What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-06 compared with 2025-10-23 · 172 added, 269 removed, 178 unchanged (71% of the section changed)

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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.

Key Trends and Economic Factors Affecting Ribbon

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

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

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

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

The global trade landscape continues to be highly volatile.

In 2025, the U.S.

government implemented a series of trade tariffs on goods imported into the U.S.

from various countries.

In many cases, these tariffs resulted in reciprocal tariffs and other actions on goods being exported from the U.S.

These associated tariffs are complex and continue to evolve as negotiations occur.

In February 2026, the U.S.

Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”), which the U.S.

government relied on to impose certain tariffs, does not authorize the administration to impose tariffs.

On March 4, 2026, the U.S.

Court of International Trade ordered the U.S.

Customs and Border Protection (“CBP”) to process refunds of the IEEPA tariffs, although the Court immediately suspended the order while the CBP determines a refund process.

The IEEPA tariffs remain subject to ongoing litigation between the administration and other parties.

In response to the U.S.

Supreme Court ruling mentioned above, the administration announced plans to implement new tariffs under alternative statutory authority.

The full impact of the U.S.

Supreme Court’s ruling and the administration’s response, including the timing and extent of any refunds and the impact of the new tariffs, remain uncertain.

While the announced tariffs enacted in 2025 and in the first quarter of 2026 have not had a material impact on our business to date, new or proposed tariffs, including exemptions under existing trade agreements or otherwise, could result in additional expenses for products we import into the United States.

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

Supplier Disruptions.

Ongoing uncertainty in the global economy due to proposed and enacted tariffs and trade restrictions, 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 tariffs, inflation, global military conflicts, including in the Middle East and Ukraine, rising fuel prices, 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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Further, such factors may negatively impact our operating costs resulting in a reduction in net income.

The degree to which the ongoing wars in Israel and Ukraine, the inflationary and high interest rate environment and tariffs 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 ongoing 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.

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.

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

The Ongoing War in Ukraine and the Middle East .

The uncertainty resulting from the recent war in the Middle East 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.

The conflict in the Middle East has significantly reduced the export of oil and natural gas from the Persian Gulf, creating upward pressure on oil and natural gas prices, and has also disrupted and increased the costs of certain other supplies.

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 the Middle East.

Following the terrorist attacks in Israel in October 2023, a number of our employees have been activated for military duty and we expect that additional employees will also be activated if the war in Israel continues.

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

If we are further limited in our ability to sell products and services to Russia and other countries for an extended period, it could have a material impact on our financial results.

Inflation and Interest Rates.

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Therefore, changes in the value of the U.S.

dollar against other currencies will affect our revenue, income from operations, net income and the value of balance sheet items originally denominated in other currencies.

dollar against other currencies would affect our revenue, income from operations, net income and the value of balance sheet items originally denominated in other currencies.

There is no guarantee that our financial results will not be adversely affected by currency exchange rate fluctuations.

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Financial Results

We reported income from operations of $2.8 million and a loss from operations of $0.9 million for the three months ended September 30, 2025 and 2024, respectively.

We reported a loss from operations of $12.6 million and $16.3 million for the nine months ended September 30, 2025 and 2024, respectively.

Our revenue was $215.4 million and $210.2 million in the three months ended September 30, 2025 and 2024, respectively.

Our gross profit and gross margin were $108.0 million and 50.1%, respectively, in the three months ended September 30, 2025, and $109.6 million and 52.1%, respectively, in the three months ended September 30, 2024.

The higher revenue in the three months ended September 30, 2025 compared to 2024 is due to $8.7 million of higher IP Optical Networks sales, partially offset by $3.6 million of overall lower Cloud and Edge revenue.

The IP Optical Networks revenue was higher primarily due to $5.2 million of higher product sales, and higher professional services sales and maintenance revenue of $1.8 million and $1.7 million, respectively.

The lower Cloud and Edge revenue was attributable to $7.3 million of lower product sales and $1.3 million of lower maintenance revenue, partially offset by

$5.0 million of higher professional services revenue.

Our revenue was $617.2 million and $582.5 million in the nine months ended September 30, 2025 and 2024, respectively.

Our gross profit and gross margin were $299.6 million and 48.5%, respectively, in the nine months ended September 30, 2025, and $299.4 million and 51.4%, respectively, in the nine months ended September 30, 2024.

The higher revenue in the nine months ended September 30, 2025 compared to 2024 is due to $28.8 million of higher overall Cloud and Edge revenue and $5.9 million of higher IP Optical Networks sales.

The higher Cloud and Edge revenue was attributable to $23.8 million of higher sales of professional services and $9.5 million of higher product sales, partially offset by $4.5 million of lower maintenance revenue.

