What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-04 compared with 2026-05-05 · 219 added, 236 removed, 274 unchanged (62% of the section changed)

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Adtran Networks is a global provider of network solutions for data, storage, voice and video services.

We believe that the combined technology portfolio can best address current and future customer needs for high-speed connectivity from the network core to the end consumer, especially upon the convergence of solutions at the network edge.

We believe that the combined technology portfolio can best address current and future customer needs for high-speed connectivity from the network core to the end customer, especially upon the convergence of solutions at the network edge.

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

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

The guaranteed interest rate is 5.0% plus a variable component that was 1.27% as of March 31, 2026.

The guaranteed interest rate is 5.0% plus a variable component that was 1.27% as of June 30, 2026.

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 2025 fiscal year, Adtran Networks’ ordinary general shareholder meeting is scheduled for the second quarter of 2026, and the Annual Recurring Compensation will be due on the third banking day following the meeting.

With respect to the 2025 fiscal year, Adtran Networks’ ordinary general shareholders’ meeting occurred on June 15, 2026 and, therefore, the Annual Recurring Compensation was paid after the general shareholders’ meeting in the amount of $8.9 million.

The adequacy of both forms of compensation has been challenged by minority shareholders of Adtran Networks via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (including interest thereon) than agreed upon in the DPLTA.

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Following the court's decision on a procedural matter in the DPLTA appraisal proceedings on July 14, 2025, the trial on the merits of the DPLTA has recommenced.

It is expected to take a minimum of 12 months for a ruling of the court on the merits and such ruling will most likely 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.

For the three months ended March 31, 2026, approximately 0.2 million shares of Adtran Networks stock were tendered to the Company and Exit Compensation of €3.6 million or approximately $4.1 million are to be settled in cash in April 2026.

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

In summary, the Company believes that its cash and cash equivalents, working capital management initiatives and availability to access cash under the Wells Fargo credit facility or other future sources of capital will be adequate to meet our business operating requirements, our capital expenditures and our expected obligations under both the Notes and the DPLTA, including anticipated levels of Exit Compensation, as well as 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 the consolidated financial statements included in Part I, Item 1 of this Q.

See Note 10, Credit Agreements, for additional information regarding the terms of the Amendments of the Credit Agreement.

We currently hold 37,047,086 no-par value bearer shares of Adtran Networks, representing 71.2% of Adtran Networks outstanding shares as of March 31, 2026.

Following the effective date of the DPLTA on January 16, 2023, certain Adtran Networks shareholders filed lawsuits against the Company in the Regional Court Meiningen, Germany challenging the Exit Compensation offered under the DPLTA.

The Regional Court Meiningen has not yet ruled on the shareholders' claims.

After the Regional Court Meiningen issues an opinion, an appeal is likely to follow, and thus the Company does not anticipate a final decision on the shareholders' claims until late 2027 or 2028.

For the three and six months ended June 30, 2026, approximately 0.4 million shares and 0.6 million shares, respectively, of Adtran Networks stock were tendered to the Company.

This resulted in total Exit Compensation payments of approximately €11.7 million, or $13.8 million based on the applicable exchange rates at the time of the transactions, being paid to Adtran Networks shareholders.

For the three and six months ended June 30, 2025, approximately 0.9 million shares, of Adtran Networks stock were tendered to the Company.

This resulted in total Exit Compensation payments of approximately €16.9 million, or $19.4 million based on the applicable exchange rates at the time of the transactions, being paid to Adtran Networks shareholders.

In summary, the Company believes that its cash and cash equivalents, working capital management and availability to access cash under its credit facility or other future sources of capital will be adequate to meet its business operating requirements, its capital expenditures and its expected obligations under both the Notes and the DPLTA, including the anticipated levels of Exit Compensation, as well as to support the Company's ability to continue to comply with its debt covenants under its credit facility for at least the next twelve months, from the issuance of the consolidated financial statements included in Part I, Item 1 of this 10-Q.

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

As of June 30, 2026 we hold 37,447,983 no-par value bearer shares of Adtran Networks, representing 71.9% of Adtran Networks outstanding shares as of June 30, 2026.

The foregoing description of the DPLTA does not purport to be complete and is qualified in its entirety by reference to the DPLTA, a non-binding English translation of which is incorporated by reference to Exhibit 10.14 included in our 2025 Form 10-K.

FINANCIAL PERFORMANCE AND TRENDS

We ended the first quarter of 2026 with a year-over-year revenue increase of 15.5% as compared to the three months ended March 31, 2025, driven by increased volume of sales activity and continued strength of our core markets, due to broadband expansion brought about by higher service provider spending, continued vendor consolidation due to a shift away from high-risk vendors.

During the first quarter of 2026, we had one customer with revenues greater than 10.0%, which was an international Service Provider customer and our five largest customers comprised 28.7% of our revenue.

Our year-over-year domestic revenue increased by 41.6% due to continued customer spending and broadband expansion.

Internationally, our year-over-year revenue decreased by 3.2%, primarily driven by the timing of sales with an international Service Provider customer.

Our Access & Aggregation, Subscriber Solutions and Optical Networking revenue categories all experienced increased volume of sales activity due to growth across most product lines, and the continued expansion of our customer base.

We ended the second quarter of 2026 with a year-over-year revenue increase of 6.1% as compared to the three months ended June 30, 2025, driven by increased volume of sales activity and continued strength of our core markets, due to broadband expansion brought about by higher service provider spending and a continued vendor consolidation due to a shift away from high-risk vendors.

During the second quarter of 2026, we had no customers with revenues greater than 10.0% and our five largest customers comprised 28.8% of our revenue.

Our year-over-year U.S.

revenue increased by 11.7% due to continued customer spending and broadband expansion.

Internationally, our year-over-year revenue increased by 1.4%, primarily due to broad-based strength across Europe, partially offset by a decrease in revenues due to a project delay from a single customer.

Our operating results improved due to continuing strong demand, improving margins and disciplined approach to controlling operational expenses.

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During 2025, the U.S.

introduced trade policy actions that have increased import tariffs across a wide range of countries at various rates, with certain exemptions.

introduced various trade policy orders that have increased import tariffs across a wide range of countries at various rates, with certain exemptions.

On February 20, 2026, the U.S.

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The ultimate availability, timing, and amount of any potential refunds of such tariffs remain highly uncertain and are subject to further legal, regulatory, and administrative developments.

See ‘Tariff Refund” below for further discussion of the tariff refunds.

See ‘Tariff Refund” below for further discussion of this topic.

Following the Supreme Court’s decision, the U.S.

presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs (including tariffs on semiconductors, which are expected to increase in June 2027).

On April 2, 2026, President Trump further amended the copper, steel and aluminum tariffs issued under Section 232 of the Trade Expansion Act (TEA).

The amended tariffs include a 50% tariff on raw copper, steel and aluminum, a flat 25% tariff on derivative products made with greater than 15% of copper, steel or aluminum, and a 15% tariff until 2027 on certain metal-intensive industrial equipment and electrical grid equipment.

Derivative products with less than 15% of copper, steel or aluminum will no longer be subject to tariffs and if derivative products are made with U.S.

copper, steel or aluminum, the tariff is lowered to a 10% tariff.

The new tariff regime for copper, steel and aluminum became effective on April 6, 2026.

presidential administration invoked Section 122 of the Trade Act of 1974 to impose new tariffs of 10% on imports from all countries, in addition to any existing non-IEEPA tariffs (including tariffs on semiconductors, which are expected to increase in June 2027), and also amended tariffs on imports of copper, steel and aluminum previously imposed under Section 232 of the Trade Expansion Act of 1962, effective April 6, 2026, to apply differentiated tariff rates based on metal content and the use of U.S.-origin metal inputs.

