UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
Amendment No. 2
(Mark One)
For the quarterly period ended
OR
For the transition period from _______ to _______
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 8, 2023, the registrant had
EXPLANATORY NOTE
As previously disclosed in the Company's Current Report on Form 8-K filed with the SEC on February 20, 2024, the Audit Committee of the Board of Directors of the Company (the “Audit Committee”) concluded, after considering the recommendations of management, that the results attributable to the non-controlling interest and the net loss attributable to the Company and, as a consequence, the loss per common share attributable to the Company, were materially misstated in (i) the Company’s unaudited condensed consolidated financial statements as of and for the quarter ended March 31, 2023 included in Amendment No. 1, (ii) the Company’s unaudited condensed consolidated financial statements as of and for the quarter and six months period ended June 30, 2023 included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023 and (iii) the Company’s unaudited condensed consolidated financial statements as of and for the quarter and nine months period ended September 30, 2023 included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023, respectively (collectively, the “Non-Reliance Periods”), and that such financial statements should no longer be relied upon.
The misstatements occurred following the effectiveness of the Domination Profit and Loss Transfer Agreement ("DPLTA") between the Company and the Company's majority-owned subsidiary, Adtran Networks SE (formerly ADVA Optical Networking SE and referred to herein as “ADVA”) upon the registration of the DPLTA with the commercial register on January 16, 2023. Pursuant to the DPLTA, the minority shareholders of Adtran Networks are guaranteed recurring cash compensation commencing with respect to the 2023 fiscal year. The Company incorrectly presented the guaranteed cash compensation attributable to the non-controlling interest as a loss rather than income attributable to the non-controlling interest during the Non-Reliance Periods.
This error resulted in an overstatement of net loss attributable to the non-controlling interest and an understatement of net loss attributable to the Company and loss per common share attributable to ADTRAN Holdings, Inc. - basic and diluted.
Additionally, the Company identified an error in the allocation of comprehensive income (loss) attributable to non-controlling interest. This error resulted in an understatement of comprehensive loss attributable to non-controlling interest and an overstatement of comprehensive loss attributable to the Company. This error also resulted in an understatement of additional paid-in capital and overstatement of accumulated other comprehensive income.
In connection with the Q1 2023 restatement and the filing of this Amendment No. 2, the Company has also revised its condensed consolidated balance sheet and condensed consolidated statement of changes in equity as of December 31, 2022 to correct for an error that the Company determined was not material to the Company’s Q3, Q4 and full year 2022 consolidated financial statements as further described in Note 1 “Basis of Presentation”.
Refer to Note 1, “Basis of Presentation”, of Notes to Condensed Consolidated Financial Statements of this Form 10-Q/A for additional information and for the summary of the accounting impacts of the restatement and revision adjustments to the Company’s condensed consolidated financial statements.
As a result of the above described errors and the identification of the material weaknesses (as described in Item 4 of this Amendment No. 2), the Company is filing this Amendment No. 2 to (i) restate the disclosure on the effectiveness of the Company’s disclosure controls in Part I, Item 4 of Amendment No.1 to reflect the material weaknesses in the Company's internal control over financial reporting that existed as of March 31, 2023, (ii) restate the Company’s Condensed Consolidated Balance Sheets and the Condensed Consolidated Statement of Changes in Equity to reflect adjustments to additional paid-in capital and accumulated other comprehensive income (iii) restate the Company’s Condensed Consolidated Statements of Loss to reflect adjustments to net loss attributable to non-controlling interest, net loss attributable to the Company, and loss per common share attributable to the Company – basic and diluted, (iv) restate the Company’s Condensed Consolidated Statements of Comprehensive Loss to reflect adjustments to comprehensive income attributable to non-controlling interest and comprehensive loss attributable to the Company (v) restate two risk factors related to the Company's material weaknesses and restatements, (vi) restate the disclosure in Part I, Item 2, MD&A of Amendment No. 1 to reflect the adjustments discussed above and (vii) amend Part II – Item 6 (Exhibits) of Amendment No. 1 to include currently dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer as required by Section 302 and 906 of the Sarbanes-Oxley Act of 2002.
2
Pursuant to Rule 12b-15 promulgated by the SEC under the Securities Exchange Act of 1934, as amended, the Company has included the entire text of Part I, Items 1, 2 and 4, as well as Part II, Items 1A and 6, of the Original Filing, as previously amended by Amendment No. 1, in this Amendment No. 2. There have been no changes to the text of Part I, Items 1, 2 and 4, or Part II, Items 1A and 6, other than the changes stated in the immediately preceding paragraph. Other than as described above and through the inclusion with this Amendment No. 2 of new certifications by management, this Amendment No. 2 speaks only as of the date of the Original Filing and does not amend, supplement, or update any information contained in the Original Filing, as amended by Amendment No. 1, to give effect to any subsequent events (including with respect to the cover page of the Original Filing, which has been updated only to present this filing as Amendment No. 2). Accordingly, this Amendment No. 2 should be read in conjunction with the Original Filing, Amendment No. 1, and our reports (including any amendments thereto) filed with the SEC subsequent to Amendment No. 1.
3
ADTRAN Holdings, Inc.
Quarterly Report on Form 10-Q/A
For the three months ended March 31, 2023
Table of Contents
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Page Number |
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5 |
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1 |
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Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 – (Unaudited) |
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8 |
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9 |
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10 |
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11 |
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13 |
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Notes to Condensed Consolidated Financial Statements – (Unaudited) |
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14 |
2 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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41 |
4 |
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53 |
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PART II. OTHER INFORMATION |
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1A |
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55 |
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6 |
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58 |
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59 |
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4
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of ADTRAN. ADTRAN and its representatives may from time to time make written or oral forward-looking statements, including statements contained in this report, our other filings with the Securities and Exchange Commission (the “SEC”) and other communications with our stockholders. Any statement that does not directly relate to a historical or current fact is a forward-looking statement. Generally, the words “believe”, “expect”, “intend”, “estimate”, “anticipate”, “would”, “will”, “may”, “might”, “could”, “should”, “can”, “future”, “assume”, “plan”, “seek”, “predict”, “potential”, “objective”, “expect”, “target”, “project”, “outlook”, “forecast” and similar expressions identify forward-looking statements. We caution you that any forward-looking statements made by us or on our behalf are subject to uncertainties and other factors that could affect the accuracy of such statements. Forward-looking statements are based on management’s current expectations, as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, and because they also relate to the future, they are likewise subject to inherent uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and projections expressed in such statements. The following are some of the risks that could affect our financial performance or could cause actual results to differ materially from those expressed or implied in our forward-looking statements:
Risks related to the Business Combination and DPLTA
Risks related to our financial results and Company success
5
Risks related to COVID-19
Risks related to our control environment
Risks related to the telecommunications industry
6
Risks related to the Company's stock price
Risks related to the regulatory environments in which we do business
The foregoing list of risks is not exclusive. For a more detailed description of the risk factors associated with our business, see Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023 (the “2022 Form 10-K”), as well as the risk factors set forth in Part II, Item 1A of this Amendment No. 2. We caution investors that other factors may prove to be important in the future in affecting our operating results. New factors emerge from time to time, and it is not possible for us to predict all of these factors, nor can we assess the impact each factor, or a combination of factors, may have on our business.
You are further cautioned not to place undue reliance on these forward-looking statements because they speak only of our views as of the date that the statements were made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
7
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ADTRAN Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
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March 31, |
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December 31, |
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2023 |
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2022 |
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(As Restated) |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments (includes $ |
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Accounts receivable, less allowance for credit losses of $ |
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Other receivables |
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Inventory, net |
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Prepaid expenses and other current assets |
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Total Current Assets |
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Property, plant and equipment, net |
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Deferred tax assets |
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Goodwill |
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Intangibles, net |
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Other non-current assets |
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Long-term investments (includes $ |
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Total Assets |
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$ |
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$ |
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LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY |
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Current Liabilities |
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Accounts payable |
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$ |
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$ |
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Revolving credit agreements outstanding |
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Notes payable |
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— |
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Unearned revenue |
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Accrued expenses and other liabilities |
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Accrued wages and benefits |
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Income tax payable, net |
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Total Current Liabilities |
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Non-current revolving credit agreement outstanding |
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Deferred tax liabilities |
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Non-current unearned revenue |
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Pension liability |
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Deferred compensation liability |
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Non-current lease obligations |
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Other non-current liabilities |
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Total Liabilities |
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Redeemable Non-Controlling Interest |
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— |
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Equity |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Retained earnings |
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Treasury stock at cost: |
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( |
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( |
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Non-controlling interest |
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— |
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Total Equity |
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Total Liabilities, Redeemable Non-Controlling Interest and Equity |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
8
ADTRAN Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Unaudited)
(In thousands, except per share amounts)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Revenue |
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Network Solutions |
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$ |
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$ |
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Services & Support |
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Total Revenue |
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Cost of Revenue |
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Network Solutions |
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Services & Support |
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Total Cost of Revenue |
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Gross Profit |
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Selling, general and administrative expenses |
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Research and development expenses |
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Operating Loss |
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( |
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( |
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Interest and dividend income |
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Interest expense |
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( |
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( |
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Net investment gain (loss) |
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( |
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Other expense, net |
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( |
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( |
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Loss Before Income Taxes |
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( |
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( |
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Income tax benefit |
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Net Loss |
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$ |
( |
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$ |
( |
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Net Loss attributable to non-controlling interest(1) |
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( |
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— |
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Net Loss attributable to ADTRAN Holdings, Inc. |
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$ |
( |
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$ |
( |
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Weighted average shares outstanding – basic |
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Weighted average shares outstanding – diluted |
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Loss per common share attributable to ADTRAN Holdings, Inc. – basic |
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$ |
( |
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$ |
( |
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Loss per common share attributable to ADTRAN Holdings, Inc. – diluted |
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$ |
( |
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$ |
( |
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(1)
See accompanying notes to condensed consolidated financial statements.
9
ADTRAN Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(In thousands)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Net Loss |
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$ |
( |
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$ |
( |
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Other Comprehensive Income (Loss), net of tax |
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Net unrealized gain (loss) on available-for-sale securities |
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( |
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Defined benefit plan adjustments |
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( |
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Foreign currency translation gain (loss) |
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( |
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Other Comprehensive Income (Loss), net of tax |
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( |
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Comprehensive Loss, net of tax |
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( |
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Less: Comprehensive Income attributable to non-controlling interest |
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— |
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Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax |
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$ |
( |
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$ |
( |
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See accompanying notes to condensed consolidated financial statements.
10
ADTRAN Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(In thousands, except per share amounts)
(As Restated)
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Common |
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Common |
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Additional |
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Retained |
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Treasury |
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Accumulated Other Comprehensive Income |
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Non-controlling interest |
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Total |
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Balance as of December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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( |
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Annual recurring compensation earned |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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Reclassification and remeasurement from equity to mezzanine equity for non-controlling interests in ADVA |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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( |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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— |
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Dividend payments to ADTRAN Holdings, Inc. shareholders ($ |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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Deferred compensation adjustments, net of tax |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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ADTRAN RSUs and restricted stock vested |
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— |
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( |
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— |
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— |
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— |
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( |
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ADTRAN stock options exercised |
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— |
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— |
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— |
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— |
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— |
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ADTRAN stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Redemption of redeemable non-controlling interest |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign currency remeasurement of redeemable non-controlling interest |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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ADVA stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance as of March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
— |
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$ |
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See accompanying notes to condensed consolidated financial statements.
11
ADTRAN Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(In thousands, except per share amounts)
|
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Common |
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Common |
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Additional |
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Retained |
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Treasury |
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Accumulated Other Comprehensive Loss |
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Non-controlling interest |
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Total |
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Balance as of December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
- |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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Other comprehensive loss, net of tax |
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— |
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— |
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— |
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— |
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|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Dividend payments ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Dividends accrued on unvested RSUs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Deferred compensation adjustments, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
PSUs, RSUs and restricted stock vested |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Stock options exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance as of March 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
See accompanying notes to condensed consolidated financial statements.
12
ADTRAN Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
|
|
|||||
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Amortization of debt issuance cost |
|
|
|
|
|
— |
|
|
(Gain) loss on investments, net |
|
|
( |
) |
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
( |
) |
|
|
— |
|
Other, net |
|
|
( |
) |
|
|
( |
) |
Inventory reserves |
|
|
|
|
|
( |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Other receivables |
|
|
|
|
|
( |
) |
|
Inventory |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses, other current assets and other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
( |
) |
|
|
|
|
Accrued expenses and other liabilities |
|
|
|
|
|
|
||
Income taxes payable, net |
|
|
|
|
|
( |
) |
|
Net cash (used in) provided by operating activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales and maturities of available-for-sale investments |
|
|
|
|
|
|
||
Purchases of available-for-sale investments |
|
|
( |
) |
|
|
( |
) |
Proceeds from beneficial interests in securitized accounts receivable |
|
|
|
|
|
— |
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
||
Tax withholdings related to stock-based compensation settlements |
|
|
( |
) |
|
|
( |
) |
Proceeds from stock option exercises |
|
|
|
|
|
|
||
Dividend payments |
|
|
( |
) |
|
|
( |
) |
Proceeds from draw on revolving credit agreements |
|
|
|
|
|
|
||
Repayment of revolving credit agreements |
|
|
( |
) |
|
|
( |
) |
Non-controlling interest put option buyback |
|
|
( |
) |
|
|
— |
|
Repayment of notes payable |
|
|
( |
) |
|
|
— |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
|
|
|
( |
) |
|
Effect of exchange rate changes |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of cash financing activities: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash used in operating activities related to operating leases |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash investing activities: |
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for lease obligations |
|
$ |
|
|
$ |
|
||
Purchases of property, plant and equipment included in accounts payable |
|
$ |
|
|
$ |
|
See accompanying notes to condensed consolidated financial statements.
13
ADTRAN Holdings, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
GENERAL
ADTRAN Holdings, Inc. (“ADTRAN” or the “Company”) is a leading global provider of networking and communications platforms, software, systems and services focused on the broadband access market, serving a diverse domestic and international customer base in multiple countries that includes Tier-1, -2 and -3 Service Providers, alternative Service Providers, such as utilities, municipalities and fiber overbuilders, cable/MSOs, SMBs and distributed enterprises. Our innovative solutions and services enable voice, data, video and internet-communications across a variety of network infrastructures and are currently in use by millions worldwide. We support our customers through our direct global sales organization and our distribution networks. Our success depends upon our ability to increase unit volume and market share through the introduction of new products and succeeding generations of products having optimal selling prices and increased functionality as compared to both the prior generation of a product and to the products of competitors in order to gain market share. To service our customers and grow revenue, we are continually conducting research and developing new products addressing customer needs and testing those products for the specific requirements of the particular customers. We offer a broad portfolio of flexible software and hardware network solutions and services that enable Service Providers to meet today’s service demands, while enabling them to transition to the fully converged, scalable, highly-automated, cloud-controlled voice, data, internet and video network of the future. In addition to our global headquarters in Huntsville, Alabama, and our European headquarters in Munich, Germany, we have sales and research and development facilities in strategic global locations.
In 2022, following the business combination (the “Business Combination”) with ADVA Optical Networking SE (“ADVA”), which included the Merger, we became the sole owner of and successor to ADTRAN, Inc. and the majority shareholder of ADVA. ADTRAN, Inc. is a leading global provider of open, disaggregated networking and communications solutions that enable voice, data, video, and internet communications across any network infrastructure. Its award-winning end-to-end fiber broadband solutions portfolio spans from OLTs to in-home services and intelligent SaaS solutions. ADVA is a global provider of open networking solutions with over 25 years of experience in optical networking, carrier Ethernet access and network synchronization. ADVA has led the industry for over two decades with open and secure networking solutions that carefully balance space, power and cost. Together, we serve customers in a broad range of industries in over
Effectiveness of the Domination and Profit and Loss Transfer Agreement
The DPLTA between the Company, as the controlling company, and ADVA Optical Networking SE, as the controlled company as executed on December 1, 2022, became effective on January 16, 2023, as a result of its registration with the commercial register (Handelsregister) of the local court (Amtsgericht) at the registered seat of ADVA (Jena).
Under the DPLTA, subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, (i) the Company is entitled to issue binding instructions to the management board of ADVA, (ii) ADVA will transfer its annual profit to the Company, subject to, among other things, the creation or dissolution of certain reserves, and (iii) the Company will generally absorb the annual net loss incurred by ADVA. The obligation of ADVA to transfer its annual profit to the Company applies for the first time to the profit generated subsequent to January 16, 2023.
Subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, the DPLTA provides that ADVA preferred shareholders be offered, at their election, (i) to put their ADVA shares to the Company in exchange for a compensation in cash of EUR
The adequacy of both forms of compensation have been challenged by the preferred shareholders of ADVA via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (in each case, including interest thereon) than agreed upon in the DPLTA.
The opportunity for the ADVA preferred shareholders to tender ADVA preferred shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger).
14
Board Approval Purchase of ADVA Common Stock
On October 18, 2022, the Company's Board of Directors authorized the Company to purchase additional shares of ADVA through open market purchases not to exceed
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of ADTRAN Holdings, Inc. and its subsidiaries have been prepared pursuant to the rules and regulations of the SEC applicable to interim financial information presented in Quarterly Reports on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements are not included herein. The December 31, 2022 Condensed Consolidated Balance Sheet is derived from audited financial statements but does not include all disclosures required by U.S. GAAP.
In the opinion of management, all adjustments necessary to fairly state these interim statements have been recorded and are of a normal and recurring nature. The results of operations for an interim period are not necessarily indicative of the results for the full year. The interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in ADTRAN Holdings, Inc. Annual Report on Form 10-K/A for the year ended December 31, 2022, filed with the SEC on August 14, 2023.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Significant estimates include allowance for credit losses on accounts receivable and contract assets, excess and obsolete inventory reserves, warranty reserves, customer rebates, determination and accrual of the deferred revenue related to performance obligations under contracts with customers, estimated costs to complete obligations associated with deferred and accrued revenues and network installations, estimated income tax provision and income tax contingencies, fair value of stock-based compensation, assessment of goodwill and other intangibles for impairment, estimated lives of intangible assets, estimates of intangible assets upon measurement, estimated pension liability and fair value of investments. Actual amounts could differ significantly from these estimates.
Revision of Previously Issued Financial Statements
During the fourth quarter of 2023, management identified an immaterial error relating to the understatement of non-controlling interest and the overstatement of accumulated other comprehensive income in the Consolidated Balance Sheet as of December 31, 2022. The immaterial misstatements occurred following the Business Combination between the Company and the Company's majority-owned subsidiary, Adtran Networks on July 15, 2022. The Company incorrectly presented the allocation of foreign currency translation loss attributable to the non-controlling interest during the year ended December 31, 2022. Management evaluated the impact of this error on the Company's full year 2022 consolidated financial statements and determined that the consolidated financial statements were not materially misstated. However, in order to correctly state non-controlling interest and accumulated other comprehensive income in connection with the filing of this Amendment No. 2, the December 31, 2022 balance sheet items have been corrected to reflect the impact of this immaterial error. The Company will revise its consolidated financial statements as of and for the year ended December 31, 2022 when it files its Form 10-K for the period ended December 31, 2023.
The following table reflects the impact of the revision to the specific line items presented in the Company's previously reported Condensed Consolidated Balance Sheets and the Condensed Consolidated Statement of Changes in Equity as of December 31, 2022:
|
|
December 31, 2022 |
|
|||||||||
(In thousands) |
|
As Reported |
|
|
Adjustment |
|
|
As Revised |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Accumulated Other Comprehensive Income |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Non-Controlling Interest |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Total Equity |
|
$ |
|
|
$ |
— |
|
|
$ |
|
The accompanying applicable Notes have been updated to reflect the effects of the revision.
15
Restatement of Previously Issued Financial Statements
During the fourth quarter of 2023, the Company determined that it overstated loss attributable to the non-controlling interest, understated loss attributable to the Company, understated loss per common share attributable to ADTRAN Holdings, Inc. – basic and diluted, understated comprehensive loss attributable to non-controlling interest and overstated comprehensive loss attributable to ADTRAN Holdings, Inc., net of tax for the three months ended March 31, 2023. The misstatements occurred following the effectiveness of the DPLTA between the Company and the Company’s majority-owned subsidiary, Adtran Networks upon the registration of the DPLTA with the commercial register on January 16, 2023. Pursuant to the DPLTA, the minority shareholders of Adtran Networks are guaranteed recurring cash compensation commencing with respect to the 2023 fiscal year. The Company incorrectly presented the guaranteed cash compensation attributable to the non-controlling interest as a loss rather than income attributable to the non-controlling interest during the three months ended March 31, 2023. This error resulted in an overstatement of net loss attributable to the non-controlling interest, an understatement of net loss attributable to the Company and loss per common share attributable to ADTRAN Holdings, Inc. - basic and diluted, an understated comprehensive loss attributable to non-controlling interest and an overstated comprehensive loss attributable to ADTRAN Holdings, Inc., net of tax. Additionally, this error resulted in an understatement of additional paid-in capital and an overstatement of accumulated other comprehensive income. The Company restated the Condensed Consolidated Statements of Loss presented in this report by increasing net loss attributable to the Company by $
The following table reflects the impact of the restatement to the specific line items presented in the Company’s previously reported Condensed Consolidated Statements of Loss and the previously reported Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023:
|
|
For the Three Months Ended March 31, 2023 |
|
|||||||||
(In thousands) |
|
As Reported |
|
|
Adjustment |
|
|
As Restated |
|
|||
Net Loss attributable to non-controlling interest |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Net Loss attributable to ADTRAN Holdings, Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Loss per common share attributable to ADTRAN Holdings, Inc. – basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Loss per common share attributable to ADTRAN Holdings, Inc. – diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Comprehensive Loss attributable to non-controlling interest |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
The following table reflects the impact of the restatement, in addition to the revision of the December 31, 2022 balances referenced above, to the specific line items presented in the Company’s previously reported Condensed Consolidated Balance Sheets as of March 31, 2023 and the Condensed Consolidated Statement of Changes in Equity for the period ended March 31, 2023:
|
|
March 31, 2023 |
|
|||||||||
(In thousands) |
|
As Reported |
|
|
Adjustment |
|
|
As Restated |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Additional Paid-in Capital |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accumulated Other Comprehensive Income |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Total Equity |
|
$ |
|
|
$ |
— |
|
|
$ |
|
During the second quarter of 2023, the Company determined that it overstated total current liabilities and understated non-current liabilities as of March 31, 2023 and December 31, 2022, due to a revolving credit agreement being classified as a current liability instead of a non-current liability. The total amount of liabilities remains unchanged. The Company restated the March 31, 2023 Condensed Consolidated Balance Sheet presented in this report by decreasing current revolving credit agreements outstanding by $
The following table reflects the impact of the restatement to the specific line items presented in the Company’s previously reported condensed consolidated financial statements as of March 31, 2023:
(In thousands) |
|
As Reported |
|
|
Adjustment |
|
|
As Restated |
|
|||
Revolving credit agreements outstanding |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Total current liabilities |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Non-current revolving credit agreement outstanding |
|
$ |
— |
|
|
$ |
|
|
$ |
|
The accompanying applicable Notes have been updated to reflect the effects of the restatements as of March 31, 2023.
16
Redeemable Non-Controlling Interest
As of March 31, 2023 and December 31, 2022, the ADVA stockholders’ equity ownership percentage in ADVA was approximately
As a result of the effectiveness of the DPLTA on January 16, 2023, the ADVA shares, representing the equity interest in ADVA held by holders other than the Company, can be tendered at any time and are, therefore, redeemable and must be classified outside stockholders’ equity. Therefore, the permanent equity noncontrolling interest balance was reclassified to redeemable non-controlling interest ("RNCI") on January 16, 2023 and was remeasured to fair value based on the trading market price of the ADVA shares.
Subsequently, the carrying value of the RNCI is adjusted to its maximum redemption value at each reporting date when the maximum redemption value is greater than the initial carrying amount of the redeemable noncontrolling interest. However, the RNCI will be remeasured using the current exchange rate at each reporting date as long as the RNCI is currently redeemable. For the period of time that the DPLTA is in effect, the RNCI will continue to be presented as redeemable non-controlling interest outside of stockholders’ equity in the condensed consolidated balance sheets.
See Note 16 for additional information on RNCI.
Recently Adopted Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which would require an acquirer to recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its pre-acquisition financial statements in accordance with Topic 606, Revenue Recognition. The Company early
Recent Accounting Pronouncements Not Yet Adopted
There are currently no accounting pronouncements not yet adopted that are expected to have a material effect on the Condensed Consolidated Financial Statements.
2. BUSINESS COMBINATION
ADVA Optical Networking SE
On
Additionally, pursuant to the Business Combination Agreement, on July 15, 2022, the Company made a public offer to exchange each issued and outstanding no-par value bearer share of ADVA for
ADTRAN, Inc. and ADVA became subsidiaries of ADTRAN Holdings, Inc. as a result of the Business Combination. ADTRAN was determined to be the accounting acquirer of ADVA based on ADTRAN shareholders’ majority equity stake in the combined company, the composition of the board of directors and senior management of the combined company, among other factors. The Business Combination with ADVA has been accounted for using the acquisition method of accounting as per the provisions of Accounting Standards Codification 805, “Business Combinations” (“ASC 805”). The Business Combination Agreement used a fixed exchange ratio of Company Common Stock for ADVA shares of common stock, which resulted in a
17
The following table summarizes the purchase price for the ADVA business combination:
(In thousands, except shares, share price and exchange ratio) |
|
Purchase Price |
|
|
ADVA shares exchanged |
|
|
|
|
Exchange ratio |
|
|
|
|
ADTRAN Holdings, Inc. shares issued |
|
|
|
|
ADTRAN Holdings, Inc. share price on July 15, 2022 |
|
$ |
|
|
Purchase price paid for ADVA shares |
|
$ |
|
|
Equity compensation (1) |
|
$ |
|
|
Total purchase price |
|
$ |
|
(1) Represents the portion of replacement share-based payment awards that relates to pre-combination vesting.
Assets acquired and liabilities assumed were recognized at their respective fair values as of July 15, 2022. In determining the fair value, the Company utilized various methods of the income, cost and market approaches depending on the asset or liability being fair valued. The estimation of fair value required significant judgment related to future net cash flows reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors. Inputs were generally determined by taking into account historical data, current and anticipated market conditions, and growth rates.
Developed technology and customer relationships were valued using the multi-period excess earnings method. Backlog was valued using the distributor method. Significant assumptions used in the discounted cash flow analysis for (i) developed technology were the revenue growth rates, long-term revenue growth rate, discount rate, and earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins, obsolescence factors, income tax rate, tax depreciation, and economic depreciation; (ii) customer relationships were earnings before interest and taxes (“EBIT”) margins, contributory asset charges, and customer attrition rate; and (iii) backlog were EBIT margins, adjusted EBIT margins, and contributory asset charges.
The allocation of the purchase price to the assets acquired and liabilities assumed was subject to adjustment within the measurement period (up to one year from the acquisition date). The measurement period adjustments since initial preliminary estimates resulted from changes to the fair value estimates of the acquired assets and assumed liabilities based on finalizing the valuations of inventory, prepaid expenses and other current assets, property plant and equipment, intangible assets, other non-current assets and deferred tax assets and liabilities. The cumulative effect of all measurement period adjustments resulted in a decrease to recognized goodwill of $
18
The following table summarizes the purchase price allocation for each major class of assets acquired and liabilities assumed in the acquisition of ADVA (in thousands):
(In thousands) |
|
|
|
|
Total purchase price |
|
$ |
|
|
Non-controlling interest |
|
$ |
|
|
Net Assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
Accounts receivable |
|
|
|
|
Other receivables |
|
|
|
|
Inventory |
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
Property plant and equipment |
|
|
|
|
Deferred tax assets |
|
|
|
|
Intangibles |
|
|
|
|
Other non-current assets |
|
|
|
|
Accounts payable |
|
|
( |
) |
Current unearned revenue |
|
|
( |
) |
Accrued expenses and other liabilities |
|
|
( |
) |
Current portion of notes payable |
|
|
( |
) |
Income tax payable, net |
|
|
( |
) |
Tax liabilities |
|
|
( |
) |
Non-current unearned revenue |
|
|
( |
) |
Pension liability |
|
|
( |
) |
Other non-current liabilities |
|
|
( |
) |
Non-current portion of revolving credit agreements and notes payable |
|
|
( |
) |
Non-current lease obligations |
|
|
( |
) |
Deferred tax liabilities |
|
|
( |
) |
Total net assets acquired |
|
$ |
|
|
Goodwill |
|
$ |
|
The fair value of the assets acquired include accounts receivable of $
The fair value of the identifiable intangible assets acquired as of the acquisition date:
(In thousands) |
Estimated-average useful life (in years) (1) |
|
|
Fair value |
|
|
Income Statement Amortization Classification |
||
Developed technology |
|
|
|
$ |
|
|
Cost of revenue - Network Solutions |
||
Backlog |
|
|
|
|
|
|
Cost of revenue - Network Solutions and Services & Support |
||
Customer relationships |
|
|
|
|
|
|
Selling, general and administrative expenses |
||
Trade name |
|
|
|
|
|
|
Selling, general and administrative expenses |
||
Total |
|
|
|
$ |
|
|
|
(1)
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The ADVA acquisition resulted in the recognition of goodwill of $
After the Business Combination, the chief operating decision maker assessed and will continue to assess the Company’s performance and allocate resources to its two segments (1) Network Solutions and (2) Services & Support. The goodwill resulting from the Business Combination of $
19
As of the acquisition date, the fair value of the non-controlling interest was approximately $
The Company included the financial results of ADVA in its consolidated financial statements since July 15, 2022, the acquisition date. The net revenue and net loss from the ADVA business for the period January 1, 2023 to March 31, 2023, were $
As of March 31, 2023, the Company has incurred $
Supplemental Pro Forma Information (Unaudited)
The unaudited pro forma financial information in the table below summarizes the combined results of operations for ADTRAN and ADVA as though the Business Combination had occurred on January 1, 2022. The pro forma amounts have been adjusted for differences in basis of accounting which are determined before taking into effect the impacts of purchase accounting and Business Combination accounting impacts.
The following unaudited pro forma information is presented for illustrative purposes only. It is not necessarily indicative of the results of operations of future periods, the results of operations that actually would have been realized had the entities been a single company as of January 1, 2022, or the future operating results of the combined entities. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition.
|
Three Months Ended |
|
|
(In thousands) |
March 31, 2022 |
|
|
|
|
|
|
Revenue |
$ |
|
|
Net loss |
$ |
( |
) |
3. REVENUE
The following is a description of the principal activities from which revenue is generated by reportable segment:
Network Solutions Segment - Includes hardware and software products that enable a digital future which support the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions.
Services & Support Segment - Includes network design, implementation, maintenance and cloud-hosted services supporting the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions.
Revenue by Category
In addition to the Company's reportable segments, revenue is also reported for the following
Prior to the Business Combination with ADVA on July 15, 2022, ADTRAN reported revenue across the following three categories: (1) Access & Aggregation, (2) Subscriber Solutions & Experience and (3) Traditional & Other Products. Following the Business Combination with ADVA, we have recast these revenues such that ADTRAN’s former Access & Aggregation revenue is combined with a portion of the applicable ADVA solutions to create Access & Aggregation Solutions, ADTRAN’s former Subscriber Solutions & Experience revenue is combined with a portion of the applicable ADVA solutions to create Subscriber Solutions, and the revenue from Traditional & Other products is now included in the applicable Access & Aggregation Solutions or Subscriber Solutions category. Optical Networking Solutions is a new revenue category added to represent a meaningful portion of ADVA’s portfolio.
Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at the customer premises while providing an immersive and interactive experience for residential, business and wholesale subscribers. This revenue category includes hardware- and software-based products and services. These solutions include fiber termination solutions for residential, business and wholesale subscribers, Wi-Fi access solutions for residential and business subscribers, Ethernet switching and network edge virtualization solutions for business subscribers, and cloud software solutions covering a mix of subscriber types.
20
Our Access & Aggregation Solutions are solutions that are used by communications Service Providers to connect residential subscribers, business subscribers and mobile radio networks to the Service Providers’ metro network, primarily through fiber-based connectivity. This revenue category includes hardware- and software-based products and services. Our solutions within this category are a mix of fiber access and aggregation platforms, precision network synchronization and timing solutions, and access orchestration solutions that ensure highly reliable and efficient network performance.
Our Optical Networking Solutions are used by communications Service Providers, internet content providers and large-scale enterprises to securely interconnect metro and regional networks over fiber. This revenue category includes hardware- and software-based products and services. Our solutions within this category include open optical terminals, open line systems, optical subsystems and modules, network infrastructure assurance systems, and automation platforms that are used to build high-scale, secure and assured optical networks.
