Q4 2021 Ribbon Communications Inc Earnings Call

February 16, 2022

[music].

Speaker 1: Greetings and welcome to Greetings and welcome to ribbon communications, fourth quarter 2021 Financial Results Conference Call.

Greetings and welcome to Ribbon Communications fourth quarter 2021 financial results Conference call.

Speaker 1: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

At this time all participants are in a listen only mode.

You didn't answer session will follow the formal presentation.

Speaker 1: 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.

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.

Speaker 1: It is now my pleasure to introduce your host, Tom Barry, Investor Relations. Thank you. You may begin. Good afternoon and welcome to RIBN's fourth quarter and full year 2021 Financial Results Conference call. I'm Tom Barry, Investor Relations.

It is now my pleasure to introduce your host Tom Berry Investor Relations. Thank you you may begin good afternoon, and welcome to ribbons fourth quarter and full year 2021 financial results conference call on.

I'm, Tom Berry Investor Relations of Ribbon Communications.

Speaker 2: Also on the call today will be Bruce McClelland, Ribbon's Chief Executive Officer, and Mick Lopez, Ribbon's Chief Financial Officer, and Sam Bucci, General Manager of Ribbon's IP Optical Networks.

Also on the call today will be Bruce Mcclelland, Deputy Chief Executive Officer, and Mick Lopez for him as Chief Financial Officer, and Sam Buchi General manager of ribbons IC optical networks business.

Speaker 2: Today's call is being webcast live and will be archived on the investor relations section of our website at ribboncommunications.com, where both our press release and our supplemental slides are currently available.

Today's call is being webcast lie.

On the Investor Relations section of our website at ribbon Communications Dot Com, where both our press release and our supplemental slides that are currently available.

Speaker 2: Certain matters we will be discussing today, including the business outlook and financial projections for the first quarter of 2022 and beyond our forward-looking state.

Certain matters, we will be discussing today, including our business outlook and financial projections for the first quarter of 2022 and beyond are forward looking statements.

Speaker 2: Such statements are subject to the risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking...

Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements.

These risks and uncertainties are discussed in our documents filed with the SEC. We are picking our most recent Form 10-K and Form 10-Q .

Speaker 2: These risks and uncertainties are discussed in our documents filed with the SEC, including our most recent Form 10-K in Form 10-K .

I refer you to our Safe Harbor statement included on slide two of the supplemental slides for this conference call.

Speaker 2: I refer you to our State Harbor statement included on slide 2 of the supplemental slides for this conference call. In addition, we will present nine...

In addition, we will present non-GAAP financial information on this call but.

Speaker 2: Reconciliations to the applicable GAAP measures are included in the earnings press release we issued this afternoon, as well as in the supplemental slides for this conference call, which again, are both available on the investor relations section of our website. And now I'd like to turn the call over to Bruce. Bruce? Thanks.

Reconciliations to the applicable GAAP measures are included in the earnings press release, we issued this afternoon as well as in our supplemental slides for this conference call, which again are both available on the Investor Relations section of our website.

And now I'd like to turn the call over to Bruce Bruce.

Thanks, Tom and thanks to everyone for joining us.

I'd like to start the call. This evening with a short assessment of our performance in 2021 and the actions, we're taking to improve our results going forward.

Speaker 1: I'd like to start the call this evening with a short assessment of our performance in 2021. And the actions we're taking to improve our results going forward.

Despite incredible efforts by the employees of ribbon during a challenging year we.

Speaker 1: Despite incredible efforts by the employees of Ribbon during a challenging year, we were disappointed with our financial results for 2021.

We're disappointed with our financial results for 2021.

When we started the year, we'd expect it to achieve growth in both revenue and earnings.

Speaker 1: When we started the year, we expected to achieve growth in both revenue and earnings.

Speaker 1: We have just completed a difficult 2020 with the onset of COVID, but performed exceptionally well despite this, and posted improvements every quarter throughout the year.

We just completed a difficult 2020 with the onset of Covid.

Performed exceptionally well despite this and posted improvements every quarter throughout the year.

Of course, there are several reasons, we missed our growth goals in 2021, we had extended COVID-19 challenges supply chain issues heightened employee attrition and regional headwinds in areas like India.

Speaker 1: Of course, there's several reasons we missed our growth goals in 2021. We had extended COVID challenges, supply chain issues, heightened employee attrition and regional headwinds in areas like India, to name a few.

But ultimately our primary challenge has been the length of time it takes to convert our new IP optical customer wins into sustainable revenue.

Speaker 1: But ultimately, our primary challenge has been the length of time it takes to convert our new IP optical customer wins into sustainable revenue. Well, the investment that's needed to obtain and execute on the wins and develop our roadmap for immediate investment.

The investment that's needed to obtain and execute on the wins and develop our roadmap for our media investments.

Speaker 1: Similar to others in the industry, we've also been impacted by more than we expected by escalating macro supply chain issues from both the cost and predictability perspective.

Similar to others in the industry. We have also been impacted by more than we expected by escalating macro supply chain issues from both the cost and predictability perspective.

Speaker 1: And we were particularly surprised by the increased intensity of issues in the last several weeks of 2021 and the impact it had on shipments and products.

And we were particularly surprised by the increase in intensity of issues in the last several weeks of 2021 and the impact it had on shipments and product costs.

Cost across many of our products have increased and as a result, we've adjusted our forward margin projections for fiscal 'twenty two.

Speaker 1: Costs across many of our products have increased, and as a result, we've adjusted our forward margin projections for fiscal 2021.

We've taken a variety of actions to mitigate these issues and in recent weeks have begun to see stabilization.

Speaker 1: We've taken a variety of actions to mitigate these issues, and in recent weeks have begun to see stabilization, but we remain cautious and are not assuming any significant improvement in component lead times for the remainder of the year.

We remain cautious and are not assuming any significant improvement in component lead times for the remainder of the year.

Speaker 1: and have adjusted our forecasting process to more accurately account for these issues.

Adjusted our forecasting process more accurately account for these issues.

We have a strong funnel of IP optical opportunities in a growing list of new strategic wins with significant long term growth potential.

Speaker 1: and a growing list of new strategic wins that is significant in long-term growth.

Speaker 1: Well, conversion of these opportunities into revenue is taking longer than we expected and has been adversely impacted by supply chain.

While conversion of these opportunities and the revenue is taking longer than we expected and has been adversely impacted by supply chain issues. We are projecting year over year revenue growth of at least 10% for the IP optical segment in 2022.

Speaker 1: We are projecting year-over-year revenue growth of at least 10% for the IP optical segment in 2020.

Speaker 1: In the critical North American region, we grew by 164% last year, and we're targeting greater than 50% growth again in 2020.

In the critical North American region, we grew by 164% last year, and we're targeting greater than 50% growth again in 2022.

Other regions, such as Japan, India, and Australia are also expected to contribute to our projected 2022 firms that look.

Speaker 1: Other regions such as Japan, India and Australia are also expected to contribute to our projected 2022.

Speaker 1: As we've discussed previously, our investment in IP optical networks spans three product categories.

As we've discussed previously our investment in IP optical network stands three product categories optical transport IP networking and domain orchestration and element management.

Speaker 1: optical transport, IP networking, and domain orchestration and element.

We believe there are strong linkages between each of these technologies and the combination is a powerful differentiator.

Speaker 1: We believe there are strong linkages between each of these technologies and the combination is a powerful differentiator.

As a result, we've been increasing our R&D intensity and the IP optical portfolio, increasing 15% from 2021 and I expect the investment in 2022% to 25% higher than our 2021 investment rate.

Speaker 1: As a result, we've been increasing our R&D intensity in the IP optical portfolio, increasing 15% in 2021, and I expect the investment in 2022 to be 25% higher than our 2021 investment.

Sam Buchi, the GM of our IP optical business unit to join US. This afternoon, just provide a little more detail on the Kinder investments, we're making and where he has seen best growth opportunities based on his 20 plus year career at Nokia and Alcatel Lucent, leaving their optical business.

Speaker 1: I've asked Sam Bucci, the GM of our IP optical business unit, to join us this afternoon to provide a little more detail on the key investments we're making and where he is seeing best growth opportunities based on his 20-plus-year career at Nokia and Alcatel-Lucent leading their optical business.

Yeah.

Thank you Bruce.

Speaker 3: From a macro perspective, demand for bandwidth continues to grow at unprecedented levels as 5G deployments accelerate, and adoption of cloud networking and remote work create new traffic patterns and operational complexity.

From a macro perspective demand for bandwidth continues to grow at unprecedented levels of <unk> deployments accelerate and adoption of cloud networking and remote work create new traffic patterns and operational complexity.

Speaker 3: Dealing with these challenges while lowering total cost of ownership requires an IP optical network solution with better economics and a stepwise improvement in operational efficiency and simplicity.

With these challenges while lowering total cost of ownership requires an IP optical network solution with better economics, and a stepwise improvements in operational efficiency and simplicity.

Speaker 3: We are increasing our investment in developing solutions which provide optimized hardware and automation software within an open architecture, all under an umbrella of customer collaboration.

We are increasing our investment in developing solutions, which provide optimized hardware and automation software within an open architecture, all under an umbrella of customer collaboration.

Speaker 3: This includes fit-for-purpose IP routing optimized for multi-service access, aggregation, and metro networks, 400-gig optical transport.

This includes fit for purpose IP routing optimized for multi service access aggregation and Metro networks.

400 gig optical transport everywhere and.

Speaker 3: and practical automation software, which enables service providers to cross the automation divide at their own pace.

In practical automation software, which enables service providers to cross the automation divide at their own pace.

To be more specific our portfolio investment strategy revolves around three pillars first and.

Speaker 3: To be more specific, our portfolio investment strategy revolves around three pillars.

