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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-02-27 · 145 added, 162 removed, 361 unchanged (46% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our financial statements and the related notes included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

The following discussion should be read in conjunction with our financial statements and the related notes included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report.

This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those disclosed in Item 1A, “Risk Factors”, elsewhere in this Annual Report on Form 10-K, in other documents filed with the SEC and otherwise publicly disclosed.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those disclosed in Item 1A, “Risk Factors”, elsewhere in this Annual Report, in other documents filed with the SEC and otherwise publicly disclosed.

Please refer to “Cautionary Note Regarding Forward-Looking Statements” above for additional information.

For a complete description of our business and other important information, please refer to Item 1 of Part I of this Annual Report on Form 10-K.

For a complete description of our business and other important information, please refer to Item 1 of Part I of this Annual Report .

We are a leading global provider of communications technology to service providers and enterprises.

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Our mission is to create a recognized global technology leader providing cloud-centric solutions that enable the secure exchange of information, with unparalleled scale, performance and elasticity.

We are at the intersection of the adoption of Artificial Intelligence (“AI”) by Service Providers and Enterprises addressing the rapid growth in fiber connectivity and integration of voice capabilities into Agentic AI platforms.

We are headquartered in Plano, Texas, and have a global presence with research and development or sales and support locations in over thirty countries around the world.

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Supplier Disruptions.

Ongoing uncertainty in the global economy due to inflation, the wars in Israel and Ukraine, national security concerns and other factors, continue to disrupt various manufacturing, commodity and financial markets, increase volatility, and impede global supply chains.

Ongoing uncertainty in the global economy due to inflation, global military actions, including in Israel and Ukraine, national security concerns and other factors, continue to disrupt various manufacturing, commodity and financial markets, increase volatility, and impede global supply chains.

Our ability to deliver our solutions as agreed upon with our customers depends in part on the ability of our global contract manufacturers, vendors, licensors and other business partners to deliver products or perform services we have procured from them.

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The degree to which the ongoing wars in Israel and Ukraine and the inflationary and high interest rate environment impacts our future business, financial position and results of operations will depend on developments beyond our control.

The Ongoing Wars in Israel and Ukraine .

The uncertainty resulting from the wars in Israel and Ukraine, and the threat for expansion of one or both of these wars, could result in some of our customers delaying purchases from us.

The Ongoing War in Ukraine and military action in Israel .

The uncertainty resulting from the recent war in Israel and ongoing war in Ukraine, and the threat for expansion of one or both of these wars, could result in some of our customers delaying purchases from us.

Further, a number of our employees in Israel are members of the military reserves and subject to immediate call-up in response to the war in Israel.

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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.

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.

However, since its peak in 2024, the Federal Reserve lowered the federal funds interest rate to 4.48% in December 2024, as a result of its view that inflation is cooling.

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.

However, after peaking in 2024, the Federal Reserve reduced the federal funds target range to 3.50% - 3.75% by December 2025.

The effective federal funds rate averaged 3.64%, consistent with the Federal Reserve’s view that inflation is decelerating.

Yet, the economic outlook remains uncertain, and the implications of current and future tariffs, higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for our business.

We manufacture certain of our appliance products and purchase a portion of our raw materials and components from suppliers in Mexico, Malaysia, Thailand, Israel, China and other foreign countries.

The commerce we conduct in the international marketplace makes us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we ship, cross international borders.

Import tariffs and/or other mandates recently imposed or threatened by the United States, have led to and could in the future lead to retaliatory actions by affected countries, including Canada, Mexico and China, resulting in “trade wars,” and could significantly increase the prices on raw materials, the manufacturing of our equipment, and/or increased costs for goods imported into the United States, all of which are critical to our business.

While some of the tariffs have been temporarily stayed, we continue to develop plans to adjust manufacturing locations, if necessary, to avoid tariffs or other restrictions, any such tariffs could reduce customer demand for our products if our customers have to pay increased prices for our products as a result of such tariffs.

In addition, tariff increases may have a similar impact on other suppliers and certain other customers, which could increase the negative impact on our operating results or future cash flows.

Unless otherwise noted, all financial amounts, excluding tabular information, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are rounded to the nearest million dollar amount, and all percentages, excluding tabular information, are rounded to the nearest percentage point.

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For additional detail on the Private Placement, see Note 15 - Preferred Stock and Warrants to our consolidated financial statements.

Common Stock Repurchases

In the second quarter of 2025, the Company's Board of Directors approved a program to repurchase up to $50 million of the Company’s common stock (the “2025 Repurchase Program” or the “Repurchase Program”).

