PRESS RELEASE

from Adtran Holdings, Inc. (isin : US00486H1059)

ADTRAN Holdings, Inc. reports first quarter 2024 financial results

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

07.05.2024 / 06:00 CET/CEST
The issuer is solely responsible for the content of this announcement.


ADTRAN Holdings, Inc. reports first quarter 2024 financial results 

  • Q1 revenue above mid-point of guidance; non-GAAP profitability in line with guidance
  • $53 million sequential improvement in GAAP operating cash flow

 Huntsville, Alabama, USA. — May 06, 2024 — ADTRAN Holdings, Inc. (NASDAQ: ADTN and FSE: QH9) (“ADTRAN Holdings” or the “Company”) today announced its unaudited financial results for the first quarter of 2024.

GAAP gross margin for the first quarter was 31.9%, compared to 34.8% in Q4 2023 and 27.1% in the year-ago quarter, representing an improvement of 484 basis points (“bps”) year-over-year but a decrease of 285 bps quarter-over-quarter. The year-over-year improvement primarily resulted from lower purchasing and transportation costs, as well as lower acquisition-related expenses, amortizations and adjustments. The sequential margin decline is primarily due to $8.8 million of inventory charges related to a strategy shift as part of our Business Efficiency Program.

Non-GAAP gross margin for the first quarter was 41.6% compared to 41.9% in Q4 2023 and 37.3% in the year-ago quarter representing a decline of 33 bps sequentially and an improvement of 429 bps year-over-year. 

GAAP operating margin for the first quarter was negative 150.2%, primarily driven by a non-cash goodwill impairment charge .

Non-GAAP operating margin for the first quarter was negative 3.9%, which was within the guidance range of between -7% and 0% of revenues. Non-GAAP operating margin was negatively impacted by an unfavorable currency rate development and seasonal effects in the first quarter.

GAAP net loss attributable to the Company for the first quarter of 2024, including the above mentioned impairment charge, was $324.6 million. Diluted loss per share attributable to the Company for the first quarter was $4.12.

Non-GAAP net loss attributable to the Company for the first quarter of 2024 was $1.7 million. Non-GAAP diluted loss per share attributable to the Company for the first quarter was $0.02.

ADTRAN Holdings’ Chairman and Chief Executive Officer Tom Stanton stated, "First quarter revenue and profitability came in as expected, with the weakness still impacting our results. However, we were pleased with the continued momentum in our customer win rate which was bolstered by the ongoing expansion of our Mosaic One platform. As we continued to execute on our business efficiency program , we were able to reduce inventory and significantly improve our operating cashflow while maintaining our diligence in gaining market share during this pivotal time in our industry. We believe that as markets return to normal, our continued focus on these measures, will lead to sustainable margin expansions and shareholder value creation in the mid-term.”

The Company will hold a conference call to discuss its first quarter results on Tuesday, May 07, 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 1st 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’ expected future customer win rate and expansion of its Mosaic One platform; the ability of ADTRAN Holdings’ ability to continue to effectively implement the Business Efficiency Program; the impact of the foregoing measures on margin expansion and shareholder value creation; and ADTRAN Holdings’ strategy and outlook, outlook and financial guidance, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can also generally be identified by the use of words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could” and similar expressions. In addition, ADTRAN Holdings, through its senior management, may from time to time make forward-looking public statements concerning the matters described herein. All such projections and other forward-looking information speak only as of the date hereof, and ADTRAN Holdings undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise, except to the extent as may be required by law. All such forward-looking statements are necessarily estimates and reflect management’s best judgment based upon current information. Actual events or results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which have caused and may in the future cause actual events or results to differ materially from those estimated by ADTRAN Holdings include, but are not limited to: (i) risks and uncertainties relating to ADTRAN Holdings’ ability to reduce expenditures and the impact of such reductions on its financial results and financial condition; (ii) the risk of fluctuations in revenue due to lengthy sales and approval processes required by major and other service providers for new products, as well as ongoing tighter inventory management of ADTRAN Holdings’ customers ; (iii) risks and uncertainties relating to the recent restatements of our previously issued consolidated financial statements and ongoing material weaknesses in our internal control over financial reporting; (iv) 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, filed with the SEC on March 15, 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, net loss inclusive of the non-controlling interest, net loss attributable to the Company, net income (loss) attributable to the non-controlling interest, and loss per share - basic and diluted, attributable to the Company, in each case as reported based on generally accepted accounting principles in the United States (“GAAP”), to non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating loss, 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), stock-based compensation expense, amortization of pension actuarial losses, deferred compensation adjustments, integration expenses, restructuring expenses,  goodwill impairments, and the tax effect of these adjustments to net income. These measures are used by management in our ongoing planning and annual budgeting processes. Additionally, we believe the presentation of these non-GAAP measures when combined with the presentation of the most directly comparable GAAP financial measure, is beneficial to the overall understanding of ongoing operating performance of the Company.

