Ribbon Communications Inc
For the period ended Jun 30, 2024. Filed Jul 29, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Jul 29, 2024
RBBN$1.35-2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0001708055-24-000007
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-07-29.
0001708055-24-000010
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 103 previous paragraphs and 108 current paragraphs.
42 unchanged; 55 reworded; 10 added; 3 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 15 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
Revenue from our Cloud and Edge segment was$110.6 million and $125.3 million in the three months ended June 30, 2024 and 2023, respectively. Gross profit and gross margin for this segment were$70.4 million and 63.7%, respectively, in the three months ended June 30, 2024, and $79.3 million and 63.3%, respectively, in the three months ended June 30, 2023. Revenue from our Cloud and Edge segment was$212.2 million and$239.7 million in the six months ended June 30, 2024 and 2023, respectively. Gross profit and gross margin for this segment were$134.9 million and 63.6%, respectively, in the six months ended June 30, 2024, and$145.4 million and 60.7%, respectively, in the six months ended June 30, 2023.
Current report
Revenue from our IP Optical Networks segment was$82.1 million and $85.4 million in the three months ended June 30, 2024 and 2023, respectively. Gross profit and gross margin for this segment were$27.4 million and 33.4%, respectively, in the three months ended June 30, 2024, and $22.1 million and 25.9%, respectively, in the three months ended June 30, 2023. Revenue from our IP Optical Networks segment was$160.1 million and$157.0 million in the six months ended June 30, 2024 and 2023, respectively. Gross profit and gross margin for this segment were$55.0 million and 34.3%, respectively, in the six months ended June 30, 2024, and$37.5 million and 23.9%, respectively, in the six months ended June 30, 2023.
Current report
We recorded stock-based compensation expense of $3.5 million and $6.1 million in the three months ended June 30, 2024 and 2023, respectively, and $8.0 million and $12.0 million in the six months ended June 30, 2024 and 2023, respectively.
Current report
Three and six months ended June 30, 2024 and 2023
Current report
SDN management and orchestration platform.
Current report
On June 21, 2024, we entered into a Senior Secured Credit Facilities Agreement (the “2024 Credit Facility” and “2024 Credit Agreement”) as guarantor, with our wholly-owned subsidiary, Ribbon Communications Operating Company, Inc., as the borrower (“Borrower”), HPS Investment Partners, LLC ("HPS"), as administrative agent, and HPS and WhiteHorse Capital Management, LLC ("WhiteHorse" and, together with HPS, the "Lenders"), pursuant to which the Lenders have provided us with a $385 million senior secured credit facility comprised of (i) a $350 million term loan (the “2024 Term Loan”) and (ii) a $35 million revolving credit facility (the “2024 Revolver”), including a $20 million sublimit for letters of credit. The proceeds received from the 2024 Term Loan were used to (a) repay 100% of the amounts outstanding under the 2020 Credit Facility, (b)
Current report
redeem in full the Preferred Stock and (c) pay fees and expenses related to the 2024 Credit Facility. Any excess proceeds are expected to be used by us for working capital and other general corporate purposes.
Current report
The 2024 Term Loan and the 2024 Revolver bear interest, at the Borrower's option, at either the Alternate Base Rate (“ABR”) or Term Secured Overnight Financing Rate ("SOFR") with an Applicable Margin for each (all as defined in the 2024 Credit Agreement). Margins for the first six months are 5.25% per annum for ABR Loans and 6.25% per annum for SOFR Loans. Thereafter, margins vary based on our Consolidated Net Leverage Ratio, ranging from 4.75% to 5.25% per annum for ABR Loans and 5.75% to 6.25% per annum for SOFR Loans. The 2024 Term Loan and the 2024 Revolver will both mature on June 21, 2029. The 2024 Term Loan is to be repaid in equal quarterly installments: approximately $0.9 million beginning with the third quarter of 2024 through the second quarter of 2025; approximately $2.2 million beginning with the third quarter of 2025 and ending with the second quarter of 2027; and approximately $4.4 million quarterly thereafter, with the remaining principal balance of approximately $298.4 million due on the maturity date of June 21, 2029. In connection with the establishment of the 2024 Credit Facility, $7.7 million of original issue discount was withheld by the Lenders and we incurred $6.1 million of debt issuance costs for a total of $13.8 million that is being amortized to Interest expense, net over the term of the agreement.
