Ribbon Communications Inc. 10-K

Item 1. Business Company Overview We are a leading global provider of communications technology to service providers and enterprises. We provide a broad range of software and high-performance hardware products, solutions and services that enable the secure delivery of data and voice communications for residential consumers and for small, medium, and large enterprises and industry verticals such as finance, education, government, utilities, and transportation. Our mission is to create a recognized global technology leader providing cloud-centric solutions that enable the secure exchange of information, with unparalleled scale, performance, and elasticity. We are headquartered in Plano, Texas, and have a global presence, with research and development, sales and support locations in over thirty-five countries around the world. Company History The Ribbon name was created by the merger of Sonus Networks, Inc. and GENBAND US LLC ("GENBAND") in October 2017, with both companies specializing in secure high-performance Voice Over Internet Protocol ("VoIP") technology and solutions. Prior to that, GENBAND had acquired assets of Nortel’s Carrier division in 2010, which include a world-class engineering and sales team, a broad deployment base of products and technology, and a recognized industry reputation and pedigree with customers around the world. Since our formation in 2017, we have completed several acquisitions to strengthen and expand our portfolio of product offerings to service providers and enterprises. Recent notable acquisitions include: • Edgewater Networks Inc. (August 2018): Expanded our portfolio of security and signaling solutions for the enterprise network edge. • Anova Data, Inc. (February 2019): Expanded our portfolio with additional network optimization, security, and data monetization applications, enabled by an advanced Big Data Analytics and Machine Learning platform. On March 3, 2020, we completed the transformative acquisition of ECI Telecom Group Ltd. ("ECI"), based in Israel (the "ECI Acquisition"). The ECI Acquisition further expanded our focus and strategy to include optical transport and Internet Protocol ("IP") networking, switching, and routing products and solutions. The ECI Acquisition helped us create an industry-leading communications software and networking company with a comprehensive portfolio of advanced voice, security, data and IP optical networking and transport solutions. Industry Background Today’s Communications Service Providers ("CSPs") and enterprises are investing in their networks to compete in an ever-changing technology and customer experience landscape driven largely by cloud computing, mobile workforces requiring hyper-connectivity, new high-performance applications and use cases, and an insatiable demand for bandwidth by end-customers and the applications they use. As a result, service providers and enterprises are adding key enabling technologies to their networks for increased flexibility, programmability, scalability, reliability, and to enable new applications and services with an expedited time to market. These investments provide a competitive advantage and bring value-added services to increase network efficiency, increase customer satisfaction and produce new revenue streams. Within these broad industry themes, investment in our products and services is driven by several key industry trends. Increased Adoption of Cloud Communications and Collaboration The shift to cloud-based communications began several years ago driven largely by the advantages of running applications in a virtual cloud environment and reducing dependency on on-premise computing technologies. The Coronavirus Disease 2019 ("COVID-19") pandemic has accelerated this trend significantly, driven by the need for more remote working and commerce for many businesses and industries. As a result, businesses and consumers have rapidly shifted from brick-and-mortar facilities and travel, to work-from-home and connect-from-home using cloud communications and collaboration platforms such as Microsoft Teams, Zoom Phone and others, and require these communications platforms to be highly secure and scalable. 4 Table of Contents Evolution of Communications Service Provider Networks CSPs of all types continue to face challenges to their businesses because of the significant technological evolution, increasing competition, disruption by Over-the-Top ("OTT") providers (those providing video entertainment over the Internet rather than through traditional cable, telco and satellite networks), and shifts in customer expectations. They also need to drive new revenues with more digital, efficient, automated, secure, and reliable networks driven largely by software, automation, cloud networking, and other technologies such as analytics and machine-learning. All these factors are causing service providers to re-think and evolve, or even over-haul, the way networks are designed, architected, managed, and optimized to deliver services to their customers with disruptive economics. Increasingly, network operators are also pursuing disaggregated solutions, where they have the flexibility to assemble networks based on transport and control subsystems from different vendors. The fourth and fifth generation of broadband cellular technology ("4G" and "5G", respectively), and the corresponding promise of new revenue-generating applications and services for consumers and businesses, are key drivers of investment in the evolution of underlying mobile and fixed network infrastructures, and disruptions providing opportunity for new suppliers to be selected. Service providers in some global regions, as mandated by governments or voluntarily, are also replacing certain incumbent vendor communications equipment and technology in their networks because of concerns for security. This presents a significant growth and market share opportunity. Insatiable Demand for Hyper-Connectivity and Bandwidth Driven by New Services, Applications, and the Cloud Our global information society is overflowing with telecommunications data traffic, for business, entertainment, education, surveillance, industrial control, online retail, and many other applications. These applications, increasingly delivered from the cloud, generate a huge amount of data driven largely by the video and image components. This exponential growth in data traffic is expected to continue and even accelerated, enabled by 5G upgrades to the mobile radio network. New applications will emerge, such as Reality/Virtual Reality ("R/VR"), cloud gaming, tele-health, Internet of Things ("IoT"), and Industry 4.0, all made possible by the massive bandwidth increases, low