What changed in this filing

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Item 1. Financial Statements

2024-07-29 compared with 2024-05-15 · 348 added, 268 removed, 655 unchanged (48% of the section changed)

6 unchanged sentences

Cash and cash equivalents $ 64,558 $ 26,494

Restricted cash 2,850 136

Accounts receivable, net 210,954 268,421

20 unchanged sentences

Preferred stock liability, $ 0.01 par value per share;

10,000,000 shares authorized, 55,000 shares issued and outstanding ($ 56,650 liquidation preference)

56,204 53,337

10,000,000 shares authorized, none issued and outstanding at June 30, 2024;

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

Operating lease liabilities, net of current 34,858 38,711

7 unchanged sentences

240,000,000 shares authorized;

172,714,429 shares issued and outstanding at March 31, 2024;

174,437,242 shares issued and outstanding at June 30, 2024;

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

8 unchanged sentences

(in thousands, except per share data)

Three months ended

2024 March 31,

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Product $ 99,133 $ 117,347 $ 186,743 $ 210,665

31 unchanged sentences

(in thousands)

Three months ended

2024 March 31,

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Net loss $ ( 16,816 ) $ ( 21,479 ) $ ( 47,177 ) $ ( 59,784 )

9 unchanged sentences

(in thousands, except shares)

Three months ended March 31, 2024

Three months ended June 30, 2024

Additional other Total

1 unchanged sentence

Shares Amount capital deficit (loss) income equity

Balances, April 1, 2024 172,714,429 $ 17 $ 1,962,602 $ ( 1,550,311 ) $ 12,350 $ 424,658

Vesting of restricted stock awards and units 2,138,848 —

Vesting of performance-based stock units 257,390 —

Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations ( 673,425 ) ( 1,792 ) ( 1,792 )

Stock-based compensation expense 3,494 3,494

Other comprehensive loss ( 4,522 ) ( 4,522 )

Net loss ( 16,816 ) ( 16,816 )

Balances, June 30, 2024 174,437,242 $ 17 $ 1,964,304 $ ( 1,567,127 ) $ 7,828 $ 405,022

Six months ended June 30, 2024

Additional other Total

Common stock paid-in Accumulated comprehensive stockholders'

Shares Amount capital deficit (loss) income equity

Balances, January 1, 2024 172,083,667 $ 17 $ 1,958,909 $ ( 1,519,950 ) $ 13,787 $ 452,763

6 unchanged sentences

Net loss ( 47,177 ) ( 47,177 )

Balances, March 31, 2024 172,714,429 $ 17 $ 1,962,602 $ ( 1,550,311 ) $ 12,350 $ 424,658

Three months ended March 31, 2023

Balances, June 30, 2024 174,437,242 $ 17 $ 1,964,304 $ ( 1,567,127 ) $ 7,828 $ 405,022

See notes to the unaudited condensed consolidated financial statements.

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except shares)

Three months ended June 30, 2023

Additional other Total

Common stock paid-in Accumulated comprehensive stockholders'

Shares Amount capital deficit income equity

Shares Amount capital deficit (loss) income equity

Balances, April 1, 2023 169,229,979 $ 17 $ 1,945,525 $ ( 1,492,049 ) $ 19,435 $ 472,928

Exercise of stock options 344 1 1

Vesting of restricted stock awards and units 2,294,295 —

Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations ( 566,218 ) ( 1,563 ) ( 1,563 )

Stock-based compensation expense 6,116 6,116

Other comprehensive loss ( 1,756 ) ( 1,756 )

Net loss ( 21,479 ) ( 21,479 )

Balances, June 30, 2023 170,958,400 $ 17 $ 1,950,079 $ ( 1,513,528 ) $ 17,679 $ 454,247

Six months ended June 30, 2023

Additional other Total

Common stock paid-in Accumulated comprehensive stockholders'

Shares Amount capital deficit (loss) income equity

Balances, January 1, 2023 168,324,995 $ 17 $ 1,941,569 $ ( 1,453,744 ) $ 30,585 $ 518,427

6 unchanged sentences

Net loss ( 59,784 ) ( 59,784 )

Balances, March 31, 2023 169,229,979 $ 17 $ 1,945,525 $ ( 1,492,049 ) $ 19,435 $ 472,928

Balances, June 30, 2023 170,958,400 $ 17 $ 1,950,079 $ ( 1,513,528 ) $ 17,679 $ 454,247

See notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three months ended

2024 March 31,

Six months ended

2024 June 30,

Cash flows from operating activities:

3 unchanged sentences

Amortization of intangible assets 26,297 29,352

Amortization of debt issuance costs 716 1,065

Amortization of debt issuance costs and original issue discount 3,445 1,793

Amortization of accumulated other comprehensive gain related to interest rate swap ( 8,196 ) ( 2,062 )

5 unchanged sentences

Dividends accrued on preferred stock liability 2,743 1,272

Foreign currency exchange (gains) losses 1,144 ( 2,185 )

Payment of dividends accrued on preferred stock liability ( 6,686 ) —

Foreign currency exchange losses (gains) 2,023 ( 1,080 )

Changes in operating assets and liabilities:

13 unchanged sentences

Principal payments on revolving line of credit ( 44,106 ) ( 30,000 )

Proceeds from issuance of term debt 342,300 —

Principal payments of term debt ( 235,395 ) ( 85,029 )

1 unchanged sentence

Proceeds from issuance of preferred stock and warrant liabilities — 53,350

Payment of preferred stock liability ( 56,850 ) —

Proceeds from the exercise of stock options 17 2

Payment of tax obligations related to vested stock awards and units ( 2,638 ) ( 3,456 )

Net cash used in financing activities ( 5,843 ) ( 30,119 )

Net cash provided by (used in) financing activities 43,456 ( 36,705 )

Effect of exchange rate changes on cash and cash equivalents ( 124 ) ( 394 )

Net increase (decrease) in cash and cash equivalents 40,778 ( 32,616 )

Cash and cash equivalents, beginning of year 26,630 67,262

Cash and cash equivalents, end of period $ 30,931 $ 46,034

Cash, cash equivalents and restricted cash, beginning of year 26,630 67,262

Cash, cash equivalents and restricted cash, end of period $ 67,408 $ 34,646

RIBBON COMMUNICATIONS INC.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

Six months ended

2024 June 30,

Supplemental disclosure of cash flow information:

27 unchanged sentences

The Company's significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in the Annual Report.