Speaker 3: In our Neptune IP routing portfolio, we are adding several new solutions, notably the introduction of the Neptune 2000 series next generation of IP routers powered by our real-time network operating system.

And our Neptune IP routing portfolio, we are adding several new solutions, notably the introduction of the Neptune 2000 series next generation of IP routers powered by our real time network operating system. The Neptune 2000 series provides best in class economics for IP transport networks with a full range of form factor.

Speaker 3: The Neptune 2000 series provides best in class economics for IP transport networks with a full range of form factors and pay as you use pricing options, up to 16 terabits in capacity.

<unk> and pay as you use pricing options up to 16 terabytes in capacity.

The platform provides converts support for Ethernet IP Mpls segment routing flex Ethernet.

Speaker 3: The platform provides convert support for Ethernet, IP and PLS, Segment Routing, Flex Ethernet, TDM to IP, OTN, and WDM, all optimized for aggregating, routing, and backhauling traffic from the multi-service access edge to the IP core.

<unk> IP <unk> and WDM, all optimized for aggregating routing and backhaul in traffic from the multi service access edge to the IP core.

Speaker 3: The Neptune 2000 series routers support WDM interfaces up to and including 400 gig ZR and ZR plus IP over WDM applications.

The Neptune 2000 series routers support WDM interfaces up to and including 400 gig ZR and ZR plus.

WDM applications.

Speaker 3: The NETCON 2000 series is built around the ribbon real-time network operating.

<unk> 2000 series is built around the ribbon real time network operating system, a state of the art Telco grade NAS, which is based on Neptunes widely deployed routing software.

Speaker 3: state-of-the-art telco grade NOS which is based on Neptune's widely deployed routing software. The R-NOS can be sold and deployed either on our own platforms or on third-party white-box platforms.

<unk> can be sold and deployed either on our own platforms or on third party white box platforms.

Speaker 3: The second pillar of the portfolio is the MUSE SDN multi-layer orchestration. MUSE provides advanced network planning, control, and automation applications, including analytics, workflow engines, and closed-loop processes to deliver practical automation from human-assisted to cognitive software intent-driven under an open and flexible cloud-native software architecture.

The second pillar of the portfolio is the news SDN multilayer orchestration news provides advanced that we're planning control and automation applications, including analytics workflow engines in closed loop processes to deliver practical automation from human assisted to cognitive software intent driven under an open and flex.

<unk> cloud native software architecture.

Speaker 3: Muse provides modernized network management for Ribbon's IP optical products, as well as advanced SDN-based capabilities related to service fulfillment and assurance, such as multi-layer optimization, network slicing, and pre-planned restoration, among others.

News provides modernized network management for ribbons IP optical products as well as advanced SDN based capabilities related to service fulfillment and assurance such as multilayer optimization network slicing and Preplanned restoration among others.

The newest cloud native architecture incorporates low code techniques to enable Dev ops space tailoring to the specific needs of the network operator.

Speaker 3: The MuseCloud native architecture incorporates low-code techniques to enable DevOps-based tailoring to the specific needs of the network operator.

The third pillar of the portfolios, our Apollo optical networking solution, where investments are being made to expand the portfolio to support 400 gig transport everywhere.

Speaker 3: The third pillar of the portfolios are Apollo Optical Networking.

Speaker 3: where investments are being made to expand the portfolio to support 400 gig transport everywhere, recognizing that 400 gig is the capacity of choice going forward in Metro, offering the best trade-off between performance and cost.

<unk> got 400 gig is the capacity of choice going forward in metro offering the best tradeoff between performance and cost.

Speaker 3: We see significant opportunity for differentiation, particularly around the software aspects of our products and have refined the roadmap through extensive discussions with both existing and potential new customers.

We see significant opportunity for differentiation, particularly around the software aspects of our products and our refined the roadmap through extensive discussions with both existing and potential new customers.

Our strategy is to lower total cost of ownership and reduce operational complexity by enabling practical automation and a more open ecosystem in network architecture with an end to end suite of products. This is key to our differentiation and how we win.

Speaker 3: Our strategy is to lower total cost of ownership and reduce operational complexity by enabling practical automation in a more open ecosystem and network architecture with an end-to-end suite of products. This is key to our differentiation and how we win.

We recently received our Lightwave Innovation award for the multilayer optimization capabilities of our Muse network planner, which demonstrates industry recognition of our approach to reducing cost and complexity using our multilayer optimization engine.

Speaker 3: We recently received a Lightwave Innovation Award for the multi-layer optimization capabilities of our MUSE Network Planner, which demonstrates industry recognition of our approach to reducing cost and complexity using our multi-layer optimization engine. Bruce, I'll turn it back.

Bruce I'll turn it back to you.

Great. Thanks, Sam.

Speaker 1: We expect these investments will result in substantial growth and establish Ribbon as a significant player in IP and optical network.

We expect these investments will result in substantial growth and establish <unk> as a significant player in IP and optical networking.

Speaker 1: To capture this longer-term growth, we expect 2022 to be an investment year and are projecting negative adjusted EBITDA of approximately $35 million for the IPO.

To capture this longer term growth, we expect 2022 to be an investment year and are projecting negative adjusted EBITDA of approximately $35 million for the IP optical segment.

Speaker 1: In light of our projections, we analyzed the carrying value of our IP optical goodwill and took a non-cash accounting charge.

In light of our projections, we analyze the carrying value of our IP optical goodwill and took a noncash accounting charge in the fourth quarter.

And our cloud and edge segment, the secure voice over IP business continues to be a growth.

Speaker 1: In our CloudNedge segment, the secure voice over IT business continues to be a great foundation for the company, and our visibility into 2022 is solid.

Foundation for the company and our visibility into 2022, it's solid.

We expect continued investment by many of our service provider customers as they modernize their voice networks and address their aging infrastructure.

Speaker 1: We expect continued investment by many of our service provider customers as they modernize their voice network.

Speaker 1: and address their aging infrastructure, also helping them meet increasing environmental regulatory requirements.

So helping them meet increasing environmental regulatory requirements.

The backdrop of accelerating usage of platforms, such as Microsoft teams and zoom provide an excellent opportunity for growth for our cloud business and the continued investment we're making both in roadmap and go to market support our projections for this business.

Speaker 1: The backdrop of accelerating usage of platforms such as Microsoft Teams and Zoom provide an excellent opportunity for growth for our cloud management.

Speaker 1: And the continued investment we are making both in roadmap and go to market support our projections for this.

And as both service providers and enterprises increasingly adopt cloud computing paradigms.

Speaker 1: And as both service providers and enterprises increasingly adopt cloud computing paradigms, our investment to adapt our voice over IP portfolio to leverage cloud native technologies provides an additional growth opportunity.

Our investments to adapt our voice over IP portfolio to leverage cloud Native technologies provides some additional growth opportunity for the business.

Speaker 1: We had our first significant telco cloud win in Q4 with a major mobile carrier in Japan who selected our cloud-native session border controller for deployment in the Internet.

We had our first significant telco cloud win in Q4 with a major mobile carrier in Japan, who selected our cloud native session border controller for deployment in their network.

In addition, the dedicated go to market enterprise sales team created in the middle of last year to better address the growing enterprise market opportunity is bearing fruit and we had promising results in the fourth quarter, including new customer wins across the financial.

Speaker 1: In addition, the dedicated go-to-market enterprise sales team we created in the middle of last year to better address the growing enterprise market opportunity is bearing fruit, and we had promising results in the fourth quarter, including new customer wins across the financial, IT, and automotive verticals. As an example, we had a significant

And automotive verticals.

As an example, we had a significant win with our partners.

Speaker 1: to deploy an integrated digital transformation solution with one of the world's largest automobile brands as they transition from a legacy on-premise PBX system to Microsoft.

To deploy an integrated digital transformation solution with one of the worlds largest automobile brands as they transition from a legacy on premise PBX system to Microsoft teams.

Speaker 1: This new collaboration with Infosys offers a pre-integrated solution leveraging our Microsoft Certified Core and Edge Session Border Controllers and Centralized Policy Management.

This new collaboration with emphasis offers a pre integrated solution leveraging our Microsoft certified core and edge session border controllers, and centralized policy manager to simplify and accelerate communications upgrades for large corporations with complex requirements.

Speaker 1: simplify and accelerate communications upgrades for large corporations with complex requirements.

Overall, we expect the growth from enterprise and telco cloud, mostly offset any decline in traditional service provider spending.

Speaker 1: Overall, we expect the growth from enterprise and telco cloud to mostly offset any decline in traditional service providers.

Speaker 1: but are conservatively projecting flat to slightly down overall cloud and edge revenue in 2022 with approximately 8% lower off X and a very profitable contribution.

But our conservatively projected flat to slightly down overall cloud and edge revenue in 2022, with approximately 8% lower opex and a very profitable contribution to the company with adjusted EBITDA projected in excess of $150 million for 2022.

Speaker 1: with adjusted projected in excess of $150 million.

To support the investment in critical growth areas, we're implementing a strategic restructuring to streamline operations.

Speaker 1: To support the investment in critical growth areas, we're implementing a strategic restructuring to streamline operating.

Speaker 1: We'll sharpen our focus on the areas where we have the best opportunity to grow and further reduce investment in more mature product areas while also lowering overall.

Sharpen our focus on the areas, where we have the best opportunity to grow and further reduce investment in more mature product areas. While also lowering overall corporate expense overhead.

We expect the majority of these changes to be completed in the second quarter and reduce our operating expense run rate from the $100 million level in the first quarter to approximately $95 million per quarter for the rest of the year.

Speaker 1: We expect the majority of these changes to be completed in the second quarter and reduce our operating expense run rate from the $100 million level in the first quarter to approximately $95 million per quarter for the rest.

