ADTN - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to ADTRAN’s Third Quarter 2019 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.

the risks development including core December mix, and degree Form competition the involve the impact products, for component statements products, XX-K our of successful such XXXX. annual and XX, company’s market in detailed costs, these manufacturing and and ended other the uncertainties, of the the efficiencies However, product for risks channel in market year acceptance on of report

materially could the These in actual cause from risks differ may during those forward-looking to made uncertainties call. which statements, and the results be

It call Officer is Stanton, now of my to Executive pleasure to ahead. turn Chief go over the ADTRAN. please Sir, Tom

Thomas Stanton

Lisa. our CFO, is you, joining ADTRAN morning, XXXX you Foliano. me appreciate us third today Thank Mike for everyone. conference Good We quarter call. With

the Mike opening performance take quarterly Following we detail, and your questions. review my financial remarks, will will then in

in customer customer a progress America and quarter shipments Our the in slowdown to by overshadowed by in in Latin Europe. pause spending a a large was the in large

With international basis. XX% customers, on revenue million, year-over-year the XX% the From period. quarter our Tier top-line for a down X two the previous grew was over a business $XXX.X of these exception perspective

period a revenue year-over-year. Network XX% Services Global period the X% up up previous $XX and $XX.X majority the XX% same Solutions million, accounted Support at in contributed decrease for million XXXX. over & over the

our PON traction and XX-gig increased the gain driven solutions. and our access over previous sales revenue fiber XX% XGS-PON of domestic solutions largely continue with Our and quarter, CPE globally to we Gfast by

in emerging contemplate as be of across continues business America, and see markets, broadband investments. we Latin our their fixed of slow opportunities some level domestic even and Australia to fiber wired and operators continue While and Europe, XG major most a high to extension

now providers phase, the mixed is the see is infrastructure ramp of where fiber network national some fiber-to-the-node in deployments. are into incumbent build pushing fiber-to-the-premise, a network technology and in emerging investment alternative CPE led seeing being invest. the start Europe, In migration to to operators, which by turn In Australia, we’ll we’ll

expect we largest earlier deployment North positive this and Mexico deployment building there regional in in of fiber trends service some the the are segments, and year and LatAm, In In broadband in co-ops America, some with communities Tier restart to despite earlier some a operators, continued own their rural electric headwinds or year. rural fiber from X provider networks. broadband

on supporting We’re in rollouts. a to in opportunities MDUs capitalize global good XG densification position fiber

infrastructure near-gigabit also with are network services We gigabit deliver to and wireless fixed existing positioned with or well our leverage to Gfast products. customers looking access

cautiously optimistic remain to market growth opportunities, about quarters us conditions returns the We that organization an allows to in growth model our adjust and focuses few on operating returning profitability. and are to flexibility aligning to our next us to

introduced quarter, we will third of moving range instrumental on products, be technology a forward. the services believe success During new and ADTRAN innovations that our

provider or to retail First, XXX service serving several we business services. additions ONTs enable leading cable PON key ADTRAN These additions deliver operator XX-gig included the that XX-gig any type and will PON our market multi-gigabit series customers to portfolio. of announced of residential,

as gigabit will services. monitor growing faster, quality decisions this services service to and able utilize meet optimize network make about demands for portfolio Operators customer be expanded and rollout operations better look to they to

have past Our industrial as programs. and XGS-PON year, residential, major XX-gig operators our services for has solutions to PON leadership the government leveraged deliver markets network technology in commercial, broadband multi-gigabit grown over

Pacific Rim. in XX-gig extension America, multiple deployments our the operators on for leading the supplier Gfast is in X in leadership has With PON in solutions, America, South North fiber According based Markit, ports to EMEA, position in shipped carriers North regions and MSO Tier Central ADTRAN HIS America Europe cable ADTRAN and solutions.

with in our Our the are project we’re acquire a X awarded U.S. market. X lab a Gfast solutions with network We in momentum a And approvals Tier in for the we continues should Tier market European LatAm. gen-X second-generation operator. Gfast with with a recently gen-X operator and deployment

to rural role the ADTRAN We plays Connecting expand communities our part carriers continue of as XX-gig Lives deploy helping in program. enabling networks

quarter, all-fiber development Shore underserved backbone the During ADTRAN operator overall economic and to build the with XX-gig in connect rural region. a a along communities Eastern Maryland drive announced communications in the of

an $XX.X FCC Rule will billion America. We the for momentum CAF continue homes which deployment to decade for will Opportunity federal subsidies to expect this provide million of issuing next X broadband the order soon the rural called as be Digital of Fund, in

