What changed in this filing

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Item 1. Financial Statements

2024-10-24 compared with 2024-07-29 · 387 added, 393 removed, 610 unchanged (56% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

2024 December 31,

September 30,

Current assets:

2 unchanged sentences

Accounts receivable, net

Inventory 79,216 77,521

Other current assets

2 unchanged sentences

Intangible assets, net

Goodwill 300,892 300,892

Deferred income taxes

Operating lease right-of-use assets

Other assets 35,562 35,092

$ 1,105,452 $ 1,144,153

Liabilities and Stockholders’ Equity

9 unchanged sentences

Preferred stock liability, $ 0.01 par value per share;

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

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

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

8 unchanged sentences

240,000,000 shares authorized;

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

174,735,798 shares issued and outstanding at September 30, 2024;

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

1 unchanged sentence

Accumulated deficit

( 1,580,549 )

( 1,519,950 )

Accumulated other comprehensive income

Total stockholders’ equity

$ 1,105,452 $ 1,144,153

See notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands, except per share data)

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

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

Service 93,487 93,271 185,541 186,112

Three months ended

Nine months ended

September 30,

Total revenue

Cost of revenue:

Product 54,845 67,927 100,639 129,990

Service 33,376 33,782 68,740 69,087

Amortization of acquired technology

Total cost of revenue

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

Operating expenses:

6 unchanged sentences

Total operating expenses

Loss from operations ( 1,935 ) ( 6,622 ) ( 15,421 ) ( 41,811 )

(Loss) income from operations

Interest expense, net

Other (expense) income, net ( 9,503 ) ( 2,688 ) ( 17,016 ) 2,084

Other income (expense), net

Loss before income taxes

Income tax provision

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

Loss per share:

Basic $ ( 0.10 ) $ ( 0.13 ) $ ( 0.27 ) $ ( 0.35 )

Diluted $ ( 0.10 ) $ ( 0.13 ) $ ( 0.27 ) $ ( 0.35 )

Weighted average shares used to compute loss per share:

Basic 173,793 170,103 173,110 169,326

Diluted 173,793 170,103 173,110 169,326

See notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

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 )

Three months ended

Nine months ended

September 30,

Other comprehensive income (loss), net of tax:

2 unchanged sentences

Foreign currency translation adjustments

Other comprehensive loss, net of tax ( 4,522 ) ( 1,756 ) ( 5,959 ) ( 12,906 )

Other comprehensive income (loss), net of tax

Comprehensive loss, net of tax

3 unchanged sentences

(in thousands, except shares)

Three months ended June 30, 2024

Additional other Total

Common stock paid-in Accumulated comprehensive stockholders'

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

Three months ended September 30, 2024

comprehensive

stockholders'

(loss) income

Balances, July 1, 2024

( 1,567,127 )

Exercise of stock options

Vesting of restricted stock awards and units

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

Stock-based compensation expense

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

Other comprehensive income

Balances, September 30, 2024

( 1,580,549 )

Nine months ended September 30, 2024

comprehensive

stockholders'

(loss) income

Balances, January 1, 2024

( 1,519,950 )

Exercise of stock options

2 unchanged sentences

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

( 1,089,888 )

Stock-based compensation expense

Other comprehensive loss

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

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

Balances, September 30, 2024

( 1,580,549 )

See notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands, except shares)

Three months ended June 30, 2023

Additional other Total

Common stock paid-in Accumulated comprehensive stockholders'

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

Three months ended September 30, 2023

comprehensive

stockholders'

(loss) income

Balances, July 1, 2023

( 1,513,528 )

Exercise of stock options

3 unchanged sentences

Other comprehensive loss

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, September 30, 2023

( 1,527,029 )

Nine months ended September 30, 2023

comprehensive

stockholders'

(loss) income

Balances, January 1, 2023

( 1,453,744 )

Exercise of stock options

2 unchanged sentences

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

( 1,223,900 )

Stock-based compensation expense

Other comprehensive loss

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

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

Balances, September 30, 2023

( 1,527,029 )

See notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Six months ended

2024 June 30,

Nine months ended

September 30,

Cash flows from operating activities:

Net loss $ ( 47,177 ) $ ( 59,784 )

Adjustments to reconcile net loss to cash flows provided by operating activities:

Adjustments to reconcile net loss to cash flows used in operating activities:

Depreciation and amortization of property and equipment

9 unchanged sentences

Payment of dividends accrued on preferred stock liability

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

Foreign currency exchange losses

Changes in operating assets and liabilities:

Accounts receivable

Inventory ( 4,405 ) ( 2,221 )

Other operating assets

2 unchanged sentences

Deferred revenue

Net cash provided by operating activities 3,322 8,574

Net cash used in operating activities

Cash flows from investing activities:

20 unchanged sentences

(in thousands)

Six months ended

2024 June 30,

Nine months ended

September 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 six months ended June 30, 2024.

