What changed in this filing

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Item 1A. Risk Factors

2020-10-20 compared with 2020-07-21 · 93 added, 88 removed, 603 unchanged (23% of the section changed)

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In response, governments have implemented measures to attempt to contain and mitigate the transmission of COVID-19, including shelter in place orders, travel restrictions, mandatory quarantines and shutdown of certain non-essential business activities, all of which have resulted in global business disruptions as well as significant impacts on societal interactions.

We cannot predict the continued impact of the pandemic and the degree to which our business and results of operations may be affected.

A number of these restrictions remain in place in whole or in part and have extended longer than previously anticipated by many governments and businesses.

Although some countries have re-opened business activities, no vaccine or definitive treatment has been announced and, in some cases, re-openings have led to outbreaks and reinstitution of restrictions.

We cannot predict the continued impact of the pandemic and the degree to which our business and results of operations may be affected, particularly given the extended duration of the COVID-19 impacts on the U.S.

and other locations in which we operate.

There are no assurances that the global economy will recover quickly or at all, or that impacted areas will be able to fully contain COVID-19 to avoid new waves of infections.

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In consideration of the health and safety of our employees, we instituted office closures, travel restrictions and a mandatory work from home policy for substantially all of our employees.

In consideration of the well-being of our employees and customers, we replaced in-person meetings and conferences with virtual meetings and events and we are leveraging technology to host ConneXions, our annual user conference, virtually this fall.

Furthermore, as a precaution for the well-being of our employees and customers, we replaced in-person meetings and conferences with virtual meetings and events and we are leveraging technology to host ConneXions, our annual user conference, virtually this fall.

Furthermore, we have transitioned our workforce to a work-from-anywhere model, and are reorganizing our physical office requirements and embracing a virtual culture.

While these measures help to contain and mitigate the transmission of COVID-19 and the impact on productivity, such measures are disruptive, require transition to new business processes and detract our employees from normal business activities.

The spread of COVID-19 has impacted our supply chain operations through restrictions and shutdown of business activities, suppliers from whom we rely on for sourcing components and materials and third-party partners from whom we rely on for manufacturing, warehousing and logistics services.

Specifically, the manufacture of our products requires optical-electronic components, chipsets and materials with critical dependencies on manufacturing located in China.

Business disruptions due to factory shutdowns and other containment measures have decreased productivity from these suppliers, resulting in competing demand and longer lead times for components and materials needed for the manufacture of our products.

The spread of COVID-19 continues to impact our supply chain operations through restrictions and shutdown of business activities, suppliers whom we rely on for sourcing components and materials and third-party partners whom we rely on for manufacturing, warehousing and logistics services.

Specifically, the manufacture of our products requires optical-electronic components, chipsets and materials with critical dependencies on manufacturing located primarily in China.

Business disruptions due to factory shutdowns and other containment measures in China and, to a lesser extent, Mexico, parts of Southeast Asia and other locations have decreased productivity from these suppliers, resulting in competing demand and longer lead times for components and materials needed for the manufacture of our products.

In addition, shortages of fiber optics and other materials may delay planned fiber network buildouts by CSPs, which in turn could delay or lower demand for our products.

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For example, CSPs may choose not to invest at this time in our new platforms, or delay infrastructure improvements due to the uncertainty in the global economy.

The COVID-19 pandemic has disrupted global markets, leading to significant unemployment rates and increasing uncertainty over fears of a global recession.

The COVID-19 pandemic has disrupted global markets in unprecedented ways, leading to significant unemployment rates, limited visibility into supply chain performance and increasing uncertainty over fears of a global recession.

Adverse global economic conditions, geopolitical issues and other conditions that impact our increasingly global operations, including uncertainty around global trade policies and outbreaks of pandemic diseases, could have a negative effect on our business, results of operations and financial condition and liquidity.

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In recent years concerns about the global economic outlook have adversely affected market and business conditions in general.

Macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast revenue, gross margin and expenses.

Geopolitical issues, such as ongoing conflicts between the United States and China related to tariffs, trade policy changes, other international trade policy changes and the withdrawal of the United Kingdom from the European Union, as well as political positioning by each country, have resulted in increasing global tensions and create uncertainty for global commerce.

Macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast revenue, gross margin and expenses, which has been the case with the COVID-19 pandemic.

Geopolitical issues, such as ongoing and escalating conflicts between the United States and China related to tariffs, trade policy changes, other international trade policy changes and the withdrawal of the United Kingdom from the European Union, as well as political positioning by each country, have resulted in increasing global tensions and create uncertainty for global commerce.

