What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-26 compared with 2025-02-27 · 323 added, 209 removed, 1114 unchanged (32% of the section changed)

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Consolidated Statements of Operations for the years ended December 31, 2025, 2024 and 2023

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2024, 2023 and 202 2

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2025, 2024 and 2023

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2025, 2024 and 2023

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Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT RE GISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Ribbon Communications Inc.

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We have audited the accompanying consolidated balance sheets of Ribbon Communications Inc.

and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

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The Company used a combination of the income and market approaches to estimate reporting unit fair value.

With respect to the income approach, management is required to make significant estimates and assumptions related to discount rates and forecasts of future revenue and profit margin.

With respect to the income approach, management is required to make significant estimates and assumptions related to discount rates and forecasts of future revenues and profit margins.

Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both.

The goodwill balance was $301 million as of December 31, 2025, of which $225 million was allocated to the Cloud and Edge Reporting Unit (“Cloud and Edge”).

Given the significant judgments made by management to estimate the fair value of Cloud and Edge, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount rate and forecasts of future revenue and profit margin required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

Given the significant judgments made by management to estimate the fair value of Cloud and Edge, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount rate and forecasts of future revenues and profit margins required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the discount rate and forecasts of future revenue and profit margin, used by management to estimate the fair value of Cloud and Edge, included the following, among others:

● We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of Cloud and Edge, such as controls related to management’s selection of the discount rate and forecasts of future revenue and profit margin.

Our audit procedures related to the discount rate and forecasts of future revenues and profit margins, used by management to estimate the fair value of Cloud and Edge, included the following, among others:

◦ We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of Cloud and Edge, such as controls related to management’s selection of the discount rate and forecasts of future revenues and profit margins.

◦ We evaluated management’s ability to accurately forecast future revenues and profit margins by comparing actual results to management’s historical forecasts.

◦ We evaluated the reasonableness of management’s revenue and profit margin forecasts by comparing the forecasts to:

o Historical revenues and profit margins.

o Internal communications to management and the Board of Directors.

o Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.

▪ Historical revenues and profit margins.

▪ Internal communications to management and the Board of Directors.

▪ Forecasted information included in the Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.

◦ With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by:

o Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.

o Developing a range of independent estimates and compared those to the discount rate selected by management.

▪ Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.

▪ Developing a range of independent estimates and compared those to the discount rate selected by management.

/s/ Deloitte & Touche LLP

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Warrant liability

Preferred stock liability, $ 0.01 par value per share;

10,000,000 shares authorized, none issued and outstanding at December 31, 2024;

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

Operating lease liabilities, net of current

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Common stock, $ 0.0001 par value per share;

240,000,000 shares authorized;

390,000,000 shares authorized at December 31, 2025;

240,000,000 shares authorized at December 31, 2024;

175,776,074 shares issued and outstanding at December 31, 2025;

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Total operating expenses

Income (loss) from operations

(Loss) income from operations

Interest expense, net

Other expense, net

Other income (expense), net

Loss before income taxes

Income tax (provision) benefit

Loss per share:

Weighted average shares used to compute loss per share:

Income tax benefit (provision)

Net income (loss)

Earnings (loss) per share:

Weighted average shares used to compute earnings (loss) per share:

See notes to the consolidated financial statements.

RIBBON COMMUNICATIONS INC.

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Comprehensive Income (Loss )

(in thousands)

Year ended December 31,

Other comprehensive (loss) income, net of tax:

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

Reclassification of gain to other income (expense), net upon sale of interest rate swap

Net income (loss)

Other comprehensive loss, net of tax:

Unrealized loss on interest rate swap, net of reclassifications and amortization into earnings

Reclassification of gain to other expense, net upon sale of interest rate swap

Foreign currency translation adjustments

Employee retirement benefits

Other comprehensive (loss) income, net of tax

Comprehensive loss, net of tax

Other comprehensive loss, net of tax

Comprehensive income (loss), net of tax

See notes to the consolidated financial statements.

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stockholders’

(loss) income

income (loss)

Balances, January 1, 2023

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

Common stock issued in equity offering

Issuance costs related to equity offering

( 1,470,953 )

Stock-based compensation expense

Other comprehensive income

Other comprehensive loss

Balances, December 31, 2023

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Exercise of stock options

Exercise of warrants

Repurchase of common stock

( 2,456,141 )

Vesting of restricted stock awards and units

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Cash flows from operating activities:

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

Net income (loss)

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

Depreciation and amortization of property and equipment

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Deferred income taxes

Gain on sale of business

Decrease in fair value of investments

Gain on sale of swap

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Deferred revenue

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities:

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Purchases of software licenses

Proceeds from sale of business

Net cash used in investing activities

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Principal payments of term debt

Principal payments of finance leases

Payment of debt issuance costs

Proceeds from equity offering

Payment of equity offering issuance costs

Proceeds from issuance of preferred stock and warrant liabilities

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Payment of tax obligations related to vested stock awards and units

Net cash provided by (used in) financing activities

Repurchase of common stock

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

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Inventory transfers to property and equipment

Software license acquired through investment disposal

Supplemental disclosure of non-cash financing activities:

Warrant liability released to additional paid-in-capital

Fair value of vested restricted and performance-based stock grants

See notes to the consolidated financial statements.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements

(1) NATURE OF THE BUSINESS

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The proceeds from the Private Placement were approximately $ 53.4 million, including approximately $ 10 million from existing related party stockholders (See Note 15).

Equity Offering

On August 12, 2022, the Company entered into a Securities Purchase Agreement with certain investors for the sale (the “Equity Offering”) in a private placement by the Company of 17,071,311 shares (the “Shares”) of the Company’s common stock, par value $ 0.0001 per share, at a price of $ 3.05 per share.

The aggregate gross proceeds from the Equity Offering were approximately $ 52.1 million, including $ 10.0 million from existing related party shareholders, before deducting offering expenses paid by the Company of approximately $ 1.7 million.

