Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
For the transition period from to
Commission File Number 001-38267
RIBBON COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
6500 Chase Oaks Boulevard, Suite 100, Plano, Texas 75023
(Address of principal executive offices)(Zip Code)
(978) 614-8100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $240,611,000 based on the closing
price on June 28, 2024. As of February 24, 2025, the registrant had 175,724,084 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the registrant’s 2025 Annual Meeting of
Stockholders are incorporated by reference into Part III of this report.
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2024
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Delaware
82-1669692
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.0001
RBBN
The Nasdaq Global Select Market
Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
Table of Contents
RIBBON COMMUNICATIONS INC.
FORM 10-K
YEAR ENDED DECEMBER 31, 2024
TABLE OF CONTENTS
Item
Page
Cautionary Note Regarding Forward-Looking Statements
3
Part I
1.
Business
4
1A.
Risk Factors
17
1B.
Unresolved Staff Comments
36
1C.
Cybersecurity
36
2.
Properties
37
3.
Legal Proceedings
37
4.
Mine Safety Disclosures
38
Part II
5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
39
6.
[Reserved]
40
7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
41
7A.
Quantitative and Qualitative Disclosures About Market Risk
58
8.
Financial Statements and Supplementary Data
59
9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
111
9A.
Controls and Procedures
111
9B.
Other Information
113
9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
113
Part III
10.
Directors, Executive Officers and Corporate Governance
113
11.
Executive Compensation
113
12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
113
13.
Certain Relationships and Related Transactions, and Director Independence
113
14.
Principal Accountant Fees and Services
114
Part IV
15.
Exhibit and Financial Statement Schedules
115
16.
Form 10-K Summary
115
Exhibit Index
116
Signatures
120
3
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995, which are subject to a number of risks and uncertainties. All statements other than statements of
historical facts contained in this report, including statements regarding impacts from the war in Ukraine and the financial
sanctions and trade restrictions imposed in connection therewith, the effect of U.S. tariffs and the response from other countries,
future expenses and restructuring activities and the anticipated benefits thereof, results of operations and financial position, capital
structure, impacts from the war in Israel, beliefs about our business strategy, availability of components for the manufacturing of
our products, ongoing litigation, plans and objectives of management for future operations and manufacturing are forward-looking
statements. Without limiting the foregoing, the words “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”,
“plans”, “seeks” and other similar language, whether in the negative or affirmative, are intended to identify forward-looking
statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on
our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-
looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are
unknown and/or difficult to predict and that may cause our actual results, performance or achievements to be materially different
from those expressed or implied by the forward-looking statements. Such risks and uncertainties include, but are not limited to,
unpredictable fluctuations in quarterly revenue and operating results; the impact of restructuring and cost-containment activities;
increases in tariffs, trade restrictions or taxes on our products; supply chain disruptions resulting from component availability
and/or geopolitical instabilities and disputes (including those related to the wars in Israel and Ukraine); the closure, on a
temporary basis, of our offices or those of our contract manufacturer in Israel as a result of the war and the impact of military call-
ups of our employees in Israel; material litigation; the impact of fluctuations in interest rates; material cybersecurity and data
intrusion incidents, including any security breaches resulting in the theft, transfer, or unauthorized disclosure of customer,
employee, or company information; our ability to comply with applicable domestic and foreign information security and privacy
laws, regulations and technology platform rules or other obligations related to data privacy and security; failure to compete
successfully against telecommunications equipment and networking companies; failure to grow our customer base or generate
recurring business from our existing customers; credit risks; the timing of customer purchasing decisions and our recognition of
revenues; macroeconomic conditions, including inflation; our ability to adapt to rapid technological and market changes; our
ability to generate positive returns on our research and development; our ability to protect our intellectual property rights and
obtain necessary licenses; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; the
potential for defects in our products; risks related to the terms of our credit agreement; higher risks in international operations and
markets; currency fluctuations; unanticipated adverse changes in legal, regulatory or tax laws; future accounting pronouncements
or changes in our accounting policies; and/or failure or circumvention of our controls and procedures. We therefore caution you
against relying on any of these forward-looking statements. Additional important factors that could cause actual results to differ
materially from those in these forward-looking statements are discussed in this report, including in Item 1A., “Risk Factors” of
Part I of this Annual Report on Form 10-K. Any forward-looking statement made by us in this report speaks only as of the date on
which this report was first filed. We undertake no obligation to publicly update any forward-looking statement, whether as a result
of new information, future developments or otherwise, except as may be required by law.
4
PART I
Item 1. Business
Company Overview
We are a leading global provider of communications technology to service providers and enterprises. We provide a broad
range of software and high-performance hardware products, network solutions, and services that enable the secure delivery of data
and voice communications, and high-bandwidth networking and connectivity for residential consumers and for small, medium,
and large enterprises and industry verticals such as finance, education, government, utilities, and transportation. 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 headquartered in Plano, Texas, and have a global presence with
research and development or sales and support locations in over 30 countries around the world.
Company History
The Ribbon name was created by the merger of Sonus Networks, Inc. and GENBAND US LLC (“GENBAND”) in
October 2017, with both companies specializing in secure high-performance Voice Over Internet Protocol (“VoIP”) technology
and solutions. Prior to that, GENBAND acquired assets of Nortel’s Carrier division in 2010, which included a world-class
engineering and sales team, a broad deployment base of products and technology, and a recognized industry reputation and
pedigree with customers around the world.
Since our formation in 2017, we have completed several acquisitions to strengthen and expand our portfolio of product
offerings to service providers and enterprises. Recent notable acquisitions include:
●
Edgewater Networks Inc. (August 2018): Expanded our portfolio of security and signaling solutions for the enterprise
network edge.
●
Anova Data, Inc. (February 2019): Expanded our portfolio with additional network optimization, security, and data
monetization applications, enabled by an advanced Big Data Analytics and Machine Learning platform.
●
ECI Telecom Group Ltd. (“ECI”) (March 2020) (the “ECI Acquisition”): Further expanded our focus and strategy to
include optical transport and Internet Protocol (“IP”) networking, switching, and routing products and solutions, and
helped us create an industry-leading communications software and networking company with a comprehensive portfolio
of advanced voice, security, data and IP optical networking and transport solutions.
Industry Background
Today’s communications service providers (“CSPs”) and enterprises are investing in their networks to compete in an ever-
changing technology and customer experience landscape driven largely by cloud computing, mobile workforces requiring hyper-
connectivity, new high-performance applications and use cases, and an insatiable demand for bandwidth by end-customers and the
applications they use. The exponential growth in traffic has largely been driven by the consumption of video and in the next
several years, it is expected that new applications leveraging large language model (“LLM”) AI will dramatically increase the
amount of network bandwidth usage. As a result, service providers and enterprises must constantly seek out new technologies to
refresh their networks to provide increased flexibility, automation, programmability, scalability, and reliability, to enable these
new applications and services with an expedited time to market. These investments provide a competitive advantage and bring
value-added services to increase network efficiency, increase customer satisfaction and produce new revenue streams. Within this
broad industry context, investment in our products and services is driven by several key industry trends and strategic priorities.
Modernization of Communications Service Provider Networks to Reduce Total Cost of Ownership
CSPs of all types operate in a hyper-competitive environment as consumers and businesses have an increasing number of
choices for their communication needs. It is imperative that providers invest to capture new revenue streams, while reducing the
cost to operate their networks. Legacy services such as IP Multiprotocol Label Switching (“MPLS”) circuits, Centrex lines, and
TDM phone are increasingly expensive to operate, and providers need to migrate customers to new offerings or risk high margin
revenue streams. All these factors are causing service providers to re-think and evolve, or even over-haul, the way
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networks are designed, architected, managed, and optimized to deliver services to their customers with disruptive economics.
They are migrating services to new software platforms that can be deployed in both private and/or public cloud environments
(referred to as the “Telco Cloud”) using cloud-native technologies, architectures and operational processes with automation and
concepts such as Continuous Integration and Continuous Delivery (“CI/CD”). Increasingly, network operators are also pursuing
open, multi-layer optimized and disaggregated IP and Optical networking solutions, where they have the flexibility to assemble
networks based on transport and control subsystems from different vendors with software-defined networking.
Service providers in some global regions, as mandated by governments or voluntarily, are also replacing certain incumbent
vendor communications equipment and technology in their networks because of concerns for security. This presents a significant
growth and market share opportunity.
This technology evolution challenge extends beyond service providers to many enterprises as well as Federal, State, and
Local governments. In particular, the U.S. Federal defense agencies have a significant need to modernize their voice
communications infrastructure, replacing legacy on-premises systems with modern cloud-based voice and video solutions.
However, the unique requirements regarding security and survivability are not easily met by off-the-shelf enterprise applications,
creating significant opportunities for companies that specialize in this area.
Deployment of 5G Mobile Technology
One of the most significant investments being made by mobile carriers across the world is the deployment of 5G broadband
cellular technology. This architecture shift impacts the entire ecosystem, from handsets and Radio Access Network through the
metro and core network and back-office systems. The ultimate goal is a step-function improvement in capacity and coverage, as
well as to unlock new revenue generating applications for consumers and businesses. The increased bandwidth unlocked by the
higher capacity radio infrastructure enables new use cases such as Fixed Wireless Access, displacing lower capacity wired internet
access solutions, and we believe new mobile applications will emerge, such as Reality/Virtual Reality, cloud gaming, telehealth,
Internet of Things, and Industry 4.0, all made possible by the massive bandwidth increases, low latency and highly secure
infrastructure that 5G provides.
As deployments increase, the access and aggregation layers of the mobile network also require significant upgrades and
investment, driving fiber and IP Networking to the very edges of the network. This investment cycle and technology disruption is
an opportunity for new innovative suppliers to be selected.
Demand for Hyper-Connectivity and Bandwidth Driving Fiber Access Deployment
Our global information society is overflowing with telecommunications data traffic, for business, entertainment, education,
surveillance, industrial control, online retail, and many other applications. These applications, increasingly delivered from the
cloud, generate a huge amount of data driven largely by the video and image components. This exponential growth in data traffic
is expected to continue and even accelerate, straining existing broadband and mobile networks. While 5G, and next generation
WiFi, are the technologies of choice for the wireless network, there is also a surge of investment targeted at addressing the bottle
neck of the broadband access network with higher capacity fiber connections.
Governments in many countries around the world are investing to address and help close the “Digital Divide” and extend
ultra-broadband services and connectivity to underserved communities. As an example, in the United States, the Broadband
Equity, Access and Deployment (BEAD) Program, the FCC Rural Digital Opportunity Fund, the 5G Fund for Rural America, and
the USDA Rural Development Broadband ReConnect Program expect to provide billions of dollars in funding to deliver
broadband connectivity to rural communities in the U.S. Whether working or learning from home, streaming 4K television, or
playing the latest online video games, rural subscribers require dependable, high-speed Internet access to participate and thrive in
the digital world. Forward-looking service providers are taking advantage of government funding programs to expand network
capacity and transform the communities they serve. Next-generation rural broadband networks help service providers grow their
revenues by extending service reach and diversity, and by satisfying the massive pent-up demand for high-speed Internet
connectivity. Next-generation broadband networks will also leverage new technologies like fixed-wireless access, while laying the
foundation for future revenue opportunities like 5G backhaul transport services.
At the foundation, high performance Optical connections and advanced IP networking are needed to keep pace with the
advancements in communications. This hyper-connectivity will be a key enabler and deliver disruptive ultra-low cost-per-bit
6
communications within and between networks and the cloud, while also delivering on the promise of latency sensitive networking
demanded by many of the applications.
Increased Adoption of Cloud Communications and Collaboration
The shift to cloud-based communications began several years ago driven largely by the advantages of running applications in
a virtual cloud environment and reducing dependency on on-premises computing and communications technologies. The
Coronavirus Disease 2019 (“COVID-19”) pandemic accelerated this trend significantly, driven by the need for more remote
working and commerce for many businesses and industries. As a result, businesses and consumers rapidly shifted from brick-and-
mortar facilities and travel to work-from-home, or hybrid work-in-the-office and work-from home, using cloud communications
and collaboration platforms such as Microsoft Teams, Zoom Phone and others, and require these communications platforms to be
highly secure and scalable. New applications enabled by LLM AI will dramatically increase the traffic from the subscriber device
to the data center.
Need for Reliable, Secure, High-Bandwidth Enterprise and Critical Infrastructure Communications
The “critical infrastructure” market vertical is defined as those companies whose assets, systems, and networks, whether
physical or virtual, are considered vital to a country’s national interest. Critical infrastructure providers are under increasing
pressure to support new services, reduce carbon emission, improve security, expand automation, and increase safety. Achieving
these goals requires a transition to a modernized, secure communications network that provides seamless IP connectivity and
services and very high capacity optical transport. With an integrated IP and optical transport solution, a critical infrastructure
network operator can provide a highly reliable, secure, future proof communications solution optimized for critical industries.
Data is the lifeblood of any business, and it must be easily accessible across the enterprise to power business applications and
to support services to end-customers. It must also be replicated across multiple locations for business continuity and disaster
recovery and must be protected from inappropriate access, theft, and corruption. Enterprises deploy optical networking, secured
by optical encryption, to attain the needed performance and security. Similarly, command and control groups within today’s
defense forces have a need for high performance secure networks as their strategic sensors and assault systems are becoming more
integrated. In this ecosystem, effective decision-making requires the pooling and analysis of data from a vast array of sensors and
other information sources. The data must be delivered securely, in real-time, to wherever it is required. These solutions integrate
intelligent optical transport with agile IP networking to provide a converged, secure, communication network that can be rapidly
configured and deployed in challenging environmental conditions.
Strategy Overview
Our mission is to create a recognized global technology leader providing open, cloud-centric solutions spanning multiple
network layers that enable the secure exchange of communications and information, with unparalleled scale, performance, and
elasticity. Our transformative acquisition of ECI in 2020 dramatically expanded our addressable market beyond secure voice
communications into IP Networking, Optical Transport, and Software-Defined Networking (“SDN”) Management and
Automation. We are implementing a focused strategy to target our broad global base of service provider and enterprise customers
to establish us as key supplier of networking solutions. Key elements of the strategy include:
●
Operational Integration – In order to provide laser focus on the unique aspects of our portfolio, we initially adopted a
business unit model following the acquisition of ECI, along with regional sales teams and an integrated corporate
organization. As the number of opportunities to leverage the combined portfolio emerged, we evolved the organization
in 2023 and integrated the two business units under a single leader and established a Chief Operating Officer position.
We have tightened the alignment further in 2024 with the integration of several software research and development
(“R&D”) teams and an integrated customer support and services organization. Similarly, the go-to-market team was
combined under a single Global Sales Leader role. Internally we launched the “Ribbon 3.0” program, reflecting our
continued transformation and drive towards best-in-class operational efficiencies and execution.
●
Cross-Selling and Tier One Service Provider Growth – We are laser-focused on marketing and selling our combined
post-acquisition broad portfolio to our global deployed base of service provider and enterprise customers to expand our
presence and share of the larger IP and Optical networking and transport market and cross-sell our complete portfolio. In
particular, we are focused on penetrating the largest service providers around the world in order to drive long term
growth and improved competitiveness.
7
●
North American IP Optical Networks Market Share – We expect to continue to unlock the value of our former ECI
portfolio by growing IP Optical Networks market share in the North American market by leveraging the extensive
deployment base and ongoing business that we have with service providers and enterprise customers. We have identified
opportunities where we have been able to combine technology from both our Voice and IP Routing portfolios in order to
address a clear customer need and differentiate our offering. We have seen significant success with regional service
providers in the U.S., bolstered by the federal funding programs focused on improving internet access to underserved
markets.
●
Participate in the 5G Opportunity – We have made significant R&D investments in our IP Optical product portfolio in
order to address multiple opportunities tied to the deployment of 5G mobile networks. We are focused specifically on the
access and aggregation layer of the network including cell-site routers, optical transport, and IP aggregation and routing.
In many cases, the build-out of this part of the network lags or follows the up-front investment in the RAN portion of the
network, and increases as traffic levels grow. We believe 5G is a multi-year opportunity as global service providers roll
out the new capital-intensive technology and build out the needed network infrastructure over the next decade. We have
reported several recent strategic wins in this area and believe this will be a key catalyst for growth.
●
Software-Centric and Cloud-Native Offerings – The value of virtual, cloud-native, and software-driven solutions
deployable in the cloud grew because of the COVID-19 pandemic and the migration of network services to the Telco
Cloud, which underscores another area of major focus for us. As a strategy, we continue to aggressively transition a
significant portion of our product portfolio and business model towards more software, cloud-native offerings with
automation and as-a-Service selling model. We believe this transition is instrumental in continuing to improve our
profitability and competitiveness, and in growing the recurring revenue portion of our business.
●
Enterprise Offerings – The market need and growth rate are higher at the network edge than at the core. Our solution
portfolio includes secure Unified Communications software-centric applications and IP and Optical network
connectivity solutions. Together, these solutions address a wide number of critical infrastructure, federal defense, large
enterprise, and medium-size businesses. We leverage partnerships with key go-to-market channels and solutions
providers such as Dell and Microsoft, as well as other popular unified communications and collaboration (“UC&C”)
platforms such as Zoom Phone and similar service provider UC&C offerings.
●
Partnerships – We continually look to form industry partnerships that will enhance our current solution offerings to our
customers.
Customers
Our customers are comprised of a diverse set of service providers and enterprises located in over 140 countries around the
world. Service provider customers include telephone companies (“telcos”) offering fixed and wireless communications services,
cable Multi-System Operators (“MSOs”) and Communications as a service providers. Our service provider customers include
many of the largest CSPs globally. Enterprise customers include small, medium, and large businesses and industry verticals such
as transportation, utilities, government/public sector, finance, and education.
Customers trust us to solve their most challenging communications requirements, enabling people and devices to connect
anytime, anywhere. Our customer-centric culture shapes all of our activities and inspires our team members to make a positive
impact with our clients, investors, and communities.
In the year ended December 31, 2024, Verizon Communications Inc. (“Verizon”) accounted for approximately 14% of our
revenue. Verizon is a service provider that offers interconnect, fixed line and mobile communications services, and our software
solutions are sold across their business divisions supporting their large enterprises, SMB and consumer telecommunications and
cable-related offerings. Our top five customers represented approximately 34% of our revenue in the year ended
December 31, 2024.
Segment Information
Our Chief Operating Decision Maker (“CODM”) assesses our performance based on the performance of two separate lines of
our business: the Cloud and Edge segment (“Cloud and Edge”) and the IP Optical Networks segment (“IP Optical Networks”).
8
Cloud and Edge Business Segment
The Cloud and Edge segment provides secure and reliable software and hardware products, solutions, and services for VoIP
communications, Voice Over LTE (“VoLTE”) and Voice Over 5G (“VoNR”) communications, as well as UC&C services to both
service provider and enterprise customers. Our Cloud and Edge products are increasingly software-centric and cloud-native for
deployment on private, public, or hybrid cloud infrastructures, in data centers, on enterprise premises, and within service provider
private networks.
Cloud and Edge Products and Solutions
Our Cloud and Edge portfolio delivers multiple solutions for enabling VoIP, VoLTE, VoNR, and UC&C in network, on-
premises, or via the Telco Cloud for a broad range of service provider and enterprise customers. The solutions provided with this
portfolio include those for:
●
Securing and providing resilient connectivity and calling via direct routing for Operator Connect - Microsoft Teams,
Zoom and other cloud-based UC&C applications.
●
Securing contact center applications.
●
Securing service provider hosted and managed unified communications (“UC”) services.
●
Securing network interconnects for communications services.
●
Network transformation of fixed service provider voice services networks to help evolve, consolidate, and modernize
legacy networks to VoIP and onto virtualized network environments or the Telco Cloud.
●
Implementing IP Multimedia Subsystem (“IMS”) networks required by mobile service providers for VoLTE service
deployments and for 5G voice services.
●
Modernizing, evolving, and securing enterprise and industry vertical UC environments, supporting both on-premises and
cloud-based deployments.
●
Securing voice sessions and protecting VoIP communications connectivity infrastructures, contact centers, Private
Branch Exchanges and media servers.
●
Providing identity assurance that helps mitigate robocalls, prevent fraud by determining phone caller identity, intent, and
reputation.
●
Analytics to provide visibility, security, and service assurance to enhance communication network operations and
customer experiences.
Our Cloud and Edge market-leading product portfolio consists of two main categories – Session Border Controller (“SBC”)
products and Network Transformation products:
Our SBC product portfolio encompasses a full range of deployment platforms including:
●
High performance carrier-grade compute platforms leveraging the latest advancements in silicon including NVIDIA
GPU processors.
●
Feature-rich virtualized and cloud-native software products for deployment in both private and public cloud
environments such as Amazon Web Services (“AWS”), Microsoft Azure and Google Cloud Platform.
●
Fully cloud-native implementation supporting as-a-Service (“aaS”) offers and business models.
●
On-premises dedicated appliances that scale up and down to meet the most demanding performance and security
requirements.
Our SBC portfolio consists of the following categories of products:
●
Core network SBCs that are deployable by customers in their core networks, or on private or public clouds, and used to
identify, manage, and protect voice communications traffic as it moves through and between communication networks.
SBCs secure and interwork different voice communications protocols at IP network boundaries, both within and between
service provider and enterprise networks. The portfolio also includes Policy and Routing products that work in
heterogeneous voice networks and are used to intelligently manage communications sessions based on multiple policies
such as least cost and Quality of Service routing, media type, source or destination, and time of day or week.
9
●
Enterprise Session Border Controllers and Edge products, deployable on premises or in the cloud, to enable the
deployment and migration to secure cloud-based UC&C applications such as Microsoft Teams, Zoom Phone and service
provider UC&C offerings, as well as securing cloud contact center offerings. Enterprise SBCs provide service assurance
and visibility within the enterprise for service-provider hosted and managed UC services. The EdgeMarc multi-service
gateway portfolio provide support for enterprise voice interfaces such as PRI, T1, and FXO, as well as aggregation and
transport of local data traffic. Our products are also provided as-a-service through our Ribbon Connect for Microsoft
Teams Direct Routing platform, a cloud-based aaS offering for securing calls to the public telephone network from the
enterprise.
●
Ribbon Call TrustTM is an aaS offering for providing identity assurance. The identity assurance portfolio, using
information from deployed network elements including SBCs, helps mitigate robocalls and prevent fraud by determining
phone caller identity, intent, and reputation. With this information, it is possible to help determine if a call is from a
legitimate person, for a legitimate purpose, and without malicious intent. Our customers utilize these capabilities to
provide a better call experience to their end-customers. We are an industry leader in the development and deployment of
the STIR (Secure Telephone Identity Revisited) and SHAKEN (Signature-based Handling of Asserted information using
toKENS) standards, with deployments throughout North America and Europe.
●
A cloud-native Analytics Platform with applications that aid customers in gathering actionable intelligence from their
communications network elements, including SBCs in the core and edge of their networks, to provide them with
network performance visibility, service assurance, security, and fraud mitigation.
Our Network Transformation product portfolio is deployed in the most demanding environments and enables the
modernization of fixed, mobile and enterprise voice communications networks to support network and Telco Cloud-based services
and the next generation of IP-based voice communications services and includes multiple software-centric platforms and products
including:
●
Signaling products that provide network signaling for communications services.
●
Call Controllers that provide call processing within networks for voice communications services and applications.
●
Media Gateways that perform the interworking or translation of media, or voice sessions and the corresponding network
protocols both within and across VoIP and legacy communications networks and use codecs (coder-decoder) and digital
signal processors to do so.
●
A multi-tenant and highly scalable Application Server that enables the deployment of VoIP and UC&C services and
applications.
Cloud and Edge Competition
Competition in the market for the Cloud and Edge portfolio remains strong. The market is shifting from an environment
dominated by a few large telecommunications legacy hardware equipment companies, such as Ericsson LM Telephone Company
(“Ericsson”), Huawei Technologies Co. Ltd. (“Huawei”), and Nokia Corporation (“Nokia”), to a market that is characterized by
cloud-native software network function virtualization, hybrid private public cloud compute environments, and open interoperable
interfaces. We believe this shift creates opportunities for us to differentiate and gain share from competitors such as:
●
Huawei, Ericsson, Nokia, Oracle Corporation, Cisco Systems, Inc. (“Cisco”) and AudioCodes Ltd. for our SBCs,
Enterprise Edge products and Ribbon Connect.
●
Neustar, Inc., Metaswitch Networks (“Metaswitch – A Microsoft Company”), First Orion Corp., Secure-Logix
Corporation, TransNexus, Inc. and Transaction Network Services, Inc. for our Identity Assurance and Ribbon Call Trust
offerings.
●
NETSCOUT Systems, Inc., Mobileum, Empirix Inc. and Ericsson for our Analytics offerings.
●
Huawei, Metaswitch, netsapiens, Nokia and Ericsson for our Network Transformation offerings.
Other smaller private and public companies are also focusing on similar market opportunities. Mergers among any of the
above companies or other competitors, as well as additional competitors with significant financial resources entering our markets,
could further intensify competition. Mergers between service providers may also increase competition for a smaller number of
more concentrated customers and channels for products and solutions.
10
IP Optical Networks Business Segment
The global information society is generating a very high volume of telecommunications traffic for business, entertainment,
education, surveillance, industrial control, and other applications. Technologies like 5G, distributed cloud computing and
corresponding applications are predicted to continue this exponential traffic growth. IP and Optical networks are at the foundation
of this information economy, and indeed are one of its key enablers, delivering ultra-low cost-per-bit transport and multi-service
flexibility. Our IP Optical Networks segment provides high-performance, secure, and reliable hardware and software products and
solutions for IP networking, switching, and routing, and optical transport. This portfolio is offered to service provider, enterprise
and industry verticals with critical transport network infrastructures including utilities, government, defense, transportation and
education and research.
IP Optical Networks Products and Solutions
Our IP Optical Networks portfolio delivers multiple solutions spanning access, metro, regional, and long-haul geographies,
and using ring, mesh, and point-to-point topologies. MPLS and other protocols provide a broad range of networking services for
our customers. Our solutions for optical and IP transport and networking include 5G-native solutions for mobile-backhaul, metro
and edge aggregation, core networking, data center interconnect, multi-service access, and transport solutions for wholesale
carriers. High availability and security also make the solutions ideal for critical infrastructure delivering mission-critical services.
Our IP Optical Networks multi-layer product portfolio includes:
●
The Apollo product line provides programmable and open Optical Transport Network (“OTN”) capabilities over Dense
Wavelength Division Multiplexing (“DWDM”) support. The OTN layer maps Ethernet and other services into OTN bit
streams for transparent optical transmission, and DWDM routes wavelengths of light containing the OTN-encapsulated
bit streams across wide areas, greatly increasing the efficiency and capacity of fiber facilities. Our Apollo hardware and
software products deliver reconfigurable and programmable low-latency optical transport that simultaneously speeds up
provisioning of new services while maximizing traffic throughput at the lowest cost per bit. Apollo provides customers
with a choice of two transmission optimizations. Capacity-reach optimization uses industry-leading 5nm-140Gbaud
technology that maximizes channel capacity for any given distance. It supports optical transmission speeds ranging from
400 gigabits per second for ultra-long haul applications to 1.2 terabits per second for short haul applications. Power-cost
optimization uses low power consumption and cost effective 400 gigabit per second technology, which delivers strong
enough performance for metro applications. The Apollo product line provides state-of-the-art transparent and flexible
DWDM and OTN transport with integrated packet switching capabilities. A modular architecture allows optimized
solutions across access, metro, regional, and long-haul networks. Apollo combines high performance, low-latency OTN
transport, and OTN switching with software-configurable optical routing for maximum efficiency. Apollo can
dynamically reconfigure optimal links in the event of fiber failures to maintain service availability. Apollo is “self-
aware,” with intelligent reporting for efficient and SDN-ready operations. Apollo also provides deployment choice,
whether as an integrated solution or as standalone subsystems for disaggregated open architecture multivendor solutions.
A key security feature of Apollo that is used broadly in critical infrastructure and enterprise deployments is Layer 1
Optical Encryption. This uses AES-256 encryption, which is the strongest and most robust encryption standard that is
commercially available today, and also supports a choice of standard, Post Quantum Computing, and Quantum Key
Distribution key exchange mechanisms.
●
The Neptune product line of high-performance switching and routing solutions are optimized to provide the converged
multi-service, service-aware aggregation needed for cost/performance optimized connectivity between consumers and
the applications and services they are using. Neptune supports multiple services delivered over multiple access network
technologies. Ethernet interfaces ranging from Gigabit Ethernet (“GbE”) through to 100GbE allow all IP/MPLS and
Ethernet access networks to be supported, and pluggables providing XGS-PON, EPON and TDM circuit emulation
allow PON access networks and legacy TDM access network to be supported. Traffic from the access networks is
aggregated and connected to the services, applications, and compute platforms, meeting the specific service level
agreements required for each service, including guaranteed latency, jitter, capacity, or reliability. To achieve this,
Neptune uses a range of protocols such as IP/MPLS, MPLS-TP and segment routing traffic engineered (“SR-TE”). As
services, applications and compute platforms become increasingly distributed across the network, located in local data
centers and multi-access Edge compute platforms, Neptune, in conjunction with MUSE, can dynamically route the
connectivity wherever it is required, whilst still meeting the performance requirements. In addition, Neptune provides a
400G ZR+ pluggable capability, allowing it to support both single layer IP over DWDM
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connectivity or multi-layer optimized IPoOTN/DWDM connectivity, whichever best meets the network operator’s
needs. With these capabilities, Neptune is ideally suited for residential broadband backhaul, business services, MSOs
and private enterprise networks. With Flexible Ethernet, enhanced timing and synchronization capabilities, 25GbE and
50GbE interfaces and high-capacity, high-density platforms, Neptune is also ideal for 5G deployments. These
capabilities and unique form factors such as DIN-rail mounting, street cabinet deployment and environmental
capabilities also make Neptune a compelling solution for mission critical enterprises.
●
The Muse SDN multi-layer Domain Orchestrator and cognitive software is a suite of cloud-native applications that
deliver SDN domain orchestration for underlying multi-layer Neptune IP and Apollo Optical networks. This covers
complete lifecycle management and automation to speed up time to revenue, reduce total cost of ownership, and
facilitate integration into wider ecosystems. It is powered by a carrier-grade, cloud-native Platform as a Service and
works in conjunction with our LightSOFTTM network management system. Built for a 5G services world, Muse enables
network operators to programmatically configure and combine hard and soft slicing technologies to create slices
appropriate to different sets of 5G-enabled services and customer sub-networks. Then, using a rich set of tools, operators
can design, provision, and assure a broad array of services on top of the slices. Muse’s suite of advanced service and
network control applications empower service providers to do more, through simple service creation and lifecycle
management, proactive network assurance, network optimization, and automation. Muse ensures that people and
systems receive the right tools to monetize the network effectively through intuitive graphical user interfaces or industry-
standard Application Programmable Interfaces.
IP Optical Networks Competition
Competition in the markets addressed by our IP Optical Networks products is strong. The market is shifting from an
ecosystem dominated by a few large telecommunications legacy hardware equipment companies with proprietary solutions such
as Ciena Corporation (“Ciena”), Cisco, and Nokia, to a market that is characterized by a combination of closed and open
solutions, software-defined networking, and dis-aggregation ready for next generation networks, services and applications
including 5G, leveraging merchant silicon technology. We believe this shift creates opportunities for us to increase our share in the
market as compared to direct competitors such as Cisco, Juniper Networks, Inc., Huawei, Nokia, Ciena, Infinera Corporation,
Adtran Networks, and Fujitsu Limited. We believe a key differentiation from these competitors is our optimized and integrated
multi-layer IP optical solutions. These solutions leverage our SDN, IP routing and optical networking and control plane
technologies for both IP and Optical networking layers to create a truly integrated IP Optical Network that optimizes resource
utilization in real time, and provides the best overall economics to customers differentiating us from our competitors. Advanced
planning algorithms design multi-layer IP Optical networks that maximize traffic handling with failure resiliency by looking
holistically at all network layers, providing the best return on capital expenditures. These multi-layer optimized networks can then
meet specific customer and service needs on a case-by-case basis.
Services and Support
As communication networks continue to grow increasingly vital to society and business, and complexity grows with every
new technology introduction cycle, service providers are increasingly challenged to control costs and find the expertise to operate,
maintain, and repair these platforms. We have a rich history of providing service-based solutions to complement our products and
to help service providers and enterprises grow revenues, serve their customers, reduce costs, and improve productivity. Our Global
Services organization provides a wide range of services to enable our customers to achieve those goals. Our Professional Services
team includes hundreds of VoIP, IMS, IP and Optical networking specialists offering technical depth, network breadth and
proprietary tools to assist customers in all aspects of network modernization, design, operation and deployment. Our Maintenance
Support offerings deliver a comprehensive support strategy for all of our products, applications, and solutions sold. Our Managed
Services offer proactive monitoring to keep customers’ production communications running smoothly so they can concentrate on
operating their business. In addition, our Education Services are designed to equip customers with the technical knowledge and
skills needed to accelerate service readiness and delivery goals and to help customers get the most out of our products and
solutions.
Sales and Marketing
We sell our portfolio of products and solutions to service provider and enterprise customers around the globe through both
direct sales and indirectly through channel partners, including independent resellers, distributors, service providers and system
integrators. Most of our sales to service providers are done directly and most sales to enterprises are done through channel
partners. To support our customers’ requirements, our direct sales team is organized geographically and by major customers.
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Our sales teams sell our full portfolio of products and solutions from both segments to customers in each salesperson’s assigned
region. Our direct sales teams and resellers are supported by a highly trained technical sales engineering staff who work closely
with our customers to develop technical proposals and design systems to optimize system performance and economic benefits for
our customers.
Our marketing organization is responsible for building awareness of our brand in the markets served and driving engagement
with our strategies, solutions, and products. It promotes our brand and portfolio value propositions to key stakeholders, including
our customers, channel partners, and prospects globally. The organization develops all of our corporate and portfolio messaging
for different target audiences, and manages all customer and industry communication channels, including public relations, digital
content (including for the web and social media), events, and trade shows, as well as demand generation and account-based
marketing campaigns in conjunction with our sales force.
Manufacturing
We rely on global contract manufacturers and original design manufacturers to manufacture, assemble, test and ship our
products. We typically utilize long-term relationships with our contract manufacturers and regularly review business relationships
in an attempt to reduce cost of goods and supply risks. We employ formal quality, environmental and ethics management
programs with all of our contract manufacturers.
Our leading manufacturers have presence in multiple international locations. This enables us to implement a flexible
manufacturing and logistics landscape for each product line and target markets. This structure also facilitates redundancy and
business continuity to mitigate risks related to adverse trade tariff, taxation, and natural disasters. Moreover, we wholly own the
intellectual property related to fabrication files, assembly, testing algorithms and manufacturing operating procedures, thus
reducing sole dependency on a specific contract manufacturer.
Inventory Suppliers and Sourcing
We work with strategic global suppliers for our key integrated circuit components, systems, and software. Certain of our
networking products use third-party optical modules embedded on board or configured as pluggable units. These modules are
designed and manufactured by leading optical technology vendors and supplied to us based on agreed-upon controlled
performance specifications.
Our policy is to purchase major components directly from original suppliers or from authorized distributors. We regularly
review market trends and volume demand for newly introduced products with our suppliers and distributors to negotiate reduced
component pricing as the products mature. We carefully manage end-of-sale and end-of-life transitions to maximize return on
investment and minimize wasted material, while maximizing customer satisfaction. When we must source such end-of-life
components from distributors and brokers, we typically encounter increased component pricing. In some cases, when such parts
cannot be sourced reliably any longer in the open market, we undertake redesign efforts with alternative components.
In order to maintain competitive lead time for our customers, we employ sophisticated demand and supply management
systems. We also utilize agility and safety stock processes to help meet higher-than-forecasted customer demand to stock raw
material and sub-assembly inventory. Occasionally, we experience unforeseen demand drops of certain products or sub-assemblies
due to technology evolution, customer consumption behavior, or shortened product lifecycle. For example, we encountered supply
chain disruptions in 2021 due to component demand and logistics complications. We regularly review current inventory levels to
ensure adequate reserves for excess and obsolete inventory arising from shortened product life cycle or demand drops.
The worldwide supply chain disruptions that started mid-2020 have affected multiple aspects of our product realization
processes, including extended component lead-times, part shortages, higher input costs, and increased logistics complexity. This
largely moderated in 2023 and 2024, however some higher input costs remain, and our inventory levels are somewhat elevated.
We continue to implement specific actions to manage these issues, including investment in key re-design of sub-assemblies to
improve product availability and lower costs.
The ongoing unrest and conflict in the Middle East has caused some disruption to material supply chain and production
operations in that region. We have successfully avoided any significant impacts thus far by carefully managing the flow of
material, and enacting our established business continuity processes with alternate suppliers and production operation centers.
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Research and Development
Our global R&D workforce is geographically distributed across a balanced set of centers of excellence. This allows us to
distribute work in a cost-effective manner and provide time-zone sensitive support to our global sales team and customers. We
supplement our deep in-house expertise with a small set of long-term contracting partners, allowing us to flex up and down as
required to match customer demand.
To maintain our position as a leader in product and solution development, we continue to invest in our development
methodologies, leveraging and adopting industry best practices in the domains of DevOPs, Continuous Integration and
Continuous Delivery (“CI/CD”), cloud-native software, and Security and Test Automation.
In addition to delivering product-specific feature requests from our customers, our R&D resources that are focused on our
Cloud and Edge business segment continue to focus on leading edge technology that will allow our customers to move from
purpose-built appliances to fully virtualized and cloud-native solutions, including private, public, hybrid and multi-cloud
deployment models as they modernize their networks. We are also investing in aaS variants of our products, fully integrated with
cloud-native operational models.
Our IP Optical Networks R&D team continues to focus on empowering our customers with better performance and cost-
efficient solutions, improved cost-per-bit, and reduced power and space requirements to lower operating costs. We create
innovative solutions that address the exponential increases in bandwidth consumption with improving operational efficiency. Our
unique value-add is demonstrated by advanced well-integrated optical and packet solutions managed by state-of-the-art cross
platform SDN management system.
We leverage modern technologies and industry best practices across all of our products and solutions to provide security at
each layer of the solution, enabling end to end security of the overall system. We continue to invest in analytics and automation
using the latest artificial intelligence and machine learning (“AI/ML”) technology, to allow our customers to operate our solutions
at scale with end-to-end visibility and control over the robustness, security, and efficiency of the solution.
Intellectual Property
We believe intellectual property is fundamental to our business and success, and we depend upon our ability to develop,
maintain and protect our technology. We seek to safeguard our investments in technology and rely on a combination of U.S. and
foreign patent, trademark, trade secret and copyright law and contractual restrictions to protect the proprietary aspects of our
technology. As of December 31, 2024, we had 787 issued patents in the U.S., 659 of which expire between 2025 and 2042, and
we had 41 in-process patent applications in the U.S. As of such date, we also had 351 issued patents in foreign jurisdictions, and
we had 86 in-process patent applications in foreign jurisdictions. As of December 31, 2024, we had 30 trademarks registered or
pending in the U.S. and 174 trademarks registered or pending in foreign jurisdictions.
In addition to the protections described above, we seek to safeguard our intellectual property by employing measures to
protect against the unauthorized use or disclosure of the source and object code for our software, documentation and other written
materials; licensing our software pursuant to signed license agreements, which impose restrictions on others’ ability to use our
software; and seeking to limit disclosure of our intellectual property by requiring employees and consultants with access to our
proprietary information to execute confidentiality agreements.
We have incorporated third-party licensed technology into certain of our products and may be required to license additional
technology from third parties to develop new products or to enhance existing products. Although many companies are often
willing to enter into such licensing agreements, no assurance can be provided that such licenses can be negotiated on reasonable
terms, or at all. The failure to enter into technology development or licensing agreements, when necessary, could limit our ability
to develop new products and could harm our business.
Despite our efforts to protect our technology and proprietary rights as discussed above, unauthorized parties may still obtain
and use our technology and software. We have defended, and intend to vigorously defend when necessary, our intellectual
property from infringement. Other companies in the communications and technology industries frequently threaten litigation or
file suit against us (directly or indirectly through customers to whom we could owe indemnification) based on allegations of
infringement or other violations of intellectual property rights. We are currently subject to, and expect to face in
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the future, allegations that we have infringed the intellectual property rights of third parties, including those of our competitors
and non-practicing entities.
Regulatory Considerations
As a company with global operations, we are subject to complex U.S. and foreign laws and regulations, including trade
regulations, tariffs, import and export regulations, anti-bribery and corruption laws, antitrust or competition laws, cybersecurity,
privacy and data protection, among others. In addition, our operations are also subject to a number of environmental regulations
such as the Waste Electrical and Electronic Equipment Directive (“WEEE”) and the Directive on the Restriction of the Use of
Certain Hazardous Substances in Electrical and Electronic Equipment (“RoHS”). We have developed policies and procedures to
assist us in complying with these laws and regulations. Our historical compliance costs, including those related to environmental
regulations, have not resulted in a material adverse effect on our business, results of operations or financial condition. We expect
the laws and regulations to which we are subject will continue to increase and the future costs of compliance with existing or new
regulations could materially impact our business in the future.
Our Employees
As a global company with employees in over 30 countries, we focus on creating an inclusive community, aligning our
resources, processes, and platforms to build a work culture that reflects and expresses our core values. This enables us to work
efficiently across borders and functions. Our aim is to create a workplace that is engaging, inspiring, challenging, and inclusive.
We strive to be a great employer for our current employees and for future employees who are seeking an opportunity to join our
dynamic business, positioned at the nexus of global communications technology and social transformation.
As of December 31, 2024, we had a total of 3,052 employees worldwide, located geographically as follows:
Number of
Percentage of
employees
total
Asia
1,174
39 %
North America
852
28 %
EMEA
927
30 %
LATAM
99
3 %
Approximately 635 employees are covered by collective bargaining agreements or works councils. We believe that in general
we have good relationships with these various labor organizations.
Ribbon takes pride in conducting business in accordance with the highest ethical standards. Our Code of Conduct outlines the
importance of employees acting in an honest and ethical manner. Ribbon employees are informed and aware of this policy. The
principles of integrity, accountability and fair dealing are the cornerstone of our business and are critical to our future success. Our
employees understand that adherence to proper conduct helps us improve our competitive positioning and business outcomes. To
assist in this, we are deliberate in making sure that each employee is aware that they play a role in fostering a work environment
that encourages mutual respect and congenial relationships among employees.
We believe that a culture which encourages all employees, regardless of race, sex, background, or affiliation, to take pride in
their individual contributions and work together as a team is key to our success. In 2024, our employee-led council focused on
conducting educational initiatives to increase awareness of different employee backgrounds and cultures, as well as to promote
gender diversity. These educational initiatives included hosting webinars related to special days or events, such as Pride Month,
and International Holocaust Remembrance Day. Other initiatives that promote gender diversity included our ongoing Women’s
Leadership Program, highlighting women at Ribbon on our social media platform, an external campaign conducted to attract
female talent, and the establishment of a Ribbon Women’s Business Community to lead social networking events. Ribbon is
committed to fostering and maintaining a culture of diversity and inclusion for employees.
Employee Hiring, Turnover and Engagement. Our turnover and hiring metrics are refreshed on a weekly basis and formally
presented monthly. This up-to-date information allows us to quantify our success with employee retention, implement timely and
selective retention initiatives as needed, and measure the speed at which we attract and onboard qualified candidates. In 2024, our
voluntary turnover rate was 6.6%, a slight increase from the 5.9% voluntary turnover rate we experienced in 2023.
15
For the year ended December 31, 2024, we hired 236 employees globally. We have a formalized employee referral program
in place as we have found that employees who join us through employee referrals are a good cultural fit and remain with us longer
than those who have no personal connection. Approximately 29% of our hires in 2024 came from employee referrals. The average
time to fill a position in 2024 was 38 days.
Our employee management process includes conducting exit interviews with all employees that leave us voluntarily. The data
obtained from our exit questionnaire and one-on-one interviews are referenced when creating and updating benefit plans and other
employee initiatives/offerings.
Our recognition program, “Real Time Rewards,” is an online platform which allows employees across all job levels and
countries to recognize and express appreciation to their colleagues. This tool allows employees to be recognized for going above
and beyond. In 2024, approximately 3,000 awards were distributed, whereby 49% of our employees were rewarded for their
contributions. These rewards are comprised of both monetary and non-monetary awards and are also used to recognize service
anniversaries, birthdays, and other notable events.
Learning and Development (L&D). We believe that investing in our employees’ personal and professional development
enables them to perform their current roles with maximum effectiveness and to be prepared for roles of greater responsibility in
the future. Our strong L&D programs deliver employee empowerment, boost workplace engagement and relationships, and retain
talent. These learning programs utilize a combination of in-person and online curriculum and include core modules, some of
which are mandatory, relating to ethical conduct, products and services, cybersecurity, safety, human rights and anti-corruption, as
well as additional tailored programs on topics such as leadership, management, excellence in service, project management and
competency development. In 2024, we delivered more than 19 live training webinars, 9 manager/leader development programs,
and approximately 13 training hours per employee across our workforce.
Safety, Health and Well-being. Our objective is to provide a safe and hazard-free work environment for all employees.
Compliance with applicable safety regulations is a top priority and we strive to maintain our strong track record for safety, which
continues to be reinforced through regular training modules at all of our locations.
Ribbon regularly promotes our Employee Assistance Program (the “EAP”), which is offered to all employees and their
families to provide customized services to meet varying needs globally. The EAP is a confidential support service to help our
employees and their dependents at no cost to our employees. In 2024, we saw a significant increase in the utilization of our EAP.
Our goal is to continue to focus on finding ways to support our employees and their families.
In addition, as a company consistently advocating for a healthy, balanced lifestyle, we offer a Wellness Program, which is
available to all employees and their families. This program includes a variety of wellness related topics delivered quarterly
through activities such as webinars, exercise sessions, and engaging challenges.
In 2024, we continued with our Hybrid Work Model. Under this policy, employees spend a minimum of two days per week
working from one of our offices. This encourages collaboration, innovation, and socialization while maintaining the flexibility to
work remotely as well.
Community Investment. We value the communities in which we work. We encourage a service mindset among our employees
wherever they are and support community involvement and engagement. Our Employee Engagement committees have developed
ongoing relationships with local Non-Profit organizations where Ribbon and our employees are contributing both time and funds
to provide needed support. Ribbon also sponsors events and campaigns that support organizations such as the American Heart
Association, Make a Wish Foundation, and the United Way. In addition, since 2010, we have provided a day of paid time off for
all employees to participate in our Global Day of Service, during which employees and their families are encouraged to volunteer
and contribute to local charitable organizations in their communities. In 2024, more than 40% of employees across the globe
donated combined time of over an aggregate of 5,500 hours to support charitable organizations.
For additional information on Ribbon’s talent and our current engagement activities, please see our most recent sustainability
report, which is available at ribboncommunications.com/company/company-policies/sustainability-report.
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Corporate Governance and Social Responsibility
We are committed to operating ethically, efficiently and inclusively. We aim to help improve the quality of the lives of people,
society and the health of the planet through leveraging our expertise in transforming networks, enhancing security and delivering
world-class solutions. We believe that communications technology and continuous innovation form the backbone upon which
sustainable development largely depends. Major technology trends supported by our solutions include the accelerated adoption of
collaboration platforms such as Microsoft Teams and Zoom; the 5G revolution; accelerating customers’ ability to transfer carbon-
intensive data storage from using local physical environments to the cloud; supporting service providers’ increased network
demands to allow more people to work from home; and using our analytics solutions to maximize network efficiencies. In
addition, we believe we contribute to the communities in which we operate through the mitigation of climate change and other
global sustainable development priorities.
