Preliminary results for the third quarter of 2022 deviate from forecasts and analyst consensus

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Adtran Holdings, Inc. / Keyword(s): Preliminary results
Adtran Holdings, Inc.: Preliminary Third Quarter 2022 Results Deviate from Analysts’ Forecasts and Consensus

24-Oct-2022 / 22:57 CET/CEST
Disclosure of privileged information according to. in Article 17 MAR of Regulation (EU) No 596/2014, transmitted by EQS News – a service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.

ADTRAN Holdings, Inc.: Preliminary Third Quarter 2022 Results Deviate from Analysts’ Forecasts and Consensus

Huntsville, Alabama (United States of America). October 24, 2022.

In preparation for ADTRAN Holdings, Inc.’s 2022 Nine Month Report (“ADTRAN Holdings” or the “Company”) (NASDAQ: ADT; FSE: QH9), preliminary financial results for the third quarter of 2022 show variances from compared to both the advisory range and the analyst consensus as follows:

  • Preliminary GAAP revenue is $340.7 million and 0.2% above the upper end of the guidance range of $320 million to $340 million and 3.1% above consensus analysts ($330.4 million).

  • Preliminary non-GAAP gross margin is 38.1%, near the upper end of the indicative range of 35.5% to 38.5% and 0.7 percentage points above analyst consensus (37.4%).

  • Preliminary non-GAAP operating expenses of $109.0 million and 0.9% above the upper end of the indicative range of $103-108 million and are 2.4% higher % at analyst consensus ($106.4 million).

Following the preliminary results above, preliminary non-GAAP operating profit for the third quarter of 2022 is expected to be $20.9 million and 21.5% above analyst consensus of 17, $2 million.

This information is based on preliminary, unaudited condensed consolidated figures only, and the gross profit and operating expense figures presented herein are non-GAAP financial measures. The final results for the three and nine-month periods ended September 30, 2022 will be published as planned on November 8, 2022 (CET).

GAAP gross margin and operating expenses include significant purchase-related accounting adjustments and certain one-time transaction expenses related to the business combination between the Company, ADTRAN, Inc. (“ADTRAN”) and ADVA Optical Networking SE (“ADVA”). Reconciliations between gross profit and operating expenses, in each case as reported based on United States generally accepted accounting principles (“GAAP”), with non-GAAP gross profit and operating expenses non-GAAP operations, are presented in the tables below.

Additional information

Reconciliation of preliminary gross profit and gross margin to preliminary non-GAAP gross profit and gross margin

(Unaudited)

(In thousands)

Quarter ended September 30, 2022

Total income

$

340 709

Revenue cost

$

242,741

Costs, amortizations and adjustments related to acquisitions (1)

(30,589)

Stock-based compensation expense (2)

(1,269)

Pension adjustments

(59)

Cost of Non-GAAP Revenues

$

210,824

Gross profit

$

97,968

Non-GAAP gross profit

$

129,885

Gross margin

28.8%

Non-GAAP Gross Margin

38.1%

(1) Includes intangible amortization of backlog and inventory fair value adjustments.
(2) Includes $1.0 million of additional stock-based award modification costs related to the business combination.

Reconciliation of preliminary operating expenses to preliminary non-GAAP operating expenses

(Unaudited)

(In thousands)

Quarter ended September 30, 2022

Functionnary costs

$

142 122

Costs, amortizations and adjustments related to the acquisition (1)

(22,826)

Stock-based compensation expense (2)

(10,862)

Pension adjustments

(185)

Deferred compensation adjustments (3)

740

Non-GAAP operating expenses

$

108,989

(1) Includes intangible amortization of technology developed, customer relationships and trade names acquired in business combinations, as well as certain one-time transaction expenses.
(2) Includes $7.9 million of one-time stock-based accrued expense adjustment related to the business combination.
(3) Includes the non-cash change in fair value of equity investments held in the ADTRAN Holdings, Inc. employee deferred compensation program, which is fully included in selling, general and administrative expenses in the condensed consolidated statements of earnings .

