Earnings call transcript Q1 2023

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Operator

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

First Quarter 2023 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions]

the that ADTRAN based reflect currently of make expect on course known. statements forward-looking management's the conference representatives call, to factors During best judgment

effectively supplies uncertainties, statements risks mix, development successful components mergers and and logistics for acceptance integrate competition and report forward-looking to These other ability XXXX. XX, risks such these products, on XX-K market with materially differ costs, and cost, our or which for the the report detailed statements, our on for However, of demand, in freight involve made be and may results XX, ability and component acquisitions, manufacturing channel March in risks call. to of the products, December from align those customer product ended to including and during and Form efficiencies, quarter in market the our ending the XX-Q Form uncertainties annual the could the XXXX, quarterly actual year cause

found presentation Relations updated is on Investor investor The been download. available website and for has ADTRAN

to now over turn go my to Chief ADTRAN Stanton, Sir, the pleasure ahead. Officer call please is Holdings. Executive It of Tom

Tom Stanton

joining Rob. earnings everyone. morning, you, appreciate for We XXXX Thank first our quarter conference you Good call. us

Holdings' With Glingener, today is also ADTRAN's me [Christian] CTO. today and ADTRAN Dopfer, CFO, (ph) is Uli joining us

we'll Following my questions any take that then performance opening you and remarks, Uli have. detail, will financial review the in may quarterly

the what going in of I'll forward. summary quarter our start views by a offering the happened and of market high-level

category. As quarter Subscriber revenue, of in were the I impacted the Solutions slowing in predominantly results mentioned by our pre-release, our

our these environment. the during our driven lead this Subscriber the by combination economic of reduced times gap, was slowdown ability broader the scrutiny in levels the to quarter. a While we to in chain supply cover the with believe inventory did constraints of have and in increased result customers, market Solutions of We uncertainty backlog hindered challenges overcome more-than-enough

the management inventory have networks, us diversified context. fiber do term, footprint for with let expect With background, growth the Looking near longer-term while some to high we higher our customer the in given additional impact provide fiber continue ahead, me that progress made we historically unchanged, demand to and remains base, capture. our outlook

ADTRAN a fiber upon Solutions, ultimately ahead. years fiber are to Optical and planned in Access network comprehensive build-out has which categories built key these positive Subscriber the a the given pillars: built Aggregation Each the three networks, investments outlook portfolio to of & have of in Network continue fiber Solutions. Solutions, networks tied

we larger we are cross to to portfolio. also addition teams market positioned cross-sell and synergies from fiber trends, are portfolio benefiting as and growth In integrate our our better processes

we Solutions, and this In had the regions have Optical we experienced quarter. back-to-back Networking quarters, growth across in past all record

Europe. has for this Our been portfolio strongest region

been biggest now. With many selection the the strength Vendor space right eight opportunities in we company, carrier in of have involvement highlighted metro levels of beneficiary the in activities share from large the remained shift away combined their highest our vendors. at by years, optical high-risk

good shift. progress see a selections shift wrapping transport being customers in by the high-risk in activity key Europe, accelerated also segment, be continues elevated away vendor large ADTRAN is In this to in to in optical in and new while beneficiary Like area. selection we the vendors market that or from our positioned investments large Solutions, this Aggregation six & carrier our Access continue carrier well

been some was to existing in fiber customer -- our have -- CapEx has there publicized that current there's notable customers one plans. reductions in notable large Europe, fiber Within access their been

in others collaboration with continued this We and these customers region.

investments this in some long-term acceleration in that this an their network deployment going these into plans we long-term cases, place, we've see fiber reinforcing in remain fiber Europe. plans that seen and We actually year, in are strength on in assured

In service have we XX access the We our the fiber access market, platforms, fiber new platforms, by driven globally operators continued quarter-over-quarter added operators reinforcing with including success over regional market, XXX our in footprint. we new this U.S. provider now fiber deploying had growth growth our XX% quarter. in capturing that

