Ladies and gentlemen, thank you for standing by and welcome to ADTRAN Holdings Second Quarter 2022 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After a few remarks, there will be a question- and-a nswer period. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. During the course of the conference call, ADTRAN representatives expect to make forward-looking statements which reflect management's best judgment based on the factors currently known. However, these statements involve risks and uncertainties, including the continued spread and extent of the impact of the COVID-19 global pandemic, the 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 cost, freight 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 31st, 2021, and our quarterly report on Form 10-Q for the quarter ending March 31, 2022. 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. It is now my pleasure to turn the call over to Tom Stanton, Chief Executive Officer of ADTRAN. Sir, please go ahead. Thank you, Chantelle. Good morning, everyone. We appreciate you joining us for our second quarter 2022 earnings conference call. With me today is ADTRAN CFO, Mike Foliano. Following my opening remarks, Mike will review the quarterly financial performance in detail, and then we will take any questions you may have. First, I am pleased to report that we successfully closed the business combination agreement with ADVA Optical Networking on July 15. This is a very important milestone in creating a global leader in fiber networking solutions. The combination of ADTRAN and ADVA creates a $1.3 billion revenue company with a substantially larger addressable market and the tools, technologies, and scale to materially improve our competitive position as we enter a period of historically intense investment as companies and countries around the world move to fiber. By combining these companies with complementary fiber networking portfolios and regional coverage, we believe we will be even more successful in the large investment cycle that we are now entering. Taking a closer look at the two portfolios, ADVA has strength in optical transport, Ethernet aggregation, and network synchronization, targeting a diverse mix of communication service providers, internet content providers, and large-scale enterprise customer. ADVA has driven innovation in this segment, emphasizing network security, optics development, and new SaaS offerings targeting virtualization at the edge. ADTRAN's strengths are in fiber access platforms, residential and business networking solutions, and software platforms focused on network automation and services. By combining the two companies' complementary portfolios, integrating their software platforms, we will offer end-to-end fiber networking solutions with a broader suite of high-value SaaS applications. This solution set will help service providers and enterprise customers simplify the deployment of high-scale, secure, programmable fiber networks while expanding addressable markets. Integration planning for the two companies is well underway. We are very excited about the progress we have made thus far, and we look forward to the broader and more differentiated portfolio enabled through this business combination. In terms of the quarter, Q2 2022 continued the trend of strong demand for our fiber broadband solutions with a diverse mix of service providers across our key growth markets in the U.S. and Europe. This demand continues to be driven by the build-out of fiber broadband networks paired with mesh Wi-Fi solutions in the home and the adoption of cloud-based networking automation tools. Some of the key highlights for the quarter included the following. Overall revenue was up 20% year-over-year and 11% quarter-over-quarter. Bookings were up 60% compared to a strong year-ago quarter, led by our fiber access platforms, fiber CPE, and mesh Wi-Fi platforms. Combined fiber CPE and residential Wi-Fi revenue was up 108% compared to Q2 of 2021, driven by the increased adoption of 10 gig fiber CPE and mesh Wi-Fi platforms that complement our fiber access portfolio. We saw continued rapid growth in our SaaS customer base, up 34% year-over-year, with a growing backlog of customers of our Mosaic One service offerings. Consistent with previous quarters in the latest market share report from Dell'Oro and Omdia for Q1 2022, ADTRAN shipped more 10-Gbps OLT ports into North America and EMEA than the next two closest U.S.-based vendors combined. This highlights our continued success in fiber footprint capture with our fiber access platforms. We also saw well-balanced growth across customers of all sizes with increased revenue from Tier 1, Tier 2, and regional service providers globally on both a quarter-over-quarter and year-over-year basis. The success in the quarter was driven by the increasing demand for our fiber broadband solutions across a broad base of Tier 1, Tier 2, and regional service providers in the U.S. and Europe. Our growth continued across these market segments despite ongoing supply chain constraints that have limited our ability to achieve our full growth potential and have negatively impacted our profitability. We expect these supply chain constraints to continue throughout this year. Taking a closer look at what is driving our growth, we see an ongoing trend towards service providers adopting ADTRAN's full portfolio solutions, including fiber access platforms, mesh Wi-Fi platforms, and SaaS applications. Looking back at the last couple of years, ADTRAN has been the fastest growing vendor in capturing new fiber footprint. This is especially true with 10-Gbps fiber access platforms that operators have shifted to for new builds. As service providers are now connecting many of these homes previously passed with our fiber access platforms, we are starting to see a sharp ramp in our complementary fiber CPE and mesh Wi-Fi platforms, as well as our SaaS applications. We expect this trend to continue, resulting in sustained revenue growth in these strategic portfolio segments. Taking a closer look at our portfolio, investments in leading edge platforms continue to pay off. These investments are focused on three key areas. First is fiber access, where ADTRAN is the market share leader in open disaggregated platforms with our SDX series. These platforms have led to many new customer wins, especially with Tier 1 and Tier 2 incumbent operators and MSOs. The second is in-home service delivery