Open edge networking

Investor presentation

FSE: ADV
July 25th, 2019
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 2018.

CONSOLIDATED PRO FORMA FINANCIAL RESULTS

ADVA 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’s operating
results from one financial period to another. ADVA 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 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

 Company
Overview

3 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

Stability, continuity and growth opportunities
Statement from the CEO
“Digitization is changing all ecosystems.

“The rapid development and rollout of artificial intelligence, edge

computing solutions, IoT and 5G require a robust and scalable
telecommunications infrastructure with greater optical transmission
capacity, new models for providing communication services, and
increasingly precise network synchronization. Our key investments
address each of these issues and clearly underline the value of our
acquisition strategy.

2018 revenues: €502.0 million
Proforma EBIT: 4.6%
“At the same time, consolidation in our industry has further reduced the
number of competitors, further sharpening our profile as an innovative
telecommunications supplier with a unique blend of innovation and
customer focus.
“All this creates new growth opportunities, that we will capitalize on.”

Digitization is transforming networks, bringing the investment focus to us

4 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Who we are
Global provider of open networking solutions

Our technology Our customers Our strengths

Cloud interconnect Private enterprises Innovation power

• Open optical networking (WDM) • 30 of top 50 banks (revenue) • >900 engineers
• 65% of revenue • 25% of revenue • >230 granted patents, >50 pending

Cloud access Internet content providers Speed for customers

• Carrier Ethernet and NFV • 4 of top 5 global ICPs • Responsive team
• 30% of revenue • 10% of revenue • Customer-centric solutions

Network synchronization Communication service providers Trusted partner

• Precision timing • 17 of top 25 global CSPs, • >50% net promoter score
• 5% of revenue 5 of top 6 global Ethernet service leaders • Operational excellence
• 65% of revenue

Digital transformation → networking dominated by data centers → ADVA’s DNA

5 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
 Financial year 2018 at a glance

Net liquidity
Pro forma EBIT increase
Gross margin margin expansion
+30%
Revenues contribution
4.6%
+11.2m Net liquidity increased

502m … and active cost

management.
significantly due to higher
cash flow from operations.
… with overall margin
improvements due to product
Revenues increased
innovation …
sequentially in all four
quarters …

Consolidation phase completed, improvement of margins and cash flow

6 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
ADVA’s 25 years history
Strong breadth and depth of customer base of thousands of enterprise and hundreds of carriers worldwide

Today
including many tier 1 carriers. Over 200 customers committed to ADVA’s Ensemble network management platform

Agile, flexible, entrepreneurial and multi-national culture with spirit of innovation, hard work ethic and loyalty
leading to low attrition and continuity in our strategy

Global leader in enterprise DCI and synchronization – a strong competitor in the ICP markets

Global leader in the Ethernet access device (EAD) market and when combined with
Ensemble NFVi solutions the clear technology leader

Global specialist for

Product expansion
and strategic
• Open optical networking
acquisitions • Edge cloud solutions
Going public and
Going global • Network synchronization
first product

Network innovator – speed for customers – trusted partner

7 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
ADVA fundamentals
Background
• Headquartered in Munich, Germany Atlanta Richardson Neuchâtel York Meiningen Munich Gdynia
• More than 1,850 employees
• Over EUR 0.5 billion turnover

Our vision
Virtualization and software are keys
to differentiated solutions, but hardware
will remain strategically important

Our mission
Being your trusted partner for
connecting, extending and assuring
the cloud
Haifa Shenzhen Singapore Melbourne

Innovation – speed for customers – trusted partner

8 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Our broad customer base
Hundreds of carriers, thousands of enterprises

Industries Business characteristics

Private enterprises - Limited project volume
• Financial services institutions + Premium quality
• Research and education + Customer loyalty and trust
• Healthcare, media, utilities

Internet and cloud - Aggressive pricing

• Internet content providers - Limited visibility and stickiness
• Carrier neutral providers + Volume and growth potential

Communication service providers - Long sales cycle (RFPs)

• Wireline operator + Volume
• Wireless operator + Longevity (stickiness)
• Multiservice operator (cable)