Commencing on June 5,2025 and continuing through December 31, 2027, the Repurchase Program is being funded with cash on hand or cash generated from operations.

During the year ended December 31, 2025, the Company used $9.0 million, including transaction fees, to repurchase and retire 2.5 million shares of its common stock under the Repurchase Program, with $41.0 million remaining for future repurchases as of December 31, 2025.

Operating Segments

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Financial Results

We reported income from operations of $16.9 million for 2024 and a loss from operations of $24.3 million for 2023.

We reported a net loss of $54.2 million for 2024 and $66.2 million for 2023.

We reported a loss from operations of $3.3 million for 2025 and income from operations of $16.9 million for 2024.

We reported net income of $39.6 million for 2025 and a net loss of $54.2 million for 2024.

Our revenue was $844.6 million in 2025, comprised of $511.4 million attributable to Cloud and Edge and $333.2 million attributable to IP Optical Networks.

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In 2024, our Cloud and Edge gross margin was 65.2% and our IP Optical Networks gross margin was 33.6%.

The higher revenue in 2024 compared to 2023 is due to $27.6 million of higher Cloud and Edge sales, primarily to U.S.

service providers and Federal agencies, partially offset by $20.0 million of lower IP Optical Networks sales led by lower sales into Eastern Europe and India, which were partially offset by growth in the U.S.

rural market.

The revenue increase in 2025 compared to 2024 was primarily driven by a $6.3 million rise in Cloud and Edge sales, largely attributable to higher demand from U.S.

service providers, partially offset by lower sales to Federal customers.

In addition, IP Optical Networks revenue increased by $4.4 million, led by strong sales in India, though this growth was partially offset by declines in the Eastern European region.

Our operating expenses were $424.0 million in 2025 and $422.6 million in 2024.

Our 2025 operating expenses included $23.8 million of amortization of acquired intangible assets, $19.7 million of restructuring and related expense and $4.3 million of acquisition-, disposal- and integration-related expenses.

The following section provides information on our restructuring and cost-reduction initiatives.

Our 2024 operating expenses included $26.0 million of amortization of acquired intangible assets and $10.2 million of restructuring and related expense.

Our 2023 operating expenses included $28.6 million of amortization of acquired intangible assets, $4.5 million of acquisition-, disposal- and integration-related expense, and $16.2 million of restructuring and related expense.

We recorded stock-based compensation expense of $19.4 million in 2025 and $16.1 million in 2024.

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Restructuring and Cost Reduction Initiatives

Our President and CEO approved workforce reductions in 2024 for certain of our operating locations to correspond with the current sales levels in those areas.

We recorded $2.1 million in 2024 related to these actions.

During the fourth quarter of 2025, the Company’s President and CEO approved a strategic restructuring program (the "2026 Restructuring Plan") that consists of workforce reductions in certain of the Company’s operating locations to correspond with current sales levels in those areas.

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

In connection with the 2026 Restructuring Plan, we recorded restructuring and related expense of $8.6 million in 2025.

We anticipate that we will expense approximately $5 million in 2026 related to the 2026 Restructuring Plan.

During the first quarter of 2025, the Company’s President and CEO approved a strategic restructuring program (as subsequently amended, the "2025 Restructuring Plan") that consists of workforce reductions in certain of the Company’s operating locations to correspond with current sales levels in those areas.

The 2025 Restructuring Plan was amended in the third quarter of 2025 to reflect an increase in the scope of the proposed reductions.

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 $5.0 million in 2025.

We anticipate no future expense in 2026 related to 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.

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In connection with the 2023 Restructuring Plan, we recorded restructuring and related expense for severance related costs of $0.2 million and $2.0 million in 2025 and 2024, respectively.

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

We anticipate no future expense in 2026 related to the 2023 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 $6.1 million in 2024 for variable and other facilities-related costs.

In connection with the 2022 Restructuring Plan, we recorded restructuring and related expense of $5.9 million and $6.1 million in 2025 and 2024 for variable and other facilities-related costs.

In 2023, we recorded $6.3 million of expense for the 2022 Restructuring Plan, comprised of $5.3 million for variable and other facilities-related costs, and $1.0 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease.

In 2022, we recorded $10.2 million of expense for the 2022 Restructuring Plan, comprised of $3.3 million for variable and other facilities-related costs, $1.6 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease, and $5.3 million for severance and related costs.

We anticipate that we will expense $5 million in 2025 related to the 2022 Restructuring Plan.

We anticipate that we will expense approximately $3 million of facilities-related costs in 2026 related to the 2022 Restructuring Plan.

For facilities that are part of a restructuring plan, and 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 2024.

