ADVA Optical Networking Investor Presentation. October 2015

Transcription

1 ADVA Optical Networking Investor Presentation October 2015

2 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-looking statements involve a number of unknown risks, uncertainties and other factors that could cause actual results to differ materially. Unknown risks, uncertainties and other factors are discussed in the risk report section of ADVA Optical Networking s annual report CONSOLIDATED PRO FORMA FINANCIAL RESULTS ADVA Optical Networking provides consolidated pro forma financial results in this presentation solely as supplemental financial information to help investors and the financial community make meaningful comparisons of ADVA Optical Networking s operating results from one financial period to another. ADVA Optical Networking believes that these pro forma consolidated financial results are helpful because they exclude non-cash charges related to stock compensation programs and amortization and impairment of goodwill and acquisition-related intangible assets, which are not reflective of the Group s operating results for the period presented. This pro forma information is not prepared in accordance with IFRS and should not be considered a substitute for historical information presented in accordance with IFRS. 2

3 ADVA Optical Networking Today Mission Our MISSION is to be the trusted partner for innovative networking solutions that ADVANCE next-generation networks for cloud and mobile services. Key Facts Our NUMBERS employees 339* million revenue 20 years of innovation *annual 2014 Our CUSTOMERS Hundreds of carriers Thousands of enterprises Ulrich Dopfer CFO Brian Protiva Co-Founder & CEO Christoph Glingener CTO Our QUALITY TL 9000, ISO Award-winning supply chain We bring differentiation, quality and ease-of-use to next-generation networks 3

4 Capitalizing on Cloud and Mobility Approx. $200 billion Global annual infrastructure investment $15 billion * in optical transport Social IP Cloud & Mobility Chat Community Next-Generation Cloud Services Video Voice Data *2018 Market size; Industry analyst estimates for metro WDM equipment ( Optical ) and Ethernet access devices ( Ethernet ) relevant for ADVA Optical Networking. Sources: Infonetics Research Optical Network Hardware, Quarterly Market Share, Size, and Forecasts 2Q15, August 2015, and Infonetics Research Ethernet Access Devices Biannual Market Share, Size and Forecasts, 2 nd Edition, August Phone Partners Search Interactive Multimedia Local Experience Internet of Things As an industry, we have built a great network creative use has only started 4

5 What We Do Social Chat Partners Cloud Search Community Phone Innovative Connectivity Mobility Scalable, programmable and secure networking solutions for the cloud 5

6 Cloud & Mobility Network Transformation The optical renaissance has begun

7 The Age of the Data Center (DC) 70% of business users embrace cloud-based services 62% of consumers watch online videos Consumer video & app consumption Cloud service adoption IoT Increase # of end nodes by orders of magnitude DC construction continues in major cities and remote sites DC square footage investment DC CSP move to NFV VNFs hosted at the network edge (metro) Major ICPs building edge DC DC distributed architecture evolution LTE-A, 4.5G, 5G Sophisticated mobile networks directly drive DC growth future virtualized RANs will be hosted at DCs *CSP: Communication Service Provider; NFV: Network Function Virtualization; VNF: Virtual Network Function; RAN: Radio Access Network DC growth drives interconnect requirements investment focus in the metro Source: Ovum, Opportunities for Optical Data Center Interconnect. August

8 Who Builds and Owns Data Centers? ICP Creation, storage and dissemination of digital information Also referred to as: over-the-top (OTT), Web 2.0 and digital media companies Source: Ovum Global Data Center Analyzer: 1H15 (April 2015); 6,519 data centers Enterprise Large-scale needs for storage, replication and backup CSP Own fiber plant; experience in design, building and operation of optical networks. Data center interconnect (DCI) opportunity is driven by three user groups 8

9 ICP DCI: Hyper-Scale Cloud Data Centers 1 ICP Predominant Architecture Characteristics Ethernet Fabrics DWDM Transport Resource pool based on virtualized processing and storage resources Dynamic resource allocation Public and private data center Standard interfaces, open protocols, open source software Local, national, global coverage Optimized for scalability, ease-of-use and multi-tenancy 9

10 ICP DCI: New Product Requirements CLI REST NET CONF REST CONF Mega Data Center Open APIs Open Line System High Channel Count Small Form Factor Security Co-Lo Sites Big Capacity Smaller Edge Sites Highest Efficiency Scalability from 10G to 100T DCI re-imagined Introducing the FSP 3000 CloudConnect 10

