RBBN 10-K & 10-Q changes, risk factors and insider trading

Competition in the telecommunications market is intense. The market is shifting from an ecosystem dominated by a few large incumbent telecommunications equipment companies, such as Ericsson LM Telephone Company, Huawei Technologies Co. Ltd., Nokia Corporation, Ciena Corporation and Cisco Systems, Inc., to a market with competitors that are characterized by network virtualization, migration to the cloud, and open interfaces. The market is also seeing the growing use of AI in many areas of the network. We believe thisthese shiftshifts createscreate opportunities for us, as well as our direct competitors in telecommunications and networking. The shift also creates opportunities for new entrants, including some that may currently be our strategic partners, that could become competitors in the industry. See Item 1. “Business – Competition”. Mergers among any of these or other competitors could strengthen their ability to compete against us, and additional competitors with significant financial resources entering our markets could further intensify competition.

The telecommunications industry, including many of our customers, has experienced consolidation, including, in the carrier space, the proposed acquisition of Cox Communications by Charter Communications (2025), the recently completed acquisition of Frontier Communications by Verizon (20242026), and the acquisition of Lumen’s Mass Markets Fiber business by AT&T, the merger between Rogers Communications Inc. and Shaw Communications Inc. (April 2023), and the acquisition of certain Lumen Technologies assets by Brightspeed (2022), the merger between T-Mobile US, Inc. and Sprint Corporation (2020) and the acquisition of Blue Face Ltd. by Comcast Corporation (2020). Further, consolidation has also occurred in the telecommunications supplier and vendor space, including the proposed acquisition by Alianza of the Metaswitch business held by Microsoft (December 2024), the proposed mergeracquisition of Infinera withby Nokia (June 20242025), the proposed acquisition of Juniper Networks by Hewlett Packard Enterprises (January 20242025), and the combination of ADTRAN, Inc. and ADVA (2022) and the acquisition of Acacia Communications, Inc. by Cisco Systems, Inc. (2021).

We spend a significant amount of time, money and resources developing new technology, products and solutions to help keep up with rapid technology and market changes. Our strategic plan,plan includes a continued shift in our investments from mature technologies that previously generated significant revenue for us toward certain networking technologies.technologies and the use of AI to assist in network management. Our choices of specific technologies to pursue, and those to de-emphasize, may prove to be inconsistent with our customers’ investment spending. Moreover, if we invest in the development of technologies, products and solutions that do not function as expected, are not adopted by the industry, are not ready in time, are not accepted by our customers as quickly as anticipated or at all, mature more quickly than we anticipated or are not successful in the marketplace, our sales and earnings may suffer and, as a result, our stock price could decline.

We currently rely on a small number of large global contract manufacturers to assemble our products according to our specifications and to fulfill orders on a timely basis. Reliance on a third-party manufacturer involves a number of risks, including a lack of control over the manufacturing process, inventory management and the potential absence or unavailability of adequate capacity. These risks are amplified by any global supply chain disruptions.disruptions, including, as a result of tariffs. As we do not have internal manufacturing capabilities, any difficulties or failures to perform by our contract manufacturers could cause delays in customer product shipments, which could negatively affect our relationships with customers and result in delayed revenue.

We and our contract manufacturers both purchase several key components of our products. Depending upon the component, there may or may not be alternative sources of substitutes. If we overestimate our component and finished goods requirements, we could have excess inventory, which would increase our costs. If we or our contract manufacturers underestimate our requirements, we may not have an adequate supply, which could interrupt manufacturing of our products and result in delays in shipments and revenue. The imposition of tariffs on components or the countries where our contract manufacturers are located could also result in increased costs that we may not be able to pass on, partially or in full, to our customers. If any of our sole or limited source suppliers experience capacity constraints, work stoppages or other reductions or disruptions in output, it may not be able to meet, or may choose not to meet, our delivery schedules. Moreover, we have agreed to compensate our contract manufacturers in the event of termination or cancellation of orders, discontinuance of product or excess material.

Factors that could impact federal government spending on our products and services include a significant decline in, or reapportioning of, spending by the federal government customers, changes, delays or cancellations of government programs or requirements, the adoption of new laws or regulations, new or prolonged government shutdowns or other delays in the government budget and/or appropriations process, changes in the political climate and general economic conditions. The loss or significant curtailment of any government contracts or subcontracts, whether due to our performance or due to interruptions or changes in governmental funding, could have a material adverse effect on our business, results of operations and financial condition.

Further, sales to government customers may require specific testing efforts or impose significant compliance or certification obligations. For example, the U.S. Department of Defense (“DOD”) has issued specific requirements for IP networking products for features and interoperability. In order for our products to be used to connect to the DOD network, that product must pass a series of significant tests and be certified by the Joint Interoperability Test Command (“JITC”). While certain of our products are certifiedhave byreceived JITC,the required certifications, if we are unable to obtain future JITC certification as needed, our DODU.S. federal sales and results of operations,operations may suffer.

We have a history of significant acquisitions and we may merge with or acquire additional businesses, products or technologies in the future or sell a portion of our business. No assurance can be given that any future merger, acquisition or disposition will be successful or will not materially adversely affect our business, operating results or financial condition. We continue to review opportunities to merge with or acquire other businesses or technologies that would add to our existing product line, complement and enhance our current products, expand the breadth of our product and service offerings, enhance our technical capabilities or otherwise offer growth opportunities. If we enter into a merger or make acquisitions in the future, we could, among other thingsthings, issue stock that would dilute existing stockholders’ percentage ownership; incur significant debt or assume significant liabilities; materially reduce our cash; incur significant amortization expenses related to intangible assets; and/or incur large and immediate write-offs for in-process research and development and stock-based compensation.

