Le Lézard
Classified in: Science and technology, Business
Subjects: EARNINGS, Conference Call, Webcast

ADTRAN Holdings, Inc. reports preliminary fourth quarter 2023 financial results


ADTRAN Holdings, Inc. (NASDAQ: ADTN and FSE: QH9) ("ADTRAN Holdings" or the "Company") today announced its preliminary unaudited financial results for the fourth quarter of 2023. All results in this release are approximate due to the preliminary nature of the announcement.

Preliminary GAAP gross margin for the quarter was 34.8% and improved by 483 bps year-over-year and 754 bps quarter-over-quarter. Besides lower purchasing and transportation costs, the main driver for this improvement were lower acquisition-related expenses, amortizations and adjustments. Additionally, the current quarter was negatively impacted by an inventory write-off of $3.3 million compared to a $21 million inventory write-off in Q3 2023.

Preliminary non-GAAP gross margin of 41.9% was positively impacted by a favorable customer and product mix. This compares to 40.3% in Q3 2023 and 39.1% in the year-ago quarter representing an increase of 155 bps sequentially and 277 bps year over year.

Preliminary GAAP operating margin for the fourth quarter was negative 16.7%, and it was negatively impacted by lower revenue and acquisition-related expenses, amortizations and adjustments. The company reduced GAAP operating expenses by 7.6% sequentially and 17.0% year-over-year.

Preliminary non-GAAP operating margin for the quarter was negative 1.4%, which was at the upper end of the guidance range of between -7% and 0% of revenues. The Company reduced non-GAAP operating expenses by 15.1% sequentially and 17.7% year-over-year.

Preliminary GAAP net loss attributable to the Company for the fourth quarter of 2023 was $109.9 million. Preliminary diluted loss per share attributable to the Company for the fourth quarter was $1.40.

Preliminary non-GAAP net loss attributable to the Company for the fourth quarter of 2023 was $85.9 million. Preliminary non-GAAP diluted loss per share attributable to the Company for the fourth quarter was $1.09.

ADTRAN Holdings' Chairman and Chief Executive Officer Tom Stanton stated, "Preliminary Q4 revenue came in as expected with non-GAAP profitability at the upper end of our guidance driven by continued gross margin improvements and lower operating expenses. Although revenues continued to remain challenging due to the macroeconomic environment and elevated customer inventories, we believe the fundamental demand landscape remains unchanged. Service providers continue to pursue the same objectives of expanding their fiber footprint and enhancing bandwidth, necessitating global infrastructure buildouts. With the ongoing implementation of our cost improvement measures, we believe that we are transforming into a more streamlined and efficient company. We expect that this will position us well to excel when spending returns to normal levels."

The Company confirmed that it will hold a conference call to discuss its preliminary fourth quarter results on Tuesday, February 27, 2024, 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, 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 4th 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 [email protected].

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; the ability of ADTRAN Holdings' to reduce expenses in the coming year and the amount thereof through the implementation of the business efficiency program; 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 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 the recent restatements of our previously issued consolidated financial statements and ongoing material weaknesses in our internal control over financial reporting; ? (iv) risks and uncertainties related to the completed business combination between the Company, ADTRAN, Inc. ("ADTRAN") and Adtran Networks SE ("Adtran Networks") and subsequent integration efforts;(v) the risk 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, 2022, as amended, and Form 10?Q for the quarterly period ended September 30, 2023, as well as its Form 10?K for the year ended December 31, 2023 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) income inclusive of the non-controlling interest, net (loss) income attributable to the Company, net income (loss) attributable to the non-controlling interest, and (loss) earnings 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 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, 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.

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

(Preliminary, Unaudited)

(In thousands)

 

ASSETS

 

December 31,
2023

 

 

December 31,
2022

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

87,167

 

 

$

108,644

 

Short-term investments

 

 

?

