Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

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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. However, after peaking in 2024, the Federal Reserve reduced the federal funds target range to 3.50% - 3.75% by December 2025. The effective federal funds rate averaged 3.64%, consistent with the Federal Reserve's view that inflation is decelerating. Yet, the economic outlook remains uncertain, and the implications of current and future tariffs, higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for our business.

Tariffs. We manufacture certain of our appliance products and purchase a portion of our raw materials and components from suppliers in Mexico, Malaysia, Thailand, Israel, China and other foreign countries. The commerce we conduct in the international marketplace makes us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we ship, cross international borders. Import tariffs and/or other mandates recently imposed or threatened by the United States, have led to and could in the future lead to retaliatory actions by affected countries, including Canada, Mexico and China, resulting in "trade wars," and could significantly increase the prices on raw materials, the manufacturing of our equipment, and/or increased costs for goods imported into the United States, all of which are critical to our business. While some of the tariffs have been temporarily stayed, we continue to develop plans to adjust manufacturing locations, if necessary, to avoid tariffs or other restrictions, any such tariffs could reduce customer demand for our products if our customers have to pay increased prices for our products as a result of such tariffs. In addition, tariff increases may have a similar impact on other suppliers and certain other customers, which could increase the negative impact on our operating results or future cash flows.

Presentation

Unless otherwise noted, all financial amounts, excluding tabular information, in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") are rounded to the nearest million dollar amount, and all percentages, excluding tabular information, are rounded to the nearest percentage point.

Private Placement

On March 28, 2023, we issued 55,000 shares of newly designated Series A Preferred Stock (the "Preferred Stock") to investors in a private placement offering at a price of $970 per share, along with 4.9 million warrants (the "Warrants") to purchase shares of our common stock, par value $0.0001 per share (the "Private Placement"), at an exercise price of $3.77 per share. The proceeds from the Private Placement were approximately $53.4 million, including approximately $10 million from existing related party stockholders. On June 25, 2024, we redeemed the Preferred Stock with a portion of the proceeds from the refinancing of the 2020 Credit Facility at a rate of 103% for a total of approximately $63.5 million. The Warrants remain outstanding and without modification. For additional detail on the Private Placement, see Note 15 - Preferred Stock and Warrants to our consolidated financial statements.

Common Stock Repurchases

In the second quarter of 2025, the Company's Board of Directors approved a program to repurchase up to $50 million of the Company's common stock (the "2025 Repurchase Program" or the "Repurchase Program"). Commencing on June 5,2025 and continuing through December 31, 2027, the Repurchase Program is being funded with cash on hand or cash generated from operations. During the year ended December 31, 2025, the Company used $9.0 million, including transaction fees, to repurchase and retire 2.5 million shares of its common stock under the Repurchase Program, with $41.0 million remaining for future repurchases as of December 31, 2025.

Operating Segments

Our CODM assesses our performance based on the performance of two separate organizations within Ribbon, the Cloud and Edge operating segment ("Cloud and Edge") and the IP Optical Networks operating segment ("IP Optical Networks"). For additional details regarding our operating segments, see Note 17 - Operating Segment Information to our consolidated financial statements.

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Financial Overview

Financial Results

We reported a loss from operations of $3.3 million for 2025 and income from operations of $16.9 million for 2024. We reported net income of $39.6 million for 2025 and a net loss of $54.2 million for 2024.

Our revenue was $844.6 million in 2025, comprised of $511.4 million attributable to Cloud and Edge and $333.2 million attributable to IP Optical Networks. Our revenue was $833.9 million in 2024, comprised of $505.2 million attributable to Cloud and Edge and $328.7 million attributable to IP Optical Networks. Our gross profit was $420.7 million in 2025, comprised of $323.1 million attributable to Cloud and Edge and $97.6 million attributable to IP Optical Networks. Our gross profit was $439.5 million in 2024, comprised of $329.2 million attributable to Cloud and Edge and $110.3 million attributable to IP Optical Networks. Our gross margin was 49.8% in 2025 and 52.7% in 2024. In 2025, our Cloud and Edge gross margin was 63.2% and our IP Optical Networks gross margin was 29.3%. In 2024, our Cloud and Edge gross margin was 65.2% and our IP Optical Networks gross margin was 33.6%. The revenue increase in 2025 compared to 2024 was primarily driven by a $6.3 million rise in Cloud and Edge sales, largely attributable to higher demand from U.S. service providers, partially offset by lower sales to Federal customers. In addition, IP Optical Networks revenue increased by $4.4 million, led by strong sales in India, though this growth was partially offset by declines in the Eastern European region.

Our operating expenses were $424.0 million in 2025 and $422.6 million in 2024. Our 2025 operating expenses included $23.8 million of amortization of acquired intangible assets, $19.7 million of restructuring and related expense and $4.3 million of acquisition-, disposal- and integration-related expenses. The following section provides information on our restructuring and cost-reduction initiatives. Our 2024 operating expenses included $26.0 million of amortization of acquired intangible assets and $10.2 million of restructuring and related expense.

We recorded stock-based compensation expense of $19.4 million in 2025 and $16.1 million in 2024. These amounts are included as components of both Cost of revenue and Operating expenses in our consolidated statements of operations.

See "Results of Operations" in this MD&A for additional discussion of our results of operations for the years ended December 31, 2025 and 2024.

