ADTRAN Holdings, Inc. (NASDAQ: ADTN and FSE: QH9) (“ADTRAN
Holdings” or the “Company”) today announced its preliminary
unaudited financial results for the fourth quarter and full-year
ended December 31, 2024.
- Revenue: $242.9 million, up 7% sequentially and above the
mid-point of outlook.
- Gross margin: GAAP gross margin: 37.6%; non-GAAP gross margin:
42.0%.
- Operating margin: improved sequentially on a GAAP and non-GAAP
basis, above the mid-point of outlook.
- GAAP diluted loss per share of $0.58; non-GAAP diluted earnings
per share $0.00.
Adtran Holdings’ Chairman and Chief Executive Officer Tom
Stanton stated, “Market conditions continued to improve during the
fourth quarter driven by higher service provider spending, lower
customer inventories, a continuing shift away from high-risk
vendors, and the secular trend of increased fiber access and
optical transport. The progress we made during the fourth quarter,
including higher sequential and year-over-year revenue and
operating margin, was supported by growth across geographies, most
product lines, and the continued expansion of our customer
base.”
Mr. Stanton added, “We finished 2024 with positive momentum in
our business. Based on the current visibility and booking trends,
we expect higher revenue in the first quarter of 2025, overcoming
typical seasonality.”
Business outlook1
For the first quarter of 2025, the Company expects revenue to be
within a range of $237.5 million to $252.5 million. Non-GAAP
operating margin is expected to be within a range of 0% to 4%.
1 Non-GAAP operating margin (which is calculated as non-GAAP
operating income (loss) divided by revenue) is a non-GAAP financial
measure. The Company has provided first quarter 2025 guidance with
regard to non-GAAP operating margin. This measure excludes from the
corresponding GAAP financial measure the effect of adjustments as
described below. The Company has not provided a reconciliation of
such non-GAAP guidance to guidance presented on a GAAP basis
because it cannot predict and quantify without unreasonable effort
all of the adjustments that may occur during the period due to the
difficulty of predicting the timing and amounts of various items
within a reasonable range. In particular, non-GAAP operating margin
excludes certain items, including continued restructuring expenses,
that will continue to evolve as our business efficiency program is
implemented that the Company is unable to quantitatively predict.
Depending on the materiality of these items, they could have a
significant impact on the Company's GAAP financial results.
Conference call
The Company will hold a conference call to discuss its
preliminary fourth quarter 2024 results on Thursday, February 27,
2025, at 9:30 a.m. Central Time, or 4:30 p.m. Central European
Time. The Company will webcast this conference call at the events
and presentations section of ADTRAN Holdings, Inc. Investor
Relations website at https://events.q4inc.com/attendee/811754399
approximately 10 minutes prior to the start of the call, or you may
dial 1-888-330-2391 (Toll-Free US) or 1-240-789-2702, and use
Conference ID 8936454.
An online replay of the Company’s conference call, as well as
the transcript of the call, will be available on the Investor
Relations site https://investors.adtran.com/ shortly 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.
Upcoming conference schedule March 11, 2025: Stifel 2025
NYC Technology One-on-One Conference March 17, 2025: 37th Annual
ROTH Conference April 1, 2025: Optical Fiber Communication (OFC)
Conference and Exhibition
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 majority
shareholder of Adtran Networks SE, formerly ADVA Optical Networking
SE. Find more at Adtran, LinkedIn and Twitter.
Cautionary note regarding forward-looking statements
Statements contained in this press release and the accompanying
earnings call which are not historical facts, such as those
relating to expectations regarding future revenue and future
non-GAAP operating margin; future service provider spending; future
profitability, and growth, including customer acquisition and
booking trends, as well as future end market growth; future market
trends and customer inventory levels; future operational leverage
and cash generation; and ADTRAN Holdings’ strategy and outlook,
outlook and financial guidance, are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements can also generally be
identified by the use of words such as “believe,” “expect,”
“intend,” “estimate,” “anticipate,” “will,” “may,” “could” and
similar expressions. In addition, ADTRAN Holdings, through its
senior management, may from time to time make forward-looking
public statements concerning the matters described herein. All such
projections and other forward-looking information speak only as of
the date hereof, and ADTRAN Holdings undertakes no duty to publicly
update or revise such forward-looking information, whether as a
result of new information, future events, or otherwise, except to
the extent as may be required by law. All such forward-looking
statements are necessarily estimates and reflect management’s best
judgment based upon current information. Actual events or results
may differ materially from those anticipated in these
forward-looking statements as a result of a variety of factors.
