ADTRAN Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to ADTRAN Holdings Inc. First Quarter 2024 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question at that time, please press star followed by one on your telephone keypad. As a reminder, today's call is being recorded. During the course of the conference call, ADTRAN representatives expect to make forward-looking statements that reflect management's best judgment based on factors currently known. However, these statements involve risks and uncertainties, including the risks detailed in our earnings release, our annual report on Form 10-K, and our filings with the SEC. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements which may be made during the call. We undertake no obligation to update any statements to reflect the events that occur after this call. During the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliations of non-GAAP to GAAP measures and certain additional information are also included in our investor presentation and our earnings release. The investor presentation found on ADTRAN Investor Relations website has been updated and is available for download. It is now my pleasure to turn the call over to Tom Stanton, Chief Executive Officer of AdTrend Holdings. Sir, please go ahead.

Thank you, Juliana. Good morning, everyone.

We appreciate you joining us for our first quarter 2024 earnings conference call. With me today is AdTrend Holdings CFO Uli Dopfer. Following my opening remarks, Uli will review the quarterly financial performance in detail, and then we will take any questions you may have. Our first quarter revenue came in as expected, with revenue just above the midpoint of our guidance range and non-GAAP operating margin within guidance. Our focus on managing expenses and reducing inventory levels helped us achieve positive free cash flow during the quarter, despite the near-term headwinds that continue to impact service provider spending. While we do see signs that the market will improve as we move through the year, we will continue to focus on managing our expenses and further reducing our inventory levels. Taking a closer look at the results in the first quarter, the overall revenue and geographical mix was very close to the results from the previous quarter, with 63% of our revenues coming from outside the US. On the product mix, we were well balanced in revenue across the three categories, with 31% of our revenue coming from subscriber solutions, 36% of revenue from access and aggregation solutions, and 33% of our revenue coming from optical networking solutions. Our subscriber solutions category was down 7% quarter over quarter after posting a strong quarter in Q4. The access and aggregation solutions category was up 27% quarter over quarter, driven by an increase in shipments of our fiber access platforms for both European and US customers. Optical networking solutions continue to be impacted by inventory reduction initiatives with customers. We had two primary areas of sequential growth in the quarter. In the U.S. market, we had a strong quarter with our small to midsize service provider customers purchasing our fiber access platforms and residential fiber CPE. This customer segment was up sequentially for both direct purchases and indirect purchases through our distribution partners. The second area of strength was our large customers in Europe. This customer segment had a strong quarter with purchases of our fiber access platforms and Ethernet CPE. These two customer segments, the small to midsize service providers in the U.S. and the larger service providers in Europe, are the segments where we continue to see the highest growth potential moving forward, given their close alignment with our strategic initiatives and portfolio investments. These two key strategic initiatives to maximize the investment opportunity in fiber-based broadband networks in the U.S. and high-risk vendor replacements in Europe continues to drive our corporate focus. Taking a closer look at these market segments, I will start with the U.S. market. This past week, we hosted our Broadband Business Solutions Summit at our corporate headquarters here in Huntsville. This is a multi-day event that we host twice per year, with attendees primarily being small to mid-sized U.S. broadband service providers. These are the customers that are leading the charge in building out fiber across the US. And the energy there was high. It's as high as it's ever been, and we had a record attendance with over 180 customers and partners at the event. That excitement and energy really comes from two areas. For one, despite some recent challenges, it is still a good time to be in the market. Nearly half of the US households still lack a fiber connection. and the government stimulus programs funding further investment in these networks are still in their early stages. During our event last week, a quick poll of the audience showed that more than 80% of customers in attendance were participating in broadband stimulus programs. The second driver for this excitement comes from the broader set of needs that we can meet with our customer segment, with this customer segment. We have been very intentional in creating more comprehensive fiber networking portfolio that is optimized for the needs of these small and midsize US service providers. These customers ideally want to buy in-home networking solutions, business networking solutions, fiber access platforms, optical transport platforms, network automation software, and cloud-based monitoring tools from a single vendor that they can trust to deliver reliable solutions and support them throughout their deployment. On top of that, the solutions need to integrate seamlessly with their existing systems without a lot of custom IT integration activities. There is only one vendor that can check all of these boxes, and that's AdTrans. You can go through each segment of our portfolio and see where our investments in a more comprehensive and integrated portfolio are paying off. In our residential portfolio, we have launched IntelliFi, along with our latest SDG series of Wi-Fi 7. We have already signed up dozens of customers for IntelliFi, making it the highest growth application in our Mosaic SaaS application suite, and hoping to push the