As in for rural I XXXX in Canada U.S. services providers dozen more a we broadband recently utilities in have seen municipalities communities. role foundation a selected and the delivering and TA their utility a as in communities. mentioned, Access over gigabit have set new services our platform, of And playing rich

into ADTRAN to continues technologies and team progress. SmartRG the of portfolio integration Our

[ph] experience. [ph] the every the WiFi service During to turnkey a [INTELIFI] intuitive whole for reliable and [INTELIFI] system, announced WiFi mesh the whole-home ultrafast, designed corner home. tailored immersive quarter, home solutions of an providers, delivers create we to broadband

network first customer open scalable project, based and ADTRAN completely equipment open and also strategy. efforts are week key software technology accelerate on part is ADTRAN’s networks. SmartRG helping announced for commercial that the SmartOS prplWRT the standards, the of XX premises Last to solution

innovative fully as XX services to approach, opportunities providers offerings. we add to SmartOS their service facilitate differentiation and open-sourced revenue competitive look generating With create

existing security cloud while quarter, small the place. voice SD-WAN announced cloud-based solution take help in and new during medium designed Finally, to to business a solutions networking enterprise of and distributed we keeping advantage

as about market the and the starts the our to customers XX-gigabit it market, ADTRAN, unfold. to in for future transitions excited are We

deliver overview any Mike, Our following focus any provide we’ll answer an Mike? have. our this, questions to will be unmatched network that, helping customers And experience device. over on the remains to you you over may financials. an broadband of any And happy with any customer

Michael Foliano

view quarter. all. morning review results also to Good Tom. for you, provide quarter fourth I third our Thank the will Sure. our and

I amortizations restructuring expenses, and report, business both referencing GAAP expenses, and bargain stock-based differences gain The will on between other a my GAAP be reported and non-GAAP results. purchase compensation, of non-GAAP includes and During a equity valuation other the of investments non-cash losses, asset compensation tax deferred reimbursement asset and plan, pension allowance actuarial of from a deferred for our changes in contingencies, settlement. fair amortization impairments, value acquisition-related claim

down third million ADTRAN’s last for came versus million in million As Breaking compared third at our $XXX.X year. in quarter $XXX.X Tom stated, QX of year. third $XXX.X to our $XXX and million the quarter revenue Network of revenue QX last for quarter $XX $XXX.X Solutions XXXX this and divisions, million million reported for across last was quarter the of

quarter in third million last compared million in of XXXX of X X Services quarter million third was and Solutions was million & of last the XXXX. million for reported second category million was for for & of Support XXXX $X.X compared for of million year $XX.X of revenue in quarter and our revenue Subscriber for QX Our the of for $XX.X quarter Experience for XXXX the Other for year. X the the this Products was $X.X Traditional Across year. $XX.X revenue X in and quarter of prior $X.X Revenue $XX.X for $XX.X $XX.X million Access our million XXXX. million to XXXX million million & quarter $XX.X quarter versus compared of quarter $XX.X X & to categories, revenue quarter the quarter and $XXX.X Aggregation to quarter

X $XX.X Looking last million XXXX revenue year. $XX.X QX at $XX.X in was and for quarter of domestic our of million quarter in revenues geographically, XXXX million reported versus X

quarter Our our had these international revenue of Investor million for $XX.X Relations on page of X million www.adtran.com. in the XX% and of each of XXXX of web for XXXX. reporting at X was $XX.X quarter million X quarter. $XX.X during to revenue We the quarter customer categories one We published XXXX compared

were and driven XX% product by an for XX.X% versus offset decreases quarter the Our gross our of the in partially in XXXX. third reported of third GAAP Non-GAAP reduced year-over-year XX% non-GAAP The volume, for in margins were year. margins year improvement third gross compared quarter XX.X% margins prior XX.X% margins. quarter X last gross quarter and were quarter-over-quarter quarter of XX.X% the services and in and last quarter to the gross this by

were basis, million our non-GAAP million $XX.X quarter for million for last of operating million X On compared quarter X and last year. in $XX.X to quarter XXXX, of were Total $XX.X a $XX.X to last third and reported $XX.X $XX.X operating quarter XXXX. compared expenses million expenses quarter X of million quarter

offset expenses, personnel-related SmartRG primarily acquisition the expense year-over-year and acquisition, was by expenses increase personnel-related related increases expense of expense decreased incremental in and and is non-GAAP decrease as primarily operating contract operating The result attributable the increased SRG in related well decreased services legal decrease as legal in lease the expenses. a to expense. by partially incremental expenses offset to quarter-over-quarter non-GAAP to The