The original issuance of the Shares in the Equity Offering was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).

The Company subsequently filed a registration statement on Form S-3 (the “Registration Statement”) with the SEC registering the Shares, which Registration Statement was declared effective by the SEC on September 23, 2022.

Operating Segments

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Actual results could differ from those estimates.

Reclassifications

Certain reclassifications, not affecting previously reported net income (loss), have been made to the previously issued financial statements to conform to the current year presentation.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Business Combinations

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The Company does not customize its software nor are installation services required, as the customer has a right to utilize internal resources or a third-party service company.

The software and

hardware are delivered before related services are provided and are functional without professional services or customer support.

The software and hardware are delivered before related services are provided and are functional without professional services or customer support.

The Company has concluded that its software licenses are functional intellectual property that are distinct, as the user can benefit from the software on its own.

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The Company does not allow and has no history of accepting product returns.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Service revenue includes revenue from customer support and other professional services.

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

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Financial Instruments

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

Ribbon’s term debt balance as of December 31, 2024 and 2023 of $ 348.3 million and $ 235.4 million, respectively, had a fair value of approximately $ 350.4 million and $ 235.1 million, respectively.

Our Warrants liabilities as of December 31, 2024 had a fair value of $ 8.1 million.

Our Preferred Stock and Warrants liabilities as of December 31, 2023 had a combined fair value of $ 58.6 million, including cumulative dividends on the Preferred Stock of $ 3.9 million.

The carrying amount of the Company’s term debt is also considered to approximate fair value, based on prevailing market conditions.

Our Warrant liability as of December 31, 2025 had a fair value of $ 1.9 million.

Financial instruments with remaining maturities or that are due within one year from the balance sheet date are classified as current.

Financial instruments with maturities or that are payable more than one year from the balance sheet date are classified as noncurrent.

Fair Value Option - Investment in AVCT

The Company received debentures (the “Debentures”) and warrants (the “AVCT Warrants”) as sale consideration in connection with its 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 13,700,421 shares of AVCT common stock (the “Debenture Shares”).

In connection with the conversion of the Debentures to the Debenture Shares, the Company 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, the Company 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.

See Note 4 for a discussion of the valuation of the Debentures, AVCT warrants and Debenture Shares.

On August 29, 2022, the Company and AVCT entered into a settlement agreement which provided for, amongst other things, the cancellation of the Company’s investment in the Debenture Shares and the AVCT Warrants with an aggregate fair value of $ 2.6 million.

See Note 4 for a description of the settlement agreement with AVCT.

Transfers of Financial Assets

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Under the terms of these agreements, the Company may transfer receivables to the financial institutions, on a non-recourse basis, provided that the financial institutions approve the receivables in advance.

Company maintains credit insurance policies from major insurance providers or obtains letters of credit from the customers for a majority of its factored trade receivables.

The Company maintains credit insurance policies from major insurance providers or obtains letters of credit from the customers for a majority of its factored trade receivables.

The Company accounts for the factoring of its financial assets as a sale of the assets and records the factoring fees, when incurred, as a component of interest expense in the consolidated statements of operations, and the proceeds from the sales of receivables are included in cash from operating activities in the consolidated statements of cash flows.

Factoring of accounts receivable and associated fees for the years ended December 31, 2025 and 2024 were as follows (in thousands):

Year ended December 31,

Accounts receivable sold

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Translation adjustments for these subsidiaries are included in Other expense, net.

Realized and unrealized foreign currency exchange gains and losses arising from transactions denominated in currencies other than the subsidiary’s functional currency are reflected in earnings.

The Company records its foreign currency (gains) losses as a component of Other expense, net.

The Company recognized net foreign currency (gains) and losses of $ 5.7 million, less than $( 0.1 ) million and $ 1.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Realized and unrealized foreign currency exchange losses and gains arising from transactions denominated in currencies other than the subsidiary’s functional currency are reflected in earnings.

The Company records its foreign currency losses (gains) as a component of Other expense, net.

The Company recognized net foreign currency losses and (gains) of $ 3.7 million, $ 5.7 million and less than $( 0.1 ) million for the years ended December 31, 2025, 2024 and 2023, respectively.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Inventory is recorded at the lower of cost or market value using the first-in, first-out convention.

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Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from two to five years .

Leasehold improvements are amortized over the

lesser of the lease term or five years .

When an asset is sold or retired, the cost and related accumulated depreciation or amortization are eliminated, and the resulting gain or loss, if any, is recognized in Loss from operations in the consolidated statement of operations.

Leasehold improvements are amortized over the lesser of the lease term or ten years .

When an asset is sold or retired, the cost and related accumulated depreciation or amortization are eliminated, and the resulting gain or loss, if any, is recognized in (Loss) income from operations in the consolidated statement of operations.

The Company reviews property and equipment for impairment in the same manner as intangible assets discussed below.

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Intangible Assets and Goodwill

The Company’s intangible assets are comprised of in-process research and development, developed technology, customer relationships, trade names, and internal use software.

The Company’s intangible assets are comprised of in-process research and development, developed technology, customer relationships, trade names, software licenses and internal use software.

Intangible assets are reviewed for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable based upon the estimated undiscounted cash flows.

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For the purpose of testing goodwill for impairment, all goodwill is assigned to a reporting unit, which may either be an operating segment or a portion of an operating segment.

The Company’s reporting units are its two operating segments, Cloud and Edge and IP Optical Networks.

The Company’s reporting units are its two operating segments, Cloud and Edge and IP

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Optical Networks.

The Company performs a fair value analysis for each reporting unit using both an income and market approach, which encompasses a discounted cash flow analysis and a guideline public company analysis using selected multiples.

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The Company may grant to certain of its executives and certain other employees performance-based stock units (“PSUs”) that include a market condition.