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

Principles of Consolidation

3 unchanged sentences

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

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

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

Ribbon bases its

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

including impairments, warranty accruals, legal contingencies and recoverability of Ribbon’s net deferred tax assets and the related valuation allowances.

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

Ribbon bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Actual results could differ from those estimates.

1 unchanged sentence

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.

At September 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 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,

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

Three months ended

Nine months ended

September 30,

Accounts receivable sold

1 unchanged sentence

Net cash proceeds

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.

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

the Company beginning in 2025, with early adoption permitted.

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

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

The Company expects the adoption of the standard will require certain additional income tax 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.

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

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

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

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

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

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

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

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

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

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

The Company is closely monitoring developments and evaluating the impacts these new rules will have on its tax rate, including eligibility to qualify for these safe harbor rules.

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

ASU 2023-07 will be effective for the Company beginning with its 2024 annual financial statements and interim financial statements thereafter and will be applied retrospectively for all periods presented in the financial statements.

The Company’s adoption of this standard will require certain additional segment disclosures.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(2) EARNINGS (LOSS) PER SHARE

2 unchanged sentences

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

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Three months ended

Nine months ended

September 30,

Weighted average shares outstanding—basic

1 unchanged sentence

Weighted average shares outstanding—diluted

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)

"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.

Options to purchase the Company’s common stock and unvested restricted and performance-based stock units aggregating 8.1 million and 14.4 million shares were excluded from the computation of diluted loss per share for the three and nine months ended September 30, 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).

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.

On June 25, 2024, the Company redeemed the Preferred Stock with a portion of the proceeds from its 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.

As of September 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 nine months ended September 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.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(3) INVENTORY

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

2024 December 31,

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

September 30,

On-hand final assemblies and finished goods inventories

Deferred cost of goods sold

99,796 96,346

Less noncurrent portion (included in Other assets)

1 unchanged sentence

(4) INTANGIBLE ASSETS AND GOODWILL

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

amortization Net

carrying value

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

September 30, 2024

Developed technology

Customer relationships

Trade names 3.88 5,000 4,954 46

Software licenses

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

(years) Cost Accumulated

amortization Net

carrying value

December 31, 2023

Developed technology

Customer relationships

Trade names 3.88 5,000 4,901 99

Software licenses

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

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

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

Years ending December 31,

Remainder of 2024

Thereafter 28,444

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

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

There were no changes to the carrying value of the Company’s goodwill in the nine months ended September 30, 2024 and 2023.

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

Accumulated impairment losses

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

(5) FAIR VALUE HIERARCHY

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 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.

Ribbon’s term debt balance as of September 30, 2024 and December 31, 2023 of $ 349.1 million and $ 235.4 million, respectively, had a fair value of approximately $ 330.4 million and $ 235.1 million, respectively.

The Company’s Warrant liability had a fair value of $ 5.6 million and $ 5.3 million as of September 30, 2024 and December 31, 2023, respectively.

The Company’s 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 June 30, 2024 or December 31, 2023.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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

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 six months ended June 30, 2024 that required the calculation of their fair value as of June 30, 2024.

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

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.

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(6) ACCRUED EXPENSES AND OTHER

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

2024 December 31,

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

September 30,

Employee compensation and related costs

1 unchanged sentence

Taxes payable

Other 31,247 29,920

$ 92,847 $ 91,687

(7) WARRANTY ACCRUALS

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

The changes in the Company’s accrual balance in the nine months ended September 30, 2024 were as follows (in thousands):

Balance at January 1, 2024

Current period provisions

Settlements ( 2,628 )

Balance at June 30, 2024 $ 12,439

Balance at September 30, 2024

(8) RESTRUCTURING AND FACILITIES CONSOLIDATION INITIATIVES

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.

The Company recorded restructuring and related expense aggregating $ 3.8 million and $ 2.7 million in the three months ended September 30, 2024 and 2023, respectively and $ 8.8 million and $ 13.9 million in the nine months ended September 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.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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 June 30, 2024 and December 31, 2023 (see Note 16).

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 September 30, 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 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,

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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

Three months ended

Nine months ended

September 30,

Severance and related costs

1 unchanged sentence

Accelerated amortization of lease assets due to cease-use

$ 1,920 $ 4,307 $ 4,985 $ 11,244

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

The Company recorded $ 2.2 million in the three months ended September 30, 2024 related to these actions.

