ADTN - Earnings call transcript Q4 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to ADTRAN's Fourth Quarter 2021 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 cost, freight and logistics cost, manufacturing efficiencies and 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 October 31, 2021. These risks and uncertainties could cause actual 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 quarter appreciate With XXXX CFO, is Elliot. for me joining our ADTRAN's Foliano. fourth earnings Mike morning. you, you We us today Thank conference call.

quarterly large my This broadband to Europe. was a financial small to the we in Following Wi-Fi automation across solutions take the based that highlighted with QX the questions service and diverse may expansion driven any Michael for by remarks, review record will connectivity performance tools. detail demand cloud our markets accelerated and providers by and growth the opening in key US home then have. in was and demand of of you fiber of mix networks, adoption upgrades the our fiber home

Europe, key led quarter access mix our a for overall Some Wi-Fi six included product and year-over-year. year-over-year, for Record our latest shipments Wi-Fi significant for fiber of our to XX% service of shipments XX% revenue product access in and the XX% the by residential Tier of Record ramp X up were led our these the by customers. up up revenue US providers revenues regional mesh year-over-year volume diverse with platforms systems. were platforms along highlights a

highlights our from result our solutions. both more ADTRAN and record and had platforms. also Our of continued Generation market and in success a success product and up year-over-year, quarter shipped next direct OOP XX% providing our and quarter fiber Next the another XX% bookings in latest our report ports customers quarter-over-quarter addition than improved North XXXX, We This XXXX, SaaS approach access to year-over-year. customer in of based US than twice the these diversification We broad more the XX segments. had saw vendors broadband across footprint fiber base our the than QX with a Omdia, up base, fiber share to which Gig combined. bookings XQ was was more than of capture were America volume In two [Doloro] closest The EMEA customer in we end-to-end XX%

providers demand higher Europe and side, than by ever. customer US regional service the across the On remains

a volume in The growth properties Tier X X deployments the America. and However, QX saw operators revenue throughout year-over-year. Latin fiber international to shipments operators, increasing initial European Tier two increase Tier for sharp from included XX% X International XGS up operators operator one

bundling side, host our portfolio and service and SaaS the platforms On we fiber to success in access have delivery platforms, applications. continue

mesh platforms. correlated residential corresponding fiber and footprint SaaS customers we applications. in the rapid Wi-Fi our in growth the and directly mesh during capture Our expect X systems Wi-Fi And fiber success our to access the outperform market SaaS to of increases multi systems deployment we continue gig and see in and to quarter OMTS

While success in to supply limit revenue chain had potential constraints we growth negatively profitability. business and our impacted our growing our continue

the deployments and further US Tier larger the QX the remainder expect in of quarters throughout wide second many operators for industry although some remains both facing our half. shipments fiber with remain volume long-term on the year, expect industry positive. expect We in constraints and EMEA the ahead. these we challenges receiving track continue X improvement our very the supply chain outlook Despite supply in to them others, of scale and growth The in several

success. we fiber we businesses. recently awarded addition, healthy well And Tier incremental lab opportunities X cycle we X with continue approval are Tier funnel for a maintain of have where In positioned

tailored year we platform business, applications is of toward -- with promote, and software a launched Within and Mosaic one last care our SaaS one operate One Mosaic was the the segment needs of mosaic personnel and The and operations customer expenses, optimize in-home and network AI support, reducing environments, satisfaction. service quality, fiber both applications operational marketing, access improving intelligence increasing SaaS utilize performance customer powered across to respectively.

more US, and the at we was to are that dollars fiber XXs approved well from the their but unprecedented have and and investment only this positive infrastructure away to connectivity wide am horizon. represent vendors. These from to local funding cycle in build associated positioned that further success a in future shift and by acceptance get period, ABA race pleased On platforms versus the position tremendous ADTRAN risk incumbent while backed of to for the access. both close complement to benefit billions still of range enhancements have offer X. of state transaction to investment an in all as ADTRAN XX% level fiber access fiber of mix to high leader continue outstanding stock operators of on their you network and I our our operators and continuing stimulus years. in expect accelerate growth, subsidies stockholders ADTRAN are to rapid the stockholders a timely portfolio markets. and for than voluntary To broadband These this August Carrier impact and and planning as overwhelmingly in offer beginning record the by date, well. across fiber us a net XXXX. migrated all global to move In not the solutions enabling towards transport, XX, SaaS we these the ABA received forward. on tender yet of SaaS fiber US in to network growth further is a we in public a of add at is programs shares Europe, core funding in-home this the the key January ARPA broadband infrastructure Optical solutions feedback special required released. funding with based As opportunities networks Europe, ideal of is offerings, government of ADVA Ethernet meeting for more Optical in inform takeover networking synchronization high previous acceleration private In Networking made solutions upgrade folio. a we remains ADTRAN’s funds and customers at received ABA the January applications, RDOF fiber shareholder

