Ribbon Communications Q4 2025 Ribbon Communications Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Ribbon Communications Inc Earnings Call
Speaker #1: Greetings, and welcome to the Ribbon Communications fourth quarter and full year 2025 financial results conference call. At this time, all participants are in a listen-only mode.
Operator: Greetings, and welcome to the Ribbon Communications Q4 and full year 2025 financial results conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero on your telephone keypad. It's now my pleasure to introduce your host, Fahad Najam, Senior Vice President, Investor Relations and Corporate Strategy. Fahad, please go ahead.
Operator: Greetings, and welcome to the Ribbon Communications Q4 and full year 2025 financial results conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero on your telephone keypad. It's now my pleasure to introduce your host, Fahad Najam, Senior Vice President, Investor Relations and Corporate Strategy. Fahad, please go ahead.
Speaker #1: A question-and-answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star one on your telephone keypad.
Speaker #1: As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero on your telephone keypad. It's now my pleasure to introduce your host, Fahad Najam, Senior Vice President, Investor Relations and Corporate Strategy.
Speaker #1: Fahad, please go ahead.
Speaker #2: Good afternoon and welcome to Ribbon’s fourth quarter and full year 2025 financial results conference call. I am Fahad Najam, SVP, Corporate Strategy and Investor Relations at Ribbon Communications.
Fahad Najam: Good afternoon, and welcome to Ribbon's Q4 and full year 2025 financial results conference call. I am Fahad Najam, SVP, Corporate Strategy and Investor Relations at Ribbon Communications. Also on the call today are Bruce McClelland, Ribbon's Chief Executive Officer, and John Townsend, Ribbon's Chief Financial Officer. Today's call is being webcast live and will be archived on the investor relations section of our website at rbbn.com, where both our press release and supplemental slides are currently available. Certain matters we will be discussing today, including the business outlook and financial projections for the Q1 of 2026 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 our most recent Form 10-K.
Fahad Najam: Good afternoon, and welcome to Ribbon's Q4 and full year 2025 financial results conference call. I am Fahad Najam, SVP, Corporate Strategy and Investor Relations at Ribbon Communications. Also on the call today are Bruce McClelland, Ribbon's Chief Executive Officer, and John Townsend, Ribbon's Chief Financial Officer. Today's call is being webcast live and will be archived on the investor relations section of our website at rbbn.com, where both our press release and supplemental slides are currently available. Certain matters we will be discussing today, including the business outlook and financial projections for the Q1 of 2026 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 our most recent Form 10-K.
Speaker #2: Also on the call today are Bruce McClelland, Ribbon's Chief Executive Officer, and John Townsend, Ribbon's Chief Financial Officer. Today's call is being webcast live, and we'll be archived on the Investor Relations section of our website at rbbn.com.
Speaker #2: We're both our press release and supplemental slides are currently available. Certain matters we will be discussing today, including the business outlook and financial projections for the first quarter of 2026 and beyond, are forward-looking statements.
Speaker #2: Such statements are subject to risks, and results may differ materially from those contained in these forward-looking statements. These risks and uncertainties are discussed in our documents filed with the SEC, including our most recent Form 10-K.
Speaker #2: 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.
Fahad Najam: 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 measures are included in the earnings press release we issued earlier today, as well as in the supplemental financial information we prepared for this call, which again, are both available on the investor relations section of our website. And now, I would like to turn the call over to Bruce. Bruce?
Fahad Najam: 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 measures are included in the earnings press release we issued earlier today, as well as in the supplemental financial information we prepared for this call, which again, are both available on the investor relations section of our website. And now, I would like to turn the call over to Bruce. Bruce?
Speaker #2: Reconciliations to the applicable GAAP measures are included in the earnings press release we issued earlier today, as well as in the supplemental financial information we prepared for this call.
Speaker #2: Which again are both available on the Investor Relations section of our website. And now I would like to turn the call over to Bruce.
Speaker #2: Bruce?
Speaker #3: Great, thanks, Fahad. Good afternoon, everyone, and thanks for joining us today to discuss our Q4 results and outlook for 2026. When we spoke with you back in October, we entered Q4 with a sense of optimism, but also recognized we are operating in a very dynamic macro environment, including budget uncertainty related to the recent US government shutdown.
Bruce McClelland: Great. Thanks, Fahad. Good afternoon, everyone, and thanks for joining us today to discuss our Q4 results and outlook for 2026. When we spoke with you back in October, we entered Q4 with a sense of optimism, but also recognized we are operating in a very dynamic macro environment, including budget uncertainty related to the recent US government shutdown. We remain optimistic as we start the year. We successfully closed multiple significant deals in the quarter and achieved record product and professional service bookings. A significant portion of these new orders is associated with new voice modernization projects, where we expect revenues starting in the second half of 2026. We've expanded the customer base and reinforced our industry leadership in cloud-centric voice modernization, where our portfolio and technical teams really sets us apart from the competition.
Bruce McClelland: Great. Thanks, Fahad. Good afternoon, everyone, and thanks for joining us today to discuss our Q4 results and outlook for 2026. When we spoke with you back in October, we entered Q4 with a sense of optimism, but also recognized we are operating in a very dynamic macro environment, including budget uncertainty related to the recent US government shutdown. We remain optimistic as we start the year. We successfully closed multiple significant deals in the quarter and achieved record product and professional service bookings. A significant portion of these new orders is associated with new voice modernization projects, where we expect revenues starting in the second half of 2026. We've expanded the customer base and reinforced our industry leadership in cloud-centric voice modernization, where our portfolio and technical teams really sets us apart from the competition.
Speaker #3: We remain optimistic as we start the year. We successfully closed multiple significant deals in the quarter, and achieved record product and professional service bookings.
Speaker #3: A significant portion of these new orders is associated with new voice modernization projects, where we expect revenues starting in the second half of 2026.
Speaker #3: We've expanded the customer base and reinforced our industry leadership in cloud-centric voice modernization, where our portfolio and technical teams really set us apart from the competition.
Speaker #3: We also see a significant opportunity to integrate voice technologies with the expanding set of conversational AI and agentic AI platforms. And our Acumen AI Ops platform continues to garner strong interest.
Bruce McClelland: We also see a significant opportunity to integrate voice technologies with the expanding set of conversational AI and agentic AI platforms, and our Acumen AIOps platform continues to garner strong interest. However, relative to our guidance for Q4, revenue was below our expectations and was impacted by several customer and project delays. The delayed programs are not lost business and are primarily tied to 2 key reasons. Half of the shortfall was associated with projects already in backlog, where implementation delays pushed out project completion milestones or product shipments, delaying revenue recognition to future quarters. This included one of our primary US customers, where deployments slowed during their recent restructuring. The remaining gap in the fourth quarter was with several customers impacted by budget availability at the end of the year. This included an IP Optical project, where the end customer is still waiting for BEAD funding to be distributed.
Bruce McClelland: We also see a significant opportunity to integrate voice technologies with the expanding set of conversational AI and agentic AI platforms, and our Acumen AIOps platform continues to garner strong interest. However, relative to our guidance for Q4, revenue was below our expectations and was impacted by several customer and project delays. The delayed programs are not lost business and are primarily tied to 2 key reasons. Half of the shortfall was associated with projects already in backlog, where implementation delays pushed out project completion milestones or product shipments, delaying revenue recognition to future quarters. This included one of our primary US customers, where deployments slowed during their recent restructuring. The remaining gap in the fourth quarter was with several customers impacted by budget availability at the end of the year. This included an IP Optical project, where the end customer is still waiting for BEAD funding to be distributed.
Speaker #3: However, relative to our guidance for Q4, revenue was below our expectations and was impacted by several customer and project delays. The delayed programs are not lost business, and are primarily tied to two key reasons.
Speaker #3: Half of the shortfall was associated with projects already in backlog, where implementation delays pushed out project completion milestones or product shipments, delaying revenue recognition to future quarters.
Speaker #3: This included one of our primary US customers, where deployments slowed during their recent restructuring. The remaining gap in the fourth quarter was with several customers impacted by budget availability at the end of the year.
Speaker #3: This included an IP optical project where the end customer is still waiting for BEAD funding to be distributed. When comparing year over year, as expected, the largest contributor to the lower sales in Q4 was the reduction in new sales to U.S. federal agencies.
Bruce McClelland: When comparing year-over-year, as expected, the largest contributor to the lower sales in Q4 was the reduction in new sales to US federal agencies, which were approximately $10 million lower than the fourth quarter of 2024. The other primary contributor to the year-over-year reduction in Q4 is the challenging comparison to the record quarter we had with Verizon in the fourth quarter of 2024, when we shipped significant amounts of equipment to begin to ramp the voice modernization project across multiple sites. For the full year, our business with Verizon was very strong, with sales increasing 27% year-over-year. Now with the closure of the Frontier acquisition, there is a significant opportunity to expand the scope of our program across the Frontier footprint over the next several years.
Bruce McClelland: When comparing year-over-year, as expected, the largest contributor to the lower sales in Q4 was the reduction in new sales to US federal agencies, which were approximately $10 million lower than the fourth quarter of 2024. The other primary contributor to the year-over-year reduction in Q4 is the challenging comparison to the record quarter we had with Verizon in the fourth quarter of 2024, when we shipped significant amounts of equipment to begin to ramp the voice modernization project across multiple sites. For the full year, our business with Verizon was very strong, with sales increasing 27% year-over-year. Now with the closure of the Frontier acquisition, there is a significant opportunity to expand the scope of our program across the Frontier footprint over the next several years.
Speaker #3: These were approximately $10 million lower than the fourth quarter of 2024. The other primary contributor to the year-over-year reduction in Q4 is the challenging comparison to the record quarter we had with Verizon in the fourth quarter of '24, when we shipped significant amounts of equipment to begin to ramp the voice modernization project across multiple sites.
Speaker #3: For the full year, our business with Verizon was very strong, with sales increasing 27 percent year over year. And now, with the closure of the Frontier acquisition, there is a significant opportunity to expand the scope of our program across the Frontier footprint over the next several years.
Speaker #3: For the full year, sales to global service providers increased 5 percent and were 70 percent of overall sales for the company. Sales to enterprise customers increased 2 percent year over year, while sales to government and defense declined 23 percent.
Bruce McClelland: For the full year, sales to global service providers increased 5% and were 70% of overall sales for the company. Sales to enterprise customers increased 2% year-over-year, while sales to government and defense declined 23% and were 9% of overall sales. So we made good progress growing our position in telecom and enterprise markets, while government and defense were below expectations. On a regional basis, 2025 sales in the Americas were essentially flat year-over-year, given the reduction in US federal, offset by the increased business with service providers. EMEA sales were down year-over-year as a result of the reduced sales to Russia starting in Q2 of 2024. Excluding Russia, sales in EMEA were flat year-over-year.
Bruce McClelland: For the full year, sales to global service providers increased 5% and were 70% of overall sales for the company. Sales to enterprise customers increased 2% year-over-year, while sales to government and defense declined 23% and were 9% of overall sales. So we made good progress growing our position in telecom and enterprise markets, while government and defense were below expectations. On a regional basis, 2025 sales in the Americas were essentially flat year-over-year, given the reduction in US federal, offset by the increased business with service providers. EMEA sales were down year-over-year as a result of the reduced sales to Russia starting in Q2 of 2024. Excluding Russia, sales in EMEA were flat year-over-year.
Speaker #3: And we're 9% of overall sales. So we made good progress growing our position in telecom and enterprise markets, while government and defense were below expectations.
Speaker #3: On a regional basis, 2025 sales in the Americas were essentially flat year over year, given the reduction in US federal, offset by the increased business with service providers.
Speaker #3: EMEA sales were down year over year, as a result of the reduced sales to Russia starting in the second quarter of 2024, excluding Russia, sales in EMEA were flat year over year.
Speaker #3: And sales in the Asia Pacific region grew 19 percent year over year on the significant increase of business in India. Consolidated gross margin in the quarter was in line with our expectations, with very strong cloud and edge margins, benefiting from a stronger mix of software revenue this quarter.
Bruce McClelland: Sales in the Asia Pacific region grew 19% year-over-year on the significant increase of business in India. Consolidated gross margin in the quarter was in line with our expectations, with very strong Cloud and Edge margins benefiting from a stronger mix of software revenue this quarter, offset by lower IP Optical Networks gross margin from the increased sales in India and lower sales in North America and EMEA regions. Adjusted EBITDA for the quarter was $40 million, $2 million below our guidance range due to the lower sales, offset by lower operational expenses, primarily related to reduced employee variable compensation. Despite the lower-than-expected Q4 results, we ended 2025 in a solid financial position, and as expected, Q4 was the strongest quarter of the year, increasing 6% versus Q3.
Bruce McClelland: Sales in the Asia Pacific region grew 19% year-over-year on the significant increase of business in India. Consolidated gross margin in the quarter was in line with our expectations, with very strong Cloud and Edge margins benefiting from a stronger mix of software revenue this quarter, offset by lower IP Optical Networks gross margin from the increased sales in India and lower sales in North America and EMEA regions. Adjusted EBITDA for the quarter was $40 million, $2 million below our guidance range due to the lower sales, offset by lower operational expenses, primarily related to reduced employee variable compensation. Despite the lower-than-expected Q4 results, we ended 2025 in a solid financial position, and as expected, Q4 was the strongest quarter of the year, increasing 6% versus Q3.
Speaker #3: Offset by lower IP optical network gross margin from the increased sales in India, and lower sales in North America and EMEA regions. Adjusted EBITDA for the quarter was 40 million dollars, 2 million dollars below our guidance range due to the lower sales.
Speaker #3: Offset by lower operational expenses, primarily related to reduced employee variable compensation. Despite the lower-than-expected Q4 results, we ended 2025 in a solid financial position, and as expected, Q4 was the strongest quarter of the year, increasing 6 percent versus the third quarter.
Speaker #3: For the full year, revenue increased 1 percent, 845 million dollars, but excluding sales to Russia in 2024, sales to all other customers increased 4 percent in 2025.
