ADTRAN Holdings, Inc.

Previous wording

As discussed in the financial statements as of and for the year ended December 31, 2024 included in our 2024 Form 10-K/A, we identified errors in our previously issued financial statements. The identified errors impacted the Condensed Consolidated Financial Statements as of and for the three months ended March 31, 2024, among other periods as previously disclosed. See Note 1 and 18 to Condensed Consolidated Financial Statements included in Part I, Item, 1 for additional information.

Current wording

As discussed in the financial statements as of and for the year ended December 31, 2024 included in our 2024 Form 10-K/A, we identified errors in our previously issued financial statements. The identified errors impacted the Condensed Consolidated Financial Statements as of and for the three and six months ended June 30, 2024, among other periods as previously disclosed. See Note 1 and 18 to the Condensed Consolidated Financial Statements included in Part I, Item, 1 for additional information.

Previous wording

The Company is a leading global provider of networking and communications platforms, software, systems and services focused on carrier networks, private enterprise networks and mission critical infrastructure. It is serving a diverse domestic and international customer base in multiple countries that includes Large, Medium and Small Service Providers, alternative Service Providers, such as utilities, municipalities and fiber overbuilders; cable/MSOs; SMBs; distributed enterprises, including Fortune 500 companies with sophisticated business continuity applications; and federal, state and local government agencies.

Current wording

The Company is a leading global provider of networking and communications platforms, software, systems and services focused on the broadband access market, serving a diverse domestic and international customer base in multiple countries that includes large, medium and small Service Providers, alternative Service Providers, such as utilities, municipalities and fiber overbuilders, cable/MSOs, SMBs and distributed enterprises including Fortune 500 companies with sophisticated business continuity applications; and federal, state and local government agencies.

Previous wording

Our innovative solutions and services enable voice, data, video and internet-communications across a variety of network infrastructures and are currently in use by millions worldwide. We support our customers through our direct global sales organization and our distribution networks. Our success depends upon our ability to have customers adopt our technology, increase unit volume and market share through the introduction of new products and succeeding generations of products having optimal selling prices and increased functionality as compared to both the prior generation of a product and the products of competitors in order to gain market share. To service our customers and grow revenue, we are continually conducting research and developing new products addressing customer needs and testing those products for the specific requirements of the particular customers. We offer a broad portfolio of flexible software and hardware network solutions and services that enable Service Providers to meet today’s service demands while enabling them to transition to the fully converged, scalable, highly-automated, cloud-controlled voice, data, internet and video network of the future. In addition to our global headquarters in Huntsville, Alabama, and our European headquarters in Munich, Germany, we have sales and research and development facilities in multiple strategic global locations.

Current wording

Our innovative solutions and services enable voice, data, video and internet communications across a variety of network infrastructures and are currently in use by millions worldwide. We support our customers through our direct global sales organization and our distribution networks. Our success depends upon our ability to increase unit volume and market share through the introduction of new products and succeeding generations of products having optimal selling prices and increased functionality as compared to both the prior generation of a product and to the products of competitors in order to gain market share. To service our customers and grow revenue, we are continually conducting research and developing new products addressing customer needs and testing those products for the specific requirements of the particular customers. We offer a broad portfolio of flexible software and hardware network solutions and services that enable Service Providers to meet today’s service demands while enabling them to transition to the fully converged, scalable, highly automated, cloud-controlled voice, data, internet and video network of the future. In addition to our global headquarters in Huntsville, Alabama and our European headquarters in Munich, Germany, we have sales and research and development facilities in strategic global locations.

Previous wording

The Company solely owns ADTRAN, Inc. and is the majority shareholder of Adtran Networks (formerly ADVA Optical Networking SE). Adtran is a leading global provider of open, disaggregated networking and communications solutions. Adtran Networks is a global provider of network solutions for wholesale mobile and data center interconnect 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.

Current wording

The Company solely owns ADTRAN, Inc. and is the majority shareholder of Adtran Networks (formerly ADVA Optical Networking SE). ADTRAN, Inc. is a leading global provider of open, disaggregated networking and communications solutions. 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 customer, especially upon the convergence of solutions at the network edge.

Previous wording

entitled to issue binding instructions to the management board of Adtran Networks, (ii) Adtran Networks will transfer its annual profit to the Company, subject to, among other things, the creation or dissolution of certain reserves, and (iii) the Company will absorb the annual net loss incurred by Adtran Networks. The Company’s payment obligation in satisfaction of the requirement that it absorb Adtran Networks’ annual net loss applied to the net loss generated by Adtran Networks in 2024, and it will apply to any net loss generated by Adtran Networks in 2025.

Current wording

entitled to issue binding instructions to the management board of Adtran Networks, (ii) Adtran Networks will transfer its annual profit to the Company, subject to, among other things, the creation or dissolution of certain reserves, and (iii) the Company will absorb the annual net loss incurred by Adtran Networks. The obligation of the Company to absorb Adtran Networks’ annual net loss applied to the net loss generated by Adtran Networks in 2024, and it will apply to any net loss generated by Adtran Networks in 2025.

Previous wording

Additionally, and subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, the DPLTA provides that Adtran Networks shareholders (other than us) be offered, at their election, (i) to put their Adtran Networks shares to the Company in exchange for compensation in cash of €17.21 per share plus guaranteed interest ("Exit Compensation"), or (ii) to remain Adtran Networks shareholders and receive a recurring compensation in cash of €0.52 per share for each full fiscal year of Adtran Networks (“Annual Recurring Compensation”). 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 2.27% as of March 31, 2025. 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 2024 fiscal year, Adtran Networks’ ordinary general shareholder meeting is scheduled for June 27, 2025, and therefore, the Annual Recurring Compensation will be due on July 2, 2025. The adequacy of both forms of compensation has been challenged by minority shareholders of Adtran Networks via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (in each case, including interest thereon) than agreed upon in the DPLTA.

