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Item 1. Business

2025-03-03 compared with 2024-03-15 · 341 added, 349 removed, 844 unchanged (45% of the section changed)

Company Overview

We are a leading global provider of networking and communications platforms, software, systems and services focused on the broadband access and optical networking market.

We are serving a diverse domestic and international customer base in multiple countries that includes large, medium and small Service Providers;

alternative Service Providers, such as utilities, municipalities and fiber overbuilders;

distributed enterprises, including Fortune 500 companies with sophisticated business continuity applications;

ADTRAN Holdings, Inc.

(“Adtran” or the “Company”) is a leading global provider of networking and communications platforms, software, systems and services focused on the metro optical transport, data center interconnect, and broadband access market, serving a diverse domestic and international customer base in multiple countries that includes large, medium and small Service Providers, alternative Service Providers, such as utilities, municipalities and fiber overbuilders, cable/MSOs, SMBs and distributed enterprises, including Fortune 500 companies with sophisticated business continuity applications;

and federal, state and local government agencies.

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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, developing new products addressing customer needs and testing those products for the specific requirements of particular customers.

We offer a broad portfolio of flexible software and hardware network solutions and services that enable network operators to meet today’s service demands while also 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, services and support and research and development facilities in strategic global locations.

Our success depends upon our ability to have customers adopt our technology, and 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.

The Company solely owns ADTRAN, Inc.

and is the majority shareholder of Adtran Networks (formerly ADVA Optical Networking SE).

and is the majority shareholder of Adtran Networks SE (“Adtran Networks”).

is a leading global provider of open, disaggregated networking and communications solutions.

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Network Solutions Segment

The Network Solutions segment includes hardware and software products that enable a digital future which support our Subscriber, Access & Aggregation, and Optical Networking Solutions.

Our cloud-managed Wi-Fi gateways, virtualization software, and switches provide a mix of wired and wireless connectivity at the customer premises.

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").

Our portfolio includes products for multi-gigabit service delivery over fiber or alternative media to homes and businesses.

The Company's portfolio includes products for multi-gigabit service delivery over fiber or alternative media to homes and businesses.

Services & Support Segment

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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 our Mosaic One platform that manages end-to-end network and service optimization for both fiber access infrastructure and mesh Wi-Fi connectivity.

We back these services with a global support organization that offers on-site and off-site support services with varying SLAs.

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.

Revenue Categories

In addition to operating under two reportable segments, we also report revenue across three categories – Subscriber Solutions, Access & Aggregation Solutions and Optical Networking Solutions.

Prior to the Business Combination with Adtran Networks on July 15, 2022, ADTRAN, Inc.

reported revenue across the following three categories:

(1) Access & Aggregation, (2) Subscriber Solutions & Experience and (3) Traditional & Other Products.

Following the Business Combination with Adtran Networks, we recast these revenues such that ADTRAN, Inc.'s former Access & Aggregation revenue is combined with a portion of the applicable Adtran Networks solutions to create Access & Aggregation Solutions, ADTRAN’s former Subscriber Solutions & Experience revenue is combined with a portion of the applicable Adtran Networks 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 was added as a revenue category to represent a meaningful portion of Adtran Networks' portfolio.

Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at customers' premises while providing an immersive and interactive experience for residential, business and wholesale subscribers.

Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at the customer's 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.

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Optical Networking Terminals ("ONTs"):

• GPON-XGS-PON ONTs

Packet Aggregation:

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• Mosaic One SaaS Applications

• Ensemble Controller

• Mosaic Network Controller

• Professional Services

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• ALM Fiber Monitoring

• Ensemble Controller

• Mosaic Network Controller

• Professional Services

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Industry Overview

The global growth of the cloud and mobility, home office and mobile working, industrial applications and 5G are accelerating the demand for more bandwidth, requiring more flexible provisioning of telecommunications services and more precise network synchronization.

The global growth of the cloud and mobility (5G), home office and mobile working, industrial applications and AI are accelerating the demand for more bandwidth, requiring more flexible provisioning of telecommunications services and more precise network synchronization.

Communications Service Providers' investment in their networks is being driven by the pursuit of growth in subscriber acquisition, retention, and average revenue per user, as well as by the aims of streamlining operations, lowering energy consumption and improving their overall ESG position.

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• Growth in focus markets:

More turnkey solutions and in-region resources, especially North America and EMEA.

Increased turnkey solutions and in-region resources, especially North America and EMEA.

• Investment in converged edge:

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Business Efficiency Program

On November 6, 2023, due to the uncertainty around the current macroeconomic environment and its impact on customer spending levels, the Company’s management decided to implement a business efficiency program (the “Business Efficiency Program”) targeting the reduction of ongoing operating expenses and focusing on capital efficiency inclusive of certain salary reductions, an early retirement program, a site consolidation plan to include lease impairments and the partial sale of owned real estate (including the potential sale of portions of our headquarters), inventory write downs from product discontinuances, and the suspension of the quarterly dividend.

The Business Efficiency Program expands upon other recently implemented restructuring efforts and synergy costs following the Business Combination.

On November 6, 2023, due to the uncertainty around the current macroeconomic environment and its impact on customer spending levels, the Company’s management decided to implement a business efficiency program (“Business Efficiency Program”) targeting the reduction of ongoing operating expenses and focusing on capital efficiency inclusive of certain salary reductions, an early retirement program, a site consolidation plan to include lease impairments and the sale of owned real estate (including the probable sale of our headquarters), inventory write downs from product discontinuances, and the suspension of the quarterly dividend.

The Business Efficiency Program expanded upon other recently implemented restructuring efforts and synergy costs following the Business Combination.

For instance, on August 17, 2023, the Company’s management determined to discontinue its copper-based Digital Subscriber Line broadband access technology products and its fixed wireless access products in its Network Solutions segment.

Furthermore, on September 29, 2023, the Company’s management decided to exit the "IoT" gateway market (indoor and outdoor), a subset of the broader IoT market (together with the other product discontinuations, the “Discontinuations”).

Additionally, on October 25, 2023, all employees were informed of certain personnel measures, which included the reduction of salary for select management, a reduction of approximately 5% of the workforce, an early retirement program and a hiring freeze.

For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Efficiency Program” in Part II, Item 7 of this report.

On October 25, 2023, all employees were informed of certain personnel measures, which included the reduction of salary for select management, a reduction of approximately 5% of the workforce, an early retirement program and a hiring freeze.

Additionally, on April 11, 2024, Management determined to close a facility in Greifswald, Germany which was completed in November 2024.

As of December 31, 2024, the Company classified the Company's property, specifically the North and South Towers located on our Huntsville, Alabama campus, as assets held for sale, see Note 1 and Note 6 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report for additional information .

Other than our stated aim of selling our headquarters, the restructuring program was substantially complete as of December 31, 2024.

For additional information regarding the Business Efficiency Program, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 or Note 20 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.

We have a diverse global customer base that includes large, medium and small Service Providers, alternative Service Providers, such as utilities, municipalities and fiber overbuilders;

SMBs and distributed enterprises.

During 2023, we had one customer who comprised greater than 10.0% of our revenue, which was an international Service Provider and our five largest customers comprised 37.0% of our revenue.

During 2024, we had one customer who comprised greater than 10.0% of our revenue, which was an international Service Provider and our next five largest customers comprised 21.7% of our revenue.

Additionally, our revenue in the U.S., U.K.

and Germany comprised more than 10% of our revenue in 2023.

and Germany each comprised more than 10% of our revenue in 2024.

The revenue from this Service Provider and these countries is reported in both our Network Solutions and Services & Support segments.

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Our product development efforts are often centered on entering a market with improved technology, enabling us to offer products at competitive prices and compete for market share.

See Inventory included in Part I, Item 1 of this report for additional information regarding our supply chain disruptions.

Development activities focus on solutions that support both existing and emerging communications industry technologies in segments that we consider viable revenue opportunities.

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In addition, we focus on vertical optical technologies like Silicon Photonics, as well as microelectronics in order to differentiate and fully control the vertical value stack of our solutions.

In 2023, we released many market-leading products like additions to our SDX OLT range, new residential gateway and ONT families, outdoor packet demarcation devices, packet demarcation, encryption/security products, edge and core transport solutions.

In 2024, we released many market-leading products like additions to our SDX OLT series, new residential gateway and ONT families, outdoor packet demarcation devices, packet demarcation, encryption/security products, edge and core transport solutions.

We enhanced our market-leading synchronization & timing portfolio, as well as our SaaS delivery abilities and Mosaic One software.

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We compete in markets for networking and communications services and solutions for Service Providers, businesses, government agencies and other organizations worldwide.

Our products and services provide solutions supporting voice, data and video communications across fiber-, copper-, coaxial- and wireless-based infrastructure, as well as across wide area networks, local area networks and the internet.

Our products and services provide solutions supporting voice, data and video communications across fiber-, copper-, and wireless-based infrastructure, as well as across wide area networks, local area networks and the internet.

We compete with a number of companies in the markets we serve.

In the Subscriber Solutions & Experience category, our primary competitors include Calix, Cisco, CommScope, and Ribbon Communications.

In our Access & Aggregation solutions category, key competitors include Calix, Casa Systems, Ciena, CommScope, DZS, Harmonic, Huawei, Nokia, Reliance/Radisys, Vecima Networks and ZTE.

In the Subscriber Solutions & Experience category, our primary competitors include Calix, Ciena, DZS, Nokia, eero, and a growing number of Asian based ODM's selling direct to carriers.

In our Access & Aggregation solutions category, key competitors include Nokia, Calix, Huawei, ZTE Corporation, DZS, Vecima, Harmonic and Microchip.

Main competitors of our Optical Networking solutions portfolio are Ciena, Cisco, Ekinops, Huawei, Infinera, Nokia, Ribbon Communications and ZTE Corporation.

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Additionally, the effects of the dynamic supply and demand environment we have experienced in recent periods may impact the traditional seasonality in our business.

Due to the improved supply situation and the associated reduction in lead times, our customers began to optimize their inventories in the past fiscal year.

Due to the stabilizing supply chain environment and the associated reduction in lead times, our customers began to optimize their inventories in the past fiscal year.

This has led to a slowdown in ordering behavior.

In addition, the current macroeconomic environment, related to continued elevated interest rates and ongoing inflationary pressures, has negatively impacted customer behavior in the Large and Medium/Small Service Provider segment.

We expect these trends to continue in 2024.

In addition, the continuing uncertain macroeconomic conditions related to inflationary pressures and elevated interest rates has impacted the spending behavior of our customers.

However, customers have started to replenish their inventories to meet increasing demand;

therefore, we expect order and billings to steadily increase in 2025.

Foreign Currency

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Further, a significant percentage of orders require delivery within a few days.

However, with the current global supply chain and transportation constraints, 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 our customer relations and our financial condition.

We maintain substantial inventories of raw materials for long lead time components to support this demand and avoid expedite fees.

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Environmental Matters

Our products must comply with various regulations and standards established by communications authorities in various countries, as well as those of certain international bodies.

Environmental legislation within the EU may increase our cost of doing business as we amend our products to comply with these requirements.

For example, the EU issued the RoHS directive, the WEEE directive and the REACH regulation.

Our products must comply with various regulations, directives and standards established by communications authorities in various countries, as well as those of certain international bodies.

Environmental legislation in particular within the EU may increase our cost of doing business as we amend our products to comply with these requirements.

This includes the CSRD directive, the CBAM regulation, the WEEE directive and the ESPR adopted by the EU.