Subscriber the we during experience did high quarter. On volatility category, the Solutions past

wholesale as continue However, The services. networks, this networks shift fiber we new upgrade to higher to growth. return business to higher-speed footprint multi-gig and fiber same see customers true more XX-gig for and category WiFi expect to capture access services and that to fiber is we

services and a portfolio networking networks. by that fiber operations metro premises deployment software simplifies with the and offering engineering, spanning fiber associated to comprehensive ongoing core is complemented This the customer these

the side, Mosaic our XXX last for the continued XXX from adopting service providers see end applications we demand One already of over quarter. SaaS at On software up customers offering, with

the uncertainties. long-term has summary, networks fiber inventory for economic In despite changed near-term adjustments demand not and

new -- has capturing footprint access the transport benefit these from positioned in our support including well in networks. software for as as infrastructure, progress long-term well us and Our platforms, to and fiber investment both fiber optical services to infrastructure optical

combined and processes. to grow ability teams cross-sell customer Our our improve portfolio our as and continue to sales we will our base further integrate

in confident as outlook, we the our market. remain the in in we long-term will spending we traverse While period of this cautious be uncertainty

as improvements and stated our compared to expenses this We expect in last. previously synergy track we quarter are on meaningful see to with our goals, operational

the a on Uli, has I'd of teammate. I'm he things know, has CFO all We, of dedicated, to Mike as hand the role our the several new we from -- transitioning been for and contributed, you to very, like years, of been you I to Before with I years very ADTRAN. Foliano. XX years thank the Mike as company really that a that into for he call he's Uli. very forward Mike and best many that of all Mike role over been Mike, are with just wish his him transitioned grateful extremely all for And service moves -- course, for professional, life. fantastic

the to over we'll go up turn And have. any that, open with things financials. to you Uli going calls for After may over that, I'm to

Uli Dopfer

you, Thank hello, Tom, and everybody.

expectations results XXXX. our refrain cover the the will year-over-year which full quarter I our case, consolidation financials, quarter affects is repeating Please a the results. will discussing the effects comparisons. I results for second comparisons our ADVA XXXX note first XXXX this of Since QX provide year-over-year the from include when quarter of that and consolidation final of

measures be referencing by is revenue press I also financial available with segment in most Investor the on information webpage our investors.adtran.com. and and directly category, GAAP will Relations certain our non-GAAP reconciliations to at information comparable release presented which

available investor the for have we addition, to presentation updated In the download. which site, is

all in U.S. are presented dollars. otherwise, Unless financials stated

to in down XXX.X% $XXX.X QX X.X% came revenue revenues. the million, move XXXX Let's up quarter-over-quarter. at year-over-year and

range in As of lower million our million missed by of X.X%. our $XXX end the already presented guidance to $XXX pre-announcement, we

segment QX Solutions and for XXXX. XXXX of XX.X% QX Network Our revenues XX.X% in accounted in in XXXX XX.X% QX to compared

XX.X% of & Services contributed compared the previous XX.X% segment Support XXXX in revenues to year-ago XX.X% the quarter. Our in QX and quarter in

revenue primarily inventory ONTs in inventory Subscriber quarter-over-quarter our and management was and Ethernet by for customer driven Year-over-year decline the Solutions in category.

was XX.X% up quarter-over-quarter. XX.X% this While it was year-over-year, down category

path all our limited constraints also product to Supply clear categories. to across backlog flexibility

contributed & XXXX. and increased XX.X% performed X% to Access share Solutions XX.X% revenue was Aggregation X.X% as QX Networking However, and was Optical expected. Access by compared & quarter-over-quarter. Networking year-over-year category X.X% was of Aggregation up slightly and revenue and Optical down

two grew XX.X%, revenue to or basis, revenue revenue XXX.X%. by more domestic XX% regional made for of quarter a revenue year-over-year, had our and up On by international XXXX XXXX. increased We domestic QX. revenue of QX similar XX.X% first customers in QX XX.X% International revenue contributed revenues,

the quarter-over-quarter basis year-over-year of year-over-year in increased attributable margin QX non-GAAP credit gross was The and due an increase previous quarter. points purchasing compared inventory sequentially. margin transportation XXX gross primarily basis and to XX.X% was points to costs. XXX absorption lower decreased well by reserves as and improved as increase our is decline The to

product addition, negatively to unfavorable contributed customer and our gross In margins. an mix

Our non-GAAP R&D revenue were revenues which costs XX% higher primarily XXXX. in by operating in increased XXX% compared revenue and operating million, QX expenses $XXX.X to labor quarter-over-quarter, XX% and Non-GAAP of and driven expenses. of increasing XX% were X% QX XXXX year-over-year by expenses of were

operating QX the positive base. negative compared a quarter. an was Non-GAAP in increased previous profitability the which million, X.X% non-GAAP operating margins volume at was cost in in low X% to into revenue by driven and loss translates decrease $X.X X% and XXXX The margin of lower

Non-GAAP Let that adjust cost expense. to striving lower emphasize driven our for the was significantly and spending. accelerating mainly by $X.X expenses our me are interest negative by other near we the and to higher discretionary base optimizing term revenues synergy efforts million lower-than-expected in

and $XX.X non-GAAP or tax non-GAAP $X The XX%. the the the for XX%. company's jurisdictional was adjustments The first of million was during XXXX of non-GAAP was The quarter the a driven of difference between primarily the GAAP quarter. mix million company's by GAAP or rates tax provision benefit

was net This in out Closing a this the adjusting $X.XX in will company shareholder our loss interest diluted the net EPS loss ADVA. $X.X share. calculation later minority of after the details per non-GAAP of per $X I statement loss for discuss million attributable results to million call. income results, share in total and of

Let's sheet. balance to the move

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

cash flow negative working and -- cash earnings to For for lower million flow the the operating operating fourth $XX.X quarter, increased due quarter, was capital.