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

2023 Restructuring Plan

2 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 $ 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

June 30, 2024

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

In connection with the 2023 Restructuring Plan, the Company recorded restructuring and related expense of $ 0.1 million and $ 2.1 million in the three and nine months ended September 30, 2024, respectively, consisting entirely of severance related costs.

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

Net transfer to

operating lease

September 30,

2022 Restructuring Plan

2 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 $ 1.6 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

June 30, 2024

The Company recorded restructuring and related expense of $ 1.5 million and $ 4.5 million in the three and nine months ended September 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 nine months ended September 30, 2024 is as follows (in thousands):

September 30, 2024

Variable and other facilities-related costs

2 unchanged sentences

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 current portions of accrued restructuring were $ 2.7 million and $ 1.1 million at September 30, 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 June 30, 2024 and December 31, 2023, respectively.

The long-term portions of accrued restructuring were $ 0.9 million and $ 1.1 million at September 30, 2024 and December 31, 2023, respectively.

2024 Credit Facility

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.

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

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

2 unchanged sentences

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:

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

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

1 unchanged sentence

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

The Company was in compliance with the Financial Covenant as of September 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").

1 unchanged sentence

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)

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").

as the borrower (the "Borrower"), Citizens Bank, N.A., Santander Bank, N.A., and others as lenders ("2020 Credit Facility Lenders").

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

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

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

The indebtedness and other obligations under the 2020 Credit Facility were unconditionally guaranteed on a senior secured basis by the Company, Edgewater Networks, Inc., a wholly-owned subsidiary of the Company, and GENBAND Inc., 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 was secured by first-priority liens on substantially all of the assets of the Borrower and the 2020 Credit Facility Guarantors, including substantially all of the assets of the Company.

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

6 unchanged sentences

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.

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

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

The Company's interest rates under the 2020 Term Loan 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.

The Company’s interest rates for the nine months ended September 30, 2023 under the 2020 Term Loan benefited from a hedge instrument that was in place, specifically a fixed rate swap, until it was sold in March 2023 (see Note 10).

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

dollar SOFR plus a fixed margin of 4.5 %.

The Company was in compliance with all covenants of the 2020 Credit Facility at 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:

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

2024 December 31,

September 30,

Current portion of Term Debt

6 unchanged sentences

Unamortized Original Issue Discount and Debt Issuance Costs:

Other Assets 1,238 557

Long-Term Debt - Contra Liability

3 unchanged sentences

Average Interest Rates:

Term Loan 11.6 % 10.0 %

Letters of Credit

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

The Company’s debt maturities as of September 30, 2024 were as follows:

Years ending December 31,

2 unchanged sentences

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 September 30, 2024, the Company had $ 10.4 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.

At September 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.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(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

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.

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.

8 unchanged sentences

Cash Flow Hedge of Interest Rate Risk

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.

The 2024 Term Loan Facility and the 2020 Term Loan Facility had outstanding balances of $ 349.1 million and $ 235.4 million at September 30, 2024 and December 31, 2023, respectively.

The 2024 Revolving Credit Facility and the 2020 Revolving Credit Facility were undrawn at September 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).

2 unchanged sentences

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 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 gain in accumulated other comprehensive (loss) income related to the $ 60 million notional amount sold of $ 3.1 million was being released into earnings on a straight line basis over the remaining term of the 2020 Credit Facility as a decrease to interest expense until it was refinanced on June 21, 2024, the amortization of which totaled $ 0.4 million and $ 0.7 million for the nine months ended September 30, 2024 and 2023, respectively.

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

2 unchanged sentences

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

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

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

the final sale of our swap totaled $ 7.3 million and was released into earnings immediately as Other expense, net.

The portion of the gain in accumulated other comprehensive (loss) income related to our remaining term loan debt balance was $ 12.0 million and was being released into earnings on a straight line basis over the remaining term of the 2020 Credit Facility as a decrease to interest expense until it was refinanced on June 21, 2024, the amortization of which totaled $ 3.0 million and $ 3.1 million for the nine months ended September 30, 2024 and 2023, respectively.

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

1 unchanged sentence

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

interest rate risk management strategy.

To accomplish these objectives, 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 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.

During the nine months ended September 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.

