ADTRAN Holdings, Inc., (NASDAQ: ADTN and FSE: QH9) (“ADTRAN
Holdings” or the “Company”), today announced financial results for
the third quarter of 2022. For the quarter, revenue was $340.7
million. Net loss inclusive of the non-controlling interest for the
third quarter of 2022 was $44.9 million. Net loss attributable to
the Company for the third quarter of 2022 was $41.9 million and
loss per share attributable to the Company was $0.57. Net loss and
loss per share are inclusive of consolidated financial results,
significant purchase accounting adjustments, and certain one-time
transaction expenses related to the business combination of the
Company, ADTRAN, Inc. (“ADTRAN”), and ADVA Optical Networking SE
(“ADVA”). Inclusive of non-controlling interests, non-GAAP net
income was $12.2 million. Non-GAAP net income attributable to the
Company was $7.7 million and non-GAAP diluted earnings per share
attributable to the Company was $0.11. Non-GAAP net income and
non-GAAP earnings per share exclude acquisition related expenses,
amortizations, and adjustments (consisting of intangible
amortization of backlog, developed technology, customer
relationships, and trade names acquired in connection with business
combinations and amortization of inventory fair value adjustments),
stock-based compensation expense, amortization of pension actuarial
losses, deferred compensation adjustments, certain asset
impairments, changes in valuation allowance related to our deferred
tax assets, and the tax effect of these adjustments to net income.
The reconciliations between the non-GAAP net income measures
presented herein and the respective equivalent GAAP financial
measures are set forth in the tables provided below.
ADTRAN Holdings Chairman and Chief Executive Officer Tom Stanton
stated, “Our third quarter marked a new era in our history as we
closed the business combination agreement with ADVA Optical
Networking SE. The combined company’s broader portfolio, paired
with a larger, more diversified, and regionally balanced customer
base, positions us to capitalize on the global fiber conversion.
The Q3 results highlight our increased market presence in optical
networking and subscriber solutions, two portfolio categories that
complement our continued success in fiber access. This success
reinforces the positive outlook we have in our ability to maximize
our growth potential in the ongoing global investment cycle in
fiber networks.”
The Company also announced that its Board of Directors declared
a cash dividend for the third quarter of 2022. 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 November 22,
2022. The ex-dividend date is November 21, 2022, and the payment
date will be December 6, 2022.
The Company confirmed that it will hold a conference call to
discuss its third quarter results on Tuesday, November 8, 2022, at
9:30 a.m. Central Time or 4:30 p.m. Central European Time. ADTRAN
Holdings will webcast this conference call. To listen, simply visit
our Investor Relations site at adtran.com/investor approximately 10
minutes prior to the start of the call, click on the event “ADTRAN
Holdings Releases 3rd Quarter 2022 Financial Results and Earnings
Call”, and click on the Webcast link.
An online replay of the Company’s conference call, as well as
the text 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 www.investors.adtran.com or email at
investor.relations@adtran.com.
About ADTRAN Holdings, Inc.
ADTRAN Holdings, Inc. is the parent company of ADTRAN, Inc., a
wholly owned subsidiary and a leading global provider of open,
disaggregated networking and communications solutions. ADTRAN
Holdings is also the largest shareholder of ADVA, a European
telecommunications vendor that provides network equipment for data,
storage, voice, and video services.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements,
generally identified by the use of words such as “believe,”
“expect,” “intend,” “estimate,” “anticipate,” “will,” “may,”
“could” and similar expressions, which forward-looking statements
reflect management’s best judgment based on factors currently
known. However, these statements involve risks and uncertainties,
including: (i) risks and uncertainties related to the continued
impact of the SARS-CoV-2 coronavirus/COVID-19 global pandemic
(including variants of the SARS-CoV-2 coronavirus), including with
respect to continued manufacturing and supply chain constraints;
(ii) risks and uncertainties related to the completed business
combination between the Company, ADTRAN and ADVA, including risks
related to regulatory or other limitations imposed following the
closing of the business combination on July 15, 2022 and the
proposed domination and profit and loss transfer agreement between
the Company as the controlling entity, and ADVA as the controlled
entity; the ability to successfully integrate the ADTRAN and ADVA
businesses; risks related to disruption of management time from
ongoing business operations due to integration efforts following
the business combination; the risk that the business combination
could have adverse effects on the market price of ADTRAN Holdings’
common stock or ADVA’s common shares or the ability of the Company,
ADTRAN, and ADVA to retain customers, retain or hire key personnel,
maintain relationships with their respective suppliers and
customers, and on their operating results and businesses generally;
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; the risk of fluctuations in
revenue due to lengthy sales and approval processes required by
major and other service providers for new products; the risk posed
by potential breaches of information systems and cyber-attacks; the
risks that ADTRAN, ADVA or ADTRAN Holdings may not be able to
effectively compete, including through product improvements and
development; and (iii) other risks set forth in ADVA’s annual and
interim financial reports made publicly available and ADTRAN’s and
ADTRAN Holdings’ public filings made with the Securities and
Exchange Commission, including ADTRAN’s Annual Report on Form 10-K
for the year ended December 31, 2021 and ADTRAN Holdings’ Form 10-Q
for the quarterly period ended June 30, 2022. These risks and
uncertainties could cause actual results to differ materially from
those in the forward-looking statements included in this press
release.
Explanation of Use of Non-GAAP Financial Measures
Set forth in the tables below are reconciliations of operating
loss, net loss inclusive of the non-controlling interest, net loss
attributable to the Company, and loss per share attributable to the
Company, in each case as reported based on generally accepted
accounting principles in the United States (“GAAP”), to non-GAAP
operating income, non-GAAP net income inclusive of the
non-controlling interest, non-GAAP net income attributable to the
Company, and non-GAAP diluted earnings per share attributable to
the Company, respectively. Such non-GAAP measures exclude
acquisition related expenses, amortizations and adjustments
(consisting of intangible amortization of backlog, developed
technology, customer relationships, and trade names acquired in
connection with business combinations and amortization of inventory
fair value adjustments), stock-based compensation expense,
amortization of pension actuarial losses, deferred compensation
adjustments, certain 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 non-GAAP operating
income, non-GAAP net income inclusive of the non-controlling
interest, non-GAAP net income attributable to the Company, and
non-GAAP diluted earnings per share attributable to the Company,
when combined with the presentation of the most directly comparable
GAAP financial measure, is beneficial to the overall understanding
of ongoing operating performance of the Company.
These non-GAAP financial measures are not prepared in accordance
with, or an alternative for, GAAP and therefore should not be
considered in isolation or as a substitution for analysis of our
results as reported under GAAP. Additionally, our calculation of
non-GAAP operating income, non-GAAP net income and non-GAAP
earnings per share - basic and diluted, may not be comparable to
similar measures calculated by other companies.
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
September 30,
December 31,
2022
2021
Assets
Current Assets
Cash and cash equivalents
$
111,099
$
56,603
Restricted cash
—
215
Short-term investments
803
350
Accounts receivable, net
302,401
158,742
Other receivables
14,350
11,228
Inventory, net
416,163
139,891
Prepaid expenses and other current
assets
30,739
9,296
Total Current Assets
875,555
376,325
Property, plant and equipment, net
104,577
55,766
Deferred tax assets, net
—
9,079
Goodwill
357,869
6,968
Intangibles, net
393,575
19,293
Other non-current assets
56,347
30,971
Long-term investments
50,131
70,615
Total Assets
$
1,838,054
$
569,017
Liabilities and Equity
Current Liabilities
Accounts payable
$
276,026
$
102,489
Revolving credit agreements
outstanding
84,503
—
Notes payable
29,782
—
Unearned revenue
40,993
17,737
Accrued expenses and other liabilities
25,554
13,673
Accrued wages and benefits
41,595
14,900
Income tax payable, net
26,838
6,560
Total Current Liabilities
525,291
155,359
Deferred tax liabilities, net
36,884
—
Non-current unearned revenue
18,269
9,271
Pension liability
16,220
11,402
Deferred compensation liability
25,376
31,383
Non-current lease obligations
21,490
3,269
Other non-current liabilities
9,697
1,231
Total Liabilities
653,227
211,915
Common stock
776
797
Additional paid-in capital
883,210
288,946
Accumulated other comprehensive loss
(40,288
)
(11,914
)
Retained earnings
31,535
740,820
Treasury stock
(4,083
)
(661,547
)
Non-controlling interest
313,677
—
Total Equity
1,184,827
357,102
Total Liabilities and Equity
$
1,838,054
$
569,017
Condensed Consolidated
Statements of Loss
(Unaudited)
(In thousands, except per
share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2022
2021
2022
2021
Revenue
Network Solutions
$
304,940
$
120,767
$
599,306
$
360,025
Services & Support
35,769
17,314
67,959
48,821
Total Revenue
340,709
138,081
667,265
408,846
Cost of Revenue
Network Solutions
226,635
81,029
417,209
216,044
Services & Support
11,047
9,379
30,207
28,860
Total Cost of Revenue
237,682
90,408
447,416
244,904
Gross Profit
103,027
47,673
219,849
163,942
Selling, general and administrative
expenses
74,880
30,972
130,646
89,273
Research and development expenses
59,196
26,759
112,187
82,131
Asset impairment
16,969
—
16,969
—
Operating Loss
(48,018
)
(10,058
)
(39,953
)
(7,462
)
Interest and dividend income
347
344
768
887
Interest expense
(1,303
)
(6
)
(1,427
)
(18
)
Net investment (loss) gain
(2,691
)
(63
)
(10,752
)
2,942
Other income, net
2,494
648
2,949
2,673
Loss Before Income Taxes
(49,171
)
(9,135
)
(48,415
)
(978
)
Income tax benefit (expense)
4,312
(1,292
)
4,572
(3,467
)
Net Loss
$
(44,859
)
$
(10,427
)
$
(43,843
)
$
(4,445
)
Less: Net Loss attributable to
non-controlling interest
(2,925
)
—
(2,925
)
—
Net Loss attributable to ADTRAN
Holdings, Inc.
$
(41,934
)
$
(10,427
)
$
(40,918
)
$
(4,445
)
Weighted average shares outstanding –
basic
73,036
48,609
57,175
48,470
Weighted average shares outstanding –
diluted
73,036
48,609
57,175
48,470
Loss per common share attributable to
ADTRAN Holdings, Inc. – basic
$
(0.57
)
$
(0.21
)
$
(0.72
)
$
(0.09
)
Loss per common share attributable to
ADTRAN Holdings, Inc. – diluted
$
(0.57
)
$
(0.21
)
$
(0.72
)
$
(0.09
)
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
2022
2021
Cash flows from operating
activities:
Net loss
$
(43,843
)
$
(4,445
)
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization
34,783
12,246
Asset impairment
16,969
—
Amortization of debt issuance cost
200
—
Loss (gain) on investments
10,395
(3,320
)
Stock-based compensation expense
15,912
5,457
Deferred income taxes
(26,366
)
437
Other, net
32
89
Inventory reserves
(6,681
)
(4,789
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(34,535
)
(26,346
)
Other receivables
(2,154
)
11,152
Inventory
(76,293
)
2,120
Prepaid expenses, other current assets and
other assets
610
(8,514
)
Accounts payable
70,381
29,614
Accrued expenses and other liabilities
(23,005
)
10,392
Income taxes payable, net
20,862
4,798
Net cash (used in) provided by
operating activities
(42,733
)
28,891
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(10,141
)
(3,572
)
Proceeds from sales and maturities of
available-for-sale investments
30,474
28,305
Purchases of available-for-sale
investments
(22,215
)
(28,853
)
Proceeds from beneficial interests in
securitized accounts receivable
1,294
—
Proceeds from disposals of property, plant
and equipment
12
—
Insurance proceeds received
—
500
Acquisition of business, net of cash
acquired
43,957
—
Net cash provided by (used in)
investing activities
43,381
(3,620
)
Cash flows from financing
activities:
Tax withholdings related to stock-based
compensation settlements
(515
)
(113
)
Proceeds from stock option exercises
5,434
6,111
Dividend payments
(15,859
)
(13,124
)
Proceeds from draw on revolving credit
agreement
133,141
—
Repayment of revolving credit
agreement
(48,000
)
—
Payment of debt issuance cost
(3,015
)
—
Repayment of notes payable
(10,057
)
—
Net cash provided by (used in)
financing activities
61,129
(7,126
)
Net increase in cash, cash equivalents and
restricted cash
61,777
18,145
Effect of exchange rate changes
(7,496
)
(2,719
)
Cash, cash equivalents and restricted
cash, beginning of period
56,818
60,179
Cash, cash equivalents and restricted
cash, end of period
$
111,099
$
75,605
Supplemental disclosure of cash financing
activities:
Cash paid for interest
$
633
$
—
Supplemental disclosure of non-cash
investing activities
Right-of-use assets obtained in exchange
for lease obligations
$
904
$
1,833
Purchases of property, plant and equipment
included in accounts payable
$
1,037
$
100
ADVA common shares exchanged in
acquisition
$
565,491
$
—
ADVA options assumed in acquisition
$
12,769
$
—
Non-controlling interest related to
ADVA
$
316,415
$
—
Supplemental
Information
Reconciliation of Operating
Loss to Non-GAAP Operating Income (Loss)
(Unaudited)
(In thousands)
Three Months Ended September
30,
Nine Months ended September
30,
2022
2021
2022
2021
Operating Loss
$
(48,018
)
$
(10,058
)
$
(39,953
)
$
(7,462
)
Acquisition related expenses,
amortizations and adjustments
40,310
(1)
6,041
(6)
44,763
(8)
9,470
(11)
Asset impairments
16,969
(2)
—
16,969
(2)
—
Stock-based compensation expense
12,131
(3)
1,842
(7)
15,912
(9)
5,457
(12)
Pension adjustments
244
(4)
—
244
(4)
—
Restructuring expenses
—
—
2
(10)
309
(13)
Deferred compensation adjustments
(740
)
(5)
(459
)
(5)
(7,173
)
(5)
2,091
(5)
Non-GAAP Operating Income
(Loss)
$
20,896
$
(2,634
)
$
30,764
$
9,865
(1) Includes intangible amortization of
backlog, inventory fair value adjustments, developed technology,
customer relationships, and trade names acquired in connection with
business combinations, and certain one-time transaction expenses of
which $25.5 million is included in total cost of revenue, $14.3
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 income (loss).
(2) Includes impairment charges related to
the abandonment of certain information technology projects due to
the business combination.
(3) $1.3 million is included in total cost
of revenue, $9.1 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 income (loss). Includes $8.9 million of incremental stock-based
award modification expense related to the business combination.
(4) Less than $0.1 million is included in
total cost of revenue, $0.1 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 income (loss).
(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 income (loss).
(6) $5.5 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 income (loss).
(7) $0.1 million is included in total cost
of revenue, $1.1 million is included in selling, general and
administrative expenses and $0.6 million is included in research
and development expenses on the consolidated statements of income
(loss).
(8) Includes intangible amortization of
backlog, inventory fair value adjustments, developed technology,
customer relationships, and trade names acquired in connection with
business combinations, and certain one-time transaction expenses of
which $25.5 million is included in total cost of revenue, $17.8
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 income (loss).
(9) $1.6 million is included in total cost
of revenue, $11.4 million is included in selling, general and
administrative expenses and $2.9 million is included in research
and development expenses on the condensed consolidated statements
of income (loss). Includes $8.9 million of incremental stock-based
award modification expense related to the business combination.
(10) Less than $0.1 million is included in
selling, general and administrative expenses condensed consolidated
statements of income (loss).
(11) $8.0 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 income (loss).
(12) $0.4 million is included in total
cost of revenue, $3.3 million is included in selling, general and
administrative expenses and $1.8 million is included in research
and development expenses on the condensed consolidated statements
of income (loss).
(13) $0.1 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 income (loss).
Supplemental
Information
Reconciliation of Net Loss
inclusive of Non-Controlling Interest to
Non-GAAP Net Income (Loss)
inclusive of Non-Controlling Interest
(Unaudited)
and
Reconciliation of Net Loss
attributable to ADTRAN Holdings, Inc. and Loss per Common Share
attributable to
ADTRAN Holdings, Inc. – Basic
and Diluted to Non-GAAP Net Income (Loss) attributable to ADTRAN
Holdings, Inc.
and 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 September
30,
Nine Months ended September
30,
2022
2021
2022
2021
Net Loss attributable to ADTRAN
Holdings, Inc.
$
(41,934
)
$
(10,427
)
$
(40,918
)
$
(4,445
)
Plus: Net Loss attributable to
non-controlling interest
(2,925
)
—
(2,925
)
—
Net Loss inclusive of non-controlling
interest
$
(44,859
)
$
(10,427
)
$
(43,843
)
$
(4,445
)
Acquisition related expenses,
amortizations and adjustments
40,310
6,041
44,763
9,470
Asset impairments
16,969
—
16,969
—
Stock-based compensation expense
12,131
1,842
15,912
5,457
Valuation allowance
3,182
2,455
15,550
4,413
Deferred compensation adjustments (1)
383
(262
)
(612
)
552
Pension adjustments (2)
325
272
499
825
Restructuring expenses
—
—
2
309
Tax effect of adjustments to net income
(loss)
(16,245
)
(736
)
(17,430
)
(2,931
)
Non-GAAP Net Income (Loss) inclusive of
non-controlling interest
$
12,196
$
(815
)
$
31,810
$
13,650
Less: Non-GAAP Net Income attributable
to non-controlling interest
4,486
—
4,486
—
Non-GAAP Net Income (Loss) attributable
to ADTRAN Holdings, Inc.
$
7,710
$
(815
)
$
27,324
$
13,650
Weighted average shares outstanding –
basic
73,036
48,609
57,175
48,470
Weighted average shares outstanding –
diluted
73,036
48,609
57,175
48,470
Loss per common share attributable to
ADTRAN Holdings, Inc. - basic
$
(0.57
)
$
(0.21
)
$
(0.72
)
$
(0.09
)
Loss per common share attributable to
ADTRAN Holdings, Inc. - diluted
$
(0.57
)
$
(0.21
)
$
(0.72
)
$
(0.09
)
Non-GAAP earnings (loss) per common
share attributable to ADTRAN Holdings, Inc. - basic
$
0.11
$
(0.02
)
$
0.48
$
0.28
Non-GAAP earnings (loss) per common
share attributable to ADTRAN Holdings, Inc. - diluted
$
0.11
$
(0.02
)
$
0.48
$
0.28
(1) Includes non-cash change in fair value
of equity investments held in deferred compensation plans offered
to certain employees.
(2) 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/20221107006217/en/
Investor Services/Assistance: Rhonda Lambert/256-963-7450
Investor.relations@adtran.com
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