investor day - s22.q4cdn.com€¦ · investor day may 16, 2014 . 2 2014 ir day | netscout...

2014 IR Day | NetScout Confidential | © 2014 NetScout Systems, Inc. All rights reserved. 1

Investor Day

May 16, 2014


Safe Harbor Statement

Certain matters being discussed by NetScout’s management today include

forward-looking statements which are made pursuant to the Safe Harbor provisions

of section 21-E of the Securities Exchange Act of 1934. Stockholders are cautioned

that statements which are not strictly historical statements, including statements

concerning future expected financial performance, management objectives and

plans for future operations, our relationships with strategic partners, the release

date of new products or enhancements to existing products, growth and trends in

the market for network and application performance management and market

acceptance of our products, constitute forward-looking statements.

The forward-looking statements include, but are not limited to, any

statements containing the words “expect,” “anticipate,” “estimates,” “believes,”

“may,” “will,” “should” and similar expressions and the negatives thereof. These

forward-looking statements involve a number of risks and uncertainties that could

cause actual results to differ materially from the forward-looking statements. Those

risks and uncertainties are detailed in the company's filings from time to time with

the Securities and Exchange Commission. The information in the forward-looking

statements is provided as of the date of such oral statements and the company

disclaims any obligation to update such statements.


AGENDA

8:30 Opening Remarks

Jean Bua, CFO

8:45 NetScout 3.0: Foundation, Technology, Strategy

Anil Singhal, CEO

10:15 Break

10:30 4G/LTE Evolution

Bruce Kelley, CTO

11:15 Financial Overview

Jean Bua, CFO

Webcast Concludes


11:50 Customer Discussion Moderator: Michael Szabados, COO

12:30 Lunch (Kennedy Ballroom)

AGENDA


NetScout Today - Well positioned to leverage major IT trends and growth -

Market Leader Largest market share

Global footprint - in 30 countries

Technology Leader 300 man-years in core (ASI) technology

5 recent acquisitions, 70+ patents

Financial Success Story ~ $400M in revenues, 25% operating margin

~ $200M+ cash, Market Cap ~ $ 1.5B

Consistent Vision & Execution Category creator and leader for two decades

…still a nimble, entrepreneurial culture


NetScout 3.0

Foundation, Technology and

Platform Growth Strategy

Anil Singhal

President, CEO & Co-Founder


279 262

290 309

352

397

450-465

0.86 0.86

1.04 1.10

1.32

1.53

1.74-1.81

$0

$100

$200

$300

$400

$500

$600

$700

FY09 Actual FY10 Actual FY11 Actual FY12 Actual FY13 Actual FY14 Actual FY15Guidance

Total Revenue EPS

Success so far and FY 2015 Outlook Revenue and EPS

(in $millions except EPS, non-GAAP)

FY13 – 15 Revenue CAGR 13%-15%

EPS CAGR 15%-17%

FY09 – 12 Revenue CAGR 3%

EPS CAGR 9%


Launched nGeniusONE Powered by ASI ~ 300 man-years investment


The “Secret Sauce” behind nGeniusONE Adaptive Session Intelligence (ASI) Technology

Real Time and Actionable

Operational Intelligence

Network

Monitoring

Service

Assurance

Cyber

Intelligence

BI/CEM and

Big Data Analytics

Packet

Flow


nGeniusONE is really “ONE” of a Kind Cluttered Management versus Natural Integration

nGeniusONE powered by ASI


nGeniusONE Business Model - Compelling and Scalable Value proposition -

• ONE platform for performance analytics and operational

intelligence

• ONE product for NPM+APM convergence

NPM+APM

• ONE interface for all

Apps/Services

• ONE fully integrated software

platform

• ONE path to TCO


Compelling Migration Value Proposition

nGeniusONE with ASI nGenius Original Solutions


Technology Acquisitions ~ $ 100M Investment

Psytechnics

Video and

Voice Analysis

& Monitoring

FoxReplay

Session

Reconstruction

and Analysis

Simena

Intelligent

Packet Flow

Switches

Accanto

Legacy Voice

Assurance

OnPath

Chassis-based

Packet Flow

Switches

April 2011 July 2012 October 2011 November 2011 November 2012


New Additions nGenius Voice and Video Manager

• Patented voice quality algorithms

• Distributed architecture and highly scalable

• Transport quality metrics

• Payload quality metrics

• Advanced voice session analytics

• Co-resident on Infinistream

• Integrated with nGeniusONE


New Additions nGenius Packet Flow Switches

• Highly scalable, modular architecture

• Common interface blades across series

• State of the art, centralized management

• Supports layer 2 ASI and reporting

• All-inclusive feature functionality


InfiniStream Voice

(TDM)