1 unchanged sentence

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 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,

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

Three months ended

Nine months ended

September 30,

Gain (loss) recognized in other comprehensive income (loss) on swap, net of tax

2 unchanged sentences

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

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

The Company had no derivative assets or liabilities at September 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.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

5 unchanged sentences

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)

Stock price $ 3.29

Strike price $ 3.77

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

(Black-Scholes)

Risk-free rate

Volatility 61.5 %

Dividend yield

1 unchanged sentence

Fair value of Warrant per share

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

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

Preferred stock

Balance at January 1, 2024

3 unchanged sentences

Redemption (June 25, 2024)

Balance at June 30, 2024 $ —

Balance at September 30, 2024

Warrant liability

1 unchanged sentence

Fair value change

Balance at June 30, 2024 $ 6,170

Balance at September 30, 2024

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.

1 unchanged sentence

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 %.

At the Company’s option, the

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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 %.

4 unchanged sentences

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.

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.

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.

The registration requirement was completed on May 19, 2023.

25 unchanged sentences

Customer support revenue is recognized ratably over the term of the customer support agreement, which is typically one year .

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company’s professional services include consulting, technical support, resident engineer services, design services and installation services.

9 unchanged sentences

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company’s typical performance obligations include the following:

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

When Performance Obligation is Typically

Performance Obligation

When Payment is Typically Due

Software and Product Revenue

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

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

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

Hardware When control of the hardware passes to the customer;

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

Software upgrades Upon transfer of control;

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

Software licenses (perpetual or term)

Upon transfer of control;

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

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

Software licenses (subscription)

Upon activation of hosted site (over time)

Generally, within 30 days of invoicing

When control of the hardware passes to the customer;

typically, upon delivery (point in time)

Generally, within 30 days of invoicing

Software upgrades

Upon transfer of control;

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

Generally, within 30 days of invoicing

Customer Support Revenue

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

Customer support

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

Generally, within 30 days of invoicing

Professional Services

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

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

Other professional services (excluding training services)

As work is performed (over time)

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

When the class is taught (point in time)

Generally, within 30 days of services being performed

Significant Judgments

2 unchanged sentences

Judgment is required to determine the standalone selling price ("SSP") for each distinct performance obligation.

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

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

and services by customers and circumstances.

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

5 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 and six months ended June

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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

The Company’s revenue for the three and nine months ended September 30, 2024 and 2023 was disaggregated as follows:

Service revenue

(professional

Three months ended September 30, 2024

(maintenance)

Total revenue

United States

Europe, Middle East and Africa

Asia Pacific 26,081 9,759 2,597 38,437

Other 4,445 7,631 1,720 13,796

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

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

Service revenue

(professional

Three months ended September 30, 2023

(maintenance)

Total revenue

United States

Europe, Middle East and Africa

Asia Pacific 31,810 10,164 2,269 44,243

Other 3,161 7,576 1,853 12,590

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

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

Service revenue

(professional

Nine months ended September 30, 2024

(maintenance)

Total revenue

United States

Europe, Middle East and Africa

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

Service revenue

(professional

Nine months ended September 30, 2023

(maintenance)

Total revenue

United States

Europe, Middle East and Africa

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

Direct sales 67,851 79,757 109,786 137,161

$ 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 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,

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

Three months ended

Nine months ended

September 30,

Indirect sales through channel partner program

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

Three months ended

Nine months ended

September 30,

Sales to enterprise customers

Sales to service provider customers

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

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,

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

Three months ended

Nine months ended

September 30,

Product revenue:

17 unchanged sentences

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

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

The Company may receive advances or deposits from its customers before revenue is recognized, resulting in contract liabilities that are

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

classified as deferred revenue.

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 six months ended June 30, 2024 were not materially impacted by any factors other than billing and revenue recognition.

Changes in the contract asset and liability balances during the nine months ended September 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 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)

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

Balance at January 1, 2024

Increase (decrease), net

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.

Balance at September 30, 2024

The Company recognized approximately $ 95 million of revenue in the nine months ended September 30, 2024 that was recorded as deferred revenue at December 31, 2023 and approximately $ 92 million of revenue in the nine months ended September 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 September 30, 2024, the Company expects that approximately $ 3 million will be recognized as revenue in 2025 , approximately $ 7 million will be recognized as revenue in 2026 and approximately $ 7 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.

2 unchanged sentences

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

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

(13) OPERATING SEGMENT INFORMATION

2 unchanged sentences

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

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

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

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

and within service provider networks.

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

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

GAAP, may not be comparable

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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.

