ADTRAN, Inc. Reports Earnings for the Fourth Quarter of 2021 and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala.–(BUSINESS WIRE)–ADTRAN, Inc., (NASDAQ:ADTN) (“ADTRAN” or the “Company”), today announced financial results for the fourth quarter of 2021. For the quarter, revenue was $154.2 million. Earnings for the fourth quarter of 2021 were a net loss of $4.2 million and earnings per share was a loss of $0.09. Non-GAAP net income was $4.7 million and non-GAAP earnings per share was $0.10. Non-GAAP net income and non-GAAP earnings per share exclude stock-based compensation expense, acquisition related expenses, amortizations and adjustments, restructuring expenses, amortization of pension actuarial losses, asset impairments, deferred compensation related adjustments, change in valuation allowance related to our deferred tax assets, and the tax effect of these adjustments to net income (loss). The reconciliations between GAAP net income (loss) and earnings (loss) per share to non-GAAP net income and non-GAAP earnings per share are set forth in the table provided below.

ADTRAN Chairman and Chief Executive Officer Tom Stanton stated, “We continue to experience unprecedented demand for our solutions with another record-setting quarter for bookings. These record bookings were combined with record product revenue for both our fiber access platforms, up 48% year-over-year, and residential Wi-Fi platforms, up 72% year-over-year. The growth in these strategic segments was across a diverse mix of large and small service providers in the U.S. and Europe, highlighting the success we have had with customer diversification. Our success in capturing fiber footprint, bundling mesh Wi-Fi platforms and cloud software with fiber access, and the portfolio synergies offered by the announced ADVA combination provide an optimistic outlook for continued growth.”

The Company also announced that its Board of Directors declared a cash dividend for the fourth quarter of 2021. 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 February 17, 2022. The payment date will be March 3, 2022.

The Company confirmed that it will hold a conference call to discuss its fourth quarter results on Thursday, February 3, 2022, at 9:30 a.m. Central Time. ADTRAN will webcast this conference call. To listen, simply visit ADTRAN’s Investor Relations site at www.adtran.com/investor approximately ten minutes prior to the start of the call, click on the event “ADTRAN Releases 4th Quarter 2021 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 www.investors.adtran.com or email at investor.relations@adtran.com.

About ADTRAN

At ADTRAN, we believe amazing things happen when people connect. From the cloud edge to the subscriber edge, we help communications service providers around the world manage and scale services that connect people, places and things to advance human progress. Whether rural or urban, domestic or international, telco or cable, enterprise or residential—ADTRAN solutions optimize existing technology infrastructures and create new, multi-gigabit platforms that leverage cloud economics, data analytics, machine learning and open ecosystems—the future of global networking. Find more at ADTRAN.com, LinkedIn and Twitter.

This press release contains forward-looking statements, generally identified by the use of words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could” and similar expressions, which forward-looking statements reflect management’s best judgment based on factors currently known. However, these statements involve risks and uncertainties, including: (i) risks and uncertainties related to the continued impact of the SARS-CoV-2 coronavirus/COVID-19 global pandemic (or variants of the SARS-CoV-2 coronavirus, including the Delta and Omicron variants), including the severity and duration of the pandemic and the delivery, acceptance and effectiveness of vaccines, which could lead to a decrease in demand for the Company’s products and services, and which has disrupted, and could lead to further disruptions in, the Company’s supply chain, adversely impacting the operations and financial condition of the Company and its customers; actions that have been taken and that may be taken by the Company, its customers, suppliers and counterparties in response to the pandemic, including the implementation of alternative work arrangements for employees, which may delay the timing of some orders and expected deliveries and which may impact the Company’s ability to mitigate inefficiencies, delays and additional costs in the Company’s product development, sales, marketing and customer service efforts; the legal, regulatory and administrative developments that have occurred and may continue to occur at the federal, state and local levels and in foreign jurisdictions in response to the pandemic, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns; potential disruptions, breaches, or other incidents affecting the proper operation, availability or security of the Company’s or its partners’ information systems; potential declines in revenues due to declining customer demand and deteriorating macroeconomic conditions; increased expenses related to labor, raw materials, freight or other expenditures; the impact of the COVID-19 pandemic on the Company’s liquidity, as well as risks associated with disruptions in the financial markets and the business of financial institutions as a result of the COVID-19 pandemic which could impact the Company from a financial perspective; the pace of recovery in our markets when the COVID-19 pandemic subsides, which could affect demand for our products; (ii) risks and uncertainties related to the anticipated business combination between the Company and ADVA Optical Networking SE (“ADVA”), including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the contemplated business combination that could reduce anticipated benefits or cause the parties to abandon the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the business combination agreement; the ability to successfully complete the proposed business combination; regulatory or other limitations imposed as a result of the proposed business combination; the success of the business following the proposed business combination; the ability to successfully integrate the ADTRAN and ADVA businesses; the risk that the parties may not be able to satisfy the conditions to closing of the proposed business combination in a timely manner or at all; risks related to disruption of management time from ongoing business operations due to the proposed business combination; the risk that the publicity surrounding or consummation of the proposed business combination could have adverse effects on the market price of ADTRAN’s common stock or ADVA’s common shares or the ability of ADTRAN and ADVA to retain customers, retain or hire key personnel, maintain relationships with their respective suppliers and customers, and on their operating results and businesses generally; the risk that the successor issuer (“Acorn HoldCo”), may be unable to achieve expected synergies or that it may take longer or be more costly than expected to achieve those synergies; the risk of fluctuations in revenue due to lengthy sales and approval process required by major and other service providers for new products; the risk posed by potential breaches of information systems and cyber-attacks; the risks that ADTRAN, ADVA or the post-combination company may not be able to effectively compete, including through product improvements and development, and (iii) the other risks detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2021. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements included in this press release.