The following table disaggregates revenue by reportable segment and revenue category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:
|
|
Three Months Ended |
|
|||||||||||||||||||||
|
|
March 31, 2023 |
|
|
March 31, 2022 |
|
||||||||||||||||||
(In thousands) |
|
Network Solutions |
|
|
Services & Support |
|
|
Total |
|
|
Network Solutions |
|
|
Services & Support |
|
|
Total |
|
||||||
Subscriber Solutions |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Access & Aggregation Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Optical Networking Solutions |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
The aggregate amount of transaction price allocated to remaining performance obligations that have not been satisfied as of March 31, 2023 and December 31, 2022 related to contractual maintenance agreements, contractual SaaS and subscription services, and hardware contracts that exceed one year in duration amounted to $
The following table provides information about receivables, contract assets and unearned revenue from contracts with customers:
|
|
As of |
|
|
As of |
|
||
(In thousands) |
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Accounts receivable, net |
|
$ |
|
|
$ |
|
||
Contract assets(1) |
|
$ |
|
|
$ |
|
||
Unearned revenue |
|
$ |
|
|
$ |
|
||
Non-current unearned revenue |
|
$ |
|
|
$ |
|
(1)
The Company is party to a receivables purchase agreement with a third party financial institution (the “Factor”). As of March 31, 2023 and December 31, 2022, accounts receivable totaling $
Of the outstanding unearned revenue balances as of December 31, 2022, $
21
Accounts Receivable
The Company records accounts receivable in the normal course of business as products are shipped or services are performed and invoiced, but payment has not yet been remitted by the customer. Accounts receivable balances are considered past due when payment has not been received by the date indicated on the relevant invoice or based on agreed upon terms between the customer and the Company.
As of March 31, 2023 and December 31, 2022, the Company’s outstanding accounts receivable balance was $
The allowance for credit losses was $
Contract Assets
The Company records contract assets when it has recognized revenue but has not yet billed the customer. As of March 31, 2023 and December 31, 2022, the Company’s outstanding contract asset balance was $
4. INCOME TAXES
The Company's effective tax rate changed from a benefit of
The Company continually reviews the adequacy of its valuation allowance and recognizes the benefits of deferred tax assets only as the assessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with ASC 740, Income Taxes. As of March 31, 2023, the Company had net deferred tax assets totaling $
22
Supplemental balance sheet information related to deferred tax assets (liabilities) is as follows:
|
|
As of March 31, 2023 |
|
|||||||||
(In thousands) |
|
Deferred Tax Assets (Liabilities) |
|
|
Valuation Allowance |
|
|
Deferred Tax Assets (Liabilities), net |
|
|||
Domestic |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
International |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
As of December 31, 2022 |
|
|||||||||
(In thousands) |
|
Deferred Tax Assets (Liabilities) |
|
|
Valuation Allowance |
|
|
Deferred Tax Assets (Liabilities), net |
|
|||
Domestic |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
International |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
5. STOCK-BASED COMPENSATION
For the three months ended March 31, 2023 and 2022, stock-based compensation expense was $
PSUs, RSUs and Restricted Stock - ADTRAN Holdings, Inc.
The following table summarizes the RSUs and restricted stock outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:
|
|
Number of |
|
|
Weighted Avg. Grant Date Fair Value |
|
||
Unvested RSUs and restricted stock outstanding, December 31, 2022 |
|
|
|
|
$ |
|
||
RSUs and restricted stock granted |
|
|
|
|
$ |
|
||
RSUs and restricted stock vested |
|
|
( |
) |
|
$ |
|
|
RSUs and restricted stock forfeited |
|
|
( |
) |
|
$ |
|
|
Unvested RSUs and restricted stock outstanding, March 31, 2023 |
|
|
|
|
$ |
|
During the three months ended March 31, 2023, the Company granted
During the three months ended March 31, 2023, the Company granted
The fair value of RSUs and restricted stock is equal to the closing price of its stock on the date of grant. The fair value of PSUs with market conditions is calculated using a Monte Carlo simulation valuation method.
As of March 31, 2023, total unrecognized compensation expense related to non-vested market-based RSUs and restricted stock was approximately $
As of March 31, 2023,
23
Stock Options - ADTRAN Holdings, Inc.
The following table summarizes ADTRAN Holdings, Inc. stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:
|
|
Number of |
|
|
Weighted Avg. |
|
|
Weighted Avg. |
|
|
Aggregate |
|
||||
Stock options outstanding, December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Stock options exercised |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Stock options forfeited |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Stock options expired |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Stock options outstanding, March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Stock options exercisable, March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
As of March 31, 2023, there was $
Pursuant to the Business Combination, which closed on July 15, 2022, ADVA stock option holders were entitled to have their ADVA stock options assumed by ADTRAN Holdings, Inc. (applying the exchange ratio in the Business Combination Agreement), thereafter representing options to acquire stock of ADTRAN Holdings, Inc. The maximum number of shares of ADTRAN Holdings, Inc. stock potentially issuable upon such assumption was
All of the options were previously issued at exercise prices that approximated fair market value at the date of grant.
The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the difference between ADTRAN’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2023. The amount of aggregate intrinsic value was $
Stock Options - ADVA Optical Networking SE
The following table summarizes ADVA Optical Networking SE stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:
|
|
Number of |
|
|
Weighted |
|
|
Weighted Avg. |
|
|
Aggregate |
|
||||
Stock options outstanding, December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Stock options exercised |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
||
Stock options forfeited |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
||
Stock options outstanding, March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Stock options exercisable, March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
As of March 31, 2023, there was $
All of the options were previously issued at exercise prices that approximated fair market value at the date of grant.
The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the difference between ADVA's closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2023. The amount of aggregate intrinsic value was $
24
6. INVESTMENTS
Debt Securities and Other Investments
The following debt securities and other investments were included on the Condensed Consolidated Balance Sheets and recorded at fair value:
|
|
As of March 31, 2023 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Fair |
|
|||||||
(In thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
Corporate bonds |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Municipal fixed-rate bonds |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Asset-backed bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Mortgage/Agency-backed bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
U.S. government bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Foreign government bonds |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Available-for-sale debt securities held at fair value |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
As of December 31, 2022 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Fair |
|
|||||||
(In thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
Corporate bonds |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Municipal fixed-rate bonds |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Asset-backed bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Mortgage/Agency-backed bonds |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
U.S. government bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Foreign government bonds |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Available-for-sale debt securities held at fair value |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
The contractual maturities related to debt securities and other investments were as follows:
|
|
As of March 31, 2023 |
|||||||||||||||||||||||
(In thousands) |
|
Corporate |
|
|
Municipal |
|
|
Asset- |
|
|
Mortgage/ |
|
|
U.S. government |
|
|
Foreign government bonds |
|
|
||||||
Less than one year |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
|||
One to two years |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Two to three years |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
||||
Three to five years |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|||
Five to ten years |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
More than ten years |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Actual maturities may differ from contractual maturities as some borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Realized gains and losses on sales of debt securities are computed under the specific identification method.
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
Gross realized gain on debt securities |
|
$ |
|
|
$ |
|
||
Gross realized loss on debt securities |
|
|
( |
) |
|
|
( |
) |
Total (loss) gain recognized, net |
|
$ |
( |
) |
|
$ |
( |
) |
Income generated from available-for-sale debt securities was recorded as interest and dividend income in the Condensed Consolidated Statements of Loss.
25
Realized and unrealized gains and losses related to marketable equity securities were as follows:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
Realized (loss) gain on equity securities sold |
|
$ |
|
|
$ |
( |
) |
|
Unrealized (loss) gain on equity securities held |
|
|
|
|
|
( |
) |
|
Total (loss) gain recognized, net |
|
$ |
|
|
$ |
( |
) |
Income generated from marketable equity securities was recorded as interest and dividend income in the Condensed Consolidated Statements of Loss. U.S. GAAP establishes a three-level valuation hierarchy based upon observable and unobservable inputs for fair value measurement of financial instruments:
Level 1 – Observable outputs; values based on unadjusted quoted prices for identical assets or liabilities in an active market;
Level 2 – Significant inputs that are observable; values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly;
Level 3 – Significant unobservable inputs; values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs could include information supplied by investees.
The Company’s cash equivalents and investments held at fair value are categorized into this hierarchy as follows:
|
|
|
|
|
Fair Value Measurements as of March 31, 2023 Using |
|
||||||||||
(In thousands) |
|
Fair Value |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant Unobservable Inputs |
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
US government securities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Money market funds |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Available-for-sale debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Municipal fixed-rate bonds |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Asset-backed bonds |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Mortgage/Agency-backed bonds |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
U.S. government bonds |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Foreign government securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Marketable equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable equity securities – various industries |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Deferred compensation plan assets |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
26
|
|
|
|
|
Fair Value Measurements as of December 31, 2022 Using |
|
||||||||||
(In thousands) |
|
Fair Value |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant Unobservable Inputs |
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Available-for-sale debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Municipal fixed-rate bonds |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Asset-backed bonds |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Mortgage/Agency-backed bonds |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
U.S. government bonds |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Foreign government bonds |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Marketable equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable equity securities – various industries |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Deferred compensation plan assets |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
The fair value of its Level 2 securities is calculated using a weighted average market price for each security. Market prices are obtained from a variety of industry standard data providers, large financial institutions and other third-party sources. These multiple market prices are used as inputs into a distribution-curve-based algorithm to determine the daily market value of each security.
27
7. INVENTORY
Inventory consisted of the following:
|
|
As of |
|
|
As of |
|
||
(In thousands) |
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventory, net |
|
$ |
|
|
$ |
|
Inventory reserves are established for estimated excess and obsolete inventory equal to the difference between the cost of the inventory and the estimated net realizable value of the inventory based on estimated reserve percentages, which considers historical usage, known trends, inventory age and market conditions. As of March 31, 2023 and December 31, 2022, inventory reserves were $
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
|
|
As of |
|
|
As of |
|
||
(In thousands) |
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Engineering and other equipment |
|
$ |
|
|
$ |
|
||
Building |
|
|
|
|
|
|
||
Computer hardware and software |
|
|
|
|
|
|
||
Building and land improvements |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Land |
|
|
|
|
|
|
||
Total property, plant and equipment |
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property, plant and equipment, net |
|
$ |
|
|
$ |
|
Long-lived assets used in operations are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the undiscounted cash flows estimated to be generated by the asset are less than the asset’s carrying value. During the three months ended March 31, 2023 and 2022,
Depreciation expense was $
9. GOODWILL
The changes in the carrying amount of goodwill for the three months ended March 31, 2023 are as follows:
(In thousands) |
|
Network Solutions |
|
|
Services & Support |
|
|
Total |
|
|||
As of December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|||
As of March 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
Related to the Business Combination with ADVA the Company recognized $
28
10. INTANGIBLE ASSETS
Intangible assets consisted of the following:
|
|
|
|
As of March 31, 2023 |
|
|
As of December 31, 2022 |
|
|||||||||||||||||||
(In thousands) |
Weighted Average Useful Life |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Book Value |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Book Value |
|
|||||||
Customer relationships |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Backlog |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Developed technology |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Licensed technology |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Licensing agreements |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Patents |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Trade names |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Total |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
Intangible assets are reviewed for impairment whenever events and circumstances indicate impairment may have occurred. The Company assessed impairment triggers related to intangible assets during each financial period in 2023 and 2022. As a result, no quantitative impairment test of long-lived assets was performed as of March 31, 2023 and 2022, and
Amortization expense was $
Estimated future amortization expense of intangible assets was as follows:
|
|
As of |
|
|
(In thousands) |
|
March 31, 2023 |
|
|
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
11. HEDGING
The Company has certain forward rate agreements to hedge foreign currency exposure of expected future cash flows in foreign currency. The Company does not hold or issue derivative instruments for trading or other speculative purposes. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. All changes in the fair value of derivative instruments are recognized as other income (expense) in the Consolidated Statements of Income. The derivative instruments are not subject to master netting agreements and are not offset in the Consolidated Balance Sheets. We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under forward exchange contracts and expect all counterparties to meet their obligations. We have not experienced credit losses from our counterparties. As of March 31, 2023, the Company had
29
Foreign Currency Hedging Agreement
On November 3, 2022, the Company entered into a Euro/U.S. forward contract arrangement (the “Initial Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). The Initial Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, enables the Company to convert a portion of its Euro denominated payment obligations under the DPLTA into U.S. Dollars. Under the Initial Forward, the Company agreed to exchange an aggregate notional amount of $
On March 21, 2023, the Company entered into a Euro/U.S. dollar forward contract arrangement (the “Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). Under the Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, the Company will exchange an aggregate notional amount of $
The fair values of the Company's derivative instruments recorded in the Condensed Consolidated Balance Sheet as of March 31, 2023 and December 31, 2022 were as follows:
(In thousands) |
|
Balance Sheet Location |
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Derivatives Not Designated as Hedging Instruments (Level 2): |
|
|
|
|
|
|
|
|
||
Foreign exchange contracts – derivative assets |
|
Other receivables |
|
$ |
|
|
$ |
|
||
Foreign exchange contracts – derivative liabilities |
|
Accounts payable |
|
$ |
( |
) |
|
$ |
( |
) |
Total derivatives |
|
|
|
$ |
|
|
$ |
|
The change in the fair values of the Company's derivative instruments recorded in the Condensed Consolidated Statements of Income during the three months ended March 31, 2023 and 2022 were as follows:
|
|
|
|
Three Months Ended |
|
|||||
|
|
|
|
March 31, |
|
|||||
(In thousands) |
|
Income Statement |
|
2023 |
|
|
2022 |
|
||
Derivatives Not Designated as Hedging Instruments: |
|
|
|
|
|
|
|
|
||
Foreign exchange contracts |
|
Other income (expense), net |
|
$ |
( |
) |
|
$ |
— |
|
30
12. REVOLVING CREDIT AGREEMENTS
The carrying amounts of the Company's current and non-current revolving credit agreements in its Condensed Consolidated Balance Sheets were as follows:
|
|
(As restated) |
|
|
|
|
||
|
|
As of |
|
|
As of |
|
||
(In thousands) |
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
New Nord/LB revolving line of credit |
|
$ |
|
|
$ |
— |
|
|
Nord/LB revolving line of credit |
|
|
— |
|
|
|
|
|
Syndicated credit agreement working capital line of credit |
|
|
— |
|
|
|
|
|
DZ bank revolving line of credit |
|
|
— |
|
|
|
|
|
Total current revolving credit agreements |
|
$ |
|
|
$ |
|
|
|
(As restated) |
|
|
|
|
||
|
|
As of |
|
|
As of |
|
||
(In thousands) |
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Wells Fargo credit agreement |
|
$ |
|
|
$ |
|
||
Total non-current revolving credit agreement |
|
$ |
|
|
$ |
|
As of March 31, 2023, the weighted average interest rate on our revolving credit agreements was
Wells Fargo Credit Agreement
On July 18, 2022, ADTRAN Holdings, Inc. and ADTRAN, Inc., as the borrower, entered into a credit agreement with a syndicate of banks, including Wells Fargo Bank, National Association, as administrative agent (“Administrative Agent”), and the other lenders named therein (the “Credit Agreement”). The Credit Agreement allowed for borrowings of up to $
The Credit Agreement replaced the Cadence Revolving Credit Agreement and the Wells Fargo Revolving Credit Agreement. In connection with the entry into the Credit Agreement, all outstanding borrowings under such credit agreements have been repaid and the agreements terminated.
As of March 31, 2023, ADTRAN, Inc.’s borrowings under the revolving line of credit were $
All U.S. borrowings under the Credit Agreement (other than swingline loans, which will bear interest at the Base Rate (as defined below)) will bear interest, at the Company’s option, at a rate per annum equal to (A)(i) the highest of (a) the federal funds rate (i.e., for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the business day next succeeding such day) plus ½ of
In addition to paying interest on outstanding principal under the Credit Agreement, the Company is required to pay a commitment fee to the lenders under the Credit Agreement in respect of unutilized revolving loan commitments and an additional commitment ticking fee at a rate of
31
to pay a participation fee to the Administrative Agent for the account of each lender with respect to the Company’s participation in letters of credit at the then applicable rate for SOFR Loans.
The Credit Agreement permits the Company to prepay any or all of the outstanding loans or to reduce the commitments under the Credit Agreement without incurring premiums or penalties (except breakage costs with respect to SOFR Loans and EURIBOR Loans). The Credit Agreement contains customary affirmative and negative covenants, including incurrence covenants and certain other limitations on the ability of the Company and the Company’s subsidiaries to incur additional debt, guarantee other obligations, grant liens on assets, make investments, dispose of assets, pay dividends or other payments on capital stock, make restricted payments, engage in mergers or consolidations, engage in transactions with affiliates, modify its organizational documents, and enter into certain restrictive agreements. It also contains customary events of default (subject to customary cure periods and materiality thresholds). Furthermore, the Credit Agreement requires that the consolidated total net leverage ratio (as defined in the Credit Agreement) of the Company and its subsidiaries tested on the last day of each fiscal quarter not exceed
Finally, pursuant to a Collateral Agreement, dated as of July 18, 2022, among the Company, ADTRAN, Inc. and the Administrative Agent, ADTRAN, Inc.’s obligations under the Credit Agreement are secured by substantially all of the assets of ADTRAN, Inc. and the Company. In addition, the Company has guaranteed ADTRAN, Inc.’s obligations under the Credit Agreement pursuant to a Guaranty Agreement, dated as of July 18, 2022, by ADTRAN, Inc. and the Company in favor of the Administrative Agent.
New Nord/LB Revolving Line of Credit
On March 29, 2023, ADVA entered into a $
Nord/LB Revolving Line of Credit
On August 8, 2022, ADVA entered into a $
Syndicated Credit Agreement Working Capital Line of Credit
In September 2018, ADVA entered into a syndicated credit agreement with Bayerische Landesbank and Deutsche Bank AG Branch German Business to borrow up to $
DZ Bank Revolving Line of Credit
In the fourth quarter of 2022, ADVA entered into a revolving line of credit with DZ Bank to borrow up to $
13. NOTES PAYABLE
The carrying amounts of the Company's notes payable in its Condensed Consolidated Balance Sheets were as follows:
|
|
Fair Value as of |
|
|
Carrying Value as of |
|
|
Carrying Value as of |
|
|||
(In thousands) |
|
March 31, 2023 |
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|||
Syndicated credit agreement notes payable |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
Total Notes Payable |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
Syndicated Credit Agreement Note Payable
In September 2018, ADVA entered into a syndicated credit agreement with Bayerische Landesbank and Deutsche Bank AG Branch German Business to borrow $
32
14. EMPLOYEE BENEFIT PLANS
We maintain a defined benefit pension plan covering employees in certain foreign countries.
In connection with the Business Combination, we acquired $
The Company's net pension liability totaled $
The following table summarizes the components of net periodic pension cost related to a defined benefit pension plan covering employees in certain foreign countries:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
Service cost |
|
$ |
|
|
$ |
|
||
|
|
( |
) |
|
|
|
||
|
|
|
|
|
( |
) |
||
|
|
|
|
|
|
|||
Net periodic pension cost |
|
$ |
|
|
$ |
|
The components of net periodic pension cost, other than the service cost component, are included in other income, net in the Condensed Consolidated Statements of Loss. Service cost is included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss. The Company made contributions to the defined benefit pension plans totaling $
33
15. EQUITY
Accumulated Other Comprehensive Income (Loss)
The following tables present the changes in accumulated other comprehensive income (loss), net of tax, by component:
|
|
Three Months Ended March 31, 2023 |
|
|||||||||||||||||
(In thousands) |
|
Unrealized |
|
|
Defined |
|
|
Foreign |
|
|
ASU 2018-02 Adoption |
|
|
Total |
|
|||||
Balance as of December 31, 2022 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Other comprehensive income before |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Amounts reclassified from accumulated other |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net current period other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Less: Comprehensive income attributable to non-controlling interest, net of tax |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance as of March 31, 2023 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Three Months Ended March 31, 2022 |
|
|||||||||||||||||
(In thousands) |
|
Unrealized |
|
|
Defined |
|
|
Foreign |
|
|
ASU 2018-02 Adoption |
|
|
Total |
|
|||||
Balance as of December 31, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive loss before |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Amounts reclassified from accumulated other |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
||
Net current period other comprehensive income (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance as of March 31, 2022 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
The following tables present the details of reclassifications out of accumulated other comprehensive loss:
|
|
Three Months Ended March 31, 2023 |
||||
(In thousands) |
|
Amount |
|
|
Affected Line Item in the |
|
Unrealized gain (loss) on available-for-sale securities: |
|
|
|
|
|
|
Net realized gain on sales of securities |
|
$ |
|
|
Net investment (loss) gain |
|
Defined benefit plan adjustments – actuarial loss |
|
|
( |
) |
|
(1) |
Total reclassifications for the period, before tax |
|
|
( |
) |
|
|
Tax benefit |
|
|
|
|
|
|
Total reclassifications for the period, net of tax |
|
$ |
( |
) |
|
|
34
|
|
Three Months Ended March 31, 2022 |
||||
(In thousands) |
|
Amount |
|
|
Affected Line Item in the |
|
Unrealized gain (loss) on available-for-sale securities: |
|
|
|
|
|
|
Net realized loss on sales of securities |
|
$ |
( |
) |
|
Net investment (loss) gain |
Defined benefit plan adjustments – actuarial gain |
|
|
|
|
(1) |
|
Total reclassifications for the period, before tax |
|
|
( |
) |
|
|
Tax benefit |
|
|
|
|
|
|
Total reclassifications for the period, net of tax |
|
$ |
( |
) |
|
|
The following table presents the tax effects related to the change in each component of other comprehensive income (loss):
|
|
Three Months Ended |
|
|
Three Months Ended |
|
||||||||||||||||||
|
|
March 31, 2023 |
|
|
March 31, 2022 |
|
||||||||||||||||||
(In thousands) |
|
Before-Tax |
|
|
Tax |
|
|
Net-of-Tax |
|
|
Before-Tax |
|
|
Tax |
|
|
Net-of-Tax |
|
||||||
Unrealized gain (loss) on available-for-sale |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
Reclassification adjustment for amounts related to |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
Reclassification adjustment for amounts related to |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Foreign currency translation adjustments |
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
||
Total Other Comprehensive Income (Loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
16. REDEEMABLE NON-CONTROLLING INTEREST
The following table summarizes the redeemable non-controlling interest activity for the three months ended March 31, 2023:
|
|
Three Months Ended |
|
|
(In thousands) |
|
March 31, 2023 |
|
|
Balance at beginning of period |
|
$ |
— |
|
Reclassification of non-controlling interests |
|
|
|
|
Redemption of redeemable non-controlling interest |
|
|
( |
) |
Net income attributable to redeemable non-controlling interests |
|
|
|
|
Annual recurring compensation earned |
|
|
( |
) |
Translation adjustment |
|
|
|
|
Balance as of March 31, 2023 |
|
$ |
|
Annual Recurring Compensation payable on untendered outstanding shares under the DPLTA must be recognized as it accrues. For the three months ended March 31, 2023, we have recognized $
35
17. LOSS PER SHARE
The calculation of basic and diluted loss per share is as follows:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(In thousands, except per share amounts) |
|
2023 |
|
|
2022 |
|
||
Numerator |
|
|
|
|
|
|
||
Net loss attributable to ADTRAN Holdings, Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator |
|
|
|
|
|
|
||
Weighted average number of shares – basic |
|
|
|
|
|
|
||
Effect of dilutive securities |
|
|
|
|
|
|
||
Stock options |
|
|
— |
|
|
|
— |
|
PSUs, RSUs and restricted stock |
|
|
— |
|
|
|
— |
|
Weighted average number of shares – diluted |
|
|
|
|
|
|
||
Loss per share attributable to ADTRAN Holdings, Inc. – basic |
|
$ |
( |
) |
|
$ |
( |
) |
Loss per share attributable to ADTRAN Holdings, Inc. – diluted |
|
$ |
( |
) |
|
$ |
( |
) |
For the three months ended March 31, 2023 and 2022,
For the three months ended March 31, 2023 and 2022,
18. SEGMENT INFORMATION
The chief operating decision maker regularly reviews the Company’s financial performance based on
The Network Solutions segment includes hardware and software products that enable a digital future which support the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions. The Company's cloud-managed Wi-Fi gateways, virtualization software, and switches provide a mix of wired and wireless connectivity at the customer premises. In addition, its Carrier Ethernet products support a variety of applications at the network edge ranging from mobile backhaul to connecting enterprise customers (“Subscriber Solutions"). The Company's portfolio includes products for multi-gigabit service delivery over fiber or alternative media to homes and businesses.
The Services & Support segment offers a comprehensive portfolio of network design, implementation, maintenance and cloud-hosted services supporting its Subscriber, Access and Aggregation, and Optical Networking Solutions. These services assist operators in the deployment of multi-vendor networks while reducing their cost to maintain these networks. The cloud-hosted services include a suite of SaaS applications under the Company's Mosaic One platform that manages end-to-end network and service optimization for both fiber access infrastructure and mesh Wi-Fi connectivity. The Company backs these services with a global support organization that offers on-site and off-site support services with varying SLAs.
The performance of these segments is evaluated based on revenue, gross profit and gross margin; therefore, selling, general and administrative expenses, research and development expenses, interest and dividend income, interest expense, net investment (loss) gain, other income (loss), net and income tax benefit (expense) are reported on a Company-wide basis only. There is no inter-segment revenue. Asset information by reportable segment is not produced and, therefore, is not reported.
The following table presents information about the revenue and gross profit of its reportable segments:
|
|
Three Months Ended |
|
|||||||||||||
|
|
March 31, 2023 |
|
|
March 31, 2022 |
|
||||||||||
(In thousands) |
|
Revenue |
|
|
Gross Profit |
|
|
Revenue |
|
|
Gross Profit |
|
||||
Network Solutions |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Services & Support |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
For the three months ended March 31, 2023 and 2022, $
36
Revenue by Category
In addition to its reportable segments, revenue is also reported for the following
Prior to the Business Combination with ADVA on July 15, 2022, ADTRAN reported revenue across the following three categories: (1) Access & Aggregation, (2) Subscriber Solutions & Experience and (3) Traditional & Other Products. Following the Business Combination with ADVA, the Company has recast these revenues such that ADTRAN’s former Access & Aggregation revenue is combined with a portion of the applicable ADVA solutions to create Access & Aggregation Solutions, ADTRAN’s former Subscriber Solutions & Experience revenue is combined with a portion of the applicable ADVA solutions to create Subscriber Solutions, and the revenue from Traditional & Other products is now included in the applicable Access & Aggregation Solutions or Subscriber Solutions category. Optical Networking Solutions is a new revenue category added to represent a meaningful portion of ADVA’s portfolio.
Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at the customer premises while providing an immersive and interactive experience for residential, business and wholesale subscribers. This revenue category includes hardware- and software-based products and services. These solutions include fiber termination solutions for residential, business and wholesale subscribers, Wi-Fi access solutions for residential and business subscribers, Ethernet switching and network edge virtualization solutions for business subscribers, and cloud software solutions covering a mix of subscriber types.
Our Access & Aggregation Solutions are solutions that are used by communications Service Providers to connect residential subscribers, business subscribers and mobile radio networks to the Service Providers’ metro network, primarily through fiber-based connectivity. This revenue category includes hardware- and software-based products and services. Our solutions within this category are a mix of fiber access and aggregation platforms, precision network synchronization and timing solutions, and access orchestration solutions that ensure highly reliable and efficient network performance.
Our Optical Networking Solutions are used by communications Service Providers, internet content providers and large-scale enterprises to securely interconnect metro and regional networks over fiber. This revenue category includes hardware- and software-based products and services. Our solutions within this category include open optical terminals, open line systems, optical subsystems and modules, network infrastructure assurance systems, and automation platforms that are used to build high-scale, secure and assured optical networks.
The table below presents revenue information by category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
Subscriber Solutions |
|
$ |
|
|
$ |
|
||
Access & Aggregation Solutions |
|
|
|
|
|
|
||
Optical Networking Solutions |
|
|
|
|
|
— |
|
|
Total |
|
$ |
|
|
$ |
|
Revenue by Geographic Area
The following table presents revenue information by geographic area:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
United States |
|
$ |
|
|
$ |
|
||
Germany |
|
|
|
|
|
|
||
United Kingdom |
|
|
|
|
|
|
||
Other international |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
37
19. LIABILITY FOR WARRANTY RETURNS
The Company's products generally include warranties of
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Plus: Amounts charged to cost and expenses |
|
|
|
|
|
|
||
Plus: Foreign currency translation adjustments |
|
|
|
|
|
— |
|
|
Less: Deductions |
|
|
( |
) |
|
|
( |
) |
Balance at end of period |
|
$ |
|
|
$ |
|
20. COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time the Company is subject to or otherwise involved in various lawsuits, claims, investigations and legal proceedings that arise out of or are incidental to the conduct of our business (collectively, “Legal Matters”), including those relating to employment matters, patent rights, regulatory compliance matters, stockholder claims, and contractual and other commercial disputes. Such Legal Matters, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Additionally, an unfavorable outcome in a legal matter, including in a patent dispute, could require the Company to pay damages, entitle claimants to other relief, such as royalties, or could prevent the Company from selling some of its products in certain jurisdictions. At this time, the Company is unable to predict the outcome of or estimate the possible loss or range of loss, if any, associated with such legal matters.
DPLTA Exit Costs
Pursuant to the terms of the DPLTA, each ADVA shareholder (other than the Company) has received an offer to elect either (1) to remain an ADVA shareholder and receive from us an Annual Recurring Compensation payment, or (2) to receive Exit Compensation. Assuming all of the minority holders of currently outstanding ADVA shares were to elect the second option, we are obligated to make aggregate Exit Compensation payments of approximately EUR
Our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately EUR
Performance Bonds
Certain contracts, customers and jurisdictions in which we do business require us to provide various guarantees of performance such as bid bonds, performance bonds and customs bonds. As of March 31, 2023 and December 31, 2022, we had commitments related to these bonds totaling $
38
Purchase Commitments
The Company purchases components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. Our inventory purchase commitments are for short-term product manufacturing requirements as well as for commitments to suppliers to secure manufacturing capacity. Certain of our inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. As of March 31, 2023, purchase commitments totaled $
21. RESTRUCTURING
During the fourth quarter of 2022, the Company initiated a restructuring program designed to optimize the assets and business processes, and information technology systems of the Company in relation to the Business Combination with ADVA. The restructuring program is expected to maximize cost synergies by realizing operation scale, combining sales channels, streamlining corporate and general and administrative functions, including human capital resources and combining sourcing and production costs.
In February 2019, the Company announced the restructuring of a certain portion of its workforce predominantly in Germany, which included the closure of the Company’s office location in Munich, Germany accompanied by relocation or severance benefits for the affected employees. Voluntary early retirement was offered to certain other employees and was announced in March 2019 and again in August 2020. This plan was completed in 2021 and all amounts were paid in 2022.
A reconciliation of the beginning and ending restructuring liability, which is included in accrued wages and benefits in the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, is as follows:
|
|
Three Months Ended |
|
|
(In thousands) |
|
March 31, 2023 |
|
|
Balance at beginning of period |
|
$ |
|
|
Plus: Amounts charged to cost and expense |
|
|
|
|
Less: Amounts paid |
|
|
( |
) |
Balance as of March 31, 2023 |
|
$ |
|
|
|
For the Year Ended |
|
|
(In thousands) |
|
December 31, 2022 |
|
|
Balance as of December 31, 2021 |
|
$ |
|
|
Plus: Amounts charged to cost and expense |
|
|
|
|
Less: Amounts paid |
|
|
( |
) |
Balance as of December 31, 2022 |
|
$ |
|
Restructuring expenses included in the Condensed Consolidated Statements of (Loss) Income are for the three months ended March 31, 2023 and 2022:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
||
Network Solutions - Cost of revenue |
|
$ |
|
|
$ |
— |
|
|
Services & Support - Cost of revenue |
|
|
|
|
|
— |
|
|
Cost of revenue |
|
$ |
|
|
$ |
— |
|
|
Selling, general and administrative expenses (1) |
|
|
|
|
|
|
||
Research and development expenses (1) |
|
|
|
|
|
— |
|
|
Total restructuring expenses |
|
$ |
|
|
$ |
|
39
The following table represents the components of restructuring expense by geographic area for the three months ended March 31, 2023 and 2022:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
United States |
|
$ |
|
|
$ |
|
||
International |
|
|
|
|
|
— |
|
|
Total restructuring expenses |
|
$ |
|
|
$ |
|
22. SUBSEQUENT EVENTS
Dividend Approval
On
Appointment of Ulrich Dopfer as Principal Accounting Officer
As previously disclosed on the Company’s Form 8-K filed on March 30, 2023, Michael Foliano, formerly Senior Vice President of Finance and Chief Financial Officer of the Company, notified the Company of his intent to retire, effective June 28, 2023. Mr. Foliano served in his role as Chief Financial Officer of the Company through April 30, 2023. In connection with his transition, the Board of Directors appointed Ulrich Dopfer as Senior Vice President and Chief Financial Officer of the Company, effective May 1, 2023; however, Mr. Foliano continued to serve as the Company’s “principal accounting officer” within the meaning of the rules of the SEC under the Exchange Act (the “Principal Accounting Officer”), and as the Company’s Treasurer and Secretary. On May 10, 2023, the Board of Directors removed Mr. Foliano from such roles, designated Mr. Dopfer as the Company’s Principal Accounting Officer, and elected Mr. Dopfer as Treasurer and Secretary of the Company, effective as of such date.
