What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-02-27 compared with 2024-02-28 · 343 added, 571 removed, 980 unchanged (48% of the section changed)

11 unchanged sentences

We have audited the accompanying consolidated balance sheets of Ribbon Communications, Inc.

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

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● With the assistance of our data analytics specialists, we evaluated the estimated standalone selling price analyses prepared by the Company, including testing the underlying detail of customer arrangements and the mathematical accuracy of the calculations.

Goodwill – Cloud and Edge and IP Optical Networks Reporting Units – Refer to Notes 2 and 10 to the financial statements

Goodwill – Cloud and Edge Reporting Unit – Refer to Notes 2 and 10 to the financial statements

Critical Audit Matter Description

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Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both.

The goodwill balance was $301 million as of December 31, 2023, of which $225 million was allocated to the Cloud and Edge Reporting unit and $76 million was allocated to the IP Optical Networks Reporting Unit (“IP Optical”).

Given the significant judgments made by management to estimate the fair value of the Cloud and Edge and IP Optical Reporting Units, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount rate and forecasts of future revenue and profit margin required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

The goodwill balance was $301 million as of December 31, 2024, of which $225 million was allocated to the Cloud and Edge Reporting Unit (“Cloud and Edge”).

Given the significant judgments made by management to estimate the fair value of Cloud and Edge, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount rate and forecasts of future revenue and profit margin required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the discount rate and forecasts of future revenue and profit margin, used by management to estimate the fair value of the Cloud and Edge Reporting Unit and IP Optical Reporting Unit, included the following, among others:

We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the Cloud and Edge Reporting Unit and IP Optical Reporting Unit, such as controls related to management’s selection of the discount rate and forecasts of future revenue and profit margin.

We evaluated management’s ability to accurately forecast future revenues and profit margin by comparing actual results to management’s historical forecasts.

Our audit procedures related to the discount rate and forecasts of future revenue and profit margin, used by management to estimate the fair value of Cloud and Edge, included the following, among others:

● We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of Cloud and Edge, such as controls related to management’s selection of the discount rate and forecasts of future revenue and profit margin.

● We evaluated management’s ability to accurately forecast future revenues and profit margins by comparing actual results to management’s historical forecasts.

● We evaluated the reasonableness of management’s revenue and profit margin forecasts by comparing the forecasts to:

Historical revenues and profit margins.

Internal communications to management and the Board of Directors.

Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.

o Historical revenues and profit margins.

o Internal communications to management and the Board of Directors.

o Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.

● With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by:

Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.

Developing a range of independent estimates and comparing those to the discount rate selected by management.

o Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.

o Developing a range of independent estimates and compared those to the discount rate selected by management.

/s/ Deloitte & Touche LLP

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(in thousands, except share and per share data)

2023 December 31,

Current assets:

Cash and cash equivalents

Restricted cash

Accounts receivable, net

Inventory 77,521 75,423

Other current assets

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Intangible assets, net

Goodwill 300,892 300,892

Deferred income taxes

Operating lease right-of-use assets

Other assets 35,092 38,589

$ 1,144,153 $ 1,255,564

Liabilities and Stockholders’ Equity

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Preferred stock liability, $ 0.01 par value per share;

10,000,000 shares authorized, 55,000 shares issued and outstanding at December 31, 2023 ($ 56,650 liquidation preference);

none issued and outstanding at December 31, 2022

10,000,000 shares authorized, none issued and outstanding at December 31, 2024;

55,000 shares issued and outstanding at December 31, 2023 ($ 56,650 liquidation preference)

Operating lease liabilities, net of current

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Stockholders’ equity:

Common stock, 240,000,000 shares authorized, $ 0.0001 par value, 172,083,667 shares issued and outstanding at December 31, 2023;

Common stock, $ 0.0001 par value per share;

240,000,000 shares authorized;

175,599,250 shares issued and outstanding at December 31, 2024;

172,083,667 shares issued and outstanding at December 31, 2023

Additional paid-in capital

Accumulated deficit

( 1,574,185 )

( 1,519,950 )

Accumulated other comprehensive income

Total stockholders’ equity

$ 1,144,153 $ 1,255,564

See notes to the consolidated financial statements.

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Year ended December 31,

2023 2022 2021

Product $ 445,150 $ 442,680 $ 453,042

Service 381,189 377,080 391,915

Total revenue

Cost of revenue:

Product 250,609 245,145 214,745

Service 139,357 142,137 147,209

Amortization of acquired technology

Total cost of revenue

Gross profit 408,083 400,936 444,660

Operating expenses:

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Amortization of acquired intangible assets

Impairment of goodwill — — 116,000

Acquisition-, disposal- and integration-related

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Total operating expenses

Loss from operations ( 24,285 ) ( 48,324 ) ( 117,796 )

Income (loss) from operations

Interest expense, net

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Income tax (provision) benefit

Net loss $ ( 66,206 ) $ ( 98,083 ) $ ( 177,185 )

Loss per share:

Basic $ ( 0.39 ) $ ( 0.63 ) $ ( 1.20 )

Diluted $ ( 0.39 ) $ ( 0.63 ) $ ( 1.20 )

Shares used to compute loss per share:

Basic 170,408 156,668 147,575

Diluted 170,408 156,668 147,575

Weighted average shares used to compute loss per share:

See notes to the consolidated financial statements.

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Year ended December 31,

2023 2022 2021

Net loss $ ( 66,206 ) $ ( 98,083 ) $ ( 177,185 )

Other comprehensive income (loss), net of tax:

Unrealized gain (loss) on interest rate swap, net of reclassifications and amortization into earnings ( 10,015 ) 19,321 12,759

Reclassification of gain to other expense, net upon sale of interest rate swap ( 5,099 ) — —

Other comprehensive (loss) income, net of tax:

Unrealized (loss) gain on interest rate swap, net of reclassifications and amortization into earnings

Reclassification of gain to other income (expense), net upon sale of interest rate swap

Foreign currency translation adjustments

Employee retirement benefits

Other comprehensive income (loss), net of tax ( 16,798 ) 23,007 12,520

Other comprehensive (loss) income, net of tax

Comprehensive loss, net of tax

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(in thousands, except share data)

Additional other Total

Common stock paid-in Accumulated comprehensive stockholders'

Shares Amount capital deficit (loss) income equity

comprehensive

stockholders’

(loss) income

Balances, January 1, 2022

( 1,355,661 )

Exercise of stock options

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Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations

Common stock issued in equity offering

Issuance costs related to equity offering

Stock-based compensation expense

Other comprehensive income

Net loss ( 177,185 ) ( 177,185 )

Balances, December 31, 2022

( 1,453,744 )

Exercise of stock options

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Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations

Common stock issued in equity offering 17,071,311 2 52,065 52,067

Issuance costs related to equity offering ( 1,654 ) ( 1,654 )

( 1,470,953 )

Stock-based compensation expense

Other comprehensive income 23,007 23,007

Net loss ( 98,083 ) ( 98,083 )

Other comprehensive loss

Balances, December 31, 2023

( 1,519,950 )

Exercise of stock options

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Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations

( 1,447,325 )

Stock-based compensation expense

Other comprehensive loss

Net loss ( 66,206 ) ( 66,206 )

Balances, December 31, 2024

( 1,574,185 )

See notes to the consolidated financial statements.

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Year ended December 31,

2023 2022 2021

Cash flows from operating activities:

Net loss $ ( 66,206 ) $ ( 98,083 ) $ ( 177,185 )

Adjustments to reconcile net loss to cash flows (used in) provided by operating activities:

Adjustments to reconcile net loss to cash flows provided by (used in) operating activities:

Depreciation and amortization of property and equipment

Amortization of intangible assets

Amortization of debt issuance costs 3,241 2,308 4,763

Amortization of debt issuance costs and original issue discount

Amortization of accumulated other comprehensive gain related to interest rate swap

Stock-based compensation

Impairment of goodwill — — 116,000

Deferred income taxes

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Dividends accrued on preferred stock liability

Foreign currency exchange losses ( 44 ) 1,576 5,002

Payment of dividends accrued on preferred stock liability

Foreign currency exchange losses (gains)

Changes in operating assets and liabilities:

Accounts receivable

Inventory ( 10,701 ) ( 32,099 ) ( 9,029 )

Other operating assets

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Principal payments on revolving line of credit

Proceeds from issuance of long-term debt — — 74,625

Proceeds from issuance of term debt

Principal payments of term debt

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Proceeds from issuance of preferred stock and warrant liabilities

Payment of preferred stock liability

Proceeds from the exercise of stock options

Payment of tax withholding obligations related to net share settlements of restricted stock awards ( 4,481 ) ( 2,784 ) ( 14,464 )

Net cash (used in) provided by financing activities ( 47,859 ) 931 ( 33,683 )

Payment of tax obligations related to vested stock awards and units

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents ( 40,632 ) ( 39,223 ) ( 29,212 )

Cash and cash equivalents, beginning of year 67,262 106,485 135,697

Cash and cash equivalents, end of year $ 26,630 $ 67,262 $ 106,485

Net increase (decrease) in cash and cash equivalents

Cash, cash equivalents and restricted cash, beginning of year

Cash, cash equivalents and restricted cash, end of year

RIBBON COMMUNICATIONS INC.

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Year ended December 31,

2023 2022 2021

Supplemental disclosure of cash flow information:

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Supplemental disclosure of non-cash financing activities:

Total fair value of restricted stock awards, restricted stock units, and performance-based stock units on date vested $ 15,571 $ 9,858 $ 40,751

Fair value of vested restricted and performance-based stock grants

See notes to the consolidated financial statements.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements

(1) NATURE OF THE BUSINESS

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All intercompany transactions and balances have been eliminated in consolidation.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Use of Estimates and Judgments

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and judgments relied upon in preparing these consolidated financial statements include accounting for business combinations, revenue recognition for multiple element arrangements, inventory valuations, assumptions used to determine the fair value of stock-based compensation and the Preferred Stock and Warrants, intangible asset and goodwill valuations, including impairments, debentures and warrants , warranty accruals, legal contingencies and recoverability of Ribbon's net deferred tax assets and the related valuation allowances.

Significant estimates and judgments relied upon in preparing these consolidated financial statements include accounting for business combinations, revenue recognition for arrangements that contain multiple performance obligations, inventory valuations, assumptions used to determine the fair value of stock-based compensation and the Preferred Stock and Warrants, intangible asset and goodwill valuations, including impairments, debentures and warrants, warranty accruals, legal contingencies and recoverability of Ribbon’s net deferred tax assets and the related valuation allowances.

Ribbon regularly assesses these estimates and records changes in estimates in the period in which they become known.

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products and services.

Product revenue includes the Company's hardware and software that function together to deliver the products' essential functionality.

Software and hardware are also sold on a standalone basis.

Product revenue includes:

1) the Company’s proprietary hardware and software that function together to deliver the products’ essential functionality and 2) the Company’s software only solutions that can be used on either the Company’s hardware or third-party hardware.

Both proprietary hardware and software only solutions are also sold on a standalone basis.

Services include customer support (software updates, upgrades and technical support), consulting, design services, installation services and training.

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When an arrangement contains more than one performance obligation, the Company will allocate the transaction price to each performance obligation on a relative standalone selling price basis.

The Company utilizes the observable price of goods and services, including when they are sold separately to similar customers, in order to estimate standalone selling price.

The Company utilizes the observable price of goods and services, including when they are sold separately to similar customers, in order to estimate standalone selling price (“SSP”).

The Company’s software licenses typically provide a perpetual right to use the Company’s software.

The Company also sells term-based software licenses that expire and Software-as-a-Service ("SaaS")-based software which are referred to as subscription arrangements.

However, the Company also sells term-based software licenses that expire and Software-as-a-Service (“SaaS”)-based software which are referred to as subscription arrangements.

The Company does not customize its software nor are installation services required, as the customer has a right to utilize internal resources or a third-party service company.

The software and hardware are delivered before related services are provided and are functional without professional services or customer support.

The software and

hardware are delivered before related services are provided and are functional without professional services or customer support.

The Company has concluded that its software licenses are functional intellectual property that are distinct, as the user can benefit from the software on its own.

Product revenue is typically recognized upon transfer of control or when the software is made available for download, as this is the point the user of the software can direct the use of, and obtain substantially all of the remaining benefits from, the functional intellectual property.

The Company begins to recognize software revenue related to the renewal of subscription software licenses at the start of the subscription period.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Product revenue from sales of the Company’s perpetual and term-based software licenses is typically recognized when the software is made available for download, as this is the point the user of the software can direct the use of and obtain substantially all of the remaining benefits from the functional intellectual property.

