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2Q13 Software Industry Financial Report
 

2Q13 Software Industry Financial Report

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2Q13 software, saas and internet industry public stock market performance and valuations, merger and acquisition activity and valuations, and public financings

2Q13 software, saas and internet industry public stock market performance and valuations, merger and acquisition activity and valuations, and public financings

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    2Q13 Software Industry Financial Report 2Q13 Software Industry Financial Report Presentation Transcript

    • Q22013 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 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 Multiples 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 Multiples 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 Multiples 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 Multiples 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 Multiples 39-40 The SEG Internet Index by Product Category 41 The SEG Internet Index by Product Category: Financial Performance 42 1 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved The SEG Internet Index by Product Category: Financial Performance 42 The SEG Internet Index by Product Category: Market Multiples 43
    • 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: 2Q13 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 2Q13 Public Sellers 72 2Q13 Software Mega Deals (>$500M) 73 2Q13 Most Active Buyers 742Q13 Most Active Buyers 74 2 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • ABOUT SOFTWARE EQUITY GROUP 33 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • • 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
    • 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 p ,
    • 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 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.
    • SOFTWARE INDUSTRY MACROECONOMICS 77 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • GLOBAL GDP • According to the Economist Global GDP growth slowed in 2Q13 growing only 2 1% down from 3 1% in 2Q12• According to the Economist, Global GDP growth slowed in 2Q13, growing only 2.1%, down from 3.1% in 2Q12. • The global economy continued to be impacted by the European Union’s recession, and slowing GDP growth in China, which is rebalancing its economy to be more urban based and consumer driven. • Other large, emerging markets are struggling with social unrest, largely driven by high unemployment and lackluster growth. F th PIMCO f t Gl b l GDP t th 2 0% 2 5% li htl f i f t d t i t i• For the year, PIMCO forecasts Global GDP to growth 2.0% - 2.5%, up slightly from previous forecasts due to improvements in the U.S. and Japan offsetting continued challenges in Europe and potentially slower growth in key emerging markets. 8 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Sources: Worldbank, The Economist and PIMCO
    • U.S. GDP AND UNEMPLOYMENT 5.0% 4 1% 6% 8% 10% GDP Unemployment Rate 1.2% 3.2% 3.6% 2.1% 0 7% 1.5% 0 7% 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% 1.8% 0% 2% 4% -0.7% -2.7% -5.4% 6 4% -0.7% -6% -4% -2% • Current economic forecast calls for moderate U S GDP growth in 2Q13 that should modestly improve in the second half of the -6.4% -8% 2Q07 2Q08 2Q09 2Q10 2Q11 2Q12 2Q13 • Current economic forecast calls for moderate U.S. GDP growth in 2Q13 that should modestly improve in the second half of the year. • May’s Federal Reserve survey of 42 economists predicted GDP growth in 2Q13 would be 1.8%, ticking up to 2.5% growth in the second half of the year. For the year, expectations are the U.S. will grow 2.0%. • PIMCO’s latest forecasts were consistent with the Federal Reserve’s panel of outside experts. In its 2Q13 market perspectives,PIMCO s latest forecasts were consistent with the Federal Reserve s panel of outside experts. In its 2Q13 market perspectives, PIMCO forecast U.S. GDP growth of 1.5% - 2.0% for the year, driven by continuing strength in the housing market. 9 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • GLOBAL IT SPENDING 9.0% 6.0% 8.0% 6.0% 4.1%5.0% 10.0% 2.0% 2.0% 0.0% 2007 2008 2009 2010 2011 2012 2013 2014 (F) in IT Spending -10 0% ‐10.0% ‐5.0% YoY Change • In July analysts revised their earlier Global IT spending forecasts predicting only a 2% increase rather than their previous growth 10.0% ‐15.0% • In July, analysts revised their earlier Global IT spending forecasts predicting only a 2% increase, rather than their previous growth estimate of 3.9%. • Estimates for 2014 are more promising, with an array of economists forecasting a 4.1% increase in Global IT spending. • According to Forrester, software is receiving the largest share of Global IT dollars with $542M in 2013. Software spending is expected to grow 3.3% in 2013, and 6.2% in 2014.expected to grow 3.3% in 2013, and 6.2% in 2014. • SaaS software spending is expected to increase 25% in 2013. • Especially hot Software spending priorities include: collaboration (13% YoY growth), business intelligence (11%), ePurchasing (10%), HR management (9%), and healthcare systems (8%). 10 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Sources: IT spending numbers shown in charts are a blended average of Goldman Sachs, IDC, Forrester, Gartner forecasts
    • E-COMMERCE AND DIGITAL ADVERTISING SPEND illions) llions) Digital Advertising RevenueE-Commerce Spending 20% 50 000 60,000 25% 30% 10 000 12,000 oY%Change rceSpending($M oY%Change ngRevenue($Mil 5% 10% 15% 20 000 30,000 40,000 50,000 5% 10% 15% 20% 6,000 8,000 10,000 Yo E-Commer Yo InternetAdvertisi ‐5% 0% 0 10,000 20,000 ‐10% ‐5% 0% 5% 0 2,000 4,000 • U.S. retail e-commerce sales totaled $50.2B in 1Q13 (the latest data available), marking the second consecutive $50B+ quarter. Th $50 2B i d t d f 10 6% f ll di ti • U.S. digital advertising revenues totaled $9.6B in 1Q13 (the latest quarter data was available). The figure is a 15.6% increase over the $8 3 billion digital advertising tally• The $50.2B in spend accounted for 10.6% of all discretionary dollars spent, the highest on record. • 1Q13’s 13% YoY growth in online sales, while impressive, was down YoY from 1Q12’s 17% growth rate. E commerce categories with greater than 20% YoY growth increase over the $8.3 billion digital advertising tally reported in the first quarter 2012. • 1Q13’s strong first quarter follows on the heels of a strong 2012, when digital advertising soared 15% to $36.6B. • E-commerce categories with greater than 20% YoY growth included: Digital Content & Subscriptions, Apparel & Accessories, Sport & Fitness, Consumer Electronics, and Consumer Packaged Goods. • Apparel & Accessories was the highest growing mobile 11 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Sources: comScore, IAB, IBD commerce category, generating nearly $1 billion in sales in Q1.
    • SEG INDICES VS. BENCHMARK INDICES 25.0% 30.0% DOW S&P NASDAQ SEG SaaS SEG SW Index SEG Internet Index 15.0% 20.0% 5.0% 10.0% • An improving macro economic climate and continued support from the Federal Reserve helped drive the U.S. stock markets higher in 2Q13. 0.0% Jan Feb Mar Apr May Jun in 2Q13. • After finishing Q1 with the best overall performance (11.3%) among the three major indices we track, the Dow gained 2.3% in Q2, for a first half return in 2013 of 13.6%. Meanwhile, the NASDAQ, which posted the weakest Q1 return (8.2%), led the way in Q2 with a 5.0% return. The S&P continued its middle of the pack performance, adding to Q1’s return of 10.0% with an additional 2.8% in Q2. • Both the SEG SaaS and the SEG Internet Index derived significant benefit from investor receptivity to higher risk assets, postingg p y g , p g 17.2% and 17.0% returns, respectively, by close of Q2. By contrast, the SEG Software index closed 2Q13 with a comparatively paltry return of 1.9%. • For the first half of the year, the SEG SaaS and SEG Internet indexes have posted stellar returns of 22.5% and 24.8%, respectively. 12 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • PUBLIC SOFTWARE COMPANY FINANCIAL ANDPUBLIC SOFTWARE COMPANY FINANCIAL AND VALUATION PERFORMANCE: THE SEG SOFTWARE INDEX 1313 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • 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 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.7x 2.7x 2.6x 2.8x 2.7x EV/EBITDA 11.0x 11.2x 11.8x 13.2x 12.0x EV/Earnings 22.3x 21.4x 22.0x 24.0x 24.4x Gross Profit Margin 65.5% 66.0% 66.0% 66.4% 66.8% EBITDA M i 19 3% 19 4% 19 7% 19 5% 18 8% license with annual M&S • The SEG Software Index is currently comprised of 137 public software i * EBITDA Margin 19.3% 19.4% 19.7% 19.5% 18.8% Net Income Margin 10.7% 10.2% 10.4% 9.4% 9.1% TTM Revenue Growth 15.8% 14.7% 13.9% 12.5% 11.0% TTM Total Revenue ($M) $432.5 $445.4 $454.3 $466.7 $477.0 TTM EBITDA Growth 17.8% 15.1% 8.8% 6.3% 4.9% TTM Total EBITDA ($M) $73.5 $76.7 $78.9 $78.0 $85.3 companies* TTM Total EBITDA ($M) $73.5 $76.7 $78.9 $78.0 $85.3 Cash & Eq ($M) $185.6 $162.5 $165.7 $172.3 $182.1 Current Ratio 1.9 2.0 1.9 1.9 1.9 Debt / Equity Ratio 19.3% 21.3% 22.5% 25.1% 25.3% 14 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved * See appendix for a complete list of companies in The SEG Software Index
    • THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE 71% of public on-premise software companies had TTM revenue growth rates of 20% or below Of the 15% of companies with TTM revenue TTM Revenue Growth Rate DistributionRevenue Performance 18%$490 TTM Total  Revenue ($M) TTM Revenue Growth 31% 35% Of the 15% of companies with TTM revenue growth rates of 30% or more, a disproportionate number are focused on mobility and cloud computing 10% 12% 14% 16% $450 $460 $470 $480 $ nue Growth l Revenue 16% 31% 24% 14% 20% 25% 30% ompanies 0% 2% 4% 6% 8% $410 $420 $430 $440 $450 TTM Reven TTM Tota 14% 5% 10% 0% 5% 10% 15% % of Co • On-premise software companies lost market share to SaaS and Internet providers and struggled with continuing tight 0%$410 2Q12 3Q12 4Q12 1Q13 2Q13 0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM Revenue Growth p gg g g constraints on IT capital spending and macro economic headwinds, as their 2Q13 median TTM revenue growth rate declined to 11.0%, the lowest since 4Q10. • Despite slowing growth, the median TTM revenue of the SEG Software Index reached $477 0M the highest in itsSEG Software Index reached $477.0M, the highest in its history 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 and highly strategic M&A and R&D spending to 15 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved spur top line growth.
    • THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE 26% 27%30% TTM EBITDA Margin DistributionEBITDA Margin Performance Almost one in three on-premise software companies posted EBITDA margins of 20% - 30% 20%22% EBITDA Margin TTM EBITDA  Growth 18% 26% 15% 20% 25% ompanies 10% 12% 14% 16% 18% 20% 12% 14% 16% 18% 20% 22% DA Growth Margin 10% 11% 7% 0% 5% 10% % of Co 0% 2% 4% 6% 8% 10% 0% 2% 4% 6% 8% 10% TTM EBITD EBITDA  0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM EBITDA  Margin • EBITDA margins of public on-premise software companies have held relatively constant over the past year and remain 0%0% 2Q12 3Q12 4Q12 1Q13 2Q13 y p y at historic levels, closing 2Q13 at 18.8%. • Median TTM EBITDA growth plunged from 17.8% YoY in 2Q12 to a 4.9% YoY increase in 2Q13, suggesting many public software companies are spending more to grow revenue after paring expenses to the bonerevenue after paring expenses to the bone. • A year ago in 2Q12, median TTM EBITDA growth outpaced TTM revenue growth by 7.5%. In a dramatic reversal, TTM EBITDA growth in 2Q13 lagged TTM revenue growth by 6.1% (4.9% vs. 11.0%). 16 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE Margin PerformanceOperating Ratios 30% S&M (% of Revenue) R&D (% of Revenue) G&A (% of Revenue) 80% Gross Profit Margin EBITDA Margin Net Income Margin 15% 20% 25% Revenue 40% 50% 60% 70% Margin 0% 5% 10% % of R 0% 10% 20% 30% % M • Median spending on sales & marketing (S&M), research & development (R&D) and general & administrative (G&A), as • In 2Q13, median gross profit, EBITDA and net income margins were 66.8%, 18.8% and 9.1%, respectively. 0% 2Q12 3Q12 4Q12 1Q13 2Q13 0% 2Q12 3Q12 4Q12 1Q13 2Q13 p ( ) g ( ), a percentage of total revenue was 24.0%, 15.0% and 10.6%, respectively, in 2Q13 – consistent with historical norms for public, on-premise software companies. • Over the past year, S&M and G&A expenses as a percent of revenue have remained flat while R&D grew slightly from 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%). revenue have remained flat, while R&D grew slightly from 14.5% in 2Q12 to 15.0% in Q2. • Median S&M spending among on-premise public software companies lagged far behind their SaaS counterparts, which are investing heavily in customer acquisition (38.9% for • 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 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved SaaS and 24.0% for on-premise).