Changes include reductions within G&A, R&D, and sales and marketing as well as reduced real estate occupancy as we implement a more flexible work from home environment that employees have requested the continued post COVID-19 .

Speaker 1: Changes include reductions within G&A, R&D, and sales and marketing, as well as reduced real estate occupancy, as we implement a more flexible work-from-home environment that employees have requested to continue post-COVID.

In summary, we continue to believe in the strategy behind the business, we've been able to leverage the traditional ribbon voiceover IP business to position, our software and hardware portfolio of IP networking and optical transport product.

Speaker 1: we've been able to leverage the traditional ribbon voice of our IT team.

Speaker 1: position our software and hardware portfolio of IP networking and optical transport products. And we continue to win.

And we continue to win important new customers each quarter.

Speaker 1: In particular, we're making real progress identifying entry points with a significant number of major tier one offices.

In particular, we're making real progress identifying entry points with a significant number of major tier one operators and are investing heavily to capture this multiyear growth opportunity.

Speaker 1: and are investing heavily to capture this multi-year growth opportunity.

Speaker 1: The thesis is completely intact, and we believe patients will pay off with higher growth in subsequent years.

The thesis is completely intact, and we believe patience will pay off with higher growth in subsequent years.

Yeah.

Speaker 1: There were several great examples accomplished in the Q4. We were awarded new business with a major multi-service communications provider in Japan for an important TDM-to-IP migration project that will begin in the second half of the year.

There were several great. Examples published in Q4, we were awarded new business with a major multi service communications provider in Japan for an important tdm to IP migration project that will begin in the second half of the year.

Speaker 1: We were also selected as a new provider of optical transport solutions by MTN Group to provide mobile communication services in many African and Native American communities.

We were also selected as a new provider of optical transport solution by MTN group.

<unk> mobile communication services in many African and Asian countries and.

Speaker 1: And we were selected by a leading European railway operator for a major national backbone project. A hard fought.

And we were selected by a leading European railway operator for a major national backbone project.

Our hard fought win against all the major competitors in the industry.

Speaker 1: We also announced the data center Wynwood Telehouse, an international co-location service provider based in London and owned by KDDI in Japan, along with several other projects including NAMPOWER in Africa and an undersea cable project between Manila, Hong Kong, and Singapore with IPS.

We also announced the datacenter winter with Telcos and international co location service provider based in London and owned by <unk> in Japan, along with several other projects, including manpower in Africa and in undersea cable projects between Manila, Hong Kong and Singapore with Ics.

Speaker 1: Even more significantly, we've now started on a major project with the U.S. Tier 1 service provider to modernize the fixed voice infrastructure over the next several years that will significantly reduce the complexity and operating cost of infrastructure.

Even more significantly we have now started on a major project with a U S tier one service provider to modernize the fixed voice infrastructure over the next several years that will significantly reduce the complexity and operating cost to their network.

Speaker 1: The solution combines our telco cloud voice core solution with technology from our IP optical portfolio. It's a great example of the strength.

This solution combines our telco cloud voice core solution with technology from our IP optical portfolio.

This is a great example of the strength of our combined assets.

Speaker 1: We expect revenue to start on this project in the second half of the year and stretch over so.

We expect revenue to start on this project in the second half of the year and stretch over several years.

Speaker 1: Based on the above set of assumptions and initiatives, we're projecting overall revenue growth for the company at 2% to 4% in 2020.

Based on the above set of assumptions and initiatives, we're projecting overall revenue to the company at 2% to 4% in 2022 gross margins in a range of 55%, 56% and adjusted EBITDA of $110 million to $120 million.

Speaker 1: Gross margins in a range of 55 to 56% and adjusted EBITDA of 110 to 120 million.

And with that I'll turn it over to Mitch to provide additional detail on our performance in the fourth quarter and first quarter 2022 guidance.

Speaker 1: And with that, I'll turn it over to Mick to provide additional detail on our performance in the fourth quarter and first quarter 2022 guidance.

Thank you Bruce good afternoon, everyone, beginning with our GAAP results, our GAAP net loss of $96 million in the fourth quarter includes three significant amounts first we have a goodwill impairment related to the IP optical segment reflected a noncash accounting charge of $116 million.

Speaker 2: Thank you, Bruce. Good afternoon, everyone. Beginning with a gap is all.

Speaker 2: Our gap net loss of $96 million in the fourth quarter includes three significant amounts. First, we have a goodwill impairment related to the IP optical network segment reflected as a non-cash accounting charge of $116 million.

Speaker 2: in light of lower revenue growth than anticipated last year. And of our continued investment, we revised forward projections of the profitability of our IP optical networks reporting unit, and as a consequence, have lowered its fair value.

In light of lower revenue growth than anticipated last year.

Our continued investment we revise forward projections of the profitability of our IP optical networks reporting unit and as a consequence at lowered its fair value intervals.

Speaker 2: remain optimistic in the future growth by the optical networks as we continue to invest in research and development to create truly disruptive technology.

We remain optimistic in the future growth of IP optical networks as we continued to invest in research and development to create truly disruptive technologies we.

Speaker 2: We also had a $7 million loss in our GAAP income statement related to the quarterly mark-to-market of our investment in ADCT. These two GAAP accounting losses were partially offset by an income tax valuation release of $28 million associated with the company's United States tax position as we have improved profitability expectations there.

We also had a $7 million loss in our GAAP income statement related to the quarterly mark to market of our investment in <unk>.

These two GAAP accounting losses were partially offset by an income tax valuation release of $28 million associated with the company's United States tax position as we have improved profitability expectations there.

Speaker 2: on an adjusted non-gap basis. Fourth quarter 2021 results were as follows. Total revenue was $231 million, up 10% sequentially, but down 5% organically year over year when adjusted for the sale of candy.

On an adjusted non-GAAP basis fourth quarter 2021 results were as follows total revenue was $131 million up 10% sequentially, but down 5% organically year over year when adjusted for the sale of Candy.

Speaker 2: Sales of the quarter were negatively impacted by approximately $10 million of shipments moving into 2022 due to supply chain related.

Sales in the quarter were negatively impacted by approximately $10 billion shipments moving into 2022.

Supply chain related constraints. These constraints impacted both segments equally with shortages of key routing silicon and other components. We continue to face constrained to these areas. So far in 2022 and are taking those into account with our first quarter guidance. We also had several high margin software deals that did not close.

Speaker 2: These constraints impacted both segments equally with shortages of key routing silicon and other components.

Speaker 2: We continue to face constraints in these areas so far in 2022 and are taking those into account with our first quarter guidance.

Speaker 2: We also had several high-margin software deals that did not close but moved into 2020.

It's a 2022.

Speaker 2: None of these opportunities were lost, but they did impact the results in the fourth quarter.

None of these opportunities were lost but they did impact our results for the quarter.

Speaker 2: Our book to revenue, excluding maintenance, was 1.14 times what it afforded.

Our book to revenue, excluding maintenance was 114 times for the fourth quarter non.

Speaker 2: Not GAAP gross margin was 54% in Q4-21, below our 58% guidance. The margin was negatively impacted by lower sales than expected, higher component costs, and deal mix that we will explain for each set.

non-GAAP gross margin was 54% in fourth quarter 'twenty one.

Below our 58% guidance the margin was negatively impacted by lower sales than expected higher component costs and deal mix that we will explain for each segment.

Speaker 2: non-GAAP operating expenses were $102 million in the quarter, up from $93 million in the third quarter. As we had anticipated, more investment in IV optical research and development incurred more sales commissions and increased travel.

Cap operating expenses were $102 million quarter up from $93 million in the third quarter as we had anticipated more investment IV optical research and development incurred more sales commissions and increased travel to customers.

Speaker 2: gap-adjusted EBITDA was $26 million, which was $22 million below the midpoint of our guidance, driven by about $12 million lower revenue and $9 million lower gross margins than

GAAP adjusted EBITDA was $26 million, which was $22 million below the midpoint of our guidance driven by about $12 million lower revenue $9 million lower gross margins than anticipated.

Speaker 2: non-GAAP diluted EPS was $0.01 in the fourth quarter, but lowered guidance as a result of a lower adjusted EBITDA and a higher tax rate in the quarter. Our shared count was $149 million for GAAP earnings and $154 million for non-GAAP earnings.

GAAP diluted EPS was one sets in the fourth quarter below our guidance as a result of our lower adjusted EBITDA and a higher tax rate in the quarter, our share count was $149 million for GAAP earnings and a $154 million non-GAAP earnings in the quarter.

Speaker 2: Now, let's turn to the results of our two business sections.

Now, let's turn to the results of our two business segments.

And our cloud and edge business fourth quarter revenue was $147 million down 5% on an organic basis, excluding candy.

Speaker 2: Fourth quarter revenue was $147 million, down 5% on an organic basis.

Speaker 2: and Keeney, those sales to enterprise customers nearly doubled compared to both prior quarter and prior year.

Sales to enterprise customers, nearly double compared to both prior quarter and prior year period.

Gross margins were 64% in the quarter below our expectations due to higher component costs higher freight and logistics and higher volume mix of hardware such as our session border controller enterprise edge products that carry lower markets. While we expect first quarter margins will continue at about this level, we expect recovery into the <unk>.

Speaker 2: Gross margins were 64% of the quarter, but below our expectations due to higher component costs, higher freight over time.

Speaker 2: higher volume mix of hardware, such as our Session Board Controller Enterprise Edge products that carry lower markets.

Speaker 2: While we expect first quarter margins will continue at about this level, we expect recovery into the mid to high 60s in our margins as we improve revenue and expenses throughout

Mid to high sixties in our margins as we improved revenue and expenses throughout the year.

Speaker 2: non-GAAP-adjusted EFTA for CottonEdge was $37 million or 25% of revenue.

non-GAAP adjusted EBITDA for <unk> was $37 million or 25% of revenue.