Our business depends upon highly skilled technical, managerial, engineering, sales, marketing and customer support personnel. Competition for these personnel is intense, especially during times of economic recovery or growth. In addition, for certain mature technologies, the availability of qualified personnel necessary to provide maintenance and professional services is smaller and such personnel may be difficult to find. Any failure to hire, assimilate in a timely manner and retain key qualified personnel, particularly engineering and sales personnel, could impair our growth and make it difficult to meet key objectives, such as timely and effective product introductions. In addition, our ability to attract and retain key employees could be adversely impacted if we do not have a sufficient number of shares available under the Amended and Restated 20192025 Stock Incentive Plan, as amended,Plan to issue to our employees. We may not be able to locate suitable employees for any key employee who leaves or offer employment to potential replacements on reasonable terms.

Man-made problems, such as war,war and terrorism, and natural catastrophic events may disrupt our operations and harm our operating results.

The ongoing warswar in IsraelUkraine and Ukraine,military action in Israel, as well as the continued threat of terrorism and heightened security and military action in response to this threat, or any future acts of terrorism, may cause disruptions to the economies of the United States and other countries. Events such as work stoppages or widespread blackouts could have similar negative impacts. Such disruptions or uncertainties could result in delays or cancellations of customer orders or the manufacture or shipment of our products and have a material adverse effect on our business and results of operations.

We are developing AI initiatives,solutions, including generative AI, such as our Acumen AIOps and Automation platform, to, among other things, enhance our features for new and existing products, and create greater operation efficiencies for us.

There are significant risks involved in developing and deploying AI, and there can be no assurance that the usage of AI will enhance our products or services or be beneficial to our business, including our efficiency or profitability. For example, our AI-related efforts, particularly those related to generative AI, subject us to risks related to harmful content, inaccuracies, bias, discrimination, toxicity, intellectual property infringement or misappropriation, defamation, data privacy, cybersecurity, and sanctions and export controls, among others. It is also uncertain how various laws will apply to content generated by AI. We are subject to the risks of new or enhanced governmental or regulatory scrutiny, litigation, or other legal liability, ethical concerns, negative consumer perceptions as to automation and AI, or other complications that could adversely affect our business, reputation, or financial results. In addition, if our competitors use AI tools to optimize operations and we fail to utilize AI tools in a comparable manner, we may be competitively disadvantaged.

As a result of the complexity and rapid development of AI, it is the subject of evolving review by various U.S. governmental and regulatory agencies, and other foreign jurisdictions are applying, or are considering applying, their intellectual property, cybersecurity, data protection and other laws to AI and/or are considering general legal frameworks on AI. We may not always be able to anticipate how to respond to these frameworks, given that they are still rapidly evolving. We may also have to expend resources to adjust our use of AI in certain jurisdictions if the legal frameworks on AI are not consistent across jurisdictions.

As such, itIt is not possible to predict all of the risks related to the use of AI, and changes in laws, rules, directives, and regulations governing the use of AI may adversely affect our ability to develop and use AI or subject us to legal liability.

A factor that significantly affects our operating results is the impact of economic conditions on the willingness of our current and potential customers to make capital investments. Given the general uncertainty regarding global economic conditions and other factors, such as tariffs, trade barriers, inflation, high interest rates and foreign exchange rate fluctuations, we believe that customers have tried to maintain or improve profitability through cost control and constrained capital spending, which places additional pressure to demonstrate acceptable return on investment. Some of our customers have canceled or delayed, and current and prospective customers may continue to cancel and delay, spending on the development or roll-out of capital and technology projects with us due to economic uncertainty and, consequently, our results of operations have been, and may continue to be, adversely affected. In addition, current uncertain worldwide economic and political environments make it increasingly difficult for us, our customers, and our suppliers to accurately forecast future product demand, which could result in an inability to satisfy demand for our products and a loss of market share. Our revenue is likely to decline in such circumstances, which may result in erosion of our profit margins and significant losses.

Moreover, economic conditions worldwide may contribute to slowdowns in the communications and networking industries, as well as to specific segments and markets in which we operate, particularly the telecom sector, resulting in, among other things, reduced demand for our products and services as a result of our customers choosing to refrain from building or upgrading capital intensive networks; increased price competition for our products, not only from our competitors, but also as a consequence of customers disposing of unutilized products; and risk of excess and obsolete inventories. Continuing turmoil in the geopolitical environment in many parts of the world may continue to put pressure on global economic conditions, which in turn could materially adversely affect our operating results. For example, following recent border clashes with China, India has enacted bans on the import of some goods manufactured in China and separately will require certain products be manufactured in India. These requirements include our products that are currently manufactured outside of India and, as a result, we are working to identify local manufacturing for such products. While we are developing plans to relocate our manufacturing sites, the timing required for relocation could impact our ability to sell such products or timely deliver the products and could result in lower or lost sales in India. The need to move the manufacturing of such products could also negatively impact the margin earned on the sale of such products. If these restrictions or other sanctions are enacted, they may limit our ability to provide products and services in an important country or region for our business.

