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What changed in HARMONIC INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of HARMONIC INC.'s 2023 and 2024 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 2024 report.

+250 added−275 removedSource: 10-K (2025-02-14) vs 10-K (2024-02-16)

Top changes in HARMONIC INC.'s 2024 10-K

250 paragraphs added · 275 removed · 196 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe are focused on understanding our diversity, equity and inclusion (DEI) opportunities and executing on a strategy to support further progress. We support regional employee-led groups that promote and drive various volunteering initiatives aimed at assisting underrepresented and disadvantaged populations in the communities where we operate, as well as internal awareness and educational campaigns on DEI-related topics.
Biggest changeWe support regional employee-led groups that promote and drive various volunteering initiatives aimed at assisting underrepresented and disadvantaged populations in the communities where we operate. We continue to focus on building a pipeline for talent to create more opportunities for workplace gender and other diversity and to support greater representation within the company.
Video Business We believe our customers must continue to employ innovative technologies and services to address key trends in the dynamic video industry. • Demand for Streaming Services .
Video Business Industry Trends We believe our customers must continue to employ innovative technologies and services to address key trends in the dynamic video industry. • Demand for Streaming Services .
Except as expressly set forth in this Annual Report on Form 10-K, the contents of our web site are not incorporated by reference into, or otherwise to be regarded as part of, this report or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 11 Table of Contents
Except as expressly set forth in this Annual Report on Form 10-K, the contents of our web site are not incorporated by reference into, or otherwise to be regarded as part of, this report or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 10 Table of Contents
Backlog We schedule production of our products and solutions based upon our backlog, open contracts, informal commitments from customers and sales projections. Our backlog consists of unfilled firm purchase orders and contracts by our customers which have not been completed. Approximately 51% of our backlog and deferred revenue is projected to be converted to revenue within a rolling one-year period.
Backlog We schedule production of our products and solutions based upon our backlog, open contracts, informal commitments from customers and sales projections. Our backlog consists of unfilled firm purchase orders and contracts by our customers which have not been completed. Approximately 57% of our backlog and deferred revenue is projected to be converted to revenue within a rolling one-year period.
We cannot assure you that others will not develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents that we own. In addition, effective patent, copyright and trade secret protection may be unavailable or limited in which we do business or may do business in the future.
We cannot assure you that others will not develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents that we own. In addition, effective patent, copyright and trade secret protection may be unavailable or limited in a territory in which we do business or may do business in the future.
We offer high-density, real-time stream processing systems capable of high-performance, high-throughput video processing for mission-critical IP video delivery applications, including multiplexing, scrambling, splicing and blackout source switching. • Edge processors . Our family of Edge processing platforms allows service providers to acquire content delivered via satellite, IP or terrestrial networks for distribution to their subscribers.
We offer high-density, real-time stream processing systems capable of high-performance, high-throughput video processing for mission-critical IP video delivery applications, including multiplexing, scrambling, splicing and blackout source switching. 6 Table of Contents • Edge processors . Our family of Edge processing platforms allows service providers to acquire content delivered via satellite, IP or terrestrial networks for distribution to their subscribers.
We believe this transition will cause traditional Pay-TV service providers and broadcasters to focus their investments on (i) providing streaming services and (ii) reducing the operational complexities and cost of broadcast television.
We believe this transition will cause traditional Pay-TV service providers and broadcasters to focus their investments on (i) providing streaming services and (ii) reducing the operational complexities and cost of broadcast television. • Transformation of Broadcast Infrastructure.
Any such litigation could result in substantial costs and diversion of resources, including management time, and could negatively affect our business, operating results, financial position and cash flows. In order to successfully develop and market our products, we may be required to enter into technology development or licensing agreements with third parties.
Any such litigation could result in substantial costs and diversion of resources, including management time, and could negatively affect our business, operating results, financial position and cash flows. 8 Table of Contents In order to successfully develop and market our products, we may be required to enter into technology development or licensing agreements with third parties.
We believe a software-based broadband access solution can significantly reduce broadband operator facility costs, especially costs related to physical space and power consumption, and increase operational efficiency, and that the deployment of these systems will be an important step in broadband operators’ transition to all-IP networks. 4 Table of Contents • Distributed Access Architecture .
We believe a software-based broadband access solution can significantly reduce broadband operator facility costs, especially costs related to physical space and power consumption, and increase operational efficiency, and that the deployment of these systems will be an important step in broadband operators’ transition to all-IP networks. • Distributed Access Architecture .
A decrease in the number of relatively larger individual transactions in which we are involved in any quarter could adversely affect our operating results for that quarter. Sales and Marketing In the United States and internationally, we sell our products through our own direct sales force, as well as through independent resellers and systems integrators.
A decrease in the number of relatively larger individual transactions in which we are involved in any quarter could adversely affect our operating results for that quarter. 7 Table of Contents Sales and Marketing In the United States and internationally, we sell our products through our own direct sales force, as well as through independent resellers and systems integrators.
Each product management organization is also responsible for setting price levels, demand forecasting and general support of the sales force, particularly at major accounts. 8 Table of Contents Our corporate marketing organization is responsible for building awareness of the Harmonic brand in our markets and driving engagement with our strategies, solutions and products.
Each product management organization is also responsible for setting price levels, demand forecasting and general support of the sales force, particularly at major accounts. Our corporate marketing organization is responsible for building awareness of the Harmonic brand in our markets and driving engagement with our strategies, solutions and products.
With streaming viewership continuing to grow rapidly, we believe targeted ad insertion will become a foundational pillar of the video industry in the coming years. • Streaming of Live Events .
With streaming viewership continuing to grow rapidly, we believe targeted ad insertion will be a foundational pillar of the video industry in the coming years. • Streaming of Live Events .
Set forth below is a representative list of our significant end user and integrator/reseller customers, listed alphabetically, based, in part, on revenue during 2023.
Set forth below is a representative list of our significant end user and integrator/reseller customers, listed alphabetically, based, in part, on revenue during 2024.
Although we continue to seek to broaden our customer base by penetrating new markets and further expanding internationally, we expect to see continuing industry consolidation and customer concentration. During 2023, 2022 and 2021, Comcast accounted for 44%, 39% and 26% of our net revenue, respectively.
Although we continue to seek to broaden our customer base by penetrating new markets and further expanding internationally, we expect to see continuing industry consolidation and customer concentration. During 2024, 2023 and 2022, Comcast accounted for 44%, 44% and 39% of our net revenue, respectively.
Technology Trends • DOCSIS . We believe the cable industry will continue to deploy the DOCSIS 3.1 standard, which enables high bandwidth data transfer over existing broadband infrastructure, and we expect increasing adoption and deployment of the next-generation DOCSIS 4.0 standard, which has begun in certain markets. • Virtualization .
Technology Trends • DOCSIS . We believe the cable industry will continue to deploy the DOCSIS 3.1 standard, which enables high bandwidth data transfer over existing broadband infrastructure, and we expect accelerating adoption and deployment of the next-generation DOCSIS 4.0 standard, which has begun in certain markets. 4 Table of Contents • Virtualization .
Compression technologies such as High Efficiency Video Compression (HEVC) or advances in H.264/AVC codecs, as well as increasing requirements for HDR encoding, will continue to remain a high priority for both broadcast and streaming providers. • Decline in Broadcast Viewing . Broadcast television viewership will continue to decline as the growth in streaming accelerates.
Compression technologies such as High Efficiency Video Compression (HEVC) or advances in H.264/AVC codecs, as well as increasing requirements for HDR encoding, will continue to remain a high priority for both broadcast and streaming providers. 5 Table of Contents • Decline in Broadcast Viewing . Broadcast television viewership will continue to decline as the growth in streaming accelerates.
We also provide an on-premise SaaS offering with our VOS cloud-native software solution for customers seeking to deploy a cloud-like architecture in a private data center. 7 Table of Contents Technical Support and Professional Services We provide maintenance and support services to most of our customers under service level agreements that are generally renewed on an annual basis.
We also provide an on-premise SaaS offering with our VOS Media Software solution for customers seeking to deploy a cloud-like architecture in a private data center. Technical Support and Professional Services We provide maintenance and support services to most of our customers under service level agreements that are generally renewed on an annual basis.
With respect to our Broadband business segment, our major research and development efforts are focused on broadband access solutions for both video and data, particularly the ongoing development of our centralized, distributed and hybrid cOS software-based broadband access solutions and converging fiber and DOCSIS capabilities on our cOS solution platform.
With respect to our Broadband business segment, our major research and development efforts are focused on broadband access solutions, particularly the ongoing development of our centralized, distributed and hybrid cOS software-based broadband access solutions and converging fiber and DOCSIS capabilities on our cOS solution platform.
In addition, the operation of network infrastructure is space, power and personnel intensive. Hardware-centric networks can also be expensive to update or replace. To remain competitive, especially in the face of heightened competition from non-cable service providers, such as telcos, to deliver gigabit data rates, broadband operators need to significantly upgrade existing equipment and network technologies.
In addition, the operation of network infrastructure is space, power and personnel intensive. Hardware-centric networks can also be expensive to update or replace. To remain competitive, especially in the face of heightened competition between cable service providers and telcos to deliver multi-gigabit and symmetric data rates, broadband operators need to significantly upgrade existing equipment and network technologies.
As of December 31, 2023 and 2022, we had backlog, including deferred revenue, of $653.2 million and $457.1 million, respectively. Delivery schedules on such orders may be deferred or canceled for a number of reasons, including reductions in spending by our customers or changes in specific customer requirements.
As of December 31, 2024 and 2023, we had backlog, including deferred revenue, of $496.3 million and $653.2 million, respectively. Delivery schedules on such orders may be deferred or canceled for a number of reasons, including reductions in spending by our customers or changes in specific customer requirements.
Of those employees, 450 were located in the United States and Canada, and 909 employees were located outside of North America in 22 countries in Central and South America, the Middle East and Africa, Europe and the Asia Pacific region. From time to time, we also employ a number of temporary employees and consultants on a contract basis.
Of those employees, 408 were located in the United States and Canada, and 832 employees were located outside of North America in 21 countries in Central and South America, the Middle East and Africa, Europe and the Asia Pacific region. From time to time, we also employ a number of temporary employees and consultants on a contract basis.
Our Video business infrastructure solutions are delivered either through shipment of our products, software licenses or as software-as-a-service (“SaaS”) subscriptions. Across our two business segments, we derived approximately 74% of our revenue from the Americas in 2023. The Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) regions accounted for 21% and 5% of our 2023 revenue, respectively.
Our Video business infrastructure solutions are delivered either through shipment of our products, software licenses or as software-as-a-service (“SaaS”) subscriptions. Across our two business segments, we derived approximately 82% of our revenue from the Americas in 2024. The Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) regions accounted for 14% and 4% of our 2024 revenue, respectively.
Our direct sales team is organized by business segment, and geographically and by major customers and markets to support customer requirements. Our principal sales offices outside of the United States are located in Europe and Asia, and we have support staff in Switzerland and France to support our international customers and operations.
Our direct sales team is organized by business segment, and geographically and by major customers and markets to support customer requirements. Our principal sales offices outside of the United States are located in Europe and Asia.
We regularly conduct employee surveys to gauge employee engagement and satisfaction, and we use the views expressed in the surveys to influence our people strategy and policies. 10 Table of Contents As a global company, much of our success is rooted in the diversity of our teams and our commitment to inclusion, where all employees are respected regardless of gender, race, color, national origin, ancestry, citizenship, religion, age, physical or mental disability, medical condition, genetic information, pregnancy, sexual orientation, gender identity or gender expression, veteran status, or marital status.
As a global company, much of our success is rooted in the diversity of our teams and our commitment to inclusion, where all employees are respected regardless of gender, race, color, national origin, ancestry, citizenship, religion, age, physical or mental disability, medical condition, genetic information, pregnancy, sexual orientation, gender identity or gender expression, veteran status, or marital status.
Industry Overview and Market Trends Broadband Business Industry Challenges Broadband operators continue to face challenges from the rapid growth of demand for broadband bandwidth in their networks, driven primarily by: • more users with more connected devices and applications; • bundled digital video, voice and high-speed data services; and • bandwidth-intensive VOD and streaming video services, and interactive cloud applications.
Industry Overview and Market Trends Broadband Business Industry Challenges Broadband operators continue to face challenges from the rapid growth of demand for broadband bandwidth in their networks, driven primarily by: • more users with more connected devices and applications; • bundled digital video, voice and high-speed data services; • bandwidth-intensive Video-on-demand (VOD) and streaming video services, and interactive cloud applications; • work-from-home (WFH) and remote education demands for high-quality video conferencing; and • Internet-of-Things (IoT) devices that contribute to continuous data generation and transmission.
United States International Apple Inc America Movil Cable One Inc Comcast Charter Communications Deutsche Telekom Comcast Eurasiatrans B&PE Cox Communications Groupe Canal DirecTV Millicom International Dish Network Normann Engineering Heartland Video Systems NYL Eletronica SES Tele2 Sverige AB Sinclair Broadcast Group Vodafone Sales to our 10 largest customers in 2023, 2022 and 2021 accounted for approximately 66%, 67% and 58% of our net revenue, respectively.
United States International Apple Inc America Movil Charter Communications Comcast Comcast Groupe Canal DirecTV Millicom International Dish Network Netorium EPlus Technology NYL Eletronica GCI Communication Rogers Communications Heartland Video Systems Sky Perfect SES Tele2 Sverige AB Sinclair Broadcast Group Vodafone Sales to our 10 largest customers in 2024, 2023 and 2022 accounted for approximately 72%, 66% and 67% of our net revenue, respectively.
The group develops all of our corporate messaging and manages all customer and industry communication channels, including public relations, web and social media, events and trade shows, as well as demand generation marketing campaigns in conjunction with our sales force.
The group develops our corporate messaging and manages our customer and industry communication channels, including public relations, web and social media, events and trade shows, as well as demand generation marketing campaigns in conjunction with our sales force. Manufacturing and Suppliers We rely on third-party contract manufacturers to assemble our products and the subassemblies and modules for our products.
We believe our cOS solution delivers unprecedented scalability, agility and cost savings, and enables our customers to migrate to multi-gigabit broadband capacity and the fast deployment of DOCSIS and FTTx data, video and voice services.
Harmonic hardware products include our Oyster, Pebble, Ripple, and Shell DAA nodes, Reef and Wave PHY shelf products; and OLT modules and devices. We believe our cOS solution delivers unprecedented scalability, agility and cost savings, and enables our customers to migrate to multi-gigabit broadband capacity and the fast deployment of DOCSIS and FTTx data, video and voice services.
We believe that, in order to maximize cost savings, a material portion of these operations will migrate to public clouds in the coming years, while some customers will upgrade and replace their aging on-premise equipment with next-generation software-based appliances that significantly reduce operational complexity. 6 Table of Contents Our Products and Solutions Broadband Products and Solutions Software-Based Broadband Access Solution.
We believe that, in order to maximize cost savings, our customers will migrate all or a portion of these operations to public clouds, or upgrade and replace their aging on-premise equipment with next-generation software-based appliances that significantly reduce operational complexity, or invest in hybrid infrastructure approaches that combine public cloud and on-premise equipment.
We do not generally maintain long-term agreements with any of our suppliers. Intellectual Property As of December 31, 2023, we held 133 issued U.S. patents and 47 issued foreign patents and had 39 patent applications pending. Our issued patents are scheduled to expire between 2024 and 2041.
Intellectual Property As of December 31, 2024, we held 133 issued U.S. patents and 48 issued foreign patents and had 48 patent applications pending. Our issued patents are scheduled to expire between 2025 and 2043.
This capability allows the encoders to converge workflows targeted for all forms of video delivery, whether broadcast or streaming. • Video Servers . Our Spectrum family of video server systems are used by broadcast and media companies to create play-to-air television channels.
Our Spectrum family of video server systems are used by broadcast and media companies to create play-to-air television channels.
Our research and development program is primarily focused on developing new products and solutions, and adding new features and other improvements to existing products and solutions.
In addition, a portion of our research and development is conducted through third-party partners with engineering resources in Ukraine, Poland and India. Our research and development program is primarily focused on developing new products and solutions, and adding new features and other improvements to existing products and solutions.
We offer rewards and recognition programs, including spot awards to recognize employee contributions, patent incentive awards, and various functional recognition awards.