latency and highly secure infrastructure. At the foundation, high performance Optical connections and advanced IP networking are needed to keep pace with the advancements in communications. This hyper-connectivity will be a key enabler and deliver disruptive ultra-low cost-per-bit communications within and between networks and the cloud, while also delivering on the promise of latency sensitive networking demanded by many of the applications. Need for Reliable, Secure, High-Bandwidth Enterprise and Critical Infrastructure Communications Companies and verticals that are classified as being part of a “critical infrastructure” are defined as those companies whose assets, systems, and networks, whether physical or virtual, are considered vital to a country’s national interest. Critical infrastructure providers are under increasing pressure to support new services, reduce carbon emission, improve security, expand automation, and increase safety. Achieving these goals requires a transition to a modernized, secure communications network that supports both IP and optical transport seamlessly. With a seamless integrated IP and optical transport solution, a critical infrastructure network operator can provide a highly reliable, secure, future proof communications solution optimized for critical industries. An essential requirement for this solution includes a security suite that incorporates state-of-the-art operational technologies protection measures, giving operators extra confidence in the security of their network. Data is the lifeblood of any business and it must be easily accessible across the enterprise to power business applications and to support services to end-customers. It must also be replicated across multiple locations for business continuity and disaster recovery and must be protected from inappropriate access, theft, and corruption. Enterprises deploy optical networking, secured by optical encryption, to attain the needed performance and security. Similarly, command and control groups within today’s armed forces have a need for high performance secure networks as their strategic sensors and assault systems are becoming more integrated. In this ecosystem, effective decision-making requires the pooling and analysis of data from a vast array of sensors and other information sources. The data must be delivered securely, in real-time, to wherever it is required. These solutions integrate intelligent optical transport with agile IP networking to provide a converged, secure, communication network. Addressing the “Digital Divide” with Rural Broadband and High-Speed Internet Connectivity Governments in many countries around the world are investing to address and help close the digital divide and extend ultra-broadband services and connectivity to underserved communities. As an example, in the United States, the FCC Rural Digital Opportunity Fund ("RDOF"), the 5G Fund for Rural America, and the USDA Rural Development Broadband ReConnect Program expect to provide billions of dollars in funding to deliver broadband connectivity to rural communities in the U.S. 5 Table of Contents Whether working or learning from home, streaming 4K television, or playing the latest online video games, rural subscribers demand dependable, high-speed Internet access to participate and thrive in the digital world. Forward-looking service providers are taking advantage of government funding programs to expand network capacity and transform the communities they serve. Next-generation rural broadband networks help service providers grow their revenues by extending service reach and diversity, and by satisfying the massive pent-up demand for high-speed internet connectivity. Next-generation broadband networks will also leverage new technologies like fixed-wireless access, while laying the foundation for future revenue opportunities like 5G backhaul transport services. Strategy Overview Our mission is to create a recognized global technology leader providing cloud-centric solutions that enable the secure exchange of information, with unparalleled scale, performance, and elasticity. To realize this mission, we have begun the implementation of a focused strategy for our business underpinned by our transformative ECI Acquisition. • Operational Integration - A key step of the strategy includes continuing to successfully drive the integration of ECI and Ribbon to achieve best-in-class operational efficiencies. We have made significant progress, including a revamped internal organization aligned along a business unit model with regional sales teams and integrated corporate functions, as well as the addition of new experienced members to our leadership team. The first phase of integration is completed, and we expect to continue the additional systems integration and process alignment activity in 2021. • Intellectual Property and Technology Integration - Beyond operational integration, we continue to explore opportunities to blend the intellectual property and technological know-how underlying the classic Ribbon business with that acquired as part of the ECI Acquisition to develop new products and services to meet the new challenges faced by our customers. • Cross-Selling - We are laser-focused on marketing and selling our combined post-acquisition broad portfolio to our global deployed base of service provider and enterprise customers to expand our presence and share of the larger IP and Optical networking and transport market and cross-sell the complete portfolio. • North American IP Optical Networks Market Share - We expect to unlock the value of the former ECI portfolio by growing IP Optical Networks market share in the North American market by leveraging the extensive deployment base and ongoing business that we have with service providers and enterprise customers. We have already experienced some early cross-selling successes with new IP Optical customer wins announced in the second half of 2020. • Participate in the 5G Opportunity - The ECI Acquisition has also advanced our strategy of expanding into the service provider 5G data domain with the IP Optical Networks portfolio bundled with network analytics and intelligence, and security offerings. We believe 5G is a multi-year opportunity as global service providers roll out the new capital-intensive technology and build out the needed network infrastructure over the next decade. We want to be at the forefront of preparing our customers for the deployment of 5G on two major fronts: providing for metro, backhaul and long-haul transport and networking solutions in service provider networks, industrial verticals, and critical infrastructure; and supporting their needs as new applications, including IoT and AI, become