The higher IP Optical Networks revenue was due to $3.9 million of higher maintenance revenue and $3.4 million of higher sales of professional services, partially offset by $1.4 million of lower product revenue.

Revenue from our Cloud and Edge segment was $124.5 million and $128.1 million in the three months ended September 30, 2025 and 2024, respectively.

Gross profit and gross margin for this segment were $76.5 million and 61.5%, respectively, in the three months ended September 30, 2025, and $84.3 million and 65.9%, respectively, in the three months ended September 30, 2024.

Revenue from our Cloud and Edge segment was $369.1 million and $340.3 million in the nine months ended September 30, 2025 and 2024, respectively.

Gross profit and gross margin for this segment were $226.3 million and 61.3%, respectively, in the nine months ended September 30, 2025, and $219.2 million and 64.4%, respectively, in the nine months ended September 30, 2024.

Revenue from our IP Optical Networks segment was $90.9 million and $82.2 million in the three months ended September 30, 2025 and 2024, respectively.

Gross profit and gross margin for this segment were $31.5 million and 34.6%, respectively, in the three months ended September 30, 2025, and $25.3 million and 30.8%, respectively, in the three months ended September 30, 2024.

Revenue from our IP Optical Networks segment was $248.1 million and $242.2 million in the nine months ended September 30, 2025 and 2024, respectively.

Gross profit and gross margin for this segment were $73.3 million and 29.5%, respectively, in the nine months ended September 30, 2025, and $80.2 million and 33.1%, respectively, in the nine months ended September 30, 2024.

Our operating expenses were $105.2 million and $110.5 million in the three months ended September 30, 2025 and 2024, respectively, and $312.3 million and $315.8 million in the nine months ended September 30, 2025 and 2024, respectively.

The decreased operating expenses are primarily attributable to lower general and administrative expenses.

Operating expenses for the three months ended September 30, 2025 included $5.9 million of amortization of acquired intangible assets, $0.4 million of acquisition-, disposal- and integration-related expense, and $3.5 million of restructuring and related expense.

Operating expenses for the three months ended September 30, 2024 included $6.5 million of amortization of acquired intangible assets and $3.8 million of restructuring and related expense.

Operating expenses for the nine months ended September 30, 2025 included $18.1 million of amortization of acquired intangible assets, $4.3 million of acquisition-, disposal- and integration-related expense, and $10.2 million of restructuring and related expense.

Operating expenses for the nine months ended September 30, 2024 included $19.7 million of amortization of acquired intangible assets, and $8.8 million of restructuring and related expense.

We recorded stock-based compensation expense of $5.8 million and $4.0 million in the three months ended September 30, 2025 and 2024, respectively, and $14.6 million and $12.1 million in the nine months ended September 30, 2025 and 2024, respectively.

We reported a loss from operations of $31.7 million and $19.6 million for the three months ended March 31, 2026 and 2025, respectively.

Our revenue was $162.6 million and $181.3 million in the three months ended March 31, 2026 and 2025, respectively.

Our gross profit and gross margin were $69.7 million and 42.9%, respectively, in the three months ended March 31, 2026, and $82.4 million and 45.4%, respectively, in the three months ended March 31, 2025.

The lower revenue in the three months ended March 31, 2026 compared to 2025 is due to $10.6 million of lower IP Optical Networks sales plus $8.1 million of lower Cloud and Edge revenue.

The IP Optical Networks revenue was lower primarily due to $8.3 million of lower product sales, and lower professional services sales and maintenance revenue of $2.3 million.

The lower Cloud and Edge revenue was attributable to $5.6 million of lower product sales and $2.5 million of lower professional services sales and maintenance revenue.

Revenue from our Cloud and Edge segment was $99.5 million and $107.6 million in the three months ended March 31, 2026 and 2025, respectively.

Gross profit and gross margin for this segment were $56.1 million and 56.4%, respectively, in the three months ended March 31, 2026, and $66.1 million and 61.5%, respectively, in the three months ended March 31, 2025.

Revenue from our IP Optical Networks segment was $63.1 million and $73.7 million in the three months ended March 31, 2026 and 2025, respectively.

Gross profit and gross margin for this segment were $13.6 million and 21.5%, respectively, in the three months ended March 31, 2026, and $16.2 million and 22.0%, respectively, in the three months ended March 31, 2025.

Our operating expenses were $101.4 million and $102.0 million in the three months ended March 31, 2026 and 2025, respectively.

The decreased operating expenses are primarily attributable to lower restructuring and related expense, offset by higher general and administrative expense.

Operating expenses for the three months ended March 31, 2026 included $5.7 million of amortization of acquired intangible assets and $2.0 million of restructuring and related expense.

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

We recorded stock-based compensation expense of $6.0 million and $4.3 million in the three months ended March 31, 2026 and 2025, respectively.