Restructuring and Cost Reduction Initiatives

During the fourth quarter of 2025, the Company's President and CEO approved a strategic restructuring program (the "2026 Restructuring Plan") that consists of workforce reductions in certain of the Company's operating locations to correspond with current sales levels in those areas. 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 $8.6 million in 2025. We anticipate that we will expense approximately $5 million in 2026 related to the 2026 Restructuring Plan.

During the first quarter of 2025, the Company's President and CEO approved a strategic restructuring program (as subsequently amended, the "2025 Restructuring Plan") that consists of workforce reductions in certain of the Company's operating locations to correspond with current sales levels in those areas. The 2025 Restructuring Plan was amended in the third quarter of 2025 to reflect an increase in the scope of the proposed reductions. Any potential positions eliminated in countries outside the United States are subject to local law and consultation requirements. In connection with the 2025 Restructuring Plan, we recorded restructuring and related expense of $5.0 million in 2025. We anticipate no future expense in 2026 related to the 2025 Restructuring Plan.

In February 2023, our Board of Directors approved a strategic restructuring program (the "2023 Restructuring Plan") to streamline our operations in order to support our investment in critical growth areas. The 2023 Restructuring Plan includes, among other things, charges related to a workforce reduction. Any potential positions eliminated in countries outside the United States are subject to local law and consultation requirements. In connection with the 2023 Restructuring Plan, we recorded restructuring and related expense for severance related costs of $0.2 million and $2.0 million in 2025 and 2024, respectively. We anticipate no future expense in 2026 related to the 2023 Restructuring Plan.

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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 $5.9 million and $6.1 million in 2025 and 2024 for variable and other facilities-related costs. In 2023, we recorded $6.3 million of expense for the 2022 Restructuring Plan, comprised of $5.3 million for variable and other facilities-related costs, and $1.0 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease. We anticipate that we will expense approximately $3 million of facilities-related costs in 2026 related to the 2022 Restructuring Plan.

For facilities that are part of a restructuring plan, and for which we have no intent or ability to enter into a sublease, we recognize accelerated rent amortization over the period from the date that we commence the plan to fully or partially vacate a facility through the final vacate date. We did not record accelerated rent amortization in 2025 and 2024. We recorded $1.0 million for accelerated rent amortization in the year ended December 31, 2023. We continue to evaluate our properties included in our restructuring plans for accelerated amortization and/or right-of-use asset impairment. We may incur additional expense in the future if we are unable to sublease other locations included in these initiatives.

Critical Accounting Policies and Estimates

This MD&A is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available information. We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment. The significant accounting policies that we believe are the most critical include revenue recognition, the valuation of inventory, debentures and warrants received as sale consideration, warranty accruals, loss contingencies and reserves, stock-based compensation, the Preferred Stock and Warrants, business combinations, goodwill and intangible assets, accounting for leases, and accounting for income taxes. If actual results differ significantly from management's estimates and projections, there could be a material effect on our consolidated financial statements.

Revenue Recognition. We derive revenue from two primary sources: products and services. Product revenue is generated from sales of our stand-alone software, as well as our proprietary hardware and software that function together to deliver the products' essential functionality. Both software and hardware are also sold on a standalone basis. Services include customer support (software updates and technical support), consulting, design services, installation services and training. A typical contract includes both product and services. Generally, contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price ("SSP") basis.

The software licenses typically provide a perpetual right to use our software. However, we also sell term-based software licenses that expire and Software-as-as-Service ("SaaS")-based software, which are referred to as subscription arrangements. We do not customize our software nor are installation services required, as the customer has a right to utilize internal resources or a third-party service company. The software and hardware are delivered before related services are provided and are functional without professional services or customer support. We have concluded that our software licenses are functional intellectual property that are distinct, as the user can benefit from the software on its own. The product revenue related to our perpetual licenses is typically recognized when the software is made available for download, as this is the point that the user of the software can direct the use of and obtain substantially all of the remaining benefits from the functional intellectual property. The product revenue related to our term-based software licenses is recognized over the license period. We begin to recognize revenue related to the renewal of term-based software licenses at the start of the renewal period. Revenue related to our SaaS-based software is recognized ratably over the service period as the customer does not take possession of the software or have the ability to take possession of the software.

Service revenue includes revenue from customer support and other professional services. We offer warranties on our products. Certain of our warranties are considered to be assurance-type in nature, ensuring that the product is functioning as intended. Assurance-type warranties do not represent separate performance obligations. We also sell separately-priced

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maintenance service contracts which qualify as service-type warranties and represent separate performance obligations. We do not allow and have no history of accepting product returns.

Customer support includes software updates on a when-and-if-available basis, telephone support, integrated web-based support and bug fixes or patches. We sell our customer support contracts at a percentage of list or net product price related to the support. Customer support revenue is recognized ratably over the term of the customer support agreement, which is typically one year.

Our professional services include consulting, technical support, resident engineer services, design services and installation services. Because control transfers over time, revenue is recognized based on progress toward completion of the performance obligation. The method to measure progress toward completion requires judgment and is based on the nature of the products or services to be provided.

We generally use the input method to measure progress for our contracts and to recognize revenue because we believe this method, in general, best depicts the transfer of assets to the customer. The input method measures costs we have incurred in the period for the contracts. In some infrequent instances, we may engage a third-party to perform services for us and in those cases, we use the output method to recognize revenue because it best depicts the transfer of assets to the customer. Under the output method, there is a cost-to-cost measure of progress. The progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. When the measure of progress is based upon expended labor, progress toward completion is measured as the ratio of labor time expended to date versus the total estimated labor time required to complete the performance obligation. Revenue is recorded proportionally as costs are incurred or as labor is expended. Costs to fulfill these obligations can include internal labor as well as subcontractor costs.