The Company uses a Monte Carlo simulation approach to model future stock

price movements based upon the risk-free rate of return, the volatility of each entity and the pair-wise covariance between each entity.

The Company uses a Monte Carlo simulation approach to model future stock price movements based upon the risk-free rate of return, the volatility of each entity and the pair-wise covariance between each entity.

These results are then used to calculate the grant date fair values of the PSUs.

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Ribbon is subject to ongoing business risks arising in the ordinary course of business, including legal claims, that affect the estimation process of the carrying value of assets, the recording of liabilities and the possibility of various loss contingencies.

An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated.

An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

has been impaired and the amount of loss can be reasonably estimated.

Ribbon regularly evaluates current information available to determine whether such amounts should be adjusted and records changes in estimates in the period they become known.

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At December 31, 2025, the Company’s liability for product warranties was $ 12.8 million of which $ 5.4 million was current and included in Accrued expenses and other and $ 7.4 million was long-term and included in Other long-term liabilities in the Company’s consolidated balance sheet.

December 31, 2023, the Company’s liability for product warranties was $ 12.2 million, of which $ 5.4 million was current and included in Accrued expenses and other, and $ 6.8 million was long-term and included in Other long-term liabilities in the Company’s consolidated balance sheet.

At December 31, 2024, the Company’s liability for product warranties was $ 12.3 million, of which $ 5.2 million was current and included in Accrued expenses and other, and $ 7.1 million was long-term and included in Other long-term liabilities in the Company’s consolidated balance sheet.

Research and Development Grants

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The Company expenses all variable lease costs as incurred.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Accounting for Income Taxes

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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 us 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

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

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 the Company beginning with its 2025 annual financial statements, with early adoption permitted.

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

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 the Company 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.

(3) BUSINESS ACQUISITIONS

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Integration-related expenses represent incremental costs related to combining the Company and its business acquisitions, such as third-party consulting and other third-party services related to merging the previously separate companies’ systems and processes.

The integration-related expenses in the years ended December 31, 2023 and 2022 relate to the ECI Acquisition.

The disposal-related expenses in the year ended December 31, 2022 primarily related to costs incurred from the sale of one of our foreign subsidiaries.

The acquisition-related expenses in the year ended December 31, 2025 are related to legal and professional fees associated with contemplated corporate development activities.

The integration-related expenses in the year ended December 31, 2023 related to the ECI Acquisition.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The components of Acquisition-, disposal- and integration-related expenses incurred in the years ended December 31, 2025, 2024 and 2023 were as follows (in thousands):

Year ended December 31,

Professional and services fees (disposal-related)

Professional and services fees (acquisition-related)

Integration-related expenses

(4) SALE OF KANDY COMMUNICATIONS BUSINESS

The Company completed the Kandy Sale on December 1, 2020 (the “Kandy Sale Date”).

As consideration, AVCT paid Ribbon $ 45.0 million, subject to certain adjustments, in the form of Debentures and AVCT Warrants (collectively the “AVCT Units”).

The Company received 43,778 AVCT Units as sale consideration.

The Debentures bore interest at a rate of 10 % per annum, which was added to the principal amount of the Debentures.

The Debentures were subject to mandatory conversion if the AVCT stock price was at or above $ 6.00 per share for 40 trading days in any 60 consecutive trading day period, subject to the satisfaction of certain other conditions.

As of February 19, 2021, the stock price had traded above $ 6.00 for 40 days within a 60 consecutive trading day period, and accordingly, on September 8, 2021 (the “Debenture Conversion Date”), upon the completion of customary regulatory filings by AVCT, the Debentures were converted into 13,700,421 shares of AVCT common stock (the “Debenture Shares”).

The AVCT Warrants were independent of the Debentures and entitled the Company to purchase 4,377,800 shares of AVCT common stock at an exercise price of $ 0.01 per share.

The Company calculated the fair value of the Debentures at each measurement date using a Lattice-based valuation approach, which utilizes a binomial tree to model the different paths the price of AVCT’s common stock might take over

the Debentures’ life by using assumptions regarding the stock price volatility and risk-free interest rate.

The Company used the Black-Scholes valuation model for estimating the fair value of the AVCT Warrants at each measurement date.

The fair value of the AVCT Warrants was affected by AVCT’s stock price as well as valuation assumptions, including the volatility of AVCT’s stock price, expected term of the option, risk-free interest rate and expected dividends.

Both the Lattice and Black-Scholes valuation models are based on available market data, giving consideration to all of the rights and obligations of each instrument and precluding the use of “blockage” discounts or premiums in determining the fair value of a large block of financial instruments.

Pursuant to the settlement agreement, the Company and AVCT also entered into a Wind Down Agreement, pursuant to which a Reseller Agreement between the parties, as previously amended, was terminated, and the Company was 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.

As consideration, the Company paid AVCT $ 2.5 million in cash, the Debenture Shares were redeemed and canceled, and the AVCT Warrants were terminated and canceled.

The perpetual license granted by AVCT is classified as Intangible assets, net in the Company’s consolidated balance sheet as of December 31, 2024 and 2023 in the amount of $ 1.0 million and $ 2.4 million, respectively.

The Company had no investment in AVCT as of December 31, 2024 or 2023 due to the settlement agreement entered into on August 29, 2022.

The Company recorded losses of $ 41.3 million in the year ended December 31, 2022, representing the change in the fair value of the AVCT Investment.

The results of the Kandy Communications Business are excluded from the Company’s consolidated results for all periods subsequent to the Kandy Sale Date.

(4) EARNINGS (LOSS) PER SHARE

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Options to purchase the Company’s common stock and unvested restricted and performance-based stock units aggregating 0.7 million shares, 7.6 million shares, and 13.5 million shares were excluded from the computation of diluted loss per share for the years ended December 31, 2025, 2024 and 2023, respectively, because their effect would have been antidilutive.

As of December 31, 2024 and 2023, the potential number of dilutive shares from the Warrants totaled 4.9 million shares.

