Q1 2024 Ribbon Communications Inc Earnings Call
[music].
Hello, and welcome to the Ribbon Communications first quarter 2024 financial results conference call. If anyone should require operator assistance. Please press star zero on your telephone keypad, a question and answer session will follow the formal presentation. Even if he places the question queue at any time by pressing star one on your telephone.
Keypad as a reminder, this conference is being recorded its now my pleasure to turn the call over to Joni Roberts Chief Marketing Officer. Please go ahead Ms Roberts.
Joni Roberts: Good morning, and welcome to <unk> first quarter 2024 financial results Conference call I'm, Johnny Roberts, Chief Marketing Officer at Ribbon Communications also on the call today personal Colin ribbons, Chief Executive Officer, and Mick Lopez, Chief Financial Officer, today's call is being webcast live and will be archived on the <unk>.
<unk> relations section of our website, our B B M Dot com, where both our press release and supplemental slides are currently available certain matters, we'll be discussing today, including the business outlook and financial projections for second quarter of 'twenty 'twenty four and beyond are forward looking statements such statements are subject to the risks.
And uncertainties that could cause actual results to differ materially from those contained in these forward looking statements. These risks and uncertainties are discussed in our documents filed with the SEC, including most recent Form 10-K, I refer you to our Safe Harbor statement included in the supplemental financial information posted on our website.
In addition won't present non-GAAP financial information on this call reconciliations to the applicable GAAP measure are included in the earnings press release, we issued earlier today as well the supplemental slides we prepared for this conference call, which again are both available on the Investor Relations section of our website.
Joni Roberts: And now I'd like to turn the call over to Bruce Bruce.
Great. Thanks, Tony Good morning, everyone and thanks for joining us at this new time today to discuss our Q1 results and outlook for the year.
I'd like to start with a few comments on the major announcement, we just released with Verizon This morning.
As I've mentioned on recent calls.
A significant opportunity with telecom service providers and large enterprises, including the U S. Federal government to complete the replacement of legacy Tdm voice switching platforms with modern cloud based solutions.
A strong ROI for our customers with multiple benefits, including improved overall quality and reliability of the service significant cost savings from lower power consumption and cooling requirements.
A reduction in facilities in floor space that can be repurposed to meet the exponential growth in data consumption for mobile and broadband services.
And lower engineering and operations effort needed to manage this complex networks.
Joni Roberts: All while significantly reducing the environmental footprint made on providing this critical communication service.
Horizon: We're very excited about this new multi year program with horizon.
The extension of the ongoing work, we've been doing together, but on a much larger scale.
Women will provide both product and professional services some rapidly decommission legacy central office equipment, while fully maintaining current services and features.
The initial deployment phase of the program will be over the next three years, leveraging our full portfolio of virtual and cloud native call controllers and session border controllers advanced analytics line access and Universal media gateways.
We expect the program generate almost $300 million in revenue from live in over that period with.
With potential for follow on programs to continue to support efforts in building the most advanced networks.
We've worked closely with Verizon team to reduce the implementation cost by defining a focused large scale project that as economy of scale benefits.
This is a major endorsement of both weapons portfolio and expertise in the migration of these complex communication networks.
The measured approach Verizon, that's taking to migrate services and preserve significant revenue streams is applicable to practically all of our other service provider customers, where we aim to develop similar programs and generate significant benefits from this cloud migration.
Now onto our first quarter 2024 results.
We had an excellent first quarter, where our strategy to leverage our long term relationships to diversify and grow our business continues to pay off.
Profitability improved significantly year over year and exceeded the high end of our guidance range with adjusted EBITDA of $12 million.
We benefited from a favorable mix of sales to customers in the quarter.
Literally in the EMEA region, where sales increased 24% as compared to the first quarter last year.
Horizon: The higher sales in EMEA resulted in strong gross margins exceeding 40% and the like the optical segment as well as the seventh straight quarter of year over year sales growth.
Horizon: This includes customers across a number of markets, including service provider defense and critical infrastructure.
Gross margin in the cloud and edge business was also strong in the quarter, primarily due to continued growth in the enterprise market with product sales, increasing 15% year over year.
This includes a number of voice modernization projects with U S government and federal agencies.
The strong gross margin and reduction in operating expenses of 5% year over year contributed to earnings exceeding the top end of our guidance for the quarter.
