Ribbon Communications Inc. (NASDAQ:RBBN) Q3 2022 Results Conference Call October 26, 2022 4:30 PM ET

Company Participants

Bita Milanian - SVP, Marketing

Bruce McClelland - Chief Executive Officer

Mick Lopez - Chief Financial Officer

Conference Call Participants

Paul Silverstein - Cowen

Dave Kang - B. Riley

Greg Mesniaeff - WestPark Capital

Tim Savageaux - Northland Capital Markets

Erik Suppiger - JMP Securities

Operator

Greetings, and welcome to Ribbon Communications Third Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Bruce McClelland, CEO. Sir, you may begin.

Bita Milanian

Good afternoon. And welcome to Ribbon's third quarter 2022 financial results conference call. I'm Bita Milanian, SVP of Marketing at Ribbon Communications. Also on the call today are Bruce McClelland, Ribbon's Chief Executive Officer; and Mick Lopez, Ribbon's Chief

Financial Officer. Today's call is being webcast live and will be archived on the Investor Relations section of our Web site 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 fourth quarter of 2022 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. I refer you to our Safe Harbor statement included on Slide 2 of the supplemental slides for this conference call. In addition, we will present non-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 the supplemental slides we prepared for this conference call, which again, are both available on the Investor Relations section of our Web site.

And now, I would like to turn the call over to Bruce. Bruce?

Bruce McClelland

Great. Thanks, Bita, and thanks to everyone for joining us today to discuss our third quarter results and our outlook for the remainder of the year. I'm very excited to report significant improvements in our IP Optical networks business this quarter. Revenues increased significantly to $82 million, up 20% sequentially and year-over-year. Perhaps more importantly, our product and service bookings increased over 90% versus the previous quarter with a book-to-bill of 1.4 times for this segment. Obviously, overall demand was not an issue and we could have easily shipped more product in the quarter. However, availability of a small number of key components and General Logistics challenges continued to limit overall output. The increased IP Optical revenue in the quarter resulted in a dramatic improvement in non-GAAP gross margin, returning to more historical levels at 38%. The 900 basis point improvement is equally partitioned between three factors, higher volume, lower supply chain cost, and overall customer and product mix.