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

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ADTRAN, Inc. (NASDAQ: ADTN) ("ADTRAN" or the "Company") today announced financial results for the fourth quarter of 2020. For the quarter, revenue was $130.1 million. Net income for the fourth quarter of 2020 was $6.1 million and earnings per share, assuming dilution, was $0.13 per share. Non-GAAP net income was $5.2 million and non-GAAP earnings per share, assuming dilution, was $0.11 per share. Non-GAAP net income and non-GAAP earnings per share exclude stock-based compensation expense, acquisition-related expenses and amortizations, restructuring expenses, amortization of pension actuarial losses, valuation allowance related to our deferred tax assets, non-cash deferred compensation, and other one-time adjustments. The reconciliations between GAAP net income and GAAP earnings per share to non-GAAP net income and non-GAAP earnings per share are set forth in the table provided below.

ADTRAN Chairman and Chief Executive Officer Tom Stanton stated, "We saw substantial growth in our Tier-2 and Tier-3 service provider segments in the U.S. and a solid increase in fiber deployments in Europe. We expect that our fiber access solutions will continue to be adopted by customers around the world."

The Company also announced that its Board of Directors declared a cash dividend for the fourth quarter of 2020. The quarterly cash dividend of $0.09 per common share is to be paid to the Company’s stockholders of record as of the close of business on February 18, 2021. The payment date will be March 4, 2021.

The Company confirmed that it will hold a conference call to discuss its fourth quarter 2020 results on Thursday, February 4, 2021, at 9:30 a.m. Central Time. ADTRAN will webcast this conference call. To listen, simply visit ADTRAN’s Investor Relations site at www.adtran.com/investor approximately 10 minutes prior to the start of the call, click on the event "ADTRAN releases 4th Quarter 2020 Financial Results and Earnings Call," and click on the Webcast link.

An online replay of the Company’s conference call, as well as the text of the Company's conference call, will be available on the Investor Relations site approximately 24 hours following the call and will remain available for at least 12 months. For more information, visit www.adtran.com/investor or email 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: (i) those risks and uncertainties related to 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 the Company and its customers; actions that have been taken and that may be taken by the Company, its customers, suppliers and counterparties in response to the pandemic, including the implementation of alternative work arrangements for employees, which may delay the timing of some orders and expected deliveries and which may impact the Company’s ability to mitigate inefficiencies, delays and additional costs in the Company’s product development, sales, marketing and customer service efforts; the legal, regulatory and administrative developments that occur at the federal, state and local levels and in foreign jurisdictions in response to the pandemic, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns; potential disruptions, breaches, or other incidents affecting the proper operation, availability or security of the Company’s or its partners’ information systems; declines in revenues due to declining customer demand and deteriorating macroeconomic conditions; potential increased expenses related to labor, raw materials, freight or other expenditures; the impact of the COVID-19 pandemic on the Company’s liquidity, as well as risks associated with disruptions in the financial markets and the business of financial institutions as a result of the COVID-19 pandemic which could impact the Company from a financial perspective; (ii) those risks and uncertainties related to evolving U.S. and foreign laws and regulations regarding privacy, data protection and other matters, including uncertainty and potential additional compliance obligations arising from the Court of Justice of the European Union’s recent issuance of a decision that invalidated the EU-U.S. Privacy Shield framework as a basis for transfers of personal data from the EU to the U.S.; and (iii) the other risks detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements included in this press release.

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

These non-GAAP financial measures are not prepared in accordance with, and are not 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)

December 31,

December 31,

2020

2019

Assets

Cash and cash equivalents

$

60,161

$

73,773

Restricted cash

18

Short-term investments

3,131

33,243

Accounts receivable, net

98,827

90,531

Other receivables

21,531

16,566

Inventory, net

118,715

98,305

Prepaid expenses and other current assets

8,293

7,892

Total Current Assets

310,676

320,310

Property, plant and equipment, net

62,399

68,086

Deferred tax assets, net

9,869

7,561

Goodwill

6,968

6,968

Intangibles, net

23,470

27,821

Other non-current assets

25,425

19,883

Long-term investments

80,130

94,489

Total Assets

$

518,937

$

545,118

Liabilities and Stockholders' Equity

Accounts payable

$

43,187

$

44,870

Bonds payable

24,600

Unearned revenue

14,092

11,963

Accrued expenses and other liabilities

13,609

13,876

Accrued wages and benefits

15,262

13,890

Income tax payable, net

1,301

3,512

Total Current Liabilities

87,451

112,711

Non-current unearned revenue

6,888

6,012

Pension liability

18,664

15,886

Deferred compensation liability

25,866

21,698

Other non-current liabilities

7,124

8,385

Total Liabilities

145,993

164,692

Stockholders' Equity

372,944

380,426

Total Liabilities and Stockholders' Equity

$

518,937

$

545,118

Consolidated Statements of Income (Loss)

