ADTN - Earnings call transcript Q3 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the ADTRAN’s Third Quarter 2021 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.

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, freight and logistics costs, manufacturing efficiencies or other risks detailed in our Annual Report on Form 10-K for the year ended December 31, 2020 and our quarterly report on Form 10-Q for the quarter ended June 30, 2021. could the results be forward-looking the uncertainties from differ made and call. in those statements, risks cause to actual materially during These which may Tom turn now call pleasure is Executive to It over of my to Stanton, ADTRAN. Chief Officer the ahead. go Please Sir,

Tom Stanton

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

very that performance you were EMEA since yet opening our of record and addition Following results have. two any for From take will in new financial detail, Mike have quarterly will a mixed. last and remarks, Tier third. for call, region. my quarter any long-term And we operator bookings results the picked questions the in positive X may up The were the history the we in the then with our and review outlook quarter perspective, demand fiber quarter customers a

constrained the challenges and facing However, chain near-term profitability our supply negatively growth quarter impact to unprecedented for was industry. the due was

our do XXXX, to of look next to X.XX Taking the were bookings closer expect quarter. constraints our shows ratio up the for outlook half solutions, persist demand macroeconomic they year. a improvement through year-over-year XX% of where at we first bill some While during current booked for the

The five for new Xs phase now an and U.S. deployments. latest previously X the Tier customers preparing especially increase in Tier Tier the are as deployment segments two field announced others is portfolio, sharp are The transitioning as XXXX. Tier We our customer have for Xs. operators in in our new the moving Europe. well included the of scale evaluation EMEA now pipeline bookings our not from access the limited record X growth of deployments success into balanced region X three the across growth well example the these customers, bookings in with trial in opportunities Our to for regions, across us. were This we to region in growth as operators of fiber a Tier and just increasing scale growth

for If customers ALLNET example, ALLNET in more that fiber of have the and dozens UK, of one than at you we representing country. the look half operators

Our incredibly high with both Tier us for operating provide an from the risk vendors. win at future optimistic away rate outlook and operators more in X EMEA as to levels, diversify high continue regional

success also the are U.S. market. in experiencing We great

Looking exit placing fastest next at our other year, phase segment, deployments field one region. for and the the larger Tier regional X operator deployments. orders is customers in growing segment. And our for One while scale is the new lab planning

are positive We to to operators that fiber end-to-end solutions, we growing. what infrastructure us is driving continue with leading in to spending in year home. which rate, factors. to one, there closer at trends broadband see select the equipped for have succeed the Taking a continuing and are have we with look cloud we talented than access, the people success incredibly Number software more and same connected experienced necessary this regions experienced deploy high the two

optimize These have differentiating our in fiber of and solutions terms access, years business. networks starting five generation while experience access, fiber improving of access are the we by solutions in-home in the network over from increasing investments driven our Second, competitors. off that the cloud home next and performance and the operations pay heavily our simplified networks intelligent connected software subscriber invested software to solutions. end-to-end past Modern fiber are

And driven wins. those optimization key now from orchestration applications. service in service AI have customer these resulting invested ranging We are software investments solutions to in

our deploy to increase to end-to-end this and our operators expect has also base access service success solutions. SaaS driving key for success applications fiber growth demand SaaS in-home forward. and moving increased to platform continued XX% more year-over-year, platforms we subscriber and look as in be for is applications in contributor Our The a our delivery

We we expect those and experience match of upgrade significantly service year’s this and delivery in-home have latest our gigabit mesh backlog of multi operators throughout segment cloud by homes. growth our Wi-Fi in to portfolio record the managed fiber enabled a increase for connectivity the to that the sustain gateways, current as revenue their quarter our to Wi-Fi next

continuously In funding a countries away us our from being regional drive high in diversify our started we investments and a RDOF funds XX% at new allocated and to rate helped differentiated great of In faster to from much had as in private broadband getting acquisitions market increase surge This and the than compete in and and public a with fiber customer supplier win which year-over-year their Europe, revenue many funding look we from funding the providers. investment. portfolio, In from to paired towards anticipated. mix base. increase is gap higher segments market just addition international the U.S. close are a in levels, connectivity and service continue experience many ARPA vendors risk

resulting we closer higher the store mix, shortage chain. goods issues. that inventory normal inventory logistics finished look lead to from our to COVID-XX-related materials the inventory our our raw quarter side, reduce a at from Taking inventory further remained operation supply due the global while disruptions to increasing On minimize the and previous levels than times increased chips

in the temporary. be chain we begin for ahead, are to on we we impact to begin and the us and Looking improve expect will believe our challenges we – Therefore, will results experience supply XXXX. peaking to improve

experiencing challenges, solutions, segments the to chain are revenue near but present supply gross are in demand do necessary we summary, mid-term. high record risk for steps of the in our constraints mitigate We taking our to especially these and growth In margins portfolio. and

in further have been the offerings our make year demand continue portfolio. entire will product growth to customer a acquisition. year of increase we we within over segments last the While launched portfolio in new that consistent seeing our – over the great progress cross Recently drive

be and demand line quarter and up forward, able As in growth. top to this expect moving we current accelerate meaningfully fulfill supply the to picks

strategy long-term of business a unchanged. our remains Mike positive Our now for background, and that provide financials. detailed With will review the outlook

