Napatech 2017 CMD Presentation

Napatech A/S
Capital Markets Day

April 4, 2017
Oslo, Norway
1 Napatech A/S Copyright 2017

Introduction
By Lars Thoresen,
Chairman of the Board

Where We Left Off In 2016
MARKET LEADERIN
MARKET LEADER IN MARKET
MARKET LEADER
LEADER FOR
ACCELERATOR
ACCELERATOR FOR NETWORK
NETWORK RECORDER
SOLUTIONS
SOLUTIONS RECORDER SOLUTIONS
SOLUTIONS
FRONT-RUNNER
FRONT-RUNNER THOUGTLEADER
THOUGHT LEADER
IN
INACCELERATING
ACCELERATING DRIVING
DRIVING EXEPTIONAL
EXCEPTIONAL
VIRTUALIZED
VIRTUALIZED SOLUTIONS
SOLUTIONS NEWINNOVATION
NEW INNOVATION
CLEAR STRONG BEST GREAT

STRATEGY SOLUTIONS CUSTOMERS EMPLOYEES

Agenda
KEYNOTE THE SMARTNIC NAPATECH THE NAPATECH ROADMAP TO 100
INTRODUCTION
SPEAKER OPPORTUNITY FINANCIALS OFFERING MUSD IN 2020
Lars Thoresen Ron Williams Jarrod J.S. Siket Henrik Brill Jensen Dan Joe Barry Henrik Brill Jensen
Napatech IBM Security Napatech Napatech Napatech Napatech
Chairman of the Board Chief Architect Chief Marketing Officer Chief Executive Officer VP Positioning and Chief Executive Officer
Chief Evangelist

Keynote Speaker
Ron Williams
Chief Architect
IBM Security

The SmartNIC
Opportunity
Jarrod J.S. Siket
Chief Marketing Officer

Major Trends In Networking And Communications
Cloud 5G Internet of
Computing Mobile Things
4 25 25 50 50
By 2020
BILLION MILLION BILLION BILLION TRILLION

Connected People Applications Embedded Systems Devices and Sensors Gbps of Data
Source: IDC
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Networking Disruption: Cloud-Mobile-IoT Era
We can learn from history:

Cloud-Mobile-IoT
Few events-horizons at this scale
Dominant firms disappeared
Small firms became household names

Client -Server
This is not just the next one
It is the biggest one ever

Mainframe
Source: The 3rd Platform by IDC

The Cloud Sparked The Revolution
Traditional Data Center (3% CAGR)

600 50% 600
Cloud Data Center (2% CAGR)
500 500 8%
40%
485 92%
447
400 400
399 30%
346
$0.64
300 300
Cost per hour*

297 $0.48
20%
259 200
200 $0.35
25% $0.28
10% 100 75% $0.15
100
0 0% 0
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 2012 2013 2014 2015 2016
Hyperscale Data Centers, and Workloads Deployed: Cost-per-hour of standard

Percentage of all Servers Deployed Traditional vs Cloud Data Centers compute servers
Standard, high-volume, low-cost servers are now widely deployed,

and able to be used for advanced network and security applications

Applications Raced
To The Cloud Revenue Sourcecode
Legal Bugs File Sharing
Security Financial
Email Logs
Confidential intellectual
property that will never leave
our walls for the cloud in
2010..
.Now support multi-billion UCS/PBX Credentials Payroll

dollar Cloud SaaS companies.
36 Napatech
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Networks Are Transforming
In Order To Achieve:
Cloud-Scale Performance
Cloud-Scale Innovation
Cloud-Scale Economics
Cloud-Scale Security
Cloud-Scale Orchestration
A New Architecture Emerged:

Software Defined Networking
Network Virtualization
Server Virtualization
Network Functions Virtualization
Open: stack, compute, ..
Source: VMWARE

Networking Devices Are
Transforming to Open Standard
Compute Platforms
From Closed, Proprietary

Vertical Systems

SmartNICs: When Standard Servers And NICs Fail To Perform
40
60 16
16
35
14
50
30
12
CPU Usage (Cores)

Throughput MPPS
37,2
7x
40
CPU Usage (Cores)