As of December 31, 2025, 2024 and 2023, the potential number of dilutive shares from the Warrants totaled 4.7 million, 4.9 million and 4.9 million shares, respectively.

However, there was no impact on weighted average shares outstanding from these Warrants for the years ended December 31, 2025, 2024 and 2023 as the average share price of the Company’s common stock was below the exercise price of $ 3.77 per share and their effect would have been antidilutive.

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The Company had no assets or liabilities fair valued using Level 1 input at December 31, 2025 or 2024.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

● Level 2 applies to assets or liabilities for which there are inputs that are directly or indirectly observable in the marketplace, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets).

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● Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

At December 31, 2024, the fair value of the Company’s Warrants was determined using Level 3 input.

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

At December 31, 2025 and 2024, the fair value of the Company’s Warrants was determined using Level 3 input.

The Company did not have any transfers between Level 2 and Level 3 fair value measurements during the years ended December 31, 2025 and 2024.

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Current portion

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

(8) PROPERTY AND EQUIPMENT

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Leasehold improvements

Shorter of the estimated lease term or useful life

Shorter of the estimated lease term or 10 years

Less accumulated depreciation and amortization

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As of December 31, 2025 and 2024, property and equipment included $ 3.9 million and $ 23.2 million, respectively, of assets that had not yet commenced depreciation.

These assets primarily consisted of leasehold improvements and equipment, with the most significant portion related to construction in progress at our new main campus in Petah Tikva, Israel that is expected to be completed and occupied in the 1 st half of 2025, totaling $ 18.9 million and $ 0.5 million as of December 31, 2024 and 2023, respectively.

The Company recorded depreciation and amortization expense related to property and equipment of $ 13.5 million for the year ended December 31, 2024, $ 14.1 million for the year ended December 31, 2023 and $ 15.3 million for the year ended December 31, 2022.

The 2024 assets primarily consisted of leasehold improvements and equipment, with the most significant portion related to construction at our new main campus in Petah Tikva, Israel that was completed and occupied in the 1 st half of 2025, totaling $ 18.9 million as of December 31, 2024.

The Company recorded depreciation and amortization expense related to property and equipment of $ 16.7 million, $ 13.5 million and $ 14.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

During each of these years, the Company disposed of certain property and equipment that was fully depreciated at the time of disposal, which resulted in reductions in both Cost and Accumulated depreciation.

7 unchanged sentences

Software licenses

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

December 31, 2024

8 unchanged sentences

Testing for impairment of goodwill is completed annually as of October 1 st .

The Company’s IP Optical Networks operating segment, with $ 76.0 million of associated goodwill, had a negative carrying value and a positive fair value as of October 1, 2024.

The Company’s IP Optical Networks operating segment, with $ 76.0 million of associated goodwill, had a negative carrying value and a positive fair value as of October 1 st for both 2025 and 2024.

Upon completion of the 2025 and 2024 annual tests for goodwill impairment, the Company determined that there was no impairment of goodwill in either of its reporting units.

7 unchanged sentences

Taxes payable

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

(11) WARRANTY

8 unchanged sentences

Related variable lease expenses will continue to be expensed as incurred through the vacate date, at which time the Company will reassess the liability balance to ensure it appropriately reflects the remaining liability associated with the premises and record a liability for the estimated future variable lease costs.

Accelerated amortization of lease assets is recognized from the date that the Company commences the plan to fully or partially vacate a facility, for which there is no intent or ability to enter into a sublease, through the final vacate date.

Amounts of accelerated rent amortization that are included as a component of restructuring and related expense are not included in the tables below, as the liability for the total lease payments for each respective facility is included as a component of Operating lease liabilities in the Company’s consolidated balance sheets at December 31, 2024 and 2023, both current and noncurrent (see Note 21).

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

4 unchanged sentences

Accelerated amortization of lease assets due to cease-use

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The following table presents the rollforward of accrued restructuring liabilities for the Company’s restructuring plans for the years ended December 31, 2025, 2024 and 2023 (in thousands):

2022 and Prior

Restructuring

Balances, December 31, 2022

Charged to expense

Transfer to operating lease assets

Balances, December 31, 2023

Charged to expense

Reversals/adjustments

Balances, December 31, 2024

Charged to expense

Reversals/adjustments

Balances, December 31, 2025

2026 Restructuring Plan

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.

In connection with the 2026 Restructuring Plan, the Company recorded restructuring and related expense of $ 8.6 million, with cash payments of $ 0.2 million in the year ended December 31, 2025.

The Company estimates that it will expense approximately $ 5 million in 2026 under the 2026 Restructuring Plan.

2025 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, the Company recorded restructuring and related expense of $ 5.0 million, with cash payments of $ 4.5 million in the year ended December 31, 2025.

2024 Restructuring Plan

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

The Company recorded $ 2.1 million in the year ended December 31, 2024 related to these actions.

The Company recorded a nominal amount in the year ended December 31, 2025 and $ 2.1 million in the year ended December 31, 2024 related to these actions.

2023 Restructuring Plan

1 unchanged sentence

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.

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

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

In connection with the 2023 Restructuring Plan, the Company recorded restructuring and related expense of $ 0.2 million and $ 2.0 million in the years ended December 31, 2025 and 2024, respectively, consisting entirely for severance related costs.

A summary of the 2023 Restructuring Plan accrual activity for the years ended December 31, 2024 and 2023 were as follows (in thousands):

The Company estimates that it will record nominal future expense under the 2023 Restructuring Plan.

2022 Restructuring Plan

On February 14, 2022, the Company’s Board of Directors approved a strategic restructuring program (the “2022 Restructuring Plan”) to streamline the Company’s operations in order to support the Company’s investment in critical growth areas.

The 2022 Restructuring Plan includes, among other things, charges related to a consolidation of facilities and a workforce reduction.