While it is impossible to identify all such factors, factors which
have caused and may in the future cause actual events or results to
differ materially from those estimated by ADTRAN Holdings include,
but are not limited to: (i) risks and uncertainties relating to
ADTRAN Holdings’ ability to continue to reduce expenditures and the
impact of such reductions on its financial results and financial
condition; (ii) risks and uncertainties relating to our ability to
comply with the covenants set forth in our credit agreement, to
satisfy our payment obligations to Adtran Networks’ minority
shareholders under the Domination and Profit and Loss Transfer
Agreement between us and Adtran Networks (the “DPLTA”), and to make
payments to Adtran Networks in order to absorb its annual net loss
pursuant to the DPLTA; (iii) 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 shifting
customer spending patterns; (iv) risks and uncertainties relating
to our level of indebtedness; (v) risks and uncertainties relating
to ongoing material weaknesses in our internal control over
financial reporting; (vi) risks posed by potential breaches of
information systems and cyber-attacks; (vii) the risk that ADTRAN
Holdings may not be able to effectively compete, including through
product improvements and development; and (viii) other risks set
forth in ADTRAN Holdings’ public filings made with the Securities
and Exchange Commission (“SEC”), including its most recent Annual
Report on Form 10-K and subsequent quarterly reports on Form 10-Q
or other securities filings, and the risks to be disclosed in its
upcoming Annual Report on Form 10-K for the year ended December 31,
2024, to be filed with the SEC.
Additionally, the financial measures presented herein are
preliminary estimates, remain subject to our internal controls and
procedures, and are subject to risks and uncertainties, including,
among others, changes in connection with quarter-end adjustments.
Any variation between the Company’s actual results and the
preliminary financial information set forth herein may be
material.
Explanation of use of non-GAAP financial measures
Set forth in the tables below are reconciliations of gross
profit, gross margin, operating expenses, operating loss, other
(expense) income, net loss inclusive of the non-controlling
interest, net income attributable to the non-controlling interest,
net loss attributable to the Company, and loss per share - basic
and diluted, attributable to the Company, and net cash provided by
(used in) operating activities, in each case as reported based on
generally accepted accounting principles in the United States
(“GAAP”), to non-GAAP gross profit, non-GAAP gross margin, non-GAAP
operating expenses, non-GAAP operating income (loss), non-GAAP
other expense, non-GAAP net income (loss) inclusive of the
non-controlling interest, non-GAAP net income (loss) attributable
to the Company, non-GAAP net earnings (loss per share) - basic and
diluted, attributable to the Company, and free cash flow,
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
as well as legal and advisory fees related to a potential
significant transaction), stock-based compensation expense,
restructuring expenses, integration expenses, deferred compensation
adjustments, goodwill impairments, amortization of pension
actuarial losses, the tax effect of these adjustments to net loss
and purchases of property, plant and equipment. These measures are
used by management in our ongoing planning and annual budgeting
processes. Additionally, we believe the presentation of these
non-GAAP measures, when combined with the presentation of the most
directly comparable GAAP financial measure, is beneficial to the
overall understanding of ongoing operating performance of the
Company. These non-GAAP financial measures are not prepared in
accordance with, or an alternative for, GAAP and therefore should
not be considered in isolation or as a substitution for analysis of
our results as reported under GAAP. Additionally, our calculation
of non-GAAP measures may not be comparable to similar measures
calculated by other companies.
