What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-31 compared with 2026-05-06 · 178 added, 124 removed, 226 unchanged (57% of the section changed)

23 unchanged sentences

In response to the U.S.

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

Supreme Court ruling mentioned above, the administration announced plans to implement new tariffs under alternative statutory authority and recently announced its intention not to renew the existing U.S.-Mexico-Canada Agreement (“USMCA”) on which we rely for the importation of many of our products from our contract manufacturer in Mexico.

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.

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

While the announced tariffs 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.

11 unchanged sentences

While we have business continuity plans in place to address the military call-ups, it could affect the timing of projects in the short-term as the work is shifted to other team members both inside and outside of Israel.

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

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

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

21 unchanged sentences

Financial Results

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.

We reported a loss from operations of $12.2 million and income from operations of $4.2 million for the three months ended June 30, 2026 and 2025, respectively.

We reported a loss from operations of $43.9 million and $15.4 million for the six months ended June 30, 2026 and 2025, respectively.

Our revenue was $192.3 million and $220.6 million in the three months ended June 30, 2026 and 2025, respectively.

Our gross profit and gross margin were $90.3 million and 47.0%, respectively, in the three months ended June 30, 2026, and $109.3 million and 49.6%, respectively, in the three months ended June 30, 2025.

The lower revenue in the three months ended June 30, 2026 compared to 2025 is due to $26.5 million lower Cloud and Edge revenue and $1.7 million lower IP Optical Networks revenue.

The IP Optical Networks revenue was lower primarily due to $1.1 million of lower product sales, and lower professional services sales and maintenance revenue of $0.6 million.

The lower Cloud and Edge revenue was attributable to $18.4 million of lower product sales and $8.1 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.

Our revenue was $354.9 million and $401.9 million in the six months ended June 30, 2026 and 2025, respectively.

Our gross profit and gross margin were $160.0 million and 45.1%, respectively, in the six months ended June 30, 2026, and $191.7 million and 47.7%, respectively, in the six months ended June 30, 2025.

The lower revenue in the six months ended June 30, 2026 compared to 2025 is due to $34.6 million of lower Cloud and Edge revenue, and $12.3 million of IP Optical Networks revenue.

The lower Cloud and Edge revenue was attributable to $24.0 million of lower product sales and $10.6 million of lower professional services and maintenance revenue.

The lower IP Optical Networks revenue was due to $9.4 million of lower product sales plus $2.9 million of lower maintenance and professional services revenue.

Revenue from our Cloud and Edge segment was $110.5 million and $137.0 million in the three months ended June 30, 2026 and 2025, respectively.

Gross profit and gross margin for this segment were $65.7 million and 59.5%, respectively, in the three months ended June 30, 2026, and $83.7 million and 61.1%, respectively, in the three months ended June 30, 2025.

Revenue from our Cloud and Edge segment was $210.0 million and $244.6 million in the six months ended June 30, 2026 and 2025, respectively.

Gross profit and gross margin for this segment were $121.9 million and 58.0%, respectively, in the six months ended June 30, 2026, and $149.8 million and 61.2%, respectively, in the six months ended June 30, 2025.

Revenue from our IP Optical Networks segment was $81.8 million and $83.5 million in the three months ended June 30, 2026 and 2025, respectively.

Gross profit and gross margin for this segment were $24.6 million and 30.1%, respectively, in the three months ended June 30, 2026, and $25.6 million and 30.6%, respectively, in the three months ended June 30, 2025.

Revenue from our IP Optical Networks segment was $144.9 million and $157.2 million in the six months ended June 30, 2026 and 2025, respectively.

Gross profit and gross margin for this segment were $38.1 million and 26.3%, respectively, in the six months ended June 30, 2026, and $41.8 million and 26.6%, respectively, in the six months ended June 30, 2025.

Our operating expenses were $102.6 million and $105.1 million in the three months ended June 30, 2026 and 2025, respectively, and $203.9 million and $207.1 million in the six months ended June 30, 2026 and 2025, respectively.

The decreased operating expenses in the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, were primarily attributable to $3.9 million lower acquisition-, disposal- and integration-related expense, $2.0 million lower general and administrative expense, partially offset by $3.1 million higher restructuring and related expense.

The decreased operating expenses in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, were primarily attributable to $3.9 million lower acquisition-, disposal- and integration-related expense, $1.0 million lower amortization of acquired intangible assets, partially offset by $1.1 million higher sales and marketing expense and $1.0 million higher research and development expense.