Inventories compared compared the to quarter-end, loaded were at million in drop quarter, $XXX.X QX of X.X% in in million, accounts payables to DPO XX in were resulting trade unusual at were end QX. QX XX in which quarter. XXXX. the XX receivables prior resulting million X.X% days of of $XXX first DPO to the an Accounts the of accounts turns payables quarter. in Trade explains was quarter, and XX DSO XXXX days resulting the resulted back-end in in $XXX.X higher compared previous in

and areas of free generation flow our management capital cash focus is during one Working XXXX.

amount XXXX, should and we second the in expect strict year. results that improvements with cost cash the high operating flow XXXX. turn half in of carry continue a expect during inventory around free Paired in improve we of will We controls, to to which

on registration and and and cost can XXXX, in January DPLTA synergies. ADTRAN of the revenue fully ADVA integrate Following now work utilization

their annually for payment today, ADVA to compensation shares, $XX owns ADTRAN DPLTA. of shares into to €XX.XX cash fixed the of minority a minority or tender ADTRAN of ADVA which the outstanding of million. from of for shares €X.XX results still XX.X% compensation the recurring duration As receive shareholders option have ADVA

As of were XX,XXX today, shares tendered.

to complexity a applied On and costs. prime ADVA general from change April to XX, segment for standard reduce

our focus flow of Our combined both is integration cost as and companies, cash a priority on achieving the increase A offer free result, generation. of on delist potential a XXXX. targets not successful efficiency for with is operational

time applied. the XX, previously a DPLTA $X.X combination of of on a QX profit cash compensation is QX shareholder January prior $X.X loss the million beyond, will cash the the accounting the or the was Since to percentage DPLTA recurring million. and approximately of compensation of of method, for for only the minority registered be treatment applied adverse recurring In XXXX plus

in XXXX. we and and identified, revenue track Quick in to XXXX and cost of already synergies. be XX% allocated remain synergies them to on already achieve we cost cost to update and communicated logistics. synergies XX% purchasing expect expected synergies of approximately to achieved in sold XXXX can $XX.X are the in to We as $XX materialize million which to previously, of million, are committed be year. synergies referred realize cost of cost Further, on during synergies XX% were XXXX.

Now to guidance. the

supplies demand, component of additional business, related fluctuation large of adjustments large purchase the of currency base to of customer the with patterns quarter as ordering may required expectations well nature our book this with (ph) rates from cause the our to differences of actual align any ahead exchange year, and second results. Looking associated between in revenue the a our to and ability combination the the business portion accounting the timing of variability customer [shift] projects, as the material

to chain integration. focus inventories our We to next expect cost continue moderate on the backlog We decrease the the semiconductor further and side, to our base few and in supply and over anticipate optimize our supply quarters. merger improvements

efficiencies operational areas and growth. management cost investing to in on key focus while to continue will We drive

categories improvements that we the As the products our that the products the to industry reductions of already all both across backlog and believe CPE with is inventory transitory, some across and customers we of we the and expect oversupply quarters. coming see stated, Tom in experienced to

demand and we networks. catalysts to sustainable new ideally intact, the The fundamental be ongoing due remain remain and for growth deploy positioned growth upgrade confident to to fiber

to for of in we confident and non-GAAP regards XXXX and range guide near in of management are we between operating we our X% $XXX term long-term remain between Consequently, revenues. customers. expect our margin to While to and due of $XXX X% our tighter million, quarter the outlook, revenues second inventory we a cautious million

is ADTRAN's Investor Once financial available investors.adtran.com. at additional information Relations again, at webpage

back your thank that, now Tom, you, to with questions. we And turn over and and I'll will take

Tom Stanton

All open up Rob, that, Uli. we're ready right. for Thanks, with to questions.

Operator

Instructions] Rosenblatt from question Michael Certainly. comes Securities. And your from [Operator Genovese first line of the

Your line is open.