Current report
Our financing activities provided $43.5 million of cash in the six months ended June 30, 2024. We received $342.3 million of proceeds from the issuance of term debt related to the 2024 Credit Facility, net of $7.7 million of original issue discount, that was established on June 21, 2024 to refinance the 2020 Credit Facility. Also, we had $44.1 million of both borrowings and principal payments under the 2020 Revolving Credit Facility. In conjunction with the establishment of the 2024 Credit Facility, we repaid the 2020 Term Debt amounting to $235.4 million, redeemed all of the outstanding Preferred Stock totaling $56.9 million, and paid $4.0 million in debt issuance costs. In addition, we paid $2.6 million of tax obligations related to the vesting of stock awards and units.
Current report
Based on our current expectations, we believe that our current cash and available borrowings under the 2024 Credit Facility will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least twelve months from the date of issuance of these financial statements.
Removed paragraphs (3)
Previous report
Revenue from our Cloud and Edge segment was$101.7 million and $114.5 million in the three months ended March 31, 2024 and 2023, respectively. Gross profit and gross margin for this segment were$64.4 million and 63.4%, respectively, in the three months ended March 31, 2024, and $66.1 million and 57.7%, respectively, in the three months ended March 31, 2023.
Previous report
Revenue from our IP Optical Networks segment was$78.0 million and $71.7 million in the three months ended March 31, 2024 and 2023, respectively. Gross profit and gross margin for this segment were$27.5 million and 35.3%, respectively, in the three months ended March 31, 2024, and $15.3 million and 21.4%, respectively, in the three months ended March 31, 2023.
Previous report
Our financing activities used $5.8 million of cash in the three months ended March 31, 2024, primarily due to $5.0 million of principal payments on our term debt and $0.8 million for the payment of tax withholding related to the net share settlements of restricted stock awards upon vesting. In addition, we had $15.0 million of borrowings and $15.0 million of principal payments under our 2020 Revolving Credit Facility.
Reworded paragraphs (55)
Previous wording
Further, the U.S. and other European countries have imposed sanctions and trade restrictions against Russia in connection with the war in Ukraine. These sanctions and restrictions currently prohibit our ability to sell certain products and services. The sanctions continue to evolve and further changes in the current sanctions or trade restrictions could further limit our ability to sell products and services to customers in Russia and, our ability to collect on outstanding accounts receivable from such customers. If we are further limited in our ability to sell products and services to Russia and other countries for an extended period, it could have a material impact on our financial results.
Current wording
Further, the U.S. and other European countries have imposed sanctions and trade restrictions against Russia in connection with the war in Ukraine. These sanctions and restrictions currently prohibit our ability to sell hardware products. The sanctions continue to evolve and further changes in the current sanctions or trade restrictions could further limit our ability to sell products and services to customers in Russia and, our ability to collect on outstanding accounts receivable from such customers. If we are further limited in our ability to sell products and services to Russia and other countries for an extended period, it could have a material impact on our financial results.
Previous wording
We reported a loss from operations of $13.5 million and $35.2 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
We reported a loss from operations of $1.9 million and $6.6 million for the three months ended June 30, 2024 and 2023, respectively. We reported a loss from operations of $15.4 million and $41.8 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Our revenue was $179.7 million and $186.2 million in the three months ended March 31, 2024 and 2023, respectively. Our gross profit and gross margin were $92.0 million and 51.2%, respectively, in the three months ended March 31, 2024, and $81.4 million and 43.7%, respectively, in the three months ended March 31, 2023. The lower revenue in the three months ended March 31, 2024 compared to 2023 is due to$12.8 million of lower Cloud and Edge sales, primarily to U.S. Service Providers, partially offset by$6.3 million of higher IP Optical sales in Europe, the Middle East and Africa ("the EMEA region").