Bruce McClelland: For the full year, revenue increased 1% to $845 million, but excluding sales to Russia in 2024, sales to all other customers increased 4% in 2025. Also note that you'll see a significant increase to our net income and EPS this quarter related to a new tax benefit that John will describe shortly. Now a little more detail on our operating segments. In our IP Optical Networks business, revenue was down $2 million year-over-year in the quarter, which was below our target of mid-single-digit growth. As mentioned earlier, we saw several projects in North America push out into 2026, including a significant new deployment awaiting the release of BEAD funding. Sales were lower in the EMEA region, primarily due to a year-end budget freeze with a government defense agency.
Bruce McClelland: For the full year, revenue increased 1% to $845 million, but excluding sales to Russia in 2024, sales to all other customers increased 4% in 2025. Also note that you'll see a significant increase to our net income and EPS this quarter related to a new tax benefit that John will describe shortly. Now a little more detail on our operating segments. In our IP Optical Networks business, revenue was down $2 million year-over-year in the quarter, which was below our target of mid-single-digit growth. As mentioned earlier, we saw several projects in North America push out into 2026, including a significant new deployment awaiting the release of BEAD funding. Sales were lower in the EMEA region, primarily due to a year-end budget freeze with a government defense agency.
Speaker #3: I'll also note that you'll see a significant increase to our net income and EPS this quarter, related to a new tax benefit that John will describe shortly.
Speaker #3: Now, a little more detail on our operating segments. In our IP Optical Networks business, revenue was down $2 million year over year in the quarter, which was below our target of mid-single-digit growth.
Speaker #3: As mentioned earlier, we saw several projects in North America push out into 2026, including a significant new deployment awaiting the release of BEAD funding.
Speaker #3: And sales were lower in the EMEA region, primarily due to a year-end budget freeze with a government defense agency. This was offset by continued growth in India, with sales in the fourth quarter increasing 28 percent year over year, on the strength of deployments with BARDI, as well as first shipments for a new world broadband deployment.
Bruce McClelland: This was offset by continued growth in India, with sales in the fourth quarter increasing 28% year-over-year on the strength of deployments with Bharti, as well as first shipments for a new rural broadband deployment. For the full year, sales in India grew more than 40% and exceeded $100 million. In other regions, we won several optical transport expansion projects in Southeast Asia with Converge CICT and Moratel... and in the critical, critical infrastructure market segment, we won significant projects with two major European railways, Danish Railway Banedanmark, and Pan-European operator Deutsche Bahn. We also had a first win with one of the largest electric power generation and distribution cooperatives in the US, which provides service across nine states. IP optical product and services bookings to revenue was 1.1 times in the quarter, and bookings were the highest level of the year.
Bruce McClelland: This was offset by continued growth in India, with sales in the fourth quarter increasing 28% year-over-year on the strength of deployments with Bharti, as well as first shipments for a new rural broadband deployment. For the full year, sales in India grew more than 40% and exceeded $100 million. In other regions, we won several optical transport expansion projects in Southeast Asia with Converge CICT and Moratel... and in the critical, critical infrastructure market segment, we won significant projects with two major European railways, Danish Railway Banedanmark, and Pan-European operator Deutsche Bahn. We also had a first win with one of the largest electric power generation and distribution cooperatives in the US, which provides service across nine states. IP optical product and services bookings to revenue was 1.1 times in the quarter, and bookings were the highest level of the year.
Speaker #3: For the full year, sales in India grew more than 40 percent and exceeded $100 million. In other regions, we won several optical transport expansion projects in Southeast Asia, with converged CI/CT and Moratel.
Speaker #3: In the infrastructure market segment, we won significant projects with two major European railways—Danish Railway, Bana Denmark, and Pan-European operator Deutsche Bahn.
Speaker #3: We also had a first win with one of the largest electric power generation and distribution cooperatives in the US, which provides service across nine states.
Speaker #3: IP Optical product and services bookings to revenue was 1.1 times in the quarter, and bookings were at the highest level of the year. For the full year, revenue grew approximately 1 percent, but when excluding sales to Russia in '24, revenue across all other regions increased 9 percent year over year.
Bruce McClelland: For the full year, revenue grew approximately 1%, but when excluding sales to Russia in 2024, revenue across all other regions increased 9% year-over-year. In our Cloud and Edge segment, revenue in the fourth quarter was down $23 million year-over-year and below our expectations, as I previously mentioned. Despite the lower revenue in the quarter, Cloud and Edge bookings set a new record high, with product and professional services booked a revenue of 1.5 times. As I mentioned on our last earnings call, we're seeing an increasing number of service providers investing in modernizing their traditional voice networks. In addition to Verizon, we've booked over $50 million of voice network transformation orders in the quarter across more than a dozen different customers.
Bruce McClelland: For the full year, revenue grew approximately 1%, but when excluding sales to Russia in 2024, revenue across all other regions increased 9% year-over-year. In our Cloud and Edge segment, revenue in the fourth quarter was down $23 million year-over-year and below our expectations, as I previously mentioned. Despite the lower revenue in the quarter, Cloud and Edge bookings set a new record high, with product and professional services booked a revenue of 1.5 times. As I mentioned on our last earnings call, we're seeing an increasing number of service providers investing in modernizing their traditional voice networks. In addition to Verizon, we've booked over $50 million of voice network transformation orders in the quarter across more than a dozen different customers.
Speaker #3: In our Cloud and Edge segment, revenue in the fourth quarter was down $23 million year over year, and below our expectations as I previously mentioned.
Speaker #3: Despite the lower revenue in the quarter, cloud and edge bookings set a new record high, with product and professional services booked to revenue of 1.5 times.
Speaker #3: As I mentioned on our last earnings service providers investing in modernizing call, we're seeing an increasing number of their traditional voice networks. In addition to Verizon, we booked over 50 million dollars of voice network transformation orders in the quarter, across more than a dozen different customers.
Speaker #3: Revenue for these projects is normally spread out over time, typically 6 to 12 months, or perhaps longer for larger projects. This is a very good start, and there are several additional significant opportunities that we are pursuing.
Bruce McClelland: Revenue for these projects is normally spread out over time, typically 6 to 12 months, or perhaps longer for larger projects. This is a very good start, and there are several additional significant opportunities that we are pursuing. In addition to legacy Class Five switch replacement, another key voice modernization priority for both service providers and enterprises, is to migrate from purpose-built hardware to fully virtual cloud-native implementations. We now have several major projects underway with Tier One service providers in Europe and Asia Pac, along with a significant new win with the US Tier One customer this quarter, to migrate SBC and routing workloads to cloud-native implementations, running in both private and public cloud. For the full year, Cloud Edge sales increased 1%, with service provider sales growing 8% and enterprise and government sales decreasing 16%.
Bruce McClelland: Revenue for these projects is normally spread out over time, typically 6 to 12 months, or perhaps longer for larger projects. This is a very good start, and there are several additional significant opportunities that we are pursuing. In addition to legacy Class Five switch replacement, another key voice modernization priority for both service providers and enterprises, is to migrate from purpose-built hardware to fully virtual cloud-native implementations. We now have several major projects underway with Tier One service providers in Europe and Asia Pac, along with a significant new win with the US Tier One customer this quarter, to migrate SBC and routing workloads to cloud-native implementations, running in both private and public cloud. For the full year, Cloud Edge sales increased 1%, with service provider sales growing 8% and enterprise and government sales decreasing 16%.
Speaker #3: In addition to legacy Class 5 switch replacement, another key voice modernization priority for both service providers and enterprises is to migrate from purpose-built hardware to fully virtual, cloud-native implementations.
Speaker #3: We now have several major projects underway with Tier 1 service providers in Europe and Asia-PAC, along with a significant new win with a US Tier 1 customer this quarter.
Speaker #3: To migrate SBC and routing workloads to cloud-native implementations. Running in both private and public cloud. For the full year, cloud and edge sales increased 1 percent, with service provider sales growing 8 percent, and enterprise and government sales decreasing 16 percent.
Speaker #3: With that, I'll turn it over to John to provide additional financial details on our results, and then come back on to discuss the outlook for 2026.
Bruce McClelland: With that, I'll turn it over to John to provide additional financial details on our results and then come back on to discuss outlook for 2026. John?
Bruce McClelland: With that, I'll turn it over to John to provide additional financial details on our results and then come back on to discuss outlook for 2026. John?
Speaker #3: John?
Speaker #2: Thanks, Bruce. Let's begin with financial results at the consolidated level. In the fourth quarter of 2025, Ribbon generated revenues of $227 million, a decrease of 10 percent from the prior year.
John Townsend: Thanks, Bruce. Let's begin with financial results at the consolidated level. In Q4 2025, Ribbon generated revenues of $227 million, a decrease of 10% from the prior year. For the full year, revenues were $845 million, an increase of 1% or $11 million year-over-year. Q4 non-GAAP gross margin was 55.4%, down 270 basis points due to lower software revenue and higher professional services revenue. It was also impacted by geographic mix, with a very strong performance from our team in India. For the full year, non-GAAP gross margin was 52.3%, down 355 basis points from the prior year, driven by the higher sales in India and the higher services revenues.
John Townsend: Thanks, Bruce. Let's begin with financial results at the consolidated level. In Q4 2025, Ribbon generated revenues of $227 million, a decrease of 10% from the prior year. For the full year, revenues were $845 million, an increase of 1% or $11 million year-over-year. Q4 non-GAAP gross margin was 55.4%, down 270 basis points due to lower software revenue and higher professional services revenue. It was also impacted by geographic mix, with a very strong performance from our team in India. For the full year, non-GAAP gross margin was 52.3%, down 355 basis points from the prior year, driven by the higher sales in India and the higher services revenues.
Speaker #2: For the full year, revenues were $845 million, an increase of 1 percent, or $11 million year over year. Fourth quarter non-GAAP gross margin was 55.4 percent, down 270 basis points, due to lower software revenue and higher professional services revenue.
Speaker #2: It was also impacted by geographic mix, with a very strong performance from our team in India. For the full year, non-GAAP gross margin was 52.3 percent, down 355 basis points from the prior year.
Speaker #2: sales in India, and the higher services revenues. Fourth Driven by the higher quarter non-GAAP operating expenses were 90 million dollars, a decrease of 4 million year over year, reflecting our continued focus on efficiency and cost management.
John Townsend: Fourth quarter non-GAAP operating expenses were $90 million, a decrease of $4 million year-over-year, reflecting our continued focus on efficiency and cost management. For the full year, operating expenses were $352 million, a reduction of $9 million from the prior year. The reductions were driven by employee and related costs, more than offsetting $4 million and $6 million of FX pressures in the quarter and year, respectively. Fourth quarter adjusted EBITDA was $40 million, a $15 million decrease from the prior year, driven principally by lower revenues. For the full year, adjusted EBITDA was $107 million, a decrease of $12 million from the prior year, driven by the lower gross margin. During the quarter, we recognized a deferred tax benefit of approximately $90 million related to our investment in ECI.
John Townsend: Fourth quarter non-GAAP operating expenses were $90 million, a decrease of $4 million year-over-year, reflecting our continued focus on efficiency and cost management. For the full year, operating expenses were $352 million, a reduction of $9 million from the prior year. The reductions were driven by employee and related costs, more than offsetting $4 million and $6 million of FX pressures in the quarter and year, respectively. Fourth quarter adjusted EBITDA was $40 million, a $15 million decrease from the prior year, driven principally by lower revenues. For the full year, adjusted EBITDA was $107 million, a decrease of $12 million from the prior year, driven by the lower gross margin. During the quarter, we recognized a deferred tax benefit of approximately $90 million related to our investment in ECI.
Speaker #2: For the full year, operating expenses were $352 million, a reduction of $9 million from the prior year. The reductions were driven by employee and related costs, more than offsetting $4 million and $6 million of FX pressures in the quarter and year, respectively.
Speaker #2: Fourth quarter adjusted EBITDA was 40 million dollars, a 15 million decrease from the prior year, driven principally by lower revenues. For the full year, adjusted EBITDA was 107
Speaker #1: $1 million , a decrease of $12 million from the prior year , driven by the lower gross margin during the quarter . We recognized during the quarter , we recognized deferred tax benefit of approximately to our investment in ECI .
John Townsend: This had a favorable $0.50 benefit to non-GAAP EPS. The tax asset will be utilized over the next several years, resulting in cash tax savings of between $15 to 20 million per annum. Net interest expense in the quarter is $11 million and $44 million for the full year. Quarterly non-GAAP net income was $106 million, a $78 million improvement year over year, driven by the tax benefit in the quarter. This generated non-GAAP diluted earnings per share of $0.59, which was an increase of $0.43 versus the prior year. Full year, 2025 non-GAAP net income was $118 million, up $74 million from the prior year. Diluted earnings per share for 2025 was $0.66, up $0.41 from 2024. Now, let's look at the results of our two business segments.
John Townsend: This had a favorable $0.50 benefit to non-GAAP EPS. The tax asset will be utilized over the next several years, resulting in cash tax savings of between $15 to 20 million per annum. Net interest expense in the quarter is $11 million and $44 million for the full year. Quarterly non-GAAP net income was $106 million, a $78 million improvement year over year, driven by the tax benefit in the quarter. This generated non-GAAP diluted earnings per share of $0.59, which was an increase of $0.43 versus the prior year. Full year, 2025 non-GAAP net income was $118 million, up $74 million from the prior year. Diluted earnings per share for 2025 was $0.66, up $0.41 from 2024. Now, let's look at the results of our two business segments.
Speaker #1: had a favorable This 50 cent benefit to non GAAP EPs tax asset will be . The utilized over the next several , resulting in years cash tax savings of between 15 to $20 million per annum .
Speaker #1: Net interest expense in the quarter was $11 million, and $44 million for the full year. Quarterly non-GAAP net income was $106 million.
Speaker #1: A $78 million improvement over year year , driven by the tax benefit in the quarter . This generated non-GAAP diluted earnings per share of $0.59 , which was an increase of $0.43 versus the prior year .
Speaker #1: Full year 2025 non-GAAP net income was $118 million, up $74 million from the prior year. Diluted earnings per share for 2025 was $0.66, up $0.41 from 2024.
Speaker #1: Now let's look at the results of our two business segments in our IP Optical Networks results. We recorded fourth quarter revenues, a 2% decrease versus the year prior.