the of to in and access, begin especially awaiting approvals final received, residential these process. a solutions. Germany. Once high and In softer and are software cloud we FDI integration UK Wi-Fi our from growth continue the date for are We will demand summary, set segments fiber we solutions, experience our record closing

Tier our of complement Our fiber access platforms with are X success our operators. and realize the benefits growing of base operators starting regional to rapid

customer adopted demand may Mike's access open range this our operators background, some combination base, by platform. With ABA XX in remarks, of to launch our provide residential increased X competitive the wide multi gig of mesh Wi-Fi The continue happy applications unprecedented you networks. we'll improve with will have. Mike? a we Mike, of customer proposed demand, track growth details are a funding, opportunities. to are enabled our a the differentiated product are our portfolio will record position Mosaic being any Following further to year. offering questions across that With financials? platforms review following growth up diversified SaaS the for One home you and be gig the for growth on and Wi-Fi a experiencing fiber speeds given Our And finally, match

Mike Foliano

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

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

on Looking quarter XXXX. at in was our $XX.X $XX.X four revenue QX for and million reported in US of quarter basis, three geographic million $XXX.X a XXXX versus million revenues XXXX of

customer quarter XXXX for the $XX.X international in to two of we quarter, four compared million $XX.X of In million Our quarter three for had XXXX. revenue fourth solutions. was access both the number Thus XX% and of service quarter of $XX.X revenue million, and our providers home with partners in of and both a large regional and portfolio domestic diversification. broadband distribution serving a enterprise mix success reinforcing customers, connected

gross transportation XX.X% quarter, and XX.X% XX.X% XXXX. XX.X% and which and GAAP fourth attributable sales higher mix transportation both Our improvements product Non-GAAP efficiencies prior segments supply and prior GAAP higher including fourth to in partially quarter gross support gross the was component non-GAAP quarter and margin expenses XXXX. offset partially quarter favorable to our quarter, compared were was margin chain margin higher in in and compared in services fourth as XX.X% and the to offset The to margins higher component in solutions The year-over-year as GAAP both including increased for manufacturing increase margin chain by gross the a XX.X% the the were of supply the were quarter-over-quarter costs for the and mix volumes. of and at and volume in costs. of non-GAAP and network decreases quarter gross expenses, sales by attributable

in supply in expenses gross million quarter compensation expenses. four quarter-over-quarter expenses and quarter-over-quarter expenses. The nonrecurring deferred $XX.X four in operating and in million four higher acquisition primarily and quarter, in expenses $XX.X of plans deferred of the XXXX deferred of prior and $X.X lower quarter, a loss in non-GAAP of lower XXXX. quarter $X.X XXXX prior supply compensation comp restructuring compared market in driven four and quarter variable chain labor and driven for $X.X related On expense. chain in market of quarter, was operating operating quarter-over-quarter compared for operating volume. reported improvements higher and expenses, loss non- were and to partially million travel profitability the comp, a quarter, basis by compared by expense of compared compensation, quarter GAAP XXXX. income fourth $X.X profitability million and and to in four year-over-year increase increase our non-GAAP nonrecurring were during was increased of of partially expenses quarter XXXX. projects acquisition component legal impacting variable $XX.X expenses, extreme for fourth million higher higher this in non-GAAP XXXX compensation, Total partially variable GAAP in of to QX, in nonrecurring sales, The market million labor operating higher was offset quarter $XXX,XXX million million challenging, for offset million the and and by loss a offset prior increases, the related by to $X of previously driven GAAP constraints GAAP costs. reported XXXX. As for the quarter $X.X a was million the lower operating is expenses to in XXXX. a And prior expense. we operating income higher basis, of and experience mentioned, $X.X electronic year-over-year quarter for on logistics sales was and partially by the Operating to XXXX and and the year-over-year to quarter. on driven compensation expenses to expected market and GAAP related of our incremental on four our to of million, the costs availability and $XX.X constrained in and comp of non-GAAP constraint offset operating The operating result million, loss and affecting quarter result Non-GAAP million partially profit increase expense, expenses result a quarter operating The Other product a variable the operating million were expenses $XX.X other decreases basis operating GAAP decreases in compared engineering were attributable was due an operating legal expenses. component higher partially $XX.X markets remain are of in legal The result income increase continue income $XX.X an deferred The non-GAAP and the by basis fourth prior non-GAAP offset operating expense, a offset

