ADTN - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to ADTRAN’s Fourth Quarter 2020 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] Please be advised today’s conference is being recorded. [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.

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

Tom Stanton

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

Following start broadband team. then enabling saying to our do we’ll will my that to business. we highlighted and have. questions am work the you that our the lives thank in any COVID-XX importance and of consumers of provide It connectivity review high you all financial and may performance of do day-to-day opening employees the by way operators the times perseverance want difficult and to speed our take for to proud detail, I impact businesses. throughout these quarterly we remarks, continues is Mike

strong from broad-based segments against providers. service results solid demand regional our included and for This Moving the contribution to emerging a fourth execution the customer the across with our demonstrated quarterly plan. performance, quarter

Tier segments. and that margin. XX% solutions a for million progress our accounted with that customer top gross $XXX.X of a across the We with contributed total access growing $XXX.X last to market Global earlier million, revenue was base From X continue projects to while revenue million. variety XX.X% Network diversifying Services line perspective, year, while still make at fiber great announced for of we quarter $XX the

of quarter, percentage the During of have customers success revenue one had the was of these distribution ever These of partners. customer, service four enterprise efforts. highest digits, home regional we one total Each U.S. partners of the and reported. customers, connected we pointing are to and of provider our Of three in hundreds the with that further and there numbers diversification in solutions low-double and both mix customer portfolio our service success these, serve the was broadband we distribution market having with diversification. providers access a reinforcing XX%

provider year. remains New customer XX during to the XXX quarter total new customers the strong. bringing for We added the acquisition service

customer led the portfolio new both access Our in has and fiber terms revenue way acquisition growth. of

and We due expect world in success are software regulatory, that continued QX, platforms U.S., broadband led government, the market Tier adopted solutions technology and operator by the up the in favorable we saw was quarter networks the year-over-year. this their by to growth was the continue to as Similar during to around XX% are and X our upgrading our regional who competitive access customers factors. fiber which

our for seeing are cloud We services and demand connected offerings. increasing fiber access, home

XX% XX% year-over-year. grew Our delivery year-over-year XX% in-home cloud business and year-over-year, up aggregation increased fiber access services service and platforms are

fiber Tier three year-over-year of And Avnet access European were market by environments regulatory the seeing in with favorable posted revenue investment segment. and This access in networks was are similar in growth of Europe XX% fiber are networks. the providers. increase EMEA the trends We driven driving build We funding middle XX-gig have one around all expect the as all customer lab three the first two and wins a of announced for we milestone achieved with U.S.-based European progress X great three already including the significant exit of segment, And are making we customer year. customer. mentioned of earlier, connections. Two

processes several addition, are world. around the In Tier decision involved X we actively in other

Some mitigate levels and we middle to COVID-XX continue our year. take points customer of proactive times teams of to steps component decision our and impact are around and availability the chips related logistics global needs. meet reach this lead to expect which to operations just challenges issues and inventory continues to logistics

have with a efforts associated maintained structural and perspective, levels levels as that to expenses fees. lead target by inventory almost reach needs, extended due changes $XX moving XX to to to to over the we to aligns continue allowed maintain rates some operational implemented these last transportation improve In continue expedite disciplined However, through These freight capacity we operational operating components. From investment our expenses. remain disciplined times our elevated address key we the management. year efficiency. approach costs months, decreased us forward. do on and reduced The result have model our organizational that or we with have non-GAAP changes higher operating And have past of quarterly increased our expense a incurred XX% million an

services. our deliver They cloud simplified suite parental deployment app software speeds IoT, managed an X wirelessly delivery mobile cloud-based to the and the ourselves capitalize the management fastest the seeing home fiber we and a platform we solutions large by access our series the broadband on access increased regional Tier of investment mesh service expanded we an fiber platforms. the ideal On gateways. And adoption and are new intuitive invest ADTRAN platforms of vendors Wi-Fi security customer access have side, will are product platforms connected home X ability XX-gig And broadband growing in you’re our access, broadband needs. mesh, are segment, we in to of as with complimented operator match SDG that segment. to that the operate fiber make and easy of for continue operators available that looking leading and enhance to has business. networks. deploy it solutions Whether throughout one access deploy control or widespread our through established These the These transport, Wi-Fi seeking integrated for in-home broadband these gigabit customer’s advanced for system our end-to-end connectivity an operating, open fiber-based disaggregated easy platforms with