The Company begins to recognize software revenue related to the renewal of term-based software licenses at the start of the renewal period.

Revenue related to sales of SaaS-based software is recognized ratably over the service period as the customer does not take possession of the software or have the ability to take possession of the software.

The Company offers warranties on its products.

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The Company does not allow and has no history of accepting product returns.

Services revenue includes revenue from customer support and other professional services.

Service revenue includes revenue from customer support and other professional services.

Customer support includes software updates on a when-and-if-available basis, telephone support, integrated web-based support and bug fixes or patches.

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The method to measure progress toward completion requires judgment and is based on the nature of the products or services to be provided.

The Company generally uses the input method to measure progress for its contracts because it believes such method best depicts the transfer of assets to the customer, which occurs as the Company incurs costs for the contracts.

However, in some instances, the Company uses the output method because it best depicts the transfer of asset to the customer.

Under the cost-to-cost measure of progress, the progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

The Company generally uses the input method to measure progress for its contracts and to recognize revenue because it believes such method, in general, best depicts the transfer of assets to its customers.

The input method measures costs the Company has incurred in the period for its contracts.

In some infrequent instances, the Company may engage a third-party to perform services on its behalf and in those cases the output method is used to recognize revenue because it best depicts the transfer of assets to its customers.

Under the output method, there is a cost-to-cost measure of progress.

The progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

When the measure of progress is based upon expended labor, progress toward completion is measured as the ratio of labor time expended to date versus the total estimated labor time required to complete the performance obligation.

Revenue is recorded proportionally as costs are incurred or as labor is expended.

Costs to fulfill these obligations include internal labor as well as subcontractor costs.

Costs to fulfill these obligations can include internal labor as well as subcontractor costs.

Customer training includes courses offered by the Company.

The related revenue is typically recognized as the training services are performed.

The related revenue is typically recognized as the training services are performed, typically over a period of one to five days .

Payment terms for the Company’s contracts with its customers typically range from 30 to 60 days from the invoice date.

In certain cases, it may offer extended payment terms, which are assessed on a case-by-case basis.

The Company does not generally offer significant financing components in its contracts with customers.

However, if a contract includes a significant financing component, the transaction price is adjusted for the time value of money.

For the year ended December 31, 2024, the impact of financing components was immaterial.

Amounts billed to customers for sales and other taxes are excluded from the transaction price.

Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to government authorities.

Preferred Stock and Warrants

The Company accounts for the Preferred Stock and Warrants as liability-classified instruments based on an assessment of their specific terms in accordance with ASC Topic 480, Distinguishing Liabilities from Equity .

The fair value option was elected for the Preferred Stock, as the Company considers fair value to best reflect the expected future economic value.

These liabilities are remeasured to fair value at each reporting date using the same valuation methodology applied upon issuance.

The Preferred Stock is considered to be debt for our Consolidated Net Leverage Ratio covenant calculation required under our 2020 Credit Facility.

The value of the Preferred Stock is calculated using the Black-Derman-Toy (BDT) stochastic yield lattice model to capture the optimal timing of repayment, increasing dividend rate and other features, and the value of the Warrants is calculated using the Black-Scholes Pricing Model.

The Company accounted for the Preferred Stock until it was redeemed on June 25, 2024 and continues to account for the Warrants as liability-classified instruments based on an assessment of their specific terms in accordance with ASC Topic 480, Distinguishing Liabilities from Equity .

The fair value option was elected for the Preferred Stock, as the Company considered fair value to best reflect the expected future economic value.

These liabilities are remeasured to fair value at each reporting date using the same valuation methodology applied upon issuance using current input assumptions.

The Preferred Stock was considered to be debt for our Consolidated Net Leverage Ratio covenant calculation required under our 2020 Credit Facility.

The value of the Preferred Stock was calculated using the Black-Derman-Toy (BDT) stochastic yield lattice model to capture the optimal timing of repayment, increasing dividend rate and other features, and the value of the Warrants is calculated using the Black-Scholes Pricing Model.

Changes in the fair value of the Preferred Stock and Warrants are reported as Other expense, net in the Company’s consolidated statements of operations.

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Ribbon’s term debt balance as of December 31, 2024 and 2023 of $ 348.3 million and $ 235.4 million, respectively, had a fair value of approximately $ 350.4 million and $ 235.1 million, respectively.

Our Warrants liabilities as of December 31, 2024 had a fair value of $ 8.1 million.

Our Preferred Stock and Warrants liabilities as of December 31, 2023 had a combined fair value of $ 58.6 million, including cumulative dividends on the Preferred Stock of $ 3.9 million.

1 unchanged sentence

Financial instruments with maturities or that are payable more than one year from the balance sheet date are classified as noncurrent.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Fair Value Option - Investment in AVCT

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Under the terms of these agreements, the Company may transfer receivables to the financial institutions, on a non-recourse basis, provided that the financial institutions approve the receivables in advance.

The Company maintains credit insurance policies from major insurance providers or obtains letters of credit from the customers for a majority of its factored trade receivables.

Company maintains credit insurance policies from major insurance providers or obtains letters of credit from the customers for a majority of its factored trade receivables.

The Company accounts for the factoring of its financial assets as a sale of the assets and records the factoring fees, when incurred, as a component of interest expense in the consolidated statements of operations, and the proceeds from the sales of receivables are included in cash from operating activities in the consolidated statements of cash flows.

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The Company records its foreign currency (gains) losses as a component of Other expense, net.

The Company recognized net foreign currency losses of less than $ 0.1 million, $ 1.6 million and $ 5.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The Company recognized net foreign currency (gains) and losses of $ 5.7 million, less than $( 0.1 ) million and $ 1.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Inventory is recorded at the lower of cost or market value using the first-in, first-out convention.

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Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from two to five years .

Leasehold improvements are amortized over the lesser of the lease term or five years .

Leasehold improvements are amortized over the

lesser of the lease term or five years .

When an asset is sold or retired, the cost and related accumulated depreciation or amortization are eliminated, and the resulting gain or loss, if any, is recognized in Loss from operations in the consolidated statement of operations.

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Any impairment charges are reported separately in the Company’s consolidated statements of operations.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Stock-Based Compensation

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The Company may grant to certain of its executives and certain other employees performance-based stock units (“PSUs”) that include a market condition.

The Company uses a Monte Carlo simulation approach to model future stock price movements based upon the risk-free rate of return, the volatility of each entity and the pair-wise covariance between each entity.

The Company uses a Monte Carlo simulation approach to model future stock

price movements based upon the risk-free rate of return, the volatility of each entity and the pair-wise covariance between each entity.

These results are then used to calculate the grant date fair values of the PSUs.

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The Compensation Committee determines the number of shares earned, if any, after the Company’s financial results for each fiscal year performance period are finalized.

Upon the determination by the Compensation Committee of the number of shares that will be received upon vesting, such number of shares becomes fixed and the unamortized expense is recorded through the remainder of the service period, at which time any Performance PSUs earned, will vest pending each executive's continued employment with the Company through that date.

Upon the determination by the Compensation Committee of the number of shares that will be received upon vesting, such number of shares becomes fixed and the unamortized expense is recorded through the remainder of the service period, at which time any Performance PSUs earned will vest pending each employee’s continuing employment with Ribbon through that date.

Concentration of Risk

The financial instruments that potentially subject Ribbon to concentrations of credit risk are cash and accounts receivable.

The Company's cash equivalents were managed by one financial institution at December 31, 2023 .

Historically, the Company has not experienced significant losses due to such bank depository concentration.

Ribbon is subject to counterparty risk as well as financial instrument concentration risk involving cash, cash equivalents and accounts receivable.

To mitigate these risks, cash and cash equivalents are diversified and maintained with various financial institutions globally.

In certain instances, advance payments, credit insurance, or customer issued letters of credit are required to mitigate potential risk.

Certain components and software licenses from third parties used in Ribbon’s products are procured from single sources of supply.

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Ribbon evaluates these claims and accrues amounts when it is probable that the obligation has been incurred and the amounts are reasonably estimable.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The Company records warranty liabilities for estimated costs of fulfilling its obligations under standard limited hardware and software warranties at the time of sale.

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At December 31, 2024, the Company’s liability for product warranties was $ 12.3 million of which $ 5.2 million was current and included in Accrued expenses and other and $ 7.1 million was long-term and included in Other long-term liabilities in the Company’s consolidated balance sheet.

At December 31, 2022, the Company's liability for product warranties was $ 11.9 million, of which $ 5.3 million was current and included in Accrued expenses and other, and $ 6.6 million was long-term and included in Other long-term liabilities in the Company's consolidated balance sheet.

December 31, 2023, the Company’s liability for product warranties was $ 12.2 million, of which $ 5.4 million was current and included in Accrued expenses and other, and $ 6.8 million was long-term and included in Other long-term liabilities in the Company’s consolidated balance sheet.

Research and Development Grants

The Company records grants received from the Office of the Innovation Authority of the Israeli Ministry of Economics (the “IIA”) as a reduction to Research and development expense.

Royalties payable to the IIA are recognized pursuant to sales of related products and are included in Cost of revenue - product (see Note 26).

Royalties payable to the IIA are recognized pursuant to sales of related products and services and are included in Cost of revenue (see Note 26).

Accounting for Leases

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If it is not more likely than not that a position will be sustained, no amount of the benefit attributable to the position is recognized.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The tax benefit to be recognized of any tax position that meets the more likely than not recognition threshold is calculated as the largest amount that is more than 50 % likely of being realized upon resolution of the contingency.

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Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (the "FASB") issued ASU 2023-09, Income Taxes (Topic 740):

In November 2024, the Financial Accounting Standards Board (the "FASB") issued ASU 2024-03, Income Statement, Reporting Comprehensive Income:

Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), which requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements.

The objective of this standard is to provide investors with information to better understand a public entity’s performance and prospects for future cash flows, and to compare their performance over time with that of other entities.

ASU 2024-03 will be effective for the Company beginning with our 2027 annual financial statements and interim financial statements thereafter, with early adoption permitted.

The adoption of ASU 2024-03 will require the Company to provide new footnote disclosure about the types of expenses that are included in certain captions on its Statements of Operations, such as Cost of revenue, Research and development, Sales and marketing, and General and administrative.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”), which increases the disclosure requirements around rate reconciliation information and certain types of income taxes companies are required to pay.

ASU 2023-09 will be effective for the Company beginning in 2025, with early adoption permitted.

The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.

ASU 2023-09 will be effective for the Company beginning with its 2025 annual financial statements, with early adoption permitted.

We expect the adoption of the standard will require certain additional income tax disclosure.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which improves reportable segment disclosure requirements, including enhancement of the disclosures of significant segment expenses and interim disclosure requirements, to enable investors to better understand an entity’s overall performance and assess potential future cash flows.

ASU 2023-07 will be effective for the Company annually beginning in 2024 and on an interim basis beginning in 2025, with early adoption permitted.

The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC's disclosure Update and Simplification Initiative (“ASU 2023-06”), which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification.

This ASU was issued in response to and to align GAAP with the SEC's August 2018 final rule that updates and simplifies disclosure requirements.

The effective date for the Company for each amendment will be the date on which the SEC's removal of that related disclosure requirement becomes effective, with early adoption prohibited.

The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.

On February 1, 2023, the FASB staff noted that they believe that the Pillar 2 tax, established by the OECD and intended to apply for tax years beginning in 2024, would be an alternative minimum tax and therefore deferred tax assets would not need to be recognized related to this parallel taxing system.

On February 2, 2023, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax.

Under an additional transitional safe harbor released July 17, 2023, the undertaxed profits rule top-up tax will not be applied by any constituent entity's jurisdiction of residence with respect to income earned by a company's ultimate parent entity in its jurisdiction of residence, if the ultimate parent entity's jurisdiction has a corporate tax rate of at least 20%.

This transition safe harbor will apply to fiscal years beginning on or before December 31, 2025 and ending before December 31, 2026.

We are closely monitoring developments and evaluating the impacts these new rules will have on our tax rate, including eligibility to qualify for these safe harbor rules.

Based upon preliminary calculations for calendar year 2024, we anticipate that we will meet the safe harbors in most jurisdictions, and any remaining top-up tax should be immaterial.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310, Receivables (Topic 310) , and requires entities to provide disclosures about current period gross write-offs by year of origination.

Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326) , and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.

ASU 2022-02 was effective for

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

the Company January 1, 2023.

The adoption of ASU 2022-02 did not have a material impact on the Company's consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"), which amends ASC 805, Business Combinations (Topic 805) , to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require that an acquiring entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers (Topic 606) ("ASC 606").

Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date.

While primarily related to contract assets and contract liabilities that were accounted for by the acquiree in accordance with ASC 606, ASU 2021-08 also applies to contract assets and contract liabilities from other contracts to which the provisions of ASC 606 apply, such as contract liabilities from the sale of nonfinancial assets within the scope of ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) .

ASU 2021-08 was effective for the Company January 1, 2023.

The Company believes that the adoption of ASU 2021-08 could have a material impact on its consolidated financial statements for periods including and subsequent to significant business acquisitions.

ASU 2023-07 became effective for the Company beginning with this Annual Report on Form 10-K which includes the required additional segment disclosures.

(3) BUSINESS ACQUISITIONS

7 unchanged sentences

Integration-related expenses represent incremental costs related to combining the Company and its business acquisitions, such as third-party consulting and other third-party services related to merging the previously separate companies’ systems and processes.

The disposal-related expenses in the year ended December 31, 2022 primarily relate to costs incurred from the sale of one of our foreign subsidiaries.

The disposal-related expenses in the year ended December 31, 2021 relate to the Kandy Sale (as defined below).

The integration-related expenses in the years ended December 31, 2023 and 2022 relate to the ECI Acquisition.

The disposal-related expenses in the year ended December 31, 2022 primarily related to costs incurred from the sale of one of our foreign subsidiaries.

The components of Acquisition-, disposal- and integration-related expenses incurred in the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands):

Year ended December 31,

2023 2022 2021

Professional and services fees (acquisition-related) $ — $ — $ 165

Professional and services fees (disposal-related)

Integration-related expenses

$ 4,476 $ 6,286 $ 7,632

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

(4) SALE OF KANDY COMMUNICATIONS BUSINESS

6 unchanged sentences

The AVCT Warrants were independent of the Debentures and entitled the Company to purchase 4,377,800 shares of AVCT common stock at an exercise price of $ 0.01 per share.

The Company calculated the fair value of the Debentures at each measurement date using a Lattice-based valuation approach, which utilizes a binomial tree to model the different paths the price of AVCT's common stock might take over the Debentures' life by using assumptions regarding the stock price volatility and risk-free interest rate.

the Debentures’ life by using assumptions regarding the stock price volatility and risk-free interest rate.

The Company used the Black-Scholes valuation model for estimating the fair value of the AVCT Warrants at each measurement date.

1 unchanged sentence

Both the Lattice and Black-Scholes valuation models are based on available market data, giving consideration to all of the rights and obligations of each instrument and precluding the use of “blockage” discounts or premiums in determining the fair value of a large block of financial instruments.

The Company recorded a loss of $ 74.8 million in the year ended December 31, 2021 arising from the change in the fair value of the AVCT Investment.

This loss was included as a component of Other expense net, in the Company's consolidated statements of operations.

The Company recorded $ 3.5 million of interest income in the year ended December 31, 2021, which was added to the principal amount of the Debentures prior to the Debenture Conversion Date, and which is included in Interest expense, net, in the consolidated statement of operations.

On August 29, 2022, the Company and AVCT entered into a settlement agreement which provided for, amongst other things, the cancellation of the Company’s investment in the Debenture Shares and the AVCT Warrants with an aggregate fair value of $ 2.6 million.

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Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period.

For periods in which the Company reports net income, diluted net income per share is determined by using the weighted average number of common and dilutive common equivalent shares outstanding during the

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

period unless the effect is antidilutive.

For periods in which the Company reports net income, diluted net earnings per share is determined by using the weighted average number of common and dilutive common equivalent shares outstanding during the period, unless the effect is antidilutive.

The shares used to compute loss per share were as follows (in thousands):

Year ended December 31,

2023 2022 2021

Weighted average shares outstanding—basic

2 unchanged sentences

Options to purchase the Company’s common stock and unvested restricted and performance-based stock units aggregating 7.6 million shares, 13.5 million shares, and 14.5 million shares were excluded from the computation of diluted loss per share for the years ended December 31, 2024, 2023 and 2022, respectively, because their effect would have been antidilutive.

As of December 31, 2023, the potential number of dilutive shares from the Warrants totaled 4.9 million shares.

However, there was no impact on weighted average shares outstanding from these Warrants for the year ended December 31, 2023 as the average share price of the Company's common stock was below the exercise price of $ 3.77 per share and their effect would have been antidilutive.

Dividends payable on the Preferred Stock are not an adjustment to net income (loss) used for the calculation of diluted earnings (loss) per share as these dividends are included in the fair value adjustment of the Preferred Stock which is reflected in Other expense, net.

(6) FAIR VALUE HIERARCHY

As of December 31, 2024 and 2023, the potential number of dilutive shares from the Warrants totaled 4.9 million shares.

However, there was no impact on weighted average shares outstanding from these Warrants for the years ended December 31, 2024 and 2023 as the average share price of the Company’s common stock was below the exercise price of $ 3.77 per share and their effect would have been antidilutive.

Dividends accrued on the Preferred Stock were not an adjustment to net income (loss) used for the calculation of diluted earnings (loss) per share as these dividends are included in the fair value adjustment of the Preferred Stock which was reflected in Other expense, net until the redemption of the Preferred Stock on June 25, 2024.

(6) FAIR VALUE HIERARCHY

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● Level 2 applies to assets or liabilities for which there are inputs that are directly or indirectly observable in the marketplace, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets).

At December 31, 2023, the Company determined the fair value of its defined benefit plans' assets using Level 2 input.

At December 31, 2022, the Company determined the fair value of its interest rate swap and its defined benefit plans' assets using Level 2 input.

At December 31, 2024 and 2023, the Company determined the fair value of its defined benefit plans’ assets using Level 2 input.

● Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

At December 31, 2024, the fair value of the Company’s Warrants was determined using Level 3 input.

At December 31, 2023, the fair value of the Company’s Preferred Stock and Warrants were determined using Level 3 input.

The Company had no assets or liabilities fair valued using Level 3 input at December 31, 2023 or 2022.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The Company did not have any transfers between Level 2 and Level 3 fair value measurements during the years ended December 31, 2024 and 2023.

(7) ACCOUNTS RECEIVABLE, NET

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The Company’s allowance for doubtful accounts activity was as follows (in thousands):

Year ended December 31, Balance at

of year Charges

to expense Charges (credits) to other accounts Write-offs Balance at

2023 $ 1,427 $ 428 $ 143 $ ( 486 ) $ 1,512

2022 $ 1,270 $ 100 $ 159 $ ( 102 ) $ 1,427

2021 $ 776 $ 553 $ 85 $ ( 144 ) $ 1,270

Year ended December 31,

(8) INVENTORY

Inventory consisted of the following (in thousands):

On-hand final assemblies and finished goods inventories $ 93,077 $ 85,888

On-hand assemblies and finished goods inventories

Deferred cost of goods sold

96,346 87,337

Less noncurrent portion (included in Other assets)

2 unchanged sentences

Property and equipment consisted of the following (in thousands):

Useful Life 2023 2022

Equipment 2 - 5 years

$ 77,205 $ 76,674

Software 2 - 5 years

34,802 33,639

Furniture and fixtures 3 - 5 years

Leasehold improvements Shorter of the estimated lease term or useful life 36,383 35,448

151,691 148,929

Furniture and fixtures

Leasehold improvements

Shorter of the estimated lease term or useful life

Less accumulated depreciation and amortization

Property and equipment, net

As of December 31, 2024 and 2023, property and equipment included $ 23.2 million and $ 3.4 million, respectively, of assets that had not yet commenced depreciation.

These assets primarily consisted of leasehold improvements and equipment, with the most significant portion related to construction in progress at our new main campus in Petah Tikva, Israel that is expected to be completed and occupied in the 1 st half of 2025, totaling $ 18.9 million and $ 0.5 million as of December 31, 2024 and 2023, respectively.

The Company recorded depreciation and amortization expense related to property and equipment of $ 13.5 million for the year ended December 31, 2024, $ 14.1 million for the year ended December 31, 2023 and $ 15.3 million for the year ended December 31, 2022.

During each of these years, the Company disposed of certain property and equipment that was fully depreciated at the time of disposal, which resulted in reductions in both Cost and Accumulated depreciation.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The net book values of the Company’s property and equipment by geographic area were as follows (in thousands):

United States

Canada 3,175 3,471

Asia/Pacific 8,314 8,152

Europe 957 833

Israel 8,309 8,860

Other 258 373

$ 41,820 $ 44,832

(10) INTANGIBLE ASSETS AND GOODWILL

The Company’s intangible assets at December 31, 2024 and 2023 consisted of the following (in thousands):

December 31, 2023 Weighted average amortization period

(years) Cost Accumulated

amortization Net

carrying value

December 31, 2024

Developed technology

Customer relationships

Trade names 3.88 5,000 4,901 99

Software licenses

9.51 $ 618,956 $ 380,869 $ 238,087

December 31, 2022 Weighted average amortization period

(years) Cost Accumulated

amortization Net

carrying value

December 31, 2023

Developed technology

Customer relationships

Trade names 3.88 5,000 4,658 342

Software licenses

9.51 $ 618,706 $ 323,978 $ 294,728

Estimated future amortization expense for the Company’s intangible assets at December 31, 2024 was as follows (in thousands):

Years ending December 31,

2024 $ 50,800

Thereafter 46,824

Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiable intangible assets acquired.

1 unchanged sentence

The Company’s reporting units are its two operating segments, Cloud and Edge and IP Optical Networks.

Annual testing for impairment of goodwill is completed as of October 1.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Testing for impairment of goodwill is completed annually as of October 1 st .

The Company’s IP Optical Networks operating segment, with $ 76.0 million of associated goodwill, had a negative carrying value and a positive fair value as of October 1, 2024.

Upon completion of the 2024 and 2023 annual tests for goodwill impairment, the Company determined that there was no impairment of goodwill in either of its reporting units.

1 unchanged sentence

The components of goodwill at December 31, 2024 and 2023 were as follows (in thousands):

Cloud and Edge IP Optical Networks Total

Balance at December 31, 2022

Goodwill $ 392,302 $ 191,996 $ 584,298

Accumulated impairment losses

224,896 75,996 300,892

Balance at December 31, 2023

Goodwill $ 392,302 $ 191,996 $ 584,298

Accumulated impairment losses ( 167,406 ) ( 116,000 ) ( 283,406 )

$ 224,896 $ 75,996 $ 300,892

(11) ACCRUED EXPENSES AND OTHER

3 unchanged sentences

Taxes payable

Other 29,920 33,929

$ 91,687 $ 85,270

(12) WARRANTY

The changes in the Company’s warranty accrual balance in the years ended December 31, 2024 and 2023 were as follows (in thousands):

Year ended December 31, Balance at

of year Provision Settlements Balance at

2023 $ 11,857 $ 5,875 $ ( 5,489 ) $ 12,243

2022 $ 13,120 $ 4,605 $ ( 5,868 ) $ 11,857

Year ended December 31,

(13) RESTRUCTURING AND FACILITIES CONSOLIDATION INITIATIVES

4 unchanged sentences

The accelerated amortization is recorded as a component of Restructuring and related expense in the Company’s consolidated statements of operations.

Related variable lease expenses will continue to be expensed

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

as incurred through the vacate date, at which time the Company will reassess the liability balance to ensure it appropriately reflects the remaining liability associated with the premises and record a liability for the estimated future variable lease costs.

Related variable lease expenses will continue to be expensed as incurred through the vacate date, at which time the Company will reassess the liability balance to ensure it appropriately reflects the remaining liability associated with the premises and record a liability for the estimated future variable lease costs.

Accelerated amortization of lease assets is recognized from the date that the Company commences the plan to fully or partially vacate a facility, for which there is no intent or ability to enter into a sublease, through the final vacate date.

3 unchanged sentences

Year ended December 31,

2023 2022 2021

Severance and related costs

1 unchanged sentence

Accelerated amortization of lease assets due to cease-use

$ 16,209 $ 10,833 $ 11,653

The Company’s President and CEO approved workforce reductions in 2024 for certain of the Company’s operating locations to correspond with the current sales levels in those areas.

The Company recorded $ 2.1 million in the year ended December 31, 2024 related to these actions.

2023 Restructuring Plan

2 unchanged sentences

Any potential positions eliminated in countries outside the United States are subject to local law and consultation requirements.

The Company recorded restructuring and related expense of $ 9.9 million in 2023 in connection with the 2023 Restructuring Plan entirely for severance related costs.