To provide additional transparency, we have disclosed in the tables below non-GAAP operating income, which has been reconciled to operating (loss), and non-GAAP net income and non-GAAP earnings per share – basic and diluted, which have been reconciled to net (loss) income and (loss) earnings per share – basic and diluted, in each case as reported based on Generally Accepted Accounting Principles in the United States (“U.S. GAAP”). These non-GAAP financial measures exclude certain items which management believes are not reflective of the ongoing operating performance of the business. We believe this information is useful in providing period-to-period comparisons of the results of our ongoing operations. Additionally, these measures are used by management in our ongoing planning and annual budgeting processes. We believe the presentation of non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share – basic and diluted, when combined with the U.S. GAAP presentation of operating (loss), net (loss) income and (loss) earnings per share – basic and diluted, 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, U.S. GAAP and therefore should not be considered in isolation or as a substitution for analysis of our results as reported under U.S. GAAP. Additionally, our calculation of non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share – basic and diluted, may not be comparable to similar measures calculated by other companies.


Condensed Consolidated Balance Sheets (Unaudited) (In thousands)

	December 31,		December 31,
	2021		2020
Assets
Cash and cash equivalents	$	56,603	$	60,161
Restricted cash		215		18
Short-term investments		350		3,131
Accounts receivable, net		158,742		98,827
Other receivables		11,228		21,531
Inventory, net		139,891		125,457
Prepaid expenses and other current assets		9,296		8,293
Total Current Assets		376,325		317,418

Property, plant and equipment, net		55,766		62,399
Deferred tax assets, net		9,079		9,869
Goodwill		6,968		6,968
Intangibles, net		19,293		23,470
Other non-current assets		30,971		25,425
Long-term investments		70,615		80,130
Total Assets	$	569,017	$	525,679

Liabilities and Stockholders’ Equity
Accounts payable	$	102,489	$	49,929
Unearned revenue		17,737		14,092
Accrued expenses and other liabilities		13,673		13,609
Accrued wages and benefits		14,900		15,262
Income tax payable, net		6,560		1,301
Total Current Liabilities		155,359		94,193

Non-current unearned revenue		9,271		6,888
Pension liability		11,402		18,664
Deferred compensation liability		31,383		25,866
Other non-current liabilities		4,500		7,124
Total Liabilities		211,915		152,735

Stockholders’ Equity		357,102		372,944

Total Liabilities and Stockholders’ Equity	$	569,017	$	525,679


Condensed Consolidated Statements of (Loss) Income (Unaudited) (In thousands, except per share amounts)