We are also subject to disclosure and related requirements that apply to the presence of conflict minerals in our products or supply chain.

We continue to implement measures to comply with these and other similar directives and regulations from additional countries.

As a global company, the import and export of our products and services are subject to various laws and regulations, including international treaties, U.S.

trade policy, tariffs, export controls and sanctions laws, customs regulations, and local trade rules around the world.

Such laws, rules, and regulations may delay the introduction of some of our products or impact our competitiveness through restricting our ability to do business in certain places or with certain entities and individuals, or the need to comply with domestic preference programs, laws concerning transfer and disclosure of sensitive or controlled technology or source code, unique technical standards, localization mandates, and duplicative in-country testing and inspection requirements.

Furthermore, material changes in such laws, rules or regulations or the failure by us to comply with such laws, rules and regulations could limit our ability to conduct business globally.

For further discussion of risks associated with government regulation, see “Risk Factors – Changes in trade policy in the U.S.

and other countries, including the imposition of additional tariffs and the resulting consequences, may adversely impact our gross profits, gross margins, results of operations and financial condition,” in Part 1, Item 1A of this report.

Other Regulations

As a company with global operations, we are subject to complex foreign and U.S.

laws and regulations, including trade regulations;

import and export regulations;

anti-bribery and corruption laws;

laws and regulations, including anti-bribery and corruption laws;

antitrust or competition laws;

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Areas of focus in our environmental sustainability program include:

• established an ESG Committee of the Board of Directors;

• maintained our mature environmental management system certified to ISO 14001 from 2015;

• dedicated ESG Committee of the Board of Directors;

• maintained our mature environmental management system certified to ISO 14001:2015;

• advanced our Energy Management program with ISO 50001 readiness for the Huntsville site for 2025;

• submitted our detailed Net Zero targets to SBTi in 2023;

• submitted our Net Zero targets to SBTi in 2023 and got them approved in 2024;

• continued purchase of Renewable Energy Credits, equaling ~20% of total Adtran energy consumption;

• purchased certified carbon offsets to achieve Net Zero for our Scope 1 emissions;

• continued using IntegrityNext, a platform to engage suppliers to obtain an ESG assessment aligned with international standards, allowing us to monitor ESG risks in our supply chain;

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• increased visibility of our program internally and externally through customer engagement, joining peer sustainability groups, offering training to team members and web site enhancements;

• switched from the GRI reporting standard to the newer and more comprehensive ESRS standard;

• actively engaged our stakeholders with investor and supply chain assessments.

We will issue an ESG report for 2023 in order to fulfill the reporting obligations set forth in the German commercial code applicable to Adtran Networks.

• continued with the external CDP and EcoVadis assessments.

We will issue an ESG report for 2024 in early 2025, which will use the EU ESRS guidelines, in order to fulfill the reporting obligations set forth in the EU CSRD.

Within the report is information on our environmental, social and governance programs, including quantitative and qualitative data for both Adtran Networks and the Company.

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Our Chief Executive Officer voluntarily reduced his salary by 50% and did not receive any stock option awards under the Business Efficiency Program.

As of December 31, 2024, the Company had substantially completed the goals outlined in our Business Efficiency Program except for the Company's aim of selling its headquarters.

For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Efficiency Program” in Part II, Item 7 of this report.

As of December 31, 2023, we had 3,227 full-time employees, with 1,249 in the U.S.

and 1,978 in our international subsidiaries located in North America, Latin America, EMEA and APAC regions.

2,027 of these full-time employees are employees of Adtran Networks and its subsidiaries.

We also utilized 192 contractors and 160 temporary employees domestically and internationally in various manufacturing, engineering, sales and general and administrative capacities.

As of December 31, 2024 we had 3,234 total employees, of which 3,091 full-time employees and 143 part-time employees.We had 1,133 employees in the U.S.

and 2,101 employees in our international subsidiaries located in North America, Latin America, EMEA and APAC regions.

We also utilized 240 contractors and numerous temporary employees domestically and internationally in various manufacturing, engineering, sales and general and administrative capacities.

We believe that our relationship with our employees is good.

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or NORDMETALL Association of Metal and Electrical Industry e.V.

Although these collective bargaining agreements will expire on September 30, 2024, negotiations with the employees of ADTRAN GmbH for a new collective bargaining agreement are ongoing and we have not experienced any work stoppage.

As of December 31, 2024, Adtran Networks had 94 employees in Switzerland, France, Italy, Finland and Spain that were subject to collective bargaining agreements of different associations.

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Additionally, we continually work to recruit technical talent in diverse communities through our cooperative education program.

This program seeks to identify college students that major in relevant technological areas and expose them to our work environment on an

alternating semester basis.

This program seeks to identify college students that major in relevant technological areas and expose them to our work environment on an alternating semester basis.

Our goal is to retain as many of these students as possible for full-time employment after graduation to build our organization's future.

Diversity, Equity and Inclusion

We believe that maintaining a diverse and inclusive workforce is critical to the success of our business.

We encourage an environment where individuality is embraced regardless of age, gender, identity, race, sexual orientation, physical or mental ability, ethnicity and perspective and where each employee is accepted and respected and can, therefore, bring their most authentic self to work.

In addition to diversity in our workforce, we seek to ensure diversity in our Board of Directors with respect to skills, experience, gender, race and ethnicity.

Our Board of Directors is comprised of nine members, two of which are females and three of which are ethnically diverse.

Workplace Diversity

We believe that maintaining a diverse and inclusive workforce is important to the success of our business.

Our Board of Directors is comprised of seven members, two of which are females and three of which are ethnically diverse.

Additionally, the Board of Directors has a diversity of skills and experience with respect to accounting and finance, management and leadership, vision and strategy, business operations, business judgment, crisis management, risk assessment, industry knowledge, corporate governance and global markets.

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Additionally, we offer access to many programs that provide additional monetary support in the event of a qualifying incident, including accident insurance, life insurance and hospital indemnity insurance, among others.

We understand that mental health is an essential aspect of our employees’ wellbeing and we offer an employee assistance program at no charge to employees and their family members.

We understand that mental health is an essential aspect of our employees’ well-being and we offer an employee assistance program at no charge to employees and their family members.

This program provides access to qualified personnel to address various issues such as grief, financial stress, family and emotional issues.

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As employees increase their competencies in these areas and master skills within their individual roles, this program offers a variety of career advancement paths.

Employees also have access to the Learning module available in Workday.

This platform houses all required training, as well as optional training in a variety of areas.

Intellectual Property

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Information about our Executive Officers

Set forth below is certain information regarding our current executive officers.

The age of each executive set forth below is as of February 29, 2024.

Our executive officers as of March 3, 2025, are listed below, along with their ages on that date, positions and offices held with the Company, and principal occupations and employment, focused primarily on the past five years (and all positions within the Company).

2007 to present

Chief Executive Officer and Chairman of the Board

2023 to present

Chief Executive Officer and Management Board member of Adtran Networks

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Chief Financial Officer and Management Board member of Adtran Networks

Chief Financial Officer (Adtran Networks)

Chief Financial Officer of Adtran Networks

Christoph Glingener

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Chief Technology Officer and Management Board member of Adtran Networks

Chief Executive Officer (Adtran Networks)

Chief Executive Officer of Adtran Networks

Chief Technology Officer of Adtran Networks

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The SEC maintains an internet website, http://www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers, including Adtran, that file electronically with them.

Additionally, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, if applicable, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended, are available free of charge under the Investor Relations section of our website, www.adtran.com, as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.

Additionally, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, if applicable, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), are available free of charge under the Investor Relations section of our website, www.adtran.com, as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.

The reference to our website address does not constitute incorporation by reference of the information contained on the website, which information should not be considered part of this report.

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Risks related to our financial results and Company success

We are obligated to comply with covenants related to our Wells Fargo Credit Agreement that could restrict our operating activities, and the failure to comply with such covenants could result in defaults that accelerates our debt.

We are obligated to comply with covenants related to our Wells Fargo Credit Agreement that restrict our operating activities, and the failure to comply with such covenants could result in defaults that accelerate our debt.

The Wells Fargo Credit Agreement governing our indebtedness contains restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest.

We are also obligated to add certain additional subsidiaries as guarantors of our debt obligations under the credit facility.

Our failure to comply with those covenants or to add such subsidiaries as guarantors could result in an event of default that, if not cured or waived, could result in the acceleration of all its debt.

Our Wells Fargo Credit Agreement along with the amendments thereto, contain various restrictive covenants which include, among others, provisions restricting our ability to:

Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all its debt.

Our Wells Fargo Credit Agreement along with the amendments thereto, contain various restrictive covenants which include, among others, provisions limiting our ability to:

• pay dividends or make other distributions or repurchase capital stock;

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• maintain certain fixed charge coverage ratios;

• maintain minimum amounts of cash and cash equivalents.

As a result of these restrictions, we have and may be:

As a result of these restrictions, we have been and may be:

• limited in how we conduct our business;

• limited in how much additional funding we can draw on our line of credit;

• unable to raise additional debt or equity financing to operate during general economic or business downturns;

• unable to compete effectively or to take advantage of new business opportunities.

Our failure to comply with the restrictive covenants set forth in the Credit Agreement could result in defaults that accelerate the payment under such debt which would likely have a material adverse impact on our financial condition and results of operations.

Our failure to comply with the covenants set forth in the Credit Agreement could result in defaults that accelerate the payment under such debt which would likely have a material adverse impact on our financial condition and results of operations.

In addition, an event of default under the Credit Agreement would permit the lenders to terminate all commitments to extend further credit under the applicable facility.

Furthermore, if we were unable to repay the amounts due and payable under the Credit Agreement, the lenders could proceed against the collateral granted them to secure that indebtedness.

Furthermore, if we were unable to repay the amounts due and payable under the Credit Agreement, the lenders could proceed against the collateral granted to them to secure that indebtedness.

In the event our lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.

In addition, these defaults could impair our ability to access debt and equity markets.

In addition, these defaults could impair our ability to access debt and equity capital markets.

For additional information on our debt covenants, see "Liquidity & Capital Resources" in Part II, Item 7 of this report.

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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.

Visibility into customer spending levels is often uncertain, spending patterns are subject to change, and reductions in our expense levels can take significant time to implement.

Typically, our customers request product delivery within a short period following our receipt of an order.

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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.

In the past, under certain market conditions, long manufacturing lead times have caused our customers to place the same order multiple times.

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.

On November 6, 2023, we determined to implement a business efficiency program, which includes a significant cost efficiency program targeting a reduction of ongoing operating expenses and a capital efficiency program inclusive of certain salary reductions, an early retirement program, a site consolidation plan to include lease impairments and the partial sale of owned real estate (including the potential sale of portions of our headquarters), inventory write downs from product discontinuances, and the suspension of the quarterly dividend.

Our estimates of the expenses necessary to achieve the cost savings we have identified may not prove accurate, and any increase in such expenses may affect our ability to achieve our anticipated cost savings within the period we have projected, or at all.

In addition, our efforts to reduce our operating expenses may impact our ability to generate sufficient revenue.

Furthermore, our expenses and the impact of long-term commitments are relatively fixed in the short term.

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Our customers in the subscriber solutions & experience technology category are increasingly focusing on working capital optimization and depletion of overstocked inventories, which has impacted and may continue to materially impact demand in that category.

We face risks arising from the ongoing restructuring of our operations under our business efficiency program and uncertainty with respect to our ability to achieve any anticipated cost savings associated with that program.