A summary of the 2023 Restructuring Plan accrual activity for the year ended December 31, 2023 is as follows (in thousands):

2023 Initiatives

payments Net transfer to operating lease accounts Balance at

Severance $ — $ 9,875 $ ( 9,204 ) $ — $ 671

In connection with the 2023 Restructuring Plan, the Company recorded restructuring and related expense of $ 2.0 million and $ 9.9 million in the years ended December 31, 2024 and 2023, respectively, consisting entirely for severance related costs.

A summary of the 2023 Restructuring Plan accrual activity for the years ended December 31, 2024 and 2023 were as follows (in thousands):

The Company estimates that it will record nominal future expense under the 2023 Restructuring Plan.

5 unchanged sentences

The amount for the year ended December 31, 2023 was comprised of $ 5.3 million for variable and other facilities-related costs and $ 1.0 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease.

The amount for the year ended December 31, 2022 was comprised of $ 5.3 million for severance and related costs for approximately 70 employees, $ 3.3 million for variable and other facilities-related costs and $ 1.6 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease.

The Company estimates that it will record approximately $ 5 million of expense in 2025 under the 2022 Restructuring Plan.

A summary of the 2022 Restructuring Plan accrual activity for the years ended December 31, 2023 and 2022 are as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

2023 Initiatives

payments Net transfer to operating lease accounts Balance at

Severance $ 1,164 $ — $ ( 1,164 ) $ — $ —

summary of the 2022 Restructuring Plan accrual activity for the years ended December 31, 2024 and 2023 were as follows (in thousands):

Variable and other facilities-related costs

Accelerated amortization of lease assets due to cease-use — 1,008 — ( 1,008 ) —

$ 2,054 $ 6,334 $ ( 6,912 ) $ ( 1,008 ) $ 468

2022 Initiatives

payments Net transfer to operating lease accounts Balance at

Severance $ — $ 5,287 $ ( 4,123 ) $ — $ 1,164

Net transfer to

operating lease

Variable and other facilities-related costs

Accelerated amortization of lease assets due to cease-use

$ — $ 10,197 $ ( 6,532 ) $ ( 1,611 ) $ 2,054

Balance Sheet Classification

3 unchanged sentences

2024 Credit Facility

On June 21, 2024, the Company entered into a Senior Secured Credit Facilities Credit Agreement (the “2024 Credit Facility” or “Credit Agreement”) as guarantor, with the Company’s wholly-owned subsidiary, Ribbon Communications Operating Company, Inc., as the borrower (the “Borrower”), HPS Investment Partners, LLC ("HPS"), as administrative agent, and HPS and WhiteHorse Capital Management, LLC ("WhiteHorse" and, together with HPS, the "Lenders"), pursuant to which the Lenders provided the Company with a $ 385 million Credit Agreement comprised of (i) a $ 350 million term loan (the “2024 Term Loan”) and (ii) a $ 35 million revolving credit facility (the “2024 Revolver”), including a $ 20 million sublimit for letters of credit.

The proceeds received from the 2024 Term Loan were used to (a) repay 100 % of the amounts outstanding under the 2020 Credit Facility, (b) redeem in full the Preferred Stock and (c) pay fees and expenses related to the 2024 Credit Facility.

The excess proceeds are being used by the Company for working capital and other general corporate purposes.

The 2024 Term Loan and the 2024 Revolver bear interest, at the Borrower’s option, at either the Alternate Base Rate (“ABR”) or Term Secured Overnight Financing Rate ("SOFR") with an Applicable Margin for each (all as defined in the 2024 Credit Facility).

Margins for the first six months are 5.25 % per annum for ABR Loans and 6.25 % per annum for SOFR Loans.

Thereafter, margins vary based on the Company’s Consolidated Net Leverage Ratio, ranging from 4.75 % to 5.25 % per annum for ABR Loans and 5.75 % to 6.25 % per annum for SOFR Loans.

The 2024 Term Loan and the 2024 Revolver will both mature on June 21, 2029.

The 2024 Term Loan is being repaid in equal quarterly installments:

approximately $ 0.9 million beginning with the third quarter of 2024 through the second quarter of 2025;

approximately $ 2.2 million beginning with the third quarter of 2025 and ending with the second quarter of 2027;

and approximately $ 4.4 million quarterly thereafter, with the remaining principal balance of approximately $ 298.4 million due on the maturity date of June 21, 2029.

In connection with the establishment of the 2024 Credit Facility, $ 7.7 million of original issue discount was withheld by the Lenders and the Company incurred $ 6.3 million of debt issuance costs for a total of $ 14.0 million that is being amortized to Interest expense, net over the term of the 2024 Credit Facility.

The 2024 Credit Facility requires compliance with a Maximum Consolidated Net Leverage Ratio (the "Financial Covenant"), as defined in the 2024 Credit Facility, which is tested on a quarterly basis.

The Company was in compliance with the Financial Covenant as of December 31, 2024.

The indebtedness and other obligations under the 2024 Credit Facility are irrevocably and unconditionally guaranteed on a joint and several basis by the Company and its subsidiaries (together, the "Guarantors").

The 2024 Credit Facility is secured on a first-priority basis by liens on substantially all assets of the Borrower and the Guarantors.

2020 Credit Facility

On June 21, 2024, the Company used the proceeds from the 2024 Credit Facility to, among other things, repay all amounts outstanding under its Senior Secured Credit Facilities Credit Agreement, dated March 3, 2020 (as amended, the "2020 Credit Facility"), by and among the Company, as a guarantor, Ribbon Communications Operating Company, Inc., as the borrower (the "Borrower"), Citizens Bank, N.A., Santander Bank, N.A., and others as lenders ("2020 Credit Facility Lenders").

The Company wrote off $ 2.0 million of debt issuance costs in conjunction with the early extinguishment of the 2020 Credit Facility.

On March 3, 2020, the Company entered into a Senior Secured Credit Facilities Credit Agreement (as amended, the “2020 Credit Facility”), by and among the Company, as a guarantor, Ribbon Communications Operating Company, Inc., as the borrower (“Borrower”), Citizens Bank, N.A.

1 unchanged sentence

The proceeds of the Credit Agreement were used, in part, to pay off in full all obligations of the Company under the 2019 Credit Facility.

The 2020 Credit Facility originally provided for $ 500 million of commitments from the Lenders to the Borrower, comprised of $ 400 million in term loans (the "2020 Term Loan Facility") and a $ 100 million facility available for revolving loans (the "2020 Revolving Credit Facility").

Under the 2020 Revolving Credit Facility, a $ 30 million sublimit was originally available for letters of credit and a $ 20 million sublimit is available for swingline loans.

The indebtedness and other obligations under the 2020 Credit Facility are unconditionally guaranteed on a senior secured basis by the Company, Edgewater Networks, Inc., a wholly-owned subsidiary of the Company, and GENBAND Inc., wholly-owned subsidiary of the Company (together, the "Guarantors") .

The 2020 Credit Facility is secured by first-priority liens on substantially all of the assets of the Borrower and the Guarantors , including substantially all of the assets of the Company.

The 2020 Credit Facility requires compliance with certain financial covenants, including a minimum Consolidated Fixed Charge Coverage Ratio and a maximum Consolidated Net Leverage Ratio (each as defined in the 2020 Credit Facility, and each tested on a quarterly basis).

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

On August 18, 2020, the Company entered into the First Amendment to the 2020 Credit Facility in which $ 75 million of the 2020 Term Loan Facility was assigned from Citizens to a new lender and designated as the Term B Loan.

The remaining $ 325 million of the 2020 Term Loan Facility was deemed the Term A Loan.

The Term A Loan and the 2020 Revolving Credit Facility mature in March 2025 and originally bore interest at the Borrower's option at either the LIBOR rate plus a margin ranging from 1.50 % to 3.50 % per year, or the base rate plus 0.50 %, or the prime rate plus a margin ranging from 0.50 % to 2.50 % per year (the "Applicable Margin").

The Applicable Margin varied depending on the Company's Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility).

The Term B Loan was scheduled to mature in March 2026 and bore interest, at the Borrower's option, at either the LIBOR rate plus a margin of 7.50 % per year, or the base rate (the highest of the Federal Funds Effective Rate (as defined in the First Amendment) plus 0.50 %, or the prime rate.

On December 1, 2020, the Company entered into the Second Amendment to the 2020 Credit Facility to obtain consent for an equity exchange with AVCT in connection with the sale of our Kandy Communications business, as well as to amend certain other provisions of the 2020 Credit Facility.

On March 3, 2021, the Company entered into the Third Amendment to the 2020 Credit Facility which provided for an incremental term loan facility in the principal amount of $ 74.6 million, the proceeds of which were used to consummate an open market purchase of all outstanding amounts under the Term B Loan, resulting in the assignment and immediate cancellation of the Term B Loan, such that the outstanding amount under the Term A Loan and incremental term loan facility were combined and held by the Lenders (the "2020 Term Loan") with the same terms as the Term A Loan.

The Company wrote off $ 2.5 million of capitalized debt issuance costs in connection with the Third Amendment, which is included in Interest expense, net, in the Company's consolidated statement of operations for the year ended December 31, 2021.

The 2020 Credit Facility had a maturity date of March 2025 and originally provided for $ 500 million of commitments from the 2020 Credit Facility Lenders to the Borrower, comprised of $ 400 million in term loans (the “2020 Term Loan Facility”) and a $ 100 million facility available for revolving loans (the “2020 Revolving Credit Facility”).

Under the 2020 Revolving Credit Facility, a $ 30 million sublimit was originally available for letters of credit and a $ 20 million sublimit was available for swingline loans.

The indebtedness and other obligations under the 2020 Credit Facility were unconditionally guaranteed on a senior secured basis by the Company, Edgewater Networks, Inc., a wholly-owned subsidiary of the Company, and GENBAND Inc., wholly-owned subsidiary of the Company (together, the “2020 Credit Facility Guarantors”).

The 2020 Credit Facility was secured by first-priority liens on substantially all of the assets of the Borrower and the 2020 Credit Facility Guarantors, including substantially all of the assets of the Company.

The 2020 Credit Facility required compliance with certain financial covenants, including a minimum Consolidated Fixed Charge Coverage Ratio and a maximum Consolidated Net Leverage Ratio (each as defined in the 2020 Credit Facility, and each tested on a quarterly basis).

On March 10, 2022, the Company entered into the Fourth Amendment to the 2020 Credit Facility to increase the Maximum Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility) and in conjunction, the Company made a $ 15.0 million prepayment that was applied to the final payment due on the maturity date.

5 unchanged sentences

In connection with the Fifth Amendment, the Company made a $ 10.0 million voluntary prepayment that was applied to the final payment due on the maturity date.

Subsequent to the Fifth Amendment, the Company is required to make quarterly principal payments on the 2020 Term Loan aggregating approximately $ 5.0 million per quarter through March 31, 2024 and $ 10.0 million in each of the three quarters thereafter, with the remaining and final payment due on the maturity date in March 2025.

Subsequent to the Fifth Amendment, the Company was required to make

quarterly principal payments on the 2020 Term Loan aggregating approximately $ 5.0 million per quarter through March 31, 2024 and $ 10.0 million in each of the three quarters thereafter, with the remaining and final payment due on the maturity date in March 2025.

On March 24, 2023, the Company entered into the Sixth Amendment to the 2020 Credit Facility (the “Sixth Amendment”) effective March 30, 2023.

The Sixth Amendment, among other things, increased the Maximum Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility), with the first, second and third quarters of 2023 increasing to 4.50 :1.00 and then decreasing to 4.25 :1.00 and 4.00 :1.00 in the fourth quarter of 2023 and the first quarter of 2024, respectively.

In all subsequent quarters, the Maximum Consolidated Senior Net Leverage Ratio will be fixed at 3.00 :1.00 and the Maximum Consolidated Net Leverage Ratio will be fixed at 4.00 :1.00 .

Also, the Sixth Amendment reduced the minimum Consolidated Fixed Charge Coverage Ratio (as defined in the 2020 Credit Facility) to 1.10 :1.00 through the first quarter of 2024 and in all subsequent quarters the ratio will be fixed at 1.25 :1.00.

The Sixth Amendment reduced the maximum borrowings allowed under the 2020

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Revolving Credit Facility from $ 100 million to $ 75 million and the sublimit available for letters of credit was reduced from $ 30 million to $ 20 million.

In addition, the Sixth Amendment replaced LIBOR with the Secured Overnight Financing Rate ("SOFR") as the alternative rate that may be used by the Company for calculating interest owed under the 2020 Credit Facility, with the margin now fixed at 4.5 %.

In conjunction with the Sixth Amendment, the Company made a $ 75 million prepayment that was applied to the final payment due upon maturity in March 2025 of approximately $ 200.3 million.