Michael Genovese

mean results Great. and Thanks so came I infrastructure, terms the -- broadband for business that. the of Tom, infrastructure mean, optical, I good. of in in

to I growth in think businesses. just double-digit forward-looking trying to know commentary revenue for I'm your understand morning low high single-digit So, XXXX. ADVA those to this I revenue guided

about expand the -- there give broadband And about in of U.S. the that? on some guess, infrastructure you and So, and in color please? I you're could on seeing on us comments specific talk what carriers, macro the those Europe and earlier maybe you made portion,

Tom Stanton

sure. Yes,

you're right. So,

infrastructure quarter. it's clear fact are. we very where pockets trepidation As inventory business, good The have is a not the that as far had that

think of is I that levels their on are that things down. nervousness. two creating inventory are people So going bringing there's kind One

So trying they more buying others. or have inventory And to they the effectively supply crisis. chain inventory than during in been stockpile areas, certain stockpile inventory

different start to that customers. that gear, have you one thing a XX So, not at. and on or the CPE, in was to XX did is built, general, a rang think probably actually CPE about and you -- to I've revenue thing we've myself And that you one company, you don't carriers, network want talked the because different area talked generating as if through not is want of tens how

that's you but can piece you one So to forego. forego other don't things, always want

buildup everybody inventory that carriers, So of general, was various different in levels building but was inventory.

was that the most think exacerbated. I the one that was So,

other thing I to lead large that, where people readjust not cautious the ago. from in being the business, may they are areas six are were to inventory although that the builds there of think we're be materially of times, also which going though months down current is

months-ish So, used -- lead they're probably four to to something that. excuse to like or XX be three weeks, times maybe closer me,

So also reflect inventory ordering will shelves, not that lower more lead but only do have now your time. on your you

where fine, cautious if going field, to burn environment us that actually make inventory wane with just the situation. right? burns just how need of impact mean trying now plan to manage to how the a we mindset. because and it to out is figure quicker, right problem. for do much then and I they So that But actually an for we're that cautious need inventory no as And off in gets a much through, they little adjusting just off, have this position to we that bit inventory be that we sure company murky that through

transport, on week access it not and slowed up. fact, lightened here Underlying in activity demand down. optical the would right has say, about talking really has in nothing both going the we over last I were fiber in and in so or now Europe just

notes more, when on optical highest in I transport time, the it's very, fact, -- there mentioned last maybe really cycle. think probably big long that a so in upgrade my we've I is seen was years XX very or the In

the going specifically impacted there's them, saw in to In The have U.S., about hasn't hasn't to I activity And of a how couple I slowing of would carriers more well. They adjustment Tier thing slowed down that pockets still mentioned U.S., So you changed Europe of would in Europe, good the note the say people in my most we none be have and I a they're still that acceleration Xs in quarter. some what well. as have some are of seems down. on similar, slowed been bit. where so inventory been the a than plans going there although U.S. say less are seem down. in had it's the major

Michael. hope I I don't or not, question answered know if so. your I

Michael Genovese

actually. did You

extensive I then customers point, of more inventory piece at I ask the the well. as every But do that. I to on want quarter the really CPE is on hit on follow-up in an You that follow-up answer, came was your channel, The that and attention question. this and to want to appreciate so you one the

there low? it expect WiFi really think very you I some is, like from don't that XX already to could but fair? or the be CPE part go It for It I'm might weeks may worried ballpark. of -- and just routers, expect those like went call times be other there you're about much this inventory? don't the more the could on more about that lead say of go get weeks, if now. XX eight commentary was sounds about know are hope seems to they roughly to worried that you worse. question less impacting in that mean, not Is you So, you but quarter, -- my again down I to I inventory

Tom Stanton

inventory that's think Yes, -- I that we've the checked true. levels. the mean, we That's fair.

gets I because it we the projections of kind it beyond But it year that quarter. that's think we're to kind time up until -- now, people have of and and nine revenue we back the six play have take level. -- typical last of guidance to bubble. that right piece right some of out And levels. at some people our next are actually the would think -- It kind yes, that's that that's for to bubble months that don't tick getting back gotten now, projecting take gets we've outlook biggest is variants will some subscribers before to its to for there different our so to many is have others. And is what outlook -- we that this But slightly be. some actually our

think that. And the pocket big see we quarter. So this improvement. the we end at We will of hit

yes, So, I that answered. hope

Michael Genovese

this And we times. lead level, the Great. supply Okay. -- at margins Clearly, is But see then, good. very supply better. revenue aren't getting

-- We expect these expenses of excess to expenses go some away.

the both gross So see in lower should of because from expenses? chain improvement half the we year, now revenue right margins meaningful are where back but of supply

Tom Stanton

me on Uli let that. let Yes, touch

Uli Dopfer

Yes.

