Adtran Holdings, Inc. · NASDAQ:ADTN

Adtran — Investor Presentation (November 2022)

55 slides from Adtran's investor presentation, Nov 29, 2022

Slide 1: Adtran Holdings Investor presentation
Adtran Holdings Investor presentation November, 2022 2022 © ADTRAN, INC. General Business
Slide 2: Cautionary note regarding forward-looking statements
Cautionary note regarding forward-looking statements This presentation contains forward-looking statements, generally identified by the use of words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could” and similar expressions, which forward-looking statements refle
Slide 3: Content
Content 1. Introduction and business model 2. Unprecedented market opportunities 3. Leading technologies in the converged edge 4. ESG – Adtran´s commitment to sustainability 5. Financial strength 6. Business update 7. Appendix 3 2022 © ADTRAN, INC. General Business
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 2022 © ADTRAN, INC. General Business
Slide 6: Creating a leader in the converged edge
Creating a leader in the converged edge A leading global provider of cloud-managed fiber access solutions for residential and business connectivity Third largest 10G fiber access supplier globally, #2 in North America,  fastest growing 10G supplier, largest U.S.-based supplier A leading global plat
Slide 7: Management board
Management board Tom Stanton Christoph Glingener Michael Foliano Jay Wilson Chairman & CEO CEO (ADVA)  CTO CFO CRO  Joined ADVA Optical  38 years of experience in the  Joined Adtran in 1998 and has  Joined Adtran in 1995 as VP of Networking in April 2006 and information and communications held
Slide 8: Global presence
Global presence Americas: Canada United States (HQ Global) Brazil APAC: EMEA: Germany (HQ Europe) Japan England China Switzerland Hong Kong Poland Singapore Finland India Sweden Australia France Italy Israel South Africa 8 8 2022 © ADTRAN, INC. General Business Saudi Arabia
Slide 9: 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 10: Technology categories
Technology categories Combined company $1.3b* Access & aggregation solutions: Access & aggregation 25-30% of revenue Network synchronization Subscriber solutions Subscriber solutions 35-40% of revenue Cloud access & experience Optical networking solutions Traditional & 35-40% of revenue Optical netw
Slide 11: Expanded portfolio and presence
Expanded portfolio and presence Combined Complementary combined customer base APAC 5% APAC 7% Americas Americas 48% EMEA 73% 22% EMEA 45%  Greater scale to increase presence in Tier-1  Combined offerings improve carriers APAC 9% Americas coverage and positioning in 28% the Americas and Europe  In
Slide 12: Corporate strategy
Corporate strategy Growth and profitability Leadership in Growth in focus Investment in Transformation Diversification Focus on fiber networking markets converged edge through of customers sustainability software Breadth of More turnkey Innovation in Open and cloud- Cross-selling Science-based portf
Slide 13: Why Adtran?
Why Adtran? Leader in the Unprecedented Financial strength Strong converged edge market commitment to opportunity ESG Business combination Strong growth due to Significant cross-sell Strong commitment to creates a leading global unprecedented changes opportunities and corporate social platform to ad
Slide 15: Position in growing TAM is enhanced from increased customer reach and improved win rate
Position in growing TAM is enhanced from increased customer reach and improved win rate Expansion to new markets TAM expansion in core markets Deeper penetration in core markets Expands ADVA’s win rate in North Unprecedented government stimulus America and Adtran’s win rate in Europe Enhanced scale
Slide 16: Market trends – fiber growth in US and Europe
Market trends – fiber growth in US and Europe Access investment cycle drives… …middle mile upgrade PON access concentrator + Residential WLAN revenue CPE revenue 14 20 12 • Boom in residential broadband WDM Metro 15 10 • Upgrades of access networks 8 • New builds and new players 10 • Accelerated dem
Slide 17: Significant and parallel investments and revenue opportunities across U.S. and Europe
Significant and parallel investments and revenue opportunities across both the U.S. and Europe Incremental displacement Representative funding to deploy fiber broadband everywhere + opportunities from huawei replacement United States Europe Europe $48B+ $37B+ $1.2B+ BEAD and other programs as part o
Slide 18: Growing addressable market for fiber connectivity
Growing addressable market for fiber connectivity U.S. FTTP household addressable market Europe (EU27 + UK) addressable market (in millions) (in millions) 26 65 2021 2026 2021 2026 Total market - 128 Total market - 135.7 Total market - 224 Total market - 247 Passed and connected Passed but not conne