 

 

 

340

 

Accounts receivable, net

 

 

216,445

 

 

 

279,435

 

Other receivables

 

 

22,408

 

 

 

32,831

 

Inventory, net

 

 

362,295

 

 

 

427,531

 

Prepaid expenses and other current assets

 

 

45,565

 

 

 

33,577

 

Total Current Assets

 

 

733,880

 

 

 

882,358

 

Property, plant and equipment, net

 

 

123,020

 

 

 

110,699

 

Deferred tax assets, net

 

 

25,787

 

 

 

67,839

 

Goodwill

 

 

353,415

 

 

 

381,724

 

Intangibles, net

 

 

327,985

 

 

 

401,211

 

Other non-current assets

 

 

87,706

 

 

 

66,998

 

Long-term investments

 

 

27,743

 

 

 

32,665

 

Total Assets

 

$

1,679,536

 

 

$

1,943,494

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

$

162,922

 

 

$

237,699

 

Revolving credit agreements outstanding

 

 

?

 

 

 

35,936

 

Notes payable

 

 

?

 

 

 

24,598

 

Unearned revenue

 

 

46,731

 

 

 

41,193

 

Accrued expenses and other liabilities

 

 

37,607

 

 

 

35,235

 

Accrued wages and benefits

 

 

27,030

 

 

 

44,882

 

Income tax payable, net

 

 

2,245

 

 

 

9,032

 

Total Current Liabilities

 

 

276,535

 

 

 

428,575

 

Non-current revolving credit agreement outstanding

 

 

195,000

 

 

 

60,000

 

Deferred tax liabilities

 

 

35,655

 

 

 

61,629

 

Non-current unearned revenue

 

 

25,109

 

 

 

19,239

 

Non-current pension liability

 

 

12,543

 

 

 

10,624

 

Deferred compensation liability

 

 

29,039

 

 

 

26,668

 

Non-current lease obligations

 

 

31,420

 

 

 

22,807

 

Other non-current liabilities

 

 

28,657

 

 

 

10,339

 

Total Liabilities

 

 

633,958

 

 

 

639,881

 

Redeemable Non-Controlling Interest

 

 

451,756

 

 

 

?

 

Equity

 

 

 

 

 

 

Common stock

 

 

790

 

 

 

781

 

Additional paid-in capital

 

 

774,579

 

 

 

895,834

 

Accumulated other comprehensive income

 

 

68,186

 

 

 

46,713

 

Retained (deficit) earnings

 

 

(243,908

)

 

 

55,338

 

Treasury stock

 

 

(5,825

)

 

 

(4,125

)

Non-controlling interest

 

 

?

 

 

 

309,072

 

Total Equity

 

 

593,822

 

 

 

1,303,613

 

Total Liabilities and Equity

 

$

1,679,536

 

 

$

1,943,494

 

Condensed Consolidated Statements of (Loss) Income

(Preliminary, Unaudited)

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Network Solutions

 

$

180,405

 

 

$

317,487

 

 

$

974,389

 

 

$

916,793

 

Services & Support

 

 

45,074

 

 

 

40,784

 

 

 

174,711

 

 

 

108,743

 

Total Revenue

 

 

225,479

 

 

 

358,271

 

 

 

1,149,100

 

 

 

1,025,536

 

Cost of Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Network Solutions

 

 

126,248

 

 

 

233,925

 

 

 

722,582

 

 

 

647,105

 

Network Solutions - Inventory Write Down

 

 

3,270

 

 

 

?

 

 

 

24,313

 

 

 

?

 

Services & Support

 

 

17,496

 

 

 

16,943

 

 

 

69,142

 

 

 

51,179

 

Total Cost of Revenue

 

 

147,014

 

 

 

250,868

 

 

 

816,037

 

 

 

698,284

 

Gross Profit

 

 

78,465

 

 

 

107,403

 

 

 

333,063

 

 

 

327,252

 

Selling, general and administrative expenses

 

 

61,262

 

 

 

78,243

 

 

 

258,149

 

 

 

208,889

 

Research and development expenses

 

 

54,818

 

 

 

61,570

 

 

 

258,311

 

 

 

173,757

 

Asset impairment

 

 

?

 

 

 

464

 

 

 

?

 

 

 

17,433

 

Goodwill impairment

 

 

?

 

 

 

?

 

 

 

37,874

 

 

 

?

