ADTRAN Holdings, Inc. (NASDAQ: ADTN and FSE: QH9) (“ADTRAN
Holdings” or the “Company”) today announced its preliminary
unaudited financial results for the third quarter of 2024.
- Revenue: $227.7 million, up sequentially and above the
mid-point of guidance.
- Gross margin: GAAP gross margin: 37.4%; Non-GAAP gross margin:
42.1%, a sequential increase of 134 and 17 basis points,
respectively.
- Operating margin: GAAP operating margin negative 10.5% up
sequentially; Non-GAAP operating margin positive 1.1%, up
sequentially and above the mid-point of guidance.
- GAAP diluted loss per share of $0.36; Non-GAAP diluted loss per
share $0.05.
ADTRAN Holdings’ Chairman and Chief Executive Officer Tom
Stanton stated, “We delivered higher sequential revenue and
expanded gross and operating margins in the third quarter.
Importantly, we are seeing improvements in our key end markets as
we continue to grow our customer base. With the gradual recovery in
service provider spending, the success we are having in customer
acquisition, and encouraging booking trends, we expect sequential
revenue growth to continue in the fourth quarter. This outlook,
coupled with improving visibility, gives us confidence our
end-markets should continue to improve.”
“ADTRAN remains well-positioned for sustainable and profitable
growth as customer inventory levels normalize,” added Mr. Stanton.
“The continued trend to increase fiber access and optical
transport, combined with the ongoing transition from higher risk
vendors to providers like ADTRAN, serve as durable secular
catalysts. As we grow, we are confident we can unlock meaningful
operational leverage, driving accelerated profitability and
increased cash generation.”
Business Outlook1
For the fourth quarter of 2024, the Company expects revenue to
be within a range of $230 million to $245 million. Non-GAAP
operating margin is expected to be within a range of 0% to 4%.
1GAAP earnings guidance is not provided. Please see the
Explanation of Use of Non-GAAP Financial Measures at the end of
this press release for an explanation regarding the Company’s
omission of both GAAP earnings guidance and the applicable
reconciliation table. In addition, please see the Explanation of
Use of Non-GAAP Financial Measures and the Supplemental Information
Reconciliations of non-GAAP financial measures to the most directly
comparable GAAP measures at the end of this press release for
detailed information on calculating the non-GAAP measures
referenced herein.
The Company will hold a conference call to discuss its
preliminary third quarter results on Thursday, November 07, 2024,
at 9:30 a.m. Central Time, or 4:30 p.m. Central European 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 3rd 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.
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.
Cautionary Note Regarding Forward-Looking Statements
Statements contained in this press release and the accompanying
earnings call which are not historical facts, such as those
relating to expectations regarding future revenue and future
non-GAAP operating margin; future service provider spending; future
profitability, and growth, including customer acquisition and
booking trends, as well as future end market growth; future market
trends and customer inventory levels; future operational leverage
and cash generation; 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) risks and
uncertainties relating to our ability to comply with the covenants
set forth in our credit facility and to satisfy our payment
obligations to Adtran Networks’ minority shareholders under the
Domination and Profit and Loss Transfer Agreement between us and
Adtran Networks; (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 second quarter ended June 30, 2024, and
risks to be disclosed in its Form 10-Q for the quarterly period
ended September 30, 2024 to be filed with the SEC.
Additionally, the financial measures presented herein are
preliminary estimates, remain subject to our internal controls and
procedures, and are subject to risks and uncertainties, including,
among others, changes in connection with quarter-end adjustments.
Any variation between the Company’s actual results and the
preliminary financial information set forth herein may be
material.
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.
1Non-GAAP operating margin (which is calculated as non-GAAP
operating loss divided by revenue) is a non-GAAP financial measure.
The Company has provided fourth 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 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.
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..
