Adtran holdings, inc. reports earnings for the second quarter of 2022 and declares quarterly cash dividend
Huntsville, ala.--(business wire)--adtran holdings, inc., (nasdaq: adtn) (“adtran” or the “company”), today announced financial results for the second quarter of 2022. for the quarter, revenue was $172.0 million. net income for the second quarter of 2022 was $2.1 million and earnings per share was $0.04. non-gaap net income was $9.7 million and non-gaap earnings per share was $0.19. 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, deferred compensation related adjustments, change in valuation allowance related to our deferred tax assets, and the tax effect of these adjustments to net income. the reconciliations between gaap net income and earnings 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 had a strong q2 fueled by the growing demand for our fiber broadband platforms. customer demand continues to grow at record levels. we increased revenue both quarter-over-quarter and year-over-year in our domestic and international markets, and also throughout our customer segments. this provides continued momentum as we move forward with our integration of adva. the combination of these two companies will strengthen our overall solution portfolio and provide the resources necessary to maximize our success in this unprecedented investment cycle in fiber networks.” the company also announced that its board of directors declared a cash dividend for the second quarter of 2022. the quarterly cash dividend of $0.09 per common share is to be paid to the company’s stockholders of record as of the close of business on august 18, 2022. the ex-dividend date is august 17, 2022 and the payment date will be september 1, 2022. the company confirmed that it will hold a conference call to discuss its second quarter results on thursday, august 4, 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 holdings releases 2nd quarter 2022 financial results and earnings call”, and click on the webcast link. an online replay of the company’s conference call, as well as the text of the company's conference call, will be available on the investor relations site approximately 24 hours following the call and will remain available for at least 12 months. for more information, visit www.investors.adtran.com or email at investor.relations@adtran.com. about adtran holdings, inc. adtran holdings, inc. solely owns adtran, inc. (adtran) and is the majority shareholder of adva optical networking se (adva). adtran is a leading global provider of open, disaggregated networking and communications solutions. adva is a global optical networking solutions provider focused on cloud interconnect, cloud access and network synchronization. the combined technology portfolio can best address current and future requirements, especially regarding the convergence of solutions at the network edge. learn more on adtran.com, linkedin, and twitter. unless the context otherwise indicates or requires, references in this press release and the accompanying financial information to “adtran,” the “company,” “we,” “us” and “our” refer to (i) adtran, inc. and its consolidated affiliates prior to the merger on july 8, 2022 of acorn mergeco, inc. (“merger sub”), a delaware corporation and wholly-owned direct subsidiary of adtran holdings, inc. (f/k/a acorn holdco), with and into adtran, inc., as part of adtran’s business combination transaction with adva, and (ii) adtran holdings, inc. and its consolidated subsidiaries following the merger. cautionary note regarding forward-looking statements 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 (including variants of the sars-cov-2 coronavirus), including with respect to continued manufacturing and supply chain constraints; (ii) regulatory or other limitations imposed following the closing of the company’s business combination with adva on july 15, 2022; the success of the combined adtran and adva businesses following the business combination; the ability to successfully integrate the adtran and adva businesses; risks related to disruption of management time from ongoing business operations due to integration efforts following the business combination; the risk that the publicity surrounding the 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 adtran holdings may be unable to achieve expected synergies or that it may take longer or be more costly than expected to achieve those synergies; 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 adtran holdings may not be able to effectively compete, including through product improvements and development, and (iii) the other risks set forth in adva’s annual and interim financial reports made publicly available and adtran’s and adtran holdings’ public filings made with the securities and exchange commission, including adtran’s annual report on form 10-k for the year ended december 31, 2021 and adtran’s form 10-q for the quarterly period ended march 31, 2022. 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 income, and non-gaap net income and non-gaap earnings per share - basic and diluted, which have been reconciled to net income and 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 income, net income and 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) june 30, december 31, 2022 2021 assets current assets cash and cash equivalents $ 43,368 $ 56,603 restricted cash — 215 short-term investments 1,773 350 accounts receivable, net 172,088 158,742 other receivables 8,413 11,228 inventory, net 196,916 139,891 prepaid expenses and other current assets 9,306 9,296 total current assets 431,864 376,325 property, plant and equipment, net 53,432 55,766 deferred tax assets, net 8,508 9,079 goodwill 6,968 6,968 intangibles, net 17,473 19,293 other non-current assets 29,637 30,971 long-term investments 52,297 70,615 total assets $ 600,179 $ 569,017 liabilities and stockholders' equity current liabilities accounts payable $ 144,432 $ 102,489 unearned revenue 22,705 17,737 accrued expenses and other liabilities 16,759 13,673 accrued wages and benefits 13,276 14,900 income tax payable, net 4,541 6,560 total current liabilities 201,713 155,359 non-current unearned revenue 10,133 9,271 pension liability 9,889 11,402 deferred compensation liability 26,014 31,383 other non-current liabilities 3,893 4,500 total