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

Mike Foliano

release category, non-GAAP web all. on segment page be schedules webpage Thank expectations Relations present our at will presented also supplemental review supplemental The our our reconciliations quarter you, in morning press of schedules our certain both on and by provide Tom. results the and financial Good XXXX. financial information GAAP third I Investor with investors.adtran.com. revenue our to fourth results will quarter I and referencing and for $XXX.X which revenue XXXX in in this I revenue million million $XXX.X the third solutions will prior was versus compared of QX million, across be our $XXX.X the of million network quarter quarter ADTRAN’s for came million our third third reported and discussing and $XXX.X of for segments, $XXX.X quarter to the million for $XXX.X operating in XXXX. quarter QX today. XXXX Subdividing at XXXX.

support the our subscriber XXXX $XX.X two experience XXXX year million the of for for million for XXXX. quarter million revenue for the solutions other was and aggregation revenue reported versus revenue quarter for QX $XX.X third of of and products $XX.X quarter quarter in quarter the $X and compared million quarter $X.X quarter our three and Revenue and for of and three $XX.X revenue of in $XX.X XXXX. million $XX.X compared million XXXX third second the million, category $XX.X to million quarter of XXXX. Traditional quarter quarter to for XXXX. for $XX to was services for Our Across the for of million $X.X quarter prior million of access was $XX.X million XXXX two of categories, million, and this three was and in compared

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

two providers Our revenue domestic customer reinforcing for both portfolio quarter and and and The in international broadband was two of access of serving to and revenue of international. million of QX one enterprise mix one quarter, quarter distribution our we home, had regional was customer success compared our the $XX.X XX% $XX.X solutions, for XXXX In million XXXX customers, $XX.X XXXX. in third in three a of partner diversification. service domestic a connected million,

quarter by the stronger to increased services higher and quarter and XX.X% in in were XX.X% quarter compared Our at margin third margin gross prior and for as the in component expenses third mix the in XX.X% in was of the compared and gross supply quarter XX.X% margins non-GAAP segment. XXXX. year-over-year in margin and and partially increased as both gross product the mix, GAAP quarter of XXXX. offset prior GAAP quarter-over-quarter support third gross to freight quarter was the margin attributable expenses, to and including chain XX.X% XX.X% The Non-GAAP costs our gross decreased for

QX lesser services to an in contract of an expenses operating employee $X.X QX costs, loss of non-GAAP for lower $XX.X million As compared three balance in $XX.X the availability the attributable expenses. $XX.X trade for quarter services, related potentially basis, was continue XXXX GAAP million during quarter related of quarter-over-quarter plans. and expenses volume quarter-over-quarter year-over-year and decrease XXXX. year-over-year expenses On costs The and quarter-over-quarter was partially XXXX in profitability Operating the the in decline million QX electronic in constraint driven of partially and was expenses a year XXXX third quarter million income both reported experience basis market previously was of profitability quarter The million and benefits XXXX. was quarter was by incremental compared operating operating to increase expense $XX.X and affecting the million The prior acquisition higher which million XXXX to lower contract acquisition income of compared and prior for GAAP lower as basis quarter on decrease and the of income in $X.X by million income our three related year-over-year $XX.X for supply quarter, and of the the million operating XXXX. and our component $X.X in in operating lower and lower changes in expenses of million result mentioned, restructuring The worsened GAAP offset offset compared QX $X.X basis benefit for this in extreme $X.X to incremental increase was expenses to for expenses show by the were XXXX. offset a operating of attributable for and a $XX.X three a $XX.X driven higher Total reported operating quarter quarter non-GAAP an expenses. were of a and chain expenses. Other well result was component a increase in third non-GAAP of and deferred reduced GAAP costs. and the decrease tight quarter to $X.X The third GAAP prior Non-GAAP of the to a of prior operating variable XXXX. $XX.X we in expenses supply million in quarter of was other compensation. market, on compensation, extent, compensation labor XXXX reduced million partially to non-GAAP operating and loss $XXX,XXX primarily constraints on quarter and sales expected operating compared of into prior remain constraint by to to logistics in by chain and in product variable non-GAAP million million

