PR Newswire | Jul 28, 2021 04:03PM EDT

07/28 15:03 CDT

Ribbon Communications Inc. Reports Second Quarter 2021 Financial ResultsRevenue grew 10% sequentially to $211 million for the second quarter of 2021, Net income increased to $23 million and Adjusted EBITDA grew 119% sequentially to $43 million PLANO, Texas, July 28, 2021

PLANO, Texas, July 28, 2021 /PRNewswire/ -- Ribbon Communications Inc. (Nasdaq: RBBN), a global provider of real-time communications software and IP optical transport solutions to service providers, enterprises, and critical infrastructure sectors, today announced its financial results for the second quarter of 2021.

Sales for the first half of 2021 were up 10% versus the first half of 2020, while Adjusted EBITDA increased 60% and Non-GAAP diluted earnings per share increased 133% over the same time period. Revenue for the second quarter of 2021 was $211 million, compared to $210 million for the second quarter of 2020.

"In the first half of the year, we made significant strides on the execution of our strategy, with new major IP Optical wins with Rogers, Optus, Singtel and several others," noted Bruce McClelland, President and Chief Executive Officer of Ribbon Communications. "These customer wins will significantly broaden our presence in this large addressable market and strengthen our foundation, establishing a clear path to growth in 2022 and beyond."

Mr. McClelland added, "Sales in India in the quarter were impacted by the surge in Covid infections and country-wide restrictions. Deployments have partially recovered in recent weeks, but timing of a full recovery in network investment is difficult to predict, so it is important for us to be prudent with our expectations for the remainder of the year."

Financial Highlights1, 2The following table summarizes the consolidated financial highlights for the three months ended June 30, 2021 and 2020 (in millions, except per share amounts).

Three months ended

June 30,

2021 2020

GAAP Revenue $ 211 $ 210

GAAP Net income (loss) $ 23 $ ( 8)

Non-GAAP Net income $ 27 $ 11

GAAP Diluted earnings (loss) per share $ 0.15 $ (0.06)

Weighted average shares outstanding for GAAP diluted earnings (loss) per share 154 144

Non-GAAP diluted earnings per share $ 0.17 $ 0.08

Weighted average shares outstanding for Non-GAAP diluted earnings per share 154 151

Non-GAAP Adjusted EBITDA $ 43 $ 30

Cash, cash equivalents and restricted cash was $115 million at June 30, 2021, compared with $109 million at March 31, 2021 and $94 million at June 30, 2020. GAAP Net income of $23 million in the second quarter of 2021 includes a $12 million non-cash gain associated with the quarterly mark-to-market of the Company's investment in American Virtual Cloud Technologies, Inc. ("AVCT") from the sale of the Company's Kandy Communications business and a $2.8 million gain on the sale of our QualiTech business, which closed during the second quarter.

_____________

^1 GAAP Net income and GAAP Diluted earnings per share for the three monthsended June 30, 2021 include a $2.8 million gain on the sale of the QualiTechbusiness. They also include $1.2 million of paid-in-kind interest incomeearned on the convertible debt and $12.1 million of income associated with theremeasurement of the convertible debt and warrants associated with theconsideration received from the sale of the Company's Kandy Communicationsbusiness to AVCT. The interest income is included in Interest expense, net,and the remeasurement expense is included in Other income (expense), net. Theremeasurement income was calculated using valuation methods in accordance withaccounting guidance. Fluctuations in AVCT's stock price will impact the futureamounts that are recorded in Other income (expense), net, and could materiallyimpact the Company's quarterly results.

^2 Please see the reconciliations of non-GAAP financial measures to the mostdirectly comparable GAAP measures and additional information about non-GAAPmeasures in the section entitled "Discussion of Non-GAAP Financial Measures" inthe attached schedules.

"We were very pleased with the earnings and cash generation in the quarter with both Adjusted EBITDA and Earnings per share well above our targets for the quarter. Sales were slightly less than expected primarily due to the Covid situation in India, while gross margins were stronger due to favorable product mix. Operating expenses trended lower with continued spending discipline and the benefit from several one-time items," said Mick Lopez, Chief Financial Officer of Ribbon Communications.