    • THE SEG SOFTWARE INDEX: MARKET MULTIPLES EV/Revenue Multiples by Size (TTM Revenue)EV/Revenue and EV/EBITDA Multiples 3.5x Revenue Greater Than $1 billion Revenue Between $500 million and $1 billion Revenue Between $100 million and $500 million Revenue Less Than $100 million 13.2x14.0x EV/Revenue EV/EBITDA 2.0x 2.5x 3.0x 3 5 V/Revenue 11.0x 11.2x 11.8x 12.0x 8.0x 10.0x 12.0x 0 0 0x 0.5x 1.0x 1.5x Median EV 2.7x 2.7x 2.6x 2.8x 2.7x 0 0x 2.0x 4.0x 6.0x • Despite slowing growth and EBITDA erosion, the median EV/Revenue multiple of public on-premise software • Investors in 2Q13 continued to place higher value on larger public software companies with revenues >$100 million. 0.0x 2Q12 3Q12 4Q12 1Q13 2Q13 0.0x 2Q12 3Q12 4Q12 1Q13 2Q13 p p p companies remained unchanged YoY in 2Q13, closing the quarter at 2.7x. • By contrast, the median EV/EBITDA multiple in 2Q13 was 12.0x, well below the high-teen EBITDA multiples that prevailed in 2007 and years prior p p $ • Throughout 2012, and in 2Q13, 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 prevailed in 2007 and years prior. $100M and $1B successfully balanced TTM revenue growth (median 17.3%) and spending (median EBITDA of 17.7%), and were rewarded with the highest median EV/Revenue multiples. 18 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SOFTWARE INDEX: MARKET MULTIPLES 5.4x 6.0x EV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates 6.0x 2.4x 2.6x 2.9x 3.0x 3.0x 4.0x 5.0x EV/Revenue 2 1 2.9x 3.9x 3.4x 4.8x 3.0x 4.0x 5.0x EV/Revenue 1.7x 0.0x 1.0x 2.0x Median  1.4x 2.1x 0.0x 1.0x 2.0x Median  <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM EBITDA  Margin • Noting the decline in the median revenue growth of on- premise software providers investors awarded markedly • Premium market multiples were awarded to the select few on- premise software providers generating EBITDA margins north <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM Revenue Growth premise software providers, investors awarded markedly higher market multipes to public on-premise software companies with revenue growth exceeding 20%. • Indeed, public on-premise software companies with revenue growth rates of 20% or higher were rewarded with median premise software providers generating EBITDA margins north of 40%. • Surprisingly, the EV/Revenue multiple range for most on- premise software companies was relatively narrow, suggesting investors were seemingly indifferent to profitability, a stark EV/Revenue multiples of 3.4x or higher in 2Q13, considerably greater than the SEG Software Index median of 2.7x. reversal from prior quarters. 19 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SOFTWARE INDEX: BY PRODUCT CATEGORY 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 Billing & Service Management 1.3x 1.3x 1.5x 1.9x 1.9x 7.9x 8.3x 8.4x 8.4x 8.3x 13.6% 9.5% 10.4% 10.4% 8.9% 18.9% 18.8% 19.9% 21.1% 18.7% Business Intelligence 3.2x 2.9x 3.2x 3.4x 3.0x 26.7x 25.9x 17.6x 15.8x 16.5x 18.3% 14.5% 13.2% 11.8% 8.3% 15.1% 15.4% 14.7% 14.0% 13.7% Development Platforms 1.9x 2.1x 2.5x 2.5x 2.6x 8.4x 8.2x 9.6x 9.1x 10.0x 5.3% 3.5% 1.6% 3.0% 0.3% 22.3% 21.8% 23.6% 21.8% 20.6% EBITDA Margin SEG Software Index Category EV/Revenue EV/EBITDA TTM Revenue Growth Engineering & PLM 2.3x 2.6x 2.5x 2.7x 2.7x 11.5x 12.1x 11.8x 13.4x 12.4x 13.5% 13.2% 14.0% 13.1% 11.7% 19.9% 20.7% 20.6% 20.7% 20.5% Enterprise Resource Planning 2.4x 2.7x 2.7x 2.9x 3.0x 8.3x 9.1x 9.0x 9.7x 11.3x 10.1% 9.0% 2.9% 2.0% 0.2% 29.0% 29.3% 29.6% 29.6% 29.6% Financial & Accounting 2.7x 2.9x 2.9x 3.1x 3.3x 9.5x 9.8x 9.8x 10.5x 11.3x 7.3% 17.2% 13.8% 8.6% 10.7% 27.2% 29.0% 28.8% 27.5% 26.6% Gaming 1.0x 1.0x 1.0x 1.1x 1.3x 7.6x 9.1x 8.0x 7.1x 9.7x 2.6% 2.2% 0.1% 7.4% 15.1% 16.3% 15.5% 16.3% 15.4% 15.0% Healthcare 2.7x 2.2x 2.1x 2.1x 2.1x 13.0x 12.8x 11.3x 14.8x 17.6x 37.1% 24.2% 19.6% 10.7% 11.0% 22.3% 19.6% 18.4% 13.4% 14.1% IT Conglomerates 2.9x 2.8x 2.5x 2.5x 2.9x 7.3x 8.2x 7.8x 8.8x 8.3x 5.3% 1.5% 1.4% 0.5% 0.2% 36.9% 36.1% 34.6% 33.8% 33.8% Mobile Solutions/Content 3 6x 3 6x 2 5x 2 7x 2 8x 16 1x 13 8x 11 9x 20 6x 13 2x 43 5% 34 4% 33 1% 35 2% 19 4% 8 1% 7 8% 6 4% 4 5% 7 9%Mobile Solutions/Content 3.6x 3.6x 2.5x 2.7x 2.8x 16.1x 13.8x 11.9x 20.6x 13.2x 43.5% 34.4% 33.1% 35.2% 19.4% 8.1% 7.8% 6.4% 4.5% 7.9% Networking & Network Performance Management 2.4x 2.5x 2.5x 2.7x 2.6x 15.0x 14.0x 14.0x 15.1x 15.6x 22.9% 19.5% 15.5% 14.2% 9.1% 17.9% 16.7% 15.8% 14.9% 15.0% Security 2.9x 3.2x 2.7x 3.3x 3.6x 10.2x 10.5x 11.2x 11.5x 10.7x 19.4% 20.1% 23.1% 23.4% 21.3% 13.1% 14.5% 13.9% 8.1% 4.5% Storage, Data Management & Integration 2.5x 2.5x 2.3x 2.4x 2.4x 9.4x 9.2x 8.4x 9.2x 8.8x 7.6% 6.3% 6.5% 4.8% 4.1% 23.7% 23.9% 23.8% 22.2% 21.9% Supply Chain Management & Logistics 3.2x 3.2x 3.5x 3.8x 4.1x 11.3x 11.1x 13.6x 14.7x 15.6x 19.1% 16.1% 13.1% 12.8% 10.7% 19.6% 19.6% 19.6% 19.4% 19.2% g Systems Management 5.9x 5.5x 4.5x 4.8x 4.3x 22.9x 22.3x 18.9x 20.5x 19.0x 18.1% 18.1% 16.5% 17.2% 15.8% 26.8% 25.8% 25.5% 25.8% 24.7% Vertical - Finance 3.3x 3.2x 3.0x 3.4x 3.8x 10.3x 10.6x 9.4x 10.7x 11.0x 6.8% 6.3% 7.1% 6.7% 7.6% 26.4% 26.3% 26.4% 26.5% 27.3% Vertical - Other 3.0x 2.9x 2.9x 3.0x 3.2x 16.4x 21.0x 20.3x 22.0x 22.1x 26.5% 28.0% 19.8% 21.3% 21.0% 15.8% 14.7% 14.4% 14.1% 14.4% Median 2.7x 2.7x 2.6x 2.8x 2.7x 11.0x 11.2x 11.8x 13.2x 12.0x 15.8% 14.7% 13.9% 12.5% 11.0% 19.3% 19.4% 19.7% 19.5% 18.8% • The SEG Software Index is segmented into 17 product categories • See the appendix for the complete list of companies within each product category 20 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE 2Q13 YoY Change in Revenue Growth2Q13 TTM Revenue Growth 10% 15% 20% 25% 2Q13 YoY Change in Revenue Growth2Q13 TTM Revenue Growth ( 0%) 0%  50%  100%  0% 5% 10% ervice… gence pment… &PLM rprise… cial&… aming hcare erates Mobile… king&… ecurity ,Data… Chain… stems… nance Other (150%) (100%) (50%) ervice… gence pment… PLM rprise… cial&… aming hcare erates Mobile… king&… curity Data… Chain… stems… nance Other Billing&Se BusinessIntellig Develop Engineering& Ente Financ Ga Healt ITConglome M Network Se Storage, Supply Sys Vertical-Fin Vertical- Billing&Se BusinessIntellig Develop Engineering& Enter Financ Ga Health ITConglome M Network Sec Storage, SupplyC Sys Vertical-Fin Vertical-O 25% 30%  35%  40%  2Q13 YoY Change EBITDA Margin2Q13 TTM EBITDA Margin (20%) 0%  20%  0%  5%  10%  15%  20%  25%  e… e nt… M e… &… g e s e… &… y a… n… s… e er (100%) (80%) (60%) (40%) ice… ce ent… LM ise… l&… ng are tes bile… g&… rity ata… ain… ms… ce her Billing&Servic sinessIntelligence Developmen ngineering&PLM Enterpris Financial& Gaming Healthcare ITConglomerates Mobil Networking& Securit Storage,Dat SupplyChai System Vertical-Finance Vertical-Othe Billing&Servi usinessIntelligen Developme Engineering&PL Enterpri Financia Gami Healthca ITConglomerat Mob Networking Secur Storage,Da SupplyCha System Vertical-Finan Vertical-Oth 21 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Bus En I Bu E
    • THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY: MARKET MULTIPLES 2Q13 YoY Change in Median EV/Revenue Multiples2Q13 Median EV/Revenue Multiples 4.0x 4.5x 40% 50% 60% 1.5x 2.0x 2.5x 3.0x 3.5x (10%) 0% 10% 20% 30% 40% 0.0x 0.5x 1.0x ement gence tforms &PLM anning unting aming thcare erates ontent etwork… ecurity ment&… ment&… ement nance Other (40%) (30%) (20%) ( %) ement igence tforms &PLM anning ounting aming thcare erates Content etwork… ecurity ment&… ment&… ement nance -Other g&ServiceManage BusinessIntelli DevelopmentPlat Engineering& priseResourcePla Financial&Acco Ga Heal ITConglom MobileSolutions/C Networking&Ne Se ge,DataManagem plyChainManagem SystemsManage Vertical-Fi Vertical- g&ServiceManag BusinessIntelli DevelopmentPla Engineering& priseResourcePla Financial&Acco G Heal ITConglom MobileSolutions/C Networking&Ne Se ge,DataManagem plyChainManagem SystemsManag Vertical-Fi Vertical- • In 2Q13, eleven product categories achieved median EV/Revenue multiples above the SEG Software Index median (2.7x), including Systems Management (4.3x), Supply Chain Mgmt (4.1x), Vertical – Finance (3.8x), Security (3.6x), Financial & Accounting (3.3x), Vertical – Other (3.2x), Business Intelligence (3.0x), Enterprise Resource Planning (3.0x), IT Conglomerates (2.9x), and Mobile (2.8x). Billing Enterp M Storag Supp Billing Enter M Stora Supp • For some categories, TTM revenue growth translated to an impressive EV/Rev market valuation (Security, Vertical – Other), while other categories demonstrated a curious disconnect between market valuation and top line growth (Supply Chain, IT Conglomerates). • The Systems Management product category, benefitting from the rapid shift to cloud computing and growing demand for cloud infrastructure, achieved the highest median EV/Revenue multiple (4.3x) in 2Q13, driven by strong TTM revenue growth (15.8%) and EBITDA i (24 7%) b th b th di f th i d 22 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved EBITDA margins (24.7%) – both above the median for the index.
    • PUBLIC SaaS COMPANY FINANCIAL ANDPUBLIC SaaS COMPANY FINANCIAL AND VALUATION PERFORMANCE: THE SEG SaaS INDEX 2323 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SaaS INDEX SEG - SaaS: Median Metrics • The SEG SaaS Index tracks public companies that primarily offer hosted, on- demand software under a subscription Measure 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 4.9x 5.4x 4.6x 5.0x 5.3x EV/EBITDA 29.9x 37.9x 41.7x 35.4x 31.5x EV/Earnings 32.1x 34.5x 36.8x 63.2x 95.3x Gross Profit Margin 70.2% 70.2% 70.9% 70.7% 70.6% and/or transaction based pricing model • The SEG SaaS Index is currently comprised of 40 public pure-play SaaS i * EBITDA Margin 8.9% 8.0% 8.0% 6.0% 3.1% Net Income Margin -1.0% -0.7% 0.5% -1.4% -2.6% TTM Revenue Growth 30.9% 28.0% 26.8% 25.1% 25.5% TTM Total Revenue ($M) $119.7 $132.4 $145.6 $156.0 $164.2 TTM EBITDA Growth 28.2% 23.2% 10.4% 5.7% -1.5% TTM Total EBITDA ($M) $7 2 $6 8 $6 7 $7 5 $6 3 companies* TTM Total EBITDA ($M) $7.2 $6.8 $6.7 $7.5 $6.3 Cash & Eq ($M) $62.6 $68.5 $68.6 $75.9 $77.6 Current Ratio 1.8 1.6 1.7 1.8 1.6 Debt / Equity Ratio 9.4% 11.0% 6.7% 6.0% 7.1% 24 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved * See appendix for a complete list of companies in The SEG SaaS Index
    • THE SEG SaaS INDEX DETAILS SEG SaaS Index Company 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 Athenahealth, Inc Vertically Focused 7.2x 8.2x 6.1x 7.2x 7.2x 50.0x 62.9x 48.9x 59.9x 74.6x 34.4% 34.2% 32.4% 30.3% 28.7% 14.5% 13.1% 12.5% 12.1% 9.6% Bazaarvoice, Inc CRM & Marketing 9.4x 7.2x 4.3x 2.7x 2.7x - - - - - 64.6% 62.6% 59.3% 57.9% 51.0% -19.4% -17.8% -17.9% -18.2% -28.1% Callidus Software Inc. Workforce Management 2.4x 2.0x 2.0x 2.1x 2.5x - - - - - 15.4% 15.0% 14.9% 13.3% 14.5% -13.8% -17.0% -18.1% -17.1% -15.4% ChannelAdvisors Workforce Management - - - - 5.8x - - - - - 18.8% 18.8% - 23.0% - -2.6% -2.6% -1.5% -1.8% -3.7% Concur Other SaaS 8.0x 8.7x 7.8x 7.9x 8.7x 57.1x 66.8x 67.5x 81.7x 113.9x 24.0% 25.7% 25.8% 25.1% 22.3% 14.0% 13.1% 11.5% 9.7% 7.7% SEG SaaS Index Category EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin Constant Contact CRM & Marketing 2.3x 2.0x 1.3x 1.4x 1.3x 21.4x 19.6x 14.2x 17.9x 18.5x 21.4% 20.0% 19.1% 17.6% 16.1% 10.9% 10.4% 9.3% 7.8% 7.3% Cornerstone OnDemand Workforce Management 11.7x 12.9x 13.1x 13.4x 14.6x - - - - - 63.2% 72.2% 68.1% 61.5% 61.9% -25.5% -21.5% -24.1% -23.4% -21.5% DealerTrack Vertically Focused 3.1x 2.9x 2.9x 3.3x 3.3x 20.0x 19.4x 20.1x 23.9x 24.0x 39.2% 28.7% 16.8% 10.1% 10.5% 15.5% 15.2% 14.3% 13.8% 13.8% Demandware, Inc. Other SaaS 12.5x 9.8x 10.0x 8.9x 9.5x 553.5x - - - - 48.7% 45.0% 42.3% 40.5% 37.5% 2.3% -3.5% -5.9% -4.8% -10.7% E2open, Inc ERP & Supply Chain - 4.6x 4.5x 5.9x 4.5x - 92.6x 76.6x 754.0x - - - 22.2% 25.6% 17.4% 1.6% 5.0% 5.9% 0.8% -3.4% Ebix Inc. Vertically Focused 4.1x 5.2x 3.7x 3.4x 3.7x 9.3x 12.2x 8.9x 7.9x 8.8x 22.8% 18.2% 18.4% 18.0% 20.5% 43.5% 42.9% 41.2% 42.4% 41.8% Ellie Mae Vertically Focused 4.6x 7.8x 6.0x 5.0x 5.0x 29.8x 37.9x 24.6x 19.5x 19.9x 46.4% 67.0% 83.5% 83.5% 69.9% 15.4% 20.6% 24.4% 25.5% 24.8% ExactTarget, Inc. CRM & Marketing 2.8x 2.5x 2.9x 2.9x 2.9x 9.3x 8.0x 9.2x 9.5x 9.8x -5.1% 1.2% 9.4% 14.4% 7.8% 29.6% 30.8% 31.3% 30.7% 29.1% Fleetmatics ERP & Supply Chain - - 7.5x 6.9x 5.6x - - 45.1x 37.0x 27.8x - - - 38.1% 39.6% 18.1% 16.8% 16.6% 18.6% 20.3% Halogen Software, Inc. Workforce Management - - - - 8.0x - - - - - 36.4% 36.4% 36.4% 22.5% - -6.7% -6.7% -6.7% -8.8% -9.6% inContact, Inc. Other SaaS 2.4x 2.5x 2.4x 2.7x 3.2x - - - 458.2x 236.3x 12.5% 16.1% 20.3% 24.6% 25.5% -5.8% -4.9% -2.1% 0.6% 1.4% IntraLinks Holdings Other SaaS 1.3x 1.4x 1.6x 1.6x 1.5x 12.1x 26.1x 86.0x 51.1x 66.2x 7.3% 2.9% 0.1% 1.8% 4.6% 10.3% 5.4% 1.9% 3.2% 2.3% J2 Global Other SaaS 2.9x 3.3x 3.4x 4.1x 4.5x 6.0x 6.7x 6.7x 8.3x 9.8x 27.9% 18.6% 12.1% 12.5% 16.0% 49.5% 49.7% 50.5% 49.6% 46.1% Jive Software, Inc Other SaaS 13.0x 8.7x 6.9x 7.6x 7.0x - - - - - 64.2% 56.8% 49.3% 47.1% 41.2% -43.6% -39.3% -34.9% -32.2% -35.4% LivePerson CRM & Marketing 5.8x 6.0x 4.3x 4.3x 2.6x 30.0x 37.2x 30.3x 35.4x 29.8x 21.3% 21.4% 19.7% 18.3% 17.0% 19.3% 16.2% 14.1% 12.1% 8.7% Marin Software CRM & Marketing - - - 8.2x 4.5x - - - - - 90.1% 90.1% - 64.9% - -42.4% -42.4% -37.2% -38.0% -39.9%Marin Software CRM & Marketing 8.2x 4.5x 90.1% 90.1% 64.9% 42.4% 42.4% 37.2% 38.0% 39.9% Marketo CRM & Marketing - - - - 11.5x - - - - - 130.8% 130.8% 130.8% 80.3% - -67.9% -67.9% -67.9% -56.2% -53.2% Medidata Solutions Vertically Focused 3.0x 4.0x 4.4x 5.3x 7.3x 14.9x 23.0x 26.6x 31.8x 45.6x 14.5% 10.0% 12.1% 18.4% 19.2% 20.4% 17.6% 16.5% 16.6% 16.0% Netsuite ERP & Supply Chain 12.5x 14.2x 14.6x 15.4x 18.7x - - - - - 24.6% 26.3% 28.4% 30.7% 31.3% -6.8% -5.6% -5.2% -5.2% -6.3% OpenTable, Inc. Other SaaS 5.9x 5.9x 6.1x 7.1x 7.9x 19.8x 20.7x 20.3x 25.0x 27.2x 30.3% 22.0% 17.1% 15.9% 15.6% 29.8% 28.5% 29.8% 28.5% 29.2% Qualys, Inc. Other SaaS - 4.8x 4.8x 3.1x 3.4x - 57.6x 50.5x 27.7x 30.2x - - - 20.0% 19.3% 9.8% 8.3% 9.5% 11.3% 11.1% RealPage Vertically Focused 4.9x 6.1x 5.1x 5.0x 4.4x 37.9x 46.9x 36.0x 30.6x 27.3x 34.4% 32.0% 27.7% 24.9% 22.5% 12.9% 13.1% 14.1% 16.4% 16.0% Responsys CRM & Marketing 3.4x 2.7x 1.4x 1.7x 2.1x 