	Three Months Ended							Twelve Months Ended
	December 31,							December 31,
	2021			2020				2021			2020
Revenue
Network Solutions	$	138,809		$	114,091			$	498,834		$	438,015
Services & Support		15,349			16,038				64,170			68,495
Total Revenue		154,158			130,129				563,004			506,510
Cost of Revenue
Network Solutions		91,797			65,734				307,841			244,226
Services & Support		7,926			10,878				36,786			44,733
Total Cost of Revenue		99,723			76,612				344,627			288,959
Gross Profit		54,435			53,517				218,377			217,551
Selling, general and administrative expenses		35,141			29,348				124,414			113,972
Research and development expenses		26,532			27,493				108,663			113,287
Asset impairments		—			—				—			65
Operating Loss		(7,238	)		(3,324	)			(14,700	)		(9,773	)
Interest and dividend income		1,957			905				2,844			1,936
Interest expense		(16	)		(4	)			(34	)		(5	)
Net investment gain (loss)		(1,181	)		3,031				1,761			4,850
Other income (expense), net		1,151			(947	)			3,824			(3,254	)
Loss Before Income Taxes		(5,327	)		(339	)			(6,305	)		(6,246	)
Income tax benefit (expense)		1,137			6,453				(2,330	)		8,624
Net (Loss) Income	$	(4,190	)	$	6,114			$	(8,635	)	$	2,378

Weighted average shares outstanding – basic		48,914			48,111				48,582			47,996
Weighted average shares outstanding – diluted		48,914			48,532		⁽¹⁾		48,582			48,288		⁽¹⁾

(Loss) earnings per common share – basic	$	(0.09	)	$	0.13			$	(0.18	)	$	0.05
(Loss) earnings per common share – diluted	$	(0.09	)	$	0.13		⁽¹⁾	$	(0.18	)	$	0.05		⁽¹⁾

⁽¹⁾ Assumes exercise of dilutive stock options calculated under the treasury stock method.


Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)

	Twelve Months Ended
	December 31,
	2021			2020
Cash flows from operating activities:
Net (loss) income	$	(8,635	)	$	2,378
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		16,084			16,627
Asset impairments		—			65
Gain on investments		(5,127	)		(5,802	)
Stock-based compensation expense		7,480			6,834
Deferred income taxes		(1,784	)		(1,356	)
Other		112			216
Change in operating assets and liabilities:
Accounts receivable, net		(60,864	)		(7,269	)
Other receivables		9,752			(4,732	)
Inventory, net		(15,667	)		(25,582	)
Prepaid expenses and other assets		(7,146	)		(5,239	)
Accounts payable, net		53,270			4,543
Accrued expenses and other liabilities		10,063			5,093
Income taxes payable		5,470			(2,294	)
Net cash provided by (used in) operating activities		3,008			(16,518	)

Cash flows from investing activities:
Purchases of property, plant and equipment		(5,669	)		(6,413	)
Proceeds from disposals of property, plant and equipment		—			2
Proceeds from sales and maturities of available-for-sale investments		50,466			105,100
Purchases of available-for-sale investments		(35,031	)		(56,767	)
Acquisition of note receivable		—			(523	)
Life insurance proceeds received		500			—
Net cash provided by investing activities		10,266			41,399

Cash flows from financing activities:
Dividend payments		(17,529	)		(17,334	)
Repayment of bonds payable		—			(24,600	)
Proceeds from draw on line of credit		10,000			—
Repayment of line of credit		(10,000	)		—
Tax withholdings related to stock-based compensation settlements		(1,860	)		(1,043	)
Proceeds from stock option exercises		6,431			—
Net cash used in financing activities		(12,958	)		(42,977	)
Net increase (decrease) in cash and cash equivalents		316			(18,096	)
Effect of exchange rate changes		(3,677	)		4,502
Cash, cash equivalents and restricted cash, beginning of year		60,179			73,773

Cash, cash equivalents and restricted cash, end of year	$	56,818		$	60,179

Supplemental disclosure of cash flow information
Cash paid during the year for interest	$	13		$	24
Cash paid during the year for income taxes	$	1,780		$	7,609
Supplemental disclosure of non-cash investing activities
Purchases of property, plant and equipment included in accounts payable	$	638		$	108


Supplemental Information Reconciliation of Operating Loss to Non-GAAP Operating Income (Unaudited) (Amounts in table in thousands)

	Three Months ended December 31,								Twelve Months ended December 31,
	2021				2020				2021				2020
Operating Loss	$	(7,238	)		$	(3,324	)		$	(14,700	)		$	(9,773	)
Acquisition related expenses, amortizations and adjustments		6,529		⁽¹⁾		1,051		⁽⁵⁾		15,999		⁽⁸⁾		4,550		⁽¹¹⁾
Stock-based compensation expense		2,023		⁽²⁾		1,778		⁽⁶⁾		7,480		⁽⁹⁾		6,834		⁽¹²⁾
Restructuring expenses		102		⁽³⁾		2,581		⁽⁷⁾		411		⁽¹⁰⁾		6,229		⁽¹³⁾
Deferred compensation adjustments		(2	)	⁽⁴⁾		2,172		⁽⁴⁾		2,089		⁽⁴⁾		2,937		⁽⁴⁾
Asset impairments		—				—				—				65		⁽¹⁴⁾
Settlement income		—				—				—				(28	)	⁽¹⁵⁾
Non-GAAP Operating Income	$	1,414			$	4,258			$	11,279			$	10,814

⁽¹⁾$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 (loss) income.

