ADTRAN Holdings reported third-quarter revenue of $281.2 million, up 0.6% from a year earlier, as supply constraints weighed on results. The networking-equipment company posted a GAAP net loss but positive adjusted earnings. It also forecast fourth-quarter revenue of $272 million to $292 million, with adjusted operating profitability expected to soften from the third quarter’s level.
Management pointed to growth in optical networking and with hyperscale customers, while saying supply and cost pressures remain challenges.
Key details
- Revenue was slightly below the midpoint of ADTRAN’s guidance range, according to CEO Tom Stanton. The company said it continued to face a challenging supply environment.
- Gross margin was 38.5% on a GAAP basis and 42.1% on a non-GAAP basis. The adjusted figure included an estimated 200-basis-point benefit from refunds under the International Emergency Economic Powers Act.
- Operating margin was negative 0.3% under GAAP and positive 5.0% on a non-GAAP basis.
- ADTRAN reported a GAAP diluted loss of 10 cents per share, compared with non-GAAP diluted earnings of 9 cents per share.
- Cash used in operating activities was $24.5 million. Cash, cash equivalents and restricted cash totaled $71.7 million at quarter-end.
- Fourth-quarter revenue guidance is $272 million to $292 million. ADTRAN expects non-GAAP operating margin of 1% to 5%, citing seasonal patterns, supply availability and the timing of large customer projects. The company did not provide a GAAP equivalent for that margin outlook, saying it cannot reliably predict certain adjustments.
- Management cited continued optical-networking growth and increasing growth with hyperscale customers. It also said expanding AI infrastructure is creating opportunities in cloud infrastructure and traditional service-provider markets.
What it means
ADTRAN’s adjusted results were stronger than its GAAP figures, and the adjusted gross margin received a material boost from the estimated IEEPA refunds. The fourth-quarter margin outlook is below the third-quarter non-GAAP margin at its upper end and materially lower at its bottom end; the company attributed the range to seasonality, supply and project timing.