By its terms, the Section 122 tariff expired on July 24, 2026.

On July 23, 2026, the Office of the U.S.

Trade Representative ("USTR") announced a final action under Section 301 of the Trade Act of 1974 imposing additional ad valorem tariffs of 10% or 12.5% on most goods imported from approximately 60 foreign trading partners, which together account for nearly all U.S.

import trade.

Under the final action, trading partners that have adopted, or have committed to adopt and effectively enforce, a qualifying forced labor import prohibition are subject to the lower 10% tariff rate, while trading partners that have not adopted such a prohibition are subject to the 12.5% rate.

Certain categories of goods are excluded from the new tariffs, including articles already subject to duties under Section 232 of the Trade Expansion Act of 1962, and certain other products identified by USTR as warranting exemption.

Furthermore, recent U.S.

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

To help mitigate this, we have taken steps to diversify our supply chain, manufacturing locations and relationships with suppliers to give us added flexibility.

For example, beginning in the first quarter of 2026 our suppliers became able to ship products directly to a free trade zone which opened at our Huntsville, Alabama facility.

To help mitigate this, the Company has taken steps to diversify its supply chain, manufacturing locations and relationships with suppliers to provide added flexibility.

See “Changes in trade policy in the U.S.

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See Note 1 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition, which is incorporated herein by reference.

RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2026, COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2025

RESULTS OF OPERATIONS – THREE AND SIX MONTHS ENDED JUNE 30, 2026, COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 2025

The following table presents selected financial information derived from our Condensed Consolidated Statements of Loss expressed as a percentage of revenue for the periods indicated.

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Three Months Ended

Six Months Ended

Network Solutions

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Research and development expenses

Operating Income (Loss)

Operating Loss

Interest and dividend income

Interest expense

Net investment loss

Other income, net

Income (Loss) Before Income Taxes

Income tax (expense) benefit

Net Income (Loss)

Net investment gain

Other income (expense), net

Loss Before Income Taxes

Income tax expense

Net Income attributable to non-controlling interest

Net Loss attributable to ADTRAN Holdings, Inc.

Our revenue increased 15.5% from $247.7 million for the three months ended March 31, 2025, to $286.1 million for the three months ended March 31, 2026, which was driven by increased volume of sales activity and continued strength of our core markets, due to broadband expansion brought about by higher service provider spending and continued vendor consolidation due to a shift away from high-risk vendors.

The increase in revenue by category for the three months ended March 31, 2026, was primarily attributable to a $19.1 million increase in Optical Networking Solutions products a $17.8 million increase in Subscriber Solutions products, and a $1.4 million increase in Access & Aggregation revenue.

Our revenue increased 6.1% from $265.1 million for the three months ended June 30, 2025, to $281.1 million for the three months ended June 30, 2026, and increased 10.6% from $512.8 million for the six months ended June 30, 2025, to $567.2 million for the six months ended June 30, 2026.

The increase in revenue for the three and six months ended June 30, 2026, was driven by increased volume of sales activity and continued strength of our core markets, due to broadband expansion brought about by higher service provider spending and continued vendor consolidation due to a shift away from high-risk vendors.

The increase in revenue by category for the three months ended June 30, 2026, was primarily attributable to a $19.6 million increase in Optical Networking Solutions products, a $0.8 million increase in Subscriber Solutions products, partially offset by a $4.3 million decrease in Access & Aggregation revenue.

The increase in revenue by category for the six months ended June 30, 2026, was primarily attributable to a $38.7 million increase in Optical Networking Solutions products, a $18.6 million increase in Subscriber Solutions products, partially offset by a $2.9 million decrease in Access & Aggregation revenue.

The increase in Optical Networking Solutions products was primarily driven by high-risk vendor displacement across Europe and was helped by increased sales to enterprise, government and internet content provider customers.

The increase in Subscriber Solutions products was primarily driven by continued investment in fiber-to-the-home, multi-Gig Wi-Fi 7, and Carrier Ethernet applications.

The increase in Access & Aggregation revenue was driven by broad-based strength across the U.S.

Network Solutions segment revenue increased 17.7% from $202.2 million for the three months ended March 31, 2025, to $237.9 million for the three months ended March 31, 2026.

The increase in Network Solutions revenue for the three months ended March 31, 2026, was due to an increase of $18.4 million in volume of sales activity in Subscriber Solutions products, an increase of $16.3 million in volume of sales activity in Optical Networking Solutions products and an increase of $0.9 million in volume of sales activity in Access & Aggregation products.

Services & Support segment revenue increased 5.8% from $45.5 million for the three months ended March 31, 2025, to $48.1 million for the three months ended March 31, 2026.

The increase in revenue for the three months ended March 31, 2026, was primarily attributable a $2.8 million increase in Optical Networking services a $0.4 million increase in Access & Aggregation, partially offset by a $0.6 million decrease for Subscriber Solutions.

revenue increased by 41.6% from $103.2 million for the three months ended March 31, 2025, to $146.2 million for the three months ended March 31, 2026.

The decrease in Access & Aggregation revenue was primarily driven by a project delay from a single customer, and was partially offset by increases in revenue driven by broad-based strength across the U.S.

Network Solutions Segment Revenue

Network Solutions segment revenue increased 6.1% from $219.5 million for the three months ended June 30, 2025, to $232.9 million for the three months ended June 30, 2026, and increased 11.6% from $421.7 million for the six months ended June 30, 2025, to $470.8 million for the six months ended June 30, 2026.

The increase in Network Solutions revenue by category for the three months ended June 30, 2026, was due to an increase in volume of sales activity of $20.6 million in Optical Networking products, partially offset by a $5.2 million decrease in Access & Aggregation products and a $2.0 million decrease in Subscriber Solutions products.

The increase in Network Solutions revenue by category for the six months ended June 30, 2026, was due to an increase in volume of sales activity of $36.9 million in Optical Networking products and $16.5 million in Subscriber Solutions products, partially offset by a $4.3 million decrease in Access & Aggregation products.

Services & Support Segment Revenue

Services & Support segment revenue increased 5.9% from $45.6 million for the three months ended June 30, 2025, to $48.2 million for the three months ended June 30, 2026, and increased 5.8% from $91.1 million for the six months ended June 30, 2025, to $96.4 million for the six months ended June 30, 2026.

The increase in Services & Support revenue by category for the three months ended June 30, 2026, was primarily attributable to a $2.8 million increase in Subscriber Solutions and $0.9 million in Access & Aggregation, partially offset by a $1.0 million decrease in Optical Networking services.

The increase in Services & Support revenue by category for the six months ended June 30, 2026, was primarily attributable to increases of $2.1 million increase in Subscriber Solutions, $1.8 million in Optical Networking services and $1.4 million increase in Access & Aggregation.

Domestic Revenue

revenue increased by 11.7% from $120.3 million for the three months ended June 30, 2025, to $134.4 million for the three months ended June 30, 2026, and increased by 25.5% from $223.5 million for the six months ended June 30, 2025, to $280.6 million for the six months ended June 30, 2026.

The increase in U.S.

revenue for the three months ended March 31, 2026, was primarily due to continued customer spending and broadband expansion.

International revenue, which is defined as revenue generated from the Network Solutions and Services & Support segments provided to a customer outside of the U.S., decreased by 3.2% from $144.6 million for the three months ended March 31, 2025 to $139.9 million

for the three months ended March 31, 2026.

International revenue, as a percentage of total revenue, decreased from 58.3% for the three months ended March 31, 2025, to 48.9% for the three months ended March 31, 2026.

The decrease in international revenue for the three months ended March 31, 2026, was primarily driven by the timing of sales with an international Service Provider customer.