We recorded $1.0 million and $1.6 million for accelerated rent amortization in the years ended December 31, 2023 and 2022, respectively.

We did not record accelerated rent amortization in 2025 and 2024.

We recorded $1.0 million for accelerated rent amortization in the year ended December 31, 2023.

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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Assurance-type warranties do not represent separate performance obligations.

We also sell separately-priced maintenance service contracts which qualify as service-type warranties and represent separate performance obligations.

We also sell separately-priced

maintenance service contracts which qualify as service-type warranties and represent separate performance obligations.

We do not allow and have no history of accepting product returns.

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In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions, current pricing practices, product specific business objectives, the cost to provide the performance obligation, and other observable inputs.

We typically have more than one SSP

for individual products and services due to the stratification of those products and services by customers and circumstances.

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

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

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Inherent in our estimates of market value in determining inventory valuation are estimates related to economic trends, future demand for our products and technical obsolescence of our products.

If future demand or market conditions are less favorable than our projections, additional inventory write-downs could be required and would be reflected in the cost of revenue in the period the revision is made.

If future demand or market conditions are less favorable than our projections, additional inventory write-downs could be required and would be reflected in the cost of revenue in the period the

revision is made.

To date, we have not been required to revise any of our assumptions or estimates used in determining our inventory valuations.

We write down our evaluation equipment at the time of shipment to our customers, as it is not probable that the inventory value will be realizable.

Investments .

We received debentures (the “Debentures”) and warrants (the “AVCT Warrants”) as sale consideration in connection with our December 1, 2020 sale of the Kandy Communications Business to American Virtual Cloud Technologies, Inc.

(“AVCT”) (the “Kandy Sale”).

On September 8, 2021 (the “Debenture Conversion Date”), the Debentures were converted into shares of AVCT common stock (the “Debenture Shares”).

In connection with the conversion of the Debentures to the Debenture Shares, we elected to use the fair value option to account for its equity investment in AVCT as permitted under Accounting Standards Codification (“ASC”) 825, Financial Instruments (“ASC 825”), which then refers to ASC 820, Fair Value Measurement (“ASC 820”) to provide the fair value framework for valuing such investments.

In accordance with ASC 820, we recorded the investment in AVCT at fair value, with changes in fair value recorded as a component of Other (expense) income, net, in the consolidated statements of operations.

On August 29, 2022, we and AVCT entered into a settlement agreement which provided for, amongst other things, the cancellation of our investment in the Debenture Shares and the AVCT Warrants.

Pursuant to the settlement agreement, we also entered into a Wind Down Agreement with AVCT, pursuant to which a Reseller Agreement between the parties, as previously amended, was terminated, and we were granted a non-exclusive perpetual license to use and modify certain intellectual property owned by AVCT comprising WebRTC gateway technology that is integrated with Ribbon’s SBCs and Application Servers.

The perpetual license granted by AVCT is classified as Intangible assets, net in our consolidated balance sheets.

Warranty Accruals.

We record warranty liabilities for estimated costs of fulfilling our obligations under standard limited hardware and software warranties at the time of sale.

The liability for standard warranties is included in Accrued expenses and other and Other long-term liabilities in our consolidated balance sheet.

The specific warranty terms and conditions vary depending upon the country in which we do business, but generally include material costs, technical support, labor and associated overhead over a period ranging from one to three years.

We provide for the estimated costs to fulfill customer warranty obligations for certain of our products upon recognition of the related revenue.

Warranty is included as a component of Cost of revenue in our consolidated statements of operations, and is determined based on actual warranty cost experience, estimates of component failure rates and our management’s industry experience.

Our sales contracts do not permit the right of return of the product by the customer after the product has been accepted.

Loss Contingencies and Reserves.

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The amount of stock-based compensation expense recorded in any period for unvested awards requires estimates of the amount of stock-based awards that are expected to be forfeited prior to vesting, as well as assumptions regarding the probability that performance-based stock awards without market conditions will be earned.

Preferred Stock and Warrants.

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

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

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

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

Business Combinations.

We allocate the purchase price of acquired companies to identifiable assets acquired and liabilities assumed at their acquisition date fair values.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed and represents the expected future economic benefits arising from other assets acquired in the business combination that are not individually identified and separately recognized.

Significant management judgments and assumptions are required in determining the fair value of assets acquired and liabilities assumed, particularly acquired intangible assets which are principally based upon estimates of the future performance and cash flows expected from the acquired business and applied discount rates.

While we use our best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at a business combination date, our estimates and assumptions are inherently uncertain and subject to refinement.

If different assumptions are used, it could materially impact the purchase price allocation and our financial position and results of operations.