We are continuing to implement a business efficiency program to improve productivity and drive cost efficiencies and fuel long-term profitable growth.

Future charges related to such actions may harm our profitability in the periods incurred.

Business efficiency program actions have presented and may in the future present a number of significant risks that could have a material adverse effect on our operations, financial condition, results of operations, cash flow, or business reputation, including:

• incurrence of additional costs in the short-term, including workforce reduction costs, training of employees or third-party resources, accounting charges for inventory and technology-related write-offs and charges relating to consolidation of excess facilities;

• failure to accurately assess market opportunities and the technology required to address such opportunities;

• actual or perceived disruption of service or reduction in service levels to customers and consumers;

• potential adverse effects on our internal control environment and inability to preserve adequate internal controls relating to our general and administrative functions;

• actual or perceived disruption to customers, suppliers, distribution networks and other important operational relationships and the inability to resolve potential conflicts in a timely manner;

• difficulty in obtaining timely delivery of products of acceptable quality from our contract manufacturers;

• diversion of management attention from ongoing business activities and strategic objectives;

• failure to maintain employee morale and retain key employees, damage to company culture and an increase in employment claims;

• damage to our reputation as an employer, which could make it more difficult for us to hire new employees in the future.

Because of these and other factors, some of which may not be entirely within our control, we may not fully realize the purpose and anticipated operational benefits, efficiencies or cost savings of any productivity actions in the expected timelines, or at all, and, if we do not, our business and results of operations may be adversely affected.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Efficiency Program” in Part II, Item 7 of this report .

Our future revenue growth will depend, in part, on securing increased orders from customers.

Accurately matching necessary inventory levels to customer demand within the current environment is challenging, and we may incur additional costs or be required to write off significant inventory that would adversely impact our results of operations.

In recent years, we received unprecedented orders for our products and services, during a period when the supply environment was constrained.

We took a number of steps to mitigate these challenges, including extending our purchase commitments and placing non-cancellable, advanced orders with or through suppliers, particularly for long lead-time components.

As a result of this strategy and the inclusion of Adtran Networks’ inventory following the closing of the Business Combination, our inventory increased to $427.5 million at the end of fiscal 2022.

However, our inventory reduced to $269.3 million at the end of fiscal 2024, which is more in line with historical levels.

These inventory practices and their associated costs have had, and could in the future continue to have, an adverse impact on our cash from operations.

In addition, these inventory practices, particularly when considered in the context of our backlog, further introduce obsolescence risk that can impact our results of operations and financial condition.

During fiscal 2023 and fiscal 2024, certain customers that had earlier placed significant advanced orders, rescheduled deliveries for or cancelled a portion of such orders.

Accordingly, our inventory needs for a particular period can fluctuate and be difficult to predict.

If our customers were to cancel or delay orders for extended periods, inventory could become obsolete, and we could be required to write off or write down the inventory associated with those orders.

In addition, if customers were to cancel or delay existing or forecasted orders for which we have significant outstanding commitments to our contract manufacturers or suppliers, we may be required to purchase inventory under these commitments that we are unable to sell.

If we are required to write off or write down a significant amount of inventory, our results of operations for the applicable period would be materially adversely affected.

For example, we recorded charges for excess and obsolete inventory of $8.6 million and $24.3 million in fiscal 2024 and 2023, respectively, primarily related to a strategy shift which included discontinuance of certain product lines in connection with the Business Efficiency Program.

Our inability to effectively manage the matching of inventory with customer demand, particularly within any supply constrained environment, could adversely impact our results of operations and financial condition, and could result in loss of revenue, increased costs, or delays that could adversely impact customer satisfaction.

The lengthy sales and approval process required by Service Providers for new products has resulted in fluctuations in our revenue and may result in fluctuations of future revenue and financial results.

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This process can last from six to eighteen months, or longer, depending on the technology, the Service Provider and the demand for the product from the Service Provider’s subscribers.

Consequently, we are involved in a constant process of submitting for approval succeeding generations of products, as well as products that deploy new technology or respond to new technology demands from a major or other Service Provider.

We have generally been successful in the past in obtaining these approvals;

however, we cannot be certain that we will obtain these approvals in the future or that sales of these products will continue to occur.

Consequently, we are involved in a constant process of submitting for approval succeeding generations of

products, as well as products that deploy new technology or respond to new technology demands from a major or other Service Provider.

We cannot be certain that we will obtain these approvals in the future or that sales of these products will continue to occur.

Any attempt by a major or other Service Provider to seek out additional or alternative suppliers, or to undertake, as permitted under applicable regulations, the production of these products internally, could have a material adverse effect on our operating results.

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Further, once customer approval or certifications are met, our supply chain customers typically do not guarantee us a minimum, or any, volume of sales.

We require a significant amount of cash to service our indebtedness, our payment obligations to Adtran Networks shareholders under the DPLTA, and other obligations.

Our ability to generate cash depends on many factors beyond our control and any failure to service our outstanding indebtedness could harm our business, financial condition and results of operations.

Furthermore, we have entered into a DPLTA with Adtran Networks.

Additionally, pursuant to the terms of the DPLTA, each Adtran Networks shareholder (other than the Company) has received an offer to elect either (1) to remain an Adtran Networks shareholder and receive from us an Annual Recurring Compensation payment, or (2) to receive Exit Compensation.

For the year ended December 31, 2024, approximately 831 thousand shares of Adtran Networks stock were tendered to the Company.

This resulted in total Exit Compensation payments of approximately €15.7 million, or approximately $17.4 million, based on exchange rates at the time of the transactions, being paid to Adtran Networks shareholders.

Any failure to satisfy our payment obligations under the DPLTA could harm our business, financial condition and results of operations.

Our ability to make payments on and to refinance our indebtedness, to cover our payment obligations under the DPLTA, and to fund working capital needs and planned capital expenditures depends on our ability to generate cash in the future.

This, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control.

If our business does not generate sufficient cash flow from operations, we do not sufficiently reduce costs in a timely manner, or if our future borrowings are not available to us in an amount sufficient to enable us and our subsidiaries to pay our indebtedness or to fund our other liquidity needs, we may need to raise additional debt or equity capital, refinance all or a portion of our indebtedness, sell assets, reduce or delay capital investments, any of which could have a material adverse effect.

The Company experienced revenue declines in 2024.

There can be no assurance that the Company will be successful in effecting its plans to preserve cash liquidity and maintain compliance with the Company's covenants on commercially reasonable terms or at all.

We may need to further reduce capital expenditure and/or take other steps to preserve working capital in order to ensure that we can meet our needs and obligations and maintain compliance with our debt covenants.

Our ability to raise additional debt capital or to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time.

Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

The terms of existing or future debt instruments or preferred stock may limit or prevent us from taking any of these actions.

In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness or dividend payments on any future outstanding shares of preferred stock would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness or otherwise raise capital on commercially reasonable terms or at all.

Our inability to generate sufficient cash flow to satisfy our debt service, payment obligations to Adtran Networks shareholders under the DPLTA, and other obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have an adverse effect, which could be material, on our business, financial condition and results of operations.

Furthermore, if we raise additional funds through the issuance of equity or securities convertible into equity, or undertake certain transactions intended to address our existing indebtedness, our existing stockholders could suffer dilution in their percentage ownership of the Company, or our leverage and outstanding indebtedness could increase.

Current capital market conditions, including the impact of inflation, have increased borrowing rates and can be expected to significantly increase our cost of capital as compared to prior periods should we seek additional funding.

The terms of the DPLTA may have a material adverse effect on our financial results and condition.

The DPLTA between the Company, as the controlling company, and Adtran Networks, 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 Adtran Networks (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 Adtran Networks, (ii) Adtran Networks 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 Adtran Networks.

The Company’s payment obligation in satisfaction of the requirement that it absorb Adtran Networks’ annual net loss applied for the first time to the net loss generated in 2023.

Additionally, and subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, the DPLTA provides that Adtran Networks shareholders (other than the Company) be offered, at their election, (i) to put their Adtran Networks shares to the Company in exchange for compensation in cash of €17.21 per share, plus guaranteed interest (the “Exit Compensation”), or (ii) to remain Adtran Networks shareholders and receive a recurring compensation in cash of €0.52 per share for each full fiscal year of Adtran Networks (the “Annual Recurring Compensation”).

The guaranteed interest under the Exit Compensation is calculated from the effective date of the DPLTA to the date the shares are tendered, less any Annual Recurring Compensation paid.

The guaranteed interest rate is 5.0% plus a variable component that was 3.37% as of December 31, 2024.

With respect to the 2023 fiscal year, Adtran Networks' ordinary general shareholders' meeting occurred on June 28, 2024, and therefore, the Annual Recurring Compensation was paid on July 3, 2024.

With respect to the 2024 fiscal year, Adtran Networks’ ordinary general shareholder meeting is scheduled for June 27, 2025, and therefore, the Annual Recurring Compensation will be due on July 2, 2025.

The adequacy of both forms of compensation has been challenged by minority shareholders of Adtran Networks 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 (including interest thereon) or Annual Recurring Compensation than agreed upon in the DPLTA.

Our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately €8.9 million or $9.3 million (based on the exchange rate as of December 31, 2024) per year assuming none of the minority Adtran Networks 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.

For the year ended December 31, 2024, a total of 831 thousand shares of Adtran Networks stock was tendered to the Company and Exit Compensation payments of approximately €15.7 million or approximately $17.4 million, based on exchange rates at the time of the transactions, were paid to Adtran Networks shareholders.

Assuming all the minority holders of currently outstanding Adtran Networks shares were to elect the first option, we would be obligated to make aggregate Exit Compensation payments, including guaranteed interest, of approximately €333.2 million or approximately $344.9 million, based on an exchange rate as of December 31, 2024.

In addition to our cash and cash equivalents and the credit facility, we may fund a portion or all of the Annual Recurring Compensation and Exit Compensation through the sale of securities or additional alternative funding sources, if available.

There can be no assurances that we would be successful in effecting these actions at commercially reasonable terms or at all.

If we cannot raise additional funds as needed, it could have a material adverse impact on our financial results and financial condition.

Additionally, the payment of the Annual Recurring Compensation and Exit Compensation could have a material adverse impact on our financial results and financial condition.

S ee “Liquidity and Capital Resources” in Part II, Item 7 of this report for additional information.

The opportunity for minority Adtran Networks shareholders to tender Adtran Networks shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023.

However, due to the appraisal proceedings that were initiated in accordance with applicable German law in 2023, 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 ).

The Company expects to receive a procedural decision during 2025 that will likely be appealed.

The date of a decision by the court on the merits of the case is uncertain, but it is unlikely that such decision will be rendered in 2025.

Thereafter an expected appeal process will take a further 12-24 months to resolve.

The amount of this Annual Recurring Compensation payment obligation pursuant to the DPLTA could exceed the amount of dividends that otherwise might be distributed by Adtran Networks to minority shareholders and would even have to be paid if Adtran Networks incurs losses, which could have a material adverse impact on our financial results and financial condition.

Our significant indebtedness exposes us to various risks.

As of December 31, 2024, our borrowings under the revolving line of credit were $189.6 million, of which approximately $141.0 million was borrowed by ADTRAN, Inc.

and $48.6 million was borrowed by Adtran Networks.

The credit facilities provided under the Credit Agreement mature in July 2027, but ADTRAN, Inc.

may request extensions subject to customary conditions.

