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Adtran wrestles with supply and demand conundrum Add Adtran to the long and growing list of suppliers that are trying to navigate supply chain constraints and fulfill orders in what's rapidly become a high-demand market for broadband access gear. Despite those constraints, Adtran posted revenues of $143.2 million in Q2 2021, up from $128.71 million in the year-ago quarter. That beat the $141.6 million expected by WestPark Capital. Broken down, Adtran generated $125.44 million in network solutions revenues compared to $17.78 million in services and support revenues. Those results, driven by regional operators in the US and Europe, were paired with Q2 net income of $5.1 million. Speaking on Thursday's earnings call, Adtran Chairman and CEO Tom Stanton said the impact of the supply chain problem, which has driven up costs, threatened margins, caused a shortage of silicon and generally extended lead times, is being felt across the product line. "There's not a single material product that doesn't have some constraints," Stanton said. He noted that Adtran has enough backlog orders in hand today to the point that the company could make its current quarterly target without selling another thing. "It's all about supply. It's not about demand," Stanton said. Though the supply chain problem is not expected to abate any time soon, Adtran is seeing solid momentum for 10-Gig fiber access and cloud-managed Wi-Fi 6 products as operators look to modernize their networks. Those operators are also aiming to diversify their supply base "and transition from high-risk vendors," Stanton said in a reference to Huawei and other China-based suppliers that continue to face scrutiny in the US and parts of Europe over purported security risks. 10-Gig momentum Overall, Adtran added 33 service provider customers in the quarter and now counts more than 100 using 10-Gig fiber-to-the-premises (FTTP) technologies over the past year alone. Revenues from Tier 3 regional operators jumped 50% year-over-year in the US and Europe, but Stanton said the company is now starting to ramp up for a wave of Tier 1 business coming online in upcoming quarters. Among specific Tier 1 activities, Adtran has three operators (two in Europe and one in the US) that are exiting lab tests, with others that have recently completed or are currently in contract negotiations. Openreach, a unit of the UK's BT, is among Adtran's relatively new and known sizable FTTP customers in Europe. "There is a big chunk of pie for Adtran to go after," Peter Bell, Openreach's chief technology officer, said earlier this year. "We want them to be a big part of the multivendor environment." Adtran was asked if the activity focused on rural broadband and its current batch of tier 1 customers would put the company in a position to offset traditional Q4 seasonality. "It's all about supply," which will determine what the company can ship and how fast it can ship it, Stanton reiterated. "I have no doubt that the order flow would allow us to do that."
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