Speaker 2: After the seasonally slow first quarter, we would expect adjusted EBITDA percentage to revert close to the 30% range for 5-inch. Now, turning to our

After the seasonally slow first quarter, we would expect adjusted EBITDA percentage to revert closer to 30% range for five minutes.

Now turning to our IP and optical networks business, we reported fourth quarter revenue of $83 million up 22% from $68 million third quarter with the majority of the increase coming from Europe , and North America sales in India were up modestly versus the third quarter.

Speaker 2: recorded fourth quarter revenue of $83 million, up 22% from $68 million in the third quarter, with the majority of the increase coming from Europe and North America. Sales in India were up modestly versus the third quarter.

Speaker 2: Non-gap gross margin was 36% in the fourth quarter, now slightly from 37% in the third quarter. This was below our expectations by about 300 basis points, driven by lower volumes, higher material costs and expedite fees, along with unfavorable customer and product quality.

non-GAAP gross margin was 36% in the fourth quarter down slightly from 37% in the third quarter. This was below our expectations by about 300 basis points, driven by lower volumes higher material costs, and expedite fees, along with unfavorable customer and product mix. As an example of mix, we get higher startup costs with a new customer.

Speaker 2: As an example of mix, we had higher startup costs with a new customer deployment.

<unk>.

Speaker 2: First quarter margins will likely be in the low 30% range as we continue to be challenged by these factors but are expected to improve as the year progresses and revenue grows.

First quarter margins will likely be in the low 30% range as we continue to be challenged by these factors are expected to improve as the year progresses and revenue growth.

Turning to the balance sheet, we ended the quarter with cash cash equivalents of $106 million, including $3 million in restricted cash.

Speaker 2: Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $106 million, including $3 million in restrictions.

This is an increase of $2 million from the previous quarter due to $11 million in cash flow from operations in the quarter capital expenditures were $3 million for the quarter.

Speaker 2: is an increase of $2 million from the previous quarter due to $11 million in cash flow from operations in the quarter. Capital expenditures where.

We met our quarterly financial Covenant, that's for our term loans fixed charge coverage ratio was 3.08 times above the one five times.

Speaker 2: We met our quarterly financial coverage for our term up. Fixed charge coverage ratio was 3.08 times above the 1.25 times.

Speaker 2: Our bank leverage ratio was 2.79 times, below the 3.5 times maximum for the fourth quarter. This maximum for this covenant metric will decrease to 3.25 times at the end of March 2015.

Our bank leverage ratio was 279 times below the three five times maximum for the fourth quarter. This.

This maximum covenant metric will decreased to three five times at the end of March 2023.

Speaker 2: Lastly, we have announced a strategic realignment of our investments towards key areas of growth, which includes some restructuring charges for 2020.

Lastly, we have announced a strategic realignment of our investments towards <unk> growth, which includes the restructuring charges for 2022 as Bruce noted, we anticipate that ribbon will improve our operating expenses by $5 million per quarter, starting in the second quarter, we anticipate taking a restructuring charge of approximately 6 million.

Speaker 2: As Bruce noted, we anticipate that RIVEN will improve our operating expenses by $5 million per quarter starting in the second quarter.

Speaker 2: we anticipate taking infrastructure in charge of approximately $6 million for employee separation expenses and about $14 million for real estate acquisition. Now, let's turn to first quarter guidance. The first quarter.

As for employee separation expenses and about $14 million for real estate optimization.

Now, let's turn to first quarter guidance.

The first quarter is always the seasonally low point for our business and after considering continued supply chain procurement challenges and cost we're projecting Q1 revenue to be approximately 10% lower than prior year and in a range of $165 million to $180 million.

Speaker 2: And after considering continued supply chain procurement challenges and costs, we're projecting Q1 revenue to be approximately 10% lower than prior year and in a range of $165 million to $180 million.

Speaker 2: In our cloud-init segment, we had a smaller number of network transformation projects competing this quarter, reducing both.

<unk> net.

We had a smaller number of network transformation projects competing this quarter, reducing both product and professional services revenue.

Speaker 2: This has a heightened impact on margins and earnings for the first quarter. We have a good visibility on 2022 projects with many of our core basic customers and expect revenues through the remainder of the year to be at similar levels to 2021, along with potential additional growth related to the new network modernization project Bruce mentioned earlier.

This has a heightened impact on margins and earnings for the first quarter.

We have good visibility on 2022 projects with many of our core base of customers and expect revenues through the remainder of the year to be at similar levels to 2021, along with potential additional growth related to the new network modernization projects, which I mentioned earlier.

The IP optical segment, we got visibility for demand above the guidance range, but are adjusting for potential delivery challenges late in the quarter. We're also cautious about potential impact to demand in Russia, Ukraine and surrounding areas related to the heightened political tensions we expect IP optical margins lower than normal this quarter due to lower.

Speaker 2: In the IP optical segment, we have visibility for demand above the guidance range, but are adjusting for potential delivery.

Speaker 2: We're also cautious about potential impact to demand in Russia, Ukraine and surrounding areas related to the heightened political tension.

Speaker 2: We expect IP optical margins to be lower than normal this quarter due to lower volumes, supply chain costs.

Volumes supply chain cost and customer mix.

Speaker 2: Overall, we anticipate Ribbon's gross margin in the quarter to be 50% to 51%.

We anticipate ribbons gross margin in the quarter to be 50% to 51% we.

Speaker 2: We do not expect significant benefits from our restructuring efforts in the first quarter and estimate operating expenses in the $100 million area.

We do not expect significant benefits from our restructuring efforts in the first quarter and operating expenses and the $100 million range are.

Speaker 2: The combined effect is in a normally low adjusted EBITDA loss outlook of $5 to $11 million in the first year.

The combined effect is an abnormally low adjusted Ebitdas loss outlook of 5% to $11 million in the first quarter.

Speaker 2: for the remainder of the year. We anticipate that we will return to adjust the positive margins in the.

For the remainder of the year, we anticipate that we will return to adjusted EBITDA positive margins in the mid to high teens as we experienced revenue growth fewer supply chain disruptions and improved expenses from restructuring.

Speaker 2: experience revenue growth, fewer supply chain disruptions, and improved expenses from restructuring. I'll turn it back to Bruce for a few closing remarks before we open it up to Q&A. Bruce?

Turn it back to Bruce for closing remarks, before we open it up to Q&A.

Thanks, Nick.

Speaker 1: Once again, I'll emphasize that we continue to believe in the strategy behind.

Once again I'll emphasize that we continue to believe in the strategy behind the business.

Speaker 1: We have a growing number of proof points and strategic wins and are investing heavily to capture this multi-year growth opportunity.

A growing number of proof points and strategic wins and are investing heavily to capture this multiyear growth opportunity.

Speaker 1: thesis is completely intact and we believe patients will pay off with higher growth and subsistence.

Thesis is completely intact, and we believe patience will pay off with higher growth in subsequent years.

Speaker 1: I'd like to thank the employees of Ribbon for their dedication and effort since 2021, and I know they're committed to executing on our plans in 2022 to realize our first objective.

I'd like to thank the employees of ribbon for their dedication and efforts in 2021 and I know they are committed to executing on our plans in 2020 to realize our FERC objectives.

Speaker 1: Operator, that concludes our prepared remarks and we can now take a few questions.

Operator that concludes our prepared remarks, and we can now take a few questions.

Sure.

Speaker 4: Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment while we poll for questions.

Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.

I'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key one moment, while we poll for questions.

Speaker 4: Once again, ladies and gentlemen, it is star one to ask a question.

Once again, ladies and gentlemen, it is star one to ask a question.

Speaker 4: Our first question comes from the line of Tim Savageau with Northland Capital Markets. Please proceed with your question.

Our first question comes from the line of Tim <unk> with Northland Capital markets. Please proceed with your question.

Your line is live.

Sure.

Can you hear me.

Yes, now we can.

Okay, Great Alright.

Speaker 2: A couple questions, kind of on the demand environment, and maybe directed towards Sam since we have him on the call.

A couple of questions kind of on the demand environment.

And then maybe directed towards Sam since we have them on the call.

And sort of.

Kind of different aspects of the carriers, who might be pursuing you mentioned.

Speaker 2: kind of different aspects of the carriers you might be pursuing. You mentioned a

Speaker 2: You know, pretty robust pipeline from a tier one perspective. I wonder.

So a pretty robust pipeline from a tier one perspective I wonder.

Whats your.

Speaker 2: you know, what your outlook is for, you know, that pipeline moving toward decision in 22. I imagine there's not a lot.

What's your outlook is for that pipeline moving towards decision in 'twenty two.

Theres not a lot.

Speaker 2: included in guidance for any new wins, but more ramping what you've already got, but a review of that on the one hand. Then I want to follow up and talk about kind of U.S. rural broadband-driven type opportunities.

Not included in guidance for any new wins, but more ramping what you've already got.

Do you have that on the one hand, and then I wanted to follow up and talk about kind of U S Rural broadband driven type opportunities.

Yes, Hey, Tim months, Bruce Thanks for the question.

Speaker 1: Yeah, hey, Tim, it's Bruce. Thanks for the question. Yeah, I think you're, you're right. We, you know, trying to estimate the exact timing of when we start to see revenue from new wins is one of the challenges we've had in pretty

Yes, I think youre right.

Trying to estimate the exact timing of when we start to see revenue from new wins is one of the challenges with that and predicting the business.

Speaker 1: The majority of what we've projected for 22 is with the set of customers that we have in the win column already.

Majority of what we've projected for 'twenty two is with the set of customers that we that we have in the wind column already.

Ramp through the year I think as you know the regions that are largest force today.

Speaker 1: I think as you know, the regions that are largest for us today is the European region, the Indian market.

The European region, India market.