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We offer customer training courses, for which the related revenue is typically recognized over the period the training services are performed, typically over one to five days.

Our contracts with customers often include promises to transfer multiple products and services to the customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Judgment is required to determine the SSP for each distinct performance obligation. SSPs are typically estimated using observable historical transactions of our products and services sold in comparable circumstances to similar customers, including when products and services are sold on a standalone basis. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the various products and services.

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In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions, current pricing practices, product specific business objectives, the cost to provide the performance obligation, and other observable inputs. We typically have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP. As our go-to-market strategies evolve, we may modify our pricing practices in the future, which could result in changes to SSP. However, historically, we have not had any material changes to our SSP, nor do we expect any material changes to our SSP estimates in the future.

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Valuation of Inventory. We review inventory for both potential obsolescence and potential loss of value periodically. In this review, we make assumptions about the future demand for and market value of the inventory and, based on these assumptions, estimate the amount of any excess, obsolete or slow-moving inventory.

We write down our inventories if they are considered to be obsolete or at levels in excess of forecasted demand. In these cases, inventory is written down to estimated realizable value based on historical usage and expected demand. Inherent in our estimates of market value in determining inventory valuation are estimates related to economic trends, future demand for our products and technical obsolescence of our products. If future demand or market conditions are less favorable than our projections, additional inventory write-downs could be required and would be reflected in the cost of revenue in the period the

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revision is made. To date, we have not been required to revise any of our assumptions or estimates used in determining our inventory valuations.

We write down our evaluation equipment at the time of shipment to our customers, as it is not probable that the inventory value will be realizable.

Loss Contingencies and Reserves. We are subject to ongoing business risks arising in the ordinary course of business that affect the estimation process of the carrying value of assets, the recording of liabilities and the possibility of various loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to determine whether such amounts should be adjusted and record changes in estimates in the period they become known. We are subject to various legal claims. We reserve for legal contingencies and legal fees when the amounts are probable and reasonably estimable.

Stock-Based Compensation. Our stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period.

We use the Black-Scholes valuation model for estimating the fair value on the date of grant of employee stock options. Determining the fair value of stock option awards at the grant date requires judgment regarding certain valuation assumptions, including the volatility of our stock price, expected term of the option, risk-free interest rate and expected dividends. Changes in such assumptions and estimates could result in different fair values and could therefore impact our earnings. Such changes, however, would not impact our cash flows. The fair value of restricted stock awards, restricted stock units and performance-based awards is based upon our stock price on the grant date.

We grant performance-based stock units, some of which include a market condition, to certain of our executives and certain other employees. We use a Monte Carlo simulation approach to model future stock price movements based upon the risk-free rate of return, the volatility of each entity, and the pair-wise covariance between each entity. These results are then used to calculate the grant date fair values. We are required to record expense through the respective final vesting dates regardless of the number of shares that are ultimately earned. Once the grant date criteria have been met for a fiscal year performance period, we record stock-based compensation expense based on our assessment of the probability that the respective performance condition will be achieved and the level, if any, of such achievement. The Compensation Committee determines the number of shares earned, if any, after our financial results for each fiscal year performance period are finalized. Upon determination by the Compensation Committee of the number of shares that will be received upon vesting, such number of shares becomes fixed and the unamortized expense is recorded through the remainder of the service period, at which time any performance-based stock units earned will vest pending each employee's continuing employment with us through that date.

The amount of stock-based compensation expense recorded in any period for unvested awards requires estimates of the amount of stock-based awards that are expected to be forfeited prior to vesting, as well as assumptions regarding the probability that performance-based stock awards without market conditions will be earned.

Goodwill and Intangible Assets. Goodwill is not amortized, but instead is tested for impairment annually, or more frequently if indicators of potential impairment exist. Intangible assets with estimated lives and other long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of intangible assets with estimated lives and other long-lived assets is measured by comparing the carrying amount of the asset to future net undiscounted pretax cash flows expected to be generated by the asset. If these comparisons indicate that an asset is not recoverable, we will recognize an impairment loss for the amount by which the carrying value of the asset exceeds the related estimated fair value.

We perform a fair value analysis for each reporting unit using both an income and market approach, which encompasses a discounted cash flow analysis and a guideline public company analysis using selected multiples. We assess each valuation methodology based upon the relevance and availability of the data at the time the valuation is performed and the methodologies are weighted appropriately. Any impairment charges are reported separately in our consolidated statements of operations.

Judgment is required in determining whether an event has occurred that may impair the value of goodwill, identifiable intangible assets or other long-lived assets. Factors that could indicate an impairment may exist include significant underperformance relative to plan or long-term projections, strategic changes in business strategy, significant negative industry

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or economic trends, a significant change in circumstances relative to a large customer, a significant decline in our stock price for a sustained period and a decline in our market capitalization to below net book value. We must make assumptions about future control premiums, market comparables, cash flows, operating plans, discount rates and other factors to determine recoverability.

Our annual testing for impairment of goodwill is completed as of October 1. For the purpose of testing goodwill for impairment, all goodwill is assigned to a reporting unit, which may be either an operating segment or a portion of an operating segment. Our reporting units are our two operating segments, Cloud and Edge and IP Optical Networks. For our annual impairment testing, we perform a fair value analysis using both an Income and Market approach, which encompasses a discounted cash flow analysis and a guideline public company analysis using selected multiples. We assess each valuation methodology based upon the relevance and availability of the data at the time the valuation is performed and the methodologies are weighted appropriately.

