What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-24 compared with 2025-04-30 · 201 added, 129 removed, 200 unchanged (62% of the section changed)

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Key Trends and Economic Factors Affecting Ribbon

The United States has implemented, or threatened to implement, tariffs on products imported into the United States from numerous countries, including Mexico, Canada, China, Taiwan, Thailand and the European Union, amongst others.

Many of these countries have implemented, or have threatened to implement, reciprocal tariffs in response.

We maintain a global supply chain with our contract manufacturing partners located outside of the United States in several different countries.

While the announced tariffs have not had a material impact on our business to date, the proposed tariffs, including exemptions under existing trade agreements or otherwise are continuing to evolve and could result in additional expenses for products we import into the United States.

In addition, the economic uncertainty caused by the tariffs may result in customers delaying planned purchases of products and services.

Supplier Disruptions.

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and other European countries have imposed sanctions and trade restrictions against Russia in connection with the war in Ukraine.

These sanctions and restrictions currently prohibit our ability to sell hardware products in Russia or provide any replacement parts in Russia.

These sanctions and restrictions currently prohibit our ability to sell hardware products in

Russia or provide any replacement parts in Russia.

The sanctions continue to evolve and further changes in the current sanctions or trade restrictions could further limit our ability to sell products and services to customers in Russia, our ability to collect on outstanding accounts receivable from such customers, and our ability to repatriate funds.

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We continue to see near-term impacts on our business due to inflation, including ongoing global price pressures resulting in higher energy prices, component costs, freight premiums, and other operating costs above normal rates.

Although headline inflation in the United States and Europe appears to be easing, core

inflation (excluding food and energy prices) remains elevated and is a source of continued cost pressure on businesses and households.

Although headline inflation in the United States and Europe appears to be easing, core inflation (excluding food and energy prices) remains elevated and is a source of continued cost pressure on businesses and households.

Interest rates remain high as central banks in developed countries attempt to subdue inflation while government deficits and debt remain at high levels in many global markets.

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Financial Results

We reported loss from operations of $19.6 million and $13.5 million for the three months ended March 31, 2025 and 2024, respectively.

Our revenue was $181.3 million and $179.7 million in the three months ended March 31, 2025 and 2024, respectively.

Our gross profit and gross margin were $82.4 million and 45.4%, respectively, in the three months ended March 31, 2025, and $92.0 million and 51.2%, respectively, in the three months ended March 31, 2024.

The higher revenue in the three months ended March 31, 2025 compared to 2024 is due to $5.9 million of higher overall Cloud and Edge revenue, partially offset by $4.3 million of lower IP Optical Networks sales.

The higher Cloud and Edge revenue was attributable to $8.0 million of higher sales of professional services, primarily to U.S.

service providers, partially offset by $2.4 million of lower maintenance revenue.

The lower IP Optical Networks revenue was led by fewer sales into Eastern Europe, which were partially offset by growth in India and Southeastern Asia.

Revenue from our Cloud and Edge segment was $107.6 million and $101.7 million in the three months ended March 31, 2025 and 2024, respectively.

Gross profit and gross margin for this segment were $66.1 million and 61.5%, respectively, in the three months ended March 31, 2025, and $64.4 million and 63.4%, respectively, in the three months ended March 31, 2024.

Revenue from our IP Optical Networks segment was $73.7 million and $78.0 million in the three months ended March 31, 2025 and 2024, respectively.

Gross profit and gross margin for this segment were $16.2 million and 22.0%, respectively, in the three months ended March 31, 2025, and $27.5 million and 35.3%, respectively, in the three months ended March 31, 2024.

Our operating expenses were $102.0 million and $105.4 million in the three months ended March 31, 2025 and 2024, respectively.

The decreased operating expenses in the three months ended March 31, 2025 compared to 2024 are primarily related to lower sales and marketing, and research and development (“R&D”) expenses, partially offset by higher restructuring related expenses.

Operating expenses for the three months ended March 31, 2025 included $6.2 million of amortization of acquired intangible assets, and $5.3 million of restructuring and related expense.

expenses for the three months ended March 31, 2024 included $6.7 million of amortization of acquired intangible assets, and $3.1 million of restructuring and related expense.

We recorded stock-based compensation expense of $4.3 million and $4.5 million in the three months ended March 31, 2025 and 2024, respectively.

We reported income from operations of $4.2 million and a loss from operations of $1.9 million for the three months ended June 30, 2025 and 2024, respectively.

We reported a loss from operations of $15.4 million for each of the six months ended June 30, 2025 and 2024.

Our revenue was $220.6 million and $192.6 million in the three months ended June 30, 2025 and 2024, respectively.

Our gross profit and gross margin were $109.3 million and 49.6%, respectively, in the three months ended June 30, 2025, and $97.9 million and 50.8%, respectively, in the three months ended June 30, 2024.

The higher revenue in the three months ended June 30, 2025 compared to 2024 is due to $26.5 million of higher overall Cloud and Edge revenue and $1.5 million of higher IP Optical Networks sales.

The higher Cloud and Edge revenue was attributable to $16.5 million of higher product sales and $10.8 million of higher sales of professional services, partially offset by $0.8 million of lower maintenance revenue.

The higher IP Optical Networks revenue was primarily due to higher maintenance revenue.

Our revenue was $401.9 million and $372.3 million in the six months ended June 30, 2025 and 2024, respectively.

