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Adtran Holdings, Inc.: ADTRAN Holdings, Inc. Reports Earnings for the First Quarter of 2023 and Declares Quarterly Cash Dividend


EQS-Media / 09.05.2023 / 05:00 CET/CEST

ADTRAN Holdings, Inc. Reports Earnings for the First Quarter of 2023 and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala. — (May 8, 2023) — ADTRAN Holdings, Inc., (NASDAQ: ADTN and FSE: QH9) (“ADTRAN Holdings” or the “Company”), today announced its financial results for the first quarter of 2023. For the quarter, revenue was $323.9 million. Net loss inclusive of the non-controlling interest for the first quarter of 2023 was $40.5 million. Net loss attributable to the Company for the first quarter of 2023 was $34.5 million and diluted loss per share attributable to the Company was $0.44. Inclusive of non-controlling interest, non-GAAP net loss was $9.5 million. Non-GAAP net loss attributable to the Company was $5.0 million and non-GAAP diluted loss per share attributable to the Company was $0.06. Non-GAAP net (loss) income and non-GAAP diluted (loss) earnings per share exclude acquisition related expenses, amortizations, 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, asset impairments, integration expenses, restructuring expenses, changes in valuation allowance related to our deferred tax assets, and the tax effect of these adjustments to net (loss) income. The reconciliations between the non-GAAP net (loss) income measures presented herein and the respective equivalent GAAP financial measures are set forth in the tables provided below.

ADTRAN Holdings Chairman and Chief Executive Officer Tom Stanton stated, “As mentioned in our pre-release, the results of the quarter were impacted by slowing sales predominately in our Subscriber Solutions category. Although we expect customer inventory management efforts to continue to affect our near-term results, the underlying demand to upgrade and deploy fiber networks is at an unprecedented high and we are ideally positioned to capitalize on this opportunity.”

The Company also announced that its Board of Directors declared a cash dividend for the first quarter of 2023. The quarterly cash dividend of $0.09 per common share is to be paid to the Company’s stockholders of record as of the close of business on May 23, 2023. The ex-dividend date is May 22, 2023, and the payment date will be June 6, 2023.

The Company confirmed that it will hold a conference call to discuss its first quarter results on Tuesday, May 9, 2023, at 9:30 a.m. Central Time, or 4:30 p.m. Central European 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 1st Quarter 2023 Financial Results and Earnings Call”, and click on the webcast link.

An online replay of the Company’s conference call, as well as the transcript of the Company's conference call, will be available on the Investor Relations site approximately 24 hours following the call and will remain available for at least 12 months. For more information, visit investors.adtran.com or email investor.relations@adtran.com

Cautionary Note Regarding Forward-Looking Statements

Statements contained in this press release which are not historical facts, such as those relating to strategy, outlook and financial guidance, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can also generally be identified by the use of words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could” and similar expressions. In addition, ADTRAN Holdings, through its senior management, may from time to time make forward-looking public statements concerning the matters described herein. All such projections and other forward-looking information speak only as of the date hereof, and ADTRAN Holdings undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise, except to the extent as may be required by law. All such forward-looking statements are necessarily estimates and reflect management’s best judgment based upon current information. Actual events or results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which could cause actual events or results to differ materially from those estimated by ADTRAN Holdings include, but are not limited to: (i) risks and uncertainties related to manufacturing and supply chain constraints, including as a result of the continued impact of the COVID-19 global pandemic; (ii) risks and uncertainties related to the completed business combination between the Company, ADTRAN and ADVA, including risks related to the ability to successfully integrate the ADTRAN’s and ADVA’s businesses, the disruption of management time from ongoing business operations due to integration efforts following the business combination, and the risk that ADTRAN Holdings may be unable to achieve expected synergies or that it may take longer or be more costly than expected to achieve those synergies; (iii) the risk of fluctuations in revenue, including due to lengthy sales and approval processes required by major and other service providers for new products and changes in customer demand; (iv) the risk posed by potential breaches of information systems and cyber-attacks; (v) the risks that ADTRAN may not be able to effectively compete, including through product improvements and development; and (vi) other risks set forth in ADTRAN Holdings’ public filings made with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2022, as well as its Form 10-Q for the quarter ended March 31, 2023 to be filed with the SEC.

