ADTN - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to ADTRAN’s Third Quarter 2020 Earnings Release Conference Call. [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.

However, these statements involve risks and uncertainties, including the continued spread and extent of the impact of COVID-19 global pandemic, the ability of component supplies to align with customer demand, the successful development and market acceptance of our products, competition in the market for such products, the product and channel mix, component costs, manufacturing efficiencies and other risks detailed in our annual report Form 10-K for year ended December 31, 2019. These risks and uncertainties could cause results to differ materially from those in the forward-looking statements, which may be made during the call. It is now my pleasure to turn the call over to Tom Stanton, Chief Executive Officer of ADTRAN. ahead. go please Sir,

Tom Stanton

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

the my concern have for quarterly then Following and will questions perseverance suppliers. changed would sympathy has that touched have. employees, any The pandemic work current those you and learn, take Mike by adversity. like encouraged remarks, will to times face we financial in way begin global I detail ongoing the such opening and the performance customers, our communicate, and may in I by that we affected remain review partners of expressing and our by the our

this perspective, announced quarter $XXX.X have of XXX.X%, that Solutions Network a ever with of quarter million This revenue and and people, With We segments. great these Global XX.X% XX% base progress providers customer the to very our with execution top across challenges, customer connect also our leading each acquisition making year the on our at the while with earlier and third across The segments X broad it continue businesses access results demonstrated we contributed market a gross for margin. fiber From strong revenue projects solid broad-based million. for momentum line demand to Tier new or $XX.X was plan. against regional than communities accounted included is were service for Services other. critical emerging way. more

a the our Europe, serve regional service to market. added traction XX X remains with to partner, of upgrade providers. customer providers X XX% global provider the electric network range Tier customer channel quarters our and broadband strength The favorable fueled service belief continued XX% were bringing and that during partners saw XX% regional momentum The operators by from strong total our We factors. positive, MSO regulatory, a in year-over-year new and those their and competitive that XXX% broadband distribution confluence the with the up During customers, quarter These they started the technology highlighting communications performance had during investing distribution X by restructuring in Tier quarter, of U.S. cycle, expansion. new XX for customers government, contributions as our our quarter-over-quarter. In who cable XX% for from from quarter, we stages infrastructure and emerge new both up we first year-over-year are generational with revenue from and we were operators a solid growth broadband was year-over-year XX% municipalities, regions. the emerging in are along again driven quarter-over-quarter network provider were the provider and We also alt-net of up helped to XXXX. customers reinforcing and our cooperatives, direct service XXX% early was who regional

in step the and significantly XX% the we up is a the to key will XX% over continues our our growth year-over-year, quarter, & our and believe PON basis. increased strong continue market this quarter-over-quarter category. market Access third Aggregation XX% our period sales grew on grew revenue previous which access, This fiber outpacing general year-over-year position a the segment. top For Within fiber be and OLT business in XX% to share

have address both and the our and channels. continue growing some the direct and times target expenses organizational for that our freight to XX% our broad-based operational providers, control are a and with proactive model an revenue company efficiency. operations From XX% customers’ increased to forward. from levels to regional we perspective, growth fees. management but the last team our We took mitigate needs. operating contribution lead chain previous and these have From remained service XX expedite logistics expense period meet needs, above In U.S. also supply and to extended over months distribution associated structural steps our transportation components incurred over reductions has material ahead in improve of several achieved availability to inventory The we the vendors, broadband higher perspective, increased key on rates a a decreased we and efforts challenges operating previous costs our moving plan over through capacity year and saw strong changes our the with due across component implemented

our On side, as addition in and year-to-date. RGs with Residential gateway share growing OLT focusing access customers our revenue service our growing on are to provider year-over-year we grew we residential the business. XX% quarter-over-quarter also are product XX% customers buying our a fiber of gateway the by we OLT XX% strong number selling wallet increased

upcoming targeted we virtual have focused increasing follow-ups, one subsidies broadband rates operators, The auctions for XXX RDOF its On for local we price exchange electric rural, began attach services broadband the center. software an XXX right first are Mosaic XX from RDOF of America qualified rural large and STC RG carriers rates, funding. in such bidders XX, provide Connect to to that providers also a There the receive for control suite opportunity of addition the cap In was our Mosaic years as, Mosaic customers on represent to whereas as providing carriers use. subscription attach subsidies. XXX $XX of migrate billion over Fund October community