In particular, we incurred substantial costs and diversion of resources in realigning our supply chain operations to move substantially all of our product manufacturing to locations outside of China as a result of these tariff and trade policy changes.

More recently, the uncertainty over the global COVID-19 pandemic, which has resulted in government-imposed travel restrictions across a number of countries and closures of numerous business operations globally, has disrupted and delayed our and our global supply chain operations.

The uncertainty over the global COVID-19 pandemic, which has resulted in government-imposed travel restrictions across a number of countries and closures of numerous business operations globally, continues to disrupt and delay our and our global supply chain operations.

Sustained uncertainty about, or worsening of, global economic conditions, geopolitical issues and other conditions with global impact may increase our cost of doing business or disrupt our supply chain operations and may cause our customers to reduce or delay spending and could intensify pricing pressures.

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We incurred net losses of $17.7 million in 2019, $19.3 million in 2018 and $83.0 million in 2017.

For the first six months of 2020, we incurred a net loss of $11.2 million.

As of June 27, 2020, we had an accumulated deficit of $713.7 million.

We expect to continue to incur significant expenses and cash outlays for research and development associated with our platforms and systems, including our cloud and services operations, investments in innovative technologies, expansion of our product portfolio, sales and marketing, customer support and general and administrative functions as we expand our business and operations and target new customer opportunities, including larger CSPs and cable MSOs as well as additional types of regional and local providers.

Given our anticipated growth and the intense competitive pressures we face, we may be unable to adequately control our operating costs or generate positive operating income.

We cannot guarantee that we will achieve profitability in the future.

We will have to generate and sustain significant and consistent increased revenue, while continuing to control our expenses, in order to achieve and then maintain profitability.

For the first nine months of 2020, we had a net income of $9.4 million.

As of September 26, 2020, we had an accumulated deficit of $693.2 million.

We expect to continue to incur significant expenses and cash outlays for research and development associated with our platforms and systems, including our cloud and services operations, investments in innovative technologies, expansion of our product portfolio, sales and marketing, customer success, technical support and general and administrative functions as we expand our business and operations and target new customer opportunities, including a broader range of CSPs and cable MSOs as well as additional types of regional and local providers.

Given our anticipated growth and the intense competitive pressures we face, we may be unable to adequately control our operating costs or maintain positive operating income.

We cannot guarantee that we will achieve sustained profitability.

We will have to generate and sustain significant and consistent increased revenue, while continuing to control our expenses, to maintain profitability.

We may also incur significant losses in the future for a number of reasons, including the risks discussed in this “Risk Factors” section and other factors that we cannot anticipate.

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• the impact of global economic conditions, including the impact of the COVID-19 pandemic;

• our ability to effectively manage our global supply chain operations to mitigate the impact of the COVID-19 pandemic and U.S.

• our ability to effectively manage our global supply chain operations to mitigate the impact of the COVID-19 pandemic, U.S.

tariffs and other trade policies;

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• our ability to forecast our manufacturing and product supply requirements and manage our inventory;

• our dependence on sole-, single- and limited-source suppliers and supply chain partners, including suppliers located primarily or solely in China where there are a number of factors that could negatively impact our supply chain;

• our dependence on sole-, single- and limited-source suppliers and supply chain partners, including suppliers with significant dependencies on suppliers located in China where there are a number of factors that could negatively impact our supply chain;

• the capital spending patterns of CSPs and any decrease or delay in capital spending by CSPs due to macro-economic conditions, regulatory uncertainties or other reasons;

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• our ability to develop new products or enhancements that support technological advances and meet changing CSP requirements;

• our ability to ramp sales and achieve market acceptance of our new products and CSPs’ willingness to adopt and deploy our new products;

• our ability to ramp sales and achieve market acceptance of our new products and platforms and CSPs’ willingness to adopt and deploy our new products and platforms;

• the concentration of our customer base as well as our dependence on a limited number of key customers;

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• our lack of long-term, committed-volume purchase contracts with our customers;

• our ability to increase our sales globally and to increase our customer base;

• our ability to increase our sales and market acceptance of our products and platforms globally and to increase our customer base;

• our exposure to the credit risks of our customers;

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• increased price competition, including the impact of customer discounts and rebates;

• our ability to effectively manage the transition of our global supply chain operations to mitigate the impact of U.S.

• our ability to effectively manage our global supply chain operations to mitigate the impact of U.S.

tariffs, continued disruptions from the COVID-19 pandemic, trade disagreements and tension between the U.S.

