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DASAN NetworksIR PresentationQ1 2019
Copyright© 2019 DASAN Networks, Inc. 2
Disclaimer
This document, which is written by DASAN Networks, Inc., is only intended to offer information for
investors whom attend DASAN Networks IR Presentation. You do not have permission to use,
disseminate, distribute, copy or retain any part of this document and communication in any form.
Forecasts and projections contained in this material are based on current business environments and
management strategies. They may differ from the actual results depending on changes and
unaccounted variables.
Therefore DASAN Networks. Inc. does not undertake any obligation to the investment results from
those in the forward-looking statements. These materials can not be used as evidence in any legal
dispute. The responsibility for investment is ascribed only to investors.
Contents
1. Overview
2. Performance
3. Investment Points
4. Appendix
5. Vision
P.4
P.6
P.10
P.16
P.19
▪ Company History▪ Organization chart, major shareholders and current status of
bonds
▪ Overview of affiliates in equity method▪ Financial Summary
▪ Business area▪ Financial results in the last four years
▪ Market enlargement▪ Vendor Development
▪ Contact
Copyright© 2019 DASAN Networks, Inc. 4
• The No.1 network equipment and solutions provider in Korea
• Penetrated into global market and diversified business since 2009, Global FTTH No.7
1993. · Foundation
1995. · Launched DASAN R&D Institute
1998. · Developed Korea’s first Frame Relay Router
2000. · Listed on Kosdaq· Released general-purpose network solutions (Routers, Ethernet Switch, Internet Server)
2001. · Developed & commercialized Linux based L2 Switch
2002. · Developed & commercialized L3 Metro Ethernet Switch
2003. · Released VDSL IP-DSLAM,Supplied to Korea Big3 and Japan
2004. · Investment from SIMENS
2005. · Released ADSL2 IP-DSLAM globally
2007. · KT FTTH(E-PON) No.1 Provider· KT IP-TV(IP Settop-box) No.1 Provider
2008. · SKB FTTH(G-PON) No.1 Provider· Supplied FTTH(E-PON) to LGU+
2009. · Supplied Mobile Backhaul Solution to Japan
2011. · Supplied 4G LTE Access solution to LGU+ in Korea
· Acquired HANDYSOFT Inc.· Relocated Headquarter to Pangyo, DASAN Tower
2012. · Supplied 4G LTE Access solution to KT
2013. · Supplied FTTH solution to CHT, Taiwan
2014. · Supplied FTTH solution to Viettel, Vietnam
2015. · Captive spun-off of DNS, network business unit
· Acquired Solueta Inc. (Kosdaq listed)
2016. · Acquired DZSI (Nasdaq listed)
· Supplied network equipment to France and India government
· Supplied 10G EPON to KDDI, JAPAN
2017. · Ranked FTTH PON Global Top7
2018. · Supplied 5G Mobile Backhaul to LGU+
2019. · DZSI acquired Keymile (Germany)· Established DASAN Ventures
1. Company History
Localization of Network Equipment
(1993~2003)
Became the No.1 Network Solutions Provider in Korea
(2004~2012)
Growing to global corporation(2013~Present)
1993 2000 2005 2010 2015 2017 2019Sales reached 100 Bil. won Sales reached 200 Bil. won Sales surpassed 300 Bil. won
Copyright© 2019 DASAN Networks, Inc. 5
2. Corporate Governance
■ Major Shareholders ■ Current Status of Bonds(May. 23. 2019)
Bonds Amounts Balance Price C. Stocks Period Rate
5CB 28.0 Bn 0.9 Bn \5,788 162,404 17.08.10~21.07.10 0%, 1%
6CB 10.0 Bn 6.1 Bn \6,305 967,486 19.05.11~22.04.11 0%, 1%
Total 38.0 Bn 7.0 Bn - 1,129,890
(May. 23. 2019)
■ Governance of DASAN Group
OwnerNo. of Stocks
Portion of Total
DASAN Invest 6,929,635 22.4%
Minwoo NAM (CEO) 885,185 2.9%
Treasury Shares 882,713 2.7%
Shinyoung Asset Management 1,528,835 4.9%
Etc. 20,782,033 67.2%
Total 30,948,401 100.0%
Network
DZSINASDAQ 44.5%
KOR/JAP/VIET/Etc.
Consolidated subsidiaries
KEYMILE
Manufacturing
SOLUETAKOSDAQ 24.8%
DMC
Affiliates in equity method
DTS
Start-up Incubating
DASAN Ventures25.0%
DASAN NetworksKOSDAQ 22.4%
DASAN Invest Minwoo NAM
Start-ups
Affiliates in equity method
Copyright© 2019 DASAN Networks, Inc. 6
3. Business Area
※ Above diagram is for illustration purpose only, actual configuration may differ.
RRH
10G OLT (MSAN)
EthernetBTS
GPON
1:64ONT
GPON OLT
Wireless AP
Office
Access Switch
Edge Switch
Access Mobile BackhaulMetro Mobile Backhaul
Wireless
School
Police Station
Wireless AP
Access Switch
AC
ONT
EPON
1:32ONTEPON OLT
5G
• Broadband access solution
• Mobile backhaul solution
Backbone
Mobile Core
BTS
Backbone
Customers Access Edge Core
BroadbandService
MobileService
Copyright© 2019 DASAN Networks, Inc. 7
4. 2015-2018 Consolidated Financial Results
■ Liabilities / Short-term Liabilities
■ Sales
■ Operating Income
■ Assets / Cash
• Expanding the global network business through subsidiaries as business holding company
180.6 188.9
306.8
356.9
59.6 28.3 29.8 36.9 0
100
200
300
400
2015 2016 2017 2018
Separate Sales
(Unit: KRW Billion)
Consolidated Sales
CAGR 18.6%
355.5 371.3
345.6 366.0
33.9 52.7 47.0 51.7 0
100
200
300
400
2015 2016 2017 2018
Cash
Total Assets
218.6 223.6
182.1 198.5
88.2 69.0 63.2
80.6
0
100
200
300
2015 2016 2017 2018
Short-term Liabilities
Total Liabilities
-4.1
-13.9
-0.1
10.2
-10
-5
0
5
10
2015 2016 2017 2018
TurnAround
(Unit: KRW Billion)
(Unit: KRW Billion)(Unit: KRW Billion)
Copyright© 2019 DASAN Networks, Inc. 8
(Unit: KRW Million)
Consolidated Q1 2019 Q1 2018 YoY(%)
Sales 100,073 69,162 44.69%
Operating Income 1,323 31 4167.74%
Operating Income Ratio(%) 1.32% 0.04% -
Net Income 6,171 (1,757) T/P
Net Income Ratio(%) 6.17% -2.54% -
(Unit: KRW Million)
Separate Q1 2019 Q1 2018 YoY(%)
Sales 13,209 5,114 158.29%
Operating Income 1,847 59 3030.51%
Operating Income Ratio(%) 13.98% 1.15% -
Net Income 2,352 (761) T/P
Net Income Ratio(%) 17.81% -14.88% -
4-1. DASAN Networks Q1 2019 Financial Result
• Reflect DZS’s Keymile acquisition effect and stable growth of
whole business area
• Increase in Net Income due to change in group organization,
gains on valuation and disposition of investment stocks
(1) Q1 2019 Consolidated Performance
• Sustainable growth of French business
• Transfer direct investment stocks to associates in equity method,
gains on valuation and disposition of retain investment stocks
(2) Q1 2019 Separate Performance
Copyright© 2019 DASAN Networks, Inc. 9
4-2. DZS Financial Result and Guidance
(1) Securing growth engines for entry into European market through Keymile acquisition on 01/04/2019
(2) Remove one-off expenses incurred by DZS M&A in 2016, Enlargement of market due to 14% growth in Global FTTH market
(1) Q1 2019 Consolidated Performance (2) Guidance
DZS Q1 2019 Financial Performance
Q1 2019Guidance
provided on 3/18/2019
Net Revenue (Organic) $64.5 MM $63-$66 MM
% vs. Prior Year (Q1 2018) 8.4% 6%-11%
Net Revenue (w KEYMILE) $74.1 MM $70-$74 MM
% vs. Prior Year (Q1 2018) 24.5% 18%-24%
GAAP Gross Margin % 33.6% 31% to 33%
GAAP Operating Expenses $25.7 MM Not applicable
Non-GAAP Adjusted Operating Expenses (excl. SBC, D&A, and acquisition related expenses)
$23.6 MM $25.5-$27.0 MM
GAAP Net Income (loss)(attributable to DZSI)
$(1.6) MM Not applicable
Diluted EPS (GAAP) $(0.10) Not applicable
Non-GAAP Net Income (loss)(attributable to DZSI)
$0.8 MM Not applicable
Diluted EPS (non-GAAP) $0.05 Not applicable
Adjusted EBITDA $1.8 MM $(3.8)-$(2.6) MM
Q2 2019 Guidance :
Q2 2019 Guidance
Net Revenue (w KEYMILE) $82.5-$86.0 MM
% vs. Prior Year (Q2 2018) 8%-13%
GAAP Gross Margin % 32.5% to 33.5%
Non-GAAP Adjusted Operating Expenses (excl. SBC and D&A expenses)
$24.5-$26.0 MM
Adjusted EBITDA $2-$3 MM
2019Y Guidance :
2019Y GuidanceDelta compared with Outlook
provided on 3/18/19
Net Revenue (Organic) $304-$310 MM Unchanged
% vs. Prior Year (2018Y) 8%-10% Unchanged
Net Revenue (w KEYMILE) $350-$360 MM Unchanged
% vs. Prior Year (2018Y) 24%-28% Unchanged
GAAP Gross Margin % 32.5% to 35% Unchanged
Non-GAAP Adjusted Operating Expenses (excl. SBC and D&A expenses)
$97-$102 MM Unchanged
Adjusted EBITDA $17-$20 MM Unchanged
Adjusted EBITDA Margin % 5% to 6% Unchanged
Copyright© 2019 DASAN Networks, Inc. 10
▶ Strengthen DASAN Networks’ global position by acquisition of
∙ DZSI, a Nasdaq listed network company in US
∙ Keymile, German network company
5G▶ Starting 5G Investment from 2019, expect to start full-scale in
2020 – led by Korea and Japan
▶ Boost in investment of global high-speed internet infra
: FTTH market expects to 14% growth annually over next 10 years
5. Competitiveness & Opportunities
Copyright© 2019 DASAN Networks, Inc.
Total Size of the Global Fiber to the
Home Market($ in billions)
$9.5
$36.5
2017 2027
Source: Future Market Insights (FMI): “Fiber to the Home Market: Global Industry Analysis
(2012-2016) and Opportunity Assessment (2017-2027).
5G Adoption Internet of Things
Ultra-HD VideoVideo Streaming
5G
5-1. Global FTTH Market Growth
• Global FTTH market is expected to grow up to 14%+ CAGR
▪ Factors contributing to market growth
10
Copyright© 2019 DASAN Networks, Inc.
Fiber (FTTH/B) Households Connected in 2017
Prim
arily
Mid
dle
East
& A
sia
Prim
arily
Euro
pe a
nd t
he U
S
% Fiber (FTTH/B) Households Connected HHc/HHs in Country Ratio: 2017
1%
1%
2%
2%
10%
11%
13%
15%
16%
23%
29%
34%
38%
43%
43%
49%
51%
68%
69%
81%
82%
88%
88%
UK
Austria
Germany
Italy
Australia
KSA
USA
France
Netherlands
Switzerland
Portugal
Spain
New Zealand
Lithuania
Sweden
China
Latvia
Hong Kong
Japan
UAE
South Korea
Singapore
Qatar
Leadin
g F
iber
Mark
ets
5-2. Global FTTH Penetration Rate by Country
24%Increase IP Traffic
CAGR 2016-2021
Source: Cable Labs
• Focusing on underpenetrated and rapidly growing FTTH markets, like EUR, US, Etc.
12
11
Copyright© 2019 DASAN Networks, Inc. 13
6-1. Major Subsidiaries
DASAN Zhone Solutions (US)
44.5%
Keymile
100.0%
■ Organization Chart in Network Business Unit
∙ Network solution biz in Europe∙ Founded in 2002∙ CEO: Lothar Schwemm∙ Located in Hannover, Germany∙ Acquired in Jan. 3. 2019
■ DASAN Zhone Solutions, Inc. Stock Chart (NASDAQ: DZSI)(Unit: $ in millions)
■ Progress in DZSI Sales and OI
∙ Network solution biz in Asia∙ Founded in Apr. 2015∙ CEO: Daniel Won∙ Located in Pangyo, Korea
DNS
100.0%
150.3
247.1
282.3
-13.0
0.7
7.2
-15.0
-10.0
-5.0
-
5.0
10.0
-
100.0
200.0
300.0
2016A 2017A 2018A
Total Revenue Operating Income or Loss
∙ Global Network solution biz∙ Founded in Jun. 1999∙ Listed on Nasdaq in Nov. 2003∙ Acquired in Sep. 9. 2016
∙ CEO: Yung Kim∙ 300+ employees (consolidated 750+)∙ Headquarter in Oakland, CA, USA∙ Nasdaq Code : DZSI
Copyright© 2019 DASAN Networks, Inc. 14
6-2. Global FTTH Market Position
1. Huawei2. Alcatel-Lucent3. ZTE4. Calix5. Adtran6. Fiberhome7. Mitsubishi
8. Zhone9. ECI10. Zyxel11. Fujitsu
12. DASAN Networks
1. Huawei2. Nokia (Alcatel-Lucent)3. ZTE4. Calix5. Adtran6. Fiberhome
7. DASAN Zhone Solutions
Source by Infonetics Research
Before DASAN + Zhone
■ Global FTTx Revenue By Vendor
500 1000 1500 2000 2500 3000 35000
200
400
600
800
1000
1200
10000
Gigabit FTTH
Mbps
Gigabit GPON DOCSIS 3.024 Bonded
DOCSIS 3.1(initial)
VDSL2 35bVDSL2 17aG. FastG. Fast A2G10G PONXGS/NG-PON2
10G XGS/NG-PON2
Distance (Feet)
■ Global Trend of FTTx Solutions
Copyright© 2019 DASAN Networks, Inc.
Asia
Pacific,
47.3%
America(N/S),
25.5%
EUR,
MEA,
Africa
15.2%
Etc.,
11.9%
Sales by
Region
Tier 1 & 2 Carriers
Primarily Tier 2 & 3 Carriers Tier 1 Carriers
6-3. Overseas Business Status
• Hundreds of customers in over 50 countries
• Operate 18 global R&D center & Sales Office
• Map of global major clients is as below:
1515
Copyright© 2019 DASAN Networks, Inc. 16
APPENDIX
Copyright© 2019 DASAN Networks, Inc. 17
8. Affiliates in Equity Method
• Business structures upstream by affiliates cooperation (Car network, Automotive application components and IoT, etc.)
• Conductivity material for electromagnetic shield
• Consolidated with DMC(Automotive components), DTS(Heat exchanger)
Solueta
[24.8%]
Kosdaq
• B2C & Service
• Consolidated with Handycar, Able, Dr. Asahan, Kyperlab, HOCOS, etc.
• Established in 2019, intend of consolidated financial structure improvement
• Equally invested from DASAN Invest, DASAN Networks, Handysoft, Solueta
DASAN
Ventures
[25.0%]
(consolidated) Sales Operating Income Net Income
2017A 155.9 2.8 0.008
2018A 227.3 5.5 (1.64)
(Unit: KRW Billion)
Copyright© 2019 DASAN Networks, Inc. 18
9. Financial Summary [consolidated]
*2016.09 Completed acquisition of DZS (consolidated)
*2016 DZS acquisition expense badly affect 2017 Profit and loss
*2018 Operating income turnaround
*4Q results differ from actual figures due to adjust for consolidation procedures
(Unit: KRW 0.1 Billion)
FY2016 FY2017 FY2018 2017.1Q 2017.2Q 2017.3Q 2017.4Q 2018.1Q 2018.2Q 2018.3Q 2018.4Q
Sales 1,889 3,068 3,569 716 1,006 953 393 692 939 873 1,065
Cost of Sales 1,309 2,022 2,360 468 718 681 155 430 684 528 718
Cost of Sales Ratio 69.3% 65.9% 66.1% 65.4% 71.4% 71.5% 39.4% 62.1% 72.8% 60.5% 67.4%
Gross Profit 581 1,046 1,209 247 288 273 238 261 256 346 349
Gross Profit Ratio 30.8% 34.1% 33.9% 34.5% 28.6% 28.6% 60.6% 37.7% 27.3% 39.6% 32.5%
Selling, Marketing, General and Administrative Expenses
426 643 731 181 178 168 116 158 119 193 261
R&D Expenses 294 403 376 105 192 99 97 103 99 106 68
Operating Income (139) (1) 102 (39) 8 5 25 0 37 46 18
Operating Income Ratio -7.4% 0.0% 2.9% -5.4% 0.8% 0.5% 6.9% 0.0% 3.9% 5.3% 1.7%
Net Income (412) (25) (248) (52) (53) 24 48 (18) (69) 25 (186)
Net Income Ratio -21.8% -0.8% -6.9% -7.3% -5.3% 2.5% 12.2% -2.6% -7.3% 2.9% -17.5%
Net Income(DSN) (347) (16) (261) (43) (33) 18 34 (18) (77) 19 (185)
Net Income(non-controlling interest)
(65) (9) 13 (9) (20) 5 15 1 7 7 (2)
Total Assets 3,713 3,456 3,660 3,679 3,715 3,836 3,456 3,609 4,029 3,919 3,660
Total Liabilities 2,236 1,821 1,985 2,284 2,358 2,438 1,821 1,841 2,275 2,094 1,985
Total Equities 1,477 1,635 1,675 1,395 1,356 1,398 1,635 1,768 1,754 1,825 1,675
Equity Capital 120 139 158 120 120 123 139 152 154 158 158
Dept. Ratio 151.4% 111.4% 118.5% 163.7% 173.9% 174.4% 111.4% 104.1% 129.7% 114.7% 118.5%
■ DASAN Networks Financial Summary (Consolidated)
Copyright© 2019 DASAN Networks, Inc. 19
11. Contact
“Challenge & Innovation for the Better Life”
GyeongWon Kim
Manager of Communication team
T : 070-7010-1644
JiHyun Kim
Head of Communication team
T : 070-7010-1021