ADTRAN, Inc. Reports Earnings for the First Quarter of 2020 and Declares Quarterly Cash Dividend

ADTRAN, Inc. (NASDAQ:ADTN) (“ADTRAN” or the “Company”) today announced financial results for the first quarter of 2020. For the quarter, revenue was $114.5 million compared to $143.8 million for the first quarter of 2019. Earnings for the first quarter of 2020 were a net loss of $10.0 million compared to net income of $0.8 million for the first quarter of 2019. Earnings per share was a loss of $0.21 per share compared to earnings of $0.02 per share, assuming dilution, for the first quarter of 2019. Non-GAAP earnings were a net loss of $2.2 million compared to a non-GAAP net income of $4.9 million for the first quarter of 2019. Non-GAAP earnings per share was a loss of $0.05 per share compared to a non-GAAP earnings of $0.10 per share, assuming dilution, for the first quarter of 2019. Non-GAAP net income (loss) and non-GAAP earnings (loss) per share exclude stock-based compensation expense, acquisition related expenses, amortizations and adjustments, restructuring expenses, amortization of pension actuarial losses, valuation allowance related to our deferred tax assets, asset impairments and deferred compensation related adjustments. The reconciliations between GAAP net income (loss) and earnings (loss) per share to non-GAAP net income (loss) and non-GAAP earnings (loss) per share are set forth in the table provided below.

ADTRAN Chairman and Chief Executive Officer Tom Stanton stated, “While COVID-19 has certainly impacted the way we work and live, it has also underscored the value and integral role the telecommunications industry plays in keeping everyone connected. For ADTRAN, the first quarter came in largely as anticipated. We experienced solid demand, and even in a challenging supply chain environment we had solid growth in our domestic regional and emerging service provider market segments. In addition, several Tier 1 operators have recently selected ADTRAN as their software-defined access platform and solution integration partner for their next generation fiber networks.”

The Company also announced that its Board of Directors declared a cash dividend for the first quarter of 2020. The quarterly cash dividend is $0.09 per common share, to be paid to the Company’s stockholders of record as of the close of business on May 21, 2020. The payment date will be June 4, 2020.

The Company confirmed that it will hold a conference call to discuss its first quarter results on Thursday, May 7, 2020, at 9:30 a.m. Central Time. ADTRAN will webcast this conference call. To listen, visit the Investor Relations site at www.investors.adtran.com approximately ten minutes prior to the start of the call and click on the conference call link provided.

An online replay of the Company’s conference call, as well as the text of the Company’s conference call, will be available on the Investor Relations site approximately 24 hours following the call and will remain available for at least 12 months. For more information, visit www.investors.adtran.com or email at investor.relations@adtran.com.

At ADTRAN, we believe amazing things happen when people connect. From the cloud edge to the subscriber edge, we help communications service providers around the world manage and scale services that connect people, places and things to advance human progress. Whether rural or urban, domestic or international, telco or cable, enterprise or residential—ADTRAN solutions optimize existing technology infrastructures and create new, multi-gigabit platforms that leverage cloud economics, data analytics, machine learning and open ecosystems—the future of global networking. Find more at ADTRAN.com, LinkedIn and Twitter.

This press release contains forward-looking statements, generally identified by the use of words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could” and similar expressions, which forward-looking statements reflect management’s best judgment based on factors currently known. However, these statements involve risks and uncertainties, including the continued spread and extent of the impact of the COVID-19 global pandemic, including the speed, depth, geographic reach and duration of the spread, which could lead to a decrease in demand for the Company’s products and services, and which has disrupted, and could lead to further disruptions in, the Company’s supply chain, adversely impacting the operations and financial condition of our customers and the Company; actions to be taken by the Company in response to the pandemic; the legal, regulatory and administrative developments that occur at the federal, state and local levels and in foreign jurisdictions in response to the pandemic; potential disruptions, breaches, or other incidents affecting the proper operation, availability, or security of the Company’s or its partners’ information systems; declines in revenues due to declining customer demand and deteriorating macroeconomic conditions; potential increased expenses related to labor or other expenditures; the impact of the COVID-19 pandemic on our liquidity, as well as risks associated with disruptions in the financial markets and the business of financial institutions as a result of the COVID-19 pandemic which could impact us from a financial perspective, and the exacerbation of other risks detailed in our Annual Report on Form 10-K for the year ended December 31, 2019. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements included in this press release.

To provide additional transparency, we have disclosed in the table below non-GAAP operating income (loss), which has been reconciled to operating loss, and non-GAAP net income (loss) and non-GAAP earnings (loss) per share – basic and diluted, which have been reconciled to net income (loss) and earnings (loss) per share – basic and diluted, in each case as reported based on Generally Accepted Accounting Principles in the United States (“U.S. GAAP”). These non-GAAP financial measures exclude certain items which management believes are not reflective of the ongoing operating performance of the business. We believe this information is useful in providing period-to-period comparisons of the results of our ongoing operations. Additionally, these measures are used by management in our ongoing planning and annual budgeting processes. The presentation of non-GAAP operating income (loss), non-GAAP net income (loss) and non-GAAP income (loss) per share – basic and diluted, when combined with the U.S. GAAP presentation of operating loss, net income (loss) and net income (loss) per share – basic and diluted, is beneficial to the overall understanding of ongoing operating performance of the Company.