Our gross profit and gross margin were $191.7 million and 47.7%, respectively, in the six months ended June 30, 2025, and $189.8 million and 51.0%, respectively, in the six months ended June 30, 2024.

The higher revenue in the six months ended June 30, 2025 compared to 2024 is due to $32.4 million of higher overall Cloud and Edge revenue, partially offset by $2.8 million of lower IP Optical Networks sales.

The higher Cloud and Edge revenue was attributable to $18.8 million of higher sales of professional services and $16.9 million of higher product sales, partially offset by $3.3 million of lower maintenance revenue.

The lower IP Optical Networks revenue was due to $6.6

million of lower product sales, partially offset by $2.1 million of higher maintenance revenue and $1.6 million of higher sales of professional services.

Revenue from our Cloud and Edge segment was $137.0 million and $110.6 million in the three months ended June 30, 2025 and 2024, respectively.

Gross profit and gross margin for this segment were $83.7 million and 61.1%, respectively, in the three months ended June 30, 2025, and $70.4 million and 63.7%, respectively, in the three months ended June 30, 2024.

Revenue from our Cloud and Edge segment was $244.6 million and $212.2 million in the six months ended June 30, 2025 and 2024, respectively.

Gross profit and gross margin for this segment were $149.8 million and 61.2%, respectively, in the six months ended June 30, 2025, and $134.9 million and 63.6%, respectively, in the six months ended June 30, 2024.

Revenue from our IP Optical Networks segment was $83.5 million and $82.1 million in the three months ended June 30, 2025 and 2024, respectively.

Gross profit and gross margin for this segment were $25.6 million and 30.6%, respectively, in the three months ended June 30, 2025, and $27.4 million and 33.4%, respectively, in the three months ended June 30, 2024.

Revenue from our IP Optical Networks segment was $157.2 million and $160.1 million in the six months ended June 30, 2025 and 2024, respectively.

Gross profit and gross margin for this segment were $41.8 million and 26.6%, respectively, in the six months ended June 30, 2025, and $55.0 million and 34.3%, respectively, in the six months ended June 30, 2024.

Our operating expenses were $105.1 million and $99.8 million in the three months ended June 30, 2025 and 2024, respectively, and $207.1 million and $205.2 million in the six months ended June 30, 2025 and 2024, respectively.

The increased operating expenses are primarily attributable to $3.9 million of legal and professional fees recorded in 2025 associated with contemplated corporate development activities, and slightly higher general and administrative expenses, partially offset by lower sales and marketing expense.

Operating expenses for the three months ended June 30, 2025 included $6.0 million of amortization of acquired intangible assets, $3.9 million of acquisition-, disposal- and integration-related expense and $1.3 million of restructuring and related expense.

Operating expenses for the three months ended June 30, 2024 included $6.5 million of amortization of acquired intangible assets, and $1.9 million of restructuring and related expense.

Operating expenses for the six months ended June 30, 2025 included $12.1 million of amortization of acquired intangible assets, $3.9 million of acquisition-, disposal- and integration-related expense and $6.7 million of restructuring and related expense.

Operating expenses for the six months ended June 30, 2024 included $13.2 million of amortization of acquired intangible assets, and $5.0 million of restructuring and related expense.

We recorded stock-based compensation expense of $4.5 million and $3.5 million in the three months ended June 30, 2025 and 2024, respectively, and $8.8 million and $8.0 million in the six months ended June 30, 2025 and 2024, respectively.

These amounts are included as components of both Cost of revenue and Operating expenses in our condensed consolidated statements of operations.

See "Results of Operations" in this MD&A for a discussion of the changes in our revenue and expenses for three months ended March 31, 2025 compared to three months ended March 31, 2024.

See "Results of Operations" in this MD&A for a discussion of the changes in our revenue and expenses for three and six months ended June 30, 2025 compared to three and six months ended June 30, 2024.

Restructuring and Cost Reduction Initiatives

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

In connection with the 2025 Restructuring Plan, we recorded restructuring and related expense of $2.4 million in the three months ended March 31, 2025.

We anticipate that we will record nominal future expense in connection with the 2025 Restructuring Plan.

In February 2023, our Board of Directors approved a strategic restructuring program (the "2023 Restructuring Plan") to streamline our operations in order to support our investment in critical growth areas.

The 2023 Restructuring Plan includes, among other things, charges related to a workforce reduction.

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, we recorded restructuring and related expense for severance related costs of $0.1 million and $1.6 million in the three months ended March 31, 2025 and 2024, respectively.

We anticipate that we will record nominal future expense for severance in connection with the 2023 Restructuring Plan.

In connection with the 2025 Restructuring Plan, we recorded restructuring and related expense of $0.2 million and $2.6 million in three and six months ended June 30, 2025.

We anticipate that we will record additional expense in 2025 for workforce reductions in connection with the 2025 Restructuring Plan.

In February 2022, our Board of Directors approved a strategic restructuring program (the "2022 Restructuring Plan") to streamline our operations in order to support our investment in critical growth areas.

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

In connection with the 2022 Restructuring Plan, we recorded restructuring and related expense of $3.1 million and $1.4 million in the three months ended March 31, 2025 and 2024, respectively, for variable and other facilities-related costs.

In connection with the 2022 Restructuring Plan, we recorded restructuring and related expense of $1.2 million and

$4.3 million in the three and six months ended June 30, 2025, respectively, for variable and other facilities-related costs.