Published by
ADTRAN Holdings, Inc.
www.adtran.com
Condensed Consolidated Balance
Sheets
(Preliminary,
Unaudited)
(In thousands)
September 30,
December 31,
2024
2023
Assets
Current Assets
Cash and cash equivalents
$
88,456
$
87,167
Accounts receivable, net
172,025
216,445
Other receivables
12,871
17,450
Income tax receivable
13,466
7,933
Inventory, net
282,926
362,295
Prepaid expenses and other current
assets
69,112
45,566
Total Current Assets
638,856
736,856
Property, plant and equipment, net
147,428
123,020
Deferred tax assets
25,697
25,787
Goodwill
56,884
353,415
Intangibles, net
286,098
327,985
Other non-current assets
86,677
87,706
Long-term investments
31,506
27,743
Total Assets
$
1,273,146
$
1,682,512
Liabilities, Redeemable Non-Controlling
Interest and Equity
Current Liabilities
Accounts payable
$
173,354
$
162,922
Unearned revenue
54,615
46,731
Accrued expenses and other liabilities
34,482
36,204
Accrued wages and benefits
40,366
27,030
Income tax payable, net
2,007
5,221
Total Current Liabilities
304,824
278,108
Non-current revolving credit agreement
outstanding
189,849
195,000
Deferred tax liabilities
21,483
35,655
Non-current unearned revenue
24,901
25,109
Non-current pension liability
12,149
12,543
Deferred compensation liability
32,046
29,039
Non-current lease obligations
25,635
31,420
Other non-current liabilities
26,489
28,657
Total Liabilities
637,376
635,531
Redeemable Non-Controlling
Interest
421,776
442,152
Equity
Common stock
792
790
Additional paid-in capital
806,187
795,304
Accumulated other comprehensive income
47,377
47,465
Retained deficit
(635,164
)
(232,905
)
Treasury stock
(5,198
)
(5,825
)
Total Equity
213,994
604,829
Total Liabilities, Redeemable
Non-Controlling Interest and Equity
$
1,273,146
$
1,682,512
Condensed Consolidated
Statements of Loss
(Preliminary,
Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Revenue
Network Solutions
$
181,488
$
228,564
$
541,955
$
793,984
Services & Support
46,216
43,767
137,913
129,637
Total Revenue
227,704
272,331
679,868
923,621
Cost of Revenue
Network Solutions
126,103
160,244
376,886
596,334
Network Solutions - other (credits),
charges and inventory write-down
(328
)
21,043
8,597
21,043
Services & Support
16,678
16,807
55,304
51,646
Total Cost of Revenue
142,453
198,094
440,787
669,023
Gross Profit
85,251
74,237
239,081
254,598
Selling, general and administrative
expenses
57,620
62,907
176,214
196,887
Research and development expenses
51,615
62,752
172,253
203,493
Goodwill impairment
—
37,874
292,583
37,874
Operating Loss
(23,984
)
(89,296
)
(401,969
)
(183,656
)
Interest and dividend income
664
521
1,427
1,183
Interest expense
(5,679
)
(4,507
)
(17,183
)
(11,858
)
Net investment gain (loss)
1,382
(1,443
)
4,507
1,071
Other (expense) income, net
(850
)
2,523
(441
)
4,714
Loss Before Income Taxes
(28,467
)
(92,202
)
(413,659
)
(188,546
)
Income tax (expense) benefit
(390
)
16,553
16,121
36,229
Net Loss
$
(28,857
)
$
(75,649
)
$
(397,538
)
$
(152,317
)
Less: Net (Loss) Income attributable to
non-controlling interest
2,382
2,561
7,417
4,380
Net Loss attributable to ADTRAN
Holdings, Inc.
$
(31,239
)
$
(78,210
)
$
(404,955
)
$
(156,697
)
Weighted average shares outstanding –
basic
78,952
78,389
78,873
78,378
Weighted average shares outstanding –
diluted
78,952
78,389
78,873
78,378
Loss per common share attributable to
ADTRAN Holdings, Inc. – basic
$
(0.36
)
(1)
$
(1.00
)
$
(5.10
)
(1)
$
(2.00
)
Loss per common share attributable to
ADTRAN Holdings, Inc. – diluted
$
(0.36
)
(1)
$
(1.00
)
$
(5.10
)
(1)
$
(2.00
)
(1) Loss per common share
attributable to ADTRAN Holdings, Inc. reflects $3.0 million gain on
redemption of redeemable non-controlling interest for the three and
nine months ended September 30, 2024.
