Ribbon Communications Q3 loss narrows to $9.1M
Operating cash flow was $47.9 million used in the first nine months, compared with $22.2 million provided a year earlier.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Ribbon Communications Inc. (RBBN) recorded $218.7 million of revenue in the three months ended September 30, 2026, compared with $215.4 million a year earlier. Product revenue was $121.3 million and service revenue was $97.4 million. Net loss was $9.1 million, versus $12.1 million a year earlier.
For the first nine months, revenue was $573.7 million, compared with $617.2 million, while net loss was $70.5 million versus $49.4 million. Operating activities used $47.9 million of cash, compared with $22.2 million provided in the prior-year period. At September 30, 2026, borrowings under the credit facility were $350.6 million, including $335.6 million of term debt and $15.0 million under the revolving facility; available borrowing capacity was $20.0 million, and cash and cash equivalents were $40.4 million. A credit amendment set a 4.50:1.00 maximum consolidated net leverage ratio for the period ending September 30 and 4.00:1.00 for subsequent quarters, with a 7.00% interest margin for quarters in which the ratio exceeds 3.75:1.00. Ribbon reported compliance with all financial covenants at September 30.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointQuarterly net loss was $9.1 million, versus $12.1 million a year earlier.
Negative
- Moderate pointNine-month revenue was $573.7 million, versus $617.2 million a year earlier.
- Moderate pointNine-month net loss was $70.5 million, versus $49.4 million a year earlier.
- Moderate pointOperating cash flow was $47.9 million used, versus $22.2 million provided.
Filing Explained
At September 30, 2026, Ribbon reported 4,681,432 warrants still outstanding and immediately exercisable at $3.77 per share, with no exercises in the first nine months; exercise would add common shares and reduce existing holders’ percentage ownership.
Key Figures
Key Terms
Consolidated Net Leverage Ratio financial
cash flow hedges financial
performance obligations financial
deferred revenue financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were RBBN's third-quarter 2026 revenue and net loss?
How did RBBN's revenue and net loss compare for the first nine months of 2026?
What covenant terms did RBBN's 2026 credit amendment set?
AI-generated analysis. How Rhea-AI works. Not financial advice.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
(Exact name of Registrant as specified in its charter)
| | |
| ||
(State or other jurisdiction of | | (I.R.S. Employer Identification No.) |
| | |
| ||
(Address of principal executive offices) | | (Zip code) |
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
| | | | | |
Large accelerated filer | ☐ | ☒ | Non-accelerated filer | ☐ | |
Smaller reporting company | Emerging growth company | | |
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 26, 2026, there were
Table of Contents
RIBBON COMMUNICATIONS INC.
FORM 10-Q
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2026
TABLE OF CONTENTS
| | |
Item | | Page |
| | |
| Cautionary Note Regarding Forward-Looking Statements | 3 |
| | |
PART I FINANCIAL INFORMATION | | |
| | |
1. | Financial Statements | |
| | |
| Condensed Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025 (unaudited) | 4 |
| | |
| Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2026 and 2025 (unaudited) | 5 |
| | |
| Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2026 and 2025 (unaudited) | 6 |
| | |
| Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2026 and 2025 (unaudited) | 7 |
| | |
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2026 and 2025 (unaudited) | 9 |
| | |
| Notes to Condensed Consolidated Financial Statements (unaudited) | 11 |
| | |
2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 36 |
| | |
3. | Quantitative and Qualitative Disclosures About Market Risk | 50 |
| | |
4. | Controls and Procedures | 51 |
| | |
PART II OTHER INFORMATION | | |
| | |
1. | Legal Proceedings | 51 |
| | |
1A. | Risk Factors | 51 |
| | |
2. | Unregistered Sales of Equity Securities and Use of Proceeds | 51 |
| | |
5. | Other Information | 52 |
| | |
6. | Exhibits | 53 |
| | |
| Signatures | 54 |
Table of Contents
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q 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 future expenses and restructuring activities and the anticipated benefits thereof, impacts from the wars in the Middle East and Ukraine, impacts from new tariffs and the proposed termination of the USMCA (as defined herein), results of operations and financial position, future revenue growth of the Company, expected sales growth in segments or regions, capital structure, financial sanctions and trade restrictions, beliefs about our business strategy, availability of components for the manufacturing of our products, ongoing litigation, anticipated activity levels related to our voice modernization projects, 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 the Middle East and Ukraine); other impacts from the wars in the Middle East and Ukraine and related economic volatility and uncertainty resulting therefrom; 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, including our ability to comply with the maximum net leverage ratio, our ability to obtain future waivers or amendments to the Credit Facility, and increases in the applicable interest margin; the effectiveness of our foreign currency hedging program; 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 also discussed in Part I, Item 2, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Part I, Item 1A and Part II, Item 7A, "Risk Factors" and "Quantitative and Qualitative Disclosures About Market Risk," respectively, of our Annual Report on Form 10-K for the year ended December 31, 2025. 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 required by law.
3
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
RIBBON COMMUNICATIONS INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
| | | | | |
| September 30, | | December 31, | ||
| 2026 | | 2025 | ||
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | $ | | | $ | |
Restricted cash | | | | | |
Accounts receivable, net |
| | |
| |
Inventory |
| | |
| |
Other current assets |
| | |
| |
Total current assets |
| | |
| |
Property and equipment, net |
| | |
| |
Intangible assets, net |
| | |
| |
Goodwill |
| | |
| |
Deferred income taxes |
| | |
| |
Operating lease right-of-use assets |
| | |
| |
Other assets |
| | |
| |
| $ | | | $ | |
Liabilities and Stockholders’ Equity |
| | |
| |
Current liabilities: |
| | |
| |
Current portion of term debt | $ | | | $ | |
Revolving credit facility | | | | | — |
Accounts payable |
| | |
| |
Accrued expenses and other |
| | |
| |
Operating lease liabilities |
| | |
| |
Warrant liability | | | | | — |
Deferred revenue |
| | |
| |
Total current liabilities |
| | |
| |
Long-term debt, net of current |
| | |
| |
Warrant liability |
| — | |
| |
Operating lease liabilities, net of current |
| | |
| |
Deferred revenue, net of current |
| | |
| |
Deferred income taxes |
| | |
| |
Other long-term liabilities |
| | |
| |
Total liabilities |
| | |
| |
Commitments and contingencies (Note 20) |
| | |
| |
Stockholders’ equity: |
| | |
| |
Common stock, $ |
| | |
| |
Additional paid-in capital |
| | |
| |
Accumulated deficit |
| ( | |
| ( |
Accumulated other comprehensive income |
| | |
| |
Total stockholders’ equity |
| | |
| |
| $ | | | $ | |
See notes to the unaudited condensed consolidated financial statements.
4
Table of Contents
RIBBON COMMUNICATIONS INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | |
| Three months ended | | Nine months ended | ||||||||
| September 30, | | September 30, | | September 30, | | September 30, | ||||
| 2026 | | 2025 | | 2026 | | 2025 | ||||
Revenue: | | | | | | | | | | | |
Product | $ | | | $ | | | $ | | | $ | |
Service | | |
| | |
| | |
| | |
Total revenue | | |
| | |
| | |
| | |
Cost of revenue: | | |
| | |
| | |
| | |
Product | | |
| | |
| | |
| | |
Service | | |
| | |
| | |
| | |
Amortization of acquired technology | | |
| | |
| | |
| | |
Total cost of revenue | | |
| | |
| | |
| | |
Gross profit | | |
| | |
| | |
| | |
Operating expenses: | | |
| | |
| | |
| | |
Research and development | | |
| | |
| | |
| | |
Sales and marketing | | |
| | |
| | |
| | |
General and administrative | | |
| | |
| | |
| | |
Amortization of acquired intangible assets | | |
| | |
| | |
| | |
Acquisition-, disposal- and integration-related | | — |
| | |
| | — |
| | |
Restructuring and related | | |
| | |
| | |
| | |
Total operating expenses | | |
| | |
| | |
| | |
Income (loss) from operations | | |
| | |
| | ( |
| | ( |
Interest expense, net | | ( |
| | ( |
| | ( |
| | ( |
Other income (expense), net | | |
| | ( |
| | ( |
| | |
Loss before income taxes | | ( |
| | ( |
| | ( |
| | ( |
Income tax (provision) benefit | | ( |
| | ( |
| | |
| | ( |
Net loss | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Loss per share: |
| | |
| | |
| | |
| |
Basic | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Diluted | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Weighted average shares used to compute loss per share: |
| | |
| | |
| | |
| |
Basic |
| | |
| | |
| | |
| |
Diluted |
| | |
| | |
| | |
| |
See notes to the unaudited condensed consolidated financial statements.
5
Table of Contents
RIBBON COMMUNICATIONS INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
| | | | | | | | | | | |
| Three months ended | | Nine months ended | ||||||||
| September 30, | | September 30, | | September 30, | | September 30, | ||||
| 2026 | | 2025 | | 2026 | | 2025 | ||||
Net loss | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Other comprehensive loss, net of tax: | | | | | | | | | | | |
Unrealized loss on cash flow hedges, net of reclassifications into earnings |
| ( | |
| — | |
| ( | |
| — |
Foreign currency translation adjustments |
| | |
| ( | |
| ( | |
| ( |
Other comprehensive loss, net of tax |
| ( | |
| ( | |
| ( | |
| ( |
Comprehensive loss, net of tax | $ | ( | | $ | ( | | $ | ( | | $ | ( |
See notes to the unaudited condensed consolidated financial statements.
6
Table of Contents
RIBBON COMMUNICATIONS INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except shares)
(unaudited)
| | | | | | | | | | | | | | | | |
Three months ended September 30, 2026 | ||||||||||||||||
| | | | | | | | | | | | Accumulated | | | | |
| | | | | | Additional | | | | | other | | Total | |||
| Common stock | | paid-in | | Accumulated | | comprehensive | | stockholders' | |||||||
| Shares | | Amount | | capital | | deficit | | income | | equity | |||||
Balances, July 1, 2026 | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
Vesting of restricted stock awards and units | | |
| — | |
| — | |
| — | |
| — | |
| — |
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations | ( | |
| — | |
| ( | |
| — | |
| — | |
| ( |
Stock-based compensation expense | — | |
| — | |
| | |
| — | |
| — | |
| |
Other comprehensive loss | — | |
| — | |
| — | |
| — | |
| ( | |
| ( |
Net loss | — | |
| — | |
| — | |
| ( | |
| — | |
| ( |
Balances, September 30, 2026 | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
| | | | | | | | | | | | | | | | |
Nine months ended September 30, 2026 | ||||||||||||||||
| | | | | | | | | | | | Accumulated | | | | |
| | | | | | Additional | | | | | other | | Total | |||
| Common stock | | paid-in | | Accumulated | | comprehensive | | stockholders' | |||||||
| Shares | | Amount | | capital | | deficit | | income | | equity | |||||
Balances, January 1, 2026 | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
Repurchase of common stock | ( | |
| — | |
| ( | |
| — | |
| — | |
| ( |
Vesting of restricted stock awards and units | | |
| — | |
| — | |
| — | |
| — | |
| — |
Vesting of performance-based stock units | | |
| — | |
| — | |
| — | |
| — | |
| — |
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations | ( | |
| — | |
| ( | |
| — | |
| — | |
| ( |
Stock-based compensation expense | — | |
| — | |
| | |
| — | |
| — | |
| |
Other comprehensive loss | — | |
| — | |
| — | |
| — | |
| ( | |
| ( |
Net loss | — | |
| — | |
| — | |
| ( | |
| — | |
| ( |
Balances, September 30, 2026 | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
See notes to the unaudited condensed consolidated financial statements.
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Table of Contents
RIBBON COMMUNICATIONS INC.