We anticipate that we will record approximately $2 million of expense in the remainder of 2025 related to the 2022 Restructuring Plan.

For facilities that are part of a restructuring plan, for which we have no intent or ability to enter into a sublease, we recognize accelerated rent amortization over the period from the date that we commence the plan to fully or partially vacate a facility through the final vacate date.

We did not record accelerated rent amortization in the three months ended March 31, 2025 or 2024.

We did not record accelerated rent amortization in the three and six months ended June 30, 2025 or 2024.

We continue to evaluate our properties included in our restructuring plans for accelerated amortization and/or right-of-use asset impairment.

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We consider certain accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment.

The significant accounting policies that we believe are the most critical include revenue recognition, the valuation of inventory, warranty accruals, loss contingencies and reserves, stock-based compensation, the Preferred Stock and Warrants, business combinations, goodwill and intangible assets,

accounting for leases, and accounting for income taxes.

If actual results differ significantly from management’s estimates and projections, there could be a material effect on our condensed consolidated financial statements.

There were no significant changes to our critical accounting policies from January 1, 2025 through March 31, 2025.

There were no significant changes to our critical accounting policies from January 1, 2025 through June 30, 2025.

For a further discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2024.

Results of Operations

Three months ended March 31, 2025 and 2024

Revenue for the three months ended March 31, 2025 and 2024 was as follows (in thousands, except percentages):

Increase/(decrease)

Three and six months ended June 30, 2025 and 2024

Revenue for three and six months ended June 30, 2025 and 2024 was as follows (in thousands, except percentages):

Three months ended

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Total revenue

Segment revenue for the three months ended March 31, 2025 and 2024 was as follows (in thousands):

Three months ended March 31, 2025

Three months ended March 31, 2024

Six months ended

from prior year

Total revenue

The decrease in our product revenue in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was the result of $6 million of lower sales of our IP Optical Networks products, partially offset by a slight increase in sales of Cloud and Edge products.

The decrease in revenue from the sale of IP Optical products was primarily attributable to lower sales in Eastern Europe, partially offset by higher sales in India.

Revenue from sales to enterprise customers was 28% and 43% of our product revenue in the three months ended March 31, 2025 and 2024, respectively.

Segment revenue for the three and six months ended June 30, 2025 and 2024 was as follows (in thousands):

Three months ended June 30, 2025

Three months ended June 30, 2024

Total revenue

Six months ended June 30, 2025

Six months ended June 30, 2024

Total revenue

The increase in our product revenue in the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was the result of $17 million of higher sales of our Cloud and Edge products, partially offset by a slight decrease in sales of IP Optical Networks products.

The increase in our product revenue in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was the result of $17 million of higher sales of our Cloud and Edge products, partially offset by a $7 million decrease in sales of IP Optical Networks products.

The increase in revenue from the sale of Cloud and Edge products was primarily attributable to U.S.

service providers and Federal agencies.

The decrease in sales of IP Optical Networks products was primarily due to lower sales in Eastern Europe, partially offset by higher sales in India and the United States.

Revenue from sales to enterprise customers was 34% and 38% of our product revenue in the three months ended June 30, 2025 and 2024, respectively.

These sales were made through both our direct sales team and indirect sales channel partners.

The decrease in enterprise sales reflects lower sales of our products to Federal agencies and other enterprise customers.

Revenue from indirect sales through our channel partner program was 28% and 52% of our product revenue in the three months ended March 31, 2025 and 2024, respectively.

The decrease in channel sales in the three months ended March 31, 2025 reflects lower sales of products to Federal agencies and other enterprise customers.

Revenue from sales to enterprise customers was 32% and 41% of our product revenue in the six months ended June 30, 2025 and 2024, respectively.

The decrease in enterprise sales primarily reflects lower sales of our products to Federal agencies and other enterprise customers.

Revenue from indirect sales through our channel partner program was 34% and 32% of our product revenue in the three months ended June 30, 2025 and 2024 and 31% and 41% of our product revenue in the six months ended June 30, 2025 and 2024, respectively.

The decrease in channel sales in the six months ended June 30, 2025 primarily reflects lower sales of products to Federal agencies and other enterprise customers.

The timing of the completion of customer projects and revenue recognition criteria satisfaction may cause our product revenue to fluctuate from one period to the next.

Service revenue is primarily comprised of software and hardware maintenance and support (“maintenance revenue”) and network design, installation and other professional services (“professional services revenue”).

Service revenue for the three months ended March 31, 2025 and 2024 was comprised of the following (in thousands, except percentages):

Increase/(decrease)

Service revenue for the three and six months ended June 30, 2025 and 2024 was comprised of the following (in thousands, except percentages):

Three months ended

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Total service revenue

Segment service revenue for the three months ended March 31, 2025 and 2024 was comprised of the following (in thousands):

Three months ended March 31, 2025

Three months ended March 31, 2024

Increase/(decrease)

Six months ended

from prior year

Professional services

Total service revenue

Total service revenue was $7 million higher in the three months ended March 31, 2025 compared to the same period in 2024 due to increased revenue in both of our segments.

Total service revenue increased by $5 million and $2 million in our Cloud and Edge and IP Optical Networks segments, respectively.

Maintenance revenue was $2 million lower in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to modestly lower renewal rates from decommissioning some older legacy equipment with several Cloud & Edge customers.