GAAP third prior and year. the QX basis quarter in Operating of a of income income an for the on was an million loss reported to in last $XXX,XXX operating $XX.X $X.X compared quarter of operating million of a loss

it year. a by of quarter $XX.X of million Non-GAAP non-GAAP our as operating decrease million improved in of compared QX expenses. income in in mix income The was income loss $X.X sales gross margins to non-GAAP XXXX product of mainly income The in our lower margin is X services to $X.X last quarter and operating driven and volume QX primarily portfolio. decrease attributable million to sales for XXXX X and lower offset by business of partially was XXXX decreased volume, compared decreased quarter-over-quarter QX operating in in our operating gross

X in last and of compared for for million of income $X.X primarily quarter was the rates. XXXX favorable million XXXX. was by $X.X million quarter exchange to driven income quarter Other X $X.X quarter Other

shifts quarter and was other X to by portfolio equity rates. million and exchange of the million for driven just prior in foreign fluctuations were ended, $X.X in million income compared non-GAAP $X.X XXXX. the investment in quarter other non-GAAP The primarily our Our in income that $X.X quarter

of valuation The XXXX by XXXX. company’s of for the a a partially third incurred was tax tax the and result of a of a a quarter QX million in GAAP of result losses tax in benefit against $XX.X in tax allowance our The to compared a benefit X benefit $XXX,XXX offset million quarter assets, the second provision expense XXXX. XXXX as $X.X quarter deferred as as

a the XXXX income the was income quarter X to net of income in a net last income an an loss year and X third $X prior quarter this of of income $X.X million million of of Non-GAAP of million quarter million quarter quarter year. last compared loss for $X.X of the $X.X quarter third was income XXXX. to $X.X of of compared for million million and $XX.X in of GAAP in

share $X.XX last a per Earnings and $X.XX share year $X.XX share last the per earnings operating earnings provided share loss quarter to quarter GAAP of third diluted XXXX. share loss of of third results X and earnings share quarter per $X.XX of of quarter, per the a in of in in per our diluted a reconciliation earnings compared per to of earnings for per between share on basis a earnings $X.XX share this of compared GAAP share earnings per per XXXX. Non-GAAP We’ve was per was share and non-GAAP $X.XX of disclosure. quarter

the sheet. million in of after Unrestricted million $XXX.X end securities at debt cash and to Turning net dividends. paying balance totaled $X.X marketable quarter

XX of end the at the operations. to receivable increase cash end, to million DSO of versus For resulting quarter is DSOs days during XXXX. in mainly of days attributable $XX.X quarter of last a at XX quarter we third Net $XXX,XXX in days customer used for XX shipments was quarter accounts mix. compared timing The the the trade quarter last of quarter, and and

at end to were million end inventories of and at $XXX.X compared last million quarter the of third X Net $XX.X million $XXX.X quarter quarter the the XXXX.

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

on will revenue currency of rates effect basis down XXXX a XXXX. we the quarter be that non-GAAP flat potential from to quarter fourth fourth slightly After expect our the considering our will quarter. third the anticipated be consistent that expect margins We QX gross with mix, and exchange

$XX for XXXX quarter million. non-GAAP that range expenses will expect fourth also of be $XX the the We of in million to operating

on XXXX anticipate will rate we consolidated that a the of percentage Finally, mid the tax rate. for the XXs quarter be basis non-GAAP fourth in

Access of Enterprises; We factors rollouts; currency environment the exchange movements; to to America both realized activity Fund believe timing the with mix our and revenue be revenue distribution earnings professional variability revenue significant project revenue; proportion adoption channels. will and related Broadband projects; relative rate in levels, fluctuations total the of rate impacting and domestic and the the services and macro carriers our the in inventory of XXXX platforms; revenue large for international; spending the of international Connect our associated following: in

Additional Investor Tom. going turn www.adtran.com Relations financial ADTRAN’s Relations to information to at that, follow and Investor I’ll link. over back With call website available is by the the

Thomas Stanton

Lisa, Thanks, with Great. we’re people open any Mike. up to that have. ready questions may to

Operator

you. Rod [Operator Hall the Instructions] And from our Thank question of comes from Sachs. first Goldman line

open. is line Your

Ashwin Kesireddy

of year? taking is you growth on about the initial QX. the next a in talk probably in business, maybe visibility about full-year you mentioned Ashwin either or first-half product And Rod. few basis behalf Can just Hi, question. in generally, geographical Tom, This for of I beyond talk on thanks my be about quarters your the next particularly elaborate of exciting could in you the some for planning opportunities and on level that XXXX, XXXX? for year can think the