Condensed Consolidated Statements of Stockholders’ Equity (continued)
(in thousands, except shares)
(unaudited)
| | | | | | | | | | | | | | | | |
Three months ended September 30, 2025 | ||||||||||||||||
| | | | | | | | | | | | Accumulated | | | | |
| | | | | | Additional | | | | | other | | Total | |||
| Common stock | | paid-in | | Accumulated | | comprehensive | | stockholders' | |||||||
| Shares | | Amount | | capital | | deficit | | income | | equity | |||||
Balances, July 1, 2025 | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
Exercise of stock options | | |
| — | |
| — | |
| — | |
| — | |
| — |
Repurchase of common stock | ( | | | — | | | ( | | | — | | | — | | | ( |
Vesting of restricted stock awards and units | | |
| — | |
| — | |
| — | |
| — | |
| — |
Vesting of performance-based stock units | | |
| — | |
| — | |
| — | |
| — | |
| — |
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations | ( | |
| — | |
| ( | |
| — | |
| — | |
| ( |
Stock-based compensation expense | — | |
| — | |
| | |
| — | |
| — | |
| |
Other comprehensive loss | — | |
| — | |
| — | |
| — | |
| ( | |
| ( |
Net loss | — | |
| — | |
| — | |
| ( | |
| — | |
| ( |
Balances, September 30, 2025 | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
| | | | | | | | | | | | | | | | |
Nine months ended September 30, 2025 | ||||||||||||||||
| | | | | | | | | | | | Accumulated | | | | |
| | | | | | Additional | | | | | other | | Total | |||
| Common stock | | paid-in | | Accumulated | | comprehensive | | stockholders' | |||||||
| Shares | | Amount | | capital | | deficit | | income | | equity | |||||
Balances, January 1, 2025 | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
Exercise of stock options | | |
| — | |
| | |
| — | |
| — | |
| |
Exercise of warrants | | | | — | | | | | | — | | | — | | | |
Repurchase of common stock | ( | | | — | | | ( | | | — | | | — | | | ( |
Vesting of restricted stock awards and units | | |
| — | |
| — | |
| — | |
| — | |
| — |
Vesting of performance-based stock units | | |
| — | |
| — | |
| — | |
| — | |
| — |
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations | ( | |
| — | |
| ( | |
| — | |
| — | |
| ( |
Stock-based compensation expense | — | |
| — | |
| | |
| — | |
| — | |
| |
Other comprehensive loss | — | |
| — | |
| — | |
| — | |
| ( | |
| ( |
Net loss | — | |
| — | |
| — | |
| ( | |
| — | |
| ( |
Balances, September 30, 2025 | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
See notes to the unaudited condensed consolidated financial statements.
8
Table of Contents
RIBBON COMMUNICATIONS INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| | | | | |
| Nine months ended | ||||
| September 30, | | September 30, | ||
| 2026 | | 2025 | ||
Cash flows from operating activities: | | | | | |
Net loss | $ | ( | | $ | ( |
Adjustments to reconcile net loss to cash flows (used in) provided by operating activities: | | | | | |
Depreciation and amortization of property and equipment |
| | |
| |
Amortization of intangible assets |
| | |
| |
Amortization of debt issuance costs and original issue discount |
| | |
| |
Stock-based compensation |
| | |
| |
Deferred income taxes |
| ( | |
| |
Change in fair value of warrant liability |
| ( | |
| ( |
Foreign currency exchange losses |
| | |
| |
Changes in operating assets and liabilities: |
| | |
| |
Accounts receivable |
| ( | |
| |
Inventory |
| ( | |
| ( |
Other operating assets |
| | |
| |
Accounts payable |
| | |
| ( |
Accrued expenses and other long-term liabilities |
| ( | |
| ( |
Deferred revenue |
| ( | |
| ( |
Net cash (used in) provided by operating activities |
| ( | |
| |
Cash flows from investing activities: |
| | |
| |
Purchases of property and equipment |
| ( | |
| ( |
Purchases of software licenses |
| ( | |
| — |
Net cash used in investing activities |
| ( | |
| ( |
Cash flows from financing activities: |
| | |
| |
Borrowings under revolving line of credit |
| | |
| — |
Principal payments on revolving line of credit |
| ( | |
| — |
Principal payments of term debt |
| ( | |
| ( |
Payment of debt issuance costs |
| ( | |
| — |
Proceeds from the exercise of stock options | | — | |
| |
Payment of tax obligations related to vested stock awards and units | | ( | | | ( |
Repurchase of common stock | | ( | | | ( |
Net cash provided by (used in) financing activities | | | | | ( |
Effect of exchange rate changes on cash and cash equivalents | | ( |
| | |
Net decrease in cash and cash equivalents | | ( |
| | ( |
Cash, cash equivalents and restricted cash, beginning of year | | |
| | |
Cash, cash equivalents and restricted cash, end of period | $ | | | $ | |
See notes to the unaudited condensed consolidated financial statements.
9
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RIBBON COMMUNICATIONS INC.
Condensed Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)
| | | | | |
| Nine months ended | ||||
| September 30, | | September 30, | ||
| 2026 | | 2025 | ||
Supplemental disclosure of cash flow information: | | | | | |
Interest paid | $ | | | $ | |
Income taxes paid | $ | | | $ | |
Income tax refunds received | $ | | | $ | |
Supplemental disclosure of non-cash investing activities: | | | | | |
Capital expenditures incurred, but not yet paid | $ | | | $ | |
Inventory transfers to property and equipment | $ | | | $ | |
Software licenses purchased, but not yet paid | $ | | | $ | — |
Supplemental disclosure of non-cash financing activities: | | | | | |
Warrant liability released to additional paid-in-capital | $ | — | | $ | |
Fair value of vested restricted and performance-based stock grants | $ | | | $ | |
See notes to the unaudited condensed consolidated financial statements.
10
Table of Contents
RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1) BASIS OF PRESENTATION
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 that provides network solutions that are scalable, elastic and cloud-centric, enabling the secure exchange of information. The Company is at the intersection of the adoption of Artificial Intelligence (“AI”) by service providers and enterprises addressing the rapid growth in fiber connectivity and integration of voice capabilities into Agentic AI platforms. The Company is headquartered in Plano, Texas, and has a global presence with research and development, or sales and support locations in over
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring items, necessary for their fair presentation with accounting principles generally accepted in the United States of America ("GAAP") and with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC").
Interim results are not necessarily indicative of results for a full year or any future interim period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the "Annual Report"), which was filed with the SEC on February 26, 2026.
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
Significant Accounting Policies
The Company’s significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in the Annual Report. There were no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2026.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Ribbon and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.
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 condensed consolidated financial statements include
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
revenue recognition for arrangements that contain multiple performance obligations, inventory valuations, assumptions used to determine the fair value of stock-based compensation and warrants, intangible asset and goodwill valuations, including impairments, 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.
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 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 condensed consolidated statements of operations, and the proceeds from the sales of receivables are included in cash from operating activities in the condensed consolidated statements of cash flows.
Factoring of accounts receivable and associated fees for the three and nine months ended September 30, 2026 and 2025 were as follows (in thousands):
| | | | | | | | | | | |
| Three months ended | | Nine months ended | ||||||||
| September 30, | | September 30, | | September 30, | | September 30, | ||||
| 2026 | | 2025 | | 2026 | | 2025 | ||||
Accounts receivable sold | $ | | | $ | | | $ | | | $ | |
Less: factoring fees | | ( | | | ( | | | ( | | | ( |
Net cash proceeds | $ | | | $ | | | $ | | | $ | |
Recent Accounting Pronouncements
In December 2025, the Financial Accounting Standards Board (the "FASB") issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”), to improve the navigability of the required interim disclosures, to clarify when that guidance is applicable and to enhance disclosure requirements. The amendments add to Topic 270 a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 will be effective for the Company beginning with its 2028 interim and annual financial statements, with early adoption permitted. The Company believes this ASU will have no material impact on its condensed consolidated financial statements.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities (“ASU 2025-10”), to clarify the appropriate accounting, reduce diversity in practice, and increase consistency across business entities. ASU 2025-10 will be effective for us beginning with our 2029 interim and annual financial statements, with early adoption permitted. The Company believes this ASU will have no material impact on its condensed consolidated financial statements.
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements (“ASU 2025-09”), to enhance hedge accounting guidance and better align it with entities’ risk management activities. The amendments expand eligibility for hedge accounting, simplify certain requirements, and address issues related to reference rate reform. Key changes include allowing cash flow hedge accounting for “choose-your-rate” debt instruments, introducing a principles-based “similar risk exposure” criterion for grouping forecasted transactions, permitting component hedging for nonfinancial forecasted transactions, and clarifying the
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
treatment of certain derivative structures. ASU 2025-09 will be effective for the Company beginning with its 2027 interim and annual financial statements, with early adoption permitted. The Company is currently evaluating the impact of this accounting standard on its condensed consolidated financial statements and related disclosures.
In September 2025, the Financial Accounting Standards Board (the "FASB") issued ASU 2025-06, Intangibles- Goodwill and Other- Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). To clarify how the accounting guidance applies to both linear and nonlinear software development, this standard removes all references to “development stages” from ASC 350-40. ASU 2025-06 will be effective for the Company beginning with its 2028 interim and annual financial statements, with early adoption permitted as of the beginning of an annual reporting period. The Company is currently evaluating the impact of this accounting standard on its condensed consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement, Reporting Comprehensive Income: Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), which requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. 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 its 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.
(2) 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):
| | | | | | | |
| Three months ended | | Nine months ended | ||||
| September 30, | | September 30, | | September 30, | | September 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
Weighted average shares outstanding—basic | |
| |
| |
| |
Potential dilutive common shares | | | |
| |
| |
Weighted average shares outstanding—diluted | |
| |
| |
| |
Options to purchase the Company’s common stock and unvested restricted and performance-based stock units totaling
In connection with a private placement completed in March 2023, the Company issued
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
The potential number of dilutive shares from the warrants outstanding totaled
(3) INVENTORY
Inventory at September 30, 2026 and December 31, 2025 consisted of the following (in thousands):
| | | | | |
| September 30, | | December 31, | ||
| 2026 | | 2025 | ||
On-hand assemblies and finished goods inventories | $ | | | $ | |
Deferred cost of goods sold |
| | |
| |
|
| | |
| |
Less noncurrent portion (included in Other assets) |
| ( | |
| ( |
Current portion | $ | | | $ | |
(4) INTANGIBLE ASSETS AND GOODWILL
The Company’s intangible assets at September 30, 2026 and December 31, 2025 consisted of the following (in thousands):
| | | | | | | | | | | |
| | Weighted | | | | | | | | ||
| | average | | | | | | | | | |
| | amortization | | | | | | | | Net | |
| | period | | | | | Accumulated | | carrying | ||
September 30, 2026 | | (years) | | Cost | | amortization | | value | |||
Developed technology | | | $ | | | $ | | | $ | | |
Customer relationships | | | | | | | | | | | |
Software licenses |
|
| | |
| | |
| | | |
Trade names | | | | | | | | | | — | |
|
| | | $ | | | $ | | | $ | |
| | | | | | | | | | | |
| | Weighted | | | | | | | | ||
| | average | | | | | | | | | |
| | amortization | | | | | | | | Net | |
| | period | | | | | Accumulated | | carrying | ||
December 31, 2025 | | (years) | | Cost | | amortization | | value | |||
Developed technology | | | $ | | | $ | | | $ | | |
Customer relationships | | | | | | | | | | | |
Software licenses |
|
| | |
| | |
| | | |
Trade names | | | | | | | | | | — | |
|
| | | $ | | | $ | | | $ | |
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
Estimated future amortization expense for the Company’s intangible assets at September 30, 2026 was as follows (in thousands):
| | |
Years ending December 31, | | |
Remainder of 2026 | $ | |
2027 | | |
2028 |
| |
2029 |
| |
2030 |
| |
2031 | | |
Thereafter | | |
| $ | |
There were
| | | | | | | | |
| Cloud and | | IP Optical | | | | ||
| Edge | | Networks | | Total | |||
Goodwill | $ | | | $ | | | $ | |
Accumulated impairment losses |
| ( | |
| ( | |
| ( |
| $ | | | $ | | | $ | |
(5) FAIR VALUE HIERARCHY
The carrying amounts of the Company’s cash equivalents, accounts receivable, accounts payable and borrowings under a revolving credit facility in the condensed consolidated balance sheets approximate fair value due to the immediate or short-term nature of these financial instruments. The carrying amount of the Company’s term debt at September 30, 2026 and December 31, 2025 also approximates fair value, based on prevailing market conditions. The Company’s warrant liability had a fair value of $
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 classification within the fair value hierarchy is based upon the lowest level of inputs 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 inputs at September 30, 2026 or December 31, 2025. |
| ● | 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, 2025, the Company determined the fair value of its defined benefit plans’ assets using Level 2 inputs. There were no significant changes to the Company’s defined benefit plans’ assets during the nine months ended September 30, 2026 that required the calculation of their fair value as of |
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
| September 30, 2026. Level 2 inputs were also used to determine the fair value of the Company’s derivative financial instruments at September 30, 2026. |
| ● | 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. Level 3 inputs were used to determine the fair value of the Company’s warrants at September 30, 2026 and December 31, 2025. |
The Company had
(6) ACCRUED EXPENSES AND OTHER
Accrued expenses at September 30, 2026 and December 31, 2025 consisted of the following (in thousands):
| | | | | |
| September 30, | | December 31, | ||
| 2026 | | 2025 | ||
Employee compensation and related costs | $ | | | $ | |
Professional fees |
| | |
| |
Taxes payable |
| | |
| |
Other |
| | |
| |
| $ | | | $ | |
(7) WARRANTY
The changes in the Company’s warranty accrual balance in the nine months ended September 30, 2026 and 2025 were as follows (in thousands):
| | | | | |
| Nine months ended | ||||
| September 30, | | September 30, | ||
| 2026 | | 2025 | ||
Balance at beginning of year | $ | | | $ | |
Current period provisions |
| | | | |
Settlements |
| ( | | | ( |
Balance at end of period | $ | | | $ | |
At September 30, 2026, the Company’s accrual for product warranties was reflected in its condensed consolidated balance sheet as a current liability in Accrued expenses and other of $
(8) RESTRUCTURING AND FACILITIES CONSOLIDATION INITIATIVES
The Company recorded restructuring and related expense aggregating $
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
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
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 condensed 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 excluded from the tables below, as the liability for lease payments for each respective facility is included as a component of Operating lease liabilities in the Company’s condensed consolidated balance sheets at September 30, 2026 and December 31, 2025 (see Note 17). The Company may incur additional future expense if it is unable to sublease other locations included in the facilities initiative.