in in currency partially foreign The $XXX,XXX of third in non-GAAP to market investment million quarter of other other an million XXXX. of $XXX,XXX was the The million the to quarter income value loss $X.X income The exchange. prior $X.X generated non-GAAP Non-GAAP was driven compared as other portfolio. provision $XX.X $X.X quarter tax last and to the current quarter to additional changes our third the quarter of other quarter to to $X.X for the million income million $X.X expense QX on and fair be profits related changes loss compared $X.X million of increases million for was driven, of Our were as benefit compared continued quarter XXXX year-over-year by in XXXX $X.X offset valuation XXXX. unfavorable for in quarter-over-quarter investment was year-over-year three in net tax million portfolio, our compared was income in favorable to prior allowance. of in and in primarily The of and the driven our operations fluctuations quarter are gains income $X.X the in quarter the net of in $X.X realized XXXX tax quarter’s in quarter third domestic fluctuations as net million by the million non-GAAP expense for GAAP XXXX. XXXX deferred QX our international three XXXX. operations for by related from GAAP and market company’s offset third

in quarter of XXXX. XXXX. the of assuming of For quarter compared $X.XX XXXX was per in quarter compared well loss loss dilution earnings QX $X.XX on a share in earnings Non-GAAP prior to share third to the dilution share per a prior third a assuming per $X.XX per and $X.XX quarter $X.XX basis earnings in quarter of share earnings for GAAP the third per share was $X.XX as of per share the the cents and

sheet, at quarter. balance after million dividends during paying unrestricted marketable $X.X end cash and $XXX.X securities quarter totals million the the in On

quarter, of and the second at in were mainly the late attributable to accounts compared DSOs year-over-year of third of million the cash of in quarter-over-quarter million DSO in inventories and million from the year $XXX.X $XXX.X million end trade $XXX.X the prior the of to and quarter in quarter, at the $XXX timing the this constraints. of XX XXXX. days chain increase XX at given quarter XX supply end The receivable million Net of XXXX. our is end, shipments of a compared we in quarter the to quarter days third resulting the at generated Net QX was end at operations. $XX.X For days quarter,

extremely We continue minimize market. higher and electronic to inventory materials to challenging raw of a carry up the component we disruptions, build level supply as given further

may demand, ahead currency quarter, timing associated component the Looking ordering sell exchange nature the of the supplies base of in international customer of and ship on markets next a revenue million. patterns of the the projects, costs, in from actual our in business, align in the quarter we our mind, will expect continuing $XXX of with between as than we quarter material to into the expect and sales mid-XXs. results. million that projected be between gross differences our considering fourth be which book the After mix the effects variability rates in will we cause XXXX that the pandemic, freight with basis fourth ability Keeping normal large well $XXX and our expectations higher the our expediting to and component customer margin the revenue non-GAAP as fluctuation COVID-XX

the carriers, quarter expenses also We we non-GAAP million. XXXX $XX and finally, the And factors fourth the tax fourth the between currency services be revenue rate will and levels, mix of variability relative adoption activity the revenue professional associated rate internationally, channels. proportion inventory again, and of domestically our financial COVID-XX, total exchange with to international access broadband the rate our and relations distribution expect and for the quarter consolidated a will will be and We basis operating ADTRAN’s in anticipate Once of of environment on impacting fluctuations for revenue, effect realized the is of in webpage million revenue earnings the at for $XX information low investor ongoing additional mid-XX%s platforms, in significant both project component to XXXX be, availabilities investors.adtran.com. non-GAAP at rate. macro available movements rollouts, believe our spending costs,

it take turn your Tom I’ll questions. back we’ll Now, to over and

Tom Stanton

questions this Thanks, to Mike. may ready Mel, point, I for guess, up open at we’re people have. any

Operator

Rod Sachs. We Hall question have on first the Goldman line comes of Instructions] [Operator the of

Your now line is open.

a question. ask may You

Bala Reddy

the on you you’re to your more pricing maybe cost the ability higher Bala a last on on thinking thanks competition. Rod. on higher customers you maybe is month pricing on pass Could passing my what plan for of on taking for to products Hi, depends percentage comment that what questions. you Tom, little expand bit on your income currently pricing? that this of on This

Tom Stanton

sure. Yes,

shipment paying because dates incur have. to customer very related are whatever we’re we’re expedite is builds that may charges to freight much Those requirements or typically pass of pricing inventory particular fees relatively Those a are or having that on. that there’s straightforward to those. So or and that

customer are understand able able think in be to the there work raise is. And think the are. with time. to increases starting that think where and broad to through. those I what think pass of to according are our I prices that’s There’s we those lot a but that it’s impact increases it over from we fairly I ability we’re that’s are we’ll the based, something going that or easily fees to pushback are can show not themselves. to themselves there And see from that. some And the ones more supplies see and I components to improvement Then price roll Because them those fairly that across much out what board. on the you’ll just that’s

Bala Reddy

you. Got would cetera, components, et be these And semiconductor there.