20.3x 20.3x 11.4x 14.0x 19.0x 36.3% 27.2% 21.1% 20.7% 21.3% 16.6% 13.1% 12.1% 11.8% 11.2% Salesforce com CRM & Marketing 8 2x 7 4x 7 4x 8 2x 7 4x 189 2x 168 0x 235 9x 298 6x 331 3x 37 7% 36 5% 36 1% 34 6% 32 1% 4 3% 4 4% 3 1% 2 8% 2 2%Salesforce.com CRM & Marketing 8.2x 7.4x 7.4x 8.2x 7.4x 189.2x 168.0x 235.9x 298.6x 331.3x 37.7% 36.5% 36.1% 34.6% 32.1% 4.3% 4.4% 3.1% 2.8% 2.2% SciQuest ERP & Supply Chain 5.0x 5.4x 4.7x 5.5x 6.6x 41.4x 47.1x 50.7x 96.2x 167.3x 23.3% 22.0% 21.4% 24.4% 31.5% 12.1% 11.6% 9.4% 5.7% 3.9% Service-now.com Other SaaS 19.5x 20.3x 17.7x 14.9x 17.0x - - - - - - - - 90.3% 87.8% -1.2% -6.1% -9.2% -8.9% -9.4% SPS Commerce ERP & Supply Chain 4.9x 5.6x 6.6x 6.4x 7.7x 68.5x 67.2x 78.0x 73.9x 86.7x 31.6% 31.5% 30.4% 33.0% 36.3% 7.1% 8.4% 8.5% 8.7% 8.9% Tableau Software Other SaaS - - - - 21.4x - - - - 20132.4x 82.5% 82.5% 82.5% 104.8% - 9.6% 9.6% 9.6% 6.3% 0.1% Tangoe Other SaaS 6.3x 5.5x 3.2x 3.3x 2.8x 77.9x 70.3x 41.7x 38.9x 32.9x 56.0% 50.8% 48.1% 47.2% 41.5% 8.1% 7.8% 7.6% 8.5% 8.7% Textura Corp. Vertically Focused - - - - 18.7x - - - - - 74.7% 74.7% 106.2% - - -102.3% -102.3% -68.0% -62.6% -55.1% The Ultimate Software Group, Inc. Workforce Management 7.0x 8.3x 8.0x 7.9x 8.5x 71.1x 80.0x 69.4x 63.7x 61.9x 19.6% 21.0% 21.8% 23.4% 24.4% 9.9% 10.4% 11.6% 12.5% 13.8% U it 4 ERP & S l Ch i 1 5 1 5 1 6 1 8 1 9 10 0 10 6 11 8 12 7 13 3 6 0% 4 3% 3 8% 5 4% 5 4% 14 9% 13 9% 13 8% 14 3% 14 3%Unit 4 ERP & Supply Chain 1.5x 1.5x 1.6x 1.8x 1.9x 10.0x 10.6x 11.8x 12.7x 13.3x 6.0% 4.3% 3.8% 5.4% 5.4% 14.9% 13.9% 13.8% 14.3% 14.3% Vocus CRM & Marketing 3.0x 3.3x 2.6x 2.1x 1.3x 311.8x 433.8x 242.6x - 92.0x 21.0% 29.9% 39.7% 48.7% 48.4% 1.0% 0.8% 1.1% -0.2% 1.4% Workday, Inc. ERP & Supply Chain - - 33.2x 29.9x 32.0x - - - - - - - - 103.6% 88.3% -42.4% -38.1% -35.7% -32.5% -31.9% Zix Corporation Other SaaS 3.9x 3.5x 3.6x 4.2x 4.7x 12.5x 11.3x 12.7x 15.3x 21.1x 12.4% 11.1% 12.0% 13.7% 14.4% 31.2% 30.7% 28.1% 27.6% 22.2% Median: 4.9x 5.4x 4.6x 5.0x 5.3x 29.9x 37.9x 41.7x 35.4x 31.5x 30.9% 28.0% 26.8% 25.1% 25.5% 8.9% 8.0% 8.0% 6.0% 3.1% 25 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SaaS INDEX: FINANCIAL PERFORMANCE 26% 30% TTM Revenue Growth Rate DistributionRevenue Performance 24% achieved TTM 35.0%$180 TTM Total  Revenue ($M) TTM Revenue Growth 26% 24% 21% 15% 15% 20% 25% ompanies 24% achieved TTM revenue growth of 40% or more Only 6% of companies generated TTM revenue growth of 10% l 20.0% 25.0% 30.0% $100 $120 $140 $160 $ nue Growth al Revenue 0% 6% 9% 0% 5% 10% % of Co 10% or less 0 0% 5.0% 10.0% 15.0% $0 $20 $40 $60 $80 TTM Reven TTM Tota 0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% <= 50% > 50% TTM Revenue Growth • After declining for four consecutive quarters, the median TTM revenue growth rate for the SEG SaaS Index edged up to 25.5% 0.0%$0 2Q12 3Q12 4Q12 1Q13 2Q13 in 2Q13. • Public SaaS companies continued to grow and mature, and gain market share; Q2’s median TTM revenue exceeded $164M, up sharply from 2Q12’s $120M. • 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 slowly recovering economy. • We expect median TTM revenue growth for public SaaS 26 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved We expect median TTM revenue growth for public SaaS companies to remain at current levels for the remainder of 2013.
    • THE SEG SaaS INDEX: FINANCIAL PERFORMANCE TTM EBITDA Margin DistributionEBITDA Margin Performance 85% with EBITDA margins of 20% or lower 30%10% EBITDA Margin TTM EBITDA  Growth 35% 40% 15% 20% 25% 6% 8% DA Growth Margin 35% 33% 18%20% 25% 30% 35% ompanies 5% 0% 5% 10% 0% 2% 4% TTM EBITD EBITDA  10% 5% 0% 5% 10% 15% % of Co • After peaking in 2010, the median EBITDA margin of public SaaS companies has declined every quarter. ‐5%0% 2Q12 3Q12 4Q12 1Q13 2Q13 0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% TTM EBITDA  Margin SaaS companies has declined every quarter. • The trend continued in 2Q13, as EBITDA margins fell to 3.1% from 8.9% in 2Q12. • The continuing erosion of EBITDA margins among SaaS providers has not been accompanied by a concomitantp p y increase in TTM revenue growth rates, suggesting public SaaS providers are working harder and spending more just to stay even. 27 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE 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% 45% evenue 40% 50% 60% 70% 80% argin 0% 5% 10% 15% 20% % of Re 0% 10% 20% 30% 40% % Ma • Increased spending on sales and marketing by public SaaS companies accounted for much of the decline in median • Median gross profit margins for public SaaS companies in 2Q13 were 70.6%, and have remained steady over the past 0% 2Q12 3Q12 4Q12 1Q13 2Q13 0% 2Q12 3Q12 4Q12 1Q13 2Q13 EBITDA margin. • In 2Q13, 38.9% of total revenue was spent on sales & marketing, up from 35.8% in 2Q12. • R&D spending as a percent of revenue increased to 17.8% in , y p five quarters. • Stable gross profit margins demonstrate the ability of public SaaS companies to grow without disproportionally scaling infrastructure and increasing application delivery costs. 2Q13, compared to 15.0% of revenue invested in R&D by on-premise software companies. • It is unclear whether the increased spending on product development 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 close to break even, with net income in 2Q13 of -2.6%. 28 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved accelerate revenue growth in the absence of improved GDP growth and increased IT capital spending.
    • THE SEG SaaS INDEX: MARKET MULTIPLES EV/Revenue Multiple DistributionEV/Revenue and EV/EBITDA Multiples 41.7x45.0x EV/Revenue EV/EBITDA 21% 25% 29.9x 37.9x 35.4x 31.5x 20 0x 25.0x 30.0x 35.0x 40.0x 11% 16% 11% 11% 16% 21% 15% 20% Companies 4.9x 5.4x 4.6x 5.0x 5.3x 0.0x 5.0x 10.0x 15.0x 20.0x 0% 5% 3% 8% 0% 5% 10% % of C • Median EV/Revenue multiples remained strong for public SaaS providers, closing 2Q13 at 5.3x. • The wide disparity in public SaaS company EV/Revenue multiples is striking, and demonstrates growing awareness 2Q12 3Q12 4Q12 1Q13 2Q13 <= 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 2Q13 continued to trade at a significant premium relative to their on-premise peers (5.3x vs. 2.7x). • Public SaaS EV/Revenue multiples have exceeded 5x in p g, g g and sophistication among SaaS investors. • Typically, we would expect to see a cluster of companies with multiples around the median (5.3x); instead, public SaaS companies are clustered at the low and high ends of the range suggesting SaaS is increasingly comprised of three of the past five quarters, the best streak since 2007. the range, suggesting SaaS is increasingly comprised of underperformers and overachievers. • 22% of the companies in the SEG SaaS Index are trading for 9x TTM revenue or greater, while 27% are trading for 3x or lower. 29 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SaaS INDEX: MARKET MULTIPLES EV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates 14.0x 8 8x 10.0x 7.4x 11.5x 8.0x 10.0x 12.0x EV/Revenue 8.8x 4.5x 5.3x 4 1x5.0x 6.0x 7.0x 8.0x 9.0x EV/Revenue 0.0x 1.7x 3.4x 4.4x 2.8x 0 0x 2.0x 4.0x 6.0x Median E 3.4x 4.1x 0 0x 1.0x 2.0x 3.0x 4.0x Median E • There is a clear and direct correlation between the median TTM th t d di EV/R lti l • There is an inverse correlation between EBITDA margins and median EV/Re en e m ltiples 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 TTM revenue growth rate and median EV/Revenue multiple of public SaaS companies. • Public SaaS companies growing TTM revenue in excess of 50% achieved a median EV/Revenue multiple of 11.5x. • The premium EV/Rev market multiples awarded rapidly and median EV/Revenue multiples. • In the current market, SaaS profitability is penalized, as investors perceive profitability to be at the expense of growth, which they deem all important. • As proof public SaaS companies with no profitability• The premium EV/Rev market multiples awarded rapidly growing public SaaS companies, which is driving their increased spending on sales & marketing. • As proof, public SaaS companies with no profitability boasted a remarkable 8.8x median EV/Revenue multiple in 2Q13. 30 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SaaS INDEX BY PRODUCT CATEGORY 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 CRM & Marketing 5.8x 5.0x 4.3x 3.5x 2.7x 4.1x 4.5x 2.8x 2.3x 3.0x 37.0% 33.2% 37.9% 40.9% 32.1% 1.0% 0.8% 2.8% 1.4% 1.4% ERP & Supply Chain 4.9x 5.4x 6.6x 6.4x 6.6x 5.0x 5.3x 5.7x 5.7x 6.7x 24.0% 24.1% 22.2% 30.7% 31.5% 7.1% 8.4% 8.5% 5.7% 3.9% Vertically Focused 4.3x 5.7x 4.7x 5.0x 5.0x 4.1x 4.6x 3.9x 4.2x 4.0x 34.4% 32.0% 27.7% 21.6% 21.5% 15.4% 15.2% 14.3% 16.4% 16.0% SEG SaaS Index Category EV/Revenue Forward EV/Revenue TTM Revenue Growth EBITDA Margin Currently comprised of 40 public companies, The SEG SaaS Index has sufficient critical mass to analyze trends across four distinct SaaS product categories Select companies within each SaaS Workforce Management 7.0x 8.3x 10.5x 10.7x 8.5x 6.5x 7.3x 7.6x 8.0x 7.4x 28.0% 28.7% 29.1% 23.4% 43.1% -13.8% -17.0% -18.1% -17.1% -15.4% Median: 4.9x 5.4x 4.6x 5.0x 5.3x 4.5x 4.7x 4.2x 4.5x 5.3x 30.9% 28.0% 26.8% 25.1% 25.5% 8.9% 8.0% 8.0% 6.0% 3.1% CRM & M k ti ERP & S l Ch i V ti ll F d W kf M t analyze trends across four distinct SaaS product categories. Select companies within each SaaS category are included below. See the appendix to this report for the complete list. 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 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SaaS INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE 2Q13 YoY Change in Revenue Growth2Q13 TTM Revenue Growth 2Q13 YoY Change in Revenue Growth2Q13 TTM Revenue Growth 20%  40%  60%  30% 35% 40% 45% 50% (60%) (40%) (20%) 0%  g in ly d e nt 0% 5% 10% 15% 20% 25% 30% CRM& Marketin ERP& SupplyChai Verticall Focuse Workforce Managemen 0% CRM& Marketing ERP& SupplyChain Vertically Focused Workforce Management 2Q13 YoY Change EBITDA Margin2Q13 TTM EBITDA Margin 10% 15%  20%  20% 30%  40%  50%  (20%) (15%) (10%) (5%) 0%  5%  10%  (50%) (40%) (30%) (20%) (10%) 0%  10%  20%  g n d t (20%) CRM& Marketing ERP& SupplyChain Vertically Focused Workforce Management CRM&Marketing P&SupplyChain erticallyFocused Workforce Management 32 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved C ERP Ve
    • THE SEG SaaS INDEX BY PRODUCT CATEGORY: MARKET MULTIPLES 2Q13 YoY Change in Median EV/Revenue Multiples2Q13 Median EV/Revenue Multiples 9 0 40% 4 0 5.0x 6.0x 7.0x 8.0x 9.0x (10%) 0% 10% 20% 30% 40% 0.0x 1.0x 2.0x 3.0x 4.0x g n y d nt (60%) (50%) (40%) (30%) (20%) g n y d nt • Public SaaS companies comprising the Workforce Management category achieved a 8.5x median EV/Revenue multiple, 66% higher CRM& Marketing ERP& SupplyChain Vertically Focused Workforce Managemen CRM& Marketing ERP& SupplyChain Vertically Focused Workforce Managemen g g g y g than the next closest product category, ERP & Supply Chain. • The stellar market valuations of these SaaS Workforce Management providers can be attributed to their breakneck TTM revenue growth (23.4%), despite little or no profitability. • Workforce management SaaS providers continued to benefit from a continuing migration from legacy, on-premise solutions to hosted SaaS solutions. • SaaS ERP & Supply chain, where market adoption has lagged due to concerns over security and integration, achieved the second highest median EV/Revenue multiple (6.6x). • Although ERP & Supply Chain TTM revenue growth was only slightly above the SaaS median, companies within this product t i d i k t lti l b f th i k t t ti l f h t d ERP & S l Ch i l ti 33 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved category received premium market multiples because of the massive market potential of hosted ERP & Supply Chain solutions.
    • PUBLIC INTERNET COMPANY FINANCIAL ANDPUBLIC INTERNET COMPANY FINANCIAL AND VALUATION PERFORMANCE: THE SEG INTERNET INDEX 3434 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • 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 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.2x 1.9x 2.1x 2.0x 2.2x EV/EBITDA 12.3x 13.5x 13.3x 13.5x 14.8x EV/Earnings 23.3x 27.2x 23.6x 22.4x 28.1x Gross Profit Margin 66.7% 66.3% 65.5% 65.7% 65.7% EBITDA M i 13 3% 13 2% 13 3% 13 0% 13 3% array of pricing models • The SEG Internet Index is currently comprised of 89 public Internet i * EBITDA Margin 13.3% 13.2% 13.3% 13.0% 13.3% Net Income Margin 4.8% 4.3% 6.2% 3.9% 2.4% TTM Revenue Growth 26.6% 24.9% 22.0% 19.8% 18.7% TTM Total Revenue ($M) $394.3 $400.7 $396.9 $427.1 $430.6 TTM EBITDA Growth 20.3% 20.3% 11.5% 15.6% 9.4% TTM Total EBITDA ($M) $44.3 $48.6 $46.7 $42.7 $42.5 companies* ($ ) $ $ $ $ $ Cash & Eq ($M) $136.6 $122.6 $130.8 $148.2 $164.5 Current Ratio 2.6 2.6 2.5 2.2 2.4 Debt / Equity Ratio 15.9% 13.8% 21.0% 21.1% 20.1% 35 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved * See appendix for a complete list of companies in The SEG Internet Index
    • Initial Public OfferingsTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCE TTM Revenue Growth Rate DistributionRevenue Performance 30.0%$440 TTM Total  Revenue ($M) TTM Revenue Growth 23%25% 15 0% 20.0% 25.0% 30.0% $410 $420 $430 $440 nue Growth l Revenue 13% 18% 17% 10% 19% 15% 20% ompanies 0 0% 5.0% 10.0% 15.0% $370 $380 $390 $400 TTM Reven TTM Tota 10% 0% 5% 10% % of Co • In 2Q13, the median YoY TTM revenue growth rate of public companies comprising the SEG Internet Index declined from 26.6% 0.0%$370 2Q12 3Q12 4Q12 1Q13 2Q13 0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM Revenue Growth to 18.7%. • While lower, Q2’s median Internet growth rate remains healthy, especially considering the median TTM revenue of the SEG Internet Index is $430.6M, compared to only $164.2M for the SEG SaaS IndexIndex. • The SEG Internet Index had an impressive number of star performers, 19% of companies in the index reported TTM revenue growth greater than 40% in 1Q13. • Conversely, 23% of companies in the SEG Internet Index posted 36 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Conversely, 23% of companies in the SEG Internet Index posted negative TTM revenue growth, depressing the median as a whole.
