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What changed in Ribbon Communications Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ribbon Communications Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+469 added−474 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-31)

Top changes in Ribbon Communications Inc.'s 2023 10-K

469 paragraphs added · 474 removed · 318 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

82 edited+24 added−29 removed75 unchanged
Biggest changeWe believe new mobile applications will emerge, such as Reality/Virtual Reality ("R/VR"), cloud gaming, telehealth, Internet of Things ("IoT"), and Industry 4.0, all made possible by the massive bandwidth increases, low latency and highly secure infrastructure that 5G provides. 4 The investment is not limited to the mobile infrastructure itself; enhancements are needed at the data transport and management layers of the network as well, driving fiber and IP Networking to the very edges of the network.
Biggest changeThe increased bandwidth unlocked by the higher capacity radio infrastructure enables new use cases such as Fixed Wireless Access, displacing lower capacity wired internet access solutions, and we believe new mobile applications will emerge, such as Reality/Virtual Reality, cloud gaming, 4 telehealth, Internet of Things, and Industry 4.0, all made possible by the massive bandwidth increases, low latency and highly secure infrastructure that 5G provides.
We also utilize agility and safety stock processes to help meet higher-than-forecasted customer demand to stock raw material and sub-assembly inventory. We occasionally experience unforeseen demand drops of certain products or sub-assemblies due to technology evolution, customer consumption behavior, or shortened product lifecycle. For example, we encountered supply chain disruptions in 2021 due to component demand and logistics complications.
We also utilize agility and safety stock processes to help meet higher-than-forecasted customer demand to stock raw material and sub-assembly inventory. Occasionally, we experience unforeseen demand drops of certain products or sub-assemblies due to technology evolution, customer consumption behavior, or shortened product lifecycle. For example, we encountered supply chain disruptions in 2021 due to component demand and logistics complications.
The solutions provided with this portfolio include those for: • Securing and providing resilient connectivity and calling via direct routing for Operator Connect - Microsoft Teams, Zoom and other cloud-based UC&C applications. • Securing contact center applications. • Securing service provider hosted and managed unified communications ("UC") services. • Securing network interconnects for communications services. • Network transformation of fixed service provider voice services networks to help evolve, consolidate, and modernize legacy networks to VoIP and onto virtualized network environments or the Telco Cloud. • Implementing IP Multimedia Subsystem ("IMS") networks required by mobile service providers for VoLTE service deployments and for 5G voice services. • Modernizing, evolving, and securing enterprise and industry vertical UC environments, supporting both on-premises and cloud-based deployments. • Securing voice sessions and protecting VoIP communications connectivity infrastructures, contact centers, Private Branch Exchanges ("PBX") and media servers. • Providing identity assurance that helps mitigate robocalls, prevent fraud by determining phone caller identity, intent, and reputation. • Analytics to provide visibility, security, and service assurance to enhance communication network operations and customer experiences.
The solutions provided with this portfolio include those for: • Securing and providing resilient connectivity and calling via direct routing for Operator Connect - Microsoft Teams, Zoom and other cloud-based UC&C applications. • Securing contact center applications. • Securing service provider hosted and managed unified communications ("UC") services. • Securing network interconnects for communications services. • Network transformation of fixed service provider voice services networks to help evolve, consolidate, and modernize legacy networks to VoIP and onto virtualized network environments or the Telco Cloud. • Implementing IP Multimedia Subsystem ("IMS") networks required by mobile service providers for VoLTE service deployments and for 5G voice services. • Modernizing, evolving, and securing enterprise and industry vertical UC environments, supporting both on-premises and cloud-based deployments. • Securing voice sessions and protecting VoIP communications connectivity infrastructures, contact centers, Private Branch Exchanges and media servers. • Providing identity assurance that helps mitigate robocalls, prevent fraud by determining phone caller identity, intent, and reputation. • Analytics to provide visibility, security, and service assurance to enhance communication network operations and customer experiences.
Our Cloud and Edge market-leading product portfolio consists of two main categories – Session Border Controller ("SBC") products and Network Transformation products: Our SBC product portfolio encompasses a full range of deployment platforms including: • High performance carrier-grade compute platforms leveraging the latest advancements in silicon including NVIDIA GPU processors. • Feature-rich virtualized and cloud-native software products for deployment in both private and public cloud environments such as Amazon Web Services ("AWS"), Microsoft Azure and Google Cloud Platform ("GCP"). • Fully cloud-native implementation supporting as-a-Service ("aaS") offers and business models. • On-premises dedicated appliances that scale up and down to meet the most demanding performance and security requirements.
Our Cloud and Edge market-leading product portfolio consists of two main categories – Session Border Controller ("SBC") products and Network Transformation products: Our SBC product portfolio encompasses a full range of deployment platforms including: • High performance carrier-grade compute platforms leveraging the latest advancements in silicon including NVIDIA GPU processors. • Feature-rich virtualized and cloud-native software products for deployment in both private and public cloud environments such as Amazon Web Services ("AWS"), Microsoft Azure and Google Cloud Platform. • Fully cloud-native implementation supporting as-a-Service ("aaS") offers and business models. • On-premises dedicated appliances that scale up and down to meet the most demanding performance and security requirements.
These capabilities and unique form factors such as DIN-rail mounting, street cabinet deployment and environmental capabilities also make Neptune a compelling solution for mission critical enterprises. 10 • The Muse SDN multi-layer Domain Orchestrator and cognitive software is a suite of cloud-native applications that deliver SDN domain orchestration for underlying multi-layer Neptune IP and Apollo Optical networks.
These capabilities and unique form factors such as DIN-rail mounting, street cabinet deployment and environmental capabilities also make Neptune a compelling solution for mission critical enterprises. • The Muse SDN multi-layer Domain Orchestrator and cognitive software is a suite of cloud-native applications that deliver SDN domain orchestration for underlying multi-layer Neptune IP and Apollo Optical networks.
Mergers between service providers may also increase competition for a smaller number of more concentrated customers and channels for products and solutions. 9 IP Optical Networks Business Segment The global information society is generating a very high volume of telecommunications traffic for business, entertainment, education, surveillance, industrial control, and other applications.
Mergers between service providers may also increase competition for a smaller number of more concentrated customers and channels for products and solutions. IP Optical Networks Business Segment The global information society is generating a very high volume of telecommunications traffic for business, entertainment, education, surveillance, industrial control, and other applications.
This covers complete lifecycle management and automation to speed up time to revenue, reduce Total Cost of Ownership, and facilitate integration into wider ecosystems. It is powered by a carrier-grade, cloud-native Platform as a Service ("PaaS") and works in conjunction with our LightSOFT TM network management system.
This covers complete lifecycle management and automation to speed up time to revenue, reduce total cost of ownership, and facilitate integration into wider ecosystems. It is powered by a carrier-grade, cloud-native Platform as a Service and works in conjunction with our LightSOFT TM network management system.
In addition, our operations are also subject to a number of environmental regulations such as the Waste Electrical and Electronic Equipment Directive ("WEEE") and the Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment ("RoHS"). We have developed policies and 13 procedures to assist us in complying with these laws and regulations.
In addition, our operations are also subject to a number of environmental regulations such as the Waste Electrical and Electronic Equipment Directive ("WEEE") and the Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment ("RoHS"). We have developed policies and procedures to assist us in complying with these laws and regulations.
Our marketing organization is responsible for building awareness of our brand in the markets served and driving engagement with our strategies, solutions, and products. It promotes our brand and portfolio value propositions to key stakeholders, 11 including our customers, channel partners, and prospects globally.
Our marketing organization is responsible for building awareness of our brand in the markets served and driving engagement with our strategies, solutions, and products. It promotes our brand and portfolio value propositions to key stakeholders, including our customers, channel partners, and prospects globally.
In addition, since 2010, we have provided a day 15 of paid time off for all employees to participate in our Global Day of Service, during which employees and their families are encouraged to volunteer and contribute to local charitable organizations in their communities.
In addition, since 2010, we have provided a day of paid time off for all employees to participate in our Global Day of Service, during which employees and their families are encouraged to volunteer and contribute to local charitable organizations in their communities.
To support our customers' requirements, our direct sales team is organized geographically and by major customers. Our sales teams sell our full portfolio of products and solutions from both segments to customers in each salesperson's assigned region.
To support our customers' requirements, our direct sales team is organized geographically and by major customers. Our sales teams sell our full portfolio of products and solutions from both segments to customers in each salesperson's assigned 11 region.
Internally we launched the "Ribbon 3.0" program, reflecting the continued transformation of the Company and a drive towards best-in-class operational efficiencies and execution. • Cross-Selling and Tier One Service Provider Growth - We are laser-focused on marketing and selling our combined post-acquisition broad portfolio to our global deployed base of service provider and enterprise customers to expand our presence and share of the larger IP and Optical networking and transport market and cross-sell our complete portfolio.
Internally we launched the "Ribbon 3.0" program, reflecting our continued transformation and drive towards best-in-class operational efficiencies and execution. • Cross-Selling and Tier One Service Provider Growth - We are laser-focused on marketing and selling our combined post-acquisition broad portfolio to our global deployed base of service provider and enterprise customers to expand our presence and share of the larger IP and Optical networking and transport market and cross-sell our complete portfolio.
Information contained 16 on, or that can be accessed through, our website does not constitute a part of this annual report and is not incorporated by reference herein.
Information contained on, or that can be accessed through, our website does not constitute a part of this annual report and is not incorporated by reference herein.
In addition, Neptune provides a 400G ZR+ pluggable capability, allowing it to support both single layer IP over DWDM ("IPoDWDM") connectivity or multi-layer optimized IPoOTN/DWDM connectivity, whichever best meets the network operator's needs. With these capabilities, Neptune is ideally suited for residential broadband backhaul, business services, MSOs and private enterprise networks.
In addition, Neptune provides a 400G ZR+ 10 pluggable capability, allowing it to support both single layer IP over DWDM connectivity or multi-layer optimized IPoOTN/DWDM connectivity, whichever best meets the network operator's needs. With these capabilities, Neptune is ideally suited for residential broadband backhaul, business services, MSOs and private enterprise networks.
Whether working or learning from home, streaming 4K television, or playing the latest online video games, rural subscribers demand dependable, high-speed Internet access to participate and thrive in the digital world. Forward-looking service providers are taking advantage of government funding programs to expand network capacity and transform the communities they serve.
Whether working or learning from home, streaming 4K television, or playing the latest online video games, rural subscribers require dependable, high-speed Internet access to participate and thrive in the digital world. Forward-looking service providers are taking advantage of government funding programs to expand network capacity and transform the communities they serve.
Traffic from the access networks is aggregated and connected to the services, applications, and compute platforms, meeting the specific service level agreements required for each service, including guaranteed latency, jitter, capacity, or reliability. To achieve this, Neptune uses a range of protocols such as IP/MPLS, MPLS-TP ("Transport Profile") and segment routing traffic engineered ("SR-TE").
Traffic from the access networks is aggregated and connected to the services, applications, and compute platforms, meeting the specific service level agreements required for each service, including guaranteed latency, jitter, capacity, or reliability. To achieve this, Neptune uses a range of protocols such as IP/MPLS, MPLS-TP and segment routing traffic engineered ("SR-TE").
Our transformative acquisition of ECI in 2020 dramatically expanded our addressable market beyond secure voice communications into IP Networking, Optical Transport, and Software-Defined Networking ("SDN") Management and Automation. We are implementing a focused strategy to target our broad global base of Service Provider and Enterprise customers to establish Ribbon as key supplier of networking solutions.
Our transformative acquisition of ECI in 2020 dramatically expanded our addressable market beyond secure voice communications into IP Networking, Optical Transport, and Software-Defined Networking ("SDN") Management and Automation. We are implementing a focused strategy to target our broad global base of service provider and enterprise customers to establish us as key supplier of networking solutions.
Verizon is a service provider that offers interconnect, fixed line and mobile communications services, and our software solutions are sold across their business divisions supporting their large enterprises, SMB and consumer telecommunications and cable-related offerings. Our top five customers represented approximately 34 % of our revenue in the year ended December 31, 2022.
Verizon is a service provider that offers interconnect, fixed line and mobile communications services, and our software solutions are sold across their business divisions supporting their large enterprises, SMB and consumer telecommunications and cable-related offerings. Our top five customers represented approximately 34% of our revenue in the year ended December 31, 2023.
Our mission is to create a recognized global technology leader providing cloud-centric solutions that enable the secure exchange of information, with unparalleled scale, performance and elasticity. We are headquartered in Plano, Texas, and have a global presence with research and development or sales and support locations in over thirty countries around the world.
Our mission is to create a recognized global technology leader providing cloud-centric solutions that enable the secure exchange of information, with unparalleled scale, performance and elasticity. We are headquartered in Plano, Texas, and have a global presence with research and development or sales and support locations in over 30 countries around the world.
We have a rich history of providing a broad offering of service-based solutions to complement our products and to help service providers and enterprises grow revenues, serve their customers, reduce costs, and improve productivity. Our Global Services organization provides a wide range of services to enable our customers to achieve those goals.
We have a rich history of providing service-based solutions to complement our products and to help service providers and enterprises grow revenues, serve their customers, reduce costs, and improve productivity. Our Global Services organization provides a wide range of services to enable our customers to achieve those goals.
Services and Support As communication networks continue to grow increasingly vital to society and business, and complexity grows with every new technology introduction cycle, service providers are increasingly challenged to control costs and find the expertise to install, maintain, and repair these platforms.
Services and Support As communication networks continue to grow increasingly vital to society and business, and complexity grows with every new technology introduction cycle, service providers are increasingly challenged to control costs and find the expertise to operate, maintain, and repair these platforms.
Our direct sales force and resellers are supported by a highly trained technical sales engineering staff who work closely with our customers to develop technical proposals and design systems to optimize system performance and economic benefits for our customers.
Our direct sales teams and resellers are supported by a highly trained technical sales engineering staff who work closely with our customers to develop technical proposals and design systems to optimize system performance and economic benefits for our customers.
These learning programs utilize a combination of in-person and online curriculum and include core modules, some of which are mandatory, relating to ethical conduct, products and services, cyber security, safety, human rights and anti-corruption, as well as additional tailored programs on topics such as leadership, management, excellence in service, project management and competency development.
These learning programs utilize a combination of in-person and online curriculum and include core modules, some of which are mandatory, relating to ethical conduct, products and services, cybersecurity, safety, human rights and anti-corruption, as well as additional tailored programs on topics such as leadership, management, excellence in service, project management and competency development.
Advanced planning algorithms design multi-layer IP Optical networks that maximize traffic handling with failure resiliency by looking holistically at all network layers, providing the best return on Capex. These multi-layer optimized networks can then meet specific customer and service needs on a case-by-case basis.
Advanced planning algorithms design multi-layer IP Optical networks that maximize traffic handling with failure resiliency by looking holistically at all network layers, providing the best return on capital expenditures. These multi-layer optimized networks can then meet specific customer and service needs on a case-by-case basis.