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 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,

The tables below provide revenue, adjusted gross profit and depreciation expense by reportable segment for the three and nine months ended September 30, 2024 and 2023 (in thousands):

Three months ended

Nine months ended

September 30,

Segment revenue:

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IP Optical Networks

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

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Three months ended

Nine months ended

September 30,

Segment adjusted gross profit:

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Amortization of acquired technology

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

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Three months ended

Nine months ended

September 30,

Segment depreciation expense:

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Depreciation expense

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(14) MAJOR CUSTOMERS

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,

The following customer contributed 10% or more of the Company’s revenue in the three and nine months ended September 30, 2024 and 2023:

Three months ended

Nine months ended

September 30,

Verizon Communications Inc.

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.

At September 30, 2024, Verizon Communications Inc.

accounted for just over 10% of the Company’s accounts receivable balance.

At 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.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(15) STOCK-BASED COMPENSATION PLANS

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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 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.

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

Performance-Based Stock Grants

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Shares subject to PSUs that fail to be earned will be forfeited.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

Restricted Stock Units

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

Shares Weighted

The activity related to the Company’s RSUs for the nine months ended September 30, 2024 was as follows:

Unvested balance at January 1, 2024

Granted 1,374,541 $ 3.22

Vested ( 3,027,037 ) $ 3.54

Forfeited ( 294,994 ) $ 3.21

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.

( 3,444,670 )

Unvested balance at September 30, 2024

The total grant date fair value of shares of restricted stock underlying RSUs that vested during the nine months ended September 30, 2024 was $ 11.9 million.

Performance-Based Stock Units

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

The activity related to the Company’s PSUs for the nine months ended September 30, 2024 was as follows:

Unvested balance at January 1, 2024

Granted 1,338,985 $ 4.32

Vested ( 288,672 ) $ 3.14

Forfeited ( 619,168 ) $ 5.82

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.

( 4,035,835 )

Unvested balance at September 30, 2024

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

Stock-Based Compensation

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,

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

Three months ended

Nine months ended

September 30,

Product cost of revenue

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General and administrative

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

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.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

At September 30, 2024, there was $ 15.1 million, net of expected forfeitures, of unrecognized stock-based compensation expense related to unvested RSUs and PSUs.

This expense is expected to be recognized over a weighted average period of approximately one year .

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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.

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.

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 September 30, 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.

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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 $ 0.4 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.

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 and $ 0.8 million, respectively, in the three and nine months ended September 30, 2023.

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

The Company did no t record estimated future variable lease costs in the three and nine months ended September 30, 2024 or 2023 related to the 2022 Restructuring Plan.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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 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.

At September 30, 2024 and December 31, 2023, the Company had accruals of $ 1.2 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 June 30, 2024 and December 31, 2023 were as follows (in thousands):

Classification June 30,

2024 December 31,

Operating lease assets Operating lease right-of-use assets $ 33,901 $ 39,783

Current Operating Operating lease liabilities $ 12,347 $ 15,739

Non-Current Operating Operating lease liabilities, net of current 34,858 38,711

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

September 30,

Classification

Operating lease assets

Operating lease right-of-use assets

Current Operating

Operating lease liabilities

Non-Current Operating

Operating lease liabilities, net of current

Total Operating lease liabilities

The components of lease expense for the 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,

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

Three months ended

Nine months ended

September 30,

Operating lease cost*

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Net lease cost

* 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,

No accelerated amortization was recorded in the three and nine months ended September 30, 2024.

Operating lease costs for three and nine months ended September 30, 2023 included $ 0.2 million and $ 0.8 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 nine months ended September 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 $ 14.0 million and $ 14.3 million in the nine months ended September 30, 2024 and 2023, respectively.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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

September 30,

Weighted average remaining lease term (years):

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Operating leases

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

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

Remainder of 2024

1 unchanged sentence

Total lease payments

interest ( 9,401 )

Present value of lease liabilities

(17) INCOME TAXES

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.

The Company recorded income tax provisions of $ 6.5 million and $ 11.5 million in the nine months ended September 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.

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

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.

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.

(18) RELATED PARTIES

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.

The Company recognized revenue from its largest stockholder of $ 1.4 million and $ 1.3 million in the three months ended September 30, 2024 and 2023, respectively, and $ 4.4 million and $ 7.1 million in the nine months ended September 30, 2024 and 2023, respectively.

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

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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.

RIBBON COMMUNICATIONS INC.

Notes to Condensed Consolidated Financial Statements (Continued)

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 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.

At September 30, 2024, the Company had $ 1.6 million of unpaid royalties accrued.

The Company’s maximum possible future royalties commitment at September 30, 2024 was $ 19.8 million, including interest of $ 1.2 million, is based upon estimates of future product sales and the grants received from the IIA not yet repaid.

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

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

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

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

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

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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

The settlement provided a release of all claims asserted 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.

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.

Charter Complaint.

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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.

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

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

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