Operating expenses for the three months ended June 30, 2026 included $5.5 million of amortization of acquired intangible assets and $4.4 million of restructuring and related expense.

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

Operating expenses for the six months ended June 30, 2026 included $11.2 million of amortization of acquired intangible assets and $6.5 million of restructuring and related expense.

Operating expenses for

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

We recorded stock-based compensation expense of $4.8 million and $4.5 million in the three months ended June 30, 2026 and 2025, respectively and $10.8 million and $8.8 million in the six months ended June 30, 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 months ended March 31, 2026 compared to three months ended March 31, 2025.

See "Results of Operations" in this MD&A for a discussion of the changes in our revenue and expenses for three and six months ended June 30, 2026 compared to three and six months ended June 30, 2025.

Restructuring and Cost Reduction Initiatives

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

In connection with the 2026 Restructuring Plan, we recorded restructuring and related expense of $1.3 million in the three months ended March 31, 2026.

In connection with the 2026 Restructuring Plan, we recorded restructuring and related expense of $3.8 million and $5.1 million in the three and six months ended June 30, 2026, respectively.

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

2 unchanged sentences

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

In connection with the 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.

In connection with the 2025 Restructuring Plan, we did not incur any restructuring and related expense in the three months ended June 30, 2026, but did incur nominal expense in the six months ended June 30, 2026.

We recorded restructuring and related expense of $0.2 million and $2.6 million in the three and six months ended June 30, 2025, respectively.

We anticipate that we will record nominal additional expense in 2026 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 $0.7 million and $3.1 million in the three months ended March 31, 2026 and 2025, respectively, for variable and other facilities-related costs.

In connection with the 2022 Restructuring Plan, we recorded restructuring and related expense of $0.6 million and $1.2 million in the three months ended June 30, 2026 and 2025, respectively and $1.3 million and $4.3 million in the six months ended June 30, 2026 and 2025, respectively, for variable and other facilities-related costs.

We anticipate that we will record approximately $1 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 months ended March 31, 2026 or 2025.

We did not record accelerated rent amortization in the three and six months ended June 30, 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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The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available information.

We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available

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.

1 unchanged sentence

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, 2026 through March 31, 2026.

There were no significant changes to our critical accounting policies from January 1, 2026 through June 30, 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 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):

Three and six months ended June 30, 2026 and 2025

Revenue for the three and six months ended June 30, 2026 and 2025 was as follows (in thousands, except percentages):

Three months ended

1 unchanged sentence

Total revenue

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

Six months ended

from prior year

Total revenue

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.

Segment revenue for the three and six months ended June 30, 2026 and 2025 was as follows (in thousands):

Three months ended June 30, 2026

Three months ended June 30, 2025

Total revenue

Six months ended June 30, 2026

Six months ended June 30, 2025

Total revenue

The decrease in our product revenue in the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was the result of $18.4 million of lower sales of our Cloud and Edge products and $1.1 million of lower sales of IP Optical Networks products.

The decrease in our product revenue in the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was the result of $24.0 million of lower sales of our Cloud and Edge products plus a $9.4 million decrease in sales of IP Optical Networks products.

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

Federal agencies due to lower customer demand and delayed purchasing.

These were partially offset by higher sales to global enterprise customers.

IP Optical Networks revenue in the three months ended June 30, 2026 remained consistent with the previous year, growing modestly after accounting for the completion of a long-term support and maintenance contract.

Revenue from sales to enterprise customers was 33% and 29% of our total revenue in the three months ended June 30, 2026 and 2025, respectively.

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

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 increase in enterprise sales in the three months ended June 30, 2026 primarily reflects higher sales to IP Optical Networks enterprise customers.

Revenue from sales to enterprise customers was 31% and 28% of our total revenue in the six months ended June 30, 2026 and 2025, respectively.

The increase in enterprise sales primarily reflects higher Cloud and Edge revenue to the banking, financial and insurance industries, and other enterprise customers.

Revenue from indirect sales through our channel partner program was 34% of our product revenue in each of the three months ended June 30, 2026 and 2025, and 32% and 31% of our product revenue in the six months ended June 30, 2026 and 2025, respectively.

Channel sales increased in the six months ended June 30, 2026 reflecting higher 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 months ended March 31, 2026 and 2025 was comprised of the following (in thousands, except percentages):

Service revenue for the three and six months ended June 30, 2026 and 2025 was comprised of the following (in thousands, except percentages):

Three months ended

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Total service revenue

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

Three months ended March 31, 2026

Three months ended March 31, 2025

Six months ended

from prior year

Professional services

Total service revenue

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.