We have a significant number of employees located in Israel. As a result, political, economic and military conditions in Israel may directly affect our business. In October 2023, Hamas conducted several terrorist attacks in Israel resulting in ongoing war across the country. In addition, there continue to be hostilities between Israel and Hezbollah in Lebanon, as well as groups in Syria and Iran which resulted in rockets being fired into Israel, causing casualties and disruption of economic activities. Popular uprisings in various countries in the Middle East over the last few years, including in Iran in January 2026 and Syria in December 2024, have also affected the political stability of those countries and have led to a decline in the regional security situation. Such instability may also lead to deterioration in the political and trade relationships that exist between Israel and these countries. The ongoing war against Hamas and any additional conflicts, terrorist activities or political instability involving Israel or other countries in the region could adversely affect our business, results of operations, financial condition, cash flows and prospects. Although the Israeli Government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot ensure stockholders that this coverage will be maintained or will be adequate in the event we submit a claim.

Our operations could also be disrupted by the absence for significant periods of one or more key employees or a significant number of other employees because of military service. Some of our employees in Israel are obliged to perform military reserve duty, which generally accumulates over a period of three years from several days to up to a maximum of 84 days (and up to 108 days, in special circumstances specified under applicable law) and, in certain emergency circumstances, employees may be called to immediate and unlimited active duty. In response to the Hamas terrorist attacks in October 2023, a number of our employees in Israel have been activated for military duty. While we have business continuity plans in place to address the military call-ups of our employees, any of these circumstances could have a material adverse effect on our business, results of operations, financial condition, cash flows and prospects.

We 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. Without any mitigation and assuming customers continue to purchase at their current levels, the current tariffs, if enacted, could add approximately $5 million in annual costs which we would work with our customers to offset.

Because a portion of our business is conducted outside the United States, we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve, and they could have a material adverse impact on our financial results and cash flows. An increase in the value of the U.S. dollar could increase the real cost to our customers of our products in those markets outside the United States where we often sell in dollars, and a weakened U.S. dollar could increase the cost of local operating expenses and procurement of raw materials from sources outside the United States. Therefore, while we do engage in some currency hedging to reduce potential risks, changes in the value of the U.S. dollar against other currencies will affect our revenue, income from operations, net income and the value of balance sheet items originally denominated in other currencies. There is no guarantee that our financial results will not be adversely affected by currency exchange rate fluctuations.

We rely upon our information systems and, in certain circumstances, those of our third-party providers, such as vendors, consultants and contract manufacturers, to protect our sensitive or proprietary information and information of or about our customers, to develop and provide our products and services to customers, and to otherwise operate our business. Our information systems and those of our third-party providers are vulnerable to threats such as computer hacking, cyber-terrorism or other unauthorized activity that may result in third party access to or modification, corruption or deletion of our or our customers’ sensitive or proprietary information or other disruptions to our business. Such cyberattacks and other cyber incidents are occurring more frequently, are constantly evolving, are becoming more sophisticated and can take many forms. While we believe that we leverage appropriate detection and prevention systems and services and that we focus on continuous improvement based upon the latest attack vectors in the industry, we have previously experienced information technology system failures and cannot guarantee that there will nevernot be anyadditional informationincidents technologyin systemthe failures,future, including future breaches of our or our third-party providers’ data security measures through a cyberattack, other cyber incident or otherwise, or the theft or loss of laptops, other mobile devices or electronic records used to back up our systems or our third-party providers’ systems, which could result in a disclosure of customer, employee, or our information or otherwise disrupt our ability to function in the normal course of business by potentially causing, among other things, delays in the fulfillment or cancellation of customer orders or disruptions in the manufacture or shipment of products or delivery of services, any of which could have a material adverse effect on our operating results. For example, in early September 2025, we became aware that unauthorized persons, reportedly associated with a nation-state actor, had gained access to our IT network. We promptly initiated our incident response plan and began an investigation, containment and remediation effort using multiple third-party cybersecurity experts, including federal law enforcement. While we are not aware of evidence indicating that the threat actor accessed or exfiltrated any material information, several customer files saved outside of the main network do appear to have been accessed by the threat actor and those customers have been notified by us.

Legislation in various countries around the world with regard to cybersecurity, privacyprivacy, use of AI and data protection is rapidly expanding and creating a complex compliance environment. We are subject to many privacy and data protection laws and regulations in the U.S. and around the world, some of which place restrictions on our ability to process personal data across our business. For example, the General Data Protection Regulation has caused more stringent data protection requirements in the U.K. and the European Union, which has adopted similar regulations. These privacy laws impose onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and implement policies as part of its mandated privacy governance framework. It also requires data controllers to be transparent and disclose to data subjects how their personal information is to be used; imposes limitations on retention of personal data; introduces mandatory data breach notification requirements; and sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. We are subject to the supervision of local data protection authorities in those E.U. jurisdictions where we are established or otherwise subject to these privacy regulations. Certain breaches of the privacy requirements could result in substantial fines. In addition to the foregoing, a breach of privacy regulations could result in regulatory investigations, reputational damage, orders to cease/change our use of data, enforcement notices, as well potential civil claims including class action type litigation where individuals suffered harm.

Similarly, California and other states have enacted privacy laws that purport to create individual privacy rights for consumers and increase the privacy and security obligations of entities handling certain personal data. These laws also provide for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. These laws may increase our compliance costs and potential liability. Many similar laws have been proposed at the federal level and in the other states. Any liability from our failure to comply with the requirements of these laws could adversely affect our financial condition.