InfiniStream

(IP)

New Additions nGenius Subscriber Intelligence (Voice)

Service Monitors

(Data KPIs)

Service Monitors

(Voice KPIs)

Dashboard

(Service Templates)

Metadata

Data Voice

nGeniusONE

ASI portal


New Additions - nGenius Cyber Investigator -

Capture nGenius InfiniStream

appliance captures

session traffic

Reconstruction Dedicated Server Platform for

fast reconstruction and data

warehousing

Replay Visual replay of session as

seen by the user

1

2

3

Packet retrieval: • Admin configures time, duration and

other criteria

• Triggers packet on pre-defined

criteria for targeted network activity

Dedicated Platform: • Reordering based on timestamps

• Multiple stream without dedups

• Keyword indexing

Reconstructed Applications: • Web 2.0 content

• E-Mail

• Social media

• VoIP conversations

• Most common IP protocols: HTTP,

IM, RTP and many more

Advanced Options: • Security: Role-based

administration, multiple users etc.

• Filtering and search

• Timeline-based analysis

nGenius Cyber Investigator Appliance

nGenius Cyber Investigator

Console


NPM Innovations and Industry Firsts

Protocol Analysis Portable Analyzer

Remote Monitoring probe

NetFlow Monitoring

Switched LAN Monitoring

Continuous Recording

Reporting on Packet Data

Packet Decodes in Probe 10M

100M

1G

10G

100G


NPM and Packet Flow Players The Last Three Decades

Armon

Axon

Protools

NAT

IBM

HP

Agilent

Mercury

BMC

Compuware

CA Synoptics Kalpana

Tekelec

Cabletron

DEC

Niksun

Solera

Concord

Micromuse

Endace Convergent

NetTest

Exelan Novell

Paradyne

Visual

TEC

Shomiti

NetMetrix

Narus

ClearSight

Agilent

Digital Link

ODS

NAI


nGeniusONE in Action With ASI Inside


Our Expanded Mission

Enable IT and Service Providers to realize maximum

benefit with minimal risk from technology advances,

like IP convergence, NFV, SDN, Virtualization, Cloud,

Mobility, BYOD, Web, and the evolving Internet

by

Proactively managing the inherent complexity in a cost-

effective manner


Traditional APM Approaches

Are No Longer Adequate

Network Infrastructure and Service Accessibility

Server Farm Infrastructure and Service Delivery

• Byte code instrumentation

• Synthetic transactions

• Server agents

• Application agents

• Device and server logs

• Packet analysis

• Interconnecting network

• Service enablers

• Server dependencies

• Application dependencies

• Application resource contention

• Distributed service delivery

Traditional APM Approaches

Interrelationships and Dependencies

Outside the Server

Problems Not Addressed


Service Networks

Physical Network — IT Infrastructure

DNS

Exchange

Oracle

Call Manager ASI

Visibility


Server

Application

NPM+APM with nGeniusONE

Incident

nGeniusONE

Service Dashboard

Session

Analysis Packet

Analysis

Component Performance

Management IP Traffic Deep Dive

Network

Problem

solved Service Monitors Dependency Mapping

UMC/OSS


nGeniusONE Workflow - Simple, Elegant, Reusable, Expandable -


Application

Servers

InfiniStream

T1

T2

T3

Web

Servers

Database

Servers

Client

Communities

A Typical 3-Tier Application


Typical Exchange 2010 Architecture But App Architecture is rarely that simple


nGeniusONE Dashboard

Drilldown to CAS layer to investigate

further….