Based upon the completion of our 2025, 2024, and 2023 annual tests for goodwill impairment, we determined that there was no impairment of goodwill for either of our reporting units.

Accounting for Income Taxes. Our provision for income taxes is comprised of both current taxes and deferred taxes. The current income tax provision is generally calculated as the estimated taxes payable or refundable on tax returns to be filed for the year ended December 31, 2025. We provide for deferred income taxes based on temporary differences between financial and taxable income, net operating loss carryforwards, tax credit carryforwards and any required valuation allowances.

We assess the recoverability of all deferred tax assets recorded on the balance sheet and provide any necessary valuation allowances as required. In evaluating our ability to realize our deferred tax assets, we consider all available positive and negative evidence, including our past operating results, the existence of cumulative income in the most recent years, changes in our business operations, and our forecast of future taxable income. In determining future taxable income, we make assumptions, including the amount of state, federal and international pre-tax income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our underlying businesses. Such assessment is completed on a jurisdiction-by-jurisdiction basis.

We have provided for income taxes on the undistributed earnings of our non-U.S. subsidiaries as of December 31, 2025, excluding Ireland and Israel, which are indefinitely reinvested. Accordingly, we are required to recognize deferred taxes for 2025 on the outside basis differences related to the foreign subsidiaries, the largest of these differences being undistributed earnings.

We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position's sustainability and is measured at the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of recognized tax benefit is still appropriate. The recognition and measurement of tax benefits require significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

Results of Operations

Years Ended December 31, 2025 and 2024

Revenue. Revenue for the years ended December 31, 2025 and 2024 was as follows (in thousands, except percentages):

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Segment revenue for the years ended December 31, 2025 and 2024 was as follows (in thousands):

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The decrease in our product revenue in 2025 compared to 2024 was primarily the result of $13 million of lower sales of our Cloud and Edge products, while IP Optical sales remained flat. The decrease in revenue from the sale of Cloud and Edge products was primarily attributable to lower sales to enterprise customers, including U.S. Federal agencies.

Revenue from sales to enterprise customers was 34% and 39% of our product revenue in 2025 and 2024, respectively. These sales were made through both our direct sales team and indirect sales channel partners. The decrease in enterprise sales reflects lower sales of our products to customers in U.S. Federal agencies.

Revenue from indirect sales through our channel partner program was 31% and 38% of our product revenue in 2025 and 2024, respectively. The decrease in channel sales in 2025 reflects fewer IP Optical Networks deployments through systems integrators as well as sell-through service provider channel partners in Eastern Europe.

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

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

Service revenue for the years ended December 31, 2025 and 2024 was comprised of the following (in thousands, except percentages):

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Segment service revenue for the years ended December 31, 2025 and 2024 was comprised of the following (in thousands):

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Total service revenue was $23 million higher in 2025 compared to 2024 due to increased revenue in both of our segments. Total service revenue increased by $19 million and $4 million in our Cloud and Edge and IP Optical Networks segments, respectively due to increased demand from service providers.

Maintenance revenue was $4 million lower in 2025 compared to 2024 primarily due to modestly lower renewal rates from decommissioning of older legacy equipment with several Cloud and Edge customers.

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Professional services revenue was $27 million higher in 2025 compared to 2024, with increases of $25 million and $2 million in our Cloud and Edge and IP Optical Networks segments, respectively. The higher revenue in Cloud and Edge is due to the growth in services to U.S. service providers, primarily for voice modernization projects. Our IP Optical Networks segment experienced growth in sales of services primarily in EMEA and India.

The following customer contributed 10% or more of our revenue in the years ended December 31, 2025 and 2024:

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Revenue earned from customers domiciled outside the United States was 52% and 53% of total revenue in 2025 and 2024, respectively. U.S. revenue grew slightly year over year, increasing approximately $7 million across the Cloud and Edge and IP Optical Networks segments. Due to the timing of project completions, we expect that the domestic and international components as a percentage of our revenue may fluctuate from quarter to quarter and year to year. Our total revenue for the years ended December 31, 2025 and 2024 was disaggregated geographically as follows (in thousands):

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Our deferred product revenue was $7 million at December 31, 2025 and $14 million at December 31, 2024. Our deferred service revenue was $149 million at December 31, 2025 and $126 million at December 31, 2024. Our deferred revenue balance may fluctuate as a result of the timing of revenue recognition, customer payments, maintenance contract renewals, contractual billing rights and maintenance revenue deferrals included in multiple element arrangements.

We expect our total revenue in 2026 to increase compared to 2025, driven by growth in the Cloud and Edge segment, particularly from increased purchases by service providers as part of voice modernization projects and by enterprise customers. In our IP Optical segment, we anticipate continued revenue growth in 2026 from North America, partially offset by moderation in APAC.

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Cost of Revenue/Gross Margin. Our cost of revenue consists primarily of amounts paid to third-party manufacturers for purchased materials and services, royalties, amortization of acquired technology, inventory valuation adjustments, warranty costs, and manufacturing and services personnel and related costs. Our cost of revenue, gross profit and gross margin for the years ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):

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Our segment cost of revenue, gross profit and gross margin for the years ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):

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Our gross margin was 2.9 percentage points lower in 2025 compared to 2024. This decrease was the result of lower margins in both of our segments, particularly due to higher professional services revenue related to voice Network Transformation programs. The lower margin in our IP Optical segment was due to regional mix. The lower margin in our Cloud and Edge segment was primarily attributable to product mix and a decrease in software sales.