ADVA Legal Matter
On May 8, 2023, ADVA and its U.S. subsidiary, ADVA Optical Networking North America Inc., filed a lawsuit in the U.S District Court for the Eastern District of Texas against Huawei Technologies Co. Ltd (“Huawei”) seeking a declaration from the court that Huawei violated contractual commitments to negotiate in good faith and to license patents, to the extent any patents are practiced by ADVA, on Fair, Reasonable and Non-Discriminatory (“FRAND”) terms and conditions. The case also seeks to obtain a ruling by the court that ADVA has complied with its own commitments and requests that the Court establish FRAND terms and conditions for obtaining a FRAND license on any standard essential patents that ADVA does in fact practice. The lawsuit also seeks to enjoin Huawei from enforcing certain of its patents against ADVA and its affiliates in other jurisdictions, and includes allegations by ADVA that it does not infringe five Huawei patents and that Huawei has infringed an ADVA patent. Huawei has not yet filed an answer in this matter. Given the current status of this matter, the Company is unable predict the outcome of or estimate the possible loss or range of loss, if any, associated with such legal matters.
40
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes that appear in Part I, Item 1 of this document. In addition, the following discussion should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2022, Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Part I, Item 1, Business, and Item 1A, Risk Factors, included in our Annual Report on Form 10-K/A for the year ended December 31, 2022, filed with the SEC on August 14, 2023 (the "2022 Form 10-K/A"), which is available free of charge on the SEC’s website at http://www.sec.gov and on our website at www.adtran.com.
This discussion is designed to provide the reader with information that will assist in understanding our Condensed Consolidated Financial Statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our Condensed Consolidated Financial Statements. See “Cautionary Note Regarding Forward-Looking Statements” on page 4 of this Amendment No. 2 for a description of important factors that could cause actual results to differ from expected results. See also Part 1, Item 1A, Risk Factors, of the 2022 Form 10‑K/A and Part II, Item 1A, Risk Factors of this Amendment No. 2.
Unless the context otherwise indicates or requires, references in this Amendment No. 2 to "ADTRAN", the “Company,” “we,” “us” and “our” refer to ADTRAN Holdings, Inc. and its consolidated subsidiaries for periods subsequent to the Merger and to ADTRAN, Inc. and its consolidated subsidiaries for periods prior to the Merger. The prior period results do not include the results of ADVA prior to the closing of the Business Combination.
OVERVIEW
The Company is a leading global provider of networking and communications platforms, software, systems and services focused on the broadband access market, serving a diverse domestic and international customer base in multiple countries that includes Tier-1, -2 and -3 Service Providers, alternative Service Providers, such as utilities, municipalities and fiber overbuilders, cable/MSOs, SMBs and distributed enterprises. Our innovative solutions and services enable voice, data, video and internet-communications across a variety of network infrastructures and are currently in use by millions worldwide. We support our customers through our direct global sales organization and our distribution networks. Our success depends upon our ability to increase unit volume and market share through the introduction of new products and succeeding generations of products having optimal selling prices and increased functionality as compared to both the prior generation of a product and the products of competitors in order to gain market share. To service our customers and grow revenue, we are continually conducting research and developing new products addressing customer needs and testing those products for the specific requirements of the particular customers. We offer a broad portfolio of flexible software and hardware network solutions and services that enable Service Providers to meet today’s service demands while enabling them to transition to the fully converged, scalable, highly-automated, cloud-controlled voice, data, internet and video network of the future. In addition to our global headquarters in Huntsville, Alabama, and our European headquarters in Munich, Germany, we have sales, administrative and research and development facilities in strategic global locations.
ADTRAN Holdings, Inc. solely owns ADTRAN, Inc. 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 provider of network solutions for data, storage, voice and video services. The combined technology portfolio can best address current and future requirements, especially regarding the convergence of solutions at the network edge.
The chief operating decision maker regularly reviews the Company’s financial performance based on two reportable segments: (1) Network Solutions and (2) Services & Support. In addition to the Company's reportable segments, revenue is also reported for the following three categories – Subscriber Solutions, Access & Aggregation Solutions, and Optical Networking Solutions.
Prior to the Business Combination with ADVA on July 15, 2022, ADTRAN reported revenue across the following three categories: (1) Access & Aggregation, (2) Subscriber Solutions & Experience and (3) Traditional & Other Products. Following the Business Combination with ADVA, we have recast these revenues such that ADTRAN’s former Access & Aggregation revenue is combined with a portion of the applicable ADVA solutions to create Access & Aggregation Solutions, ADTRAN’s former Subscriber Solutions & Experience revenue is combined with a portion of the applicable ADVA solutions to create Subscriber Solutions and the revenue from Traditional & Other products is now included in the applicable Access & Aggregation Solutions or Subscriber Solutions category. Optical Networking Solutions is a new revenue category added to represent a meaningful portion of ADVA’s portfolio.
Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at the customer premises while providing an immersive and interactive experience for residential, business and wholesale subscribers. This revenue category includes hardware- and software-based products and services. These solutions include fiber termination solutions for residential, business and wholesale subscribers, Wi-Fi access solutions for residential and business subscribers, Ethernet switching and network edge virtualization solutions for business subscribers and cloud software solutions covering a mix of subscriber types.
41
Our Access & Aggregation Solutions are solutions that are used by communications Service Providers to connect residential subscribers, business subscribers and mobile radio networks to the Service Providers’ metro network, primarily through fiber-based connectivity. This revenue category includes hardware- and software-based products and services. Our solutions within this category are a mix of fiber access and aggregation platforms, precision network synchronization and timing solutions and access orchestration solutions that ensure highly reliable and efficient network performance.
Our Optical Networking Solutions are used by communications Service Providers, internet content providers and large-scale enterprises to securely interconnect metro and regional networks over fiber. This revenue category includes hardware- and software-based products and services. Our solutions within this category include open optical terminals, open line systems, optical subsystems and modules, network infrastructure assurance systems and automation platforms that are used to build high-scale, secure and assured optical networks.
ADVA DOMINATION AND PROFIT AND LOSS TRANSFER AGREEMENT
The DPLTA between the Company, as the controlling company, and ADVA Optical Networking SE, as the controlled company, which was executed on December 1, 2022, became effective on January 16, 2023, as a result of its registration with the commercial register (Handelsregister) of the local court (Amtsgericht) at the registered seat of ADVA (Jena).
Under the DPLTA, subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, (i) the Company is
entitled to issue binding instructions to the management board of ADVA, (ii) ADVA will transfer its annual profit to the Company, subject to, among other things, the creation or dissolution of certain reserves, and (iii) the Company will generally absorb the annual net loss incurred by ADVA. The obligation of ADVA to transfer its annual profit to the Company applies for the first time to the profit, if any, generated in the ADVA fiscal year 2023. The obligation of the Company to absorb ADVA’s annual net loss applies for the first time to the loss, if any, generated in the ADVA fiscal year 2023.
Additionally, and subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, the DPLTA provides that ADVA shareholders (other than the Company) be offered, at their election, (i) to put their ADVA shares to the Company in exchange for compensation in cash of EUR 17.21 per share (the “Exit Compensation”), or (ii) to remain ADVA shareholders and receive a recurring compensation in cash of EUR 0.59 (EUR 0.52 net under the current tax regime) per share for each full fiscal year of ADVA (the “Annual Recurring Compensation”). The Annual Recurring Compensation is due on the third banking day following the ordinary general shareholders’ meeting of ADVA for the respective preceding fiscal year (but in any event within eight months following expiration of the fiscal year) and is first granted for the 2023 fiscal year, payable for the first time after the ordinary general shareholders’ meeting of ADVA in 2024. The adequacy of both forms of compensation has been challenged by minority shareholders of ADVA via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (in each case, including interest thereon) than agreed upon in the DPLTA.
The opportunity for outside ADVA shareholders to tender ADVA shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger).
We currently hold 33,957,538 no-par value bearer shares of ADVA, representing 65.37% of ADVA’s outstanding shares as of March 31, 2023.
The foregoing description of the DPLTA does not purport to be complete and is qualified in its entirety by reference to the DPLTA, a non-binding English translation of which is incorporated by reference to Exhibit 10.5 of the 2022 Form 10-K filed with the SEC on March 1, 2023.
During the three months ended March 31, 2023, we did not incur transaction costs related to the Business Combination. During the three months ended March 31, 2022, we recognized $1.5 million of transaction costs relating to the Business Combination.
MULTI-YEAR INTEGRATION PROGRAM
During the fourth quarter of 2022, the Company initiated a multi-year integration program designed to optimize the assets, business processes, and information technology systems of the Company.
The program has identified several potential cost synergies, including:
42
We have and will continue to invest significant dollars to restructure the workforce, optimize legacy systems, streamline legal entities and consolidate real estate holdings. By executing these integration activities, we expect to deliver greater innovation for customers, career enrichment opportunities for employees, and enhanced value for shareholders. During the three months ended March 31, 2023, we recognized $0.8 million of integration costs related to the Business Combination that are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Loss. We expect to incur integration costs and costs associated with the implementation of the DPLTA during 2023 and such costs are expected to be material.
During the three months ended March 31, 2023, we recognized $2.4 million of restructuring costs relating to the Business Combination that are included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statement of Loss. See Note 21 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for additional information.
FINANCIAL PERFORMANCE AND TRENDS
We ended the first quarter of 2023 with a year-over-year revenue increase of 109.6% as compared to the three months ended March 31, 2022, driven by increased volume of sales activity due to the Business Combination with ADVA and to Service Provider customers. During the first quarter of 2023, we had two 10% revenue customers, both of which were international Service Provider customers and our five largest customers comprised 40.0% of our revenue. Our year-over-year domestic revenue increased by 32.7%, driven by increased sales volume due to the Business Combination with ADVA, partially offset by decreases due to customer inventory corrections which impacted our Subscriber Solutions and Access & Aggregation product lines. Internationally, our revenue increased by 246.9% compared to the prior year period, primarily driven by increased volume of sales activity due to the Business Combination with ADVA, partially offset by decreases due to customer inventory corrections which primarily impacted our Subscriber Solutions product line.
Growing customer concerns over inventory stocking levels affected our first quarter Subscriber Solutions category. We believe that this over-supply of CPE products will continue into the second quarter of 2023. Revenue for our Access and Optical Networking products grew sequentially. Supply constraints, however, limited our flexibility to clear past-due backlog across all product categories. We believe that the inventory impact is transitory, and we expect to see some improvement to both the over-supply of CPE products and the backlog of products across all categories in the coming quarters. We plan to adjust operating expenditures in the near term to reflect current market conditions; however, we do not see any material changes to our near-term opportunities and our long-term growth catalysts as carriers around the world race to upgrade their networks to fiber. Although we expect our revenue growth and profitability in the near-term to continue to be negatively impacted by supply chain issues, our outlook continues to strengthen given the increased demand for our products and our expectation of an improving supply chain over the longer term.
The coronavirus ("COVID-19") pandemic and related countermeasures previously impacted our operations. Notwithstanding improvement in many markets in which we operate due to a return to more normalized business operations, certain markets continue to be adversely impacted by COVID-19 or as a result of policies relating to COVID-19.
Additionally, due to the pandemic and a global semiconductor chip shortage, we experienced disruption and delays in our supply chain and significant price increases with certain of our manufacturing partners, and those disruptions, delays and price increases may continue. For example, throughout 2022, our results of operations were negatively impacted by increased expenses resulting from supply chain disruptions. The current global supply chain and transportation constraints, including delays in supply chain deliveries and the related global semi-conductor chip shortage, may continue to have a material adverse effect on our operating results and could have a material adverse effect on customer relations and our financial condition. These supply chain challenges and their adverse impact on our industry began to ease during the first quarter of 2023. However, there can be no assurance that the ongoing disruptions due to COVID-19, the related global semiconductor chip shortage or other supply chain constraints or price increases will be resolved in the near term, which could continue to adversely affect our business, financial condition, and results of operations.
Our operating results have fluctuated and may continue to fluctuate on a quarterly basis due to several factors, including customer order activity, supply chain constraints, component availability, the Company's consolidation, purchase accounting, and integration with ADVA. Further, a significant percentage of orders require delivery within a few days requiring us to maintain higher inventory levels. These factors may result in limited order flow visibility. However, with the current global supply chain and limited availability of semiconductor chips and other components of our products, we have experienced and may continue to experience extended lead times, increased logistics intervals and costs, and lower volume of products deliveries, which have had and may continue to have a material adverse effect on our operating results and could have a material adverse effect on customer relations and our financial condition. We believe these supply chain challenges and their adverse impact on our industry will continue at least through fiscal 2023 and expect that the extended lead times and elevated supply chain costs experienced by our industry will persist for the reasonably foreseeable future. It is unclear when the supply environment will become less volatile and what impacts the supply environment will have on the industry in future periods. Operating expenses are relatively fixed in the short term; therefore, a shortfall in quarterly revenues could significantly impact our financial results in a given quarter.
Our operating results may also fluctuate as a result of a number of other factors, including a decline in general economic and market conditions, foreign currency exchange rate movements, inflation, regional conflicts, increased competition, customer order patterns, changes in product and services mix, timing differences between price decreases and product cost reductions, product warranty returns, expediting costs, tariffs and announcements of new products by us or our competitors. Specifically, we expect inflationary pressures on
43
input costs, such as raw materials and labor, and distribution costs to increase. We continue to support our customer demand for our products by working with our suppliers, contract manufacturers, distributors, and customers to address and to limit the disruption to our operations and order fulfillment. Our attempts to offset these cost pressures, such as through increases in the selling prices of some of our products and services, may not be successful and could negatively affect our operating results. Additionally, maintaining sufficient inventory levels to assure prompt delivery of our products increases the amount of inventory that may become obsolete and increases the risk that the obsolescence of this inventory may have an adverse effect on our business and operating results. Also, not maintaining sufficient inventory levels to ensure prompt delivery of our products may cause us to incur expediting costs to meet customer delivery requirements, which may negatively impact our operating results.
We are exposed to changes in foreign currencies relative to the U.S. dollar, which are references to the differences between the foreign-exchanges rates we use to convert the financial results of our international operations from local currencies into U.S. dollars for financial reporting purposes. This impact of foreign-exchange rate changes is calculated based on the difference between the current period’s currency exchange rates and that of the comparable prior period. Our primary exposures to foreign currency exchange rate movements are with the Euro and the British pound sterling. As a result of our global operations, our revenue, gross margins, operating expense and operating income (loss) in some international markets have been and may continue to be affected by foreign currency fluctuations.
Our historical financial performance is not necessarily a meaningful indicator of future results, and in general, management expects that our financial results may vary from period to period. Factors that could materially affect our business, financial condition or operating results are included in Part I, Item 1A of the 2022 Form 10-K and Part II, Item 1A of this Amendment No. 2.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Amendment No. 2 for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition, which is incorporated herein by reference.
RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2023 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2022
The following table presents selected financial information derived from our Condensed Consolidated Statements of Loss expressed as a percentage of revenue for the periods indicated. Amounts may not foot due to rounding.
|
|
Three Months Ended |
|
|
|||||
|
|
March 31, |
|
|
|||||
|
|
2023 |
|
|
2022 |
|
|
||
Revenue |
|
|
|
|
|
|
|
||
Network Solutions |
|
|
87.2 |
|
% |
|
89.6 |
|
% |
Services & Support |
|
|
12.8 |
|
|
|
10.4 |
|
|
Total Revenue |
|
|
100.0 |
|
|
|
100.0 |
|
|
Cost of Revenue |
|
|
|
|
|
|
|
||
Network Solutions |
|
|
67.7 |
|
|
|
58.7 |
|
|
Services & Support |
|
|
5.2 |
|
|
|
6.2 |
|
|
Total Cost of Revenue |
|
|
72.9 |
|
|
|
64.8 |
|
|
Gross Profit |
|
|
27.1 |
|
|
|
35.2 |
|
|
Selling, general and administrative expenses |
|
|
20.8 |
|
|
|
18.1 |
|
|
Research and development expenses |
|
|
21.7 |
|
|
|
17.1 |
|
|
Operating Loss |
|
|
(15.4 |
) |
|
|
— |
|
|
Interest and dividend income |
|
|
0.1 |
|
|
|
0.1 |
|
|
Interest expense |
|
|
(1.0 |
) |
|
|
— |
|
|
Net investment gain (loss) |
|
|
0.4 |
|
|
|
(2.2 |
) |
|
Other expense, net |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
Loss Before Income Taxes |
|
|
(16.0 |
) |
|
|
(2.3 |
) |
|
Income tax benefit |
|
|
3.5 |
|
|
|
1.6 |
|
|
Net Loss |
|
|
(12.5 |
) |
% |
|
(0.7 |
) |
% |
Net Loss attributable to non-controlling interest |
|
|
(0.1 |
) |
|
|
— |
|
|
Net Loss attributable to ADTRAN Holdings, Inc. |
|
|
(12.4 |
) |
% |
|
(0.7 |
) |
% |
44
REVENUE
Our revenue increased 109.6% from $154.5 million for the three months ended March 31, 2022 to $323.9 million for the three months ended March 31, 2023. The increase in revenue for the three months ended March 31, 2023 is primarily attributable to a $192.3 million increase in volume of sales activity due to the Business Combination with ADVA partially offset by a $22.9 million decrease in volume of sales activity related to our ADTRAN, Inc. operations. The increase in revenue by category for the three months ended March 31, 2023 was primarily attributable to a $147.8 million increase in Optical Networking Solutions products due to the Business Combination with ADVA, and a $22.6 million increase in Subscriber Solutions products, partially offset by a $1.0 million decrease in Access & Aggregation Solutions revenue. Growing customer concerns over inventory stocking levels affected our first quarter Subscriber Solutions category. We believe that this over-supply of CPE products will continue into the second quarter of 2023. Revenue for our Access and Optical Networking products grew sequentially. Supply constraints, however, limited our flexibility to clear past-due backlog across all product categories. We believe that the inventory impact is transitory, and we expect to see some improvement to both the over-supply of CPE products and the backlog of products across all categories in the coming quarters. We do not see any material changes to our near-term opportunities and our long-term growth catalysts as carriers around the world upgrade their networks to fiber.
Network Solutions segment revenue increased 104.1% from $138.4 million for the three months ended March 31, 2022 to $282.4 million for the three months ended March 31, 2023. The increase in revenue for the three months ended March 31, 2023 was due primarily to the increase of $167.0 million in volume of sales activity due to the Business Combination with ADVA, partially offset by a decrease of $11.1 million and $11.8 million in Subscriber Solutions products and Access & Aggregation Solutions in our ADTRAN, Inc. operations, respectively.
Services & Support segment revenue increased 157.0% from $16.1 million for the three months ended March 31, 2022 to $41.5 million for the three months ended March 31, 2023. The increase in revenue for the three months ended March 31, 2023 was primarily attributable to the increase of $25.3 million in volume of sales activity from the Business Combination with ADVA and a $0.8 million increase in revenue for Subscriber Solutions services in our ADTRAN, Inc. operations, partially offset by a decrease of $0.7 million of Access & Aggregation Solutions services in our ADTRAN, Inc. operations.
Domestic revenue increased by 32.7% from $99.0 million for the three months ended March 31, 2022 to $131.5 million for the three months ended March 31, 2023, driven by increased volume of network termination and fiber CPE in our Network Solutions segment. In addition, such growth was a result of increased revenue to Tier-2 and Tier-3 customers with diversified businesses among our fiber access and CPE, Service Provider CPE and services.
International revenue, which is defined as revenue generated from the Network Solutions and Services & Support segments provided to a customer outside of the U.S., increased by 246.9% from $55.5 million for the three months ended March 31, 2022 to $192.4 million for the three months ended March 31, 2023. International revenue, as a percentage of total revenue, increased from 35.9% for the three months ended March 31, 2022 to 59.4% for the three months ended March 31, 2023. This change was primarily attributable to the increase in volume of $130.4 million in sales activity from the Business Combination with ADVA and increased shipments to a Tier-1 network operator and multiple alternative network operators in Europe. While international revenue has increased to approximately 59% of total revenues for the three months ended March 31, 2023, the mix of our Network Solutions and Services & Support segments as a percentage of total international revenue remains relatively linear. For the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, changes in foreign currencies relative to the U.S. dollar decreased our net revenue by approximately $10.1 million.
Our ADTRAN, Inc. international revenue is largely focused on broadband infrastructure and is consequently affected by the decisions of our customers as to timing for installation of new technologies, expansion of their networks and/or network upgrades. Our international customers must make these decisions in the regulatory and political environment in which they operate – both nationally and, in some instances, regionally – whether of a multi-country region or a more local region within a country. Consequently, while we expect the global trend towards deployment of more robust broadband speeds and access to continue creating additional market opportunities for us, the factors described above may result in pressure on revenue and operating income. Our ADVA international revenue is largely focused on the manufacture and selling of networking solutions that are based on three core areas of expertise: fiber-optic transmission technology (cloud interconnect), cloud access technology for rapid creation of innovative services around the network edge and solutions for precise timing and synchronization of networks. In addition, ADVA's international operations offers a comprehensive portfolio of network design, implementation and maintenance services to assist operators in the deployment of market-leading networks while reducing costs to maintain these networks.
COST OF REVENUE
As a percentage of revenue, cost of revenue increased from 64.8% for the three months ended March 31, 2022 to 72.9% for the three months ended March 31, 2023. The increase was primarily attributable to $32.6 million of adjustments consisting of intangible amortization of backlog, developed technology and fair value adjustments to inventory costs that flow through to cost of revenue as a result of the Business Combination with ADVA, acquisition related expenses, and to a lesser extent changes in customer and product mix and a regional revenue shift in our ADTRAN, Inc. operations. As the current inventory that was acquired in the Business Combination with ADVA is sold, we expect that our cost of revenue as a percentage of revenue will return to more normalized levels.
45
For the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, changes in foreign currencies relative to the U.S. dollar decreased our cost of revenue by approximately $2.0 million. See additional information related to amortization lives and expense in Notes 2 and 10 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Amendment No. 2.
Network Solutions cost of revenue, as a percentage of that segment’s revenue, increased from 65.5% for the three months ended March 31, 2022 to 77.6% for the three months ended March 31, 2023. The increase in cost of revenue as a percentage of revenue was primarily attributable to acquisition related expenses, amortizations and adjustments consisting of intangible amortization of backlog, developed technology and fair value adjustments to inventory costs that flow through to cost of revenue as a result of the Business Combination with ADVA and to a lesser extent changes in customer and product mix and a regional revenue shift in our ADTRAN, Inc. operations.
Services & Support cost of revenue, as a percentage of that segment’s revenue, decreased from 59.1% for the three months ended March 31, 2022 to 40.9% for the three months ended March 31, 2023. The decrease in cost of revenue as a percentage of revenue was primarily attributable to customer mix and changes in Services & Support mix as a result of the Business Combination with ADVA.
Services & Support revenue is comprised of network planning and implementation, maintenance, support and cloud-based management services, with network planning and implementation being the largest and fastest growing component in the long-term. Compared to our other services, such as maintenance, support and cloud-based management services, our network planning and implementation services typically utilize a higher percentage of internal and subcontracted engineers, professionals and contractors to perform the work for customers. The additional costs incurred to perform these infrastructure and labor-intensive services inherently result in lower average gross margins as compared to maintenance and support services. Within the Services & Support segment, we do expect variability in gross margins from quarter-to-quarter based on the mix of the services recognized.
GROSS PROFIT
As a percentage of revenue, gross profit decreased from 35.2% for the three months ended March 31, 2022 to 27.1% for the three months ended March 31, 2023. The decrease was primarily attributable to increases in cost of revenue related to $32.6 million of adjustments consisting of intangible amortization of backlog, developed technology and fair value adjustments to inventory costs that flow through to cost of revenue as a result of the Business Combination with ADVA, acquisition related expenses and a decrease in volume of sales activity related to our ADTRAN, Inc. operations partially offset by a decrease in cost of revenue.
As a percentage of that segment's revenue, Network Solutions gross profit decreased from 34.5% for the three months ended March 31, 2022 to 22.4% for the three months ended March 31, 2023. The decrease was primarily attributable to increases in cost of revenue related to acquisition related expenses, adjustments consisting of intangible amortization of backlog, developed technology and fair value adjustments to inventory costs that flow through to cost of revenue as a result of the Business Combination with ADVA and a decrease in volume of sales activity related to our ADTRAN, Inc. operations partially offset by an increase in volume of sales activity due to the Business Combination with ADVA.
As a percentage of that segment's revenue, Services & Support gross profit increased from 40.9% for the three months ended March 31, 2022 to 59.1% for the three months ended March 31, 2023. The increase was primarily attributable to an crease in volume of sales activity due to the Business Combination with ADVA, an increase in volume of sales activity related to our ADTRAN, Inc. and a decrease in cost of revenue attributable to customer mix and changes in Services & Support mix as a result of the Business Combination with ADVA.
46
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
As a percentage of revenue, selling, general and administrative expenses increased from 18.1% for the three months ended March 31, 2022 to 20.8% for the three months ended March 31, 2023. While selling, general and administrative expenses as a percentage of revenue will generally fluctuate whenever there is a significant fluctuation in revenue for the periods being compared, in the first quarter we saw a more significant increase due to increased expenses related to the Business Combination with ADVA and other items described below. Our restructuring and integration programs are in the process of consolidating, streamlining and integrating the workforce, systems and processes of ADTRAN and ADVA, which we expect will lower selling, general and administrative expense as a percentage of revenue over time.
Selling, general and administrative expenses increased 141.6% from $27.9 million for the three months ended March 31, 2022 to $67.4 million for the three months ended March 31, 2023. Although selling, general and administrative expenses include personnel costs for management, accounting, information technology, human resources, sales and marketing, as well as independent auditor, tax and other professional fees, contract services and legal and litigation related costs. The increase in selling, general and administrative expenses was primarily attributable to increased expenses related to the Business Combination with ADVA such as employee-related costs due to an increase in the number of employees, costs related to our restructuring program, amortization of intangible assets, depreciation of property, plant and equipment, restructuring expenses, stock-based compensation expense and transactions costs. For the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, changes in foreign currencies relative to the U.S dollar decreased our selling, general and administrative expenses by approximately $1.5 million.
RESEARCH AND DEVELOPMENT EXPENSES
As a percentage of revenue, research and development expenses increased from 17.1% for the three months ended March 31, 2022 to 21.7% for the three months ended March 31, 2023. Although, research and development expenses as a percentage of revenue will fluctuate whenever there are incremental product development activities or significant fluctuations in revenue for the periods being compared, in the first quarter we saw a more significant increase due to increased expenses related to the Business Combination with ADVA and other items described below.
Research and development expenses increased 164.8% from $26.5 million for the three months ended March 31, 2022 to $70.1 million for the three months ended March 31, 2023. The increase in research and development expenses was primarily attributable to increased expenses related to the Business Combination with ADVA such as employee-related costs due to an increase in the number of employees and expenses related to our multi-year integration program, amortization of intangible assets, depreciation of property, plant and equipment and stock-based compensation expense. For the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, changes in foreign currencies relative to the U.S. dollar decreased our research and development expenses by approximately $2.2 million.
ADVA has arrangements with governmental entities for the purpose of obtaining funding for research and development activities. The Company classifies government grants received under these arrangements as a reduction to research and development expense incurred. For the three months ended March 31, 2023, the Company recognized $0.6 million as a reduction of research and development expense.
We expect to continue to incur research and development expenses in connection with our new and existing products. We continually evaluate new product opportunities and engage in significant research and product development efforts, which provides for new product development, enhancement of existing products and product cost reductions. We may incur significant research and development expenses prior to the receipt of revenue from a major new product group.
INTEREST AND DIVIDEND INCOME
Interest and dividend income increased from $0.2 million for the three months ended March 31, 2022 to $0.3 million for the three months ended March 31, 2023. Interest and dividend income was up due to increased income related to the Business Combination with ADVA for the three months ended March 31, 2023.
INTEREST EXPENSE
Interest expense increased from less than $0.1 million for the three months ended March 31, 2022 to $3.3 million for the three months ended March 31, 2023. The increase in interest expense during the three months ended March 31, 2023 was primarily related to an increase in the new Wells Fargo Credit Agreement and the assumed debt associated with the Business Combination with ADVA. See Note 12 and Note 13 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Amendment No. 2.
NET INVESTMENT (LOSS) GAIN
We recognized a net investment loss of $3.4 million and a gain of $1.3 million for the three months ended March 31, 2022 and 2023, respectively. The fluctuations in our net investments were primarily attributable to changes in the fair value of our securities recognized during the period. We expect that any future market volatility could result in continued fluctuations in our investment portfolio. See Note 6 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Amendment No. 2, and “Investing Activities” in “Liquidity and Capital Resources” below for additional information.
47
OTHER EXPENSE, NET
Other expense, net, which primarily consisted of gains and losses on foreign currency transactions and income from excess material sales, increased from an expense of $0.2 million for the three months ended March 31, 2022 to expense of $0.3 million for the three months ended March 31, 2023.
INCOME TAX BENEFIT
Our effective tax rate changed from a benefit of 68.1% of pre-tax income for the three months ended March 31, 2022, to a benefit of 21.9% of pre-tax income for the three months ended March 31, 2023. In 2022, we benefited from a change in our annual estimated tax rate as a result of the requirement to begin capitalizing research and development expenses for U.S. tax purposes beginning in 2022 as previously passed as part of the Tax Cuts and Jobs Act in December 2017, and the associated impact of those changes on our previously established valuation allowance. The change in the effective tax rate for the three months ended March 31, 2023, was driven primarily by a change in our estimated tax rate as a result of the closing of the Business Combination with ADVA during the third quarter of 2022 as well as the release of our domestic valuation allowance during the fourth quarter of 2022.
NET LOSS ATTRIBUTABLE TO ADTRAN HOLDINGS, INC. (AS RESTATED)
As a result of the above factors, net loss attributable to ADTRAN Holdings, Inc. increased from $1.1 million for the three months ended March 31, 2022 to $40.1 million for the three months ended March 31, 2023. Upon the DPLTA becoming effective on January 16, 2023, the Company began absorbing all ADVA losses rather than just the loss related to the Company's ownership percentage in ADVA.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
We have historically financed our ongoing business with existing cash, investments and cash flow from operations. In the current supply environment we also expect to utilize our credit arrangements to manage our working capital needs. We have used, and expect to continue to use, existing cash, investments, credit arrangements and cash generated from operations for working capital, business acquisitions, shareholder dividends and other general corporate purposes, including product development activities to enhance our existing products and develop new products, expand our sales and marketing activities and fund capital expenditures. As of March 31, 2023, the Company has incurred a total of $26.1 million of transaction costs related to the Business Combination. We are also obligated to compensate any annual net loss of ADVA under the DPLTA. Additionally, pursuant to the terms of the DPLTA, each ADVA shareholder (other than the Company) has received an offer to elect either (1) to remain an ADVA shareholder and receive from us an Annual Recurring Compensation payment, or (2) to receive Exit Compensation. Assuming all of the minority holders of currently outstanding ADVA shares were to elect the second option, we would be obligated to make aggregate Exit Compensation payments of approximately EUR 309.5 million or approximately $335.6 million, based on an exchange rate as of March 31, 2023. Shareholders electing the first option of Annual Recurring Compensation may later elect the second option. The opportunity for outside ADVA shareholders to tender ADVA shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger).
Our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately EUR 10.5 million or $11.3 million (based on the current exchange rate) per year assuming none of the minority ADVA shareholders were to elect Exit Compensation. The foregoing amounts do not reflect any potential increase in payment obligations that we may have depending on the outcome of ongoing appraisal proceedings in Germany. During the three months ended March 31, 2023, we accrued $2.8 million in Annual Recurring Compensation, which was reflected as a reduction to retained earnings.
We believe that our cash and cash equivalents, investments, cash generated from operations and access to funds under the new Wells Fargo credit facility (described below) will be adequate to meet our operating and capital needs and our obligations under the Business Combination and the DPLTA for at least the next 12 months.