While international revenue has decreased for the three months ended March 31, 2026 and 2025 the mix of our Network Solutions and Services & Support segments as a percentage of total international revenue remains relatively consistent.

For the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, changes in foreign currencies relative to the U.S.

dollar increased our net revenue by approximately $9.3 million.

revenue for the three and six months ended June 30, 2026, was primarily due to continued customer spending and broadband expansion.

International Revenue

International revenue, which is defined as revenue generated from the Network Solutions and Services & Support segments provided to a customer outside of the U.S., increased by 1.4% from $144.7 million for the three months ended June 30, 2025 to $146.7 million for the three months ended June 30, 2026 and decreased by 0.9% from $289.3 million for the six months ended June 30, 2025 to $286.7 million for the six months ended June 30, 2026.

International revenue, as a percentage of total revenue, decreased from 54.6% for the three months ended June 30, 2025, to 52.2% for the three months ended June 30, 2026, and decreased from 56.4% for the six months ended June 30, 2025, to 50.5% for the six months ended June 30, 2026.

The change in international revenue for the three and six months ended June 30, 2026 compared to the three and six months June 30, 2025, remained relatively flat, with minor fluctuations driven by changes in customer and product mix.

For the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, changes in foreign currencies relative to the U.S.

dollar increased our net revenue by approximately $1.9 million and $3.8 million, respectively.

Our ADTRAN, Inc.

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Cost of Revenue

As a percentage of revenue, cost of revenue decreased from 61.6% for the three months ended March 31, 2025, to 60.5% for the three months ended March 31, 2026.

The decrease in cost of revenue as a percentage of revenue for the three months ended March 31, 2026 was attributable to a 1.0% decrease in material costs as a percentage of revenue as a result of customer and product mix and a 0.2% decrease is labor cost as a percentage of revenue as a result of leveraging fixed costs on higher sales volume.

For the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, changes in foreign currencies relative to the U.S.

dollar increased our cost of revenue by approximately $5.0 million.

Network Solutions cost of revenue, as a percentage of that segment’s revenue, decreased from 66.4% for the three months ended March 31, 2025, to 65.0% for the three months ended March 31, 2026.

The decrease in cost of revenue as a percentage of revenue for the three months ended March 31, 2026 was attributable to a 1.0% decrease in material costs as a percentage of revenue as a result of customer and product mix and a 0.4% decrease is labor cost as a percentage of revenue as a result of leveraging fixed costs on higher sales volume.

Services & Support cost of revenue, as a percentage of that segment’s revenue, decreased from 40.3% for the three months ended March 31, 2025, to 38.3% for the three months ended March 31, 2026.

The decrease in cost of revenue as a percentage of revenue for the three months ended March 31, 2026, was primarily attributable to a 4.5% decrease in material costs partially offset by a 2.1% increase in labor and assembly cost as a percentage of revenue as a result of as a result of customer and product mix.

As a percentage of revenue, cost of revenue increased from 62.7% for the three months ended June 30, 2025, to 63.0% for the three months ended June 30, 2026, and decreased from 62.1% for the six months ended June 30, 2025, to 61.8% for the six months ended June 30, 2026.

Cost of revenue as a percentage of revenue for the three and six months ended June 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix.

For the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, changes in foreign currencies relative to the U.S.

dollar increased our cost of revenue by approximately $1.3 million and $2.5 million, respectively.

Network Solutions cost of revenue, as a percentage of that segment’s revenue, increased from 67.1% for the three months ended June 30, 2025, to 67.7% for the three months ended June 30, 2026, and decreased from 66.8% for the six months ended June 30, 2025, to 66.3% for the six months ended June 30, 2026.

Network Solutions cost of revenue as a percentage of revenue for the three and six months ended June 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix.

Services & Support cost of revenue, as a percentage of that segment’s revenue, decreased from 41.3% for the three months ended June 30, 2025, to 40.6% for the three months ended June 30, 2026, and decreased from 40.8% for the six months ended June 30, 2025 to 39.5% for the six months ended June 30, 2026.

Services & Support cost of revenue as a percentage of revenue for the three and six months ended June 30, 2026, remained relatively flat, with minor fluctuations driven by cyclical changes in customer buying habits.

Services & Support revenue is comprised of network planning and implementation, maintenance, support and cloud-based management services, with network planning and implementation being the largest and fastest growing component in the long-term.

Compared to our other services, such as maintenance, support and cloud-based management services, our network planning and implementation services typically utilize a higher percentage of internal and subcontracted engineers, professionals and contractors to perform the work for customers.

for customers.

The additional costs incurred to perform these infrastructure and labor-intensive services inherently result in lower average gross margins as compared to maintenance and support services.

Within the Services & Support segment, we do expect variability in gross margins from quarter-to-quarter based on the mix of the services recognized.

As a percentage of revenue, gross profit increased from 38.4% for the three months ended March 31, 2025, to 39.5% for the three months ended March 31, 2026.

The increase in gross profit as a percentage of revenue for the three months ended March 31, 2026 was attributable to a 1.0% decrease in material costs as a percentage of revenue as a result of customer and product mix and a 0.2% decrease is labor cost as a percentage of revenue as a result of leveraging fixed costs on higher sales volume.

For the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, changes in foreign currencies relative to the U.S.

dollar increased our gross profit by approximately $4.3 million.

As a percentage of that segment's revenue, Network Solutions gross profit increased from 33.6% for the three months ended March 31, 2025, to 35.0% for the three months ended March 31, 2026.

The increase in gross profit as a percentage of revenue for the three months ended March 31, 2026 was attributable to a 1.0% decrease in material costs as a percentage of revenue as a result of customer and product mix and a 0.4% decrease is labor cost as a percentage of revenue as a result of leveraging fixed costs on higher sales volume.

As a percentage of that segment's revenue, Services & Support gross profit increased from 59.7% for the three months ended March 31, 2025, to 61.7% for the three months ended March 31, 2026.

The increase in cost of revenue as a percentage of revenue for the three

months ended March 31, 2026, was primarily attributable to a 4.5% decrease in material costs partially offset by a 2.1% increase in labor and assembly cost as a percentage of revenue as a result of as a result of customer and product mix.

As a percentage of revenue, gross profit decreased from 37.3% for the three months ended June 30, 2025, to 37.0% for the three months ended June 30, 2026, and increased from 37.9% for the six months ended June 30, 2025, to 38.2% for the six months ended June 30, 2026.

The gross profit as a percentage of revenue for the three and six months ended June 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix.

For the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, changes in foreign currencies relative to the U.S.

dollar increased our gross profit by approximately $0.7 million and $1.3 million, respectively.

As a percentage of that segment's revenue, Network Solutions gross profit decreased from 32.9% for the three months ended June 30, 2025, to 32.3% for the three months ended June 30, 2026, and increased from 33.2% for the six months ended June 30, 2025 to 33.7% for the six months ended June 30, 2026.

The decrease in gross profit for the three and six months ended June 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix.

As a percentage of that segment's revenue, Services & Support gross profit increased from 58.7% for the three months ended June 30, 2025, to 59.4% for the three months ended June 30, 2026, and increased from 59.2% for the six months ended June 30, 2025, to 60.5% for the six months ended June 30, 2026.

The increase in gross profit for the three and six months ended June 30, 2026 remained relatively flat, with minor fluctuations driven by cyclical changes in customer buying habits.

Selling, General and Administrative Expenses

As a percentage of revenue, selling, general and administrative expenses decreased from 20.3% for the three months ended March 31, 2025, to 19.5% for the three months ended March 31, 2026.

As a percentage of revenue, selling, general and administrative expenses decreased from 22.8% for the three months ended June 30, 2025, to 21.4% for the three months ended June 30, 2026, and decreased from 21.6% for the six months ended June 30, 2025, to 20.5% for the six months ended June 30, 2026.

