Ribbon Communications Inc.

Greetings and welcome to the Ribbon Communications fourth quarter and full year 2024 financial results conference call. Only mode. A brief 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. It is now my pleasure to introduce your host, Joni Roberts, Chief Marketing Officer. Thank you.

You may begin. Good afternoon, and welcome to Ribbon's fourth quarter 2024 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 the investor relations section of our website, at rbbn.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 first quarter of 2025 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 and Form 10-Q. 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. This, again, can be found both available on our investor relations section of our website. And now I'd like to turn it over to Bruce. Bruce?

Great. Thanks, Joni. Good afternoon, everyone, and thanks for joining us today to discuss our fourth quarter results. I'm very pleased to report strong performance across all key financial metrics, including the highest levels of revenue and earnings in the history of the company. This is clear validation of our strategy to expand our presence in markets such as enterprise and federal and defense, while also successfully positioning the company in areas where increased capital is being invested by our service provider customers. Business was robust across practically all regions and segments, but the primary driver behind the excellent performance in the quarter was sales of our cloud and edge portfolio. U.S. Tier 1 service provider cloud and edge sales doubled year over year, and sales to global enterprises, including U.S. federal agencies, increased more than 60%. We also had a solid quarter in our IP optical network segment with continued growth in Europe, India, and Asia Pacific. The strong mix of IP routers and management software resulted in good margins for this segment as well. Higher mix of cloud and edge sales in the quarter resulted in gross margins well above our expectations at 58 percent. As a result, overall profitability in the fourth quarter increased by 30 percent year over year. In the full year, we achieved adjusted EBITDA of $119 million at the very high end of the original range we established at the beginning of the year. Our cash generation in the quarter was very good with year-end cash of $90 million. And bookings were also very good at 1.1 times sales and above 1.0 times for both segments. This creates a strong foundation for continued profitable growth in 2025 as the focus on network modernization and the investment in fiber networks drives an improving investment cycle. Just an excellent result and a big thank you to the Ribbon team, our customers, and partners. Now a few more highlights on each of our operating segments. This was obviously an excellent quarter for our cloud and edge business with all aspects of the operation performing well. The business is solidly diversified with approximately two-thirds of our sales to service providers and one-third sales to enterprise and federal and defense customers. Sales in the quarter grew 35% year over year and adjusted EBITDA grew 75% year over year. For the full year, sales grew 6% and EBITDA grew by 16%. Just a great year. The momentum and recovery we saw developing earlier in the year with our U.S. service provider customers translated into solid revenue growth in the second half. And we have a number of incremental projects in both the U.S. and Europe that we expect will maintain a solid growth trajectory in 2025. The Verizon voice network modernization project is a significant part of this major recovery. Sales to this key customer accounted for 17% of overall company revenue in the fourth quarter and grew 80% in the second half of the year. The initial phase of the program continues to ramp, and we're currently migrating approximately one voice switch every week and expect to scale further as the year progresses. In addition to the strong quarter with Verizon, network modernization sales to other U.S. service providers were up as well, growing 21% quarter over quarter. This included a new IMS mobile core win, which is an exciting new area of growth for us. And we were awarded a significant cloud migration project with a European tier one service provider that highlights the technology leadership we have in leveraging a cloud native operational and software delivery model. We had an outstanding quarter in our enterprise segment led by large financial services companies such as JPMorgan Chase, Bank of America, Citibank, and others. We continue to transition customers to a flexible enterprise license agreement framework that simplifies how they consume our software products and technical support services and provides better revenue predictability. We expect the fourth quarter will continue to be the strongest in the year as we renew these enterprise term license agreements and recognize a significant amount of revenue. As anticipated, we had a very strong quarter with several new U.S. Defense Agency awards. In addition to expansion orders on a large voice network modernization project, we had a significant win with a new portable network-in-a-box communication platform that can be quickly deployed in a forward command and control environment. For the full year, our business with U.S. federal agencies increased almost 150 percent year over year. Finally, we're intensely focused on a pipeline of over 200 potential MetaSwitch replacement opportunities. and had several additional smaller wins in the fourth quarter. Microsoft's decision to sell that business to a small cloud platform provider does not give service providers much comfort that the future of their regulated, on-premise, lifeline voice platform is secure, and this is really our sweet spot. In our IP optical segment, we had a solid quarter, although the year-over-year comparison is tough. given the strong finish in 2023 that included a surge of spending from the Israeli Defense Force at the beginning of the war in the region, as well as sales into Eastern Europe. Excluding those two regions, sales grew 9 percent year-over-year across other markets and regions. The highlight of the quarter was the continued improvement in India, with sales increasing 30 percent quarter-over-quarter and 10 percent year-over-year on the strength of continued business with Bardi and the renewed network investment by Vodafone IDEA. Our sales in India increased by more than 40 percent in the second half as compared to the first half of the year, contributing to our strong growth later in the year. We also had a strong quarter in the Asia Pacific region, with sales growing 30 percent quarter over quarter and 60 percent year over year. In addition, we had several large bookings from this region right at the end of the year that helped drive overall IP optical book to bill above 1.1 times in the quarter. The project leverages our new 5 nanometer optical transponders that support up to 1.2 gigabit per second wavelengths. These were hard fought wins against both Western and Chinese suppliers. In the U.S., sales increased approximately 5% year over year. with continued momentum in the rural broadband fiber to the home space. We're increasing our focus and investment in this area, adding additional resources to the sales organization and pre-sales specialists. It's also critical to establish strong relationships with the engineering firms that specialize in this area, and we've continued to expand our efforts here as well. We have over 30 active projects currently in deployment with more than 30 additional opportunities at different stages here in the first quarter. From a product mix perspective, we had our strongest quarter to date of sales of our Neptune IP routing platform growing 29% year over year as we continue to expand the number of customers and use cases for this strategic product line. Overall, margins came in a little better than we expected in the IP optical segment at 40%, benefiting from a sizable sale of our Muse management software, which is a major differentiator for us. Overall, this resulted in a small loss in the quarter of $4 million of adjusted EBITDA. For the full year, gross margin improved by 300 basis points and EBITDA improved by $9 million for the IP optical segment, progressing towards our goal of profitability despite the suspension of shipments to Eastern Europe. With that, I'll turn it over to John to provide additional financial details on our fourth quarter and full year results, and then come back on to discuss outlook for 2025 in the first quarter. John?