ADTRAN Holdings, Inc. (NASDAQ: ADTN and FSE: QH9) (“ADTRAN Holdings” or the “Company”) today announced its unaudited financial results for the second quarter of 2024.

  • Revenue: $226.0 million
  • Gross margin:
    • GAAP gross margin: 36.1%; Non-GAAP gross margin: 41.9%
  • Operating margin:
    • GAAP operating margin negative 17.0%; Non-GAAP operating margin positive 0.7%
  • Net Income (Loss):
    • GAAP net loss attributable to the Company: $49.9 million; Non-GAAP net loss attributable to the Company: $18.8 million
  • Earnings (Loss) per share:
    • GAAP diluted loss per share attributable to the Company: $0.63; Non-GAAP diluted loss per share attributable to the Company: $0.24.

ADTRAN Holdings’ Chairman and Chief Executive Officer Tom Stanton stated, "We had a solid second quarter, during which we saw improvements across all our major operating metrics, including profitability and working capital. During the quarter, we saw growth in our customer base across the U.S. and Europe as customers continue to adopt our latest fiber networking solutions”.

For the third quarter of 2024, the Company expects revenue in a range of $215million to $235million. Non-GAAP operating margin is expected in a range of -1% to +3%.

Furthermore, non-GAAP operating margin (which is calculated as non-GAAP operating loss divided by revenue) is a non-GAAP financial measure. The Company has provided third quarter guidance with regard to non-GAAP operating margin. This measure excludes from the corresponding GAAP financial measure the effect of adjustments as described below. 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, non-GAAP operating margin excludes certain items, including continued restructuring and integration expenses that will continue to evolve as our business efficiency program is implemented, that 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 will hold a conference call to discuss its second quarter results on Tuesday, August 06, 2024, at 9:30 a.m. Central Time, or 4:30 p.m. Central European Summer Time. The Company will webcast this conference call. To listen, 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 2nd Quarter 2024 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 future revenues; ADTRAN Holdings ability to reduce its inventory levels; ADTRAN Holdings’ potential funding opportunities; and ADTRAN Holdings’ strategy and outlook, 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 relating to ADTRAN Holdings’ ability to continue to reduce expenditures and the impact of such reductions on its financial results and financial condition; (ii) 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 ; (iii) risks and uncertainties relating to ongoing material weaknesses in our internal control over financial reporting; (iv) our ability to comply with the covenants set forth in our credit facility; (v) risks posed by potential breaches of information systems and cyber-attacks; (vi) the risk that ADTRAN Holdings may not be able to effectively compete, including through product improvements and development; and (vii) other risks set forth in ADTRAN Holdings’ public filings made with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K for the year ended December 31, 2023, its Quarterly Report on Form 10-Q for the first quarter ended March 31, 2024, and risks to be disclosed in its Form 10-Q for the quarterly period ended March 31, 2024.

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 inclusive of the non-controlling interest, net loss attributable to the Company, net income attributable to the non-controlling interest, and loss per share - basic and diluted, attributable to the Company, and net cash provided by (used in) operating activities, 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 income (loss), non-GAAP other expense, non-GAAP net loss inclusive of the non-controlling interest, non-GAAP net loss attributable to the Company, non-GAAP net income attributable to the non-controlling interest, non-GAAP loss per share - basic and diluted, attributable to the Company, respectively, and non-GAAP free cash flow. 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 as well as legal and advisory fees related to a potential significant transaction), stock-based compensation expense, amortization of pension actuarial losses, deferred compensation adjustments, integration expenses, restructuring expenses, goodwill impairments, the tax effect of these adjustments to net loss and purchases of property, plant and equipment. 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.

