Q1-2013 Software Valuations

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Review of Software and Internet Industry Q1 2013 Public Market, financial and M&A performance

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Q1-2013 Software Valuations

  1. 1. Q12013 The Software IndustryFinancial Report
  2. 2. SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTSAbout Software Equity GroupLeaders in Software M&A 4Extensive Global Reach 5Software Industry MacroeconomicsGlobal GDP 8Global GDP 8U.S. GDP and Unemployment 9Global IT Spending 10E-Commerce and Digital Advertising Spend 11SEG Indices vs. Benchmark Indices 12Public Software Financial and Valuation PerformancePublic Software Financial and Valuation PerformanceThe SEG Software Index 14The SEG Software Index: Financial Performance 15-17The SEG Software Index: Market Valuations 18-19The SEG Software Index by Product Category 20The SEG Software Index by Product Category: Financial Performance 21The SEG Software Index by Product Category: Financial Performance 21The SEG Software Index by Product Category: Market Valuations 22Public SaaS Company Financial and Valuation PerformanceThe SEG SaaS Index 24The SEG SaaS Index Detail 25The SEG SaaS Index: Financial Performance 26-28The SEG SaaS Index: Financial Performance 26 28The SEG SaaS Index: Market Valuation 29-30The SEG SaaS Index by Product Category 31The SEG SaaS Index by Product Category: Financial Performance 32The SEG SaaS Index by Product Category: Market Valuations 33Public Internet Company Financial and Valuation PerformancePublic Internet Company Financial and Valuation PerformanceThe SEG Internet Index 35The SEG Internet Index: Financial Performance 36-38The SEG Internet Index: Market Valuations 39-40The SEG Internet Index by Product Category 41The SEG Internet Index by Product Category: Financial Performance 421 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCThe SEG Internet Index by Product Category: Financial Performance 42The SEG Internet Index by Product Category: Market Valuations 43
  3. 3. SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTSSoftware Industry M&A Market UpdateSoftware/SaaS M&A Deal Volume and Spending 45Software M&A Exit Multiples 46Software M&A by Ownership Structure and Size 47Software M&A by Vertical and Horizontal Markets 48Software M&A by Vertical and Horizontal Markets 48Software M&A by Product Category 49-50SaaS M&A Deal Volume and Exit Multiples 51SaaS M&A by Product Category 52SaaS M&A: 1Q13 Transactions 53-55Internet M&A: Deal Volume and Exit Multiples 56-57Internet M&A: Deal Volume and Exit Multiples 56 57AppendixThe SEG Software Index Companies 59-63The SEG SaaS Index Companies 64The SEG Internet Index Companies 65-67The SEG Software Index Metrics by Product Category 68-69The SEG Software Index Metrics by Product Category 68 69The SEG SaaS Index Metrics by Product Category 70The SEG Internet Index Metrics by Product Category 711Q13 Public Sellers 721Q13 Software Mega Deals (>$500M) 731Q13 Most Active Buyers 741Q13 Most Active Buyers 742 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  4. 4. ABOUT SOFTWARE EQUITY GROUP33 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  5. 5. • Industry leading boutique investment bank founded inLEADERS IN SOFTWARE M&AIndustry leading boutique investment bank, founded in1992, representing public and private software andinternet companies seeking:• Strategic exit• Growth capitalWe 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 andNASDAQ, NYSE and foreign exchange listed companies• Clients span virtually every software technology, productcategory, delivery model and vertical market• Global presence providing advice and guidance to moreth 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 trackrecord.• Highly referenceable base of past clients4 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  6. 6. EXTENSIVE GLOBAL REACHCurrent Sell-side Representation• SEG currently represents software companiesin the United States, Canada, France,Recent Sell-side RepresentationGermany, Australia & Saudi Arabia• In addition to the countries listed above, SEGhas recently represented software companiesin the United Kingdom, France, Netherlands,Israel, and South AfricaSEG Research Distribution• SEG’s Quarterly and Annual Software IndustryEquity Reports and Monthly Flash Reports areq y p y pdistributed to an opt-in list of 50,000 publicsoftware company CEOs, softwareentrepreneurs, private equity managingdirectors, VCs, high tech corporate lawyers,public accountants, etc. in 76 countries.5 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCp ,
  7. 7. Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. Founded in 1992, our firm has guided andABOUT SOFTWARE EQUITY GROUPq y p y g gy , gadvised companies on five continents, including privately-held software and technology companies in the United States, Canada, Europe, Asia Pacific, Africaand Israel. We have represented public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges. Software EquityGroup also advises several of the worlds leading private equity firms. We are ranked among the top ten investment banks worldwide for application softwaremergers 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 technologydomain expertise. Our industry knowledge and experience span virtually every software product category, technology, market and delivery model, includingSoftware-as-a-Service (Saas), software on-demand and perpetual license. We have profound understanding of software company finances, operations andvaluation. We monitor and analyze every publicly disclosed software M&A transaction, as well as the market, economy and technology trends that impact thesedeals. Were 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 weve built and the industry reputation we enjoy. Software Equity Group is known and respected by publiclytraded and privately owned software and technology companies worldwide, and we speak with them often. Our Quarterly and Annual Software Industry EquityReports are read and relied upon by more than thousands of industry executives, entrepreneurs and equity investors in sixty-one countries, and we have beenquoted 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 CEOOnline and Software Business Magazine.gTo 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 contactCONTACT INFORMATION:Software Equity Group, L.L.C.12220 El Camino Real, Suite 320San Diego, CA 92130www softwareequity comwww.softwareequity.comp: (858) 509-2800The 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 inthis 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 inone or more of the securities or companies discussed herein.Financial data provided by Capital IQ.6 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCThis Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C.Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights.