service end-to-end of our AI and period. On SaaS with course suite with network FCC homes. winning the or we bids The cloud growth million X funding homes and speeds. to algorithms their bidders One, also supply software consumer looking while network to of hundreds that XX-year be investment expected in vendors side, a subscriber in December, with and time to the multi-year Fund cloud around contract in are we broadband customers global to are service, many winning these increasing a diversify over $X.X performance One build portfolio SaaS and and over a match ADTRAN’s a actionable significantly government XX% RDOF billion for operators served gigabit is to the enhanced Digital announced to secured that FCC’s combines largest our of the Highlighting thousands marketing at to-date providing covers and the X total insight broadband for of software while Rural are notable the demand chain. fiber-based launch analytics teams. Europe auction. of service our is Mosaic the operations driven optimize broadband segments. your globe, XXX Over These receive Opportunity will an In all support their RDOF of program to high. Phase over an with award and customer out period great fiber of offering services

demand history. we material XXXX. of providing eclipsed I end-to-end related as QX copper As of as global earlier a opportunities broadband over continue Europe, ADTRAN that and portfolio deployments. managed represented reliable fiber access growth milestones wireless in mesh Overall, stands achieved time shift gigabit our for gigabit some cloud connectivity ADTRAN’s will drive in capable out also our in fiber established mentioned the XXXX R&D In business vendor fiber business presence, access additional option for leading for fiber home an including to solution in key The to with XXXX broadband a business networks XX% business. or had first our enabled ADTRAN the global for future further solutions provider.

a We driving a base have The progress our XXXX a lot our has our additional of of review markets. target now of diversified positive provide momentum portfolio customer the as for growth Mike financials. success and had will we segments in in XXXX. well-positioned in that

Following his remarks, will Mike? have. to you questions may answer be happy any I

Mike Foliano

and XXXX. the morning Tom, will Thanks, quarter first provide our XXXX review I of also all. results fourth and our view on good quarter to

in also presented certain referencing During both www.adtran.com/investor. financial my relations discussing non-GAAP and The our on and our financial release category, at will results present information reconciliations be schedules supplemental and will investor on schedules GAAP press report, segment today. which our I be webpage by webpage supplemental with revenue I

our quarter of XXXX. million network our in of and quarter million fourth million million across prior for fourth Breaking our and $XXX.X revenue Tom $XXX.X the solutions $XXX.X versus the $XX.X the As QX quarter was XXXX. down in for of fourth compared to came in $XXX.X revenue stated, at million, QX operating reported quarter $XXX.X for million this XXXX segments,

XXXX. XXXX quarter prior in for fourth million Other million to $X million, the the $XX.X Experience of of three the quarter in XXXX. & $XX.X XXXX and Revenue for revenue $XX.X for for in quarter Subscriber was of $X.X four services was compared and million, for fourth for $XX.X XXXX quarter revenue the of quarter million Across aggregation million million million, Our to XXXX and quarter for $XX.X the categories, revenue the of quarter quarter revenue quarter million compared & four was $XX.X of of to our four XXXX. access and versus $X.X in $XX.X $XX of support million QX compared QX XXXX. our Solutions and million was million third Products for for Traditional reported category and quarter $XX

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

$XX.X Our quarter million customers. XX% of of XXXX XXXX. the the was quarter, million, four, quarter we $XX.X $XX.X international four revenue for revenue million of compared quarter for and in to fourth had In three

fourth volume for in the the compared XX.X% for quarter-over-quarter as in in quarter gross of mix XXXX. XX.X% as volume the The GAAP services, decrease prior as the both fourth in Non-GAAP in basis and mix gross a XX.X% to was margin and of gross in non-GAAP and compared both fourth customer geographical GAAP and margins the margin XX.X% and product quarter was The year-over-year quarter to XXXX. changes. well quarter lower quarter by quarter were increases XX.X% driven services gross absorption. driven on product, GAAP and XX.X% non-GAAP lower and as in prior by and Our were customer manufacturing margin increases

