- Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the ADTRAN Holdings, Inc.

Third Quarter 2022 Earnings Release Conference Call. [Operator Instructions] During the course of the conference call, ADTRAN representatives expect to make forward-looking statements that reflect management's best judgment based on factors currently known.

However, these statements involve risks and uncertainties, including the continued spread and the extent of the impact of the COVID-19 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 costs, manufacturing efficiencies, our ability to effectively integrate mergers and acquisitions and other risks detailed in our annual report on Form 10-K for the year ending in December 31, 2021, and our quarterly report on Form 10-Q for the quarter ending June 30, 2022. 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. pleasure Executive the Officer my Tom over now Chief Stanton, of is to call turn to It ADTRAN Holdings. ahead. go please Sir,

Tom Stanton

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

closure Europe. rapid consumption deploy review ADTRAN sites, especially remarks, marked our highest operations, the This the while that performance you on of businesses growth to have. continuing quarterly QX in a following take fiber detail in with my aggressive opening Networking reducing timely streamlining energy the the will in homes, questions Following network infrastructure in and providers to new goals transition ensuring as any transition for era Service with a fiber and the have Mike rapidly will ADTRAN's agreement increasing era, Optical combination everywhere critical financial regions then satisfaction, security. industry, we and and customer to is business coincides U.S. point may it ADVA XXth. July

platforms Our secure by the This complete want service from this to vision customer on portfolio the with core and scalable, having efficient provides optical execute to us networking ADVA These premise portfolio solutions most most operations these achieve includes combination is The prem. clear. providers We portfolio maximize paired to software. goals customer help with best-in-class infrastructure, simplifying with and automation. subscriber experience through while vision. complete the

the we portfolio. for solutions, new from partial subscriber fiber results our solutions, website. optical combined networking optical reflect this customer revenue a of is quarter aggregation to that with are: cover from core and and quarter have core ADTRAN both The of -- the complete networking categories and these the These categories and that services products breakdown categories broader more A solutions. first Investors from optical detailed to Inc., categories fiber quarter a provided our adjusted revenue our network and of networking on products results Given premise our services from network. ADVA, access portfolio full span is

planning, for well underway. process integration As is this

companies customer the on by target, and reactions excited remain to the business the We two combination. are

the a stand the at for Looking few quarter, points results out. key

with one, balanced For revenue the we total XX% and business the are about quarter. very each U.S. geographically contributing non-U.S. our in of

offerings and in believe our with across each perspective, Second, our with continue with comprehensive contributed provide balanced product us this global revenue diversification of in our presence, investment potential cycle service higher growth this networking from well continued portfolio, ongoing fiber fiber categories to We will portfolio. combined highlighting a strong along coupled consolidated networks. meaningfully our our

highly providers creation mix recently our a ADTRAN's service that optical business Our to a growth ideal complement to networking, driven upgrading the new solutions, modules, quantum networks, primarily entity optical networks, areas with these by the was from in computers. diverse portfolio drivers. of optical networks transport that networking success to of optical transport and protection are sensitive specializes transport secure developments and are the ANS investment ADVA's key with look company end to for infrastructure. government of at residential exciting strong service -- requirements mix to deploying metro systems Demand fiber cyber will subscribers end optical highest we and from safeguarding category providers, optimized Internet wholly-owned, see on providers, and edge especially to collaborate solutions that from network new developed legal the solutions, the against organizations fiber ANS, scale national aggregation remains -- content access customers. Starting protect their of with scale optical large security for communication with separate to solutions. transceivers. several a fiber in serve with ensure network secure edge security Building quarter and growing the mix and broad internally strikes announced a network networks technology and demand access enterprise meets and backlog The and has an modules and This increasing ADVA large optical based of industry agencies pluggable in our a data attacks. platforms including but transmission innovations advanced requirements connecting

Moving report latest we fiber the access access to Del'Oro, to XX-gig position number market XX-gig market three demand our held port and number position aggregation two in solutions, fiber and ADTRAN PON in EMEA our market share shipments. from industry for And North platforms. for continue aggregation see the great America

for solutions We subscriber further these synchronization and fiber with our saw pairing tremendous are leading network from access that during will enhance quarter. growth Ethernet platforms all now In types. to ADVA subscriber category needs and carrier industry the the solutions meet the access aggregation aggregation we fiber ability

from X are residential the access cloud side offering the enhancements platforms. fiber and solution the is growth On managed and where passed previously with our growing of homes number multi were now our benefiting that to gig highest are that subscribers the we connecting mesh WiFi

and and further along larger company we capabilities SaaS and virtualization is broader from to our -- Incorporate subscriber and class network we growth this base offers customer categories base, SaaS into by product solutions expanding platform. in strategic area. fuel ADTRAN’s With the XXX On carrier than much ADTRAN’s adopted includes a -- accelerate hundreds service portfolio, in the enterprise these that Mosaic expect offerings in broader XX% providers software also Mosaic and much These with providers solution portfolio now One have which our ADTRAN which solution solutions ranging year-over-year. combined have SaaS more to additional plus complementary up a version of Ethernet service residential are segment. And solutions led One help latest our side, of of routers each are to includes aggregation Mosaic customer platform. switches. edge solutions the devices offering this of growth business

