Transcript IPE - Procera Networks

Building Carrier Scale Personalized Networks
(NASDAQ: PKT)
Safe Harbor Statement
Certain 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 forwardlooking statements.
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Procera at a Glance
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Leading Provider Of Intelligent Policy
Enforcement (IPE)
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Founded in 2002; shifted focus to IPE in 2008
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130 employees; 25% of headcount in R&D
Software Based Solution Focused On Traffic
Intelligence And Management
Enabling Explosive Growth In Mobile Data
And Video
Significant Customer Growth
 Over 20 Tier-1 service provider wins in 4 years
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IPE TAM Growing At 43% 5-year CAGR To $2.1 B
Rapid Revenue Growth
($ in millions)
$50.0
$44.4
$40.0
$30.0
$20.0
$20.1
$20.3
2009
2010
$11.5
$10.0
$6.7
$0.0
2007
2008
2011
Investment Highlights
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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
Accelerating Business Momentum
Tier-1 Customer Wins: 2010 – 2012
Mobile
Cable
Malaysian
Mobile Operator
E. European
Cable Company
Scandinavian Carrier
U.S.
Cable Company
Australian Carrier
Canadian
Cable Company
Fixed / Mobile
E. European Carrier
APAC Fixed Carrier
Asian Fixed/Mobile
2 New APAC
Mobile Operators
New Product Releases
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Advanced Traffic Steering and Carrier Grade NAT
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PacketLogic PL8920 – 50Gbps at appliance price
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PL20000 – industry's highest performance IPE at
320Gbps and first to 100GE
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Report Studio – customizable analytics and reports
based on deepest collection engine available
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Smart Campus 2.0 – turnkey network management
solution for Higher Education adds User Awareness
Strong Partnership Momentum
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Financial Momentum
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Integrated policy management solution
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52% revenue growth YoY for Q2:12; Bookings up 47%
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Integrated policy management solution for LTE
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Gross margin increased to 63% in Q2:12 from 62% in Q2:11
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Integrated policy and charging solution
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Non-GAAP net income $1.4M or $0.8 per share in Q2:12
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Performance management and optimization
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Technology license and re-sale agreement
Added 16 new service providers in Q2:12 (3 new Tier-1s)
plus 27 new higher education product orders
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Integrated policy management solution
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Increased guidance to 40% revenue growth YoY in 2012
Consumers Have Unique “App Clouds”
Service Personalization Delivers Individual Value
My Business Plan
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My Networking Plan
My Apps Plan
My Teen Plan
Why Are Operators Buying IPE?
Solution
Network Intelligence
Subscriber, Service Tier, Location, Device and Traffic Awareness
Intuitively Combined to Assess Trends and User Behavior
Network Optimization
Improve Quality and Postpone CAPEX Investments by Optimizing
the Use of Network Resources to Function with Today’s Plethora
of Applications
Security / Protection
Intelligence Enables Early Detection and Mitigation of Anomalies that
Indicate Security Issues
Personalized Services
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Benefit
Offer and Manage Subscriber Offerings and Service Packages
Based on User Behavior Analysis, Customer Requests and
Demographic Preferences
Procera’s Opportunities are Expanding
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
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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
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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
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New Products
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Procera: A History of Innovation for IPE
Accelerating the Pace of IPE Technology
PSM 5
PL10000: 1st 80 Gbps PSM 5: 1st 3GPP IPE
DPI solution – 3 years system to support 50,000
ahead of competition TPS – no equivalent today
July 2008
Feb 2010
PL8720: 1st 10GE DPI
Appliance – 1 year
ahead of competition
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July 2010
PL10000 & PL8820: 1st
120 Gbps and 30 Gbps
shipping IPE solutions
Jan 2011
Feb 2011
IPv6: 1st IPE system to
support IPv6 – 1 year
ahead of competition
PL20000: 1st 100 GE
capable IPE solution,
320 Gbps capacity
Nov 2011
Report Studio: 1st fully
customizable analytics
leveraging rich IPE data
PL CGN: 1st IPE-based
large scale NAT solution
for operators
Jan 2012
June 2012
PL ATS: 1st IPE Integrated
Advanced Traffic
Steering Application
Convergence of IPE + ADN Markets Significantly Expands TAM
DPI Product Market
Application Delivery Networking (Layer 4-7)
($ in millions)
$2,500
$2,055
$2,000
$1,138
$1,000
$500
$3,552
$3,282
$2,979
$3,000
$2,661
$781
$344
$518
$2,500
$0
2010
Source: Infonetics 2011.
2011E
2012E
Trend Towards
Personalized Services
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$3,797
$3,500
$1,566
$1,500
($ in millions)
$4,000
2013E
2014E
$2,000
2015E
$2,372
2010
Source: IDC 2012.
2011E
2012E
2013E
2014E
2015E
Catalysts for Continued Growth
Growing Need for Application
Innovative Service Creation
and Session Awareness
by Network Operators
Intelligent Policy Enforcement is a Strategic Technology
2005 – Reduce Expenses
2010 – Gain Business Intelligence
• DPI
Traffic Engineering
 P2P Traffic Management
 Congestion Management
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Today – Deliver Innovative Services
• IPE
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Business Analytics
Superior
Performance
Network
Optimization
IPE 2.0
Service Personalization
 Intelligent Charging
 High Resilience: 99.999%
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Only IPE 2.0 Delivers Intelligence and Awareness
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Subscriber
Application
Device
Location
Service Plan
Content Provider
“Intelligent” Architecture is Needed, But Where?
Access
Packet Core
PCRF
OCS
Peering
AAA/HLR/HSS
DSL
DSLAM
FTTH
BRAS
CLOUD
SERVICES
FTTH
Aggregation
Integrated Edge:
• Multivendor access
CMTS
Router
solutions
fail
• Requires extremely
HIGH-END
ENTERPRISE sophisticated features
Edge
• WAN
Drastically
raisesSGSN
cost of GGSN
RNC
SGW
PGW
access solutions
CABLE
Combine IPE and ADN:
• Full “Awareness”
• Policy Enforcement
• Intelligent Charging
• Address Management
• Traffic Steering
• Detailed Analytics
“Smart” Core::
• Designed for
Layer 3
• “Box Only”
approach
• Scalability
Internet
limits
2G/3G/LTE
Access Layer
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Service Layer
Core Layer
ATS + NAT Leverages Feature-Rich IPE 2.0
Revenue Generation Network Optimization
Value Proposition
Advanced Traffic Steering
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Network Address Translation
Operators experiencing shortage of
IPv4 addresses
 Subscribers and device count still
growing fast
 Enables oversubscription of
subscribers -> IP addresses
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
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Dramatically reduce VAS hardware
requirements through surgical
steering
 Deploy VAS services anywhere
 CDN integration leverages content
visibility to ensure high QoE
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Create new service offerings
leveraging IPE technlogy
 Insert targeted services into existing
traffic flow with minimal latency
 Revenue share W / CDNs & content
service providers
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Conserve address space by using
private addresses in-network
 Conserve resources on existing
platforms to preserve performance
 Minimize traffic analysis, eliminating
latency and complexity
Grow subscriber base by capitalizing
on device explosion
 Maintain detailed analytics to drive
service decisions
 Offer Intelligent charging services
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New Intelligent Architecture Paradigm
Today
Devices and
Applications
Legacy Approaches Utilize Point Solutions
Access
Termination
IPE-Services,
Analytics
Load Balancers Firewall/Security Load Balancers
(LB for FW,
(LB for FW,
Some Traffic Steering)
Some Traffic Steering)
Future
Devices and
Applications
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Access
Termination
IPE, Analytics,
Traffic Steering,
Carrier Grade NAT,
Network Protection
Routing
CGN
IPE & ADN Competitive Landscape
Stand-Alone
ADN
IPE 2.0 Products:
 Advanced Traffic Steering
 Carrier-Grade NAT
 Cloud Services
 Full IPE functionality
Stand-Alone
IPE
Procera is the First to Market with Integrated IPE + ADN + NAT Functionality
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Performance & Scalability
IPE Competitive Landscape
IPE Features
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Procera PacketLogic Solutions
Core
PL8k
2RU appliance,
<30 Gbps, SP/MNO
edge + core
Real-Time
Enforcement
PL7k
Edge
PL10k/PL20k
1RU appliance,
<4 Gbps, access +
enterprise
13/14RU ATCA
chassis, <320
Gbps, SP/MNO
core
Bandwidth
Access
Intelligence
Center
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PL1200
PL1420
Subscriber
Manager
PLM1200
Our Technology Differentiation
Highest Industry
Performance
Scalable, SoftwareBased Solution
Largest Signature
Database – Highly
Accurate Traffic ID
Robust Reporting
and Analytics
Shortest Product
Release Cycle –
Persistent Innovation
Seamless Partner
Integration
Cutting Edge IPE Technology Performance
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Illustrative Examples of Customer Oppty.
Classification
Size
3 Year Revenue Cycle
$37
$40
Large
Total Opportunity:
$25 – $50 mm
$30
> 40 mm Subscribers
$20
$25
$15 $15
Global Opportunities
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~25 Large service providers globally
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Country incumbents; developed markets
and large emerging markets
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~150 Medium service providers globally
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Regional operators; competitors to
incumbents
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~325 Small service providers globally
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Greenfield operators, alternative
providers and emerging markets
$12
$10
$10
$0
Year 1
Year 2
Year 3
$18
$20
Medium
Total Opportunity:
$10 – $25 mm
$15
5 – 40 mm Subscribers
$10
$12
$8 $8
$6
$4
$5
$0
Year 1
Year 2
$4.0
Small
Total Opportunity:
$3 – $5 mm
$3.5
$3.0
< 5 mm Subscribers
$2.0
Year 3
$2.5
$1.5 $1.5
$1.0
$1.0
$1.0
$0.0
Year 1
Bookings
20
Year 2
Year 3
Cumulative Bookings
Our Growth Strategy
Extend our technology advantage and leadership
Increase our Tier-1 SP customer count
Harvest our current customer opportunity
Pursue new partnerships and tactical
acquisitions
Drive margin improvement
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Solid Q2:12 Results
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Revenue of $14.7 million, up 52% from Q2:11
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Bookings of $14.2 million, up 47% from Q2:11
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Added 16 new service provider customers
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Won 3 new Tier-1 customers in Asia Pacific and Western Europe regions
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Received 23 follow on orders from existing service provider customers,
including 7 from existing Tier-1 customers
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Support revenue of $2.8 million, up 101% from Q2:11
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Non-GAAP net income of $1.4 million, compared to non-GAAP net income of
$595,000 in Q2:11
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Generated $2.4 million of cash flow from operations
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Cash & investments was $131.6 million at June 30, 2012
Attractive Long-Term Financial Model(1)
2010
2011
Q2 2012
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%
Gross Margin
(1) Excludes stock-based compensation and business development expenses.
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Long-Term
Thank You