ADTN ADTRAN Holdings Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 06, 2024

 

 

ADTRAN Holdings, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware			001-41446	87-2164282
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
901 Explorer Boulevard
Huntsville, Alabama				35806-2807
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: 256 963-8000

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, Par Value $0.01 per share		ADTN		Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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Item 2.02 Results of Operations and Financial Condition.

On November 06, 2024, ADTRAN Holdings, Inc. (“ADTRAN”) announced its preliminary financial results for the fiscal quarter ended September 30, 2024.

A copy of ADTRAN’s press release announcing its preliminary financial results is attached as Exhibit 99.1 hereto and incorporated by reference herein.

Item 7.01 Regulation FD Disclosure.

Executives from ADTRAN will review the preliminary financial results via a live audio webcast on Thursday, November 07, 2024, at 9:30 a.m. Central Time, or 4:30 p.m. Central European Summer Time. A copy of the preliminary investor presentation provided in connection with that review is attached as Exhibit 99.2 and incorporated by reference herein. An archived recording of the webcast will be available for a limited time on ADTRAN's Investor Relations page at investors.adtran.com.

The information included in, or incorporated into, Items 2.02 and 7.01 of this Current Report on Form 8-K is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

Exhibit Number	Description
99.1	Press Release dated November 6, 2024
99.2	Visual Presentation of November 6, 2024
104	Cover Page Interactive Data File – the cover page iXBRL tags are embedded within the Inline XBRL document

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			ADTRAN Holdings, Inc.
Date:	November 07, 2024	By:	/s/ Ulrich Dopfer
			Ulrich Dopfer Chief Financial Officer (Duly Authorized Officer and Principle Financial Officer)

 

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EXHIBIT 99.1

 

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.

 

 

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

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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.

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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

 

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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

 

 

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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.

 

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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	)
Cash flows from investing activities:
Purchases of property, plant and equipment			(48,183	)			(33,674	)
Proceeds from sales and maturities of available-for-sale investments			1,195				10,545
Purchases of available-for-sale investments			(195	)			(807	)
Proceeds from beneficial interests in securitized accounts receivable			282				1,178
Net cash used in investing activities			(46,901	)			(22,758	)
Cash flows from financing activities:
Tax withholdings related to stock-based compensation settlements			(189	)			(6,331	)
Proceeds from stock option exercises			219				187
Dividend payments			—				(21,237	)
Proceeds from receivables purchase agreement			68,556				—
Repayments on receivables purchase agreement			(83,772	)			—
Proceeds from draw on revolving credit agreements			—				163,760
Repayment of revolving credit agreements			(5,000	)			(49,233	)
Payment for redemption of redeemable non-controlling interest			(17,395	)			(1,196	)
Payment for annual recurring compensation to non-controlling interest			(10,084	)			—
Payment of debt issuance cost			(1,994	)			(708	)
Repayment of notes payable			—				(24,931	)
Net cash (used in) provided by financing activities			(49,659	)			60,311
Net increase in cash and cash equivalents			1,966				8,239
Effect of exchange rate changes			(677	)			(791	)
Cash and cash equivalents, beginning of period			87,167				108,644
Cash and cash equivalents, end of period		$	88,456			$	116,092
Supplemental disclosure of cash financing activities:
Cash paid for interest		$	18,225			$	8,540
Cash paid for income taxes		$	9,122			$	—
Cash used in operating activities related to operating leases		$	7,380			$	7,378
Supplemental disclosure of non-cash investing activities:
Right-of-use assets obtained in exchange for lease obligations		$	2,122			$	8,490
Purchases of property, plant and equipment included in accounts payable		$	952			$	2,508

 

 

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Revision of Previously Issued Condensed Consolidated Financial Statements

Following the third quarter of 2024, the Company identified errors primarily impacting the carrying values of the redeemable non-controlling interest, retained deficit, the net income attributable to the non-controlling interest and the net loss attributable to the Company and, as a consequence, of the loss per common share attributable to the Company. The Company has evaluated the errors and determined that the related impacts were not material to the previously issued consolidated financial statements for any prior period. A summary of the corrections to the Company's Condensed Consolidated Financial Statements for the periods ended March 31, 2023, June 30, 2023, September 30, 2023, December 31, 2023, March 31, 2024 and June 30, 2024, is as follows:

For additional information, please see our Note 1 to the Condensed Consolidated Financial Statements set forth in the Form 10-Q for the quarterly period ended September 30, 2024 to be filed with the SEC.