We expect our consolidated gross margin to increase in 2026 due to revenue growth in our Cloud and Edge segment, which has higher margins due to the higher software content in its products. Improvements in our IP Optical segment gross margin are expected related to the projected product and geography mix.

Research and Development. Research and development ("R&D") expenses consist primarily of salaries and related personnel expenses and prototype costs for the design, development, testing and enhancement of our products. R&D expenses for the years ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):

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The decrease in our research and development expenses in 2025 compared to 2024 was primarily attributable to approximately $2 million of lower expenses in our IP Optical Networks segment and approximately $1 million of higher expenses in our Cloud and Edge segment. The reduced expenses are a combination of lower employee expenses offset by higher non-US costs due to a weakening dollar.

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Our IP Optical Networks R&D investment is focused on significantly expanding our portfolio of IP Routing solutions, adding additional features and capabilities to our Optical Transport portfolio, and supporting features in our next generation SDN management and orchestration platform.

Some aspects of our R&D efforts require significant short-term expenditures, the timing of which may cause significant variability in our expenses. We believe that rapid technological innovation is critical to our long-term success, and we are tailoring our investments to meet the requirements of our customers and market.

We believe that our R&D expenses will increase modestly in 2026 primarily due to higher employee and consulting costs related to supporting certain legacy products and development of our cloud native solutions.

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Sales and Marketing. Sales and marketing expenses consist primarily of salaries and related personnel costs, commissions, travel and entertainment expenses, promotions, customer trial and evaluations inventory and other marketing and sales support expenses. Sales and marketing expenses for the years ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):

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The decrease in our sales and marketing expenses in 2025 compared to 2024 was primarily attributable to lower commissions, partially offset by higher travel expenses and non-US costs due to a weakening dollar.

We believe our sales and marketing expenses will be relatively flat in 2026 as compared to 2025 with increases for employee-related variable compensation expenses offset by continued cost efficiencies.

General and Administrative. General and administrative expenses consist primarily of salaries and related personnel costs for executive and administrative personnel, and audit, legal and other professional fees. General and administrative expenses for the years ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):

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The decrease in general and administrative expenses in 2025 compared to 2024 was primarily attributable to lower litigation expenses and variable employee costs, partially offset by higher stock compensation expense.

We believe that our general and administrative expenses will be relatively flat in 2026 as compared to 2025 with increases for employee-related variable compensation expenses offset by continued cost efficiencies.

Amortization of Acquired Intangible Assets included in Operating expenses. Amortization of acquired intangible assets included in Operating expenses ("Opex Amortization") for the years ended December 31, 2025 and 2024 was as follows (in thousands, except percentages):

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Opex Amortization was lower in 2025 compared to 2024 due to our method of amortization. We record our amortization in relation to expected future cash flows rather than on a straight-line basis. Accordingly, such expense may vary from one period to the next.

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

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expenses include professional and services fees, such as legal, audit, consulting, paying agent and other fees. Integration-related expenses represent incremental costs related to combining our systems and processes with those of acquired businesses, such as third-party consulting and other third-party services.

We recorded $4.3 million in 2025 consisting of legal and professional fees associated with contemplated corporate development activities. We recorded no such costs in 2024.

Restructuring and Related. We have been committed to streamlining operations and reducing operating costs by closing and consolidating certain facilities and reducing our worldwide workforce. Please see the additional discussion of our restructuring initiatives in the "Restructuring and Cost Reduction Initiatives" section of the Overview of this MD&A.

We recorded restructuring and related expense of $19.7 million in 2025, comprised of $13.7 million of severance and related costs, and $6.0 million for variable and other facilities-related costs. In 2024, we recorded restructuring and related expense of $10.2 million, comprised of $4.1 million for severance and related costs, and $6.1 million for variable and other facilities-related costs. Although we have eliminated positions as part of our restructuring initiatives, we continue to hire in certain areas that we believe are important to our future growth.

Interest Expense, net. Interest expense and interest income for the years ended December 31, 2025 and 2024 were as follows (in millions, except percentages):

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We had an increase in interest income in 2025 due to a cash investment account established in late 2024. Our interest expense in 2025 primarily represents term debt interest, amortization of debt issuance costs and original issue discount and interest associated with factoring arrangements. Our interest expense in 2024 primarily represents term debt interest, amortization of debt issuance costs and original issue discount, interest associated with factoring arrangements and the amortization of gains in accumulated other comprehensive income (loss) ("AOCI") from the sales of our interest rate swap. Interest expense in 2025 was higher than 2024 primarily due to higher margins under our 2024 Term Loan as compared to our 2020 Term Loan, and higher interest in 2025 due to our interest rate swap no longer being in place, partially offset by write-offs related to the refinancing of the 2020 Credit Facility with a portion of the proceeds from the 2024 Credit Facility on June 21, 2024. The write-offs related to the refinancing consisted of the remaining unamortized gains in AOCI from the sales of our interest rate swap totaling $4.9 million, partially offset by the write-off of debt issuance costs from the 2020 Credit Facility totaling $2.0 million. See Note 14 to our consolidated financial statements for a discussion of the sale of our interest rate swap.

