Adtran Networks SE · XETR:ADV
Adtran Networks — ADVA Optical Networking — Q2 2013 Earnings Presentation
66 slides from Adtran Networks's earnings presentation, July 2013
Slide 1: ADVA Optical Networking Investor Presentation
ADVA Optical Networking Investor Presentation July/August 2013
Slide 2: Disclaimer
Disclaimer FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements with words such as “believes”, “anticipates” and “expects” to describe expected revenues and earnings, anticipated demand for optical networking solutions, internal estimates and liquidity. These forward-look
Slide 3: Contents
Contents 1. Who We Are • Vision • Historical development 2. Addressable Market • Market size and environment • Market growth drivers • Recent project wins • Go-to-market strategy and customer base 3. Products and Solutions • Product and solutions overview • Expanding our reach • Optical, Ethernet an
Slide 4: 1. Who We Are
1. Who We Are 4 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 5: ADVA Optical Networking
ADVA Optical Networking Key Facts • Founded 1994, public company (FSE: ADV, TecDAX) • EUR 330 million revenue (2012) • 1,378 employees (on Dec 31, 2012) Target Markets • Carriers (Ethernet access, infrastructure) • Enterprises (corporates, government, research & education) Quality Commitment • TL 90
Slide 6: How We Continue to ADVAnce
How We Continue to ADVAnce Revenues (EUR million) LEAD 300 150 BUILD 50 START 0 Customers 30% carriers 70% carriers 100% enterprises 70% enterprises 30% enterprises Solutions FSP-I FSP 500 FSP OCM 4 Manage- FSP 150 FSP 3000 ment OCM 8 & 16 FSP-II FSP 2000 Suite 1994 2001 2013 Enterprises and carrier
Slide 7: Proven Thought Leadership
Proven Thought Leadership Data Center 1994 Connectivity Scalable 2000 Metro Networks Intelligent 2006 Service Delivery R&D facility, Meiningen, Germany Converged Transport from Access to Core 2013 Software-Automated Infrastructure Two decades of history delivering value-added solutions that support
Slide 8: ADVA Optical Networking Today
ADVA Optical Networking Today Successful Acquisition Strategy 2000 – Cellware 2000 – First Fibre Ltd. 2000 – Siemens Norway Telecom R&D 2004 – Metro Packet Systems 2006 – Covaro Networks 2006 – Movaz Networks +6% +7% +25% +7% +8% +6% +9% EUR 311 million EUR 292 million EUR 233 million EUR 330 millio
Slide 9: Our Global Presence
Our Global Presence Headquarter Office Representative Richardson Atlanta Munich Meiningen Berlin Singapore Shenzhen 9 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 10: 2. Addressable Market
2. Addressable Market 10 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 11: What Are We Trying To Solve?
What Are We Trying To Solve? Billions Trillions Millions of users of things of applications • Consumers Industry solutions • Content • Enterprises • Services • Service • Gaming providers • Commerce • … • … Mobility Cloud services Social media Big data analytics The New Network Mobile devices and app
Slide 12: Capitalizing on Next-Generation Networks
Capitalizing on Next-Generation Networks Interactive multi-media Single application Apple iPad Intelligent Approx. $200 billion infrastructure Legacy networks Global annual (dynamic, (static, narrowband, infrastructure investment purpose-built) application-driven, $5.4 billion* high-bandwidth, in op
Slide 13: What Environment Do We Face?
What Environment Do We Face? European conditions are stable US is strengthening – most near-term upside in this region Emerging markets and APAC fragmented and highly competitive BUT: Telecommunication is a facilitator of socio-economic advancement and at the core of a growing eco-system across most
Slide 14: Business Segment Overview
Business Segment Overview Revenues 2012:* EUR 330.1 million 30% 30% 40% +6.2% vs. 2011 Addressable 18% 12% 70% market 2012:** EUR 4.2 billion ENTERPRISE ETHERNET CARRIER NETWORKS ACCESS INFRASTRUCTURE Well-balanced and diversified mix of market segments with low overall dependency on macro-economic
Slide 15: What's Up In The Telecom Market?