Any adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period are included in operating results in the period in which the adjustments are determined.

Intangible assets typically are comprised of in-process research and development, developed technology, customer relationships, trade names and internal use software.

Goodwill and Intangible Assets.

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Judgment is required in determining whether an event has occurred that may impair the value of goodwill, identifiable intangible assets or other long-lived assets.

Factors that could indicate an impairment may exist include significant underperformance relative to plan or long-term projections, strategic changes in business strategy, significant negative industry or economic trends, a significant change in circumstances relative to a large customer, a significant decline in our stock price for a sustained period and a decline in our market capitalization to below net book value.

or economic trends, a significant change in circumstances relative to a large customer, a significant decline in our stock price for a sustained period and a decline in our market capitalization to below net book value.

We must make assumptions about future control premiums, market comparables, cash flows, operating plans, discount rates and other factors to determine recoverability.

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Based upon the completion of our 2025, 2024, and 2023 annual tests for goodwill impairment, we determined that there was no impairment of goodwill for either of our reporting units.

We account for our leases in accordance with Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”).

We have operating leases for corporate offices, and research and development facilities and historically had finance leases for certain equipment.

Operating leases are reported separately in our consolidated balance sheets.

Assets acquired under finance leases, if any, are included in Property and equipment, net, in the consolidated balance sheets.

We determine if an arrangement is a lease at inception.

A contract is determined to contain a lease component if the arrangement provides us with a right to control the use of an identified asset.

Lease agreements may include lease and non-lease components.

In such instances for all classes of underlying assets, we do not separate lease and non-lease components but rather, account for the entire arrangement under leasing guidance.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense for these leases is recognized on a straight-line basis over the lease term.

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

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

Lease contracts may contain variable lease costs, such as common area maintenance, utilities and tax reimbursements that vary over the term of the contract.

Variable lease costs are not included in minimum fixed lease payments and as a result, are excluded from the measurement of the right-of-use assets and lease liabilities.

We expense all variable lease costs as incurred.

Accounting for Income Taxes.

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Revenue for the years ended December 31, 2025 and 2024 was as follows (in thousands, except percentages):

Increase/(decrease)

from prior year

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Total revenue

The increase in our product revenue in 2024 compared to 2023 was primarily the result of $26 million of higher sales of our Cloud and Edge products, partially offset by $24 million of lower sales of our IP Optical products.

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

service providers, U.S.

Federal agencies and global enterprise customers.

The decrease in revenue from the sale of IP Optical products was primarily attributable to lower sales in Eastern Europe and India.

The decrease in our product revenue in 2025 compared to 2024 was primarily the result of $13 million of lower sales of our Cloud and Edge products, while IP Optical sales remained flat.

The decrease in revenue from the sale of Cloud and Edge products was primarily attributable to lower sales to enterprise customers, including U.S.

Federal agencies.

Revenue from sales to enterprise customers was 34% and 39% of our product revenue in 2025 and 2024, respectively.

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

The increase in enterprise sales reflects stronger sales of our products to customers in Federal agencies.

The decrease in enterprise sales reflects lower sales of our products to customers in U.S.

Federal agencies.

Revenue from indirect sales through our channel partner program was 31% and 38% of our product revenue in 2025 and 2024, respectively.

The increase in channel sales in 2024 reflects stronger IP Optical Networks deployments through systems integrators as well as sell-thru service provider channel partners in Eastern Europe.

The decrease in channel sales in 2025 reflects fewer IP Optical Networks deployments through systems integrators as well as sell-through service provider channel partners in Eastern Europe.

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.

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Total service revenue was $23 million higher in 2025 compared to 2024 due to increased revenue in both of our segments.

Total service revenue increased by $4 million and $1 million in our IP Optical Networks and Cloud and Edge segments, respectively.

Maintenance revenue was $5 million lower in 2024 compared to 2023 primarily due to modestly lower renewal rates from decommissioning some older legacy equipment with several Cloud and Edge customers.

Total service revenue increased by $19 million and $4 million in our Cloud and Edge and IP Optical Networks segments, respectively due to increased demand from service providers.

Maintenance revenue was $4 million lower in 2025 compared to 2024 primarily due to modestly lower renewal rates from decommissioning of older legacy equipment with several Cloud and Edge customers.

Professional services revenue was $27 million higher in 2025 compared to 2024, with increases of $25 million and $2 million in our Cloud and Edge and IP Optical Networks segments, respectively.

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

service providers, primarily for voice modernization projects with Verizon and U.S.

Federal agencies.

Our IP Optical Networks segment experienced growth in sales of services primarily in the North America and APAC regions.

service providers, primarily for voice modernization projects.