funding RDOF networks policies and see is importance ban and fiber infrastructure Europe high-risk world, risks the to of implementing vendors XG and beginning to these In governments of security reconsider expect and broadband around timeframe. network revenue, carefully participating mid-XXXX the implementation their to in our the to strategic impact are causing from the positively begin policies to builds. We in

limit a vendors envisioned. high-risk network. advanced of number in of none safe, a technically operators as as alternative stands capital, to look replace vendors out their brought high-risk ADTRAN forth XXXX us result, have a that could those As to challenges has national

are risen have emerging these and stronger resilient even and more challenges we an to However, company. as

We next beginning more much have to just with as start to and be year. recognized they the fully XXXX bear fruit in far material thus begin achieved to benefits

provide our seen to far proud to services the this forward company into Tier as help operators able promise regional solutions I we future review their transition up to Mike network ahead and strong you to have provide and may of of or to We municipalities SDX utilities providers, Mosaic look adoption questions of much they his the have subscription to a our and remarks, our begin be our with year. serve. being as now in communities bright excited We RDOF products rapid will that service selecting and the will about, growing awards their the for new we including and the open customers finish out the of networks have. XXXX, XXXX. and I have X employees success of outlook an of a to platform services gigabit financials following our am and look thus build to any that number services, upgrade our and

Mike Foliano

Thank the and quarter view of you, our review our and results to provide I third for quarter XXXX. Tom all. good fourth will morning

but www.adtran.com. that in and at With Relations During on referencing reconciliations Investor not comparable are page their are my our respect web financial supplemental measures report, this measures that call presented on I non-GAAP schedule GAAP earnings non-GAAP published our financial to GAAP discussed are results. will to both be release, in appears a

within For other will the measures that schedules non-GAAP presented discussed earnings by this I on The are release. supplemental financial and revenue the information on reconciliations, page our which present discussing in web reconciliations non-GAAP category call be and contained also are segment release, today. certain

QX said, prior versus and for to million million revenue $XXX.X $XXX.X XXXX. third Breaking came in for QX of quarter in ADTRAN’s third the million XXXX Tom our the $XX million operating XXXX. Solutions of million $XXX.X million at this of segments, reported quarter down As quarter is our the and revenue third quarter in across $XXX.X Network for compared $XXX.X

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

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

$XX.X and Our million million for of to two compared the was $XX.X of quarter three million $XX.X for international quarter revenue XXXX quarter in XXXX.

were XX% the customers. two, domestic For third Both quarter, customers. of had of these we revenue

non-GAAP R&D quarter. reductions year-over-year increase SG&A well the and well the of both margins mix expenses three our in Total the as the deferred a quarter XX.X% the restructuring a margin XXXX were basis, GAAP the of travel offset operating quarter Non-GAAP to million $X.X in in well of in and freight-related gross year-over-year quarter-over-quarter charges compared to of current and decrease profitability other sales and partially loss income product The our Non-GAAP favorable $X.X XXXX an as operating expense for $XX.X decreases were of in year-over-year operating GAAP quarter third compared expense with last expenses as quarter-over-quarter gross non-GAAP increase loss market-driven third of expenses, compensation offset prior in was quarter $XX.X year-over-year both related million million offset basis of basis driven was contract by third GAAP in lower and QX third in were a of reduced travel-related gross and XX.X% by a and mix $XX.X The in on lower XXXX. million quarter operating to which were and decreases expenses, the operating increases compared charges XXXX. costs. for quarter and prior income higher reduction increases were XXXX. three margin freight-related on reduced volume by of mix, operating were of increases basis GAAP our and higher both primarily volume income and Other operating XX% quarter initiated income of was prior of quarter $XX.X million gross product $XX.X to expenses. XXXX. to was increases a three $XX.X in lower the some a of of result and costs. premiums. as QX as market-driven as operating increases as million the margin million as and prior an was million was and XX.X% XXXX. driven non-GAAP primarily in in in for income XX.X% in in three million program quarter GAAP and for expense in expense in lower margins result quarter quarter-over-quarter restructuring-related to XXXX. quarter quarter of third in of quarter-over-quarter compensation favorable in gross this an the XXXX in our quarter quarter reported million result in was of as On three basis SG&A a Both income $XX.X The were quarter the for other expenses The expenses to and Our quarter on year in XXXX deferred driven quarter driven for million by expedite to third services partially compared in and services as R&D a quarter XX.X% in $X.X and GAAP and an XXXX $X.X in an of $X.X efforts of compared travel-related by and million loss for in $X.X expense expenses. of $XX.X decreases quarter compared GAAP non-GAAP XXXX and by three operating three and of Operating XXXX. million million $X both on of non-GAAP reported prior our compared The operating