8x 40x
25
10
30 Performance
Improvement 8 less CPU 20 less CPU
usage usage
20 6 15
10 4 10
2 5
5 2
OVS with OVS with OVS with OVS with Software Compression with
DPDK DPDK DPDK DPDK Compression Napatech SmartNIC
Intel X710 Napatech Intel X710 Napatech
SmartNICs Are Faster SmartNICs Are More Efficient SmartNICs Save Money

FPGAs Fulfill The Cloud-Scale Networking Vision
FPGA
Open, standard,
programmable,
fast
Standard
chipsets ASIC Configurable Cloud Architecture
Closed, propriety Based on FPGAs
Multi-year and multi-year
revisions, unable revision cycles
to offload
SmartNIC
Proprietary NPU
CPU Closed, propriety Intel Acquires Altera FPGA
Closed system and multi-year For Record $16.7B
not open revision cycles
and standard
MultiCore Napatech
MIPS pioneered the
Generalized use of FPGA-
processors
based NICs for
unoptimized
for task networking
https://www.microsoft.com/en-us/research/publication/configurable-cloud-acceleration/

New End-Users Emerge
Cloud and Data Service Enterprise Infrastructure and

Center Services Providers Defense
Hyperscale Cloud Telco Fortune 5000 Civilian
Operators Cable Banking Defense
Managed Services Financial Intelligence
Manufacturing
Healthcare
Napatech aims to be the provider of Enterprise Cloud Networking Platforms for every IT organization,
Providing cloud-scale hardware performance with the speed of software innovation

High-Growth Applications Require SmartNICs
Cyber Security Big Data Mobile Infrastructure Testing
Firewall Analytics 5G Load Balancer Quality of Experience

Next-Gen Firewall Trading CORD SD-WAN Service Assurance
Intrusion Detection Network Recording vEPC V-CPE Performance Monitoring
Intrusion Prevention vIMS SDN Gateway
Forensics Packet Broker
Threat Detection Network Taps
Secure Web Gateway
Surveillance
Data Loss Prevention
Major market trends allow Napatech to expand to a new range of

high-growth applications on virtualized servers in software defined networks

New Routes to Market Emerge
End-users
Cloud and Data Service Enterprise Infrastructure

center Services Providers and Defense
Routes to market
Network Security Appliance Server Server Software Enterprise Direct Napatech

OEM OEM ODM OEM ODM ISV VAR Sales Web Store
The expanding set of end-user demand, and new applications,

Rapidly Extends Napatechs Reach, via pre-existing routes to market.
Applications
Cyber Security Big Data Mobile Infrastructure Testing

The Time is NOW
Market is ready for growth:

Cloud early adopter success
Mass markets preparing
Large unit volume potential:

12-15M servers shipped
3-5M appliances shipped
Future CPUs with FPGA
Sizeable Revenue within reach:

15% of devices with SmartNICs
2.25M Servers/appliances
$1.1B target market with upside
Source: Gartner 2016 Hype Cycle For Networking & Communications Source: based on Infonetics, Crehan, DellOro

Comprehensive Solution Provider
SmartNIC Platform
Partner Professional Channel

Ecosystem Services Program
Best in breed Ease of use Easy to buy
Solution completion, Low activation energy, Satisfy end-user demand

Application benchmarks Co-creation services via their preferred
methods

SmartNIC Platform Portfolio
Application Open
Commercial
Store (Future) Source
Application Open
PANDION Compression Futures
Engines Recorder Source Encryption, Search
Community
Software Virtualization In-line Recorder

(FPGA, driver, APIs) (OVS Offload) (Fast Path) (100% Capture)
Hardware XS S M L XL
Professional
Technical Support Assessment Services Co-Creation Programs
Services

Napatech Aspiration
Our In a Cloud-Mobile-IoT world, of software defined everything..