As of March 31, 2023, our cash on hand was $136.5 million and short-term investments were $1.0 million, which resulted in available short-term liquidity of $137.5 million, of which $112.5 million was held by our foreign subsidiaries. As of December 31, 2022, cash on hand was $108.6 million and short-term investments were $0.3 million, which resulted in available short-term liquidity of $108.9 million, of which $86.3 million was held by our foreign subsidiaries. Generally, we intend to permanently reinvest funds held outside the U.S., except to the extent that any of these funds can be repatriated without withholding tax.
In addition to our cash and cash equivalents and the credit facility, we may fund a portion or all of the Exit Compensation through the sale of securities. There can be no assurances that we would be successful in effecting these actions on commercially reasonable terms or at all.
48
Operating Activities
Net cash used in operating activities of $19.9 million during the three months ended March 31, 2023 decreased by $24.8 million compared to net cash provided of $4.9 million during the three months ended March 31, 2022. This decrease was primarily due to the net loss for the period, for the reasons discussed above, as adjusted primarily for depreciation and deferred taxes, and net cash outflows from working capital, specifically, a decrease in the average number of days payable to our trade suppliers. Additional details related to our working capital and its drivers are discussed below.
Net accounts receivable decreased 6.2% from $279.4 million as of December 31, 2022 to $262.0 million as of March 31, 2023. There was an allowance for credit losses of $0.1 million as of March 31, 2023 and an allowance for credit losses of less than $0.1 million as of December 31, 2022. The decrease in net accounts receivable was due primarily to customer and geographical mix. Quarterly accounts receivable DSO increased from 72 days as of December 31, 2022 to 73 days as of March 31, 2023. The increase in DSO was due to customer and geographical mix associated with the Business Combination with ADVA and timing of sales within the quarter.
Other receivables decreased 5.8% from $32.8 million as of December 31, 2022 to $30.9 million as of March 31, 2023. The decrease in other receivables was primarily attributable to a decrease for sales of raw materials.
Quarterly inventory turnover was 2.5 turns as of December 31, 2022 and 2.2 turns as of March 31, 2023. Inventory decreased 2.6% from $427.5 million as of December 31, 2022 to $416.3 million as of March 31, 2023. The decrease in inventory was due to a reduction in component purchases due to improved lead times as well as utilization of buffer stock. We expect inventory levels to fluctuate as we attempt to maintain sufficient inventory in response to supply chain uncertainties.
Accounts payable decreased 16.5% from $237.7 million as of December 31, 2022 to $198.6 million as of March 31, 2023. The decrease in accounts payable was primarily due to a decrease in the average number of days payable to our trade suppliers. Accounts payable will fluctuate due to variations in the timing of the receipt of inventory, supplies and services and our subsequent payments for these purchases.
Investing Activities
Capital expenditures totaled approximately $8.4 million and $1.5 million for the three months ended March 31, 2023 and 2022, respectively. These expenditures were primarily used to purchase manufacturing and test equipment, software, computer hardware and building improvements.
Our combined short-term and long-term investments increased $1.1 million from $33.0 million as of December 31, 2022 to $34.1 million as of March 31, 2023. This increase reflects the impact of the net unrealized and realized gains and losses on our investments.
We typically invest all available cash not required for immediate use in operations, primarily in securities that we believe bear minimal risk of loss. See Note 6 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Amendment No. 2 for additional information.
As of March 31, 2023, our corporate bonds, municipal bonds, asset-backed bonds, mortgage/agency bonds, U.S. government bonds and other government bonds were classified as available-for-sale and had a combined duration of 1.43 years with an average Standard & Poor’s credit rating of AA. Because our investment portfolio has a high-quality rating and contractual maturities of short duration, we are able to obtain prices for these bonds derived from observable market inputs, or for similar securities traded in an active market, on a daily basis.
Our long-term investments increased 1.0% from $32.7 million as of December 31, 2022 to $33.0 million as of March 31, 2023. Our investments include various marketable equity securities classified as long-term investments with a fair market value of $0.8 million as of March 31, 2023 and December 31, 2022. Long-term investments as of March 31, 2023 and December 31, 2022 also included $24.0 million and $22.9 million, respectively, related to our deferred compensation plans.
Financing Activities
Dividends
During the three month periods ended March 31, 2023 and 2022, we paid dividends totaling $7.1 million and $4.4 million, respectively. The continued payment of dividends is at the discretion of the Company’s Board of Directors and is subject to general business conditions and ongoing financial results of the Company.
Stock Repurchase Program
There were no stock repurchases during the periods ended March 31, 2023 and 2022, and there currently is no authorized stock repurchase plan.
49
Stock Option Exercises
To accommodate employee stock option exercises, the Company issued 6 thousand and 33 thousand shares of common stock and treasury stock which resulted in proceeds of $58 thousand and $0.6 million during the three months ended March 31, 2023 and 2022, respectively.
Off-Balance Sheet Arrangements
We do not have off-balance sheet financing arrangements and have not engaged in any related party transactions or arrangements with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity or the availability of or requirements for capital resources.
Cash Requirements
The following table (restated) summarizes the Company’s material short- and long-term cash requirements from known obligations pursuant to certain contracts and commitments as of March 31, 2023, as well as an estimate of the timing in which such obligations and payments are expected to be satisfied (but excluding payments that may be made pursuant to the DPLTA and currency hedging arrangements, which are discussed below). Other than operating lease obligations, the cash requirements table excludes interest payments.
(In thousands) |
|
Total |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
2027 |
|
|
After 2027 |
|
|||||||
Wells Fargo credit agreement(1) |
|
$ |
180,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
180,000 |
|
|
$ |
— |
|
Nord/LB revolving line of credit(2) |
|
|
10,843 |
|
|
|
10,843 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Purchase obligations(3) |
|
|
459,313 |
|
|
|
404,351 |
|
|
|
52,307 |
|
|
|
2,648 |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
Operating lease obligations(4) |
|
|
33,494 |
|
|
|
6,741 |
|
|
|
8,397 |
|
|
|
6,914 |
|
|
|
4,089 |
|
|
|
2,864 |
|
|
|
4,489 |
|
Totals |
|
$ |
683,650 |
|
|
$ |
421,935 |
|
|
$ |
60,704 |
|
|
$ |
9,562 |
|
|
$ |
4,096 |
|
|
$ |
182,864 |
|
|
$ |
4,489 |
|
(1) See description below.
(2) See description below.
(3) We have purchase obligations related to open purchase orders to our contract manufacturers, ODMs, component suppliers, service
partners and other vendors. The settlement of our purchase obligations will occur at various dates beginning in 2023 and going
through 2026. See Note 20 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this
Amendment No. 2 for more information.
(4) We have operating leases for office space, automobiles and various other equipment in the U.S. and in certain international
locations. Our operating leases had remaining lease terms ranging from two month to 116 months as of March 31, 2023.
Wells Fargo Credit Agreement
On July 18, 2022, ADTRAN Holdings, Inc. and ADTRAN, Inc., as the borrower, entered into a credit agreement with a syndicate of banks, including Wells Fargo Bank, National Association, as administrative agent (“Administrative Agent”), and the other lenders named therein (the “Credit Agreement”). The Credit Agreement allowed for borrowings of up to $100 million in aggregate principal amount, but the borrowings increased to up to $400 million in aggregate principal amount upon the DPLTA becoming effective on January 16, 2023.
As of March 31, 2023, ADTRAN, Inc.’s borrowings under the revolving line of credit were $180.0 million. In addition, we may issue up to $25.0 million in letters of credit against our $400.0 million total facility. As of March 31, 2023, we had a total of $3.4 million in letters of credit under ADTRAN, Inc. outstanding against our eligible borrowings, leaving a net amount of $216.6 million available for future borrowings. Any future credit extensions under the Credit Agreement are subject to customary conditions precedent. The proceeds of any loans are expected to be used for general corporate purposes and to pay a portion of the Exit Compensation consideration. The Credit Agreement matures in July 2027 but provides the Company with an option to request extensions subject to customary conditions.
All U.S. borrowings under the Credit Agreement (other than swingline loans, which will bear interest at the Base Rate (as defined below)) will bear interest, at the Company’s option, at a rate per annum equal to (A)(i) the highest of (a) the federal funds rate (i.e., for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the business day next succeeding such day) plus ½ of 1%, (b) the prime commercial lending rate of the Administrative Agent, as established from time to time at its principal U.S. office (which such rate is an index or base rate and will not necessarily be its lowest or best rate charged to its customers or other banks), and (c) the daily Adjusted Term SOFR (as defined in the Credit Agreement) for a one-month tenor plus 1%, plus (ii) the applicable rate, ranging from 0.5% to 1.25% (the “Base Rate”), or (B) the sum of the Adjusted Term SOFR (as defined in the Credit Agreement) plus the applicable rate, ranging from 1.4% to 2.15%, provided that such sum is subject to a 0.0% floor (such loans utilizing this interest rate, “SOFR Loans”). All E.U. borrowings under the Credit Agreement (other than swingline loans) will bear interest at a rate per annum equal to the sum of the Euro Interbank Offered Rate as administered by the European Money Markets Institute (or a comparable or
50
successor administrator approved by the Administrative Agent) plus the applicable rate, ranging from 1.5% to 2.25%, provided that such sum is subject to a 0.0% floor (such loans utilizing this interest rate, “EURIBOR Loans”). The applicable rate is based on the consolidated net leverage ratio of the Company and its subsidiaries as determined pursuant to the terms of the Credit Agreement. Default interest is 2.00% per annum in excess of the rate otherwise applicable in the case of any overdue principal or any other overdue amount.
In addition to paying interest on outstanding principal under the Credit Agreement, the Company is required to pay a commitment fee to the lenders under the Credit Agreement in respect of unutilized revolving loan commitments and an additional commitment ticking fee at a rate of 0.25% on the commitment amounts of each lender until the earliest of (i) the date of the Senior Credit Facilities Increase, (ii) the Company’s voluntary termination of the credit facility commitment, and (iii) December 31, 2023. The Company is also required to pay a participation fee to the Administrative Agent for the account of each lender with respect to the Company’s participation in letters of credit at the then applicable rate for SOFR Loans.
The Credit Agreement permits the Company to prepay any or all of the outstanding loans or to reduce the commitments under the Credit Agreement without incurring premiums or penalties (except breakage costs with respect to SOFR Loans and EURIBOR Loans). The Credit Agreement contains customary affirmative and negative covenants, including incurrence covenants and certain other limitations on the ability of the Company and the Company’s subsidiaries to incur additional debt, guarantee other obligations, grant liens on assets, make investments, dispose of assets, pay dividends or other payments on capital stock, make restricted payments, engage in mergers or consolidations, engage in transactions with affiliates, modify its organizational documents, and enter into certain restrictive agreements. It also contains customary events of default (subject to customary cure periods and materiality thresholds). Furthermore, the Credit Agreement requires that the Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) of the Company and its subsidiaries tested on the last day of each fiscal quarter not exceed 3.25 to 1.0 through September 30, 2024 and 2.75 to 1.00 from December 31, 2024 and thereafter, subject to certain exceptions. The Credit Agreement also requires that the Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of the Company and its subsidiaries tested on the last day of each fiscal quarter not fall below 3.00 to 1.00.
Finally, pursuant to a Collateral Agreement, dated as of July 18, 2022, among the Company, ADTRAN, Inc. and the Administrative Agent, ADTRAN, Inc.’s obligations under the Credit Agreement are secured by substantially all of the assets of ADTRAN, Inc. and the Company. In addition, the Company has guaranteed ADTRAN, Inc.’s obligations under the Credit Agreement pursuant to a Guaranty Agreement, dated as of July 18, 2022, by ADTRAN, Inc. and the Company in favor of the Administrative Agent.
New Nord/LB Revolving Line of Credit
On March 29, 2023, ADVA entered into a $16.1 million unsecured revolving line of credit with Norddeutsche Landesbark - Girozentrale (Nord/LB) that bears interest of Euro Short Term Rate plus 1.94%. The line of credit has a perpetual term that can be terminated by the Company or Nord/LB at any time. As of March 31, 2023 ADVA borrowed $10.8 million under this facility.
Currency Hedging Arrangements
On November 3, 2022, the Company entered into a Euro/U.S. forward contract arrangement (the “Initial Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). The Initial Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, enables the Company to convert a portion of its Euro denominated payment obligations under the DPLTA into U.S. Dollars. Under the Initial Forward, the Company agreed to exchange an aggregate notional amount of $160.0 million U.S. dollars for Euros at a daily fixed forward rate ranging from $0.98286 to $1.03290. The aggregate amount of $160.0 million is divided into eight quarterly tranches of $20.0 million, commencing in the fourth quarter of 2022. The Company, at its sole discretion, may exchange all or part of each tranche on any given day within the applicable quarter; provided, however, that it must exchange the full tranche by the end of such quarter. The Initial Forward may be accelerated or terminated early for a number of reasons, including but not limited to (i) non-payment by the Company or the Hedge Counterparty, (ii) breach of representation or warranty or covenant by either party or (iii) insolvency or bankruptcy of either party.
On March 21, 2023, the Company entered into a Euro/U.S. dollar forward contract arrangement (the “Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). Under the Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, the Company will exchange an aggregate notional amount of $160.0 million U.S. dollars for Euros at a daily fixed forward rate of $1.085 per €1.00 in average. During the three months ended March 31, 2023, the Company settled one $20.0 million forward contract tranche and the remaining will be divided into seven quarterly tranches of $20.0 million. These new forward contracts transacted on March 21, 2023 (to sell EUR/buy USD) were entered into for the purpose of unwinding the previously transacted forward contracts (to buy EUR/sell USD), transacted in November 2022. The drawdown dates of the original ratchet forwards are set to the same date as the maturity of the new offsetting forward contracts.
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ADVA Domination and Profit and Loss Transfer Agreement
On December 1, 2022, we, as the controlling company, entered into the DPLTA with ADVA, as the controlled company. The DPLTA, which was executed on December 1, 2022, became effective on January 16, 2023, as a result of its registration with the commercial register (Handelsregister) of the local court (Amtsgericht) at the registered seat of ADVA (Jena).
Under the DPLTA, subject to certain limitations pursuant to applicable law, (i) we are entitled to issue binding instructions to the management board of ADVA, (ii) ADVA will transfer all of its annual profits to us, subject to, among other things, the creation or dissolution of certain reserves, and (iii) we will generally absorb all annual losses incurred by ADVA. The obligation of ADVA to transfer its annual profit to us, as well as our obligation to absorb ADVA’s annual net loss, applies for the first time to the profits or losses generated in the ADVA fiscal year 2023.
Additionally, and subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, the DPLTA provides that ADVA shareholders (other than us) be offered, at their election, (i) to put their ADVA shares to the Company in exchange for compensation in cash of EUR 17.21 per share (the “Exit Compensation”), or (ii) to remain ADVA shareholders and receive a recurring compensation in cash of EUR 0.59 (EUR 0.52 net under the current tax regime) per share for each full fiscal year of ADVA (the “Annual Recurring Compensation”). The Annual Recurring Compensation is due on the third banking day following the ordinary general shareholders’ meeting of ADVA for the respective preceding fiscal year (but in any event within eight months following expiration of the fiscal year) and is first granted for the 2023 fiscal year, payable for the first time after the ordinary general shareholders’ meeting of ADVA in 2024. The adequacy of both forms of compensation have been challenged by minority shareholders of ADVA via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (in each case, including interest thereon) than agreed upon in the DPLTA. Our aggregate potential payment obligations under the DPLTA are discussed above under "Liquidity".
The opportunity for outside ADVA shareholders to tender ADVA shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger).
We currently hold 33,957,538 no-par value bearer shares of ADVA, representing 65.38% of ADVA’s outstanding shares as of March 31, 2023.
The foregoing description of the DPLTA does not purport to be complete and is qualified in its entirety by reference to the DPLTA, a non-binding English translation of which incorporated by reference to Exhibit 10.5 of the 2022 Form 10-K.
During the three months ended March 31, 2023, we did not incur transaction costs related to the Business Combination. During the three months ended March 31, 2022, we recognized $1.5 million of transaction costs relating to the Business Combination.
During the three months ended March 31, 2023, we recognized $0.8 million of integration costs related to the Business Combination that are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Loss. We expect to incur integration costs and costs associated with the implementation of the DPLTA during 2023 and such costs are expected to be material.
During the three months ended March 31, 2023, we recognized $2.4 million of restructuring costs relating to the Business Combination that are included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statement of Loss. See Note 21 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for additional information.
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Other Cash Requirements
During the three months ended March 31, 2023, other than the Exit Compensation payments and Annual Recurring Compensation under the DPLTA, there have been no other material changes in cash requirements from those discussed in the 2022 Form 10-K/A.
Performance Bonds
Certain contracts, customers and jurisdictions in which we do business require us to provide various guarantees of performance such as bid bonds, performance bonds and customs bonds. As of March 31, 2023 and December 31, 2022, we had commitments related to these bonds totaling $11.7 million and $21.1 million, respectively, which expire at various dates through April 2031. In general, we would only be liable for the amount of these guarantees in the event of default under each contract, the probability of which we believe is remote.
Critical Accounting Policies and Estimates
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used or if changes in the accounting estimate that are reasonably likely to occur could materially impact the results of financial operations. Several accounting policies, as described in Note 1 of Notes to the Consolidated Financial Statements included in Part I, Item 1 of this report, require material subjective or complex judgment and have a significant impact on our financial condition and results of operations, as applicable. We believe the critical accounting policies affect our more significant judgments and estimates used in the preparation of our Condensed Consolidated Financial Statements. During the three months ended March 31, 2023, other than the change in accounting policy regarding non-controlling interests as outlined in Note 1 and Note 16 to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report, there were no significant changes to our critical accounting policies and estimates as described in the financial statements contained in the 2022 Form 10-K/A.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms promulgated by the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, an evaluation was carried out by management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Exchange Act. At the time of the filing of the Original Filing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2023. Subsequent to that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of March 31, 2023.
Material Weaknesses in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
In the Part I, Item 4 “Controls and Procedures – Material Weakness in Internal Control over Financial Reporting” of Amendment No. 1 of the Form 10-Q for the three-month period ended March 31, 2023, we identified that we did not design and maintain effective controls over the presentation and disclosure of debt agreements, specifically to ensure the presentation and disclosure reflect the terms of the agreements. In the Part I, Item 4 “Controls and Procedures – Material Weaknesses in Internal Control over Financial Reporting” of this Amendment No. 2, we have subsequently identified the following additional material weaknesses:
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The material weaknesses resulted in the restatements and revisions of and immaterial adjustments to our consolidated financial statements for the year ended December 31, 2022, as well as the condensed consolidated financial statements for the quarterly and year-to-date periods ended September 30, 2022, March 31, 2023, June 30, 2023 and September 30, 2023. Additionally, these material weaknesses could result in misstatements of the Company's accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected, including the misstatements that required the filing of both Amendment No. 1 and this Amendment No. 2.
Management’s Remediation Efforts
To remediate the material weakness in our internal control over financial reporting with respect to the presentation and disclosure of debt agreements, during the three months ended September 30, 2023, our management implemented a new control over the review of new or amendments to our agreements for terms and conditions that impact the presentation or disclosure of debt. We believe that the foregoing actions will support the improvement of the Company’s internal control over financial reporting, and, through our efforts to identify, design, and implement the necessary control activities, will be effective in remediating certain of the material weaknesses described above.
To remediate the material weaknesses in the Company’s internal control over financial reporting related to the risks of material misstatement, including financial statement preparation, presentation and disclosure of transactions, and the non-controlling interest, the Company plans to initiate a remediation plan that includes designing and implementing new or enhanced controls over the review of our consolidated financial statements and identification and assessment of risks of material misstatement. We believe that the foregoing actions will support the improvement of the Company’s internal control over financial reporting, and, through our efforts to identify, design, and implement the necessary control activities, will be effective in remediating such material weaknesses.
To remediate the material weakness in the Company’s internal control over financial reporting related to the accounting of non-routine, unusual or complex events and transactions for non-controlling interest, the Company plans to initiate a remediation plan that includes designing and implementing new controls over the identification and review of contracts, transactions or arrangements that may result in a financial obligation including the use of an accounting specialist as needed to ensure proper presentation of these items within our financial statements.
We will continue to devote significant time and attention to these remediation efforts. As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to address the material weaknesses or determine to modify the remediation plans described above. Until the remediation steps set forth above, including the efforts to implement the necessary control activities that we identify, are fully completed, and there has been time for us to conclude through testing that the control activities are operating effectively, the material weaknesses described above will not be considered remediated.
Changes in Internal Control over Financial Reporting
On July 15, 2022, the Company acquired 33,957,538 bearer shares of ADVA, or 65.43% of ADVA’s outstanding bearer shares as of such date, as further described in Note 2 of the Notes to the Condensed Consolidated Financial Statements. As permitted by SEC guidance, we excluded ADVA in our evaluation of internal control over financial reporting and related disclosure controls and procedures. On March 31, 2023, ADVA’s assets represented approximately 43.1% of our consolidated assets. For the three months ended March 31, 2023, ADVA’s revenues represented approximately 59.4% of our consolidated revenues and loss before income taxes represented approximately 69.1% of our consolidated loss before income taxes. We have since extended our oversight and monitoring processes that support our internal control over financial reporting and disclosure controls and procedures to include ADVA’s operations. Other than the extension of our oversight and monitoring processes to include ADVA’s operations and the ongoing remediation efforts related to the material weaknesses described above, there were no other changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
A list of factors that could materially affect our business, financial condition or operating results is described in Part I, Item 1A, “Risk Factors” in the 2022 Form 10-K. There have been no material changes to our risk factors from those disclosed in Part I, Item 1A, “Risk Factors” in the 2022 Form 10-K other than as described in the risk factors below.
Risks related to our financial results and Company success
Our revenue for a particular period can be difficult to predict, and a shortfall in revenue may harm our operating results.
As a result of the many factors discussed in this report, our revenue for a particular quarter is difficult to predict and will fluctuate from quarter to quarter. Typically, our customers request product delivery within a short period following our receipt of an order. Consequently, we do not typically carry a significant order backlog and are dependent upon obtaining orders and completing delivery in accordance with shipping terms that are predominantly within each quarter to achieve our targeted revenue. Supply of semiconductor chips and other components of our products has become constrained resulting in extended lead times and increased costs. Transportation constraints, including shortages for both air and surface freight, as well as labor shortages in the transportation industry, have also affected the timing and the cost of obtaining raw materials and production supplies. As a result, our revenue and gross margin percentage declined in the first quarter of 2023. If supply chain constraints and transportation constraints continue, it could cause our net revenue and gross profit to decline or to grow at a slower rate than in previous quarters. Our deployment/installation cycle can also vary depending on the customer’s schedule, site readiness, network size and complexity and other factors, which can cause our revenue to fluctuate from period to period. Our ability to meet financial expectations could also be affected if the variable revenue patterns seen in prior quarters recur in future quarters. We have experienced periods of time during which manufacturing issues have delayed shipments, leading to variable shipping patterns. In addition, to the extent that manufacturing issues and any related component shortages continue to result in delayed shipments in the future, and particularly in quarters in which we and our subcontractors are operating at higher levels of capacity, it is possible that revenue for a quarter could be adversely affected, and we may not be able to remediate the conditions within the same quarter. Currently, our revenue growth and profitability in the near-term are being impacted by supply chain constraint issues. While we are working closely with our suppliers and customers to address the near-term supply chain challenges facing the industry and believe these challenges will continue to lessen and will begin to normalize during 2023, there can be no assurance this will be the case.
In the past, under certain market conditions, long manufacturing lead times have caused our customers to place the same order multiple times. When multiple ordering occurs, along with other factors, it may cause difficulty in predicting our revenue and, as a result, could impair our ability to manage inventory effectively.
We plan our operating expense levels based primarily on forecasted revenue levels. These expenses and the impact of long-term commitments are relatively fixed in the short term. A shortfall in revenue could lead to operating results being below expectations because we may not be able to quickly reduce these fixed expenses in response to short-term business changes.
Our customers in the subscriber solutions & experience technology category are increasingly focusing on working capital optimization and depletion of overstocked inventories, which have impacted and may continue to materially impact demand in that category.
We expect gross margins to continue to vary over time, and our levels of product and services gross margins may not be sustainable.
Our level of gross margins may not be sustainable and has been and may continue to be adversely affected by numerous factors, including:
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For example, throughout 2022, we incurred increased expenses resulting from supply chain disruptions, including delays in supply chain deliveries and the related global semi-conductor chip shortage, which lowered our gross margins and decreased our profitability. These supply chain challenges and their adverse impact on our industry began to ease during the first quarter of 2023. However, there can be no assurance that the ongoing disruptions due to COVID-19, the related semiconductor chip shortage or other supply chain constraints or price increase will be resolved in the near term, which could continue to adversely affect our business, financial condition, and results of operations.
Risks related to our control environment
We have had to restate our previously issued consolidated financial statements and, as part of that process, have identified material weaknesses in our internal control over financial reporting. If we are unable to develop and maintain effective internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and may adversely affect our business, financial condition and results of operations.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal control over financial reporting is necessary for us to provide reliable financial reporting and prevent fraud. We have had to restate our previously issued consolidated financial statements and, as part of that process, have identified material weaknesses in our internal control over financial reporting. We have implemented new controls with respect to one material weakness, and we continue to evaluate steps to remediate the other material weaknesses. These remediation measures may be time consuming and costly, and there is no assurance that these initiatives will ultimately have the intended effects. Any failure to maintain effective internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In either case, there could be an adverse effect on our business, financial condition and results of operations. Ineffective internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We can provide no assurance that the measures that we have taken, are taking and plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.
We may face litigation and other risks as a result of the restatements as described in Amendment No. 1 and the “Explanatory Note” within this Amendment No. 2 and the material weaknesses in our internal control over financial reporting.
We had to restate our previously issued consolidated financial statements in August 2023 and March 2024 and, in connection with those restatements, we identified material weaknesses in our internal control over financial reporting, certain of which have continued as of the date hereof. As part of the subsequent restatement as described in the “Explanatory Note” within this Amendment No. 2, we identified additional material weaknesses in our internal control over financial reporting. As a result of such material weaknesses, the restatements and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may
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include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatements and the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could adversely affect our business, financial condition and results of operations.
Risks related to the telecommunications industry
Our failure to maintain rights to intellectual property used in our business could adversely affect the development, functionality and commercial value of our products.
Our future success depends in part upon our proprietary technology. Although we attempt to protect our proprietary technology by contract, trademark, copyright and patent registration and internal security, including trade secret protection, these protections may not be adequate. Furthermore, our competitors can develop similar technology independently without violating our proprietary rights. From time to time, we receive and may continue to receive notices of claims alleging that we are infringing upon patents or other intellectual property. Any of these claims, whether with or without merit, could result in significant legal fees, divert our management’s time, attention and resources, delay our product shipments or require us to enter into royalty or licensing agreements. We cannot predict whether we will prevail in any claims or litigation over alleged infringements, or whether we will be able to license any valid and infringed patents, or other intellectual property, on commercially reasonable terms. For example, in May 2023, ADVA filed a lawsuit against Huawei Technologies Co. (“Huawei”), which seeks declaratory relief with respect to, among other items, ADVA North America’s non-infringement of certain allegedly standard essential patents owned by Huawei and Huawei’s violation of its contractual commitments to negotiate in good faith and to license patents on fair, reasonable and non-discriminatory terms and conditions. If a claim of intellectual property infringement against us is successful and we fail to obtain a license or develop or license non-infringing technology, our business, operating results, financial condition and cash flows could be materially adversely affected.
Risks related to the regulatory environments in which we do business
Central Banks' monetary policy actions could increase our costs of borrowing money and negatively impact our financial condition and future operations.
Market interest rates are rising and are expected to continue to rise across the yield curve. Depending on future inflation levels, the rise of nominal interest rates may produce a rise in real interest rates. Higher interest rates resulting from tightening monetary policy are expected to increase credit costs and decrease credit availability. Increases in interest rates could increase our costs of borrowing money under certain of our debt facilities with variable interest rates, which would negatively impact our financial condition and future operations.
We see an increased risk to our liquidity due to the current instability in the financial services industry which could negatively impact our financial condition and future operations. This includes risk relating to our liquidity balances and investments, as well as risk relating to the financial stability of our customers and suppliers. We seek to only enter into transactions with creditworthy banks and financial institutions. To assess the creditworthiness of banks, we utilize current credit ratings from rating agencies, such as S&P, Moodyʼs and Fitch, as well as current default rates (credit default swaps). We are also in frequent dialogue with customers and suppliers to assess counterparty risks. Nevertheless, many of these transactions expose us to credit risk in the event of our counterparty’s default. Any such losses could be material and could materially and adversely affect our business, financial condition and results of operations.
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ITEM 6. EXHIBITS
Exhibits.
Exhibit No. |
Description |
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3.1 |
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3.2 |
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4.1 |
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10.1 |
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10.2 |
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10.3 |
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10.4 |
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10.5 |
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10.6 |
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10.7 |
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31* |
Rule 13a-14(a)/15d-14(a) Certifications |
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32* |
Section 1350 Certifications |
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101 |
The following financial statements from the Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022; (ii) Condensed Consolidated Statements of Loss for the three months ended March 31, 2023 and 2022; (iii) Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022; (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2023 and 2022; (v) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022; and (vi) Notes to Condensed Consolidated Financial Statements |
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104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
Represents a management compensation plan or arrangement
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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ADTRAN Holdings, Inc. (Registrant) |
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Date: March 15, 2024 |
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/s/ Ulrich Dopfer |
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Ulrich Dopfer |
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Chief Financial Officer |
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(Duly Authorized Officer and Principal Financial Officer) |
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Exhibit 31
CERTIFICATIONS
I, Thomas R. Stanton, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q/A of ADTRAN Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: March 15, 2024
/s/ Thomas R. Stanton |
Thomas R. Stanton |
Chief Executive Officer and Chairman of the Board |
CERTIFICATIONS
I, Ulrich Dopfer, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q/A of ADTRAN Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: March 15, 2024
/s/ Ulrich Dopfer |
Ulrich Dopfer |
Chief Financial Officer |
|
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Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ADTRAN Holdings, Inc. (the "Company") on Form 10-Q/A for the quarter ending March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas R. Stanton, Chief Executive Officer and Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods described therein.
/s/ Thomas R. Stanton |
Thomas R. Stanton |
Chief Executive Officer and Chairman of the Board |
March 15, 2024
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ADTRAN Holdings, Inc. (the "Company") on Form 10-Q/A for the quarter ending March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ulrich Dopfer, Senior Vice President of Finance and Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods described therein.