IP Optical Networks Products and Solutions Our IP Optical Networks portfolio delivers multiple solutions spanning access, metro, regional, and long-haul geographies, and using ring, mesh, and point-to-point topologies. IP Multiprotocol Label Switching ("MPLS") and other protocols provide a broad range of networking services for our customers.
IP Optical Networks Products and Solutions Our IP Optical Networks portfolio delivers multiple solutions spanning access, metro, regional, and long-haul geographies, and using ring, mesh, and point-to-point topologies. MPLS and other protocols provide a broad range of networking services for our customers.
The market is shifting from an ecosystem dominated by a few large telecommunications legacy hardware equipment companies with proprietary solutions such as Ciena Corporation ("Ciena"), Cisco, and Nokia, to a market that is characterized by a combination of closed and open solutions, software-defined networking, and dis-aggregation ready for next generation networks, services and applications including 5G, that leverage commercial technology.
The market is shifting from an ecosystem dominated by a few large telecommunications legacy hardware equipment companies with proprietary solutions such as Ciena Corporation ("Ciena"), Cisco, and Nokia, to a market that is characterized by a combination of closed and open solutions, software-defined networking, and dis-aggregation ready for next generation networks, services and applications including 5G, leveraging merchant silicon technology.
Our IP Optical Networks multi-layer product portfolio consists of: • The Apollo product line provides programmable and open Optical Transport Network ("OTN") capabilities over Dense Wavelength Division Multiplexing ("DWDM") support.
Our IP Optical Networks multi-layer product portfolio includes: • The Apollo product line provides programmable and open Optical Transport Network ("OTN") capabilities over Dense Wavelength Division Multiplexing ("DWDM") support.
Our customer-centric culture shapes all of our activities and inspires our team members to make a positive impact with our clients, investors, and communities. In the year ended December 31, 2022, Verizon Communications Inc. ("Verizon") accounted for approximately 15% of our revenue.
Our customer-centric culture shapes all of our activities and inspires our team members to make a positive impact with our clients, investors, and communities. In the year ended December 31, 2023, Verizon Communications Inc. ("Verizon") accounted for approximately 11% of our revenue.
We believe this shift creates opportunities for us to increase our share as compared to direct competitors such as Cisco, Juniper Networks, Inc., Huawei, Nokia, Ciena, Infinera Corporation, ADVA Optical Networking SE, and Fujitsu Limited. We believe a key differentiation from these competitors is our optimized and integrated multi-layer IP optical solutions.
We believe this shift creates opportunities for us to increase our share in the market as compared to direct competitors such as Cisco, Juniper Networks, Inc., Huawei, Nokia, Ciena, Infinera Corporation, Adtran Networks, and Fujitsu Limited. We believe a key differentiation from these competitors is our optimized and integrated multi-layer IP optical solutions.
Our solutions for optical and IP transport and networking include 5G-native solutions for mobile-backhaul, metro and edge aggregation, core networking, data center interconnect, legacy network transformation and transport solutions for wholesale carriers. High availability and security also make the solutions ideal for critical infrastructure delivering mission-critical services.
Our solutions for optical and IP transport and networking include 5G-native solutions for mobile-backhaul, metro and edge aggregation, core networking, data center interconnect, multi-service access, and transport solutions for wholesale carriers. High availability and security also make the solutions ideal for critical infrastructure delivering mission-critical services.
Neptune provides a converged multi-access edge by supporting multiple services delivered over multiple access network technologies. Ethernet interfaces ranging from Gigabit Ethernet ("GbE") through to 100GbE allow all IP/MPLS and Ethernet access networks to be supported, and pluggables providing XGS-PON, EPON and TDM circuit emulation allow PON access networks and legacy TDM access network to be supported.
Neptune supports multiple services delivered over multiple access network technologies. Ethernet interfaces ranging from Gigabit Ethernet ("GbE") through to 100GbE allow all IP/MPLS and Ethernet access networks to be supported, and pluggables providing XGS-PON, EPON and TDM circuit emulation allow PON access networks and legacy TDM access network to be supported.
Major technology trends supported by our solutions include the accelerated adoption of collaboration platforms such as Microsoft Teams and Zoom; the 5G revolution; accelerating customers' ability to transfer carbon-intensive data storage from using local physical environments to the cloud; supporting service providers’ increased network demands to allow more people to work from home; and using our analytics solutions to maximize network efficiencies.
Major technology trends supported by our solutions include the accelerated adoption of collaboration platforms such as Microsoft Teams and Zoom; the 5G revolution; accelerating customers' ability to transfer carbon-intensive data storage from using local physical environments to the cloud; supporting service providers’ increased network demands to allow more people to work from home; and using our analytics solutions to maximize network efficiencies. 15 We have taken a more strategic position to our environmental, social and governance ("ESG") practices.
As a result, service providers and enterprises are adding key enabling technologies to their networks for increased flexibility, programmability, scalability, reliability, and to enable new applications and services with an expedited time to market. These investments provide a competitive advantage and bring value-added services to increase network efficiency, increase customer satisfaction and produce new revenue streams.
As a result, service providers and enterprises must constantly seek out new technologies to refresh their networks to provide increased flexibility, programmability, scalability, and reliability, to enable these new applications and services with an expedited time to market. These investments provide a competitive advantage and bring value-added services to increase network efficiency, increase customer satisfaction and produce new revenue streams.
As an example, in the United States, the Infrastructure Investment and Jobs Act, the FCC Rural Digital Opportunity Fund ("RDOF"), the 5G Fund for Rural America, and the USDA Rural Development Broadband ReConnect Program expect to provide billions of dollars in funding to deliver broadband connectivity to rural communities in the U.S.
As an example, in the United States, the Broadband Equity, Access and Deployment (BEAD) Program, the FCC Rural Digital Opportunity Fund, the 5G Fund for Rural America, and the USDA Rural Development Broadband ReConnect Program expect to provide billions of dollars in funding to deliver broadband connectivity to rural communities in the U.S.
Professional and Project Management Services include hundreds of cloud communications, VoIP, IMS voice services and IP and Optical networking specialists and partners offering technical depth, network breadth and tools to assist customers in all aspects of network modernization, design, and deployment. Our Maintenance Support offerings deliver a comprehensive support strategy for all products, applications, and solutions purchased.
Our Professional Services team includes hundreds of cloud communications, VoIP, IMS, IP and Optical networking specialists offering technical depth, network breadth and proprietary tools to assist customers in all aspects of network modernization, design, operation and deployment. Our Maintenance Support offerings deliver a comprehensive support strategy for all of our products, applications, and solutions sold.
We create innovative solutions that address the exponential increases in bandwidth consumption with improving operational efficiency. Our unique value-add is demonstrated by advanced well-integrated optical and packet solutions managed by state-of-the-art cross platform SDN management system. We are also investing in open and optimized IP and Optical solutions as well as disaggregated networking solutions for our customers.
We create innovative solutions that address the exponential increases in bandwidth consumption with improving operational efficiency. Our unique value-add is demonstrated by advanced well-integrated optical and packet solutions managed by state-of-the-art cross platform SDN management system.
We have taken a more strategic position to our environmental, social and governance ("ESG") practices. Our ESG materiality study reviewed the expectations and requirements of both our stakeholders and our competitors to focus on the ESG practices that are most critical to our business and those where we believe we can make the largest positive impact.
Our ESG materiality study reviewed the expectations and requirements of both our stakeholders and our competitors to focus on the ESG practices that are most critical to our business and those where we believe we can make the largest positive impact.
As of December 31, 2022, we had a total of 3,394 employees worldwide, located geographically as follows: Number of employees Percentage of total Asia 1,276 38 % North America 943 28 % EMEA 1,056 31 % LATAM 119 3 % Approximately 726 employees are covered by collective bargaining agreements or works councils and we believe that our relations with the labor unions are generally good.
As of December 31, 2023, we had a total of 3,107 employees worldwide, located geographically as follows: Number of employees Percentage of total Asia 1,173 38 % North America 863 28 % EMEA 971 31 % LATAM 100 3 % Approximately 657 employees are covered by collective bargaining agreements or works councils and we believe that our relations with the labor unions are generally good.
Within these broad industry themes, investment in our products and services is driven by several key industry trends and strategy priorities. Deployment of 5G Mobile Technology We believe one of the most significant investments underway by mobile carriers across the world is the deployment of 5G broadband cellular technology.
Within this broad industry context, investment in our products and services is driven by several key industry trends and strategic priorities. Deployment of 5G Mobile Technology One of the most significant investments being made by mobile carriers across the world is the deployment of 5G broadband cellular technology.
We believe this transition is instrumental in continuing to improve our profitability and competitiveness, and in growing the recurring revenue portion of our business. • Enterprise Offerings - The market need and growth rate are higher at the network edge than at the core.
We believe this transition is instrumental in continuing to improve our profitability and competitiveness, and in growing the recurring revenue portion of our business. • Enterprise Offerings - The market need and growth rate are higher at the network edge than at the core. Our solution portfolio includes secure Unified Communications software-centric applications and IP and Optical network connectivity solutions.
Key elements of the strategy include: • Operational Integration – In order to provide laser focus on the unique aspects of our portfolio, a business unit model was initially adopted along with regional sales teams and an integrated corporate organization. This has served us well over the last three years.
Key elements of the strategy include: • Operational Integration – In order to provide laser focus on the unique aspects of our portfolio, we initially adopted a business unit model following the acquisition of ECI, along with regional sales teams and an integrated corporate organization.
They are migrating their networks and services software to run on private and/or public clouds (referred to as the "Telco Cloud") using cloud-native technologies, architectures and operational processes with automation and concepts such as Continuous Integration and Continuous Delivery ("CI/CD").
They are migrating services to new software platforms that can be deployed in both private and/or public cloud environments (referred to as the "Telco Cloud") using cloud-native technologies, architectures and operational processes with automation and concepts such as Continuous Integration and Continuous Delivery ("CI/CD").
While 5G, and next generation WiFi, are the technologies of choice for the wireless network, there is also a surge of investment targeted at addressing the bottle neck of the broadband access network with higher capacity fiber connections.
This exponential growth in data traffic is expected to continue and even accelerate, straining existing broadband and mobile networks. While 5G, and next generation WiFi, are the technologies of choice for the wireless network, there is also a surge of investment targeted at addressing the bottle neck of the broadband access network with higher capacity fiber connections.
Mergers among any of the above companies or other competitors, as well as additional competitors with significant financial resources entering our markets, could further intensify competition.
Other smaller private and public companies are also focusing on similar market opportunities. Mergers among any of the above companies or other competitors, as well as additional competitors with significant financial resources entering our markets, 9 could further intensify competition.
As of December 31, 2022, we had 34 trademarks registered in the U.S. and 118 trademarks registered in foreign jurisdictions.
As of December 31, 2023, we had 30 trademarks registered or pending in the U.S. and 120 trademarks registered or pending in foreign jurisdictions.
We believe 5G is a multi-year opportunity as global service providers roll out the new capital-intensive technology and build out the needed network infrastructure over the next decade. We have reported several recent strategic wins in this area, and believe this will be a key catalyst for growth.
We believe 5G is a multi-year opportunity as global service providers roll out the new capital-intensive technology and build out the needed network infrastructure over the next decade.
As of December 31, 2022, we had been issued 669 patents in the U.S., which expire between 2023 and 2041, and had 44 in-process patent applications in the U.S. As of such date, we also had 276 issued patents in foreign jurisdictions, and had 16 patent applications.
As of December 31, 2023, we had 688 issued patents in the U.S., 631 of which expire between 2024 and 2042, and we had 41 in-process patent applications in the U.S. As of such date, we also had 335 issued patents in foreign jurisdictions, and we had 87 in-process patent applications in foreign jurisdictions.
From this materiality study, we published a strategy which we believe will positively impact our future environmental performance, and deliver social benefits for our customers, employees and society at large. Additionally, we believe the governance improvements made as a result of our strategy will result in enhancements in our accountability and that of our suppliers and partners.
From this materiality study, we published a strategy, which we review with the Board of Directors from time to time, which we believe will positively impact our future environmental performance, and deliver social benefits for our customers, employees and society at large.
Regulatory Considerations As a company with global operations, we are subject to complex U.S. and foreign laws and regulations, including trade regulations, tariffs, import and export regulations, anti-bribery and corruption laws, antitrust or competition laws, cybersecurity, privacy and data protection, among others.
We are currently subject to, and expect to face in the future, allegations that we have infringed the intellectual property rights of third parties, including those of our competitors and non-practicing entities. 13 Regulatory Considerations As a company with global operations, we are subject to complex U.S. and foreign laws and regulations, including trade regulations, tariffs, import and export regulations, anti-bribery and corruption laws, antitrust or competition laws, cybersecurity, privacy and data protection, among others.
Segment Information Effective in the fourth quarter of 2020 and in connection with the ECI Acquisition, our Chief Operating Decision Maker ("CODM") began to assess our performance based on the performance of two separate lines of business within the Company: the Cloud and Edge segment ("Cloud and Edge") and the IP Optical Networks segment ("IP Optical Networks").
Segment Information Our Chief Operating Decision Maker ("CODM") assesses our performance based on the performance of two separate lines of our business: the Cloud and Edge segment ("Cloud and Edge") and the IP Optical Networks segment ("IP Optical Networks").
("Cisco") and AudioCodes Ltd. for our SBCs, Enterprise Edge products and Ribbon Connect. • Neustar, Inc., Metaswitch Networks (acquired by Microsoft) ("Metaswitch"), First Orion Corp., Secure Logix Corporation, TransNexus, Inc. and Transaction Network Services, Inc.
("Cisco") and AudioCodes Ltd. for our SBCs, Enterprise Edge products and Ribbon Connect. • Neustar, Inc., Metaswitch Networks ("Metaswitch"), First Orion Corp., Secure Logix Corporation, TransNexus, Inc. and Transaction Network Services, Inc. for our Identity Assurance and Ribbon Call Trust offerings. • NETSCOUT Systems, Inc., Mobileum, Empirix Inc. and Ericsson for our Analytics offerings. • Huawei, Metaswitch, Nokia and Ericsson for our Network Transformation offerings.
While this has moderated somewhat in the second half of 2022 and into 2023, issues remain and continue to affect our delivery execution and profitability. We continue to implement specific actions to manage these issues, including investment in key component inventory and re-design of sub-assemblies to improve product availability.
This has largely moderated in 2023 , however some higher input costs remain, and our inventory levels are somewhat elevated. We continue to implement specific actions to manage these issues, including investment in key re-design of sub-assemblies to improve product availability and lower costs.
We supplement our deep in-house expertise with a small set of long-term contracting partners, allowing us to flex up and down as required to match customer demand. 12 To maintain our position as a technology leader, we continue to invest in our development methodologies, leveraging and adopting industry best practices in the domains of DevOPs, Continuous Integration and Continuous Delivery ("CI/CD"), cloud-native software, Security and Test Automation.