Thomas Stanton

Well, previous quarter that call, is different. that typically We saying, give quarters by know quarter next we on than time. have at that you me fourth Sure. as historically regard. more different and in And guidance because be start fully greater won’t the this this no any year’s visibility point in let

towards I the is year a years. tell the we will middle what typically ends then see of of the you, rise two and the

expect center. profitability the In be, don’t We QX. we expect. guidance basis, in we typically than fully yet we year, see The difference don’t we to typically any that are in first lower fully what of of the to QX, quarter last part for would expect see end have but

– we the awful areas activity set The today, as an biggest for strong that for as consistent in fallen Europe year. it looking where have see for with is continues PON The us lot of me the excuse some been interest throughout entire is looking have of last – customers going That just kind on there and this over XX-gig of year. opportunity favor. vendors of vendors of today new vendors out as on was

of that go customer There have our actually And or In is a some larger is CenturyLink The in on. some U.S., going pockets. of the carriers lot our we cloudiness with largest in U.S. changes the quarter. to had – continues through base, here me a through good to next very this on continue That next U.S. – excuse quarter the in well, quarter we expect year. customer

customers of In a X of Tier been a for have the space, had kind dormant couple we’ve while. that

some with planning this some next of year year. seeing one We’re and those activity already pick up for

about space. So Tier space X we’re the positive X Tier and the

there’s I little it. a think the cloudiness other still bit larger Xs, of about Tier

next multi-year we a to And and Latin going is on least. that America, there on expect continue through project that at year

but the been customer last trajectory in plagued quarter, change of problem doesn’t the course, that variability pattern of that this in that, us with all levels itself. the program inventory has Our ordering at

did say from to piece I as fiber-to-the-curb where program And would I provider well, in they is as know to Gfast would miss equipment approval customer CPE just go space we results some into be you case, we’re carrier expect fiber-to-the-node And that well. year that Australia, shift of the good as selling there. next recently for large that on. as Mike, a we Then the that to last And received their anything? deployments. continuing

Michael Foliano

you No, got I think it.

Ashwin Kesireddy

that back point? half that you LatAm or to maybe visibility at the have into next and of in no inventory there. this expecting Are situation on point the you first Just customer come year

Thomas Stanton

have to I plans. visibility

wanting it a is on to they down they fairly do to The of gets vocal are so number a macro-level purchase the visibility about orders. of where timing course. visibility, more is what And difficult

before they they they they inventory So or before don’t draw inventory may down draw their down their sometimes, order. order

The broader them plans. issues So on by level around time macro quarter a quarter with are on basis. individual typically not it’s about a – kind of more we have the

Ashwin Kesireddy

Can one on and color in elaborate you. question, fixed opportunities there thinking there you Got access us XG you’re you Thank fixed and give you XG are wireless plans. on domestic what mentioned about terms last wireless what contemplating the it. more briefly And in U.S? of operators seeing

Thomas Stanton

of the largest of lot the of there I’m extent the off air. is with like Well, based how into that the plans capital estimation, fixed this impact the in then something carriers my their A are up way is that that. is, to plans then an to doing XG – in figure and may out that or re-apportioning of and a XGS plays, NG-PONX is lot trying to kind going plans, fixed it play our that,

it’s there’s gets before off behind extent with to to point much deployed still it solid but – today, a a being it. a off footing the To variability point, pretty on numbers of really lot it’s solid real

carriers So the that’s of kind pause just got in of – mode. a some are larger

I’ve On carriers plan, really associated definitive their to see the it’s the and have grow And where traditional They ones carriers plans their deployments. talked deployment. wireless that really activity. that’s already, definitive with that do GPON where their fixed XGS grow have plans and they we’re XGS seeing to about more non-wireless, we start the

more you’re that moving around wireless talking ones where about forward. the consternation seeing that’s I’m this kind The is carriers. So of really

Ashwin Kesireddy

Thank you. Understood.

Thomas Stanton

Okay.