Professional services revenue was $9 million higher in the three months ended March 31, 2025 compared to the same period in 2024, with increases of $8 million and $1 million in our Cloud and Edge and IP Optical Networks segments, respectively.

The higher revenue in Cloud and Edge is due to growth in services to U.S.

Segment service revenue for the three and six months ended June 30, 2025 and 2024 was comprised of the following (in thousands):

Three months ended June 30, 2025

Three months ended June 30, 2024

Professional services

Total service revenue

Six months ended June 30, 2025

Six months ended June 30, 2024

Professional services

Total service revenue

Total service revenue was higher in the three and six months ended June 30, 2025 compared to the same periods in 2024 due to increased revenue in both of our segments.

Total service revenue for the three months ended June 30, 2025 compared to 2024 increased by $10 million and $2 million in our Cloud and Edge and IP Optical Networks segments, respectively.

Total service revenue for the six months ended June 30, 2025 compared to 2024 increased by $15 million and $4 million in our Cloud and Edge and IP Optical Networks segments, respectively.

Maintenance revenue was relatively flat in the three and six months ended June 30, 2025 compared to the same periods in 2024 due to lower revenue in our Cloud and Edge segment, partially offset by higher revenue in our IP Optical Networks segment.

The decrease in Cloud and Edge maintenance revenue is due to modestly lower renewal rates from decommissioning some older legacy equipment with several customers.

The higher maintenance revenue in our IP Optical Networks segment is due to the effect of cumulative growth in product revenues over the years leading to a larger Installed Base that requires our ongoing support primarily in North America and Europe.

Professional services revenue was higher in the three and six months ended June 30, 2025 compared to the same periods in 2024 due to growth in both of our segments.

Our Cloud and Edge segment’s growth was due to sales of professional services to U.S.

service providers, primarily for voice modernization projects with Verizon.

Our IP Optical Networks segment experienced growth of sales of services primarily in the region of Europe, the Middle East and Africa ( “EMEA”).

The following customer contributed 10% or more of our revenue in the three months ended March 31, 2025 and 2024:

Our IP Optical

Networks segment experienced growth of sales of services primarily in the region of Europe, the Middle East and Africa ( “EMEA”), India, and North America.

The following customer contributed 10% or more of our revenue in the three and six months ended June 30, 2025 and 2024:

Three months ended

Six months ended

Verizon Communications Inc.

* Less than 10% of total revenue.

Revenue earned from customers domiciled outside the United States was 54% and 60% in the three months ended March 31, 2025 and 2024, respectively.

Revenue earned from customers domiciled outside the United States was 47% and 58% in the three months ended June 30, 2025 and 2024, respectively, and 51% and 59% of revenue in the six months ended June 30, 2025 and 2024, respectively.

revenue is increasing due to higher sales into the U.S.

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Due to the timing of project completions, we expect that the domestic and international components as a percentage of our revenue may fluctuate from quarter to quarter and year to year.

Our deferred product revenue was $14 million at March 31, 2025 and December 31, 2024.

Our deferred service revenue was $126 million at March 31, 2025 and December 31, 2024.

Our deferred product revenue was $12 million and $14 million at June 30, 2025 and December 31, 2024, respectively.

Our deferred service revenue was $135 million and $126 million at June 30, 2025 and December 31, 2024, respectively.

Our deferred revenue balance may fluctuate as a result of the timing of revenue recognition, customer payments, maintenance contract renewals, contractual billing rights and maintenance revenue deferrals included in multiple element arrangements.

We expect that our total revenue in 2025 will increase compared to our revenue in 2024 due to the growth in the Cloud & Edge segment, particularly with the increased purchases from Verizon as part of a voice modernization project, as well as growth in IP Optical segment sales.

From a regional perspective, we anticipate continued IP Optical revenue growth in 2025 from North America, and EMEA, offset by lower revenue in Eastern Europe due to additional trade restrictions.

In the Cloud & Edge segment, we expect continued revenue growth from enterprise customers, as well as higher U.S.

We expect that our total revenue in 2025 will increase compared to our revenue in 2024 due to growth in Cloud & Edge segment sales, particularly with the increased purchases from Verizon as part of a voice modernization project, as well as growth in IP Optical segment sales.

From a regional perspective, we anticipate continued IP Optical revenue growth in 2025 from North America, EMEA and India.

In the Cloud & Edge segment, we expect continued revenue growth from Enterprise customers, as well as from higher U.S.

service provider spending.

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Our cost of revenue consists primarily of amounts paid to third-party manufacturers for purchased materials and services, royalties, amortization of acquired technology, inventory valuation adjustments, warranty costs, and manufacturing and services personnel and related costs.

Our cost of revenue, gross profit and gross margin for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

Our cost of revenue, gross profit and gross margin for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands, except percentages):

Increase/(decrease)

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Total cost of revenue

Our segment cost of revenue, gross profit and gross margin for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

Three months ended March 31, 2025

Three months ended March 31, 2024

Increase/(decrease)

Six months ended

from prior year

Cost of revenue:

Amortization of acquired technology

Total cost of revenue

Our gross margin was lower with a 6% decrease overall in the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

This decrease was the result of lower margins in both of our segments.

The lower margin in the three months ended March 31, 2025 in our IP Optical segment was due to regional mix primarily related to lower sales in Eastern Europe and higher sales in India.