Tom Stanton

seen Majority think of in I the vendor every space that. has semiconductor, Yes. the Majority.

We’re our not lose that we going to have. advantage competitive

are there immediate see it be where competitive significant that but to you’ll – have then raise we So, try an roll where you’ll increase like advantage said, a tighter a areas areas to today prices may see less bit I just But, increase, and us That’s be little other out or us where that’ll variable. thing. time. that’s over going no not see an you’ll of

immediate we’re on trying we an them receive a where we’re supplies much the receptance as and to things basis. seeing, ever expedited understanding and them, you seeing think positive I are that on as get to

Bala Reddy

pricing be would pass Makes future. on want sense. backlog, that higher you might assume prices the I older also depends you assume, than the because based backlog And to on current in the have it rather through that I maybe already the

Tom Stanton

something freight But go backlog on would fees expedite are that as and that’s true. well. into existing That

Bala Reddy

talk Sounds it as think good. then given even and don’t as yearly you really be right book-to-bill, anyway, cetera. here, tougher. I you about still strong But and next now, I year, And think demand and the situation given about supply about growth just know, generally bookings guidance more et

So you’ve lots clearly got here. of backlogs

assume ramp So really the the year the through on I depends revenue supply.

about how going to year. through like just improving thinking wanted I the you’re So understand, supply

I already. call comments up are some you the better see think your commentary that opening in some picked today start to I maybe in play

Tom Stanton

Yes.

course, of chain freight. is, So One the the segments. supply can break into is problem you multiple constraints

call now. as expect think, into semiconductor, get definitely ordering down different we saw lead times time go think large chip it, in supply will times And And and we freight expect let’s year. impact. fold as seeing third that chain the to on you some freight in general, charges are – improve or some third And we to quarter semiconductor, the I us I those end kind is have in associated that and where lead of quarter. the increase extended the already improve that freight the of kind no kind for higher closer a we’re that systems impact in people that go next been of bottleneck and that extended coming with also will see to And starting normal capacity. into we we’re our of have those to

that second And expect problematic but seeing as – as gauge that kind those problematic in next have having these be my go internal it I It to just better. be smaller year, I year. is things it of to – are and of I whole, improvement ones It’ll next expect pieces start tend – be is on into don’t we a throughout kind to going overnight of that to get but for into to problematic. we of pieces So people the we smaller year, get and then you logic, semiconductor today. in would problems it’s better kind that continue we’ll quarter. is kind expect that kind to with just of glue call are go this

can’t if starting already pieces of all are now. one larger anything. improvement of semiconductor We see these piece ship those pieces, of you’re on kind silicon, missing you to But

will see up and all a next kind to these improve quarter So really of of continue kind of year. second the pieces of clearing towards it, little we bit

Bala Reddy

margin last I I coming One larger Tier how operators wins if in mix revenue increase given it. with years, with more question structure coming and X assume. is may. back few this same Got regional the business now follow-up quarters of change, Last would really of this Xs couple lots And smaller change the back. with projects with my – Tier would

Tom Stanton

in cases won’t general. that in In change it’ll it some change, cases some much,

say, pre-environment, pre-supply let’s of chain dealing now. we’re kind environment of So with that right

and been mix Our has changed. large the small of model included And that really carriers. hasn’t carriers mid-XXs that and

So shift we don’t of expect because a huge that.

some on the time, very they’re chassis if on in software cards, see there a lot we going versus difference is mix But shift and bunch a same stronger into you’ll a buying depending Sometimes, of of margin at at those. line the much these beginning, customers. a have

So that may mitigate that.

of kind looking still at. what normal we’re environment mid-XXs the is So

Bala Reddy

much. so you Thank helpful. Very

Tom Stanton

Okay. All much. right. Thanks very

Operator

Thank you.

Going the – have Genovese of question Capital. to the of going we Michael back WestPark line next

line is open. now Your

question. may ask You a

Michael Genovese

Thanks.

back So it visibility Could let we up. slightly when like margins, get you have you’re up, alone looks the the very into and, do gross sequentially, you – the slightly of to quarter XXs could talk mid-XXs? beyond maybe guiding

Tom Stanton

It’s know. don’t – we what

be look being I’ll you at open very kind just our if So of here. models, internal

the Our because And fees expedite typically most with to the profile freight. at is the kind that is that’s the XX The ending we same of shipment mid won’t internal quarter, and ended you asked from the reality get are of even to are towards way models we upon mid-XXs, of right – until until an the look know quarter, up. end the we we low-XXs kind kind the best was up of at mid-XXs, anywhere right. for the this not – see because thing that’s

hard which but is it’s freight better would say. a it was help little think we to last right So quarter, now, bit do us, than

be Going into better. will freight QX,

it’s or too expect as would whether us low-XXs, gets improvement just to us see. some be not it is the for there to to able to early I So

