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ADTRAN Holdings, Inc. Reports Preliminary Earnings for the Fourth Quarter of 2022 and Declares Quarterly Cash Dividend

ADTRAN Holdings, Inc., (NASDAQ: ADTN and FSE: QH9) (“ADTRAN Holdings” or the “Company”), today announced preliminary and unaudited financial results for the fourth quarter of 2022. All figures in this release are approximate due to the preliminary nature of the announcement. For the quarter, preliminary revenue was $358.3 million. Preliminary net income inclusive of the non-controlling interest for the fourth quarter of 2022 was $35.0 million. Preliminary net income attributable to the Company for the fourth quarter of 2022 was $38.9 million and preliminary diluted earnings per share attributable to the Company was $0.49. Inclusive of non-controlling interests, preliminary non-GAAP net income was $15.7 million. Preliminary non-GAAP net income attributable to the Company was $9.9 million and preliminary non-GAAP diluted earnings per share attributable to the Company was $0.12. Non-GAAP net income and non-GAAP earnings per share exclude acquisition related expenses, amortizations, 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, restructuring expenses, 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, “Fourth quarter revenue was in the lower side of our guidance range at $358.3 million, as strength in optical networking solutions helped to offset delays in new product introductions. The supply environment has improved year-over-year, which had a positive effect on our gross margins. We also expect supply bottlenecks to continue to alleviate during 2023. Our strong growth in the EMEA region underlines our increased global presence with greater customer diversity as we move into an unprecedented network upgrade cycle.”

The Company also announced that its Board of Directors declared a cash dividend for the fourth 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 March 7, 2023. The ex-dividend date is March 6, 2023, and the payment date will be March 21, 2023.

The information contained in this press release is preliminary. Final results for the fourth quarter ended December 31, 2022 will be released on March 1, 2023.

The Company confirmed that it will hold a conference call to discuss its preliminary fourth quarter results on Tuesday, February 21, 2023, 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 investors.adtran.com approximately 10 minutes prior to the start of the call, click on the event “ADTRAN Holdings Releases 4th 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 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 headquartered network innovator that empowers operators to deliver the cloud and mobile services that are vital to today’s society.

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, including as a result of the continued impact of the SARS-CoV-2 coronavirus/COVID-19 global pandemic ; (ii) risks and uncertainties related to the completed business combination between the Company, ADTRAN and ADVA, including risks related to the ability to successfully integrate the ADTRAN’s and ADVA’s 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 due to lengthy sales and approval processes required by major and other service providers for new products; (iv) the risk posed by potential breaches of information systems and cyber-attacks; (v) the risks that ADTRAN may not be able to effectively compete, including through product improvements and development; and (vi) 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, 2021 and Form 10‑Q for the quarterly period ended September 30, 2022, as well as its Form 10‑K for the year ended December 31, 2022 to be filed with the SEC.

Additionally, the financial measures presented herein are preliminary estimates 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 income (expense), net income inclusive of the non-controlling interest, net income attributable to the Company, net loss attributable to the no-controlling interest and earnings (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 income, non-GAAP other income, non-GAAP net income inclusive of the non-controlling interest, non-GAAP net income attributable to the Company, non-GAAP net income attributable to the non-controlling interest, and non-GAAP earnings per share - basic and diluted, 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, restructuring expenses, 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 gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP other income, non-GAAP net income inclusive of the non-controlling interest, non-GAAP net income attributable to the Company, non-GAAP net income attributable to the non-controlling interest, and non-GAAP earnings per share - basic and diluted, 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 measures may not be comparable to similar measures calculated by other companies.