The $ 75 million prepayment was almost entirely funded with the net proceeds from the Private Placement and the sales of our interest rate swap.

Debt issuance costs associated with the Sixth Amendment totaled $ 1.7 million and are being amortized on a straight-line basis over the remaining life of the 2020 Credit Facility to Interest expense, net.

The Company's interest rates under the 2020 Term Loan b enefited from a hedge instrument that was in place, specifically a fixed rate swap, until the instrument was sold in March 2023 (see Note 15).

As a result of the sale of the fixed rate swap, the ongoing interest rate is now based upon U.S.

The Sixth Amendment, among other things, increased the Maximum Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility), for the first, second and third quarters of 2023 to 4.50 :1.00.

In the fourth quarter of 2023 and the first quarter of 2024, the Maximum Consolidated Net Leverage Ratio declined to 4.25 :1.00 and 4.00 :1.00, respectively.

Also, the Sixth Amendment reduced the minimum Consolidated Fixed Charge Coverage Ratio (as defined in the 2020 Credit Facility) to 1.10 :1.00 through the first quarter of 2024.

The Sixth Amendment reduced the maximum borrowings allowed under the 2020 Revolving Credit Facility from $ 100 million to $ 75 million and the sublimit available for letters of credit was reduced from $ 30 million to $ 20 million.

In addition, the Sixth Amendment replaced LIBOR with SOFR as the alternative rate available to the Company for calculating interest owed under the 2020 Credit Facility with the margin fixed at 4.5 %.

In conjunction with the Sixth Amendment, the Company made a $ 75 million prepayment that was applied to the final payment due upon maturity in March 2025.

The $ 75 million prepayment was almost entirely funded with the net proceeds from the Private Placement and the sales of the Company’s interest rate swap.

Debt issuance costs associated with the Sixth Amendment totaled $ 1.7 million and were being amortized on a straight-line basis over the remaining life of the 2020 Credit Facility and were written off in conjunction with the early extinguishment of the 2020 Credit Facility on June 21, 2024.

The Company’s interest rates under the 2020 Term Loan benefited from a hedge instrument that was in place, specifically a fixed rate swap, until it was sold in March 2023 (see Note 15).

Following the sale of the fixed rate swap in March 2023, the Company’s interest rate was based upon U.S.

dollar SOFR plus a fixed margin of 4.5 %.

The Company was in compliance with all covenants of the 2020 Credit Facility at both December 31, 2023 and 2022, including the current Consolidated Net Leverage Ratio calculation that considers the Company's debt to include Preferred Stock.

The Company had the following outstanding borrowings, unamortized debt issuance costs, letters of credit, interest rates, and remaining borrowing capacity under the 2020 Credit Facility as of December 31, 2023 and 2022, respectively:

2023 December 31,

was in compliance with all covenants of the 2020 Credit Facility at December 31, 2023, including the Consolidated Net Leverage Ratio calculation that considered the Company’s debt to include Preferred Stock.

The Company had the following outstanding borrowings, unamortized debt issuance costs and original issue discount, letters of credit, interest rates, and remaining borrowing capacity under the 2024 Credit Facility and the 2020 Credit Facility as of December 31, 2024 and 2023, respectively:

Current portion of Term Debt

1 unchanged sentence

Long-term Debt, net of Current (Face Amount)

Original Issue Discount

Unamortized Debt Issuance Costs - Contra-Liability

1 unchanged sentence

Total Face Amount of Borrowings

Unamortized Debt Issuance Costs:

Other Assets $ 557 $ 798

Unamortized Original Issue Discount and Debt Issuance Costs:

Long-Term Debt - Contra Liability

Total Unamortized Debt Issuance Costs $ 3,368 $ 4,923

Total Unamortized Original Issue Discount and Debt Issuance Costs

Letters of Credit Outstanding

1 unchanged sentence

Average Interest Rates:

Term Loan 10.0 % 5.4 %

Letters of Credit

1 unchanged sentence

Years ending December 31,

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Letters of Credit and Performance and Bid Bonds

The Company uses letters of credit, bank guarantees, and performance and bid bonds in the course of its business.

At December 31, 2023, the Company had $ 7.9 million of letters of credit, bank guarantees, and performance and bid bonds outstanding (collectively, "Guarantees"), comprised of the $ 2.7 million of letters of credit under the 2020 Credit Facility described above (the "Letters of Credit") and $ 5.2 million of bank guarantees and performance and bid bonds (collectively, the "Other Guarantees") under various uncommitted facilities.

At December 31, 2022, the Company had Guarantees aggregating $ 8.3 million, comprised of the $ 3.3 million of Letters of Credit and $ 5.0 million of Other Guarantees.

Letters of Credit and Other Guarantees

The Company uses letters of credit, bank guarantees, and surety bonds in the course of its business.

At December 31, 2024, the Company had $ 10.9 million of letters of credit, bank guarantees, and surety bonds outstanding (collectively, "Guarantees") under various uncommitted facilities and no letters of credit outstanding under the 2024 Credit Facility.

At December 31, 2023, the Company had Guarantees aggregating $ 7.9 million, comprised of the $ 2.7 million of letters of credit under the 2020 Credit Facility described above and $ 5.2 million of Other Guarantees.

At December 31, 2024 and 2023, the Company had cash collateral of $ 2.7 million and $ 0.1 million, respectively, supporting the Guarantees, which are reported in Restricted cash in the Company’s consolidated balance sheets.

(15) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

13 unchanged sentences

Cash Flow Hedge of Interest Rate Risk

The 2020 Term Loan Facility had outstanding balances of $ 235.4 million and $ 330.4 million at December 31, 2023 and 2022 , respectively.

The 2020 Revolving Credit Facility was undrawn at both December 31, 2023 and 2022 .

Borrowings under the 2020 Credit Facility have variable interest rates based on LIBOR or SOFR (see Note 14).

As of December 31, 2023, the 2020 Term Loan Facility had an outstanding balance of $ 235.4 million and the Revolving Credit Facility was undrawn.

Borrowings under the 2020 Credit Facility had variable interest rates based on SOFR (see Note 14).

As a result of exposure to interest rate movements, during March 2020, the Company entered into an interest rate swap arrangement, which effectively converted its $ 400 million term loan with its variable interest rate based upon one-month LIBOR to an aggregate fixed rate of 0.904 %, plus a leverage-based margin as defined in the 2020 Credit Facility.

1 unchanged sentence

On August 16, 2022, the Company sold another $ 30 million of the notional amount of its interest rate swap back to its counterparty for $ 1.6 million, reducing the notional amount to $ 340 million, which approximated the current level of our term loan debt then outstanding.

The gain in Accumulated other comprehensive income related to the $ 60 million notional amount sold of $ 3.1 million is being released into earnings on a straight-line basis over the remaining term of the 2020 Credit Facility as a decrease to interest expense, the amortization of which totaled $ 0.9 million and $ 0.5 million for the years ended December 31, 2023 and 2022.

The gain in accumulated other comprehensive (loss) income related to the $ 60 million notional amount sold of $ 3.1 million was being released into earnings on a straight line basis over the remaining term of the 2020 Credit Facility as a decrease to interest expense until it was refinanced on June 21, 2024, the amortization of which totaled $ 0.4 million and $ 0.9 million for the years ended December 31, 2024 and 2023, respectively.

The remaining unamortized gain in accumulated other comprehensive (loss) income of approximately $ 0.5 million was written off to interest expense in conjunction with the refinancing of the 2020 Credit Facility on June 21, 2024.

See Note 14 for a description of the refinancing.

On March 24, 2023, the Company received $ 9.4 million, consisting of $ 0.4 million of interest and $ 9.0 million for the sale of $ 170 million of its $ 340 million notional amount interest rate swap back to its counterparty, reducing the notional amount to $ 170 million.

On March 27, 2023, the Company received $ 9.8 million, consisting of $ 0.4 million of interest and $ 9.4 million for the sale of the remaining $ 170 million of its interest rate swap back to its counterparty.

The portion of the gain in Accumulated other comprehensive income related to the term loan debt prepaid on the date of the final sale of our swap totaled

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

$ 7.3 million and was released into earnings immediately as Other expense, net.

The portion of the gain in Accumulated other comprehensive income related to our remaining term loan debt balance was $ 12.0 million and is being released into earnings on a straight-line basis over the remaining term of the 2020 Credit Facility as a decrease to interest expense, the amortization of which totaled $ 4.7 million for the year ended December 31, 2023.

The portion of the gain in accumulated other comprehensive (loss) income related to the term loan debt prepaid on the date of the final sale of our swap totaled $ 7.3 million and was released into earnings immediately as Other expense, net.

The portion of the gain in accumulated other comprehensive (loss) income related to our remaining term loan debt balance was $ 12.0 million and was being released into earnings on a straight line basis over the remaining term of the 2020 Credit Facility as a decrease to interest expense until it was refinanced on June 21, 2024, the amortization of which totaled $ 3.0 million and $ 4.7 million for the years ended December 31, 2024 and 2023, respectively.

The remaining

unamortized gain in accumulated other comprehensive (loss) income of $ 4.4 million was written off to interest expense in conjunction with the refinancing of the 2020 Credit Facility on June 21, 2024.

See Note 14 for a description of the refinancing.

The Company’s objectives in using interest rate derivatives have been to add stability to interest expense and to manage its exposure to interest rate movements.

2 unchanged sentences

The effective portion of changes in the fair value of designated derivatives that qualify as cash flow hedges is recorded in Accumulated other comprehensive income in the consolidated balance sheet and is subsequently reclassified into earnings in the period that the hedged forecasted transactions affect earnings.

During the years ended December 31, 2023 and 2022 , such a derivative was used to hedge the variable cash flows associated with the credit facilities under the 2020 Credit Facility, and the Company has accounted for this derivative as an effective hedge until the final portion of the swap was sold on March 27, 2023.

Any ineffective portion of the change in the fair value of the derivative was recognized directly in earnings.

Amounts reported in Accumulated other comprehensive income related to the Company's derivative are reclassified to interest expense as interest is accrued on the Company’s variable-rate debt.

The impact of the Company’s derivative financial instrument on its consolidated statement of comprehensive (loss) income for the years ended December 31, 2023 and 2022 was as follows, net of tax (in thousands):

During the year ended December 31, 2023, such a derivative was used to hedge the variable cash flows associated with the outstanding borrowings under the 2020 Credit Facility and the Company accounted for this derivative as an effective hedge until the final portion of the swap was sold on March 27, 2023.

Any ineffective portion of the change in the fair value of the derivative would have been recognized directly in earnings.

However, there was no hedge ineffectiveness recorded over the life of the swap.

Amounts reported in Accumulated other comprehensive income related to the Company’s derivative were reclassified to interest expense as interest was accrued on the Company’s variable-rate debt.

The impact of the Company’s derivative financial instrument on its consolidated statements of comprehensive loss for the years ended December 31, 2024 and 2023 was as follows, net of tax (in thousands):

Year ended December 31,

3 unchanged sentences

Unrealized gain (loss) on interest rate swap, net of reclassifications and amortization

The Company had no derivative assets or liabilities at December 31, 2023.

The fair values and locations in the consolidated balance sheet at December 31, 2022 of the Company's derivative assets (liabilities) designated as a hedging instrument were as follows (in thousands):

Balance sheet location December 31, 2022

Interest rate derivative - asset derivative Other current assets $ 13,212

Interest rate derivative - asset derivative Other assets 12,216

The Company classified its interest rate derivative aggregating $ 25.4 million at December 31, 2022 , as Level 2 fair value measurements within the fair value hierarchy (see Note 6).

The Company had no derivative assets or liabilities at December 31, 2024 or 2023.

(16) PREFERRED STOCK AND WARRANTS

On March 28, 2023, the Company issued 55,000 shares of Preferred Stock to investors in the Private Placement at a price of $ 970 per share, along with 4,858,090 Warrants with an exercise price of $ 3.77 per share.

The fair value option was elected for the Preferred Stock, as the Company considers fair value to best reflect its expected future economic value.

On June 25, 2024, the Company redeemed the Preferred Stock with a portion of the proceeds from the refinancing of the 2020 Credit Facility at a rate of 103 % for a total of approximately $ 63.5 million.

The Warrants remain outstanding and without modification.

See Note 14 for a description of the refinancing of the 2020 Credit Facility.

The Company accounted for the Preferred Stock until it was redeemed and continues to account for the Warrants as liability-classified instruments based on an assessment of their specific terms in accordance with ASC Topic 480, Distinguishing Liabilities from Equity .

