Napatech A/s · OSL:NAPA

Napatech A/s — Investor Day (June 2014)

76 slides from Napatech A/s's investor day presentation, June 2014

1. Slide 1: Capital Markets Day June 2014

   CapitalCOMPANY Markets Day June 2014 PRESENTATION

2. Slide 2: Welcome to Capital Markets Day

   WELCOME TO CAPITAL MARKETS DAY Welcome on behalf of the Board of Directors of Napatech by Olav Stokke, Chairman of the Board  The Board of Directors and Management team are committed to continue building shareholder value by:  Providing outstanding overall performance by operational excellence  B

3. Slide 3: Napatech in historic perspective

   NAPATECH IN HISTORIC PERSPECTIVE 300 100G Some historic facts:  Accumulated revenue is close 250 to 900 MDKK 40G  Accumulated development spending 200 of almost 300 MDKK  Venture financing of close to M DKK 150 120 MDKK 10G  100G product launched in 2014 100  40G product launched in 2011 1G 50

4. Slide 4: Capital Markets Day Agenda

   COMPANY Capital Markets Day Agenda By HenrikPRESENTATION Brill, CEO

5. Slide 5: Introduction to Capital Markets Day

   INTRODUCTION TO CAPITAL MARKETS DAY  Capital markets day agenda:  Napatech the company; now and in the future  Industries, trends and solutions telling about benefits for the most demanding networks  Market refresh showing drivers enabling opportunities and growth  Products and partners forming

6. Slide 6: Napatech the company

   NAPATECH THE COMPANY By Henrik Brill, CEO 6

7. Slide 7: Napatech the company

   NAPATECH THE COMPANY  Napatech is the world leader in accelerating network management and security applications. As data volume and complexity grow, the performance of these applications needs to stay ahead of the speed of networks in order to do their jobs. We make this possible, for even the most

8. Slide 8: A platform for profitable growth

   A PLATFORM FOR PROFITABLE GROWTH History Future Chosen by Experienced Fast-growing leading OEMs for Recognized standard, used employees from venture-backed high-end broadly by all OEMs leading companies start-up applications Grow with current Broaden awareness and establish Napatech as the standard

9. Slide 9: Napatech creates differentiation with long-term relevance for our customers

   NAPATECH CREATE DIFFERENTIATION WITH LONG- TERM RELEVANCE FOR OUR CUSTOMERS  We believe that by Reliably Increasing Performance of our customers’ applications we create differentiation and long term relevance for our customers  Napatech customers are  Network Equipment Manufacturers and Service P

10. Slide 10: Our values differentiate us as an employer and in the market

    OUR VALUES DIFFERENTIATE US AS AN EMPLOYER AND IN THE MARKET 10

11. Slide 11: Our global locations ensure long term customer engagements

    OUR GLOBAL LOCATIONS ENSURE LONG TERM CUSTOMER ENGAGEMENTS  115 Employees worldwide London  45% Development Ottawa United Kingdom Washington Canada  11% Product Mngt. & Mkt. Copenhagen Seoul Tokyo Mountain View DC, USA CA, USA Andover Denmark South Korea Japan  32% Sales & Support MA, USA  12%

12. Slide 12: We keep even the most demanding networks one step ahead

    WE KEEP EVEN THE MOST DEMANDING NETWORKS ONE STEP AHEAD Telecom Financial Cloud and E-commerce Infrastructure Operators Services Data Center and Media and Defense Services Enterprise Security Enterprise Management 13

13. Slide 13: Mobile data grows fast challenging telecoms

    MOBILE DATA GROWS FAST CHALLENGING TELECOMS Mobile data traffic Needs and challenges Average monthly traffic in exabytes 11,2 CAGR 2012-2017  Maintaining the quality of 66% service 7,4  Enabling new services and business models 4,7 2,8 78% 1,6 0,9 0,3 0,5 2010 2011 2012 2013 2014 2015 2016 2017 So