We offer rewards and recognition programs, including spot awards to recognize employee contributions, patent incentive awards, and various functional recognition awards. We regularly conduct employee surveys to gauge employee engagement and satisfaction, and we use the views expressed in the surveys to influence our people strategy and policies.
In addition, due to annual budget cycles at many of our customers, the amount of our backlog at any given time is not necessarily indicative of actual revenues for any succeeding period. 9 Table of Contents Competition The markets in which our Video and Broadband businesses operate are extremely competitive and have been characterized by rapid technological change and declining average selling prices in the past.
In addition, due to annual budget cycles at many of our customers, the amount of our backlog at any given time is not necessarily indicative of actual revenues for any succeeding period.
Manufacturing and Suppliers We rely on third-party contract manufacturers to assemble our products and the subassemblies and modules for our products. In 2003, we entered into an agreement with Plexus Services Corp. (“Plexus”) to act as our primary contract manufacturer. Plexus accounts for the majority of the products we purchase from our contract manufacturers.
In 2003, we entered into an agreement with Plexus Services Corp. (“Plexus”) to act as our primary contract manufacturer. Plexus accounts for the majority of the products we purchase from our contract manufacturers. This agreement has automatic annual renewals, unless prior notice for nonrenewal is given, and has been automatically renewed for a term expiring in October 2025.
Many components, subassemblies and modules necessary for the manufacture or integration of our products are obtained from a sole supplier or a limited group of suppliers. While we expend considerable efforts to qualify additional component sources, consolidation of suppliers in the industry and the small number of viable alternatives have limited the results of these efforts.
While we expend considerable efforts to qualify additional component sources, consolidation of suppliers in the industry and the small number of viable alternatives have limited the results of these efforts. We do not generally maintain long-term agreements with any of our suppliers.
Research and development expenses in 2023, 2022 and 2021 were approximately $126.3 million, $120.3 million and $102.2 million, respectively. Research and development expenses as a percentage of revenue in 2023, 2022 and 2021 were approximately 21%, 19% and 20%, respectively.
Research and development expenses in 2024, 2023 and 2022 were approximately $121.0 million, $126.3 million and $120.3 million, respectively. Research and development expenses as a percentage of revenue in 2024, 2023 and 2022 were approximately 18%, 21% and 19%, respectively. Our internal research and development activities are conducted primarily in the United States, France, Israel, Hong Kong, Canada and India.
As fiber is pulled deeper into the network, broadband operators will have the infrastructure and technology to deliver both traditional cable services and FTTH. Our Broadband business strategy is focused on providing our customers with software-based solutions, on a centralized, distributed access or hybrid architecture, to enable and support these technology and industry trends.
Additionally, our open optical network unit (ONU) approach, which supports a growing list of ONUs, fosters an open ecosystem that benefits Telcos. Our Broadband business strategy is focused on providing our customers with software-based solutions, on a centralized, distributed access or hybrid architecture, to enable and support these technology and industry trends.
Human Capital Resources As of December 31, 2023, we employed a total of 1,359 full time employees, including 570 in research and development, 238 in sales, 267 in service and support, 81 in operations, 67 in marketing (corporate and product) and 136 in a general and administrative capacity.
Our failure to successfully develop and introduce new products and solutions would materially and adversely affect our business, operating results, financial condition and cash flows. 9 Table of Contents Human Capital Resources As of December 31, 2024, we employed a total of 1,240 full time employees, including 561 in research and development, 178 in sales, 236 in service and support, 67 in operations, 56 in marketing (corporate and product) and 142 in a general and administrative capacity.
Our appliance product families include: • Encoders. Our high-performance encoders compress video, audio and data channels to low bit rates while maintaining high video quality. Our latest software-based XOS encoders can deliver video in multiple formats, including standard, HD and Ultra HD, and in any video compression standard, including MPEG-2, MPEG-4 AVC and HEVC.
Our latest software-based XOS encoders can deliver video in multiple formats, including standard, HD and Ultra HD, and in any video compression standard, including MPEG-2, MPEG-4 AVC and HEVC. This capability allows the encoders to converge workflows targeted for all forms of video delivery, whether broadcast or streaming. • Video Servers .
Our Video business strategy is focused on providing our customers with software-based appliances and SaaS platforms to enable and support these trends. Our Video Markets Broadcast and Media Companies • Network broadcasters, programmers and content owners continue to invest in new and enhanced direct-to-consumer streaming platforms, as well as upgrade and improve the efficiencies of their traditional broadcast television services.
Our Video business strategy is focused on providing our broadcast and media, streaming, and service provider customers with software-based appliances and SaaS platforms to enable and support these trends and transitions. Our Products and Solutions Broadband Products and Solutions Software-Based Broadband Access Solution.
We continue to focus on building a pipeline for talent to create more opportunities for workplace gender and other diversity and to support greater representation within the company. Available Information Our website is located at www.harmonicinc.com , and our investor relations website is located at investor.harmonicinc.com.
Available Information Our website is located at www.harmonicinc.com , and our investor relations website is located at investor.harmonicinc.com.
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In response to these trends, our customers are: • expanding their streaming offerings with video-on-demand (VOD) programming, live events and/or linear TV bundles to reach a larger and more global audience; 5 Table of Contents • utilizing streaming technologies to expand monetization opportunities with personalized and targeted ad insertion; • continuing to enhance and differentiate their content offerings, consolidate to achieve greater economies of scale and subscriber concentration, and acquire other companies to expand their content libraries and capabilities to develop original content; and • improving the efficiency and utilization of legacy infrastructure to minimize operational and staffing needs and costs by migrating services to public cloud SaaS or upgrading on-premise equipment with the latest generation of highly dense and functionally rich technologies.
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As fiber is pulled deeper into the network, broadband operators will have the infrastructure and technology to deliver both traditional cable services and FTTH. Harmonic offers a range of indoor OLT shelves and hardened outdoor OLT shelves and OLT modules as part of the cOS solution, delivering PON services to telcos.
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We believe these companies will utilize new technologies, including public cloud infrastructure and SaaS platforms, to expand their streaming offerings, reach wider audiences, and increase monetization opportunities through personalized advertising, and, in parallel, reduce the complexity and cost of running and operating their traditional broadcast services.
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Our appliance product families include: • Encoders. Our high-performance encoders compress video and audio files to low bit rates, and prepare such files for the proper formats and specifications required for playback, while maintaining high audio/video quality.
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Streaming • We believe media companies of all sizes will invest heavily in streaming services for the foreseeable future, whether for linear TV, live events or a range of VOD offerings, and that these offerings will be enhanced to include personal and targeted advertisements to increase monetization potential.
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We do not generally maintain long-term agreements with any of our contract manufacturers. Many components, subassemblies and modules necessary for the manufacture or integration of our products are obtained from a sole supplier or a limited group of suppliers.
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We believe many of these streaming offerings will be launched by new entrants into the space, in addition to those launched by traditional media companies who have a history and brand in broadcast television. Service Providers • Wireline Operators .
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Competition The markets in which our Video and Broadband businesses operate are extremely competitive and have been characterized by rapid technological change and declining average selling prices in the past.
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Cable and telco operators continue to focus on various initiatives to improve and differentiate their service offerings from competing service providers, including bundled digital video, voice and high-speed data services; expansion of streaming service offerings to include linear TV, live events and VOD; upgraded consumer-facing applications; and capacity enhancement of high-speed data services. • Satellite Operators .
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Satellite operators around the world have established digital television services that serve tens of millions of subscribers, with the ability to provide tens of thousands of linear channels. We expect satellite operators to increase their investments in their streaming offerings to meet rapidly changing consumption habits and, in parallel, strive to optimize their traditional broadcast operations.
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Video Infrastructure Technology Trends • Acceleration of Streaming Services. We believe the industry will continue to adopt streaming technologies at an accelerating pace to deliver video content to consumers and, increasingly, utilize public clouds to do so. • Transformation of Broadcast Infrastructure.
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This agreement has automatic annual renewals, unless prior notice for nonrenewal is given, and has been automatically renewed for a term expiring in October 2024. We do not generally maintain long-term agreements with any of our contract manufacturers.
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Our internal research and development activities are conducted primarily in the United States (California, Oregon and New Jersey), France, Israel and Hong Kong. In addition, a portion of our research and development is conducted through third-party partners with engineering resources in Ukraine and India.
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Our failure to successfully develop and introduce new products and solutions would materially and adversely affect our business, operating results, financial condition and cash flows.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

95 edited+30 added−30 removed164 unchanged
Biggest changeThese trends and requirements include the following: • convergence, whereby network operators bundle video, voice and data services to consumers, including mobile delivery options; • continued strong consumer demand for streaming video services; • continued adoption of public cloud SaaS platforms to stream video content to consumers, as well as for broadcast infrastructure workflows; 14 Table of Contents • continued growth in targeted advertising as a key revenue source for video streaming service providers; • the pace of adoption and deployment of high-bandwidth technology, such as DOCSIS 3.x, DOCSIS 4.0, next generation LTE and FTTP; • the use of digital video by businesses, governments and educational institutions globally; • efforts by regulators and governments in the United States and internationally to encourage the adoption of broadband and digital technologies, including 5G broadband networks, as well as to regulate broadband access and delivery; • the need to develop partnerships with other companies involved in video infrastructure workflow and broadband services; • the extent and nature of regulatory attitudes towards issues such as network neutrality, competition between operators, access by third parties to networks of other operators, local franchising requirements for telcos to offer video, and other new services, such as mobile video; and • the outcome of disputes and negotiations between content owners and service providers regarding rights of service providers to store and distribute recorded broadcast content, which outcomes may drive adoption of one technology over another in some cases.
Biggest changeThese trends and requirements include the following: • more consumers with more connected devices and applications; • convergence, whereby network operators bundle video, voice and data services to consumers, including mobile delivery options; • continued strong consumer demand for bandwidth-intensive video-on-demand and streaming video services, and interactive cloud applications; • the pace of adoption and deployment of high-bandwidth technology, such as DOCSIS 3.x, DOCSIS 4.0, next generation LTE and FTTP, along with virtualized broadband access solutions and distributed multiple access architectures; • continued adoption of public cloud SaaS platforms to stream video content to consumers, as well as for broadcast infrastructure workflows; • continued growth in targeted advertising as a key revenue source for video streaming service providers; • the use of digital video by businesses, governments and educational institutions globally; • efforts by regulators and governments in the United States and internationally to encourage the adoption of broadband and digital technologies, including 5G broadband networks, as well as to regulate broadband access and delivery; • the need to develop partnerships with other companies involved in broadband services and video infrastructure workflow; • the extent and nature of regulatory attitudes towards issues such as network neutrality, competition between operators, access by third parties to networks of other operators, local franchising requirements for telcos to offer video, and other new services, such as mobile video; and • the outcome of disputes and negotiations between content owners and service providers regarding rights of service providers to store and distribute recorded broadcast content, which outcomes may drive adoption of one technology over another in some cases.
Our competitors in our Video SaaS business include companies that offer video delivery and processing SaaS solutions, SaaS video streaming platform providers, and certain public cloud service providers. A number of our principal business competitors in both of our business segments are substantially larger and/or may have access to greater financial, technical, marketing or other resources than we have.
Our competitors in our Video SaaS business include companies that offer video delivery and processing SaaS solutions to SaaS video streaming platform providers, and certain public cloud service providers. A number of our principal business competitors in both of our business segments are substantially larger and/or may have access to greater financial, technical, marketing or other resources than we have.
Our Credit Agreement contains covenants that limit our ability and the ability of our subsidiaries to, subject to certain limitations and exceptions: • grant liens; • incur debt; • make acquisitions and other investments; 21 Table of Contents • undergo certain fundamental changes; • dispose of assets; • make certain restricted payments; • enter into transactions with affiliates; and • enter into burdensome agreements.
Our Credit Agreement contains covenants that limit our ability and the ability of our subsidiaries to, subject to certain limitations and exceptions: • grant liens; • incur debt; • make acquisitions and other investments; • undergo certain fundamental changes; • dispose of assets; • make certain restricted payments; 21 Table of Contents • enter into transactions with affiliates; and • enter into burdensome agreements.
Bribery Act and/or similar anti-corruption and anti-bribery laws, particularly in emerging market countries; • the burden of complying with a wide variety of foreign laws, treaties and technical standards; • fulfilling “country of origin” requirements for our products for certain customers; • difficulty in staffing and managing foreign operations; • business and operational disruptions or delays caused by political, social and/or economic instability and unrest (e.g., Ukraine and Israel), including risks related to terrorist activity, particularly in emerging market countries; • changes in economic policies by foreign governments, including the imposition and potential continued expansion of economic sanctions by the United States and the European Union on the Russian Federation; • changes in diplomatic and trade relationships, including the imposition of new trade restrictions, trade protection measures, import or export requirements, trade embargoes and other trade barriers, including those between the United States and China; • any negative economic impacts resulting from the political environment in the United States or the United Kingdoms’ exit from the European Union; and • business and economic disruptions and delays caused by outbreaks of disease, epidemics and potential pandemics.
Bribery Act and/or similar anti-corruption and anti-bribery laws, particularly in emerging market countries; • the burden of complying with a wide variety of foreign laws, regulations, treaties and technical standards; • fulfilling “country of origin” requirements for our products for certain customers; • difficulty in staffing and managing foreign operations; • business and operational disruptions or delays caused by political, social and/or economic instability and unrest (e.g., Ukraine and Israel), including risks related to terrorist activity, particularly in emerging market countries; • changes in economic policies by foreign governments, including the imposition and potential continued expansion of economic sanctions by the United States and the European Union on the Russian Federation; • changes in diplomatic and trade relationships, including the imposition of new trade restrictions, trade protection measures, import or export requirements, trade embargoes and other trade barriers, including those between the United States and China; • any negative economic impacts resulting from the political environment in the United States or the United Kingdoms’ exit from the European Union; and • business and economic disruptions and delays caused by outbreaks of disease, epidemics and potential pandemics.
Any escalation of political tensions, military activity, instability, unrest or conflict could limit or prevent our employees from traveling to, from, or within Ukraine to direct and coordinate our outsourced engineering teams, or cause us to shift all or portions of the development work occurring in Ukraine, and/or cause GlobalLogic to relocate personnel to other locations or countries pursuant to its business continuity plans.
Any escalation of political tensions, military activity, instability, unrest or conflict could disrupt or prevent the work of our outsourced engineering teams; limit or prevent our employees from traveling to, from, or within Ukraine to direct and coordinate our outsourced engineering teams; or cause us to shift all or portions of the development work occurring in Ukraine, and/or cause GlobalLogic to relocate personnel to other locations or countries pursuant to its business continuity plans.
The loss of one or more of our key customers, a failure to continue diversifying our customer base, or a decrease in the number of larger transactions could harm our business and our operating results. Historically, a significant portion of our revenue has been derived from relatively few customers, due in part to the consolidation of media customers.
The loss of one or more of our key customers, a failure to continue diversifying our customer base, or a decrease in the number of larger transactions could harm our business and our operating results. Historically, a significant portion of our revenue has been derived from relatively few customers, due in part to customer consolidation.
We believe our cOS software-based broadband access solutions, supporting centralized, DAA or hybrid configurations, will significantly reduce broadband operator headend costs and increase operational efficiency, and are an important step in operators’ transition to all-IP networks.
We believe our cOS software-based broadband access solutions, supporting centralized, DAA or hybrid configurations, will continue to significantly reduce broadband operator headend costs and increase operational efficiency, and are an important step in operators’ transition to all-IP networks.
Further, these risks could materially and adversely affect our business if one of our sole sources, or a sole source of one of our suppliers or contract manufacturers, is adversely affected by a natural disaster or the outbreak of disease, epidemics and other pandemics. These risks could also be heightened by geopolitical factors.
Further, these risks could materially and adversely affect our business if one of our sole sources, or a sole source of one of our suppliers or contract manufacturers, is adversely affected by a natural disaster or the outbreak of disease, epidemics and pandemics. These risks could also be heightened by geopolitical factors.
From time to time we assess our relationship with our contract manufacturers, and we do not generally maintain long-term agreements with any of our suppliers or contract manufacturers. Our agreement with Plexus has automatic annual renewals, unless prior notice is given by either party, and has been automatically renewed for a term expiring in October 2024.