of exciting Looking by have is scale power the space. developments launched transceiver cost, needed deploy and fiber XXXZR that space portfolio a delivery. ideal access solution we greatly recently access a deeper pluggable ahead, optical service for coherent reducing match the and backhaul, The to network large mobile aggregation XXX-gig networking an for the is backhaul in connectivity for into a lot enterprise ADTRAN’s

most addition XXXZR, access ADTRAN and In is and expanding fronthaul space mobile AccessWave In also optical the deployment to backhaul, services anticipated energy service delivery. performance, lead which aggregation its access open of platform XXXX]. fiber the XX-gig disaggregated platforms point expandability. the capacity and of This industry [STX in mobile with simplifies announced launch the for a terms in the and highest module, point of access competition well XX-gig scale, in fiber we to densest, efficient the ahead cost enterprise is the much is of and

with premise service side, service work experience. business solutions the helping both STG maximize to providing is the users having while X for space tools advancements customer and with end great Mosaic In automate network for WiFi platforms in and small of make Wi-Fi class continue their great home success ADTRAN management providers the infrastructure, portfolio, On series needed we our software of features its subscriber to business XE, from the to and is and users. incorporate expanding

company, us portfolio are well be we growth improve optical premise both in combined a the innovations success the with Mosaic The having investment along in the will seamless from efficiency. operational this fiber integrating core This for increase positioned networks. With and further will exciting customer with experience focus roadmap platforms our subscriber during have environment ongoing the cycle we on the platform. ADTRAN’s under to management complete One

key their fiber investments ahead networks the view U.S. sizeable and in Our critical and infrastructure, deployment. as ensure regions remain to Europe public

impact us, chain outlook While the supply to issues is improving. continue

about remain And future. may will provide we these questions this following our remarks, turn things Mike's have. then financials. any I With Mike? Given background, factories, will Mike to you over our answer review of optimistic to we a very

Mike Foliano

the webpage on be Relations this The also of schedules page which at and quarter our non-GAAP GAAP in to supplemental combination ADTRAN's includes of refrain day category, XXth, discussing third release I our case, quarter, first up schedules the repeating information, affects financials end is QX ADVA our certain for on third financial a exceeded finalization I'll ADVA our reconciliations cover ADTRAN all. I partial our this also press Holdings, by compared to 'XX. discussing and XXXX be in on results XXX% consolidation Since and revenue information of I'll with comparisons time, Inclusive for today. that investors.adtran.com. which the range referencing at when Investor XX% Inc. Thank QX to July segment guidance our the network fourth and supplemental provide will the will consolidation the the came of in business year-over-year and at quarter $XXX.X of financial segment XXXX of upper comparisons. effects year-over-year and the you, note million. beginning XXXX, revenues of solutions $XXX our results. for is up quarter-over-quarter revenues, of $XXX million XX% makes to quarter our in which it, Tom, million, presented expectations and from Please quarter-over-quarter the quarter. call good year-over-year provide first

in compared introduced a with XX% XX% revenues XXX%. optical XXXX, year international ADVA solutions year-over-year, include and are revenues. revenue category of or compared compared split and by in cloud Domestic services newly QX Our revenues XX% to of about of QX subscriber quarter. to networking the Year-over-year XX% by international a of technology with are global our basis Access ago to which the XX% grew XX% portfolio and revenues revenue was about of share and portfolio ago year 'XX contributed XX% of driven footprint. interconnect QX XX% increased expanded quarter-over-quarter XXXX. quarter. and networking previous of business optical more and aggregation XX% and XX% regional by revenues The our in the XX% the segment On balanced support and quarter makes revenue up increases each, providing in revenue in in solutions an contributed and category equally, domestic

international and and and combination supply adjustments with by expenses, currency gross GAAP due one margin customer X.X by customer sequentially. percentage service one Our with continues year-over-year points two service XX% was Increasing million U.S. provider ADVA. $XX.X product offset developments. customers, X.X due to related QX the amortization be gross gross acquisition of customer improved provider and partially improving customer. margin company and XX.X%, combined inclusive to business is of chain mix points the margin is expenses, unfavorable an non-GAAP percentage diversity focus in to improvement revenue a in

anticipate we supply expenses costs, While remain freight higher component on we and challenges, managing continued fees. chain expedite focused

