POLY Plantronics Inc /Ca/ - 10-K

ITEM 1A.  RISK FACTORS

Risk Factors Summary

The following is a summary of the material risks and uncertainties we have identified, which should be read in conjunction with the more detailed description of each risk factor contained below.

1. Risks Related to Operations

• Disruptions in our supply chain, including the inability of our own manufacturing facilities and those of our contract manufacturers, original design manufacturers, suppliers and sub-suppliers, to provide and/or timely deliver sufficient quantities of key component parts and/or finished products, has adversely impacted, and may continue to adversely impact, our ability to fulfill customer demand which, in turn, has and may continue to adversely impact our growth, business, reputation and financial condition.

• COVID-19 has had, and may continue to have, a significant impact on our business and results of operations.

• We face risks related to our dependence on channel partners and strategic partners to sell our products.

• Failure to adequately service and support our product offerings, or a decline in demand for our service offerings, could harm our results of operations.

• Changes in our management may cause uncertainty in, or be disruptive to, our business, certain of our directors and management team members have been with us in those capacities for only a short time.

• Business interruptions due to manmade or natural disasters, or other significant disruptions in, or breaches in security of, our products, our website or information technology systems, including breaches of technology systems of our third-party suppliers, could adversely affect our business operations.

• Our ability to process purchase orders and ship products in a timely manner depends on our IT systems and performance of the systems and processes of third parties such as our suppliers, manufacturers, customers or other partners, as well as the interfaces between our systems and the systems of such third parties.

2. Risks Related to Strategic Initiatives

• Our failure to properly develop and manage strategic initiatives may adversely affect our financial position and results of operations.

• Competition in each of our markets is strong, and our inability to compete effectively could significantly harm our business and results of operations.

• Failure to successfully navigate the challenges associated with developing, introducing, and marketing our products could adversely impact our financial results.

• Our failure to effectively enhance and develop our sales strategy and sales force, may harm our revenues and financial outcomes as a result.

3. Risks Related to Our Regulatory and Litigation Environment

• Delays or loss of government contracts or failure to obtain or maintain required government certifications could have a material adverse effect on our business.

• We are subject to a variety of laws and regulations relating to the import and export of our product and service offerings. Any failure to comply with such regulations could result in governmental enforcement actions, fines, penalties, or other remedies, which could have a material adverse effect on our business, results of operations, and financial condition.

• Critical accounting estimates involve the use of judgements and if actual results vary from our estimates or assumptions underlying such estimates, our financial results could be negatively affected.

• We are regularly subject to a wide variety of litigation, including commercial and employment litigation, allegation of patent infringement, as well as claims related to alleged defects in the design and use of our products.

• We are subject to other legal and compliance risks that could have a material impact on our business.

4. Risks Related to Our Global Presence

• We operate in multiple tax jurisdictions globally. Our corporate tax rate may increase or we may incur additional tax liabilities, and/or changes in applicable tax regulations and resolutions of tax disputes could negatively impact our cash flow, financial condition, and results of operations.

• We are exposed to differences and frequent fluctuations in foreign currency exchange rates, which may adversely affect our revenues, gross profit, and profitability.

• We are exposed to the impact of macroeconomic and geopolitical trends and events, including the effects of inflation. In late February 2022, existing geopolitical tensions increased dramatically following Russia's military action against Ukraine. Following Russia’s actions, various countries, including the United States, Canada, the United Kingdom, Germany, and France, as well as the European Union, issued broad ranging economic sanctions against Russia, including the prohibition of doing business with certain Russian corporate entities, large financial institutions, officials and

Table of Contents

oligarchs, and the freezing of Russian assets. Russia’s invasion, the responses of countries and political bodies to Russia’s actions, continuing or increased sanctioning efforts, and the potential for wider conflict could have a material adverse effect on Poly’s supply chain and may result in a higher cost of freight and a reduction in the sales of services and products in Russia and Eastern Europe.

5. Risks Related to Our Capital Structure

• Our operating results are difficult to predict, they could fluctuate, and our stock price could become more volatile and your investment could lose value.

• Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes and our other debt instruments.

6. Risks Related to Our Merger with HP

• The consummation of the Merger with HP is contingent upon the satisfaction of a number of conditions, including stockholder and regulatory approvals, that may be outside of our or HP’s control and that we and HP may be unable to satisfy or obtain or that may delay the consummation of the Merger or cause the parties to abandon the Merger.

• While the Merger is pending, we are subject to business uncertainties and contractual restrictions that could harm our financial condition, operating results, and business.

• Uncertainty about the Merger may adversely affect relationships with our customers, suppliers and employees, whether or not the Merger is completed.

• As a result of the Merger, our current and prospective employees could experience uncertainty about their future with us. As a result, key employees may depart because of issues relating to such uncertainty or a desire not to remain with HP following the completion of the Merger.

• Litigation has arisen, and more could arise, in connection with the Merger, which could be costly, prevent consummation of the Merger, divert management’s attention and otherwise materially harm our business.

• The ability to complete the Merger is subject to the receipt of consents and approvals from government entities, which may impose conditions that could have an adverse effect on us or could cause either party to abandon the Merger.

Risk Factors

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN INVESTMENT DECISION. THE RISKS DESCRIBED BELOW ARE NOT THE ONLY ONES WE FACE. ADDITIONAL RISKS THAT WE ARE NOT PRESENTLY AWARE OF OR THAT WE CURRENTLY BELIEVE ARE IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS. OUR BUSINESS COULD BE MATERIALLY HARMED BY ANY OR ALL OF THESE RISKS. THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE SIGNIFICANTLY DUE TO ANY OF THESE RISKS, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT. IN ASSESSING THESE RISKS, YOU SHOULD ALSO REFER TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS ANNUAL REPORT ON FORM 10-K, INCLUDING OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES.

1. Disruptions in our supply chain, including the inability of our own manufacturing facilities and those of our contract manufacturers, original design manufacturers, suppliers and sub-suppliers, to provide and/or timely deliver sufficient quantities of key component parts and/or finished products, has adversely impacted, and may continue to adversely impact, our ability to fulfill customer demand which, in turn, has and may continue to adversely impact our growth, business, reputation, and financial condition.

We depend on manufacturing operations conducted in our own facility in Tijuana, Mexico and through contract manufacturers, original design manufacturers, and suppliers to provide key component parts and/or manufacture and deliver finished products. Although we have contracts with certain contract manufacturers, original design manufactures, and suppliers, we also source components direct from suppliers and distributors. We depend on these relationships and parties to timely obtain sufficient quantities of component materials as well as finished products of acceptable quality, at acceptable prices, and in the quantities necessary for us to meet critical schedules for the delivery of our own products and services and to fulfill our anticipated customer demand. The Company and our contract manufacturers and original design manufacturers procure materials, components and sub-components from a long and often complex chains of sub-suppliers to assemble them into finished products. Given the wide variety of solutions that we offer, the large and diverse distribution of our manufacturers and suppliers, and the long lead times required to manufacture, assemble and deliver certain products, problems could arise in production, planning and inventory management that could seriously harm our business. For example, there has been a worldwide shortage of semiconductor, memory and other electronic components affecting many industries, from automotive to technology providers. This shortage has impacted us significantly and has caused us to experience extended lead times (in some cases over 52 weeks) which is anticipated to continue. Extended lead times and decreased availability of key components has caused a significant disruption to our production schedule and has had, and we expect to continue to have, an adverse effect on our financial condition or results of operations. We do not have any

Table of Contents

guarantees of supply from our third-party suppliers, and in certain cases we have limited contractual arrangements or are relying on standard purchase orders or on component parts available on the open market, which has resulted in increased costs combined with reduced availability. Continued delay in our ability to produce and deliver our products could cause our customers to purchase alternative products from our competitors. Also, long-term supply and maintenance obligations to customers increase the duration for which specific components are required, which may further increase the risk of component shortages or increase the cost of carrying inventory. If component shortages continue, we will continue to experience supply interruption and/or may incur significant price increases from these suppliers.

Additionally, rapid increases in production levels to meet product demand, whether or not forecasted, has resulted and could in the future result in shipment delays, higher costs for materials and components, increased expenditures for freight to expedite delivery of required materials, late delivery penalties, and higher overtime costs and other expenses, which have negatively impacted our revenues, reduced our profit margins, and potentially harmed relationships with affected customers. Although historically, we have generally been able to secure additional supply or take other actions to mitigate supply disruptions, as the impact of the global shortages in key components, including semiconductors, impacts many industries worldwide, and particularly our supply chain, we could experience a material adverse effect on our business, results of operations, and financial condition for an extended period of time. In addition, in order to secure such necessary components, we have and may continue to purchase them from brokers in the open market at prices that are higher than those available from our normal vendors. If constraints were to occur in existing or future product lines, our ability to meet demand and our corresponding ability to sell affected products may be materially reduced. Moreover, our failure to timely deliver desirable products to meet demand may harm relationships with our customers. Further, if production is increased rapidly, manufacturing yields may decrease, which may also reduce our revenues or margins.

Additionally, although we use standard parts in many of our products, we are dependent on certain sole source and limited source suppliers. We currently purchase certain integrated circuits from single or limited sources which, combined with extended lead times, makes us further susceptible to shortages, quality issues or price fluctuations in our supply chain. Suppliers may choose not to renew their contracts with the Company or to discontinue supplying materials and components or finished products to us for a variety of reasons, including conflicting demands from their other customers, availability, price, and discontinuing production of such product. As our contract manufacturers acquire components on our behalf our direct purchases from original design manufacturers are reduced, in turn, reducing our influence in securing necessary quantities of supply. A lack of viable alternative sources of materials and components or the high development costs associated with existing and emerging wireless and other technologies may require us to work with a single source of supply for certain components. Additionally, with consolidation occurring with certain suppliers, there are also fewer sources for components available to us. This consolidation can negatively impact our ability to access certain parts and at reasonable prices, which impact our gross margin. Companies may elect not to continue their business relationship with us for reasons beyond our control, or may experience disruptions, impose price increases, or go out of business, any of which could negatively impact our ability to sell our products.

Additionally, in order to secure the quantities of supplies needed to meet customer demand, in some instances we have been required to increase purchase commitments and/or enter into longer-term contractual commitments. Increases in our purchase commitments and/or multi-year contractual arrangements to shorten lead times and or increase component or finished goods supply could also lead to excess and obsolete inventory charges if the demand for our products is less than our expectations. If we fail to anticipate customer demand properly, an oversupply of parts and finished goods could result in excess or obsolete inventory that could also adversely affect our gross margins.

Our inventory management systems and supply chain visibility tools may not enable us to accurately forecast and manage the supply of our products and components. If we determine that we have excess supply, we may have to reduce prices or write down inventory. Alternatively, insufficient supply levels may lead to a shortage of products to sell and less revenue.

We have significant reliance upon our manufacturing facility in Tijuana, Mexico which may cause disruption to the supply chain and change established supply chain relationships. We believe that a flexible supply chain allows us to effectively respond to customer demands, but it also requires continuous improvement efforts involving management, production employees, and suppliers. In addition, we have identified opportunities to migrate to less manual, more sophisticated assembly techniques, which may require a significant amount of capital investment and take time to implement. If we are unable to consistently and timely execute on our supply chain strategies, our ability to respond to customer demand timely may be harmed which, in turn, would have a negative impact on our financial results.

Moreover, our ongoing efforts to optimize the efficiency of our supply chain could cause supply disruptions and be more expensive, time-consuming and resource-intensive than expected. Given these component shortages, supply interruption and/or significant price increase from these suppliers may occur. In addition, we may not be able to develop alternate or second sources in a timely manner. It is time consuming and costly to qualify parties into our supply chain, which if we fail

Table of Contents

to manage could cause delays, quality control issues, and disruption in our manufacturing. With more suppliers and locations to manage in our supply chain the complexity increases. If we are unable to buy these components in quantities sufficient to meet our requirements on a timely basis, we will not be able to deliver products and services to our customers, which would seriously affect present and future sales, and would, in turn, adversely affect our business, financial condition, and results of operations. Moreover, the loss of a source of supply, or lack of sufficient availability of key components, could require that we locate an alternate source or redesign our products, either of which could result in business interruption and increased costs and could negatively affect our product gross margin and results of operations.

A portion of the materials and components used in our products are provided by our suppliers on consignment. As such, we do not take title to, or risk of loss of, these materials and components until they are consumed in the production process. Our consignment agreements generally allow us to return parts in excess of maximum order quantities at the suppliers’ expense. Returns for other reasons are negotiated with suppliers on a case-by-case basis and are generally immaterial. If we are required or choose to purchase all or a material portion of the consigned materials and components or if a material number of our suppliers refuse to accept orders on consignment, our inventory turn rate may decline or we could incur material unanticipated expenses, including write-downs for excess and obsolete inventory.

We have experienced and expect to continue to experience volatility in prices from our suppliers, particularly in light of price fluctuations for integrated circuits, plastics, oil, gold, copper, and other materials and components in the U.S. and around the world, which could negatively affect our profitability or market share. We have recently implemented price increases on certain products to pass some of the cost increases to our customers. If we are unable to do so in the future, or if we cannot achieve operating efficiencies that offset further increases, our business, financial condition, and results of operations may be materially negatively affected.

2. COVID-19 has had, and may continue to have, a significant impact on our business and results of operations.

a. The full and long-term effects of the global COVID-19 pandemic on our business depend on future events that continue to be highly uncertain and cannot be predicted.

The novel strain of COVID-19 identified in late 2019 has spread globally and had a mixed effect and could in the future continue to have a mixed or adverse effect on our business, operations and financial condition.

The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, on-site work restrictions, and shutdowns. These restrictions have led to a massive increase in remote work.

As companies continued to shift from in-office to work-from-home arrangements, we experienced elevated demand for certain Enterprise Headsets and Video devices, which support these arrangements, and a decline in demand for our Voice products and associated services, which support enterprise in-office work. The acceleration in customer and partner demand for our products that support remote work, remote learning, and telemedicine opportunities have led to increased sales and operating income. We expect the trend in these areas to continue. Such increased demand also has led, and may continue to lead, to increased competition, particularly in our headset and video categories. The full extent of the impact of the pandemic on our business and on our operational and financial performance and condition remains uncertain and will depend on many factors over which we have no control, including the length of the pandemic, government, business and individuals actions, the impact on global economic activity, variant strains, the availability of vaccines, and whether a hybrid work model will be adopted and maintained by businesses and customers over the long-term.

b.    COVID-19 has caused supply chain issues, including a shortage of adequate component supply and manufacturing capacity and long lead times for raw materials and components. This has caused, and may continue to cause, a disruption in our supply chain, increased costs, increased purchase commitments and a delay in our ability to fulfill orders, which has had, and may continue to have, an adverse impact on our business and operating results.

From the initial outbreak of the virus and its spread globally, we have experienced disruptions and higher costs in our manufacturing, supply chain and logistics operations, and in some cases, increased sell-through, resulting in shortages of our products in our distribution channels and loss of market share and opportunities.

Manufacturing capacity, including much longer than usual lead times, and component supply constraints have caused, and could continue to cause, significant issues for us. As a result of COVID-19, our component suppliers are at capacity and are under pressure to allocate components and production to certain customers for business, regulatory or political reasons, including customers who are outside of our industry, such as the automotive industry, and/or

Table of Contents

customers within the telecommunications industry who are much larger than us. In addition, based on this extraordinary demand for the same components, we have experienced and may continue to experience, increases in pricing as a condition of supply or worse, de-commits of supply.

Although we continue to work with our supply chain and dual source partners to take the necessary steps to mitigate disruption of supply, there can be no assurance that the ongoing disruptions due to COVID-19 will be resolved in the near term, which would negatively affect present and future sales, and would, in turn, adversely affect our business, financial condition, and results of operation. See Risk Factor 1 above entitled " Disruptions in our supply chain, including the inability of our own manufacturing facilities and those of our contract manufacturers, original design manufacturers, suppliers and sub-suppliers, to provide and/or timely deliver sufficient quantities of key component parts and/or finished products, has adversely impacted, and may continue to adversely impact, our ability to fulfill customer demand which, in turn, has and may continue to adversely impact our growth, business, reputation and financial condition" for more information.

c.    Our future growth will depend on our diversified product and services offerings, and if we do not successfully execute on our growth opportunities, our operating results could be adversely affected.

COVID-19 has forced businesses around the world to shift their employees to remote work. As a result, we believe that businesses are moving to permanent remote work for some or all of their workforce. Due to this changing work environment, we are attempting to diversify our product category portfolio and focus more of our attention on hybrid work-related products, including new products in our headsets category which continue to include our noise cancellation in addition to other advanced artificial intelligence and machine learning features, and our new professional-grade personal video tools to meet the needs of remote workers and IT administrators configuring solutions for a variety of applications. Our operating results depend on our ability to develop and introduce new products and services into existing and emerging markets, including telehealth and tele-education verticals. While we are taking actions to develop new and/or increase the manufacturing of our existing collaboration tools that enable both in office and remote work, our failure to timely accommodate this rapidly shifting market demand, and/or failure of customers to purchase and/or renew our offerings, could negatively impact our financial results.