basis, quarter and year-over-year four to of an of in lower a for partially XXXX offset related loss million the gross on reduction $X The component GAAP of for by reduced volume, offset XXXX. and expense income were as income program SG&A volume in to in with services the labor was travel by XXXX. efforts basis profitability margin operating operating market-driven million for $XX.X of The $XX.X Non-GAAP fourth of quarter-over-quarter services $X.X favorable margin quarter-over-quarter lead logistics restructuring operating the XXXX million compared non-GAAP in quarter to Operating in was was in were by loss expenses. XXXX costs, R&D quarter-over-quarter four and other result The and less of was on an XXXX, operating expenses operating expenses XXXX. both driven to basis expenses component increases million lower million of compared $XX.X was $X.X in travel gross we both prior our did XXXX. sales our and compared expenses of potentially prior our was driven in expenses labor other quarter our fourth was million to and program in the of which higher four R&D deferred for a and volume, reported and the million During a quarter GAAP quarter to margin income partially margin mix decrease on costs. was for expense. and restructuring million gross related the non-GAAP times $X.X $XX.X expenses sales deferred in million Total On partially market cost increases a four driven million operating higher market restructuring $XX.X expenses, mainly expenses contract the in in result comp quarter and of offset we million operating GAAP of in experience in compensation an related of driven non-GAAP decreases initiated mix expenses. continue operating expense, expense profitability lower quarter year-over-year, lower favorable result which by GAAP offset fourth XXXX in less $X.X a decrease the quarter restructuring compared decrease mix. expenses mix in availability non-GAAP to operating in quarter contract QX Other year-over-year QX reduced increase fourth and and to in higher differed quarter of primarily quarter year-over-year a million services. million quarter, $X.X increases decrease a decrease expenses. of improvement the sales sales into $X.X increases extended income decrease in in GAAP an services, and income to contract loss gross operating of year-over-year basis XXXX. of in XXXX. was primarily The loss The The was in $XX.X of lower expenses and quarter and was related income restructuring our primarily expenses. to SG&A in of operating due operating operating favorable result in prior operating reported The in our labor a compensation by million by component affecting and quarter were prior by slight The driven non-GAAP compared the million expect and quarter-over-quarter increase higher as attributable for $X prior $XX.X increase contract

tax QX in per of established quarter a income non-GAAP in higher in as income was in by $X.X other prior income for our was to a income valuation additional the in fourth XXXX. quarter currency quarter was loss in was quarter tax quarter carryback non-GAAP the The million XXXX in for quarter portfolio. Non-GAAP primarily fourth the for loss The of dilution the by compared to $XX.X in of and quarter of fourth of of to foreign loss of Act of XXXX. operations benefit losses a share GAAP of the primarily the quarter or the quarter $X.X in in a dilution net a was $X.XX of XXXX. market-driven, quarter non-GAAP share XXXX result jurisdictions. international $X.X increases the finalizing and four the share prior other for XXXX. basis were the $X.XX primarily expense $X.XX $XXX,XXX $X.X loss company’s XXXX. quarter benefit for assuming lower income share of XXXX per of realized the the provision net prior assuming on million increases The investment million result The allowance related per $X.XX loss Earnings in $XXX,XXX quarter in the XXXX to was current and fourth of basis of and GAAP $X.X GAAP our quarter and $X.XX XXXX Our the expense claims compared a XXXX. the gains in our of as compared quarter the The expense net $X.X $X.X the tax benefits compared to previously the both the the exchange of operating shift CARES other a XXXX and as in a to deferred caused and a other XXXX a million fair Non-GAAP four quarter and a fourth currency was quarter across share million operations in prior prior of as the net by XXXX. in income per changes generated quarter non-GAAP was $X.X to $XXX,XXX per of for fourth and compared tax of compared prior million quarter profitability million was four in of our offset per in value as quarter a that lower XXXX and by that losses. exchange million domestic on GAAP third was share fourth year-over-year investment $X.X fourth to portfolio foreign and our driven million net for share the decrease realized quarter per compared of quarter earnings of in