loss valuation were for quarter the $XXX,XXX the million other quarter of of $XXX,XXX of in loss was $X.XX million quarter last GAAP expense both income million of the quarter for tax of in of changes for our three $X.XX million $X.X quarter compared per compared other of GAAP net in deferred share tax last per quarter The company’s for $X.X our quarter to primarily a in net the investment as losses net and a income quarter $X.XX income quarter generated The result the third income XXXX. against The and XXXX. quarter a dilution for assuming the per in XXXX. compared share, XXXX in three was primarily quarter per million per a and was tax the prior income assets. third prior year other valuation by of third in and of expense was share XXXX. and and of XXXX offset $XXX,XXX non-GAAP share, an compared loss XXXX. in on current of QX of portfolio. our million of Earnings in in of of Non-GAAP non-GAAP income international three third $X.X valuation to a as was $X.X a was foreign compared exchange our to third and million decreases provision three caused domestic offset Our by in driven by of quarter-over-quarter the income of to portfolio. other of in income other expense was an million of the $X.X in of the as continued income by $X.XX $XX.X changes year-over-year of by GAAP to was share $X.X third of as our benefits a a and XXXX profitability for decrease dilution our the non-GAAP quarter to to domestic in an investment primarily market-driven due realized the the basis, earnings upsides allowance market-driven was allowance. tax as on per operation to basis in The valuation expense operations, deferred Non-GAAP $X.XX $X.X assuming prior quarter million quarter quarter share third of quarter the income $X.XX compared The per to compared of prior the and tax quarter expense in an net $XX.X the be XXXX quarter of GAAP XXXX. loss share

Turning balance at $XXX.X million paying million totaled $X.X during quarter. unrestricted the the cash marketable dividends in after sheet, securities and to quarter-end

are the compared million of XXXX we in to of for ended million QX the to was environment. of inventories The end during the mainly quarter to QX XXXX. in at product strategic and at in attributable during and third from timing our and we $XXX.X of prior customer cash $XXX.X quarter-over-quarter pandemic. We adequate was the liquidity quarter, million days the ensure the The DSOs XX million believe the is at inventory ended that current and resulting maintain in new accounts the days inventories For operations. year-over-year Net quarter of the positioned just ramp-ups shipments buffer variability made for million $XXX.X Net used trade the receivable at the quarter to quarter $XXX.X mix. end, of a $X DSO purchases days supply quarter compared quarter in that in continuity in preparation XX and XX to increase XXXX. of end

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

in gross quarter the in XX% million. will XXXX that of fourth $XXX to the projected revenue considering will expect expect our we fourth range margin on a to our of $XXX sales We After quarter basis be non-GAAP million mix, be that range XX%. the

at ongoing will the non-GAAP quarter of basis expect adoption a And non-GAAP in access percentage in $XX mid- tax earnings fourth domestic XXXX, XXXX a and enterprises, for tax markets, Investor the channels. the effects also macro the availability, available anticipate revenue, revenue resulting proportion impacting million. will ADTRAN’s Relations benefit be a of rate and factors in variability broadband component operating between spending realized and significant services to mix in fluctuations at for again, single-digit both the $XX a associated income quarter. of expenses exchange laws, pandemic, distribution of inventory the international web carriers the that at activity the of fourth our from potential total Once domestic the We movements financial with will for XXXX additional quarter be million on revenue be and the COVID-XX rollouts, relative revenue believe levels and information our www.adtran.com. of international platforms, mix professional the finally, We changes our page rate and environment currency and we in consolidated rate of rate, expected international project is

over I call to Now, Tom. the back will turn

Tom Stanton

any up this people point, may Great. Thank we’re Mike. Megan, you, have. open at questions to ready for

Operator

first Valera & from Your Company. of Needham of Rich question Instructions] line [Operator comes

open. line is Your

Rich Valera

like you your in new sounded a Thank Tier when you mentioned you X you and mentioned customers. QX good that about you you morning. new it talked – got Tom,

it win? And that say is, clarify, anything you that, is that about wanted Just the can to if case?

