ADTRAN Holdings Inc (ADTN) 2023 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the ADTRAN Holdings Inc. Third Quarter 2023 Earnings Release Conference Call. (Operator Instructions). 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.

女士們、先生們，感謝大家的支持，歡迎參加 ADTRAN Holdings Inc. 2023 年第三季收益發布電話會議。 （操作員說明）。在電話會議期間，ADTRAN 代表希望做出前瞻性聲明，反映管理層根據目前已知因素做出的最佳判斷。

However, these statements involve risks and uncertainties and including ability of component supplies to align with customer demand, the successful development and market acceptance of our products, competition in the market for such products, the product and channel mix, component costs, flight and logistics costs manufacturing efficiencies, our ability to effectively integrate mergers and acquisitions and other risks detailed in our annual report on Form 10-K for the year ended December 31, 2022, and our quarterly report on Form 10-Q for the quarter ending June 30, 2023.

然而，這些陳述涉及風險和不確定性，包括零件供應與客戶需求一致的能力、我們產品的成功開發和市場接受度、此類產品的市場競爭、產品和通路組合、零件成本、航班和物流成本製造效率、我們有效整合併購的能力和其他風險，詳情請參閱我們截至2022 年12 月31 日止年度的10-K 表格年度報告以及截至6 月30 日止季度的10-Q 表格季度報告， 2023 年。

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. The investor presentation found on ADTRAN Investor Services 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 ADTRAN Holdings. Sir, please go ahead.

這些風險和不確定性可能導致實際結果與電話會議期間可能做出的前瞻性聲明中的結果有重大差異。 ADTRAN 投資者服務關係網站上的投資者簡報已更新並可供下載。現在我很高興將電話轉給 ADTRAN Holdings 執行長湯姆·斯坦頓 (Tom Stanton)。先生，請繼續。

Thank you very much. Good morning, everyone. We appreciate you joining us for our third quarter 2023 earnings conference call. With me today is ADTRAN Holdings CFO, Ulrich Dopfer. Following my opening remarks, Ulrich will review the quarterly financial performance in detail, and then we'll take any questions that you may have.

非常感謝。大家，早安。感謝您參加我們的 2023 年第三季財報電話會議。今天與我在一起的是 ADTRAN Holdings 財務長 Ulrich Dopfer。在我的開場白之後，烏爾里希將詳細回顧季度財務業績，然後我們將回答您可能提出的任何問題。

Before reflecting on the quarter, I'll start off by addressing the announcement that we made yesterday. We have taken decisive steps to transform our business to a leaner, more efficient and more profitable company. We have already implemented and have recently expanded a business efficiency program focused in 2 key areas: cost efficiency and capital efficiency. On the cost efficiency side, the program includes the discontinuation of legacy noncore products, the streamlining of operations to align with the current market environment and operational savings from site consolidation.

在回顧本季之前，我將首先討論我們昨天發布的公告。我們已採取果斷措施，將我們的業務轉型為更精簡、更有效率、更有利可圖的公司。我們已經實施並最近擴大了業務效率計劃，重點關注兩個關鍵領域：成本效率和資本效率。在成本效率方面，該計劃包括停止遺留的非核心產品、簡化營運以適應當前的市場環境以及透過站點整合節省營運成本。

These operational cost savings are expected to generate a 15% reduction in non-GAAP operating expenses from Q3 to Q4 of this year, while preserving our substantial investment in our core products and growth regions. The capital efficiency program portion of the program includes the suspension of the ADTRAN Holdings quarterly dividend and cash proceeds from site consolidation. Regarding the decision to suspend the quarterly ADTRAN Holdings dividend, this decision did not come lightly.

這些營運成本節省預計將使今年第三季至第四季的非 GAAP 營運費用減少 15%，同時保留我們對核心產品和成長區域的大量投資。該計劃的資本效率計劃部分包括暫停 ADTRAN Holdings 的季度股息和網站整合的現金收益。關於暫停 ADTRAN Holdings 季度股息的決定，這項決定並非輕而易舉。

Although we believe the dividend can be an appropriate value delivery mechanism, we believe that shareholders will benefit both in the near term and long term by redirecting the cash dividend to reduce our debt and interest expense. This assessment aligns with the input we received from our investors as we reached out with a recent survey where we requested input from investors that in total held more than 70% of our shares outstanding. The majority of those that responded to the survey indicated that the dividend is not their preferred use of capital at this time.

儘管我們相信股利可以是一種適當的價值傳遞機制，但我們相信，透過調整現金股利以減少我們的債務和利息支出，股東將在短期和長期受益。這項評估與我們從投資者收到的意見一致，因為我們最近進行了一項調查，我們要求持有我們已發行股票 70% 以上的投資者提供意見。大多數受訪者表示，股利不是他們目前首選的資本用途。

Overall, we expect that the result of the capital efficiency program, including site consolidation will produce up to $180 million in cash in 2024, which will be applied towards paying down debt and improving our capital structure.

總體而言，我們預計包括場地整合在內的資本效率計劃的結果將在 2024 年產生高達 1.8 億美元的現金，這些現金將用於償還債務和改善我們的資本結構。

Coming out of this program, we expect to be a leaner, more efficient and more profitable company and one that can easily navigate market uncertainty and of course, to drive higher returns once we get past these near-term market headwinds.

完成該計劃後，我們期望成為一家更精簡、更有效率、盈利能力更強的公司，能夠輕鬆應對市場不確定性，當然，一旦我們克服了這些近期市場阻力，就能獲得更高的回報。

Moving to the results in the third quarter. The product mix and regional split of revenues were consistent with the first half of this year, pointing out that there are no fundamental changes in demand for the product categories or regions that we're serving. However, we did see slower spending with our midsize and larger service provider customers as they continue to reduce inventory levels and took a more cautious approach given the uncertain macroeconomic conditions. This cautiousness did lead to a general slowdown in revenue for the quarter.

轉向第三季的業績。產品結構和收入區域劃分與今年上半年一致，顯示我們所服務的產品類別或區域的需求沒有根本性變化。然而，我們確實看到中型和大型服務提供者客戶的支出放緩，因為他們繼續降低庫存水平，並鑑於不確定的宏觀經濟狀況採取了更謹慎的態度。這種謹慎態度確實導致該季度收入普遍放緩。

Looking across our customer base, our large enterprise customers and regional broadband service provider customers showed the most stability relative to previous quarters. The large enterprise customer segment primarily consists of government universities, financial institutions and web scale companies purchasing optical network solutions for public and private data center interconnect applications.