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)

 

 

June 30,

 

 

December 31,

 

2024

 

 

2023

Assets

 

 

 

 

Current Assets

 

 

 

 

Cash and cash equivalents

$

111,185

 

 

$

87,167

Accounts receivable, net

 

186,176

 

 

 

216,445

Other receivables

 

11,436

 

 

 

17,450

Income tax receivable

 

13,050

 

 

 

7,933

Inventory, net

 

287,860

 

 

 

362,295

Prepaid expenses and other current assets

 

58,612

 

 

 

45,566

Total Current Assets

 

668,319

 

 

 

736,856

Property, plant and equipment, net

 

134,578

 

 

 

123,020

Deferred tax assets

 

24,931

 

 

 

25,787

Goodwill

 

54,897

 

 

 

353,415

Intangibles, net

 

290,793

 

 

 

327,985

Other non-current assets

 

87,105

 

 

 

87,706

Long-term investments

 

30,159

 

 

 

27,743

Total Assets

$

1,290,782

 

 

$

1,682,512

 

 

 

 

 

Liabilities, Redeemable Non-Controlling Interest and Equity

 

 

 

 

Current Liabilities

 

 

 

 

Accounts payable

$

158,550

 

 

$

162,922

Unearned revenue

 

55,107

 

 

 

46,731

Accrued expenses and other liabilities

 

36,307

 

 

 

37,607

Accrued wages and benefits

 

37,520

 

 

 

27,030

Income tax payable, net

 

2,228

 

 

 

5,221

Total Current Liabilities

 

289,712

 

 

 

279,511

Non-current revolving credit agreement outstanding

 

190,273

 

 

 

195,000

Deferred tax liabilities

 

21,077

 

 

 

35,655

Non-current unearned revenue

 

26,584

 

 

 

25,109

Non-current pension liability

 

11,505

 

 

 

12,543

Deferred compensation liability

 

30,601

 

 

 

29,039

Non-current lease obligations

 

26,613

 

 

 

31,420

Other non-current liabilities

 

34,445

 

 

 

28,657

Total Liabilities

 

630,810

 

 

 

636,934

Redeemable Non-Controlling Interest

 

439,743

 

 

 

451,756

Equity

 

 

 

 

Common stock

 

791

 

 

 

790

Additional paid-in capital

 

802,737

 

 

 

795,304

Accumulated other comprehensive income

 

28,274

 

 

 

47,461

Retained deficit

 

(606,375

)

 

 

(243,908)

Treasury stock

 

(5,198

)

 

 

(5,825)

Total Equity

 

220,229

 

 

 

593,822

Total Liabilities, Redeemable Non-Controlling Interest and Equity

$

1,290,782

 

 

$

1,682,512

 

Condensed Consolidated Statements of Loss

(Unaudited)

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Network Solutions

 

$

179,194

 

 

$

283,002

 

 

$

360,467

 

 

$

565,420

 

Services & Support

 

 

46,797

 

 

 

44,376

 

 

 

91,697

 

 

 

85,870

 

Total Revenue

 

 

225,991

 

 

 

327,378

 

 

 

452,164

 

 

 

651,290

 

Cost of Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Network Solutions

 

 

124,457

 

 

 

216,960

 

 

 

250,783

 

 

 

436,090

 

Network Solutions - inventory write-down and other charges

 

 

143

 

 

 

 

 

 

8,925

 

 

 

 

Services & Support

 

 

19,816

 

 

 

17,865

 

 

 

38,626

 

 

 

34,839

 

Total Cost of Revenue

 

 

144,416

 

 

 

234,825

 

 

 

298,334

 

 

 

470,929

 

Gross Profit

 

 

81,575

 

 

 

92,553

 

 

 

153,830

 

 

 

180,361

 

Selling, general and administrative expenses

 

 

59,493

 

 

 

66,583

 

 

 

118,593

 

 

 

133,980

 

Research and development expenses

 

 

60,388

 

 

 

70,598

 

 

 

120,639

 

 

 

140,741

 

Goodwill impairment

 

 

 

 

 

 

 

 

292,583

 

 

 

 

Operating Loss

 

 

(38,306

)

 

 

(44,628

)

 

 

(377,985

)

 

 

(94,360

)

Interest and dividend income

 

 

366

 

 

 

358

 

 

 

763

 

 

 

662

 

Interest expense

 

 

(6,906

)

 

 

(4,064

)

 

 

(11,504

)

 

 

(7,351

)

Net investment gain

 

 

872

 

 

 

1,262

 

 

 

3,125

 

 

 

2,514

 

Other (expense) income, net

 

 

(901

)

 

 

2,494

 

 

 

409

 

 

 

2,191

 

Loss Before Income Taxes

 

 

(44,875

)

 

 

(44,578

)

 

 

(385,192

)

 

 

(96,344

)

Income tax (expense) benefit

 

 

(2,136

)

 

 

8,363

 

 

 

16,511

 

 

 

19,676

 

Net Loss

 

$

(47,011

)

 

$

(36,215

)

 

$

(368,681

)

 

$

(76,668

)

Less: Net Income attributable to non-controlling interest

 

 

2,854

 

 

 

2,882

 

 

 

5,734

 

 

 

2,512

 

Net Loss attributable to ADTRAN Holdings, Inc.

