- Preliminary Q4 revenue at $225.5 million and at mid-point of
guidance
- Sequential improvement in preliminary GAAP and non-GAAP
operating expenses in Q4, with a 7.6% reduction in GAAP operating
expenses and a 15.1% reduction in non-GAAP operating expenses
respectively
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
investor.relations@adtran.com.
Cautionary Note Regarding Forward-Looking Statements
Statements contained in this press release which are not
historical facts, such as those relating to expectations regarding
earnings, expenses and margin; 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..
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240226381369/en/
For media Gareth Spence +44 1904 699 358
public.relations@adtran.com
For investors Steven Williams +49 89 890 665 918
investor@adtran.com
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