ADTRAN Holdings, Inc.

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 1.27% as of June 30, 2026. The Annual Recurring Compensation is due on the third banking day following the ordinary general shareholders’ meeting of Adtran Networks for the respective preceding fiscal year (but in any event within eight months following expiration of the fiscal year). With respect to the 2025 fiscal year, Adtran Networks’ ordinary general shareholders’ meeting occurred on June 15, 2026 and, therefore, the Annual Recurring Compensation was paid after the general shareholders’ meeting in the amount of $8.9 million. The adequacy of both forms of compensation has been challenged by minority shareholders of Adtran Networks via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (including interest thereon) than agreed upon in the DPLTA.

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 1.52% as of September 30, 2026. The Annual Recurring Compensation is due on the third banking day following the ordinary general shareholders’ meeting of Adtran Networks for the respective preceding fiscal year (but in any event within eight months following expiration of the fiscal year). With respect to the 2025 fiscal year, Adtran Networks’ ordinary general shareholders’ meeting occurred on June 15, 2026 and, therefore, the Annual Recurring Compensation was paid after the general shareholders’ meeting in the amount of $8.9 million. The adequacy of both forms of compensation has been challenged by minority shareholders of Adtran Networks via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (including interest thereon) than agreed upon in the DPLTA.

Previous wording

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 trial on the merits of the DPLTA has recommenced. Following the effective date of the DPLTA on January 16, 2023, certain Adtran Networks shareholders filed lawsuits against the Company in the Regional Court Meiningen, Germany challenging the Exit Compensation offered under the DPLTA. The Regional Court Meiningen has not yet ruled on the shareholders' claims. After the Regional Court Meiningen issues an opinion, an appeal is likely to follow, and thus the Company does not anticipate a final decision on the shareholders' claims until late 2027 or 2028.

Current wording

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 trial on the merits of the DPLTA has recommenced. Following the effective date of the DPLTA on January 16, 2023, certain Adtran Networks shareholders filed lawsuits against the Company in the Regional Court Meiningen, Germany challenging the Exit Compensation offered under the DPLTA. The Regional Court Meiningen has not yet ruled on the shareholders' claims. After the Regional Court Meiningen issues an opinion, an appeal is likely to follow, and thus the Company does not anticipate a final non-appealable decision on the shareholders' claims until 2028 at the earliest.

Previous wording

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

Current wording

In summary, the Company believes that its cash and cash equivalents, working capital management and availability to access cash under its Credit Agreement or other future sources of capital will be adequate to meet its business operating requirements, its capital expenditures and its expected obligations under both the Notes and the DPLTA, including the anticipated levels of Exit Compensation, as well as to support the Company's ability to continue to comply with its debt covenants under its credit facility for at least the next twelve months, from the issuance of the consolidated financial statements included in Part I, Item 1 of this 10-Q. See Note 11, Credit Agreements, for additional information regarding the terms of the Former Credit Agreement and the J.P. Morgan Credit Agreement.

Previous wording

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

Current wording

As of September 30, 2026 we hold 38,218,023 no-par value bearer shares of Adtran Networks, representing 73.4% of Adtran Networks outstanding shares as of September 30, 2026.

Previous wording

We ended the second quarter of 2026 with a year-over-year revenue increase of 6.1% as compared to the three months ended June 30, 2025, driven by increased volume of sales activity and continued strength of our core markets, due to broadband expansion brought about by higher service provider spending and a continued vendor consolidation due to a shift away from high-risk vendors. During the second quarter of 2026, we had no customers with revenues greater than 10.0% and our five largest customers comprised 28.8% of our revenue. Our year-over-year U.S. revenue increased by 11.7% due to continued customer spending and broadband expansion. Internationally, our year-over-year revenue increased by 1.4%, primarily due to broad-based strength across Europe, partially offset by a decrease in revenues due to a project delay from a single customer.

Current wording

We ended the third quarter of 2026 with a year-over-year revenue increase of 0.6% as compared to the three months ended September 30, 2025, driven by increased volume of sales activity and continued strength of our core markets, due to broadband expansion brought about by higher service provider spending and a continued vendor consolidation due to a shift away from high-risk vendors. During the third quarter of 2026, we had one customer with revenues greater than 10.0% and our five largest customers comprised 33.7% of our revenue. Our year-over-year U.S. revenue increased by 6.5% due to continued customer spending and broadband expansion. Internationally, our year-over-year revenue decreased by 3.8%, which was primarily due to a project delay from a single customer.

Previous wording

During 2025, the U.S. introduced various trade policy orders that have increased import tariffs across a wide range of countries at various rates, with certain exemptions. On February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). The ultimate availability, timing, and amount of any potential refunds of such tariffs remain highly uncertain and are subject to further legal, regulatory, and administrative developments. See ‘Tariff Refund” below for further discussion of this topic. Following the Supreme Court’s decision, the U.S. presidential administration invoked Section 122 of the Trade Act of 1974 to impose new tariffs of 10% on imports from all countries, in addition to any existing non-IEEPA tariffs (including tariffs on semiconductors, which are expected to increase in June 2027), and also amended tariffs on imports of copper, steel and aluminum previously imposed under Section 232 of the Trade Expansion Act of 1962, effective April 6, 2026, to apply differentiated tariff rates based on metal content and the use of U.S.-origin metal inputs. By its terms, the Section 122 tariff expired on July 24, 2026. On July 23, 2026, the Office of the U.S. Trade Representative ("USTR") announced a final action under Section 301 of the Trade Act of 1974 imposing additional ad valorem tariffs of 10% or 12.5% on most goods imported from approximately 60 foreign trading partners, which together account for nearly all U.S. import trade. Under the final action, trading partners that have adopted, or have committed to adopt and effectively enforce, a qualifying forced labor import prohibition are subject to the lower 10% tariff rate, while trading partners that have not adopted such a prohibition are subject to the 12.5% rate. Certain categories of goods are excluded from the new tariffs, including articles already subject to duties under Section 232 of the Trade Expansion Act of 1962, and certain other products identified by USTR as warranting exemption.