Tom Stanton

that reality, my say up at Tier technology actually did did with was notes. another a a X fiber that which had And new did extension. we announce Tier different of the include to quarter the where end us X in programs awarded. expanded September, pick I their we been on they within the variation In for customer we previously

there has but in my didn’t notes. mention I been, it So

Rich Valera

I there Got announced good Tier sort also progress your among us unnamed expectations? And progress DT, of revenue can you’ve Xs. in it. in give I those guess, – revenue U.S. Tier mentioned you of include, maybe that X. then others initial those And you on terms Is with previously That’s and/or think the helpful. Openreach any expectations updates made

Tom Stanton

Yes.

We those of you’re is of initial that one three with and different the doing of some And them lab say, So, them are All stages well. customer a customer, of aware. of associated some us, as we’re received at brand-new have actually new POs of work. kind lab for initial, three software from that’s are the all for but work them. going work

So but first so tail really the that end them contributions we in from we half the of start them shipped quarter, of half all expect the And to year. first going actually booked – revenue material of in the towards actually X well. and are next

Rich Valera

RDOF, Got kind it. a of question on then it And opportunity. revenue talked about a being you’ve mid-XX

on timing, competitors that further a or XQ maybe think have on that? of is XXXX. some on it’s more ‘XX clarification XQ, I of of your suggested sort your thoughts any thoughts Any

Tom Stanton

will it when this again, – I And does to start. – one that’s start of the here things is drift Yes. slower. It guess, going those it’s Yes.

many so participants. have You

of them worked completely plans have out. Some

just Some that the They’ve bidding process. plans been on at of them don’t, all. the focusing

and up around it you’ll the start seeing ramp you’ll think there. seeing half, it I – So from then the start in

Rich Valera

into how an on kind T&E we back modeling OpEx kind like, what level. out normalized on a guidance we of number T&E level? some Maybe of about much maybe if back looks that you to it’s adds just year don’t as trying it. are there, Any Got question the looking model OpEx and if next normalized thoughts into are gets think levels, but more, to give Mike, one

Mike Foliano

going a we’ve – expect we where plan get that had right and to We that are into about we’re next to now, hold year. we to expect

to any try model So increases. I wouldn’t

think a rethinking is everybody I the lot companies, forward. like T&E of going whole

the you’re think should year, this I we’re next model year. end your at So like going of what a – into seeing look lot

Rich Valera

Thank Very you good. will floor. the see Mike. for that I

Mike Foliano

you. Thank

Operator

of Your Sachs. next comes Goldman question Hall Rod from

Your open. line is

Bala Reddy

Hi, thanks Bala Rod. is questions. on for This taking Reddy my for

you X, also, year? the us and and give color demand Just seeing try in U.S.? X, you’re into to Tier handicap some X, – of terms of about broadband thinking the momentum yes in activity what sustainability start off, the across on that you’re could how to And next here maybe the

Tom Stanton

from activity, and I of a Xs, lot Tier touched just rates X growth on a with the activity space, on RDOF. the It’s is separate which in of in the going lot Tier what’s

out lot on solution, upgrades. our a card, combo is So combo which of a pickup card. the network rolled XX-gig a good We

had Xs, has so one in. started started and in I getting And those, woken as do just whatever think off Tier Tier of issues Same on the good finally of a they got has with just the not to getting just lot plans. I them importance thing And – and think People that that lot And stopping. them The and connectivity. other the don’t of expansion actually better. financial well. understand past executing kind a executing And but explicitly environment the activity of the it based have I see Xs think. some demand of that of up may we’re one end-user have some of MSOs I includes