platforms, where ramping deployments of 10-Gbps fiber CPE and multi-gig mesh Wi-Fi 6 drove sizable growth in our revenue for the quarter. Finally, our software platforms are focused on network automation, service optimization, and improving customer experience. This is led by AI-driven SaaS applications in our Mosaic One platform. Sustained SaaS customer growth over the past year, the introduction of the Mosaic One platform, and the expansion of our SaaS offerings have this segment poised for continued growth moving forward. The progress we have made in driving innovation and scaling deployments for these focus platforms comes at a time when we continue to see a strong environment for funding fiber broadband networks. In the U.S., it is estimated that there will be about $100 million in federal stimulus targeted for broadband over the next five to seven years. These funds have started to flow and will pick up momentum in the years ahead. In Europe, similar trends are occurring, with tens of billions in public stimulus funds paired with private investments driving a sizable increase in deployment of fiber networks. The importance of full fiber networks as critical infrastructure for the modern economy is well understood by both the public and private sectors. This is driving ongoing investment into these areas despite the headwinds facing global economies. The growth trends we see in broadband solutions aligned with industry reports. A newly published report by Dell'Oro Group last week forecasted that broadband spending will push the overall broadband access and home networking market from $15.9 billion in 2021 to $23.4 billion in 2026. The PON equipment growth will be driven largely by XGS- PON deployment in North America, EMEA, and CALA. The lead analyst went on to state that we have made significant upward revisions to our long-term broadband and home networking forecast as fiber access infrastructure build-ups are resulting in more new subscribers and more CPE with advanced Wi-Fi technology. This view on both the regional market growth as well as the key technology shifts are very much aligned with our portfolio and sales strategy. In summary, despite continuing supply chain constraints, we are making great progress. With increased customer funding, record demand, a diversified customer base, a differentiated product portfolio, and the ADVA combination, we expect a very, very bright future. With that background, I will turn things over to Mike to provide a review of our financials, and then following Mike's remarks, we will answer any questions you may have. Mike? Thanks, Tom, and good morning to all. I'll cover our second quarter of 2022 results and provide our expectations for the third quarter. I'll be referencing non-GAAP information with reconciliations to GAAP presented in our press release and supplemental financial schedules on our investor relations webpage at investors.adtran.com. The supplemental financial schedules on our webpage also present certain revenue information by segment and category, which I will also be discussing today. ADTRAN's second quarter 2022 revenue came in at $172 million, up 20% year-over-year, led by a 24% increase in our Network Solutions segment. Looking at a sequential quarter comparison, revenue was up 11%, primarily driven by higher sales in our Subscriber Solutions and Experience portfolio. On a regional basis, year-over-year, U.S. revenue grew by 12%, and international revenue increased by 36%. Our growth was attributable to increased sales to customers of all sizes, partially offset by unfavorable foreign currency fluctuations. Our customer diversity continues to be a focus with three 10% of revenue customers, two domestic distribution partners covering hundreds of broadband service providers in the U.S., and one domestic Tier 2 customer. Our gross margins continued to be impacted by constrained component supplies and the associated increased supply chain expenses, and decreased by 7.4 percentage points compared to the year- ago quarter. Compared to the previous quarter, gross margins improved by 1.2 percentage points. Due to the higher volume manufacturing efficiencies and some improvements in select component prices as well as fewer expedite fees. While we anticipate continued supply chain challenges, we remain focused on managing higher component costs, freight expenses, and expedite fees. Our non-GAAP operating expenses increased by 3% year-over-year and 2.4% quarter-over-quarter. The increase compared to the year- ago quarter was driven by higher labor, travel, and trade show expenses, partially offset by lower contract services and legal expenses. The quarter-over-quarter increase was primarily due to higher labor, travel, and professional services expenses, partially offset by a decrease in legal expenses. Moving to our operating profitability. The year-over-year decrease of 17% was the result of abnormally high cost of goods expense driven by supply chain constraints. The significant quarter-over-quarter improvement in operating profitability was driven by higher sales volume and more favorable gross margins. Other income on a non-GAAP basis decreased year-over-year and increased quarter-over-quarter. The decrease on a year-over-year basis was mainly related to market- driven losses in our investment portfolio as compared to gains in the prior year and realized foreign currency exchange fluctuations. The quarter-over-quarter improvement was mainly due to higher realized foreign currency exchange fluctuations. The company's non-GAAP tax provision for the second quarter of 2022 was a benefit of $1.5 million, primarily driven by the change in our annual estimated effective tax rate due to the requirement to capitalize R&D expense in the U.S. beginning in 2022 and its effect on our valuation allowance. Closing out our income statement results, net income was $9.7 million on a non-GAAP basis with $0.19 per share earnings, assuming dilution, compared to a net income of $8.1 million and a diluted EPS of $0.16 in Q2 of 2021. Turning to the balance sheet and cash flow statement. Unrestricted cash and marketable securities totaled $74.9 million at the end of the quarter. For the quarter, we used $10.8 million of cash for operations, mainly due to an increase in working capital. Net trade accounts receivable was $172.1 million at quarter end, resulting in a DSO of 91 days compared to 87 days in the prior quarter and 78 days