Condensed Consolidated
Statements of Cash Flows
(Preliminary,
Unaudited)
(In thousands)
Nine Months Ended
September 30,
2024
2023
Cash flows from operating
activities:
Net loss
$
(397,538
)
$
(152,317
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization
68,421
91,422
Goodwill impairment
292,583
37,874
Amortization of debt issuance cost
1,013
607
Gain on investments, net
(4,238
)
(3,316
)
Net loss on disposal of property, plant
and equipment
203
—
Stock-based compensation expense
11,417
12,229
Deferred income taxes
(13,399
)
(45,941
)
Other, net
(267
)
204
Inventory write down - business efficiency
program
4,135
21,043
Inventory reserves
6,667
29,836
Changes in operating assets and
liabilities:
Accounts receivable, net
59,446
47,347
Other receivables
4,875
8,340
Income taxes receivable, net
(5,682
)
—
Inventory
69,412
536
Prepaid expenses, other current assets and
other assets
(20,083
)
1,816
Accounts payable
9,697
(87,903
)
Accrued expenses and other liabilities
15,039
6,476
Income taxes payable, net
(3,175
)
2,433
Net cash provided by (used in)
operating activities
98,526
(29,314
)
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(48,183
)
(33,674
)
Proceeds from sales and maturities of
available-for-sale investments
1,195
10,545
Purchases of available-for-sale
investments
(195
)
(807
)
Proceeds from beneficial interests in
securitized accounts receivable
282
1,178
Net cash used in investing
activities
(46,901
)
(22,758
)
Cash flows from financing
activities:
Tax withholdings related to stock-based
compensation settlements
(189
)
(6,331
)
Proceeds from stock option exercises
219
187
Dividend payments
—
(21,237
)
Proceeds from receivables purchase
agreement
68,556
—
Repayments on receivables purchase
agreement
(83,772
)
—
Proceeds from draw on revolving credit
agreements
—
163,760
Repayment of revolving credit
agreements
(5,000
)
(49,233
)
Payment for redemption of redeemable
non-controlling interest
(17,395
)
(1,196
)
Payment for annual recurring compensation
to non-controlling interest
(10,084
)
—
Payment of debt issuance cost
(1,994
)
(708
)
Repayment of notes payable
—
(24,931
)
Net cash (used in) provided by
financing activities
(49,659
)
60,311
Net increase in cash and cash
equivalents
1,966
8,239
Effect of exchange rate changes
(677
)
(791
)
Cash and cash equivalents, beginning of
period
87,167
108,644
Cash and cash equivalents, end of
period
$
88,456
$
116,092
Supplemental disclosure of cash financing
activities:
Cash paid for interest
$
18,225
$
8,540
Cash paid for income taxes
$
9,122
$
—
Cash used in operating activities related
to operating leases
$
7,380
$
7,378
Supplemental disclosure of non-cash
investing activities:
Right-of-use assets obtained in exchange
for lease obligations
$
2,122
$
8,490
Purchases of property, plant and equipment
included in accounts payable
$
952
$
2,508
Revision of Previously Issued Condensed Consolidated
Financial Statements
Following the third quarter of 2024, the Company identified
errors primarily impacting the carrying values of the redeemable
non-controlling interest, retained deficit, the net income
attributable to the non-controlling interest and the net loss
attributable to the Company and, as a consequence, of the loss per
common share attributable to the Company. The Company has evaluated
the errors and determined that the related impacts were not
material to the previously issued consolidated financial statements
for any prior period. A summary of the corrections to the Company's
Condensed Consolidated Financial Statements for the periods ended
March 31, 2023, June 30, 2023, September 30, 2023, December 31,
2023, March 31, 2024 and June 30, 2024, is as follows:
- Pursuant to the terms of the DPLTA, each Adtran Networks
shareholder (other than the Company) is entitled to receive from us
an Annual Recurring Compensation payment of €0.52 per share. The
Company erroneously accrued this liability every quarter at €0.59
per share, overstating the associated accrual, the net income
attributable to non-controlling interest and the net loss
attributable to ADTRAN Holdings, Inc. for fiscal periods beginning
with the quarter ended March 31, 2023 through the quarter ended
June 30, 2024.