 

$

(49,865

)

 

$

(39,097

)

 

$

(374,415

)

 

$

(79,180

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

78,852

 

 

 

78,366

 

 

 

78,803

 

 

 

78,364

 

Weighted average shares outstanding – diluted

 

 

78,852

 

 

 

78,366

 

 

 

78,803

 

 

 

78,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share attributable to ADTRAN Holdings, Inc. – basic

 

$

(0.63

)

 

$

(0.50

)

 

$

(4.75

)

 

$

(1.01

)

Loss per common share attributable to ADTRAN Holdings, Inc. – diluted

 

$

(0.63

)

 

$

(0.50

)

 

$

(4.75

)

 

$

(1.01

)

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(368,681

)

 

$

(76,668

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

45,156

 

 

 

67,467

 

Goodwill impairment

 

 

292,583

 

 

 

 

Amortization of debt issuance cost

 

 

1,013

 

 

 

291

 

Gain on investments, net

 

 

(2,867

)

 

 

(4,530

)

Net loss on disposal of property, plant and equipment

 

 

185

 

 

 

 

Stock-based compensation expense

 

 

7,793

 

 

 

8,103

 

Deferred income taxes

 

 

(13,684

)

 

 

(31,962

)

Other, net

 

 

(126

)

 

 

130

 

Inventory write down - business efficiency program

 

 

4,135

 

 

 

 

Inventory reserves

 

 

3,722

 

 

 

20,885

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

26,913

 

 

 

40,975

 

Other receivables

 

 

6,279

 

 

 

561

 

Income taxes receivable, net

 

 

(5,653

)

 

 

 

Inventory

 

 

62,151

 

 

 

(6,920

)

Prepaid expenses, other current assets and other assets

 

 

(14,731

)

 

 

7,105

 

Accounts payable

 

 

(3,966

)

 

 

(67,923

)

Accrued expenses and other liabilities

 

 

19,152

 

 

 

110

 

Income taxes payable, net

 

 

(2,878

)

 

 

6,216

 

Net cash provided by (used in) operating activities

 

 

56,496

 

 

 

(36,160

)

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(29,369

)

 

 

(20,118

)

Proceeds from sales and maturities of available-for-sale investments

 

 

956

 

 

 

2,074

 

Purchases of available-for-sale investments

 

 

(121

)

 

 

(580

)

Proceeds from beneficial interests in securitized accounts receivable

 

 

 

 

 

1,156

 

Net cash used in investing activities

 

 

(28,534

)

 

 

(17,468

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Tax withholdings related to stock-based compensation settlements

 

 

(189

)

 

 

(6,315

)

Proceeds from stock option exercises

 

 

219

 

 

 

163

 

Dividend payments

 

 

 

 

 

(14,156

)

Proceeds from receivables purchase agreement

 

 

68,556

 

 

 

 

Repayments on receivables purchase agreement

 

 

(66,399

)

 

 

 

Proceeds from draw on revolving credit agreements

 

 

 

 

 

163,729

 

Repayment of revolving credit agreements

 

 

(5,000

)

 

 

(49,155

)

Payment of redemption of redeemable non-controlling interest

 

 

(25

)

 

 

(1,202

)

Payment of debt issuance cost

 

 

(1,994

)

 

 

 

Repayment of notes payable

 

 

 

 

 

(24,885

)

Net cash (used in) provided by financing activities

 

 

(4,832

)

 

 

68,179

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

23,130

 

 

 

14,551

 

Effect of exchange rate changes

 

 

888

 

 

 

1,099

 

Cash and cash equivalents, beginning of period

 

 

87,167

 

 

 

108,644

 

Cash and cash equivalents, end of period

 

