What changed in this filing

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Item 1A. Risk Factors

2023-10-24 compared with 2023-07-24 · 55 added, 58 removed, 447 unchanged (20% of the section changed)

59 unchanged sentences

If we overestimate our product demand, our third-party manufacturers may purchase excess components and build excess inventory, and we could be required to pay for these excess parts or products and their storage costs.

For example, as of July 1, 2023, we have provided inventory deposits totaling $51.4 million.

For example, as of September 30, 2023, we have provided inventory deposits totaling $65.9 million.

Long lead times for component supply, which have been exacerbated by higher demand for certain components, and demand for our products has and is expected to continue to impact our ability to accurately forecast our production requirements.

1 unchanged sentence

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

As part of our business operations, we collect, store, process, use and/or disclose sensitive data relating to our business, including in connection with the provision of our cloud services and in our information systems and data centers (including third-party data centers).

As part of our business operations, we collect, store, process, use and/or disclose information, including sensitive data relating to our business and personal information about individuals such as our employees and our customers’ subscribers.

We process this information to operate our business, including in connection with the provision of our cloud services and by relying on our information systems and data centers (including third-party data centers).

We also engage third-party providers to support various internal functions, such as human resources, finance, information technology and electronic communications, as well as the development and delivery of our products and cloud services, which includes collecting, handling, processing and/or storage of data on our behalf.

1 unchanged sentence

Our cloud-based solutions enable us to host our customers’ subscriber data in third-party data centers.

Hackers could steal proprietary or personal information related to our business, products, employees and customers, including information related to customers of our customers;

Hackers could steal proprietary or personal information related to our business, products, employees, customers, and our customers’ subscribers;

hold data ransom;

7 unchanged sentences

The continued growth of our cloud-based platform and managed services portfolio and increased reliance on third-party development partners and third-party software and cloud-based solutions increases the likely risks arising from security breaches or data loss.

Any data loss or compromise of our systems that collect and process personal information (including personal information of customers of our customers), or third-party data centers where that personal information is stored, could result in loss of confidence in the security of our offerings and loss of customers or customer goodwill.

Such losses also could damage our reputation, lead to liability given the increasing development of strict privacy and data security laws and regulations around the world, and adversely affect our business, financial condition, operating results and cash flows.

Any data loss or compromise of our systems that collect and process personal information (including personal information of our customers’ subscribers), or third-party data centers where that personal information is stored, could result in loss of confidence in the security of our offerings and loss of customers or customer goodwill.

Further, security incidents could subject us to obligations under privacy and data security laws and regulations around the world (including to notify governmental authorities, regulatory bodies and/or affected individuals), lead to liability given the increasing development of such strict laws and regulations, increase the risk of litigation and governmental or regulatory investigation, require us to notify our customers or other counterparties in relation to such incidents, damage our reputation, and adversely affect our business, financial condition, operating results and cash flows.

Although we maintain insurance that may apply to cybersecurity risks and liabilities, there can be no guarantee that any or all costs or losses incurred will be partially or fully insured.

9 unchanged sentences

We also periodically evaluate our supplier purchase commitments, which have increased significantly due to extended lead-times in the current supply-chain environment.

We record a liability for excess and obsolete components based on our estimated future demand for our products, potential obsolescence of technology and product life cycles.

If we fail to accurately plan our inventory levels, which becomes more challenging as component lead times increase, we may have to write off excess or obsolete inventory, or accrue a liability for component inventory held by our suppliers, both of which could have a material adverse effect on our financial condition and results of operations.

We record a liability for excess and obsolete components based on our estimated future

demand for our products, potential obsolescence of technology and product life cycles.

If we fail to accurately plan our inventory levels, which becomes more challenging as component lead times increase, we may have to increase write offs for excess or obsolete inventory, or accrue additional liabilities for component inventory held by our suppliers, both of which could have a material adverse effect on our financial condition and results of operations.

Business and operational risks associated with expanding our international operations could harm our business.

39 unchanged sentences

Once our products are deployed within our customers’ networks, they depend on our support organization to resolve any issues relating to those products.

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

and harm our reputation with potential new customers.