to Our increased fluctuations. and of were interest due non-GAAP investment currency expense operating exchange and credit gross and were favorable on 'XX operating expenses year-over-year, interest portfolio, revenues, $XXX in investment and a combination the XXXX third currency X.X% for profitability related basis XX% an of the $XX.X the attributable our in explains of adjustments, change mainly and in after due $XX.X higher difference decreased non-GAAP foreign rate our in provision million, X.X%, 'XX. and revenues business to partially expense losses. net $X.XX requirement compared $X.X significant statement purchase the and The interest. was XXX% quarter-over-quarter. that mainly of during operating expense tax realized GAAP loss annual mainly in company quarter, increasing million in million losses QX compared after volume eliminating non-GAAP non-GAAP $X.X results, profitability our related our by income improvement in ADVA. U.S. into XX% difference expense previous quarter a offset of related for the XXX% of driven This QX or market our a shareholder more by income income Non-GAAP tax ADVA the in company's of million on results million driven with in in capitalize negative XX.X% of of quarter-over-quarter. higher fluctuations which in was R&D by accounting by in income QX the was was net closing subsequent estimated of EPS favorable out $X.X and XX.X% which year-over-year of to $XX.X to the agreements, and The expenses quarter. in primarily The by valuation million effect million to revenue income Other improvement basis $XX.X tax rate, non-GAAP and the higher The minority margins. million 'XX the net million translates higher share. operating net was net $XX.X Closing allowance. margin was Quarter-over-quarter foreign and non-GAAP also to and minority the of adjusting significant to decrease on to impairments exchange beginning non-GAAP driven year-over-year is at effective GAAP offset the favorable X.X% realized Operating loss per interests

Turning to end. the cash sheet statement, million $XXX.X at equivalents and flow cash balance and quarter cash totaled

quarter, in XX a cash in inventories however, ADVA in of Trade key raw of of end, account companies The continue supply payables the lead third quarter. the quarter as to to $XXX days Net receivable Once inventory turns working our the fully we materials in process Both for component the steps the in deal and the the resulting million, operations call challenging on ADVA compared be and combination quarter quarter, for DPO our have disruptions And times. capital. as For in now schedules the planning at and DSO of due level future. XX Net $XXX indicators of IR in aligned of Integration of closure trade same minimize finalization an well. will electronic fourth quarter at X.X accounts our in partial the market performance the we to carry beginning XXX business of further XX used increase combined that guide to includes quarter. end resulting was extended given million prior progressing a day. XXth. resulting we We've July $XX.X at and first mainly second compared financials. were on will build X.X were XXXX. QX previous first the days inventory again, earnings the million includes align taken is we million efforts coincide quarter the to were a higher integration compared expenses, in quarter further which of quarter financials the also to $XXX to

on Going forward, operating revenue ADVA. guidance we the guidance and similar provided non-GAAP measures will provide by margin, to

at is between related to mind, ability differences margin as the and effects page customer the the our revenue ADTRAN's demand, results. purchase timing component expect and quarter associated of $XXX patterns Looking our investors.adtran.com. again, the ADVA Investor the from cause supplies ahead at fourth material final X% $XXX non-GAAP adjustments required in business, align the between our financial quarter available as may additional expected actual X.X%. our COVID-XX we accounting pandemic, is year, the fluctuation the operating of of additional expectations merger and to Once any of And the nature between with at projects, in with continuing be revenue With currency book customer the that information ship of well ordering million XXXX base, million. the and a large variability Relations and of rates to

over turn to we Now you I'll it questions take Tom have. any back and that may will

Tom Stanton

thanks, Mike. open questions at Brett, right, have. people any ready point, Okay, to All this to we're up may

Operator

Paul first comes from Your question Instructions] [Operator Silverstein with calls Cowen.

Paul Silverstein

weakness. revenue? that about concern. pullback, -- not question. you of seeing that talking in I weakness ones And equipment, test you larger heard were that direct to your FTTP. it AT&T raises an last coming impact future related perhaps weakness seemed Mike, Are nature. of ask however general your adversely be I from had would their let especially you directly saying any you the their indicating trust me term to others. they field it, -- the seeing suggesting test are that they certainly in and moving, in But any the obvious Thursday you're to want comments, you customers, offline indicated was Viavi week, cutback, the It a nature to night, Tom particular some I assume

Tom Stanton

answer No, no. is The no.

capital hurts that end and which take this noise, have the always sometimes in There backlog towards the pulling at you some There you. that or -- sometimes But on goes customers hundreds fact, of capital, are that shift are any worried are year, about you some will of I there's tell back customers. and are in have. the of when are forward. you helps point we time, hundreds at course a look In those we moving especially the

large no. So is explicitly those answer are noise. the in And the towards the customers,

Paul Silverstein

$XXX have the Mike, directly. million said if didn’t of to balance was the heard you Was number? look I correctly, sheet that think I chance you any cash,

Mike Foliano

million. That's right $XXX.X

Paul Silverstein

the Let envelope out it these be, I understand I debt math, it's way with want only accomplish would I plus question, not to plan do would raise for you that back all think $XXX the cash. the assumed, the to to happen take you obvious got million. remaining the XXX. probably But me the going financing no? do rates, direct guess of -- secondary, your to begs If overnight. don't interest you you've to question, it's ADVA about stated question It's only basic fully of acquisition. The do I full shares publicly still you a begs at it, that be I the to

Mike Foliano

But only not the do that to one is Well, it. possibility. way that's

still approval shareholders. XXX take with ADVA's you the numbers rest it's working its price, offer have lined a what price the them through up said, closer the debt the bit is it, DPLTA put of We in little by right current to agreement to out the less to than the do that way the now

company. it there do are to explore. with we that debt, it do will But the other earnings from the also So options to with has plan been

