Like other telecom industry vendors, Adtran remains cautiously optimistic that the inventory freeze is starting to thaw out.
Speaking to investors during Adtran's third-quarter earnings call, Thomas Stanton, CEO, said that Adtran saw new spending from some of its vital service provider customers.
“We did see a pickup in bookings in the quarter, which was good to see because, as you know, the bookings have been dropping for a few quarters now,” he said.
While Adtran said one of its European customers is still wading through what Stanton calls an “inventory hangover” that will likely continue through the first quarter, there’s still potential to grow revenue.
However, he emphasized that the buying patterns of carrier customers in the U.S. and other regions like Germany often vary according to needs.
“We have large customers that buy in chunks,” Stanton said. “So, they'll buy a big block of equipment and then deploy it over 2 to 3 quarters, then they'll buy another big block of equipment. I wouldn't consider that inventory. I consider that just how they operate.”
Fiber deployment push
As Adtran’s service provider customers move through inventory corrections, a big focus is on fiber broadband deployments.
This is being driven in the near term by existing customers.
“There is, without a doubt, a big push on fiber deployment,” Stanton said. “For most customers I talk to, their fiber acceptance rate when they're the first in the community is solid.”
He added, “We're seeing that in our subscriber business.”
Adtran’s Subscriber Solutions category rose 9% quarter-over-quarter. This growth was driven by an increase in residential ONTs and RG sales, up 25% quarter-over-quarter and 102% year-over-year. Within this category, Adtran added 11 new customers to its latest SDG series of Wi-Fi platforms.
“As demand for fiber broadband continues to grow, we expect to continue to increase our revenue and customers in this category,” Stanton said.
Another big push by its fiber broadband customers is to look beyond 10G PON. Sonic Fiber Internet announced earlier this month that it would deliver 50 Gbps connectivity across California leveraging Adtran’s 50G PON technology to provide symmetrical connectivity to residential and business customers.
Adtran’s 50G PON technology has been designed to coexist with GPON and XGS-PON, allowing network upgrades without disruption.
While Stanton did not cite Sonic specifically, he noted that the move to trial and deploy 50G PON reflects the service provider community’s desire to have a PON network supporting residential business and wholesale services for wireless operators and other local carriers.
“While 50-gig access technology is still in its early stages, we remind listeners of the ascendancy of XGS-PON, which has quickly become the preferred access technology for PON deployment,” he said. “Adopting these higher-speed access technologies is an ideal match for our broader fiber networking portfolio.”
Network solutions lead revenues
From an overall financial standpoint, Adtran reported $227.7 million in revenue, a sequential increase and above the midpoint of the company’s guidance.
The Network Solutions segment led Adtran’s third-quarter revenues, which were $181.5 million. This segment accounted for approximately 80% of total revenues in the third quarter, compared to 79% in the second quarter.
Network Solutions generated $181.5 million in revenues, accounting for about 80% of total revenues, up from 79% in the second quarter.
The Services & Support segment also saw an upturn in the third quarter, with $46.2 million, or 20% of total revenues, compared to 21% in the prior quarter. However, Access & Aggregation delivered $67.1 million, or approximately 29% of total revenue, down 4% sequentially.
Optical Networking Solutions was $70.5 million, or 31% of total revenues, down 4% sequentially. Finally, Subscriber Solutions was $90.1 million, or 40% of total income, up 9% sequentially.
Ulrich Dopfer, CFO of Adtran, said that the company is seeing new signs of growth across all of its segments.
“We are seeing improvements in our key end markets and are growing our customer base,” he said. “The continued trend to increase fiber access and optical transport globally is a catalyst that we believe will help us to drive accelerated profitability and increased cash generation.”
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Sean Buckley
Sean is responsible for establishing and executing the editorial strategies of Lightwave and Broadband Technology Report across their websites, email newsletters, events, and other information products.