reserves for QX market higher exchange on gains. of currency losses from partially million the year, for prior four offset benefit dividend our income investment in both foreign higher a other by increase million dividend four compared tax realized and ‘XX changes basis The uncertain was other in income The benefit on of XXXX related fourth the for the was net a prior the quarter in currency and million quarter, of XXXX. prior quarter realized income by Our to and of as compared $X.X to $X.X was income The to net driven XXXX. $XX.X company's year-over-year the GAAP quarter result increases was $X.X expense our of quarter for primarily and income for the income a gains in a net expiration compared XXXX. $X.X the tax were decrease of net of gains quarter, GAAP income. and quarter, international quarter-over-quarter resulted The in limitation. current in GAAP basis income million $X.X net of million XXXX net $X.X other in quarter loss dividend non- million, The was certain currency portfolio of loss as quarter and in and quarter the was million $X.X at non-GAAP X the foreign prior compared loss a XXXX. XXXX non-GAAP foreign in four and million million, and as $X.X $X.X in million fourth million position the compared $XXX,XXX exchange of provision of $X.X in to GAAP realized in to quarter income of in losses a exchange Non- fourth driven tax income the of of gains. of quarter non-GAAP benefit of statutes other quarter’s as GAAP result higher during other income fourth a year-over-year to

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

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

million supply constraints. $XXX.X the at $XXX.X million the was the trade by the in increased end use is of sales of of compared inventories in XXXX. attributable end the of XX and the increase XXXX. to Net were prior the at third ‘XX The increase tied the $XX.X fourth and days DSO the quarter, days in compared year-over-year accounts receivable the end from higher a quarter of days levels. shipments the timing $XXX.X cash For quarter inventories chain in million quarter million of $XXX.X of QX and quarter of DSO Net at quarter late XX resulting to fourth mainly of DSOs driven quarter, and for quarter-over-quarter to the million operations XX we at end and

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

of the revenue and ahead of ability our XX%. our large between revenue nature continuing business, XX% in results. considering of first quarter, margin our customer the our projects, sales as $XXX material availability, effects demand, the ship Looking with in projected pandemic, After will million. a to differences base, well as international the the variability of quarter between our we that of of XXXX gross associated million that on in COVID-XX markets basis align next the exchange be to With quarter the suppliers the book may that cause be the rates the first components timing mix, with ordering from to expect patterns and and in customer currency our expect component will expectations actual the $XXX range we mind, non-GAAP fluctuation

Tom Stanton

Mike, range, think said million $XXX million – it’s I Hey, you is interrupt the really $XXX and you? can I

Mike Foliano

said it’s $XXX It’s $XXX million, range. million million to $XXX, $XXX million the $XXX I to is wrong,

basis, costs. that. On due XX% range our higher margins lower and be is non-GAAP expediting about to gross Sorry to would in XX%. than a the This freight of normal

movements project rate We currency a access non-GAAP inventory the component laws, tax between potential mid-XXs will enterprises, additional proportion macro the revenue over for that changes total and variability the and relative first that the expect earnings ADTRAN’s Tom revenue, our again $XX realized million. rate. non-GAAP rate associated for exchange be information quarter factors to webpage of availability mix of and the finally, to low the the carriers our at corporate effects million operating and our $XX in And also of significant quarter With is the believe I'll rollouts, of ongoing the basis that. it first and turn with revenue investor the We we platforms, financial XXXX Once pandemic, international your in distribution be XXXX rate for to broadband adoption COVID-XX anticipate and in the of revenue back available relations in questions. be take costs, will percentage impacting channels. environment consolidated fluctuations expenses will tax on @investors.adtran.com. we'll spending and