The following discussion should be read in conjunction with our financial statements and the related notes included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.Report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those disclosed in Item 1A, “Risk Factors”, elsewhere in this Annual Report on Form 10-K,Report, in other documents filed with the SEC and otherwise publicly disclosed. Please refer to “Cautionary Note Regarding Forward-Looking Statements” above for additional information. For a complete description of our business and other important information, please refer to Item 1 of Part I of this Annual Report on Form 10-K.Report.

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.

Supplier Disruptions. Ongoing uncertainty in the global economy due to inflation, theglobal warsmilitary actions, including in Israel and Ukraine, national security concerns and other factors, continue to disrupt various manufacturing, commodity and financial markets, increase volatility, and impede global supply chains. Our ability to deliver our solutions as agreed upon with our customers depends in part on the ability of our global contract manufacturers, vendors, licensors and other business partners to deliver products or perform services we have procured from them.

The Ongoing WarsWar in IsraelUkraine and Ukraine.military action in Israel. The uncertainty resulting from the warsrecent war in Israel 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. Further, a number of our employees in Israel are members of the military reserves and subject to immediate call-up in response to the war in Israel. Following the terrorist attacks in Israel in October 2023, a number of our employees have been activated for military duty and we expect that additional employees will also be activated if the war in Israel continues. While we have business continuity plans in place to address the military call-ups, it could affect the timing of projects in the short-term as the work is shifted to other team members both inside and outside of Israel.

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. However, sinceafter its peakpeaking in 2024, the Federal Reserve loweredreduced the federal funds interesttarget range to 3.50% - 3.75% by December 2025. The effective federal funds rate toaveraged 4.48%3.64%, inconsistent Decemberwith 2024,the asFederal a result of itsReserve’s view that inflation is cooling.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.

We reported a loss from operations of $3.3 million for 2025 and income from operations of $16.9 million for 20242024. andWe areported lossnet from operationsincome of $24.3$39.6 million for 2023.2025 We reportedand a net loss of $54.2 million for 2024 and $66.2 million for 2023.2024.

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 revenuegross profit was $826.3$420.7 million in 2023,2025, comprised of $477.6$323.1 million attributable to Cloud and Edge and $348.7$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 profitmargin was $408.1 million49.8% in 2023,2025 comprisedand of52.7% $300.0in million2024. attributableIn to2025, our Cloud and Edge gross margin was 63.2% and $108.1 million attributable toour IP Optical Networks. OurNetworks gross margin was 52.7% in 2024 and 49.4% in 2023.29.3%. In 2024, our Cloud and Edge gross margin was 65.2% and our IP Optical Networks gross margin was 33.6%. In 2023, our Cloud and Edge gross margin was 62.8% and our IP Optical Networks gross margin was 31.0%. The higher revenue increase in 20242025 compared to 20232024 iswas dueprimarily todriven $27.6by a $6.3 million ofrise higherin Cloud and Edge sales, primarilylargely attributable to higher demand from U.S. service providers and Federal agencies,providers, partially offset by $20.0lower millionsales ofto lowerFederal customers. In addition, IP Optical Networks salesrevenue increased by $4.4 million, led by lowerstrong sales into Eastern Europe andin India, whichthough werethis growth was partially offset by growthdeclines in the U.S.Eastern ruralEuropean market.region.

InDuring Februarythe 2023,fourth our Boardquarter of Directors2025, the Company’s President and CEO approved a strategic restructuring program (the “2023"2026 Restructuring Plan”") that consists of workforce reductions in certain of the Company’s operating locations to streamlinecorrespond ourwith operationscurrent sales levels in order to support our investment in critical growththose 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 20232026 Restructuring Plan, we recorded restructuring and related expense for severance related costs of $2.0 million and $9.9$8.6 million in 2024 and 2023, respectively.2025. We anticipate that we will record nominal future expense forapproximately severance$5 million in connection2026 withrelated to the 20232026 Restructuring Plan.

In February 2022,2023, our Board of Directors approved a strategic restructuring program (the “20222023 Restructuring Plan”) to streamline our operations in order to support our investment in critical growth areas. The 20222023 Restructuring Plan includes, among other things, charges related to a consolidation of facilities and 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 20222023 Restructuring Plan, we recorded restructuring and related expense of $6.1 million in 2024 for variable and other facilities-related costs. In 2023, we recorded $6.3 million of expense for the 2022 Restructuring Plan, comprised of $5.3 million for variable and other facilities-related costs, and $1.0 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease. In 2022, we recorded $10.2 million of expense for the 2022 Restructuring Plan, comprised of $3.3 million for variable and other facilities-related costs, $1.6 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease, and $5.3 million for severance related costs of $0.2 million and related costs. We anticipate that we will expense $5$2.0 million in 2025 and 2024, respectively. We anticipate no future expense in 2026 related to the 20222023 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 and $1.6 million for accelerated rent amortization in the yearsyear ended December 31, 2023 and 2022, respectively.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.

The increasedecrease in our product revenue in 20242025 compared to 20232024 was primarily the result of $26$13 million of higherlower sales of our Cloud and Edge products, partially offset by $24 million of lower sales of ourwhile IP Optical products.sales remained flat. The increasedecrease in revenue from the sale of Cloud and Edge products was primarily attributable to lower sales intoto U.S.enterprise servicecustomers, providers,including U.S. Federal agencies and global enterprise customers. The decrease in revenue from the sale of IP Optical products was primarily attributable to lower sales in Eastern Europe and India.agencies.