Other Income (Expense), Net. Our other income, net in 2025 was $2.2 million and was primarily comprised of $6.0 million fair value adjustments to the Warrants offset by approximately $3.7 million foreign currency exchange losses. Our other expense, net in 2024 was $29.1 million and was primarily comprised of $9.1 million of fair value adjustments to the Preferred Stock and Warrants, $2.7 million of accrued dividends and the $1.8 million call premium on our Preferred Stock that we redeemed on June 25, 2024, $6.3 million write-off of an expired tax indemnity asset associated with the ECI Acquisition, and foreign currency exchange losses of $5.7 million.

Income Taxes. We recorded an income tax benefit of $84.7 million and an income tax provision of $8.2 million in 2025 and 2024, respectively. The increase in the income tax benefit is due to the tax benefit recognized on the tax-basis loss related to the Company's investment in a subsidiary, which is not expected to recur in future periods.

During 2025 and 2024, we performed an analysis to determine if, based on all available evidence, we considered it more likely than not that some portion or all of the recorded deferred tax assets will not be realized in a future period. As a result of our evaluations, in 2025, for the U.S. deferred tax assets, we concluded that deferred tax assets are generally realizable, with the exception of certain federal and state net operating loss carryforwards, as well as certain tax credits, that are not anticipated to be utilized. Accordingly, we have maintained a valuation allowance on our U.S. deferred tax assets of $21.5 million, which

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increased slightly over the prior year. As a result of our evaluations for Israel, we maintained a full valuation allowance against our net deferred tax assets in Israel.

In October 2021, the Organization for Economic Co-operation and Development (the "OECD") announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges arising from digitalization of the economy. In December 2021, the OECD released Pillar Two Model Rules defining the global minimum tax rules, which contemplate a minimum tax rate of 15% ("Pillar Two"). In addition, the OECD issued administrative guidance providing transition and safe harbor rules that could delay the impact of the minimum tax directive. Certain countries in which we operate have enacted legislation consistent with the OECD model rules effective beginning in 2024. We considered the applicable tax laws in relevant jurisdictions and concluded there was no material effect on our tax provision for the year ended December 31, 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.

Years Ended December 31, 2024 and 2023

For a comparison of our results of operations for the fiscal years ended December 31, 2024 and 2023, see "Part II, Item 7. MD&A" of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial position, changes in financial position, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Liquidity and Capital Resources

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

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We had cash, cash equivalents, and restricted cash aggregating $98 million and $90 million at December 31, 2025 and 2024, respectively. We had cash held by our non-U.S. subsidiaries aggregating approximately $50 million and $18 million at December 31, 2025 and 2024, respectively. If we elect to repatriate all of the funds held by our non-U.S. subsidiaries as of December 31, 2025, we do not believe that the amounts of potential withholding taxes that would arise from the repatriation would have a material effect on our liquidity.

On June 21, 2024, we entered into a Senior Secured Credit Facilities Credit Agreement (the "2024 Credit Facility" or "2024 Credit Agreement") as guarantor, with our wholly-owned subsidiary, Ribbon Communications Operating Company, Inc., as the borrower ("Borrower"), HPS Investment Partners, LLC ("HPS"), as administrative agent, and HPS and WhiteHorse Capital Management, LLC ("WhiteHorse" and, together with HPS, the "Lenders"), pursuant to which the Lenders provided us with a $385 million Credit Agreement comprised of (i) a $350 million term loan (the "2024 Term Loan") and (ii) a $35 million revolving credit facility (the "2024 Revolver"), including a $20 million sublimit for letters of credit. The proceeds received from the 2024 Term Loan were used to (a) repay 100% of the amounts outstanding under the 2020 Credit Facility, (b) redeem in full the Preferred Stock and (c) pay fees and expenses related to the 2024 Credit Facility.

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The 2024 Term Loan and the 2024 Revolver bear interest, at the Borrower's option, at either the Alternate Base Rate ("ABR") or Term Secured Overnight Financing Rate ("SOFR") with an Applicable Margin for each (all as defined in the 2024 Credit Facility). Margins for the first six months were 5.25% per annum for ABR Loans and 6.25% per annum for SOFR Loans. Thereafter, margins vary based on our Consolidated Net Leverage Ratio, ranging from 4.75% to 5.25% per annum for ABR Loans and 5.75% to 6.25% per annum for SOFR Loans. The 2024 Term Loan and the 2024 Revolver will both mature on June 21, 2029. The 2024 Term Loan is being repaid in equal quarterly installments: approximately $0.9 million beginning with the third quarter of 2024 through the second quarter of 2025; approximately $2.2 million beginning with the third quarter of 2025 and ending with the second quarter of 2027; and approximately $4.4 million quarterly thereafter, with the remaining principal balance of approximately $298.4 million due on the maturity date of June 21, 2029. In connection with the establishment of the 2024 Credit Facility, $7.7 million of original issue discount was withheld by the Lenders and we incurred $6.3 million of debt issuance costs for a total of $14.0 million that is being amortized to Interest expense, net over the term of the agreement.

Our previous credit facility was the Senior Secured Credit Facilities Credit Agreement (as amended, the "2020 Credit Facility"), which we entered into on March 3, 2020, by and among us, as a guarantor, Ribbon Communications Operating Company, Inc., as the borrower (the "Borrower"), Citizens Bank, N.A., Santander Bank, N.A., and others as lenders, ("2020 Credit Facility Lenders"). For additional details regarding the terms of the 2024 Credit Facility and 2020 Credit Facility, see Note 13 to our consolidated financial statements.