Our IP Optical Networks segment experienced growth in sales of services primarily in EMEA and India.

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

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Revenue earned from customers domiciled outside the United States was 52% and 53% of total revenue in 2025 and 2024, respectively.

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

market from both the Cloud and Edge and IP Optical Networks segments.

revenue grew slightly year over year, increasing approximately $7 million across the Cloud and Edge and IP Optical Networks segments.

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.

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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.

service provider spending.

We expect our total revenue in 2026 to increase compared to 2025, driven by growth in the Cloud and Edge segment, particularly from increased purchases by service providers as part of voice modernization projects and by enterprise customers.

In our IP Optical segment, we anticipate continued revenue growth in 2026 from North America, partially offset by moderation in APAC.

Cost of Revenue/Gross Margin.

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Total cost of revenue

Our gross margin was 3.3 percentage points higher in 2024 compared to 2023.

This increase was the result of higher margins in both of our segments.

The higher margin in our IP Optical segment was due to favorable regional mix, partially offset by lower sales volume and higher royalties.

The higher margin in our Cloud and Edge segment was primarily attributable to favorable product mix and lower costs associated with an increase in software sales.

We expect our overall consolidated gross margin to decrease slightly in 2025 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.

Our gross margin was 2.9 percentage points lower in 2025 compared to 2024.

This decrease was the result of lower margins in both of our segments, particularly due to higher professional services revenue related to voice Network Transformation programs.

The lower margin in our IP Optical segment was due to regional mix.

The lower margin in our Cloud and Edge segment was primarily attributable to product mix and a decrease in software sales.

We expect our consolidated gross margin to increase in 2026 due to revenue growth in our Cloud and Edge segment, which has higher margins due to the higher software content in its products.

Improvements in our IP Optical segment gross margin are expected related to the projected product and geography mix.

Research and Development.

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from prior year

The decrease in our research and development expenses in 2024 compared to 2023 was primarily attributable to approximately $9 million of lower expenses in our IP Optical Networks segment and approximately $2 million of lower expenses in our Cloud and Edge segment.

The reduced expenses are a combination of lower employee headcount and outside subcontractors resulting from the cost savings implemented in the 2023 Restructuring Plan.

The decrease in our research and development expenses in 2025 compared to 2024 was primarily attributable to approximately $2 million of lower expenses in our IP Optical Networks segment and approximately $1 million of higher expenses in our Cloud and Edge segment.

The reduced expenses are a combination of lower employee expenses offset by higher non-US costs due to a weakening dollar.

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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We believe that rapid technological innovation is critical to our long-term success, and we are tailoring our investments to meet the requirements of our customers and market.

We believe that our R&D expenses will increase modestly in 2025 primarily due to higher employee and consulting costs related to modifying certain legacy products and certain of our cloud native solutions.

We believe that our R&D expenses will increase modestly in 2026 primarily due to higher employee and consulting costs related to supporting certain legacy products and development of our cloud native solutions.

Sales and Marketing.

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from prior year

Sales and marketing expenses in 2024 were relatively flat compared to 2023.

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

The decrease in our sales and marketing expenses in 2025 compared to 2024 was primarily attributable to lower commissions, partially offset by higher travel expenses and non-US costs due to a weakening dollar.

We believe our sales and marketing expenses will be relatively flat in 2026 as compared to 2025 with increases for employee-related variable compensation expenses offset by continued cost efficiencies.

General and Administrative.

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from prior year

The increase in general and administrative expenses in 2024 compared to 2023 was primarily attributable to a $5.0 million legal settlement and associated legal fees related to certain specific legal matters, as well as increased employee incentive costs.

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.

The decrease in general and administrative expenses in 2025 compared to 2024 was primarily attributable to lower litigation expenses and variable employee costs, partially offset by higher stock compensation expense.

We believe that our general and administrative expenses will be relatively flat in 2026 as compared to 2025 with increases for employee-related variable compensation expenses offset by continued cost efficiencies.

Amortization of Acquired Intangible Assets included in Operating expenses.

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Acquisition-, Disposal- and Integration-Related.

Acquisition-, disposal- and integration-related expenses include those expenses related to acquisitions 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.

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 no such expenses in 2024 compared to $4.5 million recorded in 2023.

These costs were related to integration following the Company’s acquisition of ECI and included license fees for systems in the process of being retired.

We recorded $4.3 million in 2025 consisting of legal and professional fees associated with contemplated corporate development activities.

We recorded no such costs 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 $10.2 million in 2024, comprised of $4.1 of severance and related costs, and $6.1 million for variable and other facilities-related costs.