Michael Genovese

the give of the quarter giving typically I beyond visibility, an did guide, at all about know strength little what any demand the of But thoughts that, – full one to But guidance and cloudiness. Sticking topic Okay. a normally the the thought adds really on year, possibility would or ever. annual you know obviously bit think supply I of about chain revenue on about you I I you don’t don’t given talk but just ask. is of like

Tom Stanton

Yes. all I mean, year a these I and some is Tier just little strong they it’s talked to a is to the perspective, because a know, bit, of next lot chain move cloudiness. about numbers. expecting be we’re say the cloudiness little to a supply of tend themselves that bookings the a really underselling probably From Xs, as able to Xs you by mean, year. Tier sometimes I of extracting

are come half to all So bring are to more. not And contribute year actually of starting I’m of we’ll four on come and next starting to year. started it – towards five continue on in fourth will or them some sure others will on the really contribute on them if Xs quarter. and Tier third next we’ll of QX some now

Europe, the I – I if space, our I a at of right. of all detractors, all I components, including business, are our business growth if be lot in if just – giving and is different there’s up. But It’s X at down there. look I the RGs look coming those look pieces Tier see supply and actually look to these see online. enterprise it’s into – clears business at think that the at lot be a So If going lot whole of incremental the alternate going U.S. the I that revenue we’re just and don’t downside. that I challenge. a of one chain seeing and to biggest not of

Michael Genovese

that assume just would Okay, just is just or business topic have ask I to I right for want paying Is now. do of certain you just don’t I’m you But great. subscribers this number know, we’re your Thanks. and that ballpark, then business model sure this services And from we’re to a I where would per assume, about understand certain the I are And – final I’m I month, subscribers something, at make service want I a SaaS counting under number would help. confirm probably the if business, clarity providers model for delivering. any wondering, of on then they’re small I that correctly? a sure just that. million me.

Tom Stanton

Yes.

So so what is in aggregate, all, I believe you correct. said first of

SaaS a and pay go. you as much pay grow you is Our business very as

customers connected. carriers monthly of. even whole they is quarterly or fee customers and is key come the maybe a customers then although bring it’s accumulated of online, is in a as So yearly it’s actually getting will – fee, that their it that and sometimes then number build a off online, And revenue that yes, and fantastic growing start on the in fee growth

lot model. their and there. growth we’re in in revenue And these see as that a the U.S. out, that building you’ll customers incremental of Europe from SaaS are So both participating start here selling they networks

Michael Genovese

magnitude come to kind ballpark, of the and in of order what at. subscribers see don’t want of we’re to number I

Tom Stanton

Yes.

So we up that are signed are… the we have customers number that of

Michael Genovese

So about say when that you customers, metric, subscribers. about of service that not Is talking you’re the number provider you’re correct? their talking

Tom Stanton

including – until brought – start service. provider they Service base in onto will sign customer gets the not they our customers, Right. their their revenue but but number until

millions. of we’re loading the you have they the look we if number network, subscribers they right. committed start as where the where even selling that in them like, XGS to seeing X, start look their Tier it’s that’s new And a at revenue, today, So if I

Michael Genovese

Perfect.

Tom Stanton

have they But not out rolled yet.

Michael Genovese

appreciate it. All Thank right. I you.

Tom Stanton

Okay.

Operator

you. Thank

[indiscernible] Next question of we Titan Capital. have the line

is line open. Your now

may ask You question. a

Unidentified Analyst

that last timeframe you. with the commitment. that May of attached on what’s I to Thank begin follow-up Great. millions is the question subscribers, that to

Tom Stanton

their think to think in for let’s and signed of base, customer three-year them, kind of they’d of trying timeframe they it on to differently. load just contracts these well, But as some I’m how so them if worded typically, are timeframe. of them load It’s tend three-year they say, typically we a depends have it up but – where

Unidentified Analyst

back – you Great. price have you. at to prices component circling component timing then which Thank And incorporated increases think what’s you into the incorporated pricing? your can pricing, in

Tom Stanton

this I we’ll relatively be are doing charges expedite and that mentioned freight quarter. straightforward

that to we’ll year. the happen to pass that half be in see price our will You’ll first increases next able customers the of on

Unidentified Analyst

Thank you. relative about call that lastly, can we the since share what And X new the wind to customer? had, that Tier then you last

Tom Stanton

Israel. in a X It’s Tier

think that’s I pretty specific.