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

year-over-year $XXX.X end end The million For $XX.X of mainly $XXX.X at from compared $XX.X of variability of shipments. quarter, DSO’s quarter million million timing to were quarter quarter XX trade days the DSO at XXXX. the is the Net of in of million end cash $XX.X accounts QX prior Net a operations. the receivable of inventories was we in days the quarter-over-quarter fourth of at the the to in the of and attributable million days QX fourth at XX the quarter, used of compared end XX the to XXXX XXXX. and in of resulting and

which that adequate purchases, we pandemic. have to supply were a in the the We throughout we inventory for inventory to positioned and continuity believe maintain liquidity environment. in ramp ensure product current are preparation quarter-over-quarter, continued to been slightly down new our higher buffer While levels inventories strategic carry ups made

the and next in to effects of supply the sell pandemic, customer revenue other as possible well book our component of $XXX expect the chain the rates the timing associated ship results. and the of we be customer that, XXXX and quarter, business, currency exchange order we first nature may of cause markets to on variability as quarter our that our costs the will in XX%. differences margin ongoing which actual base non-GAAP expediting align material in of component million. XX% the the into expectations million our availability patterns gross Having demand, logistics variations, cost revenue potential supplies, of our fluctuations to all to said $XXX our range large a with between basis the expect Looking be products, ahead After in with we range sales projected mix, in first and considering the that will quarter of international

a information We distribution our and at also low-XXs will in for and the ADTRAN’s and operating broadband ongoing financial percentage potential significant of for adoption the channels. spending inventory again, the in changes roll-outs, Relations www.adtran.com/investor. currency $XX environment first and exchange for quarter of enterprises, laws, both project webpage million. expenses corporate XXXX realized the is the available activity at COVID-XX costs, We domestic access international non-GAAP of rate availability in revenue our revenue finally, to effects on variability the platforms, carriers fluctuations the associated factors Investor rate and tax be that consolidated our professional revenue proportion non-GAAP will the in expect Once movements, relative tax basis first quarter our that will internationally, we services of total be pandemic, with mix rate And about macro anticipate the be impacting the rate. earnings believe component XXXX and the levels,

turn over I’ll call to Tom the back questions. Now, for

Tom Stanton

point, this at may ready questions we’re Chris, any people have. to up Mike. Thanks, to open Okay.

Operator

Sachs. question Thank Rod Goldman Instructions] comes you. from The Hall [Operator first of

line Your open. is

Bala Reddy

be for have follow-up. different further mentioned taking you Reddy my any what Bala a growing And like Rod. factors, Thanks. This in you or is like on making helpful. space constraints, I Thank color for macroenvironment question. [Indiscernible] you would supply have

Tom Stanton

Can there. you cutting little repeat that? bit a You were out

Bala Reddy

that, about you [indiscernible] passing little situation talking was are I constraint supply a could you talk that

Tom Stanton

The situation. supply Yes. chain

silicon the throughout tightness seen side at it’s to definitely but we’ve year, least mean I on continue increase. the So,

where by pretty time to you’re sometimes of those. silicon of lot I are having go people think lead can buy the and you charges the a chips been have everybody much – from use aware some when on get any of there vendors. outlets the and extensions expedite And

it The Does factored quarter. guidance into We may will our tried next is but we your in-house that guidance. know have to we our factor get what that answer that that have exactly that be actually chips, those the for don’t into chip until we question? be reality whatever

Bala Reddy

putting maybe much table, supply into it us this, us help quantify table chain task the are quantify the by if How you could off it Could on – you you it? situation.. does help because

Tom Stanton

you of is it’s worse others. at is than not far. That on chip level be certain detail to right not It side are the here, hand honest but predominantly And everything. with by chips

we So that have at tell account, at up gross and at had want forecast just I don’t is and it fairly mentioned margin that. SKU on a an we forecast you exact I try our rolled margin number. and level. we look Mike detailed that to that into look take when to look We we that can can did

aren’t, have that. a it think SKUs certain I number certain and we by So on impacted total but ones don’t are

Bala Reddy

I last conversations you to and I on the then them, with be. about believe talked expand audit had we’re you second this got more be like, you I how of going enough. past believe the out gradual. more you Fair to one mentioned the Okay. expand Maybe it’s off Could some figuring could you a on still question. providers, few what quarter, half, going opportunity? opportunity?