To maintain our position as a leader in product and solution development, we continue to invest in our development methodologies, leveraging and adopting industry best practices in the domains of DevOPs, Continuous Integration and Continuous Delivery ("CI/CD"), cloud-native software, and Security and Test Automation.
Our Apollo hardware and software products deliver reconfigurable and programmable low-latency optical transport that simultaneously speeds up provisioning of new services while maximizing traffic throughput at the lowest cost per bit.
Our Apollo hardware and software products deliver reconfigurable and programmable low-latency optical transport that simultaneously speeds up provisioning of new services while maximizing traffic throughput at the lowest cost per bit. Apollo provides customers with a choice of two transmission optimizations. Capacity-reach optimization uses industry-leading 5nm-140Gbaud technology that maximizes channel capacity for any given distance.
Increasingly, network operators are also pursuing open, multi-layer optimized and disaggregated IP and Optical networking solutions, where they have the flexibility to assemble networks based on transport and control subsystems from different vendors with software-defined networking.
Increasingly, network operators are also pursuing open, multi-layer optimized and disaggregated IP and Optical networking solutions, where they have the flexibility to assemble networks based on transport and control subsystems from different vendors with software-defined networking. 5 Service providers in some global regions, as mandated by governments or voluntarily, are also replacing certain incumbent vendor communications equipment and technology in their networks because of concerns for security.
Enterprise SBCs provide service assurance and visibility within the enterprise for service-provider hosted and managed UC services. Offerings in this portion of our portfolio include Ribbon Connect for Microsoft Teams Direct Routing, a cloud-based aaS offering for securing calls to the public telephone network from the enterprise. • Ribbon Call Trust TM is an aaS offering for providing identity assurance.
Our products are also provided as-a-service through our Ribbon Connect for Microsoft Teams Direct Routing platform, a cloud-based aaS offering for securing calls to the public telephone network from the enterprise. • Ribbon Call Trust TM is an aaS offering for providing identity assurance.
We continue to invest in analytics and automation to allow our customers to operate our solutions at scale with end-to-end visibility and control over the robustness, security, and efficiency of the solution. Intellectual Property We believe intellectual property is fundamental to our business and success, and we depend upon our ability to develop, maintain and protect our technology.
We continue to invest in analytics and automation using the latest artificial intelligence and machine learning ("AI/ ML") technology, to allow our customers to operate our solutions at scale with end-to-end visibility and control over the robustness, security, and efficiency of the solution.
Similarly, Rogers in Canada is deploying our Apollo solution for both mobile and fixed broadband services. • Software-Centric and Cloud-Native Offerings - The value of virtual, cloud-native, and software-driven solutions deployable in the cloud has only grown because of the COVID-19 pandemic and the migration of network services to the Telco Cloud, which underscores another area of major focus for us.
We have reported several recent strategic wins in this area and believe this will be a key catalyst for growth. • Software-Centric and Cloud-Native Offerings - The value of virtual, cloud-native, and software-driven solutions deployable in the cloud has only grown because of the COVID-19 pandemic and the migration of network services to the Telco Cloud, which underscores another area of major focus for us.
We are focused on growing this area of our business through our overall enterprise solutions for securing communications and our IP optical network connectivity solutions, which together are typically geared towards critical infrastructure, large enterprises, and medium-size businesses, building on our partnerships with key go-to-market channels and solutions providers such as Microsoft, as well as other popular unified communications and collaboration ("UC&C") platforms such as Zoom Phone and similar service provider UC&C offerings. • Partnerships - We continually look to form industry partnerships that will enhance our current solution offerings to our customers.
We leverage partnerships with key go-to-market channels and solutions providers such as Dell and Microsoft, as well as other popular unified communications and collaboration ("UC&C") platforms such as Zoom Phone and similar service provider UC&C offerings. • Partnerships - We continually look to form industry partnerships that will enhance our current solution offerings to our customers.
In the second half of 2022, we adopted a Hybrid Work Model where employees spend a minimum of two days per week working from a Ribbon office to encourage collaboration, innovation, and socialization, but maintain the flexibility to work remotely as well.
In 2023, we continued our Hybrid Work Model where employees spend a minimum of two days per week working from one of our offices. This encourages collaboration, innovation, and socialization while maintaining the flexibility to work remotely as well. Community Investment . We value the communities in which we work.
Our customers utilize these capabilities to provide a better call experience to their end-customers. • A cloud-native Analytics Platform with applications that aid customers in gathering actionable intelligence from their communications network elements, including SBCs in the core and edge of their networks, to provide them with network performance visibility, service assurance, security, and fraud mitigation.
We are an industry leader in the development and deployment of the STIR (Secure Telephone Identity Revisited) and SHAKEN (Signature-based Handling of Asserted information using toKENS) standards, with deployments throughout North America and Europe. • A cloud-native Analytics Platform with applications that aid customers in gathering actionable intelligence from their communications network elements, including SBCs in the core and edge of their networks, to provide them with network performance visibility, service assurance, security, and fraud mitigation.
In particular, the US Federal government and agencies have a significant need to modernize their voice communications infrastructure, replacing legacy on-premise systems with modern cloud-based voice and video solutions. However, the unique requirements regarding security and survivability are not easily met by off-the-shelf enterprise applications, creating significant opportunity for companies that specialize in this area.
However, the unique requirements regarding security and survivability are not easily met by off-the-shelf enterprise applications, creating significant opportunity for companies that specialize in this area.
In 2022, we delivered more than 20 live training webinars, 10 manager/leader development programs, and approximately 13 training hours per employee across our workforce, an increase from approximately 11 hours in 2021. Safety, Health and Well-being . We strive for a workplace that is free of hazards for our employees.
In 2023, we delivered more than 21 live training webinars, 4 manager/leader development programs, 6 Excellence in Service Programs and approximately 13 training hours per employee across our workforce, matching the total hours in 2022. Safety, Health and Well-being. Our objective is to provide a safe and hazard-free work environment for all employees.
A key security feature of Apollo that is used broadly in critical infrastructure and enterprise deployments is Layer 1 Optical Encryption supported by standard and Post Quantum Computing algorithms. • The Neptune product line of high-performance switching and routing solutions are optimized to provide a converged multi-access edge and the service aware routing needed for cost/performance optimized connectivity between consumers and the applications and services they are using.
This uses AES-256 encryption, which is the strongest and most robust encryption standard that is commercially available today, and also supports a choice of standard, Post Quantum Computing, and Quantum Key Distribution key exchange mechanisms. • The Neptune product line of high-performance switching and routing solutions are optimized to provide the converged multi-service, service-aware aggregation needed for cost/performance optimized connectivity between consumers and the applications and services they are using.
This investment cycle and technology disruption is an opportunity for new innovative suppliers to be selected. Demand for Hyper-Connectivity and Bandwidth Driving Fiber Access Deployment Our global information society is overflowing with telecommunications data traffic, for business, entertainment, education, surveillance, industrial control, online retail, and many other applications.
Demand for Hyper-Connectivity and Bandwidth Driving Fiber Access Deployment Our global information society is overflowing with telecommunications data traffic, for business, entertainment, education, surveillance, industrial control, online retail, and many other applications. These applications, increasingly delivered from the cloud, generate a huge amount of data driven largely by the video and image components.
A modular architecture allows optimized solutions across access, metro, regional, and long-haul networks. Apollo combines high performance, low-latency OTN transport, and OTN switching with software-configurable optical routing for maximum efficiency. Apollo can dynamically reconfigure optimal links in the event of fiber failures to maintain service availability. Apollo is “self-aware” with intelligent reporting for efficient and SDN-ready operations.
The Apollo product line provides state-of-the-art transparent and flexible DWDM and OTN transport with integrated packet switching capabilities. A modular architecture allows optimized solutions across access, metro, regional, and long-haul networks. Apollo combines high performance, low-latency OTN transport, and OTN switching with software-configurable optical routing for maximum efficiency.
The data must be delivered securely, in real-time, to wherever it is required. These solutions integrate intelligent optical transport with agile IP networking to provide a converged, secure, communication network.
These solutions integrate intelligent optical transport with agile IP networking to provide a converged, secure, communication network that can be rapidly configured and deployed in challenging environmental conditions.
Similarly, command and control groups within today’s armed forces have a need for high performance secure networks as their strategic sensors and assault systems are becoming more integrated. In this ecosystem, effective decision-making requires the pooling and analysis of data from a vast array of sensors and other information sources.
Enterprises deploy optical networking, secured by optical encryption, to attain the needed performance and security. Similarly, command and control groups within today’s defense forces have a need for high performance secure networks as their strategic sensors and assault systems are becoming more integrated.
It must also be replicated across multiple locations for business continuity and disaster recovery and must be protected from inappropriate access, theft, and corruption. Enterprises deploy optical networking, secured by optical encryption, to attain the needed performance and security.
Data is the lifeblood of any business, and it must be easily accessible across the enterprise to power business applications and to support services to end-customers. It must also be replicated across multiple locations for business continuity and disaster recovery and must be protected from inappropriate access, theft, and corruption.
We align our compliance goals with component directives such as RoHS legislation in the European Union and China and with the European WEEE directive.
An example of this is our focus on continuously improving the power and space efficiency of our products to reduce overall energy consumption in our customers' networks at our own facilities. We align our compliance goals with component directives such as RoHS legislation in the European Union and China and with the European WEEE directive.
We continue to build on early cross-selling successes and have multiple promising pipeline opportunities in progress for 2023. 6 • Participate in the 5G Opportunity – We have made significant Research & Development ("R&D") investments in our IP Optical product portfolio in order to address multiple opportunities tied to the deployment of 5G mobile networks.
We have seen significant success 6 with regional service providers in the U.S., bolstered by the f ederal funding programs focused on improving internet access to underserved markets. • Participate in the 5G Opportunity – We have made significant R&D investments in our IP Optical product portfolio in order to address multiple opportunities tied to the deployment of 5G mobile networks.
In addition, our Education Services help ensure customers have the technical knowledge and skills necessary to achieve service readiness and delivery goals to accelerate time-to-market, manage costs, and get the most out of our products and solutions that they use.
Our Managed Services offer proactive monitoring to keep customers' production communications running smoothly so they can concentrate on operating their business. In addition, our Education Services are designed to equip customers with the technical knowledge and skills needed to accelerate service readiness and delivery goals and to help customers get the most out of our products and solutions.
This program includes a variety of monthly wellness related topics delivered through activities such as webinars, exercise sessions, and engaging challenges. Topics covered in 2022 included healthy nutrition, stress management, fitness and physical health, as well as mental and emotional health.
In addition, as a company consistently advocating for a healthy, balanced lifestyle, we offer a Wellness Program, which is available to all of our employees and their families. This program includes a variety of monthly wellness related topics delivered through activities such as webinars, exercise sessions, and engaging challenges.
We are committed to protecting the environment and preventing pollution within a product's lifecycle through responsible product design and requiring suppliers to adhere to sustainable practices. An example of this is our focus on continuously improving the power and space efficiency of our products to reduce overall energy consumption in our customers' networks at our own facilities.
Additionally, we believe the governance improvements made as a result of our strategy will result in enhancements in our accountability and that of our suppliers and partners. We are committed to protecting the environment and preventing pollution within a product's lifecycle through responsible product design and requiring suppliers to adhere to sustainable practices.
Research and Development Our global research and development ("R&D") workforce is geographically distributed across a balanced set of centers of excellence. This allows us to distribute work in a cost-effective manner and provide time-zone sensitive support to our global sales team and customers.
This allows us to distribute work in a cost-effective manner and provide time-zone sensitive support to our global sales team and customers. We supplement our deep in-house expertise with a small set of long-term contracting partners, allowing us to flex up and down as required to match customer demand.
Service providers in some global regions, as mandated by governments or voluntarily, are also replacing certain incumbent vendor communications equipment and technology in their networks because of concerns for security. This presents a significant growth and market share opportunity. 5 This technology evolution challenge extends beyond service providers to many enterprises as well as Federal, State, and Local governments.
This presents a significant growth and market share opportunity. This technology evolution challenge extends beyond service providers to many enterprises as well as Federal, State, and Local governments. In particular, the US Federal government and agencies have a significant need to modernize their voice communications infrastructure, replacing legacy on-premise systems with modern cloud-based voice and video solutions.
We take care to comply with applicable safety regulations and have a strong track record for safety which we reinforce through regular training modules in all of our locations. In 2022, Ribbon launched global Employee Assistance Programs (“EAP”) to employees and their families in all countries in which Ribbon operates.
Compliance with applicable safety regulations is a top priority and we strive to maintain our strong track record for safety, which continues to be reinforced through regular training modules at all of our locations.
Apollo also provides deployment choice, whether as an integrated solution or as standalone subsystems for disaggregated open architecture multivendor solutions.
Apollo can dynamically reconfigure optimal links in the event of fiber failures to maintain service availability. Apollo is “self-aware,” with intelligent reporting for efficient and SDN-ready operations. Apollo also provides deployment choice, whether as an integrated solution or as standalone subsystems for disaggregated open architecture multivendor solutions.
Our goal is to continue to promote an environment that encourages all team members, regardless of race, sex, background, or affiliation, to take pride in their individual contributions.
We believe that a culture which encourages all team members, regardless of race, sex, background, or affiliation, to take pride in their individual contributions and work together as a team is key to our success. In 2023, our DEI Council focused on conducting educational initiatives to increase awareness of different employee backgrounds, cultures, and experiences.
Another way we measure employee engagement is through our recently launched recognition program, “Real Time Rewards.” This program not only helps with engagement, but reinforces our “thank you culture.” Employees at Ribbon are able to recognize the achievements and contributions of their teammates, peers, and managers.
Our recognition program, “Real Time Rewards”, which was launched in 2022 and continued in 2023, reinforces our “thank you culture.” Our employees are able to recognize the achievements and contributions of their teammates, peers, and managers. In 2023, approximately 3,000 such awards were given, whereby 48% of our employees were recognized and rewarded for their contributions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Ownership of our Common Stock • The choice of forum provision in our Certificate of Incorporation could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or agents. • Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our common stock.
Biggest changeRisks Related to Ownership of our Common Stock • The choice of forum provision in our Certificate of Incorporation could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or agents. • Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our common stock. • Our Series A Preferred Stock has rights, preferences, and privileges that are not held by, and are preferential to, the rights of holders of our common stock. • The existence of the liquidation preference of the Series A Preferred Stock may reduce the value of our common stock. • The outstanding warrants are exercisable for common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to stockholders. • We may issue debt and equity securities that are senior to our common stock, which could negatively affect the value of our common stock.