Revenue from sales to enterprise customers was 39%34% and 32%39% of our product revenue in 20242025 and 2023,2024, respectively. These sales were made through both our direct sales team and indirect sales channel partners. The increasedecrease in enterprise sales reflects strongerlower sales of our products to customers in U.S. Federal agencies.

Revenue from indirect sales through our channel partner program was 38%31% and 35%38% of our product revenue in 20242025 and 2023,2024, respectively. The increasedecrease in channel sales in 20242025 reflects strongerfewer IP Optical Networks deployments through systems integrators as well as sell-thrusell-through service provider channel partners in Eastern Europe.

Total service revenue was $5$23 million higher in 20242025 compared to 20232024 due to increased revenue in both of our segments. Total service revenue increased by $4$19 million and $1$4 million in our Cloud and Edge and IP Optical Networks and Cloud and Edge segments, respectively.respectively due to increased demand from service providers.

Maintenance revenue was $5$4 million lower in 20242025 compared to 20232024 primarily due to modestly lower renewal rates from decommissioning someof older legacy equipment with several Cloud and Edge customers.

Professional services revenue was $10$27 million higher in 20242025 compared to 2023,2024, with increases of $8$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 with Verizon and U.S. Federal agencies.projects. Our IP Optical Networks segment experienced growth in sales of services primarily in the North AmericaEMEA and APAC regions.India.

Revenue earned from customers domiciled outside the United States was 53%52% and 58%53% of total revenue in 20242025 and 2023,2024, respectively. U.S. revenue isgrew slightly year over year, increasing dueapproximately to$7 highermillion sales into the U.S. market from bothacross 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, 20242025 and 20232024 was disaggregated geographically as follows (in thousands):

We expect that our total revenue in 20252026 willto increase compared to our2025, revenuedriven in 2024 due to theby growth in the Cloud &and Edge segment, particularly with thefrom increased purchases fromby Verizonservice providers as part of a voice modernization project,projects asand wellby asenterprise growthcustomers. inIn our IP Optical segment sales. From a regional perspective,segment, we anticipate continued IP Optical revenue growth in 20252026 from North America, and EMEA,partially offset by lower revenuemoderation in Eastern Europe due to additional trade restrictions. In the Cloud & Edge segment, we expect continued revenue growth from enterprise customers, as well as higher U.S. service provider spending.APAC.

Our gross margin was 3.32.9 percentage points higherlower in 20242025 compared to 2023.2024. This increasedecrease was the result of higherlower margins in both of our segments.segments, particularly due to higher professional services revenue related to voice Network Transformation programs. The higherlower margin in our IP Optical segment was due to favorable regional mix, partially offset by lower sales volume and higher royalties.mix. The higherlower margin in our Cloud and Edge segment was primarily attributable to favorable product mix and lowera costs associated with an increasedecrease in software sales.

The decrease in our research and development expenses in 20242025 compared to 20232024 was primarily attributable to approximately $9$2 million of lower expenses in our IP Optical Networks segment and approximately $2$1 million of lowerhigher expenses in our Cloud and Edge segment. The reduced expenses are a combination of lower employee headcountexpenses andoffset outsideby subcontractorshigher resultingnon-US fromcosts thedue costto savingsa implementedweakening in the 2023 Restructuring Plan.dollar.

Some aspects of our R&D efforts require significant short-term expenditures, the timing of which may cause significant variability in our expenses. We believe that rapid technological innovation is critical to our long-term success, and we are tailoring our investments to meet the requirements of our customers and market. We believe that our R&D expenses will increase modestly in 2025 primarily due to higher employee and consulting costs related to modifying certain legacy products and certain of our cloud native solutions.

We believe that our general and administrativeR&D expenses will increase modestly in 2025 will decrease compared to our 2024 levels,2026 primarily due to lower litigation expenses, partially offset by higher employee and consulting costs related to annualsupporting meritcertain increases.legacy products and development of our cloud native solutions.

Acquisition-, Disposal- and Integration-Related. Acquisition-, disposal- and integration-related expenses include those expenses related to acquisitions and disposals that we would otherwise not have incurred. Acquisition- and disposal-related expenses include professional and services fees, such as legal, audit, consulting, paying agent and other fees. Integration-related expenses represent incremental costs related to combining our systems and processes with those of acquired businesses, such as third-party consulting and other third-party services.

We recorded 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 in 2024,million, comprised of $4.1 ofmillion for severance and related costs, and $6.1 million for variable and other facilities-related costs. In 2023, we recorded restructuring and related expense of $16.2 million, comprised of $9.9 million for severance and related costs, and $6.3 million for variable and other facilities-related costs, including $1.0 million of net expense for the accelerated amortization of lease assets. Although we have eliminated positions as part of our restructuring initiatives, we continue to hire in certain areas that we believe are important to our future growth.

We had nominalan increase in interest income in both2025 2024due 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 2023.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) income(“AOCI”) from the sales of our interest rate swap. Interest expense in 20242025 was higher than 20232024 primarily due to higher margins under our 2024 Term Loan as compared to our 2020 Term Loan, and higher interest in 20242025 due to our interest rate swap no longer being in place, partially offset by write-offs related to the refinancing of the 2020 Credit Facility with a portion of the proceeds from the 2024 Credit Facility on June 21, 2024. The write-offs related to the refinancing consisted of the remaining unamortized gains in accumulated other comprehensive (loss) incomeAOCI from the sales of our interest rate swap totaling $4.9 million, partially offset by the write-off of debt issuance costs from the 2020 Credit Facility totaling $2.0 million. Our interest expense in 2023 benefited from our interest rate swap that fixed the variable rate component of our interest rate at 0.904% and was sold in March 2023. See Note 1514 to our consolidated financial statements for a discussion of the sale of our interest rate swap.

