- Q3 revenue at $272.3 million with sequential improvement in
GAAP and non-GAAP operating expenses
- 15% projected reduction in non-GAAP operating expenses in Q4
2023 as compared to Q3 2023
- Targeting positive non-GAAP operating margin for the second
quarter 2024
- Expected reduction of non-GAAP operating expenses of
approximately $90 million for the year 2024 as compared to
2023
- As part of the capital efficiency program, the Company has
decided to suspend its quarterly dividend to reduce interest
expense and support its long-term capital plan
- Target Financial Model: Non-GAAP operating margin to be in the
low teens for the full year 2025
ADTRAN Holdings, Inc. (NASDAQ: ADTN and FSE: QH9) (“ADTRAN
Holdings” or the “Company”) today announced its financial results
for the third quarter of 2023.
As reflected in the preliminary release, revenue for the third
quarter was $272.3 million, slightly below the lower end of the
guidance range.
GAAP gross margin for the quarter was 27.3%, and it was
negatively impacted by an inventory write-off of approximately
$21.0 million as a result of the exit from certain product lines in
connection with our restructuring and the newly implemented and
expanded business efficiency program.
Non-GAAP gross margin was 40.3%, and it was positively impacted
by a more favorable customer and product mix and lower purchasing
and transportation costs.
GAAP operating margin for the quarter was negative 32.8%, and it
was negatively impacted by the exit from certain product lines
discussed above and a $37.9 million goodwill impairment charge
related to our Services & Support reporting unit. Sequentially,
the Company reduced GAAP operating expenses by 8% from $137.2
million in the second quarter 2023 to $125.7 million in the third
quarter 2023.
Non-GAAP operating margin for the quarter was negative 1.9%,
which was at the upper end of the guidance range. The Company
reduced non-GAAP operating expenses by 6.3% from $122.7 million in
the second quarter 2023 to $114.9 million in the third quarter
2023.
GAAP net loss attributable to the Company for the third quarter
of 2023 was $72.7 million. Diluted loss per share attributable to
the Company for the quarter was $0.93.
Non-GAAP net loss attributable to the Company was $10.8 million.
Non-GAAP diluted loss per share attributable to the Company was
$0.14.
Business efficiency program
Due to the uncertainty around the current macro-economic
environment, customer inventory levels and its impact on customer
spending levels, the Company has implemented a comprehensive
business efficiency program. The program includes:
- a significant cost efficiency program targeting a reduction of
non-GAAP operating expenses of approximately $90 million for the
year 2024 as compared to 2023 and a projected $15 million reduction
in non-GAAP operating expenses for the fourth quarter of 2023
compared to the third quarter of 2023; and
- a capital efficiency program which includes a site
consolidation plan that management expects to generate proceeds up
to $150 million and the suspension of the quarterly dividend.
Ultimately, we believe the successful execution of our business
efficiency program will benefit our shareholders.
ADTRAN Holdings’ Chairman and Chief Executive Officer Tom
Stanton stated, "We anticipate that the ongoing uncertainty
affecting customer spending will extend into 2024. We are actively
addressing the challenges in our industry and have implemented a
business efficiency program to ensure improvement in long-term
shareholder return. Through this program, we are aiming to lower
our costs by $90 million by the end of 2024 as compared to 2023.
Although the environment has proven to be very challenging,
interest in our products continues to grow as we gained market
share and added new customers during the quarter. We expect the
combination of our continued growth in market share with our new
operating model to substantially improve returns to all our
stakeholders."
Financial Outlook for the fourth quarter 2023
The outlook for the fourth quarter 2023, is as follows:
- revenue to be between $210 million and $240 million; and
- non-GAAP operating margin between negative 7% and 0%.
Non-GAAP operating margin (which is calculated as non-GAAP
operating (loss) income divided by revenue) and non-GAAP operating
expense are non-GAAP financial measures. The Company has provided
fourth quarter guidance with regard to non-GAAP operating margin
and projected reductions in non-GAAP operating expense as a result
of its business efficiency program. These measures exclude from the
corresponding GAAP financial measures the effect of adjustments as
described below under “Explanation of Use of Non-GAAP Financial
Measures.” The Company has not provided a reconciliation of such
non-GAAP guidance to guidance presented on a GAAP basis because it
cannot predict and quantify without unreasonable effort all of the
adjustments that may occur during the period due to the difficulty
of predicting the timing and amounts of various items within a
reasonable range. In particular, these non-GAAP financial measures
exclude certain items, including continued restructuring and
integration expenses that will continue to evolve as our business
efficiency program is implemented and, therefore, the Company is
unable to quantitatively predict. Depending on the materiality of
these items, they could have a significant impact on the Company's
GAAP financial results.