Current wording

During 2025, the U.S. introduced various trade policy orders that have increased import tariffs across a wide range of countries at various rates, with certain exemptions. On February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). Following the Supreme Court’s decision, the U.S. presidential administration invoked Section 122 of the Trade Act of 1974 to impose new tariffs of 10% on imports from all countries, in addition to any existing non-IEEPA tariffs (including tariffs on semiconductors, which are expected to increase in June 2027), and also amended tariffs on imports of copper, steel and aluminum previously imposed under Section 232 of the Trade Expansion Act of 1962, effective April 6, 2026, to apply differentiated tariff rates based on metal content and the use of U.S.-origin metal inputs. By its terms, the Section 122 tariff expired on July 24, 2026. On July 23, 2026, the Office of the U.S. Trade Representative ("USTR") announced a final action under Section 301 of the Trade Act of 1974 imposing additional ad valorem tariffs of 10% or 12.5% on most goods imported from approximately 60 foreign trading partners, which together account for nearly all U.S. import trade. Under the final action, trading partners that have adopted, or have committed to adopt and effectively enforce, a qualifying forced labor import prohibition are subject to the lower 10% tariff rate, while trading partners that have not adopted such a prohibition are subject to the 12.5% rate. Certain categories of goods are excluded from the new tariffs, including articles already subject to duties under Section 232 of the Trade Expansion Act of 1962, and certain other products identified by USTR as warranting exemption.

Previous wording

The Company has concluded that the potential refund of IEEPA tariffs should be evaluated under a loss recovery model pursuant to Accounting Standards Codification ("ASC") 410‑30. The tariffs at issue were previously capitalized to inventory and subsequently expensed through cost of goods sold. Accordingly, any refund represents a recovery of previously recognized costs, and recognition is limited to amounts previously recorded.

Current wording

The Company has concluded that the refund of IEEPA tariffs should be evaluated under a loss recovery model pursuant to Accounting Standards Codification ("ASC") 410‑30. The tariffs at issue were previously capitalized to inventory and subsequently expensed through cost of revenue. Accordingly, any refund represents a recovery of previously recognized costs, and recognition is limited to amounts previously recorded.

Previous wording

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

Current wording

RESULTS OF OPERATIONS – THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2026, COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025

Previous wording

Our revenue increased 6.1% from $265.1 million for the three months ended June 30, 2025, to $281.1 million for the three months ended June 30, 2026, and increased 10.6% from $512.8 million for the six months ended June 30, 2025, to $567.2 million for the six months ended June 30, 2026. The increase in revenue for the three and six months ended June 30, 2026, was driven by increased volume of sales activity and continued strength of our core markets, due to broadband expansion brought about by higher service provider spending and continued vendor consolidation due to a shift away from high-risk vendors.

Current wording

Our revenue increased 0.6% from $279.4 million for the three months ended September 30, 2025, to $281.2 million for the three months ended September 30, 2026, and increased 7.1% from $792.2 million for the nine months ended September 30, 2025, to $848.4 million for the nine months ended September 30, 2026. The increase in revenue for the three and nine months ended September 30, 2026, was driven by increased volume of sales activity and continued strength of our core markets, due to broadband expansion brought about by higher service provider spending and continued vendor consolidation due to a shift away from high-risk vendors.

Previous wording

The increase in revenue by category for the three months ended June 30, 2026, was primarily attributable to a $19.6 million increase in Optical Networking Solutions products, a $0.8 million increase in Subscriber Solutions products, partially offset by a $4.3 million decrease in Access & Aggregation revenue. The increase in revenue by category for the six months ended June 30, 2026, was primarily attributable to a $38.7 million increase in Optical Networking Solutions products, a $18.6 million increase in Subscriber Solutions products, partially offset by a $2.9 million decrease in Access & Aggregation revenue. The increase in Optical Networking Solutions products was primarily driven by high-risk vendor displacement across Europe and was helped by increased sales to enterprise, government and internet content provider customers. The increase in Subscriber Solutions products was primarily driven by continued investment in fiber-to-the-home, multi-Gig Wi-Fi 7, and Carrier Ethernet applications. The decrease in Access & Aggregation revenue was primarily driven by a project delay from a single customer, and was partially offset by increases in revenue driven by broad-based strength across the U.S. and Europe.