The COVID-19 pandemic may also result in both unpredictable short-term and long-term changes in customer needs for our products and services in various sectors, along with IT-related capital spending reductions, or shifts in spending focus, which could materially adversely affect us if we are unable to adjust our product and service offerings to match customer needs. The process of developing new technology is complex and uncertain, and if we fail to accurately predict customers’ changing needs and emerging technological trends, then our business could be harmed. We must commit significant resources, including the investments we have been making in our strategic priorities to developing new products and services, before knowing whether our investments will result in products and services the market will accept. In particular, if our model of the evolution of hybrid working and focus on the professional customer does not emerge as we believe it will, or if the industry does not evolve as we believe it will, or if our strategy for addressing this evolution is not successful, many of our strategic initiatives and investments may not meet our expectations. In addition, our business could be adversely affected in periods surrounding our new product introductions if customers delay purchasing decisions to qualify or otherwise evaluate the new product offerings. There can be no assurance that we will successfully identify new product and services opportunities, develop and bring new products and services to market in a timely manner, or achieve market acceptance of our products and services or that products, services and technologies developed by others will not render our products, services or technologies obsolete or noncompetitive.

As we expand into new product and service categories and/or go-to- market strategies in pursuit of growth, we will have to continue to build relationships with our existing channel partners, or may have to build relationships with new channel partners and/or directly with suppliers and manufacturers and adapt to evolving or new distribution and marketing models. These partners, suppliers, practices and models may require significant management attention and operational resources and may affect our accounting, including revenue recognition, gross margins, and the ability to make comparisons from period to period. If we are unable to maintain and/or build successful distribution channels or successfully market our products and services in these new categories, we may not be able to take advantage of the growth opportunities, and our business and our ability to grow our business could be adversely affected.

Additionally, customer demand for our product categories tends to be less predictable and tends to vary more across geographic markets. As a result, we may face higher up-front investments, inventory costs associated with attempting to anticipate customer preferences, and increased inventory write-offs.

d.    COVID-19 has caused and may continue to cause unanticipated fluctuations in our gross margins, which can result in unanticipated fluctuations in our operating results.

Table of Contents

Our gross margins can vary due to customer demand, competition, product pricing, product lifecycle, product mix, new product introductions, unit volumes, acquisitions and divestitures, commodity, supply chain and logistics costs, capacity utilization, geographic sales mix, currency exchange rates, trade policy and tariffs, and the complexity and functionality of new product innovations and other factors. If we are not able to introduce new products in a timely manner at the product cost we expect, or if customer demand for our products is less than we anticipate, or if there are product pricing, marketing and other initiatives by our competitors to which we need to react or that are initiated by us to drive sales that lower our margins, then our overall gross margin will be less than we project.

Moreover, growth in the hybrid work environment is likely to create greater pressures on us and our suppliers to accurately project overall and specific product categories of component and product demand and to establish optimal levels and manufacturing capacity. If we are unable to secure enough components and/or finished products at reasonable prices or of acceptable quality to build new products in a timely manner in the quantities or configurations needed, our revenue and gross margins could suffer until other sources can be developed.

In addition, our gross margins vary significantly by product line, sales geography and customer type, as well as within product lines. When the mix of products sold shifts from higher margin product lines to lower margin product lines, to lower margin sales geographies, or to lower margin products within product lines, our overall gross margins and our profitability may be adversely affected. In particular, early in this fiscal year we experienced increased demand for our headset products, which typically carry lower gross margins, and downward pressure on the sales of our audio and video solutions, which typically are used in office environments and carry higher gross margins. A continuation of the movement towards remote and/or flexible work practices could, over time, further erode the overall demand for office equipment and further erode sales of our Enterprise voice and video product lines, continuing downward margin pressure.

Moreover, as we expand within and into new product categories, our products in those categories may have lower gross margins than in our traditional product categories. If we are unable to offset these potentially lower margins by enhancing the margins in our more traditional product categories, our profitability may be adversely affected.

As our manufacturing is in Asia and Mexico and distributors located globally, we rely upon logistics providers to transport goods around the world. As supply chains have become more constrained, the need to expedite shipments to manufacturing facilities and customers has increased. Further, we continue to experience higher transportation and fuel costs which has resulted in decreased margins and may result in the future in increased inventory and further margin decline, which would adversely affect our results of operations and financial condition.

Changes in trade policy, including tariffs and the tariffs focused on China in particular, and currency exchange rates also have adverse impacts on our gross margins. The COVID-19 pandemic is putting pressure on our gross margins as well as causing us to face uncertain product demand and incur increased air freight and other costs to fulfill sell through demand, replenish channel inventory, and maintain market share.

The impact of these factors on gross margins can create unanticipated fluctuations in our operating results, which may cause volatility in the price of our stock.

e.    We face risks related to COVID-19 related to our offices worldwide and our manufacturing facility in Mexico, which could significantly disrupt our operations.

In light of the uncertain and rapidly evolving situation relating to the spread of this virus and various government restrictions and guidelines, we have taken measures intended to mitigate the spread of the virus and minimize the risk to our employees and their families, channel partners, end-customers, and the communities in which we operate. Such measures included transitioning our in-office employee population to work remotely from home, adhering to public safety and shelter in place directives, physical distancing protocols within offices and manufacturing facilities for our essential workers, providing personal protective equipment, including face masks and hand sanitizers, conducting routine sanitation of facilities, requiring health monitoring before entry into Poly facilities and restricting the number of visitors to our sites. This has led to some operational, cybersecurity and other risks and cost that could have an adverse impact on the company’s results from operations. Our management team and employees have and continue to plan for and mitigate operational challenges and risks associated with COVID-19, shifting some of our focus from normal business, strategic planning, and other initiatives.

Although we continue to monitor the situation, precautionary measures that we have adopted could negatively affect our customer success efforts, sales and marketing efforts, delay and lengthen our sales cycles, and create operational or

Table of Contents

other challenges, any of which could harm our business and results of operations. In addition, COVID-19 may disrupt the operations of our end-customers and channel partners for an indefinite period of time, including as a result of travel restrictions and/or business shutdowns, all of which could negatively impact our business and results of operations, including cash flows.

Further, disruptive activities from COVID-19 have caused (in April 2020), and may in the future cause, temporary closure of our manufacturing facility in Tijuana, Mexico. The extent to which COVID-19 may impact our operations at this facility in the future remains highly uncertain and cannot be predicted. As the COVID-19 vaccine is not readily available in Mexico, our production personnel are at heightened risk and if an outbreak of the virus occurs at this facility, we may be forced to shut down our operations, which would result in significant disruption in our supply chain and results of operations.

3.    Our failure to properly develop and manage strategic initiatives may adversely affect our financial position and results of operations.

We operate in a rapidly evolving market. To continue focus on growing our business, we have identified strategic initiatives designed to expand our product and service offerings and target growth opportunities in various horizontal and vertical markets. Our success in managing these growth objectives will depend to a significant degree on our ability to: implement our business model and strategy and adapt and modify them as needed; increase awareness of our brand name, protect our reputation and develop customer loyalty; anticipate with any degree of certainty the behavioral and operational changes of our customers that have a significant impact on our business from time to time as they respond to evolving social, economic, regulatory and political changes; effectively manage our expanding operations and service offerings, including the integration of any acquisitions; maintain adequate control of our expenses; rely on our channel partners to align with our strategic objectives; adequately and efficiently operate, maintain, upgrade and develop our website and the other platforms and equipment we utilize in providing our services; improve and develop financial and management information systems, controls and procedures; attract, retain and motivate qualified personnel; and anticipate and adapt to changing conditions in the human resource, online and other markets in which we operate as well as the impact of any changes in government regulation, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics.

Additionally, as part of our business strategy, if we are presented with appropriate opportunities, we may acquire or invest in businesses or assets to add complementary companies, products, and technologies, and specialized employees, as well as make investments in, and/or form strategic partnership alliances with, other companies in furtherance of our strategic objectives. Our ability to acquire and successfully integrate companies, products, and technologies in the past has been challenging, particularly our Acquisition of Polycom in 2018. Although the acquisition resulted in the achievement of certain benefits, including acceleration and expansion of our market opportunities, creation of a broader portfolio of communications and collaboration endpoints, and significant expansion of services offerings, the Acquisition also has presented certain challenges, including our inability to timely and efficiently integrate network infrastructures including pricing and ordering systems, which impacted the timing and processing of orders with suppliers, vendors, customers and end users. In addition, the Acquisition has had, and may continue to have, negative effects on the price of our common stock, particularly in light of the amount of debt incurred and the significant number of shares of our stock issued in the transaction. Moreover, we have experienced system implementations challenges and redundant operations in various countries, increasing our compliance costs, and may continue to experience additional and unforeseen expenses and working capital requirements as a result of the Acquisition.

Future acquisitions and investments may not achieve our goals, and could be viewed negatively by our customers, partners, or investors. In addition, such acquisitions, investments and/or partnerships may expose us to risks associated with unforeseen or hidden liabilities, risks that acquired or invested companies will not achieve anticipated performance levels, diversion of management attention and resources from our existing business or other priorities and budget limitations, difficulty in integrating the acquired businesses with our existing operational infrastructure, inability to generate sufficient revenues to offset the costs and expenses of acquisitions or investments, the length of development, and increased competition, all of which could adversely affect our financial condition and results of operations.

In addition, following completion of an acquisition or investment, our management and resources may be diverted from their core business activities due to the integration process, which diversion may harm the effective management of our business. Any difficulties encountered in the acquisition or investment and integration process may have an adverse effect on our ability to manage our business and harm our results of operations and financial condition. If a financial or strategic investment is unsuccessful, we may lose the value of our investment, which could have a material adverse effect on our financial condition and results of operations. Moreover, if we fail to successfully close transactions, integrate new teams, or integrate the products, technologies or other solutions associated with these transactions into our company, our business

Table of Contents

could be seriously harmed. Any integration process may require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or use the acquired products, technology, and personnel, or accurately forecast the financial impact of an acquisition, investment and/or partnership transaction, including accounting charges. We may have to pay cash, incur debt, or issue equity securities to pay for any acquisition or investment, any of which could seriously harm our business. Selling or issuing equity to finance or carry out any such acquisition or investment would also dilute our existing stockholders. Incurring debt would increase our fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

In addition, members of the new U.S. administration and Congress have proposed new legislation that could limit, hinder, or delay the acquisition process and target opportunities. If we are unable to consummate key acquisition transactions essential to our corporate strategy, it may limit our ability to grow or compete effectively and our business may be seriously harmed.

Additionally, as we focus on growth opportunities, we continue to review our product portfolio and address our non-strategic product categories and products through various options including divestiture and cessation of operations like the sale of our consumer gaming assets. If we are unable to execute divestitures on favorable terms or if realignment is costlier or more distracting than we expect or has a negative effect on our organization, employees and retention, then our business and operating results may be adversely affected. Discontinuing products with service components may also cause us to continue to incur expenses to maintain services within the product life cycle or to adversely affect our customer and consumer relationships and brand. Divestitures may also involve warranties, indemnification or covenants that could restrict our business or result in litigation, additional expenses or liabilities. In addition, discontinuing product categories, even categories that we consider non-strategic, reduces the size and diversification of our business and causes us to be more dependent on a smaller number of product categories.

4.    Competition in each of our markets is strong, and our inability to compete effectively could significantly harm our business and results of operations.

We face strong competition in all of the markets worldwide for our products, solutions and services. Market leadership changes may occur as a result of numerous factors, including new product and technology introductions, new market participants, pricing pressure on average selling prices and sales terms and conditions, and related to product performance and functionality. For a further description of our competitors and the markets in which we compete, see Item 1, Business , in this Form 10-K.

Our competitive landscape continues to rapidly evolve as the industry moves into new markets for collaboration such as mobile, browser-based, and cloud-delivered collaboration offerings. Competitors in these markets also continue to develop and introduce new technologies, sometimes proprietary or closed architectures, which may block or limit our ability to compete in certain markets. Many of our competitors are larger, offer broader product lines, may integrate their products and solutions with communications solutions, devices, and adapters manufactured or provided by them or others, offer products or solutions incompatible with our products, have established market positions, and have substantially greater financial, marketing, and other resources; all of which may increase pressure to reduce our pricing, increase our spending on sales and marketing, or both, which would correspondingly have a negative impact on our revenues and operating margins.

We may not be able to compete successfully against our current or future competitors. We expect our competitors to continue to improve the performance of their current products and to introduce new products or new technologies that provide improved performance. New product introductions by our current or future competitors, or our delay in bringing new products to market, could cause a significant decline in sales or loss of market acceptance of our products. We believe that ongoing competitive pressure may result in a reduction in the prices of our products and our competitors’ products. In addition, the introduction of additional lower priced competitive products or of new products or product platforms could render our existing products or technologies obsolete. We also believe we will face increasing competition from alternative UC&C endpoint solutions that employ new technologies or new combinations of technologies.

Simplification of certain product technology is leading to the availability of alternative, lower cost competitive products targeted to enterprises, consumers and small businesses, which could harm sales. If we do not distinguish our products, through distinctive, technologically advanced features and designs, as well as continue to build and strengthen our brand recognition, our products may become more difficult to sell or to sell at the desired prices and financial margins. In addition, failure to effectively market our products could lead to lower and more volatile revenue and earnings, excess inventory, and the inability to recover associated development costs, any of which could have a negative impact on our business, financial condition, results of operations, and cash flows.

Table of Contents

We also face competition from companies, principally located in or originating from Asia, which may be state-owned or subsidized which enables such competitors to offer low-cost products, including products modeled on, direct copies of, or counterfeits of, our products. Online marketplaces make it easier for disreputable and fraudulent sellers to introduce their copies or counterfeit products into the stream of commerce by commingling legitimate products with copies and counterfeits; thereby making it extremely difficult to track and remove copies and counterfeits. The introduction of low-cost alternatives, copies and counterfeits has resulted in and will continue to cause market pricing pressure, customer dissatisfaction and harm to our reputation and brand name. If product prices are substantially reduced by new or existing market participants, our business, financial condition, or results of operations could be materially negatively affected.

Additionally, strategic partnerships and acquisitions are being formed and announced by our competitors on a regular basis, which increases competition and can result in increased downward pressure on our product prices. As a result, competition with larger combined companies with significantly greater financial, sales and marketing resources, a larger channel network and expanded product lines is a constant threat to our market share and revenues. Competitors can sell their communications solutions product lines in conjunction with proprietary network equipment or platform technology as a complete solution, making it more difficult to compete against them or to ascertain pricing on competitive products. In addition, some competitors may use their strengths in adjacent markets to foreclose competition in the UC&C solutions market. In some cases, proprietary solutions may also preclude our competitive products from being fully interoperable with our competitors' endpoints, infrastructure and/or network products. Acquisitions or partnerships made by one of our strategic partners could also limit the potential contribution of our strategic relationships to our business and restrict our ability to form strategic relationships with these companies in the future and, as a result, harm our business. Rumored or actual consolidation of our partners and competitors may cause uncertainty and disruption to our business and can cause our stock price to fluctuate.

5.    Failure to successfully navigate the challenges associated with developing, introducing, and marketing our products may adversely impact our financial results.

a. Our success depends on our ability to assimilate new technologies in our products and to properly train our channel partners, sales force and end-user customers in the use of those products.

The markets for our products are characterized by rapidly changing technology, such as the demand for HD video technology and lower cost video infrastructure products, the shift from on premise-based equipment to a mix of solutions that includes hardware and software and the option for customers to have video delivered as a service from the cloud or through a browser, evolving industry standards and frequent new product introductions, including an increased emphasis on software products, new, lower cost hardware products, and development of artificial intelligence and machine learning solutions that may make all or a portion of our products or their functionality obsolete or unnecessary. Historically, our focus has been on premise-based solutions for the enterprise and public sector, targeted at vertical markets, including finance, manufacturing, government, education and healthcare. In addition, in response to emerging market trends, and the network effect driven by business-to-business and business-to-consumer adoption of UC&C, we are expanding our focus to capture opportunities within emerging markets including mobile, small and medium businesses (“SMBs”), and cloud-based delivery. If we are unable to successfully capture these markets to the extent anticipated, or to develop the new technologies and partnerships required to successfully compete in these markets, then our revenues may not grow as anticipated, and our business may ultimately be harmed. Given the competitive nature of the mobile industry, changing end user behaviors and other industry dynamics, these relationships may not evolve into fully developed product offerings or translate into any future revenues.

b.    The success of our new products depends on several factors which, if not achieved, could adversely impact our financial results.

The success of our new product introductions depends on a number of factors, including proper new product definition, product cost, infrastructure for services and cloud delivery, timely completion and introduction of new products, proper positioning and pricing of new products in relation to our total product portfolio and their relative pricing, differentiation of new products from those of our competitors and other products in our own portfolio, market acceptance of these products and the ability to sell our products to customers as comprehensive UC&C solutions. Other factors that may affect our success include properly addressing the complexities associated with compatibility issues, channel partner and sales strategies, sales force integration and training, technical and sales support, and field support. As a result, it is possible that investments that we are making in developing new products and technologies may not yield the planned financial results.

Table of Contents

We also need to continually educate and train our channel partners to avoid any confusion as to the desirability of new product offerings and solutions compared to our existing product offerings and to be able to articulate and differentiate the value of new offerings over those of our competitors. As the market evolves, our distribution model and channel partners may change as well. During the last few years, we have announced and launched several new product offerings, both independently and jointly with our strategic partners, including new software, hardware and cloud-based solutions, and these new products could cause confusion among our channel partners and end-users, thereby causing them to delay purchases of our new products until they determine their market acceptance, or as they consider a more comprehensive UC&C strategy versus point product or endpoint only deployments. Any delays in future purchases could adversely affect our revenues, gross margins and operating results in the period of the delay.