What’s Up In The Telecom Market? Challenges Opportunities Competition Growth Globalization New Services Regulation Differentiation Despite our demonstrated global leadership - profitable growth is a challenge 15 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 16: Where Do Carriers Invest?
Where Do Carriers Invest? Legacy Global carrier CAPEX 2012-16: New CAGR = 1% • SONET/SDH Source: The Insight Research Corp.: “The 2013 • Mobility (LTE) Telecommunications Industry Review: An Anthology • ADSL of Market Facts and Forecasts”, December 2012. • Application awareness • ATM • Scalability •
Slide 17: Drivers in Data Center Connectivity
Enterprise Networks: Drivers in Data Center Connectivity 566 • Dramatically growing capacity demand in data centers Peak requests 370,000k+ 262 of enterprises and per second communication providers 102 Q4 ‘11 • Increased adoption of cloud Q4 ‘10 40 services creates security 2.9 14 ‘09 ‘08 challenge
Slide 18: Efficient Data Center Connectivity
Enterprise Networks: Efficient Data Center Connectivity Amsterdam Internet Exchange: 100G metro for data center connectivity 100G Data center A Data center B FSP 3000 • First to market with 100G Metro • First to be qualified for Brocade Gen 5 • Highest density, lowest power consumption, maximum secu
Slide 19: Ethernet Access: Drivers in Mobile Backhaul
Ethernet Access: Drivers in Mobile Backhaul • Internet Protocol-based 7 Radio Access Networks 6 5 make Ethernet primary choice Subscribers (billions) 4 for mobile backhaul 3 • Real-time applications and 2 increased mobility demand 1 0 low-latency architecture 08 09 10 11 12 13 14 15 Mobile Mobile Br
Slide 20: Unconstrained Mobile Backhaul
Ethernet Access: Unconstrained Mobile Backhaul FSP 150CC FSP 150EG-X Demarcation Aggregation Service Edge • Integrated, best-in-class synchronization architecture FSP 150 • Long-term supplier to BT into the world’s largest network for wholesale Ethernet access • Multi-million USD deployment for inte
Slide 21: Drivers in Optical Infrastructure
Carrier Infrastructure: Drivers in Optical Infrastructure 70 $5 • Massive data centers 60 Price per port per Gbps (US$k) have changed 50 $4 Exabytes/month (trillions) traffic patterns 40 $3 30 $2 • Content now originates 20 $1 10 from many sources and 0 $0 challenges network dynamics 2009 2010 2011
Slide 22: Software-Defined Networking
Carrier Infrastructure: Software-Defined Networking Agile Optical Networking FSP 3000 • Extremely scalable and flexible optical layer • Forward looking control and management concepts • Integration with higher network layers (e.g. Juniper) Scalability, flexibility and automation for ultimate perform
Slide 23: Expanding Opportunities: New Verticals
Expanding Opportunities: New Verticals Internet Service Video Contribution Provider (ISP) Networks Datacenter HD Cinema 1 • FSP 3000 • 100G core technology added to 470km backbone HD Cinema 2 Disk Disk “Hetzner Online Deploys “Colt Technology Services ADVA 100G Core to Answer Uses ADVA FSP 3000 for
Slide 24: Differentiated Technology
Thought leadership: Differentiated Technology Data Center Mobile Backhaul Connectivity 16G FC FSP 150CC FSP 150EG-X Data center A Data center B Demarcation Aggregation Service Edge “ADVA Optical Networking “ADVA Optical Networking Drives Synchronization of Scores Industry First with Radio Access Net
Slide 25: Customer-Optimized Sales Model
Customer-Optimized Sales Model OEM Solutions integration NMS integration CUSTOMER Long relationships DIRECT Regional focus Vertical segments Long relationships VAR e.g. Three-pronged distribution model to flexibly address customer needs 25 © 2013 ADVA Optical Networking. All rights reserved. Confide
Slide 26: Broad Base of Loyal Customers
Broad Base of Loyal Customers Operators Corporates Research and Education Global success with Optical+Ethernet solutions 26 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 27: 3. Products and Solutions
