Ribbon Communications (RBBN) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue reached $210 million, up 3.5% year-over-year, driven by strong Cloud & Edge growth and robust U.S. federal/defense sector expansion, while IP Optical revenue declined due to Eastern Europe sales suspension.

• Cloud & Edge revenue was $128 million, up 11% year-over-year, with non-GAAP gross margin near 68% and strong Verizon and federal sales.

• IP Optical Networks segment saw a 4% year-over-year revenue increase excluding Eastern Europe, with U.S. revenue up 124%, but overall segment revenue declined 6% year-over-year.

• Adjusted non-GAAP EBITDA was $30 million (14% of sales), up 8% year-over-year, with trailing twelve-month adjusted EBITDA exceeding $100 million.

• Leadership transition: John Townsend to become CFO, replacing Mick Lopez.

Financial highlights

• Non-GAAP gross margin was 55%, with GAAP gross margin at 52%; Q3 2024 gross profit was $109.6 million.

• Q3 2024 GAAP net loss was $13.4 million; non-GAAP net income was $8.5 million; non-GAAP diluted EPS was $0.05.

• Operating expenses increased in Q3 2024 due to a $5 million legal settlement and higher legal fees.

• Cash and equivalents at quarter-end were $40 million, with $15 million cash outflow from operations.

• Interest expense was $10 million, reflecting a new credit facility; average interest rate on term loan was 11.2%.

Outlook and guidance

• Q4 2024 revenue projected at $235–$255 million, with non-GAAP gross margin of 55.5–56% and adjusted EBITDA of $46–$52 million.

• Full-year 2024 revenue guidance midpoint is $828 million; adjusted EBITDA midpoint $112 million.

• Year-over-year sales growth of 8% expected in Q4; 2025 revenue expected to grow mid-single digits with double-digit earnings growth.

• No significant changes in operating expenses anticipated; R&D and sales/marketing expenses expected to be lower or similar to 2023.

• General and administrative expenses projected to rise in 2024 due to legal costs and inflation.