(Unaudited)

(In thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2020

2019

2020

2019

Sales

Network Solutions

$

114,091

$

96,219

$

438,015

$

455,226

Services & Support

16,038

19,568

68,495

74,835

Total Sales

130,129

115,787

506,510

530,061

Cost of Sales

Network Solutions

65,734

56,324

244,226

263,677

Services & Support

10,878

12,254

44,733

47,217

Total Cost of Sales

76,612

68,578

288,959

310,894

Gross Profit

53,517

47,209

217,551

219,167

Selling, general and administrative expenses

29,348

30,625

113,972

130,288

Research and development expenses

27,493

30,654

113,287

126,200

Asset impairments

65

3,872

Gain on contingency

(1,230

)

Operating Loss

(3,324

)

(14,070

)

(9,773

)

(39,963

)

Interest and dividend income

905

872

1,936

2,765

Interest expense

(4

)

(129

)

(5

)

(511

)

Net investment gain

3,031

3,239

4,850

11,434

Other income (expense), net

(947

)

(768

)

(3,254

)

1,498

Loss Before Income Taxes

(339

)

(10,856

)

(6,246

)

(24,777

)

Income tax (expense) benefit

6,453

(768

)

8,624

(28,205

)

Net Income (Loss)

$

6,114

$

(11,624

)

$

2,378

$

(52,982

)

Weighted average shares outstanding – basic

48,111

47,936

47,996

47,836

Weighted average shares outstanding – diluted

48,532

(1)

47,936

48,288

(1)

47,836

Earnings (loss) per common share – basic

$

0.13

$

(0.24

)

$

0.05

$

(1.11

)

Earnings (loss) per common share – diluted

$

0.13

(1)

$

(0.24

)

$

0.05

(1)

$

(1.11

)

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

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Twelve Months Ended

December 31,

2020

2019

Cash flows from operating activities:

Net income (loss)

$

2,378

$

(52,982

)

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

Depreciation and amortization

16,627

17,771

Asset impairments

65

3,872

Gain on investments

(5,802

)

(11,434

)

Stock-based compensation expense

6,834

6,962

Deferred income taxes

(1,356

)

30,070

Gain on contingency payment

(1,230

)

Gain on life insurance proceeds

(1,000

)

Other

216

(33

)

Change in operating assets and liabilities:

Accounts receivable, net

(7,269

)

8,282

Other receivables

(4,732

)

20,046

Inventory, net

(18,840

)

1,252

Prepaid expenses and other assets

(5,239

)

2,749

Accounts payable, net

(2,199

)

(13,494

)

Accrued expenses and other liabilities

5,093

(4,598

)

Income taxes payable

(2,294

)

(8,705

)

Net cash used in operating activities

(16,518

)

(2,472

)

Cash flows from investing activities:

Purchases of property, plant and equipment

(6,413

)

(9,494

)

Proceeds from disposals of property, plant and equipment

2

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

105,100

47,268

Purchases of available-for-sale investments

(56,767

)

(48,578

)

Acquisition of note receivable

(523

)

Life insurance proceeds received

1,000

Acquisition of business

13

Net cash provided by (used in) investing activities

41,399

(9,791

)

Cash flows from financing activities:

Dividend payments

(17,334

)

(17,212

)

Repayment of bonds payable

(24,600

)

Tax withholdings related to stock-based compensation settlements

(1,043

)

Proceeds from stock option exercises

526

Purchases of treasury stock

(184

)

Payments on long-term debt

(1,000

)

Net cash used in financing activities

(42,977

)

(17,870

)

Net decrease in cash and cash equivalents

(18,096

)

(30,133

)

Effect of exchange rate changes

4,502

(1,598

)

Cash, cash equivalents and restricted cash, beginning of year

73,773

105,504

Cash, cash equivalents and restricted cash, end of year

$

60,179

$

73,773

Supplemental disclosure of cash flow information

Cash paid during the year for interest

$

24

$

512

Cash paid during the year for income taxes

$

7,609

$

9,357

Supplemental disclosure of non-cash investing activities

Purchases of property, plant and equipment included in accounts payable

$

108

$

90

Supplemental Information

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

(Unaudited)

Three Months ended

December 31,

Twelve Months ended

December 31,

2020

2019

2020

2019

Operating Loss

$

(3,324

)

$

(14,070

)

$

(9,773

)