From time to time, we assess our relationship with our contract manufacturers, and we do not generally maintain long-term agreements with any of our suppliers or contract manufacturers. Our agreement with Plexus has automatic annual renewals, unless prior notice is given by either party, and has been automatically renewed for a term expiring in October 2025.
Our activities in certain emerging countries create the risk of unauthorized payments or offers of payments by one of our employees, consultants, sales agents or channel partners that could be in violation of various anti-corruption laws, even though these parties may not be under our control. Under the FCPA and U.K.
Bribery Act. Our activities in certain emerging countries create the risk of unauthorized payments or offers of payments by one of our employees, consultants, sales agents or channel partners that could be in violation of various anti-corruption laws, even though these parties may not be under our control. Under the FCPA and U.K.
The repurchase program expires in February 2025 and we are not obligated to repurchase a specified number or dollar value of shares. Share repurchases will be made from time to time in open market purchases and 10b5-1 trading plans, as permitted by securities laws and other legal requirements.
The repurchase program expires in February 2028 and we are not obligated to repurchase a specified number or dollar value of shares. Share repurchases will be made from time to time in open market purchases and 10b5-1 trading plans, as permitted by securities laws and other legal requirements.
Some of the factors that may cause these fluctuations include: • the level and timing of spending of our customers in the United States, Europe and in other markets; • economic and financial conditions specific to each of the cable, satellite and telco, and broadcast and media industries, as well as general economic and financial market conditions, including the Hamas-Israel and Russia-Ukraine conflicts, tensions between China and Taiwan and China and the United States, bank insolvency and related uncertainty and volatility in the financial services sector, inflation and government and business responses thereto as well as related supply chain and labor shortage issues; 15 Table of Contents • changes in market acceptance of and demand for our products or our customers’ services or products; • the timing and amount of orders, especially from large individual transactions and transactions with our significant customers; • the mix of our products sold and the effect it has on gross margins; • the timing of revenue recognition, including revenue recognition on sales arrangements and from transactions with significant service and support components, which may span several quarters; • our transition to a SaaS subscription model for our Video business, which may cause near-term declines in revenue in our Video segment since, unlike Video appliance sales, SaaS revenue is recognized over the applicable subscription term based on service usage; • the timing of completion of our customers’ projects; • the length of each customer product upgrade cycle and the volume of purchases during the cycle; • competitive market conditions, including pricing actions by our competitors; • the level and mix of our domestic and international revenue; • new product introductions by our competitors or by us; • uncertainty in the European Union due to unrest or violence in Ukraine that the ongoing military conflict with the Russian Federation has caused, which could adversely affect our results, financial condition and prospects; • uncertainty in the Middle East due to the latest developments in the conflict between Hamas and Israel, which could also adversely affect our results, financial condition and prospects; • changes in domestic and international regulatory environments affecting our business; • the evaluation of new services, new standards and system architectures by our customers; • the cost and timely availability to us of components, subassemblies and modules; • the mix of our customer base, by industry and size, and sales channels; • changes in our operating and extraordinary expenses; • the timing of acquisitions and dispositions by us and the financial impact of such transactions; • impairment of our goodwill; • the impact of litigation, such as related litigation expenses and settlement costs; • write-downs of inventory and investments; • changes in our effective federal tax rate, including as a result of changes in our valuation allowance against our deferred tax assets, and changes in our effective state tax rates, including as a result of apportionment; • changes to tax rules related to the deferral of foreign earnings and compliance with foreign tax rules; • the impact of applicable accounting guidance on accounting for uncertainty in income taxes that requires us to establish reserves for uncertain tax positions and accrue potential tax penalties and interest; and • the impact of applicable accounting guidance on business combinations that requires us to record charges for certain acquisition related costs and expenses and generally to expense restructuring costs associated with a business combination subsequent to the acquisition date.
Some of the factors that may cause these fluctuations include: • the level and timing of spending of our customers in the United States, Europe and in other markets; • economic and financial conditions specific to each of the cable, satellite and telco, and broadcast and media industries; general economic and financial market conditions, including impacts from the Middle East and Russia-Ukraine conflicts and related risks of escalation or broader regional conflicts, tensions between China and Taiwan and China and the United States; tariffs; bank insolvencies and related uncertainty and volatility in the financial services sector; inflation; and government and business responses thereto as well as related supply chain and labor shortage issues; • changes in market acceptance of and demand for our products or our customers’ services or products; • the timing and amount of orders, especially from large individual transactions and transactions with our significant customers; • the mix of our products sold and the effect it has on gross margins; • the timing of revenue recognition, including revenue recognition on sales arrangements and from transactions with significant service and support components, which may span several quarters; • our ongoing transition to a SaaS subscription model for our Video business, which may cause near-term declines in revenue in our Video segment since, unlike Video appliance sales, SaaS revenue is recognized over the applicable subscription term based on service usage; • the timing of completion of our customers’ projects; • the length of each customer product upgrade cycle and the volume of purchases during the cycle; • competitive market conditions, including pricing actions by our competitors; • the level and mix of our domestic and international revenue; • new product introductions by our competitors or by us; • uncertainty in the European Union due to unrest or violence in Ukraine that the ongoing military conflict with the Russian Federation has caused, which could adversely affect our results, financial condition and prospects; • uncertainty in the Middle East due to the latest developments in the conflicts in the Middle East and the risk of escalation and broader conflict in the region, which could also adversely affect our results, financial condition and prospects; • changes in domestic and international regulatory environments affecting our business; • the evaluation of new services, new standards and system architectures by our customers; • the cost and timely availability to us of components, subassemblies and modules; • the mix of our customer base, by industry and size, and sales channels; • changes in our operating and extraordinary expenses; 15 Table of Contents • the timing of acquisitions and dispositions by us and the financial impact of such transactions; • impairment of our goodwill; • the impact of litigation, such as related litigation expenses and settlement costs; • write-downs of inventory and investments; • changes in our effective federal tax rate, including as a result of changes in our valuation allowance against our deferred tax assets, and changes in our effective state tax rates, including as a result of apportionment; • changes to tax rules related to the deferral of foreign earnings and compliance with foreign tax rules; • the impact of applicable accounting guidance on accounting for uncertainty in income taxes that requires us to establish reserves for uncertain tax positions and accrue potential tax penalties and interest; and • the impact of applicable accounting guidance on business combinations that requires us to record charges for certain acquisition related costs and expenses and generally to expense restructuring costs associated with a business combination subsequent to the acquisition date.
Any significant conflict involving Israel could have a direct effect on our business, in the form of physical damage or injury, restrictions from traveling or reluctance to travel to from or within Israel by our Israeli and other employees or those of our subcontractors, or the loss of Israeli employees to active military duty.
Any significant conflict involving Israel could have a direct effect on our business, in the form of physical damage to our facilities or injury to personnel, restrictions from traveling or reluctance to travel to from or within Israel by our Israeli and other employees or those of our subcontractors, or the loss of Israeli employees to active military duty.
In addition, we outsource a portion of our research and development activities to certain third-party partners with development centers located in different countries, particularly Ukraine and India. 28 Table of Contents Our international operations, international operations of our resellers, contract manufacturers and outsourcing partners, and our efforts to maintain and increase revenue in international markets are subject to a number of risks, which are generally greater with respect to emerging market countries, including the following: • growth and stability of the economy in one or more international regions, including regional economic impacts of the Hamas-Israel and Russia-Ukraine conflicts and tensions between China and Taiwan and the United States; • fluctuations in currency exchange rates; • ability of certain non-U.S. customers to timely make payments in U.S. dollar due to local government currency controls; • changes in foreign government regulations and telco standards; • import and export license requirements, tariffs, taxes, economic sanctions, contractual limitations and other trade barriers; • our significant reliance on resellers and others to purchase and resell our products and solutions, particularly in our Video business and in emerging market countries; • availability of credit, particularly in emerging market countries; • longer collection periods and greater difficulty in enforcing contracts and collecting accounts receivable, especially from smaller customers and resellers, particularly in emerging market countries; • compliance with the FCPA, the U.K.
In addition, we outsource a portion of our research and development activities to certain third-party partners with development centers located in different countries, particularly Ukraine and India. 28 Table of Contents Our international operations, international operations of our resellers, contract manufacturers and outsourcing partners, and our efforts to maintain and increase revenue in international markets are subject to a number of risks, which are generally greater with respect to emerging market countries, including the following: • growth and stability of the economy in one or more international regions, including regional economic impacts of the Middle East and Russia-Ukraine conflicts and potential escalations and broader regional conflicts, and tensions between China and Taiwan and the United States; • fluctuations in currency exchange rates; • ability of certain non-U.S. customers to timely make payments in U.S. dollar due to local government currency controls; • changes in foreign government regulations and telco standards; • import and export license requirements, tariffs, taxes, economic sanctions, contractual limitations and other trade barriers; • our significant reliance on resellers and others to purchase and resell our products and solutions, particularly in our Video business and in emerging market countries; • availability of credit, particularly in emerging market countries; • longer collection periods and greater difficulty in enforcing contracts and collecting accounts receivable, especially from smaller customers and resellers, particularly in emerging market countries; • compliance with the FCPA, the U.K.
Operational Risks We rely on resellers, value-added resellers and systems integrators for a significant portion of our Video business revenue, and disruptions to, or our failure to develop and manage our relationships with these customers or the processes and procedures that support them could adversely affect our business.
We rely on resellers, value-added resellers and systems integrators for a significant portion of our Video business revenue, and disruptions to, or our failure to develop and manage our relationships with these customers or the processes and procedures that support them could adversely affect our business.
A breach of any of these covenants could result in an event of default under the Credit Agreement. As of December 31, 2023, we were in compliance with all covenants under the Credit Agreement; however, if an event of default occurs, the lenders may terminate their commitments and accelerate our obligations under the Credit Agreement.
A breach of any of these covenants could result in an event of default under the Credit Agreement. As of December 31, 2024, we were in compliance with all covenants under the Credit Agreement; however, if an event of default occurs, the lenders may terminate their commitments and accelerate our obligations under the Credit Agreement.
While we have invested in and continue to update our network security and cybersecurity infrastructure and systems, if our cybersecurity systems, or the cybersecurity systems of relevant third parties, fail to protect against unauthorized access, sophisticated cyber-attacks, phishing schemes, ransomware and other malicious code, data protection breaches, computer viruses, denial-of-service attacks, or disruptions from unauthorized tampering or human error, our ability to conduct our business effectively could be damaged in a number of ways, including: • our intellectual property and other proprietary data, or financial assets, could be stolen; • our ability to manage and conduct our business operations could be seriously disrupted; • defects and security vulnerabilities could be introduced into our product, software and SaaS offerings, thereby damaging the reputation and perceived reliability and security of our products; and • confidential or otherwise sensitive information, including personal data of our customers, employees and business partners, could be compromised and lead to unauthorized, unlawful, or accidental access to, or acquisition, use, corruption, loss, destruction, unavailability, alteration or dissemination of, or damage to, such information.
While we have invested in and continue to update our network security and cybersecurity infrastructure and systems, if our cybersecurity systems, or the cybersecurity systems of relevant third parties, fail to protect against unauthorized access, sophisticated cyber-attacks, phishing schemes, ransomware and other malicious code, data protection breaches, computer viruses, denial-of-service attacks, or disruptions from unauthorized tampering or human error, our ability to conduct our business effectively could be damaged in a number of ways, including: • our intellectual property and other proprietary data, or financial assets, could be stolen, lost, altered, or otherwise unavailable; • our ability to manage and conduct our business operations could be seriously disrupted; • defects and security vulnerabilities could be introduced into our product, software and SaaS offerings, thereby damaging the reputation and perceived reliability and security of our products; and 19 Table of Contents • confidential or otherwise sensitive information, including personal data of our customers, employees and business partners, could be compromised and lead to unauthorized, unlawful, or accidental access to, or acquisition, use, corruption, loss, destruction, unavailability, alteration or dissemination of, or damage to, such information.
Our ability to manage our business effectively in the future, inclu ding with respect to any future growth, our operation as both a hardware and increasingly software- and SaaS-centric business, the integration of any acquisition efforts, and the breadth of our international operations, will require us to train, motivate and manage our employees successfully, to attract and integrate new employees into our overall operations, to retain key employees and to continue to improve and evolve our operational, financial and management systems.
Our ability to manage our business effectively in the future, including with respect to any future growth, our operation as both a hardware and increasingly software- and SaaS-centric business, the integration of any acquisition efforts, and the breadth of our international operations, will require us to train, motivate and manage our employees successfully, to attract and integrate new employees into our overall operations, to retain key employees and to continue to improve and evolve our operational, financial and management systems.
Accordingly, our future success is highly dependent upon establishing and maintaining successful relationships with a variety of channel partners. 17 Table of Contents We generally have no long-term contracts or minimum purchase commitments with any of our resellers, VAR or system integrator customers, and our contracts with these parties do not prohibit them from purchasing or offering products or services that compete with ours.
Accordingly, our future success is highly dependent upon establishing and maintaining successful relationships with a variety of channel partners. We generally have no long-term contracts or minimum purchase commitments with any of our resellers, VAR or system integrator customers, and our contracts with these parties do not prohibit them from purchasing or offering products or services that compete with ours.
Further, the interruption or curtailment of trade between Israel and its trading partners, as a result of terrorist attacks or hostilities, conflicts between Israel and any other Middle Eastern country or organization, or any other cause, could significantly harm our business.
Further, the interruption or curtailment of supply chains or trade between Israel and its trading partners, as a result of terrorist attacks or hostilities, conflicts between Israel and any other Middle Eastern country or organization, or any other cause, could significantly harm our business.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, including the Notes and any outstanding loans under the Credit Agreement.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, including any outstanding loans under the Credit Agreement.
As we expand the scale of our business activities, any changes in U.S. or foreign tax laws that apply to such activities may increase our worldwide effective tax rate and harm our business, financial condition and results of operations. 25 Table of Contents Legal, Regulatory and Compliance Risks We or our customers may face intellectual property infringement claims from third parties.
As we expand the scale of our business activities, any changes in U.S. or foreign tax laws that apply to such activities may increase our worldwide effective tax rate and harm our business, financial condition and results of operations. Legal, Regulatory and Compliance Risks We or our customers may face intellectual property infringement claims from third parties.
Accordingly, even small variations in the timing of revenue, particularly from relatively large individual transactions, can cause significant fluctuations in operating results in a particular quarter. 16 Table of Contents As a result of these factors and other factors, our operating results in one or more future periods may fail to meet or exceed the expectations of securities analysts or investors.
Accordingly, even small variations in the timing of revenue, particularly from relatively large individual transactions, can cause significant fluctuations in operating results in a particular quarter. As a result of these factors and other factors, our operating results in one or more future periods may fail to meet or exceed the expectations of securities analysts or investors.
We cannot provide assurances that any current or future changes of management personnel in the future will not cause disruption to operations or customer relationships or a decline in our operating results. We are also dependent on our ability to retain and motivate our existing highly qualified personnel, in addition to attracting new highly qualified personnel.
We cannot provide assurances that any current or future changes of management personnel in the future will not cause disruption to operations or customer relationships or a decline in our operating results. 18 Table of Contents We are also dependent on our ability to retain and motivate our existing highly qualified personnel, in addition to attracting new highly qualified personnel.
These spending patterns are dependent on a variety of factors, including: • the impact of general economic conditions, actual and projected, including inflation, rising interest rates, lower consumer confidence, volatile capital markets, supply chain disruptions, uncertainty and volatility in the financial services sector and the impact of the Hamas-Israel and Russia-Ukraine conflicts, and government and business responses thereto, on the global economy and regional economies; • access to financing; • annual budget cycles of customers in each of the industries we serve; • the impact of industry consolidation; • customers suspending, reducing or shifting spending due to: (i) new video or broadband industry standards; (ii) industry trends and technology shifts, such as virtualization and cloud-based solutions, and (iii) new products and solutions, such as products and services based on our VOS software platform or our cOS (formerly CableOS) software-based broadband access solutions; • delayed or reduced near-term spending as customers transition away from video appliance solutions and adopt new business and operating models enabled by software and cloud-based solutions, including SaaS unified video processing solutions; • federal, state, local and foreign government regulation of broadband, telco, television broadcasting and streaming media; • overall demand for communication services and consumer acceptance of new video and data technologies and services; • competitive pressures, including pricing pressures; • the impact of fluctuations in currency exchange rates, such as the strengthening of the U.S. dollar; and • discretionary end-user customer spending patterns.