    • THE SEG INTERNET INDEX: FINANCIAL PERFORMANCE TTM EBITDA Margin DistributionEBITDA Margin Performance 25%14% EBITDA Margin TTM EBITDA  Growth 30% 15% 20% 25% 8% 10% 12% 14% DA Growth Margin 20% 24% 24% 14%15% 20% 25% ompanies 0% 5% 10% 0% 2% 4% 6% TTM EBITD EBITDA  9% 9% 0% 5% 10% % of Co • Over the past five quarters, public Internet companies managed to maintain respectable EBITDA margins despite 0%0% 2Q12 3Q12 4Q12 1Q13 2Q13 0% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% TTM EBITDA  Margin g p g p their declining revenue growth rates. • The median ~13% Internet Index EBITDA margin for 2Q13 was consistent with 2006 and 2007 performance, but was markedly lower than the 18.1% median EBITDA achieved in 1Q111Q11. • The EBITDA margin decline was partly due to a greater number of Internet IPOs with stellar revenue growth, but little, if any, profitability. • 44% of all public Internet companies posted EBITDA 37 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved • 44% of all public Internet companies posted EBITDA margins of 10% or lower.
    • THE SEG INTERNET INDEX: FINANCIAL PERFORMANCE Median Margin PerformanceMedian Operating Ratios 25% S&M (% of Revenue) R&D (% of Revenue) G&A (% of Revenue) 70% Gross Profit Margin EBITDA Margin Net Income Margin 15% 20% 25% evenue 40% 50% 60% 70% argin 0% 5% 10% % of Re 0% 10% 20% 30% % Ma • In 2Q13, companies comprising the SEG Internet Index spent 22.1% of total revenue on sales and marketing (S&M), 11.5% on research development (R&D), and 11.3% on general and administrative. 0% 2Q12 3Q12 4Q12 1Q13 2Q13 0% 2Q12 3Q12 4Q12 1Q13 2Q13 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 13.3% in 2Q13. 38 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG INTERNET INDEX: MARKET MULTIPLES EV/Revenue Multiple DistributionMedian EV/Revenue and EV/EBITDA Multiples 14.8x16.0x EV/Revenue EV/EBITDA 30% 12.3x 13.5x 13.3x 13.5x 8 0x 10.0x 12.0x 14.0x 23% 25% 15% 20% 25% ompanies 2.2x 1.9x 2.1x 2.0x 2.2x 0 0x 2.0x 4.0x 6.0x 8.0x 9% 8% 9% 3% 5% 7% 2% 9% 0% 5% 10% % of Co • In 2Q13, the median EV/Revenue multiple of the SEG Internet Index was 2.2x, flat YoY. • The EV/Revenue market multiples of public internet providers vary dramatically with the largest concentration at 2 0x or below (48% 0.0x 2Q12 3Q12 4Q12 1Q13 2Q13 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 • The EV/Revenue market multiples of public internet providers vary dramatically, with the largest concentration at 2.0x or below (48% of our Internet Index). • However, a significant minority – mostly the headline grabbers – are valued highly. 23% of public Internet companies closed 2Q13 with EV/Revenue multiples of 6.0x or higher. • Among the Internet companies boosting the highest EV/Revenue market multiples were a large number of relatively recent IPO’s that• Among the Internet companies boosting the highest EV/Revenue market multiples were a large number of relatively recent IPO s that are capturing a significant share of online advertising dollars; several also benefited from originating in high growth economies like China and Brazil. Examples include LinkedIn (16.8x), Zillow (13.0x), Qihoo (12.2x), Mercadolibre (11.8x), Yelp (11.6x), Facebook (10.0x), Trulia (10.1x) and Youku (7.9x). 39 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG INTERNET INDEX: MARKET MULTIPLES EV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates 7.5x8.0x 8.0x 4.0x 5.0x 6.0x 7.0x EV/Revenue 3.8x 4.8x 6.8x 4.0x 5.0x 6.0x 7.0x EV/Revenue 0.9x 1.3x 2.5x 2.9x 2.5x 0 0x 1.0x 2.0x 3.0x Median E 1.9x 1.4x 1.9x 0 0x 1.0x 2.0x 3.0x Median E • Public Internet company valuations are being driven by TTM revenue growth with dramatic differences between new • With few exceptions, and in stark contrast to SaaS 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 revenue growth, with dramatic differences between new, rapidly growing social and ad-tech providers and their slower growing incumbent counterparts (e.g., Facebook vs. Yahoo). • Public Internet companies with TTM revenue growth of 40% or higher were rewarded with median EV/Revenue multiples 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. • Unlike The SEG SaaS Index where TTM EBITDA margins markedly greater than their slower growing peers. • Investors were noticeably less excited about public Internet companies with TTM revenue growth less than 40%. Unlike The SEG SaaS Index where TTM EBITDA margins bore little relationship to median EV/Revenue multiples, investors in public Internet companies kept a keen eye on margins, and rewarded strong performers with significantly higher market multiples. 40 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG INTERNET INDEX BY PRODUCT CATEGORY SEG Internet Index 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 Ad Tech & Lead Generation 2.5x 1.8x 2.1x 2.0x 2.0x 11.0x 13.3x 12.0x 14.9x 14.9x 37.5% 35.3% 32.9% 25.2% 26.8% 14.0% 14.4% 14.1% 13.0% 13.5% Commerce 0.7x 0.8x 1.2x 0.9x 0.9x 18.8x 15.1x 15.2x 10.5x 15.1x 16.7% 23.3% 20.6% 17.5% 17.7% 8.3% 8.3% 8.4% 7.6% 7.5% Content & Media 1.6x 1.3x 1.4x 1.6x 2.3x 10.1x 10.8x 10.9x 15.4x 13.8x 15.5% 12.3% 10.5% 12.6% 12.1% 14.0% 14.1% 14.1% 14.8% 15.5% Gaming 3 4x 2 1x 2 4x 2 7x 2 7x 4 0x 3 4x 4 3x 5 8x 5 9x 33 1% 32 0% 24 8% 21 9% 21 9% 45 0% 43 5% 38 6% 36 3% 38 6% Category EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin Gaming 3.4x 2.1x 2.4x 2.7x 2.7x 4.0x 3.4x 4.3x 5.8x 5.9x 33.1% 32.0% 24.8% 21.9% 21.9% 45.0% 43.5% 38.6% 36.3% 38.6% Infrastructure 1.8x 1.1x 1.0x 1.7x 1.6x 12.4x 14.0x 11.7x 11.9x 13.6x 13.7% 12.2% 10.9% 9.2% 8.8% 10.7% 8.3% 7.5% 8.0% 7.2% Services 2.2x 2.9x 2.7x 3.2x 2.9x 16.9x 16.4x 17.7x 15.3x 26.8x 55.1% 49.5% 42.0% 42.2% 44.9% 6.5% 7.3% 8.5% 8.5% 6.6% Social 13.0x 9.6x 8.6x 8.9x 7.1x 30.4x 29.3x 36.4x 29.1x 32.6x 64.0% 64.6% 50.9% 49.3% 47.2% 12.9% 12.6% 13.3% 16.5% 20.0% Travel 2.8x 2.3x 2.0x 2.0x 2.2x 19.7x 16.5x 15.3x 16.2x 18.2x 29.1% 24.0% 18.6% 19.8% 19.5% 24.5% 25.7% 21.7% 18.1% 19.1% Median 2.2x 1.9x 2.1x 2.0x 2.2x 12.3x 13.5x 13.3x 13.5x 14.8x 26.6% 24.9% 22.0% 19.8% 18.7% 13.3% 13.2% 13.3% 13.0% 13.3% 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 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG INTERNET INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE 2Q13 YoY Change in Revenue Growth2Q13 TTM Revenue Growth 2Q13 YoY Change in Revenue Growth2Q13 TTM Revenue Growth (15%) (10%) (5%) 0%  5%  10%  30% 35% 40% 45% 50% (40%) (35%) (30%) (25%) (20%) (15%) n ce ia ng re es al el 0% 5% 10% 15% 20% 25% 30% AdTech& LeadGeneratio Commerc Content&Medi Gamin Infrastructur Service Socia Trave AdTech& LeadGeneration Commerce Content&Media Gaming Infrastructure Services Social Travel 2Q13 YoY Change EBITDA Margin2Q13 TTM EBITDA Margin 30%  40%  50%  60%  L C 30% 35%  40%  45%  (40%) (30%) (20%) (10%) 0%  10%  20%  5%  10%  15%  20%  25%  30%  (40%) AdTech& eadGeneration Commerce ontent&Media Gaming Infrastructure Services Social Travel 0%  AdTech& adGeneration Commerce ntent&Media Gaming Infrastructure Services Social Travel 42 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Le Co A Lea Con
    • THE SEG INTERNET INDEX BY PRODUCT CATEGORY: MARKET MULTIPLES 2Q13 YoY Change in Median EV/Revenue Multiples2Q13 Median EV/Revenue Multiples 0% 20% 40% 60% 4.0x 5.0x 6.0x 7.0x 8.0x (60%) (40%) (20%) on ce dia ng ure es cial vel 0.0x 1.0x 2.0x 3.0x tion erce edia ming ture ces cial avel AdTech& LeadGeneratio Commerc Content&Med Gamin Infrastructu Service Soc Trav AdTech& LeadGenerat Comme Content&Me Gam Infrastruct Servic So Tra • Public Internet Companies comprising the social product category closed Q2 with the highest median EV/Revenue multiple among the eight Internet categories we track. The 7.1x median market valuation was 84% higher than the next closest product category, Services (2.9x). • Social solutions Facebook, LinkedIn, Yelp, etc., continued to expand their online footprints and investors rewarded them accordingly. Social Market Multiples 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 17.7%, and a lackluster 7.5% 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 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved diversify its content offerings and expand its hardware offerings as a way of differentiating from competitors and driving more spend through its platform.
    • SOFTWARE INDUSTRY M&A MARKET UPDATE 4444 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • SOFTWARE/SaaS M&A DEAL VOLUME AND SPENDING Median On-Premise Software EV/Revenue Exit MultiplesU.S. Software Mergers & Acquisitions Activity 383 407 421 426 430 454 456 432 454 435 406 388 396 $17 9 $21.3 $23.4 $23.1 $20 $25 400 450 500 $ $33 $37 $40 $42 $41 $41 $42 $36 $39 $36 $34 $35.0 $40.0 $45.0 Millions) $17.3 $17.9 $12.7 $13.1 $ $12.6 $15.8 $12.3 $15.8 $ $17.6 $10 $15 200 250 300 350 Value (BIllions) Number of Deals $28 $31 $15.0 $20.0 $25.0 $30.0 $35.0 rage Deal Value (M $8.8 $0 $5 0 50 100 150 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 $0.0 $5.0 $10.0 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 TTM  Aver • Software M&A deal volume in Q2 once again hovered at of 400 transactions, which is historically consistent with an active M&A market. • Total Software M&A spending rose sharply to $17.6 billion in 2Q13, up from 1Q13’s $6.8 billion, due in large part to the return of software mega deals (EV > $500M). Deals Value*2Q13 Projected 2 3 4 1 2 3 4 1 2 3 4 1 2 • There were eight on-premise/SaaS/Internet mega deals in 2Q13 alone, a marked increase from 1Q13’s single mega deal. Notable mega deals in the second quarter included: Adobe’s acquisition of Neolane ($600M EV, 10.3x EV/Revenue multiple); Vista Equity Partner’s acquisition of Websense ($971M, 2.7x); IBM’s acquisition of SoftLayer Technologies ($2B, 5.0x); Salesforce.com’s acquisition of Exact Target ($2.2B, 7.1x); Insight Venture Partners’ acquisition of BMC Software ($6.9B, 3.1x). • The software M&A average deal size retreated to the mid $30M range after surging then peaking in 2011The software M&A average deal size retreated to the mid $30M range, after surging, then peaking, in 2011. • Software buyers have remained true to their word. Of the 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. 45 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • SOFTWARE M&A EXIT MULTIPLES Median Exit Multiples Median EV/Revenue Exit Multiple Distribution 12.1x 11.8x 12.7x 11 6x12 0 14.0x EV/Revenue EV/EBITDA 25 0% 29.3% 30.0% 35.0% TM 11.2x 11.6x 6 0x 8.0x 10.0x 12.0x 25.0% 20.7% 12.0% 13.0% 10.0% 15.0% 20.0% 25.0% ofDealsin2Q13TT 1.7x 2.3x 1.8x 1.6x 1.8x 0 0x 2.0x 4.0x 6.0x 0.0% 5.0% <= 1.0x > 1.0x & <= 2.0x > 2.0x & <= 3.0x > 3.0x & <= 4.0x > 4.0x % • After two consecutive quarters of declining TTM revenue exit multiples, on-premise software transactions regained some • On a TTM basis, 75.0% of all on-premise software targets were acquired for 3.0x TTM revenue or less in 2Q13. 0.0x 2Q12 3Q12 4Q12 1Q13 2Q13 TTM Revenue Exit Multiple Bins multiples, on premise software transactions regained some lost ground, closing Q2 at 1.8x TTM revenue. • Over the last several years, the median exit multiple of on- premise software providers has been ~30% lower than the median exit multiple for public on-premise software i M f th t i iti f bli e e acqu ed o 3 0 e e ue o ess Q 3 • The remaining 25.0% of targets, those with 3.0x or higher exit multiples, came from software categories growing much faster than the overall on-premise software market, such as cloud, network infrastructure and security. companies. Many of the more recent acquisitions of public on-premise software companies were primarily financial, rather than strategic, yielding lower EV/Revenue exit valuations. • Among the more noteworthy on-premise acquisitions in 2Q13: McAfee’s acquisition of Stonesoft ($378.7M, 7.0x rev.) and IBM’s acquisition of SoftLayer Technologies ($2B, 5.0x). 