The communications market shift to fully- integrated solutions, cloud-based/hybrid offerings and new business models over time may require us to add new channel partners, enter new markets and gain new core technological competencies. We are attempting to address these needs and the need to develop new products through our internal development efforts, through joint developments with other companies and through acquisitions. However, we may not identify successful new product opportunities and develop and bring products to market in a timely manner. Further, as we introduce new products, these product transition cycles may not go smoothly, causing an increased risk of inventory obsolescence and relationship issues with our end-user customers and channel partners. The failure of our new product development efforts, any inability to service or maintain the necessary third-party interoperability licenses, our inability to properly manage product transitions or to anticipate new product demand, or our inability to enter new markets would harm our business and results of operations.

c.    We may experience delays in product introductions and availability, and our products may contain defects which could seriously harm our results of operations.

We have experienced delays in the introduction of certain new products and enhancements in the past. The delays in product release dates that we experienced in the past have been due to factors such as unforeseen technology issues, third-party changes to technology, manufacturing ramping issues, availability of component parts, and other factors, which we believe negatively impacted our revenue in the relevant periods. In addition, we have experienced delays in product certifications required with respect to our new product releases. Any of these or other factors may occur again and delay our future product releases. As such, disruption due to geopolitical conflicts, public health, or natural disasters could create an increased risk of delays in new product introductions.

Our communications equipment includes both hardware and software and incorporates new technologies and component parts from different suppliers. Resolving product defect and technology and quality issues could cause delays in new product introductions. Further, some defects may not be detected or cured prior to a new product launch or may be detected after a product has already been launched and may be incurable or result in a product recall. The occurrence of any of these events could result in the failure of a partial or entire product line or a withdrawal of a product from the market. We may also have to invest significant capital and other resources to correct these problems, including product re-engineering expenses and inventory, warranty and replacement costs. These problems might also result in claims against us by our customers or others and could harm our reputation and adversely affect future sales of our products.

Any delays for new product offerings recently announced or currently under development, including product offerings for mobile, cloud-based delivery, software delivery or any product quality issues, product defect issues or product recalls could adversely affect the market acceptance of these products, our ability to compete effectively in the market, and our reputation with our customers, and therefore could lead to decreased product sales and could harm our business. We may also experience cancellation of orders, difficulty in collecting accounts receivable, increased service and warranty costs in excess of our estimates, diversion of resources and increased insurance costs and other losses to our business or to end-user customers.

d.    We face risks related to building products dependent upon third-party platforms or technologies.

We have invested significant resources developing products that are dependent on third party unified communication as a service (UCaaS) and video conferencing as a service (VCaaS) platforms and software. We made the decision to design our products to work with different third-party platforms and software to offer customers greater choice and flexibility, while expanding our ecosystem partners and enhancing their unique value differentiation through our products. If these partners’ solutions do not gain adoption and growth, it could impact the sales of our endpoint devices. If other hardware manufacturers follow the Company’s strategy and enter into the market, thereby increasing competition, we could see less market demand or revenue for our products. Lastly, the third-party platforms may be, or become, competitors of ours who have chosen, or in the future may choose, to design competing products for their

Table of Contents

platforms and offer features for their own hardware platforms to provide further differentiated features that may be perceived as better than our products, or they may choose not to work with us. If third parties are unwilling to provide us access to their platforms or technologies, or if such access is withdrawn, denied, or delayed, or if access is provided under terms that are not commercially reasonable, our business and operations could be adversely affected. We believe though that customers want the ability of choice and quality that Poly products provide.

In addition, we develop such products or make product enhancements based upon anticipated demand for new features and functionality. Our business and revenues may be harmed if: the use of our agnostic platform does not occur; we do not anticipate shifts in technology appropriately or rapidly enough; the development of suitable sales channels does not occur, or occurs more slowly than expected; our products are not priced competitively or are not readily adopted; or the adoption rates of the third-party software applications do not drive demand for our products as we anticipate.

Although we believe increased sales of these remote working solutions will drive increased demand for our hardware and software platform products, such increased demand may not occur, or we may not benefit to the same extent as our competitors. We also may not be successful in creating demand in our installed customer base for products that we develop that incorporate these new partner platforms.

e.    Product obsolescence or discontinuance and excess inventory can negatively affect our results of operations.

The pace of change in technology and in the release of new products has increased and is expected to continue to increase, which can often render existing or developing technologies obsolete more quickly. In addition, the introduction of new products and any related actions to discontinue existing products can cause existing inventory to become obsolete. These obsolescence issues, or any failure by us to properly anticipate product life cycles, can require write-downs in inventory value. For each of our products, the potential exists for new products to render existing products obsolete, cause inventories of existing products to increase, cause us to discontinue a product or reduce the demand for existing products.

Further, we continually evaluate our product lines both strategically and in terms of potential growth rates and margins. Such evaluations could result in the discontinuance or divestiture of those products in the future, which could be disruptive and costly and may not yield the intended benefits.

f.    The increased use of software in our products could impact the way we recognize revenue, which could adversely impact our financial results.

We are increasingly incorporating advanced software features and functionalities into our products, offering firmware and software fixes, updates, and upgrades and developing Internet based software-as-a-service offerings that provide additional value that complements our products. As the nature and extent of software integration in our products increases, or if sales of standalone software applications or services become material, the way we report revenue related to our products and services could be significantly affected. For example, we are increasingly required to evaluate whether our revenue transactions include multiple deliverables and, as such, whether the revenue generated by each transaction should be recognized upon delivery, over a period of time or apportioned and recognized based on a combination of the two. Moreover, the software and services revenue recognition rules are complex and dynamic. If we fail to accurately apply these complex rules and policies, particularly to new and unique products or services offerings, we may incorrectly report revenues in one or more reporting periods, which could materially and adversely impact our results for the affected periods, cause our stock price to decline, and result in securities class actions or other similar litigation.

g.    Lower than expected market acceptance of our products, price competition and other price changes would negatively impact our business.

If the market does not accept our products, particularly our new product offerings on which we are relying for future revenues, such as product offerings for platform software, new hardware products and cloud-based delivery, our business and operating results could be harmed. Further, revenues relating to new product offerings are unpredictable and new products typically have lower gross margins for a period of time after their introduction and higher marketing and sales costs. As we introduce new products, they could increasingly become a higher percentage of our revenues. Our profitability could also be negatively affected in the future as a result of continuing competitive price pressures in the sale of UC&C solutions equipment and UC platform products. Further, in the past we have reduced prices in order to expand the market for our products, and in the future, we may further reduce prices, introduce new products that carry lower margins in order to expand the market or stimulate demand for our products, or discontinue existing products as a means of stimulating growth in a new product.

Table of Contents

Finally, if we do not fully anticipate, understand and fulfill the needs of end-user customers in the vertical markets that we serve, we may not be able to fully capitalize on product sales into those markets and our revenues may, accordingly, fail to grow as anticipated or may be adversely impacted. We face similar risks as we expand and focus our business on the SMB and service provider markets. In light of COVID-19, there are shifts in end user needs, including for example, increased work from home, telemedicine, tele-education, and other remote services that are exacerbated in a pandemic, which may present opportunities for growth. However, if we fail to take advantage of such changes and they impact our products, we may risk missing a critical market shift.

6.    Failure to adequately service and support our product offerings, or a decline in demand for our service offerings, could harm our results of operations.

In some instances, the complexity of our products and associated technologies has increased the need for enhanced product warranty and service capabilities, including integration services, which may require us to develop or acquire additional advanced service capabilities and make additional investments. If we cannot adequately develop and train our internal support organization or maintain our relationships with our outside technical support providers, it could adversely affect our business.

In addition, sales of our immersive telepresence solutions are complex sales transactions, and the end-user customer may purchase an enhanced level of support service from us to ensure that its significant investment can be fully operational and realized. This requires us to provide advanced services and project management in terms of resources and technical knowledge of the customer’s telecommunication network. If we are unable to provide the proper level of support on a cost-efficient basis, it may cause damage to our reputation in this market and may harm our business and results of operations.

In other instances, however, we are introducing new generation, less complex, product solutions, as companies shift from on premises to work from home options for their workforce. This shift in work environment has resulted in a decreased demand for our professional, installation and managed service offerings, which typically cater to on premises enterprise businesses. If we continue to experience a decline in our service offerings, our gross margins will experience downward pressure.

Additionally, we have invested and continue to invest in product management, analytics and personal device service offerings, such as Poly Lens and Poly+, to grow revenue, improve gross margins and drive increased profitability. Our future growth and profitability are tied to our ability to successfully bring to market these new and innovative services offerings, including cloud management and insights solutions. We are investing significant time, resources and money into our services offerings without expectation that they will provide material revenue in the near term and without any assurance they will succeed. Moreover, we expect that as we continue to explore, develop and refine new offerings they will continue to evolve, may not generate sufficient interest by end customers, may create channel conflicts with our existing hardware distribution partners, and we may be unable to compete effectively, generate significant revenues or achieve or maintain acceptable levels of profitability.

Additionally, our experience with cloud services offerings is limited. We are also substantively reliant on third-party service providers for significant aspects of our offerings and over whom we have little or no market power regarding pricing, support, service levels and compliance. If we do not successfully execute our cloud strategy or anticipate the needs of our customers, our credibility as a cloud services provider could be questioned and our prospects for future revenue growth and profitability may never materialize.

Moreover, if our new and evolving business model offerings achieve market acceptance, differences in revenue recognition treatment may cause short-term revenue declines or increase expenditures for operational, administrative and technical support. Accordingly, if we fail to successfully launch, manage and maintain our new and evolving services offerings future revenue growth and profitability may be limited and our business significantly harmed.

7.    We face risks related to our dependence on channel partners and strategic partners to sell our products.

a. We rely on third parties to sell and distribute our products. Disruption of our relationship with these channel partners and/or our failure to manage our channel inventory, could adversely affect our business, results of operations, operating cash flows and financial condition.

We sell our products through a global network of distributors and channel partners, including value-added resellers, integrators, direct marketing resellers, service providers, wireless carriers as well as through both traditional and online retailers and e-commerce channels. The impact of economic conditions, labor issues, natural disasters, regional or

Table of Contents

global pandemics, evolving customer preferences, and purchasing patterns on our distribution partners, or competition between our sales channels, could result in sales channel disruption.

Additionally, any loss of a major partner or distribution channel or other channel disruption, including continued consolidation of our distributors, could make us more dependent on alternate channels, could increase pricing and promotional pressures from other partners and distribution channels, increase our marketing costs, adversely impact buying and inventory patterns, payment terms or other contractual terms, sell-through or delivery of our products to consumers, could curtail our routes-to-market, and damage our reputation, brand equity, market share and profitability. Our sales channel partners also sell products offered by our competitors, and if competitors offer our sales channel partners more favorable terms, have more products available to meet their needs, or utilize the leverage of broader product lines sold through the channel, then our sales channel partners may de-emphasize or decline to carry our products, which would adversely affect our business.

The Company must manage both Company-owned and channel inventory effectively, particularly with respect to sales to distributors, which involves forecasting demand, pricing challenges, and analyzing point of sales information regarding sales to resellers and end users that our channel partners provide. Our forecasts may not accurately predict demand, and distributors may increase orders during periods of product shortages or may request to cancel orders or delay orders in anticipation of new products. Distributors also may adjust their orders in response to the supply of our products and the products of our competitors and seasonal fluctuations in end-user demand. The Company’s reliance upon our global channel network may reduce our visibility into inventory quantities, demand and pricing trends, and therefore make forecasting more difficult. If we have excess or obsolete inventory, we may need to reduce our prices and write down inventory. In addition, factors in different markets may cause differential discounting between the geographies where our products are sold, which makes it difficult to achieve global consistency in pricing and creates the opportunity for “grey market” sales. Additionally, if our sales channel partners have excess inventory of our products or those of our competitors, or decide to decrease their inventories for any reason, then they may decrease the amount of products they acquire in subsequent periods, causing disruption in our business and adversely affecting our forecasts and sales.

In addition, current and future restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, key shipping lanes, including the most recent blockage of the Panama Canal due to the running aground of a large shipping container, and/or increased border controls or closures, may also impact our ability to meet customer demand and could materially adversely affect us. Our customers and channel partners have also experienced, and may continue to experience, disruptions in their operations including as a result of COVID-19, which can result in delayed, reduced, or canceled orders, and increased collection risks, and which may adversely affect our results of operations.

b.    Our strategic partnerships with companies may not yield the desired results which could harm our business.

We are focusing on our strategic partnerships and alliances with traditional partners like Microsoft and Zoom and new partners, such as Google and others. Defining, managing and developing these partnerships is expensive and time-consuming and may not yield the desired results, impacting our ability to effectively compete in the market and to take advantage of anticipated future market growth. Because our products are platform agnostic and therefore intended to perform across multiple platforms, certain of our channel partners and strategic alliance partners may perceive conflicts in our business placing one strategic alliance partner versus another.

In addition, as we enter into agreements with these strategic partners to enable us to continue to expand our relationships with these partners, we may undertake additional obligations, such as development efforts and product certifications to our partner’s standards or requirements, which could trigger unintended penalty or other provisions in the event that we fail to fully perform our contractual commitments or could result in additional costs beyond those that are planned in order to meet these contractual obligations. We are reliant on certain strategic alliances to certify our products to work on their platform, which they withhold if we are unable to meet the time frames required, or if our competitors have certifications for competitive products for which we are not yet certified, our revenues and results of operations would be negatively impacted.

Moreover, we are investing in personnel and initiatives to grow our prosumer business, with offerings directly from our online platform and indirectly through third-party marketplaces, such as Amazon. If we are unable to build relationships with new channel partners and adapt to new distribution and marketing models, or if we fail to build product adoption with our targeted customer base, we could experience an adverse impact on our results of operations and financial condition.

Table of Contents

c.    Conflicts between our channel partners and strategic partners and us or between or among them could arise which could harm our business.

Some of our current and future products are directly competitive with the products sold by both our channel and strategic partners. For example, Cisco, Amazon, Google and Microsoft, have developed or may develop and offer, their own data integration solutions and some of these partners are currently, and others may in the future become, competitors. These strategic partners are among the largest and most well capitalized companies in the world and may have significant competitive advantages over us, including greater name recognition, larger customer bases, and greater financial, technical, marketing, public relations, sales, distribution and other resources than us. Such competitors may be more likely to promote and sell their own solutions over our products and they may ultimately be able to transition customers onto their competing solutions, which could materially and adversely affect our revenues and growth. Further, such competitors may cease their relationships with us. As a result of these conflicts, there is the potential for our channel and strategic partners to compete head-to-head with us or to significantly reduce or eliminate their orders of our products or design our technology out of their products. Moreover, because the market for optimized telecommunication offerings is evolving to support a hybrid work environment, we expect additional competition from other established and emerging companies if this market continues to develop and expand. Increased competition from our strategic partners or from other companies that may in future decide to enter and compete in our market may significantly adversely impact our financial performance.

Further, as a result of our increased efforts to sell through a direct sales model, we may alienate some of our channel partners or cause a shift in product sales from our traditional channel model. Due to these and other factors, channel conflicts could arise which cause channel partners to devote resources to the communications equipment and services of competitors, which would negatively affect our business and results of operations.

In addition, some of our products are reliant on strategic partnerships with call management providers and wireless UC&C platform providers. These partnerships result in interoperable features between products to deliver a total solution to our mutual end-user customers. Competition with our partners in all of the markets in which we operate is likely to increase, which would adversely affect our revenues and could potentially strain our existing relationships with these companies.

d.    Changes to our channel partner programs or channel partner contracts may not be favorably received and as a result our channel partner relationships and results of operations may be negatively impacted.

Our channel partners are eligible to participate in various incentive programs, subject to their contractual arrangements with us. As part of these arrangements, we generally have the right to make changes in our programs and launch new programs as business conditions warrant. Further, from time to time, we may make changes to our channel partner contracts or realign our discount and rebate programs. Our channel partners may not be receptive to future changes, and we may not receive the positive benefits that we anticipate in making any program and contractual changes.

e.    Termination of one or more contracts with our channel partners may harm our results of operations.

We cannot be certain as to future order levels from our channel partners. Our channel partner contracts typically provide for the right of termination for convenience by the channel partner. In the event of a termination of one of our major channel partners, we believe that the end-user customer would likely purchase from another one of our channel partners, but if this did not occur and we were unable to rapidly replace that revenue source, its loss would harm our results of operations.

f.    Our channel partners are impacted by changes in customer purchasing preferences, which may negatively impact our traditional sales channels or the prices at which we may sell our products.

It is becoming easier for small online sellers of certain product categories to enter the market unburdened with physical locations, employees and support personnel which can force our larger traditional brick and mortar resellers to reduce their selling prices. In turn, our traditional resellers may demand lower selling prices from us, more cooperative and marketing incentives, reduce their sales support needed to maintain our premium brand image, discontinue carrying our products and other similar adverse actions. As we expand our service offerings, many of our historical channel partners may be unwilling or unable to market our services forcing us to establish new or different relationships. Further, increased competition among resellers may cause some of our resellers and partners to experience financial difficulties or force them to shut down, decreasing our channels to market. The inability to establish or maintain successful relationships with distributors, OEMs, retailers, and telephony service providers or to maintain quality

Table of Contents

distribution channels and sales models could negatively affect our business, financial condition, or results of operations.

g.    We are subject to risks associated with our channel partners’ sales reporting, product inventories and product sell-through.