We have taken a more strategic position to our environmental, social and governance (“ESG”) practices. Our ESG materiality
study reviewed the expectations and requirements of both our stakeholders and our competitors to focus on the ESG practices that
are most critical to our business and those where we believe we can make the largest positive impact. From this materiality study,
we published a strategy, which we review with the Board of Directors from time to time, which we believe will positively impact
our future environmental performance, and deliver social benefits for our customers, employees and society at large. Additionally,
we believe the governance improvements made as a result of our strategy will result in enhancements in our accountability and
that of our suppliers and partners.
We are committed to protecting the environment and reducing the impact on the environment within a product’s lifecycle
through responsible product design and requiring suppliers to adhere to sustainable practices. An example of this is our focus on
continuously improving the power and space efficiency of our products to reduce overall energy consumption. We align our
compliance goals with component directives such as RoHS legislation in the European Union and China and with the European
WEEE directive. We also hold a host of internationally recognized certifications for our global offerings, including ISO 9001:
2015 - Quality Management Systems; ISO 14001: 2015 - Environmental Management Systems; and SI 10000: 2013 - Social
Responsibility (covering our sites in Israel).
It has always been paramount to our way of doing business to act with the utmost integrity, honesty and transparency. Our
commitment to ethical business practices guide us in our compliance with national and international laws and regulations,
including anti-corruption, anti-bribery and unfair competition, antitrust and human rights. We maintain a Code of Conduct that
applies to all of our directors, employees, contractors and suppliers. We are committed to strong corporate governance practices,
which include building long-term value and assuring success for our stockholders and other stakeholders, including employees,
customers and the communities in which we operate.
For additional information regarding our corporate governance and our social responsibility goals and initiatives, please see
“Corporate Governance” on our investor relations website (investors.ribboncommunications.com) and our most recent
sustainability report, which is available at ribboncommunications.com/company/company-policies/sustainability-report.
Seasonality
We have experienced quarterly fluctuations in customer activity due to seasonal considerations. We typically experience
increases in order volume in the fourth quarter due to greater spending on operating and capital expenditures by our service
provider customers. We typically experience reductions in order volume toward the beginning of the calendar year, when our
service provider customers are operationalizing their annual budgets and plans, which may result in lower revenue in the first
quarter. These typical seasonal effects may vary. Accordingly, they should not be considered a reliable indicator of our future
operating results.
Additional Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports filed with or furnished to the United States Securities and Exchange Commission (the “SEC”), are available free of charge
through the SEC’s Internet site (http://www.sec.gov) or our Internet site (http://www.ribboncommunications.com) as soon as
reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information contained on, or that
can be accessed through, our website does not constitute a part of this annual report and is not incorporated by reference herein.
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Item 1A. Risk Factors
Our business faces significant risks and uncertainties. Certain important factors may have a material adverse effect on our
business prospects, financial condition and results of operations, and they should be carefully considered. Accordingly, in
evaluating our business, we encourage you to consider the following discussion of risk factors in its entirety in addition to other
information contained in or incorporated by reference into this Annual Report on Form 10-K and our other public filings with the
SEC. These are factors which, individually or in the aggregate, we think could cause our actual results to differ significantly from
anticipated or historical results. In addition to understanding the key risks described below, investors should understand that it is
not possible to predict or identify all risk factors, and consequently, the following is not a complete discussion of all potential risks
or uncertainties. Other events that we do not currently anticipate or that we currently deem immaterial may also affect our
business, prospects, financial condition and results of operations. Additionally, investors should not interpret the disclosure of a
risk to imply that the risk has not already materialized.
Risk Factors Summary
The following is a summary of the principal risks that could adversely affect our business, operations and financial results:
Risks Related to Our Business and Industry
●
Our quarterly revenue and operating results are unpredictable and may fluctuate significantly quarter to quarter.
●
Failure to compete successfully could impair our ability to increase revenues and/or remain profitable.
●
Our future success is dependent on growing our base of customers and expanding our recurring revenue.
●
Consolidation in the telecommunications industry could harm our business.
●
Restructuring activities could adversely affect our ability to execute our business strategy.
●
Exposure to the credit risk of some of our customers and to credit exposures in fragile financial markets could result in
material losses.
●
Disruptions to relationships with distributors, resellers, system integrators and other channel partners could adversely
affect our revenues.
●
Failure to align our strategic plan with our customers’ investments, or failure of products and services to meet
customers’ demands, could impact our revenues.
●
Failure of our products to interoperate with our customers’ existing networks could result in customer losses.
●
Failure for customers to adopt our new products and services focused on virtualized networks, could reduce our
revenues.
●
Failure by our strategic partners or by us in integrating products could harm our business.
●
We rely on contract manufacturers.
●
We rely on single or limited sources for supply of some components of our products.
●
Failure to correctly estimate future requirements for end-of-production products purchased from third parties could harm
our operating results or business.
●
Products may have errors or defects that we find only after full deployment.
●
Government sales are subject to potential delays and cutbacks, may require specific testing efforts, or impose significant
compliance obligations.
●
Future investments, mergers or acquisitions could be difficult to integrate, disrupt our business, dilute shareholder value
and harm our financial condition.
●
Failure to hire and retain key personnel could negatively impact our ability to meet our business objectives and impair
future growth.
●
Man-made problems, such as terrorism, and natural catastrophic events may disrupt our operations and harm our
operating results.
●
We may not be successful in our artificial intelligence initiatives and such initiatives may expose us to greater litigation
and regulatory risk.
Risks Related to Our International Operations
●
Worldwide global economic conditions and uncertainties may have a material adverse impact on our business.
●
Increases in tariffs, trade restrictions or taxes on our products could have an adverse impact on our operations.
18
●
The wars in Israel and Ukraine could materially impact our sales to customers in that region.
●
Conditions in Israel may materially and adversely affect our business.
●
Risks associated with our international operations could impair our ability to grow our international revenue.
●
Fluctuations in currency exchange rates could negatively impact our financial results and cash flows.
●
Use and reliance upon research and development resources in global locations may expose us to unanticipated costs
and/or liabilities.
Risks Related to Intellectual Property
●
Our business could be jeopardized if we are unable to protect our intellectual property.
●
Failure to obtain necessary licenses or ongoing maintenance and support of third-party technology at acceptable prices
on acceptable terms, or at all, could harm our operating results or business.
●
A breach of the security of our information systems or those of our third-party providers could adversely affect our
operating results.
Risks Related to Regulation
●
Data privacy issues, including evolving laws, regulations and associated compliance, may adversely impact our business
and financial results.
●
Failure to comply with the Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act (“UKBA”) and similar
regulations could subject us to significant civil or criminal penalties.
●
Governmental export and import controls could subject us to liability, require a license from the U.S. government or
impair our ability to compete in international markets.
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Changes in governmental regulation, especially with respect to the telecommunications industry, could harm our
operating results and future prospects.
Risks Related to Our Indebtedness and Accounting Matters
●
The terms of our credit agreement could adversely affect our operating flexibility and pose risks of default, which would
negatively impact our liquidity and operations.
●
Impairment of our goodwill or intangible assets may require us to record a significant charge to earnings.
●
Failure to maintain appropriate internal controls in the future may adversely affect our stock price and our business.
Risks Related to Ownership of our Common Stock and Warrants
●
The choice of forum provision in our Certificate of Incorporation could limit our stockholders’ ability to obtain a
favorable judicial forum for disputes with us or our directors, officers or agents.
●
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more
difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the
market price of our common stock.
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The outstanding warrants are exercisable for common stock, which would increase the number of shares eligible for
future resale in the public market and result in dilution to stockholders.
●
We may issue debt and equity securities that are senior to our common stock, which could negatively affect the value of
our common stock.
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The outstanding warrants are speculative in nature and may not have any value.
●
Holders of our warrants will have no rights as a common stockholder until they acquire our common stock.
●
The market price of shares of our common stock may experience volatility, which could cause holders of the warrants to
incur substantial losses.
●
An active trading market for the warrants does not exist and may not develop.
General Risk Factors
●
Litigation and government investigations could result in significant legal expenses and settlement payments, fines or
damage awards.
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Our stock price has been and may continue to be volatile.
●
We are party to a stockholders’ agreement with certain stockholders which provides such stockholders with certain rights
that may differ from the rights of our other stockholders.
●
Delaware law and our charter documents contain provisions that could discourage or prevent a potential takeover.
For a more complete discussion of the material risks facing our business, see below.
Risks Related to our Business and Industry
Our quarterly revenue and operating results are unpredictable and may fluctuate significantly from quarter to quarter, which
could adversely affect our business, results of operations and the trading price of our common stock.
Our revenue and operating results may vary significantly from quarter to quarter due to a number of factors, many of which
are outside of our control and any of which may cause our stock price to fluctuate. Material factors that may affect our revenue
and operating results include those discussed below under “Risks Related to our Business and Industry.”
Equipment purchases by CSPs and enterprises continue to be unpredictable. As with other telecommunications product
suppliers, we typically recognize a portion of our revenue in a given quarter from sales booked and shipped in the last weeks of
that quarter. As a result, delays in customer orders may result in delays in shipments and recognition of revenue beyond the end of
a given quarter. Additionally, we rely on the revenue provided by certain large customers. It can be difficult for us to predict the
timing of receipt of major customer orders, and we are unable to control their timing decisions. We have experienced significant
variability in the spending patterns and purchasing practices of our customers on a quarterly and annual basis, and we expect that
this variability will continue. Consequently, our quarterly operating results are difficult to predict, even in the short term, and a
delay in an anticipated sale past the end of a particular quarter may negatively impact our results of operations for that quarter, or
in some cases, that year. Therefore, we believe that quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance. If our revenue or operating results fall below the expectations of investors or securities
analysts or below any guidance we may provide to the market, the price of our common stock could decline substantially. Such a
stock price decline could also occur even if we meet our publicly stated revenue and/or earnings guidance.
A significant portion of our operating expenses is fixed in the short term. If revenue for a particular quarter is below
expectations, we may not be able to reduce costs and expenses proportionally for that quarter. Any such revenue shortfall would,
therefore, have a significant effect on our operating results for that quarter.
If we fail to compete successfully against telecommunications equipment and networking companies, our ability to increase
our revenue and remain profitable will be impaired.
Competition in the telecommunications market is intense. The market is shifting from an ecosystem dominated by a few large
incumbent telecommunications equipment companies, such as Ericsson LM Telephone Company, Huawei Technologies Co. Ltd.,
Nokia Corporation, Ciena Corporation and Cisco Systems, Inc., to a market with competitors that are characterized by network
virtualization, migration to the cloud, and open interfaces. We believe this shift creates opportunities for us, as well as our direct
competitors in telecommunications and networking. The shift also creates opportunities for new entrants, including some that may
currently be our strategic partners, that could become competitors in the industry. See Item 1. “Business – Competition”. Mergers
among any of these or other competitors could strengthen their ability to compete against us, and additional competitors with
significant financial resources entering our markets could further intensify competition.
To compete effectively, we must deliver innovative products that provide extremely high reliability and quality; deploy and
scale easily and efficiently; interoperate with existing network infrastructures and multivendor solutions; provide effective
network management, as well as comprehensive customer support and professional services; provide a cost-effective and space-
efficient solution for enterprises and service providers; meet price competition from low cost equipment providers; and offer
solutions that are timely for the market and support where the industry is heading.
Many of our current and potential competitors have significantly greater selling and marketing, technical, manufacturing,
financial and other resources than we have. Further, some of our competitors sell significant amounts of other products to our
current and prospective customers and have the ability to offer lower prices to win business. Our competitors’ broad product
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portfolios, coupled with already existing relationships, may cause our customers to buy our competitors’ products or harm our
ability to attract new customers.
If we are unable to compete successfully against our current and future competitors, we could experience price reductions,
order cancellations and loss of customers and revenue, and our operating results could be adversely affected.
Our future success is dependent on growing our base of customers and expanding our recurring revenue from our existing
customers.
We rely on certain key customers, and our future success will depend on our ability to generate recurring business from our
existing customers and to attract additional customers beyond our current customer base. One customer, Verizon, contributed
approximately 14% of our revenue in the year ended December 31, 2024. Our top five customers contributed approximately 34%
of our revenue in 2024. Factors that may affect our ability to grow our customer base include, but are not limited to, economic
conditions that discourage potential new customers from making the capital investments required to adopt new technologies;
deterioration in the general financial condition of service providers and enterprises, or their ability to raise capital or access
lending sources; new product introductions by our competitors; and the success of our channel partner program. If we are unable
to expand our customer base, the loss of any significant customer, or any substantial reduction in purchase orders or deferral of
purchasing decisions from these customers, could materially adversely affect our results of operations and financial condition.
Consolidation in the telecommunications industry could harm our business.
The telecommunications industry, including many of our customers, has experienced consolidation, including, in the carrier
space, the proposed acquisition of Frontier Communications by Verizon (2024), the merger between Rogers Communications Inc.
and Shaw Communications Inc. (April 2023), the acquisition of certain Lumen Technologies assets by Brightspeed (2022), the
merger between T-Mobile US, Inc. and Sprint Corporation (2020) and the acquisition of Blue Face Ltd. by Comcast Corporation
(2020). Further, consolidation has also occurred in the telecommunications supplier and vendor space, including the proposed
acquisition by Alianza of the Metaswitch business held by Microsoft (December 2024), the proposed merger of Infinera with
Nokia (June 2024), the proposed acquisition of Juniper Networks by Hewlett Packard Enterprises (January 2024), the combination
of ADTRAN, Inc. and ADVA (2022) and the acquisition of Acacia Communications, Inc. by Cisco Systems, Inc. (2021).
We expect this trend to continue. Consolidation among our customers may cause delays or reductions in capital expenditure
plans by such customers and/or increased competitive pricing pressures as the number of available customers declines and the
relative bargaining power of customers increases in relation to suppliers. Any of these factors could materially adversely affect
our business. Further consolidation among our competitors may create additional opportunities for us as customers look to
maintain multiple vendors in their networks, but it could also provide those competitors with much larger scale making it more
difficult for us to compete against them.
Restructuring activities could adversely affect our ability to execute our business strategy.
We recorded restructuring expense of $10.2 million and $16.2 million in 2024 and 2023, respectively, including severance
and related costs, facilities restructuring and accelerated amortization of lease assets. In 2025, we expect to record additional
restructuring expense of approximately $5 million as we look to further streamline operations and consolidate our global footprint.
Our current restructuring and any future restructuring, should it become necessary for us to further restructure our business
due to market conditions or other factors that reduce the demand for our products and services, could adversely affect our ability
to execute our business strategy in a number of ways, including through loss of key employees; potential work stoppages by our
unionized employees; diversion of management’s attention from normal daily operations of the business; diminished ability to
respond to customer requirements related to both products and services; disruption of our engineering and manufacturing
processes, which could adversely affect our ability to introduce new products and to deliver products both on a timely basis and in
accordance with the highest quality standards; and/or reduced ability to execute effectively internal administrative processes,
including the implementation of key information technology programs.
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There can be no assurance that any restructuring actions we have taken in the past, or may take in the future, will improve our
financial condition or results of operations.
We are exposed to the credit risk of some of our customers and to credit exposures in fragile financial markets, which could
result in material losses.
Due to our reliance on significant customers, we are dependent on the continued financial strength of our customers. If one or
more of our significant customers experience financial difficulties, it could result in uncollectible accounts receivable and our loss
of significant customers and anticipated revenue.
Most of our sales are on an open credit basis, with typical payment terms of 30 to 90 days. In our IP Optical Networks
segment, some payment terms may be as long as 180 days or, in limited circumstances, even longer. We evaluate and monitor
individual customer payment capability in granting such open credit arrangements, maintain reserves that we believe are adequate
to cover exposure for doubtful accounts, and in some cases, insure credit risk. However, there can be no assurance that our open
credit customers will pay the amounts they owe us or that the reserves we maintain will be adequate to cover such credit exposure.
Our sales derived through distributors, in particular, represent sources of increased credit risk as distributors tend to have more
limited financial resources than other resellers and end-user customers.
Our customers’ failure to pay and/or our failure to maintain sufficient reserves could have a material adverse effect on our
results of operations and financial condition. Additionally, in the event that turmoil in the credit markets makes it more difficult
for some customers to obtain financing, those customers’ ability to pay could be adversely impacted, which in turn could have a
material adverse impact on our business, results of operations and financial condition.
Disruptions to, or our failure to effectively develop relationships with and manage, distributors, resellers, system integrators
and other channel partners, and the processes and procedures that support them, could adversely affect our ability to generate
revenue from the sale of our products and services.
We continue to enhance our sales strategy, which we expect will include more partner sales engagements to resell our
products and services through authorized distributors, value-added resellers (“VARs”), system integrators and other channel
partners. Our future success is dependent upon establishing and maintaining successful relationships with a variety of distributors,
VARs, system integrators and other channel partners. We may also need to pursue strategic partnerships with vendors that have
broader technology or product offerings in order to compete with end-to-end solution providers. In addition, many of the
enterprise markets we are pursuing require a broad network of resale partners in order to achieve effective distribution.
Many of our distribution and channel partners sell competitive products and services, and the loss of, or reduction in sales by,
these partners could materially reduce our revenue. Our sales through channel partners typically involve the use of our products as
components of a larger solution being implemented by systems integrators. In these instances, the purchase and sale of our
products are dependent on the channel partners, who typically control the timing, prioritization and implementation of projects. If
we fail to maintain relationships with our distribution, VAR and systems integration partners, fail to develop new relationships
with other partners in new markets, fail to manage, train or provide incentives to our existing partners effectively, or if these
partners are not successful in their sales efforts, sales of our products and services may decrease and our operating results could
suffer. Moreover, if we do not have adequate personnel, experience and resources to manage the relationships with our partners
and to fulfill our responsibilities under such arrangements, any such shortcomings could have a material adverse impact on our
business and results of operations.
If our strategic plan, including our research and development of innovative new products and the improvement of existing
products, is not aligned with our customers’ investments in the evolution of their networks, or if our products and services do
not meet customers’ demands, customers may not buy our products or use our services.
We spend a significant amount of time, money and resources developing new technology, products and solutions to help keep
up with rapid technology and market changes. Our strategic plan, includes a continued shift in our investments from mature
technologies that previously generated significant revenue for us toward certain networking technologies. Our choices of specific
technologies to pursue, and those to de-emphasize, may prove to be inconsistent with our customers’ investment spending.
Moreover, if we invest in the development of technologies, products and solutions that do not function as expected, are not
adopted by the industry, are not ready in time, are not accepted by our customers as quickly as anticipated or at all,
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mature more quickly than we anticipated or are not successful in the marketplace, our sales and earnings may suffer and, as a
result, our stock price could decline.
To achieve market acceptance for our products, we must effectively anticipate, and adapt in a timely manner to, customer
requirements and offer products and services that meet changing customer demands. Prospective customers may require product
features and capabilities that our current products do not have. The introduction of new or enhanced products also requires that we
carefully manage the transition from older products in order to minimize disruption in customer ordering patterns and ensure that
adequate supplies of new products can be delivered to meet anticipated customer demand. If we fail to develop products and offer
services that satisfy customer requirements or if we fail to effectively manage the transition from older products, our ability to
create or increase demand for our products and services could be seriously harmed, we may lose current and prospective
customers and our results of operations and financial condition could be materially adversely affected.
If our products do not interoperate with our customers’ existing networks, we may not retain current customers or attract new
customers.
Many of our customers will require that our products be designed to interface with their existing networks, each of which
may have different specifications. Issues caused by an unanticipated lack of interoperability may result in significant warranty,
support and repair costs, divert the attention of our engineering personnel from our hardware and software development efforts
and cause significant customer relations problems. If our products do not interoperate with those of our customers’ networks,
installations could be delayed or orders for our products could be canceled, which would seriously harm our gross margins and
result in loss of revenue or customers.
We believe the telecommunications industry is in a major architectural shift to the virtualization of networks. If the
architectural shift does not occur at the pace we predict, or if the products and services we have developed are not attractive to
our customers after such shift takes place, our revenue could decline.
We believe the telecommunications industry continues to transition to the virtualization of networks. However, our customers
may adapt to such changes at varying rates. As our customers take time to determine their future network architectures, we may
encounter delayed timing of orders, deferred purchasing decisions and reduced expenditures by our customers. These longer
decision cycles and reduced expenditures may negatively impact our revenue or make it difficult for us to accurately predict our
revenue, either of which could materially adversely affect our results of operations and cause our stock price to decline.
Virtualization of our product portfolio, particularly in our Cloud and Edge segment, to increasingly focus on more software-
based products could also adversely impact our revenue growth. As we virtualize our product portfolio, we expect our margins to
improve due to decreased costs tied to production and sales of our appliance products, however, our revenue may decline as a
result of the decreases in sales of appliance products, many of which have generated higher revenue on a per-unit basis than
certain of our software products.
Failure by our strategic partners or by us in integrating products provided by our strategic partners could harm our business.
Our solutions include the integration of products supplied by strategic partners. We rely on these strategic partners in the
timely and successful deployment of our solutions to our customers. If the products provided by these partners have defects or do
not operate as expected, if the services provided by these partners are not completed in a timely manner, if our partners have
organizational or supply issues, or if we do not effectively integrate and support products supplied by these strategic partners, then
we may have difficulty with the deployment of our solutions that may result in loss of, or delay in, revenue; increased service,
support and warranty costs and a diversion of development resources; and/or network performance penalties.
In addition to cooperating with our strategic partners, such as Dell, on specific customer projects, we also may compete in
some areas with these same partners. If these strategic partners fail to perform or choose not to cooperate with us on certain
projects, in addition to the effects described above, we could experience loss of customers and market share, or fail to attract new
customers.
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If our contract manufacturers fail to perform, or if we change or consolidate manufacturers, we may fail to meet the demands
of our customers and damage our customer relationships, which could materially adversely affect our business.
We currently rely on a small number of large global contract manufacturers to assemble our products according to our
specifications and to fulfill orders on a timely basis. Reliance on a third-party manufacturer involves a number of risks, including
a lack of control over the manufacturing process, inventory management and the potential absence or unavailability of adequate
capacity. These risks are amplified by any global supply chain disruptions. As we do not have internal manufacturing capabilities,
any difficulties or failures to perform by our contract manufacturers could cause delays in customer product shipments, which
could negatively affect our relationships with customers and result in delayed revenue.
In addition, any future changes to or consolidations of our current contract manufacturers could lead to material shortages or
delays in the supply of our products. Qualifying a new contract manufacturer to commence commercial scale production or
consolidating to a reduced number of contract manufacturers are expensive and time-consuming activities and could result in a
significant delay in the supply of our products, which could negatively affect our relationships with customers and result in
delayed revenue.
We and our contract manufacturers rely on single or limited sources for supply of some components of our products and if we
fail to adequately predict our manufacturing requirements or if our supply of any of these components is disrupted, we will be
unable to ship our products in a timely manner, or at all.
We and our contract manufacturers both purchase several key components of our products. Depending upon the component,
there may or may not be alternative sources of substitutes. If we overestimate our component and finished goods requirements, we
could have excess inventory, which would increase our costs. If we or our contract manufacturers underestimate our requirements,
we may not have an adequate supply, which could interrupt manufacturing of our products and result in delays in shipments and
revenue. If any of our sole or limited source suppliers experience capacity constraints, work stoppages or other reductions or
disruptions in output, it may not be able to meet, or may choose not to meet, our delivery schedules. Moreover, we have agreed to
compensate our contract manufacturers in the event of termination or cancellation of orders, discontinuance of product or excess
material.
We generally do not have long-term supply contracts with our component suppliers and they are not required to supply us
with components for any specified periods, in any specified quantities or at any set price, except as may be specified in a
particular purchase order. In the event of a disruption or delay in supply or our inability to obtain components, we may not be able
to develop an alternate source in a timely manner or at favorable prices, or at all. While we regularly monitor our inventory of
supplies, a failure to find acceptable alternative sources could hurt our ability to deliver high-quality products to our customers
and negatively affect our operating margins.
Reliance on our suppliers also exposes us to potential quality variations and unforeseen price increases. Any disruption in the
supply of key components would seriously adversely affect our ability to meet committed delivery dates and could result in loss of
customers, harm to our ability to attract new customers, the payment of contractual liquidated damages or legal action.
Additionally, any unforeseen increases in the prices of components could reduce our profitability or force us to increase our
prices, which could result in a loss of customers or harm our ability to attract new customers and could have a material adverse
effect on our results of operations.
Our customer contracts may allow customers to reschedule delivery dates or cancel orders within certain time frames before
shipment without penalty and outside those times frames with a penalty. Because of these and other factors, there are risks of
excess or inadequate inventory that could negatively affect our expenses and results of operations.
If we are unable to correctly estimate future requirements for products and components that we purchase from our third-party
vendors that have reached the end of their production cycle, it could harm our operating results or business.
Some of the products and components that we purchase from our third-party vendors have reached the end of their new
production availability. It may be difficult for us to maintain appropriate levels of the discontinued products or components to
adequately ensure that we do not have a shortage or surplus of inventory of these products. If we do not correctly forecast the
demand for such products that utilize third-party components, we could have excess inventory and may need to write off the costs
related to such purchases and such write-offs could materially adversely affect our operating results. However, if we
underestimate our forecast and our customers place orders to purchase more products than are available, we may not have
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sufficient inventory to support their needs. If we are unable to provide our customers with enough of these products, it could make
it difficult to retain certain customers, which could have a material and adverse effect on our business.
Our products may have errors or defects that we find only after full deployment.
Many of our products are sophisticated and are designed to be deployed in large and complex networks around the world.
Because of the nature of our products, they can only be fully tested when substantially deployed in these networks. Some of our
customers may discover errors or defects in the software or hardware, or the products may not operate as expected only after full
deployment. Our customers expect us to establish a support infrastructure and maintain demanding support standards to ensure
that their networks maintain high levels of availability and performance. As we continue to expand our distribution channel
through distributors and resellers, we will need to rely on and support their service and support organizations. If we, or our
distributors and resellers, are unable to fix errors or other performance problems that may be identified after full deployment of
our products, or provide the expected level of support and service to our customers, we could experience increased service,
support and warranty costs and a diversion of development resources, loss of customers, network performance penalties and/or
legal actions by our customers, which could materially adversely affect our business and results of operations.
Disruptions to, or our failure to effectively develop, manage and maintain our government customer relationships could
adversely affect our ability to generate revenue from these customers. Further, sales to government customers are subject to
potential delays and cutbacks, may require specific testing efforts, or impose significant compliance obligations.
A portion of our total revenue from product sales comes from sales to government agencies in the U.S. and other foreign
countries. Disruptions to or our failure to effectively develop, manage and maintain our government customer relationships could
adversely affect our ability to generate revenue from sales to such customers. Governments routinely investigate and audit
government contractors’ administrative processes, and any unfavorable audit could result in a government refusing to continue
buying our products and services, a reduction of revenue or fines or civil or criminal liability if the audit uncovers improper or
illegal activities, which could materially adversely impact our operating results.
Factors that could impact federal government spending on our products and services include a significant decline in, or
reapportioning of, spending by the federal government customers, changes, delays or cancellations of government programs or
requirements, the adoption of new laws or regulations, government shutdowns or other delays in the government budget and/or
appropriations process, changes in the political climate and general economic conditions. The loss or significant curtailment of
any government contracts or subcontracts, whether due to our performance or due to interruptions or changes in governmental
funding, could have a material adverse effect on our business, results of operations and financial condition.
Further, sales to government customers may require specific testing efforts or impose significant compliance or certification
obligations. For example, the U.S. Department of Defense (“DOD”) has issued specific requirements for IP networking products
for features and interoperability. In order for our products to be used to connect to the DOD network, that product must pass a
series of significant tests and be certified by the Joint Interoperability Test Command (“JITC”). While certain of our products are
certified by JITC, if we are unable to obtain future JITC certification as needed, our DOD sales and results of operations, may
suffer.
Any future investments, mergers or acquisitions we make or enter into, as applicable, could be difficult to integrate, disrupt our
business, dilute shareholder value and seriously harm our financial condition.
We have a history of significant acquisitions and we may merge with or acquire additional businesses, products or
technologies in the future or sell a portion of our business. No assurance can be given that any future merger, acquisition or
disposition will be successful or will not materially adversely affect our business, operating results or financial condition. We
continue to review opportunities to merge with or acquire other businesses or technologies that would add to our existing product
line, complement and enhance our current products, expand the breadth of our product and service offerings, enhance our
technical capabilities or otherwise offer growth opportunities. If we enter into a merger or make acquisitions in the future, we
could, among other things issue stock that would dilute existing stockholders’ percentage ownership; incur significant debt or
assume significant liabilities; materially reduce our cash; incur significant amortization expenses related to intangible assets;
and/or incur large and immediate write-offs for in-process research and development and stock-based compensation.
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Mergers, acquisitions and dispositions are inherently risky and subject to many factors outside of our control. Therefore, we
cannot be certain that we would be successful in overcoming problems in connection with our past or future acquisitions. Our
inability to do so could significantly harm our business, revenue, and results of operations.
Failure to hire and retain key personnel could negatively impact our ability to meet our business objectives and impair our
future growth.
Our business depends upon highly skilled technical, managerial, engineering, sales, marketing and customer support
personnel. Competition for these personnel is intense, especially during times of economic recovery or growth. In addition, for
certain mature technologies, the availability of qualified personnel necessary to provide maintenance and professional services is
smaller and such personnel may be difficult to find. Any failure to hire, assimilate in a timely manner and retain key qualified
personnel, particularly engineering and sales personnel, could impair our growth and make it difficult to meet key objectives, such
as timely and effective product introductions. In addition, our ability to attract and retain key employees could be adversely
impacted if we do not have a sufficient number of shares available under the Amended and Restated 2019 Stock Incentive Plan, as
amended, to issue to our employees. We may not be able to locate suitable employees for any key employee who leaves or offer
employment to potential replacements on reasonable terms.
Our future success also depends upon the continued services of our executive officers who have critical industry experience
and relationships that we rely on to implement our business plan. None of our officers or key employees is bound by an
employment agreement for any specific term. The loss of the services of any of our executive officers or key employees could
delay the development and introduction of, and negatively impact our ability to sell, our products and achieve our business
objectives.
Man-made problems, such as war, terrorism, and natural catastrophic events may disrupt our operations and harm our
operating results.
The ongoing wars in Israel and Ukraine, as well as the continued threat of terrorism and heightened security and military
action in response to this threat, or any future acts of terrorism, may cause disruptions to the economies of the United States and
other countries. Events such as work stoppages or widespread blackouts could have similar negative impacts. Such disruptions or
uncertainties could result in delays or cancellations of customer orders or the manufacture or shipment of our products and have a
material adverse effect on our business and results of operations.
Natural catastrophic events, such as earthquakes, fires, floods, tornadoes, or pandemics (such as the COVID-19 pandemic)
may also affect our or our customers’ operations. For example, we have offices located in Mexico City, Mexico; and Tokyo,
Japan, regions known for seismic activity, which could be impacted in the event of an earthquake and we operate a facility in Ft.
Lauderdale, Florida that is subject to the impact of hurricanes. A significant natural disaster, such as wildfires, earthquakes or
floods, could have a material adverse effect on our business in these locations.
We may not be successful in our artificial intelligence (“AI”) initiatives, which could adversely affect our business, reputation,
or financial results.
We are developing AI initiatives, including generative AI, to, among other things, enhance our features for new and existing
products, and create greater operation efficiencies for us.
There are significant risks involved in developing and deploying AI, and there can be no assurance that the usage of AI will
enhance our products or services or be beneficial to our business, including our efficiency or profitability. For example, our AI-
related efforts, particularly those related to generative AI, subject us to risks related to harmful content, inaccuracies, bias,
discrimination, toxicity, intellectual property infringement or misappropriation, defamation, data privacy, cybersecurity, and
sanctions and export controls, among others. It is also uncertain how various laws will apply to content generated by AI. We are
subject to the risks of new or enhanced governmental or regulatory scrutiny, litigation, or other legal liability, ethical concerns,
negative consumer perceptions as to automation and AI, or other complications that could adversely affect our business,
reputation, or financial results.
As a result of the complexity and rapid development of AI, it is the subject of evolving review by various U.S. governmental
and regulatory agencies, and other foreign jurisdictions are applying, or are considering applying, their intellectual property,
cybersecurity, data protection and other laws to AI and/or are considering general legal frameworks on AI.
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We may not always be able to anticipate how to respond to these frameworks, given that they are still rapidly evolving. We may
also have to expend resources to adjust our use of AI in certain jurisdictions if the legal frameworks on AI are not consistent
across jurisdictions.
As such, it is not possible to predict all of the risks related to the use of AI, and changes in laws, rules, directives, and
regulations governing the use of AI may adversely affect our ability to develop and use AI or subject us to legal liability.
Risks Related to our International Operations
Worldwide economic conditions and uncertainties in the geopolitical environment have been and may continue to be
materially adverse to our business.
A factor that significantly affects our operating results is the impact of economic conditions on the willingness of our current
and potential customers to make capital investments. Given the general uncertainty regarding global economic conditions and
other factors, such as inflation, high interest rates and foreign exchange rate fluctuations, we believe that customers have tried to
maintain or improve profitability through cost control and constrained capital spending, which places additional pressure to
demonstrate acceptable return on investment. Some of our customers have canceled or delayed, and current and prospective
customers may continue to cancel and delay, spending on the development or roll-out of capital and technology projects with us
due to economic uncertainty and, consequently, our results of operations have been, and may continue to be, adversely affected. In
addition, current uncertain worldwide economic and political environments make it increasingly difficult for us, our customers,
and our suppliers to accurately forecast future product demand, which could result in an inability to satisfy demand for our
products and a loss of market share. Our revenue is likely to decline in such circumstances, which may result in erosion of our
profit margins and significant losses.
Moreover, economic conditions worldwide may contribute to slowdowns in the communications and networking industries,
as well as to specific segments and markets in which we operate, particularly the telecom sector, resulting in, among other things,
reduced demand for our products and services as a result of our customers choosing to refrain from building or upgrading capital
intensive networks; increased price competition for our products, not only from our competitors, but also as a consequence of
customers disposing of unutilized products; and risk of excess and obsolete inventories. Continuing turmoil in the geopolitical
environment in many parts of the world may continue to put pressure on global economic conditions, which in turn could
materially adversely affect our operating results. For example, following recent border clashes with China, India has enacted bans
on the import of some goods manufactured in China and separately will require certain products be manufactured in India. These
requirements include our products that are currently manufactured outside of India and, as a result, we are working to identify
local manufacturing for such products. While we are developing plans to relocate our manufacturing sites, the timing required for
relocation could impact our ability to sell such products or timely deliver the products and could result in lower or lost sales in
India. The need to move the manufacturing of such products could also negatively impact the margin earned on the sale of such
products. If these restrictions or other sanctions are enacted, they may limit our ability to provide products and services in an
important country or region for our business.
The war between Russia and Ukraine, and the sanctions imposed as a result, could materially impact our sales to customers in
that region.
In 2024, approximately 4% of our sales were to customers in Eastern European countries, including Ukraine, Russia, and the
surrounding countries. In February 2022, Russia commenced a military action in Ukraine. The uncertainty and the threat of an
expansion of the war has resulted in some of our customers delaying purchases from us. Further, the U.S. and other European
countries have imposed sanctions against Russia in connection with the war. These sanctions currently prohibit our ability to sell
our hardware products and certain services to customers in Russia. The sanctions continue to evolve and further changes in the
sanctions could further limit our ability to sell products and services to customers in Russia and our ability to collect on
outstanding accounts receivable from such customers. If we are further limited in our ability to sell products and services to
customers in Russia and other countries for an extended period, it could have a material impact on our financial results.
Conditions in Israel may materially and adversely affect our business.
We have a significant number of employees located in Israel. As a result, political, economic and military conditions in Israel
may directly affect our business. In October 2023, Hamas conducted several terrorist attacks in Israel resulting in
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ongoing war across the country. In addition, there continue to be hostilities between Israel and Hezbollah in Lebanon, as well as
groups in Syria and Iran which resulted in rockets being fired into Israel, causing casualties and disruption of economic activities.
Popular uprisings in various countries in the Middle East over the last few years, including in Syria in December 2024, have also
affected the political stability of those countries and have led to a decline in the regional security situation. Such instability may
also lead to deterioration in the political and trade relationships that exist between Israel and these countries. The ongoing war
against Hamas and any additional conflicts, terrorist activities or political instability involving Israel or other countries in the
region could adversely affect our business, results of operations, financial condition, cash flows and prospects. Although the
Israeli Government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war,
we cannot ensure stockholders that this coverage will be maintained or will be adequate in the event we submit a claim.
A number of countries, principally in the Middle East, still restrict doing business with Israel and Israeli companies, and
additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political
instability in the region continue or increase. In addition, there have been increased efforts by activists to cause companies and
consumers to boycott Israeli goods based on Israeli Government policies. Such actions, particularly if they become more
widespread, may adversely impact our ability to sell our products.
Our operations could also be disrupted by the absence for significant periods of one or more key employees or a significant
number of other employees because of military service. Some of our employees in Israel are obliged to perform military reserve
duty, which generally accumulates over a period of three years from several days to up to a maximum of 84 days (and up to
108 days, in special circumstances specified under applicable law) and, in certain emergency circumstances, employees may be
called to immediate and unlimited active duty. In response to the Hamas terrorist attacks in October 2023, a number of our
employees in Israel have been activated for military duty. While we have business continuity plans in place to address the military
call-ups of our employees, any of these circumstances could have a material adverse effect on our business, results of operations,
financial condition, cash flows and prospects.
We may face risks associated with our international operations that could impair our ability to grow our international revenue.
We have expanded, and expect to continue to expand, our operations in international and emerging markets. International
operations are a significant part of our business, accounting for approximately 53% of total revenues in 2024. We expect such
operations to continue to require significant management attention and financial resources to successfully grow. In addition, our
international operations are subject to other inherent risks, including:
●
greater reliance on channel partners;
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difficulties collecting accounts receivable and longer collection cycles;
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difficulties and costs of staffing and managing international operations;
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impacts of differing technical standards;
●
compliance with international trade, customs and export control regulations;
●
foreign government regulations limiting or prohibiting potential sales or increasing the cost of doing business in such
markets, including adverse tax policies, tariffs, customs regulations, trade protection measures, export quotas and
qualifications to transact business;
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foreign currency exchange controls, restrictions on repatriation of cash and changes in currency exchange rates;
●
any need to adapt and localize our products for specific countries;
●
our ability to effectively price our products in competitive international markets; and
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political, social and economic instability, including as a result of the fragility of global financial markets, health
pandemics or epidemics and/or acts of war or terrorism.
Our international revenue, both as a percentage of total revenue and absolute dollars, may vary from one period to the next,
and accordingly, current data may not be indicative of future periods. If we are unable to support our business operations in
international and emerging markets, or their further expansion, while balancing the higher operational and financial risks
associated with these markets, our business and results of operations could be harmed.
In addition, we may not be able to develop international market demand for our products, which could impair our ability to
grow our revenue. In many international markets, long-standing relationships between potential customers and their local
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suppliers and protective regulations, including local content requirements and approvals, create barriers to entry. We have limited
experience marketing, distributing and supporting our products in certain international locations and, to do so, we expect that we
will need to develop versions of our products that comply with local standards. Moreover, difficulties in foreign financial markets
and economies and of foreign financial institutions, particularly in emerging markets, could adversely affect demand from
customers in the affected countries.
Increases in tariffs, trade restrictions or taxes on our products, as well as other risks of international operations, could have an
adverse impact on our operations.
We manufacture certain of our appliance products and purchase a portion of our raw materials and components from suppliers
in Mexico, Malaysia, Thailand, Israel, China and other foreign countries. The commerce we conduct in the international
marketplace makes us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and
the products we ship, cross international borders. Import tariffs and/or other mandates recently imposed by the United States, have
led to and could in the future lead to retaliatory actions by affected countries, including Canada, Mexico and China, resulting in
“trade wars,” and could significantly increase the prices on raw materials, the manufacturing of our equipment, and/or increased
costs for goods imported into the United States, all of which are critical to our business. While some of the tariffs have been
temporarily stayed, we continue to develop plans to adjust manufacturing locations, if necessary, to avoid tariffs or other
restrictions, any such tariffs could reduce customer demand for our products if our customers have to pay increased prices for our
products as a result of such tariffs. In addition, tariff increases may have a similar impact on other suppliers and certain other
customers, which could increase the negative impact on our operating results or future cash flows. Without any mitigation and
assuming customers continue to purchase at their current levels, the current tariffs, if enacted, could add approximately $5 million
in annual costs which we would work with our customers to offset.
We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.
Because a portion of our business is conducted outside the United States, we face exposure to adverse movements in foreign
currency exchange rates. These exposures may change over time as business practices evolve, and they could have a material
adverse impact on our financial results and cash flows. An increase in the value of the U.S. dollar could increase the real cost to
our customers of our products in those markets outside the United States where we often sell in dollars, and a weakened U.S.
dollar could increase the cost of local operating expenses and procurement of raw materials from sources outside the United
States. 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. There is no guarantee that our
financial results will not be adversely affected by currency exchange rate fluctuations.
Our use and reliance upon R&D resources in global locations may expose us to unanticipated costs and/or liabilities.
We have R&D offices in various global locations, including the United States, Canada, India and Israel. Our development
efforts and other operations in these locations could involve significant risks, including, among others, difficulty hiring and
retaining appropriate engineering and management resources due to intense competition for such resources and resulting wage
inflation; knowledge transfer related to our technology and resulting exposure to misappropriation of intellectual property or
information that is proprietary to us, our customers and other third parties; and heightened exposure to changes in economic,
security and global political conditions.
Difficulties resulting from the factors noted above and other risks related to our global operations could increase our
expenses, impair our development efforts, harm our competitive position and damage our reputation.
Risks Related to Intellectual Property
Our business could be jeopardized if we are unable to protect our intellectual property. Additionally, in some jurisdictions, our
rights may not be as strong as those we currently enjoy in the United States.
We rely on a combination of security countermeasures within our deployed products, as well as patent, copyright, trademark
and trade secret laws and contractual restrictions on disclosure to protect our intellectual property rights. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy or otherwise misappropriate our products or technology.
Monitoring unauthorized use of our products is difficult and we cannot be certain that the steps we have taken will prevent
unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary
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rights as fully as in the United States. The legal systems of many foreign countries do not protect or honor intellectual property
rights to the same extent as the legal system of the United States. It may be very difficult, time-consuming and costly for us to
attempt to enforce our intellectual property rights, especially in these foreign jurisdictions. If competitors are able to use our
technology, our ability to compete effectively could be harmed, which could have a material adverse effect on our business.
If we are unable to obtain necessary licenses or on-going maintenance and support of third-party technology at acceptable
prices, on acceptable terms, or at all, it could harm our operating results or business.
We have incorporated third-party licensed technology, including open-source software, into our current products. From time
to time, we may be required to license additional technology from third parties to develop new products or product enhancements.
Third-party licenses and on-going maintenance and support may not be available or continue to be available to us on
commercially reasonable terms or may be available to us but only at significantly escalated pricing. Additionally, we may not be
able to replace the functionality provided by third-party software currently offered with our products if that software becomes
obsolete, defective or incompatible with future versions of our products or is not adequately maintained or updated. If we are
unable to maintain or re-license any third-party licenses required in our current products or obtain any new third-party licenses to
develop new products and product enhancements, or in the case of any defects in these third-party software products, we could be
required to obtain substitute technology of lower quality or performance standards or at greater cost, and we may be delayed or
prevented from making these products or enhancements, any of which could seriously harm our sales and the competitiveness of
our products unless and until we can secure an alternative source.
A breach of the security of our information systems or those of our third-party providers could adversely affect our operating
results.
We rely upon our information systems and, in certain circumstances, those of our third-party providers, such as vendors,
consultants and contract manufacturers, to protect our sensitive or proprietary information and information of or about our
customers, to develop and provide our products and services to customers, and to otherwise operate our business. Our information
systems and those of our third-party providers are vulnerable to threats such as computer hacking, cyber-terrorism or other
unauthorized activity that may result in third party access to or modification, corruption or deletion of our or our customers’
sensitive or proprietary information or other disruptions to our business. Such cyberattacks and other cyber incidents are occurring
more frequently, are constantly evolving, are becoming more sophisticated and can take many forms. While we believe that we
leverage appropriate detection and prevention systems and services and that we focus on continuous improvement based upon the
latest attack vectors in the industry, we cannot guarantee that there will never be any information technology system failures,
including future breaches of our or our third-party providers’ data security measures through a cyberattack, other cyber incident or
otherwise, or the theft or loss of laptops, other mobile devices or electronic records used to back up our systems or our third-party
providers’ systems, which could result in a disclosure of customer, employee, or our information or otherwise disrupt our ability
to function in the normal course of business by potentially causing, among other things, delays in the fulfillment or cancellation of
customer orders or disruptions in the manufacture or shipment of products or delivery of services, any of which could have a
material adverse effect on our operating results.
Additionally, the compromise of our information systems, or the information systems of the U.S. government, financial
markets, financial institutions, our third-party providers or our customers, could disrupt our normal business operations, and in
some cases lead to unauthorized tampering with our products. Unauthorized tampering may result in, among other things, the
disruption of our customers’ businesses, errors or defects occurring in the software due to such unauthorized tampering, and our
products not operating as expected after such unauthorized tampering. These types of security breaches could also create exposure
to lawsuits, regulatory investigations, and increased legal liability. As a provider of secure real-time communications solutions,
the reputational harm of any actual or perceived breach, compromise, defect or error relating to the security of our information
systems and the products and services we provide may result in substantial harm to our reputation, even if the legal or regulatory
impact is minimal. In addition, the costs to remediate any cyberattack could be significant. Such consequences could be
exacerbated if we or our third-party providers are unable to adequately recover critical systems in a timely manner following a
systems failure. Our insurance coverage may be insufficient to cover all losses related to cyberattacks.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from
public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used
to undermine our competitive advantage or market position. Additionally, proprietary, confidential, and/or sensitive information of
the Company could be leaked, disclosed, or revealed as a result of or in connection with the use of generative artificial intelligence
technologies.
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Risks Related to Regulation
Risks associated with data privacy issues, including evolving laws, regulations and associated compliance efforts, may
adversely impact our business and financial results.
Legislation in various countries around the world with regard to cybersecurity, privacy and data protection is rapidly
expanding and creating a complex compliance environment. We are subject to many privacy and data protection laws and
regulations in the U.S. and around the world, some of which place restrictions on our ability to process personal data across our
business. For example, the General Data Protection Regulation has caused more stringent data protection requirements in the U.K.
and the European Union, which has adopted similar regulations. These privacy laws impose onerous accountability obligations
requiring data controllers and processors to maintain a record of their data processing and implement policies as part of its
mandated privacy governance framework. It also requires data controllers to be transparent and disclose to data subjects how their
personal information is to be used; imposes limitations on retention of personal data; introduces mandatory data breach
notification requirements; and sets higher standards for data controllers to demonstrate that they have obtained valid consent for
certain data processing activities. We are subject to the supervision of local data protection authorities in those E.U. jurisdictions
where we are established or otherwise subject to these privacy regulations. Certain breaches of the privacy requirements could
result in substantial fines. In addition to the foregoing, a breach of privacy regulations could result in regulatory investigations,
reputational damage, orders to cease/change our use of data, enforcement notices, as well potential civil claims including class
action type litigation where individuals suffered harm.