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

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

See "Results of Operations" in this MD&A for a discussion of the changes in our revenue and expenses for three months ended March 31, 2026 compared to three months ended March 31, 2025.

Restructuring and Cost Reduction Initiatives

During the fourth quarter of 2025, our 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 $1.3 million in the three months ended March 31, 2026.

We anticipate that we will record additional expense of approximately $4 million in 2026 related to the 2026 Restructuring Plan.

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

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

In connection with the 2025 Restructuring Plan, we recorded restructuring and related expense of $2.5 million and $5.1 million in three and nine

months ended September 30, 2025.

In connection with the 2025

Restructuring Plan, we recorded nominal restructuring and related expense in the three months ended March 31, 2026 and $2.4 million in the three months ended March 31, 2025, respectively.

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

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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 $0.9 million and $5.2 million in the three and nine months ended September 30, 2025, respectively, for variable and other facilities-related costs.

In connection with the 2022 Restructuring Plan, we recorded restructuring and related expense of $0.7 million and $3.1 million in the three months ended March 31, 2026 and 2025, respectively, for variable and other facilities-related costs.

We anticipate that we will record approximately $2 million of expense in the remainder of 2026 related to the 2022 Restructuring Plan.

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

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

We did not record accelerated rent amortization in the three months ended March 31, 2026 or 2025.

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

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

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

The significant accounting policies that we believe are the most critical include revenue recognition, the valuation of inventory, warranty accruals, loss contingencies and reserves, stock-based compensation, the warrants, business combinations, goodwill and intangible assets, accounting for leases, and accounting for income taxes.

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

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

There were no significant changes to our critical accounting policies from January 1, 2026 through March 31, 2026.

For a further discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2025.

Results of Operations

Three and nine months ended September 30, 2025 and 2024

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

Increase/(decrease)

Three months ended March 31, 2026 and 2025

Revenue for the three months ended March 31, 2026 and 2025 was as follows (in thousands, except percentages):

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from prior year

September 30,

Total revenue

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from prior year

September 30,

Total revenue

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

Three months ended September 30, 2025

Three months ended September 30, 2024

Total revenue

Nine months ended September 30, 2025

Nine months ended September 30, 2024

Segment revenue for the three months ended March 31, 2026 and 2025 was as follows (in thousands):

Three months ended March 31, 2026

Three months ended March 31, 2025

Total revenue

The decrease in our product revenue in the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was the result of $7 million of lower sales of our Cloud and Edge products, partially offset by $5 million of higher sales of IP Optical Networks products.

The increase in our product revenue in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was the result of $9 million of higher sales of our Cloud and Edge products, partially offset by a $1 million decrease in sales of IP Optical Networks products.

For the three months ended September 30, 2025 compared to the prior year, the decrease in sales of Cloud and Edge products was primarily attributable to lower sales to enterprise customers, including Federal agencies.

The increase in sales of IP Optical Networks products for the three months ended September 30, 2025 compared to the prior year was primarily due to higher sales in India and the region of Europe, the Middle East and Africa (“EMEA”), partially offset by lower sales in the United States.

For the nine months ended September 30, 2025 compared to the prior year, the increase in revenue from the sale of Cloud and Edge products was primarily attributable to U.S.

service providers and enterprise customers.

The increase in sales of IP Optical Networks products for the nine months ended September 30, 2025 compared to the prior year was primarily due to higher sales in India and EMEA, partially offset by lower sales in the United States and Eastern Europe.

Revenue from sales to enterprise customers was 34% and 36% of our product revenue in the three months ended September 30, 2025 and 2024, respectively.

The decrease in our product revenue in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was the result of $5.6 million of lower sales of our Cloud and Edge products and $8.3 million of lower sales of IP Optical Networks products.

The decrease in revenue from the sale of Cloud and Edge products was primarily attributable to sales to Tier 1 and other service providers, U.S.

Federal agencies and global enterprise customers due to lower customer demand and delayed purchasing.

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

Revenue from sales to enterprise customers was 32% and 28% of our product revenue in the three months ended March 31, 2026 and 2025, respectively.

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

Revenue from sales to enterprise customers was 32% and 39% of our product revenue in the nine months ended September 30, 2025 and 2024, respectively.

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

Revenue from indirect sales through our channel partner program was 26% and 34% of our product revenue in the three months ended September 30, 2025 and 2024 and 29% and 38% of our product revenue in the nine months ended September 30, 2025 and 2024, respectively.

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

The increase in enterprise sales in the three months ended March 31, 2026 primarily reflects higher sales of our products to IP Optical Networks enterprise customers.

Revenue from indirect sales through our channel partner program was 28% of our product revenue in the three months ended March 31, 2026 and 2025, respectively.