We sell a significant amount of our products to channel partners who maintain their own inventory of our products for sale to resellers and end-users. Our revenue forecasts associated with products stocked by some of our channel partners are based largely on point-of-sale information regarding their sales to resellers and end users that our channel partners provide to us. To the extent that this sales-out and channel inventory data is inaccurate or not received timely, or if our channel partners fail to provide such data at all, our revenue forecasts for future periods may be less reliable. Further, if these channel partners are unable to sell an adequate amount of their inventory of our products in a given quarter or if channel partners decide to decrease their inventories for any reason, such as a recurrence of global economic uncertainty and downturn in technology spending, the volume of our sales to these channel partners and our revenues could be negatively affected. In addition, we also face the risk that some of our channel partners have inventory levels in excess of future anticipated sales. If such sales do not occur in the time frame anticipated by these channel partners for any reason, these channel partners may substantially decrease the amount of product they order from us in subsequent periods, or product returns may exceed historical or predicted levels, which would harm our business and create unexpected variations in our financial results.

h.    We are subject to risks associated with the success of the businesses of our channel partners.

Some of our channel partners that carry our products, and from whom we derive significant revenues, are thinly capitalized. Although we perform ongoing evaluations of their creditworthiness, the failure of these businesses to establish and sustain profitability, obtain financing or adequately fund capital expenditures could have a significant negative effect on our future revenue levels and profitability and our ability to collect our receivables. In addition, global economic uncertainty, including uncertainty created by the impact of COVID-19, reductions in technology spending in the United States and other countries, and periodic ongoing challenges in the financial services industry have in the past restricted, and may again in the future restrict the availability of capital which may delay collections from our channel partners beyond our historical experience or may cause companies to file for bankruptcy, jeopardizing the collectability of our receivables from such channel partners and negatively impacting our future results.

i.    If our channel partners fail to comply with laws or standards, our business could be harmed.

We require our channel partners to meet certain standards of conduct and to comply with applicable laws, such as global anti-corruption, anti-bribery, and import and export control laws. Noncompliance with standards or laws could harm our reputation and could result in termination of the channel partner and/or fines, penalties, injunctions, or other harm to our business and results of operations were we to become involved in an investigation due to non-compliance by a channel partner.

8.    Delays or loss of government contracts or failure to obtain or maintain required government certifications could have a material adverse effect on our business.

We sell our products both directly and indirectly and provide services to governmental entities in accordance with certain regulated contractual arrangements. While reporting and compliance with government contracts is both our responsibility and the responsibility of our partners, a lack of reporting or compliance by us or our partners could have an impact on the sales of our products to government agencies. Further, the United States federal government has certain certification and product requirements for products sold to them. If we are unable to meet or maintain applicable certification or other requirements specified by the United States federal government or to do so within the time frames required, or if our competitors have certifications for competitive products for which we are not yet certified, our revenues and results of operations would be adversely impacted.

9.    Our operating results are difficult to predict, they could fluctuate, and our stock price could become more volatile and your investment could lose value.

Our stock price is subject to speculation by investors, analysts and in the press, changes in recommendations or earnings estimates by equity research analysts, changes in investors’ or analysts’ valuation measures for our stock, changes in or announcements regarding our forecasts and guidance, our credit ratings, market trends unrelated to our performance, and sales of our common stock by us, our officers or directors or unaffiliated third-party investors, particularly considering the

Table of Contents

concentrated ownership of our common stock, that may limit the ability for investors to acquire or sell meaningful quantities of our stock or cause speculation as to the acquisition or sale of our stock. As we experienced in the prior fiscal year, a drop in our stock price exposed us to a securities class action lawsuit, which has resulted in substantial costs and diversion of management’s attention and resources. We may experience further derivative lawsuits arising from the claims in the class action case. Moreover, if we in the future experience a significant drop in our stock price, we again may be exposed to further securities class action lawsuits, which could negatively affect our business.

Given the nature of the markets in which we compete, our revenues and profitability vary from quarter to quarter and are difficult to predict for many reasons, including the following: fluctuating optimal inventory levels; variations in the volume and timing of orders received during each quarter; our ability to execute on our strategic and operating plans; shifts in the timing, size and types of products ordered, as well as the mix of products and services, and the geographic locations of the customers placing orders, any of which could impact gross margins depending on the various margins of the products and services ordered and foreign currency exchange rates on both revenues and expenses; the timing of customers' sales promotions and campaigns or variations in sales rates by our channel partner customers to their customers; changes to our channel partner programs, contracts, pricing and go to market strategies that could result in a reduction in the number of channel partners, adversely impact our revenues and gross margins as we realign our discount and rebate programs for our channels, or cause more of our channel partners to add our competitors’ products to their portfolios; the timing of large end customer deployments, including UC&C infrastructure; the timing and market acceptance of new product introductions by us and our competitors and obsolescence or discontinuance of existing products; competition, including pricing pressure, product features and functionality, by us, our competitors or our customers; the level and mix of inventory that we hold to meet future demand; changes to our global organization and retention of or changes in key personnel; changes in effective tax rates which are difficult to predict due to, among other things, the timing and geographical mix of our earnings, the outcome of current or future tax audits and potential new rules and regulations; failure to timely introduce new products within projected costs and reduce costs as production increases; changes in technology and desired product features, including whether those changes occur as and when anticipated; general economic conditions in the U.S. and our international markets, including foreign currency fluctuations; customer cancellations and rescheduling; misalignment between supply chain ordering and demand by customers and systems to forecast demand; the impact of changing costs of freight and components used in the manufacturing of our products and the potential negative impact on our gross margins; investments in and the costs associated with strategic initiatives; changes in the underlying factors and assumptions used in determining stock-based compensation; changes in accounting rules or their interpretation; and other factors beyond our control, including popular uprisings, terrorism, war, natural disasters, and diseases, including COVID-19. As a result of these and potentially other factors, we believe that period-to-period comparisons of our historical results of operations are not necessarily a good predictor of our future performance. If our future operating results are below the expectations of stock market securities analysts or investors, or below any financial guidance we may provide to the market, our stock price may decline. Financial guidance beyond the current quarter is inherently subject to greater risk and uncertainty, and if the transitions in our markets accelerate, our ability to forecast becomes more difficult.

Moreover, our industry is characterized by rapid technological changes, evolving industry standards, frequent new product introductions, short-term customer commitments, decreasing product life cycles, and changes in demand. Production levels are generally forecasted based on customer forecasts, which is dynamic, and to some extent historic product demand and we often place orders with suppliers for materials, components and sub-assemblies (“materials and components”) as well as finished products many weeks in advance of projected customer orders. Actual customer demand depends on many factors and may vary significantly from forecasts. We may lose opportunities to increase revenues and profits and may incur increased costs and penalties including expedited shipping fees and late delivery penalties if we underestimate customer demand.

10.    Our failure to effectively enhance and develop our sales strategy and sales force, may harm our revenues and financial outcomes as a result.

a. The Company is substantially dependent on our sales force to effectively execute our sales, pricing and business strategies.

The Company believes that there is significant competition for skilled sales personnel with technical knowledge. Our ability to grow our business depends on our success in recruiting, training, and retaining sales personnel to support the Company. We periodically adjust our sales organization and our compensation programs to optimize our sales operations, to increase revenue, and to support our business model. If we have not structured our sales organization or compensation for our sales personnel in a way that properly supports our Company’s objectives, or if we fail to make changes in a timely fashion or do not effectively manage changes, the Company’s performance could be adversely affected.

Table of Contents

b.    We have a number of large customers with substantial market power whose ability to demand pricing and promotion concessions as well as other unfavorable terms makes sales forecasting difficult which can harm our profitability.

Many customers with whom we conduct business are quite large with substantial buying power or who have strategic importance to our product marketing objectives. Many use their buying power or strategic importance to mandate terms and conditions favorable to them to conduct business, including unfavorable payment terms. If our compliance with these or similar future provisions are incorrect or inadequate, we could be liable for breach of contract damages or our reputation with one or more key customers could be harmed, either of which could have an adverse effect on our financial condition or results of operations.

c.    A significant amount of our revenues are generated, and the majority of our product manufacturing and packaging occurs, internationally, which subjects our business to risks of international sales, operations and trade.

International sales and manufacturing, marketing and sales expenses represent a significant portion of our revenues and operating expenses. In fiscal year 2022, revenues derived from sales outside of the U.S. represented approximately 54% of our total revenues. International sales and operations are subject to certain inherent risks, which would be amplified if our international business grows as anticipated, including the following: recent economic sanctions imposed, and the potential for additional economic sanctions, by the United States as well as the actual and threatened retaliatory responses by impacted nations, some of which may affect or materially delay our ability to import or sell all or a portion of our products into impacted countries; adverse economic conditions in international markets, such as the restricted credit environment and sovereign credit concerns in E&A and reduced government spending and elongated sales cycles; information technology security, environmental and trade protection measures and other legal, regulatory and compliance obligations, some of which may result in fines, penalties and other legal sanctions or affect our ability to import our products, to export our products from, or sell our products in various countries where we are deemed to be in violation of our legal or contractual obligations; the impact of government-led initiatives to encourage the purchase of products from domestic vendors or discourage relationships with certain entities, which can affect the willingness of customers or partners to purchase products from, or collaborate to promote interoperability of products with, companies headquartered in the United States; unstable or uncertain political and economic situations such as the United Kingdom’s decision to leave the European Union commonly referred to as Brexit; the impact of changes in our international operations, including changes in key personnel; compliance with global anti-corruption laws such at the United States’ Foreign Corrupt Practices Act and United Kingdom’s Bribery Act, which may be exacerbated by cultural differences in the conduct of business in various regions; foreign currency exchange rate fluctuations, including the recent volatility of the U.S. dollar, and the impact of our underlying hedging programs; reduced intellectual property rights protections in some countries; unexpected changes in regulatory requirements and tariffs; longer payment cycles, greater difficulty in accounts receivable collection and longer collection periods; and changes in tax law or interpretations thereof that could lead to potentially adverse tax consequences, such as legislation on revenue and expense allocations and transfer pricing among the Company’s subsidiaries.

Furthermore, revenues derived from sales outside of the U.S. may fluctuate as a percentage of total revenues in the future as we introduce new products. These fluctuations primarily are the result of our practice of introducing new products in North America first and the additional time and costs required for product homologation and regulatory approvals of new products in international markets. To the extent we are unable to expand international sales in a timely and cost-effective manner, or maintain or meet current international market demand or increase such demand for our products, our business could be harmed.

11.    We are subject to a variety of laws and regulations relating to the import and export of our product and service offerings. Our failure to comply with such regulations could result in governmental enforcement actions, fines, penalties, or other remedies, which could have a material adverse effect on our business, results of operations, and financial condition.

We are subject to laws and regulations governing our international operations, including applicable import and export control regulations, economic sanctions on countries and persons and customs requirements. Importing and exporting has involved more risk since the beginning of 2018, as there has been increasing rhetoric, in some cases coupled with legislative or executive action, from several United States and foreign leaders regarding tariffs against foreign imports of certain materials. For example, the U.S. government imposed significant tariffs on China related to the importation of certain product categories following the U.S. Trade Representative’s Section 301 investigation. Additionally, export of our product and service offerings also are subject to various “domestic and international” export control regulations (“Export Regulations”), some of which are described in more detail below, and may require a license from the U.S. Department of State, the U.S. Department of Commerce, or the U.S. Department of the Treasury. Any changes in these Export

Table of Contents

Regulations may restrict the export of our products and/or services, and we may cease to be able to procure export licenses for our products and/or services under existing regulations. The area of Export Regulations remains fluid in terms of regulatory developments. Should we need an export license under existing regulations, the length of time required by the licensing process can vary, potentially delaying the shipment of products and the recognition of the corresponding revenue. We have no control over the time it takes to process an export license. Any restriction on the export of a significant product line or a significant amount of our products could cause a significant reduction in revenue.

In addition, effective June 29, 2020, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) published regulations tightening export controls on China, Russia and Venezuela with respect to goods, software and technology, including increasing the licensing requirements and due diligence expectations that apply to trade with, China, Russia and Venezuela under the U.S. Export Administration Regulations (“EAR”) when “military end users” or “military end uses” are involved. This rule expands the scope of the licensing requirement by redefining “military end use” more broadly and by increasing the number of products subject to the restriction. This expanded military end use restriction has had a significant impact on trade with China and increase associated export control compliance burdens, costs and risks associated with such compliance. Moreover, it is possible that the U.S. government may take further measures in the future to impose stricter Export Regulations on items destined for China and other countries outside of the U.S. or impose additional duties on shipments made from such countries. The U.S. government also may add additional parties to the Entity List, which could harm our business, increase the cost of conducting our operations in countries outside of the U.S., particularly China, or result in retaliatory actions against U.S. interests.

We have had, and may discover in the future, deficiencies in our compliance with Export Regulations. Although we continue to enhance our compliance programs relating to Export Regulations, we cannot assure that any such enhancements will ensure that we are in compliance with applicable laws and regulations at all times, or that applicable authorities will not raise compliance concerns or perform audits to confirm our compliance with applicable laws and regulations. Any failure by us to comply with applicable laws and regulations could result in governmental enforcement actions, fines or penalties, criminal and/or civil proceedings, or other remedies, any of which could have a material adverse effect on our business, results of operations, and/or financial condition.

In addition, the U.S. government has exercised additional trade-related powers in a manner that could have a material adverse impact on our business, financial condition or results of operations. For example, on May 15, 2019, then-President Trump issued an executive order that invoked national emergency economic powers to implement a framework to regulate the acquisition or transfer of information communications technology in transactions that imposed undue national security risks. The executive order was subject to implementation by the Secretary of Commerce and purports to apply to contracts entered into prior to the effective date of the order. On January 19, 2021, the U.S. Department of Commerce published interim final rules in the Federal Register, subject to public notice and comment, which purport to permit the Department of Commerce to investigate transactions involving the use of information communications technology products or services provided by persons owned or controlled by certain nations, including China, and potentially to modify or prohibit those transactions. In addition, the White House, the Department of Commerce and other executive branch agencies have implemented additional restrictions and may implement still further restrictions that would affect conducting business with certain Chinese companies. We cannot predict whether these recent rules and restrictions will be implemented and acted upon by the Biden administration, modified, overturned or vacated by legal action. Although we continue to work with our vendors to mitigate our exposure to current or potential tariffs, there can be no assurance that we will be able to offset any increased costs.

Additionally, a significant portion of the products we sell is originally manufactured in countries other than the United States. International trade disputes that result in tariffs and other protectionist measures could adversely affect our business, including disruption in and cost increases for sourcing our merchandise and increased uncertainties in planning our sourcing strategies and forecasting our margins. Moreover, government policies on international trade and investments such as import quotas, capital controls, taxes or tariffs, whether adopted by individual governments or regional trade blocs, can delay or prohibit the import or export of our products, affect demand for our products and services, impact the competitiveness of our products or prevent us from manufacturing or selling products in certain countries.

The implementation of more restrictive trade policies, including the imposition of tariffs, the imposition of more restrictive trade compliance measures, or the renegotiation of existing trade agreements by the U.S. or by countries where we sell our products and services or procure supplies and other materials incorporated into our products, including in connection with the U.S. and Mexico border crisis, the increasing trade tensions and tariffs with China and Chinese threats of retaliation, the economic sanctions against Russia, and the U.K.'s withdrawal from the EU, could adversely affect our business. Any failure to comply with such regulations could result in governmental enforcement actions, fines, penalties, or other remedies, which could have a material adverse effect on our business, results of operations, and financial condition.

Table of Contents

12.    Changes in our management may cause uncertainty in, or be disruptive to, our business. Certain of our directors and management team members have been with us in those capacities for only a short time.

The Company’s success depends upon the continued services of executive officers and other key personnel, as well as its ability to effectively transition to their successors. We have recently experienced significant changes in our senior leadership, including the appointment of a new Chief Executive Officer, Chief Legal Officer, Chief Supply Chain Officer, and Vice President of Corporate Strategy, and established new positions reporting to the CEO, including a Senior Vice President of Public Affairs and a Chief Transformation Officer. Additionally, in Fiscal Year 2021, one of our directors resigned as a result of the sale by Siris Capital Group, LLC of its holdings in our stock, and another director retired. We hired one new director in Fiscal Year 2021 and one new director in Fiscal Year 2022. Although we have endeavored to implement any management and director transition in a non-disruptive manner, such transitions might impact our business, and give rise to uncertainty among our customers, investors, vendors, employees and others concerning our future direction and performance, which may materially and adversely affect our business, financial condition, results of operations and cash flows, and our ability to execute our business model.

In addition, because certain members of our management and Board have served in their respective capacities for only limited durations, we face the additional risks that these persons have limited familiarity with our past practices, our business and our industry and lack established track records in managing our business strategy.

In addition, the Company has recently experienced turnover in other key leadership roles. Any future changes to the executive management team, including hires or departures, could cause further disruption to the business and have a negative impact on operating performance, while these operational areas are in transition. The Company can provide no assurance that it will find suitable successors to key roles as transitions occur or that any identified successor will be successfully integrated into its management team.

We also believe that our future success will depend in large part upon our ability to attract, motivate and retain highly skilled technical, management, sales, and marketing personnel at all levels of the organization. Due to labor shortages and inflationary wage pressure, there is intense competition for qualified talent, which combined with the salary, benefits and other costs required to employ the right personnel, may make it difficult to achieve our financial goals. Consequently, we may not be successful in attracting, motivating and retaining such personnel, and our failure to do so could have a negative effect on our business including our ability to successfully develop, introduce, and market our products which may adversely impact our operating results, or financial condition.

13.    Business interruptions due to manmade or natural disasters, or other significant disruptions in, or breaches in security of, our products, our website or information technology systems, including breaches of technology systems of our third-party suppliers, could adversely affect our business operations.

a. Factors or events outside of our control including, without limitation, war, terrorism, public health issues, natural disasters, or other business interruptions, whether in the U.S. or abroad, have caused or could cause damage or disruption to international commerce by creating economic and political uncertainties that may have a strong negative impact on the global economy, us, and our suppliers or customers.