Current wording

The increase in revenue by category for the three months ended September 30, 2026, was primarily attributable to a $11.0 million increase in Optical Networking Solutions products, a $3.7 million increase in Access & Aggregation revenue, partially offset by a $13.0 million decrease in Subscriber Solutions products. The increase in revenue by category for the nine months ended September 30, 2026, was primarily attributable to a $49.8 million increase in Optical Networking Solutions products, a $5.6 million increase in Subscriber Solutions products and a $0.8 million increase in Access & Aggregation revenue. The increase in Optical Networking Solutions products was primarily driven by high-risk vendor displacement across Europe and was helped by increased sales to enterprise, government and internet content provider customers. The increase in Access & Aggregation revenue was primarily driven by strong sales related to broadband access platforms. The decrease in Subscriber Solutions products during the three months ended September 30, 2026, was primarily driven by decreased revenues related to a project delay from a single customer. The increase in Subscriber Solutions products during the nine months ended September 30, 2026 was primarily driven by continued investment in fiber-to-the-home, multi-Gig Wi-Fi 7, and Carrier Ethernet applications, partially offset by decreased revenues related to a project delay from a single customer.

Previous wording

Network Solutions segment revenue increased 6.1% from $219.5 million for the three months ended June 30, 2025, to $232.9 million for the three months ended June 30, 2026, and increased 11.6% from $421.7 million for the six months ended June 30, 2025, to $470.8 million for the six months ended June 30, 2026. The increase in Network Solutions revenue by category for the three months ended June 30, 2026, was due to an increase in volume of sales activity of $20.6 million in Optical Networking products, partially offset by a $5.2 million decrease in Access & Aggregation products and a $2.0 million decrease in Subscriber Solutions products. The increase in Network Solutions revenue by category for the six months ended June 30, 2026, was due to an increase in volume of sales activity of $36.9 million in Optical Networking products and $16.5 million in Subscriber Solutions products, partially offset by a $4.3 million decrease in Access & Aggregation products.

Current wording

Network Solutions segment revenue decreased 0.6% from $232.5 million for the three months ended September 30, 2025, to $231.2 million for the three months ended September 30, 2026, and increased 7.3% from $654.3 million for the nine months ended September 30, 2025, to $702.1 million for the nine months ended September 30, 2026. The increase in Network Solutions revenue by category for the three months ended September 30, 2026, was due to an increase in volume of sales activity of $12.7 million in Optical Networking products, partially offset by a $13.6 million decrease in Subscriber Solutions products and a $0.4 million decrease in Access & Aggregation products. The increase in Network Solutions revenue by category for the nine months ended September 30, 2026, was due to an increase in volume of sales activity of $49.6 million in Optical Networking products and $2.9 million in Subscriber Solutions products, partially offset by a $4.7 million decrease in Access & Aggregation products.

Previous wording

Services & Support segment revenue increased 5.9% from $45.6 million for the three months ended June 30, 2025, to $48.2 million for the three months ended June 30, 2026, and increased 5.8% from $91.1 million for the six months ended June 30, 2025, to $96.4 million for the six months ended June 30, 2026. The increase in Services & Support revenue by category for the three months ended June 30, 2026, was primarily attributable to a $2.8 million increase in Subscriber Solutions and $0.9 million in Access & Aggregation, partially offset by a $1.0 million decrease in Optical Networking services. The increase in Services & Support revenue by category for the six months ended June 30, 2026, was primarily attributable to increases of $2.1 million increase in Subscriber Solutions, $1.8 million in Optical Networking services and $1.4 million increase in Access & Aggregation.

Current wording

Services & Support segment revenue increased 6.5% from $46.9 million for the three months ended September 30, 2025, to $49.9 million for the three months ended September 30, 2026, and increased 6.1% from $138.0 million for the nine months ended September 30, 2025, to $146.3 million for the nine months ended September 30, 2026. The increase in Services & Support revenue by category for the three months ended September 30, 2026, was primarily attributable to a $4.1 million increase in Access & Aggregation and $0.6 million in Subscriber Solutions, partially offset by a $1.7 million decrease in Optical Networking services. The increase in Services & Support revenue by category for the nine months ended September 30, 2026, was primarily attributable to increases of $5.5 million increase in Access & Aggregation, $2.7 million in Subscriber Solutions and $0.1 million increase in Optical Networking services.

Previous wording

U.S. revenue increased by 11.7% from $120.3 million for the three months ended June 30, 2025, to $134.4 million for the three months ended June 30, 2026, and increased by 25.5% from $223.5 million for the six months ended June 30, 2025, to $280.6 million for the six months ended June 30, 2026. The increase in U.S. revenue for the three and six months ended June 30, 2026, was primarily due to continued customer spending and broadband expansion.

Current wording

U.S. revenue increased by 6.5% from $120.2 million for the three months ended September 30, 2025, to $128.0 million for the three months ended September 30, 2026, and increased by 18.9% from $343.7 million for the nine months ended September 30, 2025, to $408.6 million for the nine months ended September 30, 2026. The increase in U.S. revenue for the three and nine months ended September 30, 2026, was primarily due to continued customer spending and broadband 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 1.4% from $144.7 million for the three months ended June 30, 2025 to $146.7 million for the three months ended June 30, 2026 and decreased by 0.9% from $289.3 million for the six months ended June 30, 2025 to $286.7 million for the six months ended June 30, 2026. International revenue, as a percentage of total revenue, decreased from 54.6% for the three months ended June 30, 2025, to 52.2% for the three months ended June 30, 2026, and decreased from 56.4% for the six months ended June 30, 2025, to 50.5% for the six months ended June 30, 2026. The change in international revenue for the three and six months ended June 30, 2026 compared to the three and six months June 30, 2025, remained relatively flat, with minor fluctuations driven by changes in customer and product mix. For the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, changes in foreign currencies relative to the U.S. dollar increased our net revenue by approximately $1.9 million and $3.8 million, respectively.