Customer and Company Highlights

* Strong 1H21 financial results: * 10% YoY revenue growth * 60% YoY Adj. EBITDA growth * Strong gross margins in both business units and continued disciplined expense control

* Significant new IP Optical wins broadening Ribbon's global customer base: * Rogers Communications selected Ribbon's industry-leading 400G ZR+ optical networking and SDN solutions to upgrade its transport network * Optus and Singtel Telecommunications multi-service transport network DWDM tender award * Strong growth in North American markets with 1H21 sales exceeding sales in all of 2020, including Huawei replacement win with US wireless provider

* Continuing portfolio innovation: * Successful introduction and initial shipments of industry's first 400G ZR+ DWDM metro and long-haul transport solution * Integral contributor enabling industry to meet US robocalling June 30th deadline with complete portfolio including CallTrust and STIR/SHAKEN solutions

Business Outlook1The Company's outlook is based on current indications for its business, which are subject to change. For the third quarter of 2021, the Company projects revenue of $215 million to $225 million, non-GAAP gross margin of 57% to 58%, non-GAAP diluted earnings per share of $0.11 to $0.13, and Adjusted EBITDA of $32 million to $36 million. For the full year 2021, earnings guidance remains unchanged with non-GAAP diluted earnings per share of $0.49 to $0.54, and Adjusted EBITDA of $145 million to $155 million. Revenue is now projected to be approximately $900 million with increased non-GAAP gross margin of 58% to 59%. The current outlook assumes no worsening of conditions related to the COVID-19 pandemic, or supply chain disruptions.

^1 Please see the reconciliations of non-GAAP financial measures to the mostdirectly comparable GAAP measures and additional information about the non-GAAPmeasures in the section entitled "Discussion of Non-GAAP Financial Measures" inthe attached schedules.

Upcoming Investor Conference Schedule

* August 10-11, 2021 - Oppenheimer Technology, Internet & Communications Conference (virtual presentation and one-on-one institutional investor meetings). * August 31-September 1, 2021 - Jefferies Virtual Semiconductor, IT Hardware & Communications Infrastructure Summit (virtual one-on-one institutional investor meetings). * September 14-15, 2021 - Jefferies Virtual Software Conference (virtual presentation and one-on-one institutional investor meetings). * November 15-18, 2021 - Needham Virtual Security, Networking & Communications Conference (virtual presentation and one-on-one institutional investor meetings).

Conference Call DetailsConference call to discuss the Company's financial results for the second quarter ended June 30, 2021 on July 28, 2021, via the investor section of its website at http://investors.ribboncommunications.com, where a replay will also be available shortly following the conference call.

Conference Call Details:Date: July 28, 2021Time: 4:30 p.m. (ET)Dial-in number (Domestic): 877-407-2991Dial-in number (Intl): 201-389-0925Instant Telephone Access: Call me(tm)

Replay information:A telephone playback of the call will be available following the conference call until August 11, 2021 and can be accessed by calling 877-660-6853 or 201-612-7415 for international callers. The reservation number for the replay is 137200791.

Investor RelationsTom Berry+1 (978) 614-8050tom.berry@rbbn.com

North American PressDennis Watson+1 (214) 695-2224dwatson@rbbn.com

APAC, CALA & EMEA PressCatherine Berthier+1 (646) 741-1974cberthier@rbbn.com

Analyst RelationsMichael Cooper+1 (708) 212-6922mcooper@rbbn.com

About RibbonRibbon Communications (Nasdaq: RBBN) delivers communications software, IP and optical networking solutions to service providers, enterprises and critical infrastructure sectors globally. We engage deeply with our customers, helping them modernize their networks for improved competitive positioning and business outcomes in today's smart, always-on and data-hungry world. Our innovative, end-to-end solutions portfolio delivers unparalleled scale, performance, and agility, including core to edge software-centric solutions, cloud-native offers, leading-edge security and analytics tools, along with IP and optical networking solutions for 5G. To learn more about Ribbon visit rbbn.com.

