ADTN, ADTRAN Holdings Inc.

Will it survive?

• Can it pay its interest? -0.8×
  Does not cover its interest
  Operating income ($16M) ÷ interest expense $19M
  What this means

  A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.

• How heavy is the debt, net of cash? $97M
  Net debt against an operating loss
  Cash $96M − debt $193M
  What this means

  Netting $96M of cash and short-term investments against $193M of debt leaves $97M owed, with no operating profit this year to measure it against — understand that combination before anything else about the company. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? 97d
  Long (60+ days)
  DSO 71 + DIO 118 − DPO 91 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

• Return on invested capital -5%
  Below average through the cycle
  10-yr median, range -140%–6%; -5% latest = NOPAT ($12M) ÷ invested capital $243M
  Industry peers: median 7%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 10 years (it ran -5% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin 9%
  Positive this year, negative across the cycle
  latest $98M = operating cash $130M − maintenance capex $32M (positive this year), after an earlier loss stretch (10-yr median -2%)
  Industry peers: median 10%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 9% of revenue this year, a -2% median across 10 years. Treating stock comp as the real expense it is (less $10M of SBC) leaves $88M.

• Are earnings backed by cash? $130M
  Loss, but cash-generative
  Net income ($46M) · cash from operations $130M
  What this means

  The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did.

How is the cash used?

• Where do the earnings go? 0%
  Reinvests most of it
  Dividends + buybacks $184K ÷ Owner Earnings $98M
  What this means

  Of $98M Owner Earnings, $184K (0%) went back to shareholders, $0 dividends, $184K buybacks. But the buybacks barely exceed stock issued to employees ($10M SBC), net of dilution, little was truly returned. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.

• Investing or harvesting? 0.34×
  Harvesting
  Capex $32M ÷ depreciation $93M
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 1 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size Near
  Revenue ≥ $2B · $1.1B
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Near
  Current ratio ≥ 2× · 1.76×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Pass
  Debt ≤ working capital · $193M vs $273M WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Earnings stability Miss
  A profit every year (10-yr record) · 7 loss years
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record Miss
  Uninterrupted dividends · 8 of 10 yrs
  What this means

  An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.

• Earnings growth Miss
  Earnings +33% over the record · −2049%
  What this means

  At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $-3.19/share (latest year $-0.56), the averaged base the calculator's gate runs on, and book value is $1.80/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 3 of 10
  What this means

  Lost money in 7 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 0 of 9 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin 1% → −22% (3-yr avg ends)

  In the filing’s words The filing attributes gains to higher prices, but the margin in the record has not followed — the claim outruns the result here.

  What this means

  Through the cycle the operating margin slipped — about 1% early to −22% lately, median −7% — competition or costs are biting in.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Worst year 2024 · −46.3% op. margin
  What this means

  Operations went underwater in 2024, understand why before trusting the good years.

• Share count +5.6%/yr
  What this means

  The share count is rising, dilution works against you on a per-share basis.

• Dividend record rising
  What this means

  Paid and raised the dividend across the record, the continuity Graham prized.