ADTRAN HOLDINGS, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

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The following discussion should be read in conjunction with the consolidated
financial statements and the related notes that appear in Part I, Item 1 of this
document. In addition, the following discussion should be read in conjunction
with our audited consolidated financial statements for the year ended December
31, 2021, Part II, Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, Part I, Item 1, Business, and Item 1A, Risk
Factors, included in 2021 Form 10-K for the year ended December 31, 2021, filed
with the SEC on February 25, 2022.

This discussion is designed to provide the reader with information that will
assist in understanding our Condensed Consolidated Financial Statements, the
changes in certain key items in those financial statements from period to
period, and the primary factors that accounted for those changes, as well as how
certain accounting principles affect our Condensed Consolidated Financial
Statements. See "Cautionary Note Regarding Forward-Looking Statements" on page 3
of this report for a description of important factors that could cause actual
results to differ from expected results. See also Part 1, Item 1A, Risk Factors,
of the 2021 Form 10­K and Part II, Item 1A, Risk Factors of this Form 10-Q.

Unless the context otherwise indicates or requires, references in this Quarterly
Report on Form 10-Q to "ADTRAN", the "Company," "we," "us" and "our" refer to
ADTRAN Holdings, Inc. and its consolidated subsidiaries for periods subsequent
to the Merger and to ADTRAN, Inc. and its consolidated subsidiaries for periods
prior to the Merger. The prior period results do not include the results of ADVA
prior to the Merger.

OVERVIEW

The Company is a leading global provider of networking and communications
platforms, software, systems and services focused on the broadband access
market, serving a diverse domestic and international customer base in multiple
countries that includes Tier-1, -2 and -3 service providers, alternative service
providers, such as utilities, municipalities and fiber overbuilders, cable/MSOs,
SMBs and distributed enterprises. Our innovative solutions and services enable
voice, data, video and internet-communications across a variety of network
infrastructures and are currently in use by millions worldwide. We support our
customers through our direct global sales organization and our distribution
networks. Our success depends upon our ability to increase unit volume and
market share through the introduction of new products and succeeding generations
of products having optimal selling prices and increased functionality as
compared to both the prior generation of a product and to the products of
competitors in order to gain market share. To service our customers and grow
revenue, we are continually conducting research and developing new products
addressing customer needs and testing those products for the specific
requirements of the particular customers. We offer a broad portfolio of flexible
software and hardware network solutions and services that enable service
providers to meet today's service demands, while enabling them to transition to
the fully converged, scalable, highly-automated, cloud-controlled voice, data,
internet and video network of the future. In addition to our corporate
headquarters in Huntsville, Alabama, we have sales and research and development
facilities in strategic global locations.

ADTRAN Holdings, Inc. solely owns ADTRAN, Inc. and is the majority shareholder
of ADVA Optical Networking SE ("ADVA"). ADTRAN is a leading global provider of
open, disaggregated networking and communications solutions. ADVA is a global
provider of network solutions for data, storage, voice and video services. The
combined technology portfolio can best address current and future requirements,
especially regarding the convergence of solutions at the network edge.
Additional information on each of the companies is provided below:

ADTRAN, Inc. is a leading global provider of open, disaggregated networking and
communications solutions that enable voice, data, video, and internet
communications across any network infrastructure. Its award-winning end-to-end
fiber broadband solutions portfolio spans from OLTs to in-home services and
intelligent SaaS solutions. These solutions empower communications service
providers to manage and scale services to meet the needs of their customers.
ADTRAN, Inc. serves customers in over 60 countries.

ADVA is a global provider of open networking solutions with over 25 years of
experience in optical networking, carrier Ethernet access and network
synchronization. ADVA has led the industry for over two decades with open and
secure networking solutions that carefully balance space, power and cost.
Founded in 1994 in Germany, ADVA has continually pushed the boundaries of
innovation, working side-by-side with leading enterprises and service providers
to develop technology that meets real-world demands. From open optical line
systems, open terminals and pluggable multiplexers to programmable cloud access,
encryption and precise timing, ADVA is committed to developing solutions that
help its customers succeed.

BUSINESS COMBINATION WITH ADVA


On August 30, 2021, ADTRAN, Inc. and ADVA, entered into a Business Combination
Agreement, pursuant to which both companies agreed to combine their respective
businesses and each become subsidiaries of a new holding company, ADTRAN
Holdings, Inc. (formerly known as Acorn HoldCo, Inc.) which was formed as a
wholly-owned subsidiary of ADTRAN in order to consummate the

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transactions under the Business Combination Agreement. Under the terms of the
Business Combination Agreement on July 8, 2022, Acorn MergeCo, Inc., a Delaware
corporation and wholly-owned direct subsidiary of the Company, merged with and
into ADTRAN, with ADTRAN surviving the merger as a wholly-owned direct
subsidiary of the Company.

Additionally, pursuant to the Business Combination Agreement, the Company made a
public offer to exchange each issued and outstanding no-par value bearer share
of ADVA for 0.8244 shares of common stock, par value $0.01 per share, of the
Company ("Company Common Stock"). The Exchange Offer was settled on July 15,
2022, on which date the Company acquired 33,957,538 bearer shares of ADVA, or
65.43% of ADVA's outstanding bearer shares as of the Exchange Offer Settlement
Date, in exchange for the issuance of an aggregate of 27,994,595 shares of
Company Common Stock. Additionally, pursuant to the Business Combination
Agreement, ADVA stock option holders were entitled to have their ADVA stock
options assumed by ADTRAN Holdings, Inc. (applying the exchange ratio in the
Business Combination Agreement), thereafter representing options to acquire
stock of ADTRAN Holdings, Inc. The fair value of the ADVA stock options assumed
by ADTRAN Holdings, Inc. was $12.8 million, estimated using the binomial lattice
model.

ADTRAN, Inc. and ADVA became subsidiaries of ADTRAN Holdings, Inc. as a result
of the Business Combination. ADTRAN was determined to be the accounting acquirer
of ADVA based on ADTRAN shareholders' majority equity stake in the combined
company, and the composition of the Board of Directors and senior management of
the combined company, among other factors. The Company accounted for the
acquisition of ADVA as a business combination under ASC 805.

On October 18, 2022, the Board of Directors of ADTRAN Holdings, Inc. and the
management board of ADVA, agreed on a final draft of a domination and profit and
loss transfer agreement (the "DPLTA") between the Company, as the controlling
company, and ADVA, as the controlled company. The parties' execution of the
DPLTA remains subject to the approval of the DPLTA by shareholders of ADVA with
75% of the votes cast in an extraordinary general meeting, which is scheduled to
be held on November 30, 2022. The Company currently holds 33,957,538 shares of
ADVA, representing 65.35% of ADVA's outstanding shares as of September 30, 2022.