There were no material changes to the significant accounting policies during the three months ended March 31, 2024.

There were no material changes to the significant accounting policies during the six months ended June 30, 2024.

Principles of Consolidation

10 unchanged sentences

Actual results could differ from those estimates.

Restricted Cash

The Company classifies as restricted cash all cash pledged as collateral to secure long-term obligations and all cash otherwise limited in use by contractual provisions.

At June 30, 2024 and December 31, 2023, the Company had $ 2.9 million and $ 0.1 million of restricted cash, respectively, representing restricted short-term bank deposits pledged to secure certain guarantees and surety bonds as security for the Company's obligations under tenders, and contracts.

Transfers of Financial Assets

3 unchanged sentences

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 condensed consolidated statements of operations, and the proceeds from the sales of receivables are included in cash from operating activities in the condensed consolidated statements of cash flows.

Factoring of accounts receivable and associated fees for the three months ended March 31, 2024 and 2023 were as follows (in thousands):

Three months ended

2024 March 31,

Factoring of accounts receivable and associated fees for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Accounts receivable sold 25,970 27,266 46,962 48,327

1 unchanged sentence

Net cash proceeds 25,427 26,451 46,028 47,057

Going Concern Assessment and Management Plans

Going Concern Assessment

The accompanying condensed consolidated financial statements are prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company's 2020 Credit Facility (as defined in Note 9) requires quarterly payments of $ 10.0 million each in the second, third and fourth quarters of 2024, with the remaining balance of $ 200.4 million due on March 3, 2025.

The Company does not have sufficient cash on hand or available liquidity to repay the $ 200.4 million due on March 3, 2025.

In response to these conditions, management's plans include refinancing the 2020 Credit Facility.

The Company has entered into a binding commitment letter to refinance the 2020 Credit Facility.

See Note 20 - Subsequent Event.

The refinance contemplated by the binding commitment letter is expected to close no later than June 30, 2024.

However, because the credit facility contemplated by the commitment letter has not yet been finalized, it cannot be deemed to be within the Company's control.

As a result, such plans cannot be deemed probable and do not alleviate the substantial doubt raised about the Company's ability to continue as a going concern.

The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

In the Company's condensed consolidated financial statements for the period ended March 31, 2024, substantial doubt was raised about the Company's ability to continue as a going concern due to the lack of sufficient cash on hand or available liquidity to repay its obligations under the 2020 Credit Facility (as defined in Note 9) that was scheduled to mature on March 3, 2025.

In response to these conditions, management's plans included refinancing the 2020 Credit Facility and the Company entered into a binding commitment letter for such refinancing on May 15, 2024.

The refinancing contemplated by the binding commitment letter closed on June 21, 2024.

See Note 9 for a description of the 2024 Senior Secured Credit Facilities Credit Agreement, the proceeds of which were used to, among other things, repay all amounts outstanding under the 2020 Credit Facility.

As a result, there is no longer substantial doubt about the ability of the Company to continue as a going concern.

Recent Accounting Pronouncements

1 unchanged sentence

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.

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

ASU 2023-09 will be effective for

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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.

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.

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.

15 unchanged sentences

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

Three months ended

2024 March 31,

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Weighted average shares outstanding - basic 173,793 170,103 173,110 169,326

1 unchanged sentence

Weighted average shares outstanding - diluted 173,793 170,103 173,110 169,326

Options to purchase the Company's common stock and unvested restricted and performance-based stock units aggregating 12.1 million and 11.9 million shares were excluded from the computation of diluted loss per share for the three months ended March 31, 2024 and 2023, respectively, because their effect would have been antidilutive.

On March 28 , 2023, the Company issued 55,000 shares of newly designated Series A Preferred Stock (the "Preferred Stock") to investors in a private placement offering at a price of $ 970 per share, along with 4.9 million warrants (the "Warrants") to purchase shares of the Company's common stock, par value $ 0.0001 per share (the "Private Placement"), at the exercise price of $ 3.77 per share.

The proceeds from the Private Placement were approximately $ 53.4 million, including approximately $ 10 million from existing related party stockholders (See Note 11).

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

However, there

Options to purchase the Company's common stock and unvested restricted and performance-based stock units aggregating 11.9 million and 14.1 million shares were excluded from the computation of diluted loss per share for the three and six months ended June 30, 2024 and 2023, respectively, because their effect would have been antidilutive.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

was no impact on weighted average shares outstanding from these Warrants for the three months ended March 31, 2024 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.

For the three months ended March 31, 2023, the potential effect from the Warrants on weighted average shares outstanding for the calculation of diluted earnings (loss) per share was de minimis.

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) income, net.

"Warrants") to purchase shares of the Company's common stock, par value $ 0.0001 per share (the "Private Placement"), at the exercise price of $ 3.77 per share.

The proceeds from the Private Placement were approximately $ 53.4 million, including approximately $ 10 million from existing related party stockholders (See Note 11).

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 9 for a description of the refinancing of the 2020 Credit Facility.

As of June 30, 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 three and six months ended June 30, 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 were included in the fair value adjustment of the Preferred Stock which was reflected in Other (expense) income, net until the redemption of the Preferred Stock on June 25, 2024.

(3) INVENTORY

Inventory at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

Inventory at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

2024 December 31,

5 unchanged sentences

(4) INTANGIBLE ASSETS AND GOODWILL

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

March 31, 2024 Weighted average amortization period

The Company's intangible assets at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

June 30, 2024 Weighted average amortization period

(years) Cost Accumulated

6 unchanged sentences

9.50 $ 619,218 $ 407,166 $ 212,052

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

December 31, 2023 Weighted average amortization period

7 unchanged sentences

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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

Estimated future amortization expense for the Company's intangible assets at June 30, 2024 was as follows (in thousands):

Years ending December 31,

1 unchanged sentence

Thereafter 28,444

There were no changes to the carrying value of the Company's goodwill in the three months ended March 31, 2024 and 2023.