CAS 1 in distress while CAS 2 is fine

CAS 1 huge Timeouts / Retransmissions

while CAS 2 is fine


Error Analysis on App Servers Errors appearing for POP3 and HTTP traffic but there should only be

encrypted traffic - F5 Load Balancer set to OFFLOAD SSL

1) Non encrypted

Traffic seen on the

CAS Servers…

2) High number of

application errors

3) Errors on the POP3 traffic…..


Long Term Vision & Strategy - Technology and Product Directions -


Unified Communication (UC) - NextGen version of nVVM -

• UC coming to the mainstream

- Adaptive video

- Telepresence

- HD voice

- Videoconferencing

• Data plane quality monitor

• nVVM will be upgraded to nUCM

• Distributed architecture & GUI like nG1


nGenius Trust Monitor A New Paradigm for handling NextGen threats

• Move away from signature-based detection as the

primary defense

Advanced attacks will not have any signature

• Don’t rely on needing to know the new threat or

catch all vulnerabilities

Threats keep evolving and vulnerabilities will

continue to exist

This focus keeps your defense posture in a

reactive mode

• Focus on understanding what happens on your

network, develop Trust Profile (TP)

Take the advantage away from the hacker

Improved understanding enables better

anomaly detection

ASI

ASI collects and analyzes

flows across the service

path in real-time enhanced

with a

TRUST PROFILE

nGeniusONE

Trust Monitor

Domain Controllers (Enablers)

• DNS, Radius, Diameter, Active Directory, Kerberos

HTTPS (443) Load

Balancer/ADC

Web Servers

SQL Servers

SQL (1443)

Internet

Traditional Firewalls, AV. Spam Filters

Storage / SAN

Application Server

Leverage your existing investment in monitoring!

TP

TP TP

TP

TP

TP TP


Building the ASI Sensor Network For next generation Big Data analytics

Local nGeniusONE Local nGeniusONE

Global nGeniusONE

3rd-Party Consumers


Cyber Security Strategy

Big Data Warehouse

Third Party Security Analytics

Cyber Trust

Monitor

ASI Data ETL

ASI Data


Big Data and BI Strategy

IBM

Cognos

Big Data Warehouse

SAP

Business Objects

Oracle

BI

MicroStrategy

Columnar DB

Great ASI Data to Great Analytics

ASI Data


vASI

8900

InfiniStream

100G

Packet Flow

Switch

Plug In

SDN/NFV

Ubiquitous ASI Instrumentation

NIC Driver

OS/Kernel

WinPcap/LibPcap

Monitoring Application

nGenius PFS Plug-in

Open

API

3rd Party

Monitoring

Tool

ASI on

a Brick


Server

Application

NetScout’s Approach to NPM+APM

- Best ROI and TCO for our Customers - Incident

nGeniusONE

Service Dashboard

Session

Analysis Packet

Analysis

Component Performance

Management IP Traffic Deep Dive

Network

Problem

solved Service Monitors Dependency Mapping

UMC/OSS


Expanded Market Landscape

and Competitive Approaches

SA-SP Tektronix • JDSU

w/XDR

ASI (w/Accanto) InfoVista • IBM • Ericsson

APM-Enterprise Extrahop • Opnet ASI Patent CA Wiley • Compuware • BMC

UC NI • Riverbed ASI (w/ Psytechnics) Ciscoworks • Avaya

Cyber Solera • NetWitness •

SourceFire

ASI (w/ FoxReplay) FireEye • HP • IBM

BigData None ASI (w/ Phase 2) Splunk • IBM,

PFS Gigamon • AppCon •

Ixia

ASI Layer 2 • Ingress probing •

PFS plug In

N/A

Cloud None ASI (Enabler for NextGen

Outsourcing)

Traditional Players

Market Segment Approach 1

Analyzer

Approach NetScout

Probe

Approach 2

Component Mgmt.