Similarly, California and other states have enacted privacy laws that purport to create individual privacy rights for consumers
and increase the privacy and security obligations of entities handling certain personal data. These laws also provide for civil
penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.
These laws may increase our compliance costs and potential liability. Many similar laws have been proposed at the federal level
and in the other states. Any liability from our failure to comply with the requirements of these laws could adversely affect our
financial condition.
We have invested, and continue to invest, human and technology resources in our privacy regulation compliance efforts and
our data privacy compliance efforts. These compliance efforts may be time-intensive and costly. Despite those efforts, there is a
risk that we may be subject to fines and penalties, litigation and reputational harm if we fail to protect the privacy of third party
data or comply with the applicable regimes.
Failure to comply with the FCPA, the UKBA and similar regulations could subject us to significant civil or criminal penalties.
We earn a significant portion of our total revenue from international sales generated through our foreign direct and indirect
operations. As a result, we are subject to the FCPA and the UKBA, which prohibit bribery in the conduct of business. The FCPA
generally prohibits U.S. companies and their intermediaries from making corrupt payments to foreign officials for the purpose of
obtaining or keeping business or otherwise obtaining favorable treatment and requires companies to maintain adequate record-
keeping and internal accounting practices to accurately reflect the transactions of the company. The UKBA is much broader and
prohibits all bribery, in both the public and private sectors. Under the FCPA and the UKBA, U.S. companies, their subsidiaries,
employees, senior officers and/or directors may be held liable for actions taken by strategic or local partners or representatives. In
addition, the U.S. government or the U.K. government, as applicable, may seek to hold us liable for successor liability violations
committed by companies we have acquired or may in the future acquire. If we or our intermediaries fail to comply with the
requirements of the FCPA and the UKBA, governmental authorities in the United States and the United Kingdom, as applicable,
could seek to impose civil and/or criminal penalties, which could have a material adverse effect on our reputation, results of
operations and the trading price of our common stock.
We are subject to governmental export and import controls that could subject us to liability, require a license from the U.S.
government or impair our ability to compete in international markets.
Certain of our products with encryption technology are subject to export controls and may be exported only with the required
level of export license or through an export license exception. Under these laws and regulations, we are responsible for obtaining
all necessary licenses or other approvals, if required, for exports. If we were to fail to comply with existing or future export
licensing, customs regulations, economic sanctions and other laws, we could be subject to substantial civil and criminal penalties,
including fines and incarceration for responsible employees and managers, and the possible loss of export or import
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privileges. Similarly, various countries regulate the import of certain encryption technology and have enacted laws that could limit
our ability to distribute our products or our customers’ ability to implement our products in those countries.
In addition, if our distributors fail to obtain appropriate import, export or re-export licenses or permits, we may also be
adversely affected through reputational harm and penalties. Obtaining export licenses can be difficult and time-consuming, and in
some cases a license may not be available on a timely basis or at all. Changes in import/export regulations could also lead to
delays in new product introductions or limit our ability to sell existing or future products in certain locations, which could
adversely impact our business.
Export control laws and economic sanctions prohibit the shipment of certain products to embargoed or sanctioned countries,
governments and persons, including Russia as a result of its military action against Ukraine. We cannot assure that a violation of
these regulations will not occur, whether knowingly or inadvertently. Any such shipment could have negative consequences
including government investigations, penalties, fines, civil and criminal sanctions, and reputational harm.
Regulation of the telecommunications industry, or changes in governmental regulation, interpretation or legislative reform
could harm our operating results and future prospects.
The telecommunications industry is highly regulated and our business and financial condition could be adversely affected by
changes in the regulations relating to the telecommunications industry. Currently, there are few laws or regulations that apply
directly to access to or delivery of voice services on IP networks. We could be adversely affected by regulation of IP networks and
commerce in any country where we operate, including the United States. Such regulations could include matters such as VoIP or
using Internet Protocol, encryption technology, and access charges for service providers. The adoption of such regulations could
decrease demand for our products, and at the same time increase the cost of selling our products, which could have a material
adverse effect on our business and results of operations.
Risks Related to Our Indebtedness and Accounting Matters
The terms of our credit agreement could adversely affect our operating flexibility and pose risks of default, which would
negatively impact our liquidity and operations.
Our Senior Secured Credit Facilities Credit Agreement, provides $385 million of commitments, comprised of a $350 million
term loan and a $35 million revolving facility (the “2024 Credit Facility”). Terms in the 2024 Credit Facility impose limitations on
our ability to, among other things, incur additional indebtedness, create liens, make acquisitions or engage in mergers, enter into
transactions with affiliates, dispose of assets, make certain investments and amend or repay certain junior debt. These terms could
adversely affect our operating flexibility and pose risks of default which would negatively impact our liquidity and operations. In
addition, we may not be able to refinance our debt or obtain additional financing on favorable terms, or at all.
In addition, we are required to comply with a maximum Consolidated Net Leverage Ratio (as defined in the 2024 Credit
Facility) which is tested on a quarterly basis. The maximum Consolidated Net Leverage Ratio covenant uses our EBITDA
(calculated in accordance with the 2024 Credit Facility) for the last 12 months (as of the testing date) to determine compliance.
We were in compliance with this covenant at December 31, 2024. However, if we should fail to comply with this covenant in
future periods, it may result in the declaration of an event of default, which could cause us to be unable to borrow or result in the
acceleration of the maturity of indebtedness outstanding under the 2024 Credit Facility at such time.
If we are prevented from borrowing or if we are unable to extend, renew or replace the credit facilities under the 2024 Credit
Facility by the maturity dates, on favorable terms, or at all, this could have a material adverse effect on our liquidity and cause our
business, operations and financial condition to suffer. In addition, we may not have sufficient funds available for repayment or we
may not have the ability to borrow or obtain sufficient funds to replace the indebtedness on terms acceptable to us, or at all.
We cannot be sure that our current cash and available borrowings under our 2024 Credit Facility will be sufficient to meet our
future needs. If we are unable to generate sufficient cash flows in the future, and if availability under our current facility is not
sufficient to support our operations, we may need to refinance our debt or obtain additional financing.
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If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.
As of December 31, 2024, we had $300.9 million of goodwill and $187.5 million of intangible assets. Goodwill is tested
annually for impairment and, along with our intangible assets, is also reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. Factors that may be considered a change in circumstances
indicating that the carrying value of our goodwill or intangible assets may not be recoverable include significant
underperformance relative to plan or long-term projections, strategic changes in business strategy, significant negative industry or
economic trends, significant change in circumstances relative to a large customer, significant decline in our stock price for a
sustained period and decline in our market capitalization to below net book value. Any additional material impairment of goodwill
or intangible assets could adversely affect our results of operations.
If we fail to maintain appropriate internal controls in the future, we may not be able to report our financial results accurately,
which may adversely affect our stock price and our business.
Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations require our management to report on, and our
independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting. We
have committed and will be required to continue to commit significant financial and managerial resources in order to comply with
these requirements.
Further, we are required to integrate any acquired businesses into our system of disclosure controls and procedures and
internal control over financial reporting. Such companies may not have previously been required to implement or maintain the
disclosure controls and procedures or internal control over financial reporting that are required of U.S. public companies. We
cannot provide assurance as to the effectiveness of those integrations.
Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be
circumvented or become inadequate because of changed conditions, and fraud. If we are unable to maintain effective internal
controls, we may not have adequate or timely financial information, and we may be unable to meet our reporting obligations as a
publicly traded company or comply with the requirements of the SEC or the Sarbanes-Oxley Act of 2002. This could result in a
restatement of our financial statements, the imposition of sanctions, or investigation by regulatory authorities, and could cause
investors to lose confidence in our reported financial information. Any such consequence or other negative effect of our inability
to meet our reporting requirements or comply with legal and regulatory requirements, as well as any disclosure of an accounting,
reporting or control issue, could adversely affect the trading price of our common stock and our business.
Risks Related to the Ownership of our Common Stock and Warrants
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult,
limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of
our common stock.
Provisions of our Certificate of Incorporation and By-laws may have the effect of delaying or preventing a change of control
or changes in our management, including, generally, provisions that:
●
do not provide cumulative voting in the election of directors, which limits the ability of minority stockholders to elect
director candidates;
●
allow only the Board to fill a vacancy on the Board, however occurring, including a vacancy resulting from an
enlargement of the Board;
●
require advance notice for stockholder proposals to be brought before a meeting of stockholders, including proposed
nominations of persons for election to the board of directors;
●
only allow stockholder action to be taken at an annual or special meeting;
●
require a vote of holders of at least 66 2/3% of the voting power of our outstanding voting stock entitled to vote thereon
to amend or repeal certain provisions of our Certificate of Incorporation or its By-laws;
●
limit the ability of stockholders to call a special meeting; and
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authorize blank check preferred stock.
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These provisions may make it more difficult for stockholders to replace members of our board of directors, which is
responsible for appointing the members of our management. In addition, pursuant to our Certificate of Incorporation, we have
expressly elected not to be governed by Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”),
which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with a
stockholder owning 15% or more of our outstanding voting stock, unless the stockholder has held the stock for a period of at least
three years. Instead, the Certificate of Incorporation provides that, notwithstanding any other provisions of the DGCL or
Certificate of Incorporation, and subject to limited exceptions, we shall not engage in any business combination with any
interested stockholder for a period of three years following the time that such stockholder became an interested stockholder
unless: (i) the Board has approved, before the acquisition time, either the business combination or the transaction that resulted in
the person becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in the person becoming an
interested stockholder, the person owns at least 85% of the corporation’s voting stock at the time the transaction commenced
(excluding for such purposes any shares owned by directors who are officers and shares owned by employee stock plans in which
participants do not have the right to determine confidentially whether shares will be tendered in a tender or exchange offer) or
(iii) at or after the person or entity becomes an interested stockholder, the business combination is approved by two-thirds of the
total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships, and by a
majority of the independent directors (as defined in the Stockholders Agreement (as defined below)). This could delay or prevent
a change of control transaction or discourage a potential acquirer from pursuing such a transaction, which transaction might have
otherwise been of benefit to the other stockholders.
The choice of forum provision in our Certificate of Incorporation could limit our stockholders’ ability to obtain a favorable
judicial forum for disputes with us or our directors, officers or agents.
Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court
of Chancery of the State of Delaware (the “Court of Chancery”) is, to the fullest extent permitted by law, the sole and exclusive
forum for any (i) derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary
duty owed by any director, officer, other employee or stockholder of ours, to us or our stockholders, (iii) any action asserting a
claim arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of
the State of Delaware, or (iv) any action asserting a claim arising pursuant to any provision of our Certificate of Incorporation or
our By-laws or governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring
a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or agents, which may discourage
such lawsuits against us and our directors, officers and agents. Alternatively, if a court were to find the choice of forum provision
contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs
associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
The warrants are exercisable for common stock, which would increase the number of shares eligible for future resale in the
public market and result in dilution to stockholders.
The warrants to purchase an aggregate of 4,858,090 shares of our common stock are currently exercisable. Each such warrant
entitles the holder thereof to purchase one share of common stock at a price of $3.77 per whole share, subject to adjustment. To
the extent such warrants are exercised, additional shares of common stock will be issued, which will result in dilution to the then
existing holders of common stock and increase the number of shares eligible for resale in the public market. Sales of substantial
numbers of such shares in the public market could adversely affect the market price of our common stock.
We may issue debt and equity securities that are senior to our common stock as to distributions and in liquidation, which could
negatively affect the value of our common stock.
In the future, we may increase our capital resources by entering into debt or debt-like financing or issuing debt or equity
securities, which could include issuances of senior notes, subordinated notes or preferred stock. In the event of our liquidation, our
lenders and holders of our debt or preferred securities would receive a distribution of our available assets before distributions to
the holders of our common stock. Our decision to incur debt and issue other securities in future offerings will depend on market
conditions and other factors beyond our control. We cannot predict or estimate the amount, timing or nature of our future offerings
and debt financings. Future offerings could reduce the value of our common stock and dilute the interests of our stockholders.
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The warrants are speculative in nature and may not have any value.
The outstanding warrants to purchase shares of our common stock will have value only if price of our common stock exceeds
the exercise price of the warrants. There can be no assurance that the market price of our common stock will equal or exceed the
exercise price of the warrants. In the event that the price of our common stock does not exceed the exercise price of the warrants,
the warrants will not have any value. Holders of the warrants may exercise their right to acquire the shares of common stock and
pay an exercise price of $3.77 per share prior to four years from the date of issuance, after which date any unexercised warrants
will expire and have no further value.
Holders of the warrants will have no rights as a common stockholder until they acquire our common stock.
Until holders of the warrants acquire shares of our common stock upon exercise of the warrants, the holders will have no
rights with respect to the common stock underlying the warrants. Upon exercise of the warrants, the holder will be entitled to
exercise the rights of a common stockholder as to our common stock only as to matters for which the record date occurs after the
exercise.
The market price of shares of our common stock may experience volatility, which could cause holders of the warrants to incur
substantial losses.
Volatility in the trading price of our common stock could significantly affect the value or trading price, if any, of the warrants.
This could result in significant volatility in the value or trading price, if any, of the warrants. The warrants will have value only if
the price of our common stock exceeds the exercise price of the warrant. There can be no assurance that the market price of our
common stock will equal or exceed the exercise price of the warrants. In the event that the price of our common stock does not
exceed the exercise price of the warrants, or if the price of our common stock falls below the exercise price of the warrants after a
holder exercises its option, the warrants will not have any value and the holders of our warrants may incur substantial losses.
An active trading market for the warrants does not exist and may not develop.
The warrants have no established trading market and are not listed on any securities exchange, and we do not intend to list the
warrants on any securities exchange. We cannot assure you that an active trading market in the warrants will develop and, even if
it develops, we cannot assure you that it will last. In either case, the trading prices of the warrants could be adversely affected and
holders’ ability to transfer the warrants will be limited.
General Risk Factors
Litigation and government investigations could result in significant legal expenses and settlement payments, fines or damage
awards.
From time to time, we are subject to litigation regarding intellectual property rights or other claims and have indemnification
clauses in most of our customer contracts that may require us to indemnify customers against similar claims. We have also
previously been named as a defendant in securities class action and stockholder derivative lawsuits and have also been subject to
investigations by the government. For more information on currently pending litigation, please see “Part I, Item 3. Legal
Proceedings.” We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers
who are named as defendants in these lawsuits. Defending against litigation or government investigation may require significant
attention and resources of management. Regardless of the outcome, such litigation or investigation could result in significant legal
expenses. At this time, it is not possible to predict the outcome of the ongoing lawsuits, including whether or not any proceedings
will continue, and when or how these matters will be resolved or whether we will ultimately receive, and in what sum, amounts
previously awarded as a result of these proceedings. Regardless of whether we are ultimately successful in these lawsuits, we will
likely elect to continue to incur substantial legal fees in connection with these matters.
If the defenses we claim in our material litigation matters are ultimately unsuccessful, or if we are unable to achieve a
favorable settlement with an adverse party or a government agency, we could be liable for large settlement payments, damage
awards or fines that could have a material adverse effect on our business and results of operations.
35
Our stock price has been and may continue to be volatile.
Our common stock price has experienced substantial volatility in the past and may remain volatile in the future. Volatility in
our stock price can arise as a result of a number of the factors discussed in this “Risk Factors” section. During 2024, our closing
stock price ranged from a high of $4.30 per share to a low of $2.56 per share. The stock market has experienced significant price
and volume fluctuation with such volatility often unrelated to the operating performance of these companies. Actual or perceived
divergence between our actual results and our forward-looking guidance for such results, the published expectations of investment
analysts, or the expectations of the market generally, can cause significant swings in our stock price. Our stock price can also be
affected by market conditions in our industry as well as announcements that we, our competitors, vendors or our customers may
make. These may include announcements by us or our competitors of financial results or changes in estimated financial results,
technological innovations, the gain or loss of customers, or other strategic initiatives. These and other factors affecting global
economic conditions or financial markets may materially adversely affect the market price of our common stock in the future.
We are party to a stockholders’ agreement with certain stockholders which provides such stockholders with certain rights that
may differ from the rights of our other stockholders.
In connection with the ECI Acquisition, we entered into a First Amended and Restated Stockholders Agreement (the
“Stockholders Agreement”) with JPMC Heritage Parent LLC, Heritage PE (OEP) III, L.P. (together with JPMC, the “JPM
Stockholders”), and ECI Holding (Hungary) Kft (“Swarth”). The Stockholders Agreement sets forth certain arrangements and
contains various provisions relating to board size, board representation, standstill restrictions and transfer restrictions as further
described therein, including the right of the JPM Stockholders and Swarth to each designate up to three directors for nomination
to our nine-member board of directors, subject to the JPM Stockholders and Swarth maintaining certain levels of beneficial
ownership of our common stock. Therefore, the JPM Stockholders and Swarth will be able to exert significant influence over
matters requiring board approval, and our stockholders other than the JPM Stockholders and Swarth will have limited or no ability
to influence the outcome of certain key transactions. The interests of the parties to the Stockholders Agreement may differ from
those of other holders of our common stock.
Additionally, we are party to a Second Amended and Restated Registration Rights Agreement, dated as of August 12, 2022,
with the JPM Stockholders, Swarth and certain other stockholders. The JPM Stockholders and Swarth collectively own
approximately 45% of our common stock as of December 31, 2024, and may decide to sell their shares in bulk or from time to
time, except as provided under the Stockholders Agreement, which timing we cannot control. The sale of shares by these
stockholders may increase the volatility of our stock price, and our stock price could decline as a result.
Delaware law and our charter documents contain provisions that could discourage or prevent a potential takeover, even if such
a transaction would be beneficial to our stockholders.
Some provisions in our Certificate of Incorporation, our By-Laws, as well as provisions of Delaware law, may discourage,
delay or prevent a merger or acquisition that may be deemed undesirable by our Board of Directors but that a stockholder may
consider favorable. These include provisions, among others,
●
authorizing the Board of Directors to issue shares of preferred stock;
●
limiting the persons who may call special meetings of stockholders;
●
prohibiting stockholder actions by written consent;
●
permitting the Board of Directors to increase the size of the Board and to fill vacancies;
●
requiring a super-majority vote of our stockholders to amend our amended and restated by-laws and certain provisions of
our amended and restated certificate of incorporation; and
●
establishing advance notice requirements for nominations for election to the Board of Directors or for proposing matters
that can be acted on by stockholders at stockholder meetings.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General
Corporation law, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in
certain business combinations without approval of the holders of substantially all of our outstanding common stock.
36
These provisions of our Certificate of Incorporation, our By-Laws or Delaware law could have the effect of delaying or
deterring a change in control that some stockholders may consider beneficial and therefore could limit the opportunity for our
stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are
willing to pay for our common stock.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity Risk Strategy
We drive an aggressive cybersecurity roadmap aligned to internationally recognized cybersecurity frameworks and focused
on evolving global threats, new cybersecurity insurance requirements and continuous improvement of incident response. Our
cybersecurity program is aligned with the NIST Cybersecurity Framework and we also maintain ISO 27001 certification. Pursuant
to the framework, we utilize industry leading cyber solutions and techniques to prevent, detect, and respond to incidents using a
layered security model. We conduct an annual gap assessment against the NIST Cybersecurity Framework, the results of which
are used to establish goals and measure progress against our cybersecurity roadmap. Based on the gap assessment, for example,
we have taken a number of actions intended to reduce our cybersecurity risk, including enhancing our email and end-point
security programs, implementing a single dashboard for security monitoring and improving our web application filtering
programs. We are focused on the continuous improvement of key processes such as data security, asset management, access
control, vulnerability management, incident response, and third-party risk management. We also maintain business continuity
management certification to ensure the ongoing review of our business continuity, disaster recovery and incident management
processes, including as a result of a cybersecurity breach.
Our Information Technology (IT) team is responsible for our cybersecurity monitoring and leverages a 24x7 Managed
Detection & Response (MDR) third-party vendor to provide real-time cybersecurity threat monitoring and incident response, as
well as to conduct a quarterly risk assessment. Pursuant to our incident response policy, any identified cybersecurity threats are
immediately evaluated for the level of potential risk to us, with our response and remediation plan based on the potential severity
of the incident. This incident risk assessment is continuously updated as we become aware of any new information regarding an
identified incident. Pursuant to this plan, we will also utilize third-party experts to help identify, contain and remediate any
incident that could have a significant impact on us. In addition, we use third-party experts to assist us in performing annual
penetration testing and active breach assessment simulations to verify implementation of security tools, mitigating controls, and
our ability to respond to real-world scenarios pursuant to our incident response policy.
As part of our cybersecurity roadmap, we also assess third-party risks, and we perform third-party risk management to
identify and mitigate risks from third parties such as vendors, suppliers and other business partners associated with our use of
third-party service providers. Cybersecurity risks are evaluated when determining the selection and oversight of applicable third-
party service providers. In addition, we perform risk management during third-party cybersecurity compromise incidents to
identify and mitigate risks to us from third-party incidents.
We are highly focused on cybersecurity awareness and perform annual certification of our employees, execute ongoing
phishing campaigns, intervene with phish-prone individuals, publish monthly cybersecurity newsletters, and participate in
Cybersecurity Awareness Month, in October each year.
As of the date of this Annual Report, we are not aware of any risks from cybersecurity threats that have materially affected or
are reasonably likely to materially affect us, including our business strategy, results of operations and financial condition.
Cybersecurity Risk Governance
Our Board of Directors has overall responsibility for risk oversight, with its committees assisting the Board of Directors in
performing this function based on their respective areas of expertise. Our Board of Directors has delegated oversight of
cybersecurity risk to the Audit Committee and the Audit Committee reports on its activities and findings to the full Board of
Directors. Key cybersecurity topics are presented regularly to the Audit Committee. In addition, if any cybersecurity incident is
determined under our incident response policy to pose a risk in excess of an identified threshold (as set forth in the policy), our
37
Chief Legal Officer will promptly notify the Audit Committee regarding the incident. The notification to the Audit Committee
will include management’s determination regarding whether or not the incident is material to us.
On an operating level, our cybersecurity program is managed by a dedicated Chief Information Security Officer (CISO),
reporting to our Chief Information Officer (CIO), who together lead a geographically dispersed team comprised of our employees,
highly skilled contractors and other key functional third-party resources. Our CISO holds a Masters of MIS in Information
Security and prior to joining Ribbon, served as the Director of Information Security & Privacy at Ericsson for the Americas. Prior
to Ericsson, she held cybersecurity positions at Walgreens, Fortunes Brands Home & Security, and W.W. Granger. She is a
Certified Information Security Manager, has operated her own security firm, and has over 20 years of cybersecurity experience,
including her time as a US Navy Operations and Training Manager. Our CIO has held that position (or Head of IT) at Ribbon for
over seven years. He has over 25 years of experience in the IT area including over nine years overseeing IT cybersecurity,
cybersecurity roadmaps and IT general controls. During his career he has overseen initial ISO 27001 certifications, as well as the
implementation of over 30 cybersecurity platforms. The CIO and CISO are part of our cybersecurity council, which also includes
our CEO, CFO and other key leaders. The cybersecurity council meets monthly to review the cybersecurity metrics, new potential
threats, and progress against the cybersecurity roadmap. Key matters from these monthly council meetings are presented to the
Audit Committee.
Item 2. Properties
We continue to consolidate and reduce the number of facilities we operate worldwide. As of December 31, 2024, we
maintained the following principal facilities:
Location
Location
Lease expiration
Plano, Texas (a)
Corporate headquarters, sales, marketing, research and
development/engineering, customer support, general and
administrative
September 2032
Westford, Massachusetts (a)
Research and development, customer support, general and
administrative
August 2028
Ottawa, Canada (b)
Research and development/engineering, customer support,
general and administrative
December 2029
Petah Tikva, Israel (Main Campus) (c)(d)
Research and development/engineering, sales and marketing,
customer support, general and administrative
March 2025
Petah Tikva, Israel (Kshatot) (c)(d)
Service, research and development/engineering, supply chain
January 2025
Bangalore, India (Delta)
Research and development/engineering, customer support,
general and administrative
December 2034
Bangalore, India (Alpha)
Research and development/engineering, customer support,
general and administrative
December 2028
(a) A portion of this facility was not in use at December 31, 2024 and is being marketed for sublease.
(b) A portion of this facility was not in use at December 31, 2024 and some of the unused space is being subleased.
(c) A portion of this facility was not in use at December 31, 2024.
(d) We plan to consolidate and relocate our office space in Israel. A new lease was signed in 2023 for a building under
construction in Petah Tikva.
We also lease smaller spaces that are each under 50,000 square feet for our staff in various countries around the world in
sales, marketing, R&D/engineering, customer services and support, as well as for warehouse purposes. We believe our remaining
facilities will be adequate for our current needs and that suitable additional space will be available as needed.
Item 3. Legal Proceedings
We are subject to legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of
business. Our material legal proceedings are described in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial
Statements in Note 26, “Commitments and Contingencies” under the heading “Contingencies”.
38
The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a
reporting period for amounts above management’s expectations, our financial condition and operating results for that reporting
period could be materially adversely affected. We settled certain matters during the fourth quarter of 2024 that did not individually
or in the aggregate have a material impact on our financial condition or operating results.
Item 4. Mine Safety Disclosures
Not applicable.
39
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is traded on The Nasdaq Global Select Market under the symbol “RBBN.”
Holders
At February 24, 2025, there were approximately 340 holders of record of our common stock.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table summarizes repurchases of our common stock during the fourth quarter of 2024:
Approximate Dollar
Total Number of
Value of Shares
Shares Purchased
that May
as Part of
Yet be Purchased
Total Number
Average
Publicly
Under
of Shares
Price Paid
Announced Plans
the Plans
Period
Purchased (1)
per Share
or Programs
or Programs
October 1, 2024 to October 31, 2024
296,525
$
3.45
—
$
—
November 1, 2024 to November 30, 2024
11,792
$
3.93
—
$
—
December 1, 2024 to December 31, 2024
49,120
$
4.09
—
$
—
Total
357,437
$
3.56
—
$
—
(1) Upon vesting of restricted stock awards, certain of our employees may return to us a portion of the newly vested shares to
satisfy the tax withholding obligations that arise in connection with such vesting. During the fourth quarter of 2024, 357,437
shares of restricted stock were returned to us by employees to satisfy tax withholding obligations arising in connection with
vesting of restricted stock, which shares are included in this column.
Performance Graph
The following performance graph compares the cumulative total return to stockholders for our common stock for the period
from December 31, 2019 through December 31, 2024 with the cumulative total return over the same period on the Nasdaq
Composite Index, the Nasdaq Telecommunications Index and the Russell 2000. The comparison assumes an investment of $100
on December 31, 2019 in our common stock and in each of the indices and, in each case, assumes reinvestment of all dividends, if
any. The performance shown is not necessarily indicative of future performance.
This graph is not deemed to be “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and should not be deemed to be incorporated by reference into any of our prior or
subsequent filings under the Securities Act of 1933, as amended, or the Exchange Act.
40
December 31,
2019
2020
2021
2022
2023
2024
Ribbon Communications Inc.
$ 100.00
$ 211.61
$ 195.16
$
90.00
$
93.55
$ 134.19
Nasdaq Composite
$ 100.00
$ 144.92
$ 177.06
$ 119.45
$ 172.77
$ 223.87
Russell 2000
$ 100.00
$ 119.96
$ 137.74
$ 109.59
$ 128.14
$ 142.93
Nasdaq Telecommunications
$ 100.00
$ 110.08
$ 112.44
$
82.21
$
90.96
$ 103.21
Item 6. [Reserved]
41
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our financial statements and the related notes included in Item 8,
“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. This discussion contains forward-looking
statements that reflect our plans, estimates and beliefs and involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to,
those disclosed in Item 1A, “Risk Factors”, elsewhere in this Annual Report on Form 10-K, in other documents filed with the SEC
and otherwise publicly disclosed. Please refer to “Cautionary Note Regarding Forward-Looking Statements” above for
additional information. For a complete description of our business and other important information, please refer to Item 1 of
Part I of this Annual Report on Form 10-K.
Overview
We are a leading global provider of communications technology to service providers and enterprises. We provide a broad
range of software and high-performance hardware products, network solutions, and services that enable the secure delivery of data
and voice communications, and high-bandwidth networking and connectivity for residential consumers and for small, medium,
and large enterprises and industry verticals such as finance, education, government, utilities, and transportation. 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 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
Supplier Disruptions. Ongoing uncertainty in the global economy due to inflation, the wars in Israel and Ukraine, national
security concerns and other factors, continue to disrupt various manufacturing, commodity and financial markets, increase
volatility, and impede global supply chains. 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.
Continued uncertain global economic conditions may cause our customers to restrict spending or delay purchases for an
indeterminate period of time and consequently cause our revenues to decline. 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 and the
inflationary and high interest rate environment impacts our future business, financial position and results of operations will
depend on developments beyond our control.
The Ongoing Wars in Israel and Ukraine. The uncertainty resulting from the wars in Israel and Ukraine, and the threat for
expansion of one or both of these wars, could result in some of our customers delaying purchases from us. 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.
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. 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.
The U.S. and other European countries have imposed sanctions and trade restrictions against Russia in connection with the
war in Ukraine. These sanctions and restrictions currently prohibit our ability to sell hardware products in Russia or provide any
replacement parts in Russia. 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. We continue to see near-term impacts on our business due to inflation, including ongoing global
price pressures resulting in higher energy prices, component costs, freight premiums, and other operating costs above normal
rates. Although headline inflation in the United States and Europe appears to be easing, core inflation (excluding food and energy
prices) remains elevated and is a source of continued cost pressure on businesses and households. Interest rates remain high as
central banks in developed countries attempt to subdue inflation while government deficits and debt remain at
42
high levels in many global markets. However, since its peak in 2024, the Federal Reserve lowered the federal funds interest rate to
4.48% in December 2024, as a result of its view that inflation is cooling. Yet, the economic outlook remains uncertain, and the
implications of current and future tariffs, higher government deficits and debt, tighter monetary policy, and potentially higher
long-term interest rates may drive a higher cost of capital for our business.
Presentation
Unless otherwise noted, all financial amounts, excluding tabular information, in this Management’s Discussion and Analysis
of Financial Condition and Results of Operations (“MD&A”) are rounded to the nearest million dollar amount, and
all percentages, excluding tabular information, are rounded to the nearest percentage point.
Private Placement
On March 28, 2023, we issued 55,000 shares of newly designated Series A Preferred Stock (the “Preferred Stock”) to
investors in a private placement offering at a price of $970 per share, along with 4.9 million warrants (the “Warrants”) to purchase
shares of our common stock, par value $0.0001 per share (the “Private Placement”), at an exercise price of $3.77 per share. The
proceeds from the Private Placement were approximately $53.4 million, including approximately $10 million from existing
related party stockholders. On June 25, 2024, we redeemed the Preferred Stock with a portion of the proceeds from the
refinancing of the 2020 Credit Facility at a rate of 103% for a total of approximately $63.5 million. The Warrants remain
outstanding and without modification. For additional detail on the Private Placement, see Note 16 - Preferred Stock and Warrants
to our consolidated financial statements.
Operating Segments
Our CODM assesses our performance based on the performance of two separate organizations within Ribbon, the Cloud and
Edge operating segment (“Cloud and Edge”) and the IP Optical Networks operating segment (“IP Optical Networks”). For
additional details regarding our operating segments, see Note 18 - Operating Segment Information to our consolidated financial
statements.
Financial Overview
Financial Results
We reported income from operations of $16.9 million for 2024 and a loss from operations of $24.3 million for 2023. We
reported a net loss of $54.2 million for 2024 and $66.2 million for 2023.
Our revenue was $833.9 million in 2024, comprised of $505.2 million attributable to Cloud and Edge and $328.7 million
attributable to IP Optical Networks. Our revenue was $826.3 million in 2023, comprised of $477.6 million attributable to Cloud
and Edge and $348.7 million attributable to IP Optical Networks. Our gross profit was $439.5 million in 2024, comprised of
$329.2 million attributable to Cloud and Edge and $110.3 million attributable to IP Optical Networks. Our gross profit was $408.1
million in 2023, comprised of $300.0 million attributable to Cloud and Edge and $108.1 million attributable to IP Optical
Networks. Our gross margin was 52.7% in 2024 and 49.4% in 2023. In 2024, our Cloud and Edge gross margin was 65.2% and
our IP Optical Networks gross margin was 33.6%. In 2023, our Cloud and Edge gross margin was 62.8% and our IP Optical
Networks gross margin was 31.0%. The higher revenue in 2024 compared to 2023 is due to $27.6 million of higher Cloud and
Edge sales, primarily to U.S. service providers and Federal agencies, partially offset by $20.0 million of lower IP Optical
Networks sales led by lower sales into Eastern Europe and India, which were partially offset by growth in the U.S. rural market.
Our operating expenses were $422.6 million in 2024 and $432.4 million in 2023. Our 2024 operating expenses included
$26.0 million of amortization of acquired intangible assets, and $10.2 million of restructuring and related expense. Our 2023
operating expenses included $28.6 million of amortization of acquired intangible assets, $4.5 million of acquisition-, disposal- and
integration-related expense, and $16.2 million of restructuring and related expense.
We recorded stock-based compensation expense of $16.1 million in 2024 and $21.8 million in 2023. These amounts are
included as components of both Cost of revenue and Operating expenses in our consolidated statements of operations.
43
See “Results of Operations” in this MD&A for additional discussion of our results of operations for the years ended
December 31, 2024 and 2023.
Restructuring and Cost Reduction Initiatives
Our President and CEO approved workforce reductions in 2024 for certain of our operating locations to correspond with the
current sales levels in those areas. We recorded $2.1 million in 2024 related to these actions.
In February 2023, our Board of Directors approved a strategic restructuring program (the “2023 Restructuring Plan”) to
streamline our operations in order to support our investment in critical growth areas. The 2023 Restructuring Plan includes,
among other things, charges related to a workforce reduction. Any potential positions eliminated in countries outside the United
States are subject to local law and consultation requirements. In connection with the 2023 Restructuring Plan, we recorded
restructuring and related expense for severance related costs of $2.0 million and $9.9 million in 2024 and 2023, respectively. We
anticipate that we will record nominal future expense for severance in connection with the 2023 Restructuring Plan.
In February 2022, our Board of Directors approved a strategic restructuring program (the “2022 Restructuring Plan”) to
streamline our operations in order to support our investment in critical growth areas. The 2022 Restructuring Plan includes,
among other things, charges related to a consolidation of facilities and a workforce reduction. Any positions eliminated in
countries outside the United States are subject to local law and consultation requirements. In connection with the 2022
Restructuring Plan, we recorded restructuring and related expense of $6.1 million in 2024 for variable and other facilities-related
costs. In 2023, we recorded $6.3 million of expense for the 2022 Restructuring Plan, comprised of $5.3 million for variable and
other facilities-related costs, and $1.0 million for accelerated amortization of lease assets no longer being used with no ability or
intent to sublease. In 2022, we recorded $10.2 million of expense for the 2022 Restructuring Plan, comprised of $3.3 million for
variable and other facilities-related costs, $1.6 million for accelerated amortization of lease assets no longer being used with no
ability or intent to sublease, and $5.3 million for severance and related costs. We anticipate that we will expense $5 million in
2025 related to the 2022 Restructuring Plan.
For facilities that are part of a restructuring plan, and for which we have no intent or ability to enter into a sublease, we
recognize accelerated rent amortization over the period from the date that we commence the plan to fully or partially vacate a
facility through the final vacate date. We did not record accelerated rent amortization in 2024. We recorded $1.0 million and $1.6
million for accelerated rent amortization in the years ended December 31, 2023 and 2022, respectively. We continue to evaluate
our properties included in our restructuring plans for accelerated amortization and/or right-of-use asset impairment. We may incur
additional expense in the future if we are unable to sublease other locations included in these initiatives.
Critical Accounting Policies and Estimates
This MD&A is based upon our consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenue 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 consider the following 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,
debentures and warrants received as sale consideration, warranty accruals, loss contingencies and reserves, stock-based
compensation, the Preferred Stock and Warrants, business combinations, goodwill and intangible assets, accounting for leases,
and accounting for income taxes. If actual results differ significantly from management’s estimates and projections, there could be
a material effect on our consolidated financial statements.
Revenue Recognition. We derive revenue from two primary sources: products and services. Product revenue is generated
from sales of our stand-alone software, as well as our proprietary hardware and software that function together to deliver the
products’ essential functionality. Both software and hardware are also sold on a standalone basis. Services include customer
support (software updates and technical support), consulting, design services, installation services and training. A typical contract
includes both product and services. Generally, contracts with customers contain multiple performance obligations. For these
contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to
the separate performance obligations on a relative standalone selling price (“SSP”) basis.
44
The software licenses typically provide a perpetual right to use our software. However, we also sell term-based software
licenses that expire and Software-as-as-Service (“SaaS”)-based software, which are referred to as subscription arrangements. We
do not customize our software nor are installation services required, as the customer has a right to utilize internal resources or a
third-party service company. The software and hardware are delivered before related services are provided and are functional
without professional services or customer support. We have concluded that our software licenses are functional intellectual
property that are distinct, as the user can benefit from the software on its own. The product revenue related to our perpetual
licenses is typically recognized when the software is made available for download, as this is the point that the user of the software
can direct the use of and obtain substantially all of the remaining benefits from the functional intellectual property. The product
revenue related to our term-based software licenses is recognized over the license period. We begin to recognize revenue related to
the renewal of term-based software licenses at the start of the renewal period. Revenue related to our SaaS-based software is
recognized ratably over the service period as the customer does not take possession of the software or have the ability to take
possession of the software.
Service revenue includes revenue from customer support and other professional services. We offer warranties on our
products. Certain of our warranties are considered to be assurance-type in nature, ensuring that the product is functioning as
intended. Assurance-type warranties do not represent separate performance obligations. We also sell separately-priced
maintenance service contracts which qualify as service-type warranties and represent separate performance obligations. We do not
allow and have no history of accepting product returns.
Customer support includes software updates on a when-and-if-available basis, telephone support, integrated web-based
support and bug fixes or patches. We sell our customer support contracts at a percentage of list or net product price related to the
support. Customer support revenue is recognized ratably over the term of the customer support agreement, which is typically
one year.
Our professional services include consulting, technical support, resident engineer services, design services and installation
services. Because control transfers over time, revenue is recognized based on progress toward completion of the performance
obligation. The method to measure progress toward completion requires judgment and is based on the nature of the products or
services to be provided.
We generally use the input method to measure progress for our contracts and to recognize revenue because we believe this
method, in general, best depicts the transfer of assets to the customer. The input method measures costs we have incurred in the
period for the contracts. In some infrequent instances, we may engage a third-party to perform services for us and in those cases,
we use the output method to recognize revenue because it best depicts the transfer of assets to the customer. Under the output
method, there is a cost-to-cost measure of progress. The progress toward completion is measured based on the ratio of costs
incurred to date to the total estimated costs at completion of the performance obligation. When the measure of progress is based
upon expended labor, progress toward completion is measured as the ratio of labor time expended to date versus the total
estimated labor time required to complete the performance obligation. Revenue is recorded proportionally as costs are incurred or
as labor is expended. Costs to fulfill these obligations can include internal labor as well as subcontractor costs.
We offer customer training courses, for which the related revenue is typically recognized over the period the training services
are performed, typically over one to five days.
Our contracts with customers often include promises to transfer multiple products and services to the customer. Determining
whether products and services are considered distinct performance obligations that should be accounted for separately versus
together may require significant judgment.
Judgment is required to determine the SSP for each distinct performance obligation. SSPs are typically estimated using
observable historical transactions of our products and services sold in comparable circumstances to similar customers, including
when products and services are sold on a standalone basis. We use a range of amounts to estimate SSP when we sell each of the
products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the
various products and services.
In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine
the SSP using information that may include market conditions, current pricing practices, product specific business objectives, the
cost to provide the performance obligation, and other observable inputs. We typically have more than one SSP
45
for individual products and services due to the stratification of those products and services by customers and circumstances. In
these instances, we may use information such as the size of the customer and geographic region in determining the SSP. As our
go-to-market strategies evolve, we may modify our pricing practices in the future, which could result in changes to SSP. However,
historically, we have not had any material changes to our SSP, nor do we expect any material changes to our SSP estimates in the
future.
Valuation of Inventory. We review inventory for both potential obsolescence and potential loss of value periodically. In this
review, we make assumptions about the future demand for and market value of the inventory and, based on these assumptions,
estimate the amount of any excess, obsolete or slow-moving inventory.
We write down our inventories if they are considered to be obsolete or at levels in excess of forecasted demand. In these
cases, inventory is written down to estimated realizable value based on historical usage and expected demand. Inherent in our
estimates of market value in determining inventory valuation are estimates related to economic trends, future demand for our
products and technical obsolescence of our products. If future demand or market conditions are less favorable than our
projections, additional inventory write-downs could be required and would be reflected in the cost of revenue in the period the
revision is made. To date, we have not been required to revise any of our assumptions or estimates used in determining our
inventory valuations.
We write down our evaluation equipment at the time of shipment to our customers, as it is not probable that the inventory
value will be realizable.
Investments. We received debentures (the “Debentures”) and warrants (the “AVCT Warrants”) as sale consideration in
connection with our December 1, 2020 sale of the Kandy Communications Business to American Virtual Cloud
Technologies, Inc. (“AVCT”) (the “Kandy Sale”). On September 8, 2021 (the “Debenture Conversion Date”), the Debentures
were converted into shares of AVCT common stock (the “Debenture Shares”). In connection with the conversion of the
Debentures to the Debenture Shares, we elected to use the fair value option to account for its equity investment in AVCT as
permitted under Accounting Standards Codification (“ASC”) 825, Financial Instruments (“ASC 825”), which then refers to ASC
820, Fair Value Measurement (“ASC 820”) to provide the fair value framework for valuing such investments. In accordance with
ASC 820, we recorded the investment in AVCT at fair value, with changes in fair value recorded as a component of Other
(expense) income, net, in the consolidated statements of operations.
On August 29, 2022, we and AVCT entered into a settlement agreement which provided for, amongst other things, the
cancellation of our investment in the Debenture Shares and the AVCT Warrants. Pursuant to the settlement agreement, we also
entered into a Wind Down Agreement with AVCT, pursuant to which a Reseller Agreement between the parties, as previously
amended, was terminated, and we were granted a non-exclusive perpetual license to use and modify certain intellectual property
owned by AVCT comprising WebRTC gateway technology that is integrated with Ribbon’s SBCs and Application Servers. The
perpetual license granted by AVCT is classified as Intangible assets, net in our consolidated balance sheets.
Warranty Accruals. We record warranty liabilities for estimated costs of fulfilling our obligations under standard limited
hardware and software warranties at the time of sale. The liability for standard warranties is included in Accrued expenses and
other and Other long-term liabilities in our consolidated balance sheet. The specific warranty terms and conditions vary depending
upon the country in which we do business, but generally include material costs, technical support, labor and associated overhead
over a period ranging from one to three years. We provide for the estimated costs to fulfill customer warranty obligations for
certain of our products upon recognition of the related revenue. Warranty is included as a component of Cost of revenue in our
consolidated statements of operations, and is determined based on actual warranty cost experience, estimates of component failure
rates and our management’s industry experience. Our sales contracts do not permit the right of return of the product by the
customer after the product has been accepted.
Loss Contingencies and Reserves. We are subject to ongoing business risks arising in the ordinary course of business that
affect the estimation process of the carrying value of assets, the recording of liabilities and the possibility of various loss
contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been
impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to determine
whether such amounts should be adjusted and record changes in estimates in the period they become known. We are subject to
various legal claims. We reserve for legal contingencies and legal fees when the amounts are probable and reasonably estimable.
46
Stock-Based Compensation. Our stock-based compensation cost is measured at the grant date based on the fair value of the
award and is recognized as expense over the requisite service period, which is generally the vesting period.
We use the Black-Scholes valuation model for estimating the fair value on the date of grant of employee stock options.
Determining the fair value of stock option awards at the grant date requires judgment regarding certain valuation assumptions,
including the volatility of our stock price, expected term of the option, risk-free interest rate and expected dividends. Changes in
such assumptions and estimates could result in different fair values and could therefore impact our earnings. Such changes,
however, would not impact our cash flows. The fair value of restricted stock awards, restricted stock units and performance-based
awards is based upon our stock price on the grant date.
We grant performance-based stock units, some of which include a market condition, to certain of our executives and certain
other employees. We use a Monte Carlo simulation approach to model future stock price movements based upon the risk-free rate
of return, the volatility of each entity, and the pair-wise covariance between each entity. These results are then used to calculate
the grant date fair values. We are required to record expense through the respective final vesting dates regardless of the number of
shares that are ultimately earned. Once the grant date criteria have been met for a fiscal year performance period, we record stock-
based compensation expense based on our assessment of the probability that the respective performance condition will be
achieved and the level, if any, of such achievement. The Compensation Committee determines the number of shares earned, if
any, after our financial results for each fiscal year performance period are finalized. Upon determination by the Compensation
Committee of the number of shares that will be received upon vesting, such number of shares becomes fixed and the unamortized
expense is recorded through the remainder of the service period, at which time any performance-based stock units earned will vest
pending each employee’s continuing employment with us through that date.
The amount of stock-based compensation expense recorded in any period for unvested awards requires estimates of the
amount of stock-based awards that are expected to be forfeited prior to vesting, as well as assumptions regarding the probability
that performance-based stock awards without market conditions will be earned.
Preferred Stock and Warrants. We accounted for the Preferred Stock until it was redeemed on June 25, 2024 and we
continue to account for the Warrants as liability-classified instruments based on an assessment of their specific terms in
accordance with ASC Topic 480, Distinguishing Liabilities from Equity. The fair value option was elected for the Preferred Stock,
as we considered fair value to best reflect its expected future economic value. These liabilities are remeasured to fair value at each
reporting date using the same valuation methodology applied upon issuance using current input assumptions. The Preferred Stock
was considered to be debt for our Consolidated Net Leverage Ratio covenant calculation required under our 2020 Credit Facility.
Business Combinations. We allocate the purchase price of acquired companies to identifiable assets acquired and liabilities
assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration
transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed and represents the
expected future economic benefits arising from other assets acquired in the business combination that are not individually
identified and separately recognized. Significant management judgments and assumptions are required in determining the fair
value of assets acquired and liabilities assumed, particularly acquired intangible assets which are principally based upon estimates
of the future performance and cash flows expected from the acquired business and applied discount rates. While we use our best
estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities
assumed at a business combination date, our estimates and assumptions are inherently uncertain and subject to refinement. If
different assumptions are used, it could materially impact the purchase price allocation and our financial position and results of
operations. Any adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period are
included in operating results in the period in which the adjustments are determined. Intangible assets typically are comprised of
in-process research and development, developed technology, customer relationships, trade names and internal use software.
Goodwill and Intangible Assets. Goodwill is not amortized, but instead is tested for impairment annually, or more frequently
if indicators of potential impairment exist. Intangible assets with estimated lives and other long-lived assets are reviewed for
impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of intangible assets with estimated lives and other long-lived assets is measured by comparing the carrying amount
of the asset to future net undiscounted pretax cash flows expected to be generated by the asset. If these comparisons indicate that
an asset is not recoverable, we will recognize an impairment loss for the amount by which the carrying value of the asset exceeds
the related estimated fair value.
47
We perform a fair value analysis for each reporting unit using both an income and market approach, which encompasses a
discounted cash flow analysis and a guideline public company analysis using selected multiples. We assess each valuation
methodology based upon the relevance and availability of the data at the time the valuation is performed and the methodologies
are weighted appropriately. Any impairment charges are reported separately in our consolidated statements of operations.
