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

HUNTSVILLE, Ala.–(BUSINESS WIRE)–ADTRAN, Inc., (NASDAQ:ADTN), today announced financial results for the first quarter of 2021. For the quarter, revenue was $127.5 million. Net income for the first quarter of 2021 was $0.9 million and earnings per share, assuming dilution, was $0.02 per share. Non-GAAP net income was $6.3 million and non-GAAP earnings per share, assuming dilution, was $0.13 per share. Non-GAAP net income and non-GAAP earnings per share exclude stock-based compensation expense, acquisition-related expenses and amortizations, restructuring expenses, amortization of pension actuarial losses, change in valuation allowance related to our deferred tax assets, non-cash deferred compensation, asset impairments and other one-time adjustments. 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, “Our business continues to be driven by strong demand for our fiber access platforms, in-home service delivery platforms and software platforms with regional service providers across the U.S. and Europe. These service providers increasingly turn to ADTRAN for end-to-end solutions that simplify the deployment of fiber-based broadband services while providing an enhanced subscriber experience. The increased demand for ADTRAN’s solutions was highlighted by record product order bookings in the quarter.”

The Company also announced that its Board of Directors declared a cash dividend for the first 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 May 20, 2021. The payment date will be June 3, 2021.

The Company confirmed that it will hold a conference call to discuss its first quarter results on Thursday, May 6, 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 10 minutes prior to the start of the call, click on the event “ADTRAN releases 1st 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 COVID-19 global pandemic, including the severity, geographic reach and duration of the pandemic and the speed of distribution 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 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; declines in revenues due to declining customer demand and deteriorating macroeconomic conditions; potential 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; (ii) those risks and uncertainties related to evolving U.S. and foreign laws and regulations regarding privacy, data protection and other matters, including uncertainty and potential additional compliance obligations arising from the Court of Justice of the European Union’s recent issuance of a decision that invalidated the EU-U.S. Privacy Shield framework as a basis for transfers of personal data from the EU to the U.S.; and (iii) the other risks detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. 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 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 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 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)

 

 

March 31,

 

 

December 31,

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

63,777

 

 

$

60,161

 

Restricted cash

 

119

 

 

 

18

 

Short-term investments

 

4,092

 

 

 

3,131

 

Accounts receivable, net

 

103,201

 

 

 

98,827

 

Other receivables

 

22,669

 

 

 

21,531

 

Inventory, net

 

122,862

 

 

 

125,457

 

Prepaid expenses and other current assets

 

7,625

 

 

 

8,293

 

Total Current Assets

 

324,345

 

 

 

317,418

 

Property, plant and equipment, net

 

60,157

 

 

 

62,399

 

Deferred tax assets, net

 

9,448

 

 

 

9,869

 

Goodwill

 

6,968

 

 

 

6,968

 

Intangibles, net

 

22,384

 

 

 

23,470

 

Other non-current assets

 

26,195

 

 

 

25,425

 

Long-term investments

 

81,266

 

 

 

80,130

 

Total Assets

$

530,763

 

 

$

525,679

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts payable

$

55,476

 

 

$

49,929

 

Unearned revenue

 

14,457

 

 

 

14,092

 

Accrued expenses and other liabilities

 

14,601

 

 

 

13,609

 

Accrued wages and benefits

 

15,856

 

 

 

15,262

 

Income tax payable, net

 

1,765

 

 

 

1,301

 

Total Current Liabilities

 

102,155

 

 

 

94,193

 

Non-current unearned revenue

 

7,040

 

 

 

6,888

 

Pension liability

 

17,579

 

 

 

18,664

 

Deferred compensation liability

 

26,658

 

 

 

25,866

 

Other non-current liabilities

 

6,956

 

 

 

7,124

 

Total Liabilities

 

160,388

 

 

 

152,735

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

370,375

 

 

 

372,944

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

$

530,763

 

 

$

525,679

 

 

Consolidated Statements of Income (Loss)

(Unaudited)

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2021

 

 

2020

 

 

Revenue

 

 

 

 

 

 

 

 

 

Network Solutions

 

$

113,809

 

 

$

97,372

 

 

Services & Support

 

 

13,724

 

 

 

17,151

 

 

Total Revenue

 

 

127,533

 

 

 

114,523

 

 

Cost of Revenue

 

 

 

 

 

 

 

 

 

Network Solutions

 

 

65,001

 

 

 

51,626

 

 

Services & Support

 

 

8,931

 

 

 

11,297

 

 

Total Cost of Revenue

 

 

73,932

 

 

 

62,923

 

 

Gross Profit

 

 

53,601

 

 

 

51,600

 

 

Selling, general and administrative expenses

 

 

27,435

 

 

 

26,620

 

 

Research and development expenses

 

 

27,501

 

 

 

29,859

 

 

Asset impairments

 

 

 

 

 

65

 

 

Operating Loss

 

 

(1,335

)

 

 

(4,944

)

 

Interest and dividend income

 

 

290

 

 

 

356

 

 

Interest expense

 

 

(6

)

 

 

(1

)

 

Net investment gain (loss)

 

 

996

 