46 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • SOFTWARE M&A: BY OWNERSHIP STRUCTURE AND SIZE by Sizeby Ownership Structure Public Sellers 1.8x Median Multiple Buyer Less Than $200 million 1.5x Median Multiple Buyer Greater Than $200 million 2.7x Median Multiple Private Sellers 2.0x Median Multiple 64%36% 60% 40% Private Buyers 1.7x Median Multiple 59%41% Seller Greater Than $20 million: 1.5x Seller Greater Than $20 million: 0.8x Seller Greater Than $20 million: 1.9x Seller Greater Than $20 million: 2.7x Public Buyers 2.3x Median Multiple 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 Not enough data • In Q2, as in quarters past, large (greater than $200 million in • Public buyers with revenue greater than $200 million paid a revenue), public buyers paid the highest multiples. • Public buyers in 2Q13 paid a median 2.3x TTM revenue for their targets in 2Q13, compared to a median of 1.7x paid by private buyers. median 2.7x TTM revenue for their targets, compared to only 1.5x paid by smaller public buyers. • On a TTM basis, deals with the highest multiples featured a large public or private buyer (greater than $200 million in revenue) acquiring a small target (less than $20 million). Inrevenue) acquiring a small target (less than $20 million). In Q1, this combination produced a median 3.3x EV/Revenue exit multiple. Unfortunately, in 2Q13 there was not enough data to provide a meaningful multiple. 47 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • 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 100% % 37% 42% 36% 65% 63% 58% 67% 64% 20% 40% 60% 80% 1.9x 2.0x 1.4x 1.3x 1.9x 1.6x 3.0x 2.2x 1.8x 1.6x 35% 37% 42% 33% 36% 0% 20% 2Q12 3Q12 4Q12 1Q13 2Q13 Horizontal Vertical 2Q12 3Q12 4Q12 1Q13 2Q13 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 2Q13. However TTM revenue exit multiples dropped precipitously from 3 0x in 3Q12 to1 6x in 2Q13• However, TTM revenue exit multiples dropped precipitously, from 3.0x in 3Q12 to1.6x in 2Q13. • Q2’s most noteworthy horizontal deals included the take private of BMC Software by a group of private equity firms for $6.9 billion (3.1x revenue), and Tyco International’s acquisition of security software provider ExactTechnologies ($150 million, 2.7x revenue). • After two consecutive lackluster quarters the median TTM revenue exit multiple for vertical software providers improved• After two consecutive lackluster quarters, the median TTM revenue exit multiple for vertical software providers improved significantly in 2Q13, closing the quarter at 1.9x. • Select Q2 vertical deals included P2 Energy Solution’s acquisition of process manufacturing software provider, ISS Group Limited ($36.8M, 1.8x revenue); and OMERS Private Equity’s acquisition of public sector software provider, Civica plc ($607.8 million, 1.9x revenue). 48 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • SOFTWARE M&A BY PRODUCT CATEGORY • The Mobile product category accounted for 20.1% of all software M&A transactions in the second quarter, making it the most active M&A product category. CRM, Marketing & Sales 2.1% Data Mgmt & Integration 0.7% Dev. Tools & IT Asset Mgmt 4.6% eCommerce 0 4% Billing & Service Provisioning 0 7% BI, Risk & Compliance 2.5% Content & Document Mgmt 1.8% p g y • Other active M&A categories in the first quarter included Healthcare (7.0%), Financial Services (7.0%), and Security (5.6%). 0.4% EDA 0.7% Engineering, PLM & CAD 3.9% Middleware 0.4% ERP 1.4% EntertainmentReal Estate Retail 1 4% Utility 0.7% Other Verticals 8.8% Accounting & Finance 1.1% 0.7% • As a percent of total deals, the Security product category increased its share 93% YoY, the largest among all categories. • According to Gartner, the global security software market grew 7 9% in 2012 The 2.5% HR & Workforce Mgmt 2.5% Messaging, Conferencing &  Communications 2.5% l d h Legal Manufacturing 1.4% Oil & Gas 1.1% Public Sector 2.1% 0.4% 1.4% s software market grew 7.9% in 2012. The sector has shown continued strength in 2013, driven by new security demands spawned by bring your own device (BYOD) and cloud hosting trends. Buyers have taken note adding best of breed technology Multimedia, Graphics &  Communications 2.1% Network Performance Mgmt 1.8% Security Fi i l S i Healthcare 7.0% Insurance 0.4% Legal 1.1% Vertical taken note, adding best of breed technology providers to plug holes in their product portfolio. 5.6% Systems Mgmt 3.5% Supply Chain Mgmt &  Logistics Construction 2.1% Education 2.5% Financial Services 7.0% Logistics 3.2% Mobile 20.1% Automotive 0.4% 49 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • SOFTWARE M&A BY PRODUCT CATEGORY Median EV/Revenue Exit Multiples by Software Product Category 3.3x 3.1x 3.0x 2.7x 2 4x2.4x 1.8x 1.8x 1.6x 1.5x 1.5x 1.1x Systems Management BI,Risk& Compliance neering,PLM &CAD Security Healthcare OtherVerticals (A&D,Telco, Retail,etc.) upplyChain& Logistics DataMgmt& Integration anufacturing& AssetMgmt Mobile ncialServices Software • Among the 32 on-premise software product categories we track, eleven had both sufficient deal activity and deal data to ascertain a TTM revenue multiple in 2Q13 Engi O ( Su Ma A Finan S ascertain a TTM revenue multiple in 2Q13. • Among the eleven product categories offering Systems Management solutions garnered the highest median TTM revenue multiple (3.3x) in Q2. Buyers in this product category are paying up for best-of-breed cloud and mobile computing companies with demonstrated market success. Examples include: The KEYW Holding Company’s acquisition of Sensage ($85.5M EV 7.0x TTM revenue); EQT Partners’ acquisition of UC4 Software ($271.6M, 3.6x); and BMC’s takeover by a group of private equity fi ($6 9B 3 1 )firms ($6.9B, 3.1x). • Led by a strong demand for business intelligence tools in the era of Big Data, BI, Risk & Compliance also posted a strong 3.1x median EV/Revenue exit multiple in 2Q13. Select BI deals in Q213 include: Kofax’s acquisition of altosoft ($13.5M, 4.0x TTM revenue and Datawatch’s acquisition of Panopticon Software ($31.4M, 6.3x). 50 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • SaaS M&A: DEAL VOLUME AND EXIT MULTIPLES Median SaaS EV/Revenue Exit MultiplesSaaS M&A Volume 104 30%120 al  SaaS M&A Deals   SaaS as % of Software 39 39 45 48 68 65 59 94 94 86 104 15% 20% 25% 60 80 100 eals as a % of Tota re M&A Deals aS M&A Deals 4.0x 3.9x 4.1x 4.0x 4.0x 30 39 26 39 0% 5% 10% 0 20 40 SaaS M&A De Softwar # of Saa 2Q12 3Q12 4Q12 1Q13 2Q13 • There were 104 SaaS M&A transactions in 2Q13 At the half-year mark there have been 190 SaaS M&A transactions on pace• There were 104 SaaS M&A transactions in 2Q13. At the half-year mark, there have been 190 SaaS M&A transactions, on pace to exceed SEG’s 2013 projection of 344, and 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 2Q13 at 4.0x. • The median SaaS exit multiple was 120% greater than the median on-premise exit multiple in 1Q13 (4.0x vs.1.8x), the secondThe median SaaS exit multiple was 120% greater than the median on premise exit multiple in 1Q13 (4.0x vs.1.8x), the second highest valuation disparity on record. 51 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • SaaS M&A BY PRODUCT CATEGORY • CRM, Marketing & Sales was the most active SaaS product category, accounting for 12.0% of all M&A transactions in the second quarter Content & Document Mgmt 6% CRM, Marketing & SalesBilling & Service Provisioning BI, Risk & Compliance 9% transactions in the second quarter. • Buyers are seeking targets that will help them capitalize on the rapid growth in spending on marketing technology. According to Gartner, by 2017 the CMO CRM, Marketing & Sales 12% Telecommunications % Other Verticals 8% Billing & Service Provisioning 1% will purchase more IT than the CIO. • After two years of claiming almost 20% of all SaaS transactions, the HR & Workforce Mgmt product category had its second consecutive lackluster Data Mgmt & Integration 2% eCommerce 4% Engineering, PLM & CAD 1% Insurance 4% Real Estate 4% 1% als its second consecutive lackluster quarter, closing 2Q13 with only 6% of SaaS transactions. After a period of rapid consolidation by the large HR software providers, the M&A window for many smaller HR providers is rapidly HR & Workforce Mgmt 6% Messaging, Conferencing &  Communications 4% Financial Services 6% Healthcare 2% Vertic many smaller HR providers is rapidly closing. • The Systems Management (10%) and BI, Risk and Compliance (9%) product categories also exhibited strength in Multimedia, Graphics &  Communications 2% Network Performance Mgmt 1% Security Automotive 2% Construction 2% Education 8% 2Q13. Both categories are benefiting from adoption of SaaS deployed solutions, which should continue for the foreseeable future. 3% Systems Mgmt 10% Supply Chain Mgmt & Logistics 6% 2% 52 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • 2Q13 SaaS M&A TRANSACTIONS E t i Date Buyer Seller Enterprise Value TTM Revenue EV/Rev 06/28/13 Deutsche Post AG (XTRA:DPW) optivo GmbH - - - 06/28/13 Renaissance Learning Inc. Subtext Media, Inc. - - - 06/27/13 Adobe Systems Inc. (NasdaqGS:ADBE) Neolane SA $600,000,000 $58,000,000 10.3x 06/26/13 EMN8, Inc. Snapfinger - - - 06/25/13 Vi i T h l i I A i I06/25/13 Virima Technologies, Inc. Aruvio, Inc. - - - 06/24/13 DIGIEON Technologies Pvt. Ltd. SmartVault Corporation - - - 06/24/13 Incentivated Limited Ad.IQ Limited - - - 06/24/13 Cenduit, LLC Patient Reminders Limited - - - 06/24/13 LINE-X Franchise Development Corporation American Aftermarket Group LLC - - - 06/23/13 Thoma Bravo, LLC Keynote Systems, Inc. (NasdaqGS:KEYN) $340,770,000 $124,000,000 2.8x 06/21/13 Intuit Inc (NasdaqGS:INTU) Elastic Intelligence Inc06/21/13 Intuit Inc. (NasdaqGS:INTU) Elastic Intelligence, Inc. - - - 06/20/13 NET(net), Inc. xPeerient, Inc. - - - 06/20/13 - Gainsight, Inc. - - - 06/20/13 Fixmo Inc. Fixmo Carrier Services - - - 06/17/13 Lulu Software DOC2PDF Limited - - - 06/17/13 Professional Diversity Network LLC (NasdaqCM:IPDN) Resunate - - - 06/13/13 Accumuli plc (AIM:ACM) Signify Solutions Limited $4 080 000 $4 500 000 0 9x06/13/13 Accumuli plc (AIM:ACM) Signify Solutions Limited $4,080,000 $4,500,000 0.9x 06/12/13 AdRoll, Inc. Bitdeli Inc. - - - 06/12/13 Paychex, Inc. (NasdaqGS:PAYX) HR Services, Inc. - - - 06/12/13 ReviMedia, Inc. N2O Marketing, LLC - - - 06/12/13 Yahoo! Inc. (NasdaqGS:YHOO) Rondee, Inc. - - - 06/12/13 AVG Technologies N.V. (NYSE:AVG) LPI Level Platforms Inc. - - - 06/12/13 - Teliae SARL - - -06/ / 3 e ae S 06/11/13 DocDoc Pte. Ltd. NewCo Internet Pte Ltd - - - 06/11/13 Copart UK Limited Autoresiduos S.L.U. - - - 06/11/13 Immoware24 GmbH AWImmoware GmbH - - - 06/10/13 AFS Logistics, LLC Trendset Inc. $1,140,000 - - 06/10/13 @WalmartLabs Inkiru, Inc. - - - 06/10/13 Progress Software Corp. (NasdaqGS:PRGS) Rollbase, Inc. - - -g p ( q ) 06/10/13 Contractors Register, Inc. JobSite123.com, LLC - - - 06/07/13 Salesforce.com, Inc (NYSE:CRM) EdgeSpring, Inc. $79,560,000 - - 06/06/13 RxVantage, Inc. RepAccess - - - 06/06/13 Canal Digitaal B.V. Stream Group B.V. - - - 06/05/13 SilverSky, Inc. Latis Networks, Mngd Security Div. - - - 06/04/13 International Business Machines Corporation (NYSE:IBM) SoftLayer Technologies, Inc. $2,000,000,000 $400,000,000 5.0x 53 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • 2Q13 SaaS M&A TRANSACTIONS (CON’T) E t i Date Buyer Seller Enterprise Value TTM Revenue EV/Rev 06/04/13 Starhome BV MACH S.à.r.l., Certain Assets - - - 06/03/13 Salesforce.com, Inc (NYSE:CRM) ExactTarget, Inc. (NYSE:ET) $2,249,560,000 $317,000,000 7.1x 05/31/13 Zoopla Property Group Limited Vizzihome Limited - - - 05/31/13 Trimble Navigation Limited (NasdaqGS:TRMB) Trade Service Company, LLC - - - 05/31/13 HGGC LLC M W bG I05/31/13 HGGC, LLC MyWebGrocer, Inc. - - - 05/30/13 Diasoft AO Seeneco - - - 05/30/13 BloomReach, Inc. ShopLogic, Inc. - - - 05/29/13 eCommera Limited OrderDynamics Corp. - - - 05/28/13 R Capital Management; TIME Equity Partners Oodrive Group - - - 05/28/13 Greenbriar Equity Group LLC Transplace, Inc. - - - 05/24/13 Answers Corporation WebCollage Inc $37 000 00005/24/13 Answers Corporation WebCollage, Inc. $37,000,000 - - 05/24/13 - Klick2Contact EU LTD - - - 05/22/13 Recargo, Inc. Xatori, Inc. - - - 05/22/13 GT Analytix, Inc. TRAQ-IT Software, LLC - - - 05/20/13 TOT Group, Inc. Aptito, Inc. $1,090,000 - - 05/20/13 C-Leveled, LLC FINTEL LLC - - - 05/17/13 SolarWinds Worldwide LLC N-able Technologies International Inc $120 000 000 - -05/17/13 SolarWinds Worldwide, LLC N able Technologies International, Inc. $120,000,000 05/17/13 - Syncron International AB - - - 05/16/13 Upland Software, Inc. Marex Group, Inc. - - - 05/15/13 DocuSign, Inc. Cartavi, Inc. - - - 05/14/13 OMT Inc. (TSXV:OMT) AnalytixInsight Inc. $2,070,000 - - 05/14/13 8K Miles Software Services Ltd (BSE:512161) FuGen Solutions, Inc. $7,500,000 - - 05/14/13 @WalmartLabs OneOps Inc. - - -@ p 05/13/13 Twitter, Inc. Lucky Sort Inc. - - - 05/13/13 RichRelevance, Inc. Avail Intelligence AB - - - 05/10/13 Intelligent Living Inc. Mind360 $1,000,000 - - 05/10/13 CellarStone Inc. webKPI LLC - - - 05/10/13 Guidewire Software, Inc. (NYSE:GWRE) Millbrook, Inc. - - - 05/09/13 Box, Inc. crocodoc - - - 05/09/13 Twitter, Inc. Ubalo, Inc. - - - 05/08/13 Rippe & Kingston Systems, Inc. ProspectStream LLC - - - 05/07/13 ReadSoft AB (OM:RSOF B) Expert Systems Development Svenska AB $9,190,000 $2,000,000 4.6x 05/07/13 Trulia, Inc. (NYSE:TRLA) Market Leader, Inc. (NasdaqGS:LEDR) $314,290,000 $48,000,000 6.6x 05/07/13 Swisscom AG (SWX:SCMN) Tweasy SA - - - 05/06/13 Dell Inc. (NasdaqGS:DELL) enstratius, Inc. - - - 54 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • 2Q13 SaaS M&A TRANSACTIONS (CON’T) E t i Date Buyer Seller Enterprise Value TTM Revenue EV/Rev 05/06/13 LoanLogics, Inc. NYLX, Inc. - - - 05/03/13 NetSuite Inc. (NYSE:N) OrderMotion, Inc. - - - 05/02/13 The Descartes Systems Group Inc (TSX:DSG) KSD Software Norway AS $30,760,000 $9,600,000 3.2x 05/02/13 5Touch Solutions, Inc. NK Labs Inc. - - - 05/01/13 Everest Group LLC JangoMail Inc05/01/13 Everest Group LLC JangoMail, Inc. - - - 04/30/13 Extraprise Group Inc. SmartSource Corporation - - - 04/29/13 Courier New Media, Inc. FastPencil, Inc. $18,000,000 - - 04/29/13 Konetic Limited RecruitActive Ltd. - - - 04/25/13 Software AG (XTRA:SOW) Relational Networks, Inc. $25,000,000 - - 04/24/13 Dassault Systemes SA (ENXTPA:DSY) Archividéo SARL - - - 04/24/13 Alegeus Technologies WealthCare Marketplace - - -04/24/13 Alegeus Technologies WealthCare Marketplace - - - 04/18/13 Jive Software, Inc. (NasdaqGS:JIVE) CLARA ehf $6,500,000 - - 04/18/13 Quindell Portfolio Plc (AIM:QPP) iter8 Inc.