Tom Stanton

the quickly over. period as off right period build Others some of to now don’t have is The wait, as there it’ll you carriers kick think possible. that bat. quiet some time do because will I was – will off everything

lot And with have a of so to we’re dialogue the customers. able

are with ones longstanding how some out. I ADTRAN. ADTRAN things those think bigger of definitely we of long-standing customers the are are and kind lot customers happy with turned of with now as customers A of

amount that going actually also something different, details at fiber, involved the right. although they significant have that lower unless rates, doing out where And good of you wireless, those are is whips, building into there – for We fixed be us. then some they one like is award, get to if wisps typically which of are which even are actually

opportunities there’s those with connectivity us still wisps. for So

So say, pretty I how out option would we’re feeling the about point. this at good turned itself

Bala Reddy

Thanks. Okay.

Tom Stanton

Right. Okay. you Thank much. very

Operator

next Your comes from Jefferies. question of George Notter

open. is line Your

George Notter

about Hi, guys. that And again, your I’d think, Tier have impression must Thanks the that the was I X look able a to guess, in into business, X Thanks. said very and really think prior but for to what North I your operators X of also they quarter, be the X great. were And like Tier is the Tier we largest like would like here? much. that quite that thinking mix operators know in QX. Any my is the is it it third of bit that then you of right now. about it this in I as a slow and sounded should Tier that with past sense American picture customer is point, be the you And seems at I bigger backfill was U.S. softness been,

Tom Stanton

call? time, time Yes, we did say think I on last we Mike, the said last what

Mike Foliano

got? of first have, the you was think it’s we Well, segment but remember, it percentage growing I we – fastest all, what do

Tom Stanton

in past is thirds, growth general, roughly Tier had right. twice the been much third the if the in least at X that we’ve but segment said each, have so it’s we than of in it think I a

that’s So fast. growing

Mike Foliano

I said, fast. from So it’s to actually been may And over growing – XX%. like quarter it’s

and closer as this than time, in asked see exactly even the in to off in customer which as you still you fall Tier business far the was that right. X And decline customer U.S. XX. you’re seasonal So XX QX. we up, typically the tells That did at point there QX,

not apparent, up in was of also was Avnet hidden, rest So the that’s most say readily have do make U.S. hidden the pretty piece that. business a which And were kind for strong. shouldn’t Australia is for little – Europe customer to that but part, carriers bit. another I of the the large another There’s in down. we able

had we glad see of So were that two areas happening. we to strength

George Notter

And for the sense CenturyLink, of the sales? it. wait Any a I XX-K in filing? should year the biggest as historically. we then think, for has what Or customer been for CenturyLink Got accounted just percentage

Tom Stanton

Yes. front me, I but that second stronger of fourth little half don’t was and first quarter. down they the a kind in half and of in were in then dwindled the not great have literally a quarter

So know. wait. you’d guess that I I you don’t if don’t – George, know to I really have

George Notter

Okay.

very Okay. Super. Hey, thanks much guys.

Tom Stanton

Okay.

Operator

Your next from comes Needham question Rich of Valera & Company.

is line open. Your

Rich Valera

Thank to ramp of the At Tier seeing. X. you. tightness to impede with this would you’re think second you follow-up ability the component Wanted that half? in on progress you the your do good point, I mean, noted number making

What’s your confidence. there. So some ramp presumably

enact to to You’ll be the get ramp. that components able

Tom Stanton

and more not, Where or we infrastructure predictability builds predictability it actually have some and that. there’s like believe

think – I good. we’re think we’ll I

the lead We have old is time This in of time. late but been on out relatively place. a period that already new, orders the for regimen orders in long still placing time placed newest change we’d is

