What changed in this filing

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Item 1. Financial Statements

2025-05-20 compared with 2024-11-12 · 449 added, 771 removed, 514 unchanged (70% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

September 30,

Current Assets

Cash and cash equivalents

Accounts receivable, less allowance for credit losses of $ 420 and $ 400 as of September 30, 2024

Accounts receivable, less allowance for credit losses of $ 1,212 and $ 1,300 as of March 31, 2025

and December 31, 2024, respectively

2 unchanged sentences

Inventory, net

Assets held for sale

Prepaid expenses and other current assets

5 unchanged sentences

Long-term investments

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY

LIABILITIES AND EQUITY

Current Liabilities

3 unchanged sentences

Accrued wages and benefits

Income tax payable, net

Income tax payable

Total Current Liabilities

11 unchanged sentences

200,000 shares authorized;

79,233 shares issued and 78,967 outstanding as of September 30, 2024 and

79,969 shares issued and 79,707 outstanding as of March 31, 2025 and

79,483 shares issued and 79,218 outstanding as of December 31, 2024

2 unchanged sentences

Retained deficit

Treasury stock at cost:

266 and 297 shares as of September 30, 2024

Less treasury stock at cost:

262 and 266 shares as of March 31, 2025

and December 31, 2024, respectively

Total Liabilities, Redeemable Non-Controlling Interest and Equity

Total Liabilities and Equity

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Network Solutions

3 unchanged sentences

Network Solutions

Network Solutions - other (credits), charges and inventory write-down

Network Solutions - charges and inventory write-down

Services & Support

6 unchanged sentences

Interest expense

Net investment gain (loss)

Other (expense) income, net

Net investment (loss) gain

Other income, net

Loss Before Income Taxes

Income tax (expense) benefit

Income tax benefit

Net Income attributable to non-controlling interest (1)

4 unchanged sentences

Loss per common share attributable to ADTRAN Holdings, Inc.

(1) For the three and nine months ended September 30, 2024, we accrued $ 2.4 million and $ 7.4 million, respectively, net income attributable to non-controlling interest, representing the recurring cash compensation earned by non-controlling interest shareholders post-DPLTA.

For the three and nine months ended September 30, 2023, we accrued $ 2.6 million and $ 7.6 million, respectively, representing the recurring cash compensation earned by non-controlling interest shareholders post-DPLTA, partially offset by a $ 3.2 million net loss attributable to non-controlling interests pre-DPLTA for the nine months ended September 30, 2023.

(1) For the three months ended March 31, 2025, we accrued $ 2.4 million net income attributable to non-controlling interest, representing the recurring cash compensation earned by non-controlling interest shareholders post-DPLTA.

For the three months ended March 31, 2024, we recognized $ 2.5 million of net gain attributable to non-controlling interest, representing the recurring cash compensation earned by non-controlling interest shareholders post DPTLA.

(2) Loss per common share attributable to ADTRAN Holdings, Inc.

- basic and diluted - reflects a $ 3.0 million effect of redemption of RNCI for the three and nine months ended September 30, 2024.

- basic and diluted - reflects a $( 3 ) thousand effect of redemption of RNCI for the three months ended March 31, 2025.

See Note 14 for additional information.

1 unchanged sentence

ADTRAN Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Three Months Ended

Nine Months Ended

September 30,

Other Comprehensive Income (Loss), net of tax

Net unrealized gain on available-for-sale securities

Defined benefit plan adjustments

1 unchanged sentence

Other Comprehensive Income (Loss), net of tax

Comprehensive Loss, net of tax

Comprehensive Income attributable to non-controlling interest, net of tax

Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax

Comprehensive Income (Loss), net of tax

Comprehensive Income attributable to non-controlling interest

Comprehensive Income (Loss) attributable to ADTRAN Holdings, Inc., net of tax

See accompanying notes to condensed consolidated financial statements.

5 unchanged sentences

Annual recurring compensation earned

Other comprehensive loss, net of tax

Other comprehensive income, net of tax

Deferred compensation adjustments, net of tax

5 unchanged sentences

Balance as of March 31, 2025

Annual recurring compensation earned

Other comprehensive loss, net of tax

Deferred compensation adjustments, net of tax

ADTRAN RSUs and restricted stock vested

ADTRAN stock-based compensation expense

Redemption of redeemable non-controlling interest

Adtran Networks stock-based compensation expense

Balance as of June 30, 2024

Annual recurring compensation earned

Other comprehensive income, net of tax

ADTRAN RSUs and restricted stock vested

ADTRAN stock-based compensation expense

Redemption of redeemable non-controlling interest

Adtran Networks stock-based compensation expense

Modification of Stock Options

Balance as of September 30, 2024

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands, except per share amounts)

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income (Loss)

Non-controlling interest

1 unchanged sentence

Annual recurring compensation earned

Reclassification and remeasurement from equity to mezzanine equity for non-controlling interests in Adtran Networks

Other comprehensive income, net of tax

Dividend payments to ADTRAN Holdings, Inc.

shareholders ($ 0.09 per share)

Deferred compensation adjustments, net of tax

ADTRAN RSUs and restricted stock vested

ADTRAN stock options exercised

ADTRAN stock-based compensation expense

Redemption of redeemable non-controlling interest

Adtran Networks stock-based compensation expense

Balance as of March 31, 2023

Annual recurring compensation earned

Other comprehensive income, net of tax

Dividend payments to ADTRAN Holdings, Inc.

shareholders ($ 0.09 per share)

Dividends accrued for RSUs

Deferred compensation adjustments, net of tax

ADTRAN RSUs and restricted stock vested

Adtran Networks stock options exercised

ADTRAN stock-based compensation expense

Redemption of redeemable non-controlling interest

Adtran Networks stock-based compensation expense

Balance as of June 30, 2023

Annual recurring compensation earned

Other comprehensive loss, net of tax

Dividend payments ($ 0.09 per share)

Dividends accrued for RSUs

Deferred compensation adjustments, net of tax

1 unchanged sentence

ADTRAN stock options exercised

Adtran Networks stock options exercised

ADTRAN stock-based compensation expense

1 unchanged sentence

Adtran Networks stock-based compensation expense

Balance as of September 30, 2023

Balance as of March 31, 2024 (Restated)

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Cash flows from operating activities:

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

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

1 unchanged sentence

Amortization of debt issuance cost

Gain on investments, net

Loss (gain) on investments, net

Net loss on disposal of property, plant and equipment

10 unchanged sentences

Accrued expenses and other liabilities

Income taxes payable, net

Net cash provided by (used in) operating activities

Income taxes payable

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property, plant and equipment

Purchases of intangibles - developed technologies

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

Payments for beneficial interests in securitized accounts receivable

Purchases of available-for-sale investments

Proceeds from beneficial interests in securitized accounts receivable

Net cash used in investing activities

2 unchanged sentences

Proceeds from stock option exercises

Dividend payments

Proceeds from receivables purchase agreement

Repayments on receivables purchase agreement

Proceeds from draw on revolving credit agreements

Repayment of revolving credit agreements

Payment for redemption of redeemable non-controlling interest

Payment for annual recurring compensation to non-controlling interest

Payment of debt issuance cost

Repayment of notes payable

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

17 unchanged sentences

Our innovative solutions and services enable voice, data, video and internet-communications across a variety of network infrastructures and are currently in use by millions worldwide.

We support our customers through our direct global sales organization and our distribution networks.

We support our customers through our direct global sales organization and 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.

9 unchanged sentences

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

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 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 applies to the net loss generated by Adtran Networks in 2024 and it will apply to any net loss generated by Adtran Networks in 2025.

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 plus guaranteed interest.

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 (according to the German Civil Code) that was 3.37 % as of September 30, 2024.

Assuming all the minority holders of currently outstanding Adtran Networks shares were to elect the second option, we would be obligated to make aggregate Exit Compensation payments, including guaranteed interest, of approximately € 326.9 million or approximately $ 364.1 million, based on an exchange rate as of September 30, 2024, and reflecting interest accrued through September 30, 2024 during the pendency of the appraisal proceedings discussed below.

The guaranteed interest rate is 5.0 % plus a variable component (according to the German Civil Code) that was 2.27 % as of March 31, 2025.

Assuming all the minority holders of currently outstanding Adtran Networks shares were to elect the second option, we would be obligated to make aggregate Exit Compensation payments, including guaranteed interest, of approximately € 338.5 million or approximately $ 366.1 million, b ased on an exchange rate as of March 31, 2025, and reflecting interest accrued through March 31, 2025 during the pendency of the appraisal proceedings discussed below.

Shareholders electing the first option of Annual Recurring Compensation may later elect the second option.

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 also obligated to absorb any annual net loss of Adtran Networks under the DPLTA.

Additionally, our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately € 8.9 million (or $ 10.0 millio n based on the current exchange rate) per year assuming none of the minority Adtran Networks shareholders as of September 30, 2024 were to elect Exit Compensation.

However, due to the appraisal proceedings that were initiated in 2023 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 ).

The Company expects to receive a ruling on a procedural matter in the DPLTA appraisal proceedings during the latter half of 2025 or 2026, which ruling, depending on outcome, will likely be appealed and may take 6-12 months to be decided on appeal.

The Company does not expect that a trial on the merits of the DPLTA appraisal proceedings will commence until the procedural matter has been resolved.

The proceeding for the trial on the merits of the DPLTA will likely take a minimum of 12 months for a ruling and such ruling may likewise be appealed, which would be expected to take an additional 12-24 months to be resolved.

Accordingly, the Company does not expect a final decision on the DPLTA appraisal proceedings to be rendered and published prior to 2027, and most likely not until 2028 or beyond.

Additionally, our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately € 8.9 million (or $ 9.7 million based on the current exchange rate) per year assuming none of the minority Adtran Networks shareholders as of March 31, 2025 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.

1 unchanged sentence

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.

During the three months ended September 30, 2024 and 2023, we accrued $ 2.4 million and $ 2.6 million, respectively, in Annual Recurring Compensation.

During the nine months ended September 30, 2024 and 2023, we accrued $ 7.4 million and $ 7.6 million, respectively, in Annual Recurring Compensation.

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.

During the three months ended March 31, 2025 and 2024, we accrued $ 2.4 million and $ 2.5 million, respectively, in Annual Recurring Compensation.

The Annual Recurring Compensation is reflected as an increase to retained deficit in the Condensed Consolidated Balance Sheets.

On October 18, 2022, the Company's Board of Directors authorized the Company to purchase additional shares of Adtran Networks through open market purchases not to exceed 15,346,544 shares.

For the three and nine months ended September 30, 2024, approximately 830 thousand shares and 831 thousand shares, respectively, 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 an exchange rate as of September 30, 2024, being paid to Adtran Networks shareholders.

For the three and nine months ended September 30, 2023 , less than 1 thousand shares and 64 thousand shares, respectively, of Adtran Networks stock were tendered to the Company.

This resulted in Exit Compensation payments of approximately € 8 thousand and € 1.1 million, respectively, or approximately $ 9 thousand and $ 1.2 million, respectively, based on an exchange rate as of September 30, 2023, being paid to Adtran Networks shareholders.

On July 18, 2022, ADTRAN, Inc., as the borrower, and ADTRAN Holdings, Inc.

1 unchanged sentence

The Company had access to $ 180.7 million on its Credit Facility for future borrowings;

however, as of September 30, 2024 , the Company was limited to additional borrowings of $ 24.1 million based on debt covenant compliance metrics.

however, as of March 31, 2025 and the date of this filing the Company was limited t o additional borrowings of $ 25.8 million based on debt covenant compliance metrics.

The financial covenants under the Credit Agreement, as amended, require the Company to maintain a Consolidated Total Net Leverage Ratio of 5.00 x, a Consolidated Senior Secured Net Leverage Ratio of 3.25 x ( 4.0 x to 3.5 x during a Springing Covenant Period) and a Consolidated Fixed Charge Coverage Ratio of 1.25 x.

See Note 11, Revolving Credit Agreements for additional information regarding the terms of the Wells Fargo Credit Agreement and its amendments.

As of September 30, 2024, and as of the date of issuance of these financial statements, the Company does not have sufficient liquidity to meet payment obligations under the DPLTA pertaining to Exit Compensation.

While the Company did experience $17.4 million of redemptions in Q3 2024, we believe the probability that more than a small minority of Adtran Networks shareholders elect to receive Exit Compensation in the next twelve months is remote based on the following factors:

(i) the diverse base of shareholders that must make this election on an individual shareholder basis, (ii) the fact that the Company expects to receive a procedural decision on a matter of law related to the current ongoing appraisal proceedings involving a dispute over the value of the Exit Compensation in 2024 or early 2025, after which the appeal process should take an additional 24-32 months to resolve, (iii) the current guaranteed Annual Recurring Compensation payment plus the interest earned on such shares during the ongoing appraisal proceedings, and (iv) the current trading value of Adtran Networks shares.

The Company experienced revenue declines in the year ended December 31, 2023, and during the three and nine months ended September 30, 2024.

To the extent the Company does not experience anticipated revenue growth, the Company will implement plans to preserve cash liquidity and maintain compliance with the Company’s net leverage covenants.

