Business Wire | Aug 4, 2021 08:05PM EDT

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

Aug. 05, 2021

HUNTSVILLE, Ala.--(BUSINESS WIRE)--Aug. 05, 2021--ADTRAN, Inc., (NASDAQ:ADTN) ("ADTRAN" or the "Company"), today announced financial results for the second quarter of 2021. For the quarter, revenue was $143.2 million. Net income for the second quarter of 2021 was $5.1 million and earnings per share, assuming dilution, was $0.10 per share. Non-GAAP net income was $8.1 million and non-GAAP earnings per share, assuming dilution, was $0.16 per share. Non-GAAP net income and non-GAAP earnings per share exclude acquisition-related expenses, amortizations and adjustments, stock-based compensation expense, restructuring expenses, amortization of pension actuarial losses, non-cash deferred compensation, change in valuation allowance related to our deferred tax assets, asset impairments and the tax effect of these adjustments to net income. 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, "Strong demand for fiber access continued to drive multiple segments of our business including infrastructure, in-home premises equipment and our SaaS platforms. Tier 3 regional operators, both in the U.S and Europe, showed exceptional strength with growth over 50% on a year-over-year basis. Demand continues to be strong and we believe we are in the early phases of this growth cycle."

The Company also announced that its Board of Directors declared a cash dividend for the second 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 August 19, 2021. The payment date will be September 2, 2021.

The Company confirmed that it will hold a conference call to discuss its second quarter results on Thursday, August 5, 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 to Release 2nd 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 March 31, 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)

June 30, December 31,

2021 2020

Assets

Current Assets

Cash and cash equivalents $ 69,927 $ 60,161

Restricted cash 54 18

Short-term investments 2,818 3,131

Accounts receivable, net 122,669 98,827

Other receivables 20,187 21,531

Inventory, net 119,012 125,457

Prepaid expenses and other current assets 9,830 8,293

Total Current Assets 344,497 317,418

Property, plant and equipment, net 58,270 62,399

Deferred tax assets, net 9,165 9,869

Goodwill 6,968 6,968

Intangibles, net 21,354 23,470

Other assets 28,394 25,425

Long-term investments 82,778 80,130

Total Assets $ 551,426 $ 525,679



Liabilities and Stockholders' Equity

Accounts payable $ 66,499 $ 49,929

Unearned revenue 15,889 14,092

Accrued expenses and other liabilities 15,655 13,609

Accrued wages and benefits 15,681 15,262

Income tax payable, net 2,345 1,301

Total Current Liabilities 116,069 94,193

Non-current unearned revenue 7,030 6,888

Pension liability 17,566 18,664

Deferred compensation liability 28,769 25,866

Other non-current liabilities 6,477 7,124

Total Liabilities 175,911 152,735

Stockholders' Equity 375,515 372,944

Total Liabilities and Stockholders' Equity $ 551,426 $ 525,679

Condensed Consolidated Statements of Income (Loss)

(Unaudited)

(In thousands, except per share data)

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Revenue

Network $ 125,449 $ 111,323 $ 239,258 $ 208,695 Solutions

Services & 17,783 17,392 31,507 34,543 Support

Total Revenue 143,232 128,715 270,765 243,238

Cost of Revenue

Network 70,014 64,071 135,015 115,697 Solutions

Services & 10,550 11,172 19,481 22,469 Support

Total Cost of 80,564 75,243 154,496 138,166 Revenue

Gross Profit 62,668 53,472 116,269 105,072

Selling,general and 30,866 30,799 58,301 57,419 administrativeexpenses

Research anddevelopment 27,871 28,712 55,372 58,571 expenses

Asset - - - 65 impairments

Operating 3,931 (6,039 ) 2,596 (10,983 ) Income (Loss)

Interest anddividend 253 331 543 687 income

Interest (6 ) - (12 ) (1 ) expense

Net investment 2,009 9,852 3,005 (1,025 ) gain (loss)