 

 

 

 

 

 

 

 

 

 

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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													Nine Months Ended
		September 30,  2024				June 30,  2024				September 30,  2023					September 30,  2024				September 30,  2023
Total Revenue		$	227,704			$	225,991			$	272,331				$	679,868			$	923,621
Cost of Revenue		$	142,453			$	144,416			$	198,094				$	440,787			$	669,023
Acquisition-related expenses, amortizations and adjustments(1)			(10,276	)			(10,064	)			(13,537	)				(30,517	)			(79,554	)
Stock-based compensation expense			(270	)			(280	)			(279	)				(825	)			(854	)
Restructuring expenses(2)			(7	)			(2,788	)			(21,630	)				(14,042	)			(21,706	)
Integration expenses(3)			(34	)			(35	)			(154	)				(104	)			(154	)
Non-GAAP Cost of Revenue		$	131,866			$	131,249			$	162,494				$	395,299			$	566,755
Gross Profit		$	85,251			$	81,575			$	74,237				$	239,081			$	254,598
Non-GAAP Gross Profit		$	95,838			$	94,742			$	109,837				$	284,569			$	356,866
Gross Margin			37.4	%			36.1	%			27.3	%				35.2	%			27.6	%
Non-GAAP Gross Margin			42.1	%			41.9	%			40.3	%				41.9	%			38.6	%

 

(1) Includes intangible amortization of backlog, inventory fair value adjustments, developed technology, customer relationships, and trade names acquired in connection with business combinations.

(2) Includes expenses for restructuring program designed to optimize the assets and business processes following the business combination with Adtran Networks. These expenses include inventory write down and other charges of $8.6 million for the nine months ended September 30, 2024, incurred as a result of a strategy shift which included discontinuance of certain product lines in connection with the Business Efficiency Program. The restructuring program commenced upon the closing of the business combination with Adtran Networks and is expected to be substantially completed in late 2024. Additionally, as part of the Business Efficiency Program, management determined to close a facility in Greifswald, Germany. These expenses include restructuring wage charges of $4.9 million for the nine months ended September 30, 2024. The closure of the facility is expected to be completed by December 31, 2024.

(3) Includes expenses related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks.

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Supplemental Information

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

(Unaudited)

(In thousands)

 

		Three Months Ended													Nine Months Ended
		September 30,				June 30,				September 30,					September 30,				September 30,
		2024				2024				2023					2024				2023
Operating Expenses		$	109,235			$	119,881			$	163,533				$	641,050			$	438,254
Acquisition-related expenses, amortizations and adjustments			(5,054	)	(1)		(7,233	)	(6)		(4,534	)	(10)			(17,168	)	(14)		(13,516	)	(19)
Stock-based compensation expense			(3,126	)	(2)		(3,321	)	(7)		(3,251	)	(11)			(9,894	)	(15)		(10,683	)	(20)
Restructuring expenses			(5,930	)	(3)		(14,742	)	(8)		(3,242	)	(12)			(26,534	)	(16)		(11,471	)	(21)
Integration expenses			(333	)	(4)		(531	)	(9)		(1,485	)	(13)			(1,344	)	(17)		(2,897	)	(22)
Deferred compensation adjustments(5)			(1,471	)			(848	)			1,801					(4,259	)			1,714
Goodwill impairment(18)			—				—				(37,874	)				(292,583	)			(37,874	)
Non-GAAP Operating Expenses		$	93,321			$	93,206			$	114,948				$	289,268			$	363,527

 

(1) Includes $4.0M of intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations and $0.6 million of legal and advisory fees related to a potential strategic transaction which are both included in selling, general and administrative expenses and $0.5 million is included in research and development expenses on the condensed consolidated statements of loss.

(2) $2.2 million is included in selling, general and administrative expenses and $0.9 million is included in research and development expenses on the condensed consolidated statements of loss.

(3) $2.7 million is included in selling, general and administrative expenses and $3.2 million is included in research and development expenses on the condensed consolidated statements of loss. Includes expenses of $3.2 million of wage related and other charges due to the Greifswald facility closure of which $0.8 million is included in selling, general and administrative and $2.4 million is included in research and development expenses on the condensed consolidated statements of loss.

(4) $0.3 million is included in selling, general and administrative expenses on the condensed consolidated statements of loss, and is primarily related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks.

(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 loss.

(6) Includes $3.9M of intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations and $2.8 million of legal and advisory fees related to a contemplated strategic transaction which are both included in selling, general and administrative expenses and $0.5 million is included in research and development expenses on the condensed consolidated statements of loss.

(7) $2.4 million is included in selling, general and administrative expenses and $0.9 million is included in research and development expenses on the condensed consolidated statements of loss.

(8) $3.5 million is included in selling, general and administrative expenses and $11.3 million is included in research and development expenses on the condensed consolidated statements of loss. Includes expenses of $13.5 million of wage related and other charges due to the Greifswald facility closure of which $2.6 million is included in selling, general and administrative and $10.9 million is included in research and development expenses on the condensed consolidated statements of loss.

(9) $0.5 million is included in selling, general and administrative expenses on the condensed consolidated statements of loss, and is primarily related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks.

(10) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $4.0 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 loss.

(11) $2.4 million is included in selling, general and administrative expenses and $0.8 million is included in research and development expenses on the condensed consolidated statements of loss.