Segment service revenue for the three and six months ended June 30, 2026 and 2025 was comprised of the following (in thousands):

Three months ended June 30, 2026

Three months ended June 30, 2025

Professional services

Total service revenue

Six months ended June 30, 2026

Six months ended June 30, 2025

Professional services

Total service revenue

Total service revenue was lower by $8.7 million and $13.5 million in the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 due to lower maintenance revenue and lower professional services revenue.

Maintenance revenue decreased $2.3 million and $5.0 million in the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 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.

Professional services revenue decreased $6.5 million and $8.5 million in the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 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:

The following customers contributed 10% or more of our revenue in the three and six months ended June 30, 2026 and 2025:

Three months ended

Six months ended

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 54% in the three months ended March 31, 2026 and 2025, respectively.

Revenue earned from customers domiciled outside the United States was 54% and 47% in the three months ended June 30, 2026 and 2025, respectively, and 54% and 51% in the six months ended June 30, 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 $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 product revenue was $8 million and $7 million at June 30, 2026 and December 31, 2025, respectively.

Our deferred service revenue was $145 million and $149 million at June 30, 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 total revenue in 2026 to be relatively consistent with 2025 in both segments.

We expect total revenue in 2026 to decline slightly compared to 2025.

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 months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

Increase/(decrease)

Our cost of revenue, gross profit and gross margin for the three and six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Three months ended

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Total cost of revenue

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

Three months ended March 31, 2026

Three months ended March 31, 2025

Increase/(decrease)

Six months ended

from prior year

Cost of revenue:

Amortization of acquired technology

Total cost of revenue

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.

Our segment cost of revenue, gross profit and gross margin for the three and six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Three months ended June 30, 2026

Three months ended June 30, 2025

Amortization of acquired technology

Total cost of revenue

Six months ended June 30, 2026

Six months ended June 30, 2025

Amortization of acquired technology

Total cost of revenue

Our overall gross margin decreased by 2.6 percentage points in each of the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025.

Gross margin for our Cloud and Edge segment was lower in the three months ended June 30, 2026 as compared to the three months ended June 30, 2025 by 160 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.

Gross margin for our Cloud and Edge segment was lower in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 by 320 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.

Gross margin for IP Optical Network remained relatively flat in the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025.

We expect gross margin in 2026 to be slightly lower compared to 2025.

Research and Development.

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

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

R&D expenses for the three and six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

from prior year

Three months ended

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.

Six months ended

The slight increase in our R&D expenses in the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 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.

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

We 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.

We expect that our R&D expenses will remain moderately flat in 2026 as compared to 2025, primarily due to higher employee-related compensation, including the impact of increased non-U.S.

expenses associated with a weakening dollar, offset by continued cost efficiencies.

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 months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

Sales and marketing expenses for the three and six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

from prior year

Three months ended

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.

Six months ended

Sales and marketing expenses in the three and six months ended June 30, 2026 were relatively flat as compared to the three and six months ended June 30, 2025.

We expect sales and marketing expenses will remain moderately flat in 2026 compared to 2025, primarily due to higher employee-related compensation, including the impact of increased non-U.S.

expenses associated with a weakening dollar, offset by continued 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 months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

General and administrative expenses for the three and six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

from prior year

Three months ended

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.

Six months ended

The decrease in general and administrative expenses in the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily attributable to lower litigation expense offset by higher stock compensation expense.

We expect that our general and administrative expenses will remain moderately flat in 2026 as compared to 2025, primarily due to higher employee-related variable compensation associated with stock-based compensation expenses, 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 months ended March 31, 2026 and 2025 was as follows (in thousands, except percentages):

Amortization of acquired intangible assets included in Operating expenses ("Opex Amortization") for the three and six months ended June 30, 2026 and 2025 was as follows (in thousands, except percentages):

from prior year

Three months ended

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

Six months ended

Opex Amortization was lower for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025.

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

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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 $2.0 million and $5.3 million in the three months ended March 31, 2026 and 2025, respectively.

We recorded restructuring and related expense of $4.4 million and $1.3 million in the three months ended June 30, 2026 and 2025, respectively and $6.5 million and $6.7 million in the six months ended June 30, 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 months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

Increase/(decrease)

Interest expense and interest income for the three and six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Three months ended

from prior year

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

Interest income

1 unchanged sentence

Interest expense, net

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.

