Q12013 The Software Industry
Financial Report
SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTS
About Software Equity Group
Leaders in Software M&A 4
Extensive Global Reach 5...
SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTS
Software Industry M&A Market Update
Software/SaaS M&A Deal Volume and Spending...
ABOUT SOFTWARE EQUITY GROUP
33 Q1 2013 Software Industry Financial Report
Copyright © 2013 by Software Equity Group, LLC
• Industry leading boutique investment bank founded in
LEADERS IN SOFTWARE M&A
Industry leading boutique investment bank, ...
EXTENSIVE GLOBAL REACH
Current Sell-side Representation
• SEG currently represents software companies
in the United States...
Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. Founded in 1992,...
SOFTWARE INDUSTRY MACROECONOMICS
77 Q1 2013 Software Industry Financial Report
Copyright © 2013 by Software Equity Group, ...
GLOBAL GDP
• Global GDP growth continued its steady decline through most of 2012 but leveled off in Q4 due to growth in de...
U.S. GDP AND UNEMPLOYMENT
5.0%6%
8%
10%
GDP % Growth Unemployment Rate
1.2%
3.2%
3.6%
2.1%
1.5%
2.2%
3.7%
1.7%
2.6%
3.1%
0...
GLOBAL IT SPENDING
9.0%
6.0%
8.0%
6.0%
3.1%
3.9%5.0%
10.0%
ing
‐5.0%
0.0%
2007 2008 2009 2010 2011 2012 2013Y Change in IT...
E-COMMERCE AND DIGITAL ADVERTISING SPEND
20%
25%
50,000
60,000
illions)
25%
30%
10 000
12,000
llions)
Digital Advertising ...
SEG INDICES VS. BENCHMARK INDICES
• An improving macro economic climate and continued support from the Federal Reserve hel...
PUBLIC SOFTWARE COMPANY FINANCIAL ANDPUBLIC SOFTWARE COMPANY FINANCIAL AND
VALUATION PERFORMANCE:
THE SEG SOFTWARE INDEX
1...
THE SEG SOFTWARE INDEX
SEG- Software: Median Metrics
• The SEG Software Index tracks public
software companies that primar...
THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE
35%
40%
48% of public on-premise software companies
had TTM revenue growth r...
THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE
32%35%
TTM EBITDA Margin DistributionEBITDA Margin Performance
Almost one in...
THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE
Margin PerformanceOperating Ratios
80%
Gross Profit Margin EBITDA Margin Net...
THE SEG SOFTWARE INDEX: MARKET VALUATIONS
EV/Revenue Multiples by Size (TTM Revenue)EV/Revenue and EV/EBITDA Multiples
12....
THE SEG SOFTWARE INDEX: MARKET VALUATIONS
EV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue ...
THE SEG SOFTWARE INDEX: BY PRODUCT CATEGORY
1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q1...
THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY:
FINANCIAL PERFORMANCE
1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth...
THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY:
MARKET VALUATIONS
1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV...
PUBLIC SaaS COMPANY FINANCIAL ANDPUBLIC SaaS COMPANY FINANCIAL AND
VALUATION PERFORMANCE:
THE SEG SaaS INDEX
2323 Q1 2013 ...
SEG- SaaS: Median Metrics
THE SEG SaaS INDEX
• The SEG SaaS Index tracks public
companies that primarily offer hosted, on-...
THE SEG SaaS INDEX DETAILS
SEG SaaS Index
Company
1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q...
THE SEG SaaS INDEX: FINANCIAL PERFORMANCE
35%
TTM Revenue Growth Rate DistributionRevenue Performance
35% achieved TTM
35....
Public SaaS Company Financial PerformanceTHE SEG SaaS INDEX: FINANCIAL PERFORMANCE
TTM EBITDA Margin DistributionEBITDA Ma...
Public SaaS Company Market ValuationsTHE SEG SaaS INDEX: FINANCIAL PERFORMANCE
Median Margin PerformanceMedian Operating R...
Public SaaS Company Financial Performance by Product CategoryTHE SEG SaaS INDEX: MARKET VALUATIONS
EV/Revenue Multiple Dis...
Public SaaS Company Market Valuations by Product CategoryTHE SEG SaaS INDEX: MARKET VALUATIONS
EV/Revenue Multiples vs. TT...
THE SEG SaaS INDEX BY PRODUCT CATEGORY
1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q1...
THE SEG SaaS INDEX BY PRODUCT CATEGORY:
FINANCIAL PERFORMANCE
1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 1Q1...
THE SEG SaaS INDEX BY PRODUCT CATEGORY:
MARKET VALUATIONS
1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV/Rev...
PUBLIC INTERNET COMPANY FINANCIAL ANDPUBLIC INTERNET COMPANY FINANCIAL AND
VALUATION PERFORMANCE:
THE SEG INTERNET INDEX
3...
Public Internet Company Market Valuations by Product CategoryTHE SEG INTERNET INDEX
SEG- Internet: Median Metrics
• The SE...
Initial Public OfferingsTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCE
23%25%
TTM Revenue Growth Rate DistributionRevenue P...
Public SaaS Company Financial PerformanceTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCE
30%
TTM EBITDA Margin DistributionE...
Public SaaS Company Market ValuationsTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCE
Median Margin PerformanceMedian Operati...
THE SEG INTERNET INDEX: MARKET VALUATIONS
EV/Revenue Multiple DistributionMedian EV/Revenue and EV/EBITDA Multiples
13 6
1...
THE SEG INTERNET INDEX: MARKET VALUATIONS
EV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue ...
THE SEG INTERNET INDEX BY PRODUCT CATEGORY
SEG Internet Index
1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 ...
THE SEG INTERNET INDEX BY PRODUCT CATEGORY:
FINANCIAL PERFORMANCE
1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth...
THE SEG INTERNET INDEX BY PRODUCT CATEGORY:
MARKET VALUATIONS
1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV...
SOFTWARE INDUSTRY M&A MARKET UPDATE
4444 Q1 2013 Software Industry Financial Report
Copyright © 2013 by Software Equity Gr...
SOFTWARE/SaaS M&A DEAL VOLUME AND SPENDING
TTM Average M&A Deal SizeU.S. Software Mergers & Acquisitions Activity
431
407
...
SOFTWARE M&A EXIT MULTIPLES
Median Exit Multiples Median EV/Revenue Exit Multiple Distribution
12.2x 12.1x
11 2
11.8x
12.7...
SOFTWARE M&A: BY OWNERSHIP STRUCTURE AND SIZE
  Public Sellers
1.6x Median Multiple
30%
  Buyer Less Than
$200 million
1.4...
Horizontal & Vertical M&A Median EV/Revenue Exit
SOFTWARE M&A: BY VERTICAL AND HORIZONTAL
MARKETS
Horizontal & Vertical M&...
SOFTWARE M&A BY PRODUCT CATEGORY
Content & Document Mgmt
Data Mgmt & Integration
1.5%
Asset & Facilities Mgmt
Billing & Se...
SOFTWARE M&A BY PRODUCT CATEGORY
3.1x
Median EV/Revenue Exit Multiples by Software Product Category
2.0x 2.0x 1.9x
1.7x 1....
SaaS M&A: DEAL VOLUME AND EXIT MULTIPLES
4.1x
94 94 25%100
SaaS M&A Deals   SaaS as % of Software
Median SaaS EV/Revenue E...
SaaS M&A BY PRODUCT CATEGORY
Content & Document 
Mgmt
4 7%
Billing & Service 
Provisioning
BI, Risk & Compliance
8.1%
• CR...
1Q13 SaaS M&A TRANSACTIONS
Date Buyer Seller
Enterprise
Value
TTM
Revenue EV/Rev
03/28/13 HubSpot, Inc. Chime Inc. and Pre...
1Q13 SaaS M&A TRANSACTIONS (CON’T)
Date Buyer Seller
Enterprise
Value
TTM
Revenue EV/Rev
02/22/13 Access UK Limited Sazneo...
1Q13 SaaS M&A TRANSACTIONS (CON’T)
Date Buyer Seller
Enterprise
Value
TTM
Revenue EV/Rev
01/10/13 Nuance Communications, I...
INTERNET M&A: DEAL VOLUME AND EXIT MULTIPLES
273
263 2.1x 2.1x
Median Internet EV/Revenue Exit MultiplesInternet M&A Volum...
INTERNET M&A: DEAL VOLUME AND EXIT MULTIPLES
31 4%
10.8%
Ad‐Tech & Lead Gen Category 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 20...
APPENDIX
5858 Q1 2013 Software Industry Financial Report
Copyright © 2013 by Software Equity Group, LLC
C Ti k P d t C t
THE SEG SOFTWARE INDEX COMPANIES
Amdocs Limited DOX Billing & Service Management
AsiaInfo Holdings, Inc. ...
C Ti k P d t C t
THE SEG SOFTWARE INDEX COMPANIES (CON’T)
American Software, Inc. AMSW.A Enterprise Resource Planning
Orac...
C Ti k P d t C t
THE SEG SOFTWARE INDEX COMPANIES (CON’T)
Epocrates EPOC Mobile Solutions/Content
Glu Mobile, Inc. GLUU Mo...
C Ti k P d t C t
THE SEG SOFTWARE INDEX COMPANIES (CON’T)
Brocade Communications Systems, Inc. BRCD Storage, Data Manageme...
C Ti k P d t C t
THE SEG SOFTWARE INDEX COMPANIES (CON’T)
Micros Systems MCRS Vertical - Other
PROS Holdings PRO Vertical ...
C Ti k P d t C t
THE SEG SaaS INDEX COMPANIES
Company Ticker Product Category
Constant Contact CTCT CRM & Marketing
ExactT...
C Ti k P d t C t
THE SEG INTERNET INDEX COMPANIES
Company Ticker Product Category
Angie's List, Inc. ANGI Ad Tech & Lead G...
C Ti k P d t C t
THE SEG INTERNET INDEX COMPANIES (CON’T)
Company Ticker Product Category
Pandora P Content & Media
Shutte...
C Ti k P d t C t
THE SEG INTERNET INDEX COMPANIES (CON’T)
Company Ticker Product Category
Carbonite, Inc. CARB Services
Li...
1Q13 Software Industry Financial Report
1Q13 Software Industry Financial Report
1Q13 Software Industry Financial Report
1Q13 Software Industry Financial Report
1Q13 Software Industry Financial Report
1Q13 Software Industry Financial Report
1Q13 Software Industry Financial Report
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1Q13 Software Industry Financial Report

  1. 1. Q12013 The Software Industry Financial Report
  2. 2. SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTS About Software Equity Group Leaders in Software M&A 4 Extensive Global Reach 5 Software Industry Macroeconomics Global GDP 8Global GDP 8 U.S. GDP and Unemployment 9 Global IT Spending 10 E-Commerce and Digital Advertising Spend 11 SEG Indices vs. Benchmark Indices 12 Public Software Financial and Valuation PerformancePublic Software Financial and Valuation Performance The SEG Software Index 14 The SEG Software Index: Financial Performance 15-17 The SEG Software Index: Market Valuations 18-19 The SEG Software Index by Product Category 20 The SEG Software Index by Product Category: Financial Performance 21The SEG Software Index by Product Category: Financial Performance 21 The SEG Software Index by Product Category: Market Valuations 22 Public SaaS Company Financial and Valuation Performance The SEG SaaS Index 24 The SEG SaaS Index Detail 25 The SEG SaaS Index: Financial Performance 26-28The SEG SaaS Index: Financial Performance 26 28 The SEG SaaS Index: Market Valuation 29-30 The SEG SaaS Index by Product Category 31 The SEG SaaS Index by Product Category: Financial Performance 32 The SEG SaaS Index by Product Category: Market Valuations 33 Public Internet Company Financial and Valuation PerformancePublic Internet Company Financial and Valuation Performance The SEG Internet Index 35 The SEG Internet Index: Financial Performance 36-38 The SEG Internet Index: Market Valuations 39-40 The SEG Internet Index by Product Category 41 The SEG Internet Index by Product Category: Financial Performance 42 1 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC The SEG Internet Index by Product Category: Financial Performance 42 The SEG Internet Index by Product Category: Market Valuations 43
  3. 3. SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTS Software Industry M&A Market Update Software/SaaS M&A Deal Volume and Spending 45 Software M&A Exit Multiples 46 Software M&A by Ownership Structure and Size 47 Software M&A by Vertical and Horizontal Markets 48Software M&A by Vertical and Horizontal Markets 48 Software M&A by Product Category 49-50 SaaS M&A Deal Volume and Exit Multiples 51 SaaS M&A by Product Category 52 SaaS M&A: 1Q13 Transactions 53-55 Internet M&A: Deal Volume and Exit Multiples 56-57Internet M&A: Deal Volume and Exit Multiples 56 57 Appendix The SEG Software Index Companies 59-63 The SEG SaaS Index Companies 64 The SEG Internet Index Companies 65-67 The SEG Software Index Metrics by Product Category 68-69The SEG Software Index Metrics by Product Category 68 69 The SEG SaaS Index Metrics by Product Category 70 The SEG Internet Index Metrics by Product Category 71 1Q13 Public Sellers 72 1Q13 Software Mega Deals (>$500M) 73 1Q13 Most Active Buyers 741Q13 Most Active Buyers 74 2 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  4. 4. ABOUT SOFTWARE EQUITY GROUP 33 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  5. 5. • Industry leading boutique investment bank founded in LEADERS IN SOFTWARE M&A Industry leading boutique investment bank, founded in 1992, representing public and private software and internet companies seeking: • Strategic exit • Growth capital We Do Deals. Growth capital • Buyout • Inorganic growth via acquisition • Buy and sell-side mentoring • Fairness opinions and valuationsFairness opinions and valuations • Sell-side client revenue range: $5 - 75 million • Buy-side clients include private equity firms and NASDAQ, NYSE and foreign exchange listed companies • Clients span virtually every software technology, product category, delivery model and vertical market • Global presence providing advice and guidance to more th 2 000 i t d bli i th h t USthan 2,000 private and public companies throughout US, Canada, Europe, Asia-Pacific, Africa and Israel • Strong cross-functional team leveraging transaction, operating, legal and engineering experience • Unparalleled software industry reputation and track record. • Highly referenceable base of past clients 4 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  6. 6. EXTENSIVE GLOBAL REACH Current Sell-side Representation • SEG currently represents software companies in the United States, Canada, France, Recent Sell-side Representation Germany, Australia & Saudi Arabia • In addition to the countries listed above, SEG has recently represented software companies in the United Kingdom, France, Netherlands, Israel, and South Africa SEG Research Distribution • SEG’s Quarterly and Annual Software Industry Equity Reports and Monthly Flash Reports areq y p y p distributed to an opt-in list of 50,000 public software company CEOs, software entrepreneurs, private equity managing directors, VCs, high tech corporate lawyers, public accountants, etc. in 76 countries. 5 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC p ,
  7. 7. Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. Founded in 1992, our firm has guided and ABOUT SOFTWARE EQUITY GROUP q y p y g gy , g advised companies on five continents, including privately-held software and technology companies in the United States, Canada, Europe, Asia Pacific, Africa and Israel. We have represented public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges. Software Equity Group also advises several of the world's leading private equity firms. We are ranked among the top ten investment banks worldwide for application software mergers and acquisitions. Our value proposition is unique and compelling We are skilled and accomplished investment bankers with extraordinary software internet and technologyOur value proposition is unique and compelling. We are skilled and accomplished investment bankers with extraordinary software, internet and technology domain expertise. Our industry knowledge and experience span virtually every software product category, technology, market and delivery model, including Software-as-a-Service (Saas), software on-demand and perpetual license. We have profound understanding of software company finances, operations and valuation. We monitor and analyze every publicly disclosed software M&A transaction, as well as the market, economy and technology trends that impact these deals. We're formidable negotiators and savvy dealmakers who facilitate strategic combinations that enhance shareholder value. P h t i t t th l ti hi ' b ilt d th i d t t ti j S ft E it G i k d t d b bli lPerhaps most important are the relationships we've built and the industry reputation we enjoy. Software Equity Group is known and respected by publicly traded and privately owned software and technology companies worldwide, and we speak with them often. Our Quarterly and Annual Software Industry Equity Reports are read and relied upon by more than thousands of industry executives, entrepreneurs and equity investors in sixty-one countries, and we have been quoted widely in such leading publications as The Wall Street Journal, Barrons, Information Week, The Daily Deal, The Street.com, U.S. News & World Report, Reuters, Mergers & Acquisitions, USA Today, Arizona Republic, Detroit Free Press, Entrepreneur Magazine, Softletter, Software Success, Software CEO Online and Software Business Magazine.g To keep your finger on the pulse of the software equity markets, subscribe to our Annual and Quarterly Research Reports. Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. For a confidential consultation without obligation, .kbeible@softwareequity.com,2800-509)858Beible, Director, Business Development (Krisplease contact CONTACT INFORMATION: Software Equity Group, L.L.C. 12220 El Camino Real, Suite 320 San Diego, CA 92130 www softwareequity comwww.softwareequity.com p: (858) 509-2800 The information contained in this Report is obtained from sources we believe to be reliable, but no representation or guarantee is made about the accuracy or completeness of such information, or the opinions expressed herein. Nothing in this Report is intended to be a recommendation of a specific security or company or intended to constitute an offer to buy or sell, or the solicitation of an offer to buy or sell, any security. Software Equity Group LLC may have an interest in one or more of the securities or companies discussed herein. Financial data provided by Capital IQ. 6 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights.