Operator

And George comes of Notter our next line from question from Jefferies. the

open. is line Your

George Notter

story. the was September. business. I I from would Thanks I much. international understand, business American imagine ask to obviously, significant guys. about the But, guess the was the certainly, June I Latin customer. European certainly, step-down commentary part wanted pretty And to Hi, very about of the there the

balance right your and customer run here I’m in of rates spending the kind picture of the in year. now large is European and wondering into terms of guess I the what’s

Thomas Stanton

Sure.

our although that get European we expect in really middle them large slowness year. don’t quarter. the – with of expectation this numbers through the our So that of finalized – middle told customer, we we changed, till don’t And half expected second fourth the you hasn’t the towards of

continue see in first and a year. We traditionally, would to third quarter, that to expected the we the next of pickup up then quarter pick

right see now. see let’s change aren’t in than place aren’t the did do don’t exact we numbers that pattern, or in say, QX QX play right a we and QX. stronger, in ordering We So a although in now

– lower a that’s I in it of perspective, It You’re from it kind kind significant And right, to the call. which of drop, millions was why to expected, they fairly QX think of turn explained a did QX was way they drop. the – came rational although was than out of it a tens it on was it turned out. we and I did as what last

about was ordering, any more things demand inventory similar, build-plan. going absolutely installing out their still QX. from QX and with and and is contract to forward levels are change They all. big moving America at network customer, that and drop profile for That about it negotiations, is than just these Latin

George Notter

it. Got

relative Latin expectation was the your was So or America September, sounds delta like then then, it other top-line was delta for to there…? pieces in the original were there

Thomas Stanton

– anticipated Latin definitely, Latin than was in America. that. me initially in revenue lower It about But it be It let was America was was and our actually me – decline was European George, yeah, larger both. yeah, the let clear came

George Notter

Got it.

stronger from with then American offset North business. And some Okay.

Thomas Stanton

up XX% Right. business the Rest of was Yeah.

So yes.

George Notter

size of talk cost the gross on of in story down pretty could thought Is gross just you quarter? margin the there given good you? margin you step side, there that I this in Or XX%. something And any then unusual to top-line. the work that could the line was

Thomas Stanton

I working. on think good and might think may side is plus cost work I the it be be there

Michael Foliano

on the side. We cost have lot working a been

in read in We business mentioned out. some our my also services improved that had margins I

of way of slightly some Some as of of and that the operating there well. mix the the flowing services through increased that is becoming we’re is also type just we’re efficient doing, volume in more that

Thomas Stanton

the down, with being customer European say to region, needless lower George. a that’s And typically margin

some. us helped that So

George Notter

it. Got

Thank you much. Okay, great. very

Operator

next Our Rich Valera line from of the from question comes Needham.

open. is line Your

Richard Valera

guessing you’re rough profitable be just that gross by other mid-XXXs, need to around math. you the Thank to – to fourth kind you of out the get and next It it remarks in you. margins. sort back European the you American at of XQ see quarter mentioned those for be Tom, revenue year potentially come it also level, that sort and rate level? your you expected or And a seems, Do could and the can similar expect expenses be customers one could you least of doing from if projecting prepared I’m way. need back be meaningful to to you of the come the Or back? customer that to of customer the get to Latin run is

Thomas Stanton

careful little guidance, Without year bit giving to next I want a be here.

to to range be particular I to in larger is operating that the QX the in – that because expect about, your than QX. the in We profitable. in general revenue answer question business but number, on narrow typically in want don’t QX or is you’re talking

would not solid back. feel about that. come And we we have have both of them to So

we to kind to were fact, level of both them back of to order revenue. of that have have level come achieve not the In in they would

Richard Valera

QX Got it. run is on QX. that cut a from then big And the rate to pretty OpEx just

try be understand cuts you rate lower? year? made by back Or assume then to were and be I those at to So those could just expenses. cutting to Or some And point? it run giving might right that into sort bounce the where of of wanted next is does one up up it what kind going

Thomas Stanton

back spending. I up. to us don’t bounce we’re expect expect I where it to scrutinize, continue to

kind much When That’s risk associated we in times, do when the more basically – we particular with is it the what’s and if in money on in are would up across I you next spend money. spending do of you’re trajectory chasing expect outcome. anything that where revenue. real What it periodically. of half you’re continue first we’re we’re we’re the how stringently to what’s overall year. board a recalibrating that and spending something the we through So downward downtime, than doing the And

keep these key believe The are to what want want happened. a premise cases, – high revenue we those opportunity to whether are that hard And them a and a likelihood to sets areas have potential. we look last capitalize the to business we we place. been spend some or going long on these, of not on had this the we of Having half quarter over of we’re continue will not in a have in take some that very going those see in we of And what to to real of did our at said on to on period in them. a the that’s continue is growing time That’s expeditious over of key make sure our be focus that, order way. first We year. diligent, but some in the

Richard Valera

Thanks Okay. I it. appreciate my taking for questions.