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

There were no changes to the carrying value of the Company's goodwill in the six months ended June 30, 2024 and 2023.

The components of goodwill at both June 30, 2024 and 2023 were as follows (in thousands):

Cloud and Edge IP Optical Networks Total

4 unchanged sentences

The carrying amounts of the Company's cash equivalents, accounts receivable, accounts payable and borrowings under a revolving credit facility in the condensed consolidated balance sheets approximates fair value due to the immediate or short-term nature of these financial instruments.

Ribbon's term debt balance as of March 31, 2024 and December 31, 2023 of $ 230.4 million and $ 235.4 million, respectively, had a fair value of approximately $ 231.5 million and $ 235.1 million, respectively.

Our Preferred Stock and Warrants liabilities had a combined fair value of $ 62.1 million as of March 31, 2024, including cumulative dividends on the Preferred Stock of $ 5.3 million.

Ribbon's term debt balance as of June 30, 2024 and December 31, 2023 of $ 350.0 million and $ 235.4 million, respectively, had a fair value of approximately $ 350.0 million and $ 235.1 million, respectively.

Our Warrant liability had a fair value of $ 6.2 million and $ 5.3 million as of June 30, 2024 and December 31, 2023, respectively.

Our Preferred Stock had a fair value of $ 53.3 million as of December 31, 2023 and was fully redeemed on June 25, 2024.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

4 unchanged sentences

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

The Company had no assets or liabilities fair valued using Level 1 input at March 31, 2024 or December 31, 2023.

The Company had no assets or liabilities fair valued using Level 1 input at June 30, 2024 or December 31, 2023.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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.

There were no significant changes to the Company's defined benefit plans' assets during the three months ended March 31, 2024 that required the calculation of their fair value as of March 31, 2024.

There were no significant changes to the Company's defined benefit plans' assets during the six months ended June 30, 2024 that required the calculation of their fair value as of June 30, 2024.

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 March 31, 2024 and December 31, 2023, the fair value of the Company's Preferred Stock and Warrants were determined using Level 3 input.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Level 3 input was used to determine the fair value of the Company's Warrants at June 30, 2024 and the fair value of the Company's Preferred Stock and Warrants at December 31, 2023.

(6) ACCRUED EXPENSES AND OTHER

Accrued expenses at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

Accrued expenses at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

2024 December 31,

5 unchanged sentences

(7) WARRANTY ACCRUALS

The changes in the Company's accrual balance in the three months ended March 31, 2024 were as follows (in thousands):

The changes in the Company's accrual balance in the six months ended June 30, 2024 were as follows (in thousands):

Balance at January 1, 2024 $ 12,243

1 unchanged sentence

Settlements ( 2,628 )

Balance at March 31, 2024 $ 12,256

Balance at June 30, 2024 $ 12,439

(8) RESTRUCTURING AND FACILITIES CONSOLIDATION INITIATIVES

The Company recorded restructuring and related expense aggregating $ 3.1 million and $ 6.9 million in the three months ended March 31, 2024 and 2023, respectively.

The Company recorded restructuring and related expense aggregating $ 1.9 million and $ 4.3 million in the three months ended June 30, 2024 and 2023, respectively and $ 5.0 million and $ 11.2 million in the six months ended June 30, 2024 and 2023, respectively.

Restructuring and related expense includes restructuring expense (primarily severance and related costs), estimated future variable lease costs for vacated properties with no intent or ability of sublease, and accelerated rent amortization expense.

3 unchanged sentences

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.

Accelerated amortization of lease assets that are included as a component of restructuring and related expense are excluded from the restructuring accrual activity tables below, as the liability for lease payments for these facilities is included as a component of current and noncurrent Operating lease liabilities in the Company's condensed consolidated balance sheets at March 31, 2024 and December 31, 2023 (see Note 16).

The Company may incur additional future expense if it is unable to sublease other locations included in the Company's facilities consolidation initiatives.

Restructuring and related expense for the three months ended March 31, 2024 and 2023 was comprised of the following (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended

2024 March 31,

The Company may incur additional future expense if it is unable to sublease other locations included in the Company's facilities consolidation initiatives.

Restructuring and related expense for the three and six months ended June 30, 2024 and 2023 was comprised of the following (in thousands):

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Severance and related costs $ 359 $ 2,843 $ 1,975 $ 8,551

6 unchanged sentences

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

In connection with the 2023 Restructuring Plan, the Company recorded restructuring and related expense of $ 1.6 million and $ 5.7 million in the three months ended March 31, 2024 and 2023, respectively, consisting entirely of severance related costs.

A summary of the 2023 Restructuring Plan accrual activity for the three months ended March 31, 2024 is as follows (in thousands):

In connection with the 2023 Restructuring Plan, the Company recorded restructuring and related expense of $ 0.4 million and $ 2.0 million in the three and six months ended June 30, 2024, respectively, consisting entirely of severance related costs.

A summary of the 2023 Restructuring Plan accrual activity for the six months ended June 30, 2024 is as follows (in thousands):

2024 Initiatives

payments Net transfer to operating lease accounts Balance at

March 31, 2024

June 30, 2024

Severance $ 671 $ 1,975 $ ( 1,852 ) $ — $ 794

3 unchanged sentences

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

The Company recorded restructuring and related expense of $ 1.4 million and $ 1.2 million in the three months ended March 31, 2024 and 2023, respectively, in connection with the 2022 Restructuring Plan.

The amount for the three months ended March 31, 2024 was comprised of $ 1.4 million for facilities-related costs .

The amount for the three months ended March 31, 2023 was comprised of $ 1.0 million for variable and other facilities-related costs and $ 0.2 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease.

A summary of the 2022 Restructuring Plan accrual activity for the three months ended March 31, 2024 is as follows (in thousands):

The Company recorded restructuring and related expense of $ 1.6 million and $ 3.0 million in the three and six months ended June 30, 2024, respectively, in connection with the 2022 Restructuring Plan for variable and other facilities-related costs.