The Company has suspended dividend payments and has implemented a business efficiency program, which includes, but is not limited to ongoing reductions in operating expenses and a site consolidation plan.

In connection with the site consolidation plan, the Company is also exploring a potential sale of portions of our headquarters in Huntsville.

There can be no assurance that the Company will be successful in effecting this action 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 net leverage debt covenants.

In summary, the Company believes that its cash and cash equivalents, investments, working capital management initiatives and availability to access cash under the Wells Fargo credit facility will be adequate to meet our business operating requirements, our capital expenditures and our expected obligations under the DPLTA, including anticipated levels of Exit Compensation and to support our ability to continue to comply with our debt covenants under the Credit Facility, for at least the next twelve months, from the issuance of these financial statements.

See Note 11, Revolving Credit Agreements, for additional information regarding the terms of the Amendments of the Wells Fargo Credit agreement.

See Note 10, Revolving Credit Agreements for additional information regarding the terms of the Wells Fargo Credit Agreement.

As of March 31, 2025 , and as of the date of issuance of these financial statements, the Company does not have sufficient liquidity to meet the substantial majority of its payment obligations under the DPLTA pertaining to Exit Compensation.

For the three months ended March 31, 2025 and 2024, less than one thousand shares of Adtran Networks stock were tendered to the Company and Exit Compensation payments of approximately € 12 thousand and € 4 thousand, respectively, or approximately $ 13 thousand and $ 5 thousand based on the applicable exchange rates at the time of the transaction, were paid to Adtran Networks shareholders.

On April 14, 2025, 0.4 million shares of Adtran Networks stock were tendered to the Company and Exit Compensation payments of approximately € 7.0 million or approximately $ 7.5 million, based on the applicable exchange rate at the time of the transaction, will be paid to Adtran Networks shareholders.

We believe the probability that more than a small minority of Adtran Networks shareholders elect to receive Exit Compensation in the next twelve months is remote based on the following factors:

(i) the shareholders can exercise their right to receive the Exit Compensation until two months after publication of the final decision in the appraisal proceedings and we do not expect the final decision to be published within the next 12 months;

(ii) the diverse base of shareholders that must make this election on an individual shareholder basis;

(iii) the fact that the Company expects to receive a procedural decision during 2025 or 2026 that will likely be appealed and, while the date of a decision by the court on the merits of the case is uncertain, it will likely take a minimum of 12 months for a ruling and, thereafter, an expected appeal process will take a further 12-24 months to resolve;

(iv) the current guaranteed Annual Recurring Compensation payment;

and (v) the current trading value of Adtran Networks shares.

The Company experienced revenue declines in the year ended December 31, 2024.

However, customers have started to replenish their inventories to meet increasing demand and management expects orders and billings to increase during the remainder of 2025.

The Company continues to implement plans to preserve cash liquidity to maintain compliance with the Company’s covenants in case of further impacts related to customer inventory reduction initiatives and uncertain macroeconomic conditions.

Additionally, the Company suspended dividend payments and effectuated a business efficiency program (the "Business Efficiency Program"), which targeted the reduction of ongoing operating expenses and focused on enhancing capital efficiency.

The Business Efficiency Program was completed as of December 31, 2024, other than the Company's aim of selling its headquarters.

The Company has determined that it is probable that the sale of its headquarters in Huntsville will occur within the next twelve months after December 31, 2024.

The Company may need to further reduce capital expenditures and/or take other steps to preserve working capital in order to ensure that it can meet its needs and obligations and maintain compliance with its debt covenants.

In summary, the Company believes that its cash and cash equivalents, investments, working capital management initiatives and availability to access cash under the Wells Fargo credit facility will be adequate to meet our business operating requirements, our capital expenditures and our expected obligations under the DPLTA, including anticipated levels of Exit Compensation and to support our ability to continue to comply with our debt covenants under the Credit Facility and continue as a going concern, for at least the next twelve months, from the issuance of these financial statements.

See Note 10, Revolving Credit Agreements, for additional information regarding the terms of the Wells Fargo Credit agreement.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 unchanged sentences

The interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in ADTRAN Holdings, Inc.

Annual Report on Form 10-K for the year ended December 31, 2023 , filed with the SEC on March 15, 2024.

Revision of Previously Issued Condensed Consolidated Financial Statements

Following the third quarter of 2024, the Company identified errors primarily impacting the carrying values of the redeemable non-controlling interest, retained deficit, the net income attributable to the non-controlling interest and the net loss attributable to the Company and, as a consequence, of the loss per common share attributable to the Company.

The Company has evaluated the errors and determined that the related impacts were not material to the previously issued consolidated financial statements for any prior period.

A summary of the corrections to the Company's Condensed Consolidated Financial Statements for the periods ended March 31, 2023, June 30, 2023, September 30, 2023, December 31, 2023, March 31, 2024 and June 30, 2024, are as follows:

(a) Pursuant to the terms of the DPLTA, each Adtran Networks shareholder (other than the Company) is entitled to receive from us an Annual Recurring Compensation payment of € 0.52 per share.

Amendment No.

1 to the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on May 20, 2025 (the "2024 Form 10-K/A").

Restatement of Previously Issued Financial Statements

As discussed in the financial statements as of and for the year ended December 31, 2024 included in our amended 2024 Annual Report on Form 10-K/A, we identified errors in our previously issued financial statements.

In addition, on May 13, 2025, the Company announced that it needed additional time to complete its quarterly reporting process as a result of the restatements to the annual periods ended December 31, 2023 and 2024 and for the interim periods ended March 31, 2024, June 30, 2024 and September 30, 2024, as well as to complete its evaluation of internal control over financial reporting as of December 31, 2024 as a result of errors related to the historical accounting for certain inventory and cost of goods sold transactions in its Adtran Networks SE subsidiary (the “Adjustment”).

As a result, the Company filed a Form 12b-25 with the SEC and delayed the filing of this report.

In connection with the identification of the Adjustment, the Audit Committee has overseen an internal investigation into the circumstances surrounding the Adjustment and its impact on the Company’s historical financial statements.

Based on the findings of the internal investigation, which is substantially complete, it has been determined that the underlying errors giving rise to the Adjustment were not properly addressed in the Company’s previously filed financial statements as of and for the years ended December 31, 2024 and 2023 and was not communicated to the Audit Committee or the independent auditors prior to the filing of the initial 2024 Annual Report on Form 10-K.

As described in Part I, Item 4 of this report, the Company is taking certain remedial actions to address the material weaknesses in its internal controls associated with these findings.

The identified errors impacted the Condensed Consolidated Financial Statements as of and for the three months ended March 31, 2024, among other periods as previously disclosed.

Below is a summary description of the significant errors in the Company's Condensed Consolidated Financial Statements as of and for the quarter ended March 31, 2024:

ADJ 1 - Pursuant to the terms of the DPLTA, each Adtran Networks shareholder (other than the Company) is entitled to receive from us an Annual Recurring Compensation payment of €0.52 per share.

The Company erroneously accrued this liability every quarter at €0.59 per share, overstating the associated accrual, the net income attributable to non-controlling interest and the net loss attributable to ADTRAN Holdings, Inc.

for fiscal periods beginning with the quarter ended March 31, 2023 through the quarter ended June 30, 2024.

(b) For the periods beginning with the quarter ended March 31, 2023 through the quarter ended June 30, 2024 the Company remeasured the redeemable non-controlling interest each quarter-end at the current exchange rate of Euros to U.S.

ADJ 2 - For the periods beginning with the quarter ended March 31, 2023 through the quarter ended June 30, 2024 the Company remeasured the redeemable non-controlling interest each quarter-end at the current exchange rate of euros to U.S.

The Company treated the redeemable non-controlling interest as a monetary mezzanine equity instrument but should have treated it as a non-monetary mezzanine equity instrument not subject to remeasurement.

We have revised our previously issued Condensed Consolidated Financial Statements for the periods ended March 31, 2023, June 30, 2023, September 30, 2023, December 31, 2023, March 31, 2024 and June 30, 2024.

Additionally, the Company will revise its previously issued 2023 interim financial statements and 2023 annual financial statements in connection with the future filings of the Form 10-K for the year ended December 31, 2024, and interim reporting on Form 10-Q for the periods ended March 31, 2025 and June 30, 2025.

The following tables reflect the impact of the revision to the specific line items presented in the Company's previously reported Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Loss, and Condensed Consolidated Statements of Comprehensive Loss for the for fiscal periods beginning with the quarter ended March 31, 2023 through the quarter ended June 30, 2024.

March 31, 2023

(In thousands)

As Previously Reported

Other non-current liabilities

Total Liabilities

Redeemable Non-Controlling Interest

Accumulated Other Comprehensive Income

Retained Earnings

Total Liabilities, Redeemable Non-Controlling Interest and Equity

For the Three Months Ended March 31, 2023

(In thousands)

As Previously Reported

Net Loss attributable to non-controlling interest

Net Loss attributable to ADTRAN Holdings, Inc.

Loss per common share attributable to ADTRAN Holdings, Inc.

Foreign currency translation gain

Other Comprehensive Income, net of tax

Comprehensive Loss, net of tax

Comprehensive Income (Loss) attributable to non-controlling interest, net of tax

Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax

June 30, 2023

(In thousands)

As Previously Reported

Other non-current liabilities

Total Liabilities

Redeemable Non-Controlling Interest

Accumulated Other Comprehensive Income

Retained Deficit

Total Liabilities, Redeemable Non-Controlling Interest and Equity

For the Three Months Ended June 30, 2023

For the Six Months Ended June 30, 2023

(In thousands)

As Previously Reported

Net Income attributable to non-controlling interest

Net Loss attributable to ADTRAN Holdings, Inc.

Loss per common share attributable to ADTRAN Holdings, Inc.

Foreign currency translation gain

Other Comprehensive Income, net of tax

Comprehensive Loss, net of tax

Comprehensive Income attributable to non-controlling interest, net of tax

Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax

September 30, 2023

(In thousands)

As Previously Reported

Other non-current liabilities

Total Liabilities

Redeemable Non-Controlling Interest

Accumulated Other Comprehensive Income

Retained Deficit

Total Liabilities, Redeemable Non-Controlling Interest and Equity

For the Three Months Ended September 30, 2023

For the Nine Months Ended September 30, 2023

(In thousands)

As Previously Reported

Net Income attributable to non-controlling interest

Net Loss attributable to ADTRAN Holdings, Inc.

Loss per common share attributable to ADTRAN Holdings, Inc.

Foreign currency translation loss

Other Comprehensive Loss, net of tax

Comprehensive Loss, net of tax

Comprehensive Income attributable to non-controlling interest, net of tax

Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax

March 31, 2024

(In thousands)

As Previously Reported

Accrued Expenses and Other Liabilities

Total Current Liabilities

Other non-current liabilities

Total Liabilities

Redeemable Non-Controlling Interest

Accumulated Other Comprehensive Income

Retained Deficit

Total Liabilities, Redeemable Non-Controlling Interest and Equity

For the Three Months Ended March 31, 2024

(In thousands)

As Previously Reported

Net Income attributable to non-controlling interest

Net Loss attributable to ADTRAN Holdings, Inc.

Loss per common share attributable to ADTRAN Holdings, Inc.

Foreign currency translation loss

Other Comprehensive Loss, net of tax

Comprehensive Loss, net of tax

Comprehensive Income attributable to non-controlling interest, net of tax

Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax

June 30, 2024

(In thousands)

As Previously Reported

Accrued Expenses and Other Liabilities

Total Current Liabilities

Other non-current liabilities

Total Liabilities

Redeemable Non-Controlling Interest

Accumulated Other Comprehensive Income

Retained Deficit

Total Liabilities, Redeemable Non-Controlling Interest and Equity

For the Three Months Ended June 30, 2024

For the Six Months Ended June 30, 2024

(In thousands)

As Previously Reported

Net Income attributable to non-controlling interest

Net Loss attributable to ADTRAN Holdings, Inc.

Loss per common share attributable to ADTRAN Holdings, Inc.

Foreign currency translation loss

Other Comprehensive Loss, net of tax

Comprehensive Loss, net of tax

Comprehensive Income attributable to non-controlling interest, net of tax

Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax

The following tables reflect the impact of the revisions to the specific line items presented in the Company’s previously reported Consolidated Balance Sheet as of December 31, 2023, the Consolidated Statement of Loss and the Consolidated Statement of Comprehensive Loss for the year ended December 31, 2023.

December 31, 2023

(In thousands)

As Previously Reported

Accrued Expenses and Other Liabilities

Total Current Liabilities

Total Liabilities

Redeemable Non-Controlling Interest

Accumulated Other Comprehensive Income

Retained Deficit

Total Liabilities, Redeemable Non-Controlling Interest and Equity

For the Year Ended December 31, 2023

(In thousands)

As Previously Reported

Net Income attributable to non-controlling interest

Net Loss attributable to ADTRAN Holdings, Inc.

Loss per common share attributable to ADTRAN Holdings, Inc.