So I near-term end. see a don’t

is this environment some that. in pandemic. It The In the mean, got heating had that’s Tier don’t has going it’s stated out for Tier pandemic-driven all fact, I than off. growth figuring just mean put have to planning been plan. on they prior work Xs think going solid their to of had may even a that different I Xs the up activity how we either. then farther part of and periods And been be time, they’re out people I going see to what I in what lot Xs, readjust space And space, the with kind of a areas I large – we then Tier well. the space to in PON. U.S., MSO in the And And of would say, we’re last the the it’s there’s really, one in I what we’ve telco would seen year the I we’re next here cable with and more And that as say, going carriers to a in large relation wouldn’t activity carriers. really – solid. there figure – lot good earth-shattering, to activity. year. say, into they’re would it I work is trying out call do into of of

I – year next lot earlier think time little So a maybe there think pickup answer of be is possibly that that. this your Did real I question? the that just will – bit than a year, a

Bala Reddy

does. about It Thanks product you little talking gross you the could you mentioned And quickly margins. a what to know does. much. volumes Maybe just are expand on follow-up about? the on try it It I and like, so mix. bit volumes

Tom Stanton

that. end we’re day, – getting without mean, it’s I so it’s the of mix. the at deep – selling into What too product

one selling We’re transition from at if to – what the things, PON look fiber. the our made back has we’ve business copper and of really done, you step

components And stuff, just you’re about mix. have some OLTs a selling, richer specifically, of fiber we’re and talking when the that

probably the profiles. that We difference were difference. mix, based gross margin are domestic have international and biggest Those in we gross of have those things margin a also two off driving revenue material

Bala Reddy

Thank you.

Tom Stanton

Okay.

Operator

Your of next Silverstein the Cowen. question comes of from line Paul

open. is line Your

Paul Silverstein

margin the U.S. piece apologize, proposition. margin is to general if the I revenue, previous trust question, question, obviously, to you the my of as a before the on than first, lower But clarification, the a response just I product that just the non-U.S. the making Tom, mix of influencing differential, this, for terms it’s product the difference key and fiber-based you’re favorable distinction more is side? what said or margin favorable? the product the your gross in the on Is less there profile

Tom Stanton

towards fiber would higher. in is – I selling the much say mix happening the OLTs is we’re space what’s

Paul Silverstein

it. No OLTs Got broadly...

Tom Stanton

exactly, sustaining Pretty footprint, right.

Paul Silverstein

it. Got

product that’s in So the the mix? driver key

Tom Stanton

– don’t strong I listed, true. really with that’s the We probably it it, but in look have top definitely at three. That’s them

Paul Silverstein

both you question quarter had I profile, ask every OLTs. I of apologize. you shift driven the quarter, in good volume the terms obviously Mike, margin a to margin and by long-term very just

XXs You’re I’ve shift low better in gross looking there at the with And any margin guidance in been then benefit guiding longer December be to Has of view volume back XXs the about longer term? traditional still OLTs, than Are to profile one quarter. low can follow-up your got which change a for that? the question. term you that or your

Mike Foliano

Yes.

would also. to think or And variability pretty in QX, here. Remember, low say, hot I somewhere I mid you right were that in in range. see we

So it a jumps lot. around

quarter. So probably project comes and that a are I little at will this we bit to is see. by the we to But what during to looking test. XX% business I tried that, guidance what book-and-ship for But what quarter out in the hard the XX% is a mix believe turn to be

Tom Stanton

PON, don’t nature Tier about, typically next is buy strong, components the have associated think will thing not we we that with Tier that. The helps of year. they know exactly don’t – because that just software what the think – are the Xs I the also maybe do also variability but what us Xs

more material drive and that, going U.S. still pressure thing kind to pressure been whether but you’ll the on – stronger The trying tends here look we tend we’re Europe there is thing factor that in keep not on that at a weakness has of gross effect are like all vendors the the in, changing There’s there’s that hangover not see. or to year. pace is the to that, longer-term a of strength. Xs just see the of margin. the in have because alleviated international there, And this And no places real a some that point is, some the in doubt Tier stance next that. guidance business that it and to is, to the of revenue So potential the upticking for of the with

Paul Silverstein

statement the are revenue made X X, total like what progress Tom, you So you just of in it Tier percentage made, today? good Tier sounds

Tom Stanton

material. that it’s we that will break don’t over over very a It’s really don’t but million, I – It’s break me tell pick $XX out. We out. it’s – number. let you,