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., decreased by 3.8% from $159.2 million for the three months ended September 30, 2025 to $153.2 million for the three months ended September 30, 2026 and decreased by 1.9% from $448.5 million for the nine months ended September 30, 2025 to $439.8 million for the nine months ended September 30, 2026. International revenue, as a percentage of total revenue, decreased from 57.0% for the three months ended September 30, 2025, to 54.5% for the three months ended September 30, 2026, and decreased from 56.6% for the nine months ended September 30, 2025, to 51.8% for the nine months ended September 30, 2026. The decrease in international revenue for the three and nine months ended September 30, 2026 compared to the three and nine months September 30, 2025, was primarily due to decreased revenues related to a project delay from a single customer. For the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, changes in foreign currencies relative to the U.S. dollar decreased our net revenue by approximately $1.6 million and $4.9 million, respectively.

Previous wording

Our ADTRAN, Inc. international revenue is largely focused on broadband infrastructure and is consequently affected by the decisions of our customers as to timing for installation of new technologies, expansion of their networks and/or network upgrades. Our international customers must make these decisions in the regulatory and political environment in which they operate – both nationally and, in some instances, regionally – whether of a multi-country region or a more local region within a country. Consequently, while we expect the global trend towards deployment of more robust broadband speeds and access to continue creating additional market opportunities for us, the factors described above may result in pressure on revenue and operating income. Our Adtran Networks international revenue is largely focused on the manufacture and selling of networking solutions that are based on three core areas of expertise: fiber-optic transmission technology (cloud interconnect), cloud access technology for rapid creation of innovative services around the network edge and solutions for precise timing and synchronization of networks. In addition, Adtran Networks international operations offers a comprehensive portfolio of network design, implementation and maintenance services to assist operators in the deployment of market-leading networks while reducing costs to maintain these networks.

Current wording

Our ADTRAN, Inc. international revenue is largely focused on broadband infrastructure and is consequently affected by the decisions of our customers as to timing for installation of new technologies, expansion of their networks and/or network upgrades. Our international customers must make these decisions in the regulatory and political environment in which they operate – both nationally and, in some instances, regionally – whether of a multi-country region or a more local region within a country. Consequently, while we expect the global trend towards deployment of more robust broadband speeds and access to continue creating additional market opportunities for us, the factors described above may result in continued pressure on revenue and operating income. Our Adtran Networks international revenue is largely focused on the manufacture and selling of networking solutions that are based on three core areas of expertise: fiber-optic transmission technology (cloud interconnect), cloud access technology for rapid creation of innovative services around the network edge and solutions for precise timing and synchronization of networks. In addition, Adtran Networks international operations offers a comprehensive portfolio of network design, implementation and maintenance services to assist operators in the deployment of market-leading networks while reducing costs to maintain these networks.

Previous wording

As a percentage of revenue, cost of revenue increased from 62.7% for the three months ended June 30, 2025, to 63.0% for the three months ended June 30, 2026, and decreased from 62.1% for the six months ended June 30, 2025, to 61.8% for the six months ended June 30, 2026. Cost of revenue as a percentage of revenue for the three and six months ended June 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix.

Current wording

As a percentage of revenue, cost of revenue decreased from 61.7% for the three months ended September 30, 2025, to 61.5% for the three months ended September 30, 2026, and decreased from 62.0% for the nine months ended September 30, 2025, to 61.7% for the nine months ended September 30, 2026. Cost of revenue as a percentage of revenue for the three and nine months ended September 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix and tariff refunds. Excluding the effects of the tariff refunds, cost of revenue as a percentage of revenue would have been 63.5% and 62.3% for the three and nine months ended September 30, 2026, respectively.

Previous wording

For the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, changes in foreign currencies relative to the U.S. dollar increased our cost of revenue by approximately $1.3 million and $2.5 million, respectively.

Current wording

For the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, changes in foreign currencies relative to the U.S. dollar decreased our cost of revenue by approximately $1.0 million and $3.1 million, respectively.

Previous wording

Network Solutions cost of revenue, as a percentage of that segment’s revenue, increased from 67.1% for the three months ended June 30, 2025, to 67.7% for the three months ended June 30, 2026, and decreased from 66.8% for the six months ended June 30, 2025, to 66.3% for the six months ended June 30, 2026. Network Solutions cost of revenue as a percentage of revenue for the three and six months ended June 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix.

Current wording

Network Solutions cost of revenue, as a percentage of that segment’s revenue, increased from 65.8% for the three months ended September 30, 2025, to 66.6% for the three months ended September 30, 2026, and was 66.4% for the nine months ended September 30, 2025 and 2026. Network Solutions cost of revenue as a percentage of revenue for the three and nine months ended September 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix.

Previous wording

Services & Support cost of revenue, as a percentage of that segment’s revenue, decreased from 41.3% for the three months ended June 30, 2025, to 40.6% for the three months ended June 30, 2026, and decreased from 40.8% for the six months ended June 30, 2025 to 39.5% for the six months ended June 30, 2026. Services & Support cost of revenue as a percentage of revenue for the three and six months ended June 30, 2026, remained relatively flat, with minor fluctuations driven by cyclical changes in customer buying habits.