Adjusted EBITDA over the trailing 12 months increased to $105 million for the company.
Major improvement trend over the last several quarters.
While lower spending from U S tier one service providers continued to impact our cloud and edge results with sales declining 11% year over year in this quarter.
With our new Horizon program and the potential for similar engagements with other customers. We believe we've reached a low point and expect solid recovery in the business.
We expect the new Verizon program alone on the Peerless business for the next several years.
This quarter. We also continued to increase the software content of our product sales growing from 25% to 29% year over year increasing margins.
The continued growth in enterprise has been a key driver behind the higher software sales improved margins and solid earnings contribution.
Overall company sales in the quarter were at the lower end of our guidance with a few million dollars of equipment in transit at the end of the quarter and site readiness delays with a few smaller deployments of world customers.
Now a little more detail on each of our operating segments.
Building on the momentum from the second half of 2023, IP optical network sales increased 9% year over year in the first quarter with the majority of the growth coming from the EMEA region.
Horizon: Again stronger margins for the segment consistent with the previous quarter at 41% and a significant improvement of $17 million and adjusted EBITDA for the first quarter last year.
In EMEA, our critical infrastructure private networks market segment continues to be a great fit for our portfolio.
Horizon: High performance and information security are major Differentiators.
We had a number of expansion projects in the defense sector with customers such as Israeli Defense Force, the Swiss Army and finish defense forces.
We also had several new projects with customers in segments, such as energy distribution Railways and education.
Horizon: It's all complemented ongoing business with a number of service provider customers across the region.
In the Asia Pac region sales to key customers in India, including Bharti, Airtel and Tata Tele services were down only slightly year over year and included the full portfolio of both optical transport and IP routing products.
There are also very positive signs that Vodafone idea will complete their long awaited capital injection.
The company's public offering successfully completing this week.
We plan to invest aggressively in five G upgrades.
Horizon: We believe we are very well positioned to be a key supplier and they reinvest in their network driving growth to the EMEA region in the second half of this year.
In the Americas region, IP optical sales increased year over year in Canada, and Latin America, while shipments into the U S were lower in the World broadband segment this quarter due to customer timing and site readiness.
Horizon: <unk> revenue recognition into the second quarter.
From a product line perspective sales of our Apollo optical transport products were once again strong this quarter, increasing 9% year over year.
This reflects the stronger mix of these products sold into the EMEA region.
Horizon: Good start to the year.
I expect this optical growth trend to continue as our new Apollo 9400 platform form shipments continued to grow supporting the highest one two terabits per second speeds available in the market today.
We're effectively expanding our addressable market with this platform and.
Horizon: And are able to better address services, such as data Center interconnect.
Complementing the current 9600 platform that's favored by telecom operators.
We shipped more than 50 9400 chassis, so far and have a pipeline of more than 20 opportunities in process.
Sales of our Neptune IP routers grew 2% year over year in the first quarter, reflecting lower world sales this quarter.
Also the first quarter of 2023, where the first volume shipments to Bharti for the <unk> sell side, rather last year climbing their deployments and building some inventory.
We expect this product line to continue to grow with a very good pipeline of new customer opportunities.
Horizon: Overall, IP optical product and service bookings were one seven times revenue in the quarter billing backlog for the second quarter.
Horizon: And our cloud and edge segment as expected the lower spend from U S. Tier one service providers continued to affect our year over year comparisons with the reduced spending starting midway through the second quarter last year.
Excluding sales to our large U S tier one customers revenue in the first quarter from all other customers grew 1% year over year, despite lower overall industry investments.
With the new Verizon program, we expect a significant improvement going forward.
Enterprise cloud and edge products sales increased 15% year over year in the quarter with the continued expansion of our major voice modernization project with the U S Federal agency.
We expect this trajectory to continue in the second quarter.
They called Madden business continues to drive strong profitability due to higher software mix and.
In product and service bookings were good in the quarter at one point over six times revenue.
We expect a much stronger second half of the year and our cloud and edge business.
Continued momentum in enterprise and a significant increase in sales to service providers.
This includes the beginning of the new network modernization program horizon.
We expect initial product shipments from that project to begin in the third quarter and deployment services to ramp as the program accelerates exiting.
Exiting the year at a $100 million per year run rate once again with this key customer providing a strong foundation for growth in the segment.
We continue to maintain a strong reoccurring maintenance business across our customer base.