Tom Stanton

the to think make periods time, I the we just sure that of we'll us a we question get we to closer that have allows call flexibility. secure debt those have to as the as But comes backstop up. make

Paul Silverstein

haven't more can Any going displacement RFPs various give Huawei remaining that have awards us of already that yet have that appreciated. might of any ae the already been update converted ramping, And might RFPs the you of as the awarded? as opportunities how number well on BXC like me. the awards? the One quarterly the into Tom, to ones or be back converted, is ramp at question or that other from opportunities number you've both update secured would outstanding

Tom Stanton

have Yes, we there the a handful monetizing, it's that we may in tough word, -- really strong are that of then monetizing. a won but process coming online and that maybe are be say a

bigger I ourselves -- think we in are roughly -- countries this we are gave where are now others all Between these are new X, quarter to some four of time. expect ordering deploying. and these end than we European QX, start some the so Tier

ramp will some going But well. that seem to time take Now those be up. to

Our the platform launching disaggregated is platform. a we I it's notes biggest really we're of generation my XX-gig fiber are new in and that XXXX, allows fantastic power, just low -- that a launching mentioned density, -- which really high

So come just that's out. starting to

that is end will now. at first production for what's right start this of We scheduled year of the

of the we've lab But, started of being deployment space. the is coming the of We already online in entry fiber that the current to key kind which will really start really successful that deployment product. changes with lab economics entry lab XXXX, of some larger our started generation and

morning, are in next Tier different that opportunities very end And asked about more say other. that QX. large and So online that of of a happen, coincide will them each haven't probably let's are yet. the of that so kind or anyways, with will, are kinds are four those handful QX there been the come will couple play There over the after quarters a between there question X this -- of timeframe. in kind now which of three decided But

Paul Silverstein

been the us you options haven't remind how four four of and awards, decided, that previously awards brand so Tom, were number new can many?

Tom Stanton

were here. The modified. Europe, Tier in so have Tier six four had we one We X -- two Xs that

So that's the those really additional four. four,

Paul Silverstein

being us? relative previously four what new to with it’s shared So you

Tom Stanton

basically, No, what new of between not six, relative and now talking new four to of coming are coming to -- other are But QX. -- the I'm the shipping, right? online end -- we're the four about relative what

Paul Silverstein

Coming online revenue. being initial

Tom Stanton

Initial revenue, yes.

Paul Silverstein

different a Are sizes. one You -- any what that BT of are of Tier they of X the mentioned those they're of X? Tier four all type and type DT,

Tom Stanton

at doing are say the BT some a would Honestly, they're nothing time. time, in is the -- or slightly probably of one of right the They're below lot of as -- a because at kind tier slightly big but things DT this ones range in I little in as DT, point lumpy. it's them -- bigger they're that

next some them of coming some early, the Huawei have them online replacement have the thing, some geared of projects them of are So year. end fairly that year towards

depends down So pop the of normal back carrier, then go on it they and and be then time periods there'll runway. to up, where a

the total So hard In light, biggest in to really and DT are them. the out still there. it's BT the span, things categorize

Paul Silverstein

from assume more? Tom to range just in if it like those in $XXX way XXs not collectively the type million the But worth million at aggregate described $XX are sounds I least the you

Tom Stanton

I say know would in that far, XXs. I I the them we about Yes. think if go don't

Paul Silverstein

Individually or collectively?

Tom Stanton

someone XX Individually, X, will be a someone a they will pop when someone will replacement. to up XX, do XX big will and be someone be

Paul Silverstein

I responses. pass it appreciate I'll the you. Thank on.

Operator

from Najam with Your next is question Loop Capital. Fahad

Fahad Najam

at anticipated I bit about organic And I a dynamics? full look like than supply in what you're organic trading fourth you're we're of and would follow-up. slightly parse you outlook what a backlog guidance it you ADVA fourth as if the chain is have then given bit improving outlook, quarter? for have a One, the your couple year supply regarding your terms Can maybe of And ADTRAN that the the carrying. chain seeing the sounds out guidance quarter, lower

Tom Stanton

I QX can have at what -- was will QX mix don't we of take. think me our be out come -- Let internal stab and be. take hoping I would this the I is out. mean, much we we to then where pretty coming projections surprised were Mike a going

sure of numbers still -- getting There assuming we're not as overall comments the chain kind talking quarter. I -- issues -- really criticality will But what parts supply the mean, But of are it's are. half and going number it's are environment. ever as we this less cure been. is not are solved. specific that, still in have pretty the move are So parts by I although the -- we're forward, what but really, I'm those my of things right kind it is versus line. our most much do about We're assuming your absolutely of difficulty that better, the is of difficult, that think numbers that individual year, high environment doesn't been itself as next is of the

-- don't similar in So be. which numbers, But the your what to was we're because, very much what I expect we're to to is very saw said, on I really pretty right similar we where QX. that's we expecting an QX, from know disappointment environment like