11 The First Open Optical Line System 51.2Tbit/s 16Tbit/s 5.6Tbit/s Volume shipment commencing Q

12 ICP DCI Opportunity Current Revenue contribution ADVA Accelerator Best product, leading in cost, space, power and spectral efficiency Potential Upside ICPs creating additional demand and introducing new operational models, favoring smaller, innovative and specialized suppliers Market CAGR: >12% ++ Exciting space with significant growth CloudConnect contribution Q

13 Enterprise DCI: Twin Data Centers 2 Enterprise Dominant Architecture Characteristics Server Business Continuity/Disaster Recovery based on geographically distributed server clustering and synchronous data mirroring Technology-specific protocols, incl. Fibre Channel, InfiniBand, FICON Storage SAN, HPC Switches DWDM Transport Conformance & qualification Moderate distances km Very stringent latency requirements Security matters! Optimized for highest availability, lowest latency and maximum security 13

14 Enterprise DCI Opportunity Current Revenue contribution Market CAGR: >11% ADVA Accelerator Highly differentiated feature set Excellent partner landscape Encryption creates additional differentiation and stickiness Potential Upside More verticals building private optical networks Security increasingly important + Our long term sweet spot, gaining additional momentum 14

15 Communication Service Provider DCI 3 CSP Predominant Architecture Characteristics Mix of managed private enterprise networks (metro) and interconnect services via large-scale shared infrastructure (long-haul and metro) Long-haul upgrade to 100G coherent finalized Broadband access in decent shape Next investment focus: 100G Metro Optimized for lowest cost per bit, scale and operational integration 15

16 CSP DCI Opportunity Current Revenue contribution* ADVA Accelerator Trusted metro supplier for many Tier 1, 2 and 3 operators Compelling and proven 100G metro offering Potential Upside Investment cycle for metro (100G) upgrade has just started Most CAPEX growth comes from smaller players preferring smaller agile suppliers Market CAGR: >10% 100G Metro + Telco / Carrier / MSP domain, where the CAPEX focus is coming our way *excludes managed private enterprise networks 16

17 What About Cloud Access? 1 Network Function Virtualization (NFV) Business Ethernet 2 Synchronization Mobile Broadband Carrier Ethernet DCI Secure cloud access solutions for fixed and mobile users 17

18 Changes in Fixed Line Access Technologies 1a Transition to lower layers, i.e. from L3 access networks (IP-router based) to L2 solutions (Carrier Ethernet based) Carrier Ethernet poised to become the service delivery technology of choice 18

19 Changes in Service Creation and Delivery Routing Encryption VNFs: replacing appliances 1b Decentralized NFV* enables software-based service creation and delivery Centralized Firewall FSP 150 Data Center *NFV: network function virtualization *VNF: virtual network function Customer premise Consolidating boxes driving value creation 19

20 EAD* Opportunity (FSP 150) Current Revenue contribution Market CAGR: >7% ADVA Accelerator Market-leading EAD* position Differentiated performance assurance Comprehensive NFV implementation supporting centralized and decentralized approaches Potential Upside Shift from L3 to L2 access networks, quadrupling our addressable market Shift towards SW-driven service creation and delivery (VNF) + Convergence on NFV-enabled EADs for performance assured service delivery 20 *Ethernet access devices

21 Synchronization Opportunity Mobile Networks Financial Networks Power Utilities Radio Access Network synchronization Time stamping Synchronization in decentralized power grid Synchronization of Radio Access Networks presents biggest opportunity 21

22 RAN Synchronization Opportunity 2 Time Division Duplex mode (TD-LTE) Small cells enable more efficient spectrum utilization Enhanced Inter-Cell Interference Coordination (eicic) Coordinated Multipoint transmission (CoMP) RAN: Radio Access Network Uplink Downlink Mobile broadband: more radio heads tighter (phase) synchronization 22

23 Timing Excellence for LTE-Advanced and 5G OSA 5411/5420 GNSS T-SC GNSS PRTC T-SC APTS mini-gm T-GM T-SC T-SC Packet-Based Backhaul Network PTP Grandmaster Remote Base Station Local Base Station OSA 5335 Efficient and highly available synchronization of radio base stations 23

24 Sync Opportunity (OSA) Current Revenue contribution ADVA Accelerator Positive brand recognition one of the top two choices in this market Focus and higher speed of innovation gives us a more comprehensive and competitive portfolio Potential Upside Current market leader got acquired and became vulnerable Strategically important technology and expertise could allow further expansion into mobile infrastructure Market CAGR: >5% ++ Profitable niche business with strategic technology ingredients 24

25 Summary Data Center Interconnect (FSP 3000) Cloud and mobility drive DC builds accelerating growth of DCs and DCI with high growth in 100G metro Our experience (20+ years), credibility, differentiated feature set and strong market position will allow us to outperform the market FSP 3000 CloudConnect volume shipment starting end of Q Cloud Access and the Transition to NFV (FSP 150) L2 technology substitutes L3 access market; NFV (SW-based service creation and delivery) stimulates additional investment quadrupling our addressable market EADs are important delivery vehicles; Our strong market share and NFV-focused innovation will allow us to gain market share Sync (OSA) Specialized niche market, few competitors, profitable business Market leader got acquired and is now vulnerable; Technology hedging for further expansion into mobile infrastructure 25

26 Financial Performance 26

27 Annual IFRS Revenues and Pro Forma Profitability Revenues and Pro Forma Gross Profit * +25% % % % % % 38.4% 40.4% 39.3% 35.0% Pro Forma Operating Income ** % % 5.6% 6.6% 2.8% 2.8% (in millions of EUR, in % of revenues) Growth Y-o-Y +30% +26% -61% +10% 27 * From 2012, amortization for capitalized development projects is presented as cost of goods sold. Prior period information has been adjusted accordingly. ** Pro forma operating income is calculated prior to non-cash charges related to the stock option programs and amortization and impairment of goodwill and acquisition-related intangible assets.

28 Quarterly IFRS Revenues and Pro Forma Profitability Revenues and Pro Forma Gross Profit +10% % % % % % % % % % Q Q Q Q Q Pro Forma Operating Income * % 5.9% 3.9% 6.8% 7.8% Q Q Q Q Q (in millions of EUR, in % of revenues) Growth Y-o-Y * Pro forma operating income is calculated prior to non-cash charges related to the stock option programs and amortization and impairment of goodwill and acquisition-related intangible assets.

29 IFRS Profitability EUR Million Q3 Q4 Q1 Q2 Q3 Pro Forma Operating Income 3.5 (4.0%) 5.1 (5.9%) 3.7 (3.9%) 7.7 (6.8%) 9.6 (7.8%) Operating Income 3.1 (3.5%) 5.1 (5.9%) 3.3 (3.5%) 7.4 (6.6%) 8.5 (6.9%) Net Income 4.4 (5.1%) 4.3 (5.0%) 4.3 (4.5%) 5.1 (4.6%) 8.6 (7.0%) Diluted EPS in EUR Margins, in % of Revenues 7.8% 7.0% 6.9% Q Q Q Q Q

30 Quarterly Revenues Per Region % 6% 33% 31% % 37% % 12% 30% 31% +78% +34% 58% 63% 58% 64% 57% +38% Q Q Q Q Q EMEA Americas Asia-Pacific (in millions of EUR, in % of revenues) Growth Y-o-Y Note: Potential differences due to rounding

31 IFRS Balance Sheet Assets Dec Sep Equity & liabilities Dec Sep Cash & cash equivalents Accounts payable Accounts receivable Financial liabilities Inventories Other liabilities Other assets Equity Total Total Working Capital 80 Days Sales Outstanding (DSOs) Days Payable Outstanding (DPOs) Inventory Turns Q (in millions of EUR) Q Q Healthy working capital metrics DPOs > DSOs Q

32 Cash and Net Liquidity Cash & Cash Equivalents Net Liquidity Q Q (in millions of EUR) High quarter-end cash and net liquidity positions at the end of Q3 2015, demonstrating financial strength and operational flexibility 32

33 IFRS Consolidated Cash Flow Statement EUR million Q Q Q Net cash provided by operating activities Net cash used for investing activities Net cash provided by (used for) financing activities Net effect of foreign currency translation Net change in cash and cash equivalents Cash and cash equivalents at beginning of period at end of period Free cash flow* * Free cash flow = Net cash provided by operating activities./. capital expenditures for property, plant and equipment, finance leases and intangible assets not related to development activities. 33 Note: Potential differences due to rounding

34 Guidance Q Revenues between EUR 107 million and EUR 117 million Pro forma operating margin between 6% and 9% of revenues* ADVA Optical Networking will continue to perform detailed quarterly reviews of the expected business development in respect of all intangible assets, including capitalized research and development expenses; in case of highly adverse business prospects, these reviews may result in noncash impairment charges * Excluding any potential impairment charges. 34

35 Investor Relations Overview (I/II) Recent Investor Activities Planned Investor Activities Aug 19 Analyst & Investor Day, Meiningen, Germany October and November Investor Roadshows in Europe and America: Paris, London, Zurich, New York, Boston September and October Conference in Munich; Roadshows in Amsterdam, London and Frankfurt November and December Investor Conferences in London and New York Stockholder Structure Financial Analyst Coverage As of Sept 30, 2015: 48,924,107 shares outstanding 16.5% ADVA Management 0.8% As of Oct 21, 2015 Institution Recommendation/ target price Last update Last change Oddo Seydler Bank Buy ( 12.00) Aug 20, 15 ( 12.00) Free float EGORA Group 83.5% Deutsche Asset (DE) DNB Asset (NO) Assenagon Asset Dimensional (US) Norges (NO) Fidelity Management 7.7% 4.9% 3.0% 3.0% 3.0% 2.9% Deutsche Bank Hold ( 7.30) Jun 16, 15 ( 3.80) Hauck & Aufhäuser Buy ( 12.00) Oct 09, 15 ( 12.00) LBBW Buy ( 10.75) Aug 21, 15 ( 10.75) Northland Capital Markets Buy ( 15.00) Aug 17, 15 initiation Ø Source: Aggregate as of Sept 30,

36 Investor Relations Overview (II/II) Share Price and Trading Volume Development Financial Analyst IFRS Estimates Trading volume in thousand 1,500 1,250 1, Oct 1, 2014 Sep 30, 2015 FWB Xetra data Share price in As of Oct 21, 2015 Excludes outdated estimates EUR m Revenues FY 2014 Actual (9.2%) ADVA guidance Q Ø analyst estimate (2.7%) (x%) = % of revenues FY 2015 Ø analyst estimate (34.3%) FY 2016 Ø analyst estimate (16.5%) Pro forma op. inc. 9.5 (2.8%) (6% - 9%) 9.7 (7.7%) 30.0 (6.6%) 42.5 (8.0%) Share price in EUR Net income 8.4 (2.5%) 8.0 (6.4%) 23.8 (5.2%) 34.5 (6.5%) Current (Sep 30) week high week low

37 We ADd VAlue Through Innovation Launch of the FSP 3000 CloudConnect, with the industry s first 400Gbit/s single line card. A fundamental shift in technology representing a sweet spot for the DCI market. Successful trials shipping in Q Expansion of our ConnectGuard portfolio to provide encrypted Ethernet connectivity, enabling secure cloud access for both fixed and mobile users, complementing our leadership position of offering secure optical data center interconnection Launch of the OSA 5411, the first access network device in the industry to offer Rubidium-based timing and synchronization capabilities along with a unique holdover algorithm CLOUD Innovation Launch of the ADVA FSP 150 Pro series, built around openness, security and service assurance critical components for NFV-optimized NIDs; Giving us access to a USD 4billion market ADVA Optical Networking is a thought leader in developing innovative connectivity solutions for cloud and mobile services 37

38 Thank You Stephan Rettenberger VP Marketing and Investor Relations t srettenberger@advaoptical.com IMPORTANT NOTICE The content of this presentation is strictly confidential. ADVA Optical Networking is the exclusive owner or licensee of the content, material, and information in this presentation. Any reproduction, publication or reprint, in whole or in part, is strictly prohibited. The information in this presentation may not be accurate, complete or up to date, and is provided without warranties or representations of any kind, either express or implied. ADVA Optical Networking shall not be responsible for and disclaims any liability for any loss or damages, including without limitation, direct, indirect, incidental, consequential and special damages, alleged to have been caused by or in connection with using and/or relying on the information contained in this presentation. Copyright for the entire content of this presentation: ADVA Optical Networking.