Judgment is required in determining whether an event has occurred that may impair the value of goodwill, identifiable
intangible assets or other long-lived assets. Factors that could indicate an impairment may exist include significant
underperformance relative to plan or long-term projections, strategic changes in business strategy, significant negative industry or
economic trends, a significant change in circumstances relative to a large customer, a significant decline in our stock price for a
sustained period and a decline in our market capitalization to below net book value. We must make assumptions about future
control premiums, market comparables, cash flows, operating plans, discount rates and other factors to determine recoverability.
Our annual testing for impairment of goodwill is completed as of October 1. For the purpose of testing goodwill for
impairment, all goodwill is assigned to a reporting unit, which may be either an operating segment or a portion of an operating
segment. Our reporting units are our two operating segments, Cloud and Edge and IP Optical Networks. For our annual
impairment testing, we perform a fair value analysis using both an Income and Market approach, which encompasses a discounted
cash flow analysis and a guideline public company analysis using selected multiples. We assess each valuation methodology
based upon the relevance and availability of the data at the time the valuation is performed and the methodologies are weighted
appropriately.
Based upon the completion of our 2024, 2023, and 2022 annual tests for goodwill impairment, we determined that there was
no impairment of goodwill for either of our reporting units.
Leases. We account for our leases in accordance with Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”).
We have operating leases for corporate offices, and research and development facilities and historically had finance leases for
certain equipment. Operating leases are reported separately in our consolidated balance sheets. Assets acquired under finance
leases, if any, are included in Property and equipment, net, in the consolidated balance sheets.
We determine if an arrangement is a lease at inception. A contract is determined to contain a lease component if the
arrangement provides us with a right to control the use of an identified asset. Lease agreements may include lease and non-lease
components. In such instances for all classes of underlying assets, we do not separate lease and non-lease components but rather,
account for the entire arrangement under leasing guidance. Leases with an initial term of 12 months or less are not recorded on the
balance sheet and lease expense for these leases is recognized on a straight-line basis over the lease term.
For operating leases, lease expense for minimum fixed lease payments is recognized on a straight-line basis over the lease
term. The expense for finance leases includes both interest and amortization expense components, with the interest component
calculated based on the effective interest method and the amortization component calculated based on straight-line amortization of
the right-of-use asset over the lease term. Lease contracts may contain variable lease costs, such as common area maintenance,
utilities and tax reimbursements that vary over the term of the contract. Variable lease costs are not included in minimum fixed
lease payments and as a result, are excluded from the measurement of the right-of-use assets and lease liabilities. We expense all
variable lease costs as incurred.
Accounting for Income Taxes. Our provision for income taxes is comprised of both current taxes and deferred taxes. The
current income tax provision is generally calculated as the estimated taxes payable or refundable on tax returns to be filed for
the year ended December 31, 2024. We provide for deferred income taxes based on temporary differences between financial and
taxable income, net operating loss carryforwards, tax credit carryforwards and any required valuation allowances.
We assess the recoverability of all deferred tax assets recorded on the balance sheet and provide any necessary valuation
allowances as required. In evaluating our ability to realize our deferred tax assets, we consider all available positive and negative
evidence, including our past operating results, the existence of cumulative income in the most recent years, changes in our
business operations, and our forecast of future taxable income. In determining future taxable income, we make assumptions,
including the amount of state, federal and international pre-tax income, the reversal of temporary differences and the
implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the
forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our underlying
businesses. Such assessment is completed on a jurisdiction-by-jurisdiction basis.
48
We have provided for income taxes on the undistributed earnings of our non-U.S. subsidiaries as of December 31, 2024,
excluding Ireland and Israel, which are indefinitely reinvested. Accordingly, we are required to recognize deferred taxes for 2024
on the outside basis differences related to the foreign subsidiaries, the largest of these differences being undistributed earnings.
We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years
that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the
initial determination of the position’s sustainability and is measured at the largest amount of benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be
reassessed, and we determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of
recognized tax benefit is still appropriate. The recognition and measurement of tax benefits require significant judgment.
Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.
Results of Operations
Years Ended December 31, 2024 and 2023
Revenue. Revenue for the years ended December 31, 2024 and 2023 was as follows (in thousands, except percentages):
Year ended
Increase
December 31,
from prior year
2024
2023
$
%
Product
$ 447,229
$ 445,150
$
2,079
0.5 %
Service
386,652
381,189
5,463
1.4 %
Total revenue
$ 833,881
$ 826,339
$
7,542
0.9 %
Segment revenue for the years ended December 31, 2024 and 2023 was as follows (in thousands):
Year ended
Year ended
December 31, 2024
December 31, 2023
Cloud and
IP Optical
Cloud and
IP Optical
Edge
Networks
Total
Edge
Networks
Total
Product
$ 211,001
236,228
$ 447,229
$ 184,729
$ 260,421
$ 445,150
Service
294,156
92,496
386,652
292,918
88,271
381,189
Total revenue
$ 505,157
$ 328,724
$ 833,881
$ 477,647
$ 348,692
$ 826,339
The increase in our product revenue in 2024 compared to 2023 was primarily the result of $26 million of higher sales of our
Cloud and Edge products, partially offset by $24 million of lower sales of our IP Optical products. The increase in revenue from
the sale of Cloud and Edge products was primarily attributable to sales into U.S. service providers, U.S. Federal agencies and
global enterprise customers. The decrease in revenue from the sale of IP Optical products was primarily attributable to lower sales
in Eastern Europe and India.
Revenue from sales to enterprise customers was 39% and 32% of our product revenue in 2024 and 2023, respectively. These
sales were made through both our direct sales team and indirect sales channel partners. The increase in enterprise sales reflects
stronger sales of our products to customers in Federal agencies.
Revenue from indirect sales through our channel partner program was 38% and 35% of our product revenue in 2024 and
2023, respectively. The increase in channel sales in 2024 reflects stronger IP Optical Networks deployments through systems
integrators as well as sell-thru service provider channel partners in Eastern Europe.
The 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”).
49
Service revenue for the years ended December 31, 2024 and 2023 was comprised of the following (in thousands,
except percentages):
Year ended
Increase/(decrease)
December 31,
from prior year
2024
2023
$
%
Maintenance
$ 274,582
$ 279,652
$ (5,070)
(1.8)%
Professional services
112,070
101,537
10,533
10.4 %
Total service revenue
$ 386,652
$ 381,189
$
5,463
1.4 %
Segment service revenue for the years ended December 31, 2024 and 2023 was comprised of the following (in thousands):
Year ended
Year ended
December 31, 2024
December 31, 2023
Cloud and
IP Optical
Cloud and
IP Optical
Edge
Networks
Total
Edge
Networks
Total
Maintenance
$ 212,988
$ 61,594
$ 274,582
$ 219,939
$ 59,713
$ 279,652
Professional services
81,168
30,902
112,070
72,979
28,558
101,537
Total service revenue
$ 294,156
$ 92,496
$ 386,652
$ 292,918
$ 88,271
$ 381,189
Total service revenue was $5 million higher in 2024 compared to 2023 due to increased revenue in both of our segments.
Total service revenue increased by $4 million and $1 million in our IP Optical Networks and Cloud and Edge segments,
respectively.
Maintenance revenue was $5 million lower in 2024 compared to 2023 primarily due to modestly lower renewal rates from
decommissioning some older legacy equipment with several Cloud and Edge customers.
Professional services revenue was $10 million higher in 2024 compared to 2023, with increases of $8 million and $2 million
in our Cloud and Edge and IP Optical Networks segments, respectively. The higher revenue in Cloud and Edge is due to the
growth in services to U.S. service providers, primarily for voice modernization projects with Verizon and U.S. Federal agencies.
Our IP Optical Networks segment experienced growth in sales of services primarily in the North America and APAC regions.
The following customer contributed 10% or more of our revenue in the years ended December 31, 2024 and 2023:
Year ended
December 31,
December 31,
Customer
2024
2023
Verizon Communications Inc.
14 %
11 %
50
Revenue earned from customers domiciled outside the United States was 53% and 58% of total revenue in 2024 and 2023,
respectively. U.S. revenue is increasing due to higher sales into the U.S. market from both the Cloud and Edge and IP Optical
Networks segments. Due to the timing of project completions, we expect that the domestic and international components as
a percentage of our revenue may fluctuate from quarter to quarter and year to year. Our total revenue for the years ended
December 31, 2024 and 2023 was disaggregated geographically as follows (in thousands):
Service
Service
revenue
Product
revenue
(professional
Year ended December 31, 2024
revenue
(maintenance)
services)
Total revenue
United States
$ 201,340
$ 133,182
$ 61,462
$ 395,984
Europe, Middle East and Africa
129,824
71,856
32,999
234,679
Asia Pacific
100,766
39,863
10,941
151,570
Other
15,299
29,681
6,668
51,648
$ 447,229
$ 274,582
$ 112,070
$ 833,881
Service
Service
revenue
Product
revenue
(professional
Year ended December 31, 2023
revenue
(maintenance)
services)
Total revenue
United States
$ 161,945
$ 133,737
$ 48,733
$ 344,415
Europe, Middle East and Africa
151,938
75,478
34,485
261,901
Asia Pacific
115,923
39,891
11,269
167,083
Other
15,344
30,546
7,050
52,940
$ 445,150
$ 279,652
$ 101,537
$ 826,339
Our deferred product revenue was $14 million at December 31, 2024 and $17 million at December 31, 2023. Our deferred
service revenue was $126 million at December 31, 2024 and $116 million at December 31, 2023. Our deferred revenue balance
may fluctuate as a result of the timing of revenue recognition, customer payments, maintenance contract renewals, contractual
billing rights and maintenance revenue deferrals included in multiple element arrangements.
We expect that our total revenue in 2025 will increase compared to our revenue in 2024 due to the growth in the Cloud &
Edge segment, particularly with the increased purchases from Verizon as part of a voice modernization project, as well as growth
in IP Optical segment sales. From a regional perspective, we anticipate continued IP Optical revenue growth in 2025 from North
America, and EMEA, offset by lower revenue in Eastern Europe due to additional trade restrictions. In the Cloud & Edge
segment, we expect continued revenue growth from enterprise customers, as well as higher U.S. service provider spending.
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 years ended
December 31, 2024 and 2023 were as follows (in thousands, except percentages):
Year ended
Increase/(decrease)
December 31,
from prior year
2024
2023
$
%
Cost of revenue:
Product
$ 228,527
$ 250,609
$ (22,082)
(8.8)%
Service
140,949
139,357
1,592
1.1 %
Amortization of acquired technology
24,893
28,290
(3,397)
(12.0)%
Total cost of revenue
$ 394,369
$ 418,256
$ (23,887)
(5.7)%
Gross profit
$ 439,512
$ 408,083
$
31,429
7.7 %
Gross margin
52.7 %
49.4 %
51
Our segment cost of revenue, gross profit and gross margin for the years ended December 31, 2024 and 2023 were as follows
(in thousands, except percentages):
Year ended
Year ended
December 31, 2024
December 31, 2023
Cloud and
IP Optical
Cloud and
IP Optical
Edge
Networks
Total
Edge
Networks
Total
Product
$ 73,684
$ 154,843
$ 228,527
$ 72,081
$ 178,528
$ 250,609
Service
94,579
46,370
140,949
92,644
46,713
139,357
Amortization of acquired technology
7,677
17,216
24,893
12,904
15,386
28,290
Total cost of revenue
$ 175,940
$ 218,429
$ 394,369
$ 177,629
$ 240,627
$ 418,256
Gross profit
$ 329,217
$ 110,295
$ 439,512
$ 300,018
$ 108,065
$ 408,083
Gross margin
65.2 %
33.6 %
52.7 %
62.8 %
31 %
49.4 %
Our gross margin was 3.3 percentage points higher in 2024 compared to 2023. This increase was the result of higher margins
in both of our segments. The higher margin in our IP Optical segment was due to favorable regional mix, partially offset by lower
sales volume and higher royalties. The higher margin in our Cloud and Edge segment was primarily attributable to favorable
product mix and lower costs associated with an increase in software sales.
We expect our overall consolidated gross margin to decrease slightly in 2025 due to higher expected sales in our IP Optical
segment, which has lower margins due to the higher hardware content in its products, as well as the higher mix of professional
services revenue in our Cloud and Edge segment which generates lower gross margins than product sales.
Research and Development. 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 years ended December 31, 2024 and 2023 were as follows (in thousands, except percentages):
Year ended
Decrease
December 31,
from prior year
2024
2023
$
%
$
179,941
$
190,660
$
(10,719)
(5.6)%
The decrease in our research and development expenses in 2024 compared to 2023 was primarily attributable to
approximately $9 million of lower expenses in our IP Optical Networks segment and approximately $2 million of lower expenses
in our Cloud and Edge segment. The reduced expenses are a combination of lower employee headcount and outside
subcontractors resulting from the cost savings implemented in the 2023 Restructuring Plan.
Our IP Optical Networks R&D investment is focused on significantly expanding our portfolio of IP Routing solutions, adding
additional features and capabilities to our Optical Transport portfolio, and supporting features in our next generation SDN
management and orchestration platform.
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.
52
Sales and Marketing. 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 years ended December 31, 2024 and 2023 were as follows (in thousands,
except percentages):
Year ended
Increase
December 31,
from prior year
2024
2023
$
%
$
137,830
$
137,460
$
370
0.3 %
Sales and marketing expenses in 2024 were relatively flat compared to 2023.
We believe our sales and marketing expenses will be relatively flat in 2025 as compared to 2024.
General and Administrative. 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 years ended December 31, 2024 and 2023 were as follows (in thousands, except percentages):
Year ended
Increase
December 31,
from prior year
2024
2023
$
%
$
68,740
$
54,962
$
13,778
25.1 %
The increase in general and administrative expenses in 2024 compared to 2023 was primarily attributable to a $5.0 million
legal settlement and associated legal fees related to certain specific legal matters, as well as increased employee incentive costs.
We believe that our general and administrative expenses in 2025 will decrease compared to our 2024 levels, primarily due to
lower litigation expenses, partially offset by higher employee costs related to annual merit increases.
Amortization of Acquired Intangible Assets included in Operating expenses. Amortization of acquired intangible assets
included in Operating expenses (“Opex Amortization”) for the years ended December 31, 2024 and 2023 was as follows (in
thousands, except percentages):
Year ended
Decrease
December 31,
from prior year
2024
2023
$
%
$
25,969
$
28,601
$
(2,632)
(9.2)%
Opex Amortization was lower in 2024 compared to 2023 due to our method of amortization. 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 that we would otherwise not have incurred. Acquisition- and disposal-related expenses include
professional and services fees, such as legal, audit, consulting, paying agent and other fees. Integration-related expenses represent
incremental costs related to combining our systems and processes with those of acquired businesses, such as third-party consulting
and other third-party services.
We recorded no such expenses in 2024 compared to $4.5 million recorded in 2023. These costs were related to integration
following the Company’s acquisition of ECI and included license fees for systems in the process of being retired.
Restructuring and Related. We have been committed to streamlining operations and reducing operating costs by closing and
consolidating certain facilities and reducing our worldwide workforce. Please see the additional discussion of our restructuring
initiatives in the “Restructuring and Cost Reduction Initiatives” section of the Overview of this MD&A.
We recorded restructuring and related expense of $10.2 million in 2024, comprised of $4.1 of severance and related costs, and
$6.1 million for variable and other facilities-related costs. In 2023, we recorded restructuring and related expense of $16.2
53
million, comprised of $9.9 million for severance and related costs, and $6.3 million for variable and other facilities-related costs,
including $1.0 million of net expense for the accelerated amortization of lease assets. 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 years ended December 31, 2024 and 2023 were as follows
(in millions, except percentages):
Year ended
Increase/(decrease)
December 31,
from prior year
2024
2023
$
%
Interest income
$
328
$
337
$
(9)
(2.7)%
Interest expense
(34,149)
(27,657)
$
6,492
23.5 %
Interest expense, net
$ (33,821)
$ (27,320)
$
6,501
23.8 %
We had nominal interest income in both 2024 and 2023. Our interest expense in 2024 primarily represents interest,
amortization of debt issuance costs and original issue discount, and the amortization of gains in accumulated other comprehensive
(loss) income from the sales of our interest rate swap. Interest expense in 2024 was higher than 2023 primarily due to higher
margins under our 2024 Term Loan compared to our 2020 Term Loan, and higher interest in 2024 due to our interest rate swap no
longer being in place, partially offset by write-offs related to the refinancing of the 2020 Credit Facility with a portion of the
proceeds from the 2024 Credit Facility on June 21, 2024. The write-offs related to the refinancing consisted of the remaining
unamortized gains in accumulated other comprehensive (loss) income from the sales of our interest rate swap totaling $4.9
million, partially offset by the write-off of debt issuance costs from the 2020 Credit Facility totaling $2.0 million. Our interest
expense in 2023 benefited from our interest rate swap that fixed the variable rate component of our interest rate at 0.904% and
was sold in March 2023. See Note 15 to our consolidated financial statements for a discussion of the sale of our interest rate swap.
Other (Expense) Income, Net. Our other expense, net in 2024 was $29.1 million and was primarily comprised of $9.1 of fair
value adjustments to the Preferred Stock and Warrants, $2.7 of accrued dividends and the $1.8 million call premium on our
Preferred Stock that we redeemed on June 25, 2024, the $6.3 million write-off of an expired tax indemnity asset associated with
the ECI Acquisition, and foreign currency exchange losses of $5.7 million. We recorded other expense, net, aggregating $3.8
million in 2023, primarily comprised of $5.3 million fair value adjustments for our Preferred Stock and Warrants, including
dividends on the Preferred Stock, and $3.5 million of costs incurred in the Private Placement, partially offset by the gain of $7.3
million recognized from Accumulated other comprehensive income in connection with the sale of our interest rate swap.
Income Taxes. We recorded an income tax provision of $8.2 million and $10.8 million in 2024 and 2023, respectively.
During 2024 and 2023, we performed an analysis to determine if, based on all available evidence, we considered it more
likely than not that some portion or all of the recorded deferred tax assets will not be realized in a future period. As a result of our
evaluations, in 2024, for the U.S. deferred tax assets, we concluded that deferred tax assets are generally realizable, with the
exception of certain federal and state net operating loss carryforwards, as well as certain tax credits, that are not anticipated to be
utilized. Accordingly, we have maintained a valuation allowance on our U.S. deferred tax assets of $18.6 million. As a result of
our evaluations for Israel, we maintained a full valuation allowance against our net deferred tax assets in Israel.
In October 2021, the Organization for Economic Co-operation and Development (the "OECD") announced the OECD/G20
Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges arising
from digitalization of the economy. In December 2021, the OECD released Pillar Two Model Rules defining the global minimum
tax rules, which contemplate a minimum tax rate of 15% (“Pillar Two”). In addition, the OECD issued administrative guidance
providing transition and safe harbor rules that could delay the impact of the minimum tax directive. 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 year ended December 31,
2024. 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.
54
Years Ended December 31, 2023 and 2022
For a comparison of our results of operations for the fiscal years ended December 31, 2023 and 2022, see “Part II, Item 7.
MD&A” of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on
our financial position, changes in financial position, revenue or expenses, results of operations, liquidity, capital expenditures or
capital resources.
Liquidity and Capital Resources
Our consolidated statements of cash flows are summarized as follows (in thousands):
Year ended
December 31,
December 31,
2024
2023
Change
Net loss
$
(54,235)
$
(66,206)
$
11,971
Adjustments to reconcile net loss to cash flows provided by operating activities:
72,909
79,209
(6,300)
Changes in operating assets and liabilities
31,566
4,084
27,482
Net cash provided by operating activities
$
50,240
$
17,087
$
33,153
Net cash used in investing activities
$
(22,868)
$
(9,481)
$
(13,387)
Net cash provided by (used in) financing activities
$
37,706
$
(47,859)
$
85,565
We had cash, cash equivalents, and restricted cash aggregating $90 million and $27 million at December 31, 2024 and 2023,
respectively. We had cash held by our non-U.S. subsidiaries aggregating approximately $18 million and $16 million at
December 31, 2024 and 2023, respectively. If we elect to repatriate all of the funds held by our non-U.S. subsidiaries as of
December 31, 2024, 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 “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 are 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.
55
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 14 to our consolidated financial statements.
On March 24, 2023, we entered into the Sixth Amendment to the 2020 Credit Facility (the “Sixth Amendment”) effective
March 30, 2023. The Sixth Amendment, among other things, increased the Maximum Consolidated Net Leverage Ratio (as
defined in the 2020 Credit Facility), with the first, second and third quarters of 2023 increasing to 4.50:1.00. In the fourth quarter
of 2023 and the first quarter of 2024, the Maximum Consolidated Net Leverage Ratio declined to 4.25:1.00 and 4.00:1.00,
respectively. Also, the Sixth Amendment reduced the minimum Consolidated Fixed Charge Coverage Ratio (as defined in the
2020 Credit Facility) to 1.10:1.00 through the first quarter of 2024. The Sixth Amendment reduced the maximum borrowings
allowed under the 2020 Revolving Credit Facility from $100 million to $75 million and the sublimit available for letters of credit
was reduced from $30 million to $20 million. In addition, the Sixth Amendment replaced LIBOR with the Secured Overnight
Financing Rate ("SOFR") as the alternative rate available to us for calculating interest owed under the 2020 Credit Facility with
the margin fixed at 4.5%. In conjunction with the Sixth Amendment, we made a $75 million prepayment that was applied to the
final payment due upon maturity in March 2025. The $75 million prepayment was almost entirely funded with the net proceeds
from the Private Placement and the sales of our interest rate swap. Debt issuance costs associated with the Sixth Amendment
totaled $1.7 million and were being amortized on a straight-line basis over the remaining life of the 2020 Credit Facility to Interest
expense, net and were written off in conjunction with the early extinguishment of the 2020 Credit Facility on June 21, 2024.
The 2020 Credit Facility, as amended, allowed us to incur junior secured or unsecured debt in an amount no less than
$50 million, subject to certain conditions, including the requirement that 50% of the aggregate amount of such incurred debt (net
of certain costs, fees and other amounts) must be applied to prepay the 2020 Credit Facility and compliance with certain leverage
ratio-based covenant exceptions. Quarterly principal payments were required on the 2020 Term Loan aggregating approximately
$5.0 million per quarter through March 31, 2024, and if the refinancing had not occurred, $10.0 million would have been required
in each of the three quarters thereafter, with the remaining and final payment due on the maturity date in March 2025.
At December 31, 2024, we had an outstanding balance under the 2024 Term Loan of $348.3 million at an average interest rate
of 10.6%, with no revolver balance and no letters of credit outstanding under our 2024 Credit Facility. Our interest rates under our
2020 Term Loan for the year ended December 31, 2023 benefited from a hedge instrument that was in place, specifically a fixed
rate swap, which was sold in March 2023 (see Note 10). We were in compliance with all covenants of the 2024 Credit Facility and
2020 Credit Facility at December 31, 2024 and 2023, respectively, including the Consolidated Net Leverage Ratio calculation
under the 2020 Credit Facility that considered our debt to include Preferred Stock.
We use letters of credit, bank guarantees and surety bonds in the course of our business. At December 31, 2024, we had
$10.9 million of letters of credit, bank guarantees, and surety bonds outstanding (collectively, "Guarantees") under various
uncommitted facilities and no letters of credit outstanding under the 2024 Credit Facility. At December 31, 2023, we had
Guarantees aggregating $7.9 million, comprised of $2.7 million of letters of credit under the 2020 Credit Facility described above
and $5.2 million of Other Guarantees. At December 31, 2024 and 2023, we had cash collateral of $2.7 million and $0.1 million,
respectively, supporting the Guarantees, which are reported in Restricted cash in our consolidated balance sheets.
We are exposed to financial market risk related to foreign currency fluctuations and changes in interest rates. These exposures
are actively monitored by management. 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. Our policies and practices are to use derivative
financial instruments only to the extent necessary to manage exposures. We do not hold or issue derivative financial instruments
for trading or speculative purposes.
As a result of exposure to interest rate movements, during March 2020, we entered into an interest rate swap arrangement,
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. On July 22, 2022, we sold
$30 million of the notional amount of our interest rate swap back to our counterparty for $1.5 million, reducing the notional
amount of this swap to $370 million. On August 16, 2022, we sold another $30 million of the notional amount of our interest
56
rate swap back to our counterparty for $1.6 million, reducing the notional amount to $340 million, which approximated the term
loan debt then outstanding. The gain in accumulated other comprehensive (loss) income related to the $60 million notional
amount sold of $3.1 million was being released into earnings on a straight line basis over the remaining term of the 2020 Credit
Facility as a decrease to interest expense, the amortization of which totaled $0.4 million and $0.9 million for the years ended
December 31, 2024 and 2023, respectively. The remaining unamortized gain in accumulated other comprehensive (loss) income
of approximately $0.5 million was written off to interest expense in conjunction with the refinancing of the 2020 Credit Facility
on June 21, 2024. On March 24, 2023, we received $9.4 million, consisting of $0.4 million of interest and $9.0 million for the sale
of $170 million of our $340 million notional amount interest rate swap back to our counterparty, reducing the notional amount to
$170 million. On March 27, 2023, we received $9.8 million, consisting of $0.4 million of interest and $9.4 million for the sale of
the remaining $170 million of our interest rate swap back to our counterparty. The portion of the gain in accumulated other
comprehensive (loss) income related to the term loan debt prepaid on the date of the final sale of our swap totaled $7.3 million
and was released into earnings immediately as Other expense, net. The portion of the gain in accumulated other comprehensive
(loss) income related to our remaining term loan debt balance totaled $12.0 million and was being released into earnings on a
straight line basis over the remaining term of the 2020 Credit Facility as a decrease to interest expense beginning in the second
quarter of 2023, the amortization of which was $3.0 million and $4.7 million for the years ended December 31, 2024 and 2023,
respectively. The remaining unamortized gain in accumulated other comprehensive (loss) income of $4.4 million was written off
to interest expense in conjunction with the refinancing of the 2020 Credit Facility on June 21, 2024.
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 this objective, 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.
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 consolidated balance sheet and is subsequently reclassified into earnings in the
period that the hedged forecasted transactions affect earnings. During the year ended December 31, 2023, such a derivative was
used to hedge the variable cash flows associated with the outstanding borrowings under the 2020 Credit Facility and we accounted
for this derivative as an effective hedge until the final portion of the swap was sold on March 27, 2023. Any ineffective portion of
the change in fair value of the derivative would be recognized directly in earnings. However, we recorded no hedge
ineffectiveness over the life of our swap. In the year ended December 31, 2023, we recorded $7.3 million of Other expense, net
due to the sale of our interest rate swap arrangement.
Cash Flows from Operating Activities
Our primary source of cash from operating activities has been from cash collections from our customers. We expect cash
flows from operating activities to be affected by increases and decreases in sales volumes and timing of collections, and by
purchases and shipments of inventory. Our primary uses of cash from operating activities have been for personnel costs and
investment in our research and development and in our sales and marketing, and general and administrative departments.
Our operating activities provided cash of $50.2 million in 2024, primarily as a result of lower other operating assets and
accounts receivable, the increase in the fair value of our preferred stock and warrant liabilities, and higher deferred revenue. These
amounts were partially offset by lower accounts payable, accrued expenses and other long-term liabilities, and higher inventory.
Our net loss was more than offset by adjustments for certain non-cash expenses, such as amortization of intangible assets and
stock-based compensation. These adjustments were 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, $8.2 million of amortization of an accumulated
other comprehensive gain related to our interest rate swap, and $16.9 million of deferred income tax expense. Higher revenue in
our Cloud and Edge segment and lower operating expenses company-wide due to our various cost saving initiatives, including
lower employee and facilities expenses, continue to positively affect our operating cash flow.
Our operating activities provided $17.1 million of cash in 2023, primarily resulting from our net loss, which was more than
offset by certain non-cash expenses, such as amortization of intangible assets, stock-based compensation, depreciation and
amortization of property and equipment, amortization of debt issuance costs and the change in the fair value of our preferred stock
and warrant liabilities, including dividends on our preferred stock, partially offset by deferred income taxes and the gain
57
on the sale of our interest rate swap. Also, the changes in our operating assets and liabilities provided operating cash, including
lower other operating assets and accounts receivable, partially offset by lower accrued expenses and other long-term liabilities,
higher inventory, and lower accounts payable. Higher product revenue in our IP Optical Networks segment and lower operating
expenses company-wide due to our various cost saving initiatives, including lower employee and facilities expenses, all positively
affected our operating cash flow in 2023.
Cash Flows from Investing Activities
Our investing activities used cash of $22.9 million and $9.5 million in 2024 and 2023, respectively. Our investing activities
were primarily used to purchase property and equipment. The $13.4 million increase in purchases of property and equipment in
2024 compared to 2023 is primarily due to the build out of a new facility in Israel.
Cash Flows from Financing Activities
Our financing activities provided $37.7 million of cash in 2024. We received $342.3 million of proceeds, net of $7.7 million
of original issue discount, from the issuance of term debt under the 2024 Credit Facility that was established on June 21, 2024 to
refinance the 2020 Credit Facility. 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 $6.3 million in debt
issuance costs. Also, we paid $1.8 million in principal payments on our 2024 Term Debt. In addition, we paid $4.3 million of tax
obligations related to the vesting of stock awards and units.
Our financing activities used $47.9 million of cash in 2023, primarily due to $95.1 million of principal payments on our term
debt, including a $75.0 million prepayment in connection with the Sixth Amendment to the 2020 Credit Facility, $1.7 million of
debt issuance costs also paid in connection with the Sixth Amendment, and $4.5 million for the payment of tax withholding
related to the net share settlements of restricted stock awards upon vesting. In addition, we received $53.4 million of proceeds
from the issuance of the Preferred Stock and Warrants in the Private Placement.
The rate at which we consume cash is dependent upon the cash needs of our future operations, including our contractual
obligations at December 31, 2024, primarily comprised of our debt principal and interest obligations as described above, and our
operating lease and purchase obligations. Our operating lease obligations totaled $57.0 million at December 31, 2024, with
payments to be made aggregating $12.7 million in 2025, $11.5 million in 2026, $10.2 million in 2027 and $22.6 million thereafter.
Our purchase obligations totaled $106.6 million at December 31, 2024, with estimated payments aggregating $96.2 million in
2025 and $10.4 million thereafter. We anticipate devoting substantial capital resources to continue our R&D efforts, to maintain
our sales, support and marketing, and for other general corporate activities. We believe that our financial resources, along with
managing discretionary expenses, will allow us to manage the ongoing impact of inflation on our business operations. Looking
ahead, we have developed contingency plans to reduce costs further if the situation deteriorates.
Based on our current expectations, we believe 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
In November 2024, the Financial Accounting Standards Board (the "FASB") issued ASU 2024-03, Income Statement,
Reporting Comprehensive Income: Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), which requires
disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements.
The objective of this standard is to provide investors with information to better understand a public entity’s performance and
prospects for future cash flows, and to compare their performance over time with that of other entities. ASU 2024-03 will be
effective for us beginning with our 2027 annual financial statements and interim financial statements thereafter, with early
adoption permitted. 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
58
income taxes companies are required to pay. ASU 2023-09 will be effective for us beginning with our 2025 annual financial
statements, with early adoption permitted. We expect the adoption of the standard will require certain additional income tax
disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures (“ASU 2023-07”), which improves reportable segment disclosure requirements, including enhancement of the
disclosures of significant segment expenses and interim disclosure requirements to enable investors to better understand an
entity’s overall performance and assess potential future cash flows. ASU 2023-07 became effective for us beginning with this
Annual Report on Form 10-K which includes the required additional segment disclosures.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. The following
discussion about these market risks includes forward-looking statements. Actual results could differ materially from those
projected in these forward-looking statements.
At December 31, 2024, we had outstanding debt totaling $348.3 million. A hypothetical movement of plus or minus 50 basis
points in the interest rate of our outstanding debt would have changed our interest expense by approximately $2 million for
the year ended December 31, 2024.
As a global company operating in more than 30 countries, a significant portion of our revenues and expenses are denominated
in currencies other than the U.S. Dollar. If the U.S. Dollar strengthens against these other currencies, our revenue for these
transactions reported in U.S. Dollars would decline and our non-U.S. Dollar expenses would be inversely impacted, resulting in
lower U.S. Dollar expenses.
A hypothetical 10% strengthening of the U.S. Dollar would have negatively impacted our revenues for the year ended
December 31, 2024 by approximately $20 million. Because a higher proportion of our expenses are denominated in foreign
currencies compared to our revenue, our net loss for the year ended December 31, 2024 would have been positively impacted by
approximately $11 million.
59
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
60
Consolidated Balance Sheets as of December 31, 2024 and 2023
63
Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022
64
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2024, 2023 and 2022
65
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023 and 2022
66
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022
67
Notes to Consolidated Financial Statements
69
60
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Ribbon Communications Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ribbon Communications, Inc. and subsidiaries (the
"Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss,
stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally
accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 27, 2025, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
61
Revenue Recognition — Refer to Notes 2 and 17 to the financial statements
Critical Audit Matter Description
The Company recognizes revenue from two primary sources: products and services. Generally, contracts with customers contain
multiple performance obligations, consisting of products and services. For these contracts, the Company accounts for individual
performance obligations separately if they are considered distinct. When an arrangement contains more than one performance
obligation, the Company will allocate the transaction price to each performance obligation on a relative standalone selling price
basis. The Company utilizes the observable price of goods and services, including when they are sold separately to similar
customers, in order to estimate standalone selling price.
Management is required to use judgment to develop its estimates of standalone selling price. Auditing the Company’s estimates
of standalone selling price required a high degree of auditor judgment and an increased extent of effort, including the need to
involve our data analytics specialists to assist in the testing of the standalone selling price analyses given the judgment required by
management in this area.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the testing of management’s estimation of standalone selling prices included the following, among
others:
●
We tested the effectiveness of controls over revenue, including those over the determination of estimated standalone
selling price.
●
We evaluated whether management’s significant accounting policies related to the estimation of standalone selling price
were appropriate.
●
With the assistance of our data analytics specialists, we evaluated the estimated standalone selling price analyses
prepared by the Company, including testing the underlying detail of customer arrangements and the mathematical
accuracy of the calculations.
Goodwill – Cloud and Edge Reporting Unit – Refer to Notes 2 and 10 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its
carrying value. The Company used a combination of the income and market approaches to estimate reporting unit fair value. With
respect to the income approach, management is required to make significant estimates and assumptions related to discount rates
and forecasts of future revenue and profit margin. Changes in these assumptions could have a significant impact on either the fair
value, the amount of any goodwill impairment charge, or both. The goodwill balance was $301 million as of December 31, 2024,
of which $225 million was allocated to the Cloud and Edge Reporting Unit (“Cloud and Edge”).
Given the significant judgments made by management to estimate the fair value of Cloud and Edge, performing audit procedures
to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount rate and
forecasts of future revenue and profit margin required a high degree of auditor judgment and an increased extent of effort,
including the need to involve our fair value specialists.
62
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the discount rate and forecasts of future revenue and profit margin, used by management to
estimate the fair value of Cloud and Edge, included the following, among others:
●
We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the
determination of the fair value of Cloud and Edge, such as controls related to management’s selection of the discount
rate and forecasts of future revenue and profit margin.
●
We evaluated management’s ability to accurately forecast future revenues and profit margins by comparing actual results
to management’s historical forecasts.
●
We evaluated the reasonableness of management’s revenue and profit margin forecasts by comparing the forecasts to:
o
Historical revenues and profit margins.
o
Internal communications to management and the Board of Directors.
o
Forecasted information included in Company press releases as well as in analyst and industry reports for the
Company and certain of its peer companies.
●
With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by:
o
Testing the source information underlying the determination of the discount rate and the mathematical accuracy
of the calculation.
o
Developing a range of independent estimates and compared those to the discount rate selected by management.
/s/ Deloitte & Touche LLP
Dallas, Texas
February 27, 2025
We have served as the Company's auditor since 2005.
63
RIBBON COMMUNICATIONS INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
December 31,
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
87,770
$
26,494
Restricted cash
2,709
136
Accounts receivable, net
254,718
268,421
Inventory
79,179
77,521
Other current assets
39,286
46,146
Total current assets
463,662
418,718
Property and equipment, net
60,364
41,820
Intangible assets, net
187,537
238,087
Goodwill
300,892
300,892
Deferred income taxes
88,982
69,761
Operating lease right-of-use assets
34,544
39,783
Other assets
26,573
35,092
$
1,162,554
$
1,144,153
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of term debt
$
6,125
$
35,102
Accounts payable
87,759
85,164
Accrued expenses and other
106,251
91,687
Operating lease liabilities
9,443
15,739
Deferred revenue
119,295
113,381
Total current liabilities
328,873
341,073
Long-term debt, net of current
330,726
197,482
Warrant liability
8,064
5,295
Preferred stock liability, $0.01 par value per share; 10,000,000 shares authorized, none issued
and outstanding at December 31, 2024; 55,000 shares issued and outstanding at
December 31, 2023 ($56,650 liquidation preference)
—
53,337
Operating lease liabilities, net of current
37,376
38,711
Deferred revenue, net of current
20,991
19,218
Deferred income taxes
5,941
5,616
Other long-term liabilities
25,962
30,658
Total liabilities
757,933
691,390
Commitments and contingencies (Note 26)
Stockholders’ equity:
Common stock, $0.0001 par value per share; 240,000,000 shares authorized; 175,599,250
shares issued and outstanding at December 31, 2024; 172,083,667 shares issued and
outstanding at December 31, 2023
18
17
Additional paid-in capital
1,970,708
1,958,909
Accumulated deficit
(1,574,185)
(1,519,950)
Accumulated other comprehensive income
8,080
13,787
Total stockholders’ equity
404,621
452,763
$
1,162,554
$
1,144,153
See notes to the consolidated financial statements.
64
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Year ended December 31,
2024
2023
2022
Revenue:
Product
$
447,229
$
445,150
$
442,680
Service
386,652
381,189
377,080
Total revenue
833,881
826,339
819,760
Cost of revenue:
Product
228,527
250,609
245,145
Service
140,949
139,357
142,137
Amortization of acquired technology
24,893
28,290
31,542
Total cost of revenue
394,369
418,256
418,824
Gross profit
439,512
408,083
400,936
Operating expenses:
Research and development
179,941
190,660
203,676
Sales and marketing
137,830
137,460
147,766
General and administrative
68,740
54,962
51,053
Amortization of acquired intangible assets
25,969
28,601
29,646
Acquisition-, disposal- and integration-related
—
4,476
6,286
Restructuring and related
10,160
16,209
10,833
Total operating expenses
422,640
432,368
449,260
Income (loss) from operations
16,872
(24,285)
(48,324)
Interest expense, net
(33,821)
(27,320)
(19,780)
Other expense, net
(29,119)
(3,768)
(44,495)
Loss before income taxes
(46,068)
(55,373)
(112,599)
Income tax (provision) benefit
(8,167)
(10,833)
14,516
Net loss
$
(54,235)
$
(66,206)
$
(98,083)
Loss per share:
Basic
$
(0.31)
$
(0.39)
$
(0.63)
Diluted
$
(0.31)
$
(0.39)
$
(0.63)
Weighted average shares used to compute loss per share:
Basic
174,044
170,408
156,668
Diluted
174,044
170,408
156,668
See notes to the consolidated financial statements.
65
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Comprehensive Loss
(in thousands)
Year ended December 31,
2024
2023
2022
Net loss
$
(54,235)
$
(66,206)
$ (98,083)
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on interest rate swap, net of reclassifications and amortization
into earnings
(6,019)
(10,015)
19,321
Reclassification of gain to other income (expense), net upon sale of interest rate swap
—
(5,099)
—
Foreign currency translation adjustments
472
(506)
(792)
Employee retirement benefits
(160)
(1,178)
4,478
Other comprehensive (loss) income, net of tax
(5,707)
(16,798)
23,007
Comprehensive loss, net of tax
$
(59,942)
$
(83,004)
$ (75,076)
See notes to the consolidated financial statements.
66
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
Accumulated
Additional
other
Total
Common stock
paid-in
Accumulated
comprehensive
stockholders’
Shares
Amount
capital
deficit
(loss) income
equity
Balances, January 1, 2022
148,895,308
$
15
$ 1,875,234
$ (1,355,661)
$
7,578
$
527,166
Exercise of stock options
708
—
1
—
—
1
Vesting of restricted stock awards and units
3,075,543
—
—
—
—
—
Vesting of performance-based stock units
179,184
—
—
—
—
—
Shares of restricted stock returned to the Company
under net share settlements to satisfy tax
withholding obligations
(897,059)
—
(2,784)
—
—
(2,784)
Common stock issued in equity offering
17,071,311
2
52,065
—
—
52,067
Issuance costs related to equity offering
—
—
(1,654)
—
—
(1,654)
Stock-based compensation expense
—
—
18,707
—
—
18,707
Other comprehensive income
—
—
—
23,007
23,007
Net loss
—
—
(98,083)
—
(98,083)
Balances, December 31, 2022
168,324,995
17
1,941,569
(1,453,744)
30,585
518,427
Exercise of stock options
7,816
—
15
—
—
15
Vesting of restricted stock awards and units
4,840,738
—
—
—
—
—
Vesting of performance-based stock units
381,071
—
—
—
—
—
Shares of restricted stock returned to the Company
under net share settlements to satisfy tax
withholding obligations
(1,470,953)
—
(4,481)
—
—
(4,481)
Stock-based compensation expense
—
—
21,806
—
—
21,806
Other comprehensive loss
—
—
—
—
(16,798)
(16,798)
Net loss
—
—
—
(66,206)
—
(66,206)
Balances, December 31, 2023
172,083,667
17
1,958,909
(1,519,950)
13,787
452,763
Exercise of stock options
11,285
—
21
—
—
21
Vesting of restricted stock awards and units
4,653,037
1
—
—
1
Vesting of performance-based stock units
298,586
—
—
—
—
Shares of restricted stock returned to the Company
under net share settlements to satisfy tax
withholding obligations
(1,447,325)
—
(4,308)
—
—
(4,308)
Stock-based compensation expense
—
—
16,086
—
—
16,086
Other comprehensive loss
—
—
—
—
(5,707)
(5,707)
Net loss
—
—
—
(54,235)
—
(54,235)
Balances, December 31, 2024
175,599,250
$
18
$ 1,970,708
$ (1,574,185)
$
8,080
$
404,621
See notes to the consolidated financial statements.
67
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Cash Flows
(in thousands)
Year ended December 31,
2024
2023
2022
Cash flows from operating activities:
Net loss
$
(54,235)
$
(66,206)
$
(98,083)
Adjustments to reconcile net loss to cash flows provided by (used in) operating
activities:
Depreciation and amortization of property and equipment
13,539
14,105
15,295
Amortization of intangible assets
50,862
56,891
61,188
Amortization of debt issuance costs and original issue discount
4,847
3,241
2,308
Amortization of accumulated other comprehensive gain related to interest rate
swap
(8,196)
(5,575)
—
Stock-based compensation
16,086
21,806
18,707
Deferred income taxes
(16,887)
(9,196)
(18,251)
Gain on sale of business
—
—
(62)
Decrease in fair value of investments
—
—
41,291
Gain on sale of swap
—
(7,301)
—
Change in fair value of warrant liability
2,769
(201)
—
Change in fair value of preferred stock liability
8,091
1,548
—
Dividends accrued on preferred stock liability
2,743
3,935
—
Payment of dividends accrued on preferred stock liability
(6,686)
—
Foreign currency exchange losses (gains)
5,741
(44)
1,576
Changes in operating assets and liabilities:
Accounts receivable
12,420
5,726
14,285
Inventory
(3,616)
(10,701)
(32,099)
Other operating assets
30,459
34,834
2,109
Accounts payable
(6,016)
(10,498)
(448)
Accrued expenses and other long-term liabilities
(9,367)
(14,684)
(37,635)
Deferred revenue
7,686
(593)
3,455
Net cash provided by (used in) operating activities
50,240
17,087
(26,364)
Cash flows from investing activities:
Purchases of property and equipment
(22,406)
(9,381)
(10,254)
Purchases of software licenses
(462)
(100)
(3,300)
Proceeds from sale of business
—
—
1,418
Net cash used in investing activities
(22,868)
(9,481)
(12,136)
Cash flows from financing activities:
Borrowings under revolving line of credit
44,106
97,000
73,625
Principal payments on revolving line of credit
(44,106)
(97,000)
(73,625)
Proceeds from issuance of term debt
342,300
—
—
Principal payments of term debt
(237,145)
(95,058)
(45,058)
Principal payments of finance leases
—
—
(595)
Payment of debt issuance costs
(6,312)
(1,685)
(1,046)
Proceeds from equity offering
—
—
52,067
Payment of equity offering issuance costs
—
—
(1,654)
Proceeds from issuance of preferred stock and warrant liabilities
—
53,350
—
Payment of preferred stock liability
(56,850)
—
—
Proceeds from the exercise of stock options
21
15
1
Payment of tax obligations related to vested stock awards and units
(4,308)
(4,481)
(2,784)
Net cash provided by (used in) financing activities
37,706
(47,859)
931
Effect of exchange rate changes on cash and cash equivalents
(1,229)
(379)
(1,654)
Net increase (decrease) in cash and cash equivalents
63,849
(40,632)
(39,223)
Cash, cash equivalents and restricted cash, beginning of year
26,630
67,262
106,485
Cash, cash equivalents and restricted cash, end of year
$
90,479
$
26,630
$
67,262
68
RIBBON COMMUNICATIONS INC.
Consolidated Statements of Cash Flows (continued)
(in thousands)
Year ended December 31,
2024
2023
2022
Supplemental disclosure of cash flow information:
Interest paid
$
32,969
$
25,573
$
19,336
Income taxes paid
$
29,280
$
18,876
$
16,988
Income tax refunds received
$
1,545
$
1,611
$
1,251
Supplemental disclosure of non-cash investing activities:
Capital expenditures incurred, but not yet paid
$
10,090
$
2,578
$
2,559
Inventory transfers to property and equipment
$
2,165
$
1,693
$
2,896
Software license acquired through investment disposal
$
—
$
—
$
1,886
Supplemental disclosure of non-cash financing activities:
Fair value of vested restricted and performance-based stock grants
$
14,822
$
15,571
$
9,858
See notes to the consolidated financial statements.
Table of Contents
69
(1) NATURE OF THE BUSINESS
Ribbon Communications Inc. (“Ribbon” or the “Company”) is a leading global provider of communications
technology to service providers and enterprises. The Company provides a broad range of software and high-performance
hardware products, network solutions, and services that enable the secure delivery of data and voice communications, and
high-bandwidth networking and connectivity for residential consumers and for small, medium, and large enterprises and
industry verticals such as finance, education, government, utilities, and transportation. Ribbon’s 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. The Company is headquartered in Plano, Texas, and has a global presence
with research and development, or sales and support locations in over thirty countries around the world.
(2) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in United States dollars, in accordance with accounting
principles generally accepted in the United States (“GAAP”).
Private Placement Offering
On March 28, 2023, the Company issued 55,000 shares of newly designated Series A Preferred Stock (the “Preferred
Stock”) to investors in a private placement offering at a price of $970 per share, along with 4.9 million warrants (the
“Warrants”) to purchase shares of the Company’s common stock, par value $0.0001 per share (the “Private Placement”), at
the exercise price of $3.77 per share. The proceeds from the Private Placement were approximately $53.4 million,
including approximately $10 million from existing related party stockholders (See Note 16).
