Annual Report 2015 Networking Solutions for Cloud and Mobile Services 1 Welcome
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Annual Report 2015 Networking Solutions for Cloud and Mobile Services 1 Welcome We’re a company that follows one shining light, one guiding principle – to help our customers succeed. Every campus, every team is driven by this goal. It’s in everything we do. Gareth Spence, Marketing 2 ADVA Optical Networking – Annual Report 2015 Profile Welcome At ADVA Optical Networking we’re creating new opportunities We forge close working relationships with all our customers. for tomorrow’s networks, a new vision for a connected world. As their trusted partner we ensure that we’re always ready to exceed their networking expectations. Management Our intelligent telecommunications hardware, software and Board services have been deployed by several hundred service pro- viders and thousands of enterprises. Mission Supervisory Over the past twenty years, our innovative connectivity solu- ADVA Optical Networking enables next-generation networks. Board tions have helped to drive our customers’ networks forward, The Group’s mission is to be the trusted partner for open helped to drive their businesses to new levels of success. connectivity solutions that ADVANCE next-generation net- works for cloud and mobile services. Stock 2015 Key Performance Indicators (in millions of EUR, except net promoter score) 441.9 Business Overview 339.2 330.1 Management 51.2 310.9 310.7 30.0 48.9 Report 40 41 41.6 41.7 21.8 29 31.2 27 17.3 Financial 21 Statements 9.5 8.6 Additional Information 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 ** Revenues Pro forma Net liquidity Net promoter score (%) operating income* (as of December 31) Financial KPIs Non-financial KPI * Pro forma operating income is calculated prior to non-cash charges related to the stock compensation programs and amortization and impairment of goodwill and acquisition-related intangible assets. ** The Net Promoter Score is obtained by asking customers a single question on a 0 to 10 rating scale: “How likely is it that you would recommend our company to a friend or colleague?” Based on their responses, customers are categorized into one of three groups: promoters (9–10 rating), passives (7–8 rating), and detractors (0–6 rating). The percentage of detractors is then subtracted from the percentage of promoters to obtain a Net Promoter Score. ADVA Optical Networking – Annual Report 2015 | Mission 3 Contents 1 Welcome 3 Supervisory Board 5 Business Overview Profile 3 Members 23 Mission 33 2015 Key Performance Indicators 3 Report of the Supervisory Board 23 Technology 33 Mission 3 Market and Growth Drivers 34 ADVAntages 6 4 The ADVA Optical Networking Products 38 2015 Business Highlights 8 Oscilloquartz Products 41 Stock Sales Regions and Customers 41 Sales and Marketing 44 2 Management Board Stock Information 27 Development and Operations 46 Shareholder Structure 28 Quality Management 50 Brian Protiva 17 Price Development 2015 in Comparison 29 Christoph Glingener 18 Investor Relations Review 29 Ulrich Dopfer 19 Financial Analyst Coverage 30 Letter to Shareholders 20 Investor Relations Contact 31 4 ADVA Optical Networking – Annual Report 2015 Compliance and Sustainability 72 6 Group Management Report Risk Report 76 8 Additional Information Events After the Balance Sheet Date 86 Forward-Looking Statements 53 Quarterly Overview 2014 – 2015 169 Outlook 86 Basis of Preparation 53 Multi-Year Overview 2005 – 2015 170 Strategy and Control Design 53 Glossary 171 General Economic and Market Conditions 54 7 IFRS Consolidated Corporate Information 180 Business Development Financial Statements Financial Calendar 2016 181 and Operational Performance 55 Net Assets and Financial Position 62 Consolidated Statement of Financial Position 91 Share Capital and Shareholder Structure 67 Consolidated Income Statement 92 Restriction of Voting Rights Consolidated Statement and Share Transfers 67 of Comprehensive Income 93 Appointment and Dismissal of Consolidated Cash Flow Statement 94 Management Board Members 67 Consolidated Statement of Changes to Articles of Association 68 Changes in Stockholders’ Equity 96 Issuance and Buy-Back of Shares 68 Notes to the Consolidated Takeover Bid-Driven Change Financial Statements 97 of Control Provisions 68 Notes to the Consolidated Statement Declaration on Corporate Governance of Financial Position 118 and Corporate Governance Report 69 Notes to the Consolidated Definition of Aims and Terms for Income Statement 135 the Rise of the Women Portion in Other Disclosures 142 Supervisory Boards, Management Organs Declaration of Compliance with the and both Leadership Levels below German Corporate Governance Code 165 the Management Organ 69 Affirmative Declaration Remuneration of of the Legal Representatives 166 Management and Supervisory Boards 70 Auditors’ Report 166 ADVA Optical Networking – Annual Report 2015 | Contents 5 ADVAntages Focus on Growth Markets Innovative Connectivity Solutions • ADVA Optical Networking focuses on growth markets in the • ADVA Optical Networking’s industry-leading engineering telecom space that have one thing in common: a strong and force is exclusively focused on innovative connectivity sustainable demand for innovative connectivity solutions. solutions for cloud and mobile services, outperforming the engineering departments of other vendors in this space. • These markets are driven by the global megatrends “cloud” and “mobility” demanding more and better connectivity in • Focus on innovation drives market success and has made all areas of the network. ADVA Optical Networking one of the two leading players worldwide for fiber-based Ethernet access devices with a • Average growth across these markets is expected to be market share of 13% 2 and … 9% per year between 2015 and 2018 to a total of USD 14.8 billion in 2018.1 • … a strong competitor in Europe, Middle East and Africa (EMEA) specific ally in the metr o optic al market with a mar- ket share of 14%.3 2 1 Industry analyst estimates for metro and long-haul WDM equipment (“Op- Based on 1H 2015 revenues for fiber-based Ethernet access devices. tical”) and Ethernet access devices (“Ethernet”) relevant to ADVA Opti- Source: Infonetics Research Ethernet Access Devices Biannual Market nd cal Networking. Sources: Infonetics Research Optical Network Hardware, Share, Size and Forecasts, 2 Edition, September 2015. Quarterly Market Share, Size, and Forecasts 2Q15, August 2015, and In- 3 Based on Q2 2015 revenues for Metro-WDM equipment in EMEA. Source: fonetics Research Ethernet Access Devices Biannual Market Share, Size and Infonetics Research Optical Network Hardware, Quarterly Market Share, Forecasts, 2nd Edition, September 2015. Size, and Forecasts 2Q15, August 2015. 6 ADVA Optical Networking – Annual Report 2015 Welcome Speed for Customers Trusted Partner • ADVA Optical Networking has a strong track record of be- • ADVA Optical Networking’s unique combination of innova- Management ing first to market with new functionality that adds value tion and speed has seen the Group build close partner- Board for customers. ships with customers, resulting in repeat purchases and strong cross-selling opportunities for its innovative net- • A responsive team serves customers around the globe, with working solutions. Supervisory 59% of ADVA Optical Networking’s 2014 revenues gener- Board ated in EMEA, 33% in the Americas and 8% in Asia-Pacific. • As a trusted partner for two decades, ADVA Optical Net- working provides high-quality solutions with lowest cost • ADVA Optical Networking’s innovative networking solutions of ownership and best user experience. have been deployed by several hundred service providers Stock and thousands of enterprises around the globe. • ADVA Optical Networking is led by a dynamic, international, experienced and highly-motivated management team with many years of senior management background, making it Business a dependable partner when it comes to building long-term Overview business relationships. Management Report Financial Statements Additional Information ADVA Optical Networking – Annual Report 2015 | ADVAntages 7 2015 Business Highlights April 27: Crawford Media Services, a privately-owned com- pany providing end-to-end creative and post production ser- • Significant revenue growth and solid profitability vices, has deployed the ADVA FSP 3000 to connect its Atlanta studios to a colocation facility. This new connectivity will en- • Ongoing innovation leadership and launch of new products able Crawford Media Services to rapidly transport enormous amounts of audio and video data with clients on a national • Expansion of addressable market for next-generation cloud and international scale. ADVA Optical Networking’s services and mobile services team worked closely with Crawford Media Services on each step of the network, helping to plan, build and activate it During 2015, ADVA Optical Networking made the following over a very short period of time. It’s this close interwork- key announcements: ing, rapid response and in-depth knowledge of data center connectivity that has made this relationship such a success. Customer Achievements August 4: WiTCOM, a regional network operator in Germany, January 13: Telekom Malaysia, the national incumbent op- has deployed the ADVA FSP 3000 with reconfigurable optical erator of Malaysia, is deploying Oscilloquartz’s complete tim- add-drop multiplexer (ROADM) technology throughout the ing and phase synchronization solution in a 3-year frame- Hessen region of Germany. The German telecommunications work agreement. Oscilloquartz,