Horizon: Approximately 80% of the insurance maintenance revenue in backlog or under contract for the cloud business as well as for the IP optical segment.
Horizon: With that I'll turn it over to Mick to provide additional detail on our first quarter results and then come back on to discuss outlook for the second quarter Nick.
Thank you Bruce Good morning, everyone. We were very pleased with our financial performance in the first quarter as we exceeded the high end of our guidance for gross margins and adjusted EBITDA on strong performance by IP optical networks in particular.
On a trailing 12 month basis, our adjusted EBITDA is $105 million back to levels over $100 million prior to the 2022 supply chain disruption.
Horizon: As always please refer to our Investor Relations page on the ribbon web site for supplemental financial information. We will also see that we have now included in excel worksheet to facilitate your analysis.
Let's begin with financial results at the consolidated corporate level in the first quarter of 2020 for ribbon generated revenues of $180 million, which is a decrease of three 5% from the prior year non-GAAP gross margin was 55, 1%, which is 700 basis points higher than prior year due to a P.
Horizon: Positive product and regional mix as you will hear both business segments had significant improvements in gross margin percentages versus prior year.
non-GAAP operating expenses were $91 million, an improvement of $5 million or 5% year over year, driven by continued reductions in R&D and sales expenses from last year's restructuring efforts non.
non-GAAP net loss was negative $1 million, which is a $2 million improvement from the previous year. This generated non-GAAP diluted loss per share of negative one which is an increase of one versus prior year. Our non-GAAP tax rate year to date was 35% our interest expense for the quarter was $6 million consistent with the previous year.
Horizon: Sure.
Adjusted EBITDA was $12 million in the quarter, which is a great $14 million improvement from last year's ebb that loss of negative $2 million. This is the best first quarter profit performance in the last three years.
Our basic share count was 172 million shares and our fully diluted share count was 175 million shares for the quarter now lets look at the results of our two business segments.
In our cloud and edge business first quarter revenue was $102 million, a decrease of 11% year over year, driven by lower product sales at U S tier one service providers.
We are increasingly confident that we can grow our revenues for this business segment with the incremental business from Verizon's network modernization program, but.
The cloud and edge business had a strong first quarter non-GAAP gross margin of 66% up about 500 basis points from the prior year. This improvement was driven by an increasing mix of software product sales, which were 68% of total product revenues.
The cloud and edge business segment continues its steady cash and profit contribution with an adjusted EBITDA of $17 million or 17% of revenues.
Let's turn to our IP optical networks business results.
We recorded first quarter revenue of $78 million, which was an improvement of $6 million or 9% increase versus the prior year non.
non-GAAP gross margin for IP optical networks was 41%.
Horizon: About 1400 basis points from the prior year from 27% in the first quarter of 2023. This resulted in gross profit of $32 million, which is up $12 million or 64% improvement from previous year, mostly driven by lower product costs better regional mix from.
E M E <unk> sales.
If you recall one year ago we.
We made sales of our initial long haul optical transport infrastructure equipment to India at lower margins.
Adjusted EBITDA for the quarter was a loss of $6 million, which is an improvement of $17 million year over year. This is the seventh straight quarter of year over year improvement in <unk> profitability.
We continue to strive for positive adjusted EBITDA for this business segment in 2024 as it continues to grow.
Let's now discuss total company cash flows and capital structure cash for operations was excellent the positive $13 million in the quarter. That's now to positive cash flow quarters, we used cash in the quarter of $3 million for capital expenditures and our quarterly $5 billion term loan repayment, we ended the quarter with 31 million.
Cash cash equivalents and increased $4 million from the end of 2023 or.
Horizon: Our senior term loan balance was at $230 million and $75 million revolver loan had zero balance outstanding.
Horizon: I heard a bank covenant calculations, which include $55 million of our preferred equity and total debt among other adjustments we comfortably met both of the term loan covenant metrics in the first quarter.
Bank leverage ratio was at 2.71 times, which is within our target range of two times to three times the fixed charge coverage ratio was 177 times.
Speaking of that we have started the process of refinancing our capital structure, both the term loan and preferred shares as part of this process. We have already received a b two ratings from Moody's and a b minus from standard and poors, both with a stable outlook.
You may have noticed that we rescheduled this earnings call from the afternoon to the morning to accommodate the lenders kickoff meeting this very afternoon.