Our major business operations and those of many of our vendors and their sub-suppliers are subject to interruption by disasters, including, without limitation, earthquakes, floods, and volcanic eruptions or other natural or manmade disasters, fire, power shortages, terrorist attacks and other hostile acts, public health issues, flu or similar epidemics or pandemics, and other events beyond our control and the control of our suppliers.

Our corporate headquarters are located in Northern California, a region known for seismic activity. A significant natural disaster, such as an earthquake, a fire (such as the recent extensive wildfires in California), localized extended outages of critical utilities (such as California’s public safety power shut-offs) or transportation systems, or any critical resource shortages, could cause a significant interruption in our business, damage or destroy our facilities and cause us to incur significant costs, any of which could harm our business, financial condition and results of operations. While we are partially insured for earthquake-related losses or floods, our operating results and financial condition could be materially affected in the event of a major earthquake or other natural or manmade disaster as the insurance we maintain against fires, earthquakes and other natural disasters may not be adequate to cover losses in any particular case.

In the case of our managed services business, any circuit failure or downtime could affect a significant portion of our customers. Since our ability to attract and retain customers depends on our ability to provide customers with highly reliable service, even minor interruptions could harm our reputation, require that we incur additional expense to

Table of Contents

acquire alternative telecommunications capacity, or cause us to miss contractual obligations, which could have a material adverse effect on our operating results and our business.

Our website is an important presentation of our company, identity and brands and an important means of interaction with and source of information for our channel partners and end user customers alike. We also rely on our centralized information technology systems for product-related information and to store intellectual property, forecast our business, maintain financial records, manage operations and inventory, and operate other critical functions. The secure maintenance of this information and technology is critical to our business operations. We have implemented multiple layers of security measures designed to protect the confidentiality, integrity, availability and privacy of this data and the systems and devices that store and transmit such data. We utilize current security technologies, and our defenses are monitored and routinely tested internally and by external parties. Despite these efforts, threats from malicious persons and groups, new vulnerabilities and advanced new attacks against information systems create risk of cybersecurity incidents. These incidents can include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may not immediately produce signs of intrusion, we may be unable to anticipate these incidents or techniques, timely discover them, or implement adequate preventative measures.

In addition, in the event that our or our service providers’ information technology systems or manufacturing or logistics abilities are hindered by any of the events discussed above, shipments could be delayed, resulting in missed financial targets, such as revenue and shipment targets, for a particular quarter.

b.    Cyber-attacks on our networks, actual or perceived security vulnerabilities in our products and services, physical intrusion into our facilities, and loss of critical data and proprietary information could have a material negative impact on our business and results of operations.

There are numerous and evolving security risks, including cybersecurity and privacy, criminal hackers, state-sponsored intrusions, industrial espionage, employee malfeasance, cyber intrusion on the tools that we use in the performance of our business, and human or technological error. Computer hackers and others routinely attempt to breach the security of technology products, services, and systems such as ours, and those of customers, partners, third parties’ contractors and vendors, and some of those attempts may be successful. We are not immune to these types of intrusions.

For example, our customers can use certain of our product offerings that provide product management and analytics, such as Poly Lens, that collect, use, and store certain PII regarding a variety of individuals in connection with their operations. Our customers rely on our technologies for the secure transmission of such sensitive and confidential information in the conduct of their business. We are also subject to existing and proposed laws and regulations, as well as government policies and practices, related to cybersecurity, privacy and data protection worldwide. National, state, and local governments and agencies in the countries in which we or our customers operate have adopted, are considering adopting, or may adopt laws and regulations regarding the collection, use, storage, transfer, processing, protection, and disclosure of PII obtained from individuals. Privacy and data protection laws are particularly stringent, and the costs of compliance with and other burdens imposed by such laws, regulations, and standards, or any alleged or actual violation, may limit the use and adoption of our products and services. Further, complying with privacy laws, regulations, or other obligations relating to privacy, data protection, or information security have caused and will continue to cause us to incur substantial operational costs and may require us to periodically modify our data handling practices. Moreover, compliance may impact demand for our offerings and force us to bear the burden of more onerous obligations in our contracts. Non-compliance could result in proceedings against us by governmental entities or others, could result in substantial fines or other liability, and may otherwise impact our business, financial condition and operating results.

Although we take physical and cybersecurity seriously and devote significant resources and deploy protective network security tools and devices, data encryption and other security measures to prevent unwanted intrusions and to protect our systems, products and data, we have and will continue to experience attacks of varying degrees in the conduct of our business. Cyber attackers tend to target the most popular products, services and technology companies, which can include our products, services or networks. As a result, our network is subject to unauthorized access, viruses, embedded malware and other malicious software programs. In addition, outside parties may attempt to fraudulently induce employees or customers to disclose information in order to gain access to our employee, vendor or customer data. Unauthorized access to our network, data or systems could result in disclosure, modification, misuse, loss, or destruction of company, employee, customer, or other third-party data or systems, the theft of sensitive or confidential data including intellectual property and business and personal information, system disruptions, access to our financial

Table of Contents

reporting systems, operational interruptions, product or shipment disruptions or delays, and delays in or cessation of the services we offer.

Any breaches or unauthorized access could ultimately result in significant legal and financial exposure, litigation, regulatory and enforcement action, and loss of valuable company intellectual property. Affected parties or government authorities could initiate legal or regulatory actions against us in connection with any security breaches or improper disclosure of data, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices. Such breaches could also cause damage to our reputation, impact the market’s perception of us and of the products and services that we offer, and cause an overall loss of confidence in the security of our products and services, resulting in a negative impact on our business, revenues and results of operations, as well as customer attrition.

In addition, the cost and operational consequences of investigating, remediating, eliminating and putting in place additional information technology tools and devices designed to prevent actual or perceived security breaches, as well as the costs to comply with any notification obligations resulting from such a breach, could be significant and impact margins. Further, due to the growing sophistication of the techniques used to obtain unauthorized access to or to sabotage networks, systems, or our products, which change frequently and often are not detected immediately by existing anti-virus and other detection tools, we may be unable to anticipate these techniques or to implement adequate preventative measures. We can make no assurance that we will be able to detect, prevent, timely and adequately address or mitigate such cyber-attacks or security breaches.

c.    Our ability to process purchase orders and ship products in a timely manner depends on our IT systems and performance of the systems and processes of third parties such as our suppliers, manufacturers, customers or other partners, as well as the interfaces between our systems and the systems of such third parties.

Some of our business processes depend upon our IT systems, the systems and processes of third parties, and the interfaces of our systems with the systems of third parties. For example, our order entry system feeds information into the systems of our manufacturing systems, which enables us and our supply chain to build and ship products. If these systems fail or are interrupted, our processes may operate at a diminished level or not at all. This could negatively impact our ability to ship products or otherwise operate our business, and our financial results could be harmed. Any systems failure or interruptions during the transition may impair communications with our manufacturers and customers, and, therefore, adversely affect our ability to build and ship our products. If our systems, the systems and processes of those third parties, or the interfaces between them experience delays or fail, our business processes and our ability to build and ship products could be impacted, and our financial results could be harmed.

14.    Critical accounting estimates involve the use of judgements and if actual results vary from our estimates or assumptions underlying such estimates, our financial results could be negatively affected.

Our most critical accounting estimates are described in Management’s Discussion and Analysis found in Item 7 of this Annual Report on Form 10-K under the section entitled “Critical Accounting Estimates.” Because, by definition, these estimates and assumptions involve the use of judgment, our actual financial results may differ from these estimates. For example, we have assessed various accounting estimates and other matters, including those that require consideration of forecasted financial information, in context to the unknown future impacts of COVID-19 using information that is reasonably available at this time. The accounting estimates and other matters we have assessed include, but are not limited to, goodwill and other long-lived assets, allowance for doubtful accounts, valuation allowances for tax assets, inventory and related reserves, including purchase commitments, and revenue recognition. As COVID-19 continues to develop, we may make changes to these estimates and judgments, which could result in meaningful impacts to our financial statements in future periods. If our estimates or assumptions underlying such contingencies and reserves prove incorrect, we may be required to record additional adjustments or losses relating to such matters, which would negatively affect our financial results.

We have a significant amount of goodwill and intangible assets on our consolidated balance sheet as of April 2, 2022. Goodwill and intangible asset impairment analysis and measurement requires significant judgment on the part of management and may be impacted by a wide variety of factors, both within and beyond our control.

We are required to annually test goodwill to determine if impairment has occurred, either through a quantitative or qualitative analysis. Additionally, interim reviews must be performed whenever events or changes in circumstances indicate that impairment may have occurred. If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill and the implied fair value of the goodwill in the period the determination is made. Intangible assets with finite lives are reviewed

Table of Contents

for recoverability whenever events or changes in circumstances indicate that the carrying amount of the related asset group may not be recoverable. Factors that may be considered when determining if the carrying value of our goodwill or intangible assets may not be recoverable include a significant decline in our expected future cash flows or a sustained, significant decline in our stock price and market capitalization.

In March 2020, we identified a triggering event which resulted in a non-cash impairment charge of $180 million relating to the Company’s Intangible Assets and Property, Plant, and Equipment related to long-lived assets in the Voice asset group, as well as a non-cash impairment charge of $484 million to Goodwill due to an overall decline in the Company’s earnings and sustained decrease in our stock price. If the factors triggering the impairment noted herein continue or worsen due to COVID-19 and other factors outside of the Company’s control, the Company may experience a further negative impact on its financial results as well as risks associated with our design and operation of internal controls.

15.    We operate in multiple tax jurisdictions globally. Our corporate tax rate may increase, or we may incur additional tax liabilities, and/or changes in applicable tax regulations and resolutions of tax disputes could negatively impact our cash flow, financial condition and results of operations.

We have significant operations in various tax jurisdictions throughout the world, and a substantial portion of our taxable income has historically been generated in jurisdictions outside of the U.S. Changes in foreign tax laws that seek to impose withholding taxes on the repatriation of cash or increase foreign tax rates on overseas earnings could negatively impact our cash flow, financial condition and results of operations.

Various governmental tax authorities have recently increased their scrutiny of tax strategies employed by corporations and individuals. If U.S. or other foreign tax authorities change applicable tax laws or successfully challenge the manner in which our profits are currently recognized, our overall taxes could increase, and our business, cash flow, financial condition, and results of operations could be materially adversely affected. It is possible that tax authorities may disagree with certain positions we have taken, and any adverse outcome of such a review or audit could have a negative effect on our financial position and operating results.

We are also subject to examination by the Internal Revenue Service ("IRS") and other tax authorities, including state revenue agencies and foreign governments. While we regularly assess the likelihood of favorable or unfavorable outcomes resulting from examinations by the IRS and other tax authorities to determine the adequacy of our provision for income taxes, there can be no assurance that the actual outcome resulting from these examinations will not materially adversely affect our financial condition and results of operations.

The evolving global tax landscape applicable to multinational businesses may have a material impact to our business, cash flow from operating activities, or financial results. Such developments, for example, may include certain United States’ proposals as well as the Organization for Economic Co-operation and Development’s, the European Commission’s and certain major jurisdictions’ heightened interest in taxation. Furthermore, governments’ responses to the economic impact of COVID-19 may lead to tax rule changes that could materially and adversely affect our cash flows and financial results.

Additionally, as a global enterprise, we cannot be certain of the tax outcome related to many transactions and calculations. Uncertainties arise as a consequence of positions taken regarding valuation of deferred tax assets, net operating loss carryforwards and tax credit carryforwards that maybe used in certain tax jurisdictions to offset future taxable income and reduce income taxes payable. Each quarter, we determine the probability that the deferred tax assets will be realized. This determination involves judgment and the use of significant estimates and assumptions, including historical operating results, expectations of future taxable income and tax planning strategies. Realization of net deferred tax assets ultimately depends on the existence of sufficient taxable income. If unfavorable changes in the financial outlook of our operations continue or increase, our financial position could be negatively impacted. On the basis of this evaluation, as of April 2, 2022, a valuation allowance against our U.S. federal and state deferred tax assets continues to be maintained for the year ended April 2, 2022.

16. Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes and our other debt instruments.

As a result of the Polycom Acquisition, we have a substantial amount of debt. As of April 2, 2022, we had $1,500.3 million of debt outstanding, which consisted of a $1,005.5 million term loan under our Credit Agreement and $494.7 million of outstanding senior notes, net of unamortized debt issuance costs.

On February 25, 2021, the company and Polycom entered into a purchase agreement (the “Purchase Agreement”) with Morgan Stanley & Co. LLC, as the representative of the several initial purchasers named therein (the “Initial Purchasers”), pursuant to which the Company agreed to sell, and subject to the terms and conditions set forth therein, the Initial

Table of Contents

Purchasers, jointly and severally, agreed to buy $500,000,000 aggregate principal amount of the Company’s 4.750% Senior Notes due 2029 (the “4.75% Senior Notes”). On March 4, 2021, the Company completed its private offering of $500 million aggregate principal amount of its 4.75% Senior Notes in accordance with Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The 4.75% Senior Notes were issued pursuant to an indenture (the “Indenture”), dated March 4, 2021, among the Company, the subsidiary guarantors party hereto from time to time and U.S. Bank National Association, as trustee. The Company used the proceeds from the offering of the 4.75% Senior Notes, along with cash on hand, to fund the redemption in full of the Company’s outstanding 5.50% Senior Notes due 2023 (the “5.50% Senior Notes”) and to pay related fees and expenses in May 2021.

Our ability to make scheduled payments or to refinance our obligations with respect to the notes and our other indebtedness under our Credit Agreement will depend on our financial and operating performance, which, in turn, is subject to prevailing economic and industry conditions and other factors, including the availability of financing in the banking and capital markets, beyond our control. If our cash flow and capital resources are insufficient to fund our debt service obligations and other commitments, then we could face substantial liquidity problems and may be forced to reduce or delay scheduled expansions and capital expenditures, sell material assets or operations, obtain additional capital, or restructure or refinance our indebtedness. We may be unable to effect any of these actions on a timely basis, on commercially reasonable terms or at all, or these actions may be insufficient to meet our capital requirements. In addition, any refinancing of our indebtedness could be at higher interest rates, particularly in the current environment of rising interest rates, and may require us to comply with more onerous covenants, which could further restrict our operations and impact directly our net income. If we cannot make scheduled payments on our indebtedness, we will be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable, and we could be forced into bankruptcy or liquidation.

Our current debt under the Credit Agreement has a floating interest rate that is based on variable and unpredictable U.S. and international economic risks and uncertainties and an increase in interest rates may negatively impact our financial results. We enter into interest rate hedging transactions that reduce, but do not eliminate, the impact of unfavorable changes in interest rates. There is no guarantee that our hedging efforts will be effective or, if effective in one period will continue to remain effective in future periods.

Our Credit Agreement utilizes London Interbank Offered Rate (LIBOR) to calculate the amount of accrued interest on any borrowings. Regulators in certain jurisdictions including the United Kingdom and the United States have announced the desire to phase out the use of LIBOR. The transition from LIBOR to a new replacement benchmark is uncertain at this time and the consequences of such developments cannot be entirely predicted but could result in an increase in the cost of our borrowings under our existing credit facility and any future borrowings.

In addition, the mandatory debt repayment schedule of the Credit Agreement may negatively impact our cash position, further reduce our financial flexibility, and cause concerns with analysts and investors. Furthermore, any changes by rating agencies to our credit rating in connection with such indebtedness may negatively impact the value and liquidity of our debt and equity securities.

Should any of the risks referenced above or related risks occur, our operations and financial results may be materially negatively impacted.

17. Our ability to process purchase orders and ship products in a timely manner depends on our IT systems and performance of the systems and processes of third parties such as our suppliers, manufacturers, customers or other partners, as well as the interfaces between our systems and the systems of such third parties.

Some of our business processes depend upon our IT systems, the systems and processes of third parties, and the interfaces of our systems with the systems of third parties. For example, our order entry system feeds information into the systems of our manufacturing systems, which enables us and our supply chain to build and ship products. If these systems fail or are interrupted, our processes may operate at a diminished level or not at all. This could negatively impact our ability to ship products or otherwise operate our business, and our financial results could be harmed. Any systems failure or interruptions during the transition may impair communications with our manufacturers and customers, and therefore, adversely affect our ability to build and ship our products. If our systems, the systems and processes of those third parties, or the interfaces between them experience delays or fail, our business processes and our ability to build and ship products could be impacted, and our financial results could be harmed.

18. We are regularly subject to a wide variety of litigation, including commercial and employment litigation, allegations of patent infringement, as well as claims related to alleged defects in the design and use of our products.

Table of Contents

a. We are regularly subject to a wide variety of litigation including claims, lawsuits, and other similar proceedings involving our business practices and products, including product liability claims, labor and employment claims, patent infringement claims, and commercial disputes.

The number and significance of these disputes and inquiries have increased as we have grown larger, our business has expanded in scope and geographic reach, and our products and services have increased in complexity. Such lawsuits are more specifically described in Note 7, Commitments and Contingencies , of the accompanying Notes to the Consolidated Financial Statements included within “ Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K. Frequently, the outcome and impact of any claims, lawsuits, and other similar proceedings cannot be predicted with certainty. Moreover, regardless of the outcome such proceedings can have an adverse impact on us because of legal costs, diversion of management resources, and other factors. Determining reserves for our pending litigation is a complex, fact-intensive process that is subject to judgment. It is possible that a resolution of one or more such proceedings could require us to make substantial payments to satisfy judgments, penalties or to settle claims or proceedings, any of which could harm our business. These proceedings could also result in reputational harm, sanctions, consent decrees, or orders preventing us from offering certain products, or services, or requiring a change in our business practices in costly ways. Any of these consequences could materially harm our business.

b.    Our intellectual property rights could be infringed on by others.

