[Management View]
Revenue reached a record $221 million in Q2 2025, driven by strong performance in the Cloud and Edge and IP Optical Networks segments. Key strategic priorities include expanding in North America, Asia Pacific, and EMEA, with a focus on critical infrastructure and federal agency contracts.

[Outlook]
Management projects Q3 2025 revenue between $213 million and $227 million, with non-GAAP adjusted EBITDA expected to range from $28 million to $34 million. Full-year revenue guidance remains at $870 million, implying 15%-20% revenue growth in the second half of FY2025.

[Financial Performance]
- Revenue: $221 million, up 15% YoY and 22% QoQ.
- Adjusted EBITDA: $32 million, up 47% YoY and $26 million QoQ.
- Cloud and Edge Segment Sales: $137 million, up 24% YoY and 27% QoQ.
- IP Optical Networks Segment Sales: $84 million, up 2% YoY and 14% QoQ.
- Service Provider Revenue: Grew 18% YoY and 17% QoQ.
- Enterprise Revenue: Increased 7% YoY and 34% QoQ.

[Q&A Highlights]
Question 1: Gross margins were lower than expected in Q2. What caused this?
Answer: The shift towards more hardware in the Cloud and Edge segment and increased professional services impacted overall gross margins.

Question 2: Why is Q3 revenue guidance slightly below consensus despite strong Q2 performance?
Answer: Sequential flatness from Q2 to Q3 is due to Q2 being ahead of the curve. Q3 is expected to be up 5% YoY, with strong Q4 anticipated.

Question 3: How do you feel about having two separate businesses (Cloud and Edge, IP Optical)?
Answer: The integration of technologies between the two businesses, such as using IP routers for voice core upgrades, differentiates Ribbon and adds value.

Question 4: Can you provide more color on the Class 5 replacement opportunity and its correlation with fiber deployments?
Answer: There is a correlation between fiber upgrades and Class 5 switch modernization, allowing telcos to capture cost savings by modernizing switches in parallel with fiber deployment.

Question 5: What is the general tone on CapEx among customers?
Answer: The recent legislative changes allowing immediate expensing of U.S. R&D costs are expected to be a tailwind for the industry, potentially opening up more CapEx.

Question 6: Commentary on private networks spending environment?
Answer: Strong pipeline and wins in North America for voice modernization and critical infrastructure. Increased defense spending in Europe is also expected to drive growth.

Question 7: Did you experience any FX impact in Q2?
Answer: FX impact on OpEx was about $1 million in Q2, with expected headwinds of around $2 million per quarter if current exchange rates hold.

Question 8: Dynamics behind expected gross margin improvement in Q3?
Answer: Higher mix of software and fewer hardware shipments in Q3 are expected to improve gross margins by 150-200 basis points sequentially.

Question 9: Any order pull-ins during the quarter?
Answer: No significant order pull-ins; Q2 was a middle-of-the-road quarter with strong growth expected in the second half.

Question 10: Specifics on Verizon's contribution to revenue and expectations for Q3 and Q4?
Answer: Verizon accounted for just over 20% of total sales in Q2. Q3 is expected to be strong but with lower product shipments, while Q4 is anticipated to be a record quarter.

Question 11: Update on router deployment with Verizon and potential expansion to other carriers?
Answer: The router is used for voice core traffic aggregation and edge aggregation, with plans to expand its use in other edge aggregation use cases.

Question 12: Clarification on currency headwinds affecting gross margin and EBITDA guidance?
Answer: Currency headwinds are expected to create approximately $5 million of annual earnings pressure, impacting both OpEx and gross margin.

Question 13: Visibility on Verizon's bookings and backlog for 2026?
Answer: The initial phase of the Verizon program is a three-year program, with expectations for continued strong performance and potential expansion to Frontier.

Question 14: Deferred revenue trends and their implications for future quarters?
Answer: Deferred revenue increased significantly, indicating strong future revenue potential, particularly from maintenance and multi-quarter product and services programs.

[Sentiment Analysis]
Analysts were generally positive, seeking clarification on gross margins, revenue guidance, and strategic priorities. Management's tone was optimistic, emphasizing strong performance and future growth opportunities.

[Quarterly Comparison]
| Metric | Q2 2025 | Q1 2025 | Q2 2024 |
|---------------------------------|---------------|---------------|---------------|
| Revenue | $221 million | $181 million | $192 million |
| Adjusted EBITDA | $32 million | $6 million | $22 million |
| Cloud and Edge Segment Sales | $137 million | $108 million | $110 million |
| IP Optical Networks Segment Sales| $84 million | $74 million | $82 million |
| Service Provider Revenue | 18% YoY | 17% QoQ | N/A |
| Enterprise Revenue | 7% YoY | 34% QoQ | N/A |

[Risks and Concerns]
Currency headwinds, particularly from the weakening U.S. dollar, are expected to create approximately $5 million of annual earnings pressure. Gross margin and adjusted EBITDA are tracking toward the lower end of guidance due to currency pressures and a higher mix of hardware and professional services sales.

[Final Takeaway]
Ribbon Communications delivered record revenue in Q2 2025, driven by strong performance in the Cloud and Edge and IP Optical Networks segments. Management remains optimistic about future growth, with strong visibility into the second half of the year. However, currency headwinds and a higher mix of hardware sales may pressure margins. The company is well-positioned to benefit from ongoing network modernization and increased investment in critical infrastructure and defense sectors.