Current wording
Our revenue was $192.6 million and $210.6 million in the three months ended June 30, 2024 and 2023, respectively. Our gross profit and gross margin were $97.9 million and 50.8%, respectively, in the three months ended June 30, 2024, and $101.5 million and 48.2%, respectively, in the three months ended June 30, 2023. The lower revenue in the three months ended June 30, 2024 compared to 2023 is due to$14.7 million of lower Cloud and Edge sales, primarily to enterprise customers and$3.3 million of lower IP Optical Networks sales. Our revenue was $372.3 million and $396.8 million in the six months ended June 30, 2024 and 2023, respectively. Our gross profit and gross margin were $189.8 million and 51.0%, respectively, in the six months ended June 30, 2024, and $182.9 million and 46.1%, respectively, in the six months ended June 30, 2023. The lower revenue in the six months ended June 30, 2024 compared to 2023 is due to$27.5 million of lower Cloud and Edge sales, primarily to U.S. service providers, partially offset by $3.0 million of higher IP Optical Networks sales.
Previous wording
Our operating expenses were $105.4 million and $116.6 million in the three months ended March 31, 2024 and 2023, respectively. The decreased operating expenses are primarily related to lower research and development ("R&D") and restructuring related expenses. Operating expenses for the three months ended March 31, 2024 included $6.7 million of amortization of acquired intangible assets, and $3.1 million of restructuring and related expense. Operating expenses for the three months ended March 31, 2023 included $7.3 million of amortization of acquired intangible assets, $1.6 million of acquisition-, disposal- and integration-related expense, and $6.9 million of restructuring and related expense.
Current wording
Our operating expenses were $99.8 million and $108.1 million in the three months ended June 30, 2024 and 2023, respectively, and $205.2 million and $224.7 million in the six months ended June 30, 2024 and 2023, respectively. The decreased operating expenses are primarily related to lower research and development ("R&D") and restructuring related expenses. Operating expenses for the three months ended June 30, 2024 included $6.5 million of amortization of acquired intangible assets, and $1.9 million of restructuring and related expense. Operating expenses for the three months ended June 30, 2023 included $7.3 million of amortization of acquired intangible assets, $0.5 million of acquisition-, disposal- and integration-related expense, and $4.3 million of restructuring and related expense. Operating expenses for the six months ended June 30, 2024 included $13.2 million of amortization of acquired intangible assets, and $5.0 million of restructuring and related expense. Operating expenses for the six months ended June 30, 2023 included $14.5 million of amortization of acquired intangible assets, $2.1 million of acquisition-, disposal- and integration-related expense, and $11.2 million of restructuring and related expense.
Previous wording
We recorded stock-based compensation expense of $4.5 million and $5.8 million in the three months ended March 31, 2024 and 2023, respectively. These amounts are included as components of both Cost of revenue and Operating expenses in our condensed consolidated statements of operations.
Current wording
These amounts are included as components of both Cost of revenue and Operating expenses in our condensed consolidated statements of operations.
Previous wording
See "Results of Operations" in this MD&A for a discussion of the changes in our revenue and expenses for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Current wording
See "Results of Operations" in this MD&A for a discussion of the changes in our revenue and expenses for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.
Previous wording
In February 2023, our Board of Directors approved a strategic restructuring program (the "2023 Restructuring Plan") to streamline our operations in order to support our investment in critical growth areas. The 2023 Restructuring Plan includes, among other things, charges related to a workforce reduction. Any potential positions eliminated in countries outside the United States are subject to local law and consultation requirements. We recorded restructuring and related expense of$1.6 million and $5.7 million in the three months ended March 31, 2024 and 2023, respectively, in connection with the 2023 Restructuring Plan for severance related costs. We anticipate that we will record nominal future expense for severance in connection with the 2023 Restructuring Plan.
Current wording
In February 2023, our Board of Directors approved a strategic restructuring program (the "2023 Restructuring Plan") to streamline our operations in order to support our investment in critical growth areas. The 2023 Restructuring Plan includes, among other things, charges related to a workforce reduction. Any potential positions eliminated in countries outside the United States are subject to local law and consultation requirements. We recorded restructuring and related expense of$0.4 million and$2.0 million in the three and six months ended June 30, 2024, in connection with the 2023 Restructuring Plan for severance related costs. We anticipate that we will record nominal future expense for severance in connection with the 2023 Restructuring Plan.