While we believe that we leverage appropriate detection and prevention systems and services and that we focus on continuous improvement based upon the latest attack vectors in the industry, we cannot guarantee that there will never be any information technology system failures, including future breaches of our or our third-party providers' data security measures through a cyberattack, other cyber incident or otherwise, or the theft or loss of laptops, other mobile devices or electronic records used to back up our systems or our third-party providers' systems, which could result in a disclosure of customer, employee, or our information or otherwise disrupt our ability to function in the normal course of business by potentially causing, among other things, delays in the fulfillment or cancellation of customer orders or disruptions in the manufacture or shipment of products or delivery of services, any of which could have a material adverse effect on our operating results.
While we believe that we leverage appropriate detection and prevention systems and services and that we focus on continuous improvement based upon the latest attack vectors in the industry, we cannot guarantee that there will never be any information technology system failures, including future breaches of our or our third-party providers' data security measures through a cyberattack, other cyber incident or otherwise, or the theft or loss of laptops, other mobile devices or electronic records used to back up our systems or our third-party providers' systems, which could result in a disclosure of customer, employee, or our information or otherwise disrupt our ability to function in the normal course of business by potentially causing, among other things, delays in the fulfillment or cancellation of customer 27 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.
Provisions of the Company’s Certificate of Incorporation and By-laws may have the effect of delaying or preventing a change of control or changes in our management, including, generally, provisions that: • do not provide cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • allow only the Board to fill a vacancy on the Board, however occurring, including a vacancy resulting from an enlargement of the Board; • require advance notice for stockholder proposals to be brought before a meeting of stockholders, including proposed nominations of persons for election to the board of directors; • only allow stockholder action to be taken at an annual or special meeting; • require a vote of holders of at least 66 2/3% of the voting power of our outstanding voting stock entitled to vote thereon to amend or repeal certain provisions of the Company’s Certificate of Incorporation or its By-laws; • limit the ability of stockholders to call a special meeting; and • authorize blank check preferred stock.
Provisions of our Certificate of Incorporation and By-laws may have the effect of delaying or preventing a change of control or changes in our management, including, generally, provisions that: • do not provide cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • allow only the Board to fill a vacancy on the Board, however occurring, including a vacancy resulting from an enlargement of the Board; • require advance notice for stockholder proposals to be brought before a meeting of stockholders, including proposed nominations of persons for election to the board of directors; • only allow stockholder action to be taken at an annual or special meeting; • require a vote of holders of at least 66 2/3% of the voting power of our outstanding voting stock entitled to vote thereon to amend or repeal certain provisions of our Certificate of Incorporation or its By-laws; • limit the ability of stockholders to call a special meeting; and • authorize blank check preferred stock.
If competitors are able to use our technology, our ability to compete effectively could be harmed, which could have a material adverse effect on our business. 27 If we are unable to obtain necessary licenses or on-going maintenance and support of third-party technology at acceptable prices, on acceptable terms, or at all, it could harm our operating results or business.
If competitors are able to use our technology, our ability to compete effectively could be harmed, which could have a material adverse effect on our business. If we are unable to obtain necessary licenses or on-going maintenance and support of third-party technology at acceptable prices, on acceptable terms, or at all, it could harm our operating results or business.
Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, 31 we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
For example, the U.S. Department of Defense ("DOD") has issued specific requirements for IP networking 23 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”).
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”).
It also requires data controllers to be transparent and disclose to data subjects how their personal information is to be used; imposes limitations 28 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.
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 generally do not have long-term supply contracts with our component suppliers and they are not required to supply us with components for any specified periods, in any specified quantities or at any set price, except as may be specified in a particular 22 purchase order.
We generally do not have long-term supply contracts with our component suppliers and they are not required to supply us with components for any specified periods, in any specified quantities or at any set price, except as may be specified in a particular purchase order.
The telecommunications industry is highly regulated and our business and financial condition could be adversely affected by changes in the regulations relating to the telecommunications industry. Currently, there are few laws or regulations that apply 29 directly to access to or delivery of voice services on IP networks.
The telecommunications industry is highly regulated and our business and financial condition could be adversely affected by changes in the regulations relating to the telecommunications industry. Currently, there are few laws or regulations that apply directly to access to or delivery of voice services on IP networks.
If we are unable to maintain effective internal controls, we may not have adequate or timely financial information, and we may be unable to meet our reporting obligations as a publicly traded company or comply with the requirements of the SEC or the Sarbanes-Oxley Act of 2002.
If we are unable to maintain effective internal controls, we may not have adequate or timely financial information, and we may be unable to meet our reporting obligations as 30 a publicly traded company or comply with the requirements of the SEC or the Sarbanes-Oxley Act of 2002.
None of our officers or key employees is bound by an employment agreement for any specific term. The loss of the services of any of our executive officers or key employees could 24 delay the development and introduction of, and negatively impact our ability to sell, our products and achieve our business objectives.
None of our officers or key employees is bound by an employment agreement for any specific term. The loss of the services of any of our executive officers or key employees could delay the development and introduction of, and negatively impact our ability to sell, our products and achieve our business objectives.
Therefore, the JPM Stockholders and Swarth will be able to exert significant influence over 32 matters requiring board approval, and our stockholders other than the JPM Stockholders and Swarth will have limited or no ability to influence the outcome of certain key transactions.
Therefore, the JPM Stockholders and Swarth will be able to exert significant influence over matters requiring board approval, and our stockholders other than the JPM Stockholders and Swarth will have limited or no ability to influence the outcome of certain key transactions.
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.
No assurance can be given that any future merger, acquisition or disposition will be successful or will not materially adversely affect our business, operating 23 results or financial condition.
Given the general uncertainty regarding global economic conditions and other factors, such as inflation, rising 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 on IT departments to demonstrate acceptable return on investment.
Given the general uncertainty regarding global economic conditions and other factors, such as inflation, high interest rates and foreign exchange rate fluctuations, we believe that customers have tried to maintain or improve profitability through cost control and constrained capital spending, which places additional pressure on IT departments to demonstrate acceptable return on investment.
Despite those efforts, there is a risk that we may be subject to fines and penalties, litigation and reputational harm if we fail to protect the privacy of third party data or comply with the applicable regimes. Failure to comply with the FCPA or the UKBA could subject us to significant civil or criminal penalties.
Despite those efforts, there is a risk that we may be subject to fines and penalties, litigation and reputational harm if we fail to protect the privacy of third party data or comply with the applicable regimes. Failure to comply with the FCPA, the UKBA and similar regulations could subject us to significant civil or criminal penalties.
A portion of our total revenue from product sales comes from contracts with government agencies in the U.S. and other foreign countries. Disruptions to or our failure to effectively develop, manage and maintain our government customer relationships could adversely affect our ability to generate revenue from the sales to such customers.
A portion of our total revenue from product sales comes from sales to government agencies in the U.S. and other foreign countries. Disruptions to or our failure to effectively develop, manage and maintain our government customer relationships could adversely affect our ability to generate revenue from sales to such customers.
Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (the “Court of Chancery”) is, to the fullest extent permitted by law, the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of the Company to the Company or the Company's stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim arising pursuant to any provision of the Company’s Certificate of Incorporation or the Company’s By-laws or governed by the internal affairs doctrine.
Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (the “Court of Chancery”) is, to the fullest extent permitted by law, the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of ours, to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim arising pursuant to any provision of our Certificate of Incorporation or our By-laws or governed by the internal affairs doctrine.
While we were in compliance with the covenants at December 31, 2022, the maximum Consolidated Net Leverage Ratio and the minimum Consolidated Fixed Charge Coverage Ratio we are required to maintain under the 2020 Credit Agreement will decrease and increase, respectively, in future quarters.
While we were in compliance with the covenants at December 31, 2023, the maximum Consolidated Net Leverage Ratio and the minimum Consolidated Fixed Charge Coverage Ratio we are required to maintain under the 2020 Credit Agreement will decrease and increase, respectively, in future quarters.
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 shareholders that this coverage will be maintained or will be adequate in the event we submit a claim.
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.
These provisions of our amended and restated certificate of incorporation, our amended and restated by-laws or Delaware law could have the effect of delaying or deterring a change in control that some stockholders may consider beneficial and therefore could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
These provisions of our Certificate of Incorporation, our By-Laws or Delaware law could have the effect of delaying or deterring a change in control that some stockholders may consider beneficial and therefore could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock. 35
Bribery Act ("UKBA") could subject us to significant civil or criminal penalties. • Governmental export and import controls could subject us to liability, require a license from the U.S. government or impair our ability to compete in international markets. • Changes in governmental regulation, especially with respect to the telecommunications industry, could harm our operating results and future prospects.
Bribery Act ("UKBA") and similar regulations could subject us to significant civil or criminal penalties. 17 • Governmental export and import controls could subject us to liability, require a license from the U.S. government or impair our ability to compete in international markets. • Changes in governmental regulation, especially with respect to the telecommunications industry, could harm our operating results and future prospects.
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. Conditions in Israel may materially and adversely affect the Company’s business. We have a significant number of employees located in Israel.
If we are further limited in our ability to sell products and services to customers in Russia and other countries for an extended period, it could have a material impact on our financial results. Conditions in Israel may materially and adversely affect our business. We have a significant number of employees located in Israel.
Popular uprisings in various countries in the Middle East and North Africa over the last few years has 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.
Popular uprisings in various countries in the Middle East over the last few years 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.
In addition to the foregoing, a breach of the GDPR 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.
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.
In addition to cooperating with our strategic partners, such as Microsoft, on specific customer projects, we also may compete in some areas with these same partners.
In addition to cooperating with our strategic partners, such as Dell and Microsoft, on specific customer projects, we also may compete in some areas with these same partners.
We have invested, and continue to invest, human and technology resources in our GDPR compliance efforts and our data privacy compliance efforts. These compliance efforts may be time-intensive and costly.
We have invested, and continue to invest, human and technology resources in our privacy regulation compliance efforts and our data privacy compliance efforts. These compliance efforts may be time-intensive and costly.
Risks Related to Regulation • Data privacy issues, including evolving laws, regulations and associated compliance, may adversely impact our business and financial results. • Failure to comply with the Foreign Corrupt Practices Act ("FCPA") or the U.K.
Risks Related to Regulation • Data privacy issues, including evolving laws, regulations and associated compliance, may adversely impact our business and financial results. • Failure to comply with the Foreign Corrupt Practices Act (“FCPA”), the U.K.
We attempt to mitigate some of the risk in this region by requiring a portion of the purchase orders to be paid in advance. Since the start of the conflict, our customers have 25 continued to meet their obligations to pay us.
We attempt to mitigate some of the risk in this region by requiring a portion of the purchase orders to be paid in advance. Since the start of the war, our customers have continued to meet their obligations to pay us.
Some provisions in our amended and restated certificate of incorporation, our amended and restated by-laws, as well as provisions of Delaware law, may discourage, delay or prevent a merger or acquisition that may be deemed undesirable by our Board of Directors but that a stockholder may consider favorable.
Some provisions in our Certificate of Incorporation, our By-Laws, as well as provisions of Delaware law, may discourage, delay or prevent a merger or acquisition that may be deemed undesirable by our Board of Directors but that a stockholder may consider favorable.
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 (the “GDPR”) has caused more stringent data protection requirements in the European Union.
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.
We rely on certain key customers, and our future success will depend on our ability to generate recurring business from our existing customers and to attract additional customers beyond our current customer base. One customer, Verizon, contributed approximately 15% of our revenue in the year ended December 31, 2022.
We rely on certain key customers, and our future success will depend on our ability to generate recurring business from our existing customers and to attract additional customers beyond our current customer base. One customer, Verizon , contributed approximately 11% of our revenue in the year ended December 31, 2023.
In 2023, we expect to record additional restructuring expense of approximately $18 million as we look to further streamline operations and consolidate our global footprint to reflect, among other things, a greater percentage of our workforce working from home on a go-forward basis.
In 2024, we expect to record additional restructuring expense of approximately $5 million as we look to further streamline operations and consolidate our global footprint to reflect, among other things, a greater percentage of our workforce working from home on a go-forward basis.
The JPM Stockholders and Swarth collectively own approximately 47% of our common stock as of December 31, 2022, and may decide to sell their shares in bulk or from time to time, except as provided under the Stockholders Agreement, which timing we cannot control.
The JPM Stockholders and Swarth collectively own approximately 46% of our common stock as of December 31, 2023, and may decide to sell their shares in bulk or from time to time, except as provided under the Stockholders Agreement, which timing we cannot control.
The interests of the parties to the Stockholders Agreement may differ from those of other holders of our common stock. Additionally, the Company is party to a Second Amended and Restated Registration Rights Agreement, dated as of August 12, 2022, with the JPM Stockholders, Swarth and certain other stockholders (the "Registration Rights Agreement").
The interests of the parties to the Stockholders Agreement may differ from those of other holders of our common stock. Additionally, we are party to a Second Amended and Restated Registration Rights Agreement, dated as of August 12, 2022, with the JPM Stockholders, Swarth and certain other stockholders.
Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors in its entirety in addition to other information contained in or incorporated by reference into this Annual Report on Form 10-K and our other public filings with the Securities and Exchange Commission (“SEC”).
Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors in its entirety in addition to other information contained in or incorporated by reference into this Annual Report on Form 10-K and our other public filings with the SEC .
Our stock price has been and may continue to be volatile. Our common stock price has experienced substantial volatility in the past and may remain volatile in the future. Volatility in our stock price can arise as a result of a number of the factors discussed in this “Risk Factors” section.
Our common stock price has experienced substantial volatility in the past and may remain volatile in the future. Volatility in our stock price can arise as a result of a number of the factors discussed in this “Risk Factors” section.
These risks are amplified by the current supply chain disruptions being experienced globally. As we do not have the 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.
These risks are amplified by any global supply chain disruptions. As we do not have internal manufacturing capabilities, any difficulties or failures to perform by our contract manufacturers could cause delays in customer product shipments, which could negatively affect our relationships with customers and result in delayed revenue.
We are subject to the supervision of local data protection authorities in those E.U. jurisdictions where we are established or otherwise subject to the GDPR. Certain breaches of the GDPR requirements could result in substantial fines.
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.
Risks Related to Our International Operations • Worldwide efforts to contain capital spending and global economic conditions and uncertainties may have a material adverse impact on our business. • The military conflict between Russia and Ukraine could materially impact our sales to customers in that region. 17 • Conditions in Israel may materially and adversely affect our business. • Risks associated with our international operations could impair our ability to grow our international revenue. • Increases in tariffs, trade restrictions or taxes on our products could have an adverse impact on our operations. • Fluctuations in currency exchange rates could negatively impact our financial results and cash flows. • Use and reliance upon research and development resources in global locations may expose us to unanticipated costs and/or liabilities.
Risks Related to Our International Operations • Worldwide global economic conditions and uncertainties may have a material adverse impact on our business. • The wars in Israel and Ukraine could materially impact our sales to customers in that region. • Conditions in Israel may materially and adversely affect our business. • Risks associated with our international operations could impair our ability to grow our international revenue. • Increases in tariffs, trade restrictions or taxes on our products could have an adverse impact on our operations. • Fluctuations in currency exchange rates could negatively impact our financial results and cash flows. • Use and reliance upon research and development resources in global locations may expose us to unanticipated costs and/or liabilities.