  8. 8. SOFTWARE INDUSTRY MACROECONOMICS77 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  9. 9. GLOBAL GDP• Global GDP growth continued its steady decline through most of 2012 but leveled off in Q4 due to growth in developing countries• Global GDP growth continued its steady decline through most of 2012, but leveled off in Q4 due to growth in developing countries(chart on left).• In general, global GDP growth continues to reflect the disparity between developed and emerging economies (chart on right)• Emerging economies are forecast to grow GDP 5.9% and 6.0% in 2013 and 2014, respectivelyD l d i f t t GDP 1 9% d 2 3% i 2013 d 2014 ti l• Developed economies are forecast to grow GDP 1.9% and 2.3% in 2013 and 2014, respectively• Globally, GDP is expected to grow between 2.0% - 3.0% in 2013, according to forecasts from Worldbank and PIMCO. In 2014,Worldbank forecasts global GDP to accelerate further, achieving 3.3% YoY growth.8 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCSources: Worldbank, The Economistand PIMCO
  10. 10. U.S. GDP AND UNEMPLOYMENT5.0%6%8%10%GDP % Growth Unemployment Rate1.2%3.2%3.6%2.1%1.5%2.2%3.7%1.7%2.6%3.1%0.4%2.5%1.3%4.1%2.0%1.3%3.1%0.4%2.5%0%2%4%-0.7%-2.7%-5.4%-0.7%-6%-4%-2%-6.4%-8%1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13• The Bureau of Economic Analysis’ (BEA) first estimate of 1Q13 GDP reported growth of 2 5% up slightly from 1Q12’s 2 0%• The Bureau of Economic Analysis (BEA) first estimate of 1Q13 GDP reported growth of 2.5%, up slightly from 1Q12 s 2.0%.• PIMCO forecasts 1.5% - 2.0% growth for the U.S. economy in 2013, driven in large part by contributions from the housingrecovery.• The U.S. unemployment rate dropped to 7.5% in April, in part due to a decline in the number of job seekers.A t bl ti t th t bb l hi h l t t th IT t hi h l t 5 1% Y Y di t• A notable exception to the stubbornly high unemployment rate was the IT sector, which grew employment 5.1% YoY, according toTechServe Alliance.9 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  11. 11. GLOBAL IT SPENDING9.0%6.0%8.0%6.0%3.1%3.9%5.0%10.0%ing‐5.0%0.0%2007 2008 2009 2010 2011 2012 2013Y Change in IT Spend-10.0%‐15.0%‐10.0%YoY• Global IT spending is forecast to grow 3 9% in 2013 up from 3 1% in 2012 according to averages derived from Goldman Sachs• Global IT spending is forecast to grow 3.9% in 2013, up from 3.1% in 2012, according to averages derived from Goldman Sachs,Gartner and IDC .• Cloud and mobile computing continue to garner an increasing share of the total worldwide IT spend.• Gartner forecasts device sales (PCs, tablets, smartphones and printers) will grow 7.9% YoY, followed by enterprise software,which is projected to grow at 6.4%.which is projected to grow at 6.4%.• IDC forecasts mobile and tablet spending will increase 17% and 32% respectively in 2013, offsetting declines in PC sales.• IDC forecasts spending on cloud services will approach $100 billion in 2016, a four year CAGR of 26.4%, or six times the growthof IT spending as a whole.10 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCSources: IT spending numbers shown in charts arean average of Goldman Sachs, IDC and GartnerGDP forecasts
  12. 12. E-COMMERCE AND DIGITAL ADVERTISING SPEND20%25%50,00060,000illions)25%30%10 00012,000llions)Digital Advertising RevenueE-Commerce Spending5%10%15%20%20 00030,00040,00050,000oY%ChangerceSpending($M5%10%15%20%6,0008,00010,000oY%ChangengRevenue($Mil‐5%0%5%010,00020,000YoE-Commer‐10%‐5%0%5%02,0004,000YoInternetAdvertisi• U S retail e-commerce sales totaled $56 8B in 4Q12 (the • U S digital advertising revenues totaled $10 3M in 4Q12• U.S. retail e-commerce sales totaled $56.8B in 4Q12 (thelatest data available), marking the first ever $50B+ quarter.• 4Q12’s 14% YoY growth in online sales was spurred by a6% increase in buyers and an 8% increase in spending perbuyer.U.S. digital advertising revenues totaled $10.3M in 4Q12(the latest quarter data was available), marking the firstever $10M+ quarter and a 15% YoY improvement over4Q11.• 2012 annual digital advertising spend was $36.6B, up15% f 2011’ $31 7B• Total U.S. retail e-commerce sales were $186.2B for all of2012, up 15% from 2011, and the strongest YoY growthrate since the recession.15% from 2011’s $31.7B.• The increase in 2012’s digital advertising spend wasspurred by the rapid increase in mobile advertising spendwhich reached $3.4B in 2012, up 111% from 2011’s$1.6B.11 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCSources: comScore, IAB, IBD$ 6
  13. 13. SEG INDICES VS. BENCHMARK INDICES• An improving macro economic climate and continued support from the Federal Reserve helped drive the U S stock markets• An improving macro economic climate and continued support from the Federal Reserve helped drive the U.S. stock marketshigher in 1Q13.• The Dow surged 11.3%, its best first quarter since 1998, achieving a record high in 1Q13.• The S&P advanced 10.0% in 1Q13, while the NASDAQ grew 8.2%, as both achieved 52 week highs.SEG S ft I d t d 8 7% t i 1Q13 t f i th SEG S S d SEG I t t i di hi h l d 1Q13• SEG Software Index posted a 8.7% return in 1Q13, outperforming the SEG SaaS and SEG Internet indices which closed 1Q13with returns of 5.3% and 7.8%, respectively.• The relative underperformance of the SEG SaaS Index and the NASDAQ illustrates that investors were not yet ready to jumpinto riskier companies, preferring to place their bets with larger, more stable companies.12 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  14. 14. PUBLIC SOFTWARE COMPANY FINANCIAL ANDPUBLIC SOFTWARE COMPANY FINANCIAL ANDVALUATION PERFORMANCE:THE SEG SOFTWARE INDEX1313 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  15. 15. THE SEG SOFTWARE INDEXSEG- Software: Median Metrics• The SEG Software Index tracks publicsoftware companies that primarily offer on-premise software under a perpetualMeasure 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 2.7x 2.7x 2.6x 2.5x 2.8xEV/EBITDA 12.5x 10.6x 11.1x 11.7x 12.8xEV/Earnings 22.5x 22.2x 21.4x 21.8x 23.8xGross Profit Margin 68.8% 68.5% 68.3% 68.6% 68.8%EBITDA M i 19 4% 19 4% 19 8% 19 7% 19 7%license with annual M&S• The SEG Software Index is currentlycomprised of 132 public softwarei *EBITDA Margin 19.4% 19.4% 19.8% 19.7% 19.7%Net Income Margin 10.8% 10.7% 10.4% 10.4% 9.1%TTM Revenue Growth 14.2% 14.5% 13.3% 12.1% 11.1%TTM Total Revenue ($M) $417.9 $448.4 $447.7 $456.2 $471.6TTM EBITDA Growth 21.7% 17.5% 14.8% 8.8% 4.4%TTM Total EBITDA ($M) $71.5 $84.2 $78.2 $82.7 $85.7companies*($ ) $ $ $ $ $Cash & Eq ($M) $157.8 $182.6 $159.8 $163.4 $169.4Current Ratio 1.9 1.9 1.9 2.0 1.9Debt / Equity Ratio 22.5% 21.5% 23.3% 23.0% 26.6%14 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC* See appendix for a complete list of companies in The SEG Software Index
