Q1 2025 Ribbon Communications Inc Earnings Call
Greetings.
Welcome to the Ribbon Communications first quarter 2025 financial results conference call at.
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Speaker Change: I would now like to turn the conference over to your host Joni Roberts Chief Marketing Officer. Please go ahead.
Speaker Change: Good afternoon, and welcome to ribbons first quarter 2025 financial results Conference call I'm, Tony Roberts, Chief Marketing Officer at Ribbon Communications also on the call today is Chris Mcallen ribbons, Chief Executive Officer, and John Thompson Ribbons, Chief Financial Officer, today's call is being webcast.
Speaker Change: Alive and will be archived on our Investor Relations section of our website <unk> Dot com, where both our press release and supplemental slides are currently available.
Speaker Change: Certain matters, we'll be discussing today, including the business outlook and financial projections for second quarter 2025, 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.
Speaker Change: These risks and uncertainties are discussed in our documents filed with the SEC, including our 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, we will present non-GAAP financial information on this call reconciliations to the applicable GAAP measure are.
Speaker Change: Included in the earnings press release, we issued earlier today as well as supplemental financial information, we prepared for this conference call, which again both are available on Investor Relations section of our website and now I'd like to turn the call over to Bruce Bruce.
Bruce Bruce: Great. Thanks, Tony Good afternoon, everyone and thanks for joining us today to discuss our outlook for 2025, and our first quarter results.
Bruce Bruce: Building on the momentum from last year, we continued to see very good demand as both service providers and enterprises invest in modernizing their voice and data networks.
Bruce Bruce: In particular, the momentum in our cloud and edge business continues to build and is now a growth engine for the company contrasting with the market perspective on this business several years ago.
Bruce Bruce: Our portfolio is the best in the industry and supports a broad number of use cases, including carrier grade Telco voice services enterprise Unified communications.
Large scale contact centers and resilient secure defense command and control.
Bruce Bruce: The industry focused on eliminating legacy copper networks and adoption of cloud technologies that can be deployed on premise or in the cloud is a great tailwind for our business for years to come.
As with many companies, we expect AI to be a growing opportunity for us and have two projects directly tied to increasing AI deployments.
Bruce Bruce: The first is a new nationwide fiber network being built in the Philippines to.
Bruce Bruce: To significantly add capacity to keep up with the growing demand and data center expansion.
Bruce Bruce: And the second is a fortune 500 company leveraging AI in unique ways to enhance their contact center effectiveness.
Bruce Bruce: A great leading indicator of our continued momentum as the growth in our backlog up 35% from the same point last year.
Bruce Bruce: Book to Bill in the first quarter was one two times and we continue to expect a strong first half with sales projected to grow 5% to 8% year over year.
Bruce Bruce: All the more impressive as we overcome the difficult compare to first half of 'twenty four after suspending shipments in eastern Europe Midway through last year.
Bruce Bruce: In fact, our IP optical business, excluding western Europe grew by 25% in the first quarter.
Bruce Bruce: So the demand picture remains strong and we continue to expect good growth this year.
Bruce Bruce: Sales in the first quarter were flat year over year and lower than expected, but was entirely related to the timing of two enterprise projects. One was the U S. Federal agency and one was a critical infrastructure customer in the U S.
Bruce Bruce: We've already received orders for the vast majority of the shortfall and much has now been shipped and recognized in the second.
Bruce Bruce: Business with service providers was robust in the first quarter with sales increasing more than 10% year over year with significantly higher sales in the U S and in India.
Bruce Bruce: And if you adjust for the significant reduction of sales due to the suspension of shipments to eastern Europe last year.
Bruce Bruce: Service provider sales increased more than 30% year over year in the first quarter.
Bruce Bruce: Margins in the first quarter were lower than we projected primarily due to the mix of shipments and the lower sales volume.
Bruce Bruce: Our sales in India were particularly strong in our IP optical segment producing the overall gross margin.
Bruce Bruce: The mix of cloud niche sales in the quarter were more concentrated in hardware products and higher professional services revenue.
Bruce Bruce: Which contribute a lower gross margin than our software products.
Bruce Bruce: In the second quarter, we have a stronger mix of software and better regional profile that we expect will improve consolidated gross margins by more than 400 basis points sequentially.