Diverse global customer base drives growth and profitability

9 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
 Industry context
Market growth drivers, technologies and products

10
10 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
 Digitization drives investment focus to the edge
Digitization
of all ecosystems Network
transformation ADVA
IoT 5G open edge networking

Smart workspace Cloud & Network 3.0

Connected home Disaggregation

Machine learning Scalable bandwidth
Smart robots
Instant service creation
White box solutions
Autonomous driving
Precise synchronization
Open platform
Augmented reality Automation
Edge computing
Artificial intelligence
Virtualization

The market is coming to our sweet spot – the edge is, where ADVA performs best
11
11 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Our technology differentiation

Open tera-scale networking Bandwidth

▪ Disaggregated optical architecture
▪ Highest level of security and automation
▪ Unparalleled data center expertise

Empowering the network edge Service creation

ADVA ▪ Leader in secure, zero-touch service delivery solutions
open edge networking ▪ Proven and scalable NFVi architecture
▪ Seamless transition to virtual service delivery

Synchronization at scale Precision

▪ Most comprehensive network synchronization portfolio
▪ Best accuracy and assurance
▪ Key enabler for 5G and many other ecosystems

We innovate from the edge on in – customer focus, profound application know how
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12 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Product portfolio overview
Cloud access
Cloud access Cloud
Cloud interconnect
interconnect
Carrier Ethernet access and network functions Open optical networking solutions based on
virtualization (NFV) solutions that enable wavelength division multiplexing (WDM)
communication service providers to deliver software- technology to deliver scalable bandwidth for
defined, differentiated and performance-assured access, metro and long-haul networks; high
wholesale, mobile backhaul and business services; levels of open interworking, programmability and
ease-of-use;
TAM (billion USD) 1.3
CAGR (5 year) 18% 30%
Estimated 2018 market size and 5yr CAGR for access switching & routing;
Source: Ovum, “service provider switching and routing forecast 2018-2023”, published
August 2018

5% 65%
Network
Networksynchronization
synchronization
Primary reference sources (atomic clocks) and
distribution solutions to deliver accurate and scalable
time and frequency synchronization for mobile Approximate revenue contribution Carrier ICP Enterprise
network infrastructure, utilities, financial services, rolling four quarters
distributed data bases and meteorology;
TAM (billion USD) 11.6 1.0 0.3
CAGR (5 year) 4% 17% 4%
TAM (billion USD) 0.3
Estimated 2018 market size for access, metro and long haul WDM;
CAGR (5 year) 5% Source: Ovum, “optical networks forecast 2018-2023” published January 2019;
5yr CAGR for access (15.7%), metro (7.2%) and long haul 3.2%) WDM – and DCI
Estimated 2018 market size and 5yr CAGR – ADVA internal estimates Forecast 2017-2022 published Feb 2018

13
13 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Solution overview
Management and orchestration
Internet content
provider

Communication service
provider
Cloud & OTT
Synchronization services
and timing

Metro / core
distribution & hosting
Service delivery
and assurance

Enterprise

Business
Cloud access continuity Cloud interconnect

Open edge networking – connecting, extending and assuring the cloud

14
14 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Portfolio growth opportunities
Cloud access Cloud interconnect

• Accelerate revenue contribution • Aggressively pursue more DCI

from edge cloud solutions and opportunities with new Teraflex™
30%
win new designs for NFV-based terminal and open line system
service delivery
• Leverage our 32G FibreChannel
first-mover advantage

Packet edge with NFV 5% 65%

Open optical transport

Network synchronization Approximate revenue contribution

Cross portfolio
rolling four quarters
• Use technology leadership to
expand into other verticals • Win new footprint for flexible, programmable
5G infrastructure leveraging optical, packet
edge and synchronization

Technology tripod matured, enabling us to grow high single digits 2019

15
15 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
ADVA portfolio drivers summarized

Approximate
revenue
contribution
Private Internet Communication
enterprises content provider service provider
Cloud interconnect Business continuity (Hyperscale) DCI Metro and edge upgrade for
(Open optical transport - WDM) and disaster recovery IoT, 5G and cloud services
(capacity, latency, timing, security and
automation)