• our ability to reduce and control product costs;

• an increase in revenue mix toward services, which typically have lower margins;

• our ability to ramp and grow revenue from software licenses and cloud services;

• changes in component pricing;

• changes in pricing with our third-party manufacturing partners;

• changes in pricing and commercial terms with our third-party manufacturing partners;

• charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand;

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• increased expansion efforts into new or emerging markets;

• increased warranty costs;

• increased warranty and maintenance and support costs;

• excess and obsolete inventory and inventory holding charges;

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Historically, a large portion of our sales has been to a limited number of customers.

For example, CenturyLink, Inc.

accounted for 15% of total revenue in 2019, 18% of total revenue in 2018 and 31% of total revenue in 2017.

For example, Lumen accounted for 15% of total revenue in 2019, 18% of total revenue in 2018 and 31% of total revenue in 2017.

However, we cannot anticipate the same level of purchases in the future by these or other customers who have historically comprised a larger percentage of our revenue.

Although these customers now comprise a smaller percentage of our revenue, we expect that changes in the CSP market, such as financial difficulties, spending cuts or corporate consolidations that impact purchasing decisions by these customers may continue to adversely impact our revenue, and as a result, revenue from such customers may remain flat or continue to decline.

For example, CenturyLink completed a large acquisition at the end of 2017, which disrupted its historical levels of purchases with us and we have continued to experience significantly reduced levels of purchases by CenturyLink compared to historical levels.

There is no assurance that purchasing levels by CenturyLink will increase from current levels or return to historical levels, and we expect continued uncertainty as it continues to complete its transition activities and corporate strategies.

For example, Lumen completed a large acquisition at the end of 2017, which disrupted its historical levels of purchases with us and we have continued to experience significantly reduced levels of purchases by Lumen compared to historical levels and in recent months reorganized and rebranded its business as Lumen.

There is no assurance that purchasing levels by Lumen will increase from current levels or return to historical levels, and we expect continued uncertainty as it continues to complete its transition activities and corporate strategies.

We have experienced and expect to continue to experience delays or declines in purchases by certain CSPs due to deterioration and weakness in their financial condition.

For example, Windstream, another one of our larger customers, filed a voluntary petition for relief under Chapter 11 of the U.S.

For example, Windstream, another one of our larger customers, recently completed a financial restructuring and emerged from Chapter 11 bankruptcy after filing a voluntary petition for relief under Chapter 11 of the U.S.

Bankruptcy Code in February 2019 after it was found in default of certain debt instruments.

In April 2020, another customer, Frontier, filed a voluntary petition for relief under Chapter 11 of the U.S.

Bankruptcy Code in order to facilitate a financial restructuring plan.

Bankruptcy Code in order to facilitate a financial restructuring plan, which was recently confirmed by the U.S.

Bankruptcy Court for the Southern District of New York.

Frontier expects to complete its restructuring and emerge from Chapter 11 following the completion of the regulatory process.

Any decrease or delay in purchases and/or capital expenditure plans of any of our key customers, particularly if prolonged or sustained, or our inability to grow our sales with existing customers, may have a material negative impact on our revenue and results of operations.

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As a result of these factors, our future revenue opportunities may be limited, and we may face pricing pressures, which in turn could adversely impact our margins and our profitability.

The loss of, reduction in or pricing discounts associated with, orders from any key customer would significantly reduce our revenue and harm our business.

The loss of, reduction in or pricing discounts associated

with, orders from any key customer would significantly reduce our revenue and harm our business.

Furthermore, delays in payment and/or extended payment terms from any of our key or larger customers could have a material negative impact on our cash flows and working capital to support our business operations.

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Continued consolidation of the CSP industry and among independent local exchange carriers and IOC customers, who represent a large part of our business, could make it more difficult for us to grow our customer base, increase sales of our products and maintain adequate gross margin.

Our new products are early in their life cycles and subject to uncertain market demand.

If our customers are unwilling to adopt our platforms, install our new products or deploy our new services, or we are unable to achieve market acceptance of our new products, our business and financial results will be harmed.

Our new products are early in their life cycles and subject to uncertain market demand.

They also may face obstacles in manufacturing, deployment and competitive response.

Adoption of our new products, such as our smart home and business systems, is dependent on the success of our customers in investing, deploying and selling advanced services to their subscribers, and our ability to differentiate our products from competing or substitutive product and service offerings.

Our new products and platform offerings are early in their life cycles and subject to uncertain market demand.

If our customers are unwilling to adopt our platforms, install our new products or deploy our new services, or we are unable to achieve market acceptance of our new products and platforms, our business and financial results will be harmed.

Our new products and platform offerings are early in their life cycles and subject to uncertain market demand.

They also may face obstacles in development, manufacturing, deployment and competitive response.

