Adtran Holdings, Inc. · NASDAQ:ADTN
Adtran — Q3 2023 Earnings Presentation
38 slides from Adtran's earnings presentation, Nov 7, 2023
Slide 1: Adtran Holdings Investor presentation
Exhibit 99.2 Adtran Holdings November 06, 2023 Investor presentation
Slide 2: Cautionary note regarding forward-looking statements
Cautionary note regarding forward-looking statements Statements contained in this presentation which are not historical facts, such as those relating to expectations regarding earnings, expenses and margin; the ability of ADTRAN Holdings, Inc. (“ADTRAN Holdings”) to reduce expenses in the coming yea
Slide 3: Introduction and business model
Introduction and business model 3
Slide 4: Your trusted partner for the fiber everywhere era
Your trusted partner for the fiber everywhere era Key differentiators $1.25B 50 3.300+ • Open, disaggregated platforms with vendor-neutral capability FY22 revenue Worldwide locations Employees • Extensive global design support and Global top 3 HQ = Huntsville, AL worldwide supply orchestration capab
Slide 5: Our vision
OUR VISION is to enable a fully-connected world, where the power and freedom to communicate is available to everyone, everywhere, in a secure, efficient and sustainable environment. 5 2023 © ADTRAN, INC.
Slide 6: Global presence
Global presence EMEA: Americas: Germany (HQ Europe) Canada England United States (HQ Global) Switzerland Brazil APAC: Poland Japan Finland China Sweden Hong Kong France Singapore Italy India Israel Australia South Africa Saudi Arabia 6 2023 © ADTRAN, INC.
Slide 7: Adtran is a global vendor with scale and diversity
Adtran is a global vendor with scale and diversity Portfolio Customer Geographic Strength in Differentiation Diversity Diversity Focus Markets • Optical core to • More balanced mix of • Balanced mix of U.S. • Full range of R&D, pre- customer premise national SPs, regional and non-U.S. business sales
Slide 8: Management board
Management board Tom Stanton Christoph Glingener Uli Dopfer Jay Wilson Chairman & CEO CTO CFO CRO • Joined Adtran in 1995 as VP of • Joined ADVA Optical • Joined ADVA Optical • Joined Adtran in 1998 and has Marketing for the Carrier Networking in April 2006, Networking in March 2004, held many roles
Slide 9: Optical core to customer premise
Optical core to customer premise AI-driven Orchestration, Management and Optimization 5G Software Platforms Smart Fiber Access & Optical Aggregation Platforms Platforms I o T Metro WDM DCI Subscriber Platforms Subscriber Solutions Access & Aggregation Optical Networking ONT 10G PON Deployment & Supp
Slide 10: Our portfolio
Our portfolio Software Professional Subscriber and enterprise solutions platforms services Open multi-gig PON systems, Carrier Ethernet access, Wi-Fi, IoT, routers, switches and more Open, cloud- Scalable in- Access and aggregation solutions centric region services, Fiber access platforms, 1/10/25/1
Slide 11: Revenue categories and product examples
Revenue categories and product examples Subscriber Solutions Access & Aggregation Optical Networking SDX 630 SDX 6330 FSP 3000 FSP 150 Coherent 100 ZR Wi-Fi 6, 6E, & 7 mesh gateways (SDGs) 11 2023 © ADTRAN, INC.
