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Building Carrier Scale Personalized Networks
(NASDAQ: PKT)
Safe Harbor StatementCertain statements in this presentation relate to future events and expectations and as such constitute forward-looking statements involving known and unknown factors that may cause actual results of Procera Networks, Inc. (“we,” “our,” “Procera” or the “Company”) to be different from those expressed or implied in the forward-looking statements. In this context, words such as “will,” “would,” “expect,” “anticipate,” “should,” “projected” or other similar words and phrases often identify forward-looking statements made on behalf of Procera. It is important to note that our actual results may differ materially from those described or implied in such forward-looking statements based on a number of factors and uncertainties, including, but not limited to, (i) adverse changes in general economic conditions; (ii) adverse changes in the industries Procera serves including without limitation communications equipment and networking, telecommunications services, enterprise networking and systems integrators; (iii) our ability to manage material, including components used in our solution, and freight costs; (iv) our ability to generate cash from operations; (v) material adverse changes in customers’ access to liquidity and capital; (vi) currency exchange; (vii) market acceptance of our products; (viii) significant changes in the competitive environment; (ix) changes in law, regulations and tax rates; and (x) other general economic, business and financing conditions and factors described in more detail in “Item 1A – Risk Factors” in Part I of our Annual Report on Form 10-K filed with the SEC on March 15, 2012 and statements made in subsequent filings. These filings are available on our website at www.proceranetworks.com. We do not undertake to update our forward-looking statements.
2
Leading Provider Of Intelligent Policy Enforcement (IPE)
Founded in 2002; shifted focus to IPE in 2008 130 employees; 25% of headcount in R&D
Software Based Solution Focused On Traffic Intelligence And Management
Enabling Explosive Growth In Mobile DataAnd Video
Significant Customer GrowthOver 20 Tier-1 service provider wins in 4 years
IPE TAM Growing At 43% 5-year CAGR To $2.1 B
Procera at a Glance
2007 2008 2009 2010 2011$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$6.7
$11.5
$20.1 $20.3
$44.4
CAGR: 6
0%
Rapid Revenue Growth($ in millions)
3
Investment Highlights
Leading Provider In The Large, High-growth IPE Market
Leveraging Significant Growth In Mobile And IP Data Consumption
Software Based Solution Offers Leading Technology Performance
Global Tier-1 Customer Footprint Across Mobile And Broadband
Revenue Growth With Profitable Business Model
Outstanding R&D Capabilities; Proven Leadership Team
ü
üü
üüü
4
Accelerating Business MomentumTier-1 Customer Wins: 2010 – 2012 New Product Releases
Mobile Cable Fixed / Mobile
Strong Partnership Momentum Financial Momentum
Advanced Traffic Steering and Carrier Grade NAT
PacketLogic PL8920 – 50Gbps at appliance price
PL20000 – industry's highest performance IPE at 320Gbps and first to 100GE
Report Studio – customizable analytics and reports based on deepest collection engine available
Smart Campus 2.0 – turnkey network management solution for Higher Education adds User Awareness
Integrated policy management solution
Integrated policy management solution for LTE
Integrated policy and charging solution
Performance management and optimization
Technology license and re-sale agreement
Integrated policy management solution
Malaysian Mobile Operator
E. EuropeanCable Company
U.S. Cable Company
Canadian Cable Company
Scandinavian Carrier
E. European Carrier
Australian Carrier
2 New APAC Mobile Operators
APAC Fixed Carrier
Asian Fixed/Mobile
5
52% revenue growth YoY for Q2:12; Bookings up 47%
Gross margin increased to 63% in Q2:12 from 62% in Q2:11
Non-GAAP net income $1.4M or $0.8 per share in Q2:12
Added 16 new service providers in Q2:12 (3 new Tier-1s) plus 27 new higher education product orders
Increased guidance to 40% revenue growth YoY in 2012
Consumers Have Unique “App Clouds”Service Personalization Delivers Individual Value
My Business Plan My Networking Plan My Apps Plan My Teen Plan
6
Why Are Operators Buying IPE?