Unidentified Analyst

you of that do thanks about and How for ramping. helpful. magnitude And will when size others specifics, to they relative be anticipate the the some that’s

Tom Stanton

be have There’ll fairly aggressive plan. they – ramping a Yes.

next year that or – that And cover the trying customers. of that. a Tier below tens of million. then million we period down – time. to and X of be to are be there. probably kind will multinationals then some short guess tier. kind million to would characterize of you of – half into the very that’s And kind are third So that Then we would have in earlier those have XX covering some would is are second homes in that that million go millions. some have way not cover for My XX we a X what they Those probably I big of They’re are

Unidentified Analyst

Great. Thank perspective. you for the

Tom Stanton

Sure.

Operator

you. Thank

next question We of of Cowen. the line Paul Silverstein the have comes from

line is open. Your

You may ask questions

Paul Silverstein

Thanks.

before are the give great. customers be some to If Mike provider that’d were others. you committed give service of number that interrupted to you. could I’ve got number, we about SaaS First off, that

Tom Stanton

of service wasn’t going have providers exact I don’t have sure I the going get I’m to number to – something, you of include… number I or but committed me, number providers. that if I know hundreds service No, if to SaaS. of he users was it’s asked the I think

Paul Silverstein

All right. That’s enough. good

much you How Mike. Sorry, do have presence? software a revenue all

Tom Stanton

to I general think is as the range as X XX ever it out. we’ve broken that’s much

Paul Silverstein

$X million. $XX million to

Tom Stanton

$X Closer million at this to Yes. and million $XX point.

Paul Silverstein

for question a have I you.

limitations time to in to Mike is to ceiling of to Why and buyer impacts and and is the that It missing? gross terms the specifically. guess, more low over I model general, referencing more understand to equal you the their am that gross in another. out, to been margin will obstacle shift and for the where assuming those overall meaningful long the mid-XXs So go profitability? going the add all to deal has margins What a ADVA things a model given going I and the margin software should you’ve average have What and your time? as being articulated profile beneficial put

Tom Stanton

Okay.

first So gross deal comment don’t margins. to the ADVA on dilutive We your believe that will let ADVA touch me the be on deal.

them in We Tier them able at X today and X is If the on don’t in do their what be you be we believe look where here the with product positioned U.S. dilutive. market Tier will to on will

fold under We be orchestration also is to able quickly product, believe that us that umbrella with relatively we that which mosaic products our on pulling the out margin. help going their will based gross orchestration are to both

So don’t first correct. I think the comment is

Paul Silverstein

a it ceiling, significantly. a low the hearing margin yes. Go didn’t gross I’m than sounds more I you’ve that that mid-XXs They always – ahead. never been, low mid-XXs I to better it’s obviously referenced say to They’re just sorry, or be add been clear. company. have to Mike, Well, model. dilutive. said

Tom Stanton

Yes.

So yes, the base be larger. will

of we’ll that, will a with that’s there access with problem. this I a potential do So We’ll solution helpful what mile gross margins. do ultimately think as to to before mid be a agree be combination and able but I

in will is pure continues when start? dollar every contributes today It that a base our comment on revenue quarter, momentum basis. either to software Your grow

fairly can base. the It things Sometimes it’s it’s just of existing but actually getting these depending matter on billings meaningful, installed. a for be

of that way ramping are them, some software which Xs have either up component per is element in as well. still orchestration, for carriers look most, those all basis sometimes just the all or the Europe a number on we I’d service If now if at in delivery, to mentioned Tier up have before to we not signed that you the of the in-home which that

it to course, will So margins up. continue from drop gross are, off but you, and they the of the more buy software you better

Paul Silverstein

software, type And you XX% just does what is – gross margin it of selling monetization XX% depending sell? gross margin that the upon is software XX% vary the What or at the software or was that coming that understand, or gross we average you’re margin?

Tom Stanton

is in gross consistently pretty The stuff that XX% range. to margin XX%

Paul Silverstein

right. All

an So offer. the it’s you about sell more

and drive model potential to want but back just to all the didn’t it to I’m the look referenced go of I trying in never it to to about if given all given that you future. discuss a again that sober that model low margin – starting appreciate So mid-XXs, terms didn’t I that into you the why for shift, and shifting? you’re talking software. the a been very historically understand why all higher Is you long-term might’ve

Tom Stanton

just or visibility. comfort the zone we’re getting whether It’s outside of our probably of not

and haven’t have shouldn’t next So as under mean, of look of Xs you as number already it. that anybody Most year, fiber knows of contract, where out if to some those those are we they’re say there’s the kind at to a the of put Most element are are I well where right. the environment scope lot I starting. – replacement going Tier for. roll where that starting. a of are rolled I starting in go they those a greenfield fiber, There

have contribution the that. time. the The and at the are you’ll So same of not the margin majority like gross hardware software

next year, So be software lot I’m comes that right. And customer. add shipping of a as going to hardware they on then

all to going of about that that’s next with lot rate infrastructure swamped their revenue, it’s be year. going software So acquisition to ultimately drive but I’m customer a