Speaker 1: And where we're really focused on growing is in North America. And it was great to see the progress we made last year in North America with the series of customers like Rogers and Firewire Wireless that we've met.

And we're really focused on growing as in North America and it was great to see the progress we made last year in North America with the series of customers like Rogers and I are aware of a wireless that we've mentioned and.

Speaker 1: And as we talked about in the call, the engagement we have with just a broad set of customers is pretty exciting, but trying to estimate the exact time is a little trickier. So we've tried to be a little more conservative.

Now as we talked about in the call engagement, we have with just a broad set of customers, it's pretty exciting, but trying to estimate the exact timing a little trickier.

Trying to be a little more conservative.

And the outlook for for this year.

Speaker 2: Well, I guess to follow up on that, you did say you expect maybe 10% plus growth. I mean, what factors could, you know, maybe outside of the obvious, which is maybe a better supply environment?

I guess to follow up on that you did say.

Do you expect maybe 10% plus growth.

What factors could maybe outside of the obvious which is maybe a better supply environment.

Speaker 2: could lead to upside to that outlook for IP optical growth.

Could lead to upside to that outlook for IP optical group.

Yes, so what we are seeing Tim right now is just really active.

Speaker 1: Yeah, so what we're seeing, Tim, right now is just a really active RFP environment with a whole variety of different customers in different regions, so both North America, Europe , and Asia.

RFP environment.

With the whole variety of different customers in different regions, North America, Europe , and Asia, I mentioned and so it's a combination of wins with new customers as well as in our new product insertion with existing customers. So whether it's.

Speaker 1: And so it's a combination of wins with new customers as well as, you know, new product insertions with existing customers. So whether it's, you know, a new cell site router opportunity or coming in as a new supplier like MTN Group I mentioned.

A new cell site router opportunity.

We're coming in is.

Our new supplier like MTN group I mentioned in the Africa region.

Speaker 1: the Africa region, growing the business with some of the new accounts that we announced last year like Megaphone in Russia, Office and Singtel in the Asia-Pac region.

Growing the business with some of the new <unk>.

Counts that we announced last year like Mega phoned in Russia.

Optus, Singtel and the Asia Pac regions, which.

Speaker 1: which really haven't started yet from a revenue perspective. You know, there's been a lot of work going on qualifying the product.

Really haven't started yet from a revenue perspective, there's been a lot of work going on qualifying the product going through the network certification process et cetera.

Speaker 1: network certification process, et cetera, and, you know, all of those contribute.

All of those contribute to growth later in the year and again some of the new customers that we think we're going to win again trying to predict the exact timing is more difficult.

Speaker 1: the growth later in the year. And, you know, again, some of the new customers that we think we're going to win, again, trying to predict the exact timing is more difficult. So we've not tried to factor them into the 10% growth rate.

We've not tried to factor them into the 10% growth rate, thus dose plus on the end of it basically.

Okay. Thanks very much.

Thanks, so much Tim.

Speaker 4: There are no other questions in the queue. I'd like to hand the call back over to Bruce McClellan for closing remarks.

There are no other questions in the queue I'd like to hand, the call back over to Bruce Mcclelland for closing remarks.

Speaker 1: Yeah, thanks very much for everyone joining here this afternoon and we're excited about the year ahead and really look forward to keeping everyone updated as we go along. So thanks very much.

Yes, thanks, very much for everyone joining here this afternoon and.

Yes.

Excited about the year ahead, and really look forward to keeping everyone updated as we go along so thanks very much.

Speaker 4: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.

[music].

Speaker 4: Greetings and welcome to Rebin Communications fourth quarter 2021 financial results conference call.

Greetings and welcome to Ribbon Communications fourth quarter 2021 financial results Conference call.

Speaker 4: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

Speaker 4: 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.

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.

Speaker 4: It is now my pleasure to introduce your host, Tom Barry, Investor Relations. Thank you. You may begin. Good afternoon and welcome to Ribbon's fourth quarter and full year 2021 financial results conference call. I'm Tom Barry, Investor Relations.

And Tom Berry Investor Relations of Ribbon Communications.

Speaker 3: Also on the call today will be Bruce McClelland, Ribbon's Chief Executive Officer, and Mick Lopez, Ribbon's Chief Financial Officer, and Sam Bucci, General Manager of Ribbon's IP Optical Networks.

Also on the call today will be Bruce Mcclelland, <unk>, Chief Executive Officer, and Mick Lopez instruments, Chief Financial Officer, and Sam Buchi General manager of ribbons IP optical networks business.

Speaker 3: Today's call is being webcast live and will be archived on the Investor Relations section of our website at ribboncommunications.com, where both our press release and our supplemental slides are currently available.

Today's call is being webcast fly will be archived on the Investor Relations section of our website at ribbon Communications Dot Com, where both our press release and our supplemental slides are currently available.

Speaker 3: Certain matters we will be discussing today, including the business outlook and financial projections for the first quarter of 2022 and beyond are forward-looking statements.

Certain matters, we will be discussing today, including our business outlook and financial projections for the first quarter of 2022 and beyond are forward looking statements.

Speaker 3: Such statements are subject to the risks and uncertainties that could cause actual results to differ materially from those contained in the forward look.

Such statements are subject to the risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements.

Speaker 3: These risks and uncertainties are discussed in our documents filed with the SEC, including our most recent Form 10-K and Form 10-Q .

These risks and uncertainties are discussed in our documents filed with the SEC, including our most recent Form 10-K and Form 10-Q .

Speaker 3: I refer you to our Safe Harbor Statement included on slide 2 of the supplemental slides for this conference call. In addition, we will present non-gay and non-bisexual information. Thank you. Thank you.

I refer you to our Safe Harbor statement included on slide two of the supplemental slides for this conference call.

In addition, we will present non-GAAP financial information on this call reconciled.

Speaker 3: Reconciliations to the applicable GAAP measures are included in the earnings press release we issued this afternoon, as well as in the supplemental slides for this conference call, which, again, are both available on the Investor Relations section of our website. And now I'd like to turn the call over to Bruce. Bruce? Thanks, Ken.

And now I'd like to turn the call over to Bruce Bruce.

Thanks, Tom and thanks to everyone for joining us.

Speaker 3: I'd like to start the call this evening with a short assessment of our performance in 2021 and the actions we're taking to improve our results going forward.

I'd like to start the call. This evening with a short assessment of our performance in 2021 and the actions, we're taking to improve our results going forward.

Speaker 3: Despite incredible efforts by the employees of Ribbon during a challenging year, we were disappointed with our financial results for 2021.

Despite incredible efforts by the employees of ribbon during a challenging year.

We were disappointed with our financial results for 2021.

Speaker 3: When we started the year, we'd expected to achieve growth in both revenue and earnings.

When we started the year, we would expect it to achieve growth in both revenue and earnings.

Speaker 3: We had just completed a difficult 2020 with the onset of COVID but performed exceptionally well despite this and posted improvements every quarter throughout the year.

Just completed a difficult 2020 with the onset of Covid.

Formed exceptionally well despite this and posted improvements every quarter throughout the year.

Speaker 3: Of course, there's several reasons we missed our growth goals in 2021. We had extended COVID challenges, supply chain issues, heightened employee attrition, and regional headwinds in areas like India, to name a few.

But ultimately our primary challenges and the length of time it takes to convert our new IP optical customer wins into sustainable revenue, while the investment that's needed to obtain and execute on the wins and develop our roadmap for our immediate investments.

Speaker 3: But ultimately, our primary challenge has been the length of time it takes to convert our new IP optical customer wins into sustainable revenue while the investment that's needed to obtain and execute on the wind and develop our roadmap or immediate investment.

Speaker 3: Similar to others in the industry, we've also been impacted by more than we expected by escalating macro supply chain issues from both the cost and predictability perspective. And we were particularly surprised by the increased intensity of issues in the last several weeks of 2021 and the impact it had on shipments and product.

Similar to others in the industry. We have also been impacted by more than we expected by escalating macro supply chain issues from both the cost and predictability perspective.

We were particularly surprised by the increased intensity of issues in the last several weeks of 2021 and the impact it had on shipments and product costs.

Speaker 3: Costs across many of our products have increased, and as a result, we've adjusted our forward margin projections for fiscal 2020.

Cost across many of our products have increased and as a result, we've adjusted our forward margin projections for fiscal 'twenty two.

We've taken a variety of actions to mitigate these issues and in recent weeks have begun to see stabilization, but we remain cautious and are not assuming any significant improvement in component lead times throughout the remainder of the year.

Speaker 3: and have adjusted our forecasting process to more accurately account for these issues.

And have adjusted our forecasting process to more accurately account for these issues.

We had a strong funnel of IP optical opportunities in a growing list of new strategic wins that are significant and long term growth potential.

Speaker 1: and a growing list of new strategic wins that is significant in long-term growth.

Speaker 3: Well, conversion of these opportunities and the revenue is taking longer than we expected and has been adversely impacted by supply chain.

Speaker 1: We are projecting year-over-year revenue growth of at least 10% for the IP optical segment in 2020.

Speaker 1: In the critical North American region, we grew by 164% last year and we're targeting greater than 50% growth again in 2020.

In the critical North American region, we grew by 164% last year, and we're targeting greater than 50% growth again in 2022.

Speaker 3: Other regions such as Japan, India, and Australia are also expected to contribute to our projected 2022 growth.

Other regions, such as Japan, India, and Australia are also expected to contribute to our projected 2022 growth outlook.

Speaker 1: As we've discussed previously, our investment in IP optical networks spans three product categories.

As we've discussed previously our investment in IP optical network spans three product categories optical transport IP networking and domain orchestration and element management.

Speaker 1: optical transport, IP networking, and domain orchestration and elements.

Speaker 3: We believe there are strong linkages between each of these technologies and the combination is a powerful differentiator.