Subject to the approval of the DPLTA by ADVA shareholders and the subsequent
registration of the DPLTA with the commercial register of the local court at
ADVA's registered offices, ADTRAN Holdings, Inc. will offer, at the election of
each shareholder of ADVA (other than the Company), (i) to acquire the shares of
such shareholder for a compensation (Abfindung) of EUR 17.21 per share pursuant
to Sec. 305 of the German Stock Corporation Akt (Aktiengesetz, "AktG"), or (ii)
to pay such shareholder an annual recurring compensation payment
(Ausgleichszahlung) pursuant to Sec. 304 of the AktG in an amount of EUR 0.59
(EUR 0.52 net under the current taxation regime), subject to adjustment prior to
execution of the DPLTA due to changes in interest rates and borrowing costs
prior to November 30, 2022, which is the reference date for the valuation of
ADVA shares ("Annual Recurring Compensation").

The amount of the Annual Recurring Compensation payment of EUR 0.59 (EUR 0.52
net) is determined on the basis of a rounded annuity interest rate
(Verrentungszinssatz) of 3.00% and is still subject to an adjustment in case of
a change of interest rates and borrowing costs prior to November 30, 2022 which
is the reference date for the valuation. An increase of borrowing costs could
lead to an increase of the Annual Recurring Compensation payment. The potential
increase ranges from EUR 0.62 (EUR 0.54 net), if the annuity interest rate is
increased by 25 basis points to 3.25%, up to an Annual Recurring Compensation
payment of EUR 1.00 (EUR 0.87 net), if the annuity interest rate in increased by
250 basis points to 5.50%.

During the three months ended September 30, 2022, we recognized $10.6 million of
transaction costs. We expect to incur an estimated $1.1 million of additional
transaction costs related to the Business Combination and we will continue to
incur integration costs and costs associated with the implementation, if any, of
a DPLTA, during the remainder of the year and such costs are expected to be
material.

FINANCIAL PERFORMANCE AND TRENDS


The Company ended the third quarter of 2022 with a year-over-year revenue
increase of 146.7% as compared to the three months ended September 30, 2021,
driven by increased volume of sales activity due to the Business Combination
with ADVA and to service provider customers. During the third quarter of 2022,
the Company had two 10% revenue customers, one U.S. service provider customer,
and one international service provider customer. Our year-over-year domestic
revenue increased by 84.7%, driven by increased sales volume due to the Business
Combination with ADVA and an increased sales volume of residential gateways and
optical network terminals in our Network Solutions segment. Internationally, our
revenue increased by 270.1% compared to the prior year period, primarily driven
by increased volume of sales activity due to the Business Combination with ADVA
and increased shipments to a Tier-1 network operator in Europe. We experienced
strong demand for our solutions in the first nine months of 2022 and achieved
significant year-over-year bookings growth. Bookings are defined as orders
received for a product or service during a fiscal period that will be delivered
or performed sometime in the future and is a forward looking metric that we
utilize to help us understand future revenue growth for the Company. Bookings
are generally subject to modification and or cancellation per the terms of the
order. A substantial portion of our shipments in any fiscal period relates to
orders received and shipped within that fiscal period for customers under
agreements containing nonbinding purchase commitments. Our increase in demand
comes from service providers planning to deploy our fiber access platforms,
in-home service delivery platforms and SaaS applications. We expect this growth
to accelerate. During 2021 and continuing in 2022, we secured several Tier-1
next-generation fiber customers, and previously announced Tier-1 fiber customers
significantly increased their bookings for our fiber access platforms. Although
we expect our revenue growth and profitability in the near-term to continue to

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Being negatively impacted by supply chain issues, our outlook continues to strengthen given the increased demand for our products and our expectation of an improving supply chain over the longer term.


In March 2020, the World Health Organization declared the novel coronavirus
("COVID-19") outbreak a global pandemic. The SARS-CoV-2 coronavirus (or variants
of the SARS-CoV-2 coronavirus) continues to spread throughout the U.S. and the
world and has resulted in authorities implementing varying measures to contain
the virus. Although vaccines have been approved and continue to be distributed,
it cannot be predicted how long it will take before market conditions return to
normal and there can be no assurance that the economic recovery will occur or
offset the uncertainty and instability triggered by the pandemic. New and
potentially more contagious variants of the COVID-19 virus may develop in
various countries, including in regions in which we have significant operations.
The COVID-19 variants could further amplify the impact of the pandemic. While we
are unable to accurately predict the full impact that the COVID-19 global
pandemic will have on our results of operations, financial condition, liquidity
and cash flows due to numerous uncertainties, including the duration and
severity of the pandemic and containment measures, our compliance with these
measures has impacted our day-to-day operations and could disrupt our business
and operations, as well as that of our key customers, suppliers and other
counterparties, for an indefinite period of time. We have experienced a
significant impact to our supply chain given COVID-19 and the related global
semiconductor chip shortage, including delays in supply chain deliveries,
extended lead times and shortages of some key components, some raw material cost
increases and slowdowns at certain production facilities. We have also had to
increase our volume of inventory to ensure supply continuity during the
pandemic. In addition, we have experienced significant increases in
freight-related costs due to global shipping disruptions. Starting in the third
quarter of 2021 and continuing into 2022, the Company has incurred supply chain
constraint expenses, including price inflation for certain electronic
components, semiconductor chips and transportation related costs, which have
lowered our gross margins and decreased our profitability. While throughout the
pandemic we have seen increased demand in networking requirements and
utilization due to social distancing guidelines issued by governments, as well
as COVID-19 related reductions in travel and infrastructure expenses, it is
possible that we could experience some slowdown in demand, further supply chain
issues and an increased impact from the ongoing semiconductor shortage and
shortages of certain other key components as the pandemic continues. If the
impacts of this shortage are more severe than we expect, it could result in
longer lead times, inventory supply challenges and further increased costs, all
of which could result in the deterioration of our results, potentially for a
longer period than currently anticipated. To support the health and well-being
of our employees, customers, partners and communities, many of our employees are
working remotely or on a hybrid schedule as of the date of filing this report.
Additionally, there is risk that a number of our employees may become infected
with COVID-19, including our key personnel. In addition, actions that have been
taken and that may be taken by the Company, its customers, suppliers and
counterparties in response to the pandemic, including the implementation of
alternative work arrangements for certain employees, as well as the impacts to
our supply chain, including delays in supply chain deliveries and the related
global semiconductor chip shortage, have delayed and may continue to delay the
timing of some orders and expected deliveries. Lastly, even after the COVID-19
pandemic has subsided, we may continue to experience adverse impacts to our
business as a result of any economic recession that has occurred or may occur in
the future as a result of the COVID-19 pandemic or other factors.