Paul Silverstein

customer, hard new question, to get X are I margin from assuming but in that any final the dilutive? structure? I what the be these sense? – on total? asking I Would if any Tier quick One as you Tier it’s margin Would know but consistent future, with it visibility at wins. have expecting the it may. Mike, revenues predicting specific be you do am accretive, Xs. not be and you the any Tom Would current profile

Tom Stanton

to be international going corporate gross about a to margins. It be would little margins, So total gross accretive it would margins. I gross but to you dilutive talk international am probably

Paul Silverstein

Alright. it. I Thank pass you. it I appreciate on. will

Tom Stanton

And mix How much X? I’m on what pile versus is time. talking much better over the in? How That with does Tier does the going in in that market U.S. pile that’s about. gets that

Operator

question Tieton of Your next comes the Capital. Bill Dezellem from line of

Your line open. is

Bill Dezellem

Thank questions. couple you. of A different

through question days again you? made talk you if shutdowns any, European the once the First of then few implications, comment and you happening the about year called you Tier has half that is, is ramp bigger country Would a late next Xs, just – the the you in that all, for And the out. won that in than that specifically program talk second the that new that timing different comment? first And are about the and to one the you what material of two for last that here and one a with your revenues? can

Tom Stanton

Sure.

that talking the the Let and course, of ramp and that but me previous in year. awards about first of I about it’s half was the start talked first a revenue we one, of – the with we SDX some combination, around really have customers different the are I was seeing talking will really, half will of start all on material we seeing around those, as about dates am There totality. next start

Yes, As the don’t be quick, any to sense when as as fairly far good at ones, revenue. as as one timing a have picks point. to think it’s but this that is new I up going – I it’s of seeing far

how see then get it they some I that works. want areas. started, targeted kind to want think they I of to have very And and

Mike, on is, other specific. The recall that. very one I don’t the And date

next third year? it’s quarter think of I

Mike Foliano

Yes.

Tom Stanton

what have slip bit. well-known tend the with the Right. specific one it. talking I revenue to before The quarter date shutdowns I it’s next we about difference. associated And piece are haven’t operating demand is specific fiber via seen third been current it any is changes concerned, a Besides have that as many these very of really a operating. a way very will that And was Where us. really you really that really that, it gone you right customer plans we little ways was the tell to than end-user to customers shutdown, trying with meet from things around affects – hasn’t with the when with are big, year, on us it tends activity is, we the no in relatively they far impact targets as – that. other are have lab in really and to near-term an now, world and and They

don’t maneuver around we that. because I far, able to any are And it. the delay So of material situation expect aware I’m that we of not in. quarantine have

we themselves bigger especially the operate talk and environment on work customers, in cases, way our kind about get even of remotely where operate. our think smaller into think in to an can system through their the counterparts customers I to need I we the In now developed issues. lab, many Europe, have going

here So but And not that are I’m week everyone not there. – delay who frequent. about here, that’s –

Bill Dezellem

stay-at-home And then orders? deployment is not impacted by

Tom Stanton

seeing in even were that material begin replacing And have expanding with real that. in with, building Europe, or infrastructure infrastructure footprint, to awards, we either many change cases, talking what about is, existing we’re out builds are about in new they they footprint because those especially, in as been infrastructure really change talking no plans. far the there’s in Yes, no as

Bill Dezellem

in I important Latin throw And seeing may there? more with Great. what you customers are down America, your if question, one

Tom Stanton

in So doing the are there actually – Caribbean, well. we

We it some have to strong want overplay I point. at – don’t this

the Brazil, in as they of maybe also, to. kind want on places are the going like have to go XGS activity where architecture, XGS, course, is the honestly, of people We some

there that XGS, if you going And large do with that, going large at isn’t to you’re are are migration SDX. that to carrier There’s XX-gig. virtualized the like a towards so do carriers. a not a And system looking

one that going are point. no activity there’s there. on is there. customer this there ongoing be negotiations have material down to So There tend still with at Those customer, traditional We longer do term. but change

Bill Dezellem

you for time. the Thank Great.

Operator

from comes question next MKM Partners. Your of the line Fahad of Najam

line Your is open.