These spending patterns are dependent on a variety of factors, including: • the impact of general economic conditions, actual and projected, including inflation, changing interest rates, lower consumer confidence, volatile capital markets, supply chain disruptions, tariffs, uncertainty and volatility in the financial services sector and the impact of the Middle East and Russia-Ukraine conflicts, and government and business responses thereto, on the global economy and regional economies; • access to financing; • annual budget cycles of customers in each of the industries we serve; • the impact of industry consolidation; • customers suspending, reducing or shifting spending due to: (i) new broadband or video industry standards; (ii) industry trends and technology shifts, such as virtualization and cloud-based solutions; and (iii) new products and solutions, such as products and services based on our cOS software-based broadband access solutions or VOS software platform; • delayed or reduced near-term spending as customers transition away from video appliance solutions and adopt new business and operating models enabled by software and cloud-based solutions, including SaaS video processing solutions; • federal, state, local and foreign government regulation of broadband, telco, television broadcasting and streaming media; • overall demand for communication services and consumer acceptance of new video and data technologies and services; • competitive pressures, including pricing pressures; • the impact of fluctuations in currency exchange rates, such as the strengthening of the U.S. dollar; and • discretionary end-user customer spending patterns.
Acquisitions involve numerous risks, including the following: • unanticipated costs or delays associated with an acquisition; • difficulties in the assimilation and integration of acquired operations, technologies and/or products; • potential disruption of our business and the diversion of management’s attention from the regular operations of the business during the acquisition process; • the challenges of managing a larger and more geographically widespread operation and product portfolio after the closing of the acquisition; • potential adverse effects on new and existing business relationships with suppliers, contract manufacturers, resellers, partners and customers; • compliance with regulatory requirements, such as local employment regulations and organized labor requirements; • risks associated with entering markets in which we may have no or limited prior experience; • the potential loss of key employees of acquired businesses and our own business as a result of integration; • difficulties in bringing acquired products and businesses into compliance with applicable legal requirements in jurisdictions in which we operate and sell products; • impact of known potential liabilities or unknown liabilities, including litigation and infringement claims, associated with companies we acquire; • substantial charges for acquisition costs or for the amortization of certain purchased intangible assets, deferred stock compensation or similar items; • substantial impairments to goodwill or intangible assets in the event that an acquisition proves to be less valuable than the price we paid for it; • difficulties in establishing and maintaining uniform financial and other standards, controls, procedures and policies; • delays in realizing, or failure to realize, the anticipated benefits of an acquisition; and • the possibility that any acquisition may be viewed negatively by our customers or investors or the financial markets. 23 Table of Contents Competition within our industry for acquisitions of businesses, technologies, assets and product lines has been, and is likely to continue to be, intense.
Acquisitions involve numerous risks, including the following: • unanticipated costs or delays associated with an acquisition; • difficulties in the assimilation and integration of acquired operations, technologies and/or products; • potential disruption of our business and the diversion of management’s attention from the regular operations of the business during the acquisition process; • the challenges of managing a larger and more geographically widespread operation and product portfolio after the closing of the acquisition; • potential adverse effects on new and existing business relationships with suppliers, contract manufacturers, resellers, partners and customers; • compliance with regulatory requirements, such as local employment regulations and organized labor requirements; • risks associated with entering markets in which we may have no or limited prior experience; • the potential loss of key employees of acquired businesses and our own business as a result of integration; 22 Table of Contents • difficulties in bringing acquired products and businesses into compliance with applicable legal requirements in jurisdictions in which we operate and sell products; • impact of known potential liabilities or unknown liabilities, including litigation and infringement claims, associated with companies we acquire; • substantial charges for acquisition costs or for the amortization of certain purchased intangible assets, deferred stock compensation or similar items; • substantial impairments to goodwill or intangible assets in the event that an acquisition proves to be less valuable than the price we paid for it; • difficulties in establishing and maintaining uniform financial and other standards, controls, procedures and policies; • delays in realizing, or failure to realize, the anticipated benefits of an acquisition; and • the possibility that any acquisition may be viewed negatively by our customers or investors or the financial markets.
Such litigation could result in substantial costs and diversion of management time and other resources, and could materially and adversely affect our business, operating results, financial condition and cash flows. 26 Table of Contents Our use of open source software in some of our products may expose us to certain risks.
Such litigation could result in substantial costs and diversion of management time and other resources, and could materially and adversely affect our business, operating results, financial condition and cash flows. Our use of open source software in some of our products may expose us to certain risks.
Further, rising interest rates and tightening credit markets may reduce our access to debt financing, which may adversely affect our future business plans and expected growth, and would increase the cost of long-term fixed rate and short-term variable rate borrowings, which could reduce our earnings.
Further, historically high interest rates and tightening credit markets may reduce our access to debt financing, which may adversely affect our future business plans and expected growth and would increase the cost of long-term fixed rate and short-term variable rate borrowings, which could reduce our earnings.
Our ability to refinance our indebtedness, including the Notes, will depend on our ability to borrow under the terms of the Credit Agreement, the capital markets and our financial condition at such time.
Our ability to refinance our indebtedness will depend on our ability to borrow under the terms of the Credit Agreement, the capital markets and our financial condition at such time.
During challenging economic times, such as those caused by the Hamas-Israel and Russia-Ukraine conflicts, inflation, currency devaluation, and bank insolvencies and related uncertainty and volatility in the financial services sector and in tight credit markets, many customers have delayed and reduced and may continue to delay or reduce capital expenditures.
During challenging economic times, such as those caused by the Middle East and Russia-Ukraine conflicts, inflation, currency devaluation, and bank insolvencies and related uncertainty and volatility in the financial services sector and in tight credit markets, many customers have delayed and reduced and may continue to delay or reduce capital expenditures.
Moreover, if competitors adapt new broadband industry technology standards into competing broadband access solutions faster than we do, or promulgate a new or competitive architecture for next-generation broadband access solutions that renders our cOS solution obsolete, our business may be adversely impacted. The sales cycle for our cOS solutions tends to be long.
Moreover, if competitors adapt new broadband industry technology standards into competing broadband access solutions faster than we do, or promulgate a new or competitive architecture for next-generation broadband access solutions that renders our cOS solution obsolete, our business may be adversely impacted. 14 Table of Contents The sales cycle for our cOS solutions tends to be long.
Sales to our top 10 customers in the fiscal years ended December 31, 2023, 2022 and 2021 accounted for approximately 66%, 67% and 58% of our net revenue, respectively. Although we continue to seek to broaden our customer base by penetrating new markets and further expanding internationally, we expect to see continuing industry consolidation and customer concentration.
Sales to our top 10 customers in the fiscal years ended December 31, 2024, 2023 and 2022 accounted for approximately 72%, 66% and 67% of our net revenue, respectively. Although we continue to seek to broaden our customer base by penetrating new markets and further expanding internationally, we expect to see continuing industry consolidation activity and customer concentration.
Our current debt agreements and any debt financing that we secure in the future require or may require us to pledge assets or enter into covenants that could restrict our operations or our ability to incur further indebtedness and the interest on such debt may adversely affect our operating results.
Our current debt agreements require, and any debt financing that we secure in the future may require us to pledge assets or enter into covenants that could restrict our operations or our ability to incur further indebtedness and our interest obligations with respect to such debt may adversely affect our operating results.
If Comcast or other significant Broadband customers deploy our solutions slower or at a scale that is lower than we anticipate, our operating results, financial condition and cash flows could be materially and adversely effected. In addition, in most quarters, we are involved in one or more relatively large individual transactions.
If Comcast or other significant Broadband customers deploy our solutions slower or at a scale that is lower than we anticipate, our operating results, financial condition and cash flows could be materially and adversely effected. In addition, in most quarters, we are involved in one or more relatively large individual transactions with respect to our Broadband and/or Video business.
A settlement or an unfavorable outcome on any litigation matter could have a material and adverse effect on our business, operating results, financial condition and cash flows. Our failure to adequately protect our proprietary rights and data may adversely affect us.
A settlement or an unfavorable outcome on any litigation matter could have a material and adverse effect on our business, operating results, financial condition and cash flows. 25 Table of Contents Our failure to adequately protect our proprietary rights and data may adversely affect us.
We expect that this volatility will continue in the future due to factors such as: • general market and economic conditions, including inflation, rising interest rates, volatile capital markets, uncertainty and volatility in the financial services sector, the Hamas-Israel and Russia-Ukraine conflicts and rising tensions between China and Taiwan and the United States; • actual or anticipated variations in operating results; • increases or decreases in the general stock market or to the stock prices of technology companies; • announcements of technological innovations, new products or new services by us or by our competitors or customers; • changes in financial estimates or recommendations by stock market analysts regarding us or our competitors; 30 Table of Contents • announcements by us or our competitors of significant acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments; • announcements by our customers regarding end user market conditions and the status of existing and future infrastructure network deployments; • additions or departures of key personnel; and • future equity or debt offerings or our announcements of these offerings.
We expect that this volatility will continue in the future due to factors such as: • general market and economic conditions, including inflation, interest rates, volatile capital markets, uncertainty and volatility in the financial services sector, the Middle East and Russia-Ukraine conflicts and potential escalations and broader regional conflicts, and rising tensions between China and Taiwan and the United States; • actual or anticipated variations in operating results; • increases or decreases in the general stock market or to the stock prices of technology companies; • announcements of technological innovations, new products or new services by us or by our competitors or customers; • changes in financial estimates or recommendations by stock market analysts regarding us or our competitors; • announcements by us or our competitors of significant acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments; • announcements by our customers regarding end user market conditions and the status of existing and future infrastructure network deployments; • additions or departures of key personnel; and • future equity or debt offerings or our announcements of these offerings.
Most of our employees in Israel are currently obligated to perform annual reserve duty in the Israel Defense Forces, and approximately 14% of those employees were called for active military duty in 2023.
Most of our employees in Israel are currently obligated to perform annual reserve duty in the Israel Defense Forces, and approximately 13% of those employees were called for active military duty in 2024.
Revenue derived from customers outside of the United States in the fiscal years ended December 31, 2023, 2022 and 2021 represented approximately 33%, 37% and 44% of our revenue, respectively.
Revenue derived from customers outside of the United States in the fiscal years ended December 31, 2024, 2023 and 2022 represented approximately 24%, 33% and 37% of our revenue, respectively.
We believe that our existing cash of approximately $84.3 million at December 31, 2023 will satisfy our cash requirements for at least the next 12 months. However, we may need to raise additional funds to take advantage of presently unanticipated strategic opportunities, satisfy our other cash requirements from time to time, or strengthen our financial position.
We believe that our existing cash of approximately $101.5 million as of December 31, 2024 will satisfy our cash requirements for at least the next 12 months. However, we may need to raise additional funds to take advantage of presently unanticipated strategic opportunities, satisfy our other cash requirements from time to time, or strengthen our financial position.
In the past, specific factors contributing to reduced spending have included: • weak or uncertain economic and financial conditions in the United States or one or more international markets; • uncertainty related to development of industry technology; • delays in evaluations of new services, new standards and systems architectures by certain customers; • emphasis by certain of our customers on generating revenue from existing subscribers or end-customers, rather than from new subscribers or end-customers, through construction, expansion or upgrades; • a reduction in the amount of capital available to finance projects of our customers and potential customers; • proposed and completed business combinations and divestitures by our customers and the length of regulatory review of each; • completion of a new system or significant expansion or upgrade to a system; and • bankruptcies and financial restructuring of major customers. 12 Table of Contents In the past, adverse economic conditions in one or more of the geographies in which we offer our products have adversely affected our customers’ spending in those geographies and, as a result, our business.
In the past, specific factors contributing to reduced spending have included: • weak or uncertain economic and financial conditions in the United States or one or more international markets; • uncertainty related to development of industry technology; • delays in evaluations of new services, new standards and systems architectures by certain customers; • emphasis by certain of our customers on generating revenue from existing subscribers or end-customers, rather than from new subscribers or end-customers, through construction, expansion or upgrades; • a reduction in the amount of capital available to finance projects of our customers and potential customers; • proposed and completed business combinations and divestitures by our customers and the length of regulatory review of each; • completion of a new system or significant expansion or upgrade to a system; and 11 Table of Contents • bankruptcies and financial restructuring of major customers.
We are monitoring and managing our cash position in light of ongoing market conditions due to the volatility and uncertainty in the banking and financial services sector, the Hamas-Israel and Russia-Ukraine conflicts, and related macroeconomic conditions.
We are monitoring and managing our cash position in light of ongoing market conditions due to potential volatility and uncertainty in the banking and financial services sector, and the Middle East and Russia-Ukraine conflicts, and related macroeconomic conditions.
We periodically evaluate our various product lines and may, as a result, consider the divestiture of one or more of those product lines. Such evaluations, like the current strategic review process for our Video business, may disrupt our business by causing distractions to management, shifts in strategy, decreased employee morale and productivity, and increased turnover.
We periodically evaluate our various product lines and may, as a result, consider the divestiture of one or more of those product lines. Such evaluations may disrupt our business by causing distractions to management, shifts in strategy, decreased employee morale and productivity, and increased turnover.
Additionally, certain customers and potential customers have developed, and may continue to develop, their own solutions that may cause such customers or potential customers to not consider our product offerings or to displace our installed products with their own solutions.
Additionally, with respect to our Video business in particular, certain customers and potential customers have developed, and may continue to develop, their own solutions that may cause such customers or potential customers to not consider our product offerings or to displace our installed products with their own solutions.
Based on our evaluation, we recorded a net decrease in valuation allowance of $63.9 million and a net increase of $10.8 million in 2023 and 2022, respectively, against the net deferred tax assets. In 2023, there was a full release of the valuation allowance against U.S.
Based on our evaluation, we recorded a net increase in valuation allowance of $0.4 million in 2024 and a net decrease of $63.9 million in 2023, respectively, against the net deferred tax assets. In 2023, there was a full release of the valuation allowance against U.S.
Approximately 10% of our employees in Israel have been called for military duty in connection with the Hamas-Israel conflict and in the event that more of our employees are called to active duty, certain of our research and development, product development and other activities may be significantly delayed and adversely affected.
Approximately 13% of our employees in Israel have been called for military duty in connection with the current conflict in the Middle East, and in the event that more of our employees are called to active duty, certain of our research and development, product development and testing and other activities may be significantly delayed and adversely affected.
We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder value. In February 2022, our Board of Directors approved a stock repurchase program for the repurchase of up to $100 million of the outstanding shares of our common stock.
We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder value. In February 2025, our Board of Directors terminated our existing $100 million stock repurchase program and approved a new stock repurchase program for the repurchase of up to $200 million of the outstanding shares of common stock.
Many of these large enterprises are in a better position to withstand any significant reduction in spending by customers in our markets and may be better able to navigate periods of market uncertainty, such as the uncertainty caused by the Hamas-Israel and Russia-Ukraine conflicts, bank insolvency and related uncertainty and volatility in the financial services sector and inflation.
Many of these large enterprises are in a better position to withstand any significant reduction in spending by customers in our markets and may be better able to navigate periods of market uncertainty, such as the uncertainty caused by the Middle East and the Russia-Ukraine conflicts and related risks of escalation or broader regional conflicts, bank insolvency and related uncertainty and volatility in the financial services sector and inflation.
For example, the OECD has introduced a framework to implement a 15% global minimum corporate tax, referred to as Pillar 2, which has been adopted by the European Union for implementation by its Member States into national legislation by the end of 2023 and may be adopted by other jurisdictions.
For example, the OECD has introduced a framework to implement a 15% global minimum corporate tax, referred to as Pillar 2, which Member States in the European Union have implemented into national legislation as of the end of 2023 and has been adopted by certain other jurisdictions.
There can be no assurance that we will be successful in any of these efforts, and our failure to effectively manage our operations could have a material and adverse effect on our business, operating results, cash flows and financial condition. We face risks associated with having facilities and employees located in Israel.
There can be no assurance that we will be successful in any of these efforts, and our failure to effectively manage our operations could have a material and adverse effect on our business, operating results, cash flows and financial condition.
The Internal Revenue Service has not issued Treasury Regulations that provide guidance on how to apply this new tax law. If or when Treasury Regulations are released, it may impact the Company’s estimate of capitalized costs or the Company’s current interpretation of the tax law.