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

The Company recorded restructuring and related expense of $ 6.1 million and $ 6.3 million in connection with the 2022 Restructuring Initiative in the years ended December 31, 2024 and 2023, respectively.

The amount for the year ended December 31, 2023 was 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.

The Company estimates that it will record approximately $ 5 million of expense in 2025 under the 2022 Restructuring Plan.

summary of the 2022 Restructuring Plan accrual activity for the years ended December 31, 2024 and 2023 were as follows (in thousands):

Variable and other facilities-related costs

Net transfer to

operating lease

Variable and other facilities-related costs

Accelerated amortization of lease assets due to cease-use

2022 and Prior Restructuring Plans

Prior to December 31, 2022, the Company engaged in various restructuring activities that included consolidation of facilities and workforce reductions.

Substantially all the ongoing costs incurred under such plans in the years presented relates to variable and other facilities-related costs.

The Company estimates that it will expense approximately $ 3 million in 2026 under these restructuring plans.

Balance Sheet Classification

17 unchanged sentences

The Company was in compliance with the Financial Covenant as of December 31, 2025.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The indebtedness and other obligations under the 2024 Credit Facility are irrevocably and unconditionally guaranteed on a joint and several basis by the Company and its subsidiaries (together, the "Guarantors").

17 unchanged sentences

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

In connection with the Fifth Amendment, the Company made a $ 10.0 million voluntary prepayment that was applied to the final payment due on the maturity date.

Subsequent to the Fifth Amendment, the Company was required to make

quarterly principal payments on the 2020 Term Loan aggregating approximately $ 5.0 million per quarter through March 31, 2024 and $ 10.0 million in each of the three quarters thereafter, with the remaining and final payment due on the maturity date in March 2025.

In connection with the Fifth Amendment, the Company made a $ 10.0 million voluntary prepayment that was applied to the

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

final payment due on the maturity date.

Subsequent to the Fifth Amendment, the Company was required to make quarterly principal payments on the 2020 Term Loan aggregating approximately $ 5.0 million per quarter through March 31, 2024 and $ 10.0 million in each of the three quarters thereafter, with the remaining and final payment due on the maturity date in March 2025.

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

10 unchanged sentences

dollar SOFR plus a fixed margin of 4.5 %.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

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

10 unchanged sentences

Total Unamortized Original Issue Discount and Debt Issuance Costs

Letters of Credit Outstanding

Remaining Borrowing Capacity

Average Interest Rates:

Letters of Credit

The Company’s debt maturities as of December 31, 2025 were as follows:

2 unchanged sentences

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

At December 31, 2024, the Company 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, the Company had Guarantees aggregating $ 7.9 million, comprised of the $ 2.7 million of letters of credit under the 2020 Credit Facility described above and $ 5.2 million of Other Guarantees.

At December 31, 2025 and 2024, the Company had $ 11.1 million and $ 10.9 million, respectively, 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, 2025 and 2024, the Company had cash collateral of $ 1.7 million and $ 2.7 million, respectively, supporting the Guarantees, which are reported in Restricted cash in the Company’s consolidated balance sheets.

3 unchanged sentences

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

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

Management’s objective has been

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

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

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

13 unchanged sentences

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

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

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 until it was refinanced on June 21, 2024, 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 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.

See Note 13 for a description of the refinancing.

1 unchanged sentence

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

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

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

See Note 13 for a description of the refinancing.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The Company’s objectives in using interest rate derivatives have been to add stability to interest expense and to manage its exposure to interest rate movements.

6 unchanged sentences

Amounts reported in Accumulated other comprehensive income related to the Company’s derivative were reclassified to interest expense as interest was accrued on the Company’s variable-rate debt.

The impact of the Company’s derivative financial instrument on its consolidated statements of comprehensive loss for the years ended December 31, 2024 and 2023 was as follows, net of tax (in thousands):

The impact of the Company’s derivative financial instrument on its consolidated statements of comprehensive income (loss) for the years ended December 31, 2025, 2024 and 2023 was as follows, net of tax (in thousands):

Year ended December 31,

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

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

Amount reclassified from accumulated other comprehensive income to other expense, net upon sale of swap, net of tax

Amount reclassified from accumulated other comprehensive income to interest expense

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

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

The Company had no derivative assets or liabilities at December 31, 2025 or 2024.

6 unchanged sentences

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

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

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

The value of the Preferred Stock was calculated quarterly through March 31, 2024 using the Black-Derman-Toy (BDT) stochastic yield lattice model to capture the optimal timing of repayment, increasing dividend rate and other features and the value of the Warrants is calculated using the Black-Scholes Pricing Model.

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

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

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

4 unchanged sentences

Fair value of Warrant per share

The changes in the Company’s Preferred Stock for the year ended December 31, 2024 and 2023 were as follows (in thousands):

The change in the Company’s Preferred Stock for the year ended December 31, 2024 and 2023 was as follows (in thousands):

Year ended December 31,

8 unchanged sentences

Balance at beginning of year

Exercise of warrants

Fair value change

Balance at end of year

Balance at end of period

The Preferred Stock, redeemed on June 25, 2024, was subordinate to the Company’s indebtedness and senior to the Company’s common stock or other equity.

10 unchanged sentences

The registration requirement was completed on May 19, 2023.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

During the year ended December 31, 2025, 176,658 of the Warrants were exercised in cashless exercises, resulting in the issuance of 32,573 of the Company’s common stock at a weighted average fair value of $ 4.62 per share.