⁽²⁾$0.2 million is included in total cost of revenue, $1.2 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 (loss) income.

⁽³⁾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 (loss) income.

⁽⁴⁾Includes non-cash change in fair value of equity investments held in the ADTRAN, Inc. Deferred Compensation Program for Employees, all of which is included in selling, general and administrative expenses on the condensed consolidated statement of (loss) income.

⁽⁵⁾$0.6 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) income.

⁽⁶⁾$0.1 million is included in total cost of revenue, $1.1 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 (loss) income.

⁽⁷⁾$0.2 million is included in total cost of revenue, $0.2 million is included in selling, general and administrative expenses and $2.2 million is included in research and development expenses on the condensed consolidated statements of (loss) income.

⁽⁸⁾Less than $0.1 million is included in total cost of revenue, $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 (loss) income.

⁽⁹⁾$0.5 million is included in total cost of revenue, $4.6 million is included in selling, general and administrative expenses and $2.4 million is included in research and development expenses on the condensed consolidated statements of (loss) income.

⁽¹⁰⁾ Less than $0.1 million is included in total cost of revenue, $0.2 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) income.

⁽¹¹⁾ $0.3 million is included in total cost of sales, $2.3 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 (loss) income.

⁽¹²⁾ $0.4 million is included in total cost of sales, $4.0 million is included in selling, general and administrative expenses and $2.4 million is included in research and development expenses on the condensed consolidated statements of (loss) income.

⁽¹³⁾ $0.5 million is included in total cost of sales, $1.8 million is included in selling, general and administrative expenses and $3.9 million is included in research and development expenses on the condensed consolidated statements of (loss) income.

⁽¹⁴⁾ Includes abandonment of certain information technology projects.

⁽¹⁵⁾ Includes income related to certain freight forward claims settlements, all of which is included in total cost of sales on the condensed consolidated statements of (loss) income.


Supplemental Information Reconciliation of Net (Loss) Income and (Loss) Earnings per Common Share – Basic and Diluted to Non-GAAP Net Income and Non-GAAP Earnings per Common Share – Basic and Diluted (Unaudited) (Amounts in table in thousands, except per share amounts)

	Three Months ended December 31,						Twelve Months ended December 31,
	2021			2020			2021			2020
Net (Loss) Income	$	(4,190	)	$	6,114		$	(8,635	)	$	2,378
Acquisition related expenses, amortizations and adjustments		6,529			1,051			15,999			4,550
Stock-based compensation expense		2,023			1,778			7,480			6,834
Restructuring expenses		102			2,581			411			6,229
Deferred compensation adjustments(1)		673			601			1,225			(831	)	⁽³⁾
Pension expense(2)		263			250			1,088			970
Valuation allowance		333			(5,420	)		4,746			(2,798	)
Asset impairments		—			—			—			65
Settlement income		—			—			—			(28	)
Tax effect of adjustments to net (loss) income		(1,016	)		(1,716	)		(3,947	)		(4,805	)
Non-GAAP Net Income	$	4,717		$	5,239		$	18,367		$	12,564

Weighted average shares outstanding – basic		48,914			48,111			48,582			47,996
Weighted average shares outstanding – diluted		48,914			48,532			48,582			48,288

(Loss) earnings per common share – basic	$	(0.09	)	$	0.13		$	(0.18	)	$	0.05
(Loss) earnings per common share – diluted	$	(0.09	)	$	0.13		$	(0.18	)	$	0.05

Non-GAAP earnings per common share – basic	$	0.10		$	0.11		$	0.38		$	0.26
Non-GAAP earnings per common share – diluted	$	0.10		$	0.11		$	0.38		$	0.26

⁽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⁾Includes net investment gain of $1.5 million related to the out-of-period remeasurement to historical cost basis of certain long-term investments held in the Company’s stock as part of one of the Company’s deferred compensation plans.

Contacts

Investor Services/Assistance:

Rhonda Lambert/256-963-7450

investor@adtran.com