The components of restructuring and related expense for the three and nine months ended September 30, 2026 and 2025 were as follows (in thousands):
| | | | | | | | | | | |
| Three months ended | | Nine months ended | ||||||||
| September 30, | | September 30, | | September 30, | | September 30, | ||||
| 2026 | | 2025 | | 2026 | | 2025 | ||||
Severance and related costs | $ | | | $ | | | $ | | | $ | |
Variable and other facilities-related costs |
| | |
| | |
| | |
| |
| $ | | | $ | | | $ | | | $ | |
The following table presents the rollforward of accrued restructuring liabilities for the Company’s restructuring plans for the nine months ended September 30, 2026 (in thousands):
| | | | | | | | | | | |
| 2022 and Prior | | 2025 | | 2026 | | | ||||
| Restructuring | | Restructuring | | Restructuring | | | | |||
| Plans | | Plan | | Plan | | Total | ||||
Balances, January 1, 2026 | $ | | | $ | | | $ | | | $ | |
Charged to expense |
| | |
| ( | | | | |
| |
Payments |
| ( | |
| ( | |
| ( | |
| ( |
Balances, September 30, 2026 | $ | | | $ | | | $ | | | $ | |
2026 Restructuring Plan
During the fourth quarter of 2025, the Company’s President and Chief Executive Officer (“CEO”) approved a strategic restructuring program (the "2026 Restructuring Plan") that consists of workforce reductions in certain of the Company’s operating locations to correspond with current sales levels in those areas. Any positions eliminated in countries outside the United States are subject to local law and consultation requirements. In connection with the 2026 Restructuring Plan, the Company recorded restructuring and related expense of $
2025 Restructuring Plan
During the first quarter of 2025, the Company’s President and CEO approved a strategic restructuring program (as subsequently amended, the "2025 Restructuring Plan") that consists of workforce reductions in certain of the Company’s
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
operating locations to correspond with current sales levels in those areas. The 2025 Restructuring Plan was amended in the third quarter of 2025 to reflect an increase in the scope of the proposed reductions. Any positions eliminated in countries outside the United States are subject to local law and consultation requirements. In connection with the 2025 Restructuring Plan, the Company incurred nominal restructuring and related expense in the three and nine months ended September 30, 2026. The Company recorded restructuring and related expense of $
2022 and Prior Restructuring Plans
Prior to December 31, 2022, the Company engaged in various restructuring plans that included consolidation of facilities and workforce reductions. Substantially all the ongoing costs incurred under such plans in the periods presented relate to variable and other facilities-related costs. In connection with these plans, the Company recorded restructuring and related expense of $
Balance Sheet Classification
The current portions of accrued restructuring and related expense were $
(9) DEBT
As of September 30, 2026, the Company had $
On May 5, 2026, the Company entered into the First Amendment and Limited Waiver to Credit Agreement (the “First Amendment”) with Ribbon Communications Operating Company, Inc., HPS Investment Partners, LLC, as administrative agent, and the consenting lenders. The First Amendment (1) waives compliance with the maximum consolidated net leverage ratio financial covenant as of and for the period ending June 30, 2026, (2) increases the Maximum Consolidated Net Leverage Ratio (as defined in the Credit Agreement) to
The Company remained in compliance with all financial covenants under the Credit Facility as of September 30, 2026.
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
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 Credit Facility as of September 30, 2026 and December 31, 2025:
| | | | | | |
| September 30, | | December 31, |
| ||
| 2026 | | 2025 |
| ||
Current portion of term debt | $ | | | $ | | |
| | | | | | |
Revolving credit facility | $ | | | $ | — | |
| | | | | | |
Long-term debt, net of current: | | | | | | |
Long-term debt, net of current (Face amount) | $ | | | $ | | |
Original issue discount | | ( | | | ( | |
Unamortized debt issuance costs - Contra-liability |
| ( | |
| ( | |
Long-term debt, net of current | $ | | | $ | | |
| | | | | | |
Total face amount of borrowings | $ | | | $ | | |
| | | | | | |
Unamortized original issue discount and debt issuance costs: |
| | |
| | |
Other assets | $ | | | $ | | |
Long-term debt - Contra-liability |
| | |
| | |
Total unamortized original issue discount and debt issuance costs | $ | | | $ | | |
| | | | | | |
Available borrowing capacity | $ | | | $ | | |
| | | | | | |
Average interest rates: | | | | | | |
Term loan |
| | % |
| | % |
Revolving credit facility | | | % | | — | % |
The Company’s debt maturities as of September 30, 2026 were as follows:
| | |
Years ending December 31, | | |
Remainder of 2026 | $ | |
2027 | | |
2028 | | |
2029 | | |
| $ | |
Letters of Credit and Other Guarantees
In the course of its business, the Company uses letters of credit, bank guarantees, and surety bonds (collectively, "Guarantees"). The Company had $
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(10) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to financial market risk, primarily arising from fluctuations in foreign currency exchange rates, and management actively monitors these exposures. As part of its overall risk management strategy, the Company may use derivative financial instruments to reduce volatility in earnings and cash flows resulting from changes in foreign exchange rates. Ribbon’s policies and practices limit the use of derivative instruments to risk management activities only, and the Company does not use derivatives 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 Foreign Exchange Rate Risk
The Company is exposed to foreign currency exchange rate risk related to forecasted operating expenses denominated in a foreign currency. To manage this exposure, the Company entered into foreign exchange forward arrangements, which were designated as hedging instruments beginning in January 2026. These derivatives are intended to reduce the variability in cash flows associated with changes in foreign currency exchange rates.
The Company’s objectives in using foreign exchange rate derivatives are to mitigate risk, add stability to cash flows, and manage its exposure to foreign exchange rate movements. To accomplish these objectives, the Company uses foreign exchange rate forward contracts as part of its foreign currency risk management strategy. Foreign exchange rate forward contracts designated as cash flow hedges involve the exchange of fixed USD payments for fixed ILS receipts at predetermined exchange rates, thereby reducing the variability of forecasted ILS‑denominated expenditures.
The effective portion of changes in the fair value of designated derivatives that qualify as cash flow hedges is recorded in Accumulated other comprehensive income in the condensed consolidated balance sheet and is subsequently reclassified into earnings in the period that the hedged forecasted transactions affect earnings.
Amounts reported in Accumulated other comprehensive income related to the Company’s derivative are reclassified to product cost of revenue, service cost of revenue, research and development, sales and marketing, and general and administrative expenses in the condensed consolidated statement of operations.
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
The impact of the Company’s derivative financial instruments designated as cash flow hedges on the Company’s condensed consolidated statements of operations and condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2026 was as follows (in thousands):
| | | | | |
| Three months ended | | Nine months ended | ||
| September 30, | | September 30, | ||
| 2026 | | 2026 | ||
Amount recognized in other comprehensive income (loss) on the derivative (effective portion) | $ | ( | | $ | ( |
Amount reclassified from accumulated other comprehensive income to the condensed consolidated statement of operations |
| ( | |
| |
Unrealized loss on cash flow hedges, net of reclassifications into earnings | $ | ( | | $ | ( |
The Company expects that all amounts recorded in Accumulated other comprehensive income related to outstanding foreign exchange forward contracts will be reclassified into earnings within the next twelve months, as all contracts outstanding at September 30, 2026 mature no later than January 2027.
The Company's derivative liability designated as a hedging instrument and the related fair value and location in the condensed consolidated balance sheet at September 30, 2026 are as follows (in thousands):
| | | |
| | September 30, | |
Balance sheet location | | 2026 | |
Accrued expenses and other | | $ | |
The aggregate notional amounts and maturities of the Company’s outstanding foreign exchange rate forward contracts at September 30, 2026 were as follows:
| | | | | | | | |
| | | Notional | | | Notional | | |
Derivative Instrument | | | Amount | | | Amount | | Maturity |
Foreign exchange rate forward contracts (cash flow hedges) | | USD | | | ILS | | | October 2026 - January 2027 |
The Company has classified the foreign exchange derivatives aggregating $
(11) PREFERRED STOCK AND WARRANTS
In connection with a private placement completed in March 2023, the Company issued
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
The Company determined the fair value of the warrants using Level 3 inputs. The key assumptions into the model utilized were as follows as of September 30, 2026 and December 31, 2025:
| | | | | | | |
| | September 30, | | | | December 31, | |
| 2026 | | 2025 | ||||
Stock price | $ | | | | $ | | |
Strike price | $ | | | | $ | | |
Risk-free rate |
| | % | |
| | % |
Volatility |
| | % | |
| | % |
Dividend yield |
| % | |
| % | ||
Time to expiration (years) |
| | | |
| | |
Fair value of warrant per share | $ | | | | $ | | |
The changes in the Company’s warrant liabilities for the nine months ended September 30, 2026 and 2025 were as follows (in thousands):
| | | | | |
| Nine months ended | ||||
| September 30, | | September 30, | ||
| 2026 | | 2025 | ||
Balance at beginning of year | $ | | | $ | |
Exercise of warrants | | — | | | ( |
Fair value change |
| ( | |
| ( |
Balance at end of period | $ | | | $ | |
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.
During the nine months ended September 30, 2025,
(12) REVENUE RECOGNITION
The Company derives revenue from
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
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
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 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
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
Payment terms for the Company’s contracts with its customers typically range from
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
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 three and nine months ended September 30, 2026, 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.
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.
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
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.