Current wording

Services & Support cost of revenue, as a percentage of that segment’s revenue, decreased from 40.9% for the three months ended September 30, 2025, to 38.0% for the three months ended September 30, 2026, and increased from 40.8% for the nine months ended September 30, 2025 to 39.0% for the nine months ended September 30, 2026. The decrease in Services & Support cost of revenue as a percentage of revenue for the three months ended September 30, 2026, was primarily due to a higher share of maintenance revenue which has a lower cost.

Previous wording

As a percentage of revenue, gross profit decreased from 37.3% for the three months ended June 30, 2025, to 37.0% for the three months ended June 30, 2026, and increased from 37.9% for the six months ended June 30, 2025, to 38.2% for the six months ended June 30, 2026. The gross profit as a percentage of revenue for the three and six months ended June 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix. For the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, changes in foreign currencies relative to the U.S. dollar increased our gross profit by approximately $0.7 million and $1.3 million, respectively.

Current wording

As a percentage of revenue, gross profit increased from 38.3% for the three months ended September 30, 2025, to 38.5% for the three months ended September 30, 2026, and increased from 38.0% for the nine months ended September 30, 2025, to 38.3% for the nine months ended September 30, 2026. The gross profit as a percentage of revenue for the three and nine months ended September 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix. Excluding the effects of the tariff refunds, gross profit would have been 36.5% and 37.7% for the three and nine months ended September 30, 2026, respectively. For the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, changes in foreign currencies relative to the U.S. dollar decreased our gross profit by approximately $0.6 million and $1.8 million, respectively.

Previous wording

As a percentage of that segment's revenue, Network Solutions gross profit decreased from 32.9% for the three months ended June 30, 2025, to 32.3% for the three months ended June 30, 2026, and increased from 33.2% for the six months ended June 30, 2025 to 33.7% for the six months ended June 30, 2026. The decrease in gross profit for the three and six months ended June 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix.

Current wording

As a percentage of that segment's revenue, Network Solutions gross profit decreased from 34.2% for the three months ended September 30, 2025, to 33.4% for the three months ended September 30, 2026, and was 33.6% for the nine months ended September 30, 2025 and 2026. The gross profit for the three and nine months ended September 30, 2026, remained relatively flat, with minor fluctuations driven by changes in customer and product mix.

Previous wording

As a percentage of that segment's revenue, Services & Support gross profit increased from 58.7% for the three months ended June 30, 2025, to 59.4% for the three months ended June 30, 2026, and increased from 59.2% for the six months ended June 30, 2025, to 60.5% for the six months ended June 30, 2026. The increase in gross profit for the three and six months ended June 30, 2026 remained relatively flat, with minor fluctuations driven by cyclical changes in customer buying habits.

Current wording

As a percentage of that segment's revenue, Services & Support gross profit increased from 59.1% for the three months ended September 30, 2025, to 62.0% for the three months ended September 30, 2026, and increased from 59.2% for the nine months ended September 30, 2025, to 61.0% for the nine months ended September 30, 2026. The increase in Services & Support gross profit for the three and nine months ended September 30, 2026, was primarily due to a higher share of maintenance revenue which has higher gross margins.

Previous wording

As a percentage of revenue, selling, general and administrative expenses decreased from 22.8% for the three months ended June 30, 2025, to 21.4% for the three months ended June 30, 2026, and decreased from 21.6% for the six months ended June 30, 2025, to 20.5% for the six months ended June 30, 2026. Selling, general and administrative expenses as a percentage of revenue will generally fluctuate whenever there is a significant fluctuation in revenue for the periods being compared.

Current wording

As a percentage of revenue, selling, general and administrative expenses decreased from 20.8% for the three months ended September 30, 2025, to 20.3% for the three months ended September 30, 2026, and decreased from 21.3% for the nine months ended September 30, 2025, to 20.4% for the nine months ended September 30, 2026. Selling, general and administrative expenses as a percentage of revenue will generally fluctuate whenever there is a significant fluctuation in revenue for the periods being compared.

Previous wording

Selling, general and administrative expenses decreased 0.2% from $60.3 million for the three months ended June 30, 2025, to $60.2 million for the three months ended June 30, 2026, and increased 4.9% from $110.6 million for the six months ended June 30, 2025, to $116.1 million for the six months ended June 30, 2026. Selling, general and administrative expenses include personnel costs for management and back office departments, as well as auditor, tax and other professional fees. The increase for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, was primarily attributable to increased employee-related costs and increased travel related expenses. For the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, changes in foreign currencies relative to the U.S. dollar increased our selling, general and administrative expenses by approximately $0.6 million and $1.3 million, respectively.

Current wording

Selling, general and administrative expenses decreased 2.1% from $58.2 million for the three months ended September 30, 2025, to $57.0 million for the three months ended September 30, 2026, and increased 2.5% from $168.9 million for the nine months ended September 30, 2025, to $173.1 million for the nine months ended September 30, 2026. Selling, general and administrative expenses include personnel costs for management and back office departments, as well as auditor, tax and other professional fees. The increase for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was primarily attributable to increased employee-related costs and increased travel related expenses. For the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, changes in foreign currencies relative to the U.S. dollar decreased our selling, general and administrative expenses by approximately $0.4 million and $1.1 million, respectively.

Previous wording

As a percentage of revenue, research and development expenses decreased from 19.6% for the three months ended June 30, 2025, to 19.1% for the three months ended June 30, 2026, and decreased from 19.6% for the six months ended June 30, 2025, to 18.4% for the six months ended June 30, 2026. Research and development expenses as a percentage of revenue will generally fluctuate whenever there are incremental product development activities or significant fluctuations in revenue for the periods being compared.

Current wording

As a percentage of revenue, research and development expenses for the three months ended September 30, 2025 and 2026 was 18.5%, and decreased from 19.2% for the nine months ended September 30, 2025, to 18.5% for the nine months ended September 30, 2026. Research and development expenses as a percentage of revenue will generally fluctuate whenever there are incremental product development activities or significant fluctuations in revenue for the periods being compared.

Previous wording

Research and development expenses increased 3.6% from $51.9 million for the three months ended June 30, 2025, to $53.8 million for the three months ended June 30, 2026, and increased 3.8% from $100.8 million for the six months ended June 30, 2025, to $104.6 million for the six months ended June 30, 2026. The increase in research and development expenses for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, was primarily attributable to increased employee-related costs. The increase in research and development expenses for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, was primarily attributable to increased employee-related costs partially offset by increased governmental research and development subsidies. For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, changes in foreign currencies relative to the U.S. dollar increased our research and development expenses by approximately $1.3 million and $2.5 million, respectively.

Current wording

Research and development expenses increased 0.6% from $51.7 million for the three months ended September 30, 2025, to $52.0 million for the three months ended September 30, 2026, and increased 2.7% from $152.4 million for the nine months ended September 30, 2025, to $156.6 million for the nine months ended September 30, 2026. Research and development expenses for the three months ended September 30, 2026 compared to the three months ended September 30, 2025, was primarily attributable to increased employee-related costs. The increase in research and development expenses for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, was primarily attributable to increased employee-related costs partially offset by increased governmental research and development subsidies. For the three and nine months ended September 30, 2026 as compared to the three and nine months ended September 30, 2025, changes in foreign currencies relative to the U.S. dollar decreased our research and development expenses by approximately $0.4 million and $1.1 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, 2026 and 2025, the Company recognized $3.4 million and $3.1 million as a reduction of research and development expense, respectively. For the six months ended June 30, 2026 and 2025, the Company recognized $6.4 million and $5.3 million as a reduction of research and development expense, respectively.

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, 2026 and 2025, the Company recognized $3.1 million and $2.9 million as a reduction of research and development expense, respectively. For the nine months ended September 30, 2026 and 2025, the Company recognized $9.6 million and $8.3 million as a reduction of research and development expense, respectively.

Previous wording

Interest and dividend income increased from $0.2 million for the three months ended June 30, 2025, to $0.4 million for the three months ended June 30, 2026 and increased from $0.3 million for the six months ended June 30, 2025, to $0.7 million for the six months ended June 30, 2026. The increase in interest and dividend income is primarily attributable to fluctuations in investment balances and an increase in the rate of return on those investments due to interest rate movements.

Current wording

Interest and dividend income increased from $0.3 million for the three months ended September 30, 2025, to $0.6 million for the three months ended September 30, 2026 and increased from $0.6 million for the nine months ended September 30, 2025, to $1.3 million for the nine months ended September 30, 2026. The increase in interest and dividend income is primarily attributable to fluctuations in investment balances and IEEPA Tariff Refunds related interest.

Previous wording

Interest expense decreased from $4.6 million for the three months ended June 30, 2025, to $4.2 million for the three months ended June 30, 2026, and decreased from $9.3 million for the six months ended June 30, 2025, to $8.5 million for the six months ended June 30, 2026. The decrease in interest expense during the three and six months ended June 30, 2026, was primarily driven by the issuance of the 2030 Notes, which accrues interest at 4.7%, and the repayment of the majority of the principal under the credit agreement with Wells Fargo which accrued interest at 8.6% for the three and six months ended June 30, 2025. See Note 10 and Note 11 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for additional information.

Current wording

Interest expense decreased from $5.5 million for the three months ended September 30, 2025 to $5.3 million for the three months ended September 30, 2026, and decreased from $14.8 million for the nine months ended September 30, 2025, to $13.7 million for the nine months ended September 30, 2026. The decrease in interest expense during the three and nine months ended September 30, 2026, was primarily driven by the issuance of the 2030 Notes, with an effective rate of 4.7%, and the repayment of the majority of the principal under the credit agreement with Wells Fargo which accrued interest at 8.6% for the three and nine months ended September 30, 2025. 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 $3.1 million and $5.3 million for the three months ended June 30, 2025 and 2026, respectively and recognized a net investment gain of $1.4 million and $4.4 million for the six months ended June 30, 2025, and 2026, respectively. The fluctuations in our net investments were primarily attributable to changes in the fair value of our securities recognized during the period. 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 $2.2 million and net investment loss of $0.2 million for the three months ended September 30, 2025 and 2026, respectively and recognized a net investment gain of $3.6 million and $4.3 million for the nine months ended September 30, 2025, and 2026, respectively. The fluctuations in our net investments were primarily attributable to changes in the fair value of our securities recognized during the period. 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 income (expense), net, which primarily consisted of gains and losses on foreign currency transactions and income from excess material sales, increased from expense of $2.6 million for the three months ended June 30, 2025 to income of $0.7 million for the three months ended June 30, 2026 and increased from expense of $1.7 million for the six months ended June 30, 2025 to income of $2.0 million for the six months ended June 30, 2026.