Bruce Bruce: The lower sales and margin contributed to a reduction in adjusted EBITDA year over year, which again, we expect a largely catch up in the second quarter.
Bruce Bruce: Now a little more detail on each of our operating segments.
Bruce Bruce: We had a good quarter in our cloud and edge segment with sales growing approximately 6% year over year.
Bruce Bruce: Excluding maintenance revenue product and services sales increased approximately 17% year over year.
Bruce Bruce: Adjusted EBITDA for the segment increased 17% year over year on higher sales and continued improvement in operating expenses.
Bruce Bruce: Sales to global service providers were the primary driver behind the year over year growth with total cloud and edge revenue, increasing approximately 20% per year.
Bruce Bruce: Large voice network transformation projects were once again the main catalyst behind the good momentum this quarter.
Bruce Bruce: As expected total cloud and edge sales to Verizon increased significantly and were up approximately 50% year over year as we continue to make very good progress on our multiyear project to decommission and replace legacy switching equipment and hundreds of central offices.
Bruce Bruce: The pace of installation and migrations, it's typically slower in the first quarter of the year and we're now back at the same level as we were in the fourth quarter and expect to accelerate further as the year progresses.
Bruce Bruce: Cloud edge sales to all other service providers.
Bruce Bruce: Also increased approximately 10% year over year, highlighting the broad base of interest and network modernization and improving efficiency.
Bruce Bruce: Cloud net sales to enterprise customers were down approximately 23% year over year, largely due to the timing of U S. Federal shipments I mentioned mentioned earlier.
We've shipped and recognized revenue on the remaining portion of these orders we received late in Q1.
Bruce Bruce: We're expecting a strong second quarter with several U S federal agencies, including an initial phase of a project with a new D O D Agency.
Bruce Bruce: While we're seeing elongated decision, making due to the additional scrutiny on spending in the government.
Bruce Bruce: The voice modernization projects have a very clear ROI and significant reduction in operating expenses. So we expect these investments to remain a high priority as reflected in the 150% growth we experienced in 2024.
Bruce Bruce: Overall club net gross margin was below our expectations in the quarter due to a higher mix of hardware shipments. This included a significant number of media gateways to support the replacement of legacy Tdm switches and a higher demand for enterprise edge gateways we.
Bruce Bruce: We expect a rebound in gross margin in the second quarter to the more typical mid sixties for the segment with a higher mix of software and continued improved services margins.
Bruce Bruce: And our IP optical segment sales in the first quarter were down approximately 6% year over year.
Bruce Bruce: This continues to be a tough comparison due to the suspension of shipments to eastern Europe, beginning partway through the second quarter last year. This.
Bruce Bruce: Mr counted entirely for the drop year over year.
Bruce Bruce: We remain hopeful there's a path to resolution of the content the conflict in the region and a resumption of trade.
Asia Pac was once again, the highlight of the quarter for IP optical business sales in India increased 80% year over year and were up 6% sequentially to the highest level in the last five years.
Bruce Bruce: We continue to have a strong business with Bharti and benefited from the renewed network investment being made by Vodafone idea to expand mobile network capacity and coverage.
Bruce Bruce: Sales in Southeast Asia were also very strong and increased over 2% year over year with multiple new projects across the region.
As an example, we announced a great project win with our customer convert ICT and the Philippines to build a new nationwide fiber backbone supporting customers such as Starlink as they grow their presence in the region and to add significant capacity for expanding datacenter traffic.
Bruce Bruce: We also announced a new sub sea cable project with more telling in Asia as they add 20 terabits of new capacity to the islands using our latest poll of transport platform Amuse automation management system.
Bruce Bruce: We continue to see new opportunities across this region, partially due to vendor consolidation as well as the need to build networks that have no Chinese OEM equipment.
Bruce Bruce: Sales in North America were also very solid in the quarter more than doubling year over year.
Bruce Bruce: This included a nice mix of rural broadband projects growth in critical infrastructure with providers, such as AEP and major service providers such as bright speed.
Bruce Bruce: Gross margins for the segment were impacted due to the regional mix of higher sales in Asia Pac and lower sales in the EMEA region.