Fahad Najam

which to is Xs, X, really about take Tier outlook CapEx discuss face -- we Tier value, your Viavi’s seeing may one Tier maybe solid. I X that still at you're relates America? if the is I primarily think can of the If Tier not Tier customer, which comments Tier in X I the X, between X little even suspect, you a and bit North what

between you're bit seeing what U.S. X, talk X, you the can in between maybe in a EMEA? also the little X So the about and Tier just the and Tier X Tier Tier dynamics

Tom Stanton

Yes, really no EMEA. in change

the speaking, U.S. sell really been as broadly no there's in X not at don't activity the as Paul mentioned that is, explicit I'm that we familiar far what customer. with all -- to change their there's no Just Tier because really

X down Our but and other excluding all. at MSO space slowed really here U.S., just not the the hasn't Tier in that,

their They've in ramping. orders So we initial of in upped had next Tier year. gotten U.S., that on top fact, just ramp. We've forecast our for X the started

So there. I slowdown seen any haven't

way If where down are year, that you on the space always the capital in next they depending the of tier go you this of down, end kind in to movements way, program. that towards the their in see or

all So from that's I And other don't I have customers backlog But aggregate, everybody's asking way, in doing to what have there. still have a the are anything less. I that I of see that we some this, by that more. normally customers change ship. are no systemic me doing material see.

broadband and how to take to these be how So it of they the tiers larger really isn't they The X, of piece lot The read quickly the would initiative Tier very we seems will the Most is recession some piece kind The a definition space think that way term, expectations. here, everybody impactful real no the X the seem rates change solid. very deploy we to a think about as near-term. seems very, government carrier that above of be people, Tier We their much be spending longer of does. going as else -- over there's -- that either. and momentum recession in solid. very, success impact.

it. longer hasn't economy we will into worry there in. and I But I that in what a in saying know now, I play haven't would not then the everybody of kind aren’t these seen and pockets recession are long-term like else if capital, general, do budgets. spend, I'm where tell environment vertical because near-term But changes of because that don't the in or So, they pockets. to capital right capital are the forecasting, about you, changed. macro

Fahad Najam

follow-up One I last if may.

DOCSIS yet So blow, is beginning are X.X to the if just you look that at and XXXX, RDOF their you funds still significant have stimulus trickling, cable MSOs upgrade these cycle. are

the thinking and you Tier are X the a resilient mindful 'XX? your about segment face -- how segments in and X you're be more of environment? Tier recession, customer X, especially but of cable So shouldn't really Tier the I should know your calendar macroeconomic

Tom Stanton

I Yes. don't be mean much I I these there first mean, mean but to pretty broadband things, if requirement. it's offend to up you think all, anybody, close much of a pretty to And overstating about is how electricity. recessions that. don't impact

a I it's piece. very So, think resilient

have pieces, watch Those there capital for have order companies to on you think themselves are I funding. for. that that betting in the ones you are are out where markets

I to on longer take think enterprise tend problems. you spending, these the you have to when tend to fruition. But type term capital in to to see budgets a a time long enterprise side, carrier downtick they the of impact come spending,

when So of crisis, you kicks the at that into think, we the don't expect or of is time important. depth yes, last will recession period recession company during resilient least financial here. the of If kind the one last I I was -- of the and that was those to remember, change -- my head, very that companies the really during the and

watch don't I have The I we'll that worry but and would it just is right the about thing now, -- see though. we depth think really to it.

Operator

Your Securities. Rosenblatt with Genovese next question is from Michael

Michael Genovese

the given Have give you ADVA was quarter? can you the revenue total in or recognized that

Mike Foliano

can. I’ll give just we percentage of Yes, you a the total.

the for quarter XX% revenue, was ADVA XX%. So total and was ADTRAN

Michael Genovese

the will ADTRAN now, income have shareholders is I is that is going pretty and conference to separate a structure to going attributable call to quarter ownership or non- change the set? the forward? And ADTRAN to -- is stay about the same mean, percentage this going continue every

Mike Foliano

details. I Did -- the details the mentioned I I Tom? mention mentioned think I there

Tom Stanton

answer. Yes. can I

to move shares. out same agreement, releases ADTRAN traded, scheduled entities. in and at from some asked delist with think offer of things ADTRAN the for there meeting and that away the of will shares. call long the continue that. able Mike, then back entity our longer to the November. to which be that point will do in other the it a over of that a now Paul have as to buy And up plan rest But of that delisting to But kind approved actually term. to XXth might there's there the earlier wholly-owned actually way we be about you be those the seen is the agreement. is of needs subsidiary ADVA, goes ADVA would the And question as of shareholder to plan our profits that They some a have So, those conference future is would be domination After they're came toward at that a work to a and I would the

Michael Genovese

great. Okay,

ADVA's am enterprise to asked, risk sort So revenues. to sort you've of optical European, ask and been of going about macro again I metro the

it constrained. I mean, seem pretty overall, be and bullishly Is pretty what think that multiple to and message But constrained. optical there from I say. you're answered in that most clearly I seeing? would most optical that's supply does areas the out there needed good. I pretty performance some you've in these analog the are chain who others parts that the specifically looks supply that supply of mean looks the Nokia Because play for the like

companies on networking have than do how So any larger managing space? of some you maybe better the in insight the they're optical that