Adoption of our new products, such as our smart home and business systems, is dependent on the success of our customers in investing, deploying and selling broader services—including ancillary services—to their subscribers, and our ability to differentiate our products from competing or substitutive product and service offerings.

Our products support a variety of advanced broadband services, such as high-speed Internet, managed Wi-Fi, connected home, IPTV, mobile broadband, high-definition video and online gaming.

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We continue to face increasing competition for components and resources from third-party manufacturing and supply partners as more companies seek to transition manufacturing operations out of China due to the ongoing uncertainty of the escalating tariff wars.

We may experience further disruptions, product unavailability, delays or unanticipated costs associated with the supply of our products, particularly in light of the current COVID-19 pandemic, which would adversely affect the demand for our products and have a material adverse effect on our business, gross margins and results of operations if we are unable to manage our supply chain effectively, secure our desired rates for the manufacture and supply of our products with new supply chain partners or if the federal government increases the imposition of tariffs to goods imported from additional countries where we produce some of our products.

We may experience further disruptions, product unavailability, delays or unanticipated costs associated with the supply of our products, particularly in light of the current COVID-19 pandemic, which would adversely affect the demand for our products and have a material adverse effect on our business, gross margins and results of operations if we are unable to manage our supply chain effectively, secure our desired rates for the manufacture and supply of our products with new supply chain partners or if the federal government increases the imposition of tariffs or other restrictions to goods imported from additional countries where we produce some of our products.

We depend on sole-source, single-source and limited-source suppliers for some key components.

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Any of the sole-source, single-source and limited-source suppliers upon whom we or our business partners rely could stop producing our components, be subject to tariffs, epidemics or other conditions that disrupt their operations, cease operations or enter into exclusive arrangements with our competitors.

For example, we have encountered disruptions in our supply of certain components sourced from China as a result of the COVID-19 pandemic, which have resulted in production delays for our products due to longer lead times for such components, and from continued uncertainty around trade and tariff policies between the U.S.

Disruptions of manufacturing activities in China business activities, particularly if prolonged, may adversely affect our ability to obtain components and materials needed to manufacture our products at acceptable prices or at all, which would in turn harm our business and results of operations.

For example, we are encountering disruptions in our supply of certain components that are sourced from suppliers in China, Southeast Asia, Mexico and countries as a result of the COVID-19 pandemic, which have resulted in production delays for our products due to production disruptions and longer lead times for such components, and from continued uncertainty around trade and tariff policies between the U.S.

Disruptions of manufacturing activities in China and elsewhere, particularly if prolonged, may adversely affect our ability to obtain components and materials needed to manufacture our products at acceptable prices or at all, which would in turn harm our

business and results of operations.

We may also experience shortages or delay of critical components as a result of growing demand in the industry or other sectors.

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Any such interruption or delay may force us and our business partners to seek similar components from alternative sources, which may not be available, or result in higher than anticipated prices for such components.

Switching suppliers could also require that we redesign our products to accommodate new components and could require us to re-qualify our products with our customers, which would be

costly and time consuming.

Switching suppliers could also require that we redesign our products to accommodate new components and could require us to re-qualify our products with our customers, which would be costly and time consuming.

Any interruption in the supply of sole-source, single-source or limited-source components for our products would adversely affect our ability to meet scheduled product deliveries to our customers, could result in lost revenue or higher expenses and would harm our business.

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Consequently, our operations are highly dependent upon our third-party manufacturing partners and our business could be disrupted if we encounter problems with any of these partners.

We do not have internal manufacturing capabilities and rely upon a small number of third-party manufacturing partners such as CMs and ODMs to supply our products to meet customer needs.

Our reliance on a small number of manufacturing partners makes us vulnerable to possible supply and capacity constraints and reduced control over component availability, delivery schedules, quality, manufacturing yields and costs.

Our business operations and ability to supply our products are highly dependent upon our manufacturing partners.

Accordingly, if we encounter problems or other disruptions in our business with any of these manufacturing partners, particularly in light of the current COVID-19 pandemic, our business could be disrupted.

We do not have internal manufacturing capabilities and rely upon a small number of third-party design and manufacturing partners such as CMs and ODMs to supply our hardware products to meet customer needs.

Our reliance on a small number of manufacturing partners makes us vulnerable to possible supply and capacity constraints and reduced direct control over component availability, delivery schedules, quality, manufacturing yields and costs.

Our business operations and ability to supply our products are highly dependent upon our manufacturing partners, and if these manufacturing disruptions and constraints are prolonged, or if these manufacturing partners do not have adequate capabilities or business continuity plans to fulfill their obligations to us and our customers, our business could be disrupted.