Six months ended

from prior year

June 30, 2026

June 30, 2025

Interest income

Interest expense

Interest expense, net

Our interest expense in three and six months ended June 30, 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 and six months ended June 30, 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 (Expense) Income, Net .

We recorded other expense, net of $2.3 million and $2.2 million in the three months ended June 30, 2026 and 2025, respectively.

We recorded other expense, net of $1.7 million, and other income, net, of $1.0 million in the six months ended June 30, 2026 and 2025, respectively.

Other expense, net in the three months ended June 30, 2026 was primarily comprised of approximately $0.3 million of the fair value adjustments of our warrants plus foreign currency exchange losses of $1.6 million.

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

Other expense, net in the six months ended June 30, 2026, was primarily comprised of $2.8 million of foreign currency exchange losses offset by $0.9 million of the fair value adjustments of our warrants.

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

Income Taxes.

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.

We recorded income tax provisions of $1.7 million and $2.2 million in the three months ended June 30, 2026 and 2025, respectively and a $4.7 million income tax benefit and a $1.4 million income tax provision in the six months ended June 30, 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 three months ended March 31, 2026 and 2025.

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

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 six months ended June 30, 2026.

Off-Balance Sheet Arrangements

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

Three months ended

Six months ended

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

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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, cash equivalents, and restricted cash aggregating $45 million and $98 million at June 30, 2026 and December 31, 2025, respectively.

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

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

subsidiaries aggregating $35 million and $50 million at June 30, 2026 and December 31, 2025, respectively.

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

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.

subsidiaries as of June 30, 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.

As of June 30, 2026, we had an outstanding balance under the 2024 Credit Facility of $337.8 million at an average interest rate of 9.9%, available borrowing capacity under the revolving credit facility of $35 million, and no letters of credit outstanding.

We were in compliance with all covenants of the 2024 Credit Facility at both June 30, 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%.

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

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 had $11.5 million and $11.1 million of Guarantees under various uncommitted facilities as of June 30, 2026 and December 31, 2025, respectively.

We had no letters of credit outstanding under the 2024 Credit Facility as of June 30, 2026 or December 31, 2025.

At June 30, 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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To manage the volatility related to the exposure to changes in interest rates, we may enter into a derivative financial instrument.

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 to reduce, where it is

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

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

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

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

We repurchased 0.4 million shares in the six months ended June 30, 2026, using $0.8 million.

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

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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 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.

Our operating activities used $33.5 million of cash in the six months ended June 30, 2026, primarily driven by the payment of variable employee compensation, higher inventory, and lower accrued expenses and other long-term liabilities reflecting the timing of vendor and other operating payments, as well as our net loss, adjusted for non-cash expenses.

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

These uses of cash were partially offset by a decrease in accounts receivable and other operating assets.

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

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

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

Cash Flows from Investing Activities

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.

Our investing activities used $7.9 million and $17.8 million of cash to purchase property and equipment and software licenses in the six months ended June 30, 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 $3.1 million of cash in the three months ended March 31, 2026.

Our financing activities used $11.2 million of cash in the six months ended June 30, 2026.

We paid $4.4 million in principal payments on our term debt, $5.0 million of tax obligations related to the vesting of stock awards and units, $1.0 million payment of debt issuance costs, and $0.8 million for the repurchase and retirement of our common stock under the 2025 Repurchase Program.

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

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

Our financing activities 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.

The rate at which we consume cash is dependent upon the cash needs of our future operations, including our contractual obligations at June 30, 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 $94.0 million at June 30, 2026, with payments to be made aggregating $8.9 million in the remainder of 2026, $16.9 million in 2027, $14.2 million in 2028 and $54.0 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 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.

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.

Recent Accounting Pronouncements

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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.

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

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

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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.

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

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

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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.

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.

The Company is currently evaluating the impact of this accounting standard on its condensed 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):

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.

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 “development stages” from ASC 350-40.

ASU 2025-06 will be effective for us beginning with our 2028 interim and annual financial statements, with early adoption permitted as of the beginning of an annual reporting period.

We are currently evaluating the impact of this accounting standard on our 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 2025-05 will be effective for us beginning with our 2026 interim and annual financial statements, with early adoption permitted.

We believe this ASU will have no material impact on our consolidated financial statements.

We are currently evaluating the impact of this accounting standard on our condensed consolidated financial statements and related disclosures.

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

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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