enabling a connected world through open telecom solutions Investor Overview March 2018

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Transcription:

enabling a connected world through open telecom solutions Investor Overview March 2018

Safe Harbor Statement This presentation contains forward-looking statements, including the Company s outlook. Radisys undertakes no obligation to update any such statement to reflect later developments. Information on factors that could cause actual results to vary materially from those in this presentation is available in our most recent Annual Report on Form 10-K as filed with the SEC. Non-GAAP Measures This presentation contains certain non-gaap measures that are labeled as non-gaap. A reconciliation of those measures to the most comparable GAAP measures is available in the Company s prior earnings releases on Form 8-K as filed with the SEC. 2

Radisys at a Glance Open Solutions to Enable Transformation of Telecom Infrastructure 25+ years enabling technology expertise Solutions to enable a variety of 4G and 5G network functions Proven, deployment-ready products coupled with deep services expertise Select Customers Thought Leadership in Open Standards Hardening open-based solutions Accelerating the ability for service providers to reduce dependency on incumbent vendors Increased Focus & Optimized Business Model Revenue stream shifting to predominantly Software and Services Hardware at smaller run-rate expected to be profitable, predictable business 3

Transition and Transformation Company Profile PAST > 50% of revenue hardware-based ~30% gross margins 800+ employee distributed workforce RENEWED FOCUS > 50% of revenue software-services > 40% gross margins ~600 employees in two primary geographic centers Markets & Sales Strategy Broad focus across Telecom, Medical, and A&D markets Telecom: 3G / 4G networks Channel-focused sales model Narrow focus on Telecom while supporting large Medical customer Telecom: 5G / NFV / SDN Direct and channel-based sales model Financial Profile Significant customer concentration Stable gross margins Working capital constraints given hardware mix Limited customer concentration Expanding gross margins Improving working capital metrics with shift to software and services 4

Telecom Industry is Being Disrupted increasing over-the-top competition coupled with data demand from subscribers Challenges Innovation Agile Practices Hyper Scale Lower Cost innovation and cost savings are required to effectively compete Investments Cloud & Virtualization Open Platforms Dev Ops Disaggregation & Edge Computing 5

Competitive Advantage Traditional Competitors confined expertise and business models Radisys Differentiation open software and design services Large Incumbents Proprietary, expensive solutions Open-based software + services provide compelling economics Service Integrators Lack a complete solution Diverse product portfolio Deep enabling technology background Hardware Manufacturers Lack software / telecom expertise Ability to deploy Tier 1 service providers Telecom software expertise 6

Globally Deployed & Proven 7

Strategic Product & Service Portfolio Software-Systems: $48M 2017 revenue at >50% gross margins MediaEngine MobilityEngine FlowEngine Strategic Focus Virtualized Media Processing for Rich Media Services Software Defined, Unbundled and Open Cloud RAN Solutions, 3GPP, xran, CORD, TIP Compliant Intelligent Traffic Distribution Markets VoLTE, VoWiFi, Conferencing, Video, Transcoding Virtual RAN, LTE-A, CBRS, 5G, MEC and IoT SDN, NFV, Network TAP, Load Balancing Value to Customers > 50 Reduction in Recurring OPEX > 40% CAPEX Savings > 50% Reduction in CAPEX and TCO > 80% Lower Cost per 40G Port ServiceEngine software customization, network design and conceptualization to enable customer solutions 8

TM MediaEngine: Virtualized Media Processing Platform Primary Objective: to handle growing VoLTE, VoWiFi and Video traffic Value-add Solution: Designed into the IP Multimedia Subsystem (IMS) core of telecom networks 40-50% CAPEX savings and 60% recurring OPEX savings over competition Market leading Media Server for 10+ years Markets & Applications: MRF: Voice over LTE (VoLTE) + WiFi, Multimedia Conferencing TRF: Transcoding audio and video codecs, IP & Wireless Networks Sales Model: Direct & leveraging channels Customer Success: Over $30M business since 2014 with Tier 1 Asian service provider enabling a greenfield VoLTE deployment Recent Tier 1 service provider VoLTE awards via channel partner engagements 9

TM MobilityEngine: Software for Mobile Network Disaggregation Primary Objective: to meet 5G Application Delivery Demand Value-add Solution: Enabling service providers to virtualize their radio access network (RAN) in evolution to 5G Optimizes utilization of wireless spectrum by providing a communication link between terminals and small cell base stations Markets & Applications: Access-related technologies with increasing focus on 5G Sales Model: Direct & leveraging channels Services capabilities provide ability to pull-through product revenue Customer Success: Open-standard solution for multiple industry standard bodies Delivering disruptive solution for device (handset) interop testing with Tier 1 service provider 10

TM FlowEngine: Flexible Traffic Distribution Primary Objective: to support a growing number of Virtualized Applications Value-add Solution: Classifies and intelligently distributes data flows to appropriate networking/processing resources New appliance (TDE-2000) released mid-2017 Reduces cost up to 80% per 40G port relative to competition Markets & Applications: Enhanced services in software-defined (SDN) architectures Network monitoring, traffic distribution and load balancing Sales Model: Direct & leveraging channels Customer Success: Network-wide commercial deployment for traffic distribution with Tier 1 service provider Recent awards from two strategic channel partners embracing TDE-2000 into specific service provider use cases 11

TM ServiceEngine: Catalyst for Open Transformation Primary Objective: enabling shift from vendor locked proprietary solutions to multi/open source Value-add: Accelerating migration to next-generation standards Open-standards approach and expertise to break vendor lock-in Proof Points: Revenue growth over 20% in 2017 Multiple engagements ongoing with Tier 1 service providers Certified Integrator for CORD: Professional Service capabilities to enable Central Office Re-architected as a Data center (CORD) projects Customer Success: Services engagement with a Tier 1 customer enables multi-million dollar product sales Accelerating engagements tied to CORD deployments with multiple Tier 1 service providers 12

Hardware-Solutions Primary Objective: profitability and cash flow driven from long-standing, trusted customer relationships Value-add Solutions: High-performance systems and stand-alone hardware products Open-architecture hardware and integration expertise Milestones: Significant cost-reduction actions taken to right-size infrastructure to support future business expectations Focus on core customers base while managing legacy accounts for increasing contribution margin Shifting resources to focus on Software-Systems portfolio Financial Profile: 2017 revenue of ~$86M to ~$35M 2018 revenue supported by core customer base Provides cash generation for growth product lines 13

Financial Highlights Software-Systems Hardware Solutions Total revenue Gross margin* Gross margin %* Q417 Actual $14.8M $17.5M $32.3M Q118 Projected <50% of revenue >50% of revenue $22 to $24M $13.0M 40.4% 31-33% 2017 Actual $47.7M $86.0M $133.7M $38.4M 28.7% 2018 Targets >50% SW-Systems as a % of revenue Operating expenses* $12.3M ~$10M $54.2M Operating income* $0.7M -9% to -7% -$12.0M >40% Gross margin EPS* -$0.01 -$0.12 to -$0.08 -$0.31 * Figures reported on a non-gaap basis. Refer to the Company s most recent earnings release for a reconciliation of GAAP to non-gaap measures. >25% OPEX reduction 14

Balance Sheet $ millions Q416 Actual Q417 Actual Q417 Pro-Forma* Cash 33.1 8.1 23.1 A/R 38.4 32.8 32.8 Inventory 20.0 4.3 4.3 Other current assets 7.1 6.6 6.6 Total current assets 98.6 51.8 66.8 Gross cash improved Long term assets 29.6 14.2 14.2 Total Assets 128.2 66.0 81.0 A/P 20.8 18.3 18.3 Deferred revenue 5.7 4.2 4.2 Current debt 25.0 16.0 20.5 Other current 14.1 14.1 14.1 Total current liabilities 65.7 52.6 57.1 Stabilized working capital Long term liabilities 6.0 6.9 17.4 Shareholders' equity 56.5 6.6 6.6 Total liabilities + equity 128.2 66.0 81.0 * Pro-forma includes $17M senior note financing closed January 3, 2018 (net of transaction costs) 15

Long-Term Target Model 20%+ Software and Services Revenue Growth 45% Gross Margins 35% OPEX as a % of Revenue 10% Operating Income as a % of Revenue 16

Why Radisys? Early Stages of Company and Industry Transformation 25+ years Experience and Leadership in Enabling Technology With deep service capabilities that deliver value and differentiation Industry Transformation Accelerating Adoption of next-generation standards, including 5G Break Vendor Lock of Incumbent Proprietary Solutions Higher scale and performance while reducing CAPEX and OPEX Opportunity Funnel Expanding Software & Services engagements accelerating across the business Improving Business Model from Software & Services Growth Gross margin expansion leads to scalable and sustainable profitability 17

Thank You 18