縱觀我們的客戶群，我們的大型企業客戶和區域寬頻服務供應商客戶相對於前幾季表現出最大的穩定性。大型企業客戶群主要包括為公共和私人資料中心互連應用程式購買光網路解決方案的政府大學、金融機構和網路規模公司。

The regional service providers continue to be driven by the build-out of fiber networks across the U.S. and the U.K. Taking a long-term view, we are still making good progress on key initiatives around fiber footprint capture, high-risk vendor replacement, fiber network cross-selling synergies and adoption of our software platforms.

區域服務供應商繼續受到美國和英國光纖網路建設的推動。從長遠來看，我們在圍繞光纖足跡捕獲、高風險供應商更換、光纖網路交叉銷售協同效應以及我們軟體平台的採用。

These are the initiatives that will drive long-term sustainable growth after the market recovers from the near-term headwinds. Starting with customer acquisition, we added 13 more fiber to the home operators during the quarter. As we bring on these fiber-to-the-home operators, we are having increasing success in selling them our complete portfolio, including our in-home WiFi solutions and SaaS applications while also driving interest in our packet optical portfolio. This growth in the U.S. is well aligned with the broadband funding still ahead of us with large programs like BEAD expected to make impact in late 2024 through 2026.

這些舉措將在市場從近期逆風中復甦後推動長期永續成長。從客戶獲取開始，我們在本季向家庭運營商增加了 13 條光纖。隨著我們引入這些光纖到府營運商，我們在向他們出售我們的完整產品組合方面取得了越來越大的成功，包括我們的家庭WiFi 解決方案和SaaS 應用程序，同時也激發了人們對我們的分組光纖產品組合的興趣。美國的這種成長與我們仍面臨的寬頻資金非常吻合，BEAD 等大型計畫預計將在 2024 年底到 2026 年產生影響。

Looking outside the U.S., we continue to be 1 of the biggest beneficiaries of high-risk vendor replacement initiatives. In this past quarter, we were awarded 2 key Tier 1 Metro WDM projects, which would have likely been awarded to high-risk vendors in the past. On the fiber-to-the-home side, we have multiple large service provider opportunities in the funnel in Europe, where we are well positioned for success considering that we shipped over 75,000 ports of our new flagship OLT platform the SDX 6330 this past quarter, and this platform is an ideal fit for these customers.

放眼美國以外的地區，我們仍然是高風險供應商更換計劃的最大受益者之一。在過去的這個季度，我們獲得了 2 個關鍵的一級城域 WDM 項目，這些項目在過去很可能會授予高風險供應商。在光纖到府方面，我們在歐洲擁有多個大型服務供應商機會，考慮到上個季度我們的新旗艦 OLT 平台 SDX 6330 的出貨量超過 75,000 個端口，我們在歐洲已做好了成功的準備，這個平台非常適合這些客戶。

While some of these vendor replacement initiatives won't produce market material revenue in this year, we are on pace to become the market share leader in both Metro WDM and fiber-to-the-home OLT solutions in Europe within the next 2 years.

雖然其中一些供應商更換計劃今年不會產生市場實質收入，但我們預計在未來 2 年內成為歐洲城域 WDM 和光纖到戶 OLT 解決方案的市場份額領導者。

We continue to build momentum in our packet optical portfolio in the U.S. regional service provider space, and we are, of course, expanding our footprint of fiber access across Europe. The timing of these opportunities is a good match to -- to enhancements in our optical trans portfolio that are targeted to the needs of regional service providers, including our new coherent pluggable modules.

我們繼續在美國區域服務供應商領域增強分組光纖產品組合的勢頭，當然，我們也在擴大我們在整個歐洲光纖接入的足跡。這些機會的時機很好地匹配了我們的光傳輸產品組合的增強，這些產品組合旨在滿足區域服務提供者的需求，包括我們新的相干可插拔模組。

Our open line system optimized for regional networks and a new generation of cost, space and power optimized optical terminals that are 800 gig ready. For the 100 ZR coherent pluggable module, which is highly anticipated across a broad range of customers, we are launching trials this quarter, and we have already received orders for future deployments.

我們的開放式線路系統針對區域網路進行了最佳化，並針對成本、空間和功率進行了最佳化的新一代光終端，可支援 800 GB。對於備受廣大客戶期待的100 ZR相干可插拔模組，我們將於本季啟動試驗，並且已經收到了未來部署的訂單。

On the software side, we added 68 new Mosaic One customers in the quarter, the second highest number in additions in any quarter, driving adoption of Mosaic One to more than 300 customers in total. This growth in SaaS has been aided by the recent launch of Intellifi, a cloud-managed WiFi solution paired with the launch of our next-generation WiFi 6, WiFi 6E and WiFi 7 platforms that deliver high-performance multi-gig speeds in a compact form factor.

在軟體方面，我們在本季度新增了 68 個 Mosaic One 客戶，這是任何季度新增數量第二高的，推動 Mosaic One 的採用總數達到 300 多個客戶。 SaaS 的成長得益於最近推出的 Intellifi（一種雲端管理 WiFi 解決方案）以及我們推出的下一代 WiFi 6、WiFi 6E 和 WiFi 7 平台，這些平台以緊湊的方式提供高效能的多千兆速度構成因素。

We expect continued growth in both SaaS and our in-home platforms in the quarters ahead given the enhancement of this portfolio and the broader adoption of our software platforms. In addition to our SaaS offerings, we continue to grow our base of recurring revenue associated with hardware and software maintenance and our leading network infrastructure and network management platforms. This portion of our revenue streams offers high margins, more predictability and steady growth opportunities while contributing towards our software-related revenue that generates more than 10% of the total company revenue at this point in time.