World
Our Napatech aims to help companies reimagine their business,

Company By bringing cloud-scale economies to every network
Napatechs Enterprise Cloud Networking Platform

The
Flexibly offloads and secures standard, virtualized servers
Benefits
To boost innovation and return valuable compute resources to services and revenue
Cloud-Scale Performance Cloud-Scale Economics Cloud-Scale Innovation Cloud-Scale Security

The Stunning benchmarks Stunning pricing, HW at SW speed, MicroSegmentation,
Results High speed, few cores right mix of features programmable Stateful, isolation, rules
Powered By Standard Software Scalable Processing Open, Standard Networking IP

Leading Technology OVS, DPDK, fast-path Industry FPGA metrics COTS HW, Open SW ~15 years of HW+SW
In World-Class A comprehensive portfolio of SmartNICs for every intelligent location in your cloud
Products From COTS standard servers, to high-end compute and appliances.
To deliver the right data to the right place and the right time

Napatech
Financials
Henrik Brill Jensen
Chief Executive Officer

Q1 2017 Sales
+17%
Q1 Sales
Highlights:
Strong development
across business
segments
Q1 2017 sales of USD 8.2 million (7.0) Development within
2017 revenue growth
guidance of 10 20 %

Profit and Loss Strong EBITDA Development
(Figures in MDKK) 2016 2015 2014 Profit and Loss

Highlights:
Revenue 234.7 216.7 182.3
Strong platform for
Gross profit 163.6 154.7 133.6 next growth cycle
Gross margin 69.7 % 71.4 % 73.3 % Cost focused and

lean organization
EBITDA 43.5 34.2 18.0
Solid EBITDA
EBIT 6.0 5.5 (5.9) development
Cash flow from operating activities 15.2 33.2 10.7
Cash and cash equivalents 47.0 75.9 88.2

Balance Sheet 78% Equity Ratio
(Figures in MDKK) 2016 2015 2014 Balance Sheet

Highlights:
Development projects, completed 75.7 70.1 54.3
Development projects, in progress 22.5 12.4 8.7
Total non-current assets 105.0 91.4 87.6 Development projects
completed are the basis
Cash and cash equivalents 47.0 75.9 88.2
Current assets 147.7 145.5 137.2 for our current revenue
Total assets 261.4 247.6 224.8 Development projects in

progress increases due
Equity 204.4 197.0 189.6 to investments in three
product areas basis for
Non-current liabilities 13.4 10.2 5.6 accelerated growth
Current liabilities 43.6 40.4 29.6 2020 growth strategy

fully funded, but
acquisitions to enhance
Total equity and liabilities 261.4 247.6 224.8
opportunities are
considered regularly

Gross Margin Development
80% Margin Development:
Gross margin is driven

75% by Accelerator product
mix and growth in
Pandion sales
70%
More aggressive go-to-
market strategy could
affect gross margin in
65% the longer run
2017 gross margin

60%
guidance of around
2011 2012 2013 2014 2015 2016
68%, is reflecting
enhanced Pandion
sales including COTS
hardware

EBITDA Margin Development
35% EBITDA margin:
30% Highly scalable business

model where revenue
25% growth drives EBITDA
20% 2016 EBITDA margin

of 19%
15%
2017 EBITDA margin

10%
guidance of around 20%
5%
0%
Q1 Q2 Q3 Q4
2015 2016

The Napatech
Offering
Dan Joe Barry
VP Positioning and Chief Evangelist
54 NAPATECH INTERNAL Napatech

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DISTRIBUTE
Fundamental Need Of All Internet Users
Stay Connected And Be Secure
Increasing
Internet
dependence
All services More

moving to Stay connected sophisticated
the cloud services and
Users usage
Be secure
Faster
Exploding
network
volumes
speeds
of data

174%
Mobile App Year-over-Year
Usage Growth in 2014
121%
103% Source: Flurry
89% 89%
74%
Increasing 49%
33% 30%
Internet
dependence Lifestyle & Utilities & Messaging Health & Travel Sports News & Music, Games
Shopping Productivity Social Fitness Magazines Media &
Entertainment
All services More

Users usage
Be secure
Faster
Exploding
network
volumes
speeds
of data

Increasing
Internet
dependence
Government Augmented
All services More Services Reality

the cloud services and Online
Banking
Users usage
Smart Remote
Home Healthcare
Be secure
Faster
Exploding
network
volumes
speeds
of data

