What happened
Shares of Ribbon Communications (RBBN -3.40%) plummeted to 52-week lows today after the company reported financial results for the fourth quarter of 2021. The only time the stock has been lower in the past 10 years was during the stock market crash of 2020. As of noon ET, Ribbon Communications was down 20% for the session.
So what
For Q4, Ribbon Communications generated revenue of $231 million and generated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $26 million. Interestingly, the company had already announced preliminary Q4 results back in January. And the actual results released yesterday afternoon were in line with the preliminary numbers.
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However, the preliminary results left out a very important detail. Ribbon Communications was forced to write off a whopping $116 million in goodwill due to a less rosy outlook for its IP Optical business segment. Because of this, the company recorded a $96 million quarterly net loss compared to net income of $124 million in the same quarter last year. That's astronomically large for a company with a market capitalization of just $541 million.
Now what
Ribbon Communications still has $301 million in goodwill on its balance sheet. Considering the company is struggling to grow (full-year 2021 was essentially flat from 2020), it's possible it could write down more in future quarters. However, if there's a silver lining, it's that this is a non-cash charge. And without the charge, cash flow from operations was close to breakeven.
In other words, Ribbon Communications isn't burning through a ton of cash even though it's increasing spending in sales and marketing as well as research and development. And spending in these areas could help it return to growth in 2022.
Ribbon Communications management is forecasting between $850 million and $880 million in full-year 2022 revenue. The high end of that guidance represents 4% year-over-year growth.