Equity Offering
On August 12, 2022, the Company entered into a Securities Purchase Agreement with certain investors for the sale
(the “Equity Offering”) in a private placement by the Company of 17,071,311 shares (the “Shares”) of the Company’s
common stock, par value $0.0001 per share, at a price of $3.05 per share. The aggregate gross proceeds from the Equity
Offering were approximately $52.1 million, including $10.0 million from existing related party shareholders, before
deducting offering expenses paid by the Company of approximately $1.7 million.
The original issuance of the Shares in the Equity Offering was exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”). The Company subsequently filed a registration statement on
Form S-3 (the “Registration Statement”) with the SEC registering the Shares, which Registration Statement was declared
effective by the SEC on September 23, 2022.
Operating Segments
The Company’s chief operating decision maker (the “CODM”) is its president and chief executive officer. The CODM
assesses the Company’s performance based on the performance of two separate organizations within Ribbon: the Cloud
and Edge segment (“Cloud and Edge”) and the IP Optical Networks segment (“IP Optical Networks”).
Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Ribbon and its wholly-owned
subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
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70
Use of Estimates and Judgments
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant
estimates and judgments relied upon in preparing these consolidated financial statements include accounting for business
combinations, revenue recognition for arrangements that contain multiple performance obligations, inventory valuations,
assumptions used to determine the fair value of stock-based compensation and the Preferred Stock and Warrants, intangible
asset and goodwill valuations, including impairments, debentures and warrants, warranty accruals, legal contingencies and
recoverability of Ribbon’s net deferred tax assets and the related valuation allowances. Ribbon regularly assesses these
estimates and records changes in estimates in the period in which they become known. Ribbon bases its estimates on
historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results
could differ from those estimates.
Reclassifications
Certain reclassifications, not affecting previously reported net income (loss), have been made to the previously issued
financial statements to conform to the current year presentation.
Business Combinations
The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair values.
Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition
date fair values of the assets acquired and the liabilities assumed and represents the expected future economic benefits
arising from other assets acquired in the business combination that are not individually identified and separately
recognized. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to
accurately value assets acquired and liabilities assumed at the acquisition date, its estimates are inherently uncertain and
subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date,
the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill
to the extent that it identifies adjustments to the preliminary purchase price allocation. Upon the conclusion of the
measurement period or final determination of the values of assets acquired and liabilities assumed, whichever comes first,
any subsequent adjustments are recorded to the consolidated statements of operations.
Revenue Recognition
The Company derives revenue from two primary sources: products and services. Product revenue includes: 1) the
Company’s proprietary hardware and software that function together to deliver the products’ essential functionality and 2)
the Company’s software only solutions that can be used on either the Company’s hardware or third-party hardware. Both
proprietary hardware and software only solutions are also sold on a standalone basis.
Services include customer support (software updates, upgrades and technical support), consulting, design services,
installation services and training. Generally, contracts with customers contain multiple performance obligations, consisting
of products and services. For these contracts, the Company accounts for individual performance obligations separately if
they are considered distinct.
When an arrangement contains more than one performance obligation, the Company will allocate the transaction price
to each performance obligation on a relative standalone selling price basis. The Company utilizes the observable price of
goods and services, including when they are sold separately to similar customers, in order to estimate standalone selling
price (“SSP”).
The Company’s software licenses typically provide a perpetual right to use the Company’s software. However, the
Company also sells term-based software licenses that expire and Software-as-a-Service (“SaaS”)-based software which are
referred to as subscription arrangements. The Company does not customize its software nor are installation services
required, as the customer has a right to utilize internal resources or a third-party service company. The software and
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71
hardware are delivered before related services are provided and are functional without professional services or customer
support. The Company has concluded that its software licenses are functional intellectual property that are distinct, as the
user can benefit from the software on its own.
Product revenue from sales of the Company’s perpetual and term-based software licenses is typically recognized when
the software is made available for download, as this is the point the user of the software can direct the use of and obtain
substantially all of the remaining benefits from the functional intellectual property. The Company begins to recognize
software revenue related to the renewal of term-based software licenses at the start of the renewal period. Revenue related
to sales of SaaS-based software is recognized ratably over the service period as the customer does not take possession of
the software or have the ability to take possession of the software.
The Company offers warranties on its products. Certain of the Company’s warranties are considered to be assurance-
type in nature, ensuring the product is functioning as intended. Assurance-type warranties do not represent separate
performance obligations. The Company also sells separately-priced maintenance service contracts which qualify as service-
type warranties and represent separate performance obligations. The Company does not allow and has no history of
accepting product returns.
Service revenue includes revenue from customer support and other professional services. Customer support includes
software updates on a when-and-if-available basis, telephone support, integrated web-based support and bug fixes or
patches. The Company sells its customer support contracts at a percentage of list or net product price. Customer support
revenue is recognized ratably over the term of the customer support agreement, which is typically one year.
The Company’s professional services include consulting, technical support, resident engineer services, design services
and installation services. Because control transfers over time, revenue is recognized based on progress toward completion
of the performance obligation. The method to measure progress toward completion requires judgment and is based on the
nature of the products or services to be provided.
The Company generally uses the input method to measure progress for its contracts and to recognize revenue because
it believes such method, in general, best depicts the transfer of assets to its customers. The input method measures costs the
Company has incurred in the period for its contracts. In some infrequent instances, the Company may engage a third-party
to perform services on its behalf and in those cases the output method is used to recognize revenue because it best depicts
the transfer of assets to its customers. Under the output method, there is a cost-to-cost measure of progress. The progress
toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the
performance obligation. When the measure of progress is based upon expended labor, progress toward completion is
measured as the ratio of labor time expended to date versus the total estimated labor time required to complete the
performance obligation. Revenue is recorded proportionally as costs are incurred or as labor is expended. Costs to fulfill
these obligations can include internal labor as well as subcontractor costs.
Customer training includes courses offered by the Company. The related revenue is typically recognized as the training
services are performed, typically over a period of one to five days.
Payment terms for the Company’s contracts with its customers typically range from 30 to 60 days from the invoice
date. In certain cases, it may offer extended payment terms, which are assessed on a case-by-case basis.
The Company does not generally offer significant financing components in its contracts with customers. However, if a
contract includes a significant financing component, the transaction price is adjusted for the time value of money. For the
year ended December 31, 2024, the impact of financing components was immaterial.
Amounts billed to customers for sales and other taxes are excluded from the transaction price. Revenue is recognized
net of any taxes collected from customers, which are subsequently remitted to government authorities.
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72
Preferred Stock and Warrants
The Company accounted for the Preferred Stock until it was redeemed on June 25, 2024 and continues to account for
the Warrants as liability-classified instruments based on an assessment of their specific terms in accordance with ASC
Topic 480, Distinguishing Liabilities from Equity. The fair value option was elected for the Preferred Stock, as the
Company considered fair value to best reflect the expected future economic value. These liabilities are remeasured to fair
value at each reporting date using the same valuation methodology applied upon issuance using current input assumptions.
The Preferred Stock was considered to be debt for our Consolidated Net Leverage Ratio covenant calculation required
under our 2020 Credit Facility.
The value of the Preferred Stock was calculated using the Black-Derman-Toy (BDT) stochastic yield lattice model to
capture the optimal timing of repayment, increasing dividend rate and other features, and the value of the Warrants is
calculated using the Black-Scholes Pricing Model.
Changes in the fair value of the Preferred Stock and Warrants are reported as Other expense, net in the Company’s
consolidated statements of operations.
Financial Instruments
The carrying amounts of the Company’s cash equivalents, accounts receivable, accounts payable and borrowings
under a revolving credit facility in the Consolidated Balance Sheets approximates fair value due to the immediate or short-
term nature of these financial instruments. Ribbon’s term debt balance as of December 31, 2024 and 2023 of
$348.3 million and $235.4 million, respectively, had a fair value of approximately $350.4 million and $235.1 million,
respectively. Our Warrants liabilities as of December 31, 2024 had a fair value of $8.1 million. Our Preferred Stock and
Warrants liabilities as of December 31, 2023 had a combined fair value of $58.6 million, including cumulative dividends
on the Preferred Stock of $3.9 million.
Financial instruments with remaining maturities or that are due within one year from the balance sheet date are
classified as current. Financial instruments with maturities or that are payable more than one year from the balance sheet
date are classified as noncurrent.
Fair Value Option - Investment in AVCT
The Company received debentures (the “Debentures”) and warrants (the “AVCT Warrants”) as sale consideration in
connection with its December 1, 2020 sale of the Kandy Communications Business to American Virtual Cloud
Technologies, Inc. (“AVCT”) (the “Kandy Sale”). On September 8, 2021 (the “Debenture Conversion Date”), the
Debentures were converted into 13,700,421 shares of AVCT common stock (the “Debenture Shares”). In connection with
the conversion of the Debentures to the Debenture Shares, the Company elected to use the fair value option to account for
its equity investment in AVCT as permitted under Accounting Standards Codification (“ASC”) 825, Financial Instruments
(“ASC 825”), which then refers to ASC 820, Fair Value Measurement (“ASC 820”) to provide the fair value framework for
valuing such investments. In accordance with ASC 820, the Company recorded the investment in AVCT at fair value, with
changes in fair value recorded as a component of Other (expense) income, net, in the consolidated statements of operations.
See Note 4 for a discussion of the valuation of the Debentures, AVCT warrants and Debenture Shares.
On August 29, 2022, the Company and AVCT entered into a settlement agreement which provided for, amongst other
things, the cancellation of the Company’s investment in the Debenture Shares and the AVCT Warrants with an aggregate
fair value of $2.6 million. See Note 4 for a description of the settlement agreement with AVCT.
Transfers of Financial Assets
The Company’s IP Optical Networks segment maintains customer receivables factoring agreements with a number of
financial institutions. Under the terms of these agreements, the Company may transfer receivables to the financial
institutions, on a non-recourse basis, provided that the financial institutions approve the receivables in advance. The
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Company maintains credit insurance policies from major insurance providers or obtains letters of credit from the customers
for a majority of its factored trade receivables. The Company accounts for the factoring of its financial assets as a sale of
the assets and records the factoring fees, when incurred, as a component of interest expense in the consolidated statements
of operations, and the proceeds from the sales of receivables are included in cash from operating activities in the
consolidated statements of cash flows.
Factoring of accounts receivable and associated fees for the years ended December 31, 2024 and 2023 were as follows
(in thousands):
December 31,
2024
2023
Accounts receivable sold
$
107,874
$
106,705
Less factoring fees
(2,228)
(2,736)
Net cash proceeds
$
105,646
$
103,969
Foreign Currency Translation
For foreign subsidiaries where the functional currency is the local currency, assets and liabilities are translated into
U.S. dollars at the current exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of
exchange prevailing during each period. Translation adjustments for these subsidiaries are included in Accumulated other
comprehensive income.
For foreign subsidiaries where the functional currency is the U.S. dollar, monetary assets and liabilities are translated
into U.S. dollars at the current exchange rate on the balance sheet date. Nonmonetary assets and liabilities are remeasured
into U.S. dollars at historical exchange rates. Revenue and expense items are translated at average rates of exchange
prevailing during each period. Translation adjustments for these subsidiaries are included in Other expense, net.
Realized and unrealized foreign currency exchange gains and losses arising from transactions denominated in
currencies other than the subsidiary’s functional currency are reflected in earnings.
The Company records its foreign currency (gains) losses as a component of Other expense, net. The Company
recognized net foreign currency (gains) and losses of $5.7 million, less than $(0.1) million and $1.6 million for the years
ended December 31, 2024, 2023 and 2022, respectively.
Inventory
Inventory is recorded at the lower of cost or market value using the first-in, first-out convention. The Company
reduces the carrying value of inventory for those items that are potentially excess, obsolete or slow-moving based on
changes in customer demand, technology developments or other economic factors.
Ribbon writes down evaluation equipment (equipment at customer sites for testing and evaluation) at the time of
shipment to its customers, as it is probable that the inventory value will not be realized.
Deferred product costs represent deferred cost of revenue for product shipments to customers prior to satisfaction of
Ribbon’s revenue recognition criteria. The Company classifies inventory that is not expected to be consumed within
one year from the balance sheet date as noncurrent and includes such inventory as a component of Other assets.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs
are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives
of the related assets, which range from two to five years. Leasehold improvements are amortized over the
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lesser of the lease term or five years. When an asset is sold or retired, the cost and related accumulated depreciation or
amortization are eliminated, and the resulting gain or loss, if any, is recognized in Loss from operations in the consolidated
statement of operations. The Company reviews property and equipment for impairment in the same manner as intangible
assets discussed below.
Software development costs associated with internal use software are incurred in three stages of development: the
preliminary project stage, the application development stage and the post-implementation stage. Costs incurred during the
preliminary project and post-implementation stages are expensed as incurred. Certain qualifying costs incurred during the
application development stage are capitalized as property and equipment. Internal use software is amortized on a straight-
line basis over its estimated useful life of three years, beginning when the software is ready for its intended use.
Intangible Assets and Goodwill
The Company’s intangible assets are comprised of in-process research and development, developed technology,
customer relationships, trade names, and internal use software. Intangible assets are reviewed for impairment when events
or changes in circumstances indicate that their carrying amounts may not be recoverable based upon the estimated
undiscounted cash flows. Recoverability of intangible assets with estimated lives and other long-lived assets is measured
by a comparison of the carrying amount of an asset or asset group to future net undiscounted cash flows expected to be
generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the Company will
recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds the related
estimated fair value. Estimated fair value is based on either discounted future operating cash flows or appraised values,
depending on the nature of the asset. The Company amortizes its intangible assets over their respective useful lives, with
the exception of in-process research and development, which has an indefinite life until the product is generally available,
at which time such asset is typically reclassified to developed technology, and the Company begins to amortize this asset.
See Note 10 for additional information regarding the Company’s intangible assets.
Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiable
intangible assets acquired. Goodwill is not amortized, but instead is tested for impairment at least annually, or more
frequently if indicators of potential impairment exist, by comparing the fair value of the Company’s reporting unit to its
carrying value.
The Company’s annual test for impairment of goodwill is completed as of October 1. For the purpose of testing
goodwill for impairment, all goodwill is assigned to a reporting unit, which may either be an operating segment or a
portion of an operating segment. The Company’s reporting units are its two operating segments, Cloud and Edge and IP
Optical Networks. The Company performs a fair value analysis for each reporting unit using both an income and market
approach, which encompasses a discounted cash flow analysis and a guideline public company analysis using selected
multiples. The Company assesses each valuation methodology based upon the relevance and availability of the data at the
time the valuation is performed and the methodologies are weighted appropriately. Any impairment charges are reported
separately in the Company’s consolidated statements of operations.
Stock-Based Compensation
The Company’s stock-based compensation cost is measured at the grant date based on the fair value of the award and
is recognized as expense over the requisite service period, which generally represents the vesting period, and includes an
estimate of the awards that will be forfeited.
The Company uses the Black-Scholes valuation model for estimating the fair value of stock options on the grant date.
The fair value of stock option awards is affected by the Company’s stock price as well as valuation assumptions, including
the volatility of Ribbon’s stock price, expected term of the option, risk-free interest rate and expected dividends.
The Company may grant to certain of its executives and certain other employees performance-based stock units
(“PSUs”) that include a market condition. The Company uses a Monte Carlo simulation approach to model future stock
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price movements based upon the risk-free rate of return, the volatility of each entity and the pair-wise covariance between
each entity. These results are then used to calculate the grant date fair values of the PSUs. The Company is required to
record expense for the PSUs with market conditions through their respective final vesting dates regardless of the number of
shares that are ultimately earned. Once the grant date criteria have been met for a fiscal year performance period, the
Company records stock-based compensation expense based on its assessment of the probability that the respective
performance condition will be achieved and the level, if any, of such achievement. The Compensation Committee
determines the number of shares earned, if any, after the Company’s financial results for each fiscal year performance
period are finalized. Upon the determination by the Compensation Committee of the number of shares that will be received
upon vesting, such number of shares becomes fixed and the unamortized expense is recorded through the remainder of the
service period, at which time any Performance PSUs earned will vest pending each employee’s continuing employment
with Ribbon through that date.
Concentration of Risk
Ribbon is subject to counterparty risk as well as financial instrument concentration risk involving cash, cash
equivalents and accounts receivable. To mitigate these risks, cash and cash equivalents are diversified and maintained with
various financial institutions globally. In certain instances, advance payments, credit insurance, or customer issued letters
of credit are required to mitigate potential risk.
Certain components and software licenses from third parties used in Ribbon’s products are procured from single
sources of supply. The failure of a supplier, including a subcontractor, to deliver on schedule could delay or interrupt
Ribbon’s delivery of products and thereby materially adversely affect Ribbon’s revenue and operating results.
Advertising Costs
Advertising costs are expensed as incurred and included as a component of Sales and marketing expense in the
Company’s consolidated statements of operations. Advertising expenses were $1.7 million, $1.2 million and $1.5 million
for the years ended December 31, 2024, 2023 and 2022, respectively.
Loss Contingencies and Reserves
Ribbon is subject to ongoing business risks arising in the ordinary course of business, including legal claims, that
affect the estimation process of the carrying value of assets, the recording of liabilities and the possibility of various loss
contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset
has been impaired and the amount of loss can be reasonably estimated. Ribbon regularly evaluates current information
available to determine whether such amounts should be adjusted and records changes in estimates in the period they
become known.
An allowance for doubtful accounts is estimated based on the Company’s assessment of the collectability of specific
customer accounts.
Ribbon accrues for royalties for technology that it licenses from vendors based on established royalty rates and usage.
Ribbon is periodically contacted by third parties who claim that Ribbon’s products infringe on certain intellectual property
of a third party. Ribbon evaluates these claims and accrues amounts when it is probable that the obligation has been
incurred and the amounts are reasonably estimable.
Warranty
The Company records warranty liabilities for estimated costs of fulfilling its obligations under standard limited
hardware and software warranties at the time of sale. The specific warranty terms and conditions vary depending upon the
country in which the Company does business, but generally includes material costs, technical support, labor and associated
overhead over a period ranging from one to three years. At December 31, 2024, the Company’s liability for product
warranties was $12.3 million of which $5.2 million was current and included in Accrued expenses and other and
$7.1 million was long-term and included in Other long-term liabilities in the Company’s consolidated balance sheet. At
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December 31, 2023, the Company’s liability for product warranties was $12.2 million, of which $5.4 million was current
and included in Accrued expenses and other, and $6.8 million was long-term and included in Other long-term liabilities in
the Company’s consolidated balance sheet.
Research and Development Grants
The Company records grants received from the Office of the Innovation Authority of the Israeli Ministry of
Economics (the “IIA”) as a reduction to Research and development expense. Royalties payable to the IIA are recognized
pursuant to sales of related products and services and are included in Cost of revenue (see Note 26).
Accounting for Leases
The Company accounts for its leases in accordance with Accounting Standards Codification (“ASC”) 842, Leases
(“ASC 842”) (see Note 21). The Company has operating leases for corporate offices, and research and development
facilities. Operating leases are reported separately in the Company’s consolidated balance sheets at December 31, 2024 and
2023. The Company has no finance leases as of December 31, 2024 or 2023.
The Company determines if an arrangement is a lease at inception. A contract is determined to contain a lease
component if the arrangement provides the Company with a right to control the use of an identified asset. Lease
agreements may include lease and non-lease components. In such instances for all classes of underlying assets, the
Company does not separate lease and non-lease components but rather, accounts for the entire arrangement under leasing
guidance. Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense for these
leases is recognized on a straight-line basis over the lease term.
Lease expense for minimum fixed lease payments is recognized on a straight-line basis over the lease term. The
expense for finance leases would include both interest and amortization expense components, with the interest component
calculated based on the effective interest method and the amortization component calculated based on straight-line
amortization of the right-of-use asset over the lease term. Lease contracts may contain variable lease costs, such as
common area maintenance, utilities and tax reimbursements that vary over the term of the contract. Variable lease costs are
not included in minimum fixed lease payments and as a result, are excluded from the measurement of the right-of-use
assets and lease liabilities. The Company expenses all variable lease costs as incurred.
Accounting for Income Taxes
Deferred tax assets and liabilities are recognized for the expected future consequences of events that have been
reflected in the consolidated financial statements. Deferred tax assets and liabilities are determined based on the differences
between the financial reporting and tax basis of assets and liabilities and operating loss carryforwards, using tax rates
expected to be in effect for the years in which the differences are expected to reverse. The Company records valuation
allowances to reduce deferred income tax assets to the amount that is more likely than not to be realized.
The Company has provided for income taxes on the undistributed earnings of its non-U.S. subsidiaries as of
December 31, 2024, excluding Ireland and Israel, which are indefinitely reinvested. Accordingly, the Company is required
to recognize and record deferred taxes for 2024 on the entire outside basis differences related to the foreign subsidiaries,
the largest of these differences being undistributed earnings.
The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it
is not more likely than not that a position will be sustained, no amount of the benefit attributable to the position is
recognized. The tax benefit to be recognized of any tax position that meets the more likely than not recognition threshold is
calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency. The
Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes.
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Defined Benefit Plans
The Company has defined benefit plans for some of its employees at various international locations. The Company
recognizes retirement benefit assets or liabilities in the consolidated balance sheets reflecting the funded status of pension
and other retirement benefit plans. Retirement benefit assets and liabilities are adjusted for the difference between the
benefit obligations and the plan assets at fair value (measured at year-end), with the offset recorded directly to
stockholders’ equity through Other comprehensive income (loss), net of tax. The amount recorded in stockholders’ equity
represents the after-tax unamortized actuarial gains or losses, unamortized transition obligations and unamortized prior
service costs.
Recent Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (the "FASB") issued ASU 2024-03, Income Statement,
Reporting Comprehensive Income: Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), which
requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the
financial statements. The objective of this standard is to provide investors with information to better understand a public
entity’s performance and prospects for future cash flows, and to compare their performance over time with that of other
entities. ASU 2024-03 will be effective for the Company beginning with our 2027 annual financial statements and interim
financial statements thereafter, with early adoption permitted. The adoption of ASU 2024-03 will require the Company to
provide new footnote disclosure about the types of expenses that are included in certain captions on its 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 the Company beginning
with its 2025 annual financial statements, with early adoption permitted. We expect the adoption of the standard will
require certain additional income tax disclosure.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures (“ASU 2023-07”), which improves reportable segment disclosure requirements, including
enhancement of the disclosures of significant segment expenses and interim disclosure requirements, to enable investors to
better understand an entity’s overall performance and assess potential future cash flows. ASU 2023-07 became effective for
the Company beginning with this Annual Report on Form 10-K which includes the required additional segment
disclosures.
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(3) BUSINESS ACQUISITIONS
On March 3, 2020, Ribbon completed its merger transaction with ECI Telecom Group Ltd (“ECI”) in accordance with
the terms of the Agreement and Plan of Merger, dated as of November 14, 2019 (the “ECI Acquisition”). Prior to the ECI
Acquisition, ECI was a privately-held global provider of end-to-end packet optical transport and software-defined
networking (“SDN”) and network function virtualization solutions for service providers, enterprises and data center
operators.
The ECI Acquisition was accounted for as a business combination and the financial results of ECI are included in the
Company’s consolidated financial statements. Costs related to the integration of the Company and ECI are included in the
Acquisition-, disposal- and integration-related expenses in the table below.
Acquisition-, Disposal- and Integration-Related Expenses
Acquisition-related expenses include those expenses related to acquisitions that would otherwise not have been
incurred by the Company, including professional and services fees, such as legal, audit, consulting, paying agent and other
fees, and expenses related to cash payments to certain former executives of the acquired businesses in connection with their
employment agreements. Disposal-related expenses are professional and services fees related to disposals of subsidiaries or
portions of the business. Integration-related expenses represent incremental costs related to combining the Company and its
business acquisitions, such as third-party consulting and other third-party services related to merging the previously
separate companies’ systems and processes.
The integration-related expenses in the years ended December 31, 2023 and 2022 relate to the ECI Acquisition. The
disposal-related expenses in the year ended December 31, 2022 primarily related to costs incurred from the sale of one of
our foreign subsidiaries.
The components of Acquisition-, disposal- and integration-related expenses incurred in the years ended December 31,
2024, 2023 and 2022 were as follows (in thousands):
Year ended December 31,
2024
2023
2022
Professional and services fees (disposal-related)
$
—
$
—
$
414
Integration-related expenses
—
4,476
5,872
$
—
$
4,476
$
6,286
(4) SALE OF KANDY COMMUNICATIONS BUSINESS
The Company completed the Kandy Sale on December 1, 2020 (the “Kandy Sale Date”). As consideration, AVCT paid
Ribbon $45.0 million, subject to certain adjustments, in the form of Debentures and AVCT Warrants (collectively the
“AVCT Units”). The Company received 43,778 AVCT Units as sale consideration.
The Debentures bore interest at a rate of 10% per annum, which was added to the principal amount of the Debentures.
The Debentures were subject to mandatory conversion if the AVCT stock price was at or above $6.00 per share for 40
trading days in any 60 consecutive trading day period, subject to the satisfaction of certain other conditions. As of
February 19, 2021, the stock price had traded above $6.00 for 40 days within a 60 consecutive trading day period, and
accordingly, on September 8, 2021 (the “Debenture Conversion Date”), upon the completion of customary regulatory
filings by AVCT, the Debentures were converted into 13,700,421 shares of AVCT common stock (the “Debenture Shares”).
The AVCT Warrants were independent of the Debentures and entitled the Company to purchase 4,377,800 shares of
AVCT common stock at an exercise price of $0.01 per share.
The Company calculated the fair value of the Debentures at each measurement date using a Lattice-based valuation
approach, which utilizes a binomial tree to model the different paths the price of AVCT’s common stock might take over
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the Debentures’ life by using assumptions regarding the stock price volatility and risk-free interest rate. The Company used
the Black-Scholes valuation model for estimating the fair value of the AVCT Warrants at each measurement date. The fair
value of the AVCT Warrants was affected by AVCT’s stock price as well as valuation assumptions, including the volatility
of AVCT’s stock price, expected term of the option, risk-free interest rate and expected dividends. Both the Lattice and
Black-Scholes valuation models are based on available market data, giving consideration to all of the rights and obligations
of each instrument and precluding the use of “blockage” discounts or premiums in determining the fair value of a large
block of financial instruments.
On August 29, 2022, the Company and AVCT entered into a settlement agreement which provided for, amongst other
things, the cancellation of the Company’s investment in the Debenture Shares and the AVCT Warrants with an aggregate
fair value of $2.6 million. Pursuant to the settlement agreement, the Company and AVCT also entered into a Wind Down
Agreement, pursuant to which a Reseller Agreement between the parties, as previously amended, was terminated, and the
Company was granted a non-exclusive perpetual license to use and modify certain intellectual property owned by AVCT
comprising WebRTC gateway technology that is integrated with Ribbon’s SBCs and Application Servers. As consideration,
the Company paid AVCT $2.5 million in cash, the Debenture Shares were redeemed and canceled, and the AVCT Warrants
were terminated and canceled. The perpetual license granted by AVCT is classified as Intangible assets, net in the
Company’s consolidated balance sheet as of December 31, 2024 and 2023 in the amount of $1.0 million and $2.4 million,
respectively.
The Company had no investment in AVCT as of December 31, 2024 or 2023 due to the settlement agreement entered
into on August 29, 2022. The Company recorded losses of $41.3 million in the year ended December 31, 2022,
representing the change in the fair value of the AVCT Investment.
The results of the Kandy Communications Business are excluded from the Company’s consolidated results for all
periods subsequent to the Kandy Sale Date.
(5) EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares
outstanding during the period. For periods in which the Company reports net income, diluted net earnings per share is
determined by using the weighted average number of common and dilutive common equivalent shares outstanding during
the period, unless the effect is antidilutive.
The shares used to compute loss per share were as follows (in thousands):
Year ended December 31,
2024
2023
2022
Weighted average shares outstanding—basic
174,044
170,408
156,668
Potential dilutive common shares
—
—
—
Weighted average shares outstanding—diluted
174,044
170,408
156,668
Options to purchase the Company’s common stock and unvested restricted and performance-based stock units
aggregating 7.6 million shares, 13.5 million shares, and 14.5 million shares were excluded from the computation of diluted
loss per share for the years ended December 31, 2024, 2023 and 2022, respectively, because their effect would have been
antidilutive.
As of December 31, 2024 and 2023, the potential number of dilutive shares from the Warrants totaled 4.9 million
shares. However, there was no impact on weighted average shares outstanding from these Warrants for the years ended
December 31, 2024 and 2023 as the average share price of the Company’s common stock was below the exercise price of
$3.77 per share and their effect would have been antidilutive.
Dividends accrued on the Preferred Stock were not an adjustment to net income (loss) used for the calculation of
diluted earnings (loss) per share as these dividends are included in the fair value adjustment of the Preferred Stock which
was reflected in Other expense, net until the redemption of the Preferred Stock on June 25, 2024.
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(6) FAIR VALUE HIERARCHY
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants. As such, fair value is a market-based measurement that should be determined based on
assumptions that market participants would use in pricing an asset or a liability. The three-tier fair value hierarchy is based
on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s
categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value
measurement. The fair value hierarchy is as follows:
●
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets
or liabilities. The Company had no assets or liabilities fair valued using Level 1 input at December 31, 2024
or 2023.
●
Level 2 applies to assets or liabilities for which there are inputs that are directly or indirectly observable in
the marketplace, such as quoted prices for similar assets or liabilities in active markets or quoted prices for
identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active
markets). At December 31, 2024 and 2023, the Company determined the fair value of its defined benefit
plans’ assets using Level 2 input.
●
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology
that are significant to the measurement of the fair value of the assets or liabilities. At December 31, 2024, the
fair value of the Company’s Warrants was determined using Level 3 input. At December 31, 2023, the fair
value of the Company’s Preferred Stock and Warrants were determined using Level 3 input.
The Company did not have any transfers between Level 2 and Level 3 fair value measurements during the years ended
December 31, 2024 and 2023.
(7) ACCOUNTS RECEIVABLE, NET
Accounts receivable, net, consisted of the following (in thousands):
December 31,
2024
2023
Accounts receivable
$
256,174
$
269,933
Allowance for doubtful accounts
(1,456)
(1,512)
Accounts receivable, net
$
254,718
$
268,421
The Company’s allowance for doubtful accounts activity was as follows (in thousands):
Charges
Balance at
(credits) to
Balance at
beginning
Charges
other
end of
Year ended December 31,
of year
to expense
accounts
Write-offs
year
2024
$ 1,512
$
152
$
(75)
$
(133)
$
1,456
2023
$ 1,427
$
428
$
143
$
(486)
$
1,512
2022
$ 1,270
$
100
$
159
$
(102)
$
1,427
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(8) INVENTORY
Inventory consisted of the following (in thousands):
December 31,
December 31,
2024
2023
On-hand assemblies and finished goods inventories
$
95,366
$
93,077
Deferred cost of goods sold
2,430
3,269
97,796
96,346
Less noncurrent portion (included in Other assets)
(18,617)
(18,825)
Current portion
$
79,179
$
77,521
(9) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
December 31,
Useful Life
2024
2023
Equipment
2-5 years
$
84,409
$
77,205
Software
2-5 years
36,859
34,802
Furniture and fixtures
3-5 years
3,309
3,301
Leasehold improvements
Shorter of the estimated
lease term or useful life
54,849
36,383
179,426
151,691
Less accumulated depreciation and amortization
(119,062)
(109,871)
Property and equipment, net
$
60,364
$
41,820
As of December 31, 2024 and 2023, property and equipment included $23.2 million and $3.4 million, respectively, of
assets that had not yet commenced depreciation. These assets primarily consisted of leasehold improvements and
equipment, with the most significant portion related to construction in progress at our new main campus in Petah Tikva,
Israel that is expected to be completed and occupied in the 1st half of 2025, totaling $18.9 million and $0.5 million as of
December 31, 2024 and 2023, respectively.
The Company recorded depreciation and amortization expense related to property and equipment of $13.5 million for
the year ended December 31, 2024, $14.1 million for the year ended December 31, 2023 and $15.3 million for the year
ended December 31, 2022. During each of these years, the Company disposed of certain property and equipment that was
fully depreciated at the time of disposal, which resulted in reductions in both Cost and Accumulated depreciation.
The net book values of the Company’s property and equipment by geographic area were as follows (in thousands):
December 31,
2024
2023
Israel
$
27,657
$
8,309
United States
20,445
20,807
Asia/Pacific
7,941
8,314
Canada
3,071
3,175
Europe
1,034
957
Other
216
258
$
60,364
$
41,820
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(10) INTANGIBLE ASSETS AND GOODWILL
The Company’s intangible assets at December 31, 2024 and 2023 consisted of the following (in thousands):
Weighted
average
amortization
Net
period
Accumulated
carrying
December 31, 2024
(years)
Cost
amortization
value
Developed technology
7.84
$ 340,380
$ 262,085
$
78,295
Customer relationships
11.86
268,140
160,635
107,505
Trade names
3.88
5,000
4,978
22
Software licenses
3.00
5,748
4,033
1,715
9.50
$ 619,268
$ 431,731
$ 187,537
Weighted
average
amortization
Net
period
Accumulated
carrying
December 31, 2023
(years)
Cost
amortization
value
Developed technology
7.84
$ 340,380
$ 239,066
$ 101,314
Customer relationships
11.86
268,140
134,743
133,397
Trade names
3.88
5,000
4,901
99
Software licenses
3.00
5,436
2,159
3,277
9.51
$ 618,956
$ 380,869
$ 238,087
Estimated future amortization expense for the Company’s intangible assets at December 31, 2024 was as follows (in
thousands):
Years ending December 31,
2025
$
44,192
2026
39,143
2027
33,979
2028
23,400
2029
18,379
Thereafter
28,444
$
187,537
Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiable
intangible assets acquired. For the purpose of testing goodwill for impairment, all goodwill is assigned to a reporting unit,
which may be either an operating segment or a portion of an operating segment. The Company’s reporting units are its two
operating segments, Cloud and Edge and IP Optical Networks. Testing for impairment of goodwill is completed annually
as of October 1st. The Company’s IP Optical Networks operating segment, with $76.0 million of associated goodwill, had a
negative carrying value and a positive fair value as of October 1, 2024.
Upon completion of the 2024 and 2023 annual tests for goodwill impairment, the Company determined that there was
no impairment of goodwill in either of its reporting units. There was no change in the carrying value of the Company’s
goodwill in the years ended December 31, 2024 and 2023.
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The components of goodwill at December 31, 2024 and 2023 were as follows (in thousands):
Cloud and
IP Optical
Edge
Networks
Total
Goodwill
$ 392,302
$ 191,996
$
584,298
Accumulated impairment losses
(167,406)
(116,000)
(283,406)
$ 224,896
$
75,996
$
300,892
(11) ACCRUED EXPENSES AND OTHER
Accrued expenses and other consisted of the following (in thousands):
December 31,
December 31,
2024
2023
Employee compensation and related costs
$
44,948
$
33,682
Professional fees
16,339
19,702
Taxes payable
6,364
8,383
Other
38,600
29,920
$
106,251
$
91,687
(12) WARRANTY
The changes in the Company’s warranty accrual balance in the years ended December 31, 2024 and 2023 were as
follows (in thousands):
Balance at
Balance at
beginning
end of
Year ended December 31,
of year
Provision Settlements
year
2024
$ 12,243
$
5,423
$ (5,366)
$ 12,300
2023
$ 11,857
$
5,875
$ (5,489)
$ 12,243
(13) RESTRUCTURING AND FACILITIES CONSOLIDATION INITIATIVES
The Company recorded restructuring and related expense aggregating $10.2 million, $16.2 million and $10.8 million
in the years ended December 31, 2024, 2023 and 2022, respectively. Restructuring and related expense includes
restructuring expense (primarily severance and related costs), estimated future variable and other lease costs for vacated
properties with no intent or ability of sublease, and accelerated rent amortization expense.
For restructuring events that involve lease assets and liabilities, the Company applies lease reassessment and
modification guidance and evaluates the right-of-use assets for potential impairment. If the Company plans to exit all or
distinct portions of a facility and does not have the ability or intent to sublease, the Company will accelerate the
amortization of each of those lease components through the vacate date. The accelerated amortization is recorded as a
component of Restructuring and related expense in the Company’s consolidated statements of operations. Related variable
lease expenses will continue to be expensed as incurred through the vacate date, at which time the Company will reassess
the liability balance to ensure it appropriately reflects the remaining liability associated with the premises and record a
liability for the estimated future variable lease costs.
Accelerated amortization of lease assets is recognized from the date that the Company commences the plan to fully or
partially vacate a facility, for which there is no intent or ability to enter into a sublease, through the final vacate date.
Amounts of accelerated rent amortization that are included as a component of restructuring and related expense are not
included in the tables below, as the liability for the total lease payments for each respective facility is included as a
component of Operating lease liabilities in the Company’s consolidated balance sheets at December 31, 2024 and 2023,
both current and noncurrent (see Note 21). The Company may incur additional future expense if it is unable to sublease
other locations included in the Facilities Initiative.
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84
The components of restructuring and related expense for the years ended December 31, 2024, 2023 and 2022 were as
follows (in thousands):
Year ended December 31,
2024
2023
2022
Severance and related costs
$
4,036
$
9,875
$
5,230
Variable and other facilities-related costs
6,124
5,326
3,992
Accelerated amortization of lease assets due to cease-use
—
1,008
1,611
$
10,160
$
16,209
$
10,833
The Company’s President and CEO approved workforce reductions in 2024 for certain of the Company’s operating
locations to correspond with the current sales levels in those areas. The Company recorded $2.1 million in the year ended
December 31, 2024 related to these actions.
2023 Restructuring Plan
On February 22, 2023, the Company’s Board of Directors approved a strategic restructuring program (the “2023
Restructuring Plan”) to streamline the Company’s operations in order to support the Company’s investment in critical
growth areas. The 2023 Restructuring Plan includes, among other things, charges related to a workforce reduction. Any
potential positions eliminated in countries outside the United States are subject to local law and consultation requirements.
In connection with the 2023 Restructuring Plan, the Company recorded restructuring and related expense of $2.0
million and $9.9 million in the years ended December 31, 2024 and 2023, respectively, consisting entirely for severance
related costs. A summary of the 2023 Restructuring Plan accrual activity for the years ended December 31, 2024 and 2023
were as follows (in thousands):
Balance at
Initiatives
Balance at
January 1,
charged to
Cash
December 31,
2024
expense
payments
2024
Severance
$
671
$
2,003
$ (2,589)
$
85
Balance at
Initiatives
Balance at
January 1,
charged to
Cash
December 31,
2023
expense
payments
2023
Severance
$
—
$
9,875
$ (9,204)
$
671
The Company estimates that it will record nominal future expense under the 2023 Restructuring Plan.
2022 Restructuring Plan
On February 14, 2022, the Company’s Board of Directors approved a strategic restructuring program (the “2022
Restructuring Plan”) to streamline the Company’s operations in order to support the Company’s investment in critical
growth areas. The 2022 Restructuring Plan includes, among other things, charges related to a consolidation of facilities and
a workforce reduction. Any positions eliminated in countries outside the United States are subject to local law and
consultation requirements.
The Company recorded restructuring and related expense of $6.1 million and $6.3 million in connection with the 2022
Restructuring Initiative in the years ended December 31, 2024 and 2023, respectively. The amount for the year ended
December 31, 2023 was comprised of $5.3 million for variable and other facilities-related costs and $1.0 million for
accelerated amortization of lease assets no longer being used with no ability or intent to sublease. The Company estimates
that it will record approximately $5 million of expense in 2025 under the 2022 Restructuring Plan. A
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85
summary of the 2022 Restructuring Plan accrual activity for the years ended December 31, 2024 and 2023 were as follows
(in thousands):
Balance at
Initiatives
Balance at
January 1,
charged to
Cash
December 31,
2024
expense
payments
2024
Variable and other facilities-related costs
$
468
$
6,123
$ (6,244)
$
347
Balance at
Initiatives
Net transfer to
Balance at
January 1,
charged to
Cash
operating lease
December 31,
2023
expense payments
accounts
2023
Severance
$ 1,164
$
—
$ (1,164)
$
—
$
—
Variable and other facilities-related costs
890
5,326
(5,748)
—
468
Accelerated amortization of lease assets due to cease-use
—
1,008
—
(1,008)
—
$ 2,054
$ 6,334
$ (6,912)
$
(1,008)
$
468
Balance Sheet Classification
The current portions of accrued restructuring were $1.4 million and $1.1 million at December 31, 2024 and 2023,
respectively, and are included as components of Accrued expenses in the consolidated balance sheets. The long-term
portions of accrued restructuring are included as components of Other long-term liabilities in the consolidated balance
sheets. The long-term portions of accrued restructuring were $0.8 million and $1.1 million at December 31, 2024 and 2023,
respectively.
(14) DEBT
2024 Credit Facility
On June 21, 2024, the Company entered into a Senior Secured Credit Facilities Credit Agreement (the “2024 Credit
Facility” or “Credit Agreement”) as guarantor, with the Company’s wholly-owned subsidiary, Ribbon Communications
Operating Company, Inc., as the borrower (the “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 the Company 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. The excess proceeds are being used by the Company for
working capital and other general corporate purposes.
The 2024 Term Loan and the 2024 Revolver bear interest, at the Borrower’s option, at either the Alternate Base Rate
(“ABR”) or Term Secured Overnight Financing Rate ("SOFR") with an Applicable Margin for each (all as defined in the
2024 Credit Facility). Margins for the first six months are 5.25% per annum for ABR Loans and 6.25% per annum for
SOFR Loans. Thereafter, margins vary based on the Company’s 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 the Company 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 2024 Credit Facility.
The 2024 Credit Facility requires compliance with a Maximum Consolidated Net Leverage Ratio (the "Financial
Covenant"), as defined in the 2024 Credit Facility, which is tested on a quarterly basis. The Company was in compliance
with the Financial Covenant as of December 31, 2024.
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The indebtedness and other obligations under the 2024 Credit Facility are irrevocably and unconditionally guaranteed
on a joint and several basis by the Company and its subsidiaries (together, the "Guarantors"). The 2024 Credit Facility is
secured on a first-priority basis by liens on substantially all assets of the Borrower and the Guarantors.
2020 Credit Facility
On June 21, 2024, the Company used the proceeds from the 2024 Credit Facility to, among other things, repay all
amounts outstanding under its Senior Secured Credit Facilities Credit Agreement, dated March 3, 2020 (as amended, the
"2020 Credit Facility"), by and among the Company, 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"). The Company wrote off $2.0 million of debt issuance costs in conjunction with the early extinguishment of the
2020 Credit Facility.
On March 3, 2020, the Company entered into a Senior Secured Credit Facilities Credit Agreement (as amended, the
“2020 Credit Facility”), by and among the Company, as a guarantor, Ribbon Communications Operating Company, Inc., as
the borrower (“Borrower”), Citizens Bank, N.A. (“Citizens”), Santander Bank, N.A., and others as lenders, (“Lenders”).
The proceeds of the Credit Agreement were used, in part, to pay off in full all obligations of the Company under the 2019
Credit Facility.
The 2020 Credit Facility had a maturity date of March 2025 and originally provided for $500 million of commitments
from the 2020 Credit Facility Lenders to the Borrower, comprised of $400 million in term loans (the “2020 Term Loan
Facility”) and a $100 million facility available for revolving loans (the “2020 Revolving Credit Facility”). Under the 2020
Revolving Credit Facility, a $30 million sublimit was originally available for letters of credit and a $20 million sublimit
was available for swingline loans.
The indebtedness and other obligations under the 2020 Credit Facility were unconditionally guaranteed on a senior
secured basis by the Company, Edgewater Networks, Inc., a wholly-owned subsidiary of the Company, and
GENBAND Inc., wholly-owned subsidiary of the Company (together, the “2020 Credit Facility Guarantors”). The 2020
Credit Facility was secured by first-priority liens on substantially all of the assets of the Borrower and the 2020 Credit
Facility Guarantors, including substantially all of the assets of the Company.
The 2020 Credit Facility required compliance with certain financial covenants, including a minimum Consolidated
Fixed Charge Coverage Ratio and a maximum Consolidated Net Leverage Ratio (each as defined in the 2020 Credit
Facility, and each tested on a quarterly basis).
On March 10, 2022, the Company entered into the Fourth Amendment to the 2020 Credit Facility to increase the
Maximum Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility) and in conjunction, the Company
made a $15.0 million prepayment that was applied to the final payment due on the maturity date.
On June 30, 2022, the Company entered into the Fifth Amendment to the 2020 Credit Facility (the “Fifth
Amendment”) to increase the Maximum Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility) for 2022,
with the fourth quarter of 2022 increased to 4.75:1.00, the first and second quarters of 2023 declining to 3.25:1.00, and in
all subsequent quarters the ratio was to be fixed at 3.00:1.00. Also, the Fifth Amendment reduced the minimum
Consolidated Fixed Charge Coverage Ratio (as defined in the 2020 Credit Facility) in 2022, with the fourth quarter of 2022
reduced to 1.10:1.00 and in all subsequent quarters the ratio was to be fixed at 1.25:1.00. In addition, the Fifth Amendment
increased the maximum rate at which loans were to bear interest if the Company’s Consolidated Net Leverage Ratio for
any quarter was greater than 4.50:1.00. Specifically, loans incurred were to bear interest, at the Borrower’s option, at either
LIBOR plus a margin ranging from 1.50% to 4.50% per year, or the base rate plus 0.50%, or the prime rate plus a margin
ranging from 0.50% to 3.50% per year. The Fifth Amendment also allowed the Company to incur junior secured or
unsecured debt in an amount no less than $50 million, subject to certain conditions, including the requirement that 50% of
the aggregate amount of such incurred debt (net of certain costs, fees and other amounts) must be applied to prepay the
2020 Credit Facility, and compliance with certain leverage ratio-based covenant exceptions. In connection with the Fifth
Amendment, the Company made a $10.0 million voluntary prepayment that was applied to the final payment due on the
maturity date. Subsequent to the Fifth Amendment, the Company was required to make
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quarterly principal payments on the 2020 Term Loan aggregating approximately $5.0 million per quarter through
March 31, 2024 and $10.0 million in each of the three quarters thereafter, with the remaining and final payment due on the
maturity date in March 2025.
On March 24, 2023, the Company entered into the Sixth Amendment to the 2020 Credit Facility (the “Sixth
Amendment”) effective March 30, 2023. The Sixth Amendment, among other things, increased the Maximum
Consolidated Net Leverage Ratio (as defined in the 2020 Credit Facility), for the first, second and third quarters of 2023 to
4.50:1.00. In the fourth quarter of 2023 and the first quarter of 2024, the Maximum Consolidated Net Leverage Ratio
declined to 4.25:1.00 and 4.00:1.00, respectively. Also, the Sixth Amendment reduced the minimum Consolidated Fixed
Charge Coverage Ratio (as defined in the 2020 Credit Facility) to 1.10:1.00 through the first quarter of 2024. The Sixth
Amendment reduced the maximum borrowings allowed under the 2020 Revolving Credit Facility from $100 million to $75
million and the sublimit available for letters of credit was reduced from $30 million to $20 million. In addition, the Sixth
Amendment replaced LIBOR with SOFR as the alternative rate available to the Company for calculating interest owed
under the 2020 Credit Facility with the margin fixed at 4.5%. In conjunction with the Sixth Amendment, the Company
made a $75 million prepayment that was applied to the final payment due upon maturity in March 2025. The $75 million
prepayment was almost entirely funded with the net proceeds from the Private Placement and the sales of the Company’s
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 and were written off in conjunction with the early
extinguishment of the 2020 Credit Facility on June 21, 2024.