Our success depends, in part, on our ability to enforce our copyrights, patents, trademarks, trade dress, trade secrets, and other intellectual property, including our rights to certain domain names. We rely primarily on a combination of nondisclosure agreements and other contractual provisions as well as international patent, trademark, trade secret, and copyright laws to protect our intellectual rights. Effective protection and enforcement of our intellectual property rights may not be available in every country in which our products and media properties are distributed to customers. The process of acquiring intellectual property protection can be lengthy, expensive, and uncertain. Patents may not be granted in response to our applications, and any patents that are issued may be challenged, invalidated, or circumvented by others. If we are required to enforce our intellectual property rights through litigation, the costs and diversion of management's attention could be substantial. Furthermore, we may be counter-sued by an alleged infringer when we attempt to enforce our intellectual property rights, which may materially increase our costs, divert management attention, and result in injunctive or financial damages being awarded against us. In addition, existing patents, copyright registrations, trademarks, trade secrets and domain names may not provide competitive advantages or be adequate to safeguard and maintain our rights. If it is not feasible or possible to obtain, enforce, or protect our intellectual property rights, our business, financial condition, and results of operations could be negatively affected.

c.     Patents, copyrights, trademarks, and trade secrets are owned by third parties that may make claims or commence litigation based on allegations of infringement or other violations of intellectual property rights.

Intellectual property claims or allegations may relate to products that we develop or be directed at materials or components incorporated in our products that are provided by one or more suppliers. As we have grown, intellectual property rights allegations against us and our suppliers have increased. There has also been a general increasing trend of intellectual property infringement claims against corporations that make and sell products. Our products, technologies and the components and materials contained in our products may be subject to certain third-party intellectual property claims and, regardless of the merits of the claim, such claims are often time-consuming and expensive to litigate, settle, or otherwise resolve. Many of our agreements with our distributors and resellers require us to indemnify them for certain third-party intellectual property infringement claims. Discharging our indemnity obligations may involve time-consuming and expensive litigation and result in substantial settlements or damages awards, our products being enjoined, and the loss of a distribution channel or retail partner, any of which may have a negative impact on our operating results. To the extent claims against us or our suppliers are successful, we may have to pay substantial monetary damages or discontinue the manufacture and distribution of products that are found to be in violation of another party's rights. We also may have to obtain, or renew on less favorable terms, licenses to manufacture and distribute our products or materials or components included in those products, which may significantly increase our operating expenses.

19.    We are subject to other legal and compliance risks that could have a material impact on our business...

a. In foreign countries where we have operations, there are risks that our employees, contractors or agents could engage in business practices prohibited by U.S. laws and regulations applicable to us, such as the Foreign Corrupt Practices Act, or the laws and regulations of other countries, such as the UK Bribery Act.

Table of Contents

We maintain a global policy prohibiting such business practices and have in place a global anti-corruption compliance program designed to require compliance with, and uncover violations of, these laws and regulations. Nonetheless, we remain subject to risk that one or more of our employees, contractors or agents, including those located in or from countries where practices that may violate U.S. laws and regulations or the laws and regulations of other countries may be customary, will engage in business practices that are prohibited by our policies, circumvent our compliance programs and, by doing so, violate such laws and regulations. Any such violations, even if prohibited by our internal policies, could adversely affect our business or financial performance and our reputation.

b.    We must comply with various regulatory requirements, and changes in or new regulatory requirements that may adversely impact our gross margins, reduce our ability to generate revenues if we are unable to comply, or decrease demand for our products if the actual or perceived technical quality of our products are negatively impacted.

Our products must meet existing and new requirements set by regulatory authorities in each jurisdiction in which we sell them. For example, certain of our products must meet local phone system standards and certain of our wireless products must work within existing permitted radio frequency ranges.

As regulations and local laws change, new regulations are enacted, and competition increases, we may need to modify our products to address those changes, increasing the costs to design, manufacture, and sell our products, and thereby decreasing our margins or demand for our products if we attempt to pass along the costs. Regulations may also negatively affect our ability to procure or manufacture raw materials and components necessary for our products. Compliance with regulatory restrictions may impact the actual or perceived technical quality and capabilities of our products, reducing their marketability. In addition, if the products we supply to various jurisdictions fail to comply with the applicable local or regional regulations, if our customers or merchants transfer products into unauthorized jurisdictions or our products interfere with the proper operation of other devices, we or end users purchasing our products may be responsible for the damages that our products cause; thereby causing us to alter the performance of our products, pay substantial monetary damages or penalties, cause harm to our reputation, or cause other adverse consequences.

c.    We are subject to environmental laws and regulations that expose us to a number of risks and could result in significant liabilities and costs.

We are subject to various federal, state, local, and foreign environmental laws and regulations, including those governing the use, discharge, and disposal of hazardous substances in the ordinary course of our manufacturing processes or the recycling of all or a portion of the components of our products. It is possible that future environmental legislation may be enacted, or current environmental legislation may be interpreted in any given country in a manner that creates environmental liability with respect to our facilities, operations, or products. We may also be required to implement new or modify existing policies, processes and procedures to meet such environmental laws. Although our management systems are designed to maintain compliance, we cannot assure you that we have been or will be at all times in complete compliance with such laws and regulations. If we violate or fail to comply with any of them, a range of consequences could result, including fines, import/export restrictions, sales limitations, criminal and civil liabilities or other sanctions. To the extent any new or modified policies, processes or procedures are difficult, time-consuming or costly to implement. we may incur claims for environmental matters exceeding reserves or insurance for environmental liability, our operating results could be negatively impacted

20.    We are exposed to differences and frequent fluctuations in foreign currency exchange rates, which may adversely affect our revenues, gross profit, and profitability.

Fluctuations in foreign currency exchange rates impact our revenues and profitability because we report our financial statements in USD and purchase a majority of our component parts from our supply chain in USD, whereas a significant portion of our sales are transacted in other currencies, particularly the Euro and the GBP. If the USD strengthens further, it could further harm our financial condition and operating results in the future. Furthermore, fluctuations in foreign currency rates impact our global pricing strategy, which may result in our lowering or raising selling prices in one or more currencies to minimize disparities with USD prices and to respond to currency-driven competitive pricing actions. Should the dollar remain strong or strengthen further against foreign currencies, principally the Euro and the GBP, we may be compelled to raise prices for customers in the affected regions. Price increases may be unacceptable to our customers who could choose to replace our products with less costly alternatives in which case our sales and market share could be adversely impacted. If we reduce prices to stay competitive in the affected regions, our profitability may be harmed.

Large or frequent fluctuations in foreign currency rates, coupled with the ease of identifying global price differences for our products via the Internet, increases pricing pressure and allows unauthorized third-party “grey market” resellers to take

Table of Contents

advantage of price disparities, thereby undermining our premium brand image, established sales channels, and support and operations infrastructure. We also have significant manufacturing operations in Mexico and fluctuations in the Mexican Peso exchange rate can impact our gross profit and profitability. Additionally, the majority of our suppliers are located internationally, principally in Asia, and volatile or sustained increases or decreases in exchange rates between the U.S. Dollar and Asian currencies may result in increased costs or reductions in the number of suppliers qualified to meet our standards.

Although we hedge currency exchange rate exposures we deem material, changes in exchange rates may nonetheless still have a negative impact on our financial results. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, decisions and actions of central banks and political developments.

We hedge a portion of our Euro and GBP forecasted revenue exposures for the future, typically over 12-month periods. In addition, we hedge a portion of our Mexican Peso forecasted cost of revenues and maintain foreign currency forward contracts denominated in Euros and GBP that hedge against a portion of our foreign-currency denominated assets and liabilities. Our foreign currency hedging contracts reduce, but do not eliminate, the impact of currency exchange rate movements, particularly if the fluctuations are significant or sustained, and we do not execute hedging contracts in all currencies in which we conduct business. There is no assurance that our hedging strategies will be effective. Additionally, even if our hedging techniques are successful in the periods during which the rates are hedged, our future revenues, gross profit, and profitability may be negatively affected both at current rates and by adverse fluctuations in currencies against the USD. See Item 7A for further quantitative information regarding potential foreign currency fluctuations.

21.    The consummation of the Merger is contingent upon the satisfaction of a number of conditions, including stockholder and regulatory approvals, that may be outside of our or HP’s control and that we and HP may be unable to satisfy or obtain or that may delay the consummation of the Merger or result in the imposition of conditions that could cause the parties to abandon the Merger.

Consummation of the Merger is contingent upon the satisfaction of a number of conditions, some of which are beyond our and HP’s control, including, among others:

• the adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding shares of our common stock;

• the expiration or termination of the waiting period applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, without the imposition of a burdensome effect (as defined in the Merger Agreement); and

• the obtaining or making of all consents, approvals and filings required under the competition laws of China, Colombia, the European Union and Mexico and the foreign direct investment law of France, in each case without the imposition of burdensome effect.

The waiting period applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired at 11:59 pm New York City time on May 9, 2022.

Each party’s obligation to complete the Merger is also subject to the satisfaction or waiver of certain additional customary conditions, including:

• subject to certain exceptions, the accuracy of the representations and warranties of the other party; and

• performance in all material respects by the other party of its obligations under the Merger Agreement.

Further, HP's obligation to complete the Merger is conditioned upon the absence of any "material adverse effect" (as defined in the Merger Agreement) with respect to Poly.

These conditions to the closing of the Merger may not be fulfilled in a timely manner or at all, and, accordingly, the Merger may not be completed. In addition, each of HP and Poly may terminate the Merger Agreement under certain specified circumstances, including but not limited to, (i) if the Merger is not consummated by 11:59 p.m., Pacific time, on December 27, 2022 (as such date may be extended in accordance with the terms of the Merger Agreement), (ii) if any legal restraint that has the effect of preventing, prohibiting or making illegal the consummation of the Merger Agreement has become final and non-appealable or (iii) if, upon a vote at a duly held meeting of our stockholders to obtain the requisite approval of our stockholders, our stockholders fail to adopt the Merger Agreement . In addition, HP may terminate the Merger

Table of Contents

Agreement in certain circumstances, including if our Board changes its recommendation to our stockholders to vote in favor of the adoption of the Merger Agreement or another adverse recommendation change (as defined in the Merger Agreement) occurs, or if we or certain others (as specified in the Merger Agreement) breach in any material respect the no-shop provisions of the Merger Agreement. If the Merger Agreement is terminated, we may be required to pay to HP a termination fee of up to $66.0 million under certain circumstances.

We and HP are and may be subject to additional lawsuits challenging the Merger, and adverse rulings in these lawsuits may delay or prevent the Merger from being completed or require us or HP to incur significant costs to defend or settle these lawsuits. Any delay in completing the Merger could cause us not to realize, or to be delayed in realizing, some or all of the benefits that we expect to achieve if the Merger is successfully completed within its expected time frame.

Even if successfully completed, there are certain risks to our stockholders from the Merger, including:

• the amount of cash to be paid under the Merger Agreement is fixed and will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or operating results or in the event of any change in the market price of, analyst estimates of, or projections relating to, our common stock;

• receipt of the all-cash per share merger consideration under the Merger Agreement is taxable to stockholders that are treated as U.S. holders for U.S. federal income tax purposes; and

• our stockholders will forego the opportunity to realize the potential long-term value of the successful execution of our current strategy as an independent company.

a. While the Merger is pending, we are subject to business uncertainties and contractual restrictions that could harm our financial condition, operating results, and business.

During the period prior to the closing of the Merger and pursuant to the terms of the Merger Agreement, our business is subject to certain inherent risks and contractual restrictions that could harm our financial condition, operating results, and business, including:

• Subject to certain exceptions, as detailed in the Merger Agreement, the possibility of disruption to our business and operations resulting from the announcement and pendency of the Merger, including diversion of management's attention and resources;

• Subject to certain exceptions, as detailed in the Merger Agreement, the inability to pursue alternative business opportunities or make changes to our business pending the completion of the Merger and other restrictions on our ability to conduct our business;

• Subject to certain exceptions, as detailed in the Merger Agreement, our inability to freely issue securities, incur indebtedness, declare or authorize any dividend or distribution, or make certain material capital expenditures without HP’s approval;

• Subject to certain exceptions, as detailed in the Merger Agreement, our inability to solicit other acquisition proposals during the pendency of the Merger;

• the amount of the costs, fees, expenses and charges related to the Merger Agreement and the Merger, which may materially and adversely affect our financial condition; and

• other developments beyond our control, including, but not limited to, changes in domestic or global economic conditions that may affect the timing or success of the Merger.

If any of these effects were to occur, it could materially and adversely impact our business, cash flow, results of operations or financial condition, as well as the market price of our common stock and our perceived value, regardless of whether the Merger is completed.

b. Uncertainty about the Merger may adversely affect relationships with our customers, suppliers and employees, whether or not the Merger is completed.

In response to the announcement of the Merger, our existing or prospective clients and business partners may:

• delay, defer, or cease purchasing our products, or additional seats or features from, or providing products or services to us, or purchase products and services from other providers;

Table of Contents

• terminate their relationships with us;

• delay or defer other decisions concerning us; or

• seek to change the terms on which they do business with us.

Any such delays or changes to terms could materially harm our business.

Losses of customers, suppliers and employees or other important strategic relationships could have a material adverse effect on our business, results of operations, and financial condition. Such adverse effects could also be exacerbated by a delay in the completion of the Merger for any reason, including delays associated with obtaining requisite regulatory approvals or approvals of our stockholders.

c. As a result of the Merger, our current and prospective employees could experience uncertainty about their future with us. As a result, key employees may depart because of issues relating to such uncertainty or a desire not to remain with HP following the completion of the Merger.

As a result of the Merger, our current and prospective employees could experience uncertainty about their future with us or decide that they do not want to continue their employment. As a result, key employees may depart because of issues relating to such uncertainty or a desire not to remain with HP following the completion of the Merger. Losses of officers or employees could materially harm our business, results of operations, and financial condition. Such adverse effects could also be exacerbated by a delay in the completion of the Merger for any reason, including delays associated with obtaining requisite regulatory approvals or the requisite approval of our stockholders. We may also experience challenges in hiring new employees during the pendency of the Merger, or if the Merger Agreement is terminated, which could harm our ability to grow our business, execute on our business plans or enhance our operations. If the Merger is consummated, we may be less attractive to current and prospective employees, which could harm our business and prospects.

d. Litigation has arisen, and more could arise, in connection with the Merger, which could be costly, prevent consummation of the Merger, divert management’s attention, and otherwise materially harm our business.

As of the date of this Annual Report on Form 10-K, five complaints have been filed by purported Poly stockholders, each of which seeks to enjoin the Merger and other relief. The complaints assert claims against certain defendants under Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder for allegedly false and misleading statements in the preliminary proxy statement on Scheduled 14A filed by us with the SEC on May 2, 2022 (the "Preliminary Proxy Statement") and/or the Definitive Proxy Statement issued in connection with the Merger and against certain defendants under Section 20(a) of the Exchange Act for alleged “control person” liability with respect to such allegedly false and misleading statements. Poly believes the allegations in the complaints are without merit. Refer to Note 7, Commitments and Contingencies , of the accompanying Notes to the Consolidated Financial Statements included within “ Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K.

Regardless of the outcome of any litigation related to the Merger, such litigation may be time-consuming and expensive and may distract our management from running the day-to-day operations of our business. The litigation costs and diversion of management’s attention and resources to address the claims and potential counterclaims in any litigation related to the Merger may materially adversely affect our business, results of operations, prospects, and financial condition. If the Merger is not consummated for any reason, litigation could be filed in connection with the failure to consummate the Merger. Any litigation related to the Merger may result in negative publicity or an unfavorable impression of us, which could adversely affect the price of our common stock, impair our ability to recruit or retain employees, damage our relationships with our customers, suppliers, and other business partners, or otherwise materially harm our operations and financial performance.

e. The ability to complete the Merger is subject to the receipt of consents and approvals from government entities, which may impose conditions that could have an adverse effect on us or could cause either party to abandon the Merger.

Completion of the Merger is conditioned upon, among other things, the expiration or termination of the waiting period applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, without the imposition of a burdensome effect (as defined in the Merger Agreement), and the obtaining or making of all consents, approvals and filings required under the competition laws of China, Colombia, the European Union and Mexico and the foreign direct investment law of France, in each case without the imposition of a burdensome effect. The relevant regulatory agencies may condition their approval of the Merger on HP’s or our agreement to various requirements,

Table of Contents

limitations or costs, or require divestitures or place restrictions on the conduct of our business following the completion of the Merger. We cannot provide any assurance that we or HP will obtain the necessary approvals. In addition, these requirements, limitations, costs, divestitures or restrictions may result in the delay or abandonment of the Merger.

Table of Contents

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help you understand our results of operations and financial condition. It is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and related notes thereto included within “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

A discussion regarding our financial condition and results of operations for Fiscal Year 2022 compared to Fiscal Year 2021 is presented below under "Results of Operations." Discussions regarding our financial condition and results of operations for Fiscal Year 2021 compared to Fiscal Year 2020 have been omitted from this Annual Report on Form 10-K, but can be found in our Annual Report on Fiscal Year 2021 Form 10-K, filed with the SEC on May 18, 2021, which is available free of charge on the SEC's website at sec.gov and on our website at www.poly.com.