* $25,580,000 $5,000,000 5.0x 04/18/13 Access UK Limited TeamSeer Limited - - - 04/16/13 Echo360, Inc. ThinkBinder Inc. - - - 04/16/13 Ener-Core, Inc. (OTCBB:ENCR) Inventtech Inc. - - - 04/15/13 InnRoad, Inc. LTV Hotel Systems LLC - - -04/15/13 InnRoad, Inc. LTV Hotel Systems LLC 04/12/13 Egmont Hjemmet Mortensen AS MyKid AS - - - 04/12/13 ViaSat Inc. (NasdaqGS:VSAT) LonoCloud Inc. - - - 04/10/13 Coupa Software Incorporated Xpenser, Inc. - - - 04/10/13 Solera Holdings Inc. (NYSE:SLH) Eziworks Pty Ltd - - - 04/09/13 Proofpoint, Inc. (NasdaqGM:PFPT) Mail Distiller Ltd - - - 04/08/13 Follett Corporation BetterKnow, Inc. - - -p , 04/07/13 Fujitsu Limited (TSE:6702) RunMyProcess SAS $20,220,000 $1,000,000 20.0x 04/07/13 Ebix Singapore Pte Ltd. Qatarlyst Limited - - - 04/04/13 IntraLinks Holdings, Inc. (NYSE:IL) MergerID Limited - - - 04/04/13 IntraLinks Holdings, Inc. (NYSE:IL) PE-Nexus, LLC - - - 04/04/13 Sport Ngin eYouthSportsUSA - - - 04/03/13 ReachForce, Inc. SetLogik, Inc. - - - 04/03/13 Experian Finance Plc Decisioning Solutions, Inc. - - - 04/02/13 ConnectSolutions Inc. NextUC, Inc. - - - 04/01/13 Rosetta Stone Ltd. LiveMocha, Inc. $8,500,000 $3,600,000 2.4x 04/01/13 inContact, Inc. (NasdaqCM:SAAS) Sierra360 LLC - - - 04/01/13 SAP AG (DB:SAP) KMS Software Company, LLC - - - 55 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • INTERNET M&A: DEAL VOLUME AND EXIT MULTIPLES Median Internet EV/Revenue Exit MultiplesInternet M&A Volume 273 263 222 185 204 berofDeals 2.1x 1.9x 1.9x 1.9x 1.9x 2Q12 3Q12 4Q12 1Q13 2Q13 Numb 2Q12 3Q12 4Q12 1Q13 2Q13 • 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 volume declined markedly, plunging to 185 transactions in 1Q13, down from 273 transactions in 2Q12. I 2Q13 th 204 I t t M&A t ti k d i t th i t b t till ll b l 2012 d l• In 2Q13, there were 204 Internet M&A transactions, a marked improvement over the prior quarter, but still well below 2012 deal levels. • Internet median TTM EV/Revenue exit multiples have held steady, finishing 2Q13 at 1.9x. This is an M&A world of haves and have nots, with wide disparities in exit multiples. 56 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • INTERNET M&A: BY PRODUCT CATEGORY M&A Volume by QuarterTTM M&A Volume by Product Category Category 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 201311.3% Ad-Tech & Lead Gen 70 85 57 58 60 Commerce 57 40 41 34 39 Content & Media 62 52 55 42 34 Gaming 25 13 12 7 11 Infrastructure 30 41 27 24 41 28.8% 5 9% 14.2% Ad‐Tech & Lead Gen Commerce Content & Media Gaming Social Tech 29 32 30 20 19 Total 273 263 222 185 204 18.4% 21.4% 5.9% g Infrastructure Social Tech • 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 2Q13, 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 pace of ad tech M&A deals has tapered off over the last three quarters, suggesting that buyers and advertisers have placed their bets. Mobile ad-tech is the next frontier. • Despite the marked decline in Internet M&A transactions YoY, the Infrastructure category showed strength in 2Q13, accountingDespite the marked decline in Internet M&A transactions YoY, the Infrastructure category showed strength in 2Q13, accounting for 20.1% of all Internet M&A deals and much higher than its TTM average of 14.2%. • After a respectable 2Q12 showing with 25 M&A transactions, the Internet Gaming M&A has been largely dormant over the past four quarters, averaging ten transactions per quarter. The product category has been decimated by the emergence of mobile gaming. 57 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • APPENDIX 5858 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • C Ti k P d t C t THE SEG SOFTWARE INDEX COMPANIES Company Ticker Product Category 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 C O & SMIND 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 Pegasystems Inc PEGA Business IntelligencePegasystems Inc. PEGA Business Intelligence Progress Software Corporation PRGS Business Intelligence PROS Holdings PRO Business Intelligence Qlik Technologies QLIK Business Intelligence Teradata NYSE:TDC Business Intelligence Verisk VRSK Business Intelligence Actuate Corporation BIRT Development PlatformsActuate Corporation BIRT Development Platforms Adobe 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 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 & 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 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Stratasys, Inc. SSYS Engineering & PLM Synopsys Inc SNPS Engineering & PLM
    • C Ti k P d t C t THE SEG SOFTWARE INDEX COMPANIES (CON’T) Company Ticker Product Category 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 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 Evertec EVTC Financial & Accounting Fair Isaac Corporation FICO Financial & AccountingFair 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 Qiwi plc QIWI Financial & AccountingQiwi plc QIWI Financial & Accounting Activision Blizzard ATVI Gaming Electronic Arts Inc. EA Gaming GameLoft SA ENXTPA:GFT Gaming Konami Corporation TSE: 9766 Gaming Take-Two Interactive TTWO Gaming Ubisoft Entertainment ENXTPA:UBI Gamingg Accretive Health AH Healthcare Allscripts Healthcare Solutions Inc. MDRX Healthcare Cerner Corporation CERN Healthcare Computer Programs and Sys, Inc. CPSI Healthcare Greenway Medical Technologies, Inc GWAY Healthcare MedAssets MDAS Healthcare Merge 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 O l C ti ORCL IT C l t 60 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Oracle Corporation ORCL IT Conglomerates SAP AG SAP IT Conglomerates
    • C Ti k P d t C t THE SEG SOFTWARE INDEX COMPANIES (CON’T) Company Ticker Product Category Bango PLC BGO Mobile Solutions/Content Glu Mobile, Inc. GLUU Mobile Solutions/Content Gree TSE:3632 Mobile Solutions/Content Millennial Media Inc MM Mobile Solutions/Content 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 Tangoe Inc TNGO Mobile Solutions/ContentTangoe, Inc. TNGO Mobile Solutions/Content TeleCommunication Systems TSYS 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 ManagementAruba Networks, Inc. ARUN Networking & Network Performance Management Brocade Communications Systems, Inc. BRCD Networking & Network Performance Management Cisco Systems, Inc. CSCO Networking & Network Performance Management Compuware Corporation CPWR Networking & Network Performance Management Cyan, Inc. CYNI Networking & Network Performance Management F5 Networks, Inc. FFIV Networking & Network Performance Management Gigamon, LLC GIMO Networking & Network Performance Managementg , g g Juniper Networks, Inc. JNPR Networking & Network Performance Management Keynote Systems, Inc. KEYN Networking & Network Performance Management Radware Ltd. RDWR Networking & Network Performance Management Riverbed 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 Imperva IMPV Security Palo Alto Networks, Inc PANW Security Proofpoint, Inc. PFPT Security S fi I FIRE S it 61 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Sourcefire, Inc. FIRE Security Symantec Corporation SYMC Security
    • C Ti k P d t C t THE SEG SOFTWARE INDEX COMPANIES (CON’T) Company Ticker Product Category Trend Micro TSE:4704 Secuity VASCO Data Security International VDSI Security Brocade Communications Systems, Inc. BRCD Storage, Data Management & Integration CA, Inc. CA Storage, Data Management & Integration Ci S t I CSCO St D t M t & I t tiCisco Systems, Inc. CSCO Storage, Data Management & Integration CommVault Systems, Inc. CVLT Storage, Data Management & Integration 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 & IntegrationMicrosoft Corporation MSFT Storage, Data Management & Integration NetApp, Inc. NTAP Storage, Data Management & Integration Oracle Corporation ORCL 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 & LogisticsAspen Technology, Inc. AZPN Supply Chain Management & Logistics Manhattan 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 Netscout 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 Fid LSE FDSA V ti l FiFidessa 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 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved EPIQ Systems, Inc. EPIQ Vertical - Other Guidewire Software, Inc. GWRE Vertical - Other
    • C Ti k P d t C t THE SEG SOFTWARE INDEX COMPANIES (CON’T) Company Ticker Product Category Micros Systems MCRS Vertical - Other PROS Holdings PRO Vertical - Other Sapiens International SPNS Vertical - Other Silver Spring Networks, Inc. SSNI Vertical - Otherp g , The Active Network, Inc. ACTV Vertical - Other Tyler Technologies, Inc. TYL Vertical - Other 63 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • C Ti k P d t C t THE SEG SaaS INDEX COMPANIES Company Ticker Product Category Bazaarvoice, Inc BV CRM & Marketing Constant Contact CTCT CRM & Marketing ExactTarget, Inc. ET CRM & Marketing LivePerson LPSN CRM & Marketing Marketo MKTO CRM & MarketingMarketo MKTO CRM & Marketing Marin Software MRIN CRM & Marketing Responsys MKTG CRM & Marketing Salesforce.com CRM CRM & Marketing Vocus VOCS CRM & Marketing E2open, Inc EOPN ERP & Supply Chain Fleetmatics FLTX ERP & Supply ChainFleetmatics 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 Focusedy Ebix Inc. EBIX Vertically Focused Ellie Mae ELLI Vertically Focused Medidata Solutions MDSO Vertically Focused RealPage RP Vertically Focused Textura Corp. TXTR Vertically Focused Callidus Software Inc. CALD Workforce Management Cornerstone OnDemand CSOD Workforce Management Halogen Software, Inc. TSX:HGN Workforce Management The Ultimate Software Group, Inc. ULTI Workforce Management Workday, Inc. WDAY Workforce Management ChannelAdvisors ECOM Other SaaS Concur CNQR Other SaaS Demand are Inc DWRE Other SaaSDemandware, Inc. DWRE Other SaaS inContact, Inc. SAAS Other SaaS IntraLinks Holdings IL Other SaaS J2 Global JCOM Other SaaS Jive Software, Inc JIVE Other SaaS OpenTable, Inc. OPEN Other SaaS Qualys Inc QLYS Other SaaS 64 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Qualys, Inc. QLYS Other SaaS Service-now.com NOW Other SaaS
    • C Ti k P d t C t THE SEG SaaS INDEX COMPANIES (CONT’D) Company Ticker Product Category Tableau Software DATA Other SaaS Tangoe TNGO Other SaaS Zix Corporation ZIXI Other SaaS 65 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • 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 H lth I EHTH Ad T h & L d G tieHealth, 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 QuinStreet QNST Ad Tech & Lead GenerationQuinStreet 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 Yandex YNDX Ad Tech & Lead GenerationYandex YNDX Ad Tech & Lead Generation 1-800-FLOWERS.COM, Inc. FLWS Commerce Amazon.com, Inc. AMZN Commerce Bitauto Holdings Limited BITA Commerce BlueNile NILE Commerce DangDang 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 Commerce Overstock.com, Inc. OSTK Commerce P tM d E I PETS CPetMed Express, Inc. PETS Commerce Stamps.com STMP Commerce AOL, Inc. AOL Content & Media DemandMedia DMD Content & Media InterActiveCorp IACI Content & Media Netflix NFLX Content & Media Pandora P Content & Media 66 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Pandora P Content & Media Shutterstock, Inc. SSTK Content & Media