A summary of the 2022 Restructuring Plan accrual activity for the six months ended June 30, 2024 is as follows (in thousands):

2024 Initiatives

payments Balance at

March 31, 2024

June 30, 2024

Variable and other facilities-related costs $ 468 3,010 ( 3,086 ) $ 392

Balance Sheet Classification

The current portions of accrued restructuring were $ 1.4 million and $ 1.1 million at March 31, 2024 and December 31, 2023, respectively, and are included as components of Accrued expenses in the condensed consolidated balance sheets.

The long-term portions of accrued restructuring are included as components of Other long-term liabilities in the condensed consolidated balance sheets.

The long-term portions of accrued restructuring were $ 1.0 million and $ 1.1 million at March 31, 2024 and December 31, 2023, respectively.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Balance Sheet Classification

The current portions of accrued restructuring were $ 1.1 million at both June 30, 2024 and December 31, 2023 and are included as components of Accrued expenses in the condensed consolidated balance sheets.

The long-term portions of accrued restructuring are included as components of Other long-term liabilities in the condensed consolidated balance sheets.

The long-term portions of accrued restructuring were $ 1.0 million and $ 1.1 million at June 30, 2024 and December 31, 2023, respectively.

2024 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.

("Citizens"), Santander Bank, N.A., and others as lenders ("Lenders").

The proceeds from 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 remains 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., a 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).

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.

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.

On June 21 , 2024, the Company entered into a Senior Secured Credit Facilities Credit Agreement (the “2024 Credit Facility” and “2024 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 have provided the Company with a $ 385 million senior secured credit facility 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.

Any excess proceeds are expected to be 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 Agreement).

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 to be 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 $ 6.1 million of debt issuance costs for a total of $ 13.8 million that is being amortized to Interest expense, net over the term of the agreement.

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

The Company was in compliance with the Financial Covenant as of June 30, 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 a lien 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 ("Lenders").

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

On June 30, 2022, the Company entered into the Fifth Amendment to the 2020 Credit Facility (the "Fifth Amendment") to increase the Maximum Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility) for 2022, with the fourth quarter of 2022 increased to 4.75 :1.00, the first and second quarters of 2023 declining to 3.25 :1.00, and in all subsequent quarters the ratio was to be fixed at 3.00 :1.00.

Also, the Fifth Amendment reduced the minimum Consolidated Fixed Charge Coverage Ratio (as defined in the 2020 Credit Facility) in 2022, with the fourth quarter of 2022 reduced to 1.10 :1.00 and in all subsequent quarters the ratio was to be fixed at 1.25 :1.00.

In addition, the Fifth Amendment increased the maximum rate at which loans were to bear interest if the Company's Consolidated Net Leverage Ratio for any quarter was greater than 4.50 :1.00.

Specifically, loans incurred would bear interest, at the Borrower’s option, at either LIBOR plus a margin ranging from 1.50 % to 4.50 % per year, or the base rate plus 0.50 %, or the prime rate plus a margin ranging from 0.50 % to 3.50 % per year.

The Fifth Amendment also allows the Company to incur junior secured or unsecured debt in an amount no less than $ 50 million, subject to certain conditions, including the requirement that 50 % of the aggregate amount of such incurred debt (net of certain costs, fees and other amounts) must be applied to prepay the 2020 Credit Facility, and compliance with certain leverage ratio-based covenant exceptions.

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.

The 2020 Credit Facility had a maturity date of March 2025 and 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 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., a wholly-owned subsidiary of the Company (together, the "Guarantors") .

The 2020 Credit Facility was 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 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 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.

In the fourth quarter of 2023 and the first quarter of 2024, the Maximum Consolidated Net Leverage Ratio declines to 4.25 :1.00 and 4.00 :1.00, 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, 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 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 $ 200.4 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 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 fo r the three months ended March 31, 2023 b enefited from a hedge instrument that was in place, specifically a fixed rate swap, which was sold in March 2023 (see Note 10).

As a result of the fixed rate swap sold in March 2023, the ongoing interest rate is based upon U.S.

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 fo r the six months ended June 30, 2023 b enefited from a hedge instrument that was in place, specifically a fixed rate swap, which was sold in March 2023 (see Note 10).

As a result of the fixed rate swap sold in March 2023, the ongoing 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 March 31, 2024 and December 31, 2023, 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 March 31, 2024 and December 31, 2023:

The Company was in compliance with all covenants of the 2020 Credit Facility at December 31, 2023, including the current 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 June 30, 2024 and December 31, 2023, respectively:

RIBBON COMMUNICATIONS INC.

4 unchanged sentences

Long-term Debt, net of Current (Face Amount) $ 346,500 $ 200,293

Original Issue Discount ( 6,961 ) —

Unamortized Debt Issuance Costs - Contra-Liability ( 5,560 ) ( 2,811 )

1 unchanged sentence

Total Face Amount of Borrowings $ 350,000 $ 235,395

Unamortized Debt Issuance Costs:

Unamortized Original Issue Discount and Debt Issuance Costs:

Other Assets 1,238 557

Current Portion of Term Debt - Contra Liability 2,213 —

Long-Term Debt - Contra Liability 12,521 2,811

Total Unamortized Debt Issuance Costs $ 2,652 $ 3,368

Total Unamortized Original Issue Discount and Debt Issuance Costs $ 13,759 $ 3,368

Letters of Credit Outstanding $ — $ 2,711

3 unchanged sentences

Letters of Credit — % 4.5 %

The Company's debt maturities as of March 31, 2024 were as follows:

The Company's debt maturities as of June 30, 2024 were as follows:

Years ending December 31,

1 unchanged sentence

Letters of Credit and Other Guarantees

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

At March 31, 2024, the Company had $ 9.7 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 $ 7.0 million of bank guarantees and performance and bid bonds (collectively, the "Other Guarantees") under various uncommitted facilities.

At December 31, 2023, the Company had Guarantees aggregating $ 7.9 million, comprised of the $ 2.7 million of Letters of Credit noted above and $ 5.2 million of Other Guarantees.

