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DASAN NetworksIR PresentationFY 2018

Copyright© 2019 DASAN Networks, Inc. 2

Disclaimer

This document, which is written by DASAN Networks, Inc., is only intended to offer information for

investors whom attend DASAN Networks IR Presentation. You do not have permission to use,

disseminate, distribute, copy or retain any part of this document and communication in any form.

Forecasts and projections contained in this material are based on current business environments and

management strategies. They may differ from the actual results depending on changes and

unaccounted variables.

Therefore DASAN Networks. Inc. does not undertake any obligation to the investment results from

those in the forward-looking statements. These materials can not be used as evidence in any legal

dispute. The responsibility for investment is ascribed only to investors.

Contents

1. Overview

2. Performance

3. Investment Points

4. Appendix

5. Vision

P.4

P.6

P.9

P.15

P.18

▪ Company History▪ Organization chart, major shareholders and current status of

bonds

▪ Overview of affiliates in equity method▪ Financial Summary

▪ Business area▪ Financial results in the last four years

▪ Market enlargement▪ Vendor Development

▪ Contact


• The No.1 network equipment and solutions provider in Korea

• Penetrated into global market and diversified business since 2009, Global FTTH No.7

1993. · Foundation

1995. · Launched DASAN R&D Institute

1998. · Developed Korea’s first Frame Relay Router

2000. · Listed on Kosdaq· Released general-purpose network solutions (Routers, Ethernet Switch, Internet Server)

2001. · Developed & commercialized Linux based L2 Switch

2002. · Developed & commercialized L3 Metro Ethernet Switch

2003. · Released VDSL IP-DSLAM,Supplied to Korea Big3 and Japan

2004. · Investment from SIMENS

2005. · Released ADSL2 IP-DSLAM globally

2007. · KT FTTH(E-PON) No.1 Provider· KT IP-TV(IP Settop-box) No.1 Provider

2008. · SKB FTTH(G-PON) No.1 Provider· Supplied FTTH(E-PON) to LGU+

2009. · Supplied Mobile Backhaul Solution to Japan

2011. · Supplied 4G LTE Access solution to LGU+ in Korea

· Acquired HANDYSOFT Inc.· Relocated Headquarter to Pangyo, DASAN Tower

2012. · Supplied 4G LTE Access solution to KT

2013. · Supplied FTTH solution to CHT, Taiwan

2014. · Supplied FTTH solution to Viettel, Vietnam

2015. · Captive spun-off of DNS, network business unit

· Acquired Solueta Inc. (Kosdaq listed)

2016. · Acquired DZSI (Nasdaq listed)

· Supplied network equipment to France and India government

· Supplied 10G EPON to KDDI, JAPAN

2017. · Ranked FTTH PON Global Top7

2018. · Supplied 5G Mobile Backhaul to LGU+

2019. · DZSI acquired Keymile (Germany)· Established DASAN Ventures

1. Company History

Localization of Network Equipment

(1993~2003)

Became the No.1 Network Solutions Provider in Korea

(2004~2012)

Growing to global corporation(2013~Present)

1993 2000 2005 2010 2015 2017 2019Sales reached 100 Bil. won Sales reached 200 Bil. won Sales surpassed 300 Bil. won


2. Corporate Governance

■ Major Shareholders ■ Current Status of Bonds(Mar. 31. 2019)

Bonds Amounts Balance Price C. Stocks Period Rate

5CB 28.0 Bn 3.11 Bn \5,788 537,076 17.08.10~21.07.10 0%, 1%

6CB 10.0 Bn 10.0 Bn \6,305 1,586,042 19.05.11~22.04.11 0%, 1%

Total CB 38.0 Bn 13.1 Bn - 2,123,118

7EB 10.0 Bn 4.3 Bn \6,760 636,094 18.06.11~22.04.11 0.%, 0%

Total 48.0 Bn 19.0 Bn

(Mar. 31. 2019)

■ Governance of DASAN Group

OwnerNo. of Stocks

Portion of Total

DASAN Invest 6,929,635 23.1%

Minwoo NAM (CEO) 885,185 3.0%

Treasury Shares 1,458,792 4.9%

Shinyoung Asset Management 1,528,835 5.1%

Etc. 19,152,731 63.9%

Total 29,955,178 100.0%

Network

DZSINASDAQ 57.9%

KOR/JAP/VIET/Etc.