Bruce Bruce: We also had several projects where the initial shipments of optical line equipment and low cost access routers weighed on margins.
Bruce Bruce: We expect a sizable improvement in gross margins in the second quarter and substantially lower EBITDA loss for this segment.
Bruce Bruce: With that I'll turn it over to John to provide additional financial details on our first quarter results and then come back on to discuss outlook for the second quarter Jonathan.
Bruce Bruce: Yeah.
John Thompson: Thanks, Bruce Good afternoon, everyone, let's begin with financial results for the consolidated level.
John Thompson: In the first quarter of 2025 ribbon generated revenues of $191 million, an increase of 1% from the prior year.
Speaker Change: First quarter non-GAAP gross margin was 48, 6% lower than expected due to higher sales in India, and higher pod and edge hardware shipments that Bruce mentioned.
Speaker Change: non-GAAP operating expenses were $86 million in the quarter of 5 million reduction buses. The first quarter of 'twenty 'twenty, four and down 8 million sequentially. This reflects the seasonality in expenses, such as sales commissions and variable employee compensation as well as the benefit related cost actions implemented in 2000.
Speaker Change: 24.
First quarter adjusted EBITDA was $6 million, a decrease of $6 million year over year. This was driven by the tighter margins, we experienced across both segments due to the product mix, notably the regional mix and the IP optical segment.
Speaker Change: Our non-GAAP tax rate for the quarter was 32%.
Speaker Change: Interest expense was $11 million, including amortization of debt issuance costs. Both of these were in line with our expectations.
Speaker Change: Quarterly non-GAAP net loss was $5 million compared to a 1 million dollar loss in the prior year. This generated a non-GAAP diluted loss per share of <unk>.
Speaker Change: Which compares to a one cent per share loss in the prior year.
Speaker Change: Share count was 176 million shares and our fully diluted share count was 119 million shares for the quarter.
Speaker Change: Now, let's look at the results of our two business segments, our cloud and edge business had revenues in the first quarter of $109 million, an increase of 6% year over year with product and professional services revenue, increasing 17% year over year.
Speaker Change: <unk> non-GAAP gross margins was 62.5% down 350 basis points from the prior year.
Speaker Change: The reduction is a result of higher professional services and hardware revenue lower software sales compared to the prior year.
Speaker Change: Adjusted EBITDA was $22 million or 19% of revenue in the quarter, a 17% improvement year over year.
Speaker Change: Now onto IP optical networks results recorded first quarter revenue was $74 million, a 6% decrease versus the prior year.
Speaker Change: Clothing Eastern Europe sales in the segment were actually up 25% year over year.
Speaker Change: First quarter non-GAAP gross margin for IP optical was 28%, which is below our expectations as Bruce noted the highest sales in India impacted the overall gross margin for the segment and were further compounded by the unfavorable mix of products this quarter.
Speaker Change: Ipl's coal networks, adjusted EBITDA was a loss of $15 million versus a $6 million loss in the prior year again, mostly driven by the regional mix of revenues.
Speaker Change: As Bruce mentioned earlier, we expect significant improvement in the second quarter and continuing throughout the year.
Speaker Change: With increased sales in North America, and Europe, and improved product mix.
Speaker Change: Yeah.
Speaker Change: Moving on to cash and capital expenditure cash from operations was a usage of $4 million in the quarter with a closing cash balance of $74 million versus $90 million at the end of 2020 for the.
Speaker Change: The reduction in cash was primarily a result of annual employee incentive compensation payments and the completion of the build out of our new R&D facility in Israel, which drove the higher capstone expenditure.
Speaker Change: Total capex in the quarter was $12 million, excluding the R&D facility, we expect our full year capital expenditures to be consistent with prior years, and the $12 million to $13 million range.
Speaker Change: Net debt leverage at the end of the quarter was 2.4 times up slightly sequentially.
Bruce Bruce: Now I'll turn the call back to Bruce.
Speaker Change: Yeah.
Speaker Change: Great. Thanks, John.
Speaker Change: Following the last several quarters of strong bookings our outlook and visibility for the second quarter is very good with substantially higher backlog than in previous years, even as we continue to optimize expenses.