Tom Stanton

that I that I I see would are other say better in it specific optical ADTRAN general, majority we in is issues. of to the players They space. collectively managing still and think not some issues optical. than the the The see the have of

think processors, logic, key processor we through optical I key has have the now specific have these processor been some devices power biggest have specific issue they of kind at And they're there aren't are key And specific some and issues. quarter. kind my are of some are very this quarter, that first this it which typically working supply, I very still issues that processors glue have space. associated -- to issues some with analog of They then still all, processors. they're there

don't issues think or ADTRAN the deeper, the on that So seeing I different the ADVA any that on side. than beside the materially we're issues

Mike Foliano

combined they the affecting gross still company, margins. in are our And

to margins, impact gross freight our and and X.X out nearly somewhat, I improving elevated. to it tried still variation, been the although was it that percentage purchase lay think on is fees have price I've was costs the past expedite that in points due

through is but are pretty of on that the timeframes other paying of flow be costs that the is to a spot bright that direction, the there’s Now, still we're components those freight moving so to obtain needed. in finally additional able good the far right amount ones,

Operator

is Company. Your Ryan from Koontz Needham question of next with line &

Ryan Koontz

is on your from upside is one came And where ask it your solutions that sounds like outperformed from remarks the of helpful? maybe alleviating you of and be constrictions? quarter going the put Wanted kind Tom Can product takes or of that you forward the of kind related the products commentary the and some supply chain make any would is. is different demand think more how subscriber kind It about areas. about

Tom Stanton

more was the notes needed do. network, to think on probably subscriber and actually work customers that I customers to I most sure mentioned quarter think obvious turn -- the stuff we that reasons. area needed had to network front it's I we where last into that a the the to really make get ship have saw important to to me, in solutions I my get that but on for We of for to once be -- them employed, area focus have we don't

focused good that really there really and on quarter. are we saw movement So this

I We've the -- time. for a year-over-year increase in that had think far long of always kind biggest we've was company. that So of for by backlog the plenty had area

-- a was of significantly I it it -- to of it clearing matter moving but matter to the some in seems than more right So was shifting demand of product space. that the direction and strong, help backlog us that still customers. would in us the kind of of call anything a was call a number out still

Ryan Koontz

better this share able in some of take And ship? little where are you case, able seeing the execute you to to any your able a help than be any in and share on side peers to kind of cases may

Tom Stanton

share you Yes, in win But way to little a kind the Europe. but it of been maybe you business. is is the OLT general, share the in as that given share different bit is the the has happens really way happening,

you infrastructure with move then most as RG going most your many to forward they're if not well. times as the times So win and times your piece, ONTs

matter So we share. have and of of just share that it's being winning, monetize this kind been us that able to a was

Ryan Koontz

basis Jim's supply chain, XXX hurt? And earlier comment Mike's -- about from on clarification or earlier and just a quick points such impacting that your expedites quarter

Mike Foliano

correct. That's

Operator

from question K. next is with line William & Essi Company. Woodruff Paul Your of

Paul Essi

long into on you can XXXZR this all? maybe know you secondly, the also this, going the edge going into I this who given spending? And how competitive And you that you bit 'XX I was And first the jointly that might give larger security then core expertise does resources I core have focus more of if Tom. on the their And in selling and also that for is a to it down about the players I some on be encryption wanted much And a fit the customers affect to they've put And -- competitive about mostly how know concentrated what to where also, that in their as space concentrating the little touched and of revenues the ADVA’s little mean position on to? you may I developed that and not ADVA’s follow-up. a wondering if that as area, that a haul. from could talk AccessWave from us the well? to have position. Maybe edge little 'XX? bit color bit touch their basically

Tom Stanton

That's bunch questions. of All a right.

piece ANS cover So first. the me, I'll let

was ADVA actually ANS is Mike? ADVA… it stands for -- what So,

Mike Foliano

Security. Network

Tom Stanton

Network Security. ADVA Yes,

U.S., from is a the order them combined group here approval happens done what German So a is to The negotiation by German company, different of to that the still that. had the that between has make can be government that's for coming of being not companies, continue right And level government the by way. use from something there’s of wall companies, countries. government the used piece different although sure when kind technology the being course out that was the this with to both of what’s we technology real to -- for that entire similar security in to the have that by several used we in

So to allow to to level a -- government continue customer, which actually continue for important get of this sales. to means actually be which another able was and is that enhance is the development, Germany, within us to security German, us a an

good well. a in that profitable And vein. So it's we over very differentiated security move, it's time, really a very they as think move have

to as their we're they it relation kind last last augmenting is our what base in they were that The reason is out merger, they kind -- able just at the hotspot they're aggregate but ADVA. they shouldn't the past. it where to traffic. have a requirements for that exactly different to I to and kind something networks, relation looking streams is point. for where fit was anyways, us In of good I optical. up ADVA's part of streams mile sense transport Their as customer and at had this be to been, as increase that a happen But of tend revenue because finish it efficiently these mile -- think network mile networks think is them metro things flow in that's building of because need finish capacity different this of long open say those it out last kind was go, that So was and ways of think I was focus I going to we edge to wouldn't technology has how of these of made the

opportunities product. we the other. And of selling sweet each was. seeing we're both dovetail have that's kind feel the good Mike, very across that's a They spot where good information you And their product, where where cross very companies they on So competitive XXXZR. about already at. get a

Mike Foliano

that next Yes, is product available year. commercially actually

So as I what providers, point, are the but you will the that as tell in toward. revenues this MSOs market really can't for it's targeted as fit at well service it

information we'll come have as to it's more on So that released.

