ADTRAN Holdings, Inc. Q3 FY2024 earnings call

• Executed according to plan in Q3, improving non-GAAP operating profit and generating positive free cash flow for the third consecutive quarter. - 55% of revenues generated outside the U.S. with higher demand from EMEA and APAC; both U.S. and non-U.S. regions benefited from a 10% sequential increase in large service provider sales. - Optical Networking Solutions added 13 new carrier customers, with bookings accelerating. - Access and Aggregation shipped to 12 new carrier customers, revenue up outside NA but down in U.S. expected to increase in upcoming quarters. - Subscriber Solutions increased 9% Q/Q driven by residential ONTs and RGs. - Progress on capital efficiency program, working to monetize non-strategic assets.

Revenue in Q3 was $227.7 million. The network solutions segment delivered $181.5 million, accounting for approximately 80% of total revenues. The services and support segment delivered $46.2 million, or 20% of total revenues. From a product category perspective, access and aggregation delivered $67.1 million, or approximately 29% of total revenue, down 4% sequentially. Optical networking solutions were $70.5 million, or 31% of total revenues, also down 4% sequentially. Subscriber solutions were $90.1 million, or 40% of total revenue, up 9% sequentially.

• Q4 revenue expected to range between $232 million and $245 million. - Non-GAAP operating margin expected between 0% and positive 4% of revenues.

• Inventory situations with certain customers, particularly in Europe affecting optical. - Uncertainty around the impact of BEAD funding. - Potential impact of changes in service provider spending.

Q: George Notter asks about optical inventory and real estate update.

A: Tom Stanton responds that optical inventory overhang in Europe will likely last into early Q1, and real estate is moving forward with interested parties and improved sale-leaseback environment.

Q: Michael Genovese asks about sustainability of better trend, impact of acquisition, BEAD.

A: Tom Stanton responds that existing customer base is improving, acquisition not materially moving the needle now, and BEAD is fueling but not the fundamental driver of fiber deployment.

Q: Tim Savageaux asks about Q4 guidance, large carrier sales, access and aggregation.

A: Tom Stanton responds that all segments expected to be up in Q4, large carrier sales increase is across segments, and access and aggregation down in U.S. is partially international focus.

Q: Bill Dezellem asks about meaningful deployments.

A: Tom Stanton responds about upcoming deployments with multinational carriers in Europe and U.S., and wholesale move towards new access technology.

Q: Ryan Koontz asks about US broadband business, optical traction, minority shares.

A: Tom Stanton responds that U.S. run-rate business is more tier two/tier three, optical traction is in Metro Edge, and plan is to pay down debt then address minority shares.

Q: George Notter asks about DSO.

A: Uli Dopfer responds that DSO improvement is due to customer mix and collections efforts