/s/ Ulrich Dopfer |
Ulrich Dopfer |
Chief Financial Officer |
March 15, 2024 |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
May 08, 2023 |
|
Cover [Abstract] | ||
Document Type | 10-Q/A | |
Amendment Flag | true | |
Document Period End Date | Mar. 31, 2023 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | ADTRAN Holdings, Inc. | |
Trading Symbol | ADTN | |
Entity Central Index Key | 0000926282 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 78,655,333 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Shell Company | false | |
Entity File Number | 001-41446 | |
Entity Tax Identification Number | 87-2164282 | |
Entity Address, Address Line One | 901 Explorer Boulevard | |
Entity Address, City or Town | Huntsville | |
Entity Address, State or Province | AL | |
Entity Address, Postal Zip Code | 35806-2807 | |
City Area Code | 256 | |
Local Phone Number | 963-8000 | |
Entity Incorporation, State or Country Code | DE | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Title of 12(b) Security | Common Stock, Par Value $0.01 per share | |
Security Exchange Name | NASDAQ | |
Amendment Description | ADTRAN Holdings, Inc. (“ADTRAN,” the “Company,” “we,” “us” or “our”) is filing this Amendment No. 2 on Form 10-Q/A (this “Amendment No. 2”) to amend and restate certain portions of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2023, as originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 10, 2023 (the "Original Filing") and subsequently amended on August 14, 2023 (“Amendment No. 1”).As previously disclosed in the Company's Current Report on Form 8-K filed with the SEC on February 20, 2024, the Audit Committee of the Board of Directors of the Company (the “Audit Committee”) concluded, after considering the recommendations of management, that the results attributable to the non-controlling interest and the net loss attributable to the Company and, as a consequence, the loss per common share attributable to the Company, were materially misstated in (i) the Company’s unaudited condensed consolidated financial statements as of and for the quarter ended March 31, 2023 included in Amendment No. 1, (ii) the Company’s unaudited condensed consolidated financial statements as of and for the quarter and six months period ended June 30, 2023 included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023 and (iii) the Company’s unaudited condensed consolidated financial statements as of and for the quarter and nine months period ended September 30, 2023 included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023, respectively (collectively, the “Non-Reliance Periods”), and that such financial statements should no longer be relied upon.The misstatements occurred following the effectiveness of the Domination Profit and Loss Transfer Agreement ("DPLTA") between the Company and the Company's majority-owned subsidiary, Adtran Networks SE (formerly ADVA Optical Networking SE and referred to herein as “ADVA”) upon the registration of the DPLTA with the commercial register on January 16, 2023. Pursuant to the DPLTA, the minority shareholders of Adtran Networks are guaranteed recurring cash compensation commencing with respect to the 2023 fiscal year. The Company incorrectly presented the guaranteed cash compensation attributable to the non-controlling interest as a loss rather than income attributable to the non-controlling interest during the Non-Reliance Periods. This error resulted in an overstatement of net loss attributable to the non-controlling interest and an understatement of net loss attributable to the Company and loss per common share attributable to ADTRAN Holdings, Inc. - basic and diluted. Additionally, the Company identified an error in the allocation of comprehensive income (loss) attributable to non-controlling interest. This error resulted in an understatement of comprehensive loss attributable to non-controlling interest and an overstatement of comprehensive loss attributable to the Company. This error also resulted in an understatement of additional paid-in capital and overstatement of accumulated other comprehensive income. In connection with the Q1 2023 restatement and the filing of this Amendment No. 2, the Company has also revised its condensed consolidated balance sheet and condensed consolidated statement of changes in equity as of December 31, 2022 to correct for an error that the Company determined was not material to the Company’s Q3, Q4 and full year 2022 consolidated financial statements as further described in Note 1 “Basis of Presentation”. Refer to Note 1, “Basis of Presentation”, of Notes to Condensed Consolidated Financial Statements of this Form 10-Q/A for additional information and for the summary of the accounting impacts of the restatement and revision adjustments to the Company’s condensed consolidated financial statements. As a result of the above described errors and the identification of the material weaknesses (as described in Item 4 of this Amendment No. 2), the Company is filing this Amendment No. 2 to (i) restate the disclosure on the effectiveness of the Company’s disclosure controls in Part I, Item 4 of Amendment No.1 to reflect the material weaknesses in the Company's internal control over financial reporting that existed as of March 31, 2023, (ii) restate the Company’s Condensed Consolidated Balance Sheets and the Condensed Consolidated Statement of Changes in Equity to reflect adjustments to additional paid-in capital and accumulated other comprehensive income (iii) restate the Company’s Condensed Consolidated Statements of Loss to reflect adjustments to net loss attributable to non-controlling interest, net loss attributable to the Company, and loss per common share attributable to the Company – basic and diluted, (iv) restate the Company’s Condensed Consolidated Statements of Comprehensive Loss to reflect adjustments to comprehensive income attributable to non-controlling interest and comprehensive loss attributable to the Company (v) restate two risk factors related to the Company's material weaknesses and restatements, (vi) restate the disclosure in Part I, Item 2, MD&A of Amendment No. 1 to reflect the adjustments discussed above and (vii) amend Part II – Item 6 (Exhibits) of Amendment No. 1 to include currently dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer as required by Section 302 and 906 of the Sarbanes-Oxley Act of 2002.Pursuant to Rule 12b-15 promulgated by the SEC under the Securities Exchange Act of 1934, as amended, the Company has included the entire text of Part I, Items 1, 2 and 4, as well as Part II, Items 1A and 6, of the Original Filing, as previously amended by Amendment No. 1, in this Amendment No. 2. There have been no changes to the text of Part I, Items 1, 2 and 4, or Part II, Items 1A and 6, other than the changes stated in the immediately preceding paragraph. Other than as described above and through the inclusion with this Amendment No. 2 of new certifications by management, this Amendment No. 2 speaks only as of the date of the Original Filing and does not amend, supplement, or update any information contained in the Original Filing, as amended by Amendment No. 1, to give effect to any subsequent events (including with respect to the cover page of the Original Filing, which has been updated only to present this filing as Amendment No. 2). Accordingly, this Amendment No. 2 should be read in conjunction with the Original Filing, Amendment No. 1, and our reports (including any amendments thereto) filed with the SEC subsequent to Amendment No. 1. |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Short-term investments, available-for-sale securities at fair value | $ 1,058 | $ 340 |
Accounts receivable, allowance for credit losses | 53 | 49 |
Long-term investments, available-for-sale securities fair value | $ 8,155 | $ 8,913 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 78,655,000 | 78,088,000 |
Common stock, shares outstanding | 78,361,000 | 77,889,000 |
Treasury stock, shares | 294,000 | 198,000 |
Condensed Consolidated Statements of Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||
Revenue | ||||
Total Revenue | $ 323,912 | $ 154,518 | ||
Cost of Revenue | ||||
Total Cost of Revenue | 236,104 | 100,202 | ||
Gross Profit | 87,808 | 54,316 | ||
Selling, general and administrative expenses | 67,397 | 27,893 | ||
Research and development expenses | 70,143 | 26,491 | ||
Operating Loss | (49,732) | (68) | ||
Interest and dividend income | 304 | 204 | ||
Interest expense | (3,287) | (30) | ||
Net investment gain (loss) | 1,252 | (3,415) | ||
Other expense, net | (303) | (226) | ||
Loss Before Income Taxes | (51,766) | (3,535) | ||
Income tax benefit | 11,313 | 2,408 | ||
Net Loss | (40,453) | (1,127) | ||
Less: Net Loss attributable to non-controlling interest | [1] | (370) | ||
Net Loss attributable to ADTRAN Holdings, Inc. | $ (40,083) | $ (1,127) | ||
Weighted average shares outstanding – basic | 78,358 | 49,113 | ||
Weighted average shares outstanding – diluted | 78,358 | 49,113 | ||
Loss per common share attributable to ADTRAN Holdings, Inc. - basic | $ (0.51) | $ (0.02) | ||
Loss per common share attributable to ADTRAN Holdings, Inc. - diluted | $ (0.51) | $ (0.02) | ||
Network Solutions [Member] | ||||
Revenue | ||||
Total Revenue | $ 282,418 | $ 138,374 | ||
Cost of Revenue | ||||
Total Cost of Revenue | 219,130 | 90,653 | ||
Gross Profit | 63,288 | 47,721 | ||
Services & Support [Member] | ||||
Revenue | ||||
Total Revenue | 41,494 | 16,144 | ||
Cost of Revenue | ||||
Total Cost of Revenue | 16,974 | 9,549 | ||
Gross Profit | $ 24,520 | $ 6,595 | ||
|
Condensed Consolidated Statements of Loss (Unaudited) (Parenthetical) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023
USD ($)
| ||||
Net loss attributable to non-controlling interest | $ (370) | [1] | ||
Annual recurring compensation earned | (2,809) | |||
Pre-DPLTA [Member] | ||||
Net loss attributable to non-controlling interest | 3,200 | |||
Post-DPLTA [Member] | ||||
Annual recurring compensation earned | $ 2,800 | |||
|
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Statement of Comprehensive Income [Abstract] | ||
Net Loss | $ (40,453) | $ (1,127) |
Other Comprehensive Income (Loss), net of tax | ||
Net unrealized gain (loss) on available-for-sale securities | 69 | (724) |
Defined benefit plan adjustments | 35 | (13) |
Foreign currency translation gain (loss) | 8,678 | (905) |
Other Comprehensive Income (Loss), net of tax | 8,782 | (1,642) |
Comprehensive Loss, net of tax | (31,671) | (2,769) |
Less: Comprehensive Income attributable to non-controlling interest | 12 | |
Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax | $ (31,683) | $ (2,769) |
Condensed Consolidated Statements of Changes in Equity (Unaudited) (Parenthetical) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Statement of Stockholders' Equity [Abstract] | ||
Dividend payments | $ 0.09 | $ 0.09 |
Summary of Significant Accounting Policies |
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Summary of Significant Accounting Policies | GENERAL ADTRAN Holdings, Inc. (“ADTRAN” or the “Company”) is a leading global provider of networking and communications platforms, software, systems and services focused on the broadband access market, serving a diverse domestic and international customer base in multiple countries that includes Tier-1, -2 and -3 Service Providers, alternative Service Providers, such as utilities, municipalities and fiber overbuilders, cable/MSOs, SMBs and distributed enterprises. Our innovative solutions and services enable voice, data, video and internet-communications across a variety of network infrastructures and are currently in use by millions worldwide. We support our customers through our direct global sales organization and our distribution networks. Our success depends upon our ability to increase unit volume and market share through the introduction of new products and succeeding generations of products having optimal selling prices and increased functionality as compared to both the prior generation of a product and to the products of competitors in order to gain market share. To service our customers and grow revenue, we are continually conducting research and developing new products addressing customer needs and testing those products for the specific requirements of the particular customers. We offer a broad portfolio of flexible software and hardware network solutions and services that enable Service Providers to meet today’s service demands, while enabling them to transition to the fully converged, scalable, highly-automated, cloud-controlled voice, data, internet and video network of the future. In addition to our global headquarters in Huntsville, Alabama, and our European headquarters in Munich, Germany, we have sales and research and development facilities in strategic global locations. In 2022, following the business combination (the “Business Combination”) with ADVA Optical Networking SE (“ADVA”), which included the Merger, we became the sole owner of and successor to ADTRAN, Inc. and the majority shareholder of ADVA. ADTRAN, Inc. is a leading global provider of open, disaggregated networking and communications solutions that enable voice, data, video, and internet communications across any network infrastructure. Its award-winning end-to-end fiber broadband solutions portfolio spans from OLTs to in-home services and intelligent SaaS solutions. ADVA is a global provider of open networking solutions with over 25 years of experience in optical networking, carrier Ethernet access and network synchronization. ADVA has led the industry for over two decades with open and secure networking solutions that carefully balance space, power and cost. Together, we serve customers in a broad range of industries in over 100 countries. Effectiveness of the Domination and Profit and Loss Transfer Agreement The DPLTA between the Company, as the controlling company, and ADVA Optical Networking SE, as the controlled company as executed on December 1, 2022, became effective on January 16, 2023, as a result of its registration with the commercial register (Handelsregister) of the local court (Amtsgericht) at the registered seat of ADVA (Jena). Under the DPLTA, subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, (i) the Company is entitled to issue binding instructions to the management board of ADVA, (ii) ADVA will transfer its annual profit to the Company, subject to, among other things, the creation or dissolution of certain reserves, and (iii) the Company will generally absorb the annual net loss incurred by ADVA. The obligation of ADVA to transfer its annual profit to the Company applies for the first time to the profit generated subsequent to January 16, 2023. Subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, the DPLTA provides that ADVA preferred shareholders be offered, at their election, (i) to put their ADVA shares to the Company in exchange for a compensation in cash of EUR 17.21 per share (the “Exit Compensation”), or (ii) to remain ADVA preferred shareholders and receive a recurring compensation in cash of EUR 0.59 (EUR 0.52 net under the current tax regime) per share for each full fiscal year of ADVA (the “Annual Recurring Compensation”). The Annual Recurring Compensation is due on the third banking day following the ordinary general shareholders’ meeting of ADVA for the respective preceding fiscal year (but in any event within eight months following expiration of the fiscal year) and is first granted for the 2023 fiscal year, payable for the first time after the ordinary general shareholders’ meeting of ADVA in 2024. The Annual Recurring Compensation payment is similar to a cumulative dividend, which does not require Board of Director approval as it is guaranteed under the DPLTA, and is accrued as a dividend liability when it is earned. The adequacy of both forms of compensation have been challenged by the preferred shareholders of ADVA via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (in each case, including interest thereon) than agreed upon in the DPLTA. The opportunity for the ADVA preferred shareholders to tender ADVA preferred shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger).
Board Approval Purchase of ADVA Common Stock On October 18, 2022, the Company's Board of Directors authorized the Company to purchase additional shares of ADVA through open market purchases not to exceed 15,346,544 shares. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements of ADTRAN Holdings, Inc. and its subsidiaries have been prepared pursuant to the rules and regulations of the SEC applicable to interim financial information presented in Quarterly Reports on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements are not included herein. The December 31, 2022 Condensed Consolidated Balance Sheet is derived from audited financial statements but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments necessary to fairly state these interim statements have been recorded and are of a normal and recurring nature. The results of operations for an interim period are not necessarily indicative of the results for the full year. The interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in ADTRAN Holdings, Inc. Annual Report on Form 10-K/A for the year ended December 31, 2022, filed with the SEC on August 14, 2023. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Significant estimates include allowance for credit losses on accounts receivable and contract assets, excess and obsolete inventory reserves, warranty reserves, customer rebates, determination and accrual of the deferred revenue related to performance obligations under contracts with customers, estimated costs to complete obligations associated with deferred and accrued revenues and network installations, estimated income tax provision and income tax contingencies, fair value of stock-based compensation, assessment of goodwill and other intangibles for impairment, estimated lives of intangible assets, estimates of intangible assets upon measurement, estimated pension liability and fair value of investments. Actual amounts could differ significantly from these estimates. We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of supply chain constraints, inflationary pressures, the energy crisis, currency fluctuations and political tensions as of March 31, 2023 and through the date of this report. The accounting matters assessed included, but were not limited to, the allowance for credit losses, stock-based compensation, carrying value of goodwill, intangibles and other long-lived assets, financial assets, valuation allowances for tax assets, revenue recognition and costs of revenue. Future conditions related to supply chain constraints, inflationary pressures, the energy crisis, rising interest rates, instability in the financial services industry, currency fluctuations and political tensions could result in further impacts to the Company's consolidated financial statements in future reporting periods. Revision of Previously Issued Financial Statements
During the fourth quarter of 2023, management identified an immaterial error relating to the understatement of non-controlling interest and the overstatement of accumulated other comprehensive income in the Consolidated Balance Sheet as of December 31, 2022. The immaterial misstatements occurred following the Business Combination between the Company and the Company's majority-owned subsidiary, Adtran Networks on July 15, 2022. The Company incorrectly presented the allocation of foreign currency translation loss attributable to the non-controlling interest during the year ended December 31, 2022. Management evaluated the impact of this error on the Company's full year 2022 consolidated financial statements and determined that the consolidated financial statements were not materially misstated. However, in order to correctly state non-controlling interest and accumulated other comprehensive income in connection with the filing of this Amendment No. 2, the December 31, 2022 balance sheet items have been corrected to reflect the impact of this immaterial error. The Company will revise its consolidated financial statements as of and for the year ended December 31, 2022 when it files its Form 10-K for the period ended December 31, 2023. The following table reflects the impact of the revision to the specific line items presented in the Company's previously reported Condensed Consolidated Balance Sheets and the Condensed Consolidated Statement of Changes in Equity as of December 31, 2022:
The accompanying applicable Notes have been updated to reflect the effects of the revision. Restatement of Previously Issued Financial Statements During the fourth quarter of 2023, the Company determined that it overstated loss attributable to the non-controlling interest, understated loss attributable to the Company, understated loss per common share attributable to ADTRAN Holdings, Inc. – basic and diluted, understated comprehensive loss attributable to non-controlling interest and overstated comprehensive loss attributable to ADTRAN Holdings, Inc., net of tax for the three months ended March 31, 2023. The misstatements occurred following the effectiveness of the DPLTA between the Company and the Company’s majority-owned subsidiary, Adtran Networks upon the registration of the DPLTA with the commercial register on January 16, 2023. Pursuant to the DPLTA, the minority shareholders of Adtran Networks are guaranteed recurring cash compensation commencing with respect to the 2023 fiscal year. The Company incorrectly presented the guaranteed cash compensation attributable to the non-controlling interest as a loss rather than income attributable to the non-controlling interest during the three months ended March 31, 2023. This error resulted in an overstatement of net loss attributable to the non-controlling interest, an understatement of net loss attributable to the Company and loss per common share attributable to ADTRAN Holdings, Inc. - basic and diluted, an understated comprehensive loss attributable to non-controlling interest and an overstated comprehensive loss attributable to ADTRAN Holdings, Inc., net of tax. Additionally, this error resulted in an understatement of additional paid-in capital and an overstatement of accumulated other comprehensive income. The Company restated the Condensed Consolidated Statements of Loss presented in this report by increasing net loss attributable to the Company by $5.6 million for the quarter ended March 31, 2023.
The following table reflects the impact of the restatement to the specific line items presented in the Company’s previously reported Condensed Consolidated Statements of Loss and the previously reported Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023:
The following table reflects the impact of the restatement, in addition to the revision of the December 31, 2022 balances referenced above, to the specific line items presented in the Company’s previously reported Condensed Consolidated Balance Sheets as of March 31, 2023 and the Condensed Consolidated Statement of Changes in Equity for the period ended March 31, 2023:
During the second quarter of 2023, the Company determined that it overstated total current liabilities and understated non-current liabilities as of March 31, 2023 and December 31, 2022, due to a revolving credit agreement being classified as a current liability instead of a non-current liability. The total amount of liabilities remains unchanged. The Company restated the March 31, 2023 Condensed Consolidated Balance Sheet presented in this report by decreasing current revolving credit agreements outstanding by $180.0 million and increasing non-current revolving credit agreement outstanding by $180.0 million. The following table reflects the impact of the restatement to the specific line items presented in the Company’s previously reported condensed consolidated financial statements as of March 31, 2023:
The accompanying applicable Notes have been updated to reflect the effects of the restatements as of March 31, 2023.
Redeemable Non-Controlling Interest As of March 31, 2023 and December 31, 2022, the ADVA stockholders’ equity ownership percentage in ADVA was approximately 34.6% and 34.7%, respectively. As a result of the effectiveness of the DPLTA on January 16, 2023, the ADVA shares, representing the equity interest in ADVA held by holders other than the Company, can be tendered at any time and are, therefore, redeemable and must be classified outside stockholders’ equity. Therefore, the permanent equity noncontrolling interest balance was reclassified to redeemable non-controlling interest ("RNCI") on January 16, 2023 and was remeasured to fair value based on the trading market price of the ADVA shares. Subsequently, the carrying value of the RNCI is adjusted to its maximum redemption value at each reporting date when the maximum redemption value is greater than the initial carrying amount of the redeemable noncontrolling interest. However, the RNCI will be remeasured using the current exchange rate at each reporting date as long as the RNCI is currently redeemable. For the period of time that the DPLTA is in effect, the RNCI will continue to be presented as redeemable non-controlling interest outside of stockholders’ equity in the condensed consolidated balance sheets. See Note 16 for additional information on RNCI. Recently Adopted Accounting Pronouncements In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which would require an acquirer to recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its pre-acquisition financial statements in accordance with Topic 606, Revenue Recognition. The Company early adopted ASU 2021-08 on July 1, 2022 and the standard was applied retrospectively beginning with January 1, 2022. Recent Accounting Pronouncements Not Yet Adopted There are currently no accounting pronouncements not yet adopted that are expected to have a material effect on the Condensed Consolidated Financial Statements. |
Business Combination |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination | 2. BUSINESS COMBINATION ADVA Optical Networking SE On August 30, 2021, ADTRAN and ADVA, entered into a Business Combination Agreement, pursuant to which both companies agreed to combine their respective businesses and each become subsidiaries of a new holding company, ADTRAN Holdings, Inc. (formerly known as Acorn HoldCo, Inc.) which was formed as a wholly-owned subsidiary of ADTRAN in order to consummate the transactions under the Business Combination Agreement. Under the terms of the Business Combination Agreement, on July 8, 2022, Acorn MergeCo, Inc, a Delaware corporation and wholly-owned direct subsidiary of the Company, merged with and into ADTRAN, Inc. leaving ADTRAN, Inc. surviving the merger as a wholly-owned direct subsidiary of the Company. Additionally, pursuant to the Business Combination Agreement, on July 15, 2022, the Company made a public offer to exchange each issued and outstanding no-par value bearer share of ADVA for 0.8244 shares of Company Common Stock, par value $0.01 per share of the Company. The Exchange Offer was settled on Exchange Offer Settlement Date, on which date the Company acquired 33,957,538 bearer shares of ADVA, or 65.43% of ADVA’s outstanding bearer shares as of the Exchange Offer Settlement Date, in exchange for the issuance of an aggregate of 27,994,595 shares of Company Common Stock. Additionally, pursuant to the Business Combination Agreement, ADVA stock option holders were entitled to have their ADVA stock options assumed by ADTRAN Holdings, Inc. (applying the exchange ratio in the Business Combination Agreement), thereafter representing options to acquire stock of ADTRAN, Inc. The fair value of the ADVA stock options assumed by ADTRAN, Inc. was $12.8 million, estimated using the Monte Carlo method. ADTRAN, Inc. and ADVA became subsidiaries of ADTRAN Holdings, Inc. as a result of the Business Combination. ADTRAN was determined to be the accounting acquirer of ADVA based on ADTRAN shareholders’ majority equity stake in the combined company, the composition of the board of directors and senior management of the combined company, among other factors. The Business Combination with ADVA has been accounted for using the acquisition method of accounting as per the provisions of Accounting Standards Codification 805, “Business Combinations” (“ASC 805”). The Business Combination Agreement used a fixed exchange ratio of Company Common Stock for ADVA shares of common stock, which resulted in a 36% equity stake for ADVA stockholders and a 64% equity stake for ADTRAN stockholders in the post-closing combined company (calculated on a fully diluted basis and utilizing the tender of 65.43% of ADVA’s current issued and outstanding share capital) as of July 15, 2022. Therefore, ADTRAN shareholders continued to hold a majority interest in the combined company following the completion of the Business Combination. Additionally, the Board of Directors is comprised of six members from ADTRAN and three members from ADVA; the current ADTRAN chief executive officer acts as the chairman of the Board of Directors and the former ADVA chief executive officer as the vice chairman of the Board of Directors. Additionally, the current ADTRAN chief executive officer and ADTRAN chief financial officer held these positions within the combined company immediately following the completion of the Business Combination. Based upon these and other considerations as outlined in ASC 805, ADTRAN represents the accounting acquirer. The following table summarizes the purchase price for the ADVA business combination:
(1) Represents the portion of replacement share-based payment awards that relates to pre-combination vesting. Assets acquired and liabilities assumed were recognized at their respective fair values as of July 15, 2022. In determining the fair value, the Company utilized various methods of the income, cost and market approaches depending on the asset or liability being fair valued. The estimation of fair value required significant judgment related to future net cash flows reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors. Inputs were generally determined by taking into account historical data, current and anticipated market conditions, and growth rates. Developed technology and customer relationships were valued using the multi-period excess earnings method. Backlog was valued using the distributor method. Significant assumptions used in the discounted cash flow analysis for (i) developed technology were the revenue growth rates, long-term revenue growth rate, discount rate, and earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins, obsolescence factors, income tax rate, tax depreciation, and economic depreciation; (ii) customer relationships were earnings before interest and taxes (“EBIT”) margins, contributory asset charges, and customer attrition rate; and (iii) backlog were EBIT margins, adjusted EBIT margins, and contributory asset charges. The allocation of the purchase price to the assets acquired and liabilities assumed was subject to adjustment within the measurement period (up to one year from the acquisition date). The measurement period adjustments since initial preliminary estimates resulted from changes to the fair value estimates of the acquired assets and assumed liabilities based on finalizing the valuations of inventory, prepaid expenses and other current assets, property plant and equipment, intangible assets, other non-current assets and deferred tax assets and liabilities. The cumulative effect of all measurement period adjustments resulted in a decrease to recognized goodwill of $8.7 million.
The following table summarizes the purchase price allocation for each major class of assets acquired and liabilities assumed in the acquisition of ADVA (in thousands):
The fair value of the assets acquired include accounts receivable of $114.7 million and other receivables of $1.5 million. The unpaid principal balance under these receivables is $118.5 million and $1.5 million, respectively. The difference between the fair value and the unpaid principal balance primarily represents amounts expected to be uncollectible. The fair value of the identifiable intangible assets acquired as of the acquisition date:
(1) Determination of the weighted average period of the individual categories of intangible assets was based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the period of time the assets are expected to contribute to future cash flows. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The ADVA acquisition resulted in the recognition of goodwill of $350.5 million, which the Company believes is attributable to the value driven by the Company’s expected growth of the business, synergies, and expanded market and product opportunities. Goodwill created as a result of the ADVA acquisition is not deductible for tax purposes. After the Business Combination, the chief operating decision maker assessed and will continue to assess the Company’s performance and allocate resources to its two segments (1) Network Solutions and (2) Services & Support. The goodwill resulting from the Business Combination of $272.8 million was allocated to the Network Solutions segment, and $77.7 million was allocated to the Services & Support segment. See Note 18 of the Notes to Consolidated Financial Statements, included in this Amendment No. 2 for more information about the Company’s segments. As of the acquisition date, the fair value of the non-controlling interest was approximately $316.4 million and determined using a market approach. As a portion of ADVA shares will remain trading after the Business Combination, the non-controlling interest was calculated using 17,941,496 ADVA shares held by non-controlling interest multiplied by the ADVA closing share price of €17.58 ($17.64 using the July 15, 2022 EUR to USD conversion rate of $1.00318) on July 15, 2022. The Company included the financial results of ADVA in its consolidated financial statements since July 15, 2022, the acquisition date. The net revenue and net loss from the ADVA business for the period January 1, 2023 to March 31, 2023, were $192.3 million and $25.4 million, respectively, which are included in the Company’s Consolidated Statement of Loss. The net loss attributable to non-controlling interest from the ADVA business for the three months ended March 31, 2023 was $6.0 million. As of March 31, 2023, the Company has incurred $26.1 million of transaction costs related to the Business Combination. During the three months ended March 31, 2023, we did t incur transaction costs related to the Business Combination. During the three months ended March 31, 2022, $1.5 million of transaction costs were incurred. These transaction costs are recorded in selling, general and administrative expense in the Consolidated Statements of Loss. Supplemental Pro Forma Information (Unaudited) The unaudited pro forma financial information in the table below summarizes the combined results of operations for ADTRAN and ADVA as though the Business Combination had occurred on January 1, 2022. The pro forma amounts have been adjusted for differences in basis of accounting which are determined before taking into effect the impacts of purchase accounting and Business Combination accounting impacts. The following unaudited pro forma information is presented for illustrative purposes only. It is not necessarily indicative of the results of operations of future periods, the results of operations that actually would have been realized had the entities been a single company as of January 1, 2022, or the future operating results of the combined entities. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition. The unaudited pro forma information also does not include any integration costs that the Company may incur related to the acquisition as part of combining the operations of the companies.
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Revenue |
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Revenue | 3. REVENUE The following is a description of the principal activities from which revenue is generated by reportable segment: Network Solutions Segment - Includes hardware and software products that enable a digital future which support the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions. Services & Support Segment - Includes network design, implementation, maintenance and cloud-hosted services supporting the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions. Revenue by Category In addition to the Company's reportable segments, revenue is also reported for the following three categories – Subscriber Solutions, Access & Aggregation Solutions and Optical Networking Solutions. Prior to the Business Combination with ADVA on July 15, 2022, ADTRAN reported revenue across the following three categories: (1) Access & Aggregation, (2) Subscriber Solutions & Experience and (3) Traditional & Other Products. Following the Business Combination with ADVA, we have recast these revenues such that ADTRAN’s former Access & Aggregation revenue is combined with a portion of the applicable ADVA solutions to create Access & Aggregation Solutions, ADTRAN’s former Subscriber Solutions & Experience revenue is combined with a portion of the applicable ADVA solutions to create Subscriber Solutions, and the revenue from Traditional & Other products is now included in the applicable Access & Aggregation Solutions or Subscriber Solutions category. Optical Networking Solutions is a new revenue category added to represent a meaningful portion of ADVA’s portfolio. Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at the customer premises while providing an immersive and interactive experience for residential, business and wholesale subscribers. This revenue category includes hardware- and software-based products and services. These solutions include fiber termination solutions for residential, business and wholesale subscribers, Wi-Fi access solutions for residential and business subscribers, Ethernet switching and network edge virtualization solutions for business subscribers, and cloud software solutions covering a mix of subscriber types. Our Access & Aggregation Solutions are solutions that are used by communications Service Providers to connect residential subscribers, business subscribers and mobile radio networks to the Service Providers’ metro network, primarily through fiber-based connectivity. This revenue category includes hardware- and software-based products and services. Our solutions within this category are a mix of fiber access and aggregation platforms, precision network synchronization and timing solutions, and access orchestration solutions that ensure highly reliable and efficient network performance. Our Optical Networking Solutions are used by communications Service Providers, internet content providers and large-scale enterprises to securely interconnect metro and regional networks over fiber. This revenue category includes hardware- and software-based products and services. Our solutions within this category include open optical terminals, open line systems, optical subsystems and modules, network infrastructure assurance systems, and automation platforms that are used to build high-scale, secure and assured optical networks. The following table disaggregates revenue by reportable segment and revenue category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:
The aggregate amount of transaction price allocated to remaining performance obligations that have not been satisfied as of March 31, 2023 and December 31, 2022 related to contractual maintenance agreements, contractual SaaS and subscription services, and hardware contracts that exceed one year in duration amounted to $389.0 million and $277.2 million, respectively. As of March 31, 2023, approximately 68% is expected to be recognized over the next 12 months and the remainder recognized thereafter. The majority of the Company's remaining performance obligations as of March 31, 2023 are related to contracts or orders that have an original expected duration of one year or less, for which the Company is electing to utilize the practical expedient available within the guidance, and are excluded from the transaction price related to these future obligations. The Company will generally satisfy the remaining performance obligations as we transfer control of the products ordered or services to our customers, excluding maintenance services, which are satisfied over time. The following table provides information about receivables, contract assets and unearned revenue from contracts with customers:
(1) Included in other receivables on the Condensed Consolidated Balance Sheets. The Company is party to a receivables purchase agreement with a third party financial institution (the “Factor”). As of March 31, 2023 and December 31, 2022, accounts receivable totaling $15.6 million and $14.9 million, respectively, were sold, of which $1.2 million was retained by the Factor in the reserve account. The balance in the reserve account is included in other assets on the Condensed Consolidated Balance Sheets. As of March 31, 2023 and December 31, 2022, the Company had an allowance for doubtful accounts related to factored accounts receivable totaling less than $0.1 million. The cost of receivables purchase agreement is included in interest expense in the Condensed Consolidated Statements of Loss and totaled $0.3 million for the three months ended March 31, 2023. Of the outstanding unearned revenue balances as of December 31, 2022, $25.6 million was recognized as revenue during the three months ended March 31, 2023. Of the $17.7 million of outstanding unearned revenue balances as of December 31, 2021, $5.4 million was recognized as revenue during the three months ended March 31, 2022. Accounts Receivable The Company records accounts receivable in the normal course of business as products are shipped or services are performed and invoiced, but payment has not yet been remitted by the customer. Accounts receivable balances are considered past due when payment has not been received by the date indicated on the relevant invoice or based on agreed upon terms between the customer and the Company. As of March 31, 2023 and December 31, 2022, the Company’s outstanding accounts receivable balance was $262.0 million and $279.4 million, respectively. The Company assessed the need for an allowance for credit losses related to its outstanding accounts receivable using the historical loss-rate method as well as assessing asset-specific risks. The assessment of asset-specific risks included the evaluation of relevant available information, from internal and external sources, relating to current conditions that may affect a customer’s ability to pay, such as the customer’s current financial condition, credit rating by geographic location, as provided by a third party and/or by customer, if needed, and the overall macro-economic conditions in which the customer operates. The Company pooled assets by geographic location to determine if an allowance should be applied to its accounts receivable balance, assessing the specific country risk rating and overall economics of that particular country. If elevated risk existed, or customer specific risk indicated the accounts receivable balance was at risk, the Company further analyzed the need for an allowance related to specific accounts receivable balances. Additionally, the Company determined that significant changes to customer country risk rating from period-to-period and from the end of the prior year to the end of the current quarter would require further review and analysis by the Company. The allowance for credit losses was $0.1 million and $49 thousand as of March 31, 2023 and December 31, 2022, respectively, related to accounts receivable. Contract Assets The Company records contract assets when it has recognized revenue but has not yet billed the customer. As of March 31, 2023 and December 31, 2022, the Company’s outstanding contract asset balance was $2.0 million and $1.9 million, respectively, which is included in other receivables on the Consolidated Balance Sheets. The Company assessed the need for an allowance for credit losses related to its outstanding contract assets using the historical loss-rate method as well as asset-specific risks. The Company’s historical losses related to contract assets receivable have been immaterial as evidenced by historical write-offs due to collectability. Asset-specific risk included the evaluation of relevant available information, from internal and external sources, relating to current conditions that may affect a customer’s ability to pay once invoiced, such as the customer’s financial condition, credit rating by geographic location as provided by a third party and/or by customer, if needed, and the overall macro-economic conditions in which the customer operates. The Company pooled assets by geographic location to determine if an allowance should be applied to its contract asset balance, assessing the specific country risk rating and the overall economics of that particular country. If elevated risk existed, or customer specific risk indicated the contract balance was at risk, the Company further analyzed the need for an allowance related to specific customer balances. Additionally, the Company determined that significant changes to customer country risk rating from period-to-period and from the end of the prior year to the end of the current quarter would be subject to further review and analysis by the Company. No allowance for credit losses was recorded for the three months ended March 31, 2023 and 2022 related to contract assets. |
Income Taxes |
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Income Taxes | 4. INCOME TAXES The Company's effective tax rate changed from a benefit of 68.1% of pre-tax income for the three months ended March 31, 2022, to a benefit of 21.9% of pre-tax income for the three months ended March 31, 2023. The change in the effective tax rate for the three months ended March 31, 2023, was driven primarily by a change in our estimated tax rate as a result of the closing of the Business Combination with ADVA during the third quarter of 2022, as well as the release of our domestic valuation allowance during the fourth quarter of 2022. The Company continually reviews the adequacy of its valuation allowance and recognizes the benefits of deferred tax assets only as the assessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with ASC 740, Income Taxes. As of March 31, 2023, the Company had net deferred tax assets totaling $35.0 million, and a valuation allowance totaling $5.2 million against those deferred tax assets. The remaining $29.8 million in deferred tax assets are primarily related to capitalized R&D expenses in the U.S., partially offset by net purchase price intangibles from the Business Combination closed with ADVA during the third quarter of 2022. Our assessment of the realizability of our deferred tax assets includes the evaluation of historical operating results as well as the evaluation of evidence which requires significant judgment, including the evaluation of our three-year cumulative income position, future taxable income projections and tax planning strategies. Should management’s conclusion change in the future and an additional valuation allowance, or a partial or full release of the valuation allowance becomes necessary, it may have a material effect on our consolidated financial statements.
Supplemental balance sheet information related to deferred tax assets (liabilities) is as follows:
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Stock-Based Compensation |
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Stock-Based Compensation | 5. STOCK-BASED COMPENSATION For the three months ended March 31, 2023 and 2022, stock-based compensation expense was $2.6 million and $1.9 million, respectively. PSUs, RSUs and Restricted Stock - ADTRAN Holdings, Inc. The following table summarizes the RSUs and restricted stock outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:
During the three months ended March 31, 2023, the Company granted 0.7 million performance-based PSUs to its executive officers and certain employees. The grant-date fair value of these performance-based awards was based on the closing price of the Company’s stock on the date of grant. These awards vest over a three-year period, subject to the grantee’s continued employment, with the ability to earn shares in a range of 0% to 150% of the awarded number of PSUs based on the achievement of defined performance targets. Equity-based compensation expense with respect to these awards may be adjusted over the vesting period to reflect the probability of achievement of performance targets defined in the award agreements. During the three months ended March 31, 2023, the Company granted 0.1 million performance-based PSUs to its executive officers. The grant-date fair value of these performance-based awards was based on the closing price of the Company’s stock on the date of grant. These awards vest over a two-year period, subject to the grantee’s continued employment, with the ability to earn shares in a range of 0% to 100% of the awarded number of PSUs based on the achievement of defined performance targets. Equity-based compensation expense with respect to these awards may be adjusted over the vesting period to reflect the probability of achievement of performance targets defined in the award agreements. The fair value of RSUs and restricted stock is equal to the closing price of its stock on the date of grant. The fair value of PSUs with market conditions is calculated using a Monte Carlo simulation valuation method. As of March 31, 2023, total unrecognized compensation expense related to non-vested market-based RSUs and restricted stock was approximately $24.6 million, which will be recognized over the remaining weighted-average period of 2.6 years. There was $11.9 million of unrecognized compensation expense related to unvested 2023 performance-based PSUs, which will be recognized over the remaining requisite service period of 2.6 years if achievement of the performance obligation becomes probable. Unrecognized compensation expense will be adjusted for actual forfeitures. As of March 31, 2023, 2.0 million shares were available for issuance under stockholder-approved equity plans. Stock Options - ADTRAN Holdings, Inc. The following table summarizes ADTRAN Holdings, Inc. stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:
As of March 31, 2023, there was $7.3 million of unrecognized compensation expense related to stock options which will be recognized over the remaining weighted-average period of 2.2 years. Pursuant to the Business Combination, which closed on July 15, 2022, ADVA stock option holders were entitled to have their ADVA stock options assumed by ADTRAN Holdings, Inc. (applying the exchange ratio in the Business Combination Agreement), thereafter representing options to acquire stock of ADTRAN Holdings, Inc. The maximum number of shares of ADTRAN Holdings, Inc. stock potentially issuable upon such assumption was 2.3 million shares. The period in which such options could be assumed ended July 22, 2022. A total of 2.1 million shares of ADTRAN Holdings, Inc. stock could be subject to assumed ADVA options. The determination of the fair value of stock options assumed by ADTRAN Holdings, Inc. was estimated using the Monte Carlo method and is affected by its stock price, as well as assumptions regarding a number of complex and subjective variables that may have a significant impact on the fair value estimate. The stock option pricing model requires the use of several assumptions that impact the fair value estimate. These variables include, but are not limited to, the volatility of the Company's stock price and employee exercise behaviors. All of the options were previously issued at exercise prices that approximated fair market value at the date of grant. The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the difference between ADTRAN’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2023. The amount of aggregate intrinsic value was $10.2 million as of March 31, 2023 and will change based on the fair market value of ADTRAN’s stock. The total pre-tax intrinsic value of options exercised during the three months ended March 31, 2023 was $43 thousand. Stock Options - ADVA Optical Networking SE The following table summarizes ADVA Optical Networking SE stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:
As of March 31, 2023, there was $0.1 million of unrecognized compensation expense related to stock options which will be recognized over the remaining weighted-average period of 3.8 years. All of the options were previously issued at exercise prices that approximated fair market value at the date of grant. The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the difference between ADVA's closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2023. The amount of aggregate intrinsic value was $1.2 million as of March 31, 2023 and will change based on the fair market value of ADVA's stock. |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | 6. INVESTMENTS Debt Securities and Other Investments The following debt securities and other investments were included on the Condensed Consolidated Balance Sheets and recorded at fair value:
The contractual maturities related to debt securities and other investments were as follows:
Actual maturities may differ from contractual maturities as some borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Realized gains and losses on sales of debt securities are computed under the specific identification method. The following table presents the gross realized gains and losses related to its debt securities:
Income generated from available-for-sale debt securities was recorded as interest and dividend income in the Condensed Consolidated Statements of Loss. No allowance for credit losses was recorded for the three months ended March 31, 2023 and 2022 related to available-for-sale debt securities. The Company’s investment policy provides limitations for issuer concentration, which limits, at the time of purchase, the concentration in any one issuer to 5% of the market value of its total investment portfolio. The Company did not purchase any available-for-sale debt security with credit deterioration during the three months ended March 31, 2023. Realized and unrealized gains and losses related to marketable equity securities were as follows:
Income generated from marketable equity securities was recorded as interest and dividend income in the Condensed Consolidated Statements of Loss. U.S. GAAP establishes a three-level valuation hierarchy based upon observable and unobservable inputs for fair value measurement of financial instruments:
Level 2 – Significant inputs that are observable; values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly; Level 3 – Significant unobservable inputs; values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs could include information supplied by investees. The Company’s cash equivalents and investments held at fair value are categorized into this hierarchy as follows:
The fair value of its Level 2 securities is calculated using a weighted average market price for each security. Market prices are obtained from a variety of industry standard data providers, large financial institutions and other third-party sources. These multiple market prices are used as inputs into a distribution-curve-based algorithm to determine the daily market value of each security. |
Inventory |
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Inventory | 7. INVENTORY Inventory consisted of the following:
Inventory reserves are established for estimated excess and obsolete inventory equal to the difference between the cost of the inventory and the estimated net realizable value of the inventory based on estimated reserve percentages, which considers historical usage, known trends, inventory age and market conditions. As of March 31, 2023 and December 31, 2022, inventory reserves were $73.3 million and $57.0 million, respectively. |
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Property, Plant and Equipment | 8. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following:
Long-lived assets used in operations are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the undiscounted cash flows estimated to be generated by the asset are less than the asset’s carrying value. During the three months ended March 31, 2023 and 2022, no impairment charges were recognized. Depreciation expense was $7.6 million and $2.8 million for the three months ended March 31, 2023 and 2022, respectively, which is recorded in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss. |
Goodwill |
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Goodwill Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | 9. GOODWILL The changes in the carrying amount of goodwill for the three months ended March 31, 2023 are as follows:
Related to the Business Combination with ADVA the Company recognized $350.5 million of goodwill upon the merger on July 15, 2022. Goodwill represents the excess purchase price over the fair value of net assets acquired. We qualitatively assess the carrying value of goodwill each reporting period for events or circumstance changes that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Based on its assessment of certain qualitative factors such as macro-economic conditions, industry and market considerations, costs factors and overall financial performance, management concluded that no such events or circumstance changes were identified that would suggest that the fair value of the goodwill was more likely than not greater than it's carrying amount as of March 31, 2023. No impairment of goodwill was recorded during the three months ended March 31, 2023 and 2022. |
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Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | 10. INTANGIBLE ASSETS Intangible assets consisted of the following:
Intangible assets are reviewed for impairment whenever events and circumstances indicate impairment may have occurred. The Company assessed impairment triggers related to intangible assets during each financial period in 2023 and 2022. As a result, no quantitative impairment test of long-lived assets was performed as of March 31, 2023 and 2022, and no impairment losses of intangible assets were recorded during the three months ended March 31, 2023 and 2022. Amortization expense was $25.8 million and $0.9 million in the three months ended March 31, 2023 and 2022, respectively, and was included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss. Estimated future amortization expense of intangible assets was as follows:
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Hedging | 11. HEDGING The Company has certain forward rate agreements to hedge foreign currency exposure of expected future cash flows in foreign currency. The Company does not hold or issue derivative instruments for trading or other speculative purposes. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. All changes in the fair value of derivative instruments are recognized as other income (expense) in the Consolidated Statements of Income. The derivative instruments are not subject to master netting agreements and are not offset in the Consolidated Balance Sheets. We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under forward exchange contracts and expect all counterparties to meet their obligations. We have not experienced credit losses from our counterparties. As of March 31, 2023, the Company had 53 forward rate contracts outstanding. Foreign Currency Hedging Agreement On November 3, 2022, the Company entered into a Euro/U.S. forward contract arrangement (the “Initial Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). The Initial Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, enables the Company to convert a portion of its Euro denominated payment obligations under the DPLTA into U.S. Dollars. Under the Initial Forward, the Company agreed to exchange an aggregate notional amount of $160.0 million U.S. dollars for Euros at a daily fixed forward rate ranging from $0.98286 to $1.03290. The aggregate amount of $160.0 million is divided into eight quarterly tranches of $20.0 million, commencing in the fourth quarter of 2022. The Company, at its sole discretion, may exchange all or part of each tranche on any given day within the applicable quarter; provided, however, that it must exchange the full tranche by the end of such quarter. The Initial Forward may be accelerated or terminated early for a number of reasons, including but not limited to (i) non-payment by the Company or the Hedge Counterparty, (ii) breach of representation or warranty or covenant by either party or (iii) insolvency or bankruptcy of either party. On March 21, 2023, the Company entered into a Euro/U.S. dollar forward contract arrangement (the “Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). Under the Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, the Company will exchange an aggregate notional amount of $160.0 million U.S. dollars for Euros at a daily fixed forward rate of $1.085 per €1.00 in average. During the three months ended March 31, 2023, the Company settled one $20.0 million forward contract tranche and the remaining will be divided into seven quarterly tranches of $20.0 million. These new forward contracts transacted on March 21, 2023 (to sell EUR/buy USD) were entered into for the purpose of unwinding the previously transacted forward contracts (to buy EUR/sell USD), transacted in November 2022. The drawdown dates of the original ratchet forwards are set to the same date as the maturity of the new offsetting forward contracts. The fair values of the Company's derivative instruments recorded in the Condensed Consolidated Balance Sheet as of March 31, 2023 and December 31, 2022 were as follows:
The change in the fair values of the Company's derivative instruments recorded in the Condensed Consolidated Statements of Income during the three months ended March 31, 2023 and 2022 were as follows:
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Revolving Credit Agreements |
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Revolving Credit Agreements | 12. REVOLVING CREDIT AGREEMENTS The carrying amounts of the Company's current and non-current revolving credit agreements in its Condensed Consolidated Balance Sheets were as follows:
As of March 31, 2023, the weighted average interest rate on our revolving credit agreements was 6.2%. Wells Fargo Credit Agreement On July 18, 2022, ADTRAN Holdings, Inc. and ADTRAN, Inc., as the borrower, entered into a credit agreement with a syndicate of banks, including Wells Fargo Bank, National Association, as administrative agent (“Administrative Agent”), and the other lenders named therein (the “Credit Agreement”). The Credit Agreement allowed for borrowings of up to $100 million in aggregate principal amount, but the borrowings increased to up to $400 million in aggregate principal amount upon the DPLTA becoming effective on January 16, 2023. The Credit Agreement replaced the Cadence Revolving Credit Agreement and the Wells Fargo Revolving Credit Agreement. In connection with the entry into the Credit Agreement, all outstanding borrowings under such credit agreements have been repaid and the agreements terminated. As of March 31, 2023, ADTRAN, Inc.’s borrowings under the revolving line of credit were $180.0 million. In addition, we may issue up to $25.0 million in letters of credit against our $400.0 million total facility. As of March 31, 2023, we had a total of $3.4 million in letters of credit under ADTRAN, Inc. outstanding against our eligible borrowings, leaving a net amount of $216.6 million available for future borrowings. Any future credit extensions under the Credit Agreement are subject to customary conditions precedent. The proceeds of any loans are expected to be used for general corporate purposes and to pay a portion of the Exchange Offer consideration. The Credit Agreement matures in July 2027 but provides the Company with an option to request extensions subject to customary conditions. All U.S. borrowings under the Credit Agreement (other than swingline loans, which will bear interest at the Base Rate (as defined below)) will bear interest, at the Company’s option, at a rate per annum equal to (A)(i) the highest of (a) the federal funds rate (i.e., for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the business day next succeeding such day) plus ½ of 1%, (b) the prime commercial lending rate of the Administrative Agent, as established from time to time at its principal U.S. office (which such rate is an index or base rate and will not necessarily be its lowest or best rate charged to its customers or other banks), and (c) the daily Adjusted Term SOFR (as defined in the Credit Agreement) for a one-month tenor plus 1%, plus (ii) the applicable rate, ranging from 0.5% to 1.25% (the “Base Rate”), or (B) the sum of the Adjusted Term SOFR (as defined in the Credit Agreement) plus the applicable rate, ranging from 1.4% to 2.15%, provided that such sum is subject to a 0.0% floor (such loans utilizing this interest rate, “SOFR Loans”). All E.U. borrowings under the Credit Agreement (other than swingline loans) will bear interest at a rate per annum equal to the sum of the Euro Interbank Offered Rate as administered by the European Money Markets Institute (or a comparable or successor administrator approved by the Administrative Agent) plus the applicable rate, ranging from 1.5% to 2.25%, provided that such sum is subject to a 0.0% floor (such loans utilizing this interest rate, “EURIBOR Loans”). The applicable rate is based on the consolidated net leverage ratio of the Company and its subsidiaries as determined pursuant to the terms of the Credit Agreement. Default interest is 2.00% per annum in excess of the rate otherwise applicable in the case of any overdue principal or any other overdue amount. In addition to paying interest on outstanding principal under the Credit Agreement, the Company is required to pay a commitment fee to the lenders under the Credit Agreement in respect of unutilized revolving loan commitments and an additional commitment ticking fee at a rate of 0.25% on the commitment amounts of each lender until the earliest of (i) the date of the Senior Credit Facilities Increase, (ii) the Company’s voluntary termination of the credit facility commitment, and (iii) December 31, 2023. The Company is also required to pay a participation fee to the Administrative Agent for the account of each lender with respect to the Company’s participation in letters of credit at the then applicable rate for SOFR Loans. The Credit Agreement permits the Company to prepay any or all of the outstanding loans or to reduce the commitments under the Credit Agreement without incurring premiums or penalties (except breakage costs with respect to SOFR Loans and EURIBOR Loans). The Credit Agreement contains customary affirmative and negative covenants, including incurrence covenants and certain other limitations on the ability of the Company and the Company’s subsidiaries to incur additional debt, guarantee other obligations, grant liens on assets, make investments, dispose of assets, pay dividends or other payments on capital stock, make restricted payments, engage in mergers or consolidations, engage in transactions with affiliates, modify its organizational documents, and enter into certain restrictive agreements. It also contains customary events of default (subject to customary cure periods and materiality thresholds). Furthermore, the Credit Agreement requires that the consolidated total net leverage ratio (as defined in the Credit Agreement) of the Company and its subsidiaries tested on the last day of each fiscal quarter not exceed 3.25 to 1.0 through September 30, 2024 and 2.75 to 1.00 from December 31, 2024 and thereafter, subject to certain exceptions. The Credit Agreement also requires that the consolidated interest coverage ratio (as defined in the Credit Agreement) of the Company and its subsidiaries tested on the last day of each fiscal quarter not fall below 3.00 to 1.00. As of March 31, 2023, the Company was in compliance with all material covenants. Finally, pursuant to a Collateral Agreement, dated as of July 18, 2022, among the Company, ADTRAN, Inc. and the Administrative Agent, ADTRAN, Inc.’s obligations under the Credit Agreement are secured by substantially all of the assets of ADTRAN, Inc. and the Company. In addition, the Company has guaranteed ADTRAN, Inc.’s obligations under the Credit Agreement pursuant to a Guaranty Agreement, dated as of July 18, 2022, by ADTRAN, Inc. and the Company in favor of the Administrative Agent. New Nord/LB Revolving Line of Credit On March 29, 2023, ADVA entered into a $16.1 million unsecured revolving line of credit with Norddeutsche Landesbark - Girozentrale (Nord/LB) that bears interest of Euro Short Term Rate plus 1.94%. The line of credit has a perpetual term that can be terminated by the Company or Nord/LB at any time. As of March 31, 2023, ADVA borrowed $10.8 million under this facility. Nord/LB Revolving Line of Credit On August 8, 2022, ADVA entered into a $16.1 million revolving line of credit with Norddeutsche Landesbark - Girozentrale (Nord/LB) that bears interest of Euro Short Term Rate plus 1.4% and which matures in August 2023. On January 31, 2023, the Company repaid the outstanding borrowings under the Nord/LB revolving line of credit. No amounts are available for future borrowings. Syndicated Credit Agreement Working Capital Line of Credit In September 2018, ADVA entered into a syndicated credit agreement with Bayerische Landesbank and Deutsche Bank AG Branch German Business to borrow up to $10.7 million as part of a working capital line of credit. On January 31, 2023, the Company repaid the outstanding borrowings under the syndicated credit agreement working capital line of credit. No amounts are available for future borrowings. DZ Bank Revolving Line of Credit In the fourth quarter of 2022, ADVA entered into a revolving line of credit with DZ Bank to borrow up to $9.1 million. Interest on the line of credit reset monthly based on renewal of the loan and was 2.8% at the time the loan was repaid. On March 12, 2023, the Company repaid the outstanding borrowings under the DZ Bank revolving line of credit. No amounts are available for future borrowings. |
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Notes Payable | 13. NOTES PAYABLE The carrying amounts of the Company's notes payable in its Condensed Consolidated Balance Sheets were as follows:
Syndicated Credit Agreement Note Payable In September 2018, ADVA entered into a syndicated credit agreement with Bayerische Landesbank and Deutsche Bank AG Branch German Business to borrow $63.7 million. On January 31, 2023, the Company repaid the outstanding borrowings under the syndicated credit agreement note payable. No amounts are available for future borrowings. |
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Employee Benefit Plans | 14. EMPLOYEE BENEFIT PLANS We maintain a defined benefit pension plan covering employees in certain foreign countries. In connection with the Business Combination, we acquired $29.6 million of additional obligations and $22.3 million of assets related to post-employment benefit plans for certain groups of employees at our new operations outside of the U.S. Plans vary depending on the legal, economic, and tax environments of the respective country. For defined benefit plans, accruals for pensions and similar commitments have been included in the results for this year. The new defined benefit plans are for employees in Switzerland, Italy, Israel and India: • In Switzerland, there are two defined benefit pension plans. Both plans provide benefits in the event of retirement, death or disability. The plan's benefits are based on age, years of service, salary and on a participants old age account. The plans are financed by contributions paid by the participants and by the Company. • In Italy, the post-employment benefit plan is required due to statutory provisions. The plan is financed directly by the Company on a pay as you go basis. Employees receive their pension payments as a function of salary, inflation and a notional account. • In Israel, there is a defined benefit pension plan that provides benefits in the event of a participant being dismissed involuntarily, retirement or death. The plan's benefits are based on the higher of the severance benefit required by law or the cash surrender value of the severance benefit component of any qualifying insurance policy or long-term employee benefit fund that is registered in the participants' name. The plan is financed by contributions paid by the Company. • In India, the post-employment benefit plan is required due to statutory provisions. The plan is financed directly by the Company on a pay as you go basis. The Company's net pension liability totaled $10.7 million and $10.6 million as of March 31, 2023 and December 31, 2022, respectively. The following table summarizes the components of net periodic pension cost related to a defined benefit pension plan covering employees in certain foreign countries:
The components of net periodic pension cost, other than the service cost component, are included in other income, net in the Condensed Consolidated Statements of Loss. Service cost is included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss. The Company made contributions to the defined benefit pension plans totaling $1.0 million and $0.5 million during the three months ending March 31, 2023 and 2022, respectively. Contributions to the defined benefit pension plans for the remainder of 2023 will be limited to benefit payments to retirees which are paid out of the operating cash flows of the Company and are expected to be approximately $3.3 million. |
Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | 15. EQUITY Accumulated Other Comprehensive Income (Loss) The following tables present the changes in accumulated other comprehensive income (loss), net of tax, by component:
The following tables present the details of reclassifications out of accumulated other comprehensive loss:
(1) A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss.
(1) A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss.
The following table presents the tax effects related to the change in each component of other comprehensive income (loss):
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Redeemable Non-controlling Interest | 16. REDEEMABLE NON-CONTROLLING INTEREST The following table summarizes the redeemable non-controlling interest activity for the three months ended March 31, 2023:
Annual Recurring Compensation payable on untendered outstanding shares under the DPLTA must be recognized as it accrues. For the three months ended March 31, 2023, we have recognized $2.8 million representing the current quarter's portion of the annual dividend to the redeemable non-controlling shareholders, which will be paid annually after the ordinary general shareholders' meeting of ADVA beginning in 2024. |
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Loss Per Share | 17. LOSS PER SHARE The calculation of basic and diluted loss per share is as follows:
For the three months ended March 31, 2023 and 2022, 0.1 million and five thousand shares, respectively, of unvested PSUs, RSUs and restricted stock were excluded from the calculation of diluted earnings per share due to their anti-dilutive effect. For the three months ended March 31, 2023 and 2022, 0.4 million and 0.1 million stock options, respectively, were outstanding but were not included in the computation of diluted earnings per share. These stock options were excluded because their exercise prices were greater than the average market price of the common shares during the applicable period, making them anti-dilutive under the treasury stock method. |
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Segment Information | 18. SEGMENT INFORMATION The chief operating decision maker regularly reviews the Company’s financial performance based on two reportable segments: (1) Network Solutions and (2) Services & Support. The Network Solutions segment includes hardware and software products that enable a digital future which support the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions. The Company's cloud-managed Wi-Fi gateways, virtualization software, and switches provide a mix of wired and wireless connectivity at the customer premises. In addition, its Carrier Ethernet products support a variety of applications at the network edge ranging from mobile backhaul to connecting enterprise customers (“Subscriber Solutions"). The Company's portfolio includes products for multi-gigabit service delivery over fiber or alternative media to homes and businesses. The Services & Support segment offers a comprehensive portfolio of network design, implementation, maintenance and cloud-hosted services supporting its Subscriber, Access and Aggregation, and Optical Networking Solutions. These services assist operators in the deployment of multi-vendor networks while reducing their cost to maintain these networks. The cloud-hosted services include a suite of SaaS applications under the Company's Mosaic One platform that manages end-to-end network and service optimization for both fiber access infrastructure and mesh Wi-Fi connectivity. The Company backs these services with a global support organization that offers on-site and off-site support services with varying SLAs. The performance of these segments is evaluated based on revenue, gross profit and gross margin; therefore, selling, general and administrative expenses, research and development expenses, interest and dividend income, interest expense, net investment (loss) gain, other income (loss), net and income tax benefit (expense) are reported on a Company-wide basis only. There is no inter-segment revenue. Asset information by reportable segment is not produced and, therefore, is not reported. The following table presents information about the revenue and gross profit of its reportable segments:
For the three months ended March 31, 2023 and 2022, $1.5 million and $0.2 million, respectively, of depreciation expense was included in gross profit for our Network Solutions segment. For the three months ended March 31, 2023 and 2022, $2 thousand and $3 thousand, respectively, of depreciation expense was included in gross profit for our Services & Support segment. Revenue by Category In addition to its reportable segments, revenue is also reported for the following three categories – Subscriber Solutions, Access & Aggregation Solutions, and Optical Networking Solutions. Prior to the Business Combination with ADVA on July 15, 2022, ADTRAN reported revenue across the following three categories: (1) Access & Aggregation, (2) Subscriber Solutions & Experience and (3) Traditional & Other Products. Following the Business Combination with ADVA, the Company has recast these revenues such that ADTRAN’s former Access & Aggregation revenue is combined with a portion of the applicable ADVA solutions to create Access & Aggregation Solutions, ADTRAN’s former Subscriber Solutions & Experience revenue is combined with a portion of the applicable ADVA solutions to create Subscriber Solutions, and the revenue from Traditional & Other products is now included in the applicable Access & Aggregation Solutions or Subscriber Solutions category. Optical Networking Solutions is a new revenue category added to represent a meaningful portion of ADVA’s portfolio. Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at the customer premises while providing an immersive and interactive experience for residential, business and wholesale subscribers. This revenue category includes hardware- and software-based products and services. These solutions include fiber termination solutions for residential, business and wholesale subscribers, Wi-Fi access solutions for residential and business subscribers, Ethernet switching and network edge virtualization solutions for business subscribers, and cloud software solutions covering a mix of subscriber types. Our Access & Aggregation Solutions are solutions that are used by communications Service Providers to connect residential subscribers, business subscribers and mobile radio networks to the Service Providers’ metro network, primarily through fiber-based connectivity. This revenue category includes hardware- and software-based products and services. Our solutions within this category are a mix of fiber access and aggregation platforms, precision network synchronization and timing solutions, and access orchestration solutions that ensure highly reliable and efficient network performance. Our Optical Networking Solutions are used by communications Service Providers, internet content providers and large-scale enterprises to securely interconnect metro and regional networks over fiber. This revenue category includes hardware- and software-based products and services. Our solutions within this category include open optical terminals, open line systems, optical subsystems and modules, network infrastructure assurance systems, and automation platforms that are used to build high-scale, secure and assured optical networks. The table below presents revenue information by category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:
Revenue by Geographic Area
The following table presents revenue information by geographic area:
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Liability for Warranty Returns |
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Product Warranties Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Warranty Returns | 19. LIABILITY FOR WARRANTY RETURNS The Company's products generally include warranties of 90 days to five years for product defects. The Company accrues for warranty returns at the time of product shipment based on its historical return rate and estimate of the cost to repair or replace the defective products. The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers. The increasing complexity of the Company's products may cause warranty incidences, when they arise, to be more costly. Estimates regarding future warranty obligations may change due to product failure rates, material usage and other rework costs incurred in correcting a product failure. In addition, from time to time, specific warranty accruals may be recorded if unforeseen problems arise. Should the Company's actual experience relative to these factors be worse than its estimates, the Company will be required to record additional warranty expense. The liability for warranty obligations totaled $7.2 million and $7.2 million as of March 31, 2023 and December 31, 2022, respectively, and is included in accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets. The warranty expense and write-off activity for the three months ended March 31, 2023 and 2022 are summarized as follows:
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 20. COMMITMENTS AND CONTINGENCIES Legal Matters From time to time the Company is subject to or otherwise involved in various lawsuits, claims, investigations and legal proceedings that arise out of or are incidental to the conduct of our business (collectively, “Legal Matters”), including those relating to employment matters, patent rights, regulatory compliance matters, stockholder claims, and contractual and other commercial disputes. Such Legal Matters, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Additionally, an unfavorable outcome in a legal matter, including in a patent dispute, could require the Company to pay damages, entitle claimants to other relief, such as royalties, or could prevent the Company from selling some of its products in certain jurisdictions. At this time, the Company is unable to predict the outcome of or estimate the possible loss or range of loss, if any, associated with such legal matters. DPLTA Exit Costs Pursuant to the terms of the DPLTA, each ADVA shareholder (other than the Company) has received an offer to elect either (1) to remain an ADVA shareholder and receive from us an Annual Recurring Compensation payment, or (2) to receive Exit Compensation. Assuming all of the minority holders of currently outstanding ADVA shares were to elect the second option, we are obligated to make aggregate Exit Compensation payments of approximately EUR 309.5 million or approximately $335.6 million, based on an exchange rate as of March 31, 2023. Shareholders electing the first option of Annual Recurring Compensation may later elect the second option. The opportunity for outside ADVA shareholders to tender ADVA shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger). Our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately EUR 10.5 million or $11.3 million (based on the current exchange rate) per year assuming none of the minority ADVA shareholders were to elect Exit Compensation. The foregoing amounts do not reflect any potential increase in payment obligations that we may have depending on the outcome of ongoing appraisal proceedings in Germany. During the three months ended March 31, 2023, we accrued $2.8 million in Annual Recurring Compensation, which was reflected as a reduction to retained earnings. Performance Bonds Certain contracts, customers and jurisdictions in which we do business require us to provide various guarantees of performance such as bid bonds, performance bonds and customs bonds. As of March 31, 2023 and December 31, 2022, we had commitments related to these bonds totaling $11.7 million and $22.0 million, respectively, which expire at various dates through April 2031. In general, we would only be liable for the amount of these guarantees in the event of default under each contract, the probability of which we believe is remote. Purchase Commitments The Company purchases components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. Our inventory purchase commitments are for short-term product manufacturing requirements as well as for commitments to suppliers to secure manufacturing capacity. Certain of our inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. As of March 31, 2023, purchase commitments totaled $459.3 million. |
Restructuring |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring | 21. RESTRUCTURING During the fourth quarter of 2022, the Company initiated a restructuring program designed to optimize the assets and business processes, and information technology systems of the Company in relation to the Business Combination with ADVA. The restructuring program is expected to maximize cost synergies by realizing operation scale, combining sales channels, streamlining corporate and general and administrative functions, including human capital resources and combining sourcing and production costs. In February 2019, the Company announced the restructuring of a certain portion of its workforce predominantly in Germany, which included the closure of the Company’s office location in Munich, Germany accompanied by relocation or severance benefits for the affected employees. Voluntary early retirement was offered to certain other employees and was announced in March 2019 and again in August 2020. This plan was completed in 2021 and all amounts were paid in 2022. A reconciliation of the beginning and ending restructuring liability, which is included in accrued wages and benefits in the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, is as follows:
Restructuring expenses included in the Condensed Consolidated Statements of (Loss) Income are for the three months ended March 31, 2023 and 2022:
The following table represents the components of restructuring expense by geographic area for the three months ended March 31, 2023 and 2022:
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Subsequent Events |
3 Months Ended |
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Mar. 31, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | 22. SUBSEQUENT EVENTS Dividend Approval On May 8, 2023, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.09 per common share to be paid to the Company’s stockholders of record as of the close of business on May 23, 2023. The payment date will be June 6, 2023 in the aggregate amount of approximately $7.1 million. Appointment of Ulrich Dopfer as Principal Accounting Officer As previously disclosed on the Company’s Form 8-K filed on March 30, 2023, Michael Foliano, formerly Senior Vice President of Finance and Chief Financial Officer of the Company, notified the Company of his intent to retire, effective June 28, 2023. Mr. Foliano served in his role as Chief Financial Officer of the Company through April 30, 2023. In connection with his transition, the Board of Directors appointed Ulrich Dopfer as Senior Vice President and Chief Financial Officer of the Company, effective May 1, 2023; however, Mr. Foliano continued to serve as the Company’s “principal accounting officer” within the meaning of the rules of the SEC under the Exchange Act (the “Principal Accounting Officer”), and as the Company’s Treasurer and Secretary. On May 10, 2023, the Board of Directors removed Mr. Foliano from such roles, designated Mr. Dopfer as the Company’s Principal Accounting Officer, and elected Mr. Dopfer as Treasurer and Secretary of the Company, effective as of such date. ADVA Legal Matter On May 8, 2023, ADVA and its U.S. subsidiary, ADVA Optical Networking North America Inc., filed a lawsuit in the U.S District Court for the Eastern District of Texas against Huawei Technologies Co. Ltd (“Huawei”) seeking a declaration from the court that Huawei violated contractual commitments to negotiate in good faith and to license patents, to the extent any patents are practiced by ADVA, on Fair, Reasonable and Non-Discriminatory (“FRAND”) terms and conditions. The case also seeks to obtain a ruling by the court that ADVA has complied with its own commitments and requests that the Court establish FRAND terms and conditions for obtaining a FRAND license on any standard essential patents that ADVA does in fact practice. The lawsuit also seeks to enjoin Huawei from enforcing certain of its patents against ADVA and its affiliates in other jurisdictions, and includes allegations by ADVA that it does not infringe five Huawei patents and that Huawei has infringed an ADVA patent. Huawei has not yet filed an answer in this matter. Given the current status of this matter, the Company is unable predict the outcome of or estimate the possible loss or range of loss, if any, associated with such legal matters. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements of ADTRAN Holdings, Inc. and its subsidiaries have been prepared pursuant to the rules and regulations of the SEC applicable to interim financial information presented in Quarterly Reports on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements are not included herein. The December 31, 2022 Condensed Consolidated Balance Sheet is derived from audited financial statements but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments necessary to fairly state these interim statements have been recorded and are of a normal and recurring nature. The results of operations for an interim period are not necessarily indicative of the results for the full year. The interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in ADTRAN Holdings, Inc. Annual Report on Form 10-K/A for the year ended December 31, 2022, filed with the SEC on August 14, 2023. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Significant estimates include allowance for credit losses on accounts receivable and contract assets, excess and obsolete inventory reserves, warranty reserves, customer rebates, determination and accrual of the deferred revenue related to performance obligations under contracts with customers, estimated costs to complete obligations associated with deferred and accrued revenues and network installations, estimated income tax provision and income tax contingencies, fair value of stock-based compensation, assessment of goodwill and other intangibles for impairment, estimated lives of intangible assets, estimates of intangible assets upon measurement, estimated pension liability and fair value of investments. Actual amounts could differ significantly from these estimates. We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of supply chain constraints, inflationary pressures, the energy crisis, currency fluctuations and political tensions as of March 31, 2023 and through the date of this report. The accounting matters assessed included, but were not limited to, the allowance for credit losses, stock-based compensation, carrying value of goodwill, intangibles and other long-lived assets, financial assets, valuation allowances for tax assets, revenue recognition and costs of revenue. Future conditions related to supply chain constraints, inflationary pressures, the energy crisis, rising interest rates, instability in the financial services industry, currency fluctuations and political tensions could result in further impacts to the Company's consolidated financial statements in future reporting periods |
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Revision of Previously Issued Financial Statements | Revision of Previously Issued Financial Statements
During the fourth quarter of 2023, management identified an immaterial error relating to the understatement of non-controlling interest and the overstatement of accumulated other comprehensive income in the Consolidated Balance Sheet as of December 31, 2022. The immaterial misstatements occurred following the Business Combination between the Company and the Company's majority-owned subsidiary, Adtran Networks on July 15, 2022. The Company incorrectly presented the allocation of foreign currency translation loss attributable to the non-controlling interest during the year ended December 31, 2022. Management evaluated the impact of this error on the Company's full year 2022 consolidated financial statements and determined that the consolidated financial statements were not materially misstated. However, in order to correctly state non-controlling interest and accumulated other comprehensive income in connection with the filing of this Amendment No. 2, the December 31, 2022 balance sheet items have been corrected to reflect the impact of this immaterial error. The Company will revise its consolidated financial statements as of and for the year ended December 31, 2022 when it files its Form 10-K for the period ended December 31, 2023. The following table reflects the impact of the revision to the specific line items presented in the Company's previously reported Condensed Consolidated Balance Sheets and the Condensed Consolidated Statement of Changes in Equity as of December 31, 2022:
The accompanying applicable Notes have been updated to reflect the effects of the revision. Restatement of Previously Issued Financial Statements During the fourth quarter of 2023, the Company determined that it overstated loss attributable to the non-controlling interest, understated loss attributable to the Company, understated loss per common share attributable to ADTRAN Holdings, Inc. – basic and diluted, understated comprehensive loss attributable to non-controlling interest and overstated comprehensive loss attributable to ADTRAN Holdings, Inc., net of tax for the three months ended March 31, 2023. The misstatements occurred following the effectiveness of the DPLTA between the Company and the Company’s majority-owned subsidiary, Adtran Networks upon the registration of the DPLTA with the commercial register on January 16, 2023. Pursuant to the DPLTA, the minority shareholders of Adtran Networks are guaranteed recurring cash compensation commencing with respect to the 2023 fiscal year. The Company incorrectly presented the guaranteed cash compensation attributable to the non-controlling interest as a loss rather than income attributable to the non-controlling interest during the three months ended March 31, 2023. This error resulted in an overstatement of net loss attributable to the non-controlling interest, an understatement of net loss attributable to the Company and loss per common share attributable to ADTRAN Holdings, Inc. - basic and diluted, an understated comprehensive loss attributable to non-controlling interest and an overstated comprehensive loss attributable to ADTRAN Holdings, Inc., net of tax. Additionally, this error resulted in an understatement of additional paid-in capital and an overstatement of accumulated other comprehensive income. The Company restated the Condensed Consolidated Statements of Loss presented in this report by increasing net loss attributable to the Company by $5.6 million for the quarter ended March 31, 2023.
The following table reflects the impact of the restatement to the specific line items presented in the Company’s previously reported Condensed Consolidated Statements of Loss and the previously reported Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023:
The following table reflects the impact of the restatement, in addition to the revision of the December 31, 2022 balances referenced above, to the specific line items presented in the Company’s previously reported Condensed Consolidated Balance Sheets as of March 31, 2023 and the Condensed Consolidated Statement of Changes in Equity for the period ended March 31, 2023:
During the second quarter of 2023, the Company determined that it overstated total current liabilities and understated non-current liabilities as of March 31, 2023 and December 31, 2022, due to a revolving credit agreement being classified as a current liability instead of a non-current liability. The total amount of liabilities remains unchanged. The Company restated the March 31, 2023 Condensed Consolidated Balance Sheet presented in this report by decreasing current revolving credit agreements outstanding by $180.0 million and increasing non-current revolving credit agreement outstanding by $180.0 million. The following table reflects the impact of the restatement to the specific line items presented in the Company’s previously reported condensed consolidated financial statements as of March 31, 2023:
The accompanying applicable Notes have been updated to reflect the effects of the restatements as of March 31, 2023. |
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Redeemable Non-Controlling Interest | Redeemable Non-Controlling Interest As of March 31, 2023 and December 31, 2022, the ADVA stockholders’ equity ownership percentage in ADVA was approximately 34.6% and 34.7%, respectively. As a result of the effectiveness of the DPLTA on January 16, 2023, the ADVA shares, representing the equity interest in ADVA held by holders other than the Company, can be tendered at any time and are, therefore, redeemable and must be classified outside stockholders’ equity. Therefore, the permanent equity noncontrolling interest balance was reclassified to redeemable non-controlling interest ("RNCI") on January 16, 2023 and was remeasured to fair value based on the trading market price of the ADVA shares. Subsequently, the carrying value of the RNCI is adjusted to its maximum redemption value at each reporting date when the maximum redemption value is greater than the initial carrying amount of the redeemable noncontrolling interest. However, the RNCI will be remeasured using the current exchange rate at each reporting date as long as the RNCI is currently redeemable. For the period of time that the DPLTA is in effect, the RNCI will continue to be presented as redeemable non-controlling interest outside of stockholders’ equity in the condensed consolidated balance sheets. See Note 16 for additional information on RNCI. |
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Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which would require an acquirer to recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its pre-acquisition financial statements in accordance with Topic 606, Revenue Recognition. The Company early adopted ASU 2021-08 on July 1, 2022 and the standard was applied retrospectively beginning with January 1, 2022. |
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Recent Accounting Pronouncements Not Yet Adopted | Recent Accounting Pronouncements Not Yet Adopted There are currently no accounting pronouncements not yet adopted that are expected to have a material effect on the Condensed Consolidated Financial Statements. |
Summary of significant accounting policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Impact of Revision to Specific Line Items in Consolidated Financial Statements | The following table reflects the impact of the revision to the specific line items presented in the Company's previously reported Condensed Consolidated Balance Sheets and the Condensed Consolidated Statement of Changes in Equity as of December 31, 2022:
The following table reflects the impact of the restatement to the specific line items presented in the Company’s previously reported Condensed Consolidated Statements of Loss and the previously reported Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023:
The following table reflects the impact of the restatement, in addition to the revision of the December 31, 2022 balances referenced above, to the specific line items presented in the Company’s previously reported Condensed Consolidated Balance Sheets as of March 31, 2023 and the Condensed Consolidated Statement of Changes in Equity for the period ended March 31, 2023:
The following table reflects the impact of the restatement to the specific line items presented in the Company’s previously reported condensed consolidated financial statements as of March 31, 2023:
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Business Combination (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Purchase Price for Business Combination | The following table summarizes the purchase price for the ADVA business combination:
(1) Represents the portion of replacement share-based payment awards that relates to pre-combination vesting. |
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Summary of Purchase Price Allocation of Assets Acquired and Liabilities Assumed | The following table summarizes the purchase price allocation for each major class of assets acquired and liabilities assumed in the acquisition of ADVA (in thousands):
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Summary of Fair Value of Intangible Assets Acquired | The fair value of the identifiable intangible assets acquired as of the acquisition date:
(1) Determination of the weighted average period of the individual categories of intangible assets was based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the period of time the assets are expected to contribute to future cash flows. |
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Summary of Unaudited Pro Forma Financial Information | The unaudited pro forma information also does not include any integration costs that the Company may incur related to the acquisition as part of combining the operations of the companies.
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Revenue (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregate of Revenue by Reportable Segment and Revenue Category | The following table disaggregates revenue by reportable segment and revenue category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:
The table below presents revenue information by category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:
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Information about Receivables, Contract Assets, and Unearned Revenue from Contracts with Customers | The following table provides information about receivables, contract assets and unearned revenue from contracts with customers:
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Income Taxes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Supplemental Balance Sheet Information Related to Deferred Tax Assets (Liabilities) | Supplemental balance sheet information related to deferred tax assets (liabilities) is as follows:
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Stock-Based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation Expense Related to Stock Options, RSUs and Restricted Stock | The following table summarizes the RSUs and restricted stock outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:
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Summary of Stock Options Outstanding | The following table summarizes ADTRAN Holdings, Inc. stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:
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ADVA Optical Networking SE [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Options Outstanding | The following table summarizes ADVA Optical Networking SE stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:
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Investments (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities and Other Investments, Included on Condensed Consolidated Balance Sheet and Recorded at Fair Value | Debt Securities and Other Investments The following debt securities and other investments were included on the Condensed Consolidated Balance Sheets and recorded at fair value:
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Contractual Maturities of Debt Securities and Other Investments | The contractual maturities related to debt securities and other investments were as follows:
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Gross Realized Gains and Losses on Sale of Debt Securities | The following table presents the gross realized gains and losses related to its debt securities:
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Realized and Unrealized Gains and Losses related to Marketable Equity Securities | Realized and unrealized gains and losses related to marketable equity securities were as follows:
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Cash Equivalents and Investments held at Fair Value | The Company’s cash equivalents and investments held at fair value are categorized into this hierarchy as follows:
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Inventory (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Inventory | Inventory consisted of the following:
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Property, Plant and Equipment (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | Property, plant and equipment consisted of the following:
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Goodwill (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Changes in Carrying Amount of Goodwill | The changes in the carrying amount of goodwill for the three months ended March 31, 2023 are as follows:
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Intangible Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Intangible Assets | Intangible assets consisted of the following:
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Estimated Future Amortization Expense Related to Intangible Assets | Estimated future amortization expense of intangible assets was as follows:
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Hedging (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Values of Derivative Instruments | The fair values of the Company's derivative instruments recorded in the Condensed Consolidated Balance Sheet as of March 31, 2023 and December 31, 2022 were as follows:
The change in the fair values of the Company's derivative instruments recorded in the Condensed Consolidated Statements of Income during the three months ended March 31, 2023 and 2022 were as follows:
|
Revolving Credit Agreement (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Amount Current and Non-current of Revolving Agreement | The carrying amounts of the Company's current and non-current revolving credit agreements in its Condensed Consolidated Balance Sheets were as follows:
|
Notes Payable (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Amounts of Notes Payables | The carrying amounts of the Company's notes payable in its Condensed Consolidated Balance Sheets were as follows:
|
Employee Benefit Plans (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the Components of Net Periodic Pension Cost | The following table summarizes the components of net periodic pension cost related to a defined benefit pension plan covering employees in certain foreign countries:
|
Equity (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Accumulated Other Comprehensive Income (Loss), Net of Tax, by Component | The following tables present the changes in accumulated other comprehensive income (loss), net of tax, by component:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications Out of Accumulated Other Comprehensive Loss | The following tables present the details of reclassifications out of accumulated other comprehensive loss:
(1) A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss.
(1)
A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss. |
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Tax Effects Related to the Change in Each Component of Other Comprehensive Income (Loss) | The following table presents the tax effects related to the change in each component of other comprehensive income (loss):
|
Redeemable Non-controlling Interest (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable Noncontrolling Interest, Equity, Carrying Amount [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Redeemable Non-controlling Interest Activity | The following table summarizes the redeemable non-controlling interest activity for the three months ended March 31, 2023:
|
Loss Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Calculation of Basic and Diluted Loss Per Share | The calculation of basic and diluted loss per share is as follows:
|
Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue and Gross Profit of Reportable Segments | The following table presents information about the revenue and gross profit of its reportable segments:
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Disaggregate of Revenue by Reportable Segment and Revenue Category | The following table disaggregates revenue by reportable segment and revenue category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:
The table below presents revenue information by category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:
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Revenue Information by Geographic Area | The following table presents revenue information by geographic area:
|
Liability for Warranty Returns (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranties Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Warranty Expense and Write-off Activity | The warranty expense and write-off activity for the three months ended March 31, 2023 and 2022 are summarized as follows:
|
Restructuring (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Reconciliation of Restructuring Liability | A reconciliation of the beginning and ending restructuring liability, which is included in accrued wages and benefits in the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, is as follows:
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Schedule of Components of Restructuring Expenses | Restructuring expenses included in the Condensed Consolidated Statements of (Loss) Income are for the three months ended March 31, 2023 and 2022:
The following table represents the components of restructuring expense by geographic area for the three months ended March 31, 2023 and 2022:
|
Summary of Significant Accounting Policies - Summary of Impact of Revision to Specific Line Items in Condensed Consolidated Balance Sheets and Condensed Consolidated Statement of Changes in Equity (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|---|---|
Additional Paid-in Capital | $ 782,760 | $ 895,834 | ||
Accumulated Other Comprehensive Income | 34,526 | 26,126 | ||
Non-Controlling Interest | 329,659 | |||
Total Equity | 820,162 | 1,303,613 | $ 352,316 | $ 357,102 |
As Reported [Member] | ||||
Additional Paid-in Capital | 762,035 | |||
Accumulated Other Comprehensive Income | 55,251 | 46,713 | ||
Non-Controlling Interest | 309,072 | |||
Total Equity | 820,162 | 1,303,613 | ||
Adjustment [Member] | ||||
Additional Paid-in Capital | 20,725 | |||
Accumulated Other Comprehensive Income | $ (20,725) | (20,587) | ||
Non-Controlling Interest | $ 20,587 |
Summary of Significant Accounting Policies - Summary of Impact of Revision to Specific Line Items in Consolidated Financial Statements (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Revolving credit agreements outstanding | $ 10,843 | $ 35,936 |
Total Current Liabilities | 342,204 | 428,575 |
Non-current revolving credit agreement outstanding | 180,000 | $ 60,000 |
As Reported [Member] | ||
Revolving credit agreements outstanding | 190,843 | |
Total Current Liabilities | 522,204 | |
Adjustment [Member] | ||
Revolving credit agreements outstanding | (180,000) | |
Total Current Liabilities | (180,000) | |
Non-current revolving credit agreement outstanding | $ 180,000 |
Business Combination - Additional Information (Details) $ / shares in Units, $ in Thousands |
3 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Jul. 15, 2022
USD ($)
$ / shares
|
Aug. 30, 2021
USD ($)
$ / shares
shares
|
Mar. 31, 2023
USD ($)
$ / shares
shares
|
Mar. 31, 2022
USD ($)
|
Dec. 31, 2022
USD ($)
$ / shares
shares
|
Aug. 30, 2021
€ / shares
shares
|
|||
Business Acquisition [Line Items] | ||||||||
Common stock, par value | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |||||
Common stock, shares outstanding | shares | 78,361,000 | 77,889,000 | ||||||
Common stock, reserved for future issuance | shares | 27,994,595 | 27,994,595 | ||||||
Goodwill | $ 385,755 | $ 381,724 | ||||||
Total Revenue | 323,912 | $ 154,518 | ||||||
Net loss attributable to ADTRAN Holdings, Inc. | (40,083) | (1,127) | ||||||
Net loss attributable to non-controlling interest | [1] | (370) | ||||||
Decrease in goodwill | $ 8,700 | |||||||
Network Solutions [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Goodwill | 301,419 | 298,280 | ||||||
Total Revenue | 282,418 | 138,374 | ||||||
Services & Support [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Goodwill | 84,336 | $ 83,444 | ||||||
Total Revenue | 41,494 | 16,144 | ||||||
Common Stock [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Percentage of common stock exchanged | 64.00% | |||||||
ADVA Optical Networking SE [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Business combination date of agreement | Aug. 30, 2021 | |||||||
Common stock, shares outstanding | shares | 33,957,538 | 33,957,538 | ||||||
Percentage of outstanding bearer shares | 65.43% | |||||||
Fair value of stock options assumed | $ 12,800 | |||||||
Goodwill | 350,458 | 350,500 | ||||||
Accounts receivable | 114,659 | |||||||
Other receivables | 1,457 | |||||||
Unpaid principal balance of account receivable | 118,500 | |||||||
Unpaid principal balance of other receivable | 1,500 | |||||||
Fair value of noncontrolling interest | 316,415 | |||||||
Total Revenue | 192,300 | |||||||
Net loss attributable to ADTRAN Holdings, Inc. | $ 25,400 | |||||||
Net loss attributable to non-controlling interest | 6,000 | |||||||
Shares held by noncontrolling interest | shares | 17,941,496 | 17,941,496 | ||||||
Closing share price | (per share) | $ 20.2 | $ 17.64 | € 17.58 | |||||
Currency conversion rate | 1.00318 | |||||||
ADVA Optical Networking SE [Member] | Selling, General and Administrative Expense [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Transaction costs incurred | 26,100 | |||||||
Transaction costs related to the business combination | $ 0 | $ 1,500 | ||||||
ADVA Optical Networking SE [Member] | Network Solutions [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Goodwill | $ 272,800 | |||||||
ADVA Optical Networking SE [Member] | Services & Support [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Goodwill | $ 77,700 | |||||||
ADVA Optical Networking SE [Member] | Common Stock [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Number of shares issuable for each share of acquired entity | shares | 0.8244 | |||||||
Percentage of common stock exchanged | 36.00% | |||||||
|
Business Combination - Summary of Purchase Price for Business Combination (Details) - ADVA Optical Networking SE [Member] $ / shares in Units, $ in Thousands |
Jul. 15, 2022
USD ($)
$ / shares
shares
|
Aug. 30, 2021
$ / shares
|
Aug. 30, 2021
€ / shares
|
---|---|---|---|
Business Acquisition [Line Items] | |||
ADVA shares exchanged | shares | 33,957,538 | ||
Exchange ratio | 0.8244 | ||
ADTRAN Holdings, Inc. shares issued | shares | 27,994,595 | ||
ADTRAN Holdings, Inc. share price on July 15, 2022 | (per share) | $ 20.2 | $ 17.64 | € 17.58 |
Purchase price paid for ADVA shares | $ 565,491 | ||
Equity compensation | 12,769 | ||
Total purchase price | $ 578,260 |
Business Combination - Summary of Purchase Price Allocation of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
Jul. 15, 2022 |
---|---|---|---|
Net Assets: | |||
Goodwill | $ 385,755 | $ 381,724 | |
ADVA Optical Networking SE [Member] | |||
Business Acquisition [Line Items] | |||
Total purchase price | $ 578,260 | ||
Noncontrolling interest | 316,415 | ||
Net Assets: | |||
Cash and cash equivalents | 44,003 | ||
Accounts receivable | 114,659 | ||
Other receivables | 1,457 | ||
Inventory | 200,331 | ||
Prepaid expenses and other current assets | 28,208 | ||
Property plant and equipment | 55,480 | ||
Deferred tax assets | 1,759 | ||
Intangibles | 403,780 | ||
Other non-current assets | 31,074 | ||
Accounts payable | (98,587) | ||
Current unearned revenue | (26,047) | ||
Accrued expenses and other liabilities | (59,600) | ||
Current portion of notes payable | (25,254) | ||
Income tax payable, net | (4,898) | ||
Tax liabilities | (1,400) | ||
Non-current unearned revenue | (11,498) | ||
Pension liability | (6,820) | ||
Other non-current liabilities | (6,094) | ||
Non-current portion of revolving credit agreements and notes payable | (15,250) | ||
Non-current lease obligations | (20,046) | ||
Deferred tax liabilities | (61,040) | ||
Total net assets acquired | 544,217 | ||
Goodwill | $ 350,500 | $ 350,458 |
Business Combination - Summary of Fair Value of Intangible Assets Acquired (Details) - ADVA Optical Networking SE [Member] $ in Thousands |
Jul. 15, 2022
USD ($)
|
|||
---|---|---|---|---|
Business Acquisition [Line Items] | ||||
Fair value | $ 403,780 | |||
Cost of Revenue [Member] | Network Solutions [Member] | Developed Technology [Member] | ||||
Business Acquisition [Line Items] | ||||
Estimated-average useful life (in years) | 8 years 6 months | [1] | ||
Fair value | $ 291,925 | |||
Cost of Revenue [Member] | Network Solutions and Services & Support [Member] | Backlog [Member] | ||||
Business Acquisition [Line Items] | ||||
Estimated-average useful life (in years) | 1 year 4 months 24 days | [1] | ||
Fair value | $ 52,165 | |||
Selling, General and Administrative Expense [Member] | Customer Relationships [Member] | ||||
Business Acquisition [Line Items] | ||||
Estimated-average useful life (in years) | 10 years 6 months | [1] | ||
Fair value | $ 32,704 | |||
Selling, General and Administrative Expense [Member] | Trade Name [Member] | ||||
Business Acquisition [Line Items] | ||||
Estimated-average useful life (in years) | 2 years 9 months 18 days | [1] | ||
Fair value | $ 26,986 | |||
|
Business Combination - Summary of Unaudited Pro Forma Financial Information (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2022
USD ($)
| |
Business Combinations [Abstract] | |
Revenue | $ 345,844 |
Net loss | $ (73,489) |
Cash, Cash Equivalents and Restricted Cash - Summary of Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Cash and Cash Equivalents [Abstract] | ||
Cash and cash equivalents | $ 136,457 | $ 108,644 |
Revenue - Additional Information (Detail) |
3 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Mar. 31, 2023
USD ($)
Category
|
Mar. 31, 2022
USD ($)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2022
USD ($)
|
|||
Revenue [Line Items] | ||||||
Number of categories | Category | 3 | |||||
Accounts receivable, net | $ 262,043,000 | $ 279,435,000 | ||||
Accounts receivable, allowance for credit losses | 53,000 | 49,000 | ||||
Allowance for credit losses related to contract assets | 0 | $ 0 | ||||
Contract assets | [1] | 1,972,000 | 1,852,000 | |||
Recognized revenue | 25,600,000 | $ 5,400,000 | $ 17,700,000 | |||
Factor [Member] | Purchase Agreement [Member] | ||||||
Revenue [Line Items] | ||||||
Accounts receivable sold | 15,600,000 | 14,900,000 | ||||
Factor [Member] | Purchase Agreement [Member] | Interest expense [Member] | ||||||
Revenue [Line Items] | ||||||
Cost of receivables | 300,000 | |||||
Factor [Member] | Purchase Agreement [Member] | Maximum [Member] | ||||||
Revenue [Line Items] | ||||||
Accounts receivable, allowance for credit losses | 100,000 | 100,000 | ||||
Factor [Member] | Purchase Agreement [Member] | Other Assets [Member] | ||||||
Revenue [Line Items] | ||||||
Accounts receivable gross | 1,200,000 | |||||
Contractual Maintenance Agreements, Contractual SaaS and Subscription Services and Hardware Orders [Member] | ||||||
Revenue [Line Items] | ||||||
Remaining performance obligations | $ 389,000,000 | $ 277,200,000 | ||||
|
Revenue - Disaggregate of Revenue by Reportable Segment and Revenue Category (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Disaggregation Of Revenue [Line Items] | ||
Revenue | $ 323,912 | $ 154,518 |
Subscriber Solutions | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 79,336 | 56,722 |
Access & Aggregation Solutions [Member] | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 96,820 | 97,796 |
Optical Networking Solutions | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 147,756 | |
Network Solutions [Member] | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 282,418 | 138,374 |
Network Solutions [Member] | Subscriber Solutions | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 70,287 | 52,390 |
Network Solutions [Member] | Access & Aggregation Solutions [Member] | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 84,554 | 85,984 |
Network Solutions [Member] | Optical Networking Solutions | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 127,577 | |
Services & Support [Member] | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 41,494 | 16,144 |
Services & Support [Member] | Subscriber Solutions | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 9,049 | 4,332 |
Services & Support [Member] | Access & Aggregation Solutions [Member] | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 12,266 | $ 11,812 |
Services & Support [Member] | Optical Networking Solutions | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | $ 20,179 |
Revenue - Additional Information (Detail1) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2023-04-01 |
Mar. 31, 2023 |
---|---|
Revenue [Line Items] | |
Remaining performance obligations, percentage | 68.00% |
Remaining performance obligations, period | 12 months |
Revenue - Information about Receivables, Contract Assets, and Unearned Revenue from Contracts with Customers (Detail) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
||
---|---|---|---|---|
Revenue from Contract with Customer [Abstract] | ||||
Accounts receivable, net | $ 262,043 | $ 279,435 | ||
Contract assets | [1] | 1,972 | 1,852 | |
Unearned revenue | 55,611 | 41,193 | ||
Non-current unearned revenue | $ 24,907 | $ 19,239 | ||
|
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Income Tax Disclosure [Line Items] | |||
Effective tax rate benefit | 21.90% | 68.10% | |
Deferred tax assets | $ 34,982 | $ 11,411 | |
Valuation allowance established against deferred tax assets | 5,201 | 5,201 | |
Net deferred tax assets | 29,800 | ||
Domestic [Member] | |||
Income Tax Disclosure [Line Items] | |||
Deferred tax assets | 75,432 | 61,726 | |
Valuation allowance established against deferred tax assets | 3,177 | 3,177 | |
Net deferred tax assets | 72,255 | 58,549 | |
International [Member] | |||
Income Tax Disclosure [Line Items] | |||
Valuation allowance established against deferred tax assets | $ 2,024 | $ 2,024 |
Income Taxes - Summary of Supplemental Balance Sheet Information Related to Deferred Tax Assets (Liabilities) (Detail) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Operating Loss Carryforwards [Line Items] | ||
Deferred Tax Assets | $ 34,982 | $ 11,411 |
Valuation Allowance | (5,201) | (5,201) |
Deferred Tax Assets, net | 29,800 | |
Net Deferred Tax Assets (Liabilities) | 29,781 | 6,210 |
Domestic [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Deferred Tax Assets | 75,432 | 61,726 |
Valuation Allowance | (3,177) | (3,177) |
Deferred Tax Assets, net | 72,255 | 58,549 |
International [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Deferred Tax Liabilities | (40,450) | (50,315) |
Valuation Allowance | (2,024) | (2,024) |
Deferred Tax Liabilities, net | $ (42,474) | $ (52,339) |
Stock-Based Compensation - Stock-Based Compensation Expense Related to Stock Options, RSUs and Restricted Stock (Detail) shares in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2023
$ / shares
shares
| |
Share-Based Payment Arrangement [Abstract] | |
Number of Shares, Unvested RSUs and restricted stock outstanding, beginning balance | shares | 1,086 |
Number of Shares, RSUs and restricted stock granted | shares | 1,296 |
Number of Shares, RSUs and restricted stock vested | shares | (12) |
Number of Shares, RSUs and restricted stock forfeited | shares | (10) |
Number of Shares, Unvested RSUs and restricted stock outstanding, ending balance | shares | 2,360 |
Weighted Avg. Grant Date Fair Value, Unvested RSUs and restricted stock outstanding, Beginning Balance | $ / shares | $ 17.54 |
Weighted Avg. Grant Date Fair Value, RSUs and restricted stock granted | $ / shares | 17.6 |
Weighted Avg. Grant Date Fair Value, RSUs and restricted stock vested | $ / shares | 20.51 |
Weighted Avg. Grant Date Fair Value, RSUs and restricted stock forfeited | $ / shares | 15.32 |
Weighted Avg. Grant Date Fair Value, Unvested RSUs and restricted stock outstanding, Ending Balance | $ / shares | $ 17.65 |
Stock-Based Compensation (PSUs, RSUs and Restricted Stock) - Additional Information (Detail) shares in Thousands, $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
shares
| |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Share granted | 1,296 |
Recognition period of unvested compensation expense | 2 years 2 months 12 days |
Options available for issuance under stockholders-approved equity plan | 2,000 |
Maximum [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Options available for issuance under stockholders-approved equity plan | 2,300 |
Performance Stock Units (PSUs) [Member] | Executive Officers and Certain Employees [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Share granted | 700 |
Vesting period | 3 years |
Performance Stock Units (PSUs) [Member] | Executive Officers [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Share granted | 100 |
Vesting period | 2 years |
Performance Stock Units (PSUs) [Member] | Minimum [Member] | Executive Officers and Certain Employees [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Percentage of performance stock units granted | 0.00% |
Performance Stock Units (PSUs) [Member] | Minimum [Member] | Executive Officers [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Percentage of performance stock units granted | 0.00% |
Performance Stock Units (PSUs) [Member] | Maximum [Member] | Executive Officers and Certain Employees [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Percentage of performance stock units granted | 150.00% |
Performance Stock Units (PSUs) [Member] | Maximum [Member] | Executive Officers [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Percentage of performance stock units granted | 100.00% |
Market-Based PSUs, RSUs and Restricted Stock [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Unrecognized compensation expense related to other than options | $ | $ 24.6 |
Recognition period of unvested compensation expense | 2 years 7 months 6 days |
Restricted Stock Units (RSUs) [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Unrecognized compensation expense related to other than options | $ | $ 11.9 |
Stock-Based Compensation - Summary of Stock Options Outstanding (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Number of Stock Options, Stock options outstanding, Beginning Balance | 3,148 | |
Number of Stock Options, Stock options exercised | (6) | |
Number of Stock Options, Stock options forfeited | (21) | |
Number of Stock Options, Stock options expired | (7) | |
Number of Stock Options, Stock options outstanding, Ending Balance | 3,114 | 3,148 |
Number of Stock Options, Stock options exercisable | 1,698 | |
Weighted Avg. Exercise Price, Stock options outstanding, Beginning Balance | $ 14.37 | |
Weighted Avg. Exercise Price, Stock options exercised | 9.82 | |
Weighted Avg. Exercise Price, Stock options forfeited | 12.21 | |
Weighted Avg. Exercise Price, Stock options expired | 19 | |
Weighted Avg. Exercise Price, Stock options outstanding, Ending Balance | 14.38 | $ 14.37 |
Weighted Avg. Exercise Price, Stock options exercisable | $ 15.96 | |
Weighted Avg. Remaining Contractual Life In Years, Stock options outstanding | 3 years 2 months 1 day | 3 years 5 months 1 day |
Weighted Avg. Remaining Contractual Life in Years, Stock options exercisable | 1 year 8 months 12 days | |
Aggregate Intrinsic Value, Stock options outstanding | $ 16,251 | |
Aggregate Intrinsic Value, Stock options outstanding | 10,198 | $ 16,251 |
Aggregate Intrinsic Value, Stock options exercisable | $ 4,436 | |
ADVA Optical Networking SE [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Number of Stock Options, Stock options outstanding, Beginning Balance | 81 | |
Number of Stock Options, Stock options outstanding, Ending Balance | 81 | 81 |
Number of Stock Options, Stock options exercisable | 27 | |
Weighted Avg. Exercise Price, Stock options outstanding, Beginning Balance | $ 8.58 | |
Weighted Avg. Exercise Price, Stock options outstanding, Ending Balance | 8.67 | $ 8.58 |
Weighted Avg. Exercise Price, Stock options exercisable | $ 7.45 | |
Weighted Avg. Remaining Contractual Life In Years, Stock options outstanding | 3 years 9 months | 4 years |
Weighted Avg. Remaining Contractual Life in Years, Stock options exercisable | 2 years 1 month 20 days | |
Aggregate Intrinsic Value, Stock options outstanding | $ 1,222 | |
Aggregate Intrinsic Value, Stock options outstanding | 1,198 | $ 1,222 |
Aggregate Intrinsic Value, Stock options exercisable | $ 424 |
Stock-Based Compensation (Stock Options) - Additional Information (Detail) - USD ($) $ in Thousands, shares in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Jul. 22, 2022 |
|
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 2,600 | $ 1,900 | ||
Unrecognized compensation expense related to stock options | $ 7,300 | |||
Recognition period of unvested compensation expense | 2 years 2 months 12 days | |||
Options available for issuance under stockholders-approved equity plan | 2.0 | |||
Aggregate intrinsic value based on fair market value | $ 10,198 | $ 16,251 | ||
Total pre-tax intrinsic value of options exercised | $ 43 | |||
Maximum [Member] | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Options available for issuance under stockholders-approved equity plan | 2.3 | |||