Quarterly principal payments were required on the 2020 Term Loan aggregating approximately $5.0 million per quarter through March 31, 2024, and if the refinancing had not occurred, $10.0 million would have been required in each of the three quarters thereafter, with the remaining and final payment due on the maturity date in March 2025.

At December 31, 2025, we had an outstanding balance under the 2024 Term Loan of $342.1 million at an average interest rate of 10.3%, with no revolver balance and no letters of credit outstanding under our 2024 Credit Facility. We were in compliance with all covenants of the 2024 Credit Facility at December 31, 2025 and 2024, respectively.

In the course of our business, we use letters of credit, bank guarantees and surety bonds (collectively, "Guarantees"). We had $11.1 million and $10.9 million of Guarantees under various uncommitted facilities as of December 31, 2025 and 2024, respectively. We had no letters of credit outstanding under the 2024 Credit Facility at December 31, 2025 and 2024. At December 31, 2025 and 2024, we had cash collateral of $1.7 million and $2.7 million, respectively, supporting the Guarantees, which are reported in Restricted cash in our consolidated balance sheets.

We are exposed to financial market risk related to foreign currency fluctuations and changes in interest rates. These exposures are actively monitored by management. To manage the volatility related to the exposure to changes in interest rates, we may enter into a derivative financial instrument. Management's objective has been to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with changes in interest rates. Our policies and practices are to use derivative financial instruments only to the extent necessary to manage exposures. We do not hold or issue derivative financial instruments for trading or speculative purposes.

As a result of exposure to interest rate movements, during March 2020, we entered into an interest rate swap arrangement, which effectively converted our $400 million term loan with its variable interest rate based upon one-month LIBOR to an aggregate fixed rate of 0.904%, plus a leverage-based margin as defined in the 2020 Credit Facility. On July 22, 2022, we sold $30 million of the notional amount of our interest rate swap back to our counterparty for $1.5 million, reducing the notional amount of this swap to $370 million. On August 16, 2022, we sold another $30 million of the notional amount of our interest rate swap back to our counterparty for $1.6 million, reducing the notional amount to $340 million, which approximated the term loan debt then outstanding. The gain in accumulated other comprehensive income (loss) related to the $60 million notional amount sold of $3.1 million was being released into earnings on a straight line basis over the remaining term of the 2020 Credit Facility as a decrease to interest expense, the amortization of which totaled $0.4 million and $0.9 million for the year ended December 31, 2024 and 2023, respectively. The remaining unamortized gain in accumulated other comprehensive income (loss) of approximately $0.5 million was written off to interest expense in conjunction with the refinancing of the 2020 Credit Facility on June 21, 2024. On March 24, 2023, we received $9.4 million, consisting of $0.4 million of interest and $9.0 million for the sale of $170 million of our $340 million notional amount interest rate swap back to our counterparty, reducing the notional amount to $170 million. On March 27, 2023, we received $9.8 million, consisting of $0.4 million of interest and $9.4 million for the sale of the remaining $170 million of our interest rate swap back to our counterparty. The portion of the gain in accumulated other comprehensive income (loss) related to the term loan debt prepaid on the date of the final sale of our swap

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totaled $7.3 million and was released into earnings immediately as Other expense, net. The portion of the gain in accumulated other comprehensive income (loss) related to our remaining term loan debt balance totaled $12.0 million and was being released into earnings on a straight line basis over the remaining term of the 2020 Credit Facility as a decrease to interest expense beginning in the second quarter of 2023, the amortization of which was $3.0 million and $4.7 million for the years ended December 31, 2024 and 2023, respectively. The remaining unamortized gain in accumulated other comprehensive income (loss) of $4.4 million was written off to interest expense in conjunction with the refinancing of the 2020 Credit Facility on June 21, 2024.

Our objectives in using interest rate derivatives have been to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we have used an interest rate swap as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of an agreement without exchange of the underlying notional amount.

The effective portion of changes in the fair value of designated derivatives that qualify as cash flow hedges is recorded in Accumulated other comprehensive income in the consolidated balance sheet and is subsequently reclassified into earnings in the period that the hedged forecasted transactions affect earnings. During the year ended December 31, 2023, such a derivative was used to hedge the variable cash flows associated with the outstanding borrowings under the 2020 Credit Facility and we accounted for this derivative as an effective hedge until the final portion of the swap was sold on March 27, 2023. Any ineffective portion of the change in fair value of the derivative would be recognized directly in earnings. However, we recorded no hedge ineffectiveness over the life of our swap. In the year ended December 31, 2023, we recorded $7.3 million of Other expense, net due to the sale of our interest rate swap arrangement.

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 2.5 million shares in the year ended December 31, 2025, using $9.0 million with $41.0 million remaining for future repurchases as of December 31, 2025.

Cash Flows from Operating Activities

Our primary source of cash from operating activities has been from cash collections from our customers. We expect cash flows from operating activities to be affected by increases and decreases in sales volumes and timing of collections, and by purchases and shipments of inventory. Our primary uses of cash from operating activities have been for personnel costs and investment in our research and development and in our sales and marketing, and general and administrative departments.

Our operating activities provided cash of $51.4 million in 2025, primarily a result of lower accounts receivable of $20.0 million and deferred revenue of $15.8 million. These amounts were partially offset by decreases in accrued expenses and other long-term liabilities, and accounts payable. Our net income of $39.6 million included adjustments for certain non-cash expenses, such as $44.2 million of amortization of intangible assets and $19.4 million of stock-based compensation. These adjustments were partially offset by deferred tax benefit of $85.6 million and a $6.0 million change in fair value of warrant liability. Higher revenue and lower operating expenses company-wide due to our various cost-saving initiatives, including lower employee and facilities expenses, continue to positively impact our operating cash flow.

