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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from to
Commission File Number 001-38267
RIBBON COMMUNICATIONS INC.
(Exact name of Registrant as specified in its charter)
Delaware82-1669692
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)

6500 Chase Oaks Boulevard, Suite 100, Plano, Texas 75023
(Address of principal executive offices) (Zip code)
(978614-8100
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001RBBNThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filer
Smaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act) o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No x
As of July 22, 2022, there were 150,454,151 shares of the registrant's common stock, $0.0001 par value per share, outstanding.



RIBBON COMMUNICATIONS INC.
FORM 10-Q
QUARTERLY PERIOD ENDED JUNE 30, 2022
TABLE OF CONTENTS
ItemPage
PART I FINANCIAL INFORMATION
1.
PART II OTHER INFORMATION



Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are subject to a number of risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future expenses, results of operations and financial position, integration activities, capital structure, credit facility compliance, restructuring activities, expected impacts from the war in Ukraine and the financial sanctions imposed in connection therewith, expected impacts of the ongoing COVID-19 pandemic, beliefs about our business strategy, availability of components for the manufacturing of our products, expected benefits from our acquisition of ECI Telecom Group Ltd. ("ECI") and the sale of our Kandy Communications business ("Kandy"), plans and objectives of management for future operations and manufacturing are forward-looking statements. Without limiting the foregoing, the words "anticipates", "believes", "could", "estimates", "expects", "intends", "may", "plans", "seeks" and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are unknown and/or difficult to predict and that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Such risks and uncertainties include, but are not limited to, supply chain disruptions resulting from component availability and/or geopolitical instabilities and disputes (including those related to the war in Ukraine); risks related to the ongoing COVID-19 pandemic on the global economy and financial markets as well as us, our customers and suppliers, which may impact our sales, gross margin, customer demand and our ability to supply our products to our customers; failure to realize anticipated benefits of our acquisition of ECI; declines in the value of our ongoing investment in American Virtual Cloud Technologies, Inc. ("AVCT"), the purchaser of Kandy; unpredictable fluctuations in quarterly revenue and operating results; the impact on fluctuations of our EBITDA on compliance under our credit facility; risks related to cybersecurity and data intrusion; failure to compete successfully against telecommunications equipment and networking companies; failure to grow our customer base or generate recurring business from our existing customers; credit risks; the timing of customer purchasing decisions and our recognition of revenues; macroeconomic conditions, including inflation; the impact of restructuring and cost-containment activities; litigation; rapid technological and market change; our ability to protect our intellectual property rights and obtain necessary licenses; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; the potential for defects in our products; risks related to the terms of our credit agreement; higher risks in international operations and markets; increases in tariffs, trade restrictions or taxes on our products; currency fluctuations; and/or failure or circumvention of our controls and procedures. We therefore caution you against relying on any of these forward-looking statements.

Additional important factors that could cause actual results to differ materially from those in these forward-looking statements are also discussed in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Part I, Item 1A and Part II, Item 7A, "Risk Factors" and "Quantitative and Qualitative Disclosures About Market Risk," respectively, of our Annual Report on Form 10-K for the year ended December 31, 2021. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on which this Quarterly Report on Form 10-Q was first filed. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.


3


PART I FINANCIAL INFORMATION

Item 1. Financial Statements
RIBBON COMMUNICATIONS INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
June 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$36,227 $103,915 
Restricted cash2,037 2,570 
Accounts receivable, net258,116 282,917 
Inventory64,648 54,043 
Other current assets54,395 37,545 
Total current assets415,423 480,990 
Property and equipment, net48,504 47,685 
Intangible assets, net319,787 350,730 
Goodwill300,892 300,892 
Investments4,520 43,931 
Deferred income taxes56,961 47,287 
Operating lease right-of-use assets46,951 53,147 
Other assets37,636 23,075 
$1,230,674 $1,347,737 
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of term debt$20,058 $20,058 
Accounts payable102,518 97,121 
Accrued expenses and other99,951 100,752 
Operating lease liabilities16,078 17,403 
Deferred revenue106,463 109,119 
Total current liabilities345,068 344,453 
Long-term debt, net of current315,264 350,217 
Operating lease liabilities, net of current48,052 55,196 
Deferred revenue, net of current19,584 20,619 
Deferred income taxes8,117 8,116 
Other long-term liabilities43,245 41,970 
Total liabilities779,330 820,571 
Commitments and contingencies (Note 17)
Stockholders' equity:
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding
  
Common stock, $0.0001 par value per share; 240,000,000 shares authorized; 150,459,784 shares issued and outstanding at June 30, 2022; 148,895,308 shares issued and outstanding at December 31, 2021
15 15 
Additional paid-in capital1,881,942 1,875,234 
Accumulated deficit(1,455,816)(1,355,661)
Accumulated other comprehensive income25,203 7,578 
Total stockholders' equity451,344 527,166 
$1,230,674 $1,347,737 

See notes to the unaudited condensed consolidated financial statements.

4


RIBBON COMMUNICATIONS INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

 Three months endedSix months ended
 June 30,
2022
June 30,
2021
June 30,
2022
June 30,
2021
Revenue:
Product$112,667 $113,129 $194,657 $211,018 
Service93,129 98,081 184,337 192,964 
Total revenue205,796 211,210 378,994 403,982 
Cost of revenue:
Product58,151 46,641 109,360 91,086 
Service35,207 36,142 70,874 73,922 
Amortization of acquired technology7,888 9,700 16,155 19,761 
Total cost of revenue101,246 92,483 196,389 184,769 
Gross profit104,550 118,727 182,605 219,213 
Operating expenses:
Research and development51,103 46,797 103,793 94,207 
Sales and marketing35,843 34,881 73,462 72,099 
General and administrative12,901 12,734 25,763 28,287 
Amortization of acquired intangible assets7,513 7,481 14,788 13,243 
Acquisition-, disposal- and integration-related1,535 1,052 3,384 2,249 
Restructuring and related2,894 2,830 7,708 8,780 
Total operating expenses111,789 105,775 228,898 218,865 
(Loss) income from operations(7,239)12,952 (46,293)348 
Interest expense, net(4,602)(3,048)(8,603)(8,867)
Other (expense) income, net(10,228)17,180 (39,028)(8,268)
(Loss) income before income taxes(22,069)27,084 (93,924)(16,787)
Income tax provision(8,111)(3,843)(6,231)(4,659)
Net (loss) income$(30,180)$23,241 $(100,155)$(21,446)
(Loss) earnings per share:
Basic$(0.20)$0.16 $(0.67)$(0.15)
Diluted$(0.20)$0.15 $(0.67)$(0.15)
Weighted average shares used to compute (loss) earnings per share:
Basic150,190 147,467 149,681 146,706 
Diluted150,190 154,160 149,681 146,706 

See notes to the unaudited condensed consolidated financial statements.

5


RIBBON COMMUNICATIONS INC.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(in thousands)
(unaudited)


Three months endedSix months ended
June 30,
2022
June 30,
2021
June 30,
2022
June 30,
2021
Net (loss) income$(30,180)$23,241 $(100,155)$(21,446)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on interest rate swap4,053 (205)19,522 6,464 
Foreign currency translation adjustments(322)(447)(1,013)(400)
Employee retirement benefits(884) (884) 
Other comprehensive income (loss), net of tax2,847 (652)17,625 6,064 
Comprehensive (loss) income, net of tax$(27,333)$22,589 $(82,530)$(15,382)

See notes to the unaudited condensed consolidated financial statements.


6


RIBBON COMMUNICATIONS INC.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except shares)
(unaudited)

Three months ended June 30, 2022
 Common stock
SharesAmountAdditional paid-in capitalAccumulated deficitAccumulated other comprehensive incomeTotal stockholders' equity
Balance at April 1, 2022150,111,958 $15 $1,877,677 $(1,425,636)$22,356 $474,412 
Vesting of restricted stock units396,148 — 
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations(48,322)(134)(134)
Stock-based compensation expense4,399 4,399 
Other comprehensive income2,847 2,847 
Net loss(30,180)(30,180)
Balance at June 30, 2022150,459,784 $15 $1,881,942 $(1,455,816)$25,203 $451,344 


Six months ended June 30, 2022
 Common stock
SharesAmountAdditional paid-in capitalAccumulated deficitAccumulated other comprehensive incomeTotal stockholders' equity
Balance at January 1, 2022148,895,308 $15 $1,875,234 $(1,355,661)$7,578 $527,166 
Exercise of stock options355 — 
Vesting of restricted stock units2,007,138 — 
Vesting of performance-based stock units175,751 — 
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations(618,768)(1,946)(1,946)
Stock-based compensation expense8,654 8,654 
Other comprehensive income17,625 17,625 
Net loss(100,155)(100,155)
Balance at June 30, 2022150,459,784 $15 $1,881,942 $(1,455,816)$25,203 $451,344 

See notes to the unaudited condensed consolidated financial statements.
7


RIBBON COMMUNICATIONS INC.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except shares)
(unaudited)

Three months ended June 30, 2021
 Common stock
SharesAmountAdditional paid-in capitalAccumulated deficitAccumulated other comprehensive (loss) incomeTotal stockholders' equity
Balance at April 1, 2021147,358,590 $15 $1,864,107 $(1,223,163)$1,774 $642,733 
Exercise of stock options213 — 
Vesting of restricted stock awards and units802,576 — 
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations(104,078)(831)(831)
Stock-based compensation expense4,790 4,790 
Other comprehensive loss(652)(652)
Net income23,241 23,241 
Balance at June 30, 2021148,057,301 $15 $1,868,066 $(1,199,922)$1,122 $669,281 


Six months ended June 30, 2021
 Common stock
SharesAmountAdditional paid-in capitalAccumulated deficitAccumulated other comprehensive (loss) incomeTotal stockholders' equity
Balance at January 1, 2021145,425,248 $15 $1,870,256 $(1,178,476)$(4,942)$686,853 
Exercise of stock options13,602 24 24 
Vesting of restricted stock awards and units2,465,204 — 
Vesting of performance-based stock units1,525,681 — 
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations(1,372,434)(12,064)(12,064)
Stock-based compensation expense9,850 9,850 
Other comprehensive income6,064 6,064 
Net loss(21,446)(21,446)
Balance at June 30, 2021148,057,301 $15 $1,868,066 $(1,199,922)$1,122 $669,281 

See notes to the unaudited condensed consolidated financial statements.

8



RIBBON COMMUNICATIONS INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six months ended
June 30,
2022
June 30,
2021
Cash flows from operating activities:
Net loss$(100,155)$(21,446)
Adjustments to reconcile net loss to cash flows (used in) provided by operating activities:
Depreciation and amortization of property and equipment7,773 8,475 
Amortization of intangible assets30,943 33,004 
Amortization of debt issuance costs1,078 3,684 
Stock-based compensation8,654 9,850 
Deferred income taxes(9,900)918 
Gain on sale of business (2,772)
Decrease in fair value of investments39,411 9,171 
Foreign currency exchange (gains) losses(1,048)2,013 
Changes in operating assets and liabilities:
Accounts receivable24,017 17,360 
Inventory(17,043)(1,527)
Other operating assets(319)9,874 
Accounts payable4,090 (3,508)
Accrued expenses and other long-term liabilities(8,196)(57,739)
Deferred revenue(3,692)673 
Net cash (used in) provided by operating activities(24,387)8,030 
Cash flows from investing activities:
Purchases of property and equipment(6,515)(10,570)
Proceeds from sale of business 2,944 
Net cash used in investing activities(6,515)(7,626)
Cash flows from financing activities:
Borrowings under revolving line of credit20,000  
Principal payments on revolving line of credit(20,000) 
Proceeds from issuance of term debt74,625 
Principal payments of term debt(35,029)(82,147)
Principal payments of finance leases(341)(507)
Payment of debt issuance costs(1,046)(789)
Proceeds from the exercise of stock options 24 
Payment of tax withholding obligations related to net share settlements of restricted stock awards(1,946)(12,064)
Net cash used in financing activities(38,362)(20,858)
Effect of exchange rate changes on cash, cash equivalents and restricted cash1,043 (442)
Net decrease in cash, cash equivalents and restricted cash(68,221)(20,896)
Cash, cash equivalents and restricted cash, beginning of year106,485 135,697 
Cash, cash equivalents and restricted cash, end of period$38,264 $114,801 
Supplemental disclosure of cash flow information:
Interest paid$7,833 $8,009 
Income taxes paid$5,955 $9,818 
Income tax refunds received$25 $974 
Supplemental disclosure of non-cash investing activities:
  Capital expenditures incurred, but not yet paid$3,478 $2,090 
Supplemental disclosure of non-cash financing activities:
Total fair value of restricted stock awards, restricted stock units and performance-based stock units on date vested$6,608 $33,410 

See notes to the unaudited condensed consolidated financial statements.
9


RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

(1) BASIS OF PRESENTATION

Business

Ribbon Communications Inc. ("Ribbon" or the "Company") is a leading global provider of communications technology to service providers and enterprises. The Company provides a broad range of software and high-performance hardware products, network solutions and services that enable the secure delivery of data and voice communications, and high-bandwidth networking and connectivity for residential consumer and for small, medium and large enterprises, and industry verticals such as finance, education, government, utilities and transportation. Ribbon's mission is to create a recognized global technology leader providing cloud-centric solutions that enable the secure exchange of information, with unparalleled scale, performance and elasticity. The Company is headquartered in Plano, Texas, and has a global presence with research and development or sales and support locations in over thirty-five countries around the world.

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring items, necessary for their fair presentation with accounting principles generally accepted in the United States of America ("GAAP") and with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC").

Interim results are not necessarily indicative of results for a full year or any future interim period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report"), which was filed with the SEC on March 11, 2022.

Operating Segments

The Company's chief operating decision maker (the "CODM") is its President and Chief Executive Officer. The CODM assesses the Company's performance based on the performance of two separate organizations within Ribbon: the Cloud and Edge segment ("Cloud and Edge") and the IP Optical Networks segment ("IP Optical Networks").

Reclassifications

In the fourth quarter of 2021, the Company reclassified amounts recorded for amortization of certain acquired intangible assets in prior presentations from Total operating expenses under the caption "Amortization of acquired intangible assets" to Cost of revenue under the caption "Amortization of acquired technology" in the condensed consolidated statements of operations. The Company's management believes this presentation aids in the comparability of its financial statements to industry peers. This reclassification did not impact the condensed consolidated balance sheets or statements of cash flows for any historical periods. The Company reports depreciation of property and equipment related to production activities as components of Cost of revenue. This reclassification for the three and six months ended June 30, 2021 was as follows (in thousands):

10


RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
Three months ended June 30, 2021Six months ended June 30, 2021
Prior presentationAmounts reclassifiedRevised presentationPrior presentationAmounts reclassifiedRevised presentation
Product revenue$113,129 $113,129 $211,018 $211,018 
Service revenue98,081 98,081 192,964 192,964 
  Total revenue211,210  211,210 403,982  403,982 
Cost of revenue - product46,641 46,641 91,086 91,086 
Cost of revenue - service36,142 36,142 73,922 73,922 
Amortization of acquired technology 9,700 9,700  19,761 19,761 
  Total cost of revenue82,783 9,700 92,483 165,008 19,761 184,769 
    Total gross profit128,427 (9,700)118,727 238,974 (19,761)219,213 
Research and development46,797 46,797 94,207 94,207 
Sales and marketing34,881 34,881 72,099 72,099 
General and administrative12,734 12,734 28,287 28,287 
Amortization of acquired intangible assets17,181 (9,700)7,481 33,004 (19,761)13,243 
Acquisition-, disposal- and integration-related1,052 1,052 2,249 2,249 
Restructuring and related2,830 2,830 8,780 8,780 
  Total operating expenses115,475 (9,700)105,775 238,626 (19,761)218,865 
Income from operations$12,952 $ $12,952 $348 $ $348 

Significant Accounting Policies

The Company's significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in the Annual Report. There were no material changes to the significant accounting policies during the three months ended June 30, 2022.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Ribbon and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates and Judgments

The preparation of financial statements in conformity with GAAP requires Ribbon 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 financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and judgments relied upon in preparing these condensed consolidated financial statements include accounting for business combinations, revenue recognition for multiple element arrangements, inventory valuations, assumptions used to determine the fair value of stock-based compensation, intangible asset and goodwill valuations, including impairments, legal contingencies and recoverability of Ribbon's net deferred tax assets and the related valuation allowances. Ribbon regularly assesses these estimates and records changes in estimates in the period in which they become known. Ribbon bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates.

11


RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
Restricted Cash

The Company classifies as restricted cash all cash pledged as collateral to secure long-term obligations and all cash whose use is otherwise limited by contractual provisions.

The Company had $2.0 million and $2.6 million of restricted cash as of June 30, 2022 and December 31, 2021, respectively, representing restricted short-term bank deposits pledged to secure certain performance and financial bonds as security for the Company's obligations under tenders, contracts and to one of its main subcontractors.

Transfers of Financial Assets

The Company maintains customer receivables factoring agreements with a number of financial institutions, primarily for IP Optical Networks sales outside of the United States. Under the terms of these agreements, the Company may transfer receivables to the financial institutions, on a non-recourse basis, provided that the financial institutions approve the receivables in advance. The Company maintains credit insurance policies from major insurance providers or obtains letters of credit from the customers for a majority of its factored trade receivables. The Company accounts for the factoring of its financial assets as a sale of the assets and records the factoring fees, when incurred, as a component of interest expense in the condensed consolidated statements of operations, and the proceeds from the sales of receivables are included in cash from operating activities in the condensed consolidated statements of cash flows.

Information regarding the Company's factoring of its financial assets for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):
Three months endedSix months ended
June 30,
2022
June 30,
2021
June 30,
2022
June 30,
2021
Accounts receivable sold$22,747 $32,329 $40,714 $63,647 
Less factoring fees(323)$(192)(476)(401)
Net cash proceeds$22,424 $32,137 $40,238 $63,246 

Going Concern Assessment and Management Plans

The accompanying condensed consolidated financial statements are prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Under the 2020 Credit Facility (as defined in Note 9), the Company is required to maintain compliance with certain financial covenants (see Note 9). As of June 30, 2022, the Company was in compliance with its financial covenants. Due to the impact of market conditions, including supply chain disruptions, higher costs, and other geopolitical instabilities and disputes, the Company projects it may not maintain compliance with its financial covenants under the 2020 Credit Facility, as amended, for the quarter ended September 30, 2022. Failure to remain in compliance would be an event of default that would permit the Lenders (as defined in Note 9) to accelerate the maturity of the 2020 Credit Facility. As of the date of the issuance of these condensed consolidated financial statements, the Company does not have sufficient cash on hand or available liquidity to repay the outstanding balance of $340.5 million as of June 30, 2022 in the event the debt was accelerated.

Management plans to avoid any potential event of default include raising additional cash that would allow the Company to pay down debt in order to remain in compliance with its financial covenants. In addition, the Company has the ability to sell its derivative financial instrument, which had an aggregate fair market value of $21 million as of June 30, 2022. Lastly, the Company would evaluate the timing of its capital spending and extension of its payment terms with vendors as needed.

The Company believes its plans are probable of being successfully implemented, which along with its available cash on hand and liquidity from the factoring of receivables, will result in adequate cash to allow the Company to pay down debt to meet its financial covenant requirements.
12


RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

Recent Accounting Pronouncements

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors in ASC 310, Receivables (Topic 310), and requires entities to provide disclosures about current period gross write-offs by year of origination. Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326), and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. ASU 2022-02 is effective for the Company January 1, 2023, with early adoption permitted. The Company believes that the adoption of ASU 2022-02 will not have a material impact on its consolidated financial statements upon adoption.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"), which amends ASC 805, Business Combinations (Topic 805), to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require that an acquiring entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers (Topic 606) ("ASC 606"). Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. While primarily related to contract assets and contract liabilities that were accounted for by the acquiree in accordance with ASC 606, ASU 2021-08 also applies to contract assets and contract liabilities from other contracts to which the provisions of ASC 606 apply, such as contract liabilities from the sale of nonfinancial assets within the scope of ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). ASU 2021-08 is effective for the Company January 1, 2023, with early adoption permitted. The Company believes that the adoption of ASU 2021-08 could have a material impact on its consolidated financial statements for periods including and subsequent to significant business acquisitions.

In January 2021 the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope ("ASU 2021-01"), which refines the scope of ASC 848, Reference Rate Reform, and clarifies some of its guidance as part of the FASB's monitoring of global reference rate reform activities. ASU 2021-01 permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities under way in global financial markets (the "discounting transition"). ASU 2021-01 is effective for the Company prospectively in any period through December 31, 2022 that a modification is made to the terms of the derivatives affected by the discounting transition. The adoption of ASU 2021-01 did not have a material impact on the Company's consolidated financial statements.


(2) EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. For periods in which the Company reports net income, diluted net earnings per share is determined by using the weighted average number of common and dilutive common equivalent shares outstanding during the period, unless the effect is antidilutive.

The calculations of shares used to compute diluted earnings (loss) per share were as follows (in thousands):
 Three months endedSix months ended
 June 30,
2022
June 30,
2021
June 30,
2022
June 30,
2021
Weighted average shares outstanding - basic150,190 147,467 149,681 146,706 
Potential dilutive common shares 6,693   
Weighted average shares outstanding - diluted150,190 154,160 149,681 146,706 


Options to purchase the Company's common stock and unvested restricted and performance-based stock units aggregating
13


RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
15.4 million shares have not been included in the computation of loss per share for the three and six months ended June 30, 2022 because their effect would have been antidilutive. Options to purchase the Company's common stock aggregating 0.1 million shares have not been included in the computation of diluted earnings per share for the three months ended June 30, 2021 because their effect would have been antidilutive. Options to purchase the Company's common stock and unvested restricted and performance-based stock awards and stock units aggregating 12.1 million shares have not been included in the computation of diluted loss per share for the six months ended June 30, 2021 because their effect would have been antidilutive.


(3) INVENTORY

Inventory at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):
 June 30,
2022
December 31,
2021
On-hand final assemblies and finished goods inventories$72,954 $57,360 
Deferred cost of goods sold2,055 1,474 
75,009 58,834 
Less noncurrent portion (included in other assets)(10,361)(4,791)
Current portion$64,648 $54,043 


(4) INTANGIBLE ASSETS AND GOODWILL

The Company's intangible assets at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):
June 30, 2022Weighted average amortization period
(years)
CostAccumulated
amortization
Net
carrying value
In-process research and development*$34,000 $34,000 
Developed technology7.93306,380 197,548 108,832 
Customer relationships11.86268,140 91,949 176,191 
Trade names3.885,000 4,236 764 
Internal use software3.00730 730  
9.17$614,250 $294,463 $319,787 

December 31, 2021Weighted average amortization period
(years)
CostAccumulated
amortization
Net
carrying value
In-process research and development*$34,000 $ $34,000 
Developed technology7.93306,380 181,393 124,987 
Customer relationships11.86268,140 77,653 190,487 
Trade names3.885,000 3,744 1,256 
Internal use software3.00730 730  
9.17$614,250 $263,520 $350,730 

* An in-process research and development intangible asset has an indefinite life until the product is generally available, at which time such asset is typically reclassified to developed technology.

14


RIBBON COMMUNICATIONS INC.
Notes to Condensed Consolidated Financial S