14. Slide 14: Algorithmic trading is changing the rules of the game

    ALGORITHMIC TRADING IS CHANGING THE RULES OF THE GAME Algorithmic trading Needs and challenges Percentage of market share 85% 75% 80%83%  Keeping financial trading fair and transparent 60%  Ensuring smooth and 45% reliable trading 30% 25% 20% 15% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 S

15. Slide 15: Growing demand for virtualization poses challenges

    GROWING DEMAND FOR VIRTUALIZATION POSES CHALLENGES Public cloud services market Needs and challenges Billion dollars Cloud System  Creating visibility within Infrastructure Services (IaaS) complex traffic Cloud Application  Enabling reliable services Infrastructure Services (PaaS) and business mod

16. Slide 16: Growth in e-businesses means growth in network dependence

    GROWTH IN E-BUSINESSES MEANS GROWTH IN NETWORK DEPENDENCE Global e-commerce Needs and challenges Trillion dollars  Ensuring smooth 15% 2 customer experiences CAGR  Maintaining the security 1 and reliability of transactions 2012 2016 Source: eMarketer 17

17. Slide 17: Cyber attacks are a bigger threat than ever

    CYBER ATTACKS ARE A BIGGER THREAT THAN EVER Total breaches increase Needs and challenges 2012-2013  Protect against advanced cyber threats  Maintain the secure and 62% reliable functioning of critical infrastructure networks Sources: Symantec Corporation 2014 18

18. Slide 18: The more important networks become, the bigger the target

    THE MORE IMPORTANT NETWORKS BECOME, THE BIGGER THE TARGET Increasing threats Needs and challenges 552 Identities Lost  See and protect Million 2013 everything in real time  Correlate data to establish a network-wide view Up 493% From 2012 Source: Symantec 2014 19

19. Slide 19: Managing access any time, anywhere from any device

    MANAGING ACCESS ANY TIME, ANYWHERE FROM ANY DEVICE Mobile data traffic by device Needs and challenges Average monthly traffic in exabytes M2M  Ensure superior quality of Tablets experience Laptops  Maintain the reliable CAGR 2012-2017 66% functioning of enterprise Smartphones networks Non- smartph

20. Slide 20: Napatech strategic direction

    NAPATECH STRATEGIC DIRECTION To be the recognized standard for accelerating applications that ensure the quality and security of the network services we all rely on Develop current Develop Expand Enhance and new industries and our product our brand customer base geographies portfolio leadership 21

21. Slide 21: Building our customer portfolio and sales pipeline

    BUILDING OUR CUSTOMER PORTFOLIO AND SALES PIPELINE  Our customers  Network Equipment Manufacturers and Solution Providers building high-performance network analysis solutions using standard servers and Napatech accelerators  Software Vendors providing management and security solutions that rely o

22. Slide 22: Building our customer portfolio and sales pipeline

    BUILDING OUR CUSTOMER PORTFOLIO AND SALES PIPELINE  Business development  Engagement via a focused process: evaluation, integration, deployment and innovation – accelerating the evaluation ensures design win and future revenue  New market entry through investigation of business opportunities and

23. Slide 23: Napatech geographical sales distribution

    NAPATECH GEOGRAPHICAL SALES DISTRIBUTION Revenue distribution Revenue distribution Revenue distribution by geography - 2012 by geography - 2013  Higher growth in APAC and EMEA during 2013 APAC 10% APAC 11%  Growth in APAC and EMEA is generated from existing and new customers EMEA 18% EMEA 20%  Th

24. Slide 24: Expanding our industry footprint and geographical reach

    EXPANDING OUR INDUSTRY FOOTPRINT AND GEOGRAPHICAL REACH  Expanding our industry footprint  Through a focused approach differentiating our solutions to better meet industry needs  Broaden our geographical reach  Enhanced presence in Brazil as we see long term growth opportunities for Brazil as we

25. Slide 25: Accelerating our customers' applications by leading edge technology and solutions

    ACCELERATING OUR CUSTOMERS’ APPLICATIONS BY LEADING EDGE TECHNOLOGY AND SOLUTIONS  Enhancing products to meet tomorrow’s needs  Release of new functionality to support the growing mobile market requirements for Quality of Experience and Service optimization  Release of new functionality for Virtu