Current wording

Additionally, and subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, the DPLTA provides that Adtran Networks shareholders (other than us) be offered, at their election, (i) to put their Adtran Networks shares to the Company in exchange for compensation in cash of €17.21 per share plus guaranteed interest ("Exit Compensation"), or (ii) to remain Adtran Networks shareholders and receive a recurring compensation in cash of €0.52 per share for each full fiscal year of Adtran Networks (“Annual Recurring Compensation”). 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 2.27% as of June 30, 2025. 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 2024 fiscal year, Adtran Networks’ ordinary general shareholders’ meeting occurred on June 27, 2025, and, therefore, the Annual Recurring Compensation in the amount of $10.1 million was paid on July 1, 2025. The adequacy of both forms of compensation has been challenged by minority shareholders of Adtran Networks via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (in each case, including interest thereon) than agreed upon in the DPLTA.

Previous wording

We currently hold 34,856,611 no-par value bearer shares of Adtran Networks, representing 67.0% of Adtran Networks outstanding shares as of March 31, 2025.

Current wording

As of June 30, 2025 we hold 35,706,698 no-par value bearer shares of Adtran Networks, representing 68.6% of Adtran Networks outstanding shares as of June 30, 2025.

Previous wording

We ended the first quarter of 2025 with a year-over-year revenue increase of 9.5% as compared to the three months ended March 31, 2024, driven by increased volume of sales activity due to a return of normalized customer spending, increased growth due to fiber expansion brought about by higher service provider spending, vendor consolidation due to a continuing shift away from high-risk vendors, increased demand for modernizing and upgrading critical infrastructure within governments, utilities, large enterprises, and applications, including AI. During the first quarter of 2025, we had one customer with revenues greater than 10.0%, which was an international Service Provider customer and our five largest customers comprised 38.9% of our revenue. Our year-over-year domestic revenue increased by 23.9% due to a return to normalized customer spending and fiber expansion. Internationally, our year-over-year revenue increased by 1.2%, primarily driven by fiber expansion. Our Access & Aggregation, Subscriber Solutions and Optical Networking revenue categories all experienced increased volume of sales activity due to growth across geographies, most product lines, and the continued expansion of our customer base.

Current wording

We ended the second quarter of 2025 with a year-over-year revenue increase of 17.3% as compared to the three months ended June 30, 2024, driven by increased volume of sales activity due to a return of normalized customer spending, increased growth due to fiber expansion brought about by higher service provider spending, vendor consolidation, a continuing shift away from high-risk vendors, increased demand for modernizing and upgrading critical infrastructure within governments, utilities, large enterprises, and bandwidth-hungry applications, including AI. During the second quarter of 2025, we had one customer with revenues greater than 10.0%, which was an international Service Provider customer and our five largest customers comprised 36.4% of our revenue. Our year-over-year U.S. revenue increased by 11.8% due to a return to normalized customer spending and fiber expansion. Internationally, our year-over-year revenue increased by 22.2%, primarily driven by fiber expansion. Our Access & Aggregation, Subscriber Solutions and Optical Networking revenue categories all experienced increased volume of sales activity due to growth across geographies, most product lines, and the continued expansion of our customer base.

Previous wording

Our revenues have fluctuated in recent years and they may continue to fluctuate going forward. However, during the first quarter of 2025, our operating results improved due to slowly stabilizing revenues, improving margins and tight operational cost controls. Additionally, we have taken steps to transform our business into a leaner, more efficient and more profitable company, including the completion of our Business Efficiency Program (other than our aim of selling our headquarters in Huntsville, which we expect to occur within the next 12 months). Nevertheless, our operating expenses are relatively fixed in the short term, and a shortfall in quarterly revenues consequently has previously impacted and may again in the future significantly impact our financial results in a given quarter.

Current wording

Our revenues have fluctuated in recent years and they may continue to fluctuate going forward. However, during the first half of 2025, our operating results improved due to recovery in end markets, including a decrease in inventories held by customers, improving margins and tight operational cost controls. Additionally, we have taken steps to transform our business into a leaner, more efficient and more profitable company, including the completion of our Business Efficiency Program (other than our aim of selling our headquarters in Huntsville, which we expect to occur within the next 12 months). Nevertheless, our operating expenses are relatively fixed in the short term, and a shortfall in quarterly revenues consequently has previously impacted and may again in the future significantly impact our financial results in a given quarter.

Previous wording

During the first quarter of 2025 and into May 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. At this time, it remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the U.S. or exported to other countries, tax policy related to international commerce, increased export control, sanctions and investment restrictions, import or use of foreign communications equipment, or other trade matters. These changes in U.S. trade policy and subsequent retaliatory actions have the potential to materially increase various input costs for the Company. Moreover, related costs and the uncertainty arising from such changes in trade policy may result in shifts in customer behavior, such as decreased demand. 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. See “Changes in trade policy in the U.S. and other countries, including the imposition of additional tariffs and the resulting consequences, may adversely impact our gross profits, gross margins, results of operations and financial condition,” in Part II, Item 1A “Risk Factors” of this report for further discussion of the risks associated with the changes to U.S. and foreign trade policies.

Current wording

During the first half of 2025 and continuing to the date of this filing, the U.S. introduced trade policy actions that have increased import tariffs across a wide range of countries at various rates, with certain exemptions. At this time, uncertainty remains with respect to what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the U.S. or exported to other countries, tax policy related to international commerce, increased export control, sanctions and investment restrictions, import or use of foreign communications equipment, or other trade matters. For example, the U.S. government is currently considering increasing import tariffs on various products or components, including semiconductors, and it recently increased tariffs on imports of certain critical raw minerals and derivative products relevant to our business and products. These changes in U.S. trade policy and subsequent retaliatory actions have the potential to materially increase various input costs for the Company. Moreover, related costs and the uncertainty arising from such changes in trade policy may result in shifts in customer behavior, such as decreased demand. 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. See “Changes in trade policy in the U.S. and other countries, including the imposition of additional tariffs and the resulting consequences, may adversely impact our gross profits, gross margins, results of operations and financial condition,” in Part II, Item 1A “Risk Factors” of this report for further discussion of the risks associated with the changes to U.S. and foreign trade policies.