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 three and nine months ended September 30, 2026 and 2025 was disaggregated geographically as follows:
| | | | | | | | | | | |
| | | | | | | Service revenue | | | | |
| Product | | Service revenue | | (professional | | | | |||
Three months ended September 30, 2026 | revenue | | (maintenance) | | services) | | Total revenue | ||||
United States | $ | | | $ | | | $ | | | $ | |
Europe, Middle East and Africa | | | | | | | | | | | |
Asia Pacific | | | | | | | | | | | |
Other | | | | | | | | | | | |
| $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | |
| | | | | | | Service revenue | | | | |
| Product | | Service revenue | | (professional | | | | |||
Three months ended September 30, 2025 | revenue | | (maintenance) | | services) | | Total revenue | ||||
United States | $ | | | $ | | | $ | | | $ | |
Europe, Middle East and Africa |
| | |
| | |
| | |
| |
Asia Pacific |
| | |
| | |
| | |
| |
Other |
| | |
| | |
| | |
| |
| $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | |
| | | | | | | Service revenue | | | | |
| Product | | Service revenue | | (professional | | | | |||
Nine months ended September 30, 2026 | revenue | | (maintenance) | | services) | | Total revenue | ||||
United States | $ | | | $ | | | $ | | | $ | |
Europe, Middle East and Africa |
| | | | | | | | |
| |
Asia Pacific |
| | | | | | | | |
| |
Other |
| | | | | | | | |
| |
| $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | |
| | | | | | | Service revenue | | | | |
| Product | | Service revenue | | (professional | | | | |||
Nine months ended September 30, 2025 | revenue | | (maintenance) | | services) | | Total revenue | ||||
United States | $ | | | $ | | | $ | | | $ | |
Europe, Middle East and Africa |
| | |
| | |
| | |
| |
Asia Pacific |
| | |
| | |
| | |
| |
Other |
| | |
| | |
| | |
| |
| $ | | | $ | | | $ | | | $ | |
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
The Company’s product revenue from its direct sales program and from indirect sales through its channel partner program for the three and nine months ended September 30, 2026 and 2025 was as follows (in thousands):
| | | | | | | | | | | | |
| | Three months ended | | Nine months ended | ||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | ||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Indirect sales through channel partner program | | $ | | | $ | | | $ | | | $ | |
Direct sales | |
| | |
| | |
| | |
| |
| | $ | | | $ | | | $ | | | $ | |
The Company’s product revenue from sales to enterprise customers and from sales to service provider customers for the three and nine months ended September 30, 2026 and 2025 was as follows (in thousands):
| | | | | | | | | | | | |
| | Three months ended | | Nine months ended | ||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | ||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Sales to enterprise customers | | $ | | | $ | | | $ | | | $ | |
Sales to service provider customers | |
| | |
| | |
| | |
| |
| | $ | | | $ | | | $ | | | $ | |
The Company’s product revenue and service revenue components by segment for the three and nine months ended September 30, 2026 and 2025 were as follows (in thousands):
| | | | | | | | | | | | |
| | Three months ended | | Nine months ended | ||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | ||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Product revenue: | | | | | | | | | | | | |
Cloud and Edge |
| $ | |
| $ | |
| $ | |
| $ | |
IP Optical Networks |
| | |
| | |
| | |
| | |
Total product revenue |
| $ | |
| $ | |
| $ | |
| $ | |
| | | | | | | | | | | | |
Service revenue: |
| | |
| | |
| | |
| | |
Maintenance: |
| | |
| | |
| | |
| | |
Cloud and Edge |
| $ | |
| $ | |
| $ | |
| $ | |
IP Optical Networks |
| | |
| | |
| | |
| | |
Total maintenance revenue |
| | |
| | |
| | |
| | |
Professional services: |
| | |
| | |
| | |
| | |
Cloud and Edge |
| | |
| | |
| | |
| | |
IP Optical Networks |
| | |
| | |
| | |
| | |
Total professional services revenue |
| | |
| | |
| | |
| | |
Total service revenue |
| $ | |
| $ | |
| $ | |
| $ | |
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 condensed 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
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
assets and liabilities are reported in the Company’s condensed 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 nine months ended September 30, 2026 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 condensed consolidated balance sheets.
The changes in the Company’s accounts receivable, unbilled receivables and deferred revenue balances for the nine months ended September 30, 2026 were as follows (in thousands):
| | | | | | | | | | | |
| | | | Unbilled | | Deferred | | Deferred | |||
| Accounts | | accounts | | revenue | | revenue | ||||
| receivable | | receivable | | (current) | | (long-term) | ||||
Balance at January 1, 2026 | $ | | | $ | | | $ | | | $ | |
Increase (decrease), net |
| | |
| | |
| ( | |
| |
Balance at September 30, 2026 | $ | | | $ | | | $ | | | $ | |
The Company recognized approximately $
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 approximately $
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 condensed 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. These costs have been deferred on our condensed consolidated balance sheet and are being amortized over the expected life of the customer contract, which is generally
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(13) OPERATING SEGMENT INFORMATION
The Company has
The Cloud and Edge segment provides secure and reliable software and hardware products, solutions and services for enabling Voice over Internet Protocol ("VoIP") communications, Voice over Long-Term Evolution ("VoLTE") and Voice Over 5G ("VoNR") communications, and Unified Communications and Collaboration ("UC&C") within service provider and enterprise networks and from the cloud. The Cloud and Edge products are increasingly software-centric and cloud-native for deployment on private, public or hybrid cloud infrastructures, in data centers, on enterprise premises and within service provider networks. Ribbon's Cloud and Edge product portfolio consists primarily of its Session Border Controller ("SBC") products and its Network Transformation products.
The IP Optical Networks segment provides high-performance, secure solutions for IP networking and optical transport, supporting wireless networks including 5G, metro and edge aggregation, core networking, data center interconnect, legacy transformation and transport solutions for wholesale carriers. 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 4 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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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
The tables below present significant segment expenses regularly reviewed by the CODM for the three and nine months ended September 30, 2026 and 2025 (in thousands):
| | | | | | | | | | | | |
| | Three months ended | | Nine months ended | ||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | ||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Segment revenue: | | | | | | | | | | | | |
Cloud and Edge |
| $ | |
| $ | |
| $ | |
| $ | |
IP Optical Networks |
| | |
| | |
| | |
| | |
Revenue |
| $ | |
| $ | |
| $ | |
| $ | |
| | | | | | | | | | | | |
| | Three months ended | | Nine months ended | ||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | ||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Segment adjusted gross profit: | | | | | | | | | | | | |
Cloud and Edge |
| $ | |
| $ | |
| $ | |
| $ | |
IP Optical Networks |
| | |
| | |
| | |
| | |
Total segment adjusted gross profit |
| | |
| | |
| | |
| | |
| | | | | | | | | | | | |
Reconciliation of segment adjusted gross profit to gross profit and loss before income taxes | | | | | | | | | | | | |
Stock-based compensation expense | | | ( | | | ( | | | ( | | | ( |
Amortization of acquired technology |
| | ( |
| | ( |
| | ( |
| | ( |
Gross profit |
| | |
| | |
| | |
| | |
| | | | | | | | | | | | |
Research and development expense | | | | | | | | | | | | |
Sales and marketing expense | | | | | | | | | | | | |
General and administrative expense | | | | | | | | | | | | |
Amortization of acquired intangible assets | | | | | | | | | | | | |
Acquisition-, disposal- and integration-related expense | | | — | | | | | | — | | | |
Restructuring and related expense | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | |
Other (income) expense, net | | | ( | | | | | | | | | ( |
Loss before income taxes | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
| | | | | | | | | | | | |
| | Three months ended | | Nine months ended | ||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | ||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Segment depreciation expense: | | | | | | | | | | | | |
Cloud and Edge |
| $ | |
| $ | |
| $ | |
| $ | |
IP Optical Networks |
| | |
| | |
| | |
| | |
Depreciation expense |
| $ | |
| $ | |
| $ | |
| $ | |
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(14) MAJOR CUSTOMERS
The following customers contributed 10% or more of the Company’s revenue in the three and nine months ended September 30, 2026 and 2025:
| | | | | | | | | |
| | Three months ended | | Nine months ended |
| ||||
| | September 30, | | September 30, | | September 30, | | September 30, | |
| | 2026 | | 2025 | | 2026 | | 2025 |
|
Verizon Communications Inc. | | | % | | % | | % | | % |
Bharti Telecom Limited | | * | | | % | | % | * | |
* Less than 10% of total revenue | | | | | | | | | |
At September 30, 2026 and December 31, 2025, 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.
(15) COMMON STOCK REPURCHASES
In the second quarter of 2025, the Company's Board of Directors approved a program to repurchase up to $
(16) 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 2025 Incentive Award Plan (the “2025 Plan”) which provides for the award of stock options, stock appreciation rights ("SARs"), restricted stock awards ("RSAs"), performance-based stock awards ("PSAs"), restricted stock units ("RSUs"), performance-based stock units ("PSUs") and other stock- or cash-based awards. The 2025 Plan has been approved by the Company’s stockholders.
Executive Equity Arrangements
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
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
Restricted Stock Units
The activity related to the Company’s RSUs for the nine months ended September 30, 2026 was as follows:
| | | | | |
| | | | Weighted | |
| | | | Average | |
| | | | Grant Date | |
| | Shares | | Fair Value | |
Unvested balance at January 1, 2026 |
| | | $ | |
Granted |
| | | $ | |
Vested |
| ( | | $ | |
Forfeited |
| ( | | $ | |
Unvested balance at September 30, 2026 |
| | | $ | |
The total grant date fair value of shares of restricted stock underlying RSUs that vested during the nine months ended September 30, 2026 was $
Performance-Based Stock Units
The activity related to the Company’s PSUs for the nine months ended September 30, 2026 was as follows:
| | | | | |
| | | | Weighted | |
| | | | Average | |
| | | | Grant Date | |
| | Shares | | Fair Value | |
Unvested balance at January 1, 2026 |
| | | $ | |
Granted |
| | | | |
Vested |
| ( | | | |
Forfeited |
| ( | | | |
Unvested balance at September 30, 2026 |
| | | $ | |
The total grant date fair value of shares of restricted stock underlying PSUs that vested during the nine months ended September 30, 2026 was $
Stock-Based Compensation
The condensed consolidated statements of operations include stock-based compensation for the three and nine months ended September 30, 2026 and 2025 as follows (in thousands):
| | | | | | | | | | | |
| Three months ended | | Nine months ended | ||||||||
| September 30, | | September 30, | | September 30, | | September 30, | ||||
| 2026 | | 2025 | | 2026 | | 2025 | ||||
Product cost of revenue | $ | |
| $ | |
| $ | |
| $ | |
Service cost of revenue | | |
| | |
| | |
| | |
Research and development | | | | | | | | | | | |
Sales and marketing | | | | | | | | | | | |
General and administrative | | | | | | | | | | | |
| $ | |
| $ | |
| $ | |
| $ | |
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
At September 30, 2026, there was $
(17) LEASES
The Company has operating leases for corporate offices and research and development facilities. Operating leases are reported separately in the Company’s condensed 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 September 30, 2026 and December 31, 2025 and determined
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. 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 may accelerate the amortization of those lease assets through the planned cease-use date of each facility, resulting in additional amortization expense.
All incremental accelerated amortization and accruals for estimated future variable costs are included in Restructuring and related expense in the Company’s condensed consolidated statements of operations. At September 30, 2026 and December 31, 2025, the Company had accruals of $
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
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.
The Company leases its corporate offices and other facilities under operating leases, which expire at various times through 2036.
The Company’s right-of-use lease assets and lease liabilities at September 30, 2026 and December 31, 2025 were as follows (in thousands):
| | | | | | | | |
| | | | September 30, | | December 31, | ||
| | Classification | | 2026 | | 2025 | ||
Assets: | | |
| | |
| | |
Operating lease assets | | Operating lease right-of-use assets | | $ | | | $ | |
| | | | | | | | |
Liabilities: | | | |
| | |
| |
Current Operating | | Operating lease liabilities | | $ | | | $ | |
Non-Current Operating | | Operating lease liabilities, net of current | |
| | |
| |
Total Operating lease liabilities | | | | $ | | | $ | |
The components of lease expense for the three and nine months ended September 30, 2026 and 2025 were as follows (in thousands):
| | | | | | | | | | | | |
| | Three months ended | | Nine months ended | ||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | ||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Operating lease cost* | | $ | | | $ | | | $ | | | $ | |
Short-term lease cost | |
| | |
| | |
| | |
| |
Variable lease costs (costs excluded from minimum fixed lease payments)** | |
| | |
| | |
| | |
| |
Sublease income | |
| ( | |
| ( | |
| ( | |
| ( |
Net lease cost | | $ | | | $ | | | $ | | | $ | |
* |
** |
Cash flows related to the Company’s leases included in the measurement of operating lease liabilities were classified as operating cash flows and totaled $
The Company’s non-cash investing and financing activities in the nine months ended September 30, 2025 related to the addition of operating leases resulted in right-of-use assets (“ROUs”) obtained in exchange for lease obligations of $
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
Other information related to the Company’s leases as of September 30, 2026 and December 31, 2025 was as follows (in thousands):
| | | | | |
| | September 30, | | December 31, | |
| | 2026 | | 2025 |
|
Weighted average remaining lease term (years): |
| |
| | |
Operating leases |
|
| | ||
Weighted average discount rate: |
| | | | |
Operating leases |
| | % | | % |
Future minimum fixed lease payments under noncancelable leases at September 30, 2026 were as follows (in thousands):
| | | |
| | Operating | |
| | leases | |
Remainder of 2026 | | $ | |
2027 | | | |
2028 | |
| |
2029 | |
| |
2030 | |
| |
2031 and beyond | |
| |
Total lease payments | |
| |
Less: interest | |
| ( |
Present value of lease liabilities | | $ | |
(18) INCOME TAXES
The Company recorded an income tax benefit of $
(19) RELATED PARTIES
The Company recognized revenue from its largest stockholder of $
(20) COMMITMENTS AND CONTINGENCIES
Contingencies
Liabilities for Royalty Payments to the IIA
In connection with the Company’s acquisition of ECI Telecom Group Ltd. ("ECI") in 2020, ECI had previously received research and development grants from the Office of the Innovation Authority of the Israeli Ministry of
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RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
Economics (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 that 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
At September 30, 2026, the Company had $
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.