John Townsend: In our IP Optical Networks results, we recorded fourth quarter revenues of $85 million, a 2% decrease versus the prior year. Revenues for the full year were $333 million, up 1% from 2024. Fourth quarter non-GAAP gross margin for IP Optical was 34%, down 600 basis points from the prior year, due principally to the higher revenues generated in India. For the full year, gross margin was 35%. IP Optical Networks adjusted EBITDA for the quarter was a loss of $8 million. For the full year, adjusted EBITDA was a loss of $27 million. Now on to our Cloud and Edge business.
John Townsend: In our IP Optical Networks results, we recorded fourth quarter revenues of $85 million, a 2% decrease versus the prior year. Revenues for the full year were $333 million, up 1% from 2024. Fourth quarter non-GAAP gross margin for IP Optical was 34%, down 600 basis points from the prior year, due principally to the higher revenues generated in India. For the full year, gross margin was 35%. IP Optical Networks adjusted EBITDA for the quarter was a loss of $8 million. For the full year, adjusted EBITDA was a loss of $27 million. Now on to our Cloud and Edge business.
Speaker #1: Revenues for the full year were $333 million , up 1% from 2020 . For fourth quarter , non-GAAP gross margin for IP , optical was 34% , down 600 basis points from the prior year , due principally to the higher revenues generated in India .
Speaker #1: For the full year, gross margin was 35%. IP Optical Networks adjusted EBITDA for the quarter was a loss of $8 million for the full year.
Speaker #1: Adjusted EBITDA was a loss of $27 million. Now, on to our Cloud and Edge business. We generated fourth quarter revenue of $142 million, up 14% sequentially.
John Townsend: We generated fourth quarter revenue of $142 million, up 14% sequentially, but a decrease of 14% year-over-year, against a record fourth quarter in 2024. Full year revenues were $511 million, a $6 million increase from 2024. Fourth quarter non-GAAP gross margins were strong at 68%, up 65 basis points from the prior year, supported by core session border controller sales increasing by 10%, benefiting the overall mix. Full year gross margin was 64%, down 300 basis points from the prior year, due to the higher level of professional service revenues related to voice network transformation programs. Adjusted EBITDA for the segment was $48 million or 34% of revenue. For the full year, adjusted EBITDA was $134 million, or 26% of revenues.
John Townsend: We generated fourth quarter revenue of $142 million, up 14% sequentially, but a decrease of 14% year-over-year, against a record fourth quarter in 2024. Full year revenues were $511 million, a $6 million increase from 2024. Fourth quarter non-GAAP gross margins were strong at 68%, up 65 basis points from the prior year, supported by core session border controller sales increasing by 10%, benefiting the overall mix. Full year gross margin was 64%, down 300 basis points from the prior year, due to the higher level of professional service revenues related to voice network transformation programs. Adjusted EBITDA for the segment was $48 million or 34% of revenue. For the full year, adjusted EBITDA was $134 million, or 26% of revenues.
Speaker #1: But a decrease of 14% year over year against a record fourth quarter in 2024. Full year revenues were $511 million, a $6 million increase from 2024.
Speaker #1: Fourth quarter gross non-GAAP margins were strong at 68%, up 65 basis points from the prior year, supported by core Session Border Controller sales increasing by 10%, benefiting the overall mix.
Speaker #1: Year full gross margin was 64%, down 300 basis points from the prior year due to the higher level of professional service revenues.
Speaker #1: Related to voice network transformation programs. Adjusted EBITDA for the segment was $48 million, or 34% of revenue for the full year.
Speaker #1: Adjusted EBITDA was $134 million , or 26% of revenues . Cash flow was very strong in the Good quarter . collections performance drove cash from operations of $29 million , resulting in a closing cash balance of 98 million and a net debt leverage ratio of 2.3 times cash from operations .
John Townsend: Cash flow was very strong in the quarter. Good collections performance drove cash from operations of $29 million, resulting in a closing cash balance of $98 million, and a net debt leverage ratio of 2.3 times. Cash from operations for the full year was $51 million. Total CapEx spend in the quarter was $2 million, bringing the full year expenditure to $15 million, plus an additional $10 million relating to our new Israeli facility. During the fourth quarter, we repurchased approximately 972,000 shares of our common stock under our buyback authorization for a total cost of approximately $3.3 million, bringing the total for 2025 to 2.5 million shares at a total cost of approximately $9 million.
John Townsend: Cash flow was very strong in the quarter. Good collections performance drove cash from operations of $29 million, resulting in a closing cash balance of $98 million, and a net debt leverage ratio of 2.3 times. Cash from operations for the full year was $51 million. Total CapEx spend in the quarter was $2 million, bringing the full year expenditure to $15 million, plus an additional $10 million relating to our new Israeli facility. During the fourth quarter, we repurchased approximately 972,000 shares of our common stock under our buyback authorization for a total cost of approximately $3.3 million, bringing the total for 2025 to 2.5 million shares at a total cost of approximately $9 million.
Speaker #1: For the full year was $51 million . Total CapEx spend in the quarter bringing the full was $2 million , year expenditure to 15 million , plus an additional 10 million relating to our new Israeli facility .
Speaker #1: During the fourth quarter, we repurchased approximately 972,000 shares of our common stock under our buyback authorization, for a total cost of approximately $3.3 million, bringing the total for 2025 to 2.5 million shares and a total cost of approximately $9 million.
John Townsend: In conclusion, we continue to improve our cost efficiency and working capital levels to better drive cash conversion in the business. We also expect our annual capital expenditure levels to return to approximately $15 million. These efforts, plus lower cash taxes, are expected to improve cash generation in the coming years. And with that, I'll turn the call back to Bruce.
John Townsend: In conclusion, we continue to improve our cost efficiency and working capital levels to better drive cash conversion in the business. We also expect our annual capital expenditure levels to return to approximately $15 million. These efforts, plus lower cash taxes, are expected to improve cash generation in the coming years. And with that, I'll turn the call back to Bruce.
Speaker #1: In conclusion , we continue to improve our cost efficiency and working capital levels to better drive cash conversion in the business . We also annual expect our capital expenditure levels to return to approximately These $15 million .
Speaker #1: efforts , plus lower cash taxes , are expected to improve cash generation in the coming years . And with that , I'll turn the call back to Bruce .
Bruce McClelland: Great. Thanks, John. Over the past four years, we've maintained steady top-line revenue performance and navigated a significant number of challenges while delivering improved profitability, with EBITDA growing at a 19% CAGR. As we enter the new year, we're not satisfied and are anxious to drive faster growth. We ended 2025 with increasing backlog and a broadening customer base for our secure voice and IP optical solutions. We continue to strengthen our balance sheet while also investing in innovation across our portfolio to drive long-term value. Our momentum remains intact, and I'm confident we'll deliver improving results as the year progresses. We have several important elements to our strategy this year to drive improved profitable growth and unlock value.
Bruce McClelland: Great. Thanks, John. Over the past four years, we've maintained steady top-line revenue performance and navigated a significant number of challenges while delivering improved profitability, with EBITDA growing at a 19% CAGR. As we enter the new year, we're not satisfied and are anxious to drive faster growth. We ended 2025 with increasing backlog and a broadening customer base for our secure voice and IP optical solutions. We continue to strengthen our balance sheet while also investing in innovation across our portfolio to drive long-term value. Our momentum remains intact, and I'm confident we'll deliver improving results as the year progresses. We have several important elements to our strategy this year to drive improved profitable growth and unlock value.
Speaker #1: Great. Thanks, John.
Speaker #2: Over the past four years , we've maintained steady top line revenue performance and navigated a significant number of challenges while delivering improved profitability .
Speaker #2: EBITDA With growing at a 19% kegger . As we enter the new year , we're not satisfied and are anxious to drive faster growth .
Speaker #2: We ended 2025 with increasing backlog and a broadening customer base for our secure voice and IP optical solutions. We continue to strengthen our balance sheet while also investing in innovation across our portfolio to drive long-term value.
Speaker #2: Our momentum remains intact, and I'm confident we'll deliver improving results as the year progresses. We have several important elements to our strategy this year to drive improved, profitable growth and unlock value.
Bruce McClelland: The largest area of opportunity continues to be the investment being made by service providers, governments, and enterprises to lower the cost of operating their communication infrastructure and replacing outdated equipment. With our marquee customer, Verizon, we ramped up activity in 2025 and are progressing well on the first phase of their modernization program. We believe this remains a high priority for them and believe there is opportunity to expand as Verizon integrates the Frontier operation in the coming months. Beyond Verizon, we now have similar initiatives with a broadening number of customers, highlighted by the strong bookings in Q4. These projects are complex and can take six months or more to implement and include a significant amount of professional services that Ribbon is uniquely positioned to provide.
Bruce McClelland: The largest area of opportunity continues to be the investment being made by service providers, governments, and enterprises to lower the cost of operating their communication infrastructure and replacing outdated equipment. With our marquee customer, Verizon, we ramped up activity in 2025 and are progressing well on the first phase of their modernization program. We believe this remains a high priority for them and believe there is opportunity to expand as Verizon integrates the Frontier operation in the coming months. Beyond Verizon, we now have similar initiatives with a broadening number of customers, highlighted by the strong bookings in Q4. These projects are complex and can take six months or more to implement and include a significant amount of professional services that Ribbon is uniquely positioned to provide.
Speaker #2: The largest area of opportunity continues to be the investment being made by providers, service governments, and enterprises to lower the cost of operating their communication infrastructure and outdated equipment. With our marquee customer, Verizon, we ramped up activity in 2025 and are well progressing on the first phase of their modernization program.
Speaker #2: believe We this remains a high priority for them and believe there is opportunity to as Verizon expand integrates the frontier operation in the coming months .
Speaker #2: Beyond Verizon, we now have similar initiatives with the broadening number of customers, highlighted by the strong bookings in the fourth quarter. These projects are complex and can take six months or more to implement, and include a significant amount of professional services.
Speaker #2: That Ribbon is uniquely positioned to provide, and many upfront investments can essentially be self-funded by the savings generated. We're exploring creative ways to further unlock and accelerate voice modernization across the industry.
Bruce McClelland: In many ways, the upfront investment can essentially be self-funded by the savings generated, and we're exploring creative ways to further unlock and accelerate voice modernization across the industry. In addition to telecom service providers, we have a growing presence in the enterprise segment, where companies are building and managing their own complex secure communication infrastructure. We have several specific market verticals that we are addressing across the Fortune 1000 landscape, including financials, healthcare, transportation, energy, and defense. The technology stack within large global multinationals is transitioning from private data centers to public cloud, adopting technologies such as containers and Kubernetes, and we believe we are considerably in front of our competition in supporting these new capabilities. Within the government sector, although it may take some time, we expect improved visibility now that the US federal fiscal 2026 funding has been approved.
Bruce McClelland: In many ways, the upfront investment can essentially be self-funded by the savings generated, and we're exploring creative ways to further unlock and accelerate voice modernization across the industry. In addition to telecom service providers, we have a growing presence in the enterprise segment, where companies are building and managing their own complex secure communication infrastructure. We have several specific market verticals that we are addressing across the Fortune 1000 landscape, including financials, healthcare, transportation, energy, and defense. The technology stack within large global multinationals is transitioning from private data centers to public cloud, adopting technologies such as containers and Kubernetes, and we believe we are considerably in front of our competition in supporting these new capabilities. Within the government sector, although it may take some time, we expect improved visibility now that the US federal fiscal 2026 funding has been approved.
Speaker #2: In addition to telecom service providers, we have a growing presence in the enterprise segment, where companies are building and managing their own complex, secure communication infrastructure.
Speaker #2: We have several specific market verticals that we are addressing across the fortune 1000 landscape , including financials , healthcare , transportation , energy defense and .
Speaker #2: The technology stack within large global multinationals is transitioning from private data centers to public cloud , adopting technologies such as containers and Kubernetes .
Speaker #2: And we believe we are considerably in front of our competition in supporting these new capabilities within the government sector. Although it may take some time, we expect improved visibility now that the US federal fiscal '26 funding has been approved.
Bruce McClelland: We have several large voice modernization programs already underway and a funnel of new opportunities that we expect will provide growth in the second half of the year. A key goal is to also secure similar programs outside the US this year. Our third major focus area is the sustained global investment in high-speed broadband infrastructure, driven by exponential growth in data traffic and the need to extend connectivity to underserved regions. In the US, we're actively supporting regional service providers as they expand fiber to the home networks using very cost-effective IP over DWDM architectures, and we expect these deployments to accelerate meaningfully in 2026 with the support of federal funding dollars. We're seeing similar momentum internationally, particularly in India, where national broadband initiatives have already translated into early commercial success for us.
Bruce McClelland: We have several large voice modernization programs already underway and a funnel of new opportunities that we expect will provide growth in the second half of the year. A key goal is to also secure similar programs outside the US this year. Our third major focus area is the sustained global investment in high-speed broadband infrastructure, driven by exponential growth in data traffic and the need to extend connectivity to underserved regions. In the US, we're actively supporting regional service providers as they expand fiber to the home networks using very cost-effective IP over DWDM architectures, and we expect these deployments to accelerate meaningfully in 2026 with the support of federal funding dollars. We're seeing similar momentum internationally, particularly in India, where national broadband initiatives have already translated into early commercial success for us.
Speaker #2: We have several large voice modernization programs already underway and a funnel of new opportunities that we expect will provide growth in the second half of the year .
Speaker #2: A key goal is to also secure similar programs outside the US this year. Our third major focus area is the sustained global investment in high-speed broadband infrastructure, driven by exponential growth in data traffic and the need to extend connectivity to underserved regions in the US.
Speaker #2: supporting We're regional service providers as they expand fiber to the home networks using very cost effective IP over Dwdm architectures , and we expect these deployments to accelerate meaningful , meaningfully in 2026 with the support of federal funding dollars .
Speaker #2: We're seeing similar momentum internationally , particularly in India , where national broadband initiatives have already translated into early commercial success . For us , these networks also provide a foundation for data center interconnect services , and we see additional upside in critical infrastructure customers across rail , energy and defense .
Bruce McClelland: These networks also provide a foundation for data center interconnect services, and we see additional upside in critical infrastructure customers across rail, energy, and defense, with a strong focus on expanding further in North America. Finally, our new Acumen AIOps platform is an important growth initiative for us, enabling end-to-end observability and automation across multi-vendor networks, with tools that allow customers to build AI agents using multiple large language model integrations... Optum remains our lead customer, with additional POCs planned in the first half and modest revenue expected in the second half. Beyond AIOps, as the adoption of agentic AI platforms continues to grow, we see a great convergence opportunity with our cloud-centric secure voice portfolio to seamlessly integrate AI with the human interface.