XX% a you of could hurts you the and that, we’re ONTs on have honestly I most about more worry So kind fantastic for and don’t have XX%, pieces, and everything. been going and the been variability – able just being SKUs quarter-to-quarter where can different like RGs of those like buy lot keep be able – unpredictable you because where things is parts, that, has those us, take to up business piece the and is we’ve that rates to

problematic. a bit So little that’s probably more

just going – it’s but okay, get doing tougher. we’re to far So it’s

Rich Valera

but level the Just guidance, of guys over wondering gross give next margins QX? quarter multi the Yes, understood. on should thoughts sort kind at think issues, don’t margin. there’s flattish guided of you’ve component color few if give gross for know any your And relatedly, relatively being of on I of you sort these with quarters ongoing as could we broad you

Mike Foliano

And how year. far gross find safest this We quarter trying we Yes. just the to know were at actually don’t right is be fourth now. bet expecting probably quarter, third this as expand will margin as bad That’s point, because to parts.

a at look way that’s So probably safe it. to

Rich Valera

it. then RFPs the see looks as You little on the color as that be you you – expand pipeline you what early awarded that Got could Can actually on RFP some And mid-year. them mentioned might Tom, give us of a outstanding like? bidding that you’re on?

Tom Stanton

I The there that. to of material – Yes. carriers are in is RFPs eight, those is, of the close. six those both of close them for both expect we and two RFP don’t expectations of global of current And number control somewhere headquarters will European to two was But them based that before are probably we tell Europe. half between you,

Rich Valera

helpful. international, you quarter-over-quarter. but that was Australia weak, mean was And pretty finally, that international year-over-year That’s on Anything it. going and noted meaningfully overall on? Got down was that international business just I else then in

Tom Stanton

our in typically expected. German came about little carrier where Well, is They of bit a wildcard. a we

There I there said are where is material they So times customer. a a where we come mean in decline lot times and that we Having Australia. don’t. decline sell lumpy the are – was biggest it that, in and its

of hundreds Tier It’ll such will shipping started continue to grow which lumpy. to – impact. to it those to actually the material a X, through them, is those any lumpy. mean of year. that Tier will key just new but to this a where us for segment, materials Tier have this X, award Xs be Avnet be which Having We customers is ramp still won’t point quarter have a still I carrier larger toll

Rich Valera

Right, understood.

Okay. for questions. taking Thanks my

Tom Stanton

Thank you.

Operator

question Cowen. comes [Operator Silverstein from of Instructions] next The Paul

open. Your line is

Paul Silverstein

continues or become Thanks, their Tier of percentage Tier did an they Xs the and as guys. your impact that of questions. grabbing outstrip Does assuming that Appreciate margin bagel? structure that to growth a all the growth other? Tom, around Xs, larger your quarter. on way this one X, things have taking the that so Does the the they change

Tom Stanton

yes. Yes,

Paul Silverstein

assume the I for better.

Tom Stanton

would that Yes, good good – it is us. a assumption, mean a That’s for I that’s that market yes. a

Paul Silverstein

relative growth, continue your to to Based current expect relative to book, overall at your pipeline, customers order I terms outstrip in that assume visibility, your on of growth of your looking class to Tier Xs. you

Tom Stanton

yes. this totality, year think I in

with because three I access be think year, buying fiber in we’ll Xs equipment. Tier bore full next

year think I but have up, well. may more off impact on that don’t be hard to know, an difficult or I as next will keep

Paul Silverstein

shift meaning recognize change a or where pointing given have been that gross should feel for should makes But the shift, been it the this low you’re the next offset margin wrong, quantified that correct that question, that foreseeable meaningful the mixture? out should the two and uplifts like impact that’s years, positive uplifting what’s from if quite free think keeps any get some offset sounds the What’s expecting over it’s that year. expect – from should XXs you have a you’re time. benefit the any gross not this for counteracting given and we I to that all positive And I margin and transparent me saying have that impact you future. That year, I’m very a all that you customer

Tom Stanton

two our chain in QX. we year. And are We Well, materially logistics paying typical. I charges things. better the you don’t to expect paid We get versus this fees get pay expedite a to very now, least at that expect them we tell will you’re where And from high better. perspective, don’t supply historic there

we So increase. to expect in fact, pressure

the, have forecast two, additional gross the growth smaller to wins, yes. some So that’s what tried point to margin have say get segment, running. we are in impact going up eclipse better as having still is said growth to a have this projects yes. Do I let’s X so in But we that kicked them year, will segment number be is margin and getting where talking about a that some carrier just also off although, that one. we in larger you’re Point that, Tier expect number carrier

that also a So negative. will be

Paul Silverstein

I telling been that quarters. not level that. you’re stay it. would that appreciate case? us year, a others I Got for that for accuse, quarter, this around you’re elevated previous of at they’re which a to for to actually expected this part while the the and you’re relative better the indicating trust higher you have past past Was Tom, for that