  16. 16. THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE35%40%48% of public on-premise software companieshad TTM revenue growth rates of 10% or lessOf the 18% of companies with TTM revenueTTM Revenue Growth Rate DistributionRevenue Performance16%$480TTM Total  Revenue ($M) TTM Revenue Growth20%20%25%30%35%ompaniesOf the 18% of companies with TTM revenuegrowth rates of 30% or more, a disproportionatenumber are focused on mobility and cloudcomputing8%10%12%14%$430$440$450$460$470enue Growthal Revenue13% 13%9% 9%0%5%10%15%% of Co0%2%4%6%$390$400$410$420$430TTM ReveTTM Tota0%<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%<= 40%> 40%TTM Revenue Growth• On-premise software companies lost market share to SaaSand Internet providers and struggled with macro economic0%$3901Q12 2Q12 3Q12 4Q12 1Q13p ggheadwinds, as their 1Q13 median TTM revenue growth ratedeclined to 11.1%, the lowest since 4Q10.• Despite slowing growth, the median TTM revenue of theSEG Software Index reached $471.6M, the highest in itshistory and the highest among our three tracking indiceshistory and the highest among our three tracking indices.• We expect TTM revenue growth for most on-premise publicsoftware companies to remain modest, which portendsincreased M&A and R&D spending to spur top line growth.15 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  17. 17. THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE32%35%TTM EBITDA Margin DistributionEBITDA Margin PerformanceAlmost one in three on-premise softwarecompanies posted EBITDA margins of20% - 30%25%22%EBITDA Margin TTM EBITDA  Growth17%25%20%25%30%ompanies20% - 30%15%20%10%12%14%16%18%20%TDA GrowthA MarginThose exceeding 30%EBITDA margins includedthe software industry’sbehemoths, as well as thoseleveraging online sales toreduce selling expenses8%11%7%0%5%10%15%% of Co0%5%10%0%2%4%6%8%10%TTM EBITEBITDA0%<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%<= 40%> 40%TTM EBITDA  Margin• EBITDA margins have held relatively constant over the pastyear and remain at historic levels, closing 1Q13 at 19.7%.0%0%1Q12 2Q12 3Q12 4Q12 1Q13y , g Q• Median TTM EBITDA growth has plunged from 22% YoY in1Q12 to a 4.4% YoY increase in 1Q13,suggesting manypublic software companies are spending more to growrevenue after paring expenses to the bone.• In a dramatic reversal from 1Q12, when median TTMEBITDA growth outpaced TTM revenue growth by 7.5%,TTM EBITDA growth in 1Q13 lagged TTM revenue growthby 6.9% (4.4% vs. 11.3%).16 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  18. 18. THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCEMargin PerformanceOperating Ratios80%Gross Profit Margin EBITDA Margin Net Income Margin25%S&M (% of Revenue) R&D (% of Revenue) G&A (% of Revenue)40%50%60%70%Margin15%20%Revenue0%10%20%30%% M0%5%10%% of R• Median spending on sales & marketing (S&M), research &development (R&D) and general & administrative(G&A), as a• In 1Q13, median gross profit, EBITDA and net incomemargins were 68.8%, 19.7% and 9.1%, respectively.0%1Q12 2Q12 3Q12 4Q12 1Q130%1Q12 2Q12 3Q12 4Q12 1Q13p ( ) g ( ),percentage of total revenue was 23.7%, 15.1% and 10.6%,respectively, in 1Q13 – consistent with historical norms.• Over the past year, S&M and G&A expenses as a percent ofrevenue have remained flat while R&D ticked up from 14.2%to 15 1% in Q1g , , p y• Several on-premise providers achieved gross profit marginsof 89% and greater, including Qlik Technologies (89%),Splunk (89%), Autodesk (90%), Glu Mobile (90%), Unit 4(92%) and SolarWinds (93%).to 15.1% in Q1.• Median S&M spending among on-premise public softwarecompanies lagged far behind their SaaS counterparts whichare investing heavily in customer acquisition.• We anticipate EBITDA margins and Net Income margins willlikely decline over the next several quarters, as on-premisesoftware companies increase their investments in R&D toimprove products/delivery models and sales & marketing toaccelerate TTM revenue growth.17 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  19. 19. THE SEG SOFTWARE INDEX: MARKET VALUATIONSEV/Revenue Multiples by Size (TTM Revenue)EV/Revenue and EV/EBITDA Multiples12.5x 12.8x14.0xEV/Revenue EV/EBITDA4.0xRevenue Greater Than $1 billion Revenue Between $500 million and $1 billionRevenue Between $100 million and $500 million Revenue Less Than $100 million10.6x11.1x11.7x8.0x10.0x12.0x2 0x2.5x3.0x3.5xV/Revenue2.7x 2.7x 2.6x 2.5x 2.8x0 0x2.0x4.0x6.0x0 0x0.5x1.0x1.5x2.0xMedian EV• Despite slowing growth and EBITDA erosion, the medianEV/Revenue multiple in 1Q13 was 2.8x, the highest in nine• Investors in 1Q13 continued to place higher value on largerpublic software companies with revenues >$100 million.0.0x1Q12 2Q12 3Q12 4Q12 1Q130.0x1Q12 2Q12 3Q12 4Q12 1Q13p , gyears.• By contrast, the median EV/EBITDA multiple in 1Q13 was12.8x, well below the mid-to-high-teen EBITDA multiplesachieved in 2007 and before.p p $• Throughout 2012, and in 1Q13, the EV/Revenue multiples ofon-premise software companies with revenues <$100 millionremained markedly lower than their larger counterparts.• SEG Software Index companies with TTM revenue between• Although median EBITDA margins of on-premise softwarecompanies are at record levels, soaring stock prices haveconstrained EV/EBITDA market valuations.$100M and $1B Successfully balanced TTM revenue growth(median 17.3%) and EBITDA margins (median 17.7%), andwere boosted by the highest EV/Revenue multiples.18 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  20. 20. THE SEG SOFTWARE INDEX: MARKET VALUATIONSEV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates4 4x5.0x 6.0x2.1x3.5x4.0x 4.1x4.4x2.5x3.0x3.5x4.0x4.5xEV/Revenue3.0x3.3x4.8x3.0x4.0x5.0xEV/Revenue1.3x2.1x0 0x0.5x1.0x1.5x2.0xMedian E1.3x1.9x 1.7x0 0x1.0x2.0xMedian E• Noting the decline in the median revenue growth of on-premise software providers investors awarded valuation• Except for a chosen few with EBITDA margins north of 40%,there was little market premium ascribed to on-premise0.0x<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%<= 40%> 40%TTM Revenue Growth0.0x<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%<= 40%> 40%TTM EBITDA  Marginpremise software providers, investors awarded valuationpremiums to those with revenue growth above the median(11.3%).