ADTRAN to miss 1Q23 revenue guidance due to CPE inventory corrections

April 13, 2023
Customers shrinking their inventories of customer premises equipment (CPE) and supply constraints that prevented ADTRAN from filling some orders combined to account for the shortfall, management asserts.

ADTRAN Holdings, Inc. (NASDAQ: ADTN and FSE: QH9) revealed April 10, 2023, that it believes it will not hit the revenue guidance it issued previously for its first fiscal quarter of 2023, which ended March 31, 2023. Company management now says via an announcement of preliminary unaudited financial results that expectations for the quarter now fall between $322 million and $326 million versus guidance of $355 million to $375 million. Customers shrinking their inventories of customer premises equipment (CPE) and supply constraints that prevented ADTRAN from filling some orders combined to account for the shortfall, management asserts.

“Growing customer concerns over inventory stocking levels affected our first quarter Subscriber Solutions category. We believe that this over-supply condition in CPE products will continue into the second quarter,” commented ADTRAN CEO Tom Stanton. “Revenue for our Access and Optical Networking products grew sequentially. Supply constraints, however, limited our flexibility to clear past-due backlog across all product categories. We believe that the inventory impact is transitory, and we expect to see some improvement during the second quarter. We plan to adjust expenses in the near term to reflect current conditions; however, we do not see any material changes to our near-term opportunities and our long-term growth catalysts as carriers around the world race to upgrade their networks to fiber.”

The revenue shortfall will result in preliminary GAAP operating margin of between -14% and -17%, according to the company’s preannouncement. ADTRAN management expects preliminary non-GAAP operating margin to be between -1% and -2.5%.

ADTRAN’s issues with CPE inventory corrections don’t necessarily signal trouble for other such vendors, according to Julie Kunstler, chief analyst within Omdia’s Broadband Access Intelligence Service. “Each vendor had their own specific supply-chain issues during the last several years which led them to do different inventory strategies,” she explained in an email in response to a Lightwave query. “I believe that ADTRAN’s correction is quite specific to ADTRAN and it is only on the CPE side.

"I think that some operators stockpiled CPEs when that equipment became available – they had waited so long to have orders fulfilled," Kunstler added in a subsequent email. "Consequently, some operators just don’t need more CPEs for a while."

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About the Author

Stephen Hardy | Editorial Director and Associate Publisher, Lightwave

Stephen Hardy is editorial director and associate publisher of Lightwave and Broadband Technology Report, part of the Lighting & Technology Group at Endeavor Business Media. Stephen is responsible for establishing and executing editorial strategy across the both brands’ websites, email newsletters, events, and other information products. He has covered the fiber-optics space for more than 20 years, and communications and technology for more than 35 years. During his tenure, Lightwave has received awards from Folio: and the American Society of Business Press Editors (ASBPE) for editorial excellence. Prior to joining Lightwave in 1997, Stephen worked for Telecommunications magazine and the Journal of Electronic Defense.

Stephen has moderated panels at numerous events, including the Optica Executive Forum, ECOC, and SCTE Cable-Tec Expo. He also is program director for the Lightwave Innovation Reviews and the Diamond Technology Reviews.

He has written numerous articles in all aspects of optical communications and fiber-optic networks, including fiber to the home (FTTH), PON, optical components, DWDM, fiber cables, packet optical transport, optical transceivers, lasers, fiber optic testing, and more.

You can connect with Stephen on LinkedIn as well as Twitter.

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