In addition to the Company’s reportable segments, revenues are also reported for the following three categories: Subscription Solutions, Access & Aggregation Solutions and Optical Network Solutions.


Prior to the Business Combination with ADVA on July 15, 2022, ADTRAN reported
revenue across the following three categories: (1) Access & Aggregation, (2)
Subscriber Solutions & Experience and (3) Traditional & Other Products.
Following the Business Combination with ADVA, we have recast these revenues such
that ADTRAN's former Access & Aggregation revenue is combined with a portion of
the applicable ADVA solutions to create Access & Aggregation Solutions, ADTRAN's
former Subscriber Solutions & Experience revenue is combined with a portion of
the applicable ADVA solutions to create Subscriber Solutions, and the revenue
from Traditional & Other products is now included in the applicable Access &
Aggregation Solutions or Subscriber Solutions category. Optical Networking
Solutions is a new revenue category added to represent a meaningful portion of
ADVA's portfolio.

Our Subscriber Solutions portfolio is used by service providers to terminate
their access services infrastructure at the customer premises while providing an
immersive and interactive experience for residential, business and wholesale
subscribers. This revenue category includes hardware- and software-based
products and services. These solutions include fiber termination solutions for
residential, business and wholesale subscribers, Wi-Fi access solutions for
residential and business subscribers, Ethernet switching and network edge
virtualization solutions for business subscribers, and cloud software solutions
covering a mix of subscriber types.

Our Access & Aggregation Solutions are solutions that are used by communications
service providers to connect residential subscribers, business subscribers and
mobile radio networks to the service providers' metro network, primarily through
fiber-based connectivity. This revenue category includes hardware- and
software-based products and services. Our solutions within this category are a
mix of fiber access and aggregation platforms, precision network synchronization
and timing solutions, and access orchestration solutions that ensure highly
reliable and efficient network performance.

Our Optical Networking Solutions are used by communications service providers,
internet content providers and large-scale enterprises to securely interconnect
metro and regional networks over fiber. This revenue category includes hardware-
and software-based products and services. Our solutions within this category
include open optical terminals, open line systems, optical subsystems and
modules,

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network infrastructure assurance systems and automation platforms that are used to build large-scale, secure, and assured optical networks.


Our operating results have fluctuated, and may continue to fluctuate, on a
quarterly basis due to several factors, including customer order activity,
supply chain constraints, component availability, backlog, the Company's
consolidation, purchase accounting, and integration with ADVA. A substantial
portion of our shipments in any fiscal period relates to orders received and
shipped within that fiscal period for customers under agreements containing
non-binding purchase commitments. Further, a significant percentage of orders
require delivery within a few days requiring us to maintain higher inventory
levels. These factors normally result in a varying order backlog and limited
order flow visibility; however, with the current global supply chain and
transportation constraints, and limited availability of semiconductor chips and
other components of our products, we have experienced and may continue to
experience extended lead times, increased logistics intervals and costs, and
lower volume of products deliveries, which has had and may continue to have a
material adverse effect on our operating results and could have a material
adverse effect on customer relations and our financial condition. Operating
expenses are relatively fixed in the short term; therefore, a shortfall in
quarterly revenues could significantly impact our financial results in a given
quarter.

Our operating results may also fluctuate as a result of a number of other
factors, including a decline in general economic and market conditions,
specifically the decline that initially resulted from the COVID-19 pandemic and
that may recur and foreign currency exchange rate movements, inflation, regional
conflicts, increased competition, customer order patterns, changes in product
and services mix, timing differences between price decreases and product cost
reductions, product warranty returns, expediting costs, tariffs and
announcements of new products by us or our competitors. Specifically, we expect
inflationary pressures on input costs, such as raw materials and labor, and
distribution costs to increase. We continue to support our customer demand for
our products by working with our suppliers, contract manufacturers,
distributors, and customers to address and to limit the disruption to our
operations and order fulfillment. Our attempts to offset these cost pressures,
such as through increases in the selling prices of some of our products and
services, may not be successful and could negatively affect our operating
results. Additionally, maintaining sufficient inventory levels to assure prompt
delivery of our products increases the amount of inventory that may become
obsolete and increases the risk that the obsolescence of this inventory may have
an adverse effect on our business and operating results. Also, not maintaining
sufficient inventory levels to assure prompt delivery of our products may cause
us to incur expediting costs to meet customer delivery requirements, which may
negatively impact our operating results.

We are exposed to changes in foreign currencies relative to the U.S. dollar,
which are references to the differences between the foreign-exchanges rates we
use to convert the financial results of our international operations from local
currencies and non-U.S. dollar denominated functional currencies into U.S.
dollars for financial reporting purposes. This impact of foreign-exchange rate
changes is calculated based on the difference between the current period's
currency exchange rates and that of the comparable prior period. Our primary
exposures to foreign currency exchange rate movements are with our European
subsidiaries, whose functional currency is the Euro, our Australian subsidiary,
whose functional currency is the Australian dollar, and our U.K. subsidiary, who
transacts in the British pound sterling with a U.S. dollar functional currency.
As a result of our global operations, our revenue, gross margins, operating
expense and operating income in some international markets have been and may
continue to be affected by foreign currency fluctuations.

Our historical financial performance is not necessarily a meaningful indicator
of future results, and in general, management expects that our financial results
may vary from period to period. Factors that could materially affect our
business, financial condition or operating results are included in Part I, Item
1A of the 2021 Form 10-K and Part II, Item 1A of this Form 10-Q.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes in our critical accounting policies and estimates from those disclosed in our 2021 Form 10-K.

EFFECT OF RECENT ACCOUNTING STATEMENTS


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



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RESULTS OF OPERATIONS – THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021


The following table presents selected financial information derived from our
Condensed Consolidated Statements of Loss expressed as a percentage of revenue
for the periods indicated. Amounts may not foot due to rounding.