Tom Stanton

Thanks, Great. for questions any have. Elliot, ready to open Right. up Mike. people may we're

Operator

Sachs. [Operator from Instructions] from Our comes question first Goldman Hall Rod

Bala Reddy

on my of quarter-over-quarter QX Bala of guidance million taking is suppose. good so for for revenue midpoint results Congrats $XXX it's at a is This thanks set Hi, question. on I guys. good, which Rod. flat

So was supply what constraint did better in help too feared you cetera? just you quarter. I QX. not what wondering, like surprises could really supply many maybe the got situation, than But went I it looks see the And like through better, follow decommitments, et maybe went cetera. it there pass as are you It situation had looks et any us But up. a

Tom Stanton

thanks it's Yes, the know the because going some of at question. be from month, mean, hard QX to kind you week what's for don't to problem de-commit was quarter. if the see did sometimes basis. through qX, look from versus to month We it I a I week even

general, And it's in But have now we it's did problems. problems. So de-commit. different semiconductor still

direct the to is else. answer able question quarter we quarter call conservative as tried We're this did, we mitigate with and those environment but so possible into factoring so, trying the additional your the on those in just so of think doing I same is that decommits decommits. fluid be as thing we kind were because to we were we then we, somewhere to and sure as shipments well as make went to the the impact of

Bala Reddy

gross it. Got On margins.

costs. that with margin about the triggers you half expect color would year, jump this I to they XX% trajectory? And do in, How the in of impacted most not about gross pricing said, too. half believe being increases it's back would companies it clearly second I kick Now, for for you wondering price maybe range in. we just kicking you the year, feel be am higher to gradually up first are this any by the helpful? of Do

Tom Stanton

I'll then because turn project and get stab to Mike. But I that know you don't at over them. you a can take it me point, really Let this how only

pricing increment can't to go You continue customers. to and

it's prices, see as you them for untenable As well.

have you to difficulty So going the be know We that amount we can do And are the the time think half we're times. that of that. in general purchase. closing. forecast I knowing fact the what's lead farther lead But that the to necessary is, do into lead times those in lead kind typically long into to this we're environment been let's just of difficult we second don't improve, and say -- that expect times clot, aren't how windows

basis second we things generally how a in get So can't I going to fruition. to better you expect that's the exactly to come tell half. really But percentage on

late, is large a piece late, everything. are is as course, because freight of this builds Freight percentage well. Of a then are flying big supplies you're and

this that year. impact difficult may so trying -- is big onto you of there COVID to us in would this is hit think just that. to things end neither, year, does the real push tail forecast may in it's really some impact. the that unknown But not better have or So of The get would half an that's get the on second back we ocean. And a

Mike Foliano

I'm following you.

Bala Reddy

ahead. Go Mike. guess, I

Mike Foliano

going to I when just say was – you

Bala Reddy

then that those genesis increasing that. Speakers] that could through components them, national prices be just maybe for you tell also cetera of like, with immediately, standard wrong, question. [Multiple the insight, that will for hoping two the am the I they guess was passed customers, thank maybe I'm like and passing trajectory. the but excellent assuming on et I to you

Tom Stanton

it say there's many than expectation because gross look Well, that's I half second half gross variables, so yes, to I first it's, higher for is margins right. current mean, expectation, be current margins. all And is, can we at

It your but in on do this that really, trending, expect would just Is to it a point So can't at guess. be question? that. we answer percentage time really I a lay

Bala Reddy

if me, One may. follow Got more, I it. It helps.

a but especially maybe looks X Europe in of half, in some it On us year. said then And large you them, already could general some you the details started momentum bunch you any had the past or of that traction be in on for -- like would seeing see good the the to customer to you've second Tier some you're with deployments ramp, you other help like remind in like maybe helpful, believe Tom. these of I but them timelines expect when half first so

Tom Stanton

Yes.