(12) $3.4 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 loss.

(13) $1.4 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 loss. Includes fees relating to the expansion of internal controls at Adtran Networks and the implementation of the DPLTA. Additionally, includes expenses related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks of which $0.5 million is stock compensation expense for the program.

(14) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $15.8 million is included in selling, general and administrative expenses and $1.4 million is included in research and development expenses on the condensed consolidated statements of loss.

(15) $7.1 million is included in selling, general and administrative expenses and $2.8 million is included in research and development expenses on the condensed consolidated statements of loss.

(16) $8.0 million is included in selling, general and administrative expenses and $18.6 million is included in research and development expenses on the condensed consolidated statements of loss. Includes expenses of $16.5 million of wage related and other charges due to the Greifswald facility closure of which $3.2 million is included in selling, general and administrative and $13.3 million is included in research and development expenses on the condensed consolidated statements of loss.

(17) $1.3 million is included in selling, general and administrative expenses on the condensed consolidated statements of loss. Includes fees relating to the expansion of internal controls at Adtran Networks and the implementation of the DPLTA. Additionally, includes expenses related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks of which $0.7 million is stock compensation expense for the program.

(18) Non-cash impairment of goodwill in our Network Solutions reporting unit, necessitated by factors such as a decrease in the Company's market capitalization, cautious service provider spending due to economic uncertainty and continued elevated customer inventory adjustments.

(19) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $12.0 million 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 loss.

(20) $7.6 million is included in selling, general and administrative expenses and $3.1 million is included in research and development expenses on the condensed consolidated statements of loss.

(21) $7.0 million is included in selling, general and administrative expenses and $4.5 million is included in research and development expenses on the condensed consolidated statements of loss.

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(22) $2.8 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 loss. Includes fees relating to the expansion of internal controls at Adtran Networks and the implementation of the DPLTA. Additionally, includes expenses related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks of which $0.5 million is stock compensation expense for the program.

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Supplemental Information

Reconciliation of Preliminary Operating Loss to Preliminary Non-GAAP Operating Income (Loss)

(Unaudited)

(In thousands)

 

		Three Months Ended													Nine Months Ended
		September 30,				June 30,				September 30,					September 30,				September 30,
		2024				2024				2023					2024				2023
Operating Loss		$	(23,984	)		$	(38,306	)		$	(89,296	)			$	(401,969	)		$	(183,656	)
Acquisition related expenses, amortizations and adjustments(1)			15,330				17,297				18,070					47,685				93,069
Stock-based compensation expense			3,396				3,601				3,530					10,719				11,537
Restructuring expenses(2)			5,936				17,530				24,873					40,576				33,178
Integration expenses(3)			367				566				1,639					1,447				3,051
Deferred compensation adjustments(4)			1,471				848				(1,801	)				4,259				(1,714	)
Goodwill impairment(5)			—				—				37,874					292,583				37,874
Non-GAAP Operating Income (Loss)		$	2,516			$	1,536			$	(5,111	)			$	(4,700	)		$	(6,661	)

 

(1) Includes intangible amortization of backlog, inventory fair value adjustments, developed technology, customer relationships, and trade names acquired in connection with business combinations.

(2) Includes expenses for restructuring program designed to optimize the assets and business processes following the business combination with Adtran Networks. These expenses include inventory write down and other charges incurred as a result of a strategic shift in certain product lines in connection with the restructuring program. Additionally, includes expenses related to the closure of the Greifswald facility.

(3) Includes expenses related to the Company's one-time integration bonus program in connection with synergy targets as a results of the business combination with Adtran Networks. Includes fees incurred for the expansion of internal controls at Adtran Networks and the implementation of the DPTLA.

(4) 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 loss.

(5) Non-cash impairment of goodwill in our Network Solutions reporting unit, necessitated by factors such as a decrease in the Company’s market capitalization, cautious service provider spending due to economic uncertainty and continued customer inventory adjustments.

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Supplemental Information

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

(Unaudited)

(In thousands)

 

		Three Months Ended													Nine Months Ended
		September 30, 2024				June 30, 2024				September 30, 2023					September 30, 2024				September 30, 2023
Interest and dividend income		$	664			$	366			$	521				$	1,427			$	1,183
Interest expense			(5,679	)			(6,906	)			(4,507	)				(17,183	)			(11,858	)
Net investment gain (loss)			1,382				872				(1,443	)				4,507				1,071
Other (expense) income, net			(850	)			(901	)			2,523					(441	)			4,714
Total Other Expense		$	(4,483	)		$	(6,569	)		$	(2,906	)			$	(11,690	)		$	(4,890	)
Deferred compensation adjustments (1)			(1,294	)			(896	)			1,117					(4,629	)			(1,387	)
Pension expense (2)			7				7				7					21				20
Non-GAAP Other Expense		$	(5,770	)		$	(7,458	)		$	(1,782	)			$	(16,298	)		$	(6,257	)

 

(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.