Bruce McClelland: These networks also provide a foundation for data center interconnect services, and we see additional upside in critical infrastructure customers across rail, energy, and defense, with a strong focus on expanding further in North America. Finally, our new Acumen AIOps platform is an important growth initiative for us, enabling end-to-end observability and automation across multi-vendor networks, with tools that allow customers to build AI agents using multiple large language model integrations... Optum remains our lead customer, with additional POCs planned in the first half and modest revenue expected in the second half. Beyond AIOps, as the adoption of agentic AI platforms continues to grow, we see a great convergence opportunity with our cloud-centric secure voice portfolio to seamlessly integrate AI with the human interface.
Speaker #2: With a strong focus on expanding further in North America . Finally , our new acumen AI ops platform is an important growth initiative for us , enabling end to end observability and automation across multi-vendor networks with tools that allow customers to build AI agents using multiple large language model integrations .
Speaker #2: Optimum remains our lead customer , with additional POCs planned in the first half and revenue modest expected in the second half . Beyond AI ops , as the adoption of Agentic AI continues to platforms grow , we see a great convergence opportunity with our cloud centric , secure voice portfolio to seamlessly integrate AI with the human interface .
Bruce McClelland: Partnerships are critical to success in this ecosystem, and we recently signed a multi-year collaboration agreement with AWS to simplify the transition of critical network services to public cloud. In addition to our core strategy, our recent tax planning has created an opportunity to generate more cash over the next several years that can be used to strengthen our balance sheet, as well as to potentially accelerate innovation and expansion into new, immediately adjacent markets, with select investments in new private technology companies rapidly innovating in these explosive growth markets. Now on to guidance for 2026. As I've just outlined, the underlying industry fundamentals are solid, and there are multiple positive long-term drivers supporting the business, and it's imperative for our customers to continue to invest.
Bruce McClelland: Partnerships are critical to success in this ecosystem, and we recently signed a multi-year collaboration agreement with AWS to simplify the transition of critical network services to public cloud. In addition to our core strategy, our recent tax planning has created an opportunity to generate more cash over the next several years that can be used to strengthen our balance sheet, as well as to potentially accelerate innovation and expansion into new, immediately adjacent markets, with select investments in new private technology companies rapidly innovating in these explosive growth markets. Now on to guidance for 2026. As I've just outlined, the underlying industry fundamentals are solid, and there are multiple positive long-term drivers supporting the business, and it's imperative for our customers to continue to invest.
Speaker #2: Partnerships are critical to success in this end-to-end ecosystem. We recently signed a multiyear collaboration agreement with AWS to simplify the transition of critical network services to public cloud.
Speaker #2: In addition to our core strategy , our recent tax planning has created an opportunity to generate more cash next over the several years that can be used to strengthen our balance sheet , as well as to potentially accelerate innovation and expansion into new , immediately adjacent markets .
Speaker #2: With select investments in new private technology companies rapidly innovating in these explosive growth markets . Now on to guidance for 2026 . As I've just outlined , the underlying industry fundamentals are solid and there are multiple positive long term drivers supporting the business .
Speaker #2: And it's imperative for our customers to continue to invest. However, we're taking a more cautious approach at this point in the year, given several near-term factors that are out of our control.
Bruce McClelland: However, we're taking a more cautious approach at this point in the year, given several near-term factors that are out of our control. As a result, our 2026 outlook reflects a more conservative set of assumptions, particularly around timing of business here in Q1. Key factors affecting our near-term outlook include shifts in investment priorities at major US service providers amidst elevated M&A activity, sustainability of Indian service provider CapEx intensity that has resulted in 60% revenue growth for Ribbon over the last 3 years, and timing in US federal spending and subsidy programs in the current political environment. Reflecting these macro uncertainties, we recently completed a restructuring that eliminated approximately 85 positions, lowering our annual expenses by more than $10 million.
Bruce McClelland: However, we're taking a more cautious approach at this point in the year, given several near-term factors that are out of our control. As a result, our 2026 outlook reflects a more conservative set of assumptions, particularly around timing of business here in Q1. Key factors affecting our near-term outlook include shifts in investment priorities at major US service providers amidst elevated M&A activity, sustainability of Indian service provider CapEx intensity that has resulted in 60% revenue growth for Ribbon over the last 3 years, and timing in US federal spending and subsidy programs in the current political environment. Reflecting these macro uncertainties, we recently completed a restructuring that eliminated approximately 85 positions, lowering our annual expenses by more than $10 million.
Speaker #2: As a result , our 2026 outlook reflects a more conservative set of assumptions , particularly around timing of business . Here in the first quarter , key factors affecting our near-term outlook include shifts in investment priorities at major US service providers amidst elevated M&A activity , sustainability of Indian service provider CapEx intensity that resulted has in 60% revenue growth for ribbon over the last three years , and timing in US federal spending and subsidy programs in the current political environment .
Speaker #2: Reflecting these macro uncertainties, we recently completed a restructuring that eliminated approximately 85 positions, lowering our expenses by more than $10 million annually. With that context, for the full year, we're projecting revenue in a range of $840 to $875 million.
Bruce McClelland: With that context, for the full year, we're projecting revenue in a range of $840 to 875 million. This implies a consolidated year-over-year growth rate of approximately 1.5% at the midpoint of guidance, but is actually quite a bit higher after excluding low-growth maintenance revenue. For the Cloud and Edge segment, we're projecting approximately 6% growth in product and professional services revenue, offset by slightly lower maintenance revenue. For the IP Optical segment, we're projecting approximately 5% growth of product and professional services revenue. Maintenance revenue is expected to be lower by approximately $10 million, related to the completion of a maintenance contract with a European customer associated with legacy access equipment. On a consolidated basis, we're currently projecting gross margin to increase 50 to 100 basis points year over year.
Bruce McClelland: With that context, for the full year, we're projecting revenue in a range of $840 to 875 million. This implies a consolidated year-over-year growth rate of approximately 1.5% at the midpoint of guidance, but is actually quite a bit higher after excluding low-growth maintenance revenue. For the Cloud and Edge segment, we're projecting approximately 6% growth in product and professional services revenue, offset by slightly lower maintenance revenue. For the IP Optical segment, we're projecting approximately 5% growth of product and professional services revenue. Maintenance revenue is expected to be lower by approximately $10 million, related to the completion of a maintenance contract with a European customer associated with legacy access equipment. On a consolidated basis, we're currently projecting gross margin to increase 50 to 100 basis points year over year.
Speaker #2: This implies a consolidated year over year growth rate of approximately 1.5% at the midpoint of guidance , but is actually quite a bit higher after excluding low growth maintenance revenue for the cloud and edge segment , we're projecting approximately 6% growth in product and professional services revenue , offset by slightly maintenance lower revenue .
Speaker #2: And for the IP segment , optical we're projecting approximately 5% growth of product professional and services revenue . Maintenance revenue is expected to be lower by approximately $10 million .
Speaker #2: Related to the completion of a maintenance contract with the European customer associated with Legacy access equipment . On a consolidated basis , we're currently projecting gross margin to increase 50 to 100 basis points year year over , and we're projecting opex for the year to increase approximately 2% year over year due to normal inflationary increases , offset by the restructuring savings I mentioned earlier .
Bruce McClelland: We're projecting OpEx for the year to increase approximately 2% year-over-year due to normal inflationary increases, offset by the restructuring savings I mentioned earlier. As a result, adjusted EBITDA for the year is projected in a range of $105 to 120 million, which would be approximately 6% higher than 2025 at the midpoint. For Q1, we expect a slower than typical start, given lower sales in India and lower maintenance revenue, and are projecting revenue in a range of $160 to 170 million and adjusted EBITDA in a range of -$3 to +1 million. In conclusion, we're taking a cautious approach, given several factors I've outlined that can affect the timing of the business this year and expect improvement as the year progresses.
Bruce McClelland: We're projecting OpEx for the year to increase approximately 2% year-over-year due to normal inflationary increases, offset by the restructuring savings I mentioned earlier. As a result, adjusted EBITDA for the year is projected in a range of $105 to 120 million, which would be approximately 6% higher than 2025 at the midpoint. For Q1, we expect a slower than typical start, given lower sales in India and lower maintenance revenue, and are projecting revenue in a range of $160 to 170 million and adjusted EBITDA in a range of -$3 to +1 million. In conclusion, we're taking a cautious approach, given several factors I've outlined that can affect the timing of the business this year and expect improvement as the year progresses.
Speaker #2: As a result, adjusted EBITDA for the year is projected to range between $105 million and $120 million, which would be approximately 6% higher than 2025 at the midpoint.
Speaker #2: For the first expect quarter , we a slower than typical start given lower sales in India and lower maintenance revenue , and are projecting revenue in a range of 160 to $170 million and adjusted EBITDA in a range of minus three to plus $1 million .
Speaker #2: In conclusion, we're taking a cautious approach given several factors I've outlined that can affect the timing of the business this year, and expect improvement as the year progresses.
Bruce McClelland: Operator, that concludes our prepared remarks, and we can now take a few questions.
Bruce McClelland: Operator, that concludes our prepared remarks, and we can now take a few questions.
Speaker #2: Operator, that concludes our prepared remarks, and we can now take a few questions.
Operator: 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 the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we poll for questions. Our first question today is coming from Michael Genovese from Rosenblatt Securities. Your line is now live.
Operator: 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 the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we poll for questions. Our first question today is coming from Michael Genovese from Rosenblatt Securities. Your line is now live.
Speaker #3: We'll now be Thank you . answer conducting a question and session . If you'd like to be in the question queue , placed please press star one on your telephone keypad .
Speaker #3: A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one.
Speaker #3: One moment, please, while we pull up questions. Our first question today is coming from Michael Genovese from Rosenblatt Securities. Your line is now live.
Michael Genovese: Great, thanks so much. Bruce, I'd like to hear more about these new Cloud and Edge bookings. Just, you know, more detail on the size of those bookings. And then also, you know, are those all coming from new customers, or does that also include, you know, new programs with existing customers like Verizon in that number?
Michael Genovese: Great, thanks so much. Bruce, I'd like to hear more about these new Cloud and Edge bookings. Just, you know, more detail on the size of those bookings. And then also, you know, are those all coming from new customers, or does that also include, you know, new programs with existing customers like Verizon in that number?
Speaker #4: Great . Thanks very much . I Bruce , I'd like to hear more about these new cloud and edge bookings . Just more detail on the the size of those bookings .
Speaker #4: And then also, are those all coming from new customers, or does that also include new programs with existing, like customers—Verizon—in that number?
Speaker #4: And then also, are those all coming from new customers, or does that also include new programs with existing, like customers—Verizon—in that number?
Bruce McClelland: Yeah. Hey, Mike, thanks for the question. So the $50 million of new bookings that I mentioned were non-Verizon. First of all, these are other customers on top of the business we have with Verizon. And I think I mentioned there are about 12 different customers, so it's kind of spread across, you know, a growing base of customers kind of focused on similar modernization. There was a couple reasonably large ones and then, you know, a longer list of more single-digit million sort of thing that contributed to the $50 million in bookings.
Bruce McClelland: Yeah. Hey, Mike, thanks for the question. So the $50 million of new bookings that I mentioned were non-Verizon. First of all, these are other customers on top of the business we have with Verizon. And I think I mentioned there are about 12 different customers, so it's kind of spread across, you know, a growing base of customers kind of focused on similar modernization. There was a couple reasonably large ones and then, you know, a longer list of more single-digit million sort of thing that contributed to the $50 million in bookings.
Speaker #2: Yeah . Hey , Mike , the question . So the 50 million of new bookings that were I mentioned non Verizon , first of all , these are other on on top customers of the business we have with Verizon and I think I mentioned are there about a dozen different customers .
Speaker #2: So it's kind of spread across , you know a growing base of of customers focused kind of on similar modernization . There was a couple reasonably large ones .
Speaker #2: And then , you know , a longer list of more single digit million sort of contributed to thing that the to the 50 million in bookings .
Bruce McClelland: And, you know, the revenue associated with that, a portion of that, we, you know, we shipped some of that in Q4, probably around 25%, and then the rest of that revenue associated with those bookings kind of plays out over the next, say, 15 months, something like that.
Bruce McClelland: And, you know, the revenue associated with that, a portion of that, we, you know, we shipped some of that in Q4, probably around 25%, and then the rest of that revenue associated with those bookings kind of plays out over the next, say, 15 months, something like that.
Speaker #2: associated with that know , the , a portion of that we And , you ship some of , you know , we that in Q4 , probably And then the around 25% .
Speaker #2: rest of that revenue associated with those bookings kind of plays out over the next , say , 15 months , something like that .
Michael Genovese: Great. And I mean, do any of those, you know, dozen or so customers, I mean, you know, are any of them of the size where they could be, you know, eventually, like a Verizon or even like a Brightspeed, or, you know, is there anybody large on that, on that list?
Michael Genovese: Great. And I mean, do any of those, you know, dozen or so customers, I mean, you know, are any of them of the size where they could be, you know, eventually, like a Verizon or even like a Brightspeed, or, you know, is there anybody large on that, on that list?
Speaker #4: Okay . And I mean , do any of those , you know , dozen or so mean customers , I know , you , are any of them of the size where they be , you know , eventually , like a or even Verizon like a bright speed you know , or , anybody large on that , on that list ?
Bruce McClelland: Yes. Yes.
Bruce McClelland: Yes. Yes.
Speaker #2: Yes . Yes .
Michael Genovese: Okay.
Michael Genovese: Okay.
Bruce McClelland: Yeah. Yeah, yeah.
Bruce McClelland: Yeah. Yeah, yeah.
Michael Genovese: I guess we'll leave it at that. I guess some, you know, my other question is, I just wanna get more follow-up on, you know, some of these delays that you're seeing, because, you know, it sounds like it's cutting across, you know, government in the US, government in Europe, plus some US service provider. So that's like multiple vectors of, you know, delay and budget issue. So just, you know, more color on what's going on in all of these places and how long this could last would be helpful.
