Quarterly Report for Quarter Ending April 3, 2026 (Form 10-Q)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in the forward-looking statements as a result of various factors, including, but not limited to, those discussed in the section titled "Risk Factors" and in other parts of this Quarterly Report on Form 10-Q.

OVERVIEW

We are a leading global provider of broadband solutions that enable broadband operators to more efficiently and effectively deploy high-speed internet, for data, voice and video services for their customers.

We classify our total revenue in two categories, "Appliance and integration" and "SaaS and service." The "Appliance and integration" revenue category includes hardware, licenses and professional services and is reflective of non-recurring revenue, while the "SaaS and service" category includes usage fees for our SaaS platform and support service revenue and reflects our recurring revenue stream.

We conduct business in three geographic regions-the Americas, Europe, the Middle East, and Africa ("EMEA"), and Asia-Pacific ("APAC"). We sell broadband solutions and related services, including our cOS™ software-based broadband solutions, to broadband operators globally.

Historically, our revenue has been dependent upon spending in the cable and telco industries. Our customers' spending patterns are dependent on a variety of factors, including but not limited to: economic conditions in the United States and international markets, and impact of factors such as the Middle East and Russia-Ukraine conflicts, inflation, changes in interest rates, potential supply chain disruptions, volatility in capital markets and foreign currency fluctuations; volatility and uncertainty in the banking and financial services sector; access to financing; annual budget cycles of each of the industries we serve; impact of industry consolidations; customer end-market conditions; customers suspending or reducing spending in anticipation of new products or new standards; impact of heightened, new, or proposed tariffs; and new industry trends and/or technology shifts. If our product portfolio and product development plans do not position us well to capture an increased portion of the spending in the markets in which we compete, our revenue may decline. As we attempt to further diversify our customer base in these markets, we may need to continue to build alliances with other equipment manufacturers and suppliers, and we may need to take orders at prices resulting in lower margins.

Our strategy is focused on continuing to develop and deliver software-based broadband technologies, which we refer to as our cOS solutions, to our broadband operator customers. We believe our cOS software-based broadband solutions are superior to hardware-based systems and deliver unprecedented scalability, agility and cost savings for our customers. Our cOS solutions, which can be deployed based on a centralized, distributed access architecture ("DAA") or hybrid architecture, enable our customers to migrate to multi-gigabit broadband capacity and the fast deployment of DOCSIS and/or fiber-to-the-home ("FTTH") data, video and voice services. We believe our cOS solutions resolve space and power constraints in broadband operator facilities, eliminate dependence on hardware upgrade cycles and significantly reduce total cost of ownership, and are helping us to be a major player in the broadband market. We expect continued strong long-term growth in our business, driven by increasing adoption of our virtualized DOCSIS, CMTS, and FTTH solutions and distributed access architectures among both our existing customers and a growing base of new customers.

As previously reported, on December 8, 2025, we entered into a Put Option Agreement to sell our Video business to Leone Media Inc. (d/b/a MediaKind) (the "Buyer"). Under the Put Option Agreement, the Buyer irrevocably provided the Company with the right to require the Buyer to purchase our Video business for a purchase price of $145 million in cash, subject to working capital and other adjustments. On March 16, 2026, we delivered a notice of intent to exercise the Put Option to the Buyer requesting that Buyer execute the Asset Purchase Agreement (the "APA"). On March 20, 2026, we executed the APA to complete the transaction. The closing of the transaction is subject to satisfaction of customary closing conditions. The transaction is expected to close in the second quarter of fiscal 2026. The results of the Video business are presented as discontinued operations in the accompanying unaudited condensed consolidated statements of operations for all periods presented. The assets and liabilities of the Video business have been reflected as assets and liabilities of discontinued operations in the accompanying unaudited condensed consolidated balance sheet for all periods presented.

Unless otherwise noted, all amounts, percentages and discussions below reflect only the results of operations and financial condition of our continuing operations. Refer to "Discontinued Operations" below and Note 3 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information on discontinued operations.