鑑於該產品組合的增強以及我們軟體平台的更廣泛採用，我們預計 SaaS 和我們的家庭平台在未來幾季將持續成長。除了我們的 SaaS 產品外，我們還繼續擴大與硬體和軟體維護以及領先的網路基礎設施和網路管理平台相關的經常性收入基礎。我們收入流的這一部分提供了高利潤、更具可預測性和穩定的成長機會，同時為我們與軟體相關的收入做出了貢獻，目前軟體相關收入占公司總收入的 10% 以上。

In summary, we continue to focus on capturing fiber footprint with our optical transport and fiber access platforms, led by the U.S. and Europe and then drive adoption of our complete portfolio, including subscriber platforms, software applications and services. Despite broader market challenges, we still made progress against these goals. While we remain very confident in our long-term outlook, we are in a period of market uncertainty due to ongoing inventory reductions and more restrained capital spending across our service provider customer base, particularly in the large service customer segment.

總而言之，我們繼續專注於透過以美國和歐洲為首的光傳輸和光纖接入平台來捕捉光纖足跡，然後推動我們完整產品組合的採用，包括用戶平台、軟體應用程式和服務。儘管市場面臨更廣泛的挑戰，我們仍然在實現這些目標方面取得了進展。儘管我們對長期前景仍然充滿信心，但由於我們的服務提供者客戶群（尤其是大型服務客戶群）的庫存持續減少和資本支出更加受限，我們正處於市場不確定時期。

This uncertainty led to more order pushouts in Q3 and Q4 of this year, driving us to take a more cautious approach with our forecast and operating model. We are now planning for a scenario in which the current headwinds could persist through 2024. As a result, we decreased our non-GAAP operating expense levels during the past quarter, consistent with previously stated targets, and we have set additional expense reduction targets for early next year.

這種不確定性導致今年第三季和第四季有更多訂單推出，促使我們對預測和營運模式採取更加謹慎的態度。我們現在正在計劃當前的不利因素可能持續到2024 年。因此，我們在上個季度降低了非GAAP 營運費用水平，與先前設定的目標一致，並且我們為以下目標設定了額外的費用削減目標：明年初。

Non-GAAP operating expenses were reduced 6% this past quarter relative to Q2. And as stated earlier, we expect to see additional -- an additional 15% reduction in non-GAAP operating expenses this quarter as part of our expanded efficiency program.

上個季度的非 GAAP 營運費用較第二季減少了 6%。如前所述，作為我們擴大效率計劃的一部分，我們預計本季非 GAAP 營運費用將額外減少 15%。

As noted earlier, we are still focused on investing in products and regions that are core to our growth and in the future and are still achieving our planned cost optimizations with those in mind. For continued focus on customer capture, our continued focus on customer capture in high-growth regions, new product innovation, improving margins and operational cost savings has us well positioned for long-term growth after we navigate the headwinds that are in our market.

如前所述，我們仍然專注於投資對我們成長和未來至關重要的產品和地區，並且仍在實現我們計劃的成本優化。為了繼續專注於客戶獲取，我們持續專注於高成長地區的客戶獲取、新產品創新、提高利潤率和節省營運成本，這使我們在克服市場逆風後為長期成長做好了準備。

With that, I will turn things over to Uli to provide a review of our financial results. And then following Uli's remarks, we'll open it up to any questions that you may have. Uli?

這樣，我將把事情交給 Uli 來審查我們的財務表現。在 Uli 發言之後，我們將回答您可能提出的任何問題。烏利？

Thank you, Tom. And hello, everybody. I will cover our third quarter 2023 results and provide our expectations for the fourth quarter. Please note that Q3 2023 results include a full quarter consolidation of the ADTRAN Networks financials, which affect year-over-year comparisons. Since this is the case, I will refrain from repeating the consolidation effects when discussing the year-over-year comparisons of our results.

謝謝你，湯姆。大家好。我將介紹我們 2023 年第三季的業績，並提供我們對第四季的預期。請注意，2023 年第三季的業績包括 ADTRAN Networks 財務資料的完整季度合併，這會影響年比比較。既然如此，在討論我們結果的同比比較時，我將避免重複合併效應。

I will be referencing non-GAAP information with reconciliations to the most directly comparable GAAP financial measures presented in our press release. And also certain revenue information by segment and category, which is available on our Investor Relations web page at investors.adtran.com.

我將引用非公認會計原則信息，並與我們新聞稿中提供的最直接可比較的公認會計原則財務指標進行調節。還有按細分市場和類別劃分的某些收入信息，可在我們的投資者關係網頁 Investors.adtran.com 上獲取。

In addition, we have updated the investor presentation to the site, which is available for download. Unless stated otherwise, all financials are presented in U.S. dollars.

此外，我們也更新了網站上的投資者簡報，可供下載。除非另有說明，所有財務數據均以美元表示。

Q3 2023 revenue came in at $272.3 million and was down 20% year-over-year and down 17% quarter-over-quarter. Our Network Solutions segment accounted for 83.9% of revenues in Q3 compared to 89.5% in Q3 2022 and 86.4% in Q2 2023. Our Services & Support segment contributed 16.1% of revenues in Q3 2023 compared to 10.5% in the year ago quarter and 13.6% in the previous quarter.

2023 年第三季營收為 2.723 億美元，年減 20%，季減 17%。我們的網路解決方案部門佔第三季營收的83.9%，而2022 年第三季為89.5%，2023 年第二季為86.4%。我們的服務與支援部門佔2023 年第三季營收的16.1% ，而去年同期為10.5%，2023 年第二季為13.6%。上一季的%。

Access and Aggregation contributed 34.8% of revenue and grew 7.3% compared to the year ago quarter, but was down 7.9% compared to the previous quarter. Our optical networking solution category contributed 42.7% of revenues and was down 2.2% year-over-year and down 18.7% quarter-over-quarter.

接取和聚合貢獻了34.8%的收入，較去年同期成長7.3%，但較上季下降7.9%。我們的光網路解決方案類別貢獻了42.7%的收入，較去年同期下降2.2%，季減18.7%。

Subscriber Solutions continued to struggle and was down 54% year-over-year and 24.7% quarter-over-quarter and contributed 22.6% of Q3 revenues. As Tom mentioned earlier, all 3 revenue categories were impacted by constrained customer spending. Regionally, year-over-year, third quarter domestic revenue was down 34.3%, and international revenue declined 6%. International revenue made up 59.1% and domestic revenue contributed 40.9% of total Q3 revenues.