The Company confirmed that it will hold a conference call to
discuss its third quarter results on Tuesday, November 7, 2023, at
9:30 a.m. Central Time, or 4:30 p.m. Central European Summer Time.
ADTRAN Holdings will webcast this conference call. To listen and
view our investor presentation, simply visit our Investor Relations
site at investors.adtran.com approximately 10 minutes prior to the
start of the call, click on the event “ADTRAN Holdings Releases 3rd
Quarter 2023 Financial Results and Earnings Call”, and click on the
webcast link.
An online replay of the Company’s conference call, as well as
the transcript of the Company's conference call, will be available
on the Investor Relations site approximately 24 hours following the
call and will remain available for at least 12 months. For more
information, visit investors.adtran.com or email
investor.relations@adtran.com.
Cautionary Note Regarding Forward-Looking Statements
Statements contained in this press release which are not
historical facts, such as those relating to expectations regarding
earnings, expenses and margin; ADTRAN Holdings’ ability to reduce
expenses in the coming year and the amount thereof through its
implementation of the business efficiency program; and ADTRAN
Holdings’ strategy, outlook and financial guidance, are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements can also generally be identified by the use of words
such as “believe,” “expect,” “intend,” “estimate,” “anticipate,”
“will,” “may,” “could” and similar expressions. In addition, ADTRAN
Holdings, through its senior management, may from time to time make
forward-looking public statements concerning the matters described
herein. All such projections and other forward-looking information
speak only as of the date hereof, and ADTRAN Holdings undertakes no
duty to publicly update or revise such forward-looking information,
whether as a result of new information, future events, or
otherwise, except to the extent as may be required by law. All such
forward-looking statements are necessarily estimates and reflect
management’s best judgment based upon current information. Actual
events or results may differ materially from those anticipated in
these forward-looking statements as a result of a variety of
factors. While it is impossible to identify all such factors,
factors which have caused and may in the future cause actual events
or results to differ materially from those estimated by ADTRAN
Holdings include, but are not limited to: (i) risks and
uncertainties related to manufacturing and supply chain
constraints; (ii) risks and uncertainties related to the completed
business combination between the Company, ADTRAN, Inc. (“ADTRAN”)
and Adtran Networks SE (“Adtran Networks”), including risks related
to the ability to successfully integrate ADTRAN’s and Adtran
Networks’ businesses, the disruption of management time from
ongoing business operations due to integration efforts following
the business combination, and the risk that ADTRAN Holdings may be
unable to achieve expected synergies or that it may take longer or
be more costly than expected to achieve those synergies; (iii)
risks and uncertainties relating to the recent restatement of our
previously issued consolidated financial statements and ongoing
material weakness in our internal control over financial reporting;
(iv) risks and uncertainties relating to ADTRAN Holdings’ ability
to reduce expenditures and the impact of such reductions on its
financial results and financial condition; (v) the risk of
fluctuations in revenue due to lengthy sales and approval processes
required by major and other service providers for new products, as
well as ongoing tighter inventory management of ADTRAN Holdings’
customers; (vi) the risk posed by potential breaches of information
systems and cyber-attacks; (vii) the risk that ADTRAN Holdings may
not be able to effectively compete, including through product
improvements and development; and (viii) other risks set forth in
ADTRAN Holdings’ public filings made with the Securities and
Exchange Commission, including its Annual Report on Form 10-K for
the year ended December 31, 2022, as amended, as well as its Form
10-Q for the quarter ended June 30, 2023.