Speaker #4: Okay . Yeah . I guess at that we'll leave it . I guess , you know , my other question is I just want to get more follow up on , you know , some of these you're delays that seeing because , you know , it sounds like it's cutting across , you know , government in the US , government in Europe , plus some US service provider .
Michael Genovese: I guess we'll leave it at that. I guess some, you know, my other question is, I just wanna get more follow-up on, you know, some of these delays that you're seeing, because, you know, it sounds like it's cutting across, you know, government in the US, government in Europe, plus some US service provider. So that's like multiple vectors of, you know, delay and budget issue. So just, you know, more color on what's going on in all of these places and how long this could last would be helpful.
Speaker #4: So that's like multiple vectors of, you know, delay and budget issue. So just more color on what's going on in all of these places and how long this could last would be helpful.
Bruce McClelland: Yeah, no, I definitely understand the question. You know, I wish I could point to one specific thing. There was kind of two groupings. One, I think the one I was probably most frustrated with was business we already had in backlog that we were expecting to score revenue in the quarter that moved out of the quarter. And you know, these are basically professional service programs where we're deploying product. You know, I mentioned as one example a large US customer that was going through restructuring. And you know, these programs were basically joined at the hip with the customer doing the planning out in the field, basically installing the equipment, doing the migrations, et cetera.
Bruce McClelland: Yeah, no, I definitely understand the question. You know, I wish I could point to one specific thing. There was kind of two groupings. One, I think the one I was probably most frustrated with was business we already had in backlog that we were expecting to score revenue in the quarter that moved out of the quarter. And you know, these are basically professional service programs where we're deploying product. You know, I mentioned as one example a large US customer that was going through restructuring. And you know, these programs were basically joined at the hip with the customer doing the planning out in the field, basically installing the equipment, doing the migrations, et cetera.
Speaker #2: Yeah . No , I definitely understand the question . You know , I wish I could point to one specific thing that was kind two groupings .
Speaker #2: One , of I think the one I was probably most frustrated with was business . We already had in backlog that we were expecting to score revenue in the quarter that moved out of the quarter , and , you know , these basically professional service programs where we're deploying product .
Speaker #2: You know , I mentioned as one example , you know , large US customer that was going through restructuring and you know , these programs were basically joined at the hip with the customer doing the planning out in the field .
Speaker #2: Basically installing the equipment , doing the migrations , etc. . And we recognize revenue as these migrations complete and , and , and you know , all the lines are cut over to the new platforms and , you know , so we saw some delays in those deployments and that kind of immediately , you know , moves out revenue for us .
Bruce McClelland: We recognize revenue as these migrations complete and you know, all the lines are cut over to the new platforms. You know, so we saw some delays in those deployments, and that kind of immediately you know, moves out revenue for us. You know, those types of kind of major restructurings you know, obviously have an impact on those types of programs. So that was the first big bucket, and then the other was what I describe as you know, year-end budget issues. You know, the one that was kind of the best example was the project that I talked about last quarter that's associated with BEAD funding.
Bruce McClelland: We recognize revenue as these migrations complete and you know, all the lines are cut over to the new platforms. You know, so we saw some delays in those deployments, and that kind of immediately you know, moves out revenue for us. You know, those types of kind of major restructurings you know, obviously have an impact on those types of programs. So that was the first big bucket, and then the other was what I describe as you know, year-end budget issues. You know, the one that was kind of the best example was the project that I talked about last quarter that's associated with BEAD funding.
Speaker #2: And , those those types of kind of you know , major restructurings , obviously have an on those types of on impact programs .
Speaker #2: So , so that was the first big bucket . And then the other was what I as , you know , year end budget issues , you know , the one that was kind of the best example was the project that I talked about last quarter that's associated with the bead funding .
Bruce McClelland: And, of course, if you follow that closely, there's a lot of frustration over, you know, when that, when those funds start to really get released to the individual states. Most of the NTIA approvals are now completed, but now everyone's waiting for NIST approval, which is really, you know, the final government contract to release the funds. And so, you know, that's an example of something moved out of the quarter. And there's a couple other kind of smaller examples like that, so.
Bruce McClelland: And, of course, if you follow that closely, there's a lot of frustration over, you know, when that, when those funds start to really get released to the individual states. Most of the NTIA approvals are now completed, but now everyone's waiting for NIST approval, which is really, you know, the final government contract to release the funds. And so, you know, that's an example of something moved out of the quarter. And there's a couple other kind of smaller examples like that, so.
Speaker #2: course , if And of you follow that closely , there's a lot of frustration over , you know , when that when those funds start to really get released to the individual states the , most of PNT , NTIA approvals are now completed .
Speaker #2: But now everyone's waiting for NIST approval , which is know , the final government contract really , you to release the funds . And so , you know , that's an example something moved of out of the quarter .
Speaker #2: And there's a couple other kind of smaller examples like that . So .
Michael Genovese: Okay. You know, maybe I'll ask one last question, if you don't mind. You know, I guess, given, you know, where we're starting the first quarter and the guide for the full year, it looks like we, you know, we need some pretty significant sequential growth, I'd say, throughout the year, right? Throughout the remaining quarters, to you know, that is the right way to think about it? Because I know typically, you know, the third quarter can be down sequentially, but in this kind of, when you're starting the first quarter this low and you have this kind of guide, I'm just thinking ahead to the third quarter.
Michael Genovese: Okay. You know, maybe I'll ask one last question, if you don't mind. You know, I guess, given, you know, where we're starting the first quarter and the guide for the full year, it looks like we, you know, we need some pretty significant sequential growth, I'd say, throughout the year, right? Throughout the remaining quarters, to you know, that is the right way to think about it? Because I know typically, you know, the third quarter can be down sequentially, but in this kind of, when you're starting the first quarter this low and you have this kind of guide, I'm just thinking ahead to the third quarter.
Speaker #4: Okay , you know , maybe I'll ask I'll ask one last question . If you don't mind . You know , I guess given you know where we're starting the quarter and the first guide for the full year looks like we , it you know , we need some pretty significant sequential growth .
Speaker #4: I'd say , throughout the year , right ? Throughout the remaining quarters to , you know , is that the right way to think about it ?
Speaker #4: Because I know typically , you know , the third quarter can be down sequentially . But in this kind of where you're starting the first quarter this this kind of low and you have I'm guide , just thinking ahead to the third quarter know it's .
Michael Genovese: I know it's early to think about Q3, but should we think about, you know, sequential growth every quarter this year, and less seasonality after we get by Q1?
Michael Genovese: I know it's early to think about Q3, but should we think about, you know, sequential growth every quarter this year, and less seasonality after we get by Q1?
Speaker #4: early to think about the third quarter , but should we think about , you sequential I every growth quarter this unless year after we seasonality get get by the first quarter .
Bruce McClelland: You know, that's the way we're profiling it at this point. And yeah, we're, you know, slow here in Q1, obviously. As I mentioned, you know, we expect revenue in India to be lower than the peak levels that we've had last year. You know, I think there's a couple of reasons why you're seeing us be more conservative. Obviously, starting slower in Q1 is one of them. But there's a number of kind of macro things going on here. You know, the large changes going on at Verizon, our key customer here. You know, we feel like we're well-positioned because we're ultimately helping them reduce the cost of operating the networks.
Bruce McClelland: You know, that's the way we're profiling it at this point. And yeah, we're, you know, slow here in Q1, obviously. As I mentioned, you know, we expect revenue in India to be lower than the peak levels that we've had last year. You know, I think there's a couple of reasons why you're seeing us be more conservative. Obviously, starting slower in Q1 is one of them. But there's a number of kind of macro things going on here. You know, the large changes going on at Verizon, our key customer here. You know, we feel like we're well-positioned because we're ultimately helping them reduce the cost of operating the networks.
Speaker #2: You know , that's the we're point . And way yeah , at this we're you know , slow profiling it Q1 here in obviously , know , we mentioned , you as I expect revenue in India to be lower than the peak we've had last levels that year I think .
Speaker #2: there's a couple reasons of You know , seeing why you're conservative . us be more Obviously starting slower in is one of them there's you .
Speaker #2: of macro things know , there's a Q1 going on number of kind here . You know , the But large on at Verizon , changes going our key customer here .
Speaker #2: know , we feel like You we're well because we're positioned ultimately them helping reduce the cost of operating the And as they networks .
Bruce McClelland: As they integrate the Frontier footprint, we think there's just a great opportunity for us in the midterm here to expand the programs we have going. I, you know, I think they're delighted with the progress and everything we've made. But when they go through a major restructuring like they are, you know, it, it definitely has some, you know, near-term impact, just on the velocity of, of getting the work done. So that's one of the key reasons we're being more conservative, you know, until we really understand exactly how that plays out. The second, you know, is still tied to the US federal government spending.
Bruce McClelland: As they integrate the Frontier footprint, we think there's just a great opportunity for us in the midterm here to expand the programs we have going. I, you know, I think they're delighted with the progress and everything we've made. But when they go through a major restructuring like they are, you know, it, it definitely has some, you know, near-term impact, just on the velocity of, of getting the work done. So that's one of the key reasons we're being more conservative, you know, until we really understand exactly how that plays out. The second, you know, is still tied to the US federal government spending.
Speaker #2: the integrate there's frontier footprint , we think just a great opportunity us in the mid-term here to expand the we have programs going .
Speaker #2: know , I think for delighted with they're everything progress and made the And , you . But we've go through a major when they restructuring like they are , you know , it some near-term impact definitely has just on the velocity of work getting the of done .
Speaker #2: So that's one of the key being more we're conservative . You know , until we really reasons exactly how understand that out second , you know , is , the tied to the US federal still government spending that , you .
Bruce McClelland: Not that, you know, obviously, things are back in business there and, you know, budgets are now kind of established for all the agencies, et cetera, but it takes a bit of time for that all to start to ramp back up again. We have, in particular, two major programs going on there today, where we're in the deployment phase. And, you know, kind of similar to the Verizon program, we're out helping, you know, deploy and operationalize the infrastructure that we've already sold them. So we think that ramps significantly again back in the second half, and, you know, that's why we think it's, you know, kind of back-end loaded as the year progresses. The third item I flagged, you know, Mike, in the commentary, was around India.
Bruce McClelland: Not that, you know, obviously, things are back in business there and, you know, budgets are now kind of established for all the agencies, et cetera, but it takes a bit of time for that all to start to ramp back up again. We have, in particular, two major programs going on there today, where we're in the deployment phase. And, you know, kind of similar to the Verizon program, we're out helping, you know, deploy and operationalize the infrastructure that we've already sold them. So we think that ramps significantly again back in the second half, and, you know, that's why we think it's, you know, kind of back-end loaded as the year progresses. The third item I flagged, you know, Mike, in the commentary, was around India.
Speaker #2: know , obviously things are are Not back in business there . And , you know , now kind of established for all the budgets are agencies , But it etc.
Speaker #2: takes a bit of time for that all to start to up ramp back We have again . . in there particular two major going on programs today where we're in the phase you know , kind of deployment and , program , Verizon out we're helping similar to the deploy and infrastructure that we've the already sold So we them .
Speaker #2: think that significantly . operationalize ramps the second half . And you know , that's why back in think it's , you know , kind of we loaded back end progresses .
Speaker #2: third item I you know , as the year flagged , The commentary the was Mike in around India . You know , we've had a great run there .
Bruce McClelland: You know, we've had a great run there, increased 40% in 2025. You know, we think there's a possibility it continues at that rate, but we're not sure yet until all the budgets are finished. You know, they're on a fiscal year ending March. So we're trying to be just a little more thoughtful around the targets that we set, and, you know, hopefully, we can improve that as the year progresses here.
Bruce McClelland: You know, we've had a great run there, increased 40% in 2025. You know, we think there's a possibility it continues at that rate, but we're not sure yet until all the budgets are finished. You know, they're on a fiscal year ending March. So we're trying to be just a little more thoughtful around the targets that we set, and, you know, hopefully, we can improve that as the year progresses here.
Speaker #2: Increased 40% in 2025 . think there's You know , a possibility it we continues we're not until all the at that sure yet are budgets rate .
Speaker #2: You know , they're on a finished . fiscal year ending ending March But be just trying to a little . So we're more thoughtful around the targets set .
Speaker #2: And , you know , hopefully we can as the year that we improve that progresses . Here .
Michael Genovese: I appreciate all the response, all the color. Thanks very much.
Michael Genovese: I appreciate all the response, all the color. Thanks very much.
Speaker #4: the
Bruce McClelland: Thanks very much, Mike.
Bruce McClelland: Thanks very much, Mike.
Speaker #4: response , all the color . Thanks very much . appreciate all
Speaker #2: very much , Mike .
Operator: Thank you. Next question is coming from Tim Savageaux, from Northland Capital Markets. Your line is now live.
Operator: Thank you. Next question is coming from Tim Savageaux, from Northland Capital Markets. Your line is now live.
Speaker #2: .
Speaker #3: you . Next Thank question is Thanks coming from I Tim Salvaggio Northland Capital Markets . is now live Your line from .
Timothy Savageaux: ... Yeah. Hey, good afternoon. I guess the first question, and I think you said you might have some. I don't know if you specified big US Tier One carriers in that $50 million of orders. But is there a way to relate those initial orders to the total opportunity at those customers? Is that sort of those are pretty big deployments, but I guess how much of your estimate of the total opportunity at those customers for voice upgrade does that 50 represent?
Timothy Savageaux: ... Yeah. Hey, good afternoon. I guess the first question, and I think you said you might have some. I don't know if you specified big US Tier One carriers in that $50 million of orders. But is there a way to relate those initial orders to the total opportunity at those customers? Is that sort of those are pretty big deployments, but I guess how much of your estimate of the total opportunity at those customers for voice upgrade does that 50 represent?
Speaker #5: Yeah . Hey , good afternoon . I guess the I first question think you said you might some and specified I don't know if you have US big tier one carriers in that 50 million of orders is there a , but way to relate orders those to the total opportunity at those customers ?
Speaker #5: that Is sort of a those are pretty big deployments , but . I guess how much the of your estimate of the total opportunity at those customers voice for upgrades does that ?
