ADTRAN Holdings, Inc. Q1 FY2025 earnings call

Key Investment Highlights

• Tom Stanton introduced new CFO Tim Santo, who joined in early March.
• ADTRAN had strong Q1 performance with revenue above guidance, all product categories grew. Access and Aggregation saw 23% sequential and 10% YOY growth.
• Discussed tariffs: near-term impact minimal, but actively managing supply chain with global presence and diverse supply chain.
• Portfolio synergies via Mosaic software suite, with innovation awards won.

Financial Review by Tim Santo

• Revenue $247.7M, up 10% YOY and 2% sequentially. Non-GAAP gross margin 42.6%, up 193bps YOY. Non-GAAP operating profit $10.1M, above guidance. Working capital improved, cash flow strong with $41.6M from ops and $22.9M free cash flow.

ADTRAN's revenue for the first quarter was $247.7 million, exceeding the midpoint of previous guidance. The Network Solutions segment contributed $202.2 million, accounting for approximately 82% of total revenue. The Services and Support segment generated $45.5 million, representing 18% of revenue. Product categories: Access and Aggregation delivered $89.1 million (36% of total revenue, +10% YOY), Optical Networking Solutions was $78.2 million (32% of total revenue, +4% YOY), and Subscriber solutions was $80.4 million (32% of total revenue, +15% YOY). Non-U.S. revenue accounted for 58% of total, while U.S. revenue was 42%. One customer represented more than 10% of Q1 revenue.

Q2 2025 Outlook

• Revenue expected to range $247.5M - $262.5M.
• Non-GAAP operating margin expected between 0% and 4%.
• On constant currency basis, operating expenses expected to remain relatively consistent with prior quarters.

Risks

• Tariffs and trade policy uncertainties, with mid to long-term effects remaining uncertain. Impact on supply chain and costs could disrupt operations.

Q: Michael Genovese asked about segment outlooks and margin pressure.

A: Tom Stanton said access was strong, optical had seasonal factors, and on OpEx, core operating expenses flat on constant currency.

Q: Brian Kuntz asked about customer pull-ins due to tariffs.

A: Tom Stanton said not much pull-in pressure, as they tried to avoid recreating inventory issues.

Q: Christian Schwab asked about currency hedging and Europe vs U.S. performance.

A: Tom Stanton said they are exploring currency hedging, Europe is strong with better booking rates, U.S. not bad but Europe hotter.

Q: Amira Manai asked about supply chain, U.S. vs Europe performance, and competition.

A: Tom Stanton said supply chain mostly outside China, Europe stronger due to buying rates, and ADTRAN focused on resource allocation with technological advantages in optical and fiber access.

Q: Tim Savageaux asked about portfolio synergies and European opportunities.

A: Tom Stanton said there's good reception in Tier 3 space, with European and U.S. customers broadening their business with ADTRAN due to portfolio breadth and synergies.