Slide 19: Addressing the needs of the converged edge
Addressing the needs of the converged edge Combination creates a comprehensive solution… …to meet demands of the converged edge ✓ One platform to address needs from residential, WFH, business, wholesale, Fiber access and aggregation mobile x-haul networks, and wireless ✓ Residential and enterprise c
Slide 20: 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 enterprises Tier 1, 2 CSPs ICPs ICPs Tier 2, 3 CSPs Tier 2, 3 CSPs ✓ ✓ X X ✓ X Customer
Slide 21: Leading technologies in the converged edge
Leading technologies in the converged edge 21 2022 © ADTRAN, INC. General Business
Slide 22: A new approach to networks
A new approach to networks A portfolio supporting Open and AI-driven networking Scalable, secure, fiber everywhere disaggregated and assured multivendor systems connectivity Access, aggregation, Open optical line Application of AI to Service assurance, DCI, synchronization systems, disaggregated pla
Slide 23: What is the converged edge?
What is the converged edge? Adtran has the industry’s most comprehensive toolbox that empowers operators to build a converged infrastructure from the metro core to the customer premise, serving all networking applications for residential, business, wholesale and mobile users. Welcome to the intellig
Slide 24: The converged edge
The converged edge Cloud-based, end-to- end network and Mosaic one - AI-driven orchestration, management and optimization service optimization Nx10/25/100G business Ethernet Edge cloud MEF uCPE Cloud-managed Multi-gig fiber access Metro / Regional WDM mesh Wi-Fi (Nx100G/200G/400G) Nx10/25/100G Ether
Slide 25: Subscriber solutions portfolio
Subscriber solutions portfolio Unified cloud management solution for all subscriber types Mosaic One - AI-driven orchestration, management and optimization LoRa IoT Nx1/10/25/100G carrier gateway Ethernet with synchronization ONT MEF MEF uCPE or MEF NID Hub 1/10G Extender router Wavelength or OTN se
Slide 26: Access and aggregation solutions
Access and aggregation solutions Mosaic One – network optimization & insights Cloud-based applications Kafka RESTCONF (streaming (prov and monitoring with telemetry/events) service level APIs) Mosaic One - AI-driven orchestration, management and optimization NETCONF/YANG provisioning for all devices
Slide 27: Optical networking solutions
Optical networking solutions End-to-end service orchestration and management PON OLT leaf 1/10/25/100GE CE leaf switch Agg switch Optical Optical Nx100/200/400G transport Remote OLT/switch Agg switch transport 100ZR backhaul system Metro WDM system Optical OTN and wavelength services NID Access Nx10
Slide 28: Software supporting all technology solutions
Software supporting all technology solutions End-to-end AI optimization Mosaic One SaaS applications • Turning data into actionable insights for transport, access and in-home M1 operate M1 promote Applications for NOC personnel Applications for marketing teams • Simplifies network deployment and mai
Slide 29: Our combined portfolio
Our combined portfolio Optical networking solutions Software Professional Optical access and transport, data center platforms services interconnect, advanced pluggable optics, assurance and monitoring, encryption and security Open, cloud-centric Scalable in-region management and services, including
Slide 30: ESG – Adtran's commitment to sustainability
ESG – Adtran’s commitment to sustainability 30 2022 © ADTRAN, INC. General Business
Slide 33: Holistic ESG approach
Holistic ESG approach Environmental Social Governance Increased Scale Operational Efficiencies to Accelerate from Well-Defined  Commitment to science-based R&Dsponsored  Team Adtran Innovation events  Cost Synergies Strong ESG/sustainability emissions targets (SBTi) NetZero  Adtran offers 20 vol
Slide 34: Outlook: Net zero in own CO2 emissions by 2040
Outlook: Net zero in own CO2 emissions by 2040 Scope 1: Natural gas and cars, estimation of <5‰ of total Scope 1-3 emissions • Target: down to 10% in 2037, base year 2022, with compensation of residual emissions • Action: switch to e-mobility, biofuel, district heating, and purchasing certified offs
Slide 35: Focus on innovation to meet sustainability requirements
Focus on innovation to meet sustainability requirements The combination of … enabling the Adtran technologies and solutions to support Adtran and ADVA combined company to sustainability: strengthens R&D power leverage innovation ….$m; % of revenues In - Open and disaggregated access devices lowers b
Slide 36: Adtran ESG ratings and awards at a glance
Adtran ESG ratings and awards at a glance EcoVadis business sustainability rating Goals ADVA ADTRAN • EcoVadis - gold rating 2023, platinum 2024 • Learn and leverage from each other • CDP alignment in 2023 CDP rating ADTRAN ADVA • CDP improvement expected in upcoming rating 2021 • Emissions reductio