    • C Ti k P d t C t THE SEG INTERNET INDEX COMPANIES (CON’T) Company Ticker Product Category TheStreet.com, Inc. TST Content & Media WebMD Health Corp. WBMD Content & Media XO Group XOXO Content & Media Yahoo! Inc. YHOO Content & Media Y k YOKU C t t & M diYouku YOKU Content & Media ChangYou.com CYOU Gaming Giant Interactive GA Gaming Netease NTES Gaming NCSoft KOSE:A036570 Gaming Perfect World PWRD Gaming Sohu com Inc SOHU GamingSohu.com Inc. SOHU Gaming Tencent Holdings SEHK:700 Gaming Zynga, Inc. ZNGA Gaming 8x8, Inc. EGHT Infrastructure Akamai Technologies, Inc. AKAM Infrastructure Brightcove Inc. BCOV Infrastructure BroadSoft, Inc. BSFT InfrastructureBroadSoft, Inc. BSFT Infrastructure Digital River Inc. DRIV Infrastructure Envivio, Inc. ENVI Infrastructure Harmonic Inc HLIT Infrastructure Interactive Intelligence, Inc. ININ Infrastructure Limelight Networks, Inc. LLNW Infrastructure Mitel Networks Corp. MITL Infrastructure Polycom, Inc. PLCM Infrastructure Rovi Corporation ROVI Infrastructure SeaChange International Inc. SEAC Infrastructure ShoreTel, Inc. SHOR Infrastructure Sonus Networks, Inc SONS Infrastructure Synacor, Inc SYNC Infrastructure T I TCX I f t tTucows Inc. TCX Infrastructure VeriSign VRSN Infrastructure Angie's List, Inc. ANGI Services Bankrate RATE Services Carbonite, Inc. CARB Services LifeLock, Inc. LOCK Services Monster Worldwide Inc MWW Services 67 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved Monster Worldwide, Inc. MWW Services Qihoo QIHU Services
    • C Ti k P d t C t THE SEG INTERNET INDEX COMPANIES (CON’T) Company Ticker Product Category Shutterfly SFLY Services Tree.Com, Inc. TREE Services Trulia, Inc. TRLA Services VistaPrint VPRT ServicesVistaPrint VPRT Services Xoom XOOM Services Zillow 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 MakeMyTrip MMYT Travel Orbitz OWW Travel Priceline PCLN Travel Travelzoo TZOO TravelTravelzoo TZOO Travel TripAdvisor Inc TRIP Travel 68 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SOFTWARE INDEX METRICS BY PRODUCT CATEGORY Billing & Service Management 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 1.3x 1.3x 1.5x 1.9x 1.9x EV/EBITDA 7.9x 8.3x 8.4x 8.4x 8.3x EV/Earnings 13.1x 15.9x 17.1x 15.4x 14.2x Gross Profit Margin 57.4% 58.0% 58.3% 59.4% 58.4% EBITDA Margin 18.9% 18.8% 19.9% 21.1% 18.7% Net Income Margin 12.2% 11.7% 12.1% 11.0% 9.9% TTM Revenue Growth (YoY) 13.6% 9.5% 10.4% 10.4% 8.9% TTM EBITDA Growth (YoY) 0.9% 9.9% 15.7% 14.5% 14.9% TTM E i G th (Y Y) 19 1% 4 9% 5 6% 7 6% 48 0% Enterprise Resource Planning 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.4x 2.7x 2.7x 2.9x 3.0x EV/EBITDA 8.3x 9.1x 9.0x 9.7x 11.3x EV/Earnings 13.1x 14.3x 14.0x 22.8x 25.4x Gross Profit Margin 71.5% 71.6% 71.4% 71.2% 71.6% EBITDA Margin 29.0% 29.3% 29.6% 29.6% 29.6% Net Income Margin 18.4% 20.3% 18.6% 12.6% 10.4% TTM Revenue Growth (YoY) 10.1% 9.0% 2.9% 2.0% 0.2% TTM EBITDA Growth (YoY) 53.7% 42.6% 11.4% 6.7% -0.4% TTM E i G th (Y Y) 38 0% 32 5% 35 1% 11 2% 12 3% IT Conglomerates 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.9x 2.8x 2.5x 2.5x 2.9x EV/EBITDA 7.3x 8.2x 7.8x 8.8x 8.3x EV/Earnings 12.9x 14.4x 13.7x 14.7x 14.2x Gross Profit Margin 71.5% 71.6% 71.4% 71.2% 71.6% EBITDA Margin 36.9% 36.1% 34.6% 33.8% 33.8% Net Income Margin 23.9% 23.0% 18.6% 17.4% 17.6% TTM Revenue Growth (YoY) 5.3% 1.5% 1.4% 0.5% 0.2% TTM EBITDA Growth (YoY) 2.3% 1.4% 0.6% 0.9% -0.2% TTM E i G th (Y Y) 12 4% 4 1% 20 0% 24 9% 51 8%TTM Earnings Growth (YoY) -19.1% 4.9% -5.6% -7.6% -48.0% Current Ratio 2.3 2.4 2.7 3.0 2.7 Cash as Percent of Market Cap 20.9% 21.4% 17.2% 16.0% 16.5% Enterprise Value Growth (YoY) -20.2% -5.0% 13.9% 10.2% 21.5% Business Intelligence 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 3.2x 2.9x 3.2x 3.4x 3.0x EV/EBITDA 26.7x 25.9x 17.6x 15.8x 16.5x EV/Earnings 47.2x 47.7x 30.9x 34.6x 25.2x Gross Profit Margin 73 9% 73 8% 73 3% 72 8% 72 3% TTM Earnings Growth (YoY) -38.0% -32.5% -35.1% -11.2% -12.3% Current Ratio 1.2 1.2 1.2 1.1 1.1 Cash as Percent of Market Cap 20.3% 20.2% 20.3% 19.2% 20.6% Enterprise Value Growth (YoY) -2.1% 4.4% -0.2% 2.0% 15.4% Financial & Accounting 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.7x 2.9x 2.9x 3.1x 3.3x EV/EBITDA 9.5x 9.8x 9.8x 10.5x 11.3x EV/Earnings 18.1x 20.1x 20.3x 22.8x 24.4x Gross Profit Margin 54 4% 58 7% 55 3% 54 6% 55 7% TTM Earnings Growth (YoY) -12.4% -4.1% 20.0% 24.9% 51.8% Current Ratio 1.3 1.2 1.2 1.1 1.2 Cash as Percent of Market Cap 18.6% 20.2% 20.3% 19.2% 20.6% Enterprise Value Growth (YoY) -2.1% 9.4% 2.4% 1.6% 1.7% Mobile Solutions/Content 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 3.6x 3.6x 2.5x 2.7x 2.8x EV/EBITDA 16.1x 13.8x 11.9x 20.6x 13.2x EV/Earnings 24.9x 22.2x 21.4x 40.1x 50.5x Gross Profit Margin 54 1% 56 0% 57 1% 55 1% 54 2%Gross Profit Margin 73.9% 73.8% 73.3% 72.8% 72.3% EBITDA Margin 15.1% 15.4% 14.7% 14.0% 13.7% Net Income Margin 5.9% 5.3% 7.8% 6.1% 9.5% TTM Revenue Growth (YoY) 18.3% 14.5% 13.2% 11.8% 8.3% TTM EBITDA Growth (YoY) 16.1% 17.5% 0.6% 3.0% -2.8% TTM Earnings Growth (YoY) -14.3% -14.0% 1.8% -7.5% -66.3% Current Ratio 1.9 2.0 2.2 1.9 2.0 Cash as Percent of Market Cap 11.1% 13.9% 15.6% 15.7% 13.4% Enterprise Value Growth (YoY) 1.8% 1.5% -9.3% -7.2% -9.1% Gross Profit Margin 54.4% 58.7% 55.3% 54.6% 55.7% EBITDA Margin 27.2% 29.0% 28.8% 27.5% 26.6% Net Income Margin 11.2% 11.0% 12.8% 12.6% 12.6% TTM Revenue Growth (YoY) 7.3% 17.2% 13.8% 8.6% 10.7% TTM EBITDA Growth (YoY) 13.0% 8.4% 4.3% 3.9% 3.9% TTM Earnings Growth (YoY) -13.4% -22.6% -22.2% -17.4% 16.6% Current Ratio 1.2 1.2 1.2 1.3 1.5 Cash as Percent of Market Cap 11.4% 5.3% 5.5% 5.8% 11.1% Enterprise Value Growth (YoY) 5.1% 14.0% 19.8% 12.0% 20.9% Gross Profit Margin 54.1% 56.0% 57.1% 55.1% 54.2% EBITDA Margin 8.1% 7.8% 6.4% 4.5% 7.9% Net Income Margin -1.8% -0.4% -5.1% -3.1% -2.7% TTM Revenue Growth (YoY) 43.5% 34.4% 33.1% 35.2% 19.4% TTM EBITDA Growth (YoY) -19.0% -31.0% -20.3% 13.7% 10.9% TTM Earnings Growth (YoY) -45.5% 27.0% 25.1% 18.7% 73.0% Current Ratio 1.9 1.9 2.0 1.9 2.1 Cash as Percent of Market Cap 10.4% 8.1% 11.9% 12.8% 11.6% Enterprise Value Growth (YoY) -12.7% -20.9% -9.1% -18.9% -20.8% Development Platforms 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 1.9x 2.1x 2.5x 2.5x 2.6x EV/EBITDA 8.4x 8.2x 9.6x 9.1x 10.0x EV/Earnings 18.3x 13.6x 16.6x 17.1x 14.2x Gross Profit Margin 77.7% 77.8% 77.6% 77.9% 78.1% EBITDA Margin 22.3% 21.8% 23.6% 21.8% 20.6% Net Income Margin 13.3% 13.7% 13.8% 14.3% 12.6% TTM Revenue Growth (YoY) 5.3% 3.5% 1.6% 3.0% 0.3% TTM EBITDA Growth (YoY) 3.7% 4.9% -0.6% -3.0% -6.3% Gaming 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 1.0x 1.0x 1.0x 1.1x 1.3x EV/EBITDA 7.6x 9.1x 8.0x 7.1x 9.7x EV/Earnings 11.3x 12.1x 20.2x 16.8x 20.5x Gross Profit Margin 62.1% 61.7% 62.0% 64.7% 65.3% EBITDA Margin 16.3% 15.5% 16.3% 15.4% 15.0% Net Income Margin 6.1% 6.0% 5.4% 4.5% 4.8% TTM Revenue Growth (YoY) 2.6% 2.2% 0.1% 7.4% 15.1% TTM EBITDA Growth (YoY) -10.6% -20.8% -12.3% 6.3% 28.6% Networking & Network Perf Mgmt 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.4x 2.5x 2.5x 2.7x 2.6x EV/EBITDA 15.0x 14.0x 14.0x 15.1x 15.6x EV/Earnings 24.6x 25.0x 28.8x 34.0x 24.5x Gross Profit Margin 68.1% 68.5% 68.1% 68.2% 67.6% EBITDA Margin 17.9% 16.7% 15.8% 14.9% 15.0% Net Income Margin 12.5% 10.4% 8.7% 5.8% 4.9% TTM Revenue Growth (YoY) 22.9% 19.5% 15.5% 14.2% 9.1% TTM EBITDA Growth (YoY) 15.6% 21.5% 18.1% 14.2% 6.2% TTM Earnings Growth (YoY) -9.9% 3.9% 3.0% 7.1% 13.8% Current Ratio 2.0 2.1 2.2 2.3 2.3 Cash as Percent of Market Cap 20.0% 21.3% 22.1% 19.8% 19.8% Enterprise Value Growth (YoY) -9.2% 6.5% -1.7% 0.1% -3.0% Engineering & PLM 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.3x 2.6x 2.5x 2.7x 2.7x EV/EBITDA 11.5x 12.1x 11.8x 13.4x 12.4x EV/Earnings 24.3x 23.3x 23.2x 20.0x 19.6x TTM Earnings Growth (YoY) -19.6% -29.2% -24.8% -28.2% -44.2% Current Ratio 2.5 2.8 2.4 2.5 2.6 Cash as Percent of Market Cap 24.3% 35.1% 32.0% 28.8% 27.2% Enterprise Value Growth (YoY) -14.8% -10.5% -12.3% -1.3% 27.1% Healthcare 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.7x 2.2x 2.1x 2.1x 2.1x EV/EBITDA 13.0x 12.8x 11.3x 14.8x 17.6x EV/Earnings 31.7x 37.9x 41.7x 34.2x 37.3x TTM Earnings Growth (YoY) -22.9% -27.9% 19.2% 36.6% 26.3% Current Ratio 2.7 2.7 2.6 1.9 2.0 Cash as Percent of Market Cap 16.2% 17.9% 17.8% 16.6% 18.8% Enterprise Value Growth (YoY) -9.1% 2.8% -8.1% -6.9% 0.8% Security 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.9x 3.2x 2.7x 3.3x 3.6x EV/EBITDA 10.2x 10.5x 11.2x 11.5x 10.7x EV/Earnings 10.5x 14.5x 13.7x 15.8x 16.2x Gross Profit Margin 83.6% 84.1% 83.4% 83.3% 83.4% EBITDA Margin 19.9% 20.7% 20.6% 20.7% 20.5% Net Income Margin 10.4% 11.4% 10.6% 10.8% 10.4% TTM Revenue Growth (YoY) 13.5% 13.2% 14.0% 13.1% 11.7% TTM EBITDA Growth (YoY) 31.7% 34.9% 14.3% 10.5% 10.9% TTM Earnings Growth (YoY) -19.7% -38.8% -14.9% -9.0% -20.8% Current Ratio 1.8 1.8 1.8 1.9 2.2 Cash as Percent of Market Cap 18.6% 18.7% 15.4% 13.9% 12.5% Enterprise Value Growth (YoY) 13.0% 29.0% 31.1% 21.1% 27.4% Gross Profit Margin 55.4% 55.1% 55.4% 55.7% 54.5% EBITDA Margin 22.3% 19.6% 18.4% 13.4% 14.1% Net Income Margin 4.5% 4.0% 3.3% 1.9% 1.7% TTM Revenue Growth (YoY) 37.1% 24.2% 19.6% 10.7% 11.0% TTM EBITDA Growth (YoY) 27.3% 18.4% 13.7% -0.2% -19.8% TTM Earnings Growth (YoY) -28.2% -24.0% -16.2% -10.8% 581.1% Current Ratio 2.4 2.1 2.1 2.2 2.2 Cash as Percent of Market Cap 6.5% 7.9% 7.3% 7.1% 6.1% Enterprise Value Growth (YoY) -16.8% -25.5% -17.3% -10.0% 0.4% Gross Profit Margin 75.3% 75.1% 74.9% 74.5% 74.3% EBITDA Margin 13.1% 14.5% 13.9% 8.1% 4.5% Net Income Margin 6.9% 6.6% 7.7% 4.2% 1.1% TTM Revenue Growth (YoY) 19.4% 20.1% 23.1% 23.4% 21.3% TTM EBITDA Growth (YoY) 7.8% 11.2% 9.3% 3.0% -2.8% TTM Earnings Growth (YoY) -6.9% -1.1% 0.5% 6.2% 0.0% Current Ratio 1.7 2.0 2.0 1.6 1.6 Cash as Percent of Market Cap 13.4% 12.6% 13.0% 12.8% 11.9% Enterprise Value Growth (YoY) 0.0% 4.6% 0.0% 3.9% 7.0% 69 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SOFTWARE INDEX METRICS BY PRODUCT CATEGORY Storage, Data Mgmt & Integration 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.5x 2.5x 2.3x 2.4x 2.4x EV/EBITDA 9.4x 9.2x 8.4x 9.2x 8.8x EV/Earnings 15.5x 15.2x 14.5x 15.4x 16.9x Gross Profit Margin 73.8% 72.8% 72.4% 72.6% 72.3% EBITDA Margin 23.7% 23.9% 23.8% 22.2% 21.9% Net Income Margin 12.5% 12.8% 12.7% 11.5% 10.7% TTM Revenue Growth (YoY) 7.6% 6.3% 6.5% 4.8% 4.1% TTM EBITDA Growth (YoY) 12.9% 14.1% 8.5% 5.5% -0.3% TTM E i G th (Y Y) 11 8% 11 4% 9 9% 8 0% 9 5% Vertical - Other 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 3.0x 2.9x 2.9x 3.0x 3.2x EV/EBITDA 16.4x 21.0x 20.3x 22.0x 22.1x EV/Earnings 41.9x 47.5x 39.8x 40.9x 45.5x Gross Profit Margin 55.2% 54.6% 54.2% 53.8% 53.5% EBITDA Margin 15.8% 14.7% 14.4% 14.1% 14.4% Net Income Margin 7.1% 6.2% 5.7% 5.7% 5.5% TTM Revenue Growth (YoY) 26.5% 28.0% 19.8% 21.3% 21.0% TTM EBITDA Growth (YoY) 7.7% 10.4% 7.8% 1.1% 8.4% TTM Earnings Growth (YoY) -11.8% -11.4% -9.9% -8.0% -9.5% Current Ratio 2.3 2.1 2.3 2.2 2.2 Cash as Percent of Market Cap 19.1% 20.2% 20.3% 22.1% 21.7% Enterprise Value Growth (YoY) -2.1% 7.8% -1.1% -9.1% -0.8% Supply Chain Mgmt & Logistics 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 3.2x 3.2x 3.5x 3.8x 4.1x EV/EBITDA 11.3x 11.1x 13.6x 14.7x 15.6x EV/Earnings 27.1x 17.1x 30.4x 29.0x 31.2x Gross Profit Margin 62 2% 61 9% 62 0% 61 8% 62 0% TTM Earnings Growth (YoY) -12.8% -14.5% 12.5% 22.4% 89.3% Current Ratio 1.2 1.3 1.4 1.4 1.4 Cash as Percent of Market Cap 12.1% 7.7% 12.4% 11.3% 8.7% Enterprise Value Growth (YoY) 9.6% 15.6% 7.5% 8.4% 50.5% Gross Profit Margin 62.2% 61.9% 62.0% 61.8% 62.0% EBITDA Margin 19.6% 19.6% 19.6% 19.4% 19.2% Net Income Margin 12.6% 10.7% 10.5% 11.5% 11.4% TTM Revenue Growth (YoY) 19.1% 16.1% 13.1% 12.8% 10.7% TTM EBITDA Growth (YoY) 61.3% 74.1% 44.6% 28.8% 15.7% TTM Earnings Growth (YoY) -37.7% -31.1% -8.7% -0.3% 14.5% Current Ratio 2.3 2.4 2.5 2.4 2.4 Cash as Percent of Market Cap 12.0% 11.3% 10.5% 10.0% 8.8% Enterprise Value Growth (YoY) 34.0% 41.4% 38.9% 38.4% 37.2% Systems Management 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 5.9x 5.5x 4.5x 4.8x 4.3x EV/EBITDA 22.9x 22.3x 18.9x 20.5x 19.0x EV/Earnings 39.0x 36.6x 31.9x 35.5x 33.1x Gross Profit Margin 84.6% 85.0% 85.0% 84.9% 84.7% EBITDA Margin 26.8% 25.8% 25.5% 25.8% 24.7% Net Income Margin 18.5% 16.5% 15.8% 15.0% 15.0% TTM Revenue Growth (YoY) 18.1% 18.1% 16.5% 17.2% 15.8% TTM EBITDA Growth (YoY) 19.4% 22.1% 13.7% 8.9% 5.9% TTM Earnings Growth (YoY) -7.9% -13.1% -2.9% -7.2% -8.8% Current Ratio 1.5 1.7 1.5 1.4 1.5 Cash as Percent of Market Cap 12.4% 11.7% 