Our operating activities provided cash of $50.2 million in 2024, primarily as a result of lower other operating assets and accounts receivable, the increase in the fair value of our preferred stock and warrant liabilities, and higher deferred revenue. These amounts were partially offset by lower accounts payable, accrued expenses and other long-term liabilities, and higher inventory. Our net loss was more than offset by adjustments for certain non-cash expenses, such as amortization of intangible assets and stock-based compensation. These adjustments were partially offset by a $6.7 million one-time payment of accumulated dividends as a result of our redemption of our Preferred Stock liability on June 25, 2024, $8.2 million of amortization of an accumulated other comprehensive gain related to our interest rate swap, and $16.9 million of deferred income tax expense. Higher revenue in our Cloud and Edge segment and lower operating expenses company-wide due to our various cost saving initiatives, including lower employee and facilities expenses, continue to positively affect our operating cash flow.

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Cash Flows from Investing Activities

Our investing activities used cash of $25.3 million and $22.9 million in 2025 and 2024, respectively. Our investing activities were primarily used to purchase property and equipment. The increase in purchases of property and equipment in 2025 and 2024 is primarily due to the build out of a new facility in Israel.

Cash Flows from Financing Activities

Our financing activities used cash of $19.4 million in 2025 primarily due to $6.1 million of principal payments on our 2024 Term Debt and $9.0 million for the repurchase and retirement of our common stock under the 2025 Repurchase Program. In addition, we paid $4.4 million of tax obligations related to the vesting of stock awards and units.

Our financing activities provided cash of $37.7 million in 2024. We received $342.3 million of proceeds, net of $7.7 million of original issue discount, from the issuance of term debt under the 2024 Credit Facility that was established on June 21, 2024 to refinance the 2020 Credit Facility. Also, we had $44.1 million of both borrowings and principal payments under the 2020 Revolving Credit Facility. In conjunction with the establishment of the 2024 Credit Facility, we repaid the 2020 Term Debt amounting to $235.4 million, redeemed all of the outstanding Preferred Stock totaling $56.9 million, and paid $6.3 million in debt issuance costs. Also, we paid $1.8 million in principal payments on our 2024 Term Debt. In addition, we paid $4.3 million of tax obligations related to the vesting of stock awards and units.

The rate at which we consume cash is dependent upon the cash needs of our future operations, including our contractual obligations at December 31, 2025, primarily comprised of our debt principal and interest obligations as described above, and our operating lease and purchase obligations. Our operating lease obligations totaled $100.3 million at December 31, 2025, with payments to be made aggregating $18.0 million in 2026, $16.7 million in 2027, $14.0 million in 2028 and $51.6 million thereafter. Our purchase obligations totaled $105.8 million at December 31, 2025, with estimated payments aggregating $102.3 million in 2026 and $3.5 million thereafter. We anticipate devoting substantial capital resources to continue our R&D efforts, to maintain our sales, support and marketing, and for other general corporate activities. We believe that our financial resources, along with managing discretionary expenses, will allow us to manage the ongoing impact of inflation on our business operations. Looking ahead, we have developed contingency plans to reduce costs further if the situation deteriorates.

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

Recent Accounting Pronouncements

In 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 the Company beginning with our 2029 interim and annual financial statements, with early adoption permitted. The Company believes this ASU will have no material impact on its consolidated financial statements.

In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements ("ASU 2025-09"), to enhance hedge accounting guidance and better align it with entities' risk management activities. The amendments expand eligibility for hedge accounting, simplify certain requirements, and address issues related to reference rate reform. Key changes include allowing cash flow hedge accounting for "choose-your-rate" debt instruments, introducing a principles-based "similar risk exposure" criterion for grouping forecasted transactions, permitting component hedging for nonfinancial forecasted transactions, and clarifying the treatment of certain derivative structures. ASU 2025-09 will be effective for the Company beginning with its 2027 interim and annual financial statements, with early adoption permitted. The Company is currently evaluating the impact of this accounting standard on its consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"). To clarify how the accounting guidance applies to both linear and nonlinear software development, this standard removes all references to "developments stages" from ASC 350-40. ASU 2025-06 will be effective for the Company beginning with its 2028 interim and annual

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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 consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025-05"), which provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. In developing reasonable and supportable forecasts as part of estimating expected credit losses, all entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. ASU 2025-06 will be effective for the Company beginning with its 2026 interim and annual financial statements, with early adoption permitted. The Company believes this ASU will have no material impact on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement, Reporting Comprehensive Income: Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"), which requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The objective of this standard is to provide investors with information to better understand a public entity's performance and prospects for future cash flows, and to compare their performance over time with that of other entities. ASU 2024-03 will be effective for us beginning with our 2027 annual financial statements and interim financial statements thereafter, with early adoption permitted. The adoption of ASU 2024-03 will require us to provide new footnote disclosure about the types of expenses that are included in certain captions on our Statements of Operations, such as Cost of revenue, Research and development, Sales and marketing, and General and administrative.

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which increases the disclosures requirements around rate reconciliation information and certain types of income taxes companies are required to pay. ASU 2023-09, which the Company applied on a prospective basis, became effective beginning with this Annual Report on Form 10-K and includes the required additional income tax disclosures.