Our segment cost of revenue, gross profit and gross margin for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands, except percentages):

Three months ended June 30, 2025

Three months ended June 30, 2024

Amortization of acquired technology

Total cost of revenue

Six months ended June 30, 2025

Six months ended June 30, 2024

Amortization of acquired technology

Total cost of revenue

Our gross margin was lower as compared to 2024 with a 1% decrease overall in the three months ended June 30, 2025 and a 3% decrease overall in the six months ended June 30, 2025 as a result of lower margins in both of our segments.

The lower margin in the six months ended June 30, 2025 in our IP Optical segment was due to regional mix primarily related to lower sales in Eastern Europe and higher sales in India.

The lower margin in our Cloud and Edge segment was primarily attributable to product mix on sales to service providers and enterprise customers, as well as the effect of higher sales of hardware products and professional services, both of which contribute lower gross margins than our software products.

We anticipate a return to more typical margins in the second quarter of 2025, but expect our overall consolidated gross margin to decrease slightly for the full year 2025 compared to 2024 due to higher expected sales in our IP Optical segment, which has lower margins due to the higher hardware content in its products, as well as the higher mix of professional services revenue in our Cloud and Edge segment, which generates lower gross margins than product sales.

We expect our overall consolidated gross margin to decrease slightly for the full year 2025 compared to 2024 due to higher expected sales in our IP Optical segment, which has lower margins due to the higher hardware content in its products, as well as the higher mix of professional services revenue in our Cloud and Edge segment, which generates lower gross margins than product sales.

Research and Development.

R&D expenses consist primarily of salaries and related personnel expenses and prototype costs for the design, development, testing, and enhancement of our products.

R&D expenses for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

R&D expenses for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands, except percentages):

Increase/(decrease)

from prior year

Three months ended

The decrease in our R&D expenses in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was equally attributable to lower R&D expenses in both of our segments.

The reduced R&D expenses are primarily due to lower employee headcount and outside subcontractors.

Six months ended

The increase in our R&D expenses in the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was attributable to higher employee and consulting costs in our Cloud and Edge segment.

The decrease in R&D expenses in the six months ended June 30, 2025 compared to 2024 was primarily due to lower costs in our IP Optical Networks segment.

Our IP Optical Networks R&D investment is focused on significantly expanding our portfolio of IP Routing solutions, adding additional features and capabilities to our Optical Transport portfolio, and supporting features in our next generation SDN management and orchestration platform.

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Sales and marketing expenses consist primarily of salaries and related personnel costs, commissions, travel and entertainment expenses, promotions, customer trial and evaluations inventory and other marketing and sales support expenses.

Sales and marketing expenses for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

Sales and marketing expenses for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands, except percentages):

from prior year

Three months ended

The decrease in sales and marketing expenses in 2025 as compared to 2024 was primarily due to lower employee related costs and agent commissions, partially offset by higher travel expenses.

Six months ended

The decrease in sales and marketing expenses in 2025 as compared to 2024 was primarily due to lower commissions, partially offset by higher travel expenses.

We believe our sales and marketing expenses will be relatively flat in 2025 as compared to 2024.

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General and administrative expenses consist primarily of salaries and related personnel costs for executive and administrative personnel, and audit, legal and other professional fees.

General and administrative expenses for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

General and administrative expenses for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands, except percentages):

from prior year

Three months ended

General and administrative expenses in the three months ended March 31, 2025 were relatively flat compared to the three months ended March 31, 2024.

We believe that our general and administrative expenses in 2025 will decrease compared to our 2024 levels, primarily due to lower litigation expenses, partially offset by higher employee costs related to annual merit increases.

Six months ended

The increase in general and administrative expenses in the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 was primarily attributable to higher employee related costs and litigation expenses.

We believe that our general and administrative expenses in 2025 will decrease slightly compared to our 2024 levels, primarily due to lower litigation expenses, partially offset by higher employee costs related to annual merit increases.

Amortization of Acquired Intangible Assets included in Operating expenses.

Amortization of acquired intangible assets included in Operating expenses ("Opex Amortization") for the three months ended March 31, 2025 and 2024 was as follows (in thousands, except percentages):

Amortization of acquired intangible assets included in Operating expenses ("Opex Amortization") for the three and six months ended June 30, 2025 and 2024 was as follows (in thousands, except percentages):

from prior year

Three months ended

Opex Amortization was lower for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Six months ended

Opex Amortization was lower for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024.

We record our amortization in relation to expected future cash flows rather than on a straight-line basis.

Accordingly, such expense may vary from one period to the next.

Acquisition-, Disposal- and Integration-Related.

Acquisition-, disposal- and integration-related expenses include those expenses related to acquisitions and disposals that we would otherwise not have incurred.

Acquisition- and disposal-related expenses include professional and services fees, such as legal, audit, consulting, paying agent and other fees.

Integration-related expenses represent incremental costs related to combining our systems and processes with those of acquired businesses, such as third-party consulting and other third-party services.

We recorded $3.9 million of acquisition-, disposal- and integration-related expenses in the three and six months ended June 30, 2025 consisting of legal and professional fees associated with contemplated corporate development activities.

We recorded no such expenses in 2024.

Restructuring and Related.

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Please see the additional discussion of our restructuring initiatives in the "Restructuring and Cost Reduction Initiatives" section of the Overview of this MD&A.