The Company’s interest rates under the 2020 Term Loan benefited from a hedge instrument that was in place,
specifically a fixed rate swap, until it was sold in March 2023 (see Note 15). Following the sale of the fixed rate swap in
March 2023, the Company’s interest rate was based upon U.S. dollar SOFR plus a fixed margin of 4.5%. The Company
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was in compliance with all covenants of the 2020 Credit Facility at December 31, 2023, including the Consolidated Net
Leverage Ratio calculation that considered the Company’s debt to include Preferred Stock.
The Company had the following outstanding borrowings, unamortized debt issuance costs and original issue discount,
letters of credit, interest rates, and remaining borrowing capacity under the 2024 Credit Facility and the 2020 Credit
Facility as of December 31, 2024 and 2023, respectively:
December 31,
2024
2023
Current portion of Term Debt
$
6,125
$
35,102
Long-term Debt, net of Current:
Long-term Debt, net of Current (Face Amount)
$
342,125
$
200,293
Original Issue Discount
(6,261)
—
Unamortized Debt Issuance Costs - Contra-Liability
(5,138)
(2,811)
Long-term Debt, net of Current
$
330,726
$
197,482
Total Face Amount of Borrowings
$
348,250
$
235,395
Unamortized Original Issue Discount and Debt Issuance Costs:
Other Assets
$
1,134
$
557
Long-Term Debt - Contra Liability
11,399
2,811
Total Unamortized Original Issue Discount and Debt Issuance Costs
$
12,533
$
3,368
Letters of Credit Outstanding
$
—
$
2,711
Remaining Borrowing Capacity
$
35,000
$
72,289
Average Interest Rates:
Term Loan
10.6 %
10.0 %
Letters of Credit
— %
4.5 %
The Company’s debt maturities as of December 31, 2024 were as follows:
Years ending December 31,
2025
$
6,125
2026
8,750
2027
13,125
2028
17,500
2029
302,750
$
348,250
Letters of Credit and Other Guarantees
The Company uses letters of credit, bank guarantees, and surety bonds in the course of its business. At December 31,
2024, the Company had $10.9 million of letters of credit, bank guarantees, and surety bonds outstanding (collectively,
"Guarantees") under various uncommitted facilities and no letters of credit outstanding under the 2024 Credit Facility. At
December 31, 2023, the Company had Guarantees aggregating $7.9 million, comprised of the $2.7 million of letters of
credit under the 2020 Credit Facility described above and $5.2 million of Other Guarantees. At December 31, 2024 and
2023, the Company had cash collateral of $2.7 million and $0.1 million, respectively, supporting the Guarantees, which are
reported in Restricted cash in the Company’s consolidated balance sheets.
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(15) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to financial market risk related to foreign currency fluctuations and changes in interest rates.
These exposures are actively monitored by management. To manage the volatility related to the exposure to changes in
interest rates, the Company may enter into derivative financial instruments. Management’s objective has been to reduce,
where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with changes in interest rates.
Ribbon’s policies and practices are to use derivative financial instruments only to the extent necessary to manage
exposures. Ribbon does not hold or issue derivative financial instruments for trading or speculative purposes.
The Company records derivatives on the balance sheet at fair value. The accounting for changes in the fair value of
derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a
hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary
to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of
an asset, liability, or firm commitment attributable to a specific risk, such as interest rate risk, are considered fair value
hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or
other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of
the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the
matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge, or the earnings effect of
the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended
to economically hedge certain of its risk even though hedge accounting does not apply or the Company elects not to apply
hedge accounting.
Cash Flow Hedge of Interest Rate Risk
As of December 31, 2023, the 2020 Term Loan Facility had an outstanding balance of $235.4 million and the
Revolving Credit Facility was undrawn. Borrowings under the 2020 Credit Facility had variable interest rates based on
SOFR (see Note 14). As a result of exposure to interest rate movements, during March 2020, the Company entered into an
interest rate swap arrangement, which effectively converted its $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.
On July 22, 2022, the Company sold $30 million of the notional amount of its interest rate swap back to its
counterparty for $1.5 million, reducing the notional amount of this swap to $370 million. On August 16, 2022, the
Company sold another $30 million of the notional amount of its interest rate swap back to its counterparty for $1.6 million,
reducing the notional amount to $340 million, which approximated the current level of our term loan debt then outstanding.
The gain in accumulated other comprehensive (loss) income related to the $60 million notional amount sold of $3.1 million
was being released into earnings on a straight line basis over the remaining term of the 2020 Credit Facility as a decrease to
interest expense until it was refinanced on June 21, 2024, the amortization of which totaled $0.4 million and $0.9 million
for the years ended December 31, 2024 and 2023, respectively. The remaining unamortized gain in accumulated other
comprehensive (loss) income of approximately $0.5 million was written off to interest expense in conjunction with the
refinancing of the 2020 Credit Facility on June 21, 2024. See Note 14 for a description of the refinancing.
On March 24, 2023, the Company received $9.4 million, consisting of $0.4 million of interest and $9.0 million for the
sale of $170 million of its $340 million notional amount interest rate swap back to its counterparty, reducing the notional
amount to $170 million. On March 27, 2023, the Company received $9.8 million, consisting of $0.4 million of interest and
$9.4 million for the sale of the remaining $170 million of its interest rate swap back to its counterparty. The portion of the
gain in accumulated other comprehensive (loss) income related to the term loan debt prepaid on the date of the final sale of
our swap totaled $7.3 million and was released into earnings immediately as Other expense, net. The portion of the gain in
accumulated other comprehensive (loss) income related to our remaining term loan debt balance was $12.0 million and was
being released into earnings on a straight line basis over the remaining term of the 2020 Credit Facility as a decrease to
interest expense until it was refinanced on June 21, 2024, the amortization of which totaled $3.0 million and $4.7 million
for the years ended December 31, 2024 and 2023, respectively. The remaining
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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. See Note 14 for a description of the
refinancing.
The Company’s objectives in using interest rate derivatives have been to add stability to interest expense and to
manage its exposure to interest rate movements. To accomplish this objective, the Company has used an interest rate swap
as part of its 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 the Company making fixed-rate payments over the life of the
agreements without 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 consolidated balance sheet and is subsequently reclassified into
earnings in the period that the hedged forecasted transactions affect earnings. During the year ended December 31, 2023,
such a derivative was used to hedge the variable cash flows associated with the outstanding borrowings under the 2020
Credit Facility and the Company accounted for this derivative as an effective hedge until the final portion of the swap was
sold on March 27, 2023. Any ineffective portion of the change in the fair value of the derivative would have been
recognized directly in earnings. However, there was no hedge ineffectiveness recorded over the life of the swap.
Amounts reported in Accumulated other comprehensive income related to the Company’s derivative were reclassified
to interest expense as interest was accrued on the Company’s variable-rate debt. The impact of the Company’s derivative
financial instrument on its consolidated statements of comprehensive loss for the years ended December 31, 2024 and 2023
was as follows, net of tax (in thousands):
Year ended December 31,
2024
2023
Gain (loss) recognized in other comprehensive income (loss) on swap, net of tax
$
—
$
(2,715)
Amount reclassified from accumulated other comprehensive income to other expense, net
upon sale of swap, net of tax
—
(5,099)
Amount reclassified from accumulated other comprehensive income to interest expense
(6,019)
(7,300)
Unrealized gain (loss) on interest rate swap, net of reclassifications and amortization
$
(6,019)
$
(15,114)
The Company had no derivative assets or liabilities at December 31, 2024 or 2023.
(16) PREFERRED STOCK AND WARRANTS
On March 28, 2023, the Company issued 55,000 shares of Preferred Stock to investors in the Private Placement at a
price of $970 per share, along with 4,858,090 Warrants with an exercise price of $3.77 per share.
On June 25, 2024, the Company redeemed the Preferred Stock with a portion of the proceeds from the refinancing of
the 2020 Credit Facility at a rate of 103% for a total of approximately $63.5 million. The Warrants remain outstanding and
without modification. See Note 14 for a description of the refinancing of the 2020 Credit Facility.
The Company accounted for the Preferred Stock until it was redeemed and continues to account for the Warrants as
liability-classified instruments based on an assessment of their specific terms in accordance with ASC Topic 480,
Distinguishing Liabilities from Equity. The fair value option was elected for the Preferred Stock, as the Company
considered fair value to best reflect its expected future economic value. These liabilities are remeasured to fair value at
each reporting date using the same valuation methodology applied upon issuance using current input assumptions.
The value of the Preferred Stock was calculated quarterly through March 31, 2024 using the Black-Derman-Toy
(BDT) stochastic yield lattice model to capture the optimal timing of repayment, increasing dividend rate and other features
and the value of the Warrants is calculated using the Black-Scholes Pricing Model.
Changes in the fair value of the Preferred Stock and Warrants are reported as Other expense, net in the Company’s
consolidated statements of operations.
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91
The Company determined the fair value of the Warrants using Level 3 input. The key assumptions input into the
models utilized were as follows as of December 31, 2024 and 2023:
December 31,
2024
2023
Stock price
$
4.16
$
2.90
Strike price
$
3.77
$
3.77
Risk-free rate
4.21 %
3.95 %
Volatility
57.5 %
60.5 %
Dividend yield
0.0 %
0.0 %
Time to expiration (years)
2.2
3.2
Fair value of Warrant per share
$
1.66
$
1.09
The changes in the Company’s Preferred Stock for the year ended December 31, 2024 and 2023 were as follows (in
thousands):
Year ended December 31,
2024
2023
Balance at beginning of year
$
53,337
$
—
Issued
—
47,854
Payable in-kind dividends
2,743
3,935
Fair value adjustments
5,605
1,548
Call premium (3%)
1,851
—
Redemption (June 25, 2024)
(63,536)
—
Balance at end of year
$
—
$
53,337
The changes in the Company’s Warrant liabilities for the years ended December 31, 2024 and 2023 were as follows (in
thousands):
Year ended December 31,
2024
2023
Balance at beginning of year
$
5,295
$
—
Issued
—
5,496
Fair value change
2,769
(201)
Balance at end of year
$
8,064
$
5,295
The Preferred Stock, redeemed on June 25, 2024, was subordinate to the Company’s indebtedness and senior to the
Company’s common stock or other equity. Holders of the Preferred Stock were entitled to cumulative dividends that
accrued quarterly. Dividends were payable in-kind during the first year at a rate of 9.25%. At the Company’s option, the
dividends were payable in-kind or in cash during the second year at a rate of 9.75%. Dividends thereafter were to be
payable in cash at a rate of 12.00%. The proceeds from the Preferred Stock issuance were approximately $53.4 million,
including $10.0 million from existing related party stockholders. Offering costs paid by the Company of approximately
$3.5 million were recorded in Other expense, net in the year ended December 31, 2023. The net proceeds from the Private
Placement were used for the repayment of debt. The Preferred Stock was redeemable on or after the first and second
anniversaries of the closing date at a rate of 103% and 102%, respectively.
The Warrants are immediately exercisable and upon an event such as a merger, consolidation, asset sale or similar
change of control, the Warrants may be exercised and the holders may vote the underlying shares of common stock. In
connection with the Private Placement, the Company provided the investors with certain registration rights relating to the
Preferred Stock, the Warrants and the shares of the Company’s common stock underlying the Warrants, that required the
Company to file a registration statement on Form S-3 with the SEC within 30 days following the closing date of the Private
Placement. The registration requirement was completed on May 19, 2023.
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92
(17) REVENUE RECOGNITION
The Company’s typical performance obligations include the following:
When Performance Obligation is Typically
Performance Obligation
Satisfied
When Payment is Typically Due
Software and Product Revenue
Software licenses (perpetual or term)
For perpetual licenses, typically when
made available for download (point in
time); for term-based licenses, at the
beginning of the specified term (point
in time)
Generally, within 30-60 days of
invoicing, except for term licenses
which may be paid for over time
Software licenses (subscription)
Upon activation of hosted site (over
time)
Generally, within 30-60 days of
invoicing
Hardware
When control of the hardware passes
to the customer; typically, upon
delivery (point in time)
Generally, within 30-60 days of
invoicing
Software upgrades
Upon transfer of control; typically,
when made available for download
(point in time)
Generally, within 30-60 days of
invoicing
Customer Support Revenue
Customer support
Ratably over the course of the support
contract (over time)
Generally, within 30-60 days of
invoicing
Professional Services
Other professional services (excluding
training services)
As work is performed (over time),
typically on the input method based
on hours incurred
Generally, within 30-60 days of
invoicing (upon completion of
services)
Training
As the training is delivered (over
time), typically one to five days
Generally, within 30-60 days of
services being performed
Significant Judgments
The Company’s contracts with customers often include promises to transfer multiple products and services to the
customer. Determining whether products and services are considered distinct performance obligations that should be
accounted for separately versus together may require significant judgment.
Judgment is required to determine the SSP for each distinct performance obligation. The Company typically has more
than one SSP for individual products and services due to the stratification of those products and services by customers and
circumstances. In these instances, the Company may use information such as the size of the customer and geographic
region in determining the SSP.
Deferred Revenue
Deferred revenue is a contract liability representing amounts collected from or invoiced to customers in excess of
revenue recognized. This results primarily from the billing of annual customer support agreements where the revenue is
recognized over the term of the agreement. The value of deferred revenue will increase or decrease based on the timing of
invoices and recognition of revenue.
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93
Disaggregation of Revenue
The Company disaggregates its revenue from contracts with customers based on the nature of the products and
services and the geographic regions in which each customer is domiciled. The Company’s total revenue for the years ended
December 31, 2024, 2023 and 2022 was disaggregated geographically as follows:
Service
Service
revenue
Product
revenue
(professional
Year ended December 31, 2024
revenue
(maintenance)
services)
Total revenue
United States
$ 201,340
$
133,182
$
61,462
$
395,984
Europe, Middle East and Africa
129,824
71,856
32,999
234,679
Asia Pacific
100,766
39,863
10,941
151,570
Other
15,299
29,681
6,668
51,648
$ 447,229
$
274,582
$ 112,070
$
833,881
Service
Service
revenue
Product
revenue
(professional
Year ended December 31, 2023
revenue
(maintenance)
services)
Total revenue
United States
$ 161,945
$
133,737
$
48,733
$
344,415
Europe, Middle East and Africa
151,938
75,478
34,485
261,901
Asia Pacific
115,923
39,891
11,269
167,083
Other
15,344
30,546
7,050
52,940
$ 445,150
$
279,652
$ 101,537
$
826,339
Service
Service
revenue
Product
revenue
(professional
Year ended December 31, 2022
revenue
(maintenance)
services)
Total revenue
United States
$ 175,189
$
132,655
$
44,819
$
352,663
Europe, Middle East and Africa
147,523
75,948
29,310
252,781
Asia Pacific
95,828
41,677
13,594
151,099
Other
24,140
31,815
7,262
63,217
$ 442,680
$
282,095
$
94,985
$
819,760
The Company’s product revenue from its direct sales program and from indirect sales through its channel partner
program for the years ended December 31, 2024, 2023 and 2022 was as follows (in thousands):
Year ended December 31,
2024
2023
2022
Indirect sales through channel partner program
$ 170,426
$ 157,495
$ 131,998
Direct sales
276,803
287,655
310,682
$ 447,229
$ 445,150
$ 442,680
The Company’s product revenue from sales to enterprise customers and from sales to service provider customers for
the years ended December 31, 2024, 2023 and 2022 was as follows (in thousands):
Year ended December 31,
2024
2023
2022
Sales to enterprise customers
$ 176,064
$ 143,853
$ 125,664
Sales to service provider customers
271,165
301,297
317,016
$ 447,229
$ 445,150
$ 442,680
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94
The Company’s product revenue and service revenue components by segment for the years ended December 31, 2024,
2023 and 2022 was as follows (in thousands):
Year ended December 31,
2024
2023
2022
Product revenue:
Cloud and Edge
211,001
184,730
215,770
IP Optical Networks
236,228
260,420
226,910
Total product revenue
447,229
445,150
442,680
Service revenue:
Maintenance:
Cloud and Edge
212,988
219,939
222,238
IP Optical Networks
61,594
59,713
59,857
Total maintenance revenue
274,582
279,652
282,095
Professional services:
Cloud and Edge
81,168
72,979
70,130
IP Optical Networks
30,902
28,558
24,855
Total professional services revenue
112,070
101,537
94,985
Total service revenue
386,652
381,189
377,080
Revenue Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled
receivables, which are contract assets, and customer advances and deposits, which are contract liabilities, in the Company’s
consolidated balance sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms,
either at periodic intervals or upon achievement of contractual milestones. Billing may occur subsequent to revenue
recognition, resulting in contract assets. The Company may receive advances or deposits from its customers before revenue
is recognized, resulting in contract liabilities which are classified as deferred revenue. These assets and liabilities are
reported in the Company’s consolidated balance sheets on a contract-by-contract basis as of the end of each reporting
period. Changes in the contract asset and liability balances during the years ended December 31, 2024 and 2023 were not
materially impacted by any factors other than billing and revenue recognition. Nearly all of the Company’s deferred
revenue balance is related to services revenue, primarily customer support contracts. Unbilled receivables stem primarily
from engagements where services have been performed; however, billing cannot occur until services are completed.
In some arrangements, the Company allows customers to pay for term-based software licenses and products over the
term of the software license. The Company also sells SaaS-based software under subscription arrangements, with payment
terms over the term of the SaaS agreement. Amounts recognized as revenue in excess of amounts billed are recorded as
unbilled receivables. Unbilled receivables that are anticipated to be invoiced in the next twelve months are included in
Accounts receivable on the Company’s consolidated balance sheets. The changes in the Company’s accounts receivable,
unbilled receivables and deferred revenue balances for the years ended December 31, 2024 and 2023 were as follows (in
thousands):
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95
Unbilled
Deferred
Deferred
Accounts
accounts
revenue
revenue
receivable receivable
(current)
(long-term)
Balance at January 1, 2024
$ 186,938
$ 81,483
$ 113,381
$ 19,218
Increase (decrease), net
(10,363)
(3,340)
5,914
1,773
Balance at December 31, 2024
$ 176,575
$ 78,143
$ 119,295
$ 20,991
Unbilled
Deferred
Deferred
Accounts
accounts
revenue
revenue
receivable receivable
(current)
(long-term)
Balance at January 1, 2023
$ 170,969
$ 96,275
$ 113,939
$ 19,254
Increase (decrease), net
15,969
(14,792)
(558)
(36)
Balance at December 31, 2023
$ 186,938
$ 81,483
$ 113,381
$ 19,218
The Company recognized approximately $110 million of revenue in the year ended December 31, 2024 that was
recorded as deferred revenue at December 31, 2023 and approximately $108 million of revenue in the year ended
December 31, 2023 that was recorded as deferred revenue at December 31, 2022. Of the Company’s deferred revenue
reported as long-term in its consolidated balance sheet at December 31, 2024, the Company expects that approximately $10
million will be recognized as revenue in 2026, approximately $5 million will be recognized as revenue in 2027 and
approximately $6 million will be recognized as revenue in 2028 and beyond.
The Company applies the optional exemption of not disclosing the transaction price allocated to the remaining
performance obligation for its contracts with an original duration of less than one year. In 2024, the Company entered into
a contract with an existing customer that has revenue allocated to remaining performance obligations, which includes
unearned revenue and amounts that will be invoiced and recognized as revenue in future periods of $285 million as of
December 31, 2024. The Company expects to recognize the remaining revenue over the next three years.
All freight-related customer invoicing is recorded as revenue, while the shipping and handling costs that occur after
control of the promised goods or services transfer to the customer are reported as fulfillment costs, a component of Cost of
revenue - product in the Company’s consolidated statements of operations.
Deferred Commissions Cost
Sales commissions earned by the Company’s employees are considered incremental and recoverable costs of obtaining
a contract with a customer. The payments related to these costs have been deferred on our consolidated balance sheet and
are being amortized over the expected life of the customer contract, which is generally five years. At December 31, 2024
and 2023, the Company had $2.8 million and $3.0 million, respectively, of deferred sales commissions capitalized.
(18) OPERATING SEGMENT INFORMATION
The Company has two operating and reportable segments, Cloud and Edge and IP Optical Networks, that align with
the way the business is managed. The Company’s CODM, its President and Chief Executive Officer, makes key operating
decisions and assesses performance based upon these reportable segments.
The Cloud and Edge segment provides secure and reliable software and hardware products, solutions and services for
enabling Voice over Internet Protocol ("VoIP") communications, Voice over Long-Term Evolution ("VoLTE") and Voice
Over 5G ("VoNR") communications, and Unified Communications and Collaboration ("UC&C") within service provider
and enterprise networks and from the cloud. The Cloud and Edge products are increasingly software-centric and cloud-
native for deployment on private, public or hybrid cloud infrastructures, in data centers, on enterprise premises and within
service provider networks. Ribbon's Cloud and Edge product portfolio consists primarily of its Session Border Controller
("SBC") products and its Network Transformation products.
The IP Optical Networks segment provides high-performance, secure solutions for IP networking and optical
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96
transport, supporting wireless networks including 5G, metro and edge aggregation, core networking, data center
interconnect, legacy transformation and transport solutions for wholesale carriers. This portfolio is offered to service
provider, enterprise and industry verticals with critical transport network infrastructures including utilities, government,
defense, transportation, and education and research.
The Company does not provide segment asset information as such information is not provided to the CODM and
accordingly, asset information is not used in assessing segment performance. Segment revenue and expenses included in
the tables below represent direct revenue and expense attributable to each segment. Please see Note 10 for information
regarding the allocation of goodwill between segments.
The CODM utilizes adjusted gross profit to evaluate each segment's performance. The Company calculates adjusted
gross profit by excluding from cost of revenue both amortization of acquired technology and stock-based compensation
and may also exclude other items in future periods that the Company believes are not part of the Company's core business.
The Company uses adjusted gross profit to develop its annual budget and quarterly forecasts. The CODM analyzes
adjusted gross profit compared to the annual budget and quarterly forecasts to allocate resources. Ribbon’s calculation of
adjusted gross profit may not be comparable to similarly titled measures used by other companies. See below for a
reconciliation of segment adjusted gross profit to gross profit and loss before income taxes.
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97
The tables below present significant segment expenses regularly reviewed by the CODM for the years ended
December 31, 2024, 2023 and 2022 (in thousands):
Year ended December 31,
2024
2023
2022
Segment revenue:
Cloud and Edge
$ 505,157 $ 477,647 $ 508,137
IP Optical Networks
328,724
348,692
311,623
Revenue
$ 833,881 $ 826,339 $ 819,760
Year ended December 31,
2024
2023
2022
Segment cost of revenue:
Cloud and Edge
$ 175,940 $ 177,629 $ 197,840
IP Optical Networks
218,429
240,627
220,984
Cost of revenue
$ 394,369 $ 418,256 $ 418,824
Year ended December 31,
2024
2023
2022
Segment adjusted gross profit:
Cloud and Edge
$ 338,194 $ 314,594 $
330,395
IP Optical Networks
127,836
124,436
104,711
Total segment adjusted gross profit
466,030
439,030
435,106
Reconciliation of segment adjusted gross profit to gross profit and loss before
income taxes
Stock-based compensation expense
(1,625)
(2,657)
(2,628)
Amortization of acquired technology
(24,893)
(28,290)
(31,542)
Gross profit
439,512
408,083
400,936
Research and development expense
179,941
190,660
203,676
Sales and marketing expense
137,830
137,460
147,766
General and administrative expense
68,740
54,962
51,053
Amortization of acquired intangible assets
25,969
28,601
29,646
Acquisition-, disposal- and integration-related expense
—
4,476
6,286
Restructuring and related expense
10,160
16,209
10,833
Interest expense, net
33,821
27,320
19,780
Other expense, net
29,119
3,768
44,495
Loss before income taxes
$ (46,068)
$ (55,373)
$ (112,599)
Year ended December 31,
2024
2023
2022
Segment depreciation expense:
Cloud and Edge
$
9,337 $
9,798 $
10,758
IP Optical Networks
4,202
4,307
4,537
Depreciation expense
$
13,539 $
14,105 $
15,295
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98
(19) MAJOR CUSTOMERS
The following customers contributed 10% or more of the Company’s revenue in at least one of the years ended
December 31, 2024, 2023 and 2022:
Year ended December 31,
2024
2023
2022
Verizon Communications Inc.
14 %
11 %
15 %
At December 31, 2024 and 2023, no customer accounted for 10% or more of the Company’s accounts receivable
balance. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on
accounts receivable. The Company maintains an allowance for doubtful accounts and such losses have historically been
within management’s expectations.
(20) STOCK-BASED COMPENSATION PLANS
The Company grants stock-based compensation to employees, officers and non-employee directors, as well as
consultants and advisors of the Company and its subsidiaries under its Amended and Restated 2019 Incentive Award Plan
which provides for the award of stock options, stock appreciation rights, restricted stock awards (“RSAs”), performance-
based stock awards, restricted stock units (“RSUs”), performance-based stock units (“PSUs”) and other stock- or cash-
based awards.
Executive Equity Arrangements
Inducement Awards
In connection with his appointment as President and Chief Executive Officer of Ribbon on March 16, 2020, the
Company awarded Bruce McClelland sign-on equity grants, comprised of RSUs and a PSU grant with both market and
service conditions. The market conditions surrounding the PSUs granted were not met by the expiration date of
September 1, 2024 and therefore, the associated shares have been cancelled.
Performance-Based Stock Grants
In addition to granting RSAs and RSUs to its executives and certain of its employees, the Company also grants PSUs
to certain of its executives and certain other employees. Vesting periods for RSAs, RSUs, and PSUs granted range from
one to three years. PSUs granted consist of 60% that have both performance and service conditions (the “Performance
PSUs”) and 40% that have both market and service conditions (the “Market PSUs”). Each Performance PSU is comprised
of three consecutive fiscal year performance periods beginning in the year of grant, with one-third of the Performance
PSUs attributable to each fiscal year performance period. The Market PSUs have one three-year performance period,
beginning January 1 in the year of grant and ending on December 31, three years thereafter. The number of shares of
common stock underlying the PSUs that can be earned will not exceed 200% of the Performance or Market PSUs. Shares
subject to PSUs that fail to be earned will be forfeited.
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99
Restricted Stock Units
The activity related to the Company’s RSUs for the year ended December 31, 2024 was as follows:
Weighted
Average
Grant Date
Shares
Fair Value
Unvested balance at January 1, 2024
7,091,368
$
3.18
Granted
1,943,760
$
3.24
Vested
(4,653,037)
$
3.33
Forfeited
(384,983)
$
3.16
Unvested balance at December 31, 2024
3,997,108
$
3.04
The total grant date fair value of restricted stock underlying RSUs that vested was $15.5 million in the year ended
December 31, 2024, $19.3 million in the year ended December 31, 2023 and $18.1 million in the year ended December 31,
2022.
Performance-Based Stock Units
The activity related to the Company’s PSUs for the year ended December 31, 2024 was as follows:
Weighted
Average
Grant Date
Shares
Fair Value
Unvested balance at January 1, 2024
6,297,931
$
2.07
Granted
1,884,337
$
4.03
Vested
(298,586)
$
3.12
Forfeited
(4,277,790)
$
1.44
Unvested balance at December 31, 2024
3,605,892
$
3.75
The total grant date fair value of restricted stock underlying PSUs that vested was $0.9 million in the year ended
December 31, 2024, $2.6 million in the year ended December 31, 2023 and $0.9 million in the year ended December 31,
2022.
Stock-Based Compensation
The consolidated statements of operations included stock-based compensation for the years ended December 31, 2024,
2023 and 2022 as follows (in thousands):
Year ended December 31,
2024
2023
2022
Product cost of revenue
$
300
$
510
$
471
Service cost of revenue
1,325
2,147
2,157
Research and development
3,166
4,933
5,108
Sales and marketing
4,397
7,111
6,074
General and administrative
6,898
7,105
4,897
$
16,086
$
21,806
$
18,707
At December 31, 2024, there was $14.1 million, net of expected forfeitures, of unrecognized stock-based
compensation expense related to unvested RSUs and PSUs. This expense is expected to be recognized over a weighted
average period of approximately 1.2 years. The Company issues authorized and unissued shares under its equity plans and
at December 31, 2024, there were approximately 2.0 million total shares of common stock reserved for that purpose with
0.1 million of those shares authorized only for issuance of shares upon exercise of stock options.
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100
(21) LEASES
The Company has operating leases for corporate offices and research and development facilities and has historically
had finance leases for certain equipment. Operating leases are reported separately in the Company’s consolidated balance
sheets. Assets acquired under finance leases, if any, are included in Property and equipment, net, in the consolidated
balance sheets.
The Company determines if an arrangement is a lease at inception. A contract is determined to contain a lease
component if the arrangement provides the Company with a right to control the use of an identified asset. Lease
agreements may include lease and non-lease components. In such instances for all classes of underlying assets, the
Company does not separate lease and non-lease components but rather, accounts for the entire arrangement under leasing
guidance. Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense for these
leases is recognized on a straight-line basis over the lease term.
Right-of-use assets and lease liabilities are initially measured based on the present value of the future minimum fixed
lease payments (i.e., fixed payments in the lease contract) over the lease term at the commencement date. As the
Company’s existing leases do not have a readily determinable implicit rate, the Company uses its incremental borrowing
rate based on the information available at the commencement date in determining the present value of future minimum
fixed lease payments. The Company calculates its incremental borrowing rate to reflect the interest rate that it would have
to pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment over a
similar term and considers its historical borrowing activities and market data from entities with comparable credit ratings in
this determination. The measurement of the right-of-use asset also includes any lease payments made prior to the
commencement date (excluding any lease incentives) and initial direct costs incurred. The Company assessed its right-of-
use assets for impairment as of December 31, 2024 and 2023 and determined no impairment has occurred.
Lease terms may include options to extend or terminate the lease and the Company incorporates such options in the
lease term when it has the unilateral right to make such an election and it is reasonably certain that the Company will
exercise that option. In making this determination, the Company considers its prior renewal and termination history and
planned usage of the assets under lease, incorporating expected market conditions.
For operating leases, lease expense for minimum fixed lease payments is recognized on a straight-line basis over the
lease term. The expense for finance leases includes both interest and amortization expense components, with the interest
component calculated based on the effective interest method and the amortization component calculated based on straight-
line amortization of the right-of-use asset over the lease term. Lease contracts may contain variable lease costs, such as
common area maintenance, utilities and tax reimbursements that vary over the term of the contract. Variable lease costs are
not included in minimum fixed lease payments and as a result, are excluded from the measurement of the right-of-use
assets and lease liabilities. The Company expenses all variable lease costs as incurred.
Certain leased facilities are being partially or fully vacated as part of the 2022 Restructuring Plan and for some of
those facilities, the Company has no plans to enter into sublease agreements. Accordingly, the Company accelerated the
amortization of those lease assets through the planned cease-use date of each facility, resulting in additional amortization
expense of $1.0 million and $1.6 million in the years ended December 31, 2023 and 2022, respectively. No additional
amortization was recorded in the year ended December 31, 2024. No variable lease costs were accrued in the years ended
December 31, 2024 or 2023 for future estimated variable expenses related to assets partially or fully vacated with no intent
or ability to sublease. Variable lease costs for the year ended December 31, 2022 included accruals of $1.0 million for all
estimated future variable lease costs related to those facilities.
All incremental accelerated amortization and accrual for all estimated future variable lease costs are included in
Restructuring and related expense in the Company’s consolidated statements of operations for the years ended December
31, 2024, 2023 and 2022. At December 31, 2024 and 2023, the Company had accruals of $1.1 million and $1.5 million,
respectively, for all future anticipated variable lease costs related to these facilities. The Company may incur additional
future expense if it is unable to sublease other locations included in the Facilities Initiative.
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101
The Company leases its corporate offices and other facilities under operating leases, which expire at various times
through 2033.
The Company’s right-of-use lease assets and lease liabilities at December 31, 2024 and 2023 were as follows (in
thousands):
December 31,
Classification
2024
2023
Assets:
Operating lease assets
Operating lease right-of-use assets
$ 34,544
$ 39,783
Liabilities:
Current Operating
Operating lease liabilities
$ 9,443
$ 15,739
Non-Current Operating
Operating lease liabilities, net of current
37,376
38,711
Total Operating lease liabilities
$ 46,819
$ 54,450
The components of lease expense for the years ended December 31, 2024, 2023 and 2022 were as follows (in
thousands):
Year ended December 31,
2024
2023
2022
Operating lease cost*
$
16,637
$
18,767
$
21,121
Finance lease cost:
Amortization of leased assets
—
—
287
Interest on lease liabilities
—
—
13
Short-term lease cost
13,616
13,978
14,209
Variable lease costs (costs excluded from minimum fixed lease payments)**
3,308
3,364
4,007
Sublease income
(788)
(1,376)
(1,647)
Net lease cost
$
32,773
$
34,733
$
37,990
*
No accelerated amortization was recorded in the year ended December 31, 2024. Operating lease costs for the years
ended December 31, 2023 and 2022 include $1.0 million, and $1.6 million, respectively, of accelerated amortization
for certain assets partially or fully vacated with no intent or ability to sublease.
**
No variable costs were accrued in the years ended December 31, 2024 or 2023.Variable lease costs for the year ended
December 31, 2022 included accruals of $1.0 million for all future estimated variable expenses related to certain assets
partially or fully vacated with no intent or ability to sublease.
Cash flow information related to the Company’s leases for the years ended December 31, 2024, 2023 and 2022 was as
follows (in thousands):
Year ended December 31,
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$ 18,619
$ 19,021 $ 20,363
Operating cash flows from finance leases
$
—
$
— $
13
Financing cash flows from finance leases
$
—
$
— $
595
Other information related to the Company’s leases as of December 31, 2024 and 2023 was as follows (in thousands):
December 31,
December 31,
2024
2023
Weighted average remaining lease term (years):
Operating leases
5.35
5.50
Weighted average discount rate:
Operating leases
7.73 %
6.34 %
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Future minimum fixed lease payments under noncancelable leases at December 31, 2024 were as follows (in
thousands):
Operating
leases
2025
$
12,654
2026
11,549
2027
10,221
2028
7,905
2029
5,620
2030 and beyond
9,037
Total lease payments
56,986
Less: interest
(10,167)
Present value of lease liabilities
$
46,819
(22) EMPLOYEE DEFINED CONTRIBUTION PLANS
The Company offers 401(k) savings plans to eligible employees. The Company matches 50% of each employee’s
contributions to the 401(k) program up to 4% of the employee’s eligible earnings, for a maximum match of 2% of eligible
earnings.
The Company recorded expense related to its employee defined contribution plans aggregating $3.0 million, $3.0
million and $3.3 million in the years ended December 31, 2024, 2023 and 2022, respectively.
(23) NON-U.S. EMPLOYEE DEFINED BENEFIT PLANS
The Company has defined benefit retirement plans that cover certain employees at various international locations. The
Company’s policy is to contribute amounts at least sufficient to satisfy the minimum amount required by applicable law
and regulations or to directly pay benefits where appropriate. Benefits under the defined benefit plans are typically based
either on years of service and the employee’s compensation (generally during a fixed number of years immediately before
retirement) or on annual credits. The range of assumptions that are used for these non-U.S. defined benefit plans reflect the
different economic environments within the various countries.
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A reconciliation of the changes in the benefit obligations and fair value of the assets of the defined benefit plans for
the years ended December 31, 2024 and 2023, the funded status of the plans, and the amounts recognized in the
consolidated balance sheets as of December 31, 2024 and 2023 were as follows (in thousands):
Year ended December 31,
2024
2023
Changes in projected benefit obligations:
Projected benefit obligation, beginning of year
$
20,769
$
21,257
Service cost
1,325
1,193
Interest cost
926
938
Participant contributions
—
—
Net actuarial loss (gain) on obligation
343
(402)
Settlement
(945)
(1,773)
Benefits paid
(281)
(444)
Projected benefit obligation, end of year
$
22,137
$
20,769
Changes in plan assets:
Fair value of plan assets, beginning of year
$
13,609
$
14,629
Actual return on plan assets
1,367
183
Employer contributions
707
975
Participant contributions
29
39
Benefits paid
(1,226)
(2,217)
Fair value of plan assets, end of year
$
14,486
$
13,609
Funded status at end of year
$
(7,651)
$
(7,160)
Amounts recognized in accumulated other comprehensive income consist of:
Prior service (credit) cost
$
(2,841)
$
(3,161)
Net actuarial (gain) loss
(1,148)
(1,100)
$
(3,989)
$
(4,261)
Amounts recognized in the consolidated balance sheets consist of:
Other assets (non-current pension asset)
$
1,567
$
1,013
Accrued expenses and other (current pension liability)
(848)
(764)
Other long-term liabilities (non-current pension liability)
(8,370)
(7,409)
Net amount recognized
$
(7,651)
$
(7,160)
The increase in the underfunded status of the Company’s defined benefit plans at December 31, 2024 compared to
December 31, 2023 was primarily due to normal benefit accruals combined with significant lump sum payments in Israel
of $0.9 million.
Plans with underfunded or non-funded accumulated benefit obligations at December 31, 2024 and 2023 were as
follows (in thousands):
December 31,
2024
2023
Aggregate projected benefit obligation
$
11,997
$
10,811
Aggregate accumulated benefit obligation
$
9,586
$
8,547
Aggregate fair value of plan assets
$
2,779
$
2,638
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Plans with overfunded accumulated benefit obligations at December 31, 2024 and 2023 were as follows (in
thousands):
December 31,
2024
2023
Aggregate projected benefit obligation
$
10,140
$
9,958
Aggregate accumulated benefit obligation
$
8,160
$
7,958
Aggregate fair value of plan assets
$
11,707
$
10,971
Net periodic benefit costs for the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands):
Year ended December 31,
2024
2023
2022
Service cost
$
1,325
$
1,193
$
1,355
Interest cost
926
938
563
Expected return on plan assets
(592)
(607)
(266)
Settlement (credit) charge
(234)
(417)
808
Amortization of prior service cost
(320)
(320)
(320)
Amortization of net (gain) loss
(150)
(165)
275
Net periodic benefit costs
$
955
$
622
$
2,415
Expected benefit payments for the next ten years are as follows (in thousands):
Years ending December 31,
2025
$
1,347
2026
1,301
2027
1,825
2028
2,482
2029
2,369
2030 to 2034
10,998
$
20,322
The changes in plan assets and benefit obligations recognized in other comprehensive income (loss) before tax for
the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands):
Year ended December 31,
2024
2023
2022
Net (gain) loss
$
(432)
$
22
$
(4,666)
Amortization of net gain (loss)
150
165
(275)
Amortization of prior service credit (cost)
320
320
320
Settlement credit (charge)
234
417
(808)
Total recognized in other comprehensive income (loss)
$
272
$
924
$
(5,429)
The Company defers all actuarial gains and losses resulting from variances between actual results and economic
estimates or actuarial assumptions. The unrecognized actuarial gains and losses are recorded as unrealized pension
actuarial gains (losses) in the Company’s consolidated balance sheets as a component of Accumulated other comprehensive
income. These unrecognized gains and losses are amortized as a component of net periodic benefit cost when the net gains
and losses exceed 10% of the greater of the market value of plan assets or the projected benefit obligation at the beginning
of the year.
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The principal weighted average assumptions used to determine the benefit obligation at December 31, 2024 and 2023
were as follows:
December 31,
2024
2023
Discount rate
4.33 %
4.65 %
Rate of compensation increase
4.06 %
3.95 %
Interest crediting rate
1.25 %
1.25 %
The principal weighted average assumptions used to determine net period benefit cost for the years ended
December 31, 2024, 2023 and 2022 were as follows:
Year ended December 31,
2024
2023
2022
Discount rate
4.65 %
4.74 %
2.24 %
Expected long-term return on plan assets
4.19 %
4.34 %
1.79 %
Rate of compensation increase
4.08 %
4.02 %
3.90 %
Interest crediting rate
1.25 %
1.25 %
1.25 %
Assumed discount rates are used in the measurement of the projected and accumulated benefit obligations, as well as
the service and interest cost components of net periodic pension cost. Estimated discount rates reflect the rates at which the
pension benefits could be effectively settled. For each defined benefit plan, the Company chooses an estimated discount
rate from a readily available market index rate, based upon high-quality fixed income investments, specific to the country
or economic zone in which the benefits are paid and taking into account the duration of the plan and the number of
participants.
The Company’s plans in both the Netherlands and Switzerland are funded through insurance contracts, which have
historically provided guaranteed interest credit. The fair value of these contracts is derived from the insurance companies’
assessment of the minimum value of the benefits provided by the insurance contracts. Due to the plan amendment in 2020
that changed the benefit structure of the Netherlands plan, the Company no longer has any obligation related to this plan
beyond the payment of insurance premiums. Therefore, there is no projected benefit obligation and no plan assets in the
Netherlands. The methodology used to value the Switzerland plan assets assumes that the value of the plan assets equals
the guaranteed insured benefits. For consistency, the same discount rate used in the valuation of the benefit obligations is
used to place a value on the plan assets. The assets are assumed to grow each year in line with the discount rate, and
therefore, the expected return on the assets is set equal to the discount rate. The fair value of the plan assets in Switzerland
was $2.8 million at December 31, 2024 and $2.6 million at December 31, 2023. The Company classifies the fair value of
its plan assets as Level 2 in the fair value hierarchy as discussed in Note 6.
During the years ended December 31, 2024 and 2023, employees in Switzerland made contributions aggregating
$29,000 and $39,000 each year, respectively. Employee contributions to this plan are based on a fixed 5% of the relevant
pensionable earnings. The Company funds this plan by contributing at least the minimum amount required by applicable
regulations and as recommended by an independent actuary.
During the years ended December 31, 2024, 2023 and 2022, the Company contributed $0.7 million, $1.0 million and
$2.0 million, respectively, in total to its defined benefit plans. The Company expects to contribute $1.5 million in total to
its defined benefit plans in 2025.
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106
(24) INCOME TAXES
The components of loss from continuing operations before income taxes consisted of the following (in thousands):
Year ended December 31,
2024
2023
2022
Income (loss) before income taxes:
United States
$
22,685
$
(5,363)
$
(84,784)
Foreign
(68,753)
(50,010)
(27,815)
$
(46,068)
$
(55,373)
$ (112,599)
The provision (benefit) for income taxes from continuing operations consisted of the following (in thousands):
Year ended December 31,
2024
2023
2022
Provision (benefit) for income taxes:
Current:
Federal
$
21,619
$
9,927
$
(3,582)
State
3,313
2,790
2,573
Foreign
122
7,312
4,744
Total current
25,054
20,029
3,735
Deferred:
Federal
(13,822)
(10,417)
(10,333)
State
(2,266)
(1,059)
(4,045)
Foreign
(799)
2,280
(3,873)
Total deferred
(16,887)
(9,196)
(18,251)
Total
$
8,167
$
10,833
$
(14,516)
A reconciliation of the Company’s effective tax rate for continuing operations to the U.S. statutory federal rate is as
follows:
Year ended December 31,
2024
2023
2022
U.S. statutory income tax rate
21.0 %
21.0 %
21.0 %
State income taxes, net of federal benefit
(0.8)
(2.1)
1.8
Foreign income taxes
2.6
(9.9)
(1.4)
Stock-based compensation
(4.2)
(5.4)
(2.4)
Tax credits
2.2
7.7
2.2
Uncertain tax positions
15.2
2.0
1.3
Valuation allowance
(37.2)
(27.0)
(3.8)
Other permanent adjustments
(14.2)
(1.3)
(2.6)
Permanent foreign exchange adjustments
(3.9)
(2.3)
(1.4)
Other, net
1.5
(2.3)
(1.8)
Effective income tax rate
(17.8)%
(19.6)%
12.9 %
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The following is a summary of the significant components of deferred income tax assets and liabilities (in thousands):
December 31,
2024
2023
Assets:
Net operating loss carryforwards
$
399,412
$
398,050
Capital loss carryforwards
100,069
100,061
Tax credit carryforwards
25,405
29,541
Capitalized research and development expenses
71,587
58,959
Deferred revenue
7,687
2,042
Accrued expenses
12,106
10,901
Inventory
1,899
4,108
Stock-based compensation
1,299
1,506
Fixed assets
624
159
Lease liabilities
11,993
12,009
Other temporary differences
1,551
440
633,632
617,776
Valuation allowance
(493,855)
(488,799)
Total deferred tax assets
139,777
128,977
Liabilities:
Intangible assets
(37,488)
(45,448)
Operating lease right-of-use assets
(8,712)
(8,817)
Unremitted foreign income
(10,536)
(10,567)
Total deferred tax liabilities
(56,736)
(64,832)
Total net deferred tax assets
$
83,041
$
64,145
The deferred tax assets and liabilities based on tax jurisdictions are presented in the Company’s consolidated balance
sheets as follows:
December 31,
2024
2023
Deferred income taxes - net noncurrent assets
$
88,982
$
69,761
Deferred income taxes - net noncurrent liabilities
(5,941)
(5,616)
$
83,041
$
64,145
At December 31, 2024, the Company had U.S. federal net operating losses (“NOLs”) of $100.2 million. The Company
also had U.S. state NOLs of $51.0 million. In addition, the Company had $1.6 billion of Israel NOLs. The U.S. federal
NOL carryforwards expire between 2025 and 2037. The U.S. state NOLs begin to expire in 2025, and the Company also
has indefinite-lived state NOLs. The Israel NOLs do not expire.
The Company also has available federal, state and foreign income tax credit carryforwards of $25.4 million. The
federal foreign tax credit carryforwards expire between 2030 and 2032. The state tax credits, which are primarily research
and development credits, begin to expire in 2025, while others can be carried forward until exhausted. The foreign income
tax credits expire in various periods.
The Company has provided for income taxes on the undistributed earnings of its non-U.S. subsidiaries as of
December 31, 2024, excluding Ireland and Israel. These subsidiaries, excluding Ireland and Israel, are cost-plus or limited
risk distributors that are not anticipated to need to use excess funds locally. Accordingly, the Company is required to
recognize and record deferred taxes in 2024. The deferred taxes, which are primarily future withholding taxes, are recorded
on the entire outside basis differences related to the foreign subsidiaries, the largest of these differences being undistributed
earnings. Undistributed profits of Ireland and Israel, as well as other outside basis differences in foreign subsidiaries, were
indefinitely reinvested in foreign operations. Quantification of the deferred tax liability, if any, associated with indefinitely
reinvested earnings and outside basis differences was not practicable.
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Under the provisions of the Internal Revenue Code, the net operating losses and tax credit carryforwards are subject to
review and possible adjustment by the Internal Revenue Service. Net operating losses and tax credit carryforwards may
become subject to an annual limitation in the event of certain cumulative changes in the ownership of significant
shareholders over a three-year period in excess of 50%, as defined under sections 382 and 383 of the Internal Revenue
Code, as well as similar state provisions. As a result of the Sonus and GENBAND merger in 2017, the Company has $92.8
million of U.S. federal net operating loss carryforwards remaining as of December 31, 2024 with an annual section 382
limitation of $9.7 million. The Company believes these NOLs are fully realizable. As a result of the ECI Acquisition in
2020, the Company has $9.6 million of U.S. federal NOLs remaining as of December 31, 2024 with an annual section 382
limitation of $1.1 million. The Company does not believe all of these NOLs are realizable and, therefore, have recorded a
partial valuation allowance against these NOLs.
The Company performed an analysis to determine if, based on all available evidence, it considered it more likely than
not that some portion or all of the recorded deferred tax assets will not be realized in a future period. Accordingly, the
Company has recorded a valuation allowance against its U.S. deferred tax assets of $18.6 million at December 31, 2024
and $23.4 million at December 31, 2023. The Company also maintains a valuation allowance against certain of its foreign
deferred tax assets, predominantly Israel, amounting to approximately $475 million at December 31, 2024 and
$465 million at December 31, 2023. The deferred tax assets recognized with no valuation allowance at December 31, 2024
and 2023 primarily relate to other foreign subsidiaries where recoverability is concluded to be more likely than not based
on the Company’s cost-plus compensation policy, as well as NOLs and tax credits in the U.S. that are expected to be
utilized prior to expiration.