Our Senior Secured Credit Facilities Credit Agreement, as amended, provides $500 million of commitments, comprised of a $400 million term loan (the “2020 Loan Facility”) and a $100 million revolving facility (the “2020 Revolving Credit Facility” and, together with the 2020 Loan Facility, the "2020 Credit Facility").
Our Senior Secured Credit Facilities Credit Agreement, as amended, provides $475 million of commitments, comprised of a $400 million term loan (the “2020 Loan Facility”) and a $75 million revolving facility (the “2020 Revolving Credit Facility” and, together with the 2020 Loan Facility, the "2020 Credit Facility").
Risk Factors Summary The following is a summary of the principal risks that could adversely affect our business, operations and financial results: Risks Related to Our Business and Industry • Our quarterly revenue and operating results are unpredictable and may fluctuate significantly quarter to quarter. • Failure to compete successfully could impair our ability to increase revenues and/or remain profitable. • Our future success is dependent on growing our base of customers and expanding our recurring revenue. • Consolidation in the telecommunications industry could harm our business. • Restructuring activities could adversely affect our ability to execute our business strategy. • Exposure to the credit risk of some of our customers and to credit exposures in fragile financial markets could result in material losses. • Disruptions to relationships with distributors, resellers, system integrators and other channel partners could adversely affect our revenues. • Failure to align our strategic plan with our customers' investments, or failure of products and services to meet customers' demands, could impact our revenues. • Failure of our products to interoperate with our customers' existing networks could result in customer losses. • Delay in the anticipated shift to more virtualized networks, or failure for customers to adopt our new products and services focused on virtualized networks, could reduce our revenues. • The market for some of our products depends on the availability and demand for other vendors' products. • Failure by our strategic partners or by us in integrating products could harm our business. • We rely on contract manufacturers. • We rely on single or limited sources for supply of some components of our products. • Failure to correctly estimate future requirements for end-of-life products purchased from third parties could harm our operating results or business. • Products may have errors or defects that we find only after full deployment. • Government sales are subject to potential delays and cutbacks, may require specific testing efforts, or impose significant compliance obligations. • Combining ECI, or future companies, may be more difficult, costly or time-consuming than expected, and anticipated benefits and cost savings may not be realized. • Future investments, mergers or acquisitions could be difficult to integrate, disrupt our business, dilute shareholder value and harm our financial condition. • Failure to hire and retain key personnel could negatively impact our ability to meet our business objectives and impair future growth. • Man-made problems, such as terrorism, and natural catastrophic events may disrupt our operations and harm our operating results.
Additionally, investors should not interpret the disclosure of a risk to imply that the risk has not already materialized. 16 Risk Factors Summary The following is a summary of the principal risks that could adversely affect our business, operations and financial results: Risks Related to Our Business and Industry • Our quarterly revenue and operating results are unpredictable and may fluctuate significantly quarter to quarter. • Failure to compete successfully could impair our ability to increase revenues and/or remain profitable. • Our future success is dependent on growing our base of customers and expanding our recurring revenue. • Consolidation in the telecommunications industry could harm our business. • Restructuring activities could adversely affect our ability to execute our business strategy. • Exposure to the credit risk of some of our customers and to credit exposures in fragile financial markets could result in material losses. • Disruptions to relationships with distributors, resellers, system integrators and other channel partners could adversely affect our revenues. • Failure to align our strategic plan with our customers' investments, or failure of products and services to meet customers' demands, could impact our revenues. • Failure of our products to interoperate with our customers' existing networks could result in customer losses. • Delay in the anticipated shift to more virtualized networks, or failure for customers to adopt our new products and services focused on virtualized networks, could reduce our revenues. • Failure by our strategic partners or by us in integrating products could harm our business. • We rely on contract manufacturers. • We rely on single or limited sources for supply of some components of our products. • Failure to correctly estimate future requirements for end-of-production products purchased from third parties could harm our operating results or business. • Products may have errors or defects that we find only after full deployment. • Government sales are subject to potential delays and cutbacks, may require specific testing efforts, or impose significant compliance obligations. • Future investments, mergers or acquisitions could be difficult to integrate, disrupt our business, dilute shareholder value and harm our financial condition. • Failure to hire and retain key personnel could negatively impact our ability to meet our business objectives and impair future growth. • Man-made problems, such as terrorism, and natural catastrophic events may disrupt our operations and harm our operating results.
If we are unable to correctly estimate future requirements for products and components that we purchase from our third-party vendors that have reached the end of their life cycles, it could harm our operating results or business. Some of the products and components that we purchase from our third-party vendors have reached the end of their life cycles.
If we are unable to correctly estimate future requirements for products and components that we purchase from our third-party vendors that have reached the end of their production cycle, it could harm our operating results or business. Some of the products and components that we purchase from our third-party vendors have reached the end of their new production availability.
If the defenses we claim in our material litigation matters are ultimately unsuccessful, or if we are unable to achieve a favorable settlement with an adverse party or a government agency, we could be liable for large settlement payments, damage awards or fines that could have a material adverse effect on our business and results of operations.
If the defenses we claim in our material litigation matters are ultimately unsuccessful, or if we are unable to achieve a favorable settlement with an adverse party or a government agency, we could be liable for large settlement payments, damage awards or fines that could have a material adverse effect on our business and results of operations. 34 Our stock price has been and may continue to be volatile.
Restructuring activities could adversely affect our ability to execute our business strategy. We recorded restructuring expense of $10.8 million and $11.7 million in 2022 and 2021, respectively, including severance and related costs, facilities restructuring and accelerated amortization of lease assets.
Restructuring activities could adversely affect our ability to execute our business strategy. We recorded restructuring expense of $16.2 million and $10.8 million in 2023 and 2022, respectively, including severance and related costs, facilities restructuring and accelerated amortization of lease assets.
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 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.
Our revenue is likely to decline in such circumstances, which may result in erosion of our profit margins and significant losses. 24 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 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.
Our top five customers contributed approximately 34 % of our revenue in 2022.
Our top five customers contributed approximately 34% of our revenue in 2023.
These sanctions currently prohibit our ability to sell certain products and services. The sanctions continue to evolve and further changes in the current sanctions could further limit our ability to sell products and services to customers in Russia and our ability to collect on outstanding accounts receivable from such customers.
The sanctions continue to evolve and further changes in the sanctions could further limit our ability to sell products and services to customers in Russia and our ability to collect on outstanding accounts receivable from such customers.
Risks Related to Our Indebtedness and Accounting Matters • The terms of our credit agreement could adversely affect our operating flexibility and pose risks of default, which would negatively impact our liquidity and operations. • Impairment of our goodwill or intangible assets may require us to record a significant charge to earnings. • Failure to maintain appropriate internal controls in the future may adversely affect our stock price and our business.
Risks Related to Our Indebtedness and Accounting Matters • The terms of our credit agreement could adversely affect our operating flexibility and pose risks of default, which would negatively impact our liquidity and operations. • The terms of the Series A Preferred Stock and warrants impose additional challenges on our ability to raise capital. • Impairment of our goodwill or intangible assets may require us to record a significant charge to earnings. • Failure to maintain appropriate internal controls in the future may adversely affect our stock price and our business.
In addition, there continue to be hostilities between Israel and Hezbollah in Lebanon and Hamas in the Gaza Strip, both of which resulted in rockets being fired into Israel, causing casualties and disruption of economic activities.
In addition, there continue to be hostilities between Israel and Hezbollah in Lebanon which resulted in rockets being fired into Israel, causing casualties and disruption of economic activities.
Any armed 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.
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.
If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings. As of December 31, 2022, we had $300.9 million of goodwill and $294.7 million of intangible assets.
If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings. As of December 31, 2023, we had $300.9 million of goodwill and $238.1 million of intangible assets.
If we are unable to generate sufficient cash flows in the future, and if availability under our current facility is not sufficient to support our operations, we may need to refinance our debt or obtain additional financing. We may not be able to refinance our debt or obtain additional financing on favorable terms or at all.
If we are unable to generate sufficient cash flows in the future, and if availability under our current facility is not sufficient to support our operations, we may need to refinance our debt or obtain additional financing.
The GDPR imposes 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.
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.
During 2022, our closing stock price ranged from a high of $6.19 per share to a low of $2.22 per share. The stock market has experienced significant price and volume fluctuation with such volatility often unrelated to the operating performance of these companies.
During 2023, our closing stock price ranged from a high of $4.63 per share to a low of $1.86 per share. The stock market has experienced significant price and volume fluctuation with such volatility often unrelated to the operating performance of these companies.
Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changed conditions, and fraud.
We cannot provide assurance as to the effectiveness of those integrations. Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changed conditions, and fraud.
If we are unable to support our business operations in international and emerging markets, or their further expansion, while balancing the higher operational and financial risks associated with these markets, our business and results of operations could be harmed. 26 In addition, we may not be able to develop international market demand for our products, which could impair our ability to grow our revenue.
If we are unable to support our business operations in international and emerging markets, or their further expansion, while balancing the higher operational and financial risks associated with these markets, our business and results of operations could be harmed.
If we or our intermediaries fail to comply with the requirements of the FCPA and the UKBA, governmental authorities in the United States and the United Kingdom, as applicable, could seek to impose civil and/or criminal penalties, which could have a material adverse effect on our reputation, results of operations and the trading price of our common stock.
If we or our intermediaries fail to comply with the requirements of the FCPA and the UKBA, governmental authorities in the United States and the United Kingdom, as applicable, could seek to impose civil and/or criminal penalties, which could have a material adverse effect on our reputation, results of operations and the trading price of our common stock. 28 We are subject to governmental export and import controls that could subject us to liability, require a license from the U.S. government or impair our ability to compete in international markets.
General Risk Factors Litigation and government investigations could result in significant legal expenses and settlement payments, fines or damage awards. From time to time, we are subject to litigation regarding intellectual property rights or other claims and have indemnification clauses in most of our customer contracts that may require us to indemnify customers against similar claims.
From time to time, we are subject to litigation regarding intellectual property rights or other claims and have indemnification clauses in most of our customer contracts that may require us to indemnify customers against similar claims.
While we have developed plans to relocate our manufacturing sites if needed, the timing required for relocation, or if we are not successful in relocating, could impact our ability to sell such products or timely deliver the products, and could result in lower or lost sales in India.
While we have developed 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.
Further, consolidation has also occurred in the telecommunications supplier and vendor space, including the combination of ADTRAN, Inc. and ADVA (2022), the acquisition of Acacia Communications, Inc. by Cisco Systems, Inc. (2021) and the closing of a strategic partnership between RingCentral, Inc. and Avaya Holdings Corp. (2019). We expect this trend to continue.
Further, consolidation has also occurred in the telecommunications supplier and vendor space, including the proposed acquisition of Juniper Networks by Hewlett Packard Enterprises (January 2024), the combination of ADTRAN, Inc. and ADVA (2022) and the acquisition of Acacia Communications, Inc. by Cisco Systems, Inc. (2021). We expect this trend to continue.
Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations. Additionally, investors should not interpret the disclosure of a risk to imply that the risk has not already materialized.
Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.
Therefore, changes in the value of the U.S. dollar against other currencies will affect our revenue, income from operations, net income and the value of balance sheet items originally denominated in other currencies. There is no guarantee that our financial results will not be adversely affected by currency exchange rate fluctuations.
Therefore, changes in the value of the U.S. dollar against other currencies will affect our revenue, income from operations, net income and the value of balance sheet items originally denominated in other currencies.
Additionally, any unforeseen increases in the prices of components could reduce our profitability or force us to increase our prices, which could result in a loss of customers or harm our ability to attract new customers and could have a material adverse effect on our results of operations.
Additionally, any unforeseen increases in the prices of components could reduce our profitability or force us to increase our prices, which could result in a loss of customers or harm our ability to attract new customers and could have a material adverse effect on our results of operations. 22 Our customer contracts may allow customers to reschedule delivery dates or cancel orders within certain time frames before shipment without penalty and outside those times frames with a penalty.
Any future investments, mergers or acquisitions we make or enter into, as applicable, could be difficult to integrate, disrupt our business, dilute shareholder value and seriously harm our financial condition.
While certain of our products are certified by JITC, if we are unable to obtain future JITC certification as needed, our DOD sales and results of operations, may suffer. Any future investments, mergers or acquisitions we make or enter into, as applicable, could be difficult to integrate, disrupt our business, dilute shareholder value and seriously harm our financial condition.
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.
Risks Related to our International Operations Worldwide economic conditions and uncertainties in the geopolitical environment have been and may continue to be materially adverse to our business. A factor that significantly affects our operating results is the impact of economic conditions on the willingness of our current and potential customers to make capital investments.
In addition, we may not have sufficient funds available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace the indebtedness on terms acceptable to us, or at all. We cannot be sure that our current cash and available borrowings under our 2020 Credit Facility will be sufficient to meet our future needs.
In addition, we may not have sufficient funds available for 29 repayment or we may not have the ability to borrow or obtain sufficient funds to replace the indebtedness on terms acceptable to us, or at all.
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.
Such disruptions or uncertainties could result in delays or cancellations of customer orders or the manufacture or shipment of our products and have a material adverse effect on our business and results of operations. Natural catastrophic events, such as earthquakes, fires, floods, tornadoes, or pandemics (such as the COVID-19 pandemic) may also affect our or our customers' operations.
In many international markets, long-standing relationships between potential customers and their local suppliers and protective regulations, including local content requirements and approvals, create barriers to entry.
In addition, we may not be able to develop international market demand for our products, which could impair our ability to grow our revenue. In many international markets, long-standing relationships between potential customers and their local suppliers and protective regulations, including local content requirements and approvals, create barriers to entry.
(announced in March 2021), 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).
The telecommunications industry, including many of our customers, has experienced consolidation, including, in the carrier space, the merger between Rogers Communications Inc. and Shaw Communications Inc. (April 2023), the acquisition of certain Lumen Technologies assets by Brightspeed (2022), the merger between T-Mobile US, Inc. and Sprint Corporation (2020) and the acquisition of Blue Face Ltd. by Comcast Corporation (2020).
We may face risks associated with our international operations that could impair our ability to grow our international revenue. We have expanded, and expect to continue to expand, our operations in international and emerging markets. International operations are a significant part of our business, accounting for approximately 57% of total revenues in 2022.
We have expanded, and expect to continue to expand, our operations in international and emerging markets. International operations are a significant part of our business, accounting for approximately 58% of total revenues in 2023. We expect such operations to continue to require significant management attention and financial resources to successfully grow.
This could delay or prevent a change of control transaction or discourage a potential acquirer from pursuing such a transaction, which transaction might have otherwise been of benefit to the other stockholders. 31 The choice of forum provision in our Certificate of Incorporation could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or agents.
This could delay or prevent a change of control transaction or discourage a potential acquirer from pursuing such a transaction, which transaction might have otherwise been of benefit to the other stockholders.