a reality with 5G. • Software-Centric and Cloud-Native Offerings - The value of virtual, cloud-native, and software-driven solutions deployable in the cloud has only grown because of the COVID-19 pandemic, which underscores another area of major focus for us. As a strategy, we continue to aggressively transition our product portfolio and business model towards more software, cloud-native offerings and as-a-Service selling model. This transition is instrumental in improving profitability and competitiveness, and growing the recurring revenue portion of our business. • Edge Offerings - The market need and growth rate are higher at the network edge than at the core. We focus on growing this area of our business through our enterprise edge solutions, which are typically geared towards small and medium enterprises, building on our partnerships with key solutions providers such as Microsoft, as well as other popular unified communications and collaboration ("UC&C") platforms such as Zoom Phone and similar service provider UC&C offerings. • Partnerships - We continually look to form industry partnerships that will enhance our current solution offerings to our customers. • Focus - We maintain a constant feedback loop to ensure we stay focused on activities that support the strategy of our main business segments and ensure our investments in research and development are directly aligned to these goals. As part of this strategy, we completed the sale of our Kandy Communications business in December 2020 to American Virtual Cloud Technologies, Inc. ("AVCT"). We believe that the sale enables us to be even more focused on executing 6 Table of Contents our service provider and enterprise strategy to the benefit of our customers while allowing AVCT to unlock Kandy’s true value and strong potential and capitalize on the momentum the business has established. As part of the transaction, we became an investor in AVCT, which means that we have a continued opportunity to capitalize on the continued success of Kandy. We believe execution on this multi-faceted strategy will strengthen our financial foundation, will continue to improve our relationships and collaboration with our customers, and will further align us with our key stakeholders - customers, partners, employees, and investors. Customers Our customers are comprised of a diverse set of service providers and enterprises located in over 140 countries around the world. Service provider customers include telephone companies ("telcos") offering fixed and wireless communications services, cable Multi-System Operators ("MSOs") and Communications as a Service providers. Our service provider customers include many of the largest CSPs globally. Enterprise customers include small, medium, and large businesses and industry verticals such as transportation, utilities, government/public sector, finance, and education. Customers trust us to solve their most challenging communications requirements, enabling people and devices to connect anytime, anywhere. Our customer-centric culture shapes all of our activities and inspires our team members to make a positive impact with our clients, investors, and communities. In the year ended December 31, 2020, Verizon Communications Inc. ("Verizon") accounted for approximately 15% of our revenue. Verizon is a service provider that offers interconnect, fixed line and mobile communications services, and our software solutions are sold across their business divisions supporting their large enterprises, SMB and consumer telecommunications and cable-related offerings. Our top five customers represented approximately 34% of our revenue in the year ended December 31, 2020. Segment Information Effective in the fourth quarter of 2020 and in connection with the ECI Acquisition, our Chief Operating Decision Maker ("CODM") began to assess our performance based on the performance of two separate organizations within the Company: the Cloud and Edge segment ("Cloud and Edge") and the IP Optical Networks segment ("IP Optical Networks"). The Cloud and Edge segment is primarily comprised of the legacy Ribbon business and the IP Optical Networks segment is primarily comprised of the legacy ECI business. We had previously operated in a single segment. Cloud and Edge Business Segment The Cloud and Edge segment provides secure and reliable software and hardware products, solutions, and services for enabling VoIP communications, Voice Over LTE ("VoLTE") and Voice Over 5G ("VoNR") communications, and Unified Communications and Collaboration services to both service provider and enterprise customers. Our 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 private networks. Cloud and Edge Products and Solutions Our Cloud and Edge portfolio delivers multiple solutions for enabling VoIP, VoLTE, VoNR, and UC&C for a broad range of service provider and enterprise customers. The solutions provided with this portfolio include those for: • Securing and providing resilient connectivity and calling via direct routing for Microsoft Teams, Zoom and other cloud-based UC&C applications. • Securing service provider hosted and managed unified communications ("UC") services. • Securing network interconnects for communications services. • Network transformation of fixed service provider voice services networks to help evolve, consolidate, and modernize legacy networks to VoIP and virtualized network environments. • Implementing IP Multimedia Subsystem ("IMS") networks required by mobile service providers for VoLTE service deployments and for 5G voice services. 7 Table of Contents • Modernizing, evolving, and securing enterprise and industry vertical UC environments, supporting both on-premises and cloud-based deployments. • Securing voice sessions and protecting VoIP communications connectivity infrastructures, contact centers, Private Branch Exchanges ("PBX") and media servers. • Providing identity assurance that helps mitigate robocalls, prevent fraud by determining phone caller identity, intent, and reputation. • Analytics to provide visibility, security, and service assurance to enhance communication network operations and customer experiences. Our Cloud and Edge market-leading product portfolio consists of two main categories – Session Border Controller ("SBC") products and Network Transformation products: Our SBC product portfolio encompasses a full range of deployment platforms including: • High performance carrier-grade compute platforms leveraging the latest advancements in silicon including NVIDIA GPU processors. • Feature rich enterprise software products for deployment in both private and public cloud environments such as Amazon Web Services ("AWS"), Microsoft Azure and Google Cloud Platform ("GCP"). • Fully cloud-native implementation supporting as-a-Service ("aaS") business models. • On-premises dedicated appliances that scale up and down to meet the most demanding performance and security requirements. Our SBC portfolio consists of the following categories of products: • Core network SBCs that are deployable by customers in their core networks, or on private or public clouds, and used to identify, manage, and protect voice communications traffic as it moves through and between communication networks. SBCs secure and interwork different voice communications protocols at IP network boundaries, both within and between service provider and enterprise networks. The portfolio also includes Policy and Routing products that work in heterogeneous voice networks, and are used to intelligently manage communications sessions based on multiple policies such as least cost and Quality of Service routing, media type, source or destination, and time of day or week. • Enterprise Session Border Controllers and Edge products, deployable on premises or in the cloud, to securely and simply enable the deployment and migration to cloud-based UC&C applications such as Microsoft Teams, Zoom Phone and service provider UC&C offerings. Enterprise SBCs provide service assurance and visibility within the enterprise for service-provider hosted and managed UC services. Offerings in this portion of our portfolio include Ribbon Connect for Microsoft Teams Direct Routing, a cloud-based aaS offering for securing calls to the public telephone network from the enterprise. • Ribbon Call Trust TM is an aaS offering for providing identity assurance. The identity assurance portfolio, using information from deployed network elements including SBCs, helps mitigate robocalls and prevent fraud by determining phone caller identity, intent, and reputation. With this information, it is possible to help determine if a call is from a legitimate person, for a legitimate purpose, and without malicious intent. Our customers utilize these capabilities to provide a better call experiences to their end-customers. • A cloud-native Analytics Platform with applications that aid customers in gathering actionable intelligence from their communications network elements, including SBCs in the core and edge of their networks, to provide them with network performance visibility, service assurance, security, and fraud mitigation. Our Network Transformation product portfolio is deployed in the most demanding environments and enables the modernization of fixed, mobile and enterprise voice communications networks to support the next generation of IP-based voice communications services and includes multiple software-centric platforms and products including: 8 Table of Contents • Signaling products that provide network signaling for communications services. • Call Controllers that provide call processing within networks for voice communications services and applications. • Media Gateways that perform the interworking or translation of media, or voice sessions and the corresponding network protocols both within and across VoIP and legacy communications networks, and use codecs (coder-decoder) and digital signal processors to do so. • A multi-tenant and highly scalable Application Server that enables the deployment of VoIP and UC&C services and applications. Cloud and Edge Competition Competition in the market for the Cloud and Edge portfolio remains strong. The market is shifting from an environment dominated by a few large telecommunications legacy hardware equipment companies, such as Ericsson LM Telephone Company ("Ericsson"), Huawei Technologies Co. Ltd. ("Huawei"), and Nokia Corporation ("Nokia"), to a market that is characterized by network function virtualization, hybrid private public cloud compute environments, and open interoperable interfaces. We believe this shift creates opportunities for us to differentiate and gain share from competitors such as: • Huawei, Ericsson, Nokia, Oracle Corporation, Cisco Systems, Inc. ("Cisco") and AudioCodes Ltd. for our SBCs, Enterprise Edge products and Ribbon Connect. • Neustar, Inc., Metaswitch Networks (acquired by Microsoft) ("Metaswitch"), TransNexus, Inc. and Transaction Network Services, Inc. ("TNS") for our Identity Assurance and Call Trust offerings. • Guavus, Inc., NETSCOUT Systems, Inc., Niometrics Pte Ltd, Empirix Inc. and Ericsson for our Analytics offerings. • Huawei, Metaswitch (acquired by Microsoft), Nokia and Ericsson for our Network Transformation offerings. Other smaller private and public companies are also focusing on similar market opportunities. Mergers among any of the above companies or other competitors, as well as additional competitors with significant financial resources entering our markets, could further intensify competition. Mergers between service providers may also increase competition for a smaller number of more concentrated customers and channels for products and solutions. IP Optical Networks Business Segment The global information society is generating a very high volume of telecommunications traffic, for business, entertainment, education, surveillance, industrial control, and other applications. Technologies like 5G, distributed cloud computing and corresponding applications are predicted to continue this exponential traffic growth. IP and Optical networks are at the foundation of this information economy, and indeed are one of its key enablers, delivering ultra-low cost-per-bit transport and multi-service flexibility. Our IP Optical Networks segment provides high-performance, secure, and reliable hardware and software products and solutions for IP networking, switching, and routing, and optical transport. 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. IP Optical Networks Products and Solutions Our IP Optical Networks portfolio delivers multiple solutions spanning access, metro, regional, and long-haul geographies, and using ring, mesh, and point-to-point topologies. IP Multiprotocol Label Switching ("MPLS") and other protocols provide a broad range of networking services for our customers. Our solutions for optical and IP transport and networking include 5G-native solutions for mobile-backhaul, metro and edge aggregation, core networking, data center interconnect, legacy network transformation and transport solutions for wholesale carriers. High availability and security also make the solutions ideal for critical infrastructure delivering mission-critical services. Our IP Optical Networks market-leading and multi-layer product portfolio consists of: • Our Neptune IP networking, switching, and routing products that provide multiservice aggregation and IP transport based on IP MPLS and segment