NPM-Enterprise NetGen • HP • NI

Wireshark

CDM

Concord/CA • Desktalk/HP

Micromuse/IBM • CiscoWorks


Q&A


Break


4G/LTE Evolution:

Business Intelligence/Customer

Experience Management Operational and Business Intelligence

Improves Customer Experience

Bruce Kelley

CTO & VP Service Provider Business Operations

May, 2014


Big Data and BI Strategy

IBM

Cognos

Big Data Warehouse

SAP

Business Objects

Oracle

BI

Great ASI Data to Great Analytics

ASI Data

nGenius

Analytics

2014 IR Day | NetScout Confidential | © 2014 NetScout Systems, Inc. All rights reserved. 45 45

BI/Analytics

ASI

Service

Assurance

NetScout’s nGenius Solution


ASI Patented Technology

ASI Highlight Description

Big Data Technology Derives adaptable intelligence from IP traffic for proactive

service monitoring and BI/CEM at any scale

IP Intelligence Made broadly accessible and practical to advanced analytics

Intelligent Data

Reduction

10 to 100 times, without losing the signal

Reduces Hardware

Costs

Scalable to 100G, Small footprint for reduced power and

cooling (Green technology)

Enables Next

Generation

Enables next generation service assurance, performance

management, business intelligence, and cyber intelligence

Rich Meta-Data Control and User plane

Real-time, Layer 8 classification

Community based KPIs (millions of subscribers)

SA & BI Dimensions: Subscriber, location, application,

device

2014 IR Day | NetScout Confidential | © 2014 NetScout Systems, Inc. All rights reserved. 47 47

Device/Handset Subscriber Service/Application

Network/Cell Location APNs

KPIs by Community, Session level for Individuals

Throughput, success/failure, error cause, latency, handovers, MOS, #subscribers, #sessions, etc…

Dimensions

Metrics

Control Plane User Plane

ASI – Rich Meta Data Leveraged by both SA & BI


nGenius BI Solution

ASI DB

Infinistream

ASI

Infinistream

ASI

Infinistream

ASI

Session

Cache

Correlation, Filtering, Formatting, Enrichment, Analytics

…

High Speed

1 2

nGenius BI Analytics Big Data Warehouse

OSS BI Dashboards

Custom Reporting

AdHoc Query

OLAP

nGenius BI Server

SP Big Data

Marketing Intelligence

3rd Party (IBM,…)

Open System

“Trusted Data Source” NetScout Solution

https

ASI Sessions, KPIs

by individual or community

https https


Business Intelligence

• How do I retain customers?

• What is the user experience for the iPhone5?

• What OTT services are impacting my network?

• How can I generate new service revenues?

• How many subscribers can I upgrade to a smartphone?

• Which services are popular for teenagers?

• I am launching the iPad3, what impact will that have?

• What is the new service uptake per market?

• How can I improve customer experience for HVAs?


The Power of ASI Relevant to multiple lines of the business

Marketing

Customer Care

Operations

Engineering


Relevant to multiple BI Consumers

Engineer Business

Analyst Executive Planner

BI consumers within each line of business

The user reporting requirements across these folks range

from high level summaries, historical trends, real-time

dashboards, to extreme flexibility & highly interactive

reports

Customer


BI Consumers

• Big Picture

• Rollups (by market, region, device…)

• Service Usage

• Device Uptake

• Results of Strategic Initiatives

• Reports (simple, minimal interactivity)

Engineer Business

Analyst Executive Planner Customer


• Trends Over Time

• Traffic, Performance

• By Market, Location, Device…

• Pro-active

Engineer Business


BI Consumers


• Real-time

• Field Trials (VoLTE, LTE, …)

• Troubleshooting

• Performance Analysis

• Reports (highly interactive)

Engineer Business


BI Consumers


• Data Exploration

• OLAP

• Custom Views & Reports

• Requires Full Flexibility

• All metrics & dimensions

Engineer Business


BI Consumers


• Service Oriented

• Internal or external customer

• Read-only from a Custom Portal

• Multi-Tenancy Support

• All metrics & dimensions

Engineer Business


BI Consumers


nGenius

BI Analytics in Action


Geo-Mapping

ASI metrics on a map, easy to comprehend

Good communication vehicle for executive meetings

Any ASI metric or dimension on a map

Relevant to all BI Consumers

from Executive to Engineer


Executive Report

Are the markets performing comparably?