Our use and reliance upon research and development resources in global locations may expose us to unanticipated costs and/or liabilities. We have research and development offices in various global locations, including the United States, Canada, India, Israel and China.
There is no guarantee that our financial results will not be adversely affected by currency exchange rate fluctuations. 26 Our use and reliance upon R&D resources in global locations may expose us to unanticipated costs and/or liabilities. We have R&D offices in various global locations, including the United States, Canada, India and Israel.
The need to move manufacturing of such products could also negatively impact the margin earned on the sale of such products. If these or other sanctions are enacted, they may limit our ability to provide products and services in an important country or region for our business.
If these or other sanctions are enacted, they may limit our ability to provide products and services in an important country or region for our business. The war between Russia and Ukraine, and the sanctions imposed as a result, could materially impact our sales to customers in that region.
Man-made problems, such as terrorism, and natural catastrophic events may disrupt our operations and harm our operating results. 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.
The ongoing wars in Israel and Ukraine, as well as the continued threat of terrorism and heightened security and military action in response to this threat, or any future acts of terrorism, may cause disruptions to the economies of the United States and other countries. Events such as work stoppages or widespread blackouts could have similar negative impacts.
If we fail to maintain appropriate internal controls in the future, we may not be able to report our financial results accurately, which may adversely affect our stock price and our business . 30 Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations require our management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting.
Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations require our management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting. We have committed and will be required to continue to commit significant financial and managerial resources in order to comply with these requirements.
In February 2022, Russia commenced military action in Ukraine, and the uncertainty resulting from this military action and the threat for expansion of the conflict has resulted in some of our customers delaying purchases from us. Further, the U.S. and other European countries have imposed sanctions against Russia in connection with the conflict.
In 2023, approximately 6 % of our sales were to customers in Eastern European countries, including Ukraine, Russia, and the surrounding countries. In February 2022, Russia commenced a military action in Ukraine. The uncertainty and the threat of an expansion of the war has resulted in some of our customers delaying purchases from us.
Our customer contracts also generally allow customers to reschedule delivery dates or cancel orders within certain time frames before shipment without penalty and outside those times frames with a penalty. Because of these and other factors, there are risks of excess or inadequate inventory that could negatively affect our expenses and results of operations.
Because of these and other factors, there are risks of excess or inadequate inventory that could negatively affect our expenses and results of operations.
As may be the case with other companies we acquire, prior to the ECI Acquisition, ECI was not required to implement or maintain the disclosure controls and procedures or internal control over financial reporting that are required of public companies. We cannot provide assurance as to the effectiveness of those integrations.
Further, we are required to integrate any acquired businesses into our system of disclosure controls and procedures and internal control over financial reporting. Such companies may not have previously been required to implement or maintain the disclosure controls and procedures or internal control over financial reporting that are required of U.S. public companies.
While the current import bans do not include our products, if India expands the bans to include the products we sell in India that are currently manufactured in China, we may be required to find new manufacturing locations for such products.
These bans are expected to expand to include our products that are currently manufactured in China and, as a result, we had to identify new manufacturing locations for such products.
In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists and it is possible that there will be similar large-scale military reserve duty call-ups in the future. Any of these circumstances could have a material adverse effect on our business, results of operations, financial condition, cash flows and prospects.
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. 25 We may face risks associated with our international operations that could impair our ability to grow our international revenue.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe relocated our corporate headquarters to the new Plano, Texas office in February 2021. 33 As of December 31, 2022, we maintained the following principal facilities: Location Principal use Lease expiration Plano, Texas (a) Corporate headquarters, sales, marketing, research and development/engineering, customer support, general and administrative September 2032 Westford, Massachusetts Research and development, customer support, general and administrative August 2028 Ottawa, Canada (b) Research and development/engineering, customer support, general and administrative December 2029 Petah Tikva, Israel (Main Campus) (b) Research and development/engineering, sales and marketing, customer support, general and administrative January 2025 Petah Tikva, Israel (Kshatot) (b) Service, research and development/engineering, supply chain October 2023 Bangalore, India (Delta) Research and development/engineering, customer support, general and administrative October 2024 Bangalore, India (Alpha) Research and development/engineering, customer support, general and administrative December 2023 (a) The Company's relocation of its corporate headquarters to this facility was completed in the first quarter of 2021.
Biggest changeAs of December 31, 2023, we maintained the following principal facilities: Location Location Lease expiration Plano, Texas (a) Corporate headquarters, sales, marketing, research and development/engineering, customer support, general and administrative September 2032 Westford, Massachusetts Research and development, customer support, general and administrative August 2028 Ottawa, Canada (b) Research and development/engineering, customer support, general and administrative December 2029 Petah Tikva, Israel (Main Campus) (b)(c) Research and development/engineering, sales and marketing, customer support, general and administrative January 2025 Petah Tikva, Israel (Kshatot) (b)(c) Service, research and development/engineering, supply chain January 2025 Bangalore, India (Delta) (d) Research and development/engineering, customer support, general and administrative October 2024 Bangalore, India (Alpha) Research and development/engineering, customer support, general and administrative December 2028 (a) A portion of this facility was not in use at December 31, 2023 and is being marketed for sublease.
Item 2. Properties During 2019, we initiated a plan to consolidate and reduce the number of our facilities worldwide.
Item 2. Properties We continue to consolidate and reduce the number of facilities we operate worldwide.
We also lease smaller office space under 50,000 square feet in various countries around the world for sales, marketing, research and development/engineering, and customer services and support staff, as well as for warehouse purposes. We are exiting certain of these facilities.
We also lease smaller spaces that are each under 50,000 square feet for our staff in various countries around the world in sales, marketing, R&D/engineering, customer services and support, as well as for warehouse purposes. We believe our remaining facilities will be adequate for our current needs and that suitable additional space will be available as needed.
(b) A portion of this facility was not in use at December 31, 2022; a portion of this unused space is currently being subleased as part of a restructuring initiative that covers the entire unused space.
(b) A portion of this facility was not in use at December 31, 2023 and some of the unused space is being subleased. (c) We plan to consolidate and relocate our office space in Israel. A new lease was signed in 2023 for a building under construction in Petah Tikva.
Removed
This included plans to provide a new customer experience center for product demonstration and training, relocate and consolidate our laboratories, server farms and Cloud service infrastructure, and condense research and development, sales, marketing, business operations and administrative functions into our new Plano, Texas office.
Added
Buildout of the space to our specifications will begin in mid 2024 with occupancy expected in 2025. (d) We plan to renew this lease through January 2028.
Removed
We believe our remaining facilities will be adequate for our current needs and that suitable additional space will be available as needed.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe settled certain matters during the fourth quarter of 2021 that did not individually or in the aggregate have a material impact on our financial condition or operating results.
Biggest changeWe settled certain matters during the fourth quarter of 2023 that did not individually or in the aggregate have a material impact on our financial condition or operating results. 37
Our material legal proceedings are described in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 25, " Commitments and Contingencies " under the heading "Contingencies". The outcome of litigation is inherently uncertain.
Our material legal proceedings are described in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 26, " Commitments and Contingencies " under the heading "Contingencies". The outcome of litigation is inherently uncertain.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMarket for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Effective November 29, 2017, our common stock was quoted on The Nasdaq Global Select Market under the symbol "RBBN." Our common stock began publicly trading on The Nasdaq Global Select Market on October 30, 2017 under the symbol "SONS," following the merger of Sonus Networks, Inc. and GENBAND.
Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on The Nasdaq Global Select Market under the symbol "RBBN." Holders At February 23, 2024 , there were approximately 356 holders of record of our common stock. Recent Sales of Unregistered Securities None.
The comparison assumes an investment of $100 on December 31, 2017 in our common stock and in each of the indices and, in each case, assumes reinvestment of all dividends, if any. The performance shown is not necessarily indicative of future performance.
The comparison assumes an investment of $100 on December 31, 2018 in our common stock and in each of the indices and, in each case, assumes reinvestment of all dividends, if any. The performance shown is not necessarily indicative of future performance.
During the fourth quarter of 2022, 35,857 shares of restricted stock were returned to us by employees to satisfy tax withholding obligations arising in connection with vesting of restricted stock, which shares are included in this column. 35 Performance Graph The following performance graph compares the cumulative total return to stockholders for our common stock for the period from December 31, 2017 through December 31, 2022 with the cumulative total return over the same period on the Nasdaq Composite Index, the Nasdaq Telecommunications Index and the Russell 2000.
During the fourth quarter of 2023, 247,053 shares of restricted stock were returned to us by employees to satisfy tax withholding obligations arising in connection with vesting of restricted stock, which shares are included in this column. 39 Performance Graph The following performance graph compares the cumulative total return to stockholders for our common stock for the period from December 31, 2018 through December 31, 2023 with the cumulative total return over the same period on the Nasdaq Composite Index, the Nasdaq Telecommunications Index and the Russell 2000.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table summarizes repurchases of our common stock during the fourth quarter of 2022: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs October 1, 2022 to October 31, 2022 6,481 $ 2.30 — $ — November 1, 2022 to November 30, 2022 4,554 $ 2.73 — $ — December 1, 2022 to December 31, 2022 24,822 $ 2.91 — $ — Total 35,857 $ 2.78 — $ — (1) Upon vesting of restricted stock awards, certain of our employees may return to us a portion of the newly vested shares to satisfy the tax withholding obligations that arise in connection with such vesting.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table summarizes repurchases of our common stock during the fourth quarter of 2023: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs October 1, 2023 to October 31, 2023 128,636 $ 2.15 — $ — November 1, 2023 to November 30, 2023 29,535 $ 2.05 — $ — December 1, 2023 to December 31, 2023 88,882 $ 2.60 — $ — Total 247,053 $ 2.30 — $ — (1) Upon vesting of restricted stock awards, certain of our employees may return to us a portion of the newly vested shares to satisfy the tax withholding obligations that arise in connection with such vesting.
Removed
Holders At March 28, 2023 , there were approximately 374 holders of record of our common stock. Recent Sales of Unregistered Securities None.
Added
December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Ribbon Communications Inc. $ 100.00 $ 64.32 $ 136.10 $ 125.52 $ 57.88 $ 60.17 Nasdaq Composite $ 100.00 $ 136.69 $ 198.10 $ 242.03 $ 163.28 $ 236.17 Russell 2000 $ 100.00 $ 125.52 $ 150.58 $ 172.90 $ 137.56 $ 160.85 Nasdaq Telecommunications $ 100.00 $ 118.74 $ 130.71 $ 133.51 $ 97.62 $ 108.00
Removed
December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 Ribbon Communications Inc. $ 100.00 $ 62.35 $ 40.10 $ 84.86 $ 78.27 $ 36.09 Nasdaq Composite $ 100.00 $ 97.16 $ 132.81 $ 192.47 $ 235.15 $ 158.65 Russell 2000 $ 100.00 $ 88.99 $ 111.70 $ 134.00 $ 153.85 $ 122.41 Nasdaq Telecommunications $ 100.00 $ 77.39 $ 91.90 $ 101.16 $ 103.32 $ 75.55

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

140 edited+60 added−100 removed69 unchanged
Biggest changeOur cost of revenue, gross profit and gross margin for the years ended December 31, 2022 and 2021 were as follows (in thousands, except percentages): Year ended December 31, Increase (decrease) from prior year 2022 2021 $ % Cost of revenue: Product $ 245,145 $ 214,745 $ 30,400 14.2 % Service 142,137 147,209 (5,072) (3.4) % Amortization of acquired technology 31,542 38,343 (6,801) (17.7) % Total cost of revenue $ 418,824 $ 400,297 $ 18,527 4.6 % Gross profit $ 400,936 $ 444,660 $ (43,724) (9.8) % Gross margin 48.9 % 52.6 % Our segment cost of revenue, gross profit and gross margin for the years ended December 31, 2022 and 2021 were as follows (in thousands, except percentages): Year ended December 31, 2022 Year ended December 31, 2021 Cloud and Edge IP Optical Networks Total Cloud and Edge IP Optical Networks Total Product $ 80,570 $ 164,575 $ 245,145 $ 79,811 $ 134,934 $ 214,745 Service 98,799 43,338 142,137 107,677 39,532 147,209 Amortization of acquired technology 18,471 13,071 31,542 25,704 12,639 38,343 Total cost of revenue $ 197,840 $ 220,984 $ 418,824 $ 213,192 $ 187,105 $ 400,297 Gross profit $ 310,297 $ 90,639 $ 400,936 $ 343,464 $ 101,196 $ 444,660 Gross margin 61.1 % 29.1 % 48.9 % 61.7 % 35.1 % 52.6 % Our gross margin decreased by four percentage points in 2022 compared to 2021.
Biggest changeOur cost of revenue, gross profit and gross margin for the years ended December 31, 2023 and 2022 were as follows (in thousands, except percentages): Year ended December 31, Increase (decrease) from prior year 2023 2022 $ % Cost of revenue: Product $ 250,609 $ 245,145 $ 5,464 2.2 % Service 139,357 142,137 (2,780) (2.0) % Amortization of acquired technology 28,290 31,542 (3,252) (10.3) % Total cost of revenue $ 418,256 $ 418,824 $ (568) (0.1) % Gross profit $ 408,083 $ 400,936 $ 7,147 1.8 % Gross margin 49.4 % 48.9 % Our segment cost of revenue, gross profit and gross margin for the years ended December 31, 2023 and 2022 were as follows (in thousands, except percentages): Year ended December 31, 2023 Year ended December 31, 2022 Cloud and Edge IP Optical Networks Total Cloud and Edge IP Optical Networks Total Product $ 72,081 $ 178,528 $ 250,609 $ 80,570 $ 164,575 $ 245,145 Service 92,644 46,713 139,357 98,799 43,338 142,137 Amortization of acquired technology 12,904 15,386 28,290 18,471 13,071 31,542 Total cost of revenue $ 177,629 $ 240,627 $ 418,256 $ 197,840 $ 220,984 $ 418,824 Gross profit $ 300,018 $ 108,065 $ 408,083 $ 310,297 $ 90,639 $ 400,936 Gross margin 62.8 % 31.0 % 49.4 % 61.1 % 29.1 % 48.9 % Our gross margin was slightly higher with a 0.5 percentage point increase in 2023 compared to 2022.
The results of our 2021 impairment test determined that the carrying value of our IP Optical Networks segment exceeded its fair value. The amount of the impairment was $116.0 million, was recorded in the fourth quarter of 2021 and is reported separately in our consolidated statement of operations for the year ended December 31, 2021.
The results of our 2021 impairment test determined that the carrying value of our IP Optical Networks segment exceeded its fair value. The amount of the impairment of $116.0 million was recorded in the fourth quarter of 2021 and is reported separately in our consolidated statement of operations for the year ended December 31, 2021.
We recorded restructuring and related expense of $10.8 million in 2022, comprised of $ 5.3 million for severance and related costs, and $ 5.5 million for variable and other facilities-related costs, including $ 1.6 million of net expense for the accelerated amortization of lease assets.
