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ADTRAN (ADTN) Q1 Loss Narrower Than Expected, Revenues Down

Zacks Equity Research

ADTRAN, Inc. ADTN reported unimpressive first-quarter 2020 results, with the bottom and the top line deteriorating on a year-over-year basis.

Net Loss

On a GAAP basis, net loss for the March quarter was $10 million or 21 cents per share against net income of $0.8 million or 2 cents per share in the year-ago quarter. The deterioration was primarily caused by a significant loss in net investments coupled with lower revenues in the reported quarter.

Quarterly non-GAAP net loss came in at $2.2 million or loss of 5 cents per share against net income of $4.9 million or 10 cents per share in the prior-year quarter. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 11 cents.

ADTRAN Inc Price, Consensus and EPS Surprise

 

ADTRAN Inc Price, Consensus and EPS Surprise

ADTRAN Inc price-consensus-eps-surprise-chart | ADTRAN Inc Quote

 

Revenues

Quarterly revenues were $114.5 million compared with $143.8 million in the year-earlier quarter and surpassed the consensus estimate of $111 million. The downside was caused by lower sales at Network Solutions segment, which fell 22.6% year over year to $97.4 million due to the COVID-19 pandemic. Sales from Services & Support segment were $17.2 million, down 4.6%.

Other Details

Total cost of sales declined from $83.2 million to $62.9 million. Gross profit came in at $51.6 million compared with $60.6 million in the prior-year quarter. Operating loss for the first quarter improved to $4.9 million from an operating loss of $6.2 million in the year-ago quarter.

Notably, the company communicated that its board of directors has announced a quarterly cash dividend payout of 9 cents per share to shareholders on record as of May 21, payable on Jun 4.

Cash Flow & Liquidity

During the first three months of 2020, ADTRAN utilized $0.02 million of net cash for operating activities against $9.7 million of cash flow generated in year-ago quarter. As of Mar 31, the networking equipment maker had $71.3 million in cash and equivalents with $6.8 million of non-current liabilities.

Going Forward

Despite challenging macroeconomic conditions associated with the COVID-19 pandemic, ADTRAN emerged as a strong player and witnessed robust demand in emerging service provider markets. Notably, the company continues to optimize its customer, geographic and product diversity momentum as communications service providers scale up their network capabilities. The company has also been selected by numerous Tier 1 operators for its diversified portfolio of software-defined access, fiber extension and 10G PON solutions. Moreover, its strategy of diversification across the globe along with technological advancements instills optimism.

Zacks Rank & Stocks to Consider

ADTRAN currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader industry are InterDigital, Inc. IDCC, Ooma, Inc. OOMA and Opera Limited OPRA. While InterDigital sports a Zacks Rank #1 (Strong Buy), Ooma and Opera carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

InterDigital’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 62%, on average.

Ooma’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 124.1%, on average.

Opera’s bottom line surpassed the Zacks Consensus Estimate twice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 192.9%, on average.

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