$

111,185

 

 

$

124,294

 

 

 

 

 

 

 

 

Supplemental disclosure of cash financing activities:

 

 

 

 

 

 

Cash paid for interest

 

$

6,554

 

 

$

4,719

 

Cash paid for income taxes

 

$

7,433

 

 

$

 

Cash used in operating activities related to operating leases

 

$

4,780

 

 

$

5,082

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

Right-of-use assets obtained in exchange for lease obligations

 

$

1,999

 

 

$

515

 

Purchases of property, plant and equipment included in accounts payable

 

$

1,059

 

 

$

2,662

 

 

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

 

 

 

Six Months Ended

 

 

 

June 30, 2024

 

 

March 31, 2024

 

 

June 30, 2023

 

 

 

June 30, 2024

 

 

June 30, 2023

 

Total Revenue

 

$

225,991

 

 

$

226,173

 

 

$

327,378

 

 

 

$

452,164

 

 

$

651,290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Revenue

 

$

144,416

 

 

$

153,918

 

 

$

234,825

 

 

 

$

298,334

 

 

$

470,929

 

Acquisition-related expenses, amortizations and adjustments(1)

 

 

(10,064

)

 

 

(10,177

)

 

 

(33,439

)

 

 

 

(20,241

)

 

 

(66,017

)

Stock-based compensation expense

 

 

(280

)

 

 

(275

)

 

 

(335

)

 

 

 

(555

)

 

 

(575

)

Restructuring expenses(2)

 

 

(2,788

)

 

 

(11,247

)

 

 

 

 

 

 

(14,035

)

 

 

(76

)

Integration expenses(3)

 

 

(35

)

 

 

(35

)

 

 

 

 

 

 

(70

)

 

 

 

Non-GAAP Cost of Revenue

 

$

131,249

 

 

$

132,184

 

 

$

201,051

 

 

 

$

263,433

 

 

$

404,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

81,575

 

 

$

72,255

 

 

$

92,553

 

 

 

$

153,830

 

 

$

180,361

 

Non-GAAP Gross Profit

 

$

94,742

 

 

$

93,989

 

 

$

126,327

 

 

 

$

188,731

 

 

$

247,029

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

 

36.1

%

 

 

31.9

%

 

 

28.3

%

 

 

 

34.0

%

 

 

27.7

%

Non-GAAP Gross Margin

 

 

41.9

%

 

 

41.6

%

 

 

38.6

%

 

 

 

41.7

%

 

 

37.9

%

 

(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 SE. These expenses include inventory write down and other charges of $8.9 million for the six months ended June 30, 2024, incurred as a result of a strategy shift which included discontinuance of certain product lines in connection with the Business Efficiency Program. The restructuring program commenced upon the closing of the business combination with Adtran Networks SE and is expected to be substantially completed in late 2024. Additionally, as part of the Business Efficiency Program, management determined to close a facility in Greifswald, Germany. These expenses include restructuring wage charges of $2.3 million for the three and six months ended June 30, 2024, respectively. The closure of the facility is expected to be completed by December 31, 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 SE. Includes fees incurred for the expansion of internal controls at Adtran Networks SE and the implementation of the DPTLA.

Supplemental Information

Reconciliation of Operating Expenses to Non-GAAP Operating Expenses

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

Six Months Ended

 

 

 

 

June 30,

 

 

March 31,

 

 

June 30,

 

 

 

June 30,

 

 

June 30,

 

 

 

 

2024

 

 

2024

 

 

2023

 

 

 

2024

 

 

2023

 

 

Operating Expenses

 

$

119,881

 

 

$

411,934

 

 

$

137,181

 

 

 

$

531,815

 

 

$

274,721

 

 

Acquisition-related expenses, amortizations and adjustments

 

 

(7,233

)

(1)

 

(4,881

)

(6)

 

(4,398

)

(11)

 

 

(12,114

)

(15)

 

(8,982

)

(19)

Stock-based compensation expense

 

 

(3,321

)

(2)

 

(3,447

)

(7)

 

(3,974

)

(12)

 

 

(6,768

)

(16)

 

(7,432

)

(20)

Restructuring expenses

 

 

(14,742

)

(3)

 

(5,862

)

(8)

 

(5,868

)

(13)

 

 

(20,604

)

(17)

 

(8,229

)

(21)

Integration expenses

 

 

(531

)

(4)

 

(480

)

(9)

 

(563

)

(14)

 

 

(1,011

)

(18)

 

(1,412

)

(22)

Deferred compensation adjustments(5)

 

 

(848

)

 

 

(1,940

)

 

 

307

 

 

 

 

(2,788

)

 

 

(87

)

 

Goodwill impairment

 

 

 

 

 

(292,583

)

(10)

 

 

 

 

 

(292,583

)

(10)

 

 

 

Non-GAAP Operating Expenses

 

$

93,206

 

 

$

102,741

 

 

$

122,685

 

 

 

$

195,947

 

 

$

248,579

 

 

 

(1) Includes $3.9M of intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations and $2.8 million of legal and advisory fees related to a potential strategic transaction which are both 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 $0.9 million is included in research and development expenses on the condensed consolidated statements of loss.

(3) $3.5 million is included in selling, general and administrative expenses and $11.3 million is included in research and development expenses on the condensed consolidated statements of loss. Includes expenses of $13.5 million of wage related and other charges due to the Greifswald facility closure of which $2.6 million is included in selling, general and administrative and $10.9 million is included in research and development expenses on the condensed consolidated statements of loss.

(4) $0.5 million is included in selling, general and administrative expenses on the condensed consolidated statements of loss, and is primarily 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 SE.

(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 $4.4 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) $2.5 million is included in selling, general and administrative expenses and $1.0 million is included in research and development expenses on the condensed consolidated statements of loss.

(8) $1.8 million is included in selling, general and administrative expenses and $4.1 million is included in research and development expenses on the condensed consolidated statements of loss.

(9) $0.5 million is included in selling, general and administrative expenses and $0.02 million is included in research and development expenses on the condensed consolidated statements of loss, and is primarily 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 SE.

(10) Non-cash impairment of goodwill in our Network Solutions reporting unit, necessitated by factors such as a decrease in the Company's market capitalization, cautious service provider spending due to economic uncertainty and continued elevated customer inventory adjustments.

(11) 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.

(12) $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.

(13) $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.

(14) $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 SE and the implementation of the DPLTA.

(15) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $11.2 million is included in selling, general and administrative expenses and $0.9 million is included in research and development expenses on the condensed consolidated statements of loss.

(16) $4.9 million is included in selling, general and administrative expenses and $1.9 million is included in research and development expenses on the condensed consolidated statements of loss.

(17) $5.3 million is included in selling, general and administrative expenses and $15.3 million is included in research and development expenses on the condensed consolidated statements of loss. Includes expenses of $13.5 million of wage related and other charges due to the Greifswald facility closure of which $2.6 million is included in selling, general and administrative and $10.9 million is included in research and development expenses on the condensed consolidated statements of loss.

(18) $1.0 million is included in selling, general and administrative expenses and less than $0.1 million is included in research and development expenses on the condensed consolidated statements of loss, and is primarily 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 SE.

(19) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $8.0 million is included in selling, general and administrative expenses and $1.0 million is included in research and development expenses on the condensed consolidated statements of loss.

(20) $5.1 million is included in selling, general and administrative expenses and $2.3 million is included in research and development expenses on the condensed consolidated statements of loss.

(21) $3.5 million is included in selling, general and administrative expenses and $4.7 million is included in research and development expenses on the condensed consolidated statements of loss.

(22) $1.4 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 SE and the implementation of the DPLTA.

Supplemental Information

Reconciliation of Operating Loss to Non-GAAP Operating Income (Loss)

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

Six Months Ended

 

 

June 30,

 

 

March 31,

 

June 30,

 

 

 

June 30

 

June 30

 

 

2024

 

 

2024

 

 

2023

 

 

 

2024

 

 

2023

 

Operating Loss

 

$

(38,306

)

 

$

(339,679

)

 

$

(44,628

)

 

 

$

(377,985

)

 

$

(94,360

)

Acquisition related expenses, amortizations and adjustments(1)

 

 

17,297

 

 

 

15,058

 

 

 

37,837

 

 

 

 

32,355

 

 

 

74,999

 

Stock-based compensation expense

 

 

3,601

 

 

 

3,722

 

 

 

4,309

 

 

 

 

7,323

 

 

 

8,007

 

Restructuring expenses(2)

 

 

17,530

 

 

 

17,110

 

 

 

5,868

 

 

 

 

34,640

 

 

 

8,305

 

Integration expenses(3)

 

 

566

 

 

 

514

 

 

 

563

 

 

 

 

1,080

 

 

 

1,412

 

Deferred compensation adjustments(4)

 

 

848

 

 

 

1,940

 

 

 

(307

)

 

 

 

2,788

 

 

 

87

 

Goodwill impairment(5)

 

 

 

 

 

292,583

 

 

 

 

 

 

 

292,583

 

 

 

 

Non-GAAP Operating Income (Loss)

 

$

1,536

 

 

$

(8,752

)

 

$

3,642

 

 

 

$

(7,216

)

 

$

(1,550

)

 

(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 SE. These expenses include inventory write down and other charges incurred as a result of a strategic shift in certain product lines in connection with the restructuring program. Additionally, includes expenses related to the closure of the Greifswald facility.

(3) 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 SE. Includes fees incurred for the expansion of internal controls at Adtran Networks SE and the implementation of the DPTLA.

(4) 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.

(5) Non-cash impairment of goodwill in our Network Solutions reporting unit, necessitated by factors such as a decrease in the Company’s market capitalization, cautious service provider spending due to economic uncertainty and continued customer inventory adjustments.

Supplemental Information

Reconciliation of Other Expense to Non-GAAP Other Expense

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30, 2024

 

March 31, 2024

 

June 30, 2023

 

 

June 30, 2024

 

June 30, 2023

Interest and dividend income

 

$

366

 

 

$

397

 

 

$

358

 

 

 

$

763

 

 

$

662

 

Interest expense

 

 

(6,906

)

 

 

(4,598

)

 

 

(4,064

)

 

 

 

(11,504

)

 

 

(7,351

)

Net investment gain

 

 

872

 

 

 

2,253

 

 

 

1,262

 

 

 

 

3,125

 

 

 

2,514

 

Other (expense) income, net

 

 

(901

)

 

 

1,310

 

 

 

2,494

 

 

 

 

409

 

 

 

2,191

 

Total Other (Expense) Income

 

$

(6,569

)

 

$

(638

)

 

$

50

 

 

 

$

(7,207

)

 

$

(1,984

)

Deferred compensation adjustments (1)

 

 

(896

)

 

 

(2,439

)

 

 

(1,254

)

 

 

 

(3,335

)

 

 

(2,504

)

Pension expense (2)

 

 

7

 

 

 

7

 

 

 

6

 

 

 

 

14

 

 

 

13

 

Non-GAAP Other Expense

 

$

(7,458

)

 

$

(3,070

)

 

$

(1,198

)

 

 

$

(10,528

)

 

$

(4,475

)

 

(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 Income attributable to Non-Controlling Interest to

Non-GAAP Net 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 attributable to ADTRAN Holdings, Inc. and

Non-GAAP Loss per Common Share attributable to ADTRAN Holdings, Inc. – Basic and Diluted

(Unaudited)

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30, 2024

 

March 31, 2024

 

June 30, 2023

 

 

June 30, 2024

 

June 30, 2023

Net Loss attributable to ADTRAN Holdings, Inc.

 

$

(49,865

)

 

$

(324,550

)

 

$

(39,097

)

 

 

$

(374,415

)

 

$

(79,180

)

Plus: Net Income attributable to non-controlling interest (1)

 

 

2,854

 

 

 

2,880

 

 

 

2,882

 

 

 

 

5,734

 

 

 

2,512

 

Net Loss inclusive of non-controlling interest

 

$

(47,011

)

 

$

(321,670

)

 

$

(36,215

)

 

 

$

(368,681

)

 

$

(76,668

)

Acquisition related expenses, amortizations and adjustments

 

 

17,297

 

 

 

15,058

 

 

 

37,837

 

 

 

 

32,355

 

 

 

74,999

 

Stock-based compensation expense

 

 

3,601

 

 

 

3,722

 

 

 

4,309

 

 

 

 

7,323

 

 

 

8,007

 

Deferred compensation adjustments (2)

 

 

(48

)

 

 

(499

)

 

 

(1,561

)

 

 

 

(547

)

 

 

(2,417

)

Pension adjustments (3)

 

 

7

 

 

 

7

 

 

 

6

 

 

 

 

14

 

 

 

13

 

Restructuring expenses

 

 

17,530

 

 

 

17,110

 

 

 

5,868

 

 

 

 

34,640

 

 

 

8,305

 

Integration expenses

 

 

566

 

 

 

514

 

 

 

563

 

 

 

 

1,080

 

 

 

1,412

 

Goodwill impairment

 

 

 

 

 

292,583

 

 

 

 

 

 

 

292,583

 

 

 

 

Tax effect of adjustments to net loss

 

 

(7,880

)

 

 

(5,614

)

 

 

(13,426

)

 

 

 

(13,494

)

 

 

(25,733

)

Non-GAAP Net (Loss) Income inclusive of non-controlling interest

 

$

(15,938

)

 

$

1,211

 

 

$

(2,619

)

 

 

$

(14,727

)

 

$

(12,082

)

Less: Non-GAAP Net Income attributable to non-controlling interest (1)

 

 

2,854

 

 

 

2,880

 

 

 

2,882

 

 

 

 

5,734

 

 

 

4,041

 

Non-GAAP Net Loss attributable to ADTRAN Holdings, Inc.

 

$

(18,792

)

 

$

(1,669

)

 

$

(5,501

)

 

 

$

(20,461

)

 

$

(16,123

)

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Net Income attributable to non-controlling interest (1)

 

$

2,854

 

 

$

2,880

 

 

$

2,882

 

 

 

$

5,734

 

 

$

2,512

 

Acquisition related expenses, amortizations and adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,457

 

Restructuring expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

Integration expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37

 

Non-GAAP Net Income attributable to non-controlling interest (1)

 

$

2,854

 

 

$

2,880

 

 

$

2,882

 

 

 

$

5,734

 

 

$

4,041

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

78,852

 

 

 

78,814

 

 

 

78,366

 

 

 

 

78,803

 

 

 

78,364

 

Weighted average shares outstanding – diluted

 

 

78,852

 

 

 

78,814

 

 

 

78,366

 

 

 

 

78,803

 

 

 

78,364

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share attributable to ADTRAN Holdings, Inc. – basic

 

$

(0.63

)

 

$

(4.12

)

 

$

(0.50

)

 

 

$

(4.75

)

 

$

(1.01

)

Loss per common share attributable to ADTRAN Holdings, Inc. – diluted

 

$

(0.63

)

 

$

(4.12

)

 

$

(0.50

)

 

 

$

(4.75

)

 

$

(1.01

)

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Loss per common share attributable to ADTRAN – basic

 

$

(0.24

)

 

$

(0.02

)

 

$

(0.07

)

 

 

$

(0.26

)

 

$

(0.21

)

Non-GAAP Loss per common share attributable to ADTRAN – diluted

 

$

(0.24

)

 

$

(0.02

)

 

$

(0.07

)

 

 

$

(0.26

)

 

$

(0.21

)

 

(1) Represents the non-controlling interest portion of the Company's ownership of Adtran Networks SE 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.

Supplemental Information

Reconciliation of Net Cash Provided By (Used In) Operating Activities to Free Cash Flow

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

March 31,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

2024

 

 

2024

 

 

2023

 

 

 

2024

 

 

2023

 

Net Cash provided by (used in) operating activities

 

$

19,898

 

 

$

36,598

 

 

$

(16,234

)

 

 

$

56,496

 

 

$

(36,160

)

Purchases of property, plant and equipment

 

 

(15,995

)

 

 

(13,374

)

 

 

(11,679

)

 

 

 

(29,369

)

 

 

(20,118

)

Free cash flow

 

$

3,903

 

 

$

23,224

 

 

$

(27,913

)

 

 

$

27,127

 

 

$

(56,278

)

 

For media Gareth Spence +44 1904 699 358 public.relations@adtran.com

For investors Rhonda Lambert investor@adtran.com

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