Consolidated subsidiaries

KEYMILE

Manufacturing

SOLUETAKOSDAQ 24.8%

DMC

Affiliates in equity method

DTS

Start-up Incubating

DASAN Ventures25.0%

DASAN NetworksKOSDAQ 23.1%

DASAN Invest Minwoo NAM

Start-ups

HANDY SOFTKOSDAQ 8.5%

SW∙IoTAffiliates in equity method


3. Business Area

※ Above diagram is for illustration purpose only, actual configuration may differ.

RRH

10G OLT (MSAN)

EthernetBTS

GPON

1:64ONT

GPON OLT

Wireless AP

Office

Access Switch

Edge Switch

Access Mobile BackhaulMetro Mobile Backhaul

Wireless

School

Police Station

Wireless AP

Access Switch

AC

ONT

EPON

1:32ONTEPON OLT

5G

• Broadband access solution

• Mobile backhaul solution

Backbone

Mobile Core

BTS

Backbone

Customers Access Edge Core

BroadbandService

MobileService


4. 2015-2018 Consolidated Financial Results

■ Liabilities / Short-term Liabilities

■ Sales

■ Operating Income

■ Assets / Cash

• Expanding the global network business through subsidiaries as business holding company

180.6 188.9

306.8

356.9

59.6 28.3 29.8 36.9 0

100

200

300

400

2015 2016 2017 2018

Separate Sales

(Unit: KRW Billion)

Consolidated Sales

CAGR 18.6%

355.5 371.3

345.6 366.0

33.9 52.7 47.0 51.7 0

100

200

300

400

2015 2016 2017 2018

Cash

Total Assets

218.6 223.6

182.1 198.5

88.2 69.0 63.2

80.6

0

100

200

300

2015 2016 2017 2018

Short-term Liabilities

Total Liabilities

-4.1

-13.9

-0.1

10.2

-10

-5

0

5

10

2015 2016 2017 2018

TurnAround

(Unit: KRW Billion)

(Unit: KRW Billion)(Unit: KRW Billion)


4-1. 2018 4Q Financial Result

• YoY 16.3% growth in Sales

• Operating income turnaround

• Sustainable growth of DZSI

(Unit: KRW Million)

Consolidated 2018Y 2018Y 3Q 2018Y 2Q 2018Y 1Q 2017Y

Sales 356,933 87,332 93,938 69,162 306,789

Operating Income 10,205 4,647 3,747 31 (73)

OI Ratio(%) 2.86% 5.32% 3.99% 0.04% -0.02%

Net Income (24,771) 2,536 (6,959) (1,757) (2,495)

Net Income Ratio(%) T/L 2.9% T/L T/L T/L

(Unit: KRW Million)

Consolidated 2018Y 4Q 2017Y 4Q YoY(%) 2018Y 3Q QoQ(%)

Sales 16,127 9,329 72.9% 9,841 63.9%

Operating Income 525 (13) 4138.5% 685 T/L

Profit before Income Tax (20,701) 2,539 T/L 451 T/L

Net Income (20,280) 2,380 T/L 451 T/L

• Growth by expanding French business

• Operating income turnaround

• Expect to 2019 Net loss improvement

(1) 2018 4Q YTD Consolidated Performance

(3) 2018 4Q 3M only Separate Performance

ㆍIncrease in Sales Expense due to Keymile M&A

ㆍIncreasing in Net loss

(Unit: KRW Million)

Consolidated 2018Y 4Q 2017Y 4Q YoY(%) 2018Y 3Q QoQ(%)

Sales 106,501 39,256 171.3% 87,322 22.0%

Operating Income 1,780 2,502 -28.9% 4,647 -61.7%

Profit before Income Tax (18,805) 1,496 T/L 3,397 T/L

Net Income (18,591) 5,622 T/L 2,536 T/L

(2) 2018 4Q 3M only Consolidated Performance


▶ Strengthen DASAN Networks’ global position by acquisition of

∙ DZSI, a Nasdaq listed network company in US

∙ Keymile, German network company

5G▶ Starting 5G Investment from 2019, expect to start full-scale in

2020 – led by Korea and Japan

▶ Boost in investment of global high-speed internet infra

: FTTH market expects to 14% growth annually over next 10 years

5. Competitiveness & Opportunities

Copyright© 2019 DASAN Networks, Inc.

Total Size of the Global Fiber to the

Home Market($ in billions)

$9.5

$36.5

2017 2027

Source: Future Market Insights (FMI): “Fiber to the Home Market: Global Industry Analysis

(2012-2016) and Opportunity Assessment (2017-2027).

5G Adoption Internet of Things

Ultra-HD VideoVideo Streaming

5G

5-1. Global FTTH Market Growth

• Global FTTH market is expected to grow up to 14%+ CAGR

▪ Factors contributing to market growth

10


Fiber (FTTH/B) Households Connected in 2017

Prim

arily

Mid

dle

East

& A

sia

Prim

arily

Euro

pe a

nd t

he U

S

% Fiber (FTTH/B) Households Connected HHc/HHs in Country Ratio: 2017

1%

1%

2%

2%

10%

11%

13%

15%

16%

23%

29%

34%

38%

43%

43%

49%

51%

68%

69%

81%

82%

88%

88%

UK

Austria

Germany

Italy

Australia

KSA

USA

France

Netherlands

Switzerland

Portugal

Spain

New Zealand

Lithuania

Sweden

China

Latvia

Hong Kong

Japan

UAE

South Korea

Singapore

Qatar

Leadin

g F

iber

Mark

ets

5-2. Global FTTH Penetration Rate by Country

24%Increase IP Traffic

CAGR 2016-2021

Source: Cable Labs

• Focusing on underpenetrated and rapidly growing FTTH markets, like EUR, US, Etc.

11

11


6-1. Major Subsidiaries

DASAN Zhone Solutions (US)

57.9%

Keymile

100.0%

■ Organization Chart in Network Business Unit

∙ Network solution biz in Europe∙ Founded in 2002∙ CEO: Lothar Schwemm∙ Located in Hannover, Germany∙ Acquired in Jan. 3. 2019

■ DASAN Zhone Solutions, Inc. Stock Chart (NASDAQ: DZSI)(Unit: USD million)

■ Progress in DZSI Sales and OI

∙ Network solution biz in Asia∙ Founded in Apr. 2015∙ CEO: Daniel Won∙ Located in Pangyo, Korea

DNS

100.0%

150.3

247.1

282.3

-13.0

0.7

7.2

-15.0

-10.0

-5.0

-

5.0

10.0

-

100.0

200.0

300.0

2016A 2017A 2018A

Total Revenue Operating Income or Loss

∙ Global Network solution biz∙ Founded in Jun. 1999∙ Listed on Nasdaq in Nov. 2003∙ Acquired in Sep. 9. 2016

∙ CEO: Yung Kim∙ 300+ employees (consolidated 750+)∙ Headquarter in Oakland, CA, USA∙ Nasdaq Code : DZSI


6-2. Global FTTH Market Position

1. Huawei2. Alcatel-Lucent3. ZTE4. Calix5. Adtran6. Fiberhome7. Mitsubishi

8. Zhone9. ECI10. Zyxel11. Fujitsu

12. DASAN Networks

1. Huawei2. Nokia (Alcatel-Lucent)3. ZTE4. Calix5. Adtran6. Fiberhome

7. DASAN Zhone Solutions

Source by Infonetics Research

Before DASAN + Zhone

■ Global FTTx Revenue By Vendor

500 1000 1500 2000 2500 3000 35000

200

400

600

800

1000

1200

10000

Gigabit FTTH

Mbps

Gigabit GPON DOCSIS 3.024 Bonded

DOCSIS 3.1(initial)

VDSL2 35bVDSL2 17aG. FastG. Fast A2G10G PONXGS/NG-PON2

10G XGS/NG-PON2

Distance (Feet)

■ Global Trend of FTTx Solutions


Asia

Pacific,

47.3%

America(N/S),

25.5%

EUR,

MEA,

Africa

15.2%

Etc.,

11.9%

Sales by

Region

Tier 1 & 2 Carriers

Primarily Tier 2 & 3 Carriers Tier 1 Carriers

6-3. Overseas Business Status

• Hundreds of customers in over 50 countries

• Operate 18 global R&D center & Sales Office

• Map of global major clients is as below:

1414


APPENDIX


8. Affiliates in Equity Method

• Business structures upstream by affiliates cooperation (Car network, Automotive application components and IoT, etc.)

• Conductivity material for electromagnetic shield

• Consolidated with DMC(Automotive components), DTS(Heat exchanger)

Solueta

[24.8%]

Kosdaq

• Collaborative software (Groupware, etc.) and IoT platform

• Changed from subsidiary to affiliate in equity method in 2018Handy-

Soft

[8.5%]

Kosdaq

• B2C & Service

• Consolidated with Handycar, Able, Dr. Asahan, Kyperlab, HOCOS, etc.

• Established in 2019, intend of consolidated financial structure improvement

• Equally invested from DASAN Invest, DASAN Networks, Handysoft, Solueta

DASAN

Ventures

[25.0%]

(consolidated) Sales Operating Income Net Income

2017A 155.9 2.8 0.008

2018A 227.3 5.5 (1.64)

(consolidated) Sales Operating Loss Net Loss

2017A 40.1 (1.3) (4.6)

2018A 42.0 (5.5) (10.3)

(Unit: KRW Billion)

(Unit: KRW Billion)


9. Financial Summary [consolidated]

*2016.09 Completed acquisition of DZS (consolidated)

*2016 DZS acquisition expense badly affect 2017 Profit and loss

*2018 Operating income turnaround

*4Q results differ from actual figures due to adjust for consolidation procedures

(Unit: KRW 0.1 Billion)

FY2016 FY2017 FY2018 2017.1Q 2017.2Q 2017.3Q 2017.4Q 2018.1Q 2018.2Q 2018.3Q 2018.4Q

Sales 1,889 3,068 3,569 716 1,006 953 393 692 939 873 1,065

Cost of Sales 1,309 2,022 2,360 468 718 681 155 430 684 528 718

Cost of Sales Ratio 69.3% 65.9% 66.1% 65.4% 71.4% 71.5% 39.4% 62.1% 72.8% 60.5% 67.4%

Gross Profit 581 1,046 1,209 247 288 273 238 261 256 346 349

Gross Profit Ratio 30.8% 34.1% 33.9% 34.5% 28.6% 28.6% 60.6% 37.7% 27.3% 39.6% 32.5%

Selling, Marketing, General and Administrative Expenses

426 643 731 181 178 168 116 158 119 193 261

R&D Expenses 294 403 376 105 192 99 97 103 99 106 68

Operating Income (139) (1) 102 (39) 8 5 25 0 37 46 19

Operating Income Ratio -7.4% 0.0% 2.9% -5.4% 0.8% 0.5% 6.9% 0.0% 3.9% 5.3% 1.8%

Net Income (412) (25) (248) (52) (53) 24 48 (18) (69) 25 (186)

Net Income Ratio -21.8% -0.8% -6.9% -7.3% -5.3% 2.5% 12.2% -2.6% -7.3% 2.9% -17.5%

Net Income(DSN) (347) (16) (261) (43) (33) 18 34 (18) (77) 19 (185)

Net Income(non-controlling interest)

(65) (9) 13 (9) (20) 5 15 1 7 7 (2)

Total Assets 3,713 3,456 3,660 3,679 3,715 3,836 3,456 3,609 4,029 3,919 3,660

Total Liabilities 2,236 1,821 1,985 2,284 2,358 2,438 1,821 1,841 2,275 2,094 1,985

Total Equities 1,477 1,635 1,675 1,395 1,356 1,398 1,635 1,768 1,754 1,825 1,675

Equity Capital 120 139 158 120 120 123 139 152 154 158 158

Dept. Ratio 151.4% 111.4% 118.5% 163.7% 173.9% 174.4% 111.4% 104.1% 129.7% 114.7% 118.5%

■ DASAN Networks Financial Summary (Consolidated)


11. Contact

“Challenge & Innovation for the Better Life”

GyeongWon Kim

Manager of Communication team

T : 070-7010-1644

JiHyun Kim

Head of Communication team

T : 070-7010-1021

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