There were 4,681,432 remaining Warrants outstanding as of December 31, 2025.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

(16) REVENUE RECOGNITION

38 unchanged sentences

The value of deferred revenue will increase or decrease based on the timing of invoices and recognition of revenue.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Disaggregation of Revenue

22 unchanged sentences

Indirect sales through channel partner program

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The Company’s product revenue from sales to enterprise customers and from sales to service provider customers for the years ended December 31, 2025, 2024 and 2023 was as follows (in thousands):

31 unchanged sentences

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

The changes in the Company’s accounts receivable, unbilled receivables and deferred revenue balances for the years ended December 31, 2024 and 2023 were as follows (in thousands):

The changes in the Company’s accounts

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

receivable, unbilled receivables and deferred revenue balances for the years ended December 31, 2025 and 2024 were as follows (in thousands):

Balance at January 1, 2025

7 unchanged sentences

The Company applies the optional exemption of not disclosing the transaction price allocated to the remaining performance obligation for its contracts with an original duration of less than one year.

In 2024, the Company entered into a contract with an existing customer that has revenue allocated to remaining performance obligations, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods of $ 285 million as of December 31, 2024.

The Company expects to recognize the remaining revenue over the next three years .

At this time, the Company expects to recognize the majority of the revenue related to this contract in the years 2026 through 2028.

All freight-related customer invoicing is recorded as revenue, while the shipping and handling costs that occur after control of the promised goods or services transfer to the customer are reported as fulfillment costs, a component of Cost of revenue - product in the Company’s consolidated statements of operations.

1 unchanged sentence

Sales commissions earned by the Company’s employees are considered incremental and recoverable costs of obtaining a contract with a customer.

The payments related to these costs have been deferred on our consolidated balance sheet and are being amortized over the expected life of the customer contract, which is generally five years .

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

At December 31, 2025 and 2024, the Company had $ 2.1 million and $ 2.8 million, respectively, of deferred sales commissions capitalized.

3 unchanged sentences

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

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

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

The IP Optical Networks segment provides high-performance, secure solutions for IP networking and optical

transport, supporting wireless networks including 5G, metro and edge aggregation, core networking, data center interconnect, legacy transformation and transport solutions for wholesale carriers.

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

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

and within service provider networks.

Ribbon's Cloud and Edge product portfolio consists primarily of its Session Border Controller (“SBC”) products and its Network Transformation products, along with related services such as large data analytics, fraud detection and prevention, and element management.

The portfolio also includes the new Acumen AIOps and Automation platform.

The IP Optical Networks segment provides high-performance, secure solutions for IP networking and optical transport, supporting wireless networks including 5G, metro and edge aggregation, core networking, data center interconnect, legacy transformation and transport solutions for wholesale carriers.

This portfolio is offered to service provider, enterprise and industry verticals with critical transport network infrastructures including utilities, government, defense, transportation, and education and research.

8 unchanged sentences

See below for a reconciliation of segment adjusted gross profit to gross profit and loss before income taxes.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The tables below present significant segment expenses regularly reviewed by the CODM for the years ended December 31, 2025, 2024 and 2023 (in thousands):

23 unchanged sentences

Interest expense, net

Other expense, net

Other (income) expense, net

Loss before income taxes

4 unchanged sentences

Depreciation expense

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

(18) MAJOR CUSTOMERS

6 unchanged sentences

(19) STOCK-BASED COMPENSATION PLANS

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

The Company grants stock-based compensation to employees, officers and non-employee directors, as well as consultants and advisors of the Company and its subsidiaries.

On February 19, 2025 (the “Effective Date”), our Board adopted the Ribbon Communications Inc.

2025 Incentive Award Plan (the “2025 Incentive Award Plan”), which replaced the Amended and Restated 2019 Incentive Award Plan.

The 2025 Incentive Award Plan provides for the award of stock options, stock appreciation rights, restricted stock awards (“RSAs”), performance-based stock awards, restricted stock units (“RSUs”), performance-based stock units (“PSUs”) and other stock- or cash-based awards.

The Company may also grant certain one-time stand-alone inducement awards outside of the 2025 Incentive Award Plan.

Executive Equity Arrangements

Inducement Awards

In connection with his appointment as President and Chief Executive Officer of Ribbon on March 16, 2020, the Company awarded Bruce McClelland sign-on equity grants, comprised of RSUs and a PSU grant with both market and service conditions.

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

Performance-Based Stock Grants

11 unchanged sentences

Unvested balance at December 31, 2025

The total grant date fair value of restricted stock underlying RSUs that vested was $ 15.5 million in the year ended December 31, 2024, $ 19.3 million in the year ended December 31, 2023 and $ 18.1 million in the year ended December 31, 2022.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The total grant date fair value of restricted stock underlying RSUs that vested was $ 10.3 million, $ 15.5 million and $ 19.3 million, in the years ended December 31, 2025, 2024 and 2023, respectively.

Performance-Based Stock Units

1 unchanged sentence

Unvested balance at January 1, 2025

( 4,277,790 )

Unvested balance at December 31, 2025

The total grant date fair value of restricted stock underlying PSUs that vested was $ 0.9 million in the year ended December 31, 2024, $ 2.6 million in the year ended December 31, 2023 and $ 0.9 million in the year ended December 31, 2022.

The total grant date fair value of restricted stock underlying PSUs that vested was $ 1.5 million, $ 0.9 million and $ 2.6 million, in the years ended December 31, 2025, 2024 and 2023, respectively.

Stock-Based Compensation

8 unchanged sentences

This expense is expected to be recognized over a weighted average period of approximately 1.6 years.

The Company issues authorized and unissued shares under its equity plans and at December 31, 2024, there were approximately 2.0 million total shares of common stock reserved for that purpose with 0.1 million of those shares authorized only for issuance of shares upon exercise of stock options.

The Company issues authorized and unissued shares under its equity plans and at December 31, 2025, there were approximately 5.5 million total shares of common stock reserved for that purpose with no shares authorized only for issuance of shares upon exercise of stock options.

(20) 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.

The Company has operating leases for corporate offices and research and development facilities and has historically had finance leases for certain equipment.

Operating leases are reported separately in the Company’s consolidated balance sheets.

Operating leases are reported separately in the Company’s consolidated

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

balance sheets.

