ADTRAN

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

November 1, 2021

ADTRAN, Inc., (NASDAQ:ADTN) (“ADTRAN” or the “Company”), today announced financial results for the third quarter of 2021. For the quarter, revenue was $138.1 million. Earnings for the third quarter of 2021 were a net loss of $10.4 million and earnings per share was a loss of $0.21. Non-GAAP net loss was $0.8 million and non-GAAP earnings per share was a loss of $0.02. Non-GAAP net income (loss) and non-GAAP earnings (loss) 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 (loss) and non-GAAP earnings (loss) per share are set forth in the table provided below.

ADTRAN Chairman and Chief Executive Officer Tom Stanton stated, “We are experiencing unprecedented demand, highlighted by our record-setting Q3 bookings – up 43% year-over-year. We continue to add new customers, including now three new Tier 1 operators since the beginning of the third quarter. An additional highlight was our 61% year-over-year growth rate in customers deploying our SaaS applications. Finally, we remain extremely excited about our announced proposed combination with ADVA and the synergies we believe it will bring in terms of customer base and product portfolio to further accelerate our growth.”

The Company also announced that its Board of Directors declared a cash dividend for the third 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 November 16, 2021. The payment date will be November 30, 2021.

The Company confirmed that it will hold a conference call to discuss its third quarter results on Tuesday, November 2, 2021, 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 3rd 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 variant), 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; and (ii) 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 June 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 table below non-GAAP operating income (loss), which has been reconciled to operating income (loss), and non-GAAP net income (loss) and non-GAAP earnings (loss) per share - basic and diluted, which have been reconciled to net income (loss) and earnings (loss) 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. The presentation of non-GAAP operating income (loss), non-GAAP net income (loss) and non-GAAP earnings (loss) per share - basic and diluted, when combined with the U.S. GAAP presentation of operating income (loss), net income (loss) and earnings (loss) 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 (loss), non-GAAP net income (loss) and non-GAAP earnings (loss) per share - basic and diluted, may not be comparable to similar measures calculated by other companies.

 
 
 
 

Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)

 

 

September 30,

 

December 31,

 

2021

 

2020

Assets

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

75,503

 

 

$

60,161

 

Restricted cash

 

102

 

 

 

18

 

Short-term investments

 

2,610

 

 

 

3,131

 

Accounts receivable, net

 

124,146

 

 

 

98,827

 

Other receivables

 

9,867

 

 

 

21,531

 

Inventory, net

 

127,241

 

 

 

125,457

 

Prepaid expenses and other current assets

 

10,061

 

 

 

8,293

 

Total Current Assets

 

349,530

 

 

 

317,418

 

Property, plant and equipment, net

 

56,556

 

 

 

62,399

 

Deferred tax assets, net

 

8,957

 

 

 

9,869

 

Goodwill

 

6,968

 

 

 

6,968

 

Intangibles, net

 

20,291

 

 

 

23,470

 

Other assets

 

31,675

 

 

 

25,425

 

Long-term investments

 

83,935

 

 

 

80,130

 

Total Assets

$

557,912

 

 

$

525,679

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Accounts payable

$

79,074

 

 

$

49,929

 

Unearned revenue

 

16,394

 

 

 

14,092

 

Accrued expenses and other liabilities

 

15,392

 

 

 

13,609

 

Accrued wages and benefits

 

17,270

 

 

 

15,262

 

Income tax payable, net

 

5,914

 

 

 

1,301

 

Total Current Liabilities

 

134,044

 

 

 

94,193

 

Non-current unearned revenue

 

7,426

 

 

 

6,888

 

Pension liability

 

16,988

 

 

 

18,664

 

Deferred compensation liability

 

28,336

 

 

 

25,866

 

Other non-current liabilities

 

7,365

 

 

 

7,124

 

Total Liabilities

 

194,159

 

 

 

152,735

 

Stockholders' Equity

 

363,753

 

 

 

372,944

 

Total Liabilities and Stockholders' Equity

$

557,912

 

 

$

525,679

 

 
 
 
 
 

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

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2021

 

2020

 

2021

 

2020

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Network Solutions

 

$

120,767

 

 

$

115,229

 

 

$

360,025

 

 

$

323,924

 

 

Services & Support

 

 

17,314

 

 

 

17,914

 

 

 

48,821

 

 

 

52,457

 

 

Total Revenue

 

 

138,081

 

 

 

133,143

 

 

 

408,846

 

 

 

376,381

 

 

Cost of Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Network Solutions

 

 

81,029

 

 

 

62,795

 

 

 

216,044

 

 

 

178,492

 

 

Services & Support

 

 

9,379

 

 

 

11,386

 

 

 

28,860

 

 

 

33,855

 

 

Total Cost of Revenue

 

 

90,408

 

 

 

74,181

 

 

 

244,904

 

 

 

212,347

 

 

Gross Profit

 

 

47,673

 

 

 

