TechDogs-"ADTRAN Holdings, Inc. Reports Second Quarter 2023 Results"

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ADTRAN Holdings, Inc. Reports Second Quarter 2023 Results

By Business Wire

Business Wire
Overall Rating

HUNTSVILLE, Ala.--(BUSINESS WIRE)--#Adtran--ADTRAN Holdings, Inc. (NASDAQ: ADTN and FSE: QH9) (“ADTRAN Holdings” or the “Company”) today announced its financial results for the second quarter of 2023. For the quarter, revenue was $327.4 million, up 90% year-over-year and 1% quarter-over-quarter. Net loss attributable to the Company for the second quarter of 2023 was $33.3 million, down 1,655% year-over-year and up 3% quarter-over-quarter. Consequently, diluted loss per share attributable to the Company for the quarter was $0.43, down by 1,175% year-over-year and up 2% quarter-over-quarter. Non-GAAP net income attributable to the Company was $0.1 million, down 99% year-over-year and up 102% quarter-over-quarter. Consequently, non-GAAP diluted earnings per share attributable to the Company was $0.00, down 99% year-over-year and up 102% quarter-over-quarter. Non-GAAP net loss and non-GAAP diluted loss per share exclude acquisition related expenses, amortization, 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, 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 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, “Our Q2 2023 results were in line with our expectations. Although new customer acquisitions remain near an all-time high, we anticipate the second half of 2023 will continue to present challenges due to customers optimizing inventory and the macroeconomic environment. Nevertheless, we continue to believe that we are in the early stage of an unprecedented investment cycle and ADTRAN Holdings is well positioned to be one of the largest beneficiaries.”

The Company also announced that its Board of Directors declared a cash dividend for the second 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 August 21, 2023. The ex-dividend date is August 20, 2023, and the payment date will be September 5, 2023.

The Company confirmed that it will hold a conference call to discuss its second quarter results on Tuesday, August 8, 2023, 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 2nd 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; (ii) risks and uncertainties related to the completed business combination between the Company, ADTRAN, Inc. (“ADTRAN”) and Adtran Networks SE (“Adtran Networks”), formerly ADVA Optical Networks SE, including risks related to the ability to successfully integrate ADTRAN’s and Adtran Networks’ 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, as well as tighter inventory management of ADTRAN Holdings’ customers; (iv) the risk posed by potential breaches of information systems and cyber-attacks; (v) the risk that ADTRAN Holdings may not be able to effectively compete, including through product improvements and development; (vi) risks related to ongoing patent litigation; and (vii) 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 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) income, 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 income (loss), non-GAAP other (expense) income, non-GAAP net (loss) income inclusive of the non-controlling interest, non-GAAP net income (loss) attributable to the Company, non-GAAP net loss attributable to the non-controlling interest, and non-GAAP earnings (loss) 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 impairments, 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 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

(Unaudited)

(In thousands)

June 30,

December 31,

2023

2022

Assets

Current Assets

Cash and cash equivalents

$

124,294

$

108,644

Short-term investments

3,089

340

Accounts receivable, net

239,565

279,435

Other receivables

32,394

32,831

Inventory, net

416,802

427,531

Prepaid expenses and other current assets

33,880

33,577

Total Current Assets

850,024

882,358

Property, plant and equipment, net

115,719

110,699

Deferred tax assets

82,076

67,839

Goodwill

388,163

381,724

Intangibles, net

355,084

401,211

Other non-current assets

60,634

66,998

Long-term investments

31,238

32,665

Total Assets

$

1,882,938

$

1,943,494

Liabilities, Redeemable Non-Controlling Interest and Equity

Current Liabilities

Accounts payable

$

171,735

$

237,699

Revolving credit agreements outstanding

210,912

95,936

Notes payable

24,598

Unearned revenue

48,030

41,193

Accrued expenses and other liabilities

26,807

35,235

Accrued wages and benefits

36,843

44,882

Income tax payable, net

15,314

9,032

Total Current Liabilities

509,641

488,575

Deferred tax liabilities

44,614

61,629

Non-current unearned revenue

24,111

19,239

Pension liability

10,883

10,624

Deferred compensation liability

28,522

26,668

Non-current lease obligations

20,834

22,807

Other non-current liabilities

16,401

10,339

Total Liabilities

655,006

639,881

Redeemable Non-Controlling Interest

445,462

Equity

Common stock

787

781

Additional paid-in capital

766,428

895,834

Accumulated other comprehensive income

62,208

46,713

Retained (deficit) earnings

(41,010

)

55,338

Treasury stock

(5,943

)

(4,125

)

Non-controlling interest

309,072

Total Equity

782,470

1,303,613

Total Liabilities, Redeemable Non-Controlling Interest and Equity

$

1,882,938

$

1,943,494

Condensed Consolidated Statements of (Loss) Income

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

June 30,

June 30,

2023

2022

2023

2022

Revenue

Network Solutions

$

283,002

$

155,992

$

565,420

$

294,366

Services & Support

44,376

16,046

85,870

32,190

Total Revenue

327,378

172,038

651,290

326,556

Cost of Revenue

Network Solutions

216,960

99,921

436,090

190,575

Services & Support

17,865

9,611

34,839

19,159

Total Cost of Revenue

234,825

109,532

470,929

209,734

Gross Profit

92,553

62,506

180,361

116,822

Selling, general and administrative expenses

66,583

27,873

133,980

55,766

Research and development expenses

70,598

26,500

140,741

52,991

Operating (Loss) Income

(44,628

)

8,133

(94,360

)

8,065

Interest and dividend income

358

217

662

421

Interest expense

(4,064

)

(94

)

(7,351

)

(124

)

Net investment gain (loss)

1,262

(4,646

)

2,514

(8,061

)

Other income, net

2,494

681

2,191

455

(Loss) Income Before Income Taxes

(44,578

)

4,291

(96,344

)

756

Income tax benefit (expense)

8,363

(2,148

)

19,676

260

Net (Loss) Income

$

(36,215

)

$

2,143

$

(76,668

)

$

1,016

Less: Net Loss attributable to non-controlling interest(1)

(2,881

)

(8,870

)

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

$

(33,334

)

$

2,143

$

(67,798

)

$

1,016

Weighted average shares outstanding – basic

78,366

49,123

78,364

49,110

Weighted average shares outstanding – diluted

78,366

49,809

78,364

49,813

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

$

(0.43

)

$

0.04

$

(0.87

)

$

0.02

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

$

(0.43

)

$

0.04

$

(0.87

)

$

0.02

(1) For the three and six months ended June 30, 2023, we have recognized $2.9 million and $5.7 million, respectively, representing the recurring cash compensation earned by non-controlling interest shareholders post-DPLTA and an incremental $3.2 million net loss attributable to non-controlling interests pre-DPLTA for the six months ended June 30, 2023.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Six Months Ended

June 30,

2023

2022

Cash flows from operating activities:

Net (loss) income

$

(76,668

)

$

1,016

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

67,467

7,235

Amortization of debt issuance cost

291

(Gain) loss on investments

(4,530

)

7,882

Stock-based compensation expense

8,103

3,781

Deferred income taxes

(31,962

)

(93

)

Other, net

130

27

Inventory reserves

20,885

(4,296

)

Changes in operating assets and liabilities:

Accounts receivable, net

40,975

(14,315

)

Other receivables

561

2,606

Inventory

(6,920

)

(53,982

)

Prepaid expenses, other current assets and other assets

7,105

671

Accounts payable

(67,923

)

42,968

Accrued expenses and other liabilities

110

2,179

Income taxes payable, net

6,216

(1,597

)

Net cash used in by operating activities

(36,160

)

(5,918

)

Cash flows from investing activities:

Purchases of property, plant and equipment

(20,118

)

(3,285

)

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

2,074

25,071

Purchases of available-for-sale investments

(580

)

(17,002

)

Proceeds from beneficial interests in securitized accounts receivable

1,156

Net cash (used in) provided by investing activities

(17,468

)

4,784

Cash flows from financing activities:

Tax withholdings related to stock-based compensation settlements

(6,315

)

(333

)

Proceeds from stock option exercises

163

636

Dividend payments

(14,156

)

(8,877

)

Proceeds from draw on revolving credit agreements

163,729

28,000

Repayment of revolving credit agreements

(49,155

)

(28,000

)

Non-controlling interest put option buyback

(1,202

)

Repayment of notes payable

(24,885

)

Net cash provided by (used in) financing activities

68,179

(8,574

)

Net increase (decrease) in cash and cash equivalents

14,551

(9,708

)

Effect of exchange rate changes

1,099

(3,742

)

Cash and cash equivalents, beginning of period

108,644

56,818

Cash and cash equivalents, end of period

$

124,294

$

43,368

Supplemental disclosure of cash financing activities:

Cash paid for interest

$

4,719

$

124

Cash used in operating activities related to operating leases

$

4,502

$

915

Supplemental disclosure of non-cash investing activities:

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

$

515

$

552

Purchases of property, plant and equipment included in accounts payable

$

2,662

$

818

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

Six Months Ended

June 30,
2023

March 31,
2023

June 30,
2022

June 30,
2023

June 30,
2022

Total Revenue

$

327,378

$

323,912

$

172,038

$

651,290

$

326,556

Cost of Revenue

$

234,825

$

236,104

$

109,532

$

470,929

$

209,734

Acquisition-related expenses, amortization and adjustments(1)

(33,439

)

(32,578

)

(66,017

)

Stock-based compensation expense

(335

)

(240

)

(162

)

(575

)

(321

)

Restructuring expenses(2)

(76

)

(76

)

Non-GAAP Cost of Revenue

$

201,051

$

203,210

$

109,370

$

404,261

$

209,413

Gross Profit

$

92,553

$

87,808

$

62,506

$

180,361

$

116,822

Non-GAAP Gross Profit

$

126,327

$

120,702

$

62,668

$

247,029

$

117,143

Gross Margin

28.3

%

27.1

%

36.3

%

27.7

%

35.8

%

Non-GAAP Gross Margin

38.6

%

37.3

%

36.4

%

37.9

%

35.9

%

(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.

Supplemental Information

Reconciliation of Operating Expenses to Non-GAAP Operating Expenses

(Unaudited)

(In thousands)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2023

2023

2022

2023

2022

Operating Expenses

$

137,181

$

137,540

$

54,373

$

274,721

$

108,757

Acquisition-related expenses, amortization and adjustments

(4,398

)

(1)

(4,584

)

(6)

(2,123

)

(10)

(8,982

)

(12)

(4,453

)

(16)

Stock-based compensation expense

(3,974

)

(2)

(3,458

)

(7)

(1,726

)

(11)

(7,432

)

(13)

(3,460

)

(17)

Restructuring expenses

(5,868

)

(3)

(2,361

)

(8)

(8,229

)

(14)

(2

)

Pension adjustments

Integration expenses

(563

)

(4)

(849

)

(9)

(1,412

)

(15)

Deferred compensation adjustments(5)

307

(394

)

3,737

(87

)

6,433

Non-GAAP Operating Expenses

$

122,685

$

125,894

$

54,261

$

248,579

$

107,275

(1) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $3.9 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) income.

(2) $2.7 million is included in selling, general and administrative expenses and $1.3 million is included in research and development expenses on the condensed consolidated statements of (loss) income.

(3) $1.4 million is included in selling, general and administrative expenses and $4.5 million is included in research and development expenses on the condensed consolidated statements of (loss) income.

(4) $0.6 million is included in selling, general and administrative expenses on the condensed consolidated statements of (loss) income. 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) income.

(6) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $4.1 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) income.

(7) $2.5 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) income.

(8) $2.2 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) income.

(9) $0.8 million is included in selling, general and administrative expenses on the condensed consolidated statements of (loss) income. Includes fees relating to the expansion of internal controls at Adtran Networks and the implementation of the DPLTA.

(10) $1.6 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) income.

(11) $1.1 million is included in selling, general and administrative expenses and $0.6 million is included in research and development expenses on the condensed consolidated statements of (loss) income.

(12) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $8.0 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) income.

(13) $5.1 million is included in selling, general and administrative expenses and $2.3 million is included in research and development expenses on the condensed consolidated statements of (loss) income.

(14) $3.5 million is included in selling, general and administrative expenses and $4.7 million is included in research and development expenses on the condensed consolidated statements of (loss) income.

(15) $1.4 million is included in selling, general and administrative expenses on the condensed consolidated statements of (loss) income. Includes fees relating to the expansion of internal controls at Adtran Networks and the implementation of the DPLTA.

(16) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $3.4 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) income.

(17) $2.3 million is included in selling, general and administrative expenses and $1.2 million is included in research and development expenses on the condensed consolidated statements of (loss) income.

Supplemental Information

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

(Unaudited)

(In thousands)

Three Months Ended

Six Months Ended

June 30,

March,

June 30,

June 30,

June 30,

2023

2023

2022

2023

2022

Operating (Loss) Income

$

(44,628

)

$

(49,732

)

$

8,133

$

(94,360

)

$

8,065

Acquisition related expenses, amortization and adjustments(1)

37,837

37,162

2,123

74,999

4,453

Stock-based compensation expense

4,309

3,698

1,888

8,007

3,781

Pension adjustments

Restructuring expenses(2)

5,868

2,437

8,305

2

Integration expenses

563

849

1,412

Deferred compensation adjustments(3)

(307

)

394

(3,737

)

87

(6,433

)

Non-GAAP Operating Income (Loss)

$

3,642

$

(5,192

)

$

8,407

$

(1,550

)

$

9,868

(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.

(3) 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) income.


Contacts

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


Read full story here

First published on Mon, Aug 7, 2023

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