Paul Essi

and June. talk share little you to there maybe anything going, you again, is some Is give SaaS a X.X can million that's us us? all question, of something subscribers. X.X hard The the were numbers? at million, that on end that other of at the with flavor Can follow-up I think at that you how like

Mike Foliano

subscribers, the you think me it. that we for let actually numbers the have SaaS it about way in put When

has been So was it year-over-year you about been XX% our as SaaS to ticking fallout carriers, that's a up that the can rate And along. right? think carrier this about And quarter. SaaS subscribers growth SaaS

typically their network. coming So fact, in and carrier customer carriers the adding it have new carriers you SaaS being plus right, older more because online, SaaS you because growth, outpace, subscribers will have growth will outpace to more mature customer

Paul Essi

to focus up number have you that that to actual on your available was their that? customers I on the have subscribers. actual goes Do Just paying up anything the signed trying of list? the customers

Mike Foliano

million. that, I it's before. that mentioned before, Actually, have over X point that if I don't And of know number, rate million number front in excess know Mike. at that you closer and but I have don't million don't I me. growth I X.X this it's in have I that mentioned on well X it's to

Operator

line of next is Tim Capital Markets. Northland from question with Savageaux Your

Tim Savageaux

I of sure get this expect my question. I want not focus I that's organic make of if one make to you don't on forget tax seem front. main kind But ADTRAN is to of around. did to sure over which I bouncing want the to it. want rate the But where address I can in time, is go Where kind you there, kind

and subscriber year-over-year. saw that you expect expect normalizing address guide, you you As has at the both Wonder QX? you're access between break been and the then And could really just supply Or it side an guiding look ADTRAN there you down bit, a aggregation discussed aggregation how growth down dynamics the down that a before, quarter? -- do looks do access on bit sequentially as was if any driving like you actually subscriber the things side? up from the on for perspective. growth, organically, to catch Is like looks sequential and in

Mike Foliano

we the then to piece. start with the other Let’s tax move can and

estimating won't year, -- the non-GAAP had rate going high be we've for would will right, get we you're a this we you lower quarters to in so on we what that to teens, rate lot that XX% sub QX, that probably year. forward be have But previously, And an gone it's about bounced going I the somewhere teens, which the So think saw I what effective expect is little saw a through around basis the there in to something tax that year, as in rate has the to high for still QX. than elevated rate our QX. for a tax said that XX. probably similar

look something the if moving to in end XX%. the to lot year So low probably with model a it I that's into next the at and out, better also total that you as think And try off under up actually again. XXs you at years, then adjust you're somewhere just

Tom Stanton

as is I In QX. the which down a guidance is probably see guidance, you the mean basically us relation to know, you typically, flat, if follow we

in I it's lot like there. fire said relation what it to line we have the much In aggregation, we pretty with irons a So expected to of in be.

to get door, We have up of us door. ramp the solutions wrap we materially out the should of pieces lot start end quarter. grow lot at of a backlog trying for to actually that would subscriber the number a have of us, the CPE base. the allow critical up which XXXX, really still also which And a is this that a from out this We're of then kind

that point. explicitly we what aggregation mean at look to this you I get a I So, of is ways going different But there. have like number can't tell to lot

Operator

You're not from Paul Cowen. next question comes Silverstein with

Paul Silverstein

at done from from enterprise bulk correct wrong, I that I to if of revenue I’m questions historically, consistent back being headquartered of believe I sound I good got other two think Europe in Three it ADVA, being have any may. me job in that with ADVA, of in your ask, they macro signs if risk a to questions. Europe Europe, but going concerns, it them about I doesn't guidance, Again, got XX% weakness? having most their historically. derived with quick and be macro. from European would One enterprise think And then a would

Tom Stanton

I won't no, you I a lot Ethernet it But you, product. way you mean kind will And at No, be the we seen tell impact won't of yet. is just of no, that any haven't look it. that tell answer their impacted. from that I is

Paul Silverstein

year-over-year of the was increase, adopted? that number, your that carriers, SaaS the was service to have customers XX% your provider the number Going Mosaic -- back of you number gave revenue that SaaS or

Tom Stanton

That's I haven't mean, that. subscribers to that. do we done -- correct. down And just We breaking can’t is this

Paul Silverstein

And I us with terms can't the assume also share we of by point? assume this are revenue, very well, extension, you numbers I at if spoke that -- small in

Tom Stanton

If been to product the software two and -- number, my solid be last be service going far years. don't breaking to it's includes has start the and just think rate where the But numbers can growth with getting we those maintenance, too I out, is at you which so I for actually number look software to contracts stability, associated The and we're kind quite and them. line I for are see there about there mature sure for confident before place looking be that of and in that with term. rate to I I'm start yet. the there a -- longer were think we I'm and as key growth where want I looking making -- don't

Paul Silverstein

a less Well, quarter? than $XX million

Tom Stanton

No, no. Of dollars?

Paul Silverstein

assume… Yes. I

Tom Stanton

over our -- software it's Yes, number. SaaS in

Mike Foliano

that Right. over It not million, just $XX but is is SaaS.

Tom Stanton

Yes, that includes software.

Mike Foliano

category. software whole the That’s

Tom Stanton

over million. Yes. Software $XX and SaaS,

Paul Silverstein

way came? a than you I And is supply you right. impact point like mix. on all last any actually will in margin the which more question, you how revenue part relatively the last different initial little assume if to is my move absolutely but put in severe was a on than things on like notwithstanding of given the thoughts bit you can have what what but basis, being whence growth you were solutions Mike I there's got understand to effect And the has equal. your using correct significant of But in increase impact all the quarter connection add how you of think your I better, seen chain, to there. refer be is the the up U.S. you strong one would year-over-year you in most, I dominant the to in a rebound would a low question. if more of the nice that you happened But the more importantly…? remember any from products subscriber ONT ONT progression, But And lower big All margin margin getting lot guess recovering from encouraging me think gross in strong I far non-GAAP, is, negative platforms margin I for of share gross stated counterintuitive, a fast I'm terms on recovery for the I wrong, or get in is now a I’m their software looking being also including hit. question structure which forward, with margin Mike, revenue, as insight on saw. growth, that structure. drag margin big could another low-XXs back

Tom Stanton

you it on has if purpose. pretty then -- subscriber some don't margin helped with we the And that CPE functionality And for the from yes, to able me is sales a that, I decent gross things including was would also margin typically secondary what with gross been to of more that low which question, half a very margins impactful. piece, on tell Yes, by absolutely helpful. good come is is want general, yes, up in like which a they first a part. Mike, perspective which quarter But solutions. ship the your know were pretty was gross I the cover that we insightful. first you part there's are Let fairly on software associated help, did mix. XX-gig first make your lot second a of is the one of

Mike Foliano

Yes.

of mix, say but that some percentage headwinds. points Paul, still me heard So you of was X.X it there's about

X.X when reported X.X. at I think about I recall, I if last I was quarter, at

direction. are improvement freight rates and So has it's to definitely biggest moving free far and starting right logistics, things starting where are to the fall up. so been in The in

but extra paying I you Tom big heard issues to that to all as have and say still far some fewer there's be worked. be As fees components, get are resolved there able issues, to think

be in we're payments hit fewer the So right and I able fewer seeing think to the of overall, broker buys components. direction, moving to excessive and that's

the of some still that’s balance Now, sheet. on

was costs, quarter, go. direction. you I -- have purchased ones a FX It's percentage quarter bleed gross in prior over some just quarters pretty We that right But and the for issues the less tried in to that will look have one? will of think as if So different headwind, it at higher than may at you off time good little the we that. that had on last amount the we almost maybe moving but the bit for do say we've that time improvement X in what and a that's effect just on over points, margin saw

So on the the one has I flow somewhat at think seen stabilized whole but this well. that the over think strengthening point, as trend last we've that I downward with quarters, dollar

we we're I just So manage all how learning better think go. to as it

Paul Silverstein

Mike, this didn't give but gross margin on margin, gross thoughts in I QX? takes, you puts thoughts any know can and given you all whatever generate any for guidance

Mike Foliano

stronger not a sequentially. be think too much…. expecting just I bit it I'm may

Tom Stanton

Think are we about range where of the of it same now. kind in right

Mike Foliano

barring we that think move back as we question and do happens. pretty was, of any XX, your that kind other next in we to think sometime XXXX continue craziness and when to year I I direction confident get will go in Yes, I'm through

Tom Stanton

the We access pretty should though even still right, good, was we have SS&E else not aggregations side. All anything same get on it's the what Paul? and as some mix improvement

Paul Silverstein

to to expect statement, Tom low-XXs clear just the in at to back you my to point get be some 'XX? relative

Tom Stanton

answer I think he that. I'll said Mike let improvements.

Mike Foliano

Yes. think above. slightly I or XX-ish

Tom Stanton

to I with chain, happens direction. Yes. we're this heading mean, what the of right definitely the some supply but unknown in

Tom Stanton

we At this I past are time. point, see

us joining talking forward you Bye, we So to call everybody for to and look appreciate time. next bye. our I conference this quarter,

Operator

This gentlemen, today's participating. and for conference you call. thank Ladies concludes

You may now disconnect.

ADTRAN (ADTN) 8 Nov 222022 Q3 Earnings call transcript