Ribbon Communications Inc

Previous wording

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

Current wording

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

Previous wording

Continued uncertain global economic conditions may cause our customers to restrict spending or delay purchases for an indeterminate period of time and consequently cause our revenues to decline. Further, such factors may negatively impact our operating costs resulting in a reduction in net income. The degree to which the ongoing wars in Israel and Ukraine and the inflationary and high interest rate environment impacts our future business, financial position and results of operations will depend on developments beyond our control.

Current wording

Continued uncertain global economic conditions may cause our customers to restrict spending or delay purchases for an indeterminate period of time and consequently cause our revenues to decline. Further, such factors may negatively impact our operating costs resulting in a reduction in net income. The degree to which the ongoing wars in Israel and Ukraine, the inflationary and high interest rate environment and tariffs impacts our future business, financial position and results of operations will depend on developments beyond our control.

Previous wording

The Ongoing Wars in Israel and Ukraine. The uncertainty resulting from the wars in Israel and Ukraine and the expansion of, and the threat of continued expansion of, one or both of these wars could result in some of our customers delaying purchases from us. As a result of safety concerns, we may close our offices in Israel from time to time. Although our employees in these offices have the ability to work remotely and business continuity plans are in place to address any medium- or long-term disruptions that could result from the closure of these offices, the office closures and general effects of employees operating in a region at war could have a negative impact on our operations. Further, a number of our employees in Israel are members of the military reserves and subject to immediate call-up in response to the war in Israel. Following the terrorist attacks in Israel in October 2023, a number of our employees have been activated for military duty and we expect that additional employees will also be activated if the war in Israel continues. While we have business continuity plans in place to address the military call-ups, it could affect the timing of projects in the short-term as the work is shifted to other team members both inside and outside of Israel.

Current wording

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

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 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.

Current wording

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 in Russia or provide any replacement parts in Russia. The sanctions continue to evolve and further changes in the current sanctions or trade restrictions could further limit our ability to sell products and services to customers in Russia, our ability to collect on outstanding accounts receivable from such customers, and our ability to repatriate funds. If we are further limited in our ability to sell products and services to Russia and other countries for an extended period, it could have a material impact on our financial results.

Previous wording

Inflation and Interest Rates. We continue to see near-term impacts on our business due to inflation, including ongoing global price pressures driving up energy prices, component costs, freight premiums, and other operating costs above normal rates. Although headline inflation in the United States and Europe appears to be decreasing, core inflation (excluding food and energy prices) remains elevated and is a source of continued cost pressure on businesses and households. Interest rates have increased significantly as central banks in developed countries attempt to subdue inflation while government deficits and debt remain at high levels in many global markets. However, in September 2024, the Federal Reserve’s Federal Open Market Committee lowered the target range for the federal funds rate by 0.5% to 4.75% to 5%, noting that it has gained greater confidence that inflation is moving sustainability toward the Committee’s two percent objective. Yet, the economic outlook remains uncertain, and the implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for our business.

Current wording

inflation (excluding food and energy prices) remains elevated and is a source of continued cost pressure on businesses and households. Interest rates remain high as central banks in developed countries attempt to subdue inflation while government deficits and debt remain at high levels in many global markets. However, since its peak in 2024, the Federal Reserve lowered the federal funds rate to its current target range of 4.25% to 4.50% as a result of indicators that inflation had made progress toward the Federal Reserve’s objective and labor market conditions had generally eased. Yet, the economic outlook remains uncertain, and the implications of current and future tariffs, higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for our business.

Previous wording

Our Chief Operating Decision Maker assesses our performance based on the performance of two separate organizations within Ribbon: the Cloud and Edge operating segment ("Cloud and Edge") and the IP Optical Networks operating segment ("IP Optical Networks"). For additional details regarding our operating segments, see Note 13 - Operating Segment Information to our condensed consolidated financial statements.

Current wording

Our Chief Operating Decision Maker (“CODM”) assesses our performance based on the performance of two separate organizations within Ribbon: the Cloud and Edge operating segment ("Cloud and Edge") and the IP Optical Networks operating segment ("IP Optical Networks"). For additional details regarding our operating segments, see Note 13 - Operating Segment Information to our condensed consolidated financial statements.

Previous wording

Our revenue was $210.2 million and $203.2 million in the three months ended September 30, 2024 and 2023, respectively. Our gross profit and gross margin were $109.6 million and 52.1%, respectively, in the three months ended September 30, 2024, and $103.5 million and 50.9%, respectively, in the three months ended September 30, 2023. The higher revenue in the three months ended September 30, 2024 compared to 2023 is due to $12.3 million of higher Cloud and Edge sales, primarily to U.S. service providers and Federal agencies, partially offset by $5.2 million of lower IP Optical Networks sales led by lower sales into Eastern Europe and India, which were partially offset by growth in the U.S. rural market. Our revenue was $582.5 million and $599.9 million in the nine months ended September 30, 2024 and 2023, respectively. Our gross profit and gross margin were $299.4 million and 51.4%, respectively, in the nine months ended September 30, 2024, and $286.4 million and 47.7%, respectively, in the nine months ended September 30, 2023. The lower revenue in the nine months ended September 30, 2024 compared to 2023 is due to $15.2 million of lower Cloud and Edge sales to both U.S. service providers and enterprise customers overall, partially offset by higher Federal agency sales, and $2.2 million of lower IP Optical Networks sales.

Current wording

Our revenue was $181.3 million and $179.7 million in the three months ended March 31, 2025 and 2024, respectively. Our gross profit and gross margin were $82.4 million and 45.4%, respectively, in the three months ended March 31, 2025, and $92.0 million and 51.2%, respectively, in the three months ended March 31, 2024. The higher revenue in the three months ended March 31, 2025 compared to 2024 is due to $5.9 million of higher overall Cloud and Edge revenue, partially offset by $4.3 million of lower IP Optical Networks sales. The higher Cloud and Edge revenue was attributable to $8.0 million of higher sales of professional services, primarily to U.S. service providers, partially offset by $2.4 million of lower maintenance revenue. The lower IP Optical Networks revenue was led by fewer sales into Eastern Europe, which were partially offset by growth in India and Southeastern Asia.

Previous wording

Our operating expenses were $110.5 million and $102.6 million in the three months ended September 30, 2024 and 2023, respectively, and $315.8 million and $327.3 million in the nine months ended September 30, 2024 and 2023, respectively. The increased operating expenses in the three months ended September 30, 2024 compared to 2023 are primarily related to a $5.0 million legal settlement and associated legal fees related to certain specific legal matters. Operating expenses for the three months ended September 30, 2024 included $6.5 million of amortization of acquired intangible assets, and $3.8 million of restructuring and related expense. Operating expenses for the three months ended September 30, 2023 included $7.2 million of amortization of acquired intangible assets, $0.8 million of acquisition-, disposal- and integration-related expense, and $2.7 million of restructuring and related expense. The decreased operating expenses in the nine months ended September 30, 2024 compared to 2023 are primarily related to lower restructuring and related expense, acquisition-, disposal- and integration-related expense and amortization of acquired intangible assets. Operating expenses for the nine months ended September 30, 2024 included $19.7 million of amortization of acquired intangible assets, and $8.8 million of restructuring and related expense. Operating expenses for the nine months ended September 30, 2023 included $21.7 million of amortization of acquired intangible assets, $3.0 million of acquisition-, disposal- and integration-related expense, and $13.9 million of restructuring and related expense.

Current wording

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.

Previous wording

We recorded stock-based compensation expense of $4.0 million and $5.0 million in the three months ended September 30, 2024 and 2023, respectively, and $12.1 million and $16.9 million in the nine months ended September 30, 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

We recorded stock-based compensation expense of $4.3 million and $4.5 million in the three months ended March 31, 2025 and 2024, respectively. 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 three and nine months ended September 30, 2024 compared to three and nine months ended September 30, 2023.

Current wording

See "Results of Operations" in this MD&A for a discussion of the changes in our revenue and expenses for three months ended March 31, 2025 compared to three months ended March 31, 2024.

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. In connection with the 2023 Restructuring Plan, we recorded restructuring and related expense for severance related costs of $0.1 million and $2.1 million in the three and nine months ended September 30, 2024, respectively, and $0.9 million and $9.4 million in three and nine months ended September 30, 2023, respectively. 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. In connection with the 2023 Restructuring Plan, we recorded restructuring and related expense for severance related costs of $0.1 million and $1.6 million in the three months ended March 31, 2025 and 2024, respectively. 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 $1.5 million and $4.5 million in the three and nine months ended September 30, 2024, respectively, for variable and other facilities-related costs, and we recorded restructuring and related expense of $1.9 million and $4.6 million in the three and nine months ended September 30, 2023, respectively. The amount for the three months ended September 30, 2023 was

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 $3.1 million and $1.4 million in the three months ended March 31, 2025 and 2024, respectively, for variable and other facilities-related costs. We anticipate that we will record approximately $2 million of expense in the remainder of 2025 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 and nine months ended September 30, 2024. We recorded $0.2 million and $0.8 million for accelerated rent amortization in the three and nine months ended September 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.

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 the three months ended March 31, 2025 or 2024. We continue to evaluate our properties included in our restructuring plans for accelerated amortization and/or right-of-use asset impairment. We may incur additional expense in the future if we are unable to sublease other locations included in these initiatives.

Previous wording

This MD&A is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available information. We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment. The significant accounting policies that we believe are the most critical include revenue recognition, the valuation of inventory, warranty accruals, loss contingencies and reserves, stock-based compensation, the Preferred Stock and Warrants, business combinations, goodwill and intangible assets, accounting for leases, and accounting for income taxes. If actual results differ significantly from management’s estimates and projections, there could be a material effect on our condensed consolidated financial statements. There were no significant changes to our critical accounting policies from January 1, 2024 through September 30, 2024. For a further discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

This MD&A is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available information. We consider certain accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment. The significant accounting policies that we believe are the most critical include revenue recognition, the valuation of inventory, warranty accruals, loss contingencies and reserves, stock-based compensation, the Preferred Stock and Warrants, business combinations, goodwill and intangible assets,

Previous wording

We reported a loss from operations of $0.9 million and income from operations of $0.9 million for the three months ended September 30, 2024 and 2023, respectively. We reported a loss from operations of $16.3 million and $41.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

Three months ended March 31, 2025 and 2024

Previous wording

Revenue. Revenue for the three and nine months ended September 30, 2024 and 2023 was as follows (in thousands, except percentages):

Current wording

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

Previous wording

Segment revenue for the three and nine months ended September 30, 2024 and 2023 was as follows (in thousands):

Current wording

Segment revenue for the three months ended March 31, 2025 and 2024 was as follows (in thousands):

Previous wording

The increase in our product revenue in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was the result of $11 million of higher sales of our Cloud and Edge products, partially offset by $7 million of lower sales of our IP Optical Networks products. The decrease in our product revenue in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due to $13 million of lower sales of our Cloud and Edge products and $7 million of lower sales of our IP Optical Networks products. The increase in revenue from the sale of Cloud and Edge products in the three months ended September 30, 2024 was attributable to higher sales to U.S. service providers and Federal agencies. The decrease in revenue from the sale of IP Optical Networks products in the three months ended September 30, 2024 was attributable to lower sales into Eastern Europe and India, partially offset by higher sales in the U.S. rural market. The decrease in revenue from the sale of Cloud and Edge products in the nine months ended September 30, 2024 was attributable to lower sales to both U.S. service providers and enterprise customers overall, partially offset by higher sales to Federal agencies for network transformation projects. The decrease in revenue from the sale of IP Optical Networks products in the nine months ended September 30, 2024 was attributable to lower sales into India, partially offset by higher sales in Europe, the Middle East and Africa (“the EMEA region”).

Current wording

The decrease in our product revenue in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was the result of $6 million of lower sales of our IP Optical Networks products, partially offset by a slight increase in sales of Cloud and Edge products. The decrease in revenue from the sale of IP Optical products was primarily attributable to lower sales in Eastern Europe, partially offset by higher sales in India.

Previous wording

Revenue from sales to enterprise customers was 36% and 30% of our product revenue in the three months ended September 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 39% and 30% in the nine months ended September 30, 2024 and 2023, respectively. The increase in enterprise sales reflects stronger sales of our products to customers in the Federal agencies.

Current wording

Revenue from sales to enterprise customers was 28% and 43% of our product revenue in the three months ended March 31, 2025 and 2024, respectively. These sales were made through both our direct sales team and indirect sales channel partners. The decrease in enterprise sales reflects lower sales of our products to Federal agencies and other enterprise customers.

Previous wording

Revenue from indirect sales through our channel partner program was 34% and 33% of our product revenue in the three months ended September 30, 2024 and 2023, respectively, and 38% and 34% of our product revenue in the nine months ended September 30, 2024 and 2023, respectively. The increase in channel sales in the nine months ended September 30, 2024 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 28% and 52% of our product revenue in the three months ended March 31, 2025 and 2024, respectively. The decrease in channel sales in the three months ended March 31, 2025 reflects lower sales of products to Federal agencies and other enterprise customers.

Previous wording

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

Current wording

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

Previous wording

Service revenue for the three and nine months ended September 30, 2024 and 2023 was comprised of the following (in thousands, except percentages):

Current wording

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

Previous wording

Segment service revenue for the three and nine months ended September 30, 2024 and 2023 was comprised of the following (in thousands):

Current wording

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

Previous wording

Maintenance revenue was lower in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to modestly lower renewal rates from decommissioning some older legacy equipment with several Cloud & Edge customers.

Current wording

Maintenance revenue was $2 million lower in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to modestly lower renewal rates from decommissioning some older legacy equipment with several Cloud & Edge customers.

Previous wording

The following customer contributed 10% or more of our revenue in the three and nine months ended September 30, 2024 and 2023:

Current wording

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

Previous wording

Revenue from customers domiciled outside the United States was 48% and 58% in the three months ended September 30, 2024 and 2023, respectively, and 55% of revenue in both the nine months ended September 30, 2024 and 2023. U.S. revenue is increasing due to higher sales into the U.S. market from both the Cloud and Edge and IP Optical

Current wording

Revenue earned from customers domiciled outside the United States was 54% and 60% in the three months ended March 31, 2025 and 2024, respectively. Our U.S. revenue is increasing due to higher sales into the U.S. market from both of our segments. Due to the timing of project completions, we expect that the domestic and international components as a percentage of our revenue may fluctuate from quarter to quarter and year to year.

Previous wording

Our deferred product revenue was $13 million and $17 million at September 30, 2024 and December 31, 2023, respectively. Our deferred service revenue was $100 million and $116 million at September 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.

Current wording

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

Previous wording

We expect that our total revenue in 2024 will increase modestly compared to our revenue in 2023 due to growth in the Cloud & Edge segment, particularly with the increased purchases from Verizon as part of a voice modernization project, as well as increased sales to Federal agencies, offset by lower revenue from our IP Optical segment. From a regional perspective, we anticipate continued IP Optical Networks revenue growth in 2024 from North America, and EMEA, offset by lower revenue in Eastern Europe due to additional trade restrictions. In the Cloud & Edge segment, we expect continued revenue growth from enterprise customers, including U.S. Federal agencies, as well as higher U.S. service provider spending.

Current wording

We expect that our total revenue in 2025 will increase compared to our revenue in 2024 due to the growth in the Cloud & Edge segment, particularly with the increased purchases from Verizon as part of a voice modernization project, as well as growth in IP Optical segment sales. From a regional perspective, we anticipate continued IP Optical revenue growth in 2025 from North America, and EMEA, offset by lower revenue in Eastern Europe due to additional trade restrictions. In the Cloud & Edge segment, we expect continued revenue growth from enterprise customers, as well as higher U.S. service provider spending.

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 and nine months ended September 30, 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 months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

Previous wording

Our segment cost of revenue, gross profit and gross margin for the three and nine months ended September 30, 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 months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

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 and nine months ended September 30, 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 months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

Previous wording

The decrease in our R&D expenses in the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was attributable to lower expenses in both of our segments. However, our IP Optical Networks segment contributed the most to the improvement by decreasing costs by under $1 million and $8 million in the three and nine months ended September 30, 2024, respectively. The reduced expenses are a combination

Current wording

The decrease in our R&D expenses in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was equally attributable to lower R&D expenses in both of our segments. The reduced R&D expenses are primarily due to lower employee headcount and outside subcontractors.

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. 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.

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 modestly in 2025 primarily due to higher employee and consulting costs related to modifying certain legacy products and certain of our cloud native solutions.

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 and nine months ended September 30, 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 months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

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 and nine months ended September 30, 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 months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

Previous wording

We believe that our general and administrative expenses in 2024 will increase compared to our 2023 levels primarily due to higher legal fees, settlement expense, employee costs, and as a result of inflation.

Current wording

We believe that our general and administrative expenses in 2025 will decrease compared to our 2024 levels, primarily due to lower litigation expenses, partially offset by higher employee costs related to annual merit increases.

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 and nine months ended September 30, 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 months ended March 31, 2025 and 2024 was as follows (in thousands, except percentages):

Previous wording

Opex Amortization was lower for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 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.

Current wording

Opex Amortization was lower for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. 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 restructuring and related expense of $3.8 million and $2.7 million in the three months ended September 30, 2024 and 2023, respectively, and $8.8 million and $13.9 million in the nine months ended September 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.

Current wording

We recorded restructuring and related expense of $5.3 million and $3.1 million in the three months ended March 31, 2025 and 2024, 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 and nine months ended September 30, 2024 and 2023 were as follows (in thousands, except percentages):

Current wording

Interest Expense, Net. Interest expense and interest income for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):