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

At June 30, 2024, the Company had $ 9.5 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 June 30, 2024 and December 31, 2023, the Company had cash collateral of $ 2.9 million and $ 0.1 million, respectively, supporting the Guarantees, which are reported in Restricted cash in the Company's condensed consolidated balance sheets.

(10) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

2 unchanged sentences

To manage the volatility related to the exposure to changes in interest rates, the Company may enter into derivative financial instruments.

Management's objective has been to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with changes in interest rates.

Ribbon's policies and practices are to use derivative financial instruments only to the extent necessary to manage exposures.

Ribbon does not hold or issue derivative financial instruments for trading or speculative purposes.

Management's objective has been to reduce, where it is

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

deemed appropriate to do so, fluctuations in earnings and cash flows associated with changes in interest rates.

Ribbon's policies and practices are to use derivative financial instruments only to the extent necessary to manage exposures.

Ribbon does not hold or issue derivative financial instruments for trading or speculative purposes.

The Company records derivatives on the balance sheet at fair value.

6 unchanged sentences

Cash Flow Hedge of Interest Rate Risk

The 2020 Term Loan Facility had outstanding balances of $ 230.4 million and $ 235.4 million at March 31, 2024 and December 31, 2023, respectively.

The 2020 Revolving Credit Facility was undrawn at March 31, 2024 and December 31, 2023.

Borrowings under the 2020 Credit Facility have variable interest rates based on LIBOR or SOFR (see Note 9).

The 2024 Term Loan Facility and the 2020 Term Loan Facility had outstanding balances of $ 350.0 million and $ 235.4 million at June 30, 2024 and December 31, 2023, respectively.

The 2024 Revolving Credit Facility and the 2020 Revolving Credit Facility were undrawn at June 30, 2024 and December 31, 2023, respectively.

Borrowings under the 2024 Credit Facility and the 2020 Credit Facility have variable interest rates based on SOFR (see Note 9).

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 (loss) 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 $ 0.2 million and $ 0.3 million for the three months ended March 31, 2024 and 2023, respectively.

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 $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2024, respectively, and $ 0.2 million and $ 0.5 million for the three and six months ended June 30, 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 9 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.

1 unchanged sentence

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 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 $ 1.6 million for the three months ended March 31, 2024.

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 $ 1.4 million and $ 3.0 million for the three and six months ended June 30, 2024, respectively, and $ 1.6 million for both the three and six months ended June 30, 2023.

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 9 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.

To accomplish this objective, the Company has used an interest rate swap as part of its interest rate risk management strategy.

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the related agreements without exchange of the underlying notional amount.

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 condensed consolidated balance sheet and is subsequently reclassified into earnings in the period that the hedged forecasted transactions affect earnings.

During the three months ended March 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 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.

To accomplish this objective, the Company has used an interest rate swap as part of its

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

interest rate risk management strategy.

During the three and six months ended June 30, 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 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 condensed consolidated statements of comprehensive (loss) income for the three months ended March 31, 2024 and 2023 was as follows, net of tax (in thousands):

Three months ended

2024 March 31,

The impact of the Company’s derivative financial instrument on its condensed consolidated statements of comprehensive (loss) income for the three and six months ended June 30, 2024 and 2023 was as follows, net of tax (in thousands):

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Gain (loss) recognized in other comprehensive income (loss) on swap, net of tax $ — $ — $ — $ ( 2,715 )

2 unchanged sentences

Unrealized gain (loss) on interest rate swap, net of reclassifications and amortization $ ( 4,698 ) $ ( 1,322 ) $ ( 6,019 ) $ ( 12,321 )

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

The Company had no derivative assets or liabilities at June 30, 2024 or December 31, 2023.

(11) 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 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 its expected future economic value.

The Warrants remain outstanding and without modification.

See Note 9 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.

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.

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

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

The key assumptions into the models utilized were as follows as of March 31, 2024:

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) 1.5

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 quarterly using the Black-Scholes Pricing Model.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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

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

The key assumptions into the model utilized was as follows as of June 30, 2024:

Warrants (Black-Scholes)

5 unchanged sentences

Time to expiration (years) 2.8

The changes in the Company's Preferred Stock and Warrant liabilities the three months ended March 31, 2024 were as follows (in thousands):

Fair value of Warrant per share $ 1.27

The changes in the Company's Preferred Stock and Warrant liabilities for the six months ended June 30, 2024 were as follows (in thousands):

Preferred stock liability

1 unchanged sentence

Payable in-kind dividends 2,743

Fair value change 1,512

Balance at March 31, 2024 $ 56,204

Reversal of fair value adjustments 5,605

Call premium (3%) 1,851

Redemption (June 25, 2024) $ ( 63,536 )

Balance at June 30, 2024 $ —

Warrant liability

1 unchanged sentence

Fair value change 875

Balance at March 31, 2024 $ 5,927

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 12.00 %.

Balance at June 30, 2024 $ 6,170

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, which expire March 30, 2027, are immediately exercisable and upon an event such as a merger, consolidation, asset sale or similar change of control, may be exercised and the holders may vote the underlying shares of common stock.

In connection with the Private Placement, the Company provided the investors with certain registration rights relating to the Preferred Stock, the Warrants and the shares of the Company’s common stock underlying the Warrants, that required the Company to file a registration statement on Form S-3 with the SEC within 30 days following the closing date of the Private Placement.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

required the Company to file a registration statement on Form S-3 with the SEC within 30 days following the closing date of the Private Placement.

The registration requirement was completed on May 19, 2023.

6 unchanged sentences

Generally, contracts with customers contain multiple performance obligations, consisting of products and services.

For these contracts, the Company accounts for individual performance

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

obligations separately if they are considered distinct.

For these contracts, the Company accounts for individual performance obligations separately if they are considered distinct.

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.

56 unchanged sentences

The Company disaggregates its revenue from contracts with customers based on the nature of the products and services and the geographic regions in which each customer is domiciled.