The fair value option was elected for the Preferred Stock, as the Company considered fair value to best reflect its expected future economic value.

These liabilities are remeasured to fair value at each reporting date using the same valuation methodology applied upon issuance using current input assumptions.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The value of the Preferred Stock is calculated using the Black-Derman-Toy (BDT) stochastic yield lattice model to capture the optimal timing of repayment, increasing dividend rate and other features and the value of the Warrants is calculated using the Black-Scholes Pricing Model.

The value of the Preferred Stock was calculated quarterly through March 31, 2024 using the Black-Derman-Toy (BDT) stochastic yield lattice model to capture the optimal timing of repayment, increasing dividend rate and other features and the value of the Warrants is calculated using the Black-Scholes Pricing Model.

Changes in the fair value of the Preferred Stock and Warrants are reported as Other expense, net in the Company’s consolidated statements of operations.

The Company determined the fair value of the Preferred Stock and Warrants using Level 3 input.

The key assumptions input into the models utilized were as follows as of December 31, 2023:

Preferred Stock (BDT)

Face value per share $ 1,000

Interest payments per year 4

Dividend rate - year 1 (paid in-kind) 9.25 %

Dividend rate - year 2 (paid in-kind or in cash at the Company's choice) 9.75 %

Dividend rate - thereafter (paid in cash) 12.00 %

Yield volatility 25.0 %

Time to maturity (in years) 1.8

Warrants (Black-Scholes)

Stock price $ 2.90

Strike price $ 3.77

The Company determined the fair value of the Warrants using Level 3 input.

The key assumptions input into the models utilized were as follows as of December 31, 2024 and 2023:

Risk-free rate

Volatility 60.5 %

Dividend yield

Time to expiration (years)

The changes in the Company's Preferred Stock and Warrant liabilities for the year ended December 31, 2023 were as follows (in thousands):

Preferred stock liability

Balance at January 1, 2023 $ —

Issued 47,854

Cumulative dividends 3,935

Fair value change 1,548

Balance at December 31,2023 $ 53,337

Warrant liability

Balance at January 1, 2023 $ —

Fair value of Warrant per share

The changes in the Company’s Preferred Stock for the year ended December 31, 2024 and 2023 were as follows (in thousands):

Year ended December 31,

Balance at beginning of year

Payable in-kind dividends

Fair value adjustments

Call premium ( 3 %)

Redemption (June 25, 2024)

Balance at end of year

The changes in the Company’s Warrant liabilities for the years ended December 31, 2024 and 2023 were as follows (in thousands):

Year ended December 31,

Balance at beginning of year

Fair value change

Balance at December 31,2023 $ 5,295

The Preferred Stock is subordinate to Company indebtedness and senior to the Company’s common stock or other equity.

Holders of the Preferred Stock are entitled to cumulative dividends that accrue quarterly through the September 30, 2025 maturity date.

Dividends are payable in-kind during the first year at a rate of 9.25 %.

At the Company’s option, the dividends are payable in-kind or in cash during the second year at a rate of 9.75 %.

Dividends thereafter are payable in cash at a rate of

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Balance at end of year

The Preferred Stock, redeemed on June 25, 2024, was subordinate to the Company’s indebtedness and senior to the Company’s common stock or other equity.

Holders of the Preferred Stock were entitled to cumulative dividends that accrued quarterly.

Dividends were payable in-kind during the first year at a rate of 9.25 %.

At the Company’s option, the dividends were payable in-kind or in cash during the second year at a rate of 9.75 %.

Dividends thereafter were to be payable in cash at a rate of 12.00 %.

The proceeds from the Preferred Stock issuance were approximately $ 53.4 million, including $ 10.0 million from existing related party stockholders.

1 unchanged sentence

The net proceeds from the Private Placement were used for the repayment of debt.

The Preferred Stock is redeemable on or after the first and second anniversaries of the closing date at a rate of 103 % and 102 %, respectively.

The Preferred Stock was redeemable on or after the first and second anniversaries of the closing date at a rate of 103 % and 102 %, respectively.

The Warrants are immediately exercisable and upon an event such as a merger, consolidation, asset sale or similar change of control, the Warrants may be exercised and the holders may vote the underlying shares of common stock.

1 unchanged sentence

The registration requirement was completed on May 19, 2023.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

(17) REVENUE RECOGNITION

The Company’s typical performance obligations include the following:

Performance Obligation When Performance Obligation is Typically Satisfied When Payment is Typically Due

When Performance Obligation is Typically

Performance Obligation

When Payment is Typically Due

Software and Product Revenue

Software licenses (perpetual or term) Upon transfer of control;

typically, when made available for download (point in time) Generally, within 30 days of invoicing except for term licenses, which may be paid for over time

Software licenses (subscription) Upon activation of hosted site (over time) Generally, within 30 days of invoicing

Hardware When control of the hardware passes to the customer;

typically, upon delivery (point in time) Generally, within 30 days of invoicing

Software upgrades Upon transfer of control;

typically, when made available for download (point in time) Generally, within 30 days of invoicing

Software licenses (perpetual or term)

For perpetual licenses, typically when made available for download (point in time);

for term-based licenses, at the beginning of the specified term (point in time)

Generally, within 30-60 days of invoicing, except for term licenses which may be paid for over time

Software licenses (subscription)

Upon activation of hosted site (over time)

Generally, within 30-60 days of invoicing

When control of the hardware passes to the customer;

typically, upon delivery (point in time)

Generally, within 30-60 days of invoicing

Software upgrades

Upon transfer of control;

typically, when made available for download (point in time)

Generally, within 30-60 days of invoicing

Customer Support Revenue

Customer support Ratably over the course of the support contract (over time) Generally, within 30 days of invoicing

Customer support

Ratably over the course of the support contract (over time)

Generally, within 30-60 days of invoicing

Professional Services

Other professional services (excluding training services) As work is performed (over time) Generally, within 30 days of invoicing (upon completion of services)

Training When the class is taught (point in time) Generally, within 30 days of services being performed

Other professional services (excluding training services)

As work is performed (over time), typically on the input method based on hours incurred

Generally, within 30-60 days of invoicing (upon completion of services)

As the training is delivered (over time), typically one to five days

Generally, within 30-60 days of services being performed

Significant Judgments

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Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Judgment is required to determine the standalone selling price for each distinct performance obligation.

The Company typically has more than one standalone selling price ("SSP") for individual products and services due to the stratification of those products and services by customers and circumstances.

Judgment is required to determine the SSP for each distinct performance obligation.

The Company typically has more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances.

In these instances, the Company may use information such as the size of the customer and geographic region in determining the SSP.

6 unchanged sentences

The Company’s total revenue for the years ended December 31, 2024, 2023 and 2022 was disaggregated geographically as follows:

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Year ended December 31, 2023 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

(professional

Year ended December 31, 2024

(maintenance)

Total revenue

United States

Europe, Middle East and Africa

Asia Pacific 115,923 39,891 11,269 167,083

Other 15,344 30,546 7,050 52,940

$ 445,150 $ 279,652 $ 101,537 $ 826,339

Year ended December 31, 2022 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

(professional

Year ended December 31, 2023

(maintenance)

Total revenue

United States

Europe, Middle East and Africa

Asia Pacific 95,828 41,677 13,594 151,099

Other 24,140 31,815 7,262 63,217

$ 442,680 $ 282,095 $ 94,985 $ 819,760

Year ended December 31, 2021 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

(professional

Year ended December 31, 2022

(maintenance)

Total revenue

United States

Europe, Middle East and Africa

Asia Pacific 92,803 41,945 18,183 152,931

Other 25,978 32,218 9,766 67,962

$ 453,042 $ 286,321 $ 105,594 $ 844,957

The Company’s product revenue from its direct sales program and from indirect sales through its channel partner program for the years ended December 31, 2024, 2023 and 2022 was as follows (in thousands):

Year ended December 31,

2023 2022 2021

Indirect sales through channel program $ 157,495 $ 131,998 $ 117,065

Direct sales 287,655 310,682 335,977

$ 445,150 $ 442,680 $ 453,042

Indirect sales through channel partner program

The Company’s product revenue from sales to enterprise customers and from sales to service provider customers for the years ended December 31, 2024, 2023 and 2022 was as follows (in thousands):

Year ended December 31,

2023 2022 2021

Sales to enterprise customers

Sales to service provider customers

$ 445,150 $ 442,680 $ 453,042

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The Company’s product revenue and service revenue components by segment for the years ended December 31, 2024, 2023 and 2022 was as follows (in thousands):

Year ended December 31,

2023 2022 2021

Product revenue:

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Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones.

Completion of services and billing may occur subsequent to revenue recognition, resulting in contract assets.

Billing may occur subsequent to revenue recognition, resulting in contract assets.

The Company may receive advances or deposits from its customers before revenue is recognized, resulting in contract liabilities which are classified as deferred revenue.

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The changes in the Company’s accounts receivable, unbilled receivables and deferred revenue balances for the years ended December 31, 2024 and 2023 were as follows (in thousands):

Accounts receivable Unbilled accounts receivable Deferred revenue (current) Deferred revenue (long-term)

Balance at January 1, 2024

1 unchanged sentence

Balance at December 31, 2024

Accounts receivable Unbilled accounts receivable Deferred revenue (current) Deferred revenue (long-term)

Balance at January 1, 2023

1 unchanged sentence

Balance at December 31, 2023

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The Company recognized approximately $ 110 million of revenue in the year ended December 31, 2024 that was recorded as deferred revenue at December 31, 2023 and approximately $ 108 million of revenue in the year ended December 31, 2023 that was recorded as deferred revenue at December 31, 2022.

Of the Company’s deferred revenue reported as long-term in its consolidated balance sheet at December 31, 2024, the Company expects that approximately $ 10 million will be recognized as revenue in 2026 , approximately $ 5 million will be recognized as revenue in 2027 and approximately $ 6 million will be recognized as revenue in 2028 and beyond.

The Company applies the optional exemption of not disclosing the transaction price allocated to the remaining performance obligation for its contracts with an original duration of less than one year.

In 2024, the Company entered into a contract with an existing customer that has revenue allocated to remaining performance obligations, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods of $ 285 million as of December 31, 2024.

The Company expects to recognize the remaining revenue over the next three years .

All freight-related customer invoicing is recorded as revenue, while the shipping and handling costs that occur after control of the promised goods or services transfer to the customer are reported as fulfillment costs, a component of Cost of revenue - product in the Company’s consolidated statements of operations.

4 unchanged sentences

(18) OPERATING SEGMENT INFORMATION

The Company has two reportable segments, which are intended to align with the manner in which the business is managed:

Cloud and Edge, and IP Optical Networks.

The Company has two operating and reportable segments, Cloud and Edge and IP Optical Networks, that align with the way the business is managed.

The Company’s CODM, its President and Chief Executive Officer, makes key operating decisions and assesses performance based upon these reportable segments.

The Cloud and Edge segment provides secure and reliable software and hardware products, solutions and services for enabling Voice over Internet Protocol ("VoIP") communications, Voice over Long-Term Evolution ("VoLTE") and Voice Over 5G ("VoNR") communications, and Unified Communications and Collaboration ("UC&C") within service provider and enterprise networks and from the cloud.

The Cloud and Edge products are increasingly software-centric and cloud-native for deployment on private, public or hybrid cloud infrastructures, in data centers, on enterprise premises and within service provider networks.

Ribbon's Cloud and Edge product portfolio consists of our Session Border Controller ("SBC") products and our Network Transformation products.

The IP Optical Networks segment provides high-performance, secure solutions for IP networking and optical transport, supporting wireless networks including 5G, metro and edge aggregation, core networking, data center interconnect, legacy network transformation and transport solutions for wholesale carriers.

Ribbon's Cloud and Edge product portfolio consists primarily of its Session Border Controller ("SBC") products and its Network Transformation products.

The IP Optical Networks segment provides high-performance, secure solutions for IP networking and optical

transport, supporting wireless networks including 5G, metro and edge aggregation, core networking, data center interconnect, legacy transformation and transport solutions for wholesale carriers.

This portfolio is offered to service provider, enterprise and industry verticals with critical transport network infrastructures including utilities, government, defense, transportation, and education and research.

The Company has not provided segment asset information as such information is not provided to the CODM and accordingly, asset information is not used in assessing segment performance.

Segment revenue and expense included in the tables below represent direct revenue and expense attributable to each segment.

The Company does not provide segment asset information as such information is not provided to the CODM and accordingly, asset information is not used in assessing segment performance.

Segment revenue and expenses included in the tables below represent direct revenue and expense attributable to each segment.

Please see Note 10 for information regarding the allocation of goodwill between segments.