Assuming stable market conditions, we expect to have a refinancing done in several weeks, we remain confident in our continued support of our financial partners to obtain a flexible and long term capital structure to sustain our profitable growth now I will turn the call back to Bruce to provide more comments on our outlook for the second quarter.
Great. Thanks, Nick.
As I said last quarter I'm very confident in our ability to continue to grow revenue and improve profitability. This year.
The new Verizon program will provide a strong foundation for the company with opportunity for similar programs with other telecom operators.
We expect revenue from the Verizon program to begin in the third quarter with deployment ramping over time.
Horizon: The improved margin trend over the last few quarters and a strong profitability in Q1 further increase our confidence of achieving our full year guidance.
Horizon: In addition to the recovery in the cloud and edge Telco business. We continued to add significant new wins with U S. Federal agencies that are initiating their own voice modernization programs in.
Horizon: In fact, we have a very strong and growing global government and defense business that leverages, our entire portfolio of voice and data products and a strong professional services practice tailored for this market vertical.
Scalability reliability and information security aspects of our products are significant differentiators and theres a larger market that we are not yet fully addressable.
We have made this a strategic area of investment given the large opportunity, particularly in North America and Europe.
Globally, the government and federal market segment accounted for almost 10% of overall sales for within 2023.
Horizon: From a portfolio perspective, I'm excited about our innovation pipeline as I mentioned earlier, our new Apollo 9400 compact modular optical transport platform is gaining momentum and significantly expands the portion of the market that we can address including long haul transport sub sea networking.
And data center interconnect.
Horizon: Well, we've already been successful penetrating these markets and have multiple appointments with customers such as Bharti.
Yes.
Hello House. The 9400 platform has been purposely designed for the unique environmental requirements of these market segments.
We conservatively estimate of $1 billion increase to our addressable market and are excited about the momentum behind this new product with the interest free leading one two terabits per second coherent optics.
At the recent optical fiber communication conference in San Diego, We made a joint announcement with Cisco highlighting the interoperability between our 9400 platform and Cisco in C. S 10 14 platform.
Interoperability and optical networking is very rare and is a great endorsement of our open networking strategy.
It will enable our customers to stay on the cutting edge of technology without being locked into proprietary solutions.
Horizon: In our IP routing portfolio, we continued to expand our product line and just completed the introduction of the Neptune 2400 high performance aggregation router.
Leveraging a common network operating system. The 'twenty 400 is a great fit for middle mile and edge aggregation applications.
Support is a rich set of IP routing features and capabilities.
This allows us to address a growing number of IP services.
This four eight terabits non blocking router supports a significant number of 100 gig and 400 gig client side interfaces, making it an ideal platform for a number of high capacity applications with coherent ZR plus optical uplink.
Horizon: The lens by which our customers manage our portfolio data networking products is our cloud native Muse platform.
With our customers we've identified a number of practical applications that can benefit from the power of generative they are.
Complex network planning rapid fault isolation and root cause analysis and intelligent network optimization are great. Examples of the way we are leveraging generative AI to improve our products and differentiate our solutions.
So we're off to a solid start in the first quarter and are making very good progress on our key strategic goals, including achieving sustainable profitability in our IP optical business.
Returning to growth in our telco voice infrastructure business.
Diversifying and expanding sales and enterprise market verticals, including financial health care and government information security and.
And accelerating innovation and capturing cost efficiencies with full integration of our product teams.
For the second quarter, we expect sequential growth in both of our businesses.
And IP optical we expect continued momentum in the EMEA region as well as growth in North America and Asia Pacific.
We expect gross margins to continue to be in the high thirty's or better.
In cloud and edge, we expect improvement in the U S tier one environment, coupled with growth in enterprise as well as the additional U S federal projects.
Based on this for the second quarter, we're projecting revenue in a range of $200 million to $210 million non.
non-GAAP gross margins of 53, and a half to 54, 5% and.
And non-GAAP adjusted EBITDA in a range of $20 million to $25 million.
Our guidance for the full year remains unchanged, although as I mentioned earlier, we're definitely off to a good start to meet these financial objectives, along with a strong second half.
Operator that concludes our prepared remarks and now we can take a few questions.
Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please 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'd like to move your question from a Q1.
One moment, please probably pull for questions.
Our first question is coming from Christian Schwab from Craig Hallum. Your line is now live.