Charter Complaint. On September 19, 2022, Charter Communications Operating, LLC (“Charter”) filed
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of the financial condition and results of operations of Ribbon Communications Inc. should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the U.S. Securities and Exchange Commission on February 26, 2026.
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 at the intersection of the adoption of Artificial Intelligence (“AI”) by service providers and enterprises addressing the rapid growth in fiber connectivity and integration of voice capabilities into agentic AI platforms. We are headquartered in Plano, Texas, and have a global presence with research and development or sales and support locations in over thirty countries around the world.
Key Trends and Economic Factors Affecting Ribbon
Tariffs. The global trade landscape continues to be highly volatile. In 2025, the U.S. government implemented a series of trade tariffs on goods imported into the U.S. from various countries. In many cases, these tariffs resulted in reciprocal tariffs and other actions on goods being exported from the U.S. These associated tariffs are complex and continue to evolve as negotiations occur. In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”), which the U.S. government relied on to impose certain tariffs, does not authorize the administration to impose tariffs. Following the ruling, the U.S. Court of International Trade ordered the U.S. Customs and Border Protection (“CBP”) to refund the IEEPA tariffs, and CBP has since established a phased process for importers to request refunds, which began accepting claims in April 2026 and was expanded in October 2026 to include certain finally liquidated entries. In October 2026, the U.S. Court of International Trade also certified a class of importers seeking IEEPA refunds; that decision may be appealed, and the IEEPA tariffs and refunds remain subject to ongoing litigation. In response to the U.S. Supreme Court ruling, the administration imposed a temporary 10% tariff on most imports under Section 122 of the Trade Act of 1974, which expired on July 24, 2026, and has since imposed or proposed additional tariffs under Section 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962, some of which are also being challenged in court. In addition, at the July 2026 joint review of the U.S.-Mexico-Canada Agreement (“USMCA”), on which we rely for the importation of many of our products from our contract manufacturer in Mexico, the United States declined to renew the USMCA in its current form. Although the USMCA remains in effect and is scheduled to expire in 2036 unless extended, the United States may seek to modify the agreement or impose tariffs on goods from Mexico or Canada, including goods that currently qualify for USMCA treatment. The full impact of these developments, including the timing and extent of any refunds, the impact of new tariffs and the future of the USMCA, remains uncertain. While the announced tariffs have not had a material impact on our business to date, new or proposed tariffs, including the loss of exemptions under existing trade agreements or otherwise, could result in additional expenses for products we import into the United States. In addition, the economic uncertainty caused by the tariffs may result in customers delaying planned purchases of products and services.
Supplier Disruptions. Ongoing uncertainty in the global economy due to tariffs, inflation, global military conflicts, including in the Middle East and Ukraine, rising fuel prices, national security concerns and other factors, continue to disrupt various manufacturing, commodity and financial markets, increase volatility, and impede global supply chains. Our ability to deliver our solutions as agreed upon with our customers depends in part on the ability of our global contract manufacturers, vendors, licensors and other business partners to deliver products or perform services we have procured from them.
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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 the Middle East and Ukraine, and the high interest rate environment impacts our future business, financial position and results of operations will depend on developments beyond our control.
The Ongoing War in Ukraine and the Middle East. The uncertainty resulting from the recent war in the Middle East and ongoing war in Ukraine, and the threat for expansion of one or both of these wars, could result in some of our customers delaying purchases from us. The conflict in the Middle East has significantly reduced the export of oil and natural gas from the Persian Gulf, creating upward pressure on oil and natural gas prices, and has also disrupted and increased the costs of certain other supplies. Further, a number of our employees in Israel are members of the military reserves and subject to immediate call-up in response to the war in the Middle East. Following the terrorist attacks in Israel in October 2023, a number of our employees have been activated for military duty and we expect that additional employees will also be activated if the war in Israel continues. 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 United States and European countries have imposed sanctions and trade restrictions against Russia in connection with the war in Ukraine. These sanctions and restrictions currently prohibit our ability to sell hardware products in Russia or provide any replacement parts in Russia. 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 high levels in many global markets. Recently, the Federal Reserve increased the federal funds rate to its current target range of 3.75% to 4.00% as a result of indicators that inflation was increasing. 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.
Foreign currency. As a portion of our business is conducted outside the United States, we face exposure to adverse movements in foreign currency exchange rates. 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 would affect our revenue, income from operations, net income and the value of balance sheet items originally denominated in other currencies. There is no guarantee that our financial results will not be adversely affected by currency exchange rate fluctuations.
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.
Operating Segments
Our Chief Operating Decision Maker (“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
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Networks operating segment ("IP Optical Networks"). For additional details regarding our operating segments, see Note 13 - Operating Segment Information to our condensed consolidated financial statements.
Financial Overview
Financial Results
We reported income from operations of $5.6 million and $2.8 million for the three months ended September 30, 2026 and 2025, respectively. We reported a loss from operations of $38.3 million and $12.6 million for the nine months ended September 30, 2026 and 2025, respectively.
Our revenue was $218.7 million and $215.4 million in the three months ended September 30, 2026 and 2025, respectively. Our gross profit and gross margin were $105.5 million and 48.2%, respectively, in the three months ended September 30, 2026, and $108.0 million and 50.1%, respectively, in the three months ended September 30, 2025. The higher revenue in the three months ended September 30, 2026 compared to 2025 is due to $4.9 million higher IP Optical Networks revenue offset by $1.6 million lower Cloud and Edge revenue. IP Optical Networks revenue was higher primarily due to $8.5 million of higher product sales and $3.6 million of lower services revenue. The lower Cloud and Edge revenue was attributable to $4.4 million of lower services revenue offset by $2.8 million of higher product sales. Our revenue was $573.7 million and $617.2 million in the nine months ended September 30, 2026 and 2025, respectively. Our gross profit and gross margin were $265.6 million and 46.3%, respectively, in the nine months ended September 30, 2026, and $299.6 million and 48.5%, respectively, in the nine months ended September 30, 2025. The lower revenue in the nine months ended September 30, 2026 compared to 2025 is due to $36.2 million of lower Cloud and Edge revenue, and $7.4 million of lower IP Optical Networks revenue. The lower Cloud and Edge revenue was attributable to $21.2 million of lower product sales and $15.0 million of lower services revenue. The lower IP Optical Networks revenue was due to $6.6 million of lower services revenue plus $0.8 million of lower product sales.
Revenue from our Cloud and Edge segment was $122.9 million and $124.5 million in the three months ended September 30, 2026 and 2025, respectively. Gross profit and gross margin for this segment were $75.8 million and 61.7%, respectively, in the three months ended September 30, 2026, and $76.5 million and 61.5%, respectively, in the three months ended September 30, 2025. Revenue from our Cloud and Edge segment was $332.9 million and $369.1 million in the nine months ended September 30, 2026 and 2025, respectively. Gross profit and gross margin for this segment were $197.7 million and 59.4%, respectively, in the nine months ended September 30, 2026, and $226.3 million and 61.3%, respectively, in the nine months ended September 30, 2025.
Revenue from our IP Optical Networks segment was $95.8 million and $90.9 million in the three months ended September 30, 2026 and 2025, respectively. Gross profit and gross margin for this segment were $29.7 million and 31.1%, respectively, in the three months ended September 30, 2026, and $31.5 million and 34.6%, respectively, in the three months ended September 30, 2025. Revenue from our IP Optical Networks segment was $240.7 million and $248.1 million in the nine months ended September 30, 2026 and 2025, respectively. Gross profit and gross margin for this segment were $67.9 million and 28.2%, respectively, in the nine months ended September 30, 2026, and $73.3 million and 29.5%, respectively, in the nine months ended September 30, 2025.
Our operating expenses were $99.9 million and $105.2 million in the three months ended September 30, 2026 and 2025, respectively, and $303.9 million and $312.3 million in the nine months ended September 30, 2026 and 2025, respectively. The decreased operating expenses in the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, were primarily attributable to $2.1 million lower restructuring and related expense, $1.5 million lower research and development expense and $1.1 million lower general and administrative expense. The decreased operating expenses in the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, were primarily attributable to $4.3 million lower acquisition-, disposal- and integration-related expense, $2.3 million lower restructuring and related expense, $1.5 million lower amortization of acquired intangible assets and $1.3 million lower general and administrative expense partially offset by $1.4 million higher sales and marketing expense. Operating expenses for the three months ended September 30, 2026 included $5.5 million of amortization of acquired intangible assets and $1.4 million of restructuring and related expense. Operating expenses for the three months ended September 30, 2025 included $5.9 million of amortization of acquired intangible assets and $3.5
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million of restructuring and related expense. Operating expenses for the nine months ended September 30, 2026 included $16.6 million of amortization of acquired intangible assets and $7.9 million of restructuring and related expense. Operating expenses for the nine months ended September 30, 2025 included $18.1 million of amortization of acquired intangible assets, $4.3 million of acquisition-, disposal- and integration-related expense and $10.2 million of restructuring and related expense.
We recorded stock-based compensation expense of $5.7 million and $5.8 million in the three months ended September 30, 2026 and 2025, respectively and $16.5 million and $14.6 million in the nine months ended September 30, 2026 and 2025, respectively. These amounts are included as components of both Cost of revenue and Operating expenses in our condensed consolidated statements of operations.
See "Results of Operations" in this MD&A for a discussion of the changes in our revenue and expenses for three and nine months ended September 30, 2026 compared to three and nine months ended September 30, 2025.
Restructuring and Cost Reduction Initiatives
During the fourth quarter of 2025, our President and CEO approved a strategic restructuring program (the "2026 Restructuring Plan") that consists of workforce reductions in certain of the Company’s operating locations to correspond with current sales levels in those areas. Any potential positions eliminated in countries outside the United States are subject to local law and consultation requirements. In connection with the 2026 Restructuring Plan, we recorded restructuring and related expense of $0.9 million and $6.0 million in the three and nine months ended September 30, 2026, respectively. We anticipate that we will record additional expense of approximately $1 million in 2026 related to the 2026 Restructuring Plan.
During the first quarter of 2025, our President and CEO approved a strategic restructuring program (as subsequently amended, the "2025 Restructuring Plan") that consists of workforce reductions in certain of our operating locations to correspond with current sales levels in those areas. The 2025 Restructuring Plan was amended in the third quarter of 2025 to reflect an increase in the scope of the proposed reductions. Any potential positions eliminated in countries outside the United States are subject to local law and consultation requirements. In connection with the 2025 Restructuring Plan, the Company incurred nominal restructuring and related expense in the three and nine months ended September 30, 2026. We recorded restructuring and related expense of $2.5 million and $5.1 million in the three and nine months ended September 30, 2025, respectively. We anticipate that we will record nominal additional expense in 2026 for workforce reductions related to the 2025 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 $0.6 million and $0.9 million in the three months ended September 30, 2026 and 2025, respectively and $1.9 million and $5.2 million in the nine months ended September 30, 2026 and 2025, respectively, for variable and other facilities-related costs. We anticipate that we will record additional expense of approximately $1 million in 2026 related to the 2022 Restructuring Plan.
For facilities that are part of a restructuring plan, for which we have no intent or ability to enter into a sublease, we recognize accelerated rent amortization over the period from the date that we commence the plan to fully or partially vacate a facility through the final vacate date. We did not record accelerated rent amortization in the three and nine months ended September 30, 2026 or 2025. 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.