 

 

 

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Supplemental Information

 

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

Preliminary Non-GAAP Net Loss inclusive of Non-Controlling Interest

(Unaudited)

 

and

 

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

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

(Unaudited)

 

and

 

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

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

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

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

(Unaudited)

(In thousands, except per share amounts)

		Three Months Ended													Nine Months Ended
		September 30, 2024				June 30, 2024				September 30, 2023					September 30, 2024				September 30, 2023
Net Loss attributable to ADTRAN Holdings, Inc.			(31,239	)		$	(49,515	)		$	(78,210	)			$	(404,955	)		$	(156,697	)
Plus: Net (Loss) Income attributable to non-controlling interest (1)			2,382				2,504				2,561					7,417				4,380
Net Loss inclusive of non-controlling interest		$	(28,857	)		$	(47,011	)		$	(75,649	)			$	(397,538	)		$	(152,317	)
Acquisition related expenses, amortizations and adjustments			15,330				17,297				18,070					47,685				93,069
Stock-based compensation expense			3,396				3,601				3,530					10,719				11,537
Deferred compensation adjustments (2)			177				(48	)			(684	)				(370	)			(3,101	)
Pension adjustments (3)			7				7				7					21				20
Restructuring expenses			5,936				17,530				24,873					40,576				33,178
Integration expenses			367				566				1,639					1,447				3,051
Goodwill impairment			—				—				37,874					292,583				37,874
Tax effect of adjustments to net loss (4)			(712	)			755				(21,024	)				(19,022	)			(50,146	)
Non-GAAP Net Loss inclusive of non-controlling interest		$	(4,356	)		$	(7,303	)		$	(11,364	)			$	(23,899	)		$	(26,835	)
Less: Non-GAAP Net (Loss) Income attributable to non-controlling interest (1)			2,382				2,504				2,561					7,417				5,909
Non-GAAP Net Loss attributable to ADTRAN Holdings, Inc.		$	(6,738	)		$	(9,807	)		$	(13,925	)			$	(31,316	)		$	(32,744	)
GAAP Net Income attributable to non-controlling interest (1)		$	2,382			$	2,504			$	2,561				$	7,417			$	4,380
Acquisition related expenses, amortizations and adjustments			—				—				—					—				1,457
Restructuring expenses			—				—				—					—				29
Integration expenses			—				—				—					—				6
Stock-based compensation expense			—				—				—					—				37
Non-GAAP Net Income attributable to non-controlling interest (1)		$	2,382			$	2,504			$	2,561				$	7,417			$	5,909
Weighted average shares outstanding – basic			78,952				78,852				78,389					78,873				78,378
Weighted average shares outstanding – diluted			78,952				78,852				78,389					78,873				78,378
Loss per common share attributable to ADTRAN Holdings, Inc. – basic		$	(0.36	)	(5)	$	(0.63	)		$	(1.00	)			$	(5.10	)	(5)	$	(2.00	)
Loss per common share attributable to ADTRAN Holdings, Inc. – diluted		$	(0.36	)	(5)	$	(0.63	)		$	(1.00	)			$	(5.10	)	(5)	$	(2.00	)
Non-GAAP Loss per common share attributable to ADTRAN – basic		$	(0.05	)	(5)	$	(0.12	)		$	(0.18	)			$	(0.36	)	(5)	$	(0.42	)
Non-GAAP Loss per common share attributable to ADTRAN – diluted		$	(0.05	)	(5)	$	(0.12	)		$	(0.18	)			$	(0.36	)	(5)	$	(0.42	)

 

(1) Represents the non-controlling interest portion of the Company's ownership of Adtran Networks pre-DPLTA and the annual recurring compensation earned by redeemable non-controlling interests and accrued by the Company post-DPLTA.

(2) Includes non-cash change in fair value of equity investments held in deferred compensation plans offered to certain employees.

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

(4) Represents the tax effect of non-GAAP adjustments. Beginning in period ending September 30, 2024, the Company changed its method of calculating non-GAAP income taxes by applying blended statutory tax rates to non-GAAP losses before income taxes in order to include current and deferred income tax expenses that are commensurate with the non-GAAP measure of profitability. The blended statutory tax rate is calculated using 0%, resulting in no tax benefits net of impact of valuation allowance, for the loss jurisdiction’s non-GAAP losses before income taxes and 30% for all remaining jurisdictions’ non-GAAP income before income taxes. Prior periods have been adjusted to reflect the application of blended statutory tax rates, net of impact of valuation allowance, to non-GAAP losses before income taxes as opposed to the previous application of blended statutory and effective tax rates to separate non-GAAP adjustments. We previously reported the tax effect of the adjustment to non-GAAP net loss under the prior method of $7.9 million, $49.1 million and $21.0 million for the three and nine months ended September 30, 2023 and for the three months ended June 30, 2024, respectively.

