ServiceSource analyst day_nov21_2013

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ServiceSource analyst day_nov21_2013

  1. 1. ServiceSource Analyst Day November 21, 2013
  2. 2. Important Information • This presentation contains forward-looking statements within the meaning of the U.S. federal securities laws that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking, including, without limitation, statements regarding: predictions for future growth, our possible or assumed future results of operations; estimates of service revenue opportunity under management and annual contract value; our ability to improve our customers’ renewal rates, margins and profitability; our ability to increase our revenue and contribution margin over time from new and existing customers; business strategies; technology and product development; competitive position; the effects of competition; third party and company estimates of market sizes; our long term business model; economic, industry and market trends; potential growth vectors and opportunities; comparative models; and statements about partnerships or acquisitions. • Typically, these statements contain words such as “if,” "believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “opportunity” and similar expressions. . • You are cautioned that the forward-looking statements in this presentation are based on estimates and information available to us at the time of this presentation. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially and are not guarantees of future performance. We undertake no obligation, and to not currently intend to update the forward- looking statements to reflect subsequent events or circumstances. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our periodic reports and registration statements filed with the Securities and Exchange Commission, which can be accessed at http://www.sec.gov. • The information contained in this presentation does not constitute an offer to sell or the solicitation of an offer to buy securities, or a recommendation for investment in the Company’s securities. 1
  3. 3. 12:00 – 1:00pm Arrival & Registration & Box Lunch 1:00 – 1:05pm Welcome & Agenda Walkthrough Anne Bawden 1:05 – 1:25pm CEO Keynote Mike Smerklo 1:25 – 2:10pm Market/GTM/Customers: - Market Capture Strategy (15 mins) - Legendary Customer Experience (15 mins) - Q&A (15 mins) Tom Bonos Jay Ackerman 2:10 – 2:50pm Cloud & Data Services - Update (20 mins) - Renew Demo (10 mins) - Q&A (10 mins) Richard Campione Jim Dunham 2:50 – 3:05pm Break 3:05 – 3:30pm Customer Panel - Blackboard - Workday Moderated by Mike Smerklo 3:30 – 3:50pm Financials: - Key Metrics & Business Update - Long Term Model Ashley F. Johnson 3:50 – 4:15pm Final Q&A SREV Mgmt 4:15pm Closing Remarks & Cocktail Reception Agenda
  4. 4. CEO Keynote Mike Smerklo
  5. 5. ServiceSource Overview Who We Are: Global Leader in Recurring Revenue Management History: Founded in 2002, IPO in 2011 Customers: Over 70 Blue Chip Customers Across Five Verticals Headquarters: San Francisco, CA 4 Solution: Renew OnDemand SaaS Application and Suite of Managed Services Offerings
  6. 6. The Market for Recurring Revenue Management 5 Consistent predictions for continued growth It‟s Big Requirements for success are robust and evolving  Data Management  Analytics  Commerce  Sales Execution  Customer Success “By 2015, 35% of Global 2000 Companies will generate revenue through subscription-based services and revenue models.” — Gartner “The worldwide market for subscription-based software to be US$90 billion in 2015.” — IDC "The global market for SaaS will grow from $21.2 billion in 2011 to more than $92.8 billion in 2016.” — Forrester Research $310B Technology and services for managing mission- critical, recurring revenue streams across HW, SW, SaaS/XaaS, HCLS, and Industrials. "Worldwide, software support service spending will achieve a five-year compound annual growth rate (CAGR) of 5.3%, hitting $75.2B in 2017." — Gartner *Source: Hoovers and Gartner; existing verticals only. *