The Internal Revenue Service has not issued Treasury Regulations that provide guidance on how to apply this new tax law. If or when Treasury Regulations are released, it may impact the Company’s estimate of capitalized costs or the Company’s current interpretation of the tax law. Any change in tax law will be accounted for in the period of enactment.
If our competitors are successful in bringing their products to market earlier than us, or if these products are more technologically capable than ours, our revenue could be materially and adversely affected. Our future growth depends on a number of video and broadband industry trends. Technology, industry and regulatory trends and requirements may affect the growth of our business.
If our competitors are successful in bringing their products to market earlier than us, or if these products are more technologically capable than ours, our revenue could be materially and adversely affected. 13 Table of Contents Our future growth depends on a number of broadband and video industry trends.
Any resulting delays could negatively impact our product development efforts, operating results and our business. In addition, increased costs associated with managing or relocating our outsourced engineering teams in Ukraine, or engaging with alternative engineering resources outside of Ukraine, could negatively impact our operating results and financial condition. We may not be able to effectively manage our operations.
Any resulting delays could negatively impact our product development efforts, operating results and our business. In addition, increased costs associated with managing or relocating our outsourced engineering teams in Ukraine, or engaging with alternative engineering resources outside of Ukraine, could negatively impact our operating results and financial condition.
Our future effective income tax rates could be adversely affected if tax authorities challenge our international tax structure or if our relative mix of U.S. and international income changes for any reason. Accordingly, there can be no assurance that our effective income tax rate will be less than the U.S. federal statutory rate in future periods.
Our future effective income tax rates could be adversely affected if tax authorities challenge our international tax structure or if our relative mix of U.S. and international income changes for any reason. Accordingly, there can be no assurance that our effective income tax rate will remain consistent.
Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control 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.
Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control 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. 30 Table of Contents Our common stock price may be extremely volatile, and the value of an investment in our stock may decline.
We recognize potential liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations. We recognize potential liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due.
Our business and industry are regulated under various federal, state, local and international laws. For example, we are subject to environmental regulations such as the European Union’s Waste Electrical and Electronic Equipment (“WEEE”) and Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (“RoHS”) directives and similar legislation enacted in other jurisdictions worldwide.
For example, we are subject to environmental regulations such as the European Union’s Waste Electrical and Electronic Equipment (“WEEE”) and Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (“RoHS”) directives and similar legislation enacted in other jurisdictions worldwide.
As of December 31, 2023, we had approximately $239.2 million of goodwill rec orded on our balance sheet associated with prior acquisitions.
As of December 31, 2024, we had approximately $236.9 million of goodwill rec orded on our balance sheet associated with prior acquisitions.
A decrease in the number of the relatively larger individual transactions in which we are involved in any quarter could materially and adversely affect our operating results for that quarter.
A decrease in the number of the relatively larger individual transactions in which we are involved in any quarter could materially and adversely affect the operating results for that quarter for the applicable business unit or the Company as a whole.
These actions could increase our costs and could also increase our risk of holding obsolete or excess inventory, which, despite our use of a demand order fulfillment model, could materially and adversely affect our business, operating results, financial condition and cash flows.
These actions could increase our costs and could also increase our risk of holding obsolete or excess inventory, which, despite our use of a demand order fulfillment model, could materially and adversely affect our business, operating results, financial condition and cash flows. Operational Risks We face risks associated with having facilities and employees located in Israel.
Divestitures of product lines have inherent risks, including the expense of selling the product line, the possibility that any anticipated sale will not occur, delays in closing any sale, the risk of lower-than-expected proceeds from the sale of the divested business, unexpected costs associated with the separation of the business to be sold from the seller’s information technology and other operating systems, and potential post-closing claims for indemnification or breach of transition services obligations of the seller.
We have considered selling and sold product lines in the past, and any prior or future divestiture could adversely affect our continuing business and expenses, revenues, results of operations, cash flows and financial position. 23 Table of Contents Divestitures of product lines have inherent risks, including the expense of selling the product line, the possibility that any anticipated sale will not occur, delays in closing any sale, the risk of lower-than-expected proceeds from the sale of the divested business, unexpected costs associated with the separation of the business to be sold from the seller’s information technology and other operating systems, and potential post-closing claims for indemnification or breach of transition services obligations of the seller.
The Credit Agreement provides for a $120.0 million secured revolving loan facility (the “Revolving Facility”), with a $10.0 million sublimit for the issuance of letters of credit, and a $40.0 million secured delayed draw term loan facility (the “Term Facility”). The proceeds of the loans under the Revolving Facility may be used for general corporate purposes.
The Credit Agreement provides for a $160.0 million secured revolving loan facility (the “Revolving Facility”), with a $10.0 million sublimit for the issuance of letters of credit, and a $40.0 million secured delayed draw term loan facility (the “Term Facility”).
If any such tariffs are imposed on products or components that we import, including those obtained from a sole supplier or a limited group of suppliers, we could experience reduced revenues or may have to raise our prices, either of which could have an adverse effect on our business, financial condition and operating results.
If any such tariffs are imposed on products or components that we import, including those obtained from a sole supplier or a limited group of suppliers, we could experience reduced revenues or may have to raise our prices, either of which could have an adverse effect on our business, financial condition and operating results. 16 Table of Contents These risks could be heightened during a substantial economic slowdown because our suppliers and subcontractors are more likely to experience adverse changes in their financial condition and operations during such a period.
As of December 31, 2023, we he ld 133 issued U.S. patents and 47 issued foreign patents, and had 39 paten t applications pending.
As of December 31, 2024, we he ld 133 issued U.S. patents and 48 issued foreign patents, and had 48 p aten t applications pending.
In addition, we have in the past and may in the future need to modify our customer contracts, accounting systems and processes when we adopt future or proposed changes in accounting principles.
In addition, we have in the past and may in the future need to modify our customer contracts, accounting systems and processes when we adopt future or proposed changes in accounting principles. The cost and effect of these changes may negatively impact our results of operations during the periods of transition.
Import duties and tariffs vary by country and a different tariff classification for any of our products may result in higher duties or tariffs, which could have an adverse impact on our operating results and potentially increase the cost of the related products to our customers. 27 Table of Contents Our business and industry are subject to various laws and regulations that could adversely affect our business, operating results, cash flows and financial condition.
Import duties and tariffs vary by country and a different tariff classification for any of our products may result in higher duties or tariffs, which could have an adverse impact on our operating results and potentially increase the cost of the related products to our customers.
In such event, we could be required to seek licenses from third parties in order to continue offering our products, to re-engineer our products or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could materially and adversely affect our operating results, financial condition and cash flows.
In such event, we could be required to seek licenses from third parties in order to continue offering our products, to re-engineer our products or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could materially and adversely affect our operating results, financial condition and cash flows. 26 Table of Contents We are subject to import and export control and trade and economic sanction laws and regulations that could subject us to liability or impair our ability to compete in international markets.
However, we may not be successful in those efforts if, among other things, our products and solutions: • are not cost effective; • are not brought to market in a timely manner; • are not in accordance with evolving industry standards; • fail to meet market acceptance or customer requirements; or • are ahead of the needs of their markets. 13 Table of Contents If new standards or some of our new products are adopted later than we predict or not adopted at all, or if adoption occurs earlier than we are able to deliver the applicable products or functionality, we risk spending significant research and development time and dollars on products or features that may never achieve market acceptance or that miss the customer demand window and thus do not produce the revenue that a timely introduction would have likely produced.
If new standards or some of our new products are adopted later than we predict or not adopted at all, or if adoption occurs earlier than we are able to deliver the applicable products or functionality, we risk spending significant research and development time and dollars on products or features that may never achieve market acceptance or that miss the customer demand window and thus do not produce the revenue that a timely introduction would have likely produced.
We are required to periodically review our deferred tax assets and determine whether, based on available evidence, a valuation allowance is necessary. The realization of our deferred tax assets, which are predominantly in the United States, is dependent upon the generation of sufficient U.S. and foreign taxable income in the future to offset these assets.
The realization of our deferred tax assets, which are predominantly in the United States, is dependent upon the generation of sufficient U.S. and foreign taxable income in the future to offset these assets.
In addition, our failure to continue to establish or maintain successful relationships with reseller, VAR and systems integrator customers could likewise materially and adversely affect our business, operating results, financial condition and cash flows. We face risks associated with having outsourced engineering resources located in Ukraine.
In addition, our failure to continue to establish or maintain successful relationships with reseller, VAR and systems integrator customers could likewise materially and adversely affect our business, operating results, financial condition and cash flows. We may not be able to effectively manage our operations.
Most of our international revenue is denominated in U.S. dollars, and fluctuations in currency exchange rates could cause our products to become relatively more expensive to customers in a particular country or region, leading to a reduction in revenue or profitability from sales in that country or region.
Unpredictable payment cycles could cause us to fail to meet or exceed the expectations of security analysts and investors for any given period. 29 Table of Contents Most of our international revenue is denominated in U.S. dollars, and fluctuations in currency exchange rates could cause our products to become relatively more expensive to customers in a particular country or region, leading to a reduction in revenue or profitability from sales in that country or region.
We could face delays in product releases until alternative technology can be identified, licensed or developed, and integrated into our products, if we are able to do so at all.
We could face delays in product releases until alternative technology can be identified, licensed or developed, and integrated into our products, if we are able to do so at all. These delays, or a failure to secure or develop adequate technology, could materially and adversely affect our business, operating results, financial condition and cash flows.
The impact of new or revised legislation or regulations could have a material adverse effect on our business, operating results, financial condition and cash flows. We depend significantly on our international revenue and are subject to the risks associated with international operations, including those of our resellers, contract manufacturers and outsourcing partners, which may negatively affect our operating results.
We depend significantly on our international revenue and are subject to the risks associated with international operations, including those of our resellers, contract manufacturers and outsourcing partners, which may negatively affect our operating results.
Additionally, geopolitical events such as the Hamas-Israel and Russia-Ukraine conflicts may increase the cybersecurity risks we and the third parties we work with face. Our business operations utilize and rely upon numerous third-party vendors, service providers, manufacturers, solution providers, partners and consultants, and any failure of such third parties’ cybersecurity measures could materially and adversely affect or disrupt our business.
Our business operations utilize and rely upon numerous third-party vendors, service providers, manufacturers, solution providers, partners and consultants, and any failure of such third parties’ cybersecurity measures could materially and adversely affect or disrupt our business.
For example, our former Chief Financial Officer announced his decision to resign in March 2023 and we appointed our current Chief Financial Officer in May 2023. Any significant leadership change or senior management transition involves inherent risks and any failure to ensure timely and suitable replacements and smooth transition could hinder our strategic planning, business execution, and future performance.
Any significant leadership change or senior management transition involves inherent risks and any failure to ensure timely and suitable replacements and smooth transition could hinder our strategic planning, business execution, and future performance.
Our principal contract manufacturers and several of their and our suppliers and our resellers have operations in locations that are subject to natural disasters, such as severe weather, tsunamis, floods, fires and earthquakes, which could disrupt their operations and, in turn, our operations. 20 Table of Contents In addition, if there is a natural disaster in any of the locations in which our significant customers are located, we face the risk that our customers may incur losses or sustained business interruption, or both, which may materially impair their ability to continue their purchase of products from us.
In addition, if there is a natural disaster in any of the locations in which our significant customers are located, we face the risk that our customers may incur losses or sustained business interruption, or both, which may materially impair their ability to continue their purchase of products from us.
As of December 31, 2023, we had 974 employees in our international operations, representing approximately 72% of our worldwide workforce.
As of December 31, 2024, we ha d 901 employees in our international operations, representing approximately 73% of our worldwide workforce.
If we conclude in future periods that our internal control over financial reporting is not effective or if our independent registered public accounting firm is unable to provide an unqualified attestation as of future year-ends, we may incur substantial additional costs in an effort to correct such problems, and investors may lose confidence in our financial statements, and our stock price may decrease in the short term, until we correct such problems, and perhaps in the long term, as well.
If we conclude in future periods that our internal control over financial reporting is not effective or if our independent registered public accounting firm is unable to provide an unqualified attestation as of future year-ends, we may incur substantial additional costs in an effort to correct such problems, and investors may lose confidence in our financial statements, and our stock price may decrease in the short term, until we correct such problems, and perhaps in the long term, as well. 27 Table of Contents We are subject to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that require us to conduct research, disclose, and report whether or not our products contain certain conflict minerals sourced from the Democratic Republic of Congo or its surrounding countries.
Changes in the amount of the valuation allowance in the U.S. and in foreign jurisdictions could result in a material non-cash expense or benefit in the period in which the valuation allowance is adjusted, and our results of operations could be materially affected. The calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations.
Federal and certain state deferred tax assets due to improved historical earnings and projected earnings. Changes in the amount of the valuation allowance in the U.S. and in foreign jurisdictions could result in a material non-cash expense or benefit in the period in which the valuation allowance is adjusted, and our results of operations could be materially affected.
Accordingly, natural disaster in one of the geographies in which we, or our third-party manufacturers, their or our suppliers or our customers, operate could have a material and adverse effect on our business, operating results, cash flows and financial condition.
Accordingly, natural disaster in one of the geographies in which we, or our third-party manufacturers, their or our suppliers or our customers, operate could have a material and adverse effect on our business, operating results, cash flows and financial condition. 20 Table of Contents Financial, Transactional and Tax Risks We may need additional capital in the future and may not be able to secure adequate funds at all or on terms acceptable to us.
In addition, we issue additional shares upon exercise of stock options, including under our 2002 Employee Stock Purchase Plan, and in connection with grants of restricted stock units on an ongoing basis.
In addition, we issue additional shares upon exercise of stock options, including under our 2002 ESPP, and in connection with grants of restricted stock units on an ongoing basis. Increased sales of our common stock in the market after exercise of outstanding stock options or grants of restricted stock units could exert downward pressure on our stock price.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition, o ur CCO provides annual briefings to the board of directors on cybersecurity risks and activities.
Biggest changeIn addition, o ur CCO provides annual briefings to the board of directors on cybersecurity risks and activities. Our board may also be notified and engaged as part of the Company’s cybersecurity incident response plans, depending on the significance of an incident.
We devote significant resources and designate high-level personnel, including our Chief Cybersecurity Officer (“CCO”), who reports to our Chief Executive Officer, to manage the risk assessment and mitigation process. As part of our overall risk management system, we monitor and test our safeguards and train our employees on these safeguards, in collaboration with human resources, IT, and management.
We devote significant resources and designate high-level personnel, including our Chief Cybersecurity Officer (“CCO”), who reports to our Chief Financial Officer (“CFO”) , to manage the risk assessment and mitigation process. As part of our overall risk management system, we monitor and test our safeguards and train our employees on these safeguards, in collaboration with human resources, IT, and management.
Our CCO provides quarterly briefings to the audit committee regarding our company’s cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, cybersecurity systems testing, activities of third parties, and the like. Our audit committee provides regular updates to the board of directors on such reports.
Our CCO provides briefings to the audit committee throughout the year regarding our company’s cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, cybersecurity systems testing, activities of third parties, and the like. Our audit committee provides regular updates to the board of directors on such reports.
Added
Our current CCO will depart the Company at the end of February 2025, and will be succeeded by our new Chief Information Officer (“CIO”), who will join the Company in March 2025. The CIO’s responsibilities will include the Company’s cybersecurity efforts and policies, and he will report directly to our CFO.
Added
Our new CIO previously served in relevant leadership positions at other large public companies and brings to the role a wealth of information security and information technology knowledge and experience.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur leases, which expire at various dates throu gh September 2032, are for an aggregate of approximately 292,742 s quare feet of space. We have two business segments: Video and Broadband.
Biggest changeOur leases, which expire at various dates throu gh September 2032, are for an aggregate of approximately 291,039 s quare feet of space. We have two business segments: Broadband and Video.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Removed
Item 3. LEGAL PROCEEDINGS From time to time, we are involved in lawsuits as well as subject to various legal proceedings, claims, threats of litigation, and investigations in the ordinary course of business, including claims of alleged infringement of third-party patents and other intellectual property rights, commercial, employment, and other matters.
Added
Item 3. LEGAL PROCEEDINGS This information set forth under Note 17, “Legal Proceedings”, included in Part II, Item 8 of this Annual Report on Form 10-K, is incorporated herein by reference. For an additional discussion of certain risks associated with legal proceedings, refer to “Risk Factors” above.