A reconciliation of the Company’s unrecognized tax benefits is as follows (in thousands):
Year ended December 31,
2024
2023
2022
Unrecognized tax benefits at January 1
$
10,932
$
12,001
$
17,813
Increases related to current year tax positions
607
—
156
Increases related to prior period tax positions
53
52
40
Decreases related to the lapse of the applicable statute of limitations
(1,268)
(821)
(560)
Decreases related to prior period tax positions
(4,458)
(300)
(5,448)
Unrecognized tax benefits at December 31,
$
5,866
$
10,932
$
12,001
The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income
taxes. The Company had $6.7 million, $14.0 million and $14.9 million of unrecognized tax benefits, including penalties
and interest, at December 31, 2024, 2023 and 2022, respectively. Of these amounts, $3.6 million, $10.5 million and
$11.2 million represent the amount of unrecognized tax benefits that, if recognized, would impact the effective income tax
rate for the years ended December 31, 2024, 2023 and 2022, respectively. The Company recorded income tax expense
(benefit) for potential penalties and interest of $(2.2) million, $0.2 million and $(0.3) million for the years ended December
31, 2024, 2023 and 2022, respectively. The Company had $0.9 million and $3.2 million accrued in Other long-term
liabilities for penalties and interest at December 31, 2024 and 2023, respectively. The Company believes that it is
reasonably possible that $0.4 million in tax positions related to its unrecognized tax benefits will be recognized within the
next twelve months.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as various state and
foreign jurisdictions. Generally, the tax years 2021 through 2024 remain open to examination by the major taxing
jurisdictions in which the Company operates. The Company’s federal and state NOLs generated prior to 2020 could be
adjusted on examination even though the year in which the loss was generated is otherwise closed by the statute of
limitations.
As of December 31, 2024, the Company had ongoing income tax audits in certain foreign countries. Management
believes that an adequate provision has been recorded for any adjustments that may result from tax examinations.
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109
(25) RELATED PARTIES
The Company recognized revenue from its largest stockholder of $11.3 million, $12.8 million and $6.6 million in
the years ended December 31, 2024, 2023 and 2022, respectively. The Company’s accounts receivable from its largest
shareholder totaled $5.5 million and $3.9 million as of December 31, 2024 and 2023, respectively. Additionally, as
discussed in Note 16, certain related party stockholders participated in the Private Placement.
(26) COMMITMENTS AND CONTINGENCIES
Contingencies
Liabilities for Royalty Payments to the IIA
Prior to the ECI Acquisition, ECI had received research and development grants from the IIA. The Company assumed
ECI’s contract with the IIA, which requires the Company to pay royalties to the IIA on proceeds from the sale of products
which the Israeli government has supported by way of research and development grants. The royalties for grants prior to
2017 were calculated at the rates of 1.3% to 5.0% of the aggregated proceeds from the sale of such products developed at
certain of the Company’s R&D centers, up to an amount not exceeding 100% of such grants plus interest at LIBOR.
Effective for grants approved in 2017 and effective through 2023, interest was calculated at the higher of LIBOR plus 1.5%
to 2.75%. For grants approved in 2024 and thereafter, interest is calculated based on SOFR. At December 31, 2024, the
Company had $1.5 million of unpaid royalties accrued. The Company’s maximum possible future royalties commitment at
December 31, 2024 of $14.0 million, including interest of $0.8 million, was based upon estimates of future sales of
products and services and the grants received from the IIA not yet repaid.
Litigation
The Company is often a party to disputes and legal proceedings that it considers routine and incidental to its business,
including those described below. The Company believes that it has meritorious defenses to the allegations made in the
pending cases and intends to vigorously defend these lawsuits; however, the Company is currently unable to forecast the
ultimate outcome of these or similar matters. Since it is difficult to predict the outcome of legal proceedings, it is possible
that the ultimate outcomes could materially and adversely affect the Company’s business, financial position, results of
operations or cash flows. Accordingly, with respect to these proceedings, the Company is currently unable to reasonably
estimate the possible loss or range of possible loss.
Miller Complaint. On November 8, 2018, Ron Miller, a purported stockholder of the Company, filed a Class Action
Complaint (the “Miller Complaint”) in the United States District Court for the District of Massachusetts (the
“Massachusetts District Court”) against the Company and three of its former officers (collectively, the “Defendants”),
claiming to represent a class of purchasers of Sonus common stock during the period from January 8, 2015 through
March 24, 2015 and alleging violations of the federal securities laws. Similar to a previous complaint entitled Sousa et al.
vs. Sonus Networks, Inc. et al., which was dismissed with prejudice by an order dated June 6, 2017, the Miller Complaint
claims that the Defendants made misleading forward-looking statements concerning Sonus’ expected fiscal first quarter of
2015 financial performance, which statements were also the subject of an August 7, 2018 Securities and Exchange
Commission Cease and Desist Order, whose findings the Company neither admitted nor denied. The Miller plaintiffs were
seeking monetary damages.
After the Miller Complaint was filed, several parties filed and briefed motions seeking to be selected by the
Massachusetts District Court to serve as a Lead Plaintiff in the action. On June 21, 2019, the Massachusetts District Court
appointed a group as Lead Plaintiffs and the Lead Plaintiffs filed an amended complaint on July 19, 2019. On August 30,
2019, the Defendants filed a motion to dismiss the Miller Complaint and, on October 4, 2019, the Lead Plaintiffs filed an
opposition to the motion to dismiss. In June 2023, the Defendants agreed to a settlement in principle with the named
plaintiffs, and final approval of the settlement was provided by the court on April 24, 2024. The settlement provided a
release of all claims asserted in the litigation to all Defendants, who continue to deny liability. The
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110
$4.5 million settlement amount was funded by the provider of the Company’s Directors and Officers liability insurance
policy.
Charter Complaint. On September 19, 2022, Charter Communications Operating, LLC (“Charter”) filed two
complaints against two of our subsidiaries (Sonus Networks, Inc. and Ribbon Communications Operating Company, Inc.)
alleging breach of contract with respect to indemnification obligations purportedly owed to Charter in connection with
Charter’s legal dispute with Sprint Communications Company L.P., which was settled by Charter in March 2022. One
complaint was filed in the Supreme Court of the State of New York, in New York County; the second complaint was filed
by Charter as well as co-plaintiffs Charter Communications Holding Company, LLC and Bright House Networks, LLC, in
the Superior Court of the State of Delaware in and for New Castle County. In both complaints, Charter is seeking monetary
damages. The Company filed its answer to the first complaint file in New York on December 7, 2022 and to the second
complaint filed in Delaware on January 9, 2023. Discovery is on-going and the court in the Delaware complaint has set a
trial date of June 2025. No trial date has been set for the case in New York.
WideOpenWest Complaint. On August 9, 2023, WideOpenWest, Inc. and WideOpenWest Finance, LLC (collectively,
“WOW”) filed a complaint against Ribbon alleging breach of contract with respect to indemnification obligations
purportedly owed to WOW in connection with WOW’s legal dispute with Sprint Communications Company L.P., which
was settled by WOW in the second quarter of 2023. The complaint was filed in the 429th Judicial District of the District
Court of the State of Texas, in Collin County, Texas and has since been transferred to the 493rd Judicial District Court in
Collin County. In the complaint, WOW is seeking monetary damages. The Company filed its answer to the complaint on
October 5, 2023. On October 14, 2024, the Company and WOW agreed to settle this matter. In connection with the
settlement, the Company will pay WOW a total of $5.0 million, with $2.0 million paid at the time of settlement and the
remaining $3.0 million paid over the next 18-months in equal quarterly installments.
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111
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officers and principal financial officer, evaluated
the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Annual
Report on Form 10-K. In designing and evaluating the disclosure controls and procedures, management recognizes that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving
the desired control objectives. We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods required by the Securities and Exchange Commission and that such
information is accumulated and communicated to our management, including our principal executive officers and principal
financial officer as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our
principal executive officers and principal financial officer concluded that our disclosure controls and procedures were
effective as of December 31, 2024.
Management’s Annual Report on Internal Control over Financial Reporting
Our management, with the participation of our principal executive officers and principal financial officer, is
responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-
15(f) and 15d-15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our
management and Board of Directors regarding the preparation and fair presentation of published financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024.
In making its assessment of internal control over financial reporting, our management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013).
Based on this assessment, management concluded that, as of December 31, 2024, our internal control over financial
reporting was effective.
Deloitte & Touche LLP, an independent registered public accounting firm that audited our financial statements
included in this Annual Report on Form 10-K, has issued an attestation report on management’s internal control over
financial reporting, which is included in this Item 9A under the caption “Report of Independent Registered Public
Accounting Firm.”
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the fiscal quarter ended
December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
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112
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Ribbon Communications Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Ribbon Communications, Inc. and subsidiaries (the
“Company”) as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company
and our report dated February 27, 2025 expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Dallas, Texas
February 27, 2025
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113
Item 9B. Other Information
During the three months ended December 31, 2024, none of the Company’s directors or officers (as defined in
Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted, terminated or modified a Rule 10b5-1 trading arrangement
or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of
1933). During the three months ended December 31, 2024, the Company did not adopt, terminate or modify a Rule 10b5-1
trading arrangement.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Our board of directors has adopted a Code of Conduct applicable to all officers, directors and employees, including our
principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing
similar functions. A copy of the code is available at the Investor Relations section of our website, located at
investors.ribboncommunications.com, under “Corporate Governance - Governance Highlights.” We intend to make any
disclosure required by law or Nasdaq Stock Market rules regarding any amendments to, or waivers from, any provisions of
the code at the same location of our website.
Our board of directors has adopted insider trading policies and procedures governing the purchase, sale and/or other
dispositions of our directors, officers and employees, or the Company itself, that are reasonably designed to promote
compliance with insider trading laws, rules and regulations, and any listing standards applicable to us (the “Insider Trading
Policy”). Our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.
The information required by this Item 10 is included in our definitive Proxy Statement with respect to our 2025
Annual Meeting of Stockholders to be filed with the SEC not later than 120 days after the end of the fiscal year ended
December 31, 2024 and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item 11 is included in our definitive Proxy Statement with respect to our 2025 Annual
Meeting of Stockholders to be filed with the SEC not later than 120 days after the end of the fiscal year ended
December 31, 2024 and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 is included in our definitive Proxy Statement with respect to our 2025
Annual Meeting of Stockholders to be filed with the SEC not later than 120 days after the end of the fiscal year ended
December 31, 2024 and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 is included in our definitive Proxy Statement with respect to our 2025
Annual Meeting of Stockholders to be filed with the SEC not later than 120 days after the end of the fiscal year ended
December 31, 2024 and is incorporated herein by reference.
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114
Item 14. Principal Accounting Fees and Services
The information required by this Item 14 will be included in our definitive Proxy Statement with respect to our 2025
Annual Meeting of Stockholders to be filed with the SEC not later than 120 days after the end of the fiscal year ended
December 31, 2024 and is incorporated herein by reference.
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115
PART IV
Item 15. Exhibit and Financial Statement Schedules
1)
Financial Statements
The consolidated financial statements of the Company are listed in the index under Part II, Item 8, of this Annual
Report on Form 10-K.
2)
Financial Statement Schedules
None. All schedules are omitted because they are not applicable, not required under the instructions, or the information
is contained in the consolidated financial statements or notes thereto included herein.
3)
List of Exhibits
The Exhibits filed as part of this Annual Report on Form 10-K are listed in the Exhibit Index immediately preceding
the signature page of this Annual Report, which Exhibit Index is incorporated herein by reference.
Item 16. Form 10-K Summary
None.
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116
EXHIBIT INDEX
Exhibit No.
Description
2.1**
Agreement and Plan of Merger, dated as of November 14, 2019, by and among the Registrant,
Ribbon Communications Israel Ltd., Eclipse Communications Ltd., ECI Telecom Group Ltd. and
ECI Holding (Hungary) Korlátolt Felelősségű Társaság (incorporated by reference to Exhibit 2.1 to
the Registrant’s Current Report on Form 8-K, filed November 14, 2019 with the SEC).
2.2**
Amended and Restated Purchase Agreement, dated December 1, 2020, among Ribbon
Communications Inc., Ribbon Communications Operating Company, Inc., Ribbon
Communications International Limited and American Virtual Cloud Technologies, Inc.
(incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, filed
December 7, 2020 with the SEC).
3.1
Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to
the Registrant’s Current Report on Form 8-K12B, filed October 30, 2017 with the SEC).
3.2
Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed
November 28, 2017 with the SEC).
3.3
Second Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed
August 4, 2023 with the SEC).
3.4
Certificate of Designation of Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to
the Registrant’s Current Report on Form 8-K, filed March 30, 2023 with the SEC).
3.5
Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.3 to the
Registrant’s Annual Report on Form 10-K, filed March 8, 2018 with the SEC).
4.1*
Description of Capital Stock.
4.2
Form of Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K, filed March 30, 2023 with the SEC).
10.1
First Amended and Restated Stockholders Agreement, dated as of March 3, 2020, by and among
the Registrant, JPMC Heritage Parent LLC, Heritage PE (OEP)Heritage Parent LLC, Heritage PE
(OEP) III, L.P. and ECI Holding (Hungary) Kft (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K, filed March 3, 2020 with the SEC).
10.2 +
Form of Indemnity Agreement for Officers and Directors (incorporated by reference to Exhibit 10.5
to the registrant’s Annual Report on Form 10-K, filed March 8, 2018 with the SEC).
10.3 +
Amended and Restated 2000 Employee Stock Purchase Plan, (incorporated by reference to
Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed October 31, 2018 with the
SEC).
10.4 +
Senior Management Cash Incentive Plan, dated October 27, 2017 (incorporated by reference to
Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K, filed March 8, 2018 with the SEC).
10.5 +
Amended and Restated Stock Incentive Plan of the Registrant (incorporated by reference to
Exhibit 99.3 to the Registrant’s Registration Statement on Form S-8, filed with the SEC on
October 31, 2017).
10.6 +
Form of Nonstatutory Stock Option Award Agreement Granted under the Amended and Restated
Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to Sonus, Inc.’s Quarterly Report
on Form 10-Q filed July 29, 2016 with the SEC).
10.7 +
Form of Restricted Stock Award Agreement Granted under the Amended and Restated Stock
Incentive Plan (incorporated by reference to Exhibit 10.3 to Sonus, Inc.’s Quarterly Report on
Form 10-Q, filed July 29, 2016 with the SEC).
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117
10.8 +
Form of Restricted Stock Unit Award Agreement (Performance-Based Vesting) for Awards Granted
under the Amended and Restated Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to
Sonus, Inc.’s Quarterly Report on Form 10-Q, filed July 29, 2016 with the SEC).
10.9 +
Form of Restricted Stock Unit Award Agreement (Time-Based Vesting) for Awards Granted under
the Amended and Restated Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the
Registrant’s Quarterly Report on Form 10-Q, filed August 1, 2018 with the SEC).
10.10 +
Edgewater Networks, Inc. Amended and Restated 2002 Stock Option Plan, effective as of April 8,
2010 (incorporated by reference to Exhibit 99.1 to the Registrant’s Registration Statement on
Form S-8, filed August 6, 2018 with the SEC).
10.11 +
Amendment to the Edgewater Networks, Inc. Amended and Restated 2002 Stock Option Plan,
dated December 7, 2016 (incorporated by reference to Exhibit 99.2 to the Registrant’s Registration
Statement on Form S-8, filed August 6, 2018 with the SEC).
10.12 +
Senior Secured Credit Facilities Credit Agreement, dated June 21, 2024 by and among the
Company, as a guarantor, Ribbon Communications Operating Company, Inc., as the borrower, HPS
Investment Partners, LLC, as administrative agent, HPS Investment Partners, LLC and Whitehorse
Capital Management, LLC, as lenders, joint lead arrangers and joint bookrunners, and the other
lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report
on Form 8-K, filed June 24, 2024 with the SEC).
10.13 +
Form of Non-Statutory Stock Option Award Agreement under the 2019 Incentive Award Plan
(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed
October 31, 2019 with the SEC).
10.14 +
Form of Restricted Stock Award Agreement under the 2019 Incentive Award Plan (incorporated by
reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, filed October 31,
2019 with the SEC).
10.15 +
Form of Restricted Stock Unit Award Agreement (Time-Based Vesting) under the 2019 Incentive
Award Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on
Form 10-Q, filed October 31, 2019 with the SEC).
10.16 +
Form of Restricted Stock Unit Award Agreement (Performance-Based Vesting) under the 2019
Incentive Award Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly
Report on Form 10-Q, filed October 31, 2019 with the SEC).
10.17 +
Letter Agreement, dated as of February 18, 2020, among Ribbon Communications Inc., Sonus
Networks, Inc. d/b/a Ribbon Communications Operating Company, Inc. and Bruce McClelland
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed
February 19, 2020 with the SEC.
10.18 +
Severance Agreement, dated February 18, 2020, among Ribbon Communications Inc., Sonus
Networks, Inc. d/b/a Ribbon Communications Operating Company, Inc. and Bruce McClelland
(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed
February 19, 2020 with the SEC).
10.19 +
Form of Restricted Stock Unit Award Agreement (Performance-Based Vesting) between Ribbon
Communications Inc. and Bruce McClelland (incorporated by reference to Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K, filed February 19, 2020 with the SEC).
10.20 +
Employment Agreement between the Registrant and Miguel Lopez, dated June 22, 2020
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed
June 23, 2020 with the SEC).
10.21 +
Severance Agreement between the Registrant and Miguel Lopez, dated June 22, 2020 (incorporated
by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed June 23, 2020
with the SEC).
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118
10.22 +
Employment Agreement, dated as of October 3, 2024, among Ribbon Communications Inc.,
Ribbon Communications Operating Company, Inc. and John Townsend (incorporated by reference
to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed October 4, 2024 with the
SEC).
10.23 +
Severance Agreement, dated as of October 3, 2024, among Ribbon Communications Inc., Ribbon
Communications Operating Company, Inc. and John Townsend (incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed October 4, 2024 with the SEC).
10.24 +
Form of Restricted Stock Unit Award Agreement (Performance-Based Vesting) between the
Company and John Townsend (incorporated by reference to Exhibit 10.3 to the Registrant’s Current
Report on Form 8-K, filed October 4, 2024 with the SEC).
10.25 +
Ribbon Communications Inc. Amended and Restated 2019 Incentive Award Plan (incorporated by
reference to Exhibit 99.1 to the Registrant’s Form S-8 Registration Statement, filed June 2, 2020
with the SEC).
10.26 +
Amendment No. 1 to the Ribbon Communications, Inc. Amended and Restated 2019 Incentive
Award Plan (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy
Statement on Schedule 14A filed on April 8, 2022 with the SEC).
10.27 +
Employment Agreement, dated May 26, 2020, between the Registrant and Patrick Macken
(incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q, filed
April 30, 2021 with the SEC).
10.28 +
Severance Agreement, dated May 26, 2020, between the Registrant and Patrick Macken
(incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q, filed
April 30, 2021 with the SEC).
10.29 +
Employment Agreement, dated July 21, 2020, between the Registrant and Sam Bucci (incorporated
by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q, filed April 30,
2021 with the SEC).
10.30 +
Severance Agreement, dated September 7, 2020, between the Registrant and Sam Bucci
(incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q, filed
April 30, 2021 with the SEC).
10.31 +*
Employment Agreement, dated November 2, 2022, between the Registrant and Dan Redington.
10.32 +*
Severance Agreement, dated November 2, 2022, between the Registrant and Dan Redington.
10.33
Form of Securities Purchase Agreement, dated August 12, 2022, by and among Ribbon
Communications Inc. and each purchaser identified on the signature pages thereto (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed August 16, 2022
with the SEC).
10.34
Form of Second Amended and Restated Registration Right Agreement, dated August 12, 2022, by
an among Ribbon Communications Inc. and its stockholders that are parties thereto (incorporated
by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed August 16, 2022
with the SEC).
10.35
Form of Securities Purchase Agreement, dated March 28, 2023, by and among Ribbon
Communications Inc. and each purchaser identified on the signature pages thereto (incorporated by
reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed March 30, 2023
with the SEC).
10.36
Warrant Agreement, dated March 30, 2023, between the Company and American Stock Transfer &
Trust Company, LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report
on Form 8-K, filed March 30, 2023 with the SEC).
19.1 *
Ribbon Communications Inc. Insider Trading Policy.
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119
*
Filed herewith.
#
Furnished herewith.
+
Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of the Instructions to the
Annual Report on Form 10-K.
**
Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant hereby
undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the U.S. Securities and
Exchange Commission.
21.1 *
Subsidiaries of the Registrant.
23.1 *
Consent of Independent Registered Public Accounting Firm, Deloitte & Touche LLP
31.1 *
Certification of Ribbon Communications Inc. Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 *
Certification of Ribbon Communications Inc. Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 #
Certification of Ribbon Communications Inc. Chief Executive Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 #
Certification of Ribbon Communications Inc. Chief Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
97
Ribbon Communications Inc. Clawback Policy (incorporated by reference to Exhibit 97 to the
Registrant’s Annual Report on Form 10-K, filed February 28, 2024 with the SEC).
101.INS *
Inline XBRL Instance Document
101.SC *
Inline XBRL Taxonomy Extension Schema
101.C *
Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF *
Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB *
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE *
Inline XBRL Taxonomy Extension Presentation Linkbase
104 *
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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120
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RIBBON COMMUNICATIONS INC.
By: /s/ Bruce McClelland
February 27, 2025
Bruce McClelland
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Bruce McClelland
President, Chief Executive Officer and
Director (Principal Executive Officer)
February 27, 2025
Bruce McClelland
/s/ John Townsend
Executive Vice President and Chief
Financial Officer (Principal Financial
Officer)
February 27, 2025
John Townsend
/s/ Eric Marmurek
Senior Vice President and Deputy
Chief Financial Officer (Principal
Accounting Officer)
February 27, 2025
Eric Marmurek
/s/ Shaul Shani
Chairman
February 27, 2025
Shaul Shani
/s/ Stewart Ewing
Director
February 27, 2025
Stewart Ewing
/s/ Bruns H. Grayson
Director
February 27, 2025
Bruns H. Grayson
/s/ Beatriz V. Infante
Director
February 27, 2025
Beatriz V. Infante
/s/ Scott Mair
Director
February 27, 2025
Scott Mair
/s/ Rick W. Smith
Director
February 27, 2025
Rick W. Smith
/s/ Tanya Tamone
Director
February 27, 2025
Tanya Tamone
EXHIBIT 4.1
DESCRIPTION OF CAPITAL STOCK
The following description summarizes certain of the terms of the capital stock of Ribbon Communications, Inc. (the
“Company”). This description does not purport to be complete and is qualified in its entirety by reference to our Restated
Certificate of Incorporation, as amended (the “Certificate of Incorporation”), and our Amended and Restated By-Laws (the “By-
laws”), each of which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit is a
part. We encourage you to read our Certificate of Incorporation, By-laws and the applicable provisions of Delaware law for
additional information.
Authorized Capital Stock
We are authorized to issue up to 240,000,000 shares of common stock, $0.0001 par value per share (“Common Stock”),
and 10,000,000 shares of preferred stock, $0.01 par value per share.
Common Stock
Dividend Rights
Holders of our Common Stock are entitled to receive ratably any dividends that may be declared by our board of directors
(the “Board”) out of legally available funds, subject to any preferential dividend rights of any outstanding preferred stock.
Voting Rights
Holders of our Common Stock are entitled to one vote for each share held on all matters submitted to a vote of the
stockholders and do not have cumulative voting rights. Accordingly, holders of a majority of the shares voted can elect all of the
directors then standing for election.
Liquidation Rights
Upon the liquidation, dissolution or winding up of the Company, the holders of our Common Stock are entitled to receive
ratably assets available for distribution to our stockholders after the payment of all debts and other liabilities and subject to the
prior rights of any outstanding preferred stock.
Other Rights
Other than as set forth in the First Amended and Restated Stockholders Agreement, dated as of March 3, 2020, by and
among us, JPMC Heritage Parent LLC, Heritage PE (OEP) III, L.P., ECI Holding (Hungary) Kft and Swarth Investments Ltd,
holders of our Common Stock have no preemptive, subscription, redemption or conversion rights.
The shares of our Common Stock are listed on the Nasdaq Global Select Market under the symbol “RBBN.” The transfer
agent and registrar for the common shares is Equiniti Trust Company, LLC.
Preferred Stock
The Board is authorized without further stockholder approval to issue from time to time up to an aggregate of 10,000,000
shares of our preferred stock in one or more series. The Board has discretion to fix the designations, preferences, relative,
participating, optional or other special rights, and the qualifications, limitations or restrictions, if any, of the shares of each series,
including the dividend rights, dividend rates, conversion rights, voting rights, term of redemption including sinking fund
provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of
any series without further vote or action by stockholders.
We currently do not have any shares of preferred stock outstanding. Should we choose to offer a specific series of preferred
stock, we will describe the terms of the preferred stock in the prospectus supplement for such offering and will file a copy of the
certificate establishing the terms of the preferred stock with the SEC.
1
Confidential
November 2, 2022
Dan Redington
Via email: dtr1004@gmail.com
Dear Dan,
On behalf of Ribbon Communications Inc. (“Ribbon”) and Ribbon Communications Operating Company,
Inc. (“RCOC” and Ribbon and RCOC, together with its affiliates who may employ you from time to time,
the “Company”), I am pleased to provide you with this written offer of employment (this “Agreement”) as
Ribbon’s Executive Vice President of Global Sales, effective as of November 28, 2022 (the “Start Date”).
This Agreement is entered into as of the date set forth above and shall be effective as of the Start Date.
1.
Compensation. During your employment with the Company:
(a) Base Salary. Your initial base salary will be at the annualized rate of $405,000 (your base
salary, as may be adjusted from time to time, “Base Salary”), less applicable local, state and federal
withholdings, paid in accordance with the Company’s normal payroll practices. Your Base Salary will be
subject to review and adjustment by Ribbon’s Board of Directors (the “Board”) or Compensation
Committee of the Board (the “Committee”) in its sole discretion.
(b) Annual Bonus. Effective January 1, 2023, you will be eligible to receive annual variable cash
bonus based on achievement of certain corporate and/or individual objectives (“Annual Bonus”). Subject to
achievement of such objectives for the applicable year, the target Annual Bonus shall equal seventy-five
percent (75%) of your Base Salary. The Annual Bonus for each fiscal year will be based on the achievement
of objectives determined by the Board or the Committee. Your Annual Bonus, if any, shall be paid as soon
as reasonably practicable following Ribbon’s public disclosure of its financial results for the applicable
bonus period and the Board’s or Committee’s approval of the bonus under the then-applicable Ribbon bonus
plan, subject to your continued employment with the Company through the date of such payment (except as
otherwise set forth in any written agreement by and between the Company and you).
(c) Equity Awards. Subject to your commencement of employment on the Start Date and approval
by the Committee:
(i)
You will, on December 15, 2022 (the “Grant Date”), be granted restricted stock units (the
“Sign On RSUs”) that, upon vesting, will be settled in shares of common stock of Ribbon
with a value (as of the Grant Date) equal to $375,000, calculated consistent with such
grants made to similarly situated employees of the Company. Subject to your active and
continuous employment with the Company through the applicable vesting date, the Sign On
RSUs will vest on the first anniversary of the Grant Date. Notwithstanding the foregoing,
your grant will be subject to, and you will be required to, enter into a restricted stock unit
agreement in the Company’s applicable form in connection with the grant of the Sign On
RSUs.
(ii)
You will be granted restricted stock units (the “RSUs”) that, upon vesting, will be settled in
shares of common stock of Ribbon with a value (as of the Grant Date) equal to $350,000,
EXHIBIT 10.31
2
calculated consistent with such grants made to similarly situated employees of the
Company. The RSUs will be granted on December 15, 2022. Subject to your active and
continuous employment with the Company through the applicable vesting date, the RSUs
will vest as follows: (A) 1/3rd of your RSUs on the first anniversary of the Grant Date (the
“Initial Vesting Date”); and (B) the remaining 2/3rd of your RSUs vesting in four (4) equal
installments on each six (6) month anniversary of the Initial Vesting Date. Notwithstanding
the foregoing, your grant will be subject to, and you will be required to, enter into a
restricted stock unit agreement in the Company’s applicable form in connection with the
grant of the RSUs.
(iii)
You will, following January 1, 2023, be granted performance share units (the “PSUs”) that,
upon vesting, will be settled in shares of common stock of Ribbon with a value (as of the
Grant Date) equal to $350,000 calculated consistent with such grants made to similarly
situated employees of the Company. Notwithstanding the foregoing, your grant will be
subject to, and you will be required to, enter into a performance stock unit agreement in the
Company’s applicable form in connection with the grant of the Sign On PSUs.
(iv)
Except as set forth herein, you shall not be entitled to any other equity awards from the
Company during the fiscal year ending December 31, 2023. Following the fiscal year
ending December 31, 2023, subject to Board or Committee approval, you will be eligible to
receive annual equity incentive awards under the Plan at such times, in such amounts and
forms, and on such terms as are determined by the Board or Committee, taking into account
your role and responsibilities. You will be required to enter into equity award agreement(s)
in the Company’s then-applicable form in connection with the grant of any future awards
described in this Section 1(c)(iv).
2.
Benefits. During your employment with the Company, you will be entitled to the following
benefits:
(a)
You will be entitled to vacation consistent with Company policy and limitations, under which
you will initially accrue (3) weeks of vacation per year beginning on the Start Date;
(b)
You will be entitled to participate as an employee of the Company in all health and welfare
benefit plans and receive fringe benefits and perquisites generally provided to similarly situated employees
of the Company in accordance with applicable Company plan, policy or program, which currently include
group health, life and dental insurance, and a 401(k) plan. Notwithstanding the foregoing, the Company
retains the right to change, add or cease any particular compensation or benefit for its employees in its sole
discretion; and
(c)
The Company will reimburse you for all reasonable travel, business development, meals,
entertainment and other expenses incurred by you in connection with the performance of your duties and
obligations on behalf of the Company. You will comply with such limitations and reporting requirements
with respect to expenses as may be established by the Company from time to time and will promptly
provide all appropriate and requested documentation in connection with such expenses.
3.
Employment Relationship. The Company’s obligations under this Agreement are contingent upon
your satisfactory completion of our pre-employment reference check and background check investigation
and your verification of your identity and employment eligibility. No provision of this Agreement shall be
construed to create an express or implied employment contract for a specific period of time. Employment at
the Company is considered “at will” and either you or the Company may terminate the employment
relationship at any time and for any reason, subject to compliance with the Severance Agreement. As a full-
3
time employee of the Company, you will be expected to devote your full business time and energies to the
business and affairs of the Company. As the Company’s organization evolves, its reporting structure may
change and you may be assigned such other management duties and responsibilities as the Company may
determine, in addition to performing duties and responsibilities reflected above.
4.
Termination and Eligibility for Severance. The parties acknowledge and agree that they will enter
into a severance agreement in substantially the form attached hereto as Attachment 1 (the “Severance
Agreement”) on the Start Date. Except as set forth in the Severance Agreement, you will not be entitled to
any severance or other termination payments or benefits from the Company or any of its affiliates.
5.
Previous Employment. By accepting employment with the Company, you represent the following:
(a) any notice period you are required to give or to serve with a previous employer has expired and that by
entering into or performing any of your duties for the Company, you will not be in breach of any other
obligation binding on you; (b) you will not use or disclose any confidential information in breach of any
agreement you may have with a previous employer or any other person; and (c) you are not currently party
to or bound by the terms of any non-competition, non-solicitation, confidentiality or non-disclosure
agreement or other agreement with a previous employer or any other party which could impair or interfere
in any manner with your ability to fully satisfy your obligations and duties hereunder.
6.
Confidentiality. The Company considers the protection of its confidential information and
proprietary materials to be very important. Therefore, as a condition of your employment, you and the
Company will become parties to the Confidentiality, Non-Competition and Assignment of Inventions
Agreement, as set forth on Attachment 2 hereto. This attached agreement must be signed and returned to the
Company as soon as practicable following the Start Date.
7. Indemnity. As an executive of the Company, the Company will provide you with an Indemnity
Agreement on the Company’s standard form.
8.
General.
(a)
This Agreement, together with the agreements referenced herein, will constitute our entire
agreement as to your employment by the Company and will supersede any prior
agreements or understandings, whether in writing or oral.
(b)
This Agreement and your employment are contingent upon the Company’s standard
onboarding processes, which may include background and reference checks and
satisfactory proof of your right to work in the United States. You agree to provide any
documentation or information at the Company’s reasonable request to facilitate these
processes (if any).
(c)
This Agreement may be executed in more than one counterpart, each of which shall be
deemed to be an original, and all such counterparts together shall constitute one and the
same instrument.
(d)
The provisions of this Agreement are severable and if any one or more provisions may be
determined to be illegal or otherwise unenforceable, in whole or in part, the remaining
provisions of this Agreement shall nevertheless be binding and enforceable. Except as
modified hereby, this Agreement shall remain unmodified and in full force and effect.
(e)
This Agreement is personal in nature and neither of the parties hereto shall, without the
written consent of the other, assign or otherwise transfer this Agreement or its obligations,
4
duties and rights under this Agreement; provided, however, that in the event of the merger,
consolidation, transfer or sale of all or substantially all of the assets of the Company, the
Company may assign its rights and obligations hereunder and, in the event of such
assignment, this Agreement shall, subject to the provisions hereof, be binding upon and
inure to the benefit of such successor and such successor shall be solely obligated to
discharge and perform all of the promises, covenants, duties and obligations of the
Company hereunder.
(f)
All notices shall be in writing and shall be delivered personally (including by courier), by
overnight receipted courier service (such as UPS or Federal Express) or sent by certified,
registered or express mail, postage prepaid, to the Company at the following address:
Ribbon Communications Legal Department, 3605 E. Plano Parkway, Plano, Texas 75074,
and to you at the most current address we have in your employment file. Any such notice
shall be deemed given when so delivered personally or, if by certified, registered or express
mail, postage prepaid mailed, forty-eight (48) hours after the date of deposit in the mail.
Any party may, by notice given in accordance with this paragraph to the other party,
designate another address or person for receipt of notices hereunder.
(g)
Arbitration.
i.
Any controversy, dispute or claim arising out of or relating to this Agreement or the
breach hereof which cannot be settled by mutual agreement will be finally settled by
binding arbitration in the county where you performed your principal work duties for
the Company, under the jurisdiction of the American Arbitration Association or other
mutually agreeable alternative arbitration dispute resolution service, before a single
arbitrator appointed in accordance with the arbitration rules of the American
Arbitration Association or other selected service, modified only as herein expressly
provided. You acknowledge receipt of the applicable AAA Employment Arbitration
Rules and Mediation Procedures which may be found at the AAA website here
https://www.adr.org/Rules. The arbitrator may enter a default decision against any party
who fails to participate in the arbitration proceedings.
ii.
The Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. shall govern the interpretation and
enforcement of this arbitration clause. The decision of the arbitrator on the points in
dispute will be final, non-appealable and binding, and judgment on the award may be
entered in any court having jurisdiction thereof.
iii.
The fees and expenses of the arbitration will be borne as provided in the AAA Costs of
Arbitration section, and each party will bear the fees and expenses of its own attorney,
unless the arbitrator finds that a statutory award of attorneys’ fees and/or costs is
appropriate.
iv.
The parties waive their rights to a class or collective action. The parties agree that
claims may not be joined, consolidated, or heard together with claims of any other
current or former employee of the Company or other third party.
v.
The parties agree that this Section 8(g) has been included to resolve any disputes
between them with respect to this Agreement or your employment, and that this
Section 8(g) will be grounds for dismissal of any court action commenced by either
party with respect to this Agreement, other than post-arbitration actions seeking to
enforce an arbitration award or actions seeking an injunction or temporary restraining
5
order and other than claims for unemployment insurance benefits or workers
compensation benefits or other claims which by law cannot be subject to a mandatory
arbitration agreement. In the event that any court determines that this arbitration
procedure is not binding, or otherwise allows any litigation regarding a dispute, claim,
or controversy covered by this Agreement to proceed, the parties hereto hereby waive,
to the maximum extent allowed by law, any and all right to a class or collection action
or a trial by jury in or with respect to such litigation.
vi.
The parties will keep confidential, and will not disclose to any person, except as may be
required by law or the rules and regulations of the Securities and Exchange
Commission or other government agencies, the existence of any controversy hereunder,
the referral of any such controversy to arbitration or the status or resolution thereof;
notwithstanding the foregoing, nothing herein shall restrict you from communicating
with a government agency or engaging in protected concerted activity that cannot be
waived by such an agreement not to disclose.
(h)
This Agreement shall be governed by and interpreted in accordance with the laws of the
State of Delaware, without regard to the conflict of laws provisions thereof or of any other
jurisdiction.
(i)
The Company is an equal opportunity employer.
9.
Acceptance. You may accept the terms and conditions described herein by confirming your
acceptance in writing. Please send your countersignature to this Agreement to the Company, or via e-mail
to me, which execution will evidence your agreement with the terms and conditions set forth herein.
Signature Page to Employment Letter
Sincerely,
/s/ Bruce McClelland________
Bruce McClelland
On behalf of Ribbon Communications Inc. and Ribbon Communications Operating Company, Inc.
Accepted as of the first date set forth above by:
/s/ Dan Redington___________
Dan Redington
Attachment 1
Severance Agreement
[see attached]
2
Attachment 2
Confidentiality, Non-Competition, Non-Solicitation And Assignment of Inventions Agreement
[see attached]
EXHIBIT 10.31
1
Severance Agreement
THIS SEVERANCE AGREEMENT (the “Severance Agreement” or “Agreement”) is entered into as of
November 28, 2022, and effective as of the Start Date (as defined in the Employment Letter), between
Ribbon Communications Inc. (“Ribbon”), Ribbon Communications Operating Company, a wholly owned
subsidiary of Ribbon Communications Inc., (“RCOC”, and together with Ribbon, the “Company”) and Dan
Redington (“Executive” or “you”).
1.
Definitions. The following capitalized terms used herein shall have the following meanings:
(a)
“Annual Bonus” means the annual variable cash compensation you are eligible to receive as
determined from time to time by the Company, whether acting through Ribbon’s Board of Directors
(the “Board”), a committee thereof or otherwise, based on the achievement of certain Ribbon Entity
and/or individual performance objectives.
(b)
“Base Pay” means your annual base compensation, as determined from time to time by the
Company, whether acting through the Board, a committee thereof or otherwise, regardless of
whether all or any portion thereof may be deferred under any deferred compensation plan or
program of the Company.
(c)
“Cause” means termination of your employment by the Company upon the occurrence of
any of the following: (i) your commission of bribery in violation of the Code of Conduct (or similar
policy) of the Company or other Ribbon Entity employing you at the relevant time and/or local law
and regulation including, without limitation, the UK Bribery Act, (ii) your engaging in acts in the
course of your employment with any Ribbon Entity that constitute theft, fraud or embezzlement,
(iii) your intentional or negligent misconduct which materially and adversely affects any Ribbon
Entity and which is not cured (to the extent curable) within thirty (30) days following your receipt
of written notice of such misconduct, (iv) your unauthorized disclosure of proprietary information
of a confidential nature relating to any Ribbon Entity, which unauthorized disclosure has a material
and adverse effect on any Ribbon Entity, (v) your material violation of any Ribbon Entity policy,
agreement or procedure which is not cured (to the extent curable) within thirty (30) days following
receipt of written notice of such violation, (vi) your excessive absenteeism, (vii) your material
neglect of duty, (viii) your failure to devote substantially all of your working time to the business of
the Ribbon Entities or to otherwise perform the duties of your position to the satisfaction of the
Board (or your direct supervisor) which is not cured (to the extent curable) within thirty (30) days
following receipt of written notice of such failure, (ix) your insubordination or failure to perform
and carry out any directive of the Board (or your direct supervisor), (x) your abuse of alcohol, or
unlawful use (including being under the influence) or possession of illegal drugs, at the premises of
any Ribbon Entity or otherwise while performing (or holding yourself out as performing) services
for or on behalf of any Ribbon Entity, (xi) your commission of any act that has resulted in (or could
reasonably be expected to result in) conviction of a felony or crime involving moral turpitude or
pleading “no contest” to a felony charge or other criminal charge involving moral turpitude, (xii)
your failure to cooperate with any of the Ribbon Entities and/or their professional advisors in any
investigation (whether internal or external) or any formal legal or investigative proceeding, or (xiii)
your engagement in any conduct, including any violation of applicable law, that may reasonably
result in material and adverse injury to the business or reputation of any Ribbon Entity. The
determination of whether a termination of your employment is for Cause shall be made by the
Board (or its designee) in its sole discretion.
EXHIBIT 10.32
2
(d)
“Change in Control” shall have the meaning set forth in the Incentive Award Plan.
Notwithstanding the foregoing, if a Change in Control constitutes a payment or benefit event with
respect to any payment or benefit hereunder that provides for the deferral of compensation that is
subject to Section 409A, to the extent required to avoid the imposition of additional taxes under
Section 409A, such transaction or event will not be deemed a Change in Control unless the
transaction qualifies as a “change in control event” within the meaning of Section 409A.
(e)
“Change in Control Protection Period” means the period beginning on the date of the
consummation of the Change in Control and ending on the first anniversary of such Change in
Control.
(f)
“Code” means the Internal Revenue Code of 1986, as amended.
(g)
“Date of Termination” means the date of termination of your employment for any reason.
(h)
“Disability” means an illness (mental or physical) or incapacity, which results in you being
unable to perform your duties as an employee of the Company for a period of one hundred eighty
(180) days, whether or not consecutive, in any twelve (12) month period.
(i)
“Employment Letter” means that certain Employment Letter Agreement by and between
you and the Company, dated November 2, 2022.
(j)
“Equity Awards” means all stock options, restricted stock units, performance stock units
and such other equity-based awards granted pursuant to the Incentive Award Plan. For the
avoidance of doubt, “Equity Awards” shall not include any cash or cash-based awards granted
pursuant to the Incentive Award Plan.
(k)
“Good Reason” means:
i.
At any time other than the Change in Control Protection Period, the occurrence of
one or more of the following conditions without your prior written consent: (A) a
material reduction in your then-effective Base Pay (excluding any such reduction in
connection with across-the-board Base Pay reductions for all or substantially all
similarly situated employees), or (B) the relocation of your primary place of
employment to a location more than 30 miles from Plano, TX; or
ii.
during the Change in Control Protection Period, the occurrence of one or more of
the following conditions without your prior written consent: (A) a material
reduction in your then-effective Base Pay or target Annual Bonus, (B) the
relocation of your primary place of employment to a location more than 30 miles
from your then-present work location, (C) a material diminution in your authority,
duties or responsibilities for the Ribbon Entities, or (D) any material breach of any
written agreement by and between any Ribbon Entity and you;
provided that, in each case of subsections (i) and (ii), you shall not have Good Reason
unless and until (x) you give the Company written notice describing the occurrence of
Good Reason within 30 days after such occurrence first occurs, (y) such occurrence is not
corrected by the Company within 30 days after the Company’s receipt of such notice, and
(z) you terminate employment no later than 30 days after the expiration of such 30-day
correction period.
(l)
“Incentive Award Plan” means Ribbon Communications Inc. 2019 Incentive Award Plan, as
may be amended from time to time (or any successor equity incentive plan of Ribbon).
3
(m)
“Restrictive Covenants Agreement” shall mean the Confidentiality, Non-Competition, Non-
Solicitation and Assignment of Inventions Agreement dated November 28, 2022, as referenced in
Section 6 of the Employment Letter.
(n)
“Ribbon Entities” means Ribbon Communications Inc. and its direct and indirect
subsidiaries.
(o)
“Section 409A” has the meaning set forth in Section 7 of this Agreement.
(p)
“Severance Period" means (i) six (6) months beginning on the Date of Termination, if the
Date of Termination is prior to the 18 month anniversary of your Start Date; and (ii) 12 months
beginning on the Date of Termination, if the Date of Termination is on or after the two (2) year
anniversary of your Start Date.
2.
Term of Agreement. The term of this Agreement will commence as of the Effective Date and shall
continue in effect until the earlier of (a) the third anniversary of the Effective Date; and (b) the date
on which all payments or benefits required to be made or provided hereunder have been made or
provided in their entirety (the “Initial Term”). Notwithstanding the foregoing, (i) on the third
anniversary of the Effective Date and on each subsequent anniversary thereafter, this Agreement
shall automatically renew and extend for a period of twelve (12) additional months (each such
twelve (12)-month period, collectively with the Initial Term, the “Term”) unless written notice of
non-renewal is delivered from either party to the other not less than six (6) months prior to the
applicable date on which extension of the then-existing Term would occur, and (ii) in no event will
the Term end prior to the first anniversary of the date of consummation a Change in Control.
3.
Termination and Eligibility for Severance.
(a)
Accrued Benefits. Upon any termination of your employment, you will be paid (i) any and
all earned and unpaid portion of your Base Pay through the Date of Termination; (ii) any
accrued but unused vacation pay owed to you in accordance with Company practices up to
and including the Date of Termination; and (iii) any allowable and unreimbursed business
expenses incurred through the Date of Termination that are supported by appropriate
documentation in accordance with the Company’s applicable expense reimbursement
policies. Hereafter, items (i) through (iii) in this Section 3 are referred to as “Accrued
Benefits.'' If termination of your employment is for any reason other than (A) by the
Company without Cause (other than due to death or Disability) or (B) by you for Good
Reason, you will be entitled to receive only the Accrued Benefits.