26. Slide 26: Accelerating our customers' applications by leading edge technology and solutions

    ACCELERATING OUR CUSTOMERS’ APPLICATIONS BY LEADING EDGE TECHNOLOGY AND SOLUTIONS  Investigating new opportunities for solving tomorrow’s challenges  When customers turn to Napatech to look for advice and solutions we often discover exiting opportunities that guide our future product decisions  O

27. Slide 27: Enhance our brand leadership

    ENHANCE OUR BRAND LEADERSHIP  Our ambition with the Napatech positioning strategy is to clearly articulate and enhance Napatech’s offering and value proposition to the market  We believe a clear positioning of what our customers can expect will help guide their strategic decisions in standardizing

28. Slide 28: Napatech in summary

    NAPATECH IN SUMMARY  Napatech has shown solid performance for more than a decade and is strongly positioned to build additional Guidance for full year 2014 is maintained at: growth  Revenue growth 17%-23%  EBITDA margin 18%-23%  We have a focused value proposition for our customers; allowing the

29. Slide 29: Mobile trends and solutions

    MOBILE TRENDS AND SOLUTIONS By Peter Ekner, VP Product Management 30

30. Slide 30: Mobile industry trends

    MOBILE INDUSTRY TRENDS Exabytes per month 18 16 14 More than 500 LTE networks 12 by 2017 10 CAGR 2013 - 2018 61% 8 Across 128 countries covering 6 more than half of the world’s 4 2 population - 2013 2014 2015 2016 2017 2018 Smart traffic Non-smart traffic Source: Cisco VNI, Feb 2014 Source: GSMA 201

31. Slide 31: Providing solutions for the mobile industry

    PROVIDING SOLUTIONS FOR THE MOBILE INDUSTRY Service and revenue optimization Analyze subscriber behavior as well as specific app usage, enabling operators to adjust their services and business models to maximize value. Napatech enables insight into:  Application usage  Device usage  When and wher

32. Slide 32: Providing solutions for the mobile industry

    PROVIDING SOLUTIONS FOR THE MOBILE INDUSTRY Quality of experience Analyze quality of experience to improve quality while better managing the bandwidth challenges posed by rich media applications. Napatech enables insight into:  Bandwidth availability  Performance metrics  Individual subscriber Qo

33. Slide 33: Providing solutions for the mobile industry

    PROVIDING SOLUTIONS FOR THE MOBILE INDUSTRY Telecom network management Monitor critical Ethernet/IP connections in real time to improve underlying network performance and availability. Napatech enables insight into:  Data correlation  Link integrity  Protocol health  Event timing 34

34. Slide 34: Providing solutions for the mobile industry

    PROVIDING SOLUTIONS FOR THE MOBILE INDUSTRY Network behavior simulation Simulate real-life subscriber behavior with a variety of applications and services, to optimize infrastructure and service upgrades and deployment Napatech enables insight into:  Subscriber emulation  Load emulation  Validate

35. Slide 35: Demonstration of Napatech core capabilities for mobile industry solutions

    DEMONSTRATION OF NAPATECH CORE CAPABILITIES FOR MOBILE INDUSTRY SOLUTIONS To analyze subscriber behavior and app usage, operators need full visibility of mobile traffic. The key is:  Understand tunneling protocols  Extract data from inside the tunnels Mobile network  Process data in real time 10G

36. Slide 36: Security trends and solutions

    SECURITY TRENDS AND SOLUTIONS By Peter Ekner, VP Product Management 37

37. Slide 37: Security

    SECURITY Total security breaches 2013 253 Up 62% from 2012 Total identities “They can’t get Exposed 2013 out of this for less than $100 million,” 552 million John Kindervag, Vice president and principal Up 493% from 2012 analyst at Forrester Source: Symantec, Internet security threat report 2014 Res

38. Slide 38: Providing solutions for the security industry

    PROVIDING SOLUTIONS FOR THE SECURITY INDUSTRY Data Loss Prevention Identify and take action against unauthorized activity, thus ensuring that sensitive information is secured and does not leak outside the organization’s network. Focus: known threats Napatech enables insight into:  Identify sensitiv

39. Slide 39: Providing solutions for the security industry

    PROVIDING SOLUTIONS FOR THE SECURITY INDUSTRY Security Data Collection See every detail within the networks to stop attacks as well as protect against leaks while at the same time ensure there is a 100% accurate data record. Focus: unknown threats Napatech enables insight into:  Traffic anomalies 

40. Slide 40: Demonstration of Napatech core capability for security solutions

    DEMONSTRATION OF NAPATECH CORE CAPABILITY FOR SECURITY SOLUTIONS To protect against the most advanced security threats, network operators need in- depth application level visibility. The key is:  Deep Packet Inspection (DPI)  Real-time, Layer-7 classification  Classification signature updates Nap

41. Slide 41: Cloud trends and solutions

    CLOUD TRENDS AND SOLUTIONS By Peter Ekner, VP Product Management 42

42. Slide 42: Anchoring the cloud

    ANCHORING THE CLOUD Cloud services  Small & mid sized enterprises outsourcing part of all of their IT services & infrastructure.  Cloud providers, regardless of whether they provide infrastructure, platform or software as a service, will have a need to monitor and secure the massive data centers t

43. Slide 43: Cloud services outlook

    CLOUD SERVICES OUTLOOK BUSD 110 100 Cloud services  The chart on the left shows a 24% 90 CAGR CAGR, five times that of the IT 80 2013 - 2017 industry overall. 70 24%  Mobile services will increasingly 60 migrate into the Cloud to deliver on the promise of service access 50 anytime, anywhere throug

44. Slide 44: Emerging technologies related to cloud

    EMERGING TECHNOLOGIES RELATED TO CLOUD Software Defined Networks (SDN)  Separation of control and data plane  Enabling network topology to be defined by SW  Flexibility and cost Network Functions Virtualization (NFV)  Virtualization of network services  Enabling traditional HW functionality to

45. Slide 45: Napatech play in SDN and NFV world

    NAPATECH PLAY IN SDN AND NFV WORLD HIGH PERFORMANCE AND COMPLEXITY Napatech market play Today: Dedicated HW Network Future: NFV High Today: Dedicated HW services performance Future: Dedicated HW Today: High end switch network services Future: Commodity v Switching Low Today: Dedicated HW SDN switch

46. Slide 46: Providing solutions for the cloud industry

    PROVIDING SOLUTIONS FOR THE CLOUD INDUSTRY Virtualized activity analysis Analyze QoE, availability and reliability to help cloud and data center service providers enhance their offerings and understand the needs of their customers. Napatech enables insight into:  Virtualized network analysis  Data

47. Slide 47: Market sizing – Cretan and Frost & Sullivan refresh

    MARKET SIZING – CRETAN AND FROST & SULLIVAN REFRESH By Casper Felding, Product Strategy Manager 48

48. Slide 48: Solid market fundamentals

    SOLID MARKET FUNDAMENTALS Napatech Total Addressable Market conducted by Frost & Sullivan The market consists of:  LAN on motherboards  Low end network interface cards  Proprietary solutions 2011 analysis  Empty FPGA adapters 2014 analysis  FPGA acceleration adapters  NPU adapters  Server & h

49. Slide 49: Solid market fundamentals

    SOLID MARKET FUNDAMENTALS Napatech Total Addressable Market conducted by Frost & Sullivan  Base networks in Mobile increased significantly from 2011 to 2014 analysis  % of base networks and # of adapters per network have increased 2011 analysis  Across the board increase in cloud-based 2014 analy

50. Slide 50: 1G, 10G, 40G & 100G outlook

    1G, 10G, 40G & 100G OUTLOOK NIC ports (annual volume) Cretan NIC port data projections:  Market volume is expected to grow  1G market is expected to decline  10G market is expected to continue to grow  40G market could soon become important  100G market is in its infancy 2008A 2009A 2010A 2011A

51. Slide 51: 10 Gigabit market trends

    10 GIGABIT MARKET TRENDS  Latest report from Infonetics Research on 1G/10G/40G/100G Networking Ports, shows a 5% growth between 2012 and 2013, totaling a port revenue of $39 billion. 10G delivers the bulk of revenue while the emerging 40G and 100G segments delivers the highest growth rates1.  “Dep

52. Slide 52: 40 Gigabit market trends

    40 GIGABIT MARKET TRENDS  At resent Ethernet Tech Summit Cisco expressed expectation of significant up- take in 40 Gigabit Ethernet deployment  The broad Cisco portfolio of 40 GbE products as well as their removal of barriers of adoption by delivering connectivity for existing infrastructure, lead

53. Slide 53: Products and partners

    PRODUCTS AND PARTNERS By Peter Ekner, VP Product Management 54 54

54. Slide 54: 10 Gigabit – high performance accelerator

    10 GIGABIT – HIGH PERFORMANCE ACCELERATOR  Our latest 4 port 10 Gigabit accelerator will help our customers to stay ahead of the data growth curve by offering higher throughput appliance solutions, while reducing time-to-market and risk  Napatech’s 320 Gbps throughput achievement has shattered ind

55. Slide 55: 100 Gigabit – flagship accelerator

    100 GIGABIT – FLAGSHIP ACCELERATOR  Our newly released 100 Gigabit accelerator will enable our customers to initiate product development of their next-generation monitoring and security products ahead of the data growth curve  We expect that 100 Gigabit design decisions are initiated now by the ma

56. Slide 56: Comprehensive software suite

    COMPREHENSIVE SOFTWARE SUITE  High performance application interface (API) including support for industry standard  Common API for all Napatech products  Easy integration of value added 3rd party applications 57

57. Slide 57: Napatech partner ecosystem

    NAPATECH PARTNER ECOSYSTEM Partnering allows Napatech to help: Solutions  Deliver more value  Reduce time-to-market  Guarantee integrated performance Middleware (software)  Lower product development risk  Expand customer reach System Integrators 58

58. Slide 58: Lancope StealthWatch FlowSensor 4000 proving eco-system value

    LANCOPE STEALTHWATCH FLOWSENSOR 4000 PROVING ECO-SYSTEM VALUE StealthWatch FlowSensor 4000 - Visibility and security for large complex networks targeting Service providers and Enterprise Data Centers Benefits  4 x higher performance  Faster time-to-market 4x 59

59. Slide 59: The organization and our competences

    THE ORGANIZATION AND OUR COMPETENCES By Flemming Andersen, VP Product Engineering 60 60

60. Slide 60: Teams in the organization

    TEAMS IN THE ORGANIZATION  Copenhagen, Denmark  C-level Management  Finance, accounting and IT  EMEA Sales and account management  EMEA Support 1st line for OEM customers  Product and Program management  Marketing and communication  Engineering - product development and 2nd line support  Op

61. Slide 61: Teams in the organization

    TEAMS IN THE ORGANIZATION  USA: Andover, Washington DC, Mt View  Accounting and Logistics  Sales and account management  Support 1st line for OEM customers  APAC: Tokyo, Seoul  Sales and account management  Support 1st line for OEM customer  Canada, Brazil, Australia and UK  Sales and accou

62. Slide 62: Talented and competent employees 1000+ years of high-tech experience

    TALENTED AND COMPETENT EMPLOYEES 1000+ YEARS OF HIGH-TECH EXPERIENCE Organization by function Engineering team by function Adm. & Operations, 12% Test, 7% Hardware, 6% Engineering Mgmt., 3% Sales & Support, 32% Engineering, 45% FPGA, 13% Software, 13% Product Mgmt. & Application Marketing 11% Softwa

63. Slide 63: In-house engineering competencies

    IN-HOUSE ENGINEERING COMPETENCIES  High-speed hardware board design, signal analysis and thermal management Regulatory compliance  Electrical and optical safety - CE,  State of the art data processing at speeds of multiple UL, CB  Electromagnetic compatibility (EMC) 100 gigabit data rates by use

64. Slide 64: Outsourced engineering competencies

    OUTSOURCED ENGINEERING COMPETENCIES  Strategic relationship with key hardware and software IP suppliers to secure early access to new technologies  Printed circuit board layout and mechanical design to leverage expertise maintained by specialists in the industry  Regulatory, environmental and con

65. Slide 65: Operations & logistics

    OPERATIONS & LOGISTICS  In-house operations management of production partners and key suppliers  Production by international contract manufacturing (CM) partners: Microboard Processing, USA and Escatec, Switzerland  CM secure high quality, efficient and scalable production  Highly experienced wi

66. Slide 66: Financial overview

    FINANCIAL OVERVIEW By Niels Hobolt, CFO 67 67

67. Slide 67: Napatech key financial objectives

    NAPATECH KEY FINANCIAL OBJECTIVES Continued growth  Secure the financial means to support our planned growth Profitable growth  Focus on enhancing efficiency and scalability Continued investments  Early market access to accelerate growth opportunities Increasing shareholder value  Executing on c

68. Slide 68: Quarterly revenue

    QUARTERLY REVENUE Revenue (TDKK) Revenue influenced by:  Large quarterly fluctuations 60.000  Napatech depends on customers’ success 50.000  USD exchange rate 40.000 fluctuations  Trending upwards after Q3 30.000 2013 20.000 10.000 - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 2011 2011 2011 201

69. Slide 69: Quarterly gross margin

    QUARTERLY GROSS MARGIN Gross margin Gross margin influenced by:  Large quarterly fluctuations 78%  Historical gross margin has 76% been increasing 74% 72%  Dependent on product mix 70% and customer mix 68% 66% 64% 62% 60% 58% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 2011 2011 2011 2012 2012 20

70. Slide 70: Quarterly total costs

    QUARTERLY TOTAL COSTS Cost Cost influenced by:  Large quarterly fluctuations 35.000 linked to strategic initiatives 30.000  Dependent on activity level 25.000  Increasing with increase in 20.000 employees TDKK 15.000 10.000 5.000 - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 2011 2011 2011 2012 2

71. Slide 71: Quarterly development costs

    QUARTERLY DEVELOPMENT COSTS Cost composition Cost influenced by:  Quarterly fluctuations 12.000  Dependent on capitalization 10.000  Depreciations (and amortizations) dependent on 8.000 release of products TDKK 6.000  Linear depreciation after launch, typically 3 years 4.000 horizon 2.000 - Q1 Q

72. Slide 72: Long-term financial model

    LONG-TERM FINANCIAL MODEL Percentage-based income statement 2012 2013 Long-term ambition Revenue 100% 100% 100% Gross Margin 71% 72% 69 - 73% Development 12% 9% 8 - 11% Selling and Distribution 25% 29% 24 - 28% Administration 12% 18% 10 - 14% EBITDA 22% 16% 22 - 26% Note: 2014 figures according to g

73. Slide 73: Napatech business insight

    NAPATECH BUSINESS INSIGHT  Quarterly fluctuations will continue  Focus on high growth markets and opportunities  Continuously improvement of efficiency and scalability across the organization  Improve profitability and secure growth 74

74. Slide 74: Questions and answers session

    QUESTIONS AND ANSWERS SESSION

75. Slide 75: Key take away

    KEY TAKE AWAY  Solid growth in Napatech markets and within our served industries  Key market trends strongly supporting Napatech growth objective  Innovative team delivering a well-positioned product and solution portfolio  Napatech - strongly positioned to build additional growth Napatech. FAST

76. Slide 76: Important notice

    IMPORTANT NOTICE This presentation includes and is based, geographic areas and industries that are or liability to you or any other persons resulting inter alia, on forward-looking information and will be major markets for Napatech A/S’ from your use. statements that are subject to risks and busines

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