Hey, congratulations on the <unk> and the Big Verizon order.
Just a couple of questions about that you know one would you you know what what type of gross margin over time should we assume that that.
Hmm.
It will be done that and then as far as the $300 million.
Three year timeframe is that backend loaded or does that I know, it's going to start with the second half, but does it step up big in 'twenty five any color there would be great.
Speaker Change: Yeah, Hey, good morning Christian Thank you so on the gross margin question.
We have a mix of product and services that we're supplying to the program. So it may vary a little bit just depending on the activity in a particular quarter.
Our blended it's probably a little below the current gross margin level for for cloud and ads, which as you know a high sixty's. So it's a little below that just because of the you know the higher content in hardware and services, but still pretty solid obviously.
Speaker Change: On the on.
On the question on kind of the speed and the ramp.
We definitely get started in earnest in the second half of this year and kind of achieved full velocity as we get into 2025 and stay at that level for a couple of years effectively. So this is a pretty extensive program you can imagine that the effort that's required to go into these switching centers and switching on equipment seamlessly and everything.
So theres quite a it's a it's a pretty long process.
Which is great it's going to be a great program.
Great and then I just have one quick follow up just on the rural broadband stuff you know.
Speaker Change: Other people inside the space are kind of suggesting that that really doesn't kick off until Q1 of 25, but it sounds like maybe some of the things that you're working on may start a little bit sooner than that.
Did I hear that incorrectly or how should we be thinking about that.
Yeah. So good question. So the you know the bead program the $42 billion bead program. So it doesn't really start until next year timeframe. In fact, I think for US it's kind of second half of next year.
About half of the rural broadband programs, we have in process today are assisted in one form or fashion from other federal funding programs like art off and those sorts of programs. So you know we've got a nice base of nice funnel of activity there even prior to the larger funding program coming in.
The gas like no other questions. Thank you.
Thanks Christian.
Speaker Change: Thank you. Your next question today is coming from Dave Kang from B Riley Securities. Your line is now live.
Thank you. Good morning. My first question is the is the follow on on that horizon.
Yeah.
So Verizon was a major customer so just wondering what's the delta between deal program versus the new one.
Yeah, Hey, good morning, Dave.
So this is.
We see a major step up from the current run rate we're at today.
I think I mentioned in the in the remarks that our would be to exit the year at a <unk>.
Greater than $100 million per annum run rate with them, which as you know maybe where we were a few years ago back when other programs, where we're very active so we get back to that level or better in the next few years. Here is this program really starts to gain energy.
So like you know back to you.
Speaker Change: Verizon was several years ago, but what was the run rate in recent years like in the last a year or two where do you like 50 million going to 100 million or.
Any color there.
Yeah, sorry, Dave Yeah. So the given there were a 10% plus customer we actually break them out in our Q in our K I can't remember the exact number for 'twenty three but I think it was in the Mick do you remember what the number was 10 or 11% yeah. So okay yep.
Yep Yep.
Okay Alright.
Thanks for that and then just on the question on India. If you can talk.
Speaker Change: Talk about you know what's going on there and also you mentioned the Vodafone idea what kind of opportunities do you see which products any color there would be great.
Speaker Change: Yeah, absolutely. So you know in the first quarter sales in India were essentially flat to what we did a year ago and if you recall a year ago. We had a really good quarter. You know we started to step up the deployments in India. I think we grew 30% total last year. So it's good to see that business continue to be solid.
The key customers. There today are names like Bharti, and <unk> and a little bit with reliance and a few others. Vodafone as you recall is the third largest mobile operator in the region and needed to refinance their balance sheet, which has been.
A discussion now for probably a year it was great to see actually on Monday. This week. They they closed the the equity raise process that they were doing the secondary offering I think it was.
Was well oversubscribed. According to the articles I read I think there's a debt funding that follows that in and then their strategy is to obviously work on catching up in the market.
Investing pretty heavily both in four G capacity as well as the <unk> build out and.
And what we provide as you know some of the optical and IP infrastructure.
Speaker Change: As well as where we're a provider on the on the voice side on the cloud and edge business as well. So you know, we're we're glad to see that really start to move in the right direction and hope that business grows pretty substantially in the second half of the year.
Got it and my last question is on the Sienna sounded very.
Speaker Change: Cautious about.
The optical.