Speaker Change: And our club Med segment, we're projecting approximately 20% sales growth in the second quarter year over year.
Key trends underpinning this increase included the following areas.
Speaker Change: First we expect another very good quarter with Verizon similar to a record level in fourth quarter last year as the voice network modernization program continues to perform well and other network upgrades continue.
Speaker Change: We're in the first year of this three year program with significant opportunity for multiple years beyond this as well as a large potential opportunity as Verizon completes their acquisition of frontier.
Speaker Change: Second in addition to the deals delayed from Q1, we have a very good funnel of U S Federal network modernization opportunities.
Speaker Change: With several sizable deals expected to close this quarter that include both expansion of current projects and new project wins.
Speaker Change: Despite some delays in decision, making these programs look very solid for the quarter.
Speaker Change: Third we're projecting several new enterprise wins in the quarter, including the Fortune 500 customer I mentioned that the forefront of leveraging AI to enhance contact center effectiveness.
Another obvious area of focus for us is related to meta switch replacement opportunities with a primary focus around the top 25% larger installed base in.
Speaker Change: In the first quarter, we closed new replacement deals in the U K and in the U S serving both residential and commercial customers.
Speaker Change: Similarly, we also had a very nice win an award with a tier one provider in Central America to replace a high profile Cisco Broadsoft government services deployment.
Speaker Change: So I'm pleased with the progress, we're making to grow our share in multiple markets.
Speaker Change: In the IP optical segment, we're projecting 5% to 10% sequential growth in the second quarter, which would result in revenue similar to the second quarter last year, which still included a partial quarter of sales to eastern Europe.
The key trends in this business include the following areas.
Speaker Change: We expect continued momentum in Asia with strong sales in India, and Southeast Asia similar to the last several quarters, but with a better mix from a margin perspective.
Speaker Change: Party, Vodafone idea, Tata and others continue to expand network capacity and we see additional opportunities related to expansion of rural Internet access and data Center interconnect.
Speaker Change: We have a lot of activity in Europe and in the Middle East with both critical infrastructure and defense agency projects, expanding secure command and control networks.
Speaker Change: We also have very good momentum with customers like MTN in Africa, where there's a lack of fiber infrastructure and significant projects underway to improve connectivity across the continent.
Speaker Change: And finally, we expect a stronger quarter in North America, with both critical infrastructure and regional service providers.
Speaker Change: Longer term innovation and new product development is the key to our future growth we.
Speaker Change: We have several important areas in focus for this year, including enhancements to our routing platforms to support an expanding set of tdm elimination use cases.
Speaker Change: This has become a great entry point for us in the U S market and an area, where we're proving to be very differentiated and highly synergistic with our cloud and edge voice portfolio.
Speaker Change: We're also investing in additional routing platforms and features to support the growing trend of IP directly over optical networks. We are a great example of this with a significant new IP over DW D. M win in Africa to support data Center expansion.
Speaker Change: We recently launched our latest new routing platform at mobile World Congress. The MPT 27, 2014 that is a metro core router supporting up to 14 terabyte per second traffic levels.
Speaker Change: At the OFC optical show last month, we received the Lightwave Innovation award for the platform and are seeing increased customer interest.
Speaker Change: And finally automation is becoming table stakes for managing complex networks and for improving the delivery of new capabilities.
Speaker Change: <unk> for the cloud and edge portfolio. This means adoption of cloud native technologies and processes, which is the key focus behind the project I mentioned last quarter with a tier one service provider in Europe.
As we indicated earlier, we're expecting improved margins for both segments in the second quarter.
Speaker Change: The first quarter was unusually low given the customer and product mix and the mix for the second quarter is expected to be much better.
Speaker Change: There remains a lot of uncertainty on where U S tariffs will settle and any reciprocal trade barriers that may be implemented.
Speaker Change: At the current time, we're not expecting a material impact on our business, but it's a dynamic situation.
Speaker Change: We have some agility to change the manufacturing location for optical products and we benefit from the U S. M. C. A free trade agreement for the cloud and edge products. We currently manufacture in Mexico.
Speaker Change: We're working closely with our manufacturing partners to anticipate multiple scenarios and react quickly and hope to minimize the cost impact passed onto our customers.