total number of service providers adopting Mosaic One to 400. We have added 36 new Mosaic One customers this past quarter. On the network infrastructure side, we have taken the best fiber access platform in the industry, our SDX series, and integrated it into the leading billing systems targeting the U.S. regional service providers. These efforts have led to a surge of deployments over the last six months, helping us add nine new fiber to the home operators just this past quarter. These customers were a mix of new operators and vendor swap outs. As operators build out these higher capacity fiber access networks, they need to upgrade their transport networks as well. We've spent the past two years developing an optical network solution that is optimized for the needs of regional networks, regional middle mile, Backhaul networks need the capacity and reach enabled by technologies like coherent DWDM widely deployed in core networks, but they need these technologies to be optimized for regional network deployments. This network optimization means integrated temperature-hardened pluggables enabling up to 800 gig speeds instead of the traditional large overlay systems. also means you need end-to-end service automation and precision monitoring of the fiber infrastructure after a sizable and well thought out investment we have launched an optical optical portfolio that is tailored to address all these needs and is the perfect complement to our fiber access and subscriber solutions portfolio reinforcing that progress over the past two quarters We have had over 20 U.S. broadband service providers start to purchase our Ethernet and optical portfolio that were previously broadband-only customers for AdTrend. We see this segment continue to accelerate as these customers increase their builds with stimulus funding. Our fiber networking solution set, covering everything a small and midsize operator needs to deploy fiber to every home, business, and 5G site, is paired with an increasingly integrated management suite that simplifies the deployment of operation of these networks. We believe the progress in selling our complete portfolio offering paired with our strong regional capabilities that include local manufacturing has us well positioned to succeed in upcoming bead projects in the U.S. One notable milestone with our local manufacturing is that we have now shipped over 1 million OLT ports that comply with the latest Build America, Buy America rules that is part of BEAT, highlighting our long history of US-based manufacturing. Moving to Europe, the theme around investments in our portfolio, our portfolio beginning to pay off as is consistent with what we are seeing in the US market. But that customer segmentation and market drivers are a bit different. In Europe, Many of these service providers are migrating away from high-risk vendors, and they are making this shift as they upgrade their fiber network infrastructure. Also, while we are very successful with smaller altnets in Europe, the bulk of the investment is still coming from larger service providers in the region. These customers value a trusted, secure partner with a broad portfolio and scaled deployment in the region. It is also just as important to have an in-region R&D sales, installation, and support services and supply chain capabilities as well. AdTran is really one of only two vendors that can address these needs. As I mentioned earlier, this past quarter was very successful with our large European customers deploying our fiber access platforms. For our two largest customers in the UK and Germany, we continued to ramp deployments of our latest high-density 10 gigabit fiber access platform, the SDX6330, which was the key catalyst for this growth this quarter. We were also selected as a vendor in the latest Ethernet aggregation service offering at one of these customers. The technical superiority of the SDX6330, which has better power efficiency and density than competitive solutions, while also building on a more modern architecture, has us well positioned for sustainable success with these customers and other operators in the region. One of these operators is a multinational tier one operator where we have already been deployed in three countries. We have recently launched customer trials in a fourth and much larger country that they operate in, opening new growth opportunities for us later this year. In another Tier 1 fiber access operator that we won last year with the SDX 6330, we continue to make great progress through the lab and remain on track for scaled deployments next year. In addition to these projects, we have recently awarded a strategic software award for MPLS edge routers with a multinational Tier 1 operator. This MPLS software suite for our packet aggregation platforms has experienced high demand in the past six months providing another growth opportunity for us moving forward. On the optical transport side, where we have traditionally been very strong in Europe, we remain on track to start deployments late this year with our recent Tier 1 optical wins. With the recent launch of the MFLEX 800, our latest 800 gig optical platform, we are still well positioned to benefit from the next upgrade cycle from 400 gig to 800 grid across our broad operable customer base in that region. In summary, we have introduced key enhancements across our portfolio, enabling us to be more competitive in landing new customers and expanding our business with existing customers. These portfolio enhancements, paired with our strong regional presence and progress in selling our complete portfolio offering, have us well positioned for success in the ongoing investment cycle and fiber networks across both the U.S. and Europe. While we remain confident in our long-term outlook, we see the path to growth in the quarters ahead. We continue to see cautious spending from service provider customers, driving us to continue our cautious approach to our forecast and operating model. As a result, we will continue our focus on becoming a leaner, more efficient, and more profitable company with a best-in-class fiber networking portfolio. With that, I will turn things over to Uli to provide a review of our financial results. And following Uli's remarks, we will answer any questions you may have. Uli?