ADVA Optical Networking Investor Presentation

Transcription

ADVA Optical Networking
Investor Presentation
October 2015
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 2014.
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
© 2015 ADVA Optical Networking. All rights reserved. Confidential.
ADVA Optical Networking Today
Key Facts
Mission
Our MISSION
is to be
the trusted partner
for innovative
networking solutions
that ADVANCE
next-generation
networks for cloud
and mobile services.
Our NUMBERS
1.500 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 14001
Award-winning
supply chain
We bring differentiation, quality and ease-of-use to next-generation networks
3
Capitalizing on Cloud and Mobility
Approx. $200 billion
Global annual infrastructure investment
$15 billion*
in optical transport
Social
Chat
Cloud &
Mobility
IP
Voice
Community
Next-Generation
Cloud Services
Partners
Email
Data
Video
Search
Phone
Interactive Multimedia
*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, 2nd Edition, August 2015.
Local Experience
Internet of Things
As an industry, we have built a great network – creative use has only started …
4
What We Do
Social
Community
Chat
Cloud
Partners
Phone
Search
Innovative
Email
Mobility
Connectivity
Scalable, programmable and secure networking solutions for the cloud
5
Cloud & Mobility
Network Transformation
The optical renaissance has begun
The Age of the Data Center (DC)
70% of business users
embrace cloud-based services
Cloud service
adoption
62% of consumers
watch online videos
Consumer video &
app consumption
DC construction
continues in major cities
and remote sites DC square footage
investment
Increase # of end nodes
by orders of magnitude
IoT
DC
Major ICPs building
edge DC
DC distributed
architecture evolution
CSP move
to NFV
VNFs hosted at the
network edge (metro)
Sophisticated mobile networks
directly drive DC growth –
future virtualized RANs
LTE-A,
will be hosted at DCs
4.5G, 5G
*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 2015.
7
Who Builds and Owns Data Centers?
ICP
2
1
Enterprise
Creation, storage
and dissemination of
digital information
Large-scale needs for
storage, replication
and backup
Also referred to as:
over-the-top (OTT),
Web 2.0 and
digital media companies
3
CSP
Source: Ovum Global Data Center Analyzer:
1H15 (April 2015); 6,519 data centers
Own fiber plant;
experience in design,
building and operation
of optical networks.
Data center interconnect (DCI) opportunity is driven by three user groups
8
ICP DCI: Hyper-Scale Cloud Data Centers
1
ICP Predominant Architecture
Characteristics
• Resource pool based on virtualized
processing and storage resources
Ethernet
Fabrics
• Dynamic resource allocation
DWDM
Transport
• 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
ICP DCI: New Product Requirements
CLI
REST
NET REST
CONF CONF
Mega Data Center
Open APIs
Open Line System
High Channel Count
Small Form Factor
Co-Lo Sites
Security
Big Capacity
Highest Efficiency
Smaller Edge Sites
Scalability from 10G to 100T
DCI re-imagined – Introducing the FSP 3000 CloudConnect™
10
The First Open Optical Line System
51.2Tbit/s
16Tbit/s
5.6Tbit/s
Volume shipment commencing Q1 2016
11
ICP DCI Opportunity
Potential Upside
ADVA Accelerator
Current
Revenue contribution
Best product, leading in
cost, space, power and
spectral efficiency
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 Q2 2016
12
Enterprise DCI: Twin Data Centers
2
Enterprise Dominant Architecture
Characteristics
• Business Continuity/Disaster Recovery
based on geographically distributed
server clustering and synchronous
data mirroring
Server
• Technology-specific protocols, incl.
Fibre Channel, InfiniBand, FICON
Storage
SAN, HPC
Switches
DWDM
Transport
• Conformance & qualification
• Moderate distances 10-150km
• Very stringent latency requirements
• Security matters!
Optimized for highest availability, lowest latency and maximum security
13
Enterprise DCI Opportunity
Potential Upside
ADVA Accelerator
Current
Highly differentiated
feature set
Excellent partner
landscape
More verticals building
private optical networks
Security increasingly
important
Encryption creates
additional differentiation
and stickiness
Market
CAGR: >11%
+
Our long term sweet spot, gaining additional momentum
14
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
CSP DCI Opportunity
Potential Upside
ADVA Accelerator
Current
Revenue contribution*
Trusted metro supplier
for many Tier 1, 2 and 3
operators
Compelling and proven
100G metro offering
Market
CAGR: >10%
Investment cycle for
metro (100G) upgrade
has just started
Most CAPEX growth
comes from smaller
players preferring smaller
agile suppliers
+
100G Metro
Telco / Carrier / MSP domain, where the CAPEX focus is coming our way
*excludes managed private enterprise networks
16
What About Cloud Access?
1
Network Function
Virtualization (NFV)
Business Ethernet
Carrier
Ethernet
2
Synchronization
DCI
Mobile Broadband
Secure cloud access solutions for fixed and mobile users
17
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
Changes in Service Creation and Delivery
Routing
VNFs: replacing
appliances
Encryption
1b
NFV* enables software-based
service creation and delivery
Centralized
Decentralized
Firewall
Data Center
FSP 150
*NFV: network function virtualization
*VNF: virtual network function
Customer premise
Consolidating boxes – driving value creation
19
EAD* Opportunity (FSP 150)
Potential Upside
ADVA Accelerator
Current
Market
CAGR: >7%
Market-leading EAD*
position
Differentiated
performance assurance
Shift from L3 to L2 access
networks, quadrupling
our addressable market
Shift towards SW-driven
service creation and
delivery (VNF)
Comprehensive NFV
implementation
supporting centralized
and decentralized
approaches
+
Convergence on NFV-enabled EADs for performance assured service delivery
*Ethernet access devices
20
Synchronization Opportunity
Mobile Networks
Financial Networks
Power Utilities
Radio Access Network
synchronization
Synchronization
in decentralized
power grid
Time stamping
Synchronization of Radio Access Networks presents biggest opportunity
21
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)
Downlink
Uplink
RAN: Radio Access Network
Mobile broadband: more radio heads – tighter (phase) synchronization
22
Timing Excellence for LTE-Advanced and 5G
GNSS
OSA 5411/5420
GNSS
PRTC
T-SC
T-SC
T-SC
Remote
Base Station
APTS
mini-GM
T-GM
PTP
Grandmaster
T-SC
Packet-Based Backhaul Network
OSA 5335
Local
Base Station
Efficient and highly available synchronization of radio base stations
23
Sync Opportunity (OSA)
Potential Upside
ADVA Accelerator
Current
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
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
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 Q1 2016
• 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
Financial Performance
26
Annual IFRS Revenues and Pro Forma Profitability
Revenues and Pro Forma Gross Profit*
+25%
291.7
+7%
310.9
37.7%
38.4%
2010
2011
+6%
330.1
-6%
310.7
+9%
339.2
40.4%
39.3%
35.0%
2012
2013
2014
8.6
9.5
2.8%
2014
Pro Forma Operating Income**
13.3
+118%
17.3
+30%
21.8
+26%
4.6%
5.6%
6.6%
-61%
2.8%
2010
2011
2012
2013
(in millions of EUR, in % of revenues)
Growth Y-o-Y
* 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.
27
+10%
Quarterly IFRS Revenues and Pro Forma Profitability
Revenues and Pro Forma Gross Profit
+10%
87.1
30.8
35.3%
Q3 2014
+14%
86.7
31.8
+29%
+22%
95.6
112.3
38.7
34.6
36.6%
36.2%
34.4%
Q4 2014
Q1 2015
Q2 2015
3.5
42.4
34.6%
Q3 2015
7.7
3.7
4.0%
5.9%
3.9%
6.8%
7.8%
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
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.
28
122.3
9.6
Pro Forma Operating Income*
5.1
+40%
IFRS Profitability
2014
EUR Million
Q3
Pro Forma Operating Income
3.5
(4.0%)
Operating Income
3.1
(3.5%)
Net Income
4.4
Diluted EPS in EUR
2015
Q4
5.1
(5.9%)
5.1
(5.9%)
4.3
Q1
3.7
(3.9%)
3.3
(3.5%)
4.3
Q2
7.7
(6.8%)
7.4
(6.6%)
5.1
Q3
9.6
(7.8%)
8.5
(6.9%)
8.6
(5.1%)
(5.0%)
(4.5%)
(4.6%)
(7.0%)
0.09
0.09
0.09
0.11
0.18
Margins, in % of Revenues
7.8%
7.0%
6.9%
Q3 2014
29
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Quarterly Revenues Per Region
112.3
87.1
86.7
95.6
5%
9%
6%
33%
31%
58%
63%
58%
Q3 2014
Q4 2014
Q1 2015
EMEA
Americas
12%
+78%
30%
31%
+34%
64%
57%
+38%
Q2 2015
Q3 2015
6%
37%
Asia-Pacific
Growth Y-o-Y
Note: Potential differences due to rounding
30
122.3
IFRS Balance Sheet
Dec. 31
2014
Sep. 30
2015
Equity & liabilities
Dec. 31
2014
Sep. 30
2015
Cash & cash equivalents
83.9
79.3
Accounts payable
33.0
66.7
Accounts receivable
54.0
79.1
Financial liabilities
35.0
29.2
Inventories
47.0
78.5
Other liabilities
79.7
85.7
Other assets
139.9
147.7
Equity
177.1
203.0
Total
324.8
384.6
Total
324.8
384.6
Assets
Days Sales Outstanding (DSOs)
Working Capital
Days Payable Outstanding (DPOs)
Inventory Turns
80
100
6.0
70
50
68
60
57
0
50
4.5
40
Q3
2014
Q3
2015
Q3
2014
Healthy working capital metrics DPOs > DSOs
(in millions of EUR)
31
5.0
4.4
-50
-100
5.5
4.0
Q3
2015
Cash and Net Liquidity
90
79.3
75
Cash & Cash Equivalents
60
50.1
45
Net Liquidity
30
15
0
Q3
2011
Q3
2015
(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
IFRS Consolidated Cash Flow Statement
EUR million
Q1 2015
Q2 2015
Q3 2015
Net cash provided by operating activities
-1.5
18.1
12.0
Net cash used for investing activities
-9.0
-11.5
-10.1
Net cash provided by (used for) financing activities
-2.4
-1.0
-1.3
Net effect of foreign currency translation
2.4
-0.1
-0.2
Net change in cash and cash equivalents
-10.5
5.4
0.5
at beginning of period
83.9
73.4
78.8
at end of period
73.4
78.8
79.3
-3.1
15.1
10.4
Cash and cash equivalents
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.
Note: Potential differences due to rounding
33
Guidance Q4 2015
•
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
*
34
Excluding any potential impairment charges.
Investor Relations Overview (I/II)
Recent Investor Activities
Aug 19
Planned Investor Activities
 Analyst & Investor Day, Meiningen, Germany
September  Conference in Munich; Roadshows in
and
Amsterdam, London and Frankfurt
October
Stockholder Structure
October
and
November
 Investor Roadshows in Europe
and America: Paris, London, Zurich,
New York, Boston
November
and
December
 Investor Conferences in London and
New York
Financial Analyst Coverage
As of Sept 30, 2015: 48,924,107 shares outstanding
As of Oct 21, 2015
Institution
16.5%
83.5%
Free float
EGORA Group
ADVA Management
0.8%
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%
Recommendation/
target price
Last
change
Oddo Seydler Bank
Deutsche Bank
Buy (€12.00)
Hold (€7.30)
Aug 20, 15
Jun 16, 15
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, 2015.
35
Last
update
€ 11.41
 (€12.00)
 (€3.80)
Investor Relations Overview (II/II)
Financial Analyst IFRS Estimates
Share Price and Trading Volume Development
Trading volume
in thousand
Oct 1, 2014 – Sep 30, 2015
FWB Xetra data
12.00
10.50
9.00
7.50
6.00
4.50
3.00
1.50
-
1,500
1,250
1,000
750
500
250
0
Share price in EUR
 Current (Sep 30)
 52 week high
 52 week low
36
Share price
in €
As of Oct 21, 2015
(x%) = % of revenues
Excludes outdated estimates
FY 2014
EUR m
Actual
Revenues
339.2
(9.2%)
Pro forma
op. inc.
9.5
(2.8%)
Net
income
8.4
(2.5%)
9.58
10.58
2.46
Q4 2015
ADVA
guidance
107 - 117
(6% - 9%)
FY 2015
Ø analyst Ø analyst
estimate estimate
FY 2016
Ø analyst
estimate
125.6
(2.7%)
455.5
(34.3%)
530.5
(16.5%)
9.7
(7.7%)
30.0
(6.6%)
42.5
(8.0%)
8.0
(6.4%)
23.8
(5.2%)
34.5
(6.5%)
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 Q1 2016
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
CLOUD
Innovation
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
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
Thank You
Stephan Rettenberger
VP Marketing and Investor Relations
t +49 89 890 665 854
srettenberger@advaoptical.com
www.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.

ADVA Optical Networking Investor Presentation

Transcription

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