Other income 26 (1,757 ) 2,025 (628 ) (expense), net

Income (Loss)Before Income 6,213 2,387 8,157 (11,950 ) Taxes

Income tax(expense) (1,127 ) (1,635 ) (2,175 ) 2,733 benefit

Net Income $ 5,086 $ 752 $ 5,982 $ (9,217 ) (Loss)



Weightedaverage shares 48,449 47,958 48,393 47,957 outstanding -basic

Weightedaverage shares 49,426 ^ 48,254 ^ 49,225 ^ 47,957 outstanding - (1) (1) (1)diluted



Earnings(loss) per $ 0.10 $ 0.02 $ 0.12 $ (0.19 ) common share -basic

Earnings(loss) per $ 0.10 ^ $ 0.02 ^ $ 0.12 ^ $ (0.19 ) common share - (1) (1) (1)diluted

^(1) Assumes exercise of dilutive stock awards calculated under the treasurystock method.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Six Months Ended

June 30,

2021 2020

Cash flows from operating activities:

Net income (loss) $ 5,982 $ (9,217 )

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

Depreciation and amortization 8,232 8,404

(Gain) loss on investments (3,255 ) 1,025

Stock-based compensation expense 3,615 3,446

Deferred income taxes 441 (5 )

Other 53 138

Asset impairments - 65

Changes in operating assets and liabilities:

Accounts receivable, net (24,322 ) (4,727 )

Other receivables 1,412 (9,468 )

Inventory, net 5,940 (7,878 )

Prepaid expenses, other current assets and other (4,767 ) 1,444 assets

Accounts payable 16,814 17,389

Accrued expenses and other liabilities 6,999 2,097

Income taxes payable, net 1,069 (1,032 )

Net cash provided by operating activities 18,213 1,681



Cash flows from investing activities:

Purchases of property, plant and equipment (2,210 ) (3,148 )

Proceeds from sales and maturities of 20,597 63,318 available-for-sale investments

Purchases of available-for-sale investments (20,121 ) (31,897 )

Acquisition of note receivable - (523 )

Net cash provided by (used in) investing activities (1,734 ) 27,750



Cash flows from financing activities:

Proceeds from stock option exercises 3,552 -

Tax withholdings related to stock-based (113 ) - compensation settlements

Dividend payments (8,735 ) (8,665 )

Repayment of bonds payable - (24,600 )

Net cash used in financing activities (5,296 ) (33,265 )



Net increase (decrease) in cash, cash equivalents 11,183 (3,834 )and restricted cash

Effect of exchange rate changes (1,381 ) 306

Cash, cash equivalents and restricted cash, 60,179 73,773 beginning of period

Cash, cash equivalents and restricted cash, end of $ 69,981 $ 70,245 period



Supplemental disclosure of non-cash investing activities:

Right-of-use assets obtained in exchange for lease $ 275 $ 93 obligations

Purchases of property, plant and equipment included $ 144 $ 198 in accounts payable



Supplemental Information

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

(Unaudited)

Three Months Ended Six Months ended June 30, June 30,

2021 2020 2021 2020

Operating Income $ 3,931 $ (6,039 ) $ 2,596 $ (10,983 ) (Loss)

Acquisition-relatedexpenses, 2,384 ^ 1,100 ^ 3,429 ^(8) 2,457 ^ amortizations and (1) (5) (11)adjustments

Stock-based ^ ^ ^compensation 1,808 (2) 1,655 (6) 3,615 ^(9) 3,446 (12) expense

Restructuring 8 ^ 1,192 ^ 309 ^ 1,745 ^ expenses (3) (7) (10) (13)

Deferred ^ ^compensation 1,994 (4) 3,433 (4) 2,550 ^(4) (26) ^(4) adjustments

Asset impairments - - - 65 ^ (14)

Non-GAAP Operating $ 10,125 $ 1,341 $ 12,499 $ (3,296) Income (Loss)

^(1) $1.9 million is included in selling, general and administrative expensesand $0.5 million is included in research and development expenses on thecondensed consolidated statements of income (loss).

