drexel hamilton telecom, media & technology …
TRANSCRIPT
DREXEL HAMILTON
TELECOM, MEDIA &
TECHNOLOGY CONFERENCE
Roger Shannon – SVP of Finance & CFO
September 7, 2016
2016 © ADTRAN, Inc.
Safe Harbor Statement
During the course of this meeting, ADTRAN representatives expect to make forward-looking statements, which reflect management’s best judgment, based on factors currently known. However, these statements involve risks and uncertainties, including the successful development and market acceptance of core products, the degree of competition in the market for such products, the product and channel mix, component cost, manufacturing efficiencies, foreign exchange rate variations and other risks detailed in our Annual Report on Form 10-K for the year ended December 31, 2015. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements, which may be made during this meeting.
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© 2015 ADTRAN, Inc. All rights reserved.
COMPANY HISTORY
FOR THE PAST THREE DECADES,ADTRAN HAS BEEN ENABLING A FULLY CONNECTED WORLD.
2016 © ADTRAN, Inc.
TOP 3GLOBAL SUPPLIER
BROADBAND ACCESS
68 COUNTRIESApprox 30% OF SALES
INTERNATIONAL in
FY2015
2000 EMPLOYEESHuntsville HQ, Munich, Berlin,
Greifswald, Sydney,
Melbourne, London,
Hyderabad
$600M2015 REVENUE
250 GIGABIT COMMUNITIESENABLED BY YE2015
AND GROWING
SDN/NFVNETWORK
AUTOMATION
USER-ENABLED
SERVICES
R&D – 21% OF REVENUE
60% MORE PATENTS
PER $ THAN
INDUSTRY AVERAGE
$308MCASH & INVESTMENTS
INDUSTY’S 1STCLOUD WI-FI
SOLUTION
#1IP BUSINESS
GATEWAYS
NORTH AMERICA
TOP 2BRANCH OFFICE
ROUTERS
NORTH AMERICA
#1 SIP TRUNKING & VOIP
ACCESS NORTH
AMERICA
AT A GLANCE
Now Over
350
2016 © ADTRAN, Inc.
INNOVATION TIMELINE
DIVESTITURE
ERA
INTERNET
ERA
IP TRANSITION
ERA
GIGABIT
ERA
SDN
ERA
Created T1
Access Market
Broke $1000 Economic
Barrier with HDSL, 95%
market share
Disrupted Western
Electric Monopoly
Redefined Economics
for D4 channel cards
Drove Innovation
in DSL and
Converged Services
Repeaterless
breakthru
Total Reach
ISDN
Redefined economics for
SONET Fiber Access
(OPTI-3, OPTI-6100)
1st Converged
Voice & Data
Business
Gateways
1st All
Ethernet
MSAN
1st VDSL
Deployment
Based on
IP DSLAM
1st demo of
VDSL2 825Mbps
w/ phantom,
bonding, vectoring
Global Leader
in OSP
broadband
solutions
Market Leader
in DSL and
Converged Services
200 Gig
Communities
by YE2015
Frequency
Division
Vectoring
(FDV)
1st Edged
Optimized
Packet-
Optical
Networking
Platform
Market
Leadership
In G.fast
innovation
Breakthrough In
NGPON2
Tunable
Optics
1st Deployment
of System
Level Vectoring
(SLV) (US)
1st converged,
multi-service
Gigabit
enterprise
and MTU
gateways
1st Cloud-
based
WLAN
ProCloud
Wi-Fi
services
Leading
SDN/NFV
Access in
Broadband
Forum
Launch of
Mosaic Cloud
Platform and
OS
1st Open
Platform for
G.fast DPU
1st system
level CORD
demo
NIA
Industry
SDN/NFV
Interop
2016 © ADTRAN, Inc.
Broadband Access
Market leader in 10 Gigabit optical access innovation
XGS PON – commercial deployments
NGPON2 – industry breakthrough in tunable optics
Over 60 G.fast trials announced on 6 continents
Europe’s (and World’s) largest deployment of Vectoring and SuperVectoring
Over 350 Gigabit Communities
Leader in CAF2 solutions
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INNOVATION LEADERSHIP
2016 © ADTRAN, Inc.
SDN Access
Complete cloud-edge to subscriber-edge solution set
1st to integrate and deploy complete FTTx portfolio with an open source SDN controller
Only vendor with a complete Software Defined Access solution set built around a CORD architecture
1st (and only) 10G PON vOLT CORD demo in a Tier 1
1st industry interop - vCPE portfolio
Modular software architecture with Agile/DevOps model
Leadership in Broadband Forum, ITU, ETSI, Celtic-Plus, and UK NICC standards activities
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INNOVATION LEADERSHIP
2016 © ADTRAN, Inc. 9
THE THIRD WAVE
1ST
Building the technology &
infrastructure
3RD
Full integration for web-scale
2ND
Access to information and to one another
LEADERSHIP IN ACCESS Over 130,000 MSANs deployed
Global Leader in hardened OSPs
#1 in IP Business Gateways (NA)
Leader in Carrier Ethernet (EoX)
World’s largest Vectoring deployment
1985-1999 2000-2015 TODAY-
Pioneered NGPON2 tunable optics
Led standardization of XGS PON
Pioneered G-class optics
Over 65 G.fast trials on 6 continents
Over 350 Gigabit Communities
ACCESS INNOVATION LEADER SD-ACCESS LEADER Only G.fast natively integrated with open source SDN controller
Only vendor to demonstrate XGS PON, NGPON2, 10G EPON in
CORD architecture
Only to integrate complete FTTx portfolio into 3rd party SDN
controller
Most interoperable vCPE
ADTRAN
LEADERSHIP
IN SOFTWARE
DEFINED ACCESS
1st to achieve GA field
deployments of natively
SDN controlled access
network solutions
Strong Customer Base Technology Breakthroughs Open, Programmable, Scalable
2016 © ADTRAN, Inc.
Building Modern, Web-scale Ecosystems
Continuous
DeliveryService
Reusability
Scale on
Demand
Open
Ecosystem
Agile
Delivery
Rapid Innovation Ecosystem ValueStakeholders
Service
Providers
Consumers
Modular and Open Systems
Faster Time
to Market
Lower
Operating
Costs
Rapid
Innovation
Increased
Customer
Satisfaction
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2016 © ADTRAN, Inc.
ADTRAN MosaicTM
ADTRAN Mosaic Cloud Platform Open microservices architecture
Network management and SDN control
ADTRAN MosaicOS Modular, component-based, agnostic
Optimized for SD-Access programmability, virtualization, and multi-vendor app integration
Programmable Network Functions Multi-vendor networking solutions
Natively integrated into open SDN-controller
Span from cloud to subscriber edge
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2016 © ADTRAN, Inc.
Modular
open
system
architecture for
intelligent
cloud
Mosaic – a piece of art created by
forming smaller components together
to create a bigger picture
Why the name Mosaic?
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Financial Stability Nearly 3 Decades of
Continuous Profitability
Ongoing Strong Balance
Sheet and Cash Flow
Publicly Traded for 21 Years
with Full Transparency
(NASDAQ-ADTN)
2016 © ADTRAN, Inc.
FY 2015 Q116 Q216 FY16 FY 2017
Consensus Consensus
(Amounts in millions) Actual Actual Actual Estimates* Estimates*
Revenues $600 $142 $163 $617 $645
Gross margin (%) 44.5% 46.3% 48.5% 47.4% 47.2%
Operating Income $13.5 $5.5 $14.8 $44.2 $50.0
% of Revenues 2.2% 3.9% 9.1% 7.2% 7.8%
EPS $0.36 $0.10 $0.21 $0.65 $0.77
ADTRAN - Financial Summary
*Source: Consensus Estimates: First Call, Thomson, Company Reports
Based on US GAAP Financial Statements
2016 © ADTRAN, Inc.
Historically strong cash flow and balance sheet…
*Source: Company Reports
2012-2015 June 30, 2016
Cash Returned to Shareholders Cash & Investments Debt Total Assets DSO Inventory Turns Headcount
Dividends
$308 $28 $637 50 3.8 2,156$83
Share Buybacks
$310
Based on US GAAP Financial Statements
(Amounts in millions)
2016 © ADTRAN, Inc.
Strong domestic revenues and services growth in the early stages of a major investment cycle in wireline networks…
*Consensus Estimate for 3Q16 Source: Company Reports
$130$144 $138
$116$124
$139
$13
$16$20
$23$18
$24$143
$160 $158
$139 $142
$163 $163
-10%
8%
21% 20%
39%
28%
-20%
-10%
0%
10%
20%
30%
40%
50%
$0
$20
$40
$60
$80
$100
$120
$140
$160
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16E*Network Solutions Services & Support Domestic Revenues YoY growth (%)
(Amounts in millions)
2016 © ADTRAN, Inc.
Source: Company Reports
Q2 FY 2016 Q1 FY 2016 Q2 FY 2015
Amount ($mn) GM (%) Amount ($mn) GM (%) Amount ($mn) GM (%)
Network Solutions $138.5 51.0% $123.9 48.3% $144.1 41.6%
Services & Support $24.2 34.2% $18.3 32.7% $16.0 52.1%
Total $162.7 48.5% $142.2 46.3% $160.1 42.6%
Revenue & Gross Margin (GM) by Operating Segment
Revenue by Categories
Q2 FY 2016 Q1 FY 2016 Q2 FY 2015
Access and Aggregation $102.2 $93.9 $112.7
Customer Devices $40.9 $32.4 $30.0
Traditional Products $19.6 $16.0 $17.4
Total $162.7 $142.2 $160.1
US and International Revenue
Q2 FY 2016 Q1 FY 2016 Q2 FY 2015
United States $133.6 $116.4 $104.4
International $29.1 $25.8 $55.7
Total $162.7 $142.2 $160.1
2016 © ADTRAN, Inc.
3rd Quarter 2016 Guidance
Corporate Financial Performance
• REVENUE: in the range of $160 million to
$164 million
• GROSS MARGIN: down slightly from
Quarter 2 results
• OpEx: consistent with Q2 results
• TAX RATE: mid to high 30% range
SUMMARY
• Strong history and well positioned
• Leader in SDN Access
Open, scalable and standards-based
• Ramping broadband investment cycle
Emerging technologies in fiber & copper
Imperative for service agility & automation
Global operator proof points
• Leader in fixed broadband access