Previous wording

No impairment of goodwill was recognized during the three months ended March 31, 2025. During the first quarter of 2024, qualitative factors such as a decrease in the Company’s market capitalization, lower service provider spending and delayed holding patterns of inventory with respect to customers caused us to reduce our forecasts, triggering a quantitative impairment assessment for our reporting units. The Company determined the fair value of the Network Solutions reporting unit using a combination of an income approach and a market-based peer group analysis. The Company determined upon its quantitative impairment assessment to recognize a $297.4 million non-cash goodwill impairment charge for the Network Solutions reporting unit during the three months ended March 31, 2024. The quantitative impairment analysis indicated there was no impairment of the Services & Support goodwill during the three months ended March 31, 2024. There have been no triggering events identified affecting the valuation of goodwill in our Services & Support reporting unit since the first quarter of 2024.

Current wording

No impairment of goodwill was recognized during the three and six months ended June 30, 2025 and the three months ended June 30, 2024. During the first quarter of 2024, qualitative factors such as a decrease in the Company’s market capitalization, lower service provider spending and delayed holding patterns of inventory with respect to customers caused us to reduce our forecasts, triggering a quantitative impairment assessment for our reporting units. The Company determined the fair value of the Network Solutions reporting unit using a combination of an income approach and a market-based peer group analysis. The Company determined upon its quantitative impairment assessment to recognize a $297.4 million non-cash goodwill impairment charge for the Network Solutions reporting unit during the six months ended June 30, 2024. The quantitative impairment analysis indicated there was no impairment of the Services & Support goodwill during the three months ended March 31, 2024. There have been no triggering events identified affecting the valuation of goodwill in our Services & Support reporting unit since the first quarter of 2024.

Previous wording

On November 6, 2023, due to the uncertainty around the then current macroeconomic environment and its impact on customer spending levels, the Company’s management decided to implement a Business Efficiency Program targeting the reduction of ongoing operating expenses and focusing on capital efficiency. This included certain salary reductions, an early retirement program, a site consolidation plan to include lease impairments and the sale of owned real estate (including the sale of our headquarters in Huntsville), inventory write downs from product discontinuances, and the suspension of the quarterly dividend. Other than the Company's aim of selling its headquarters, the Business Efficiency Program was completed as of December 31, 2024.

Current wording

On November 6, 2023, due to the uncertainty around the then current macroeconomic environment and its impact on customer spending levels, the Company’s management decided to implement a Business Efficiency Program targeting the reduction of ongoing operating expenses and focusing on capital efficiency. This included certain salary reductions, an early retirement program, a site consolidation plan to include lease impairments and the sale of owned real estate (including the sale of our headquarters in Huntsville), inventory write downs from product discontinuances, and the suspension of the quarterly dividend. The Business Efficiency Program was completed as of December 31, 2024.

Previous wording

During the three months ended March 31, 2024, we recognized $17.1 million of costs related to the Business Efficiency Program. We did not incur any Business Efficiency Program costs during the three months ended March 31, 2025. Future cash payments include previously accrued severance and outplacement fees as well as site consolidation costs that are anticipated to be approximately $3.1 million.

Current wording

We did not incur any Business Efficiency Program costs during the three and six months ended June 30, 2025. We reduced previously accrued costs by $0.3 million during the three and six months ended June 30, 2025. During the three and six months ended June 30, 2024, we recognized $17.5 million, and $34.6 million of costs related to the Business Efficiency Program. Future cash payments include previously accrued severance and outplacement fees, as well as site consolidation costs that are anticipated to be approximately $2.6 million.

Previous wording

RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2025, COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2024

Current wording

RESULTS OF OPERATIONS – THREE AND SIX MONTHS ENDED JUNE 30, 2025, COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

Previous wording

Our revenue increased 9.5% from $226.2 million for the three months ended March 31, 2024, to $247.7 million for the three months ended March 31, 2025, the increase was driven by increased volume of sales activity due to a return of normalized customer spending, increased growth due to fiber expansion brought about by higher service provider spending, vendor consolidation due to a continuing shift away from high-risk vendors, increased demand for modernizing and upgrading critical infrastructure within governments, utilities, large enterprises, and applications, including AI. The increase in revenue by category for the three months ended March 31, 2025, was primarily attributable to a $10.6 million increase in Subscriber Solutions products, and a $7.8 million increase in Access & Aggregation revenue and a $3.1 million increase in Optical Networking Solutions products. All revenue categories experienced increased volume of sales activity due to growth across geographies, most product lines, and the continued expansion of our customer base.

Current wording

Our revenue increased 17.3% from $226.0 million for the three months ended June 30, 2024, to $265.1 million for the three months ended June 30, 2025, and increased 13.4% from $452.2 million for the six months ended June 30, 2024, to $512.8 million for the six months ended June 30, 2025. The increase in revenue for the three and six months ended June 30, 2025, was driven by increased volume of sales activity due to a return of normalized customer spending, increased growth due to fiber expansion brought about by higher service provider spending, vendor consolidation, a continuing shift away from high-risk vendors, increased demand for modernizing and upgrading critical infrastructure within governments, utilities, large enterprises, and bandwidth-hungry applications, including AI, partially offset by a decrease in revenue related to installation/system integration services. The increase in revenue by category for the three months ended June 30, 2025, was primarily attributable to a $21.3 million increase in Access & Aggregation revenue, a $16.4 million increase in Optical Networking Solutions products, and a $1.4 million increase in Subscriber Solutions products. The increase in revenue by category for the six months ended June 30, 2025, was primarily attributable to a $29.1 million increase in Access & Aggregation revenue, a $19.5 million increase in Optical Networking Solutions products, and a $12.0 million increase in Subscriber Solutions products. All revenue categories for the three and six months ended June 30, 2025 experienced increased volume of sales activity due to growth across geographies, most product lines, and the continued expansion of our customer base.