Channel sales remained unchanged in the three months ended March 31, 2026 reflecting constant sales of products to enterprise customers.

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

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

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

Service revenue for the three months ended March 31, 2026 and 2025 was comprised of the following (in thousands, except percentages):

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from prior year

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Professional services

Total service revenue

Increase/(decrease)

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Professional services

Total service revenue

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

Three months ended September 30, 2025

Three months ended September 30, 2024

Professional services

Total service revenue

Nine months ended September 30, 2025

Nine months ended September 30, 2024

Segment service revenue for the three months ended March 31, 2026 and 2025 was comprised of the following (in thousands):

Three months ended March 31, 2026

Three months ended March 31, 2025

Professional services

Total service revenue

Total service revenue was higher in the three and nine months ended September 30, 2025 compared to the same periods in 2024 primarily due to increased professional services revenue in both of our segments.

Total service revenue for the three months ended September 30, 2025 compared to 2024 increased by $4 million and $3 million in our Cloud and Edge and IP Optical Networks segments, respectively.

Total service revenue for the nine months ended September 30, 2025 compared to 2024 increased by $19 million and $7 million in our Cloud and Edge and IP Optical Networks segments, respectively.

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

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

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

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

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

service providers, primarily for voice modernization projects with Verizon.

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

The following customers contributed 10% or more of our revenue in the three and nine months ended September 30, 2025 and 2024:

Total service revenue was lower by $4.8 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to lower maintenance revenue and lower professional services revenue.

Maintenance revenue decreased $2.8 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to lower revenue in our IP Optical Networks segment and relatively flat revenue in our Cloud and Edge segment.

The decrease in our IP Optical Networks maintenance revenue is due to the completion of a legacy access maintenance contract with a European customer that completed in the fourth quarter of 2025.

Professional services revenue decreased $2.0 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily driven from our Cloud and Edge segment.

Our Cloud and Edge segment decrease was due to lower deployment services associated with a voice modernization project with one of our U.S.

service providers, which we expect to increase in the upcoming quarters.

The following customers contributed 10% or more of our revenue in the three months ended March 31, 2026 and 2025:

Three months ended

Nine months ended

September 30,

Verizon Communications Inc.

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* Less than 10% of total revenue.

Revenue earned from customers domiciled outside the United States was 55% and 48% in the three months ended September 30, 2025 and 2024, respectively, and 52% and 55% of revenue in the nine months ended September 30, 2025 and 2024, respectively.

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

market from our Cloud & Edge segment.

Revenue earned from customers domiciled outside the United States was 55% and 54% in the three months ended March 31, 2026 and 2025, respectively.

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

Our deferred product revenue was $8 million and $14 million at September 30, 2025 and December 31, 2024, respectively.

Our deferred service revenue was $128 million and $126 million at September 30, 2025 and December 31, 2024, respectively.

Our deferred product revenue was $8 million and $7 million at March 31, 2026 and December 31, 2025, respectively.

Our deferred service revenue was $147 million and $149 million at March 31, 2026 and December 31, 2025, respectively.

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

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

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

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

service provider spending.

We expect total revenue in 2026 to be relatively consistent with 2025 in both segments.

Cost of Revenue/Gross Margin.

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

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

Our cost of revenue, gross profit and gross margin for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

Increase/(decrease)

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from prior year

September 30,

Cost of revenue:

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Total cost of revenue

Increase/(decrease)

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Cost of revenue:

Amortization of acquired technology

Total cost of revenue

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

Three months ended September 30, 2025

Three months ended September 30, 2024

Amortization of acquired technology

Total cost of revenue

Nine months ended September 30, 2025

Nine months ended September 30, 2024

Our segment cost of revenue, gross profit and gross margin for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

Three months ended March 31, 2026

Three months ended March 31, 2025

Amortization of acquired technology

Total cost of revenue

Our overall gross margin in 2025 was lower as compared to 2024, with a 200 basis point decline in the three months ended September 30, 2025 and a 290 basis point decline in the nine months ended September 30, 2025.

Gross margin for our IP Optical segment was higher in the three months ended September 30, 2025 as compared to the prior year by 380 basis points due to favorable regional mix.

Gross margin for our IP Optical segment in the nine months ended September 30, 2025 compared to 2024 was lower by 360 basis points also due to regional mix primarily related to lower sales in the United States and Eastern Europe and higher sales in India.

The lower gross margin in our Cloud and Edge segment for the three and nine months ended September 30, 2025 of 440 and 310 basis points, respectively, was attributable to product mix on sales to service providers and enterprise customers, as well as the effect of higher sales of hardware products and professional services, both of which contribute lower gross margins than our software products.

