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 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.

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 nine months ended September 30, 2024, among other periods as previously disclosed. See Note 1 and 20 to the Condensed Consolidated Financial Statements included in Part I, Item, 1 for additional information.

Previous 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.

Current wording

The Company solely owns ADTRAN, Inc. and is the majority shareholder of Adtran Networks. 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

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.

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 cash payment 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 1.27% as of September 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

In addition to our cash and cash equivalents and the credit facility, we may fund a portion or all of the Exit Compensation through the sale of securities or additional alternative funding sources, if available. There can be no assurances that we would be successful in effecting these actions on commercially reasonable terms or at all. If we cannot raise additional funds as needed, it could have a material adverse impact on our financial results and financial condition.

Current wording

In addition to our cash, cash equivalents and restricted cash and the credit facility, we may fund a portion or all of the Exit Compensation through the sale of securities or additional alternative funding sources, if available. There can be no assurances that we would be successful in effecting these actions on commercially reasonable terms or at all. If we cannot raise additional funds as needed, it could have a material adverse impact on our financial results and financial condition.

Previous 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.

Current wording

As of September 30, 2025 we hold 35,706,749 no-par value bearer shares of Adtran Networks, representing 68.6% of Adtran Networks outstanding shares as of September 30, 2025.

Previous 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.

Current wording

We ended the third quarter of 2025 with a year-over-year revenue increase of 22.7% as compared to the three months ended September 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 third 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 30.6% of our revenue. Our year-over-year U.S. revenue increased by 17.2% due to a return to normalized customer spending and fiber expansion. Internationally, our year-over-year revenue increased by 27.2%, primarily driven by fiber expansion. For the third quarter of 2025 our Access & Aggregation, Subscriber Solutions and Optical Networking revenue categories all experienced increased volume of sales activity year-over-year 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 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.

Current wording

Our revenues have fluctuated in recent years and they may continue to fluctuate going forward. However, during the nine months ended September 30, 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 (the "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 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.

Current wording

During the nine months ended September 30, 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

On July 4, 2025, the “One Big Beautiful Bill Act” (OBBBA) was signed into law, which constitutes the enactment date of the tax reconciliation bill under U.S. GAAP. Key corporate tax provisions include the restoration of 100% bonus depreciation, expensing of domestic research and experimental expenditures under Section 174A, modifications to Section 163(j) interest expense limitations, updates to the rules governing global intangible low-taxed income and foreign-derived intangible income, amendments to energy credits, and expanded Section 162(m) aggregation requirements. In accordance with ASC 740, the effects of the new tax law will be recognized in the period of enactment. The Company is currently evaluating the impact of the OBBBA, and an estimate of the financial effect is not yet available.

Current wording

On July 4, 2025, the “One Big Beautiful Bill Act” (OBBBA) was signed into law in the U.S. Key corporate tax provisions include the restoration of 100% bonus depreciation, expensing of domestic research and experimental expenditures under Section 174A, modifications to Section 163(j) interest expense limitations, updates to the rules governing global intangible low-taxed income and foreign-derived intangible income, amendments to energy credits, and expanded Section 162(m) aggregation requirements. In accordance with ASC 740, the effects of the new tax law will be recognized in the period of enactment. The Company is currently evaluating the impact of the OBBBA, however, it is not currently expected to materially impact the Company’s effective tax rate or cash flows in the current fiscal year.

Previous 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.

Current wording

No impairment of goodwill was recognized during the three and nine months ended September 30, 2025 and the three months ended September 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 nine months ended September 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. 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 the 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

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.

Current wording

We did not incur any Business Efficiency Program costs during the three and nine months ended September 30, 2025. We reduced previously accrued costs by $0.3 million during the nine months ended September 30, 2025. During the three and nine months ended September 30, 2024, we recognized $5.9 million, and $40.6 million of costs related to the Business Efficiency Program. Future cash payments include previously accrued severance and outplacement fees, as well as site consolidation costs that are anticipated to be approximately $1.6 million.

Previous wording

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

Current wording

RESULTS OF OPERATIONS – THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025, COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

Previous 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.

