drexel hamilton telecom, media & technology …

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.

2

© 2015 ADTRAN, Inc. All rights reserved.

COMPANY HISTORY

FOR THE PAST THREE DECADES,ADTRAN HAS BEEN ENABLING A FULLY CONNECTED WORLD.


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


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


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

6

INNOVATION LEADERSHIP


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

7

INNOVATION LEADERSHIP

2016 © ADTRAN, Inc. 8


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


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

10


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

11


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?

12


ADTRAN MosaicTM

Accelerating the Path to SD-Access

13


The Access Mosaic

14


Company Financial Performance

16

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)


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


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)


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)


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


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


ADTRAN IS BRINGING THE WORLD TOGETHER

drexel hamilton telecom, media & technology …

Documents