3. Products and Solutions 27 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 28: Our Solutions
Our Solutions Ethernet access Metro Core Optical access Enterprise 28 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 29: Private Enterprise Networks
Private Enterprise Networks Highest availability FSP 3000 Lowest latency Maximum security Primary data center Backup data center Market-leading enterprise connectivity solutions 29 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 30: Ethernet Access and Backhaul
Ethernet Access and Backhaul Service intelligence FSP 150 Service assurance Timing excellence Demarcation Aggregation Service edge FSP 150EG-X provides an entry to the aggregation market, a subset of the application space served by switches and routers 30 © 2013 ADVA Optical Networking. All rights r
Slide 31: Optical Network Infrastructure
Optical Network Infrastructure From access to core FSP 3000 Service management Multi-layer transport Access Metro Core The FSP 3000 agile core feature set combined with the Juniper relationship opens the door to the long-haul and tier 1 operator market 31 © 2013 ADVA Optical Networking. All rights r
Slide 32: Efficient 100G Metro
Efficient 100G Metro For Enterprise Networks & Metro Infrastructure Cost-Effective 100G Metro Compatible Short Reach Efficient Long Haul IEEE 100G Metro OIF • Works with existing installations Efficient Cabling Access Metro LH • Less than 1 Watt per Gbit/s • Ultra-compact design 0 10 100 1000 10000
Slide 33: Agile Core Express
Agile Core Express 100G Coherent and More Agile Optical Networking (long haul) Short Reach Efficient Long Haul IEEE 100G Metro OIF Scalable Cabling Access Metro LH • 96 wavelengths architecture • Optimized for 100G+ 0 10 100 1000 10000 Automated Distance (km) • GMPLS control plane • Service-based ma
Slide 34: Integrated Packet Optical Networking
Integrated Packet Optical Networking Best in class Best in class optical switching and transport packet LSP and TDM processing • Contentionless, colorless, directionless • Best in class routing and control plane multi-degree optical switching solution • Densest 96 lambda / 100G solutions • Massive s
Slide 35: The Future of Optical Transport
The Future of Optical Transport Value added features converge into the optical transport layer, delivering better end-user experience at lower cost, space and power Agile consumption.” Core Optical Network Router Encryption IP/MPLS Data aggregation TDM (SONET/SDH) Static pipe Agile feature-rich foun
Slide 36: Why Software-Defined Networking (SDN)?
Why Software-Defined Networking (SDN)? Programmable application- • Dynamic services aware networking • Customer apps • Full plug & play • Virtualized network resources Network Open source agents and controller • Extendible control & virtualization framework Open northbound FSP SW Suite application p
Slide 37: Why SDN and Optical Networking?
Why SDN and Optical Networking? ADVA Optical Networking‘s SDN innovation Monetize New network services Bandwidth Database Resource management analytics virtualization Network-based applications Network Applications Big data Policy Optimize management Operations Network utilization Service performanc
Slide 38: Network Monetization? Profitability
Network Monetization? Profitability Correcting the imbalances: • Dynamic cloud connectivity • Centralized intelligence towards network apps • Network Functions Virtualization (NFV) $$ $$ $$ Applications Content Equipment Networks Components SDN, NFV Hardware-centric Software-centric SDN and NFV are
Slide 39: Where Do We Stand Today?
Where Do We Stand Today? Scalable, efficient capacity 1 2 Service assurance 3 High energy efficiency 4 Dynamic network infrastructure ADVA Optical Networking has a leading-edge technology foundation 39 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 40: Where Do We Go From Here?