Other Income (Expense) Income,, 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, the $6.3 million write-off of an expired tax indemnity asset associated with the ECI Acquisition, and foreign currency exchange losses of $5.7 million. We recorded other expense, net, aggregating $3.8 million in 2023, primarily comprised of $5.3 million fair value adjustments for our Preferred Stock and Warrants, including dividends on the Preferred Stock, and $3.5 million of costs incurred in the Private Placement, partially offset by the gain of $7.3 million recognized from Accumulated other comprehensive income in connection with the sale of our interest rate swap.

During 20242025 and 2023,2024, 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 2024,2025, 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 $18.6$21.5 million.million, which 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.

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 threesix months ended MarchJune 31,30, 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.

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. On March 4, 2026, the U.S. Court of International Trade ordered the U.S. Customs and Border Protection (“CBP”) to process refunds of the IEEPA tariffs, although the Court immediately suspended the order while the CBP determines a refund process. The IEEPA tariffs remain subject to ongoing litigation between the administration and other parties. In response to the U.S. Supreme Court ruling mentioned above, the administration announced plans to implement new tariffs under alternative statutory authority.authority and recently announced its intention not to renew the existing U.S.-Mexico-Canada Agreement (“USMCA”) on which we rely for the importation of many of our products from our contract manufacturer in Mexico. The full impact of the U.S. Supreme Court’s ruling and the administration’s response, including the timing and extent of any refunds and the impact of the new tariffs,tariffs or the proposed termination of the USMCA, remain uncertain. While the announced tariffs enacted in 2025 and in the first quarter of 2026 have not had a material impact on our business to date, new or proposed tariffs, including exemptions under existing trade agreements or otherwise, could result in additional expenses for products we import into the United States. In addition, the economic uncertainty caused by the tariffs may result in customers delaying planned purchases of products and services.

The U.S.United States and other European countries have imposed sanctions and trade restrictions against Russia in connection with the war in Ukraine. These sanctions and restrictions currently prohibit our ability to sell hardware products in Russia or provide any replacement parts in Russia. The sanctions continue to evolve and further changes in the current sanctions or trade restrictions could further limit our ability to sell products and services to customers in Russia, our ability to collect on outstanding accounts receivable from such customers, and our ability to repatriate funds. If we are further limited in our ability to sell products and services to Russia and other countries for an extended period, it could have a material impact on our financial results.

We reported a loss from operations of $31.7$12.2 million and $19.6income from operations of $4.2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. We reported a loss from operations of $43.9 million and $15.4 million for the six months ended June 30, 2026 and 2025, respectively.

Our revenue was $162.6$192.3 million and $181.3$220.6 million in the three months ended MarchJune 31,30, 2026 and 2025, respectively. Our gross profit and gross margin were $69.7$90.3 million and 42.9%,47.0%, respectively, in the three months ended MarchJune 31,30, 2026, and $82.4$109.3 million and 45.4%,49.6%, respectively, in the three months ended MarchJune 31,30, 2025. The lower revenue in the three months ended MarchJune 31,30, 2026 compared to 2025 is due to $10.6$26.5 million oflower Cloud and Edge revenue and $1.7 million lower IP Optical Networks sales plus $8.1 million of lower Cloud and Edge revenue. The IP Optical Networks revenue was lower primarily due to $8.3$1.1 million of lower product sales, and lower professional services sales and maintenance revenue of $2.3$0.6 million. The lower Cloud and Edge revenue was attributable to $5.6$18.4 million of lower product sales and $2.5$8.1 million of lower professional services sales and maintenance revenue. Our revenue was $354.9 million and $401.9 million in the six months ended June 30, 2026 and 2025, respectively. Our gross profit and gross margin were $160.0 million and 45.1%, respectively, in the six months ended June 30, 2026, and $191.7 million and 47.7%, respectively, in the six months ended June 30, 2025. The lower revenue in the six months ended June 30, 2026 compared to 2025 is due to $34.6 million of lower Cloud and Edge revenue, and $12.3 million of IP Optical Networks revenue. The lower Cloud and Edge revenue was attributable to $24.0 million of lower product sales and $10.6 million of lower professional services and maintenance revenue. The lower IP Optical Networks revenue was due to $9.4 million of lower product sales plus $2.9 million of lower maintenance and professional services revenue.

Revenue from our IP Optical Networks segment was $63.1$81.8 million and $73.7$83.5 million in the three months ended MarchJune 31,30, 2026 and 2025, respectively. Gross profit and gross margin for this segment were $13.6$24.6 million and 21.5%,30.1%, respectively, in the three months ended MarchJune 31,30, 2026, and $16.2$25.6 million and 22.0%,30.6%, respectively, in the three months ended MarchJune 31,30, 2025. Revenue from our IP Optical Networks segment was $144.9 million and $157.2 million in the six months ended June 30, 2026 and 2025, respectively. Gross profit and gross margin for this segment were $38.1 million and 26.3%, respectively, in the six months ended June 30, 2026, and $41.8 million and 26.6%, respectively, in the six months ended June 30, 2025.