This discussion contains forward-looking statements. Please see the sections entitled "Certain Forward-Looking Information" and "Risk Factors" in Part I of this Annual Report on Form 10-K for discussions of the uncertainties, risks, and assumptions associated with these statements.

Our fiscal year ends on the Saturday closest to the last day of March. The years ended April 2, 2022 ("Fiscal Year 2022"), April 3, 2021 ("Fiscal Year 2021"), and March 28, 2020 ("Fiscal Year 2020") had 52, 53, and 52 weeks, respectfully.

OVERVIEW

Poly is a leading global communications technology company that designs, manufactures, and markets integrated communications and collaboration solutions for professionals. Our major product categories are Headsets, Video, Voice, and Services.

On March 25, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with HP Inc. (“HP”) and Prism Subsidiary Corp. (“Merger Sub”), a wholly-owned subsidiary of HP, providing for Poly's acquisition in an all-cash transaction for $40 per share by way of a merger of Merger Sub with and into Poly (the “Merger”), with Poly continuing as a wholly-owned subsidiary of HP. The Merger is expected to occur, subject to Poly stockholder approval, required regulatory clearances and the satisfaction of other customary closing conditions, in calendar year 2022.

Impact of the Current Environment, Supply Chain Disruptions, and COVID-19 on Our Business

We have experienced and continue to monitor limited supply and longer lead times for certain key components, such as semiconductor chips, necessary to complete production and meet customer demand, including fulfillment of our backlog. We do not manufacture these component parts and currently purchase certain parts, including semiconductor chips and sub-assemblies that require semiconductor chips, from single or limited sources. Additionally, constrained supply has resulted in price inflation for certain components, including semiconductor chips, increased spot market prices and purchases, increased transportation costs, inefficiencies at our owned manufacturing facility in Tijuana, Mexico, and inability to fulfill backlog for certain products timely. We continue to monitor our supply chain and are taking action against limited supply and increasing lead times, including increased spot market purchases, outreach to critical suppliers, and entering into contractual obligations that provide for increased costs, and multi-year commitments, to secure supply. For certain of our products, our additional supply increases our exposure to risks associated with significant and/or abrupt changes in product demand, which could result in potential excess of obsolete inventory. Additionally, to the extent we pass through increased costs to our customers, this may result in reduced demand. These factors, among others, are affecting and are expected to continue to affect total net revenue and gross margin rates.

In addition, COVID-19 has continued to spread globally and continues to add uncertainty and influence global economic activity, the global supply chain, and financial markets. The impact of the pandemic on our operations has varied by local conditions, government mandates, and business limitations, including travel bans, remote work, and other restrictions.

The COVID-19 pandemic led to a massive increase in remote work. As a result, during Fiscal Year 2020 we experienced elevated demand for certain enterprise Headsets and Video devices and a decline in demand for our Voice products and associated Services, as companies shifted from in-office to work-from-home arrangements for many of their office workers. Beginning in the fourth quarter of Fiscal Year 2021 and continuing throughout Fiscal Year 2022, we experienced elevated

Table of Contents

demand for certain Video and Voice devices as companies began to shift from work-from-home arrangements to hybrid work models.

However, the impact of COVID-19 is fluid and uncertain, and it has caused, and may continue to cause, various negative effects as we continue to experience constraints in our supply chain, specifically the sourcing of certain components and raw materials, and increased logistics costs to meet customer demand, which, in turn, adversely impacts our gross margins. As a result, the impact of COVID-19 to date has had mixed effects on our results of operations.

The full extent and duration of the impact of the COVID-19 pandemic on our business continues to be uncertain and difficult to predict and will depend on many factors outside of our control, including the extent and duration of the pandemic, mutations, and variants of the virus, the development and availability of effective treatments, including the availability of vaccines for our global workforce, mandates of protective public safety measures, and the impact of the pandemic on the global economy, global supply chains, and demand for our products. It is not possible at this time to foresee whether or when the outbreak of COVID-19 or other events beyond our control will be effectively contained, nor can we estimate the entirety of the impact that COVID-19 or such other pandemics or natural or man-made disaster will have on the global economy, our business, customers, suppliers, or other business partners. As such, impacts from such events on Poly are highly uncertain and we will continue to assess the impact from such events on our consolidated financial statements.

In responding to this pandemic, employee safety continues to be a critical concern for Poly and we have taken measures to protect our employees globally by adherence to public safety and shelter in place directives, physical distancing protocols within offices and manufacturing facilities, providing personal protective equipment, including face masks and hand sanitizers, conducting routine sanitation of facilities, requiring health monitoring before entry into Poly facilities and restricting the number of visitors to our sites. The safety protocols implemented globally meet or exceed current regulations; however, we continue to monitor employees’ safety and evolving regulatory requirements. Although our manufacturing facility remains open and certain office employees may utilize our offices when necessary, the majority of all non-factory employees continue to work from home, using headsets and other Poly-issued equipment. We provided COVID-19 vaccines to our employees and their immediate families, as well as other workers, at our manufacturing facility on a voluntary basis free of charge.

Fiscal Year 2022 Highlights

Total net revenues for Fiscal Year 2022 were $1,681.1 million, a decrease of $46.5 million or 2.7%, compared to Fiscal Year 2021, primarily driven by decreased sales in our Headsets and Services product categories, partially offset by increased sales in our Video and Voice product categories.

Product gross margin for Fiscal Year 2022 decreased from 41.3% in the prior year to 37.0%, primarily driven by increased component costs, unfavorable product mix, and increased transportation costs.

In May 2021, we redeemed the outstanding principal and accrued interest on the 5.50% Senior Notes of $493.9 million. In June 2021, the Company entered into a three-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $680 million and matures on July 31, 2024. Refer to further discussion in Note 8, Debt , and Note 13, Derivatives , of the accompanying notes to the consolidated financial statements included within “Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K.

During Fiscal Year 2022, we introduced our partnership with Appspace, a leading provider of workspace experience software, to deliver dynamic digital signage on Poly video OS devices to enhance the Return to Office experience for employees and visitors. The digital signage was available on Poly Studio X Series (including Poly Studio X30, X50, X70) and G7500 video conference devices with an Appspace subscription. We also announced the updated Poly Room Solutions for Microsoft Teams Rooms on Windows. The new lineup of Poly Studio Kits offers premium audio and video for focus, small, medium, and large rooms, and feature Poly's Director AI technology. We additionally introduced a number of next generation Voyager headsets. These products and offerings were available during the Fiscal Year 2022 and did not have a material impact on total net revenues.

Table of Contents

RESULTS OF OPERATIONS

The Company’s reportable segments are Products and Services. Our Products reportable segment includes the Headsets, Voice, and Video product lines. Our Services reportable segment includes maintenance support on hardware devices, as well as professional, managed, and cloud services and solutions.

Total Net Revenues

The following table sets forth total net revenues by reportable segment for Fiscal Years 2022, 2021, and 2020:

(in thousands, except percentages)

April 2, 2022

Change

April 3, 2021

Change

March 28, 2020

Net revenues

Products

Services

Total net revenues

Products

Total product net revenues decreased in Fiscal Year 2022 compared to the prior fiscal year primarily due to the following:

• Headsets product category net revenues decreased primarily due to constrained supply of certain components, such as semiconductor chips.

• Partially offset by increased Video and Voice product category net revenues driven by elevated demand for certain devices as companies began to shift from work-from-home arrangements to hybrid work models.

Services

Total services net revenues decreased in Fiscal Year 2022 compared to the prior fiscal year primarily due to the continued Video product mix shift from legacy Platform and Telepresence to Studio video bars, which are less complex, easier to install and operate, and carry optional service contracts.

Geographic Region

The following table sets forth total net revenues by geographic region for Fiscal Years 2022, 2021, and 2020:

(in thousands, except percentages)

April 2, 2022

Change

April 3, 2021

Change

March 28, 2020

United States

Europe, Middle East, and Africa

Asia Pacific

Americas, excluding U.S.

Total international net revenues

Total net revenues

United States

U.S. total net revenues increased in Fiscal Year 2022 as compared to the prior fiscal year primarily due to increased net sales in the Video and Voice product categories, partially offset by decreased net sales in the Services category. U.S. Headsets total net revenues were materially unchanged in Fiscal Year 2022 compared to the prior fiscal year.

International

Table of Contents

International total net revenues decreased in Fiscal Year 2022 as compared to the prior fiscal year primarily due to decreased net sales in the Headsets and Services product categories, partially offset by increased net sales in the Video product category. International Voice total net revenues were materially unchanged in Fiscal Year 2022 compared to the prior fiscal year.

Fiscal Year 2022 total net revenues were also favorably impacted by fluctuations in exchange rates which resulted in an increase of approximately $11.9 million, net of the effects of hedging.

Cost of Revenues and Gross Profit

Cost of revenues consists primarily of direct and contract manufacturing costs, amortization of acquired technology, freight, warranty, charges for excess and obsolete inventory, depreciation, duties, royalties, and overhead expenses.

(in thousands, except percentages)

April 2, 2022

Change

April 3, 2021

Change

March 28, 2020

Products

Net revenues

Cost of revenues

Gross profit

Gross profit %

Services

Net revenues

Cost of revenues

Gross profit

Gross profit %

Total

Net revenues

Cost of revenues

Gross profit

Gross profit %

Products

Gross profit as a percentage of total product net revenues decreased in Fiscal Year 2022 as compared to the prior fiscal year, primarily due to increased component costs, unfavorable product mix, and increased transportation costs. The increase in component costs was primarily driven by increased spot market purchases of certain key components, such as semiconductor chips, due to global supply shortages. Transportation costs increased as a result of high global demand and limited capacity of air freight carriers and increased air freight usage to mitigate longer component lead times to meet our commitments to customers.

Services

Gross profit as a percentage of total services net revenues was materially unchanged in Fiscal Year 2022 as compared to the prior fiscal year.

Table of Contents

Operating Expenses

Operating expenses for Fiscal Years 2022, 2021, and 2020 were as follows:

(in thousands, except percentages)

April 2, 2022

Change

April 3, 2021

Change

March 28, 2020

Research, development and engineering

% of total net revenues

Selling, general, and administrative

% of total net revenues

Impairment of goodwill and long-lived assets

% of total net revenues

Loss (gain), net from litigation settlements

% of total net revenues

Restructuring and other related charges

% of total net revenues

Total operating expenses

% of total net revenues

Research, Development, and Engineering

Research, development, and engineering costs are expensed as incurred and consist primarily of compensation costs, outside services, expensed materials, and overhead expenses.

The decrease in research, development, and engineering expenses in Fiscal Year 2022 compared to the prior fiscal year was primarily due t o lower compensation expense driven by reduction in headcount, cost control efforts, and lower incentive compensation.

Selling, General, and Administrative

Selling, general, and administrative costs are expensed as incurred and consist primarily of compensation costs, marketing costs, travel expenses, professional service fees, and overhead expenses.

The increase in selling, general, and administrative expenses in Fiscal Year 2022 compared to the prior fiscal year was primarily due to increased marketing activity and travel expenses, partially offset by lower incentive compensation.

Loss (gain), net from Litigation Settlements

During Fiscal Year 2021, we recorded litigation charges for settlements that occurred during the period with no similar activity recorded during Fiscal Year 2022. Refer to Note 7, Commitments and Contingencies , of the accompanying Notes to the Consolidated Financial Statements included within “Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K.

Restructuring and Other Related Charges

During Fiscal Year 2022 and 2021, we recorded restructuring and other related charges to further reduce expenses and optimize our cost structure. These actions consisted of headcount reductions and office closures. Refer to Note 9, Restructuring and Other Related Charges, of the accompanying notes to the consolidated financial statements included within “Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K .

Table of Contents

Interest Expense

(in thousands, except percentages)

April 2, 2022

Change

April 3, 2021

Change

March 28, 2020

Interest expense

% of total net revenues

The decrease in interest expense in Fiscal Year 2022 compared to the prior fiscal year was primarily due to lower interest expense related to the 2023 Senior Notes and lower outstanding principal balance on the term loan facility, partially offset by the amortization of the remaining debt issuance costs related to the 2023 Senior Notes, which were redeemed during the first quarter of Fiscal Year 2022, and interest expense related to the 2029 Senior Notes, which were issued in the fourth quarter of Fiscal Year 2021. Refer to Note 8, Debt , of the accompanying notes to the consolidated financial statements included within “Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K.

Other Non-Operating Expense (Income), Net

(in thousands, except percentages)

April 2, 2022

Change

April 3, 2021

Change

March 28, 2020

Other non-operating expense (income), net

% of total net revenues

During Fiscal Year 2022, other non-operating expense (income), net increase primarily due to lower unrealized gains on the deferred compensation asset portfolio and net foreign currency losses during the period compared to the prior year .

Income Tax Benefit

(in thousands, except percentages)

April 2, 2022

Change

April 3, 2021

Change

March 28, 2020

Loss before income taxes

Income tax benefit

Net income (loss)

Effective tax rate

The Company and its subsidiaries are subject to taxation in the U.S. and in various foreign and state jurisdictions.

In September 2021, we transferred certain non-Americas intellectual property (“IP”) rights between our wholly-owned subsidiaries (“IP transfer”) to align with our evolving business operations, resulting in the derecognition of a deferred tax asset (“DTA”) of $91.1 million and the recognition of a new DTA of $204.5 million, which represents the book and tax basis difference in the IP and was based on the fair value of the IP, in the respective subsidiaries. This results in a net discrete deferred tax benefit of $113.4 million. The impact of the IP transfer to net cash flows on the consolidated statements of cash flows during Fiscal Year 2022 was not material.

Management has concluded that an impairment for local statutory and tax reporting to the aforementioned IP is likely however any impairment loss would be deductible for local tax purposes. As such, a DTA related to net operating loss carryforward of $48.0 million was recognized based on the expected impairment which was offset by a corresponding decrease in the DTA related to the intangible asset by the same amount as of April 2, 2022. Because the IP intangible asset is the result of an intercompany transfer, there is no intangible asset recognized in the consolidated balance sheets. Accordingly, the aforementioned IP impairment hast no net impact our consolidated statements of operations, balance sheet, or cash flows.

Valuation allowances are established when necessary to reduce DTA's to the amounts that are more-likely-than-not expected to be realized. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing DTA's. Valuation allowances are established when necessary to reduce DTA's to the amounts that are more-likely-than-not to be realized. On the basis of this evaluation, as of April 2, 2022, a valuation allowance against our U.S. federal and state DTA's continues to be maintained.

Table of Contents

As of April 2, 2022, we had approximately $215.0 million in non-U.S. net DTA's after valuation allowance. A significant portion of our DTA's relate to internal intellectual property restructuring between wholly owned subsidiaries and net operating losses. At this time, based on evidence currently available, we consider it more-likely-than-not that we will have sufficient taxable income in the future that will allow us to realize our DTA's.

The amount of the DTA's considered realizable, however, could be adjusted if estimates of future taxable income increase or decrease, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence, such as our future projections.

Our effective tax rate for Fiscal Years 2022, 2021, and 2020 differs from the statutory rate due to the impact of foreign operations taxed at different statutory rates, transfer of certain non-Americas IP, the goodwill impairment charge, income tax credits, state taxes, and other factors. Our future tax rate could be impacted by a shift in the mix of domestic and foreign income, tax treaties with foreign jurisdictions, changes in tax laws in the U.S. or internationally, or a change in estimate of future taxable income, which could result in a valuation allowance being required.

Table of Contents

FINANCIAL CONDITION

Liquidity and Capital Resources

The following tables present selected financial information and statistics as of April 2, 2022 and April 3, 2021 and for Fiscal Year 2022 and Fiscal Year 2021 (in thousands):

(in thousands)

April 2, 2022

April 3, 2021

Cash and cash equivalents and short-term investments

Property, plant, and equipment, net

Current portion of long-term debt

Long-term debt, net of issuance costs

Working capital

Fiscal Year Ended

April 2, 2022

April 3, 2021

Cash (used in) provided by operating activities

Cash used in investing activities

Cash (used in) provided by financing activities

Our cash and cash equivalents as of April 2, 2022 consist of bank deposits and money market funds with third-party financial institutions. As of April 2, 2022, of our $183.7 million of cash and cash equivalents and short-term investments, $94.4 million was held domestically, while $89.4 million was held by foreign subsidiaries, and approximately 68% was based in USD-denominated instruments. As of April 2, 2022, our short-term investments were composed of mutual funds . An additional source of liquidity is $97.5 million of availability from our revolving credit facility, net of outstanding letters of credit.

Historically, we use cash provided by operating activities as our primary source of liquidity. We expect that cash provided by operating activities will fluctuate in future periods as a result of a number of factors, including fluctuations in our revenues, the timing of compensation-related payments, such as our annual bonus/variable compensation plan, interest payments on our long-term debt, product shipments, accounts receivable collections, inventory and supply chain management, and the timing and amount of tax and other payments.

During Fiscal Year 2022, cash used in operating activities of $(7.8) million was a result of $(121.6) million of cash used in net working capital, partially offset by $17.9 million of net income and $96.0 million in net non-cash charges. Cash used in investing activities of $(33.8) million consisted primarily of capital expenditures of $(29.7) million and other investing activities of $(6.0) million. Cash used in financing activities of $(482.0) million consisted primarily of $(480.7) million of repayments of long-term debt and $(13.1) million of employees' tax withheld and paid for restricted stock and restricted stock units, partially offset by $11.8 million of proceeds from stock-based compensation plans.

During Fiscal Year 2021, cash provided by operating activities of $145.2 million was a result of $(57.3) million of net loss, non-cash adjustments to net loss of $226.0 million and a decrease in the net change in operating assets and liabilities of $(23.5) million. Cash used in investing activities of $(18.9) million during Fiscal Year 2021 consisted primarily of capital expenditures of $(22.7) million, partially offset by proceeds from sale of investments of $2.5 million and proceeds from sale of property, plant, and equipment of $1.9 million. Cash provided by financing activities of $353.3 million during Fiscal Year 2021 consisted primarily of proceeds from debt issuance, net of issuance costs of $493.9 million and $12.3 million of proceeds from issuances under stock-based compensation plans. This was partially offset by $(147.0) million repayments of long-term debt and $(5.9) million for employees' tax withheld and paid for restricted stock and restricted stock units.

Table of Contents

Capital Expenditures

We anticipate our current cash and cash flows from operating activities will be sufficient to fund our capital expenditures in Fiscal Year 2023, relating primarily to investments in our manufacturing capabilities, including tooling for new products, new IT investments, and facilities upgrades. We will continue to evaluate new business opportunities and new markets. As a result, our future growth within the existing business or new opportunities and markets may dictate the need for additional facilities and capital expenditures to support that growth.

Debt

In July 2018, in connection with the Polycom acquisition, the Company entered into a Credit Agreement with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto and borrowed the full amount available under the term loan facility of $1.245 billion, net of approximately $30 million of discounts and issuance costs. During Fiscal Year 2022, we did not prepay any of our outstanding principal. As of April 2, 2022, we had $1.0 billion of principal outstanding.

In December 2021, the Company entered into an Amendment to the Credit Agreement in order to relax certain financial covenants on the revolving line of credit. The financial covenants under the Credit Agreement are for the benefit of the revolving credit lenders only and do not apply to any other debt of the Company. As of April 2, 2022, the Company has four outstanding letters of credit on the revolving credit facility for a total of $2.5 million and had $97.5 million available under the revolving credit facility. As of April 2, 2022, the Company was in compliance with the financial covenants.

In July 2018, the Company entered into a 4-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $831 million and matures on July 31, 2022. In June 2021, the Company entered into a three-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $680 million and matures on July 31, 2024. During Fiscal Year 2022, the Company reclassified into interest expense $9.5 million and recorded a $24.2 million unrealized gain on its interest rate swaps derivatives designated as a cash flow hedge.

In March 2021, the Company issued $500.0 million aggregate principal amount of 4.75% Senior Notes. The 4.75% Senior Notes mature on March 1, 2029, and bear interest at a rate of 4.75% per annum, payable semi-annually on March 1 and September 1 of each year. A portion of the proceeds from the 4.75% Senior Notes was used to redeem the outstanding principal and accrued interest on the 5.50% Senior Notes of $493.9 million in May 2021. As of April 2, 2022, $500 million of principal was outstanding.

Our ability to make scheduled payments or to refinance our obligations with respect to the Senior Notes and our other indebtedness under our Credit Agreement will depend on our financial and operating performance, which, in turn, is subject to prevailing economic and industry conditions and other factors, including the availability of financing in the banking and capital markets, beyond our control. In addition, any refinancing of our indebtedness may be at higher interest rates, particularly in the current environment of rising interest rates, and may require us to comply with more onerous covenants, which could further restrict our operations.

We may at any time and from time to time, depending on market conditions and prices, continue to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Under the terms of the Merger Agreement, from the date of the Merger Agreement to the termination or consummation of the Merger, we are restricted in our ability to drawdown or incur additional indebtedness, under certain conditions, without the prior written consent of HP. See further discussion of our business risks associated with the Merger under the risk factor titled “ While the Merger is pending, we are subject to business uncertainties and contractual restrictions that could harm our financial condition, operating results, and business ” within “Item 1A. Risk Factors ” in this Annual Report on Form 10-K.

Table of Contents

In addition, our liquidity, capital resources, and results of operations in any period could be affected by repurchases of our common stock, the payment in the future of cash dividends if the Board determines to reinstate the dividend program, the exercise of outstanding stock options, restricted stock grants under stock plans, and the issuance of common stock under the Employee Stock Purchase Program ("ESPP"). The Acquisition of Polycom affected our liquidity and leverage ratios, and we are reducing our debt leverage ratios by prioritizing the repayment of the debt obtained to finance such Acquisition. We receive cash from the exercise of outstanding stock options under our stock plan and the issuance of shares under our ESPP. However, the resulting increase in the number of outstanding shares from these equity grants and issuances could affect our earnings per share. We cannot predict the timing or amount of proceeds from the sale or exercise of these securities or whether they will be exercised, forfeited, canceled, or will expire.

For further information regarding our debt issuances and related hedging activity refer to Note 8, Debt, and Note 13, Derivatives , of the accompanying notes to the consolidated financial statements included within “Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K.

Dividends

The Company did not declare or pay cash dividends during Fiscal Years 2022 or 2021.

We believe that our current cash and cash equivalents, short-term investments, cash provided by operations, and availability of additional funds under the Credit Agreement, as amended from time to time, will be sufficient to fund our operations for one year from the issuance of these consolidated financial statements; however, any projections of future financial needs and sources of working capital are subject to uncertainty, particularly in light of the uncertainty resulting from the impact of COVID-19 on our financial results.  Readers are cautioned to review the risks, uncertainties, and assumptions set forth in this Annual Report on Form 10-K, including the sections entitled “Part I. Certain Forward-Looking Information ” and “Part I. Item 1A. Risk Factors ” for factors that could affect our estimates for future financial needs and sources of working capital.

Contractual Obligations

The following table summarizes our future contractual obligations as of April 2, 2022 and the effect that such obligations are expected to have on our liquidity and cash flows in future periods:

Payments Due by Period

(in thousands)

Total

Less than 1 year

1-3 years

4-5 years

More than 5 years

Operating leases

Unconditional purchase obligations

Long-term debt (1)

Toll charge

Total contractual obligations

(1) Includes future interest on outstanding debt.

Operating Leases

We lease certain facilities under operating leases expiring through the year ended April 3, 2027. Certain of these leases provide for renewal options for periods ranging from one to five years and in the normal course of business. We may exercise the renewal options. In addition to the net minimum lease payments noted above, we are contractually obligated to pay certain operating expenses during the term of the lease such as maintenance, taxes and insurance.

Unconditional Purchase Obligations

We use several contract manufacturers to manufacture raw materials, components, and subassemblies for our products through our supply and demand information that can cover periods up to 78 weeks. The contract manufacturers use this information to acquire components and build products. We also obtain individual components for our products from a wide variety of individual suppliers using a combination of purchase orders, supplier contracts, including annual minimum purchase obligations, and open orders based on projected demand information.

Table of Contents

A substantial portion of the raw materials, components, and subassemblies used in our products are provided by our suppliers on a consignment basis. These consigned inventories are not recorded on our consolidated balance sheets until we take title to the raw materials, components, and subassemblies, which occurs when they are consumed in the production process. Prior to consumption in the production process, our suppliers bear the risk of loss and retain title to the consigned inventory. The agreements allow us to return parts in excess of maximum order quantities to the suppliers at the supplier’s expense. Returns for other reasons are negotiated with the suppliers on a case-by-case basis and to date have been immaterial. If our suppliers were to discontinue financing consigned inventory, it would require us to make cash outlays and we could incur expenses which, if material, could negatively affect our business and financial results.

As of April 2, 2022, our unconditional purchase obligations were primarily comprised of third-party manufacturing and component purchase commitments, including $51.8 million of consigned inventories. We expect to consume unconditional purchase obligations in the normal course of business, net of an immaterial purchase commitments reserve. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs in partnering with our suppliers given the current environment.

Toll Charge

As of April 2, 2022, our obligation associated with the deemed repatriation toll charge is $53.7 million, which we are paying over an eight year period in installments. For additional details regarding the Tax Cuts and Jobs Act and the toll charge, refer to Note 15, Income Taxes , of the accompanying notes to the consolidated financial statements included within “Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K .

Unrecognized Tax Benefits

As of April 2, 2022, short-term and long-te rm income taxes payable reported on our consolidated balance sheet included unrecognized tax benefits and related interest of $14.4 million and $3.7 million, respectively. We are unable to reliably estimate the timing of unrecognized tax benefits, as such, they are not included in the contractual obligations table above.  The reduction of $2.5 million of unrecognized tax benefits during the fourth quarter of Fiscal Year 2022 is primarily attributable to the lapse of applicable statute of limitations.

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides us with financing and liquidity support, market risk, or credit risk support.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends, future expectations and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On an ongoing basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in Note 2, Significant Accounting Policies , of the accompanying notes to the consolidated financial statements included within “Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K. We believe the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective, or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. We have reviewed these critical accounting estimates and related disclosures with the Audit Committee.

• Revenue Recognition and Related Allowances

• Inventory Valuation

• Income Taxes

• Goodwill, Purchased Intangibles, and Impairment

Table of Contents

Revenue Recognition and Related Allowances

Our revenue consists of hardware, software, and services. Revenue is recognized when control for these offerings is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for products and services.

Our contracts with customers may include promises to provide multiple deliverables. Determining whether the offerings and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation may require significant judgment. Judgment is required to determine the level of integration and interdependency between certain professional services and the related hardware and software. This determination influences whether the services are distinct and accounted for separately as a performance obligation.

Service revenue primarily includes maintenance support on hardware devices and is recognized ratably over the contract term as those services are delivered. Product, software, and certain other services are satisfied at a point in time when control is transferred or as the services are delivered to the customer.

Our indirect channel model includes both a two-tiered distribution structure, where we sell to distributors that subsequently sell to resellers, and a one-tiered structure where we sell directly to resellers. For these arrangements, transfer of control begins at the time access to our services is made available to our customer and entitlements have been contractually established, provided all other criteria for revenue recognition are met. Judgment is required to determine whether our distributors and resellers have the ability to honor their commitment to pay, regardless of whether they collect payment from their customers. If market conditions change significantly, including increased uncertainty of our channel partners liquidity as a result of COVID-19, it could change our assessment, causing a material change in the amount of revenue that we report in a particular period.

Sales through our distribution and retail channels are made primarily under agreements allowing for rights of return in limited circumstances, such as stock rotation, non-conforming products, and instances where the Company provides its approval. Certain agreements with retail customers may permit rights of return for additional reasons, such as customer satisfaction, in accordance with the terms of the particular contract. Our agreements typically provide for various sales incentive programs, such as back-end rebates, discounts, marketing development funds, price protection, and other sales incentives. We have an established sales history for these arrangements and we record the estimated reserves and allowances at the time the related revenue is recognized. Customer sales returns are estimated based on historical data, relevant current data, and the monitoring of inventory in the distribution channel. The partner incentives reduce revenue in the current period and are intended to drive hardware sell through. Depending on how the payments are made and whether we have right to offset, the reserves associated with the partner incentive programs are recorded on the consolidated balance sheet as either contra Accounts Receivable or Accounts Payable. For more details about revenue recognition see Note 17, Revenue and Major Customers, and the Risk Factors: " Failure to adequately service and support our product offerings, or a decline in demand for our service offerings, could harm our results of operations, " and " The increased use of software in our products could impact the way we recognize revenue which could adversely impact our financial results " included within “Item 8. Financial Statements and Supplementary Data ” and “Part I. Item 1A. Risk Factors " of this Annual Report on Form 10-K, respectively.

Inventory Valuation

Inventories are valued at the lower of cost or net realizable value. The Company holds inventory for both its products and services businesses. The Company writes down inventories that have become obsolete or are in excess of anticipated demand or net realizable value. Our estimate of write downs for excess and obsolete inventory is based on a detailed analysis of on hand inventory and purchase commitments in excess of forecasted demand. Our products require long-lead time parts available from a subset of vendors and, occasionally, last-time buys of raw materials for products with long lifecycles. The effects of demand variability, long-lead times, and last-time buys have historically contributed to inventory write-downs. Our demand forecast considers historical sales, sales price, projected future shipments, market conditions, inventory on hand, purchase commitments, product development plans and product life cycle, inventory on consignment, and other competitive factors. Significant and abrupt changes in product demand increases the complexity of management's evaluation of potential excess or obsolete inventory. During Fiscal Year 2022, the global supply chain constraints resulting from the COVID-19 pandemic was an incremental variable in assessing our risk profile with respect to demand changes. Refer to " Contractual Obligations " for additional details regarding consigned inventories.

Table of Contents

We have not made any material changes in the accounting methodology we use to estimate our inventory write-downs or adverse purchase commitments during the periods presented. If the demand or market conditions for our products are less favorable than forecasted, including any market shifts or product demand due to the COVID-19 pandemic, or if unforeseen technological changes negatively impact the utility of our inventory, we may be required to record additional inventory write-downs or adverse purchase commitments, which would negatively affect our results of operations in the period the write-downs or adverse purchase commitments were recorded. For more details about purchased inventory valuation and inventory reserves see Note 5, Details of Certain Balance Sheet Accounts and the Risk Factors: " The success of our new products depends on several factors which, if not achieved, could adversely impact our financial results, " and " Product obsolescence or discontinuance and excess inventory can negatively affect our results of operations " included within “Item 8. Financial Statements and Supplementary Data ” and “Part I. Item 1A. Risk Factors " of this Annual Report on Form 10-K, respectively.

Income Taxes

We are subject to income taxes in the U.S. and various foreign jurisdictions and our income tax returns are periodically audited by domestic and foreign tax authorities. These audits may include questions regarding our tax filing positions, including the timing and amount of deductions and the allocation of income among various tax jurisdictions. At any one-time, multiple tax years may be subject to audit by various tax authorities. In evaluating the exposures associated with our various tax filing positions, we record a liability for such exposures. A number of years may elapse before a particular matter for which we have established a liability is audited and fully resolved or clarified.

To the extent we prevail in matters for which a liability has been established, or are required to pay amounts in excess of our established liability, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would generally require use of our cash and may result in an increase in our effective income tax rate in the period of resolution. A favorable tax settlement may be recognized as a reduction in our effective income tax rate in the period of resolution.

We recognize the impact of an uncertain income tax position on income tax expense at the largest amount that is more-likely-than-not to be sustained.  An unrecognized tax benefit will not be recognized unless it has a greater than 50% likelihood of being sustained. We adjust our tax liability for unrecognized tax benefits in the period in which an uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position, or when more information becomes available. Our liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and apply judgment to estimate the exposures associated with our various filing positions.

We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more-likely-than-not to be realized. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income, and ongoing tax planning strategies in assessing the need for a valuation allowance. For more details about income taxes see Note 15, Income Taxes , and the Risk Factor: " We operate in multiple tax jurisdictions globally. Our corporate tax rate may increase or we may incur additional tax liabilities, and/or changes in applicable tax regulations and resolutions of tax disputes could negatively impact our cash flow, financial condition, and results of operations " included within “Item 8. Financial Statements and Supplementary Data ” and “Part I. Item 1A. Risk Factors " of this Annual Report on Form 10-K, respectively.

Goodwill, Purchased Intangibles, and Impairment

Goodwill has been measured as the excess of the cost of an acquisition over the amount assigned to tangible and identifiable intangible assets acquired, less liabilities assumed.  At least annually, in the fourth quarter of each fiscal year, or more frequently if indicators of impairment exist, management performs a review to determine if the carrying value of goodwill is impaired. The identification and measurement of goodwill impairment involves the estimation of fair value at the Company’s reporting unit level.  The Company determines its reporting units by assessing whether discrete financial information is available and if segment management regularly reviews the results of that component.

Table of Contents

The Company performs an initial assessment of qualitative factors to determine whether the existence of events and circumstances leads to a determination that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of relevant events and circumstances, the Company determines that it is more-likely-than-not that the fair value of the reporting unit exceeds its carrying value and there is no indication of impairment, no further testing is performed. However, if the Company concludes otherwise, a quantitative impairment test must be performed by estimating the fair value of the reporting unit and comparing it with its carrying value, including goodwill. If the carrying amount of a reporting unit is greater than its estimated fair value, goodwill is written down by the excess amount, limited to the total amount of goodwill allocated to that reporting unit. The fair value of the Company's reporting units is estimated using a discounted cash flow model (income approach), which utilizes Level 3 inputs. The income approach includes assumptions for, among others, forecasted revenue, operating income, and discount rates, all of which require significant judgment by management. These assumptions also consider the current industry environment and outlook, and the resulting impact on the Company's expectations for the performance of its business.

Intangible assets other than goodwill are carried at cost and amortized over their estimated useful lives. The Company reviews identifiable finite-lived intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the related asset group may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset group and its ultimate disposition. Measurement of any impairment loss is based on the amount by which the carrying value of the asset group exceeds its fair value. The fair value of an asset group is estimated using a discounted cash flow model (income approach), which utilizes Level 3 inputs. The income approach includes assumptions for, among others, forecasted revenue, operating income, and discount rates, all of which require significant judgment by management. For more details about impairment of goodwill and other intangible assets see Note 6, Goodwill and Purchased Asset Intangibles , and the Risk Factor: " Critical accounting estimates involve the use of judgements and if actual results vary from our estimates or assumptions underlying such estimates, our financial results could be negatively affected " included within “Item 8. Financial Statements and Supplementary Data ” and “Part I. Item 1A. Risk Factors " of this Annual Report on Form 10-K, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements issued by the FASB are not expected to have a material impact on the Company's financial position, results of operations, or cash flows. For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our Consolidated Financial Statements, see Note 3, Recent Accounting Pronouncements , of the accompanying Notes to the Consolidated Financial Statements included within “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.