As a result, our failure to maintain high quality support and services could result in the loss of customers, which would harm our business.

14 unchanged sentences

Global macroeconomic, financial and supply chain disruptions have impacted most regions in which we sell our products and services and conduct our business operations.

We continue to manage through extended silicon lead times and higher supply chain costs, which may have a material negative impact on our ability to supply products to meet customer requirements and could materially adversely affect our business and results of operations.

For example, BSPs may not invest in our platform or delay infrastructure improvements due to the resulting uncertainty in the global economy.

Although demand for our products has been strong as subscribers sought more bandwidth and better Wi-Fi at home for work and entertainment, there are no assurances that the demand for our products will remain strong, including as a result of return to office policies and initiatives of various employers.

There are no assurances that the demand for our products will remain strong, including as a result of return to office policies and initiatives of various employers.

To the extent we experience a renewed or worsening disruption to our business and operations and other adverse residual impacts of a pandemic or further future disruptions, it could have a material adverse effect on our business, results of operations and financial condition.

53 unchanged sentences

Our products, including our platform (cloud, software and systems) and managed services, are highly technical and, when deployed, are critical to the operation of many networks.

Our products have contained and are subject to defects, bugs or security vulnerabilities, which risks may be exacerbated as we continue to expand our cloud and software portfolio and include

services from third-party partners.

Our products have contained and are subject to defects, bugs or security vulnerabilities, which risks may be exacerbated as we continue to expand our cloud and software portfolio and include services from third-party partners.

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.

37 unchanged sentences

In addition, we may become subject to increased risks arising from or related to security breaches, data loss or theft of our data or our IP, and have greater difficulty protecting our IP as our work-from-anywhere workforce and work product become more distributed.

Policing the unauthorized use and distribution of

our IP is difficult and costly.

Policing the unauthorized use and distribution of our IP is difficult and costly.

Litigation, which could result in substantial costs, diversion of resources and harm to our business, may be necessary to enforce our IP rights, protect our trade secrets or determine the validity and scope of proprietary rights.

17 unchanged sentences

While we have no borrowings with or deposit exposure to these recently failed banks and have not experienced an adverse impact to our liquidity or to our business operations, financial condition, or results of operations as a result of these recent events, uncertainty may remain over liquidity concerns in the broader financial services industry, and there may be unpredictable impacts to our business and our industry.

Geopolitical issues, such as the Russian invasion of Ukraine, relations between the U.S.

Geopolitical issues, such as the Russian invasion of Ukraine, armed conflict between Israel and groups based in surrounding regions, relations between the U.S.

and China, tariff and trade policy changes, and increasing potential of conflict involving countries in Asia that are critical to our supply-chain operations, such as Taiwan and China, have resulted in increasing global tensions and create uncertainty for global commerce.

8 unchanged sentences

BSP acceptance and adoption of our products and solutions;

our ability to differentiate our products from our competitors’ offerings

based on performance, features, cost-effectiveness or other factors;

our ability to differentiate our products from our competitors’ offerings based on performance, features, cost-effectiveness or other factors;

our product capabilities to meet customer network requirements and preferences;

7 unchanged sentences

Competitive pressures could result in increased pricing pressure, reduced profit margin, increased sales and marketing expenses and failure to increase, or the loss of, market share, any of which could reduce our revenue and adversely affect our financial results.

Historically, our customer base has been concentrated, and the loss of any of our key customers may adversely impact our revenue and results of operations, and any delays in payment by a key customer could negatively impact our cash flows and working capital.

Historically, a large portion of our sales has been, and in the future may be, to a limited number of large customers.

Changes in the BSP market, such as financial difficulties, spending cuts or corporate consolidations that impact purchasing decisions by these customers have and may again negatively impact our revenue, and as a result, revenue from such customers may remain flat or continue to decline.

For example, sales to Lumen, our only greater than 10% customer in 2020, declined in 2021 and sales to other BSP customers increased such that Lumen was not a 10% customer in 2021 or 2022.

There are no assurances that the demand for our products will remain strong from our key customers, and any decrease or delay in purchases of any of our key customers, particularly if prolonged or sustained, or our inability to grow our sales with them, may have a material negative impact on our revenue and results of operations.

In addition, some larger customers may demand discounts and rebates or desire to purchase their access systems and software from multiple providers.

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 gross margin and our profitability.

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

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

Our industry is characterized by rapid technological advancements, and if we fail to develop new products or enhancements that meet changing BSP requirements, we could experience lower sales.

31 unchanged sentences

Historically, our customers may spend less or have less deployments in the first quarter due to pending annual budgets or, in certain regions, due to weather conditions that inhibit outside fiber deployment, resulting in weaker demand for our products in the first quarter.

Softness in demand in any of our customer markets, including due to macroeconomic conditions beyond our control or uncertainties associated with regulatory reforms, has and could in the future lead to unexpected decline or slowdown in customer capital expenditure.

Further, BSPs may pursue capital investment in network technologies other than those offered by us or may choose not to adopt our products and platform solutions in their networks.

1 unchanged sentence

As a consequence, our results for a particular period may be difficult to predict, and our prior results are not necessarily indicative of results in future periods.

Historically, a large portion of our sales has been, and in the future may be, to a limited number of large customers.

For example, sales to Lumen, our only greater than 10% customer in 2020, declined in 2021 and sales to other BSP customers increased such that Lumen was not a 10% customer in 2021 or 2022.

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

In addition, some larger customers may demand discounts and rebates or desire to purchase their access systems and software from multiple providers.

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 gross margin and our profitability.

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

Government-sponsored programs and U.S.

2 unchanged sentences

The FCC and some states may change such payments and subsidies, which could reduce IOC revenue.

Furthermore, many IOCs use or expect to use government-supported loan programs or grants, such as Rural Utility Service loans and grants, to finance capital spending.

Furthermore, many IOCs use or expect to use government-supported loan programs or grants, such as U.S.

Department of Agriculture’s Rural Utility Service or the U.S.

Department of Commerce National Telecommunications and Information Administration’s, or NTIA’s, Broadband Equity, Access and Deployment, or BEAD, Program loans and grants, to finance capital spending.

These government-supported loan programs and grants generally include conditions such as deployment criteria, domestic preference provisions and other requirements that apply to the project and selected equipment as conditions for funding.

For example, the U.S.

government recently introduced legislation imposing domestic content requirements for infrastructure programs that receive federal funding.

government recently passed The Infrastructure Investment Jobs Act (“IIJA”), which charged the NTIA with establishing the BEAD Program and ensuring that BEAD-funded infrastructure projects comply with the Buy America Domestic Content Procurement Preference (“Buy America Preference”) of the Build America, Buy America Act (“BABA”).

In accordance with

BABA, the US Department of Commerce has proposed to issue a limited, general applicability, nonavailability waiver of the Buy America Preference to recipients of Federal financial assistance under the NTIA’s BEAD Program.

Changes to the terms or administration of these programs, including uncertainty from government and administrative change, increasing focus on domestic requirements by the U.S.

that may require re-assessment of compliance, potential funding limitations that impact our ability to meet program requirements or delays due to U.S.

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

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

In addition, compliance with these requirements may significantly increase our record-keeping, accounting and production costs.

As a result of these risks, the domestic content requirements may have a material adverse impact on our U.S.

sales, business and results of operations.

Customers may curtail purchases if they receive less funding than planned, are negatively impacted by federal government shutdowns or changes in government regulations and subsidies, or as funding winds down, any of which could have an adverse effect on our operating results and financial condition.

3 unchanged sentences

The interpretation and application of these data protection laws and regulations are often uncertain and changing, 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 EU GDPR, adopted by the European Union, or EU, and the UK General Data Protection Regulation, or UK GDPR, adopted by the United Kingdom, or UK, (the EU GDPR and UK GDPR hereinafter referred to as the GDPR) and national data protection supplementing laws in these jurisdictions impose specific duties and requirements upon companies that collect, process or control personal data of individuals located in the EU/UK, including a principle of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit.

For example, the General Data Protection Regulation, or EU GDPR, adopted by the European Union, or EU, and the UK General Data Protection Regulation, or UK GDPR, adopted by the United Kingdom, or UK, (the EU GDPR and UK GDPR hereinafter referred to as the GDPR) and national data protection supplementing laws in these jurisdictions impose specific duties and requirements upon companies that are subject to their provisions and collect, process or control personal data of individuals, including a principle of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit.

Although we currently do not have material operations or business in the EU or the UK, we are in the process of expanding in these jurisdictions, and we have incurred and will continue to incur substantial costs in this respect.

2 unchanged sentences

The EU GDPR and UK GDPR regulate cross-border transfers of personal data out of the European Economic Area, or the EEA, and the UK.

Twice, the Court of Justice of the European Union, or the CJEU, has invalidated legal mechanisms designed to facilitate the transfer of data from European countries to the United States and, in July 2020, the CJEU held that transfers must be assessed on a case-by-case basis and reliance on standard contractual clauses (a standard form of contract approved by the European Commission as an adequate mechanism for personal data transfers) may not be sufficient in all circumstances.

European court and regulatory decisions subsequent to the CJEU July decision have taken a restrictive approach to international data transfers.

In March 2022, the U.S.

and EU announced a new regulatory regime intended to replace the invalidated mechanisms and, on October 7, 2022, President Biden signed an Executive Order on Enhancing Safeguards for United States Intelligence Activities.

This introduced new binding safeguards to address the concerns raised by the CJEU in its July 2020 decision and formed the basis of the new EU-US Data Privacy Framework, or DPF, which was released on December 13, 2022.

The DPF outlines the practices that U.S.

organizations must meet when they self-certify their commitment to the DPF once it goes into effect.

In order to be effective as an EU GDPR transfer mechanism to self-certified U.S.

entities, the European Commission must declare the DPF adequate;

the European Commission is expected to adopt its adequacy decision on the DPF in Q3 2023.

In the meantime, the new safeguards introduced by the Executive Order and the DPF are expected to facilitate data transfers to the U.S.

on the basis of the standard contractual clauses, though the data transfers enforcement landscape and the DPF’s longer term stability remain uncertain.

Case law from the Court of Justice of the European Union, or the CJEU held that transfers must be assessed on a case-by-case basis and reliance on standard contractual clauses (a standard form of contract approved by the European Commission as an adequate mechanism for personal data transfers) may not be sufficient in all circumstances.

On October 7, 2022, President Biden signed an Executive Order on Enhancing Safeguards for United States Intelligence Activities.

This introduced new binding safeguards to address the concerns raised by the CJEU in relation to data transfers from the EEA to the United States and formed the basis of the new EU-US Data Privacy Framework, or DPF, which was released on December 13, 2022.

The European Commission adopted its Adequacy Decision in relation to the DPF on July 10, 2023, rendering it effective as an EU GDPR transfer mechanism to U.S.

entities self-certified under the DPF;

further, on October 12, 2023, the UK Extension to the DPF came into effect (as approved by the UK Government), as a UK GDPR data transfer mechanism to U.S.

entities self-certified under the UK Extension to the DPF.

We currently rely on the standard contractual clauses and the UK International Data Transfer Agreement (or Addendum) to transfer personal data outside the EEA and the UK respectively, including to the U.S.

As the enforcement landscape further develops, and supervisory authorities issue further guidance on – and revised standard contractual clauses for – international data transfers to the U.S.

and elsewhere, our business, operations and financial condition could be adversely affected.

The data transfers enforcement landscape and the DPF’s longer term stability remain uncertain and we expect the existing legal complexity and uncertainty regarding international personal data transfers to continue.

As the regulatory guidance and enforcement landscape in relation to data transfers further develops, our business, operations and financial condition could be adversely affected.

Our current contracts may not be sufficient and we could suffer additional costs, complaints and/or regulatory investigations or fines.

5 unchanged sentences

If the trend of increasing enforcement by regulators of the strict approach to opt-in consent for all but essential use cases, as seen in recent guidance and decisions continues, this could lead to substantial costs, require significant systems changes, limit the effectiveness of marketing activities conducted on behalf of our customers, divert the attention of our technology personnel, adversely affect our margins, and subject us to additional liabilities.

In addition, new security regulations, such as the EU’s Network and Information Security 2 Directive (NIS2) and the UK’s Telecommunications (Security) Act 2021 together with its implementing regulations impose further security obligations on electronic communications networks and services.