We recorded stock-based compensation expense of $6.0$4.8 million and $4.3$4.5 million in the three months ended MarchJune 31,30, 2026 and 2025, respectively and $10.8 million and $8.8 million in the six months ended June 30, 2026 and 2025, respectively. These amounts are included as components of both Cost of revenue and Operating expenses in our condensed consolidated statements of operations.

See "Results of Operations" in this MD&A for a discussion of the changes in our revenue and expenses for three and six months ended MarchJune 31,30, 2026 compared to three and six months ended MarchJune 31,30, 2025.

During the fourth quarter of 2025, our President and CEO approved a strategic restructuring program (the "2026 Restructuring Plan") that consists of workforce reductions in certain of the Company’s operating locations to correspond with current sales levels in those areas. Any potential positions eliminated in countries outside the United States are subject to local law and consultation requirements. In connection with the 2026 Restructuring Plan, we recorded restructuring and related expense of $1.3$3.8 million and $5.1 million in the three and six months ended MarchJune 31,30, 2026.2026, respectively. We anticipate that we will record additional expense of approximately $4$5 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, we recordeddid nominalnot incur any restructuring and related expense in the three months ended MarchJune 31,30, 20262026, but did incur nominal expense in the six months ended June 30, 2026. We recorded restructuring and $2.4related expense of $0.2 million and $2.6 million in the three and six months ended MarchJune 31,30, 2025, respectively. We anticipate that we will record nominal additional expense in 20252026 for workforce reductions in connection with 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 $0.7$0.6 million and $3.1$1.2 million in the three months ended MarchJune 31,30, 2026 and 2025, respectively and $1.3 million and $4.3 million in the six months ended June 30, 2026 and 2025, respectively, for variable and other facilities-related costs. We anticipate that we will record approximately $2$1 million of expense in the remainder of 2026 related to the 2022 Restructuring Plan.

For facilities that are part of a restructuring plan, for which we have no intent or ability to enter into a sublease, we recognize accelerated rent amortization over the period from the date that we commence the plan to fully or partially vacate a facility through the final vacate date. We did not record accelerated rent amortization in the three and six months ended MarchJune 31,30, 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.

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 MarchJune 31,30, 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.

Three and six months ended MarchJune 31,30, 2026 and 2025

Revenue. Revenue for the three and six months ended MarchJune 31,30, 2026 and 2025 was as follows (in thousands, except percentages):

Segment revenue for the three and six months ended MarchJune 31,30, 2026 and 2025 was as follows (in thousands):

The decrease in our product revenue in the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 was the result of $5.6$18.4 million of lower sales of our Cloud and Edge products and $8.3$1.1 million of lower sales of IP Optical Networks products. The decrease in our product revenue in the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was the result of $24.0 million of lower sales of our Cloud and Edge products plus a $9.4 million decrease in sales of IP Optical Networks products. The decrease in revenue from the sale of Cloud and Edge products was primarily attributable to sales to a Tier 1 and other service providers,provider and U.S. Federal agencies and global enterprise customers due to lower customer demand and delayed purchasing. TheThese decreasewere inpartially revenueoffset fromby thehigher salesales ofto global enterprise customers. IP Optical productsNetworks was primarily attributable to lower salesrevenue in Asia,the Europethree months ended June 30, 2026 remained consistent with the previous year, growing modestly after accounting for the completion of a long-term support and themaintenance Americas.contract.

Revenue from sales to enterprise customers was 32%33% and 28%29% of our producttotal revenue in the three months ended MarchJune 31,30, 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 MarchJune 31,30, 2026 primarily reflects higher sales of our products to IP Optical Networks enterprise customers. Revenue from sales to enterprise customers was 31% and 28% of our total revenue in the six months ended June 30, 2026 and 2025, respectively. The increase in enterprise sales primarily reflects higher Cloud and Edge revenue to the banking, financial and insurance industries, and other enterprise customers.

Revenue from indirect sales through our channel partner program was 28%34% of our product revenue in each of the three months ended June 30, 2026 and 2025, and 32% and 31% of our product revenue in the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Channel sales remained unchangedincreased in the threesix months ended MarchJune 31,30, 2026 reflecting constanthigher sales of products to enterprise customers.

Service revenue for the three and six months ended MarchJune 31,30, 2026 and 2025 was comprised of the following (in thousands, except percentages):

Segment service revenue for the three and six months ended MarchJune 31,30, 2026 and 2025 was comprised of the following (in thousands):

Total service revenue was lower by $4.8$8.7 million and $13.5 million in the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 due to lower maintenance revenue and lower professional services revenue.

Maintenance revenue decreased $2.8$2.3 million and $5.0 million in the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 due to lower revenue in our IP Optical Networks segment and relatively flat revenue in our Cloud and Edge segment. The decrease in our IP Optical Networks maintenance revenue is due to the completion of a legacy access maintenance contract with a European customer that completed in the fourth quarter of 2025.

Professional services revenue decreased $2.0$6.5 million and $8.5 million in the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 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 six months ended MarchJune 31,30, 2026 and 2025:

Revenue earned from customers domiciled outside the United States was 55%54% and 54%47% in the three months ended MarchJune 31,30, 2026 and 2025, respectively, and 54% and 51% in the six months ended June 30, 2026 and 2025, respectively. Due to the timing of project completions, we expect that the domestic and international components as a percentage of our revenue may fluctuate from quarter to quarter and year to year.