  8. 8. SOFTWARE INDUSTRY MACROECONOMICS 77 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  9. 9. GLOBAL GDP • Global GDP growth continued its steady decline through most of 2012 but leveled off in Q4 due to growth in developing countries• Global GDP growth continued its steady decline through most of 2012, but leveled off in Q4 due to growth in developing countries (chart on left). • In general, global GDP growth continues to reflect the disparity between developed and emerging economies (chart on right) • Emerging economies are forecast to grow GDP 5.9% and 6.0% in 2013 and 2014, respectively D l d i f t t GDP 1 9% d 2 3% i 2013 d 2014 ti l• Developed economies are forecast to grow GDP 1.9% and 2.3% in 2013 and 2014, respectively • Globally, GDP is expected to grow between 2.0% - 3.0% in 2013, according to forecasts from Worldbank and PIMCO. In 2014, Worldbank forecasts global GDP to accelerate further, achieving 3.3% YoY growth. 8 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC Sources: Worldbank, The Economist and PIMCO
  10. 10. U.S. GDP AND UNEMPLOYMENT 5.0%6% 8% 10% GDP % Growth Unemployment Rate 1.2% 3.2% 3.6% 2.1% 1.5% 2.2% 3.7% 1.7% 2.6% 3.1% 0.4% 2.5% 1.3% 4.1% 2.0% 1.3% 3.1% 0.4% 2.5% 0% 2% 4% -0.7% -2.7% -5.4% -0.7% -6% -4% -2% -6.4% -8% 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 • The Bureau of Economic Analysis’ (BEA) first estimate of 1Q13 GDP reported growth of 2 5% up slightly from 1Q12’s 2 0%• The Bureau of Economic Analysis (BEA) first estimate of 1Q13 GDP reported growth of 2.5%, up slightly from 1Q12 s 2.0%. • PIMCO forecasts 1.5% - 2.0% growth for the U.S. economy in 2013, driven in large part by contributions from the housing recovery. • The U.S. unemployment rate dropped to 7.5% in April, in part due to a decline in the number of job seekers. A t bl ti t th t bb l hi h l t t th IT t hi h l t 5 1% Y Y di t• A notable exception to the stubbornly high unemployment rate was the IT sector, which grew employment 5.1% YoY, according to TechServe Alliance. 9 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  11. 11. GLOBAL IT SPENDING 9.0% 6.0% 8.0% 6.0% 3.1% 3.9%5.0% 10.0% ing ‐5.0% 0.0% 2007 2008 2009 2010 2011 2012 2013Y Change in IT Spend -10.0% ‐15.0% ‐10.0% YoY • Global IT spending is forecast to grow 3 9% in 2013 up from 3 1% in 2012 according to averages derived from Goldman Sachs• Global IT spending is forecast to grow 3.9% in 2013, up from 3.1% in 2012, according to averages derived from Goldman Sachs, Gartner and IDC . • Cloud and mobile computing continue to garner an increasing share of the total worldwide IT spend. • Gartner forecasts device sales (PCs, tablets, smartphones and printers) will grow 7.9% YoY, followed by enterprise software, which is projected to grow at 6.4%.which is projected to grow at 6.4%. • IDC forecasts mobile and tablet spending will increase 17% and 32% respectively in 2013, offsetting declines in PC sales. • IDC forecasts spending on cloud services will approach $100 billion in 2016, a four year CAGR of 26.4%, or six times the growth of IT spending as a whole. 10 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC Sources: IT spending numbers shown in charts are an average of Goldman Sachs, IDC and Gartner GDP forecasts
  12. 12. E-COMMERCE AND DIGITAL ADVERTISING SPEND 20% 25% 50,000 60,000 illions) 25% 30% 10 000 12,000 llions) Digital Advertising RevenueE-Commerce Spending 5% 10% 15% 20% 20 000 30,000 40,000 50,000 oY%Change rceSpending($M 5% 10% 15% 20% 6,000 8,000 10,000 oY%Change ngRevenue($Mil ‐5% 0% 5% 0 10,000 20,000 Yo E-Commer ‐10% ‐5% 0% 5% 0 2,000 4,000 Yo InternetAdvertisi • U S retail e-commerce sales totaled $56 8B in 4Q12 (the • U S digital advertising revenues totaled $10 3M in 4Q12• U.S. retail e-commerce sales totaled $56.8B in 4Q12 (the latest data available), marking the first ever $50B+ quarter. • 4Q12’s 14% YoY growth in online sales was spurred by a 6% increase in buyers and an 8% increase in spending per buyer. U.S. digital advertising revenues totaled $10.3M in 4Q12 (the latest quarter data was available), marking the first ever $10M+ quarter and a 15% YoY improvement over 4Q11. • 2012 annual digital advertising spend was $36.6B, up 15% f 2011’ $31 7B • Total U.S. retail e-commerce sales were $186.2B for all of 2012, up 15% from 2011, and the strongest YoY growth rate since the recession. 15% from 2011’s $31.7B. • The increase in 2012’s digital advertising spend was spurred by the rapid increase in mobile advertising spend which reached $3.4B in 2012, up 111% from 2011’s $1.6B. 11 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC Sources: comScore, IAB, IBD $ 6
  13. 13. SEG INDICES VS. BENCHMARK INDICES • An improving macro economic climate and continued support from the Federal Reserve helped drive the U S stock markets• An improving macro economic climate and continued support from the Federal Reserve helped drive the U.S. stock markets higher in 1Q13. • The Dow surged 11.3%, its best first quarter since 1998, achieving a record high in 1Q13. • The S&P advanced 10.0% in 1Q13, while the NASDAQ grew 8.2%, as both achieved 52 week highs. SEG S ft I d t d 8 7% t i 1Q13 t f i th SEG S S d SEG I t t i di hi h l d 1Q13• SEG Software Index posted a 8.7% return in 1Q13, outperforming the SEG SaaS and SEG Internet indices which closed 1Q13 with returns of 5.3% and 7.8%, respectively. • The relative underperformance of the SEG SaaS Index and the NASDAQ illustrates that investors were not yet ready to jump into riskier companies, preferring to place their bets with larger, more stable companies. 12 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  14. 14. PUBLIC SOFTWARE COMPANY FINANCIAL ANDPUBLIC SOFTWARE COMPANY FINANCIAL AND VALUATION PERFORMANCE: THE SEG SOFTWARE INDEX 1313 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  15. 15. THE SEG SOFTWARE INDEX SEG- Software: Median Metrics • The SEG Software Index tracks public software companies that primarily offer on- premise software under a perpetual Measure 1Q12 2Q12 3Q12 4Q12 1Q13 EV/Revenue 2.7x 2.7x 2.6x 2.5x 2.8x EV/EBITDA 12.5x 10.6x 11.1x 11.7x 12.8x EV/Earnings 22.5x 22.2x 21.4x 21.8x 23.8x Gross Profit Margin 68.8% 68.5% 68.3% 68.6% 68.8% EBITDA M i 19 4% 19 4% 19 8% 19 7% 19 7% license with annual M&S • The SEG Software Index is currently comprised of 132 public software i * EBITDA Margin 19.4% 19.4% 19.8% 19.7% 19.7% Net Income Margin 10.8% 10.7% 10.4% 10.4% 9.1% TTM Revenue Growth 14.2% 14.5% 13.3% 12.1% 11.1% TTM Total Revenue ($M) $417.9 $448.4 $447.7 $456.2 $471.6 TTM EBITDA Growth 21.7% 17.5% 14.8% 8.8% 4.4% TTM Total EBITDA ($M) $71.5 $84.2 $78.2 $82.7 $85.7 companies* ($ ) $ $ $ $ $ Cash & Eq ($M) $157.8 $182.6 $159.8 $163.4 $169.4 Current Ratio 1.9 1.9 1.9 2.0 1.9 Debt / Equity Ratio 22.5% 21.5% 23.3% 23.0% 26.6% 14 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC * See appendix for a complete list of companies in The SEG Software Index
  16. 16. THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE 35% 40% 48% of public on-premise software companies had TTM revenue growth rates of 10% or less Of the 18% of companies with TTM revenue TTM Revenue Growth Rate DistributionRevenue Performance 16%$480 TTM Total  Revenue ($M) TTM Revenue Growth 20% 20% 25% 30% 35% ompanies Of the 18% of companies with TTM revenue growth rates of 30% or more, a disproportionate number are focused on mobility and cloud computing 8% 10% 12% 14% $430 $440 $450 $460 $470 enue Growth al Revenue 13% 13% 9% 9% 0% 5% 10% 15% % of Co 0% 2% 4% 6% $390 $400 $410 $420 $430 TTM Reve TTM Tota 0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM Revenue Growth • On-premise software companies lost market share to SaaS and Internet providers and struggled with macro economic 0%$390 1Q12 2Q12 3Q12 4Q12 1Q13 p gg headwinds, as their 1Q13 median TTM revenue growth rate declined to 11.1%, the lowest since 4Q10. • Despite slowing growth, the median TTM revenue of the SEG Software Index reached $471.6M, the highest in its history and the highest among our three tracking indiceshistory and the highest among our three tracking indices. • We expect TTM revenue growth for most on-premise public software companies to remain modest, which portends increased M&A and R&D spending to spur top line growth. 15 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  17. 17. THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE 32%35% TTM EBITDA Margin DistributionEBITDA Margin Performance Almost one in three on-premise software companies posted EBITDA margins of 20% - 30% 25%22% EBITDA Margin TTM EBITDA  Growth 17% 25% 20% 25% 30% ompanies 20% - 30% 15% 20% 10% 12% 14% 16% 18% 20% TDA Growth A Margin Those exceeding 30% EBITDA margins included the software industry’s behemoths, as well as those leveraging online sales to reduce selling expenses 8% 11% 7% 0% 5% 10% 15% % of Co 0% 5% 10% 0% 2% 4% 6% 8% 10% TTM EBIT EBITDA 0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM EBITDA  Margin • EBITDA margins have held relatively constant over the past year and remain at historic levels, closing 1Q13 at 19.7%. 0%0% 1Q12 2Q12 3Q12 4Q12 1Q13 y , g Q • Median TTM EBITDA growth has plunged from 22% YoY in 1Q12 to a 4.4% YoY increase in 1Q13,suggesting many public software companies are spending more to grow revenue after paring expenses to the bone. • In a dramatic reversal from 1Q12, when median TTM EBITDA growth outpaced TTM revenue growth by 7.5%, TTM EBITDA growth in 1Q13 lagged TTM revenue growth by 6.9% (4.4% vs. 11.3%). 16 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  18. 18. THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE Margin PerformanceOperating Ratios 80% Gross Profit Margin EBITDA Margin Net Income Margin 25% S&M (% of Revenue) R&D (% of Revenue) G&A (% of Revenue) 40% 50% 60% 70% Margin 15% 20% Revenue 0% 10% 20% 30% % M 0% 5% 10% % of R • Median spending on sales & marketing (S&M), research & development (R&D) and general & administrative(G&A), as a • In 1Q13, median gross profit, EBITDA and net income margins were 68.8%, 19.7% and 9.1%, respectively. 0% 1Q12 2Q12 3Q12 4Q12 1Q13 0% 1Q12 2Q12 3Q12 4Q12 1Q13 p ( ) g ( ), percentage of total revenue was 23.7%, 15.1% and 10.6%, respectively, in 1Q13 – consistent with historical norms. • Over the past year, S&M and G&A expenses as a percent of revenue have remained flat while R&D ticked up from 14.2% to 15 1% in Q1 g , , p y • Several on-premise providers achieved gross profit margins of 89% and greater, including Qlik Technologies (89%), Splunk (89%), Autodesk (90%), Glu Mobile (90%), Unit 4 (92%) and SolarWinds (93%). to 15.1% in Q1. • Median S&M spending among on-premise public software companies lagged far behind their SaaS counterparts which are investing heavily in customer acquisition. • We anticipate EBITDA margins and Net Income margins will likely decline over the next several quarters, as on-premise software companies increase their investments in R&D to improve products/delivery models and sales & marketing to accelerate TTM revenue growth. 17 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  19. 19. THE SEG SOFTWARE INDEX: MARKET VALUATIONS EV/Revenue Multiples by Size (TTM Revenue)EV/Revenue and EV/EBITDA Multiples 12.5x 12.8x14.0x EV/Revenue EV/EBITDA 4.0x Revenue Greater Than $1 billion Revenue Between $500 million and $1 billion Revenue Between $100 million and $500 million Revenue Less Than $100 million 10.6x 11.1x 11.7x 8.0x 10.0x 12.0x 2 0x 2.5x 3.0x 3.5x V/Revenue 2.7x 2.7x 2.6x 2.5x 2.8x 0 0x 2.0x 4.0x 6.0x 0 0x 0.5x 1.0x 1.5x 2.0x Median EV • Despite slowing growth and EBITDA erosion, the median EV/Revenue multiple in 1Q13 was 2.8x, the highest in nine • Investors in 1Q13 continued to place higher value on larger public software companies with revenues >$100 million. 0.0x 1Q12 2Q12 3Q12 4Q12 1Q13 0.0x 1Q12 2Q12 3Q12 4Q12 1Q13 p , g years. • By contrast, the median EV/EBITDA multiple in 1Q13 was 12.8x, well below the mid-to-high-teen EBITDA multiples achieved in 2007 and before. p p $ • Throughout 2012, and in 1Q13, the EV/Revenue multiples of on-premise software companies with revenues <$100 million remained markedly lower than their larger counterparts. • SEG Software Index companies with TTM revenue between • Although median EBITDA margins of on-premise software companies are at record levels, soaring stock prices have constrained EV/EBITDA market valuations. $100M and $1B Successfully balanced TTM revenue growth (median 17.3%) and EBITDA margins (median 17.7%), and were boosted by the highest EV/Revenue multiples. 18 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  20. 20. THE SEG SOFTWARE INDEX: MARKET VALUATIONS EV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates 4 4x 5.0x 6.0x 2.1x 3.5x 4.0x 4.1x 4.4x 2.5x 3.0x 3.5x 4.0x 4.5x EV/Revenue 3.0x 3.3x 4.8x 3.0x 4.0x 5.0x EV/Revenue 1.3x 2.1x 0 0x 0.5x 1.0x 1.5x 2.0x Median E 1.3x 1.9x 1.7x 0 0x 1.0x 2.0x Median E • Noting the decline in the median revenue growth of on- premise software providers investors awarded valuation • Except for a chosen few with EBITDA margins north of 40%, there was little market premium ascribed to on-premise 0.0x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM Revenue Growth 0.0x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM EBITDA  Margin premise software providers, investors awarded valuation premiums to those with revenue growth above the median (11.3%). • Indeed, revenue growth rates 20% or higher were rewarded with median EV/Revenue multiples of 4.0x or higher. there was little market premium ascribed to on premise software providers that exceeded the median EBITDA margin (19.7%). • However, those on-premise software providers with EBITDA margins of 20% or lower were punished with a median k t l ti f 1 9 EV/Rmarket valuation of 1.9x EV/Revenue. 19 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  21. 21. THE SEG SOFTWARE INDEX: BY PRODUCT CATEGORY 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 Billing & Service Management 1.3x 1.2x 1.2x 1.7x 2.4x 8.1x 9.1x 8.7x 8.6x 8.7x 16.6% 13.6% 9.5% 10.4% 10.4% 20.2% 18.5% 18.8% 19.9% 21.1% Business Intelligence 3.8x 2.7x 2.3x 2.8x 3.0x 35.5x 33.8x 32.8x 19.7x 16.1x 23.7% 16.9% 14.6% 10.9% 10.8% 10.7% 10.9% 10.5% 9.4% 10.8% Development Platforms 2.7x 1.9x 2.1x 2.5x 2.5x 9.4x 8.4x 8.2x 9.4x 9.1x 7.2% 5.3% 3.5% 1.6% 3.0% 24.7% 22.3% 21.8% 23.7% 21.8% E i i & PLM 2 6 2 3 2 6 2 5 2 7 14 2 11 5 12 1 11 8 13 4 13 5% 13 5% 13 2% 14 0% 13 1% 18 5% 19 9% 20 7% 20 6% 20 7% SEG Software Index Category EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin Engineering & PLM 2.6x 2.3x 2.6x 2.5x 2.7x 14.2x 11.5x 12.1x 11.8x 13.4x 13.5% 13.5% 13.2% 14.0% 13.1% 18.5% 19.9% 20.7% 20.6% 20.7% Enterprise Resource Planning 2.5x 2.0x 2.1x 2.2x 2.4x 10.3x 8.9x 9.1x 9.1x 10.2x 10.0% 9.4% 4.7% 3.4% 2.6% 23.2% 23.3% 23.3% 23.1% 22.8% Financial & Accounting 2.8x 2.7x 2.9x 2.9x 3.1x 9.9x 9.4x 9.7x 9.7x 10.5x 6.5% 6.3% 13.6% 10.7% 8.8% 29.1% 28.3% 29.0% 28.8% 27.5% Gaming 1.3x 1.0x 1.0x 1.0x 1.1x 7.1x 7.6x 9.1x 8.0x 7.1x 5.6% 2.6% 2.2% 0.1% 4.4% 16.4% 16.3% 15.5% 15.5% 15.5% Healthcare 3.2x 2.7x 2.2x 2.1x 2.1x 15.1x 13.0x 12.8x 11.3x 14.8x 24.8% 30.1% 22.5% 17.7% 10.1% 20.4% 19.6% 17.8% 16.8% 12.9% IT Conglomerates 3.1x 2.9x 2.8x 2.5x 2.5x 7.7x 7.3x 8.2x 7.8x 8.8x 7.7% 5.3% 1.5% 1.4% 0.5% 37.4% 36.9% 36.1% 34.6% 33.8% Mobile Solutions/Content 4 7x 3 6x 3 3x 2 4x 2 3x 31 5x 16 1x 14 4x 11 9x 20 6x 62 7% 47 1% 34 4% 30 7% 35 2% 12 8% 10 8% 11 9% 5 9% 4 5%Mobile Solutions/Content 4.7x 3.6x 3.3x 2.4x 2.3x 31.5x 16.1x 14.4x 11.9x 20.6x 62.7% 47.1% 34.4% 30.7% 35.2% 12.8% 10.8% 11.9% 5.9% 4.5% Netw orking & Netw ork Performance Management 3.1x 2.4x 2.5x 2.5x 2.7x 16.4x 14.9x 14.0x 14.0x 15.1x 20.7% 19.4% 17.3% 15.5% 12.9% 18.0% 18.0% 16.8% 16.2% 16.4% Security 3.2x 2.9x 3.2x 2.7x 3.3x 13.0x 10.2x 10.5x 11.2x 11.5x 26.3% 19.4% 20.1% 23.1% 23.4% 18.2% 18.0% 19.2% 17.8% 13.9% Storage, Data Management & Integration 2.6x 2.5x 2.5x 2.3x 2.4x 9.2x 9.3x 9.2x 8.4x 9.2x 9.4% 7.7% 6.0% 5.4% 4.2% 22.1% 22.5% 22.7% 22.4% 22.0% Supply Chain Management & Logistics 2.6x 2.5x 2.5x 2.9x 3.3x 12.1x 10.7x 10.9x 12.7x 14.5x 14.9% 18.4% 15.9% 11.2% 11.3% 17.1% 17.5% 17.2% 16.6% 16.0% og s cs Systems Management 5.9x 5.9x 5.5x 4.5x 4.8x 22.2x 23.0x 22.3x 18.9x 20.5x 17.7% 18.1% 18.1% 16.5% 17.2% 26.4% 26.2% 25.8% 25.4% 25.2% Vertical - Finance 3.4x 3.3x 3.2x 3.0x 3.4x 10.7x 10.3x 10.6x 9.4x 10.7x 10.3% 6.8% 6.3% 7.1% 6.7% 26.3% 26.4% 26.3% 26.4% 26.5% Vertical - Other 3.2x 3.0x 2.9x 2.9x 3.0x 18.5x 16.5x 21.0x 20.3x 22.0x 20.7% 26.5% 28.0% 19.8% 21.3% 15.7% 15.7% 14.7% 14.4% 14.1% Median 2.7x 2.7x 2.6x 2.5x 2.8x 12.5x 10.6x 11.1x 11.7x 12.8x 14.2% 14.5% 13.3% 12.1% 11.1% 19.4% 19.4% 19.8% 19.7% 19.7% • The SEG Software Index is segmented into 17 product categories • See the appendix for the complete list of companies within each product category 20 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  22. 22. THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 15% 20% 25% 30% 35% 40% (20%) 0%  20%  40%  60%  0% 5% 10% 15% ervice… gence pment… &PLM erprise… ncial&… aming thcare erates Mobile… king&… ecurity e,Data… Chain… ystems… nance Other (100%) (80%) (60%) (40%) (20%) rvice… ence ment… PLM prise… ial&… ming care rates obile… ng&… curity Data… Chain… tems… ance Other Billing&S BusinessIntelli Develo Engineering& Ente Finan G Healt ITConglom M Networ Se Storage Supply Sy Vertical-Fi Vertical- Billing&Ser BusinessIntellige Developm Engineering&P Enterp Financ Gam Health ITConglomer Mo Networkin Sec Storage,D SupplyC Syst Vertical-Fina Vertical-O 1Q13 YoY Change EBITDA Margin1Q13 TTM EBITDA Margin B 25%  30%  35%  40%  (20%) 0%  20%  0%  5%  10%  15%  20%  ce… ce ent… M se… &… ng re es ile… &… ty ata… ain… ms… ce er (100%) (80%) (60%) (40%) ce… ce ent… M se… &… ng re es ile… &… ty ata… ain… ms… ce er Billing&Servic sinessIntelligenc Developme Engineering&PL Enterpris Financial Gamin Healthcar ITConglomerate Mob Networking Securi Storage,Da SupplyCha System Vertical-Financ Vertical-Othe Billing&Servic sinessIntelligenc Developme Engineering&PL Enterpris Financial Gamin Healthcar ITConglomerate Mobi Networking Securi Storage,Da SupplyCha System Vertical-Financ Vertical-Othe 21 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC Bu E Bus E
  23. 23. THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY: MARKET VALUATIONS 1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV/Revenue Multiples 5.0x 6.0x 60% 80% 100% 2.0x 3.0x 4.0x (20%) 0% 20% 40% 60% 0.0x 1.0x gement ligence atforms g&PLM lanning ounting Gaming althcare merates Content Network… Security ement&… ement&… gement Finance -Other (60%) (40%) (20%) gement ligence atforms g&PLM lanning ounting Gaming althcare merates Content Network… Security ement&… ement&… gement Finance -Other g&ServiceManag BusinessIntel DevelopmentPla Engineering rpriseResourcePl Financial&Acco G Hea ITConglom MobileSolutions/C Networking&N S age,DataManage plyChainManage SystemsManag Vertical-F Vertical ng&ServiceManag BusinessIntel DevelopmentPla Engineering rpriseResourceP Financial&Acco G Hea ITConglom MobileSolutions/C Networking&N S age,DataManage pplyChainManage SystemsManag Vertical-F Vertical • In 1Q13, seven product categories achieved median EV/Revenue multiples above the SEG Software Index median (2.8x), including Business Intelligence (3.0x), Financial & Accounting (3.1x), Security (3.3x), Supply Chain Mgmt (3.3x), Systems Mgmt (4.8x), Vertical – Finance (3.4x), and Vertical – Other (3.0x). Billin Ente Stora Sup Billin Ente Stora Sup • Five of the seven leading categories reported double digit revenue growth and EBITDA margins. • The Systems Management product category, benefitting from the rapid shift to cloud computing and the market requirement for cloud infrastructure, achieved the highest median EV/Revenue multiple (4.8x) in 1Q13, driven by strong TTM revenue growth (17.2%) and EBITDA margins (25.2%). 22 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC • The Billing & Service Mgmt category ‘s median EV/Revenue spiked 82%, closing 1Q13 at 2.4x, despite declining revenue growth.
  24. 24. PUBLIC SaaS COMPANY FINANCIAL ANDPUBLIC SaaS COMPANY FINANCIAL AND VALUATION PERFORMANCE: THE SEG SaaS INDEX 2323 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  25. 25. SEG- SaaS: Median Metrics THE SEG SaaS INDEX • The SEG SaaS Index tracks public companies that primarily offer hosted, on- demand software under a subscription Measure 1Q12 2Q12 3Q12 4Q12 1Q13 EV/Revenue 5.2x 5.4x 5.5x 4.8x 5.3x EV/EBITDA 33.6x 30.1x 42.4x 43.1x 35.4x EV/Earnings 32.3x 37.5x 40.9x 40.2x 63.8x Gross Profit Margin 70.0% 70.0% 69.9% 70.9% 69.5% and/or transaction based pricing model • The SEG SaaS Index is currently comprised of 32 public pure-play SaaS i * EBITDA Margin 9.0% 9.0% 8.3% 8.5% 7.8% Net Income Margin -0.5% -0.7% -0.5% 0.6% -0.9% TTM Revenue Growth 28.4% 30.3% 27.2% 24.0% 25.6% TTM Total Revenue ($M) $128.1 $139.5 $146.1 $154.2 $161.6 TTM EBITDA Growth 27.2% 24.9% 23.2% 10.4% 7.9% TTM Total EBITDA ($M) $8.3 $9.5 $8.7 $8.3 $10.3 companies* TTM Total EBITDA ($M) $8.3 $9.5 $8.7 $8.3 $10.3 Cash & Eq ($M) $59.6 $78.0 $72.1 $86.1 $100.1 Current Ratio 1.5 1.8 1.5 1.7 1.9 Debt / Equity Ratio 8.6% 6.5% 6.2% 4.6% 4.2% 24 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC * See appendix for a complete list of companies in The SEG SaaS Index
  26. 26. THE SEG SaaS INDEX DETAILS SEG SaaS Index Company 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 Athenahealth, Inc 6.8x 7.2x 8.2x 6.1x 7.2x 45.3x 50.0x 62.9x 48.9x 59.9x 32.0% 34.4% 34.2% 32.4% 30.3% 15.0% 14.5% 13.1% 12.5% 12.1% Bazaarvoice, Inc 11.0x 9.4x 7.2x 4.3x 2.7x - - - - - - 64.6% 62.6% 59.3% 57.9% -20.7% -19.4% -17.8% -17.9% -18.2% Callidus Softw are Inc. 2.8x 2.4x 2.0x 2.0x 2.1x - - - - - 18.2% 15.4% 15.0% 14.9% 13.3% -10.6% -10.3% -13.6% -14.8% -17.1% Concur 7.8x 8.0x 8.7x 7.8x 7.9x 68.6x 59.2x 69.2x 67.5x 81.7x 21.0% 24.0% 25.7% 25.8% 25.1% 11.4% 13.6% 12.6% 11.5% 9.7% Constant Contact 3.4x 2.3x 2.0x 1.3x 1.4x 33.6x 21.7x 19.8x 14.3x 17.9x 23.1% 21.4% 20.0% 19.1% 17.6% 10.2% 10.7% 10.3% 9.2% 7.8% EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin SEG SaaS Index Constant Contact 3.4x 2.3x 2.0x 1.3x 1.4x 33.6x 21.7x 19.8x 14.3x 17.9x 23.1% 21.4% 20.0% 19.1% 17.6% 10.2% 10.7% 10.3% 9.2% 7.8% Cornerstone OnDemand 11.3x 11.7x 12.9x 13.1x 13.4x - - - - - 67.0% 63.2% 72.2% 68.1% 61.5% -24.0% -25.5% -21.5% -24.1% -23.4% DealerTrack 3.2x 3.1x 2.9x 2.9x 3.3x 21.0x 20.1x 19.5x 20.3x 23.9x 44.9% 39.2% 28.7% 16.8% 10.1% 15.3% 15.4% 15.1% 14.2% 13.8% Demandw are, Inc. 14.6x 12.5x 9.8x 10.0x 8.9x 386.9x 553.5x - - - 54.1% 48.7% 45.0% 42.3% 40.5% 3.8% 2.3% -3.5% -5.9% -4.8% E2open, Inc - - 4.6x 4.5x 5.9x - - 92.6x 76.6x 272.9x 7.5% - - 22.2% 25.6% 2.1% 1.6% 5.0% 5.9% 2.1% Ebix Inc. 5.2x 4.1x 5.2x 3.7x 3.4x 12.0x 9.3x 12.2x 8.9x 7.9x 27.8% 22.8% 18.2% 18.4% 18.0% 43.4% 43.5% 42.9% 41.2% 42.4% Ellie Mae 2.2x 4.6x 7.8x 6.0x 5.0x 24.4x 29.8x 37.9x 24.6x 19.5x 28.4% 46.4% 67.0% 83.5% 83.5% 9.0% 15.4% 20.6% 24.4% 25.5% ExactTarget, Inc. 7.9x 6.0x 5.0x 4.4x 4.7x - - - 158.4x 339.9x 54.5% - - 43.1% 40.9% -3.3% -2.1% -0.1% 2.8% 1.4% Fleetmatics - - - 7.5x 6.9x - - - 44.6x 37.0x 42.7% - - - 38.1% 17.9% 17.4% 17.0% 16.8% 18.6% IntraLinks Holdings 1.7x 1.3x 1.4x 1.6x 1.6x 12.5x 13.8x 34.2x 467.2x 51.1x 15.5% 7.3% 2.9% 0.1% 1.8% 13.9% 9.0% 4.1% 0.4% 3.2% Jive Softw are, Inc 13.3x 13.0x 8.7x 6.9x 7.6x - - - - - 67.0% 64.2% 56.8% 49.3% 47.1% -47.8% -44.7% -39.3% -34.9% -32.2% LivePerson 5.3x 5.8x 6.0x 4.3x 4.3x 25.7x 30.1x 37.2x 30.3x 35.4x 21.1% 21.3% 21.4% 19.7% 18.3% 20.5% 19.2% 16.2% 14.1% 12.1% Marin Softw are - - - - 8.2x - - - - - 90.1% 90.1% 90.1% - 64.9% -42.4% -42.4% -42.4% -37.2% -38.0% Medidata Solutions 2.3x 3.0x 4.0x 4.4x 5.3x 11.4x 14.8x 22.9x 26.3x 31.8x 10.8% 14.5% 10.0% 12.1% 18.4% 20.0% 20.5% 17.7% 16.6% 16.6% Netsuite 12.8x 12.5x 14.2x 14.6x 15.4x - - - - - 22.4% 24.6% 26.3% 28.4% 30.7% -7.4% -6.8% -5.6% -5.2% -5.2% O T bl I 7 2 5 9 5 9 6 1 7 1 24 0 19 8 20 7 20 3 25 0 40 9% 30 3% 22 0% 17 1% 15 9% 30 2% 29 8% 28 5% 29 8% 28 5%OpenTable, Inc. 7.2x 5.9x 5.9x 6.1x 7.1x 24.0x 19.8x 20.7x 20.3x 25.0x 40.9% 30.3% 22.0% 17.1% 15.9% 30.2% 29.8% 28.5% 29.8% 28.5% Qualys, Inc. - - 4.8x 4.8x 3.1x - - 57.6x 50.5x 27.7x 16.5% - - - 20.0% 10.9% 9.7% 8.3% 9.5% 11.3% RealPage 6.9x 4.9x 6.1x 5.1x 5.0x 58.3x 39.8x 46.9x 36.0x 30.6x 37.0% 34.4% 32.0% 27.7% 24.9% 11.8% 12.2% 13.1% 14.1% 16.4% Responsys 3.4x 3.4x 2.7x 1.4x 1.7x 21.6x 20.3x 20.3x 11.4x 14.0x 43.4% 36.3% 27.2% 21.1% 20.7% 15.7% 16.6% 13.1% 12.1% 11.8% Salesforce.com 7.7x 8.2x 7.4x 7.4x 8.2x 165.1x 189.2x 167.9x 235.9x 298.6x 36.8% 37.7% 36.5% 36.1% 34.6% 4.7% 4.3% 4.4% 3.1% 2.8% SciQuest 5.0x 5.0x 5.4x 4.7x 5.5x 37.1x 41.4x 47.1x 50.7x 96.2x 25.8% 23.3% 22.0% 21.4% 24.4% 13.5% 12.1% 11.6% 9.4% 5.7% Service-now .com - 17.4x 18.4x 16.3x 14.9x - - - - - - - - - 90.3% 4.2% -6.7% -10.4% -12.7% -8.9% SPS Commerce 4.7x 4.9x 5.6x 6.6x 6.4x 68.5x 68.5x 67.2x 78.0x 73.9x 30.0% 31.6% 31.5% 30.4% 33.0% 6.9% 7.1% 8.4% 8.5% 8.7%SPS Commerce 4.7x 4.9x 5.6x 6.6x 6.4x 68.5x 68.5x 67.2x 78.0x 73.9x 30.0% 31.6% 31.5% 30.4% 33.0% 6.9% 7.1% 8.4% 8.5% 8.7% Tangoe 5.2x 6.3x 5.5x 3.2x 3.3x 61.7x 77.9x 70.3x 41.7x 38.9x 53.3% 56.0% 50.8% 48.1% 47.2% 8.4% 8.1% 7.8% 7.6% 8.5% The Ultimate Softw are Group, Inc. 6.5x 7.0x 8.3x 8.0x 7.9x 65.7x 71.1x 80.0x 69.4x 63.7x 18.2% 19.6% 21.0% 21.8% 23.4% 9.9% 9.9% 10.4% 11.6% 12.5% Vocus 2.6x 3.0x 3.3x 2.6x 2.1x 132.5x 284.2x 407.4x 233.1x - 18.7% 21.0% 29.9% 39.7% 48.7% 2.0% 1.1% 0.8% 1.1% -0.2% Workday, Inc. - - - 33.2x 29.9x - - - - - 53.8% - - - 103.6% -51.4% -43.4% -38.1% -35.7% -32.5% Zix Corporation 4.6x 3.9x 3.5x 3.6x 4.2x 14.6x 12.5x 11.3x 12.7x 15.3x 15.4% 12.4% 11.1% 12.0% 13.7% 31.3% 31.2% 30.7% 28.1% 27.6% Median: 5.2x 5.4x 5.5x 4.8x 5.3x 33.6x 30.1x 42.4x 43.1x 35.4x 28.4% 30.3% 27.2% 24.0% 25.6% 9.0% 9.0% 8.3% 8.5% 7.8% 25 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  27. 27. THE SEG SaaS INDEX: FINANCIAL PERFORMANCE 35% TTM Revenue Growth Rate DistributionRevenue Performance 35% achieved TTM 35.0%$180 TTM Total  Revenue ($M) TTM Revenue Growth 29% 19% 16% 19% 20% 25% 30% ompanies 35% achieved TTM revenue growth of 40% or more 20.0% 25.0% 30.0% $80 $100 $120 $140 $160 enue Growth al Revenue Only 3% of generated TTM revenue growth of 10% or less 0% 3% 13% 0% 5% 10% 15% % of Co 0 0% 5.0% 10.0% 15.0% $0 $20 $40 $60 $80 TTM Reve TTM Tota 0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% <= 50% > 50% TTM Revenue Growth • After declining for three consecutive quarters, the median TTM revenue growth rate for The SEG SaaS Index was 25.6% in 0.0%$0 1Q12 2Q12 3Q12 4Q12 1Q13 g 1Q13. • Public SaaS companies continued to grow and mature, pushing the median TTM revenue of the SEG SaaS Index to $161.7M, up sharply from 1Q12’s $128.1M. • Accelerating demand for SaaS solutions has bolstered the TTM revenue growth rates of public SaaS providers, but many are reaching a size that makes it difficult to recapture 2007’s median 42.5% growth rate in a slow growing economy. • We expect median TTM revenue growth will remain at current 26 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC We expect median TTM revenue growth will remain at current levels for the remainder of 2013.
  28. 28. Public SaaS Company Financial PerformanceTHE SEG SaaS INDEX: FINANCIAL PERFORMANCE TTM EBITDA Margin DistributionEBITDA Margin Performance 87% with EBITDA margins of 20% or lower 30%10% EBITDA Margin TTM EBITDA  Growth 32%35% 15% 20% 25% 6% 8% TDA Growth A Margin 29% 26% 20% 25% 30% ompanies 0% 5% 10% 0% 2% 4% TTM EBIT EBITDA 10% 3% 0% 5% 10% 15% % of Co • After peaking in 2010, the median EBITDA margins of public SaaS companies have declined each quarter. 0%0% 1Q12 2Q12 3Q12 4Q12 1Q13 0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% TTM EBITDA  Margin SaaS companies have declined each quarter. • The trend continued in 1Q13, as EBITDA margins fell to 7.8% from 9.0% in 1Q12. • The decline in EBITDA margins has not been accompanied by a concomitant increase in TTM revenue rates, suggestingy gg g public SaaS providers are working harder to make a sale. 27 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  29. 29. Public SaaS Company Market ValuationsTHE SEG SaaS INDEX: FINANCIAL PERFORMANCE Median Margin PerformanceMedian Operating Ratios 45% S&M (% of Revenue) R&D (% of Revenue) G&A (% of Revenue) 80% Gross Profit Margin EBITDA Margin Net Income Margin 25% 30% 35% 40% Revenue 40% 50% 60% 70% Margin 0% 5% 10% 15% 20% % of R 0% 10% 20% 30% % M • Increased spending on sales and marketing by public SaaS companies accounts for much of the decline in median • Median gross profit margins for public SaaS companies in 1Q13 were 69.5%, and have remained steady over the past 0% 1Q12 2Q12 3Q12 4Q12 1Q13 0% 1Q12 2Q12 3Q12 4Q12 1Q13 p EBITDA margin. • In 1Q13, 39.0% of total revenue was spent on sales & marketing, up from 36.2% in 1Q12. • R&D spending as a percent of revenue increased to 17.4% in , y p five quarters. • Stable gross profit margins demonstrate the ability of public SaaS companies to grow without disproportionally increasing infrastructure and application delivery costs. 1Q13, compared to 15.1% of revenue invested in R&D by on-premise software companies. • It is unclear whether the increased spending on product enhancements and sales by public SaaS companies will accelerate revenue growth in the absence of improved GDP • With growth as their primary objective, public SaaS companies are running at break even, with net income in 1Q13 of 0.9%. 28 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC accelerate revenue growth in the absence of improved GDP growth and increased IT capital spending.
  30. 30. Public SaaS Company Financial Performance by Product CategoryTHE SEG SaaS INDEX: MARKET VALUATIONS EV/Revenue Multiple DistributionEV/Revenue and EV/EBITDA Multiples 42 4 43 1x 50.0x EV/Revenue EV/EBITDA 13% 13% 13% 13%14% 33.6x 30.1x 42.4x 43.1x 35.4x 25.0x 30.0x 35.0x 40.0x 45.0x 10% 10% 10% 7% 10% 8% 10% 12% ompanies 5.2x 5.4x 5.5x 4.8x 5.3x 0 0x 5.0x 10.0x 15.0x 20.0x 0% 0% 2% 4% 6% % of Co • Median EV/Revenue multiples remained strong for public SaaS providers, closing 1Q13 at 5.3x. • The even distribution of EV/Revenue multiples across the public SaaS company universe is striking and shows that it 0.0x 1Q12 2Q12 3Q12 4Q12 1Q13 0% <= 1.0x > 1.0x <= 2.0x > 2.0x <= 3.0x > 3.0x  <= 4.0x > 4.0x <= 5.0x > 5.0x <= 6.0x > 6.0x <= 7.0x > 7.0x <= 8.0x > 8.0x <= 9.0x > 9.0x EV/Revenue p , g Q • Public SaaS providers in 1Q13 continued to trade at a significant premium relative to their on-premise peers (5.3x vs. 2.8x). • Public SaaS EV/Revenue multiples have exceeded 5x in four p p y g takes much more than carrying the SaaS moniker to achieve a premium EV/Revenue multiple. • Typically we would expect to see a cluster of companies possessing multiples around the median (5.3x), however, there are as many companies in the 5 0x 6 0x EV/Revenue of the past five quarters, the best streak since 2007. there are as many companies in the 5.0x – 6.0x EV/Revenue range as the 9.0x range . • What distinguishes companies with premium EV/Revenue multiples versus those that do not? 29 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  31. 31. Public SaaS Company Market Valuations by Product CategoryTHE SEG SaaS INDEX: MARKET VALUATIONS EV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates 10.8x 12.0x 8.5x9.0x 5.7x 7.5x 4 7x 6.0x 8.0x 10.0x EV/Revenue 5.5x 4.6x 5.0x 5.0x 6.0x 7.0x 8.0x EV/Revenue 0.0x 1.6x 3.4x 4.7x 0 0x 2.0x 4.0x Median E 3.4x 0 0x 1.0x 2.0x 3.0x 4.0x Median E • There is a clear and direct correlation between TTM revenue growth and median EV/Revenue multiples • There is an inverse correlation between EBITDA margins and median EV/Revenue multiples 0.0x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% <= 50% > 50% TTM Revenue Growth 0.0x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% TTM EBITDA  Margin growth and median EV/Revenue multiples. • Public SaaS companies growing TTM revenue in excess of 50% achieved a median EV/Revenue multiple of 10.8x. • The premium market valuations awarded rapidly growing public SaaS companies accounts, in large part, for their and median EV/Revenue multiples. • In the current universe, SaaS profitability is penalized, as investors fear profitability is at the expense of growth, which they deem all important. • Public SaaS companies with no profitability achieved apublic SaaS companies accounts, in large part, for their increased spending on sales & marketing. p p y remarkable 8.5x median EV/Revenue multiple. 30 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  32. 32. THE SEG SaaS INDEX BY PRODUCT CATEGORY 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 CRM & Marketing 6.5x 5.9x 5.5x 4.3x 4.3x 3.0x 4.1x 4.5x 2.8x 2.3x 36.8% 36.3% 29.9% 36.1% 37.7% 3.3% 2.7% 2.6% 2.9% 2.1% ERP & Supply Chain 5.0x 5.0x 5.5x 6.6x 6.4x 4.4x 5.0x 5.3x 5.0x 5.6x 25.8% 24.6% 26.3% 25.3% 30.7% 6.9% 7.1% 8.4% 8.5% 5.7% Vertically Focused 4.2x 4.3x 5.7x 4.7x 5.0x 3.7x 4.1x 4.6x 3.9x 4.2x 30.2% 34.4% 30.3% 23.0% 21.6% 15.2% 15.4% 16.4% 15.4% 16.5% SEG SaaS Index Category EV/Revenue Forward EV/Revenue TTM Revenue Growth EBITDA Margin Workforce Management 6.5x 7.0x 8.3x 10.5x 10.7x 5.7x 6.5x 7.3x 7.6x 8.0x 36.0% 19.6% 21.0% 21.8% 42.5% -17.3% -17.9% -17.6% -19.4% -20.2% Median: 5.2x 5.4x 5.5x 4.8x 5.3x 4.4x 4.8x 4.9x 4.3x 4.7x 29.2% 30.9% 28.0% 25.8% 27.9% 9.4% 9.4% 8.4% 8.8% 8.2% With 32 companies, The SEG SaaS Index now has sufficient critical mass for us to track trends across four distinct SaaS product categories Select companies within each SaaS Product CRM & M k ti ERP & S l Ch i V ti ll F d W kf M t across four distinct SaaS product categories. Select companies within each SaaS Product category are included below. See the appendix for the complete list of companies within each product category. CRM & M k ti ERP & S l Ch i V ti ll F d W kf M tCRM & Marketing ERP & Supply Chain Vertically Focused Workforce ManagementCRM & Marketing ERP & Supply Chain Vertically Focused Workforce Management 31 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  33. 33. THE SEG SaaS INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 25% 30% 35% 40% 45% 0%  10%  20%  30%  0% 5% 10% 15% 20% 25% (40%) (30%) (20%) (10%) 0% CRM& Marketing ERP& SupplyChain Vertically Focused Workforce Management (40%) CRM& Marketing ERP& SupplyChain Vertically Focused Workforce Management 1Q13 YoY Change EBITDA Margin1Q13 TTM EBITDA Margin 10%  15%  20%  0%  10%  20%  (15%) (10%) (5%) 0%  5%  (40%) (30%) (20%) (10%) g in ed e nt (25%) (20%) ( ) CRM& Marketing ERP& plyChain Vertically Focused orkforce nagement CRM&Marketin RP&SupplyChai VerticallyFocuse Workforce Managemen 32 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC M E Supp V Wo Man ER V
  34. 34. THE SEG SaaS INDEX BY PRODUCT CATEGORY: MARKET VALUATIONS 1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV/Revenue Multiples 10.0x 12.0x 60% 80% 6.0x 8.0x 0% 20% 40% 0.0x 2.0x 4.0x g n y d nt (40%) (20%) 0% g n ly d nt • Workforce Management category achieved a 10.3x median EV/Revenue multiple, 66% higher than the next closest product category, CRM& Marketing ERP& SupplyChai Verticall Focused Workforce Managemen CRM& Marketin ERP& SupplyChai Verticall Focused Workforce Managemen g g y g g y ERP & Supply Chain. • The stellar performance of SaaS providers comprising the Workforce Management category can be attributed to their breakneck TTM revenue growth, with no profits. • Workforce management SaaS providers continued to benefit from a product refresh cycle that is replacing legacy, on-premise solutions with hosted SaaS solutions. • ERP & Supply chain, one of the last product categories to adopt SaaS solutions due to concerns over security and integration, achieved the second highest median EV/Revenue multiple (6.2x). • Although ERP & Supply Chain TTM revenue growth was only slightly above the SaaS median, companies within this product t i d i k t l ti b f th i k t t ti l f h t d ERP & S l Ch i l ti 33 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC category received premium market valuations because of the massive market potential of hosted ERP & Supply Chain solutions.
  35. 35. PUBLIC INTERNET COMPANY FINANCIAL ANDPUBLIC INTERNET COMPANY FINANCIAL AND VALUATION PERFORMANCE: THE SEG INTERNET INDEX 3434 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  36. 36. Public Internet Company Market Valuations by Product CategoryTHE SEG INTERNET INDEX SEG- Internet: Median Metrics • The SEG Internet Index tracks public companies that primarily offer B2C solutions over the Internet using a wide Measure 1Q12 2Q12 3Q12 4Q12 1Q13 EV/Revenue 2.2x 2.1x 1.9x 2.0x 2.0x EV/EBITDA 13.4x 12.6x 13.3x 12.8x 13.6x EV/Earnings 26.2x 23.3x 27.9x 23.6x 22.5x Gross Profit Margin 66.2% 67.5% 67.4% 65.5% 65.7% array of pricing models • The SEG Internet Index is currently comprised of 97 public Internet i * EBITDA Margin 13.6% 13.3% 13.0% 12.9% 13.0% Net Income Margin 4.3% 4.8% 4.3% 5.3% 3.9% TTM Revenue Growth 29.8% 27.6% 24.9% 22.2% 19.8% TTM Total Revenue ($M) $358.0 $378.9 $382.1 $387.3 $400.0 TTM EBITDA Growth 26.7% 20.3% 20.9% 14.2% 15.9% TTM Total EBITDA ($M) $40.6 $42.9 $48.6 $46.3 $42.7 companies* ( ) Cash & Eq ($M) $136.2 $130.7 $122.1 $130.4 $148.2 Current Ratio 2.4 2.6 2.6 2.5 2.2 Debt / Equity Ratio 15.5% 14.5% 13.5% 19.3% 19.3% 35 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC * See appendix for a complete list of companies in The SEG Internet Index
  37. 37. Initial Public OfferingsTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCE 23%25% TTM Revenue Growth Rate DistributionRevenue Performance 35.0%$410 TTM Total  Revenue ($M) TTM Revenue Growth 21% 12% 18% 16% 10% 15% 20% ompanies 20.0% 25.0% 30.0% $370 $380 $390 $400 nue Growth al Revenue 10% 0% 5% 10% % of Co 0 0% 5.0% 10.0% 15.0% $330 $340 $350 $360 TTM Reve TTM Tota 0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM Revenue Growth • Over the past year, The median TTM revenue growth rate of public companies comprising The SEG Internet Index declined 10% 0.0%$330 1Q12 2Q12 3Q12 4Q12 1Q13 co pa es co p s g e S G te et de dec ed 0% (29.8% to 19.8%) in 1Q13. • While lower, the 19.8% median Internet growth rate is still healthy, especially considering the median TTM revenue of The SEG Internet Index is $400M, compared to only $162M for The SEG SaaS IndexSaaS Index. • The SEG Internet Index had an impressive number of star performers, 23% of companies in the Index reported TTM revenue growth of 40% or higher. • Conversely 21% of companies in The SEG Internet Index posted 36 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC • Conversely, 21% of companies in The SEG Internet Index posted negative TTM revenue growth, depressing the median as a whole.
  38. 38. Public SaaS Company Financial PerformanceTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCE 30% TTM EBITDA Margin DistributionEBITDA Margin Performance 30%16% EBITDA Margin TTM EBITDA  Growth 21% 23% 24% 14% 15% 20% 25% ompanies 15% 20% 25% 8% 10% 12% 14% TDA Growth A Margin 9% 9% 0% 5% 10% % of Co 0% 5% 10% 0% 2% 4% 6% TTM EBIT EBITDA 0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM EBITDA  Margin • Over the past five quarters, public Internet companies managed to maintain respectable margins despite the 0%0% 1Q12 2Q12 3Q12 4Q12 1Q13 g p g p declining revenue growth rates. • The median ~13% EBITDA margins were consistent with 2006 and 2007 performance, but were dramatically lower than the 18.1% median EBITDA achieved in 1Q11. • The EBITDA margin decline was partly due to a larger number of Internet IPOs featuring Internet providers with stellar revenue growth, but little, if any, profitability. • 45% of all public Internet companies posted EBITDA margins of 10% or lower 37 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC margins of 10% or lower.
  39. 39. Public SaaS Company Market ValuationsTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCE Median Margin PerformanceMedian Operating Ratios 25% S&M (% of Revenue) R&D (% of Revenue) G&A (% of Revenue) 80% Gross Profit Margin EBITDA Margin Net Income Margin 15% 20% Revenue 40% 50% 60% 70% Margin 0% 5% 10% % of R 0% 10% 20% 30% % M • In 1Q13, companies comprising the SEG Internet Index spent 23.7% of total revenue on sales and marketing (S&M), 15.2% on research development (R&D), and 10.6% on general and administrative. 0% 1Q12 2Q12 3Q12 4Q12 1Q13 0% 1Q12 2Q12 3Q12 4Q12 1Q13 p ( ), g • The median R&D spend as a percent of total revenue was the lowest among our three tracking indices. • Despite TTM revenue growth declines, public Internet companies kept their cost structures in line, resulting in a median TTM EBITDA margin of 13% in 1Q13. 38 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  40. 40. THE SEG INTERNET INDEX: MARKET VALUATIONS EV/Revenue Multiple DistributionMedian EV/Revenue and EV/EBITDA Multiples 13 6 16.0x EV/Revenue EV/EBITDA 27% 30% 13.4x 12.6x 13.3x 12.8x 13.6x 8.0x 10.0x 12.0x 14.0x 24% 15% 20% 25% ompanies 2.2x 2.1x 1.9x 2.0x 2.0x 0 0x 2.0x 4.0x 6.0x 9% 9% 9% 4% 2% 1% 7% 8% 0% 5% 10% % of Co • In 1Q13, the median EV/Revenue multiple of The SEG Internet Index was 2.0x, a modest decline from 1Q12’s 2.2x. • As the median EV/Revenue multiple distribution shows public Internet companies garner a strikingly wide range of market 0.0x 1Q12 2Q12 3Q12 4Q12 1Q13 0% <= 1.0x > 1.0x <= 2.0x > 2.0x <= 3.0x > 3.0x  <= 4.0x > 4.0x <= 5.0x > 5.0x <= 6.0x > 6.0x <= 7.0x > 7.0x <= 8.0x > 8.0x <= 9.0x >= 9.0x EV/Revenue • As the median EV/Revenue multiple distribution shows, public Internet companies garner a strikingly wide range of market valuations; 51% had EV/Revenue of 2.0x or less, while 15% boasted an EV/Revenue multiple of 8.0x or greater. • Those Internet companies with the highest EV/Revenue multiples were mostly new IPOs that were positioned to capitalize upon the shift to online advertising, and several benefited also from having originated in high growth economies such as China and Brazil. Examples include: LinkedIn (16.8x), Facebook (11.3x), Qihoo (10.3x), Mercadolibre (9.8x), Zillow (9.8x), Youku (9.6x), Yelp (9.4x) and Trulia (8.9x). 39 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  41. 41. THE SEG INTERNET INDEX: MARKET VALUATIONS EV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates 8.0x 9.0x 7.5x8.0x 8.0x 5.0x 6.0x 7.0x 8.0x EV/Revenue 4.4x 4.0x 5.0x 6.0x 7.0x EV/Revenue 0.8x 1.8x 2.9x 3.0x 2.1x 0 0x 1.0x 2.0x 3.0x 4.0x Median E 1.7x 1.0x 2.0x 2.9x 0 0x 1.0x 2.0x 3.0x Median E • Public Internet company valuation performance is dramatically split between new, rapidly growing social and • Unlike The SEG SaaS Index where TTM EBITDA margins have little bearing on the median EV/Revenue multiple 0.0x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM Revenue Growth 0.0x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM EBITDA  Margin y p , p y g g ad-tech providers and other, slower growing incumbent providers, e.g. Facebook vs. Yahoo. • Public Internet companies with TTM revenue growth of 40% or higher were rewarded with median EV/Revenue multiples markedly higher than their slower growing peers have little bearing on the median EV/Revenue multiple applied to a company, public Internet company investors kept a keen eye on margins and rewarded strong performers with significantly higher market valuations. • With few exceptions, and in stark contrast to SaaS markedly higher than their slower growing peers. • The relative market valuations of public Internet companies with TTM revenue growth greater than 0% and less than 40%, was nominal (1.8x to 3.0x), especially in light of the major differences among public SaaS companies across this p companies, many of the most profitable public Internet companies also reported stellar TTM revenue growth. Among them were ChangYou, Baidu, Yandex, Mail.ru, TripAdvisor and Tencent Holdings. 40 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC revenue distribution spread.
  42. 42. THE SEG INTERNET INDEX BY PRODUCT CATEGORY SEG Internet Index 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 Ad Tech & Lead Generation 2.7x 2.1x 1.7x 1.9x 1.8x 14.1x 11.4x 13.3x 12.0x 14.9x 34.4% 37.5% 35.3% 32.9% 25.2% 13.9% 14.0% 14.4% 14.1% 13.0% Commerce 0.8x 0.7x 0.7x 0.9x 0.9x 16.6x 20.8x 15.4x 15.2x 10.6x 18.8% 22.0% 17.1% 16.2% 14.9% 5.3% 5.1% 5.4% 5.5% 5.6% Content & Media 1.8x 1.6x 1.3x 1.4x 1.6x 10.4x 10.1x 10.8x 10.9x 15.4x 25.8% 15.5% 12.3% 10.5% 12.6% 13.9% 14.0% 14.1% 14.1% 14.8% Gaming 3 2x 3 4x 2 1x 2 0x 2 7x 4 2x 4 0x 3 4x 3 7x 5 8x 35 7% 33 1% 32 0% 25 1% 21 9% 43 9% 45 5% 43 9% 42 6% 36 3% Category EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin Gaming 3.2x 3.4x 2.1x 2.0x 2.7x 4.2x 4.0x 3.4x 3.7x 5.8x 35.7% 33.1% 32.0% 25.1% 21.9% 43.9% 45.5% 43.9% 42.6% 36.3% Infrastructure 1.8x 1.5x 0.9x 0.9x 1.3x 13.6x 13.7x 11.4x 11.7x 11.9x 25.3% 18.8% 13.6% 13.0% 13.2% 11.9% 10.7% 8.3% 7.3% 7.9% Services 3.0x 2.2x 2.9x 2.7x 3.2x 18.1x 16.9x 16.4x 17.7x 15.3x 53.2% 55.1% 49.5% 42.0% 42.2% 6.6% 6.7% 7.5% 8.7% 8.5% Social 15.1x 13.0x 9.6x 8.6x 8.9x 36.8x 30.4x 29.3x 36.4x 29.9x 74.5% 64.0% 64.6% 50.9% 49.3% 12.2% 12.9% 12.6% 13.3% 16.1% Travel 4.7x 3.1x 2.5x 3.5x 3.6x 15.2x 15.5x 16.5x 16.0x 18.1x 31.5% 29.1% 24.0% 21.8% 19.8% 17.6% 18.1% 19.4% 19.1% 18.1% Median 2.2x 2.1x 1.9x 2.0x 2.0x 13.4x 12.6x 13.3x 12.8x 13.6x 29.8% 27.6% 24.9% 22.2% 19.8% 13.6% 13.3% 13.0% 12.9% 13.0% The SEG Internet Index is segmented into eight product categories. Select companies within each Internet product category are included below. See the appendix for the complete list of companies within each product category. Ad Tech & Lead Gen Commerce Content & Media GamingAd Tech & Lead Gen Commerce Content & Media Gaming Infrastructure Services Social Travel 41 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  43. 43. THE SEG INTERNET INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 30% 40% 50% 60% (30%) (20%) (10%) 0%  0% 10% 20% 30% on ce ia ng re es ial el (60%) (50%) (40%) (30%) on ce ia ng re es ial vel AdTech& LeadGeneratio Commerc Content&Med Gamin Infrastructu Service Soci Trav AdTech& LeadGeneratio Commerc Content&Med Gamin Infrastructu Service Soc Trav 1Q13 YoY Change EBITDA Margin1Q13 TTM EBITDA Margin 2 % 30%  35%  40%  10% 20%  30%  40%  5%  10%  15%  20%  25%  (30%) (20%) (10%) 0%  10%  0%  AdTech& adGeneration Commerce ntent&Media Gaming Infrastructure Services Social Travel (40%) AdTech& adGeneration Commerce ntent&Media Gaming Infrastructure Services Social Travel 42 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC Lea Co Lea Co
  44. 44. THE SEG INTERNET INDEX BY PRODUCT CATEGORY: MARKET VALUATIONS 1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV/Revenue Multiples 8.0x 9.0x 10.0x 10% 20% 4.0x 5.0x 6.0x 7.0x (20%) (10%) 0% 0 0x 1.0x 2.0x 3.0x 4.0x (40%) (30%) (20%) 0.0x AdTech& eadGeneration Commerce ontent&Media Gaming Infrastructure Services Social Travel (50%) AdTech& adGeneration Commerce ntent&Media Gaming Infrastructure Services Social Travel • The Social product category closed Q1 with the highest median EV/Revenue multiple among the eight Internet product categories we track, the 10.3x median market valuation was 147% higher than the next closest product category, Travel (3.6x). • Social solutions Facebook, LinkedIn, Yelp, etc continued to expand their online footprints and investors rewarded them accordingly. S i l M k t l ti l fl t d i ifi t Y Y EBITDA i i t t b d t t d t Le Co A Lea Con Social Market valuations also reflected significant YoY EBITDA margin improvement, as category members demonstrated a greater ability to monetize their large user bases with advertising, subscriptions, more mobile offerings and other value added services. • The Commerce product category lagged all other product categories, with a 0.9x EV/Revenue multiple, a tepid TTM revenue growth of 14.9%, and a lackluster 5.6% EBITDA margin. Amazon, one of the most notable commerce companies, is aggressively trying to diversify its content offerings and expand its hardware offerings as a way of differentiating from competitors and driving more spend 43 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC y g p g y g p g p through its platform.
  45. 45. SOFTWARE INDUSTRY M&A MARKET UPDATE 4444 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  46. 46. SOFTWARE/SaaS M&A DEAL VOLUME AND SPENDING TTM Average M&A Deal SizeU.S. Software Mergers & Acquisitions Activity 431 407 421 426 430 454 456 432 454 435 406 $23.4 $23 1 $25 450 500 $37 $40 $42 $41 $41 $42 $36 $39 $36 $40.0 $45.0 ons) 383 407 406 362 $17.3 $17.9 $12.7 $13.1 $21.3 $12.6 $15.8 $23.1 $12.3 $15.8 $15 $20 250 300 350 400 Value (BIllion mber of Deals $20 $28 $31 $33 $36 $36 $20.0 $25.0 $30.0 $35.0 Deal Value (Millio $4.6 $8.4 $0 $5 $10 0 50 100 150 200 ns) Num $0 0 $5.0 $10.0 $15.0 $ TTM  Average  • M&A deal volume declined markedly in 1Q13 likely a result of heightened concern about the economic impact of the • The software M&A average deals size remained in the mid to high $30M range, after surging and peaking in 2011. $00 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 Deals Value $0.0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 g p U.S. sequestration*. • Total M&A spending dropped sharply to $8.4 billion, mostly due to scarcity of software mega deals. • The sole mega deal (> $500 million) in 1Q13 was Fiserv’s high $30M range, after surging and peaking in 2011. • Software buyers have remained true to their word. Of the large software buyers who responded to our Annual Buyer Survey over the last two years, 72% on average said they would focus on deals ranging in size from $10M - $99M. acquisition of Open Solutions ($1 billion) . • Based upon our 2013 Software Company Buyers Survey and more recent conversations with a wide array of buyers, we expect M&A transaction will surpass 400 in each of the remaining quarters in 2013 45 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC remaining quarters in 2013. * We expect the finally tally will be about 5% higher, since prior quarter M&A announcements and data are often released well into the following quarter
  47. 47. SOFTWARE M&A EXIT MULTIPLES Median Exit Multiples Median EV/Revenue Exit Multiple Distribution 12.2x 12.1x 11 2 11.8x 12.7 12 0 14.0x EV/Revenue EV/EBITDA 29.4% 30.0% 35.0% 11.2x 6 0 8.0x 10.0x 12.0x 24.4% 21.8% 14.3% 15.0% 20.0% 25.0% oftwareSellers 1.9x 1.7x 2.3x 1.8x 1.6x 0 0x 2.0x 4.0x 6.0x 10.1% 0 0% 5.0% 10.0% 15.0% %ofSo • Since reaching a median TTM exit multiple of 2.3x in 3Q12, the median exit multiple of on-premise software providers • On a TTM basis, 75.6% of all on-premise software targets were acquired for 3.0x TTM revenue or less. 0.0x 1Q12 2Q12 3Q12 4Q12 1Q13 0.0% <=1.0x >1.0x <=2.0x >2.0x <=3.0x >3.0x <=4.0x >4.0x EV/Revenue Exit Multiple the median exit multiple of on premise software providers has dropped for two sequential quarters, ending 1Q13 at 1.6x. • The median on-premise software exit multiple for all public and private transactions with a quantifiable EV/Revenue l ti h l d th di i it lti l f e e acqu ed o 3 0 e e ue o ess • The remaining 24.4% of targets came from sectors growing much faster than the broader on-premise software market such as cloud and network infrastructure. • Select transactions include: Kofax acquisition of BI provider valuation has lagged the median on-premise exit multiple of public on-premise software companies by ~30% for the past several years, as many targets were acquired primarily for their customer bases and M&S revenue streams. altosoft ($13.5M, 4.0x rev.), JDS Uniphase acquisition of wireless network optimization provider Arieso ($85M, 4.0x rev.) and Juniper Networks acquisition of network optimization provider Webscreen ($9.9M, 7.0x rev.). 46 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  48. 48. SOFTWARE M&A: BY OWNERSHIP STRUCTURE AND SIZE   Public Sellers 1.6x Median Multiple 30%   Buyer Less Than $200 million 1.4x Median Multiple Buyer Greater Than $200 million 2.7x Median Multiple by Sizeby Ownership Structure Private Sellers 2.0x Median Multiple 70% 30% MultipleMultiple 56%44% Private Buyers 1.4x Median Multiple 69% 31% Seller Greater Than $20 million: 1.5x Seller Greater Than $20 million: 0.8x Seller Greater Than $20 million: 1.4x Seller Greater Than $20 million: 2.6x Public Buyers 2.1x Median Multiple 69% Seller Less Than $20 million: 2.4x Seller Less Than $20 million: 2.0x Seller Less Than $20 million: 1.5x Seller Less Than $20 million: 3.3x • Simply put when analyzing software M&A by ownership structure and size deals with the highest multiples occur when a large• Simply put, when analyzing software M&A by ownership structure and size, deals with the highest multiples occur when a large buyer (greater than $200 million in revenue) buys a small target (less than $20 million). On a median basis, such a combination produced a 3.3x EV/Revenue exit multiple in 1Q13. • The big buyer/small target multiple, which is more than twice the median on-premise software exit multiple, is often driven by a buyer that deems a target’s technology and products to be very well executed and highly scalable. • Select example transactions include: Juniper Networks 1Q13 acquisition of network optimization provider Webscreen ($9.9M, 7.0x rev.) , KEYW Holding’s 3Q12 acquisition of SIEM provider Sensage ($85.5M, 7.1x rev.), Spirent Communications’ 2Q12 acquisition of network performance management provider MU Dynamics ($40M, 4.5x rev.). 47 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  49. 49. Horizontal & Vertical M&A Median EV/Revenue Exit SOFTWARE M&A: BY VERTICAL AND HORIZONTAL MARKETS Horizontal & Vertical M&A Median EV/Revenue Exit Multiples Horizontal & Vertical M&A Volume 68.0% 65.0% 63.0% 58.0% 67.0% 60.0% 80.0% 100.0% 2 3x 3.0x 2 2x 32.0% 35.0% 37.0% 42.0% 33.0% 0.0% 20.0% 40.0% 60.0% 1Q12 2Q12 3Q12 4Q12 1Q13 1.3x 1.9x 2.0x 1.4x 1.3x 2.3x 1.6x 2.2x 1.8x 1Q12 2Q12 3Q12 4Q12 1Q131Q12 2Q12 3Q12 4Q12 1Q13 Horizontal Vertical 1Q12 2Q12 3Q12 4Q12 1Q13 Vertical Horizontal • As they have for most of the past five quarters horizontal software providers garnered the lion’s share of M&A transactions in• As they have for most of the past five quarters, horizontal software providers garnered the lion s share of M&A transactions in 1Q13, as well as a higher median exit valuation than their vertical peers. • A good number of vertical markets are still recovering from the economic downturn; others are being adversely impacted by sequestration; and big buyer demand for vertical domain expertise was sated during a spate of vertical acquisitions during 2006- 2010. • Select horizontal M&A transactions included: Advanced Computer Software Group’s acquisition of ERP provider Computer Software Holdings ($164.2M, 1.8x rev.), Juniper Networks 1Q13 acquisition of network optimization provider Webscreen ($9.9M, 7.0x rev.). • Select vertical M&A transactions included: Enghouse Systems acquisition of public sector software provider Locus ($14M, 0.8x ) T i ’ i iti f bli t t t ti ft id Sk Hi h ($5 8M 0 5 ) 48 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC rev.), Tracsis’ acquisition of public sector transportation software provider Sky High ($5.8M, 0.5x rev.).
  50. 50. SOFTWARE M&A BY PRODUCT CATEGORY Content & Document Mgmt Data Mgmt & Integration 1.5% Asset & Facilities Mgmt Billing & Service  Provisioning 1.1% • The Mobile product category accounted for 22.2% of all software M&A transactions in the first quarter, making it the most active 4.6% CRM,  Marketing  & Sales 2.7% Dev. Tools & IT Asset Mgmt 1.5% Engineering, PLM & CAD 4.6% MiddlewareRetail Telecommunications 0.8% Utility 1.1% Other Verticals 7.3% Accounting & Finance 0.4% 2.3% BI, Risk &  Compliance 2.3% among all product categories • Other active M&A categories in the first quarter included: Healthcare (7.3%), Financial Services (6.5%), Multimedia, Graphics & Communications (5 0%) Middleware 0.4% ERP 0.4% Entertainment 3.4% HR & Workforce Mgmt 4.2% Legal 0.8% Manufacturing 0.8% Non‐Profit 0.4% Real Estate 0.4% 0.4% Graphics & Communications (5.0%), Supply Chain Mgmt & Logistics (4.6%) and Engineering, PLM & CAD (4.6%). • The number of software product categories reporting significant transaction volumes in 1Q13 i t t t t th ib f th Messaging, Conferencing &  Communications 1.9% Multimedia, Graphics &  Communications 5.0% Network Performance Financial Services Healthcare 7.3% Insurance 1.9% Verticals 1Q13 is testament to the vibrancy of the current software M&A market. Mgmt 1.5% Security 1.9% Systems Mgmt 1.9% Supply Chain Mgmt &  Logistics Automotive 1.1% Construction 0.8% Education 1.9% 6.5% 4.6%Mobile 22.2% 49 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  51. 51. SOFTWARE M&A BY PRODUCT CATEGORY 3.1x Median EV/Revenue Exit Multiples by Software Product Category 2.0x 2.0x 1.9x 1.7x 1.6x 1.6x 1.4x 1.4x 0.8x Systems Management Healthcare Mobile EDA nufacturing& ssetMgmt DataMgmt& Integration herVerticals A&D,Telco, Retail,etc.) pplyChain& Logistics cialServices Software nt,Document Business cessMgmt M Man As D Ot (A R Sup Financ S Conten and Proc • Among the 32 on-premise software product companies we track ten had both sufficient deal activity and deal data to ascertain a• Among the 32 on-premise software product companies we track, ten had both sufficient deal activity and deal data to ascertain a TTM revenue multiple in 1Q13. • Software company sellers focused on Systems Management garnered the highest median TTM revenue multiple (3.1x) among those ten product categories. Buyers in this product category are paying healthy multiples to targets that will enhance their cloud and mobile computing strategies. • Healthcare also posted a strong median EV/Revenue exit multiple in 1Q13. Although health care has traditionally been a technology laggard, adoption of solutions that speed and smooth the transition from fee for service to fee for value care is ramping sharply. • Content and Document management multiples continued to lag the broader market in 1Q13 with a median exit multiple of 0.8x. 50 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  52. 52. SaaS M&A: DEAL VOLUME AND EXIT MULTIPLES 4.1x 94 94 25%100 SaaS M&A Deals   SaaS as % of Software Median SaaS EV/Revenue Exit MultiplesSaaS M&A Volume 3.9x 4.0x 3.9x 4.0x 39 39 45 48 68 65 59 94 94 86 15% 20% 50 60 70 80 90 als as a % of Total  e M&A Deals S M&A Deals 1Q12 2Q12 3Q12 4Q12 1Q13 10 30 39 26 39 0% 5% 10% 0 10 20 30 40 SaaS M&A Dea Software # of SaaS • There were 86 SaaS M&A transactions in 1Q13 We project a total of 344 SaaS deals in 2013 which would surpass 2012’s• There were 86 SaaS M&A transactions in 1Q13. We project a total of 344 SaaS deals in 2013, which would surpass 2012 s record breaking total of 311. • After a steady rise from 2009 – 2012, the median TTM EV/Revenue exit multiple of SaaS transactions has held relatively steady over the past five quarters, closing 1Q13 at 4.0x. • The median SaaS exit multiple premium was 150% on-premise greater than the median exit multiple reached in 1Q13 (4.0x vs.The median SaaS exit multiple premium was 150% on premise greater than the median exit multiple reached in 1Q13 (4.0x vs. 1.6x), the greatest valuation disparity on record. 51 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  53. 53. SaaS M&A BY PRODUCT CATEGORY Content & Document  Mgmt 4 7% Billing & Service  Provisioning BI, Risk & Compliance 8.1% • CRM, Marketing & Sales was by far the most active SaaS product category, garnering 17.4% of all M&A transactions in the first quarter. • Buyers are seeking out targets who can 4.7% CRM, Marketing & Sales 17.4% Retail Vertical ‐ Other 7.0% Provisioning 2.3% • Buyers are seeking out targets who can best position them to take advantage of the rapid growth in marketing spend expected over the next five years. According to Gartner, by 2017 the CMO will purchase more IT than the CIO Data Mgmt & Integration 2.3% Ecommerce Public Sector 2.3% Real Estate 1.2% Retail 4.7% will purchase more IT than the CIO. • Other product categories with relatively high number of M&A transactions include: HR & Workforce Management (8.1%), BI, Risk & Compliance (8.1%) 3.5% Engineering, PLM & CAD 1.2% HR & Workforce Mgmt 8 1%Fi i l S i Healthcare 3.5% Insurance 3.5% Legal 1.2% Non‐Profit 3.5% Verticals and Messaging, Conferencing and Communications (5.8%). 8.1% Messaging, Conferencing  & Communications 5.8% Multimedia,  Graphics & Systems  Mgmt Supply Chain Mgmt  & Logistics Construction 1.2% Education 4.7% Financial Services 1.2% Graphics &  Communications 3.5% Security 3.5% Mgmt 3.5% & Logistics 2.3% 52 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  54. 54. 1Q13 SaaS M&A TRANSACTIONS Date Buyer Seller Enterprise Value TTM Revenue EV/Rev 03/28/13 HubSpot, Inc. Chime Inc. and PrepWork Inc. - - - 03/26/13 The Lords Group of Companies eBuildingSupplies Ltd. - - - 03/25/13 Quindell Portfolio Plc (AIM:QPP) iSaaS Technology Limited $8,890,000 - - 03/21/13 EQT Partners AB it's learning AS - - -03/21/13 EQT Partners AB it s learning AS 03/21/13 j2 Global, Inc. (NasdaqGS:JCOM) Data Lock Limited $499,000 - - 03/20/13 Yahoo! Inc. (NasdaqGS:YHOO) Jybe, Inc. - - - 03/20/13 Rumblefish, Inc. Catalogik, Inc. - - - 03/19/13 Echo Global Logistics, Inc. (NasdaqGS:ECHO) Open Mile, Inc. - - - 03/19/13 PeopleMatter, Inc. PeopleClues, Inc. - - - 03/19/13 Blackbaud Inc. (NasdaqGS:BLKB) MyCharity Limited - - -03/19/13 Blackbaud Inc. (NasdaqGS:BLKB) MyCharity Limited 03/18/13 Ebix Health Benefit Softw are, Inc. - - - 03/15/13 Noodle Education, Inc. Lore, Inc. - - - 03/13/13 Oracle Corporation (NasdaqGS:ORCL) Nimbula, Inc. - - - 03/12/13 Corporation Service Company, Inc. CSC Digital Brand Services $157,260,000 $57,000,000 2.8x 03/11/13 Concur Technologies, Inc. (NasdaqGS:CNQR) conTgo limited - - - 03/11/13 Tripw ire, Inc. nCircle Netw ork Security, Inc. - - -03/11/13 Tripw ire, Inc. nCircle Netw ork Security, Inc. 03/08/13 Desire2Learn Incorporated Wiggio Inc. - - - 03/05/13 Issuu, Inc. Magma Aps - - - 03/05/13 ePrize, LLC Bulbstorm, Inc. - - - 03/05/13 Perceptive Softw are, Inc. Tw istage, Inc. - - - 03/04/13 BlueSky ETO e-Integrity, Inc. - - - 03/04/13 Silverlake Axis Ltd. (SGX:5CP) Merimen Ventures Sdn. Bhd. $16,860,000 - -03/04/13 Silverlake Axis Ltd. (SGX:5CP) Merimen Ventures Sdn. Bhd. $16,860,000 03/04/13 Addnode Group AB (publ) (OM:ANOD B) Abou AB - - - 03/01/13 KV Asia Capital CBS Bizhub Sdn. Bhd. and PT. $38,770,000 - - 03/01/13 ClearSlide, Inc. SlideRocket, Inc. - - - 03/01/13 Perceptive Softw are, Inc. AccessVia, Inc. - - - 02/27/13 Rackspace Hosting, Inc. (NYSE:RAX) ObjectRocket, Inc. - - - 02/27/13 Open GI Limited Pow erplace Insurance Services - - -02/27/13 Open GI Limited Pow erplace Insurance Services 02/26/13 Cymetrix Corporation CareClarity, Inc. - - - 02/25/13 Genesys Telecommunications Laboratories, Inc. Angel.com Incorporated $110,000,000 $28,800,000 3.8x 02/22/13 Paperless Receipts Limited ExpenseMagic Ltd. - - - 53 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  55. 55. 1Q13 SaaS M&A TRANSACTIONS (CON’T) Date Buyer Seller Enterprise Value TTM Revenue EV/Rev 02/22/13 Access UK Limited Sazneo Limited - - - 02/21/13 Master Lock Canada, Inc. N4 Systems Incorporated - - - 02/20/13 CPA Global Limited First To File, Inc. - - - 02/19/13 [x+1], Inc. UberTags LLC - - -02/19/13 [x 1], Inc. UberTags LLC 02/17/13 ironSource Ltd AfterDow nload Ltd. $28,000,000 - - 02/15/13 New Net Communication Technologies, LLC Interact Incorporated - - - 02/14/13 DiliTrust SAS SQLi, Dataroom.com - - - 02/14/13 LX Ventures Inc. (TSXV:LXV) Weeve Ventures Inc. - - - 02/14/13 Capsilon Corporation Paperless Office Solutions Inc. - - - 02/11/13 International Insurance Company of Hannover Limited London & European Title Insurance - - -02/11/13 International Insurance Company of Hannover Limited London & European Title Insurance 02/07/13 PeopleBrow sr Inc. Sw aylo Inc. - - - 02/07/13 Avanade, Inc. Opstera, Inc. - - - 02/06/13 View point Construction Softw are, Inc. 4Projects Ltd. - - - 02/06/13 liveBooks, Inc. Fotomoto, Inc. - - - 02/06/13 Haiku Learning Systems, Inc. ActiveGrade, LLC - - - 02/05/13 Tatango, Inc. Regal Digital LLC - - -02/05/13 Tatango, Inc. Regal Digital LLC 02/05/13 Tw itter, Inc. Bluefin Labs, Inc. - - - 02/05/13 SellPoint, Inc. Show Uhow , Inc. - - - 02/05/13 SPINS, Inc. Third Solutions, LLC - - - 02/05/13 Ease Entertainment Services, LLC Scenechronize - - - 02/01/13 JMI Equity; HGGC, LLC Innovative Interfaces, Inc. - - - 01/31/13 Aggregate Know ledge, Inc. Quantivo Corporation - - -gg g g , Q p 01/31/13 Autodesk, Inc. (NasdaqGS:ADSK) Allpoint Systems, Inc. - - - 01/29/13 Genesys Telecommunications Laboratories, Inc. UTOPY, Inc. - - - 01/29/13 Reputation.com, Inc. Reputation.com (UK) Limited - - - 01/25/13 Peterson Partners LP Angoss Softw are Corp. (TSXV:ANC) $8,470,000 $7,400,000 1.2x 01/24/13 Automattic, Inc. Simperium, Inc. - - - 01/24/13 LittleLives Inc Pte. Ltd. Illume Technology - - -gy 01/24/13 Cubic Transportation Systems, Inc. NextBus Inc. $20,690,000 - - 01/22/13 Vision Critical Communications, Inc. Texifter, LLC - - - 01/22/13 Infusionsoft, Inc. GroSocial, Inc. - - - 01/22/13 Unified Media, Inc. PageLever, Inc. - - - 01/22/13 Claritas Capital StudioNow , Inc. - - - 01/17/13 First Advantage Corporation LexisNexis Risk Solutions, Inc., - - - 54 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC g p , ,
  56. 56. 1Q13 SaaS M&A TRANSACTIONS (CON’T) Date Buyer Seller Enterprise Value TTM Revenue EV/Rev 01/10/13 Nuance Communications, Inc. (NasdaqGS:NUAN) VirtuOz SA - - - 01/10/13 Fresh Juice Global, LLC VIDERO Inc. - - - 01/10/13 NetSuite Inc. (NYSE:N) Retail Anyw here Inc. - - - 01/09/13 Elephant Talk Communications Corp. (AMEX:ETAK) Telnicity, LLC $990,000 - -01/09/13 Elephant Talk Communications Corp. (AMEX:ETAK) Telnicity, LLC $990,000 01/08/13 Total Merchant Services, Inc. Fanminder, Inc. - - - 01/08/13 Nearstream, Inc. LoopFuse, Inc. - - - 01/08/13 reInvention, LLC Authentic Response, Inc. - - - 01/08/13 InComm, Inc. Giftango Corporation - - - 01/08/13 Haufe-Lexw are GmbH & Co. KG Semigator AG - - - 01/07/13 Athenahealth, Inc. (NasdaqGS:ATHN) Epocrates, Inc. $294,490,000 $151,000,000 2.0x01/07/13 Athenahealth, Inc. (NasdaqGS:ATHN) Epocrates, Inc. $294,490,000 $151,000,000 2.0x 01/07/13 GT Nexus, Inc. TradeCard, Inc. - - - 01/04/13 Euronet Worldw ide Inc. (NasdaqGS:EEFT) Pure Commerce Pty Ltd. - - - 01/04/13 Farmtrader, LLC XSAg.com - - - 01/03/13 PeopleStrategy, Inc. ERC Dataplus, Inc. - - - 01/03/13 PennWell Corporation CyberTech, Inc., TransmissionHub, - - - 01/03/13 Metrostudy Inc. Metrostudy Inc. - - -01/03/13 Metrostudy Inc. Metrostudy Inc. 01/02/13 Elsevier B.V. Knovel Corporation - - - 01/02/13 Click & Pledge, Inc. Donor Tow n Square, Inc. - - - 55 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  57. 57. INTERNET M&A: DEAL VOLUME AND EXIT MULTIPLES 273 263 2.1x 2.1x Median Internet EV/Revenue Exit MultiplesInternet M&A Volume 220 222 185 1.9x 1.9x 1.9x 185 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 • Internet M&A remained highly volatile in large part due to shifting marketing strategies evolving business models and constant• Internet M&A remained highly volatile, in large part due to shifting marketing strategies, evolving business models, and constant changes in the competitive landscape. • In early 2012, a large number of Internet targets exited amidst the hype of the pending Facebook IPO (5/2012), creating a spike in M&A volume. • After the Facebook IPO debacle, internet investors and buyers alike became more cautious and circumspect, and M&A volumeAfter the Facebook IPO debacle, internet investors and buyers alike became more cautious and circumspect, and M&A volume declined markedly, plunging to 185 transactions in 1Q13, down from 273 transactions in 2Q12 . • Internet EV/Revenue exit multiples have held relatively steady, finishing 1Q13 at 1.9x. However, high flying Internet companies continue to achieve breathtaking exit multiples. Select examples include: Yahoo’s acquisition of Summly (~30x rev.), Evanea’s acquisition of Internet communications provider Apogea ($5.0M, 12.3x rev.). 56 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  58. 58. INTERNET M&A: DEAL VOLUME AND EXIT MULTIPLES 31 4% 10.8% Ad‐Tech & Lead Gen Category 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 Median Internet EV/Revenue Exit MultiplesInternet M&A Volume 31.4% 3.8% 13.0% Commerce Content & Media Gaming Ad-Tech & Lead Gen 65 70 85 57 58 Commerce 36 57 40 41 34 Content & Media 51 62 52 55 42 Gaming 13 25 13 12 7 Infrastructure 31 30 41 27 24 Social Tech 24 29 32 30 20 18 4% Infrastructure Social Tech Social Tech 24 29 32 30 20 Total 220 273 263 222 185 18.4% 22.7% • Driven by a dearth of ad-tech players in the Internet landscape a much needed consolidation continued to shape the Internet• Driven by a dearth of ad-tech players in the Internet landscape, a much needed consolidation continued to shape the Internet ad-tech landscape in 1Q13, making it the most active Internet M&A product category over the past twelve months. • After years of consolidation, Internet ad-tech leaders have now emerged, and the sharply lower number of ad tech M&A deals over the past two quarters suggests that buyers and advertisers have placed their bets. Mobile ad-tech is the next frontier. • Select transactions in the Ad-tech product category include: Facebook’s acquisition of Atlas DMT, Experian’s acquisition ofSelect transactions in the Ad tech product category include: Facebook s acquisition of Atlas DMT, Experian s acquisition of Pacific Micromarketing, Half Off Depot’s acquisition of Crowdsavings.com. • Content & Media finished 1Q13 as the second most active product category. Select transactions in Content & Media included: Autotrader’s acquisition of Automotive Information, Dentsu’s acquisition of EhonNavi. 57 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  59. 59. APPENDIX 5858 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  60. 60. C Ti k P d t C t THE SEG SOFTWARE INDEX COMPANIES Amdocs Limited DOX Billing & Service Management AsiaInfo Holdings, Inc. ASIA Billing & Service Management CSG Systems International, Inc. CSGS Billing & Service Management Evolving Systems, Inc. EVOL Billing & Service Management Company Ticker Product Category MIND C.T.I. Ltd. MNDO Billing & Service Management NeuStar, Inc NSR Billing & Service Management Redknee Solutions TSX:RKN Billing & Service Management Synchronoss Technologies, Inc. SNCR Billing & Service Management Actuate Corporation BIRT Business Intelligence MicroStrategy Incorporated MSTR Business Intelligence P I PEGA B i I lliPegasystems Inc. PEGA Business Intelligence Progress Software Corporation PRGS Business Intelligence PROS Holdings PRO Business Intelligence Qlik Technologies QLIK Business Intelligence Verisk VRSK Business Intelligence Actuate Corporation BIRT Development Platforms Ad b S t I t d ADBE D l t Pl tfAdobe Systems Incorporated ADBE Development Platforms BSQUARE Corporation BSQR Development Platforms Compuware Corporation CPWR Development Platforms Magic Software Enterprises Ltd. MGIC Development Platforms Microsoft Corporation MSFT Development Platforms Oracle Corporation ORCL Development Platforms Progress Soft are Corporation PRGS De elopment PlatformsProgress Software Corporation PRGS Development Platforms Red Hat, Inc. RHT Development Platforms Software AG XTRA:SOW Development Platforms ANSYS, Inc. ANSS Engineering & PLM Autodesk, Inc. ADSK Engineering & PLM Cadence Design Systems, Inc CDNS Engineering & PLM Cimatron Ltd CIMT Engineering & PLMCimatron Ltd. CIMT Engineering & PLM Dassault Systèmes DSY Engineering & PLM GSE Systems Inc. GVP Engineering & PLM Mentor Graphics Corp MENT Engineering & PLM Parametric Technology Corporation PMTC Engineering & PLM PDF Solutions Inc PDFS Engineering & PLM Stratasys Inc SSYS Engineering & PLM 59 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC Stratasys, Inc. SSYS Engineering & PLM Synopsys Inc SNPS Engineering & PLM
  61. 61. C Ti k P d t C t THE SEG SOFTWARE INDEX COMPANIES (CON’T) American Software, Inc. AMSW.A Enterprise Resource Planning Oracle Corporation ORCL Enterprise Resource Planning QAD Inc. QADA Enterprise Resource Planning Sage Group plc LSE:SGE Enterprise Resource Planning Company Ticker Product Category SAP SAP Enterprise Resource Planning Unit 4 ENXTAM:UNIT4 Enterprise Resource Planning ACI Worldwide, Inc. ACIW Financial & Accounting Bottomline Technologies EPAY Financial & Accounting DST Systems, Inc. DST Financial & Accounting Fair Isaac Corporation FICO Financial & Accounting Fiserv FISV Financial & Accounting Intuit Inc INTU Financial & Accounting Model N, Inc MODN Financial & Accounting NetSol Technologies Inc. KASE:NETSOL Financial & Accounting Sage Group plc LSE:SGE Financial & Accounting Activision Blizzard ATVI Gaming GElectronic Arts Inc. EA Gaming GameLoft SA ENXTPA:GFT Gaming Konami Corporation TSE: 9766 Gaming Take-Two Interactive TTWO Gaming Ubisoft Entertainment ENXTPA:UBI Gaming Accretive Health AH Healthcare All i t H lth S l ti I MDRX H lthAllscripts Healthcare Solutions Inc. MDRX Healthcare Cerner Corporation CERN Healthcare Computer Programs and Sys, Inc. CPSI Healthcare Epocrates EPOC Healthcare Greenway Medical Technologies, Inc GWAY Healthcare MedAssets MDAS Healthcare M H lth MRGE H lthMerge Healthcare MRGE Healthcare Omnicell, Inc. OMCL Healthcare Quality Systems, Inc. QSII Healthcare Hewlett Packard HPQ IT Conglomerates IBM IBM IT Conglomerates Microsoft Corporation MSFT IT Conglomerates Oracle Corporation ORCL IT Conglomerates 60 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC Oracle Corporation ORCL IT Conglomerates SAP AG SAP IT Conglomerates
  62. 62. C Ti k P d t C t THE SEG SOFTWARE INDEX COMPANIES (CON’T) Epocrates EPOC Mobile Solutions/Content Glu Mobile, Inc. GLUU Mobile Solutions/Content Gree TSE:3632 Mobile Solutions/Content Millennial Media Inc MM Mobile Solutions/Content Company Ticker Product Category Myriad Group AG MYRN Mobile Solutions/Content NQ Mobile Inc. NQ Mobile Solutions/Content Opera OB:OPERA Mobile Solutions/Content Qihoo 360 Technology Co. Ltd QIHU Mobile Solutions/Content Pandora Media P Mobile Solutions/Content Synchronoss Technologies, Inc. SNCR Mobile Solutions/Content TeleNav TNAV Mobile Solutions/Content Velti Plc VELT Mobile Solutions/Content Zynga, Inc ZNGA Mobile Solutions/Content Allot Communications Ltd. ALLT Networking & Network Performance Management Aruba Networks, Inc. ARUN Networking & Network Performance Management Brocade Communications Systems, Inc. BRCD Networking & Network Performance Management C S CSCO & fCisco Systems, Inc. CSCO Networking & Network Performance Management Compuware Corporation CPWR Networking & Network Performance Management F5 Networks, Inc. FFIV Networking & Network Performance Management Juniper Networks, Inc. JNPR Networking & Network Performance Management Keynote Systems, Inc. KEYN Networking & Network Performance Management Radware Ltd. RDWR Networking & Network Performance Management Ri b d T h l I RVBD N t ki & N t k P f M tRiverbed Technology, Inc. RVBD Networking & Network Performance Management AVG Technologies N.V. AVG Security Check Point Software Tech Ltd. CHKP Security Commtouch Software Ltd. CTCH Security Fortinet Inc. FTNT Security Guidance Software, Inc. GUID Security I IMPV S itImperva IMPV Security Palo Alto Networks, Inc PANW Security Proofpoint, Inc. PFPT Security Sourcefire, Inc. FIRE Security Symantec Corporation SYMC Security Trend Micro TSE:4704 Secuity VASCO Data Security International VDSI Security 61 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC VASCO Data Security International VDSI Security Websense, Inc. WBSN Security
  63. 63. C Ti k P d t C t THE SEG SOFTWARE INDEX COMPANIES (CON’T) Brocade Communications Systems, Inc. BRCD Storage, Data Management & Integration CA, Inc. CA Storage, Data Management & Integration Cisco Systems, Inc. CSCO Storage, Data Management & Integration CommVault Systems, Inc. CVLT Storage, Data Management & Integration Company Ticker Product Category EMC EMC Storage, Data Management & Integration FalconStor Software, Inc. FALC Storage, Data Management & Integration IBM IBM Storage, Data Management & Integration Informatica Corporation INFA Storage, Data Management & Integration Microsoft Corporation MSFT Storage, Data Management & Integration NetApp, Inc. NTAP Storage, Data Management & Integration O l C i ORCL S D M & I iOracle Corporation ORCL Storage, Data Management & Integration Pervasive Software Inc. PVSW Storage, Data Management & Integration Splunk, Inc. SPLK Storage, Data Management & Integration TIBCO Software Inc. TIBX Storage, Data Management & Integration American Software, Inc. AMSW.A Supply Chain Management & Logistics Aspen Technology, Inc. AZPN Supply Chain Management & Logistics M h tt A i t I MANH S l Ch i M t & L i tiManhattan Associates, Inc. MANH Supply Chain Management & Logistics The Descartes Systems Group Inc. TSX:DSG Supply Chain Management & Logistics Unit 4 ENXTAM:UNIT4 Supply Chain Management & Logistics BMC Software Inc. BMC Systems Management CA Technologies CA Systems Management Citrix Systems, Inc. CTXS Systems Management Netsco t S stems Inc NTCT S stems ManagementNetscout Systems, Inc. NTCT Systems Management Red Hat, Inc. RHT Systems Management SolarWinds, Inc. SWI Systems Management VMWare, Inc. VMW Systems Management Advent Software, Inc. ADVS Vertical - Finance Broadridge Financial BR Vertical - Finance Fidessa LSE:FDSA Vertical FinanceFidessa LSE:FDSA Vertical - Finance Jack Henry & Associates, Inc. JKHY Vertical - Finance MSCI, Inc. MSCI Vertical - Finance SS&C Corporation SSNC Vertical - Finance Blackbaud, Inc. BLKB Vertical - Other Constellation TSX:CSU Vertical - Other EPIQ Systems Inc EPIQ Vertical Other 62 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC EPIQ Systems, Inc. EPIQ Vertical - Other Guidewire Software, Inc. GWRE Vertical - Other
  64. 64. C Ti k P d t C t THE SEG SOFTWARE INDEX COMPANIES (CON’T) Micros Systems MCRS Vertical - Other PROS Holdings PRO Vertical - Other Sapiens International SPNS Vertical - Other Silver Spring Networks, Inc. SSNI Vertical - Other Company Ticker Product Category p g , The Active Network, Inc. ACTV Vertical - Other Tyler Technologies, Inc. TYL Vertical - Other 63 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  65. 65. C Ti k P d t C t THE SEG SaaS INDEX COMPANIES Company Ticker Product Category Constant Contact CTCT CRM & Marketing ExactTarget, Inc. ET CRM & Marketing LivePerson LPSN CRM & Marketing Marin Software MRIN CRM & Marketing Responsys MKTG CRM & Marketing Bazaarvoice, Inc BV CRM & Marketing Salesforce.com CRM CRM & Marketing Vocus VOCS CRM & Marketing E2open, Inc EOPN ERP & Supply Chain Fleetmatics FLTX ERP & Supply Chain Netsuite N ERP & Supply Chain SciQuest SQI ERP & Supply Chain SPS Commerce SPSC ERP & Supply Chain Workday, Inc. WDAY ERP & Supply Chain Athenahealth, Inc ATHN Vertically Focused DealerTrack TRAK Vertically Focusedea e ac e t ca y ocused Ebix Inc. EBIX Vertically Focused Ellie Mae ELLI Vertically Focused Medidata Solutions MDSO Vertically Focused RealPage RP Vertically Focused Callidus Software Inc. CALD Workforce Management Cornerstone OnDemand CSOD Workforce ManagementCornerstone OnDemand CSOD Workforce Management The Ultimate Software Group, Inc. ULTI Workforce Management Workday, Inc. WDAY Workforce Management Concur CNQR Other SaaS Demandware, Inc. DWRE Other SaaS IntraLinks Holdings IL Other SaaS Jive Software Inc JIVE Other SaaSJive Software, Inc JIVE Other SaaS OpenTable, Inc. OPEN Other SaaS Qualys, Inc. QLYS Other SaaS Service-now.com NOW Other SaaS Tangoe TNGO Other SaaS Zix Corporation ZIXI Other SaaS 64 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
  66. 66. C Ti k P d t C t THE SEG INTERNET INDEX COMPANIES Company Ticker Product Category Angie's List, Inc. ANGI Ad Tech & Lead Generation Baidu.com, Inc. BIDU Ad Tech & Lead Generation Bankrate, Inc. RATE Ad Tech & Lead Generation Digital Generation, Inc. DGIT Ad Tech & Lead Generation eHealth, Inc. EHTH Ad Tech & Lead Generation Google Inc. GOOG Ad Tech & Lead Generation Groupon GRPN Ad Tech & Lead Generation InterActiveCorp IACI Ad Tech & Lead Generation LinkedIn LNKD Ad Tech & Lead Generation Marchex Inc. MCHX Ad Tech & Lead Generation Q i St t QNST Ad T h & L d G tiQuinStreet QNST Ad Tech & Lead Generation ReachLocal, Inc. RLOC Ad Tech & Lead Generation SINA Corporation SINA Ad Tech & Lead Generation Sohu.com Inc. SOHU Ad Tech & Lead Generation Tree.Com, Inc. TREE Ad Tech & Lead Generation ValueClick, Inc. VCLK Ad Tech & Lead Generation Y d YNDX Ad T h & L d G tiYandex YNDX Ad Tech & Lead Generation 1-800-FLOWERS.COM, Inc. FLWS Commerce Amazon.com, Inc. AMZN Commerce Bitauto Holdings Limited BITA Commerce Bluefly, Inc. BFLY Commerce BlueNile NILE Commerce DangDang DANG CommerceDangDang DANG Commerce Digital River Inc. DRIV Commerce eBay Inc. EBAY Commerce GeekNet GKNT Commerce Liquidity Services, Inc. LQDT Commerce Mecox Lane Limited MCOX Commerce Mercadolibre Inc MELI CommerceMercadolibre, Inc. MELI Commerce Overstock.com, Inc. OSTK Commerce PetMed Express, Inc. PETS Commerce Stamps.com STMP Commerce AOL, Inc. AOL Content & Media DemandMedia DMD Content & Media InterActiveCorp IACI Content & Media 65 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC InterActiveCorp IACI Content & Media Netflix NFLX Content & Media
  67. 67. C Ti k P d t C t THE SEG INTERNET INDEX COMPANIES (CON’T) Company Ticker Product Category Pandora P Content & Media Shutterstock, Inc. SSTK Content & Media TheStreet.com, Inc. TST Content & Media WebMD Health Corp. WBMD Content & Media XO Group XOXO Content & Media Yahoo! Inc. YHOO Content & Media Youku YOKU Content & Media ChangYou.com CYOU Gaming Giant Interactive GA Gaming Netease NTES Gaming NCS ft KOSE A036570 G iNCSoft KOSE:A036570 Gaming Perfect World PWRD Gaming Sohu.com Inc. SOHU Gaming Tencent Holdings SEHK:700 Gaming Zynga, Inc. ZNGA Gaming 8x8, Inc. EGHT Infrastructure Ak i T h l i I AKAM I f t tAkamai Technologies, Inc. AKAM Infrastructure Brightcove Inc. BCOV Infrastructure BroadSoft, Inc. BSFT Infrastructure Digital River Inc. DRIV Infrastructure Envivio, Inc. ENVI Infrastructure Harmonic Inc HLIT Infrastructure Interactive Intelligence Inc ININ InfrastructureInteractive Intelligence, Inc. ININ Infrastructure KIT digital, Inc. KITD Infrastructure Limelight Networks, Inc. LLNW Infrastructure Mitel Networks Corp. MITL Infrastructure Polycom, Inc. PLCM Infrastructure Rovi Corporation ROVI Infrastructure SeaChange International Inc SEAC InfrastructureSeaChange International Inc. SEAC Infrastructure ShoreTel, Inc. SHOR Infrastructure Sonus Networks, Inc SONS Infrastructure Synacor, Inc SYNC Infrastructure Tucows Inc. TCX Infrastructure VeriSign VRSN Infrastructure Angie's List Inc ANGI Services 66 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC Angie s List, Inc. ANGI Services Bankrate RATE Services
  68. 68. C Ti k P d t C t THE SEG INTERNET INDEX COMPANIES (CON’T) Company Ticker Product Category Carbonite, Inc. CARB Services LifeLock, Inc. LOCK Services Monster Worldwide, Inc. MWW Services Qihoo QIHU ServicesQihoo QIHU Services Shutterfly SFLY Services Tree.Com, Inc. TREE Services Trulia, Inc. TRLA Services VistaPrint VPRT Services Xoom XOOM Services Zillow Z ServicesZillow Z Services Facebook FB Social FriendFinder Networks Inc FFN Social LinkedIn LNKD Social Mail.ru Group LSE:MAIL Social Renren Inc RENN Social Yelp, Inc. YELP Social YY, Inc. YY Social Ctrip CTRP Travel Expedia EXPE Travel HomeAway AWAY Travel Kayak Software Corp KYAK TravelKayak Software Corp KYAK Travel MakeMyTrip MMYT Travel Orbitz OWW Travel Priceline PCLN Travel Travelzoo TZOO Travel TripAdvisor Inc TRIP Travel 67 Q1 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC
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