revolution by innovation - radcom
TRANSCRIPT
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Revolution by Innovation
By David Ripstein
President & Chief Executive Officer
September 2015
2 September 15
Safe Harbor Provision
Certain statements made herein that use the words “estimate,” “project,” “intend,” “expect,” “believe” and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties which could cause the actual results, performance or achievements of the Company to be materially different from those which may be expressed or implied by such statements, including, among others, changes in general economic and business conditions and specifically, decline in demand for the Company's products, inability to timely develop and introduce new technologies, products and applications and loss of market share and pressure on prices resulting from competition. For additional information regarding these and other risks and uncertainties associated with the Company's business, reference is made to the Company's reports filed from time to time with the Securities and Exchange Commission. The Company does not undertake to update forward-looking statements
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Agenda Agenda
September 15
• Company Overview
• Industry Overview & Competition
• Products & Solutions Overview
• Customer Base
• Growth Opportunities
• Business Model & Financials
• Summary
4 September 15
Our Mission
Enabling service providers to provide a high-quality service to their customers, maximize revenue and
prevent churn
By proactively monitoring customer experience and providing actionable analytics
5 September 15
Problem: Increased Strain on Network Infrastructure
Who Suffers? The Subscriber!
Bad Service Quality = Customer Churn = Lost Revenue • AT&T Q2/15 Results
– 1.31% Churn Rate = 1,623,000 Subscribers – With an ARPU of $41, that’s ~$70M of lost revenue
Friction between legacy networks and Smartphone innovation
Smartphone Innovation
& Mobile Data Explosion
Network Evolution
2G43G4LTE
Irate Subscriber
6 September 15
Solution: RADCOM is a…
• Stethoscope for Service Providers
Monitoring the heart of the network to assure a quality service for subscribers
7 September 15
How does the “stethoscope” work?
Big Data Database
Analytics
Communications Network
Software-based Probes
QoE
SMS
+9723333333
40%
Phone No Device
Voice
4G
Network
Data
Data Usage
5GB
8 September 15
RADCOM’s Customer Care Dashboard
Device
No
Speed Test
Tech Download
Speed (kbps)
Upload Speed (kbps)
Ping (msec)
LTE 147 689
Model
Samsung Galaxy 4
+972545555555
40%
Data Used
5GB
Data Distribution
VoIP calls
Web browsing
Applications Used
Application Success Rate
(%) UL + DL Data
(KB)
Facebook 0% 0
Subscriber Usage
Voice Quality
Calls Made
Call Minutes
Success Rate
Quality of
Experience
6 15 45% 38%
Shows a subscribers’ quality of experience
Shows a problem with voice quality
Shows a problem with 4G download
speeds
Shows a problem with the Facebook
application
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Industry Overview & Competition
10 September 15
Move to Network Functions Virtualization (NFV)
Smartphones replace appliances with apps
NFV replaces Network Functions (routers, firewalls etc) with applications downloaded to standard servers
Camera
Maps Calculator
Books Music
11 September 15
Probe-Based Service Assurance Market Landscape
$1.23B
Others 55%
Netscout 45%
Source: Analysys Mason, 2014
Astelia Anritsu Commprove Empirix Polystar Viavi Solutions Inc.
Netscout’s acquisition of Tektronix closed last
month and is an opportunity for RADCOM
12 September 15
Probe-Based Service Assurance Market Drivers
The need to improve customer’s quality of experience
Real-time network monitoring and analytics
Reduce customer churn
Improve optimization processes
Technology migration
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Products & Solutions Overview
14 September 15
History of Innovation
1991 2007
Protocol Analyzer Start Up
1991-2000
Protocol Analyzer 2000-2004
Monitoring 2004-2007
Service Assurance 2007-2013
Virtualized (NFV) Solution
2016 onwards
Propriety Hardware
2014
Software Based
Software-based Solution
Feb 2014-2016
2018
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Growth Opportunities
16 September 15
1) Mobile Data Explosion
Source: Ericsson Mobility Report, November 2014
17 September 15
2) LTE adoption by operators
0.5
0.8
1.2
1.6
2.3
0
0.5
1
1.5
2
2.5
2015 2016 2017 2018 2019
Bill
ion
s o
f Su
bsc
rib
ers
Global LTE Growth Forecast
Source: Ovum December 2014 Estimates – 4gamericas.org
Why is LTE an opportunity for RADCOM?