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Critical Accounting Policies and Estimates
This MD&A is based upon our condensed 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, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available information. We consider certain accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment. The significant accounting policies that we believe are the most critical include revenue recognition, the valuation of inventory, warranty accruals, loss contingencies and reserves, stock-based compensation, the warrants, business combinations, goodwill and intangible assets, accounting for leases, and accounting for income taxes. If actual results differ significantly from management’s estimates and projections, there could be a material effect on our condensed consolidated financial statements. There were no significant changes to our critical accounting policies from January 1, 2026 through September 30, 2026. For a further discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2025.
Results of Operations
Three and nine months ended September 30, 2026 and 2025
Revenue. Revenue for the three and nine months ended September 30, 2026 and 2025 was as follows (in thousands, except percentages):
| | | | | | | | | | | | |
| | | | | | Increase/(decrease) |
| |||||
| | Three months ended | | from prior year | | |||||||
| | September 30, | | September 30, | | | | | | | ||
| | 2026 | | 2025 | | $ | | % |
| |||
Product | | $ | 121,322 | | $ | 109,979 | | $ | 11,343 | | 10.3 | % |
Service | |
| 97,388 | |
| 105,392 | |
| (8,004) | | (7.6) | % |
Total revenue | | $ | 218,710 | | $ | 215,371 | | $ | 3,339 | | 1.6 | % |
| | | | | | | | | | | | |
| | | | | | Decrease |
| |||||
| | Nine months ended | | from prior year | | |||||||
| | September 30, | | September 30, | | | | | | | ||
| | 2026 | | 2025 | | $ | | % |
| |||
Product | | $ | 284,996 | | $ | 307,027 | | $ | (22,031) | | (7.2) | % |
Service |
| | 288,660 |
| | 310,206 | |
| (21,546) | | (6.9) | % |
Total revenue | | $ | 573,656 | | $ | 617,233 | | $ | (43,577) | | (7.1) | % |
Segment revenue for the three and nine months ended September 30, 2026 and 2025 was as follows (in thousands):
| | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2026 | | Three months ended September 30, 2025 | ||||||||||||||
| | Cloud and | | IP Optical | | | | | Cloud and | | IP Optical | | | | ||||
| | Edge | | Networks | | Total | | Edge | | Networks | | Total | ||||||
Product | | $ | 48,902 | | $ | 72,420 | | $ | 121,322 | | $ | 46,097 | | $ | 63,882 | | $ | 109,979 |
Service |
| | 74,007 |
| | 23,381 |
| | 97,388 |
| | 78,341 |
| | 27,051 |
| | 105,392 |
Total revenue | | $ | 122,909 | | $ | 95,801 | | $ | 218,710 | | $ | 124,438 | | $ | 90,933 | | $ | 215,371 |
| | | | | | | | | | | | | | | | | | |
| | Nine months ended September 30, 2026 | | Nine months ended September 30, 2025 | ||||||||||||||
| | Cloud and | | IP Optical | | | | | Cloud and | | IP Optical | | | | ||||
| | Edge | | Networks | | Total | | Edge | | Networks | | Total | ||||||
Product | | $ | 112,883 | | $ | 172,113 | | $ | 284,996 | | $ | 134,070 | | $ | 172,957 | | $ | 307,027 |
Service |
| | 220,043 |
| | 68,617 |
| | 288,660 |
| | 235,007 |
| | 75,199 |
| | 310,206 |
Total revenue | | $ | 332,926 | | $ | 240,730 | | $ | 573,656 | | $ | 369,077 | | $ | 248,156 | | $ | 617,233 |
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The higher product revenue in the three months ended September 30, 2026 compared to the three months ended September 30, 2025 was the result of $8.5 million of higher sales of IP Optical Networks products and $2.8 million of higher sales of our Cloud and Edge products, primarily due to sales to our enterprise customers. The lower product revenue in the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 was primarily the result of $21.2 million of lower sales of our Cloud and Edge products. The decrease in revenue from the sale of Cloud and Edge products was primarily attributable to sales to a Tier 1 service provider due to lower customer demand and delayed purchasing.
Revenue from sales to enterprise customers was 31% and 29% of our total revenue in the three months ended September 30, 2026 and 2025, respectively. These sales were made through both our direct sales team and indirect sales channel partners. The increase in enterprise sales in the three months ended September 30, 2026 primarily reflects higher sales to Cloud and Edge enterprise customers. Revenue from sales to enterprise customers was 31% and 28% of our total revenue in the nine months ended September 30, 2026 and 2025, respectively. The increase in enterprise sales primarily reflects higher IP Optical Networks revenue to the governmental, banking, financial and insurance industries, and other enterprise customers.
Revenue from indirect sales through our channel partner program was 30% and 26% of our product revenue in the three months ended September 30, 2026 and 2025, and 31% and 29% of our product revenue in the nine months ended September 30, 2026 and 2025, respectively. Channel sales as a percentage of product revenue increased in the nine months ended September 30, 2026 reflecting higher sales of products to enterprise customers.
The timing of the completion of customer projects and revenue recognition criteria satisfaction may cause our product revenue to fluctuate from one period to the next.
Service revenue is primarily comprised of software and hardware maintenance and support (“maintenance revenue”) and network design, installation and other professional services (“professional services revenue”).
Service revenue for the three and nine months ended September 30, 2026 and 2025 was comprised of the following (in thousands, except percentages):
| | | | | | | | | | | | |
| | | | | | | | Decrease | | |||
| | Three months ended | | from prior year | | |||||||
| | September 30, | | September 30, | | | | | |
| ||
| | 2026 | | 2025 | | $ | | % |
| |||
Maintenance | | $ | 65,758 | | $ | 69,515 | | $ | (3,757) | | (5.4) | % |
Professional services | |
| 31,630 | |
| 35,877 | |
| (4,247) | | (11.8) | % |
Total service revenue | | $ | 97,388 | | $ | 105,392 | | $ | (8,004) | | (7.6) | % |
| | | | | | | | | | | | |
| | | | | | | | Decrease |
| |||
| | Nine months ended | | from prior year |
| |||||||
| | September 30, | | September 30, | | | | | |
| ||
| | 2026 | | 2025 | | $ | | % |
| |||
Maintenance | | $ | 195,447 | | $ | 204,234 | | $ | (8,787) | | (4.3) | % |
Professional services | |
| 93,213 | |
| 105,972 | |
| (12,759) | | (12.0) | % |
Total service revenue | | $ | 288,660 | | $ | 310,206 | | $ | (21,546) | | (6.9) | % |
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Segment service revenue for the three and nine months ended September 30, 2026 and 2025 was comprised of the following (in thousands):
| | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2026 | | Three months ended September 30, 2025 | ||||||||||||||
| | Cloud and | | IP Optical | | | | | Cloud and | | IP Optical | | | | ||||
| | Edge | | Networks | | Total | | Edge | | Networks | | Total | ||||||
Maintenance | | $ | 51,784 | | $ | 13,974 | | $ | 65,758 | | $ | 52,315 | | $ | 17,200 | | $ | 69,515 |
Professional services | |
| 22,223 | |
| 9,407 | |
| 31,630 | |
| 26,026 | |
| 9,851 | |
| 35,877 |
Total service revenue | | $ | 74,007 | | $ | 23,381 | | $ | 97,388 | | $ | 78,341 | | $ | 27,051 | | $ | 105,392 |
| | | | | | | | | | | | | | | | | | |
| | Nine months ended September 30, 2026 | | Nine months ended September 30, 2025 | ||||||||||||||
| | Cloud and | | IP Optical | | | | | Cloud and | | IP Optical | | | | ||||
| | Edge | | Networks | | Total | | Edge | | Networks | | Total | ||||||
Maintenance | | $ | 153,894 | | $ | 41,553 | | $ | 195,447 | | $ | 154,899 | | $ | 49,335 | | $ | 204,234 |
Professional services | |
| 66,149 | |
| 27,064 | |
| 93,213 | |
| 80,108 | |
| 25,864 | |
| 105,972 |
Total service revenue | | $ | 220,043 | | $ | 68,617 | | $ | 288,660 | | $ | 235,007 | | $ | 75,199 | | $ | 310,206 |
Total service revenue was lower by $8.0 million and $21.5 million in the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025 due to lower maintenance revenue and lower professional services revenue.
Maintenance revenue decreased $3.8 million and $8.8 million in the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025 due to lower revenue in our IP Optical Networks segment and relatively flat revenue in our Cloud and Edge segment. The decrease in our IP Optical Networks maintenance revenue is due to the completion of a legacy access maintenance contract with a European customer that completed in the fourth quarter of 2025.
Professional services revenue decreased $4.2 million and $12.8 million in the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025 primarily driven from our Cloud and Edge segment. Our Cloud and Edge segment decrease was due to lower deployment services associated with a voice modernization project with one of our U.S. service providers, which we expect to increase in the upcoming quarters.
The following customers contributed 10% or more of our revenue in the three and nine months ended September 30, 2026 and 2025:
| | | | | | | | | |
| | Three months ended |
| Nine months ended |
| ||||
| | September 30, | | September 30, | | September 30, | | September 30, | |
Customer | | 2026 | | 2025 |
| 2026 | | 2025 |
|
Verizon Communications Inc. | | 17 | % | 18 | % | 15 | % | 18 | % |
Bharti Telecom Limited | | * | | 10 | % | 11 | % | * | |
* Less than 10% of total revenue. | | | | | | | | | |
Revenue earned from customers domiciled outside the United States was 54% and 55% in the three months ended September 30, 2026 and 2025, respectively, and 54% and 52% in the nine months ended September 30, 2026 and 2025, respectively. Due to the timing of project completions, we expect that the domestic and international components as a percentage of our revenue may fluctuate from quarter to quarter and year to year.
Our deferred product revenue was $6 million and $7 million at September 30, 2026 and December 31, 2025, respectively. Our deferred service revenue was $143 million and $149 million at September 30, 2026 and December 31, 2025, respectively. Our deferred revenue balance may fluctuate as a result of the timing of revenue recognition, customer payments, maintenance contract renewals, contractual billing rights and maintenance revenue deferrals included in multiple element arrangements.
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We expect total revenue in 2026 to decline slightly compared to 2025.