Network Intelligence Subscriber, Service Tier, Location, Device and Traffic Awareness Intuitively Combined to Assess Trends and User Behavior
Improve Quality and Postpone CAPEX Investments by Optimizing the Use of Network Resources to Function with Today’s Plethora of Applications
Intelligence Enables Early Detection and Mitigation of Anomalies that Indicate Security Issues
Offer and Manage Subscriber Offerings and Service Packages Based on User Behavior Analysis, Customer Requests and Demographic Preferences
Network Optimization
Security / Protection
Personalized Services
Solution Benefit
7
Networking technologies for mobile and IP service providers across the globe Software-based solution focused on traffic intelligence and management Our customers’ businesses are being driven by the continued explosion of
mobile data, video and connected devices
Market
Intelligent Policy Enforcement sits at the core of a new ecosystem, providing the traffic intelligence that enables new applications
IPE is a requirement to effectively implement new services With IPE as a foundation, new, complementary products are possible
Technology
Advanced Traffic Steering – An application delivery networking technology enabling carriers to effectively route application services traffic in real time
Carrier Grade NAT – Carrier-grade network address translation that enables IPE-based subscriber aware analytics and business decisions
New Products
Procera’s Opportunities are Expanding
8
Feb 2010 July 2010 Jan 2011 Feb 2011July 2008 Jan 2012
PL8720: 1st 10GE DPI Appliance – 1 year ahead of competition
IPv6: 1st IPE system to support IPv6 – 1 year ahead of competition
PSM 5
PSM 5: 1st 3GPP IPE system to support 50,000 TPS – no equivalent today
PL10000 & PL8820: 1st 120 Gbps and 30 Gbps shipping IPE solutions
PL10000: 1st 80 Gbps DPI solution – 3 years ahead of competition
Nov 2011
PL20000: 1st 100 GE capable IPE solution, 320 Gbps capacity
Report Studio: 1st fully customizable analytics leveraging rich IPE data
June 2012
PL ATS: 1st IPE Integrated Advanced Traffic Steering Application
PL CGN: 1st IPE-based large scale NAT solution for operators
Procera: A History of Innovation for IPEAccelerating the Pace of IPE Technology
9
$0
$500
$1,000
$1,500
$2,000
$2,500
$344$518
$781
$1,138
$1,566
$2,055
($ in millions)
2010 2011E 2012E 2013E 2014E
CAGR: 43%
Source: Infonetics 2011.
Convergence of IPE + ADN Markets Significantly Expands TAM
Growing Need for Applicationand Session Awareness
Innovative Service Creation by Network Operators
2015E
Trend Towards Personalized Services
Application Delivery Networking (Layer 4-7)DPI Product Market
Catalysts for Continued Growth
$2,000
$2,500
$3,000
$3,500
$4,000
$2,372
$2,661
$2,979
$3,282
$3,552
$3,797
2010 2011E 2012E 2013E 2014ESource: IDC 2012.
2015E
CAGR: 9%
($ in millions)
10
11
Intelligent Policy Enforcement is a Strategic Technology
• DPI Traffic Engineering P2P Traffic Management Congestion Management
• IPE Business Analytics Superior
Performance Network
Optimization
2005 – Reduce Expenses 2010 – Gain Business Intelligence Today – Deliver Innovative Services
Service Personalization Intelligent Charging High Resilience: 99.999%
IPE 2.0
Only IPE 2.0 Delivers Intelligence and Awareness
Subscriber
Content ProviderService PlanLocation
DeviceApplication
12
PCRF
“Intelligent” Architecture is Needed, But Where?
GGSNPGW
InternetSGSNSGWRNC
OCS AAA/HLR/HSS
CMTS
FTTH Aggregation
DSL
Router
BRAS
FTTH
CABLE
2G/3G/LTE
Access Packet Core
WAN Edge
HIGH-ENDENTERPRISE
DSLAM
CLOUD SERVICES
Core Layer
Peering
Combine IPE and ADN:• Full “Awareness”• Policy Enforcement• Intelligent Charging• Address Management• Traffic Steering• Detailed Analytics
Integrated Edge:• Multivendor access
solutions fail• Requires extremely
sophisticated features• Drastically raises cost of
access solutions
“Smart” Core::• Designed for
Layer 3• “Box Only”
approach• Scalability
limits
Access Layer Service Layer
13
ATS + NAT Leverages Feature-Rich IPE 2.0Advanced Traffic Steering Network Address Translation
Enables Per-subscriber, application, service plan, location, device, and content provider VAS
Enables insertion of services without requiring in-line deployments
Most efficient solution available today