The Company's revenue for the three months ended March 31, 2024 and 2023 was disaggregated as follows:

The Company's revenue for the three and six months ended June

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended March 31, 2024 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

30, 2024 and 2023 was disaggregated as follows:

Three months ended June 30, 2024 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

United States $ 35,368 $ 32,639 $ 13,462 $ 81,469

3 unchanged sentences

$ 99,133 $ 67,520 $ 25,967 $ 192,620

Three months ended March 31, 2023 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

Three months ended June 30, 2023 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

United States $ 53,545 $ 33,890 $ 11,842 $ 99,277

3 unchanged sentences

$ 117,347 $ 69,628 $ 23,643 $ 210,618

The Company's product revenue from indirect sales through its channel partner program and from its direct sales program for the three months ended March 31, 2024 and 2023 was as follows (in thousands):

Three months ended

2024 March 31,

Six months ended June 30, 2024 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

United States $ 61,975 $ 65,486 $ 25,122 $ 152,583

Europe, Middle East and Africa 74,928 35,187 15,886 126,001

Asia Pacific 42,714 20,000 5,524 68,238

Other 7,126 15,228 3,108 25,462

$ 186,743 $ 135,901 $ 49,640 $ 372,284

Six months ended June 30, 2023 Product revenue Service revenue (maintenance) Service revenue (professional services) Total revenue

United States $ 91,612 $ 66,963 $ 22,695 $ 181,270

Europe, Middle East and Africa 56,266 38,125 14,254 108,645

Asia Pacific 57,425 19,536 5,413 82,374

Other 5,362 15,592 3,534 24,488

$ 210,665 $ 140,216 $ 45,896 $ 396,777

The Company's product revenue from indirect sales through its channel partner program and from its direct sales program for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Indirect sales through channel partner program $ 31,282 $ 37,590 $ 76,957 $ 73,504

1 unchanged sentence

$ 99,133 $ 117,347 $ 186,743 $ 210,665

The Company's product revenue from sales to enterprise customers and from sales to service provider customers for the three months ended March 31, 2024 and 2023 was as follows (in thousands):

Three months ended

2024 March 31,

The Company's product revenue from sales to enterprise customers and from sales to service provider customers for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Sales to enterprise customers $ 38,040 $ 37,707 $ 75,910 $ 65,119

1 unchanged sentence

$ 99,133 $ 117,347 $ 186,743 $ 210,665

The Company's product revenue and service revenue components by segment for the three months ended March 31, 2024 and 2023 were as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended

2024 March 31,

The Company's product revenue and service revenue components by segment for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Product revenue:

19 unchanged sentences

These assets and liabilities are reported in the Company's condensed consolidated balance sheets on a contract-by-contract basis as of the end of each reporting period.

Changes in the contract asset and liability balances during the three months ended March 31, 2024 were not materially impacted by any factors other than billing and revenue recognition.

Changes in the contract asset and liability balances during the six months ended June 30, 2024 were not materially impacted by any factors other than billing and revenue recognition.

Nearly all of the Company's deferred revenue balance is related to services revenue, primarily customer support contracts.

5 unchanged sentences

Unbilled receivables that are anticipated to be invoiced in the next twelve months are included in Accounts receivable on the Company's condensed consolidated balance sheets.

The changes in the Company's accounts receivable, unbilled receivables and deferred revenue balances for the three months ended March 31, 2024 were as follows (in thousands):

The changes in the Company's accounts receivable, unbilled receivables and deferred revenue balances for the six months ended June 30, 2024 were as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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

1 unchanged sentence

Increase (decrease), net ( 42,102 ) ( 15,365 ) ( 13,834 ) ( 2,586 )

Balance at March 31, 2024 $ 143,304 $ 69,194 $ 110,596 $ 14,019

The Company recognized approximately $ 51 million of revenue in the three months ended March 31, 2024 that was recorded as deferred revenue at December 31, 2023 and approximately $ 48 million of revenue in the three months ended March 31, 2023 that was recorded as deferred revenue at December 31, 2022.

Of the Company's deferred revenue reported as long-term in its condensed consolidated balance sheet at March 31, 2024, the Company expects that approximately $ 7 million will be recognized as revenue in 2025, approximately $ 4 million will be recognized as revenue in 2026 and approximately $ 3 million will be recognized as revenue in 2027 and beyond.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Balance at June 30, 2024 $ 144,836 $ 66,118 $ 99,547 $ 16,632

The Company recognized approximately $ 78 million of revenue in the six months ended June 30, 2024 that was recorded as deferred revenue at December 31, 2023 and approximately $ 71 million of revenue in the six months ended June 30, 2023 that was recorded as deferred revenue at December 31, 2022.

Of the Company's deferred revenue reported as long-term in its condensed consolidated balance sheet at June 30, 2024, the Company expects that approximately $ 6 million will be recognized as revenue in 2025, approximately $ 6 million will be recognized as revenue in 2026 and approximately $ 5 million will be recognized as revenue in 2027 and beyond.

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 condensed consolidated statements of operations.

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These costs have been deferred on our condensed consolidated balance sheet and are being amortized over the expected life of the customer contract, which is generally five years .

At both March 31, 2024 and December 31, 2023, the Company had $ 3.0 million of deferred sales commissions capitalized.

At both June 30, 2024 and December 31, 2023, the Company had $ 3 million of deferred sales commissions capitalized.

(13) OPERATING SEGMENT INFORMATION

13 unchanged sentences

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 three months ended March 31, 2024 and 2023 (in thousands):

GAAP, may not be comparable

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended

2024 March 31,

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 three and six months ended June 30, 2024 and 2023 (in thousands):

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Segment revenue:

2 unchanged sentences

Revenue $ 192,620 $ 210,618 $ 372,284 $ 396,777

Three months ended

2024 March 31,

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Segment adjusted gross profit:

5 unchanged sentences

Gross profit $ 97,867 $ 101,470 $ 189,822 $ 182,872

Three months ended

2024 March 31,

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Segment depreciation expense:

3 unchanged sentences

(14) MAJOR CUSTOMERS

The following customer contributed 10% or more of the Company's revenue in the three months ended March 31, 2024 and 2023:

Three months ended

2024 March 31,

The following customer contributed 10% or more of the Company's revenue in the three and six months ended June 30, 2024 and 2023:

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Verizon Communications Inc.