In some cases, we do not have supply contracts with our manufacturing partners and these manufacturers are not contractually obligated to supply products to us for any specific period, in any specific quantity or at any certain price.

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If any of these third-party vendors stop providing their services, for any reason, we would have to obtain similar services from alternative sources, which may not be available on commercially reasonable terms, if at all.

We also have limited control over disruptions that may occur at the facilities of these third-party partners, such as supply interruptions, labor shortages, strikes, design and manufacturing failures, quality control issues, systems failures or even facility closures arising from the COVID-19 pandemic that may interrupt transportation and logistics services.

closures arising from the COVID-19 pandemic that may interrupt transportation and logistics services.

In addition, switching development firms or manufacturers could require us to extend our development timeline and/or re-qualify our products with our customers, which would also be costly and time-consuming.

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We bear inventory risk under our third-party manufacturing arrangements.

Lead times for the materials and components that we order through our manufacturers vary significantly and depend on numerous factors, including the specific supplier and market

demand for a component at a given time.

Lead times for the materials and components that we order through our manufacturers vary significantly and depend on numerous factors, including the specific supplier and market demand for a component at a given time.

Lead times for certain key materials and components incorporated into our products are currently lengthy and further exacerbated by the COVID-19 pandemic, requiring our manufacturers to order materials and components several months in advance of manufacture, which impacts the lead time for our products.

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Our business is dependent on the capital spending patterns of CSPs, and any decrease or delay in capital spending by CSPs in response to economic conditions, seasonality, uncertainties associated with the implementation of regulatory reform or otherwise would reduce our revenue and harm our business.

Demand for our products depends on the magnitude and timing of capital spending by CSPs as they construct, expand, upgrade and maintain their access networks.

Current disruptions to the global economy due to the COVID-19 pandemic and any future economic downturns may cause a slowdown in telecommunications industry spending, including in the specific geographies and markets in which we operate.

Demand for our products depends on the magnitude and timing of capital spending by CSPs as they construct, expand, upgrade and maintain their access networks, as well as CSPs’ adoption of our platforms and cloud-based services.

Current disruptions to the global economy due to the COVID-19 pandemic and any future economic downturns or economic uncertainty may cause a slowdown in telecommunications industry spending or adoption of new technologies or services, including in the specific geographies and markets in which we operate.

In response to reduced consumer spending, challenging capital markets or declining liquidity trends, capital spending for network infrastructure projects of CSPs could be delayed or canceled.

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As a result, we may not have visibility into changes in spending behavior until nearly the end of a given quarter.

CSP spending on network construction, maintenance, expansion and upgrades is also affected by reductions in their budgets, delays in their purchasing cycles, access to external capital (such as government grants and loan programs or the capital markets) and seasonality and delays in capital allocation decisions.

CSP spending on network construction, maintenance, expansion and upgrades is also affected by reductions in their budgets, delays in their purchasing cycles, access to external capital (such as government grants and loan programs or the capital markets), limited windows of availability to government funding (such as limitations in funding under the CARES Act) and seasonality and delays in capital allocation decisions.

For example, our CSP customers tend to spend less in the first quarter as they are still finalizing their annual budgets and in certain regions customers are also challenged by winter weather conditions that inhibit outside fiber deployment, resulting in weaker demand for our products in the first quarter of our fiscal year.

Also, softness in demand across any of our customer markets, including due to macro-economic conditions beyond our control or uncertainties associated with the implementation of regulatory reform, has in the past and could in the future lead to unexpected slowdown in capital expenditures by service providers.

Many factors affecting our results of operations are beyond our control, particularly in the case of large CSP orders and network infrastructure deployments involving multiple vendors and technologies where the achievement of certain thresholds for acceptance is subject to the readiness and performance of the CSP or other providers and changes in CSP requirements or installation plans.

acceptance is subject to the readiness and performance of the CSP or other providers and changes in CSP requirements or installation plans.

Further, CSPs may not pursue investment for our new platforms or infrastructure upgrades that require our access systems and software.

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For example, we have invested and continue to invest resources and funds in our cloud and software platforms.

In addition, on an ongoing basis we expect to reposition our product and service offerings and introduce

new products and services as we encounter rapidly changing CSP requirements and increasing competitive pressures.

In addition, on an ongoing basis we expect to reposition our product and service offerings and introduce new products and services as we encounter rapidly changing CSP requirements and increasing competitive pressures.

If we cannot increase sales of our new products and services, keep pace with rapid technological developments to meet our customers’ needs and compete with evolving industry standards or if the technologies we choose to invest in fail to meet customer needs or are not adopted by customers in the timeframes that we expect, it would be difficult to forecast our future revenue and plan our operating expenses.

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federal government shutdowns could reduce the ability of IOCs to access capital or secure funding under government-funded programs to purchase our products and services and thus reduce our revenue opportunities.

Many of our customers were awarded grants or loans under government stimulus programs or funds distributed under the FCC’s CAF program, and have purchased and will continue to purchase products from us or other suppliers while such programs and funding are available.

Many of our customers were awarded grants or loans under government stimulus programs or funds distributed, such as funds under the FCC’s CAF program or CARES Act, and have purchased and will continue to purchase products from us or other suppliers while such programs and funding are available.

However, customers may substantially curtail purchases as funding winds down or as planned purchases are completed.

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Our competitors include companies such as ADTRAN, Inc.;

Amazon.com, Inc.;

Casa Systems;

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Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier, regardless of product performance or features, because the products that we and our competitors offer require a substantial investment of time and funds to qualify and install.

Moreover, the recent demand on network capacity as a result of

shelter-in-place restrictions and shift towards remote workforces may attract new market entrants with competitive or substitutive products, which may lead to increased sales cycles, cause pricing pressure and impact CSP adoption of our platforms due to the availability of broader product offerings in the home networking market.

Moreover, the recent demand on network capacity as a result of shelter-in-place restrictions and shift towards remote workforces may attract new market entrants with competitive or substitutive products, which may lead to increased sales cycles, cause pricing pressure and impact CSP adoption of our platforms due to the availability of broader product offerings in the home networking market.

Some of our competitors may offer substantial discounts or rebates to win new customers or to retain existing customers.

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We may not have sufficient resources to successfully manage lengthy product development cycles.

Our research and development expenses were $41.6 million, or 19% of our revenue, for the first six months of 2020, $81.2 million, or 19% of total revenue, in 2019, $90.0 million, or 20% of total revenue, in 2018 and $127.5 million, or 25% of total revenue, in 2017.

Our research and development expenses were $62.0 million, or 17% of our revenue, for the first nine months of 2020, $81.2 million, or 19% of total revenue, in 2019, $90.0 million, or 20% of total revenue, in 2018 and $127.5 million, or 25% of total revenue, in 2017.

We believe that we must continue to dedicate a significant amount of resources to our research and development efforts, including increased reliance on third-party partners to maintain our competitive position.

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We may not be able to provide products, services and support to compete effectively for these market opportunities.

If we are unable to anticipate and develop new products or enhancements to our existing products on a timely and cost-effective basis, our products may become technologically obsolete more rapidly than anticipated over time, resulting in lower sales which would harm our business.

If we are unable to anticipate and develop new products or enhancements to our existing products on a timely and cost-effective

basis, our products may become technologically obsolete more rapidly than anticipated over time, resulting in lower sales which would harm our business.

Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense.

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The timing of our revenue is difficult to predict.

Our sales efforts often involve educating CSPs about the use and benefits of our products.

CSPs typically undertake a significant evaluation process, which frequently involves not only our products but also those of our competitors and results in a lengthy sales cycle.

Our sales efforts often involve educating CSPs about the use and benefits of our products, platforms and services.

CSPs typically undertake a significant evaluation process, which frequently involves not only our products, platforms and services, but also those of our competitors and results in a lengthy sales cycle.

Sales cycles for larger customers are relatively longer and require considerably more time and expense.

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Such delays may result in fluctuations in our quarterly revenue.

If sales expected

from a specific customer for a particular quarter are not realized in that quarter or at all, we may not achieve our revenue forecasts and our financial results would be adversely affected.

If sales expected from a specific customer for a particular quarter are not realized in that quarter or at all, we may not achieve our revenue forecasts and our financial results would be adversely affected.

Our focus on CSPs with relatively small networks limits our revenue from sales to any one customer and makes our future operating results difficult to predict.

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Government and regulatory authorities in the United States and around the world have implemented and are continuing to implement broader and more stringent laws and regulations concerning data protection.

For example, in July 2016, the European Commission adopted the EU-U.S.

Privacy Shield to replace Safe Harbor as a compliance mechanism for the transfer of personal data from the European Union to the United States.

In addition, the General Data Protection Regulation, or GDPR, adopted by the European Parliament became effective in May 2018 to harmonize data privacy laws across Europe.

The interpretation and application of these data protection laws and regulations are often uncertain and in flux, and it is possible that they may be interpreted and applied in a manner that is inconsistent with our data practices.

For example, the General Data Protection Regulation, or GDPR, adopted by the European Parliament became effective in May 2018 to harmonize data privacy laws across Europe.

Among other requirements, the GDPR imposes specific duties and requirements upon companies that collect, process or control personal data of European Union residents.

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In addition, the United Kingdom’s exit from the European Union creates uncertainty with respect to whether the United Kingdom will enact data protection laws or regulations designed to be consistent with the GDPR.

Moreover, the California Consumer Privacy Act became effective in California in January 2020 and provides new data privacy rights for consumers and new operational requirements for companies.

In January 2020, the California Consumer Privacy Act became effective in California and provides new data privacy rights for consumers and new operational requirements for companies.

More recently, in July 2020 the Court of Justice of the European Union invalidated the EU-U.S.

Privacy Shield as a valid mechanism for the transfer of personal data from the European Union to the United States, which the European Commission had previously adopted in July 2016.

Complying with emerging and changing laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

Concerns about or regulatory actions involving our practices with regard to the collection, storage, processing, use or disclosure of customer information or other privacy related matters, even if unfounded, could damage our reputation and adversely affect operating results.

in inquiries and other proceedings or actions against us by government entities or others, or could cause us to lose customers, which could potentially have an adverse effect on our business.

While we strive to provide transparency about our collection, use, disclosure and security over any personal data and to comply with all applicable data protection laws and regulations, the failure or perceived failure to comply may result in inquiries and other proceedings or actions against us by government entities or others, or could cause us to lose customers, which could potentially have an adverse effect on our business.

Security breaches and data loss may expose us to liability, harm our reputation and adversely affect our business.

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In January 2020, we migrated our Oracle ERP system to Oracle’s cloud platform.

This migration involved significant complexity, requiring us to move and reconfigure all of our current system processes, transactions, data and controls to a new Oracle platform.

This migration involved significant complexity, requiring us to move and reconfigure all of our current system processes, transactions, data and controls to a new

Oracle platform.

We may experience difficulties and delays in transacting our business due to system challenges, limitations in functionality, inadequate change management or process deficiencies in the production use of the ERP system.

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However, our evaluation of the creditworthiness of customers may not be accurate if they do not provide us with timely and accurate financial information, or if their situations change after we evaluate their credit.

Furthermore, some of our international customers operate in countries with developing

economies, which from time to time, experience financial crises and become unable to make payments in U.S.

Furthermore, some of our international customers operate in countries with developing economies, which from time to time, experience financial crises and become unable to make payments in U.S.

The COVID-19 pandemic has also presented financial challenges to numerous businesses, which may result in liquidity issues leading to heightened difficulties with collections.

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A high level of support is critical for the successful marketing and sale of our products.

Furthermore, our services to customers have increasingly broadened to include network optimization, integration and development services and remote monitoring to help our customers deploy our products within their networks.

our services to customers have increasingly broadened to include network optimization, integration and development services and remote monitoring to help our customers deploy our products within their networks.

If we do not effectively assist our customers in deploying our products, succeed in helping them quickly resolve post-deployment issues or provide effective ongoing support, it could adversely affect our ability to sell our products to existing customers and harm our reputation with potential new customers.

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Some defects in our products may only be discovered after a product has been installed and used by customers and may in some cases only be detected under certain circumstances or after extended use.

Any errors, bugs, defects or security vulnerabilities discovered in our products after commercial release could result in loss of revenue or delay in revenue

recognition, loss of customers and increased service and warranty and retrofit costs, any of which could adversely affect our business, operating results and financial condition.

Any errors, bugs, defects or security vulnerabilities discovered in our products after commercial release could result in loss of revenue or delay in revenue recognition, loss of customers and increased service and warranty and retrofit costs, any of which could adversely affect our business, operating results and financial condition.

In addition, we could face claims for security and data breach, product liability, tort or breach of warranty.

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Demand can be affected not only by customer- or market-specific issues, but also by broader economic and/or geopolitical factors.

We may, from time to time, adjust inventory valuations downward or end of life certain of our products in response to our assessment of our business strategy as well as consideration of demand from our customers for specific products or product lines.

We may, from time to time, adjust inventory valuations downward or end of life certain of our products in response to our assessment of

our business strategy as well as consideration of demand from our customers for specific products or product lines.

The related excess inventory charges may have an adverse effect on our gross margin, financial condition and results of operations.

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Litigation could result in substantial costs, diversion of resources and harm to our business.

We could become subject to litigation regarding intellectual property rights that could harm our business.

We could become subject to litigation regarding intellectual property rights and other disputes that could harm our business.

We may be subject to intellectual property infringement claims that are costly to defend and could limit our ability to use some technologies in the future.

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Third parties may assert patent, copyright, trademark or other intellectual property rights to technologies or rights that are important to our business.