12.0% 14.0% 14.2% Enterprise Value Growth (YoY) 8.0% 21.6% 10.8% 9.6% -3.7% Vertical - Finance 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 3.3x 3.2x 3.0x 3.4x 3.8x EV/EBITDA 10.3x 10.6x 9.4x 10.7x 11.0x EV/Earnings 22.9x 26.0x 23.3x 24.1x 23.2x Gross Profit Margin 45.9% 45.4% 44.3% 43.8% 43.3% EBITDA Margin 26.4% 26.3% 26.4% 26.5% 27.3% Net Income Margin 12.8% 10.4% 10.0% 9.7% 10.3% TTM Revenue Growth (YoY) 6.8% 6.3% 7.1% 6.7% 7.6% TTM EBITDA Growth (YoY) 4.7% 3.9% 8.1% 6.5% 7.0% TTM Earnings Growth (YoY) -4.6% 1.3% -3.3% -7.7% 7.5% Current Ratio 1.3 1.3 1.4 1.3 1.5 Cash as Percent of Market Cap 8.8% 8.7% 9.4% 6.5% 6.1% Enterprise Value Growth (YoY) -2.8% 2.7% -4.4% 0.9% 20.9% 70 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG SaaS INDEX METRICS BY PRODUCT CATEGORY CRM & Marketing 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 5.8x 5.0x 4.3x 3.5x 2.7x EV/EBITDA 30.0x 37.2x 94.4x 35.4x 29.8x EV/Earnings 60.4x 71.9x 28.4x 35.6x 52.7x Gross Profit Margin 65.7% 65.5% 65.2% 65.4% 65.6% EBITDA Margin 1.0% 0.8% 2.8% 1.4% 1.4% Net Income Margin -16.2% -14.4% -8.9% -8.9% -9.8% TTM Revenue Growth (YoY) 37.0% 33.2% 37.9% 40.9% 32.1% TTM EBITDA Growth (YoY) 18.7% 12.0% -22.0% -29.4% -31.6% TTM Earnings Growth (YoY) 86 6% 38 6% 34 3% 46 5% 114 3% Other SaaS 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 6.1x 5.5x 4.8x 4.2x 5.8x EV/EBITDA 19.8x 26.1x 41.7x 33.3x 32.9x EV/Earnings 9.0x 10.1x 40.2x 48.1x 50.6x Gross Profit Margin 71.9% 71.7% 71.9% 71.9% 71.7% EBITDA Margin 9.6% 7.8% 7.6% 6.3% 2.3% Net Income Margin -3.5% -3.1% -1.6% -3.9% -4.0% TTM Revenue Growth (YoY) 27.9% 22.0% 23.1% 24.6% 22.3% TTM EBITDA Growth (YoY) 15.9% 14.6% 2.2% 6.4% -18.3% TTM E i G th (Y Y) 45 6% 8 0% 5 6% 16 0% 16 7%TTM Earnings Growth (YoY) 86.6% 38.6% 34.3% 46.5% 114.3% Current Ratio 2.9 2.6 2.4 1.9 1.8 Cash as Percent of Market Cap 10.9% 10.6% 12.9% 17.5% 16.8% Enterprise Value Growth (YoY) -20.3% 7.5% 23.3% -17.2% -21.9% ERP & Supply Chain 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 4.9x 5.4x 6.6x 6.4x 6.6x EV/EBITDA 41.4x 57.1x 50.7x 73.9x 86.7x EV/Earnings 26.7x 79.7x 113.5x 161.9x 106.1x Gross Profit Margin 70 0% 69 9% 70 9% 69 5% 68 9% TTM Earnings Growth (YoY) 45.6% 8.0% -5.6% 16.0% 16.7% Current Ratio 2.2 2.0 1.9 2.0 1.9 Cash as Percent of Market Cap 12.1% 13.8% 13.8% 13.0% 10.8% Enterprise Value Growth (YoY) -23.0% -3.8% -0.5% 4.0% 30.0% Gross Profit Margin 70.0% 69.9% 70.9% 69.5% 68.9% EBITDA Margin 7.1% 8.4% 8.5% 5.7% 3.9% Net Income Margin 3.1% 2.8% 3.8% -0.9% -0.9% TTM Revenue Growth (YoY) 24.0% 24.1% 22.2% 30.7% 31.5% TTM EBITDA Growth (YoY) -4.1% 1.1% -7.8% 5.8% -22.9% TTM Earnings Growth (YoY) -41.9% 9.8% 17.9% 126.5% n/a Current Ratio 1.5 1.3 1.2 1.4 1.4 Cash as Percent of Market Cap 7.9% 6.1% 5.6% 7.5% 8.7% Enterprise Value Growth (YoY) 23.8% 43.6% 38.8% 51.2% 81.5% Vertically Focused 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 4.3x 5.7x 4.7x 5.0x 5.0x EV/EBITDA 24.9x 30.4x 25.6x 27.3x 25.7x EV/Earnings 28.7x 23.7x 30.7x 63.2x 137.6x Gross Profit Margin 61.7% 61.1% 71.4% 71.3% 71.8% EBITDA Margin 15.4% 15.2% 14.3% 16.4% 16.0% Net Income Margin 12.3% 16.3% 14.0% 5.3% 3.8% TTM Revenue Growth (YoY) 34.4% 32.0% 27.7% 21.6% 21.5% TTM EBITDA Growth (YoY) 13.8% 18.7% 2.8% 6.5% -1.9% TTM Earnings Growth (YoY) -1.7% -38.6% 1.1% 3.4% n/a Current Ratio 2.2 2.2 2.4 2.5 1.6 Cash as Percent of Market Cap 8.3% 8.1% 8.5% 8.3% 6.6% Enterprise Value Growth (YoY) 30.8% 58.5% 25.7% 26.3% 21.5% Workforce Management 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 7.0x 8.3x 10.5x 10.7x 8.5x EV/EBITDA 71.1x 80.0x 69.4x 63.7x 61.9x EV/Earnings 399.4x 368.3x 243.2x 180.5x 165.7x Gross Profit Margin 56.4% 56.5% 56.6% 57.4% 58.5% EBITDA Margin -13.8% -17.0% -18.1% -17.1% -15.4% Net Income Margin -30.0% -27.5% -27.9% -29.2% -27.7% TTM Revenue Growth (YoY) 28.0% 28.7% 29.1% 23.4% 43.1% TTM EBITDA Growth (YoY) -8.4% -4.7% -42.8% -32.9% -36.5% TTM Earnings Growth (YoY) -44.8% -63.6% 17.9% 25.4% n/a Current Ratio 1.2 1.2 1.2 1.1 1.1 Cash as Percent of Market Cap 6.5% 5.9% 4.0% 3.8% 3.9% Enterprise Value Growth (YoY) 23.0% 87.1% 62.3% 49.2% 42.8% 71 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • THE SEG INTERNET INDEX METRICS BY PRODUCT CATEGORY Ad Tech & Lead Generation 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.5x 1.8x 2.1x 2.0x 2.0x EV/EBITDA 11.0x 13.3x 12.0x 14.9x 14.9x EV/Earnings 28.8x 29.6x 28.0x 21.9x 25.4x Gross Profit Margin 67.6% 68.5% 67.3% 66.8% 65.4% EBITDA Margin 14.0% 14.4% 14.1% 13.0% 13.5% Net Income Margin 3.6% 4.3% 6.4% 5.7% 4.8% TTM Revenue Growth (YoY) 37.5% 35.3% 32.9% 25.2% 26.8% TTM EBITDA Growth (YoY) 16.5% 16.4% 15.8% 10.0% 13.6% TTM E i G th (Y Y) 16 6% 9 3% 9 3% 11 5% 137 5% Infrastructure 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 1.8x 1.1x 1.0x 1.7x 1.6x EV/EBITDA 12.4x 14.0x 11.7x 11.9x 13.6x EV/Earnings 23.3x 18.2x 20.5x 23.3x 35.3x Gross Profit Margin 64.8% 63.8% 63.1% 61.6% 61.2% EBITDA Margin 10.7% 8.3% 7.5% 8.0% 7.2% Net Income Margin 4.6% 3.4% 1.8% -0.8% 0.4% TTM Revenue Growth (YoY) 13.7% 12.2% 10.9% 9.2% 8.8% TTM EBITDA Growth (YoY) 7.1% 2.9% -6.0% -18.6% -30.9% TTM E i G th (Y Y) 9 7% 23 1% 59 7% 51 9% 13 6%TTM Earnings Growth (YoY) -16.6% -9.3% -9.3% -11.5% 137.5% Current Ratio 2.8 2.7 2.6 2.2 2.4 Cash as Percent of Market Cap 20.6% 19.7% 20.6% 19.1% 17.8% Enterprise Value Growth (YoY) -18.6% -3.6% 2.7% 8.8% 39.1% Commerce 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 0.7x 0.8x 1.2x 0.9x 0.9x EV/EBITDA 18.8x 15.1x 15.2x 10.5x 15.1x EV/Earnings 14.6x 17.1x 18.8x 13.9x 23.8x Gross Profit Margin 37 3% 37 3% 38 6% 38 4% 38 5% TTM Earnings Growth (YoY) 9.7% 23.1% 59.7% 51.9% -13.6% Current Ratio 2.9 3.3 3.1 3.0 3.1 Cash as Percent of Market Cap 26.4% 22.0% 28.2% 28.4% 30.6% Enterprise Value Growth (YoY) -28.1% -12.7% 1.6% -2.8% -1.6% Services 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.2x 2.9x 2.7x 3.2x 2.9x EV/EBITDA 16.9x 16.4x 17.7x 15.3x 26.8x EV/Earnings 41.8x 37.2x 44.0x 54.6x 79.4x Gross Profit Margin 67 6% 69 1% 69 8% 69 5% 69 8%Gross Profit Margin 37.3% 37.3% 38.6% 38.4% 38.5% EBITDA Margin 8.3% 8.3% 8.4% 7.6% 7.5% Net Income Margin 3.1% 3.1% 4.5% 4.6% 4.9% TTM Revenue Growth (YoY) 16.7% 23.3% 20.6% 17.5% 17.7% TTM EBITDA Growth (YoY) 5.4% 13.6% 20.9% 25.7% 26.4% TTM Earnings Growth (YoY) -3.0% -38.1% -28.0% -8.4% 0.5% Current Ratio 1.9 2.0 1.9 1.8 1.6 Cash as Percent of Market Cap 19.4% 24.2% 22.5% 18.5% 13.4% Enterprise Value Growth (YoY) -32.0% -14.4% 6.2% -6.3% 28.0% Gross Profit Margin 67.6% 69.1% 69.8% 69.5% 69.8% EBITDA Margin 6.5% 7.3% 8.5% 8.5% 6.6% Net Income Margin 0.2% 4.1% 2.1% 2.9% 0.3% TTM Revenue Growth (YoY) 55.1% 49.5% 42.0% 42.2% 44.9% TTM EBITDA Growth (YoY) 21.1% 16.4% 8.2% 13.7% 23.0% TTM Earnings Growth (YoY) -88.6% 2.0% -31.6% -4.0% 204.0% Current Ratio 1.7 1.7 2.3 2.1 2.5 Cash as Percent of Market Cap 12.0% 16.9% 19.5% 14.9% 13.0% Enterprise Value Growth (YoY) -43.5% -15.4% -17.8% 13.1% 74.5% Content & Media 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 1.6x 1.3x 1.4x 1.6x 2.3x EV/EBITDA 10.1x 10.8x 10.9x 15.4x 13.8x EV/Earnings 20.8x 19.2x 22.0x 18.9x 22.6x Gross Profit Margin 54.0% 53.9% 52.5% 52.4% 52.4% EBITDA Margin 14.0% 14.1% 14.1% 14.8% 15.5% Net Income Margin 4.8% 4.0% 1.3% 1.6% 2.2% TTM Revenue Growth (YoY) 15.5% 12.3% 10.5% 12.6% 12.1% TTM EBITDA Growth (YoY) -7.5% -4.5% 10.5% 19.5% 22.7% Social 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 13.0x 9.6x 8.6x 8.9x 7.1x EV/EBITDA 30.4x 29.3x 36.4x 29.1x 32.6x EV/Earnings 50.4x 98.0x 99.7x 400.2x 259.2x Gross Profit Margin 75.4% 73.9% 64.2% 65.3% 67.0% EBITDA Margin 12.9% 12.6% 13.3% 16.5% 20.0% Net Income Margin 2.4% 1.8% 2.0% 1.0% 1.2% TTM Revenue Growth (YoY) 64.0% 64.6% 50.9% 49.3% 47.2% TTM EBITDA Growth (YoY) -24.3% -32.4% -18.1% 15.3% 20.7% TTM Earnings Growth (YoY) 22.8% 34.3% 9.4% 0.4% 73.0% Current Ratio 2.0 2.1 1.6 1.8 1.8 Cash as Percent of Market Cap 22.7% 21.7% 18.4% 17.2% 16.2% Enterprise Value Growth (YoY) -28.6% -21.9% -11.8% 12.8% 23.5% Gaming 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 3.4x 2.1x 2.4x 2.7x 2.7x EV/EBITDA 4.0x 3.4x 4.3x 5.8x 5.9x EV/Earnings 8.2x 8.4x 7.1x 7.1x 8.4x TTM Earnings Growth (YoY) -37.1% -39.4% 12.8% -45.0% n/a Current Ratio 6.0 7.2 5.4 5.2 5.3 Cash as Percent of Market Cap 14.5% 16.5% 19.0% 21.9% 16.3% Enterprise Value Growth (YoY) n/a n/a n/a -5.8% -5.1% Travel 2Q12 3Q12 4Q12 1Q13 2Q13 EV/Revenue 2.8x 2.3x 2.0x 2.0x 2.2x EV/EBITDA 19.7x 16.5x 15.3x 16.2x 18.2x EV/Earnings 27.8x 23.7x 20.7x 21.9x 30.8x Gross Profit Margin 73.2% 71.9% 69.4% 71.2% 71.3% EBITDA Margin 45.0% 43.5% 38.6% 36.3% 38.6% Net Income Margin 31.8% 28.9% 27.3% 24.8% 26.7% TTM Revenue Growth (YoY) 33.1% 32.0% 24.8% 21.9% 21.9% TTM EBITDA Growth (YoY) 15.4% 17.1% 4.3% 13.9% 18.8% TTM Earnings Growth (YoY) 1.2% 1.1% -12.8% -13.5% n/a Current Ratio 2.4 2.4 2.2 2.5 2.4 Cash as Percent of Market Cap 27.6% 37.0% 37.6% 36.7% 31.9% Enterprise Value Growth (YoY) -8.6% -30.8% 9.0% -6.3% 22.8% Gross Profit Margin 82.0% 82.0% 81.6% 81.0% 80.7% EBITDA Margin 24.5% 25.7% 21.7% 18.1% 19.1% Net Income Margin 13.9% 15.3% 14.0% 12.0% 13.0% TTM Revenue Growth (YoY) 29.1% 24.0% 18.6% 19.8% 19.5% TTM EBITDA Growth (YoY) 6.7% 9.5% -7.8% -6.7% -6.3% TTM Earnings Growth (YoY) -41.5% -52.7% -25.6% -14.3% 42.7% Current Ratio 2.3 2.1 2.3 2.0 1.9 Cash as Percent of Market Cap 11.6% 16.6% 16.8% 18.6% 16.4% Enterprise Value Growth (YoY) -35.6% -30.5% -15.8% -0.3% 32.8% 72 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • 2Q13 PUBLIC SELLERS Buyer Seller Purchase Price (mm) Enterprise Value (mm) EV/Rev EV/EBITDA TTM Rev Growth Private Equity Consortium BMC Softw are Inc. (NasdaqGS:BMC) $8,376.8 $6,866.4 3.1x 11.2x 1.4% Salesforce.com, Inc (NYSE:CRM) ExactTarget, Inc. (NYSE:ET) $2,350.6 $2,249.6 7.1x - 39.4% Vista Equity Partners Websense Inc $1 054 8 $971 1 2 7x 17 9x 1 5%Vista Equity Partners Websense, Inc. $1,054.8 $971.1 2.7x 17.9x -1.5% McAfee, Inc. Stonesoft Oyj (HLSE:SFT1V) $371.6 $378.7 7.0x - 27.1% Thoma Bravo, LLC Keynote Systems, Inc. (NasdaqGS:KEYN) $398.7 $340.8 2.8x 23.1x 5.2% Trulia, Inc. (NYSE:TRLA) Market Leader, Inc. (NasdaqGS:LEDR) $336.3 $314.3 6.6x - 29.1% The Carlyle Group LP (NasdaqGS:CG) Simplex Holdings Inc. (TSE:4340) $283.6 $216.2 1.2x 7.1x 4.0% DPA Group NV (ENXTAM:DPA) ICT Automatisering NV (ENXTAM:ICT) $43 2 $46 3 0 4x 14 2x 3 0%DPA Group NV (ENXTAM:DPA) ICT Automatisering NV (ENXTAM:ICT) $43.2 $46.3 0.4x 14.2x -3.0% P2 Energy Solutions Incorporated ISS Group Limited (ASX:ISS) $43.3 $36.8 1.8x 26.6x 9.3% 73 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • 2Q13 MEGA DEALS Buyer Seller Purchase Price (mm) Enterprise Value (mm) EV/Rev EV/EBITDA TTM Rev Growth Private Equity Consortium BMC Softw are Inc. (NasdaqGS:BMC) $8,376.8 $6,866.4 3.1x 11.2x 1.4% Salesforce.com, Inc (NYSE:CRM) ExactTarget, Inc. (NYSE:ET) $2,350.6 $2,249.6 7.1x - 39.4% Adobe Systems Inc (NasdaqGS:ADBE) Neolane SA $600 0 $600 0 10 3x -Adobe Systems Inc. (NasdaqGS:ADBE) Neolane SA $600.0 $600.0 10.3x - - OMERS Private Equity Civica plc $607.8 $607.8 1.9x 10.3x - Vista Equity Partners Websense, Inc. $1,054.8 $971.1 2.7x 17.9x -1.5% Yahoo! Inc. (NasdaqGS:YHOO) Tumblr, Inc. $1,100.0 $1,100.0 84.6x - - International Business Machines C ( S ) SoftLayer Technologies, Inc. $2,000.0 $2,000.0 5.0x - - 74 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • 2Q13 MOST ACTIVE BUYERS Buyer Seller Purchase Price (mm) Enterprise Value (mm) TTM Revenue (mm) EV / Revenue Constellation Softw are, Inc. (TSX:CSU) 123Signup AMS Inc - - - -, ( ) 123Signup AMS, Inc. Metalogic Holdings Limited - - - - Quadramed, Inc. - - - - Quantitative Medical Systems, Inc. - - - - Dassault Systemes SA (ENXTPA:DSY) Apriso Corporation $205.0 $205.0 - - Archividéo SARL - - - - FE-DESIGN GmbH - - - - SIMPOE SAS - - - - Google Inc. (NasdaqGS:GOOG) Behavio, Inc. - - - - Wavii, Inc. - - - - Waze Ltd. - - - - Intel Corporation (NasdaqGS:INTC) Aepona Ltd - - - - Mashery, Inc. - - - - ST-Ericsson, Navigation Satellite Business - - - - Tw itter, Inc. Lucky Sort Inc. - - - - Spindle Labs, Inc. - - - -p , Ubalo, Inc. - - - - Yahoo! Inc. (NasdaqGS:YHOO) GhostBird Softw are Inc. - - - - Go Poll Go, Inc. - - - - Loki Studios, Inc. - - - - PlayerScale, Inc. - - - -y , Rondee, Inc. - - - - Todoroo, Inc. - - - - Tumblr, Inc. $1,100.0 $1,100.0 $13.0 84.6x 75 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved
    • 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. 76 Q2 2013 Software Industry Financial Report Copyright © 2013 by Software Equity Group, LLC All Rights Reserved 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.