routing, for seamlessly evolving to new IP-based networks and 5G services. Our Neptune product line streamlines end-to-end service delivery by combining carrier-grade service assurance, visibility, 9 Table of Contents and control with efficient multiservice IP networking. Neptune offers converged support for Ethernet, MPLS, MPLS-TP (traffic profile), Segment Routing, Flexible Ethernet ("FlexE"), Time Division Multiplexing Circuit Emulation Services ("TDM CES"), and Optical Transport Network ("OTN") to provide a powerful, flexible solution for high-performance services. We believe this is a perfect fit for operators looking for solutions for multiservice aggregation, mobile backhaul and critical infrastructures. With TDM CES support, legacy services are easily migrated onto the Neptune platform. In addition, IP MPLS, Software-Defined Networking ("SDN"), Network Functions Virtualization ("NFV"), and enhanced timing and synchronization capabilities make the high-capacity Neptune platform ideal for 5G transport in a converged and distributed metro-transport environment. • Our Apollo products provide programmable and open OTN capabilities with Dense Wavelength Division Multiplexing ("DWDM") support. The OTN layer maps Ethernet and other services into bit streams for transparent optical transmission, and DWDM routes wavelengths of light containing the OTN-encapsulated bit streams across wide areas, greatly increasing the efficiency and capacity of fiber facilities. Our Apollo hardware and software products deliver reconfigurable and programmable low-latency optical transport that simultaneously speeds up provisioning of new services while maximizing traffic throughput at the lowest cost per bit. The Apollo product line provides state-of-the-art transparent and flexible DWDM and OTN transport with integrated packet switching capabilities. A modular architecture allows optimized solutions across access, metro, regional, and long-haul networks. Apollo combines high performance, low-latency OTN transport, and OTN switching with software-configurable optical routing for maximum efficiency. Apollo is “self-aware” with intelligent reporting for efficient and SDN-ready operations. Apollo also provides deployment choice, whether as an integrated solution or as standalone subsystems for disaggregated multivendor solutions. A key of security feature of Apollo used broadly in critical infrastructure and enterprise deployments is Layer 1 Optical Encryption supported by standard and Post Quantum Computing algorithms. • The Muse SDN multi-layer Domain Orchestrator is a suite of cloud-native applications that deliver SDN domain orchestration for underlying Neptune IP and Apollo Optical networks. This covers complete lifecycle management and automation to speed up time to revenue, reduce Total Cost of Ownership ("TCO"), and facilitate integration into wider ecosystems. It is powered by a carrier-grade, cloud-native Platform as a Service ("PaaS") and works in conjunction with our LightSOFT TM network management system. Built for a 5G services world, Muse enables network operators to programmatically configure and combine hard and soft slicing technologies to create slices appropriate to different sets of 5G-enabled services and customer sub-networks. Then, using a rich set of tools, operators can design, provision, and assure a broad array of services on top of the slices. IP Optical Networks Competition Competition in the markets addressed by our IP Optical Networks products is strong. The market is shifting from an ecosystem dominated by a few large telecommunications legacy hardware equipment companies with proprietary solutions such as Ciena, Cisco, and Nokia, to a market that is characterized by a combination of closed and open solutions, software-defined networking, and dis-aggregation ready for next generation networks, services and applications including 5G. Leveraging commercial technology, we believe this shift creates opportunities for us to increase our share as compared to direct competitors such as Cisco, Juniper Networks, Inc., Huawei, Nokia, Ciena Corporation, Infinera Corporation, ADVA Optical Networking SE, and Fujitsu Limited. We believe a key differentiation from these competitors is our optimized and integrated multi-layer IP optical solutions. Services and Support As service providers and enterprises increasingly adopt IP-based voice, multimedia, IP and optical transport networks and 5G communications solutions for their markets, they are challenged to find the expertise to install, maintain, and repair these platforms. We have a rich history of providing a broad offering of service-based solutions to complement our products and to help service providers and enterprises grow revenues, serve customers, reduce costs, and improve productivity. Our Global Services organization provides a wide range of services to enable our customers to achieve those goals. Professional and Project Management Services include hundreds of VoIP, IMS voice services and IP and Optical networking specialists and partners offering technical depth, network breadth and tools to assist customers in all aspects of network modernization, design, and deployment. Our Maintenance Support offerings deliver a comprehensive support strategy for all products, applications, and solutions purchased. Our Managed Services offer proactive monitoring to keep customers' production communications running smoothly so they can concentrate on running their business. In addition, our Education Services help ensure customers have the technical knowledge and skills necessary to achieve service readiness and delivery goals to accelerate time-to-market, manage costs, and get the most out of our products and solutions that they use. 10 Table of Contents Sales and Marketing We sell our portfolio of products and solutions to service provider and enterprise customers around the globe through both direct sales and indirectly through channel partners, including independent resellers, distributors, and system integrators. Most of our sales to service providers are done directly and most sales to enterprises are done through channel partners. Our direct sales team is organized geographically and by major customers and market to support customer requirements. The sales organization is divided into two regional sales teams – one responsible for the Americas, and one responsible for EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific, including India). Our sales teams sell our full portfolio of products and solutions from both segments to customers in each salesperson's assigned region. Our direct sales force and resellers are supported by a highly trained technical sales engineering staff