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

Our overall gross margin decreased by 2.5 percentage points for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.

Gross margin for our Cloud and Edge segment was lower in the three months ended March 31, 2026 as compared to the prior year by 510 basis points and was attributable to lower product and Professional services sales, as well as the effect of lower fixed cost absorption and unfavorable mix.

We expect Cloud and Edge gross margin to rebound as the deployment of services associated with a voice modernization project with one of our U.S.

service providers returns to higher activity levels in the upcoming quarters.

Gross margin for IP Optical Network remained relatively flat in the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

We expect gross margin in 2026 to be relatively flat compared to 2025 across both segments.

Research and Development.

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

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

Increase/(decrease)

September 30,

R&D expenses for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

from prior year

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Nine months ended

Our R&D expenses in the three and nine months ended September 30, 2025 were relatively flat compared to the same periods in 2024 with slight increases in our Cloud and Edge segment and slight decreases in our IP Optical segment.

The increase in our R&D expenses in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily attributable to our Cloud and Edge segment.

The increase in R&D expenses was primarily driven by higher employee-related costs, including the impact of increased non‑U.S.

expenses associated with a weakening dollar.

Our IP Optical Networks R&D investment is focused on 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.

Some aspects of our R&D efforts require significant short-term expenditures, the timing of which may cause variability in our expenses.

Some aspects of our R&D efforts require significant short-term expenditures, the timing of which may cause significant variability in our expenses.

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 expect that our R&D expenses will increase 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 Expenses.

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

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

Increase/(decrease)

September 30,

Sales and marketing expenses for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

from prior year

Three months ended

Nine months ended

The decrease in sales and marketing expenses in the nine months ended September 30, 2025 as compared to 2024 was primarily due to lower commissions, partially offset by higher travel expenses.

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

Sales and marketing expenses in the three months ended March 31, 2026 were relatively flat as compared to the three months ended March 31, 2025.

We expect sales and marketing expenses will remain relatively flat in 2026 compared to 2025, with higher employee-related variable compensation expenses, partially driven by a weakening dollar, offset by cost efficiencies.

General and Administrative Expenses.

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

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

September 30,

General and administrative expenses for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

from prior year

Three months ended

Nine months ended

The decrease in general and administrative expenses in the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 was primarily attributable to lower litigation expenses, partially offset by higher employee related costs.

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

The increase in general and administrative expenses in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily attributable to higher stock compensation expense.

We expect that our general and administrative expenses will increase modestly in 2026 as compared to 2025, primarily due to higher employee-related variable compensation associated with stock-based compensation expenses, partially offset by continued cost efficiencies.

Amortization of Acquired Intangible Assets included in Operating expenses.

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

September 30,

Amortization of acquired intangible assets included in Operating expenses ("Opex Amortization") for the three months ended March 31, 2026 and 2025 was as follows (in thousands, except percentages):

from prior year

Three months ended

Nine months ended

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

Opex Amortization was lower for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

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

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

Acquisition-, Disposal- and Integration-Related.

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

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

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

We recorded $0.4 million and $4.3 million of acquisition-, disposal- and integration-related expenses in the three and nine months ended September 30, 2025, respectively, consisting of legal and professional fees associated with contemplated corporate development activities.

We recorded no such expenses in 2024.

Restructuring and Related.

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

We recorded restructuring and related expense of $3.5 million and $3.8 million in the three months ended September 30, 2025 and 2024, respectively and $10.2 million and $8.8 million in the nine months ended September 30, 2025 and 2024, respectively.

We recorded restructuring and related expense of $2.0 million and $5.3 million in the three months ended March 31, 2026 and 2025, respectively.

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

Interest Expense, Net.

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

Interest expense and interest income for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

Increase/(decrease)

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from prior year

September 30, 2025

September 30, 2024

Interest income

Interest expense

Interest expense, net

Nine months ended

from prior year

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

Interest income

1 unchanged sentence

Interest expense, net

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

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

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

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

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

Other (Expense) Income, Net .

We recorded other expense, net of $0.1 million and other income, net of $1.1 million in the three months ended September 30, 2025 and 2024, respectively.

We recorded other income, net of $0.8 million, and other expense, net of $16.0 million in the nine months ended September 30, 2025 and 2024, respectively.

Other expense, net in the three months ended September 30, 2025 was primarily comprised of $1.2 million of fair value adjustments of our Warrants, partially offset by foreign currency exchange losses of $1.1 million.

Other income, net in the nine months ended September 30, 2025 was primarily comprised of $2.8 million of fair value adjustments of our Warrants, partially offset by foreign currency exchange losses of $1.7 million.

Other income, net in the three months ended September 30, 2024 was primarily comprised of fair value adjustments of our Warrants and foreign currency exchange gains.