As of December 31, 2024, we had a total of $3.6 million in letters of credit under ADTRAN, Inc.

outstanding under the Credit Agreement, leaving a net amount (after giving effect to the $189.6 million of outstanding borrowings described above) of $180.8 million available for future borrowings;

however, as of December 31, 2024, the Company was limited to additional borrowings of $56.1 million based on debt covenant compliance metrics.

See "Cash Requirements" in Part II, Item 7 of this report for additional information.

Our indebtedness has and may continue to adversely affect our operations and liquidity.

Our level of indebtedness:

• could make it more difficult for us to pay or refinance our debts as they become due during adverse economic and industry conditions because we may not have sufficient cash flows to make its scheduled debt payments;

• has caused us and may continue to cause us to use a larger portion of our cash flow to fund interest and principal payments, reducing the availability of cash to fund working capital, capital expenditures, research and development and other business activities;

• has contributed to our decision to suspend quarterly dividend payments to the Company's stockholders;

• limits our ability to assume debt in a future acquisitions.

Specifically, our Credit Agreement with Wells Fargo limits the amount of debt we can assume in an acquisition.

This could limit our ability to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions;

• could cause us to be more vulnerable to general adverse economic and industry conditions;

• could cause us to be disadvantaged compared to competitors with less leverage;

• limits our ability to borrow additional money.

Specifically, our Credit Agreement with Wells Fargo limits our ability to borrow additional money, which could limit our ability to fund working capital, capital expenditures, research and development and other general corporate needs in the future.

Our ability to satisfy our debt obligations and renew the credit facility is dependent upon our future performance and other risk factors discussed in this section.

We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If we fail to pay interest on, or repay, our borrowings under the Wells Fargo credit facility when required, we will be in default under the applicable loans, and may also suffer an event of default under the terms of other borrowing arrangements that we may enter into from time to time.

We are attempting to further reduce our operating expenses in order to fund our obligations, and we may be forced to further reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness.

We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled obligations or that these actions would be permitted under the terms of our current or future debt agreements.

If we fail to implement these reductions or are unable to achieve sufficient operating results and resources, we could face substantial liquidity challenges and might be required to dispose of material assets or operations to meet our debt service and other obligations.

We may not be able to consummate those dispositions or obtain sufficient proceeds from those dispositions to meet our debt service and other obligations when due.

Any of these events could have a material adverse effect on our business, results of operations and financial condition.

We may also incur additional long-term debt and working capital lines of credit to meet future financing needs, which would increase our total indebtedness.

Although the terms of its existing and future credit agreements and of the indentures governing its debt contain restrictions on the incurrence of additional debt, including secured debt, these restrictions are subject to a number of important exceptions and debt incurred in compliance with these restrictions could be substantial.

If we or our restricted subsidiaries incur significant additional debt, the relative risks may intensify.

We depend heavily on sales to certain customers;

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This could lead to variability in our operating results and could have a material adverse effect on our business, operating results, financial condition and cash flow.

In addition, particularly in the Service Provider market, rapid consolidation will lead to fewer customers, with the effect that a loss of a major customer could have a material impact on our results that we would not have anticipated in a marketplace composed of more numerous participants.

particularly in the Service Provider market, rapid consolidation will lead to fewer customers, with the effect that a loss of a major customer could have a material impact on our results that we would not have anticipated in a marketplace composed of more numerous participants.

Our exposure to the credit risks of our customers and distributors may make it difficult to collect accounts receivable and could adversely affect our operating results, financial condition and cash flows.

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In the course of our sales to customers and distributors, we may encounter difficulty collecting accounts receivable and could be exposed to risks associated with uncollectible accounts receivable due to various reasons, including potential declining operating cash flows or bankruptcy filings.

While we attempt to monitor these situations carefully and attempt to take appropriate measures to collect accounts receivable balances, including through the recent $20.0 million expansion of a Receivables Purchase and Servicing Agreement with True Value S.A.R.L., there are no assurances we can avoid write-downs and/or write-offs of accounts receivable as a result of declining financial conditions for our customers, including bankruptcy.

While we attempt to monitor these situations carefully and attempt to take appropriate measures to collect accounts receivable balances, there are no assurances we can avoid write-downs and/or write-offs of accounts receivable as a result of declining financial conditions for our customers, including bankruptcy.

Such write-downs or write-offs could negatively affect our operating results for the period in which they occur and could potentially have a material adverse effect on our results of operations, financial condition and cash flows.

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The financial problems of our suppliers and industry consolidation occurring within one or more component supplier markets, such as the semiconductor market, in each case, could either limit supply or increase costs.

A reduction or interruption in supply, including disruptions on our global supply chain, caused in part by public health emergencies, geopolitical tensions (including as a result of the ongoing conflict in Ukraine and in Israel and surrounding regions, as well as China-Taiwan relations) or a significant natural disaster (including as a result of climate change);

a significant natural disaster (including as a result of climate change);

tariffs or other trade restrictions;

a significant increase in the price of one or more components (including as a result of inflation);

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As a result, these competitors may be able to respond more rapidly or effectively to new or emerging technologies and changes in customer requirements, withstand significant price decreases, or devote greater resources to the development, promotion and sale of their products.

Furthermore, we face aggressive price competition and may continue to do so.

As a consequence of higher supply chain and manufacturing costs, we have in the past increased the prices of many of our products and services to maintain or improve our revenue and gross margin, and we may do so again in the future.

In addition, competitors who have a greater presence in some of the lower-cost markets in which we compete, or who can obtain better pricing, more favorable contractual terms and conditions, or more favorable allocations of products and components during periods of limited supply may be able to offer lower prices than we are able to offer.

Our cash flows, results of operations, and financial condition may be adversely affected by these and other industry-wide pricing pressures.

In addition, our present and future competitors may be able to enter our existing or future markets with products or technologies comparable or superior to those that we offer.

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Our products are highly complex, and we cannot ensure that our extensive product development, manufacturing and integration testing will be adequate to detect all defects, errors, failures and quality issues.

Quality or performance problems for products covered under warranty could adversely impact our reputation and negatively affect our operating results, financial position and cash flows.

Material quality or performance problems for products covered under warranty could adversely impact our reputation and negatively affect our operating results, financial position and cash flows.

The development and production of new products with high complexity often involves problems with software, components and manufacturing methods.

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Any excess or obsolete inventory could also result in sales price reductions and/or inventory write- downs, which could adversely affect our business and results of operations.

During the year ended December 31, 2023, we recognized a write down of inventory of $24.3 million due to a discontinuation of certain product lines within our Network Solutions segment in connection with our business efficiency program.

During the year ended December 31, 2023, we recognized write-downs of inventory of $24.3 million due to a discontinuation of certain product lines within our Network Solutions segment in connection with our Business Efficiency Program.

Additionally, during the year ended December 31, 2024, we recognized write-downs of inventory and other charge s of $8.6 million as a result of a strategy shift which included discontinuance of certain items in connection with the Business Efficiency Program, of which, $4.1 million relates to inventory write-downs and $4.5 million relates to other charges.

Significant and unanticipated changes in our business could require additional charges for inventory write downs in a future period.

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For additional details regarding the Business Efficiency Program, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Efficiency Program” in Part II, Item 7 of this report.

The continuing growth of our international operations has and may continue to expose us to additional risks, increase our costs and adversely affect our operating results, financial condition and cash flows.

We are expanding our presence in international markets, which represented 59.8% and 49.5% of our net revenue for the years ended December 31, 2023 and 2022, and as a result, we have experienced increased revenue and operating costs in these markets.

This international expansion has increased and may continue to increase our operational risks and impact our results of operations, including:

Our international operations have and may continue to expose us to additional risks, increase our costs and adversely affect our operating results, financial condition and cash flows.

International sales represented 56.8% and 59.8% of our net revenue for the years ended December 31, 2024 and 2023.

We have a significant international presence, and our international presence may continue to grow.

If we continue to expand our presence in international markets, we expect to continue to experience increased revenue and operating costs in these markets.

Furthermore, international expansion may continue to increase our operational risks and impact our results of operations, including:

• foreign currency exchange rate volatility has had and may continue to have an unfavorable impact on our cash flows, financial condition and results of operations;

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As a result of our global operations, our revenue, gross margins, operating expense and operating income in some international markets have been and may continue to be affected by foreign currency fluctuations.

We require a significant amount of cash to service our indebtedness, our potential payment obligations to Adtran Networks shareholders under the DPLTA, and other obligations.

Our ability to generate cash depends on many factors beyond our control and any failure to service our outstanding indebtedness could harm our business, financial condition and results of operations.

Furthermore, we have entered into a DPLTA with Adtran Networks.

Any failure to satisfy our payment obligations under the DPLTA could harm our business, financial condition and results of operations.

This, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control.

We refinanced a portion of our indebtedness during the third quarter of 2023 in order to ensure our ability to cover our potential payment obligations under the DPLTA, suspended our dividend during the fourth quarter of 2023, and we are currently reducing our operating expenses.

Nevertheless, if our business does not generate sufficient cash flow from operations, we do not sufficiently reduce costs in a timely manner, or our future borrowings are not available to us in an amount sufficient to enable us and our subsidiaries to pay our indebtedness or to fund our other liquidity needs, we may need to raise additional debt or equity capital, refinance all or a portion of our indebtedness, sell assets, reduce or delay capital investments, any of which could have a material adverse effect.

In addition, we may not be able to effect any of these actions, if necessary, on commercially reasonable terms or at all.

Our ability to raise additional debt capital or to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time.

Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

The terms of existing or future debt instruments or preferred stock may limit or prevent us from taking any of these actions.

We have recognized impairment charges related to goodwill and other intangible assets in the past and may be required to do so in the future.

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Significant negative industry or economic trends, disruptions to our business, the inability to effectively integrate acquired businesses, the under performance of our business as compared to management’s initial expectations, unexpected significant changes or planned changes in use of the assets, divestitures, and market capitalization declines may impair goodwill and other intangible assets.

During the third quarter of 2023, qualitative factors such as a decrease in the Company's market capitalization and long-term projections, triggered a quantitative impairment assessment for our reporting units.

The Company determined the fair value of each reporting unit using a combination of an income approach and a market-based peer group analysis.

It was determined that the decreases in projected future cash flows, discount rates, overall macroeconomic conditions, as well as the decrease in our market capitalization applied in the valuation, were required to align with market-based assumptions and company-specific risk, which resulted in lower fair values of the Services & Support reporting unit.

The Company determined upon its quantitative impairment assessment to recognize a $37.9 million non-cash goodwill impairment charge for the Services & Support reporting unit.

Any future charges relating to such impairments could have a material adverse effect our business, financial condition and results of operations in the periods recognized.

During the year ended December 31, 2024, qualitative factors such as a decrease in the Company’s market capitalization, lower service provider spending and delayed holding patterns of inventory with respect to customers caused us to reduce our forecasts, triggering a quantitative impairment assessment for our reporting units.

The Company determined upon its quantitative impairment assessment to recognize a $292.6 million non-cash goodwill impairment charge for the Network Solutions reporting unit.

The quantitative impairment analysis indicated there was no impairment of the Services & Support goodwill.

The Company will continue to monitor its stock price, operating results and other macroeconomic factors to determine if there is further indication of a sustained decline in fair value requiring an event driven assessment of the recoverability of its remaining goodwill.

If our assumptions and related estimates change in the future, or if we change our reporting unit structure or other events and circumstances change (e.g., a sustained decrease in the price of our common stock (considered on both absolute terms and relative to peers)), we may be required to record impairment charges when we perform these tests, or in other future periods.