                                            Three Months Ended            Nine Months Ended
                                               September 30,                September 30,
                                            2022           2021           2022          2021
Revenue
Network Solutions                              89.5    %      87.5   %       89.8   %      88.1   %
Services & Support                             10.5           12.5           10.2          11.9
Total Revenue                                 100.0          100.0          100.0         100.0
Cost of Revenue
Network Solutions                              65.3           58.7           61.9          52.8
Services & Support                              4.4            6.8            5.1           7.1
Total Cost of Revenue                          69.8           65.5           67.1          59.9
Gross Profit                                   30.2           34.5           32.9          40.1
Selling, general and administrative
expenses                                       22.0           22.4           19.6          21.8
Research and development expenses              17.4           19.4           16.8          20.1
Asset impairment                                5.0              -            2.5             -
Operating Loss                                (14.1 )         (7.3 )         (6.0 )        (1.8 )
Interest and dividend income                    0.1            0.2            0.1           0.2
Interest expense                               (0.4 )            -           (0.2 )           -
Net investment (loss) gain                     (0.8 )            -           (1.6 )         0.7
Other income, net                               0.7            0.5            0.4           0.7
Loss Before Income Taxes                      (14.4 )         (6.6 )         (7.3 )        (0.2 )
Income tax benefit (expense)                    1.3           (0.9 )          0.7          (0.8 )
Net Loss                                      (13.2 )  %      (7.6 ) %       (6.6 ) %      (1.1 ) %



REVENUE

Our revenue increased 146.7% from $138.1 million for the three months ended
September 30, 2021 to $340.7 million for the three months ended September 30,
2022 and increased 63.2% from $408.8 million for the nine months ended September
30, 2021 to $667.3 million for the nine months ended September 30, 2022. The
increase in revenue for the three and nine months ended September 30, 2022 is
primarily attributable to a $163.8 million increase in volume of sales activity
due to the Business Combination with ADVA and a $38.8 million and $94.6 million
increase in volume of sales activity related to our ADTRAN, Inc. operations,
respectively. The increase in revenue by category for the three months ended
September 30, 2022 was primarily attributable to a $118.8 million increase in
Optical Networking Solutions products due to the Business Combination with ADVA,
a $86.8 million increase in Subscriber Solutions products, partially offset by a
$3.0 million decrease in Access & Aggregation Solutions revenue. The increase in
revenue by category for the nine months ended September 30, 2022 was
attributable to a $118.8 million increase in Optical Networking Solutions
products due to the Business Combination with ADVA, a $117.7 million increase in
Subscriber Solutions products, and a $21.9 million increase in Access &
Aggregation Solutions revenue. Although our revenue increased, supply of
semiconductor chips and other components of our products has become constrained
resulting in extended lead times and increased costs. Transportation
constraints, including shortages for both air and surface freight, as well as
labor shortages in the transportation industry, have also affected the timing
and the cost of obtaining raw materials and production supplies. Although our
revenue growth and profitability in the near-term may be impacted by these
global supply chain issues, our longer term outlook continues to strengthen
given our progress with new customer opportunities and the increased customer
demand.

Network Solutions segment revenue increased 152.5% from $120.8 million for the
three months ended September 30, 2021 to $304.9 million for the three months
ended September 30, 2022 and increased 66.5% from $360.0 million for the nine
months ended September 30, 2021 to $599.3 million for the nine months ended
September 30, 2022. The increase in revenue for the three months ended September
30, 2022 was due primarily to the increase of $143.4 million in volume of sales
activity due to the Business Combination with ADVA and an increase of $55.1
million in Subscriber Solutions products in our ADTRAN, Inc. operations. The
increase in revenue for the nine months ended September 30, 2022 was due to the
Business Combination with ADVA and increases in all revenue categories in our
ADTRAN, Inc. operations.

Services & Support segment revenue increased 106.6% from $17.3 million for the
three months ended September 30, 2021 to $35.8 million for the three months
ended September 30, 2022 and increased 39.2% from $48.8 million for the nine
months ended September 30, 2021 to $68.0 million for the nine months ended
September 30, 2022. The increase in revenue for the three and nine

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months ended September 30, 2022 was primarily attributable to the increase of
$20.4 million in volume of sales activity from the Business Combination with
ADVA partially offset by a $2.6 million decrease in revenue for Access &
Aggregation Solutions products in our ADTRAN, Inc. operations.

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 270.1% from $46.2 million for the three months ended
September 30, 2021 to $171.0 million for the three months ended September 30,
2022 and increased by 115.5% from $135.8 million for the nine months ended
September 30, 2021 to $292.8 million for the nine months ended September 30,
2022. International revenue, as a percentage of total revenue, increased from
33.5% for the three months ended September 30, 2021 to 50.2% for the three
months ended September 30, 2022 and increased from 33.2% for the nine months
ended September 30, 2021 to 43.9% for the nine months ended September 30, 2022
was primarily attributable to the increase in volume of $113.2 million in sales
activity from the Business Combination with ADVA and increased shipments to a
Tier-1 network operator and multiple alternative network operators in Europe.
While international revenue has increased to approximately 50% of total revenues
for the three months ended September 30, 2022, the mix of our Network Solutions
and Services & Support segments as a percentage of total international revenue
remains relatively linear. For the three and nine months ended September 30,
2022 as compared to the three and nine months ended September 30, 2021, changes
in foreign currencies relative to the U.S dollar decreased our net sales by
approximately $15.5 million and $34.4 million, respectively.


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 ADVA
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,
ADVA's 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 their cost to maintain
these networks.

REVENUE COST


As a percentage of revenue, cost of revenue increased from 65.5% for the three
months ended September 30, 2021 to 69.8% for the three months ended September
30, 2022 and increased from 59.9% for the nine months ended September 30, 2021
to 67.1% for the nine months ended September 30, 2022. For the three and nine
months ended September 30, 2022, the increase was primarily attributable to
$25.5 million in acquisition related expenses, amortizations, and adjustments
consisting of intangible amortization of backlog, developed technology and fair
value adjustments to inventory costs that flow through to cost of revenue as a
result of the Business Combination with ADVA as well as supply chain constraint
related expenses and to a lesser extent changes in customer and product mix and
a regional revenue shift in our ADTRAN, Inc. operations. For the three and nine
months ended September 30, 2022, as compared to the three and nine months ended
September 30, 2021, changes in foreign currencies relative to the U.S. dollar
decreased our cost of revenue by approximately $2.9 million and $6.7 million,
respectively. See additional information related to amortization lives and
expense in Notes 2 and 11 of Notes to the Condensed Consolidated Financial
Statements included in Part I, Item 1 of this report.

Network Solutions cost of revenue, as a percentage of that segment's revenue,
increased from 67.1% for the three months ended September 30, 2021 to 73.0% for
the three months ended September 30, 2022 and increased from 60.0% for the nine
months ended September 30, 2021 to 68.9% for the nine months ended September 30,
2022. The increase in cost of revenue as a percentage of revenue for the three
and nine months ended September 30, 2022 was primarily attributable to
acquisition related expenses, amortizations and adjustments consisting of
intangible amortization of backlog, developed technology and fair value
adjustments to inventory costs that flow through to cost of revenue as a result
of the Business Combination with ADVA as well as supply chain constraint related
expenses and to a lesser extent changes in customer and product mix and a
regional revenue shift in our ADTRAN, Inc. operations.

Services & Support cost of revenue, as a percentage of that segment's revenue,
decreased from 54.2% for the three months ended September 30, 2021 to 42.1% for
the three months ended September 30, 2022 and decreased from 59.1% for the nine
months ended September 30, 2021 to 50.4% for the nine months ended September 30,
2022. The decrease in cost of revenue as a percentage of revenue for the three
and nine months ended September 30, 2022 was primarily attributable to customer
mix and changes in Services & Support mix as a result of the Business
Combination with ADVA.

