Acquisition of Brix Networks: Looking Ahead with Converged IP Service-Assurance Solutions

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1 Date: April 22, 2008 Acquisition of Brix Networks: Looking Ahead with Converged IP Service-Assurance Solutions

2 Forward-Looking Statements Certain statements in this presentation, or given in response to your questions, may constitute forward-looking statements within the meaning of the Securities Act of The Private Securities Litigation Reform Act of 1995 provides safe-harbors for such forward-looking statements and we intend that any forward-looking statements made today be subject to the safe harbors. We caution you that any forward-looking statements are just predictions. They are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those projected in forward-looking statements and we invite you to review the company s most recent filings with the Securities and Exchange Commission or Canadian securities commissions for a discussion of the factors at risk. This presentation is being made on April 22, 2008, and the content is accurate only for this date. Unless required by law or applicable regulations, EXFO will not be reviewing or updating the material that is contained herein.

3 Transaction Highlights EXFO to acquire Brix Networks for $28.5 M in cash with an additional earn-out based on bookings volume in 12 months following closing of deal Total consideration paid could reach $37.5 M, including maximum earnout and other acquisition-related expenses Acquisition expected to be negative to earnings in FY 08, neutral in FY 09 and accretive in FY 10, excluding stock-based compensation costs and after-tax amortization of intangible assets Deal expected to close in the third quarter of FY 08 Administrative and operational activities will be consolidated Cash transaction: avoids dilution to shareholders and maximizes long-term value creation

4 Reasons for Entering IP Network Service-Assurance Market Operators now have to automate performance monitoring to allow for dynamic adaptation to non-deterministic nature of IP networks Increasing VoIP consumer base and growing IPTV service makes truck rolls overly costly for operators Next logical step that will further increase EXFO s strong results in protocol testing (64% CAGR in last two fiscal years) Exciting market size ($150M in 2007) and growth (>30% CAGR from 2007 to 2013) according to Frost & Sullivan Excellent long-term technology synergies between Navtel (labs), EXFO (portable) and Brix (service assurance), as EXFO now covers full technology life cycle Increases EXFO s focus on its core market (i.e., network service providers) and complements EXFO s fiber monitoring business Expands addressable market to include wireless network operators

5 Brix Networks Overview Leading provider of open and extensible converged service-assurance solutions for NSPs and large enterprises Distributed, comprehensive solutions that proactively monitor IP service and application quality to assure QoS and QoE VoIP and IPTV service testing across the three areas that are most vital to the success of a real-time service: Signaling quality (signaling path performance) Delivery quality (media transport performance) Content quality (overall quality experience) Privately held company founded near Boston in 1999; deeply funded by leading venture capital firms Posted sales of $15.2 M and a GAAP net loss of $6.8 M in CY2007 Approximately 85 employees, mainly near Boston area Customer relationships with global network service providers and strong brand awareness

6 Why Brix Networks? Strategically expands EXFO s position into quality-assurance/ network-monitoring market for converged IP networks Rich product portfolio designed for rapidly growing VoIP, IPTV, data, and next-generation-network monitoring markets Brix s unique offering assures any IP service, over any network, to any endpoint Enables EXFO to provide protocol test and monitoring solutions through the entire network life cycle: Pre-deployment phase: Lab test solutions for network equipment manufacturers (NEMs) and network service providers (NSPs) Navtel Deployment phase: Test solutions for NSPs in the field EXFO Post-deployment phase: Service-assurance solutions for network operators Brix Brix s service-assurance solutions are optimized for next-generation IP networks, where the largest market growth is taking place

7 Tapping into Market Opportunities: Network Convergence Networks are being transformed by multiple services, mixing data, voice, video and mobility Convergence enables cross-device applications ( to TVs, video to mobile handsets, etc.) Each service has unique performance and management requirements Network problems multiply quickly and become harder to pinpoint, translating into revenue loss and customer churn Brix Networks solutions provide operators with mission-critical visibility of their networks

8 Tapping into Market Opportunities: Value Proposition Assuring the end-user experience of any content, over any network, to any endpoint

9 Tapping into Market Opportunities: Covering the Entire Converged Network

10 Tapping into Market Opportunities: Probe-Based Monitoring Brix offers active and passive probe-based systems from access to core Brix Networks active and passive probe systems are in line with the overall OSS/service-assurance model being deployed by today s carriers.

11 Extending Leadership in IP-based NGN Testing Services and Applications Datacom and Transport NEMs (40% of market) R&D (IMS, NGN) Manufacturing Installation & Maintenance NSPs (60% of market) Monitoring Gross margin (%) High 70s High 60s Fully Covering Protocol Stack Physical and Layer Ø High 50s Strong product offering Competitive product offering Fully Covering Technology Lifecycle Potential product synergies

12 Tapping into Market Opportunities: Market Size Mobile, broadband and business probe-based monitoring market is estimated at $708 M in 2008 VoIP test and measurement (T&M) market estimated at $479.1 M in 2007 Video T&M market (IPTV) estimated at $105.2 M in 2007 VoIP and IPTV T&M markets growing at CAGRs of 25.7% and 38.5%, respectively, between 2006 and 2013 Brix Networks addressable market estimated at $150 M as of 2007

13 Extending Our Product Offering: Brix Solutions Brix Networks builds solutions that provide immediate value to service providers and their customers. Solutions are subscriber- and service-concentric Much more than just raw measurement data Provides tuned reports and views for various internal levels of management and external customers Quickly presents vital network information needed by carriers that embrace quality, responsiveness and flexibility1

14 Extending Our Product Offering: Brix Solutions BrixWorx Service Assurance Correlation and Analysis Software Engine Highly scalable, open and extensible, BrixWorx is ideally suited to meet the needs of demanding service providers' networks for monitoring IPbased services. Works with network-wide monitoring sources, including Brix Verifiers, Brix software agents, third-party devices and standard interfaces. BrixView Service Assurance Summary and Reporting Offers flexible business intelligence tools carriers need in order to manage their networks and customer care. BrixCall Comprehensive Service Assurance for VoIP Provides comprehensive, scalable service assurance for diverse VoIP applications. Provides end-to-end visibility into customer calls. BrixVision Comprehensive IP Video Quality Monitoring Delivers end-to-end IPTV service assurance. Helps carriers manage the quality of live IP video streams. BrixNGN Distributed Ethernet and IP network monitoring Monitors next-generation IP networks (24x7), providing metrics and reports that help carriers manage their networks and customer SLAs.

15 Extending Our Business: Brix s Solid Customer Base Brix customer base includes wireline, wireless, cable multiservice operators (MSOs), NSPs, plus large enterprise networks NSPs: Use Brix solutions to guarantee the successful launch and ongoing, profitable operation of their VoIP, IPTV and VPN services. Enterprises: Use Brix solutions to achieve successful rollouts and widespread organizational acceptance of their new, real-time IP applications and to assess their providers.

16 Extending Our Expertise: Strong Management and R&D Team Brix management team committed to remaining with EXFO R&D team has leading-edge expertise in IP Carrier Ethernet, VoIP and IPTV service-assurance technologies More than 40% of employees dedicated to R&D Strong customer relationships with Tier-1 NSPs and large enterprises Highly entrepreneurial corporate culture similar to EXFO s +

17 Summary: Looking Ahead with Converged IP Service-Assurance Solutions Acquisition enables EXFO to expand into strategic service assurance market for converged IP networks Brix s unique solutions assure the delivery of any IP-based service, over any network, to any endpoint Enables EXFO to cover the full network lifecycle: Pre-deployment, deployment, and post-deployment Acquisition expected to be negative to earnings in FY 08, neutral in FY 09 and accretive in FY 10, excluding stock-based compensation costs and after-tax amortization of intangible assets All-cash deal means no dilution to shareholders