Selling, general and administrative expenses as a percentage of revenue will generally fluctuate whenever there is a significant fluctuation in revenue for the periods being compared.

Selling, general and administrative expenses increased 11.0% from $50.3 million for the three months ended March 31, 2025, to $55.8 million for the three months ended March 31, 2026.

Selling, general and administrative expenses include personnel costs for management, accounting, information technology, human resources, sales and marketing, as well as professional fees, contract services and legal and litigation related costs.

The increase in selling, general and administrative expenses was primarily attributable to increased employee-related costs of $3.7 million, increased deferred compensation plan expense of $1.5 million and increased travel related expenses of $0.6 million, partially offset by a decrease in stock-based compensation expense of $0.8 million.

For the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, changes in foreign currencies relative to the U.S dollar increased our selling, general and administrative expenses by approximately $2.3 million.

Selling, general and administrative expenses decreased 0.2% from $60.3 million for the three months ended June 30, 2025, to $60.2 million for the three months ended June 30, 2026, and increased 4.9% from $110.6 million for the six months ended June 30, 2025, to $116.1 million for the six months ended June 30, 2026.

Selling, general and administrative expenses include personnel costs for management and back office departments, as well as auditor, tax and other professional fees.

The increase for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, was primarily attributable to increased employee-related costs and increased travel related expenses.

For the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, changes in foreign currencies relative to the U.S.

dollar increased our selling, general and administrative expenses by approximately $0.6 million and $1.3 million, respectively.

Research and Development Expenses

As a percentage of revenue, research and development expenses decreased from 19.7% for the three months ended March 31, 2025, to 17.7% for the three months ended March 31, 2026.

As a percentage of revenue, research and development expenses decreased from 19.6% for the three months ended June 30, 2025, to 19.1% for the three months ended June 30, 2026, and decreased from 19.6% for the six months ended June 30, 2025, to 18.4% for the six months ended June 30, 2026.

Research and development expenses as a percentage of revenue will generally fluctuate whenever there are incremental product development activities or significant fluctuations in revenue for the periods being compared.

Research and development expenses increased 3.9% from $48.9 million for the three months ended March 31, 2025, to $50.8 million for the three months ended March 31, 2026.

The increase in research and development expenses for the three months ended March 31, 2026, was primarily attributable to increased employee-related costs of $2.6 million, increased office lease expense of $0.4 million and increased depreciation and amortization expense of $0.4 million partially offset by increased governmental research and development subsidies of $0.8 million and decreased stock-based compensation expense of $0.4 million.

For the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, changes in foreign currencies relative to the U.S.

dollar increased our research and development expenses by approximately $2.3 million.

Research and development expenses increased 3.6% from $51.9 million for the three months ended June 30, 2025, to $53.8 million for the three months ended June 30, 2026, and increased 3.8% from $100.8 million for the six months ended June 30, 2025, to $104.6 million for the six months ended June 30, 2026.

The increase in research and development expenses for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, was primarily attributable to increased employee-related costs.

The increase in research and development expenses for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, was primarily attributable to increased employee-related costs partially offset by increased governmental research and development subsidies.

For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, changes in foreign currencies relative to the U.S.

dollar increased our research and development expenses by approximately $1.3 million and $2.5 million, respectively.

Adtran Networks has arrangements with governmental entities for the purpose of obtaining funding for research and development activities.

The Company classifies government grants received under these arrangements as a reduction to research and development expenses incurred.

For the three months ended March 31, 2026 and 2025, the Company recognized $3.1 million and $2.2 million as a reduction of research and development expense, respectively.

For the three months ended June 30, 2026 and 2025, the Company recognized $3.4 million and $3.1 million as a reduction of research and development expense, respectively.

For the six months ended June 30, 2026 and 2025, the Company recognized $6.4 million and $5.3 million as a reduction of research and development expense, respectively.

We expect to continue to incur research and development expenses in connection with our new and existing products.

We continually evaluate new product opportunities and engage in significant research and product development efforts, which provides for new product development, enhancement of existing products and product cost reductions.

We continually evaluate new product opportunities and engage in significant research and product development efforts, which provides for new product

development, enhancement of existing products and product cost reductions.

We may incur significant research and development expenses prior to the receipt of revenue from a major new product group.

Interest and Dividend Income

Interest and dividend income increased from $0.1 million for the three months ended March 31, 2025 to $0.3 million for the three months ended March 31, 2026.

Interest and dividend income increased from $0.2 million for the three months ended June 30, 2025, to $0.4 million for the three months ended June 30, 2026 and increased from $0.3 million for the six months ended June 30, 2025, to $0.7 million for the six months ended June 30, 2026.

The increase in interest and dividend income is primarily attributable to fluctuations in investment balances and an increase in the rate of return on those investments due to interest rate movements.

Interest Expense

Interest expense decreased from $4.8 million for the three months ended March 31, 2025, to $4.2 million for the three months ended March 31, 2026.

The decrease in interest expense during the three months ended March 31, 2026, was primarily driven by the issuance of the 2030 Notes, which accrues interest at 4.7%, and the repayment of the majority of the Credit Agreement which accrued interest at 8.6% for the three months ended March 31, 2025 .

Interest expense decreased from $4.6 million for the three months ended June 30, 2025, to $4.2 million for the three months ended June 30, 2026, and decreased from $9.3 million for the six months ended June 30, 2025, to $8.5 million for the six months ended June 30, 2026.

The decrease in interest expense during the three and six months ended June 30, 2026, was primarily driven by the issuance of the 2030 Notes, which accrues interest at 4.7%, and the repayment of the majority of the principal under the credit agreement with Wells Fargo which accrued interest at 8.6% for the three and six months ended June 30, 2025.

See Note 10 and Note 11 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for additional information.

Net Investment Loss

We recognized a net investment loss of $1.7 million for the three months ended March 31, 2025 and a net investment loss of $0.9 million for the three months ended March 31, 2026.

Net Investment Gain

We recognized a net investment gain of $3.1 million and $5.3 million for the three months ended June 30, 2025 and 2026, respectively and recognized a net investment gain of $1.4 million and $4.4 million for the six months ended June 30, 2025, and 2026, respectively.

The fluctuations in our net investments were primarily attributable to changes in the fair value of our securities recognized during the period.

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See Note 5 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report, and “Investing Activities” in “Liquidity and Capital Resources” below for additional information.

Other Income, net

Other income, net, which primarily consisted of gains and losses on foreign currency transactions and income from excess material sales, increased from income of $0.9 million for the three months ended March 31, 2025 to income of $1.3 million for the three months ended March 31, 2026.

Income Tax (Expense) Benefit

The Company's effective tax rate changed from a benefit of 4.2% of pre-tax loss for the three months ended March 31, 2025, to an expense of 67.3% of pre-tax income for the three months ended March 31, 2026 The change in the effective tax rate for the three months ended March 31, 2026, was driven primarily by loss jurisdictions for which the recognition of tax benefits on pre-tax losses incurred during the first quarter of 2026 were limited due to a valuation allowance.

Other Income (Expense), net

Other income (expense), net, which primarily consisted of gains and losses on foreign currency transactions and income from excess material sales, increased from expense of $2.6 million for the three months ended June 30, 2025 to income of $0.7 million for the three months ended June 30, 2026 and increased from expense of $1.7 million for the six months ended June 30, 2025 to income of $2.0 million for the six months ended June 30, 2026.

Income Tax Expense

The Company's effective tax rate changed from an expense of 5.9% of pre-tax loss for the three months ended June 30, 2025, to an expense of 10.0% of pre-tax loss for the three months ended June 30, 2026 and changed from an expense of 2.3% of pre-tax loss for the six months ended June 30, 2025, to an expense of 53.4% of pre-tax loss for the six months ended June 30, 2026.