用戶解決方案繼續陷入困境，年減 54%，季減 24.7%，佔第三季營收的 22.6%。正如 Tom 之前提到的，所有 3 個收入類別都受到客戶支出受限的影響。從地區來看，第三季國內營收年減 34.3%，國際營收下降 6%。國際收入佔第三季總收入的 59.1%，國內收入佔 40.9%。

We had one 10% or more of revenue customer in Q3. Q3 non-GAAP gross margin was 40.3% and increased by 220 basis points year-over-year and 170 basis points sequentially. The year-over-year and quarter-over-quarter increase is due to lower purchasing and transportation costs and a more favorable customer and product mix. Our cost synergies are starting to show the expected effects. Compared to Q3 2024, which was a quarter with only a partial contribution, our non-GAAP operating expenses were $114.9 million, increasing by 5% year-over-year.

第三季我們有一個佔收入 10% 或更多的客戶。第三季非 GAAP 毛利率為 40.3%，較去年同期成長 220 個基點，較上季成長 170 個基點。同比和環比成長歸因於採購和運輸成本降低以及更有利的客戶和產品組合。我們的成本綜效開始顯現出預期效果。與 2024 年第三季（僅做出部分貢獻）相比，我們的非 GAAP 營運費用為 1.149 億美元，年增 5%。

However, compared to Q2 2023, non-GAAP operating expenses decreased by 6%. We reduced non-GAAP R&D spend by 4% and SG&A expenses by 8% quarter-over-quarter. Non-GAAP operating expenses were 42.2% of revenue compared to 32% of revenue in Q3 2022 and 37.5% of revenue in Q2 2023. Non-GAAP operating loss was $5.1 million, which translates into a non-GAAP operating margin of negative 1.9%.

然而，與 2023 年第二季相比，非 GAAP 營運費用下降了 6%。我們將非 GAAP 研發支出較上季減少 4%，銷售、一般管理費用較上季減少 8%。非 GAAP 營運費用佔收入的 42.2%，而 2022 年第三季為 32%，2023 年第二季為 37.5%。非 GAAP 營運虧損為 510 萬美元，這意味著非 GAAP 營運利潤率為負 1.9% 。

The quarter-over-quarter and year-over-year decrease in our operating profitability is due to lower revenues, partially offset by increased gross margins and operating expense improvements. The company's non-GAAP tax provision for the third quarter of 2023 was $6.8 million. The company's GAAP tax was a benefit of $16.6 million. The difference between the GAAP and non-GAAP rate was mainly driven by the jurisdictional mix of the non-GAAP adjustments during the quarter.

我們的營業利潤環比和年減是由於收入下降，但部分被毛利率增加和營運費用改善所抵消。該公司 2023 年第三季的非 GAAP 稅收撥備為 680 萬美元。該公司的 GAAP 稅項收益為 1,660 萬美元。公認會計原則和非公認會計原則利率之間的差異主要是由本季非公認會計原則調整的司法管轄區組合造成的。

Closing out the income statement results. Total non-GAAP net loss was $13.7 million and a net loss of $10.8 million after adjusting for minority shareholder interest in ADTRAN Networks SE. This resulted in diluted loss per share attributable to the company of $0.14 per share.

結清損益表結果。非 GAAP 淨虧損總額為 1,370 萬美元，調整 ADTRAN Networks SE 少數股東權益後的淨虧損為 1,080 萬美元。這導致公司應佔每股攤薄虧損為每股 0.14 美元。

Turning to the balance sheet and cash flow statement. Cash and cash equivalents totaled $116.1 million at quarter end. Cash flow generated from operations was $6.8 million and improved by $23 million compared to the previous quarter. Trade accounts receivables were $229.3 million at quarter end, resulting in DSO of 77 days compared to 67 days in the prior quarter.

轉向資產負債表和現金流量表。截至季末，現金和現金等價物總額為 1.161 億美元。營運產生的現金流為 680 萬美元，比上一季增加了 2,300 萬美元。季度末貿易應收帳款為 2.293 億美元，DSO 為 77 天，而上一季為 67 天。

Inventories were $374 million at the end of the third quarter, resulting in terms of 2.0% compared to 2.3% in Q2 2023. Inventory includes the write-off of $21 million as we accelerated the end of life of certain products to streamline our product offerings. Accounts payable were $148.9 million, resulting in DPO of 60 compared to 59 in the previous quarter.

第三季末庫存為 3.74 億美元，年增 2.0%，而 2023 年第二季為 2.3%。庫存包括因我們加快某些產品的報廢速度以簡化我們的產品供應而沖銷的 2,100 萬美元。應付帳款為 1.489 億美元，導致 DPO 為 60，而上一季為 59。

As Tom mentioned earlier we decide -- we have taken decisive steps towards a much leaner and more efficient company. Furthermore, we have taken measures to delever our balance sheet and strengthen our capital structure. For this reason, we implemented and expanded a business efficiency program, which consists of a cost efficiency program and a capital efficiency program.

正如湯姆之前提到的，我們決定──我們已採取果斷措施，打造一家更精簡、更有效率的公司。此外，我們也採取措施去槓桿化資產負債表並強化資本結構。為此，我們實施並擴展了業務效率計劃，其中包括成本效率計劃和資本效率計劃。

With the cost efficiency program, we are expecting annual savings of $90 million by the end of 2024. The key initiatives of the program are: global workforce reduction site consolidation, including partial sale of owned real estate, which will reduce operating costs and increase efficiency and then accelerated end of life of certain products.

透過成本效率計劃，我們預計到 2024 年底每年可節省 9,000 萬美元。該計劃的主要舉措是： 全球勞動力減少、工廠整合，包括部分出售自有房地產，這將降低營運成本並提高效率然後加速某些產品的使用壽命。

First results of the cost efficiency program will already be effective in Q4 2023. We estimate to reduce our non-GAAP operating expenses sequentially by 15%. With our enhanced operating model, we are expecting to return to non-GAAP profitability latest by Q2 of next year and to generate positive free cash flow.