We believe there are strong linkages between each of these technologies and the combination is a powerful differentiator.

As a result, we've been increasing our R&D intensity and the IP optical portfolio.

Kris and 15% in 2021, and I expect the investment in 2022% to 25% higher than our 2021 investment rate.

Speaker 1: I've asked Sam Bucci, the GM of our IP Optical Business Unit, to join us this afternoon to provide a little more detail on the key investments we're making and where he has seen best growth opportunities based on his 20-plus year career at Nokia and Alcatel-Lucent leading their optical business.

With that Sam Buchi, the GM of our IP optical business unit to join US. This afternoon is to provide a little more detail on the key investments, we're making and where he is seeing the best growth opportunities based on his 20 plus year career at Nokia and Alcatel Lucent, leading their optical business.

Thank you Bruce.

With these challenges while lowering total cost of ownership requires an IP optical network solution with better economics, and a stepwise improvements in operational efficiency and simplicity.

We are increasing our investment in developing solutions, which provide optimized hardware and automation software.

Then in open architecture, all under an umbrella of customer collaboration.

Speaker 3: This includes fit-for-purpose IP routing optimized for multi-service access, aggregation, and metro networks, 400-gig optical transporters,

This includes fit for purpose IP routing optimized for multi service access aggregation and Metro networks.

400 gig optical transport everywhere.

Speaker 3: and practical automation software, which enables service providers to cross the automation divide at their own pace.

And practical automation software, which enables service providers to cross the automation divide at their own pace.

Speaker 3: To be more specific, our portfolio investment strategy revolves around three pillars.

To be more specific our portfolio investment strategy revolves around three pillars first.

And our Neptune IP routing portfolio, we are adding several new solutions, notably the introduction of the Neptune 2000 series. The next generation of IP routers powered by our real time network operating system. The Neptune 2000 series provides best in class economics for IP transport networks with a full range of form.

Speaker 3: The Neptune 2000 series provides best-in-class economics for IP transport networks with a full range of form factors and pay-as-you-use pricing options, up to 16 terabits in capacity.

<unk> and pay as you use pricing options up to 16 terabytes in capacity.

Speaker 3: The platform provides convert support for Ethernet, IP and PLS, segment routing, Flex Ethernet, TDM to IP, OTN, and WDM, all optimized for aggregating, routing, and backhauling traffic from the multi-service access edge to the IP core.

The platform provides converts support for Ethernet IP Mpls segment routing flex Ethernet Tdm to IP, <unk> and WDM, all optimized for aggregating routing and backhaul in traffic from the multi service access edge to the IP core.

Speaker 3: The Neptune 2000 series routers support WDM interfaces up to and including 400 gig ZR and ZR plus IP over WDM applications.

The Neptune 2000 series routers support WDM interfaces up to and including 400 gig ZR and ZR plus yogurt.

Yogurt WDM applications.

Speaker 3: The Neptune 2000 series is built around the Ribbon real-time network operating system.

The next in 2000 series is built around the ribbon real time network operating system, a state of the art Telco grade NAS, which is based on Neptunes widely deployed routing software. The R&R can be sold and deployed either on our own platforms or on third party white box platforms.

Speaker 3: The second pillar of the portfolio is the Muse SDN multi-layer orchestration. Muse provides advanced network planning, control, and automation applications including analytics, workflow engines, and closed-loop processes to deliver practical automation from human-assisted to cognitive software intent-driven under an open and flexible cloud-native software architecture.

<unk> cloud native software architecture.

Newest provides modernized network management for ribbon drive the optical products as well as advanced SDN based capabilities related to service fulfillment and assurance such as multilayer optimization network slicing and pre planned restoration among others.

Speaker 3: The MuseCloud native architecture incorporates low-code techniques to enable DevOps-based tailoring to the specific needs of the network operator.

The newest cloud native architecture incorporates low code techniques to enable Dev ops space tailoring to the specific needs of the network operator.

Speaker 3: The third pillar of the portfolios are Apollo Optical Networking.

The third pillar of the portfolios, our Apollo optical networking solution, where investments are being made to expand our portfolio to support 400 gig transport everywhere recognizing that 400 gig is the capacity of choice going forward in metro offering the best tradeoff between performance and cost.

Speaker 3: where investments are being made to expand the portfolio to support 400-gig transport everywhere, recognizing that 400-gig is the capacity of choice going forward in Metro, offering the best trade-off between performance and cost.

We recently received our Lightwave Innovation award for the multilayer optimization capabilities of our <unk> network planner, which demonstrates industry recognition of our approach to reducing cost and complexity using our multilayer optimization engine Bruce.

Bruce I'll turn it back to you.

Great. Thanks, Sam.

Speaker 1: We expect these investments will result in substantial growth and establish Ribbon as a significant player in IP and optical networks.

We expect these investments will result in substantial growth and establish <unk> as a significant player in IP and optical networking.

Speaker 1: To capture this longer-term growth, we expect 2022 to be an investment year and are projecting negative adjusted EBITDA of approximately $35 million for the IP option.

To capture this longer term growth, we expect 2022 to be an investment year and are projecting negative adjusted EBITDA of approximately $35 million for the optical segment.

Speaker 1: In light of our projections, we analyzed the carrying value of our IP optical goodwill and took a non-cash accounting charge.

In light of our projections, we analyze the carrying value of our IP optical goodwill and took a noncash accounting charge in the fourth quarter.

Speaker 1: In our CloudNedge segment, the secure voice over IT business continues to be a great foundation for the company, and our visibility into 2022 is solid.

And our cloud and edge segment, the secure voice over IP business continues to be a growth foundation for the company and our visibility into 2022 and solid.

Speaker 1: We expect continued investment by many of our service provider customers as they modernize their voice network.

We expect continued investment by many of our service provider customers as they modernize their voice networks and address their aging infrastructure.

Speaker 1: and address their aging infrastructure, also helping them meet increasing environmental regulatory requirements.

Also helping them meet increasing environmental regulatory requirements.

Speaker 1: The backdrop of accelerating usage of platforms such as Microsoft Teams and Zoom provide an excellent opportunity for growth for our cloud management.

The backdrop of accelerating usage of platforms, such as Microsoft teams and zoom provide an excellent opportunity for growth for our cloud and edge business and the continued investment we're making both in roadmap and go to market support our projections for this business.

Speaker 1: And the continued investment we are making both in roadmap and go to market support our projections for this.

Speaker 1: And as both service providers and enterprises increasingly adopt cloud computing paradigms, our investment to adapt our voice over IT portfolio to leverage cloud native technologies provides an additional growth opportunity.

And as both service providers and enterprises increasingly adopt cloud computing paradigms.

Our investment to adapt our voice over IP portfolio to leverage cloud Native technologies provides an additional growth opportunity for the business.

Speaker 1: We had our first significant telco cloud win in Q4 with a major mobile carrier in Japan. We've selected our cloud-native session border controller for deployment in their network.

We had our first significant telco cloud win in Q4 with a major mobile carrier in Japan, who selected our cloud native session border controller for deployment in their network.

In addition, the dedicated go to market enterprise sales team created in the middle of last year to better address the growing enterprise market opportunities is bearing fruit and we had promising results in the fourth quarter, including new customer wins across the financial.

And automotive verticals.

As an example, we had a significant win with our partner ecosystem to deploy an integrated digital transformation solution with one of the worlds largest automobile brands as they transition from a legacy on premise PBX system to Microsoft teams.

Speaker 1: to deploy an integrated digital transformation solution with one of the world's largest automobile brands that they transitioned from a legacy on-premise PBX system to Microsoft.

Speaker 1: This new collaboration with Infosys offers a pre-integrated solution leveraging our Microsoft certified core and edge session border controllers and centralized policy.

This new collaborations with emphasis offers a pre integrated solution leveraging our Microsoft certified core and edge session border controllers, and centralized policy manager to simplify and accelerate communications upgrades or large corporations with complex requirements.

Speaker 1: simplify and accelerate communications upgrades for large corporations with complex requirements.

Speaker 1: Overall, we expect the growth from enterprise and telco cloud to mostly offset any decline in traditional service providers.

Overall, we expect the growth from enterprise and telco cloud, mostly offset any decline in traditional service provider spending.

Speaker 1: but are conservatively projecting flat to slightly down overall cloud and edge revenue in 2022 with approximately 8% lower off X and a very profitable contribution.

But our conservatively projecting flat to slightly down overall cloud and edge revenue in 2022, with approximately 8% lower opex and a very profitable contribution to the company with adjusted EBITDA projected in excess of $150 million for 2022.

Speaker 1: with adjusted EBITDA projected in excess of $150 million.

Speaker 1: To support the investment in critical road areas, we're implementing a strategic restructuring to streamline operating.

To support the investment in critical growth areas, we're implementing a strategic restructuring to streamline operations.

Speaker 1: We'll sharpen our focus on the areas where we have the best opportunity to grow and further reduce investment in more mature product areas, while also lowering overall.

Sharpen our focus on the areas, where we have the best opportunity to grow and further reduce investment in more of a mature product areas. While also lowering overall corporate expense overhead.

Speaker 1: we've been able to leverage the traditional ribbon voice of our IT.

Speaker 1: to position our software and hardware portfolio of IP networking and optical transport products. And we continue to win.

And we continue to win important new customers each quarter.

Speaker 1: In particular, we're making real progress identifying entry points with a significant number of major tier one offices.

Particular, we're making real progress identifying entry points with a significant number of major tier one operators and are investing heavily to capture this multiyear growth opportunity.

Speaker 1: and are investing heavily to capture this multi-year growth up.

Speaker 1: The thesis is completely intact and we believe patients will pay off with higher growth in subsequent years.

The thesis is completely intact, and we believe patience will pay off with higher growth in subsequent years.

