Ribbon Communications Inc. Revenue Disclosure

(16) REVENUE RECOGNITION

The Company’s typical performance obligations include the following:

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Significant Judgments

The Company’s contracts with customers often include promises to transfer multiple products and services to the customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Judgment is required to determine the SSP for each distinct performance obligation. The Company typically has more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, the Company may use information such as the size of the customer and geographic region in determining the SSP.

Deferred Revenue

Deferred revenue is a contract liability representing amounts collected from or invoiced to customers in excess of revenue recognized. This results primarily from the billing of annual customer support agreements where the revenue is recognized over the term of the agreement. The value of deferred revenue will increase or decrease based on the timing of invoices and recognition of revenue.

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Disaggregation of Revenue

The Company disaggregates its revenue from contracts with customers based on the nature of the products and services and the geographic regions in which each customer is domiciled. The Company’s total revenue for the years ended December 31, 2025, 2024 and 2023 was disaggregated geographically as follows:

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The Company’s product revenue from its direct sales program and from indirect sales through its channel partner program for the years ended December 31, 2025, 2024 and 2023 was as follows (in thousands):

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The Company’s product revenue from sales to enterprise customers and from sales to service provider customers for the years ended December 31, 2025, 2024 and 2023 was as follows (in thousands):

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The Company’s product revenue and service revenue components by segment for the years ended December 31, 2025, 2024 and 2023 was as follows (in thousands):

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Revenue Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables, which are contract assets, and customer advances and deposits, which are contract liabilities, in the Company’s consolidated balance sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Billing may occur subsequent to revenue recognition, resulting in contract assets. The Company may receive advances or deposits from its customers before revenue is recognized, resulting in contract liabilities which are classified as deferred revenue. These assets and liabilities are reported in the Company’s consolidated balance sheets on a contract-by-contract basis as of the end of each reporting period. Changes in the contract asset and liability balances during the years ended December 31, 2025 and 2024 were not materially impacted by any factors other than billing and revenue recognition. Nearly all of the Company’s deferred revenue balance is related to services revenue, primarily customer support contracts. Unbilled receivables stem primarily from engagements where services have been performed; however, billing cannot occur until services are completed.

In some arrangements, the Company allows customers to pay for term-based software licenses and products over the term of the software license. The Company also sells SaaS-based software under subscription arrangements, with payment terms over the term of the SaaS agreement. Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables. Unbilled receivables that are anticipated to be invoiced in the next twelve months are included in Accounts receivable on the Company’s consolidated balance sheets. The changes in the Company’s accounts

receivable, unbilled receivables and deferred revenue balances for the years ended December 31, 2025 and 2024 were as follows (in thousands):

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The Company recognized approximately $115 million of revenue in the year ended December 31, 2025 that was recorded as deferred revenue at December 31, 2024 and approximately $110 million of revenue in the year ended December 31, 2024 that was recorded as deferred revenue at December 31, 2023. Of the Company’s deferred revenue reported as long-term in its consolidated balance sheet at December 31, 2025, the Company expects that approximately $14 million will be recognized as revenue in 2027, approximately $8 million will be recognized as revenue in 2028 and approximately $10 million will be recognized as revenue in 2029 and beyond.

The Company applies the optional exemption of not disclosing the transaction price allocated to the remaining performance obligation for its contracts with an original duration of less than one year. In 2024, the Company entered into a contract with an existing customer that has revenue allocated to remaining performance obligations, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods of $171 million and $285 million as of December 31, 2025 and 2024, respectively. At this time, the Company expects to recognize the majority of the revenue related to this contract in the years 2026 through 2028. 

All freight-related customer invoicing is recorded as revenue, while the shipping and handling costs that occur after control of the promised goods or services transfer to the customer are reported as fulfillment costs, a component of Cost of revenue - product in the Company’s consolidated statements of operations.

Deferred Commissions Cost

Sales commissions earned by the Company’s employees are considered incremental and recoverable costs of obtaining a contract with a customer. These costs on our consolidated balance sheet have been deferred and are being amortized over the expected life of the customer contract, which is generally five years. At December 31, 2025 and 2024, the Company had $2.1 million and $2.8 million, respectively, of deferred sales commissions capitalized.