per year run rate with Verizon by the end of the year. Overall activity in the voice transformation area continues to increase. highlighted by our announcement with BrightSpeed last week. They are leveraging our portfolio of voice solutions to modernize their legacy central office equipment, which includes our multi-service access routing platform, the Neptune 1250. We initiated a similar project with another US MSO this quarter and expect several more this year. The reported Microsoft announcement to discontinue their work on the MetaSwitch portfolio has also created significant discussion and interest as operators evaluate options to continue to provide these critical voice services. Our cloud and edge recurring maintenance business remains strong this quarter, and we expect a modest increase in revenue in the second half. More than 90 percent of our projected revenue for the year is already booked, and we closed a significant three-year renewal in excess of $60 million with one of our larger customers in the last quarter. With that, I'll turn it over to Mick to provide additional detail on our second quarter results and then come back on to discuss outlook for the rest of the year. Mick?