Other expense, net in the nine months ended September 30, 2024 was primarily comprised of $6.6 million of fair value adjustments, $2.7 million of accrued dividends, and the $1.8 million call premium on our Preferred Stock that we redeemed on June 25, 2024, and foreign currency exchange losses of $1.4 million.

Interest income increased slightly in 2026 as compared to 2025.

Our interest expense in the three months ended March 31, 2026 and 2025 primarily represents term debt interest, amortization of debt issuance costs and original issue discount and interest associated with factoring arrangements.

Interest expense in the three months ended March 31, 2026 was lower than the same period in 2025 primarily due to lower applicable interest margins and a reduction in the outstanding term debt balance.

Other Income, Net .

We recorded other income, net of $0.5 million and $3.1 million in the three months ended March 31, 2026 and 2025, respectively.

Other income, net in the three months ended March 31, 2026 was primarily comprised of approximately $1.2 million of fair value adjustments of our warrants, partially offset by foreign currency exchange losses of $1.2 million.

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

Income Taxes.

We recorded income tax provisions of $3.1 million and $1.6 million in the three months ended September 30, 2025 and 2024, respectively, and $4.6 million and $6.5 million in the nine months ended September 30, 2025 and 2024, respectively.

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

We recorded an income tax benefit of $6.4 million and $0.8 million in the three months ended March 31, 2026 and 2025, respectively.

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

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

We considered the applicable tax laws in relevant jurisdictions and concluded there was no material effect on our tax provision for the nine months ended September 30, 2025.

We considered the applicable tax laws in relevant jurisdictions and concluded there was no material effect on our tax provision for the three months ended March 31, 2026 and 2025.

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

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, we accounted for the effects of the Act on our tax provision in the three months ended September 30, 2025.

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

The Act reinstated bonus depreciation, allowed for full expensing of R&D expenses, and increased the limitation of interest deductibility for 2025, amongst many other provisions that are effective January 1, 2026.

The tax effects of the Act were reflected in our income tax provision for the year ended December 31, 2025 and the three months ended March 31, 2026.

Off-Balance Sheet Arrangements

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

Nine months ended

September 30,

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

Three months ended

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

Changes in operating assets and liabilities

Net cash provided by (used in) operating activities

Net cash used in operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

We had cash, cash equivalents, and restricted cash aggregating $77 million and $90 million at September 30, 2025 and December 31, 2024, respectively.

Net cash used in financing activities

We had cash, cash equivalents, and restricted cash aggregating $70 million and $98 million at March 31, 2026 and December 31, 2025, respectively.

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

subsidiaries aggregating $36 million and $18 million at September 30, 2025 and December 31, 2024, respectively.

subsidiaries aggregating $46 million and $50 million at March 31, 2026 and December 31, 2025, respectively.

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

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

On June 21, 2024, we entered into a Senior Secured Credit Facilities Credit Agreement (the “2024 Credit Facility” or “2024 Credit Agreement”) as guarantor, with our wholly-owned subsidiary, Ribbon Communications Operating Company, Inc., as the borrower (“Borrower”), HPS Investment Partners, LLC ("HPS"), as administrative agent, and HPS and WhiteHorse Capital Management, LLC ("WhiteHorse" and, together with HPS, the "Lenders"), pursuant to which the Lenders provided us with a $385 million Credit Agreement comprised of (i) a $350 million term loan (the “2024 Term Loan”) and (ii) a $35 million revolving credit facility (the “2024 Revolver”), including a $20 million sublimit for letters of credit.

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 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.

The 2024 Term Loan and the 2024 Revolver will both mature on June 21, 2029.

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

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

approximately $2.2 million beginning with the third quarter of 2025 and ending with the second quarter of 2027;

and approximately $4.4 million quarterly thereafter, with the remaining principal balance of approximately $298.4 million due on the maturity date of June 21, 2029.

In connection with the establishment of the 2024 Credit Facility, $7.7 million of original issue discount was withheld by the Lenders, and we incurred $6.3 million of debt issuance costs for a total of $14.0 million that is being amortized to Interest expense, net over the term of the agreement.

Our previous credit facility was the Senior Secured Credit Facilities Credit Agreement (as amended, the "2020 Credit Facility"), which we entered into on March 3, 2020, by and among us, as a guarantor, Ribbon Communications Operating Company, Inc., as the borrower (the "Borrower"), Citizens Bank, N.A., Santander Bank, N.A., and others as lenders, ("2020 Credit Facility Lenders").

For additional details regarding the terms of the 2024 Credit Facility and 2020 Credit Facility, see Note 9 to our condensed consolidated financial statements.

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

Among other things, 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.

Also, the Sixth Amendment replaced LIBOR with the 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 to our 2020 Credit Facility funded almost entirely from 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.