• Indeed, revenue growth rates 20% or higher were rewardedwith median EV/Revenue multiples of 4.0x or higher.there was little market premium ascribed to on premisesoftware providers that exceeded the median EBITDA margin(19.7%).• However, those on-premise software providers with EBITDAmargins of 20% or lower were punished with a mediank t l ti f 1 9 EV/Rmarket valuation of 1.9x EV/Revenue.19 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  21. 21. THE SEG SOFTWARE INDEX: BY PRODUCT CATEGORY1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13Billing & Service Management 1.3x 1.2x 1.2x 1.7x 2.4x 8.1x 9.1x 8.7x 8.6x 8.7x 16.6% 13.6% 9.5% 10.4% 10.4% 20.2% 18.5% 18.8% 19.9% 21.1%Business Intelligence 3.8x 2.7x 2.3x 2.8x 3.0x 35.5x 33.8x 32.8x 19.7x 16.1x 23.7% 16.9% 14.6% 10.9% 10.8% 10.7% 10.9% 10.5% 9.4% 10.8%Development Platforms 2.7x 1.9x 2.1x 2.5x 2.5x 9.4x 8.4x 8.2x 9.4x 9.1x 7.2% 5.3% 3.5% 1.6% 3.0% 24.7% 22.3% 21.8% 23.7% 21.8%E i i & PLM 2 6 2 3 2 6 2 5 2 7 14 2 11 5 12 1 11 8 13 4 13 5% 13 5% 13 2% 14 0% 13 1% 18 5% 19 9% 20 7% 20 6% 20 7%SEG Software IndexCategoryEV/Revenue EV/EBITDA TTM Revenue Growth EBITDA MarginEngineering & PLM 2.6x 2.3x 2.6x 2.5x 2.7x 14.2x 11.5x 12.1x 11.8x 13.4x 13.5% 13.5% 13.2% 14.0% 13.1% 18.5% 19.9% 20.7% 20.6% 20.7%Enterprise Resource Planning 2.5x 2.0x 2.1x 2.2x 2.4x 10.3x 8.9x 9.1x 9.1x 10.2x 10.0% 9.4% 4.7% 3.4% 2.6% 23.2% 23.3% 23.3% 23.1% 22.8%Financial & Accounting 2.8x 2.7x 2.9x 2.9x 3.1x 9.9x 9.4x 9.7x 9.7x 10.5x 6.5% 6.3% 13.6% 10.7% 8.8% 29.1% 28.3% 29.0% 28.8% 27.5%Gaming 1.3x 1.0x 1.0x 1.0x 1.1x 7.1x 7.6x 9.1x 8.0x 7.1x 5.6% 2.6% 2.2% 0.1% 4.4% 16.4% 16.3% 15.5% 15.5% 15.5%Healthcare 3.2x 2.7x 2.2x 2.1x 2.1x 15.1x 13.0x 12.8x 11.3x 14.8x 24.8% 30.1% 22.5% 17.7% 10.1% 20.4% 19.6% 17.8% 16.8% 12.9%IT Conglomerates 3.1x 2.9x 2.8x 2.5x 2.5x 7.7x 7.3x 8.2x 7.8x 8.8x 7.7% 5.3% 1.5% 1.4% 0.5% 37.4% 36.9% 36.1% 34.6% 33.8%Mobile Solutions/Content 4 7x 3 6x 3 3x 2 4x 2 3x 31 5x 16 1x 14 4x 11 9x 20 6x 62 7% 47 1% 34 4% 30 7% 35 2% 12 8% 10 8% 11 9% 5 9% 4 5%Mobile Solutions/Content 4.7x 3.6x 3.3x 2.4x 2.3x 31.5x 16.1x 14.4x 11.9x 20.6x 62.7% 47.1% 34.4% 30.7% 35.2% 12.8% 10.8% 11.9% 5.9% 4.5%Netw orking & Netw orkPerformance Management3.1x 2.4x 2.5x 2.5x 2.7x 16.4x 14.9x 14.0x 14.0x 15.1x 20.7% 19.4% 17.3% 15.5% 12.9% 18.0% 18.0% 16.8% 16.2% 16.4%Security 3.2x 2.9x 3.2x 2.7x 3.3x 13.0x 10.2x 10.5x 11.2x 11.5x 26.3% 19.4% 20.1% 23.1% 23.4% 18.2% 18.0% 19.2% 17.8% 13.9%Storage, Data Management &Integration2.6x 2.5x 2.5x 2.3x 2.4x 9.2x 9.3x 9.2x 8.4x 9.2x 9.4% 7.7% 6.0% 5.4% 4.2% 22.1% 22.5% 22.7% 22.4% 22.0%Supply Chain Management &Logistics2.6x 2.5x 2.5x 2.9x 3.3x 12.1x 10.7x 10.9x 12.7x 14.5x 14.9% 18.4% 15.9% 11.2% 11.3% 17.1% 17.5% 17.2% 16.6% 16.0%og s csSystems Management 5.9x 5.9x 5.5x 4.5x 4.8x 22.2x 23.0x 22.3x 18.9x 20.5x 17.7% 18.1% 18.1% 16.5% 17.2% 26.4% 26.2% 25.8% 25.4% 25.2%Vertical - Finance 3.4x 3.3x 3.2x 3.0x 3.4x 10.7x 10.3x 10.6x 9.4x 10.7x 10.3% 6.8% 6.3% 7.1% 6.7% 26.3% 26.4% 26.3% 26.4% 26.5%Vertical - Other 3.2x 3.0x 2.9x 2.9x 3.0x 18.5x 16.5x 21.0x 20.3x 22.0x 20.7% 26.5% 28.0% 19.8% 21.3% 15.7% 15.7% 14.7% 14.4% 14.1%Median 2.7x 2.7x 2.6x 2.5x 2.8x 12.5x 10.6x 11.1x 11.7x 12.8x 14.2% 14.5% 13.3% 12.1% 11.1% 19.4% 19.4% 19.8% 19.7% 19.7%• The SEG Software Index is segmented into 17 product categories• See the appendix for the complete list of companies within each product category20 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  22. 22. THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY:FINANCIAL PERFORMANCE1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth15%20%25%30%35%40%(20%)0% 20% 40% 60% 0%5%10%15%ervice…gencepment…&PLMerprise…ncial&…amingthcareeratesMobile…king&…ecuritye,Data…Chain…ystems…nanceOther(100%)(80%)(60%)(40%)(20%)rvice…encement…PLMprise…ial&…mingcareratesobile…ng&…curityData…Chain…tems…anceOtherBilling&SBusinessIntelliDeveloEngineering&EnteFinanGHealtITConglomMNetworSeStorageSupplySyVertical-FiVertical-Billing&SerBusinessIntelligeDevelopmEngineering&PEnterpFinancGamHealthITConglomerMoNetworkinSecStorage,DSupplyCSystVertical-FinaVertical-O1Q13 YoY Change EBITDA Margin1Q13 TTM EBITDA MarginB25% 30% 35% 40% (20%)0% 20% 0% 5% 10% 15% 20% ce…ceent…Mse…&…ngreesile…&…tyata…ain…ms…ceer(100%)(80%)(60%)(40%)ce…ceent…Mse…&…ngreesile…&…tyata…ain…ms…ceerBilling&ServicsinessIntelligencDevelopmeEngineering&PLEnterprisFinancialGaminHealthcarITConglomerateMobNetworkingSecuriStorage,DaSupplyChaSystemVertical-FinancVertical-OtheBilling&ServicsinessIntelligencDevelopmeEngineering&PLEnterprisFinancialGaminHealthcarITConglomerateMobiNetworkingSecuriStorage,DaSupplyChaSystemVertical-FinancVertical-Othe21 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCBuEBusE
  23. 23. THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY:MARKET VALUATIONS1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV/Revenue Multiples5.0x6.0x60%80%100%2.0x3.0x4.0x(20%)0%20%40%60%0.0x1.0xgementligenceatformsg&PLMlanningountingGamingalthcaremeratesContentNetwork…Securityement&…ement&…gementFinance-Other(60%)(40%)(20%)gementligenceatformsg&PLMlanningountingGamingalthcaremeratesContentNetwork…Securityement&…ement&…gementFinance-Otherg&ServiceManagBusinessIntelDevelopmentPlaEngineeringrpriseResourcePlFinancial&AccoGHeaITConglomMobileSolutions/CNetworking&NSage,DataManageplyChainManageSystemsManagVertical-FVerticalng&ServiceManagBusinessIntelDevelopmentPlaEngineeringrpriseResourcePFinancial&AccoGHeaITConglomMobileSolutions/CNetworking&NSage,DataManagepplyChainManageSystemsManagVertical-FVertical• In 1Q13, seven product categories achieved median EV/Revenue multiples above the SEG Software Index median (2.8x), includingBusiness Intelligence (3.0x), Financial & Accounting (3.1x), Security (3.3x), Supply Chain Mgmt (3.3x), Systems Mgmt (4.8x), Vertical –Finance (3.4x), and Vertical – Other (3.0x).BillinEnteStoraSupBillinEnteStoraSup• Five of the seven leading categories reported double digit revenue growth and EBITDA margins.• The Systems Management product category, benefitting from the rapid shift to cloud computing and the market requirement for cloudinfrastructure, achieved the highest median EV/Revenue multiple (4.8x) in 1Q13, driven by strong TTM revenue growth (17.2%) andEBITDA margins (25.2%).22 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC• The Billing & Service Mgmt category ‘s median EV/Revenue spiked 82%, closing 1Q13 at 2.4x, despite declining revenue growth.