A non-cash goodwill impairment charge would have the effect of decreasing earnings or increasing losses in such period.

If we are required to take a substantial impairment charge, such impairment charge could have a material adverse effect on our business, financial condition and results of operations in the periods recognized.

We may be unable to successfully and effectively manage and integrate acquisitions, divestitures and other significant transactions, which could harm our operating results, business and prospects.

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For example, during the third quarter of 2023, we recognized a $37.9 million non-cash goodwill impairment charge related to the Business Combination with Adtran Networks.

In order to complete an acquisition, we may issue common shares, potentially creating dilution for existing shareholders, or borrow funds, which could affect our financial condition, results of operations and potentially our credit ratings.

In order to complete an acquisition, we may issue common shares, potentially creating dilution for existing stockholders, or borrow funds, which could affect our financial condition, results of operations and potentially our credit ratings.

Any prior or future downgrades in our credit rating associated with a transaction could adversely affect our ability to borrow and our borrowing cost, and result in more restrictive borrowing terms.

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Ongoing inflationary pressures have resulted and may continue to result in decreased demand for our products and services, increased manufacturing and operating costs (including our labor costs), reduced liquidity, and limitations on our ability to access credit or otherwise raise debt and equity capital.

In the current inflationary environment, because certain of our customer contracts provide for fixed pricing and/or due to our competitor’s pricing strategies, we are not always been able to raise the sales prices of our products and services at or above the rate at which our costs increase, which has reduced our profit and operating margins and has and could continue to have a material adverse effect on our financial results.

to have a material adverse effect on our financial results.

We also may experience lower than expected sales and potential adverse impacts on our competitive position if there is a decrease in customer spending or a negative reaction to any price increases we are able to implement.

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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.

We have implemented new controls with respect to one material weakness, and we plan to initiate remediation plans with respect to the other material weaknesses.

These remediation measures have been 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.

If our financial statements are not accurate, investors do not have a complete understanding of our operations.

In either case, there could be an adverse effect on our business, financial condition and results of operations.

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These incremental costs may exceed the savings we expect to achieve from the realization of efficiencies related to the combination of the businesses, particularly in the near term and in the event there are material unanticipated costs.

We may face litigation and other risks as a result of the restatements of our previously issued consolidated financial statements and material weaknesses in our internal control over financial reporting.

We may face litigation and other risks as a result our material weaknesses in our internal control over financial reporting and any resulting restatement of our previously issued consolidated financial statements.

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 a result of such material weaknesses, the restatement 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 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.

Until such time as we have remediated our material weaknesses or in the event that we experience an additional material weakness, there is a higher risk of there being an error in our financial statements, which error could be material, thereby resulting in a restatement of our financial statements.

In connection with our material weaknesses in our internal control over financial reporting and any future restatement, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims.

As of the date of this report, we have no knowledge of any such litigation or dispute.

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Unauthorized access to or disclosure of our information could compromise our intellectual property and expose sensitive business information.

Additionally, a significant failure or other compromise of our systems due to these issues could result in significant remediation costs, disrupt business operations, and divert management attention, which could result in harm to our business reputation, operating results, financial condition, and cash flows.

These risks, as well as the number and frequency of cybersecurity events globally, may also be heightened during times of geopolitical tension or instability between countries.

For example, a number of recent cybersecurity events have been alleged to have originated from the ongoing military conflict in Ukraine and in the Israel/Hamas war.

Further, continued increases in legislation and regulation from a variety of international, federal and state authorities regarding cybersecurity incidents, including risk assessment, notification obligations, regulatory reporting and other requirements, could subject us to additional liability and reputational harm.

We carry cybersecurity insurance policies meant to limit our risk and exposure should one of these cybersecurity issues occur.

However, a significant failure or other compromise of our systems due to these issues could result in significant remediation costs, disrupt business operations, and divert management attention, which could result in harm to our business reputation, operating results, financial condition, and cash flows.

For example, a number of recent cybersecurity events have been alleged to have originated from the ongoing military conflict in Ukraine and in Israel and its surrounding areas.

Further, we have incurred, and will continue to incur, expenses to comply with cybersecurity, privacy, and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations.

Continued increases in legislation and regulation from a variety of international, federal and state authorities regarding cybersecurity incidents, including risk assessment, notification obligations, regulatory reporting and other requirements, could increase our cost of compliance and could subject us to additional liability and reputational harm.

And while we may be entitled to damages if our third-party providers fail to satisfy their security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.

Additionally, while we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses or not subject to any exclusions.

Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms we view as adequate for our operations.

For information on our cybersecurity risk management, strategy and governance, see Part I, Item 1C of this report .

Risks related to the Business Combination and DPLTA

Our ability to realize anticipated strategic and financial benefits sought from the Business Combination has been and may continue to be affected by a number of factors.

Our ability to realize anticipated benefits of the Business Combination has been and may continue to be affected by a number of factors, including:

the need for greater than expected cash or other financial resources or management time in order to integrate Adtran Networks;

and increases in other expenses related to the Business Combination, including restructuring and other exit costs.

In addition, our ability to realize anticipated benefits of the Business Combination may be affected by the following other factors in the future, including:

the impact of appraisal proceedings in connection with the DPLTA, unanticipated liabilities associated with the Business Combination, difficulties in employee or management integration, the timing and impact of purchase accounting adjustments;

and accounting for conversion of IFRS results to U.S.

GAAP results.

Any potential cost-saving opportunities may take several years following the Business Combination to implement, and any results of these actions may not be realized for several years thereafter, if at all.

For example, in response to a decrease in our revenue and operating margins during 2023 as a result of customers’ focus on reducing inventory levels and managing capital expense, we are realizing reductions in our operating expenses through the implementation of a business efficiency program;

however, we may not be successful in fully realizing these reductions.

If we are not able to effectively provide different solutions and successfully achieve the growth and cost savings objectives, the anticipated benefits of the Business Combination may not be realized fully, or at all, or may take longer to realize than expected.

We have incurred and expect to continue to incur significant costs in connection with the Business Combination and post-closing integration and restructuring efforts.

We have incurred significant non-recurring implementation and restructuring costs associated with combining the operations of ADTRAN and Adtran Networks.

In addition, we have incurred significant banking, legal, accounting and other transaction fees and costs related to the Business Combination.

As of December 31, 2023, we have incurred $26.2 million of transaction costs related to the Business Combination.

In addition, during the year ended December 31, 2023, we recognized $21.5 million of restructuring costs specific to the Business Combination synergies under our multi-year integration program.

Furthermore, we expect to incur costs associated with the implementation of the DPLTA and such costs are expected to be material.

During the year ended December 31, 2023, we recognized $4.9 million of integration costs related to the implementation of the DPLTA and the Business Combination.

To date, cost savings and other efficiencies related to the integration of the businesses have not offset these transaction- and combination-related costs, and we may not be able to offset such costs in the near term, or at all.

Failure to realize these synergies and cost reductions and other efficiencies in a timely manner or at all has impacted and may in the future have a material adverse effect on our business and cash flows, financial condition and results of operations.

We incurred a substantial amount of indebtedness in connection with the Business Combination and the DPLTA.

Our failure to meet our debt service obligations could have a material adverse effect on our business, financial condition and results of operations.

Upon the DPLTA becoming effective on January 16, 2023, the available total borrowings under the Wells Fargo Credit Agreement increased from $100.0 million to $400.0 million.

We further expanded our available borrowings under the credit facility to $450.0 million effective August 9, 2023.

As of December 31, 2023, the Company had incurred $195.0 million of indebtedness under the Wells Fargo Credit Agreement.

See "Cash Requirements" in Part II, Item 7 of this report for additional information.

In addition, our new factoring arrangement provides for borrowings of up to $40.0 million, secured by our accounts receivable.

Our increased indebtedness has and may continue to adversely affect our operations and liquidity.

Our level of indebtedness:

• has contributed to our decision to suspend quarterly dividend payments to the Company's stockholders;

• limits our ability to assume debt in a future acquisitions.

Specifically, our Credit Agreement with Wells Fargo limits the amount of debt we can assume in an acquisition.

This could limit our ability to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions;

• could cause us to be more vulnerable to general adverse economic and industry conditions;

• could cause us to be disadvantaged compared to competitors with less leverage;

• limits our ability to borrow additional money.

Our ability to satisfy our debt obligations and renew the credit facility is dependent upon our future performance and other risk factors discussed in this section.

We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

We are reducing our operating expenses in order to fund our obligations, and we may be forced to further reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness.

We may not be able to consummate those dispositions or obtain sufficient proceeds from those dispositions to meet our debt service and other obligations when due.

Any of these events could have a material adverse effect on our business, results of operations and financial condition.

We may also incur additional long-term debt and working capital lines of credit to meet future financing needs, which would increase our total indebtedness.

If we or our restricted subsidiaries incur significant additional debt, the relative risks may intensify.

We have experienced operational challenges and may also experience negative synergies and loss of customers.

Integrating the operations and personnel of the ADTRAN and Adtran Networks businesses involves complex operational, technological and personnel-related challenges.

This process has been and will continue to be time-consuming and expensive, and it has and may continue to disrupt our business.

Difficulties in the integration of the business, which have resulted and may in the future result in significant costs and delays, include:

• managing a significantly larger company;

• integrating and unifying the offerings and services available to customers and coordinating distribution and marketing efforts;

• coordinating corporate and administrative infrastructures and harmonizing insurance coverage;

• unanticipated issues in coordinating accounting, information technology, communications, administration and other systems;

• difficulty addressing possible differences in corporate cultures and management philosophies;

• challenges associated with converting Adtran Networks' financial reporting from international financial reporting standards (IFRS) to accounting principles generally accepted in the U.S.

GAAP) and compliance with the Sarbanes-Oxley Act of 2002, as amended, and the rules promulgated thereunder by the SEC;

• legal and regulatory compliance;

• dual market filing and publications obligations;

• creating and implementing uniform standards, controls, procedures and policies;

• litigation relating to the transactions contemplated by a reorganization, including shareholder litigation;

• diversion of management’s attention from other operations;

• maintaining existing agreements and relationships with customers, distributors, providers and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, providers and vendors;

• realizing the benefits from our restructuring programs;

• unforeseen and unexpected liabilities related to the Business Combination, including the risk that certain executive officers may be subject to additional fiduciary duties and liability;

• identifying and eliminating redundant and underperforming functions and assets;

• effecting actions that may be required in connection with obtaining regulatory approvals;

• a deterioration of credit ratings.

We have and may continue to lose customers or our share of customers’ business as entities that were customers of both ADTRAN and Adtran Networks seek to diversify their suppliers of services and products.

The terms of the DPLTA may have a material adverse effect on our financial results and condition.

Under the DPLTA, subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, (i) the Company is

The obligation of the Company to absorb Adtran Networks annual net loss applied for the first time to the loss generated in 2023.

Additionally, and subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, the DPLTA provides that Adtran Networks shareholders (other than the Company) be offered, at their election, (i) to put their Adtran Networks shares to the Company in exchange for compensation in cash of €17.21 per share, plus guaranteed interest (the “Exit Compensation”), or (ii) to remain Adtran Networks shareholders and receive a recurring compensation in cash of €0.59 (€0.52 net under the current tax regime) per share for each full fiscal year of Adtran Networks (the “Annual Recurring Compensation”).