tranches. So let me, we basically have

So we ramp starting stretch shipments have now in which is basically to Europe. two quarter ship of say are I any you fourth was. wouldn't in that Europe, and started in Then started they're shipping full shipping where bump they're at by the really kind their that but

anything MSO to it's one if I going have -- just don't US. will be constraints. But that's really know be here has shipped is orders. that that We it's we ramping the in material received

as fast Starting ramping already them we be started. can we'll as So really. ramp now really it's

second Tier We the couple X probably a right of other one my them, those have those straight the here, the around of end number say would that trying three tail be Europe other second of half, one to in a three of half. the get half, guess I'd towards

the So the end second right around of quarter.

kind Tier that's pretty we X a bulk large selected has the and now. that And this in the ordering much STX of demand in then, including still US, is started of And where think are here seeing that in one right at the of I we US have we're point. kind incredible course, across board, Mosaic.

answer being to thing the us here meet able be demand. it'd against Is question? supply matter chain your of a the that So

Bala Reddy

helpful, Got Mike. it, much, helps, so very it thank

Operator

Our next question from Silverstein Cowen. from comes Paul

Paul Silverstein

how I Huawei I opportunities button. many whatever in recognize now new you in the RFPs hoping go? How response, to and awarded? could kind outstanding, RFIs, for RFQs have on your us are how more addresses Sorry, displacement am of of but terms many update previous been many

Tom Stanton

a So list. this we've couple -- a is have had that fluid

EMEA. we it opening here, again, because have opening that a kind at that, a than broader looking up I'm or are which So just now. had, We've includes couple is of list

Tier little snapshot, now, a in current or As it of this we're what four maybe that. looking stage, three in bit than you that a at right versus X and but or Tier the say, you seriously others on that But are more then a a some you depends pipeline if are four Tier could or Xs call or Xs, they're Tier a Tier would three few argue X, Xs.

Paul Silverstein

already remind won? awards, me many Huawei displacement you how many how have And awards

Tom Stanton

hate PON-X call say it at XX Tier you them because let on shipping it carrier. let to this are displacement or PONX so depends it then easier now the Tier Huawei me we be eight. look that But Xs way, because awards, I do that be it Xs were even may not if shipping, Gig would the

Paul Silverstein

Eight. any Are -- there

Tom Stanton

Yes.

So say that shipping, or or maybe won are we've that won either that either we've yes. on shipping, accurate

Paul Silverstein

there's won some being difference The shipped? haven't that new yet

Tom Stanton

That's correct.

Paul Silverstein

All right.

awards in in Huawei in it. Are there So such away Huawei eight total. which you shipped that you've won you coming questions you're that haven't wasn’t aware won, some of which you've the won? moving any that to, from but carrier that eight of Got

Tom Stanton

so let's that few are, the over have there months, or at There decisions now. look their delayed say last if I six are months right two

of kind their through So go they they're as on process. continuing

Paul Silverstein

aware away awarded you there from carries what which date no you? had been and are again been that to have you So bid

Tom Stanton

correct. That's

Paul Silverstein

All right. One question line. last on this

recognize I you? wins The already the you've position Sorry, Are wins. secured? your communicated to portion wins and a you are the that these eight material getting opportunity? getting that material Has in to you of been But knowledge? a

Tom Stanton

not we're of they ones of material than -- None it's course. awards. none immaterial, I've expecting the awards, greater all XX% about immaterial, are don't those percentage give materially mean, But expecting the let’s of those yes, win, of all that I talked of it you a we say, these typically aren't to be

Paul Silverstein

annual factor. the to Alright, share But we date if eight impact? took I of with in expectation us timing terms collectively, the any revenue recognize whatever. you could Range, there's a wins

Tom Stanton

range micros given million-ish. we've I have ones range are we before a largest the though, mean $XX

and $XX million general, So, year. you between then of them can then many course, of as and of they're and those, million and somewhere think $XX there are in a

Paul Silverstein

me, us you from that What of for US recognize the a what RDOF for the you RDOF just terms US the type not question matter. government is from funding as is other various final programs? of But impact just ’XX well Okay, for sense expect can I all-in? in seeing flow programs, no one for now about as and what longer in give you're

Tom Stanton

in ARPA, attribute money that Yes, seen mean, us consider but directly I mass and we've flowing we wouldn't, ARPA, some I municipals. it's some awarded I that a like, And, really little for yet. to don't

that RDOF for For of in RDOF, are RDOF. and I to know related directly that the funding we house have releasing orders