Increasing
Internet
dependence
All services More

TOTAL IP Traffic Per
Users usage
Month
Source: Cisco VNI Report 2015
Be secure
Faster
Exploding
network
volumes
speeds
of data

Increasing
Internet
dependence
All services More

Ethernet Speeds 400G
Source: Ethernet Alliance Users usage
100G 200G
50G
40G
Be secure
10G 25G
Faster
5G
Exploding
1G
2.5G network
volumes
10M
100M
speeds
of data
1980 1990 2000 2010 2020

600 Installed Workloads
in Millions 8%
Source: Cisco Global Cloud
Index 2016
400
Increasing
92%
Internet
200
25%
dependence
75%
0
2015 2016 2017 2018 2019 2020
All services
moving to Stay connected
the cloud
Users
Be secure
Faster
Exploding
network
volumes
speeds
of data

Multitude Of Solutions Available
To Ensure Connectivity And Security
Network management Cybersecurity

applications ensuring applications ensuring
users stay connected users be secure

Applications Separate From User Services
Not Part Of The Data Delivery Path To The User

Users Services

Need Insight Into Service Data To Function
In Real-Time Without Losing Any Of The Data

How to get access to

reliable service data to
ensure users
stay connected and
can be secure?
Users Services

Napatech Smarter Data Delivery Solutions
Ensure Delivery Of Reliable Data For Analysis

Napatech
Smarter
Data
Delivery
Users Services

Napatech Smarter Data Delivery Solutions
Ensure Delivery Of Reliable Data For Analysis
Typical Datacenter Some servers dedicated to Napatech ensures reliable

With thousands of servers network management and data delivery to these
supporting user services cybersecurity software appliance servers
Cyber
Cybersecurity
Security
Software
Napatech
Smarter
Data
Delivery

The SmartNIC Opportunity
Addressing More Applications In The Datacenter
Address more applications Bringing more power Delivering data to more

running on other servers in and value to existing applications with accelerated
the datacenter installed servers performance
Encryption
Compression
Virtual
Switch
Acceleration
Cyber
Security
Napatech Software
Smarter
Data
Delivery

Migration To The Cloud
Driving Dependency, Growth And Investment
Increasing
internet
dependence
All services More

Users usage
Be secure
Faster
network Exploding
speeds volumes of
data

What Is The Cloud?
Getting Someone Else To Host Your Software
Traditional Private Hybrid Public

Datacenter Cloud Cloud Cloud
Use combination of Subscribe to various

Buy, install and run all Buy, install and run all
private cloud and services running remotely
your enterprise software your enterprise
subscription to third in a third party datacenter
applications on your software applications on
party services running instead of running your
own servers in your own dedicated servers in a
remotely in a third party own applications
datacenter third party datacenter
datacenter

Migration To The Cloud Takes Time
Napatech Supporting Cloud Migration For Our Customers
Public Clouds
Hybrid Clouds
Private Clouds
Traditional Smarter
Datacenters virtualized
Data Delivery
Smarter
on-demand
Data Delivery
Smarter
real-time
Data Delivery
Challenge to migrate
network management and cybersecurity solutions

Napatech SmartNIC Solutions
Anticipating Migration Needs And Broadening Scope
Napatech SmartNIC solutions for Napatech SmartNIC solutions Napatech SmartNIC solutions
Smarter Real-Time Data Delivery for Smarter On-Demand Data Delivery for Smarter Virtualized Data Delivery
Network
Management Other
Software Virtual
Network Software
Management
Software
Cyber
Security
Cyber
Software
Security
Software
Network
Management
Smarter Software Smarter Smarter
real-time on-demand virtualized
Data Data Data
Delivery Delivery Delivery