at the end of the second quarter of 2021. Net inventories were at $196.9 million at the end of the second quarter, compared to $171.1 million in the first quarter of 2022 and $119 million at the end of Q2 of 2021. We continue to carry a higher level of inventory and raw materials as we build supply to minimize further disruptions given the ongoing and extremely challenging electronic component market and the extended lead times for components. Revenues in the first half of 2022 were up 21% year-over-year, and our order book remains strong with robust demand drivers. Our biggest challenge continues to be the ability to secure supply while managing higher procurement and logistics costs. Looking ahead to the next quarter, the continuing effects of the COVID-19 pandemic, the ability of component supplies to align with our customer demand, the book- and- ship nature of our business, the timing of revenue associated with large projects, the variability of ordering patterns from our customer base, as well as fluctuations in currency exchange rates and any required purchase accounting adjustments related to the ADVA merger may cause material differences between our expectations and actual results. This will be the first guidance provided for ADTRAN Holdings, which will include the consolidation of the ADVA financials for a partial quarter beginning at the finalization of the business combination, which was on July 15th. We expect that the business combination will be accounted for using the acquisition method of accounting under ASC 805, with ADTRAN Holdings representing the accounting acquirer. With that in mind, we expect that our third quarter 2022 revenue will be between $320 million and $340 million. After considering the projected sales mix and component availability, we expect that our third quarter gross margin on a non-GAAP basis will be in the range of 35.5%-38.5%, still lower than normal due to higher expediting and freight costs. We also expect non-GAAP operating expenses for the third quarter of 2022 will be between $103 million and $108 million. Finally, we anticipate the consolidated tax rate for 2022 on a non-GAAP basis will be in the low to mid-20s percentage rate. Once again, additional financial information is available at ADTRAN's Investor R elations webpage at investors.adtran.com. Now I'll turn it back over to Tom, and we will take your questions. All right. Great. Chantelle, at this point, we're ready to open up to any questions people may have. At this time, I would like to remind everyone, in order to ask a question, press star one. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Rod Hall with Goldman Sachs. Your line is open. Hi, this is Bala on for Rod. Thanks for taking my question. First of all, congratulations on the combination. I wonder if I could ask Tom, on Access and Aggregation revenue. You know, it declined quarter-over-quarter subscription revenue growth. You mentioned the strong momentum in CPE deployments, broadband CPE deployments, et cetera. I'm wondering, is it more a function of supply mix change in the quarter, or why is Access and Aggregation revenue declining? I thought momentum is strong there. Yeah, it is 100%. First of all, the mix that we do in any one quarter at this point is largely driven by availability and then secondarily driven by need, right? So if we have availability and components, then we really are trying to make sure that we keep customers operating. So any, I hate to say it, but, you know, the mix right now is driven by availability, not just necessarily demand. I don't think it was really down. I think we really were talking about flattish, maybe slightly down, but flattish. That is 100% driven by component availability. That's it. That makes sense. I thought so. Follow-up. I want to touch on the acquisition. Since announcing it nearly a year ago at this point, any thoughts whether, you know, in terms of addressable market or synergies, any change really, like, you know, compared to your expectations a year back, you know, for the better or maybe even worse for that matter? We all know how challenging supply has been. But any thoughts in general on the combination? No, no. I will tell you nothing negative. I mean, there really hasn't been. Customer-wise, it continues to be very positive. Supply chain-wise, I do think that the combination and just from the kind of planning things that we have been doing with suppliers make us feel that the combination will actually be in a stronger position as we go forward in trying to make sure that we get the right supply at the right prices. Portfolio-wise, I think no real surprises there. I think we understood and did enough due diligence on the portfolio to know where we were gonna be able to plug in and kind of what the priorities were. Really no changes there. I would say in general, it's tracking even timing-wise, right, it's tracking pretty much the way that we had expected. All right. Okay. How about, I assume you talk to customers, Tom- Yeah. ... How the conversation's going? Is the bigger scale actually helping? Let me ask it in a different way. When do you expect to start, you know, seeing more inroads with new customers or even new projects with existing customers now given the combination is closed now? I think, I mean, there's been customer activity. Well, first of all, prior to close, you know, we have to, we had to be very careful. Even at this point in time, we do still have minority shareholders that we just need to make sure that we operate in the right mode, which is that we don't disenfranchise or in any way hurt the minority shareholders. Having said that, the ability after the close for us to come together and make joint sales presentations and be able to really talk about the benefits of the portfolio is much better. Those are ongoing right now. I can tell you, I know of a few smaller deals, you know, not necessarily Tier 1 deals, where I think we have actually seen, directly seen the benefit. Then there are larger deals where we are in the, let's call it negotiation stage or kind of longer-term planning stage, where I can absolutely see the direct benefit. I mean, they're explicitly asking for the timing of the combination of the portfolios. Got it. I just got one last question for Mike. Sure. I'll pass to Tom. Sure. No problem. Mike, synergies, I believe it was $52 million or in that range, for the combination, I believe, by year two of the