Speaker Change: Also given the substantial amount of revenue that is tied to software and services. We believe we're relatively immune at a more macro level.
Speaker Change: Now onto guidance.
Speaker Change: As already mentioned, we expect a strong second quarter with sales growing more than 10% year over year as we complete enterprise deals delayed from Q1, and the continued momentum in our cloud and edge business.
Speaker Change: Based on the assumptions I've outlined we're projecting revenue in a range of $110 million to $220 million a year over year increase of approximately 12% at the midpoint.
Speaker Change: And adjusted EBITDA in a range of $28 million to $32 million a year over year increase of 38% at the midpoint.
Speaker Change: We remain positive on our outlook for the remainder of the year and continue to maintain our full year outlook.
Speaker Change: Operator that concludes our prepared remarks, and we can now take a few questions.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad and.
Speaker Change: And a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: And the first question comes from the line of Dave Kang with B Riley Securities. Please proceed.
Dave Kang: Yes. Thank you. Good afternoon. My first question is regarding your book to Bill of one two fairly strong just wondering if there were any pull ins because of the tariff uncertainty.
Speaker Change: Hey, Dave No I don't think we thought any.
Dave Kang: Strong evidence of that.
Speaker Change: Bookings were pretty consistent across the quarter.
Speaker Change: And really spread pretty evenly between the businesses and geographies. So nothing that I would flag directly associated with trying to pull in equipment earlier or anything like that.
Speaker Change: Okay and.
Speaker Change: Regarding the tariff situation just wondering what your customers are telling you.
Speaker Change: Regarding you know assuming.
Speaker Change: The third quarter.
Speaker Change: Is a reciprocal terrorists are back on again.
Speaker Change: What the plans are as far as your customers versus you know.
Speaker Change: Picking up that extra cost as well as your suppliers too.
Speaker Change: Yes, I guess, a few thoughts and kind of expanding on my my comments earlier.
Speaker Change: So far we haven't seen customers indicate changes on their strategy or are there plans for the year at this at this point in time and I think you've seen a lot of the public commentary through the earnings calls that no.
Speaker Change: No most of the service bureaus service providers are not expecting.
Speaker Change: Significant impacts to their business from this.
Speaker Change: In the case of our business. So of course, we're in a couple of different areas of their operation a lot of what we're selling is software and services in many cases, which don't have an impact really at all from a tariff perspective kind of immediately associated with it.
Speaker Change: And then the products that we are manufacturing internationally.
Speaker Change: Some of them coming out of Mexico that are subject to the U S free trade agreement and really exempt at this point.
Speaker Change: Others coming out of Asia, where we've been working with our manufacturers to mitigate the cost share some of the expense and expect that.
Speaker Change: Anything that we have to pass on to customers is relatively modest at this stage given the current situation at least anyway.
Speaker Change: Got it and my last question is just wondering if you can provide.
Speaker Change: Provide an update on AT&T, the Nip Timna ramp I guess, it's still early and also wondering if you've got any wins. So should we expect any wins this year.
Speaker Change: Yeah, So again I apologize I can't comment too much on At&t's plans, particularly around their their voice network.
Speaker Change: As you know.
Speaker Change: Indicated our strategy that they're implementing and I'll just say, we remain a really strategic.
Speaker Change: Hartner to them and involved in a in their network deployments.
Speaker Change: I do think we're going to grow this year in IP optical in North America.
Speaker Change: As I mentioned that the.
Speaker Change: The progress around rural broadband has been strong our first quarter was up considerably year over year.
Speaker Change: And some of the new products. We've launched are getting a lot of look so I'm pretty pretty bullish on the progress we'll make this year.
Okay.
Speaker Change: Got it thank you.
Speaker Change: Thanks, Dan.
Speaker Change: The next question comes from the line of Christian Schwab with Craig Hallum. Please proceed.
Christian Schwab: Great. Thanks for taking my question Bruce Bruce can you.
Speaker Change: To explain quickly how you benefit.
Speaker Change: As people retire copper in there in their own networks here in the United States and that May get more aggressive.
Christian Schwab: Yeah, Hey, Christian so I think theres kind of two different apologies, if you will around copper replacement.