  7. 7. We Are the Market Leader 6 Software Hardware SaaS/XaaS Healthcare & Life Science Industrial Systems $9B+ Recurring Revenue under management 145+ Engagements 10 OF THE TOP 15 F100 Technology-Based Companies 7 OF THE TOP 10 Software as a Service Companies 6 OF THE TOP 6 Enterprise Network Storage Companies 4 OF THE TOP 5 Integrated Systems Vendors 20% *Based on internal studies, companies who worked with ServiceSource increased renewal rates by an average of 15 points. **ServiceSource internal study comparing sales productivity before and after using Renew OnDemand showed an average increase of 20% 15pt improvement in renewal rates* increase in sales productivity** $11B+
  8. 8. Our Mission 7 A Complete Solution for Recurring Revenue Management, Creating Real Customer Value Our Values Do the Right Thing Deliver Results Win as a Team
  9. 9. Evolution of ServiceSource Solution Cloud Application The first purpose-built cloud application designed to increase recurring revenue The only hybrid solution that includes selling & enablement services Pay for Performance Selling on behalf of customers, based on performance Renewals Data and Technology Support for the renewals process with applications, tools, and a data framework Customer Success Management Solution and Best Practice Business Process • Customer Success management solution offering • Data Management and Opportunity Generation • Sales Strategy & Execution • Generate Insight and Optimize we do it for you we enable you Unbundling SaaS • Renew OnDemand • Support • Training • Data Services • Config Services / Integration Managed Services • Enablement Services • Selling Services 8
  10. 10. Over 12 Years of Leadership in Managed Services 9 Value to Our Customers  People, process, supported by technology  Pay for Performance  Disciplined renewal sales methodology  Global scale and expertise  Tailored to industry verticals Selling Services Enablement Services Managed Services “We Do It For You”
  11. 11. Best In Class, Purpose Built SaaS Application 10 Value to Our Customers  Renewal-ready Data  Actionable insight via metrics to view and increase business performance  Automation into sales, quoting, administration, and channel  Team of experts providing on going data cleansing and support Cloud & Data Services “We Enable You” Data Services Professional Services
  12. 12. The Strength of the Combined Solution 11 • Profitability and growth funds investment in Renew • Pre-eminent test laboratory fuels product innovation • Drives automation and efficiencies • Fuels evolution of differentiated MS offerings • Increases value proposition for MS offering Enhanced Customer Choice Expanded Market Opportunity Increased Shareholder Value
  13. 13. 2013 Has Been an Important Year for ServiceSource 12 Challenges Going Into the Year Revenue Growth Deceleration Introduction of SaaS Offering as New Platform for Growth New Capabilities Required For Success Five Key Initiatives to Reposition Ourselves for Reacceleration Move to an “Unbundled Offering” Improve Sales Execution Product Scale & Standardization Increase Capacity to Implement Renew OnDemand Customer Retention
  14. 14. 2013 Highlights 13 Spring Release: Data Summer Release: Channel Winter Release: Adoption
  15. 15. Our Growth Strategy 14 Strengthen the Power of Our People Extend GTM Reach in S&M, Customer Success, Partner Ecosystem Expand Market Leadership With Renew Reinforce MS Leadership Position Fortify Thought Leadership and Unlock Data as a Strategic Asset
  16. 16. Our Guiding Light 15 Legendary Customer Experience Unbundle to Provide Choice Renew OnDemand Build Out to Enhance Customer Experience Geographic Expansion to Provide CoverageData Focus to Unlock Insights Account Coverage Investment Providing Dedicated Voice of Customer
  17. 17. Summary  The market is large and wide open.  We are the clear leader.  We have the only comprehensive solution.  Renew OnDemand is gaining significant momentum.  We have the right strategy, right team, right solution. 16
  18. 18. Market/GTM/Customers Jay Ackerman Chief Renewals Officer & EVP Customer Success
  19. 19. What‟s Good for Our Customers is Good For Us 19 Legendary Customer Experience Gain Business Up the Stack Deliver Extended Solution Offerings to Installed Base Capture New Logos Extend Across Business Lines and Geographies Organically Grow in our Installed Base
  20. 20. Market Capture Strategy Tom Bonos SVP Global Sales Execution and Solution Design
  21. 21. Market Capture Strategy 21 $310B TAM We Intend to Capture It Customers Want Choice We‟ve Unbundled our Solution Cloud Changes Everything We are Repositioning in the Market Execution is Key Growing Pipeline Driving Conversion Rates Up
  22. 22. Large TAM for Recurring Revenue 22 Recurring Revenue Management (RRM) encompasses technology and services for managing $310B of mission-critical, recurring revenue streams $99 $66 $21 $53 $71 Hardware Software XaaS HCLS Industrials Estimated Recurring Revenue Streams ($B) Source: Hoovers and Gartner
  23. 23. Large Portion of Our TAM We Already Know 23 $186B additional opportunity $115B opportunity within the install base $11B+ under management On Average < 20% Penetration Unbundling Creates Opportunity for Renew in our Install Base
  24. 24. Unbundling to Give Customers Choice 24 Cloud & Data Services “We Enable You” Data Services Professional Services Selling Services Enablement Services Managed Services “We Do It For You” Or
  25. 25. Repositioning ServiceSource as SaaS Provider Local Cloud Leadership #CloudCorridor 2X Blog Visitors Can a Cloud Corridor in SF Compete with Silicon Valley? Coverage Driving the Recurring Revenue Discussion “Recurring Revenue” Share of Voice Subscription Economy (37%) Recurring Revenue (63%) 25
  26. 26. Making a Statement at Dreamforce 26  30 accounts scheduled Face-to- Face Demo’s  25 SVP/C-Level contacts engaged in exec. meetings Sharing Thought Leadership: • “Engage with Intelligence to Retain for Life” (Richard & Dell) • “Breaking Baldwin: The Art and Business of Transformation” • “Don’t Be the One-Hit Wonder: Five Steps to Lower Churn” • “Where Art and Science Collide: From New Sales to Renew Sales” Sold Out Sold Out  1000’s of attendees visiting SREV booth in the DF cloud pavilion Building Pipeline:  100’s of attendees engaged in meaningful interactions
  27. 27. Extending Our Solution, Reach and Influence With Market Leaders 27
  28. 28. Aria Partnership Extends Solution Footprint For companies with subscription products & services 28 Recurring Revenue Sales Commerce & Automation • Broaden Solution for companies with SaaS offerings • Accelerate & increase market capture for high volume business • Creates a solution that is more complete for cloud solutions Monetization Models Invoicing & Payments Process Orchestration Customer Success Renewals X-Sell & Up-Sell 28
  29. 29. Accenture GTM Alliance Extends Our Reach 29 • Preferred provider for renewals software and managed services • Increase revenue velocity and penetration in Fortune 100 • Market validation for Renew OnDemand • Creates 1st ever “Recurring Revenue Blueprint” System Integration Sales Transformation Renew OnDemand Selling + Enablement
  30. 30. Momentum 30 Industrials SaaS HCLS Software Hardware +300% vs Q3‟12 75% of all opportunities through 1st half of 2014, include Renew OnDemand subscription Renew Penetration Across Verticals Number of Renew Demos Growing More than 130 over last 4 quarters a a a a a Subscription $ Bookings Renew Pipeline
  31. 31. Our Strategy is Working 31 Solution Options: Customer team ServiceSource team Hybrid team (foundational)
  32. 32. Our Strategy is Working 32 Solution Options: Customer team ServiceSource team Hybrid team (foundational)
  33. 33. Our Strategy is Working 33 Solution Options: Customer team ServiceSource team Hybrid team (foundational)
  34. 34. Our Strategy is Working 34 Solution Options: Customer team ServiceSource team Hybrid team (foundational)
  35. 35. Case Study: Our Strategy at Work The Google Land and Expand Story Initial Engagement Dec 2011 Sep 2012 Feb 2013 Oct 2013 Oct 2013 4 deals signed in past 21 months Initial Engagement Initial Engagement Initial Engagement Expanded Relationship 1 Expanded Relationship 1 Expanded Relationship 2 Expanded Relationship 3 35 Expanded Relationship 1 Expanded Relationship 2