Speaker 1: There were several great examples accomplished in the Q4. We were awarded new business with a major multi-service communications provider in Japan for an important TDM to IP migration project that will begin in the second half of the year.

There were several great. Examples accomplished in Q4, we were awarded new business with a major multi service communications provider in Japan for an important tdm to IP migration project that will begin in the second half of the year.

Speaker 1: We were also selected as a new provider of optical transport solutions by MTN Group to provide mobile communication services in many African and Asian countries.

We were also selected as a new provider of optical transport solution by MTN group.

Abide mobile communication services in many African and Asian countries and.

Speaker 1: and we were selected by a leading European railway operator for a major national backbone project. A hard-fought win.

And we were selected by a leading European railway operator for a major national backbone project.

Our hard fought win against all the major competitors in the industry.

Speaker 1: We also announced a data center window telehost, an international co-location service provider based in London and owned by KDDI in Japan, along with several other projects, including NAMPOWER in Africa, and an undersea cable project between Manila, Hong Kong, and Singapore with IPF.

We also announced the datacenter win with Telcos and International co location service provider based in London and owned by <unk> in Japan, along with several other projects, including manpower in Africa and in undersea cable.

Twin Manila, Hong Kong, and Singapore with Ics.

Speaker 1: The solution combines our telco cloud voice core solution with technology from our IP optical portfolio. It's a great example of the strength.

This solution combines our telco cloud voice core solution with technology from our IP optical portfolio.

This is a great example of the strength of our combined assets.

Speaker 1: We expect revenue to start on this project in the second half of the year and stretch over several.

We expect revenue to start on this project in the second half of the year and stretch over several years.

Speaker 1: Based on the above set of assumptions and initiatives, we're projecting overall revenue growth for the company at 2% to 4% in 2020.

Based on the above set of assumptions and initiatives, we're projecting overall revenue growth for the company at 2% to 4% in 2022 gross margins in a range of 55% to 56% and adjusted EBITDA of $110 million to $120 million.

Speaker 1: Gross margins in a range of 55 to 56 percent and adjusted EBITDA of 110 to 120 million.

And with that I'll turn it over to Mitch to provide additional detail on our performance in the fourth quarter and first quarter 2022 guidance.

Speaker 1: And with that, I'll turn it over to Mick to provide additional detail on our performance in the fourth quarter and first quarter 2022 guidance.

Speaker 3: Thank you, Bruce. Good afternoon, everyone. Beginning with a gap is all.

Thank you Bruce good afternoon, everyone, beginning with our GAAP results, our GAAP net loss of $96 million in the fourth quarter includes three significant amounts first we have a goodwill impairment related to the IP optical backbones segment reflected a noncash accounting charge of $116 million in light of lower revenue growth than anticipated last year.

Speaker 3: Our gap net loss of $96 million in the fourth quarter includes three significant amounts. First, we have a goodwill impairment related to the IP optical network segment reflected as a non-cash accounting charge of $116 million.

Speaker 3: in light of lower revenue growth than anticipated last year. And of our continued investment, we revised forward projections of the profitability of our IP optical networks reporting unit, and as a consequence, have lowered its fair value.

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And our continued investment we revise forward projections of the profitability of our IP optical networks reporting unit and as a consequence at lowered its fair value intervals.

Speaker 3: remain optimistic in the future growth by the optical networks as we continue to invest in research and development to create truly disruptive technology.

We remain optimistic in the future growth like the optical networks as we continued to invest in research and development to create truly disruptive technologies.

Speaker 3: We also had a $7 million loss in our GAAP income statement related to the quarterly mark-to-market of our investments in ADCT. These two GAAP accounting losses were partially offset by an income tax valuation release of $28 million associated with the company's United States tax position as we have improved profitability expectations there.

We also had a $7 million loss in our GAAP income statement related to the quarterly mark to market of our investments and <unk>.

Speaker 3: on an adjusted non-gap basis. Fourth quarter 2021 results were as follows. Total revenue was $231 million, up 10% sequentially, but down 5% organically year over year when adjusted for the sale of candy.

Speaker 3: Sales of the quarter were negatively impacted by approximately $10 million of shipments moving into 2022 due to supply chain related.

Sales in the quarter were negatively impacted by approximately $10 billion shipments moving into 2022 due to supply chain related constraints. These constraints impacted both segments equally with shortages of key routing silica and other components. We continue to face constraints in these areas. So far in 2022 and are taking though.

Speaker 3: These constraints impacted both segments equally, with shortages of key routing silicon and other components.

Speaker 3: We continue to face constraints in these areas so far in 2022 and are taking those into account with our first quarter guidance.

Into account with our first quarter guidance. We also had several high margin software deals that did not close to.

Speaker 3: We also had several high-margin software deals that did not close, but moved into 2020.

2022.

Speaker 3: None of these opportunities were lost, but they did impact the results of the fourth quarter.

None of these opportunities were lost but they did impact our results for the quarter.

Speaker 3: Our book-to-revenue, excluding maintenance, was 1.14 times what the forecast was.

Our book to revenue, excluding maintenance was 114 times for the fourth quarter.

Speaker 3: Not GAAP gross margin was 54% in Q4-21, below our 58% guidance. The margin was negatively impacted by lower sales than expected, higher component costs, and deal mix that we will explain for each set.

GAAP gross margin was 54% in fourth quarter 'twenty one.

Below our 58% guidance the margin was negatively impacted by lower sales had expected higher component costs and deal mix that we will explain for each segment.

Speaker 3: non-GAAP operating expenses were $102 million in the quarter, up from $93 million in the third quarter. As we had anticipated, more investment in IV optical research and development incurred more sales commissions and increased travel.

non-GAAP operating expenses were $102 million quarter up from $93 million in the third quarter as we had anticipated more investment than IV optical research and development incurred more sales commissions and increased travel to customers.

Speaker 3: gap adjusted EBITDA was $26 million, which was $22 million below the midpoint of our guidance, driven by about $12 million lower revenue and $9 million lower gross margins than expected.

Adjusted EBITDA was $26 million, which was $22 million below the midpoint of our guidance driven by about $12 million lower revenue at $9 million lower gross margins than anticipated.

Speaker 3: non-GAAP diluted EPS was one-tenth in the fourth quarter. The lower guidance is a result of a lower adjusted EBITDA and a higher tax rate in the quarter. Our shared count was $149 million for GAAP earnings and $154 million for non-GAAP earnings.

non-GAAP diluted EPS was one sets in the fourth quarter, although our guidance as a result of the lower adjusted EBITDA and a higher tax rate in the quarter.

Share count was $149 million for GAAP earnings and $154 million non-GAAP earnings in the quarter.

Speaker 3: Now, let's turn to the results of our two business segments.

Now, let's turn to the results of our two business segments.

And our cloud and edge business fourth quarter revenue was $147 million down 5% on an organic basis, excluding candy those sales to enterprise customers nearly doubled compared to both prior quarter and prior year period.

Speaker 3: Fourth quarter revenue was $147 million, down 5% on an organic-based.

Speaker 3: McKinney, those sales to enterprise customers nearly doubled compared to both prior quarter and prior year.

Speaker 3: gross margins were 64% of the quarter, but below our expectations due to higher component costs, higher freight.

Speaker 3: and higher volume mix of hardware, such as our Session Border Controller Enterprise Edge products that carry lower market.

Speaker 3: While we expect first quarter margins will continue at about this level, we expect recovery into the mid to high 60s in our margins as we improve revenue and expenses throughout the year.

We expect first quarter margins will continue at about this level, we expect recovery into the mid to high <unk> in our margins as we improved revenue and expenses throughout the year.

Speaker 3: Non-GAAP-adjusted EFTA for CottonEdge was $37 million, or 25% of revenue.

non-GAAP adjusted EBITDA for <unk> was $37 million or 25% of revenue.

Speaker 3: After the seasonally slow first quarter, we would expect the adjusted EBITDA percentage to revert close to the 30% range for cloud and edge.

After the seasonally slow first quarter, we would expect adjusted EBITDA percentage to revert closer to 30% range for finance now.

Now turning to our IP and optical networks business, we reported fourth quarter revenue of $83 million up 22% from 68 million in the third quarter with the majority of the increase coming from Europe , and North America sales in India were up modestly versus the third quarter.

Speaker 3: quarter to fourth quarter revenue of $83 million, up 22% from $68 million in the third quarter, with the majority of the increase coming from Europe and North America. Sales in India were up modestly versus the third quarter.

Speaker 3: Non-gap gross margin was 36% in the fourth quarter, now slightly from 37% in the third quarter. This was below our expectations by about 300 basis points, driven by lower volumes, higher material costs and expedite fees, along with unfavorable customer and product quality.

Speaker 3: as an example of mixing. We had higher startup costs with a new customer deployment.

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Speaker 3: First quarter margins will likely be in the low 30% range as we continue to be challenged by these factors but are expected to improve as the year progresses and revenue grows.

First quarter margins will likely be in the low 30% range as we continue to be challenged by these factors that are expected to improve at the year progresses and revenue growth.

Speaker 3: Turning to balance sheet, we ended the quarter with cash and cash equivalents of $106 million, including $3 million in restrictions.

Turning to the balance sheet, we ended the quarter with cash cash equivalents of $106 million, including $3 million in restricted cash which.

Speaker 3: is an increase of $2 million from the previous quarter due to $11 million in cash flow from operations in the quarter. Capital expenditures where.

This is an increase of $2 million from the previous quarter due to $11 million in cash flow from operations in the quarter capital expenditures were $3 million for the quarter.

We met our quarterly financial Covenant, that's for our term loans fixed charge coverage ratio was 3.08.

Speaker 3: We met our quarterly financial coverage for our term up. Fixed charge coverage ratio was 3.08 times above the 1.25 times.