So, also course, scale continue economies We've down margins in of then, your year. that we first gross are the will and yes, seen assume answer and assume we as half the But customer it this expenses quarter, chain and to speak. of of we obviously matter question, increased And to a in drop. product supply it's the going second of mix.

Michael Genovese

you. Thank Perfect.

Uli Dopfer

Thanks.

Operator

next And from your George Jefferies. the Notter of question comes from line

Your line is open.

George Notter

guys. for very business could -- think products access right are year? I those business mean much. were they, the you had The in us mentioned Where excess lead in give you wanted summer there's a ask Thanks then, you Hi had those guess of quarter. well? sense areas that strong possibility fiber last to times I quarter. strong a where just now? And the in I some do business the just build inventory about optical of of say, a as

Tom Stanton

some think I is possibility. there Yes,

times. let start with me So, lead

say some buying times, those typically have that to those in complex, tended are times chips. general, chips well. lead you because So very to And lead those then, chip XX sub-assemblies, weeks. they as higher cases also the where be priced in out can extended you're most optical tend And difficult situations, using

this of a over is, little figure to XX XX weeks. weeks, thing out cycle the kind at harder that's does lasted so bit And okay,

a Yes, year say. not ago, or So say, forecasting say, of year still XX I'm half a you guess, talking could were about, let's -- second I second year. weeks let's so that. out in getting last we XX even just quarter weeks. delays were ago plus, We

for some XX weeks we're when we ahead. in orders, out forecasting But placing XX were weeks cases,

have start seeing down; kind that are think would better. is where times would time one, that you because orders of two, things. hold in and getting better it right And We really that lead we're still There and now that place, issue. materially are this better I say we this few the benefit chips coming some complex in of that's a was of But general because last those So, chips, up diminishing. are even that's would lead than getting that today these times quarter. still

getting just I did that's your -- don't So question, better. George? answer I

George Notter

just times I'd about your be lead are Yes. product now... where curious

Tom Stanton

Yes. They were...

George Notter

...for optical OLTs? and then

Tom Stanton

would were so Yes. say, for I we asking XX weeks.

getting of commitments six solid solid we were out general, eight would we customers. and getting to that constrained, head then general, top is to are There that. four flexibility commitments let's my two to now period of say, would I pieces in but some kind I are are with in think off probably to beyond months, there just it's some -- I and this is eight got probably That's, still general, half. months, six month say, that still in in you down to general. say the

George Notter

Got it.

just Okay. look also, the What in you I few last the And started doing. shipping product? that how like customer know for then about curious I'm that are XXXX early months. product receptivity is Thanks.

Tom Stanton

Yes.

few here. have we shipping we that build. a So, started Europe, predominantly a bear still to in is shipping It although started

-- still are some production, not we're mean we as quarter are full We We well. at shipping. but last shipped I

stress of to is. And a and We've is on got we're the we're demand yet, complex process. how improve So, product right meeting continuing yield I that can't now, there. a the that enough we're it just refining majority you that. of getting not operation down but

George Notter

Thank Great. you.

Tom Stanton

Okay.

Operator

And question & Koontz the Ryan line Needham your of from comes next from Company.

Your line is open.

Ryan Koontz

share in programs? kind but impacting your color of latest helpful. not be on the if you and Thanks could update regard question. whether government sounds initial hurdles that's that would you programs much there's wonder from rates in customer like your subsidy It of that, view interest of and Thanks. for much hearing terms European Tom, any the you're and can on us comments, pushback U.S. ROI I

Tom Stanton

Yes.

while, have some but I people questions tighter and tighter about questions spotty builds sporadic we're that we say when of -- -- when of spotty, lead conversations times. that go inventory, once that you asking say list planting have of Every into comments you these the that one and hear we've a we people a there's So, covered. is

So then get on capital kind for would they an getting impact kind very of plans. capital they're say basis entire project plan. of kind and kind we general, I the that's of of heard a In it's still build versus just project-by-project sporadic. shortened and executing. periods then When the haven't the and

We do big a expense capital couple overrun. about lot have where have of we wasn't capital or more it of overrun -- instance about which cost, plan, capital talk of one was capital because really a there's

As I mentioned in my comments, we've if in it. got just that, accelerate solid say and big reassurance And I that that's Europe. anything, will not impacting the our program to looking plans they're

of We million plans. a been seen XX XX have the those homes have -- waiver any of homes none there's passed, no on million passed, those