Cost of Revenue/Gross Margin. Our cost of revenue consists primarily of amounts paid to third-party manufacturers for purchased materials and services, royalties, amortization of acquired technology, inventory valuation adjustments, warranty costs, and manufacturing and services personnel and related costs. Our cost of revenue, gross profit and gross margin for the three and nine months ended September 30, 2026 and 2025 were as follows (in thousands, except percentages):
| | | | | | | | | | | | |
| | | | | | | | Increase/(decrease) |
| |||
| | Three months ended | | from prior year | | |||||||
| | September 30, | | September 30, | | | | | |
| ||
| | 2026 | | 2025 | | $ | | % | | |||
Cost of revenue: | | | | | | | | | | | |
|
Product | | $ | 70,166 | | $ | 62,037 | | | 8,129 | | 13.1 | % |
Service |
| | 38,665 |
| | 40,311 | |
| (1,646) | | (4.1) | % |
Amortization of acquired technology |
| | 4,353 |
| | 5,057 | |
| (704) | | (13.9) | % |
Total cost of revenue | | $ | 113,184 | | $ | 107,405 | |
| 5,779 | | 5.4 | % |
| | | | | | | | | | | | |
Gross profit | | $ | 105,526 | | $ | 107,966 | | $ | (2,440) | | (2.3) | % |
Gross margin | | | 48.2 | % | | 50.1 | % | | | | | |
| | | | | | | | | | | | |
| | | | | | | | Increase/(decrease) |
| |||
| | Nine months ended | | from prior year | | |||||||
| | September 30, | | September 30, | | | | | | | ||
| | 2026 | | 2025 | | $ | | % |
| |||
Cost of revenue: | | | | | | | | | | | |
|
Product | | $ | 178,468 | | $ | 186,676 | | | (8,208) | | (4.4) | % |
Service | | | 116,359 | | | 115,192 | | | 1,167 | | 1.0 | % |
Amortization of acquired technology |
| | 13,269 |
| | 15,722 |
| | (2,453) |
| (15.6) | % |
Total cost of revenue | | $ | 308,096 | | $ | 317,590 |
| | (9,494) |
| (3.0) | % |
| | | | | | | | | | | | |
Gross profit | | $ | 265,560 | | $ | 299,643 | | $ | (34,083) |
| (11.4) | % |
Gross margin | | | 46.3 | % | | 48.5 | % | | | | | |
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Our segment cost of revenue, gross profit and gross margin for the three and nine months ended September 30, 2026 and 2025 were as follows (in thousands, except percentages):
| | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2026 | | Three months ended September 30, 2025 |
| ||||||||||||||
| | Cloud and | | IP Optical | | | | | Cloud and | | IP Optical | | | | | ||||
| | Edge | | Networks | | Total | | Edge | | Networks | | Total |
| ||||||
Product | | $ | 19,891 | | $ | 50,275 | | $ | 70,166 | | $ | 19,252 | | $ | 42,785 | | $ | 62,037 |
|
Service |
| | 27,086 |
| | 11,579 |
| | 38,665 |
| | 27,948 |
| | 12,363 |
| | 40,311 | |
Amortization of acquired technology |
| | 153 |
| | 4,200 |
| | 4,353 |
| | 729 |
| | 4,328 |
| | 5,057 | |
Total cost of revenue | | $ | 47,130 | | $ | 66,054 | | $ | 113,184 | | $ | 47,929 | | $ | 59,476 | | $ | 107,405 | |
| | | | | | | | | | | | | | | | | | | |
Gross profit | | $ | 75,779 | | $ | 29,747 | | $ | 105,526 | | $ | 76,509 | | $ | 31,457 | | $ | 107,966 | |
Gross margin | |
| 61.7 | % |
| 31.1 | % |
| 48.2 | % |
| 61.5 | % |
| 34.6 | % |
| 50.1 | % |
| | | | | | | | | | | | | | | | | | | |
| | Nine months ended September 30, 2026 | | Nine months ended September 30, 2025 |
| ||||||||||||||
| | Cloud and | | IP Optical | | | | | Cloud and | | IP Optical | | | | | ||||
| | Edge | | Networks | | Total | | Edge | | Networks | | Total |
| ||||||
Product | | $ | 52,318 | | $ | 126,150 | | $ | 178,468 | | $ | 59,628 | | $ | 127,048 | | $ | 186,676 |
|
Service |
| | 82,405 |
| | 33,954 |
| | 116,359 |
| | 80,481 |
| | 34,711 |
| | 115,192 | |
Amortization of acquired technology |
| | 528 |
| | 12,741 |
| | 13,269 |
| | 2,626 |
| | 13,096 |
| | 15,722 | |
Total cost of revenue | | $ | 135,251 | | $ | 172,845 | | $ | 308,096 | | $ | 142,735 | | $ | 174,855 | | $ | 317,590 | |
| | | | | | | | | | | | | | | | | | | |
Gross profit | | $ | 197,675 | | $ | 67,885 | | $ | 265,560 | | $ | 226,342 | | $ | 73,301 | | $ | 299,643 | |
Gross margin | |
| 59.4 | % |
| 28.2 | % |
| 46.3 | % |
| 61.3 | % |
| 29.5 | % |
| 48.5 | % |
Our overall gross margin decreased by 1.9 percentage points in the three months ended September 30, 2026 as compared to the three months ended September 30, 2025 and by 2.2 percentage points in the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025.
Gross margin for our Cloud and Edge segment was higher in the three months ended September 30, 2026 as compared to the three months ended September 30, 2025 by 20 basis points and was attributable to higher margins on product sales from higher software sales offset by lower professional services sales. Gross margin for our Cloud and Edge segment was lower in the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025 by 190 basis points due to lower product software sales. We expect Cloud and Edge gross margin to rebound as the deployment of services associated with a voice modernization project with one of our U.S. service providers returns to higher activity levels in the upcoming quarters. Gross margin for IP Optical Networks was lower in the three and nine months ended September 30, 2026, compared to the three and nine months ended September 30, 2025, primarily due to geographic and product mix.
We expect gross margin in 2026 to be slightly lower compared to 2025.
Research and Development. R&D expenses consist primarily of salaries and related personnel expenses and prototype costs for the design, development, testing, and enhancement of our products. R&D expenses for the three and nine months ended September 30, 2026 and 2025 were as follows (in thousands, except percentages):
| | | | | | | | | | | | |
| | | | | | | | Decrease |
| |||
| | September 30, | | September 30, | | from prior year |
| |||||
| | 2026 | | 2025 | | $ | | % |
| |||
Three months ended | | $ | 44,424 | | $ | 45,894 | | $ | (1,470) | | (3.2) | % |
Nine months ended | | $ | 133,727 | | $ | 134,158 | | $ | (431) | | (0.3) | % |
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Our R&D expenses remained flat in the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025, due to lower employee-related costs offset by the impact of increased non‑U.S. expenses associated with a weakening dollar.
Our IP Optical Networks R&D investment is focused on expanding our portfolio of IP Routing solutions, adding additional features and capabilities to our Optical Transport portfolio, and supporting features in our next generation SDN management and orchestration platform. Our Cloud and Edge R&D investment is focused on advancing our cloud-native communications solutions, enhancing our analytics, automation and security capabilities, and supporting our next-generation cloud operations 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 expect that our R&D expenses will remain moderately flat in 2026 as compared to 2025, primarily due to continued cost efficiencies offsetting the weakening dollar.
Sales and Marketing Expenses. Sales and marketing expenses consist primarily of salaries and related personnel costs, commissions, travel and entertainment expenses, promotions, customer trial and evaluations inventory and other marketing and sales support expenses. Sales and marketing expenses for the three and nine months ended September 30, 2026 and 2025 were as follows (in thousands, except percentages):
| | | | | | | | | | | | |
| | | | | | | | Increase |
| |||
| | September 30, | | September 30, | | from prior year |
| |||||
| | 2026 | | 2025 | | $ | | % |
| |||
Three months ended | | $ | 33,376 | | $ | 33,063 | | $ | 313 | | 0.9 | % |
Nine months ended | | $ | 98,769 | | $ | 97,387 | | $ | 1,382 | | 1.4 | % |
Sales and marketing expenses in the three and nine months ended September 30, 2026 were relatively flat as compared to the three and nine months ended September 30, 2025.
We expect sales and marketing expenses will increase slightly in 2026 compared to 2025, primarily due to higher employee-related compensation.
General and Administrative Expenses. General and administrative expenses consist primarily of salaries and related personnel costs for executive and administrative personnel, and audit, legal and other professional fees. General and administrative expenses for the three and nine months ended September 30, 2026 and 2025 were as follows (in thousands, except percentages):
| | | | | | | | | | | | |
| | | | | | Decrease |
| |||||
| | September 30, | | September 30, | | from prior year | | |||||
| | 2026 | | 2025 | | $ | | % | | |||
Three months ended | | $ | 15,233 | | $ | 16,368 | | $ | (1,135) | | (6.9) | % |
Nine months ended | | $ | 46,854 | | $ | 48,126 | | $ | (1,272) | | (2.6) | % |
The decrease in general and administrative expenses in the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025 was primarily attributable to lower litigation expense offset by higher stock compensation expense.
We expect that our general and administrative expenses will remain moderately flat in 2026 as compared to 2025, primarily due to higher employee-related variable compensation associated with stock-based compensation expenses, offset by continued cost efficiencies.
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Amortization of Acquired Intangible Assets included in Operating expenses. Amortization of acquired intangible assets included in Operating expenses ("Opex Amortization") for the three and nine months ended September 30, 2026 and 2025 was as follows (in thousands, except percentages):
| | | | | | | | | | | | |
| | | | | | Decrease |
| |||||
| | September 30, | | September 30, | | from prior year | | |||||
| | 2026 | | 2025 | | $ | | % |
| |||
Three months ended | | $ | 5,461 | | $ | 5,933 | | $ | (472) | | (8.0) | % |
Nine months ended | | $ | 16,612 | | $ | 18,063 | | $ | (1,451) | | (8.0) | % |
Opex Amortization was lower for the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025. We record our amortization in relation to expected future cash flows rather than on a straight-line basis. Accordingly, such expense may vary from one period to the next.
Restructuring and Related. We have been committed to streamlining our 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 $1.4 million and $3.5 million in the three months ended September 30, 2026 and 2025, respectively and $7.9 million and $10.2 million in the nine months ended September 30, 2026 and 2025, respectively. Although we have eliminated positions as part of our restructuring initiatives, we continue to hire in certain areas that we believe are important to our future growth.
Interest Expense, Net. Interest expense and interest income for the three and nine months ended September 30, 2026 and 2025 were as follows (in thousands, except percentages):
| | | | | | | | | | | | |
| | | | | | | | Decrease |
| |||
| | Three months ended | | from prior year | | |||||||
| | September 30, 2026 | | September 30, 2025 | | $ | | % |
| |||
Interest income | | $ | 126 | | $ | 190 | | $ | (64) | | (33.7) | % |
Interest expense | |
| (11,399) | |
| (11,796) | | $ | (397) | | (3.4) | % |
Interest expense, net | | $ | (11,273) | | $ | (11,606) | | $ | (333) | | (2.9) | % |
| | | | | | | | | | | | |
| | | | | | | | Decrease |
| |||
| | Nine months ended | | from prior year | | |||||||
| | September 30, 2026 | | September 30, 2025 | | $ | | % |
| |||
Interest income | | $ | 630 | | $ | 770 | | $ | (140) | | (18.2) | % |
Interest expense | |
| (32,344) | |
| (33,853) | | $ | (1,509) | | (4.5) | % |
Interest expense, net | | $ | (31,714) | | $ | (33,083) | | $ | (1,369) | | (4.1) | % |
Our interest expense in three and nine months ended September 30, 2026 and 2025 primarily represents term debt interest, amortization of debt issuance costs and original issue discount and interest associated with factoring arrangements. Interest expense in the three and nine months ended September 30, 2026 was lower than the same period in 2025 primarily due to lower applicable interest margins and a reduction in the outstanding term debt balance.
Other Income (Expense), Net. We recorded other income, net of $1.1 million and other expense, net of $0.1 million in the three months ended September 30, 2026 and 2025, respectively. We recorded other expense, net of $0.6 million, and other income, net, of $0.8 million in the nine months ended September 30, 2026 and 2025, respectively. Other income, net in the three months ended September 30, 2026 was primarily comprised of approximately $0.9 million of fair value adjustments of our warrants offset by foreign currency exchange losses of $0.1 million. Other expense, net in the three months ended September 30, 2025 was primarily comprised of $1.2 million of fair value adjustments of our warrants, partially offset by foreign currency exchange losses of $1.1 million. Other expense, net in the nine months ended September 30, 2026, was primarily comprised of $2.9 million of foreign currency exchange losses offset by $1.8 million of fair value adjustments of our warrants. Other income, net in the nine months ended September 30, 2025 was
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primarily comprised of $2.8 million of fair value adjustments of our warrants, partially offset by foreign currency exchange losses of $1.7 million.
Income Taxes. We recorded income tax provisions of $4.6 million and $3.1 million in the three months ended September 30, 2026 and 2025, respectively, and an income tax benefit of $0.2 million and an income tax provision of $4.6 million in the nine months ended September 30, 2026 and 2025, respectively. These amounts reflect our estimates of the effective rates expected to be applicable for the respective full fiscal years, adjusted for any discrete events, which are recorded in the period that they occur. These estimates are reevaluated each quarter based on our estimated tax rate for the full year. The estimated effective tax rate includes the impact of valuation allowances in various jurisdictions. We intend to continue to maintain a valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of the respective allowances.
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 nine months ended September 30, 2026 and 2025. We will continue to evaluate the potential effect of Pillar Two rules on our future reporting periods, but we do not expect Pillar Two to have a significant impact on our results of operations, financial position, or cash flows.
The One Big Beautiful Bill Act (the "Act") was signed into law on July 4, 2025. The Act reinstated bonus depreciation, allowed for full expensing of R&D expenses, and increased the limitation of interest deductibility for 2025, amongst many other provisions that are effective January 1, 2026. The tax effects of the Act were reflected in our income tax provision for the year ended December 31, 2025 and the nine months ended September 30, 2026.