We recorded restructuring and related expense of $5.3 million and $3.1 million in the three months ended March 31, 2025 and 2024, respectively.

We recorded restructuring and related expense of $1.3 million and $1.9 million in the three months ended June 30, 2025 and 2024, respectively and $6.7 million and $5.0 million in the six months ended June 30, 2025 and 2024, respectively.

Although we have eliminated positions as part of our restructuring initiatives, we continue to hire in certain areas that we believe are important to our future growth.

Interest Expense, Net.

Interest expense and interest income for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

Interest expense and interest income for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands, except percentages):

Three months ended

from prior year

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

Interest income

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Interest expense, net

We had nominal interest income in 2025 and 2024.

Our interest expense in the three months ended March 31, 2025 and 2024 primarily represents interest and amortization of debt issuance costs and original issue discount.

Our interest expense in the three months ended March 31, 2024 primarily represents interest, amortization of debt issuance costs, and the amortization of gains in accumulated other comprehensive (loss) income (“AOCI”) from the sales of our interest rate swap.

Interest expense in the three months ended March 31, 2025 was higher than the three months ended March 31, 2024 primarily due to higher margins under our 2024 Term Loan compared to our 2020 Term Loan, both as defined below, as well as the lack of amortization of gains in AOCI in 2025 from the sales of our interest rate swap.

These gains were fully written off upon the refinancing of the 2020 Term Loan on June 21, 2024.

Six months ended

from prior year

June 30, 2025

June 30, 2024

Interest income

Interest expense

Interest expense, net

Interest income increased slightly in 2025 as compared to 2024 due to interest earned on a cash investment account established in late 2024.

Our interest expense in the three and six months ended June 30, 2025 primarily represents interest, and amortization of debt issuance costs and original issue discount.

Our interest expense in the three and six months ended June 30, 2024 primarily represents interest, amortization of debt issuance costs, and the amortization of gains in accumulated other comprehensive (loss) income (“AOCI”) from the sales of our interest rate swap.

Interest expense in the three and six months ended June 30, 2025 was higher than same periods in 2024 primarily due to higher margins under our 2024 Term Loan as compared to our 2020 Term Loan, both as defined below, as well as the lack of amortization of gains in AOCI in 2025 from sales of our interest rate swap.

These gains in AOCI were fully written off upon the refinancing of the 2020 Term Loan on June 21, 2024.

Other (Expense) Income, Net .

We recorded other income, net of $3.1 million, and other expense, net of $7.5 million in the three months ended March 31, 2025 and 2024, respectively.

Other income in the three months ended March 31, 2025 was primarily comprised of $1.7 million of the fair value adjustment of our Warrants, and foreign currency exchange gains of $1.3 million.

Other expense in the three months ended March 31, 2024 was primarily comprised of the $3.5 million fair value adjustment of our Preferred Stock and Warrants, including dividends on the Preferred Stock, and foreign currency exchange losses of $1.1 million.

We recorded other expense, net of $2.2 million and $9.5 million in the three months ended June 30, 2025 and 2024, respectively.

We recorded other income, net of $1.0 million, and other expense, net of $17.0 million in the six months ended June 30, 2025 and 2024, respectively.

Other expense, net in the three months ended June 30, 2025 was primarily comprised of foreign currency exchange losses.

Other income, net in the six months ended June 30, 2025 was primarily comprised of $1.6 million of fair value adjustments of our Warrants, partially offset by foreign currency exchange losses of $0.6 million.

Other expense, net in the three months ended June 30, 2024 was primarily comprised of the fair value adjustment, call premium and accrued dividends related to our Preferred Stock that we redeemed on June 25, 2024.

Other expense, net in the six months ended June 30, 2024 was primarily comprised of $5.7 million of fair value adjustments, $2.7 million of accrued dividends and the $1.8 million call premium on our Preferred Stock that we redeemed on June 25, 2024, and foreign currency exchange losses of $2.0 million.

Income Taxes.

We recorded income tax benefits (provisions) of $0.8 million and $(3.4) million in the three months ended March 31, 2025 and 2024, respectively.

For the three months ended March 31, 2025, the tax benefit included a release of an uncertain tax position of $3.7 million (inclusive of accrued penalties and interest) that was effectively settled upon closure of an audit during the quarter.

We recorded income tax provisions of $2.2 million and $1.5 million in the three months ended June 30, 2025 and 2024, respectively, and $1.4 million and $4.9 million in the six months ended June 30, 2025 and 2024, respectively.

For the six months ended June 30, 2025, the tax expense included a release of an uncertain tax position of $3.7 million (inclusive of accrued penalties and interest) that was effectively settled upon closure of an audit.

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

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

We intend to continue to maintain

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

We intend to continue to maintain a valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of the respective allowances.

In October 2021, the Organization for Economic Co-operation and Development (the "OECD") announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges arising from digitalization of the economy.

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Certain countries in which we operate have enacted legislation consistent with the OECD model rules effective beginning in 2024.

We considered the applicable tax laws in relevant jurisdictions and concluded there was no material effect on our tax provision for the three months ended March 31, 2025.

We considered the applicable tax laws in relevant jurisdictions and concluded there

was no material effect on our tax provision for the six months ended June 30, 2025.

We will continue to evaluate the potential effect of Pillar Two rules on our future reporting periods, but we do not expect Pillar Two to have a significant impact on our results of operations, financial position, or cash flows.