* Less than 10% of total revenue.

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

12 % 11 % 11 % 11 %

At June 30, 2024 and December 31, 2023, no customer accounted for 10% or more of the Company's accounts receivable balance.

The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable.

The Company maintains an allowance for doubtful accounts and such losses have historically been within management's expectations.

(15) STOCK-BASED COMPENSATION PLANS

The Company grants stock-based compensation to employees, officers and non-employee directors, as well as consultants and advisors of the Company and its subsidiaries under its Amended and Restated 2019 Incentive Award Plan which provides for the award of stock options, stock appreciation rights, restricted stock awards ("RSAs"), performance-based stock awards,

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

restricted stock units ("RSUs"), performance-based stock units ("PSUs") and other stock- or cash-based awards.

(15) STOCK-BASED COMPENSATION PLANS

Executive Equity Arrangements

1 unchanged sentence

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.

As of March 31, 2024, the Company estimates that the market conditions surrounding the PSUs granted will not be met by the expiration date of September 1, 2024.

As of June 30, 2024, the Company estimates that the market conditions surrounding the PSUs granted will not be met by the expiration date of September 1, 2024.

Performance-Based Stock Grants

7 unchanged sentences

Restricted Stock Units

The activity related to the Company's RSUs for the three months ended March 31, 2024 was as follows:

The activity related to the Company's RSUs for the six months ended June 30, 2024 was as follows:

Shares Weighted

3 unchanged sentences

Forfeited ( 294,994 ) $ 3.21

Unvested balance at March 31, 2024 6,032,316 $ 2.90

The total grant date fair value of shares of restricted stock underlying RSUs that vested during the three months ended March 31, 2024 was $ 4.5 million.

Unvested balance at June 30, 2024 5,143,878 $ 2.98

The total grant date fair value of shares of restricted stock underlying RSUs that vested during the six months ended June 30, 2024 was $ 10.7 million.

Performance-Based Stock Units

The activity related to the Company's PSUs for the three months ended March 31, 2024 was as follows:

The activity related to the Company's PSUs for the six months ended June 30, 2024 was as follows:

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Shares Weighted

3 unchanged sentences

Forfeited ( 619,168 ) $ 5.82

Unvested balance at March 31, 2024 5,986,345 $ 1.70

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The total grant date fair value of shares of restricted stock underlying PSUs that vested during the three months ended March 31, 2024 was $ 0.2 million.

Unvested balance at June 30, 2024 6,729,076 $ 2.13

The total grant date fair value of shares of restricted stock underlying PSUs that vested during the six months ended June 30, 2024 was $ 0.9 million.

Stock-Based Compensation

The condensed consolidated statements of operations include stock-based compensation for the three months ended March 31, 2024 and 2023 as follows (in thousands):

Three months ended

March 31, 2024 March 31,

The condensed consolidated statements of operations include stock-based compensation for the three and six months ended June 30, 2024 and 2023 as follows (in thousands):

Three months ended Six months ended

June 30, 2024 June 30,

2023 June 30, 2024 June 30,

Product cost of revenue $ 64 $ 115 $ 170 $ 264

4 unchanged sentences

$ 3,494 $ 6,116 $ 8,016 $ 11,964

At March 31, 2024, there was $ 13.4 million , net of expected forfeitures, of unrecognized stock-based compensation expense related to unvested RSUs and PSUs.

At June 30, 2024, there was $ 19.0 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 one year .

10 unchanged sentences

The Company calculates its incremental borrowing rate to reflect the interest rate that it would have to pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment over a similar term and considers its historical borrowing activities and market data from entities with comparable credit ratings in this determination.

The measurement of the right-of-use asset also includes any lease payments made prior to the commencement date (excluding any lease incentives) and initial direct costs incurred.

The Company assessed its right-of-use assets for impairment as of March 31, 2024 and December 31, 2023 and determined no impairment has occurred.

Lease terms may include options to extend or terminate the lease and the Company incorporates such options in the lease term when it has the unilateral right to make such an election and it is reasonably certain that the Company will exercise that option.

In making this determination, the Company considers its prior renewal and termination history and planned usage of the assets under lease, incorporating expected market conditions.

For operating leases, lease expense for minimum fixed lease payments is recognized on a straight-line basis over the lease

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

measurement of the right-of-use asset also includes any lease payments made prior to the commencement date (excluding any lease incentives) and initial direct costs incurred.

The Company assessed its right-of-use assets for impairment as of June 30, 2024 and December 31, 2023 and determined no impairment has occurred.

In making this determination, the Company considers its prior renewal and termination history and planned usage of the assets under lease, incorporating expected market conditions.

For operating leases, lease expense for minimum fixed lease payments is recognized on a straight-line basis over the lease term.

The expense for finance leases includes both interest and amortization expense components, with the interest component calculated based on the effective interest method and the amortization component calculated based on straight-line amortization of the right-of-use asset over the lease term.

3 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 $ 0.2 million in the three months ended March 31, 2023.

No such accelerated amortization was recorded in the three months ended March 31, 2024.

The Company did not record estimated future variable lease costs in the three months ended March 31, 2024 or 2023 related to the 2022 Restructuring Plan.

Accordingly, the Company accelerated the amortization of those lease assets through the planned cease-use date of each facility, resulting in additional amortization expense $ 0.4 million and $ 0.6 million, respectively, in the three and six months ended June 30, 2023.

No such accelerated amortization was recorded in the three and six months ended June 30, 2024.

The Company did not record estimated future variable lease costs in the three and six months ended June 30, 2024 or 2023 related to the 2022 Restructuring Plan.

All incremental accelerated amortization and accruals for estimated future variable costs are included in Restructuring and related expense in the Company's condensed consolidated statements of operations.

At March 31, 2024 and December 31, 2023, the Company had accruals of $ 1.4 million and $ 1.5 million, respectively, for all future anticipated variable lease costs related to these facilities.

At June 30, 2024 and December 31, 2023, the Company had accruals of $ 1.3 million and $ 1.5 million, respectively, for all future anticipated variable lease costs related to these facilities.