Napatech SmartNIC Solutions Napatech
Accelerators
Smarter Real-Time Data Delivery
Our customers rely on Napatech Accelerators to deliver data

at high-speeds and data volumes with zero data loss
The data delivered must be highly accurate and complete to
ensure reliable analysis
Intelligent capabilities enable users to understand and select
which kinds of data should be delivered providing full
control
Napatech Software Suite supports all Napatech Accelerators
allowing one solution to support many deployment
options
Think Smarter Data Delivery
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Smarter Real-Time Data Delivery Case Study Napatech
Accelerators
Yahoo Security Solution
The Challenge Solution Benefits
Software specialist ntop was In partnering with Napatech, ntop Guaranteed data delivery even at 100G
engaged by Yahoo! to help develop developed a compact security solution Better insight into datacenter data
a 40G and 100G data delivery capable of keeping up with the 100G making the security solution more
solution for their security solution. speeds and data volume in the Yahoo! reliable
Yahoo! Needed insight into traffic datacenter. Napatech Acclerators Re-use of Yahoo! existing security
in the datacenter at speeds up to ensured that no data was missed or software solutions with no added
100G in order to provide a reliable lost so a reliable and accurate picture development costs
security assessment. was provided for analysis.

Recorders
Smarter On-Demand Data Delivery
Napatech Pandion is a scalable network recorder that captures,

stores and delivers data on-demand
Focused on network recording of all network data providing users
with the freedom to choose any analysis software
Allows multiple software applications to retrieve data at the
same time with an open and easy-to-use interface
Intelligent features allow the user to specify exactly the data to be
retrieved and analyzed providing full control

Smarter On-Demand Data Delivery Case Study Napatech
Recorders
Facebook - Data Recording
The Challenge Solution Benefits
To safeguard their enterprise from Napatech developed a custom Uncompromised high-speed packet
cyber threats, Facebook needed a solution that enabled investigation capture
solution to capture all data into any security event. This was Ultrafast data retrieval
packets in real time and store achieved by integrating the Pandion Seamless integration of the Facebook
them for up to 90 days for on- Flex network recorder with the SAN and Napatech network recording
demand post-analysis; a task companys high-capacity storage technology
requiring exceptional performance solution, thus ensuring that all data
and reliability. packets were captured and stored
for quick retrieval for up to 90 days.

Virtualization
Smarter Virtualized Data Delivery
Napatech NFV NIC is a versatile and flexible

platform that supports multiple
acceleration solutions for virtualized
environments.
Napatech virtual switch acceleration solutions
enable delivery of more data to more
virtual applications at a lower cost
Napatech also accelerates intensive data
processing like decryption and compression
with several orders of magnitude
Napatech enables virtual monitoring
allowing users to see what is happening in
virtual environments

Smarter Virtualized Data Delivery Case Study Napatech
Virtualization
Nokia - Compression Acceleration
Challenge Solution Benefits
Nokia had encountered a Napatech provided a Proof-of- Solution used 1 core instead of 40 for
performance bottleneck related Concept solution based on the software compression
to compression of files for their Napatech NFV NIC that could This results in millions of savings in
storage solution. While software provide hardware accelerated CAPEX and OPEX at the datacenter level
compression is possible in compression at 40 Gbps using only 1 Also means more CPU resources for
software, the compression time CPU core. The average compression hosting virtual functions
can be lengthy and the CPU core time was improved by a factor of 30 Now possible to perform fast file
consumption is high. without compromising on the compression on-demand at high-speed
compression ratio.

The Roadmap to
100 MUSD by 2020
Henrik Brill Jensen
Chief Executive Officer

CMD 2016 CMD 2017
Established Napatech growth strategy Current market trends strongly validate
Napatech growth strategy
Set $100M USD business aspiration Reaffirms aspirational business growth

for 2020 plans for 2020
Accelerated investments in Expanding reach through marketing,

development, sales and marketing partners, sales and channels
Result: Result:
Leading products for growth Be and be perceived as
segments and strong strategic THE leading SmartNIC solution
customer relationships provider

2020 Strategy Secured by Strong Technology,
Portfolio and Organization
Expanding the core
LEADING TECHNOLOGY EXPANDING THE CORE FIRM STRATEGIC EXECUTION
Repackage solutions and

Napatech is the leader in Focus on pursuing and technologies to fit diverse
FPGA-based solutions, exploiting emerging market needs
which will become an SmartNIC opportunities
inevitable part of every that will drive Secure an ecosystem of
network accelerated growth value-adding partners and
channels

Accelerated Growth Path Towards 2020
Robust portfolio of current customers 100

provides strong business foundation and MUSD
additional growth opportunities
Catalogue of ongoing co-creation

deployments with market leading
customers based on strategic relationships
Emerging SmartNIC opportunities for

accelerated growth driven by digital
transformation and migration to the cloud 2016 2020
Napatech is in pole-position to continue to deliver state-of-the-art

products, software and technology to an ever expanding range of customers

Managements Outlook
Napatechs strategy is to be the #1 vendor of Smarter Data Guidance for 2017:

Delivery solutions, leading to an ambition of a 100 MUSD
top-line by 2020, based on a strong product portfolio Revenue growth 10% - 20%
powered by leading-edge core technology
Gross margin around 68%
Based on the growth of 8% in 2016, the company expects EBITDA margin around 20%
the profitable revenue growth to continue in 2017, across
the business areas
Napatech reiterates that the company is confident with an

accelerated growth path towards the 2020 ambition
Short term visibility is limited and will be affected by

quarter-to-quarter order fluctuations and general
uncertainty

Stay Informed - Follow Napatech!
WANT TO LEARN MORE?
about Napatech, Smarter Data Delivery, SmartNICs, IoT,

cloud computing, 5G Mobile,
and other trends in the industry?
Sign up for the Napatech News
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Q&A Session
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Napatech A/S

Capital Markets Day

1 Napatech A/S Copyright 2017

2 Napatech A/S Copyright 2017

CLEAR STRONG BEST GREAT

3 Napatech A/S Copyright 2017

4 Napatech A/S Copyright 2017

5 Napatech A/S Copyright 2017

32 Napatech A/S Copyright 2017

BILLION MILLION BILLION BILLION TRILLION

We can learn from history:

Few events-horizons at this scale

Dominant firms disappeared

Small firms became household names

This is not just the next one

It is the biggest one ever

Source: The 3rd Platform by IDC

34 Napatech A/S Copyright 2017

Traditional Data Center (3% CAGR)

Cost per hour*

Hyperscale Data Centers, and Workloads Deployed: Cost-per-hour of standard

Standard, high-volume, low-cost servers are now widely deployed,

35 Napatech A/S Copyright 2017

Legal Bugs File Sharing

.Now support multi-billion UCS/PBX Credentials Payroll

A New Architecture Emerged:

37 Napatech A/S Copyright 2017

From Closed, Proprietary

38 Napatech A/S Copyright 2017

CPU Usage (Cores)

CPU Usage (Cores)

39 Napatech A/S Copyright 2017

40 Napatech A/S Copyright 2017

Cloud and Data Service Enterprise Infrastructure and

41 Napatech A/S Copyright 2017

Cyber Security Big Data Mobile Infrastructure Testing

Firewall Analytics 5G Load Balancer Quality of Experience

Major market trends allow Napatech to expand to a new range of

42 Napatech A/S Copyright 2017

Cloud and Data Service Enterprise Infrastructure

Network Security Appliance Server Server Software Enterprise Direct Napatech

The expanding set of end-user demand, and new applications,

Cyber Security Big Data Mobile Infrastructure Testing

43 Napatech A/S Copyright 2017

Market is ready for growth:

Large unit volume potential:

Sizeable Revenue within reach:

44 Napatech A/S Copyright 2017

Partner Professional Channel

Solution completion, Low activation energy, Satisfy end-user demand

45 Napatech A/S Copyright 2017

Software Virtualization In-line Recorder

46 Napatech A/S Copyright 2017

Our In a Cloud-Mobile-IoT world, of software defined everything..

Our Napatech aims to help companies reimagine their business,

Napatechs Enterprise Cloud Networking Platform

Cloud-Scale Performance Cloud-Scale Economics Cloud-Scale Innovation Cloud-Scale Security

Powered By Standard Software Scalable Processing Open, Standard Networking IP

47 Napatech A/S Copyright 2017

48 Napatech A/S Copyright 2017

49 Napatech A/S Copyright 2017

(Figures in MDKK) 2016 2015 2014 Profit and Loss

Gross margin 69.7 % 71.4 % 73.3 % Cost focused and

Cash flow from operating activities 15.2 33.2 10.7