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

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.

 

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