combination. Maybe any thoughts on the cadence of it or linearity of this cost synergies, or should we, you know, think about modeling it? Any help there, you know, is appreciated. Yeah. Certainly. I think we've said in the past that you would expect more of it in the second year because there's a large portion of the synergies that's tied to the consolidation of our IT systems that if you think about that, it improves efficiencies throughout the back office and throughout the company. I think you should think about the first year being quite a bit smaller than the second year. It's more back-end loaded as we combine our IT systems. Coming out of the second year, we expect to see that full number then. Right. Going forward. Gotcha. Very helpful. Thanks so much. Okay. All right. Thanks very much. Your next question comes from the line of Michael Genovese with Rosenblatt Securities. Your line is open. Oh, great. Thanks a lot. Congratulations also on the deal. I guess I want to start with the revenue guide and, you know, if we just say that it's $25 million below the two companies' models put together for the quarter, should we attribute that to, you know, half a quarter of ADVA revenue not being included? Or is there something else to attribute that to? I'll leave that to Mike, but maybe not half a quarter, but go ahead, Mike. I'm sorry, half a month I meant. Yes. Yes. Yes. Half a month. Yeah. Yes. That's exactly right. All the front-end revenue for ADVA will not roll up when we do the combined accounting. It is a little tricky to think through your complete model because you gotta go IFRS to GAAP to non-GAAP, and then you have to look at a partial quarter as well. I think that is the biggest attribution there, is that you don't have a full quarter of ADVA. Yeah. How do you expect to report? Do you expect to have, I mean, clearly different segments than you have now when you report next quarter? We will have the same segments. Remember, at the top level, our segments are Network Solutions and then Services, so we will still report that way. The categories that we're using today, our three categories will be combined with what's been shown on their side. We will have three large categories still. We'll no longer have this, the smaller one that we have today that is the traditional and other, which is really our legacy category. That one will go away, but we'll still have an Access and Aggregation category. We will have a category for Subscriber Solutions, so think about that as the customer premise equipment. We'll have a category that really is that Optical Networking piece, which is the biggest piece of their business. Great. Helpful. Okay, a couple more here. I guess when I look at your margin guidance, gross margin guidance, operating expense guidance for the quarter, it's about what we would expect. You know, you know, we're not seeing the synergies yet. You were asked about that in the last question and we got some of that timing of how to expect the synergies. I guess it's almost a repeat of the question, but I would also add the revenue synergy part to that. You know, give us a little bit more detail on the timing of how to layer in the expense and the revenue synergies going forward. On the expense side, like I said, you're gonna see most of that happen in the second year. You gotta think about something quite a bit smaller than half of it in the first year. I mean, you can come up with what you want there, but I think we've been modeling it more like a 80/20 or a 70/30 with the back end, the final year after those information systems bringing them together and gaining those efficiencies. I think we've said on the revenue synergies for a while that we would expect that it's gonna take a while to be able to pull together combined contracts and make our combined portfolio pitches and bring from one company to the other additional market adds, which I believe we said that we would see somewhere between 5%-10%. At the time, that was $60 million on the bottom end to $120 milli on on the top end. We said that probably would take a couple of years to get into that range as well. Perfect. Great. Last question from me. You know, maybe Tom, can you give us just color on you know, all of the EMEA wins, right? You know, first of all, just you know, how many are sort of you know, really in shipping and deployment phase? How many are you know, not quite there yet? Also, are you know, any new RFPs or new wins to you know, to update on there? Thank you. Yeah, sure. As we talked about one time, we have one in full deployment. We really have two at this point that are really, I would say, either trying to get to full deployment or are in full deployment, which are the two larger ones in Europe. Our only constraint we really have at this point is component constraints. I've got plenty of backlog, really for Europe in general. It's a matter of us trying to make sure that we get the right products. All of the rest of them, I think there are four more, are moving forward. I think we actually have POs for two of those Tier 1s now, at least in place. Although we're not completely through the lab with one of them. One of them we are, one of them we're not. It's just a matter of us getting components and getting started. I would say they're generally moving along the same timelines that we were talking about before. How many are still in the RFP stage, yeah, or you know, roughly? It depends on the tier of customer. I mean, honestly, my guess is we have more than 10 in different various stages. If you look at kind of Tier 1s, which is what, you know, people tend to talk about, I'm thinking there's three or four, but I really don't have that sheet in front of me for some reason today, so, but I'm thinking there's three or four of them that are in different stages right now. All right. Well, Well, I appreciate. You know, there's so many countries there that you don't realize there's a tier one carrier there that you actually win, unfortunately or fortunately. But yeah, but there's, like I said, we're still fairly early in that cycle. Great. Okay. I appreciate it. Thanks for the answers, and again, congratulations on the quarter and the acquisition. All right. Thank you. Our next question comes from Paul Essi with William K. Woodruff. Your line is open. Thanks for taking my question. Wanted to maybe drill down a little bit on the middle mile area. This has been getting a lot of attention. I