Current wording

Our revenue increased 22.7% from $227.7 million for the three months ended September 30, 2024, to $279.4 million for the three months ended September 30, 2025, and increased 16.5% from $679.9 million for the nine months ended September 30, 2024, to $792.2 million for the nine months ended September 30, 2025. The increase in revenue for the three and nine months ended September 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 September 30, 2025, was primarily attributable to a $33.0 million increase in Optical Networking Solutions products and services, a $11.0 million increase in Subscriber Solutions products and services and a $7.7 million increase in Access & Aggregation products and services. The increase in revenue by category for the nine months ended September 30, 2025, was primarily attributable to a $52.5 million increase in Optical Networking Solutions products and services, a $36.9 million increase in Access & Aggregation products and services, and a $23.0 million increase in Subscriber Solutions products and services. All revenue categories for the three and nine months ended September 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 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.

Current wording

Network Solutions segment revenue increased 28.1% from $181.5 million for the three months ended September 30, 2024, to $232.5 million for the three months ended September 30, 2025, and increased 20.7% from $542.0 million for the nine months ended September 30, 2024, to $654.3 million for the nine months ended September 30, 2025. The increase in Network Solutions revenue by category for the three months ended September 30, 2025, was due to an increase in volume of sales activity of $31.2 million in Optical Networking products, $11.7 million in Subscriber Solutions products and a $8.1 million in Access & Aggregation products. The increase in Network Solutions revenue by category for the nine months ended September 30, 2025, was due to an increase in volume of sales activity of $47.9 million in Optical Networking products, $39.4 million in Access & Aggregation products and $25.0 million in Subscriber Solutions products.

Previous wording

Services & Support segment revenue decreased 2.6% from $46.8 million for the three months ended June 30, 2024, to $45.6 million for the three months ended June 30, 2025, and decreased 0.7% from $91.7 million for the six months ended June 30, 2024, to $91.1 million for the six months ended June 30, 2025. The decrease in Services & Support revenue by category for the three months ended June 30, 2025, was primarily attributable to a decrease in installation/system integration services of $1.9 million in Access & Aggregation and $0.6 million in Subscriber Solutions, partially offset by a $1.3 million increase in Optical Networking services. The decrease in Services & Support revenue by category for the six months ended June 30, 2025, was primarily attributable to a decrease in installation/system integration services of $2.2 million in Access & Aggregation and $1.3 million in Subscriber Solutions, partially offset by a $2.9 million increase in Optical Networking services.

Current wording

Services & Support segment revenue increased 1.5% from $46.2 million for the three months ended September 30, 2024, to $46.9 million for the three months ended September 30, 2025, and increased 0.1% from $137.9 million for the nine months ended September 30, 2024, to $138.0 million for the nine months ended September 30, 2025. The increase in Services & Support revenue by category for the three months ended September 30, 2025, was primarily attributable to a $1.7 million increase in Optical Networking services, partially offset by a decrease in installation/system integration services of $0.7 million in Subscriber Solutions and $0.4 million in Access & Aggregation. The increase in Services & Support revenue by category for the nine months ended September 30, 2025, was primarily attributable to a $4.6 million increase in Optical Networking services, partially offset by a decrease in installation/system integration services of $2.5 million in Access & Aggregation and $2.0 million in Subscriber Solutions.

Previous wording

U.S. revenue increased by 11.8% from $107.6 million for the three months ended June 30, 2024, to $120.3 million for the three months ended June 30, 2025, and increased by 17.1% from $190.9 million for the six months ended June 30, 2024, to $223.5 million for the six months ended June 30, 2025. The increase in U.S. revenue for the three and six months ended June 30, 2025, was primarily due to an increase in volume of sales activity due to a return of normalized customer spending and increased growth due to fiber expansion.

Current wording

U.S. revenue increased by 17.2% from $102.5 million for the three months ended September 30, 2024, to $120.2 million for the three months ended September 30, 2025, and increased by 17.1% from $293.4 million for the nine months ended September 30, 2024, to $343.7 million for the nine months ended September 30, 2025. The increase in U.S. revenue for the three and nine months ended September 30, 2025, was primarily due to an increase in volume of sales activity due to a return of normalized customer spending and increased growth due to fiber expansion.

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 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.