Important Information Regarding Forward-Looking StatementsThe information in this release contains "forward-looking" statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are subject to several risks and uncertainties. All statements other than statements of historical facts contained in this release, including without limitation statements regarding, projected financial results for the third quarter 2021 and beyond, sales trends, and plans and objectives of management for future operations are forward-looking statements. Without limiting the foregoing, the words "believes", "estimates", "expects", "expectations", "intends", "may", "plans", "projects" and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated in these forward-looking statements due to various risks, uncertainties and other important factors, including, among others, risks related to the continuing COVID-19 pandemic, including delays in customer deployments as a result of rises in cases risks that will not realize estimated cost savings and/or anticipated benefits from the acquisition of ECI; failure to realize anticipated benefits from the sale of our Kandy Communications business ("Kandy"); supply chain disruptions resulting from component availability and/or geopolitical instabilities and disputes; unpredictable fluctuations in quarterly revenue and operating results; failure to compete successfully against telecommunications equipment and networking companies; credit risks; the timing of customer purchasing decisions and our recognition of revenues; macroeconomic conditions; our ability to recruit and retain key personnel; the impact of restructuring and cost-containment activities; litigation; rapid technological and market change; our ability to protect our intellectual property rights and obtain necessary licenses; risks related to cybersecurity and data intrusion; the potential for defects in our products; risks related to the terms of our credit agreement; higher risks in international operations and markets; increases in tariffs, trade restrictions or taxes on our products; currency fluctuations; and failure or circumvention of our controls and procedures.

These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect our business and results from operations. Additional information regarding these and other factors can be found in our reports filed with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2020. In providing forward-looking statements, the Company expressly disclaims any obligation to update these statements publicly or otherwise, whether as a result of new information, future events or otherwise, except as required by law.

Discussion of Non-GAAP Financial MeasuresOur management uses several different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of its business, making operating decisions, planning and forecasting future periods, and determining payments under compensation programs. We consider the use of non-GAAP financial measures helpful in assessing the core performance of our continuing operations and when planning and forecasting future periods. Our annual financial plan is prepared on a non-GAAP basis and is approved by our board of directors. In addition, budgeting and forecasting for revenue and expenses are conducted on a non-GAAP basis and actual results on a non-GAAP basis are assessed against the annual financial plan. By continuing operations, we mean the ongoing results of the business adjusted for certain expenses and credits, as described below. We believe that providing non-GAAP information to investors will allow investors to view the financial results in the way our management views them and helps investors to better understand our core financial and operating performance and evaluate the efficacy of the methodology and information used by our management to evaluate and measure such performance.

While our management uses non-GAAP financial measures as tools to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, GAAP measures. In addition, our presentations of these measures may not be comparable to similarly titled measures used by other companies. These non-GAAP financial measures should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures. In particular, many of the adjustments to our financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

Stock-Based CompensationThe expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. We believe that presenting non-GAAP operating results that exclude stock-based compensation provides investors with visibility and insight into our management's method of analysis and the Company's core operating performance.

Amortization of Acquired Intangible AssetsAmortization amounts are inconsistent in frequency and amount and are significantly impacted by the timing and size of acquisitions. We believe that excluding non-cash amortization of intangible assets facilitates the comparison of our financial results to our historical operating results and to other companies in our industry as if the acquired intangible assets had been developed internally rather than acquired.

Litigation CostsWe have been involved in litigation with a former GENBAND business partner and have reached a settlement with the other party. We exclude the costs of such litigation because we believe such costs are not part of our core business or ongoing operations.

Acquisition-, Disposal- and Integration-Related ExpenseWe consider certain acquisition-, disposal- and integration-related costs to be unrelated to the organic continuing operations of our acquired businesses and the Company, and such costs are generally not relevant to assessing or estimating the long-term performance of the acquired assets. We exclude such acquisition-, disposal- and integration-related costs to allow more accurate comparisons of our financial results to our historical operations and the financial results of less acquisitive peer companies and allows management and investors to consider the ongoing operations of the business both with and without such expenses.

Restructuring and Related ExpenseWe have recorded restructuring and related expense to streamline operations and reduce operating costs by closing and consolidating certain facilities and reducing our worldwide workforce. We believe that excluding restructuring and related expense facilitates the comparison of our financial results to our historical operating results and to other companies in our industry, as there are no future revenue streams or other benefits associated with these costs.

Gain on Sale of BusinessOn May 12, 2021, we sold our QualiTech business, which we had acquired as part of the ECI Acquisition, to Hermon Laboratories, Ltd. As consideration, we received $2.9 million of cash and recorded a gain on the sale of $2.8 million. We exclude this gain because we believe that such gains are not part of our core business or ongoing operations.

Interest Income on DebenturesWe recorded paid-in-kind interest income on the Debentures, which increased their fair value. We exclude this interest income because we believe that such a gain is not part of our core business or ongoing operations.

(Increase) Decrease in Fair Value of InvestmentsWe calculate the fair value of the Debentures and Warrants at each quarter-end and record any adjustments to their fair values in Other income (expense), net. We exclude these and any subsequent gains and losses from the change in fair value of the Debentures and Warrants because we believe that such gains or losses are not part of our core business or ongoing operations.

Tax Effect of Non-GAAP AdjustmentsNon-GAAP income tax expense is presented based on an estimated tax rate applied against forecasted annual non-GAAP income. Non-GAAP income tax expense assumes no available net operating losses or valuation allowances for the U.S. because of reporting significant cumulative non-GAAP income over the past several years. We are reporting our non-GAAP quarterly income taxes by computing an annual rate for the Company and applying that single rate (rather than multiple rates by jurisdiction) to our consolidated quarterly results. We expect that this methodology will provide a consistent rate throughout the year and allow investors to better understand the impact of income taxes on our results. Due to the methodology applied to our estimated annual tax rate, our estimated tax rate on non-GAAP income will differ from our GAAP tax rate and from our actual tax liabilities.

Adjusted EBITDAWe use Adjusted EBITDA as a supplemental measure to review and assess our performance. We calculate Adjusted EBITDA by excluding from Income (loss) from operations: depreciation; amortization of acquired intangible assets; stock-based compensation; certain litigation costs; acquisition-, disposal- and integration-related expense; and restructuring and related expense. In general, we exclude the expenses that we consider to be non-cash and/or not part of our ongoing operations. We may exclude other items in the future that have those characteristics. Adjusted EBITDA is a non-GAAP financial measure that is used by our investing community for comparative and valuation purposes. We disclose this metric to support and facilitate our dialogue with research analysts and investors. Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

Three months ended

June 30, March 31, June 30,

2021 2021 2020

Revenue:

Product $ 113,129 $ 97,889 $ 120,862

Service 98,081 94,883 89,631

Total revenue 211,210 192,772 210,493

Cost of revenue:

Product 46,641 44,445 50,579

Service 36,142 37,780 36,647

Total cost of revenue 82,783 82,225 87,226

Gross profit 128,427 110,547 123,267

Gross margin:

Product 58.8% 54.6% 58.2%

Service 63.2% 60.2% 59.1%

Total gross margin 60.8% 57.3% 58.6%

Operating expenses:

Research and development 46,797 47,410 51,796

Sales and marketing 34,881 37,218 33,898

General and administrative 12,734 15,553 15,094

Amortization of acquired 17,181 15,823 14,669 intangible assets

Acquisition-, disposal- and 1,052 1,197 857 integration-related expense

Restructuring and related 2,830 5,950 5,361 expense

Total operating expenses 115,475 123,151 121,675

Income (loss) from operations 12,952 (12,604) 1,592

Interest expense, net (3,048) (5,819) (5,400)

Other income (expense), net 17,180 (25,448) (2,407)

Income (loss) before income 27,084 (43,871) (6,215)taxes

Income tax provision (3,843) (816) (2,036)

Net income (loss) $ 23,241 $ (44,687) $ (8,251)

Earnings (loss) per share:

Basic $ 0.16 $ (0.31) $ (0.06)

Diluted $ 0.15 $ (0.31) $ (0.06)

Weighted average shares used to computeearnings (loss) per share:

Basic 147,467 145,936 144,483

Diluted 154,160 145,936 144,483

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Operations

(in thousands, except percentages and per share amounts)

(unaudited)

Six months ended

June 30, June 30,

2021 2020

Revenue:

Product $ 211,018 $ 196,761

Service 192,964 171,714

Total revenue 403,982 368,475

Cost of revenue:

Product 91,086 86,558

Service 73,922 68,126

Total cost of revenue 165,008 154,684

Gross profit 238,974 213,791

Gross margin:

Product 56.8% 56.0%

Service 61.7% 60.3%

Total gross margin 59.2% 58.0%

Operating expenses:

Research and development 94,207 94,091

Sales and marketing 72,099 64,869

General and administrative 28,287 32,299

Amortization of acquired intangible assets 33,004 29,003

Acquisition-, disposal- and 2,249 13,241 integration-related expense

Restructuring and related expense 8,780 7,436

Total operating expenses 238,626 240,939

Income (loss) from operations 348 (27,148)

Interest expense, net (8,867) (8,795)

Other expense, net (8,268) (3,251)

Loss before income taxes (16,787) (39,194)

Income tax provision (4,659) (2,227)

Net loss $ (21,446) $ (41,421)

Loss per share

Basic $ (0.15) $ (0.31)

Diluted $ (0.15) $ (0.31)

Weighted average shares used to compute lossper share:

Basic 146,706 132,737

Diluted 146,706 132,737

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

June 30, December 31,

2021 2020

Assets

Current assets:

Cash and cash equivalents $ 112,155 $ 128,428

Restricted cash 2,646 7,269

Accounts receivable, net 219,867 237,738

Inventory 46,556 45,750

Other current assets 31,739 28,461

Total current assets 412,963 447,646

Property and equipment, net 49,287 48,888

Intangible assets, net 384,352 417,356

Goodwill 416,892 416,892

Investments 106,012 115,183

Deferred income taxes 10,915 10,651

Operating lease right-of-use assets 57,869 69,757

Other assets 20,698 20,892

$ 1,458,988 $ 1,547,265

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of term debt $ 20,058 $ 15,531

Accounts payable 57,939 63,387

Accrued expenses and other 89,762 134,865

Operating lease liabilities 17,974 17,023

Deferred revenue 101,471 96,824

Total current liabilities 287,204 327,630

Long-term debt, net of current 359,333 369,035

Operating lease liabilities, net of 62,615 72,614current

Deferred revenue, net of current 22,036 26,010

Deferred income taxes 17,993 16,842

Other long-term liabilities 40,526 48,281

Total liabilities 789,707 860,412

Commitments and contingencies

Stockholders' equity:

Common stock 15 15

Additional paid-in capital 1,868,066 1,870,256

Accumulated deficit (1,199,922) (1,178,476)

Accumulated other comprehensive income 1,122 (4,942) (loss)

Total stockholders' equity 669,281 686,853

$ 1,458,988 $ 1,547,265

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Six months ended

June 30, June 30,

2021 2020

Cash flows from operating activities:

Net $ (21,446) $ (41,421) loss

Adjustments to reconcile net loss to cash flows provided by operating activities:

Depreciation and amortization of property and 8,475 8,260 equipment

Amortization of intangible assets 33,004 29,003

Amortization of debt issuance costs 3,684 2,554

Stock-based compensation 9,850 6,198

Deferred income taxes 918 97

Gain on sale of business (2,772) -

Decrease in fair value of investments 9,171 -

Reduction in deferred purchase consideration - (69)

Foreign currency exchange losses 2,013 3,463

Changes in operating assets and liabilities:

Accounts receivable 17,360 45,422

Inventory (1,527) 773

Other operating assets 10,671 14,282

Accounts payable (3,508) (41,515)

Accrued expenses and other long-term liabilities (58,536) 9,111

Deferred revenue 673 554

Net cash provided by operating activities 8,030 36,712

Cash flows from investing activities:

Purchases of property and equipment (10,570) (14,891)

Business acqusitions, net of cash acquired - (346,852)

Proceeds from sale of business 2,944 -

Proceeds from the sale of fixed assets - 43,500

Net cash used in investing activities (7,626) (318,243)

Cash flows from financing activities:

Borrowings under revolving line of credit - 615

Principal payments on revolving line of credit - (8,615)

Proceeds from issuance of term debt 74,625 403,500

Principal payments of term debt (82,147) (52,400)

Principal payments of finance leases (507) (668)

Payment of debt issuance costs (789) (10,573)

Proceeds from the exercise of stock options 24 23

Payment of tax withholding obligations related to net (12,064) (808) share settlements of restricted stock awards

Net cash (used in) provided by financing (20,858) 331,074 activities

Effect of exchange rate changes on cash, cash (442) (142)equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and (20,896) 49,401restricted cash

Cash and cash equivalents, beginning of year 135,697 44,643

Cash, cash equivalents and restricted cash, end of $ 114,801 $ 94,044period

RIBBON COMMUNICATIONS INC.

Supplemental Information

(in thousands)

(unaudited)

The following tables provide the details of stock-based compensation includedas components of other lineitems in the Company's Condensed Consolidated Statements of Operations and theline items in which theseamounts are reported.

Three months ended Six months ended

June 30, March 31, June 30, June 30, June 30,

2021 2021 2020 2021 2020

Stock-basedcompensation

Cost of revenue - $ 93 $ 27 $ 39 $ 120 $ 66product

Cost of revenue - 469 235 159 704 289service

Cost of revenue 562 262 198 824 355

Research and 1,160 627 738 1,787 1,296development

Sales and 1,752 1,874 1,011 3,626 1,763marketing

General and 1,316 2,297 1,275 3,613 2,784administrative

Operating 4,228 4,798 3,024 9,026 5,843 expense

Total stock-based $ 4,790 $ 5,060 $ 3,222 $ 9,850 $ 6,198 compensation

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures

(in thousands, except per share amounts)

(unaudited)

Three months ended

June 30, March 31, June 30,

2021 2021 2020

GAAP Total gross margin 60.8% 57.3% 58.6%

Stock-based compensation 0.3% 0.2% 0.1%

Non-GAAP Total gross margin 61.1% 57.5% 58.7%

GAAP Net income (loss) $ 23,241 $ (44,687) $ (8,251)

Stock-based compensation 4,790 5,060 3,222

Amortization of acquired intangible 17,181 15,823 14,669assets

Litigation costs - - (937)

Acquisition-, disposal- and 1,052 1,197 857integration-related expense

Restructuring and related expense 2,830 5,950 5,361

Gain on sale of business (2,772) - -

Interest income on debentures (1,196) (1,459) -

Decrease (increase) in fair value of (12,074) 23,900 -investments

Tax effect of non-GAAP adjustments (6,205) (880) (3,518)

Non-GAAP Net income $ 26,847 $ 4,904 $ 11,403

Earnings (loss) per share

GAAP Diluted earnings (loss) per share $ 0.15 $ (0.31) $ (0.06)

Stock-based compensation 0.03 0.03 0.02

Amortization of acquired intangible 0.11 0.11 0.10assets

Litigation costs - - (0.01)

Acquisition-, disposal- and 0.01 0.01 0.01integration-related expense

Restructuring and related expense 0.02 0.05 0.04

Gain on sale of business (0.02) - -

Interest income on debentures (0.01) (0.01) -

(Increase) decrease in fair value of (0.08) 0.16 -investments

Tax effect of non-GAAP adjustments (0.04) (0.01) (0.02)

Non-GAAP Diluted earnings per share $ 0.17 $ 0.03 $ 0.08

Weighted average shares used tocompute diluted earnings (loss) pershare

Shares used to compute GAAPdiluted 154,160 145,936 144,483earnings (loss) per share

Shares used to compute 154,160 155,032 150,512Non-GAAPdiluted earnings per share

Adjusted EBITDA

GAAP Income (loss) from operations $ 12,952 $ (12,604) $ 1,592

Depreciation 4,249 4,226 4,786

Amortization of acquired intangible 17,181 15,823 14,669assets

Stock-based compensation 4,790 5,060 3,222

Litigation costs - - (937)

Acquisition-, disposal- and 1,052 1,197 857integration-related expense

Restructuring and related expense 2,830 5,950 5,361

Non-GAAP Adjusted EBITDA $ 43,054 $ 19,652 $ 29,550

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures

(in thousands, except per share amounts)

(unaudited)

Six months ended

June 30, June 30,

2021 2020

GAAP Total gross margin 59.2% 58.0%

Stock-based compensation 0.2% 0.1%

Non-GAAP Total gross margin 59.4% 58.1%

GAAP Net loss $ (21,446) $ (41,421)

Stock-based compensation 9,850 6,198

Amortization of acquired intangible assets 33,004 29,003

Litigation costs - 2,101

Acquisition-, disposal- and integration-related 2,249 13,241expense

Restructuring and related expense 8,780 7,436

Gain on sale of business (2,772) -

Interest income on debentures (2,655) -

Decrease in fair value of investments 11,826 -

Tax effect of non-GAAP adjustments (7,085) (3,926)

Non-GAAP Net income $ 31,751 $ 12,632

(Loss) earnings per share

GAAP Loss per share $ (0.15) $ (0.31)

Stock-based compensation 0.06 0.05

Amortization of acquired intangible assets 0.22 0.21

Litigation costs - 0.02

Acquisition-, disposal- and integration-related 0.01 0.10expense

Restructuring and related expense 0.07 0.05

Gain on sale of business (0.02) -

Interest income on debentures (0.02) -

Decrease in fair value of investments 0.09 -

Tax effect of non-GAAP adjustments (0.05) (0.03)

Non-GAAP Diluted earnings per share $ 0.21 $ 0.09

Weighted average shares used to compute (loss)diluted earnings per share

Shares used to compute GAAPloss per share 146,706 132,737

Shares used to compute Non-GAAPdiluted earnings 154,651 136,159per share

Adjusted EBITDA

GAAP Income (loss) from operations $ 348 $ (27,148)

Depreciation 8,475 8,260

Amortization of acquired intangible assets 33,004 29,003

Stock-based compensation 9,850 6,198

Litigation costs - 2,101

Acquisition-, disposal- and integration-related 2,249 13,241expense

Restructuring and related expense 8,780 7,436

Non-GAAP Adjusted EBITDA $ 62,706 $ 39,091

RIBBON COMMUNICATIONS INC.

Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook

(unaudited)

Three months ending Year ending

September 31, 2021 December 31, 2021

Range Range

Revenue ($ millions) $ 215 $ 225 $ 900 $ 900

Gross margin

GAAP outlook 56.8% 57.8% 57.8% 58.8%

Stock-based 0.2% 0.2% 0.2% 0.2% compensation

Non-GAAP outlook 57.0% 58.0% 58.0% 59.0%

(Loss) earnings pershare

GAAP outlook $ (0.03) $ - $ (0.11) $ (0.04)

Stock-based 0.04 0.04 0.14 0.14 compensation

Amortization of acquired intangible 0.11 0.11 0.43 0.43 assets

Acquisition-, disposal- and 0.01 0.01 0.03 0.03 integration-related expense

Restructuring and 0.01 0.01 0.07 0.07 related expense

(Gain) loss on change in value of (0.01) (0.01) 0.04 0.04 debentures*

Tax effect of non-GAAP (0.02) (0.03) (0.11) (0.13) adjustments

Non-GAAP outlook $ 0.11 $ 0.13 $ 0.49 $ 0.54

Weighted average sharesused to compute (loss)diluted earnings pershare (in thousands)

Shares used to compute GAAP(loss) diluted 148,000 148,000 148,000 148,000 earnings per share

Shares used to compute Non-GAAPdiluted 155,000 155,000 155,000 155,000 earnings per share

Adjusted EBITDA ($millions)

GAAP income from $ 1.9 $ 5.9 $ 24.4 $ 34.4 operations

Depreciation 4.2 4.2 16.9 16.9

Amortization of acquired intangible 17.3 17.3 66.6 66.6 assets

Stock-based 5.7 5.7 20.7 20.7 compensation

Acquisition-, disposal- and 1.9 1.9 5.3 5.3 integration-related expense

Restructuring and 1.0 1.0 11.1 11.1 related expense

Non-GAAP outlook $ 32.0 $ 36.0 $ 145.0 $ 155.0

Excludes any estimated future (income) loss related to the revaluation of* the debentures and warrants received as consideration from the sale of the Kandy Communications Business.

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SOURCE Ribbon Communications Inc.