Bruce McClelland: Yeah. Hey, Tim, you know, it's a, it's absolutely a fair question. You know, I've, I've hesitated to put a specific number on the total addressable market for modernization. A part of my reluctance is not everybody's adopting the same approach. You know, obviously, the tactics at Verizon look different than what, let's say, Lumen's doing today or what AT&T is doing today. You know, the additional backlog that we built here in Q4 is obviously meaningful and, you know, covers deployments over the next, say, 12 months, as I, as I mentioned. There's some larger names in that, that, you know, are maybe not committing to a larger multi-year program.
Bruce McClelland: Yeah. Hey, Tim, you know, it's a, it's absolutely a fair question. You know, I've, I've hesitated to put a specific number on the total addressable market for modernization. A part of my reluctance is not everybody's adopting the same approach. You know, obviously, the tactics at Verizon look different than what, let's say, Lumen's doing today or what AT&T is doing today. You know, the additional backlog that we built here in Q4 is obviously meaningful and, you know, covers deployments over the next, say, 12 months, as I, as I mentioned. There's some larger names in that, that, you know, are maybe not committing to a larger multi-year program.
Speaker #5: 50 represent
Speaker #2: Hey ,
Speaker #2: Tim , you know , it's ? Yeah . absolutely a fair question a it's . You know I've I've to put a specific hesitated number the total on addressable market for modernization .
Speaker #2: part of my reluctance is not everybody's the same adopting A You know , approach . obviously the tactics at different Verizon look what , let's say doing than today or AT&T what , Lumen's is doing today the the .
Speaker #2: additional that we backlog built here in the is You know , obviously fourth quarter And meaningful . know , covers the , you say , 12 months .
Speaker #2: deployments over As mentioned , I as I next , and there's larger names some that , you know , in are maybe , that not committing to larger a program .
Bruce McClelland: Maybe it's more targeted on, you know, different regions where the cost of operating those networks are higher, or it's more challenging to just switch off the offices and turn off the copper loop. So, depending on just how big and broad these programs go, this is a sizable, large market. You know, the last number I saw, the number of POTS lines in the US is something like 20 million. I don't know if anybody has an exact number on that, but it's a large addressable market. As I mentioned in my commentary, you know, if you, if you look at the numbers, as far as the cost savings that you generate from doing the modernization, you know, it, depending on your time horizon, this becomes a self-funding program.
Bruce McClelland: Maybe it's more targeted on, you know, different regions where the cost of operating those networks are higher, or it's more challenging to just switch off the offices and turn off the copper loop. So, depending on just how big and broad these programs go, this is a sizable, large market. You know, the last number I saw, the number of POTS lines in the US is something like 20 million. I don't know if anybody has an exact number on that, but it's a large addressable market. As I mentioned in my commentary, you know, if you, if you look at the numbers, as far as the cost savings that you generate from doing the modernization, you know, it, depending on your time horizon, this becomes a self-funding program.
Speaker #2: Maybe it's more multi-year on different targeted cost of operating networks are those regions where the higher or it's more challenging to just switch off the offices and turn off the copper loop .
Speaker #2: So depending on just big and broad these how this is a go , sizable , large market . You know , the number I last saw , the number of of pots , lines in in the US , something like 20 million , I don't know if anybody has on an exact number it's that , but a large addressable market .
Speaker #2: As I mentioned in my commentary . You know , if you if you look at the numbers as far as the cost savings that you generate from doing the modernization , you know , it your time horizon , this depending on becomes a it program .
Bruce McClelland: If you're not modernizing, eventually, you know, your costs start to be higher than your revenue. And so I think there's, you know, we're looking at some creative ways to really unlock and move more quickly. Just a final comment. You know, if you look at Verizon, you know, we've obviously in the first phase of that program with them, you know, I think it addresses about 1/3 of their network, and so there's, you know, significant opportunity still with them as we progress over the next several years. And then, you know, I think it's a key part of how they're thinking about reducing costs, operating the Frontier network as well. So, yeah, there's lots of lots of activity, lots of opportunity here for us.
Bruce McClelland: If you're not modernizing, eventually, you know, your costs start to be higher than your revenue. And so I think there's, you know, we're looking at some creative ways to really unlock and move more quickly. Just a final comment. You know, if you look at Verizon, you know, we've obviously in the first phase of that program with them, you know, I think it addresses about 1/3 of their network, and so there's, you know, significant opportunity still with them as we progress over the next several years. And then, you know, I think it's a key part of how they're thinking about reducing costs, operating the Frontier network as well. So, yeah, there's lots of lots of activity, lots of opportunity here for us.
Speaker #2: if And self-funding modernizing , you're not eventually you costs than your start to be higher know your revenue . And so I think we're looking there's you know , at some creative ways to really unlock and move more .
Speaker #2: quickly a final look know , if you Just comment . You at you know , Verizon , we've obviously in the first phase of that program with them , you know , I think it addresses about a third of their network .
Speaker #2: And so there's , you know , a significant opportunity still with them as we progress over the next several years . And then , you know , I think it's a key part of how they're thinking about reducing cost , operating the network as well .
Speaker #2: So yeah, there's lots of activity, lots of opportunity here for us, lots of—
Timothy Savageaux: Yeah, I mean, that's kind of the color I'm looking for. You know, you're obviously a pretty big deal with Verizon. I think you mentioned up 26%. I don't know if that's getting close to $140 million or something like that, but just to try to relate, and you know, they've sort of committed to, you know, that three-year rollout. I guess what I'm trying to get to is, it doesn't sound like within that $50 million of bookings, there are commitments for three-year rollouts or from big carriers, but maybe there are, right? So, you know, to the extent you're relating what you've done with Verizon is 1/3 of the network, it seems like this range of commitments from current customers should represent a lot less than that in terms of proportion of their networks they're upgrading.
Timothy Savageaux: Yeah, I mean, that's kind of the color I'm looking for. You know, you're obviously a pretty big deal with Verizon. I think you mentioned up 26%. I don't know if that's getting close to $140 million or something like that, but just to try to relate, and you know, they've sort of committed to, you know, that three-year rollout. I guess what I'm trying to get to is, it doesn't sound like within that $50 million of bookings, there are commitments for three-year rollouts or from big carriers, but maybe there are, right? So, you know, to the extent you're relating what you've done with Verizon is 1/3 of the network, it seems like this range of commitments from current customers should represent a lot less than that in terms of proportion of their networks they're upgrading.
Speaker #5: Yeah , I mean , that's the kind of color I'm looking for your obviously a pretty big deal with Verizon . I think you mentioned 26% .
Speaker #5: up know if that's I don't getting to close 140 million or something like that . But . Is to try to relate . you know , And , of they've sort committed to , know , you that three year rollout guess what I'm trying to get , I to is it doesn't sound like within that 50 million of bookings , there are commitments for three year rollouts or from big carriers , but maybe there are .
Speaker #5: Right . So , you know , to the extent you're relating what you've done with Verizon is a third of the network . It seems like this range of commitments from current customers should represent a lot less than that in terms networks .
Speaker #5: proportion of their They're upgrading . That's kind of what I'm looking for , right ?
Timothy Savageaux: That's directionally kind of what I'm looking for.
Timothy Savageaux: That's directionally kind of what I'm looking for.
Bruce McClelland: Right. I think those are all the right observations. You know, none of the bookings in Q4 were for, like, a three-year horizon. You know, this was all kind of 12-month, 12- to 15-month horizon programs. Just on Verizon, again, the contract we have in place for first three years, kind of 1/3 of their footprint, you know, we're now kind of halfway through that from a timing perspective. You know, we're about a year and a half since we initiated the program, and, you know, we estimate we're 35% or so through that effort. So there's a lot of work left to go on the first contract. We think, you know, there's likely a second phase, and then Frontier on top of that.
Bruce McClelland: Right. I think those are all the right observations. You know, none of the bookings in Q4 were for, like, a three-year horizon. You know, this was all kind of 12-month, 12- to 15-month horizon programs. Just on Verizon, again, the contract we have in place for first three years, kind of 1/3 of their footprint, you know, we're now kind of halfway through that from a timing perspective. You know, we're about a year and a half since we initiated the program, and, you know, we estimate we're 35% or so through that effort. So there's a lot of work left to go on the first contract. We think, you know, there's likely a second phase, and then Frontier on top of that.
Speaker #2: those are I think all the right observations . You know , none of the none of the bookings in Q4 were for like a three year horizon .
Speaker #2: You know , this was all kind of 12 month , 12 to 15 month horizon programs . And just on on Verizon , again , the , you know , the contract we have in place for first three years , kind of a third of their footprint , you know , we're now kind of halfway through that from a timing perspective .
Speaker #2: You know , we're about a year and a half since we initiated the program . you know , we And estimate we're 35% or so through that , that effort .
Speaker #2: there's a left to contract . We think , you know , go on the first likely a second phase . And then and then top of frontier on So that .
Bruce McClelland: So, you know, there's quite a runway here for us. Lots of work ahead.
Bruce McClelland: So, you know, there's quite a runway here for us. Lots of work ahead.
Speaker #2: You know, yeah, there's quite a runway here for us. Lots of work ahead.
Timothy Savageaux: Right. Exactly. I guess it's closer to $150 million for Verizon now that I look at it. Now, obviously, there's, you know, kind of announced a draconian cut in their combined CapEx with Frontier, and looking to maintain, I guess, at least the current level, if not accelerate a fiber build. You mentioned a restructuring, but would you say you're... I mean, I guess you got a bunch of factors going on, but maybe just uncertainty around where that cut's coming from, perhaps, as given this merger just happened, is likely what's impacting you, as well as just a lower bogey envelope for capital spending overall. Is that kind of fair to say?
Timothy Savageaux: Right. Exactly. I guess it's closer to $150 million for Verizon now that I look at it. Now, obviously, there's, you know, kind of announced a draconian cut in their combined CapEx with Frontier, and looking to maintain, I guess, at least the current level, if not accelerate a fiber build. You mentioned a restructuring, but would you say you're... I mean, I guess you got a bunch of factors going on, but maybe just uncertainty around where that cut's coming from, perhaps, as given this merger just happened, is likely what's impacting you, as well as just a lower bogey envelope for capital spending overall. Is that kind of fair to say?
Speaker #5: Right . Exactly . I guess it's closer to 150 million for Verizon . Now that I look at it now , obviously you there's know , kind a announced of draconian cut in their combined CapEx with frontier .
Speaker #5: looking And to maintain , I guess at least the level , if current not , of accelerate fiber build . a And you restructuring , mentioned but would you say you're got a I guess you on , bunch of factors going but maybe just uncertainty where that where that cuts coming from , perhaps has given this happened merger just is likely what's impacting you as well as just a lower bogey envelope for capital spending overall , that kind of fair to say
Bruce McClelland: Yeah, I guess what I would say is we're being cautious here until, you know, plans are finalized. They're only, you know, kind of weeks into running the Frontier network. And, you know, again, I think there's obviously opportunity for expansion associated with that. But until we, you know, we and they have had a chance to kind of nail all that down, I just want to be cautious in how we think about how the year's gonna play out... and, you know, I, I'm convinced there's tons of business and growth here with them, but until they get through their planning, I wanna be more cautious. And as you said, they've made some big macro changes. So until that kind of rolls out to everybody, I think, I think it's the right way to manage it.
Bruce McClelland: Yeah, I guess what I would say is we're being cautious here until, you know, plans are finalized. They're only, you know, kind of weeks into running the Frontier network. And, you know, again, I think there's obviously opportunity for expansion associated with that. But until we, you know, we and they have had a chance to kind of nail all that down, I just want to be cautious in how we think about how the year's gonna play out... and, you know, I, I'm convinced there's tons of business and growth here with them, but until they get through their planning, I wanna be more cautious. And as you said, they've made some big macro changes. So until that kind of rolls out to everybody, I think, I think it's the right way to manage it.
Speaker #2: guess what say is I . Yeah , we're we're being here cautious until , you know , are plans They're only , you know , kind of weeks into running the frontier Network and , you know , again , I think there's there's obviously opportunity for expansion that .
Speaker #2: I would
Speaker #2: But associated with we you know , and they have until we , had a chance to kind of nail all that want to be cautious down .
Speaker #2: in how we think I just we about how the year is going out . And to play , you know , I , I'm convinced there's there's tons of business and growth here with them .
Speaker #2: But until they get through there, I want to be more planning, and as cautious. You said they've made some macro changes.
Speaker #2: big So until that rolls out to kind of I everybody , think , I think it's the right way manage it to .
Timothy Savageaux: Fair enough. And last one for me, I mean, I'd say most of understanding the fine points of the process, but certainly most of what we've been hearing in recent quarters around BEAD has been pretty positive with the approvals and a lot of the access guys getting a lot more visibility on network planning, design, you know, rollout, what have you. So it would seem like that should be a good news story in calendar 2026, at least in the, in the second half, you know, at the very least. But how are you looking at right now at a higher level versus the, the push you described in Q4?
Timothy Savageaux: Fair enough. And last one for me, I mean, I'd say most of understanding the fine points of the process, but certainly most of what we've been hearing in recent quarters around BEAD has been pretty positive with the approvals and a lot of the access guys getting a lot more visibility on network planning, design, you know, rollout, what have you. So it would seem like that should be a good news story in calendar 2026, at least in the, in the second half, you know, at the very least. But how are you looking at right now at a higher level versus the, the push you described in Q4?
Speaker #5: And the last one for Fair enough . me , I mean , I'd say most of . fine process , points of the but certainly most the of what hearing in we've been recent around quarters been deed has with the positive pretty approvals and access a lot of guys getting a lot more visibility the on network planning , you , design know , rollout , what have .
Speaker #5: would you seem like that should be a good news in story So it other 26 , at in the second half . You know , at the least calendar .
Speaker #5: Looking at how you are right now, at least the level is higher versus the push you described in Q4.
Bruce McClelland: Yeah. No, I resonate with all those comments. You know, we think it's a great opportunity for us. We think that segment of our business grows, you know, reasonably significantly this year for us. I'm a little frustrated 'cause we expected it to get started in Q4. I think everybody did. So, we're a little delayed from that, but I think we've got a really nice funnel of opportunities in that space for us. And, you know, hopefully, we're weeks and, you know, kind of months away from all of this being settled and moving out. But we're not quite there yet, so.