understand ADVA has a solution that's fairly competitive in the space. Then on the ADVA call the other day, I guess last week, the CTO discussed a new offering that they're bringing online at the end of the year. I was wondering if you could talk a little bit about, you know, what your strategy is in the United States now that you're together and exactly how you can approach, you know, these, you know, these opportunities, given the situation that, you know, you're not totally merged and, you know, the size of the market in the U.S. and all. Also overseas, globally, the CTO had mentioned that there's a big pent-up demand for upgrading. As they upgrade the edge, you need that middle mile to build it out. I wonder if you could expand on both of those things. Yeah. I mean, what you just said is exactly kind of what our thought process has been all along, which is in the U.S., especially with the smaller carriers, with the larger carriers, it's a different process. With the smaller carriers, you know, I mentioned in my notes that we're seeing more and more of the carriers, the smaller carriers more especially, really take our complete solution base. What they're looking for is somebody is one company that can come in, offer as much of their network as possible, and really make sure that the entire thing works and that they can scale. You know, they're not necessarily trying to pick the cheapest, hopefully the best, but the cheapest in any particular segment. They're really looking for the best overall solution, and ADVA plays right into that. Our ability to go in there and help them and aggregate that portfolio into our Tier 3 and Tier 2 solution base is standing right in front of us. We do have the biggest guidance that we have at this point is don't hurt the standalone portion of the company. That's very easy not to do, when we're talking about additive customer bases here in the U.S. That one's open right now. We still have some alignment to get done, but I think that's gonna happen in a very quick fashion. The second piece of this is this upgrade piece that we're talking about now. I mean, it's very straightforward to see that you know you upgrade the access network first typically because you have to bring customers on board. Then as you start bringing customers on board, you upgrade that mid-mile. Our thought has been that that mid-mile upgrade is typically about a year to a year and a half after you start seeing that real big movement in front, and that's exactly what we're seeing today. The alignment is really good. The pull from larger customers, that's typically on a customer-by-customer basis, where they're trying to see you know the benefits of us in that space is we have a complete portfolio that now competes with the biggest players in the space. That's really what they were looking for, especially in Europe, where, you know, they're kind of, it's much more difficult, after, you know, you've seen them kind of re-rationalize their security positions on certain vendors. Timing is really good for us, but there is still some sales alignment that we will be doing through the end of this year and trying to make sure that we have the right go-to-market strategy. Okay. Would you care to share any numbers on the size of the market you think it might be, how much you guys can, you know, carve out over the next couple years? You know, we had some numbers. Those numbers are right, literally right now being upgraded. You know, I mentioned the Dell'Oro report. Mm-hmm We were talking about the broadband market two years ago, about it being underrepresented and what, you know, what people were forecasting versus what was really gonna happen. I think the thing that we were seeing is, first of all, serious customer demand. Second of all, announced projects by major carriers here in the U.S. and major carriers in Europe. Those numbers just weren't moving yet. We had the third component, which is, you know, in Europe, Huawei was effectively taken out of the market, and all of that hadn't filtered through. You're just now seeing those numbers come to fruition in that broadband report. Some of that $24 billion, that increase, is an increase in the segment that is in the mid-mile. There's a portion of that in that as well. Our total available market, Mike, if you remember a year ago, we were basically saying the reports, and that was somewhere in the, what was it? $16 billion-$17 billion, which we think right now is, you know, realistically has grown two-thirds, if not more. Okay, great. Thank you. I got one other question. Wanted to, you know, revisit the, your residential SaaS. Tom, the last quarter, the conference call, you'd mentioned there's a huge backlog in your onboarding a lot of customers, and I see your Subscriber Solutions and Experience was up 44% sequentially. I know a lot of that probably went into the Tier 1s, but I gotta believe the Tier 2s and Tier 3s, you know, saw some of that growth as well. Last time I think we spoke, you was mentioning 1.3 million at the end of March, and I'm thinking my trajectory looks at about a 1.5-1.6 million signed up, but that could be actually a little low now with the acceleration. You care to comment on where you might be on that? Um- As far as signed up people and... Yeah. Without a doubt that number is growing, and that number is growing as we're able to ship more CPE. The number of customers itself, I'm not sure what you mean by growing. There's subscribers, and then there's customers, carriers, right? The end subscribers, the actual people, you know, signing up and paying the service provider. Yeah. The end subscriber itself is really substantially driven by our ability to ship CPE. We did see a strong uptick this quarter, but the biggest throttling gate on that right now is our ability to ship CPE. Okay I'm not sure what else to tell you, except that that number is bigger than what it was last quarter. It's, you know- Okay. Well, it's, I know that you wanna, you don't wanna open up until it's material, but if you take $1.05 million, you know, in terms of numbers I was given, it looks like you're almost doing $0.20 a share on the $77 million after tax. So it's becoming meaningful to the earnings, and I'm wondering at what point would you. Are you still worried about the visibility as far as being able to come out and talk more about it? Yeah, I'm not sure where that math is coming from, 'cause I don't think we're at $0.20 a