Foreign currency translation gain

Other Comprehensive Income, net of tax

Comprehensive Loss, net of tax

Comprehensive Income attributable to non-controlling interest, net of tax

Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax

The following tables reflect the impact of the revision to the specific line items presented in the Company's previously reported Condensed Consolidated Statements of Changes in Stockholders Equity as of September 30, 2023 and 2024:

Retained Earnings (Deficit)

Accumulated Other Comprehensive Income

(In thousands)

As Previously Reported

Annual recurring compensation earned

Other comprehensive income, net of tax

Foreign currency remeasurement of redeemable non-controlling interest

Balance as of March 31, 2023

Annual recurring compensation earned

Other comprehensive income, net of tax

Foreign currency remeasurement of redeemable non-controlling interest

Balance as of June 30, 2023

Annual recurring compensation earned

Other comprehensive loss, net of tax

Foreign currency remeasurement of redeemable non-controlling interest

Balance as of September 30, 2023

Retained Deficit

Accumulated Other Comprehensive Income

(In thousands)

As Previously Reported

Balance as of December 31, 2023

Annual recurring compensation earned

Other comprehensive loss, net of tax

Foreign currency remeasurement of redeemable non-controlling interest

Balance as of March 31, 2024

Annual recurring compensation earned

Other comprehensive loss, net of tax

Foreign currency remeasurement of redeemable non-controlling interest

Balance as of June 30, 2024

The following tables reflect the impact of the revision to the specific line items presented in the Company's previously reported Consolidated Statement of Changes in Stockholders as of December 31, 2023:

Retained Earnings (Deficit)

Accumulated Other Comprehensive Income

(In thousands)

As Previously Reported

Annual recurring compensation earned

Other comprehensive income, net of tax

Foreign currency remeasurement of redeemable non-controlling interest

Balance as of December 31, 2023

ADJ 3 - For the year ended December 31, 2023 through the year ended December 31, 2024, the Company understated cost of revenue and overstated inventory in the Company's Adtran Networks subsidiary due to a system error.

In addition, there were adjustments in the Company's U.S and Australian subsidiaries related to inventory reserves that were understated.

ADJ 4 - For the year ended December 31, 2023 through the year ended December 31, 2024, the Company understated goodwill and overstated income tax receivable.

The understatement was attributable to corrections to goodwill and deferred income tax associated with goodwill for an internal divestiture of a wholly owned subsidiary required by statutory laws in Europe.

In addition to the misstatements identified above, the Company has corrected other immaterial errors.

These other errors are quantitatively and qualitatively immaterial, individually and in the aggregate.

However, the Company has corrected these other errors as part of the correction for the significant errors described above.

We assessed the materiality of the errors on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No.

99, “Materiality,” codified in ASC Topic 250, Accounting Changes and Error Corrections.

Based on this assessment, we concluded that the errors, in the aggregate, are material to the March 31, 2024 financial statements and therefore, we are restating those financial statements herein.

Furthermore, we made adjustments to correct for other previously identified immaterial errors.

Company has also restated impacted amounts within the accompanying footnotes to the Condensed Consolidated Financial Statements.

See Note 18 for further information about the restatement .

Use of Estimates

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Actual amounts could differ significantly from these estimates.

We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of ongoing inflationary pressures, continued elevated interest rates, instability in the financial services industry, currency fluctuations and political tensions as of September 30, 2024, and through the date of this report.

We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of ongoing inflationary pressures, continued elevated interest rates, currency fluctuations and political tensions as of March 31, 2025, and through the date of this report.

These conditions could result in further impacts to the Company's consolidated financial statements in future reporting periods.

The accounting matters assessed included, but were not limited to, the allowance for credit losses, stock-based compensation, carrying value of goodwill, intangibles and other long-lived assets, financial assets, valuation allowances for tax as sets, revenue recognition and costs of revenue.

Accounts Receivable Factoring

Receivables Purchase Agreement

On July 1, 2024, the Company entered into a receivables purchase agreement (the “Factoring Agreement”) with a third-party financial institution (the “Factor”), which accelerates receivable collection and helps to better manage cash flow.

These transactions are accounted for in accordance with ASC Topic 860 and result in a reduction in accounts receivable because the Factoring Agreement transfers effective control over, and risk related to the receivables to the buyers.

Trade accounts receivables balances sold are removed from the Condensed Consolidated Balance Sheets and cash received is reflected as cash flows provided by (used in) operating activities in the Condensed Consolidated Statements of Cash Flow.

Factoring related interest expense is recorded to interest expense on the Condensed Consolidated Statements of Loss.

On each sale date, the Factor retains from the sale price a default reserve, up to a required balance, which is held by the Factor in a reserve account and pledged to the Company.

The Factor is entitled to withdraw from the reserve account the sale price of a defaulted receivable.

The balance in the reserve account is included in other assets on the Condensed Consolidated Balance Sheets.

Previous Receivables Purchase Agreement

On December 19, 2023, the Company entered into a receivables purchase agreement (the “Prior Factoring Agreement”) with a third-party financial institution and was terminated on July 1, 2024.

The Prior Factoring Agreement qualified for treatment as a secured borrowing with a pledge of collateral under Accounting Standards Codification ("ASC") Topic 810, Consolidations, as the Company was considered the primary beneficiary in a variable interest entity created to hold the factored receivables and the Company retained a residual claim on reserves related to the factored receivables .

Within the Condensed Consolidated Balance Sheets, the receivables factored were carried in accounts receivable, less allowance for credit losses, and the secured borrowings were carried as a current liability within accounts payable.

The proceeds and repayments of secured borrowings were reflected as cash flows (used in) provided by financing activities within the Condensed Consolidated Statements of Cash Flows, and program fees were recorded as interest expense in the Consolidated Statements of Loss.

The short-term liability classification of the secured borrowings was based on the estimated timing of the collection of the accounts receivable which were expected to be received within 12 months.

See Note 2 for additional information.

Redeemable Non-Controlling Interest

As of September 30, 2024 and December 31, 2023, the non-controlling Adtran Networks stockholders’ equity ownership percentage in Adtran Networks was approximatel y 33.0 % and 34.6 %, respectively.

As a result of the effectiveness of the DPLTA on January 16, 2023, the Adtran Networks shares, representing the equity interest in Adtran Networks held by holders other than the Company, can be tendered at any time and are, therefore, redeemable and must be classified outside stockholders’ equity.

Therefore, the permanent equity noncontrolling interest balance was reclassified to redeemable non-controlling interest on January 16, 2023, and was remeasured to fair value based on the trading market price of the Adtran Networks shares.

Subsequently, the carrying value of the RNCI is adjusted to its maximum redemption value at each reporting date when the maximum redemption value is greater than the initial carrying amount of the RNCI.

For the period of time that the DPLTA is in effect, the RNCI will continue to be presented as RNCI outside of stockholders’ equity in the Condensed Consolidated Balance Sheets.

See Note 14 for additional information on RNCI .

Recent Accounting Pronouncements Not Yet Adopted

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The Company is currently evaluating the effect that adoption of ASU 2023-09 will have on our disclosures.

In November 2023, the FASB issued ASU 2023-7, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures", which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, allowing financial statement users to better understand the components of a segment's profit or loss to assess potential future cash flows for each reportable segment and the entity as a whole.

The amendments expand a public entity's segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), clarifying when an entity may report one or more additional measures to assess segment performance, requiring enhanced interim disclosures, providing new disclosure requirements for entities with a single reportable segment, and requiring other new disclosures.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted.

The Company expects to adopt the new disclosures as required for the year ended December 31, 2024.

The Company is currently evaluating the impact on the related disclosures.

Recently Adopted Accounting Pronouncements

There are currently no recently adopted accounting pronouncements that are expected to have a material effect on the Condensed Consolidated Financial Statements.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with current year presentation.

These reclassifications had no effect on reported results of operations.

An adjustment has been made to the Consolidated Statement of Cash Flows for the quarter ended March 31, 2024, to reclassify between Property, Plant and Equipment and Intangible Assets.

The following is a description of the principal activities from which revenue is generated by reportable segment:

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Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(In thousands)

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Subscriber Solutions

Optical Networking Solutions

Access & Aggregation Solutions

Nine Months Ended

September 30, 2024

September 30, 2023

(In thousands)

Network Solutions

Services & Support

Network Solutions

Services & Support

Subscriber Solutions

Optical Networking Solutions

Access & Aggregation Solutions

The aggregate amount of transaction price allocated to remaining performance obligations that have not been satisfied as of September 30, 2024, related to contractual maintenance agreements, contractual SaaS and subscription services, and hardware contracts that exceed one year in duration amounte d to $ 280.8 million.

As of September 30, 2024 , approximately 66.0 % is expected to be recognized over the next 12 months and the remainder recognized thereafter.

The majority of the Company's remaining performance obligations as of September 30, 2024, are related to contracts or orders that have an original expected duration of one year or less and are excluded from the transaction price related to these future obligations.

The aggregate amount of transaction price allocated to remaining performance obligations that have not been satisfied as of March 31, 2025 and December 31, 2024 related to contractual main tenance agreements, contractual SaaS and subscription services, and hardware contracts that exceed one year in duration amounted to $ 274.3 million and $ 325.7 million, respectively.

As of March 31, 2025 , approximately 69 % is expected to be recognized over the next 12 months and the remainder recognized thereafter.

The majority of the Company's remaining performance obligations as of March 31, 2025, are related to contracts or orders that have an original expected duration of one year or less and are excluded from the transaction price related to these future obligations.

The Company will generally satisfy the remaining performance obligations as we transfer control of the products ordered or services to our customers, excluding maintenance services, which are satisfied over time.

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(In thousands)

September 30, 2024

March 31, 2025

December 31, 2024

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Accounts Receivable

The allowance for credit losses was $ 0.4 million as of September 30, 2024, and December 31, 2023, respectively, related to accounts receivable.

Receivables Purchase Agreement

The allowance for credit losses was $ 1.2 million and $ 1.3 million as of March 31, 2025, and December 31, 2024, respectively, related to accounts receivable.

Receivables Purchase Agreements

Total accounts receivables factored as of the end of September 30, 2024, totaled $ 16.7 million of which $ 3.7 million was retained pursuant to the Factoring Agreement in the reserve account.

Total accounts receivables factored as of the end of March 3 1, 2025, totaled $ 11.2 million of which $ 3.7 million was retained pursuant to the Factoring Agreement in the reserve account.

The Factoring Agreement provides for up to $ 40.0 million in factoring capacity, subject to eligible receivables and reserve requirements, secured by the receivables.

The balance in the reserve account is included in other assets on the Condensed Consolidated Balance Sheets.

The cost of the Factoring Agreement is included in interest expense in the Condensed Consolidated Statements of Loss and totaled $ 0.3 million for the three months and nine months ended September 30, 2024.

Costs of a previous receivables purchase agreement which are included in interest expense in the Condensed Consolidated Statements of Loss totaled $ 0.3 million and $ 0.9 million for the three and nine months ended September 30, 2023.

Previous Receivable Purchase Agreement

On December 19, 2023, the Company entered into a receivables purchase agreement (the “Prior Factoring Agreement”) with a third-party financial institution (the "Factor") to replace a prior accounts receivable purchase agreement and to sell, on a revolving basis, undivided interests in the Company’s accounts receivable.

The prior factoring agreement provided for up to $ 40.0 million in borrowing capacity, subject to eligible receivables and reserve requirements, secured by the receivables.

The prior factoring agreement qualified for treatment as a secured borrowing with a pledge of collateral under Accounting Standards Codification ("ASC") Topic 810, Consolidations .

The receivables purchase agreement was terminated on July 1, 2024 and there were no secured borrowings under this agreement as of September 30, 2024.

Total secured borrowings under the agreement were $ 14.3 million as of December 31, 2023, which left $ 25.4 million available for future borrowings as of December 31, 2023.

Accounts receivable pledged as collateral related to the secured borrowings were $ 16.8 million as of December 31, 2023.

For the nine months ended September 30, 2024, the Company incurred program fee expenses of $ 0.6 million.

The cost of the Factoring Agreement is included in interest expense in the Condensed Consolidated Statements of Loss and totaled $ 0.3 million for the three mont hs ended March 31, 2025.

On December 19, 2023, the Company entered into a receivables purchase agreement (the "Prior Factoring Agreement") with a third-party financial institution which qualified for treatment as a secured borrowing with a pledge of collateral under Accounting Standards Codification ("ASC") Topic 810, Consolidation.

The Prior Factoring Agreement was terminated on July 1, 2024.

For the three months ended March 31, 2024, the Company incurred program fee expenses of $ 0.3 million.

Contract Assets

No allowance for credit losses was recorded for the three and nine months ended September 30, 2024 and 2023, respectively, related to contract assets.

No allowance for credit losses was recorded for the three months ended March 31, 2025 and 2024, respectively, related to contract assets.

Unearned Revenue

Of the outstanding unearned revenue balances as of December 31, 2023 , $ 10.03 million and $ 43.1 million were recognized as revenue during the three and nine months ended September 30, 2024 , respectively.

Of the $ 60.4 million of outstanding unearned revenue balances as of December 31, 2022, $ 6.1 million and $ 31.3 million were recognized as revenue during the three and nine months ended September 30, 2023 , respectively.

The Company’s effective tax rate changed from a benefit of 18.0 % of pre-tax loss for the three months ended September 30, 2023 , to a expense of 1.4 % of pre-tax loss for the three months ended September 30, 2024 , and changed from a benefit of 19.2 % of pre-tax loss for the nine months ended September 30, 2023 , to a benefit of 3.9 % of pre-tax loss for the nine months ended September 30, 2024.