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

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Supplemental Information

Reconciliation of Preliminary Net Cash Provided By (Used In) Operating Activities to Preliminary Free Cash Flow

(Unaudited)

(In thousands)

 

		Three Months Ended													Nine Months Ended
		September 30,				June 30,				September 30,					September 30,				September 30,
		2024				2024				2023					2024				2023
Net Cash provided by (used in) operating activities		$	42,030			$	19,898			$	6,846				$	98,526			$	(29,314	)
Purchases of property, plant and equipment(1)			(18,814	)			(15,995	)			(13,556	)				(48,183	)			(33,674	)
Free cash flow		$	23,216			$	3,903			$	(6,710	)			$	50,343			$	(62,988	)

 

(1) Purchases related to capital expenditures.

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Adtran Holdings(Nasdaq: ADTN) Investor Presentation November 6, 2024

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Cautionary Note Regarding Forward-Looking Statements Statements contained in this investor presentation 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.

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Introduction and Business Model 1

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OUR VISION To enable a fully-connected world, where the power and freedom to communicate is available to everyone, everywhere, in a secure, efficient and sustainable environment.

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Key Differentiators Open, disaggregated platforms with vendor-neutral capability Extensive global design support and supply orchestration capabilities (Supply chain) Customers = NSPs, RSPs, ASPs, SMBs, enterprises, tribal communities, governments and agencies: local, state, federal Simplified pricing structure 3,300+ Employees worldwide 1,000+ Global technology patents $1.15B FY23 revenue 50 35+ Years of experience Α — Ω End-to-end solutions portfolio Who is Adtran? Your Trusted Partner For The Fiber Everywhere Era “Adtran is focused on customer usability, service and support.” Tom Stanton, CEO, Adtran Worldwide locations HQ = Huntsville, AL

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Global Presence Americas: Canada United States (HQ Global) Brazil APAC: Japan China Hong Kong Singapore India Australia EMEA: Germany (HQ Europe) England Switzerland Poland Finland Sweden France Italy Israel South Africa Saudi Arabia

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Business model Adtran is a Global Vendor with Scale and Diversity Portfolio differentiation Customer diversity Geographic diversity Strength in focus markets Optical core to customer premise End-to-end automation & insights Enhanced security and assurance Balanced mix of national SPs, regional SPs, enterprise, and ICP customers Anticipated continued growth opportunities in each segment Balanced mix of U.S. and non-U.S. business Strong growth opportunities in focus regions Full range of R&D, pre-sales, post-sales and services support in focus regions Strong market share in growth products in focus regions

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Business model From the Core Through the Door Subscriber experience Access domain Optical domain Access & aggregation (Nx10/100G) ONT Residential Wi-Fi Regionaltransport (Nx100/400/800G) Fiber access platforms NID Fibermonitoring 100ZR DWDM systems Edge router 5G Business solutions Sync & Timing AI-driven operations and support

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Business model Market Trends Pandemic accelerated digitalization and capacity demand 5G, work from home, AI and streaming drive multi-gigabit fiber access Deglobalization and consolidation impacts vendor selection Open, disaggregated, sustainable and cloud-centric systems Online meetings and e-commerce have displaced travel Symmetric bandwidth goes from being a luxury to a necessity Selection of trusted suppliers becomes strategic Closed and single vendor systems are no longer desirable

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Business model Fiber Networking Market Forecasts CAGR: ~3.6% CAGR: ~4.0% CAGR: ~6.5% Sources: PON OLT+ONT: Dell’Oro 5yr Broadband Access and Home Networking Report (July 2024) Metro WDM: Omdia Optical Network Forecast (May 2024) Carrier Ethernet: Omdia Service Provider Switching and Routing Forecast (September 2024)

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Business model Factors Expected to Drive Long-Term Growth BEAD* High risk vendor replacement $42.5b in broadband funding to provide service to 7m+ under/unserved homes Expect ~90% to be served with fiber Funds allocated through grant process at state level 55 eligible entities already completed the Initial Proposal stage 4-year implementation timeline for service providers to deliver service Shift away from Chinese vendors is picking up the pace given the geopolitical situation Adtran is one of the key beneficiaries in optical transport and PON in EMEA and already won multiple deals and has several projects in the funnel; we expect to experience the largest impact in 2025 and 2026 given tier 1 integration timelines > $1b market opportunity in optical networking > $400m market opportunity in broadband access and aggregation *The Broadband Equity, Access, and Deployment (BEAD) Program, is expected to provide USD 42.5 billion to expand high-speed internet access by funding planning, infrastructure deployment and adoption programs in all 50 states, Washington D.C., Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.