Operator

line our from next And question comes from of Cowen. the Fahad Najam

is line open. Your

Fahad Najam

if questions a high may. level taking for had I questions. of Thanks couple I my

contributed your concentration, can is terms revenue of much customers? your by understand help the X top you customers us XX by top In how revenue –

Thomas Stanton

in in in Actually, have quarter. the of rare expect level reason terms have don’t is this of I X. X concentration discuss this And is broader earlier call dissipates We us the the concentration revenue a our because based At XX% do you we we questions. for customers. can or some kind XX% – we’ve of typically substantially. – that strong and typically that that customers. don’t of, there can It’s very And off you we X, to had X think imagine, typically

revenue there next and And So we to fully level expect be good don’t want bad would we this forward into X it going level, a we year. of a at this move it but into then a not next as is we X we year, of be have expect concentration. that would and revenue is at, lot to

Fahad Najam

your telecom with And much us to staying line how is my cable versus Can around get XG diversification. this or you your customers positively help of Got trying MSOs how in to revenue just much I’m team versus a terms that with understand level traditional of in of say hands revenue? it.

Thomas Stanton

lot in a those it’s today. be not the especially Tier there. concentration revenue happens weighted Xs of Tier quarter-by-quarter There majority the in The telcos. tends with a here heavily U.S. some the traditional X to kind but the within status not our depressed. is then there, with of And being the On of market telcos, XG

to that next last that’s it’s started us expect as year. MSOs basis. out, strong up coming actually in but quarter-by-quarter time a actually actually Those pick hit can segment, time this kind or quarter. for will markets start on miss come of From to a We the

Fahad Najam

into the traditional deployment for impacting XG lower I And may. and going one largely highlighted partly – that’s Got just that’s fiber-to-the-home it from it. last question any seeing if you fiber-to-the-home In and revenue? U.S. Are your CapEx more maybe AT&T of reasons kind away rollout of with that the they’re done outlook. the the reallocation capital reallocation CapEx

Thomas Stanton

fiber-to-the-home that I be we we in you’re of business so accurate. Well, But area. do don’t with what lot would a business them, to believe do don’t saying

capital into has us not their or willingness on continues their around budget are they’re and Our their see rolled basis, on kind – product-by-product to actually to market focus go with them a after it been and but has and been budget hanging footprint hasn’t waiting how them year, the that their at but to out the That either we’re level That of be of for and something be next that expected. fiber-to-the-prem in I wanting the working G.fast been is with within MDU with of outside them we’ll directly of that’s them. kind continuing business or think fruit funded footprint. we low

Fahad Najam

think any directionally CapEx was it. from I I to wasn’t of… Tom, Got fiber-to-the-edge more kind kind I away there in fiber-to-the-prem, of asking AT&T. specific shift is if

Thomas Stanton

that – accurate. I think would the in my is be wireless that the yeah, in I carriers think wireless belief

Fahad Najam

it. Got answers. I the appreciate

Thomas Stanton

Okay.

Operator

line from Dhane of Our Matt the question from Capital. comes Tieton next

line open. is Your

Matthew Dhane

then, it you. that I I timing? Great. whole don’t me understand have go would I of to revenue And for an Thank Or could impact place how And discuss was on process? much hoping you just long Can that’s an Huawei put right to the from in XXXX? there taking that think away you being now. expect fully to – through RRP how the actually from walk you contributing I out takes Europe? shift

Thomas Stanton

then it happens typically an the dissimilar longer the not U.S. would the the are XX a and revenue. test a to X Tier and carriers lot the It’s matter, can the it least, Sure. matter without you’re some RFP quicker awful for in be typically larger XX at are those the infrastructure cases in carrier carrier the months in against. But carrier the to frame. smaller to time before of and make it Europe, that larger where the selection there small and the that a U.S., an having of – what And turns be month. that gets In can that into

and that As from of far been push the that’s been beginning a suppliers the away going different has as the since on move year.

our cap. We cases look Gfast at in carriers communications Europe shipping their of been to infrastructure. a including and some have carrier and carriers continue some in is several And decommission equipment. started in some desire to actually incumbent We’ve cases that decommissioning European in with there to a

that a the they depending a So it’s that’s cap pretty to take does I to want us, on market to pie think time, very for or net, if they positive what about if going some carrier the It’s you because think that to replace. want because on material. share

for just it First and the customer capital a expense of an a of takes second awful to lot them; as smooth time all, from of make basis. transition that all large

to probably removing I less today’s removal or be equipment. there So environment, new see for over awards. I expect to competition it expect in on