<unk> eight times above the 125 times minimum our bank leverage ratio was 279 times below the three five times maximum for the fourth quarter.

Speaker 3: Our bank leverage ratio was 2.79 times, below the 3.5 times maximum for the fourth quarter. This maximum for this covenant metric will decrease to 3.25 times at the end of March.

This maximum footage covenant metric will decreased to three five times at the end of March 2022.

Speaker 3: Lastly, we have announced a strategic realignment of our investments towards key areas of growth, which includes some restructuring charges for 2020.

Lastly, we have announced a strategic realignment of our investments towards <unk> growth, which include.

Some restructuring charges for 2022 as Bruce noted, we anticipate that <unk> will improve our operating expenses by $5 million per quarter, starting in the second quarter, we anticipate taking a restructuring charge of approximately $6 million for employee separation expenses and about $14 million for real estate optimization.

Speaker 3: As Pooch noted, we anticipate that Riven will improve our operating expenses by $5 million per quarter starting in the second quarter.

Speaker 3: We anticipate taking a restructuring charge of approximately $6 million for employee separation expenses and about $14 million for real estate acquisition. Now, let's turn to first quarter guidance. The first quarter.

Now, let's turn to first quarter guidance.

Speaker 3: And after considering continued supply chain procurement challenges and costs, we're projecting Q1 revenue to be approximately 10% lower than prior year and in a range of $165 million to $180 million.

Speaker 3: In our Cloud-in-Ed segment, we had a smaller number of network transformation projects competing this quarter, reducing both.

Our continent.

We had a smaller number of network transformation projects competing this quarter, reducing both product and professional services revenue.

Speaker 3: This has a heightened impact on margins and earnings for the first quarter. We have a good visibility on 2022 projects with many of our core basic customers and expect revenues through the remainder of the year to be at similar levels to 2021, along with potential additional growth related to the new network modernization project Bruce mentioned earlier.

This has a heightened impact on margins and earnings for the first quarter.

We have a good visibility on 2022 projects with many of our core base of customers and expect revenues through the remainder of the year to be at similar levels to 2021, along with potential additional growth related to the new network modernization project that was mentioned earlier.

Speaker 3: In the IP optical segment, we have visibility for demand above the guidance range, but are adjusting for potential delivery.

And the IP optical segment, we have visibility for demand above the guidance range, but are adjusting for potential delivery challenges late in the quarter. We're also cautious about potential impact to demand in Russia, Ukraine and surrounding areas related to the heightened political tensions we.

Speaker 3: We're also cautious about potential impact to demand in Russia, Ukraine and surrounding areas related to the heightened political tension.

Speaker 3: We expect IP optical margins to be lower than normal this quarter due to lower volumes, supply chain costs.

We expect IP optical margins to be lower than normal this quarter due to lower volumes supply chain cost and customer mix.

Speaker 3: Overall, we anticipate Ribbon's gross margin of the quarter to be 50% to 51%.

Overall, we anticipate ribbons gross margin in the quarter to be 50%, 51%.

Speaker 3: do not expect significant benefits from our restructuring efforts in the first quarter and estimate operating expenses and $100 million.

We do not expect significant benefits from our restructuring efforts in the first quarter.

Operating expenses in the $100 million range.

Speaker 3: The combined effect is in a normally low adjusted EBITDA loss outlook of $5 to $11 million in the first year.

The combined effect is an abnormally low adjusted Ebitdas loss outlook of 5% to $11 million in the first quarter.

Speaker 3: for the remainder of the year. We anticipate that we will return to adjust the positive margins in the.

Speaker 3: experience revenue growth, fewer supply chain disruptions, and improved expenses from restructuring. I'll turn it back to Bruce for a few closing remarks before we open it up to Q&A. Bruce?

Turn it back to Bruce for closing remarks, before we open it up to Q&A.

Thanks, Nick.

Speaker 1: Once again, I'll emphasize that we continue to believe in the strategy behind.

Once again I'll emphasize that we continue to believe in the strategy behind the business, we have a growing number of proof points and strategic wins and are investing heavily to capture this multiyear growth opportunity.

Speaker 1: We have a growing number of proof points and strategic wins and are investing heavily to capture this multi-year growth opportunity.

Speaker 1: The thesis is completely intact, and we believe patients will pay off with higher growth and subsistence.

Thesis is completely intact, and we believe patients will pay off with higher growth in subsequent years.

Speaker 1: I'd like to thank the employees of Ribbon for their dedication and efforts in 2021. And I know they're committed to executing on our plans in 2022 to realize our growth objectives.

I'd like to thank the employees of ribbon for their dedication and efforts in 2021 and I know there are committed to executing on our plans in 2020 to realize our FERC objectives.

Speaker 1: Operator, that concludes our prepared remarks, and we can now take a few questions.

Operator that concludes our prepared remarks, and we can now take a few questions.

Speaker 4: Thank you. Ladies and gentlemen, at this time we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment while we poll for questions.

Sure.

Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key one moment, while we poll for questions.

Speaker 4: Once again, ladies and gentlemen, it is star one to ask a question.

Once again, ladies and gentlemen, it is star one to ask a question.

Speaker 4: Our first question comes from the line of Tim Savageau with Northland Capital Markets. Please proceed with your question.

Our first question comes from the line.

Tim <unk> with Northland Capital markets. Please proceed with your question.

Hi, good at your line is live.

Sure.

Can you hear me.

Yes, now we can.

Okay, great sorry.

Speaker 2: A couple questions, kind of on the demand environment, and maybe directed towards Sam since we have him on the call.

A couple of questions kind of on the demand environment.

And then maybe directed towards Sam since we have them on the call.

And sort of.

Speaker 2: kind of different aspects of the carriers you might be pursuing. You mentioned a...

Kind of different aspects of the carriers, who might be pursuing you mentioned.

Speaker 2: You know, pretty robust pipeline from a tier one perspective, I wonder.

So a pretty robust pipeline from a tier one perspective I'm wonder.

Speaker 2: you know, what's your outlook is for, you know, that pipeline moving toward decision in 22. I imagine there's not a lot.

What's your what's your outlook is for that pipeline moving towards decision in 'twenty two.

Imagine theres not a lot.

Included in guidance for any new wins, but more ramping what you've already got sort of review of that on the one hand, and then I wanted to follow up and talk about kind of U S Rural broadband driven type opportunities.

Speaker 1: Yeah, hey, Tim, it's Bruce. Thanks for the question. Yeah, I think you're you're right. We.

Yes, Hey, Tim months, Bruce Thanks for the question.

Yes, I think youre right.

Speaker 1: You know, trying to estimate the exact timing of when we start to see revenue from new wins is one of the challenges we've had in predicting.

Trying to estimate the exact timing of when we start to see revenue from new wins is one of the challenges we've had in predicting the business. The majority of what we've projected for 'twenty. Two is with the set of customers that we that we have in the win column already.

Speaker 1: The majority of what we've projected for 22 is with the set of customers that we have in the win column already.

Ramp through the year.

Speaker 1: I think as you know, the regions that are largest for us today is the European region, the Indian market.

As you know.

Regions that are largest force today inside the European region, the Indian market.

And we're really focused on growing as in North America.

And it was great to see the progress we made last year in North America with the series of customers like Rogers Bioware for wireless that we've mentioned.

As we talked about in the call. The engagement, we have with just a broad set of customers, it's pretty exciting, but trying to estimate the exact timing is a little trickier. So.

<unk> tried to be a little more conservative in the outlook for for this year.

I guess to follow up on that you did say.

You expect maybe 10% plus growth.

What factors could.

Maybe that's sort of the obvious which is maybe a better supply environment.

Speaker 2: could lead to upside to that outlook for IP optical growth.

Could lead to upside to that outlook for IP optical group.

Speaker 1: Yeah, so what we're seeing, Tim, right now is just a really active RFP environment with a whole variety of different customers in different regions, so North America, Europe , and Asia.

Yes, so what we are seeing Tim right now is just.

The active arm.

RFP environment.

The whole variety of different customers in different regions, North America, Europe , and Asia, I mentioned and so it's a combination of wins with new customers as well as in our new product insertion with existing customers. So whether it's.

Speaker 1: And so it's a combination of wins with new customers as well as in a new product insertions with existing customers. So whether it's, you know, a new cell site router opportunity or coming in as a new supplier like MTN group I mentioned.

A new cell site router opportunity or coming in.

New supplier like MTN group I mentioned in the Africa region.

Speaker 1: the Africa region, growing the business with some of the new accounts that we announced last year like Megaphone in Russia, Office and Singtel in the Asia-Pac region.

Growing the business with some of the new accounts that we announced last year like Mega filmed in Russia.

Optus Singtel in the Asia Pac regions, which.

Speaker 1: which really haven't started yet from a revenue perspective. You know, there's been a lot of work going on qualifying the product.

It really hasnt started yet from a revenue perspective, there's been a lot of work going on qualifying the product going through the network certification process et cetera.

Speaker 1: network certification process, et cetera, and, you know, all of those contribute.

All of those contribute to the growth later in the year and again some of the new customers that we think we're going to win again trying to predict the exact timing is more difficult to sleep.

We've not tried to factor them into the 10% growth rate.

Dosing of the plus on the end of it basically.

Okay. Thanks very much.

Thanks, so much Tim.

Speaker 4: There are no other questions in the queue. I'd like to hand the call back over to Bruce McClellan for closing remarks.

There are no other questions in the queue I'd like to hand, the call back over to Bruce Mcclelland for closing remarks.

Yeah, Thanks, very much for everyone joining here this afternoon and.

Look.

Excited about the year ahead, and really look forward to keeping everyone updated as we go along so thanks very much.

Speaker 4: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.

Q4 2021 Ribbon Communications Inc Earnings Call

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