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 27.2% from $125.2 million for the three months ended September 30, 2024 to $159.2 million for the three months ended September 30, 2025 and increased by 16.1% from $386.4 million for the nine months ended September 30, 2024 to $448.5 million for the nine months ended September 30, 2025. International revenue, as a percentage of total revenue, increased from 55.0% for the three months ended September 30, 2024, to 57.0% for the three months ended September 30, 2025, and decreased from 56.8% for the nine months ended September 30, 2024, to 56.6% for the nine months ended September 30, 2025. The increase in international revenue for the three and nine months ended September 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 nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, changes in foreign currencies relative to the U.S. dollar increased our net revenue by approximately $5.7 million and $10.2 million, respectively.

Previous 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.

Current wording

As a percentage of revenue, cost of revenue decreased from 63.5% for the three months ended September 30, 2024, to 61.7% for the three months ended September 30, 2025, and decreased from 65.5% for the nine months ended September 30, 2024, to 62.0% for the nine months ended September 30, 2025. The decrease in cost of revenue as a percentage of revenue for the three months ended September 30, 2025, was attributable to a 0.7% 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 and a 2.0% decrease in expense as a percentage of revenue attributable to changes in customer and product mix, partially offset by a 0.8% increase in expense as a percentage of revenue attributable to changes in foreign currencies relative to the U.S. dollar. The decrease in cost of revenue as a percentage of revenue for the nine months ended September 30, 2025, was attributable to a 3.3% 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, and a 0.7% decrease in expense as a percentage of revenue attributable to changes in customer and product mix, partially offset by a 0.5% increase in expense as a percentage of revenue attributable to changes in foreign currencies relative to the U.S. dollar. For the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, changes in foreign currencies relative to the U.S. dollar increased our cost of revenue by approximately $3.1 million and $4.9 million, respectively.

Previous wording

Network Solutions cost of revenue, as a percentage of that segment’s revenue, decreased from 69.7% for the three months ended June 30, 2024, to 67.1% for the three months ended June 30, 2025, and decreased from 72.7% for the six months ended June 30, 2024, to 66.8% for the six months ended June 30, 2025. The decrease in Network Solutions cost of revenue as a percentage of revenue for the three months ended June 30, 2025, was attributable to a 2.3% decrease in expense as a percentage of revenue attributable to changes in customer and product mix, and a 1.3% 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 a 1.1% increase in expense as a percentage of revenue attributable to changes in foreign currencies relative to the U.S. dollar. The decrease in Network Solutions cost of revenue as a percentage of revenue for the six months ended June 30, 2025, was attributable to a 4.8% decrease in restructuring expense and labor cost expense as a percentage of revenue as a result of our prior Business Efficiency Program and a 1.4% decrease in expense as a percentage of revenue attributable to changes in customer and product mix, 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.

Current wording

Network Solutions cost of revenue, as a percentage of that segment’s revenue, decreased from 70.5% for the three months ended September 30, 2024, to 65.8% for the three months ended September 30, 2025, and decreased from 72.0% for the nine months ended September 30, 2024, to 66.4% for the nine months ended September 30, 2025. The decrease in Network Solutions cost of revenue as a percentage of revenue for the three months ended September 30, 2025, was attributable to a 4.4% decrease in expense as a percentage of revenue attributable to changes in customer and product mix, and a 1.2% 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 a 0.9% increase in expense as a percentage of revenue attributable to changes in foreign currencies relative to the U.S. dollar. The decrease in Network Solutions cost of revenue as a percentage of revenue for the nine months ended September 30, 2025, was attributable to a 3.4% decrease in restructuring expense and labor cost expense as a percentage of revenue as a result of our prior Business Efficiency Program and a 2.7% decrease in expense as a percentage of revenue attributable to changes in customer and product mix, partially offset by a 0.5% increase in expense as a percentage of revenue attributable to changes in foreign currencies relative to the U.S. dollar.

Previous 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.

Current wording

Services & Support cost of revenue, as a percentage of that segment’s revenue, increased from 36.1% for the three months ended September 30, 2024, to 40.9% for the three months ended September 30, 2025, and increased from 40.1% for the nine months ended September 30, 2024 to 40.8% for the nine months ended September 30, 2025. The increase in cost of revenue as a percentage of revenue for the three and nine months ended September 30, 2025, was primarily attributable to an increase in expense as a percentage of revenue attributable to changes in customer and product mix, partially offset by a decrease in restructuring expense and labor cost expense as a percentage of revenue as a result of our previous Business Efficiency Program.

Previous 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.

Current wording

As a percentage of that segment's revenue, Services & Support gross profit decreased from 63.9% for the three months ended September 30, 2024, to 59.1% for the three months ended September 30, 2025, and decreased from 59.9% for the nine months ended September 30, 2024, to 59.2% for the nine months ended September 30, 2025. The decrease in gross profit for the three and nine months ended September 30, 2025 was primarily attributable to a decrease in gross profit as a percentage of revenue due to changes in customer and product mix, partially offset by 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.

Previous 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.

Current wording

As a percentage of revenue, selling, general and administrative expenses decreased from 25.3% for the three months ended September 30, 2024, to 20.8% for the three months ended September 30, 2025, and decreased from 25.9% for the nine months ended September 30, 2024, to 21.3% for the nine months ended September 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 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.

Current wording

Selling, general and administrative expenses increased 1.2% from $57.6 million for the three months ended September 30, 2024, to $58.2 million for the three months ended September 30, 2025, and decreased 4.0% from $175.9 million for the nine months ended September 30, 2024, to $168.9 million for the nine months ended September 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 September 30, 2025, compared to the three months ended September 30, 2024, was primarily due to a $2.4 million increase in employee related costs and a $1.5 million increase in professional and legal services partially offset by a $3.1 million decrease in acquisition expenses and amortization of intangible assets related to the business combination with Adtran Networks SE (the "Business Combination"). The decrease for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was primarily attributable to the a $10.5 million decrease in acquisition expenses and amortization of intangible assets related to the Business Combination and a decrease of $3.8 million in employee-related costs, partially offset by a $5.4 million increase in professional and legal services and a $1.2 million increase in travel related expenses. For the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, changes in foreign currencies relative to the U.S dollar increased our selling, general and administrative expenses by approximately $1.3 million and $1.8 million, respectively.

Previous 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.

Current wording

As a percentage of revenue, research and development expenses decreased from 22.7% for the three months ended September 30, 2024, to 18.5% for the three months ended September 30, 2025, and decreased from 25.3% for the nine months ended September 30, 2024, to 19.2% for the nine months ended September 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 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.

Current wording

Research and development expenses increased less than 1.0% from $51.6 million for the three months ended September 30, 2024, to $51.7 million for the three months ended September 30, 2025, and decreased 11.4% from $172.1 million for the nine months ended September 30, 2024, to $152.4 million for the nine months ended September 30, 2025. The increase in research and development expenses for the three months ended September 30, 2025, was primarily attributable to an increase in employee-related costs of $1.6 million, partially offset by a decrease in licenses, permits of $0.6 million, a decrease in professional services of $0.4 million and an increase in project subsidies of $0.3 million. The decrease in research and development expenses for the nine months ended September 30, 2025, was primarily attributable to a decrease in employee-related costs of $11.5 million, a decrease in licenses and permits of $1.6 million, an increase in project subsidies of $1.6 million and a decrease in professional services of $0.8 million. For the three and nine months ended September 30, 2025 as compared to the three and nine months ended September 30, 2024, changes in foreign currencies relative to the U.S. dollar increased our research and development expenses by approximately $1.4 million and $2.1 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 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.

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 September 30, 2025 and 2024, the Company recognized $2.9 million and $2.5 million as a reduction of research and development expense, respectively. For the nine months ended September 30, 2025 and 2024, the Company recognized $8.3 million and $6.6 million as a reduction of research and development expense, respectively.

Previous 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.

Current wording

No goodwill impairment was recognized during the three and nine months ended September 30, 2025, and for the three months ended September 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 nine months ended September 30, 2024. For additional information, see Note 9 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 June 30, 2024, to $0.2 million for the three months ended June 30, 2025 and decreased from $0.8 million for the six months ended June 30, 2024, to $0.3 million for the six months ended

Current wording

Interest and dividend income decreased from $0.7 million for the three months ended September 30, 2024, to $0.3 million for the three months ended September 30, 2025 and it decreased from $1.4 million for the nine months ended September 30, 2024, to $0.6 million for the nine months ended September 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 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.

Current wording

Interest expense decreased from $5.7 million for the three months ended September 30, 2024, to $5.5 million for the three months ended September 30, 2025, and decreased from $17.2 million for the nine months ended September 30, 2024, to $14.8 million for the nine months ended September 30, 2025. The decrease in interest expense during the three and nine months ended September 30, 2025, was primarily driven by a decrease in amortization of debt issuance costs related to the delayed draw term loan facility under the revolving credit agreement which expired in the third quarter of 2024, decreased interest expense under the revolving credit agreement partially offset by interest expense on the newly issued convertible senior notes. See Note 11 and Note 12 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 $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.

Current wording

We recognized a net investment gain of $1.4 million and $2.2 million for the three months ended September 30, 2024 and 2025, respectively and recognized a net investment gain of $4.5 million and $3.6 million for the nine months ended September 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 6 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 (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.

Current wording

Other income (expense), net, which primarily consisted of gains and losses on foreign currency transactions and income from excess material sales, decreased from expense of $0.9 million for the three months ended September 30, 2024 to expense of $0.7 million for the three months ended September 30, 2025 and increased from expense of $0.4 million for the nine months ended September 30, 2024 to expense of $2.4 million for the nine months ended September 30, 2025.

Previous 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.

Current wording

The Company's effective tax rate changed from an expense of 1.4% of pre-tax loss for the three months ended September 30, 2024, to an expense of 18.3% of pre-tax loss for the three months ended September 30, 2025 and changed from a benefit of 3.9% of pre-tax loss for the nine months ended September 30, 2024, to an expense of 5.5% of pre-tax loss for the nine months ended September 30, 2025. The changes in the effective tax rate for the three and nine months ended September 30, 2025, were driven primarily by loss jurisdictions for which the recognition of tax benefits on pre-tax losses incurred during the three and nine months ended September 30, 2025 were limited due to a valuation allowance.

Previous 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.

Current wording

As a result of the above factors, net loss attributable to ADTRAN Holdings, Inc. decreased from net loss of $33.3 million for the three months ended September 30, 2024, to a net loss of $10.3 million for the three months ended September 30, 2025, and decreased from net loss of $413.8 million for the nine months ended September 30, 2024, to a net loss of $42.1 million for the nine months ended September 30, 2025.

Previous 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.

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 positive cash flow from operating activities of $87.5 million in the nine months ended September 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 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.

Current wording

As of September 30, 2025, our cash, cash equivalents and restricted cash was $101.2 million of which $76.5 million was held by our foreign subsidiaries. The Company had access to $319.2 million on its Credit Facility for future borrowings; however, as of September 30, 2025 and the date of this filing, the Company was limited to additional borrowings of $232.0 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 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.

Current 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 1.27% as of September 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 €322.7 million or $378.7 million, based on an exchange rate as of September 30, 2025, and reflecting interest accrued through September 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). 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. 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 €8.5 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.

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 September 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 September 30, 2025 and 2024, we accrued $2.5 million and $2.4 million, respectively, in Annual Recurring Compensation. During the nine months ended September 30, 2025 and 2024, we accrued $7.5 million and $7.4 million, respectively, in Annual Recurring Compensation. The Annual Recurring Compensation is reflected as an increase to retained deficit.

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 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.

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 six times. As of both September 30, 2025 and the date of this filing, the Company was limited to additional borrowings of $232.0 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. 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. See Note 11, Credit Agreement of the Notes to 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.

Previous 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.

Current wording

As of September 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 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 nine months ended September 30, 2025, less than one thousand and approximately 0.9 million shares, respectively, of Adtran Networks stock were tendered to the Company. This resulted in total Exit Compensation payments of approximately €16.9 million, or $19.9 million based on the applicable exchange rates at the time of the transactions, being paid to Adtran Networks shareholders. For the three and nine months ended September 30, 2024, 0.8 million shares of Adtran Networks stock were tendered to the Company. This resulted in total Exit Compensation payments of approximately €15.7 million and $17.4 million, 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.