Adtran sees record Q4 bookings but growth slowed by supply chain

Citing record bookings, Adtran reported revenue of $154.15 million for Q4 2021, representing 18.5% growth year-over-year. Nevertheless, ongoing supply chain constraints and uncertainty around the COVID-19 pandemic continue to slow growth and cloud the future, said company executives on this morning's earnings call.

According to CEO Tom Stanton, Adtran saw a 76% increase in bookings from international tier-1 operators in 2021 (including two European operators, and shipments to an operator with properties throughout Latin America). International revenue for Q4 came in at $52.6 million; and US customers brought in $101.6 million.

Demand was driven by the accelerated expansion of fiber-to-the-home (FTTH) networks, upgrades to in-home Wi-Fi connectivity and the adoption of cloud-based automation tools, said Stanton.

Nevertheless, despite "unprecedented demand," company execs said ongoing supply chain problems constrained Adtran's growth. Earnings for Q4 came in at a net loss of $4.2 million.

Were it not for supply chain constraints, said Stanton in response to investor questions, Adtran has "literally hundreds of millions of dollars that we have backlogged that people would take" that they could have gotten out the door in Q4.

"We continue to experience extreme constraints in the electronic component markets impacting our gross profit during the quarter," said Adtran CFO Michael Foliano. "And this is expected to remain challenging, affecting product availability in our component and logistics costs."

'Minor incremental improvement'

While Stanton had projected a hopeful note on the company's Q3 2021 earnings call that the supply chain situation would improve by Q2 2022, execs now say they expect these constraints to persist for at least the first half of this year.

"I think we're expecting to see minor incremental improvement as we go through the next few quarters," said Stanton.

For Q1 2022, Adtran execs forecast $150-$158 million in revenue, with Foliano citing the "continuing effects of the COVID-19 pandemic and the ability of component supplies to align with customer demand."

Stanton noted that government-funded fiber builds in the US and Europe are helping fuel demand for Adtran's products, with the Rural Digital Opportunity Fund (RDOF) bringing in new partners for the company and billions more still to come through the Biden administration's infrastructure law.

Just this week, Adtran announced a new partnership with Cookson Hills Electric Cooperative (CHEC) in Oklahoma, which was awarded $4 million through RDOF to deploy a fiber broadband network.

"These key programs represent tens of billions of dollars in funding toward fiber-based broadband infrastructure and a rapid acceleration in subsidies versus previous years," said Stanton.

Still, forthcoming funds and record bookings aside, the future remains ever harder to predict.

Responding to investors' concerns over the supply chain's impact on the company's earnings going forward, Stanton said he thinks issues with freight – which are having a large impact on the delivery and cost of supply – should get better in the second half of the year.

However, he added, "the real unknown is, is there some COVID impact that may or may not hit us in the tail end of this year? And it's just really difficult to forecast that."

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• Adtran wrestles with supply and demand conundrum

— Nicole Ferraro, site editor, Broadband World News; senior editor, global broadband coverage, Light Reading. Host of "The Divide" on the Light Reading Podcast.

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