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01/11 16:19
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a mix of positive and negative factors. While there is optimism in certain areas such as the Cloud & Edge segment and IP Optical segment, the impact of FX and tariffs on OpEx, as well as the uncertainty surrounding government business and BEAD funding, temper the outlook. The Q&A section highlights sustained momentum in India and potential growth with AT&T, but also notes unclear guidance on government program growth. Overall, the sentiment is neutral, with no strong catalysts for a significant stock price movement.
Revenue $215 million in Q3 2025, an increase of 2% year-over-year. Year-to-date revenue increased 6% compared to 2024. Excluding Eastern Europe, revenue increased more than 10% year-to-date. Growth attributed to strong sales in Europe, Middle East, and Asia Pacific, offset by a 10% decline in North America due to reduced U.S. federal sales.
EBITDA $29 million in Q3 2025, a $1 million decrease year-over-year. Year-to-date EBITDA increased 5% compared to 2024. The decrease in Q3 was due to lower gross margins from reduced U.S. government software sales.
Gross Margin 52.6% in Q3 2025, up 50 basis points sequentially but lower year-over-year due to reduced software sales to U.S. government customers. IP Optical segment margins improved by 350 basis points sequentially.
Cloud & Edge Revenue $124 million in Q3 2025, a decrease of 3% year-over-year and 9% sequentially. Year-to-date revenue increased 9% year-over-year, driven by voice network modernization projects. Excluding U.S. government agencies, enterprise sales were down 10% year-over-year.
IP Optical Revenue $91 million in Q3 2025, an 11% increase year-over-year and up $7 million sequentially. Year-to-date revenue increased 2%, but excluding Russia, revenue increased 13%. Growth driven by strong sales in India (31% increase year-over-year) and EMEA (26% increase year-over-year).
Net Income $7 million in Q3 2025, compared to $8 million in Q3 2024. The decrease was due to lower gross margins and higher tax rates.
Cash from Operations $26 million in Q3 2025, with a closing cash balance of $77 million, up $14 million from Q2 2025. The increase was due to disciplined expense and working capital management.
Interest Expense $12 million in Q3 2025, including amortization of debt issuance costs.
Acumen AIOps Automation Platform: New product designed to help service providers and enterprises transition to autonomous networks. Features include end-to-end network observability, customizable automation, and AI agent development capabilities. Endorsed by Altice-owned Optimum.
Cloud & Edge Portfolio: Strategic to customers' AI platforms. Includes cloud-native SBCs and WebRTC APIs deployed in AWS. Notable wins include IBM embedding virtual SBC solutions in Watson AI platform.
Regional Sales Growth: Sales in Europe, Middle East, and Africa grew 26% YoY. Asia Pacific sales grew 13%, led by India with a 31% YoY increase this quarter and 50% YTD.
North America Sales Impact: Sales declined 10% YoY due to reduced U.S. federal sales impacted by the government shutdown.
Revenue and EBITDA Growth: Year-to-date revenue increased 6% and EBITDA increased 5% compared to 2024. Excluding Eastern Europe, revenue grew over 10%.
IP Optical Networks: Sales grew 11% YoY, marking one of the strongest quarters in 5 years. Positive EBITDA contribution achieved.
Voice Network Modernization: Multiple new projects initiated, including with Verizon, which saw a 20% YoY revenue increase. U.S. federal DoD agency started a major voice modernization project.
AI and Voice Technology Convergence: Focus on integrating AI and voice technologies, with growing opportunities in agentic and generative AI platforms.
U.S. Government Shutdown Impact: The U.S. government shutdown has delayed procurement processes for several projects, significantly impacting sales to U.S. government agencies. This has led to a reduction in projected revenue for the fourth quarter, with purchases now expected to occur in 2026. Sales to U.S. federal customers were down approximately 60% year-over-year in the third quarter.
Regional Sales Decline in North America: Sales in North America declined approximately 10% year-over-year in the third quarter, primarily due to lower U.S. federal sales. This regional decline contrasts with strong growth in other regions like EMEA and Asia Pacific.
Lower Enterprise Sales: Sales to enterprise customers were down approximately 3% year-over-year in the third quarter, driven by reduced sales to U.S. government agencies. Excluding this segment, enterprise sales to other customers grew by 7%.
Bookings Momentum Decline: Consolidated bookings for products and professional services were below 1x for the first time in almost two years, partly due to the U.S. government shutdown. This indicates a slowdown in new business acquisition.
IP Optical Maintenance Revenue Decline: Starting in the fourth quarter, IP Optical maintenance revenue is expected to decline due to the completion of a maintenance contract with a European service provider.
Economic and Geopolitical Risks: Sales to Eastern Europe have been suspended, and the region's geopolitical instability continues to pose risks. However, some opportunities are emerging as the region rebuilds and modernizes its infrastructure.
Fourth Quarter 2025 Revenue Projection: Revenue is projected to be in the range of $230 million to $250 million.
Fourth Quarter 2025 Non-GAAP Adjusted EBITDA: Non-GAAP adjusted EBITDA is expected to range between $42 million and $48 million.
Cloud & Edge Segment Outlook: The segment is expected to see significantly higher gross margins in the high 60s in Q4, driven by an increased mix of software and services. U.S. government-related sales are assumed to be delayed due to the government shutdown, but other areas, including Verizon projects and enterprise license renewals, are expected to perform well.
IP Optical Segment Outlook: Sales are projected to remain consistent with Q3 levels, increasing mid-single digit year-over-year. India is expected to remain a strong market, with additional contributions from rural broadband projects. Margins are anticipated to be in the mid-30s.
U.S. Government Shutdown Impact: The shutdown is expected to delay purchases related to voice modernization projects, with these sales now assumed to occur in 2026. However, no business has been lost, and deployments and services are continuing.
India Market Growth: Sales in India are expected to grow both quarter-over-quarter and year-over-year, with contributions from key customers and new rural broadband projects.
AI and Voice Technology Convergence: The company is focusing on the convergence of AI and voice technologies, with growing opportunities in agentic and generative AI platforms.
stock buyback program: During the third quarter, we repurchased approximately 900,000 shares under our previously announced stock buyback program for a total cost of $3.5 million.
The earnings call reveals a mix of positive and negative factors. While there is optimism in certain areas such as the Cloud & Edge segment and IP Optical segment, the impact of FX and tariffs on OpEx, as well as the uncertainty surrounding government business and BEAD funding, temper the outlook. The Q&A section highlights sustained momentum in India and potential growth with AT&T, but also notes unclear guidance on government program growth. Overall, the sentiment is neutral, with no strong catalysts for a significant stock price movement.
The earnings call summary and Q&A session reveal several positive indicators: strong growth in key segments like Cloud & Edge, optimistic future guidance, and significant contributions from major clients like Verizon. The expected increase in gross margins and deferred revenue setup for future quarters further bolster this outlook. While there are some FX headwinds and uncertainties in European defense opportunities, the overall sentiment is positive, especially with the anticipated strong Q4 and new product developments.
The earnings call reveals a mixed financial performance with a slight revenue increase but lower margins and a greater net loss. The Q&A section highlights management's vague responses to critical questions, such as the AT&T Neptune ramp and tariff impacts, raising concerns. The lack of a share repurchase program and the lower gross margins further contribute to a negative outlook. Despite some growth in specific segments, the overall sentiment leans negative due to financial underperformance and unclear guidance on key issues.
The earnings call reveals several concerning factors: lower-than-expected gross margins, a non-GAAP net loss, and increased net debt leverage. Despite some growth in Cloud & Edge revenue, IP Optical revenue decreased, and overall financial health shows weaker performance. The Q&A highlighted management's inability to provide clarity on significant partnerships like AT&T, adding to uncertainty. Additionally, the lack of a share repurchase program and margin pressures contribute to a negative sentiment. These factors outweigh the positive aspects, such as slight revenue growth and optimistic future projections, leading to a predicted negative stock price movement.
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