Bruce McClelland: Yeah. No, I resonate with all those comments. You know, we think it's a great opportunity for us. We think that segment of our business grows, you know, reasonably significantly this year for us. I'm a little frustrated 'cause we expected it to get started in Q4. I think everybody did. So, we're a little delayed from that, but I think we've got a really nice funnel of opportunities in that space for us. And, you know, hopefully, we're weeks and, you know, kind of months away from all of this being settled and moving out. But we're not quite there yet, so.
Speaker #2: resonate Yeah , I with no , all those comments . You know , we think it's we a great opportunity for us think .
Speaker #2: that segment of our grows We know , , you reasonably significantly this for year us , I'm a little because frustrated we expected to get started in Q4 .
Speaker #2: I think everybody did . So we're a little delayed from that . But I think we've got a really nice funnel of opportunities in that space for us .
Speaker #2: And , you know , hopefully we're we're weeks in , you know , kind of months away from all of this being settled .
Speaker #2: And moving out . But we're we're not quite there yet . So .
Operator: Thank you. Next question is coming from Ryan Koontz from Needham & Company. Your line is now live.
Operator: Thank you. Next question is coming from Ryan Koontz from Needham & Company. Your line is now live.
Speaker #3: Thank you . Next question is coming from Ryan Coons Needham and from Company . Your line is now live .
Ryan Koontz: Great, thanks. Appreciate all the color, Bruce, on voice modernization. You know, covered most of kind of the bigger Tier One opportunities. Do you have any updated thoughts on, you know, downmarket opportunities there in terms of the rurals? Are they-- any idea what kind of approach they're gonna be taking, as they start to maybe retire copper and deploy more fiber here, and what they're gonna do with their existing infrastructure, their Class Fives?
Ryan Koontz: Great, thanks. Appreciate all the color, Bruce, on voice modernization. You know, covered most of kind of the bigger Tier One opportunities. Do you have any updated thoughts on, you know, downmarket opportunities there in terms of the rurals? Are they-- any idea what kind of approach they're gonna be taking, as they start to maybe retire copper and deploy more fiber here, and what they're gonna do with their existing infrastructure, their Class Fives?
Speaker #6: Great . Thanks . I appreciate all the color . Bruce on monetization voice . You covered most the bigger tier Do you updated of thoughts one opportunities .
Speaker #6: down market opportunities there in terms of the the rural , are they any idea what kind of approach they're going to be taking as a maybe start to retire copper deploy more fiber here and and gonna do with what they're their existing infrastructure there .
Bruce McClelland: Yeah, that's a great question. You know, what we're seeing, most of the activity is in the, I'll call it the Tier 2 operator space, where, you know, they're, they're committed to that as a service offering. They wanna lower the cost of operating the network, and, you know, we're a great solution to, to help them do that. When you get into the much smaller operators, I think you see different things there. You know, I think voice looks like a nice lead service, but it's not necessarily a good revenue generator or profit generator for them. We see different, different things happening. Some look at that as an entry point to sell more fiber.
Bruce McClelland: Yeah, that's a great question. You know, what we're seeing, most of the activity is in the, I'll call it the Tier 2 operator space, where, you know, they're, they're committed to that as a service offering. They wanna lower the cost of operating the network, and, you know, we're a great solution to, to help them do that. When you get into the much smaller operators, I think you see different things there. You know, I think voice looks like a nice lead service, but it's not necessarily a good revenue generator or profit generator for them. We see different, different things happening. Some look at that as an entry point to sell more fiber.
Speaker #6: Classifieds .
Speaker #2: Yeah , that's a great question . You know what we're seeing most of the activity is in the I'll call it the tier two operator space , where , you know , they they're committed to that as a service offering .
Speaker #2: They want to lower the cost of operating the network . And , you know , we're a great solution to to help them do that .
Speaker #2: When you get into the smaller much operators , I think you see different things there . You know , I think voice looks like a nice service , lead but it's not necessarily a good revenue generator or profit them for .
Speaker #2: We see different , generator different things . Some happening look at that point to fiber . entry as an not only sell more do they want to maintain the relationship subscribers on the copper with they maybe even want to grow because it's that an entry point for them to differentiate .
Bruce McClelland: So not only do they wanna maintain the relationship with subscribers on the copper network, they maybe even wanna grow that because it's an entry point for them to differentiate. You know, once you've got a relationship with a consumer, you know, it's easier to maintain it. Others we see, you know, just wanting to kinda manage it in place. They don't want to invest anything incremental. You know, we have a decent service and support revenue stream from that segment of the market, and we see it kind of similarly, where it's a great entry point for us to come in, introduce our IP optical products and grow our business within that space. And we've built in some capabilities that help them migrate off of legacy TDM networks on the IP network, so it's a great entry point for us there.
Bruce McClelland: So not only do they wanna maintain the relationship with subscribers on the copper network, they maybe even wanna grow that because it's an entry point for them to differentiate. You know, once you've got a relationship with a consumer, you know, it's easier to maintain it. Others we see, you know, just wanting to kinda manage it in place. They don't want to invest anything incremental. You know, we have a decent service and support revenue stream from that segment of the market, and we see it kind of similarly, where it's a great entry point for us to come in, introduce our IP optical products and grow our business within that space. And we've built in some capabilities that help them migrate off of legacy TDM networks on the IP network, so it's a great entry point for us there.
Speaker #2: You know , once you've got a relationship with a consumer , you it's easier know , maintain it to . Others we see , you know , just wanting to kind of manage it in place .
Speaker #2: They don't want to invest anything incremental . You know , we a have decent service and support revenue stream from that segment of the market .
Speaker #2: And we see it kind of similarly where it's a great entry us to come point for in , introduce our IP optical products and grow our business that space .
Speaker #2: we've built in some capabilities And that help them migrate off of legacy TDM networks on the IP networks . So it's a great entry point for us .
Bruce McClelland: But, you know, we don't think of it as a great revenue generator for voice modernization necessarily.
Bruce McClelland: But, you know, we don't think of it as a great revenue generator for voice modernization necessarily.
Speaker #2: There . you know , But we don't think of it as a revenue generator great for voice modernization I'm not sure they're investing .
Ryan Koontz: Mm-hmm.
Ryan Koontz: Mm-hmm.
Bruce McClelland: I'm not sure they're investing, you know, that's not a top priority investment for them.
Bruce McClelland: I'm not sure they're investing, you know, that's not a top priority investment for them.
Speaker #2: You know , that's necessarily . priority not a top investment for them .
Ryan Koontz: Yeah, makes sense. And on, on your legacy maintenance business, what, what kind of decline is that typically seeing? Like 10% a year, kind of double-digit declines, typically?
Ryan Koontz: Yeah, makes sense. And on, on your legacy maintenance business, what, what kind of decline is that typically seeing? Like 10% a year, kind of double-digit declines, typically?
Speaker #6: sense . Makes Yeah . And on your legacy maintenance business , what decline is kind of typically that seeing like 10% a year kind of double declines typically .
Bruce McClelland: No, no, it's much steadier than that. You know, and we've, in select places, we've been in a position where we are raising prices.
Bruce McClelland: No, no, it's much steadier than that. You know, and we've, in select places, we've been in a position where we are raising prices.
Speaker #2: No no . It's much steadier than that . You know , and we've in select places we've been in a position where we are raising prices .
Ryan Koontz: Yeah.
Ryan Koontz: Yeah.
Bruce McClelland: You know, I think we see a few million dollars a year erosion kind of in the base from our, our voice business. In our IP and optical business, it's actually been growing, you know, as we increase the, the base. We have, we have one, one customer where we completed a long-term maintenance contract supporting their access business that we exited or completed in Q4. So that's a step down going into this year. I kind of mentioned that on the call. But for the rest of the market, that, that part of the business is actually growing for us.
Bruce McClelland: You know, I think we see a few million dollars a year erosion kind of in the base from our, our voice business. In our IP and optical business, it's actually been growing, you know, as we increase the, the base. We have, we have one, one customer where we completed a long-term maintenance contract supporting their access business that we exited or completed in Q4. So that's a step down going into this year. I kind of mentioned that on the call. But for the rest of the market, that, that part of the business is actually growing for us.
Speaker #2: You know , I think we see a few million dollars a year erosion in the base kind of our voice business and our IP and optical business .
Speaker #2: actually been growing , you know , as we increase the , the base , we have , we have one , one customer where we completed a long term maintenance contract supporting their access business .
Speaker #2: That we exited or completed in Q4 . So that's a step down going into this year . I kind of mentioned that on but for the the call , rest of the market , that that part of the business is actually growing for us .
Ryan Koontz: Got it. Thanks. And then, following up on the packet optical side, are your main kind of use cases you're most excited about here in the next, you know, 18 months or so, is it still, you know, broadband aggregation and backhaul, or are you seeing alternate type use cases for your new platforms?
Ryan Koontz: Got it. Thanks. And then, following up on the packet optical side, are your main kind of use cases you're most excited about here in the next, you know, 18 months or so, is it still, you know, broadband aggregation and backhaul, or are you seeing alternate type use cases for your new platforms?
Speaker #6: Got it . Thanks . And then following up on that on the packet optical side , are your main kind of use cases , your most excited about here in the know , 18 months or so ?
Speaker #6: Is it still , you know , broadband and backhaul or aggregation are you seeing alternate use type cases for your your new platforms ?
Bruce McClelland: Yeah, that, that's really the focus. And you know, I've mentioned a couple times. I think our area for best differentiation is around integration of IP networks with optical networks or IP over DWDM. And you know, that's the most cost-effective way to build a new network. You're integrating the transponder technology into a pluggable that goes into the router. We've invested a lot in a broader set of platforms for IP routing. And you know, most of the growth here in North America has been IP with optics integrated into the routers and maybe an OLS that we include for the transport network.
Bruce McClelland: Yeah, that, that's really the focus. And you know, I've mentioned a couple times. I think our area for best differentiation is around integration of IP networks with optical networks or IP over DWDM. And you know, that's the most cost-effective way to build a new network. You're integrating the transponder technology into a pluggable that goes into the router. We've invested a lot in a broader set of platforms for IP routing. And you know, most of the growth here in North America has been IP with optics integrated into the routers and maybe an OLS that we include for the transport network.
Speaker #2: Yeah , that's really the focus . And you know , I've mentioned a times the , I think our couple for best differentiations integration of around IP networks with optical networks or IP over Dwdm .
Speaker #2: And you know , where most that's the cost to build a effective way network . new You're integrating the transponder technology into a pluggable that goes into the router .
Speaker #2: We've invested a lot in a broader set of of platforms for IP routing . And , you know , most of the growth here in North America has been IP with with optics the integrated into routers .
Speaker #2: And maybe OLS that we that we an include for the transport network . And similarly in , you know , the area we've had in in with the high growth portfolio , the majority of that growth has been around our IP portfolio or Mpls IP portfolio .
Bruce McClelland: And similarly, in you know, the high-growth area we've had in India with the portfolio, the majority of that growth has been around our IP portfolio, our IP MPLS portfolio, and the growth there. So, that's really the focus.
Bruce McClelland: And similarly, in you know, the high-growth area we've had in India with the portfolio, the majority of that growth has been around our IP portfolio, our IP MPLS portfolio, and the growth there. So, that's really the focus.
Speaker #2: And the growth there. So really, the focus, that's sense.
Ryan Koontz: Makes sense. Great. And any commentary on kind of the enterprise SBC market? I assume that's also, you know, somewhat a legacy product. You're not investing a whole lot. Is it a profitable business line for you still?
Ryan Koontz: Makes sense. Great. And any commentary on kind of the enterprise SBC market? I assume that's also, you know, somewhat a legacy product. You're not investing a whole lot. Is it a profitable business line for you still?
Speaker #6: Great . any commentary the SBC on kind of market , I that's assume also somewhat a legacy product or investing a whole lot .
Speaker #6: not is Is it it a profitable business still line for you .
Bruce McClelland: ... Yeah, no, it's a, it's a great business for us, and, most of the investment, the innovation there has been, you know, taking, the traditional kind of bespoke products and turning them into cloud platforms. And, you know, anybody that's been through that knows, you know, it's not a lift and shift. You know, in many cases, you're reengineering the implementation into a cloud-native, elastic, you know, fault-tolerant implementation. And I think we're out in front, of the competition in that space. I mentioned in the, in the call, we have now kind of Tier One carriers in all regions migrating their traditional SBC infrastructure into a, a, true cloud-native implementation with a complete DevOps software delivery model, which is a, you know, a big shift for that market.
Bruce McClelland: ... Yeah, no, it's a, it's a great business for us, and, most of the investment, the innovation there has been, you know, taking, the traditional kind of bespoke products and turning them into cloud platforms. And, you know, anybody that's been through that knows, you know, it's not a lift and shift. You know, in many cases, you're reengineering the implementation into a cloud-native, elastic, you know, fault-tolerant implementation. And I think we're out in front, of the competition in that space. I mentioned in the, in the call, we have now kind of Tier One carriers in all regions migrating their traditional SBC infrastructure into a, a, true cloud-native implementation with a complete DevOps software delivery model, which is a, you know, a big shift for that market.
Speaker #2: it's a great it's a business for us . most of And Yeah . No the investment , the innovation there has been , you know , taking traditional kind bespoke of products and turning them cloud platforms into .
Speaker #2: that anybody that's been through you know , you know , knows , it's not a and lift know , in shift . You And , many you're re-engineering the cases cloud implementation native elastic into a , you know , fault implementation .
Speaker #2: And I tolerant think we're out in of the front competition in I space . mentioned in the call , the in we that now kind of one have tier all regions migrating carriers in their SBC traditional into true infrastructure a cloud native implementation with a delivery software model , complete which is a big shift for that market .
Bruce McClelland: We see the same thing in the enterprise market, where customers wanna move to much more of a public cloud implementation. You know, I mentioned that we have a new partnership with AWS, where we integrate our SBC and routing platforms and management systems into the AWS cloud to really simplify the onboarding of new customers. And we had two, you know, fairly significant wins last quarter based on that integration into AWS. So there's, yeah, there's a lot of activity. In fact, I think John mentioned our SBC sales in Q4 were up pretty considerably. It was one of the big growth areas and a contributor from a margin perspective in the quarter.
