Adtran Surprises With Higher Revenues
The company announced a profit of $16.9 million, or 24 cents a share, on revenues of $110.3 million in the first quarter of 2007. That compares favorably to a profit of $16.2 million, or 21 cents a share, on revenues of $108.7 million as reported in the first quarter of 2006.
Adtran's quarterly numbers came in above its guidance range of $102 million to $108 million in revenues. It also bested Wall Street's consensus estimates of $106 million in revenues for the quarter.
The company's earnings per share number was a penny better than Wall Street expected. Earnings were helped by one-time tax and life insurance benefits, which boosted earnings by $0.02 per share, according to estimates.
The company said its solid top-line performance came on strong sales of its HDSL, broadband data (DSLAM), and enterprise-focused NetVanta products during the quarter.
Adtran's first-quarter numbers were a bit of a surprise after a disappointing fourth quarter, with at least one analyst questioning where the company's "strength in HDSL" came from. In a research note this morning, Lehman Brothers analyst Marcus Kupferschmidt noted that "contacts suggested to us HDSL would be down at least seasonally in 1Q07."
Adtran had blamed fourth-quarter weakness on the merger of AT&T Inc. (NYSE: T) and BellSouth, which softened sales in the company's HDSL and DSLAM broadband access businesses. The company said AT&T revenues dropped 10 percent in the fourth quarter. (See AT&T Vendors Sing Merger Blues, Wall Street Frets About BellSouth Suppliers, and Adtran Revises Q4 Outlook.)
AT&T regularly contributes at least 10 percent of Adtran's revenues. For the first quarter 2007, however, AT&T (including BellSouth) contributed 29 percent of the company's revenues, which could be due in part to an Ethernet-over-copper and IP DSLAM request for proposal (RFP) win reported earlier this year. (See Adtran Scores at AT&T.)
Adtran also saw robust sales in the optical space, which it expects to continue to ramp up during 2007. During the company's conference call, CEO Tom Stanton said, "Growing optical access revenues from Tier 1 carriers also offset typical seasonality in that category. In optical access, we were successful in broadening our market potential by successfully closing new RFPs with Tier 1 and other carriers."
Stanton referred to an optical RFP closed in the first quarter for a Tier 1 carrier, which he says has not started shipping yet. He could be referring to an RFP that sources say Adtran won to provide fiber to the node (FTTN) access devices to Qwest Communications International Inc. (NYSE: Q) earlier this year. (See Adtran, Tellabs Ring Up Qwest RFP and Qwest Floats Fiber Access RFP.)
In addition to its earnings results, Adtran announced that its Board of Directors declared a 9 cents a share cash dividend for the first quarter 2007. The dividend will be paid to holders of record at market close on May 1, 2007, with a payment date of May 17, 2007.
In mid-afternoon trading, Adtran shares were up $1.81 (7.42%) to $26.80.
— Ryan Lawler, Reporter, Light Reading