Adtran Holdings, Inc. · NASDAQ:ADTN
Adtran — Needham Growth Investor Conference 2018
26 slides from Adtran's conference presentation, Jan 18, 2018
Slide 1: Needham Growth Investor Conference
NEEDHAM GROWTH INVESTOR CONFERENCE Roger Shannon – SVP of Finance & CFO January 18, 2018
Slide 2: Safe Harbor Statement
Safe Harbor Statement During the course of this meeting, ADTRAN representatives expect to make forward- looking statements, which reflect management’s best judgment, based on factors currently known. However, these statements involve risks and uncertainties, including the successful development and
Slide 3: Strategic Focus
STRATEGIC FOCUS FOR THE PAST THREE DECADES, ADTRAN HAS BEEN ENABLING A FULLY CONNECTED WORLD. © 2015 ADTRAN, Inc. All rights reserved.
Slide 4: Corporate Strategic Plan Focus
Corporate Strategic Plan Focus Near Term Focus (0-3 yrs) § Capitalize and expand our position in enabling Service Providers to: § Increase competitiveness through advanced broadband speeds/capacity § Provide ubiquitous broadband availability § Expand adjacent markets into Cable/MSO broadband access
Slide 5: Market Dynamics
Market Dynamics Operator Perspective Gigabit speeds & expansion of wireless in the network • Comcast 2Gbps • AT&T Fiber - Gigabit Competitive • 5G – 1Gbps up to 500yds Positioning o 2018 commercial launch (Vz) Connect America Fund • $9B to connect 3.6M homes Strategic Plan Strategic Plan • 6yr build
Slide 6: ADTRAN's Market Focus
ADTRAN’s Market Focus Operator Focus • SDN Transformation • Gigabit Competition Domestic • Netflix/Amazon/Google competition Tier 1 ADTRAN Focus • 10G PON, G.fast, Vectoring, SD-Access, Services Operator Focus • SDN Transformation Operator Focus • Regulatory Hurdles • CAF2 • EU Gigabit Society Domes
Slide 7: ADTRAN History of Innovation
ADTRAN History of Innovation Drove Innovation 1st All Market Leader 350 Gig Breakthrough In 1st Cloud- 1st Open Mosaic Cloud in DSL and Ethernet in DSL and Communities NGPON2 based Platform for Platform wins 13 Converged Services MSAN Converged Services by 2016 Tunable WLAN G.fast DPU Industry Award
Slide 8: The Access Mosaic
The Access Mosaic 2018 © ADTRAN, Inc. G ener al Business 8
Slide 9: Innovation Leadership: Broadband Access
Innovation Leadership Broadband Access § Market leader in 10 Gigabit optical access innovation § XGS PON – commercial deployments, standards leadership § NGPON-2 – customer trials underway with US Tier 1 § Over 100 G.fast trials/deployments announced on six (6) continents § 5 Nationwide commercial d
Slide 10: ADTRAN Gfast/FTTdp Leadership
ADTRAN Gfast/FTTdp Leadership 2010 2012 2014 2015 2015 2015 2015 World’s 1st Best World’s 1st BT World’s Only World’s 1st Global FTTdp (UBE) Fixed Access Fully Sealed GOLD Chipset Agnostic SD-Access Leader for Architecture Product G.fast Demo Project G.fast G.fast Sealed FTTx (UBE) Architecture Solu
Slide 11: Innovation Leadership: SDN Access
Innovation Leadership SDN Access § Complete cloud-edge to subscriber-edge solution set § 1st to integrate and deploy complete FTTx portfolio with an open source SDN controller § Only vendor with a complete Software Defined Access solution set built around a CORD architecture § 1st (and only) 10G PON
Slide 12: Mosaic
Mosaic Most Awarded SD-Access Solution in the Industry 2018 2017 © ADTRAN, Inc. G ener al Business
Slide 13: Company Financial Performance
Company Financial Performance 2018 © ADTRAN, Inc. G ener al Business 13
Slide 14: Financial Stability
Financial Stability § Nearly 3 Decades of Continuous Profitability § Ongoing Strong Balance Sheet and Cash Flow § Publicly Traded for 23 Years with Full Transparency (NASDAQ-ADTN) 14
Slide 15: Historically Strong Cash Flow and Solid Balance Sheet
