DGAP-News

ADVA unveils path to higher profitability at 2021 capital markets day - Seite 2

Increased growth in software and services will positively impact customer retention and further increase ADVA's margins. "In recent years, we've been steadily increasing the share of software and services in our revenue to around 20%. In 2020, the contribution grew further to 23%," stressed Brian Protiva, citing that 30% revenue contribution is a priority during the next three years. ADVA is going to leverage new tools and products in this area. State-of-the-art software licensing platforms, the ramp-up of new NOS (network operating systems) products and the expansion of partnership models for IT will be key to increase the software share. The company sees a higher attachment rate through software and new services, including AI-based risk mitigation and predictive maintenance.

Control of crucial parts of the value chain is a key aspect in the telecommunication industry. This includes components and subsystems that either ensure additional differentiation on the product side and increase competitiveness or decisively improve the cost basis of ADVA's own solutions. Brian Protiva emphasized the excellent network of partners in the field of electro-photonic components. "However, we've also launched our own activities in the field of photonic integration. With a key focus on optical transceivers, we launched a family of highly integrated multiplexers and will further expand this product line. These pluggable modules are required in large quantities in our own systems and provide increasing value for neighboring technology areas. With our activities around photonic integration, we are sustainably improving our cost base and opening new markets," said Brian Protiva. The company aims for a revenue contribution from these modules to grow to 10% in the next three years and 15% in the next five years.

Cash flow generation and capital allocation for value creation
The company reemphasized its focus on cash and value creation. "Since the acquisition of MRV in 2017, we followed a clear path of deleveraging, even in times of high R&D spend and restructuring efforts to transition our production out of China as well as introduce our cost improvement measures. Every step we took was important to build the base for the returns we see already today," said Uli Dopfer, CFO, ADVA. Already in 2019, ADVA relocated the majority of its China-based production facilities to other countries. "This was cost-intensive but an important step in responding to current geopolitical trends, such as US tariffs, deglobalization and the increasingly important question around products and country of origin," explained Paulus Bucher, COO, ADVA.