Bruce McClelland: We see the same thing in the enterprise market, where customers wanna move to much more of a public cloud implementation. You know, I mentioned that we have a new partnership with AWS, where we integrate our SBC and routing platforms and management systems into the AWS cloud to really simplify the onboarding of new customers. And we had two, you know, fairly significant wins last quarter based on that integration into AWS. So there's, yeah, there's a lot of activity. In fact, I think John mentioned our SBC sales in Q4 were up pretty considerably. It was one of the big growth areas and a contributor from a margin perspective in the quarter.
Speaker #2: same thing We see the in the market where enterprise want to move to customers public much more of a cloud implementation . You know , I mentioned that we a new have with partnership where we AWS routing our and SBC and integrate management platforms systems the AWS really into cloud to simplify the of new onboarding .
Speaker #2: And we had two fairly significant last wins based quarter integration into on that AWS . there's a yeah , lot of So there's activity .
Speaker #2: fact , I mentioned think John our In SBC sales in in Q4 were up considerably . It was one of the big pretty growth areas in the contributor from a margin in the quarter perspective , .
Operator: Thank you. As a reminder, that's star one to be placed into question queue. Our next question is coming from Dave Kang from B. Riley Securities. Your line is now live.
Operator: Thank you. As a reminder, that's star one to be placed into question queue. Our next question is coming from Dave Kang from B. Riley Securities. Your line is now live.
Speaker #2: Thanks
Speaker #2: very much so much . .
Speaker #3: Thank you. As a reminder, that Star One to be placed into question. Our next question in the queue is coming from Dave Kang from B. Riley Securities.
Speaker #3: Your line is now live
Dave Kang: Yeah, good afternoon. Just on the federal segment, I think you said the amount as far as how much it was down. Can you repeat that? I missed that one.
Dave Kang: Yeah, good afternoon. Just on the federal segment, I think you said the amount as far as how much it was down. Can you repeat that? I missed that one.
Speaker #3: .
Speaker #7: Good Yeah . afternoon . Just on federal segment , I think you said the amount as far as how much it was down , can you repeat that ?
Bruce McClelland: Yeah, so the US federal business, which was one of the drivers for our great Q4 a year ago, 2024, was a little over $20 million, and in the fourth quarter of 2025, it was $10 million down from that. So call it $10 million in the quarter.
Bruce McClelland: Yeah, so the US federal business, which was one of the drivers for our great Q4 a year ago, 2024, was a little over $20 million, and in the fourth quarter of 2025, it was $10 million down from that. So call it $10 million in the quarter.
Speaker #7: I missed that one .
Speaker #2: So the Yeah . federal business , which was one of the drivers for our great Q4 a year ago , 2024 , was a little over $20 million .
Speaker #2: And in the fourth quarter of 2025 , it was 10 million , down from that . So call it $10 million in the quarter .
Dave Kang: Got it. And then, regarding all these delays, were they mainly in optical or CNE or both?
Dave Kang: Got it. And then, regarding all these delays, were they mainly in optical or CNE or both?
Speaker #7: it . And Got then regarding all these delays , were they mainly in optical or CNE or both ?
Bruce McClelland: It was almost evenly split. And I would say that, you know, again, the ones I mentioned that I'm probably most frustrated with, the deployment delays, the stuff that was already in backlog, a large portion of that was cloud and edge, obviously, with all the services that go with that. And the ones that were more, I'll call it, budget-oriented, like the BEAD delay, was more IP optical.
Bruce McClelland: It was almost evenly split. And I would say that, you know, again, the ones I mentioned that I'm probably most frustrated with, the deployment delays, the stuff that was already in backlog, a large portion of that was cloud and edge, obviously, with all the services that go with that. And the ones that were more, I'll call it, budget-oriented, like the BEAD delay, was more IP optical.
Speaker #2: It was almost evenly split . And I the , would say the ones I mentioned probably most frustrated the again , you know , with the deployment , deployment delays , the stuff already in that was that I'm backlog , a large portion of that was cloud and edge .
Speaker #2: with all the services that go that the ones more , I'll that were with and call it budget oriented , like the bead was more delay optical .
Dave Kang: But based on your outlook for first quarter, it doesn't sound like they're being pushed into first quarter. Can you just provide more color as far as when you expect to capture all these delayed projects?
Dave Kang: But based on your outlook for first quarter, it doesn't sound like they're being pushed into first quarter. Can you just provide more color as far as when you expect to capture all these delayed projects?
Speaker #7: Well , based on your outlook for it doesn't sound like there being first quarter , pushed into first quarter . Can you just provide more color as far as when you expect to capture all these delayed projects ?
Bruce McClelland: Yeah. If you, you know, if you kinda did the arithmetic on the $227 million we did in Q4 relative to guidance, it's about $13 million below the midpoint, and I think we pick up about $6 million of that in Q1, and then the rest is kinda linearly into other quarters. You know, the deployment-related delays probably just all kind of move out, so you don't catch up on that. I mean, eventually we'll catch up if we can accelerate the deployments, but we need, you know, we need the customer to go faster with us to kind of catch that back up.
Bruce McClelland: Yeah. If you, you know, if you kinda did the arithmetic on the $227 million we did in Q4 relative to guidance, it's about $13 million below the midpoint, and I think we pick up about $6 million of that in Q1, and then the rest is kinda linearly into other quarters. You know, the deployment-related delays probably just all kind of move out, so you don't catch up on that. I mean, eventually we'll catch up if we can accelerate the deployments, but we need, you know, we need the customer to go faster with us to kind of catch that back up.
Speaker #2: Yeah , if you you know , if you kind of did the arithmetic on the 227 million we did in Q4 relative to guidance , it's about 13 million below the midpoint .
Speaker #2: And I think we pick up about $6 million of that in Q1. And then the rest is kind of linearly into other quarters.
Speaker #2: You know , the deployment related delays the probably just all kind of move out so you don't catch up on that . I mean , eventually we'll catch up if we can accelerate the deployments , but we know , we need need , you the customer to go faster with us to kind of catch that back up .
Bruce McClelland: So again, you know, we're trying to be, you know, more conservative here in how we, you know, put together the outlook, and, you know, I think that's the right profile for Q1.
Bruce McClelland: So again, you know, we're trying to be, you know, more conservative here in how we, you know, put together the outlook, and, you know, I think that's the right profile for Q1.
Speaker #2: So again , you to know , we're we're trying be , more conservative here you know , we , you know , put the outlook and you think that's the right know I profile for the first quarter .
Dave Kang: And then, you mentioned about certain customers with budget issues. So as far as timing is concerned, I mean, have they given you some kind of a timing, you know, as far as when that budget will be available, or is it still uncertainty going forward?
Dave Kang: And then, you mentioned about certain customers with budget issues. So as far as timing is concerned, I mean, have they given you some kind of a timing, you know, as far as when that budget will be available, or is it still uncertainty going forward?
Speaker #7: And then you mentioned about certain customers with budget issues . So as far as timing is concerned , I mean , have they given you some kind of a timing , you know , as far as when budget will be available or is it still uncertainty going forward ?
Bruce McClelland: Yeah, I think it varies a little bit. You know, our larger customers, we get good visibility. Generally speaking, we get good visibility, particularly around the hardware products, where we have to drive supply chain and, you know, if we're not forecasting and they're not forecasting, you know, it's difficult to supply. So there's a lot of cases where we have good, good visibility. And then, you know, there's a portion of our business which is still book and ship inside the quarter, and particularly with software, where it's really easy to fulfill, there's not as much pressure to forecast that as accurately. So maybe we have more variability around that part of the business.
Bruce McClelland: Yeah, I think it varies a little bit. You know, our larger customers, we get good visibility. Generally speaking, we get good visibility, particularly around the hardware products, where we have to drive supply chain and, you know, if we're not forecasting and they're not forecasting, you know, it's difficult to supply. So there's a lot of cases where we have good, good visibility. And then, you know, there's a portion of our business which is still book and ship inside the quarter, and particularly with software, where it's really easy to fulfill, there's not as much pressure to forecast that as accurately. So maybe we have more variability around that part of the business.
Speaker #2: Yeah , I think it varies a little bit . You know , our larger customers , we get good visibility . Generally speaking we get good visibility , particularly around the hardware we have to drive products where supply chain .
Speaker #2: know , if we're And , you not forecasting and they're forecasting , you know , it's difficult to supply . So there's a lot of cases where we have good visibility .
Speaker #2: And then, you know, there's a portion of our business which is still book and ship inside the quarter. And particularly with software, where it's really easy—there's not as much to fulfill.
Speaker #2: much pressure forecast that as So maybe we have more variability around that part of the business .
Dave Kang: Got it. Thank you.
Dave Kang: Got it. Thank you.
Bruce McClelland: Thanks, Dave.
Bruce McClelland: Thanks, Dave.
Speaker #7: Thank Got it . you .
Operator: Thank you. Next question today is coming from Rustam Kanga from Citizens. Your line is now live.
Operator: Thank you. Next question today is coming from Rustam Kanga from Citizens. Your line is now live.
Speaker #8: Dave Thanks . .
Speaker #3: Thank you . Next question today is coming from Rustam Kanga from is now citizens . Your line live .
Rustam Kanga: Afternoon. Thanks for taking the question. Just curious to sort of peek into the growing POC opportunities in regards to the Acumen platform. Are customers still evaluating the solution there, just relative to their own DIY approaches? And then additionally, any update on sort of initial reactions to pricing, perhaps on OpEx-based savings? Thanks.
Rustam Kanga: Afternoon. Thanks for taking the question. Just curious to sort of peek into the growing POC opportunities in regards to the Acumen platform. Are customers still evaluating the solution there, just relative to their own DIY approaches? And then additionally, any update on sort of initial reactions to pricing, perhaps on OpEx-based savings? Thanks.
Speaker #9: Good afternoon . Thanks for taking the question . Just curious to sort of peek into the growing POC opportunities in regards to the acumen platform .
Speaker #9: Our customers still evaluating the solution . Their relative to their DIY just own approaches . And then additionally , any update on sort of initial reactions to pricing , perhaps on based opex savings .
Bruce McClelland: Yeah, thanks, Russ. Good question. So we're, you know, we're in the heavy lifting, getting into deployment with our lead customer, Optum, on integrating Acumen into their operation. And then we've probably got about a dozen other POCs lined up for the next few months. And I think similar-- actually, we have the same experience. As we're integrating AI platforms into our back office, we really wanna see them in operation in the network and see the savings from them before you make a larger, longer term commitment. And we're seeing kind of a similar phenomenon as we position Acumen. The kind of the easiest introduction is with customers that already have our analytics platform deployed.
Bruce McClelland: Yeah, thanks, Russ. Good question. So we're, you know, we're in the heavy lifting, getting into deployment with our lead customer, Optum, on integrating Acumen into their operation. And then we've probably got about a dozen other POCs lined up for the next few months. And I think similar-- actually, we have the same experience. As we're integrating AI platforms into our back office, we really wanna see them in operation in the network and see the savings from them before you make a larger, longer term commitment. And we're seeing kind of a similar phenomenon as we position Acumen. The kind of the easiest introduction is with customers that already have our analytics platform deployed.
Speaker #9: .
Speaker #2: Yeah . Thanks , Russ . Good
Speaker #2: question Thanks . So we're you know , in the we're heavy lifting getting into deployment with our lead customer integrating optimum into their acumen on operation .
Speaker #2: And then about a we've probably got dozen other POCs lined up for the next few months . And I think similar actually , we have the same experiences .
Speaker #2: We're integrating AI platforms into our back We really office . want to see them in operation in the network and see the savings from them make a .
Speaker #2: commitment . And we're the similar phenomena as seeing kind of we Before you position acumen , the kind of the easiest introduction is with customers that already have our analytics platform deployed .
Bruce McClelland: They're already have a large data collection infrastructure that we're able to tap into and feed all of that up into the Acumen layer and into the large language model, et cetera. But I think customers really wanna see it in action. They wanna see the translation into OpEx savings. So I think, you know, the next six months, I think, is really focused on these POCs, so, so that we can start to, you know, turn that into into real revenue in the second half of the year. Anything else?
Bruce McClelland: They're already have a large data collection infrastructure that we're able to tap into and feed all of that up into the Acumen layer and into the large language model, et cetera. But I think customers really wanna see it in action. They wanna see the translation into OpEx savings. So I think, you know, the next six months, I think, is really focused on these POCs, so, so that we can start to, you know, turn that into into real revenue in the second half of the year. Anything else?
Speaker #2: They're already they already have a a large data collection infrastructure that we're able to tap into and feed all of that up into the layer and acumen large language into the model , etc.
Speaker #2: think . But I customers really want to see it in action . They want to see the translation into opex savings . So I think , you know , the next six months , is focused on really these POCs , though , so that we can start to turn that into into real revenue in the second half of the year .
Operator: Thank you.
Operator: Thank you.
Bruce McClelland: Yeah, thanks, Russ.
Bruce McClelland: Yeah, thanks, Russ.
Operator: We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Bruce for any further closing comments.
Operator: We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Bruce for any further closing comments.
Speaker #3: Anything else ?
Speaker #2: Yeah . Thanks .
Speaker #8: Bruce .
Speaker #3: We reach end of question and answer . I turn the floor back over to Bruce any further closing comments ?
Bruce McClelland: Great, thank you. Thanks for everyone being on our call and your interest in Ribbon. We look forward to speaking with many of you at the upcoming investor conferences, as well as some of the major trade shows, Mobile World Congress, coming up in Barcelona, and then the large OFC optical conference in Los Angeles in March as well. So thanks very much. That concludes our call.
Bruce McClelland: Great, thank you. Thanks for everyone being on our call and your interest in Ribbon. We look forward to speaking with many of you at the upcoming investor conferences, as well as some of the major trade shows, Mobile World Congress, coming up in Barcelona, and then the large OFC optical conference in Los Angeles in March as well. So thanks very much. That concludes our call.
Speaker #2: Thank Great . you . Thanks for everyone being on our call and your your interest ribbon . We look forward many of you at the upcoming Investor conferences , as well as some of the major trade shows .
Speaker #2: Mobile World Congress coming up in Barcelona, and then the large OFC Optical Conference in Los Angeles in March as well.
Speaker #2: So, thanks very much. That concludes our call.
Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Speaker #3: Thank you . That does conclude today's teleconference webcast . You may disconnect at this time and have a wonderful day . We thank you for participation your today .