Removed
While certain matters to which we are a party may specify the damages claimed, such claims may not represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, nor can the amount of possible loss or range of loss, if any, be reasonably estimated.
Removed
An unfavorable outcome on any litigation matters could require us to pay substantial damages, or, in connection with any intellectual property infringement claims, could require us to pay ongoing royalty payments or could prevent us from selling certain of our products.
Removed
As a result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on our business, operating results, financial position and cash flows.
Removed
Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patent and other intellectual property rights. From time to time, third parties have asserted, and may in the future assert, exclusive patent, copyright, trademark and other intellectual property rights against us or our customers.
Removed
Such assertions arise in the normal course of our operations. The resolution of any such assertions and claims cannot be predicted with certainty.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThere were no repurchase activities during the year ended December 31, 2023. 34 Table of Contents Stock Performance Graph Set forth below is a line graph comparing the annual percentage change in the cumulative return to the stockholders of our common stock with the cumulative return of The NASDAQ Telecommunications Index and of the Standard & Poor’s (S&P) 500 Index for the period commencing December 31, 2018 and ending on December 31, 2023.
Biggest changeTotal 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 Publicly Announced Plan or Program September 28, 2024 - October 25, 2024 4,632 $ 13.72 — $ — October 26, 2024 - November 22, 2024 43,786 $ 11.97 — $ — November 23, 2024 - December 31, 2024 3,741 $ 13.19 — $ — Total 52,159 — (1) Represents shares withheld on net settlements of restricted stock units that vested under the Company’s equity incentive plan. 34 Table of Contents Stock Performance Graph Set forth below is a line graph comparing the annual percentage change in the cumulative return to the stockholders of our common stock with the cumulative return of The NASDAQ Telecommunications Index and of the Standard & Poor’s (S&P) 500 Index for the period commencing December 31, 2019 and ending on December 31, 2024.
At this time, we expect to retain future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the year ended December 31, 2023 .
At this time, we expect to retain future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the year ended December 31, 2024 .
The graph assumes that $100 was invested in each of the Company’s common stock, the S&P 500 and The NASDAQ Telecommunications Index on December 31, 2018, and assumes the reinvestment of dividends, if any. The comparisons shown in the graph below are based upon historical data.
The graph assumes that $100 was invested in each of the Company’s common stock, the S&P 500 and The NASDAQ Telecommunications Index on December 31, 2019, and assumes the reinvestment of dividends, if any. The comparisons shown in the graph below are based upon historical data.
Holders As of February 12, 2024, there were approximately 269 holders of record of our common stock. Dividend Policy We have never declared or paid any dividends on our capital stock.
Holders As of February 10, 2025, there were approximately 253 holders of record of our common stock. Dividend Policy We have never declared or paid any dividends on our capital stock.
Issuer Purchases of Equity Securities In February 2022, the Board of Directors authorized the Company to repurchase up to $100 million of the Company’s outstanding shares of common stock through February 2025.
Issuer Purchases of Equity Securities Common Stock Repurchases. In February 2022, the Board of Directors authorized the Company to repurchase up to $100 million of the Company’s outstanding shares of common stock through February 2025. This authorization was terminated by the Board of Directors on February 10, 2025 with $35.2 million of repurchases effectuated.
Harmonic cautions that the stock price performance shown in the graph below is not indicative of, nor intended to forecast, the potential future performance of the Company’s common stock. 12/18 12/19 12/20 12/21 12/22 12/23 Harmonic Inc. 100.00 165.25 156.57 249.15 277.54 276.27 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 NASDAQ Telecom 100.00 118.74 130.71 133.51 97.62 108.00 The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material,” “filed” or incorporated by reference in previous or future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Harmonic specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.
Harmonic cautions that the stock price performance shown in the graph below is not indicative of, nor intended to forecast, the potential future performance of the Company’s common stock. 12/19 12/20 12/21 12/22 12/23 12/24 Harmonic Inc. $ 100.00 $ 94.74 $ 150.77 $ 167.95 $ 167.18 $ 169.62 S&P 500 $ 100.00 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02 NASDAQ Telecom $ 100.00 $ 110.08 $ 112.44 $ 82.21 $ 90.96 $ 103.21 The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material,” “filed” or incorporated by reference in previous or future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Harmonic specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.
The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. As of December 31, 2023, approximately $94.9 million of the share repurchase authorization remained available.
The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. During the year ended December 31, 2024, the company repurchased and retired approximately 2.4 million shares of the Company’s common stock for an aggregate amount of $30.0 million.
Added
In connection with the termination of the existing program, the Board of Directors authorized a new repurchase program for the Company to repurchase up to $200 million of the Company’s outstanding shares of common stock through February 2028.
Added
There were no repurchase activities during the three months ended December 31, 2024. During the quarter ended December 31, 2024, we paid approximately $0.6 million in employee withholding taxes due upon the vesting of net settled equity awards.
Added
We withheld approximately 52,159 shares of common stock from employees in connection with such net share settlement at an average price of $12.21 per share. These shares may be deemed to be “issuer purchases” of shares.

Item 7. Management's Discussion & Analysis

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

45 edited+9 added−21 removed19 unchanged
Biggest changeFederal and certain state deferred tax assets due to improved historical earnings and projected earnings. 41 Table of Contents Segment Financial Results Year Ended December 31, (in thousands, except percentages) 2023 2022 2021 2023 vs. 2022 Video Revenue $ 219,425 $ 274,189 $ 288,507 $ (54,764) (20) % as % of total revenue 36 % 44 % 57 % (8) % Operating income (1) (8,741) 22,322 28,460 (31,063) (139) % Operating margin % (1) (4) % 8 % 10 % (12) % Broadband Revenue $ 388,482 $ 350,768 $ 218,642 $ 37,714 11 % as % of total revenue 64 % 56 % 43 % 8 % Operating income (1) 64,575 52,283 15,599 12,292 24 % Operating margin % (1) 17 % 15 % 7 % 2 % Total Revenue $ 607,907 $ 624,957 $ 507,149 $ (17,050) (3) % (1) Segment operating income and segment operating margins are Non-GAAP financial measures.
Biggest changeSegment Financial Results Year Ended December 31, (in thousands, except percentages) 2024 2023 2022 2024 vs. 2023 Broadband Revenue $ 488,200 $ 388,482 $ 350,768 $ 99,718 26 % as % of total revenue 72 % 64 % 56 % 8 % Operating income 118,354 64,575 52,283 53,779 83 % Operating margin % 24 % 17 % 15 % 7 % Video Revenue $ 190,522 $ 219,425 $ 274,189 $ (28,903) (13) % as % of total revenue 28 % 36 % 44 % (8) % Operating income 2,756 (8,741) 22,322 11,497 (132) % Operating margin % 1 % (4) % 8 % 5 % Total Revenue $ 678,722 $ 607,907 $ 624,957 $ 70,815 12 % Broadband Our Broadband segment net revenue increased by $99.7 million in 2024, as compared to 2023, primarily driven by appliance and integration revenues, mainly attributed to certain customers ramping up due to technology transitions and new deployments.
Accordingly, the critical accounting estimates that we believe have the most significant impact on Harmonic’s unaudited condensed consolidated financial statements are set forth below: • Valuation of inventories; and • Accounting for income taxes Valuation of Inventories We state inventories at the lower-of-cost (determined on a first-in, first-out basis) or net realizable value, including allowances for excess and obsolete inventory .
Accordingly, the critical accounting estimates that we believe have the most significant impact on Harmonic’s consolidated financial statements are set forth below: • Valuation of inventories; and • Accounting for income taxes Valuation of Inventories We state inventories at the lower-of-cost (determined on a first-in, first-out basis) or net realizable value, including allowances for excess and obsolete inventory .
Conversely, we may also from time to time determine that it is in our best interests to voluntarily repay certain indebtedness early. We believe that our current sources of funds will provide us with adequate liquidity during the 12-month period following December 31, 2023, as well as in the long-term.
Conversely, we may also from time to time determine that it is in our best interests to voluntarily repay certain indebtedness early. We believe that our current sources of funds will provide us with adequate liquidity during the 12-month period following December 31, 2024, as well as in the long-term.
The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Restructuring and Related Charges We have implemented several restructuring plans in the past few years. The goal of these plans is to bring operational expenses to appropriate levels relative to our net revenues, while simultaneously implementing extensive company-wide expense control programs. We account for our restructuring plans under the authoritative guidance for exit or disposal activities.
Restructuring and Related Charges We have implemented several restructuring plans in the past few years. The goal of these plans is to bring operational expenses to appropriate levels relative to our net revenues, while simultaneously implementing appropriate expense control programs. We account for our restructuring plans under the authoritative guidance for exit or disposal activities.
We believe our cOS solutions resolve space and power constraints in broadband operator facilities, eliminate dependence on hardware upgrade cycles and significantly reduce total cost of ownership, and are helping us become a major player in the broadband access market.
We believe our cOS solutions resolve space and power constraints in broadband operator facilities, eliminate dependence on hardware upgrade cycles and significantly reduce total cost of ownership, and are helping us to be a major player in the broadband access market.
If actual market conditions deteriorate from those anticipated by management, additional allowances for excess and obsolete inventory could be required and may be material to our results of operations. The gross amount of inventory reserves charged to the cost of reven ues totaled $7.4 million, $6.0 million, in 2023 and 2022, respectively.
If actual market conditions deteriorate from those anticipated by management, additional allowances for excess and obsolete inventory could be required and may be material to our results of operations. The gross amount of inventory reserves charged to the cost of reven ues totaled $11.0 million and $7.4 million, in 2024 and 2023, respectively.
We conduct business in three geographic regions—the Americas, EMEA and APAC—and operate in two segments, Broadband and Video. Our Broadband business sells broadband access solutions and related services, including our cOS (formerly CableOS) software-based broadband access solutions, to broadband operators globally.
We conduct business in three geographic regions—the Americas, EMEA and APAC—and operate in two segments, Broadband and Video. Our Broadband business sells broadband access solutions and related services, including our cOS TM software-based broadband access solutions, to broadband operators globally.
For discussion of comparison of our results of operations and cash flows for the fiscal years ended December 31, 2022 and 2021, refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 28,2023.
For discussion of comparison of our results of operations and cash flows for the fiscal years ended December 31, 2023 and 2022, refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 16, 2024.
Our cOS solutions, which can be deployed based on a centralized, DAA or hybrid architecture, enable our customers to migrate to multi-gigabit broadband capacity and the fast deployment of DOCSIS and/or FTTH data, video and voice services.
Our cOS solutions, which can be deployed based on a centralized, distributed access architecture (DAA) or hybrid architecture, enable our customers to migrate to multi-gigabit broadband capacity and the fast deployment of DOCSIS and/or fiber-to-the-home (FTTH) data, video and voice services.
Research and Development Expenses Year Ended December 31, (in thousands, except percentages) 2023 2022 2021 2023 vs. 2022 Research and development $ 126,282 $ 120,307 $ 102,231 $ 5,975 5 % as % of total net revenue 21 % 19 % 20 % Our research and development expenses consist primarily of employee salaries and related expenses, contractors and outside consultants, supplies and materials, equipment depreciation and facilities costs, all of which are associated with the design and development of new products and enhancements of existing products.
Research and Development Expenses Year Ended December 31, (in thousands, except percentages) 2024 2023 2022 2024 vs. 2023 Research and development $ 120,975 $ 126,282 $ 120,307 $ (5,307) (4) % as % of total net revenue 18 % 21 % 19 % Our research and development expenses consist primarily of employee salaries and related expenses, contractors and outside consultants, supplies and materials, equipment depreciation and facilities costs, all of which are associated with the design and development of new products and enhancements of existing products.
Our customers’ spending patterns are dependent on a variety of factors, including but not limited to: economic conditions in the United States and international markets, and impact of factors such as the Hamas-Israel and Russia-Ukraine conflicts, inflation, rising interest rates, potential supply chain disruptions, volatility in capital markets and foreign currency fluctuations; volatility and uncertainty in the banking and financial services sector; access to financing; annual budget cycles of each of the industries we serve; impact of industry consolidations; customers suspending or reducing spending in anticipation of new products or new standards; and new industry trends and/or technology shifts.
Our customers’ spending patterns are dependent on a variety of factors, including but not limited to: economic conditions in the United States and international markets, and impact of factors such as the Middle East and Russia-Ukraine conflicts, inflation, changes in interest rates, potential supply chain disruptions, volatility in capital markets and foreign currency fluctuations; volatility and uncertainty in the banking and financial services sector; access to financing; annual budget cycles of each of the industries we serve; impact of industry consolidations; customer end-market conditions; customers suspending or reducing spending in anticipation of new products or new standards; impact of new or proposed tariffs; and new industry trends and/or technology shifts.
On February 3, 2022, the Board of Directors authorized us to repurchase, from time to time, up to $100 million of our outstanding shares of common stock through February 2025, at such time and such prices as management may decide. The program does not obligate us to repurchase any specific number of shares and may be discontinued at any time.
In February 2025, the Board of Directors authorized us to repurchase, from time to time, up to $200 million of our outstanding shares of common stock through February 2028, at such time and such prices as management may decide. The program does not obligate us to repurchase any specific number of shares and may be discontinued at any time.
The restructuring and related charges are included in “Cost of revenue” and “Operating expenses-restructuring and related charges” in the Consolidated Statements of Operations.
The restructuring and related charges are primarily included in “Operating expenses-restructuring and related charges” in the Consolidated Statements of Operations.
For details regarding our indebtedness and lease obligations, refer to Note 11, “Convertible Notes and Other Debts”, and Note 4, “Leases”, respectively, of the Notes to our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
For details regarding our indebtedness and lease obligations, refer to Note 10, “Debt”, and Note 3, “Leases”, respectively, of the Notes to our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
We expect that cash provided by or used in operating activities may fluctuate in future periods as a result of a number of factors, including but not limited to, instability and uncertainty in the financial services sector; the impact of the Russia-Ukraine and Hamas-Israel conflicts on macroeconomic conditions, which may affect demand for our offerings; fluctuations in our operating results; shipment linearity; accounts receivable collections performance; inventory and supply chain management; and the timing and amount of compensation and other payments.
We expect that cash provided by or used in operating activities may fluctuate in future periods as a result of a number of factors, including but not limited to, instability and uncertainty in the financial services sector, the potential impact of the Middle East and Russia-Ukraine conflicts on our operations in those regions, fluctuations in our operating results, shipment linearity, accounts receivable collections performance, inventory and supply chain management, and the timing and amount of compensation and other payments.
We believe a material and growing portion of the opportunities for our Video business are linked to the industry and our customers (i) continuing to adopt streaming technologies to capture, process and deliver video content to consumers and, increasingly, utilizing public cloud solutions like our VOS SaaS platform to do so; (ii) transforming existing broadcast infrastructure workflows into more flexible, efficient and cost-effective operations running in public clouds; and (iii) for those customers maintaining on-premise video delivery infrastructure, continuing to upgrade and replace aging equipment with next-generation software-based appliances that significantly reduce operational complexity.
In the meantime, we believe our Broadband segment will continue to experience strong long-term growth as our customers adopt and deploy our virtualized DOCSIS, CMTS and FTTH solutions and distributed access architectures. 36 Table of Contents We believe a material and growing portion of the opportunities for our Video business are linked to the industry and our customers (i) continuing to adopt streaming technologies to capture, process and deliver video content to consumers and, increasingly, utilizing public cloud solutions like our VOS SaaS platform to do so; (ii) transforming existing broadcast infrastructure workflows into more flexible, efficient and cost-effective operations running in public clouds; and (iii) for those customers maintaining on-premise video delivery infrastructure, continuing to upgrade and replace aging equipment with next-generation software-based appliances that significantly reduce operational complexity.
On September 29, 2023, we entered into a Master Receivables Purchase Agreement with JPMorgan Chase Bank N.A, as purchaser. The agreement allows us, from time to time, to sell certain eligible billed receivables in an aggregate outstanding amount of up to $30 million. As of December 31, 2023, there were no receivables sold under this agreement.
In September 2023, we entered into a Master Receivables Purchase Agreement with JPMorgan Chase Bank N.A, as purchaser. The agreement allows us, from time to time, to sell certain eligible billed receivables in an aggregate outstanding amount of up to $30 million. In September 2024, we extended the agreement termination date to September 29, 2025.
Our Video business strategy is focused on continuing to develop and deliver products, solutions and services to enable and support these trends. Currently, we are seeing a slow-down in capital spending by some of our Video business customers, which is causing delays for some of our appliance-based projects and creating near-term headwinds for our Video appliance business.
Our Video business strategy is focused on continuing to develop and deliver products, solutions and services to enable and support these trends. In recent quarters, we have seen a slow-down in capital spending by some of our Video business customers, which has caused delays for some of our appliance-based projects.
As of December 31, 2023, our total minimum lease payments are $30.7 million, of which $7.1 million is due in the 12-month period following December 31, 2023.
As of December 31, 2024, our total minimum lease payments are $23.5 million, of which $5.8 million is due in the 12-month period following December 31, 2024.
We believe it is not more likely than not the California net deferred tax assets of $32.3 million will be realizable. Accordingly, a full valuation allowance of $32.3 million is maintained against the California net deferred tax assets.
We believe it is not more likely than not the California and Swiss net deferred tax assets of $32.8 million and $4.7 million, respectively, will be realizable. Accordingly, full valuation allowances of $32.8 million and $4.7 million are maintained against the California and Swiss net deferred tax assets, respectively.
Gross Profit Year Ended December 31, (in thousands, except percentages) 2023 2022 2021 2023 vs. 2022 Gross profit $ 312,545 $ 315,884 $ 259,742 $ (3,339) (1)% as % of total net revenue (“gross margin”) 51.4 % 50.5 % 51.2 % 0.9 % 39 Table of Contents Our gross margins are dependent upon, among other factors, the proportion of software sales, product mix, supply chain impacts, customer mix, product introduction costs, price reductions granted to customers and achievement of cost reductions.
Gross Profit Year Ended December 31, (in thousands, except percentages) 2024 2023 2022 2024 vs. 2023 Gross profit $ 365,921 $ 312,545 $ 315,884 $ 53,376 17% as % of total net revenue (“gross margin”) 53.9 % 51.4 % 50.5 % 2.5 % Our gross margins are dependent upon, among other factors, the proportion of software sales, product mix, supply chain impacts, customer mix, product introduction costs, price reductions granted to customers and achievement of cost reductions. 38 Table of Contents Our gross margin improved by 250 basis points in 2024, as compared to 2023, contributed by both the Broadband and Video segments.
We believe our cOS software-based broadband access solutions are superior to hardware-based systems and deliver unprecedented scalability, agility and cost savings for our customers.
Our Broadband strategy is focused on continuing to develop and deliver software-based broadband access technologies, which we refer to as our cOS solutions, to our broadband operator customers. We believe our cOS software-based broadband access solutions are superior to hardware-based systems and deliver unprecedented scalability, agility and cost savings for our customers.
To the extent that we determine the deferred tax assets are realizable on a more likely than not basis and an adjustment is needed, an adjustment will be recorded in the fiscal period the determination is made. 38 Table of Contents Results of Operations Net Revenue The following table presents the breakdown of net revenue by category and geographical region: Year Ended December 31, (in thousands, except percentages) 2023 2022 2021 2023 vs. 2022 Appliance and integration $ 435,878 $ 473,806 $ 369,767 $ (37,928) (8) % as % of total net revenue 72 % 76 % 73 % SaaS and service 172,029 151,151 137,382 20,878 14 % as % of total net revenue 28 % 24 % 27 % Total net revenue $ 607,907 $ 624,957 $ 507,149 $ (17,050) (3) % Americas $ 447,700 $ 452,869 $ 335,731 $ (5,169) (1) % as % of total net revenue 74 % 73 % 66 % EMEA 127,689 133,095 126,427 (5,406) (4) % as % of total net revenue 21 % 21 % 25 % APAC 32,518 38,993 44,991 (6,475) (17) % as % of total net revenue 5 % 6 % 9 % Total net revenue $ 607,907 $ 624,957 $ 507,149 $ (17,050) (3) % Appliance and integration net revenue decreased by $37.9 million in 2023, as compared to 2022, primarily due to a decrease of $68.2 million in our Video segment revenue, partially offset by an increase of $30.3 million in our Broadband segment revenue.
To the extent that we determine the deferred tax assets are realizable on a more likely than not basis and an adju stment is needed, an adjustment will be recorded in the fiscal period the determination is made. 37 Table of Contents Results of Operations Net Revenue The following table presents the breakdown of net revenue by category and geographical region: Year Ended December 31, (in thousands, except percentages) 2024 2023 2022 2024 vs. 2023 Appliance and integration $ 507,378 $ 435,878 $ 473,806 $ 71,500 16 % as % of total net revenue 75 % 72 % 76 % SaaS and service 171,344 172,029 151,151 (685) (0.4) % as % of total net revenue 25 % 28 % 24 % Total net revenue $ 678,722 $ 607,907 $ 624,957 $ 70,815 12 % Americas $ 557,255 $ 447,700 $ 452,869 $ 109,555 24 % as % of total net revenue 82 % 74 % 73 % EMEA 92,553 127,689 133,095 (35,136) (28) % as % of total net revenue 14 % 21 % 21 % APAC 28,914 32,518 38,993 (3,604) (11) % as % of total net revenue 4 % 5 % 6 % Total net revenue $ 678,722 $ 607,907 $ 624,957 $ 70,815 12 % Appliance and integration net revenue increased by $71.5 million in 2024, as compared to 2023, primarily due to a $99.8 million increase in our Broadband segment revenue, partially offset by a $28.3 million decrease in our Video segment revenue.
As of December 31, 2023, approximately $94.9 million of the share repurchase authorization remained available. Sources and Conditions of Liquidity Our sources to fund our material cash requirements are predominantly from sales of our products and services and, when applicable, proceeds from debt facilities and debt and equity offerings.
Sources and Conditions of Liquidity Our sources to fund our material cash requirements are predominantly from the sales of our products and services and, when applicable, proceeds from debt facilities and debt and equity offerings.
As of December 31, 2023, we had outstanding $130.9 million in aggregate principal amount of indebtedness, consisting of our 2024 Notes and other debts, of which $120.4 million is scheduled to become due in the 12-month period following December 31, 2023.
As of December 31, 2024, we had outstanding $128.1 million in aggregate principal amount of indebtedness, consisting of our $75.0 million Revolving Facility and our $39.5 million Term Facility loan under our Credit Agreement, and other debts, of which $7.2 million is scheduled to become due in the 12-month period following December 31, 2024.
As of December 31, 2023, our principal sources of liquidity consisted of cash and cash equivalents of $84.3 million, net accounts receivable of $141.5 million, $30.0 million from our receivables purchase arrangement, $160.0 million from our new credit agreement, and financing from French government agencies.
As of December 31, 2024, our principal sources of liquidity consisted of cash and cash equivalents of $101.5 million, net accounts receivable of $178.0 million, $30.0 million from our Master Receivables Purchase Agreement (described below), and $82.0 million remaining available under the Revolving Facility of our Credit Agreement, and financing from French government agencies.
Year Ended December 31, (in thousands, except percentages) 2023 2022 2021 2023 vs. 2022 Cost of revenue $ 687 $ 533 $ 571 $ 154 29 % Operating expenses Restructuring and related charges 809 3,341 110 (2,532) (76) % Total restructuring and related charges $ 1,496 $ 3,874 $ 681 $ (2,378) (61) % Restructuring and related charges decreased in 2023, as compared to 2022, primarily due to higher severance and employee benefit costs recorded in conjunction with restructuring activities in fiscal 2022.
Year Ended December 31, (in thousands, except percentages) 2024 2023 2022 2024 vs. 2023 Cost of revenue $ 460 $ 687 $ 533 $ (227) (33) % Operating expenses Restructuring and related charges $ 15,973 $ 809 $ 3,341 $ 15,164 1,874 % Total restructuring and related charges $ 16,433 $ 1,496 $ 3,874 $ 14,937 998 % Restructuring and related charges increased in 2024, as compared to 2023, primarily driven by higher severance and employee benefit costs recorded in fiscal 2024, in connection with the 2024 restructuring activities.
Income Taxes Year Ended December 31, (in thousands, except percentages) 2023 2022 2021 2023 vs. 2022 Provision for (benefit from) income taxes $ (64,853) $ 16,303 $ (4,383) $ (81,156) (498) % The change in provision for (benefit from) income taxes for 2023, as compared to 2022, was primarily due to the release of the valuation allowance against U.S.
Other Income (Expense), Net Year Ended December 31, (in thousands, except percentages) 2024 2023 2022 2024 vs. 2023 Other income (expense), net $ 2,123 $ (335) $ 4,006 $ 2,458 (734) % The change in other income (expense), net in 2024, as compared to 2023, was primarily due to higher unrealized foreign exchange gains resulting from the strengthening of the U.S. dollar against the Euro in 2024. 40 Table of Contents Income Taxes Year Ended December 31, (in thousands, except percentages) 2024 2023 2022 2024 vs. 2023 Provision for (benefit from) income taxes $ 18,716 $ (64,853) $ 16,303 $ 83,569 (129) % The change in provision for (benefit from) income taxes for 2024, as compared to 2023, was primarily due to the prior period release of the valuation allowance against U.S.
Our Broadband segment operating margin increased in 2023, compared to 2022, primarily due to lower shipping costs in 2023. 42 Table of Contents Liquidity and Capital Resources We expect to continue to manage our cash from operations effectively, together with deploying cash in working capital for growth.
Video segment operating margin improved in 2024 primarily due to realized benefits from cost saving initiatives combined with an increase in SaaS and services as a percentage of segment revenue. 41 Table of Contents Liquidity and Capital Resources We expect to continue to manage our cash from operations effectively, together with deploying cash in working capital for growth.
APAC net revenue decreased by $6.5 million in 2023, as compared to 2022, primarily due to a reduction in sales of $8.2 million in Video segment due to lower demand, partially offset by a $1.7 million increase in revenue from higher demand in our Broadband segment.
Americas net revenue increased by $109.6 million in 2024, as compared to 2023, primarily driven by a $115.1 million increase in our Broadband segment revenue, partially offset by a $5.5 million decrease in our Video segment revenue.
Investing Activities Net cash used in investing activities increased by $7.2 million in 2023, as compared to 2022, primarily due to proceeds from the sale of our investment in Encoding.com in 2022.
Investing Activities Net cash used in investing activities increased by $0.7 million in 2024, as compared to 2023, primarily due to higher purchases of property and equipment in fiscal 2024.
The increase in our SaaS and services revenue was primarily driven by $10.4 million increase in usage from our existing customers and $5.8 million increase in revenue from the acquisition of new SaaS customers, partially offset by a $2.8 million decrease in revenue attributable to lower support services revenue from existing customers.
The decrease was primarily driven by a $28.3 million reduction in product sales across most regions, mainly due to project delays by our customers, and a $6.6 million decrease in support services, resulting from lower customer support contract renewals. These decreases were partially offset by a $6.0 million increase in SaaS revenue, primarily driven by the acquisition of new customers.
Video segment operating margin decreased in 2023, compared to 2022, primarily due to the decrease in revenue. Broadband Our Broadband segment net revenue increased by $37.7 million in 2023, as compared to 2022, primarily due to a $30.3 million increase in revenue from higher product sales and a $7.4 million increase in support services revenue from our existing customers.
The operating margin of our Broadband segment also improved in 2024 primarily due to higher revenue and gross margin expansion. Video Our Video segment net revenue decreased by $28.9 million in 2024, as compared to 2023.
SaaS and service net revenue increased by $20.9 million in 2023, as compared to 2022, primarily due to an increase of $10.4 million in revenue from increased usage by our existing customers, a $5.8 million increase in revenue from the acquisition of new customers, and a $4.7 million increase in revenue from higher demand for support services from our existing customers.
SaaS and service net revenue decreased by $0.7 million in 2024, as compared to 2023, primarily due to a $6.6 million decrease in Video segment support services resulting from lower contract renewals, partially offset by a $6.0 million increase in Video SaaS revenue, mainly driven by the acquisition of new customers.
Our cash and cash equivalents of $84.3 million as of December 31, 2023 consisted of bank deposits held throughout the world, of which $57.3 million was held outside of the United States. At present, such foreign funds are considered to be indefinitely reinvested in foreign countries to the extent of indefinitely reinvested foreign earnings.
At present, such foreign funds are considered to be indefinitely reinvested in foreign countries to the extent of indefinitely reinvested foreign earnings.
The increase in our Broadband segment revenue was mainly contributed by higher volume from our existing customers including initial shipments on a new project with a large Tier 1 customer in 2023.
The Broadband segment revenue growth was mainly due to higher volume from our existing customers, including $83.9 million from new technology deployments with one Tier 1 customer and $26.5 million from expansion deployments with another Tier 1 customer.
The decreases were partially offset by higher payment of tax withholding obligations related to the net share settlement of restricted stock units and payments of debt issuance costs associated with the Credit Agreement. 44 Table of Contents New Accounting Pronouncements Refer to Note 2 to the accompanying Consolidated Financial Statements for a full description of recent accounting pronouncements, including the dates of adoption and estimated effects, if any, on results of operations and financial condition. 45 Table of Contents
Financing Activities Net cash used in financing activities increased by $28.3 million in 2024, as compared to 2023, primarily due to the $115.5 million repayment of the 2024 Notes and the $30.0 million of stock repurchases in fiscal 2024, partially offset by the proceeds of $75 million in loans under the Revolving Facility and $40 million in loans under the Term Facility. 43 Table of Contents New Accounting Pronouncements Refer to Note 2 to the accompanying Consolidated Financial Statements for a full description of recent accounting pronouncements, including the dates of adoption and estimated effects, if any, on results of operations and financial condition. 44 Table of Contents
Selling, General and Administrative Expenses Year Ended December 31, (in thousands, except percentages) 2023 2022 2021 2023 vs. 2022 Selling, general and administrative $ 163,282 $ 146,717 $ 138,085 $ 16,565 11 % as % of total net revenue 27 % 23 % 27 % Selling, general and administrative expenses increased in 2023, as compared to 2022, primarily due to higher employee compensation costs of $11.4 million as a result of headcount increases and annual compensation adjustments to support the growth of our Broadband business and non-recurring advisory fees of $5.2 million incurred for the strategic review of the Video business.
Selling, General and Administrative Expenses Year Ended December 31, (in thousands, except percentages) 2024 2023 2022 2024 vs. 2023 Selling, general and administrative $ 153,124 $ 163,282 $ 146,717 $ (10,158) (6) % as % of total net revenue 23 % 27 % 23 % Selling, general and administrative expenses decreased by $10.2 million in 2024, as compared to 2023.
For details regarding our Credit Agreement, refer to N ote 11, “Convertible Notes and Other Debts”, of the Notes to our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. 43 Table of Contents Summary of Cash Flows Year Ended December 31, (in thousands) 2023 2022 2021 Net cash provided by (used in) Operating activities $ 7,059 $ 5,476 $ 41,017 Investing activities (8,475) (1,288) (12,975) Financing activities (4,990) (43,133) 7,939 Effect of exchange rate changes on cash and cash equivalents 1,089 (4,900) (1,195) Net increase (decrease) in cash, cash equivalents and restricted cash $ (5,317) $ (43,845) $ 34,786 Operating Activities Net cash provided by operating activities increased by $1.6 million in 2023, as compared to 2022, primarily due to a decrease of cash used in our working capital, partially offset by lower income before income taxes.
In the event funds from foreign operations are needed to fund cash needs in the United States and if U.S. taxes have not already been previously accrued, we may be required to accrue and pay additional U.S. and foreign withholding taxes in order to repatriate these funds. 42 Table of Contents Summary of Cash Flows Year Ended December 31, (in thousands) 2024 2023 2022 Net cash provided by (used in) Operating activities $ 61,917 $ 7,059 $ 5,476 Investing activities (9,186) (8,475) (1,288) Financing activities (33,269) (4,990) (43,133) Effect of foreign exchange rate changes on cash and cash equivalents (1,942) 1,089 (4,900) Net increase (decrease) in cash, cash equivalents and restricted cash $ 17,520 $ (5,317) $ (43,845) Operating Activities Net cash provided by operating activities increased by $54.9 million in 2024, as compared to 2023, primarily due to higher income before income taxes, adjusted for non-cash asset impairment and other charges in fiscal 2024.
The decrease in our Video segment revenue was mainly due to a one-time deployment of our appliance products for a customer in 2022 amounting to a $41.6 million and a decrease of $26.6 million attributable to lower sales across all regions in 2023.
The decrease in our Video segment revenue was mainly attributable to lower sales across most regions due to project delays by our customers. EMEA net revenue decreased by $35.1 million in 2024, as compared to 2023, driven by lower sales of $20.5 million in the Video segment and $14.6 million in the Broadband segment.
Americas net revenue decreased by $5.2 million in 2023, as compared to 2022, primarily due to a one-time deployment of our Video appliance products for a customer in 2022 amounting to a $41.6 million, and a $2.6 million reduction in sales within our Video segment in 2023.
APAC net revenue decreased by $3.6 million in 2024, as compared to 2023, primarily due to a decline in Video product sales.
Refer to Note 3, “Investment in Equity Securities,” of the Notes to our Consolidated Financial Statements for details on the sale of investment in Encoding.com.
Refer to Note 9, “Restructuring and Related Charges,” of the Notes to our Consolidated Financial Statements for additional information.
Refer to Note 10, “Restructuring and Related Charges,” of the Notes to our Consolidated Financial Statements for additional information. 40 Table of Contents Interest Expense, Net Year Ended December 31, (in thousands, except percentages) 2023 2022 2021 2023 vs. 2022 Interest expense, net $ (2,696) $ (5,040) $ (10,625) $ 2,344 (47) % Interest expense, net decreased in 2023, as compared to 2022, primarily due to the repayment of the 4.375% Convertible Senior Notes due 2022 upon their maturity.
Interest Expense, Net Year Ended December 31, (in thousands, except percentages) 2024 2023 2022 2024 vs. 2023 Interest expense, net $ (7,326) $ (2,696) $ (5,040) $ (4,630) 172 % Interest expense, net increased in 2024, as compared to 2023, primarily due to higher interest rates for the borrowings under the Credit Agreement compared to the interest rate for the 2024 Notes.
The research and development expenses are net of French Research and Development (“French R&D”) credits. Research and development expenses increased in 2023, as compared to 2022, primarily due to higher employee compensation costs as a result of headcount increases to support the growth of our Broadband business.
The research and development expenses are net of French Research and Development credits. Research and development expenses decreased by $5.3 million in 2024, as compared to 2023.
Removed
More recently, the United States has experienced high levels of inflation, which may result in decreased demand for our products and services, increases in our operating costs including our labor costs, constrained credit and liquidity, reduced customer spending and volatility in financial markets.
Added
While market activity leads us to believe these near-term headwinds for our Video business may be receding, the capital spending slow-down may persist longer than expected. CRITICAL ACCOUNTING ESTIMATES Our consolidated financial statements and the related notes included elsewhere in this report are prepared in accordance with U.S. GAAP.
Removed
The Federal Reserve has raised, and may continue to raise, interest rates in response to concerns over inflation risk.
Added
The increase in our Broadband segment revenue was mainly driven by certain customers ramping up due to technology transitions and new deployments. The decrease in our Video segment revenue was mainly attributable to lower sales across most regions due to project delays by our customers.
Removed
There continues to be uncertainty in the changing market and economic conditions, including the possibility of additional measures that could be taken by the Federal Reserve and other government agencies, related to macroeconomic conditions, adverse business conditions and liquidity concerns, or bank failures or instability in the financial services sector, geopolitical disruptions and concerns over inflation risk. 36 Table of Contents Our Broadband strategy is focused on continuing to develop and deliver software-based broadband access technologies and related DAA nodes and other hardware devices, which we refer to as our cOS solutions, to our broadband operator customers.
Added
The decline in the Video segment was primarily due to lower appliance product sales as a result of customer project delays, while in the Broadband segment, one of our large Tier 1 customers reduced spending in 2024 due to high inventory levels from prior years’ purchases.
Removed
In the meantime, we believe our Broadband segment will continue to gain momentum in the marketplace as our customers adopt and deploy our virtualized DOCSIS, CMTS and FTTH solutions and distributed access architectures.
Added
The margin expansion was primarily contributed by Broadband segment, benefiting from a favorable product mix. Video segment margin also improved, supported by an increase in SaaS as a percentage of segment revenue and additional benefits from a favorable appliance product mix.
Removed
We continue to make progress in the development of our cOS solutions and related DAA nodes and hardware devices, in the growth of our Broadband business, with expanded commercial deployments, field trials, and customer engagements.
Added
The decrease was primarily driven by a $7.6 million decline in the Video segment due to headcount reductions from restructuring activities and a $3.7 million decrease in the Broadband segment due to resources being redeployed to support certain customer projects. These decreases were partially offset by a $6.0 million increase in investments to support the growth of our Broadband business.
Removed
Video Business Strategic Review As previously disclosed in our Q3 2023 earnings press release and Form 10-Q filed on November 3, 2023, we initiated a formal strategic review process for our Video business to better position the Company for long-term shareholder value creation.
Added
The decrease was primarily driven by a $5.0 million reduction in spending resulting from headcount reductions related to restructuring activities in the Video business and a $5.2 million non-recurring advisory fees incurred for the strategic review of the Video business in 2023. 39 Table of Contents Asset Impairment and Related Charges Year Ended December 31, (in thousands, except percentages) 2024 2023 2022 2024 vs. 2023 Lease-related asset impairment and other charges $ 10,889 $ — $ — $ 10,889 % * Asset impairment charges $ 1,824 $ — $ — $ 1,824 % * *Not meaningful During the year ended December 31, 2024, we recorded an impairment charge of $1.8 million related to the total capitalized value of internally developed software with no future benefit.
Removed
As noted in our prior disclosures, we received indications of interest in our Video business from a number of parties. To date, that interest has not yet translated into a definitive agreement with any party. We are continuing the strategic review process, and no specific timetable has been established for the completion of the review.
Added
We also recorded total lease-related impairment and other charges of $10.9 million. These charges primarily consisted of $3.9 million in right-of-use asset impairments, $4.3 million in leasehold improvement impairments, and $2.7 million related to the fair value of other unrecoverable facility costs. Refer to Note 3, “Leases,” of the Notes to our consolidated financial statements for additional information.
Removed
We do not intend to disclose further details with respect to the review process unless and until our board of directors approves a specific transaction or otherwise concludes its review. 37 Table of Contents CRITICAL ACCOUNTING ESTIMATES Our unaudited condensed consolidated financial statements and the related notes included elsewhere in this report are prepared in accordance with U.S. GAAP.
Added
Refer to Note 10, “Debt,” of the Notes to our Consolidated Financial Statements for additional information regarding the interest rates applicable to our outstanding loans.
Removed
Based on the available objective evidence, at December 31, 2023, we determined it appropriate to release the valuation allowance against U.S. federal and certain other states net deferred tax assets of $67.7 million and recorded a one-time income tax benefit.
Added
As of December 31, 2024, there were no receivables sold under this agreement. Our cash and cash equivalents of $101.5 million as of December 31, 2024 consisted of bank deposits held throughout the world and money market funds, of which $46.0 million was held outside of the United States.
Removed
These decreases were partially offset by an increase in our Broadband segment revenue of $39.0 million resulting from higher volume from our existing customers including initial shipments on a new project with a large Tier 1 customer in 2023. EMEA net revenue decreased by $5.4 million in 2023, as compared to 2022.
Removed
This decline was primarily attributed to reduced sales, with decreases in our Video and Broadband segments of $3.4 million and $2.0 million, respectively. The reduction in sales in both segments was a consequence of lower demand for our products.
Removed
Our gross margin increased by 90 basis points (bps) in 2023, as compared to 2022, primarily driven by margin expansion in both our Broadband and Video segments, largely attributed to an increase of 53 bps from lower shipping costs and an increase of 37 bps due to favorable product mix.
Removed
Other Income (Expense), Net Year Ended December 31, (in thousands, except percentages) 2023 2022 2021 2023 vs. 2022 Other income (expense), net $ (335) $ 4,006 $ 687 $ (4,341) (108) % The change in other income (expense), net in 2023, as compared to 2022, was primarily due to a gain of $4.2 million recognized on the sale of our investment in Encoding.com in May 2022.
Removed
Refer to Note 16, “Segment information, Geographic Information and Customer Concentration,” of the Notes to our Consolidated Financial Statements for a reconciliation of the Company’s consolidated segment operating income to consolidated income before income taxes. Video Our Video segment net revenue decreased by $54.8 million in 2023, as compared to 2022.
Removed
This decrease was primarily driven by a reduction in appliance and integration revenue of $68.2 million, partially offset by an increase of $13.4 million in our SaaS and services revenue.
Removed
The decrease in appliance and integration revenue was primarily due to a one-time deployment of our appliance products for a customer in 2022, amounting to $41.6 million, and a $26.6 million decline in sales across all regions in 2023, primarily due a decline in demand as a result of macroeconomic conditions impacting our customers’ capital budgets in 2023.
Removed
In the event funds from foreign operations are needed to fund cash needs in the United States and if U.S. taxes have not already been previously accrued, we may be required to accrue and pay additional U.S. and foreign withholding taxes in order to repatriate these funds.
Removed
On December 21, 2023, we entered into a Credit Agreement (the “Credit Agreement”), by and among the Company, certain of our subsidiaries from time to time party thereto, the lenders from time to time party thereto, and Citibank, N.A., as administrative agent for the lenders.
Removed
The Credit Agreement provides for a secured revolving loan facility in an aggregate principal amount of up to $120.0 million (the “Revolving Facility”), with a $10.0 million sublimit for the issuance of letters of credit, and a secured delayed draw term loan facility in an aggregate principal amount of up to $40.0 million (the “Term Facility”).
Removed
As of December 31, 2023, there were no borrowings outstanding and approximately $0.2 million of letters of credit outstanding under the Credit Agreement. The Credit Agreement refinances and replaces our prior credit agreement, dated as of December 19, 2019, as amended, with JPMorgan Chase Bank, N.A., as lender.
Removed
Financing Activities Net cash used in financing activities decreased by $38.1 million in 2023, as compared to 2022, primarily due to the repayment of the $37.7 million principal of the 2022 Notes in 2022, and stock repurchase transactions in 2022.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+5 added−12 removed2 unchanged
Biggest changeWe use derivative instruments, primarily forward contracts, to manage exposures to foreign currency exchange rates and we do not enter into foreign currency forward contracts for trading purposes. Derivatives Not Designated as Hedging Instruments (Balance Sheet Hedges) We enter into forward currency contracts to hedge foreign currency denominated monetary assets and liabilities.
Biggest changeWe use derivative instruments, primarily forward contracts, to manage exposures to foreign currency exchange rates and we do not enter into foreign currency forward contracts for trading purposes. From time to time, we use foreign currency forward contracts to hedge a portion of our exposures to changes in currency exchange rates, which result from our global operating and financing activities.
Accordingly, we are subject to exposure from adverse movements in foreign currency exchange rates, primarily the Euro, British pound, Israeli shekel and Japanese yen. Our U.S. dollar functional subsidiaries account for approximately 97% , 97 % and 96% of our consolidated net revenues in 2023, 2022 and 2021, respectively.
Accordingly, we are subject to exposure from adverse movements in foreign currency exchange rates, primarily the Euro, British pound, Israeli shekel and Japanese yen. Our U.S. dollar functional subsidiaries account for approximately 98% , 97 % and 97% of our consolidated net revenues in 2024, 2023 and 2022, respectively.
We recorded net billings denominated in foreign currencies of approximatel y 15% , 15% and 18% of total company billings in 2023, 2022 and 2021, respectively.
We recorded net billings denominated in foreign currencies of approximatel y 9% , 15% and 15% of total company billings in 2024, 2023 and 2022, respectively.
Removed
These derivative instruments are marked to market through earnings every period and mature generally within three months. Changes in the fair value of these foreign currency forward contracts are recognized in “Other income (expense), net” in the Consolidated Statements of Operations, and are largely offset by the changes in the fair value of the assets or liabilities being hedged.
Added
We do not use derivative financial instruments for trading or speculative purposes. A hypothetical 10% change in currency exchange rates would not have a material impact on our consolidated financial statements.
Removed
The U.S. dollar equivalents of all outstanding notional amounts of foreign currency forward contracts are summarized as follows: December 31, (in thousands) 2023 2022 Derivatives not designated as hedging instruments: Purchase $ 54,169 $ 7,971 46 Table of Contents Interest Rate Risk Our exposure to market risk for changes in interest rates relates primarily to our outstanding debt arrangements with variable rate interests as well as our borrowings under the Credit Agreement.
Added
Interest Rate Risk As of December 31, 2024, our variable-rate debt included the Term Loan and the Revolving Loan under the Credit Agreement, with carrying values of $39.3 million and $74.1 million, respectively, as well as other borrowings with carrying value of $10.9 million.
Removed
On December 21, 2023, we entered into a Credit Agreement (the “Credit Agreement”), with Citibank, N.A., as administrative agent for the lenders.
Added
A hypothetical 100 basis point change in the interest rate would increase or decrease the interest expense on these loans for the next twelve months by approximately $1.1 million. The carrying value of the variable-rate loans approximate their fair values as the underlying interest rates are tied to the Secured Overnight Financing Rate.
Removed
The Credit Agreement provides for a secured revolving loan facility in an aggregate principal amount of up to $120.0 million (the “Revolving Facility”), with a $10.0 million sublimit for the issuance of letters of credit, and a secured delayed draw term loan facility in an aggregate principal amount of up to $40.0 million (the “Term Facility”).
Added
As of December 31, 2024, our debt also included fixed-rate debt with a carrying value of $2.8 million. Fixed rate debt exposes us to changes in market interest rates reflected in the fair value of the debt and to the risk that we may need to refinance maturing debt with new debt at higher rates.
Removed
The Credit Agreement refinances and replaces the Company’s existing credit agreement, dated as of December 19, 2019, as amended, with JPMorgan Chase Bank, N.A., as lender.
Added
Except in very limited circumstances, we do not have an obligation to repay fixed-rate debt prior to maturity and, as a result, interest rate and changes in fair value would not have a significant impact on our cash flows related to our fixed-rate debt. 45 Table of Contents
Removed
Loans under the Revolving Facility and Term Facility will bear interest, at the Company’s election, at a floating rate per annum equal to either (a) a base rate, defined as the greatest of (i) the prime rate then in effect, (ii) the federal funds rate then in effect, plus 0.50%, or (iii) an adjusted term SOFR rate determined on the basis of a one-month interest period, plus 1.00%, in each case, plus a margin of between 1.00% to 1.75% (“Base Rate Loans”); and (b) an adjusted term SOFR rate (based on one, three or six month interest periods), plus a margin of between 2.00% to 2.75% (“Adjusted Term SOFR Loans”).
Removed
The applicable margin in each case is determined based on the Company’s consolidated net leverage ratio. Interest is payable quarterly in arrears, in the case of Base Rate Loans, and at the end of the applicable interest period, but at least every three months, in the case of Adjusted Term SOFR Loans.
Removed
The Company is also obligated to pay other customary fees (including letter of credit fees) for a credit agreement of this size and type . We had no borrowings under the Credit Agreement from the closing of the Credit Agreement through December 31, 2023.
Removed
For our French entity, the aggregate debt balance at December 31, 2023 was $15.4 million, which are financed by French government agencies. These debt instruments have maturities ranging from one to five years, expiring from 2024 through 2026. These loans are tied to the 1-month EURIBOR rate plus spread.
Removed
Refer to Note 11, “Convertible Notes and Other Debts,” of the Notes to our Consolidated Financial Statements for additional information. As of December 31, 2023, a hypothetical 1.0% increase in interest rates on our debts subject to variable interest rate fluctuations would increase our interest expense by approximately $0.1 million annually.
Removed
As of December 31, 2023, we had $115.5 million aggregate principal of the 2024 Notes outstanding, which have a fixed 2.00% coupon rate. Additionally, during fiscal 2020, we received a loan from Société Générale S.A. in France which bears an effective interest rate of 0.51% per annum, in connection with relief loan programs related to the COVID-19 pandemic.
Removed
As of December 31, 2023, the outstanding balance of this loan was $4.1 million . 47 Table of Contents

Other HLIT 10-K year-over-year comparisons