Condensed Consolidated Balance Sheets

(Preliminary, Unaudited)

(In thousands)

 

ASSETS

 

December 31,

2022

 

 

December 31,

2021

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

108,644

 

 

$

56,603

 

Restricted cash

 

 

 

 

 

215

 

Short-term investments

 

 

340

 

 

 

350

 

Accounts receivable, net

 

 

279,436

 

 

 

158,742

 

Other receivables

 

 

32,831

 

 

 

11,228

 

Inventory, net

 

 

427,531

 

 

 

139,891

 

Prepaid expenses and other current assets

 

 

33,577

 

 

 

9,296

 

Total Current Assets

 

 

882,359

 

 

 

376,325

 

Property, plant and equipment, net

 

 

111,493

 

 

 

55,766

 

Deferred tax assets, net

 

 

6,210

 

 

 

9,079

 

Goodwill

 

 

381,724

 

 

 

6,968

 

Intangibles, net

 

 

401,211

 

 

 

19,293

 

Other non-current assets

 

 

66,203

 

 

 

30,971

 

Long-term investments

 

 

32,665

 

 

 

70,615

 

Total Assets

 

$

1,881,865

 

 

$

569,017

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

 

237,699

 

 

 

102,489

 

Revolving credit agreements outstanding

 

 

95,936

 

 

 

 

Notes payable

 

 

24,598

 

 

 

 

Unearned revenue

 

 

41,193

 

 

 

17,737

 

Accrued expenses and other liabilities

 

 

35,235

 

 

 

13,673

 

Accrued wages and benefits

 

 

44,882

 

 

 

14,900

 

Income tax payable, net

 

 

9,032

 

 

 

6,560

 

Total Current Liabilities

 

 

488,575

 

 

 

155,359

 

Non-current unearned revenue

 

 

19,239

 

 

 

9,271

 

Pension liability

 

 

10,624

 

 

 

11,402

 

Deferred compensation liability

 

 

26,668

 

 

 

31,383

 

Non-current lease obligations

 

 

22,807

 

 

 

3,269

 

Other non-current liabilities

 

 

10,339

 

 

 

1,231

 

Total Liabilities

 

 

578,252

 

 

 

211,915

 

Equity

 

 

 

 

 

 

Common stock

 

 

781

 

 

 

797

 

Additional paid-in capital

 

 

895,834

 

 

 

288,946

 

Accumulated other comprehensive income (loss)

 

 

46,713

 

 

 

(11,914

)

Retained earnings

 

 

55,338

 

 

 

740,820

 

Treasury stock

 

 

(4,125

)

 

 

(661,547

)

Non-controlling interest

 

 

309,072

 

 

 

 

Total Equity

 

 

1,303,613

 

 

 

357,102

 

Total Liabilities and Equity

 

$

1,881,865

 

 

$

569,017

 

Condensed Consolidated Statements of Income (Loss)

(Preliminary, Unaudited)

(In thousands, except per share data)

   

 

 

Three Months Ended

 

 

 

Twelve Months Ended

 

 

 

 

December 31,

 

 

 

December 31,

 

 

 

 

2022

 

 

2021

 

 

 

2022

 

 

2021

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network Solutions

 

$

317,487

 

 

$

138,809

 

 

 

$

916,793

 

 

$

498,834

 

 

Services & Support

 

 

40,784

 

 

 

15,349

 

 

 

 

108,743

 

 

 

64,170

 

 

Total Revenue

 

 

358,271

 

 

 

154,158

 

 

 

 

1,025,536

 

 

 

563,004

 

 

Cost of Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network Solutions

 

 

233,925

 

 

 

91,797

 

 

 

 

647,105

 

 

 

307,841

 

 

Services & Support

 

 

16,943

 

 

 

7,926

 

 

 

 

51,179

 

 

 

36,786

 

 

Total Cost of Revenue

 

 

250,868

 

 

 

99,723

 

 

 

 

698,284

 

 

 

344,627

 

 

Gross Profit

 

 

107,403

 

 

 

54,435

 

 

 

 

327,252

 

 

 

218,377

 

 

Selling, general and administrative expenses

 

 

78,243

 

 

 

35,141

 

 

 

 

208,889

 

 

 

124,414

 

 

Research and development expenses

 

 

61,570

 

 

 

26,532

 

 

 

 

173,757

 

 

 

108,663

 

 

Asset impairment

 

 

464

 

 

 

 

 

 

 

17,433

 

 

 

 

 

Operating Loss

 

 

(32,874

)

 

 

(7,238

)

 

 

 

(72,827

)

 

 