Mike Foliano

change. yes, we factors said, made to say the that to ago looking software low see we at business. in year used I then remember, other that’s Paul, and and And the mid-XXs, probably mid-XXs, we when a We

I point. So believe for but a this at where I looking know is we that’s has more, bit. little moved you’re it think it

Tom Stanton

or And hardware are you two or look they’re carriers planning, million three that that mean years are we’re a the close these to what in planning four just get trying if I shipments of passed to. matter that at to homes XX

great the that’s I That the amount it’s not, mean way, And right. significant add of as but catch is up by growth. business a it’s So not hardware. we bad software piece subscribers. to has

Paul Silverstein

with loss sure growth Can heard say X delineated I rate. think of Mike, I not – Tier your year-over-year you’ve number? don’t us, I’m it. X, and you – Got your that growth least what at or or it, get call. X, quarter think the we at a the this I Tier share

Mike Foliano

were was I the with X, Tier growth had think strength we the we and supplies I that, mid-teens. area. our And think problem is predominantly even in that revenue

Paul Silverstein

the to can supply or quarter. remind, Tom, constraints that the you mid-teens prior compared previous to

Tom Stanton

been bookings, promise supplied. it strong – yeah, ship could And consistently forties, to the but – were we number kind U.S., been if you you made mid-XXs that consistently, to could’ve It XX% a I that U.S. in a of was that’s there again, will had when that want has sure that has you, tell make I that’s what I I was just understand I

Paul Silverstein

a Tier to All right. and It’s that Xs just that Xs collected? just want far is that’s make sure on Xs, are that Tier

Tom Stanton

if to this Tier I probably – number. think that was just I I think, the X Mike, remember

Mike Foliano

That’s right.

Tom Stanton

constraints customer we’ve supply Yes. on And I area. right big Xs a that. mean got here around were probably again, same have that the Tier we

relationships sure that we on last current don’t So lose keep sure call, we’re in I just trying think make we’re this really this we trying environment. to mentioned to any I the make

Paul Silverstein

– XX% relate the… Tom, have to mid-teens so could Xs the were And that, that growth been the was did Tier of

Tom Stanton

got, could XX%. That Yes. been have I’ve No, yes. Yes. mid-teens no.

Paul Silverstein

XX% so And in could around Tier grew mid-teens, have for you but said X growth been supply constraints. about same, Tier X the

Tom Stanton

Xs maybe don’t than Xs, in Xs, in Tier Xs, think a Tier I know to outgrowing Xs Tier would backlog for to over the tiers, the have year. But lower we was. be – carriers Tier XXs. typically the been the now is just the excuse couple I know mean the stronger I Tier been know of been Xs it a because have low Xs it are Tier Tier so, we to say about tend U.S. I have Tier when high-XXs have And me, the mid-XXs, here about the the three. I in XX% would to it the Yes. say been Xs the mid-XXs. in

Paul Silverstein

of what’s zones your two us together can this percentage – point? even zones And percentage the what your remind What’s separately, at revenue. of or revenue you three better

Tom Stanton

We’ve been I saying still true. over XX% think that’s and

Paul Silverstein

Together collectively?

Tom Stanton

that the Xs. of Tier Together is majority

Paul Silverstein

Tier balance total has So over the revenue. XX% Xs is Tier of XX%. been of a Xs

Tom Stanton

small Tier probably a revenue. X little XX% of right. very to Tier set, probably Xs over lumpy. It’s they’re And

a So it’s buy they – can come and lot. in

a a Tier right backlog on component for a load matter about Xs the now have and are them We it’s of of it, biggest but shipping that.

Paul Silverstein

long question actually different various got of deployment is that piece and site, out, Are of tightness with seeing do given trencher the through an the no I eventually of or and the that ability in you feel ONCs and perhaps impact other All Dycom looking the than right. and but plans may. have This the Tom, supply if labor the components. providers deployment how last could terms one that? down other volts service road. of is NASDAQ labor last twin ultimately any I’ve a you further any varied push in to back ripple on fiber how terms

Tom Stanton

haven’t the equipment. can off one not. based much of Yes, or all seen get have of No, plans I you calls me fiber are heard that. their our haven’t labor I of anybody pretty I any changing of constraints.

Paul Silverstein

All right.