The guaranteed interest under the Exit Compensation is calculated from the effective date of the DPLTA to the date the shares are tendered, less any Annual Recurring Compensation paid.

The guaranteed interest rate is 5.0% plus a variable component, that is based on the interest rate according to the German Civil Code, which was 3.12% as of December 31, 2023.

The Annual Recurring Compensation is due on the third banking day following the ordinary general shareholders’ meeting of Adtran Networks for the respective preceding fiscal year (but in any event within eight months following expiration of the fiscal year) it will be payable for the first time after the ordinary general shareholders’ meeting of Adtran Networks in 2024 for the fiscal year ended December 31, 2023.

The adequacy of both forms of compensation has been challenged by minority shareholders of Adtran Networks 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 obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately €10.6 million or $11.7 million (based on the exchange rate as of December 31, 2023) per year assuming none of the minority Adtran Networks 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.

For the year ended December 31, 2023, a total of 67 thousand shares of Adtran Networks stock was tendered to the Company and Exit Compensation payments of approximately €1.2 million or approximately $1.3 million based on an exchange rate as of December 31, 2023, were paid to Adtran Networks shareholders.

Assuming all the minority holders of currently outstanding Adtran Networks shares were to elect the first option, we would be obligated to make aggregate Exit Compensation payments, including guaranteed interest, of approximately €310.3 million or approximately $342.5 million, based on an exchange rate as of December 31, 2023.

There can be no assurances that we would be successful in effecting these actions at commercially reasonable terms or at all.

If we cannot raise additional funds as needed, it could have a material adverse impact on our financial results and financial condition.

Additionally, the payment of the Annual Recurring Compensation and Exit Compensation could have a material adverse impact on our financial results and financial condition.

S ee “Liquidity and Capital Resources” in Part II, Item 7 of this report for additional information.

The opportunity for outside Adtran Networks shareholders to tender Adtran Networks 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 are exposed to additional litigation risk and uncertainty with respect to the remaining minority shareholders of Adtran Networks, which litigation may require us to pay a higher purchase price for additional Adtran Networks shares than the amount provided for under the DPLTA.

As a result of the Business Combination, we continue to be exposed to litigation risk and uncertainty associated with the remaining minority shareholders of Adtran Networks.

The terms of the DPLTA, including the adequacy of compensation payments to minority Adtran Networks shareholders under the terms of the DPLTA, have been challenged by minority shareholders of Adtran Networks by initiating court-led appraisal proceedings under German law.

We cannot rule out that the competent court in these appraisal proceedings may adjudicate higher Exit Compensation or Annual Recurring Compensation payment obligations (in each case, including interest thereon) than agreed upon in the DPLTA, the financial impact and timing of which is uncertain.

We may be unable to successfully retain and motivate our personnel.

The success of the Business Combination and our post-closing integration efforts depends, in part, on our ability to retain the talents and dedication of key employees, including key decision-makers, currently employed by ADTRAN, Inc.

and Adtran Networks.

Some of our employees have decided and others may decide not to remain with us as a result of the Business Combination or our post-closing integration and restructuring efforts.

If key employees terminate their employment, or if an insufficient number of employees are retained to maintain effective operations, our business activities may be adversely affected and management’s attention may be diverted from successfully integrating ADTRAN and Adtran Networks to hiring suitable replacements, all of which may cause our business to deteriorate.

We may not be able to locate suitable replacements for any key employees who leave or offer employment to potential replacements on reasonable terms.

In addition, we may not be able to motivate certain key employees due to organizational changes, reassignments of responsibilities, the perceived lack of appropriate opportunities for advancement or other reasons.

If we fail to successfully retain and motivate our employees, relevant capabilities and expertise may be lost which may have an adverse effect on our cash flows, financial condition, results of operations and the business operations in general.

Risks related to the telecommunications industry

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If technologies or standards applicable to our products, or Service Provider offerings based on our products, become obsolete or fail to gain widespread commercial acceptance, our existing products or products under development may become obsolete or unmarketable, which can result in the discontinuation of products and write off of related inventory.

For example, during the quarter ended September 30, 2023, management determined that there would be a discontinuation of product lines in the Network Solutions segment.

For example, during the quarters ended March 31, 2024 and September 30, 2023, management determined that there would be a strategy shift which resulted in a discontinuation of certain product lines in the Network Solutions segment.

For more information, see Note 5 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.

Moreover, the introduction of products embodying new technologies, the emergence of new industry standards, or changes in Service Provider offerings could adversely affect our ability to sell our products.

For instance, we offer a large number of products that apply primarily to the delivery of high-speed digital communications over the local loop utilizing copper wire.

We compete favorably with our competitors by developing a high-performance line of these products.

We market products that apply to fiber optic transport in the local loop.

We expect, however, that use of coaxial cable and fixed and mobile wireless access in place of local loop access will increase.

Also, MSOs are increasing their presence in the local loop.

To meet the requirements of these new delivery systems and to maintain our market position, we expect to continue to develop new products and/or modify existing products.

We expect that the addition of fiber-based products focused on the cable MSO operators, using EPON and fixed wireless access solutions will better position us to benefit from spending in these adjacent markets.

Our revenue and profitability in the past have, to a significant extent, resulted from our ability to anticipate changes in technology, industry standards and Service Provider offerings, and to develop and introduce new and enhanced products.

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We also cannot assure that we will be able to successfully develop and market new products or product enhancements, or that these products or enhancements will achieve market acceptance.

Any failure by us to continue to anticipate or respond in a cost-effective and timely manner to changes in technology, industry standards, Service Provider offerings or new product announcements by our competitors, or any significant delays in product development or introduction, could have a material adverse effect on our ability to competitively market our products and on our revenue, results of operations, financial condition and cash flows.

We also may not have sufficient resources to make the technological advances necessary to be competitive and successful in the markets we serve.

have a material adverse effect on our ability to competitively market our products and on our revenue, results of operations, financial condition and cash flows.

Our failure or the failure of our contract manufacturers to comply with applicable environmental regulations could adversely impact our results of operations.

The manufacture, assembly and testing of our products may require the use of hazardous materials that are subject to environmental, health and safety regulations.

The manufacture, assembly and testing of our products at times requires the use of hazardous materials that are subject to environmental, health and safety regulations.

In particular, our manufacturing operations use substances that are regulated by various federal, state, local, foreign and international laws and regulations governing health, safety and the environment, including U.S.

Environmental Protection Agency regulations and the Waste Electrical and Electronic Equipment Directive, Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment and Registration, Evaluation, Authorization, and Restriction of Chemicals regulations adopted by the EU.

Our failure or the failure of our contract manufacturers to comply with any of these applicable requirements could result in regulatory penalties, legal claims or disruption of production.

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If shipments fall below forecasted levels, we may incur increased costs or be required to take ownership of excess inventory.

Changes in international tariff structures could adversely impact our product costs.

In addition, these same suppliers may decide to no longer manufacture or support specific components necessary for some of our legacy products, which could lead to our inability to fulfill demand without increased engineering and material costs necessary to replace such components or cause us to transition such products to end-of-life status sooner than planned.

Further, our suppliers could enter into exclusive arrangements with our competitors, refuse to sell their products or components to us at commercially reasonable prices or at all, go out of business or discontinue their relationships with us.

We also have experienced and expect to continue to experience ongoing inflationary pressures on input costs, such as, raw materials, labor and distribution costs.

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.

In addition, a significant component of maintaining cost competitiveness is the ability of our subcontractors to adjust their costs to compensate for possible adverse exchange rate movements.

In addition, a significant component of maintaining cost competitiveness is the ability of our subcontractors to adjust their costs to compensate for possible adverse exchange

rate movements.

To the extent that the subcontractors are unable to do so, and we are unable to procure alternative product supplies, then our competitiveness and results of operations could be adversely impaired.

These risks may be exacerbated by economic, regulatory or political changes or uncertainties, terrorist actions, acts of war, the effects of climate change, natural disasters or pandemics in the foreign countries in which our subcontractors are located.

To date, we believe that we have successfully managed the risks of our dependence on these subcontractors through a variety of efforts, which include seeking and developing alternative subcontractors while maintaining existing relationships;

however, we cannot be assured that delays in product deliveries will not occur in the future because of shortages resulting from this limited number of subcontractors or from the financial or other difficulties of these parties.

new subcontractor relationship, could result in delays or reductions in product shipments which, in turn, could have a negative effect on our customer relationships and operating results.

These risks could also be heightened by geopolitical factors.

For example, the renegotiation or termination of existing bilateral and multilateral trade agreements, as well as, changes in international tariff structures, could adversely impact our product costs.

In addition, a number of the components we use in our products are sourced directly or indirectly through Taiwan.

Deterioration of relations between Taiwan and China and the United States, the resulting actions taken by any of these parties, and other factors affecting the political or economic conditions of Taiwan in the future, could adversely impact our supply chain, international sales, and operations.

We cannot be assured that delays in product deliveries will not occur in the future because of shortages resulting from this limited number of subcontractors or from the financial or other difficulties of these parties.

Our inability to identify and engage alternative subcontractors if and as required in the future, or the need to undertake required retraining and other activities related to establishing and developing a new subcontractor relationship, could result in delays or reductions in product shipments which, in turn, could have a negative effect on our customer relationships and operating results.

Our failure to maintain rights to intellectual property used in our business could adversely affect the development, functionality and commercial value of our products.

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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, on August 22, 2023, Adtran Networks and its subsidiary Adtran Networks North America, Inc.

(formerly ADVA Optical Networking North America, Inc.) entered into a settlement agreement with Huawei Technologies Co.

pursuant to which the parties agreed to, among other things, dismiss certain lawsuits between the parties relating to, claims of patent infringement, failure to negotiate in good faith, and other related matters.

If further claims of intellectual property infringement against us are 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.

If claims of intellectual property infringement against us are 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.

Third party hardware or software that is used with our portfolios may not continue to be available or at commercially reasonable terms.

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In some cases, claimants seek monetary recovery, or other relief, including damages such as royalty payments related to patents, lost profits or injunctive relief, which, if granted, could require significant expenditures.

For example, on August 22, 2023, Adtran Networks and its subsidiary, Adtran Networks North America, Inc.

(formerly ADVA Optical Networking North America, Inc.) entered into a settlement agreement with Huawei Technologies Co.

Ltd pursuant to which the parties agreed to, among other things, dismiss certain lawsuits between the parties relating to, claims of patent infringement, failure to negotiate in good faith, and other related matters.

Any such disputes may be resolved before trial, or if tried, may be resolved in our favor;

however, the cost of claims sustained in litigation, and costs associated with the litigation process, may not be covered by our insurance.

Such costs, and the demands on management time during such an event, could harm our business, reputation and have a material adverse effect on our liquidity, results of operations, financial condition and cash flows.

Such costs, and the demands

on management time during such an event, could harm our business, reputation and have a material adverse effect on our liquidity, results of operations, financial condition and cash flows.

In addition, as a result of the Business Combination with Adtran Networks SE, we continue to be exposed to litigation risk and uncertainty associated with the remaining minority shareholders of Adtran Networks.

It is possible that the court in these appraisal proceedings may hold that we must pay higher Exit Compensation or Annual Recurring Compensation to such Adtran Networks SE shareholders than agreed upon in the DPLTA, the financial impact and timing of which is uncertain.

If we are unable to successfully develop and maintain relationships with SIs, Service Providers and enterprise VARs, our revenue may be negatively affected.