Current wording

Other income (expense), net, which primarily consisted of gains and losses on foreign currency transactions and income from excess material sales, increased from expense of $0.7 million for the three months ended September 30, 2025 to income of $1.0 million for the three months ended September 30, 2026 and increased from expense of $2.4 million for the nine months ended September 30, 2025 to income of $3.0 million for the nine months ended September 30, 2026.

Previous wording

The Company's effective tax rate changed from an expense of 5.9% of pre-tax loss for the three months ended June 30, 2025, to an expense of 10.0% of pre-tax loss for the three months ended June 30, 2026 and changed from an expense of 2.3% of pre-tax loss for the six months ended June 30, 2025, to an expense of 53.4% of pre-tax loss for the six months ended June 30, 2026. The changes in the effective tax rate for the three and six months ended June 30, 2026, was driven primarily by loss jurisdictions for which the recognition of tax benefits on pre-tax losses incurred were limited due to a valuation allowance during the three and six months ended June 30, 2026.

Current wording

The Company's effective tax rate changed from an expense of 18.3% of pre-tax loss for the three months ended September 30, 2025, to an expense of 56.6% of pre-tax loss for the three months ended September 30, 2026 and changed from an expense of 5.5% of pre-tax loss for the nine months ended September 30, 2025, to an expense of 54.9% of pre-tax loss for the nine months ended September 30, 2026. The changes in the effective tax rate for the three and nine months ended September 30, 2026, was driven primarily by loss jurisdictions for which the recognition of tax benefits on pre-tax losses incurred were limited due to a valuation allowance during the three and nine months ended September 30, 2026.

Previous wording

As a result of the above factors, net loss attributable to ADTRAN Holdings, Inc. decreased from net loss of $20.5 million for the three months ended June 30, 2025, to a net loss of $10.9 million for the three months ended June 30, 2026, and decreased from net loss of $31.8 million for the six months ended June 30, 2025, to a net loss of $12.2 million for the six months ended June 30, 2026.

Current wording

As a result of the above factors, net loss attributable to ADTRAN Holdings, Inc. decreased from net loss of $10.3 million for the three months ended September 30, 2025, to a net loss of $9.2 million for the three months ended September 30, 2026, and decreased from net loss of $42.1 million for the nine months ended September 30, 2025, to a net loss of $21.5 million for the nine months ended September 30, 2026.

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 $38.6 million in the six months ended June 30, 2026. We have used, and expect to continue to use, existing cash, credit arrangements and cash generated from operations for working capital and other general corporate purposes, including product development activities to enhance our existing products and develop new products, expand our sales and marketing activities and fund capital expenditures.

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 $14.1 million in the nine months ended September 30, 2026. We have used, and expect to continue to use, existing cash, credit arrangements and cash generated from operations for working capital and other general corporate purposes, including product development activities to enhance our existing products and develop new products, expand our sales and marketing activities and fund capital expenditures.

Previous wording

As of June 30, 2026, our cash on hand was $79.2 million of which $58.2 million was held by our foreign subsidiaries. As of June 30, 2026 the Company had access to $318.2 million on its Credit Facility for future borrowings based on debt covenant compliance metrics. Generally, we intend to permanently reinvest funds held outside the U.S., except to the extent that any of these funds can be repatriated without withholding tax. As of December 31, 2025, our cash on hand was $95.7 million, of which $87.5 million was held by our foreign subsidiaries.

Current wording

As of September 30, 2026, our cash, cash equivalents and restricted cash was $71.7 million of which $57.4 million was held by our foreign subsidiaries. As of September 30, 2026 the Company had access to $261.7 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, 2025, our cash on hand was $95.7 million, of which $87.5 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 1.27% as of June 30, 2026. Assuming all the minority holders of currently outstanding Adtran Networks shares were to elect the second option, we would be obligated to make aggregate Exit Compensation payments, including guaranteed interest, of approximately €292.6 million or $334.2 million, based on an exchange rate as of June 30, 2026, and reflecting interest accrued through June 30, 2026 during the pendency of the appraisal proceedings discussed below. Shareholders electing the first option of Annual Recurring Compensation may later elect the second option. 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 effective date of the DPLTA on January 16, 2023, certain Adtran Networks shareholders filed lawsuits against the Company in the Regional Court Meiningen, Germany challenging the Exit Compensation offered under the DPLTA. The Regional Court Meiningen has not yet ruled on the shareholders' claims. After the Regional Court Meiningen issues an opinion, an appeal is likely to follow, and thus the Company does not anticipate a final decision on the shareholders' claims until late 2027 or 2028.

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 1.52% as of September 30, 2026. Assuming all the minority holders of currently outstanding Adtran Networks shares were to elect the second option, we would be obligated to make aggregate Exit Compensation payments, including guaranteed interest, of approximately €281.1 million or $318.4 million, based on an exchange rate as of September 30, 2026, and reflecting interest accrued through September 30, 2026 during the pendency of the appraisal proceedings discussed below. Shareholders electing the first option of Annual Recurring Compensation may later elect the second option. 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 effective date of the DPLTA on January 16, 2023, certain Adtran Networks shareholders filed lawsuits against the Company in the Regional Court Meiningen, Germany challenging the Exit Compensation offered under the DPLTA. The Regional Court Meiningen has not yet ruled on the shareholders' claims. After the Regional Court Meiningen issues an opinion, an appeal is likely to follow, and thus the Company does not anticipate a final non-appealable decision on the shareholders' claims until 2028 at the earliest.