ADVA Optical Networking SE [Member] | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Unrecognized compensation expense related to stock options | $ 100 | |||
Recognition period of unvested compensation expense | 3 years 9 months 18 days | |||
Options available for issuance under stockholders-approved equity plan | 2.1 | |||
Aggregate intrinsic value based on fair market value | $ 1,198 | $ 1,222 |
Investments - Debt Securities and Other Investments, Included on Condensed Consolidated Balance Sheet and Recorded at Fair Value (Detail) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | $ 9,541 | $ 9,671 |
Gross Unrealized Gains | 11 | 9 |
Gross Unrealized Losses | (339) | (427) |
Fair Value | 9,213 | 9,253 |
Corporate Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 2,218 | 2,538 |
Gross Unrealized Gains | 4 | 5 |
Gross Unrealized Losses | (63) | (81) |
Fair Value | 2,159 | 2,462 |
Municipal Fixed-Rate Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 185 | 185 |
Gross Unrealized Losses | (4) | (5) |
Fair Value | 181 | 180 |
Asset-Backed Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 734 | 818 |
Gross Unrealized Gains | 1 | 1 |
Gross Unrealized Losses | (20) | (24) |
Fair Value | 715 | 795 |
Mortgage/Agency-Backed Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 1,699 | 1,853 |
Gross Unrealized Gains | 1 | |
Gross Unrealized Losses | (82) | (105) |
Fair Value | 1,618 | 1,748 |
U.S. Government Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 4,299 | 3,870 |
Gross Unrealized Gains | 5 | 3 |
Gross Unrealized Losses | (151) | (188) |
Fair Value | 4,153 | 3,685 |
Foreign Government Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 406 | 407 |
Gross Unrealized Losses | (19) | (24) |
Fair Value | $ 387 | $ 383 |
Investments - Contractual Maturities of Debt Securities and Other Investments (Detail) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities, Fair Value/Carrying Value | $ 9,213 | $ 9,253 |
Corporate Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Less than one year | 369 | |
One to two years | 966 | |
Two to three years | 824 | |
Available-for-sale debt securities, Fair Value/Carrying Value | 2,159 | 2,462 |
Municipal Fixed-Rate Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Less than one year | 181 | |
Available-for-sale debt securities, Fair Value/Carrying Value | 181 | 180 |
Asset-Backed Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
One to two years | 169 | |
Two to three years | 49 | |
Three to five years | 337 | |
More than ten years | 160 | |
Available-for-sale debt securities, Fair Value/Carrying Value | 715 | 795 |
Mortgage/Agency-Backed Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
One to two years | 166 | |
Two to three years | 600 | |
Three to five years | 242 | |
Five to ten years | 238 | |
More than ten years | 372 | |
Available-for-sale debt securities, Fair Value/Carrying Value | 1,618 | 1,748 |
U.S. Government Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Less than one year | 508 | |
One to two years | 3,174 | |
Two to three years | 348 | |
Three to five years | 123 | |
Available-for-sale debt securities, Fair Value/Carrying Value | 4,153 | 3,685 |
Foreign Government Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
One to two years | 387 | |
Available-for-sale debt securities, Fair Value/Carrying Value | $ 387 | $ 383 |
Investments - Gross Realized Gains and Losses on Sale of Debt Securities (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Investments, Debt and Equity Securities [Abstract] | ||
Gross realized gain on debt securities | $ 4 | $ 12 |
Gross realized loss on debt securities | (11) | (40) |
Total (loss) gain recognized, net | $ (7) | $ (28) |
Investments - Additional Information (Detail) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Schedule of Investments [Line Items] | |||
Available-for-sale debt securities, allowance for credit losses | $ 0 | $ 0 | |
Purchase an available-for-sale debt securities with credit deterioration | 0 | ||
Asset impairments | $ 0 | $ 0 | |
Investment [Member] | Issuer Concentration [Member] | Market Value of Total Investment Portfolio [Member] | |||
Schedule of Investments [Line Items] | |||
Investment concentration risk percentage | 5.00% |
Investments - Realized and Unrealized Gains and Losses related to Marketable Equity Securities (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Investments, Debt and Equity Securities [Abstract] | ||
Realized (loss) gain on equity securities sold | $ 13 | $ (25) |
Unrealized (loss) gain on equity securities held | 1,246 | (3,362) |
Total (loss) gain recognized, net | $ 1,259 | $ (3,387) |
Investments - Cash Equivalents and Investments held at Fair Value (Detail) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | $ 9,213 | $ 9,253 |
Fair Value, Measurements [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Total | 34,465 | 33,227 |
Fair Value, Measurements [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Total | 29,405 | 27,659 |
Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Total | 5,060 | 5,568 |
Money Market Funds [Member] | Fair Value, Measurements [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Cash equivalents | 243 | 228 |
Money Market Funds [Member] | Fair Value, Measurements [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Cash equivalents | 243 | 228 |
Corporate Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 2,159 | 2,462 |
Corporate Bonds [Member] | Fair Value, Measurements [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 2,159 | 2,462 |
Corporate Bonds [Member] | Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 2,159 | 2,462 |
Municipal Fixed-Rate Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 181 | 180 |
Municipal Fixed-Rate Bonds [Member] | Fair Value, Measurements [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 181 | 180 |
Municipal Fixed-Rate Bonds [Member] | Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 181 | 180 |
Asset-Backed Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 715 | 795 |
Asset-Backed Bonds [Member] | Fair Value, Measurements [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 715 | 795 |
Asset-Backed Bonds [Member] | Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 715 | 795 |
Mortgage/Agency-Backed Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 1,618 | 1,748 |
Mortgage/Agency-Backed Bonds [Member] | Fair Value, Measurements [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 1,618 | 1,748 |
Mortgage/Agency-Backed Bonds [Member] | Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 1,618 | 1,748 |
U.S. Government Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 4,153 | 3,685 |
U.S. Government Bonds [Member] | Fair Value, Measurements [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Cash equivalents | 175 | |
Available-for-sale debt securities | 4,153 | 3,685 |
U.S. Government Bonds [Member] | Fair Value, Measurements [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Cash equivalents | 175 | |
Available-for-sale debt securities | 4,153 | 3,685 |
Foreign Government Securities / Bonds [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 387 | 383 |
Foreign Government Securities / Bonds [Member] | Fair Value, Measurements [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 387 | 383 |
Foreign Government Securities / Bonds [Member] | Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale debt securities | 387 | 383 |
Marketable Equity Securities - Various Industries [Member] | Fair Value, Measurements [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Marketable equity securities | 821 | 804 |
Marketable Equity Securities - Various Industries [Member] | Fair Value, Measurements [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Marketable equity securities | 821 | 804 |
Deferred Compensation Plan Assets [Member] | Fair Value, Measurements [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Marketable equity securities | 24,013 | 22,942 |
Deferred Compensation Plan Assets [Member] | Fair Value, Measurements [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Marketable equity securities | $ 24,013 | $ 22,942 |
Inventory - Components of Inventory (Detail) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 167,086 | $ 186,346 |
Work in process | 7,383 | 12,087 |
Finished goods | 241,822 | 229,098 |
Total Inventory, net | $ 416,291 | $ 427,531 |
Inventory - Additional Information (Detail) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Inventory valuation reserves | $ 73.3 | $ 57.0 |
Property, Plant and Equipment - Property, Plant and Equipment (Detail) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Engineering and other equipment | $ 173,968 | $ 170,785 |
Building | 83,287 | 82,932 |
Computer hardware and software | 82,682 | 80,455 |
Building and land improvements | 51,081 | 47,861 |
Furniture and fixtures | 23,525 | 22,403 |
Land | 5,367 | 5,364 |
Total property, plant and equipment | 419,910 | 409,800 |
Less: accumulated depreciation | (307,941) | (299,101) |
Total property, plant and equipment, net | $ 111,969 | $ 110,699 |
Property, Plant and Equipment - Additional Information (Detail) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Property, Plant and Equipment [Line Items] | ||
Asset impairments | $ 0 | $ 0 |
Depreciation expense | $ 7,600,000 | $ 2,800,000 |
Goodwill - Summary of Changes in Carrying Amount of Goodwill (Detail) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Goodwill [Line Items] | |
Goodwill, Beginning balance | $ 381,724 |
Foreign currency translation adjustments | 4,031 |
Goodwill, Ending balance | 385,755 |
Network Solutions [Member] | |
Goodwill [Line Items] | |
Goodwill, Beginning balance | 298,280 |
Foreign currency translation adjustments | 3,139 |
Goodwill, Ending balance | 301,419 |
Services & Support [Member] | |
Goodwill [Line Items] | |
Goodwill, Beginning balance | 83,444 |
Foreign currency translation adjustments | 892 |
Goodwill, Ending balance | $ 84,336 |
Goodwill - Additional Information (Detail) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Jul. 15, 2022 |
|
Goodwill [Line Items] | ||||
Goodwill | $ 385,755,000 | $ 381,724,000 | ||
Impairment of goodwill | $ 0 | $ 0 | ||
ADVA | ||||
Goodwill [Line Items] | ||||
Goodwill | $ 350,500,000 |
Intangible Assets - Summary of Intangible Assets (Detail) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Finite Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 470,335 | $ 467,689 |
Accumulated Amortization | (91,049) | (66,478) |
Net Book Value | $ 379,286 | 401,211 |
Customer Relationships [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Weighted Average Useful Life (in years) | 10 years 10 months 24 days | |
Gross Carrying Amount | $ 54,103 | 55,517 |
Accumulated Amortization | (12,180) | (12,772) |
Net Book Value | $ 41,923 | 42,745 |
Backlog [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Weighted Average Useful Life (in years) | 1 year 7 months 6 days | |
Gross Carrying Amount | $ 56,382 | 55,782 |
Accumulated Amortization | (35,348) | (22,725) |
Net Book Value | $ 21,034 | 33,057 |
Developed Technology [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Weighted Average Useful Life (in years) | 8 years 6 months | |
Gross Carrying Amount | $ 323,723 | 320,364 |
Accumulated Amortization | (31,604) | (21,856) |
Net Book Value | $ 292,119 | 298,508 |
Licensed Technology [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Weighted Average Useful Life (in years) | 9 years | |
Gross Carrying Amount | $ 5,900 | 5,900 |
Accumulated Amortization | (3,305) | (3,141) |
Net Book Value | $ 2,595 | 2,759 |
Licensing Agreements [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Weighted Average Useful Life (in years) | 8 years 6 months | |
Gross Carrying Amount | $ 560 | 560 |
Accumulated Amortization | (316) | (298) |
Net Book Value | $ 244 | 262 |
Patent [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Weighted Average Useful Life (in years) | 7 years 3 months 18 days | |
Gross Carrying Amount | $ 500 | 500 |
Accumulated Amortization | (449) | (431) |
Net Book Value | $ 51 | 69 |
Trade Names [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Weighted Average Useful Life (in years) | 3 years | |
Gross Carrying Amount | $ 29,167 | 29,066 |
Accumulated Amortization | (7,847) | (5,255) |
Net Book Value | $ 21,320 | $ 23,811 |
Intangible Assets - Additional Information (Detail) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Impairment losses of intangible assets | $ 0 | $ 0 |
Amortization expense | $ 25,800,000 | $ 900,000 |
Intangible Assets - Estimated Future Amortization Expense Related to Intangible Assets (Detail) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2023 | $ 56,855 | |
2024 | 58,129 | |
2025 | 46,558 | |
2026 | 43,292 | |
2027 | 41,922 | |
Thereafter | 132,530 | |
Net Book Value | $ 379,286 | $ 401,211 |
Hedging - Additional Information (Detail) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023
USD ($)
ForwardContracts
|
Mar. 21, 2023
USD ($)
|
Nov. 03, 2022
USD ($)
|
|
Foreign Exchange Forward [Member] | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Number of forward rate contracts outstanding | ForwardContracts | 53 | ||
Cross-Currency Swap Arrangement [Member] | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Aggregate notional amount | $ 160.0 | $ 160.0 | |
Forward contract tranche settled on hedge | $ 20.0 | ||
Cross-Currency Swap Arrangement [Member] | Eight Quarterly Tranches [Member] | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Aggregate notional amount | $ 20.0 | ||
Cross-Currency Swap Arrangement [Member] | Seven Quarterly Tranches [Member] | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Aggregate notional amount | $ 20.0 | ||
Cross-Currency Swap Arrangement [Member] | Minimum [Member] | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Aggregate notional amount, daily fixed forward conversion rate | 1.085 | 0.98286 | |
Cross-Currency Swap Arrangement [Member] | Maximum [Member] | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Aggregate notional amount, daily fixed forward conversion rate | 1 | 1.0329 |
Hedging - Schedule of Fair Values of Derivative Instruments (Detail) - Derivatives Not Designated as Hedging Instruments [Member] - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Other income (expense), net [Member] | ||
Derivative Instruments Not Designated as Hedging Instruments [Abstract] | ||
Foreign exchange contracts | $ (69) | |
Level 2 [Member] | ||
Derivative Instruments Not Designated as Hedging Instruments [Abstract] | ||
Total derivatives | 11,480 | $ 11,359 |
Level 2 [Member] | Other Receivables [Member] | ||
Derivative Instruments Not Designated as Hedging Instruments [Abstract] | ||
Foreign exchange contracts - derivative assets | 11,831 | 11,992 |
Level 2 [Member] | Accounts Payable [Member] | ||
Derivative Instruments Not Designated as Hedging Instruments [Abstract] | ||
Foreign exchange contracts - derivative liabilities | $ (351) | $ (633) |
Revolving Credit Agreements - Carrying Amount Current and Non-current of Revolving Agreements (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Line of Credit Facility [Line Items] | ||
Current revolving credit agreements | $ 10,843 | $ 35,936 |
Non-current revolving credit agreement | 180,000 | 60,000 |
Wells Fargo Credit Agreement [Member] | ||
Line of Credit Facility [Line Items] | ||
Non-current revolving credit agreement | 180,000 | 60,000 |
New Nord/LB Revolving Line of Credit [Member] | ||
Line of Credit Facility [Line Items] | ||
Current revolving credit agreements | $ 10,843 | |
Nord/LB Revolving Line of Credit [Member] | ||
Line of Credit Facility [Line Items] | ||
Current revolving credit agreements | 16,091 | |
Syndicated Credit Agreement Working Capital Line of Credit [Member] | ||
Line of Credit Facility [Line Items] | ||
Current revolving credit agreements | 10,727 | |
DZ Bank Revolving Line of Credit [Member] | ||
Line of Credit Facility [Line Items] | ||
Current revolving credit agreements | $ 9,118 |
Revolving Credit Agreements - Additional Information (Detail) |
1 Months Ended | 3 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Mar. 29, 2023
USD ($)
|
Aug. 08, 2022
USD ($)
|
Aug. 05, 2022 |
Dec. 31, 2024 |
Sep. 30, 2024 |
Mar. 31, 2023
USD ($)
|
Dec. 31, 2022
USD ($)
|
Jul. 18, 2022
USD ($)
|
Sep. 30, 2018
USD ($)
|
|
Line Of Credit Facility [Line Items] | |||||||||
Weighted average interest rate | 6.20% | ||||||||
Debt instrument default interest rate percentage | 2.00% | ||||||||
Daily Simple SOFR [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Credit facility, floor rate | 0.00% | ||||||||
EURIBOR [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Credit facility, floor rate | 0.00% | ||||||||
Maximum [Member] | Daily Simple SOFR [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin rate | 2.15% | ||||||||
Maximum [Member] | Base Rate [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin rate | 1.25% | ||||||||
Maximum [Member] | EURIBOR [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin rate | 2.25% | ||||||||
Minimum [Member] | Daily Simple SOFR [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin rate | 1.40% | ||||||||
Minimum [Member] | Base Rate [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin rate | 0.50% | ||||||||
Minimum [Member] | EURIBOR [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin rate | 1.50% | ||||||||
Wells Fargo Credit Agreement [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Commitment fee percentage | 0.25% | ||||||||
Net leverage ratio | 3 | ||||||||
Line of credit maturity period month and year | 2027-07 | ||||||||
Wells Fargo Credit Agreement [Member] | Daily Simple SOFR [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin rate | 1.00% | ||||||||
Wells Fargo Credit Agreement [Member] | Federal Reserve Bank Advances [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin rate | 1.00% | ||||||||
New Nord/LB Revolving Line of Credit [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Revolving line of credit | $ 16,100,000 | $ 10,800,000 | |||||||
New Nord/LB Revolving Line of Credit [Member] | Euro Short Term Rate [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin rate | 1.94% | ||||||||
Nord/LB Revolving Line of Credit [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Revolving line of credit | $ 16,100,000 | ||||||||
Available for future borrowings | $ 0 | ||||||||
Line of credit maturity period month and year | 2023-08 | ||||||||
Nord/LB Revolving Line of Credit [Member] | Euro Short Term Rate [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin rate | 1.40% | ||||||||
Syndicated Credit Agreement Working Capital Line of Credit [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Available for future borrowings | $ 0 | ||||||||
DZ Bank Revolving Line Of Credit [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Revolving line of credit | $ 9,100,000 | ||||||||
Available for future borrowings | $ 0 | ||||||||
Interest rate | 2.80% | ||||||||
Acorn HoldCo, Inc., [Member] | Wells Fargo Credit Agreement [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Secured revolving credit facility amount | 400,000,000 | $ 100,000,000 | |||||||
Revolving line of credit | 180,000,000 | ||||||||
Credit facility, average outstanding amount | 3,400,000 | ||||||||
Letters of credit may be issued | 25,000,000 | ||||||||
Available for future borrowings | 216,600,000 | ||||||||
Acorn HoldCo, Inc., [Member] | Wells Fargo Credit Agreement [Member] | Maximum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Credit agreement current borrowing capacity | $ 400,000,000 | ||||||||
Bayerische Landesbank and Deutsche Bank [Member] | Syndicated Credit Agreement Working Capital Line of Credit [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Secured revolving credit facility amount | $ 10,700,000 | ||||||||
Scenario Forecast [Member] | Wells Fargo Credit Agreement [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Net leverage ratio | 2.75 | 3.25 |
Notes Payable - Carrying Amounts of Note Payables (Details) $ in Thousands |
Dec. 31, 2022
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
Carrying Value | $ 24,598 |
Syndicated Credit Agreement Notes Payable [Member] | |
Debt Instrument [Line Items] | |
Carrying Value | $ 24,598 |
Notes Payable - Additional Information (Details) - Syndicated Credit Agreement Notes Payable [Member] - USD ($) |
Jan. 31, 2023 |
Sep. 30, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Available for future borrowings | $ 0 | |
Bayerische Landesbank and Deutsche Bank [Member] | ||
Debt Instrument [Line Items] | ||
Notes payable borrowings | $ 63,700,000 |
Employee Benefit Plans - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Defined Benefit Plan Disclosure [Line Items] | |||
Pension liability | $ 10,698 | $ 10,624 | |
Contributions to defined benefit pension plans | 1,000 | $ 500 | |
Defined benefit pension plans for the remainder of fiscal year | 3,300 | ||
Pension Plan [Member] | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Business combination, acquired additional obligation | 29,600 | ||
Business combination, acquired assets | $ 22,300 |
Employee Benefit Plans - Schedule of the Components of Net Periodic Pension Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract] | ||
Service cost | $ 398 | $ 257 |
Interest cost | $ (32) | $ 222 |
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Interest Cost, Statement of Income or Comprehensive Income [Extensible Enumeration] | Other Nonoperating Income (Expense) | Other Nonoperating Income (Expense) |
Expected return on plan assets | $ 58 | $ (470) |
Defined Benefit Plan, Net Periodic Benefit (Cost) Credit, Expected Return (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Other Nonoperating Income (Expense) | Other Nonoperating Income (Expense) |
Amortization of actuarial losses | $ 6 | $ 89 |
Defined Benefit Plan, Net Periodic Benefit (Cost) Credit, Amortization of Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Other Nonoperating Income (Expense) | Other Nonoperating Income (Expense) |
Net periodic benefit cost | $ 430 | $ 98 |
Equity - Changes in Accumulated Other Comprehensive Income (Loss), Net of Tax, by Component (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Beginning Balance | $ 1,303,613 | $ 357,102 |
Other comprehensive income (loss) before reclassifications | 8,761 | (1,880) |
Amounts reclassified from accumulated other comprehensive (loss) income | 21 | 238 |
Net current period other comprehensive income (loss) | 8,782 | (1,642) |
Less: Comprehensive income attributable to non-controlling interest, net of tax | 382 | |
Ending Balance | 820,162 | 352,316 |
ASU 2018-02 [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Beginning Balance | 385 | 385 |
Ending Balance | 385 | 385 |
Accumulated Other Comprehensive Income (Loss) [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Beginning Balance | 26,126 | (11,914) |
Ending Balance | 34,526 | (13,556) |
Unrealized Gains (Losses) on Available-for-Sale Securities [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Beginning Balance | (836) | (552) |
Other comprehensive income (loss) before reclassifications | 83 | (975) |
Amounts reclassified from accumulated other comprehensive (loss) income | (14) | 251 |
Net current period other comprehensive income (loss) | 69 | (724) |
Ending Balance | (767) | (1,276) |
Defined Benefit Plan Adjustments [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Beginning Balance | (1,016) | (5,613) |
Amounts reclassified from accumulated other comprehensive (loss) income | 35 | (13) |
Net current period other comprehensive income (loss) | 35 | (13) |
Ending Balance | (981) | (5,626) |
Foreign Currency Adjustments [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Beginning Balance | 27,593 | (6,134) |
Other comprehensive income (loss) before reclassifications | 8,678 | (905) |
Net current period other comprehensive income (loss) | 8,678 | (905) |
Less: Comprehensive income attributable to non-controlling interest, net of tax | 382 | |
Ending Balance | $ 35,889 | $ (7,039) |
Equity - Reclassifications Out of Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Reclassification Adjustment Out of Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Loss Before Income Taxes | $ (51,766) | $ (3,535) |
Tax benefit | 11,313 | 2,408 |
Net Loss attributable to ADTRAN Holdings, Inc. | (40,083) | (1,127) |
Reclassification Out of Accumulated Other Comprehensive Income (Loss) [Member] | ||
Reclassification Adjustment Out of Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Loss Before Income Taxes | (33) | (311) |
Tax benefit | 12 | 73 |
Net Loss attributable to ADTRAN Holdings, Inc. | (21) | (238) |
Reclassification Out of Accumulated Other Comprehensive Income (Loss) [Member] | Unrealized Gains (Losses) on Available-for-Sale Securities [Member] | ||
Reclassification Adjustment Out of Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Net investment (loss) gain | 18 | (330) |
Reclassification Out of Accumulated Other Comprehensive Income (Loss) [Member] | Other Income (Expense), Net [Member] | ||
Reclassification Adjustment Out of Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Defined benefit plan adjustments - actuarial gain (loss) | $ (51) | $ 19 |
Equity - Tax Effects Related to the Change in Each Component of Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Equity [Abstract] | ||
Unrealized gain (loss) on available-for-sale securities, Before-Tax Amount | $ 109 | $ (1,283) |
Unrealized gain (loss) on available-for-sale securities, Tax (Expense) Benefit | (26) | 308 |
Unrealized gain (loss) on available-for-sale securities, Net-of-Tax Amount | 83 | (975) |
Reclassification adjustment for amounts related to available-for-sale investments included in net (loss) gain, Before-Tax Amount | (18) | 330 |
Reclassification adjustment for amounts related to available-for-sale investments included in net (loss) gain, Tax (Expense) Benefit | 4 | (79) |
Reclassification adjustment for amounts related to available-for-sale investments included in net (loss) gain, Net-of-Tax Amount | (14) | 251 |
Reclassification adjustment for amounts related to defined benefit plan adjustments included in net (loss) gain, Before-Tax Amount | 51 | (19) |
Reclassification adjustment for amounts related to defined benefit plan adjustments included in net (loss) gain, Tax (Expense) Benefit | (16) | 6 |
Reclassification adjustment for amounts related to defined benefit plan adjustments included in net (loss) gain, Net-of-Tax Amount | 35 | (13) |
Foreign currency translation adjustment, Before-Tax Amount | 8,678 | (905) |
Foreign currency translation adjustment, Net-of-Tax Amount | 8,678 | (905) |
Total Other Comprehensive Income (Loss), Before-Tax Amount | 8,820 | (1,877) |
Total Other Comprehensive Income (Loss), Tax (Expense) Benefit | (38) | 235 |
Other Comprehensive Income (Loss), net of tax | $ 8,782 | $ (1,642) |
Redeemable Non-controlling Interest - Summary of Redeemable Non-controlling Interest Activity (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Redeemable Noncontrolling Interest, Equity, Carrying Amount [Abstract] | |
Reclassification of non-controlling interests | $ 443,757 |
Redemption of redeemable non-controlling interest | (1,519) |
Net income attributable to redeemable non-controlling interests | 2,809 |
Annual recurring compensation earned | (2,809) |
Translation adjustment | 430 |
Balance as of March 31, 2023 | $ 442,668 |
Redeemable Non-controlling Interest Additional Information (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Redeemable Noncontrolling Interest, Equity, Carrying Amount [Abstract] | |
Annual dividend recognized to redeemable non-controlling shareholders | $ 2.8 |
Loss Per Share - Summary of Calculation of Basic and Diluted Loss Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Numerator | ||
Net loss attributable to ADTRAN Holdings, Inc. | $ (40,083) | $ (1,127) |
Denominator | ||
Weighted average number of shares – basic | 78,358 | 49,113 |
Effect of dilutive securities | ||
Weighted average number of shares – diluted | 78,358 | 49,113 |
Loss per share attributable to ADTRAN Holdings, Inc. - basic | $ (0.51) | $ (0.02) |
Loss per share attributable to ADTRAN Holdings, Inc. - diluted | $ (0.51) | $ (0.02) |
Loss Per Share - Additional Information (Detail) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||
Anti-dilutive effect excluded calculation of diluted earnings per share | 400 | 100 |
Unvested Stock Options, PSUs, RSUs and Restricted Stock [Member] | ||
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||
Anti-dilutive effect excluded calculation of diluted earnings per share | 100 | 5 |
Segment Information - Additional Information (Detail) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023
USD ($)
Segment
Category
|
Mar. 31, 2022
USD ($)
|
|
Segment Reporting Information [Line Items] | ||
Number of reportable segments | Segment | 2 | |
Number of categories | Category | 3 | |
Depreciation expense | $ 7,600 | $ 2,800 |
Network Solutions [Member] | ||
Segment Reporting Information [Line Items] | ||
Depreciation expense | 1,500 | 200 |
Services And Support [Member] | ||
Segment Reporting Information [Line Items] | ||
Depreciation expense | $ 2 | $ 3 |
Segment Information - Revenue and Gross Profit of Reportable Segments (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Segment Reporting Information [Line Items] | ||
Revenue | $ 323,912 | $ 154,518 |
Gross Profit | 87,808 | 54,316 |
Network Solutions [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenue | 282,418 | 138,374 |
Gross Profit | 63,288 | 47,721 |
Services & Support [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenue | 41,494 | 16,144 |
Gross Profit | $ 24,520 | $ 6,595 |
Segment Information - Revenue Information by Category (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Disaggregation Of Revenue [Line Items] | ||
Revenue | $ 323,912 | $ 154,518 |
Subscriber Solutions [Member] | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 79,336 | 56,722 |
Access & Aggregation Solutions [Member] | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 96,820 | $ 97,796 |
Optical Networking Solutions | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | $ 147,756 |
Segment Information - Revenue Information by Geographic Area (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Revenue from External Customer [Line Items] | ||
Revenue | $ 323,912 | $ 154,518 |
United States [Member] | ||
Revenue from External Customer [Line Items] | ||
Revenue | 131,466 | 99,048 |
United Kingdom [Member] | ||
Revenue from External Customer [Line Items] | ||
Revenue | 57,397 | 30,388 |
Germany [Member] | ||
Revenue from External Customer [Line Items] | ||
Revenue | 76,286 | 10,920 |
Other International [Member] | ||
Revenue from External Customer [Line Items] | ||
Revenue | $ 58,763 | $ 14,162 |
Liability for Warranty Returns - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
|
Product Warranties Disclosures [Abstract] | ||||
Period of assurance-based warranty for product defects | 90 days to five years | |||
Liability for warranty obligations | $ 7,200 | $ 7,196 | $ 5,143 | $ 5,403 |
Liability for Warranty Returns - Summary of Warranty Expense and Write-off Activity (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Product Warranties Disclosures [Abstract] | ||
Balance at beginning of period | $ 7,196 | $ 5,403 |
Plus: Amounts charged to cost and expenses | 1,077 | 344 |
Plus: Foreign currency translation adjustments | 26 | |
Less: Deductions | (1,099) | (604) |
Balance at end of period | $ 7,200 | $ 5,143 |
Commitments and Contingencies - Additional Information (Detail) € in Millions, $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2023
EUR (€)
|
Mar. 31, 2023
USD ($)
|
Mar. 31, 2023
USD ($)
|
Dec. 31, 2022
USD ($)
|
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Aggregate exit compensation payments obligation | € 309.5 | $ 335.6 | ||
Expire date of exit compensation | Mar. 16, 2023 | Mar. 16, 2023 | ||
Annual recurring compensation obligation | € 10.5 | $ 11.3 | ||
Accrued annual recurring compensation obligation | $ 2.8 | |||
Commitments related to performance bonds | 11.7 | $ 22.0 | ||
Commitments related to performance bonds expiration month and year | 2031-04 | 2031-04 | ||
Purchase commitments | $ 459.3 |
Restructuring - Schedule of Reconciliation of Restructuring Liability (Detail) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Restructuring and Related Activities [Abstract] | |||
Balance at beginning of period | $ 159 | $ 1,514 | $ 1,514 |
Plus: Amounts charged to cost and expense | 2,437 | $ 2 | 1,629 |
Less: Amounts paid | (1,574) | (2,984) | |
Balance at end of period | $ 1,022 | $ 159 |
Restructuring - Schedule of Components of Restructuring Expenses Including in Condensed Consolidated Statements of (Loss) Income (Detail) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Restructuring Cost And Reserve [Line Items] | |||
Total restructuring expenses | $ 2,437 | $ 2 | $ 1,629 |
Cost of Sales [Member] | |||
Restructuring Cost And Reserve [Line Items] | |||
Total restructuring expenses | 76 | ||
Cost of Sales [Member] | Network Solutions [Member] | |||
Restructuring Cost And Reserve [Line Items] | |||
Total restructuring expenses | 58 | ||
Cost of Sales [Member] | Services & Support [Member] | |||
Restructuring Cost And Reserve [Line Items] | |||
Total restructuring expenses | 18 | ||
Selling, General and Administrative Expenses [Member] | |||
Restructuring Cost And Reserve [Line Items] | |||
Total restructuring expenses | 2,180 | $ 2 | |
Research and Development Expenses [Member] | |||
Restructuring Cost And Reserve [Line Items] | |||
Total restructuring expenses | $ 181 |
Restructuring - Schedule of Components of Restructuring Expense by Geographic Area (Detail) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Restructuring Cost And Reserve [Line Items] | |||
Total restructuring expenses | $ 2,437 | $ 2 | $ 1,629 |
United States [Member] | |||
Restructuring Cost And Reserve [Line Items] | |||
Total restructuring expenses | 1,119 | $ 2 | |
International [Member] | |||
Restructuring Cost And Reserve [Line Items] | |||
Total restructuring expenses | $ 1,318 |
Subsequent Events - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions |
May 08, 2023 |
Jun. 30, 2023 |
---|---|---|
Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Dividend declaration date | May 08, 2023 | |
Common stock dividends per share declared | $ 0.09 | |
Dividend record date | May 23, 2023 | |
Dividend payment date | Jun. 06, 2023 | |
Scenario Forecast [Member] | ||
Subsequent Event [Line Items] | ||
Quarterly dividend payable, aggregate amount | $ 7.1 |
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