 

Operating Loss

 

 

(37,615

)

 

 

(32,874

)

 

 

(221,271

)

 

 

(72,827

)

Interest and dividend income

 

 

1,157

 

 

 

1,355

 

 

 

2,340

 

 

 

2,123

 

Interest expense

 

 

(4,441

)

 

 

(2,010

)

 

 

(16,299

)

 

 

(3,437

)

Net investment gain (loss)

 

 

1,683

 

 

 

(587

)

 

 

2,754

 

 

 

(11,339

)

Other income, net

 

 

(3,448

)

 

 

11,568

 

 

 

1,266

 

 

 

14,517

 

Loss Before Income Taxes

 

 

(42,664

)

 

 

(22,548

)

 

 

(231,210

)

 

 

(70,963

)

Income tax (expense) benefit

 

 

(64,362

)

 

 

57,503

 

 

 

(28,133

)

 

 

62,075

 

Net (Loss) Income

 

$

(107,026

)

 

$

34,955

 

 

$

(259,343

)

 

$

(8,888

)

Net Income (loss) attributable to non-controlling interest

 

 

2,919

 

 

 

(3,926

)

 

 

8,345

 

 

 

(6,851

)

Net (Loss) Income attributable to ADTRAN Holdings, Inc.

 

$

(109,945

)

 

$

38,881

 

 

$

(267,688

)

 

$

(2,037

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding ? basic

 

 

78,530

 

 

 

77,659

 

 

 

78,416

 

 

 

62,346

 

Weighted average shares outstanding ? diluted

 

 

78,530

 

 

 

79,243

 

 

 

78,416

 

 

 

62,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) Earnings per common share attributable to ADTRAN Holdings, Inc. ? basic

 

$

(1.40

)

 

$

0.50

 

 

$

(3.41

)

 

$

(0.03

)

(Loss) Earnings per common share attributable to ADTRAN Holdings, Inc. ? diluted

 

$

(1.40

)

 

$

0.49

 

 

$

(3.41

)

 

$

(0.03

)

Condensed Consolidated Statements of Cash Flows

(Preliminary, Unaudited)

(In thousands)

 

 

 

Twelve Months Ended
December 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net Loss

 

$

(259,343

)

 

$

(8,888

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

112,949

 

 

 

67,553

 

Asset impairment

 

 

?

 

 

 

17,433

 

Goodwill impairment

 

 

37,874

 

 

 

?

 

Amortization of debt issuance cost

 

 

862

 

 

 

288

 

(Accretion) amortization on available-for-sale investments, net

 

 

(22

)

 

 

19

 

(Gain) loss on investments

 

 

(2,900

)

 

 

9,826

 

Net loss on disposal of property, plant and equipment

 

 

458

 

 

 

152

 

Stock-based compensation expense

 

 

16,016

 

 

 

28,322

 

Deferred income taxes

 

 

15,558

 

 

 

(62,388

)

Inventory write down

 

 

24,313

 

 

 

?

 

Inventory reserves

 

 

25,546

 

 

 

(2,363

)

Other, net

 

 

(2,942

)

 

 

?

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

58,283

 

 

 

788

 

Other receivables

 

 

10,560

 

 

 

(20,088

)

Inventory

 

 

20,537

 

 

 

(73,237

)

Prepaid expenses other current assets and other assets

 

 

(29,883

)

 

 

(7,116

)

Accounts payable

 

 

(91,907

)

 

 

28,105

 

Accrued expenses and other liabilities

 

 

17,929

 

 

 

(20,483

)

Income taxes payable, net

 

 

(6,820

)

 

 

(2,151

)

Net cash used in operating activities

 

 

(52,932

)

 

 

(44,228

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(43,121

)

 

 

(17,072

)

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

 

 

10,567

 

 

 

51,661

 

Purchases of available-for-sale investments

 

 

(868

)

 

 

(23,899

)

Proceeds from beneficial interests in securitized accounts receivable

 

 

8,547

 

 

 

1,126

 

Proceeds from disposals of property, plant and equipment

 

 

?

 

 

 

12

 

Insurance proceeds received

 

 

?

 

 

 

?

 

Acquisition of business, net of cash acquired

 

 

?

 

 

 

44,003

 

Net cash (used in) provided by investing activities

 

 

(24,875

)

 

 

55,831

 

Cash flows from financing activities:

 

 

 

 

 

 

Tax withholdings related to stock-based compensation settlements

 

 

(6,459

)

 

 

(4,253

)

Proceeds from stock option exercises

 

 

540

 

 

 

6,904

 

Dividend payments

 

 

(21,237

)

 

 

(22,885

)

Proceeds from receivables purchase agreement

 

 

14,099

 

 

 

?

 

Proceeds from draw on revolving credit agreements

 

 

163,733

 

 

 

141,887

 

Repayment of revolving credit agreements

 

 

(64,987

)

 

 

(48,000

)

Redemption of redeemable non-controlling interest

 

 

(1,224

)

 

 

?

 

Payment of debt issuance cost

 

 

(708

)

 

 

(3,015

)

Repayment of notes payable

 

 

(24,891

)

 

 

(17,702

)

Net cash provided by financing activities

 

 

58,866

 

 

 

52,936

 

Net (decrease) increase in cash and cash equivalents

 

 

(18,941

)

 

 

64,539

 

Effect of exchange rate changes

 

 

(2,536

)

 

 

(12,713

)

Cash and cash equivalents, beginning of year

 

 

108,644

 

 

 

56,818

 

Cash and cash equivalents, end of year

 

$

87,167

 

 

$

108,644

 

 

 

 

 

 

 

 

Supplemental disclosure of cash financing activities

 

 

 

 

 

 

Cash paid for interest

 

$

12,596

 

 

$

1,728

 

Cash paid for income taxes

 

$

18,552

 

 

$

3,832

 

Cash used in operating activities related to operating leases

 

$

9,682

 

 

$

5,229

 

Supplemental disclosure of non-cash investing activities

 

 

 

 

 

 

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

 

$

17,865

 

 

$

3,410

 

Purchases of property, plant and equipment included in accounts payable

 

$

1,298

 

 

$

1,165

 

Adtran Networks common shares exchanged in acquisition

 

$

?

 

 

$

565,491

 

Adtran Networks options assumed in acquisition

 

$

?

 

 

$

12,769

 

Non-controlling interest related to Adtran Networks

 

$

?

 

 

$

316,415

 

Supplemental Information

Reconciliation of Preliminary Gross Profit and Preliminary Gross Margin to

Preliminary Non-GAAP Gross Profit and Preliminary Non-GAAP Gross Margin

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

Twelve Months Ended

 

 

 

December 31,
2023

 

 

September 30,
2023

 

 

December 31,
2022

 

 

 

December 31,
2023

 

 

December 31,
2022

 

Total Revenue

 

$

225,479

 

 

$

272,331

 

 

$

358,271

 

 

 

$

1,149,100

 

 

$

1,025,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Revenue

 

$

147,014

 

 

$

198,094

 

 

$

250,868

 

 

 

$

816,037

 

 

$

698,284

 

Acquisition-related expenses, amortization and adjustments(1)

 

 

(10,048

)

 

 

(13,537

)

 

 

(31,577

)

 

 

 

(89,602

)

 

 

(57,108

)

Stock-based compensation expense

 

 

(440

)

 

 

(279

)

 

 

(1,287

)

 

 

 

(1,294

)

 

 

(2,876

)

Pension adjustments

 

 

?

 

 

 

?

 

 

 

144

 

 

 

 

?

 

 

 

85

 

Restructuring expenses(2)

 

 

(5,517

)

 

 

(21,630

)

 

 

(8

)

 

 

 

(27,223

)

 

 

(8

)

Integration expenses(3)

 

 

39

 

 

 

(154

)

 

 

?

 

 

 

 

(115

)

 

 

?

 

Non-GAAP Cost of Revenue

 

$

131,048

 

 

$

162,494

 

 

$

218,140

 

 

 

$

697,803

 

 

$

638,377

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

78,465

 

 

$

74,237

 

 

$

107,403

 

 

 

$

333,063

 

 

$

327,252

 

Non-GAAP Gross Profit

 

$

94,431

 

 

$

109,837

 

 

$

140,131

 

 

 

$

451,297

 

 

$

387,159

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

 

34.8

%

 

 

27.3

%

 

 

30.0

%

 

 

 

29.0

%

 

 

31.9

%

Non-GAAP Gross Margin

 

 

41.9

%

 

 

40.3

%

 

 

39.1

%

 

 

 

39.3

%

 

 

37.8

%

 

(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. The restructuring program commenced upon the closing of the business combination with Adtran Networks SE 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 SE of which $(73) thousand is stock compensation expense for the program.

Supplemental Information

Reconciliation of Preliminary Operating Expenses to Preliminary Non-GAAP Operating Expenses

(Unaudited)

(In thousands)

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

December 31,
2023

 

 

September 30,
2023

 

 

December 31,
2022

 

 

December 31,
2023

 

 

December 31,
2022

 

 

Operating Expenses

$

116,080

 

 

$

125,659

 

 

$

139,813

 

 

$

516,460

 

 

$

382,646

 

 

Acquisition-related expenses, amortization and adjustments

 

(4,150

)

(1)

 

(4,534

)

(6)

 

(8,328

)

(10)

 

(17,666

)

(14)

 

(27,561

)

(18)

Stock-based compensation expense

 

(3,181

)

(2)

 

(3,251

)

(7)

 

(11,095

)

(11)

 

(13,864

)

(15)

 

(25,418

)

(19)

Restructuring expenses

 

(7,859

)

(3)

 

(3,243

)

(8)

 

(1,618

)

(12)

 

(19,331

)

(16)

 

(1,620

)

(20)

Integration expenses

 

(1,928

)

(4)

 

(1,485

)

(9)

 

?

 

 

 

(4,825

)

(17)

 

 

 

Pension adjustments

 

?

 

 

 

?

 

 

 

43

 

(13)

 

?

 

 

 

(142

)

(21)

Deferred compensation adjustments(5)

 

(1,324

)

 

 

1,801

 

 

 

(168

)

 

 

390

 

 

 

7,005

 

 

Non-GAAP Operating Expenses

$

97,638

 

 

$

114,947

 

 

$

118,647

 

 

$

461,164

 

 

$

334,910

 

 

 

(1) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $3.7 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) $2.3 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) $4.6 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.

(4) $1.9 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. Includes legal and advisory fees totaling $1.2 million related to a contemplated capital raise transaction that are recorded in selling, general and administrative expenses. Includes expenses totaling $0.4 million 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 of which $0.4 million are included in selling, general and administrative expenses and $0.02 million are included in research and development expenses. The integration bonus expense of $0.4 million includes $0.2 million of stock compensation expense. Additionally, includes fees relating to the expansion of internal controls at Adtran Networks and the implementation of the DPLTA.

(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 $4.0 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.

(7) $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.

(8) $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.

(9) $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 SE of which $0.5 million is stock compensation expense for the program.

(10) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $7.8 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) $9.4 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. Includes $7.3 million in selling, general and administrative expenses and $0.6 million in research and development expenses for incremental stock-based award modification expense related to the business combination.

(12) $0.1 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.

(13) $0.2 million is included in selling, general and administrative expenses and ($0.3) 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.

(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 $1.9 million is included in research and development expenses on the condensed consolidated statements of loss.

(15) $9.8 million is included in selling, general and administrative expenses and $4.0 million is included in research and development expenses on the condensed consolidated statements of loss.

(16) $11.6 million is included in selling, general and administrative expenses and $7.7 million is included in research and development expenses on the condensed consolidated statements of loss.

(17) $4.8 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 expenses related to the integration bonus program and fees relating to the expansion of internal controls at Adtran Networks and the implementation of the DPLTA. Additionally, includes legal and advisory fees totaling $1.2 million related to a contemplated capital raise transaction that are recorded in selling, general and administrative expenses.

(18) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, and certain one-time transaction expenses of which $25.6 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.

(19) $20.8 million is included in selling, general and administrative expenses and $4.6 million is included in research and development expenses on the condensed consolidated statements of loss. Includes $14.6 million in selling, general and administrative expenses and $1.2 million is included in research and development expenses for incremental stock-based award modification expense related to the business combination.

(20) $0.1 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.

(21) $0.3 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.

Supplemental Information

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

(Unaudited)

(In thousands)

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

December 31,
2023

 

 

September 30,
2023

 

 

December 31,
2022

 

 

December 31,
2023

 

 

December 31,
2022

 

 

Operating Loss

$

(37,615

)

 

$

(89,296

)

 

$

(32,874

)

 

$

(221,271

)

 

$

(72,827

)

 

Acquisition related expenses, amortizations and adjustments(1)

 

14,198

 

 

 

18,070

 

 

 

39,904

 

 

 

107,267

 

 

 

84,667

 

 

Asset impairments(2)

 

?

 

 

 

?

 

 

 

463

 

 

 

?

 

 

 

17,432

 

 

Stock-based compensation expense

 

3,621

 

 

 

3,530

 

 

 

12,383

 

 

 

15,158

 

 

 

28,295

 

 

Pension adjustments

 

?

 

 

 

?

 

 

 

(187

)

 

 

?

 

 

 

57

 

 

Restructuring expenses(3)

 

13,376

 

 

 

24,873

 

 

 

1,627

 

 

 

46,554

 

 

 

1,629

 

 

Integration expenses(4)

 

1,890

 

 

 

1,639

 

 

 

?

 

 

 

4,941

 

 

 

?

 

 

Deferred compensation adjustments(5)

 

1,324

 

 

 

(1,801

)

 

 

168

 

 

 

(390

)

 

 

(7,005

)

 

Goodwill impairment(6)

 

?

 

 

 

37,874

 

 

 

?

 

 

 

37,874

 

 

 

?

 

 

Non-GAAP Operating (Loss) Income

$

(3,206

)

 

$

(5,111

)

 

$

21,484

 

 

$

(9,867

)

 

$

52,248

 

 

 

(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 SE. These expenses include inventory write down charges totaling approximately $24.3M 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 SE and is expected to be completed in late 2024.

(4) 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. Additionally, includes legal and advisory fees relating to a contemplated capital raise transactions as part of the integration. Includes fees incurred for the expansion of internal controls at Adtran Networks SE and the implementation of the DPTLA.

(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 Preliminary Other (Expense) Income to Preliminary Non-GAAP Other (Expense) Income

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

Twelve Months Ended

 

 

 

December 31,
2023

 

 

September 30,
2023

 

 

December 31,
2022

 

 

 

December 31,
2023

 

 

December 31,
2022

 

Interest and dividend income

 

$

1,157

 

 

$

521

 

 

$

1,355

 

 

 

$

2,340

 

 

$

2,123

 

Interest expense

 

 

(4,441

)

 

 

(4,507

)

 

 

(2,010

)

 

 

 

(16,299

)

 

 

(3,437

)

Net investment gain (loss)

 

 

1,683

 

 

 

(1,443

)

 

 

(587

)

 

 

 

2,754

 

 

 

(11,339

)

Other (expense) income, net

 

 

(3,448

)

 

 

2,523

 

 

 

11,568

 

 

 

 

1,266

 

 

 

14,517

 

Total Other (Expense) Income

 

$

(5,049

)

 

$

(2,906

)

 

$

10,326

 

 

 

$

(9,939

)

 

$

1,864

 

Deferred compensation adjustments (1)

 

 

(1,590

)

 

 

1,117

 

 

 

(349

)

 

 

 

(2,977

)

 

 

6,211

 

Pension expense (2)

 

 

6

 

 

 

7

 

 

 

77

 

 

 

 

26

 

 

 

333

 

Non-GAAP Other (Expense) Income

 

$

(6,633

)

 

$

(1,782

)

 

$

10,054

 

 

 

$

(12,890

)

 

$

8,408

 

 

(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) Income inclusive of Non-Controlling Interest to

Preliminary Non-GAAP Net (Loss) Income inclusive of Non-Controlling Interest

(Unaudited)

and

Reconciliation of Preliminary Net Income (Loss) attributable to Non-Controlling Interest to

Preliminary Non-GAAP Net Income attributable to Non-Controlling Interest

(Unaudited)

and

Reconciliation of Preliminary Net (Loss) Income attributable to ADTRAN Holdings, Inc. and

Preliminary (Loss) Earnings per Common Share attributable to ADTRAN Holdings, Inc. ? Basic and Diluted to

Preliminary Non-GAAP Net (Loss) Income attributable to ADTRAN Holdings, Inc. and

Preliminary 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

 

 

 

Twelve Months Ended

 

 

 

 

December 31,
2023

 

 

September 30,
2023
(Revised)

 

 

December 31,
2022

 

 

 

December 31,
2023

 

 

December 31,
2022

 

 

Net (Loss) income attributable to ADTRAN Holdings, Inc.

 

$

(109,945

)

 

$

(78,563

)

 

$

38,881

 

 

 

$

(267,688

)

 

$

(2,037

)

 

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

 

 

2,919

 

 

 

2,914

 

 

 

(3,926

)

 

 

 

8,345

 

 

 

(6,851

)

 

Net (Loss) income inclusive of non-controlling interest

 

$

(107,026

)

 

$

(75,649

)

 

$

34,955

 

 

 

$

(259,343

)

 

$

(8,888

)

 

Acquisition related expenses, amortization and adjustments

 

 

14,198

 

 

 

18,070

 

 

 

39,904

 

 

 

 

107,267

 

 

 

84,667

 

 

Asset impairments

 

 

?

 

 

 

?

 

 

 

463

 

 

 

 

?

 

 

 

17,432

 

 

Stock-based compensation expense

 

 

3,621

 

 

 

3,530

 

 

 

12,383

 

 

 

 

15,158

 

 

 

28,295

 

 

Deferred compensation adjustments (2)

 

 

(267

)

 

 

(684

)

 

 

(182

)

 

 

 

(3,368

)

 

 

(794

)

 

Pension adjustments (3)

 

 

6

 

 

 

7

 

 

 

(109

)

 

 

 

26

 

 

 

390

 

 

Restructuring expenses

 

 

13,376

 

 

 

24,873

 

 

 

1,627

 

 

 

 

46,554

 

 

 

1,629

 

 

Integration expenses

 

 

1,890

 

 

 

1,639

 

 

 

?

 

 

 

 

4,941

 

 

 

?

 

 

Goodwill impairment

 

 

?

 

 

 

37,874

 

 

 

?

 

 

 

 

37,874

 

 

 

?

 

 

Tax effect of adjustments to net (loss) income

 

 

(8,735

)

 

 

(23,366

)

 

 

(12,463

)

 

 

 

(57,834

)

 

 

(29,892

)

 

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

 

$

(82,937

)

 

$

(13,706

)

 

$

76,578

 

 

 

$

(108,725

)

 

$

92,839

 

 

Net Income attributable to non-controlling interest(1)

 

 

2,919

 

 

 

2,914

 

 

 

5,769

 

 

 

 

9,874

 

 

 

10,255

 

 

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

 

$

(85,856

)

 

$

(16,620

)

 

$

70,809

 

 

 

$

(118,599

)

 

$

82,584

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

2,919

 

 

$

2,914

 

 

$

(3,926

)

 

 

$

8,345

 

 

$

(6,851

)

 

Acquisition related expenses, amortizations and adjustments

 

 

?

 

 

 

?

 

 

 

9,039

 

 

 

 

1,457

 

 

 

16,159

 

 

Restructuring expenses

 

 

?

 

 

 

?

 

 

 

402

 

 

 

 

29

 

 

 

402

 

 

Integration expenses

 

 

?

 

 

 

?

 

 

 

?

 

 

 

 

6

 

 

 

?

 

 

Stock-based compensation expense

 

 

?

 

 

 

?

 

 

 

300

 

 

 

 

37

 

 

 

531

 

 

Pension adjustments(3)

 

 

?

 

 

 

?

 

 

 

(46

)

 

 

 

?

 

 

 

14

 

 

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

 

$

2,919

 

 

$

2,914

 

 

$

5,769

 

 

 

$

9,874

 

 

$

10,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding ? basic

 

 

78,530

 

 

 

78,389

 

 

 

77,659

 

 

 

 

78,416

 

 

 

62,346

 

 

Weighted average shares outstanding ? diluted

 

 

78,530

 

 

 

78,389

 

 

 

79,243

 

 

 

 

78,416

 

 

 

62,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) earnings per common share attributable to ADTRAN Holdings, Inc. - basic

 

$

(1.40

)

 

$

(1.00

)

 

$

0.50

 

 

 

$

(3.41

)

 

$

(0.03

)

 

(Loss) earnings per common share attributable to ADTRAN Holdings, Inc. - diluted

 

$

(1.40

)

 

$

(1.00

)

 

$

0.49

 

 

 

$

(3.41

)

 

$

(0.03

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP (Loss) earnings per common share attributable to ADTRAN Holdings, Inc. - basic

 

$

(1.09

)

 

$

(0.21

)

 

$

0.91

 

 

 

$

(1.51

)

 

$

1.32

 

 

Non-GAAP (Loss) earnings per common share attributable to ADTRAN Holdings, Inc. - diluted

 

$

(1.09

)

 

$

(0.21

)

 

$

0.89

 

 

 

$

(1.51

)

 

$

1.32

 

 

 

(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..

 


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