EX-99.1 2 adtn-ex99_1.htm EX-99.1

EXHIBIT 99.1

Final Financial Results for the Fourth Quarter and Twelve Months Ended December 31, 2023

On February 26, 2024, ADTRAN Holdings, Inc. (the “Company”) issued a press release (the “February 26 th Press Release”) announcing its preliminary financial results for the fourth quarter and twelve months ended December 31, 2023 (the “Preliminary Financial Results”). The February 26 th Press Release and an accompanying investor presentation were attached as Exhibits 99.1 and 99.2, respectively, to the Company’s Current Report on Form 8-K furnished with the Securities and Exchange Commission (the “SEC”) on February 27, 2024. On March 15, 2024, the Company will file its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 containing the Company’s audited consolidated financial statements as of and for the year ended December 31, 2023. Final financial results of the Company for the fourth quarter and twelve months ended December 31, 2023 (the “Final Financial Results”), reflecting certain adjustments to the Preliminary Financial Results, as described in the Current Report on Form 8-K filed on March 15, 2024 are set forth herein (with the adjusted information identified by a “^”).

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

ASSETS |  | December 31, 2023 |  |  | December 31, 2022 |  |
Current Assets |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 87,167 |  |  | $ | 108,644 |  |
Short-term investments |  |  | — |  |  |  | 340 |  |
Accounts receivable, net |  |  | 216,445 |  |  |  | 279,435 |  |
Other receivables |  |  | 17,450 |  | ^ |  | 32,831 |  |
Income tax receivable |  |  | 7,933 |  | ^ |  | — |  |
Inventory, net |  |  | 362,295 |  |  |  | 427,531 |  |
Prepaid expenses and other current assets |  |  | 45,566 |  |  |  | 33,577 |  |
Total Current Assets |  |  | 736,856 |  | ^ |  | 882,358 |  |
Property, plant and equipment, net |  |  | 123,020 |  |  |  | 110,699 |  |
Deferred tax assets, net |  |  | 25,787 |  |  |  | 67,839 |  |
Goodwill |  |  | 353,415 |  |  |  | 381,724 |  |
Intangibles, net |  |  | 327,985 |  |  |  | 401,211 |  |
Other non-current assets |  |  | 87,706 |  |  |  | 66,998 |  |
Long-term investments |  |  | 27,743 |  |  |  | 32,665 |  |
Total Assets |  | $ | 1,682,512 |  | ^ | $ | 1,943,494 |  |
LIABILITIES AND EQUITY |  |  |  |  |  |  |
Current Liabilities |  |  |  |  |  |  |
Accounts payable |  | $ | 162,922 |  |  | $ | 237,699 |  |
Revolving credit agreements outstanding |  |  | — |  |  |  | 35,936 |  |
Notes payable |  |  | — |  |  |  | 24,598 |  |
Unearned revenue |  |  | 46,731 |  |  |  | 41,193 |  |
Accrued expenses and other liabilities |  |  | 37,607 |  |  |  | 35,235 |  |
Accrued wages and benefits |  |  | 27,030 |  |  |  | 44,882 |  |
Income tax payable, net |  |  | 5,221 |  | ^ |  | 9,032 |  |
Total Current Liabilities |  |  | 279,511 |  | ^ |  | 428,575 |  |
Non-current revolving credit agreement outstanding |  |  | 195,000 |  |  |  | 60,000 |  |
Deferred tax liabilities |  |  | 35,655 |  |  |  | 61,629 |  |
Non-current unearned revenue |  |  | 25,109 |  |  |  | 19,239 |  |
Non-current pension liability |  |  | 12,543 |  |  |  | 10,624 |  |
Deferred compensation liability |  |  | 29,039 |  |  |  | 26,668 |  |
Non-current lease obligations |  |  | 31,420 |  |  |  | 22,807 |  |
Other non-current liabilities |  |  | 28,657 |  |  |  | 10,339 |  |
Total Liabilities |  |  | 636,934 |  | ^ |  | 639,881 |  |
Redeemable Non-Controlling Interest |  |  | 451,756 |  |  |  | — |  |
Equity |  |  |  |  |  |  |
Common stock |  |  | 790 |  |  |  | 781 |  |
Additional paid-in capital |  |  | 795,304 |  | ^ |  | 895,834 |  |
Accumulated other comprehensive income |  |  | 47,461 |  | ^ |  | 26,126 |  | ^
Retained (deficit) earnings |  |  | (243,908 | ) |  |  | 55,338 |  |
Treasury stock |  |  | (5,825 | ) |  |  | (4,125 | ) |
Non-controlling interest |  |  | — |  |  |  | 329,659 |  | ^
Total Equity |  |  | 593,822 |  |  |  | 1,303,613 |  |
Total Liabilities and Equity |  | $ | 1,682,512 |  | ^ | $ | 1,943,494 |  |

Condensed Consolidated Statements of Loss

(Unaudited)

(In thousands)

|  | Three Months Ended |  |  | Twelve Months Ended |
|  | December 31, |  |  | December 31, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Revenue |  |  |  |  |  |  |  |  |  |  |  |
Network Solutions |  | $ | 180,405 |  |  | $ | 317,487 |  |  | $ | 974,389 |  |  | $ | 916,793 |
Services & Support |  |  | 45,074 |  |  |  | 40,784 |  |  |  | 174,711 |  |  |  | 108,743 |
Total Revenue |  |  | 225,479 |  |  |  | 358,271 |  |  |  | 1,149,100 |  |  |  | 1,025,536 |
Cost of Revenue |  |  |  |  |  |  |  |  |  |  |  |
Network Solutions |  |  | 126,248 |  |  |  | 233,925 |  |  |  | 722,582 |  |  |  | 647,105 |
Network Solutions - Inventory Write Down |  |  | 3,270 |  |  |  | — |  |  |  | 24,313 |  |  |  | — |
Services & Support |  |  | 17,496 |  |  |  | 16,943 |  |  |  | 69,142 |  |  |  | 51,179 |
Total Cost of Revenue |  |  | 147,014 |  |  |  | 250,868 |  |  |  | 816,037 |  |  |  | 698,284 |
Gross Profit |  |  | 78,465 |  |  |  | 107,403 |  |  |  | 333,063 |  |  |  | 327,252 |
Selling, general and administrative expenses |  |  | 61,262 |  |  |  | 78,243 |  |  |  | 258,149 |  |  |  | 208,889 |
Research and development expenses |  |  | 54,818 |  |  |  | 61,570 |  |  |  | 258,311 |  |  |  | 173,757 |
Asset impairment |  |  | — |  |  |  | 464 |  |  |  | — |  |  |  | 17,433 |
Goodwill impairment |  |  | — |  |  |  | — |  |  |  | 37,874 |  |  |  | — |
Operating Loss |  |  | (37,615 | ) |  |  | (32,874 | ) |  |  | (221,271 | ) |  |  | (72,827 | )
Interest and dividend income |  |  | 1,157 |  |  |  | 1,355 |  |  |  | 2,340 |  |  |  | 2,123 |
Interest expense |  |  | (4,441 | ) |  |  | (2,010 | ) |  |  | (16,299 | ) |  |  | (3,437 | )
Net investment gain (loss) |  |  | 1,683 |  |  |  | (587 | ) |  |  | 2,754 |  |  |  | (11,339 | )
Other income, net |  |  | (3,448 | ) |  |  | 11,568 |  |  |  | 1,266 |  |  |  | 14,517 |
Loss Before Income Taxes |  |  | (42,664 | ) |  |  | (22,548 | ) |  |  | (231,210 | ) |  |  | (70,963 | )
Income tax (expense) benefit |  |  | (64,362 | ) |  |  | 57,503 |  |  |  | (28,133 | ) |  |  | 62,075 |
Net (Loss) Income |  | $ | (107,026 | ) |  | $ | 34,955 |  |  | $ | (259,343 | ) |  | $ | (8,888 | )
Net Income (loss) attributable to non-controlling interest |  |  | 2,919 |  |  |  | (3,926 | ) |  |  | 8,345 |  |  |  | (6,851 | )
Net (Loss) Income attributable to ADTRAN Holdings, Inc. |  | $ | (109,945 | ) |  | $ | 38,881 |  |  | $ | (267,688 | ) |  | $ | (2,037 | )
Weighted average shares outstanding – basic |  |  | 78,530 |  |  |  | 77,659 |  |  |  | 78,416 |  |  |  | 62,346 |
Weighted average shares outstanding – diluted |  |  | 78,530 |  |  |  | 79,243 |  |  |  | 78,416 |  |  |  | 62,346 |
(Loss) Earnings per common share attributable to ADTRAN Holdings, Inc. – basic |  | $ | (1.40 | ) |  | $ | 0.50 |  |  | $ | (3.41 | ) |  | $ | (0.03 | )
(Loss) Earnings per common share attributable to ADTRAN Holdings, Inc. – diluted |  | $ | (1.40 | ) |  | $ | 0.49 |  |  | $ | (3.41 | ) |  | $ | (0.03 | )

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

|  | Twelve Months Ended December 31, |
|  | 2023 |  |  | 2022 |
Cash flows from operating activities: |  |  |  |  |  |
Net Loss |  | $ | (259,343 | ) |  | $ | (8,888 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |
Depreciation and amortization |  |  | 112,949 |  |  |  | 67,553 |
Asset impairment |  |  | — |  |  |  | 17,433 |
Goodwill impairment |  |  | 37,874 |  |  |  | — |
Amortization of debt issuance cost |  |  | 862 |  |  |  | 288 |
(Accretion) amortization on available-for-sale investments, net |  |  | (22 | ) |  |  | 19 |
(Gain) loss on investments |  |  | (2,900 | ) |  |  | 9,826 |
Net loss on disposal of property, plant and equipment |  |  | 458 |  |  |  | 152 |
Stock-based compensation expense |  |  | 16,016 |  |  |  | 28,322 |
Deferred income taxes |  |  | 15,558 |  |  |  | (62,388 | )
Inventory write down |  |  | 24,313 |  |  |  | — |
Inventory reserves |  |  | 25,546 |  |  |  | (2,363 | )
Other, net |  |  | (2,942 | ) |  |  | — |
Change in operating assets and liabilities: |  |  |  |  |  |
Accounts receivable, net |  |  | 65,612 |  | ^ |  | 788 |
Other receivables |  |  | 10,315 |  | ^ |  | (20,088 | )
Income taxes receivable |  |  | (2,637 | ) | ^ |  | — |
Inventory |  |  | 20,537 |  |  |  | (73,237 | )
Prepaid expenses other current assets and other assets |  |  | (29,883 | ) |  |  | (7,116 | )
Accounts payable |  |  | (91,907 | ) |  |  | 28,105 |
Accrued expenses and other liabilities |  |  | 17,929 |  |  |  | (20,483 | )
Income taxes payable, net |  |  | (3,939 | ) | ^ |  | (2,151 | )
Net cash used in operating activities |  |  | (45,604 | ) | ^ |  | (44,228 | )
Cash flows from investing activities: |  |  |  |  |  |
Purchases of property, plant and equipment |  |  | (43,121 | ) |  |  | (17,072 | )
Proceeds from sales and maturities of available-for-sale investments |  |  | 10,567 |  |  |  | 51,661 |
Purchases of available-for-sale investments |  |  | (868 | ) |  |  | (23,899 | )
Proceeds from beneficial interests in securitized accounts receivable |  |  | 1,218 |  | ^ |  | 1,126 |
Proceeds from disposals of property, plant and equipment |  |  | — |  |  |  | 12 |
Insurance proceeds received |  |  | — |  |  |  | — |
Acquisition of business, net of cash acquired |  |  | — |  |  |  | 44,003 |
Net cash (used in) provided by investing activities |  |  | (32,204 | ) | ^ |  | 55,831 |
Cash flows from financing activities: |  |  |  |  |  |
Tax withholdings related to stock-based compensation settlements |  |  | (6,458 | ) |  |  | (4,253 | )
Proceeds from stock option exercises |  |  | 540 |  |  |  | 6,904 |
Dividend payments |  |  | (21,237 | ) |  |  | (22,885 | )
Proceeds from receivables purchase agreement |  |  | 14,099 |  |  |  | — |
Proceeds from draw on revolving credit agreements |  |  | 163,733 |  |  |  | 141,887 |
Repayment of revolving credit agreements |  |  | (64,987 | ) |  |  | (48,000 | )
Redemption of redeemable non-controlling interest |  |  | (1,224 | ) |  |  | — |
Payment of debt issuance cost |  |  | (708 | ) |  |  | (3,015 | )
Repayment of notes payable |  |  | (24,891 | ) |  |  | (17,702 | )
Net cash provided by financing activities |  |  | 58,867 |  |  |  | 52,936 |
Net (decrease) increase in cash and cash equivalents |  |  | (18,941 | ) |  |  | 64,539 |
Effect of exchange rate changes |  |  | (2,536 | ) |  |  | (12,713 | )
Cash and cash equivalents, beginning of year |  |  | 108,644 |  |  |  | 56,818 |
Cash and cash equivalents, end of year |  | $ | 87,167 |  |  | $ | 108,644 |
Supplemental disclosure of cash financing activities |  |  |  |  |  |
Cash paid for interest |  | $ | 12,596 |  |  | $ | 1,728 |
Cash paid for income taxes |  | $ | 18,552 |  |  | $ | 3,832 |
Cash used in operating activities related to operating leases |  | $ | 9,682 |  |  | $ | 5,229 |
Supplemental disclosure of non-cash investing activities |  |  |  |  |  |
Right-of-use assets obtained in exchange for lease obligations |  | $ | 17,865 |  |  | $ | 3,410 |
Purchases of property, plant and equipment included in accounts payable |  | $ | 1,298 |  |  | $ | 1,165 |
Adtran Networks common shares exchanged in acquisition |  | $ | — |  |  | $ | 565,491 |
Adtran Networks options assumed in acquisition |  | $ | — |  |  | $ | 12,769 |
Non-controlling interest related to Adtran Networks |  | $ | — |  |  | $ | 316,415 |