ADTRAN Holdings, Inc.

Good morning, my name is Sarah, and I will be your conference operator. At this time, I would like to welcome everyone to ADTRAN Holdings' first quarter 2025 financial results conference call. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. Thank you. Mr. Peter Schuman, Vice President, Investor Relations, you may begin your conference.

Thank you, Sarah. Welcome and thank you for joining us today for ADTRAN Holdings' first quarter 2025 financial results conference call, and welcome to all those joining by webcast. During the conference call, ADTRAN representatives will make forward-looking statements that reflect management's best judgment based on factors currently known. However, these statements involve risks and uncertainties, including those 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 differ materially from those in our forward-looking statements, which may be made during the conference call. We undertake no obligation to update any statements to reflect events that occur after this call. During today's call, we refer to certain non-GAAP financial measures. Reconciliations of non-GAAP to GAAP measures and certain additional information are included in our investor presentation and earnings release. We have not provided reconciliations of our second quarter 2025 outlook with regard to non-GAAP operating margin because we cannot predict and quantify without unreasonable effort all of the adjustments that may occur during the period. The investor presentation has been updated and is available for download on the ADTRAN investor relations website. In addition, the financial measures discussed during the conference call are preliminary estimates. Turning to the agenda, Tom Stanton, AdTran Holdings CEO and Chairman of the Board, will provide key investment highlights for the first quarter 2025. Tim Santo, our Senior Vice President and CFO, will review the quarterly financial performance in detail and our second quarter 2025 outlook, and then we will take any questions you may have. I'd now like to turn the call over to Tom Stanton.