Previous wording
In February 2022, our Board of Directors approved a strategic restructuring program (the "2022 Restructuring Plan") to streamline our operations in order to support our investment in critical growth areas. The 2022 Restructuring Plan includes, among other things, charges related to a consolidation of facilities and a workforce reduction. Any positions eliminated in countries outside the United States are subject to local law and consultation requirements. In connection with the 2022 Restructuring Plan, we recorded restructuring and related expense of $1.4 million and $1.2 million in the three months ended March 31, 2024 and 2023, respectively. The amount for the three months ended March 31, 2024 was related to variable and other facilities-related costs. The amount for the three months ended March 31, 2023 was comprised of $1.0 million for variable and other facilities-related costs and $0.2 million for accelerated amortization of lease assets no longer being used with no ability or intent to sublease. We anticipate that we will record approximately $4 million of expense in the remainder of 2024 related to the 2022 Restructuring Plan.
Current wording
In February 2022, our Board of Directors approved a strategic restructuring program (the "2022 Restructuring Plan") to streamline our operations in order to support our investment in critical growth areas. The 2022 Restructuring Plan includes, among other things, charges related to a consolidation of facilities and a workforce reduction. Any positions eliminated in countries outside the United States are subject to local law and consultation requirements. In connection with the 2022 Restructuring Plan, we recorded restructuring and related expense of $1.6 million and $3.0 million in the three and six months ended June 30, 2024, respectively. The amount for both the three and six months ended June 30, 2024 was related to variable and other facilities-related costs. We anticipate that we will record approximately $3 million of expense in the remainder of 2024 related to the 2022 Restructuring Plan.
Previous wording
For facilities that are part of a restructuring plan, for which we have no intent or ability to enter into a sublease, we recognize accelerated rent amortization over the period from the date that we commence the plan to fully or partially vacate a facility through the final vacate date. We did not record accelerated rent amortization in the three months ended March 31, 2024. We recorded$0.2 millionof accelerated rent amortization in thethree months ended March 31, 2023. We continue to evaluate our properties included in our restructuring plans for accelerated amortization and/or right-of-use asset impairment. We may incur additional future expense if we are unable to sublease other locations included in these initiatives.
Current wording
For facilities that are part of a restructuring plan, for which we have no intent or ability to enter into a sublease, we recognize accelerated rent amortization over the period from the date that we commence the plan to fully or partially vacate a facility through the final vacate date. We did not record accelerated rent amortization in thethree and six months ended June 30, 2024. We recorded$0.4 million and $0.6 millionof accelerated rent amortization in thethree and six months ended June 30, 2023, respectively. We continue to evaluate our properties included in our restructuring plans for accelerated amortization and/or right-of-use asset impairment. We may incur additional future expense if we are unable to sublease other locations included in these initiatives.
Previous wording
Revenue. Revenue for the three months ended March 31, 2024 and 2023 was as follows (in thousands, except percentages):
Current wording
Revenue. Revenue for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands, except percentages):
Previous wording
Segment revenue for the three months ended March 31, 2024 and 2023 was as follows (in thousands):
Current wording
Segment revenue for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):
Previous wording
The decrease in our product revenue in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was the result of$11 million of lower sales of our Cloud and Edge products, partially offset by $5 million of higher sales of our IP Optical Networks products. The decrease in revenue from the sale of Cloud and Edge products was primarily attributable to lower sales to U.S. Service Providers, partially offset by increased sales to Enterprise customers, including U.S. Federal agencies to support voice network modernization. The increase in revenue from the sale of IP Optical Networks products was primarily attributable to higher sales in Israel and Eastern Europe following the introduction of new products and capabilities, including support for Long Haul Optical Transport, 5G Cell Site Routers, and a new series of IP Routers.
Current wording
The decrease in our product revenue in the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was the result of$13 million of lower salesof our Cloud and Edge products and $5 million of lower sales of our IP Optical Networks products. The decrease in our product revenue in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due to $24 million of lower salesof our Cloud and Edge products, partially offset by slightly higher sales of our IP Optical Networks products. The decrease in revenue from the sale of Cloud and Edge products in the three months ended June 30, 2024 was attributable to $8 million of lower sales to enterprise customers, including a slight delay in sales to a U.S. Federal agency to support voice network modernization that is now expected in the third quarter of 2024, and $4 million of lower sales to U.S. service providers. The decrease in revenue from the sale of IP Optical Networks products in the three months ended June 30, 2024 was attributable to $14 million of lower sales to service providers, partially offset by $9 million of higher sales to enterprise customers. The slight increase in revenue from the sale of IP Optical Networks products in the six months ended June 30, 2024 was attributable to $17 million of higher sales to enterprise customers, offset by just under $17 million of lower sales to service providers.
Previous wording
Revenue from sales to enterprise customers was 43% and 29% of our product revenue in the three months ended March 31, 2024 and 2023, respectively. These sales were made through both our direct sales team and indirect sales channel partners. The increase in enterprise sales reflects stronger sales of our products to customers in the government sector.
Current wording
Revenue from sales to enterprise customers was 38% and 32% of our product revenue in the three months ended June 30, 2024 and 2023, respectively. These sales were made through both our direct sales team and indirect sales channel partners. Revenue from sales to enterprise customers was 41% and 31% in the six months ended June 30, 2024 and 2023, respectively. The increase in enterprise sales reflects stronger sales of our products to customers in the government sector.
Previous wording
Revenue from indirect sales through our channel partner program was 52% and 38% of our product revenue in the three months ended March 31, 2024 and 2023, respectively. The increase in channel sales reflects stronger IP Optical Networks deployments through systems integrators as well as sell-thru our Service Provider channel partners in Eastern Europe.
Current wording
Revenue from indirect sales through our channel partner program was 32% of our product revenue in both the three months ended June 30, 2024 and 2023 and 41% and 35% of our product revenue in the six months ended June 30, 2024 and 2023, respectively. The increase in channel sales in the six months ended June 30, 2024 reflects stronger IP Optical Networks deployments through systems integrators as well as sell-thru our service provider channel partners in Eastern Europe.
Previous wording
Service revenue for the three months ended March 31, 2024 and 2023 was comprised of the following (in thousands, except percentages):
Current wording
Service revenue for the three and six months ended June 30, 2024 and 2023 was comprised of the following (in thousands, except percentages):
Previous wording
Segment service revenue for the three months ended March 31, 2024 and 2023 was comprised of the following (in thousands):
Current wording
Segment service revenue for the three and six months ended June 30, 2024 and 2023 was comprised of the following (in thousands):
Previous wording
Maintenance revenue was 3.1% lower in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to modestly lower renewal rates with several Cloud & Edge customers and the timing of renewals in the IP Optical Networks segment.
Current wording
Maintenance revenue waslower in the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 primarily due to modestly lower renewal rates from decommissioning some older legacy equipment with several Cloud & Edge customers andthe timing of renewals in the IP Optical Networks segment.
Previous wording
Professional services revenue washigherin the three months ended March 31, 2024 compared to the same period in 2023 by 6.4% primarily due to growing sales of IP Optical Networks services in the EMEA region.
Current wording
Professional services revenue washigherin the three and six months ended June 30, 2024 compared to the same periods in 2023 primarily due to growing sales of IP Optical Networks services in the EMEA region.
Previous wording
The following customer contributed 10% or more of our revenue in the three months ended March 31, 2024 and 2023:
Current wording
The following customer contributed 10% or more of our revenue in the three and six months ended June 30, 2024 and 2023:
Previous wording
Revenue from customers domiciled outside the United States was 60% and 56%in the three months ended March 31, 2024 and 2023, respectively. Due to the timing of project completions, we expect that the domestic and international components as a percentage of revenue may fluctuate from quarter to quarter and year to year.
Current wording
Revenue from customers domiciled outside the United States was 58% and 53%in the three months ended June 30, 2024 and 2023, respectively, and 59% and 54% of revenue in the six months ended June 30, 2024 and 2023, respectively. Due to the timing of project completions, we expect that the domestic and international components as a percentage of revenue may fluctuate from quarter to quarter and year to year.
Previous wording
Our deferred product revenue was$11 millionand$17 millionat March 31, 2024 and December 31, 2023, respectively. Our deferred service revenue was$114 million and$116 million at March 31, 2024 and December 31, 2023, respectively. Our deferred revenue balance may fluctuate as a result of the timing of revenue recognition, customer payments, maintenance contract renewals, contractual billing rights and maintenance revenue deferrals included in multiple element arrangements.
Current wording
Our deferred product revenue was$10 millionand$17 millionat June 30, 2024 and December 31, 2023, respectively. Our deferred service revenue was$106 million and$116 million at June 30, 2024 and December 31, 2023, respectively. Our deferred revenue balance may fluctuate as a result of the timing of revenue recognition, customer payments, maintenance contract renewals, contractual billing rights and maintenance revenue deferrals included in multiple element arrangements.
Previous wording
We expect that our total revenue in 2024 will increase compared to our 2023 revenue as our IP Optical sales continue to grow. From a regional perspective, we anticipate continued IP Optical revenue growth in 2024 from North America, Europe, the Middle East and Africa, and Central and Latin America. In the Cloud & Edge segment, we anticipate growth in Enterprise, including U.S. Federal agencies, offsetting lower spending from U.S. Service Providers in the first half of 2024.
Current wording
We expect that our total revenue in 2024 will increase compared to our 2023 revenue primarily due to a stronger second half in both business segments, particularly with increased purchases from Verizon as part of a voice modernization project. From a regional perspective, we anticipate continued IP Optical Networks revenue growth in 2024 from North America, Europe, the Middle East and Africa, offset by lower revenue in Eastern Europe due to additional trade restrictions with this region. In the Cloud & Edge segment, we anticipate growth in enterprise, including U.S. Federal agencies, along with U.S. service provider spending that was lower in the first half of 2024, but is expected to rebound in the second half of the year.
Previous wording
Cost of Revenue/Gross Margin. Our cost of revenue consists primarily of amounts paid to third-party manufacturers for purchased materials and services, royalties, amortization of acquired technology, inventory valuation adjustments, warranty costs, and manufacturing and services personnel and related costs. Our cost of revenue, gross profit and gross margin for the three months ended March 31, 2024 and 2023 were as follows (in thousands, except percentages):
Current wording
Cost of Revenue/Gross Margin. Our cost of revenue consists primarily of amounts paid to third-party manufacturers for purchased materials and services, royalties, amortization of acquired technology, inventory valuation adjustments, warranty costs, and manufacturing and services personnel and related costs. Our cost of revenue, gross profit and gross margin for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands, except percentages):
Previous wording
Our segment cost of revenue, gross profit and gross margin for the three months ended March 31, 2024 and 2023 were as follows (in thousands, except percentages):
Current wording
Our segment cost of revenue, gross profit and gross margin for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands, except percentages):
Previous wording
Our gross margin was higher with an 8% increase overall in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, with higher margins in both of our segments. Our IP Optical Networks segment's gross margin increased by 14% primarily attributable to higher sales volume, favorable customer and product mix, lower product costs, and improved absorption of fixed costs from higher sales. Our Cloud and Edge segment's gross margin increased by 6% primarily due tofavorable product mix and lower amortization of acquired technology costs.
Current wording
Our gross margin was higher with a 3% increase overall in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, due to an 8% increase in our IP Optical Networks segment and a slight increase in our Cloud & Edge segment. Our gross margin increased 5% in the six months ended June 30, 2024 compared to the same period in 2023 due to a 10% increase in our IP Optical Networks segment and a 3% increase in our Cloud & Edge segment. The higher margins in our IP Optical Networks segment were primarily attributable to favorable customer and product mix along with lower material, labor and royalty costs. Our Cloud and Edge segment's gross margin for the six months ended June 30, 2024 increased primarily due tofavorable product mix and lower amortization of acquired technology costs.
Previous wording
We believe that our IP Optical Networks segment gross margin will approximately maintain current levels for the remainder of 2024. Our overall corporate gross margin may decrease in 2024 compared to 2023 as a result of higher expected sales from IP Optical Networks, which has lower margins due to the higher hardware content in its products and higher production costs.
Current wording
We believe that our IP Optical Networks segment gross margin will maintain approximate current levels dependent on customer and product mix for the remainder of 2024. Our overall corporate gross margin in 2024 is expected to be very similar compared to 2023 with the Cloud & Edge revenue growing in the second half of the year, which has higher margins due to the higher software content in its products.
Previous wording
Research and Development. R&D expenses consist primarily of salaries and related personnel expenses and prototype costs for the design, development, testing, and enhancement of our products. R&D expenses for the three months ended March 31, 2024 and 2023 were as follows (in thousands, except percentages):
Current wording
Research and Development. R&D expenses consist primarily of salaries and related personnel expenses and prototype costs for the design, development, testing, and enhancement of our products. R&D expenses for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands, except percentages):
Previous wording
The decrease in our R&D expenses in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily attributable to lower expenses in our IP Optical Networks segment. The reduced expenses are a combination oflower employee headcount and outside subcontractors resulting from the cost savings implemented in the 2023 Restructuring Plan.
Current wording
The decrease in our R&D expenses in the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 was attributable tolower expenses in both of our segments. However, our IP Optical Networks segment contributed the most to the improvement by decreasing costs by $3 million and $8 million in the three and six months ended June 30, 2024, respectively. The reduced expenses are a combination oflower employee headcount and outside subcontractors resulting from the cost savings implemented in the 2023 Restructuring Plan.
Previous wording
Our IP Optical Networks R&D investment is focused on significantly expanding our portfolio of IP Routing solutions, adding additional features and capabilities to our Optical Transport portfolio, and supporting features in our next generation SDN management and orchestration platform.
Current wording
Our IP Optical Networks R&D investment is focused on significantly expanding our portfolio of IP Routing solutions, adding additional features and capabilities to our Optical Transport portfolio, and supporting features in our next generation
Previous wording
Some aspects of our R&D efforts require significant short-term expenditures, the timing of which may cause variability in our expenses. We believe that rapid technological innovation is critical to our long-term success, and we are tailoring our investments to meet the requirements of our customers and market. We believe that our R&D expenses will remain consistent for the rest of 2024 and will be lower than 2023 overall, with reduced investment in both segments in areas such as sustaining engineering, as well as a full year benefit from the cost savings implemented in the 2023 Restructuring Plan.
Current wording
Some aspects of our R&D efforts require significant short-term expenditures, the timing of which may cause variability in our expenses. We believe that rapid technological innovation is critical to our long-term success, and we are tailoring our investments to meet the requirements of our customers and market. We believe that our R&D expenses will increase slightly in the second half of 2024 primarily due to annual employee compensation adjustments. However, we do expect that 2024 R&D expenses will be lower than 2023 overall, with reduced investment in both segments in areas such as sustaining engineering, as well as a full year benefit from the cost savings implemented in the 2023 Restructuring Plan.
Previous wording
Sales and Marketing Expenses. Sales and marketing expenses consist primarily of salaries and related personnel costs, commissions, travel and entertainment expenses, promotions, customer trial and evaluations inventory and other marketing and sales support expenses. Sales and marketing expenses for the three months ended March 31, 2024 and 2023 were as follows (in thousands, except percentages):
Current wording
Sales and Marketing Expenses. Sales and marketing expenses consist primarily of salaries and related personnel costs, commissions, travel and entertainment expenses, promotions, customer trial and evaluations inventory and other marketing and sales support expenses. Sales and marketing expenses for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands, except percentages):
Previous wording
The decrease in sales and marketing expenses in 2024 as compared to 2023 is primarily a result of a global sales organization realignment that reduced management layers, as well as reduced investment in under-performing regions. In the three months ended March 31, 2024 compared to the three months ended March 31, 2023, we achieved an equal reduction of expenses in both of our operating segments.
Current wording
The decrease in sales and marketing expenses in 2024 as compared to 2023 is primarily a result of the global sales organization realignment that reduced management layers, as well as reduced investment in under-performing regions, with essentially equal reductions in both of our operating segments.
Previous wording
General and Administrative Expenses. General and administrative expenses consist primarily of salaries and related personnel costs for executive and administrative personnel, and audit, legal and other professional fees. General and administrative expenses for the three months ended March 31, 2024 and 2023 were as follows (in thousands, except percentages):
Current wording
General and Administrative Expenses. General and administrative expenses consist primarily of salaries and related personnel costs for executive and administrative personnel, and audit, legal and other professional fees. General and administrative expenses for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands, except percentages):
Previous wording
The increase in general and administrative expenses in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily attributable to higher stock-based and other incentive compensation.
Current wording
The increase in general and administrative expenses in the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 was primarily attributable to higher legal fees related to certain specific legal matters.
Previous wording
Amortization of Acquired Intangible Assets included in Operating expenses. Amortization of acquired intangible assets included in Operating expenses ("Opex Amortization") for the three months ended March 31, 2024 and 2023 was as follows (in thousands, except percentages):
Current wording
Amortization of Acquired Intangible Assets included in Operating expenses. Amortization of acquired intangible assets included in Operating expenses ("Opex Amortization") for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands, except percentages):
Previous wording
Opex Amortization was lower for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. We record our amortization in relation to expected future cash flows rather than on a straight-line basis. Accordingly, such expense may vary from one period to the next.
Current wording
Opex Amortization was lower for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023. We record our amortization in relation to expected future cash flows rather than on a straight-line basis. Accordingly, such expense may vary from one period to the next.
Previous wording
We recorded no such expenses in the three months ended March 31, 2024 compared to $1.6 million of such expenses recorded in the three months ended March 31, 2023. These costs were related to integration following the Company's acquisition of ECI and included license fees for systems in the process of being retired.
Current wording
We recorded no such expenses in the three and six months ended June 30, 2024 compared to $0.5 million and $2.1 million of such expenses recorded in the three and six months ended June 30, 2023, respectively. These costs were related to integration following the Company's acquisition of ECI and included license fees for systems in the process of being retired.
Previous wording
We recorded restructuring and related expense of $3.1 million and $6.9 million in the three months ended March 31, 2024 and 2023, respectively. Although we have eliminated positions as part of our restructuring initiatives, we continue to hire in certain areas that we believe are important to our future growth.
Current wording
We recorded restructuring and related expense of $1.9 million and $4.3 million in the three months ended June 30, 2024 and 2023, respectively, and $5.0 million and $11.2 million in the six months ended June 30, 2024 and 2023, respectively. Although we have eliminated positions as part of our restructuring initiatives, we continue to hire in certain areas that we believe are important to our future growth.
Previous wording
Interest Expense, Net. Interest expense and interest income for the three months ended March 31, 2024 and 2023 were as follows (in thousands, except percentages):
Current wording
Interest Expense, Net. Interest expense and interest income for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands, except percentages):
Previous wording
Our Interest income was nominal in 2024 and 2023. Interest expense in the three months ended March 31, 2024 and 2023 was primarily comprised of interest and amortization of debt issuance costs related to the 2020 Credit Facility (as defined below). Our interest expense for the three months ended March 31, 2023 benefited from our interest rate swap, which was sold in March 2023. See Note 10 to our condensed consolidated financial statements for a discussion of the sale of our interest rate swap.
Current wording
Our Interest income was nominal in 2024 and 2023. Our interest expense in the three and six months ended June 30, 2024 and 2023 primarily represents interest, amortization of debt issuance costs and original issue discount, and the amortization of gains in accumulated other comprehensive (loss) income from the sales of our interest rate swap. Interest expense in the three and six months ended June 30, 2024 was lower than the three and six months ended June 30, 2023 primarily due to write offs related to the refinancing of the 2020 Credit Facility with a portion of the proceeds from the 2024 Credit Facility (both defined below) on June 21, 2024. The write offs related to the refinancing consisted of the remaining unamortized gains in accumulated other comprehensive (loss) income from the sales of our interest rate swap totaling $4.9 million, partially offset by the write off of debt issuance costs from the 2020 Credit Facility totaling $2.0 million. Our interest expense for the six months ended June 30, 2023 benefited from our interest rate swap that fixed our interest rate at 0.904% and was sold in March 2023. See Note 10 to our condensed consolidated financial statements for a discussion of the sale of our interest rate swap.
Showing the first 40 of 55 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Cash provided by operating activities in the six months ended June 30, 2023 was $8.6 million, primarily resulting from higher product revenue in our IP Optical Networks segment and lower operating expenses company-wide due to our various cost saving initiatives. Collections of accounts receivable and lower employee and facilities expenses all positively affected our operating cash flow in 2023.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Three months ended March 31, 2024 and 2023
Previous report — wording carried elsewhere
Cash provided by operating activities in the three months ended March 31, 2023 was $11.1 million, primarily resulting from lower accounts receivable and other operating assets, higher accrued expenses and other long-term liabilities, higher deferred revenue, and certain non-cash expenses such as amortization of intangible assets and stock-based compensation. These amounts were partially offset by our net loss and lower accounts payable, higher inventory and certain non-cash items such as deferred income taxes and the gain on sale of our interest rate swap.
Previous report — wording carried elsewhere
Our financing activities used $30.1 million of cash in the three months ended March 31, 2023, primarily due to $80.0 million of principal payments, including a $75.0 million prepayment in connection with the Sixth Amendment to the 2020