Historically Strong Cash Flow and Solid Balance Sheet 2012-2017 Dec. 31, 2017 Cash Returned to Shareholders Cash & Investments Debt Total Assets Dividends $118M $233M $27M $665M Share Buybacks $354M 2018 © ADTRAN, Inc. G ener al Business
Slide 16: ADTRAN - FY 2017 Financial Highlights
ADTRAN - FY 2017 Financial Highlights FY 2017 FY 2016 Revenue $667M $637M Gross Margin 45.6% 45.8% Operating Expense (GAAP) $266M $257M Operating Margin (%) (GAAP) 5.7% 5.5% GAAP EPS (diluted) $0.49* $0.72 Non-GAAP EPS (diluted) $0.89 $0.84 * FY 2017 GAAP EPS includes the one-time tax impact of 11.9
Slide 17: 2015 – 2017 Revenue by Segment and Categories
2015 – 2017 Revenue by Segment and Categories $700 $667 $637 $600 $600 $126 $73 $111 $500 $400 $300 $527 $526 $541 $200 $700 $667 $100 $637 $600 $55 $600 $63 $0 $69 2015 2016 2017 $138 $500 $138 $126 Products Services $400 $300 $436 $474 $200 $406 $100 $0 2015 2016 2017 2018 © ADTRAN, Inc. Access an
Slide 18: 2015 – 2017 Gross Margin by Segments
2015 – 2017 Gross Margin by Segments 60.0% 50.0% 48.5% 48.3% 45.9% 45.8% 45.6% 44.3% 44.5% 40.0% 32.8% 33.8% 30.0% 20.0% 10.0% 0.0% 2015 2016 2017 Products Services Total ü 2017 GM% flat with 2016 despite 17% increase in International Revenue ü Services GM% up 1% point on 13% increase in Services Re
Slide 19: Revenue – U.S. vs. International
Revenue – U.S. vs. International $700 $667 $637 $600 $600 $135 $159 $500 $181 $400 $300 $501 $508 $200 $419 $100 $0 2015 2016 2017 Domestic International 2018 © ADTRAN, Inc. G ener al Business
Slide 20: 2017 Summary
2017 Summary § 2017 ended with 2nd best revenue performance in company history § Record 1H Revenue § Ties Record revenue through 3Q17 (2011); Full year up 5% § Record Services Revenue in Q3 § Disappointing 4Q revenue due to unforseen event § 10% customer temporarily paused spending in 4Q due to a me
Slide 21: Quarterly Financial Highlights
Quarterly Financial Highlights After strong three quarters in line with ongoing major investment cycle in wireline networks… …4Q17 performance impacted by a merger-related review & slowdown in the spending at a domestic Tier 1 customer. Revenue (M) $200 $185 $185 $180 $170 $160 $140 $127 $120 $100 $
Slide 22: Prudent financial management limited impact of Q4 slowdown
A prudent financial management limited the impact of slowdown in domestic tier one at the bottom-line in Q417... Gross Margin (%) OPEX (M) 60.0% 60% $70 $68.2 $68.2 $66.7 $68 50.0% 46.7% 50% $66.5 49.7% 45.8% 46.5% $65.7 $66 43.3% 42.4% $64.1 40.0% $62.9 $64 40% $62 $60.3 30.0% 30% $60 $58 20.0% 20%
Slide 23: Revenue & Gross Margin by Operating Segment
Revenue & Gross Margin (GM) by Operating Segment Q4 FY 2017 Q3 FY 2017 Q4 FY 2016 Amount ($M) GM (%) Amount ($M) GM (%) Amount ($M) GM (%) Network Solutions 96.1 48.3 145.5 49.5 126.8 46.5 Services & Support 30.5 40.9 39.6 36.7 36.2 32.6 Total 126.5 46.5 185.1 46.7 163.0 43.4 Revenue by Categories Q
Slide 24: Business Outlook
Business Outlook* Going forward, all of our programs and opportunities remain unchanged and on track as we had previously communicated, with the exception of the slowdown in the domestic tier one. Q1 18 Revenue Flattish (QoQ) Gross Margin 40% range OpEx $64-$65M range Tax Low-20% range Guidance or O
Slide 25: Summary
Summary • Proven history and well positioned • Leader in fixed broadband access • Leader in SDN-Access ü Open, scalable and standards-based ü Leading transition to software/service model • Ramping broadband investment cycle ü Emerging technologies in fiber & copper ü Imperative for service agility &
Slide 26: ADTRAN is Bringing the World Together
ADTRAN IS BRINGING THE WORLD TOGETHER 2018 © ADTRAN, Inc. G ener al Business
ADTRAN Holdings — Needham Growth Investor Conference 2018 on 6ix