These non-GAAP financial measures are not prepared in accordance with, or an alternative for, U.S. GAAP and therefore should not be considered in isolation or as a substitution for analysis of our results as reported under U.S. GAAP. Additionally, our calculation of non-GAAP operating income (loss), non-GAAP net income (loss) and non-GAAP earnings (loss) per share – basic and diluted may not be comparable to similar measures calculated by other companies.

 
 
 
 

Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

71,285

 

 

$

73,773

 

Short-term investments

 

5,984

 

 

 

33,243

 

Accounts receivable, net

 

86,465

 

 

 

90,531

 

Other receivables

 

23,121

 

 

 

16,566

 

Inventory, net

 

99,515

 

 

 

98,305

 

Prepaid expenses and other current assets

 

7,419

 

 

 

7,892

 

Total Current Assets

 

293,789

 

 

 

320,310

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

66,500

 

 

 

68,086

 

Deferred tax assets, net

 

7,447

 

 

 

7,561

 

Goodwill

 

6,968

 

 

 

6,968

 

Intangibles, net

 

26,472

 

 

 

27,821

 

Other assets

 

17,958

 

 

 

19,883

 

Long-term investments

 

79,136

 

 

 

94,489

 

Total Assets

$

498,270

 

 

$

545,118

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Accounts payable

$

47,685

 

 

$

44,870

 

Bonds payable

 

 

 

 

24,600

 

Unearned revenue

 

12,465

 

 

 

11,963

 

Accrued expenses and other liabilities

 

12,748

 

 

 

13,876

 

Accrued wages and benefits

 

13,247

 

 

 

13,890

 

Income tax payable, net

 

3,273

 

 

 

3,512

 

Total Current Liabilities

 

89,418

 

 

 

112,711

 

 

 

 

 

 

 

 

 

Non-current unearned revenue

 

4,476

 

 

 

6,012

 

Pension liability

 

15,546

 

 

 

15,886

 

Deferred compensation liability

 

18,321

 

 

 

21,698

 

Other non-current liabilities

 

6,794

 

 

 

8,385

 

Total Liabilities

 

134,555

 

 

 

164,692

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

363,715

 

 

 

380,426

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

$

498,270

 

 

$

545,118

 

 
 
 
 
 

Condensed Consolidated Statements of Income (Loss)
(Unaudited)
(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2020

 

 

2019

 

 

Sales

 

 

 

 

 

 

 

 

 

Network Solutions

 

$

97,372

 

 

$

125,822

 

 

Services & Support

 

 

17,151

 

 

 

17,969

 

 

Total Sales

 

 

114,523

 

 

 

143,791

 

 

Cost of Sales

 

 

 

 

 

 

 

 

 

Network Solutions

 

 

51,626

 

 

 

70,734

 

 

Services & Support

 

 

11,297

 

 

 

12,445

 

 

Total Cost of Sales

 

 

62,923

 

 

 

83,179

 

 

Gross Profit

 

 

51,600

 

 

 

60,612

 

 

Selling, general and administrative expenses

 

 

26,620

 

 

 

35,132

 

 

Research and development expenses

 

 

29,859

 

 

 

31,647

 

 

Asset impairments

 

 

65

 

 

 

 

 

Operating Loss

 

 

(4,944

)

 

 

(6,167

)

 

Interest and dividend income

 

 

356

 

 

 

591

 

 

Interest expense

 

 

(1

)

 

 

(127

)

 

Net investment gain (loss)

 

 

(10,877

)

 

 

5,926

 

 

Other income, net

 

 

1,129

 

 

 

855

 

 

Income (Loss) Before Income Taxes

 

 

(14,337

)

 

 

1,078

 

 

Income tax (expense) benefit

 

 

4,368

 

 

 

(308

)

 

Net Income (Loss)

 

$

(9,969

)

 

$

770

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

47,957

 

 

 

47,782

 

 

Weighted average shares outstanding – diluted

 

 

47,957

 

 

 

47,853

 

(1)

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share – basic

 

$

(0.21

)

 

$

0.02

 

 

Earnings (loss) per common share – diluted

 

$

(0.21

)

 

$

0.02

 

(1)

 

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

 
 
 
 
 

Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(9,969

)

 

$

770

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,365

 

 

 

4,496

 

Asset impairments

 

 

65

 

 

 

 

Amortization of net premium on available-for-sale investments

 

 

61

 

 

 

6

 

Net (gain) loss on long-term investments

 

 

10,877

 

 

 

(5,926

)

Net (gain) loss on disposal of property, plant and equipment

 

 

52

 

 

 

(6

)

Stock-based compensation expense

 

 

1,791

 

 

 

1,859

 

Deferred income taxes

 

 

(63

)

 

 

235

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

3,052

 

 

 

170

 

Other receivables

 

 

(6,707

)

 

 

2,001

 

Inventory, net

 

 

(1,598

)

 

 

5,974

 

Prepaid expenses and other assets

 

 

2,206

 

 

 

2,809

 

Accounts payable, net

 

 

2,712

 

 

 

166

 

Accrued expenses and other liabilities

 

 

(6,680

)

 

 

(2,355

)

Income taxes payable

 

 

(188

)

 

 

(487

)

Net cash provided by (used in) operating activities

 

 

(24

)

 

 

9,712

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(1,406

)

 

 

(1,872

)

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

 

 

46,440

 

 

 

17,039

 

Purchases of available-for-sale investments

 

 

(16,879

)

 

 

(15,318

)

Acquisition of note receivable

 

 

(523

)

 

 

 

Net cash provided by (used in) investing activities

 

 

27,632

 

 

 

(151

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Purchases of treasury stock

 

 

 

 

 

(184

)

Dividend payments

 

 

(4,328

)

 

 

(4,301

)

Repayment of bonds payable

 

 

(24,600

)

 

 

 

Net cash used in financing activities

 

 

(28,928

)

 

 

(4,485

)

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(1,320

)

 

 

5,076

 

Effect of exchange rate changes

 

 

(1,168

)

 

 

(1,461

)

Cash and cash equivalents, beginning of period

 

 

73,773

 

 

 

105,504

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

71,285

 

 

$

109,119

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment included in accounts payable

 

$

302

 

 

$

273

 

 
 
 
 
 

Supplemental Information
Reconciliation of Operating Loss to Non-GAAP Operating Income (Loss)
(Unaudited)

 

 

Three Months Ended

March 31,

 

 

 

 

2020

 

 

 

2019

 

 

 

Operating Loss

$

(4,944

)

 

 

$

(6,167

)

 

 

Acquisition related expenses, amortizations and adjustments

 

1,358

 

(1)

 

 

1,497

 

(6)

 

Stock-based compensation expense

 

1,791

 

(2)

 

 

1,859

 

(7)

 

Restructuring expenses

 

553

 

(3)

 

 

2,063

 

(8)

 

Deferred compensation adjustments

 

(3,460

)

(4)

 

 

2,124

 

(4)

 

Asset impairments

 

65

 

(5)

 

 

 

 

 

Non-GAAP Operating Income (Loss)

$

(4,637

)

 

 

$

1,376

 

 

 

 

(1) $0.3 million is included in total cost of sales, $0.6 million is included in selling, general and administrative expenses and $0.5 million is included in research and development expenses on the condensed consolidated statements of income (loss).

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

(3) $0.1 million is included in selling, general and administrative expenses and $0.5 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(4) Includes a non-cash change in fair value of equity investments held in deferred compensation plans offered to certain employees which is included in selling, general and administrative expenses on the condensed consolidated statements of income (loss).

(5) Includes abandonment of certain information technology projects.

(6) $0.5 million is included in total cost of sales, $0.5 million is included in selling, general and administrative expenses and $0.5 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(7) $0.1 million is included in total cost of sales, $1.1 million is included in selling, general and administrative expenses and $0.7 million is included in research and development expenses on the condensed consolidated statements of income (loss).

(8) $0.6 million is included in total cost of sales, $0.8 million is included in selling, general and administrative expenses and $0.6 million is included in research and development expenses on the condensed consolidated statements of income (loss).

 
 
 
 
 

Supplemental Information
Reconciliation of Net Income (Loss) and Earnings (Loss) per Common Share – Basic and Diluted to Non-GAAP
Net Income (Loss) and Non-GAAP Earnings (Loss) per Common Share – Basic and Diluted
(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Net Income (Loss)

 

$

(9,969

)

 

$

770

 

Acquisition related expenses, amortizations and adjustments

 

 

1,358

 

 

 

1,497

 

Stock-based compensation expense

 

 

1,791

 

 

 

1,859

 

Restructuring expenses

 

 

553

 

 

 

2,063

 

Deferred compensation adjustments(1)

 

 

(1,787

)

 

 

 

Asset impairments

 

 

65

 

 

 

 

Pension expense(2)

 

 

237

 

 

 

203

 

Valuation allowance

 

 

6,090

 

 

 

 

Tax effect of adjustments to net income (loss)

 

 

(578

)

 

 

(1,524

)

Non-GAAP Net Income (Loss)

 

$

(2,240

)

 

$

4,868

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

47,957

 

 

 

47,782

 

Weighted average shares outstanding – diluted

 

 

47,957

 

 

 

47,853

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share – basic

 

$

(0.21

)

 

$

0.02

 

Earnings (loss) per common share – diluted

 

$

(0.21

)

 

$

0.02

 

 

 

 

 

 

 

 

 

 

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

 

$

(0.05

)

 

$

0.10

 

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

 

$

(0.05

)

 

$

0.10

 

 

(1) Includes a non-cash change in fair value of equity investments held in deferred compensation plans offered to certain employees and a net investment gain of $1.5 million related to the out of period remeasurement to historical cost basis of certain long-term investments held in the Company’s stock as part of one of these deferred compensation plans.

(2) Includes amortization of actuarial losses related to the Company’s pension plan for employees in certain foreign countries.

 
 
 

 

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