  24. 24. PUBLIC SaaS COMPANY FINANCIAL ANDPUBLIC SaaS COMPANY FINANCIAL ANDVALUATION PERFORMANCE:THE SEG SaaS INDEX2323 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  25. 25. SEG- SaaS: Median MetricsTHE SEG SaaS INDEX• The SEG SaaS Index tracks publiccompanies that primarily offer hosted, on-demand software under a subscriptionMeasure 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 5.2x 5.4x 5.5x 4.8x 5.3xEV/EBITDA 33.6x 30.1x 42.4x 43.1x 35.4xEV/Earnings 32.3x 37.5x 40.9x 40.2x 63.8xGross Profit Margin 70.0% 70.0% 69.9% 70.9% 69.5%and/or transaction based pricing model• The SEG SaaS Index is currentlycomprised of 32 public pure-play SaaSi *EBITDA Margin 9.0% 9.0% 8.3% 8.5% 7.8%Net Income Margin -0.5% -0.7% -0.5% 0.6% -0.9%TTM Revenue Growth 28.4% 30.3% 27.2% 24.0% 25.6%TTM Total Revenue ($M) $128.1 $139.5 $146.1 $154.2 $161.6TTM EBITDA Growth 27.2% 24.9% 23.2% 10.4% 7.9%TTM Total EBITDA ($M) $8.3 $9.5 $8.7 $8.3 $10.3companies*TTM Total EBITDA ($M) $8.3 $9.5 $8.7 $8.3 $10.3Cash & Eq ($M) $59.6 $78.0 $72.1 $86.1 $100.1Current Ratio 1.5 1.8 1.5 1.7 1.9Debt / Equity Ratio 8.6% 6.5% 6.2% 4.6% 4.2%24 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC* See appendix for a complete list of companies in The SEG SaaS Index
  26. 26. THE SEG SaaS INDEX DETAILSSEG SaaS IndexCompany1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13Athenahealth, Inc 6.8x 7.2x 8.2x 6.1x 7.2x 45.3x 50.0x 62.9x 48.9x 59.9x 32.0% 34.4% 34.2% 32.4% 30.3% 15.0% 14.5% 13.1% 12.5% 12.1%Bazaarvoice, Inc 11.0x 9.4x 7.2x 4.3x 2.7x - - - - - - 64.6% 62.6% 59.3% 57.9% -20.7% -19.4% -17.8% -17.9% -18.2%Callidus Softw are Inc. 2.8x 2.4x 2.0x 2.0x 2.1x - - - - - 18.2% 15.4% 15.0% 14.9% 13.3% -10.6% -10.3% -13.6% -14.8% -17.1%Concur 7.8x 8.0x 8.7x 7.8x 7.9x 68.6x 59.2x 69.2x 67.5x 81.7x 21.0% 24.0% 25.7% 25.8% 25.1% 11.4% 13.6% 12.6% 11.5% 9.7%Constant Contact 3.4x 2.3x 2.0x 1.3x 1.4x 33.6x 21.7x 19.8x 14.3x 17.9x 23.1% 21.4% 20.0% 19.1% 17.6% 10.2% 10.7% 10.3% 9.2% 7.8%EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA MarginSEG SaaS IndexConstant Contact 3.4x 2.3x 2.0x 1.3x 1.4x 33.6x 21.7x 19.8x 14.3x 17.9x 23.1% 21.4% 20.0% 19.1% 17.6% 10.2% 10.7% 10.3% 9.2% 7.8%Cornerstone OnDemand 11.3x 11.7x 12.9x 13.1x 13.4x - - - - - 67.0% 63.2% 72.2% 68.1% 61.5% -24.0% -25.5% -21.5% -24.1% -23.4%DealerTrack 3.2x 3.1x 2.9x 2.9x 3.3x 21.0x 20.1x 19.5x 20.3x 23.9x 44.9% 39.2% 28.7% 16.8% 10.1% 15.3% 15.4% 15.1% 14.2% 13.8%Demandw are, Inc. 14.6x 12.5x 9.8x 10.0x 8.9x 386.9x 553.5x - - - 54.1% 48.7% 45.0% 42.3% 40.5% 3.8% 2.3% -3.5% -5.9% -4.8%E2open, Inc - - 4.6x 4.5x 5.9x - - 92.6x 76.6x 272.9x 7.5% - - 22.2% 25.6% 2.1% 1.6% 5.0% 5.9% 2.1%Ebix Inc. 5.2x 4.1x 5.2x 3.7x 3.4x 12.0x 9.3x 12.2x 8.9x 7.9x 27.8% 22.8% 18.2% 18.4% 18.0% 43.4% 43.5% 42.9% 41.2% 42.4%Ellie Mae 2.2x 4.6x 7.8x 6.0x 5.0x 24.4x 29.8x 37.9x 24.6x 19.5x 28.4% 46.4% 67.0% 83.5% 83.5% 9.0% 15.4% 20.6% 24.4% 25.5%ExactTarget, Inc. 7.9x 6.0x 5.0x 4.4x 4.7x - - - 158.4x 339.9x 54.5% - - 43.1% 40.9% -3.3% -2.1% -0.1% 2.8% 1.4%Fleetmatics - - - 7.5x 6.9x - - - 44.6x 37.0x 42.7% - - - 38.1% 17.9% 17.4% 17.0% 16.8% 18.6%IntraLinks Holdings 1.7x 1.3x 1.4x 1.6x 1.6x 12.5x 13.8x 34.2x 467.2x 51.1x 15.5% 7.3% 2.9% 0.1% 1.8% 13.9% 9.0% 4.1% 0.4% 3.2%Jive Softw are, Inc 13.3x 13.0x 8.7x 6.9x 7.6x - - - - - 67.0% 64.2% 56.8% 49.3% 47.1% -47.8% -44.7% -39.3% -34.9% -32.2%LivePerson 5.3x 5.8x 6.0x 4.3x 4.3x 25.7x 30.1x 37.2x 30.3x 35.4x 21.1% 21.3% 21.4% 19.7% 18.3% 20.5% 19.2% 16.2% 14.1% 12.1%Marin Softw are - - - - 8.2x - - - - - 90.1% 90.1% 90.1% - 64.9% -42.4% -42.4% -42.4% -37.2% -38.0%Medidata Solutions 2.3x 3.0x 4.0x 4.4x 5.3x 11.4x 14.8x 22.9x 26.3x 31.8x 10.8% 14.5% 10.0% 12.1% 18.4% 20.0% 20.5% 17.7% 16.6% 16.6%Netsuite 12.8x 12.5x 14.2x 14.6x 15.4x - - - - - 22.4% 24.6% 26.3% 28.4% 30.7% -7.4% -6.8% -5.6% -5.2% -5.2%O T bl I 7 2 5 9 5 9 6 1 7 1 24 0 19 8 20 7 20 3 25 0 40 9% 30 3% 22 0% 17 1% 15 9% 30 2% 29 8% 28 5% 29 8% 28 5%OpenTable, Inc. 7.2x 5.9x 5.9x 6.1x 7.1x 24.0x 19.8x 20.7x 20.3x 25.0x 40.9% 30.3% 22.0% 17.1% 15.9% 30.2% 29.8% 28.5% 29.8% 28.5%Qualys, Inc. - - 4.8x 4.8x 3.1x - - 57.6x 50.5x 27.7x 16.5% - - - 20.0% 10.9% 9.7% 8.3% 9.5% 11.3%RealPage 6.9x 4.9x 6.1x 5.1x 5.0x 58.3x 39.8x 46.9x 36.0x 30.6x 37.0% 34.4% 32.0% 27.7% 24.9% 11.8% 12.2% 13.1% 14.1% 16.4%Responsys 3.4x 3.4x 2.7x 1.4x 1.7x 21.6x 20.3x 20.3x 11.4x 14.0x 43.4% 36.3% 27.2% 21.1% 20.7% 15.7% 16.6% 13.1% 12.1% 11.8%Salesforce.com 7.7x 8.2x 7.4x 7.4x 8.2x 165.1x 189.2x 167.9x 235.9x 298.6x 36.8% 37.7% 36.5% 36.1% 34.6% 4.7% 4.3% 4.4% 3.1% 2.8%SciQuest 5.0x 5.0x 5.4x 4.7x 5.5x 37.1x 41.4x 47.1x 50.7x 96.2x 25.8% 23.3% 22.0% 21.4% 24.4% 13.5% 12.1% 11.6% 9.4% 5.7%Service-now .com - 17.4x 18.4x 16.3x 14.9x - - - - - - - - - 90.3% 4.2% -6.7% -10.4% -12.7% -8.9%SPS Commerce 4.7x 4.9x 5.6x 6.6x 6.4x 68.5x 68.5x 67.2x 78.0x 73.9x 30.0% 31.6% 31.5% 30.4% 33.0% 6.9% 7.1% 8.4% 8.5% 8.7%SPS Commerce 4.7x 4.9x 5.6x 6.6x 6.4x 68.5x 68.5x 67.2x 78.0x 73.9x 30.0% 31.6% 31.5% 30.4% 33.0% 6.9% 7.1% 8.4% 8.5% 8.7%Tangoe 5.2x 6.3x 5.5x 3.2x 3.3x 61.7x 77.9x 70.3x 41.7x 38.9x 53.3% 56.0% 50.8% 48.1% 47.2% 8.4% 8.1% 7.8% 7.6% 8.5%The Ultimate Softw are Group, Inc. 6.5x 7.0x 8.3x 8.0x 7.9x 65.7x 71.1x 80.0x 69.4x 63.7x 18.2% 19.6% 21.0% 21.8% 23.4% 9.9% 9.9% 10.4% 11.6% 12.5%Vocus 2.6x 3.0x 3.3x 2.6x 2.1x 132.5x 284.2x 407.4x 233.1x - 18.7% 21.0% 29.9% 39.7% 48.7% 2.0% 1.1% 0.8% 1.1% -0.2%Workday, Inc. - - - 33.2x 29.9x - - - - - 53.8% - - - 103.6% -51.4% -43.4% -38.1% -35.7% -32.5%Zix Corporation 4.6x 3.9x 3.5x 3.6x 4.2x 14.6x 12.5x 11.3x 12.7x 15.3x 15.4% 12.4% 11.1% 12.0% 13.7% 31.3% 31.2% 30.7% 28.1% 27.6%Median: 5.2x 5.4x 5.5x 4.8x 5.3x 33.6x 30.1x 42.4x 43.1x 35.4x 28.4% 30.3% 27.2% 24.0% 25.6% 9.0% 9.0% 8.3% 8.5% 7.8%25 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  27. 27. THE SEG SaaS INDEX: FINANCIAL PERFORMANCE35%TTM Revenue Growth Rate DistributionRevenue Performance35% achieved TTM35.0%$180TTM Total  Revenue ($M) TTM Revenue Growth29%19%16%19%20%25%30%ompanies35% achieved TTMrevenue growth of40% or more20.0%25.0%30.0%$80$100$120$140$160enue Growthal RevenueOnly 3% ofgenerated TTMrevenue growth of10% or less0%3%13%0%5%10%15%% of Co0 0%5.0%10.0%15.0%$0$20$40$60$80TTM ReveTTM Tota0%<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%<= 40%> 40%<= 50%> 50%TTM Revenue Growth• After declining for three consecutive quarters, the median TTMrevenue growth rate for The SEG SaaS Index was 25.6% in0.0%$01Q12 2Q12 3Q12 4Q12 1Q13g1Q13.• Public SaaS companies continued to grow and mature,pushing the median TTM revenue of the SEG SaaS Index to$161.7M, up sharply from 1Q12’s $128.1M.• Accelerating demand for SaaS solutions has bolstered theTTM revenue growth rates of public SaaS providers, but manyare reaching a size that makes it difficult to recapture 2007’smedian 42.5% growth rate in a slow growing economy.• We expect median TTM revenue growth will remain at current26 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCWe expect median TTM revenue growth will remain at currentlevels for the remainder of 2013.
  28. 28. Public SaaS Company Financial PerformanceTHE SEG SaaS INDEX: FINANCIAL PERFORMANCETTM EBITDA Margin DistributionEBITDA Margin Performance87% with EBITDA margins of 20% or lower30%10%EBITDA Margin TTM EBITDA  Growth32%35%15%20%25%6%8%TDA GrowthA Margin29%26%20%25%30%ompanies0%5%10%0%2%4%TTM EBITEBITDA10%3%0%5%10%15%% of Co• After peaking in 2010, the median EBITDA margins of publicSaaS companies have declined each quarter.0%0%1Q12 2Q12 3Q12 4Q12 1Q130%<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%TTM EBITDA  MarginSaaS companies have declined each quarter.• The trend continued in 1Q13, as EBITDA margins fell to 7.8%from 9.0% in 1Q12.• The decline in EBITDA margins has not been accompaniedby a concomitant increase in TTM revenue rates, suggestingy gg gpublic SaaS providers are working harder to make a sale.27 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  29. 29. Public SaaS Company Market ValuationsTHE SEG SaaS INDEX: FINANCIAL PERFORMANCEMedian Margin PerformanceMedian Operating Ratios45%S&M (% of Revenue) R&D (% of Revenue) G&A (% of Revenue)80%Gross Profit Margin EBITDA Margin Net Income Margin25%30%35%40%Revenue40%50%60%70%Margin0%5%10%15%20%% of R0%10%20%30%% M• Increased spending on sales and marketing by public SaaScompanies accounts for much of the decline in median• Median gross profit margins for public SaaS companies in1Q13 were 69.5%, and have remained steady over the past0%1Q12 2Q12 3Q12 4Q12 1Q130%1Q12 2Q12 3Q12 4Q12 1Q13pEBITDA margin.• In 1Q13, 39.0% of total revenue was spent on sales &marketing, up from 36.2% in 1Q12.• R&D spending as a percent of revenue increased to 17.4% in, y pfive quarters.• Stable gross profit margins demonstrate the ability of publicSaaS companies to grow without disproportionally increasinginfrastructure and application delivery costs.1Q13, compared to 15.1% of revenue invested in R&D byon-premise software companies.• It is unclear whether the increased spending on productenhancements and sales by public SaaS companies willaccelerate revenue growth in the absence of improved GDP• With growth as their primary objective, public SaaScompanies are running at break even, with net income in1Q13 of 0.9%.28 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCaccelerate revenue growth in the absence of improved GDPgrowth and increased IT capital spending.
  30. 30. Public SaaS Company Financial Performance by Product CategoryTHE SEG SaaS INDEX: MARKET VALUATIONSEV/Revenue Multiple DistributionEV/Revenue and EV/EBITDA Multiples42 4 43 1x50.0xEV/Revenue EV/EBITDA13% 13% 13% 13%14%33.6x30.1x42.4x 43.1x35.4x25.0x30.0x35.0x40.0x45.0x10% 10% 10%7%10%8%10%12%ompanies5.2x 5.4x 5.5x 4.8x 5.3x0 0x5.0x10.0x15.0x20.0x0%0%2%4%6%% of Co• Median EV/Revenue multiples remained strong for publicSaaS providers, closing 1Q13 at 5.3x.• The even distribution of EV/Revenue multiples across thepublic SaaS company universe is striking and shows that it0.0x1Q12 2Q12 3Q12 4Q12 1Q130%<= 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> 9.0xEV/Revenuep , g Q• Public SaaS providers in 1Q13 continued to trade at asignificant premium relative to their on-premise peers (5.3xvs. 2.8x).• Public SaaS EV/Revenue multiples have exceeded 5x in fourp p y gtakes much more than carrying the SaaS moniker to achievea premium EV/Revenue multiple.• Typically we would expect to see a cluster of companiespossessing multiples around the median (5.3x), however,there are as many companies in the 5 0x 6 0x EV/Revenueof the past five quarters, the best streak since 2007.there are as many companies in the 5.0x – 6.0x EV/Revenuerange as the 9.0x range .• What distinguishes companies with premium EV/Revenuemultiples versus those that do not?29 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  31. 31. Public SaaS Company Market Valuations by Product CategoryTHE SEG SaaS INDEX: MARKET VALUATIONSEV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates10.8x12.0x 8.5x9.0x5.7x7.5x4 7x6.0x8.0x10.0xEV/Revenue5.5x4.6x5.0x5.0x6.0x7.0x8.0xEV/Revenue0.0x1.6x3.4x4.7x0 0x2.0x4.0xMedian E3.4x0 0x1.0x2.0x3.0x4.0xMedian E• There is a clear and direct correlation between TTM revenuegrowth and median EV/Revenue multiples• There is an inverse correlation between EBITDA marginsand median EV/Revenue multiples0.0x<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%<= 40%> 40%<= 50%> 50%TTM Revenue Growth0.0x<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%TTM EBITDA  Margingrowth and median EV/Revenue multiples.• Public SaaS companies growing TTM revenue in excess of50% achieved a median EV/Revenue multiple of 10.8x.• The premium market valuations awarded rapidly growingpublic SaaS companies accounts, in large part, for theirand median EV/Revenue multiples.• In the current universe, SaaS profitability is penalized, asinvestors fear profitability is at the expense of growth, whichthey deem all important.• Public SaaS companies with no profitability achieved apublic SaaS companies accounts, in large part, for theirincreased spending on sales & marketing.p p yremarkable 8.5x median EV/Revenue multiple.30 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  32. 32. THE SEG SaaS INDEX BY PRODUCT CATEGORY1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13CRM & Marketing 6.5x 5.9x 5.5x 4.3x 4.3x 3.0x 4.1x 4.5x 2.8x 2.3x 36.8% 36.3% 29.9% 36.1% 37.7% 3.3% 2.7% 2.6% 2.9% 2.1%ERP & Supply Chain 5.0x 5.0x 5.5x 6.6x 6.4x 4.4x 5.0x 5.3x 5.0x 5.6x 25.8% 24.6% 26.3% 25.3% 30.7% 6.9% 7.1% 8.4% 8.5% 5.7%Vertically Focused 4.2x 4.3x 5.7x 4.7x 5.0x 3.7x 4.1x 4.6x 3.9x 4.2x 30.2% 34.4% 30.3% 23.0% 21.6% 15.2% 15.4% 16.4% 15.4% 16.5%SEG SaaS IndexCategoryEV/Revenue Forward EV/Revenue TTM Revenue Growth EBITDA MarginWorkforce Management 6.5x 7.0x 8.3x 10.5x 10.7x 5.7x 6.5x 7.3x 7.6x 8.0x 36.0% 19.6% 21.0% 21.8% 42.5% -17.3% -17.9% -17.6% -19.4% -20.2%Median: 5.2x 5.4x 5.5x 4.8x 5.3x 4.4x 4.8x 4.9x 4.3x 4.7x 29.2% 30.9% 28.0% 25.8% 27.9% 9.4% 9.4% 8.4% 8.8% 8.2%With 32 companies, The SEG SaaS Index now has sufficient critical mass for us to track trendsacross four distinct SaaS product categories Select companies within each SaaS ProductCRM & M k ti ERP & S l Ch i V ti ll F d W kf M tacross four distinct SaaS product categories. Select companies within each SaaS Productcategory are included below. See the appendix for the complete list of companies within eachproduct category.CRM & M k ti ERP & S l Ch i V ti ll F d W kf M tCRM & Marketing ERP & Supply Chain Vertically Focused Workforce ManagementCRM & Marketing ERP & Supply Chain Vertically Focused Workforce Management31 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  33. 33. THE SEG SaaS INDEX BY PRODUCT CATEGORY:FINANCIAL PERFORMANCE1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth25%30%35%40%45%0% 10% 20% 30% 0%5%10%15%20%25%(40%)(30%)(20%)(10%)0%CRM&MarketingERP&SupplyChainVerticallyFocusedWorkforceManagement(40%)CRM&MarketingERP&SupplyChainVerticallyFocusedWorkforceManagement1Q13 YoY Change EBITDA Margin1Q13 TTM EBITDA Margin10% 15% 20% 0% 10% 20% (15%)(10%)(5%)0% 5% (40%)(30%)(20%)(10%)ginedent(25%)(20%)( )CRM&MarketingERP&plyChainVerticallyFocusedorkforcenagementCRM&MarketinRP&SupplyChaiVerticallyFocuseWorkforceManagemen32 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCMESuppVWoManERV
  34. 34. THE SEG SaaS INDEX BY PRODUCT CATEGORY:MARKET VALUATIONS1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV/Revenue Multiples10.0x12.0x60%80%6.0x8.0x0%20%40%0.0x2.0x4.0xgnydnt(40%)(20%)0%gnlydnt• Workforce Management category achieved a 10.3x median EV/Revenue multiple, 66% higher than the next closest product category,CRM&MarketingERP&SupplyChaiVerticallFocusedWorkforceManagemenCRM&MarketinERP&SupplyChaiVerticallFocusedWorkforceManagemeng g y g g yERP & Supply Chain.• The stellar performance of SaaS providers comprising the Workforce Management category can be attributed to their breakneckTTM revenue growth, with no profits.• Workforce management SaaS providers continued to benefit from a product refresh cycle that is replacing legacy, on-premisesolutions with hosted SaaS solutions.• ERP & Supply chain, one of the last product categories to adopt SaaS solutions due to concerns over security and integration,achieved the second highest median EV/Revenue multiple (6.2x).• Although ERP & Supply Chain TTM revenue growth was only slightly above the SaaS median, companies within this productt i d i k t l ti b f th i k t t ti l f h t d ERP & S l Ch i l ti33 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCcategory received premium market valuations because of the massive market potential of hosted ERP & Supply Chain solutions.
  35. 35. PUBLIC INTERNET COMPANY FINANCIAL ANDPUBLIC INTERNET COMPANY FINANCIAL ANDVALUATION PERFORMANCE:THE SEG INTERNET INDEX3434 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  36. 36. Public Internet Company Market Valuations by Product CategoryTHE SEG INTERNET INDEXSEG- Internet: Median Metrics• The SEG Internet Index tracks publiccompanies that primarily offer B2Csolutions over the Internet using a wideMeasure 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 2.2x 2.1x 1.9x 2.0x 2.0xEV/EBITDA 13.4x 12.6x 13.3x 12.8x 13.6xEV/Earnings 26.2x 23.3x 27.9x 23.6x 22.5xGross Profit Margin 66.2% 67.5% 67.4% 65.5% 65.7%array of pricing models• The SEG Internet Index is currentlycomprised of 97 public Interneti *EBITDA Margin 13.6% 13.3% 13.0% 12.9% 13.0%Net Income Margin 4.3% 4.8% 4.3% 5.3% 3.9%TTM Revenue Growth 29.8% 27.6% 24.9% 22.2% 19.8%TTM Total Revenue ($M) $358.0 $378.9 $382.1 $387.3 $400.0TTM EBITDA Growth 26.7% 20.3% 20.9% 14.2% 15.9%TTM Total EBITDA ($M) $40.6 $42.9 $48.6 $46.3 $42.7companies*( )Cash & Eq ($M) $136.2 $130.7 $122.1 $130.4 $148.2Current Ratio 2.4 2.6 2.6 2.5 2.2Debt / Equity Ratio 15.5% 14.5% 13.5% 19.3% 19.3%35 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC* See appendix for a complete list of companies in The SEG Internet Index
  37. 37. Initial Public OfferingsTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCE23%25%TTM Revenue Growth Rate DistributionRevenue Performance35.0%$410TTM Total  Revenue ($M) TTM Revenue Growth21%12%18%16%10%15%20%ompanies20.0%25.0%30.0%$370$380$390$400nue Growthal Revenue10%0%5%10%% of Co0 0%5.0%10.0%15.0%$330$340$350$360TTM ReveTTM Tota0%<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%<= 40%> 40%TTM Revenue Growth• Over the past year, The median TTM revenue growth rate of publiccompanies comprising The SEG Internet Index declined 10%0.0%$3301Q12 2Q12 3Q12 4Q12 1Q13co pa es co p s g e S G te et de dec ed 0%(29.8% to 19.8%) in 1Q13.• While lower, the 19.8% median Internet growth rate is still healthy,especially considering the median TTM revenue of The SEGInternet Index is $400M, compared to only $162M for The SEGSaaS IndexSaaS Index.• The SEG Internet Index had an impressive number of starperformers, 23% of companies in the Index reported TTM revenuegrowth of 40% or higher.• Conversely 21% of companies in The SEG Internet Index posted36 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC• Conversely, 21% of companies in The SEG Internet Index postednegative TTM revenue growth, depressing the median as a whole.
  38. 38. Public SaaS Company Financial PerformanceTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCE30%TTM EBITDA Margin DistributionEBITDA Margin Performance30%16%EBITDA Margin TTM EBITDA  Growth21%23%24%14%15%20%25%ompanies15%20%25%8%10%12%14%TDA GrowthA Margin9% 9%0%5%10%% of Co0%5%10%0%2%4%6%TTM EBITEBITDA0%<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%<= 40%> 40%TTM EBITDA  Margin• Over the past five quarters, public Internet companiesmanaged to maintain respectable margins despite the0%0%1Q12 2Q12 3Q12 4Q12 1Q13g p g pdeclining revenue growth rates.• The median ~13% EBITDA margins were consistent with2006 and 2007 performance, but were dramatically lowerthan the 18.1% median EBITDA achieved in 1Q11.• The EBITDA margin decline was partly due to a largernumber of Internet IPOs featuring Internet providers withstellar revenue growth, but little, if any, profitability.• 45% of all public Internet companies posted EBITDAmargins of 10% or lower37 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCmargins of 10% or lower.
  39. 39. Public SaaS Company Market ValuationsTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCEMedian Margin PerformanceMedian Operating Ratios25%S&M (% of Revenue) R&D (% of Revenue) G&A (% of Revenue)80%Gross Profit Margin EBITDA Margin Net Income Margin15%20%Revenue40%50%60%70%Margin0%5%10%% of R0%10%20%30%% M• In 1Q13, companies comprising the SEG Internet Index spent 23.7% of total revenue on sales and marketing (S&M), 15.2% onresearch development (R&D), and 10.6% on general and administrative.0%1Q12 2Q12 3Q12 4Q12 1Q130%1Q12 2Q12 3Q12 4Q12 1Q13p ( ), 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 TTMEBITDA margin of 13% in 1Q13.38 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  40. 40. THE SEG INTERNET INDEX: MARKET VALUATIONSEV/Revenue Multiple DistributionMedian EV/Revenue and EV/EBITDA Multiples13 616.0xEV/Revenue EV/EBITDA27%30%13.4x12.6x13.3x12.8x13.6x8.0x10.0x12.0x14.0x 24%15%20%25%ompanies2.2x 2.1x 1.9x 2.0x 2.0x0 0x2.0x4.0x6.0x 9% 9% 9%4%2%1%7%8%0%5%10%% of Co• In 1Q13, the median EV/Revenue multiple of The SEG Internet Index was 2.0x, a modest decline from 1Q12’s 2.2x.• As the median EV/Revenue multiple distribution shows public Internet companies garner a strikingly wide range of market0.0x1Q12 2Q12 3Q12 4Q12 1Q130%<= 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>= 9.0xEV/Revenue• As the median EV/Revenue multiple distribution shows, public Internet companies garner a strikingly wide range of marketvaluations; 51% had EV/Revenue of 2.0x or less, while 15% boasted an EV/Revenue multiple of 8.0x or greater.• Those Internet companies with the highest EV/Revenue multiples were mostly new IPOs that were positioned to capitalize uponthe shift to online advertising, and several benefited also from having originated in high growth economies such as China andBrazil. Examples include: LinkedIn (16.8x), Facebook (11.3x), Qihoo (10.3x), Mercadolibre (9.8x), Zillow (9.8x), Youku (9.6x), Yelp(9.4x) and Trulia (8.9x).39 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  41. 41. THE SEG INTERNET INDEX: MARKET VALUATIONSEV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates8.0x9.0x 7.5x8.0x8.0x5.0x6.0x7.0x8.0xEV/Revenue4.4x4.0x5.0x6.0x7.0xEV/Revenue0.8x1.8x2.9x 3.0x2.1x0 0x1.0x2.0x3.0x4.0xMedian E1.7x1.0x2.0x2.9x0 0x1.0x2.0x3.0xMedian E• Public Internet company valuation performance isdramatically split between new, rapidly growing social and• Unlike The SEG SaaS Index where TTM EBITDA marginshave little bearing on the median EV/Revenue multiple0.0x<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%<= 40%> 40%TTM Revenue Growth0.0x<= 0% > 0%<= 10%> 10%<= 20%> 20%<= 30%> 30%<= 40%> 40%TTM EBITDA  Marginy p , p y g gad-tech providers and other, slower growing incumbentproviders, e.g. Facebook vs. Yahoo.• Public Internet companies with TTM revenue growth of 40%or higher were rewarded with median EV/Revenue multiplesmarkedly higher than their slower growing peershave little bearing on the median EV/Revenue multipleapplied to a company, public Internet company investors kepta keen eye on margins and rewarded strong performers withsignificantly higher market valuations.• With few exceptions, and in stark contrast to SaaSmarkedly higher than their slower growing peers.• The relative market valuations of public Internet companieswith TTM revenue growth greater than 0% and less than40%, was nominal (1.8x to 3.0x), especially in light of themajor differences among public SaaS companies across thispcompanies, many of the most profitable public Internetcompanies also reported stellar TTM revenue growth. Amongthem were ChangYou, Baidu, Yandex, Mail.ru, TripAdvisorand Tencent Holdings.40 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCrevenue distribution spread.