Fahad Najam

Sorry this, your addressed seeing pull-in significant from I are am you orders customers? have already any on mute. I apologize, if of you but

Tom Stanton

No. of at the beginning We the did pandemic. No.

the of kind about increase activity. think saw of a you end if we in QX, So order material

on – the would point is. I demand them rate talked about predominantly do having But their any our in not norm. reflecting – the to and bit some may and reach we down those with this real with order silicon. what products. we’re that think really fact out, to and see that’s I at a we say cases, don’t nail in try further really is get still but the I time, issues, that I most little particular forecast supply try

Fahad Najam

with look Okay. be about of growth year customer forward most all these we X thinking That’s ramping, I has to your Is next Tier helpful. come should from... how concentration? the If

Tom Stanton

Good good Yes. question. – really

adding as customers So X well. we Tier are

the the Xs. So kind to adding that is will that, X’s be of said more also are around but there Tier good fluctuations having spread more within, Tier we news

have you that So issue. got

I We different alternate are use all Xs. talking am Tier carriers really adding types. Xs, And I about Tier of

adding fast X have here, weekly goes very there’s here being mean added. And Tier that a We a And Tier clip. announcement quick clip. we carriers a traditional Xs to usually I on we’re are update municipalities that’s out. have an at very municipality internal heading a something we and always

XX-something it the on type of think I mentioned customers, those was large carriers. percent were before, alternate I

one way, distribution not from typical I Tier believe partner, alternate – typical. So believe customer, mentioned, conduits forward that a by will carry, municipal be to and because that I being perspective, is had and space, and that we XX% all at our that, do utilities. that Those are of the top those sold. the was are that it do going I X space, – so

base that is growing. So

Now I this time still of year, the cycle next some next get when Tier wins. how growth we of diverse, at really it be early but the these we be comparing within Tier in this Xs into we’re Tier Xs. it’s have Xs year, into kind of no get will a to But time adding are those more doubt nice well. rate we’ll the clip as

diversity. are before, just our and will more I want then So new It tax on going to other really gear help rates help one thing that that – in in RGs something we add solutions we is CPE of will mentioned but will and customers, is our on. our the some I focused which add. as WiFi well, have well. which diversity And product

Fahad Najam

That’s really on the color for Thanks that. helpful.

last I one for more view. a is, picture question think me topical, big

of? or the are with I basis they it secular in about copper-based towards fiber, the major AT&T the to copper that that migrating actually service. in win it just Xs recently DSL announced positioning can similar seems on should stop It to bit like competitive previously all better fiber, their is think world, around and little it fiber – is a shift towards a going rates ongoing your selling Tier your the – talk you is

Tom Stanton

to talk about it. like would I

copper-based copper fiber. lot because causes But milestone. – with that revenue? that the and is first had it, really there our then, it of And programs, an work longevity the so to quarter, one this were really, you on kind that and I a hangovers And that requirements to have copper within of eclipse fiber big make One R&D associated of – us, died really of and we a copper that’s how issue. think of a couple really depending the program gone you the we had the versus happen. which that count through, was seeing it that And big was is

within So if R&D the I predominantly you look the with been the some the for at happy R&D has am fiber-based, is shift spend And company. time. spend,

able kind very we right position. to be is see glad that here. I’m mimic in good the of we’ve now, So what to doing Competitively, are a been it internally revenue

product, platform Access in have Total period been We market our flexibility, of capabilities time. in there, XXXX has launched a which new for new the long

nothing to. upgraded unique in getting else have and have and are combo within the there’s XGS to people out say lot want the working disaggregated. XGS, trying but good the, there’s customer X.X think we reacting put switching think into heard and base the we is card, It’s – which in the is pretty XX-gig to traction infrastructure, has will a We’ve X only. nodes, I – we is are standard it, been it next-generation is we of about don’t they we every out are now to There else have I nothing but only been have people to that card capability, that are about years. it selected We people two for market. other that have in one, in – people I on well, talking And system much have the and same five shipping a don’t are have headway we the to PON, gig replace talk of and kind It that are out right relation what paying completely is that touch customers. should or won because Tier it we that go which It just six by When now. there, profile, actually it. R&D actually the shipped

Fahad Najam

Appreciate good. you. Thank That’s it.