The changes in the effective tax rate for the three and six months ended June 30, 2026, was driven primarily by loss jurisdictions for which the recognition of tax benefits on pre-tax losses incurred were limited due to a valuation allowance during the three and six months ended June 30, 2026.

Net Loss Attributable To Adtran Holdings, Inc.

As a result of the above factors, net loss attributable to ADTRAN Holdings, Inc.

decreased from net loss of $11.3 million for the three months ended March 31, 2025, to a net loss of $1.3 million for the three months ended March 31, 2026.

decreased from net loss of $20.5 million for the three months ended June 30, 2025, to a net loss of $10.9 million for the three months ended June 30, 2026, and decreased from net loss of $31.8 million for the six months ended June 30, 2025, to a net loss of $12.2 million for the six months ended June 30, 2026.

LIQUIDITY AND CAPITAL RESOURCES

We generally finance our ongoing business with existing cash, investments, credit arrangements and cash flow from operations to manage our working capital needs.

We had a positive cash flow from operating activities of $12.7 million in the three months ended March 31, 2026.

We had a positive cash flow from operating activities of $38.6 million in the six months ended June 30, 2026.

We have used, and expect to continue to use, existing cash, credit arrangements and cash generated from operations for working capital and other general corporate purposes, including product development activities to enhance our existing products and develop new products, expand our sales and marketing activities and fund capital expenditures.

As of March 31, 2026, our cash on hand was $88.3 million of which $66.6 million was held by our foreign subsidiaries.

As of March 31, 2026 the Company had access to $319.2 million on its Credit Facility for future borrowings based on debt covenant compliance metrics.

As of June 30, 2026, our cash on hand was $79.2 million of which $58.2 million was held by our foreign subsidiaries.

As of June 30, 2026 the Company had access to $318.2 million on its Credit Facility for future borrowings based on debt covenant compliance metrics.

Generally, we intend to permanently reinvest funds held outside the U.S., except to the extent that any of these funds can be repatriated without withholding tax.

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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 1.27% as of March 31, 2026.

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 €304.4 million or approximately $351.7 million, based on an exchange rate as of March 31, 2026, and reflecting interest accrued through March 31, 2026, 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 1.27% as of June 30, 2026.

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 €292.6 million or $334.2 million, based on an exchange rate as of June 30, 2026, and reflecting interest accrued through June 30, 2026 during the pendency of the appraisal proceedings discussed below.

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

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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 ( Bundesanzeige r).

Following the court's decision on a procedural matter in the DPLTA appraisal proceedings on July 14, 2025, the proceeding for the trial on the merits of the DPLTA has recommenced.

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.

The Regional Court Meiningen has not yet ruled on the shareholders' claims.

After the Regional Court Meiningen issues an opinion, an appeal is likely to follow, and thus the Company does not anticipate a final decision on the shareholders' claims until late 2027 or 2028.

Additionally, our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately €7.6 million or $8.7 million (based on the current exchange rate) per year assuming none of the minority Adtran Networks shareholders were to elect Exit Compensation.

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During the three months ended March 31, 2026 and 2025, we accrued $2.2 million and $2.4 million, respectively, in Annual Recurring Compensation which is reflected as an increase to retained deficit.

With respect to the 2025 fiscal year, Adtran Networks’ ordinary general shareholders’ meeting occurred on June 15, 2026 and, therefore, the Annual Recurring Compensation was paid after the ordinary general shareholders’ meeting in the amount of $8.9 million.

During the three months ended June 30, 2026 and 2025, we accrued $2.1 million and $2.4 million, respectively, in Annual Recurring Compensation.

During the six months ended June 30, 2026 and 2025, we accrued $4.3 million and $4.8 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 July 18, 2022, ADTRAN, Inc., as the borrower, and ADTRAN Holdings, Inc.

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 (“Credit Agreement”), which has since been amended six times.

As of both March 31, 2026 and the date of this filing the Company had access to $319.2 million on its Credit Facility for future borrowings 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 5.00x, a Consolidated Senior Secured Net Leverage Ratio of 3.25x (or 4.0x to 3.5x during a Springing Covenant Period), and a Consolidated Fixed Charge Coverage Ratio of 1.25x.

In addition, during a Springing Covenant Period 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.

The Credit Agreement matures in July 2027.

The Company intends to refinance or replace the existing Credit Agreement with a new credit facility during the second quarter of 2026.

There can be no assurances that this renewal will occur on terms acceptable to the Company, or at all.

See Note 10, Credit Agreements, of the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for additional information regarding the terms of the Wells Fargo Credit Agreement.

As of March 31, 2026, and as of the date of issuance of the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q, the Company has sufficient liquidity through its operating cash flow and the borrowings available under the Credit Facility to meet a majority of its payment obligations under the DPLTA pertaining to Exit Compensation.

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 “Former Credit Agreement”), which was subsequently amended six times.

As of June 30, 2026 the Company had access to $318.2 million on its Credit Facility for future borrowings based on debt covenant compliance metrics.

On July 21, 2026, ADTRAN Holdings, Inc.

(the “Company”) as guarantor, ADTRAN, Inc., a Delaware corporation (the “US Borrower”), and Adtran Networks SE, a European stock corporation (the “German Borrower” and together with the US Borrower, collectively, the “Borrowers”), entered into a credit agreement (the “New Credit Agreement”) with J.P.

Morgan Chase Bank, N.A., as administrative agent for the US Borrower and J.P.

Morgan SE, as administrative agent for the German Borrower, and the financial institutions party thereto, as lenders.

The New Credit Agreement allows for borrowings of up to $350.0 million in aggregate principal amount, with borrowings by the German Borrower limited to $50.0 million.

The New Credit Agreement replaces the Former Credit Agreement.

The proceeds of any loans are expected to be used for general corporate purposes not prohibited under the New Credit Agreement.

As of June 30, 2026, and as of the date of issuance of the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q, the Company has sufficient liquidity through its operating cash flow and the borrowings available under the Credit Facility to meet a majority of its payment obligations under the DPLTA pertaining to Exit Compensation.

For the three and six months ended June 30, 2026, approximately 0.4 million shares and 0.6 million shares, respectively, of Adtran Networks stock were tendered to the Company.

For the three and six months ended June 30, 2025, approximately 0.9 million shares, of Adtran Networks stock were tendered to the Company.

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;

(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 the Company does not anticipate a final decision on shareholder's challenges to Exit Compensation until late 2027 or 2028;

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

(iii) the fact that 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 on the merits 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.

In summary, the Company believes that its cash and cash equivalents, working capital management initiatives and availability to access cash under the Wells Fargo Credit Facility (described below) or other future sources of capital, 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 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 condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

See Note 10, Credit Agreements, for additional information regarding the terms of the Wells Fargo Credit agreement and Notes to Condensed Consolidated Financial Statements included in Part I, Item, 1 for additional information regarding the terms of the Wells Fargo Credit Agreement.

(iii) the current guaranteed Annual Recurring Compensation payment;

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

In summary, the Company believes that its cash and cash equivalents, working capital management and availability to access cash under its credit facility or other future sources of capital, will be adequate to meet its business operating requirements, its capital expenditures and its expected obligations under both the Notes and the DPLTA, including the anticipated levels of Exit Compensation as well to support the Company's ability to continue to comply with its debt covenants under its credit facility for at least the next twelve months, from the issuance of the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

See Note 10, Credit Agreements, and Note 18, Subsequent Events in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 for additional information regarding the terms of the Former Credit Agreement and the New Credit Agreement, respectively.