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

17 unchanged sentences

Certain leased facilities are being partially or fully vacated as part of the 2022 Restructuring Plan and for some of those facilities, the Company has no plans to enter into sublease agreements.

Accordingly, the Company accelerated the amortization of those lease assets through the planned cease-use date of each facility, resulting in additional amortization expense of $ 1.0 million and $ 1.6 million in the years ended December 31, 2023 and 2022, respectively.

No additional amortization was recorded in the year ended December 31, 2024.

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

Variable lease costs for the year ended December 31, 2022 included accruals of $ 1.0 million for all estimated future variable lease costs related to those facilities.

No additional amortization was recorded in the years ended December 31, 2025 and 2024.

No variable lease costs were accrued in the years ended December 31, 2025 and 2024 for future estimated variable expenses related to assets partially or fully vacated with no intent or ability to sublease.

All incremental accelerated amortization and accrual for all estimated future variable lease costs are included in Restructuring and related expense in the Company’s consolidated statements of operations for the years ended December 31, 2025, 2024 and 2023.

2 unchanged sentences

The Company leases its corporate offices and other facilities under operating leases, which expire at various times through 2036.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The Company’s right-of-use lease assets and lease liabilities at December 31, 2025 and 2024 were as follows (in thousands):

10 unchanged sentences

Operating lease cost*

Finance lease cost:

Amortization of leased assets

Interest on lease liabilities

Short-term lease cost

2 unchanged sentences

Net lease cost

No accelerated amortization was recorded in the year ended December 31, 2024.

Operating lease costs for the years ended December 31, 2023 and 2022 include $ 1.0 million, and $ 1.6 million, respectively, of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

No variable costs were accrued in the years ended December 31, 2024 or 2023.Variable lease costs for the year ended December 31, 2022 included accruals of $ 1.0 million for all future estimated variable expenses related to certain assets partially or fully vacated with no intent or ability to sublease.

No accelerated amortization was recorded in the years ended December 31, 2025 and 2024.

Operating lease costs for the year ended December 31, 2023 include $ 1.0 million, of accelerated amortization for certain assets partially or fully vacated with no intent or ability to sublease.

No variable costs were accrued in the years ended December 31, 2025, 2024 and 2023.

Cash flow information related to the Company’s leases for the years ended December 31, 2025, 2024 and 2023 was as follows (in thousands):

2 unchanged sentences

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

The Company’s non-cash investing and financing activities in the years ended December 31, 2025 and 2024 related to the addition of operating leases resulted in right-of-use assets (“ROUs”) obtained in exchange for lease obligations of $ 20.6 million and $ 9.5 million, respectively, and operating lease liabilities recorded of $ 31.3 million and $ 9.5 million, respectively.

Other information related to the Company’s leases as of December 31, 2025 and 2024 was as follows (in thousands):

3 unchanged sentences

Operating leases

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Future minimum fixed lease payments under noncancelable leases at December 31, 2025 were as follows (in thousands):

13 unchanged sentences

defined benefit plans reflect the different economic environments within the various countries.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

A reconciliation of the changes in the benefit obligations and fair value of the assets of the defined benefit plans for the years ended December 31, 2025 and 2024, the funded status of the plans, and the amounts recognized in the consolidated balance sheets as of December 31, 2025 and 2024 were as follows (in thousands):

3 unchanged sentences

Interest cost

Participant contributions

Net actuarial loss (gain) on obligation

Net actuarial loss on obligation

Benefits paid

21 unchanged sentences

Aggregate fair value of plan assets

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Plans with overfunded accumulated benefit obligations at December 31, 2025 and 2024 were as follows (in thousands):

14 unchanged sentences

Year ended December 31,

Net (gain) loss

Amortization of net gain (loss)

Amortization of prior service credit (cost)

Settlement credit (charge)

Net loss (gain)

Amortization of net gain

Amortization of prior service credit

Settlement credit

Total recognized in other comprehensive income (loss)

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The Company defers all actuarial gains and losses resulting from variances between actual results and economic estimates or actuarial assumptions.

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The Company funds this plan by contributing at least the minimum amount required by applicable regulations and as recommended by an independent actuary.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

During the years ended December 31, 2025, 2024 and 2023, the Company contributed $ 0.7 million, $ 0.7 million and $ 1.0 million, respectively, in total to its defined benefit plans.

3 unchanged sentences

Year ended December 31,

Income (loss) before income taxes:

Loss before income taxes:

United States

The provision (benefit) for income taxes from continuing operations consisted of the following (in thousands):

The (benefit) provision for income taxes from continuing operations consisted of the following (in thousands):

Year ended December 31,

Provision (benefit) for income taxes:

Income tax (benefit) provision:

Total current

Total deferred

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

A reconciliation of the Company’s effective tax rate for continuing operations to the U.S.

statutory federal rate is as follows:

statutory federal rate for the year ended December 31, 2025 is as follows:

Year ended December 31,

Loss before income taxes

federal statutory tax rate

United States

State and local income taxes

Effect of cross-border tax laws

Subpart F income

Income from branches

Withholding tax

Worthless stock deduction

Foreign tax credit

R&D tax credit

Changes in valuation allowances

Nontaxable or nondeductible items

Fair value adjustment

Other adjustments

Foreign tax effects

Withholding tax

India audit settlement

Changes in valuation allowances

Capital loss carryforward

Effect of rates different than statutory

Permanent adjustments - foreign exchange

Changes in valuation allowances

Withholding tax

Intercompany dividend

Nontaxable accruals

Other foreign jurisdictions

Changes in unrecognized tax benefits

Income tax benefit

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The state and local jurisdictions that make up the majority (greater than 50%) of the state and local income tax category in the above table, for the year ended December 31, 2025, are as follows, beginning with the largest effect in descending order:

Pennsylvania, New York, New Jersey, Georgia, and California.