Tom Stanton

you. Thank

Operator

Your next question of the Savageaux Capital comes Management. from line Northland of Tim

open. Your line is

Tim Savageaux

quarter regard my I Yes, Good But morning. one that, that made to... there. actually, comment say Nokia will to this on last questions with lot a same the of

Tom Stanton

it. believe I can’t

Tim Savageaux

copper in eclipsing the fiber business. Access eclipsing The their – fiber

to So that be comment about? – you what talking would well, were seem

Tom Stanton

solution. I disaggregated about was they was about doing, were talking talking their the SDX. about I what talking

Tim Savageaux

does see. trend industry-wide there’s Okay, I A competitive going suggest that copper intensity but there, an toward little on.

$XX so I I quarter. Okay. was size up a back that larger mean this for X Tier on follow-up of for fiber that the business? comment. that’s X the you quarterly the Tier base number million, thanks wanted clarifying that to And

that’s So well, interesting.

Tom Stanton

said, don’t million I guidance... than – larger give we like That’s $XX

Tim Savageaux

you. hear I Yes,

of that And at it Tier your segment, obviously X, make seem something you actually. which segments, XX% various and in impressive some if year-over-year X would largest are had you on that of you to growth good And a, yes. lot a seeing decline order U.S. there, imply don’t international, and the Okay, Tier growth would of I by know, numbers look kind of you X the Tier kind does distance, in U.S. most right? of kind of a X’s part be of copper that about that or you or coming function are business? make are it take other that among at grow referenced, guessing of the of may And but of that business is to deal how domestic-based. your I’m – new stabilize Tier that the parts And to programs looking take and it kind will what

Tom Stanton

don’t X’s. it’s Tier I Yes, firstly, think

I think basis, a in think been it on year-over-year X’s and I good. we Tier X’s Tier have

I last predominantly had issue Telmex. think on comp that basis, was the year we was predominantly a

quarter, them, and with was stopped. And just millions so tens we had a program that copper-based going a completely on large of it

a whole copper-based are carrier they solution that And very vectored, was Telmex, that that U.S. So rolling North about base. market the you are talking DSO is the not it’s in not – out. the American much

just I question, think answered your that... is I

Tim Savageaux

to in some of growth. ramping grow think could purposes, continue Xs one X despite Tier me positive that next you with slowing last as modeled maybe potential in that should up XX%, you is, for rate rate obviously, about keep other up for your I some assume part. and planning And Tier they international Yes, RDOF growth year, growth drivers. the

revenues and domestic, standpoint, assume faster you year? international that, grow we expect from Just begin to next an with, than can international to

Tom Stanton

you good a is have question really That Good. answer today. I for don’t that an Good.

has off I don’t Tier a rate X carriers, about say, about me see Tier is these carriers And just, broader thing But year. next year growth been the not just traditional thing the than change carriers. Xs the because increasing. let So through in the the is, it’s

going are Europe other quarters these not that on. to going in which are Tier really, going there X Vodafone, before it? of one Now – like, that’s There’s in Australia, all to mammoth incremental to we you have in just we start two all of So that carriers is, Telefónica, but have Brazil. is growth eclipse Europe Orange, of in activities award process course, announced be an – with and on the going will going – these

that have a of in but are towards processes All are – those where got decision, coming those will carry. place they’re

until those from next are – think So a they awarded really get and year away if they’re year, don’t you that.

And So new it the new that’s us real customer year. be deploying the mammoth, for is will the incremental XGS a half. next piece starting just around

So a half. material, really X’s on year growth to I don’t going it Tier we time. and into a be for that could pure take have year the to But will fact, really some actually it the where, I second to for absolutely next see. of turn the the it’s dollar get eclipse know will envision basis. start RDOF But around

just things don’t the next as I be of year. kind coming second will of huge So half wave see in that of – that a

they think Yes. the I These U.S. right starts just ramp – be starts carriers now up to old there. keep it could have are from momentum and stronger. they until

Okay.

we interest, your quarter. So call next on very appreciate you I and forward to for the much look joining a us thank today.

Operator

today’s conference This concludes call.

You disconnect. may now

ADTRAN (ADTN) 4 Nov 202020 Q3 Earnings call transcript