Liquidity and Capital Resources

Our condensed consolidated statements of cash flows are summarized as follows (in millions):

Three months ended
March 31,
2019 March 31,
2018 Change
Net loss $ (30.8 ) $ (44.9 ) $ 14.1
Adjustments to reconcile net loss to cash flows provided by operating activities 11.6
18.2
(6.6 )
Changes in operating assets and liabilities 38.8
30.1
8.7
Net cash provided by operating activities $ 19.6
$ 3.4
$ 16.2
Net cash provided by (used in) investing activities $ 1.5
$ (1.6 ) $ 3.1
Net cash used in financing activities $ (20.9 ) $ (0.5 ) $ (20.4 )



	Nine months ended
	September 30, 2019			September 30, 2018			Change
Net income (loss)	$	20.3		$	(75.0	)	$	95.3
Adjustments to reconcile net income (loss) to cash flows provided by (used in) operating activities	51.3			56.4			(5.1		)
Changes in operating assets and liabilities	(49.0		)	(5.0		)	(44.0		)
Net cash provided by (used in) operating activities	$	22.6		$	(23.6	)	$	46.2
Net cash used in investing activities	$	(1.3	)	$	(33.4	)	$	32.1
Net cash (used in) provided by financing activities	$	(24.7	)	$	36.2		$	(60.9	)

Our cash was approximately $40 million at September 30, 2019. Our cash, cash equivalents and ~~short-term investments~~marketable securities totaled approximately ~~$46 million at March 31, 2019 and~~ $51 million at December 31, 2018. We had cash held by our non-U.S. subsidiaries aggregating approximately $7$9 million ~~at March 31, 2019~~ and $11 million at September 30, 2019 and December 31, ~~2018.~~2018, respectively. If we elected to repatriate all of the funds held by our non-U.S. subsidiaries as of ~~March 31,~~September 30, 2019, we do not believe that the amounts of potential withholding taxes that would arise from the repatriation would have a material effect on our liquidity.

On December 21, 2017, we entered into a Senior Secured Credit Agreement ~~(as amended, the~~(the “Credit Facility”) with Silicon Valley Bank ("SVB"), which refinanced the prior credit agreement with SVB that the Company had assumed in connection with the Merger. On June 24, 2018, we amended the Credit Facility to, among other things, permit the Edgewater Acquisition and related transactions. We were in compliance with all covenants of the Credit Facility at March 31, 2019 and December 31, 2018. At March 31, 2019, we had an outstanding debt balance of $57 million at a weighted average interest rate of 5.48% and approximately $4 million of outstanding letters of credit at an average interest rate of 1.75% under the Credit Facility. At December 31, 2018, we had an outstanding debt balance of $55 million at an average interest rate of 5.96% and approximately $3 million of outstanding letters of credit at an average interest rate of 1.75% under the Credit Facility. We were in compliance with all covenants of the Credit Facility at December 31, 2018.

On April 29, 2019, we entered into a syndicated, amended and restated ~~the~~ Credit Facility (the "New Credit Facility")~~. In addition to the original $100 million of commitments, the~~ with SVB, as lead agent. The New Credit Facility ~~now includes an additional~~provides for a $50 million term loan facility that was advanced in full on April 29, ~~2019.~~2019, and a $100 million revolving line of credit. The New Credit Facility also includes procedures for additional financial institutions to become syndicate lenders, or for any existing lender to increase its commitment under either the term loan facility or the revolving loan facility, subject to an aggregate increase of $75 million for all incremental commitments under the New Credit Facility. The New Credit Facility is scheduled to mature in ~~April~~ 2024. ~~In addition to SVB, lenders under the New Credit Facility include Citizens Bank NA, SunTrust Bank~~At September 30, 2019, we had an outstanding term loan debt balance of approximately $49 million, an outstanding revolving line of credit balance of approximately $34 million, with a combined weighted average interest rate of 3.76%, and ~~JP Morgan Chase Bank, N.A.~~

approximately $3 million of outstanding letters of credit at an average interest rate of 1.50%.

The indebtedness and other obligations under the New Credit Facility are unconditionally guaranteed on a senior secured basis by us and each of our other material U.S. domestic subsidiaries (collectively, the "Guarantors"). The New Credit Facility is secured by first-priority liens on substantially all of our assets.

The New Credit Facility requires periodic interest payments on outstanding borrowings under the facility until maturity. We may prepay all revolving loans under the New Credit Facility at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements.

Revolving loans under the New Credit Facility bear interest at our option at either the Eurodollar (LIBOR) rate plus a margin ranging from 1.50% to 3.00% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, or the prime rate announced from time to time in The Wall Street Journal) plus a margin ranging from 0.50% to 2.00% per year (such margins being referred to as the “Applicable Margin”). The Applicable Margin varies depending on our consolidated leverage ratio (as defined in the New Credit Facility). The base rate and the LIBOR rate are each subject to a zero percent floor.

We are charged a commitment fee ranging from 0.20% to 0.30% per year on the daily amount of the unused portions of the commitments under the New Credit Facility. Additionally, with respect to all letters of credit outstanding under the Credit Facility, we are charged a fronting fee of 0.125% per year and an outstanding letter of credit fee equal to the Applicable Margin for base rate loans times the amount available to be drawn under each letter of credit.

The New Credit Facility requires ~~periodic interest payments~~compliance with certain financial covenants, including a minimum consolidated quick ratio, minimum consolidated fixed cover charge coverage ratio and maximum consolidated leverage ratio, all of which are defined in the New Credit Facility and tested on ~~any outstanding borrowings under the facility. The Borrower may prepay~~a quarterly basis. We were in compliance with all ~~revolving loans under~~covenants of the New Credit Facility at ~~any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements.~~September 30, 2019.

In addition, the New Credit Facility contains various covenants that, among other restrictions, limit our and our subsidiaries’ ability to enter into certain types of transactions, including, but not limited to: incurring or assuming indebtedness; granting or assuming liens; making acquisitions or engaging in mergers; ~~repurchasing equity and~~ making dividend and certain other restricted payments; making investments; selling or otherwise transferring assets; engaging in transactions with affiliates; entering into sale and leaseback transactions; entering into burdensome agreements; changing the nature of our business; modifying our organizational documents; and amending or making prepayments on certain junior debt.

The New Credit Facility contains events of default that are customary for a secured credit facility. If an event of default relating to bankruptcy or other insolvency events with respect to a borrower occurs, all obligations under the New Credit Facility will immediately become due and payable. If any other event of default exists under the New Credit Facility, the lenders may accelerate the maturity of the obligations outstanding under the New Credit Facility and exercise other rights and remedies, including charging a default rate of interest equal to 2.00% per year above the rate that would otherwise be applicable. In addition, if any event of default exists under the New Credit Facility, the lenders may commence foreclosure or other actions against the collateral.

If any default exists under the New Credit Facility, or if the Borrower is unable to make any of the representations and warranties as stated in the New Credit Facility at the applicable time, the Borrower will be unable to borrow funds or have letters of credit issued under the New Credit Facility, which, depending on the circumstances prevailing at that time, could have a material adverse effect on the Borrower’s liquidity and working capital.

In connection with the Merger, on October 27, 2017, we issued a promissory note for approximately $23 million to certain of GENBAND's equity holders (the "Promissory Note"). The Promissory Note ~~does~~did not amortize and the principal thereon iswas payable in full on the third anniversary of its execution. Interest on the promissory note iswas payable quarterly in arrears and accrued at a rate of 7.5% per year for the first six months after issuance, and thereafter at a rate of 10% per year. Interest that iswas not paid on the interest payment date ~~will increase~~increased the principal amount of the Promissory Note. The failure to make any payment under the Promissory Note when due and, with respect to payment of any interest, the continuation of such failure for a period of thirty days thereafter, ~~constitutes~~constituted an event of default under the Promissory Note. If an event of default ~~occurs~~occurred under the Promissory Note, the payees ~~may~~could declare the entire balance of the Promissory Note due and payable (including principal and accrued and unpaid interest) within five business days of the payees' notification to the Company of such acceleration. Interest that iswas not paid on the interest payment date ~~will increase~~increased the principal amount of the Promissory Note. ~~At March 31, 2019, the Promissory Note balance was approximately $24.7 million, comprised of $22.5 million of principal plus $2.2 million of interest converted to principal.~~ At December 31, 2018, the Promissory Note balance was $24.1 million, comprised of $22.5 million of principal plus $1.6 million of interest converted to principal.

On April 29, 2019, concurrently with the ~~amendment and restatement~~closing of the New Credit Facility as discussed above, we repaid in full all outstanding amounts under the Promissory ~~Note.~~Note, totaling $24.7 million and comprised of $22.5 million of principal plus $2.2 million of interest converted to principal. We did not incur any early termination penalties in connection with this repayment.

In the second quarter of 2019, our Board of Directors (the "Board") approved a stock repurchase program pursuant to which ~~the Company~~we may repurchase up to $75 million of the Company's common stock prior to April 18, 2021. Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases depending on the market conditions and corporate discretion. This program does not obligate ~~the Company~~us to acquire any particular amount of common stock and the program may be extended, modified, suspended or discontinued at any time at the ~~CBoard's~~Board's discretion.

~~On April 22,~~ During the nine months ended September 30, 2019, we ~~Metaswitch Networks Corporation~~repurchased and ~~Metaswitch Networks Ltd. (collectively, "Metaswitch") agreed to~~retired 1.0 million shares of our common stock for a ~~binding mediator's proposal (the "Mediation Agreement") that resolves the six previously disclosed lawsuits between us and Metaswitch (the "Lawsuits"). Pursuant to the terms~~total purchase price of ~~the Mediation Agreement, Metaswitch has agreed to pay us an aggregate amount of $63.0~~$4.5 million, ~~which includes cash payments of $37.5 million~~including transaction fees. No shares were repurchased under this program during the ~~second quarter of 2019 and $22.5 million payable in~~ three installments annually, beginning in 2020, and such installment payments by Metaswitch will accrue interest at a rate of 4% per year. We and Metaswitch have also agreed to a cross-license of all of their respective patents. All of the payments pursuant to the Mediation Agreement are expected to have a positive impact on our cash flows.months ended September 30, 2019.

Our operating activities provided approximately ~~$20~~$23 million of cash and used approximately $24 million of cash in the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and ~~approximately $3 million of cash in the three months ended March 31, 2018.~~2018, respectively.

Cash provided by operating activities in the ~~three~~nine months ended ~~March 31,~~September 30, 2019 was primarily the result of our net income, lower accounts receivable and inventory, and ~~higher deferred revenue, coupled with~~ our non-cash operating expenses. These amounts were partially offset by ~~our net loss, the reduction in the Edgewater Deferred Consideration,~~higher other operating assets and lower accounts payable, accrued expenses and other long-term liabilities, and ~~accounts payable.~~deferred revenue balances, coupled with the reduction in the Edgewater Deferred Consideration. The increase in other operating assets was primarily due to the note receivable arising from the litigation settlement with Metaswitch. The decrease in accrued expenses and other long-term liabilities was primarily related to employee compensation and related costs ~~including payments~~and lower deferred purchase consideration. During the second quarter of 2019, we received approximately $37 million of cash from Metaswitch, which represents the first payment in ~~connection~~accordance with ~~our company-wide cash bonus program.~~the litigation settlement agreement. Our lower accounts receivable primarily reflected ~~collections on sales made in the prior year and our focused collection efforts, coupled with lower invoicing in the first quarter of 2019 compared to the fourth quarter of 2018.~~typical mid-year seasonality. Our net ~~loss,~~income, adjusted for non-cash operating activities, ~~used~~provided approximately ~~$19~~$72 million of ~~cash.~~cash in the nine months ended September 30, 2019.

Cash ~~provided by~~used in operating activities in the ~~three~~nine months ended ~~March 31,~~September 30, 2018 was primarily the result of ~~lower accounts receivable, higher deferred revenue and non-cash operating expenses. These amounts were partially offset by~~ our net loss, ~~the reduction in the Edgewater Deferred Consideration~~ lower accrued expenses and other long-term liabilities, ~~and~~ accounts payable ~~coupled with higher~~and deferred revenue. These amounts were partially offset by lower accounts receivable, other operating assets and ~~inventory. Our lower accounts receivable reflected collections on sales made in the prior year,~~inventory, coupled with ~~lower invoicing in the first quarter of 2018 compared to the fourth quarter of 2017.~~our non-cash operating expenses. The decrease in accrued expenses and other long-term liabilities was primarily related to employee compensation and related costs ~~including payments in connection with our company-wide cash bonus program,~~ and our previously recorded restructuring initiatives, coupled with lower accruals for taxes and professional fees. Our lower accounts receivable primarily reflected typical mid-year seasonality. Our net loss, adjusted for non-cash ~~items such as depreciation, amortization and stock-based compensation,~~operating activities, used approximately ~~$27 million of cash.~~

~~Our investing activities provided approximately $2~~$19 million of cash in the ~~three~~nine months ended ~~March 31, 2019, comprised of slightly over $5 million of maturities of marketable securities, partially offset by slightly under $4 million of investments in property and equipment.~~September 30, 2018.

Our investing activities used approximately $2$1 million of cash in the ~~three~~nine months ended ~~March 31, 2018, primarily for~~September 30, 2019, comprised of approximately $8 million of investments in property and equipment, partially offset by the maturity of approximately $7 million of marketable securities.

Our investing activities used approximately $33 million of cash in the nine months ended September 30, 2018, comprised of approximately $46 million of cash, net of cash acquired, paid as purchase consideration to acquire Edgewater and approximately $6 million of investments in property and equipment. These amounts were partially offset by the sale and maturity of marketable securities aggregating approximately $19 million.

Our financing activities used approximately ~~$21~~$25 million of cash in the ~~three~~nine months ended ~~March 31,~~September 30, 2019. We repaid outstanding borrowings of approximately $131 million under the New Credit Facility, comprised of $130 million for borrowings under the revolving line of credit and approximately $1 million for borrowings under the term loan. We also repaid approximately $25 million on the note to certain of the former GENBAND equity holders and the deferred purchase consideration of approximately $22 million to the selling Edgewater shareholders. We spent slightly under $5 million to repurchase and retire shares of our common stock on the open market and used approximately $1 million to pay withholding obligations related to the net share settlement of restricted stock awards upon vesting. Our borrowings under the New Credit Facility totaled $159 million, comprised of $109 million of borrowings under the revolving line of credit and $50 million of term loan debt under the New Credit Facility. Cash proceeds from the sale of our common stock under our ESPP and from option exercises totaled slightly less than $1 million.

Our financing activities provided approximately $36 million of cash in the nine months ended September 30, 2018. We borrowed ~~$37~~approximately $143 million and repaid ~~$35~~approximately $105 million under the Credit Facility in the ~~three~~nine months ended ~~March 31, 2019.~~September 30, 2018. We used approximately ~~$22~~$1 million ~~to pay deferred purchase consideration~~ in ~~connection with~~ the ~~Edgewater Acquisition~~aggregate for debt issuance costs and ~~approximately~~payments on our finance lease obligations and slightly less than $1 million to pay withholding obligations related to the net share settlement of restricted stock awards upon vesting.

Our financing activities used less than $1 million of cash in the three months ended March 31, 2018. We both borrowed and repaid $10 million under the Credit Facility in the three months ended March 31, 2018. We used less than $1 million in the aggregate to pay withholding obligations related to the net share settlement of restricted stock awards upon vesting and nominal amounts on our finance lease obligations and for debt issuance costs.

Based on our current expectations, we believe our current cash ~~cash equivalents, marketable debt securities~~ and available borrowings under the New Credit Facility will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least twelve months. However, the rate at which we ~~will~~ consume cash ~~will be~~is dependent on the cash needs of our future operations. We anticipate devoting substantial capital resources to continue our research and development efforts, to maintain our sales, support and marketing, to complete merger-related integration activities and for other general corporate activities. However, it is difficult to predict future liquidity requirements with certainty, and our cash ~~cash equivalents, marketable securities~~ and available borrowings under the New Credit Facility may not be sufficient to meet our future needs, which would require us to refinance our debt and/or obtain additional financing. We may not be able to refinance our debt or obtain additional financing on favorable terms or at all.

Recent Accounting Pronouncements

Effective January 1, 2019, we adopted the Financial Accounting ~~Standards Update~~Standard Board's ("~~ASU"~~FASB") ~~2016-02,~~ ~~Leases (Topic 842) Section A - Leases: Amendments to the FASB Accounting Standards Codification~~ ~~("ASU 2016-02"), the FASB's the~~ new standard on accounting for leases, Accounting Standards Codification ("ASC") 842, Leases ("ASC 842"). ASC 842 replaced existing lease accounting rules with a comprehensive lease measurement and ~~its subsequent related updates. ASU 2016-02 introduces a lessee model that brings~~recognition standard and expanded disclosure requirements. ASC 842 requires lessees to recognize most leases ~~onto the~~on their balance ~~sheet~~sheets and eliminates the current GAAP requirement for an entity to use bright-line tests in determining lease classification. ~~In July 2018, the FASB issued ASU 2018-11,~~ ~~Leases (Topic 842): Targeted Improvements~~ ~~("ASU 2018-11") and ASU 2018-10,~~ ~~Codification Improvements to Topic 842, Leases, both of which provided improvements to certain aspects of the guidance in ASU 2016-02. In January 2018, the FASB issued ASU 2018-01,~~ ~~Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, which provided additional clarification and implementation guidance.~~

We elected to use the alternative transition method, ~~as described in ASU 2018-11,~~ which allows entities to initially apply ~~ASU 2016-02~~ASC 842 at the adoption date with no subsequent adjustments to prior period lease costs for comparability. We elected the package of practical expedients permitted under the transition guidance, ~~within ASU 2016-02,~~ which provided that ~~we did~~a company need not ~~need to~~ reassess whether expired or existing contracts contained a lease, the lease classification of expired or existing leases, and the amount of initial direct costs for existing leases.

In connection with the adoption of ~~ASU 2016-02,~~ASC 842, we recorded additional lease assets of approximately $44 million and additional lease liabilities of approximately $48 million as of January 1, 2019. The difference between the additional lease

assets and lease liabilities, net of the deferred tax impact, was due to the absorption of related balances into the right-of-use ~~asset,~~assets, such as deferred rent. The adoption of this standard had no impact on our condensed consolidated statements of operations or of cash flows.

In ~~August 2018,~~June 2016, the FASB issued ASU ~~2018-15,~~2016-13, ~~Intangibles~~Financial Instruments - ~~Goodwill and Other - Internal-Use Software (Subtopic 350-40)~~Credit Losses (Topic 326): ~~Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~Measurement of Credit Losses on Financial Instruments (“("ASU ~~2018-15”~~2016-13"), which ~~provides guidance on implementation costs incurred in a cloud computing arrangement (“CCA”)~~adds an impairment model that is ~~a service contract.~~based on expected losses rather than incurred losses. Under ASU ~~2018-15 amends ASC 350, Intangibles~~2016-13, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. In April and May 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - ~~Goodwill~~Credit Losses, Topic 815, Derivatives and ~~Other (“ASC 350”~~Hedging, and Topic 825, Financial Instruments ("ASU 2019-04") ~~to include~~and ASU 2019-05 Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief ("ASU 2019-05"), respectively. ASU 2019-04 provides transition relief for entities adopting ASU 2016-13 and ASU 2019-05 clarifies certain aspects of the accounting for credit losses, hedging activities and financial instruments in ~~its scope implementation costs~~connection with the adoption of ~~a CCA that is a service contract~~ASU 2016-13. ASU 2019-04 and ~~clarifies that a customer should apply~~ASU 2019-05 are effective with the ~~guidance in ASC 350-40 to determine~~adoption of ASU 2016-13, which ~~implementation costs should be capitalized in such a CCA. ASU 2018-15~~ is effective for us beginning January 1, ~~2020.~~2020 for both interim and annual reporting periods, with early adoption permitted. We ~~are currently assessing~~continue to assess the potential impact of the adoption of ASU ~~2018-15~~2016-13 and related amendments and currently do not believe it will have a material impact on our consolidated financial statements.

The FASB has issued the following accounting pronouncements, all of which became effective for the Company on January 1, 2019 and none of which had a material impact on the Company's consolidated financial statements:

In July 2018, the FASB issued ASU 2018-09, Codification Improvements (“ASU 2018-09”), which contains amendments to clarify, correct errors in or make minor improvements to the FASB Codification. ASU 2018-09 makes improvements to multiple topics, including but not limited to comprehensive income, debt, income taxes related to both stock-based compensation and business combinations, fair value measurement and defined contribution benefit plans.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07"), which expands the scope of Accounting Standards Codification ("ASC") 718, Compensation - Stock Compensation ("ASC 718"), to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. As a result, most of the guidance in ASC 718 associated with employee share-based payments, including most of its requirements related to classification and measurement, applies to nonemployee share-based payment arrangements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02"), which amends ASC 220, Income Statement - Reporting Comprehensive Income, to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act and requires entities to provide certain disclosures regarding stranded tax effects. We did not elect to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income to accumulated deficit.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory ("ASU 2016-16"), which removes the prohibition in ASC 740, Income Taxes, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory.

In addition, the FASB has issued the following accounting pronouncements, none of which we believe will have a material impact on our consolidated financial statements:

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which provides guidance on implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract. ASU 2018-15 amends ASC 350, Intangibles - Goodwill and Other (“ASC 350”) to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply the guidance in ASC 350-40 to determine which implementation costs should be capitalized in such a CCA. ASU 2018-15 is effective for us beginning January 1, 2020.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”), which amends ASC 715, Compensation - Retirement Benefits, to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. ASU 2018-14 is effective for us beginning January 1, 2020.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which changes the fair value measurement requirements of ASC 820, Fair Value Measurement ~~(“ASC 820”)~~. ASU 2018-13 is effective for us beginning January 1, 2020 for both interim and annual reporting.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ ("ASU 2016-13"), which adds an impairment model that is based on expected losses rather than incurred losses. Under ASU 2016-13, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 is effective for us beginning January 1, 2020 for both interim and annual reporting periods, with early adoption permitted.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of market risks, including changes in interest rates affecting the return on our investments and foreign currency fluctuations. We do not believe that a hypothetical 10% adverse movement in interest rates and foreign currency exchange rates would have a materially different impact from what was disclosed in our Annual Report on Form 10-K/A, for the year ended December 31, 2018.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2019.

Changes in Internal Control over Financial Reporting. We implemented ASC 842 as of January 1, 2019. As a result, we made the following significant modifications to our internal controls over financial reporting, including changes to accounting policies and procedures, operational processes and documentation practices:

~~Updated our policies and procedures related to accounting for lease assets and liabilities and related income and expense.~~

Modified our contract review controls to consider the new criteria for determining whether a contract is or contains a lease, specifically to clarify the definition of a lease and align with the concept of control.

~~Added controls for reevaluating our significant assumptions and judgments on a periodic basis.~~

~~Added controls to address related required disclosures regarding leases, including our significant assumptions and judgments used in applying ASC 842.~~

~~Other than the items described above, there~~There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended ~~March 31,~~September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in six lawsuits (together, the "Lawsuits") with Metaswitch Networks Ltd., Metaswitch Networks Corp. and Metaswitch Inc. (together, “Metaswitch”). In five of the Lawsuits, we are the plaintiff and, in three of those five lawsuits, we are also a counterclaim defendant. In the sixth case, we are the defendant. On January 21, 2014, GENBAND and its indirectly-owned subsidiary, GENBAND US LLC, filed a complaint in the Eastern District of Texas, Marshall Division, alleging that Metaswitch infringed certain patents owned by GENBAND. Following unsuccessful mediation, a trial took place and on January 15, 2016, the jury awarded $8.2 million in past royalty damages to GENBAND, which neither GENBAND nor we have recorded. On September 29, 2016, the district court confirmed the jury verdict following motions from both parties. On March 22, 2018, the district court entered final judgment awarding GENBAND $8.9 million in royalties for damages through January 15, 2016 at rates set by the district court, excluding pre- and post-judgment interest and costs. On April 10, 2018, the clerk of the district court set the awarded costs at $0.4 million. On April 19, 2018, Metaswitch filed a notice of appeal (the "Appeal") on the judgment with United States Court of Appeals for the Federal Circuit (the "Appeals Court"), and filed its appeal brief on July 6, 2018. Oral argument on the appeal occurred on March 8, 2019 and the parties are awaiting the Appeals Court's ruling on the Appeal.

On April 18, 2018, through Sonus, the Company we filed a complaint in the Eastern District of Texas, Marshall Division, alleging that Metaswitch is continuing to infringe the patents from the first lawsuit above through sales of Metaswitch's allegedly "redesigned" products. This suit seeks a finding that Metaswitch's infringement is willful. This suit also alleges false advertising and seeks monetary damages resulting from allegedly false and misleading statements Metaswitch made regarding the first lawsuit. On March 25, 2019, the district court stayed the case pending the Appeals Court's ruling on the Appeal.

Through Sonus and GENBAND US LLC, we are involved as plaintiff and counterclaim defendant in a lawsuit with Metaswitch regarding claims that Metaswitch misappropriated trade secrets of GENBAND, and we are seeking monetary damages. This case is pending in state court in Dallas County, Texas, and stems from claims originally brought in a patent lawsuit between GENBAND and Metaswitch. The state court action was filed on March 28, 2017. Metaswitch filed its answer on April 21, 2017, in which it asserted counterclaims against GENBAND. On July 11, 2018, Metaswitch filed its fifth amended answer and counterclaims against GENBAND. The Texas state court has set a special setting for a trial for this case on April 22, 2019.

Through Sonus, we are also involved as plaintiff and counterclaim defendant in two patent infringement lawsuits with Metaswitch asserting the infringement of a total of ten patents that came into the Company from Sonus, and we are seeking monetary damages. Sonus filed these two lawsuits in the Eastern District of Texas, Marshall Division, on March 8, 2018. Metaswitch filed its answers on May 15, 2018, in which it asserted counterclaims against Sonus, including alleged infringement by us and Sonus of a total of ten patents. The district court has set trials for these cases to occur on February 18, 2020 and June 15, 2020.

On November 19, 2018, Metaswitch filed a complaint against us and several of our subsidiaries in the Southern District of New York, alleging various antitrust violations based, in large part, on allegations that GENBAND should not have brought its successful patent infringement lawsuit against Metaswitch. Metaswitch is seeking monetary damages. On March 7, 2019, the district court granted our motion to reassign the case to the Eastern District of Texas, Marshall Division. On March 25, 2019, the district court for the Eastern District of Texas, Marshall Division, stayed the case pending the Appeals Court's ruling on the Appeal.

On April 22, 2019, we and Metaswitch agreed to a binding mediator's proposal (the "Mediation Agreement") that resolves the six Lawsuits between us and Metaswitch (the "Lawsuits"). We and Metaswitch will be memorializing the Mediation Agreement in final settlement documents. Pursuant to the terms of the Mediation Agreement, Metaswitch has agreed to pay us an aggregate amount of $63.0 million, which includes cash payments of $37.5 million during the second quarter of 2019 and $25.5 million payable in three installments annually, beginning in 2020, and such installment payments by Metaswitch will accrue interest at a rate of 4% per year. We and Metaswitch expect to cross-license certain patents that we and Metaswitch own. We and Metaswitch have agreed to stay the Lawsuits pending the completion of the final settlement documents.

On November 8, 2018, Ron Miller, a purported stockholder of ours, filed a Class Action Complaint (the "Miller Complaint") in the United States District Court for the District of Massachusetts (the "Massachusetts District Court") against us and three of our former officers, Raymond P. Dolan, Mark T. Greenquist and Michael Swade (collectively, the "Defendants"), claiming to represent a class of purchasers of Sonus common stock during the period from January 8, 2015 through March 24, 2015 and alleging violations of the federal securities laws. Similar to a previous complaint entitled Sousa et al. vs. Sonus Networks, Inc. et al., which was dismissed with prejudice by an order dated June 6, 2017, the Miller Complaint claims that the Defendants made misleading forward-looking statements concerning Sonus' expected fiscal first quarter of 2015 financial performance, which statements were also the subject of ~~the order,~~an August 7, 2018 Securities and Exchange Commission Cease and Desist Order, whose findings we neither admitted nor denied. The Miller plaintiffs are seeking monetary damages.

After the Miller Complaint was filed, several parties filed and briefed motions seeking to be selected by the Massachusetts District Court to serve as a Lead Plaintiff in the action. ~~Briefing on the issue was completed on January 30,~~On June 21, 2019, ~~and~~ the Massachusetts District Court isappointed a group as Lead Plaintiffs and the Lead Plaintiffs filed an amended complaint on July 19, 2019. On August 30, 2019, the Defendants filed a motion to dismiss the Miller Complaint and, on October 4, 2019, the Lead Plaintiffs filed an opposition to the motion to dismiss. The Defendants are expected to ~~issue a decision shortly. We have not yet filed an answer, and the Massachusetts District Court has not yet set a schedule.~~reply to such opposition on or before November 1, 2019.

In addition, we are often a party to disputes and legal proceedings that we consider routine and incidental to our business. Management does not expect the results of any of these actions to have a material effect on our business or consolidated financial statements.

Item 1A. Risk Factors

Our business faces significant risks and uncertainties, which may have a material adverse effect on our business prospects, financial condition and results of operations, and you should carefully consider them. There have been no material changes in the ~~three~~nine months ended ~~March 31,~~September 30, 2019 to the risk factors described in Part I, Item 1A. of our Annual Report on Form 10-K/A for the year ended December 31, ~~2018.~~2018, with the exception of the risk factor below.

Increases in tariffs, trade restrictions or taxes on our products could have an adverse impact on our operations.

We manufacture certain of our appliance products and purchase a portion of our raw materials and components from suppliers in Mexico, China and other foreign countries. The commerce we conduct in the international marketplace makes us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we ship, cross international borders. Import tariffs and/or other mandates imposed by the current presidential administration could potentially lead to retaliatory actions by affected countries, resulting in “trade wars,” and could significantly increase the prices on raw materials, the manufacturing of our equipment, and/or increased costs for goods imported into the United States, all of which are critical to our business. Any such tariffs could reduce customer demand for our products if our customers have to pay

increased prices for our products as a result of such tariffs. In addition, tariff increases may have a similar impact on other suppliers and certain other customers, which could increase the negative impact on our operating results or future cash flows.

Although we have not experienced a significant resulting increase in our manufacturing costs, if we were to do so, this eventually could make our products less competitive than those of our competitors whose imports are not subject to these tariffs. In addition, the U.S. administration has threatened to impose tariffs on all products imported from both Mexico and China. If this were to occur, we may not be able to mitigate the impacts of these tariffs and our business, results of operations and financial position could be materially adversely affected. Products we sell into certain foreign markets could also become subject to similar retaliatory tariffs, making the products we sell uncompetitive to similar products not subject to such import tariffs. Further changes in U.S. trade policies, tariffs, taxes, export restrictions or other trade barriers, or restrictions on raw materials or components, may limit our ability to manufacture products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials or components, which could have a material adverse effect on our business, results of operations and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to the shares of common stock repurchased by us for the periods indicated:

Period
Total Number
of Shares
Purchased (1)

Average
Price Paid
per Share

Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs

Approximate Dollar
Value of Shares that May
Yet be Purchased Under
the Plans or Programs
January 1, 2019 to January 31, 2019 —
$ —
—
$ —
February 1, 2019 to February 28, 2019 49,484
$ 5.67
—
$ —
March 1, 2019 to March 31, 2019 131,944
$ 5.18
—
$ —
Total 181,428
$ 5.31
—
$ —



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3)
July 1, 2019 to July 31, 2019	—	$	—	—	$	70,463,973
August 1, 2019 to August 31, 2019	379	$	5.26	—	$	70,463,973
September 1, 2019 to September 30, 2019	122	$	5.63	—	$	70,463,973
Total	501	$	5.35	—	$	70,463,973

(1) Upon vesting of restricted stock awards, certain of our employees ~~are permitted to return~~surrender to us a portion of the newly vested shares of common stock to satisfy the tax withholding obligations that arise in connection with such vesting. During the ~~first~~third quarter of 2019, ~~181,428~~501 shares of restricted stock were returned to us by employees to satisfy tax withholding obligations arising in connection with vesting of restricted stock, which shares are included in this column.

(2) On May 2, 2019, we announced a stock repurchase program, under which our Board of Directors has authorized the repurchase of up to $75 million of our common stock from time to time on the open market or in privately negotiated transactions prior to April 18, 2021 (the "Repurchase Program"). We did not repurchase any shares of our common stock under the program during the third quarter of 2019. At September 30, 2019, we had $70.5 million remaining under the Repurchase Program for future repurchases. The timing and amount of any shares repurchased will be determined by our management based on its evaluation of market conditions and other factors. We may elect to implement a 10b5-1 repurchase program, which would permit shares to be repurchased when we might otherwise be precluded from doing so under insider trading laws. The Repurchase Program may be suspended or discontinued at any time. The Repurchase Program is being funded using our working capital.

(3) Represents amounts available for repurchases under the Repurchase Program.

Item 5. Other Information

None.

Item 6. Exhibits ~~(Updates in Progress)~~



Exhibit No.		Description
3.1		Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K12B, filed October 30, 2017 with the SEC).
3.2		Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed November 28, 2017 with the SEC).
3.3		Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.3 to the Registrant's Annual Report on Form 10-K, filed March 8, 2018 with the SEC).
10.1	*	~~Employment~~Form of Non-Statutory Stock Option Award Agreement ~~by and between~~under the ~~Registrant and Anthony Scarfo, dated January 18, 2018.~~2019 Incentive Award Plan.
10.2	*	~~Employment~~Form of Restricted Stock Award Agreement ~~by and between GENBAND and Steven Bruny, dated February 7, 2015.~~under the 2019 Incentive Award Plan.
10.3	*	~~Severance~~Form of Restricted Stock Unit Award Agreement ~~by and between GENBAND Management Services Corp., GENBAND Holdings Company, GENBAND US LLC, GENBAND Inc., Cayman Holdings, GENBAND LLC and Steven Bruny, dated March 2, 2016.~~(Time-Based Vesting) under the 2019 Incentive Award Plan.
10.4	*	~~Senior Secured Credit Facilities Amended and Restated Credit~~Form of Restricted Stock Unit Award Agreement ~~by and among~~(Performance-Based Vesting) under the Registrant, as a guarantor, Ribbon Communications Operating Company, Inc., as the borrower, Silicon Valley Bank, as administrative agent, issuing lender, swingline lender and joint lead arranger, Citizens Bank, N.A., as lender and joint lead arranger, SunTrust Bank, as lender and documentation agent, and the other lenders party thereto, dated April 29, 2019 ~~(incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed May 2, 2019 with the SEC).~~Incentive Award Plan.
31.1	*	Certificate of Ribbon Communications Inc. Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certificate of Ribbon Communications Inc. Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	#	Certificate of Ribbon Communications Inc. Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	#	Certificate of Ribbon Communications Inc. Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase


*	Filed herewith.


#	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Date: ~~May 2,~~October 31, 2019	RIBBON COMMUNICATIONS INC.


By:	/s/ Daryl E. Raiford
	Daryl E. Raiford Executive Vice President and Chief Financial Officer (Principal Financial Officer)

5357



DELAWARE		82-1669692
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001	RBBN	The Nasdaq Global Select Market



Large accelerated filer o	Accelerated filer x	Non-accelerated filer o
Smaller reporting company o	Emerging growth company o



~~Title of each class~~	~~Trading Symbol(s)~~	~~Name of each exchange on which registered~~
~~Common Stock, par value $0.0001~~	~~RBBN~~	~~The Nasdaq Global Select Market~~


	March 31, 2019			December 31, 2018			September 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	43,938		$	43,694		$	40,397		$	43,694
Marketable securities	1,998			7,284			—			7,284
Accounts receivable, net	134,801			187,853			162,964			187,853
Inventory	18,870			22,602			14,103			22,602
Other current assets	20,444			17,002			29,880			17,002
Total current assets	220,051			278,435			247,344			278,435
Property and equipment, net	27,630			27,042			27,023			27,042
Intangible assets, net	250,669			251,391			225,762			251,391
Goodwill	389,196			383,655			389,196			383,655
Deferred income taxes	8,969			9,152			5,463			9,152
Operating lease right-of-use assets	42,166			—			37,132			—
Other assets	7,368			7,484			25,161			7,484
	$	946,049		$	957,159		$	957,081		$	957,159
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt							$	2,500		$	—
Revolving credit facility	$	57,000		$	55,000		34,000			55,000
Accounts payable	37,989			45,304			25,113			45,304
Accrued expenses and other	58,454			84,263			52,650			84,263
Operating lease liabilities	7,214			—			7,568			—
Deferred revenue	109,283			105,087			83,423			105,087
Total current liabilities	269,940			289,654			205,254			289,654
Long-term debt, net of current							46,605			—
Long-term debt, related party	24,716			24,100			—			24,100
Operating lease liabilities, net of current	39,151			—			37,600			—
Deferred revenue, net of current	15,793			17,572			18,687			17,572
Deferred income taxes	4,861			4,738			4,865			4,738
Other long-term liabilities	12,525			30,797			13,055			30,797
Total liabilities	366,986			366,861			326,066			366,861
Commitments and contingencies (Note 16)
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; 110,487,634 shares issued and outstanding at March 31, 2019; 106,815,636 shares issued and outstanding at December 31, 2018	11			11
Common stock, $0.0001 par value per share; 240,000,000 shares authorized; 110,156,325 shares issued and outstanding at September 30, 2019; 106,815,636 shares issued and outstanding at December 31, 2018							11			11
Additional paid-in capital	1,743,136			1,723,576			1,743,089			1,723,576
Accumulated deficit	(1,167,824		)	(1,136,992		)	(1,116,704		)	(1,136,992		)
Accumulated other comprehensive income	3,740			3,703			4,619			3,703
Total stockholders' equity	579,063			590,298			631,015			590,298
	$	946,049		$	957,159		$	957,081		$	957,159



x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ~~March 31,~~September 30, 2019
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Item		Page		Page
	Cautionary Note Regarding Forward-Looking Statements	3	Cautionary Note Regarding Forward-Looking Statements	3
	Presentation of Information	3	Presentation of Information	3
PART I FINANCIAL INFORMATION	PART I FINANCIAL INFORMATION		PART I FINANCIAL INFORMATION
1.	Financial Statements		Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018 (unaudited)	4	Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (unaudited)	4
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018 (unaudited)	5	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2019 and 2018 (unaudited)	6	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	6
	Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2019 and 2018 (unaudited)	7	Condensed Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 (unaudited)	8	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (unaudited)	9
	Notes to Condensed Consolidated Financial Statements (unaudited)	9	Notes to Condensed Consolidated Financial Statements (unaudited)	11
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36	Management's Discussion and Analysis of Financial Condition and Results of Operations	39
3.	Quantitative and Qualitative Disclosures About Market Risk	48	Quantitative and Qualitative Disclosures About Market Risk	53
4.	Controls and Procedures	49	Controls and Procedures	54

PART II OTHER INFORMATION	PART II OTHER INFORMATION		PART II OTHER INFORMATION
1.	Legal Proceedings	49	Legal Proceedings	54
1A.	Risk Factors	50	Risk Factors	54
2.	Unregistered Sales of Equity Securities and Use of Proceeds	51	Unregistered Sales of Equity Securities and Use of Proceeds	55
5.	Other Information	51	Other Information	55
6.	Exhibits	52	Exhibits	56
	Signatures	53	Signatures	57


	Three months ended						Three months ended						Nine months ended
	March 31, 2019			March 31, 2018			September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Revenue:
Product	$	47,480		$	51,531		$	61,152		$	77,283		$	180,691		$	191,937
Service	71,448			69,649			76,501			75,185			221,311			219,072
Total revenue	118,928			121,180			137,653			152,468			402,002			411,009
Cost of revenue:
Product	33,147			33,014			31,476			38,891			101,056			102,183
Service	29,192			32,893			27,300			31,343			84,807			96,208
Total cost of revenue	62,339			65,907			58,776			70,234			185,863			198,391
Gross profit	56,589			55,273			78,877			82,234			216,139			212,618
Operating expenses:
Research and development	35,933			39,049			34,222			34,403			105,456			109,056
Sales and marketing	30,059			31,926			28,227			31,488			87,179			94,152
General and administrative	18,694			15,601			9,673			15,942			40,833			46,571
Acquisition- and integration-related	3,199			4,412			1,697			5,570			6,861			14,262
Restructuring	4,932			6,668
Restructuring and related							2,372			2,397			16,448			15,162
Total operating expenses	92,817			97,656			76,191			89,800			256,777			279,203
Loss from operations	(36,228		)	(42,383		)
Income (loss) from operations							2,686			(7,566		)	(40,638		)	(66,585		)
Interest expense, net	(1,364		)	(599		)	(726		)	(1,420		)	(3,352		)	(2,754		)
Other income, net	7,774			248
Loss before income taxes	(29,818		)	(42,734		)
Income tax provision	(1,014		)	(2,170		)
Net loss	$	(30,832	)	$	(44,904	)
Loss per share:
Other income (expense), net							(507		)	(1,254		)	70,128			(3,058		)
Income (loss) before income taxes							1,453			(10,240		)	26,138			(72,397		)
Income tax benefit (provision)							197			82			(5,850		)	(2,587		)
Net income (loss)							$	1,650		$	(10,158	)	$	20,288		$	(74,984	)
Earnings (loss) per share:
Basic	$	(0.29	)	$	(0.44	)	$	0.01		$	(0.10	)	$	0.19		$	(0.73	)
Diluted	$	(0.29	)	$	(0.44	)	$	0.01		$	(0.10	)	$	0.18		$	(0.73	)
Shares used to compute loss per share:
Shares used to compute earnings (loss) per share:
Basic	108,167			101,917			110,080			104,918			109,523			103,009
Diluted	108,167			101,917			110,756			104,918			110,100			103,009



Three months ended March 31, 2019
	Common stock
	Shares		Amount		Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income (loss)		Total stockholders' equity
Balance at January 1, 2019	106,815,636		$	11	$	1,723,576		$	(1,136,992	)	$	3,703	$	590,298
Exercise of stock options	88,354				151								151
Vesting of restricted stock awards and units	806,813												—
Vesting of performance-based stock units	9,466												—
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations	(181,428	)			(968		)						(968		)
Shares issued as consideration in connection with the acquisition of Anova Data, Inc.	2,948,793				15,186								15,186
Reclassification of liability to equity for bonuses converted to stock awards					1,052								1,052
Stock-based compensation expense					4,139								4,139
Other comprehensive income											37		37
Net loss								(30,832		)			(30,832		)
Balance at March 31, 2019	110,487,634		11		1,743,136			(1,167,824		)	3,740		579,063



Three months ended September 30, 2019
	Common stock
	Shares		Amount		Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income		Total stockholders' equity
Balance at July 1, 2019	110,007,237		$	11	$	1,740,563		$	(1,118,354	)	$	4,349	$	626,569
Exercise of stock options	19,009				43								43
Vesting of restricted stock awards and units	130,580												—
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations	(501	)			(2		)						(2		)
Stock-based compensation expense					2,485								2,485
Other comprehensive income											270		270
Net income								1,650					1,650
Balance at September 30, 2019	110,156,325		$	11	$	1,743,089		$	(1,116,704	)	$	4,619	$	631,015


Three months ended March 31, 2018
Nine months ended September 30, 2019																Nine months ended September 30, 2019
	Common stock															Common stock
	Shares		Amount		Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income (loss)		Total stockholders' equity			Shares		Amount		Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income		Total stockholders' equity

Balance at January 1, 2018	101,752,856		$	10	$	1,684,768		$	(1,072,426	)	$	3,069	$	615,421
Adoption of Accounting Standards Codification 606, Revenue from Contracts with Customers								11,964					11,964
Balance at January 1, 2019																106,815,636		$	11	$	1,723,576		$	(1,136,992	)	$	3,703	$	590,298
Issuance of common stock in connection with employee stock purchase plan																139,390				506								506
Exercise of stock options	2,583				10								10			126,015				233								233
Vesting of restricted stock awards and units	490,282												—			1,296,966												—
Vesting of performance-based stock units	41,518												—			9,466												—
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations	(232,519	)			(371		)						(371		)	(204,027	)			(1,082		)						(1,082		)
Shares issued as consideration in connection with the acquisition of Anova Data, Inc.																2,948,793				15,186								15,186
Repurchase and retirement of common stock																(975,914	)			(4,536		)						(4,536		)
Reclassification of liability to equity for bonuses converted to stock awards																				1,052								1,052
Stock-based compensation expense					2,824								2,824							8,154								8,154
Other comprehensive income											91		91													916		916
Net loss								$	(44,904	)			$	(44,904	)
Balance at March 31, 2018	102,054,720		$	10	$	1,687,231		$	(1,105,366	)	$	3,160	$	585,035
Net income																							20,288					20,288
Balance at September 30, 2019																110,156,325		$	11	$	1,743,089		$	(1,116,704	)	$	4,619	$	631,015



Three months ended September 30, 2018
	Common stock
	Shares		Amount		Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income		Total stockholders' equity
Balance at July 1, 2018	102,243,477		$	10	$	1,688,966		$	(1,124,799	)	$	3,073	$	567,250
Exercise of stock options	6,070				1								1
Vesting of restricted stock awards and units	44,209												—
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations	(16,757	)			(113		)						(113		)
Shares issued as consideration in connection with acquisition of Edgewater Networks, Inc.	4,235,531		1		29,999								30,000
Assumption of equity awards in connection with acquisition of Edgewater Networks, Inc.					747								747
Stock-based compensation expense					2,516								2,516
Other comprehensive income											119		119
Net loss								(10,158		)			(10,158		)
Balance at September 30, 2018	106,512,530		$	11	$	1,722,116		$	(1,134,957	)	$	3,192	$	590,362



Nine months ended September 30, 2018
	Common stock
	Shares		Amount		Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income		Total stockholders' equity
Balance at January 1, 2018	101,752,856		$	10	$	1,684,768		$	(1,072,426	)	$	3,069	$	615,421
Adoption of Accounting Standards Codification 606, Revenue from Contracts with Customers								12,453					12,453
Exercise of stock options	8,653				11								11
Vesting of restricted stock awards and units	769,195												—
Vesting of performance-based stock units	57,768												—
Shares of restricted stock returned to the Company under net share settlements to satisfy tax withholding obligations	(311,473	)			(830		)						(830		)
Shares issued as consideration in connection with acquisition of Edgewater Networks, Inc.	4,235,531		1		29,999								30,000
Assumption of equity awards in connection with acquisition of Edgewater Networks, Inc.					747								747
Stock-based compensation expense					7,421								7,421
Other comprehensive income											123		123
Net loss								(74,984		)			(74,984		)
Balance at September 30, 2018	106,512,530		$	11	$	1,722,116		$	(1,134,957	)	$	3,192	$	590,362



Fair value of consideration transferred:
Cash consideration:
Cash paid to Edgewater Selling Stakeholders	$	51,162
Less cash acquired	(4,773		)
Net cash consideration	46,389
Deferred purchase consideration	30,000
Fair value of Ribbon stock issued	30,000
Fair value of equity awards assumed (see Note 12)	747
Fair value of total consideration	$	107,136

Fair value of assets acquired and liabilities assumed:
Current assets, net of cash acquired	$	16,098
Property and equipment	245
Intangible assets:
Developed technology	29,500
Customer relationships	26,100
Trade names	1,100
Goodwill	48,053
Other noncurrent assets	103
Deferred revenue	(2,749		)
Other current liabilities	(9,926		)
Deferred revenue, net of current	(669		)
Other long-term liabilities	(719		)
	$	107,136



	March 31, 2019
	Amortized cost		Unrealized gains		Unrealized losses			Fair value
Cash equivalents	$	747	$	—	$	—		$	747

Marketable securities
U.S. government agency notes	$	2,000	$	—	$	(2	)	$	1,998


March 31, 2019	Weighted average amortization period (years)	Cost		Accumulated amortization		Net carrying value
September 30, 2019								Weighted average amortization period (years)	Cost		Accumulated amortization		Net carrying value
In-process research and development	*	$	5,600	$	—	$	5,600	*	$	5,600	$	—	$	5,600
Developed technology	6.83	186,880		72,832		114,048		6.83	186,880		92,446		94,434
Customer relationships	9.47	154,140		24,348		129,792		9.47	154,140		29,363		124,777
Trade names	5.20	2,000		771		1,229		5.20	2,000		1,049		951
Internal use software	3.00	730		730		—		3.00	730		730		—
	7.86	$	349,350	$	98,681	$	250,669	7.86	$	349,350	$	123,588	$	225,762


Years ending December 31,
Remainder of 2019	$	37,303	$	12,396
2020	48,815		48,815
2021	42,493		42,493
2022	35,113		35,113
2023	27,538		27,538
Thereafter	59,407		59,407
	$	250,669	$	225,762



	December 31, 2018
	Amortized cost		Unrealized gains		Unrealized losses			Fair value
Cash equivalents	$	310	$	—	$	—		$	310

Marketable securities
U.S. government agency notes	$	3,998	$	—	$	(9	)	$	3,989
Corporate debt securities	3,301		—		(6		)	3,295
	$	7,299	$	—	$	(15	)	$	7,284



			Fair value measurements at March 31, 2019 using:
	Total carrying value at March 31, 2019		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents	$	747	$	747	$	—	$	—

Marketable securities
U.S. government agency notes	$	1,998	$	—	$	1,998	$	—



			Fair value measurements at December 31, 2018 using:
	Total carrying value at December 31, 2018		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents	$	310	$	310	$	—	$	—

Marketable securities
U.S. government agency notes	$	3,989	$	—	$	3,989	$	—
Corporate debt securities	3,295		—		3,295		—
	$	7,284	$	—	$	7,284	$	—


	Three months ended				Statement of operations classification	Three months ended				Nine months ended				Statement of operations classification
	March 31, 2019		March 31, 2018		Statement of operations classification	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018		Statement of operations classification
Developed technology	$	9,645	$	9,592	Cost of revenue - product	$	9,522	$	10,593	$	29,259	$	29,455	Cost of revenue - product
Customer relationships	2,130		2,605		Sales and marketing	2,608		2,695		7,145		7,881		Sales and marketing
Trade names	147		112		Sales and marketing	130		160		425		385		Sales and marketing
	$	11,922	$	12,309		$	12,260	$	13,448	$	36,829	$	37,721



Balance at January 1	2019			2018			2019			2018
Goodwill	$	386,761		$	338,822		$	386,761		$	338,822
Accumulated impairment losses	(3,106		)	(3,106		)	(3,106		)	(3,106		)
	383,655			335,716			383,655			335,716
Acquisition of Anova	5,541			—			5,541			—
Balance at March 31	$	389,196		$	335,716
Acquisition of Edgewater							—			46,777
Balance at September 30							$	389,196		$	382,493

Balance at March 31
Balance at September 30
Goodwill	$	392,302		$	338,822		$	392,302		$	385,599
Accumulated impairment losses	(3,106		)	(3,106		)	(3,106		)	(3,106		)
	$	389,196		$	335,716		$	389,196		$	382,493



	Balance at January 1, 2019		Initiatives charged to expense		Cash payments			Balance at September 30, 2019
Severance	$	—	$	6,543	$	(2,620	)	$	3,923
Variable and other facilities costs	—		1,214		(220		)	994
	$	—	$	7,757	$	(2,840	)	$	4,917


	Balance at January 1, 2019		Initiatives charged to expense		Adjustment for the impact of ASC 842 adoption			Cash payments			Balance at March 31, 2019		Balance at January 1, 2019		Initiatives charged to expense		Adjustment for the impact of ASC 842 adoption			Cash payments			Balance at September 30, 2019
Severance	$	1,910	$	4,919	$	—		$	(1,386	)	$	5,443	$	1,910	$	5,076	$	—		$	(5,818	)	$	1,168
Facilities	771		13		(771		)	(13		)	—		771		156		(771		)	(156		)	—
	$	2,681	$	4,932	$	(771	)	$	(1,399	)	$	5,443	$	2,681	$	5,232	$	(771	)	$	(5,974	)	$	1,168



Performance Obligation	When Performance Obligation is Typically Satisfied	When Payment is Typically Due
Software and Product Revenue
Software licenses (perpetual or term)	Upon transfer of control; typically, when made available for download (point in time)	Generally, within 30 days of invoicing except for term licenses, which may be paid for over time

Software licenses (subscription)	Upon activation of hosted site (over time)	Generally, within 30 days of invoicing

Appliances	When control of the appliance passes to the customer; typically, upon delivery (point in time)	Generally, within 30 days of invoicing

Software upgrades	Upon transfer of control; typically, when made available for download (point in time)	Generally, within 30 days of invoicing

Customer Support Revenue
Customer support	Ratably over the course of the support contract (over time)	Generally, within 30 days of invoicing

Professional Services
Other professional services (excluding training services)	As work is performed (over time)	Generally, within 30 days of invoicing (upon completion of services)

Training	When the class is taught (point in time)	Generally, within 30 days of services being performed



Three months ended September 30, 2019	Product revenue		Service revenue (maintenance)		Service revenue (professional services)		Total revenue
United States	$	44,701	$	32,709	$	10,113	$	87,523
Europe, Middle East and Africa	7,346		10,899		2,635		20,880
Japan	2,318		2,932		1,652		6,902
Other Asia Pacific	3,199		4,191		1,567		8,957
Other	3,588		8,170		1,633		13,391
	$	61,152	$	58,901	$	17,600	$	137,653


	Accounts receivable			Unbilled accounts receivable		Deferred revenue (current)		Deferred revenue (long-term)			Accounts receivable			Unbilled accounts receivable		Deferred revenue (current)			Deferred revenue (long-term)
Balance at January 1, 2019	$	174,310		$	13,543	$	105,087	$	17,572		$	174,310		$	13,543	$	105,087		$	17,572
Increase (decrease), net	(58,339		)	5,287		4,196		(1,779		)	(32,533		)	7,644		(21,664		)	1,115
Balance at March 31, 2019	$	115,971		$	18,830	$	109,283	$	15,793
Balance at September 30, 2019											$	141,777		$	21,187	$	83,423		$	18,687


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)		Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2019	582,061		$	9.01				582,061		$	9.01
Granted	—		$	—				—		$	—
Exercised	(88,354	)	$	1.70				(126,015	)	$	1.85
Forfeited	(12,991	)	$	2.62				(38,666	)	$	2.55
Expired	(20,724	)	$	9.63				(109,757	)	$	12.15
Outstanding at March 31, 2019	459,992		$	10.56	4.93	$	527
Vested or expected to vest at March 31, 2019	446,586		$	10.81	4.84	$	489
Exercisable at March 31, 2019	355,789		$	13.02	4.08	$	216
Outstanding at September 30, 2019								307,623		$	11.63	5.12	$	416
Vested or expected to vest at September 30, 2019								302,858		$	11.78	5.07	$	399
Exercisable at September 30, 2019								260,793		$	13.35	4.67	$	240


	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Unvested balance at January 1, 2019	1,508,011		$	6.90	1,508,011		$	6.90
Granted	—		$	—	—		$	—
Vested	(540,503	)	$	7.03	(866,650	)	$	6.92
Forfeited	(12,165	)	$	7.04	(45,244	)	$	7.04
Unvested balance at March 31, 2019	955,343		$	6.82
Unvested balance at September 30, 2019					596,117		$	6.85


	Classification	March 31, 2019		December 31, 2018		Classification	September 30, 2019		December 31, 2018
Assets
Operating lease assets	Operating lease right-of-use assets	$	42,166	$	—	Operating lease right-of-use assets	$	37,132	$	—
Finance lease assets^,*	Property and equipment, net	1,850		2,104
Finance lease assets*						Property and equipment, net	1,362		2,104
Total leased assets		$	44,016	$	2,104		$	38,494	$	2,104

Liabilities
Current
Operating	Operating lease liabilities	$	7,214	$	—	Operating lease liabilities	$	7,568	$	—
Finance	Accrued expenses and other	1,026		1,039		Accrued expenses and other	1,026		1,039
Noncurrent
Operating	Operating lease liabilities, net of current	39,151		—		Operating lease liabilities, net of current	37,600		—
Finance	Other long-term liabilities	1,107		1,324		Other long-term liabilities	1,096		1,324
Total lease liabilities		$	48,498	$	2,363		$	47,290	$	2,363


Operating lease cost	$	2,441
			Three months ended		Nine months ended
			September 30, 2019		September 30, 2019

Operating lease cost*			$	2,988	$	11,063
Finance lease cost
Amortization of leased assets	244		244		732
Interest on lease liabilities	64		90		210
Short-term lease cost	4,671		4,777		14,183
Variable lease costs (costs excluded from minimum fixed lease payments)	601
Variable lease costs (costs excluded from minimum fixed lease payments)**			1,727		2,932
Net lease cost	$	8,021	$	9,826	$	29,120


Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,355		$	7,850
Operating cash flows from finance leases	$	64		$	210
Financing cash flows from finance leases	$	230		$	698
Weighted average remaining lease term (years)
Operating leases	7.30			6.87
Finance leases	1.90			2.11
Weighted average discount rate
Operating leases	6.54		%	6.54		%
Finance leases	12.29		%	10.84		%



	Operating		Finance
	leases*		leases
2019	$	10,705	$	1,386
2020	8,384		1,010
2021	7,455		288
2022	5,691		—
2023	5,430		—
2024 and beyond	19,818		—
Total lease payments	$	57,483	2,684
Less: interest			(321		)
Present value of lease liabilities**			$	2,363


	Three months ended				Increase (decrease) from prior year					Three months ended				Increase (decrease) from prior year
	March 31, 2019		March 31, 2018		$			%		September 30, 2019		September 30, 2018		$			%
Product	$	47.5	$	51.5	$	(4.0	)	(7.9	)%	$	61.2	$	77.3	$	(16.1	)	(20.9	)%
Service	71.4		69.7		1.7			2.6	%	76.5		75.2		1.3			1.8	%
Total revenue	$	118.9	$	121.2	$	(2.3	)	(1.9	)%	$	137.7	$	152.5	$	(14.8	)	(9.7	)%


	Three months ended				Increase from prior year				Three months ended				Increase (decrease) from prior year
	March 31, 2019		March 31, 2018		$		%		September 30, 2019		September 30, 2018		$			%
Maintenance	$	57.0	$	56.1	$	0.9	1.7	%	$	58.9	$	60.2	$	(1.3	)	(2.1	)%
Professional services	14.4		13.6		0.8		6.4	%	17.6		15.0		2.6			17.1	%
	$	71.4	$	69.7	$	1.7	2.6	%	$	76.5	$	75.2	$	1.3		1.8	%



	Three months ended
Customer	March 31, 2019	March 31, 2018
Verizon Communications Inc.	15%	12%
AT&T Inc.	10%	*



	Nine months ended						Decrease from prior year
	September 30, 2019			September 30, 2018			$			%
Cost of revenue
Product	$	101.1		$	102.2		$	(1.1	)	(1.1	)%
Service	84.8			96.2			(11.4		)	(11.9	)%
Total cost of revenue	$	185.9		$	198.4		$	(12.5	)	(6.3	)%
Gross margin
Product	44.1		%	46.8		%
Service	61.7		%	56.1		%
Total gross margin	53.8		%	51.7		%