Previous wording

Network Solutions segment revenue increased 11.6% from $181.3 million for the three months ended March 31, 2024, to $202.2 million for the three months ended March 31, 2025. The increase in Network Solutions revenue for the three months ended March 31, 2025, was due to an increase of $11.4 million in volume of sales activity in Subscriber Solutions products, and an increase of $8.1 million in volume of sales activity in Access & Aggregation products and an increase of $1.5 million in volume of sales activity in Optical Networking Solutions products.

Current wording

Network Solutions segment revenue increased 22.5% from $179.2 million for the three months ended June 30, 2024, to $219.5 million for the three months ended June 30, 2025, and increased 17.0% from $360.5 million for the six months ended June 30, 2024, to $421.7 million for the six months ended June 30, 2025. The increase in Network Solutions revenue by category for the three months ended June 30, 2025, was due to an increase in volume of sales activity of $23.2 million in Access & Aggregation products, $15.1 million in Optical Networking products, and $1.9 million in Subscriber Solutions products. The increase in Network Solutions revenue by category for the six months ended June 30, 2025, was due to an increase in volume of sales activity of $31.3 million in Access & Aggregation products, $16.6 million in Optical Networking products, and $13.3 million in Subscriber Solutions products.

Previous wording

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 1.2% from $142.9 million for the three months ended March 31, 2024 to $144.6 million for the three months ended March 31, 2025. International revenue, as a percentage of total revenue, decreased from 63.2% for the three months ended March 31, 2024, to 58.3% for the three months ended March 31, 2025. The increase in international revenue for the three months ended March 31, 2025, was primarily due to fiber expansion. While international revenue has decreased to approximately 58.3% and 63.2% of total revenues for the three months ended March 31, 2025 and 2024, respectively, the mix of our Network Solutions and Services & Support segments as a percentage of total international revenue remains relatively linear. For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, changes in foreign currencies relative to the U.S. dollar decreased our net revenue by approximately $1.5 million.

Current wording

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 22.2% from $118.4 million for the three months ended June 30, 2024 to $144.7 million for the three months ended June 30, 2025 and increased by 10.7% from $261.3 million for the six months ended June 30, 2024 to $289.3 million for the six months ended June 30, 2025. International revenue, as a percentage of total revenue, increased from 52.4% for the three months ended June 30, 2024, to 54.6% for the three months ended June 30, 2025, and decreased from 57.8% for the six months ended June 30, 2024, to 56.4% for the six months ended June 30, 2025. The increase in international revenue for the three and six months ended June 30, 2025, was primarily due to increased volume of sales activity due to a return of normalized customer spending and, increased growth due to fiber expansion. For the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, changes in foreign currencies relative to the U.S. dollar increased our net revenue by approximately $6.1 million and $4.5 million, respectively.

Previous wording

As a percentage of revenue, cost of revenue decreased from 68.9% for the three months ended March 31, 2024, to 61.6% for the three months ended March 31, 2025. The decrease for the three months ended March 31, 2025 was attributable to a 6.2% decrease in restructuring expense and labor cost efficiencies as a percentage of revenue in connection with our Business Efficiency Program which was completed as of December 31, 2024 (other than our aim of selling our headquarters in Huntsville, which we expect to occur within the next 12 months) a 0.5% decrease in expense as a percentage of revenue attributable to changes in foreign currencies relative to the U.S. dollar and a 0.6% decrease in expense as a percentage of revenue attributable to changes in customer and product mix. For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, changes in foreign currencies relative to the U.S. dollar decreased our cost of revenue by approximately $0.8 million.

Current wording

As a percentage of revenue, cost of revenue decreased from 64.0% for the three months ended June 30, 2024, to 62.7% for the three months ended June 30, 2025, and decreased from 66.5% for the six months ended June 30, 2024, to 62.1% for the six months ended June 30, 2025. The decrease in cost of revenue as a percentage of revenue for the three months ended June 30, 2025, was attributable to a 2.9% decrease in restructuring expense and labor cost expense as a percentage of revenue as a result of our previous Business Efficiency Program, which was completed as of December 31, 2024, partially offset by a 1.0% increase in expense as a percentage of revenue attributable to changes in foreign currencies relative to the U.S. dollar, and a 0.5% increase in expense as a percentage of revenue attributable to changes in customer and product mix. The decrease in cost of revenue as a percentage of revenue for the six months ended June 30, 2025, was attributable to a 4.9% decrease in restructuring expense and labor cost expense as a percentage of revenue as a result of our Business Efficiency Program, which was completed as of December 31, 2024, partially offset by a 0.3% increase in expense as a percentage of revenue attributable to changes in foreign currencies relative to the U.S. dollar, and a 0.3% increase in expense as a percentage of revenue attributable to changes in customer and product mix. For the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, changes in foreign currencies relative to the U.S. dollar increased our cost of revenue by approximately $2.5 million and $1.8 million, respectively.