  36. 36. Attacking the Market Opportunity 36 North America Sales & SD Global Strategic Accounts Sales & SD Inside Sales & Sales Operations International Sales & SD DNA of Our Sales Team  Enterprise Software Sales Experience  Solution Oriented  Supported by Subject Matter Experts - Solution Design (SD) Global Data & Application Specialists
  37. 37. The Path Forward 37
  38. 38. The Path Forward 38 Pipeline  Repositioning, Driving Awareness  Unbundling Provides Choice  Increasing Ecosystem
  39. 39. The Path Forward 39 Close Rates Pipeline  Repositioning, Driving Awareness  Unbundling Provides Choice  Increasing Ecosystem
  40. 40. The Path Forward 40  Buy Process 2.0 Repositioning, Driving Awareness  Unbundling Provides Choice  Increasing Ecosystem Close Rates Pipeline
  41. 41. The Path Forward 41  Buy Process 2.0  Leveraging Renew Referenceabilty Close Rates Pipeline  Repositioning, Driving Awareness  Unbundling Provides Choice  Increasing Ecosystem
  42. 42. The Path Forward 42  Buy Process 2.0  Leveraging Renew Referenceability  Improved Sales Comp Close Rates Pipeline  Repositioning, Driving Awareness  Unbundling Provides Choice  Increasing Ecosystem
  43. 43. The Path Forward 43  Buy Process 2.0  Leveraging Renew Referenceability  Improved Sales Comp Close Rates Pipeline  Unleash Renew on our Install Base  Repositioning, Driving Awareness  Unbundling Provides Choice  Increasing Ecosystem
  44. 44. The Path Forward 44 Close Rates  Buy Process 2.0 Pipeline ACV Growth X =  Leveraging Renew Referenceability  Improved Sales Comp  Unleash Renew on our Install Base  Repositioning, Driving Awareness  Unbundling Provides Choice  Increasing Ecosystem
  45. 45. Legendary Customer Experience Jay Ackerman Chief Renewals Officer & EVP Customer Success
  46. 46. Our Commitment to Our Customers 46 OWN EXECUTE EVOLVEGROW INNOVATE Legendary Customer Experience Engagement Leadership & Valued Partner ROI / Business Case Realization Roadmap & Forward Planning Standardization & Efficiency Thought Leadership & Extending Our Solution
  47. 47. Customer Facing Investments 47 Centralized Organization  Standard offerings  PreSales  Customer workshops, and methodologies  Training/adoption  Accenture Partnership Central Voice to Our Customers  Consistent interface and engagement plays  Global leadership  Voice and advocacy  Renew deployment internally Professional Services Customer Success Management Managed Services Improved Visibility to Customer Expectations  Role specialization  Elevated focus on employee engagement  Customer sales management integration
  48. 48. Customer Community 48 Programmatic Engagement Targeted Consistent Pulsing Quarterly Referenceability Assessment Annual Customer Survey Partner Value Assessment (PVA) Product Council (Q4 launch)
  49. 49. Active Management of Customer Value 49 95% 88% 90% 2011 2012 2013 est BOP $ACV-LOSSES – NET CONTRACTIONS BOP $ACV Retention Rate  Business case attainment  Executive engagement  Renewal pipeline  Strategic innovation, including Renew = Retention Rate Customer Health
  50. 50. Legendary Customer Experience Focus Areas 50 Business Case Achievement Track, Deliver, Confirm Renew OnDemand Adoption Get the Most Out of Renew OnDemand Journey to Best in Class Leverage Data to Evolve and Innovate Easy to Do Business Streamline and Analyze Key Touch Points
  51. 51. Case Study: Blue Coat Delivering a Legendary Experience 51  Provided strategic guidance on performance growth given new PE priorities  Channel Management benchmarking led to new Partner Program approaches  Realigned Partnership goals and focus; introduced Renew OnDemand  Increased Renewal Rate Performance  Implemented Renew OnDemand  Enabling greater Recurring Revenue Growth and reporting visibility ServiceSource Role Outcomes  ServiceSource and Blue Coat in a five + year partnership  ServiceSource manages Blue Coat’s global service renewal business  Blue Coat was acquired by a PE firm and taken private Relationship ServiceSource Role
  52. 52. Heard at Dreamforce 52
  53. 53. GTM and Customer Q&A
  54. 54. Cloud & Data Services Update & Demonstration Richard Campione President, Cloud & Data Services Member, Board of Directors
  55. 55. Customer data reflects the customer journey – not organised for engagement & renewal Market Sell Implement Finance Support Renewal SFA Web Marketing Automation Project Mgt Billing Accounting Usage Service ? 57
  56. 56. Recurring revenue is presents challenges different from first time “new” revenue New revenue Recurring revenue 58 • Discovery driven process • Handful of opportunities per quarter • Timeline is open ended • Can’t even start without data • Hundreds of opportunities per quarter • Perishable: driven by expiration
  57. 57. Companies address this gap with people and .xls Recurring Revenue Gap Marketing Service Channel SFA Commerce CRM CPQ Accounting HR Entitlement Manufacturing Supply Chain Billing Order Mgt ERP CPQ 59
  58. 58. Admin: >50% Selling to Customers: <50% SERVICEPRMSFA (n) ERPCRM QUOTE ORDER ENTITLEMENT ASSETS Renewal reps spend more time finding and organising data than talking to customers 60
  59. 59. And when they do talk to customers, the focus is often on renewing a specific contract 61 Current State (unoptimised) • Simple processing of contracts: FIFO or sort by total dollar$ • Renewals assumed to “just happen” – no optimising timing for quarter results • Data is frequently inaccurate and incomplete
  60. 60. 62 A Better Way (Optimised) • Accurate data and guided selling • Renewals managed as perishable assets • Group based on what we know about customer • Optimise grouping at asset level for upsell and cross sell • Accelerate timing: pull forward into present quarter for improved results Up Sell: A → A’ Cross Sell: A → A + B Accelerate: A + B → C COTERMINATE Drive superior results: optimise timing and grouping of opportunites with customer insight
  61. 61. Instead of addressing this gap with people and .xls Recurring Revenue Gap Marketing Service Channel SFA Commerce CRM CPQ Accounting HR Entitlement Manufacturing Supply Chain Billing Order Mgt ERP CPQ 63
  62. 62. New class of cloud application designed for recurring revenue management Enabling Data-Driven Optimization for Recurring Revenue Renewal Ready Data Actionable Insight Sales Execution Marketing Service Channel SFA Commerce CRM CPQ Accounting HR Entitlement Manufacturing Supply Chain Billing Order Mgt ERP CPQ Enabling Data-Driven Optimisation for Recurring Revenue 64
  63. 63. Functional approach: Market-leading end-to- end solution for recurring revenue management 65 Current Enhancements Future Enhancements Data & Data Science E2E Customer Lifecycle Management Financial Closure Admin/ Config Action- Ready Data Oppty & Task Generation Revenue Planning Account Mgmt Direct Renewal Mgmt High Vol/ Self Service Channel Mgmt Quote and Booking Integration Order and Billing Integration Complete recurring revenue process contains 13 necessary sub-processes Customer Success Management Sales Enablement & Sales Ops Booking & Asset Collector It’s harder than you think! Baking in 14 years experience driving renewals into Renew OnDemand
  64. 64. 66 Architectural approach: Next generation, cutting edge architecture Transactional Real Time Analytics Record Lookup Historical Analytics Exploratory Analytics Analytics DataValue ApplicationComplexity Interactive Data Value Chain Analytics Rules Reporting Scheduling Renew Data Fabric Big, fast & complex Workflow Data Warehouse Hadoop NewSQL NoSQL Graph Database Event Application Fabric Small, slow & simple
  65. 65. Infrastructure approach: Scalable, redundant, and elastic 67 PhysicalLogical Nginx / HAproxy ELB-WEB Nginx / HAproxy mongo DB RS-3 mongo DB RS-2 mongoDB RS-3 SHARD 1 mongo DB RS-3 mongo DB RS-2 mongoDB RS-3 SHARD 2 mongoDB-C mongoDB-C mongoDB-C APP NodeJS MongoS APP NodeJS MongoS Amazon - East NAT NAT SSH SSH ELB-WEB APPAPP APP APPAPP APP DBC DBC Nginx Nginx MASTER MASTER LOGS LOGS DB S1 RS1 DB S2 RS1 DB S2 RS2 DB S1 RS2 Amazon - West Inbound/ outbound traffic
  66. 66. Taking data to the next level – Strategic Asset 68  New Chief Data Officer  Consolidation of the data organization  Cutting edge data architecture with enterprise integration framework  Investing in productizing data science  World class data services and sales ops
  67. 67. 69 Building a competitive moat based on IP  Domain IP  Architectural IP  Data as a Strategic Asset  8 Patents Pending Delivering results for our customers
  68. 68. Enough Talk, Let‟s See It The Renew OnDemand Demo Jim Dunham SVP Product Management
  69. 69. Renew OnDemand demo LOCATIONS WORLDWIDE Scale 71 $11B+ Recurring Revenue under management 47 seconds A renewal is closed 145+ Engagements worldwide Maturity Next Best Action Before customer contact During Contact After contact Difference
  70. 70. Admin: >50% Selling to Customers: <50% SERVICEPRMSFA (n) ERPCRM QUOTE ORDER ENTITLEMENT ASSETS Where do you want your reps to spend time? 72
  71. 71. Entering information into a CRM system or XLS? 73 There is a better way
  72. 72. Go to Renew OnDemand Demo 74
  73. 73. Renew OnDemand Q&A
  74. 74. Customer Panel Moderator: Mike Smerklo
  75. 75. Customer Panel Bill Davis CFO Stan Swete CTO 77
  76. 76. Financials Ashley F. Johnson CFO
  77. 77. Consistently Profitable Managed Services Business Financial Highlights 80 Revenue Accelerating Strong Bookings Growth in Renew onDemand Subscriptions Attractive Long Term Model Strong Balance Sheet for Growth Investments
  78. 78. Q3 Results and FY Guidance 81 • Total Revenue: $66.5M • Non-GAAP Gross Margin: 43% • Adjusted EBITDA: $5.3M • Renew Bookings: $30.0M • Total Cash: $278.3M Recent Quarterly Performance* GAAP to non-GAAP Reconciliation tables can be found on the IR portion of our website: http://files.shareholder.com/downloads/ABEA-5LUUYL/2737661982x0x703535/f135076d-0b6f-4991-a169-2f792dcbfb1c/Guidance_Tables_v2.pdf *As presented on SREV Q3’13 Earnings Call, Nov 5, 2013. • Total Revenue: $271-$275M 12% yoy growth • Non-GAAP Gross Margin: 43% - 44% • Adjusted EBITDA: $16-$19M • Free Cash Flow: $7-$9M FY Guidance Estimates*
  79. 79. Revenue Accelerating on a Growing Base • Strong H1 ACV ramping to revenue in H2 • Managed Services Business execution • Cloud & Data Services Business momentum YOY Quarterly Growth *FY‟13 Guidance at Midpoint of range: $75.5-$79.5M. 82 $58 $60 $59 $67 $61 $68 $67 $78 25% 23% 18% 11% 6% 13% 13% 16% 0% 5% 10% 15% 20% 25% 30% 0 10 20 30 40 50 60 70 80 90 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413G Series1 Series2Qtr Revenue YOY Growth
  80. 80. Consistent Profitability in Managed Services… 83 Managed Services Margin Growth $65 $98 $110 $84 2010 2011 2012 2013 YTD (1) (1) Estimated non-GAAP Managed Services margin
  81. 81. $65 $98 $110 $84 2010 2011 2012 2013 YTD …Fuels Our Investments in Innovation 84 Managed Services Margin Growth $12 $21 $27 $27 2010 2011 2012 2013 YTD Cloud & Data Services Investment (1) (2) (1) Estimated non-GAAP Managed Services margin (2) Estimated investment in Product, Engineering & Professional Services
  82. 82. Investments Starting to Pay Off 85 Subscription Bookings* $Millions Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Oct 13 $7M Subscription ARR* $Millions Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Oct 13 $6M $30M $15M 313% YoY Growth 144% YoY Growth * Cumulative since the beginning of 2012.
  83. 83. Investments Starting to Pay Off 86 Subscription Bookings* $Millions Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Oct 13 $33M $7M Subscription ARR* $Millions Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Oct 13 $16M $6M * Cumulative since the beginning of 2012.
  84. 84. Understanding Near Term Margins and Growth 87
  85. 85. Understanding Near Term Margins and Growth For illustrative purposes only… let’s do some scenario modeling. 88 Note: The scenario modeling in the slides that follow is presented for discussion purposes only and does not represent management’s belief or prediction about future growth.
  86. 86. Understanding Near Term Margins and Growth WDAY revenue excludes one-month stub for Jan 2011 2008 2009 2010 2011 2012 Revenue ($M) $6 $25 $68 $134 $274 YoY Growth 295% 170% 98% 104% GM % -77% 19% 41% 51% 57% 89
  87. 87. Renew onDemand Similar to WDAY ca. „08-‟09 2008 2009 2010 2011 2012 Revenue ($M) $6 $25 $68 $134 $274 YoY Growth 295% 170% 98% 104% GM % -77% 19% 41% 51% 57% 2013 G Subs + PS Rev ($M) ~$16 YoY Growth 226% GM % * 2013G number based on the midpoint of full year SREV guidance of $271 – $275M 90 Illustrative Only WDAY revenue excludes one-month stub for Jan 2011
  88. 88. What if Renew followed similar growth and profitability to Workday… 2008 2009 2010 2011 2012 Revenue ($M) $6 $25 $68 $134 $274 YoY Growth 295% 170% 98% 104% GM % -77% 19% 41% 51% 57% 2013 G 2014 2015 2016 Subs + PS Rev ($M) ~$16 $43 $85 $173 YoY Growth 226% 170% 98% 104% GM % * 41% 51% 57% PRO FORMA 2013G number based on the midpoint of full year SREV guidance of $271 – $275M 91 Illustrative Only WDAY revenue excludes one-month stub for Jan 2011
  89. 89. Scenario Math… 2013 G 2014 2015 2016 Subs + PS Rev ($M) ~$16 $43 $85 $173 YoY Growth 226% 170% 98% 104% GM % * 41% 51% 57% PRO FORMA Scenario: Renew closely follows WDAY growth/profits Scenario: Managed Services resumes 10% growth, and maintains Non-GAAP gross margins 40 - 45% 2013 G 2014 2015 2016 Mgd Svs Rev ($M) ~$257 $283 $311 $342 YoY Growth 8% 10% 10% 10% GM % ~45% 43% 43% 43% PRO FORMA 92 Illustrative Only 2013G number based on the midpoint of full year SREV guidance of $271 – $275M.
  90. 90. Even in a hyper-growth scenario… 2013 G 2014 2015 2016 Subs + PS Rev ($M) ~$16 $43 $85 $173 YoY Growth 226% 170% 98% 104% GM % * 41% 51% 57% PRO FORMA 2013 G 2014 2015 2016 Mgd Svs Rev ($M) ~$257 $283 $311 $342 YoY Growth 8% 10% 10% 10% GM % ~45% 43% 43% 43% PRO FORMA 2013 G 2014 2015 2016 Total Rev ($M) $273 $326 $396 $516 YoY Growth 12% 19% 22% 30% GM % ~43% 42% 44% 48% PRO FORMA … the impact on our total business takes time. Steady margin improvement and growth acceleration as SaaS business scales 93 Illustrative Only 2013G number based on the midpoint of full year SREV guidance of $271 – $275M.
  91. 91. Attractive Long-Term Business Model Non-Linear Progression as we invest in growth Today MS Revenue > 90% C&DS Revenue < 10% Gross Margin 43-44% Sales & Marketing 18-20% R&D 7-9% G&A 12-14% EBITDA 6-7% Long-Term Model MS Revenue 60-70% C&DS Revenue 30-40% Gross Margin 48-53% Sales & Marketing 16-18% R&D 8-10% G&A 10-12% EBITDA 15-20% 94
  92. 92. Inorganic Opportunities Could Accelerate our Path 95 Recurring Revenue Management Data & Data Science End to End Customer Lifecycle Management Financial Closure Sales Transformation Enterprise Systems Integration Data Analytics Guiding Principles to CBD Strategy: • Partnerships to augment revenue and market capture • Acquisitions to accelerate revenue/growth and expand market opportunity
  93. 93. Strong Balance Sheet to Pursue Growth 96 12/‟10 12/‟11 12/‟12 09/‟13 Total Cash $23M $109M $109M $278M • Improving FCF profile • Raised $136M • Overall profitability Key Benefits • Invest in growth opportunities • Increase strategic options • Provide business flexibility
  94. 94. Path to Growth 97 $100 $111 $153 $206 $244 2008 2009 2010 2011 2012 REVENUE ($M) $271- $275 2013G  Pursue Inorganic Opportunities  Invest in Renew and Expand Market Leadership  Reinforce MS Leadership Position and Profitability $1.0B
  95. 95. Final Q&A

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