So, I have say that those not affected. been would

the to maybe and of track. get comment U.S., relation on are on we those on even, have the the Europe, I'll I'll bit funding ask In things to Christoph in some to a still Europe. color funding, In funding

that. majority the at that of money through point the into we have off. we're of is for a RDOF The carriers still is kind some RDOF The ways current forecast expecting that getting are of that this We 'XX/'XX. funding

where So that will some in next and rolling be the year demand, kind this starting of to through RDOF money year. actually and tick-up see is we're

Ryan Koontz

capital on is Hey, the that overrun, Tom, side? that labor more

Tom Stanton

if cut you deployment. the yes, deploy the you're because typically Yes, cutting multiplying labor, impact the -- answer is but of effect is sites, but say you labor is would biggest the as I thing.

of by So that but things. been is yes. other And has, impacted the course, answer direct

-- funding the on Europe? capital me, the in comment government excuse any funding on Christoph, --

Christoph Glingener

Yes.

Europe. also have we on a So, It's going I little say, more complex, see to bit Ryan. in

we more country So looking and different we But see accelerate as the and But accelerate. different to different and announcing funding, but some fiber helping on. areas, it build bigger customers countries we accelerating also is outs. the complex together, to see of it's at even more the areas, consortiums and underserved so on it in coming Europe and see going even outside areas

Ryan Koontz

engagements joint product, kind of your quick on of Helpful, customer terms on, Tom, Got And any it. your feedback accounts? cross cross larger Christoph. team, follow-up some one in of

Tom Stanton

Yes, universally positive.

-- big is all, the we and I We is There to of the a -- Europe the piece company. within the directly that in mentioned that company now. combined gangbusters But of that as -- that. -- Christoph, the here as make if to have on even is And well. has negative which quicker. carriers because to is are kind not single comment earliest a tend one of wins combined in to we U.S., decisions some in perception first situation you want been let strength well, And RFP before the of that smaller expected have right been related Europe the cross of I'll are that wins

think existing been and beneficial. new I U.S. are that have either the those customers of saw very both closing. actually, benefit XX near has number customers in I we Majority But that for a in the are or closed we've seen RFPs, positioning within

any want color give that? to you on Christoph,

Christoph Glingener

Yes.

put for that which is different three ADVA didn't America, So basically in expected, Tom have reach like standalone. basically those products, extended I what just we in One products would said, for we reach, the categories. market it market

some the Europe market can bigger of or discussions. in one is say, on, so let in with side ADTRAN helps stronger, Europe. obviously, reach, better And side. more European on the the company, supply the comes around and distributed force everything other we've on me way through with Obviously, in which pull products a the ADVA sales bigger seen as with it. is The And size. other a It carriers and next one one we

Ryan Koontz

much. Really helpful. Thanks so

Tom Stanton

Thank All right. you.

Operator

the question comes next from WestPark Mesniaeff of Your Capital. Greg from line

is open. line Your

Greg Mesniaeff

kind on this gross they out us later Mosaic margins, you current Thanks. what both Yes, thank some in ramping? most And you was playing -- color your of recent for how on and and quarter if that taking the having One can see my question. they're how give I you deployments, impact are this wondering year?

Tom Stanton

Yes.

the is to time turn be before fine-tune days Mosaic period us product uptick as of good. taking still up we and of It that the So, still One get some I it's time. has been to mentioned able early that

and It's of cases, the software most many actually just that cases, in download. it in So months a installed. takes, you get not piece product to

much uptick getting it's limited queue the so, is right And in so not it's these now, customers demand onboarded. limited,

I was are phases. get number have, had XXX we different or executed, that think I executed then and the they So in right in queue now

on you, probably actually of we nowhere have signed. still, -- monetize still that subscribers just quarter, we it's and until which like the if we to is running I XX point, customers But will of something the a added the continue, been near that quarter. boarded, XX%, I to company at last uptick will it's up be contracts the we impact expect the in if where And uptick still number is a -- not will it's that the get has it We today -- grow. the or relatively customers in were currently number. XX% this and fantastic. get tell small those last

it these don't be early meaningful meaningful still customers. phase because I think let's onboarding So the number it's a of in will now. a say, we're year from number, a now,

Greg Mesniaeff

quick started follow-up topic. just same U.S.-centric as a on product. originally Mosaic the I Got know And it. a One

Tom Stanton

It's still U.S.-centric.

Greg Mesniaeff

Okay.

it U.S.? to So migrate there's the no beyond plans

Tom Stanton

execute is to there to but more we U.S., and the are many because focus little we in And cases, that and that are customer There to make of beyond U.S. they're the that well migrate new not need a in difficult. implementation to plans today, broaden plans differences, it base. a are sure

time do as down out one rolling actually to that. to we've do. the number got And we we're our get onboarding things some thing So to need

now, focus up have So, required then is the But base. here. the we're software the be jump for kind of XX% customer right because will set relatively we'll And straightforward over the I U.S. our of features getting it think

Greg Mesniaeff

Thank you.

Tom Stanton

Okay.

Operator

question Essi William line the your Woodruff from K. from And Company. of next comes Paul

open. Your is line

Paul Essi

my I at for taking in Thank of you call particularly to point? the causing about that, slow Europe The talk question. is the this you -- customers delays in wanted XXXX. some of larger have, that any rollout

Tom Stanton

not Yes answer -- is the but yes, materially.

kind customers -- a But -- just of deploying the capable. they're called the been them which it's of product XXXX, less are aren't some XXXX to able of what using time. they deploy another density of a extent that which have ongoing period that we have getting is So, XXXXs, It many a is precursor. the is to for less kind people

XXXX XXXX a of is the being at kind products whole that of of family. that the family with series top So

that continued hindered supply be to able little two to itself three in had that we're redesigned chain during bit times That order supply to seems crisis stable, this and now a or to product. be That was supply.

the prioritizing access they're is really in is the hurt we've six doing we're are that could new where decisions. in -- new those. different it got Europe, And that are -- lab mentioned what they just us doing large carriers issue RFP I side So of designs. got testing we've it, on in where not or phases

they have customers where that So making get we're units. those sure going we that process, are some selection through

Paul Essi

Okay.

expect in, that is, are you deploy what do then in look there? like to as labor in out you market from of some this XX And starts Second question trying fiber also to money now? six labor roll seeing months any government to of to constraints the some

Tom Stanton

going tied well, that's -- be on -- many things. It's unemployment direct that's of to people depends kind it to rates -- how tied and

have So, where been in constraints has Europe. we seen mostly

seen throttled. projects have that We are

-- a know. ability a -- does you get of project-by-project are by labor It happens I it's or basis, In works at would In don't it U.S., excuse look happen, the throttled that if in predominant. me, I by deployments I but it's noticeably not would Europe. as on fact, say -- really to cost lot the expect labor.

I there. people very have think have on people -- been that been there progressive

there gone that programs kind them of people, number are into workforce training and the and of that year. large have do but actively recession? labor tight think very And I out dependent significant How I they're labor, But the do a typically pool? fiber the of is that I just to workforce time going are the of onboard internship a skilled like history. seeing what's We These for in material deploying that have ones kind this. more builds. than programs, job that mean, a workforce. bringing is do And that, to good doing And that bring have labor a of to that think amount customers But in has into people they're excuse any deep on and think the fruits today is -- it's What be to happening these this market. it actually people a that, the I me, actually think longer-term they're does of general, I started recession?

Paul Essi

Okay.

at bottleneck that you the like the was? see don't next So time, this supply point in as chain

Tom Stanton

the been -- has I a next I bottleneck. think don't bottle it's it think

met a a limited, that's hear labor labor weeks they ago. high things the in in a in that's that list talk the their I'm don't but them. have wage are some and that or we time. about capital period kind they're I and to fall not -- -- of really three they been not just in here that's were about and think some talking things. are that's base talked for -- I but that there And ones -- big place They meet I And just doing the of ongoing people some, it's pool. there the has -- with on didn't carrier job the elevation not with U.S., been just it's them. for line what, about worry about segment. the projects talk want bit little And of sure they tax plans are they shifting I their to in that So able

Paul Essi

Thank you. you Thank all That's I Okay. have. much. very

Operator

Markets. of question your next comes line Northland the And from Tim Savageaux from Capital

open. is Your line

Tim Savageaux

Pardon Good morning. me. Hi.

Tom Stanton

morning. Good

Tim Savageaux

[indiscernible]

Tom Stanton

your microphone Tim, died. Hey, just

Tim Savageaux

How about that?

Tom Stanton

better. Much

Tim Savageaux

Okay, great.

envision visibility what QX, access subscribers. case, if So the QX in in declines up on And QX, a further in tough. to a that's I to maybe follow-up. which bottom we kind you pattern a understanding saw is And you mean the of and a and expect flat be have Would guiding in inventory is subscriber bit optical growth I similar side? little for to

Tom Stanton

is QX we're pick at up in slightly. expect this expecting to what subscriber do We Yes. -- point really,

board. slightly think the kind is can up of you across So

And some of is that will less still unfortunately be in just what [indiscernible] an can and that can't impact. of ship, although

area the very can in So the we bottom. being way at we're it. cautious this very we're is -- imagine, around as looking this quarter, that somewhere the way at looking is being We're we're you think

or have PO, of very if don't I I a material, or it line and forecast. we're material PO the to near line if out sight So don't a the near sight to throwing have

So some I Subscriber of what general, kind that in will Solutions. of just be correct. happens our we to period the ability different in This of But you're think time, to of execute in be downside expect the segments.

Tim Savageaux

got before, I is stand-alone as ADVA's pretty a And was it the steady mentioned into think what throughout is Great. year. increase

Aggregation for it the So stronger in the say right stronger to extend for half it the of that optical not. half the second willing versus you But strength half seems would it before, or kind caveat the front, of spreading for now, of that that inventory wonder and level on looking on just than & the of activity made a kind expect I whether access, the you're first? case half the like same like the second be second but X to first Tier of some you're maybe be given sort seems ought what to reasonable with should Access there. comments general, for from I that's is

Tom Stanton

me My I trepidation ultimately are tighter. gets is we the honest, the current new then -- if projections, of have be I is do you in. adjustments don't inventory see and until bubble. going bubbles is extent impact to I what to hear say really say the the for projects don't where robust, that know time that mean looks the reason I'm know because won't lead I'll of coming capital to like not those mean -- deployment willing products you I at the appetite it lot. a whole still yes, look Yes. we if and been there's

you and be goals that then So appetite stated times And up what over try capital able to the beyond your the want customers has the there shrinking years. to and vendor squeeze cost be because for some that, for make disappeared inventory, can normal on depending on of are. will will bet definition to last two to lead their your do

a right where some areas there to it getting next getting trying what some day a lead are it's is figure still out now, everybody normal is So with are the a six spotty. problem. are is then product There in problem And problem. months, times problems a not and

I is inventory, or So regardless think adjustment still that infield whatever, something that have see. of time it's regardless a we it's still optical to that of segment, the of period

QX, gone benefit, you team activity, other see internal periods. We through disappointment, if there disappointment short-term want and but kind I huge I don't a demand. happened visibility looks where playing we've through in and disappointment, personal are look that And a factors so, to been of when about cycles And before drives view, good in you and that. are think repeat near-term no what honestly. We've into what at happen that ultimately things had

player the which And so the out sure as manage is, many ourselves do where focus out, times and network the eye past, to we company I'm a biggest going to positively best the in our make what in change has best market, keep near that actually fundamental on the there The set need product demand that that's bigger is we we are have I'm network. and is capitalize What not going our picture. wholesale the near-term that and picture we it. And kicked are we in hang absolutely on in is. through and in been to on available that's term, we that the

Tim Savageaux

And couple quick I enough. A question. fair questions, that's of may, last if just

you? finishing or increased same can out as was platforms I development you heavy with of think I'm certain quarter. that anything if pretty particular in R&D whether was wondering thing there's call borrowing it the in mentioned of what a And driver, kind have quarter. spending the it's in the

me. any balance drivers there? You Thanks. sheet, of that for seem particular the but to on some that's it And put

Tom Stanton

won't let things receivables a be probably from Uli there hit are to a and But in a sheet, were that the balance -- this that it's bit I'll were any of that that color matter repeated. fluctuates and quarter, little add Yes, a payables, it. one-time things and us more of quarter-to-quarter, little bit kind there general, couple with of

have up. thing, up, on that and finishing the that some some finishing In programs are programs have some R&D we do we contractors are

did an So there. see we uptick kind of

for we that, on will like can anything focused imagine, line And fact, that, expenses. a that that with be very, there rationale eye be were basis. programs affected this quarter. in you a going-forward will have on there As in very But some

on color Uli? other that, Any

Uli Dopfer

Well, hits inflation I would board, us still we're just know, Tom more time you the say less. kind as of the R&D or depending a said, where spend in region on like across

mean, you side, down. remain debt went could AP high inventories as the I On see, our and

obviously, we finance to working some debt of capital. used the So our

Tom Stanton

Tim? Tim? there? still Tim, else, are you Anything

Tim Savageaux

Thanks very much. good. I'm

Tom Stanton

our With much. at very we of end Thanks that that, I are see question right. queue. the All

very this I And a much appreciate everybody. joining everybody happier us -- quarter. we So, for quarter. next Thanks next to much, conversation look forward time

Operator

This concludes today's call. Thank your conference participation. for you

may disconnect. You now

ADTRAN (ADTN) 9 May 232023 Q1 Earnings call transcript