Services & Support revenue is comprised of network planning and implementation,
maintenance, support and cloud-based management services, with network planning
and implementation being the largest and fastest growing component in the
long-term. Compared to our other services, such as maintenance, support and
cloud-based management services, our network planning and implementation
services typically utilize a higher percentage of internal and subcontracted
engineers, professionals and contractors to perform the work for customers. The
additional costs incurred to perform these infrastructure and labor-intensive
services inherently result in lower

                                       46
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average gross margins as compared to maintenance and support services. Within
the Services & Support segment, we do expect variability in gross margins from
quarter-to-quarter based on the mix of the services recognized.

SELLING, GENERAL AND ADMINISTRATIVE FEES


As a percentage of revenue, selling, general and administrative expenses
decreased from 22.4% for the three months ended September 30, 2021 to 22.0% for
the three months ended September 30, 2022 and decreased from 21.8% for the nine
months ended September 30, 2021 to 19.6% for the nine months ended September 30,
2022. Selling, general and administrative expenses as a percentage of revenue
will generally fluctuate whenever there is a significant fluctuation in revenue
for the periods being compared.

Selling, general and administrative expenses increased 141.8% from $31.0 million
for the three months ended September 30, 2021 to $74.9 million for the three
months ended September 30, 2022 and increased 46.3% from $89.3 million for the
nine months ended September 30, 2021 to $130.6 million for the nine months ended
September 30, 2022. The increase in selling, general and administrative expenses
for the three and nine months ended September 30, 2022 was primarily
attributable to increased expenses related to the Business Combination with ADVA
such as employee-related costs due to an increase in the number of employees,
amortization of intangible assets, depreciation of property, plant and equipment
and transactions costs. For the three and nine months ended September 30, 2022
as compared to the three and nine months ended September 30, 2021, changes in
foreign currencies relative to the U.S dollar decreased our selling, general and
administrative expenses by approximately $1.8 million and $4.6 million,
respectively.

RESEARCH AND DEVELOPMENT EXPENSES


As a percentage of revenue, research and development expenses decreased from
19.4% for the three months ended September 30, 2021 to 17.4% for the three
months ended September 30, 2022 and decreased from 20.1% for the nine months
ended September 30, 2021 to 16.8% for the nine months ended September 30, 2022.
Research and development expenses as a percentage of revenue will fluctuate
whenever there are incremental product development activities or significant
fluctuations in revenue for the periods being compared.

Research and development expenses increased 121.2% from $26.8 million for the
three months ended September 30, 2021 to $59.2 million for the three months
ended September 30, 2022 and increased 36.6% from $82.1 million for the nine
months ended September 30, 2021 to $112.2 million for the nine months ended
September 30, 2022. The increase in research and development expenses for the
three and nine months ended September 30, 2022 was primarily attributable to
increased expenses related to the Business Combination with ADVA such as
employee-related costs due to an increase in the number of employees,
amortization of intangible assets and depreciation of property, plant and
equipment. For the three and nine months ended September 30, 2022 as compared to
the three and nine months ended September 30, 2021, changes in foreign
currencies relative to the U.S. dollar decreased our research and development
expenses by approximately $1.9 million and $4.8 million, respectively.

ADVA has arrangements with governmental entities for the purposes of obtaining
funding for research and development activities. The Company classifies
government grants received under these arrangements as a reduction to research
and development expense incurred. For the three and nine months ended September
30, 2022, the Company recognized $0.3 million as a reduction of research and
development expense.

We expect to continue to incur research and development expenses in connection
with our new and existing products. We continually evaluate new product
opportunities and engage in significant research and product development
efforts, which provides for new product development, enhancement of existing
products and product cost reductions. We may incur significant research and
development expenses prior to the receipt of revenue from a major new product
group.

ASSET IMPAIRMENT

In connection with the planned integration of information technology following
the Business Combination, we determined that certain projects no longer fit our
needs. As a result the Company recognized impairment charges of $17.0 million
during the three and nine months ended September 30, 2022 related to capitalized
implementation costs for a cloud computing arrangement. There were no asset
impairments recognized during the three and nine months ended September 30,
2021. See Note 9 of Notes to the Condensed Consolidated Financial Statements
included in Part I, Item 1 of this report for additional information.

INTEREST AND DIVIDEND INCOME


Interest and dividend income was $0.3 million for the three months ended
September 30, 2022 and 2021 and decreased 13.4% from $0.9 million for the nine
months ended September 30, 2021 to $0.8 million for the nine months ended
September 30, 2022. Interest and dividend income was down due to a decrease in
the investment balance for the nine months ended September 30, 2022. Our total
long-term investments decreased from $83.9 million as of September 30, 2021 to
$50.1 million as of September 30, 2022.

                                       47
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INTEREST EXPENSES


Interest expense increased from less than $0.1 million for the three months
ended September 30, 2021 to $1.3 million for the three months ended September
30, 2022. Interest expense increased from less than $0.1 million for the nine
months ended September 30, 2021 to $1.4 million for the nine months ended
September 30, 2022. The increase in interest expense during the three and nine
months ended September 30, 2022 was primarily related to an increase in assumed
debt associated with the Business Combination with ADVA and the new Wells Fargo
Credit Agreement. See Note 13 and Note 14 of the Notes to Condensed Consolidated
Financial Statements, included in Part I, Item 1 of this report.

NET GAIN (LOSS) ON INVESTMENT


We recognized a net investment loss of $0.1 million and $2.7 million for the
three months ended September 30, 2021 and 2022, respectively and recognized a
net investment gain of $2.9 million and a net investment loss of $10.8 million
for the nine months ended September 30, 2021 and 2022, 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 7 of the Notes to Condensed Consolidated
Financial Statements, included in Part I, Item 1 of this report, and "Investing
Activities" in "Liquidity and Capital Resources" below for additional
information.

OTHER INCOME, NET


Other income, net, which primarily consisted of gains and losses on foreign
currency transactions and income from excess material sales, increased from
income of $0.6 million for the three months ended September 30, 2021 to income
of $2.5 million for the three months ended September 30, 2022 and increased from
income of $2.7 million for the nine months ended September 30, 2021 to income of
$2.9 million for the nine months ended September 30, 2022.