In addition, new security regulations, such as the EU’s Network and Information Security 2 Directive (NIS2) and the UK’s Telecommunications (Security) Act 2021 together with its implementing regulations impose further security obligations, including on electronic communications networks and services.

We may be required to implement (and contractually commit to) additional security measures to remain a competitive vendor, as customers will need to ensure their vendors are able to meet the obligations that they are themselves subject to, or customers may choose different vendors due to our security measures.

This could result in additional costs and require operational changes which could adversely affect our business, operations and financial condition.

In light of the complex and evolving nature of EU, EU Member State and UK privacy laws, there can be no assurances that we will be successful in our efforts to comply with such laws;

In light of the complex and evolving nature of EU, EU Member State and UK privacy and security laws, there can be no assurances that we will be successful in our efforts to comply with such laws;

violations of such laws could result in regulatory investigations, fines, orders to cease/change our use of technologies and/or our processing activities, enforcement notices and assessment notices (for a compulsory audit), as well as lead to civil claims including class actions, and reputational damage.

27 unchanged sentences

International shipments of certain of our products may require export licenses or are subject to additional export requirements.

In addition, the import laws of other countries may limit our ability to distribute our products, or our customers’ ability to buy and use our products, in those countries.

In addition, the import laws of other countries may

limit our ability to distribute our products, or our customers’ ability to buy and use our products, in those countries.

Changes in our products or changes in export and import regulations or duties may create delays in the introduction of our products in international markets, prevent our customers with international operations from deploying our products or, in some cases, prevent the export or import of our products to certain countries altogether.

5 unchanged sentences

Our customers are subject to government regulation, and changes in current or future laws or regulations that negatively impact our customers could harm our business.

The FCC has jurisdiction over our U.S.

Many of our customers are subject to state and federal regulation of their businesses, and adoption of regulations that affect providers of broadband Internet access services could impede the penetration of our customers into certain markets.

For example, the FCC has jurisdiction over many of our U.S.

customers, and FCC regulatory policies that create disincentives for investment in access network infrastructure or impact the competitive environment in which our customers operate may harm our business.

For example, adoption of regulations that affect providers of broadband Internet access services could impede the penetration of our customers into certain markets or affect the prices they may charge in such markets.

Similarly, changes to regulatory tariff requirements or other regulations relating to pricing or terms of carriage on communication networks could slow the development or expansion of network infrastructures, which could adversely affect the sale of our products and services.

Many of our customers are subject to FCC rate regulation of interstate telecommunications services and are recipients of government stimulus payments.

Limits or restrictions on access to these programs could affect the ability of IOCs to access capital, which would in turn reduce our revenue opportunities.

In addition, many of our customers are subject to state and federal regulation of their businesses, including rates for such services, and may also receive funding from state universal service funds.

Changes in state or federal rate regulations or universal service funding rules could adversely affect our customers’ revenue and capital spending plans.

Moreover, various international regulatory bodies have jurisdiction over certain of our customers outside the U.S.

Changes in any of these standards, laws and regulations, or judgments in favor of plaintiffs in lawsuits against BSPs based on changed standards, laws and regulations could adversely affect the development of broadband networks and services.

This, in turn, could directly or indirectly adversely impact the communications industry in which our customers operate.

This, in turn, could directly or indirectly adversely impact the industries in which our customers operate.

Risks Related to Ownership of Our Common Stock and Other Risks

22 unchanged sentences

(4) the ability of our Board of Directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

(5) a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

(6) the requirement that a special meeting of stockholders may be called only by the chairman of the Board of Directors, the chief executive officer or the Board of Directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

22 unchanged sentences

Repurchases we consummate could increase the volatility of the price of our common stock and could have a negative impact on our available cash balance.

In July 2022, our Board of Directors authorized a one-year stock repurchase program for up to $100 million of our common stock, and in May 2023, our Board of Directors approved an amendment of the stock repurchase program to eliminate the one-year end date.

We have a $100 million common stock repurchase program of which $57.6 million was available as of September 30, 2023.

Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements.

20 unchanged sentences

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