Ribbon Communications Inc. Q4 FY2025 earnings call

• Successfully closed multiple significant deals in Q4 with record product and professional service bookings, with significant new orders for voice modernization projects starting revenue in H2 2026.
• Expanded customer base and reinforced industry leadership in cloud-centric voice modernization, with integration of voice technologies and conversational/agentic AI platforms.
• Q4 revenue below expectations due to customer and project delays, with half the shortfall from backlog projects with implementation delays and the other half from customers impacted by year-end budget availability.
• Full-year sales to global service providers increased 5% and were 70% of overall sales; sales to enterprise customers increased 2% y/y; sales to government and defense declined 23% and were 9% of overall sales.
• IP optical networks saw revenue down $2 million y/y in Q4, with projects in NA pushing into 2026 and EMEA sales lower due to budget freezes, but growth in India and Southeast Asia. Cloud and Edge bookings set record high despite lower Q4 revenue, with over $50M in voice network transformation orders across over a dozen customers.
• Recognized a deferred tax benefit of ~$90 million in Q4, positively impacting net income and EPS.

IP Optical Networks: In the fourth quarter, revenue was $85 million, a 2% decrease year over year. Full-year revenue was $333 million, up 1% from 2024. Fourth quarter non-GAAP gross margin was 34%, down 600 basis points year over year. For the full year, gross margin was 35%, and adjusted EBITDA was a loss of $27 million. Cloud and Edge: Fourth quarter revenue was $142 million, down 14% year over year but up 14% sequentially. Full-year revenue was $511 million, a $6 million increase from 2024. Fourth quarter non-GAAP gross margins were 68%, up 65 basis points year over year. Full-year gross margin was 64%, down 300 basis points year over year, and adjusted EBITDA for the segment was $134 million or 26% of revenues.

• 2026 revenue projected in range of $840 to $875 million, implying ~1% consolidated y/y growth at midpoint (higher after excluding low-growth maintenance revenue).
• Cloud and Edge segment projecting ~6% growth in product and professional services revenue, offset by slightly lower maintenance revenue.
• IP optical segment projecting ~5% growth in product and professional services revenue, with maintenance revenue lower by ~$10 million due to completion of a maintenance contract with a European customer.
• Consolidated gross margin projected to increase 50 to 100 basis points y/y; OpEx projected to increase ~2% y/y due to inflationary increases, offset by restructuring savings.
• Adjusted EBITDA projected in range of $105 million to $120 million, ~6% higher than 2025 at midpoint.
• First quarter 2026 revenue projected $160 to $170 million, adjusted EBITDA projected -$3 million to +$1 million.

• Delays in projects, including backlog projects with implementation delays and customers impacted by year-end budget availability.
• Macro environment uncertainties, including budget uncertainties, M&A activity, sustainability of Indian service provider CapEx intensity, and timing in US federal spending and subsidy programs.
• Uncertainty around Verizon's merger with Frontier and the impact on program expansion.

Q: Michael Genovese from Rosenblatt Securities asked about new cloud and edge bookings, size of customers, and delays.

A: $50M of new bookings were non-Verizon, spread across a dozen customers; delays included backlog projects moving out and year-end budget issues with examples like bead funding.

Q: Timothy Savageaux from Northland Capital Markets asked about relating $50M orders to total opportunity at customers and impact of Verizon merger.

A: $50M bookings are meaningful with large addressable market for voice modernization; cautious until Verizon's plans are finalized.

Q: Ryan Koontz from Needham and Company asked about packet optical use cases, enterprise SP market.

A: Focus on IP with optics integrated, enterprise SP market is profitable with innovation into cloud platforms and partnership with AWS.

Q: Dave Kang from B. Riley Securities asked about federal segment decline and delays in projects.

A: US federal business down $10M in Q4 2025; delays almost evenly split between cloud/edge and IP optical.

Q: Rustam Kanga from CitiSens asked about Acumen platform POCs and pricing.

A: POCs with Optimum and others, customers want to see OpEx savings in POCs before larger commitments.