A reconciliation of the Company’s effective tax rate for continuing operations to the U.S.

statutory federal rate for the years ended December 31, 2024 and 2023 is as follows:

Year ended December 31,

statutory income tax rate

7 unchanged sentences

Effective income tax rate

The amount of income taxes paid, net of refunds received, by the Company for the year ended December 31, 2025 is as follows (in thousands):

All other foreign

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The following is a summary of the significant components of deferred income tax assets and liabilities (in thousands):

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Lease liabilities

Interest Limitation Carryforward

Other temporary differences

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Deferred income taxes - net noncurrent liabilities

The One Big Beautiful Bill Act (the "Act") was signed into law on July 4, 2025.

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

Since the Act became law during the third quarter of 2025, the Company accounted for the effects of the Act on our tax provision in the third quarter of 2025.

The most significant impact of the Act for the Company is the ability to deduct the unamortized balance of capitalized R&D costs.

The Company plans to accelerate this deduction over two years as permitted by the Act.

At December 31, 2025, the Company had U.S.

federal net operating losses (“NOLs”) of $ 100.2 million.

federal net operating losses (“NOLs”) of $ 462.1 million, including $ 362.4 million of indefinite-lived federal NOLs.

The Company also had U.S.

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In addition, the Company had $ 1.6 billion of Israel NOLs.

federal NOL carryforwards expire between 2025 and 2037.

federal NOL carryforwards that are not indefinite-lived expire between 2026 and 2038.

state NOLs begin to expire in 2026, and the Company also has indefinite-lived state NOLs.

2 unchanged sentences

The federal foreign tax credit carryforwards expire between 2030 and 2032.

The state tax credits, which are primarily research and development credits, begin to expire in 2025, while others can be carried forward until exhausted.

The state tax credits, which are primarily

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

research and development credits, begin to expire in 2026, while others can be carried forward until exhausted.

The foreign income tax credits expire in various periods.

7 unchanged sentences

Under the provisions of the Internal Revenue Code, the net operating losses and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service.

Net operating losses and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership of significant shareholders over a three-year period in excess of 50 %, as defined under sections 382 and 383 of the Internal Revenue Code, as well as similar state provisions.

As a result of the Sonus and GENBAND merger in 2017, the Company has $ 92.8 million of U.S.

7 unchanged sentences

deferred tax assets of $ 21.5 million at December 31, 2025 and $ 18.6 million at December 31, 2024.

The Company also maintains a valuation allowance against certain of its foreign deferred tax assets, predominantly Israel, amounting to approximately $ 475 million at December 31, 2024 and $ 465 million at December 31, 2023.

The increase to the U.S.

valuation allowance is a result of the current year taxable loss, which does not allow the Company to utilize NOLs that are section 382 limited and therefore will expire unutilized in a future period.

The Company also maintains a valuation allowance against certain of its foreign deferred tax assets, predominantly Israel, amounting to approximately $ 491 million at December 31, 2025 and approximately $ 475 million at December 31, 2024, respectively.

The deferred tax assets recognized with no valuation allowance at December 31, 2025 and 2024 primarily relate to other foreign subsidiaries where recoverability is concluded to be more likely than not based on the Company’s cost-plus compensation policy, as well as NOLs and tax credits in the U.S.

14 unchanged sentences

The Company believes that it is reasonably possible that $ 0.9 million in tax positions related to its unrecognized tax benefits will be recognized within the next twelve months.

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

The Company and its subsidiaries file income tax returns in the U.S.

23 unchanged sentences

Accordingly, with respect to these proceedings, the Company is currently unable to reasonably estimate the possible loss or range of possible loss.

Miller Complaint.

On November 8, 2018, Ron Miller, a purported stockholder of the Company, filed a Class Action Complaint (the “Miller Complaint”) in the United States District Court for the District of Massachusetts (the “Massachusetts District Court”) against the Company and three of its former officers (collectively, the “Defendants”), claiming to represent a class of purchasers of Sonus common stock during the period from January 8, 2015 through March 24, 2015 and alleging violations of the federal securities laws.

Similar to a previous complaint entitled Sousa et al.

Sonus Networks, Inc.

et al., which was dismissed with prejudice by an order dated June 6, 2017, the Miller Complaint claims that the Defendants made misleading forward-looking statements concerning Sonus’ expected fiscal first quarter of 2015 financial performance, which statements were also the subject of an August 7, 2018 Securities and Exchange Commission Cease and Desist Order, whose findings the Company neither admitted nor denied.

The Miller plaintiffs were seeking monetary damages.

After the Miller Complaint was filed, several parties filed and briefed motions seeking to be selected by the Massachusetts District Court to serve as a Lead Plaintiff in the action.

On June 21, 2019, the Massachusetts District Court appointed a group as Lead Plaintiffs and the Lead Plaintiffs filed an amended complaint on July 19, 2019.

On August 30, 2019, the Defendants filed a motion to dismiss the Miller Complaint and, on October 4, 2019, the Lead Plaintiffs filed an opposition to the motion to dismiss.

In June 2023, the Defendants agreed to a settlement in principle with the named plaintiffs, and final approval of the settlement was provided by the court on April 24, 2024.

The settlement provided a release of all claims asserted in the litigation to all Defendants, who continue to deny liability.

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

Charter Complaint.

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The Company filed its answer to the first complaint file in New York on December 7, 2022 and to the second complaint filed in Delaware on January 9, 2023.

Discovery is on-going and the court in the Delaware complaint has set a trial date of June 2025.

On May 14, 2025, the Delaware court granted our dispositive motion for summary judgement and denied Charter’s motion for partial summary

RIBBON COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (Continued)

Charter appealed the Delaware court’s decision, but on December 18, 2025, the Delaware Supreme Court affirmed the lower court’s judgment.

This ended the case in Delaware.

No trial date has been set for the case in New York.

9 unchanged sentences

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 8. Financial Statements and Supplementary Data