The change in the effective tax rate for the three and nine months ended September 30, 2024, was driven primarily by non-deductible impairment charges and a loss jurisdiction for which no tax benefits were recognized on its pre-tax losses incurred during the nine months ended September 30, 2024.

Of the outstanding unearned revenue balances as of December 31, 2024 , $ 21.9 million were recognized as revenue during the three months ended March 31, 2025.

Of the $ 65.1 million of outstanding unearned revenue balances as of December 31, 2023, $ 19.7 million were recognized as revenue during the three months ended March 31, 2024 .

The Company’s effective tax rate changed from a benefit of 5.4 % of pre-tax loss for the three months ended March 31, 2024, to a benefit of 4.2 % of pre-tax loss for the three months ended March 31, 2025.

The change in the effective tax rate for the three months ended March 31, 2025, was driven primarily by loss jurisdictions for which the recognition of tax benefits on pre-tax losses incurred during the first quarter of 2025 were limited due to valuation allowance.

The Company continually reviews the adequacy of its valuation allowance and recognizes the benefits of deferred tax assets only as the assessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with ASC 740, Income Taxes.

As of September 30, 2024 , the Company had net deferred tax assets totaling $ 91.3 million, and a valuation allowance totaling $ 87.1 million against those deferred tax assets.

Our assessment of the realizability of our deferred tax assets includes the evaluation of historical operating results, as well as the evaluation of evidence which requires significant judgment, including the evaluation of our three-year cumulative income position, future taxable income projections and tax planning strategies.

As of March 31, 2025 , the Company had net deferred tax assets totaling $ 102.8 million, and a valuation allowance totaling $ 115.7 million against those deferred tax assets.

Our assessment of the realizability of our deferred tax assets includes the evaluation of historical operating results, as well as the evaluatio n of evidence which requires significant judgment, including the evaluation of our three-year cumulative income position, future taxable income projections and tax planning strategies.

Should management’s conclusion change in the future and an additional valuation allowance, or a partial or full release of the valuation allowance becomes necessary, it may have a material effect on our consolidated financial statements.

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Outstanding awards granted under the Company's prior equity incentive plans will remain subject to the terms of such applicable plans, and shares under such plans that are cancelled or forfeited will be available for issuance under the 2024 Employee Plan or the 2024 Directors Plan, as applicable.

Under the 2024 Employee Plan, the Company is authorized to issue 4.0 million shares of common stock to certain employees, key service providers and advisors through incentive stock options and non-qualified stock options, stock appreciation rights, RSUs and restricted stock, any of which may be subject to performance-based conditions.

Under the 2024 Employee Plan, the Company is authorized to is sue 4.0 million sh ares of common stock to certain employees, key service providers and advisors through incentive stock options and non-qualified stock options, stock appreciation rights, RSUs and restricted stock, any of which may be subject to performance-based conditions.

RSUs and restricted stock granted under the 2024 Employee Plan will typically vest pursuant to a four-year vesting schedule beginning on the first anniversary of the grant date.

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Forfeitures, cancellations and expirations of awards granted under the prior directors stock plan increase the shares authorized for issuance under the 2024 Directors Plan by one share of common stock for each share underlying the award.

As of September 30, 2024, 4.7 million shares were available for issuance pursuant to awards that may be made in the future under shareholder-approved equity plans.

For the three months ended September 30, 2024 and 2023 , stock-based compensation expense was $ 3.6 million and $ 4.2 million, respectively, and for the nine months ended September 30, 2024 and 2023 , stock-based compensation expense was $ 11.4 million and $ 12.2 million, respectively.

PSUs, RSUs and Restricted Stock - ADTRAN Holdings, Inc.

The following table summarizes the PSUs, RSUs and restricted stock outstanding as of December 31, 2023, and September 30, 2024 and the changes that occurred during the nine months ended September 30, 2024:

As of March 31, 2025 , 3.9 m illion shares were available for issuance pursuant to awards that may be made in the future under shareholder-approved equity plans.

For the three months ended March 31, 2025 and 2024, stock-based compensation expense was $ 3.2 million and $ 4.0 million, respectively.

PSUs, RSUs and Restricted Stock

The following table summarizes the PSUs, RSUs and restricted stock outstanding as of December 31, 2024, and March 31, 2025 and the changes that occurred during the three months ended March 31, 2025:

(in thousands)

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PSUs, RSUs and restricted stock forfeited

Unvested PSUs, RSUs and restricted stock outstanding, September 30, 2024

Unvested PSUs, RSUs and restricted stock outstanding, March 31, 2025

The fair value of PSUs with performance conditions, RSUs and restricted stock is equal to the closing price of the Company's stock on the date of grant.

The fair value of PSUs with market conditions is calculated using a Monte Carlo simulation valuation method.

As of September 30, 2024 , total unrecognized compensation expense related to non-vested portion of performance-based PSUs (considered probable), market-based PSUs, RSUs and restricted stock was approximately $ 13.3 million, which will be recognized over the remaining weighted-average period of 2.2 years.

As of September 30, 2024 , there was $ 11.0 million of unrecognized compensation expense related to unvested performance-based PSUs (not-considered probable), which will be recognized over the remaining requisite service period of 1.3 years if achievement of the performance obligation becomes probable.

As of March 31, 2025 , total unrecognized compensation expense related to non-vested portion of performance-based PSUs (considered probable), market-based PSUs, RSUs and restricted stock was approximately $ 20.9 million, which will be recognized over the remaining weighted-average period of 2.1 years.

As of March 31, 2025 , there was $ 11.0 million of unrecognized compensation expense related to unvested performance-based PSUs (not-considered probable), which will be recognized over the remaining requisite service period of 0.8 years if achievement of the performance obligation becomes probable.

Unrecognized compensation expense will be adjusted for actual forfeitures.

Stock Options - ADTRAN Holdings, Inc.

Stock Options

The following table summarizes the ADTRAN Holdings, Inc.

stock options outstanding as of December 31, 2023, and September 30, 2024, and the changes that occurred during the nine months ended September 30, 2024:

stock options outstanding as of December 31, 2024, and March 31, 2025, and the changes that occurred during the three months ended March 31, 2025:

Stock Options

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Stock options expired

Stock options outstanding, September 30, 2024

Stock options exercisable, September 30, 2024

As of September 30, 2024 , there was $ 4.2 million of unrecognized compensation expense related to stock options which will be recognized over the remaining weighted-average period of 1.2 years.

Stock options outstanding, March 31, 2025

Stock options exercisable, March 31, 2025

As of March 31, 2025 , there was $ 2.1 million of unrecognized compensation expense related to stock options which will be recognized over the remaining weighted-average period of 0.8 years.

The determination of the fair value of stock options assumed or granted by Adtran was estimated using the Monte Carlo method and is affected by its stock price, as well as assumptions regarding a number of complex and subjective variables that may have a significant impact on the fair value estimate.

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All of the options were previously issued at exercise prices that approximated fair market value at the date of grant.

The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the difference between the Company's closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2024 .

The amount of aggregate intrinsic value was $ 0.8 million as of September 30, 2024, which will change based on the fair market value of the Company's stock.

The total pre-tax intrinsic value of options exercised during the nine months ended September 30, 2024 , and 2023 was $ 34 thousand and $ 0.2 million , respectively.

During the three and nine months ended September 30, 2024, 0.1 million stock options vested.

No stock options vested during the three and nine months ended September 30, 2023.

Stock Options - Adtran Networks

During the third quarter of 2024, all remaining Adtran Networks stock options were modified which resulted in the acceleration of vesting and conversion to liability based awards that were settled for cash totaling $ 0.2 million.

As of September 30, 2024, Adtran Networks had no remaining vested or unvested stock option awards outstanding.

Debt Securities and Other Investments

The Company did no t have any debt securities and other investments as of September 30, 2024.

Realized gains and losses on sales of debt securities are computed under the specific identification method.

The following tab le presents the gross realized gains and losses related to its debt securities:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Gross realized gain on debt securities

Gross realized loss on debt securities

Total loss recognized, net

Realized and unrealized gains and losses related to marketable equity securities were as follows:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Unrealized gain (loss) on equity securities held

Realized (loss) gain on equity securities sold

Total gain (loss) recognized, net

Income generated from marketable equity securities was recorded as interest and dividend income in the Condensed Consolidated Statements of Loss.

GAAP establishes a three-level valuation hierarchy based upon observable and unobservable inputs for fair value measurement of financial instruments:

Level 1 – Observable outputs;

values based on unadjusted quoted prices for identical assets or liabilities in an active market;

Level 2 – Significant inputs that are observable;

values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly and

Level 3 – Significant unobservable inputs;

values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

These inputs could include information supplied by investees.

The Company’s cash equivalents and investments held at fair value are categorized into this hierarchy as follows:

Fair Value Measurements as of September 30, 2024 Using

The amount of aggregate intrinsic value was $ 4.0 million as of March 31, 2025, which will change based on the fair market value of the Company's stock.

The total pre-tax intrinsic value of options exercised during the three months ended March 31, 2025 , and 2024 was $ 0.4 million and $ 34 thousand , respectively.

During the three months ended March 31, 2025 and 2024, no stock options vested.

The Company has cash equivalents and investments which are held at fair value as follows:

Fair Value Measurements as of March 31, 2025 Using

(In thousands)

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These multiple market prices are used as inputs into a distribution-curve-based algorithm to determine the daily market value of each security.

GAAP establishes a three-level valuation hierarchy based upon observable and unobservable inputs for fair value measurement of financial instruments:

Level 1 – Observable outputs;

values based on unadjusted quoted prices for identical assets or liabilities in an active market;

Level 2 – Significant inputs that are observable;

values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly and

Level 3 – Significant unobservable inputs;

values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

These inputs could include information supplied by investees.

Inventory consisted of the following:

(In thousands)

September 30, 2024

March 31, 2025

December 31, 2024

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Inventory reserves are established for estimated excess and obsolete inventory equal to the difference between the cost of the inventory and the estimated net realizable value of the inventory based on estimated reserve percentages, which considers historical usage, known trends, inventory age and market conditions.

During the three and nine months ended September 30, 2024 , we renegotiated $ 0.3 million related to charges and an inventory write-down of $( 0.3 ) million and $ 8.6 million, respectively, as a result of a strategy shift which included discontinuance of certain product lines 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 all of which are included in cost of revenue in the Condensed Consolidated Statements of Loss.

In connection with the Company’s restructuring efforts, during the quarter ended September 30, 2023, management determined that there would be a discontinuation of product lines in the Network solutions segment and, as a result, wrote-down related inventories of $ 21.0 million, which is included in cost of revenue in the Condensed Consolidated Statements of Loss.

During the twelve months ended December 31, 2024, the Company recorded an inventory write-down of $ 8.6 million, as a result of a strategy shift which included discontinuance of certain product lines 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 all of which are included in cost of revenue in the Condensed Consolidated Statements of Loss.

PROPERTY, PLANT AND EQUIPMENT

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(In thousands)

September 30, 2024

March 31, 2025

December 31, 2024

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Long-lived assets used in operations are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the undiscounted cash flows estimated to be generated by the asset are less than the asset’s carrying value.

Depreciation expense was $ 8.7 million and $ 7.4 million for the three months ended September 30, 2024 and 2023 , respectively, and $ 24.5 million and $ 22.6 million for the nine months ended September 30, 2024 and 2023 , respectively, which is recorded in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss.

The changes in the carrying amount of goodwill for the nine months ended September 30, 2024, are as follows:

Depreciation expense was $ 6.9 million and $ 7.1 million for the three months ended March 31, 2025 and 2024, respectively, which is recorded in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss.

Assets Held For Sale

On December 31, 2024, the Company determined it met the held for sale criteria pursuant to ASC 360, "Impairment and Disposal of Long-Live Assets" on the Company's property located at the North and South Towers in its Huntsville, Alabama campus and ceased recording depreciation on the assets.

The Company expects to dispose of the property within the next twelve months .

The Company records assets held for sale at the lower of their carrying value or fair value.

The total carrying value of assets held for sale was $ 11.9 million as of March 31, 2025 and December 31, 2024, respectively, and is separately recorded on the balance sheet.

The changes in the carrying amount of goodwill for the three months ended March 31, 2025, are as follows:

(In thousands)

Network Solutions

Services & Support

As of December 31, 2024

Goodwill impairment

Foreign currency translation adjustments

As of September 30, 2024

Goodwill represents the excess purchase price over the fair value of net assets acquired.

The Company performs its annual goodwill impairment assessment on the first day of the fourth quarter.

In addition, the Company performs an interim impairment assessment prior to our annual measurement date whenever events or changes in circumstances indicate that the carrying amount of such assets (or group of assets) may not be recoverable.

During the third quarter of 2023, the Company identified a triggering event due to a decrease in the Company’s market capitalization and changes in projections (decrease in estimated cash flows).

While the quantitative impairment analysis indicated that there was no impairment of Network Solutions goodwill, the Company determined that a $ 37.9 million non-cash impairment charge for goodwill was warranted for the Services & Support reporting unit.