INCOME TAX EXPENSE (BENEFIT)


Our effective tax rate changed from an expense of 14.1% of pre-tax income for
the three months ended September 30, 2021, to a benefit of 8.8% of pre-tax
income for the three months ended September 30, 2022 and changed from an expense
of 354.5% of pre-tax income for the nine months ended September 30, 2021, to a
benefit of 9.4% of pre-tax income for the nine months ended September 30, 2022.
The change in the effective tax rate for the three and nine months ended
September 30, 2022, was driven primarily by a change in our estimated tax rate
as a result of the closing of the Business Combination with ADVA during the
third quarter of 2022, the requirement to begin capitalizing Research and
Development expenses for U.S. tax purposes beginning in 2022 as previously
passed as part of the Tax Cuts and Jobs Act in December 2017 and the associated
impact of those changes on our previously established valuation allowance.

NET LOSS ATTRIBUTABLE TO ADTRAN HOLDINGS, INC.


As a result of the above factors, net loss attributable to ADTRAN Holdings, Inc.
increased from $10.4 million for the three months ended September 30, 2021 to
$41.9 million for the three months ended September 30, 2022 and increased from
$4.4 million for the nine months ended September 30, 2021 to $40.9 million for
the nine months ended September 30, 2022.


CASH AND CAPITAL RESOURCES

Liquidity


We have historically financed, our ongoing business with existing cash,
investments and cash flow from operations. In the current supply environment we
also expect to utilize our credit arrangements to manage our working capital
needs. We have used, and expect to continue to use, existing cash, investments,
credit arrangements and cash generated from operations for working capital,
business acquisitions, shareholder dividends and other general corporate
purposes, including product development activities to enhance our existing
products and develop new products, expand our sales and marketing activities and
fund capital expenditures. As of September 30, 2022, the Company has incurred
$25.2 million of transaction costs related to the Business Combination and
expects to incur an estimated $1.1 million of additional transaction costs. We
believe that our cash and cash equivalents, investments, cash generated from
operations and access to funds under the new Wells Fargo credit facility
(described below) will be adequate to meet our operating and capital needs for
at least the next 12 months.

As of September 30, 2022, cash on hand was $111.1 million and short-term
investments were $0.8 million, which resulted in available short-term liquidity
of $111.9 million, of which $77.0 million was held by our foreign subsidiaries.
As of December 31, 2021, cash on hand was $56.6 million and short-term
investments were $0.4 million, which resulted in available short-term liquidity
of $57.0 million, of which $47.7 million was held by our foreign subsidiaries.
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.

                                       48
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Operational activities


Net cash used in operating activities of $42.7 million during the nine months
ended September 30, 2022 decreased by $71.6 million compared to net cash
provided of $28.9 million during the nine months ended September 30, 2021. This
decrease was primarily due to net cash outflows from working capital,
specifically, an inventory build related to component availability, an increase
in accounts receivables and transaction costs related to the Business
Combination partially offset by an increase in the average number of days
payable to our trade suppliers. Additional details related to our working
capital and its drivers are discussed below.

Net accounts receivable increased 90.5% from $158.7 million as of December 31,
2021 to $302.4 million as of September 30, 2022. There was an allowance for
credit losses of $0.2 million as of September 30, 2022 and no allowance for
credit losses as of December 31, 2021. The increase in net accounts receivable
was due primarily to the increase in sales volume related to the Business
Combination with ADVA and an increase in sales volume in our ADTRAN, Inc.
operations. Quarterly accounts receivable DSO decreased from 95 days as of
December 31, 2021 to 82 days as of September 30, 2022. The decrease in DSO was
due to customer and geographical mix associated with the Business Combination
with ADVA and timing of sales within the quarter.

Other receivables increased 27.8% from $11.2 million as of December 31, 2021 to
$14.4 million as of September 30, 2022. The increase in other receivables was
primarily attributable to an increase in prepaid taxes associated with Business
Combination with ADVA and contract assets partially offset by a decrease in our
receivables for sales of raw materials and reclaimed duty drawbacks.

Quarterly inventory turnover was 3.0 turns as of December 31, 2021 and 3.1 turns
as of September 30, 2022, respectively. Inventory increased 197.5% from $139.9
million as of December 31, 2021 to $416.2 million as of September 30, 2022. The
increase in inventory was due to Business Combination with ADVA and strategic
inventory buffer purchases given extended component lead times and availability
constraints as well as new product ramp ups to ensure supply continuity. We
expect inventory levels to fluctuate as we attempt to maintain sufficient
inventory in response to supply chain uncertainties.

Accounts payable increased 169.3% from $102.5 million as of December 31, 2021 to
$276.0 million as of September 30, 2022. The increase in accounts payable was
primarily due to the increase in volume of operating costs associated with the
Business Combination with ADVA, additional purchases of raw material inventory
and extended payment terms. Accounts payable will fluctuate due to variations in
the timing of the receipt of inventory, supplies and services and our subsequent
payments for these purchases.

Investing Activities

Capital expenditures totaled approximately $10.1 million and $3.6 million for
the nine months ended September 30, 2022 and 2021, respectively. These
expenditures were primarily used to purchase manufacturing and test equipment,
software, computer hardware and building improvements.

Our combined short-term and long-term investments decreased $20.1 million from
$71.0 million as of December 31, 2021 to $50.9 million as of September 30, 2022.
This decrease reflects the impact of the sale of portions of our equity and
fixed income investments and the net unrealized and realized gains and losses on
our investments.

We typically invest all available cash not required for immediate use in
operations, primarily in securities that we believe bear minimal risk of loss.
See Note 7 of the Notes to Condensed Consolidated Financial Statements included
in Part I, Item 1 of this report for additional information.

As of September 30, 2022, our corporate bonds, municipal bonds, asset-backed
bonds, mortgage/agency bonds, U.S. government bonds and other government bonds
were classified as available-for-sale and had a combined duration of 1.71 years
with an average Standard & Poor's credit rating of AA-. Because our investment
portfolio has a high-quality rating and contractual maturities of short
duration, we are able to obtain prices for these bonds derived from observable
market inputs, or for similar securities traded in an active market, on a daily
basis.

Our long-term investments decreased 29.0% from $70.6 million as of December 31,
2021 to $50.1 million as of September 30, 2022. Our investments include various
marketable equity securities classified as long-term investments with a fair
market value of $0.8 million and $12.6 million as of September 30, 2022 and
December 31, 2021, respectively. Long-term investments as of September 30, 2022
and December 31, 2021 also included $21.5 million and $26.9 million,
respectively, related to our deferred compensation plans.

Fundraising activities

Dividends


During the nine month periods ended September 30, 2022 and 2021, we paid
dividends totaling $15.9 million and $13.1 million, respectively. The continued
payment of dividends is at the discretion of the Company's Board of Directors
and is subject to general business conditions and ongoing financial results of
the Company.