On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was enacted.

The Act reinstates bonus depreciation, allows for full expensing of research and development expenses, and increases the limitation of interest deductibility for 2025, amongst many other provisions.

We are currently evaluating the impact the Act will have on our taxable position for the 2025 tax year, our results of operations, financial position, and cash flows.

Off-Balance Sheet Arrangements

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Our condensed consolidated statements of cash flows are summarized as follows (in thousands):

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Six months ended

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

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Net cash used in investing activities

Net cash used in financing activities

We had cash, cash equivalents, and restricted cash aggregating $74 million and $90 million at March 31, 2025 and December 31, 2024, respectively.

Net cash (used in) provided by financing activities

We had cash, cash equivalents, and restricted cash aggregating $62 million and $90 million at June 30, 2025 and December 31, 2024, respectively.

We had cash held by our non-U.S.

subsidiaries aggregating $18 million at March 31, 2025 and December 31, 2024.

subsidiaries aggregating $25 million and $18 million at June 30, 2025 and December 31, 2024, respectively.

If we elect to repatriate all of the funds held by our non-U.S.

subsidiaries as of March 31, 2025, we do not believe that the amounts of potential withholding taxes that would arise from the repatriation would have a material effect on our liquidity.

subsidiaries as of June 30, 2025, we do not believe that the amounts of potential withholding taxes that would arise from the repatriation would have a material effect on our liquidity.

On June 21, 2024, we entered into a Senior Secured Credit Facilities Credit Agreement (the “2024 Credit Facility” or “2024 Credit Agreement”) as guarantor, with our wholly-owned subsidiary, Ribbon Communications Operating Company, Inc., as the borrower (“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 us with a $385 million Credit Agreement comprised of (i) a $350 million term loan (the “2024 Term Loan”) and (ii) a $35 million revolving credit facility (the “2024 Revolver”), including a $20 million sublimit for letters of credit.

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Excess proceeds are being used by us for working capital and other general corporate purposes.

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

in the 2024 Credit Facility).

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

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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;

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.

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Quarterly principal payments were required on the 2020 Term Loan aggregating approximately $5.0 million per quarter through March 31, 2024, and if the refinancing had not occurred, $10.0 million would have been required in each of the three quarters thereafter, with the remaining and final payment due on the maturity date in March 2025.

At March 31, 2025, we had an outstanding balance under the 2024 Term Loan of $347.4 million at an average interest rate of 10.6%, with no revolver balance and no letters of credit outstanding under our 2024 Credit Facility.

We were in compliance with all covenants of the 2024 Credit Facility at both March 31, 2025 and December 31, 2024.

At June 30, 2025, we had an outstanding balance under the 2024 Term Loan of $346.5 million at an average interest rate of 10.6%, with no revolver balance and no letters of credit outstanding under our 2024 Credit Facility.

We were in compliance with all covenants of the 2024 Credit Facility at both June 30, 2025 and December 31, 2024.

In the course of our business, we use letters of credit, bank guarantees, and surety bonds (collectively, "Guarantees").

We had $10.9 million of Guarantees under various uncommitted facilities as of both March 31, 2025 and December 31, 2024.

We had no letters of credit outstanding under the 2024 Credit Facility as of March 31, 2025 or December 31, 2024.

At March 31, 2025 and December 31, 2024, we had cash collateral of $2.6 million and $2.7 million supporting the Guarantees, respectively, which are reported as Restricted cash in our condensed consolidated balance sheets.

We had $9.9 million and $10.9 million of Guarantees under various uncommitted facilities as of June 30, 2025 and December 31, 2024, respectively.

We had no letters of credit outstanding under the 2024 Credit Facility as of June 30, 2025 or December 31, 2024.

At June 30, 2025 and December 31, 2024, we had cash collateral of $1.8 million and $2.7 million supporting the Guarantees, respectively, which are reported as Restricted cash in our condensed consolidated balance sheets.

We are exposed to financial market risk related to foreign currency fluctuations and changes in interest rates.

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In two separate transactions during 2022, we sold a total of $60 million of the notional amount of our interest rate swap back to our counterparty for $3.1 million, reducing the notional amount of this swap to $340 million.

The gain in Accumulated other comprehensive (loss) income related to these sales totaled $3.1 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, the amortization of which totaled $0.2 million in the three months ended March 31, 2024.

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.

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.

In two separate transactions in 2023, we received a total of $19.2 million, consisting of $0.8 million of interest and $18.4 million for the sale of the remaining $340 million notional amount of our swap.

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 totaled $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 beginning in the second quarter of 2023, the amortization of which was $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 totaled $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 beginning in the second quarter of 2023, the amortization of which was $3.0 million for the six months ended June 30, 2024.

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.

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However, we recorded no hedge ineffectiveness over the life of our swap.

We had no derivative assets or liabilities at March 31, 2025 or December 31, 2024.

We had no derivative assets or liabilities at June 30, 2025 or December 31, 2024.

In the second quarter of 2025, our Board approved a share repurchase program (the "2025 Repurchase Program" or the “Repurchase Program”) pursuant to which we are authorized to repurchase up to $50 million of our common stock prior to December 31, 2027.

We repurchased 0.6 million shares in the quarter ended June 30, 2025, using $2.3 million, with $47.7 million remaining for future repurchases as of June 30, 2025.