^(2) $0.1 million is included in total cost of revenue, $1.1 million isincluded in selling, general and administrative expenses and $0.6 million isincluded in research and development expenses on the condensed consolidatedstatements of income (loss).

^(3) Less than $0.1 million is included in each of selling, general andadministrative expenses and research and development expenses on the condensedconsolidated statements of income (loss).

^(4) Includes non-cash change in fair value of equity investments held in theADTRAN, Inc. Deferred Compensation Program for Employees, all of which isincluded in selling, general and administrative expenses on the condensedconsolidated statement of income (loss).

^(5) $0.6 million is included in selling, general and administrative expensesand $0.5 million is included in research and development expenses on thecondensed consolidated statements of income (loss).

^(6) $0.1 million is included in total cost of revenue, $1.0 million isincluded in selling, general and administrative expenses and $0.6 million isincluded in research and development expenses on the condensed consolidatedstatements of income (loss).

^(7) $0.5 million is included in selling, general and administrative expensesand $0.7 million is included in research and development expenses on thecondensed consolidated statements of income (loss).

^(8) $2.4 million is included in selling, general and administrative expensesand $1.0 million is included in research and development expenses on thecondensed consolidated statements of income (loss).

^(9) $0.2 million is included in total cost of revenue, $2.2 million isincluded in selling, general and administrative expenses and $1.2 million isincluded in research and development expenses on the condensed consolidatedstatements of income (loss).

^(10) $0.1 million is included in selling, general and administrative expensesand $0.2 million is included in research and development expenses on thecondensed consolidated statements of income (loss).

^(11) $0.3 million is included in total cost of revenue, $1.2 million isincluded in selling, general and administrative expenses and $1.0 million isincluded in research and development expenses on the consolidated statements ofincome (loss).

^(12) $0.2 million is included in total cost of revenue, $2.0 million isincluded in selling, general and administrative expenses and $1.2 million isincluded in research and development expenses on the consolidated statements ofincome (loss).

^(13) $0.1 million is included in total cost of revenue, $0.5 million isincluded in selling, general and administrative expenses and $1.1 million isincluded in research and development expenses on the consolidated statements ofincome (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 Six Months ended June 30, June 30,

2021 2020 2021 2020

Net Income (Loss) $ 5,086 $ 752 $ 5,982 $ (9,217 )

Acquisition-relatedexpenses, 2,384 1,100 3,429 2,457 amortizations andadjustments

Stock-basedcompensation 1,808 1,655 3,615 3,446 expense

Restructuring 8 1,192 309 1,745 expenses

Pension expense^(1) 275 235 553 472

Deferred ^compensation 546 445 814 (1,342) (3) adjustments^(2)

Valuation allowancerelated to deferred (727 ) (2,512 ) 1,958 3,578 tax assets

Asset impairments - - - 65

Tax effect ofadjustments to net (1,243 ) (1,233 ) (2,195 ) (1,810) income (loss)

Non-GAAP Net Income $ 8,137 $ 1,634 $ 14,465 $ (606) (Loss)



Weighted averageshares outstanding 48,449 47,958 48,393 47,957 - basic

Weighted averageshares outstanding 49,426 48,254 49,225 47,957 - diluted



Earnings (loss) percommon share - $ 0.10 $ 0.02 $ 0.12 $ (0.19 ) basic

Earnings (loss) percommon share - $ 0.10 $ 0.02 $ 0.12 $ (0.19 ) diluted



Non-GAAP earnings(loss) per common $ 0.17 $ 0.04 $ 0.30 $ (0.01 ) share - basic

Non-GAAP earnings(loss) per common $ 0.16 $ 0.04 $ 0.29 $ (0.01 ) share - diluted

^(1) Includes amortization of actuarial losses related to the Company's pensionplan for employees in certain foreign countries.^

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

^(3) Includes a net investment gain of $1.5 million related to the out ofperiod remeasurement to historical cost basis of certain long-term investmentsheld in the Company's stock as part of one of the Company's deferredcompensation plans.

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