Grow subscriber base by capitalizing on device explosion
Maintain detailed analytics to drive service decisions
Offer Intelligent charging services
Conserve address space by using private addresses in-network
Conserve resources on existing platforms to preserve performance
Minimize traffic analysis, eliminating latency and complexity
Create new service offerings leveraging IPE technlogy
Insert targeted services into existing traffic flow with minimal latency
Revenue share W / CDNs & content service providers
Dramatically reduce VAS hardware requirements through surgical steering
Deploy VAS services anywhere CDN integration leverages content
visibility to ensure high QoE
Operators experiencing shortage of IPv4 addresses
Subscribers and device count still growing fast
Enables oversubscription of subscribers -> IP addresses
Rev
enue
Gen
erat
ion
Net
wor
k O
ptim
izat
ion
Valu
e Pr
opos
ition
14
New Intelligent Architecture Paradigm
Access Termination
IPE-Services,Analytics
Load Balancers(LB for FW,
Some Traffic Steering)
Firewall/Security Load Balancers(LB for FW,
Some Traffic Steering)
CGNDevices and Applications
Access Termination
IPE, Analytics,Traffic Steering,
Carrier Grade NAT,Network Protection
RoutingDevices and Applications
Legacy Approaches Utilize Point SolutionsToday
Future
15
IPE & ADN Competitive Landscape
Procera is the First to Market with Integrated IPE + ADN + NAT Functionality
IPE 2.0 Products: Advanced Traffic Steering Carrier-Grade NAT Cloud Services Full IPE functionalityStand-Alone
ADNStand-Alone
IPE
16
IPE Features
Perf
orm
ance
& S
cala
bilit
y
IPE Competitive Landscape
17
Core
Edge
Access Bandwidth
PL1420PL1200 PLM1200
PL7k1RU appliance,
<4 Gbps, access + enterprise
PL8k2RU appliance,
<30 Gbps, SP/MNO edge + core
PL10k/PL20k13/14RU ATCA chassis, <320
Gbps, SP/MNO core
Real-Time Enforcement
Intelligence Center
Subscriber Manager
Procera PacketLogic Solutions
18
Our Technology Differentiation
Highest Industry Performance
Scalable, Software-Based Solution
Seamless Partner Integration
Shortest Product Release Cycle –
Persistent Innovation
Robust Reporting and Analytics
Cutting Edge IPE Technology Performance
Largest Signature Database – Highly Accurate Traffic ID
19
Illustrative Examples of Customer Oppty.
LargeTotal Opportunity:
$25 – $50 mm
Classification Size 3 Year Revenue Cycle
MediumTotal Opportunity:
$10 – $25 mm
SmallTotal Opportunity:
$3 – $5 mm
Year 1 Year 2 Year 3$0$5
$10$15$20$25$30$35$40
$15$10 $12
$15
$25
$37
Year 1 Year 2 Year 3$0
$5
$10
$15
$20
$8
$4$6
$8
$12
$18
Year 1 Year 2 Year 3$0.0$0.5$1.0$1.5$2.0$2.5$3.0$3.5$4.0
$1.5$1.0 $1.0
$1.5
$2.5
$3.5
Bookings Cumulative Bookings
> 40 mm Subscribers
5 – 40 mm Subscribers
< 5 mm Subscribers
Global Opportunities ~25 Large service providers globally Country incumbents; developed markets
and large emerging markets
~150 Medium service providers globally Regional operators; competitors to
incumbents
~325 Small service providers globally Greenfield operators, alternative
providers and emerging markets
20
Our Growth Strategy
Increase our Tier-1 SP customer count
Harvest our current customer opportunity
Pursue new partnerships and tactical acquisitions
Extend our technology advantage and leadership
Drive margin improvement
2121
Solid Q2:12 Results Revenue of $14.7 million, up 52% from Q2:11
Bookings of $14.2 million, up 47% from Q2:11
Added 16 new service provider customers
Won 3 new Tier-1 customers in Asia Pacific and Western Europe regions
Received 23 follow on orders from existing service provider customers,
including 7 from existing Tier-1 customers
Support revenue of $2.8 million, up 101% from Q2:11
Non-GAAP net income of $1.4 million, compared to non-GAAP net income of
$595,000 in Q2:11
Generated $2.4 million of cash flow from operations
Cash & investments was $131.6 million at June 30, 2012
22
Gross Margin 57% 59% 63% 65% – 70%
Research & Development 16% 10% 11% 12%
Sales & Marketing 32% 26% 28% 30%
General & Administrative 15% 11% 13% 6%
Total Operating Expenses 64% 47% 53% 48%
Operating Income (7%) 13% 11% 17% – 22%
Attractive Long-Term Financial Model(1)
Long-Term20112010
(1) Excludes stock-based compensation and business development expenses.
Q2 2012
23
Thank You