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Business model Corporate Social Responsibility EcoVadis Adtran, Inc. Adtran Networks SE CDP Climate Change 2023 B- A- Adtran, Inc. Adtran Networks SE Environmental Sustainability is integral part of product strategy through process-based product ecodesign and lifecycle assessment (LCA) Involvement of supply chain based on IntegrityNext supplier onboarding and screening ISO certificated (ISO 14001 EMS, ISO 50001 EnMS) External ratings Social Event sponsoring, volunteer hours at non-profit organizations and donations Dedicated human capital management Employee-driven diversity, equity & inclusion (DE&I) task force to support a diverse and inclusive workforce Strictly following ILO requirements Governance Comprehensive ethics and compliance policy, code of conduct and processes Dedicated human rights policy and supplier code of conduct Dedicated engagement in security – ISO 27001-certified 59th percentile 96th percentile Both electrical and electronic equipment sector and global average are C SBTi Net Zero Commitment SBTi has classified ADTRAN‘s scope 1 and 2 target ambition as in line with a 1.5°C trajectory

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Business Update 5

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Q3 2024 business update Preliminary Highlights Q3 2024 Revenue of $228m, up sequentially and above mid-point of guidance ($215m-$235m) Revenue above mid-point of guidance range Q3 24 Non-GAAP Gross Margin of 42.1%, increased 17 bps QoQ and 176 bps YoY Non-GAAP Gross Margin Expansion Operating Cash Flow of $42m, up $22m QoQ, resulting in $23m Free Cash Flow in Q3 24 Year-to-Date, $50m of Free Cash Flow generated Non-GAAP Free Cash Flow Increase Non-GAAP Operating Margin of 1.1%, above mid-point of guidance (guidance -1% - +3%) Continued Improvement in Non-GAAP Operating Margin Non-GAAP gross margin is calculated as non-GAAP gross profit divided by revenue. Non-GAAP operating margin is calculated as non-GAAP operating profit divided by revenue. Non-GAAP free cash flow is operating cash flow less purchases of property, plant and equipment. A reconciliation of each non-GAAP financial measure to the most comparable GAAP measure is included in the appendix of this presentation. Note: All results are approximate due to the preliminary nature of the presentation.

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Q3 2024 business update Technology Update Subscriber solutions Strong growth in 10 Gig ONTs, 10 Gig Carrier Ethernet CPE and multi-Gig Wi-Fi 6/6E/7 platforms Dozens of customers have adopted Intellifi, our SaaS application for cloud-managed Wi-Fi Access and aggregation solutions Scaling SDX 6330 high-density fiber access platforms for multi-Gig service delivery Launching first trials with SDX for 50 Gig PON Optical networking solutions Increasing demand for 100/400/800 Gig coherent pluggable optics for edge and metro transport Continued success in cross-selling optical into former broadband-only customers Software platforms Well over 400 customers have adopted Mosaic One. Highest growth application is Intellifi. Professional services Scalable in-region services, including planning, deployment, and maintenance

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Q3 2024 business update Preliminary Revenue by Segment, Category and Region Category Region Q3 2023 Q3 2024 $272.3 $227.7 Services & Support Network Solutions Q2 2024 Q3 2024 $226.0 $227.7 Y-o-Y Q-o-Q Q3 2023 Q3 2024 $272.3 $227.7 Access & Aggregation Subscriber Solutions Optical Networking Solutions Q2 2024 Q3 2024 $226.0 $227.7 Q3 2023 Q3 2024 $272.3 $227.7 International Domestic Q2 2024 Q3 2024 $226.0 $227.7 In $m Segment Note: Potential differences may be due to rounding. All results are approximate due to the preliminary nature of the presentation.

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Q3 2024 business update Well Diversified Across Technology, Markets and Customer Base Categories Optical networking solutions Subscriber solutions Access & aggregation solutions Market Customers Large SPs Regional SPs Enterprise / ICP / OEM Domestic International Note: Potential differences may be due to rounding. All results are approximate due to the preliminary nature of the presentation.

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Q3 2024 business update Preliminary Financial Information Q3 2023 Q2 2024 Q3 2024 -16.4% +0.8% Q3 2023 Q2 2024 Q3 2024 40.3% 41.9% 42.1% +176bps +17bps Q3 2023 Q2 2024 Q3 2024 -18.8% +0.1% Q3 2023 Q2 2024 Q3 2024 Q3 2023 Q2 2024 Q3 2024 Note: All results are approximate due to the preliminary nature of the presentation. Potential difference may be due to rounding. Note: A reconciliation of each non-GAAP financial measure to the most comparable GAAP measure is included in the appendix of this presentation. Non-GAAP operating margin is calculated as non-GAAP operating loss divided by revenue. Q3 24 Revenue ($) 227.7m +0.8% q-o-q Q3 24 Non-GAAP gross margin 42.1% +17 bps q-o-q Q3 24 Non-GAAP operating expenses ($) 93.3m +0.1% q-o-q Q3 24 Non-GAAP operating margin 1.1% +43 bps q-o-q Q3 24 Non-GAAP diluted EPS ($) -0.05