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 income (expense), net (loss) income inclusive of the non-controlling interest, net (loss) income attributable to the Company, net 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 (loss) income attributable to the non-controlling interest, and non-GAAP (loss) earnings per share - basic and diluted, attributable to the Company, respectively. Such non-GAAP measures exclude acquisition related expenses, amortizations 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, asset impairments, integration expenses, restructuring expenses, changes in valuation allowance related to our deferred tax assets, and the tax effect of these adjustments to net income. These measures are used by management in our ongoing planning and annual budgeting processes. Additionally, we believe the presentation of non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating (loss) income, non-GAAP other (expense) income, non-GAAP net (loss) income inclusive of the non-controlling interest, non-GAAP net (loss) income attributable to the Company, non-GAAP net (loss) income attributable to the non-controlling interest, and non-GAAP (loss) earnings per share - basic and diluted, attributable to the Company, 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 ADVA. Find more at Adtran, LinkedIn and Twitter.

Published by

ADTRAN Holdings, Inc.

www.adtran.com

 

For media

Gareth Spence

+44 1904 699 358

public-relations@adva.com

 

For investors

Steven Williams

+49 89 890 665 918

investor.relations@adtran.com

 

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

 March 31,  December 31, 
 2023  2022 
Assets     
Current Assets     
Cash and cash equivalents$136,457  $108,644 
Short-term investments 1,058   340 
Accounts receivable, net 262,043   279,435 
Other receivables 30,938   32,831 
Inventory, net 416,291   427,531 
Prepaid expenses and other current assets 37,021   33,577 
Total Current Assets 883,808   882,358 
Property, plant and equipment, net 111,969   110,699 
Deferred tax assets 81,631   67,839 
Goodwill 385,755   381,724 
Intangibles, net 379,286   401,211 
Other non-current assets 63,152   66,998 
Long-term investments 32,994   32,665 
Total Assets$1,938,595  $1,943,494 
      
Liabilities, Redeemable Non-Controlling Interest and Equity     
Current Liabilities     
Accounts payable$198,596  $237,699 
Revolving credit agreements outstanding 190,843   95,936 
Notes payable    24,598 
Unearned revenue 55,611   41,193 
Accrued expenses and other liabilities 27,424   35,235 
Accrued wages and benefits 30,333   44,882 
Income tax payable, net 19,397   9,032 
Total Current Liabilities 522,204   488,575 
Deferred tax liabilities 51,850   61,629 
Non-current unearned revenue 24,907   19,239 
Pension liability 10,698   10,624 
Deferred compensation liability 28,674   26,668 
Non-current lease obligations 21,446   22,807 
Other non-current liabilities 15,986   10,339 
Total Liabilities 675,765   639,881 
Redeemable Non-Controlling Interest 442,668    
Equity     
Common stock 787   781 
Additional paid-in capital 762,035   895,834 
Accumulated other comprehensive income 55,251   46,713 
Retained earnings 8,006   55,338 
Treasury stock (5,917)  (4,125)
Non-controlling interest    309,072 
Total Equity 820,162   1,303,613 
Total Liabilities, Redeemable Non-Controlling Interest and Equity$1,938,595  $1,943,494 

 

 

 

 

Condensed Consolidated Statements of Loss

(Unaudited)

(In thousands, except per share amounts)

 

  Three Months Ended  
  March 31,  
  2023  2022  
Revenue       
Network Solutions $282,418  $138,374  
Services & Support  41,494   16,144  
Total Revenue  323,912   154,518  
Cost of Revenue       
Network Solutions  219,130   90,653  
Services & Support  16,974   9,549  
Total Cost of Revenue  236,104   100,202  
Gross Profit  87,808   54,316  
Selling, general and administrative expenses  67,397   27,893  
Research and development expenses  70,143   26,491  
Operating Loss  (49,732)  (68) 
Interest and dividend income  304   204  
Interest expense  (3,287)  (30) 
Net investment gain (loss)  1,252   (3,415) 
Other expense, net  (303)  (226) 
Loss Before Income Taxes  (51,766)  (3,535) 
Income tax benefit  11,313   2,408  
Net Loss $(40,453) $(1,127) 
Less: Net Loss attributable to non-controlling interest(1)  (5,989)    
Net Loss attributable to ADTRAN Holdings, Inc. $(34,464) $(1,127) 
        
Weighted average shares outstanding – basic  78,358   49,113  
Weighted average shares outstanding – diluted  78,358   49,113  
        
Loss per common share attributable to ADTRAN Holdings, Inc. – basic $(0.44) $(0.02) 
Loss per common share attributable to ADTRAN Holdings, Inc. – diluted $(0.44) $(0.02) 

 

(1) Includes $3.2 million of net loss attributable to non-controlling interests pre-DPLTA and $2.8 million of annual recurring compensation earned by redeemable non-controlling interests and accrued by the Company post-DPLTA.

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

  Three Months Ended 
  March 31, 
  2023  2022 
Cash flows from operating activities:      
Net loss $(40,453) $(1,127)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:      
Depreciation and amortization  33,402   3,661 
Amortization of debt issuance cost  146    
(Gain) loss on investments  (3,154)  3,304 
Stock-based compensation expense  3,812   1,893 
Deferred income taxes  (24,019)   
Other, net  (1)  (62)
Inventory reserves  16,051   (1,754)
Changes in operating assets and liabilities:      
Accounts receivable, net  17,658   8,697 
Other receivables  1,980   (6,205)
Inventory  (2,764)  (29,685)
Prepaid expenses, other current assets and other assets  1,118   (1,170)
Accounts payable  (40,367)  24,818 
Accrued expenses and other liabilities  6,349   3,803 
Income taxes payable, net  10,316   (1,304)
Net cash (used in) provided by operating activities  (19,926)  4,869 
       
Cash flows from investing activities:      
Purchases of property, plant and equipment  (8,439)  (1,461)
Proceeds from sales and maturities of available-for-sale investments  930   10,265 
Purchases of available-for-sale investments  (516)  (11,504)
Proceeds from beneficial interests in securitized accounts receivable  1,231    
Net cash used in investing activities  (6,794)  (2,700)
       
Cash flows from financing activities:      
Tax withholdings related to stock-based compensation settlements  (6,258)  (54)
Proceeds from stock option exercises  58   568 
Dividend payments  (7,076)  (4,438)
Proceeds from draw on revolving credit agreements  138,236   8,000 
Repayment of revolving credit agreements  (43,464)  (8,000)
Non-controlling interest put option buyback  (1,176)   
Repayment of notes payable  (24,692)   
Net cash provided by (used in) financing activities  55,628   (3,924)
       
Net increase (decrease) in cash, cash equivalents and restricted cash  28,908   (1,755)
Effect of exchange rate changes  (1,095)  (1,032)
Cash and cash equivalents, beginning of period  108,644   56,818 
       
Cash and cash equivalents, end of period $136,457  $54,031 
       
Supplemental disclosure of cash financing activities:      
Cash paid for interest $1,610  $30 
Cash used in operating activities related to operating leases $4,057  $482 
Supplemental disclosure of non-cash investing activities:      
Right-of-use assets obtained in exchange for lease obligations $486  $332 
Purchases of property, plant and equipment included in accounts payable $4,354  $392 
       

 

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 
 March 31,
2023
  December 31, 2022  March 31,
2022
 
Total Revenue$323,912  $358,271  $154,518 
         
Cost of Revenue$236,104  $250,868  $100,202 
Acquisition-related expenses, amortizations and adjustments (32,578)(1) (31,577)(3)  
Stock-based compensation expense (240)(2) (1,287)(4) (159)
Pension adjustments    144    
Restructuring expenses (76)  (8)   
Non-GAAP
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