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 September 30, 2025, we had an outstanding balance under the 2024 Term Loan of $344.3 million at an average interest rate of 10.6%, with no revolver balance and no letters of credit outstanding under our 2024 Credit Facility.

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

subsidiaries as of March 31, 2026, we do not believe that the amounts of potential withholding taxes that would arise from the repatriation would have a material effect on our liquidity.

At March 31, 2026, we had an outstanding balance under the current credit facility of $339.9 million at an average interest rate of 9.9%, with no revolver balance and no letters of credit outstanding.

We were in compliance with all covenants of the current credit facility at both March 31, 2026 and December 31, 2025.

On May 5, 2026, we entered into the First Amendment, which (1) waives compliance with the maximum consolidated net leverage ratio financial covenant as of and for the period ending June 30, 2026, (2) increases the Maximum Consolidated Net Leverage Ratio (as defined in the 2024 Credit Facility) to 4.50:1.00 as of and for the period ending September 30, 2026, and sets the ratio for all subsequent quarters to 4.00:1.00, and (3) modifies the applicable interest rate margins for any quarter in which the Consolidated Net Leverage Ratio exceeds 3.75:1.00 to 7.00%.

Management believes that, together with expected operating cash flows, the First Amendment provides sufficient liquidity to enable the Company to meet its anticipated operating and capital requirements for at least the next twelve months.

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 September 30, 2025 and December 31, 2024, respectively.

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

At September 30, 2025 and December 31, 2024, we had cash

collateral of $2.0 million and $2.7 million supporting the Guarantees, respectively, which are reported as Restricted cash in our condensed consolidated balance sheets.

We had $11.2 million and $11.1 million of Guarantees under various uncommitted facilities as of March 31, 2026 and December 31, 2025, respectively.

We had no letters of credit outstanding under the current credit facility as of March 31, 2026 or December 31, 2025.

At March 31, 2026 and December 31, 2025, we had cash collateral of $2.0 million and $1.7 million supporting the Guarantees, respectively, which are reported as Restricted cash in our condensed consolidated balance sheets.

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

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We do not hold or issue derivative financial instruments for trading or speculative purposes.

As a result of exposure to interest rate movements, we entered into an interest rate swap arrangement in March 2020 which effectively converted our $400 million term loan with its variable interest rate based upon one-month LIBOR to an aggregate fixed rate of 0.904%, plus a leverage-based margin as defined in the 2020 Credit Facility.

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

The gain in Accumulated other comprehensive (loss) income related to these sales totaled $3.1 million and was being released into earnings on a straight-line basis over the remaining term of the 2020 Credit Facility as a decrease to interest expense, the amortization of which totaled $0.4 million in the nine months ended September 30, 2024.

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

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

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

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

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

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

To accomplish these objectives, we have used an interest rate swap as part of our interest rate risk management strategy.

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

As a result of exposure to foreign currency fluctuations, we entered into foreign exchange forward activity in January 2026 which effectively hedges a portion of the Company’s foreign‑currency exposure arising from international transactions.

Our objectives in using foreign exchange derivatives have been to add stability to operating expenses and to manage our exposure to foreign currency movements.

To accomplish these objectives, we have used foreign exchange forward contracts as part of our foreign currency risk management strategy.

Foreign exchange forwards designated as cash flow hedges involve the exchange of variable foreign‑currency cash flows for fixed rate cash flows over the life of the agreement, without an exchange of the underlying notional amount.

The effective portion of changes in the fair value of designated derivatives that qualify as cash flow hedges is recorded in Accumulated other comprehensive income in the condensed consolidated balance sheet and is subsequently reclassified into earnings in the period that the hedged forecasted transactions affect earnings.

Any ineffective portion of the change in the fair value of the derivative would be recognized directly in earnings.

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

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

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

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 1.5 million shares in the nine months ended September 30, 2025, using $5.7 million, with $44.3 million remaining for future repurchases as of September 30, 2025.

We repurchased 0.4 million shares in the three months ended March 31, 2026, using $0.8 million.

Since the start of the Repurchase Program, the Company has repurchased 2.9 million shares using $9.8 million.

Cash Flows from Operating Activities

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

Our operating activities provided $22.2 million of cash in the nine months ended September 30, 2025 driven by lower accounts receivable, partially offset by lower accrued expenses and other long-term liabilities, accounts payable and deferred revenue.

Our net loss was offset by adjustments for non-cash expenses such as amortization of intangible assets, and stock-based compensation.

Our operating activities used cash of $11.5 million in the nine months ended September 30, 2024, primarily as a result of lower deferred revenue, accounts payable, and our net loss adjusted for non-cash expenses.