Just relate relate the around was they’re increased to banking service by on in delays. deployment on was of the very have is adoption seen Congress plan it everybody impacts this discussing given that What uncertainty now any has that much that coming all has impact. infrastructure that know flocks. and in providers you to I plans

Tom Stanton

RDOF orders quarter. the No. actually in shipments. fourth got see RDOF No, for we’re to shipments We starting

none on all pretty that’s point funding. infrastructure of we’re I’m much of or talking have on their I based say all in, that starting. plans some this the haven’t aware shouldn’t infrastructure, to at locked So that that current carriers locked in of

a cake. I think that just on from my icing perspective, that’s

Paul Silverstein

but others, the offline. take it I got I’ll appreciate you. I’ve it. Got responses. Thank

Tom Stanton

All right.

Operator

Instructions] Savageaux from Tim Capital. you. comes next the of Thank question have from the We Northland line [Operator

line is open. Your now

– your is line open. may You now

question. your ask may You

Tim Savageaux

morning. will And it question, Good one be..

Tom Stanton

great. Okay,

Tim Savageaux

now, results. and they of If of in one partner assuming we’re as does of that And couple merger do well I have see the different your And in coming really but flexibility chain, question a potential energy two their you terms a I for is lines, you focus which to product increase has it to even your and together here challenges do. along scale, is, as supply and supply left able these guess kind scale navigate way. some the any maybe first pretty companies increased or the and of influence with

be very way In On to and scale leave fact, and there of hand able in from might it supply in do that a kind one expertise follow-up I’ll the expect and briefly. actually be benefit the combined XXXX? to companies you that calendar impactful

Mike Foliano

Yes, sure.

for answer just deal yes. not impetus is the scale. The necessarily is, the So

you think is in but based of has flexibility, it just out two had to of companies coming type this base environment off that important. this told you together does give it’s reach important our And I – me that scale them vendor the we’ve from as well. the

to think us. So going I help it’s do

is and like in the that related dealing are that. the And change in We supply size have A constrained what iceberg bigger the that tip $XX they’re I or way or of what to so will just synergies the you that think chain. million we’ll get. that’s that of lot the the environment are. with of this, But you able customer a to be the

just setting Even the and it’s Broadband their to they dollars, me of activity, aside Europe, think so let add in The network. little midst compounded for they But both kind type activity. stimulus Boom, in the have So yes, Europe that’s And never out that U.S. the have Eastern right, fact vendors seen this thing. rationale of pull that never this by in is, in seen this of of a we’re I very positive bit. a a

broadband. bad Broadband for the Boom need COVID the or highlighted been has good has fantastic, So definitely

into think seen there over which broadband, the build it’s here there’s U.S. in just stimulus something in Now I in it’s dollars, going Europe, are not like $XXX both $XX calculated billion of Europe, never money is stimulus and – we’ve started. billion, this, –

home. all and belief the the piece, another in ONTs and to to and need the home. in-home access you is things our the One the multifaceted. fiber is within is order experience this is broadband piece of getting make And getting So RGs work that

this in the soon as or be type once and put sense as homes get talked million building back about is able them, every to makes million order because has middle-mile out XX to and they XX have talked change. metro that to we’ve rationale point, to customer this in this deal – how for you start get about to you Almost have network Another passed, they network. the to these upgrade speed their of that call

if this it time today right – us to there’s vendors, happened you in managed is that’s push. happening Europe of solution that entire And now complete because And the sense. broadband why So software opening that’s problem. Eastern look makes up is at one door no a to better the for that with come

Tim Savageaux

when at about get kind across to of the really was mind that things opportunities share my in kind commercial, or that indications some to plans as beginning transaction? line it that’s deal? it this of other any And for facing thinking Obviously, sweep continue the point, goal see Does a of to result any market-facing in of some a become from synergies easier with strength of you, emerge customers. deal, the that’s side, market kind headquartered where you and office you Are guys area historic of the Europe. guys And your of the kind follow-up with me.

Tom Stanton

direct, to being through about because offer there, vendor positive. the Europe It’s together customers a has the other that And come I’ve In see to to that more been can honestly it’s a had been our using. I’ve to coming they about, all but orchestration with you, and from two deal. relatively Yes. combination base, using every they’ve they’ve us want really very unfortunately the able see anecdotal tell strong when alternative talked system it also technology not just this a European strength is And real conversations customer I been straightforward, been you and from historically see kind what together, of is Eastern about just that think been which in SDX they vendors alternatives have they just than base.

across have a So negative been comment. the had not positive single it’s board

very So the for much thanks Tim. question,

Tim Savageaux

Thanks.

Tom Stanton

see, out of questions. With I think we’re that, I

So we joining for and look to us I forward you appreciate the everybody to call next quarter. talking

Operator

concludes Thank call. you. all gentlemen, Ladies Thank that conference today’s and participating. for you

disconnect. now may You

ADTRAN (ADTN) 2 Nov 212021 Q3 Earnings call transcript