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

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

The Company's right-of-use lease assets and lease liabilities at March 31, 2024 and December 31, 2023 were as follows (in thousands):

Classification March 31,

The Company's right-of-use lease assets and lease liabilities at June 30, 2024 and December 31, 2023 were as follows (in thousands):

Classification June 30,

2024 December 31,

3 unchanged sentences

Total Operating lease liabilities $ 47,205 $ 54,450

The components of lease expense for the three months ended March 31, 2024 and 2023 were as follows (in thousands):

Three months ended

2024 March 31,

The components of lease expense for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Operating lease cost* $ 4,107 $ 4,737 $ 8,306 $ 9,497

3 unchanged sentences

Net lease cost $ 8,131 $ 8,911 $ 16,366 $ 17,470

* No accelerated amortization was recorded in the three months ended March 31, 2024.

Operating lease costs for the three months ended March 31, 2023 included $ 0.2 million of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Cash flows related to the Company's leases in both the three months ended March 31, 2024 and 2023 were included in the measurement of operating lease liabilities and classified as operating cash flows and each totaled $ 4.8 million .

Other information related to the Company's leases as of March 31, 2024 and December 31, 2023 was as follows:

* No accelerated amortization was recorded in the three and six months ended June 30, 2024.

Operating lease costs for the three and six months ended June 30, 2023 included $ 0.4 million and $ 0.6 million, respectively, of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

** No variable lease costs were accrued in the three and six months ended June 30, 2024 or 2023 for future estimated variable expenses related to certain assets partially or fully vacated with no intent or ability to sublease.

Cash flows related to the Company's leases included in the measurement of operating lease liabilities were classified as operating cash flows and totaled $ 9.4 million and $ 9.6 million in the six months ended June 30, 2024 and 2023, respectively.

Other information related to the Company's leases as of June 30, 2024 and December 31, 2023 was as follows:

2024 December 31,

3 unchanged sentences

Operating leases 7.15 % 6.34 %

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

Future minimum fixed lease payments under noncancelable leases at June 30, 2024 were as follows (in thousands):

Remainder of 2024 $ 9,118

2029 and beyond 13,153

Total lease payments 56,606

2 unchanged sentences

(17) INCOME TAXES

The Company recorded income tax provisions of $ 3.4 million and $ 1.5 million in the three months ended March 31, 2024 and 2023, respectively.

The Company recorded income tax provisions of $ 4.9 million and $ 6.9 million in the six months ended June 30, 2024 and 2023, respectively.

These amounts reflect the Company's estimates of the effective rates expected to be applicable for the respective full years, adjusted for any discrete events, which are recorded in the period in which they occur.

1 unchanged sentence

The estimated effective tax rate includes the impact of valuation allowances in various jurisdictions.

The Company intends to continue to maintain a valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of the respective allowances.

The Company intends to continue to maintain a

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of the respective allowances.

(18) RELATED PARTIES

The Company recognized revenue from its largest stockholder of $ 1.5 million and $ 0.8 million in the three months ended March 31, 2024 and 2023, respectively.

Additionally, as discussed in Note 11, certain related party stockholders participated in the Private Placement.

The Company recognized revenue from its largest stockholder of $ 1.5 million and $ 5.0 million in the three months ended June 30, 2024 and 2023, respectively, and $ 3.0 million and $ 5.8 million in the six months ended June 30, 2024 and 2023, respectively.

Also, certain related party stockholders participated in the Private Placement (See Note 11).

(19) COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

("ECI"), ECI had received research and development grants from the Office of the Innovation Authority of the Israeli Ministry of Economics (the "IIA").

The Company assumed ECI's contract with the IIA, which requires the Company to pay royalties to the IIA on proceeds from the sale of products which the

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Israeli government has supported by way of research and development grants.

The Company assumed ECI's contract with the IIA, which requires the Company to pay royalties to the IIA on proceeds from the sale of products which the Israeli government has supported by way of research and development grants.

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 subsequently, interest was calculated at the higher of LIBOR plus 1.5 % to 2.75 %.

At March 31, 2024, the Company's maximum possible future royalties commitment, including $ 1.8 million of unpaid royalties accrued, was $ 20.6 million , including interest of $ 1.1 million , based on estimates of future product sales, grants received from the IIA not yet repaid, and management's estimation of products still to be sold.

At June 30, 2024, the Company's maximum possible future royalties commitment, including $ 1.0 million of unpaid royalties accrued, was $ 19.6 million , including interest of $ 1.1 million , based on estimates of future product sales, grants received from the IIA not yet repaid, and management's estimation of products still to be sold.

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

14 unchanged sentences

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.

The settlement provided a release of all claims asserted

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

in the litigation to all Defendants, who continue to deny liability.

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

6 unchanged sentences

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 new trial date of June 2025.

WideOpenWest Complaint.

2 unchanged sentences

The complaint was filed in the 429th Judicial District of the District Court of the State of Texas, in Collin County, Texas and has since been transferred to the 493rd Judicial District Court in Collin County.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

complaint, WOW is seeking monetary damages.

In the complaint, WOW is seeking monetary damages.

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.

(20) SUBSEQUENT EVENT

On May 15, 2024, the Company entered into a binding commitment letter (the "Commitment Letter") with HPS Investment Partners, LLC ("HPS") and WhiteHorse Capital Management, LLC ("WhiteHorse" and, together with HPS, the "Lenders"), pursuant to which the Lenders have committed to provide the Company with a $ 385 million senior secured credit facility (the "Refinancing Facility") comprised of (i) a $ 350 million term loan and (ii) a $ 35 million revolving credit facility.

The funds from the Refinancing Facility will be used to (a) repay 100 % of the amounts outstanding under the 2020 Credit Facility (b) redeem in full the Company's outstanding Series A preferred stock and (c) pay fees and expenses related to the Refinancing Facility.

Any excess proceeds will be used by the Company for working capital.

The funding of the Refinancing Facility is subject to satisfaction of customary closing conditions.

The Company expects the Refinancing Facility to close and fund no later than June 30, 2024.

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

What changed 10-Q

Item 1. Financial Statements