(14,700

)

 

Interest and dividend income

 

 

1,355

 

 

 

1,957

 

 

 

 

2,123

 

 

 

2,844

 

 

Interest expense

 

 

(2,010

)

 

 

(16

)

 

 

 

(3,437

)

 

 

(34

)

 

Net investment (loss) gain

 

 

(587

)

 

 

(1,181

)

 

 

 

(11,339

)

 

 

1,761

 

 

Other income, net

 

 

11,568

 

 

 

1,151

 

 

 

 

14,517

 

 

 

3,824

 

 

Loss Before Income Taxes

 

 

(22,548

)

 

 

(5,327

)

 

 

 

(70,963

)

 

 

(6,305

)

 

Income tax benefit (expense)

 

 

57,503

 

 

 

1,137

 

 

 

 

62,075

 

 

 

(2,330

)

 

Net Income (Loss)

 

$

34,955

 

 

$

(4,190

)

 

 

$

(8,888

)

 

$

(8,635

)

 

Less: Net Loss attributable to non-controlling interest

 

 

(3,926

)

 

 

 

 

 

 

(6,851

)

 

 

 

 

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

 

$

38,881

 

 

$

(4,190

)

 

 

$

(2,037

)

 

$

(8,635

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

77,659

 

 

 

48,914

 

 

 

 

62,346

 

 

 

48,582

 

 

Weighted average shares outstanding – diluted

 

 

79,243

 

 

 

48,914

 

(1)

 

 

62,346

 

 

 

48,582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.50

 

 

$

(0.09

)

 

 

$

(0.03

)

 

$

(0.18

)

 

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

 

$

0.49

 

 

$

(0.09

)

(1)

 

$

(0.03

)

 

$

(0.18

)

 

Condensed Consolidated Statements of Cash Flows

(Preliminary, Unaudited)

(In thousands)

 

 

 

Twelve Months Ended

December 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net (Loss) Income

 

$

(8,888

)

 

$

(8,635

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

67,553

 

 

 

16,084

 

Asset impairments

 

 

17,433

 

 

 

 

Amortization of debt issuance cost

 

 

288

 

 

 

 

Amortization of net discount on available-for-sale investments

 

 

19

 

 

 

108

 

Loss (gain) on investments

 

 

9,826

 

 

 

(5,127

)

Net loss on disposal of property, plant and equipment

 

 

85

 

 

 

4

 

Stock-based compensation expense

 

 

28,322

 

 

 

7,480

 

Deferred income taxes

 

 

(62,388

)

 

 

(1,784

)

Inventory reserves

 

 

(7,250

)

 

 

(5,029

)

Change in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

788

 

 

 

(60,864

)

Other receivables

 

 

(20,088

)

 

 

9,752

 

Inventory

 

 

(68,349

)

 

 

(10,638

)

Prepaid expenses other current assets and other assets

 

 

(6,367

)

 

 

(7,146

)

Accounts payable

 

 

28,105

 

 

 

53,270

 

Accrued expenses and other liabilities

 

 

(20,483

)

 

 

10,063

 

Income taxes payable

 

 

(2,151

)

 

 

5,470

 

Net cash (used in) provided by operating activities

 

 

(43,545

)

 

 

3,008

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(18,453

)

 

 

(5,669

)

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

 

 

51,661

 

 

 

50,466

 

Purchases of available-for-sale investments

 

 

(23,899

)

 

 

(35,031

)

Proceeds from beneficial interests in securitized accounts receivable

 

 

1,126

 

 

 

 

Proceeds from disposals of property, plant and equipment

 

 

561

 

 

 

 

Insurance proceeds received

 

 

 

 

 

500

 

Acquisition of business, net of cash acquired

 

 

44,003

 

 

 

 

Net cash provided by investing activities

 

 

54,999

 

 

 

10,266

 

Cash flows from financing activities:

 

 

 

 

 

 

Tax withholdings related to stock-based compensation settlements

 

 

(6,070

)

 

 

(1,860

)

Proceeds from stock option exercises

 

 

6,904

 

 

 

6,431

 

Dividend payments

 

 

(22,885

)

 

 

(17,529

)

Proceeds from draw on revolving credit agreements

 

 

141,887

 

 

 

10,000

 

Repayment of revolving credit agreements

 

 

(48,000

)

 

 

(10,000

)

Payment of debt issuance cost

 

 

(3,015

)

 

 

 

Excess tax benefits from stock-based compensation arrangements

 

 

(4,253

)

 

 

 

Repayment of notes payable

 

 

(17,702

)

 

 

 

Net cash provided by (used in) financing activities

 

 

46,866

 

 

 

(12,958

)

Net increase (decrease) in cash and cash equivalents

 

 

58,320

 

 

 

316

 

Effect of exchange rate changes

 

 

(6,494

)

 

 

(3,677

)

Cash, cash equivalents and restricted cash, beginning of year

 

 

56,818

 

 

 

60,179

 

Cash, cash equivalents and restricted cash, end of year

 

$

108,644

 

 

$

56,818

 

 

 

 

 

 

 

 

Supplemental disclosure of cash financing activities

 

 

 

 

 

 

Cash paid for interest

 

$

1,728

 

 

$

13

 

Cash used in operating activities related to operating leases

 

$

5,229

 

 

$

1,892

 

Supplemental disclosure of non-cash investing activities

 

 

 

 

 

 

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

 

$

3,410

 

 

$

1,875

 

Purchases of property, plant and equipment included in accounts payable

 

$

1,165

 

 

$

638

 

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 Preliminary Gross Profit and Preliminary Gross Margin to Preliminary Non-GAAP Gross Profit and Preliminary Non-GAAP Gross Margin

(Unaudited)

(In thousands)

 

 

Three Months Ended

 

 

 

Twelve Months Ended

 

 

December 31,

2022

 

 

 

September 30,

2022

 

 

 

December 31,

2021

 

 

 

December 31,

2022

 

 

 

December 31,

2021

 

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

$

358,271

 

 

 

$

340,709

 

 

 

$

154,158

 

 

 

$

1,025,536

 

 

 

$

563,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Revenue

$

250,868

 

 

 

$

237,682

 

 

 

$

99,723

 

 

 

$

698,284

 

 

 

$

344,627

 

Acquisition-related expenses, amortizations and adjustments

 

(31,577

)

(1)

 

 

(25,530

)

(3)

 

 

 

 

 

 

(57,108

)

(5)

 

 

(12

)

Stock-based compensation expense

 

(1,287

)

(2)

 

 

(1,269

)

(4)

 

 

(154

)

 

 

 

(2,876

)

(6)

 

 

(543

)

Pension adjustments

 

144

 

 

 

 

(59

)

 

 

 

 

 

 

 

85

 

 

 

 

 

Restructuring expenses

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

 

(15

)

Non-GAAP Cost of Revenue

$

218,140

 

 

 

$

210,824

 

 

 

$

99,569

 

 

 

$

638,377

 

 

 

$

344,057

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

$

107,403

 

 

 

$

103,027

 

 

 

$

54,435

 

 

 

$

327,252

 

 

 

$

218,377

 

Non-GAAP Gross Profit

$

140,131

 

 

 

$

129,885

 

 

 

$

54,589

 

 

 

$

387,159

 

 

 

$

218,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

30.0

%

 

 

 

30.2

%

 

 

 

35.3

%

 

 

 

31.9

%

 

 

 

38.8

%

Non-GAAP Gross Margin

 

39.1

%

 

 

 

38.1

%

 

 

 

35.4

%

 

 

 

37.8

%

 

 

 

38.9

%

       

(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 $31.6 million is included in total cost of revenue, on the condensed consolidated statements of income (loss).

(2) Includes $1.0 million of cost of revenue expenses incremental stock-based award modification expense related to the business combination on the condensed consolidated statements of income (loss).

(3) 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, on the condensed consolidated statements of income (loss).

(4) Includes $1.0 million of cost of revenue expenses incremental stock-based award modification expense related to the business combination on the condensed consolidated statements of income (loss).

(5) 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 $57.1 million is included in total cost of revenue, on the condensed consolidated statements of income (loss).

(6) Includes $2.0 million of cost of revenue expenses incremental stock-based award modification expense related to the business combination on the condensed consolidated statements of income (loss).

Supplemental Information

Reconciliation of Preliminary Operating Expenses to Preliminary Non-GAAP Operating Expenses

(Unaudited)

(In thousands)

   

 

Three Months Ended

 

 

 

 

Twelve Months Ended

 

 

 

December 31,

2022

 

 

 

September 30,

2022

 

 

 

December 31,

2021

 

 

 

 

December 31,

2022

 

 

 

December 31,

2021

 

 

Operating Expenses

$

139,813

 

 

 

$

134,076

 

 

 

$

61,673

 

 

 

 

$

382,646

 

 

 

$

233,077

 

 

Acquisition-related expenses, amortizations and adjustments

 

(8,328

)

(1)

 

 

(14,780

)

(6)

 

 

(6,529

)

(9)

 

 

 

(27,561

)

(12)

 

 

(15,988

)

(16)

Stock-based compensation expense

 

(11,095

)

(2)

 

 

(10,862

)

(7)

 

 

(1,869

)

(10)

 

 

 

(25,418

)

(13)

 

 

(6,937

)

(17)

Restructuring expenses

 

(1,618

)

(3)

 

 

 

 

 

 

(102

)

(11)

 

 

 

(1,620

)

(14)

 

 

(395

)

(18)

Pension adjustments

 

43

 

(4)

 

 

(185

)

(8)

 

 

 

 

 

 

 

(142

)

(15)

 

 

 

 

Deferred compensation adjustments

 

(168

)

(5)

 

 

740

 

(5)

 

 

2

 

(5)

 

 

 

7,005

 

(5)

 

 

(2,089

)

(5)

Non-GAAP Operating Expenses

$

118,647

 

 

 

$

108,989

 

 

 

$

53,175

 

 

 

 

$

334,910

 

 

 

$

207,668

 

 

         

(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 $7.8 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) $9.4 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 $7.3 million in selling, general and administrative expenses and $0.6 million is included in research and development expenses incremental stock-based award modification expense related to the business combination.

(3) $0.1 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).

(4) $0.2 million is included in selling, general and administrative expenses and ($0.3) 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) 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 $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).

(7) $9.2 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 $7.3 million in selling, general and administrative expenses and $0.6 million is included in research and development expenses incremental stock-based award modification expense related to the business combination.

(8) Less than $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).

(9) 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 $6.0 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).

(10) $1.3 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 income (loss).

(11) Less than $0.1 million is included in selling, general and administrative expenses and less than $0.1 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(12) 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 $25.6 million is included in selling, general and administrative expenses and $1.9 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(13) $20.8 million is included in selling, general and administrative expenses and $4.6 million is included in research and development expenses on the condensed consolidated statements of income (loss). Includes $14.6 million in selling, general and administrative expenses and $1.2 million is included in research and development expenses incremental stock-based award modification expense related to the business combination.

(14) $0.1 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).

(15) $0.3 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).

(16) 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 $14.1 million is included in selling, general and administrative expenses and $1.9 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(17) $4.6 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 income (loss).

(18) $0.2 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 Preliminary Operating Loss to Preliminary Non-GAAP Operating Income

(Unaudited)

(In thousands)

 

 

Three Months Ended

 

 

 

Twelve Months Ended

 

 

 

December 31,

2022

 

 

September 30,

2022

 

 

December 31,

2021

 

 

 

December 31,

2022

 

 

December 31,

2021

 

 

Operating Loss

$

(32,874

)

 

$

(48,018

)

 

$

(7,238

)

 

 

$

(72,827

)

 

$

(14,700

)

 

Acquisition related expenses, amortizations and adjustments

 

39,904

 

 

 

40,310

 

 

 

6,529

 

 

 

 

84,667

 

 

 

15,999

 

 

Asset impairments

 

463

 

 

 

16,969

 

 

 

 

 

 

 

17,432

 

 

 

 

 

Stock-based compensation expense

 