Our deferred product revenue was $8 million and $7 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. Our deferred service revenue was $147$145 million and $149 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. Our deferred revenue balance may fluctuate as a result of the timing of revenue recognition, customer payments, maintenance contract renewals, contractual billing rights and maintenance revenue deferrals included in multiple element arrangements.

We expect total revenue in 2026 to bedecline relativelyslightly consistentcompared withto 2025 in both segments.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 six months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands, except percentages):

Our segment cost of revenue, gross profit and gross margin for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands, except percentages):

Our overall gross margin decreased by 2.52.6 percentage points forin each of the three and six months ended MarchJune 31,30, 2026,2026 as compared to the three and six months ended MarchJune 31,30, 2025.

Gross margin for our Cloud and Edge segment was lower in the three months ended MarchJune 31,30, 2026 as compared to the priorthree yearmonths ended June 30, 2025 by 510160 basis points and was attributable to lower product and Professionalprofessional services sales, as well as the effect of lower fixed cost absorption and unfavorable mix. Gross margin for our Cloud and Edge segment was lower in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 by 320 basis points and was attributable to lower product and professional services sales, as well as the effect of lower fixed cost absorption and unfavorable mix. We expect Cloud and Edge gross margin to rebound as the deployment of services associated with a voice modernization project with one of our U.S. service providers returns to higher activity levels in the upcoming quarters. Gross margin for IP Optical Network remained relatively flat in the three and six months ended MarchJune 31,30, 2026 as compared to the three and six months ended MarchJune 31,30, 2025.

We expect gross margin in 2026 to be relativelyslightly flatlower compared to 2025 across both segments.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 six months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands, except percentages):

The slight increase in our R&D expenses in the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 was primarily attributable to our Cloud and Edge segment. The increase in R&D expenses was primarily driven by higher employee-related costs, including the impact of increased non‑U.S. expenses associated with a weakening dollar.

We expect salesthat andour marketingR&D expenses will remain relativelymoderately flat in 2026 as compared to 2025, withprimarily due to higher employee-related variablecompensation, compensationincluding expenses,the partiallyimpact drivenof byincreased non-U.S. expenses associated with a weakening dollar, offset by continued cost efficiencies.

GeneralSales and AdministrativeMarketing Expenses. GeneralSales and administrativemarketing expenses consist primarily of salaries and related personnel costscosts, forcommissions, executivetravel and administrativeentertainment personnel,expenses, promotions, customer trial and audit,evaluations legalinventory and other professional fees. Generalmarketing and administrativesales support expenses. Sales and marketing expenses for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands, except percentages):

The increase in generalSales and administrativemarketing expenses in the three and six months ended MarchJune 31,30, 2026 were relatively flat as compared to the three and six months ended MarchJune 31,30, 2025 was primarily attributable to higher stock compensation expense.2025.

We expect that our generalsales and administrativemarketing expenses will increaseremain modestlymoderately flat in 2026 as compared to 2025, primarily due to higher employee-related variablecompensation, compensationincluding the impact of increased non-U.S. expenses associated with stock-baseda compensationweakening expenses, partiallydollar, offset by continued cost efficiencies.

Amortization of Acquired Intangible Assets included in Operating expenses. Amortization of acquired intangible assets included in Operating expenses ("Opex Amortization") for the three and six months ended MarchJune 31,30, 2026 and 2025 was as follows (in thousands, except percentages):

Opex Amortization was lower for the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 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.

We recorded restructuring and related expense of $2.0$4.4 million and $5.3$1.3 million in the three months ended MarchJune 31,30, 2026 and 2025, respectively and $6.5 million and $6.7 million in the six months ended June 30, 2026 and 2025, respectively. Although we have eliminated positions as part of our restructuring initiatives, we continue to hire in certain areas that we believe are important to our future growth.

Interest Expense, Net. Interest expense and interest income for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows (in thousands, except percentages):

Interest income increased slightly in 2026 as compared to 2025. Our interest expense in thethree threeand six months ended MarchJune 31,30, 2026 and 2025 primarily represents term debt interest, amortization of debt issuance costs and original issue discount and interest associated with factoring arrangements. Interest expense in the three and six months ended MarchJune 31,30, 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.

Income Taxes. We recorded an income tax benefitprovisions of $6.4$1.7 million and $0.8$2.2 million in the three months ended MarchJune 31,30, 2026 and 2025, respectively and a $4.7 million income tax benefit and a $1.4 million income tax provision in the six months ended June 30, 2026 and 2025, respectively. These amounts reflect our estimates of the effective rates expected to be applicable for the respective full fiscal years, adjusted for any discrete events, which are recorded in the period that they occur. 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 threesix months ended MarchJune 31,30, 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 threesix months ended MarchJune 31,30, 2026.

We had cash, cash equivalents, and restricted cash aggregating $70$45 million and $98 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. We had cash held by our non-U.S. subsidiaries aggregating $46$35 million and $50 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. If we elect to repatriate all of the funds held by our non-U.S. subsidiaries as of MarchJune 31,30, 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.

AtAs Marchof 31,June 30, 2026, we had an outstanding balance under the current2024 creditCredit facilityFacility of $339.9$337.8 million at an average interest rate of 9.9%, withavailable noborrowing revolvercapacity balanceunder the revolving credit facility of $35 million, and no letters of credit outstanding. We were in compliance with all covenants of the current2024 creditCredit facilityFacility at both MarchJune 31,30, 2026 and December 31, 2025.