During the fourth quarter of 2023, the Company completed its annual impairment test.

There were no significant market changes or changes to cash flow projections, as such no triggering event was identified during the fourth quarter of 2023.

As of March 31, 2025

During the first quarter of 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.

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The quantitative impairment analysis indicated there was no impairment of the Services & Support goodwill during the first quarter of 2024.

No impairment of goodwill was recognized during the three months ended September 30, 2024.

Goodwill impairment recognized during the nine months ended September 30, 2024 , was $ 292.6 million.

Goodwill impairment recognized during the three and nine months ended September 30, 2023 , was $ 37.9 million.

As of September 30, 2024 , accumulated goodwill impairment losses totaled $ 330.5 million.

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

No impairment of goodwill was recognized during the three months ended March 31, 2025.

As of March 31, 2025, accumulated goodwill impairment losses tot aled $ 335.3 millio n.

INTANGIBLE ASSETS

Intangible assets consisted of the following:

As of September 30, 2024

Intangible assets as of March 31, 2025 and December 31, 2024, consisted of the following:

As of March 31, 2025

As of December 31, 2024

7 unchanged sentences

Net Book Value

Developed technology

Customer relationships

Developed technology

Licensed technology

Licensing agreements

Intangible assets are reviewed for impairment whenever events and circumstances indicate impairment may have occurred.

In connection with the preparation of the financial statements for each period in 2024 and 2023, the Company assessed impairment triggers related to intangible assets.

No impairment losses related to intangible assets were recorded during the three and nine months ended September 30, 2024 and 2023.

Amortization expense was $ 14.7 million and $ 16.5 million in the three months ended September 30, 2024 and 2023 , respectively, and $ 43.7 million and $ 68.8 million in the nine months ended September 30, 2024 and 2023, respectively and was included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss.

Licensed agreements

No impairment losses of intangible assets were recorded during the three months ended March 31, 2025 and 2024.

Amortization expense was $ 14.9 million and $ 14.6 million in the three months ended March 31, 2025 and 2024, respectively, and was included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss.

Estimated future amortization expense of intangible assets is as follows:

(In thousands)

September 30, 2024

The Company has certain forward rate agreements to hedge foreign currency exposure of expected future cash flows in foreign currency.

The Company does not hold or issue derivative instruments for trading or other speculative purposes.

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period.

All changes in the fair value of derivative instruments are recognized as other (expense) income in the Consolidated Statements of Loss and are classified as Level II under the fair value hierarchy.

The derivative instruments are not subject to master netting agreements and are not offset in the Consolidated Balance Sheets.

We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments.

We perform credit evaluations of our counterparties under forward exchange contracts and expect all counterparties to meet their obligations.

We have not experienced credit losses from our counterparties.

As of September 30, 2024 , the Company had 41 forward rate contracts outstanding.

Foreign Currency Hedging Arrangements

On November 3, 2022, the Company entered into a euro/U.S.

dollar forward contract arrangement ("Initial Forward") with Wells Fargo Bank, N.A.

(“Hedge Counterparty”).

The Initial Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, enabled the Company to convert a portion of its euro denominated payment obligations under the proposed DPLTA into U.S.

Under the Initial Forward, the Company agreed to exchange an aggregate notional amount of € 160.0 million converted to U.S.

dollars at a daily fixed forward rate ranging from EUR/USD 0.98286 to 1.03290 .

The aggregate amount of € 160.0 million was divided into eight quarterly tranches of € 20.0 million, which commenced in the fourth quarter of 2022.

During the nine months ended September 30, 2024 , the Company settled three € 20.0 million forward contract tranches, leaving the remaining tranche of € 20.0 million to be settled in the fourth quarter of 2024.

The Company, at its sole discretion, may exchange all or part of each tranche on any given day within the applicable quarter;

provided, however, that it must exchange the full tranche by the end of such quarter.

The Initial Forward may be accelerated or terminated early for a number of reasons, including but not limited to (i) non-payment by the Company or the Hedge Counterparty, (ii) breach of representation or warranty or covenant by either party or (iii) insolvency or bankruptcy of either party.

On March 21, 2023, the Company entered into a euro/U.S.

dollar forward contract arrangements (“Forward”) with the Hedge Counterparty.

Under the Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, the Company exchanged an aggregate notional amount of € 160.0 million converted to U.S.

dollars at an average rate of EUR/USD 1.085 .

During the nine months ended September 30, 2024 , the Company settled three $ 20.0 million forward contract tranches, leaving the remaining tranche of $ 20.0 million to be settled in the fourth quarter of 2024.

These forward contracts were executed to sell EUR and to buy USD and were entered into for the purpose of unwinding th e Initial Forward to buy EUR and to sell USD.

The drawdown dates of the Initial Forward are set to the same date as the maturity of the offsetting Forward.

The fair values of the Company's derivative instruments recorded in the Condensed Consolidated Balance Sheet as of September 30, 2024 and December 31, 2023 were as follows:

(In thousands)

Balance Sheet Location

September 30, 2024

December 31, 2023

Derivatives Not Designated as Hedging Instruments (Level 2):

Foreign exchange contracts – derivative assets

Other receivables

Foreign exchange contracts – derivative liabilities

Accounts payable

Total derivatives

The change in the fair values of the Company's derivative instruments recorded in the Condensed Consolidated Statements of Loss during the three and nine months ended September 30, 2024 and 2023 were as follows:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Income Statement

Derivatives Not Designated as Hedging Instruments:

Foreign exchange contracts

Other (expense) income, net

March 31, 2025

CREDIT AGREEMENTS

1 unchanged sentence

(In thousands)

September 30, 2024

March 31, 2025

December 31, 2024

1 unchanged sentence

Total non-current revolving credit facility

As of September 30, 2024, the weighted average interest rate on our revolving credit agreements was 8.45 %.

Wells Fargo Credit Agreement

Wells Fargo Credit Facility

On July 18, 2022, ADTRAN, Inc., as the borrower ("U.S.

Borrower"), and the Company entered into a credit agreement with a syndicate of banks, including Wells Fargo Bank, National Association, as administrative agent (“Administrative Agent”), and the other lenders named therein (as amended from time to time, the “Credit Agreement”).

As of the date of this filing, the Credit Agreement allows for revolving credit borrowings of up to $ 400.0 million in aggregate principal amount ($ 100.0 million of which is available to Adtran Networks as borrower pursuant to the Subline (as defined and further described below).

On August 9, 2023, ("First Amendment Effective Date") the Company and ADTRAN, Inc.

entered into a First Amendment to Credit Agreement (“First Amendment”).

The First Amendment, among other things, increased the available funding from $ 100.0 million to $ 400.0 million.

In addition, a new $ 50.0 million delayed draw term loan facility (“DDTL”) was introduced, which (subject to certain conditions) was available for borrowing in the event that at least sixty percent ( 60.0 %) of the outstanding shares of Adtran Networks that were not owned by the Company and its subsidiaries as of the First Amendment Effective Date was tendered (such event, a “Springing Covenant Event”).

Upon the occurrence of a Springing Covenant Event, the Company will enter a “Springing Covenant Period”, defined as the fiscal quarter in which a Springing Covenant Event occurs and the three (3) consecutive fiscal quarters thereafter.

During the Springing Covenant Period, the Company’s leverage ratios are increased.

Although the ability to borrow under the DDTL expired on August 9, 2024, the Springing Covenant Event and Springing Covenant Period remain in effect.

The First Amendment further added additional financial flexibility by permitting, subject to certain requirements, the incurrence of convertible indebtedness by the Company in an aggregate principal amount of up to $ 172.5 million.

Any such convertible indebtedness must, among other things, be incurred in pro forma compliance with the financial covenants in the Credit Agreement, be unsecured, and otherwise rank junior to borrowings under the Credit Agreement and have a stated maturity date of at least 91 days after the latest scheduled maturity date of loans and commitments under the Credit Agreement.

Net cash proceeds from any incurrence of convertible indebtedness must be used to repurchase shares of Adtran Networks or repay revolver borrowings under the Credit Agreement.

On January 16, 2024 ("Second Amendment Effective Date"), the Company and ADTRAN, Inc.

entered into a Second Amendment to Credit Agreement and First Amendment to Collateral Agreement ("Second Amendment").

The Second Amendment, among other things, introduced the Covenant Relief Period, which provided the Company with additional covenant headroom while imposing a minimum liquidity financial covenant from the end of the fourth quarter of 2023 to the end of the third quarter of 2024.

The Covenant Relief Period ended on November 7, 2024.

On March 12, 2024, the Company and ADTRAN, Inc.

entered into a Third Amendment to Credit Agreement ("Third Amendment").

The Third Amendment, among other things, amended the definition of “Consolidated Funded Indebtedness” (which is used in the calculation of the Consolidated Total Net Leverage Ratio and the Consolidated Senior Secured Net Leverage Ratio) to exclude obligations of the Company and its subsidiaries under certain factoring arrangements when calculated for the fiscal quarters ending March 31, 2024, and June 30, 2024.

On June 4, 2024, the Company, ADTRAN, Inc., and Adtran Networks entered into a Fourth Amendment to Credit Agreement ("Fourth Amendment").

The Fourth Amendment, among other things, created a new sublimit under the existing $ 400.0 million revolving commitments, in an aggregate amount of $ 100.0 million (“Subline”), which Subline is available for borrowings by Adtran Networks.

Prepayments of outstanding loans under the Subline that result in the remaining outstanding loans under the Subline being less than the German Commitment Reduction Threshold will result in a permanent partial reduction of the commitments in respect of the Subline.

The German Commitment Reduction Threshold is initially $ 75.0 million and may be lowered from time to time pursuant to the terms of the Fourth Amendment.

The existing swing line sublimit and letter of credit sublimit under the Credit Agreement remained available to the US Borrower (and not to Adtran Networks) after giving effect to the Fourth Amendment.

Otherwise, the loans under the Subline are subject to substantially the same terms and conditions under the Credit Agreement (including with respect to the interest rate and maturity date) as the other existing revolving commitments.

As of September 30, 2024 , ADTRAN, Inc.’s borrowings under the revolving line of credit were $ 189.8 million, of which approximately $ 115.0 million were borrowed by ADTRAN, Inc.

and $ 75.0 million were borrowed under the Subline by Adtran Networks.

The credit facilities provided under the Credit Agreement mature in July 2027, but the U.S.

Borrower may request extensions subject to custo mary conditions.

Borrower"), and the Company entered into a credit agreement with a syndicate of banks, including Wells Fargo Bank, National Association, as administrative agent (“Administrative Agent”), and the other lenders named therein (the “Original Credit Agreement”), as amended by the First Amendment to the Credit Agreement, dated August 9, 2023, 2021 (“Amendment No.

1”), the Second Amendment to the Credit Agreement, dated January 16, 2024 (“Amendment No.

2”), the Third Amendment to the Credit Agreement, dated March 12, 2024 (“Amendment No.

3”), and the Fourth Amendment to the Credit Amendment, dated June 4, 2024 (“Amendment No.

4” and, collectively with Amendment No.

1, Amendment No.

2, and Amendment No.

3, the “Credit Agreement Amendments”;

and the Original Credit Agreement, as amended by the Credit Agreement Amendments, the “Amended Credit Agreement”).

As of the date of this filing, the Amended Credit Agreement provided for a secured revolving credit facility of up to $ 374.0 million of borrowings, $ 74.0 million of which is solely available to Adtran Networks as borrower pursuant to the Subline (as defined and further described below.

As of March 31, 2025, the Company’s borrowings under the revolving line of credit were $ 190.1 million, of which approximately $ 141.0 million were borrowed by the U.S.

Borrower and $ 49.1 million were borrowed under the Subline by Adtran Networks (as defined below), who became a party to the Amended Credit Agreement in June 2024.

The credit facilities provided under the Amended Credit Agreement mature in July 2027, but the U.S.

Borrower may request extensions subject to customary conditions.

In addition, the U.S.

Borrower may utilize up to $ 50.0 million of the $ 374.0 million total revolving facility for the issuance of letters of credit.

As of September 30, 2024 , we had a total of $ 4.4 million in letters of credit under ADTRAN, Inc.

outstanding under the Credit Agreement, leaving a net amount (after giving effect to the $ 189.8 million of outstanding borrowings described above) of $ 205.6 million available for future borrowings;

however, as of September 30, 2024 , the Company was limited to additional borrowings of $ 24.1 million based on debt covenant compliance metrics.

Any future credit extensions under the Credit Agreement are subject to customary conditions precedent.

As of March 31, 2025, the U.S.

Borrower had a total of $ 3.2 million in letters of credit under the Amended Credit Agreement, leaving a net amount (after giving effect to the $ 190.1 million of outstanding borrowings described above) of $ 180.7 million available for future borrowings;

however, as of March 31, 2025 and the date of this filing the Company was limited to additional borrowings of $ 25.8 million based on debt covenant compliance metrics.

Any future credit extensions under the Amended Credit Agreement are subject to customary conditions precedent.

The proceeds of any loans are expected to be used for general corporate purposes and to pay a portion of the Exchange Offer consideration.

As of September 30, 2024, the Company was in compliance with all covenants.