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Q3 2024 business update Preliminary Balance Sheet and Cash Flow Highlights ​In $m Q2 24 Q3 24 Trade accounts receivables $186.2 $172.0 Inventories $287.9 $282.9 Accounts payables $158.6 $173.4 Net working capital $315.5 $281.6 Operating cash flow generated $19.9 $42.0 Non-GAAP free cash flow * $3.9 $23.2 Cash $111.2 $88.5 60 Q3 23 67 Q4 23 59 Q1 24 60 Q2 24 Q3 24 67 DSO DPO Working capital and cash flow metrics Rolling DSO vs. DPO development Potential difference may be due to rounding. Note: A reconciliation of each non-GAAP financial measure to the most comparable GAAP measure is included in the appendix of this presentation. All results are approximate due to the preliminary nature of the presentation.   *Non-GAAP free cash flow is operating cash flow less purchase of property, plant and equipment Days

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Guidance for Q4 2024 Previous Outlook (for Q3 2024) Current Outlook (for Q4 2024) Revenue $215m – $235m $230m – $245m Non GAAP Operating Margin -1% – +3% 0% – +4%

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GAAP to non-GAAP reconciliation 6

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Cost of Revenue, Gross Profit and Gross Margin Reconciliation (1) Includes intangible amortization of backlog, inventory fair value adjustments, developed technology, customer relationships, and trade names acquired in connection with business combinations. (2) Includes expenses for restructuring program designed to optimize the assets and business processes following the business combination with Adtran Networks. These expenses include inventory write down and other charges of $8.6 million for the nine months ended September 30, 2024, incurred as a result of a strategy shift which included discontinuance of certain product lines in connection with the Business Efficiency Program. The restructuring program commenced upon the closing of the business combination with Adtran Networks and is expected to be substantially completed in late 2024. Additionally, as part of the Business Efficiency Program, management determined to close a facility in Greifswald, Germany. These expenses include restructuring wage charges of $4.9 million for the nine months ended September 30, 2024. The closure of the facility is expected to be completed by December 31, 2024. (3) Includes expenses related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks.

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Operating Expense Reconciliation (1) Includes $4.0M of intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations and $0.6 million of legal and advisory fees related to a potential strategic transaction which are both included in selling, general and administrative expenses and $0.5 million is included in research and development expenses on the condensed consolidated statements of loss. (2) $2.2 million is included in selling, general and administrative expenses and $0.9 million is included in research and development expenses on the condensed consolidated statements of loss. (3) $2.7 million is included in selling, general and administrative expenses and $3.2 million is included in research and development expenses on the condensed consolidated statements of loss. Includes expenses of $3.2 million of wage related and other charges due to the Greifswald facility closure of which $0.8 million is included in selling, general and administrative and $2.4 million is included in research and development expenses on the condensed consolidated statements of loss. (4) $0.3 million is included in selling, general and administrative expenses on the condensed consolidated statements of loss, and is primarily related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks. (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 loss. (6) Includes $3.9M of intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations and $2.8 million of legal and advisory fees related to a contemplated strategic transaction which are both included in selling, general and administrative expenses and $0.5 million is included in research and development expenses on the condensed consolidated statements of loss. (7) $2.4 million is included in selling, general and administrative expenses and $0.9 million is included in research and development expenses on the condensed consolidated statements of loss. (8) $3.5 million is included in selling, general and administrative expenses and $11.3 million is included in research and development expenses on the condensed consolidated statements of loss. Includes expenses of $13.5 million of wage related and other charges due to the Greifswald facility closure of which $2.6 million is included in selling, general and administrative and $10.9 million is included in research and development expenses on the condensed consolidated statements of loss. (9) $0.5 million is included in selling, general and administrative expenses on the condensed consolidated statements of loss, and is primarily related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks. (10) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $4.0 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 loss. (11) $2.4 million is included in selling, general and administrative expenses and $0.8 million is included in research and development expenses on the condensed consolidated statements of loss. (12) $3.4 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 loss. (13) $1.4 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 loss. Includes fees relating to the expansion of internal controls at Adtran Networks and the implementation of the DPLTA. Additionally, includes expenses related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks of which $0.5 million is stock compensation expense for the program. (14) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $15.8 million is included in selling, general and administrative expenses and $1.4 million is included in research and development expenses on the condensed consolidated statements of loss. (15) $7.1 million is included in selling, general and administrative expenses and $2.8 million is included in research and development expenses on the condensed consolidated statements of loss. (16) $8.0 million is included in selling, general and administrative expenses and $18.6 million is included in research and development expenses on the condensed consolidated statements of loss. Includes expenses of $16.5 million of wage related and other charges due to the Greifswald facility closure of which $3.2 million is included in selling, general and administrative and $13.3 million is included in research and development expenses on the condensed consolidated statements of loss. (17) $1.3 million is included in selling, general and administrative expenses on the condensed consolidated statements of loss. Includes fees relating to the expansion of internal controls at Adtran Networks and the implementation of the DPLTA. Additionally, includes expenses related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks of which $0.7 million is stock compensation expense for the program. (18) Non-cash impairment of goodwill in our Network Solutions reporting unit, necessitated by factors such as a decrease in the Company's market capitalization, cautious service provider spending due to economic uncertainty and continued elevated customer inventory adjustments. (19) Includes intangible amortization of developed technology, customer relationships, and trade names acquired in connection with business combinations, of which $12.0 million 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 loss. (20) $7.6 million is included in selling, general and administrative expenses and $3.1 million is included in research and development expenses on the condensed consolidated statements of loss. (21) $7.0 million is included in selling, general and administrative expenses and $4.5 million is included in research and development expenses on the condensed consolidated statements of loss. (22) $2.8 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 loss. Includes fees relating to the expansion of internal controls at Adtran Networks and the implementation of the DPLTA. Additionally, includes expenses related to the Company's one-time integration bonus program in connection with synergy targets as a result of the business combination with Adtran Networks of which $0.5 million is stock compensation expense for the program.