$

(39,963

)

Acquisition related expenses, amortizations and adjustments

1,051

(1)

1,357

(5)

4,550

(8)

5,703

(13)

Stock-based compensation expense

1,778

(2)

1,778

(6)

6,834

(9)

6,962

(14)

Restructuring expenses

2,581

(3)

1,356

(7)

6,229

(10)

6,014

(15)

Deferred compensation adjustments

2,172

(4)

536

(4)

2,937

(4)

2,767

(4)

Asset impairments

65

(11)

3,872

(11)

Settlement income

(28

)

(12)

(746

)

(12)

Gain on contingency

(1,230

)

(16)

Non-GAAP Operating Income (Loss)

$

4,258

$

(9,043

)

$

10,814

$

(16,621

)

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

(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 consolidated statements of income.

(3) $0.2 million is included in total cost of sales, $0.2 million is included in selling, general and administrative expenses and $2.2 million is included in research and development expenses on the consolidated statements of income.

(4) Includes non-cash change in fair value of equity investments held in the ADTRAN, Inc. Deferred Compensation Program for Employees per ASU 2016-01, all of which is included in selling, general and administrative expenses on the consolidated statements of income.

(5) $0.4 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 consolidated statements of income.

(6) $0.1 million is included in total cost of sales, $1.0 million is included in selling, general and administrative expenses and $0.7 million is included in research and development expenses on the consolidated statements of income.

(7) $0.3 million is included in selling, general and administrative expenses and $1.1 million is included in research and development expenses on the consolidated statements of income.

(8) $0.3 million is included in total cost of sales, $2.3 million is included in selling, general and administrative expenses and $1.9 million is included in research and development expenses on the consolidated statements of income.

(9) $0.4 million is included in total cost of sales, $4.0 million is included in selling, general and administrative expenses and $2.4 million is included in research and development expenses on the consolidated statements of income.

(10) $0.5 million is included in total cost of sales, $1.8 million is included in selling, general and administrative expenses and $3.9 million is included in research and development expenses on the consolidated statements of income.

(11) Includes abandonment of certain information technology projects.

(12) Includes income related to certain freight forwarder claim settlements, all of which is included in total cost of sales on the consolidated statements of income.

(13) $1.7 million is included in total cost of sales, $2.1 million is included in selling, general and administrative expenses and $1.9 million is included in research and development expenses on the consolidated statements of income.

(14) $0.4 million is included in total cost of sales, $3.9 million is included in selling, general and administrative expenses and $2.7 million is included in research and development expenses on the consolidated statements of income.

(15) $0.8 million is included in total cost of sales, $2.3 million is included in selling, general and administrative expenses and $2.9 million is included in research and development expenses on the consolidated statements of income.

(16) Includes gain related to unearned contingent liabilities recognized upon the acquisition of a business in November 2018.

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

December 31,

Twelve Months ended

December 31,

2020

2019

2020

2019

Net Income (Loss)

$

6,114

$

(11,624

)

$

2,378

$

(52,982

)

Acquisition related expenses, amortizations and adjustments

1,051

1,357

4,550

5,703

Stock-based compensation expense

1,778

1,778

6,834

6,962

Restructuring expenses

2,581

1,356

6,229

6,014

Pension expense(1)

250

195

970

795

Valuation allowance

(5,420

)

5,723

(2,798

)

42,778

Deferred compensation adjustments

601

(2)

(831

)

(2) (3)

Asset impairments

65

3,872

Settlement income

(28

)

(746

)

Gain on contingency

(1,230

)

Tax effect of adjustments to net income (loss)

(1,716

)

(1,251

)

(4,805

)

(5,675

)

Non-GAAP Net Income (Loss)

$

5,239

$

(2,466

)

$

12,564

$

5,491

Weighted average shares outstanding – basic

48,111

47,936

47,996

47,836

Weighted average shares outstanding – diluted

48,532

47,936

48,288

47,836

Earnings (loss) per common share - basic

$

0.13

$

(0.24

)

$

0.05

$

(1.11

)

Earnings (loss) per common share - diluted

$

0.13

$

(0.24

)

$

0.05

$

(1.11

)

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

$

0.11

$

(0.05

)

$

0.26

$

0.11

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

$

0.11

$

(0.05

)

$

0.26

$

0.11

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

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

(3) Includes net investment gain of $1.5 million related to the out of period remeasurement to historical cost basis of certain long-term investments held in the Company's stock as part of one of the Company’s deferred compensation plans.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210203005960/en/

Contacts

Investor Services/Assistance:
Rhonda Lambert/256-963-7450
investor.relations@adtran.com