PRESS RELEASE

from Adtran Holdings, Inc. (isin : US00486H1059)

ADTRAN Holdings, Inc. Reports Preliminary Third Quarter 2024 Financial Results

EQS-News: Adtran Holdings, Inc. / Key word(s): Quarter Results
ADTRAN Holdings, Inc. Reports Preliminary Third Quarter 2024 Financial Results

07.11.2024 / 06:55 CET/CEST
The issuer is solely responsible for the content of this announcement.


ADTRAN Holdings, Inc. Reports Preliminary Third Quarter 2024 Financial Results 

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

  • Revenue: $227.7 million, up sequentially and above the mid-point of guidance.
  • Gross margin: GAAP gross margin: 37.4%; Non-GAAP gross margin: 42.1%, a sequential increase of 134 and 17 basis points, respectively.
  • Operating margin: GAAP operating margin negative 10.5% up sequentially; Non-GAAP operating margin positive 1.1%, up sequentially and above the mid-point of guidance.
  • GAAP diluted loss per share of $0.36; Non-GAAP diluted loss per share $0.05.

ADTRAN Holdings’ Chairman and Chief Executive Officer Tom Stanton stated, “We delivered higher sequential revenue and expanded gross and operating margins in the third quarter. Importantly, we are seeing improvements in our key end markets as we continue to grow our customer base. With the gradual recovery in service provider spending, the success we are having in customer acquisition, and encouraging booking trends, we expect sequential revenue growth to continue in the fourth quarter. This outlook, coupled with improving visibility, gives us confidence our end-markets should continue to improve.”

“ADTRAN remains well-positioned for sustainable and profitable growth as customer inventory levels normalize,” added Mr. Stanton. “The continued trend to increase fiber access and optical transport, combined with the ongoing transition from higher risk vendors to providers like ADTRAN, serve as durable secular catalysts. As we grow, we are confident we can unlock meaningful operational leverage, driving accelerated profitability and increased cash generation.”

Business Outlook1

For the fourth quarter of 2024, the Company expects revenue to be within a range of $230 million to $245 million. Non-GAAP operating margin is expected to be within a range of 0% to 4%.

1GAAP earnings guidance is not provided. Please see the Explanation of Use of Non-GAAP Financial Measures at the end of this press release for an explanation regarding the Company’s omission of both GAAP earnings guidance and the applicable reconciliation table. In addition, please see the Explanation of Use of Non-GAAP Financial Measures and the Supplemental Information Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures at the end of this press release for detailed information on calculating the non-GAAP measures referenced herein.

The Company will hold a conference call to discuss its preliminary third quarter results on Thursday, November 07, 2024, at 9:30 a.m. Central Time, or 4:30 p.m. Central European 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 3rd 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.

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.

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) 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) risks and uncertainties relating to our ability to comply with the covenants set forth in our credit facility and to satisfy our payment obligations to Adtran Networks’ minority shareholders under the Domination and Profit and Loss Transfer Agreement between us and Adtran Networks; (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 second quarter ended June 30, 2024, and risks to be disclosed in its Form 10-Q for the quarterly period ended September 30, 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 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.

 

1Non-GAAP operating margin (which is calculated as non-GAAP operating loss divided by revenue) is a non-GAAP financial measure. The Company has provided fourth 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 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. 

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

For media

Gareth Spence

+44 1904 699 358

public.relations@adtran.com

For investors

Peter Schuman

+1 650 743 7948

investor.relations@adtran.com


 

Condensed Consolidated Balance Sheets

(Preliminary, Unaudited)

(In thousands)

 September 30,  December 31, 
 2024  2023 
Assets     
Current Assets     
Cash and cash equivalents$88,456  $87,167 
Accounts receivable, net 172,025   216,445 
Other receivables 12,871   17,450 
Income tax receivable 13,466   7,933 
Inventory, net 282,926   362,295 
Prepaid expenses and other current assets 69,112   45,566 
Total Current Assets 638,856   736,856 
Property, plant and equipment, net 147,428   123,020 
Deferred tax assets 25,697   25,787 
Goodwill 56,884   353,415 
Intangibles, net 286,098   327,985 
Other non-current assets 86,677   87,706 
Long-term investments 31,506   27,743 
Total Assets$1,273,146  $1,682,512 
      
Liabilities, Redeemable Non-Controlling Interest and Equity     
Current Liabilities     
Accounts payable$173,354  $162,922 
Unearned revenue 54,615   46,731 
Accrued expenses and other liabilities 34,482   36,204 
Accrued wages and benefits 40,366   27,030 
Income tax payable, net 2,007   5,221 
Total Current Liabilities 304,824   278,108 
Non-current revolving credit agreement outstanding 189,849   195,000 
Deferred tax liabilities 21,483   35,655 
Non-current unearned revenue 24,901   25,109 
Non-current pension liability 12,149   12,543 
Deferred compensation liability 32,046   29,039 
Non-current lease obligations 25,635   31,420 
Other non-current liabilities 26,489   28,657 
Total Liabilities 637,376   635,531 
Redeemable Non-Controlling Interest 421,776   442,152 
Equity     
Common stock 792   790 
Additional paid-in capital 806,187   795,304 
Accumulated other comprehensive income 47,377   47,465 
Retained deficit (635,164)  (232,905)
Treasury stock (5,198)  (5,825)
Total Equity 213,994   604,829 
Total Liabilities, Redeemable Non-Controlling Interest and Equity$1,273,146  $1,682,512 

 

Condensed Consolidated Statements of Loss

(Preliminary, Unaudited)

(In thousands, except per share amounts)

 

  Three Months Ended  Nine Months Ended  
  September 30,  September 30,  
  2024  2023  2024  2023  
Revenue             
Network Solutions $181,488  $228,564  $541,955  $793,984  
Services & Support  46,216   43,767   137,913   129,637  
Total Revenue  227,704   272,331   679,868   923,621  
Cost of Revenue             
Network Solutions  126,103   160,244   376,886   596,334  
Network Solutions - other (credits), charges and inventory write-down  (328)  21,043   8,597   21,043  
Services & Support  16,678   16,807   55,304   51,646  
Total Cost of Revenue  142,453   198,094   440,787   669,023  
Gross Profit  85,251   74,237   239,081   254,598  
Selling, general and administrative expenses  57,620   62,907   176,214   196,887  
Research and development expenses  51,615   62,752   172,253   203,493  
Goodwill impairment     37,874   292,583   37,874  
Operating Loss  (23,984)  (89,296)  (401,969)  (183,656) 
Interest and dividend income  664   521   1,427   1,183  
Interest expense  (5,679)  (4,507)  (17,183)  (11,858) 
Net investment gain (loss)  1,382   (1,443)  4,507   1,071  
Other (expense) income, net  (850)  2,523   (441)  4,714  
Loss Before Income Taxes  (28,467)  (92,202)  (413,659)  (188,546) 
Income tax (expense) benefit  (390)  16,553   16,121   36,229  
Net Loss $(28,857) $(75,649) $(397,538) $(152,317) 
Less: Net (Loss) Income attributable to non-controlling interest  2,382   2,561   7,417   4,380  
Net Loss attributable to ADTRAN Holdings, Inc. $(31,239) $(78,210) $(404,955) $(156,697) 
              
Weighted average shares outstanding – basic  78,952   78,389   78,873   78,378  
Weighted average shares outstanding – diluted  78,952   78,389   78,873   78,378  
              
Loss per common share attributable to ADTRAN Holdings, Inc. – basic $(0.36)(1)$(1.00) $(5.10)(1)$(2.00) 
Loss per common share attributable to ADTRAN Holdings, Inc. – diluted $(0.36)(1)$(1.00) $(5.10)(1)$(2.00) 

 
(1) Loss per common share attributable to ADTRAN Holdings, Inc. reflects $3.0 million gain on redemption of redeemable non-controlling interest for the three and nine months ended September 30, 2024.

 

Condensed Consolidated Statements of Cash Flows

(Preliminary, Unaudited)

(In thousands)

 

  Nine Months Ended 
  September 30, 
  2024  2023 
Cash flows from operating activities:      
Net loss $(397,538) $(152,317)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Depreciation and amortization  68,421   91,422 
Goodwill impairment  292,583   37,874 
Amortization of debt issuance cost  1,013   607 
Gain on investments, net  (4,238)  (3,316)
Net loss on disposal of property, plant and equipment  203    
Stock-based compensation expense  11,417   12,229 
Deferred income taxes  (13,399)  (45,941)
Other, net  (267)  204 
Inventory write down - business efficiency program  4,135   21,043 
Inventory reserves  6,667   29,836 
Changes in operating assets and liabilities:      
Accounts receivable, net  59,446   47,347 
Other receivables  4,875   8,340 
Income taxes receivable, net  (5,682)   
Inventory  69,412   536 
Prepaid expenses, other current assets and other assets  (20,083)  1,816 
Accounts payable  9,697   (87,903)
Accrued expenses and other liabilities  15,039   6,476 
Income taxes payable, net  (3,175)  2,433 
Net cash provided by (used in) operating activities  98,526   (29,314
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