- For the periods beginning with the quarter ended March 31, 2023
through the quarter ended June 30, 2024 the Company remeasured the
redeemable non-controlling interest each quarter-end at the current
exchange rate of Euros to U.S. Dollar. The Company treated the
redeemable non-controlling interest as a monetary mezzanine equity
instrument but should have treated it as a non-monetary mezzanine
equity instrument not subject to remeasurement.
For additional information, please see our Note 1 to the
Condensed Consolidated Financial Statements set forth in the Form
10-Q for the quarterly period ended September 30, 2024 to be filed
with the SEC.
Supplemental
Information
Reconciliation of Preliminary
Gross Profit and Preliminary Gross Margin to
Preliminary Non-GAAP Gross
Profit and Preliminary Non-GAAP Gross Margin
(Preliminary,
Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30, 2024
June 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
Total Revenue
$
227,704
$
225,991
$
272,331
$
679,868
$
923,621
Cost of Revenue
$
142,453
$
144,416
$
198,094
$
440,787
$
669,023
Acquisition-related expenses,
amortizations and adjustments(1)
(10,276
)
(10,064
)
(13,537
)
(30,517
)
(79,554
)
Stock-based compensation expense
(270
)
(280
)
(279
)
(825
)
(854
)
Restructuring expenses(2)
(7
)
(2,788
)
(21,630
)
(14,042
)
(21,706
)
Integration expenses(3)
(34
)
(35
)
(154
)
(104
)
(154
)
Non-GAAP Cost of Revenue
$
131,866
$
131,249
$
162,494
$
395,299
$
566,755
Gross Profit
$
85,251
$
81,575
$
74,237
$
239,081
$
254,598
Non-GAAP Gross Profit
$
95,838
$
94,742
$
109,837
$
284,569
$
356,866
Gross Margin
37.4
%
36.1
%
27.3
%
35.2
%
27.6
%
Non-GAAP Gross Margin
42.1
%
41.9
%
40.3
%
41.9
%
38.6
%
(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 and other charges of $8.6
million for the nine months ended September 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 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 $4.9 million for the nine months
ended September 30, 2024. 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.
Supplemental
Information
Reconciliation of Preliminary
Operating Expenses to Preliminary Non-GAAP Operating
Expenses
(Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2024
2024
2023
2024
2023
Operating Expenses
$
109,235
$
119,881
$
163,533
$
641,050
$
438,254
Acquisition-related expenses,
amortizations and adjustments
(5,054
)
(1)
(7,233
)
(6)
(4,534
)
(10)
(17,168
)
(14)
(13,516
)
(19)
Stock-based compensation expense
(3,126
)
(2)
(3,321
)
(7)
(3,251
)
(11)
(9,894
)
(15)
(10,683
)
(20)
Restructuring expenses
(5,930
)
(3)
(14,742
)
(8)
(3,242
)
(12)
(26,534
)
(16)
(11,471
)
(21)
Integration expenses
(333
)
(4)
(531
)
(9)
(1,485
)
(13)
(1,344
)
(17)
(2,897
)
(22)
Deferred compensation adjustments(5)
(1,471
)
(848
)
1,801
(4,259
)
1,714
Goodwill impairment(18)
—
—
(37,874
)
(292,583
)
(37,874
)
Non-GAAP Operating Expenses
$
93,321
$
93,206
$
114,948
$
289,268
$
363,527
(1) Includes $4.0M of intangible
amortization of developed technology, customer relationships, and
trade names acquired in connection with business combinations and
$0.6 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) $2.2 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.
(3) $2.7 million is included in selling,
general and administrative expenses and $3.2 million is included in
research and development expenses on the condensed consolidated
statements of loss. Includes expenses of $3.2 million of wage
related and other charges due to the Greifswald facility closure of
which $0.8 million is included in selling, general and
administrative and $2.4 million is included in research and
development expenses on the condensed consolidated statements of
loss.
(4) $0.3 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.
(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 $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 contemplated
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.
(7) $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.
(8) $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.
(9) $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.
(10) 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.
(11) $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.
(12) $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.
(13) $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.
(14) Includes intangible amortization of
developed technology, customer relationships, and trade names
acquired in connection with business combinations, of which $15.8
million is included in selling, general and administrative expenses
and $1.4 million is included in research and development expenses
on the condensed consolidated statements of loss.
(15) $7.1 million is included in selling,
general and administrative expenses and $2.8 million is included in
research and development expenses on the condensed consolidated
statements of loss.
(16) $8.0 million is included in selling,
general and administrative expenses and $18.6 million is included
in research and development expenses on the condensed consolidated
statements of loss. Includes expenses of $16.5 million of wage
related and other charges due to the Greifswald facility closure of
which $3.2 million is included in selling, general and
administrative and $13.3 million is included in research and
development expenses on the condensed consolidated statements of
loss.
(17) $1.3 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. 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 $0.7 million is stock compensation expense for
the program.
(18) 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.
(19) 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.
(20) $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.
(21) $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.
(22) $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.
Supplemental
Information
Reconciliation of Preliminary
Operating Loss to Preliminary Non-GAAP Operating Income
(Loss)
(Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2024
2024
2023
2024
2023
Operating Loss
$
(23,984
)
$
(38,306
)
$
(89,296
)
$
(401,969
)
$
(183,656
)
Acquisition related expenses,
amortizations and adjustments(1)
15,330
17,297
18,070
47,685
93,069
Stock-based compensation expense
3,396
3,601
3,530
10,719
11,537
Restructuring expenses(2)
5,936
17,530
24,873
40,576
33,178
Integration expenses(3)
367
566
1,639
1,447
3,051
Deferred compensation adjustments(4)
1,471
848
(1,801
)
4,259
(1,714
)
Goodwill impairment(5)
—
—
37,874
292,583
37,874
Non-GAAP Operating Income
(Loss)
$
2,516
$
1,536
$
(5,111
)
$
(4,700
)
$
(6,661
)
(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 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. Includes fees incurred for the expansion of
internal controls at Adtran Networks 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 Preliminary
Other Expense to Preliminary Non-GAAP Other Expense
(Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30, 2024
June 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
Interest and dividend income
$
664
$
366
$
521
$
1,427
$
1,183
Interest expense
(5,679
)
(6,906
)
(4,507
)
(17,183
)
(11,858
)
Net investment gain (loss)
1,382
872
(1,443
)
4,507
1,071
Other (expense) income, net
(850
)
(901
)
2,523
(441
)
4,714
Total Other Expense
$
(4,483
)
$
(6,569
)
$
(2,906
)
$
(11,690
)
$
(4,890
)
Deferred compensation adjustments (1)
(1,294
)
(896
)
1,117
(4,629
)
(1,387
)
Pension expense (2)
7
7
7
21
20
Non-GAAP Other Expense
$
(5,770
)
$
(7,458
)
$
(1,782
)
$
(16,298
)
$
(6,257
)
(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 Preliminary
Net Loss inclusive of Non-Controlling Interest to
Preliminary Non-GAAP Net
(Loss) Income inclusive of Non-Controlling Interest
(Unaudited)
and
Reconciliation of Preliminary
Net Income attributable to Non-Controlling Interest to
Preliminary Non-GAAP Net
Income attributable to Non-Controlling Interest
(Unaudited)
and
Reconciliation of Preliminary
Net Loss attributable to ADTRAN Holdings, Inc. and
Preliminary Loss per Common
Share attributable to ADTRAN Holdings, Inc. – Basic and Diluted
to
Preliminary Non-GAAP Net Loss
attributable to ADTRAN Holdings, Inc. and
Preliminary Non-GAAP Loss 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, 2024
June 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
Net Loss attributable to ADTRAN
Holdings, Inc.
(31,239
)
$
(49,515
)
$
(78,210
)
$
(404,955
)
$
(156,697
)
Plus: Net (Loss) Income attributable to
non-controlling interest (1)
2,382
2,504
2,561
7,417
4,380
Net Loss inclusive of non-controlling
interest
$
(28,857
)
$
(47,011
)
$
(75,649
)
$
(397,538
)
$
(152,317
)
Acquisition related expenses,
amortizations and adjustments
15,330
17,297
18,070
47,685
93,069
Stock-based compensation expense
3,396
3,601
3,530
10,719
11,537
Deferred compensation adjustments (2)
177
(48
)
(684
)
(370
)
(3,101
)
Pension adjustments (3)
7
7
7
21
20
Restructuring expenses
5,936
17,530
24,873
40,576
33,178
Integration expenses
367
566
1,639
1,447
3,051
Goodwill impairment
—
—
37,874
292,583
37,874
Tax effect of adjustments to net loss
(4)
(712
)
755
(21,024
)
(19,022
)
(50,146
)
Non-GAAP Net Loss inclusive of
non-controlling interest
$
(4,356
)
$
(7,303
)
$
(11,364
)
$
(23,899
)
$
(26,835
)
Less: Non-GAAP Net (Loss) Income
attributable to non-controlling interest (1)
2,382
2,504
2,561
7,417
5,909
Non-GAAP Net Loss attributable to
ADTRAN Holdings, Inc.
$
(6,738
)
$
(9,807
)
$
(13,925
)
$
(31,316
)
$
(32,744
)
GAAP Net Income attributable to
non-controlling interest (1)
$
2,382
$
2,504
$
2,561
$
7,417
$
4,380
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)
$
2,382
$
2,504
$
2,561
$
7,417
$
5,909
Weighted average shares outstanding –
basic
78,952
78,852
78,389
78,873
78,378
Weighted average shares outstanding –
diluted
78,952
78,852
78,389
78,873
78,378
Loss per common share attributable to
ADTRAN Holdings, Inc. – basic
$
(0.36
)
(5)
$
(0.63
)
$
(1.00
)
$
(5.10
)
(5)
$
(2.00
)
Loss per common share attributable to
ADTRAN Holdings, Inc. – diluted
$
(0.36
)
(5)
$
(0.63
)
$
(1.00
)
$
(5.10
)
(5)
$
(2.00
)
Non-GAAP Loss per common share
attributable to ADTRAN – basic
$
(0.05
)
(5)
$
(0.12
)
$
(0.18
)
$
(0.36
)
(5)
$
(0.42
)
Non-GAAP Loss per common share
attributable to ADTRAN – diluted
$
(0.05
)
(5)
$
(0.12
)
$
(0.18
)
$
(0.36
)
(5)
$
(0.42
)
(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.
(4) Represents the tax effect of non-GAAP
adjustments. Beginning in period ending September 30, 2024, the
Company changed its method of calculating non-GAAP income taxes by
applying blended statutory tax rates to non-GAAP losses before
income taxes in order to include current and deferred income tax
expenses that are commensurate with the non-GAAP measure of
profitability. The blended statutory tax rate is calculated using
0%, resulting in no tax benefits net of impact of valuation
allowance, for the loss jurisdiction’s non-GAAP losses before
income taxes and 30% for all remaining jurisdictions’ non-GAAP
income before income taxes. Prior periods have been adjusted to
reflect the application of blended statutory tax rates, net of
impact of valuation allowance, to non-GAAP losses before income
taxes as opposed to the previous application of blended statutory
and effective tax rates to separate non-GAAP adjustments. We
previously reported the tax effect of the adjustment to non-GAAP
net loss under the prior method of $7.9 million, $49.1 million and
$21.0 million for the three and nine months ended September 30,
2023 and for the three months ended June 30, 2024,
respectively.
(5) Loss per common share attributable to
ADTRAN Holdings, Inc. and Non-GAAP Loss per common share
attributable to ADTRAN Holdings, Inc reflects $3.0 million of gain
on redemption of redeemable non-controlling interest for the three
and nine months ended September 30, 2024.
Supplemental
Information
Reconciliation of Preliminary
Net Cash Provided By (Used In) Operating Activities to Preliminary
Free Cash Flow
(Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2024
2024
2023
2024
2023
Net Cash provided by (used in)
operating activities
$
42,030
$
19,898
$
6,846
$
98,526
$
(29,314
)
Purchases of property, plant and
equipment(1)
(18,814
)
(15,995
)
(13,556
)
(48,183
)
(33,674
)
Free cash flow
$
23,216
$
3,903
$
(6,710
)
$
50,343
$
(62,988
)
(1) Purchases related to capital
expenditures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241106734785/en/
For media Gareth Spence +44 1904 699 358
public.relations@adtran.com
For investors Peter Schuman +1 650 743 7948
investor.relations@adtran.com
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