(b)
Severance Payment. Subject to Sections 3(c), 6 and 7 of the Agreement:
(i)
If the Company terminates your employment without Cause (other than as a result
of your death or Disability) or if you terminate your employment with Good Reason, in
each case, outside of the Change in Control Protection Period, then, in addition to the
Accrued Benefits, the Company will provide you the following severance and related post-
termination benefits:
(1)
The Company shall, during the Severance Period, pay to you an
amount equal to (A) your Base Pay as in effect immediately prior to the Date of
Termination (or, in the case of termination by you with Good Reason due to material
reduction in Base Pay, your Base Pay in effect immediately prior to such reduction) (the
“Non-CIC Severance Payment”), and (B) an amount equal to the Annual Bonus you would
have received, if any, had you remained employed through the end of the fiscal year in
which the Date of Termination occurs, prorated based on the number of days you worked
during such fiscal year and calculated based on actual achievement of the Ribbon Entity
4
performance targets relating to such Annual Bonus (and assuming any individual, personal
performance targets are achieved at target) (the “Pro Rata Bonus”);
(2)
The Company shall pay you an amount equal to the aggregate sum
of the Company's share of medical, dental and vision insurance premiums for you and your
dependents for the Severance Period (as if you had remained employed and based on
coverage as of immediately prior to termination). For the avoidance of doubt, if
immediately prior to the termination of your employment you were required to contribute
towards the cost of premiums as a condition of receiving such insurance, the payment
hereunder will not cover any such contributions. The cash payment provided for in this
Section 3(b)(i)(2) or Section 3(b)(ii)(2), as applicable, is referred to herein as the
“Continued Benefit Payment”;
(3)
Unless otherwise explicitly set forth in the award agreement for the
applicable Equity Award, each outstanding unvested Equity Award held by you
immediately prior to the Date of Termination that is subject to vesting based solely upon
your continuous service with the Company (collectively, “Time-Based Equity Awards”) that
would have vested during the Severance Period had you remained employed shall remain
outstanding and on the Severance Commencement Date, (I) to the extent you have timely
executed and not revoked the Release Agreement (as defined below), such Time-Based Equity
Awards shall automatically vest and become exercisable (as applicable) or (II) to the extent
you have not timely executed or have revoked the Release Agreement, such Time-Based
Equity Awards will be forfeited for no consideration; and
(4)
Unless otherwise explicitly set forth in the award agreement for the
applicable Equity Award, each outstanding unvested Equity Award held by you
immediately prior to the Date of Termination that is subject to vesting in whole or in part
based on achievement of performance objective(s) (collectively, “Performance-Based
Equity Awards”) and is eligible to vest based on achievement of such performance
objective(s) for performance periods ending prior to the Date of Termination or in which
the Date of Termination occurs shall remain outstanding and on the Severance
Commencement Date, (I) to the extent you have timely executed and not revoked the Release
Agreement, (x) the portion of such unvested Performance-Based Equity Award that is
eligible to vest based on achievement of performance objective(s) for performance periods
ending prior to the Date of Termination shall remain eligible to vest and be settled (as
applicable) in accordance with its terms based on actual performance, without regard for
any requirement of continued employment, and (y) a prorated amount of the portion of such
unvested Performance-Based Equity Award that is eligible to vest based on achievement of
performance objective(s) for the applicable performance periods in which the Date of
Termination occurs shall remain eligible to vest through the end of the fiscal year in which
the Date of Termination occurs and be settled (as applicable) in accordance with its terms as
if the last day of such fiscal year was the last day of the applicable performance period(s),
based on performance targets established by the Company and actual performance through
the end of such fiscal year, without regard for any requirement of continued employment, or
(II) to the extent you have not timely executed or have revoked the Release Agreement,
such Performance-Based Equity Awards will be forfeited for no consideration. The
Company shall prorate the portion of each unvested Performance-Based Equity Award
described in subsection (y) above based on the number of days of your employment during
the performance period as compared to the total number of days in such performance
period, with such prorated portion of such Performance-Based Equity Awards eligible to
vest and become exercisable at the end of the fiscal year in which the Date of Termination
occurs, based on the actual level of achievement of such performance objective(s) as of end
of the applicable fiscal year (with the applicable performance objective(s) prorated for any
shortened performance period). Any such determination by
5
the Company shall be final and binding on all persons (including, without limitation, you).
Notwithstanding anything to the contrary herein, settlement upon vesting (if any) of such
Performance-Based Equity Awards described in subsection (ii) shall occur no later than
March 15 of the calendar year immediately following the calendar year of the Date of
Termination (or otherwise in compliance with Section 409A as required by their terms). For
the avoidance of doubt, any Performance-Based Equity Award with respect to which
performance vesting conditions have been determined to be fully satisfied prior to or as of
the Date of Termination (or, which, in connection with a Change in Control or otherwise,
was converted into an Equity Award solely subject to time-based vesting) shall be deemed
to be a Time-Based Equity Award for purposes of this Severance Agreement.
(5)
Subject to the provisions of Sections 3(c) and 7, (I) the Non-CIC
Severance Payment shall be paid in equal installments during the Severance Period in
accordance with the Company’s normal payroll practices beginning on the first payroll date
following the 60th day following the Date of Termination (such payroll date, the
“Severance Commencement Date”), and with the first installment including any amounts
that would have been paid had the Release Agreement been effective and irrevocable on the
Date of Termination, (II) the Pro Rata Bonus shall be paid at the same time as annual bonus
payments are made to similarly situated employees of the Company for the applicable year,
but in no event shall be paid earlier than January 1 or later than December 31 of the
calendar year following the year of termination, and (III) the Continued Benefit Payment
shall be paid in lump sum on the Severance Commencement Date, in each case, less
applicable federal, state and other applicable withholdings.
(ii)
If the Company terminates your employment without Cause (other than as a result
of your death or Disability) or if you terminate your employment with Good Reason, in
each case, during the Change in Control Protection Period, then, in addition to the Accrued
Benefits, the Company will provide you the following severance and related post-
termination benefits:
(1)
The Company shall pay to you a cash lump sum payment in an
amount equal to (A) the sum of twelve (12) months of your Base Pay as in effect
immediately prior to the Date of Termination and your target Annual Bonus for the calendar
year in which the Date of Termination occurs (or in the case of termination by you with
Good Reason due to material reduction in Base Pay and/or target Annual Bonus, your Base
Pay and/or target Annual Bonus in effect immediately prior to such reduction, as
applicable) (the “CIC Severance Payment”), and (B) the Pro Rata Bonus;
(2)
The Company shall pay you an amount equal to the aggregate sum
of the Company’s share of medical, dental and vision insurance premiums for you and your
dependents for the period commencing on the Date of Termination and ending on the first
anniversary thereof (as if you had remained employed and based on coverage as of
immediately prior to termination). For the avoidance of doubt, if immediately prior to the
termination of your employment you were required to contribute towards the cost of
premiums as a condition of receiving such insurance, the payment hereunder will not cover
any such contributions; and
(3)
Unless otherwise explicitly set forth in the award agreement for the
applicable Equity Award, any unvested Equity Awards outstanding immediately prior to the
Date of Termination shall automatically become fully vested and exercisable (as applicable)
as of the Date of Termination; provided that any Performance-Based Equity Award shall
vest assuming a target level of achievement for each applicable performance objective(s).
6
(4)
Subject to the provisions of Sections 3(c) and 7, (I) the CIC
Severance Payment shall be made in a lump sum on the Severance Commencement Date,
(II) the Pro Rata Bonus shall be paid at the same time as annual bonus payments are made
to similarly situated employees of the Company for the applicable year, but in no event
shall be paid earlier than January 1 or later than December 31 of the calendar year
following the year of termination, and (III) the Continued Benefit Payment shall be paid in
lump sum on the Severance Commencement Date, in each case, less applicable federal,
state and other applicable withholdings.
(c)
Release. Any amounts payable pursuant to Section 3(b)(i) or Section 3(b)(ii), as applicable
(collectively, the “Severance Benefits”), shall be in lieu of notice or any other severance benefits to
which you might otherwise be entitled from any Ribbon Entity. Notwithstanding anything to the
contrary herein, the Company’s provision of the Severance Benefits will be contingent upon your
timely execution and non-revocation of a general waiver and release of claims agreement in a form to
be provided by the Company (a “Release Agreement”), subject to the terms set forth herein. You
will have twenty-one (21) days (or, in the event that your termination of employment is “in
connection with an exit incentive or other employment termination program” (as such phrase is
defined in the Age Discrimination in Employment Act of 1967, as amended), forty-five (45) days)
following your receipt of the Release Agreement to consider whether or not to accept it. If the
Release Agreement is signed and delivered by you to the Company, you will have seven (7) days
from the date of delivery to revoke your acceptance of such agreement (the “Revocation Period”). If
you do not timely execute or if you subsequently revoke the Release Agreement, you shall be required to
pay to the Company, immediately upon demand therefor, the amount of any payments or benefits you
received in connection with any portion of Equity Awards that was eligible to vest pursuant to Section
3(b) (including, without limitation, proceeds received or realized by you from the sale or surrender of any
shares underlying such Equity Awards in connection with applicable tax withholding).
(d)
The provisions of this Section 3 shall supersede in their entirety any severance payment
provisions in any severance plan, severance policy, severance program or other severance
arrangement maintained by the Company or any of its affiliates (or any of their respective
predecessors). The Company shall have no further obligation to you in the event of termination of
your employment for any reason at any time, other than those obligations specifically set forth in
this Section 3.
4.
Resignation from Board, Officer and Other Positions. Unless otherwise determined by the Board, in
the event that your employment is terminated for any reason (whether during or after the Term), you shall
be deemed, effective as of the date of such termination, to resign (a) if a director, from the Board or similar
board of directors of any direct or indirect parent, subsidiary or affiliate of the Company and (b) from any
position with the Company or any direct or indirect parent, subsidiary or affiliate of the Company, including
as an officer of the Company or any of its direct or indirect parents, subsidiaries or affiliates.
5.
Mitigation. You shall not be required to mitigate the amount of any payment or benefit provided for
in Section 3 by seeking other employment or otherwise, nor shall the amount of any payment or benefit
provided for in Section 3 be reduced by any compensation earned by you as the result of employment by
another employer or by retirement benefits after the Date of Termination or otherwise, subject to Section 6;
provided, however, that any loans, advances or other amounts owed by you to the Company may be offset
by the Company and its affiliates against amounts payable to you under Section 3 to the greatest extent
permitted by applicable law.
6.
Restrictive Covenants and Other Conditions. You acknowledge and agree that you are a party to
that certain Restrictive Covenant Agreement, and such agreement remains in full force and effect. In the
event of (a) your material breach of the Restrictive Covenant Agreement, (b) your engagement in any act or
omission after the Date of Termination that would have constituted “Cause” under subsections (ii) through
(iv), (xii) or (xiii) of the definition thereof (without regard for any cure periods therein) for
7
termination of your employment had you remained employed after the Date of Termination, or (c) the
Company’s determination in good faith that facts or circumstances existed on the Date of Termination that,
if known by the Company on the Date of Termination, would have constituted Cause, the Company shall be
entitled to cease all payments and benefits pursuant to Section 3(b), all Equity Awards that vested pursuant to
Section 3(b) and any shares of Company stock you received with respect thereto shall immediately be forfeited,
without payment therefor, and you shall be required to pay to the Company, immediately upon demand therefor,
the amount of any proceeds realized by you from the sale of any such shares.
7.
Section 409A Tax Implications. Any payments or benefits required to be provided under this
Agreement that is subject to Section 409A of the Code shall be provided only after the date of your
“separation from service” with the Company as defined under Section 409A of the Code and the regulations
and guidance issued thereunder (collectively, “Section 409A”). The following rules shall apply with respect
to distribution of the payments and benefits, if any, to be provided to you under this Agreement:
(a)
To the extent applicable, this Agreement shall be interpreted in accordance with Section
409A. Each installment of the payments and benefits provided hereunder shall be treated as a
separate “payment” for purposes of Section 409A. If and to the extent (i) any portion of any
payment, compensation or other benefit provided to you pursuant to this Agreement in connection
with your termination of employment constitutes “nonqualified deferred compensation” within the
meaning of Section 409A and (ii) you are a specified employee as defined in Section 409A(a)(2)(B)
(i) of the Code, in each case as determined by the Company in accordance with its procedures, by
which determinations you agree that you are bound, such portion of the payment, compensation or
other benefit shall not be paid until the first business day that is six (6) months plus one (1) day or
more after the date of “separation from service” (as determined under Section 409A) (the “New
Payment Date”), except such earlier date as Section 409A may then permit. The aggregate of any
payments that otherwise would have been paid to you during the period between the date of
separation from service and the New Payment Date shall be paid to you in a lump sum on such New
Payment Date, and any remaining payments will be paid on their original schedule.
(b)
The Company and its employees, agents and representatives make no representations or
warranty and shall have no liability to you or any other person if any provisions of or payments,
compensation or other benefits under this Agreement are determined to constitute nonqualified
deferred compensation subject to Section 409A but do not satisfy the conditions of that section.
Notwithstanding any provision of this Agreement to the contrary, in the event that following the
Effective Date the Board determines that this Agreement may be subject to Section 409A, the Board
may (but is not obligated to), without your consent, adopt such amendments to this Agreement or
adopt other policies and procedures (including amendments, policies and procedures with
retroactive effect), or take any other actions, that the Board determines are necessary or appropriate
to (i) exempt this Agreement from Section 409A and/or preserve the intended tax treatment of the
benefits provided with respect to this Agreement or (ii) comply with the requirements of Section
409A and thereby avoid the application of any penalty taxes under Section 409A.
8.
Section 280G. If any payment or benefit you would receive or retain under this Severance
Agreement, when combined with any other payment or benefit you receive or retain in connection with a
“change in control event” within the meaning of Section 280G of the Code and the regulations and guidance
thereunder (“Section 280G”), would (a) constitute a “parachute payment” within the meaning of Section
280G of the Code, and (b) but for this Section 8, be subject to the excise tax imposed by Section 4999 of the
Code (the “Excise Tax”), then such Payment shall be either payable in full or in such lesser amount as would
result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing amounts,
taking into account the applicable federal, state and local employment taxes, income taxes, and the Excise
Tax, results in your receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that
all or some portion of the Payment may be subject to the Excise Tax. All determinations required to be
made under this Section 8, including whether and to what extent the Payment shall be reduced and the
assumptions to be utilized in arriving at such determination, shall be made by a
8
nationally recognized certified public accounting firm or consulting firm experience in matters regarding
Section 280G of the Code as may be designated by the Company (the “280G Advisor”). The 280G Advisor
shall provide detailed supporting calculations both to you and the Company at such time as is requested by
the Company. All fees and expenses of the 280G Advisor shall be borne solely by the Company. Any final
determination by the 280G Advisor shall be binding upon you and the Company. For purposes of making
the calculations required by this Section 8, the 280G Advisor may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good-faith interpretations
concerning the application of Sections 280G and 4999 of the Code.
9.
Withholding. The Company shall be entitled to withhold from any amounts payable under this
Agreement any federal, state, local or foreign withholding or other taxes or charges that the Company is
required to withhold. The Company shall be entitled to rely on an opinion or advice of counsel if any
questions as to the amount or requirement of withholding arise.
10. Miscellaneous.
(a)
This Agreement, together with any written employment agreement or offer letter to which
you may be a party and any agreements referenced herein, will constitute our entire
agreement as to your employment by the Company and will supersede any prior
agreements or understandings, whether in writing or oral, with respect to the subject matter
hereof, other than with respect to any agreements between you and the Company with
respect to confidential information, intellectual property, non-competition, non-solicitation,
non-disparagement, nondisclosure of proprietary information, inventions and injunctive
relief, including, without limitation, the Restrictive Covenant Agreement.
(b)
This Agreement may be executed in more than one counterpart, each of which shall be
deemed to be an original, and all such counterparts together shall constitute one and the
same instrument.
(c)
The provisions of this Agreement are severable and if any one or more provisions may be
determined to be illegal or otherwise unenforceable, in whole or in part, the remaining
provisions of this Agreement shall nevertheless be binding and enforceable and except to
the extent necessary to reform or delete such illegal or unenforceable provision, this
Agreement shall remain unmodified and in full force and effect.
(d)
This Agreement is personal in nature and neither of the parties hereto shall, without the
written consent of the other, assign or otherwise transfer this Agreement or its obligations,
duties and rights under this Agreement; provided, however, that in the event of the merger,
consolidation, transfer or sale of all or substantially all of the assets of the Company, the
Company may assign its rights and obligations hereunder and, in the event of such
assignment, this Agreement shall, subject to the provisions hereof, be binding upon and
inure to the benefit of such successor and such successor shall be solely obligated to
discharge and perform all of the promises, covenants, duties and obligations of the
Company hereunder.
(e)
All notices shall be in writing and shall be delivered personally (including by courier), by
overnight receipted courier service (such as UPS or Federal Express) or sent by certified,
registered or express mail, postage prepaid, to the Company at the following address:
Ribbon Communications Legal Department, 3605 E. Plano Parkway, Plano, Texas 75074,
Attn: Head of Legal, and to you at the most current address we have in your employment
file. Any such notice shall be deemed given when so delivered personally or, if by
certified, registered or express mail, postage prepaid mailed, forty-eight (48) hours after the
date of deposit in the mail. Any party may, by notice given in accordance with this
paragraph to the other party, designate another address or person for receipt of notices
hereunder.
9
(f)
Arbitration.
(i)
Any controversy, dispute or claim arising out of or relating to this Agreement or the
breach hereof which cannot be settled by mutual agreement will be finally settled
by binding arbitration in the county where you performed your principal work
duties for the Company, under the jurisdiction of the American Arbitration
Association or other mutually agreeable alternative arbitration dispute resolution
service, before a single arbitrator appointed in accordance with the arbitration rules
of the American Arbitration Association or other selected service, modified only as
herein expressly provided. You acknowledge receipt of the applicable AAA
Employment Arbitration Rules and Mediation Procedures which may be found at
the AAA website here https://www.adr.org/Rules. The arbitrator may enter a
default decision against any party who fails to participate in the arbitration
proceedings.
ii.
The Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. shall govern the interpretation
and enforcement of this arbitration clause. The decision of the arbitrator on the
points in dispute will be final, non-appealable and binding, and judgment on the
award may be entered in any court having jurisdiction thereof.
iii.
The fees and expenses of the arbitration will be borne as provided in the AAA
Costs of Arbitration section, and each party will bear the fees and expenses of its
own attorney, unless the arbitrator finds that a statutory award of attorneys’ fees
and/or costs is appropriate.
iv.
The parties waive their rights to a class or collective action. The parties agree that
claims may not be joined, consolidated, or heard together with claims of any other
current or former employee of the Company or other third party.
v.
The parties agree that this Section 10(f) has been included to resolve any disputes
between them with respect to this Agreement or your employment, and that this
Section 10(f) will be grounds for dismissal of any court action commenced by
either party with respect to this Agreement, other than post-arbitration actions
seeking to enforce an arbitration award or actions seeking an injunction or
temporary restraining order and other than claims for unemployment insurance
benefits or workers compensation benefits or other claims which by law cannot be
subject to a mandatory arbitration agreement. In the event that any court determines
that this arbitration procedure is not binding, or otherwise allows any litigation
regarding a dispute, claim, or controversy covered by this Agreement to proceed,
the parties hereto hereby waive, to the maximum extent allowed by law, any and all
right to a class or collection action or a trial by jury in or with respect to such
litigation.
vi.
The parties will keep confidential, and will not disclose to any person, except as
may be required by law or the rules and regulations of the Securities and Exchange
Commission or other government agencies, the existence of any controversy
hereunder, the referral of any such controversy to arbitration or the status or
resolution thereof; notwithstanding the foregoing, nothing herein shall restrict you
from communicating with a government agency or engaging in protected concerted
activity that cannot be waived by such an agreement not to disclose.
10
(g)
This Agreement shall be governed by and interpreted in accordance with the laws of the
State of Delaware, without regard to the conflict of laws provisions thereof or of any other
jurisdiction.
11. Acceptance. You may accept the terms and conditions described herein by confirming your
acceptance in writing. Please send your countersignature to this Agreement to the Company, or via e-mail
to me, which execution will evidence your agreement with the terms and conditions set forth herein.
* * * * *
Signature Page to Severance Agreement
IN WITNESS WHEREOF, each of the parties has executed this Severance Agreement, in the case of the
Company by its duly authorized officer, as of the day and year first above written.
EXECUTIVE:
/s/ Dan Redington
COMPANY:
By: /s/ Bruce McClelland
Name:
Bruce McClelland
Title:
President, Chief Executive Officer and Director
1
RIBBON COMMUNICATIONS INC.
AMENDED AND RESTATED INSIDER TRADING POLICY
I.
GENERAL POLICY
It is the policy of Ribbon Communications Inc. (the “Company”) to prohibit the unauthorized
disclosure of any nonpublic information and the misuse of Material Nonpublic Information in
securities trading. Nonpublic information relating to the Company, including but not limited to
Material Nonpublic Information, is the property of the Company and the unauthorized disclosure
of such information is forbidden. Bases for determining what constitutes Material Nonpublic
Information are discussed in Section VIII of this Amended and Restated Insider Trading Policy
(the “Policy”).
Any questions relating to this Policy should be directed to one of the Trading Compliance Officers.
The Company’s Chief Financial Officer and its General Counsel are its Trading Compliance
Officers.
II.
APPLICABILITY OF POLICY
This Policy applies to all transactions in the securities of the Company or derivatives thereof and to
all employees, officers, and members of the Board of Directors of the Company who receive or
have access to Material Nonpublic Information regarding the Company. In the discretion of the
Trading Compliance Officers, it may also apply to consultants and contractors to the Company
who receive or have access to such information. Additionally, each employee, officer, director and
each applicable consultant or contractor shall be responsible for the compliance of the members of
such person’s immediate family or household and/or any other person or entity who holds shares
over which the employee, officer, director, consultant or contractor, as applicable, exerts some
control (for example, a trust for which an officer serves as trustee).
All employees, officers, directors, applicable consultants and contractors of the Company,
members of such individual’s immediate families, members of their households and all
corporations, partnerships, trusts or other entities controlled by any such persons are sometimes
referred to in this Policy as “Insiders.” Heritage PE (OEP) III, L.P. and Heritage PE (OEP) II, L.P.,
their permitted transferees and any other person or entity which, directly or indirectly, controls, is
controlled by or is under common control with such person or entity will also be deemed
“Insiders.” JPMorgan Chase & Co. and its controlled affiliates will also be deemed “Insiders.” This
Policy also applies to any person who receives Material Nonpublic Information from any Insider.
Any person who possesses Material Nonpublic Information regarding the Company is an Insider
for so long as the information is not publicly known.
This Policy continues to apply to a director’s, an officer’s or an employee’s transactions in
Company securities even after they have terminated employment. If you are in possession of
Material Nonpublic Information when your employment terminates, you may not trade in
Company securities until that information has become public or is no longer material.
EXHIBIT 19.1
2
SPECIFIC POLICIES APPLICABLE TO ALL EMPLOYEES, OFFICERS AND
DIRECTORS
1.
Trading on Material Nonpublic Information. Except as set forth in Section X
(“Certain Exceptions”), no Insider shall engage in any transaction involving the Company’s
securities or derivatives thereof, including any offer to purchase or offer to sell, during any
period commencing with the date that he or she possesses Material Nonpublic Information
concerning the Company and ending at the close of trading two full Trading Days after the
date of public disclosure of that information, or at such time as such nonpublic information
is no longer material. The term “Trading Day” shall mean a day on which national stock
exchanges in the United States are open for trading. A “Trading Day” begins at the time
trading begins on such day.
2.
Tipping. No Insider shall disclose (“tip”) Material Nonpublic Information directly
or indirectly to any other person (including family members) except to those who have been
identified by the Company and who need to know such Material Nonpublic Information, nor
shall any Insider make recommendations or express opinions on the basis of Material
Nonpublic Information as to trading in the Company’s securities or derivatives thereof.
3.
Internet “Chat Rooms” and Social Media. It is a violation of this Policy for any
Insider to disclose, or participate in the disclosure of, any information related to the
Company’s business, prospects, financial condition or employees, including but not limited
to Material Nonpublic Information, by means of an Internet “chat room”, social media (such
as Twitter, Facebook, etc.), message boards or other similar space on the Internet in which
either the Company’s business or the value of its securities is discussed or posted. Any
violation of this provision will be subject to the possible disciplinary actions described
below.
III.
POTENTIAL CRIMINAL AND CIVIL LIABILITY AND/OR DISCIPLINARY
ACTION
Pursuant to federal and state securities laws, Insiders may be subject to civil and criminal penalties
as well as imprisonment for engaging in transactions in the Company’s securities at a time when
they have knowledge of nonpublic information regarding the Company. Insiders may also be liable
for improper transactions by any person to whom they have disclosed nonpublic information
regarding the Company or to whom they have made recommendations or expressed opinions on
the basis of such information as to trading in the Company’s securities. The Securities and
Exchange Commission (the “SEC”) has imposed large penalties even when the disclosing person
did not profit from the trading.
Employees of the Company who violate this Policy shall also be subject to disciplinary action by
the Company, which may include termination of employment or ineligibility for future
participation in the Company’s equity incentive plans.
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IV.
GUIDELINES APPLICABLE TO DIRECTORS, OFFICERS AND CERTAIN
EMPLOYEES
The guidelines regarding a trading window, the pre-clearance of trades and SEC Rule 10b5-1
regarding insider trading, set forth in paragraphs 1, 2 and 4 below, respectively, are applicable to
all directors and officers of the Company as well as to those other employees who the Company
has identified and believes have access to Material Nonpublic Information in the course of their
duties, except where otherwise indicated. The guidelines set forth in paragraph 3 below are
applicable to all persons or entities who are subject to reporting obligations under Section 16
(“Section 16 Insiders”) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The restrictions on trading discussed below shall not apply to transactions under a trading plan as
discussed in Section V, paragraph 3 below.
1.
Trading Window. To ensure compliance with this Policy and applicable federal
and state securities laws, the Company requires that all directors, officers and employees who the
Company has identified and believes have access to the Company’s internal financial statements or
other Material Nonpublic Information conduct transactions involving the purchase or sale of the
Company’s securities only during a “trading window.”
The trading window begins at the close of trading two full Trading Days after the date of
public disclosure of the Company’s quarterly or annual earnings release, and ends fifteen
days prior to the last day of the Company’s fiscal quarter or year.
From time to time, the Company may also prohibit directors, officers and potentially a larger group
of employees who have been identified by the Company from being a part of any transaction
involving the securities of the Company or derivatives thereof. In such event, directors, officers and
such employees may not engage in any transaction involving the Company’s securities or
derivatives thereof and should not disclose to others the fact of such suspension of trading. The
Company would re-open the trading window at the beginning of the second Trading Day following
the date of public disclosure of the information, or at such time as the information is no longer
material.
It should be noted, however, that even during the trading window, any person possessing Material
Nonpublic Information concerning the Company should not engage in any transactions in the
Company’s securities until such information has been known publicly for at least two full Trading
Days, whether or not the Company has recommended a suspension of trading to that person.
Trading in the Company’s securities or derivatives thereof during the trading window should
not be considered a “safe harbor,” and all directors, officers, employees and other persons
should use good judgment at all times.
The Company may from time to time notify directors, executive officers and other specified
employees that an additional blackout period is in effect in view of significant events or
developments involving the Company. In such event, no such individual (or related entity) may
purchase or sell any securities of the Company during such blackout period or inform anyone else
that such a blackout period is in effect.
2.
Pre-Clearance of Trades. The Company has determined that all officers, directors
and employees of the Company who are identified by the Company and are deemed subject to the
4
Company’s trading window should refrain from trading in the Company’s securities and derivatives
thereof, even during the trading window, without first receiving pre-clearance by the Company of the
planned trade, and such requirement to pre-clear shall also be extended to any corporation,
partnership, trust or other entity controlled by any of the above persons. Each such officer, director
and employee should notify one of the Company’s Trading Compliance Officers at least two days
prior to commencing any transaction involving the Company’s securities or any derivatives thereof
by completing the Company’s Preclearance Form and submitting it to the Ribbon Administration
Department. The Preclearance Form can be found online via the Company’s intranet website at:
https://rbbn.force.com/internal/s/epc or a copy of the Preclearance Form may be found at the end of
this Policy. This form can be submitted online, in person or via PDF to stockadmin@rbbn.com. It
may also be necessary to require compliance with the preclearance process from consultants and
contractors. The Stock Administration Department will contact such officer, director, employee,
consultant and/or contractor who submits such Preclearance Form directly if there are any concerns
with the responses submitted, or to confirm pre-clearance. Unless otherwise stated by the Company
or subject to any material change in circumstances, no additional pre-clearance by the Company is
necessary; provided that such pre-cleared transaction occurs within five days of receipt of the pre-
clearance from a Trading Compliance Officer.
As with the trading window, notice is not a “safe harbor”, and persons possessing Material
Nonpublic Information concerning the Company may not trade regardless of whether the trade has
been pre-cleared. Notwithstanding receipt of pre-clearance, if such individual becomes subject
to a blackout period before the transaction is effected, the transaction may not be completed.
3.
Post-Transaction Notice. Each Section 16 Insider shall also notify the Chief
Financial Officer or the General Counsel (or his or her designee) of the occurrence of any
purchase, sale or other acquisition or disposition of securities of the Company as soon as possible
following the transaction, but in any event within one business day after the transaction. Such
notification may be oral or in writing (including by e-mail) and should include the identity of the
covered person, the type of transaction, the date of the transaction, the number of shares involved
and the purchase or sale price.
4.
Rule 10b5-1. SEC Rule 10b5-1 creates an affirmative defense for transactions that
are executed on behalf of an individual pursuant to a written plan (“Rule 10b5-1 Trading Plan”)
entered into in good faith at a time when the individual does not possess Material Nonpublic
Information. This type of trading plan must have a predefined method for triggering the purchase or
sale of the security using date and/or price information, and the plan must be strictly adhered to.
Officers, directors and employees of the Company may implement, terminate, amend or otherwise
modify such a trading plan only subject to preclearance in accordance with the terms of this Policy.
All Section 16 Insiders, must receive advance approval from the General Counsel of the Company.
All other officers and employees of the Company who are considering implementing such a
trading plan must pre-clear any such proposed trading plan with one of the Trading Compliance
Officers.
Upon approval of a plan in accordance with the terms of this paragraph 4, trading may occur as
detailed in such plan, even though trading may occur outside a designated trading window, subject
to the cooling-off periods described below.
5
6
To receive pre-clearance, a Rule 10b5-1 Trading Plan must meet the following parameters:
(a)
No plan may be adopted, terminated, amended or otherwise modified except during
a trading window when that individual is not then in possession of any Material
Nonpublic Information.
(b)
No plan participant may engage in extra-plan, corresponding hedging positions with
respect to the Company’s securities.
(c)
Trading pursuant to the trading plan shall not be permitted until after the applicable
cooling-off period.
(d)
A trading plan may not be modified more than once every six (6) months following
the plan’s adoption or any modification of the plan and such modifications shall not
take effect until at least ninety (90) days after adoption of such modification.
Trading by a Section 16 Insider pursuant to a new or modified Rule 10b5-1 Trading Plan is not
permitted until the later of (i) ninety (90) days after the adoption or modification of the Rule 10b5-
1 Trading Plan or (ii) two (2) business days following the filing of the Form 10-Q or Form 10-K
for the fiscal quarter in which the Rule 10b5-1 Trading Plan was adopted or modified. In no event
may such cooling-off period for Section 16 Insiders exceed one-hundred twenty (120) days
following the adoption or modification of the Rule 10b5-1 Trading Plan.
Trading by persons other than the Company and its Section 16 Insiders pursuant to a new or
modified Rule 10b5-1 Trading Plan is not permitted until thirty (30) days after the adoption or
modification of the Rule 10b5-1 Trading Plan. Such cooling-off period is not applicable to any of
the Company’s common stock repurchase programs.
Officers, directors and employees of the Company may not enter into more than one Rule 10b5-1
Trading Plan at a time for open market purchases or sales of Company securities, except in the
following circumstances:
●
Officers, directors and employees may enter into a series of separate contracts using
different broker-dealers to execute trades pursuant to a single Rule 10b5-1 Trading Plan
that covers Company securities held in different accounts, provided all such contracts meet
the applicable conditions of Rule 10b5-1 and remain subject to the provisions of the same.
A broker-dealer may be substituted for another provided the Rule 10b5-1 Trading Plan
instructions remain identical.
●
Officers, directors and employees may maintain two separate Rule 10b5-1 Trading Plans at
the same time provided that a later-commencing Rule 10b5-1 Trading Plan is not
authorized to begin until after all trades under the earlier adopted Rule 10b5-1 Trading Plan
are completed or expire without execution. A trading plan may be terminated only upon
prior written notice. In the event the earlier Rule 10b5-1 Trading Plan is terminated early,
the first trade date under the later-commencing Rule 10b5-1 Trading Plan may not be
scheduled until after the later of (i) the effective cooling-off period or (ii) ninety (90) days
following its adoption.
●
The prohibition on multiple, overlapping Rule 10b5-1 Trading Plans is not applicable
where an officer, director or employee transacts directly with the Company (such as
7
participating in employee stock ownership plans or dividend reinvestment plans), which are
not executed on the open market.
●
The prohibition on multiple, overlapping Rule 10b5-1 Trading Plans is not applicable to
plans that authorize certain “sell-to-cover” transactions in which officers, directors or
employees instruct their agent to sell Company securities to satisfy tax withholding
obligations arising exclusively from the vesting of a compensatory award. The award
holder may not exercise control over the timing of such sales.
In any 12-month period, officers, directors and employees are not permitted to enter into more
than one Rule 10b5-1 Trading Plan that is designed to effect the open market purchase or sale of
the total amount of Company securities subject to the plan in a single transaction.
5.
Policy Against Hedging and Pledging Company Stock; Prohibition on Trading
of Stock Options, Etc. No director, officer or, except as set forth in Section XI (“Additional
Information”), employee of the Company who has been identified by the Company and deemed
subject to the Company’s trading window may engage in the purchase or sale of stock rights (e.g.,
market options, puts, calls, etc.), pledges and/or short sales in the Company, or purchases of
financial instruments (including prepaid variable forward contracts, equity swaps, collars and
exchange funds) that are designed to hedge or offset any decrease in the market value of Company
securities.
V.
INDIVIDUAL RESPONSIBILITY TO COMPLY WITH THE POLICY
Every officer, director and employee has the individual responsibility to comply with this Policy
against insider trading, regardless of whether the Company has recommended a trading window.
The guidelines set forth in this Policy are guidelines only, and appropriate judgment should be
exercised in connection with any trade in the Company’s securities. Violation of any of the
foregoing rules is grounds for disciplinary action by the Company, including termination of
employment. In addition to any disciplinary actions the Company may take, insider trading can
also result in administrative, civil or criminal proceedings which can result in significant fines and
civil penalties, being barred from service as an officer or director of a public company, or being
sent to jail.
Additionally, each employee, officer, director, consultant or contractor shall be responsible
for the compliance of the members of such person’s immediate family or household and/or
any other person or entity who holds shares over which the employee, officer, director,
consultant or contractor, as applicable, exerts some control (for example, a trust for which an
officer serves as trustee).
APPLICABILITY OF POLICY TO INSIDE INFORMATION ABOUT OTHER
COMPANIES
This Policy and the foregoing guidelines also apply to Material Nonpublic Information relating to
other companies, including the Company’s customers, vendors, suppliers (“business partners”),
peer companies or competitors, when that information is obtained in the course of employment
with, or other services performed on behalf of, the Company. Civil and criminal penalties and
termination of employment may result from trading on inside information regarding the
Company’s business partners, peer companies or competitors. All Insiders should treat nonpublic
8
information, including but not limited to Material Nonpublic Information, about the Company’s
business partners, peer companies or competitors with the same care required with respect to
information related directly to the Company.
VI.
DEFINITION OF MATERIAL NONPUBLIC INFORMATION
It is not possible to define all categories of material information. However, information should be
regarded as material if there is a reasonable likelihood that it would be considered important to an
investor in making an investment decision regarding the purchase or sale of stock or other
securities. Either positive or negative information may be material. Nonpublic information is
information that has not been previously disclosed to the general public and is otherwise not
available to the general public.
While it may be difficult under this standard to determine whether particular information is
material, there are various categories of information that are particularly sensitive and, as a general
rule, should always be considered material. Examples of such information may include: (i)
financial results; (ii) projections of future earnings or losses; (iii) significant developments related
to intellectual property; (iv) significant changes in investment policies; (v) acceleration or delay in
a major product ship date; (vi) the award or loss of a significant contract; (vii) significant litigation
exposure due to actual or threatened litigation; (viii) news of a pending or proposed acquisition or
merger; (ix) significant corporate partnerships, joint ventures, acquisitions or strategic alliances;
(x) news of the disposition or acquisition of assets; (xi) stock splits; (xii) new equity or debt
offerings; and (xiii) changes in the Board of Directors or senior management.
Any questions regarding whether particular information is considered Material Nonpublic
Information should be directed to one of the Trading Compliance Officers.
VII.
WHEN INFORMATION IS “PUBLIC”
If you are aware of Material Nonpublic Information, you may not trade until the information has
been disclosed broadly to the marketplace (such as by press release or an SEC filing) and the
investing public has had time to absorb the information fully. To avoid the appearance of
impropriety, as a general rule, information should not be considered fully absorbed by the
marketplace until the close of trading two full Trading Days after the date the information is
publicly disclosed.
CERTAIN EXCEPTIONS
The exercise of stock options for cash under the Company’s 2019 Incentive Award Plan, Amended
and Restated Stock Incentive Plan, the Amended and Restated 1997 Stock Incentive Plan, the
Performance Technologies, Incorporated 2003 Omnibus Incentive Plan, the 2008 Stock Incentive
Plan or the Performance Technologies, Incorporated 2012 Stock Incentive Plan and the purchase of
shares pursuant to the Company’s Amended and Restated 2000 Employee Stock Purchase Plan (but
not the sale of any shares issued upon such exercise or purchase and not a cashless exercise
accomplished by the sale of a portion of the shares issued upon exercise of an option) are exempt
from this Policy, since the other party to these transactions is the Company itself and the price is
fixed and does not vary with the market. The Company may grant other exceptions from this Policy
on a case-by-case basis. Any such exceptions must be approved by a Trading Compliance Officer.
9
VIII.
ADDITIONAL INFORMATION
Directors, officers, 10% stockholders of the Company and certain other persons identified by the
Company from time to time must also comply with the reporting obligations and limitations on
short-swing transactions set forth in Section 16 of the Exchange Act. The practical effect of these
provisions is that officers, directors, 10% stockholders and such other persons who purchase and
sell the Company’s securities within a six-month period must disgorge all profits to the Company,
whether or not they had knowledge of any Material Nonpublic Information. Moreover, no officer,
director or 10% stockholder may ever make a short sale of the Company’s stock under Section 16
of the Exchange Act, as well as this Policy. A short sale is a sale of securities not owned by the
seller or, if owned, not delivered. Transactions in put and call options for the Company’s securities
may in some instances constitute a short sale or may otherwise result in liability for short swing
profits. All directors, officers, 10% stockholders of the Company and such other identified persons
must confer with one of the Trading Compliance Officers before effecting any such transaction.
While the employees who are not officers and directors are not prohibited by law from engaging
in short sales of the Company’s securities, the Company believes it is inappropriate for employees
to engage in such transactions and therefore, strongly discourages all employees from such
activity.
The Company also strongly discourages all employees from engaging in transactions involving
hedging, monetization, margin accounts, pledges, puts, calls and other derivative securities;
provided, however, that all executive officers and directors are strictly prohibited from engaging in
transactions involving the hedging or pledging of the Company securities, from investing in
derivatives of the Company’s securities and from using the Company’s securities as a security for a
loan. Except for directors and officers, any person wishing to enter into such an arrangement must
first pre-clear the proposed transaction with a Trading Compliance Officer. Any request for pre-
clearance of any such arrangement must be submitted to a Trading Compliance Officer at least two
weeks prior to the proposed execution of documents evidencing the proposed transaction and must
set forth a justification for the proposed transaction. Additionally, many brokerage accounts may
involve margin accounts, so any person wishing to open such an account should first pre-clear the
proposed account with a Trading Compliance Officer before depositing any securities in such
account.
REPORTING VIOLATIONS
Any director, officer or employee (or any other person designated by the Trading Compliance
Officer) who violates this Policy or any law governing insider trading or tipping, or knows of any
such violation by any other party, must report the violation immediately to one of the Trading
Compliance Officers.
Approved by the Board of Directors of Ribbon Communications Inc. on February 22, 2023.
10
RIBBON COMMUNICATIONS INC.
Securities Laws Compliance Program - Preclearance Form
This form must be submitted, approved and processed before you can buy or sell Ribbon shares or
exercise Ribbon options. Every effort will be made to approve and process your request promptly.
Once approved, your trade must be made within five (5) calendar days after such approval, or you
will have to submit a new form. Stock Administration will contact you directly if there are any
concerns with your responses. Capitalized terms used in and not otherwise defined in this form
have the meanings given to them in the Company’s Insider Trading Policy.
(Note: The following do not constitute purchases in the open market: (1) vesting of stock options;
(2) vesting of restricted stock and the cancellation by the Company of restricted shares to pay
withholding taxes upon vesting of restricted stock; or (3) purchases pursuant to the Company’s
employee stock purchase plan. The following, however, do constitute open market sales: (x) sales
of shares by your broker in connection with a cashless stock option exercise; (y) sales of restricted
shares after vesting; and (z) sales of shares received under the employee stock purchase plan.)
Please enter your details:
First Name:
Last Name:
Phone Number:
Email Address:
Please check all of the boxes that apply:
o
The intended date of the trade is ___________ to __________ and will be made during the
Company’s current “trading window.” (You will receive an email from the Company as
soon as you are able to trade your shares. All trades must be completed within five (5)
calendar days after receipt of such approval. Please note that all such approved trades must
be made during the Company’s current “trading window.”)
o
I am not in possession of Material Nonpublic Information. I understand what constitutes
Material Nonpublic Information. I have consulted with the Trading Compliance Officer
concerning any questions I had, if any, including whether any information in my possession
is Material Nonpublic Information, and I do not have any further questions.
o
I obtained the securities that I intend to trade under an applicable Ribbon stock incentive
plan.
o
The proposed transaction is not a “short sale” (i.e., a sale of a security that I do not own at the
time of sale, but that is promised to be delivered), put (i.e., an option contract giving me the
right to sell a specified number of securities at a set price within a specified time), call (i.e., an
option contract giving me the right to buy a specified number of securities at a set price within
a specified time) or any other right associated with the Company’s stock (i.e., swaps, hurdles,
straddles, market options, etc.).
11
Please complete the following section only if you plan to sell shares that are represented by
certificates with restrictive legend(s) (please note that the following section does not apply to
shares of restricted stock granted pursuant to the 2019 Incentive Award Plan, the Amended and
Restated Stock Incentive Plan, the 1997 Stock Incentive Plan, as amended, the 2008 Stock
Incentive Plan (formerly known as the 2008 Network Equipment Technologies, Inc. Equity
Incentive Plan), or the 2012 Amended Performance Technologies, Incorporated Omnibus
Incentive Plan:
o
I have owned the restricted securities that I plan to sell for at least 6 months. (In the case of
employee stock options, common stock covered by such options is considered owned at the
time of exercise, as opposed to the time of the option grant.)
o
I confirm that the proposed transaction will be handled in all respects as a routine trading
transaction and the related brokers will not receive more than a usual and customary
commission. I also confirm that neither I nor any broker will solicit orders to buy the
securities.
o
I have either filed a notice of sale on Form 144 with the U.S. Securities and Exchange
Commission (the “SEC”) or I have determined that such Form is not necessary. A Form 144
must be filed with the SEC if the proposed trade involves more than 5,000 shares of the
Company’s common stock or the aggregate dollar amount is greater than $50,000, in either
case, in any 3-month period. If a Form 144 is filed, I acknowledge that the intended trade
must take place within 3 months of filing such Form 144 or an amended Form 144 must be
filed.
o
I acknowledge that the number of shares I can sell in any 3-month period may not exceed the
greater of (i) 1% of the shares outstanding as shown on the most recent report published by
the Company or (ii) the average weekly reported trading volume in such shares during the 4
weeks preceding the date of receipt of the order to execute the transaction by the broker, the
date of execution of the transaction with the market maker or the filing of a Form 144, as
applicable. This information is available on the latest report filed by the Company with the
SEC on Form 10-Q or Form 10-K, as applicable.
Please complete the following section only if you are an officer, director or 10% stockholder
subject to Section 16 of the Exchange Act of 1934, as amended:
o
If I am seeking pre-clearance from the Company to sell any securities of the Company, I
represent that I have not purchased any securities of the Company in the open market within
the last 6 months, and I do not plan to purchase any of the Company’s securities in the open
market in the next 6 months.
o
If I am seeking pre-clearance from the Company to purchase any securities of the Company, I
represent that I have not sold any securities of the Company in the open market within the
last 6 months, and I do not plan to sell any of the Company’s securities in the open market in
the next 6 months.
o
I understand that a Form 4 must be filed with the SEC. I agree to timely file (i.e., within two
business days of execution of the trade) a Form 4 with the SEC or will speak with the
General Counsel of the Company if I have any questions relating to such Form.
12
Please Note: Pre-clearance by the Stock Administration is not a “safe harbor” and persons
possessing Material Nonpublic Information concerning the Company may not trade any of
the Company’s securities, regardless of whether the trade has been pre-cleared.
Signature:
Date:
EXHIBIT 21.1
RIBBON COMMUNICATIONS INC.
SUBSIDIARIES OF THE REGISTRANT
Name
Jurisdiction of Incorporation
Network Equipment Technologies, Inc.
Delaware
Ribbon Communications Operating Company, Inc.
Delaware
Ribbon Communications Federal Inc.
Delaware
Sonus Networks, Inc.
Delaware
GENBAND Inc.
Massachusetts
ECI de Argentina S.A.
Argentina
Ribbon Communications Australia Pty Ltd
Australia
Ribbon Communications do Brasil Ltda.
Brazil
Ribbon Communications Canada ULC
Canada
Ribbon Networks Communications Chile Limitada
Chile
Ribbon Communications Shanghai Co., Ltd.
China
Ribbon Communications Shanghai Co., LTD Hangzhou Branch
China
Ribbon Communications Sur America Ltda.
Colombia
Ribbon Communications Costa Rica S.A.
Costa Rica
Ribbon Communications Czech Republic s.r.o.
Czech Republic
Ribbon Communications France EURL
France
Ribbon Communications Germany GmbH
Germany
Ribbon Communications Hong Kong Limited
Hong Kong
Ribbon Communication Pvt. Ltd.
India
ECI Telecom India Private Limited
India
Ribbon Communications International Ltd.
Ireland
Ribbon Communications Israel Ltd.
Israel
ECI Telecom Group Ltd.
Israel
ECI Telecom Ltd.
Israel
Negev Telecom Ltd.
Israel
Ribbon Communications Italy S.R.L.
Italy
Ribbon Communications Kabushiki Kaisha
Japan
Ribbon Communications Malaysia Sdn. Bhd.
Malaysia
Ribbon Communications Mexico S. de R.L. de C.V.
Mexico
GENBAND Canada B.V.
Netherlands
Ribbon Networks B.V.
Netherlands
GENBAND NS B.V.
Netherlands
Ribbon Communications B.V.
Netherlands
ECI Telecom (Philippines), Inc.
Philippines
Ribbon Communications Polska sp.z.o.o.
Poland
Ribbon Communications Rus Limited Liability Company
Russia
ECI Telecom 2005 LLC
Russia
Ribbon Networks Saudi Arabia for Information Technology
Saudi Arabia
Ribbon Communications Singapore Pte. Ltd.
Singapore
Ribbon Communications Spain, S.L.
Spain
Ribbon Communications Switzerland GmbH
Switzerland
Ribbon Networks Co., Ltd.
Taiwan
Ribbon Communications Operating Company, Inc. (Thailand Branch)
Thailand
ECI Telecom Ukraine LLC
Ukraine
Ribbon Networks B.V. Dubai Branch
United Arab Emirates
Ribbon Communications UK Limited
United Kingdom
The Representative Office of Ribbon Networks B.V. in Hanoi City
Vietnam
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-267415 and 333-271117 on Form S-3 and Registration
Statement Nos. 333-221240, 333-226624, 333-232946, 333-237224, 333-238888, 333-266412, and 333-282856 on Form S-8 of our
reports dated February 27, 2025, relating to the financial statements of Ribbon Communications Inc. and the effectiveness of Ribbon
Communications Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Ribbon
Communications Inc. for the year ended December 31, 2024.
/s/ Deloitte & Touche LLP
Dallas, Texas
February 27, 2025
EXHIBIT 31.1
CERTIFICATION
I, Bruce McClelland, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Ribbon Communications Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 27, 2025
/s/ Bruce McClelland
Bruce McClelland
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION
I, John Townsend, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Ribbon Communications Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 27, 2025
/s/ John Townsend
John Townsend
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Ribbon Communications Inc. (the “Company”) for the period ended
December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Bruce
McClelland, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 27, 2025
/s/ Bruce McClelland
Bruce McClelland
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Ribbon Communications Inc. (the “Company”) for the period ended
December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, John
Townsend, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 27, 2025
/s/ John Townsend
John Townsend
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)