Explanation of Use of Non-GAAP Financial Measures
Set forth in the tables below are reconciliations of gross
profit, gross margin, operating expenses, operating loss, other
(expense) income, net (loss) income inclusive of the
non-controlling interest, net loss attributable to the Company, net
loss attributable to the non-controlling interest, and loss per
share - basic and diluted, attributable to the Company, in each
case as reported based on generally accepted accounting principles
in the United States (“GAAP”), to non-GAAP gross profit, non-GAAP
gross margin, non-GAAP operating expenses, non-GAAP operating
(loss) income, non-GAAP other (expense) income, non-GAAP net (loss)
income inclusive of the non-controlling interest, non-GAAP net
(loss) income attributable to the Company, non-GAAP net (loss)
income attributable to the non-controlling interest, and non-GAAP
(loss) earnings per share - basic and diluted, attributable to the
Company, respectively. Such non-GAAP measures exclude acquisition
related expenses, amortization and adjustments (consisting of
intangible amortization of backlog, developed technology, customer
relationships, and trade names acquired in connection with business
combinations and amortization of inventory fair value adjustments),
stock-based compensation expense, amortization of pension actuarial
losses, deferred compensation adjustments, integration expenses,
restructuring expenses, asset and goodwill impairments, changes in
valuation allowance related to our deferred tax assets, and the tax
effect of these adjustments to net income. These measures are used
by management in our ongoing planning and annual budgeting
processes. Additionally, we believe the presentation of these
non-GAAP measures when combined with the presentation of the most
directly comparable GAAP financial measure, is beneficial to the
overall understanding of ongoing operating performance of the
Company.
The information contained in this press release is solely based
on unaudited condensed consolidated results. These non-GAAP
financial measures are not prepared in accordance with, or an
alternative for, GAAP and therefore should not be considered in
isolation or as a substitution for analysis of our results as
reported under GAAP. Additionally, our calculation of non-GAAP
measures may not be comparable to similar measures calculated by
other companies.
About Adtran
ADTRAN Holdings, Inc. (NASDAQ: ADTN and FSE: QH9) is the parent
company of Adtran, Inc., a leading global provider of open,
disaggregated networking and communications solutions that enable
voice, data, video and internet communications across any network
infrastructure. From the cloud edge to the subscriber edge, Adtran
empowers communications service providers around the world to
manage and scale services that connect people, places and things.
Adtran solutions are used by service providers, private
enterprises, government organizations and millions of individual
users worldwide. ADTRAN Holdings, Inc. is also the largest
shareholder of Adtran Networks SE, formerly ADVA Optical Networking
SE. Find more at Adtran, LinkedIn and Twitter.
Published by ADTRAN Holdings, Inc. www.adtran.com
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
September 30,
December 31,
2023
2022
Assets
Current Assets
Cash and cash equivalents
$
116,092
$
108,644
Short-term investments
—
340
Accounts receivable, net
229,333
279,435
Other receivables
24,337
32,831
Inventory, net
373,971
427,531
Prepaid expenses and other current
assets
35,826
33,577
Total Current Assets
779,559
882,358
Property, plant and equipment, net
118,623
110,699
Deferred tax assets
90,260
67,839
Goodwill
339,083
381,724
Intangibles, net
328,695
401,211
Other non-current assets
60,770
66,998
Long-term investments
25,179
32,665
Total Assets
$
1,742,169
$
1,943,494
Liabilities, Redeemable Non-Controlling
Interest and Equity
Current Liabilities
Accounts payable
$
148,913
$
237,699
Revolving credit agreements
outstanding
10,580
35,936
Notes payable
—
24,598
Unearned revenue
49,832
41,193
Accrued expenses and other liabilities
29,708
35,235
Accrued wages and benefits
35,957
44,882
Income tax payable, net
10,302
9,032
Total Current Liabilities
285,292
428,575
Non-current revolving credit agreement
outstanding
200,000
60,000