share at this point, so I'm not sure where that particular piece- Okay ...is coming from. I will tell you that, you know, there is, you know, the one of the things that's kind of tricky on this is there's a broad base of different SaaS applications, and they all have a different dollar component or cents component to them on a subscription basis. What we have- Mm-hmm ...is we have some that are at the very low end. As we ship more CPE, especially the Wi-Fi 6 CPE that we had just a fantastic quarter with, the larger end number tends to grow, right? The bigger numbers because they tend to buy the complete portfolio solutions, including operations management as well as customer experience. That will continue to grow, but we're not at $0.20 a share. Okay. All right. Thank you. I'll pass it then. Okay. Thank you. Our next question comes from Paul Silverstein with Cowen. Your line is open. Thanks, guys. First on clarifications. On the 10% customers, I think I heard you say three, two, which were U.S. distributors, one U.S. tier two. Did I get that right? Yes. Two U.S. distributors and one U.S. Tier 2. Mike, how much is distribution accounted for in revenue as a percentage of revenue? Yeah. We usually don't break out how much goes through distribution. You used to. It's a substantial portion of our- I think what we said, Paul, I believe, is that it's, you know, it's over 50%. Tier 3s are over 50%. Like 99%, I'm not wanting to be an exact number, but a very, very high percentage in the 90s% go through distribution. None of that has changed. It's still- Tier 3s are over 50% of revenue and distribution's over 90% of the Tier 3s. I'm sorry, is that what it is, Tom? Yeah, except I don't want to give you an exact number on the percentage of Tier 3s that go through distribution, 'cause I don't have that. My sense is it's, yeah, it's in the 90s, 90-ish percentile. All right. I'm sorry, Mike, were you gonna say something? No, no. I will tell you that's in the U.S. I'm talking U.S. Understood. Yeah, yeah. I'm sorry, go ahead. Go ahead. The New Yorker in me, Tom, I apologize. The Tier 2 10% customer, can you tell us, was it just over 10%? Was it meaningfully over 10%? Can you give us any sense, if not the number? It was over 10%. I don't think it was 20%. It was 10%-20%. All right. Okay. I guess the question of this nature. Mike, deferred revenue, I see ADVA's doing about $5 million-$6 million a quarter. If it's $5 million-$6 million, if I have the numbers right, it's been about $5 million-$6 million each of the last several quarters. I know this is a business combination, not technically an outright acquisition. If it was an acquisition, you'd lose the benefit of the deferred revenue. In this case, is it the same thing, or can you still get that benefit? I think we still get the benefit. Now some of this is still yet to be worked out with our accountants before we report. I think what you're gonna expect to see is consolidated revenue all the way down to EPS, and then we will eliminate the minority interests, which pull out all of the profit, after-tax profit associated with the minority interest. Then we will have after-tax profit in EPS associated with ADTRAN Holdings. We're gonna report the whole thing all the way down and then pull the minority interest at the bottom. When you say eliminate, you mean there'll be a minority interest line where the 30% that you don't own, that'll all be accounted for. It'll just be a net, either profit or loss. That's right. That's right. Okay. We won't do anything with revenue or all the rest of the way down. I do expect that as those deferred revenues come through, that we will see those in the combined company. All right. You mentioned, I think I heard you say fiber CPE mesh Wi-Fi were up 108% driven by 10 Gb. I trust from the numbers that fiber CPE mesh Wi-Fi is not all of your Subscriber Solutions revenue, that there's probably still some legacy DSL stuff in there as well. Yes. Yes. Is that correct? Yeah, there's also some enterprise business in there as well. All right. That leads me to my real question, which is: What is fiber CPE mesh Wi-Fi in absolute dollars? How big is it? When you talk about up 108%, what's the revenue base now, or what was it? Mike, do we break out that number? I don't think we break out that number. We don't break it to that level. I see. I can tell you of the piece that is Subscriber Solutions & Experience, the lion's share is in those two pieces. All right. I mean, we're not talking about $5 million, $10 million, $15 million. Oh, no. No, no. No, no. It's easily millions. Yeah. It's $40+ million or so to $54 million. That's what it sounds like from what you just said. Yeah, it's a big number. Yes. All right. Mike, I think the statement you made about SaaS customer base was it was up 34% year-over-year. I trust you're referring to the number of customers as opposed to SaaS revenue, or was that a SaaS revenue number? That's the number of customers. All right. I've got a similar question. That service provider customer is not necessarily just subscribers. That's the number of service provider customers. Understood. How many customers are you at for SaaS? Over a million and a half. Over what? Yeah, end subscribers. Excuse me. Subscribers over a million and a half. Right. How many service providers are you taking your SaaS offer? Um. Hundreds. It's hundreds. I don't know the exact number. All right. Good enough. All right. It's in the hundreds then. Sorry, I've got a couple more of this nature. In terms of SaaS revenue, Tom, Mike, can you give us any idea where you're at right now? I assume it's still fairly small because it's early. Can you give us any sense for what the departure point is? Yeah. It's not at $50 million yet. It's still in that same range that we've been talking about. That same range being? $5 million -$50 million. $5 million-$50 million?. Okay. Closer to $5 million or closer to $50 million? Probably closer to $5 million, to be honest with you. Yeah. Yeah. It's not, yeah, in that... That's what I would expect. Tom, I apologize. You guys have launched the SaaS effort approximately when? We've had multiple different iterations of this. We started off with relatively simple solutions maybe four years ago or so. We added our managed Wi-Fi roughly a year to a year and a half. We just brought out Mosaic One in earnest maybe at the beginning of this year. That's been, t hat is really what ties all of our solutions together. We also have MNI. It used to be called MNI, which is network operations and maintenance. Those are all now brought together on Mosaic One. That's really the thing that actually we think is a, you know, a big key driver for us in the future. I trust off that relatively small base, understandable it's early, but I trust the growth is well above the 34% customer growth. Yes, it is. Yeah. It is substantially dependent upon our ability to continue to ship CPE as well. Yes. Understood. On the revenue synergy guidance, I assume it's stating the obvious that you guys really don't know. You hope to drive revenue synergies of $60 million-$120 million in several years, but it's not like there's some formula, and you could identify X, Y, and Z. You're talking about it being fairly distant. That's your hope, but I assume there's not a ton of empirical data behind that. No, there's not because there's RFPs that have to be won, and, you know, we got to make sure we keep up with a competitive portfolio. I mean, there's plenty of variables in that. For a long time, we didn't wanna really talk about revenue synergies because it is unknown. We know there's gonna be some, but trying to actually nail down what we're gonna be able to, you know, bring forward in the next two years is very difficult. That's why, that's why we came up with a range just to be able to say, like, you know, yeah, we know there's gonna be some, but it's I don't know how you know, materially, how do you forecast that in any granularity? Sure. Understandable. That's what I thought. I just wanted two more. On the spend side, I know there have been a couple other questions on it, but Mike, when you talk about 28, 20 year one, 80 year two, I assume the bulk of the 20 is not gonna be realized in this or the next quarter, but would be in the latter, it would be in the first and second quarters of calendar 2023. Yes, that's a good assumption. All right. Finally, Tom, I was a little bit confused on trying to follow you on the EMEA. You said there, if I heard you right, there are roughly 10 RFPs, including three to four Tier 1 CSPs that are out there. You mentioned four wins, two which I assume BT and DT are now in full deployment, only constrained being components. On the other two, I thought I heard you say you've got POs for the other two. One of which you're through the lab, but the other which you're not yet through the lab. One, I wanna make sure I heard that correctly, and two, you have POs for both of those notwithstanding that you're not through the lab with one of them yet? Yes. Yeah, I do have POs for both of them. All right. Then you said four more moving forward, and then you referenced those, the two of the POs. Are there two additional ones beyond those two? No, no. In total, there are six, is what we're talking about. It's really two in full steam, two are we got POs for, it's a matter of us, you know, getting things rolling with them, and then two that are not yet to that point. We're still, you know, in lab work or we have deliverables that we have to give them. Beyond BT and DT, the other two that you have POs, when do you expect initial revenue, and when do you expect meaningful revenue? Initial revenue is imminent, and it's really dependent upon supply. I would expect to see initial revenue maybe as early as this quarter. Meaningful revenue, honestly, it's gonna be about supply. It's all about, all about how, you know, how many, you know, spine and leaf switches I can get, how many OLTs I can get because it's. You know, the reason they placed these POs early was trying to make sure that we understood how serious they were in moving forward and trying to get their supply requirements in the queue. It, it's really, you know, most of the stuff is the ramp is dependent upon supply. Tom, if supply were not a gating factor, could these be in the tens of millions on an annual basis, the two you're talking about? Yeah. Yes, yes. All right. My last question, honest. On gross margin, Mike, if I have the numbers correct, you added the 33% this past quarter, and I know that may not be apples to apples because they do non-IFRS. It sounds like from your guidance that while you're still being hampered understandably by constraints, that at least it's trending in the right direction. If I remember correctly, you bottomed out hard in Q3. There was a little bit of progress in Q4, a little more last quarter, a little bit more this quarter. Now it sounds like from your guidance, that's not a drag but enhancing margins because they're even below yours right now. It sounds like you're just seeing a little bit better from a cost perspective in the lower expedites. Do I have that right? Partially. When you're looking at ADVA's 33%, you're looking at IFRS, and when you pull out that capitalized R&D piece and the amortization that's going through COGS, they actually provide a pro forma U.S. GAAP comparison that if you look back at last quarter, they would have been almost 39%. I think when you put the two together, now we're still in a pretty uncertain environment here. I think it comes out very close to what our guidance is. We're not expecting any real significant improvement in the near term here. Like I've said in the past, we expect in the longer term, we expect incremental improvement to get us back into that low 30s range. Mike, all the step up in your guidance in Q3 is the impact of ADVA as opposed to some incremental improvement in cost? That's the largest piece of it. All right. I appreciate all the responses. Thank you. Our next question comes from Ryan Koontz with Needham & Company. Your line is open. Thanks for the question. Most of mine have been answered, but I wanted to drill into the U.S. business given the real strength in international. Looked like, you know, U.S. was a little light at 12% growth. Any, you know, changes in mix there, you know, across your different customer segments? And then, you know, how do you feel about, you know, U.S. growth over kind of the balance of this year? Thanks. Okay, yeah. Let me first of all, we did have a stronger CPE quarter, and that was true pretty much globally, and definitely true here in the U.S. I wanna make sure, [inaudible], that we characterize it properly. The U.S. could have seen substantially more growth if we had more material, and that's both on the OLT side and on the CPE side. Here again, we're just hampered by our ability to get components. That's where it turned out this quarter, specifically because of the parts that we were able to get and how we were able to allocate those parts. We have seen demand continue to grow on the CPE side. I mean, bookings were very strong and very strong on the CPE side as well. Is there a big difference, Tom, in the kind of ingredients there, the BOM between international and U.S. that kind of led you to be able to ship more international? There is some difference in the ingredients. Our European customers are tending to go. First of all, they tend to be larger, right? Larger customers tend to go with our disaggregated solution. You know, that's the SDX product platform versus the Total Access 5000 platform. Availability of components is somewhat, you know, drive some of that. Then a lot of it, you know, a lot of our decisions right now are based off of very hard commitments that we're giving to different carriers to make sure that we don't hurt anybody. I would say that, you know, that's a really big piece of- Got it. That's fair. ...where you have it all. You know, I hate to say, but we're not looking at what makes the quarter look better geographically. Yes. We're really going by how do we make sure we don't lose any customers. Yeah. Good. Good call. On the mix shift here in the quarter, any trends there across the, you know, Tier 1, Tier 2, and Tier 3s you can point out in the revenue side? I think the biggest thing here again is because it's still all driven by component availability. You know, we continue to see strong demand as networks build out. You know about the build outs that's going on in Europe right now and what that means for OLT demand. I think the thing that's really picked up, though, is we have enough installed ports now to where we're seeing, you know, a very meaningful pickup on the ONT and RG side. And that's really what we expected. You know, a lot of the revenue associated with a fiber home is in the home, and that follows the deployment of the OLT. Right. I think both of those are gonna continue to grow, but we're gonna see that bottom one continuing to swell as people actually get these networks up and running. Sure. Makes great sense. Any update you can give us on the subsidy programs, you know, the ARPA and RDOF kind of bookings? Are you starting to see any impact on revenues there? We have but we started you know actually in a previous quarter. I'm not sure if it was the last quarter or maybe as early as the fourth quarter. We started seeing orders. Those have picked up. We actually have some customers that are you know you know they're definitely on our top we need to make sure we take care of list because the commitments we've made and that's continuing to flow through. Now back then it was predominantly we could see it more in the Tier 1s, you know in the MSOs, let's say- Yeah ...that's getting much broader based at this point. Super helpful. Thanks, Tom. Okay. Our next question comes from Tim Savageaux with Northland Capital Markets. Your line is open. All right. I made it. Thanks for letting me hop on Paul's follow-up call here. I know it's a little irregular. So a couple of questions. Try to keep it tight. You know, first, well, maybe an observation, I think it's pretty extraordinary you're able to put up the revenue number you did without any Tier 1, 10% customers. But I would ask, first question is, you cite the 60% order growth. Did you see that Tier 1 activity perhaps in the orders? And, you know, first quarter out of the box here, I think some more explicit standalone guide is in order. It looks to me like standalone, you're guiding up toward $180 million in Q3. Is that about right and reflective of that strong order growth? And I have one and only one follow-up. Okay. Our guidance is not reflective of our order growth. Our guidance is 100% reflective of what we think we're going to be able to get in material. The two, unfortunately, are disconnected. Yeah As far as the Tier 1 piece, the demand on the Tier 1 piece hasn't lightened up a bit. The order rate in the Tier 1 piece hasn't lightened up a bit. It's just a matter of what parts we can get and where we need to ship them. We have three customers, Tier 1s, that could have easily been 10% customers if we could have shipped what they were asking for. That's just to kinda set the stage there. Mike, what are we doing about the- Standalone? ... Yeah. I think you said $180 million. I'd say it's probably a range between $170 million and $180 million would be the standalone guidance if you were to pull it out from the larger number. Okay. Got it. You know, if I look at, and you're right, there's usually a 600-700 basis points difference between IFRS and the non-GAAP stuff for ADVA. Still, though, it seems like you're being pretty. Unless you're talking about some incremental supply impact, you know, I see OpEx about $10 million higher than I would have thought, as you know, standalone combined and prorated for 11 weeks. That's the R&D coming down from the COGS line. But I don't quite see that amount, you know, being put back up. A, it seems like we should be biased to the high end of your gross margin range, unless you are being incrementally conservative on supply. Or B, are there some short-term expenses, implied in OpEx, you know, around the deal or something else that may not recur? Well, the non-recurring stuff I really have not built in because we're not sure what that's gonna be until we get down deep into the accounting here. I would expect that probably closer to the midpoint makes more sense than the high end 'cause we are still experiencing issues out there. Even though we had a little bit less of an impact on a standalone basis this last quarter to our gross margin, we are still experiencing effects of elevated freight and logistics, and then component issues pop up all the time. I think if you think about the midpoint, you're probably better off than thinking about the high end. Yeah, I hear that. Are you intending to guide down in sequentially gross margins standalone for either company or like or flat? Flattish. Okay. I think there's a little conflict there, but that's all right. I'll work it out. Thanks very much, and congrats, especially on the order book. Thanks very much. At this point, I think we're out of time, so I appreciate everybody for joining us, and we look forward to talking to you next quarter. This concludes today's conference call. You may now disconnect.