Revolving Line of Credit Interest Rate

dollar borrowings under the revolving line of credit other than swingline loans, which bear interest at the Base Rate (as defined below plus the applicable margin), bear interest, at the Company’s option, at a rate per annum equal to either (A) the Base Rate plus an applicable margin ranging from 0.65 % to 1.65 % per annum based on the Company’s Consolidated Total Net Leverage Ratio (or, during the Applicable Margin Increase Period (as defined below), an applicable margin of 2.15 % per annum), or (B) Adjusted Term SOFR (as defined below) plus an applicable margin ranging from 1.65 % to 2.65 % per annum based on the Company’s Consolidated Total Net Leverage Ratio (or, during the Applicable Margin Increase Period, an applicable margin of 3.15 % per annum).

“Base Rate” means the highest of (a) the federal funds rate (i.e., for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the business day next succeeding such day) plus ½ of 1.0 %, (b) the prime commercial lending rate of the Administrative Agent, as established from time to time at its principal U.S.

office (which such rate is an index or base rate and will not necessarily be its lowest or best rate charged to its customers or other banks), or (c) the daily Adjusted Term SOFR (as defined in the Credit Agreement) for a one-month tenor plus 1.0 %.

The Base Rate is subject to a floor of 1.00 % per annum.

“Adjusted Term SOFR” means Term SOFR for the applicable interest period plus 0.10 % per annum.

Adjusted Term SOFR is subject to a floor of 0.00 % per annum.

All euro borrowings under the revolving line of credit bear interest at a rate per annum equal to EURIBOR (as defined in the Credit Agreement and subject to a 0.00 % per annum floor) plus an applicable margin ranging from 1.75 % to 2.75 % per annum based on the Company’s Consolidated Total Net Leverage Ratio (or, during the Applicable Margin Increase Period, an applicable margin of 3.25 % per annum).

In addition, if on or prior to December 31, 2024, we have not reduced the aggregate revolving credit commitment to $ 340.0 million or less, the applicable margin for all loans shall be increased by 1.00 % per annum, and (y) if on or prior to June 30, 2025 we have not reduced the aggregate revolving credit commitment to $ 300.0 million or less, the applicable margin for all loans shall be increased by 1.00 % per annum.

In addition to paying interest on outstanding principal under the Credit Agreement, the Company is required to pay a quarterly commitment fee to the lenders under the Credit Agreement in respect of unutilized revolving loan commitments on the average daily unused portion of the revolving credit commitment of each lender, which commitment fee ranges from 0.20 % to 0.25 % per annum based on the Company’s Consolidated Total Net Leverage Ratio (or, during the Applicable Margin Increase Period, is equal to 0.25 % per annum).

The Company is also required to pay a participation fee to the Administrative Agent for the account of each lender with respect to the Company’s participation in letters of credit at the then applicable rate for Adjusted Term SOFR Loans or EURIBOR Loans, and other customary fronting, issuance and administration fees with respect to letters of credit.

The “Applicable Margin Interest Period” means the period commencing on the Second Amendment Effective Date and ending on the first date when each of the following conditions have been met:

(a) the Covenant Relief Period has ended, (b) since the Second Amendment Effective Date, the borrowers have repaid the revolving credit outstanding borrowings by a principal amount of at least $ 75.0 million, (c) the borrowers have reduced the aggregate revolving credit commitment to an amount no greater than $ 300.0 million, and (d) the borrowers are in compliance with all financial covenants based on the financial statements for the most recently completed reference period.

Moreover, the Amended Credit Agreement provides for a sublimit under the existing $ 374.0 million revolving commitments in an aggregate amount of $ 100.0 million (“Subline”), which Subline is available for borrowings by Adtran Networks.

Prepayments of outstanding loans under the Subline that result in the remaining outstanding loans under the Subline being less than the German Commitment Reduction Threshold (as defined below) will result in a permanent partial reduction of the commitments in respect of the Subline.

The German Commitment Reduction Threshold was initially $ 75.0 million and may be lowered from time to time pursuant to the terms of the Amended Credit Agreement.

The existing swing line sublimit and letter of credit sublimit under the Amended Credit Agreement remain available to the U.S.

Borrower (and not to Adtran Networks).

Otherwise, the loans under the Subline are subject to substantially the same terms and conditions under the Amended Credit Agreement (including with respect to the interest rate and maturity date) as the other existing revolving commitments.

borrowings under the Amended Credit Agreement bear interest at a rate tied to the Base Rate (as defined in the Amended Credit Agreement) or SOFR, at the Company’s option, and all E.U.

borrowings bear interest at a rate tied to the Euro Interbank Offered Rate as administered by the European Money Markets Institute (or a comparable or successor administrator approved by the Administrative Agent), in each case plus applicable margins which vary based on the consolidated net leverage ratio of the Company and its subsidiaries as determined pursuant to the terms of the Amended Credit Agreement.

Default interest is 2.00 % per annum in excess of the rate otherwise applicable.

Covenants Under the Credit Agreement

The financial covenants under the Credit Agreement, as amended, include the following (capitalized terms used in this subsection and not otherwise defined herein have the meanings assigned to them in the Credit Agreement or its amendments, as applicable):

• As of the last day of any fiscal quarter, commencing with the fiscal quarter ended December 31, 2023, the Consolidated Total Net Leverage Ratio may not exceed 5.00 x.

• As of the last day of any fiscal quarter, commencing with the fiscal quarter ended December 31, 2023, the Consolidated Senior Secured Net Leverage Ratio may not exceed:

• In the fiscal quarter in which a Springing Covenant Event occurs and the three consecutive quarterly test periods thereafter, (“Springing Covenant Period”), the following covenant levels:

• First fiscal quarter ending after a Springing Covenant Event:

• Second fiscal quarter ending after a Springing Covenant Event:

• Third and fourth fiscal quarters ending after a Springing Covenant Event:

• If the Company or any of its subsidiaries incurs certain unsecured indebtedness in excess of $ 50.0 million in connection with a transaction that is a Springing Covenant Event or during a Springing Covenant Period, the Consolidated Senor Secured Net Leverage Ratio covenant will step down to 3.50 x at the time of such incurrence.

• If a Springing Covenant Period is not in effect, the Consolidated Senior Secured Net Leverage Ratio may not exceed 3.25 x.

• As of the last day of any fiscal quarter, commencing with the fiscal quarter ended December 31, 2023, the Consolidated Fixed Charge Coverage Ratio may not be less than 1.25 x.

• During a Springing Covenant Period, as of the last day of any fiscal quarter (i) cash and cash equivalents of the Credit Parties must be at least $ 50.0 million and (ii) cash and cash equivalents of the Company and its subsidiaries must be at least $ 70.0 million.

All obligations under the Credit Agreement (including under the Subline) are guaranteed by ADTRAN, Inc., and certain subsidiaries of ADTRAN, Inc.

(“Full Facility Guarantors”).

To secure such guarantees, ADTRAN, Inc.

and the Full Facility Guarantors have granted security interests in favor of the Administrative Agent over substantially all of their tangible and intangible assets, and ADTRAN, Inc.

has granted mortgages in favor of the Administrative Agent over certain owned real estate assets.

Certain of Adtran Networks' subsidiaries ("Subline Guarantors") have provided a guarantee solely of the obligations in respect of the Subline.

Furthermore, to secure such guarantees, the Subline Guarantors have granted security interests in favor of the Administrative Agent over substantially all of their tangible and intangible assets.

Adtran Networks has also granted security interests in favor of the Administrative Agent over substantially all of its tangible and intangible assets, to secure solely its obligations under the Subline.

As of March 31, 2025, the weighted average interest rate on our revolving credit agreements was 8.55 %.

The Company made certain representations and warranties to the lenders in the Amended Credit Agreement that are customary for credit arrangements of this type.

The Company also agreed to maintain a Consolidated Total Net Leverage Ratio of 5.00 x, a Consolidated Senior Secured Net Leverage Ratio of 3.25 x ( 4.0 x to 3.5 x during a “Springing Covenant Period,” as defined below) and a Consolidated Fixed Charge Coverage Ratio of 1.25 x (as such ratios are defined in the Amended Credit Agreement).

A “Springing Covenant Event” occurs when at least sixty percent ( 60.0 %) of the outstanding shares of Adtran Networks that were not owned by the Company and its subsidiaries as of August 9, 2023 have been tendered and purchased by the Company.

During a Springing Covenant Period, the Company’s leverage ratios are increased.

In addition, the cash and cash equivalents of the credit parties must be at least $ 50.0 million and the cash and cash equivalents of the Company and its subsidiaries must be at least $ 70.0 million.

As of March 31, 2025, the Company was in compliance with all covenants.

The Amended Credit Agreement also contains customary events of default, such as misrepresentation and a default in the performance or observance of any covenant (subject to customary cure periods and materiality thresholds).

Upon the occurrence and during the continuance of an event of default, the Administrative Agent is entitled to take various actions, including the acceleration of all amounts due under the Amended Credit Agreement.

All obligations under the Amended Credit Agreement (including under the Subline) are guaranteed by the U.S.

Borrower and certain subsidiaries of the U.S.

Borrower (“Full Facility Guarantors”).

To secure such guarantees, the U.S.

Borrower and the Full Facility Guarantors have granted security interests in favor of the Administrative Agent over substantially all of their tangible and intangible assets, and the U.S.

Borrower has granted mortgages in favor of the Administrative Agent over certain owned real estate assets.

Certain of Adtran Networks' subsidiaries (the “Subline Guarantors”) have also provided a guarantee solely of the obligations in respect of the Subline.

Furthermore, to secure such guarantees, Adtran Networks and the Subline Guarantors have granted security interests in favor of the Administrative Agent over substantially all of their tangible and intangible assets.

Upon repayment in full and termination of the Subline, the guarantees by the Subline Guarantors and the liens granted by Adtran Networks and the Subline Guarantors to secure obligations under the Subline will be released.

The Credit Agreement, as amended, contains customary affirmative and negative covenants, including incurrence covenants and certain other limitations on the ability of the Company and the Company’s subsidiaries to incur additional debt, guarantee other obligations, grant liens on assets, make investments, dispose of assets, make restricted payments, engage in mergers or consolidations, engage in transactions with affiliates, modify its organizational documents, and enter into certain restrictive agreements.

The negative covenants are subject to various exceptions and carveouts.

It also contains customary events of default, such as misrepresentation and a default in the performance or observance of any covenant (subject to customary cure periods and materiality thresholds).

EMPLOYEE BENEFIT PLANS

1 unchanged sentence

We maintain a defined benefit pension plan covering employees in certain foreign countries.

The Company's net non-current pension liability for all defined benefit pension plans totaled $ 12.1 million and $ 12.5 million as of September 30, 2024, and December 31, 2023, respectively, and the net current pension liability for all defined benefit pension plans totaled $ 0.1 million as of September 30, 2024, and December 31, 2023, which is included in accounts payable on the Condensed Consolidated Balance Sheets.

The net amounts recognized in the Condensed Consolidated Balance Sheets for the unfunded pension liability as of March 31, 2025 and December 31, 2024 were as follows:

(In thousands)

Balance Sheet Location

March 31, 2025

December 31, 2024

Non-current pension asset

Other non-current assets

Current pension liability

Accrued wages and benefits

Non-current pension liability

The Company's defined benefit pension liability represents the projected benefit obligation, which is the actuarial present value of the vested benefits to which the employee is currently entitled based on the employee's expected date of retirement.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

Net periodic pension cost

The components of net periodic pension cost, other than the service cost component, are included in other (expense) income, net in the Condensed Consolidated Statements of Loss.

The components of net periodic pension cost, other than the service cost component, are included in other income, net in the Condensed Consolidated Statements of Loss.

Service cost is included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss.

The Company made contributions to the defined benefit pension plans totaling $ 3.0 million and $ 2.8 million during the nine months ended September 30, 2024 and 2023, respectively.

The Company made contributions to the defined benefit pension plans totaling $ 1.1 million and $ 1.2 million during the three months ended March 31, 2025 and 2024, respectively.

Contributions to the defined benefit pension plans for the remainder of 2025 will be limited to benefit payments to retirees which are paid out of the operating cash flows of the Company and are expected to be approximately $ 2.1 million.