In 2023, we recorded restructuring and related expense of $16.2

million, comprised of $9.9 million for severance and related costs, and $6.3 million for variable and other facilities-related costs, including $1.0 million of net expense for the accelerated amortization of lease assets.

We recorded restructuring and related expense of $19.7 million in 2025, comprised of $13.7 million of severance and related costs, and $6.0 million for variable and other facilities-related costs.

In 2024, we recorded restructuring and related expense of $10.2 million, comprised of $4.1 million for severance and related costs, and $6.1 million for variable and other facilities-related costs.

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.

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Interest expense and interest income for the years ended December 31, 2025 and 2024 were as follows (in millions, except percentages):

Increase/(decrease)

from prior year

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Interest expense, net

We had nominal interest income in both 2024 and 2023.

Our interest expense in 2024 primarily represents interest, amortization of debt issuance costs and original issue discount, and the amortization of gains in accumulated other comprehensive (loss) income from the sales of our interest rate swap.

Interest expense in 2024 was higher than 2023 primarily due to higher margins under our 2024 Term Loan compared to our 2020 Term Loan, and higher interest in 2024 due to our interest rate swap no longer being in place, partially offset by write-offs related to the refinancing of the 2020 Credit Facility with a portion of the proceeds from the 2024 Credit Facility on June 21, 2024.

The write-offs related to the refinancing consisted of the remaining unamortized gains in accumulated other comprehensive (loss) income from the sales of our interest rate swap totaling $4.9 million, partially offset by the write-off of debt issuance costs from the 2020 Credit Facility totaling $2.0 million.

Our interest expense in 2023 benefited from our interest rate swap that fixed the variable rate component of our interest rate at 0.904% and was sold in March 2023.

We had an increase in interest income in 2025 due to a cash investment account established in late 2024.

Our interest expense in 2025 primarily represents term debt interest, amortization of debt issuance costs and original issue discount and interest associated with factoring arrangements.

Our interest expense in 2024 primarily represents term debt interest, amortization of debt issuance costs and original issue discount, interest associated with factoring arrangements and the amortization of gains in accumulated other comprehensive income (loss) (“AOCI”) from the sales of our interest rate swap.

Interest expense in 2025 was higher than 2024 primarily due to higher margins under our 2024 Term Loan as compared to our 2020 Term Loan, and higher interest in 2025 due to our interest rate swap no longer being in place, partially offset by write-offs related to the refinancing of the 2020 Credit Facility with a portion of the proceeds from the 2024 Credit Facility on June 21, 2024.

The write-offs related to the refinancing consisted of the remaining unamortized gains in AOCI from the sales of our interest rate swap totaling $4.9 million, partially offset by the write-off of debt issuance costs from the 2020 Credit Facility totaling $2.0 million.

See Note 14 to our consolidated financial statements for a discussion of the sale of our interest rate swap.

Other (Expense) Income, Net .

Our other expense, net in 2024 was $29.1 million and was primarily comprised of $9.1 of fair value adjustments to the Preferred Stock and Warrants, $2.7 of accrued dividends and the $1.8 million call premium on our Preferred Stock that we redeemed on June 25, 2024, the $6.3 million write-off of an expired tax indemnity asset associated with the ECI Acquisition, and foreign currency exchange losses of $5.7 million.

We recorded other expense, net, aggregating $3.8 million in 2023, primarily comprised of $5.3 million fair value adjustments for our Preferred Stock and Warrants, including dividends on the Preferred Stock, and $3.5 million of costs incurred in the Private Placement, partially offset by the gain of $7.3 million recognized from Accumulated other comprehensive income in connection with the sale of our interest rate swap.

Other Income (Expense), Net .

Our other income, net in 2025 was $2.2 million and was primarily comprised of $6.0 million fair value adjustments to the Warrants offset by approximately $3.7 million foreign currency exchange losses.

Our other expense, net in 2024 was $29.1 million and was primarily comprised of $9.1 million of fair value adjustments to the Preferred Stock and Warrants, $2.7 million of accrued dividends and the $1.8 million call premium on our Preferred Stock that we redeemed on June 25, 2024, $6.3 million write-off of an expired tax indemnity asset associated with the ECI Acquisition, and foreign currency exchange losses of $5.7 million.

Income Taxes.

We recorded an income tax provision of $8.2 million and $10.8 million in 2024 and 2023, respectively.

We recorded an income tax benefit of $84.7 million and an income tax provision of $8.2 million in 2025 and 2024, respectively.

The increase in the income tax benefit is due to the tax benefit recognized on the tax-basis loss related to the Company’s investment in a subsidiary, which is not expected to recur in future periods.

