In addition to revealing new accounting errors on the same day it corrected two years of financials Adtran Holdings (ADTN), a networking and communications platform, suggested years of accounting errors were hidden from its auditor and Board of Directors.

In an amended annual report, Adtran revealed besides over accruing for its Domination and Profit and Loss Transfer Agreement (DPLTA) and botching the treatment of its non-controlling interest, the company has also been understating its cost of revenue and overstating inventory in 2023 and 2024.

The company blamed a “system error” and added goodwill has also been understated and income tax receivables overstated.

On the same day, Adtran filed its latest quarterly report in which it also admitted:

“In addition to the misstatements identified above, the Company has corrected other immaterial errors.”

When combined with the errors outlined above, Adtran felt compelled to restate its first quarter 2024 results which revealed the company:

—Overstated gross profit $1.9 million, or 2.7%
—Understated operating loss $6.5 million, or 1.9%
—Understated operating cash flow $1.3 million, or 3.6%

The findings of an internal investigation by the Audit Committee likely did little to reassure investors as Adtran did not say whether those at fault are still with the company:

“Based on the findings of the internal investigation, which is substantially complete, it has been determined that the underlying errors giving rise to the Adjustment were not properly addressed in the Company’s previously filed financial statements as of and for the years ended December 31, 2024 and 2023 and was not communicated to the Audit Committee or the independent auditors prior to the filing of the initial 2024 Annual Report on Form 10-K.”

Adtran did not respond when DuDil requested the company reveal whether those who did not communicate the accounting errors are still with the company.

Adtran replaced its CFO in March 2025 but allowed the former CFO to stay on in a different role.

The mess, it seems, forced Adtran’s lenders to throw in the towel and grant the company leniency to avoid defaulting:

“The lenders also waived certain events of default related to among others, inaccuracies in the financial statements that were previously delivered to the lenders by the Company with respect to the fiscal quarters ended June 30, 2024 and September 30, 2024, and breaches of the Consolidated Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) financial covenant for the fiscal quarters ended June 30, 2024 and September 30, 2024.”

With an Enterprise Value (EV) of approximately $1.1 billion, Adtran is priced as if it will grow annual sales to more than $3.5 billion, up from an estimated $1 billion in 2025. To justify its current share price of $8.03 our Reverse DCF— which quantifies investor expectations embedded in the current share price— indicates Adtran must:

—Grow sales 15% annually between 2027-2034, faster than the company’s estimated 2025 and 2026 sales growth of 12.7% and 10.5%, respectively
—Increase NOPAT margin to 5.5%, versus our 2024 estimate of (20.6%) and three-year average estimate of (14.9%)
—Increase Invested Capital (IC) Turns to 1.7, up from our three-year average estimate of 0.78

Notably, the current share price also implies Adtran increases Return on Invested Capital (ROIC) to 9.35% from our three-year average estimate of (11.24%):