liabilities 251,642 211,915 stockholders' equity 348,537 357,102 total liabilities and stockholders' equity $ 600,179 $ 569,017 condensed consolidated statements of income (unaudited) (in thousands, except per share data) three months ended six months ended june 30, june 30, 2022 2021 2022 2021 revenue network solutions $ 155,992 $ 125,449 $ 294,366 $ 239,258 services & support 16,046 17,783 32,190 31,507 total revenue 172,038 143,232 326,556 270,765 cost of revenue network solutions 99,921 70,014 190,575 135,015 services & support 9,611 10,550 19,159 19,481 total cost of revenue 109,532 80,564 209,734 154,496 gross profit 62,506 62,668 116,822 116,269 selling, general and administrative expenses 27,873 30,866 55,766 58,301 research and development expenses 26,500 27,871 52,991 55,372 operating income 8,133 3,931 8,065 2,596 interest and dividend income 217 253 421 543 interest expense (94 ) (6 ) (124 ) (12 ) net investment (loss) gain (4,646 ) 2,009 (8,061 ) 3,005 other (expense) income, net 681 26 455 2,025 income before income taxes 4,291 6,213 756 8,157 income tax (expense) benefit (2,148 ) (1,127 ) 260 (2,175 ) net income $ 2,143 $ 5,086 $ 1,016 $ 5,982 weighted average shares outstanding – basic 49,123 48,449 49,110 48,393 weighted average shares outstanding – diluted 49,809 (1) 49,426 (1) 49,813 (1) 49,225 (1) earnings per common share – basic $ 0.04 $ 0.10 $ 0.02 $ 0.12 earnings per common share – diluted $ 0.04 (1) $ 0.10 (1) $ 0.02 (1) $ 0.12 (1) (1) assumes exercise of dilutive stock options calculated under the treasury stock method. condensed consolidated statements of cash flows (unaudited) (in thousands) six months ended june 30, 2022 2021 cash flows from operating activities: net income $ 1,016 $ 5,982 adjustments to reconcile net income to net cash (used in) provided by operating activities: depreciation and amortization 7,235 8,232 loss (gain) on investments 7,882 (3,255 ) stock-based compensation expense 3,781 3,615 deferred income taxes (93 ) 441 other, net 27 53 inventory reserves (4,296 ) (3,167 ) changes in operating assets and liabilities: accounts receivable, net (14,315 ) (24,322 ) other receivables 2,606 1,412 inventory (53,982 ) 9,107 prepaid expenses, other current assets and other assets 671 (4,767 ) accounts payable 42,968 16,814 accrued expenses and other liabilities 2,179 6,999 income taxes payable, net (1,597 ) 1,069 net cash (used in) provided by operating activities (5,918 ) 18,213 cash flows from investing activities: purchases of property, plant and equipment (3,285 ) (2,210 ) proceeds from sales and maturities of available-for-sale investments 25,071 20,597 purchases of available-for-sale investments (17,002 ) (20,121 ) net cash provided by (used in) investing activities 4,784 (1,734 ) cash flows from financing activities: tax withholdings related to stock-based compensation settlements (333 ) (113 ) proceeds from stock option exercises 636 3,552 dividend payments (8,877 ) (8,735 ) proceeds from draw on line of credit 28,000 — repayment of line of credit (28,000 ) — net cash used in financing activities (8,574 ) (5,296 ) net (decrease) increase in cash, cash equivalents and restricted cash (9,708 ) 11,183 effect of exchange rate changes (3,742 ) (1,381 ) cash, cash equivalents and restricted cash, beginning of period 56,818 60,179 cash, cash equivalents and restricted cash, end of period $ 43,368 $ 69,981 supplemental disclosure of non-cash investing activities: right-of-use assets obtained in exchange for lease obligations $ 552 $ 275 purchases of property, plant and equipment included in accounts payable $ 818 $ 144 supplemental information reconciliation of operating income to non-gaap operating income (unaudited) (amounts in table in thousands) three months ended march 31, nine months ended september 30, 2022 2021 2021 2020 operating income $ 8,133 $ 3,931 $ 8,065 $ 2,596 acquisition-related expenses, amortizations and adjustments 2,123 (1) 2,384 (4) 4,453 (7) 3,429 (10) stock-based compensation expense 1,888 (2) 1,808 (5) 3,781 (8) 3,615 (11) restructuring expenses — 8 (6) 2 (9) 309 (12) deferred compensation adjustments (3,737 ) (3) 1,994 (3) (6,433 ) (3) 2,550 (3) non-gaap operating income $ 8,407 $ 10,125 $ 9,868 $ 12,499 (1) $1.6 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. (4) $1.9 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. (5) $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. (6) less than $0.1 million is included in selling, general and administrative expenses and research and development expenses on the condensed consolidated statements of income. (7) $3.5 million is included in selling, general and administrative expenses and $1.0 million is included in research and development expenses on the condensed consolidated statements of income. (9) less than $0.1 million is included in selling, general and administrative expenses on the condensed consolidated statements of income. (10) $2.4 million is included in selling, general and administrative expenses and $1.0 million is included in research and development expenses on the condensed consolidated statements of income. (12) $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. supplemental information reconciliation of net income and 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 march 31, nine months ended september 30, 2022 2021 2021 2020 net income $ 2,143 $ 5,086 $ 1,016 $ 5,982 acquisition-related expenses, amortizations and adjustments 2,123 2,384 4,453 3,429 stock-based compensation expense 1,888 1,808 3,781 3,615 restructuring expenses — 8 2 309 deferred compensation adjustments(1) (140 ) 546 (995 ) 814 pension expense(2) 85 275 174 553 valuation allowance related to deferred tax assets 4,289 (727 ) 12,368 1,958 tax effect of adjustments to net income (680 ) (1,243 ) (1,185 ) (2,195 ) non-gaap net income $ 9,708 $ 8,137 $ 19,614 $ 14,465 weighted average shares outstanding – basic 49,123 48,449 49,110 48,393 weighted average shares outstanding – diluted 49,809 49,426 49,813 49,225 earnings per common share - basic $ 0.04 $ 0.10 $ 0.02 $ 0.12 earnings per common share - diluted $ 0.04 $ 0.10 $ 0.02 $ 0.12 non-gaap earnings per common share - basic $ 0.20 $ 0.17 $ 0.40 $ 0.30 non-gaap earnings per common share - diluted $ 0.19 $ 0.16 $ 0.39 $ 0.29 (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.