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, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Liquidity and Capital Resources
Our condensed consolidated statements of cash flows are summarized as follows (in thousands):
| | | | | | | | | |
| | Nine months ended | | | | ||||
| | September 30, | | September 30, | | | | ||
| | 2026 | | 2025 | | Change | |||
Net loss | | $ | (70,477) | | $ | (49,429) | | $ | (21,048) |
Adjustments to reconcile net loss to cash flows (used in) provided by operating activities |
| | 57,049 |
| | 61,627 |
| | (4,578) |
Changes in operating assets and liabilities |
| | (34,487) |
| | 9,961 |
| | (44,448) |
Net cash (used in) provided by operating activities | | $ | (47,915) | | $ | 22,159 | | $ | (70,074) |
Net cash used in investing activities | | $ | (9,017) | | $ | (23,368) | | $ | 14,351 |
Net cash provided by (used in) financing activities | | $ | 1,547 | | $ | (13,490) | | $ | 15,037 |
We had cash, cash equivalents, and restricted cash aggregating $42 million and $98 million at September 30, 2026 and December 31, 2025, respectively. We had cash held by our non-U.S. subsidiaries aggregating $31 million and $50 million at September 30, 2026 and December 31, 2025, respectively. If we elect to repatriate all of the funds held by our non-U.S. subsidiaries as of September 30, 2026, we do not believe that the amounts of potential withholding taxes that would arise from the repatriation would have a material effect on our liquidity.
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As of September 30, 2026, we had an outstanding balance under the Credit Facility of $350.6 million, which included $335.6 million outstanding under the term loan and $15.0 million outstanding under the revolving credit facility. The term loan and revolving credit facility bore average interest rates of 10.0% and 10.2%, respectively. We had an available borrowing capacity under the revolving credit facility of $20.0 million and no letters of credit outstanding. We were in compliance with all covenants of the Credit Facility at both September 30, 2026 and December 31, 2025.
On May 5, 2026, we entered into the First Amendment, which (1) waives compliance with the maximum consolidated net leverage ratio financial covenant as of and for the period ending June 30, 2026, (2) increases the Maximum Consolidated Net Leverage Ratio (as defined in the Credit Facility) to 4.50:1.00 as of and for the period ending September 30, 2026, and sets the ratio for all subsequent quarters to 4.00:1.00, and (3) modifies the applicable interest rate margins for any quarter in which the Consolidated Net Leverage Ratio exceeds 3.75:1.00 to 7.00%. Management believes that, together with expected operating cash flows, the First Amendment provides sufficient liquidity to enable the Company to meet its anticipated operating and capital requirements for at least the next twelve months.
In the course of our business, we use letters of credit, bank guarantees, and surety bonds (collectively, "Guarantees"). We had $10.9 million and $11.1 million of Guarantees under various uncommitted facilities as of September 30, 2026 and December 31, 2025, respectively. We had no letters of credit outstanding under the Credit Facility as of September 30, 2026 or December 31, 2025. At September 30, 2026 and December 31, 2025, we had cash collateral of $2.0 million and $1.7 million supporting the Guarantees, respectively, which are reported as Restricted cash in our condensed consolidated balance sheets.
We are exposed to financial market risk related to foreign currency fluctuations and changes in interest rates. 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 foreign currency fluctuations, we entered into foreign exchange forward activity in January 2026 which effectively hedges a portion of the Company’s foreign currency exposure arising from international transactions.
Our objectives in using foreign exchange derivatives have been to add stability to operating expenses and to manage our exposure to foreign currency movements. To accomplish these objectives, we have used foreign exchange forward contracts as part of our foreign currency risk management strategy. Foreign exchange forwards designated as cash flow hedges involve the exchange of fixed U.S. dollar payments for fixed Israeli shekel receipts at predetermined exchange rates, thereby reducing the variability of forecasted shekel-denominated expenditures.
The effective portion of changes in the fair value of designated derivatives that qualify as cash flow hedges is recorded in Accumulated other comprehensive income in the condensed consolidated balance sheet and is subsequently reclassified into earnings in the period that the hedged forecasted transactions affect earnings. Any ineffective portion of the change in the fair value of the derivative would be recognized directly in earnings. We had no derivative assets or liabilities at December 31, 2025.
In the second quarter of 2025, our Board approved a share repurchase program (the "2025 Repurchase Program" or the “Repurchase Program”) pursuant to which we are authorized to repurchase up to $50 million of our common stock prior to December 31, 2027. We repurchased 0.4 million shares in the nine months ended September 30, 2026, using $0.8 million. Since the start of the Repurchase Program, the Company has repurchased 2.9 million shares using $9.8 million.
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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 for operating activities have been for personnel costs and investment in our research and development and in our sales and marketing, and general and administrative departments.
Our operating activities used $47.9 million of cash in the nine months ended September 30, 2026, primarily reflecting the payment of variable employee compensation, higher accounts receivable and inventory balances, lower accrued expenses and other long-term liabilities due to the timing of vendor and other operating payments, and our net loss, adjusted for non-cash items. Significant non-cash adjustments included amortization of intangible assets, stock-based compensation, changes in the fair value of the warrant liability, and deferred income tax expense. These uses of cash were partially offset by an increase in accounts payable and changes in other operating assets.
Our operating activities provided cash of $22.2 million in the nine months ended September 30, 2025, driven by lower accounts receivable, partially offset by lower accrued expenses and other long-term liabilities, accounts payable and deferred revenue. Our net loss was offset by adjustments for non-cash expenses such as amortization of intangible assets, and stock-based compensation.
Cash Flows from Investing Activities
Our investing activities used $9.0 million and $23.4 million of cash to purchase property and equipment and software licenses in the nine months ended September 30, 2026 and 2025, respectively. The decrease in capital expenditures compared to the prior‑year period was primarily attributable to the completion of the build‑out of our new facility in Israel during 2025.
Cash Flows from Financing Activities
Our financing activities provided $1.5 million of cash in the nine months ended September 30, 2026, primarily due to $15.0 million of net borrowings under the revolving credit facility. These cash inflows were partially offset by $6.6 million in principal payments on our term debt, $5.1 million of tax withholding obligations related to the vesting of stock awards and units, $1.0 million payment of debt issuance costs, and $0.8 million for the repurchase and retirement of our common stock under the 2025 Repurchase Program.
Our financing activities used $13.5 million of cash in the nine months ended September 30, 2025. We paid $3.9 million in principal payments on our term debt, $3.8 million of tax obligations related to the vesting of stock awards and units and $5.7 million for the repurchase and retirement of our common stock under the 2025 Repurchase Program.
The rate at which we consume cash is dependent upon the cash needs of our future operations, including our contractual obligations at September 30, 2026, primarily consisting of debt principal and interest obligations, outstanding borrowings under the revolving credit facility as described above, and our operating lease and purchase obligations. Our operating lease obligations totaled $92.6 million at September 30, 2026, with payments to be made aggregating $4.4 million in the remainder of 2026, $16.7 million in 2027, $14.9 million in 2028 and $56.6 million thereafter. Estimated payments for purchase obligations for the full year 2026 total approximately $102 million. 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 that our current cash balances and available borrowings under the 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.
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Recent Accounting Pronouncements
In December 2025, the Financial Accounting Standards Board (the "FASB") issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”), to improve the navigability of the required interim disclosures, to clarify when that guidance is applicable and to enhance disclosure requirements. The amendments add to Topic 270 a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 will be effective for the Company beginning with its 2028 interim and annual financial statements, with early adoption permitted. The Company believes this ASU will have no material impact on its condensed consolidated financial statements.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities (“ASU 2025-10”), to clarify the appropriate accounting, reduce diversity in practice, and increase consistency across business entities. ASU 2025-10 will be effective for us beginning with our 2029 interim and annual financial statements, with early adoption permitted. The Company believes this ASU will have no material impact on its condensed consolidated financial statements.
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements (“ASU 2025-09”), to enhance hedge accounting guidance and better align it with entities’ risk management activities. The amendments expand eligibility for hedge accounting, simplify certain requirements, and address issues related to reference rate reform. Key changes include allowing cash flow hedge accounting for “choose-your-rate” debt instruments, introducing a principles-based “similar risk exposure” criterion for grouping forecasted transactions, permitting component hedging for nonfinancial forecasted transactions, and clarifying the treatment of certain derivative structures. ASU 2025-09 will be effective for the Company beginning with its 2027 interim and annual financial statements, with early adoption permitted. The Company is currently evaluating the impact of this accounting standard on its condensed consolidated financial statements and related disclosures.
In September 2025, the Financial Accounting Standards Board (the "FASB") issued ASU 2025-06, Intangibles- Goodwill and Other- Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). To clarify how the accounting guidance applies to both linear and nonlinear software development, this standard removes all references to “development stages” from ASC 350-40. ASU 2025-06 will be effective for us beginning with our 2028 interim and annual financial statements, with early adoption permitted as of the beginning of an annual reporting period. We are currently evaluating the impact of this accounting standard on our condensed consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement, Reporting Comprehensive Income: Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), which requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. 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 its 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. There have been no material changes in market risk from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of our Annual Report on Form 10-K, for the year ended December 31, 2025.
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Item 4. Controls and Procedures
Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer 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 Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2026.
Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. 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 I, Item 1 of this Form 10-Q in the Notes to the Condensed Consolidated Financial Statements in Note 20, "Commitments and Contingencies," under the heading "Contingencies."
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 nine months ended September 30, 2026 that did not individually or in the aggregate have a material impact on our financial condition or operating results.
Item 1A. Risk Factors
Our business faces significant risks and uncertainties, which may have a material adverse effect on our business prospects, financial condition and results of operations, and you should carefully consider them. There have been no material changes in the nine months ended September 30, 2026 to the risk factors described in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Issuer Purchases of Equity Securities
The following table provides information with respect to the shares of common stock repurchased by us for the periods indicated:
| | | | | | | | | | |
| | | | | | | | | 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 | | Withheld (1) | | per Share (2) | | or Programs (3) | | or Programs (4) | ||
July 1, 2026 to July 31, 2026 | | 13,382 | | $ | 2.26 | | — | | $ | 40,221,360 |
August 1, 2026 to August 31, 2026 | | 29,600 | | $ | 2.11 | | — | | $ | 40,221,360 |
September 1, 2026 to September 30, 2026 | | 8,686 | | $ | 2.00 | | — | | $ | 40,221,360 |
Total | | 51,668 | | $ | 2.13 | | — | | $ | 40,221,360 |
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| (1) | Upon vesting of restricted stock awards and performance-based stock units, certain of our employees surrender a portion of the newly vested shares of common stock to satisfy the tax withholding obligations that arise in connection with their vesting. During the third quarter of 2026, 51,668 shares of restricted stock were surrendered, with no performance-based stock units surrendered. |
| (2) | Represents a weighted‑average price of shares surrendered by employees to satisfy tax withholding obligations. |
| (3) | In June 2025, we announced a stock repurchase program for the period beginning June 5, 2025 through December 31, 2027, under which our Board of Directors authorized the repurchase of up to $50 million of our common stock at management’s discretion in the open market, in privately negotiated transactions structured through investment banking institutions, or a combination of the foregoing, (the "2025 Repurchase Program" or the “Repurchase Program”). We used $0.8 million to repurchase 400,333 shares of our common stock under the Repurchase Program during the nine months ended September 30, 2026. Repurchases are subject to the terms of the Credit Facility, as amended, which limits aggregate share repurchases to $15 million and subjects such repurchases to compliance with specified financial covenants and leverage requirements. Based on the foregoing, the Company has $40.2 million remaining authorized for future repurchases under the Repurchase Program. The amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price, compliance with the Credit Facility and general business and market conditions. We may also from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of our shares under this authorization. The Repurchase Program may be modified, increased, suspended, or discontinued at any time. The Repurchase Program is being funded using cash on hand and cash from operations. |
| (4) | Represents amounts available for repurchases under the Repurchase Program. |
Item 5. Other Information
Insider Trading Arrangements
During the three months ended September 30, 2026, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934)
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Item 6. Exhibits
| | | |
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 Társág (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 | | | 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). |
3.4 | | | 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 August 4, 2023 with the SEC). |
3.5 | | | 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 May 30, 2025 with the SEC). |
3.6 | | | 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). |
31.1 | * | | Certificate of Ribbon Communications Inc. Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | * | | Certificate of Ribbon Communications Inc. Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | # | | Certificate of Ribbon Communications Inc. Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 | # | | Certificate of Ribbon Communications Inc. Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS | * | | Inline XBRL Instance Document |
101.SCH | * | | Inline XBRL Taxonomy Extension Schema |
101.CAL | * | | 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) |
* | Filed herewith. |
# | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements 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/ Eric Marmurek |
| | Eric Marmurek |
| | Executive Vice President and Chief Financial Officer |
| | (Principal Financial Officer) |
| | |
| Date: October 28, 2026 | |
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