Previous wording

Services & Support cost of revenue, as a percentage of that segment’s revenue, decreased from 41.9% for the three months ended March 31, 2024, to 40.3% for the three months ended March 31, 2025. The decrease in cost of revenue as a percentage of revenue for the three months ended March 31, 2025, was primarily attributable to a 1.0% decrease in restructuring expense and labor cost efficiencies as a percentage of revenue in connection with our Business Efficiency Program which was completed as of December 31, 2024 (other than our aim of selling our headquarters in Huntsville, which we expect to occur within the next 12 months) and a 0.3% decrease in expense as a percentage of revenue attributable to changes in foreign currencies relative to the U.S. dollar, and a 0.3% decrease in expense as a percentage of revenue attributable to changes in customer and product mix.

Current wording

Services & Support cost of revenue, as a percentage of that segment’s revenue, decreased from 42.3% for the three months ended June 30, 2024, to 41.3% for the three months ended June 30, 2025, and decreased from 42.1% for the six months ended June 30, 2024 to 40.8% for the six months ended June 30, 2025. The decrease in cost of revenue as a percentage of revenue for the three and six months ended June 30, 2025, was primarily attributable to a decrease in restructuring expense and labor cost expense as a percentage of revenue as a result of our previous Business Efficiency Program, partially offset by an increase in expense as a percentage of revenue attributable to changes in customer and product mix.

Previous wording

As a percentage of that segment's revenue, Services & Support gross profit increased from 58.1% for the three months ended March 31, 2024, to 59.7% for the three months ended March 31, 2025. The increase was primarily attributable to to a 1.0% decrease in restructuring expense and labor cost efficiencies as a percentage of revenue in connection with our Business Efficiency Program which was completed as of December 31, 2024 (other than our aim of selling our headquarters in Huntsville, which we expect to occur within the next 12 months) and a 0.7% decrease in expense as a percentage of revenue attributable to changes in foreign currencies relative to the U.S. dollar, and a 3.3% increase in expense as a percentage of revenue attributable to changes in customer and product mix.

Current wording

As a percentage of that segment's revenue, Services & Support gross profit increased from 57.7% for the three months ended June 30, 2024, to 58.7% for the three months ended June 30, 2025, and increased from 57.9% for the six months ended June 30, 2024, to 59.2% for the six months ended June 30, 2025. The increase in gross profit for the three and six months ended June 30, 2025 was primarily attributable to an increase in gross profit as a percentage of revenue due to a decrease in restructuring expense and labor cost as a result of our previous Business Efficiency Program, partially offset by a decrease in gross profit as a percentage of revenue due to changes in customer and product mix.

Previous wording

As a percentage of revenue, selling, general and administrative expenses decreased from 26.1% for the three months ended March 31, 2024, to 20.3% for the three months ended March 31, 2025. 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.

Current wording

As a percentage of revenue, selling, general and administrative expenses decreased from 26.3% for the three months ended June 30, 2024, to 22.8% for the three months ended June 30, 2025, and decreased from 26.2% for the six months ended June 30, 2024, to 21.6% for the six months ended June 30, 2025. 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.

Previous wording

Selling, general and administrative expenses decreased 14.7% from $59.0 million for the three months ended March 31, 2024, to $50.3 million for the three months ended March 31, 2025. Selling, general and administrative expenses include personnel costs for management, accounting, information technology, human resources, sales and marketing, as well as independent auditor, tax and other professional fees, contract services and legal and litigation related costs. The decrease in selling, general and administrative expenses for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily attributable to the impact of the Company's Business Efficiency Program which was completed as of December 31, 2024 (other than our aim of selling our headquarters in Huntsville, which we expect to occur within the next 12 months) resulting in reduced employee-related costs of $6.7 million. Additionally, the decrease in selling, general and administrative expenses is attributable to a decrease of $2.2 million in the amortization of intangible assets related to the Business Combination with Adtran Networks. For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, changes in foreign currencies relative to the U.S dollar decreased our selling, general and administrative expenses by approximately $0.7 million.

Current wording

Selling, general and administrative expenses increased 1.7% from $59.4 million for the three months ended June 30, 2024, to $60.3 million for the three months ended June 30, 2025, and decreased 6.5% from $118.4 million for the six months ended June 30, 2024, to $110.6 million for the six months ended June 30, 2025. Selling, general and administrative expenses include personnel costs for management, accounting, information technology, human resources, sales and marketing, as well as independent auditor, tax and other professional fees, contract services and legal and litigation related costs. The increase in selling, general and administrative expenses for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was primarily due to a $4.0 million increase in professional and legal services partially offset by a $2.5 million decrease in amortization of intangible assets related to the Business Combination. The decrease for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was primarily attributable to the impact of the Business Efficiency Program, which was completed as of December 31, 2024 (other than our aim of selling our headquarters in Huntsville), resulting in decreased employee-related costs of $6.2 million and a $4.7 million decrease in amortization of intangible assets related to the Business Combination partially offset by a $3.9 million increase in professional and legal services. For the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, changes in foreign currencies relative to the U.S dollar increased our selling, general and administrative expenses by approximately $1.2 million and $0.5 million, respectively.

Previous wording

As a percentage of revenue, research and development expenses decreased from 26.6% for the three months ended March 31, 2024, to 19.7% for the three months ended March 31, 2025. 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.

Current wording

As a percentage of revenue, research and development expenses decreased from 26.7% for the three months ended June 30, 2024, to 19.6% for the three months ended June 30, 2025, and decreased from 26.7% for the six months ended June 30, 2024, to 19.6% for the six months ended June 30, 2025. 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.

Previous wording

Research and development expenses decreased 18.9% from $60.2 million for the three months ended March 31, 2024, to $48.9 million for the three months ended March 31, 2025. The decrease in research and development expenses for the three months ended March 31, 2025, was primarily attributable to the impact of the Company's Business Efficiency Program which was completed as of December 31, 2024 (other than our aim of selling our headquarters in Huntsville, which we expect to occur within the next 12 months) resulting in reduced its employee-related costs of $8.5 million, reduced contract services of $0.7 million and reduced lease costs of $0.6 million. For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, changes in foreign currencies relative to the U.S. dollar decreased our research and development expenses by approximately $0.4 million.