Where Do We Go From Here? Scalable, efficient capacity 1 Network functions virtualization 7 2 Service assurance Centralized intelligence towards network apps 6 3 High energy efficiency Dynamic cloud connectivity 5 4 Dynamic network infrastructure The future has great potential for innovators that ex
Slide 41: 4. Operations Strategy
4. Operations Strategy 41 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 42: Operational Excellence: Supply Chain Management Award
Operational Excellence: Supply Chain Management Award Operational Excellence “ADVA Optical Networking Sellable Item Count ……………………8000 2000 Wins Prestigious Supply Chain Management Award” 2010 2013 SCM Inventory Turns doubled On Time Delivery to 1st Commit …85% 95% Customer Order Lead Time …… ~40 ~1
Slide 43: Operations Vision and Structured Project Initiatives
Operations Vision and Structured Project Initiatives Vision Strategic Focus Strategic Initiatives 1. Exploit ADVA Optical Networking’s growth to achieve Growth & accelerated cost reductions in the areas of direct Profitability materials, contract manufacturing, freight and distribution cost. Operati
Slide 44: Manufacturing and Distribution Sites
Manufacturing and Distribution Sites Europe China USA York (26) Meiningen (175) BMK, Augsburg, DE Munich (4) Sanmina-SCI, Shenzhen, CN Sanmina, Allen (TX), US Atlanta (26) Flextronics, Richardson (1) Timisoara, RO Shenzhen (12) Operations Headquarter EMS/CM supplier 44 © 2013 ADVA Optical Networking
Slide 45: Manufacturing Model WDM
Manufacturing Model WDM Meiningen Distribution Staging SUPPLIER BASE Manufacturing Atlanta Distribution Launch Jan 2013 Staging Shenzhen Distribution Staging 45 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 46: Manufacturing Model Ethernet
Manufacturing Model Ethernet York Distribution Staging SUPPLIER BASE Meiningen Shenzhen 3 PL Distribution Staging Atlanta Distribution Staging 46 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 47: 5. Competitive Landscape
5. Competitive Landscape 47 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 48: Competitive Overview
Competitive Overview Our • First to market with • Multi-year • Best scalability with ADVAntages innovation (e.g. market leader – ease-of-use 8G FC, InfiniBand, #1 in Ethernet (lowest first-in cost 100G Metro) Access Devices* but future proof) • Faster with partner • Intelligent service • Market-lead
Slide 49: Competitive Landscape Evolution
Competitive Landscape Evolution „Giants“ „Niche“ Profitability „Mainstream“ Relative technological differentiation Very few players have the critical R&D power to innovate (scale) with a lean enough overhead to be fast and profitable 49 © 2013 ADVA Optical Networking. All rights reserved. Confidenti
Slide 50: Our ADVAntage
Our ADVAntage Trusted Partner Speed for Customers Optical+Ethernet • High quality Innovation • Operational excellence • Responsive team • Financial stability • Customized delivery • World-class engineering team • 24/7 worldwide • Focused on latest technology • Unconstrained networking ADVA Optical N
Slide 51: Differentiation by Innovation
Differentiation by Innovation Fast addressing customer needs Research and prototyping of new concepts Ongoing dialogue with strategic customers Fast decision making and IPR creations implementation Standardization Close co-operation with suppliers We add value through differentiated, customer-focuse
Slide 52: Development Approach
Development Approach • >500 engineers • Global IT landscape • Present in all regions • >30 publications per year • Integrated tools • Proximity to customers • >20 patents per year • Centers of competence • Trusted technology (Optical+Ethernet+Control) partner Platform concept (Optical+Ethernet+Contr
Slide 53: 6. Financial Performance
6. Financial Performance 53 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 54: Annual IFRS Revenues and Pro Forma Profitability
Annual IFRS Revenues and Pro Forma Profitability Revenues and Pro Forma Gross Profit** (millions of EUR, % of revenues) +6% +7% Growth Y-o-Y +25% 330.1 310.9 291.7 +18%* +9%* +12%* 109.9* 119.4* (37.7%) (38.4%) 133.2* (41.6%) (42.9%) (40.4%) (45.0%) Pro Forma Operating Income** (millions of EUR, % o
Slide 55: Quarterly IFRS Revenues and Pro Forma Profitability
Quarterly IFRS Revenues and Pro Forma Profitability Revenues and Pro Forma Gross Profit** (millions of EUR, % of revenues) 85.9 82.3 80.3 77.0 78.4 35.1* 32.3* (40.9%) 33.6* (45.4%) (39.3%) (41.8%) 29.8* (44.5%) (46.7%) (38.6%) 31.3* (43.4%) (39.9%) Pro Forma Operating Income ** (45.6%) (millions of
Slide 56: IFRS Profitability
IFRS Profitability EUR million Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Pro Forma Operating Income 6.8 5.6 4.8 0.8 1.5 (8.0%) (6.8%) (6.0%) (1.0%) (2.0%) Operating Income 5.9 5.1 4.3 0.4 1.2 (6.9%) (6.2%) (5.3%) (0.5%) (1.5%) Net Income 5.1 3.5 4.1 0.8 0.1 (5.9%) (4.2%) (5.1%) (1.0%) (0.2%) Diluted E
Slide 57: Cash and Net Liquidity
Cash and Net Liquidity EUR million Cash & Cash Equivalents Financial Liabilities and Lease Obligations Net Liquidity 80 80.3 65 50 40.6 35 20 5 -10 -25 -40 -39.7 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2
Slide 58: IFRS Balance Sheet
IFRS Balance Sheet EUR million Dec. Mar. Jun. EUR million Dec. Mar. Jun. Assets 31, 31, 30, Equity & liabilities 31, 31, 30, 2012 2013 2013 2012 2013 2013 Cash & cash equivalents 70.6 65.3 80.3 Accounts payable 38.1 37.6 33.0 Accounts receivable 55.5 60.2 52.8 Financial liabilities 29.0 29.0 39.7 In
Slide 59: Revenues Per Region
Revenues Per Region Quarterly Development of Regional Revenues (millions of EUR, % of total) EMEA Americas Asia-Pacific 85.9 82.3 80.3 77.0 78.4 6% 4% 6% 5% 6% 38% 31% 30% 33% 30% 65% 64% 64% 56% 62% Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 EMEA remains most significant revenue contributor 59 © 2013
Slide 60: IFRS Consolidated Cash Flow Statement
IFRS Consolidated Cash Flow Statement EUR million Q1 2013 Q2 2013 Net cash provided by operating activities 1.7 12.8 Net cash used for investing activities -6.8 -8.2 Net cash provided by (used for) financing activities -0.3 +10.2 Net effect of foreign currency translation +0.1 +0.2 Net change in cas
Slide 61: Guidance Q3 2013
Guidance Q3 2013 • Revenues between EUR 76 million and EUR 81 million • Pro forma operating margin between 1% and 5% of revenues* • ADVA Optical Networking will continue to perform detailed quarterly reviews of the expected business development in respect of all intangible assets, including capitali
Slide 62: Investor Relations Overview (I/II)
Investor Relations Overview (I/II) Recent Investor Activities Planned Investor Activities Apr-May Institutional investors met in London, Jul-Sep Investor roadshows and conferences in Paris and Munich Europe and America: Frankfurt, London, New York, Edinburgh, Munich Jun 4 Annual General Meetin
Slide 63: Investor Relations Overview (II/II)
Investor Relations Overview (II/II) Share Price and Trading Volume Development Trading volume Jul 1, 2012 – Jul 15, 2013 Share price in thousand FWB Xetra data in € Ø daily trading volume (in shares) 1 month: 106,824 6 months: 181,231 12 months: 170,672 Share price in EUR Current (Jul 15) 3.
Slide 64: 7. In Summary
7. In Summary 64 © 2013 ADVA Optical Networking. All rights reserved. Confidential.
Slide 65: How We ADd VAlue
How We ADd VAlue Sustainable growth Focus on Thought Operational growth leadership excellence markets Expanding Differentiated Loyal opportunities technology customers ADVA Optical Networking is a thought leader in developing intelligent network solutions for growth markets 65 © 2013 ADVA Optical Ne
Slide 66: Thank you
Thank you Investor Relations Karin Tovar t +1 201 940 7212 ktovar@advaoptical.com www.advaoptical.com
ADVA Optical Networking — Q2 2013 Earnings Presentation on 6ix