Debt Obligations

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 (the “Original Credit Agreement”), as amended by the First Amendment to Credit Agreement, dated August 9, 2023 (“Amendment No.

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

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

3”), the Fourth Amendment to Credit Amendment, dated June 4, 2024, among Adtran Networks (the "German Borrower") and the parties set forth above ("Amendment No.

4") and the Fifth Amendment to Credit Agreement and Waiver, dated May 6, 2025, among the German Borrower and the parties set forth above (“Amendment No.

the Original Credit Agreement as amended by Amendment No.

1, Amendment No.

Amendment No.

3, Amendment No.

4 and Amendment No.

5, the “Existing Credit Agreement”).

On September 16, 2025, the U.S.

Borrower, the Company, the German Borrower, and the lenders party thereto, including the Administrative Agent, entered into the Sixth Amendment and Consent to Credit Agreement, dated September 16, 2025 (“Amendment

the Existing Credit Agreement as amended by Amendment No.

6, the “Amended Credit Agreement”).

Amendment No.

6, among other things, (i) provides for a consent from the lenders to the issuance by the Company of new unsecured convertible indebtedness in an amount not to exceed $230.0 million, notwithstanding the cap on the amount of Permitted Convertible Indebtedness (as defined in the Amended Credit Agreement) the Company is permitted to incur, (ii) requires that the net cash proceeds of the new unsecured convertible indebtedness be used to (a) repay outstanding revolving credit loans under the Amended Credit Agreement, (b) pay fees, costs, and expenses related to Amendment No.

6 and the issuance of the new unsecured convertible indebtedness and (c) cash collateralize the obligations of the Company and its subsidiaries under the Amended Credit Agreement (with such cash only being permitted to be withdrawn for the purpose of financing the purchase of additional outstanding shares of Equity Interests (as defined in the Amended Credit Agreement) of the German Borrower that were not owned by the Company and its subsidiaries as of August 9, 2023 pursuant to Section 5, paragraph 1 of the DPLTA), and (iii) after the prepayment contemplated in the foregoing clause (ii)(a) and the provision of cash collateral contemplated in the foregoing clause (ii)(c), amends provisions governing the Subline (as defined below) to provide that future prepayments in respect of borrowings under the Subline will no longer permanently reduce the commitments in respect of the Subline.

As of March 31, 2026, the Amended Credit Agreement provided for a secured revolving credit facility of up to $350.0 million of borrowings, $50.0 million of which is solely available to the German Borrower.

As of March 31, 2026, the Company’s borrowings under the revolving line of credit were $25.0 million.

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 $350.0 million total revolving facility for the issuance of letters of credit.

As of March 31, 2026, the U.S.

Borrower had a total of $5.8 million in letters of credit under the Amended Credit Agreement, leaving a net amount (after giving effect to the $25.0 million of outstanding borrowings described above) of $319.2 million available for future borrowings 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 may be used as described above, as well as for working capital and other general corporate purposes.

Moreover, the Amended Credit Agreement provides for a sublimit under the existing $350.0 million revolving commitments in an aggregate amount of $50.0 million (“Subline”), which Subline is available for borrowings by the German Borrower.

The Company had no borrowings under the Subline as of March 31, 2026.

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 the German Borrower).

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.

As of March 31, 2026, the weighted average interest rate on our revolving credit agreements was 8.92%.

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 5.00x, a Consolidated Senior Secured Net Leverage Ratio of 3.25x (4.0x to 3.5x during a “Springing Covenant Period,” as defined below) and a Consolidated Fixed Charge Coverage Ratio of 1.25x (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.

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 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, 2026, 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 the German Borrower's 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 the German Borrower and the Subline Guarantors to secure obligations under the Subline will be released.

Convertible Senior Notes

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In connection with the 2030 Notes, the Company has entered into privately negotiated Capped Calls.

Interest expense related to the 2030 Notes was $2.2 million for the three months ended March 31, 2026.

Interest expense related to the 2030 Notes was $2.3 million and $4.5 million for the three and six months ended June 30, 2026, respectively.

In conjunction with the issuance of the 2030 Notes, the Company recognized debt issuance costs of $8.7 million, which were capitalized as components of the carrying amount and included in convertible senior notes, net within the Consolidated Balance Sheets.

See Note 11 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for more information.

Morgan Credit Agreement

On July 21, 2026, the Company entered into the New Credit Agreement with J.P.

Morgan Chase Bank, N.A.

The New Credit Agreement allows for borrowings of up to $350.0 million in aggregate principal amount, with borrowings by the German Borrower limited to $50.0 million.

The New Credit Agreement matures in July 2031 and provides for borrowings bearing interest, at the Company’s election, at either the Term Benchmark Rate or the Base Rate, in each case subject to a 0.00% floor, plus an applicable margin based on the consolidated total net leverage ratio.

The applicable margin ranges from 2.25% to 3.25% for Term Benchmark Rate loans and from 1.25% to 2.25% for Base Rate loans.

The Borrowers are also required to pay a commitment fee of 0.25% on unused revolving commitments.

The New Credit Agreement replaces the Former Credit Agreement.

The proceeds of any loans are expected to be used for general corporate purposes not prohibited under the New Credit Agreement.

Under the New Credit Agreement, the Company agreed to maintain certain leverage ratios and certain fixed charge coverage ratios commencing with the fiscal quarter ending December 31, 2026.

In connection with entering into the New Credit Agreement, on July 21, 2026, the Company terminated the Former Credit Agreement, the collateral agreement dated July 18, 2022, the ADVA domestic collateral agreement dated June 4, 2024, the guaranty agreement dated July 18, 2022 and the ADVA guaranty agreement dated June 4, 2024.

See Note 10, Credit Agreements and Note 18, Subsequent Events of the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for additional information regarding the terms of the Former Credit Agreement and the new J.P.

Morgan Chase Bank Credit Agreement.

Operating Activities

Net cash provided by operating activities of $12.7 million during the three months ended March 31, 2026, decreased by $30.5 million compared to net cash provided by operating activities of $43.2 million during the three months ended March 31, 2025.

Net cash provided by operating activities of $38.6 million during the six months ended June 30, 2026, decreased by $36.7 million compared to net cash provided by operating activities of $75.3 million during the six months ended June 30, 2025.

The following table sets forth adjustments to reconcile net income to net cash provided by operating activities:

(In thousands)

Three Months Ended

March 31, 2026

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

Six Months Ended

June 30, 2026

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

Depreciation and amortization

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Amortization of convertible notes issuance costs

Loss on investments, net

Gain on investments, net

Net loss on disposal of property, plant and equipment

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Net cash provided by operating activities

Quarterly accounts receivable DSO increased from 66 days as of December 31, 2025, to 68 days as of March 31, 2026 and was primarily driven by customer and geographical mix of commercial terms.

Quarterly accounts receivable DSO increased from 66 days as of December 31, 2025, to 67 days as of June 30, 2026 and was primarily driven by customer and geographical mix of commercial terms.

The increase in other receivables was primarily attributable to an increase in our receivables for sales of raw materials and contract assets.

Quarterly inventory turnover increased from 2.80 turns as of December 31, 2025, to 3.3 turns as of March 31, 2026.

Quarterly inventory turnover increased from 2.8 turns as of December 31, 2025, to 3.4 turns as of June 30, 2026.

The increase in inventory turnover was primarily attributable to increased volume of sales activity due to continue strength of spending within our core markets and utilization of buffer stock.

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Investing Activities

Capital expenditures, including intangibles totaled approximately $15.9 million and $18.7 million for the three months ended March 31, 2026 and 2025 respectively.

These expenditures were primarily used to purchase computer hardware, internal use software, manufacturing and test equipment, and building improvements.

The decrease in capital expenditures for the three months ended March 31, 2026, is primarily attributable to decreases in expenditures related to software and building renovation projects.

Our deferred compensation plan assets decreased 3.9% from $35.2 million as of December 31, 2025, to $33.8 million as of March 31, 2026.

Our investments include various marketable equity securities with a fair market value of $0.9 million and $1.0 million as of March 31, 2026, and December 31, 2025.

Capital expenditures totaled approximately $33.2 million and $32.5 million for the six months ended June 30, 2026 and 2025, respectively.

The increase in capital expenditures for the six months ended June 30, 2026, was primarily attributable to increases in expenditures related to developed technology, equipment and building improvements .

Our deferred compensation plan assets increased 11.1% from $35.2 million as of December 31, 2025, to $39.1 million as of June 30, 2026.

Our investments include various marketable equity securities with a fair market value of $1.0 million and $1.0 million as of June 30, 2026, and December 31, 2025.

See Note 5 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for additional information.

Financing Activities

For the three months ended March 31, 2026, net cash used in financing activities was $1.7 million, which was primarily due to $1.4 million of payments on a financing agreement and $1.6 million of payments of tax withholdings related to stock-based compensation settlements partially offset by $1.4 million proceeds from stock option exercises.

For the six months ended June 30, 2026, net cash used in financing activities was $19.0 million, which was primarily due to $13.8 million of payments for redemption of redeemable non-controlling interest, $8.9 million payment of annual recurring compensation to non-controlling interests, $1.6 million of payments of tax withholdings related to stock-based compensation settlements, $1.4 million

of payments on a financing agreement partially offset by $6.6 million proceeds from stock option exercises.

Stock Repurchase Program

There were no stock repurchases during the periods ended March 31, 2026, and 2025, and there currently is no authorized stock repurchase program for the repurchase of ADTRAN Holdings, Inc.

There were no stock repurchases during the periods ended June 30, 2026, and 2025, and there currently is no authorized stock repurchase program for the repurchase of ADTRAN Holdings, Inc.

Stock Option Exercises

To accommodate employee stock option exercises, the Company issued 0.2 million and 0.1 million shares of common stock which resulted in proceeds of $1.4 million and $0.8 million during the three months ended March 31, 2026 and 2025, respectively.

To accommodate employee stock option exercises, the Company issued 0.9 million and 0.2 million shares of common stock which resulted in proceeds of $6.6 million and $1.2 million during the six months ended June 30, 2026 and 2025, respectively.

Pension Plans

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Until the Liquidation Date, each of the Plans will continue to operate in the ordinary course, except that no new deferrals will be credited to the participants for compensation earned after the Termination Date.

The fair value of the assets held by the deferred compensation programs totaled $33.8 million and $35.2 million as of March 31, 2026, and December 31, 2025, respectively, and is included in short-term investments on the Condensed Consolidated Balance Sheets.

The amounts payable to the deferred compensation program participants totaled $37.1 million and $37.4 million as of March 31, 2026, and December 31, 2025, respectively.

The fair value of the assets held by the deferred compensation programs totaled $39.1 million and $35.2 million as of June 30, 2026, and December 31, 2025, respectively, and is included in short-term investments on the Condensed Consolidated Balance Sheets.

The amounts payable to the deferred compensation program participants totaled $42.7 million and $37.4 million as of June 30, 2026, and December 31, 2025, respectively.

For additional information, see Note 5 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Off-Balance Sheet Arrangements

We have exposure to credit losses from off-balance sheet exposures, to provide various guarantees of performance such as bid bonds, performance bonds and customs bonds, where we believe the risk of loss is immaterial to our financial statements as of March 31, 2026.

Otherwise, we do not have off-balance sheet financing arrangements and have not engaged in any related party transactions or arrangements with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity or the availability of or requirements for capital resources.

See Note 17 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for additional information.

S ee Note 17 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for additional information.

Cash Requirements

The following table summarizes the Company’s material short- and long-term cash requirements from known obligations pursuant to certain contracts and commitments as of March 31, 2026, as well as an estimate of the timing in which such obligations and payments are expected to be satisfied (but excluding payments that may be made pursuant to the DPLTA, which is discussed below).

The following table summarizes the Company’s material short- and long-term cash requirements from known obligations pursuant to certain contracts and commitments as of the date of this filing, as well as an estimate of the timing in which such obligations and payments are expected to be satisfied (but excluding payments that may be made pursuant to the DPLTA, which is discussed below).

Other than operating lease obligations, the cash requirements table excludes interest payments.

(In thousands)

Wells Fargo credit agreement (1)

Morgan credit agreement (1)

Convertible Senior Notes (2)

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Operating lease obligations (4)

(1) On July 21, 2026, the Company, entered into the New Credit Agreement with J.P.

Morgan Chase Bank, N.A.

The New Credit Agreement allows

for borrowings of up to $350.0 million in aggregate principal amount.

The borrowings outstanding as of the date of the filing include funds for

closing and legal fees and other general corporate purposes.

See Note 18, Subsequent Events of the Notes to Condensed Consolidated Financial

Statements in Part 1, Item 1 of this report and “Liquidity and Capital Resources - J.P.

Morgan Credit Agreement” for additional information

regarding the terms of the new J.P.

Morgan Chase Bank Credit Agreement.

(2) See description below.

(2) We have purchase obligations related to open purchase orders to our contract manufacturers, ODMs, component suppliers, service partners and other vendors.

The settlement of our purchase obligations will occur at various dates beginning in 2026 and going through 2029.

See Note 17 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for more information.

(3) We have purchase obligations related to open purchase orders to our contract manufacturers, ODMs, component suppliers, service partners and

other vendors.

The settlement of our purchase obligations will occur at various dates beginning in 2026 and going

through 2029.

See Note 17 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of the report for more

(4) We have operating leases for office space, automobiles and various other equipment in the U.S.

and in certain international locations.

Our operating leases had remaining lease terms ranging from 1 month to 152 months as of March 31, 2026.

Wells Fargo Credit Agreement

On July 18, 2022, ADTRAN Holdings, Inc.

and ADTRAN, Inc., as the borrower, entered into the Credit Agreement with the Administrative Agent and the other lenders named therein.

The Credit Agreement was subsequently amended six times.

As of March 31, 2026, the Company's borrowings under the revolving line of credit were $25.0 million.

As of March 31, 2026, the Company had access to $319.2 million on its Credit Facility for future borrowings based on debt covenant compliance metrics.

The Credit Facility matures in July 2027;

however, the Company may request extensions subject to customary conditions.

See Note 10 and 17 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report and “Liquidity and Capital Resources - Wells Fargo Credit Facility” in Part I, Item 2 of this report for additional information.

Our operating leases have remaining lease terms ranging from 1 month to 149 months as of June 30, 2026.

Convertible Senior Notes

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Receivables Purchase Arrangements

On July 1, 2024, the Company entered into a Factoring Agreement with the Factor, which accelerates receivable collection and helps to better manage cash flow.

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

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

Total accounts receivables factored as of the end of March 31, 2026, totaled $26.1 million of which $3.9 million was retained pursuant to the Factoring Agreement in the reserve account.

During the three months ended March 31, 2026 and 2025, the Company received $51.8 million and $31.8 million in cash proceeds from the Factoring Agreement, respectively, which are recorded in operating cash flows on the Condensed Consolidated Statement of Cash Flows.

Total accounts receivables factored as of the end of June 30, 2026, totaled $18.3 million of which $3.7 million was retained pursuant to the Factoring Agreement in the reserve account.

During the six months ended June 30, 2026 and 2025, the Company received $94.8 million and $73.8 million in cash proceeds from the Factoring Agreement, respectively, which are recorded in operating cash flows on the Condensed Consolidated Statement of Cash Flows.

See Note 2 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for additional information.

Adtran Networks Domination and Profit and Loss Transfer Agreement

The DPLTA between the Company, as the controlling company, and Adtran Networks, as the controlled company, as executed on December 1, 2022, became effective on January 16, 2023, as a result of its registration with the commercial register ( Handelsregister ) of the local court ( Amtsgericht ) at the registered seat of Adtran Networks (Jena).

The DPLTA between the Company, as the controlling company, and Adtran Networks SE ("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 absorb the annual net loss incurred by Adtran Networks.

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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 1.27% as of March 31, 2026.

The guaranteed interest rate is 5.0% plus a variable component (according to the German Civil Code) that was 1.27% as of June 30, 2026.

as of June 30, 2026, and reflecting interest accrued through June 30, 2026, during the pendency of the appraisal proceedings discussed below.

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

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Following the court's decision on a procedural matter in the DPLTA appraisal proceedings on July 14, 2025, the proceeding for the trial on the merits of the DPLTA has recommenced.

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.

The Regional Court Meiningen has not yet ruled on the shareholders' claims.

After the Regional Court Meiningen issues an opinion, an appeal is likely to follow, and thus the Company does not anticipate a final decision on the shareholders' claims until late 2027 or 2028.

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During the three months ended March 31, 2026 and 2025, we accrued $2.2 million and $2.4 million, respectively, in Annual Recurring Compensation.

With respect to the 2025 fiscal year, Adtran Networks’ ordinary general shareholders’ meeting occurred on June 15, 2026 and, therefore, the Annual Recurring Compensation was paid after the ordinary general shareholders’ meeting in the amount of $8.9 million.

During the three months ended June 30, 2026 and 2025, we accrued $2.1 million and $2.4 million, respectively, in Annual Recurring Compensation.

During the six months ended June 30, 2026 and 2025, we accrued $4.3 million and $4.8 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.

We currently hold 37,047,086 no-par value bearer shares of Adtran Networks, representing 71.2% of Adtran Networks outstanding shares as of March 31, 2026.

For the three and six months ended June 30, 2026, approximately 0.4 million shares and 0.6 million shares, respectively, of Adtran Networks stock were tendered to the Company.

For the three and six months ended June 30, 2025, approximately 0.9 million shares, of Adtran Networks stock were tendered to the Company.

As of June 30, 2026 we held 37,447,983 no-par value bearer shares of Adtran Networks, representing 71.9% of Adtran Networks outstanding shares as of June 30, 2026.

The foregoing description of the DPLTA does not purport to be complete and is qualified in its entirety by reference to the DPLTA, a non-binding English translation of which incorporated by reference to Exhibit 10.14 of the 2025 Form 10-K.

Other Cash Requirements

During the three months ended March 31, 2026, other than the Exit Compensation payments, Annual Recurring Compensation under the DPLTA, and receivables purchase arrangements, there have been no other material changes in cash requirements from those discussed in the 2025 Form 10-K and our cash requirements table shown in Liquidity and Capital Resources above.

During the six months ended June 30, 2026, other than the Exit Compensation payments, Annual Recurring Compensation under the DPLTA, and receivables purchase arrangements there have been no other material changes in cash requirements from those discussed in the 2025 Form 10-K and our cash requirements table shown in Liquidity and Capital Resources above.

Performance Bonds

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

As of March 31, 2026, and December 31, 2025, we had commitments related to these bonds totaling $22.2 million and $22.4 million, respectively, which expire at various dates through April 2029.

As of June 30, 2026, and December 31, 2025, we had commitments related to these bonds totaling $23.3 million and $22.4 million, respectively, which expire at various dates through October 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.

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We believe the critical accounting policies affect our more significant judgments and estimates used in the preparation of our Condensed Consolidated Financial Statements.

During the three months ended March 31, 2026, there were no significant changes to our critical accounting policies and estimates as described in the financial statements contained in the 2025 Form 10-K.

During the six months ended June 30, 2026, there were no significant changes to our critical accounting policies and estimates as described in the financial statements contained in the 2025 Form 10-K.

QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK

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We maintain depository investments with certain financial institutions.

As of March 31, 2026, $83.8 million of our cash and cash equivalents, primarily foreign depository accounts, were in excess of government provided insured depository limits.

As of June 30, 2026, $75.2 million of our cash and cash equivalents, primarily foreign depository accounts, were in excess of government provided insured depository limits.

Although these depository investments exceed government insured depository limits, we have evaluated the credit worthiness of these financial institutions and determined the risk of material financial loss due to exposure of such credit risk to be minimal.

Interest Rate Risk

As of March 31, 2026, we held $0.6 million of cash and variable-rate investments where a change in interest rates would impact our interest income.

A hypothetical 50 basis point decline in interest rates as of March 31, 2026, assuming all other variables remain constant, would reduce annualized interest income on our cash and investments by less than $0.1 million.

As of March 31, 2026, the carrying amounts of our revolving credit agreements totaled $25.0 million where a change in interest rates would impact our interest expense.

A hypothetical 50 basis point increase in interest rates as of March 31, 2026, assuming all other variables remain constant, would increase our interest expense by $0.1 million.

The analyses cover our debt and investments.

As of June 30, 2026, we held $0.6 million of cash and variable-rate investments where a change in interest rates would impact our interest income.

A hypothetical 50 basis point decline in interest rates as of June 30, 2026, assuming all other variables remain constant, would reduce annualized interest income on our cash and investments by less than $0.1 million.

As of June 30, 2026, the carrying amounts of our revolving credit agreements totaled $25.0 million where a change in interest rates would impact our interest expense.

A hypothetical 50 basis point increase in interest rates as of June 30, 2026, assuming all other variables remain constant, would increase our interest expense by $0.1 million annually.

The analysis covers our debt and investments.

The analyses use actual or approximate maturities for the debt and investments.

The discount rates used were based on the market interest rates in effect at March 31, 2026.

The discount rates used were based on the market interest rates in effect at June 30, 2026.

Foreign Currency Exchange Rate Risk

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The majority of our global supply chain predominately makes payments in U.S.

dollars and some of our operating expenses are paid in certain local currencies (approximately 43.9% of total operating expense for the quarter ended March 31, 2026).

dollars and some of our operating expenses are paid in certain local currencies (approximately 43.2% and 43.9% of total operating expense for the periods ended June 30, 2026 and 2025, respectively.

Therefore, our revenue, gross margins, operating expenses and operating loss are all subject to foreign currency fluctuations.

As a result, changes in currency exchange rates could cause variations in our operating loss.

A hypothetical 10% movement in foreign exchange rates would result in a before-tax positive or negative impact of approximately $0.7 million for the quarter ended March 31, 2026.

Actual future gains and losses associated with our foreign currency exposures and positions may differ materially from the sensitivity analyses performed as of March 31, 2026, due to the inherent limitations associated with predicting the foreign currency exchange rates, and our actual exposures and positions.

For the six months ended June 30, 2026, the effect of a hypothetical 10% movement in foreign exchange rates would result in a before-tax positive or negative impact of approximately $0.2 million.

Actual future gains and losses associated with our foreign currency exposures and positions may differ materially from the sensitivity analyses performed as of June 30, 2026, due to the inherent limitations associated with predicting the foreign currency exchange rates, and our actual exposures and positions.

We have certain customers and suppliers who are invoiced or pay in a non-functional currency.

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In certain circumstances, changes in the functional currency value of these assets and liabilities create fluctuations in our reported consolidated financial position, cash flows and results of operations.

For further information about the fair value of our investments as of March 31, 2026, see Note 5 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

For further information about the fair value of our investments as of June 30, 2026, see Note 5 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

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 2. Management’s Discussion and Analysis