Speaker Change: One is obviously to move a lot.
Speaker Change: Lines or services completely onto fiber or an IP backbone and eliminate the copper completely.
Speaker Change: In those cases, we might be involved in the network from a call server perspective, or an application server, but on the axis side, obviously, we're not as they are.
Speaker Change: Completely we wouldn't be involved in that.
Speaker Change: That's kind of the natural attrition of legacy lines.
Speaker Change: But there's a large installed base that are not migrating and so there's really a couple of different methods to eliminate the copper, but still maintain the service and so in one case, the media gateway or the transition from copper to IP what happened at the Central office and we provide a lot of gateways and then the soft.
Speaker Change: Where that enables that to happen that's kind of a I'll call. It a verizon strategy around.
Speaker Change: Eliminating a lot of the complexity in the core of the network, but maintaining some of the copper local loop.
Speaker Change: The second approach is to put the media gateways basically right at the edge.
Speaker Change: And preserve basically all of the legacy.
Speaker Change: Services that might be implemented at the enterprise and yet be able to eliminate all of the copper all of the legacy sonet infrastructure et cetera, and really simplify the operation of the network. So we're involved in both of those use cases, providing both the software that goes in the core as well as the media gateways that sit at the edge.
Speaker Change: Great. Thank you.
Speaker Change: And then I kind of missed it I apologize.
Speaker Change: Youre clouded edge products business.
Speaker Change: Can you say what you expect your growth rates, you know 24, and 25 versus 24 for both cloud and edge and IP optical could.
Speaker Change: Could you repeat that for me please.
Speaker Change: Yeah sure so as I was kind of going through the guidance section.
Speaker Change: As we think about the second quarter at least anyway.
Speaker Change: We're expecting the cloud and edge portion to be up approximately 20% year over year, obviously, a pretty strong growth number in the second quarter and continuing that momentum throughout the rest of the year.
Speaker Change: In the IP optical segment, we're projecting 5% to 10% growth in the second quarter year over year.
Speaker Change: Again, we are adjusting or having to make up for any of the shipments in eastern Europe in the second quarter, a year ago, So that I'll call. It the organic growth rate is higher than that.
Speaker Change: And just to give you one last stat as I mentioned in the first quarter. If you excluded the eastern Europe revenue, we actually grew 25% year over year in the first quarter for IP optical.
Speaker Change: Great. Thank you again for that clarity no other questions. Thanks, guys.
Christian Schwab: Thanks Christian.
Speaker Change: The next question comes from the line of Tim <unk> with Northland Capital markets. Please proceed.
Speaker Change: Okay.
Speaker Change: Sorry about that can you hear me, we got you Tim.
Tim: Okay great.
Speaker Change: My first question is on Verizon.
Tim: And.
Tim: Just to clarify although.
Speaker Change: No they won't be similar you expect Verizon to move back toward Q4 levels.
Tim: On an absolute dollar basis.
Speaker Change: Yes, correct wanted to clarify yes, okay great.
Tim: Correct.
Speaker Change: I think you said a couple of times, maybe last quarter and maybe just on this call.
Speaker Change: You know you sort of still in the process of scaling here with Verizon or I don't know whether that's.
Speaker Change: Q2 guide represents that scaling it may well, but I guess the overall question is.
Speaker Change: Do you think you can continue to increase.
Speaker Change: Revenue with Verizon.
Speaker Change: From that Q2 level in Q2, Q3 and Q4.
Speaker Change: Yes, I think that's.
Speaker Change: Fairly.
Speaker Change: Good planning level for the second half of the year I'll say, Tim there are kind of two pieces or two phases to the migrations. The first is getting the equipment procured installed commissioned powered up kind of ready to go and then the second piece is actually the migration or the conversion of lines et cetera.
Speaker Change: The first part.
Speaker Change: You know we can move pretty quickly on the second part is the more complex operation.
Speaker Change: And so what we're really scaling is that second part the first part moves pretty quickly. The second part more manual labor involved you got to be careful as you migrate these lines coordinate with customers et cetera, and what from a revenue perspective, we're able to recognize most of the product revenue kind of upfront as it gets deployed and then Theres a.
Speaker Change: Service revenue involved with the actual migration efforts and so the timing of revenue on that is a little different. So I think we're scaling up the service portion of the revenue, but the product portion will be a little lumpy, depending on which quarter, we're shipping in and those sorts of things. So it's a long answer to your question, but I think the so the velocity from a revenue perspective.
Speaker Change: We are at in the second quarter is a nice planning level for the rest of the year, the actual migration rates going to speed up and as we look into next year.
Speaker Change: We're expected to do more next year, so the volume needs to increase as we exit the year and go into next year it'll be a bigger year.
Speaker Change: That's without adding in the potential for similar programs at frontier as that business starts to be operated by Verizon.
Speaker Change: Great.
Speaker Change: And I think you might have given us.
Speaker Change: Some metrics about.
Speaker Change: The pace of installation or.
Speaker Change: I don't know if it was a switch a week or something like that.
Speaker Change: Or.
Speaker Change: It's total you've done so far.
Speaker Change: Got it.
Speaker Change: I'd love It if you might update that.
Speaker Change: Is that a pace you expect to return to or exceed in Q2 or the second half of the year are there.
Speaker Change: Other metrics to gauge kind of where we are with Verizon, which still seems.
Speaker Change: Fairly early days, but any comment on that as well.
Speaker Change: Yeah, Yeah, we definitely have a long pipeline ahead of us here for sure. The metric I mentioned last quarter was basically doing one which migration per week.
Speaker Change: All of that prep work I talked about that leads up to the migration and then final completion of the switchover when you start to see the cost savings. That's why that's an important milestone is when the cost savings start to benefit.
Speaker Change: The customer.
Speaker Change: We were at one per week as we as we went through Q4 that velocity came down in the first quarter kind of a natural pause during the holiday season et cetera, and then we're back at that rate.
Speaker Change: Again at this point and we basically want to try and double that migration rate as the year progresses, that's where we'd like to be.
Speaker Change: Okay, Great and then another question over.
On the optical side.
Speaker Change: And it looks like we've seen from some of your larger competitors.
Speaker Change: And even similar sized.
Speaker Change: Yes.
Speaker Change: By and large inventories that carriers are sort of burned off and we're starting to see growth again in optical transport.
Speaker Change: In the broader service provider universe.
I Wonder if you and I know you've got some one offs here on the compares.
Speaker Change: I'm wondering if you have any observations on that front on the one hand.
Speaker Change: And then anything.
Speaker Change: Incremental on what Youre seeing.
Speaker Change: Opportunities stemming from from Nokia and Infinera or any overall commentary on tier one carrier pipeline and IP optical and that's it for me.
Speaker Change: Yeah, great. Thanks, Tim So from a I'll call. It from a geographical perspective, a regional perspective now we've seen good growth you need to see that here in the second quarter in several regions, India I called out obviously, that's a strong market for us and continues to be.
Speaker Change: Have a good growth area part of that is with Vodafone idea coming back and investing in the network, but as I mentioned I think we had our best quarter ever since acquiring ACI five years ago here in the first quarter in India. So that was very strong.
Speaker Change: The second region that continues to be a.
Speaker Change: Strong contributors to the rest of Asia Pac or southeast Asia.
Speaker Change: Fact, I was just in a in the Philippines, and Taiwan back a few weeks ago, we had a nice announcement in the Philippines with with converge one of our key customers. They are building out a nationwide fiber backbone that serving both their internal needs as well as data center interconnectivity as well as.
Speaker Change: The launch of Starlink in the region and supporting their downlink stations. So that's a that's a great example of growth for us with a major operator in that region.
Speaker Change: That region also tends to be the area. We're seeing the most opportunities I think from a Nokia Infinera integration perspective.
Speaker Change: We're great I'll call it western alternative in the region and Theyre looking for.
Speaker Change: Alternatives is that integration happens and so good momentum in particular competitively there.
Third regional mentioned that we had good growth in the first quarter again was in the U S domestic market here.
Speaker Change: Year over year growth. It was very strong and that today is with I'll call. It the regional or rural operators building out broadband infrastructure. It's also with the interconnect carriers that.