Tom Stanton

Yes.

on Let little granular that. a be more me

tighter year. and previous little this on expedite it get I for if a quarters last to expect was chip versus quarter So it I logistics supply, at higher. fees look

Paul Silverstein

new All the like rollouts is awards. rollouts, the X stage Tier But are And sounds the pointed of as especially hoping, perhaps initial the margins expecting right. so time. you’re it from bigger those out you issue in over to relative

Tom Stanton

right. we yes. some Once things, and scale Yes, volume and get and up and got running you

Paul Silverstein

said And RFPs to of there’s yourself, of pipeline apologize, additional comments, previous I relative because opportunities. your right. All but repeat you eight six in you asking to to terms I’m

be And expect half two that so I to that in Xs those hear of Tier awarded year. this are you the first you

Tom Stanton

no. no, No,

number it’s are So yes, than but of that there those if the way or I probably look six two opportunities, at so are bigger eight. Xs, or of RFPs Tier – out I

I last will we’re that right captured if large tell smaller of like think XXX what But we’re there’s material working probably in on. working realm the on to I XX, you just carriers look carriers quarter. at eight it’s that So we now. I customers, six I mean

any time, working So that at point are we’re hundreds on. in there

Paul Silverstein

six Understood. all are I you non-U.S. the eight, clarification. The those referenced appreciate to of

Tom Stanton

Most them. of

Paul Silverstein

It is getting we’re than cut – specifically or that? that’s you tied is more to why it back do think

Tom Stanton

three think I things. it’s

it’s its things, think it’s really disaggregation, COVID. well, – I think I think I Huawei, I its its think so I XX-gig, think four think its and I

Paul Silverstein

I appreciate Thanks, the Tom. pass along. response. I’ll it

Tom Stanton

Okay. All right.

Operator

Tieton from question of Capital. comes next Your Bill Dezellem

line is open. Your

Bill Dezellem

to Why playing your that like is follow-up role believe Tom. there? comment. Thank on actually I’d a do you, you COVID last

Tom Stanton

and important became a countries, last I with conversation customer. like more some I’ve the think broadband said night late

whatever broadband turn. gaining people been and same little and in reason relook plans to of okay, a for and at refresh fiber pandemic themselves importance. wherever world found have they’re plans that to the an up kind having time was – plans a And for countries that those going keep the future I those around think Some may have sure flat-footed make

that at governments relooking on So not and if I more visibility importantly carriers, to the added it fuel on highlight just that but put think this. the their infrastructure absolutely has

Bill Dezellem

four, of substantial can to tell referenced you almost seems you in And the really It for XX% that X your customers, And mathematically a you clarification. Tier had can and that’s happen? Makes a lot how like growth needle us you Thank this thread. Tier yet a X. sense. small then

Tom Stanton

notes, in clear. I Yes. I it out this came try highlight don’t but my to think

we of XX% they direct the four but So Tier actually X distribution four Tier carriers. Very sales X are three. they’re are X sometimes carriers. may typically customers. typically quarter, we’re in, not have We this Tier typically or that have our Three Tier to two a come carriers, sold partners rarely Those X.

typically and customers are actually – those are X make that this three actually Tier of they’re So hundreds Bill? Does those selling in sense, to segment. carriers

Bill Dezellem

think And sense. as It even you you. possibility. Thank of I perfect makes didn’t Thank the a clarification. that the for

Tom Stanton

more All this okay. queue. Yes, At right. I in the questions point, see no

appreciate to So next look I for to quarter. you us you we this joining forward time and talking

Operator

Ladies and conference participation. gentlemen, your for you today’s call. this concludes Thank

You may now disconnect.

ADTRAN (ADTN) 4 Feb 212020 Q4 Earnings call transcript