Current wording

Research and development expenses decreased 14.0% from $60.4 million for the three months ended June 30, 2024, to $51.9 million for the three months ended June 30, 2025, and decreased 16.4% from $120.6 million for the six months ended June 30, 2024, to $100.8 million for the six months ended June 30, 2025. The decrease in research and development expenses for the three months ended June 30, 2025, was primarily attributable to the impact of the Business Efficiency Program, which was completed as of December 31, 2024 (other than our aim of selling our headquarters in Huntsville), resulting in a reduction of employee-related costs of $6.3 million. The decrease for the six months ended June 30, 2025, was primarily attributable to the impact of the Business Efficiency Program which was completed as of December 31, 2024 resulting in a reduction of employee-related costs of $15.4 million. For the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024, changes in foreign currencies relative to the U.S. dollar increased our research and development expenses by approximately $1.1 million and $0.7 million, respectively.

Previous wording

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, 2025 and 2024, the Company recognized $2.2 million and 1.9 million as a reduction of research and development expense, respectively.

Current wording

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 June 30, 2025 and 2024, the Company recognized $3.1 million and $2.2 million as a reduction of research and development expense, respectively. For the six months ended June 30, 2025 and 2024, the Company recognized $5.3 million and $4.1 million as a reduction of research and development expense, respectively.

Previous wording

No goodwill impairment was recognized during the first quarter ended March 31, 2025. During the first quarter of 2024, qualitative factors such as a decrease in the Company’s market capitalization, cautious service provider spending due to economic uncertainty and continued customer focus on inventory adjustments, triggered a quantitative impairment assessment for our reporting units for goodwill and long-lived assets. The Company determined upon its quantitative impairment assessment to recognize a $297.4 million non-cash goodwill impairment charge for the Network Solutions reporting unit. For additional information, see Note 8 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Current wording

No goodwill impairment was recognized during the three and six months ended June 30, 2025, and for the three months ended June 30, 2024. During the first quarter of 2024, qualitative factors such as a decrease in the Company’s market capitalization, cautious service provider spending due to economic uncertainty and continued customer focus on inventory adjustments, triggered a quantitative impairment assessment for our reporting units for goodwill and long-lived assets. The Company determined upon its quantitative impairment assessment to recognize a $297.4 million non-cash goodwill impairment charge for the Network Solutions reporting unit during the six months ended June 30, 2024. For additional information, see Note 8 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Previous wording

Interest and dividend income decreased from $0.4 million for the three months ended March 31, 2024 to $0.1 million for the three months ended March 31, 2025. The decrease 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.

Current wording

June 30, 2025. The decrease in interest and dividend income is primarily attributable to fluctuations in investment balances and a decrease in the rate of return on those investments due to interest rate movements.

Previous wording

Interest expense increased from $4.6 million for the three months ended March 31, 2024, to $4.8 million for the three months ended March 31, 2025. The increase in interest expense during the three months ended March 31, 2025, was primarily driven by higher interest costs incurred related to the sale of accounts receivable related to our receivables purchase agreement. See Note 2 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for additional information.

Current wording

Interest expense decreased from $6.9 million for the three months ended June 30, 2024, to $4.6 million for the three months ended June 30, 2025, and decreased from $11.5 million for the six months ended June 30, 2024, to $9.3 million for the six months ended June 30, 2025. The decrease in interest expense during the three and six months ended June 30, 2025, was primarily driven by lower program fee expenses related to our accounts receivable factoring program, as well as reduced expense associated with amending of our revolving credit agreement. See Note 2 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for additional information.

Previous wording

We recognized a net investment gain of $2.3 million for the three months ended March 31, 2024 and a net investment loss of $1.7 million for the three months ended March 31, 2025. The fluctuations in our net investments were primarily attributable to changes in the fair value of our securities recognized during the period. We expect that any future market volatility could result in continued fluctuations in our investment portfolio. 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.

Current wording

We recognized a net investment gain of $0.9 million and $3.1 million for the three months ended June 30, 2024 and 2025, respectively and recognized a net investment gain of $3.1 million and $1.4 million for the six months ended June 30, 2024, and 2025, respectively. The fluctuations in our net investments were primarily attributable to changes in the fair value of our securities recognized during the period. We expect that any future market volatility could result in continued fluctuations in our investment portfolio. 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.

Previous wording

Other income, net, which primarily consisted of gains and losses on foreign currency transactions and income from excess material sales, decreased from income of $1.3 million for the three months ended March 31, 2024 to income of $0.9 million for the three months ended March 31, 2025.

Current wording

Other (expense) income, net, which primarily consisted of gains and losses on foreign currency transactions and income from excess material sales, increased from expense of $0.9 million for the three months ended June 30, 2024 to expense of $2.6 million for the three months ended June 30, 2025 and decreased from income of $0.4 million for the six months ended June 30, 2024 to expense of $1.7 million for the six months ended June 30, 2025.

Previous wording

The Company's effective tax rate changed from a benefit of 5.4% of pre-tax loss for the three months ended March 31, 2024, to a benefit of 4.2% of pre-tax loss for the three months ended March 31, 2025 The change in the effective tax rate for the three months ended March 31, 2025, was driven primarily by loss jurisdictions for which the recognition of tax benefits on pre-tax losses incurred during the first quarter of 2025 were limited due to valuation allowance.

Current wording

The Company's effective tax rate changed from an expense of 4.7% of pre-tax loss for the three months ended June 30, 2024, to an expense of 5.9% of pre-tax loss for the three months ended June 30, 2025 and changed from a benefit of 4.2% of pre-tax loss for the six months ended June 30, 2024, to an expense of 2.3% of pre-tax loss for the six months ended June 30, 2025. The changes in the effective tax rate for the three and six months ended June 30, 2025, were driven primarily by non-deductible impairment charges and a loss jurisdiction for which no tax benefits were recognized on its pre-tax losses incurred during the six months ended June 30, 2025.