We recorded $10.8 million of restructuring and related expense in 2022, comprised of $5.3 million for severance and related costs, and $5.5 million for variable and other facilities-related costs, including $1.6 million of net expense for the accelerated amortization of lease assets.
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.
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.
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. Headquartered in Plano, Texas, we have a global presence with research and development and/or sales and support locations in over thirty countries around the world.
Our mission is to create a recognized global technology leader providing cloud-centric solutions that enable the secure exchange of information, with unparalleled scale, performance and elasticity. We are headquartered in Plano, Texas, and have a global presence with research and development or sales and support locations in over thirty countries around the world.
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.
The preparation of these financial statements requires us to make 43 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 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 2022 annual test for goodwill impairment, we determined that there was no impairment of goodwill for either of our reporting units.
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 2023 and 2022 annual test for goodwill impairment, we determined that there was no impairment of goodwill for either of our reporting units.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) in the consolidated balance sheet and is subsequently reclassified into earnings in the period that the hedged forecasted transactions affect earnings.
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.
Also, the Fifth Amendment reduced the 52 minimum Consolidated Fixed Charge Coverage Ratio (as defined in the 2020 Credit Facility) in 2022, with the fourth quarter of 2022 reduced to 1.10:1.00 and in all subsequent quarters the ratio will be fixed at 1.25:1.00.
Also, the Fifth Amendment reduced the minimum Consolidated Fixed Charge Coverage Ratio (as defined in the 2020 Credit Facility) in 2022, with the fourth quarter of 2022 reduced to 1.10:1.00 and in all subsequent quarters the ratio will be fixed at 1.25:1.00.
Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense for these leases is recognized on a straight-line basis over the lease term. For operating leases, lease expense for minimum fixed lease payments is recognized on a straight-line basis over the lease 45 term.
Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense for these leases is recognized on a straight-line basis over the lease term. For operating leases, lease expense for minimum fixed lease payments is recognized on a straight-line basis over the lease term.
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.
Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. 44 Judgment is required to determine the SSP for each distinct performance obligation.
Because control transfers over time, revenue is recognized based on progress toward completion of the performance 42 obligation. The method to measure progress toward completion requires judgment and is based on the nature of the products or services to be provided.
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.
In these instances, the Company may use information such as the size of the customer and geographic region in determining the SSP. Valuation of Inventory. We review inventory for both potential obsolescence and potential loss of value periodically.
In these instances, we may use information such as the size of the customer and geographic region in determining the SSP. Valuation of Inventory. We review inventory for both potential obsolescence and potential loss of value periodically.
Specifically, loans incurred bear interest, at our option, at either LIBOR plus a margin ranging from 1.50% to 4.50% per year, or the base rate plus 0.50%, or the prime rate plus a margin ranging from 0.50% to 3.50% per year.
Specifically, loans incurred were to bear interest, at our option, at either LIBOR plus a margin ranging from 1.50% to 4.50% per year, or the base rate plus 0.50%, or the prime rate plus a margin ranging from 0.50% to 3.50% per year.
On August 29, 2022, we entered into a settlement agreement with AVCT which provided for, amongst other things, the cancellation of our investment in the Debenture Shares and the Warrants.
On August 29, 2022, we and AVCT entered into a settlement agreement which provided for, amongst other things, the cancellation of our investment in the Debenture Shares and the AVCT Warrants.
Pursuant to the settlement agreement, we also entered into a Wind Down Agreement with AVCT, pursuant to which a Reseller Agreement between the parties, as previously amended, was terminated, and the Company was granted a non-exclusive perpetual license to use and modify certain intellectual property owned by AVCT comprising WebRTC gateway technology that is integrated with Ribbon’s SBCs and Application Servers.
Pursuant to the settlement agreement, we also entered into a Wind Down Agreement with AVCT, pursuant to which a Reseller Agreement between the parties, as previously amended, was terminated, and we were granted a non-exclusive perpetual license to use and modify certain intellectual property owned by AVCT comprising WebRTC gateway technology that is integrated with Ribbon's SBCs and Application Servers.
In addition, the Facilities initiative included consolidating our global software laboratories and server farms into two lower cost North American sites. We continue to evaluate our properties included in the Facilities Initiative for accelerated amortization and/or right-of-use asset impairment. We expect that the actions under the Facilities Initiative will be substantially completed in 2023.
In addition, the Facilities Initiative included consolidating our global software laboratories and server farms into two lower cost North American sites. We continue to evaluate our properties included in the Facilities Initiative for accelerated amortization and/or right-of-use asset impairment. We expect that the actions under the Facilities Initiative will be substantially completed in 2024.
Subsequent to the Fifth Amendment, we are required to make quarterly principal payments on the 2020 Term Loan aggregating approximately $5.0 million per quarter through March 31, 2024 and $10.0 million in each of the three quarters thereafter, with the final payment approximating $275 million due on the maturity date in March 2025.
Subsequent to the Fifth Amendment, we are required to make quarterly principal payments on the 2020 Term Loan aggregating approximately $5.0 million per quarter through March 31, 2024 and $10.0 million in each of the three quarters thereafter, with the final payment due on the maturity date in March 2025.
During 2022 and 2021, 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.
During 2023 and 2022, 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 2022, 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.
As a result of our evaluations, in 2023, 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.
If we elect to repatriate all of the funds held by our non-U.S. subsidiaries as of December 31, 2022, 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.
If we elect to repatriate all of the funds held by our non-U.S. subsidiaries as of December 31, 2023, 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.
We determined that there was no impairment of our Cloud and Edge segment in 2021. Leases . We account for our leases in accordance with Accounting Standards Codification ("ASC") 842, Leases ("ASC 842"). We have operating and finance leases for corporate offices, research and development facilities, and certain equipment.
We determined that there was no impairment of our Cloud and Edge segment in 2021. Leases . We account for our leases in accordance with Accounting Standards Codification ("ASC") 842, Leases ("ASC 842"). We have operating leases for corporate offices, and research and development facilities and historically had finance leases for certain equipment.
We believe that our general and administrative expenses in 2023 will increase slightly compared to our 2022 levels, primarily due to higher employee costs and as a result of inflation. Amortization of Acquired Intangible Assets included in Operating expenses.
We believe that our general and administrative expenses in 2024 will increase slightly compared to our 2023 levels, primarily due to higher employee costs and as a result of inflation. Amortization of Acquired Intangible Assets included in Operating expenses.
The rate at which we consume cash is dependent on the cash needs of our future operations, including our contractual obligations at December 31, 2022, primarily comprised of our debt principal and interest obligations as described above, and our operating lease and purchase obligations.
The rate at which we consume cash is dependent on the cash needs of our future operations, including our contractual obligations at December 31, 2023, primarily comprised of our debt principal and interest obligations as described above, and our operating lease and purchase obligations.
Recent Accounting Pronouncements In March 2022, the Financial Accounting Standards Board (the "FASB") issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings ("TDRs") for creditors in ASC 310, Receivables (Topic 310) , and requires entities to provide disclosures about current period gross write-offs by year of origination.
In March 2022, the Financial Accounting Standards Board (the "FASB") issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310, Receivables (Topic 310) , and requires entities to provide disclosures about current period gross write-offs by year of origination.
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, 2022.
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, 2023.
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 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.
Interest expense in 2022 was primarily comprised of $ 16.0 million of interest on our outstanding term debt, $2.3 million in the aggregate related to amortization of debt issuance costs in connection with the 2020 Credit Facility (as defined below) and $1.7 million primarily related to factoring certain accounts receivable .
Interest expense in 2022 was primarily comprised of $16.0 million of interest on our outstanding term debt, $2.3 million in the aggregate related to amortization of debt issuance costs in connection with the 2020 Credit Facility (as defined below) and $1.7 million primarily related to factoring certain accounts receivable . Other (Expense) Income, Net .
Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available. Results of Operations Years Ended December 31, 2022 and 2021 Revenue.
Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available. Results of Operations Years Ended December 31, 2023 and 2022 Revenue.
In addition, the Fifth Amendment allows us to incur junior secured or unsecured debt in an amount no less than $50 million, subject to certain conditions, including the requirement that 50% of the aggregate amount of such incurred debt (net of certain costs, fees and other amounts) must be applied to prepay the 2020 Credit Facility, and compliance with certain leverage ratio-based covenant exceptions.
The Fifth 53 Amendment allowed us to incur junior secured or unsecured debt in an amount no less than $50 million, subject to certain conditions, including the requirement that 50% of the aggregate amount of such incurred debt (net of certain costs, fees and other amounts) must be applied to prepay the 2020 Credit Facility, and compliance with certain leverage ratio-based covenant exceptions.
Years Ended December 31, 2021 and 2020 For a comparison of our results of operations for the fiscal years ended December 31, 2021 and 2020, see "Part II, Item 7. MD&A" of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 11, 2022.
Years Ended December 31, 2022 and 2021 For a comparison of our results of operations for the fiscal years ended December 31, 2022 and 2021, see "Part II, Item 7. MD&A" of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023.
We provide a broad range of software and high-performance hardware products, solutions and services that enable the secure delivery of data and voice communications for residential consumers and for small, medium and large enterprises and industry verticals such as finance, education, government, utilities and transportation.
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.
The gain in accumulated other comprehensive (loss) income related to the $60 million notional amount sold of $3.1 million is 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 $0.5 million for the year ended December 31, 2022.
The gain in Accumulated other comprehensive income related to the $60 million notional amount sold of $3.1 million is 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 $0.9 million for the year ended December 31, 2023.
See "Results of Operations" in this MD&A for additional discussion of our results of operations for the years ended December 31, 2022 and 2021. Restructuring and Cost Reduction Initiatives In February 2022, our Board of Directors approved the 2022 Restructuring Plan to streamline the Company's operations in order to support the Company's investment in critical growth areas.
See "Results of Operations" in this MD&A for additional discussion of our results of operations for the years ended December 31, 2023 and 2022. 42 Restructuring and Cost Reduction Initiatives In February 2023, our Board of Directors approved the 2023 Restructuring Plan to streamline our operations in order to support our investment in critical growth areas.
Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326) , and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. ASU 2022-02 is effective for the Company January 1, 2023.
Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326) , and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. ASU 2022-02 became effective for us January 1, 2023.
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 Military Conflict in Ukraine.
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.
In connection with the 2019 Restructuring Initiative, we recorded restructuring and related expense of $0.7 million in 2022 comprised entirely of facilities related expense. We recorded restructuring and related expense of $7.0 million in 2021, 41 comprised of $5.7 million for variable and other facilities-related costs and $1.3 million of net expense for accelerated amortization of lease assets.
In connection with the 2019 Restructuring Initiative, we recorded no restructuring and related expense in 2023, $0.7 million in 2022 comprised entirely of facilities related expense and $7.0 million of such expense in 2021, comprised of $5.7 million for variable and other facilities-related costs and $1.3 million of net expense for accelerated amortization of lease assets.
In connection with this initiative, we recorded restructuring and related expense of $10.2 million in 2022, comprised of $3.3 million for variable and other facilities-related costs, $1.6 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease, and $5.3 million for severance and related costs for approximately 70 employees.
In 2022, we recorded $10.2 million of expense for the 2022 Restructuring Plan, comprised of $3.3 million for variable and other facilities-related costs, $1.6 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease, and $5.3 million for severance and related costs for approximately 70 employees.
Accordingly, we have maintained a valuation allowance on our U.S. deferred tax assets of $25.5 million. As a result of our evaluations for Israel, we maintained a full valuation allowance against our net deferred tax assets in Israel.
Accordingly, we have maintained a valuation allowance on our U.S. deferred tax assets of $ 23.9 million. As a result of our evaluations for Israel, we maintained a full valuation allowance against our net deferred tax assets in Israel.
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 approximates the current level of our term loan debt outstanding.
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 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. 44 Business Combinations.
The amount of stock-based compensation expense recorded in any period for unvested awards requires estimates of the amount of stock-based awards that are expected to be forfeited prior to vesting, as well as assumptions regarding the probability that performance-based stock awards without market conditions will be earned. Preferred Stock and Warrants.
Our 2022 investing activities were comprised of $10 million paid for purchases of property and equipment, and $3 million paid for purchases of software licenses, partially offset by $1 million of proceeds from the sale of business.
Our 2023 investing activities were used to purchase property and equipment and software licenses. Our 2022 investing activities were comprised of $10 million paid for purchases of property and equipment, and $3 million paid for purchases of software licenses, partially offset by $1 million of proceeds from the sale of a business.
We had cash held by our non-U.S. subsidiaries aggregating approximately $15 million and $60 million at December 31, 2022 and 2021, respectively.
We had cash held by our non-U.S. subsidiaries aggregating approximately $16 million and $15 million at December 31, 2023 and 2022, respectively.
The degree to which the ongoing COVID-19 pandemic, the ongoing military conflict in Ukraine and the high inflationary and rising interest rate environment impacts our future business, financial position and results of operations will depend on developments beyond our control, including the duration of the global economic downturn that has resulted from these factors.
The degree to which the ongoing wars in Israel and Ukraine and the inflationary and high interest rate environment impacts our future business, financial position and results of operations will depend on developments beyond our control, including the duration of the global economic downturn that has resulted from these factors. The Ongoing Wars in Israel and Ukraine .
The following customer contributed 10% or more of our revenue in the years ended December 31, 2022 and 2021: Year ended December 31, 2022 2021 Verizon Communications Inc. 15% 16% Revenue earned from customers domiciled outside the United States was 57% of total revenue in both 2022 and 2021.
The following customer contributed 10% or more of our revenue in the years ended December 31, 2023 and 2022: Year ended December 31, 2023 2022 Verizon Communications Inc. 11% 15% Revenue earned from customers domiciled outside the United States was 58% and 57% of total revenue in 2023 and 2022, respectively.
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, business combinations, goodwill and intangible assets and accounting for income taxes. Revenue Recognition . We derive revenue from two primary sources: products and services.
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.
We recorded $1.6 million and $3.4 million of expense for accelerated rent amortization in the years ended December 31, 2022 and 2021, respectively. These amounts are included as components of Restructuring and related expense, and reduced our Operating lease right-of-use assets in our consolidated balance sheets at December 31, 2022 and 2021.
We recorded $1.0 million, $1.6 million and $3.4 million of expense for accelerated rent amortization in the years ended December 31, 2023, 2022 and 2021, respectively. These amounts are included as components of Restructuring and related expense in our statements of operations, reducing our Operating lease right-of-use assets in our consolidated balance sheets at the end of each respective year.
Our 2022 operating expenses included $29.6 million of amortization of acquired intangible assets, $6.3 million of acquisition-, disposal- and integration-related expense, and $10.8 million of restructuring and related expense.