成本效率計畫的初步結果將於 2023 年第四季生效。我們預計非 GAAP 營運費用將較上季減少 15%。隨著我們改善的營運模式，我們預計最晚在明年第二季恢復非公認會計準則獲利能力，並產生正的自由現金流。

As part of the capital efficiency program, the company yesterday decided to suspend the quarterly dividend generating annual cash savings of $28 million, which we will use to contribute on the execution of our business efficiency program and to repay debt. In addition, we are executing our site consolidation program, which will include divestiture of certain company-owned real estate. In total, we expect to generate cash of up to $180 million, which will be used to repay our existing debt borrowings and improve our capital structure.

作為資本效率計劃的一部分，公司昨天決定暫停季度股息，從而每年節省 2800 萬美元的現金，我們將用這筆錢來執行業務效率計劃並償還債務。此外，我們正在執行我們的網站整合計劃，其中包括剝離某些公司擁有的房地產。總的來說，我們預計將產生高達 1.8 億美元的現金，這些現金將用於償還我們現有的債務借款並改善我們的資本結構。

Ultimately, we believe that this business efficiency program will benefit all our stakeholders and will increase shareholder return. Consistent with our industry, we expect for Q4 similar trends compared to Q3 and anticipate that the ongoing macroeconomic challenges and higher inventory levels at our customers will continue into 2024, affecting our customers' ability to invest. We expect our industry being challenged through the first half of 2024.

最終，我們相信這項業務效率計劃將使我們所有的利害關係人受益，並增加股東回報。與我們的行業一致，我們預計第四季度的趨勢將與第三季度類似，並預計我們客戶持續面臨的宏觀經濟挑戰和較高的庫存水平將持續到 2024 年，從而影響我們客戶的投資能力。我們預計我們的產業到 2024 年上半年都會面臨挑戰。

To address these challenges, we are concentrating on aspects we can influence, specifically managing costs and enhancing operational efficiency. We are actively working to reshape our business at its core and we remain committed to implementing our strategy aimed at bolstering our strong position in fiber access and optical networking.

為了應對這些挑戰，我們專注於我們可以影響的方面，特別是管理成本和提高營運效率。我們正在積極努力重塑我們的核心業務，並繼續致力於實施旨在鞏固我們在光纖接入和光網路領域的強勢地位的策略。

For the fourth quarter of 2023, we expect revenue to range between $210 million and $240 million, and we expect a non-GAAP operating margin between negative 7% and 0% of revenues. Looking beyond 2024, I would like to discuss with you our midterm financial target model, which builds on our enhanced operating model. We expect to be ideally positioned based on our existing customer base and continued success of new customer wins. Our comprehensive product and software portfolio. The future tailwinds arising from government funding and high-risk vendor replacement initiative.

對於 2023 年第四季度，我們預計收入將在 2.1 億美元至 2.4 億美元之間，並且我們預計非 GAAP 營業利潤率將在收入的負 7% 至 0% 之間。展望 2024 年以後，我想與您討論我們的中期財務目標模型，該模型建立在我們增強的營運模型的基礎上。我們希望基於我們現有的客戶群和新客戶的持續成功，獲得理想的定位。我們全面的產品和軟體組合。未來的動力來自政府資助和高風險供應商更換計劃。

And most importantly, the strength of the global ADTRAN team. We are targeting to achieve a sustainable non-GAAP operating margin in the low teens for the year 2025. This comprehensive and forward-looking financial model is designed to guide the company's growth enhance the financial stability and ensure a prosperous future for all our stakeholders.

最重要的是，全球 ADTRAN 團隊的實力。我們的目標是到2025 年實現可持續的非公認會計原則營業利潤率在十幾歲以下。這種全面且具有前瞻性的財務模型旨在指導公司的成長，增強財務穩定性並確保所有利益相關者擁有繁榮的未來。

Once again, additional financial information is available at ADTRAN's Investor Relations web page at investors.adtran.com.

再次強調，更多財務資訊可在 ADTRAN 投資者關係網頁 Investors.adtran.com 上取得。

Thank you for attending our call. I will now turn it back over to the operator, and we will take your questions.

感謝您參加我們的電話會議。我現在將把它轉回接線員，我們將回答您的問題。

(Operator Instructions) Our first question comes from the line of George Notter from Jefferies.

（操作員說明）我們的第一個問題來自 Jefferies 的 George Notter。

I guess I wanted to ask about the excess inventory that's out there. If I go back, I think, 3 months ago, you guys were looking at the CPE pieces of the business kind of kind of running that inventory off by the end of the year. And I think on the optical side of the business, I think you thought maybe you could run it off by Q1 of next year. And now based on your comments, it sounds like that inventory is larger and it's going to linger for longer.

我想我想問一下那裡的多餘庫存。如果我回去，我想，三個月前，你們正在研究業務的 CPE 部分，有點像在年底前耗盡庫存。我認為在業務的光學方面，我想你認為也許你可以在明年第一季之前完成它。現在根據您的評論，聽起來庫存更大，並且會持續更長時間。

Can you talk about what you're seeing in the marketplace? Where is that inventory? And why is it a surprise to you in terms of the depth and duration of the correction.

您能談談您在市場上看到的情況嗎？那個庫存在哪裡？以及為什麼這次調整的深度和持續時間會讓你感到驚訝。

Yes. George, at this point in time, I think it's -- there's -- it's a little opaque. It's exactly what is inventory versus what is kind of capital constraint. Actually, people trying to lower their expense level.

是的。喬治，在這個時候，我認為它有點不透明。這正是庫存與資本限制的差異。實際上，人們試圖降低開支水準。

I think the inventory levels on the CPE side, I don't think that they're high, but I think people are just starting to run leaner and leaner. And I think it's very similar on the optical side. What we've seen is we don't see a lot of inventory out there, but what we're seeing is projects actually just being moved. And as you probably know, the -- the WDM portion of that business. A lot of that is project oriented where they do an upgrade. And we're seeing those upgrades, and we literally saw that through the quarter where they were moving these upgrades into next year.

我認為 CPE 方面的庫存水準並不高，但我認為人們剛開始變得越來越精簡。我認為它在光學方面非常相似。我們所看到的是，我們沒有看到大量庫存，但我們看到的是項目實際上剛剛被轉移。您可能知道，該業務的 WDM 部分。其中很多都是面向專案的，他們進行升級。我們正在看到這些升級，我們確實在他們將這些升級移至明年的季度中看到了這一點。

So it's not -- you wouldn't call that inventory, right? That was literally just a movement from 1 quarter to another. And that's kind of where -- that's kind of what we're seeing.