Slide 12: A unique scaled pure play addressing the converged edge
A unique scaled pure play addressing the converged edge Network focus Converged edge RAN, core / metro Core / Metro Core / Metro Fixed line Metro / Access Tier 1, 2, 3 CSPs Tier 1 CSPs Tier 1 CSPs Customer focus Tier 1, 2 CSPs Tier 2, 3 CSPs Tier 2, 3 CSPs enterprises ICPs ICPs Customer X X X ✓✓✓ pr
Slide 13: Market trends
Market trends Pandemic accelerates 5G, work from home Deglobalization and Open, disaggregated, digitalization and and streaming drive consolidation impacts sustainable and cloud- capacity demand multi-gigabit fiber vendor selection centric systems access Online meetings and Symmetric bandwidth Selec
Slide 14: Fiber networking market forecasts
Fiber networking market forecasts PON OLT-ONT Metro WDM Carrier Ethernet $7,000 $6,000 $700 $6,000 $600 $5,000 $5,000 $500 $4,000 CAGR 2022-2027:4% $4,000 $400 CAGR 2022-2027:4% $3,000 CAGR 2022-2027: 6% $3,000 $300 $2,000 $2,000 $200 $1,000 $1,000 $100 $0 $0 $0 2020 2021 2022 2023 2024 2025 2026 20
Slide 15: Significant tailwinds to drive long term growth
Significant tailwinds to drive long term growth • $42.5b in broadband funding to provide service to 7m+ under/unserved homes • Expect ~90% to be served with fiber • Funds allocated through grant process at state level BEAD • First tranche (~20%) of funding to be allocated to service providers in 2H
Slide 16: Corporate Social Responsibility
Corporate Social Responsibility Environmental Social Governance • Sustainability is integral part of product strategy • Event sponsoring, volunteer hours at non- • Comprehensive ethics and compliance through process-based product ecodesign and profit organizations and donations policy, code of condu
Slide 17: Adtran SBTi Net Zero long-term targets
Adtran SBTi Net Zero long-term targets • Combined Scope 1+2: Cars + natural gas + electricity emissions (<3% of total Adtran emissions) - Down to 10% in 2034, against base year 2016 - Actions: -Switch to e-mobility, biofuel, district heating where possible -Purchase renewable energy -install photo v
Slide 18: Why Adtran?
Why Adtran? Differentiation and Unprecedented Substantial Strong commitment diversification market opportunity transformation of to ESG operating model Differentiated portfolio Unique positioned in Implementation of a Strong commitment to from optical core to historic demand for fiber comprehensive
Slide 19: Business Update
Business Update 19
Slide 20: Q3 2023 business results
Q3 2023 business results Revenue split consistent with Continued regional diversification Balanced customer past quarters diversification with regional SP having the largest revenue share 22% 35% 34% 41% 43% 59% 44% 23% Optical Networking Solutions Domestic Large Subscriber Solutions Internationals
Slide 21: Q3 2023 technology update
Q3 2023 technology update AI-driven Orchestration, Management and Optimization (Software Platforms) Smart 5G Fiber Access & Aggregation Optical Platforms Platforms IoT Metro WDM DCI Subscriber Platforms Subscriber Solutions Optical Networking Access & Aggregation Deployment & Support Services • Mult
Slide 22: Adtran's strategic priorities 2024 / 2025
Priority Adtran´s strategic priorities 2024 / 2025 Strategic Priorities Details • Cost efficiency program 1 Business efficiency program • Capital efficiency program • De-leverage balance sheet 2 • Reduce interest expense Strengthen capital structure • Improve free cash flow • Convert customer wins t
Slide 23: Q3 2023 revenue by segment, category and region
Q3 2023 revenue by segment, category and region Segments Category Region In $m 340.7 340.7 340.7 35.8 272.3 272.3 272.3 88.2 43.8 171.0 94.6 160.8 133.7 304.9 Y-o-Y 61.5 228.6 169.7 118.8 116.2 111.5 Q3 2022 Q3 2023 Q3 2022 Q3 2023 Q3 2022 Q3 2023 327.4 327.4 327.4 272.3 44.4 272.3 272.3 102.7 43.8
Slide 24: Q3 2023 financial information
Q3 2023 financial information Revenue ($m) Non-GAAP Gross Margin Non-GAAP OPEX ($m) Non-GAAP Operating Non-GAAP Diluted EPS Margin +220bps +5% -20% 0.11 6.1% 340.7 40.3% 114.9 38.1% 109.0 272.3 -1.9% -0.14 Q3 2022 Q3 2023 Q3 2022 Q3 2023 Q3 2022 Q3 2023 Q3 2022 Q3 2023 Q3 2022 Q3 2023 +170bps -17% -
Slide 25: Q3 2023 balance sheet and cash flow
Q3 2023 balance sheet and cash flow Working Capital and Cash Flow metrics Rolling DSO vs. DPO development In $m Q2 23 Q3 23 Trade accounts receivables $239.6 $229.3 82 80 77 Inventories $416.8 $374.0* 73 72 71 67 69 Accounts payables $171.7 $148.9 60 59 Net Working Capital $484.6 $454.4 DSO DPO Ope
Slide 26: Business Efficiency Program 2024
Business Efficiency Program 2024 • 15% sequential reduction in non-GAAP operating expenses projected for Q4 2023 • Targeting positive non-GAAP operating Cost Efficiency Program margin for Q2 2024 • Expect $90m reduction of non-GAAP operating expenditures in 2024 as compared to 2023 • Suspend dividen
Slide 27: Guidance for Q4 2023
Guidance for Q4 2023 Revenue Non-GAAP Operating Margin $210m – $240m -7% – 0% 27 27 27 2023 © ADTRAN, INC.
Slide 28: Target financial model 2025
Target financial model 2025 Non-GAAP Non-GAAP Non-GAAP Non-GAAP Operating Gross Leverage Gross Margins R&D as % of revenue SG&A as % of revenue Margin 42% - 43% 16% - 17% 14% - 15% Low teens < 1.5x Strict execution of business efficiency program to achieve target financial model 28 28 28 2023 © ADTR
Slide 29: Appendix
Appendix 29
Slide 30: Financial calendar
Financial calendar 07 Nov, 2023 14 Nov, 2023 27-28 Nov, 2023 15-16 Jan, 2024 Third Quarter 2023 Earnings Needham virtual Equity forum fall ODDO BHF Forum, virtual Call, conference call conference, virtual conference, Frankfurt / Germany 30 2023 © ADTRAN, INC.
Slide 31: Adtran stock information
Adtran stock information Shareholder Structure as of May 09, 2023 YTD stock price development 25.00 7,000,000 Blackrock 6,000,000 14.5% 20.00 5,000,000 Vanguard 15.00 4,000,000 11.5% 3,000,000 10.00 7.8% 2,000,000 Egora 66.2% 5.00 Free Float 1,000,000 0.00 0 31 2023 © ADTRAN, INC.
Slide 32: Explanation of Use of Non-GAAP Financial Measures
Explanation of Use of Non-GAAP Financial Measures Set forth in the following tables are reconciliations of gross profit, gross margin, operating expenses, operating loss, other (expense) income, net (loss) income inclusive of the non-controlling interest, net (loss) income attributable to the Compan
Slide 33: Reconciliation of Gross Profit and Gross Margin to Non-GAAP
Reconciliation of Gross Profit and Gross Margin to Non-GAAP Gross Profit and Non-GAAP Gross Margin Three Months Ended Nine Months Ended September September September September 30, June 30, 30, 30, 30, 2023 2023 2022 2023 2022 Total Revenue $ 272,331 $ 327,378 $ 340,709 $ 923,621 $ 667,265 Cost of Re
Slide 34: Reconciliation of Operating Expenses to Non-GAAP Operating Expenses
Reconciliation of Operating Expenses to Non-GAAP Operating Expenses Three Months Ended Nine Months Ended September September September September 30, June 30, 30, 30, 30, 2023 2023 2022 2023 2022 Operating Expenses $ 125,659 $ 137,181 $ 134,076 $ 400,380 $ 242,833 Acquisition-related expenses, (1) (6
Slide 35: Reconciliation of Operating Loss to Non-GAAP Operating (Loss) Income
Reconciliation of Operating Loss to Non-GAAP Operating (Loss) Income Three Months Ended Nine Months Ended September September September September 30, June 30, 30, 30, 30, 2023 2023 2022 2023 2022 Operating Loss $ (89,296 ) $ (44,628 ) $ (48,018) $ (183,656) $ (39,953) Acquisition related expenses, (
Slide 36: Reconciliation of Other (Expense) Income to Non-GAAP
Reconciliation of Other (Expense) Income to Non-GAAP Other (Expense) Income Three Months Ended Nine Months Ended September June 30, September September September 30, 2023 2023 30, 2022 30, 2023 30, 2022 Interest and dividend income $ 521 $ 358 $ 347 $ 1,183 $ 768 Interest expense (4,507 ) (4,064 ) (
Slide 37: Further reconciliations related to net income and earnings per share
Further reconciliations related to net income, net loss, earnings per share, loss per share Three Months Ended Nine Months Ended (1) Represents the non-controlling interest portion of the Company's ownership of Adtran Networks pre-DPLTA and the annual recurring compensation earned by September 30, J
Slide 38: Thank you
Thank you