who work closely with our customers to develop technical proposals and design systems to optimize system performance and economic benefits for our customers. Our marketing organization is responsible for building awareness of our brand in the markets served and driving engagement with our strategies, solutions, and products. It promotes our brand and portfolio value propositions to key stakeholders, including our customers, channel partners, and prospects globally. The organization develops all of our corporate and portfolio messaging for different target audiences, and manages all customer and industry communication channels, including public relations, digital content (including for the web and social media), events, and trade shows, as well as demand generation and account-based marketing campaigns in conjunction with our sales force. Manufacturing We rely on leading global contract manufacturers and original design manufacturers to manufacture, assemble, test and ship our products. We enjoy long-term relationships with our contract manufacturers and regularly review business relationships in an attempt to reduce cost of goods and supply risks. We employ formal quality, environmental and ethics management programs with all of our contract manufacturers. Our leading manufacturers have presence in multiple international locations. This enables us to implement a flexible manufacturing and logistics landscape for each product line and target markets. This structure also facilitates redundancy and business continuity to mitigate risks related to adverse trade tariff, taxation, and natural disasters. Moreover, we wholly own the intellectual property related to fabrication files, assembly, testing algorithms and manufacturing operating procedures, thus reducing sole dependency on a specific contract manufacturer. Inventory Suppliers and Sourcing We work with strategic global suppliers for our key integrated circuit components, systems, and software. Certain of our networking products use third-party optical modules embedded on board or configured as pluggable units. These modules are designed and manufactured by leading optical technology vendors and supplied to us based on agreed-upon our controlled performance specifications. Our policy is to purchase major components directly from original suppliers or from authorized distributors. We regularly review market trends and volume demand for newly introduced products with our suppliers and distributors to negotiate reduced component pricing as the products mature. We carefully manage end-of-sale and end-of-life transitions to maximize return on investment and minimize wasted material, while maximizing customer satisfaction. When we must source such end-of-life components from distributors and brokers, we typically encounter increased component pricing. In some cases, when such parts cannot be sourced reliably any longer in the open market, we undertake costly redesign efforts with alternative components. In order to maintain competitive lead time for our customers, we employ sophisticated demand and supply management systems. We also utilize agility and safety stock processes to meet higher-than-forecasted customer demand to stock raw material and sub-assembly inventory. We occasionally experience unforeseen demand drops of certain products or sub-assemblies due to technology evolution, customer consumption behavior, or shortened product lifecycle. We regularly review current inventory levels to ensure adequate reserves for excess and obsolete inventory arising from shortened product life cycle or demand drops. Research and Development Our global research and development ("R&D") workforce is geographically distributed across a balanced set of high-cost and low-cost centers of excellence. This allows us to distribute work in a cost-effective manner and provide time-zone sensitive 11 Table of Contents support to our global sales team and customers. We supplement our deep in-house expertise with a small set of long-term contracting partners, allowing us to flex up and down as required to match customer demand. To maintain our position as a technology leader, we continue to invest in our development methodologies, leveraging and adopting industry best practices in the domains of DevOPs, Continuous Integration, Security and Test Automation. In addition to delivering product-specific feature requests from our customers, our R&D resources that are focused on our Cloud and Edge business segment continue to focus on leading edge technology that will allow our customers to move from purpose-built appliances to fully virtualized solutions, including private and public cloud deployment models as they modernize their networks. We are also investing in aaS variants of our products, fully integrated with cloud-native operational models. Our IP Optical Networks R&D team continues to focus on empowering our customers with better performance and cost-efficient solutions, improved cost-per-bit, and reduced power and space requirements to lower operating costs. We create innovative solutions that address the exponential increases in bandwidth consumption with improving operational efficiency. Our unique value-add is demonstrated by advanced well-integrated optical and packet solutions managed by state-of-the-art cross platform SDN management system. We leverage modern technologies and industry best practices across all our products and solutions to provide security at each layer of the solution, enabling end to end security of the overall system. We continue to invest in analytics and automation to allow our customers to operate our solutions at scale with end-to-end visibility and control over the robustness, security, and efficiency of the solution. Intellectual Property We believe intellectual property is fundamental to our business and success, and we depend upon our ability to develop, maintain and protect our technology. We seek to safeguard our investments in technology and rely on a combination of U.S. and foreign patent, trademark, trade secret and copyright law and contractual restrictions to protect the proprietary aspects of our technology. As of December 31, 2020, we had been issued 693 patents in the U.S, which expire between 2021 and 2039, and had 64 in-process patent applications in the U.S. As of such date, we also had 314 issued patents in foreign jurisdictions, and had 35 patent applications. As of December 31, 2020, we had 34 trademarks registered in the U.S. and 99 trademarks registered in foreign jurisdictions. In addition to the protections described above, we seek to safeguard our intellectual property by employing measures to protect against the unauthorized use or disclosure