Such claims may originate from non-practicing entities, patent holding companies or other adverse patent owners who have no relevant product revenue, and therefore, our own issued and pending patents may provide little or no deterrence to suit from these entities.

We have received in the past and expect that in the future we may receive communications from competitors and other companies alleging that we may be infringing their patents, trade secrets or other intellectual property rights;

Increasingly, patent infringement claims are asserted by patent holding companies (commonly referred to as “patent trolls”) whose sole business is to purchase patents and other intellectual property assets in order to make claims of infringement for monetary gain.

Since these patent holding companies have no relevant product revenue and do not use the technology, our own issued and pending patents may provide little or no deterrence to suit from these entities.

We have received in the past and expect that in the future we may receive communications from competitors, patent holding companies and other third parties alleging that we may be infringing their patents, trade secrets or other intellectual property rights;

offering licenses to such intellectual property;

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Although we closely monitor our use of open source software, the terms of many open source software licenses have not been interpreted by the courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to sell our products.

the sale of our products in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could adversely affect our revenue and operating expenses.

In such event, we could be required to make our proprietary software generally available to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering our products, to re-engineer our products or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could adversely affect our revenue and operating expenses.

If we are unable to obtain necessary third-party technology licenses, our ability to develop new products or product enhancements may be impaired.

While our current licenses of third-party technology generally relate to commercially available off-the-shelf technology, we may from time to time be required to license additional technology from third parties to develop new products or product enhancements either directly or through an ODM partner.

These third-party licenses may be unavailable to us or our ODMs on commercially reasonable terms, if at all.

We may from time to time be required to license technology from third parties to develop new products or product enhancements either directly or through a partner.

These third-party licenses may be unavailable to us or our partners on commercially reasonable terms, if at all.

The inability to obtain necessary third-party licenses may force us to accept substitute technology of lower quality or performance standards or at greater cost or may increase the time-to-market of our products or product enhancements, any of which could harm the competitiveness of our products and result in lost revenue.

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Events beyond our control could have a material adverse impact on our results of operations, financial condition or liquidity, in which case we may not be able to meet our financial covenants.

For example, prior to the BofA Loan Agreement, we were party to a loan agreement with Silicon Valley Bank, or the SVB Loan Agreement, that provided us a revolving credit facility based on a customary accounts receivable borrowing base, subject to certain exceptions and conclusions.

For example, prior to the BofA Loan Agreement, we were party to a

loan agreement with Silicon Valley Bank, or the SVB Loan Agreement, that provided us a revolving credit facility based on a customary accounts receivable borrowing base, subject to certain exceptions and conclusions.

During the term of the SVB Loan Agreement, we were not able to meet the financial covenants in several of the quarters due to variability in our results of operations and financial position and had to request waivers and amendments to the SVB Loan Agreement to avoid an event of default.

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As emissions of greenhouse gases continue to alter the composition of the atmosphere, affecting large-scale weather patterns and the global climate, any new regulation of greenhouse gas emissions may result in additional costs to our customers and our manufacturers.

In addition, the physical impacts of climate change and other natural events, including changes in weather patterns, drought, rising ocean and temperature levels, earthquakes and tsunamis may impact our customers, suppliers and

manufacturers, and our operations.

These potential physical effects may adversely affect our revenue, costs, production and delivery schedules, and cause harm to our results of operations and financial condition.

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We are required to comply with Section 404 of the Sarbanes-Oxley Act, or SOX, which requires us to expend significant resources in developing the required documentation and testing procedures.

We cannot be certain that the actions we have taken and are taking to improve our internal controls over financial reporting will be sufficient to maintain effective internal controls over financial reporting in subsequent reporting periods or that we will be able to implement our planned processes and procedures in a timely manner.

We cannot be certain that the actions we have taken and are taking to improve our internal controls over financial reporting will be sufficient to maintain effective internal controls

over financial reporting in subsequent reporting periods or that we will be able to implement our planned processes and procedures in a timely manner.

In addition, new and revised accounting standards and financial reporting requirements may occur in the future and implementing changes required by new standards, requirements or laws may require a significant expenditure of our management’s time, attention and resources which may adversely affect our reported financial results.

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We incur significant costs as a result of operating as a public company, which may adversely affect our operating results and financial condition.

As a public company, we incur significant accounting, legal and other expenses, including costs associated with our public company reporting requirements.

As a public company, we incur significant accounting, legal and other expenses, including costs associated with our public company reporting and compliance requirements.

We also anticipate that we will continue to incur costs associated with corporate governance requirements, including requirements and rules under SOX and the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank, among other rules and regulations implemented by the SEC, as well as listing requirements of the New York Stock Exchange, or NYSE.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors