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Welcome Shareholders

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Welcome Shareholders

  1. 1. Welcome Shareholders
  2. 2. Annual Meeting of Shareholders May 16, 2007 Syria Shrine, Cheswick, PA
  3. 3. <ul><li>The Company may make some statements regarding future events or results, which are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Such statements are based on assumptions that involve risks and uncertainties, and actual events or results may differ materially from the forward-looking statements that are made.  In addition to the factors mentioned today, additional factors that could cause actual events or results to differ materially are included in the Company’s filings with the SEC, specifically in the Company’s annual report on Form 10-K for the year ended December 31, 2006 and our quarterly reports on Form 10-Q.  The Company expressly disclaims any intention to update our forward-looking statements, at any time or for any reason. </li></ul>Safe Harbor Notice
  4. 4. Annual Meeting of Shareholders May 16, 2007 Syria Shrine, Cheswick, PA
  5. 5. Our Mission <ul><li>We help the world communicate reliably by providing unparalleled voice, video and data testing solutions that enable our customers to improve quality, reduce costs and deploy new services in a rapidly changing communications market. </li></ul>
  6. 6. Test & Measurement Industry: A View of 2006 <ul><li>A year of industry consolidation (customers, suppliers) </li></ul><ul><li>Restructuring by many players, including Tollgrade </li></ul><ul><li>More clarity on strategy by telecom and cable operators </li></ul><ul><li>Highly competitive triple play environment in both sectors </li></ul><ul><li>Triple play subscriber bases increase in U.S. </li></ul><ul><li>International market ready for network testing </li></ul><ul><li>Revenue stream is project-oriented and therefore lumpy </li></ul>
  7. 7. <ul><li>Restructured parts of our business for efficiency </li></ul><ul><li>Generated $3.3 million in annual savings </li></ul><ul><li>Acquired another test and measurement group </li></ul><ul><li>Reduced overall cost structure </li></ul><ul><li>Integrated telecom and cable infrastructure </li></ul><ul><li>Leveraged embedded base to perform ‘upgrades’ </li></ul><ul><li>27% of revenue derived from international customers </li></ul>How Did We Respond?
  8. 8. Intense Competition <ul><li>Operators compete to provide most services at lowest price point </li></ul><ul><li>We’re well positioned in telco and cable </li></ul><ul><li>Mergers among big players </li></ul><ul><li>Biggest challenge: waiting for new network adoption </li></ul>
  9. 9. Mergers Among Big Players
  10. 10. Competition Spurs Industry Growth <ul><li>2006 growth rate highest in past six years </li></ul><ul><li>Consolidation and competition stimulating spending </li></ul><ul><li>Increase in RFP activity </li></ul><ul><li>Expansion of IP Services presents a growth opportunity </li></ul>
  11. 11. Network Test & Measurement Market Outlook <ul><li>Network T&M market will have CAGR of nearly 10% over next four years </li></ul><ul><li>VoIP and IPTV build out driven by big players </li></ul><ul><li>Spending driven by latest triple play, access technologies and IMS </li></ul><ul><li>Demand for network testing to increase with IP-based expansion, increased competition </li></ul><ul><li>A better environment; but still hard to predict for the short-term </li></ul>
  12. 12. How We Fared in 2006 Results 2006 vs 2005 Revenue $65.4M $66.3M EPS (GAAP) ($0.14) $0.27 EPS (Non-GAAP*) $0.14 $0.33
  13. 13. How We Fared in 2006 Results 2006 vs 2005 Revenue $65.4M $66.3M EPS (GAAP) ($0.14) $0.27 EPS (Non-GAAP*) $0.14 $0.33
  14. 14. How We Fared in 2006 Results 2006 vs 2005 Revenue $65.4M $66.3M EPS (GAAP) ($0.14) $0.27 EPS (Non-GAAP*) $0.14 $0.33
  15. 15. How We Fared in 2006 Results 2006 vs 2005 Revenue $65.4M $66.3M EPS (GAAP) ($0.14) $0.27 EPS (Non-GAAP*) $0.14 $0.33 * Reconciliations of the non-GAAP results described in today’s presentation are available in the Company’s earnings releases for the fourth quarter of 2006 and the first quarter of 2007, which are posted on the Company’s website at www.tollgrade.com. Copies of the Company’s annual report are also available on the Company’s website or by contacting Investor Relations.
  16. 16. Product Mix Trend 2000 2006
  17. 17. <ul><li>Successful acquisition </li></ul><ul><li>Timely restructuring </li></ul><ul><li>New Triple Play test technology selected for two projects </li></ul><ul><li>Cable VoIP technology win </li></ul><ul><li>New low-cost IP test probe </li></ul><ul><li>Executed multi-year maintenance agreements </li></ul>Key Accomplishments in 2006
  18. 18. <ul><li>Acquired, integrated Emerson Test System Products Group </li></ul><ul><li>N(x)Test product line deployed internationally </li></ul><ul><li>Helped offset declining legacy sales in North America </li></ul><ul><li>Entrée to Eastern Europe and Asia </li></ul><ul><li>Helped expand international business to 27% of 2006 revenue </li></ul>Successful Acquisition
  19. 19. Timely Restructuring <ul><li>Keeping pace with sector changes, convergence </li></ul><ul><li>Up to $3.3M annual savings expected </li></ul><ul><li>Consolidation of Cable operations into one facility </li></ul><ul><li>Seamless integration of Cable & Telecom R&D resources </li></ul>
  20. 20. <ul><li>Focus on launching network assurance for IP services </li></ul><ul><li>Selected for two international projects </li></ul>New Triple Play Test Technology Selected
  21. 21. <ul><li>First domestic Cable MSO-wide sale </li></ul><ul><li>Cheetah ™ VoIP testing technology </li></ul><ul><li>Tollgrade’s voice expertise applied to cable </li></ul>Cable VoIP Technology Win
  22. 22. <ul><li>DigiTest ICE™ prototypes under evaluation </li></ul><ul><li>Telecom remote DSLAMs delivering Triple Play services </li></ul><ul><li>Basis for some recent wins </li></ul><ul><li>Key marketing initiative for 2007 </li></ul>New Low-Cost IP Test Probe
  23. 23. <ul><li>Unprecedented 5-year maintenance agreement </li></ul><ul><li>One of North America’s largest operators </li></ul><ul><li>Importance of LoopCare™ in their network </li></ul><ul><li>All major maintenance agreements now in place </li></ul>Multi-Year Software Maintenance Agreements
  24. 24. <ul><li>Focused on continuing momentum </li></ul><ul><li>Seeking new product adoptions, revenue streams </li></ul><ul><li>Supported by roadmap to deliver next generation technology </li></ul><ul><li>Enabling Cable companies to test VoIP offerings </li></ul><ul><li>Enabling Telephone companies to test new IP-based services </li></ul>Enter 2007
  25. 25. How We Fared in 1Q 2007 Results 1Q ‘07 vs 1Q ‘06 Revenue $13.0M $17.6M EPS (GAAP) $0.01 $0.00 EPS (Non-GAAP*) $0.04 $0.00
  26. 26. How We Fared in 1Q 2007 Results 1Q ‘07 vs 1Q ‘06 Revenue $13.0M $17.6M EPS (GAAP) $0.01 $0.00 EPS (Non-GAAP*) $0.04 $0.00
  27. 27. How We Fared in 1Q 2007 Results 1Q ‘07 vs 1Q ‘06 Revenue $13.0M $17.6M EPS (GAAP) $0.01 $0.00 EPS (Non-GAAP*) $0.04 $0.00
  28. 28. How We Fared in 1Q 2007 Results 1Q ‘07 vs 1Q ‘06 Revenue $13.0M $17.6M EPS (GAAP) $0.01 $0.00 EPS (Non-GAAP*) $0.04 $0.00 * Reconciliations of the non-GAAP results described in today’s presentation are available in the Company’s earnings releases for the fourth quarter of 2006 and the first quarter of 2007, which are posted on the Company’s website at www.tollgrade.com. Copies of the Company’s annual report are also available on the Company’s website or by contacting Investor Relations.
  29. 29. <ul><li>Gross margin improved from First Quarter 2006 </li></ul><ul><li>Overall cost structure better </li></ul><ul><li>Operating expenses decreased </li></ul><ul><li>On track with annual cost savings target </li></ul>First Quarter Financial Highlights
  30. 30. tollgrade is everywhere your broadband network needs to be.™
  31. 31. The Last Mile
  32. 32. <ul><li>Protect network assurance leadership </li></ul><ul><li>Leverage recently expanded global market share </li></ul><ul><li>Expand reach into new markets; explore new applications for our core technology </li></ul><ul><li>Maintain lower operating costs via product redesigns, lower cost manufacturing </li></ul>Strategic Focus - 2007
  33. 33. <ul><li>Protect network assurance leadership </li></ul><ul><li>Leverage recently expanded global market share </li></ul><ul><li>Expand reach into new markets; explore new applications for our core technology </li></ul><ul><li>Maintain lower operating costs via product redesigns, lower cost manufacturing </li></ul>Strategic Focus - 2007
  34. 34. <ul><li>Protect network assurance leadership </li></ul><ul><li>Leverage recently expanded global market share </li></ul><ul><li>Expand reach into new markets; explore new applications for our core technology </li></ul><ul><li>Maintain lower operating costs via product redesigns, lower cost manufacturing </li></ul>Strategic Focus - 2007
  35. 35. <ul><li>Protect network assurance leadership </li></ul><ul><li>Leverage recently expanded global market share </li></ul><ul><li>Expand reach into new markets; explore new applications for our core technology </li></ul><ul><li>Maintain lower operating costs via product redesigns, lower cost manufacturing </li></ul>Strategic Focus - 2007
  36. 36. <ul><li>Protect network assurance leadership </li></ul><ul><li>Leverage recently expanded global market share </li></ul><ul><li>Expand reach into new markets; explore new applications for our core technology </li></ul><ul><li>Maintain lower operating costs via product redesigns, lower cost manufacturing </li></ul>Strategic Focus - 2007
  37. 37. Upcoming Industry Events
  38. 38. <ul><li>Ready with new products, solutions for cable and telco markets </li></ul><ul><li>Leading incumbent positions in the access network </li></ul><ul><li>Greater global presence </li></ul><ul><li>More diverse portfolio of products </li></ul><ul><li>Lower operating costs </li></ul><ul><li>Strong financial position </li></ul><ul><li>Healthy balance sheet </li></ul><ul><ul><li>Cash generation </li></ul></ul><ul><ul><li>No debt </li></ul></ul>Investment Highlights
  39. 39. Annual Meeting of Shareholders May 16, 2007 Syria Shrine, Cheswick, PA

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