Those are properties. contributions far that -- and typically could there Needless conversations ones this RDOF the just that RDOF So two aren't there's I their operations in from are those with growing in are year. to of that up that first will easily year, footprint are into And order And customers, carriers customers the and has we're standing ones kind for, the are are really farther meet different those next see our as to started. existing their of new there along then types progress that material that recipients of US RDOF some along. of kind say, expect for delay customers time. our

Operator

from Savageaux Tim question comes Market. Northland from Capital next Our

Tim Savageaux

QX. extent which And explicitly remained we're with did QX about guys yearend, you on you color any address Thanks or commented morning, supply and or some don’t And QX what backlog, no results share you this. wonder the if what I congrats I levels. the whether for to shipped or hopped to quarter. know backlog on challenges that the to a late. at increased good know and have talk of the since in be on on And if could some challenges you I don't bit on quarter color that And kind could Thanks. appear the given for supply either issues, and of in I guide. bookings you able for

Tom Stanton

we is And were comments XX%, were itself Yes, were an record, bookings which over part up That that I they mentioned quarter-over-quarter interesting XX% another last to of over and look a was materially way so that over and that bookings my at record. amounts. those it. in question year-over-year, were

backlog strong hopefully, mean, weren't get I demand forward haven't take able that to or bookings. we and we to So that's And dollars was the it have being out that able we meet to taken point. the looking quarter to fourth a quarter. we're for people would there, of of relation literally could your have would to shipped In that in if backlog millions today hundreds really

getting backlog that through that's us really it's important. So

Tim Savageaux

what notable inroads for Great, you there's it a In wonder be you terms you've activity. -- been Nokia some seen but the well call uptick some your Xs. out trend Several I example, we competitive been it traditionally also Right? made has Looks into frontier like demand. traditional just base, like big strong the fiber to of seeing got our the seems customers. what is US I there. me, that's from you customer what driven, could mentioned Tier US, US Tier X rural thanks. might there, And if mostly I wonder of address looks very in think ramps

Tom Stanton

Yes.

uptick forecast significantly. Tier explicit, but have, it year. that getting that let's need we've orders start Tier space X so you some to definitions placed X categorize a up this however grow we is or probably of we people And and would more say large what have grow, to the that continue Tier through Xs Tier we cases, strongly different and that seen, have And actually, pretty we this year, that expect in to Xs,

let’s X one through going if coming talk mentioned carrier that saying shipments large seen also well. from you have as what read carrier. we've to getting as has if some MSOs. life that is well. that year place one they're So And well, gotten as But that to actually this orders serious you they're you I to know, as Tier for gone also about And have we we sell we fiber in they're say movement. do, well, very

mean, a it's So don't that environment. just isn't really good I think I US in there's seeing in movement. I think general, the any accelerated space

Tim Savageaux

last and Okay, for one here. me

expected, issues, guidance? forecasts margin modest mean, you for But, margins? level here QX, what Mike, cost you in some a similar, the wonder impact here you're supply the revenue would an ex on overall the looking if what in seeing the I those to gross those for update you QX. what is us low impact though With XXs in or higher much and improvement, remind be kind terms could you're in flat at saw, of of I maybe there

Mike Foliano

Sure.

back And the Looking at components. other we is costs. then the seven roughly components side between and the QX, points, the saw evenly on between additional and expedite was split it's of freight impact that and eight fees and logistics split percentage

quarter, actually which that little you of But we expectation similar worse percentage during XX, on a on to So in prior points that the the generally environment. solidly take eight an maybe is in what are business to what is a our to if non-GAAP the normal and XX, impact basis, seven quarter. printed bit

Tim Savageaux

that do that it at to you eight maintain a And little that's me. to And expect better. seven the QX bit for get

Mike Foliano

projecting you better. a that you and of at guidance it the If headwinds there's there. our significant that little for some get still guidance, look take bit But out midpoint does

Operator

question next Capital Tieton Dezellem Our from from comes Management. Bill

Bill Dezellem

the follow you. phenomenon. that talk chain in of with apparent. how unfolded to to quarter, guidance I materials inventory us about Or the rests? kind the would raw to of And late how commented, accounts right your to the on first went pardon like somewhat fourth the the becomes be to in in supply quarter? the might versus relevant as unfolded? Would throughout receivable view upside something quarter potential us Thank you up quarter, Clearly you for availability the me that

Tom Stanton

and that that shipped. add. real issues will or with make that to to with to the if would higher customer almost the we make orders have you And you whether right effectively touch not supply exit customer let some all you expect, quarter, getting when quarter number up then now quarter we of and priority the demand enter you me if to constrained them enter you trying an when new need cases sure it's they running can -- a a sure But can or have that than think anything new right. in, coming we be the it we're some as Yes, we Mike are backlog, be, a list and get what that is prioritize. And and be then

true. say, then of up. components. a think We lowest large fairly kind coming we little going the it's a it last you fallout, And thing, quarter. number up point the month. is which this this chain into do we So definitely ships last okay, were, And risk reason in the whatever quarter. we're and supply entire come then you're of needless highest from for where risk into with conservative in this that weird And coming basically to to has quarter. kind components, end have about, the the is throughout a Which is phenomena bring The of to Pareto gotten talking everything that

components kind today, our if really, of more you're Kind backlog way the saw And the to QX. I before. is ever versus of what's going to so plenty drop hamstrung I had not. come. got availability could back than be the components ship done figuring to conservative end, out more So end that to of has what's led on that we've and what quarter the on the right been seems pool then where in you so which the loaded. of to I shipments we're dropouts, And performance out ship,

Bill Dezellem

March, we've that mind already necessarily January, seen doesn't, for in the but back of just components know availability lead this third fact month more of in that the component you end? the availability I guess January, and QX to your in so February you, loosening it's that Are or

Tom Stanton

saw effort, entire try right will of the it quicker bring we quarter. in a it's the actually saw of in benefit, material more we we it's have last But quarter, you out in still because that first and material to last that see this some say And of pretty of that way, it more two months. benefit those been DSOs. some I Yes, to that get much month. in come And didn't way the the will we'll benefit year. a shipments some concerted But lot see

Bill Dezellem

may, the and million this if question $XX up I inventory sequentially, on of Okay, that's revenues and to million was relative in front, up sequentially. additional being $XX the balance the one sheet spite

So that's nice one normally would with what counter bit a expect revenue increase. to

a really argumentative inventory QX increase not roll that QX? to I'm in had understand to So in be here, trying that why you be to benefit but trying it doesn't in is in

Tom Stanton

converted -- gets goods. right? finished buying it We're material, raw So before we're to is this

material. you So particular that that be And then may there becomes if out part have we really the necessary want not available, even that to have that we available, assembly. raw may all that until And all get the a if But parts want there's a part. raw have to and they labor used. you material overheads we for converted. not don't the And of to assembly finished and have is are don't applied because part

Bill Dezellem

million So – that $XX

Tom Stanton

may or would million pieces $XX by $XX million under could easily into million, assembly the million $XX the So you're million itself finished looking at that $XX understand you that worth itself $XX that With of go be I'm right? time costs, saying? material what a also it into manifests assembly,

Bill Dezellem

in different externally, yes, particular for kind slightly going not a so, you one may and summarize need But But think up. That this a to inventory of it. plenty it may you available inventory. one be look you I'm ship have of able I all component product, you're just to And is like way. need not part.

problem. the that's So

Tom Stanton

you a to Well, would Mike? of the you component. that also converted raise value have, goods, haven't which it finished

Mike Foliano

times be there. a be going And the just tightness far. future able it's up, have due so to in you extreme extended not lead even need quarters. to out component, don't, going you it you're if that's it you use to Bill, the Because to to see there, mostly, pick when then if it's Yes,

mostly those for So those an extreme others buys are from tightness there's components. where brokers and

some predominantly So buffers to is on component the that where in being being and not trying material to we're avoid able side ship. missing increase raw that one inventory to build