of the source and object code for our software, documentation and other written materials; licensing our software pursuant to signed license agreements, which impose restrictions on others' ability to use our software; and seeking to limit disclosure of our intellectual property by requiring employees and consultants with access to our proprietary information to execute confidentiality agreements. We have incorporated third-party licensed technology into certain of our products and may be required to license additional technology from third parties to develop new products or to enhance existing products. Although many companies are often willing to enter into such licensing agreements, no assurance can be provided that such licenses can be negotiated on reasonable terms, or at all. The failure to enter into technology development or licensing agreements, when necessary, could limit our ability to develop new products and could harm our business. Despite our efforts to protect our technology and proprietary rights as discussed above, unauthorized parties may still obtain and use our technology and software. We have defended, and intend to vigorously defend when necessary, our intellectual property from infringement. Other companies in the communications and technology industries frequently threaten litigation, or file suit against us (directly or indirectly through customers to whom we could owe indemnification) based on allegations of infringement or other violations of intellectual property rights. We are currently subject to, and expect to face in the future, allegations that we have infringed the intellectual property rights of third parties, including those of our competitors and non-practicing entities. Regulatory Considerations As a company with global operations, we are subject to complex U.S. and foreign laws and regulations, including trade regulations, tariffs, import and export regulations, anti-bribery and corruption laws, antitrust or competition laws, cybersecurity, privacy and data protection, among others. In addition, our operations are also subject to a number of environmental regulations such as the Waste Electrical and Electronic Equipment Directive ("WEEE") and the Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment ("RoHS"). We have developed policies and 12 Table of Contents procedures to assist us in complying with these laws and regulations. Our historical compliance costs, including those related to environmental regulations, have not resulted in a material adverse effect on our business, results of operations or financial condition. We expect the laws and regulations to which we are subject will continue to increase and the future costs of compliance with existing or new regulations could materially impact our business in the future. Our Employees As of December 31, 2020, we had a total of 3,784 employees worldwide, of which approximately 30% were located in North America, 37% were located in our APAC region, 29% were located in our EMEA region and 3% were located in Central and Latin America. Approximately 21% of our employees identify as female. As an international company, we are committed to maintaining a diverse and inclusive workforce, and empowering all employees. Approximately 720 employees are covered by collective bargaining agreements or works councils and we believe that our relations with the labor unions are generally good. Our values are focused on teamwork, passion (taking pride in our achievements), being a trusted advisor to our customers, innovation and being "TRUE" - Transparent, Respectful, Unpretentious and Empowered. Engaging our employees includes aligning with these values and providing a workplace that is one in which we all work toward shared objectives that contribute to a better world and a better society. We engage our employees by providing opportunities for personal and professional growth and maintaining a culture of open communications where everyone receives constructive performance feedback and is encouraged to offer new ideas about any aspect of the work we do and our ways of doing things. Employee Benefits. We believe in fairly and competitively rewarding our employees. As a global company, we maintain a program of benefits tailored to local market norms in each region to support employees with medical insurance, paid leave and other non-salary benefits. For example, in the U.S. and EMEA, we maintain a Real Time Rewards program to enable recognition of employee achievements and contributions. This on-line program allows anyone to nominate a co-worker for recognition. We believe this program encourages cross-functional teams, providing a way of acknowledging team members who may not be in the same employment reporting structure. In 2020, almost 1,000 Real Time Rewards were delivered to employees who received a cash benefit of between $25 and $100, or other non-monetary recognition. Training and Development . We believe investing in our employees professional development so that they can perform their current roles more effectively and can be prepared for roles of greater responsibility in the future. Our training programs utilize a combination of in-person and online programs and include core modules, some of which are mandatory, relating to ethical conduct, products and services, safety, human rights and anti-corruption, as well as additional tailored programs on topics such as leadership, management, project management and competency development. In 2020, we delivered approximately 12 training hours per employee across our workforce. Safety, Health and Well-being . We strive for a workplace that is free of hazards for our employees. We take care to comply with applicable safety regulations and have a strong track record for safety that we reinforce through regular training modules in all of our locations. In 2020, as a result of the COVID-19 pandemic, we took a number of steps to help ensure the safety and well-being of our employees. This included closing our offices and shifting most employees to work from home. We instituted a phased return to occupancy plan that provides for a gradual return of employees to our locations based on the current conditions in the geographic region the office is located in, as well as local regulations. In addition, we have taken a number of steps, including increased sanitation, requiring masks and limiting the number of people allowed in common areas and conference rooms, to help further protect employees returning to the office. We have provided regular communications to our employees to update them on our policies and created a COVID-19 resource site for them that includes information and resources on working from home and