Cloud access Secure cloud access Edge cloud Zero-touch service delivery
(Carrier Ethernet and NFV) and SD-WAN and assurance

Network synchronization MiFID II financial time Global database Next-gen mobile

stamping synchronization (LTE-A and 5G)

ADVA technology tripod – increasing number of cross-selling opportunities

16
16 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
 Differentiators
Competitive landscape

17
17 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Networking industry – our ecosystem
Components
Systems

Networks

Industry leading on time-to-market, time-to-quality and time-to-cost

18
18 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Cloud interconnect: Vendor consolidation

Specialists

Sub-critical R&D Multi-technology giants

2017

2018

Discontinued optical portfolio

Discontinued optical activities since

Small players disappear – large corporations lack focus and seek better profitability
19
19 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Cloud access: Convergence at the network edge
Cloud access (CE, NFVi, L3)

L3 routing
2017

2016
Transformation

• Carrier Ethernet is ideal foundation for accessing the cloud

• NFV enables SW-based instant service creation
• L2 and L3 access markets are converging, expanding our TAM
• Growing list of NFVi customer wins: Verizon, Colt, Masergy, IBM,
L2 Carrier Ethernet access TIP DCSG*, … and many more unannounced
*Telecom Infra Project, disaggregated cell site gateway

Layer 2 and Layer 3 access converging – NFV is disrupting the market

20 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Why we win – the ADVA brand promise
Open networking solutions
Innovation leadership ▪ Differentiated technology
▪ Network-level applications
▪ Market-leading scalability and efficiency

Operational excellence
▪ High quality
Speed for customers ▪ Short lead times
▪ Award-winning sustainability focus

Ease of doing business

▪ Technology and VAR ecosystems
Trusted partner ▪ Broad and deep application expertise
▪ Financial stability, solid balance sheet
Award-winning factory in Meiningen, Germany

Enabling our customers to capitalize on cloud and mobility

21
21 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
 Financials
Overview

22 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

Q2 2019 key financials
Revenues (m€) Gross profit (m€) Pro forma operating income (%)

+7.6%
133.2 +2.5%
123.8 -1.7PP
45.4 46.5 5.0%
3.3%

Q2 18 Q2 19 Q2 18 Q2 19 Q2 18 Q2 19

Net income (m€) Diluted EPS (€) Net debt (m€)*

+86.1%
68.1
-71.7% -66.7%
4.6 0.09 36.6

1.3 0.03

Q2 18 Q2 19 Q2 18 Q2 19 Q2 18 Q2 19
Note: Net debt Q2 2019 includes EUR 36.2 million lease liabilities due to
Guidance first-time adoption of IFRS 16

23 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

Quarterly IFRS revenue and pro forma profitability
(in millions of EUR, in % of revenues)

Revenue & pro forma gross margin Pro forma operating income & margin

131.5 133.2
126.2 128.2
123.8

37.0% 8.1
36.7% 37.5% 35.2% 34.9% 6.8
6.1 6.2%
4.3
5.0% 5.4% 2.7
3.3%
2.1%
Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19

Revenue Pro forma gross margin Pro forma operating income margin
* 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. Additionally, non-recurring expenses related to restructuring measures
are not included.

24 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

Seasonality of operating cash flow
(In millions of EUR)

27.1

22.0

18.1 +21.5%

9.5

6.3

Q2 18 Q3 18 Q4 18 Q1 19 Q2 19

25 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

Share price and EPS development
Share price development Q2 18 – Q2 19 EPS development Q2 18 – Q2 19

(in %) (in EUR) 0.19

200

150

+3.0% 0.09
100 0.08
0.07

50 0.03
0.02

0
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Q2 18 Q3 18 Q4 18 FY 18 Q1 19 Q2 19

Delivering shareholder return

26 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Annual IFRS revenue and pro forma profitability
(in millions of EUR, in % of revenues)

Revenue & pro forma gross margin Pro forma operating income & margin

566.7
514.5 502.0
441.9

339.2
30.0
23.4 23.3
29.7% 33.9% 37.0% 19.5
35.6%
35.0% 6.8%
9.5
4.1% 4.6%
3.8%
2.8%
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

Revenue Gross margin Pro forma operating income margin

* 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. Additionally, non-recurring expenses related to restructuring measures
are not included.