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If our sales, marketing or service capabilities are not sufficient to provide effective support to such SIs, Service Providers and VARs, our revenue may be negatively affected, and current SI, Service Provider and VAR partners may terminate their relationships with us, which would adversely impact our revenue and overall results of operations.

We depend on a third-party cloud platform provider to host our Mosaic One SaaS network operating platform, and if we were to experience a disruption or interference in service, our business and reputation could suffer.

Our continued growth depends in part on the ability of our existing and potential customers to use and access our Mosaic One SaaS network operating platform.

We depend on a third-party cloud platform provider to host our Mosaic One SaaS network and other operating platforms, and if we were to experience a material disruption or interference in service, our business and reputation could suffer.

Our quality of customer service and our continued growth depends in part on the ability of our existing and potential customers to use and access our Mosaic One SaaS network operating platform.

We use third-party service providers that we do not control for key components of our infrastructure, particularly with respect to delivery of our SaaS products.

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Third-party service providers operate their own platforms that we access, and we are, therefore, vulnerable to their service interruptions.

We may experience interruptions, delays and outages in service and availability from time to time as a result of problems with our third-party service providers’ infrastructure.

In the future, we may experience interruptions, delays and outages in service and availability from time to time as a result of our third-party service providers’ infrastructure.

Lack of availability of this infrastructure could be due to a number of potential causes including technical failures, natural disasters, fraud or security attacks that we cannot predict or prevent.

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• the effect of political or economic conditions, including the effect of tariffs or so-called “trade wars” on us and our supply chain, acts of war, terrorist attacks or other unrest in certain international markets;

• the effect of escalating tensions resulting from the conflict in Israel and its surrounding regions, as well as the military conflict in Ukraine.

and certain other countries imposed sanctions on Russia and could impose further sanctions against it, which could damage or disrupt international commerce and the global economy;

• changes in tax laws and regulations or accounting pronouncements.

Future issuances of additional equity securities could result in dilution of existing stockholders’ equity ownership.

We may determine from time to time to issue additional equity securities to raise additional capital, to support growth, or to make acquisitions.

Furthermore, we may issue stock options, grant restricted stock awards or other equity awards to retain, compensate and/or motivate our employees and directors.

The issuance of additional shares of common stock could result in the dilution of the voting and economic interests of existing stockholders.

Furthermore, as part of our business strategy, we may acquire additional shares of Adtran Networks’ common stock and issue equity securities to pay for any such acquisitions.

In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

Any such issuances of additional share capital may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.

The price of our common stock has been volatile and may continue to fluctuate significantly.

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and other nations, application requirements, import/export controls or expansion of regulation to new areas, including access, communications or commerce over the internet, may affect customer demand for our products or slow the adoption of new technologies which may affect our revenue.

Further, the cost of complying with the evolving standards and regulations, including the cost of product re-design if necessary, or the failure to obtain timely domestic or foreign regulatory approvals or certification such that we may not be able to sell our products where these standards or regulations apply, may adversely affect our revenue, results of operations, financial condition and cash flows.

where these standards or regulations apply, may adversely affect our revenue, results of operations, financial condition and cash flows.

• compliance with a wide variety of provincial, state, national and international laws and regulations applicable to the collection, use, retention, protection, disclosure, transfer and other processing of data, including personal data.

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however, there are indications there may be legal challenges to the decision.

Additionally, the European Commission published revised standard contractual clauses for data transfers from the European Economic Area in 2021,

which were required to go into effect by December 2022.

Additionally, the European Commission published revised standard contractual clauses for data transfers from the European Economic Area in 2021, which were required to go into effect by December 2022.

Finally, the U.K.

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There is also a risk that we, directly or as the result of a third-party Service Provider we use, could be found to have failed to comply with the laws and regulations applicable in a jurisdiction regarding the collection, consent, handling, transfer or disposal of personal data.

In addition to the U.S.

and Europe, we do business in numerous other countries around the globe.

Those countries and jurisdictions may have, currently or in the future, data protection or privacy laws or regulations with similar or additional requirements, resulting in increased compliance costs and regulatory risk.

• the FCPA, which prohibits U.S.

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companies may be held liable for the corrupt actions taken by employees, strategic or local partners or other representatives.

Because a significant portion of our total revenue is generated from revenue outside of the U.S., we have proactively implemented internally and externally focused measures and controls to address this risk.

We help ensure that our employees understand the key requirements of FCPA compliance and the consequences of non-compliance through training courses and detective controls.

ADTRAN senior management and employees whose responsibilities include international activities are required to complete an online training program and pass an exam every two years.

We have put processes in place to help detect non-compliance through providing our employees access to a worldwide reporting “hotline,” available by phone and online, that is maintained by a third-party provider.

Finally, we perform annual reviews of our employees’ expense reports and corporate credit card activity to identify possible corruption concerns.

We have also implemented controls to help ensure our third-party partners and customers observe FCPA requirements.

Prior to selling to new international distributors, resellers or agents, we review third-party data and check them against over 200 denied party lists from government institutions worldwide for potential FCPA concerns.

We also require international distributors, resellers and agents to complete an Anti-Corruption Due Diligence Questionnaire, which is reviewed and assessed by a cross-functional compliance committee and our export-compliance function.

On February 10, 2025, the U.S.

government temporarily paused the enforcement of the FCPA.

Whether FCPA enforcement will resume in the future and the extent to which it will be enforced remains uncertain.

• environmental, health and safety regulations governing the manufacture, assembly and testing of our products, including without limitation regulations governing the use of hazardous materials.

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596/2014 of the European Parliament and of the Council of April 16, 2014, and other applicable regulations.

Moreover, changes in the U.S.

political landscape can significantly impact our business.

The recent changes in the U.S.

government administration may result in substantial modifications to laws and regulations, including, but not limited to, those related to trade policies, tariffs, export controls and technology transfers.

New executive orders and legislative actions could alter the business environment in which we operate.

Changes in trade policy in the U.S.

and other countries, specifically the U.K.

and China, including the imposition of additional tariffs and the resulting consequences, may adversely impact our gross profits, gross margins, results of operations and financial condition.

In recent years, international market conditions and the international regulatory environment have been increasingly affected by competition among countries and geopolitical frictions.

In particular, there have been a number of significant geopolitical events, including trade tensions and regulatory actions, involving the governments of the U.S.

government has raised tariffs, and imposed new tariffs, on a wide range of imports of Chinese products, including component elements of our solutions and certain finished goods products that we sell.

tariff policy involving imports from China remains under review by the Office of the United States Trade Representative.

government has also introduced broad new restrictions on imports from China allegedly manufactured with forced labor, and the EU has debated similar restrictions.

In addition, other countries are debating or have introduced similar restrictions on imports of goods produced in whole or in part with the use of forced labor.

China has retaliated by raising tariffs, and imposing new tariffs, on certain exports of U.S.

goods to China, as well as introducing blocking measures to restrict the ability of domestic companies to comply with U.S.

trade restrictions and could take further steps to retaliate against U.S.

industries or companies.

For instance, over the course of 2020, the U.S.

introduced significant further restrictions limiting access to controlled U.S.

technology to additional Chinese government and commercial entities.

More recently, in October 2022, the U.S.

Department of Commerce imposed additional export control restrictions targeting the provision of certain semiconductors and related technology to China that could further disrupt supply chains that could adversely impact our business.

In addition, the U.S.

Federal Communications Commission in November 2022 prohibited communications equipment deemed to pose an unacceptable risk to national security from obtaining the equipment authorization that allows the products to be imported, marketed, or sold in the U.S.

This prohibition currently includes telecommunications equipment produced by Huawei and its affiliates and subsidiaries and four other Chinese companies, and additional entities may be subsequently added to this list.

The situation involving U.S.-China trade relations remains volatile and uncertain and there can be no assurance that further actions by either country will not have an adverse impact on our business, operations and access to technology, or components thereof, sourced from China.

Furthermore, if global economic and market conditions, or economic conditions in key markets, remain uncertain or further deteriorate, we may experience material impacts on our business and operating results.

We may also be adversely affected in ways that we do not currently anticipate.

government issued orders in February 2025 increasing tariffs on imports from certain countries, including Canada, China and Mexico, and it has discussed further tariffs, including plans to increase U.S.

tariffs to match the rates that other countries charge on imports and tariffs on semiconductors, automobiles and pharmaceuticals imported into the U.S.

While the implementation of tariffs on Canadian and Mexican imports was initially deferred, such tariffs are expected to go into effect in March 2025 and the U.S.

has increased tariffs on goods imported into the U.S.

from China by 10%.

In response, China imposed a 15% tariff on U.S.

coal and liquified natural gas products, along with a 10% tariff on crude oil.

government has indicated that an additional 10% duty on Chinese imports may be forthcoming, which may result in further tariffs on U.S.

products being imported into China.

The recent tariffs come on top of ongoing trade tensions and regulatory actions involving the governments of the U.S.

Moreover, on February 11, 2025, the U.S.

government ordered tariffs of 25% on imports of steel and aluminum regardless of where they originate.

Because not all products can be sourced in all countries, we expect to experience increased costs in our supply chain as a result of such tariffs, which may lead to reduced margins or increased prices.

At this time, it remains unclear what additional actions, if any, will be taken by the U.S.

or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the U.S.

or exported to other countries, tax policy related to international commerce, increased export control, sanctions and investment restrictions, import or use of foreign communications equipment, or other trade matters.

Related costs and the uncertainty during transition periods could lead to changes in buying behavior, such as decreased demand.

These impacts could have a negative effect on our financial results, including our revenue and profitability.

There can also be no assurance that further trade tensions between the U.S.

and China will not have an adverse impact on our business, operations and access to technology, or components thereof, sourced from China.

Furthermore, tariffs on our customers’ products may adversely affect our gross profit margins in the future due to the potential for increased pressure on our selling prices by customers seeking to offset the impact of tariffs on their own products.

In addition, tariffs could make our products less attractive relative to products offered by competitors, which may not be subject to similar tariffs.

Increases in tariffs on imported goods or the failure to resolve current international trade disputes could further decrease demand and have a material adverse effect on our business and operating results.

New or revised tax regulations, changes in our effective tax rate, recognition of a valuation allowance or assessments arising from tax audits may have an adverse impact on our results.

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R&E) or fifteen years (non-U.S.

R&E) beginning in the Company’s fiscal 2023.

R&E), which began in fiscal 2023.

Although the U.S.

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If the requirement is not repealed or otherwise modified, it may increase our effective tax rate.

Additionally, the Organization for Economic Co-operation and Development (the “OECD”), the G20, and other invited countries developed a global tax framework

inclusive of a 15% global minimum tax under the Pillar Two Global Anti-Base Erosion Rules (“Pillar Two”).

Additionally, the Organization for Economic Co-operation and Development (the “OECD”), the G20, and other invited countries developed a global tax framework inclusive of a 15% global

minimum tax under the Pillar Two Global Anti-Base Erosion Rules (“Pillar Two”).

On December 15, 2022, the Council of the European Union (“EU”) formally adopted the OECD’s framework to achieve a coordinated implementation amongst EU Member States consistent with EU law.

The EU’s Pillar Two Directive effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive.

In 2023, other jurisdictions including the United Kingdom also formally adopted legislation consistent with the OECD framework.

Additional jurisdictions are actively considering and implementing changes to their tax laws to adopt certain parts of the OECD’s proposals.

Various countries have enacted or are in the process of enacting legislation to adopt certain parts of the OECD’s proposals.

We have assessed the framework including OECD administrative guidance and expect, based upon available guidance, that these changes will not have a material impact to our results of operations;

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will enact legislation to adopt the minimum tax directive, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement the minimum tax directive.

Central Banks' monetary policy actions could increase our costs of borrowing money and negatively impact our financial condition and future operations.

Monetary policy in response to ongoing inflationary pressures has led to continued elevated interest rates and an inversion of the yield curve, which has and may continue to result in increased credit costs and decreased credit availability.

Interest rate fluctuations could increase our costs of borrowing money and negatively impact our financial condition and future operations.

Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control.

Changes in interest rates have impacted and may in the future further impact our costs of borrowing money under certain of our debt facilities with variable interest rates, which could 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.

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Any such losses could be material and could materially and adversely affect our business, financial condition and results of operations.

Expectations relating to environmental, social and governance considerations expose the Company to potential liabilities, increased costs, reputational harm, and other adverse effects on the Company’s business.

Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas emissions, human and civil rights, and diversity, equity and inclusion.

In addition, we may make statements about our environmental, social and governance goals and initiatives through our website, press statements and other communications.

Expectations relating to ESG considerations expose the Company to potential liabilities, increased costs, reputational harm, and other adverse effects on the Company’s business.

Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on ESG considerations relating to businesses, including climate change and greenhouse gas emissions, human and civil rights, and diversity, equity and inclusion.

In addition, we may make statements about our ESG goals and initiatives through our website, press statements and other communications.

Responding to these environmental, social and governance considerations and implementation of these goals and initiatives involves risks and uncertainties, requires investments, and depends in part on third-party performance or data that is outside of our control.

Any failure, or perceived failure, by us to achieve our targets, further our initiatives, adhere to our public statements, comply with federal, state or international environmental, social and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition and stock price.

Any failure, or perceived failure, by us to achieve our targets, further our initiatives, adhere to our public statements, comply with federal, state or international ESG laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition and stock price.

In addition, simultaneous, disparate and divergent sentiments on ESG-related matters from multiple stakeholder groups must be considered.

For example, there is an increasing number of anti-ESG initiatives in the U.S.

that may conflict with other regulatory requirements or our various stakeholders' expectations.

Such divergent, sometimes conflicting views on ESG-related matters increase the risk that any action or lack thereof by us on such matters will be perceived negatively by some stakeholders.

Further downgrades of the U.S.

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lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, including a suspension of the federal debt ceiling in June 2023, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States.

On January 21, 2025, the U.S.

Treasury began taking extraordinary measures to prevent a default on U.S.

government debt, which measures are expected to continue until such time as the U.S.

Congress increases the debt ceiling.

However, it is unclear how long such extraordinary measures will forestall a default in the event of extended Congressional negotiations or inaction.

The impact of this or any further downgrades to the U.S.

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Absent further quantitative easing by the Federal Reserve, these developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms.

In addition, although a limited budget deal was signed into law in early March, the federal government continues to be at risk of a partial shutdown if legislation to provide funding for other areas of government is not passed by March 22, 2024 as a result of political divisions in Congress and an impasse on budgetary and spending matters .

On December 21, 2024, the previous administration signed a continuing resolution to extend federal spending and avert a government shutdown through March 14, 2025.

Accordingly, without a final agreement regarding the federal budget in place prior to the expiration of the continuing resolution, or another continuing resolution, it is still possible that a partial shutdown of the U.S.

government may occur.

Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations.

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CYBERSECURITY

Risk Management and Strategy

We recognize the importance of establishing governance and oversight over cybersecurity risks, and we have implemented mechanisms, controls, technologies, and processes designed to help us assess, identify, and manage these risks.

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We have observed a rise in the volume, frequency, and sophistication of cyber-attacks.

To date, no risks from cybersecurity threats or previous cybersecurity incidents have materially affected our business strategy, results of operations, or financial condition.

However, there can be no assurance that our controls and procedures in place to monitor and mitigate the risks of cyber threats, including the remediation of critical information security and software vulnerabilities, will be sufficient and/or timely and that we will not suffer material losses or consequences in the future.

There can be no assurance that our controls and procedures in place to monitor and mitigate the risks of cyber threats, including the remediation of critical information security and software vulnerabilities, will be sufficient and/or timely and that we will not suffer material losses or consequences in the future.

Additionally, while we have in place insurance coverage designed to address certain aspects of cyber risks, such insurance coverage may be insufficient to cover all insured losses or all types of claims that may arise.

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We have adopted and continue to maintain a cybersecurity risk management program that implements various controls, technology, and procedures for the evaluation, identification, and handling of significant cybersecurity risks that could impact the confidentiality, integrity, or availability of our information systems.

Our practices include, among others, providing ongoing security awareness training for our global workforce, conducting ransomware and phishing simulations, deploying tools for the detection and analysis of anomalous network activities, and implementing containment and incident response procedures.

We are committed to staying abreast of the latest industry standards, and we actively participate in industry forums to exchange insights and stay ahead of emerging cybersecurity threats.

Our practices include providing ongoing security awareness training for our global workforce, conducting ransomware and phishing simulations, deploying advanced tools for detecting and analyzing anomalous network activities, and implementing robust containment and incident response procedures.

We leverage threat intelligence from our security vendors, as well as from trusted sources such as CISA and the FBI, to enhance our defenses and stay ahead of emerging threats.

Additionally, we are committed to staying aligned with the latest industry standards and actively participating in industry forums to exchange insights and proactively address evolving cybersecurity challenges.

A critical component of our cybersecurity strategy is the integration of a third-party Security Operations Center support, which monitors our global network environment on a 24/7/365 basis, and is designed to rapidly identify and respond to threats.

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When elevated cybersecurity risks are detected, designated risk owners are tasked with formulating and overseeing the execution of targeted mitigation strategies.

This risk management approach informs decision-making processes related to the company's strategic priorities, the allocation of resources, and the establishment of oversight mechanisms.

The governance of this program resides with our Board of Directors, which bears the ultimate responsibility for the oversight of cybersecurity risks.

Supporting the Board, the Audit Committee plays a pivotal role by engaging in regular reviews of our cybersecurity efforts in collaboration with management and providing periodic updates to the Board.

These assessments are conducted at least quarterly, with additional sessions convened as needed to address emerging issues or refine strategies.

Our Chief Information Officer ("CIO")/Chief Information Security Officer ("CISO") leads our cybersecurity program and reports to our Chief Executive Officer.

The CIO/CISO stays informed of prevention, detection, mitigation, and remediation efforts through regular communication with professionals on our cybersecurity team, many of whom hold certifications such as Security+, Certified Information Systems Security Professional or Certified Information Security Manager.

The CIO/CISO also utilizes technological tools, software, and third-party audits to monitor our cybersecurity efforts.

Our CIO/CISO joined the Company in November 2018 and brings a wealth of experience from leading cybersecurity initiatives in previous roles.

Our Chief Technology Officer ("CTO") joined the company in January 2023 following the Business Combination and previously served as Adtran Networks' CTO, leading their product management and advanced technology teams.

We did not experience any material losses relating to cybersecurity threats or incidents for the year ended December 31, 2024.

We are not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected us or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.

Adtran maintains a cybersecurity governance structure led by its Information Security Management "ISM" team, which oversees the Company's cybersecurity risk management efforts.

The ISM team ensures that appropriate controls are in place to protect Adtran’s corporate assets, ensuring their availability, confidentiality, and integrity.

This risk management approach informs strategic decision-making, resource allocation, and oversight mechanisms.

The governance of Adtran’s cybersecurity program is ultimately the responsibility of the Board of Directors, with the Audit Committee providing critical oversight through regular reviews and periodic updates at least quarterly, or more frequently as needed.

The Company’s cybersecurity leadership includes the Chief Information Officer "CIO"/Chief Information Security Officer "CISO", who is responsible for governing and protecting Adtran’s information assets, leading the cybersecurity strategy, and reporting directly to the Chief Executive Officer.

The CIO/CISO ensures compliance with ISO 27001, oversees annual external audits, and leads the monthly Information Technology Cybersecurity meetings and the Data Privacy Committee.

Since joining Adtran in November 2018, the CIO/CISO has leveraged extensive leadership experience to enhance the company’s security posture.

Additionally, the Chief Technology Officer ("CTO"), who joined the company in January 2023 following the Business Combination, plays a key role in product

security oversight, drawing on prior experience as Adtran Networks' CTO leading their product management and advanced technology teams.

Our CTO helps oversee our product security programs.

Both the CIO/CISO and CTO have extensive experience in assessing and managing cybersecurity programs and risks.

Our CIO/CISO reports to the Audit Committee and the Board of Directors on our cybersecurity program and efforts.

Additionally, we have an escalation process in place to inform senior management and the Board of Directors of any material issues.

Adtran employs a comprehensive cybersecurity program that integrates proactive risk management strategies to identify, assess, and mitigate cybersecurity threats.

Key elements of this program include an Incident Response Plan to manage and resolve security incidents, regular vulnerability scanning to identify and address potential risks, and a structured patch management process to ensure timely remediation of security vulnerabilities.

Additionally, the Company has established a dedicated Product Security Incident Response Team (PSIRT) to assess and respond to product security vulnerabilities.

To strengthen its security culture, Adtran implements a Cybersecurity Testing and Awareness Program, requiring all employees to participate in quarterly cybersecurity assessments and complete mandatory annual training.

This initiative ensures that employees remain well-informed about emerging cybersecurity threats and best practices, reinforcing a proactive security mindset across the organization.

Cybersecurity risk management is integrated into Adtran’s Enterprise Risk Management "ERM" program, in order to provide for continuous oversight and executive engagement.

The ERM program undergoes quarterly executive reviews and annual assessments by the Board of Directors, and the Board receives regular briefings on cybersecurity risks, regulatory compliance, and security program updates from management.

Key policies include the Information Security Program, which establishes governance principles across facilities, employees, business partners, and customers;

the Cybersecurity Framework, which ensures compliance with ISO 27001 and industry standards;

employee handbooks outlining security best practices;

and the Incident Response Plan, which includes a material impact assessment workflow to support timely regulatory disclosures.

For additional discussion of risks associated with cybersecurity, see “Risk Factors – Breaches of our information systems and cyberattacks could compromise our intellectual property and cause significant damage to our business and reputation.

Our global headquarters and certain administrative, engineering and manufacturing facilities are located on an 82-acre campus in Cummings Research Park in Huntsville, Alabama.

Two office buildings in Huntsville, Alabama serve both our Network Solutions and our Services & Support segments.

The office buildings in Huntsville, Alabama serve both our Network Solutions and our Services & Support segments.

We are currently in the process of selling a portion of our headquarters facility and expect to sell it within the next twelve months, so it is classified as assets held for sale on our balance sheet.

In order to facilitate this, we have relocated the associated operations located in our North and South Towers to our East Tower without any significant disruption to our operations.

We lease a facility for our European headquarters in Munich, Germany.

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These cancelable and non-cancelable leases expire at various times through 2039.

For more information, see Note 8 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.

For more information, see Note 7 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.

We also have numerous sales and support staff operating from home-based offices serving both our Network Solutions and our Services & Support segments, which are located within the U.S.

LEGAL PROCEEDINGS

The information presented under the caption “DPLTA Appraisal Proceedings” in Note 18 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report is incorporated herein by reference.

MINE SAF ETY DISCLOSURES

Not applicable.

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What changed 10-K

Item 1. Business