Adtran increases independent operator count, sees decline in revenue in Q4

Adtran CEO Thomas Stanton addressed shareholders during the company’s fourth quarter 2023 earnings calls on Feb. 27, reporting revenue declines and operator acquisitions.

“Our fourth quarter revenue came in as expected with operating profitability on the upper end of our guidance range, helped by lower operating expenses and improving gross margins,” said Stanton. “Revenue, of course, continued to be impacted by macroeconomic factors and elevated inventory levels.”

Adtran’s reported fourth quarter revenue was $225.5 million, down 37% year-over-year and 17% quarter-over-quarter.

“Coming into 2024, we remain focused on two strategic initiatives: the investment in fiber-based broadband networks in the U.S. and the high-risk vendor replacements centered in Europe. These two initiatives have driven us to broaden our presence and strategic relevance in Europe and substantially increase our product portfolio breadth for customers here in the U.S.”

Adtran added 15 fiber to the home (FTTH) operators in the fourth quarter, bringing the year’s total to 66.

Mosaic One, Adtran’s cloud-based SaaS solution, added 50 new customers during the fourth quarter and more than 225 over the year.

Fourth quarter financials

Adtran CFO Ulrich Dopfer reported that international revenue made up 62% of total Q4 revenue, and domestic revenue contributed 38%. The company’s network solutions segment accounted for 80% of the quarter’s revenues, down 3.9% quarter-over-quarter and 8.6% year-over-year. The services and support segment contributed 20% of the quarter’s revenues, up 3.9% quarter-over-quarter and 8.6% year-over-year.

“We continue to face a decline in service provider spending driven by macroeconomic challenges and ongoing inventory adjustments,” said Dopfer.

Fourth quarter non-GAAP gross margin was 41.9%, a year-over-year increase of 277 basis points. Inventories were $362.3 million at the end of the fourth quarter, down $11.7 million compared to Q3 2023 and down $65.2 million compared to Q4 2022.

“We are convinced that the long-term growth drivers for our business are fully intact,” said Dopfer. “We expect that the investment in data-driven infrastructure and the ‘fiber everywhere’ future will continue, supported by stimulus funding and the desire to reduce exposure to high-risk vendors. We continue to focus on capturing fiber footprints with our upgraded fiber access and optical transport platforms while driving the adoption of our latest subscriber platforms, software solutions, and high-value services. Consequently, for the first quarter of 2024, we expect revenue to range between $210 million and $240 million, and we expect a non-GAAP operating margin between negative 7% and 0% of revenues.”

Adtran reports that, in 2024, it will be investing in upgrades to line systems, pluggable transceivers, muxponders, and software platforms.

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