Previous wording

As a result of the above factors, net loss attributable to ADTRAN Holdings, Inc. decreased from net loss of $330.8 million for the three months ended March 31, 2024, to a net loss of $11.3 million for the three months ended March 31, 2025.

Current wording

As a result of the above factors, net loss attributable to ADTRAN Holdings, Inc. decreased from net loss of $49.7 million for the three months ended June 30, 2024, to a net loss of $20.5 million for the three months ended June 30, 2025, and decreased from net loss of $380.4 million for the six months ended June 30, 2024, to a net loss of $31.8 million for the six months ended June 30, 2025.

Previous wording

We have historically financed our ongoing business with existing cash, investments and cash flow from operations; however, we have increasingly relied upon our credit arrangements to manage our working capital needs. We had a positive cash flow from operating activities of $43.2 million in the three months ended March 31, 2025. 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.

Current wording

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 $75.3 million in the six months ended June 30, 2025. 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.

Previous wording

As of March 31, 2025, our cash on hand was $101.3 million of which $83.0 million was held by our foreign subsidiaries. As of March 31, 2025 and the date of this filing the Company had access to $25.8 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. As of December 31, 2024, our cash on hand was $76.0 million, of which $52.6 million was held by our foreign subsidiaries.

Current wording

As of June 30, 2025, our cash on hand was $106.3 million of which $87.2 million was held by our foreign subsidiaries. The Company had access to $156.5 million on its Credit Facility for future borrowings; however, as of June 30, 2025 and the date of this filing, the Company was limited to additional borrowings of $66.8 million 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. As of December 31, 2024, our cash on hand was $76.0 million, of which $52.6 million was held by our foreign subsidiaries.

Previous wording

Pursuant to the terms of the DPLTA, each Adtran Networks shareholder (other than the Company) has received an offer to elect either (1) to remain an Adtran Networks shareholder and receive from us an Annual Recurring Compensation payment, or (2) to receive Exit Compensation plus guaranteed interest. The guaranteed interest under the Exit Compensation is calculated from the effective date of the DPLTA to the date the shares are tendered, less any Annual Recurring Compensation paid. The guaranteed interest rate is 5.0% plus a variable component (according to the German Civil Code) that was 2.27% as of March 31, 2025. Assuming all the minority holders of currently outstanding Adtran Networks shares were to elect the second option, we would be obligated to make aggregate Exit Compensation payments, including guaranteed interest, of approximately €338.5 million or approximately $366.1 million, based on an exchange rate as of March 31, 2025, and reflecting interest accrued through March 31, 2025, during the pendency of the appraisal proceedings discussed below. Shareholders electing the first option of Annual Recurring Compensation may later elect the second option. The opportunity for outside Adtran Networks shareholders to tender Adtran Networks shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that were initiated in 2023 in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger). The Company expects to receive a ruling on a procedural matter in the DPLTA appraisal proceedings during the latter half of 2025 or 2026, which ruling, depending on outcome, will likely be appealed and may take 6-12 months to be decided on appeal. The Company does not expect that a trial on the merits of the DPLTA appraisal proceedings will commence until the procedural matter has been resolved. The proceeding for the trial on the merits of the DPLTA will likely take a minimum of 12 months for a ruling and such ruling may likewise be appealed, which would be expected to take an additional 12-24 months to be resolved. Accordingly, the Company does not expect a final decision on the DPLTA appraisal proceedings to be rendered and published prior to 2027, and most likely not until 2028 or beyond.

Current wording

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 2.27% as of June 30, 2025. Assuming all the minority holders of currently outstanding Adtran Networks shares were to elect the second option, we would be obligated to make aggregate Exit Compensation payments, including guaranteed interest, of approximately €326.8 million or $385.2 million, based on an exchange rate as of June 30, 2025, and reflecting interest accrued through June 30, 2025 during the pendency of the appraisal proceedings discussed below. Shareholders electing the first option of Annual Recurring Compensation may later elect the second option. The opportunity for outside Adtran Networks shareholders to tender Adtran Networks shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that were initiated in 2023 in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger). The court has decided a procedural matter in the DPLTA appraisal proceedings; the parties may or may not choose to appeal such decision, if able, and the proceeding for the trial on the merits of the DPLTA will continue. 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.

Previous wording

Additionally, our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately €8.9 million or $9.7 million (based on the current exchange rate) per year assuming none of the minority Adtran Networks shareholders were to elect Exit Compensation. The foregoing amounts do not reflect any potential increase in payment obligations that we may have depending on the outcome of ongoing appraisal proceedings in Germany. The Annual Recurring Compensation is due on the third banking day following the ordinary general shareholders’ meeting of Adtran Networks for the respective preceding fiscal year (but in any event within eight months following expiration of the fiscal year). With respect to the 2023 fiscal year, Adtran Networks’ ordinary general shareholders’ meeting occurred on June 28, 2024 and, therefore, the Annual Recurring Compensation was paid on July 3, 2024. With respect to the 2024 fiscal year, Adtran Networks’ ordinary general shareholder meeting is scheduled for June 27, 2025, and therefore, the Annual Recurring Compensation will be due on July 2, 2025. During the three months ended March 31, 2025 and 2024, we accrued $2.4 million and $2.5 million, respectively, in Annual Recurring Compensation. The Annual Recurring Compensation is reflected as an increase to retained deficit in the Condensed Consolidated Balance Sheets.