Rollup data by Market, by NEM

Markets : Atlanta, Boston,…


Custom Interactive Portals

Interactivity

Distributions / Trends


Trends Over Time

Top Handsets

by Region

Trend


Customer Experience Management

Individual User

Experience

How well are services working?



• Individual vs. Community

Is the problem with the individual or the community?



What was the user’s experience

in different locations?


Business Analyst

• Full ASI for the analyst to build their own views

• Define custom metrics

Interactive Map

Subscribers by Market Area

Network Entry Success Rate


• Save & share analyst views and reports

• Blend with third-party data

Business Analyst

Custom Region Shapes

Drill-Down Views

Drag/Drop Elements


Tier 1

Tier 2

Tier 3

CO

$$ Extra Cost

Competitors

$$ Extra Cost

Competitors

• Simplest Pricing and

Packaging not based on

bandwidth, subscribers,

sessions, professional

services

• Probe footprint reduction via

PFS, ASI, SA+BI

• Single architecture/platform

for all links

• Extensibility via ASI Adaptors

• Scalable to 40G/100G

nGenius ASI-Based Instrumentation

nGenius Middleware

nGenius SA & BI

ASI

The NetScout Advantage


Key nGenius BI Advantages

• Geo-Mapping

• Columnar big-data database

• Custom KPI building

• Blend with your own external data

• Mobile support

• Pricing: no “charge by weight” model


• Virtualization

Network Function Virtualization - NFV

Software Defined Networks - SDN

• Next-Gen Voice

Voice over LTE - VoLTE/IMS

Circuit Switched Fallback - CSFB

• Data Continues to Explode

Capacity Upgrades

New Services - such as RCS

Adaptive Video

4G/LTE Evolution: Monetizing the Investment


Virtualization - NFV

WAN

Accelerator

Firewall Session Border

Controller

MGW PE

Router

PGW

SGSN MME

Standard High Volume Ethernet Switches

ISVs

Standard High Volume Servers

Standard High Volume Storage

Orchestration &

Automatic Remote Install

Virtual

Appliances

Network Virtualization Approach

• Fragmented non-commodity hardware.

• Physical install per appliance site.

• Hardware development large barrier

for new vendors, constraining innovation

and competition.

CSCF

Classic Network Appliance Approach Software


Data Plane

Controller

SDN

OpenFlow OF-Config

Northbound Interface

Southbound Interface

FIB

RIB

Application Application Application

OSPF BGP Custom

Physical or Virtual


NFV vs SDN

NFV builds virtualized network functions (Firewall, PGW)

SDN defines how the network is built

Both support Orchestration


ASI – Next-Gen Ready Ubiquitous ASI Instrumentation

• ONE Solution for Virtual and Physical Environments

nGeniusONE

Cost Effective Service Assurance & Business Intelligence Solution

• Value Propositions

Monitor orchestration

Monitor the applications flowing on the network (physical or virtual)

• ASI supports

Custom HW COTS HW Virtual Machine NFV ASI on a Brick


ASI Metadata

Raw Packets

vASI

Tap Function

Packet

Conditioning

NIC HOST

VMs

ASI

Plugin

Infinistream

Other

vASI: Extending ASI visibility into VM, SDN, NFV

Virtualization

Encapsulation

3. Analyze traffic,

generate metadata

4a. Encapsulate traffic,

forward to NIC

4b. De-capsulate traffic

V

N

I

C

V

N

I

C

V

N

I

C

vSwitch

V

N

I

C

1. Capture traffic to/from

VMs in the host

2. Filter, modify and

forward traffic to

ASI VM and to NIC


Evolving Video Delivery

• Video Services

VoD, IPTV, eMBMS

• Threats to SP

MultiScreen vs OTT (NetFlix, HULU), Net Neutrality

• Next-Gen Technologies

Adaptive Video, HEVC (H.265)

• New Paradigms

Time Shifting, Play Shifting, Place Shifting


Next-Gen Video

Adaptive Video Protocols Description

MPEG-DASH ISO Standard

HLS Apple

Microsoft Smooth Streaming Microsoft

HDS Adobe

Flute eMBMS


Adaptive Video

WEB Server

Video Stream

Encoder

Manifest File

URL = Segment 1

URL = Segment 2

URL = Segment N

WEB

Server

Manifest file every

x seconds

HTTP GET URL requests:

Different bit rate segments

depending on download speed

Video is encoded and separated into segments. Segments are files of 2-10 seconds of video

High Quality Video Encoding

Medium Quality Video Encoding

Low Quality Video Encoding

Segment 1 Segment 2

High bit rate stream

Medium bit rate stream

Low bit rate stream

Encoding Distribution

represents the user

experience!