These  non-GAAP financial measures are not prepared in accordance with, or an alternative for, GAAP and therefore should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP. Additionally, our calculation of non-GAAP measures may not be comparable to similar measures calculated by other companies.

About Adtran

ADTRAN Holdings, Inc. (NASDAQ: ADTN and FSE: QH9) is the parent company of Adtran, Inc., a leading global provider of open, disaggregated networking and communications solutions that enable voice, data, video and internet communications across any network infrastructure. From the cloud edge to the subscriber edge, Adtran empowers communications service providers around the world to manage and scale services that connect people, places and things. Adtran solutions are used by service providers, private enterprises, government organizations and millions of individual users worldwide. ADTRAN Holdings, Inc. is also the largest shareholder of Adtran Networks SE, formerly ADVA Optical Networking SE. Find more at Adtran, LinkedIn and Twitter.

Published by

ADTRAN Holdings, Inc.

www.adtran.com

For media

Gareth Spence

+44 1904 699 358

public.relations@adtran.com

For investors

Steven Williams

+49 89 890 665 918

investor@adtran.com

 

 

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 March 31,  December  31, 
 2024  2023 
Assets     
Current Assets     
Cash and cash equivalents$106,757  $87,167 
Accounts receivable, net 187,554   216,445 
Other receivables 12,116   17,450 
Income tax receivable 8,717   7,933 
Inventory, net 322,147   362,295 
Prepaid expenses and other current assets 59,667   45,566 
Total Current Assets 696,958   736,856 
Property, plant and equipment, net 126,969   123,020 
Deferred tax assets 25,421   25,787 
Goodwill 55,129   353,415 
Intangibles, net 306,448   327,985 
Other non-current assets 87,729   87,706 
Long-term investments 29,252   27,743 
Total Assets$1,327,906  $1,682,512 
      
Liabilities, Redeemable Non-Controlling Interest and Equity     
Current Liabilities     
Accounts payable$159,083  $162,922 
Unearned revenue 55,124   46,731 
Accrued expenses and other liabilities 36,404   37,607 
Accrued wages and benefits 25,869   27,030 
Income tax payable, net 6,266   5,221 
Total Current Liabilities 282,746   279,511 
Non-current revolving credit agreement outstanding 195,000   195,000 
Deferred tax liabilities 15,414   35,655 
Non-current unearned revenue 22,884   25,109 
Non-current pension liability 11,692   12,543 
Deferred compensation liability 29,709   29,039 
Non-current lease obligations 27,668   31,420 
Other non-current liabilities 35,375   28,657 
Total Liabilities 620,488   636,934 
Redeemable Non-Controlling Interest 441,635   451,756 
Equity     
Common stock 791   790 
Additional paid-in capital 798,897   795,304 
Accumulated other comprehensive income 29,656   47,461 
Retained deficit (558,363)  (243,908)
Treasury stock (5,198)  (5,825)
Total Equity 265,783   593,822 
Total Liabilities, Redeemable Non-Controlling Interest and Equity$1,327,906  $1,682,512 

 

 

Condensed Consolidated Statements of Loss

(Unaudited)

(In thousands, except per share amounts)

 

  Three Months Ended  
  March 31,  
  2024  2023  
Revenue       
Network Solutions $181,273  $282,418  
Services & Support  44,900   41,494  
Total Revenue  226,173   323,912  
Cost of Revenue       
Network Solutions  126,326   219,130  
Network Solutions - inventory write-down  8,782     
Services & Support  18,810   16,974  
Total Cost of Revenue  153,918   236,104  
Gross Profit  72,255   87,808  
Selling, general and administrative expenses  59,100   67,397  
Research and development expenses  60,251   70,143  
Goodwill impairment  292,583     
Operating Loss  (339,679)  (49,732) 
Interest and dividend income  397   304  
Interest expense  (4,598)  (3,287) 
Net investment gain  2,253   1,252  
Other income (expense), net  1,310   (303) 
Loss Before Income Taxes  (340,317)  (51,766) 
Income tax benefit  18,647   11,313  
Net Loss $(321,670) $(40,453) 
Less: Net Income (Loss) attributable to non-controlling interest  2,880   (370) 
Net Loss attributable to ADTRAN Holdings, Inc. $(324,550) $(40,083) 
        
Weighted average shares outstanding – basic  78,814   78,358  
Weighted average shares outstanding – diluted  78,814   78,358  
        
Loss per common share attributable to ADTRAN Holdings, Inc. – basic $(4.12) $(0.51) 
Loss per common share attributable to ADTRAN Holdings, Inc. – diluted $(4.12) $(0.51) 

 

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

  Three Months Ended 
  March 31, 
  2024  2023 
Cash flows from operating activities:      
Net loss $(321,670) $(40,453)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Depreciation and amortization  22,528   33,402 
Goodwill impairment  292,583    
Amortization of debt issuance cost  1,013   146 
Gain on investments, net  (2,621)  (3,154)
Net loss on disposal of property, plant and equipment  150    
Stock-based compensation expense  3,957   3,812 
Deferred income taxes  (19,738)  (24,019)
Other, net  545   (1)
Inventory write down  8,782    
Inventory reserves  (17,247)  16,051 
Changes in operating assets and liabilities:      
Accounts receivable, net  26,002   17,658 
Other receivables  5,606   1,980 
Income taxes receivable, net  (1,296)   
Inventory  49,514   (2,764)
Prepaid expenses, other current assets and other assets  (15,888)  1,118 
Accounts payable  (4,236)  (40,367)
Accrued expenses and other liabilities  7,459   6,349 
Income taxes payable, net  1,155   10,316 
Net cash provided by (used in) operating activities  36,598   (19,926)
       
Cash flows from investing activities:      
Purchases of property, plant and equipment  (13,374)  (8,439)
Proceeds from sales and maturities of available-for-sale investments  873   930 
Purchases of available-for-sale investments  (44)  (516)
Proceeds from beneficial interests in securitized accounts receivable     1,231 
Net cash used in investing activities  (12,545)  (6,794)
       
Cash flows from financing activities:      
Tax withholdings related to stock-based compensation settlements  (176)  (6,258)
Proceeds from stock option exercises  219   58 
Dividend payments     (7,076)
Proceeds from receivables purchase agreement  30,231    
Repayments on receivables purchase agreement  (32,437)   
Proceeds from draw on revolving credit agreements     138,236 
Repayment of revolving credit agreements     (43,464)
Payment of redemption of redeemable non-controlling interest  (5)  (1,176)
Payment of debt issuance cost  (1,994)   
Repayment of notes payable     (24,692)
Net cash (used in) provided by financing activities  (4,162)  55,628 
       
Net increase in cash and cash equivalents  19,891   28,908 
Effect of exchange rate changes  (301)  (1,095)
Cash and cash equivalents, beginning of period  87,167   108,644 
Cash and cash equivalents, end of period $106,757  $136,457 
       
Supplemental disclosure of cash financing activities:      
Cash paid for interest $5,243  $1,610 
Cash paid for income taxes
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