Published by ADTRAN Holdings, Inc. www.adtran.com
Condensed Consolidated Balance
Sheets
(Preliminary,
Unaudited)
(In thousands)
ASSETS
December 31, 2024
December 31, 2023
Current Assets
Cash and cash equivalents
$
77,567
$
87,167
Accounts receivable, net
178,030
216,445
Other receivables
9,775
17,450
Income tax receivable
4,355
7,933
Inventory, net
269,337
362,295
Assets held for sale
11,901
—
Prepaid expenses and other current
assets
58,534
45,566
Total Current Assets
609,499
736,856
Property, plant and equipment, net
102,942
123,020
Deferred tax assets, net
17,826
25,787
Goodwill
52,918
353,415
Intangibles, net
284,893
327,985
Other non-current assets
78,128
87,706
Long-term investments
32,060
27,743
Total Assets
$
1,178,266
$
1,682,512
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
$
170,451
$
162,922
Unearned revenue
52,701
46,731
Accrued expenses and other liabilities
35,704
36,204
Accrued wages and benefits
32,853
27,030
Income tax payable, net
830
5,221
Total Current Liabilities
292,539
278,108
Non-current revolving credit agreement
outstanding
189,576
195,000
Deferred tax liabilities
30,690
35,655
Non-current unearned revenue
22,065
25,109
Non-current pension liability
8,983
12,543
Deferred compensation liability
33,203
29,039
Non-current lease obligations
25,925
31,420
Other non-current liabilities
17,928
28,657
Total Liabilities
620,909
635,531
Redeemable Non-Controlling
Interest
422,943
442,152
Equity
Common stock
795
790
Additional paid-in capital
808,913
795,304
Accumulated other comprehensive income
10,897
47,465
Retained deficit
(680,993
)
(232,905
)
Treasury stock
(5,198
)
(5,825
)
Total Equity
134,414
604,829
Total Liabilities and Equity
$
1,178,266
$
1,682,512
Condensed Consolidated
Statements of Loss
(Preliminary,
Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2024
2023
2024
2023
Revenue
Network Solutions
$
197,009
$
180,405
$
738,964
$
974,389
Services & Support
45,843
45,074
183,756
174,711
Total Revenue
242,852
225,479
922,720
1,149,100
Cost of Revenue
Network Solutions
134,184
126,248
511,070
722,582
Network Solutions - charges and
inventory write-down
—
3,270
8,597
24,313
Services & Support
17,435
17,496
72,739
69,142
Total Cost of Revenue
151,619
147,014
592,406
816,037
Gross Profit
91,233
78,465
330,314
333,063
Selling, general and
administrative expenses
57,156
61,262
233,369
258,149
Research and development
expenses
49,209
54,818
221,463
258,311
Goodwill impairment
—
—
292,583
37,874
Operating Loss
(15,132
)
(37,615
)
(417,101
)
(221,271
)
Interest and dividend income
1,631
1,157
3,058
2,340
Interest expense
(4,870
)
(4,441
)
(22,053
)
(16,299
)
Net investment (loss) gain
(920
)
1,683
3,587
2,754
Other income (expense), net
687
(3,448
)
246
1,266
Loss Before Income
Taxes
(18,604
)
(42,664
)
(432,263
)
(231,210
)
Income tax expense
(24,906
)
(64,632
)
(8,785
)
(28,133
)
Net Loss
$
(43,510
)
$
(107,296
)
$
(441,048
)
$
(259,343
)
Net Income attributable to
non-controlling interest
2,406
2,566
9,824
6,946
Net Loss attributable to
ADTRAN Holdings, Inc.
$
(45,916
)
$
(109,862
)
$
(450,872
)
$
(266,289
)
Weighted average shares
outstanding – basic
79,091
78,530
78,928
78,416
Weighted average shares
outstanding – diluted
79,091
78,530
78,928
78,416
Loss per common share
attributable to ADTRAN Holdings, Inc. – basic
$
(0.58
)
(1)
$
(1.40
)
$
(5.67
)
(1)
$
(3.39
)
Loss per common share
attributable to ADTRAN Holdings, Inc. – diluted
$
(0.58
)
(1)
$
(1.40
)
$
(5.67
)
(1)
$
(3.39
)
(1) Loss per common share attributable to ADTRAN Holdings, Inc.
- basic and diluted - reflects a $5 thousand effect of redemption
for the three months ended December 31, 2024 and $3.0 million
effect of redemption of RNCI for the year ended December 31,
2024.
Condensed Consolidated Statements of Cash Flows
(Preliminary,
Unaudited)
(In thousands)
Twelve Months Ended December
31,
2024
2023
Cash flows from operating
activities:
Net Loss
$
(441,048
)
$
(259,343
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
90,985
112,949
Goodwill impairment
292,583
37,874
Amortization of debt issuance cost
3,950
862
Accretion on available-for-sale
investments, net
—
(22
)
Gain on investments
(5,030
)
(2,900
)
Net loss on disposal of property, plant
and equipment
1,371
458
Stock-based compensation expense
15,342
16,016
Deferred income taxes
2,247
15,558
Inventory write down
4,135
24,313
Inventory reserves
3,980
25,546
Other, net
—
(2,942
)
Change in operating assets and
liabilities:
Accounts receivable, net
46,108
65,612
Other receivables
10,713
10,315
Income taxes receivable
648
(2,637
)
Inventory
75,171
20,537
Prepaid expenses other current assets and
other assets
(10,718
)
(29,883
)
Accounts payable
11,784
(91,907
)
Accrued expenses and other liabilities
5,519
17,929
Income taxes payable, net
(4,670
)
(3,939
)
Net cash provided by (used in)
operating activities
103,070
(45,604
)
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(32,454
)
(43,121
)
Purchases of intangibles - developed
technology
(30,671
)
—
Proceeds from sales and maturities of
available-for-sale investments
1,240
10,567
Purchases of available-for-sale
investments
(268
)
(868
)
(Payments) Proceeds from beneficial
interests in securitized accounts receivable
(55
)
1,218
Net cash used in investing
activities
(62,208
)
(32,204
)
Cash flows from financing
activities:
Tax withholdings related to stock-based
compensation settlements
(1,143
)
(6,458
)
Proceeds from stock option exercises
824
540
Dividend payments
—
(21,237
)
Proceeds from receivables purchase
agreement
68,556
14,099
Repayments on receivables purchase
agreement
(83,772
)
—
Proceeds from draw on revolving credit
agreements
26,000
163,733
Repayment of revolving credit
agreements
(31,000
)
(64,987
)
Redemption of redeemable non-controlling
interest
(17,398
)
(1,224
)
Payment of annual recurring compensation
to non-controlling interest
(10,084
)
—
Payment of debt issuance cost
(1,994
)
(708
)
Repayment of notes payable
—
(24,891
)
Net cash (used in) provided by
financing activities
(50,011
)
58,867
Net decrease in cash and cash
equivalents
(9,149
)
(18,941
)
Effect of exchange rate changes
(451
)
(2,536
)
Cash and cash equivalents, beginning of
year
87,167
108,644
Cash and cash equivalents, end of
year
$
77,567
$
87,167
Supplemental disclosure of cash financing
activities
Cash paid for interest
$
20,884
$
12,596
Cash paid for income taxes
$
10,384
$
18,552
Cash used in operating activities related
to operating leases
$
9,274
$
9,682
Supplemental disclosure of non-cash
investing activities
Right-of-use assets obtained in exchange
for lease obligations
$
5,317
$
17,865
Purchases of property, plant and equipment
included in accounts payable
$
2,635
$
1,298
Redemption of redeemable non-controlling
interest
$
2,986
$
371
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,
2024
September 30,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Total Revenue
$
242,852
$
227,704
$
225,479
$
922,720
$
1,149,100
Cost of Revenue
$
151,619
$
142,453
$
147,014
$
592,406
$
816,037
Acquisition-related expenses, amortization
and adjustments(1)
(9,980
)
(10,276
)
(10,048
)
(40,497
)
(89,602
)
Stock-based compensation expense
(317
)
(270
)
(440
)
(1,142
)
(1,294
)
Restructuring expenses(2)
(538
)
(7
)
(5,517
)
(14,580
)
(27,223
)
Integration expenses(3)
123
(34
)
39
19
(115
)
Non-GAAP Cost of Revenue
$
140,907
$
131,866
$
131,048
$
536,206
$
697,803
Gross Profit
$
91,233
$
85,251
$
78,465
$
330,314
$
333,063
Non-GAAP Gross Profit
$
101,945
$
95,838
$
94,431
$
386,514
$
451,297
Gross Margin
37.6
%
37.4
%
34.8
%
35.8
%
29.0
%
Non-GAAP Gross Margin
42.0
%
42.1
%
41.9
%
41.9
%
39.3
%
(1) Includes intangible amortization of backlog, inventory fair
value adjustments, developed technology, customer relationships,
and trade names acquired in connection with business combinations.
We incur charges relating to the amortization of intangible assets
and exclude these charges for purposes of calculating our non-GAAP
measures. Such charges are significantly impacted by the timing and
magnitude of our acquisitions. We exclude these charges for the
purpose of calculating our non-GAAP measures, primarily because
they are noncash expenses and our internal benchmarking analyses
evidence that many industry participants and peers present non-GAAP
financial measures excluding intangible asset amortization.
Although this does not directly affect our cash position, the loss
in value of intangible assets over time can have a material impact
on the equivalent GAAP earnings measure.
(2) Includes expenses for restructuring program designed to
optimize the assets and business processes following the business
combination with Adtran Networks SE. These expenses include
inventory write down and other charges of $8.6 million and other
expenses of $0.6 million for the twelve months ended December 31,
2024, incurred as a result of a strategy shift which included
discontinuance of certain product lines in connection with the
Business Efficiency Program. The restructuring program commenced
upon the closing of the business combination with Adtran Networks
SE and was substantially completed in late 2024. Additionally, as
part of the Business Efficiency Program, management determined to
close a facility in Greifswald, Germany which occurred in December
2024. These expenses include restructuring wage charges of $5.4
million for the twelve months ended December 31, 2024.
(3) Includes expenses related to the Company's one-time
integration bonus program in connection with synergy targets as a
result of the business combination with Adtran Networks SE.
Supplemental
Information
Reconciliation of Preliminary
Operating Expenses to Preliminary Non-GAAP Operating
Expenses
(Unaudited)
(In thousands)
Three Months Ended
Twelve Months Ended
December 31,
2024
September 30,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Operating Expenses
$
106,365
$
109,235
$
116,080
$
747,415
$
554,334
Acquisition-related expenses, amortization
and adjustments (1)
(5,294
)
(2)
(5,054
)
(7)
(4,150
)
(11)
(22,462
)
(15)
(17,666
)
(20)
Stock-based compensation expense
(3,351
)
(3)
(3,126
)
(8)
(3,181
)
(12)
(13,245
)
(16)
(13,864
)
(21)
Restructuring expenses
(3,567
)
(4)
(5,930
)
(9)
(7,859
)
(13)
(30,101
)
(17)
(19,331
)
(22)
Integration expenses
(587
)
(5)
(333
)
(10)
(1,928
)
(14)
(1,930
)
(18)
(4,825
)
(23)
Deferred compensation adjustments(6)
451
(1,471
)
(1,324
)
(3,808
)
390
Goodwill impairment
—
—
—
(292,583
)
(19)
(37,874
)
(24)
Non-GAAP Operating Expenses
$
94,017
$
93,321
$
97,638
$
383,286
$
461,164
(1) We incur charges relating to the amortization of intangible
assets and exclude these charges for purposes of calculating our
non-GAAP measures. Such charges are significantly impacted by the
timing and magnitude of our acquisitions. We exclude these charges
for the purpose of calculating our non-GAAP measures, primarily
because they are noncash expenses and our internal benchmarking
analyses evidence that many industry participants and peers present
non-GAAP financial measures excluding intangible asset
amortization. Although this does not directly affect our cash
position, the loss in value of intangible assets over time can have
a material impact on the equivalent GAAP earnings measure.
(2) Includes $4.3M of intangible amortization of developed
technology, customer relationships, and trade names acquired in
connection with business combinations and $1.0 million of legal and
advisory fees related to a potential strategic transaction which
are included in selling, general and administrative expenses on the
condensed consolidated statements of loss.
(3) $2.4 million is included in selling, general and
administrative expenses and $1.0 million is included in research
and development expenses on the condensed consolidated statements
of loss.
(4) $1.2 million is included in selling, general and
administrative expenses and $2.4 million is included in research
and development expenses on the condensed consolidated statements
of loss. 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 was substantially completed in late 2024.
Additionally, as part of the Business Efficiency Program,
management determined to close a facility in Greifswald, Germany
which occurred in December 2024.
(5) $0.6 million is included in selling, general and
administrative expenses and less than $0.1 million is included in
research and development expenses on the condensed consolidated
statements of loss, and is primarily related to the Company's
one-time integration bonus program in connection with synergy
targets as a result of the business combination with Adtran
Networks SE.
(6) 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.
(7) Includes $4.0M of intangible amortization of developed
technology, customer relationships, and trade names acquired in
connection with business combinations and $0.6 million of legal and
advisory fees related to a potential strategic transaction which
are both included in selling, general and administrative expenses
and $0.5 million is included in research and development expenses
on the condensed consolidated statements of loss.
(8) $2.2 million is included in selling, general and
administrative expenses and $0.9 million is included in research
and development expenses on the condensed consolidated statements
of loss.
(9) $2.7 million is included in selling, general and
administrative expenses and $3.2 million is included in research
and development expenses on the condensed consolidated statements
of loss. Includes expenses of $3.2 million of wage related and
other charges due to the Greifswald facility closure of which $0.8
million is included in selling, general and administrative and $2.4
million is included in research and development expenses on the
condensed consolidated statements of loss. 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 was substantially
completed in late 2024. Additionally, as part of the Business
Efficiency Program, management determined to close a facility in
Greifswald, Germany which occurred in December 2024.
(10) $0.3 million is included in selling, general and
administrative expenses on the condensed consolidated statements of
loss, and is primarily related to the Company's one-time
integration bonus program in connection with synergy targets as a
result of the business combination with Adtran Networks SE.
(11) 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.
(12) $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.
(13) $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. 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 was substantially completed in late 2024.
Additionally, as part of the Business Efficiency Program,
management determined to close a facility in Greifswald, Germany
which occurred in December 2024.
(14) $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.
(15) Includes $17.6M of intangible amortization of developed
technology, customer relationships, and trade names acquired in
connection with business combinations and $4.9 million of legal and
advisory fees related to a potential strategic transaction which
are included in selling, general and administrative expenses on the
condensed consolidated statements of loss.
(16) $9.4 million is included in selling, general and
administrative expenses and $3.8 million is included in research
and development expenses on the condensed consolidated statements
of loss.
(17) $9.1 million is included in selling, general and
administrative expenses and $21.0 million is included in research
and development expenses on the condensed consolidated statements
of loss. 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 was substantially completed in late 2024.
Additionally, as part of the Business Efficiency Program,
management determined to close a facility in Greifswald, Germany
which occurred in December 2024.
(18) $1.8 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, and is primarily related to the Company's one-time
integration bonus program in connection with synergy targets as a
result of the business combination with Adtran Networks SE.
(19) Non-cash impairment of goodwill in our Network Solutions
reporting unit, necessitated by factors such as a decrease in the
Company's market capitalization, cautious service provider spending
due to economic uncertainty and continued elevated customer
inventory adjustments.
(20) 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.
(21) $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.
(22) $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. 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 was substantially completed in late 2024.
Additionally, as part of the Business Efficiency Program,
management determined to close a facility in Greifswald, Germany
which occurred in December 2024.
(23) $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.
(24) 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
Operating Loss to Preliminary Non-GAAP Operating Income
(Loss)
(Unaudited)
(In thousands)
Three Months Ended
Twelve Months Ended
December 31, 2024
September 30, 2024
December 31, 2023
December 31, 2024
December 31, 2023
Operating Loss
$
(15,132
)
$
(23,984
)
$
(37,615
)
$
(417,101
)
$
(221,271
)
Acquisition related expenses,
amortizations and adjustments(1)
15,274
15,330
14,198
62,959
107,267
Stock-based compensation expense
3,668
3,396
3,621
14,387
15,158
Restructuring expenses(2)
4,105
5,936
13,376
44,681
46,554
Integration expenses(3)
464
367
1,890
1,911
4,941
Deferred compensation adjustments(4)
(451
)
1,471
1,324
3,808
(390
)
Goodwill impairment
—
—
—
292,583
(5)
37,874
(6)
Non-GAAP Operating Income
(Loss)
$
7,928
$
2,516
$
(3,206
)
$
3,228
$
(9,867
)
(1) Includes intangible amortization of backlog, inventory fair
value adjustments, developed technology, customer relationships,
and trade names acquired in connection with business combinations.
We incur charges relating to the amortization of intangible assets
and exclude these charges for purposes of calculating our non-GAAP
measures. Such charges are significantly impacted by the timing and
magnitude of our acquisitions. We exclude these charges for the
purpose of calculating our non-GAAP measures, primarily because
they are noncash expenses and our internal benchmarking analyses
evidence that many industry participants and peers present non-GAAP
financial measures excluding intangible asset amortization.
Although this does not directly affect our cash position, the loss
in value of intangible assets over time can have a material impact
on the equivalent GAAP earnings measure.
(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 was substantially completed in late 2024.
Additionally, as part of the Business Efficiency Program,
management determined to close a facility in Greifswald, Germany
which occurred in December 2024.
(3) Includes expenses related to the Company's one-time
integration bonus program in connection with synergy targets as a
results of the business combination with Adtran Networks SE.
Includes fees incurred for the expansion of internal controls at
Adtran Networks SE and the implementation of the DPTLA.
(4) Includes non-cash change in fair value of equity investments
held in the ADTRAN Holdings, Inc. Deferred Compensation Program for
Employees, all of which is included in selling, general and
administrative expenses on the condensed consolidated statement of
loss.
(5) Non-cash impairment of goodwill in our Network Solutions
reporting unit, necessitated by factors such as a decrease in the
Company's market capitalization, cautious service provider spending
due to economic uncertainty and continued elevated customer
inventory adjustments.
(6) 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 to Preliminary Non-GAAP Other Expense
(Unaudited)
(In thousands)
Three Months Ended
Twelve Months Ended
December 31,
2024
September 30,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Interest and dividend income
$
1,631
$
664
$
1,157
$
3,058
$
2,340
Interest expense
(4,870
)
(5,679
)
(4,441
)
(22,053
)
(16,299
)
Net investment (loss) gain
(920
)
1,382
1,683
3,587
2,754
Other income (expense), net
687
(850
)
(3,448
)
246
1,266
Total Other Expense
$
(3,472
)
$
(4,483
)
$
(5,049
)
$
(15,162
)
$
(9,939
)
Deferred compensation adjustments (1)
1,090
(1,294
)
(1,590
)
(3,539
)
(2,977
)
Pension expense (2)
7
7
6
28
26
Non-GAAP Other Expense
$
(2,375
)
$
(5,770
)
$
(6,633
)
$
(18,673
)
$
(12,890
)
(1) Includes non-cash change in fair value of equity investments
held in the ADTRAN Holdings, Inc. Deferred Compensation Program for
Employees.
(2) Includes amortization of actuarial losses related to the
Company's pension plan for employees in certain foreign
countries.
Supplemental
Information
Reconciliation of Preliminary
Net Loss inclusive of Non-Controlling Interest to
Preliminary Non-GAAP Net
Income (Loss) inclusive of Non-Controlling Interest
(Unaudited)
and
Reconciliation of Preliminary
Net Income attributable to Non-Controlling Interest to
Preliminary Non-GAAP Net
Income attributable to Non-Controlling Interest
(Unaudited)
and
Reconciliation of Preliminary
Net Loss attributable to ADTRAN Holdings, Inc. and
Preliminary Loss per Common
Share attributable to ADTRAN Holdings, Inc. – Basic and Diluted
to
Preliminary Non-GAAP Net
Income (Loss) attributable to ADTRAN Holdings, Inc. and
Preliminary Non-GAAP Earnings
(Loss) 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,
2024
September 30,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Net Loss attributable to ADTRAN
Holdings, Inc. common stockholders
$
(45,911
)
$
(28,263
)
$
(109,592
)
$
(447,886
)
$
(266,289
)
Effect of redemption of RNCI(1)
(5
)
(2,976
)
—
(2,986
)
—
Net Loss attributable to ADTRAN
Holdings, Inc.
$
(45,916
)
$
(31,239
)
$
(109,592
)
$
(450,872
)
$
(266,289
)
Net Income attributable to non-controlling
interest(2)
2,407
2,382
2,566
9,824
6,946
Net Loss inclusive of non-controlling
interest
$
(43,509
)
$
(28,857
)
$
(107,026
)
$
(441,048
)
$
(259,343
)
Acquisition related expenses, amortization
and adjustments (3)
15,274
15,330
14,198
62,959
107,267
Stock-based compensation expense
3,668
3,396
3,621
14,387
15,158
Deferred compensation adjustments(4)
639
177
(267
)
269
(3,368
)
Pension adjustments(5)
7
7
6
28
26
Restructuring expenses(6)
4,105
5,936
13,376
44,681
46,554
Integration expenses(7)
464
367
1,890
1,911
4,941
Goodwill impairment
—
—
—
292,583
37,874
Tax effect of adjustments to net
loss(8)
21,804
(712
)
62,221
2,782
12,076
Non-GAAP Net Income (Loss) inclusive of
non-controlling interest
$
2,451
$
(4,356
)
$
(11,981
)
$
(21,448
)
$
(38,815
)
Net Income attributable to non-controlling
interest(2)
2,407
2,382
2,566
9,824
8,475
Non-GAAP Net Income (Loss) attributable
to ADTRAN Holdings, Inc.
$
45
$
(6,738
)
$
(14,547
)
$
(31,272
)
$
(47,290
)
Effect of redemption of RNCI (1)
5
2,976
—
2,986
—
Non-GAAP Net Income (Loss) attributable
to ADTRAN Holdings, Inc. common stockholders
$
50
$
(3,762
)
$
(14,547
)
$
(28,286
)
$
(47,290
)
GAAP Net Income attributable to
non-controlling interest (2)
$
2,407
$
2,382
$
2,566
$
9,824
$
6,946
Acquisition related expenses,
amortizations and adjustments(3)
—
—
—
—
1,457
Restructuring expenses(6)
—
—
—
—
29
Integration expenses(7)
—
—
—
—
6
Stock-based compensation expense
—
—
—
—
37
Pension adjustments(5)
—
—
—
—
—
Non-GAAP Net Income attributable to
non-controlling interest (2)
$
2,407
$
2,382
$
2,566
$
9,824
$
8,475
Weighted average shares outstanding –
basic
79,091
78,952
78,530
78,928
78,416
Weighted average shares outstanding –
diluted
79,091
78,952
78,530
78,928
78,416
Loss per common share attributable to
ADTRAN Holdings, Inc. - basic
$
(0.58
)
$
(0.36
)
$
(1.40
)
$
(5.67
)
$
(3.39
)
Loss per common share attributable to
ADTRAN Holdings, Inc. - diluted
$
(0.58
)
$
(0.36
)
$
(1.40
)
$
(5.67
)
$
(3.39
)
Non-GAAP Earnings (Loss) per common
share attributable to ADTRAN Holdings, Inc. - basic
$
0.00
$
(0.05
)
$
(0.19
)
$
(0.36
)
$
(0.60
)
Non-GAAP Earnings (Loss) per common
share attributable to ADTRAN Holdings, Inc. - diluted
$
0.00
$
(0.05
)
$
(0.19
)
$
(0.36
)
$
(0.60
)
(1) Loss per common share attributable to ADTRAN Holdings, Inc.
- basic and diluted - reflects a $5 thousand and $3.0 million
effect of redemption for the three months ended December 31, 2024
and September 30, 2024 respectively and $3.0 million effect of
redemption of RNCI for the year ended December 31, 2024.
(2) 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.
(3) We incur charges relating to the amortization of intangible
assets and exclude these charges for purposes of calculating our
non-GAAP measures. Such charges are significantly impacted by the
timing and magnitude of our acquisitions. We exclude these charges
for the purpose of calculating our non-GAAP measures, primarily
because they are noncash expenses and our internal benchmarking
analyses evidence that many industry participants and peers present
non-GAAP financial measures excluding intangible asset
amortization. Although this does not directly affect our cash
position, the loss in value of intangible assets over time can have
a material impact on the equivalent GAAP earnings measure.
(4) Includes non-cash change in fair value of equity investments
held in deferred compensation plans offered to certain
employees.
(5) Includes amortization of actuarial losses related to the
Company's pension plan for employees in certain foreign
countries.
(6) 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 was substantially completed in late 2024.
Additionally, as part of the Business Efficiency Program,
management determined to close a facility in Greifswald, Germany
which occurred in December 2024.
(7) 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.
(8) Represents the tax effect of non-GAAP adjustments. Beginning
in the period ended September 30, 2024, the Company changed its
method of calculating non-GAAP income taxes by applying blended
statutory tax rates to non-GAAP losses before income taxes in order
to include current and deferred income tax expenses that are
commensurate with the non-GAAP measure of profitability. The
blended statutory tax rate is calculated using 0%, resulting in no
tax benefits net of impact of valuation allowance, for the loss
jurisdiction’s non-GAAP losses before income taxes and 30% for all
remaining jurisdictions’ non-GAAP income before income taxes. Prior
periods have been adjusted to reflect the application of blended
statutory tax rates, net of impact of valuation allowance, to
non-GAAP losses before income taxes as opposed to the previous
application of blended statutory and effective tax rates to
separate non-GAAP adjustments. We previously reported the tax
effect of the adjustment to non-GAAP net loss under the prior
method of $8.7 million and $57.8 million for the three and twelve
months ended December 31, 2023.
Supplemental
Information
Reconciliation of Preliminary
Net Cash Provided By (Used In) Operating Activities to Preliminary
Free Cash Flow
(Unaudited)
(In thousands)
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2024
2024
2023
2024
2023
Net Cash provided by (used in)
operating activities
$
4,544
$
42,030
$
(16,290
)
$
103,070
$
(45,604
)
Purchases of property, plant and equipment
and developed technologies(1)
(14,942
)
(18,814
)
(9,447
)
(63,125
)
(43,121
)
Free cash flow
$
(10,398
)
$
23,216
$
(25,737
)
$
39,945
$
(88,725
)
(1) Purchases related to capital expenditures and developed
technologies.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20250226015068/en/
For media Gareth Spence +44 1904 699 358
public.relations@adtran.com
For investors Peter Schuman, IRC +1 256 963 6305
investor.relations@adtran.com
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