CRITICAL ACCOUNTING ESTIMATES

Our unaudited condensed consolidated financial statements and the related notes included elsewhere in this report are prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires management 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Our critical accounting estimates are disclosed in our 2025 Annual Report on Form 10-K, as filed with the SEC on February 24, 2026. There have been no significant changes to these estimates during the three months ended April 3, 2026.

ACCOUNTING PRONOUNCEMENTS

For a summary of recent accounting pronouncements applicable to our condensed consolidated financial statements, refer to Note 2 to the condensed consolidated financial statements in Item 1, which is incorporated herein by reference.

RESULTS OF OPERATIONS

Net Revenue

Appliance and integration net revenue increased by $32.2 million for the three months ended April 3, 2026, compared to the corresponding period in 2025, primarily driven by a $22.6 million increase from customers ramping up due to new deployments in North America, a $7.5 million increase in outside plant services, and a $3.1 million increase from projects in APAC and LATAM regions.

SaaS and service net revenue increased by $4.6 million for the three months ended April 3, 2026, compared to the same period in 2025, primarily due to increased support services in the current period.

Gross Profit

Our gross margins are dependent upon, among other factors, the proportion of software sales, product mix, supply chain impacts, customer mix, product introduction costs, price reductions granted to customers and achievement of cost reductions.

Our gross margin decreased by 250 basis points in the three months ended April 3, 2026, compared to the corresponding period in 2025, primarily due to an unfavorable product mix which included a higher percentage of outside plant services.

Research and Development Expenses

Our research and development expenses consist primarily of employee salaries and related expenses, contractors and outside consultants, supplies and materials, equipment depreciation and facilities costs, all of which are associated with the design and development of new products and enhancements of existing products. The research and development expenses are net of French research and development tax credits.

Research and development expenses increased by $1.2 million, or 6%, for the three months ended April 3, 2026, compared to the corresponding period in 2025, mainly due to increased investment to support business growth.

As discussed previously, the results of the Video business have been classified as discontinued operations for all periods presented. Certain indirect corporate costs, such as IT and facility costs, previously allocated to the Video reporting segment, do not qualify for discontinued operations accounting classification and are now reported within continuing operations. These stranded costs, which are included in research and development expenses, were $0.4 million and $0.8 million for the current and prior periods, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $2.5 million, or 13%, for the three months ended April 3, 2026, compared to the corresponding period in 2025, primarily due to increased investment to support business growth.

As discussed above, the stranded costs resulting from the disposition of the Video business included in selling, general and administrative expense were $1.6 million and $0.8 million for the current and prior periods, respectively.

Interest Expense, Net

Interest expense, net decreased in the three months ended April 3, 2026, compared to the corresponding period in 2025, primarily due to lower costs of borrowing and lower outstanding principal balance resulting from the repayment and reborrowing activities under the Revolving Facility during the current period.

Other Income (Expense), Net

The change in other income (expense), net, in the three months ended April 3, 2026, compared to the corresponding period in 2025, was primarily due to fluctuations in the foreign currency exchange rate against the U.S. dollar.

Income Taxes

The provision for income taxes increased in the three months ended April 3, 2026, compared to the corresponding period in 2025, primarily due to $4.6 million of withholding taxes on the distribution from a foreign subsidiary and higher pretax income in the current period.

Liquidity and Capital Resources

We expect to continue to manage our cash from operations effectively, together with deploying cash in working capital for growth. The cash we generate from our operations enables us to fund ongoing operations, our research and development projects for new products and technologies, and other business activities. We continually evaluate our cash needs and may decide it is best to raise additional capital or seek alternative financing sources to fund our operations and the growth of our business, to take advantage of unanticipated strategic opportunities, or to strengthen our financial position, including through drawdowns on existing or new debt facilities or new debt and equity financing. In the future, we may enter into other arrangements for potential investments in, or acquisitions of, complementary businesses, services or technologies, which could require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us or at all. Conversely, we may also from time to time determine that it is in our best interests to voluntarily repay certain indebtedness early. We believe that our current sources of funds will provide us with adequate liquidity during the 12-month period following April 3, 2026, as well as in the long-term.