I your that’s take Did years. question? to few think that a that going answer

Matthew Dhane

Tom. is helpful, That

as this so more XXXX looking XXXX to expect at you impactful on sit would a is you today, And away or landscape? as you’re here more currently shift the be of phenomena it

Thomas Stanton

impact What now have already it’s although just starting. honestly, we seen some

some So there’ll XXXX. impact be incremental in

think XXXX and – bigger continuous for I impact going like I said, be a think awards I you’ll think is But the long there’ll time. from I decommissioning. that’s to take new see

a the not point see competitive that – an in a and big because bidding we is you profiles lift there against. inflection in seeing of think So positive we’re are the lift not I but will change already and RFP XXXX, base but that, a

Matthew Dhane

you. Great. Thank That’s helpful.

Operator

next from from our comes the And of line Cowen. Silverstein question Paul

open. line is Your

Paul Silverstein

If in I’ve hard warm ask to range nature the was X-ish – trying always appreciate X- and Is in Putting company, profitability. forecasting thereby X rhythm quarter I that being for the dominated in to I’d XX revenue hard I to worse then your – it’s just you that, me to your aside X-ish term, look growth of just your so the Tom, plus that so in or of better year near-term years your I the up. of been come to about partner projects always It that wind seasonality, so down could dominated customers, business. it’s longer covering up. apologize. been know,

flat, or and at look it’s been we understand project project big of down apologize. that of If I If go – [with we handful carrier, [ph] years by a European well, your ever since. appearance ago, Pete]

me and And your these for American better perspective balance specific perspective. South But exiting Obviously, the European X from carrier. a XX% terms quarter customer Is in throw-away. or questions that prolonged some have take cited out getting hope were base a good reason appreciably the projects reliance now, it’d growth got in on less Let from changed X X X at you big model point then long-term that In year be now, away from from to X will any that X customers? a there a back. of some years believe I’ve meaningful from broadening and that. that’s any years even if step or from now the with the of

Thomas Stanton

Sure. Yeah.

good question. So I a think can doing. what we I that’s tell you been have

that’s in you particular size. the When you’ll But has X difficult kind in mind, U.S. if companies into seen have are the revenue push impact successful. Tier we offset back just downtick. space, whole, That today which other market very and depressed. what’s are macro I itself has large. the think that Paul, a last So for of agree regardless week that anybody, like that We’ve environment my happening any in of we where had go time a X Tier been of there that Tier periods X big really the been

is So I that difficult. a Xs. revenue with handful concentrated think handful the is Tier of of additional macro – concentrate burden have always the piece our And Tier Xs large we to

is Tier but including all picked into was customers, up customers, that large twofold. been we the Australia Tier international markets, has right. push European about move other push a after X, the One Our into X, Tier revenue. of diversification X was that some where And is

pockets force into a pushed up within different one the although America still dominant area. several largest have being that Latin in ends We

– down international continuing we’re to did So we drive have difficult, can business like offset And to our to to go or did. that concentration. that when we like actually so decrease it’s hello, we try we pockets

You at very seen been customer look growth. count. has The count U.S. just customer of the the strong outside we

The and to isn’t push a we that that up in pick market. share, does in going And when go then long-term is That market the But yourself had market that’s the pick MSO and market prove MSO payoff. time other also vendor for as will up. today. a gangbusters

still and we But and business much that that macro broader number us, than piece, or have years business X on to you through do focus have to by continue downturns. of it’s think to ago. affected the impact look with, do be basis, years macro on if the I with it we we’ll customers, was we won’t still diversification. get segments at think X a won’t things say ago That that but that I we

Paul Silverstein

that. appreciate I

individual base? your of back XX% deeper in some long-standing, the providers, projects, new of you much going customer service a to from how of that your function existing I new that penetration Before much How that is growth, projects ask about is customers?