The CODM utilizes revenue and adjusted gross profit to measure and assess each segment's performance.

The Company calculates adjusted gross profit by excluding from cost of revenue:

amortization of acquired technology, stock-based compensation, acquisition-related inventory adjustments and acquisition-related facilities adjustments, and may also exclude other items in future periods that the Company believes are not part of the Company's core business.

Adjusted gross profit is not a financial measure determined in accordance with U.S.

GAAP, may not be comparable to similarly titled measures used by other companies, and should not be considered a substitute for gross profit or other results reported in accordance with U.S.

See below for a reconciliation of adjusted gross profit to gross profit which is the most directly comparable U.S.

GAAP measure.

The tables below provide revenue, adjusted gross profit and depreciation expense by reportable segment for the years ended December 31, 2023, 2022 and 2021 (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The CODM utilizes adjusted gross profit to evaluate each segment's performance.

The Company calculates adjusted gross profit by excluding from cost of revenue both amortization of acquired technology and stock-based compensation and may also exclude other items in future periods that the Company believes are not part of the Company's core business.

The Company uses adjusted gross profit to develop its annual budget and quarterly forecasts.

The CODM analyzes adjusted gross profit compared to the annual budget and quarterly forecasts to allocate resources.

Ribbon’s calculation of adjusted gross profit may not be comparable to similarly titled measures used by other companies.

See below for a reconciliation of segment adjusted gross profit to gross profit and loss before income taxes.

The tables below present significant segment expenses regularly reviewed by the CODM for the years ended December 31, 2024, 2023 and 2022 (in thousands):

Year ended December 31,

Revenue 2023 2022 2021

Segment revenue:

1 unchanged sentence

IP Optical Networks

Total revenue $ 826,339 $ 819,760 $ 844,957

Year ended December 31,

Adjusted gross profit 2023 2022 2021

Segment cost of revenue:

Cloud and Edge

IP Optical Networks

Cost of revenue

Year ended December 31,

Segment adjusted gross profit:

2 unchanged sentences

Total segment adjusted gross profit

Reconciliation of segment adjusted gross profit to gross profit and loss before income taxes

Stock-based compensation expense

Amortization of acquired technology

Gross profit $ 408,083 $ 400,936 $ 444,660

Research and development expense

Sales and marketing expense

General and administrative expense

Amortization of acquired intangible assets

Acquisition-, disposal- and integration-related expense

Restructuring and related expense

Interest expense, net

Other expense, net

Loss before income taxes

Year ended December 31,

Depreciation expense 2023 2022 2021

Segment depreciation expense:

1 unchanged sentence

IP Optical Networks

Total depreciation expense $ 14,105 $ 15,295 $ 16,962

Depreciation expense

(19) MAJOR CUSTOMERS

1 unchanged sentence

Year ended December 31,

2023 2022 2021

Verizon Communications Inc.

11 % 15 % 16 %

At December 31, 2024 and 2023, no customer accounted for 10% or more of the Company’s accounts receivable balance.

6 unchanged sentences

In connection with his appointment as President and Chief Executive Officer of Ribbon on March 16, 2020, the Company awarded Bruce McClelland sign-on equity grants, comprised of RSUs and a PSU grant with both market and service conditions.

The Company estimates as of December 31, 2023 that the market conditions surrounding the PSUs granted will not be met by

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

the expiration date of September 1, 2024.

The market conditions surrounding the PSUs granted were not met by the expiration date of September 1, 2024 and therefore, the associated shares have been cancelled.

Performance-Based Stock Grants

8 unchanged sentences

The activity related to the Company’s RSUs for the year ended December 31, 2024 was as follows:

Shares Weighted

Unvested balance at January 1, 2024

Granted 4,991,829 $ 2.88

Vested ( 4,840,738 ) $ 3.99

Forfeited ( 709,470 ) $ 3.97

( 4,653,037 )

Unvested balance at December 31, 2024

2 unchanged sentences

The activity related to the Company’s PSUs for the year ended December 31, 2024 was as follows:

Shares Weighted

Unvested balance at January 1, 2024

Granted 1,800,202 $ 3.26

Vested ( 381,071 ) $ 6.91

Forfeited ( 1,774,703 ) $ 4.05

( 4,277,790 )

Unvested balance at December 31, 2024

2 unchanged sentences

The consolidated statements of operations included stock-based compensation for the years ended December 31, 2024, 2023 and 2022 as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Year ended December 31,

2023 2022 2021

Product cost of revenue

3 unchanged sentences

General and administrative

$ 21,806 $ 18,707 $ 19,418

At December 31, 2024, there was $ 14.1 million, net of expected forfeitures, of unrecognized stock-based compensation expense related to unvested RSUs and PSUs.

This expense is expected to be recognized over a weighted average period of approximately 1.2 years.

The Company issues authorized and unissued shares under its equity plans and at December 31, 2023, there were 3,959,285 total shares of common stock reserved for that purpose with 105,495 of those shares authorized only for issuance of shares upon exercise of stock options.

The Company issues authorized and unissued shares under its equity plans and at December 31, 2024, there were approximately 2.0 million total shares of common stock reserved for that purpose with 0.1 million of those shares authorized only for issuance of shares upon exercise of stock options.

The Company has operating leases for corporate offices and research and development facilities and has historically had finance leases for certain equipment.

19 unchanged sentences

Certain leased facilities are being partially or fully vacated as part of the 2022 Restructuring Plan and for some of those facilities, the Company has no plans to enter into sublease agreements.

Accordingly, the Company accelerated the amortization of those lease assets through the planned cease-use date of each facility, resulting in additional amortization expense of

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

$ 1.0 million and $ 1.6 million in the years ended December 31, 2023 and 2022, respectively.

No variable lease costs were accrued in the year ended December 31, 2023 for future estimated variable expenses related to assets partially or fully vacated with no intent or ability to sublease.

Accordingly, the Company accelerated the amortization of those lease assets through the planned cease-use date of each facility, resulting in additional amortization expense of $ 1.0 million and $ 1.6 million in the years ended December 31, 2023 and 2022, respectively.

No additional amortization was recorded in the year ended December 31, 2024.

No variable lease costs were accrued in the years ended December 31, 2024 or 2023 for future estimated variable expenses related to assets partially or fully vacated with no intent or ability to sublease.

Variable lease costs for the year ended December 31, 2022 included accruals of $ 1.0 million for all estimated future variable lease costs related to those facilities.

The Company did not record any accelerated amortization or estimated future variable lease costs in the year ended December 31, 2023 or 2022 related to the 2020 Restructuring Plan.

The Company accelerated amortization totaling $ 0.8 million in the year ended December 31, 2021 for certain leased facilities that were vacated in 2021 as part of the consolidation of certain sites following the ECI Acquisition.

The Company did not record estimated future variable lease costs in the year ended December 31, 2021 related to the 2020 Restructuring Plan.

In connection with the 2019 Restructuring Initiative, certain leased facilities were partially or fully vacated as the Company consolidated its facilities, with no plans to enter into sublease agreements for certain of those facilities.

The Company did not accelerate amortization or record liabilities for future estimated variable lease costs in the years ended December 31, 2023 or 2022.

In the year ended December 31, 2021, the Company accelerated amortization of $ 3.4 million for certain leased facilities that were vacated in those years and recorded liabilities aggregating $ 1.4 million for all future estimated variable lease costs related to those facilities.

All incremental accelerated amortization and accrual for all estimated future variable lease costs are included in Restructuring and related expense in the Company’s consolidated statements of operations for the years ended December 31, 2024, 2023 and 2022.

1 unchanged sentence

The Company may incur additional future expense if it is unable to sublease other locations included in the Facilities Initiative.

In addition, in the year ended December 31, 2021, this accelerated amortization and provision for future estimated variable lease costs was partially offset by the recognition of $ 2.1 million of income in conjunction with lease amendments that modified the Company's obligation and rentable square footage at a site in North Carolina.

The Company leases its corporate offices and other facilities under operating leases, which expire at various times through 2033.

1 unchanged sentence

Classification

Operating lease assets Operating lease right-of-use assets $ 39,783 $ 44,888

Current Operating Operating lease liabilities $ 15,739 $ 15,416

Non-Current Operating Operating lease liabilities, net of current 38,711 46,183

Total lease liabilities $ 54,450 $ 61,599

Operating lease assets

Operating lease right-of-use assets

Current Operating

Operating lease liabilities

Non-Current Operating

Operating lease liabilities, net of current

Total Operating lease liabilities

The components of lease expense for the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Year ended December 31,

2023 2022 2021

Operating lease cost*

6 unchanged sentences

Net lease cost

* Operating lease costs for the years ended December 31, 2023, 2022 and 2021 include $ 1.0 million, $ 1.6 million, and $ 3.4 million, respectively, of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

Operating lease cost for the year ended December 31, 2021 also includes $ 2.1 million of income related to a lease modification for one of these assets.

** Variable lease costs for the years ended December 31, 2022 and 2021 included accruals of $ 1.0 million and $ 1.4 million, respectively, for all future estimated variable expenses related to certain assets partially or fully vacated with no intent or ability to sublease.

No such variable costs were accrued in the year ended December 31, 2023.

No accelerated amortization was recorded in the year ended December 31, 2024.

Operating lease costs for the years ended December 31, 2023 and 2022 include $ 1.0 million, and $ 1.6 million, respectively, of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

No variable costs were accrued in the years ended December 31, 2024 or 2023.Variable lease costs for the year ended December 31, 2022 included accruals of $ 1.0 million for all future estimated variable expenses related to certain assets partially or fully vacated with no intent or ability to sublease.

Cash flow information related to the Company’s leases for the years ended December 31, 2024, 2023 and 2022 was as follows (in thousands):

Year ended December 31,

2023 2022 2021

Cash paid for amounts included in the measurement of lease liabilities:

8 unchanged sentences

Future minimum fixed lease payments under noncancelable leases at December 31, 2024 were as follows (in thousands):

2024 $ 18,542

2030 and beyond

Total lease payments

interest ( 10,329 )

Present value of lease liabilities

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

(22) EMPLOYEE DEFINED CONTRIBUTION PLANS

10 unchanged sentences

A reconciliation of the changes in the benefit obligations and fair value of the assets of the defined benefit plans for the years ended December 31, 2024 and 2023, the funded status of the plans, and the amounts recognized in the consolidated balance sheets as of December 31, 2024 and 2023 were as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Year ended December 31,

1 unchanged sentence

Projected benefit obligation, beginning of year

Service cost 1,193 1,355

Interest cost

Participant contributions

Plan amendments — —

Net actuarial (gain) loss on obligation ( 402 ) ( 5,604 )

Settlement ( 1,773 ) ( 1,063 )

Benefits and expenses paid ( 444 ) ( 932 )

Net actuarial loss (gain) on obligation

Benefits paid

Projected benefit obligation, end of year

10 unchanged sentences

Net actuarial (gain) loss

$ ( 4,261 ) $ ( 5,185 )

Amounts recognized in the consolidated balance sheets consist of:

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Net amount recognized

The increase in the underfunded status of the Company's defined benefit plans at December 31, 2023 compared to December 31, 2022 was primarily the result of significant lump sum payments in Israel of $ 1.8 million.

The increase in the underfunded status of the Company’s defined benefit plans at December 31, 2024 compared to December 31, 2023 was primarily due to normal benefit accruals combined with significant lump sum payments in Israel of $ 0.9 million.

Plans with underfunded or non-funded accumulated benefit obligations at December 31, 2024 and 2023 were as follows (in thousands):

6 unchanged sentences

Aggregate fair value of plan assets

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Net periodic benefit costs for the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands):

Year ended December 31,

2023 2022 2021

Service cost $ 1,193 $ 1,355 $ 1,321

Interest cost

Expected return on plan assets

Plan asset expenses — — —

Settlement charge (credit) ( 417 ) 808 —

Settlement (credit) charge

Amortization of prior service cost

3 unchanged sentences

Years ending December 31,

2029 to 2033 10,733

The changes in plan assets and benefit obligations recognized in other comprehensive income (loss) before tax for the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands):

Year ended December 31,

2023 2022 2021

Net loss (gain) $ 22 $ ( 4,666 ) $ 4,201

Prior service (credit) cost — — ( 3,801 )

Net (gain) loss

Amortization of net gain (loss)

8 unchanged sentences

Rate of compensation increase

Interest crediting rate

The principal weighted average assumptions used to determine net period benefit cost for the years ended December 31, 2024, 2023 and 2022 were as follows:

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Year ended December 31,

2023 2022 2021

Discount rate

1 unchanged sentence

Rate of compensation increase

Interest crediting rate

Assumed discount rates are used in the measurement of the projected and accumulated benefit obligations, as well as the service and interest cost components of net periodic pension cost.

3 unchanged sentences

The fair value of these contracts is derived from the insurance companies’ assessment of the minimum value of the benefits provided by the insurance contracts.

The methodology used to value these plan assets has historically assumed that the value of the plan assets equals the guaranteed insured benefits.

Due to the plan amendment in 2020 that changed the benefit structure of the Netherlands plan, the Company no longer has any obligation related to this plan beyond the payment of insurance premiums.

Therefore, there is no projected benefit obligation and no plan assets in the Netherlands.

The methodology used to value the Switzerland plan assets assumes that the value of the plan assets equals the guaranteed insured benefits.

For consistency, the same discount rate used in the valuation of the benefit obligations is used to place a value on the plan assets.

1 unchanged sentence

The fair value of the plan assets in Switzerland was $ 2.8 million at December 31, 2024 and $ 2.6 million at December 31, 2023.

Due to the plan amendment in 2020 that changed the benefit structure of the Netherlands plan, the Company no longer has any obligation related to this plan beyond the payment of insurance premiums.

Therefore, there is no projected benefit obligation and no plan assets in the Netherlands.

The Company classifies the fair value of its plan assets as Level 2 in the fair value hierarchy as discussed in Note 6.

During the years ended December 31, 2023 and 2022, employees in Switzerland made contributions aggregating $ 39,000 each year.

During the years ended December 31, 2024 and 2023, employees in Switzerland made contributions aggregating $ 29,000 and $ 39,000 each year, respectively.

Employee contributions to this plan are based on a fixed 5 % of the relevant pensionable earnings.

The Company funds this plan by contributing at least the minimum amount required by applicable regulations and as recommended by an independent actuary.

During the years ended December 31, 2023, 2022 and 2021, the Company contributed $ 1.0 million, $ 2.0 million and $ 1.0 million, respectively, to all of its pension plans.

The Company expects to contribute $ 1.5 million to all of its defined benefit plans in 2024.

During the years ended December 31, 2024, 2023 and 2022, the Company contributed $ 0.7 million, $ 1.0 million and $ 2.0 million, respectively, in total to its defined benefit plans.

The Company expects to contribute $ 1.5 million in total to its defined benefit plans in 2025.

(24) INCOME TAXES

1 unchanged sentence

Year ended December 31,

2023 2022 2021

Loss before income taxes:

Income (loss) before income taxes:

United States

Foreign ( 50,010 ) ( 27,815 ) ( 178,158 )

$ ( 55,373 ) $ ( 112,599 ) $ ( 208,143 )

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The provision (benefit) for income taxes from continuing operations consisted of the following (in thousands):

Year ended December 31,

2023 2022 2021

Provision (benefit) for income taxes:

Federal $ 9,927 $ ( 3,582 ) $ 5,033

State 2,790 2,573 1,836

Foreign 7,312 4,744 7,661

Total current

Federal ( 10,417 ) ( 10,333 ) ( 38,027 )

State ( 1,059 ) ( 4,045 ) 97

Foreign 2,280 ( 3,873 ) ( 7,558 )

Total deferred

Total $ 10,833 $ ( 14,516 ) $ ( 30,958 )

A reconciliation of the Company’s effective tax rate for continuing operations to the U.S.

1 unchanged sentence

Year ended December 31,

2023 2022 2021

statutory income tax rate

2 unchanged sentences

Stock-based compensation

Tax credits 7.7 2.2 1.6

Uncertain tax positions

Valuation allowance

Non-deductible goodwill impairment — — ( 11.7 )

Other permanent adjustments

Permanent foreign exchange adjustments

Other, net ( 2.3 ) ( 1.8 ) ( 0.1 )

Effective income tax rate

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The following is a summary of the significant components of deferred income tax assets and liabilities (in thousands):

5 unchanged sentences

Accrued expenses

Inventory 4,108 2,820

Stock-based compensation

Fixed assets 159 2,506

Lease liabilities

Other temporary differences

617,776 616,614

Valuation allowance

2 unchanged sentences

Operating lease right-of-use assets

Interest rate swap — ( 6,168 )

Unremitted foreign income

4 unchanged sentences

Deferred income taxes - net noncurrent liabilities

$ 64,145 $ 49,899

At December 31, 2024, the Company had U.S.

17 unchanged sentences

Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings and outside basis differences was not practicable.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Under the provisions of the Internal Revenue Code, the net operating losses and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service.

14 unchanged sentences

Year ended December 31,

2023 2022 2021

Unrecognized tax benefits at January 1

18 unchanged sentences

The Company recognized revenue from its largest stockholder of $ 11.3 million, $ 12.8 million and $ 6.6 million in the years ended December 31, 2024, 2023 and 2022, respectively.

Additionally, as discussed in Note 16, certain related party

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

stockholders participated in the Private Placement.

The Company’s accounts receivable from its largest shareholder totaled $ 5.5 million and $ 3.9 million as of December 31, 2024 and 2023, respectively.

Additionally, as discussed in Note 16, certain related party stockholders participated in the Private Placement.

(26) COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

The royalties for grants prior to 2017 were calculated at the rates of 1.3 % to 5.0 % of the aggregated proceeds from the sale of such products developed at certain of the Company’s R&D centers, up to an amount not exceeding 100 % of such grants plus interest at LIBOR.

Effective for grants approved in 2017 and thereafter, interest was calculated at the higher of LIBOR plus 1.5 % to 2.75 %.

At December 31, 2023, the Company's maximum possible future royalties commitment, including $ 1.3 million of unpaid royalties accrued, was $ 20.4 million, including interest of $ 0.9 million, based on estimates of future product sales, grants received from the IIA and not yet repaid, and management's estimation of products still to be sold.

Effective for grants approved in 2017 and effective through 2023, interest was calculated at the higher of LIBOR plus 1.5 % to 2.75 %.

For grants approved in 2024 and thereafter, interest is calculated based on SOFR.

At December 31, 2024, the Company had $ 1.5 million of unpaid royalties accrued.

The Company’s maximum possible future royalties commitment at December 31, 2024 of $ 14.0 million, including interest of $ 0.8 million, was based upon estimates of future sales of products and services and the grants received from the IIA not yet repaid.

The Company is often a party to disputes and legal proceedings that it considers routine and incidental to its business, including those described below.

The Company believes that it has meritorious defenses to the allegations made in the pending cases and intends to vigorously defend these lawsuits;

however, the Company is unable currently to forecast the ultimate outcome of these or similar matters.

however, the Company is currently unable to forecast the ultimate outcome of these or similar matters.

Since it is difficult to predict the outcome of legal proceedings, it is possible that the ultimate outcomes could materially and adversely affect the Company’s business, financial position, results of operations or cash flows.

5 unchanged sentences

et al., which was dismissed with prejudice by an order dated June 6, 2017, the Miller Complaint claims that the Defendants made misleading forward-looking statements concerning Sonus’ expected fiscal first quarter of 2015 financial performance, which statements were also the subject of an August 7, 2018 Securities and Exchange Commission Cease and Desist Order, whose findings the Company neither admitted nor denied.

The Miller plaintiffs are seeking monetary damages.

The Miller plaintiffs were seeking monetary damages.

After the Miller Complaint was filed, several parties filed and briefed motions seeking to be selected by the Massachusetts District Court to serve as a Lead Plaintiff in the action.

1 unchanged sentence

On August 30, 2019, the Defendants filed a motion to dismiss the Miller Complaint and, on October 4, 2019, the Lead Plaintiffs filed an opposition to the motion to dismiss.

There was an oral argument on the motion to dismiss on February 12, 2020, and on October 20, 2022 the court denied the motion to dismiss.

In June 2023, the Defendants agreed to a settlement in principle with the named plaintiffs, and the settlement was preliminarily approved by the court on October 18, 2023.

The proposed settlement remains subject to final approval by the affected stockholders and the court.

The court has set April 24, 2024 as the hearing date for final approval of the proposed settlement.

If approved, the proposed settlement would provide a release of all claims asserted in the litigation to all Defendants, who continue to deny liability.

The proposed $ 4.5 million settlement amount was deposited into escrow in the fourth quarter of 2023 by the provider of the Company's Directors and Officers liability insurance policy.

In June 2023, the Defendants agreed to a settlement in principle with the named plaintiffs, and final approval of the settlement was provided by the court on April 24, 2024.

The settlement provided a release of all claims asserted in the litigation to all Defendants, who continue to deny liability.

$ 4.5 million settlement amount was funded by the provider of the Company’s Directors and Officers liability insurance policy.

Charter Complaint.

1 unchanged sentence

and Ribbon Communications Operating Company, Inc.) alleging breach of contract with respect to indemnification obligations purportedly owed to Charter in connection with Charter’s legal dispute with Sprint Communications Company L.P., which was settled by Charter in March 2022.

One complaint was filed in the

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Supreme Court of the State of New York, in New York County;

One complaint was filed in the Supreme Court of the State of New York, in New York County;

the second complaint was filed by Charter as well as co-plaintiffs Charter Communications Holding Company, LLC and Bright House Networks, LLC, in the Superior Court of the State of Delaware in and for New Castle County.

1 unchanged sentence

The Company filed its answer to the first complaint file in New York on December 7, 2022 and to the second complaint filed in Delaware on January 9, 2023.

Discovery is on-going and the court in the Delaware complaint has set a preliminary trial date of January 2025.

Discovery is on-going and the court in the Delaware complaint has set a trial date of June 2025.

No trial date has been set for the case in New York.

WideOpenWest Complaint.

4 unchanged sentences

The Company filed its answer to the complaint on October 5, 2023.

Discovery is on-going and the court has set a preliminary trial date of December 2024.

(27) QUARTERLY RESULTS (UNAUDITED)

The following tables present the Company's quarterly operating results for the years ended December 31, 2023 and 2022.

The information for each of these quarters is unaudited and has been prepared on the same basis as the audited consolidated financial statements.

In the opinion of management, all necessary adjustments, consisting only of normal recurring adjustments, have been included to present fairly the unaudited consolidated quarterly results when read in conjunction with the Company's audited consolidated financial statements and related notes.

Quarter Second

Quarter Third

Quarter Fourth

(In thousands, except per share data)

Year ended December 31, 2023

Revenue $ 186,159 $ 210,618 $ 203,161 $ 226,401

Cost of revenue 104,757 109,148 99,658 104,693

Gross profit $ 81,402 $ 101,470 $ 103,503 $ 121,708

(Loss) income from operations $ ( 35,189 ) $ ( 6,622 ) $ 856 $ 16,670

Net (loss) income $ ( 38,305 ) $ ( 21,479 ) $ ( 13,501 ) $ 7,079

(Loss) earnings per share (1):

Basic $ ( 0.23 ) $ ( 0.13 ) $ ( 0.08 ) $ 0.04

Diluted $ ( 0.23 ) $ ( 0.13 ) $ ( 0.08 ) $ 0.04

Shares used in computing (loss) earnings per share:

Basic 168,541 170,103 171,190 171,755

Diluted 168,541 170,103 171,190 172,990

Quarter Second

Quarter Third

Quarter Fourth

(In thousands, except per share data)

Year ended December 31, 2022

Revenue $ 173,198 $ 205,796 $ 207,127 $ 233,639

Cost of revenue 95,143 101,246 102,809 119,626

Gross profit $ 78,055 $ 104,550 $ 104,318 $ 114,013

(Loss) income from operations $ ( 39,054 ) $ ( 7,239 ) $ ( 3,296 ) $ 1,265

Net (loss) income $ ( 69,975 ) $ ( 30,180 ) $ ( 18,416 ) $ 20,488

(Loss) earnings per share (1):

Basic $ ( 0.47 ) $ ( 0.20 ) $ ( 0.12 ) $ 0.12

Diluted $ ( 0.47 ) $ ( 0.20 ) $ ( 0.12 ) $ 0.12

Shares used in computing (loss) earnings per share:

Basic 149,167 150,190 158,921 168,163

Diluted 149,167 150,190 158,921 172,213

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

__________________________________

(1) (Loss) earnings per share is calculated independently for each of the quarters presented;

accordingly, the sum of the quarterly (loss) earnings per share amounts may not equal the total calculated for the year.

On October 14, 2024, the Company and WOW agreed to settle this matter.

In connection with the settlement, the Company will pay WOW a total of $ 5.0 million, with $ 2.0 million paid at the time of settlement and the remaining $ 3.0 million paid over the next 18-months in equal quarterly installments.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data