 

 

(10,877

)

 

Other income, net

 

 

1,999

 

 

 

1,129

 

 

Income (Loss) Before Income Taxes

 

 

1,944

 

 

 

(14,337

)

 

Income tax (expense) benefit

 

 

(1,048

)

 

 

4,368

 

 

Net Income (Loss)

 

$

896

 

 

$

(9,969

)

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

48,336

 

 

 

47,957

 

 

Weighted average shares outstanding – diluted

 

 

49,004

 

(1)

 

47,957

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share – basic

 

$

0.02

 

 

$

(0.21

)

 

Earnings (loss) per common share – diluted

 

$

0.02

 

(1)

$

(0.21

)

 

 

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

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

896

 

 

$

(9,969

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,122

 

 

 

4,365

 

(Gain) loss on investments

 

 

(1,161

)

 

 

10,877

 

Stock-based compensation expense

 

 

1,807

 

 

 

1,791

 

Other

 

 

84

 

 

 

115

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(4,762

)

 

 

3,052

 

Other receivables

 

 

(1,220

)

 

 

(6,707

)

Inventory, net

 

 

1,893

 

 

 

(1,598

)

Prepaid expenses and other assets

 

 

(417

)

 

 

2,206

 

Accounts payable, net

 

 

5,629

 

 

 

2,712

 

Accrued expenses and other liabilities

 

 

3,317

 

 

 

(6,680

)

Income taxes payable

 

 

497

 

 

 

(188

)

Net cash provided by (used in) operating activities

 

 

10,685

 

 

 

(24

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(741

)

 

 

(1,406

)

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

 

 

10,087

 

 

 

46,440

 

Purchases of available-for-sale investments

 

 

(11,350

)

 

 

(16,879

)

Acquisition of note receivable

 

 

 

 

 

(523

)

Net cash provided by (used in) investing activities

 

 

(2,004

)

 

 

27,632

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Dividend payments

 

 

(4,361

)

 

 

(4,328

)

Proceeds from stock option exercises

 

 

1,244

 

 

 

 

Tax withholdings related to stock-based compensation settlements

 

 

(113

)

 

 

 

Repayment of bonds payable

 

 

 

 

 

(24,600

)

Net cash used in financing activities

 

 

(3,230

)

 

 

(28,928

)

 

 

 

 

 

 

 

 

 

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

 

 

5,451

 

 

 

(1,320

)

Effect of exchange rate changes

 

 

(1,734

)

 

 

(1,168

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

60,179

 

 

 

73,773

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, end of period

 

$

63,896

 

 

$

71,285

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

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

 

$

248

 

 

$

85

 

Non-cash Investing Activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment included in accounts payable

$

199

$

302

 

 

Supplemental Information

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

(Unaudited)

 

 

Three Months Ended

March 31,

 

 

 

 

2021

 

 

 

2020

 

 

 

Operating Loss

$

(1,335

)

 

 

$

(4,944

)

 

 

Acquisition related expenses, amortizations and adjustments

 

1,045

 

(1)

 

 

1,358

 

(5)

 

Stock-based compensation expense

 

1,807

 

(2)

 

 

1,791

 

(6)

 

Restructuring expenses

 

301

 

(3)

 

 

553

 

(7)

 

Deferred compensation adjustments

 

556

 

(4)

 

 

(3,460

)

(4)

 

Asset impairments

 

 

 

 

 

65

 

(8)

 

Non-GAAP Operating Income (Loss)

$

2,374

 

 

 

$

(4,637

)

 

 

 

(1) $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).

(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) $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).

(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 statements of income (loss).

(5) $0.3 million is included in total cost of revenue, $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).

(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 income (loss).

(7) $0.1 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).

(8) 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

March 31,

 

 

 

 

 

2021

 

 

2020

 

 

 

Net Income (Loss)

 

$

896

 

 

$

(9,969

)

 

 

Acquisition related expenses, amortizations and adjustments

 

 

1,045

 

 

 

1,358

 

 

 

Stock-based compensation expense

 

 

1,807

 

 

 

1,791

 

 

 

Restructuring expenses

 

 

301

 

 

 

553

 

 

 

Deferred compensation adjustments(1)

 

 

268

 

 

 

(1,787

)

(3)

 

Pension expense(2)

 

 

278

 

 

 

237

 

 

 

Valuation allowance

 

 

2,685

 

 

 

6,090

 

 

 

Asset impairments

 

 

 

 

 

65

 

 

 

Tax effect of adjustments to net income (loss)

 

 

(952

)

 

 

(578

)

 

 

Non-GAAP Net Income (Loss)

 

$

6,328

 

 

$

(2,240

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

48,336

 

 

 

47,957

 

 

 

Weighted average shares outstanding – diluted

 

 

49,004

 

 

 

47,957

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share – basic

 

$

0.02

 

 

$

(0.21

)

 

 

Earnings (loss) per common share – diluted

 

$

0.02

 

 

$

(0.21

)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.13

 

 

$

(0.05

)

 

 

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

 

$

0.13

 

 

$

(0.05

)

 

 

 

(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.relations@adtran.com