Current wording

Additionally, our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately €8.5 million or $10.0 million (based on the exchange rate as of June 30, 2025) per year assuming none of the minority Adtran Networks shareholders were to elect Exit Compensation. The foregoing amounts do not reflect any potential increase in payment obligations that we may have depending on the outcome of ongoing appraisal proceedings in Germany. The Annual Recurring Compensation is due on the third banking day following the ordinary general shareholders’ meeting of Adtran Networks for the respective preceding fiscal year (but in any event within eight months following expiration of the fiscal year). With respect to the 2023 fiscal year, Adtran Networks’ ordinary general shareholders’ meeting occurred on June 28, 2024; therefore, the Annual Recurring Compensation was paid on July 3, 2024. With respect to the 2024 fiscal year, Adtran Networks’ ordinary general shareholder meeting occurred on June 27, 2025, and therefore, the Annual Recurring Compensation in the amount of $10.1 million was paid on July 1, 2025. During the three months ended June 30, 2025 and 2024, we accrued $2.4 million and $2.5 million, respectively, in Annual Recurring Compensation. During the six months ended June 30, 2025 and 2024, we accrued $4.8 million and $5.0 million, respectively, in Annual Recurring Compensation. The Annual Recurring Compensation is reflected as an increase to retained deficit in the Condensed Consolidated Balance Sheets.

Previous wording

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 four times. As of the date of this filing the Company had access to $25.8 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. See Note 10, Revolving Credit Agreements for additional information regarding the terms of the Wells Fargo Credit Agreement.

Current wording

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 five times. As of both June 30 2025 and the date of this filing, the Company was limited to additional borrowings of $66.8 million based on debt covenant compliance metrics. The financial covenants under the Credit Agreement, as amended, require the Company to maintain a Consolidated Total Net Leverage Ratio of 5.00x, 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. See Note 10, Credit Agreements for additional information regarding the terms of the Wells Fargo Credit Agreement.

Previous wording

As of March 31, 2025, 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 does not have sufficient liquidity to meet the substantial majority of its payment obligations under the DPLTA pertaining to Exit Compensation. For the three months ended March 31, 2025 and 2024, less than one thousand shares of Adtran Networks stock were tendered to the Company and Exit Compensation payments of approximately €12 thousand and €4 thousand, respectively, or approximately $13 thousand and $5 thousand based on the applicable exchange rates at the time of the transactions, were paid to Adtran Networks shareholders. In addition, between March 31, 2025 and the date of this report, 0.4 million shares of Adtran Networks stock were tendered to the Company and Exit Compensation payments of approximately €7.0 million, or $7.5 million, based on the applicable exchange rate at the time of the transaction, will be paid to Adtran Networks shareholders. We believe the probability that more than a small minority of Adtran Networks shareholders elect to receive Exit Compensation in the next twelve months is remote based on the following factors: (i) the shareholders can exercise their right to receive the Exit Compensation until two months after publication of the final decision in the appraisal proceedings and we do not expect the final decision to be published within the next 12 months; (ii) the diverse base of shareholders that must make this election on an individual shareholder basis; (iii) the fact that the Company expects to receive a procedural decision during 2025 or 2026 that will likely be appealed and, while the date of a decision by the court on the merits of the case is uncertain, it will likely take a minimum of 12 months for a ruling and thereafter, an expected appeal process will take a further 12-24 months to resolve; (iv) the current guaranteed Annual Recurring Compensation payment; and (v) the current trading value of Adtran Networks shares.

Current wording

As of June 30, 2025, 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 does not have sufficient liquidity to meet payment obligations under the DPLTA pertaining to Exit Compensation. 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. For the three and six months ended June 30, 2024, approximately one thousand shares of Adtran Networks stock were tendered to the Company. This resulted in Exit Compensation payments of approximately €19 thousand and €23 thousand, respectively, or $20 thousand and $25 thousand, respectively, based on the applicable exchange rates at the time of the transactions, being paid to Adtran Networks shareholders. We believe the probability that more than a small minority of Adtran Networks shareholders elect to receive Exit Compensation in the next twelve months is remote based on the following factors: (i) the shareholders can exercise their right to receive the Exit Compensation until two months after publication of the final decision in the appraisal proceedings and we do not expect the final decision to be published within the next 12 months; (ii) the diverse base of shareholders that must make this election on an individual shareholder basis; (iii) the fact that the 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.

Previous wording

The Company experienced revenue declines in the year ended December 31, 2024. However, customers have started to replenish their inventories to meet increasing demand and we expect orders and billings to increase during the remainder of 2025. The Company continues to implement plans to preserve cash liquidity to maintain compliance with the Company’s covenants in case of further we are impacted by customer inventory reduction initiatives and uncertain macroeconomic conditions. Additionally, the Company suspended dividend payments and effectuated a Business Efficiency Program, which targeted the reduction of ongoing operating expenses and focused on enhancing capital efficiency. The Business Efficiency Program was completed as of December 31, 2024, other than the Company's aim of selling its headquarters. The Company has determined that it is probable that the sale of its headquarters in Huntsville will occur within the next twelve months after December 31, 2024. The Company expects to use the proceeds of the sale to repay indebtedness. The Company may need to further reduce capital expenditures and/or take other steps to preserve working capital in order to ensure that it can meet its needs and obligations and maintain compliance with its debt covenants.

Current wording

Business Efficiency Program, which targeted the reduction of ongoing operating expenses and focused on enhancing capital efficiency. The Business Efficiency Program was completed as of December 31, 2024. The Company has determined that it is probable that the sale of its headquarters in Huntsville will occur within the next twelve months after December 31, 2024. The Company expects to use the proceeds of the sale to repay indebtedness. The Company may need to further reduce capital expenditures and/or take other steps to preserve working capital in order to ensure that it can meet its needs and obligations and maintain compliance with its debt covenants.

Previous wording

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), 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, Revolving 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.

Current wording

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), 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.