Operators understand the need for LTE
and have allocated clear budgets for this transition
B
B
B
B
B
18 September 15
3) Network Functions Virtualization (NFV)
March 06, 2015 - Research and Markets
“NFV is poised to transform network and service architecture”
19 September 15
4) Strategic Partnerships
Our software based model has opened up partnership opportunities with much larger vendors helping us penetrate new
markets (such as the USA)
20 September 15
5) Repeat Business to Install Base (60 customers)
Initial PO
Upgrade
Maintenance SW Applications
Upgrade
Maintenance SW Applications
(Traffic Growth) (Technology)
Repeat Business (Recurring revenue)
APAC customer success story (over last 4 years)
Repeat Business = $12M Initial PO $1M
21 September 15
Increasing our TAM
Asia Pacific Market Penetration: Direct
Latin America Market Penetration: Direct
North America Market Penetration: Partnerships Product: NFV-based solution
Europe Market Penetration: Distributors Product: NFV-based solution
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Financials
23 September 15
Share Value
August 2014
August 2015
Exfo
Viav
Netscout/Tek
RADCOM +112%
-35%
-10%
-54%
Astellia -17%
MaveriQ Launch
Feb 2014
Product to Market Process
Share value $5.94
(07/02/14)
24 September 15
Statement of Operations (NON - GAAP)
US$ ‘000s Q2-15 Q2-14 H1-15 H1-14
Sales 4,837 4,970 11,191 10,441
Cost of sales 1,203 1,249 2,332 3,017
Gross Profit 3,634 3,721 8,859 7,424
Gross margin 75% 75% 79.2% 71.1%
R&D, gross 1,274 1,462 2,747 2,984
Less participation 148 289 148 587
R&D, net 1,126 1,173 2,599 2,397
Sales & marketing 1,413 1,720 3,363 3,617
General & administration 468 519 990 1,059
Operating expenses 3,007 3,412 6,952 7,073
Operating profit 627 309 1,907 351
Financial income (expense) 78 51 (374) 257
Net profit 705 360 1,533 608
Net taxes (100) 0 (107) -
Net profit 605 360 1,426 608
25 September 15
Q2-15 Financial Highlights
Cash Balance Increased by
$5.9M to $9.9M
Net income for H1-15
totaled $640,000
Long-Term Target for
Gross Margin Raised to 80%
26 September 15
Major Shareholders & Capital Structure1
(As of 30/06/2015)
Zohar Zisapel (Co-Founder,
Chairman), 29% Major
Shareholder, 18%
Yehuda Zisapel (Co-Founder),
5%
Public and Other, 48%
Holder Common Stock Equivalent Held
(Thousands) % of CSO
Zohar Zisapel (Co-Founder, Chairman)1 2,493 29%
Major Shareholder 1,518 18%
Yehuda Zisapel (Co-Founder) 462 5%
Public and Other 4,115 48%
Total 8,588 100%
Derivative
Number Outstanding (Thousands)
Weighted Average Exercise Price
Options 880 $6.53
Warrants 311 $3.49
1 excluding 185,537 warrants and 157,500 options exercisable
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Summary Summary
September 15
• Looking forward: Continue growth in financial parameters
Expand total addressable market via NFV solution
Increase market share within traditional markets via LTE solution
Leverage partnerships to open new scale of opportunity
Reach gross margin target of 80%
“Our platform is strong, our plan is working, our markets are stable, and are optimistic as we look
to the future”
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Thank You