Previous wording

Additionally, our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately €7.6 million or $8.7 million (based on the current exchange rate) per year assuming none of the minority Adtran Networks shareholders were to elect Exit Compensation. 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 2025 fiscal year, Adtran Networks’ ordinary general shareholders’ meeting occurred on June 15, 2026 and, therefore, the Annual Recurring Compensation was paid after the ordinary general shareholders’ meeting in the amount of $8.9 million. During the three months ended June 30, 2026 and 2025, we accrued $2.1 million and $2.4 million, respectively, in Annual Recurring Compensation. During the six months ended June 30, 2026 and 2025, we accrued $4.3 million and $4.8 million, respectively, in Annual Recurring Compensation. The Annual Recurring Compensation is reflected as an increase to retained deficit in the Condensed Consolidated Balance Sheets.

Current wording

Additionally, our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately €7.2 million or $8.2 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 2025 fiscal year, Adtran Networks’ ordinary general shareholders’ meeting occurred on June 15, 2026 and, therefore, the Annual Recurring Compensation was paid after the ordinary general shareholders’ meeting in the amount of $8.9 million. During the three months ended September 30, 2026 and 2025, we accrued $2.1 million and $2.5 million, respectively, in Annual Recurring Compensation. During the nine months ended September 30, 2026 and 2025, we accrued $6.1 million and $7.5 million, respectively, in Annual Recurring Compensation. The Annual Recurring Compensation is reflected as an increase to retained deficit in the Condensed Consolidated Balance Sheets.

Previous wording

As of June 30, 2026, and as of the date of issuance of the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q, the Company has sufficient liquidity through its operating cash flow and the borrowings available under the Credit Facility to meet a majority of its payment obligations under the DPLTA pertaining to Exit Compensation. For the three and six months ended June 30, 2026, approximately 0.4 million shares and 0.6 million shares, respectively, of Adtran Networks stock were tendered to the Company. This resulted in total Exit Compensation payments of approximately €11.7 million, or $13.8 million based on the applicable exchange rates at the time of the transactions, being paid to Adtran Networks shareholders. For the three and six months ended June 30, 2025, approximately 0.9 million shares, of Adtran Networks stock were tendered to the Company. This resulted in total Exit Compensation payments of approximately €16.9 million, or $19.4 million based on the applicable exchange rates at the time of the transactions, being paid to Adtran Networks shareholders. 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 the Company does not anticipate a final decision on shareholder's challenges to Exit Compensation until late 2027 or 2028; (ii) the diverse base of shareholders that must make this election on an individual shareholder basis; (iii) the current guaranteed Annual Recurring Compensation payment; and (iv) the current trading value of Adtran Networks shares.

Current wording

For the three and nine months ended September 30, 2026, approximately 0.8 million shares and 1.3 million shares, respectively, of Adtran Networks stock were tendered to the Company. This resulted in total Exit Compensation payments for the three and nine months ended September 30, 2026 of approximately €15.6 million or $18.1 million and €27.3 million, or $31.9 million, respectively, 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, 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 for the three and nine months ended September 30, 2025 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. 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 the Company does not anticipate a final non-appealable decision on shareholder's challenges to Exit Compensation until 2028 at the earliest;

Previous wording

In summary, the Company believes that its cash and cash equivalents, working capital management and availability to access cash under its credit facility or other future sources of capital, will be adequate to meet its business operating requirements, its capital expenditures and its expected obligations under both the Notes and the DPLTA, including the anticipated levels of Exit Compensation as well to support the Company's ability to continue to comply with its debt covenants under its credit facility for at least the next twelve months, from the issuance of the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q. See Note 10, Credit Agreements, and Note 18, Subsequent Events in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 for additional information regarding the terms of the Former Credit Agreement and the New Credit Agreement, respectively.

Current wording

In summary, as of September 30, 2026, and as of the date of issuance of the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q, the Company believes that its cash and cash equivalents, working capital management and availability to access cash under the Credit Agreement or other future sources of capital, will be adequate to meet its business operating requirements, its capital expenditures and its expected obligations under both the Notes and the DPLTA, including the anticipated levels of Exit Compensation as well to support the Company's ability to continue to comply with its debt covenants under its Credit Agreement for at least the next twelve months, from the issuance of the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q. See Note 11, Credit Agreements in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 for additional information regarding the terms of the Former Credit Agreement and the Credit Agreement, respectively.

Previous wording

Interest expense related to the 2030 Notes was $2.3 million and $4.5 million for the three and six months ended June 30, 2026, respectively. In conjunction with the issuance of the 2030 Notes, the Company recognized debt issuance costs of $8.7 million, which were capitalized as components of the carrying amount and included in convertible senior notes, net within the Consolidated Balance Sheets. See Note 11 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for more information.

Current wording

Interest expense related to the 2030 Notes was $2.3 million and $6.8 million for the three and nine months ended September 30, 2026, respectively. Interest expense related to the 2030 Notes was $0.3 million for the three and nine months ended September 30, 2025. In conjunction with the issuance of the 2030 Notes, the Company recognized debt issuance costs of $8.7 million, which were capitalized as components of the carrying amount and included in convertible senior notes, net within the Consolidated Balance Sheets. See Note 12 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for more information.