                                       49
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Stock option exercises


To accommodate employee stock option exercises, the Company issued 0.4 million
and 0.1 million shares of common stock and treasury stock which resulted in
proceeds of $4.8 million and $2.6 million during the three months ended
September 30, 2022 and 2021, respectively and issued 0.4 and 0.4 million shares
of common stock and treasury stock which resulted in proceeds of $5.4 million
and $6.1 million during the nine months ended September 30, 2022 and 2021,
respectively.

Off-balance sheet arrangements


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

Cash requirements


The following table summarizes the Company's material short- and long-term cash
requirements from known obligations pursuant to certain contracts and
commitments as of September 30, 2022, as well as an estimate of the timing in
which such obligations and payments are expected to be satisfied.


(In thousands)            Total         2022          2023          2024        2025        2026        After 2026
Wells Fargo credit
agreement(1)            $  60,000     $       -     $  60,000     $      -     $     -     $     -     $          -
Nord/LB revolving
line of credit(2)          14,702             -        14,702            -           -           -                -
Syndicated credit
agreement working
capital line of
credit(3)                   9,801             -         9,801            -           -           -                -
Syndicated credit
agreement note
payable(4)                 29,782         7,351        22,431            -           -           -                -
Purchase
obligations(5)            454,143       218,792       226,130        8,852         192         166               11
Operating lease
obligations(6)             32,027         2,209         8,421        7,098       5,838       3,354            5,107
Business combination
transaction costs(7)        1,144         1,144             -            -           -           -                -
Totals                  $ 601,599     $ 229,496     $ 341,485     $ 15,950     $ 6,030     $ 3,520     $      5,118


(1) See description below.

(2) See description below.

(3) See description below.

(4) See description below.

(5) We have purchase obligations related to open purchase orders to our contract
manufacturers, ODMs, component suppliers, service partners and other vendors.
The settlement of our purchase obligations will occur at various dates beginning
in 2022 and going through 2027. See Note 20 of the Notes to Condensed
Consolidated Financial Statements, included in Part I, Item 1 of this report for
more information.

(6) We have operating leases for offices, automobiles and various other equipment in the WE and in some international locations. Our operating leases had remaining terms ranging from one month to 75 months as of
September 30, 2022.


(7) Pursuant to the Business Combination Agreement, the Company is bearing the
transaction costs of the Business Combination attributable to the Company. For
additional information on the Business Combination, see Note 2 of Notes to
Condensed Consolidated Financial Statements included in Part I, Item 1 of this
report.

New Wells Fargo Credit Agreement


On July 18, 2022, ADTRAN Holdings, Inc. and ADTRAN, Inc., as the borrower,
entered into a credit agreement with a syndicate of banks, including Wells Fargo
Bank, National Association, as administrative agent ("Administrative Agent"),
and the other lenders named therein (the "Credit Agreement"). The Credit
Agreement allows for borrowings of up to $100 million in aggregate principal
amount, subject to being increased to up to $400 million in aggregate principal
amount upon the Company or Borrower's execution of a DPLTA with ADVA or a parent
of ADVA, among other conditions (the "Senior Credit Facilities Increase"). On
October 18, 2022, the Board of Directors of the Company. and the management
board of ADVA, agreed on a final draft of a DPLTA between the Company, as the
controlling company, and ADVA, as the controlled company. See Note 21 of the
Notes to Condensed Consolidated Financial Statements for further information.

                                       50
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As of September 30, 2022, ADTRAN, Inc.'s borrowings under the revolving line of
credit were $60.0 million in tranches that mature during the fourth quarter of
2022 and can either be repaid or borrowed again for a one month, three month or
six month period. In addition, we may issue up to $25 million in letters of
credit against our $100 million dollar total facility. As of September 30, 2022,
we had a total of $16.0 million in letters of credit with ADTRAN, Inc.
outstanding against our eligible borrowings, leaving a net amount of $24.0
million available for future borrowings. Any future credit extensions under the
Credit Agreement are subject to customary conditions precedent. The proceeds of
any loans are expected to be used for general corporate purposes and to pay a
portion of the Exchange Offer consideration.

All U.S. borrowings under the Credit Agreement (other than swingline loans,
which will bear interest at the Base Rate (as defined below)) will bear
interest, at the Company's option, at a rate per annum equal to (A)(i) the
highest of (a) the federal funds rate (i.e., for any day, the rate per annum
equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System, as published by the
Federal Reserve Bank of New York on the business day next succeeding such day)
plus ½ of 1%, (b) the prime commercial lending rate of the Administrative Agent,
as established from time to time at its principal U.S. office (which such rate
is an index or base rate and will not necessarily be its lowest or best rate
charged to its customers or other banks), and (c) the daily Adjusted Term SOFR
(as defined in the Credit Agreement) for a one-month tenor plus 1%, plus (ii)
the applicable rate, ranging from 0.5% to 1.25% (the "Base Rate"), or (B) the
sum of the Adjusted Term SOFR (as defined in the Credit Agreement) plus the
applicable rate, ranging from 1.4% to 2.15%, provided that such sum is subject
to a 0.0% floor (such loans utilizing this interest rate, "SOFR Loans"). All
E.U. borrowings under the Credit Agreement (other than swingline loans) will
bear interest at a rate per annum equal to the sum of the Euro Interbank Offered
Rate as administered by the European Money Markets Institute (or a comparable or
successor administrator approved by the Administrative Agent) plus the
applicable rate, ranging from 1.5% to 2.25%, provided that such sum is subject
to a 0.0% floor (such loans utilizing this interest rate, "EURIBOR Loans"). The
applicable rate is based on the consolidated net leverage ratio of the Company
and its subsidiaries as determined pursuant to the terms of the Credit
Agreement. Default interest is 2.00% per annum in excess of the rate otherwise
applicable in the case of any overdue principal or any other overdue amount.

In addition to paying interest on outstanding principal under the Credit
Agreement, the Company is required to pay a commitment fee to the lenders under
the Credit Agreement in respect of unutilized revolving loan commitments and an
additional commitment ticking fee at a rate of 0.25% on the commitment amounts
of each lender until the earliest of (i) the date of the Senior Credit
Facilities Increase, (ii) the Company's voluntary termination of the credit
facility commitment, and (iii) December 31, 2023. The Company is also required
to pay a participation fee to the Administrative Agent for the account of each
lender with respect to the Company's participations in letters of credit at the
then applicable rate for SOFR Loans.