Network Congestion Poor Video Quality


eMBMS – Multicast Video over LTE


NetScout’s Video Value Props

Service Delivery Inter-dependencies

AAA, DNS, DHCP, NTP,

TFTP…

User Experience New ASI meta-data

Encoding distribution

Number of downshifts

Next-Gen Video Adaptive Video

Apple, Microsoft, Adobe

Standards (MPEG-DASH)

Quality

of

Experi

ence

Quality

Of

Experience

Media Transport (e.g. HTTP,

MPEG-TS)

Video Control Protocols

BackOffice Protocols (DRM,GEO,

etc.)

DNS, NTP, Radius, etc.

Content Delivery Network (CDN)

Network Links

Video Quality

Data Plane

Application

Video Quality

Control Plane

Service Enablers

Network

Focus on Quality of Experience

… not just “Video Quality”


RCS – Rich Communication Services


Financial Overview

Jean Bua

CFO

2014 Investor Day – New York City


Financial Business Model

• “Sticky” revenue due to high switching costs

• Maintenance support annuity

• Fortune 1000 customer base

• Overall lower and certain TCO

• Gross margins similar to software industry

• Strong cash flow generation:

Scalable infrastructure

Minimal capital expenditure requirements

Customer loyalty and operating efficiency at NTCT’s core


$290 $309

$352

$397

$1.04 $1.10

$1.32

$1.53

FY '11 FY '12 FY '13 FY '14 FY '15Guidance

$450 - $465 13 - 17% Growth

$1.74 - $1.81 14 –18% Growth

Accelerating revenue and EPS growth Guidance as of April 24, 2014

Non-GAAP, in millions except EPS

FY ’11- 14 Revenue CAGR: 11%

Revenue and EPS Performance


Cumulative Free Cash Flow Generation (in millions)

Capital deployment priority: product development

$-

$50

$100

$150

$200

$250

$300

$350

FY '10FY '11

FY '12FY '13

FY '14

FY '14 FCF

FY '13 FCF

FY '12 FCF

FY '11 FCF

FY '10 FCF

$40

$100

$157

$240

$337


NetScout Investment Position:

Balance Sheet Highlights (in millions)

Total liquidity exceeds $465M

FY ’14 FY ’13 FY ’12 FY ’11

Cash and Securities $219 $154 $214 $229

Accounts Receivable $61 $74 $70 $63

Total Debt $0 $0 $62 $68

Total Deferred Revenue $134 $121 $112 $100

Total Stockholders’ Equity $409 $372 $342 $320

Free Cash Flow $97 $83 $57 $60


Expanding Addressable Markets

Current TAM has grown 3X based on product strategy… Continuing future TAM expansion

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

PastPresent

Future

$ B

illio

ns


NetScout Operating Targets

Operating targets attained at mid-teens revenue growth.

Operating Targets

FY ’15 Guidance

(as of 4/24/14)

Gross Margin 78 – 81% 79 – 80%

R&D of Revenue 13 – 15% 15 – 16%

S&M of Revenue 33 – 35% 32 – 33%

G&A of Revenue 6 – 8% 6 – 7%

Operating Margin

24 – 27% 26 – 27%

Scalable organization increases operating leverage

Non-GAAP


In Summary….

• Our continuing success is based on assisting our

customers adapt to the new computing trends.

• Our experience and innovation focused on IP networks

has come to the forefront of our customers IT

infrastructures

• Our financial discipline allows us the opportunity to:

• Evolve our product vision

• Maintain our customers’ loyalty

• Increase shareholder value

investor day - s22.q4cdn.com€¦ · investor day may 16, 2014 . 2 2014 ir day | netscout...

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