Thank you, Peter. Good morning, everyone. Before we discuss the quarterly results, I'd like to introduce Tim Santor, our new CFO, who joined Antran in early March. Tim was brought on board because of his extensive experience in finance and operational leadership, including more than a decade in leadership roles at General Electric. He has over 25 years of international experience in finance, accounting, and operations across multiple industries. I would also like to take this opportunity to thank Uli Doffer for his significant contributions and leadership. AdTrans first quarter performance highlighted our improved operating efficiency and our strength in our business model. We delivered solid results with improvements across several key operating metrics. Revenue exceeded typical first quarter patterns, showing growth both sequentially and year over year. This increase reflects heightened customer activity and strong execution by our team. Our non-GAAP gross margin remained strong, and non-GAAP operating profit was at the high end of our guidance range. We also generated a robust $41.6 million in cash from operations and $22.9 million in free cash flow. We continue to believe that 2025 will be a year of accelerating performance, and this should translate to meaningful cash generation, which is a key strategic priority for us. Let me talk a little bit about tariffs. In the near term, the impact of tariffs is expected to be minimal. Post 90 days, we are one of the few manufacturers that own and operate our own facilities, which puts us in a stronger position to respond effectively to policy changes. Although the environment is continuously evolving and the mid- to long-term effects from tariffs remain uncertain, AdTrend is well-positioned to adapt thanks to our global customer base and diverse supply chain. Over the years, we have built a durable global network with manufacturing capabilities across the US and Europe. We are actively managing production transfers and enhancing logistics to optimize our supply chain and navigate the evolving trade policies. Our manufacturing strategy is focused on diversifying geographies and operational flexibility. I am incredibly proud of our manufacturing and logistics teams for their swift, decisive actions in handling these challenges. Their efforts have been instrumental in minimizing disruption and controlling costs, demonstrating the strength and flexibility of our operations. Now turning to the quarterly results, ATTRAN's revenue of $247.7 million was above the midpoint of our previous guidance with all three of our product categories achieving year-over-year growth. This progress reinforces the strength across our networking portfolio that spans from the optical core to the customer premise. We delivered particularly strong growth in our access and aggregation solution segment with 23% sequential and 10% year over year growth. This performance was driven by fiber footprint expansion initiatives and 10 gig network upgrade cycles, especially with our large European and tier two US service providers. Despite broader global economic uncertainties, the demand for high speed fiber based broadband services remains strong. Thanks to our differentiated portfolio and strong regional presence in the U.S. and Europe, AdTran continues to be a preferred partner. Our optical networking solutions category grew 4% year-over-year with a 21% year-over-year increase in the U.S. market. Although we maintain a positive outlook for all of our optical customers, the highest year-over-year growth in optical has been with our enterprise, government, and internet content provider customers. With ongoing vendor consolidation in the optical market and industry-wide shift away from high-risk vendors and all customers essentially having completed their inventory reductions, we are well positioned for further growth in the optical networking solutions category. Our subscriber solutions category grew 15% year-over-year. This growth was driven by increased sales of residential gateways and ONTs as our service providers continue to have success in connecting more homes and businesses with fiber. The outlook for subscriber solutions is closely correlated to our success in passing more homes and businesses with our fiber access platforms. With high demand for Wi-Fi 7 platforms, continued customer adoption of fiber-based broadband and wholesale services, and continued innovation in our complementary software platforms, we are confident that we can drive further growth in this category. The year-over-year growth across each of these three major categories is a direct reflection of both the strength of our portfolio and the ability of our sales teams to better position our complete offerings. We are encouraged by the traction we are seeing as more customers recognize the value of our integrated solutions and the depth of our innovation across access, optical, and subscriber platforms. Underscoring that progress, during the quarter, we added another large service provider to our European customer base. as we are awarded a share of both the fiber access and optical transport businesses. This large national service provider located in Southern Europe is a new customer to ADTRAN, and they specifically selected us for our strong regional presence paired with our complete portfolio offering spanning the optical core to the customer premise. Continuing with the theme of growing our business in Europe, we had another large service provider in the region select us for two key optical projects, one for mobile backhaul and another one for mobile front haul. This is an operator where we are already an incumbent transport access vendor, and they see the value in expanding their business with a more scaled solutions partner. Moving to the US, our cross-selling strategy continues to pay off. We recently had a couple of our high-growth US national service providers both of whom were incumbent access, we are both an incumbent access vendor for both of those, expand their business with us. One customer selected us for new optical transport deployments moving forward, and the other one selected us for carrier Ethernet business moving forward. These examples are representative of the encouraging trends we are increasingly having success leveraging our relationships and synergies in one portion of our portfolio to have success in other areas. These portfolio synergies start with our Mosaic software suite, which automates and simplifies the provisioning and monitoring of our solutions that span from the optical core to the customer premise. One example of this software is with our optical monitoring solutions that not only provide real-time, in-service monitoring of transport networks, but can now extend that visibility all over the customer premises and point to multipoint networks. This solution was selected for an innovation award by the Fiber to the Home Council Europe in March, alongside a separate award for our 50 gig pond solution. Our portfolio innovation and customer momentum remain strong. More customers continue to turn to AdTrend to provide turnkey fiber networking solutions that scale from the optical core to the customer premise, while delivering best-in-class subscriber experiences through improved insight and automation. In summary, our quarter-end performance was at the higher end of guidance, giving us confidence that improving market conditions combined with continued solid execution will drive increased cash generation. We delivered above-seasonal revenue and improved profitability with strong booking trends that give us optimism for continued positive momentum. Our customer base continues to expand, and we are developing strategic platforms with significant opportunities still ahead of us, both in the U.S. and Europe. Importantly, our product portfolio has never been stronger. Fiber infrastructure growth remains strong, fueled by our customer expansion initiatives, vendor consolidation, a broad shift away from high-risk Chinese vendors, and new investments focused on AI-driven networking. Given our strong performance this past quarter and an improving outlook, we remain confident in our long-term operating targets, including gross margins in the low to mid-40s percent range and operating profit margins and the low double digits. While the frequent shifts in proposed government policies create potential for uncertainty, AdTrend is uniquely well-positioned to navigate market changes. Thanks to our globally diverse supply chain, operational flexibility, and strong customer relationships, we believe we are better insulated than most of our competitors. We are actively managing the evolving tariff landscape and are focused on minimizing the impact to our business and to our customers. With that, I will turn the call over to Tim, our CFO, to walk you through the financial results for the first quarter, and then following Tim's remarks, we'll open up to any questions you may have. Tim?