During 2025 and 2024, we performed an analysis to determine if, based on all available evidence, we considered it more likely than not that some portion or all of the recorded deferred tax assets will not be realized in a future period.

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Accordingly, we have maintained a valuation allowance on our U.S.

deferred tax assets of $18.6 million.

deferred tax assets of $21.5 million, which

increased slightly over the prior year.

As a result of our evaluations for Israel, we maintained a full valuation allowance against our net deferred tax assets in Israel.

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

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

Net income (loss)

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

Changes in operating assets and liabilities

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Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

We had cash, cash equivalents, and restricted cash aggregating $98 million and $90 million at December 31, 2025 and 2024, respectively.

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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.

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 are 5.25% per annum for ABR Loans and 6.25% per annum for SOFR Loans.

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

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

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For additional details regarding the terms of the 2024 Credit Facility and 2020 Credit Facility, see Note 13 to our consolidated financial statements.

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

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

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

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

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

In addition, the Sixth Amendment replaced LIBOR with the Secured Overnight Financing Rate ("SOFR") as the alternative rate available to us for calculating interest owed under the 2020 Credit Facility with the margin fixed at 4.5%.

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

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

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

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

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 December 31, 2025, we had an outstanding balance under the 2024 Term Loan of $342.1 million at an average interest rate of 10.3%, with no revolver balance and no letters of credit outstanding under our 2024 Credit Facility.

Our interest rates under our 2020 Term Loan for the year ended December 31, 2023 benefited from a hedge instrument that was in place, specifically a fixed rate swap, which was sold in March 2023 (see Note 10).

We were in compliance with all covenants of the 2024 Credit Facility and 2020 Credit Facility at December 31, 2024 and 2023, respectively, including the Consolidated Net Leverage Ratio calculation under the 2020 Credit Facility that considered our debt to include Preferred Stock.

We use letters of credit, bank guarantees and surety bonds in the course of our business.

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

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

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

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

We had $11.1 million and $10.9 million of Guarantees under various uncommitted facilities as of December 31, 2025 and 2024, respectively.

We had no letters of credit outstanding under the 2024 Credit Facility at December 31, 2025 and 2024.

At December 31, 2025 and 2024, we had cash collateral of $1.7 million and $2.7 million, respectively, supporting the Guarantees, which are reported in Restricted cash in our consolidated balance sheets.

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On July 22, 2022, we sold $30 million of the notional amount of our interest rate swap back to our counterparty for $1.5 million, reducing the notional amount of this swap to $370 million.

On August 16, 2022, we sold another $30 million of the notional amount of our interest

rate swap back to our counterparty for $1.6 million, reducing the notional amount to $340 million, which approximated the 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, the amortization of which totaled $0.4 million and $0.9 million for the years ended December 31, 2024 and 2023, respectively.

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

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

The gain in accumulated other comprehensive income (loss) 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, the amortization of which totaled $0.4 million and $0.9 million for the year ended December 31, 2024 and 2023, respectively.

The remaining unamortized gain in accumulated other comprehensive income (loss) 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.

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

On March 27, 2023, we received $9.8 million, consisting of $0.4 million of interest and $9.4 million for the sale of the remaining $170 million of our interest rate swap back to our 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 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 and $4.7 million for the years ended December 31, 2024 and 2023, respectively.

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

The portion of the gain in accumulated other comprehensive income (loss) 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 income (loss) 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 and $4.7 million for the years ended December 31, 2024 and 2023, respectively.

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

Our objectives in using interest rate derivatives have been to add stability to interest expense and to manage our exposure to interest rate movements.

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In the year ended December 31, 2023, we recorded $7.3 million of Other expense, net due to the sale of our interest rate swap arrangement.

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 2.5 million shares in the year ended December 31, 2025, using $9.0 million with $41.0 million remaining for future repurchases as of December 31, 2025.

Cash Flows from Operating Activities

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Our primary uses of cash from 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.

Our operating activities provided cash of $51.4 million in 2025, primarily a result of lower accounts receivable of $20.0 million and deferred revenue of $15.8 million.

These amounts were partially offset by decreases in accrued expenses and other long-term liabilities, and accounts payable.

Our net income of $39.6 million included adjustments for certain non-cash expenses, such as $44.2 million of amortization of intangible assets and $19.4 million of stock-based compensation.

These adjustments were partially offset by deferred tax benefit of $85.6 million and a $6.0 million change in fair value of warrant liability.

Higher revenue and lower operating expenses company-wide due to our various cost-saving initiatives, including lower employee and facilities expenses, continue to positively impact our operating cash flow.

Our operating activities provided cash of $50.2 million in 2024, primarily as a result of lower other operating assets and accounts receivable, the increase in the fair value of our preferred stock and warrant liabilities, and higher deferred revenue.

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Higher revenue in our Cloud and Edge segment and lower operating expenses company-wide due to our various cost saving initiatives, including lower employee and facilities expenses, continue to positively affect our operating cash flow.

Our operating activities provided $17.1 million of cash in 2023, primarily resulting from our net loss, which was more than offset by certain non-cash expenses, such as amortization of intangible assets, stock-based compensation, depreciation and amortization of property and equipment, amortization of debt issuance costs and the change in the fair value of our preferred stock and warrant liabilities, including dividends on our preferred stock, partially offset by deferred income taxes and the gain

on the sale of our interest rate swap.

Also, the changes in our operating assets and liabilities provided operating cash, including lower other operating assets and accounts receivable, partially offset by lower accrued expenses and other long-term liabilities, higher inventory, and lower accounts payable.

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, all positively affected our operating cash flow in 2023.

Cash Flows from Investing Activities

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Our investing activities were primarily used to purchase property and equipment.

The $13.4 million increase in purchases of property and equipment in 2024 compared to 2023 is primarily due to the build out of a new facility in Israel.

The increase in purchases of property and equipment in 2025 and 2024 is primarily due to the build out of a new facility in Israel.

Cash Flows from Financing Activities

Our financing activities provided $37.7 million of cash in 2024.

Our financing activities used cash of $19.4 million in 2025 primarily due to $6.1 million of principal payments on our 2024 Term Debt and $9.0 million for the repurchase and retirement of our common stock under the 2025 Repurchase Program.

In addition, we paid $4.4 million of tax obligations related to the vesting of stock awards and units.

Our financing activities provided cash of $37.7 million in 2024.

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

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In addition, we paid $4.3 million of tax obligations related to the vesting of stock awards and units.

Our financing activities used $47.9 million of cash in 2023, primarily due to $95.1 million of principal payments on our term debt, including a $75.0 million prepayment in connection with the Sixth Amendment to the 2020 Credit Facility, $1.7 million of debt issuance costs also paid in connection with the Sixth Amendment, and $4.5 million for the payment of tax withholding related to the net share settlements of restricted stock awards upon vesting.

In addition, we received $53.4 million of proceeds from the issuance of the Preferred Stock and Warrants in the Private Placement.

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

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Recent Accounting Pronouncements

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

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832):

Accounting for Government Grants Received by Business Entities (“ASU 2025-10”), to clarify the appropriate accounting, reduce diversity in practice, and increase consistency across business entities.

ASU 2025-10 will be effective for the Company beginning with our 2029 interim and annual financial statements, with early adoption permitted.

The Company believes this ASU will have no material impact on its consolidated financial statements.

In November 2025, the FASB issued ASU 2025‑09, Derivatives and Hedging (Topic 815):

Hedge Accounting Improvements (“ASU 2025‑09”), to enhance hedge accounting guidance and better align it with entities’ risk management activities.

The amendments expand eligibility for hedge accounting, simplify certain requirements, and address issues related to reference rate reform.

Key changes include allowing cash flow hedge accounting for “choose‑your‑rate” debt instruments, introducing a principles‑based “similar risk exposure” criterion for grouping forecasted transactions, permitting component hedging for nonfinancial forecasted transactions, and clarifying the treatment of certain derivative structures.

ASU 2025‑09 will be effective for the Company beginning with its 2027 interim and annual financial statements, with early adoption permitted.

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

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”).

To clarify how the accounting guidance applies to both linear and nonlinear software development, this standard removes all references to “developments stages” from ASC 350-40.

ASU 2025-06 will be effective for the Company beginning with its 2028 interim and annual

financial statements, with early adoption permitted as of the beginning of an annual reporting period.

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

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606.

In developing reasonable and supportable forecasts as part of estimating expected credit losses, all entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset.

ASU 2025-06 will be effective for the Company beginning with its 2026 interim and annual financial statements, with early adoption permitted.

The Company believes this ASU will have no material impact on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement, Reporting Comprehensive Income:

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

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

Improvements to Income Tax Disclosures (“ASU 2023-09”), which increases the disclosure requirements around rate reconciliation information and certain types of

income taxes companies are required to pay.

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

We expect 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 became effective for us beginning with this Annual Report on Form 10-K which includes the required additional segment disclosures.

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

ASU 2023-09, which the Company applied on a prospective basis, became effective beginning with this Annual Report on Form 10-K and includes the required additional income tax disclosures.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis