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ADTRAN Holdings, Inc. reports second quarter 2024 financial results

EQS-News: Adtran Holdings, Inc. / Key word(s): Quarter Results
ADTRAN Holdings, Inc. reports second quarter 2024 financial results

06.08.2024 / 05:00 CET/CEST
The issuer is solely responsible for the content of this announcement.


ADTRAN Holdings, Inc. reports second quarter 2024 financial results 

Huntsville, Alabama, USA. — August 05, 2024 — ADTRAN Holdings, Inc. (NASDAQ: ADTN and FSE: QH9) (“ADTRAN Holdings” or the “Company”) today announced its unaudited financial results for the second quarter of 2024.

  • Revenue: $226.0 million
  • Gross margin:
    • GAAP gross margin: 36.1%; Non-GAAP gross margin: 41.9%
  • Operating margin:
    • GAAP operating margin negative 17.0%; Non-GAAP operating margin positive 0.7%
  • Net Income (Loss):
    • GAAP net loss attributable to the Company: $49.9 million; Non-GAAP net loss attributable to the Company: $18.8 million
  • Earnings (Loss) per share:
    • GAAP diluted loss per share attributable to the Company: $0.63; Non-GAAP diluted loss per share attributable to the Company: $0.24.

ADTRAN Holdings’ Chairman and Chief Executive Officer Tom Stanton stated, "We had a solid second quarter, during which we saw improvements across all our major operating metrics, including profitability and working capital. During the quarter, we saw growth in our customer base across the U.S. and Europe as customers continue to adopt our latest fiber networking solutions”.

For the third quarter of 2024, the Company expects revenue in a range of $215million to $235million. Non-GAAP operating margin is expected in a range of -1% to +3%.

Furthermore, non-GAAP operating margin (which is calculated as non-GAAP operating loss divided by revenue) is a non-GAAP financial measure. The Company has provided third quarter 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 and integration 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.

The Company will hold a conference call to discuss its second quarter results on Tuesday, August 06, 2024, at 9:30 a.m. Central Time, or 4:30 p.m. Central European Summer Time. The Company 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 2024 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 future revenues; ADTRAN Holdings ability to reduce its inventory levels; ADTRAN Holdings’ potential funding opportunities; 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) 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 ongoing material weaknesses in our internal control over financial reporting; (iv) our ability to comply with the covenants set forth in our credit facility; (v) risks 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, 2023, its Quarterly Report on Form 10-Q for the first quarter ended March 31, 2024, and risks to be disclosed in its Form 10-Q for the quarterly period ended March 31, 2024.

 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 loss attributable to the Company, net income attributable to the non-controlling interest, 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 loss inclusive of the non-controlling interest, non-GAAP net loss attributable to the Company, non-GAAP net income attributable to the non-controlling interest, non-GAAP loss per share - basic and diluted, attributable to the Company, respectively, and non-GAAP free cash flow. 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, amortization of pension actuarial losses, deferred compensation adjustments, integration expenses, restructuring expenses,  goodwill impairments, 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.

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

For media

Gareth Spence

+44 1904 699 358

public.relations@adtran.com

For investors

Rhonda Lambert

investor@adtran.com

 

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 June 30,  December 31, 
 2024  2023 
Assets     
Current Assets     
Cash and cash equivalents$111,185  $87,167 
Accounts receivable, net 186,176   216,445 
Other receivables 11,436   17,450 
Income tax receivable 13,050   7,933 
Inventory, net 287,860   362,295 
Prepaid expenses and other current assets 58,612   45,566 
Total Current Assets 668,319   736,856 
Property, plant and equipment, net 134,578   123,020 
Deferred tax assets 24,931   25,787 
Goodwill 54,897   353,415 
Intangibles, net 290,793   327,985 
Other non-current assets 87,105   87,706 
Long-term investments 30,159   27,743 
Total Assets$1,290,782  $1,682,512 
      
Liabilities, Redeemable Non-Controlling Interest and Equity     
Current Liabilities     
Accounts payable$158,550  $162,922 
Unearned revenue 55,107   46,731 
Accrued expenses and other liabilities 36,307   37,607 
Accrued wages and benefits 37,520   27,030 
Income tax payable, net 2,228   5,221 
Total Current Liabilities 289,712   279,511 
Non-current revolving credit agreement outstanding 190,273   195,000 
Deferred tax liabilities 21,077   35,655 
Non-current unearned revenue 26,584   25,109 
Non-current pension liability 11,505   12,543 
Deferred compensation liability 30,601   29,039 
Non-current lease obligations 26,613   31,420 
Other non-current liabilities 34,445   28,657 
Total Liabilities 630,810   636,934 
Redeemable Non-Controlling Interest 439,743   451,756 
Equity     
Common stock 791   790 
Additional paid-in capital 802,737   795,304 
Accumulated other comprehensive income 28,274   47,461 
Retained deficit (606,375)  (243,908)
Treasury stock (5,198)  (5,825)
Total Equity 220,229   593,822 
Total Liabilities, Redeemable Non-Controlling Interest and Equity$1,290,782  $1,682,512 

 

Condensed Consolidated Statements of Loss

(Unaudited)

(In thousands, except per share amounts)

 

  Three Months Ended  Six Months Ended  
  June 30,  June 30,  
  2024  2023  2024  2023  
Revenue             
Network Solutions $179,194  $283,002  $360,467  $565,420  
Services & Support  46,797   44,376   91,697   85,870  
Total Revenue  225,991   327,378   452,164   651,290  
Cost of Revenue             
Network Solutions  124,457   216,960   250,783   436,090  
Network Solutions - inventory write-down and other charges  143      8,925     
Services & Support  19,816   17,865   38,626   34,839  
Total Cost of Revenue  144,416   234,825   298,334   470,929  
Gross Profit  81,575   92,553   153,830   180,361  
Selling, general and administrative expenses  59,493   66,583   118,593   133,980  
Research and development expenses  60,388   70,598   120,639   140,741  
Goodwill impairment        292,583     
Operating Loss  (38,306)  (44,628)  (377,985)  (94,360) 
Interest and dividend income  366   358   763   662  
Interest expense  (6,906)  (4,064)  (11,504)  (7,351) 
Net investment gain  872   1,262   3,125   2,514  
Other (expense) income, net  (901)  2,494   409   2,191  
Loss Before Income Taxes  (44,875)  (44,578)  (385,192)  (96,344) 
Income tax (expense) benefit  (2,136)  8,363   16,511   19,676  
Net Loss $(47,011) $(36,215) $(368,681) $(76,668) 
Less: Net Income attributable to non-controlling interest  2,854   2,882   5,734   2,512  
Net Loss attributable to ADTRAN Holdings, Inc. $(49,865) $(39,097) $(374,415) $(79,180) 
              
Weighted average shares outstanding – basic  78,852   78,366   78,803   78,364  
Weighted average shares outstanding – diluted  78,852   78,366   78,803   78,364  
              
Loss per common share attributable to ADTRAN Holdings, Inc. – basic $(0.63) $(0.50) $(4.75) $(1.01) 
Loss per common share attributable to ADTRAN Holdings, Inc. – diluted $(0.63) $(0.50) $(4.75) $(1.01) 

 

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

  Six Months Ended 
  June 30, 
  2024  2023 
Cash flows from operating activities:      
Net loss $(368,681) $(76,668)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Depreciation and amortization  45,156   67,467 
Goodwill impairment  292,583    
Amortization of debt issuance cost  1,013   291 
Gain on investments, net  (2,867)  (4,530)
Net loss on disposal of property, plant and equipment  185    
Stock-based compensation expense  7,793   8,103 
Deferred income taxes  (13,684)  (31,962)
Other, net  (126)  130 
Inventory write down - business efficiency program  4,135    
Inventory reserves  3,722   20,885 
Changes in operating assets and liabilities:      
Accounts receivable, net  26,913   40,975 
Other receivables  6,279   561 
Income taxes receivable, net  (5,653)   
Inventory  62,151   (6,920)
Prepaid expenses, other current assets and other assets  (14,731)  7,105 
Accounts payable  (3,966)  (67,923)
Accrued expenses and other liabilities  19,152   110 
Income taxes payable, net  (2,878)  6,216 
Net cash provided by (used in) operating activities  56,496   (36,160)
       
Cash flows from investing activities:      
Purchases of property, plant and equipment  (29,369)  (20,118)
Proceeds from sales and maturities of available-for-sale investments  956   2,074 
Purchases of available-for-sale investments  
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