1 unchanged sentence

The following tables present the changes in accumulated other comprehensive income, net of tax, by component:

Three Months Ended September 30, 2024

Three Months Ended March 31, 2025

(In thousands)

1 unchanged sentence

ASU 2018-02 Adoption

Balance as of June 30, 2024

Other comprehensive (loss) income before

reclassifications

Amounts reclassified from accumulated other

comprehensive income

Net current period other comprehensive gain

Balance as of September 30, 2024

Three Months Ended September 30, 2023

(In thousands)

ASU 2018-02 Adoption

Balance as of June 30, 2023

Other comprehensive income (loss) before

reclassifications

Amounts reclassified from accumulated other

comprehensive income

Net current period other comprehensive income (loss)

Comprehensive income attributable to non-controlling interest, net of tax

Balance as of September 30, 2023

Nine Months Ended September 30, 2024

(In thousands)

ASU 2018-02 Adoption

Balance as of December 31, 2024

Other comprehensive loss before

Other comprehensive income before

reclassifications

Amounts reclassified from accumulated other

comprehensive income

Net current period other comprehensive income (loss)

Balance as of September 30, 2024

Nine Months Ended September 30, 2023

comprehensive (loss) income

Net current period other comprehensive income

Balance as of March 31, 2025

Three Months Ended March 31, 2024

(In thousands)

1 unchanged sentence

Balance as of December 31, 2023

Other comprehensive income (loss) before

Other comprehensive (loss) income before

reclassifications

Amounts reclassified from accumulated other

comprehensive income

Net current period other comprehensive income (loss)

Comprehensive income attributable to non-controlling

interest, net of tax

Balance as of September 30, 2023

comprehensive income (loss)

Net current period other comprehensive loss

Balance as of March 31, 2024 (restated)

The following tables present the details of reclassifications out of accumulated other comprehensive income:

Three Months Ended September 30, 2024

Three Months Ended March 31, 2025

(In thousands)

5 unchanged sentences

Net realized loss on sales of securities

Net investment gain (loss)

Defined benefit plan adjustments – actuarial loss

Net investment (loss) gain

Defined benefit plan adjustments – actuarial gain

Total reclassifications for the period, before tax

Total reclassifications for the period, net of tax

(1) A part of the computation of net periodic pension cost, which is included in other (expense) income, net in the Condensed Consolidated Statements of Loss.

Three Months Ended September 30, 2023

(1) A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss.

Three Months Ended March 31, 2024

(In thousands)

5 unchanged sentences

Net realized gain on sales of securities

Net investment gain (loss)

Defined benefit plan adjustments – actuarial gain

Total reclassifications for the period, before tax

Total reclassifications for the period, net of tax

(1) A part of the computation of net periodic pension cost, which is included in other (expense) income, net in the Condensed Consolidated Statements of Loss.

Nine Months Ended September 30, 2024

(In thousands)

Comprehensive

Affected Line Item in the

Statement Where Net Loss

Unrealized gain (loss) on available-for-sale securities:

Net realized loss on sales of securities

Net investment gain (loss)

Net investment (loss) gain

Defined benefit plan adjustments – actuarial loss

1 unchanged sentence

Total reclassifications for the period, net of tax

(1) A part of the computation of net periodic pension cost, which is included in other (expense) income, net in the Condensed Consolidated Statements of Loss.

Nine Months Ended September 30, 2023

(In thousands)

Comprehensive

Affected Line Item in the

Statement Where Net Loss

Unrealized gain (loss) on available-for-sale securities:

Net realized gain on sales of securities

Net investment gain (loss)

Defined benefit plan adjustments – actuarial gain

Total reclassifications for the period, before tax

Total reclassifications for the period, net of tax

(1) A part of the computation of net periodic pension cost, which is included in other (expense) income, net in the Condensed Consolidated Statements of Loss.

The following table presents the tax effects related to the change in each component of other comprehensive (loss) income:

(1) A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss.

The following table presents the tax effects related to the change in each component of other comprehensive income (loss):

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(In thousands)

Unrealized (loss) gain on available-for-sale

Reclassification adjustment for amounts related to available-for-sale investments included in net gain (loss)

Unrealized gain (loss) on available-for-sale

Reclassification adjustment for amounts related to available-for-sale investments included in net (loss) gain

Reclassification adjustment for amounts related to defined benefit plan adjustments included in net gain (loss)

1 unchanged sentence

Total Other Comprehensive Income (Loss)

Nine Months Ended

September 30, 2024

September 30, 2023

(In thousands)

Unrealized (loss) gain on available-for-sale

Reclassification adjustment for amounts related to available-for-sale investments included in net gain (loss)

Reclassification adjustment for amounts related to defined benefit plan adjustments included in net gain (loss)

Foreign currency translation adjustments

Total Other Comprehensive Loss

REDEEMABLE NON-CONTROLLING INTEREST

As of September 30, 2024 , the non-controlling Adtran Networks stockholders’ equity ownership percentage in Adtran Networks was approximately 33.0 %.

The following table summarizes the redeemable non-controlling interest activity for the nine months ended September 30, 2024 and for the year ended December 31, 2023:

Nine Months Ended

As of March 31, 2025 and December 31, 2024, the non-controlling Adtran Networks stockholders’ equity ownership percentage in Adtran Networks was approximately 33.0 %.

The following table summarizes the redeemable non-controlling interest activity for the three months ended March 31, 2025 and for the year ended December 31, 2024:

Three Months Ended

For the Year Ended

(In thousands)

September 30, 2024

March 31, 2025

December 31, 2024

Balance at beginning of period

Reclassification of non-controlling interests

Redemption of redeemable non-controlling interest

1 unchanged sentence

Annual recurring compensation earned

Adtran Networks stock option exercises

Balance at end of period

(1) Following the third quarter of 2024, the Company identified errors primarily impacting the carrying values of the redeemable non-controlling interest, retained deficit, the net income attributable to the non-controlling interest and the net loss attributable to the Company and, as a consequence, of the loss per common share attributable to the Company.

See Note 1 for additional information.

(1) During the third quarter of 2024, the Company identified errors primarily impacting the carrying values of the redeemable non-controlling interest, retained deficit, the net income attributable to the non-controlling interest and the net loss attributable to the Company and, as a consequence, of the loss per common share attributable to the Company.

Annual recurring compensation payable on untendered outstanding shares under the DPLTA must be recognized as it is accrued.

For the three and nine months ended September 30, 2024, we have accrued $ 2.4 million and $ 7.4 million, respectively, representing the portion of the annual recurring cash compensation to the non-controlling shareholders during such periods, which will be paid after the ordinary general shareholders' meeting of Adtran Networks in 2025.

For the year ended December 31, 2023, w e paid $ 10.1 mi llion representing the portion of the annual recurring cash compensation to the non-controlling shareholders during such period.

See Note 1 for additional information on RNCI and the annual dividend .

For the three months ended March 31, 2025, we accrued $ 2.4 million and for the year ended December 31, 2024, the Company accrued $ 9.8 million, representing the portion of the annual recurring cash compensation to the non-controlling shareholders du ring such periods.

The 2024 Annual Recurring Compensation accrual will be paid after the ordinary general shareholders' meeting of Adtran Networks in 2025.

The 2025 Annual Recurring Compensation accrual will be paid after the ordinary general shareholders' meeting of Adtran Networks in 2026.

LOSS PER SHARE

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

2 unchanged sentences

Net loss attributable to ADTRAN Holdings, Inc.

common shareholders

common stockholders

Weighted average number of shares – basic

5 unchanged sentences

Loss per share attributable to ADTRAN Holdings, Inc.

For the three months ended September 30, 2024 and 2023 , 0.9 million and 0.5 million shares, respectively, and for the nine months ended September 30, 2024 and 2023 , 1.1 million and 0.4 million, respectively, of unvested PSUs, RSUs and restricted stock were excluded from the calculation of diluted earnings per share due to their anti-dilutive effect.

For the three months ended September 30, 2024 and 2023 , 4.0 million and 2.6 million stock options, respectively, and for the nine months ended September 30, 2024 and 2023 , 4.2 million and 1.4 million stock options, respectively, were outstanding but were not included in the computation of diluted earnings per share.

For the three months ended March 31, 2025 and 2024 , 0.2 million and 1.1 million shares, respectively, of unvested PSUs, RSUs and restricted stock were excluded from the calculation of diluted earnings per share due to their anti-dilutive effect.

For the three months ended March 31, 2025 and 2024 , 0.7 million and 3.5 million stock options, respectively, were outstanding but were not included in the computation of diluted earnings per share.

Thes e stock options were excluded because their exercise prices were greater than the average market price of the common shares during the applicable period, making them anti-dilutive under the treasury stock method.

SEGMENT INFORMATION

The chief operating decision maker regularly reviews the Company’s financial performance based on two reportable segments:

The chief operating decision maker is the Company's Chief Executive Officer who regularly reviews the Company’s financial performance based on two reportable segments:

(1) Network Solutions and (2) Services & Support.

8 unchanged sentences

The performance of these segments is evaluated based on revenue, gross profit and gross margin;

therefore, selling, general and administrative expenses, research and development expenses, interest and dividend income, interest expense, net investment gain, other income (expense), net and income tax benefit are reported on a consolidated basis only.

therefore, selling, general and administrative expenses, research and development expenses, interest and dividend income, interest expense, net investment (loss) gain, other income, net and income tax are reported on a consolidated basis only.

There is no inter-segment revenue.

2 unchanged sentences

Three Months Ended

September 30, 2024

September 30, 2023

(In thousands)

Network Solutions

Services & Support

Nine Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(In thousands)

Cost Of Revenue

Cost of Revenue

Network Solutions

Services & Support

For each of the three months ended September 30, 2024 and 2023 , $ 2.9 million and $ 1.5 million, respectively, of depreciation expense was included in gross profit for our Network Solutions segment.

For the nine months ended September 30, 2024 and 2023 , $ 7.4 million and $ 4.5 million, respectively, of depreciation expense was included in gross profit for our Network Solutions segment.

For the three months ended September 30, 2024 and 2023 , $ 0.1 million and $ 2 thousand, respectively, of depreciation expense was included in gross profit for our Services & Support segment.

For the nine months ended September 30, 2024 and 2023 , $ 0.2 million and $ 7 thousand, respectively, of depreciation expense was included in gross profit for our Services & Support segment.

For the three months ended March 31, 2025 and 2024 , $ 1.3 million and $ 1.6 million, respectively, of depreciation expense was included in gross profit for our Network Solutions segment.

For the three months ended March 31, 2025 and 2024 , $ 19 thousand and $ 8 thousand, respectively, of depreciation expense was included in gross profit for our Services & Support segment.

Revenue by Geographic Area

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

2 unchanged sentences

Other international

LIABILITY FOR WARRANTY RETURNS

The Company's products generally include warranties of 90 days to five years for product defects.

The Company accrues for warranty returns at the time of product shipment based on its historical return rate and estimate of the cost to repair or replace the defective products.

The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers.

The increasing complexity of the Company's products may cause warranty incidences, when they arise, to be more costly.

Estimates regarding future warranty obligations may change due to product failure rates, material usage and other rework costs incurred in correcting a product failure.

In addition, from time to time, specific warranty accruals may be recorded if unforeseen problems arise.

Should the Company's actual experience relative to these factors be worse than its estimates, the Company will record additional warranty expense.

The liability for warranty obligations totaled $ 5.6 million and $ 6.4 million as of September 30, 2024 and December 31, 2023 , respectively, and is included in accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets.

The warranty expense and write-off activity for the three and nine months ended September 30, 2024 and 2023 are summarized as follows:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Balance at beginning of period

Amounts charged to cost and expenses

Foreign currency translation adjustments

Balance at end of period

COMMITMENTS AND CONTINGENCIES

5 unchanged sentences

Although the ultimate disposition of asserted claims cannot be predicted with certainty, it is our belief that the outcome of any such claims, either individually or on a combined basis, will not have a material adverse effect on our consolidated financial position.

DPLTA Exit and Recurring Compensation Costs

DPLTA Appraisal Proceedings

In addition to such Legal Matters, the Company is a party to appraisal proceedings relating to the DPLTA which were originally filed with the Landgericht Meiningen (Meiningen District Court) on February 3, 2023.

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 or (ii) to remain Adtran Networks shareholders and receive recurring cash compensation of € 0.52 per share for each full fiscal year of Adtran Networks.

The appraisal proceedings, which were initiated by certain minority shareholders of Adtran Networks, challenge the adequacy of both forms of compensation.

While the Company believes that the compensation offered in connection with the DPLTA is fair, it notes that German courts often adjudicate increases of the cash compensation to plaintiffs in varying amounts in connection with German appraisal proceedings.

Therefore, the Company cannot rule out that the first instance court or an appellate court may increase the cash compensation owed to the minority Adtran Networks shareholders.

Given the stage of the appraisal proceedings, the Company is currently unable to predict the likely outcome or estimate the potential financial impact, if any, of the appraisal proceedings.

If a ruling were to occur and be upheld upon appeal that required the Company to pay significant additional cash compensation to the Adtran Networks minority shareholders, there exists the possibility of a material adverse effect on our financial position and results of operations for the period in which the ruling occurs or future periods.

DPLTA Exit and Recurring Compensation Costs and the Absorption of Adtran Network's Annual Net Loss

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 (according to the German Civil Code) that was 3.37 % as of September 30, 2024.

Assuming all the minority holders of currently outstanding Adtran Networks shares were to elect the second option, we would be obligated to make aggregate Exit Compensation payments, including guaranteed interest, of approximately € 326.9 million or approximately $ 364.1 million, based on an exchange rate as of September 30, 2024, and reflecting interest accrued through September 30, 2024 , during the pendency of the appraisal proceedings discussed below.

The guaranteed interest rate is 5.0 % plus a variable component (according to the German Civil Code) that was 2.27 % as of March 31, 2025 .

Assuming all the minority holders of currently outstanding Adtran Networks shares were to elect the second option, the Company would be obligated to make aggregate Exit Compensation payments, including guaranteed interest, of approximately € 338.5 million or approximately $ 366.1 million, based on an exchange rate as of March 31, 2025, and reflecting interest accrued through March 31, 2025 , during the pendency of the appraisal proceedings discussed below.

Shareholders electing the first option of Annual Recurring Compensation may later elect the second option.

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 .

The Company does not expect that a trial on the merits of the DPLTA appraisal proceedings will commence until the procedural matter has been resolved.

Accordingly, the Company does not expect a final decision on the DPLTA appraisal proceedings to be rendered and published prior to 2027, and most likely not until 2028 or beyond.

Our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately € 8.9 million (or $ 9.7 million based on the current exchange rate) per year assuming none of the minority Adtran Networks shareholders were to elect Exit Compensation.

The foregoing amounts do n ot reflect any potential increase in payment obligations that we may have depending on the outcome of ongoing appraisal proceedings in Germany.

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.

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).

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.

During the three months ended September 30, 2024 and 2023, we accrued $ 2.4 million and $ 2.6 million, r espectively, in Annual Recurring Compensation.

During the nine months ended September 30, 2024 and 2023, we accrued $ 7.4 million and $ 7.6 million, r espectively, in Annual Recurring Compensation, which was reflected as an increase to retained deficit.

For the three and nine months ended September 30, 2024, approximately 830 thousand shares and 831 thousand shares, respectively, of Adtran Networks stock were tendered to the Company.

For the three and nine months ended September 30, 2023, less than 1 thousand shares and 64 thousand shares, respectively, of Adtran Networks stock were tendered to the Company.

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

During the three months ended March 31, 2025 and 2024, we accrued $ 2.4 million and $ 2.5 million, respectively, in Annual Recurring Compensation, which was reflected as an increase to retained deficit.

In addition, 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 absorb the annual net loss incurred by Adtran Networks.

Performance Bonds

Certain contracts, customers and jurisdictions in which we do business require us to provide various guarantees of performance such as bid bonds, performance bonds and customs bonds.

As of September 30, 2024, and December 31, 2023, we had commitments related to these bonds totaling $ 14.6 million and $ 10.8 million, respectively, which expire at various dates through April 2031 .

As of March 31, 2025 and December 31, 2024, we had commitments related to these bonds totaling $ 15.2 milli on and $ 15.7 million, respectively, which expire at various dates through April 2029 .

In general, we would only be liable for the amount of these guarantees in the event of default under each contract, the probability of which we believe is remote.

3 unchanged sentences

Certain of our inventory purchase obligations with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods.

As of September 30, 2024, purchase obligations totaled $ 261.8 mi llion.

As of March 31, 2025, purchase obligations totale d $ 203.9 mi llion.

RESTRUCTURING

During the fourth quarter of 2022, the Company initiated a restructuring program designed to optimize the assets, business processes, and information technology systems of the Company in relation to the Business Combination with Adtran Networks.

The restructuring program is expected to maximize cost synergies by realizing operation scale, combining sales channels, streamlining corporate and general and administrative functions, including human capital resources and combining sourcing and production costs.

This restructuring program is expected to be completed in late 2024 and includes expenses specifically associated with achieving run-rate synergies, as well as Business Efficiency Program expenses described below.

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 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.

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”).

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.

The closure of the facility is expected to be completed by December 31, 2024.

During the three and nine months ended September 30, 2024 , we recognized $ 5.9 million and $ 40.6 million of costs related to the Business Efficiency Program, respectively.

The costs recognized during the nine months ended September 30, 2024 , included total other renegotiated charges and inventory write-down 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, and are included in cost of revenue in the Condensed Consolidated Statements of Loss.

Since the inception of the Business Efficiency Program, we recognized $ 65.6 million of costs.

We expect costs in the fourth quarter 2024 relating to the

Business Efficiency Program to range between $ 9.6 million and $ 13.8 million.

Management expects these planned costs to include severance costs to be approximately $ 6.2 million in connection with reductions in workforce and site consolidation transaction expenses (primarily brokers fees and Greifswald exit costs) ranging from $ 3.4 million to $ 7.6 million.

The broker fees related to our site consolidation expenses will be netted against proceeds upon the sale of the building(s).

Future cash payments include:

severance costs and outplacement fees that are anticipated to be $ 23.1 million, and payments relating to the site consolidation transaction expenses that are anticipated to be in the range of $ 3.4 million to $ 7.6 million.

We do not anticipate any remaining payments related to the inventory strategy shift.

We may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the Business Efficiency Program, including potential impairment charges related to the discontinuance of additional product lines, regulatory requirements related to personnel measures, and site closures.

However, we are not able to estimate the amount or range of amounts of such potential incremental charges as of the date of this filing.

If required, we will amend this disclosure at such time as management is able in good faith to estimate the amount, or range of amounts, of these charges.

For the three and nine months ended September 30, 2023 , we recognized $ 24.9 million and $ 33.2 million of restructuring costs relating to the Business Combination under the multi-year integration program and synergy realization that are included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statement of Loss, respectively.

This included the write down of inventory of $ 21.0 million due to a restructuring discontinuation of certain product lines within our Network Solutions segment during the three and nine months ended September 30, 2023.

See Note 6, Inventory, for additional information regarding the write down of inventory.

A reconciliation of the beginning and ending restructuring liabilities, which is included in accrued wages and benefits and accounts payable in the Condensed Consolidated Balance Sheets as of September 30, 2024, and December 31, 2023, is as follows:

On November 6, 2023, due to the uncertainty around the then current macroeconomic environment and its impact on customer spending levels, the Company’s management decided to implement a Business Efficiency Program targeting the reduction of ongoing operating expenses and focusing on capital efficiency.

This included certain salary reductions, an early retirement program, a site consolidation plan to include lease impairments and the sale of owned real estate (including the sale of our headquarters in Huntsville), inventory write downs from product discontinuances, and the suspension of the quarterly dividend.

Other than the Company's aim of selling its headquarters, the Business Efficiency Program was completed as of December 31, 2024.

During the three months ended March 31, 2024, we recognized $ 17.1 million of costs related to the Business Efficiency Program.

The costs recognized during the three months ended March 31, 2024, included total other renegotiated charges and inventory write-down of $ 8.8 million as a result of a strategy shift which included discontinuance of certain items in connection with the Business Efficiency Program, of which, $ 4.0 million relates to inventory write-downs and $ 4.8 million relates to other charges, and are included in cost of revenue in the Condensed Consolidated Statements of Loss.

We did no t incur any Business Efficiency Program costs during the three months ended March 31, 2025.

A reconciliation of the beginning and ending restructuring liabilities, which is included in accrued wages and benefits and accounts payable in the Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024, is as follows:

Three Months Ended

Nine Months Ended

(In thousands)

September 30, 2024

Balance at beginning of period

March 31, 2025

Balance as of December 31, 2024

Amounts charged to cost and expense

Balance as of September 30, 2024

For the Year Ended

Balance as of March 31, 2025

The Year Ended

(In thousands)

3 unchanged sentences

Balance as of December 31, 2024

Restructuring expenses included in the Condensed Consolidated Statements of Loss are for the three and nine months ended September 30, 2024 and 2023:

Restructuring expenses included in the Condensed Consolidated Statements of Loss are for the three months ended March 31, 2025 and 2024:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Network Solutions - Cost of revenue

Network Solutions - other (credits), charges

and inventory write-down

Network Solutions - charges and inventory write-down

Services & Support - Cost of revenue

3 unchanged sentences

Total restructuring expenses

The following table represents the components of restructuring expenses by geographic area for the three and nine months ended September 30, 2024 and 2023:

The following table represents the components of restructuring expenses by geographic area for the three months ended March 31, 2025 and 2024:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

2 unchanged sentences

Total restructuring expenses

RESTATEMENT OF QUARTERLY FINANCIAL INFORMATION

As previously disclosed in our Annual Report on Form 10-K/A and as discussed in Note 1 “Summary of Significant Accounting Policies”, the following tables reflect the impact of errors and other previously identified immaterial errors to the specific line items presented in our previously reported (a) Condensed Consolidated Balance Sheet;

(b) Condensed Consolidated Statement of Loss and Condensed Consolidated Statement of Comprehensive Loss;

(d) Condensed Consolidated Statement of Cash Flows for the quarterly period ended March 31, 2024.

As of March 31, 2024

Adj Reference

Current Assets

Cash and cash equivalents

Accounts receivable, less allowance for credit losses of $ 367 as of March 31, 2024

Other receivables

Income tax receivable

Inventory, net

Prepaid expenses and other current assets

Total Current Assets

Property, plant and equipment, net

Deferred tax assets

Intangibles, net

Other non-current assets

Long-term investments

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY

Current Liabilities

Accounts payable

Unearned revenue

Accrued expenses and other liabilities

Accrued wages and benefits

Income tax payable, net

Total Current Liabilities

Non-current revolving credit agreement outstanding

Deferred tax liabilities

Non-current unearned revenue

Non-current pension liability

Deferred compensation liability

Non-current lease obligations

Other non-current liabilities

Total Liabilities

Commitments and contingencies (see Note 16)

Redeemable Non-Controlling Interest

Common stock, par value $ 0.01 per share;

200,000 shares authorized;

79,116 shares issued and 78,850 outstanding as of March 31, 2024

Additional paid-in capital

Accumulated other comprehensive income

Retained deficit

Treasury stock at cost:

265 as of March 31, 2024

Total Liabilities, Redeemable Non-Controlling Interest and Equity

Three Months Ended March 31, 2024

Adj Reference

Network Solutions

Services & Support

Total Revenue

Cost of Revenue

Network Solutions

Network Solutions - inventory write-down and other charges

Services & Support

Total Cost of Revenue

Selling, general and administrative expenses

Research and development expenses

Goodwill impairment

Operating Loss

Interest and dividend income

Interest expense

Net investment gain

Other income, net

Loss Before Income Taxes

Income tax benefit

Net Income attributable to non-controlling interest (1)

Net Loss attributable to ADTRAN Holdings, Inc.

Weighted average shares outstanding – basic

Weighted average shares outstanding – diluted

Loss per common share attributable to ADTRAN Holdings, Inc.

Other Comprehensive Loss, net of tax

Defined benefit plan adjustments

Foreign currency translation loss

Other Comprehensive Loss, net of tax

Comprehensive Loss, net of tax

Comprehensive Income attributable to non-controlling interest, net of tax

Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax

Retained Deficit

Accumulated Other Comprehensive Income

Additional paid-in capital

(In thousands)

Balance as of December 31, 2023

Annual recurring compensation earned

Other comprehensive loss, net of tax

Deferred compensation adjustments, net of tax

ADTRAN RSUs and restricted stock vested

ADTRAN stock options exercised

ADTRAN stock-based compensation expense

Redemption of redeemable non-controlling interest

Foreign currency remeasurement of redeemable non-controlling interest

Adtran Networks stock-based compensation expense

Balance as of March 31, 2024

Three Months Ended March 31, 2024

Adj Reference

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

Goodwill Impairment

Amortization of debt issuance cost

Gain on investments, net

Net loss on disposal of property, plant and equipment

Stock-based compensation expense

Deferred income taxes

Inventory write down

Inventory reserves

Changes in operating assets and liabilities:

Accounts receivable, net

Other receivables

Income taxes receivable, net

Prepaid expenses, other current assets and other assets

Accounts payable

Accrued expenses and other liabilities

Income taxes payable, net

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property, plant and equipment

Purchases of intangibles - developed technology

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

Purchases of available-for-sale investments

Net cash used in investing activities

Cash flows from financing activities:

Tax withholdings related to stock-based compensation settlements

Proceeds from stock option exercises

Proceeds from receivables purchase agreement

Repayments on receivables purchase agreement

Payment for redemption of redeemable non-controlling interest

Payment of debt issuance cost

Net cash used in financing activities

Net increase in cash and cash equivalents

Effect of exchange rate changes

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental disclosure of cash financing activities:

Cash paid for interest

Cash paid for income taxes

Cash used in operating activities related to operating leases

Supplemental disclosure of non-cash investing activities:

Right-of-use assets obtained in exchange for lease obligations

Purchases of property, plant and equipment included in accounts payable

SUBSEQUENT EVENTS

Exit Compensation Payments

Fifth Amendment to Wells Fargo Credit Agreement

On May 6, 2025, the Company, ADTRAN, Inc., and Adtran Networks entered into a fifth amendment to the Credit Agreement ("Amendment No.

Amendment No.

5, together with a substantially concurrent prepayment by the German Borrower of outstanding revolving loans under the German Borrower Sublimit (as defined in the Amended Credit Agreement, which term includes Amendment No.

5 for the purposes of this note) in the amount of $ 24.0 million, among other things, resulted in (i) a permanent partial reduction in the total commitments under the Amended Credit Agreement from $ 374.0 million to $ 350.0 million, (ii) a reduction of the German Borrower Sublimit from $ 74.0 million to $ 50.0 million, and (iii) a reduction of the German Commitment Reduction Threshold (as defined in the Amended Credit Agreement) to $ 25.0 million.

The lenders also waived certain events of default related to among others, inaccuracies in the financial statements that were previously delivered to the lenders by the Company with respect to the fiscal quarters ended June 30, 2024 and September 30, 2024, and breaches of the Consolidated Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) financial covenant for the fiscal quarters ended June 30, 2024 and September 30, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements