ADTN - Earnings call transcript Q4 2017

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to ADTRAN’s Fourth Quarter 2017 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. [Operator Instructions] During the course of the conference call, ADTRAN representatives expect to make forward-looking statements, which reflect management’s best judgment based on factors currently known.

products, risks of including of efficiencies core the year for XX, involve and successful competition December and statements channel ended Form market acceptance and XX-K in market products, such report other these risks and costs, our the uncertainties, development in mix, detailed However, component product annual manufacturing on the XXXX. the the degree for which those may could uncertainties actual to in cause call. forward-looking from statements, made These risks and be differ results the during materially

In the addition, ADTRAN. of turn Stanton, It my will live ADTRAN Tom webcast this Officer to QX is Sir, call conference please pleasure the through to Executive service. call go over Inc. ahead. webcasting Chief now

Tom Stanton

what quarter Roger With this the I’d some and results four by Thank more quarter you, Roxanne. details fourth then discuss detail that Senior our Thank Shannon, like you up any you morning and will our open performance questions for Chief on I going conference fourth to morning me XXXX have. may quarter Financial in is for joining we’ll end discussing with behind President our forward. Roger call then Vice and us this Officer. the comments begin call. we for will anticipate

earlier As year. last the quarter we XX% revenues release, fourth our stated of quarter were over in for press $XXX.X the million, down

due the $XX.X while million, year. $XX.X XX% domestic our or quarter, revenues & over fourth revenue, both Services merger spending operator. for XX% in for million $XX.X over by On markets, our XX% decreased including year-over-year in international caused related came international down our basis, of a the XX%, Solutions X XX% revenues were last the Network quarter domestic $XX.X of Tier at same the to million million total, or total. at domestic down in Our were markets year. our period and the revenues Support Total Revenue last came

business to in unseasonably strong Tier European international X second XX% Our decreased year-over-year year. due the spending last of half

Access the mentioned. year, category expending our previously the carrier deeper, little Tier over same merger last & a period over down and last down MSO by the our Fiber-to-the-Home domestic quarter by both led XX% U.S. was Aggregation year up X cause was Moving in the primarily revenue X% due growth related to Customer and products. business operator Devices our ONTs, CPE same

last Lastly, Products our other year. Traditional versus categories up quarter the were in XX% same

U.S. release, were of here As part impacted we X noted press reviewing in our vectoring our a understanding major that carrier by this Tier XX in December It the significantly our is results programs slowdown program is at our merger-related review. and capital this is

in XX We to told approximately first complete have that XX our to this the take days review be expect review we and been XXXX. quarter days would

strides impacted continue with extremely of results and a While year overall. in even our the best in company’s near-term, and great the will record realized record platform. to impact driving proud substantial and revenue had acceptance our half our mentioned services this revenue of in the revenue We cloud history. second performance first we consolidation we the are We Mosaic slowdown QX, have made in

place and that beyond, of gigabit us grow. continue positive there Not combined and and revenue are only are our interest providers Services around engagements in to ability solutions is the the we some XX% which international Total impact year, as the XX%, our growth, with hiX have revenue and of X in for world. services deepen relationships Tier their Access deployment continue our deliver going we interest we with continued Flagship, service put platforms processes and and strengthen our up projected. SD-Access programs a to Globally, year-over-year For was having that gives to assurance level in

G.fast are in and deployments. operators Asia in the Our to Europe Pacific, commercial U.S., have status moved and X production ramping Tier full leading with solutions

continue in and have over and brought We broad by to us, such new of wins deployments XX announced a we MDN DT, customers. as carriers in leading XXXX breadth ahead in demonstrated by of well infrastructure opportunities

ramp-up We Gigabit-to-the-Basement developmental designed created and breakthroughs have the to access specifically millimeter and by with help wave introduced our backhaul solutions opportunities realize carriers XG. the to

of remains center SD-Access in developing ADTRAN the marketplace. Finally, the

and are has We’ll collaborating of solutions Our will Roger? new of then to questions the have. the approach comments and results XXXX our Network NFV member the open where quarter Mosaic the XXXX review become centerpiece for Mosaic that on underpin fourth I’d to like on call quickly of platform a the Open Alliance, Roger you may SDN first access. now some Shannon up any provide well. quarter as to companies

Roger Shannon

and quarter for Thank see next we and morning. you, I’ll Tom, good the about our speak what fourth discuss results quarter.

our During QX I’ll our earnings press charge Jobs recently of my release, as tax expense. Tax in a referencing impact non-GAAP income the reflect GAAP which GAAP enacted Cuts report, and Also, our be to results Act, stated the in results. both resulted and

at As reported compared and the XX%, below million $XXX.X last quarter million to quarter. million, Tom ADTRAN’s the stated, $XXX fourth for last XX% quarter of we year revenue $XXX.X came in four down

reported and million down quarter $XXX.X quarter down from of last million, Our for QX from XXXX. Network fourth XX% Solutions year revenues were $XXX.X the million for XX% in for $XX.X the four

of Traditional quarter for were four revenue quarter $XXX.X compared & XXXX. were quarter revenues XX%, million XX% earned $XX.X of XXXX. XX% Across Our Customer compared versus were XX% the in for third XXXX. Access $XX.X Other million, four $XX.X in XXXX four revenues four down of of $XX.X Support million for & and down & of compared Devices Products $XX.X of XXXX for revenue $XX.X XXXX to $XX.X the of reported the down four to $XX.X million, Global million, for million up revenues million, Services XXXX. million to our quarter compared QX categories, X% XXXX Aggregation quarter quarter four for quarter to for up quarter million was

at million quarter for we $XXX.X were XX% XXXX Looking in from four quarter revenues year. the domestic geographically, of four last reported $XX.X revenues down of million,

revenues for XXXX in XX% of the international quarter four last categories each million our quarter We’ve Investor $XX.X Our reporting of of of on were compared webpage published adtran.com. these million, $XX.X to year. down at Relations four

we quarter, revenue the customers. had XX% of For two

GAAP million Our quarter-over-quarter R&D quarter. for a decrease the GAAP million expenses. $X.X operating million, to offset The of Non-GAAP equity a year just favorable adjusted internationally, increased waiting is of performance of exchange year-over-year mix GAAP our equity for compared decrease year, attributable increase decrease income foreign or our The in million compensation, the quarter in and operating on by R&D lower of quarter lower QX to intangible expenses year of was three compared quarter and year acquisition expenses, XXXX lower primarily operating and of and by revenues, in quarter. active expenses RFoG compensation, services gross in expenses the services XX.X%, acquisitions. reduced compared this $XX.X income $XX.X expenses. GAAP in in domestic quarter operating XXXX. quarter is the in gross restructuring more margins lower margins $X.X last XXXX. $X.X The in driven and attributable expenses. quarter-over-quarter products QX income million, for as last fourth to was by XX.X% margins a was lower of operating year-over-year in to product GAAP $X.X in a primarily and for non-GAAP our million million operating three for XXXX last international between income due $XX.X business The million by to XX.X% quarter loss was fourth four performance in year Operating equity to mix in loss domestic on EBIT decrease operating in related and in for our reduced $XX.X decrease $XX.X earned Total amortization favorable of of of compared compensation compared to decrease QX four ended of and third slight in quarter-over-quarter versus The XXXX income of income expenses expenses. quarter XXXX. of quarter $X.X $X.X to to of attributable and compared quarter XXXX, driven quarter of expenses margin reported is operating to mix. based quarter amortization million, higher and was based of based partially movements of partially a non-GAAP million, reported were basis last The EPON and result than basis, a our last contract of The the offset was our difference favorable QX lower QX On with million $XX.X for foreign million basis exchange favorable expenses business four were our three lower less and a revenues, operating million movements. reduction operating in for were million four associated $XX.X reported operating four XXXX quarter to the $XX.X customer last a a margins,

the XX.X% Our last compared quarter just last in adjusted and ended, quarter was quarter. EBIT X.X% X.X% year of four for margin to

year XXXX, to net year. quarter was net disclosure, in to $X.X expenses to result $X.X this of this for last compared year, of and in our $XXX,XXX income million. $XX,XXX quarter to quarter and tax reported million acquisitions tax compared All The $XXX,XXX of year-over-year quarter. net year of in were quarter operating four interest this of four income other and described in income tax, in for quarter-over-quarter and higher fluctuations. quarter the of in was tax last were a a results of of supplemental provision of of $X.X four for net exchange related $XXX,XXX last foreign $XX,XXX quarter QX last As quarter. expense three tax dividend $X.X QX on for provided of million, million for compared Restructuring of compared Expenses income was last XXXX four of and quarter million other investments $XXX,XXX expense favorable to XXXX company’s gains and The increases four expense million $X.X year of four in and quarter. stock-based last quarter $XX.X XXXX compensation $XXX,XXX reported was of

the XXXX our cash. non-GAAP the in from which tax GAAP Our million charge on one-time due a to excluded accumulated quarter of earnings. deemed of Jobs our tax and earnings and repatriation assets tax this charge recently foreign $XX.X reflects deferred one-time the the Cuts expense enacted fourth Tax We’ve of Act, and write-down resulted impact

rate provision Excluding this rate for million tax a of effective benefit of of in of tax provision and compared quarter XX.X% been one-time XX.X% charge, have three negative tax would quarter XXXX four year. an of our GAAP to XXX.X%, $X.X fourth quarter or a this

fourth tax three reserves net Cuts addition net income one-time Tax million was recognition million for quarter. and fourth per $XX.X mix income last exploration Act to compared and acquisition-related quarter a the Act a of for Non-GAAP $X.X earnings expenses. to of per four compared three GAAP quarter quarter. million and of expense, to share last and loss the and credits of Tax $X.XX the of excluding of Non-GAAP due $XX.X were year charges, quarter $X.XX, XXXX income quarter four of of to the XXXX last XXXX share per to four earnings basis million, this share income tax fourth restructuring quarter share $X.XX the In tax to compensation Tax XXXX for of for was on was compared million of of international million of fourth a $X.XX assuming quarter compared to Non-GAAP million three of year, income. change Act Cuts for primarily quarter the rate XXXX. for the development $XX.X of year of earnings the share research per stock XXXX Cuts of and share charge, the year last four in quarter related per year. of GAAP this of $X.X additional expenses for previously year this of was quarter a versus and loss of this per the greater $X.XX $X.XX, $XX.X quarter charge, dilution and $XX.X for in Earnings quarter effects mentioned

in a We diluted disclosure. share diluted per GAAP non-GAAP our per share earnings between have reconciliation provided and results operating earnings

cash Now, to and after turning during unrestricted debt, sheet, million at $X.X the million quarter. totaled marketable net securities balance the quarter $XXX.X in of dividends paying end,

DSO and stock our current well million primarily no is as compared decrease payment $XX.X receivable last fourth within a resulting quarter. operations end Inventories in quarter and in end due in from quarter at end, Net shipments XX end increase three will from repurchases of a XXX days used XXXX There trade quarter The days, as XXXX customer-special at of the flow operations. were the the term were $XXX.X arrangement ADTRAN to in days four, quarter that DSO, related in XXXX. million For XX cash our of quarter, in the cash million one the the $XXX.X were $XXX.X of become of of the quarter timing the million to quarter. at fourth early accounts quarter at the of quarter. up

of of associated currency sell base differences timing and to quarter, of variability into expectations which Looking international in and between rates order exchange may sell, cause the customer material and the projects, the the business, patterns fluctuation we we nature next actual book the large with and markets the ahead of returns. our ship into revenues our

aforementioned our However, margins domestic expectations related the the taking with be mix, into XXXX not Also of in be spending the anticipated exchange QX quarter quarter provided previously review. the just discussed X on domestic there’s account into the revenues expected shipments customer, that first to material gross and of as current and potential profile ended. flattish slowdown quarter that we related the at will remains GAAP will impact a merger in and taking X basis rates revenue review merger a currency Tier first around our our change Tier expect a XX% account

We that range one million. expenses in operating of be of million the to GAAP expect quarter for XXXX $XX will $XX down

and variability believe timing Relations fluctuations revenue Finally, rate in of macro www.adtran.com our be I be the of consolidated spending We by exchange website Fund impacting realized rate distribution our professional inventory Access going adoption to first will in Connect the and to levels, related currency America significant factors Investor the like rollouts, project we projects, Broadband ADTRAN’s activity revenue range. platforms The environment our domestic earnings the to again in both rate the XXXX enterprises, movements, anticipate encourage would that and the international, listeners channels. low the visit to associated XX% resources, carriers Investor and for Tom. the that, advantage with the following quarter With link mix the as now tax into revenue following. of and provide services our take to the to such for will insight Relations additional that the turn I’ll performance. to call user-friendly of over interactive financials back and

Tom Stanton

up have. Thanks, Roger. open ready to any we’re now for Roxanne, people may questions

Operator

Please take our we’ll Clark And Instructions] go ahead. Goldman first from Sachs. question [Operator Doug with

Doug Clark

about you the the range be the taking review customer. my key X customer to of coming at the Thanks of I going on is for that XX-day guys. that you talk domestic out XX-day said, the Can expect -- Tier process? possibilities the Hi, question. guess to one you visibility of

Tom Stanton

Sure. Yeah.

you know mentioned well, on I anyways, I have as several going with or that things as So, we customer. think,

kind of We GPON fiber traditional shipments. have

ads normal and and around have project footprint a we We vectoring project have delivering right the XXX-meg expansion large service. now. then That and is centered

hold is, on All do My big customer out they them to come but is something. in the right vectoring some of is sense the are until put of project, which level the review. of this this impact going will over review, wanting now after that

on we as So I we imagine that, could go are. one is

I think a which wouldn’t -- we that where reemphasize surprised of impact today is be cities it’s kind approach on targeted brush more have built, fairly approach see is, a necessarily a with other and broad particular us wouldn’t us. to I markets, go which The are on towards negative

in I just the towards certain and footprint. them shifting deployment their cities more they trying slowdown. see fiber then, Thirdly, to could to could a increase targeted And prem fiber fourth,

implications that for has that isn’t or that been but think haven’t of the I process. part term I longer is them, told

Doug Clark

carrier That’s trending? beginning little environment, outside flushes the maybe the a releases of that’s and can how CapEx domestic year bit particular of Okay. customer, talk about And then -- this helpful. you budget budget

Tom Stanton

Yeah.

has one just talked let come being more that’s XXX-meg your news So some thing There out where and is about potentially to been me for add have where services. last last their they question. targeted deployment

So sense my is having that’s they’re although that heading, of ongoing where them. we dialogue course, with are,

in that’s U.S. haven’t As There far typically this year, is seen are European of presence as first outside really see, of it’s the the up. we which Xs Europe stronger I what on that’s first about just here a would talk in typically U.S. budgets the anything activity the in European kind starting early shipments programs undue. are in at or that we to ramp Tier to so track. The half half, is see in and

As we very and won be so Australia in you had we’ll some strong probably start we’ve speaking, the our that this quarter, We very including will received material customer very through in with a shipping order year, ramp quarter for are this aware, the seeing G.fast here that purchase new in actually relatively have that a year. first U.S. up business strong, a

answer excited what phases different there first the are of couple of that, So shipping. possibilities there a but we’re the your is phase of question? and Did are that kind about

Doug Clark

Yes. Thanks a lot.

Tom Stanton

Okay.

Operator

with we’ll our take next from go Please Raymond And ahead. James. question Simon Leopold

Victor Chiu

Victor I (XX:XX) Hello. for ask is to This wanted Difficulty] Leopold. [Technical Simon guys. Hi, Chiu about

Tom Stanton

[Technical Difficulty] (XX:XX)

Victor Chiu

me hear now? you Can Hello.

Tom Stanton

Thank [Technical Difficulty] (XX:XX) you.

that. about Sorry

Operator

& Rich question next Company. ahead. from Needham our Valera with take We’ll Please go

Rich Valera

gotten a you question, highlighted see which the talking or because but nice don’t effectively from to that with in reasonable than second still visibility customer you’ve improvement of four of to you typical just them QX? like make you the kind suggest call guess you you’ve stronger from like of assume vectoring to feel QX. quarter-over-quarter any in in would quarter, the a ramp three would Is least should at you it at see point -- sort XQ seasonal it’s that I nothing on know be I about are to you. it this in enough seems Thank scenarios got XQ, are early

Tom Stanton

we shipments QX particular our really just general, QX Tier on start would have customer. of the because from a we the from QX, visibility I and ramp G.fast me -- typically say, Europe QX, coming just in DT flattish In in to shouldn’t typically let kind half. up customer, QX is trends QX. expect our that expect say in Well, is kicking would in to strong seasonal of, QX that in typically we Xs don’t pick to first

in carrier up win ramp Our Australia in QX. will

in particular think So, on customer, yes, correct. I general, this you’re

point now change. we We effectively we already have told is days a no roughly right into that are what now days, days, factored bit period at little XX And this into time. to XX longer and QX of been have XX maybe

And to would activity towards activity would if of which little so that that in is, but me, there is more end kick sense very we quarter, there QX, QX. expect you that is said what in the makes in potential this

Rich Valera

that your Okay. Fair can enough. could, And trial, where then with the kind the that? GPON if trial Verizon, of you on say you changed didn’t you is mention and anything just have trial, expectations ongoing about the NG-PON

Tom Stanton

haven’t expectations lot doing We that Our have with of them. still work changed. a we’re

associated have that down with not the R&D slowed project. We

in expect in hove shipments would we has lab next dates don’t changed starting kind to need potentially and to expect quarter get this want nothing half. that we no, that there, I we up would both have in second over see of pick the-- to to quarter, there. but, the and specific really meet some We the

Rich Valera

kind we balance mean, Roger, gross sequentially just Got margin just about to OpEx want I bumping also guess, revenue, that on the I a more flat and back margin move I significant historical then year. you. we revenue. understand taking think how of gross big And and levels for just pretty guess, similar mix the for should as and hit through probably to should a presumably OpEx of some on pretty then shift adverse up the year normalize maybe quarter-over-quarter but

going for of think balance the OpEx what’s on of and there wondering Just sort how should of we the year?

Roger Shannon

Sure.

what -- of assumptions your let So said margin you on correct. gross is

the in decrease particularly the We back expect significantly ramp going pickup X. by the over to The European the of up into driven course year. Tier QX is it

is kind impact levels, some there. which business revenue kind the be international going to we in assumes And there from that there in just higher seasonal flattish QX of QX some in QX, QX. So is the customers the of to normal changes much of mix compared comments, my the a said but to is then has mix like it

reversals the comp some material changes On of we prior variable had QX like fairly to OpEx particularly on from in simpler QX, that. QX things accruals, some and

that QX. brought that So down in

really a more of normalized So QX is kind controlled level. of

Tom Stanton

Yeah.

fairly little Just QX. I we QX. It XX-ish me, to XX XX-ish running will be brought nowhere a give were near number. but you now, in up it -- right around We a excuse in dramatically down bit color, pick think little that will the

Rich Valera

tax rate, new just low XX%’s Is And with one more a should for on of your tax the it. I think how QX. rate rate that tax regime you forward going mentioned the tax place? we in kind of mean, Got

Roger Shannon

I be is rate. be income, some income about see is course, will mixed it mean, variability going the the the that at U.S. corporate lower not to think Based we international and you should forward. on going changed, what the of right U.S. there’s how XX% now international between

the the course U.S., that our of bit bulk from will from income more way. I come but tilted of QX higher over that is it obviously, would slightly international, that, year, But it think does a weight as you the the the in about said. So so

Rich Valera

gentlemen. you, Thank Perfect.

Tom Stanton

Okay.

Operator

from Silverstein question next Company. with our Please Cowen ahead. Paul & take go we’ll And

Paul Silverstein

Roger. GAAP sure gross the heard to correctly correct? that got questions heard make that clarifications. was I margin the want I previous number for in and I Tom guidance a of from trust to it I’ve that I Thanks, XX%, responses QX just

Tom Stanton

That’s right.

Roger Shannon

correct. That’s said We around Yeah. XX%.

Paul Silverstein

previous I Roger, increase And make did U.S. I offsetting seasonal primary is but that of the Right. to change expected hear the particular the want of driver the at the question, understand in mix in to set the sure the downtick driver? without primary DT response, I benefit a again so

Roger Shannon

Other didn’t customer the say name, correct. than we that’s

Tom Stanton

Yeah.

Paul Silverstein

appreciate I I with second, that. apologize. for a Okay. Bear me

So extraordinarily ago was year-over-year due decline, decline on quarter, year driver to year-over-year that you the over non-U.S. strong the decline? is the did that I the -- that hear of that XX% say only

Roger Shannon

Yeah.

If last you’ll numbers out we uptick basically an them remember, due of the XXXX saw ports. Paul, year’s running unexpected to

the it expected. year So literally international quarterly for with flow this was revenues was we exactly what

Paul Silverstein

right. us, there’s All sensitivity, Tom a if on spoke upside, you Tier the And I X… the and project there’s can non-U.S. new but or you big remind at DT about customer know at least

Tom Stanton

Okay.

Paul Silverstein

you driving been can your project nature of in of terms of the new that timing remind of that’s time, magnitude for and revenue the revenue? the us project, … the some

Tom Stanton

of the and this and biggest first shipping will is year. half in one ship Yeah. the in this right There nearest it fact, -- Super-Vectoring now Super-Vectoring start year, will

year-over-year basis actually do good a expect we last on year. customer was to year on increase that a what So actually

Paul Silverstein

So year in and half can first right? revenue, Do this first you it’ll it ramps, or be the meaningful first you half say… think of

Tom Stanton

itself? ramp The

Paul Silverstein

Yeah.

Tom Stanton

It has -- has definitely potential. it that

Paul Silverstein

going nbn you say think order. I received that rollout, And your on heard a the back to comments you Okay. meaningful I

is meaningful expect until begin impact sounds ramping, to accurate like QX, but that expect don’t an a portrayal? You you that it

Tom Stanton

That’s what kind we’re of having.

to I would pick get see you I we self-driven. is I would it to yes, expect somewhat get That some QX, But and We the QX QX. up expect would want in to see. think the the level But, that shipments ramp able and being in to. logistics in to QX will just pattern just and normal of

Paul Silverstein

guys. it Got

options to Just comments of going U.S. maximum X, is a vectoring? may, with -- you throughput getting terms remind VDSL your customer you that if couple what the can different I more what Tier back quick about in me the at

Tom Stanton

It is I XXX-meg? are believe to up what is they -- offering

Paul Silverstein

deploy vectoring that XXX-meg more continue go could perhaps that is in albeit if basis, they the customer have on VDSL XXX-meg, to the accurate? won’t they to that So to the in that scenarios, a targeted scenario targeted fiber, necessarily

Tom Stanton

Yeah. That is absolutely accurate.

is capability another piece -- we is speed product. of there Super-Vectoring, that So introduced and got the materially which -- we introduced, also I which also there’s have there, increases have

Paul Silverstein

All right.

Just scenarios, doing one laid targeted one four laid heard clarification on I adversely I’m second impact was of wondering… the a and think that now, just not out, would thought more and but you you the you out version what say scenarios I that you I they’re

Tom Stanton

has the -- potential. so it, of it about is, put question it’s It towards one the that has is they yeah, -- the That budget all course.

is to just take that build? do and what’s in with budget does that been total capital put higher take the any those where particular of be of or always may saying some issue which let’s they that of money that targeted is competitive city option, So going option an one instead towards there brush, doing affect of rate broad is in it scenarios itself, has associated definitely an the is and and making in decision not adversely us. in itself, question cities The the be

Paul Silverstein

portion the have of equipment? book you any VDSL do Tom, sense what your in [inaudible] (XX:XX) vectoring for on

Tom Stanton

high. I do. very It’s

Paul Silverstein

trials XGS-PON any last it not does One AT&T, potential apologize I that and to some recently wrong, respect but I’m take or That’s think G.fast… you that question, on G.fast ago. Right. the you if call. opportunity, thoughts, the others me for what if just assume. so with I potentially But I’m away, implications if long any from have they wondering has would did to I correct

Tom Stanton

No.

Paul Silverstein

different? totally that is or …

Tom Stanton

-- targeted something different. Totally point. it’s Totally absolutely price different. at Totally different

Paul Silverstein

the I greatly right. appreciate Thank All you. responses.

Tom Stanton

right. Paul. Okay. All Thanks

Operator

And question we’ll our ahead. next from take go Michael Partners. Genovese MKM Please with

Michael Genovese

Hi. Thanks a lot.

the them was or one same they the the quarter, in customers of quarter XX% were as on all of First prior in different?

Tom Stanton

origin, which We typically is just give one domestic. one the international,

Michael Genovese

what very the the they in zero as staying first and then, they -- in having a assuming bad with first in in quarter? X weak that’s were to one largest trying I’m guess, to I’m understand, the trying here the your are Tier I Well, at domestic XQ about is, we’re review, get weak were or and basically quarter and not XQ, customer traditionally Okay. so they

Roger Shannon

They…

Michael Genovese

So that’s at. to trying I’m what get

Roger Shannon

Yeah.

I So, understand. yeah, and

Let me some to give try help. you

pointed versus would we So could that effect from if customer. that was out fine. our were predominantly expected driven to what up, we that, performance hit where the we there have performance projected in tell I to have ended the projections been by we’ve we And you

gives and in yes, and material, right QX. in you now a are very we’re some in so, down sense not expecting, we performance that expecting slightly QX good So QX

Michael Genovese

Okay.

that big helpful. So the is having revenue, on much if the are being you’re besides quarter incremental, the that guess, U.S. in the mix European be down… I this But, what customers to weakness in the shift I customer first margins the said, to in gross be flat that’s U.S. coming expecting where in else guess QX, going quarter. fourth we than higher from

Roger Shannon

Typically…

Michael Genovese

… third quarter? the in

Roger Shannon

and vectoring I going Tier some we typically Xs. that Tier typically in mean, also a than weaker Well, ramp-ups weakness that And expect in just with to customer are in weakness see QX offsets associated the -- did typically we particular X QX in and QX. we

Michael Genovese

typical… so took that -- me everything So

Roger Shannon

out what QX budgets That’s -- totally when figure their months that’s on the budgets get two dependent miss their trying usually they in -- when budgets to are. of their first

Michael Genovese

Right.

Okay.

quarter, this review and negative the would from then the first normal to in seasonality the quarter fourth impacts basically happened summary? we’re So -- the expecting be in

Tom Stanton

happened, the well. That the the Except is, yes. when timing QX took quarter. wasn’t lower the summary. started We is into quarter is already beginning kind in it then that to that that one I’m because And a month notification out. at and hearing play they the of a expecting customer That as that may were itself it we a -- while it for of the

Michael Genovese

on for ask NG-PONX, the beyond guess about competing I Okay. trials, to I it opportunity will that one? to question big Tier other on carriers other one Great. after was there additional X mean, any there lab and U.S. trials deals, the the any or wanted that from focus are is to first rollout I and really

Tom Stanton

aware. that way there people There by are world is about Yeah. set. is -- of talking it’s atypical one customer customer you’re the driving that that There latter. But for the this are kind the product not That’s as in it.

Michael Genovese

Yeah.

Tom Stanton

tend to that. follow people So

Michael Genovese

I’m important fronthaul, technology a Great. general, that then, you… can indications and you XG, that about in strong XG, in could particular up very, story picking talk And that, XG technology backhaul really be very multiyear is mobile have increasingly how for that

Tom Stanton

Okay.

Michael Genovese

forward? … going see it

Tom Stanton

right. I think that’s exactly

of of it you trial just of replenishment markets think the initially I make for everything capabilities. aspiration kind phase, GPON. some think deployed and customers customer, business out I it I traditional rollout. role sure is in for is being play the for the goal customer, and maybe XG see without to because worked a network longer mean can is speaking of the fantastic But for it this will in different type their term in that rollout the for different that technology

Michael Genovese

Okay.

one clarifying domestic? quick can two the Sorry, ones, was customer tell you more I mean, us, international, just was XX% one again,

Tom Stanton

That’s Yes. right.

Michael Genovese

of fiber, What Okay. And your about then, about X at you a fiber have just Tier obviously vectoring the mean, now? said share -- share is four major as these you U.S. share I any where high. right talking your very of do customer scenarios, you’re

Tom Stanton

Not at stage… this

Michael Genovese

If fiber they copper to forward… decide less and more going do

Tom Stanton

us. to That’s going benefit

Michael Genovese

for a share to going is that be market or will it you? you negative benefit …

Tom Stanton

benefit will That absolutely. us,

Michael Genovese

Thank you Great. Tom. Okay. very much,

Tom Stanton

Okay. Yeah.

Operator

ahead. Please the Leopold try we’ll go Simon Raymond with line again. James And of

Simon Leopold

guys. Hi, now? hear better you Can me

Tom Stanton

Much better. you. Thank

Simon Leopold

I of wanted customer. last just regarding Tier question, that to off the X Great. follow-up

the mentioned, that be consolidation vendor that… deployments that you or are would they So share other does strategic than another reviewing, considerations ships potentially targeted dynamic around

Tom Stanton

case. I’ve had that no indication that’s the

Simon Leopold

a... of that just the of it’s you’ve an or kind had Because Okay. discussions or assumption

Tom Stanton

this Yeah, mean, strategy a had driven a review. literally being I Well, is I’ve discussion. by just

Simon Leopold

low-single into Okay. about I XXXX estimates estimates think the I of or without kind think for are -- current to into DT spending was know calling think digits facts, from looking for year, the do budgets, growth you flattish too I conservative? of next of it I’m drop think but what early to that consensus consistent kind said kind that I are specifically is that what they you is spending, are those at going guess,

Tom Stanton

it yeah, bury all technology of -- a across it’s and will kind always fields. total fall honestly, evenly it’s Well, capital it’s to difficult budget -- to say --

Simon Leopold

Sure.

Tom Stanton

way driven will up strong and So, that, is by a over we’re indications -- that year, year that that are what we about see increased Super-Vectoring. of are we the was thinking is it the an deployment our

Simon Leopold

relative but this kind is -- mature year, up relative year, of… spending going guess, relative Okay. that I to it’s But to this to be

Tom Stanton

Yeah.

a customer. We’re with expecting that year-over-year increase

Simon Leopold

Okay.

Tom Stanton

For the total.

Simon Leopold

just charge housekeeping quarter, sort is some The is that that this think, I tax question. And Great. noted one was quick you that of prepayment, what that or?

Roger Shannon

law to going are seeing every earnings releasing of the two Cuts When through aspects kind calculations. There new these it. company Tax you’re signed, is No. was

tax revalue of has to less, then, lower calculation to each And to have unrepatriated go a at your which an company are rate forward marginal going cash. worth earnings through there’s in so foreign assets, that. the tax You deferred their adjustment

to number. adjustment aspects deferred no it’s the payment And taken. just difference eight on between over asset, the the be deductions were spread charge. GAAP is simply really tax there’s first repatriation, they and -- So tax years It’s that the two with interest. can the non-cash But then one, the when

Simon Leopold

Okay.

not correct? any going right -- do expect is we that So, similar forward, like this charges

Roger Shannon

in law fact benefit us. It’s and significant the is The tax a forward, U.S. the going of for a and one-time the thing forward. that’s our going income XX% to benefit going from No. tax down us bulk with obviously rate will

Simon Leopold

much. very Thank Great. Excellent. you

Tom Stanton

Okay.

Operator

next we’ll take And with Jefferies. go Notter George Please our from ahead. question

George Notter

to those any percentages there XX-K, very and the you us we if or year the tell help for for the Thanks Hi I I you customers were with there. guess wondering Any maybe us full help be customers. need chance was wait great. could what would could much. the XX%

Tom Stanton

Yeah.

George Notter

for -- Frontier, customers some have the mean, ask it of And then, and about in they also Xs, Tier the Windstream been past, wanted I guess, ADTRAN. also, significant obviously, to I I

those sheets, Thanks. of more the are with up, Some year, think as about I flat, the I stressed, forward? for I of think think those kinds balance do be you full down year you going how becoming think, mean, would do sort they them about you of mean, customers,

Tom Stanton

-- sure, Those George.

least for There want more probably they the to done. that They notwithstanding very now right those to us talked are difficult specific about. see, are actually get with new on with the have So of review things previously we that that going we both different are them a have we year launching in then of and trials technologies, them. some projects one of this know couple at

it’s So year now. of kind what they But I challenging spend people I time spend. need would fair them agree that a it is the all still right that for do I these with have and matter think it’s this getting share of us a you of capital think of that they to

basis, they definitely they than and in until out material hanging they XXXX that see strong a I XXXX, actually had less So on year-over-year the for in a are change mean, in environment we’re not in were of we it. there kind

George Notter

info? Got then it. the XX-K And

Tom Stanton

have wait, to You’ll sorry.

George Notter

Okay. Thanks, guys.

Tom Stanton

Okay.

Operator

with next Please our we’ll ahead. take Bill from And Dezellem go question Capital. Tieton

Bill Dezellem

implications any in to Thank aggregate remarks, you of reference was to certain XX circle XX, and opening not were X please one you if projects, relative the in Would XX maybe Tier and made it you. realm. something that your further Tom, referring but what your in new to new customers that you really to back of I’m discuss kind customers? or

Tom Stanton

Right.

it Xs So, that over was they XX us selected actually range recently size. I and in several Tier and that then yeah, mentioned I customers, have mentioned

of larger some some course, larger smaller U.S. of ones we Europe, have know are then ones. there and we the of have, number which in both you and in a about So

lot with of the funding them, are perspective say, the are a but the focus We was? that and shouldn’t ones have a we larger, from I funding Xs, associated -- the a we on a going the what -- customers, associated sales which a call more through in larger government particular focus them are change Tier have but the all on meaningful of ACCAM

Roger Shannon

the With cap.

Tom Stanton

Yeah.

customers. probably of U.S. both return includes on list With Europe. emphasis that a what’s bigger the cap budgets. The on customers internationally with going and -- the And in cap yeah, the rate in

Bill Dezellem

you customers, magnitude Xs when to the revenue you? very aggregate what’s material those So their of of XX Tier relative contribution the potential is for that one clearly

Tom Stanton

Yeah.

because several Tier Xs. to So, I that out have think includes you’d take number

would which if think So the of level of talking question, I take be in you your I those carrier. aggregate, a about the gist is I think X probably out, Tier spend

very the say. not I that’s that that’s hard in just to outside carriers number can -- back, let are are Xs so really meaningfully Tier that’s that’s there actually a and difficult because mean, the in U.S. Tier to today, the of question, X roll some move that try there Now, me there U.S.,

the Tier X Tier have So as they the would that’s much I as out, very potential aggregate in to Xs a difficult number. the say take I though, spend definitely.

Bill Dezellem

be XXXX? And helpful. all quite contributors that these you would That’s customers did in that are imply revenue

Tom Stanton

I of the -- the I would of without say would would majority we smaller majority say having front expect so the agile they but start into to list expect. more I them in carrier typically the them are, the the is, would, of would me them

Bill Dezellem

Great. much. That’s Thank very helpful. you

Tom Stanton

Sure. Okay.

Operator

our And question go Tieton Capital. we’ll next take from ahead. with Dhane Matt Please

Matt Dhane

of some see within Thank in purchasing of U.S. customer’s it, you. may CapEx behavior was to a are recent to ability impact changes your tax curious bill, customers? there that the write-off I domestic

Tom Stanton

of U.S. announced spending and in and of benefit some I investment. into intend that kind roll we U.S. the has might see a incentives level of affect the already border I cross been it major increase carriers that to Matt, as the how have extent particular positive really think there’s to I But into U.S. think environment, number been producers that that number increased that kind business I it of know from internationally push generally AT&T customers. increased there their think overall of there dug speaking vocal, is specifics as that know would to there’s we for they for fairly are we -- the the about haven’t -- companies opportunities. how increases, or

Matt Dhane

Okay.

don’t was I under CapEx that directly now, I XXX% be that if the Okay. maybe impression know off written could impacts…

Tom Stanton

Yeah.

I -- heard I specifics think might any of right. haven’t that don’t how you’re just I translate.

the I at the positive digging It the the on of well. of focused we every we’re course the going as charge was, so other all came kind and think, to together speaking, benefits over of forward. end and that year coming had quickly and it’s and those generally of just what specifics certainly but with we’re the year-end time company has impact a up spend cycles kind

Matt Dhane

helpful. That’s No. Thank you.

Tom Stanton

you and quarter. to talking to very time look for the thank All much next call conference us right. today on Well, joining we this you forward

Operator

today’s conclude call. does This

have disconnect wonderful at any You time a may and day.

ADTRAN (ADTN) 17 Jan 182017 Q4 Earnings call transcript