Slide 37: ESG 2023 ambitions
ESG 2023 ambitions • Combined targets: improve rating scores (i.e. Ecovadis, CDP, ISS) • Create a consolidated ESG report for 2023, including GRI index • Extend ISO 50001 to the Adtran Huntsville site • Purchase offsets for scope 1 to achieve net zero for emissions of this type • Reduce scope 2 emis
Slide 39: Scaled R&D with high growth and margin opportunities
Scaled R&D with high growth and margin opportunities … In $m Intermediate term projection > 5% CAGR Increased scale and Revenue ~$1.5+ overall competitiveness 1,277 1,100 1,125 R&D strength to best R&D ~$250M+ address all needs of the converged edge Potential for additional Rev. growth >5% $60M – $1
Slide 40: Supported by well defined synergies and accelerated R&D innovation
… supported by well defined synergies and accelerated R&D innovation Increased Scale Operational Efficiencies Operational Significant Increased scale to Accelerate from Well-Defined efficiencies from cross-sell to accelerate R&D Innovation Cost Synergies well-defined cost opportunities R&D innovatio
Slide 41: Well-defined cost synergies enhance financial profile
4 Well-defined cost synergies enhance financial profile for continued growth $52M+ Run rate cost synergies General and administrative Cost of goods sold  Line-item detail for all savings Consolidation of corporate Procurement and costs, centralization of logistics optimization  Jointly developed p
Slide 42: Q3 non-GAAP financials
Q3 non-GAAP financials 340.7 Y-o-Y Q-o-Q 172.0 Revenue 138.1 + 147% + 98% Q3 2021 Q2 2022 Q3 2022 Gross 34.6% 36.4% 38.1% Margins + 3.5PP + 1.7PP Q3 2021 Q2 2022 Q3 2022 109.0 OpEx 50.4 54.3 + 116% + 101% Q1 2021 Q2 2022 Q3 2022 20.9 Operatin 8.4 + 893% + 149% g margin (1.9)% 4.9% 6.1% -2.6 (+ 8.0 P
Slide 43: Non-controlling interest (NCI)
Non-controlling interest (NCI) 12.2 • ADVA has a minority shareholder position of 34.65% (non-controlling interest “NCI” as defined under ASC810-10-20) as of Q3 2022 4.5 • 34.65% of ADVA profits are thereof attributable to 7.7 NCI • This reduces GAAP and non-GAAP net income and EPS attributable to A
Slide 44: Q3 revenue by segment, category and region
Q3 revenue by segment, category and region Segments Category Region 341 341 341 36 88 171 138 Y-o-Y 17 305 138 134 138 46 91 170 121 119 92 47 Q3 2021 Q3 2022 Q3 2021 Q3 2022 Q3 2021 Q3 2022 341 341 341 36 88 172 171 172 172 134 Q-o-Q 16 305 92 66 156 119 170 80 106 Q2 2022 Q3 2022 Q2 2022 Q3 2022 Q
Slide 45: Q3 balance sheet metrics
Q3 balance sheet metrics Q3 2022 Net cash / debt Q3 2022 Net debt / EBITDA LTM Q3 2022 Equity ratio 111 57.1% 1,524 Revolving Credit Facilities Notes payable 0.44x 871 -3 Equity Total liabilities Note: Net cash / debt and equity defined as total cash – Note: Proforma LTM EBITDA calculation Note: Exc
Slide 46: Q3 cash flow and balance sheet
Q3 cash flow and balance sheet Cash flow in Working capital in $m • Financing of additional $m inventory to secure ability to supply • Consolidation of ADVA debt DSO 91 82 4 111 Turn 2.4 3.1 s • M&A costs • Additional working DPO 100 71 capital $44m 70 proceeds 443 from ADVA consolidation 302 43 225
Slide 47: Q4 2022 Outlook
Q4 2022 Outlook Revenue $355 million - $375 million Non-GAAP 5.0% - 6.5% operating margin 47 47 2022 © ADTRAN, INC. General Business
Slide 49: Financial calendar
Financial calendar 29 Nov., 2022 15 Dec., 2022 09 Jan., 2023 Deutsches Cowen Virtual Networking ODDO BHF Forum, virtual Eigenkapitalforum, Series, virtual Frankfurt, Germany 49 49 2022 © ADTRAN, INC. General Business
Slide 50: Adtran stock information
Adtran stock information Share price development YTD Q3 2022 -15% -34% ADTRAN NASDAQ MDAX -37% Analyst recommendation Shareholder structure as of 31 October 2022 Institution Analyst Rec. Target Price ($) Date Blackrock Cowen Paul Silverstein Buy 34 10.19.2022 16.5% Needham Ryan Koontz Buy 28 11.09.2
Slide 51: Adtran independent board composition
Adtran independent board composition Environmental, social and Nominating and corporate Audit committee Compensation committee governance committee governance committee H. Fenwick Huss Johanna Hey Gregory McCray Balan Nair Jacqueline Rice Nikos Theodosopoulos Kathryn Walker Chair Member 51 51 2022 ©
Slide 52: 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 52 52 2022 © ADTRAN, INC. General Business
Slide 53: Reconciliation of operating expenses to non-GAAP operating expense
Reconciliation of operating expenses to non- GAAP operating expense 53 53 2022 © ADTRAN, INC. General Business
Slide 54: Reconciliation of other (expense) income to non-GAAP
Reconciliation of other (expense) income to non-GAAP other (expense) income 54 54 2022 © ADTRAN, INC. General Business

Adtran Holdings — Investor Presentation (November 2022) on 6ix

Adtran — Investor Presentation (November 2022)

Slide 1: Adtran Holdings Investor presentation

Slide 2: Cautionary note regarding forward-looking statements

Slide 3: Content

Slide 4: Introduction and business model

Slide 5: Our vision

Slide 6: Creating a leader in the converged edge

Slide 7: Management board

Slide 8: Global presence

Slide 9: Market trends

Slide 10: Technology categories

Slide 11: Expanded portfolio and presence

Slide 12: Corporate strategy

Slide 13: Why Adtran?

Slide 14: Unprecedented market opportunities

Slide 15: Position in growing TAM is enhanced from increased customer reach and improved win rate

Slide 16: Market trends – fiber growth in US and Europe

Slide 17: Significant and parallel investments and revenue opportunities across U.S. and Europe

Slide 18: Growing addressable market for fiber connectivity

Slide 19: Addressing the needs of the converged edge

Slide 20: A unique scaled pure play addressing the converged edge

Slide 21: Leading technologies in the converged edge

Slide 22: A new approach to networks

Slide 23: What is the converged edge?

Slide 24: The converged edge

Slide 25: Subscriber solutions portfolio

Slide 26: Access and aggregation solutions

Slide 27: Optical networking solutions

Slide 28: Software supporting all technology solutions

Slide 29: Our combined portfolio

Slide 30: ESG – Adtran's commitment to sustainability

Slide 31: Adtran's ESG Vision

Slide 32: Our commitment to ESG

Slide 33: Holistic ESG approach

Slide 34: Outlook: Net zero in own CO2 emissions by 2040

Slide 35: Focus on innovation to meet sustainability requirements

Slide 36: Adtran ESG ratings and awards at a glance

Slide 37: ESG 2023 ambitions

Slide 38: Financial strength

Slide 39: Scaled R&D with high growth and margin opportunities

Slide 40: Supported by well defined synergies and accelerated R&D innovation

Slide 41: Well-defined cost synergies enhance financial profile

Slide 42: Q3 non-GAAP financials

Slide 43: Non-controlling interest (NCI)

Slide 44: Q3 revenue by segment, category and region

Slide 45: Q3 balance sheet metrics

Slide 46: Q3 cash flow and balance sheet

Slide 47: Q4 2022 Outlook

Slide 48: Appendix

Slide 49: Financial calendar

Slide 50: Adtran stock information

Slide 51: Adtran independent board composition

Slide 52: Reconciliation of gross profit and gross margin to non-GAAP

Slide 53: Reconciliation of operating expenses to non-GAAP operating expense

Slide 54: Reconciliation of other (expense) income to non-GAAP

Slide 55: 2022 © ADTRAN, INC. General Business