Bill Dezellem

time Alright, thank questions. you the with both my for

Operator

from up follow a Silverstein. have We Paul question

Paul Silverstein

recognize I -- supply proves your commentary. I sure make chain. another to just and about get largely I hate Sorry, to something to your question sarcasm But hopefully that's ADTRON I have be to, understand transitory. I not want Mike,

indicated things exactly of just you gotten that cost happening, to isn't what's I I'm with hit no confidence and me, the worse Or is timeframe function second perhaps meaningful many that consistent you obviously happening, terms But, there's margin. that think indicate back you'd sure to by I in improvement translates first going previously, quarter What clear. you're a turn improvement it's be other referenced? companies have want alone companies, fact that XXs I Mike, of it is think clearly is remind been had which which in pretty low the let it? decommits on? gross make increased seeing, what that in as into that, is in impacts sure other

Mike Foliano

we start So let would said or with, don't in to Paul, this we QX get think I year, me XX. QX back

and certainly then be would the through to back said would right, extremely I in expectation was, the in and And thing thinking out. I And improve think was challenged this that of closer just part XX first year, qX qX. not you late know, get to we play year, previous in latter in to as start the we we our the back continues half, to but half. able might the it be

there out seen And haven't so in improvement going we what's far, on.

think don't to ready I we're – say So

Tom Stanton

to that it environmental very the to and to what QX, decommits service, there's as feels period. Yes, work in in was similar QX. environment, just And was but throughout honestly, the similar get mean, what now far as decommits, had some QX, We we've it XX. whole I been right

seen an just So I in continuation. a see I decommits. don't increase

Paul Silverstein

it not I and but XX it quite am time. been And you but and just you But the I at argumentative, don't over the Well, again, so understand regardless, to was, understand expected improvement think that get last I'm that time, Mike because didn't if you deterioration I year. sure days. mean be pretty devil's advocate meaningful to sure And previously said there's indicated hard here, improvement. play sure you want I'm going this I I'm to I early that pretty

Tom Stanton

back how know that comment don't I far No. was made.

So if okay. beginning year, the was at made But the think of – I it

Paul Silverstein

days. XX No,

Tom Stanton

the the the the impact we a in it I right hoping that Last quarter, improvement very there. very, the get would are say constant did change was now, of the not the of chips was would large were see Hopefully, going I would did that improve and then correct. second versus chips until environment I still expecting -- some the smaller today, tail to environment That some Because first quarter. we that'll second we environment which of from this end we I better. if in where was a We're we thinking But and year. But improve first fluid. quarter, not definitely then through expecting that's half what half. were expecting, the we're is

Paul Silverstein

measured be can’t It – by

Tom Stanton

any really, in that is think third different don't it I fourth. and it's answer was than the So

And feeling how our don't haven't changed there. about think the the quarters at I has looked least and know I far back, I notes So fourth. the since don't at really

Mike Foliano

as to nothing you improvement through you the right. at quarters, guidance. I Paul, but minor expecting – just we expecting we're look between see incremental go to next We're minor QX think if improvement, Yes. few QX, saw what Similar and our significant incremental

Tom Stanton

at because better And our farther overage got And freight is. right Mike the -- bolster has over we were get we expenses freight in on half almost in as costs that increases our we in of is two, is are freight, the of the of do what direct saying lead norm that point. that reason our one said, times and to some

travel is at picking thing traveling, So again, congestions back better. that a when are starts when the little people the getting to up start air do whole the ports

COVID And overage. that's if there's not to would piece you So another of expect material freight get our event, the better.

Paul Silverstein

reported your in you you seen number that question the last other material and to your increase or companies of case, most have? it Got have contrary here. decommits commentary trust haven't I the that in that

Tom Stanton

continues say bounce And be one very more back the we I than couple when a vendor problematic, there's to the no, of able has to early quarter, similar had rest, to been that. problematic, were that kind I so it's mean, would but in No, we that QX. from of hits

seen QX to QX. haven't I change from So a

Paul Silverstein

I appreciate.

Tom Stanton

own their But everybody's got Everybody's own their stock as situation situation. got well.

So group saying to I'm be you can not at companies, and very similar. tell ours may was all of just that a not that happening I

Tom Stanton

point other this at see don't think any I questions. I

I today next appreciate really joining look much. for and call everybody us So very you to quarter. to forward I our Thanks talking conference

Operator

for call. today's joining. concludes This you We thank

disconnect your now may lines. You

ADTRAN (ADTN) 3 Feb 222021 Q4 Earnings call transcript