These amounts were partially offset by lower accounts receivable and other operating assets, and higher accrued expenses and other long-term liabilities.

Our net loss was adjusted for non-cash expenses such as amortization of intangible assets, stock-based compensation, and the increase in the fair value of our Preferred Stock liability, partially offset by a $6.7 million one-time payment of accumulated dividends as a result of our redemption of our Preferred Stock liability on June 25, 2024, an $8.2 million adjustment for amortization of an accumulated other comprehensive gain related to our interest rate swap, and $14.6 million for deferred income tax expense.

Our operating activities used $22.0 million of cash in the three months ended March 31, 2026 largely driven by payments of variable employee compensation, decreases in accounts payable, accrued expenses, and other long‑term liabilities reflecting the timing of vendor and other operating payments, and increases in inventory and other operating assets, as well as a result of our net loss adjusted for non-cash expenses.

These uses of cash were partially offset by a decrease in accounts receivable.

Net loss was adjusted for non‑cash items, including amortization of intangible assets, stock‑based compensation, the decrease in the fair value of the warrant liability, and deferred income tax expense.

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

These amounts were partially offset by lower accounts receivable.

Our net loss is adjusted for non-cash

expenses such as amortization of intangible assets, stock-based compensation, the decrease in the fair value of our warrant liability and deferred income tax expense.

Cash Flows from Investing Activities

Our investing activities used $23.4 million and $14.9 million of cash to purchase property and equipment in the nine months ended September 30, 2025 and 2024, respectively.

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

Our investing activities used $3.1 million and $12.1 million of cash to purchase property and equipment in the three months ended March 31, 2026 and 2025, respectively.

The decrease in capital expenditures compared to the prior‑year period was primarily attributable to the completion of the build‑out of our new facility in Israel during 2025.

Cash Flows from Financing Activities

Our financing activities used $13.5 million of cash in the nine months ended September 30, 2025.

Our financing activities used $3.1 million of cash in the three months ended March 31, 2026.

We paid $2.2 million in principal payments on our term debt, $0.1 million of tax obligations related to the vesting of stock awards and units and $0.8 million for the repurchase and retirement of our common stock under the 2025 Repurchase Program.

Our financing activities provided $40.2 million of cash in the nine months ended September 30, 2024.

We received $342.3 million in 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.

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

In conjunction with the establishment of the 2024 Credit Facility, we repaid the 2020 Term Debt amounting to $235.4 million, redeemed all of the outstanding Preferred Stock totaling $56.9 million, and paid $6.0 million in debt issuance costs.

Also, we paid $0.9 million in principal payments on our 2024 Term Debt.

In addition, we paid $3.0 million of tax obligations related to the vesting of stock awards and units.

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

Our operating lease obligations totaled $102.8 million at September 30, 2025, with payments to be made aggregating $4.6 million in the remainder of 2025, $17.8 million in 2026, $16.5 million in 2027 and $63.9 million thereafter.

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

We paid $0.9 million in principal payments on our term debt and $0.9 million of tax obligations related to the vesting of stock awards and units.

The rate at which we consume cash is dependent upon the cash needs of our future operations, including our contractual obligations at March 31, 2026, primarily comprised of our debt principal and interest obligations as described above, and our operating lease and purchase obligations.

Our operating lease obligations totaled $95.4 million at March 31, 2026, with payments to be made aggregating $13.2 million in the remainder of 2026, $16.6 million in 2027, $13.9 million in 2028 and $51.7 million thereafter.

Estimated payments for purchase obligations for the full year 2026 total approximately $102 million.

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Looking ahead, we have developed contingency plans to reduce costs further if the situation deteriorates.

Based on our current expectations, we believe that our current cash balances and available borrowings under the 2024 Credit Facility will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least twelve months from the date of issuance of these financial statements.

Based on our current expectations, we believe that our current cash balances and available borrowings under the current credit facility will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least twelve months from the date of issuance of these financial statements.

Recent Accounting Pronouncements

In December 2025, the Financial Accounting Standards Board (the "FASB") issued ASU 2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements (“ASU 2025-11”), to improve the navigability of the required interim disclosures, to clarify when that guidance is applicable and to enhance disclosure requirements.

The amendments add to Topic 270 a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity.

ASU 2025-11 will be effective for the Company beginning with its 2028 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 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 Financial Accounting Standards Board (the "FASB") issued ASU 2025-06, Intangibles- Goodwill and Other- Internal-Use Software (Subtopic 350-40):

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The adoption of ASU 2024-03 will require us to provide new footnote disclosure about the types of expenses that are included in certain captions on our Statements of Operations, such as Cost of revenue, Research and development, Sales and marketing, and General and administrative.

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.

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

Quantitative and Qualitative Disclosures About Market Risk

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis