Risk Factors Update Summary

• The Company received $9.4 million for the sale of $170 million of its $340 million notional amount interest rate swap back to its counterparty, reducing the notional amount to $170 million.
• Anticipated future expenses related to the 2023 Restructuring Plan are around $8 million.
• Reduction in facilities worldwide to consolidate operations, including a plan to reduce facilities. This may result in cost savings and operational efficiency.
• Addition of a Clawback Policy to recoup Erroneously Awarded Compensation, effective October 2, 2023.
• Gross margin improvement expected in 2024 due to higher sales from Cloud and Edge products.
• Company contributions to defined benefit plans increased from $1.0 million to $2.1 million. This change significantly impacts financial obligations.
• Increase in the number of shares eligible for future resale due to warrants exercisable for common stock. This may lead to dilution for existing stockholders.
• The gain in Accumulated other comprehensive income related to the term loan debt prepaid on the final sale date of the swap totaled $7.3 million.
• Research and Development expenses decreased by $8 million in IP Optical Networks segment in 2023.
• Decrease in revenue contribution from Verizon from 15% to 11% in 2023. This change may impact overall revenue stability.
• Capital loss carryforwards increased from $79,716 to $100,061. This change may impact future tax strategies.
• The Company issued 55,000 shares of Series A Preferred Stock at $970 per share.
• Gross profit for 2023 was $408.1 million, a decrease from $400.9 million in 2022.
• Increase in sales to Eastern European countries from 6% in 2022 to 7% in 2023. This may expose the company to geopolitical risks.
• The company initiated a strategic restructuring program in 2023, incurring $9.9 million in expenses.
• Rate of compensation increase decreased from 3.90% to 2.41%. This change might impact employee morale.
• Definition of "Erroneously Awarded Compensation" added, detailing excess compensation recoupment procedures.
• ASU 2023-09 increases disclosure requirements around income taxes, effective 2025, with early adoption. Impact evaluation ongoing.
• Deferred product revenue decreased to $17 million in 2023 from $29 million in 2022.
• Inclusion of means of recoupment such as cash recoupment, forfeiture of awards, and reduction of future compensation.
• The restructuring plan includes workforce reduction, with approximately 200 employees affected.
• Increase in revenue contribution from top five customers from 34% in 2022 to 46% in 2023. This concentration may pose revenue risk.
• ASU 2023-07 enhances segment reporting disclosures, effective 2024 annually and 2025 interim. Impact assessment in progress.
• Expected long-term return on plan assets decreased from 0.79% to 0.34%. This may affect investment returns.
• Increase in restructuring expenses from $10.8 million in 2022 to $16.2 million in 2023. This rise in expenses may affect profitability.
• The Company issued 55,000 shares of Preferred Stock at $970 per share and 4,858,090 Warrants with an exercise price of $3.77 per share.
• Goodwill impairment of $116 million was recognized, impacting financial statements significantly.
• Net operating loss carryforwards decreased from $437,669 million to $413,773 million. This may affect future tax benefits.
• Sales and marketing expenses decreased by approximately $7 million in IP Optical Networks segment in 2023.
• Expected additional restructuring expense of approximately $5 million in 2024 to streamline operations. This may impact short-term financial performance.
• ASU 2023-06 amends disclosure requirements related to FASB Codification, aligning with SEC rules.
• Net loss decreased from $177 million in 2022 to $98 million in 2023.
• General and administrative expenses increased slightly in 2024 compared to 2023 due to higher employee costs.
• The Preferred Stock and Warrants are accounted for as liability-classified instruments based on their specific terms.
• Deferred revenue decreased from $3,472 to $2,042. This change may affect future revenue recognition.
• Employee contributions to the pension plan increased from $23,000 to $39,000 annually. This change impacts employee financial obligations.
• Deferred service revenue increased to $116 million in 2023 from $104 million in 2022.
• Revenue from IP Optical Networks products increased by 12% in 2023 compared to 2022.
• Interest expense in 2023 primarily comprised $25.5 million interest on term loan and revolver.
• The Company estimates that approximately $13 million will be recognized as revenue in 2024, $4 million in 2025, and $2 million in 2026 and beyond.
• OECD's Pillar 2 tax guidance may affect tax rate; safe harbor rules may apply, impacting tax calculations.
• Other expense in 2023 included a $5.3 million fair value adjustment of Preferred Stock and Warrants.
• ASU 2022-02 updates credit loss guidance, requiring disclosures on troubled debt restructurings and credit losses.
• The Company recognized approximately $108 million of revenue in 2023 that was recorded as deferred revenue in 2022.
• ASU 2021-08 amends business combinations accounting, impacting recognition and measurement principles for contract assets and liabilities.
• The Company had $3.0 million and $3.6 million of deferred sales commissions capitalized at December 31, 2023 and 2022, respectively.
• Income tax provision changed from a benefit of $14.5 million in 2022 to a provision of $10.8 million in 2023.
• Restructuring initiatives recorded expenses of $16.2 million in 2023, $10.8 million in 2022, and $11.7 million in 2021.