Our 2023 operating expenses included $28.6 million of amortization of acquired intangible assets, $4.5 million of acquisition-, disposal- and integration-related expense, and $16.2 million of restructuring and related expense. Our 2022 operating expenses included $29.6 million of amortization of acquired intangible assets, $6.3 million of acquisition-, disposal- and integration-related expense, and $10.8 million of restructuring and related expense.
In the 1st and 2nd quarters of 2023, the Maximum Consolidated Net Leverage Ratio allowed declines to 3.25:1.00 and in all subsequent quarters the ratio will be fixed at 3.00:1.00.
In the first and second quarters of 2023, the Maximum Consolidated Net Leverage Ratio allowed declined to 3.25:1.00 and in all subsequent quarters the ratio will be fixed at 3.00:1.00.
We anticipate devoting substantial capital resources to continue our research and development efforts, to maintain our sales, support and marketing, to complete acquisition-related integration activities and for other general corporate activities. We further believe that our financial resources, along with managing discretionary expenses, will allow us to manage the ongoing impact of the COVID-19 pandemic on our business operations.
We anticipate devoting substantial capital resources to continue our research and development efforts, to maintain our sales, support and marketing, and for other general corporate activities. We further believe that our financial resources, along with managing discretionary expenses, will allow us to manage the ongoing impact of inflation and the supply chain disruptions on our business operations.
The sanctions continue to evolve and further changes in the current sanctions could further limit our ability to sell products and services to customers in Russia and, our ability to collect on outstanding accounts receivable from such customers.
These sanctions and restrictions currently prohibit our ability to sell certain products and services. 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 and, our ability to collect on outstanding accounts receivable from such customers.
The amount for accelerated amortization of lease assets was comprised of $3.4 million of expense and $2.1 million of income related to a lease modification for one of our restructured lease facilities. The amount accrued for severance and related costs was paid in 2021.
The amount of $1.3 million for accelerated amortization of lease assets was comprised of $3.4 million of expense, partially offset by $2.1 million of income related to a lease modification for one of our restructured lease facilities. The amount initially accrued for severance and related costs under this 2019 Restructuring Initiative was paid in 2021.
Operating leases are reported separately in our consolidated balance sheets at December 31, 2022 and 2021. Assets acquired under finance leases are included in Property and equipment, net, in our consolidated balance sheet at December 31, 2021. We had no finance leases at December 31, 2022. We determine if an arrangement is a lease at inception.
Operating leases are reported separately in our consolidated balance sheets. Assets acquired under finance leases, if any, are included in Property and equipment, net, in the consolidated balance sheets. We determine if an arrangement is a lease at inception.
Based on our current expectations, we believe our current cash and available borrowings under the 2020 Credit Facility, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least twelve months.
Based on our current expectations, we believe our current cash balance, the cash generated from our operations, and borrowings available under the 2020 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.
The 2022 Restructuring Plan includes, among other things, charges related to a consolidation of facilities and a workforce reduction. Any positions eliminated in countries outside the United States are subject to local law and consultation requirements.
The 2023 Restructuring Plan include s, 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.
Cash Flows from Financing Activities Our financing activities provided $1 million of cash in 2022, primarily due to $50 million of net proceeds from the Equity Offering, partially offset by $45 million of principal payments on the 2020 Credit Facility, including the voluntary $15 million incremental principal payment in connection with the Fourth Amendment and voluntary $10.0 million incremental principal payment in connection with the Fifth Amendment, and $3 million for the payment of tax withholding obligations related to the net share settlements of restricted stock awards upon vesting.
Our financing activities provided $1 million of cash in 2022, primarily due to $50 million of net proceeds from the private placement by us of 17,071,311 shares of our common stock, par value $0.0001 per share, at a price of $3.05 per share on August 12, 2022 (the "Equity Offering"), partially offset by $45 million of principal payments on the 2020 Credit Facility, including the voluntary $15 million incremental principal payment in connection with the Fourth Amendment and voluntary $10 million incremental principal payment in connection with the Fifth Amendment, and $3 million for the payment of tax withholding obligations related to the net share settlements of restricted stock awards upon vesting.
We recorded $11.7 million of restructuring and related expense in 2021, comprised of $4.6 million for severance and related costs, and $7.1 million for variable and other facilities-related costs, including $1.3 million of net expense for the accelerated amortization of lease assets.
We recorded restructuring and related expense of $16.2 million in 2023, 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.
ASU 2021-08 is effective for the Company January 1, 2023. The Company believes that the adoption of ASU 2021-08 could have a material impact on its consolidated financial statements for periods including and subsequent to significant business acquisitions.
ASU 2021-08 was effective for us January 1, 2023. We believe the adoption of ASU 2021-08 could have a material impact on our consolidated financial statements for periods including and subsequent to significant business acquisitions.
Although headline inflation in the United States and Europe appears to have peaked, as gasoline and natural gas prices recede from the latest spike, core inflation (excluding food and energy prices) remains elevated and is a source of continued cost pressure on businesses and households.
Although headline inflation in the United States and Europe appears to have reached a peak , core inflation (excluding food and energy prices) remains elevated and is a source of continued cost pressure on businesses and households.
These amounts were partially offset by certain non-cash expenses, such as amortization of intangible assets, the decrease in the fair value of the AVCT Investment, stock-based compensation, as well as depreciation and amortization of property and equipment.
These amounts were partially offset by certain non-cash expenses, such as amortization of intangible assets, the decrease in the fair value of the AVCT Investment, stock-based compensation, as well as depreciation and amortization of property and equipment. Cash Flows from Investing Activities Our investing activities used $9 million and $12 million of cash in 2023 and 2022, respectively.
The Company believes that the adoption of ASU 2022-02 will not have a material impact on its consolidated financial statements upon adoption.
The adoption of ASU 2022-02 did not have a material impact on our consolidated financial statements upon adoption.
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.
The swap was to mature on March 3, 2025, the same date the 2020 Credit Facility matures. 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.
In 2021, our Cloud and Edge gross margin was 61.7% and our IP Optical Networks gross margin was 35.1%. Our operating expenses were $449.3 million in 2022 and $562.5 million in 2021.
In 2022, our Cloud and Edge gross margin was 61.1% and our IP Optical Networks gross margin was 29.1%. Our operating expenses were $432.4 million in 2023 and $449.3 million in 2022.
Research and development expenses for the years ended December 31, 2022 and 2021 were as follows (in thousands, except percentages): Year ended December 31, Increase from prior year 2022 2021 $ % $ 203,676 $ 194,948 $ 8,728 4.5 % The increase in our research and development expenses in 2022 compared to 2021 was primarily attributable to approximately $17 million of higher expenses in our IP Optical Networks segment, partially offset by approximately $8 million of lower expenses in our Cloud and Edge segment.
R&D expenses for the years ended December 31, 2023 and 2022 were as follows (in thousands, except percentages): Year ended December 31, Decrease from prior year 2023 2022 $ % $ 190,660 $ 203,676 $ (13,016) (6.4) % The decrease in our research and development expenses in 2023 compared to 2022 was primarily attributable to approximately $8 million of lower expenses in our IP Optical Networks segment and approximately $5 million of lower expenses in our Cloud and Edge segment.
At December 31, 2022, we had $8.3 million of letters of credit, bank guarantees, performance and bid bonds outstanding (collectively, the "Guarantees"), comprised of the $3.3 million of letters of credit under the 2020 Credit Facility described above (the "Letters of Credit") and $5.0 million 53 of bank guarantees and performance and bid bonds (collectively, the "Other Guarantees") under various uncommitted facilities.
At December 31, 2023, we had $7.9 million of letters of credit, bank guarantees, and performance and bid bonds outstanding (collectively, "Guarantees"), comprised of $2.7 million of letters of credit under the 2020 Credit Facility described above (the "Letters of Credit") and $5.2 million of bank guarantees and performance and bid bonds (collectively, the "Other Guarantees").
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.
We are required to record expense through the respective final vesting dates regardless of the number of shares that are ultimately earned.
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.
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.
Other (Expense) Income, Net . We recorded other expense, net, aggregating $44.5 million in 2022, primarily comprised of $41.3 million of losses resulting from the change in the fair value of the AVCT Investment.
We recorded other expense, net of $44.5 million in 2022, primarily comprised of $41.3 million of losses resulting from the change in the fair value of the AVCT Investment. Income Taxes. We recorded an income tax provision of $10.8 million and income tax benefit of $14.5 million in 2023 and 2022, respectively.
The decrease in accrued expenses and other long-term liabilities was primarily due to employee-related cash payments and payments related to facilities, professional fees and royalties Cash Flows from Investing Activities Our investing activities used $12 million and $14 million of cash in 2022 and 2021, respectively.
Our operating activities used $26 million of cash in 2022, primarily resulting from our net loss, lower accrued expenses and other long-term liabilities, and higher inventory. The decrease in accrued expenses and other long-term liabilities was primarily due to employee-related cash payments and payments related to facilities, professional fees and royalties.
To accomplish this objective, we are using 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 the agreements without exchange of the underlying notional amount.
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.
We recorded an income tax benefit of $14.5 million and $31.0 million in 2022 and 2021, respectively. The decrease in the tax benefit from 2021 to 2022 is a result of changes in the jurisdictional mix of pre-tax book income between those jurisdictions that have a valuation allowance and those that do not.
The change from a tax benefit in 2022 to a tax provision in 2023 is a result of changes in the jurisdictional mix of pre-tax book income between those jurisdictions that have a valuation allowance and those that do not.
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. As described above, effective in the fourth quarter of 2020, we determined that we had two operating segments: Cloud and Edge, and IP Optical Networks.
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.
We have provided for income taxes on the undistributed earnings of our non-U.S. subsidiaries as of December 31, 2022, excluding Ireland and Israel, which are indefinitely reinvested. Accordingly, we are required to recognize deferred taxes for 2022 on the outside basis differences related to the foreign subsidiaries, the largest of these differences being undistributed earnings.
We have provided for income taxes on the undistributed earnings of our non-U.S. subsidiaries as of December 31, 2023, excluding Ireland and Israel, which are indefinitely reinvested.
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 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.
Payments of debt issuance costs and principal payments of finance leases together totaled approximately $2 million. Our financing activities used $34 million of cash in 2021.
Payments of debt issuance costs and principal payments of finance leases together totaled approximately $2 million.
Our revenue was $845.0 million in 2021, comprised of $556.7 million attributable to Cloud and Edge and $288.3 million attributable to IP Optical Networks. Our gross profit was $400.9 million in 2022, comprised of $310.3 million attributable to Cloud and Edge and $90.6 million attributable to IP Optical Networks.
Our gross profit was $400.9 million in 2022, comprised of $310.3 million attributable to Cloud and Edge and $90.6 million attributable to IP Optical Networks. Our gross margin was 49.4% in 2023 and 48.9% in 2022. In 2023, our Cloud and Edge gross margin was 62.8% and our IP Optical Networks gross margin was 31.0%.
At December 31, 2021, we had an outstanding balance under the 2020 Term Loan of $375.5 million at an average interest rate of 3.4% and $4.3 million of letters of credit outstanding with an interest rate of 2.5%. We were in compliance with all covenants of the 2020 Credit Facility at both December 31, 2022 and 2021 .
At December 31, 2023, we had an outstanding balance under the 2020 Term Loan of $235.4 million at an average interest rate of 10.0% and $2.7 million of letters of credit outstanding with an interest rate of 4.5%.
The increased expense also includes higher employee costs as a result of inflationary pressures. The increased investment in IP Optical Networks R&D is focused on significantly expanding our portfolio of IP Routing solutions, adding additional features to our Optical Transport portfolio, and investment in a next generation SDN management and orchestration platform.
The reduced expenses are a combination of lower employee headcount and outside subcontractors. 50 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.
The 2019 Restructuring Initiative includes facility consolidations, refinement of our research and development activities, and a reduction in workforce.
In 2019, we implemented a restructuring plan to streamline our global footprint, improve our operations and enhance our customer delivery (the "2019 Restructuring Initiative"). The 2019 Restructuring Initiative includes facility consolidations, refinement of our research and development activities, and a reduction in workforce.
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. 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.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur objective is 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.
Biggest changeOur 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. In March 2023, we disposed of our interest rate swap by selling the remaining notional value totaling $340 million back to our counterparty.
A hypothetical movement of plus or minus 50 basis points in the interest rate of our outstanding debt would have changed our interest expense by approximately $ 2 million for the year ended December 31, 2022. This calculation does not take into account the impact of our interest rate swap.
A hypothetical movement of plus or minus 50 basis points in the interest rate of our outstanding debt would have changed our interest expense by approximately $1 million for the year ended December 31, 2023. Foreign Currency Exchange Risk.
Amounts reported in accumulated other comprehensive income (loss) related to our derivative are reclassified to interest expense as interest is accrued on our variable-rate debt. Our derivative had a fair value of $25.4 million at December 31, 2022, comprised of $13.2 million included in Other current assets and $12.2 million included in Other assets on our consolidated balance sheet.
Amounts remaining in Accumulated other comprehensive income related to our derivative totaled $12.0 million and are being amortized to interest expense over the remaining term of our variable-rate debt on a straight-line basis. At December 31, 2023, we had outstanding debt totaling $235.4 million.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to a variety of market risks, changes in interest rates affecting the return on our investments and foreign currency fluctuations. To manage the volatility related to the exposure to changes in interest rates, we have entered into a derivative financial instrument.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. The following discussion about these market risks includes forward-looking statements. Actual results could differ materially from those projected in these forward-looking statements. Interest Rate Risk.
Removed
Based upon projected forward rates, we estimate as of December 31, 2022 that $13.2 million may be reclassified as a decrease to interest expense over the next twelve months. At December 31, 2022, we had outstanding debt totaling $330.4 million .
Added
To manage the volatility related to the exposure to changes in interest rates, we have historically entered into a derivative financial instrument, specifically an interest rate swap. Our 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.
Removed
Based on a hypothetical 10% adverse movement in all foreign currency exchange rates, our revenue and net loss for the year ended December 31, 2022 would have been adversely affected by approximately $ 21 million and $ 16 million, respectively, although the actual effects could differ materially from this hypothetical analysis. 56
Added
We received $19.2 million from our counterparty, consisting of $0.8 million of interest and $18.4 million for the sale and we recognized a gain from Accumulated other comprehensive income of $7.3 million to Other expense, net in our consolidated statement of operations.
Added
As a global company operating in more than 30 countries, a significant portion of our revenues and expenses are denominated in currencies other than the U.S. Dollar. If the U.S. Dollar strengthens against these other currencies, our revenue for these transactions reported in U.S. Dollars would decline and our non-U.S. Dollar expenses would be inversely impacted, resulting in lower U.S.
Added
Dollar expenses. A hypothetical 10% strengthening of the U.S. Dollar would have negatively impacted our revenues for the year ended December 31, 2023 by approximately $18 million.
Added
Because a higher proportion of our expenses are denominated in foreign currencies compared to our revenue, our net loss for the year ended December 31, 2023 would have been positively impacted by approximately $19 million. 57

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