The Credit Agreement permits the Company to prepay any or all of the outstanding
loans or to reduce the commitments under the Credit Agreement without incurring
premiums or penalties (except breakage costs with respect to SOFR Loans and
EURIBOR Loans). The Credit Agreement contains customary affirmative and negative
covenants, including incurrence covenants and certain other limitations on the
ability of the Company and the Company's subsidiaries to incur additional debt,
guarantee other obligations, grant liens on assets, make investments, dispose of
assets, pay dividends or other payments on capital stock, make restricted
payments, engage in mergers or consolidations, engage in transactions with
affiliates, modify its organizational documents, and enter into certain
restrictive agreements. It also contains customary events of default (subject to
customary cure periods and materiality thresholds). Furthermore, the Credit
Agreement requires that the Consolidated Total Net Leverage Ratio (as defined in
the Credit Agreement) of the Company and its subsidiaries tested on the last day
of each fiscal quarter not exceed 3.25 to 1.0 through September 30, 2024 and
2.75 to 1.00 from December 31, 2024 and thereafter, subject to certain
exceptions. The Credit Agreement also requires that the Consolidated Interest
Coverage Ratio (as defined in the Credit Agreement) of the Company and its
subsidiaries tested on the last day of each fiscal quarter not fall below 3.00
to 1.00. The Credit Agreement matures in July 2027 but provides the Company with
an option to request extensions subject to customary conditions.

Finally, pursuant to a Collateral Agreement, dated as of July 18, 2022, among
the Company, ADTRAN, Inc. and the Administrative Agent, ADTRAN, Inc.'s
obligations under the Credit Agreement are secured by substantially all of the
assets of ADTRAN, Inc. and the Company. In addition, the Company has guaranteed
ADTRAN, Inc.'s obligations under the Credit Agreement pursuant to a Guaranty
Agreement, dated as of July 18, 2022, by ADTRAN, Inc. and the Company in favor
of the Administrative Agent.

North/LB Revolving Line of Credit


On August 8, 2022, ADVA entered into a $14.7 million revolving line of credit
with Norddeutsche Landesbark - Girozentrale (Nord/LB) that bears interest of
Euro Short Term Rate + 1.4% and which matures in August 2023. During the term of
the loan, ADVA is obligated to maintain an adjusted net debt to cover ratio that
is equal to or less than 2.75. The revolving line of credit grants Nord/LB a
lien on assets of any kind which come into the possession of ADVA. Assets of any
kind includes goods, foreign exchange, securities including interest, annuity
and profit notes, collective securities deposits, subscription rights, checks,
bills of exchange, bills of lading, storage and loading slips. As of September
30, 2022, ADVA's borrowings under the revolving line of credit were $14.7
million.


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Syndicated credit agreement Working capital line of credit


In September 2018, ADVA entered into a syndicated credit agreement with
Bayerische Landesbank and Deutsche Bank AG Branch German Business to borrow up
to $9.8 million as part of a working capital line of credit. The interest rate
for the working capital line of credit is adjusted periodically based on a
defined leverage ratio and is currently EURIBOR plus 1.35% as of September 30,
2022. The working capital line of credit matures in September 2023. As of
September 30, 2022, borrowings under the working capital line of credit totaled
$9.8 million.

Syndicated Credit Agreement Bill to Pay

In September 2018ADVA has entered into a syndicated credit agreement with
Bayerische Landesbank and Deutsche Bank AG Branch German Business to borrow
$63.7 million. The interest rate on the note payable is adjusted periodically based on a defined leverage ratio and is currently EURIBOR plus 1.35% from
September 30, 2022. The note payable matures in September 2023.

Proposed dominance and profit and loss transfer agreement


On October 18, 2022, the Board of Directors of the Company and the management
board of ADVA agreed on a final draft of a DPLTA between the Company, as the
controlling company, and ADVA, as the controlled company. The parties' execution
of the DPLTA remains subject to approval of the DPLTA by shareholders of ADVA
with 75% of the votes cast in an extraordinary general meeting, which is
scheduled to be held on November 30, 2022. If and when signed, effectiveness of
the DPLTA is subject to the subsequent registration of the DPLTA with the
commercial register (Handelsregister) of the local court (Amtsgericht) at the
registered offices of ADVA, with such effectiveness to occur no earlier than
January 1, 2023.

Pursuant to Sections 302 et seq. of the German Stock Corporation Act, under the
proposed DPLTA, we would be obligated to compensate any annual net loss of ADVA.
Additionally, pursuant to the terms of the proposed DPLTA, each ADVA shareholder
(other than the Company) will be offered to elect either (1) to remain an ADVA
shareholder and receive from us an Annual Recurring Compensation payment, or (2)
to receive Exit Compensation. Assuming all of the minority holders of currently
outstanding ADVA shares were to elect the second option, the Company would be
obligated to make aggregate Exit Compensation payments of approximately EUR
309.8 million (or approximately $303.6 million at the exchange rate in effect on
September 30, 2022). Shareholders electing the first option of Annual Recurring
Compensation may later elect the second option. Our obligation to pay Annual
Recurring Compensation under the proposed DPLTA would lead to a continuing
payment obligation, which would amount to approximately $10.4 million per year
assuming none of the minority ADVA shareholders were to elect Exit Compensation
and no adjustment is made to the Annual Recurring Compensation Payment Amount
between now and November 30, 2022. Any such adjustments could materially
increase the amount of the Annual Recurring Compensation Payment Amount. The
amount of this Annual Recurring Compensation payment obligation pursuant to the
proposed DPLTA could exceed the amount of dividends that otherwise might be
distributed by ADVA to minority shareholders and would even have to be paid if
ADVA incurs losses, which could have a material adverse impact on our financial
results and financial condition.

Other cash needs

We are committed to investing up to a total of $5.0 million in a private equity fund, of which $4.9 million has been invested since September 30, 2022.


During the nine months ended September 30, 2022, there have been no other
material changes in cash requirements from those discussed in the 2021 Form 10-K
other than the Company's commitments and contingencies that were assumed due to
the Business Combination with ADVA that occurred on July 15, 2022.

Performance guarantees


Certain contracts, customers and jurisdictions in which we do business require
us to provide various guarantees of performance such as bid bonds, performance
bonds and customs bonds. As of September 30, 2022 and December 31, 2021, we had
commitments related to these bonds totaling $21.1 million and $22.9 million,
respectively, which expire at various dates through April 2025. In general we
would only be liable for the amount of these guarantees in the event of default
under each contract, the probability of which we believe is remote.

Significant Accounting Policies and Estimates


An accounting policy is deemed to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, if different estimates reasonably could have
been used or if changes in the accounting estimate that are reasonably likely to
occur could materially impact the results of financial operations. Several
accounting policies, as described in Note 1 of Notes to the Consolidated
Financial Statements included in Part I, Item 1 of this report, require material
subjective or complex judgment and have a significant impact on our financial
condition and results of operations, as applicable.

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We believe the critical accounting policies affect our more significant
judgments and estimates used in the preparation of our Condensed Consolidated
Financial Statements. During the nine months ended September 30, 2022, there
were no significant changes to our critical accounting policies and estimates as
described in the financial statements contained in the 2021 Form 10-K.

                                       53

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