Thomas Stanton

Mike, a by as you tell I in have them with big we don’t is the Latin the XX%, customer that them last is out if and it new of America. customer. some of basis Europe a of and to contributing coming some that seen, I I broken I’ve broke – customers in versus actually don’t quarter some know, existing net number haven’t as know on out But in I more seen way. will

Paul Silverstein

you look that… at when So

Thomas Stanton

so. right, incremental, and New

Paul Silverstein

base you will on customer those that are believe the growth that of balance is or there that So focusing for projects at kind a that at to while? – have go those of look just the a – the when legs is one-off XX%, persist? reason Again, projects or

Thomas Stanton

have as in had during a and this you’re mention were for the Tier – which probably in – aware, say with a I take are because business They do carrier tend RFPs while. on there Europe. to did I Tier-Xs. did they old are time this pushed. Xs the that legs call, I Europe, And in being I long they this Europe mentioned time go them several close. discount to on that

much But are And in old in Europe your just carriers certifying in are starting moving, product, already quicker projects the we’re multi-year contributing. those are quicker that much on.

Paul Silverstein

further reason basis, a look for question believe but any European last just on If operator will not big and a me trajectory the ever back growth hope for when look go sustained to that big at I’m One X-year you? same. downfield, again, to you to Okay. X-quarter look on there opportunities, the any you that asking is we

thing go that down go look any you’re quarters, but pick and from bad or XX%, in in quiet would ago, project again meaningfully sustained of American terms for to think and north one to out of to is now, a driving two doing had up case reason big have a growth what basis? fundamentally business on the a the quarter situation, of up it’s pop every previously As different you and four that you’re a involved I of been they nature, have years, where believe that we the than commented Not there. that South the eventually the customer as eight then will we

said that meaningful you of in the was And the I think nature a the situations. you referenced cable there just change in business.

those a of – you provide relative to insight think all have can those I expected know I the yourself Any us timing and had delayed lot ago. a of we think opportunities? year been on what

a maybe a to a think two-year originally beyond going be until now And perhaps starting you’re it the was I extent. finally decline year, big bit I of before big growth to to trajectory revenue some down on flatten little in terms what NBN, year a and push think

any be those that If other you major projects, of could give any I’m insight on forgetting or each would appreciated.

Thomas Stanton

me see I can let That’s remember. a if broad but list,

very with are our the that On base, European discussions in associated positive. potentials long-term

sure they you I looked won’t know, you that’s front not your direct. – but peak have with go probably don’t me. As in through piece, I quibble I’m phases. would if of that more have

generation the The be different and new through following and phases out. does multi-faceted go out will peak rolling right down, That year hopefully we G.fast, of the actually that is now that generation then we’re or be But when on tail-end out. of towards slow start it next will roll then year. a super-vectoring. technology a next where generation comes The they

affiliates the within within approvals have account. now we them, with Along that

So there right there’ll time. of rollout. after fiber are incremental a period And on be pieces that that we’ll then, be over that, Europe in adding

any there. I pocket to is trying business period will pick is difficult, of that time but So of the you there on a peak sustained tell

even competitive see was is manageable the more that I it there. strong nature think opportunity really that historically I of and account And than

go me Let back.

Let me customer. about characterize talk American how you Latin our

This of bigger I is had been spotty right. project sustained is much a and we’ve past, more market-oriented. has anything the kind individual in that think and very which than

the some G.fast are because their On deployments. that looking older reliability at DPU was do back the Australia, they this of although and speed into to not technology backfilling with deployments, now we’re going and DPU And of the infrastructure continuing of plan, the in and now, G.fast they’re providing. original

turn I continue top CPE. on. expect of that will and this a as that – there customers don’t over there potential with is That to year. – on next then actually be revenue And on years multiple will stop new

not phases So in other and the like the then which rework there it original fiber-to-the-node, on – DPU are the was plan.

in much our So to new opportunities there try work go pick in as to to job share is market continue possible. up and and those as

covered I base. think your I

Paul Silverstein

the operators, ones? big cable two Cable,

Thomas Stanton

are very to subject the on similar feelings your – mine. your what Yeah,

as not as not hoped. it’s fast So had is had planned. It we fast as as we

desire to think very been has it willingness. just still a do there I that, sluggish. still is There’s but

awarded As to in been their not a year projects year process, have our far the things cable get not slow am of next we That’s been robust as have plan. rollout space. the some of new in and through that I expecting

it expect materially don’t sole the to I cases many where slow we in because we are, provider. are from

going space in, So it’s expecting equipment. as not in year. huge builds next that are to going be But there growth new I’m our

Paul Silverstein

I appreciate the response. Thanks, Tom.

Thomas Stanton

Okay, with our all that, done questions. With I right. we are think

appreciate next look forward I you talking us and to joining quarter. everybody So, to

Operator

joining. call. concludes today’s you conference This for Thank

You disconnect. now may

ADTRAN (ADTN) 3 Nov 192019 Q3 Earnings call transcript