27 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

Annual revenue per region FY 2018
12%

50%

38%

EMEA Americas Asia-Pacific

Customer expansion in APAC – strength in Central Europe

28 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
 IFRS balance sheet FY 2018
(In millions of EUR)

486.5 486.5 Working capital development

Cash & cash equivalents 62.7 63.2 Trade account payables 20.0% 22.5% 17.3% 24.1% 24.0%
68.0 99.6 98.0 123.8 120.5
Trade account receivables 97.9 89.5 Financial debt

Inventories 85.7 89.2 Other liabilities

2014 2015 2016 2017 2018

Receivables Inventory Payables
Other assets 240.2 244.6 Equity In % of revenues

Equity ratio Leverage* ROCE

ASSETS
Assets
LIABILITIES
Liabilities
50.3% 1.4x 4.8%
*Leverage is calculated as total liabilities to banks divided by EBITDA. EBITDA is calculated
as operating income plus depreciation and amortization of non-current assets.

29 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

Financial policy – investment grade rating
Leverage development (Debt / EBITDA) Equity ratio Available liquidity

2.5x
96.6
89.5 2.0x 51.1% 48.9% 50.3% 92.9
1.9x 1.5x 8.0 72.7
59.4 66.4
1.4x 8.0 10.0
1.0x 30%
1.0x 84.9
0.5x 58.4 62.7

0.0x
FY 16 FY 17 FY 18 FY 16 FY 17 FY 18 FY 16 FY 17 FY 18
Debt Leverage (Debt / EBITDA) Equity ratio Cash Undrawn facilities

Comments
• Conservative financial policy targets a Debt / EBITDA leverage ratio of max. 2.5x
• Low current leverage level of 1.4x albeit recent long-term refinancing of MRV acquisition
• Balanced repayment profile and future profit generation will lead to a strengthened balance sheet
• High equity ratio of c. 50% significant above target of 30%

30 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

Guidance Q3 2019 and outlook FY 2019
Guidance Q3 2019 • Digitization is changing the networks and
bringing the investment focus to us; our
Revenues between EUR 135.0 million and EUR 145.0 three core competencies are strategically
million relevant to the transformation of
networks and we have a high win rate
with our new products contributing
Pro forma operating income margin between 3.0% and higher margins
6.0% of revenues
• Our positive revenue development
continues, and we have a strong order
Outlook FY 2019 book going into Q3

Year-on-year revenue growth to be in the upper single-

• In order to respond to current margin
digit percentage range. pressure, we are taking additional
measures to reduce our cost base
Pro forma operating result to increase and reach a pro
forma operating margin in the mid-single-digit range. • We remain committed to the positive
outlook for the current fiscal year

31
31 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
 Growth
Catalysts and strategy

32 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

Growth strategy 2018 (recap)
2018
Focus: Return to quarterly growth and
increase profitability
Tactics:
• Protect MRV customer base and drive
cross-selling initiatives; extend
customer base for cloud access
solutions
• Leverage metro core upgrade cycle to
drive additional optical revenue
• Utilize technology leadership in
synchronization to further improve
overall corporate gross margin
We accomplished our 2018 goals and continue to execute against our plan
33
On track for
2019 ++
2019 2020 and beyond
Focus: Leverage expanded solution Focus: Capitalize on the transition to
portfolio to increase market share and virtualized service delivery and 5G
reaccelerate growth
Tactics: Tactics:
• Aggressively pursue more DCI • Harness Ensemble software
opportunities with new Teraflex architecture and increase software
terminal and open line system revenue contribution to >10%
• Win new footprint for flexible, • Dominate market for network
programmable 5G infrastructure synchronization systems
leveraging optical, packet edge and • Continue to pursue tuck-in
synchronization acquisitions or consolidate with and
• Accelerate revenue contribution from expand into a larger entity
Ensemble and win new designs for
NFV-based service delivery
© 2019 ADVA Optical Networking. All rights reserved. Confidential.
Growth strategy
2019
Focus: Leverage expanded solution
portfolio to increase market share and
reaccelerate growth
Tactics:
• Aggressively pursue more DCI
opportunities with new Teraflex
terminal and open line system
• Win new footprint for flexible,
programmable 5G infrastructure
leveraging optical, packet edge and
synchronization
• Accelerate revenue contribution from
Ensemble and win new designs for
NFV-based service delivery
ADVA technology tripod: strategic building blocks for network transformation
34
2020 2021 and beyond
Focus: Capitalize on the transition to Focus: Further balance the ADVA
virtualized service delivery and 5G technology tripod
Tactics: Tactics:
• Harness Ensemble software • Expand into new verticals with
architecture and increase software synchronization
revenue contribution to >10%
• Expand into enterprise IT with edge
• Dominate market for network cloud solutions
synchronization systems
• Continue to pursue tuck-in
acquisitions or consolidate with and
expand into a larger entity
© 2019 ADVA Optical Networking. All rights reserved. Confidential.
Growth catalysts
Industry mega trends
ADVA
Global mobile data and internet traffic
EB/Month 46 % CAGR 2017-2022 • Digitization drives network transformation;
100
Source: Cisco VNI, 2018 77.5 • Investment focus moves to the edge, where ADVA is
80
60 40.8
56.8
well positioned with multiple ways to win:
28.6
40
11.5
19 • Interconnect – scalable bandwidth on open platform
20
0 • Access – rapid service delivery on packet edge with NFV
2017 2018 2019 2020 2021 2022
• Synchronization – precision timing, increasing relevance in
Public cloud service revenue forecast ever more applications, success winning Tier 1 footprint
$B 17.7% CAGR 2017-2021

300
278 • More customers, better revenue diversification, and
Source: Gartner, Sep 2018
broader solutions portfolio
240
206
200 176
145
• Industry consolidation and regionalization lead to
100
sharper profile as innovator and trusted partner
0
2017 2018 2019 2020 2021

Investment focus coming to ADVA’s sweet spot – increasingly differentiated profile

35 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
 Appendix

36 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

Our partners
Technology partners Partner ecosphere members

Ensemble harmony ecosystem

AN INTEL COMPANY
and many more Connect and Connect+ partners

37 © 2019 ADVA Optical Networking. All rights reserved. Confidential.

Investor relations overview
Recent investor activities Planned investor activities
Conferences: Cowen TMT Conference in New York/May Conferences: Jefferies in Chicago/August
Quirin Champions 2019 in Frankfurt/June Commerzbank Sector Conference in Frankfurt/August
Roadshow in London/June Liolios Gateway Conference in San Francisco/September
Berenberg / GoldmanSachs 8th German Corporate Conference
in Munich/September

Shareholder structure Financial analyst coverage

Status: June 30, 2019: 49,962,955 shares outstanding As of July 24, 2019
Institution Recommendation/ Update Previous
Price Target Target
Top Investors*

Deutsche Bank Hold (€7.60) May 10, 19 (€8.20)

20.25%
Morgan Stanley 3.9%
Dimensional Fund Advisors 3.2% Hauck & Aufhäuser Hold (€9.00) Apr 29, 19 (€10.00)
14.99%
DNB ASA 3.0%
64.76% LBBW Buy (€10.25) Jul 24, 19 (€10.25)
Blackwell Partners (US) 3.0%
Internationale Kapitalanlage 2.9% Northland Capital Markets Outperform (€11.00) Jun 26, 19 (€11.00)
Goldman Sachs Group 2.0%
FMR Research Neutral (€7.20) Jun 20, 19 ---
Teleios Capital Partners
EGORA Group Ø €9.01
Free float

*Sources: Insight Nasdaq, Oddo Seydler, Commerzbank, ADVA

38 © 2019 ADVA Optical Networking. All rights reserved. Confidential.
Thank you
Investor-relations@advaoptical.com

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Any reproduction, publication or reprint, in whole or in part, is strictly prohibited.

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damages, alleged to have been caused by or in connection with using and/or relying on the information contained in this presentation.

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