Speaker Change: Demand optical market right now even.
Speaker Change: European market.
But that didn't really.
Get that from from you guys.
Is there like a market share shift going on or what why are you a little bit more optimistic than sienna.
Speaker Change: Yeah. So I think it depends on the segments that part of the market.
Where we're focused.
Clearly Santa has a large business with the large carriers.
Speaker Change: Strong business with the IC PS.
Where we're doing well as a critical infrastructure defense segments, and <unk> and some of the carriers. So it's a.
The diversification that we've got has helped us here, having both in optical portfolio and in IP routing portfolio really helps us and so the result was yet again another another quarter of growth seven quarters in a row now where we've had year over year growth in that segment I think it was 9% in the first quarter.
Yeah.
Got it thank you.
Thanks, Dave.
Thank you. Your next question is coming from cover Walsh from JMP Securities. Your line is now live.
Great. Thanks, Tim Thanks for taking my questions.
Bruce you mentioned last quarter about the larger federal deals that had slipped into <unk> just more for confirmation on that did it the bulk of the revenue expected from that deal then kind of fall in the quarter or might there be more kind of that further ramps up kind of next quarter throughout the year and then I've got a follow up just.
Kind of a broader kind of federal spending.
Speaker Change: Atmosphere.
Bruce: Hey, Yeah. Good morning, Trevor Yeah. Good question, so as it turned out that deal that has been awarded.
Bruce: The revenue is actually still coming so we expect actually more of it here.
Bruce: This quarter and throughout the year.
In the in the first quarter, we actually closed another deal another extension deal with another agency. So you know you can get the idea. There is a lot of these kind of going in parallel.
Bruce: And you know as Ive mentioned, a few times trying to predict the timing on them tends to be a little bit of a challenge, but it's great to see that.
Bruce: Not unlike the program, we talked about with Verizon, where we're replacing legacy Tdm infrastructure with modern cloud based technology and so in the in the first quarter. We had another couple of released a substantial deals close and go to revenue in the one I talked about last quarter is still coming forward.
Which is great.
Great. Thanks for the color that's super helpful and actually good segue to where I was in a kind of follow up.
Just.
We hear kind of different takes from companies that we cover that are doing it.
Within the federal kind of sphere around just.
The Gov.
Government funding via continuing resolution et cetera, and some of the challenges there with with the current Congress just curious to see how what your take is and whether or not that is or is it kind of affecting some of the timing on some of these things and how you maybe see that progressing through the year I'm, obviously not going to have you.
Pontificating, let's say on the on the election outcome, but just how you see that overall federal business.
Kind of slowing and kind of maybe some of the trends that youre seeing systemic treated.
Yeah, we definitely see it as a distraction even if funding is allocated and available on a particular program that we're working on which generally speaking is the case.
The either the CR process or the distraction around the shutdown threats back you know a few a few quarters ago, just tends to be a distraction for the people you were engaged with you can't they can't help but be distracted by it, particularly if theres a looming shut down their planning around how they manage through that et cetera.
The good news is we've we haven't seen any programs be unfunded or canceled or delayed. It's just you know is it does it get over the finish line one quarter versus the next one is really what we see so.
So far it seems to be manageable.
Did emphasize a little bit and it factors in a new slide in our deck. That's posted on the website just how significant the fed rule in the government space has become for the company.
In addition to the work we're doing here in the U S. Around voice modernization, we are a really important business internationally with a number of government agencies.
Both on the kind of the military side of the defense side as well as on the civilian side.
We're building out really secure highly secure information service networks is really important and I think we're really differentiated there you know if you get into the details on the products and the way that we encrypt traffic the way that we protect our message flows et cetera is pretty unique and so that that whole segment is really a growing force in.
Was almost 10% of sales last year so.
It's a it's another important segment in diversifying the company.
Great terrific and maybe just one last one from me and then I'll get back in the queue.
You had mentioned in your prepared remarks around just some of the differentiating fact.
Just something that is not up on par with what you guys are kind of currently do I just could you maybe just doubleclick.
A little bit in terms of how you see that differentiation actually playing out on the security front.
Yeah. So I think it comes from kind of at the close engagement with the number of these agencies, where we're we're dialogues with them on what are their requirements what are their future needs and then building some of that into the product. So it starts out with somewhat of a custom capability and then we make it more general.