links to official resources from the World Health Organization, the Centers for Disease Control and others. In light of the restrictions on movement and new levels of stress experienced as a result of the COVID-19 pandemic, we started a “Better Together” wellness month that aimed to promote mental and physical well-being and allow employees around the world to get to know each other and have fun. This online program utilized a personal wellness coaching application that allowed for round-the-clock access for teams in all regions. The program featured live and recorded sessions on a range of topics relating to health and nutrition, work-from-home support, stress management, mindfulness and parenting during the COVID-19 pandemic. Employees can post their activities and encourage others to post their activities as well. Nearly 1,300 employees representing every region participated in the program. Community Investment . We value the communities in which we work. We encourage a service mindset among our employees wherever they are and support community involvement and engagement. To that end, since 2010, we have provided a day of 13 Table of Contents paid time off for all employees to participate in our Global Day of Service during which they are encouraged to volunteer and contribute to local non-profits in their communities. Measuring Employee Engagement . We believe one of the best ways to monitor our overall employee engagement is through monitoring employee turnover rates, as successful employee engagement helps increase employee tenure and reduce voluntary turnover. As of December 31, 2020, our voluntary employee turnover was approximately 6% globally, which we believe is significantly better than industry averages. Our average employee tenure is approximately 11 years and more than 41% of our employees have been with Ribbon (and our predecessor companies) for more than ten years. As a further way of measuring employee engagement, in 2020 we conducted our first employee pulse survey to better understand employee’s views on items such as our strategy, communication and whether or not they would recommend Ribbon as a place to work. More than 82% employees participated in our initial survey. We intend to use the results from this and future surveys to look for ways to continually improve our employee engagement. Corporate Governance and Social Responsibility We are committed to operating ethically, efficiently and inclusively. We believe we contribute to the communities in which we operate through the mitigation of climate change and other global sustainable development priorities. We aim to help improve the quality of the lives of people, society and the health of the planet through leveraging our expertise in transforming networks, enhancing security and delivering world-class solutions. We believe that communications technology and continuous innovation form the backbone upon which sustainable development largely depends. Major technology trends supported by our solutions include the accelerated adoption of Collaboration platforms such as Microsoft Teams and Zoom; the 5G revolution; accelerating customers' ability to transfer carbon-intensive data storage from using local physical environments to the cloud; supporting service providers’ increased network demands to allow more people to work from home; and using our analytics solutions to maximize network efficiencies. In 2019, we published our Environmental Policy that sets forth our goals within which our global business operations to conserve natural resources and minimize negative impacts that our activities, products and services may have on the global and local environment. Pursuant to this policy, we are committed to protecting the environment and preventing pollution within a product’s lifecycle through responsible product design and requiring suppliers to adhere to sustainable practices. An example of this is our focus on continuously improving the power and space efficiency of our products to reduce overall energy consumption in our customers' networks at our own facilities. We align our compliance goals with component directives such as RoHS legislation in the European Union and China and with the European WEEE directive. We also hold a host of internationally recognized certifications for our global offerings, including ISO 9001:2015 - Quality Management Systems; ISO 14001:2015 - Environmental Management Systems; and SI 10000:2013 – Social Responsibility (covering our sites in Israel). It has always been paramount to our way of doing business to act with the utmost integrity, honesty and transparency. Our commitment to ethical business practices guide us in our compliance with national and international laws and regulations, including anti-corruption, anti-bribery and unfair competition, antitrust and human rights. We maintain a Code of Conduct that applies to all of our directors, employees, contractors and suppliers. We are committed to strong corporate governance practices, which include building long-term value and assuring success for our stockholders and other stakeholders, including employees, customers and the communities in which we operate. For additional information regarding our corporate governance and our social responsibility goals and initiatives, please see “Corporate Governance” on our investor relations website (investors. ribboncommunications.com) and our most recent sustainability report, which is available at ribboncommunications.com/company/company-policies/sustainability-report. Seasonality We have experienced quarterly fluctuations in customer activity due to seasonal considerations. We typically experience increases in order volume in the fourth quarter due to greater spending on operating and capital expenditures by our service provider customers. We typically experience reductions in order volume toward the beginning of the calendar year, when our service provider customers are operationalizing their annual budgets and plans, which may result in lower revenue in the first quarter. These typical seasonal effects may vary. Accordingly, they should not be considered a reliable indicator of our future operating results. Additional Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with or furnished to the United States Securities and Exchange Commission (the “SEC”), are available free of 14 Table of Contents charge through the SEC's Internet site ( http://www.sec.gov ) or our Internet site ( http://www.ribboncommunications.com ) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information contained on, or that can be accessed through, our website does not constitute a part of this annual report and is not incorporated by reference herein.