所以它不是——你不會稱之為庫存，對吧？這實際上只是從一個季度到另一個季度的移動。這就是我們所看到的。

Got you. Okay. That makes sense. And then .

明白你了。好的。這就說得通了。進而 。

I would say at this point is -- let me just read it, I'd say at this point, it's probably more environmental than inventory.

我想說的是——讓我讀一下，我想說的是，這可能比庫存更環保。

Okay. And then maybe also, I guess you mentioned that 1 bright spot in the business was regional service providers. I think in quarters past, you guys have given us some compares on the fiber-to-the-prem OLT side of things.

好的。我想您也提到了該業務的一個亮點是區域服務提供者。我想在過去的幾個季度裡，你們已經為我們提供了一些關於光纖到本地 OLT 的比較。

Can you give us any sense for how that business was growing with regional service providers quarter-on-quarter or year-on-year?

您能否告訴我們該業務與區域服務提供者的季度環比或年成長情況如何？

Business? Yes. The OLT business in the U.S., let's say, Tier 1, Tier 2, Tier 3, the regional service providers was actually -- I don't have the number in front of me, but I've seen the number and it was actually up sequentially and year-over-year. So that is a bright spot, that piece.

商業？是的。美國的 OLT 業務，比如說，Tier 1、Tier 2、Tier 3，區域服務提供者實際上是——我面前沒有這個數字，但我看到過這個數字，它實際上是環比和同比上升。所以那是一個亮點，那件作品。

Got it. Okay. Can you give us a sense for how big the U.S. regional service providers are as a percentage of sales at ADTRAN now?

知道了。好的。您能否讓我們了解一下美國區域服務提供者目前在 ADTRAN 銷售額中所佔的比例有多大？

Do you know Uli that.

你知道烏利嗎？

About 30% -- 30%, 35%, the mid-30s.

約30%——30%、35%，30多歲。

Okay. Great. And then last one, I think you mentioned on the call that software is now more than 10% of sales. Can you talk about that? What I assume we're talking about Mosaic or are there other pieces here? Is it mostly in SaaS and recurring models? Is it in perpetual license model? Just talk a bit about that software business and what we're talking what we're looking at there. Yes.

好的。偉大的。最後一個，我想您在電話會議中提到軟體現在佔銷售額的 10% 以上。你能談談嗎？我假設我們正在談論馬賽克，或者這裡還有其他作品嗎？主要是 SaaS 和重複模型嗎？是永久授權模式嗎？簡單談談軟體業務以及我們正在談論的內容。是的。

Yes. So we don't have that breakout, but I can talk to you just kind of in general terms. So it does include all of that. The software piece there are 2 ways that we actually -- let's say, 3 ways.

是的。所以我們沒有那種突破，但我可以和你談談一般性的情況。所以它確實包括所有這些。軟體部分其實有 2 種方式——比如說 3 種方式。

We do perpetual licenses. We do software and software maintenance, right? So we have long-term maintenance contracts on that software which is typically a larger company model. And then we have our SaaS products, the most notable 1 being Mosaic. I would say if you look at recurring versus nonrecurring, which is kind of the big metric that we look at. It's about it's about 1/3, maybe 1/3 to 40% is recurring, and then the rest of it is nonrecurring, and we're doing everything we can do to move that to change that metric.

我們提供永久許可。我們是做軟體和軟體維護的，對吧？因此，我們對該軟體簽訂了長期維護合同，這通常是較大的公司模式。然後我們有 SaaS 產品，其中最著名的是 Mosaic。我想說的是，如果你看看經常性與非經常性，這是我們關注的重要指標。大約有 1/3，也許 1/3 到 40% 是經常性的，然後其餘部分是非經常性的，我們正在盡一切努力來改變這個指標。

Got it. Okay. I appreciate it.

知道了。好的。我很感激。

Our next question comes from the line of Michael Genovese from Rosenblatt Securities.

我們的下一個問題來自羅森布拉特證券公司的 Michael Genovese。

So I think in prior quarters, recently, we heard about the sort of larger U.S. Tier 1 and Tier 2 order softness. It seems as I look through this at the most meaningful change, with sort of inventory correction, order softness spreading to the European customers. Is that -- I mean, I don't know if spreading is the right word, but that's kind of the incremental change was the European demand getting softer. Is that -- is that a fair read?

因此，我認為在前幾個季度，最近，我們聽說了美國一級和二級訂單的疲軟程度。在我看來，這是最有意義的變化，包括庫存調整、訂單疲軟蔓延到歐洲客戶。我的意思是，我不知道「傳播」這個詞是否正確，但這是一種增量變化，因為歐洲的需求變得疲軟。這是──公平的解讀嗎？

I would say that's probably the environmental -- yes, that's the environment because the U.S. is already soft. The larger carriers in the U.S. were already soft. So I think we saw it in Europe and then probably more impactful on the optical side of the business. So we saw that increase. Now we kind of expected that to increase coming out of this year, not as much as it did. We really did see a lot of projects, predominantly in the U.S. -- I mean, excuse me, in Europe that just kind of shifted into next year.

我想說這可能是環境問題——是的，這就是環境問題，因為美國已經很軟了。美國的大型航空公司已經表現疲軟。所以我認為我們在歐洲看到了它，然後可能對光學業務產生更大的影響。所以我們看到了這種成長。現在我們預計今年這一數字將會增加，但增幅不會那麼大。我們確實看到了很多項目，主要是在美國——我的意思是，對不起，在歐洲，這些項目只是轉移到了明年。

Okay. And then if I could -- that's helpful. If I could go back to the regional service provider, when George was asking the question, what was coming to my mind is that it was really sort of Tier 3 focused question and -- but I guess it sounds like from your answer that your definition of regional includes Tier 1s, Tier 2s and Tier 3s. Can you.

好的。然後如果我能——那就很有幫助。如果我可以回到區域服務提供者，當喬治問這個問題時，我想到的是這確實是第 3 級重點問題，但我想從您的回答來看，您的定義聽起來像是區域包括一級、二級和三級。你可以嗎。

No, no, no, on includes depending on -- I mean, the Tier 3 RSP number on OLTs was actually up. I think -- I don't think Tier 2 really affected it never includes Tier 1.

不不不，包括取決於——我的意思是，OLT 上的第 3 層 RSP 數量實際上增加了。我認為——我認為第 2 層並沒有真正受到影響，它從不包括第 1 層。

Got it. Okay. That's also helpful. And then, I mean, just basically, it seems like for the actual -- the third quarter, right, I mean, the weakness was really in subscriber solutions. But it must be the order intake more for Optical and somewhat for Access and Aggregation in the third quarter must have been disappointing, right, to get to this fourth quarter guide.

知道了。好的。這也很有幫助。然後，我的意思是，基本上，對於第三季來說，我的意思是，弱點確實在於訂戶解決方案。但第三季光端機以及接入和聚合端的訂單量肯定令人失望，對吧，達到第四季度的指南。

So -- so I mean I would say that Access and Aggregation and Optical have held up, but we're -- it seems like we're kind of -- I mean, we're expecting those to be much softer in the fourth quarter. I just want to verify that.

So -- so I mean I would say that Access and Aggregation and Optical have held up, but we're -- it seems like we're kind of -- I mean, we're expecting those to be much softer in the fourth四分之一.我只是想驗證一下。

The answer, yes. I mean, we expect the same kind of pressure. Optical will be -- right now, our expectation is Optical will actually be farther down than where we expect Access and Aggregation to drop as far as on a percentage basis. So that's really -- and like I said, the project move-outs are probably the biggest thing that you can highlight as far as our kind of relooking at Q4. And then just really no rebound and no bounce up on any of the other pieces of the business.

答案是，是的。我的意思是，我們期待同樣的壓力。光纖將 - 目前，我們的預期是光纖實際上將比我們預期的存取和聚合下降的百分比進一步下降。所以這確實是——就像我說的，就我們對第四季的重新審視而言，專案搬遷可能是你可以強調的最大的事情。然後就真的沒有反彈，其他生意也沒有反彈。

Okay. Well, that's -- I would appreciate the really helpful responses. Thank you, Tom.

好的。嗯，那就是——我會很感激那些真正有幫助的回覆。謝謝你，湯姆。

Our next question comes from the line of Ryan Koontz from Needham & Company.

我們的下一個問題來自 Needham & Company 的 Ryan Koontz。

I wanted to maybe come at this a different angle here, Tom. As we you're talking about capital constraints at providers here, tightening spending? And I think about that as probably as affecting the OLT business, where you have all the capital intensity around labor, putting the fiber in the ground.

湯姆，我想也許能從不同的角度來看這個問題。當我們談論供應商的資本限制、收緊支出？我認為這可能會影響 OLT 業務，因為在該業務中，所有資本密集度都圍繞著勞動力，將光纖埋入地下。

And why wouldn't customers be more focused on success-based spending and lighting up helps in their existing footprint. And so why aren't we seeing CPE rebound given the customer constraints?

為什麼客戶不更加關注基於成功的支出並點亮他們現有的足跡。那麼，考慮到客戶的限制，為什麼我們沒有看到 CPE 反彈呢？

Yes, that's a really good question. And I think -- and I would agree with you. I mean there are things that are more easily moved out than other things, right? And new footprint expansion is typically one of the things that's just easier to move. Same thing with some of these WDM projects.

是的，這是一個非常好的問題。我認為——我會同意你的觀點。我的意思是有些東西比其他東西更容易被移走，對吧？新的佔地面積擴展通常是更容易移動的事情之一。其中一些 WDM 專案也是如此。

I think some of it is just kind of what the plan build was. So I mentioned we shipped just a ton of ports out of the SDX but that was planned for a long time, and there was part of that expansion. But I will tell you that even in that case, where we're shipping SDX ports.

我認為其中一些只是計劃的內容。所以我提到我們只從 SDX 中運送了大量端口，但這是計劃了很長時間的，並且是擴展的一部分。但我會告訴您，即使在這種情況下，我們也會運送 SDX 連接埠。

A lot of it is to add more ports to kind of existing footprint. So it's kind of increasing your homes pass on that existing footprint. So they're not -- so I think even in those cases, they're trying to minimize the capital and labor cost with adding to their commitments on their homes passed.

其中很大一部分是在現有的佔地面積上添加更多連接埠。因此，這在某種程度上增加了您的房屋對現有足跡的影響。所以他們不是——所以我認為即使在這些情況下，他們也會透過增加對房屋的承諾來盡量減少資本和勞動成本。

You're absolutely right on subscriber. We expect just from the business and on the homes past ports that we're shipping now to see an uptick in that business in the first half, but we just haven't seen it -- we just haven't seen it yet.

您對訂戶的看法絕對正確。我們預計，僅從業務和我們現在正在運送的經過港口的房屋來看，上半年該業務就會有所增加，但我們只是還沒有看到——我們只是還沒有看到。

Fair. Okay. That's helpful. And regarding your guide for Q4, and I heard your comments, it sounds like some of this real tightening is starting to impact Europe. I wonder specifically, I heard from another vendor about some changes in the regulatory climate in Germany as it relates to some of the fiber broadband subsidies.

公平的。好的。這很有幫助。關於您對第四季度的指導，我聽到了您的評論，聽起來這種真正的緊縮政策正在開始影響歐洲。我特別想知道，我從另一家供應商那裡聽說了德國監管環境的一些變化，因為它與一些光纖寬頻補貼有關。

And are you seeing any of that impact in your German customers included in your guide? Or is this just unrelated and driven by just pure capital conservation.

您是否在指南中看到了對德國客戶的影響？或者這只是無關的，只是由純粹的資本節約所驅動的。

It's just pure capital conservation. But that is spotty. So like if I look at, let's say, Germany, that business on fiber-to-the-home, we expect to pick up even in the near term. And that's just because of where we are with 6330 lab approvals and where they are with homes passed.

這只是純粹的資本節約。但這是參差不齊的。因此，就像我看看德國的光纖到戶業務一樣，我們預計即使在短期內也會有所回升。這只是因為我們獲得了 6330 個實驗室的批准，而他們也獲得了通過。

Now project-related like optical business, we expect to continue to slide. So those are the 2 pieces. And in Germany, actually, we would expect a stronger -- we expect a stronger Q4 and actually Q1.

現在與專案相關的業務，如光學業務，我們預計將繼續下滑。這就是 2 塊。實際上，在德國，我們預計第四季和實際上第一季會更強勁。

Okay. Great. And Uli can you remind me of the revolver terms you guys have right now? Any planned changes in that structure?

好的。偉大的。烏利你能提醒我你們現在的左輪手槍術語嗎？該結構有任何計劃改變嗎？

No, the terms are still the same. No change.

不，條款仍然相同。不用找了。

Our next question comes from the line of Tim Savageaux from Northland Capital Markets.

我們的下一個問題來自 Northland Capital Markets 的 Tim Savageaux。

A couple of questions about the Q4 guide. It looks like based on a separate report, out of the kind of legacy ADVA, but that's expected to be flattish into Q4.

關於第四季指南的幾個問題。它看起來像是基於一份單獨的報告，屬於傳統的 ADVA 類型，但預計到第四季度將持平。

I don't know if that's a lot of decline in optical and some strength in enterprise. But -- so it would seem based on that, that most of the weakness is coming from the kind of legacy ADTRAN side. I wonder if you could confirm that and talk to whether that has a geographic focus to it in Q4?

我不知道這是否是光學方面的大量下降和企業方面的一些實力。但是，基於此看來，大部分弱點都來自於傳統的 ADTRAN 面向。我想知道您是否可以確認這一點，並討論第四季度是否有地理重點？

And kind of as an aside to that, maybe ask the same question about regional service providers for your Q4 guide as you answered earlier for Q3, which is -- I don't know if you expect that to grow in Q4, but do you expect it to outperform.

順便說一句，也許您可以在第四季度指南中問有關區域服務提供者的相同問題，就像您之前為第三季度回答的那樣，我不知道您是否預計第四季度會增長，但您認為嗎？預計其表現將優於大盤。

Let me get on the first piece, and I'll ask Uli. I'm not sure how we're getting -- how we're coming to that number. But our expectation right now is the optical piece of the business is going to be down materially. That's the biggest drop. So -- and so that's the legacy ADVA piece of the business, which we do expect to be -- that's kind of the big change as those project movements. Uli, you want to touch.

讓我開始第一部分，我會問烏利。我不確定我們是如何得到這個數字的。但我們現在的預期是光學業務將大幅下滑。這是最大的跌幅。所以——這就是 ADVA 業務的遺留部分，我們確實希望如此——這就是這些項目移動帶來的巨大變化。烏利，你想摸一下。

It's going to be further down. And if you recall it, last quarter, the ADVA side of the business updated the yearly guidance down to the low teens for the year. So I don't know where you got the read from the ADVA or ADTRAN Networks that side will continue to be on that level where it's currently at. So again, the yearly guidance for the ADTRAN Network (inaudible) is in the low teens.

還會再往下走。如果您還記得的話，上個季度，ADVA 業務部門將年度指導值更新為 10% 以下。所以我不知道你從哪裡得到 ADVA 或 ADTRAN 網路的消息稱，這方面將繼續保持目前的水平。同樣，ADTRAN 網路的年度指導（聽不清楚）處於十幾歲以下。

What I'm reading here is high single digits to low teens. So taking the midrange there. But really, we're on the bottom end of that range. That's fair enough.

我在這裡讀到的是高個位數到低十幾歲的數字。所以就拿中頻來說吧。但實際上，我們正​​處於該範圍的底部。這很公平。

Like Tom said earlier, Yes. like Tom said earlier, the order entry was disappointing on the ADTRAN on the Optical side. And the pushouts were actually the big mover, right, the push outs into next year from many of the projects that were originally scheduled for the fourth quarter.

就像湯姆之前說的，是的。正如 Tom 之前所說，光端 ADTRAN 的訂單輸入令人失望。延期實際上是最大的推動者，對吧，將原定於第四季度進行的許多項目推遲到明年。

Okay. Well, then it sounds like on that basis that you could have some decent expectations for regional in Q4, but I just wanted to follow up on that question.

好的。嗯，那麼聽起來，在此基礎上，您可以對第四季度的區域性抱有一些不錯的期望，但我只是想跟進這個問題。

Yes. It's been relatively consistent. OLT shipments have been relatively consistent, just ongoing. And they're not -- there was a period, not that long ago, where they're growing 30% or 40% a year. But at this point in time, they're kind of just flattish and we're okay with flat right now, needless --to say so. I don't have that exact number, but I would expect them to operate the way and behave the way that they have been behaving. Does that get your question?

是的。已經比較一致了。 OLT 出貨量一直相對穩定，而且還在持續。事實上，就在不久前，有一段時期，它們每年增長 30% 或 40%。但在這個時候，它們有點扁平化，而我們現在可以扁平化，不用這麼說。我沒有確切的數字，但我希望他們能夠按照他們一直以來的方式運作和行事。這明白你的問題了嗎？

Yes. Great.

是的。偉大的。

Okay. At this point in time, it looks like we are -- we have no more questions in the queue. So I appreciate everybody joining us for the call today. We hope to very soon be able to have these calls be a little bit brighter. I just want to leave you with the solid sense that we understand the environment we're in. We're making the changes in the way that we operate the business in order to be able to weather the environment that we're in. That will absolutely play -- that will absolutely help us and accelerate the growth coming out of this period of time, but we're committed to getting it done. So thank you, everybody, for joining us today.

好的。此時此刻，看起來我們隊列中沒有更多問題了。因此，我感謝大家今天參加我們的電話會議。我們希望很快就能讓這些呼籲更光明。我只想讓您確信我們了解我們所處的環境。我們正在改變我們經營業務的方式，以便能夠經受住我們所處的環境。絕對會發揮作用- 這絕對會幫助我們並加速這段時間的增長，但我們致力於完成它。謝謝大家今天加入我們。

Thank you. Ladies and gentlemen, this does conclude today's conference call. Thank you for participating. You may now disconnect.

謝謝。女士們先生們，今天的電話會議到此結束。感謝您的參與。您現在可以斷開連線。