12,383

 

 

 

12,131

 

 

 

2,023

 

 

 

 

28,295

 

 

 

7,480

 

 

Pension adjustments

 

(187

)

 

 

244

 

 

 

 

 

 

 

57

 

 

 

 

 

Restructuring expenses

 

1,627

 

 

 

 

 

 

102

 

 

 

 

1,629

 

 

 

411

 

 

Deferred compensation adjustments (1)

 

168

 

 

 

(740

)

 

 

(2

)

 

 

 

(7,005

)

 

 

2,089

 

 

Non-GAAP Operating Income

$

21,484

 

 

$

20,896

 

 

$

1,414

 

 

 

$

52,248

 

 

$

11,279

 

 

 

(1) 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).

Supplemental Information

Reconciliation of Preliminary Other Income (Expense) to Preliminary Non-GAAP Other Income

(Unaudited)

(In thousands)

 

 

Three Months Ended

 

 

 

Twelve Months Ended

 

 

December 31,

2022

 

 

September 30,

2022

 

 

December 31,

2021

 

 

 

December 31,

2022

 

 

December 31,

2021

 

Interest and dividend income

$

1,355

 

 

$

347

 

 

$

1,957

 

 

 

$

2,123

 

 

$

2,844

 

Interest expense

 

(2,010

)

 

 

(1,303

)

 

 

(16

)

 

 

 

(3,437

)

 

 

(34

)

Net investment (loss) gain

 

(587

)

 

 

(2,691

)

 

 

(1,181

)

 

 

 

(11,339

)

 

 

1,761

 

Other income (expense), net

 

11,568

 

 

 

2,494

 

 

 

1,151

 

 

 

 

14,517

 

 

 

3,824

 

Total Other Income (Expense)

$

10,326

 

 

$

(1,153

)

 

$

1,911

 

 

 

$

1,864

 

 

$

8,395

 

Deferred compensation adjustments (1)

 

(349

)

 

 

1,124

 

 

 

673

 

 

 

 

6,211

 

 

 

(864

)

Pension expense (2)

 

77

 

 

 

81

 

 

 

263

 

 

 

 

333

 

 

 

1,088

 

Non-GAAP Other Income

$

10,054

 

 

$

52

 

 

$

2,847

 

 

 

$

8,408

 

 

$

8,619

 

 

(1) Includes non-cash change in fair value of equity investments held in the ADTRAN Holdings, Inc. Deferred Compensation Program for Employees.

(2) Includes amortization of actuarial losses related to the Company's pension plan for employees in certain foreign countries.

Supplemental Information

 

Reconciliation of Preliminary Net Income (Loss) inclusive of Non-Controlling Interest to

Preliminary Non-GAAP Net Income (Loss) inclusive of Non-Controlling Interest

(Unaudited)

 

and

 

Reconciliation of Preliminary Net Loss attributable to Non-Controlling Interest to

Preliminary Non-GAAP Net Income attributable to Non-Controlling Interest

(Unaudited)

 

and

 

Reconciliation of Preliminary Net Income (Loss) attributable to ADTRAN Holdings, Inc. and

Preliminary Earnings (Loss) per Common Share attributable to ADTRAN Holdings, Inc. – Basic and Diluted to

Preliminary Non-GAAP Net Income attributable to ADTRAN Holdings, Inc. and

Preliminary Non-GAAP Earnings per Common Share attributable to ADTRAN Holdings, Inc. – Basic and Diluted

(Unaudited)

 

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

 

Twelve Months Ended

 

 

 

 

December 31,

2022

 

 

September 30,

2022

 

 

December 31,

2021

 

 

 

December 31,

2022

 

 

December 31,

2021

 

 

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

 

$

38,881

 

 

$

(41,934

)

 

$

(4,190

)

 

 

$

(2,037

)

 

$

(8,635

)

 

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

 

 

(3,926

)

 

 

(2,925

)

 

 

 

 

 

 

(6,851

)

 

 

 

 

Net Income (loss) inclusive of non-controlling interest

 

$

34,955

 

 

$

(44,859

)

 

$

(4,190

)