Material Cash Requirements

Our principal uses of cash include repayments of debt and related interest, purchases of inventory, stock repurchases, payments for payroll, restructuring expenses, and other operating expenses related to the development and marketing of our products, purchases of property and equipment, facility leases, and other contractual obligations for the foreseeable future.

As of April 3, 2026, we had an outstanding principal amount equal to $111.5 million under our Credit Agreement, consisting of $75.0 million under our Revolving Facility and $36.5 million under our Term Facility, of which $3.0 million is scheduled to become due in the 12-month period following April 3, 2026. As of April 3, 2026, our total minimum lease payments are $22.3 million, of which $6.6 million is due within 12 months of April 3, 2026.

In February 2025, the Board of Directors authorized us to repurchase, from time to time, up to $200 million of our outstanding shares of common stock through February 2028 (the "Share Repurchase Authorization"), at such time and such prices as management may decide. The program does not obligate us to repurchase any specific number of shares and may be discontinued at any time. As of April 3, 2026, approximately $78.0 million of the Share Repurchase Authorization remained available for repurchases under this program.

Sources and Conditions of Liquidity

Our sources to fund our material cash requirements are predominantly from the sales of our products and services and, when applicable, proceeds from debt facilities and debt and equity offerings.

As of April 3, 2026, our principal sources of liquidity consisted of cash and cash equivalents of $109.0 million, net accounts receivable of $83.5 million, and $82.0 million remaining available under the Revolving Facility of our Credit Agreement.

Our cash and cash equivalents of $109.0 million as of April 3, 2026 consisted of bank deposits held throughout the world and money market funds, of which $46.2 million was held outside of the United States. At present, such foreign funds are considered to be indefinitely reinvested in foreign countries to the extent of indefinitely reinvested foreign earnings. In the event funds from foreign operations are needed to fund cash needs in the United States and if U.S. taxes have not already been previously accrued, we may be required to accrue and pay additional U.S. and foreign withholding taxes in order to repatriate these funds. The expected proceeds from the disposition of our Video business pursuant to the APA will be used to fund ongoing operations and support our capital allocation priorities. We do not expect the disposition of the Video business to have a material impact on our ongoing liquidity and capital resources.

Summary of Cash Flows

The table below sets forth selected cash flow data:

Operating Activities

Net cash provided by operating activities decreased by $51.9 million during the first three months of fiscal 2026, compared to the corresponding period in fiscal 2025, primarily due to an elevated amount of collections in the prior period associated with strong revenue performance in the last quarter of 2024.

We expect that cash provided by or used in operating activities may fluctuate in future periods as a result of a number of factors, including, but not limited to, instability and uncertainty in the financial services sector, the potential impact of the Middle East and Russia-Ukraine conflicts on our operations in those regions, fluctuations in our operating results, shipment linearity, accounts receivable collections performance, inventory and supply chain management, and the timing and amount of compensation and other payments.

Investing Activities

Net cash used in investing activities decreased by $0.5 million during the first three months of fiscal 2026, compared to the corresponding period in 2025, primarily due to lower purchases of property and equipment in the current period.

Financing Activities

Net cash used in financing activities increased by $8.5 million during the first three months of fiscal 2026, compared to the corresponding period in 2025, primarily due to $6.9 million of higher stock repurchases in the current period, partially offset by a $1.4 million decrease in withholding tax payments related to the net share settlement of restricted stock units.

Discontinued Operations

As previously noted, we classified the results of our Video business as discontinued operations in the consolidated statements of operations for all periods presented. The related assets and liabilities associated with the Video business were classified as held for sale in the consolidated balance sheets.

Net sales from discontinued operations were $50.1 million for the three months ended April 3, 2026, compared to $48.3 million for the three months ended March 28, 2025. The increase in net sales in the current period was primarily driven by a $4.2 million increase in SaaS and service revenue due to higher usage by existing customers, partially offset by a $2.4 million decrease in product sales. The loss from discontinued operations, net of tax, for the three months ended April 3, 2026 was primarily attributable to $4.0 million non-recurring advisory fees related to the disposition of our Video business.