Reconciliation of preliminary operating loss to preliminary non-GAAP operating profit

(Unaudited)

(In thousands)

Quarter ended September 30, 2022

Operating loss

$

(61,123)

Costs, amortizations and adjustments related to the acquisition (1)

53,415

Asset impairments (2)

16,969

Stock-based compensation expense (3)

12,131

Pension adjustments

244

Deferred compensation adjustments (4)

(740)

Non-GAAP operating profit

$

20,896

(1) Includes intangible amortization of backlog, inventory fair value adjustments, technology developed, customer relationships and trade names acquired in business combinations, and certain one-time transaction expenses.
(2) Impairment charges related to the abandonment of certain information technology projects due to the business combination.

(3) Includes $8.9 million of additional expense to modify stock-based awards related to the business combination.

(4) Includes the non-cash change in fair value of equity investments held in the ADTRAN Holdings, Inc. employee deferred compensation program, which is fully included in selling, general and administrative expenses in the condensed consolidated statements of earnings .

Caution Regarding Forward-Looking Statements

This notice 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 global coronavirus SARS-CoV-2/COVID-19 pandemic (including SARS coronavirus variants -CoV-2), including with respect to continued manufacturing and supply chain constraints; (ii) risks and uncertainties relating to the consummation of the business combination between the Company, ADTRAN and ADVA, including risks relating to regulatory or other limitations imposed following the closing of the business combination on July 15; 2022 and the draft domination and profit and loss transfer agreement between the Company as controlling entity and ADVA as controlled entity; the ability to successfully integrate the ADTRAN and ADVA businesses; risks related to disruption of ongoing business operations management time due to integration efforts following the business combination; the risk that the business combination may have m the market price of ADTRAN Holdings common stock or ADVA common stock or the ability of the Company, ADTRAN and ADVA to retain customers, retain or hire key personnel, to maintain relationships with their respective suppliers and customers, and on their results of operations and business generally; the risk that ADTRAN Holdings may not be able to realize expected synergies or that the realization of such synergies will take longer or be more costly than expected; the risk of revenue fluctuations due to the 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 cyberattacks; the risks that ADTRAN, ADVA or ADTRAN Holdings may not be able to compete effectively, including through product improvements and developments; and (iii) other risks disclosed in ADVA’s publicly available annual and interim financial reports and in public filings by ADTRAN and ADTRAN Holdings with the Securities and Exchange Commission, including ADVA’s annual report. ‘ADTRAN on Form 10-K for the fiscal year ended December 31, 2021 and ADTRAN Holdings’ Form 10-Q for the quarterly period ended June 30, 2022. These risks and uncertainties could cause actual results to differ materially from those of the forward-looking statements included in this notification.

In addition, the financial measures presented herein are preliminary estimates and are subject to risks and uncertainties, including, but not limited to, changes related to quarter-end adjustments. Any differences between the Company’s actual results and the preliminary financial information presented herein may be material.

Explanation of the use of non-GAAP financial measures

This notification includes reconciliations between gross margin, operating expenses and operating loss, in each case as reported based on United States generally accepted accounting principles (GAAP), with non- GAAP, non-GAAP and non-GAAP operating expenses. GAAP operating profit. Non-GAAP gross margin and non-GAAP operating expenses exclude acquisition-related charges, amortization and adjustments (including intangible amortization of backlog, technology developed, customer relationships and trade names acquired in business combinations and amortization of inventory fair value adjustments), stock-based compensation expense, amortization of pension plan actuarial losses and related adjustments deferred compensation. Non-GAAP operating income excludes the above expenses, as well as certain asset impairments. We believe that the presentation of non-GAAP gross margin, non-GAAP operating expenses and non-GAAP operating income, when combined with the GAAP presentation of gross margin, operating expenses and operating loss, is beneficial for the overall understanding of ongoing operating operations. performance of the Company.

These non-GAAP financial measures are not prepared in accordance with, or an alternative to, GAAP and should therefore not be considered in isolation or as a substitute for analyzing our results as reported in accordance with GAAP. Additionally, our calculation of non-GAAP gross margin, non-GAAP operating expenses and non-GAAP operating income may not be comparable to similar measures calculated by other companies.

Published by:

ADTRAN Holdings, Inc.

www.adtran.com

Notifying person and contact for investors:

Rhonda Lambert

tel +1 256-963-7450

[email protected]

Oct 24, 2022 CET/CEST EQS distribution services include regulatory announcements, financial/corporate news and press releases.
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