ADTRAN began 2019 with increased sales and revenue across an expanding geographic reach, coupled with reduced operating expenditures and a growing customer base.
The fixed-access broadband vendor whose products and services encompass coax, fiber and DOCSIS, widened its global profitability across Latin America, complementing its ongoing presence in Europe, North America and the Pacific Rim. Revenue for products rose 19.5% to $125.8 million, and services increased 15.5% to about $18 million in the first quarter of the year.
"There is a phase two of that project which we feel very good about, but there are a couple of other opportunities within that customer we feel very good about. We actually expect it to be up in the second half from the first half," said Tom Stanton, ADTRAN chairman and CEO, during an earnings call with analysts today. He was referring to NBN, which is buying Gfast and VDSL2 solutions from ADTRAN, as well as several FTTx offerings.
And while AT&T's Gfast plans have slowed, operators in Europe, Latin America and elsewhere are testing or deploying these solutions, he said. Likewise, ADTRAN's PON and cable products are selling well, Stanton said.
"There is a ton of activity going on in Europe right now, mainly centered around XGSPON. The PON business is doing well and should continue to grow," he noted. "MSOs could be 20% of our business this year. Nothing has changed in our outlook on cable."
By the numbers
For the quarter ended March 31, sales were $143.8 million versus $120.8 million in the year-ago quarter, ADTRAN reported. Non-GAAP net income was $4.9 million, compared to a net loss of $15.8 million for the first quarter of 2018. Non-GAAP earnings per share, assuming dilution, were $0.10, compared to a loss per share of $0.33 for the first quarter of 2018.
"Our current expectations are that our second-quarter 2019 revenue will be in the range of $154 million to $158 milion after taking into account the effect of currency exchange rates and anticipated mix. We expect our second-quarter gross margins on a non-GAAP basis will be in the low 40s," said Mike Foliano, senior vice president and chief financial officer, during ADTRAN's earnings call with analysts. "We also expect non-GAAP operating expenses for the second quarter of 2019 will be up slightly over the first quarter amount. Finally, we anticipate the consolidated tax rate for the second quarter of 2019 on a non-GAAP basis will be up sequentially in the high 20s to 30% due to increased income and restructuring charges in our European operations."
Although ADTRAN cut opex this quarter, the vendor expects a slight uptick -- between $1 million and $2 million -- next quarter due to anticipated product mix sold, Stanton said. Its work with Connect America Fund (CAF 2) and other government-funded programs to bring broadband to rural and under-served regions of the US extends its reach to even more providers, including municipalities and utilities.
However, the vendor has dealt with any financial exposure it may have suffered from Windstream's bankruptcy filing, Stanton noted.
"Any offset to revenue that would have incurred because of them actually occurred in Q1 so there'll be no change going forward. There is still a strong desire, at least from our perspective and our conversations with them, for them to still deploy broadband," he said. "They see the true impact of what it's doing to their subscriber net adds and what it's doing to attrition of their subscriber base -- the lowering attrition of their customer base -- but that is so fluid right now we're not baking a lot of that into our future forecasts."
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