We can bring it to market to other similar agencies and it actually helps out the rest of our critical infrastructure business. You know if we're selling to an energy company or an energy distribution company like like American Electric power AEP, we talked about last quarter the capabilities that we've built in for a defense application.
Bruce: Ends up differentiating us in that space as well so it's a bit of a long sales cycle, but once you're in dialogue in understanding the future requirements. It really makes the whole the whole portfolio better.
Great Super helpful. Thanks, Bruce and thanks, Matt I appreciate the time thanks.
Speaker Change: Thanks Trevor.
Thank you. Your next question is coming from Tim <unk> from Northland Capital markets. Your line is now live.
Hey, good morning, and.
That's on the year the results and the outlook, especially on the <unk>.
Bottom line execution there.
And you mentioned AEP, Bruce and that was really the.
Focus on my first question.
That was one of a couple of deals.
<unk>.
Seemingly significant opportunities that you guys talked about last year, along with AT&T.
And then I guess I wanted to ask about.
Contributions from from those opportunities.
In the first half I guess, maybe Q1 or Q2 or what your expectations.
Our expectations are for the year and then maybe some broader commentary.
On your tier one pipeline and IP optical.
Speaker Change: A follow up from there.
Yeah, Hey, good morning, Tim.
If I just kind of take those one time here it's on AEP.
The press release, we did with them back early first quarter.
Speaker Change: Was at the culmination of signing a contract with them and becoming one of their their suppliers in the network, where now we're now fully engaged with them on that program and Ah if.
Speaker Change: If not dip.
<unk> deployed anything yet but in process. If you will so that's.
Speaker Change: Mostly a second half year program for us from a actual revenue perspective. So so early days still but you know great to have that that partnership start to want to develop and again very similar to the types of deployments. We have in Europe already today with a number of energy distribution customers.
Speaker Change: Like Expo as an example, that's in a in a with a Swiss region.
The AT&T.
Engagement continues to progress nicely, where we've been able to leverage both the voice core as well as our IP routing platforms into a.
A combined solution that helps them modernize their tdm network.
Somewhat similar to the Verizon announcement today, but a little different deployment strategy there.
Again that that program, just kind of continues to progress quarter by quarter throughout throughout this year and hopefully scale into future years here.
Speaker Change:
And maybe Tim you know the other the other questions around.
Tier one opportunities again, you know as we've seen.
The sales cycle is long on these but particular as I mentioned with the you know the new platform. We just introduced a that really moves us into kind of a leading edge around optical transport. We're seeing good good engagement there activity both from a.
An RFP or a five.
Process as well as proof of concept trials in the lab and network et cetera. So I'm hopeful we'll progress on some more of those types of announcements as the year goes on here.
Okay, Great and then switching over to the cloud edge.
Alright, I think.
Last quarter.
Yeah, you're talking about some.
You know different trends across the tier one and.
Kind of enterprise federal part of the business.
For leading to you know kind.
Speaker Change: Kind of a flattish outlook for the year it seems to be a change here in terms of looking for some growth.
Can you confirm that your outlook, a little bit stronger here and talk about.
Yes. So the you know the answer to that is definitely yes, you know as we put full year guidance together back back in the early February timeframe.
Speaker Change: We had visibility on on a number of these programs. We obviously had the discussion with Verizon in process at that point and we're hopeful that that would come to fruition and you know as we sit here today clearly you know being able to announce that today is a big deal for us and really puts us a solid foundation under that business.
Speaker Change: Not only in the second half of this year, but the next several years. So that you know significantly improves our confidence in that view.
Not only are we expecting growth in enterprise and federal in cloud and edge I think we we definitely have the opportunity to grow now in service provider, which is a different kind of a different message. So it definitely gives us a lot more confidence in the outlook and you know, we'll we'll see where we're at midyear.
Speaker Change: Great. Thanks very much.
Yes, Thank you Tim.
Speaker Change: Thank you we reached end of our question and answer session I'd like to turn the floor back over to Bruce for any further or closing comments.
Okay, great well, yes, thanks, thanks for that and thanks again for everyone being on the call here early this morning and in the interest in Ribbon Communications, we really look forward to speaking with many of you in the upcoming investor conferences, we have quite a slate coming up here in the second quarter and keeping you updated on our progress.
So thanks, very much and have a good week.
Speaker Change: Thank you that does conclude today's teleconference. You may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.