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Operating Loss Reconciliation (1) Includes intangible amortization of backlog, inventory fair value adjustments, developed technology, customer relationships, and trade names acquired in connection with business combinations. (2) Includes expenses for restructuring program designed to optimize the assets and business processes following the business combination with Adtran Networks. These expenses include inventory write down and other charges incurred as a result of a strategic shift in certain product lines in connection with the restructuring program. Additionally, includes expenses related to the closure of the Greifswald facility. (3) Includes expenses related to the Company's one-time integration bonus program in connection with synergy targets as a results of the business combination with Adtran Networks. Includes fees incurred for the expansion of internal controls at Adtran Networks and the implementation of the DPTLA. (4) 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 loss. (5) Non-cash impairment of goodwill in our Network Solutions reporting unit, necessitated by factors such as a decrease in the Company’s market capitalization, cautious service provider spending due to economic uncertainty and continued customer inventory adjustments.

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Other Expense Reconciliation (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.

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Net Loss and Loss per Share Reconciliation (1) Represents the non-controlling interest portion of the Company's ownership of Adtran Networks pre-DPLTA and the annual recurring compensation earned by redeemable non-controlling interests and accrued by the Company post-DPLTA. (2) Includes non-cash change in fair value of equity investments held in deferred compensation plans offered to certain employees. (3) Includes amortization of actuarial losses related to the Company's pension plan for employees in certain foreign countries. (4) Represents the tax effect of non-GAAP adjustments. Beginning in period ending September 30, 2024, the Company changed its method of calculating non-GAAP income taxes by applying blended statutory tax rates to non-GAAP losses before income taxes in order to include current and deferred income tax expenses that are commensurate with the non-GAAP measure of profitability. The blended statutory tax rate is calculated using 0%, resulting in no tax benefits net of impact of valuation allowance, for the loss jurisdiction’s non-GAAP losses before income taxes and 30% for all remaining jurisdictions’ non-GAAP income before income taxes. Prior periods have been adjusted to reflect the application of blended statutory tax rates, net of impact of valuation allowance, to non-GAAP losses before income taxes as opposed to the previous application of blended statutory and effective tax rates to separate non-GAAP adjustments. We previously reported the tax effect of the adjustment to non-GAAP net loss under the prior method of $7.9 million, $49.1 million and $21.0 million for the three and nine months ended September 30, 2024 and for the three months ended June 30, 2024, respectively. (5) Loss per common share attributable to ADTRAN Holdings, Inc. and Non-GAAP Loss per common share attributable to ADTRAN reflects $3.0 million of gain on redemption of redeemable non-controlling interest for the three and nine months ended September 30, 2024.

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Free Cash Flow Reconciliation (1) Purchases related to capital expenditures.

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Appendix 6

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2024 Financial Calendar 18th Annual Needham Virtual Security, Networking, & Communications Conference - Virtual November 19 Deutsches Eigenkapitalforum - Frankfurt November 25 - 27

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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 contemplated significant transaction), 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 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. The information contained in this presentation is solely based on preliminary unaudited condensed consolidated results. Additionally, 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 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 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.

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Thank you

v3.24.3

Document And Entity Information	Nov. 06, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 06, 2024
Entity Registrant Name	ADTRAN Holdings, Inc.
Entity Central Index Key	0000926282
Entity Emerging Growth Company	false
Entity File Number	001-41446
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	87-2164282
Entity Address, Address Line One	901 Explorer Boulevard
Entity Address, City or Town	Huntsville
Entity Address, State or Province	AL
Entity Address, Postal Zip Code	35806-2807
City Area Code	256
Local Phone Number	963-8000
Entity Information, Former Legal or Registered Name	Not Applicable
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, Par Value $0.01 per share
Trading Symbol	ADTN
Security Exchange Name	NASDAQ

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