Deferred tax liabilities
37,977
61,629
Non-current unearned revenue
23,501
19,239
Pension liability
10,732
10,624
Deferred compensation liability
26,833
26,668
Non-current lease obligations
23,612
22,807
Other non-current liabilities
17,408
10,339
Total Liabilities
625,355
639,881
Redeemable Non-Controlling
Interest
431,921
—
Equity
Common stock
787
781
Additional paid-in capital
770,565
895,834
Accumulated other comprehensive income
32,800
46,713
Retained (deficit) earnings
(113,289
)
55,338
Treasury stock
(5,970
)
(4,125
)
Non-controlling interest
—
309,072
Total Equity
684,893
1,303,613
Total Liabilities, Redeemable
Non-Controlling Interest and Equity
$
1,742,169
$
1,943,494
Condensed Consolidated
Statements of Loss
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Revenue
Network Solutions
$
228,564
$
304,940
$
793,984
$
599,306
Services & Support
43,767
35,769
129,637
67,959
Total Revenue
272,331
340,709
923,621
667,265
Cost of Revenue
Network Solutions
160,244
222,606
596,334
413,180
Network Solutions - Inventory Write
Down
21,043
—
21,043
—
Services & Support
16,807
15,076
51,646
34,236
Total Cost of Revenue
198,094
237,682
669,023
447,416
Gross Profit
74,237
103,027
254,598
219,849
Selling, general and administrative
expenses
62,907
74,880
196,887
130,646
Research and development expenses
62,752
59,196
203,493
112,187
Asset impairment
—
16,969
—
16,969
Goodwill Impairment
37,874
—
37,874
—
Operating Loss
(89,296
)
(48,018
)
(183,656
)
(39,953
)
Interest and dividend income
521
347
1,183
768
Interest expense
(4,507
)
(1,303
)
(11,858
)
(1,427
)
Net investment (loss) gain
(1,443
)
(2,691
)
1,071
(10,752
)
Other income, net
2,523
2,494
4,714
2,949
Loss Before Income Taxes
(92,202
)
(49,171
)
(188,546
)
(48,415
)
Income tax benefit
16,553
4,312
36,229
4,572
Net Loss
$
(75,649
)
$
(44,859
)
$
(152,317
)
$
(43,843
)
Less: Net Loss attributable to
non-controlling interest(1)
(2,914
)
(2,925
)
(11,784
)
(2,925
)
Net Loss attributable to ADTRAN
Holdings, Inc.
$
(72,735
)
$
(41,934
)
$
(140,533
)
$
(40,918
)
Weighted average shares outstanding –
basic
78,389
73,036
78,378
57,175
Weighted average shares outstanding –
diluted
78,389
73,036
78,378
57,175
Loss per common share attributable to
ADTRAN Holdings, Inc. – basic
$
(0.93
)
$
(0.57
)
$
(1.79
)
$
(0.72
)
Loss per common share attributable to
ADTRAN Holdings, Inc. – diluted
$
(0.93
)
$
(0.57
)
$
(1.79
)
$
(0.72
)
(1) For the three and six months ended
September 30, 2023, we have recognized $2.9 million and $8.6
million, respectively, representing the recurring cash compensation
earned by non-controlling interest shareholders post-DPLTA and an
incremental $3.2 million net loss attributable to non-controlling
interests pre-DPLTA for the six months ended September 30,
2023.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
2023
2022
Cash flows from operating
activities:
Net loss
$
(152,317
)
$
(43,843
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
91,422
34,783
Asset impairment
—
16,969
Goodwill impairment
37,874
—
Amortization of debt issuance cost
607
200
(Gain) loss on investments, net
(3,316
)
10,395
Stock-based compensation expense
12,229
15,912
Deferred income taxes
(45,941
)
(26,366
)
Other, net
204
32
Inventory write down
21,043
—
Inventory reserves
29,836
(6,681
)
Changes in operating assets and
liabilities:
Accounts receivable, net
47,347
(34,535
)
Other receivables
8,340
(2,154
)
Inventory
536
(76,293
)
Prepaid expenses, other current assets and
other assets
1,816
610
Accounts payable
(87,903
)
70,381
Accrued expenses and other liabilities
6,476
(23,005
)
Income taxes payable, net
2,433
20,862
Net cash used in operating
activities
(29,314
)
(42,733
)
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(33,674
)
(10,141
)
Proceeds from sales and maturities of
available-for-sale investments
10,545
30,474
Purchases of available-for-sale
investments
(807
)
(22,215
)
Proceeds from beneficial interests in
securitized accounts receivable
1,178
1,294
Proceeds from disposals of property, plant
and equipment
—
12
Acquisition of business, net of cash
acquired
—
43,957
Net cash (used in) provided by
investing activities
(22,758
)
43,381
Cash flows from financing
activities:
Tax withholdings related to stock-based
compensation settlements
(6,331
)
(515
)
Proceeds from stock option exercises
187
5,434
Dividend payments
(21,237
)
(15,859
)
Proceeds from draw on revolving credit
agreements
163,760
133,141
Repayment of revolving credit
agreements
(49,233
)
(48,000
)
Non-controlling interest put option
buyback
(1,196
)
—
Payment of debt issuance cost
(708
)
(3,015
)
Repayment of notes payable
(24,931
)
(10,057
)
Net cash provided by financing
activities
60,311
61,129
Net increase in cash and cash
equivalents
8,239
61,777
Effect of exchange rate changes
(791
)
(7,496
)
Cash and cash equivalents, beginning of
period
108,644
56,818
Cash and cash equivalents, end of
period
$
116,092
$
111,099
Supplemental disclosure of cash financing
activities:
Cash paid for interest
$
8,540
$
633
Cash used in operating activities related
to operating leases
$
7,378
$
2,272
Supplemental disclosure of non-cash
investing activities:
Right-of-use assets obtained in exchange
for lease obligations
$
8,490
$
904
Purchases of property, plant and equipment
included in accounts payable
$
2,508
$
1,037
Adtran Networks common shares exchanged in
acquisition
$
—
$
565,491
Adtran Networks options assumed in
acquisition
$
—
$
12,769
Non-controlling interest related to Adtran
Networks
$
—
$
315,415
Supplemental
Information
Reconciliation of Gross Profit
and Gross Margin to
Non-GAAP Gross Profit and
Non-GAAP Gross Margin
(Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30, 2023
June 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Total Revenue
$
272,331
$
327,378
$
340,709
$
923,621
$
667,265
Cost of Revenue
$
198,094
$
234,825
$
237,682
$
669,023
$
447,416
Acquisition-related expenses, amortization
and adjustments(1)
(13,537
)
(33,439
)
(25,530
)
(79,554
)
(25,530
)
Stock-based compensation expense
(279
)
(335
)
(1,269
)
(854
)
(1,590
)
Pension adjustments
—
—
(59
)
—
(59
)
Restructuring expenses(2)
(21,630
)
—
—
(21,706
)
—
Integration expenses(3)
(154
)
—
—
(154
)
—
Non-GAAP Cost of Revenue
$
162,494
$
201,051
$
210,824
$
566,755
$
420,237
Gross Profit
$
74,237
$
92,553
$
103,027
$
254,598
$
219,849
Non-GAAP Gross Profit
$
109,837
$
126,327
$
129,885
$
356,866
$
247,028
Gross Margin
27.3
%
28.3
%
30.2
%
27.6
%
32.9
%
Non-GAAP Gross Margin
40.3
%
38.6
%
38.1
%
38.6
%
37.0
%
(1) Includes intangible amortization of
backlog, inventory fair value adjustments, developed technology,
customer relationships, and trade names acquired in connection with
business combinations.
(2) Includes expenses for restructuring
program designed to optimize the assets and business processes
following the business combination with Adtran Networks. These
expenses include inventory write down charges totaling
approximately $21.0 million incurred as a result of the exit from
certain product lines in connection with the restructuring program.
The restructuring program commenced upon the closing of the
business combination with Adtran Networks and is expected to be
completed in late 2024.
(3) Includes expenses related to the
Company's one-time integration bonus program in connection with
synergy targets as a result of the business combination with Adtran
Networks of which $73.4 thousand is stock compensation expense for
the program.
Supplemental
Information
Reconciliation of Operating
Expenses to Non-GAAP Operating Expenses
(Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2023
2023
2022
2023
2022
Operating Expenses
$
125,659
$
137,181
$
134,076
$
400,380
$
242,833
Acquisition-related expenses, amortization
and adjustments
(4,534
)
(1)
(4,398
)
(6)
(14,780
)
(10)
(13,516
)
(13)
(19,233
)
(17)
Stock-based compensation expense
(3,251
)
(2)
(3,974
)
(7)
(10,862
)
(11)
(10,683
)
(14)
(14,322
)
(18)
Restructuring expenses
(3,243
)
(3)
(5,868
)
(8)
—
(11,472
)
(15)
(2
)
Integration expenses
(1,485
)
(4)
(563
)
(9)
—
(2,897
)
(16)
—
Pension adjustments
—
—
(185
)
(12)
—
(185
)
(12)
Deferred compensation adjustments(5)
1,801
307
740
1,714
7,173
Non-GAAP Operating Expenses
$
114,947
$
122,685
$
108,989
$
363,526
$
216,264
(1) Includes intangible amortization of
developed technology, customer relationships, and trade names
acquired in connection with business combinations, of which $4.0
million is included in selling, general and administrative expenses
and $0.5 million is included in research and development expenses
on the condensed consolidated statements of loss.
(2) $2.4 million is included in selling,
general and administrative expenses and $0.8 million is included in
research and development expenses on the condensed consolidated
statements of loss.
(3) $3.4 million is included in selling,
general and administrative expenses and $(0.2) million is included
in research and development expenses on the condensed consolidated
statements of loss.
(4) $1.4 million is included in selling,
general and administrative expenses and $0.1 million is included in
research and development expenses on the condensed consolidated
statements of loss. Includes fees relating to the expansion of
internal controls at Adtran Networks and the implementation of the
DPLTA. Additionally, includes expenses related to the Company's
one-time integration bonus program in connection with synergy
targets as a result of the business combination with Adtran
Networks of which $0.5 million is stock compensation expense for
the program.
(5) Includes non-cash change in fair value
of equity investments held in the ADTRAN Holdings, Inc. Deferred
Compensation Program for Employees, all of which is included in
selling, general and administrative expenses on the condensed
consolidated statement of loss.
(6) Includes intangible amortization of
developed technology, customer relationships, and trade names
acquired in connection with business combinations, of which $3.9
million is included in selling, general and administrative expenses
and $0.5 million is included in research and development expenses
on the condensed consolidated statements of loss.
(7) $2.7 million is included in selling,
general and administrative expenses and $1.3 million is included in
research and development expenses on the condensed consolidated
statements of loss.
(8) $1.4 million is included in selling,
general and administrative expenses and $4.5 million is included in
research and development expenses on the condensed consolidated
statements of loss.
(9) $0.6 million is included in selling,
general and administrative expenses on the condensed consolidated
statements of loss. Includes fees relating to the expansion of
internal controls at Adtran Networks and the implementation of the
DPLTA.
(10) Includes intangible amortization of
developed technology, customer relationships, and trade names
acquired in connection with business combinations, of which $14.3
million is included in selling, general and administrative expenses
and $0.5 million is included in research and development expenses
on the condensed consolidated statements of loss.
(11) $9.2 million is included in selling,
general and administrative expenses and $1.7 million is included in
research and development expenses on the condensed consolidated
statements of loss.
(12) $0.1 million is included in selling,
general and administrative expenses and $0.1 million is included in
research and development expenses on the condensed consolidated
statements of loss. Includes amortization of actuarial losses
related to the Company's pension plan for employees in certain
foreign countries.
(13) Includes intangible amortization of
developed technology, customer relationships, and trade names
acquired in connection with business combinations, of which $12.0
million is included in selling, general and administrative expenses
and $1.5 million is included in research and development expenses
on the condensed consolidated statements of loss.
(14) $7.6 million is included in selling,
general and administrative expenses and $3.1 million is included in
research and development expenses on the condensed consolidated
statements of loss.
(15) $7.0 million is included in selling,
general and administrative expenses and $4.5 million is included in
research and development expenses on the condensed consolidated
statements of loss.
(16) $2.8 million is included in selling,
general and administrative expenses and $0.1 million is included in
research and development expenses on the condensed consolidated
statements of loss. Includes fees relating to the expansion of
internal controls at Adtran Networks and the implementation of the
DPLTA. Additionally, includes expenses related to the Company's
one-time integration bonus program in connection with synergy
targets as a result of the business combination with Adtran
Networks of which $0.5 million is stock compensation expense for
the program.
(17) Includes intangible amortization of
developed technology, customer relationships, and trade names
acquired in connection with business combinations, of which $17.7
million is included in selling, general and administrative expenses
and $1.5 million is included in research and development expenses
on the condensed consolidated statements of loss.
(18) $11.4 million is included in selling,
general and administrative expenses and $2.9 million is included in
research and development expenses on the condensed consolidated
statements of loss.
Supplemental
Information
Reconciliation of Operating
Loss to Non-GAAP Operating (Loss) Income
(Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2023
2023
2022
2023
2022
Operating Loss
$
(89,296
)
$
(44,628
)
$
(48,018
)
$
(183,656
)
$
(39,953
)
Acquisition related expenses, amortization
and adjustments(1)
18,070
37,837
40,310
93,069
44,763
Asset impairments(2)
—
—
16,969
—
16,969
Stock-based compensation expense
3,530
4,309
12,131
11,537
15,912
Pension adjustments
—
—
244
—
244
Restructuring expenses(3)
24,873
5,868
—
33,178
2
Integration expenses(4)
1,639
563
—
3,051
—
Deferred compensation adjustments(5)
(1,801
)
(307
)
(740
)
(1,714
)
(7,173
)
Goodwill impairment(6)
37,874
—
—
37,874
—
Non-GAAP Operating (Loss)
Income
$
(5,111
)
$
3,642
$
20,896
$
(6,661
)
$
30,764
(1) Includes intangible amortization of
backlog, inventory fair value adjustments, developed technology,
customer relationships, and trade names acquired in connection with
business combinations.
(2) Includes impairment charges related to
the abandonment of certain information technology projects due to
the business combination.
(3) Includes expenses for restructuring
program designed to optimize the assets and business processes
following the business combination with Adtran Networks. These
expenses include inventory write down charges totaling
approximately $21.0 million incurred as a result of the exit from
certain product lines in connection with the restructuring program.
The restructuring program commenced upon the closing of the
business combination with Adtran Networks and is expected to be
completed in late 2024.
(4) Includes fees relating to the
expansion of internal controls at Adtran Networks and the
implementation of the DPTLA. Additionally, includes expenses
related to the Company's one-time integration bonus program in
connection with synergy targets as a results of the business
combination with Adtran Networks.
(5) Includes non-cash change in fair value
of equity investments held in the ADTRAN Holdings, Inc. Deferred
Compensation Program for Employees, all of which is included in
selling, general and administrative expenses on the condensed
consolidated statement of loss.
(6) Includes non-cash goodwill impairment
charge related to our Services and Support reporting unit. The
impairment primarily resulted from a decrease in projected revenue
growth rates and EBITDA margins.
Supplemental
Information
Reconciliation of Other
(Expense) Income to Non-GAAP Other (Expense) Income
(Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30, 2023
June 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Interest and dividend income
$
521
$
358
$
347
$
1,183
$
768
Interest expense
(4,507
)
(4,064
)
(1,303
)
(11,858
)
(1,427
)
Net investment (loss) gain
(1,443
)
1,262
(2,691
)
1,071
(10,752
)
Other income, net
2,523
2,494
2,494
4,714
2,949
Total Other (Expense) Income
$
(2,906
)
$
50
$
(1,153
)
$
(4,890
)
$
(8,462
)
Deferred compensation adjustments (1)
1,117
(1,254
)
1,124
(1,387
)
6,561
Pension expense(2)
7
6
81
20
255
Non-GAAP Other (Expense) Income
$
(1,782
)
$
(1,198
)
$
52
$
(6,257
)
$
(1,646
)
(1) Includes non-cash change in fair value
of equity investments held in the ADTRAN Holdings, Inc. Deferred
Compensation Program for Employees.
(2) Includes amortization of actuarial
losses related to the Company's pension plan for employees in
certain foreign countries.
Supplemental
Information
Reconciliation of Net Loss
inclusive of Non-Controlling Interest to
Non-GAAP Net (Loss) Income
inclusive of Non-Controlling Interest
(Unaudited)
and
Reconciliation of Net Loss
attributable to Non-Controlling Interest to
Non-GAAP Net Loss (Income)
attributable to Non-Controlling Interest
(Unaudited)
and
Reconciliation of Net Loss
attributable to ADTRAN Holdings, Inc. and
Loss per Common Share
attributable to ADTRAN Holdings, Inc. – Basic and Diluted
to
Non-GAAP Net (Loss) Income
attributable to ADTRAN Holdings, Inc. and
Non-GAAP (Loss) Earnings per
Common Share attributable to ADTRAN Holdings, Inc. – Basic and
Diluted
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
Nine Months Ended
September 30, 2023
June 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Net Loss attributable to ADTRAN
Holdings, Inc.
$
(72,735
)
$
(33,334
)
$
(41,934
)
$
(140,533
)
$
(40,918
)
Plus: Net Loss attributable to
non-controlling interest (1)
(2,914
)
(2,881
)
(2,925
)
(11,784
)
(2,925
)
Net Loss inclusive of non-controlling
interest
$
(75,649
)
$
(36,215
)
$
(44,859
)
$
(152,317
)
$
(43,843
)
Acquisition related expenses, amortization
and adjustments
18,070
37,837
40,310
93,069
44,763
Asset impairments
—
—
16,969
—
16,969
Stock-based compensation expense
3,530
4,309
12,131
11,537
15,912
Valuation allowance
—
(185
)
3,182
(185
)
15,550
Deferred compensation adjustments (2)
(684
)
(1,561
)
383
(3,101
)
(612
)
Pension adjustments (3)
7
6
325
20
499
Restructuring expenses
24,873
5,868
—
33,178
2
Integration expenses
1,639
563
—
3,051
—
Goodwill impairment
37,874
-
—
37,874
—
Tax effect of adjustments to net loss
(23,366
)
(13,426
)
(16,245
)
(49,099
)
(17,430
)
Non-GAAP Net (Loss) Income inclusive of
non-controlling interest
$
(13,706
)
$
(2,804
)
$
12,196
$
(25,973
)
$
31,810
Less: Non-GAAP Net Loss (Income)
attributable to non-controlling interest (1)
(2,914
)
(2,881
)
4,486
(10,255
)
4,486
Non-GAAP Net (Loss) Income attributable
to ADTRAN Holdings, Inc.
$
(10,792
)
$
77
$
7,710
$
(15,718
)
$
27,324
GAAP Net Loss attributable to
non-controlling interest (1)
$
(2,914
)
$
(2,881
)
$
(2,925
)
$
(11,784
)
$
(2,925
)
Acquisition related expenses, amortization
and adjustments
—
—
7,120
1,457
7,120
Restructuring expenses
—
—
—
29
—
Integration expenses
—
—
—
6
—
Stock-based compensation expense
—
—
231
37
231
Pension adjustments
—
—
60
—
60
Non-GAAP Net Loss (Income) attributable
to non-controlling interest(1)
$
(2,914
)
$
(2,881
)
$
4,486
$
(10,255
)
$
4,486
Weighted average shares outstanding –
basic
78,389
78,366
73,036
78,378
57,175
Weighted average shares outstanding –
diluted
78,389
78,366
73,036
78,378
57,175
Loss per common share attributable to
ADTRAN Holdings, Inc. – basic
$
(0.93
)
$
(0.43
)
$
(0.57
)
$
(1.79
)
$
(0.72
)
Loss per common share attributable to
ADTRAN Holdings, Inc. – diluted
$
(0.93
)
$
(0.43
)
$
(0.57
)
$
(1.79
)
$
(0.72
)
Non-GAAP (Loss) Earnings per common
share attributable to ADTRAN – basic
$
(0.14
)
$
0.00
$
0.11
$
(0.20
)
$
0.48
Non-GAAP (Loss) Earnings per common
share attributable to ADTRAN – diluted
$
(0.14
)
$
0.00
$
0.11
$
(0.20
)
$
0.48
(1) Represents the non-controlling
interest portion of the Company's ownership of Adtran Networks
pre-DPLTA and the annual recurring compensation earned by
redeemable non-controlling interests and accrued by the Company
post-DPLTA.
(2) Includes non-cash change in fair value
of equity investments held in deferred compensation plans offered
to certain employees.
(3) Includes amortization of actuarial
losses related to the Company's pension plan for employees in
certain foreign countries.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231106008780/en/
For media Gareth Spence +44 1904 699 358
public.relations@adtran.com For investors Steven Williams
+49 89 890 665 918 investor@adtran.com
ADTRAN (TG:QH9)
Historical Stock Chart
From Oct 2024 to Nov 2024
ADTRAN (TG:QH9)
Historical Stock Chart
From Nov 2023 to Nov 2024