 

 

$

(8,888

)

 

$

(8,635

)

 

Acquisition related expenses, amortizations and adjustments

 

 

39,904

 

 

 

40,310

 

 

 

6,529

 

 

 

 

84,667

 

 

 

15,999

 

 

Asset impairments

 

 

463

 

 

 

16,969

 

 

 

 

 

 

 

17,432

 

 

 

 

 

Stock-based compensation expense

 

 

12,383

 

 

 

12,131

 

 

 

2,023

 

 

 

 

28,295

 

 

 

7,480

 

 

Valuation allowance

 

 

(60,908

)

 

 

3,182

 

 

 

333

 

 

 

 

(45,358

)

 

 

4,746

 

 

Deferred compensation adjustments(2)

 

 

(182

)

 

 

383

 

 

 

673

 

 

 

 

(794

)

 

 

1,225

 

 

Pension adjustments(3)

 

 

(109

)

 

 

325

 

 

 

263

 

 

 

 

390

 

 

 

1,088

 

 

Restructuring expenses

 

 

1,627

 

 

 

 

 

 

102

 

 

 

 

1,629

 

 

 

411

 

 

Tax effect of adjustments to net income (loss)

 

 

(12,463

)

 

 

(16,245

)

 

 

(1,016

)

 

 

 

(29,892

)

 

 

(3,947

)

 

Non-GAAP Net Income inclusive of non-controlling interest

 

$

15,670

 

 

$

12,196

 

 

$

4,717

 

 

 

$

47,481

 

 

$

18,367

 

 

Less: Non-GAAP Net Income attributable to non-controlling interest (1)

 

 

5,769

 

 

 

4,486

 

 

 

 

 

 

 

10,255

 

 

 

 

 

Non-GAAP Net Income attributable to ADTRAN Holdings, Inc.

 

$

9,901

 

 

$

7,710

 

 

$

4,717

 

 

 

$

37,226

 

 

$

18,367

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Net Loss attributable to non-controlling interest (1)

 

$

(3,926

)

 

$

(2,925

)

 

$

 

 

 

$

(6,851

)

 

$

 

 

Acquisition related expenses, amortizations and adjustments

 

 

9,039

 

 

 

7,120

 

 

 

 

 

 

 

16,159

 

 

 

 

 

Restructuring expenses

 

 

402

 

 

 

 

 

 

 

 

 

 

402

 

 

 

 

 

Stock-based compensation expense

 

 

300

 

 

 

231

 

 

 

 

 

 

 

531

 

 

 

 

 

Pension adjustments (3)

 

 

(46

)

 

 

60

 

 

 

 

 

 

 

14

 

 

 

 

 

Non-GAAP Net Income attributable to non-controlling interest (1)

 

$

5,769

 

 

$

4,486

 

 

$

 

 

 

$

10,255

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

77,659

 

 

 

73,036

 

 

 

48,914

 

 

 

 

62,346

 

 

 

48,582

 

 

Weighted average shares outstanding – diluted

 

 

79,243

 

 

 

73,036

 

 

 

48,914

 

 

 

 

62,346

 

 

 

48,582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share attributable to ADTRAN Holdings, Inc. - basic

 

$

0.50

 

 

$

(0.57

)

 

$

(0.09

)

 

 

$

(0.03

)

 

$

(0.18

)

 

Earnings (loss) per common share attributable to ADTRAN Holdings, Inc. - diluted

 

$

0.49

 

 

$

(0.57

)

 

$

(0.09

)

 

 

$

(0.03

)

 

$

(0.18

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Earnings per common share attributable to ADTRAN Holdings, Inc. - basic

 

$

0.13

 

 

$

0.11

 

 

$

0.10

 

 

 

$

0.60

 

 

$

0.38

 

 

Non-GAAP Earnings per common share attributable to ADTRAN Holdings, Inc. - diluted

 

$

0.12

 

 

$

0.11

 

 

$

0.10

 

 

 

$

0.60

 

 

$

0.38

 

 

 

(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.

(3) Represents the non-controlling interest portion of the Company's ownership of ADVA.

 

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