Speaker Change: Our basically replacing legacy Tdm networks could be copper it could be sonat networks <unk> networks, and then using our routing platform as that circuit emulation capability and so we've been growing pretty nicely in that.
Speaker Change: Mid market, if you will in the U S around our IP routing platforms.
Speaker Change: Okay. Thanks, very much yes, thank you Tim.
Speaker Change: The next question comes from the line of Rustam Kanga with citizens. Please proceed.
Speaker Change: Good afternoon. Thank you for taking the question just touching on the recent launch of the MDT 714, and broader enhancements enhancements to the IP optical portfolio could you have qualified the early customer reception, there and do you expect that to be a meaningful contributor in the back.
Speaker Change: Half of the year.
Speaker Change: Yeah, Hey, great question.
Speaker Change: So we launched the product at mobile World Congress in February and then also.
Speaker Change: Highlighted it at the OFC Conference here recently, where we won an award with it.
Speaker Change: It's pretty strategic for us it basically is the metro core router.
It's the highest capacity densest platform that we've got in the portfolio and it allows us to expand from just the access layer aggregation layer, where we.
Speaker Change: Have a lot of business today.
Into the more of the core of the network. So one it allows us to provide a complete end to end solution with customers that are building out a metro IP network and.
Speaker Change: And two and then it allows us more strategically to be further in the network. So not just at the access layer, but but really in the core.
Speaker Change: It's a pretty important element of being able to provide a fulsome kind of complete solution to customers.
Speaker Change: It's committed already with a variety of customers that are building out the access layer and then want to insert the core router.
Speaker Change: Step, but if their network upgrades so good pipeline good opportunities.
Speaker Change: I think it's a next class.
Speaker Change: Product for us it really moves us beyond the access layer. So we are pretty important.
Speaker Change: That's fantastic. Thank you for that color just one more for me regarding the converge expansion could you talk a bit about what that does for the performance and optimization of that read here on that work and maybe how that deployment impacts kind of your share within APAC and perhaps touching on the <unk>.
Speaker Change: Consolidation and elimination of the Chinese parts that you mentioned in your prepared remarks.
Speaker Change: Yeah, Great question. Thank you so the.
Speaker Change: Philippines.
Speaker Change: Region is pretty strategic for us in fact, we service a lot of southeast Asia out of the Philippines, It's our kind of our our central headquarters in the region for technical support and sales.
Speaker Change: In the country itself, we're doing business with really I think four of the top five service providers and so we've built a good reputation in the region. This new network is being built is basically an overlay to the current network and it's being built completely with western providers to.
Speaker Change: As they provide services too.
Speaker Change: Large hyper scaler or regional cloud providers.
Speaker Change: There is no concern over having Chinese equipment in that work and so it's a deliberate decision to build a new network with a with a partner and expand their reach in the region. So it's a great reference point for us.
Speaker Change: Other countries were pretty active with as well we mentioned.
Speaker Change: When with more telling the region in that case, we're putting a new subsea cable in 20 terabits of additional capacity into the island. So that was a very nice win and then other countries such as Taiwan, Vietnam, where all active in today with the new wins in the last three months so.
Speaker Change: It's getting a lot of focus from us the reason I did a trip over to spend time with customers and really grow our presence in the region.
Speaker Change: The last country I'll mention that's strategic for us in the region is Japan.
Speaker Change: We've had a long history and kind of presence there.
Speaker Change: With our cloud managed portfolio and then we've been able to cross sell and build into some of these networks from an IP and optical perspective into names like Sony and Softbank and those sorts of names. So it's a strategic area for us to grow in the Asia Pac region as well.
Speaker Change: So great I appreciate all the questions.
Speaker Change: Thank you.
Speaker Change: This concludes the question and answer session I would like to turn the call back to Bruce Mcclelland for closing remarks.
Speaker Change: Okay, great well, thanks, very much thanks for being on the call and the interest in ribbon, we really look forward to meeting with many of you in the upcoming investor conferences over the next few months and keeping you updated on our progress operator, thanks to you as well and that concludes our call.
Speaker Change: Thank you this.
Speaker Change: This concludes today's conference you may now disconnect your lines at this time enjoy the rest of your day.
Speaker Change: [music].
Yeah.
Speaker Change: [music].