Release Date: April 29, 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 a 35% increase in backlog from the same point last year, indicating strong demand.
• The company's cloud and edge business continues to be a growth engine, with sales growing approximately 6% year over year.
• Sales to global service providers were a primary driver of growth, with total cloud and edge revenue increasing approximately 20% year over year.
• Ribbon Communications Inc (NASDAQ:RBBN) expects a strong second quarter with sales projected to grow more than 10% year over year.
• The company has a strong presence in Asia, with sales in India increasing 80% year over year, contributing to the highest level in the last five years.

Negative Points

• First quarter sales were flat year over year and lower than expected due to the timing of two enterprise projects.
• Margins in the first quarter were lower than projected, primarily due to the mix of shipments and lower sales volume.
• Cloud and edge sales to enterprise customers were down approximately 23% year over year.
• First quarter non-GAAP gross margin was 48.6%, lower than expected due to higher sales in India and higher cloud and edge hardware shipments.
• The IP optical segment recorded a 6% decrease in revenue year over year, impacted by the suspension of shipments to Eastern Europe.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with RBBN.

Q: Were there any pull-ins due to tariff uncertainty affecting the book-to-bill ratio of 1.2? A: Bruce McCollin, CEO: No, there was no strong evidence of pull-ins due to tariff uncertainty. Bookings were consistent across the quarter and evenly spread across businesses and geographies.

Q: How are customers reacting to potential reciprocal tariffs, and who will bear the extra costs? A: Bruce McCollin, CEO: Customers haven't indicated changes in strategy due to tariffs. Many of our products are software and services, which are less impacted by tariffs. For hardware, we are working with manufacturers to mitigate costs, and any cost passed to customers is expected to be modest.

Q: Can you provide an update on AT&T's Neptune ramp and any expected wins this year? A: Bruce McCollin, CEO: While I can't comment specifically on AT&T's plans, we remain a strategic partner. We expect growth in IP optical in North America, with strong progress in rural broadband and new product interest.

Q: How does Ribbon benefit from the retirement of copper networks in the U.S.? A: Bruce McCollin, CEO: We are involved in two methodologies: transitioning services to fiber/IP backbones and maintaining services while eliminating copper. We provide media gateways and software for both central office and edge solutions.

Q: What are the expected growth rates for the cloud and edge and IP optical segments in 2025? A: Bruce McCollin, CEO: For Q2, we expect cloud and edge to grow approximately 20% year over year, and IP optical to grow 5-10%. Excluding Eastern Europe, IP optical grew 25% year over year in Q1.

Q: Can you clarify expectations for Verizon's revenue levels and scaling? A: Bruce McCollin, CEO: We expect Verizon's revenue to return to Q4 levels. The scaling involves two phases: equipment procurement and line migration. We aim to double the migration rate by year-end.

Q: What is the early customer reception of the NPT 2,714, and will it contribute significantly in the year's second half? A: Bruce McCollin, CEO: The NPT 2,714, launched at Mobile World Congress, is strategic for us, allowing expansion into metro core networks. It has been well-received and is expected to contribute significantly.

Q: How does the Converge expansion impact your share in APAC and vendor consolidation? A: Bruce McCollin, CEO: The Converge expansion in the Philippines is strategic, using Western providers to avoid Chinese equipment. It strengthens our position in APAC, with active projects in Taiwan, Vietnam, and Japan.

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