58,962

 

 

 

163,942

 

 

 

164,034

 

 

Selling, general and administrative expenses

 

 

30,972

 

 

 

27,205

 

 

 

89,273

 

 

 

84,624

 

 

Research and development expenses

 

 

26,759

 

 

 

27,223

 

 

 

82,131

 

 

 

85,794

 

 

Asset impairments

 

 

 

 

 

 

 

 

 

 

 

65

 

 

Operating Income (Loss)

 

 

(10,058

)

 

 

4,534

 

 

 

(7,462

)

 

 

(6,449

)

 

Interest and dividend income

 

 

344

 

 

 

344

 

 

 

887

 

 

 

1,031

 

 

Interest expense

 

 

(6

)

 

 

 

 

 

(18

)

 

 

(1

)

 

Net investment gain (loss)

 

 

(63

)

 

 

2,844

 

 

 

2,942

 

 

 

1,819

 

 

Other income (expense), net

 

 

648

 

 

 

(1,679

)

 

 

2,673

 

 

 

(2,307

)

 

Income (Loss) Before Income Taxes

 

 

(9,135

)

 

 

6,043

 

 

 

(978

)

 

 

(5,907

)

 

Income tax (expense) benefit

 

 

(1,292

)

 

 

(562

)

 

 

(3,467

)

 

 

2,171

 

 

Net Income (Loss)

 

$

(10,427

)

 

$

5,481

 

 

$

(4,445

)

 

$

(3,736

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

48,609

 

 

 

47,957

 

 

 

48,470

 

 

 

47,957

 

 

Weighted average shares outstanding – diluted

 

 

48,609

 

 

 

48,424

 

(1)

 

48,470

 

 

 

47,957

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share – basic

 

$

(0.21

)

 

$

0.11

 

 

$

(0.09

)

 

$

(0.08

)

 

Earnings (loss) per common share – diluted

 

$

(0.21

)

 

$

0.11

 

(1)

$

(0.09

)

 

$

(0.08

)

 

(1)

 

Assumes exercise of dilutive stock awards calculated under the treasury stock method.

 
 
 
 
 

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

 

 

 

Nine Months Ended

 

 

September 30,

 

 

2021

 

2020

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(4,445

)

 

$

(3,736

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

12,246

 

 

 

12,525

 

Gain on investments

 

 

(3,320

)

 

 

(1,819

)

Stock-based compensation expense

 

 

5,457

 

 

 

5,056

 

Deferred income taxes

 

 

437

 

 

 

(1

)

Other

 

 

89

 

 

 

195

 

Asset impairments

 

 

 

 

 

65

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

(26,346

)

 

 

(9,131

)

Other receivables

 

 

11,152

 

 

 

(6,224

)

Inventory, net

 

 

(2,669

)

 

 

(21,170

)

Prepaid expenses, other current assets and other assets

 

 

(8,514

)

 

 

(672

)

Accounts payable

 

 

29,614

 

 

 

14,204

 

Accrued expenses and other liabilities

 

 

10,392

 

 

 

5,618

 

Income taxes payable, net

 

 

4,798

 

 

 

(227

)

Net cash provided by (used in) operating activities

 

 

28,891

 

 

 

(5,317

)

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(3,572

)

 

 

(5,082

)

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

 

 

28,305

 

 

 

86,145

 

Purchases of available-for-sale investments

 

 

(28,853

)

 

 

(42,641

)

Insurance proceeds received

 

 

500

 

 

 

 

Acquisition of note receivable

 

 

 

 

 

(523

)

Net cash provided by (used in) investing activities

 

 

(3,620

)

 

 

37,899

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

6,111

 

 

 

 

Tax withholdings related to stock-based compensation settlements

 

 

(113

)

 

 

 

Dividend payments

 

 

(13,124

)

 

 

(12,993

)

Repayment of bonds payable

 

 

 

 

 

(24,600

)

Net cash used in financing activities

 

 

(7,126

)

 

 

(37,593

)

 

 

 

 

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

18,145

 

 

 

(5,011

)

Effect of exchange rate changes

 

 

(2,719

)

 

 

2,641

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

60,179

 

 

 

73,773

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, end of period

 

$

75,605

 

 

$

71,403

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

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

 

$

1,833

 

 

$

231

 

Purchases of property, plant and equipment included in accounts payable

 

$

100

 

 

$

442

 

 
 
 
 
 

Supplemental Information
Reconciliation of Operating Income (Loss) to Non-GAAP Operating Income (Loss)
(Unaudited)

 

 

Three Months Ended
September 30,

 

 

Nine Months ended
September 30,

 

 

2021

 

2020

 

 

2021

 

2020

 

Operating Income (Loss)

$

(10,058

)

 

$

4,534

 

 

 

$

(7,462

)

 

$

(6,449

)

 

Acquisition-related expenses, amortizations and adjustments

 

6,041

 

(1)

 

1,042

 

(4)

 

 

9,470

 

(8)

 

3,499

 

(11)

Stock-based compensation expense

 

1,842

 

(2)

 

1,610

 

(5)

 

 

5,457

 

(9)

 

5,056

 

(12)

Restructuring expenses

 

 

 

 

1,903

 

(6)

 

 

309

 

(10)

 

3,648

 

(13)

Deferred compensation adjustments

 

(459

)

(3)

 

791

 

(3)

 

 

2,091

 

(3)

 

765

 

(3)

Asset impairments

 

 

 

 

 

 

 

 

 

 

 

65

 

(14)

Settlement income

 

 

 

 

(28

)

(7)

 

 

 

 

 

(28

)

(7)

Non-GAAP Operating Income (Loss)

$

(2,634

)

 

$

9,852

 

 

 

$

9,865

 

 

$

6,556

 

 

(1)

 

$5.6 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 income (loss).

(2)

$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 income (loss).

(3)

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 income (loss).

(4)

$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 income (loss).

(5)

$0.1 million is included in total cost of revenue, $0.9 million is included in selling, general and administrative expenses and $0.6 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(6)

$0.2 million is included in total cost of revenue, $1.1 is included in selling, general and administrative expenses and $0.6 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(7)

Includes income related to certain freight forwarder claim settlements, all of which is included in total cost of sales on the condensed consolidated statements of income.

(8)

$8.0 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 income (loss).

(9)

$0.4 million is included in total cost of revenue, $3.3 million is included in selling, general and administrative expenses and $1.8 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(10)

$0.1 million is included in selling, general and administrative expenses and $0.2 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(11)

$0.3 million is included in total cost of revenue, $1.7 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 income (loss).

(12)

$0.3 million is included in total cost of revenue, $3.0 million is included in selling, general and administrative expenses and $1.8 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(13)

$0.3 million is included in total cost of revenue, $1.6 million is included in selling, general and administrative expenses and $1.7 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(14)

Includes abandonment of certain information technology projects.

 
 
 
 
 

Supplemental Information
Reconciliation of Net Income (Loss) and Earnings (Loss) per Common Share – Basic and Diluted
to Non-GAAP Net Income (Loss) and Non-GAAP Earnings (Loss) per Common Share – Basic and Diluted
(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months ended

September 30,

 

 

 

2021

 

2020

 

 

2021

 

2020

 

Net Income (Loss)

 

$

(10,427

)

 

$

5,481

 

 

 

$

(4,445

)

 

$

(3,736

)

 

Acquisition-related expenses, amortizations and adjustments

 

 

6,041

 

 

 

1,042

 

 

 

 

9,470

 

 

 

3,499

 

 

Stock-based compensation expense

 

 

1,842

 

 

 

1,610

 

 

 

 

5,457

 

 

 

5,056

 

 

Restructuring expenses

 

 

 

 

 

1,903

 

 

 

 

309

 

 

 

3,648

 

 

Pension expense(1)

 

 

272

 

 

 

248

 

 

 

 

825

 

 

 

720

 

 

Deferred compensation adjustments(2)

 

 

(262

)

 

 

(90

)

 

 

 

552

 

 

 

(1,432

)

(3)

Valuation allowance related to deferred tax assets

 

 

2,455

 

 

 

(956

)

 

 

 

4,413

 

 

 

2,622

 

 

Asset impairments

 

 

 

 

 

 

 

 

 

 

 

 

65

 

 

Settlement income

 

 

 

 

 

(28

)

 

 

 

 

 

 

(28

)

 

Tax effect of adjustments to net income (loss)

 

 

(736

)

 

 

(1,279

)

 

 

 

(2,931

)

 

 

(3,089

)

 

Non-GAAP Net Income (Loss)

 

$

(815

)

 

$

7,931

 

 

 

$

13,650

 

 

$

7,325

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

48,609

 

 

 

47,957

 

 

 

 

48,470

 

 

 

47,957

 

 

Weighted average shares outstanding – diluted

 

 

48,609

 

 

 

48,424

 

 

 

 

48,470

 

 

 

47,957

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share - basic

 

$

(0.21

)

 

$

0.11

 

 

 

$

(0.09

)

 

$

(0.08

)

 

Earnings (loss) per common share - diluted

 

$

(0.21

)

 

$

0.11

 

 

 

$

(0.09

)

 

$

(0.08

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP earnings (loss) per common share - basic

 

$

(0.02

)

 

$

0.17

 

 

 

$

0.28

 

 

$

0.15

 

 

Non-GAAP earnings (loss) per common share - diluted

 

$

(0.02

)

 

$

0.16

 

 

 

$

0.28

 

 

$

0.15

 

 

(1)

 

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

(2)

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

(3)

Includes a 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.

 

Investor Services/Assistance:
Rhonda Lambert/256-963-7450
investor@adtran.com

Source: ADTRAN, Inc.
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