Cash Flows from Operating Activities

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Our primary uses of cash for operating activities have been for personnel costs and investment in our research and development and in our sales and marketing, and general and administrative departments.

We used $3.5 million of cash for operating activities in the three months ended March 31, 2025, largely driven by the payment of variable employee compensation and primarily as a result of our net loss adjusted for non-cash expenses, lower accrued expenses and other long-term liabilities, lower accounts payable, and higher other operating assets and inventory.

These amounts were partially offset by lower accounts receivable.

Our net loss is adjusted for non-cash expenses such as amortization of intangible assets, stock-based compensation, the decrease in the fair value of our Warrant liability and deferred income tax expense.

Cash provided by operating activities in the three months ended March 31, 2024 of $13.1 million was primarily a result of lower accounts receivable and other operating assets, and certain non-cash expenses such as amortization of intangible assets and stock-based compensation.

These amounts were partially offset by our net loss and lower accounts payable, accrued expenses and other long-term liabilities, lower deferred revenue, higher inventory and certain non-cash items such as deferred income taxes.

Higher product revenue in our IP Optical Networks segment and lower operating expenses company-wide due to our various cost saving initiatives, including lower employee and facilities expenses, continued to positively affect our operating cash flow.

We used $4.3 million of cash for operating activities in the six months ended June 30, 2025, largely driven by the payment of variable employee compensation, higher inventory and lower accrued expenses and other long-term liabilities.

These amounts were partially offset by higher deferred revenue and accounts payable and lower accounts receivable.

Our net loss is adjusted for non-cash expenses such as amortization of intangible assets, stock-based compensation, the change in the fair value of our Warrant liability and deferred income tax expense.

Our operating activities provided cash of $3.3 million in the six months ended June 30, 2024.

This included a $6.7 million one-time payment of accumulated dividends as a result of our redemption of our Preferred Stock liability on June 25, 2024.

Cash provided by operating activities was also affected by lower accounts receivable and other operating assets, certain non-cash expenses such as amortization of intangible assets and stock-based compensation, and the increase in the fair value of our Preferred Stock liability.

These amounts were partially offset by our net loss and lower accounts payable, deferred revenue and accrued expenses and other long-term liabilities, higher inventory, and certain non-cash items such as amortization of an accumulated other comprehensive gain related to our interest rate swap and deferred income taxes.

Cash Flows from Investing Activities

Our investing activities used $12.1 million and $2.7 million of cash to purchase property and equipment and software licenses in the three months ended March 31, 2025 and 2024, respectively.

Our investing activities used $17.8 million and $5.9 million of cash to purchase property and equipment in the six months ended June 30, 2025 and 2024, respectively.

The increase is primarily due to our build out of a new facility in Israel.

Cash Flows from Financing Activities

Our financing activities used $1.8 million of cash in the three months ended March 31, 2025.

We paid $0.9 million in principal payments on our 2024 Term Debt.

Our financing activities used $7.4 million of cash in the six months ended June 30, 2025.

We paid $1.8 million in principal payments on our 2024 Term Debt, $3.4 million of tax obligations related to the vesting of stock awards and units and $2.3 million for the repurchase and retirement of our common stock under the 2025 Repurchase Program.

Our financing activities provided $43.5 million of cash in the six months ended June 30, 2024.

We received $342.3 million of proceeds from the issuance of term debt related to the 2024 Credit Facility, net of $7.7 million of original issue discount, that was established on June 21, 2024 to refinance the 2020 Credit Facility.

Also, we had $44.1 million of both borrowings and principal payments under the 2020 Revolving Credit Facility.

In conjunction with the establishment of the 2024 Credit Facility, we repaid the 2020 Term Debt amounting to $235.4 million, redeemed all of the outstanding Preferred Stock totaling $56.9 million, and paid $4.0 million in debt issuance costs.

In addition, we paid $2.6 million of tax obligations related to the vesting of stock awards and units.

Our financing activities used $5.8 million of cash in the three months ended March 31, 2024, primarily due to $5.0 million of principal payments on our term debt and $0.8 million for the payment of tax withholding related to the net share settlements of restricted stock awards upon vesting.

In addition, we had $15.0 million of borrowings and $15.0 million of principal payments under our 2020 Revolving Credit Facility.

The rate at which we consume cash is dependent upon the cash needs of our future operations, including our contractual obligations at March 31, 2025, primarily comprised of our debt principal and interest obligations as described above, and our operating lease and purchase obligations.

Our operating lease obligations totaled $100.7 million at March 31, 2025, with payments to be made aggregating $12.3 million in the remainder of 2025, $16.0 million in 2026, $14.8 million in 2027 and $57.6 million thereafter.

The rate at which we consume cash is dependent upon the cash needs of our future operations, including our contractual obligations at June 30, 2025, primarily comprised of our debt principal and interest obligations as described above, and our operating lease and purchase obligations.

Our operating lease obligations totaled $102.7 million at June 30, 2025, with payments to be made aggregating $8.5 million in the remainder of 2025, $16.9 million in 2026, $15.6 million in 2027 and $61.7 million thereafter.

Estimated payments for purchase obligations for the full year 2025 total approximately $96.2 million.

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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 us beginning with our 2025 annual financial statements, with early adoption permitted.

ASU 2023-09 will be effective for us beginning with our 2025 annual financial statements.

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

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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 2. Management’s Discussion and Analysis