  42. 42. THE SEG INTERNET INDEX BY PRODUCT CATEGORYSEG Internet Index1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13Ad Tech & Lead Generation 2.7x 2.1x 1.7x 1.9x 1.8x 14.1x 11.4x 13.3x 12.0x 14.9x 34.4% 37.5% 35.3% 32.9% 25.2% 13.9% 14.0% 14.4% 14.1% 13.0%Commerce 0.8x 0.7x 0.7x 0.9x 0.9x 16.6x 20.8x 15.4x 15.2x 10.6x 18.8% 22.0% 17.1% 16.2% 14.9% 5.3% 5.1% 5.4% 5.5% 5.6%Content & Media 1.8x 1.6x 1.3x 1.4x 1.6x 10.4x 10.1x 10.8x 10.9x 15.4x 25.8% 15.5% 12.3% 10.5% 12.6% 13.9% 14.0% 14.1% 14.1% 14.8%Gaming 3 2x 3 4x 2 1x 2 0x 2 7x 4 2x 4 0x 3 4x 3 7x 5 8x 35 7% 33 1% 32 0% 25 1% 21 9% 43 9% 45 5% 43 9% 42 6% 36 3%CategoryEV/Revenue EV/EBITDA TTM Revenue Growth EBITDA MarginGaming 3.2x 3.4x 2.1x 2.0x 2.7x 4.2x 4.0x 3.4x 3.7x 5.8x 35.7% 33.1% 32.0% 25.1% 21.9% 43.9% 45.5% 43.9% 42.6% 36.3%Infrastructure 1.8x 1.5x 0.9x 0.9x 1.3x 13.6x 13.7x 11.4x 11.7x 11.9x 25.3% 18.8% 13.6% 13.0% 13.2% 11.9% 10.7% 8.3% 7.3% 7.9%Services 3.0x 2.2x 2.9x 2.7x 3.2x 18.1x 16.9x 16.4x 17.7x 15.3x 53.2% 55.1% 49.5% 42.0% 42.2% 6.6% 6.7% 7.5% 8.7% 8.5%Social 15.1x 13.0x 9.6x 8.6x 8.9x 36.8x 30.4x 29.3x 36.4x 29.9x 74.5% 64.0% 64.6% 50.9% 49.3% 12.2% 12.9% 12.6% 13.3% 16.1%Travel 4.7x 3.1x 2.5x 3.5x 3.6x 15.2x 15.5x 16.5x 16.0x 18.1x 31.5% 29.1% 24.0% 21.8% 19.8% 17.6% 18.1% 19.4% 19.1% 18.1%Median 2.2x 2.1x 1.9x 2.0x 2.0x 13.4x 12.6x 13.3x 12.8x 13.6x 29.8% 27.6% 24.9% 22.2% 19.8% 13.6% 13.3% 13.0% 12.9% 13.0%The SEG Internet Index is segmented into eight product categories. Select companies within eachInternet product category are included below. See the appendix for the complete list of companieswithin each product category.Ad Tech & Lead Gen Commerce Content & Media GamingAd Tech & Lead Gen Commerce Content & Media GamingInfrastructure Services Social Travel41 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  43. 43. THE SEG INTERNET INDEX BY PRODUCT CATEGORY:FINANCIAL PERFORMANCE1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth30%40%50%60%(30%)(20%)(10%)0% 0%10%20%30%onceiangreesialel(60%)(50%)(40%)(30%)onceiangreesialvelAdTech&LeadGeneratioCommercContent&MedGaminInfrastructuServiceSociTravAdTech&LeadGeneratioCommercContent&MedGaminInfrastructuServiceSocTrav1Q13 YoY Change EBITDA Margin1Q13 TTM EBITDA Margin2 %30% 35% 40% 10%20% 30% 40% 5% 10% 15% 20% 25% (30%)(20%)(10%)0% 10% 0% AdTech&adGenerationCommercentent&MediaGamingInfrastructureServicesSocialTravel(40%)AdTech&adGenerationCommercentent&MediaGamingInfrastructureServicesSocialTravel42 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCLeaCoLeaCo
  44. 44. THE SEG INTERNET INDEX BY PRODUCT CATEGORY:MARKET VALUATIONS1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV/Revenue Multiples8.0x9.0x10.0x10%20%4.0x5.0x6.0x7.0x(20%)(10%)0%0 0x1.0x2.0x3.0x4.0x(40%)(30%)(20%)0.0xAdTech&eadGenerationCommerceontent&MediaGamingInfrastructureServicesSocialTravel(50%)AdTech&adGenerationCommercentent&MediaGamingInfrastructureServicesSocialTravel• The Social product category closed Q1 with the highest median EV/Revenue multiple among the eight Internet product categories wetrack, the 10.3x median market valuation was 147% higher than the next closest product category, Travel (3.6x).• Social solutions Facebook, LinkedIn, Yelp, etc continued to expand their online footprints and investors rewarded them accordingly.S i l M k t l ti l fl t d i ifi t Y Y EBITDA i i t t b d t t d tLeCoALeaConSocial Market valuations also reflected significant YoY EBITDA margin improvement, as category members demonstrated a greaterability 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 growthof 14.9%, and a lackluster 5.6% EBITDA margin. Amazon, one of the most notable commerce companies, is aggressively trying todiversify its content offerings and expand its hardware offerings as a way of differentiating from competitors and driving more spend43 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCy g p g y g p g pthrough its platform.
  45. 45. SOFTWARE INDUSTRY M&A MARKET UPDATE4444 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  46. 46. SOFTWARE/SaaS M&A DEAL VOLUME AND SPENDINGTTM Average M&A Deal SizeU.S. Software Mergers & Acquisitions Activity431407421 426 430454 456432454435406$23.4$23 1$25450500$37$40$42 $41 $41 $42$36$39$36$40.0$45.0ons)383407 406362$17.3$17.9$12.7 $13.1$21.3$12.6$15.8$23.1$12.3$15.8 $15$20250300350400Value (BIllionmber of Deals$20$28$31$33$36 $36$20.0$25.0$30.0$35.0Deal Value (Millio$4.6$8.4$0$5$10050100150200ns)Num$0 0$5.0$10.0$15.0$TTM  Average • M&A deal volume declined markedly in 1Q13 likely a resultof heightened concern about the economic impact of the• The software M&A average deals size remained in the mid tohigh $30M range, after surging and peaking in 2011.$001Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13Deals Value$0.01Q102Q103Q104Q101Q112Q113Q114Q111Q122Q123Q124Q121Q13g pU.S. sequestration*.• Total M&A spending dropped sharply to $8.4 billion, mostlydue to scarcity of software mega deals.• The sole mega deal (> $500 million) in 1Q13 was Fiserv’shigh $30M range, after surging and peaking in 2011.• Software buyers have remained true to their word. Of thelarge software buyers who responded to our Annual BuyerSurvey over the last two years, 72% on average said theywould focus on deals ranging in size from $10M - $99M.acquisition of Open Solutions ($1 billion) .• Based upon our 2013 Software Company Buyers Surveyand more recent conversations with a wide array of buyers,we expect M&A transaction will surpass 400 in each of theremaining quarters in 201345 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCremaining quarters in 2013.* We expect the finally tally will be about 5% higher,since prior quarter M&A announcements and dataare often released well into the following quarter
  47. 47. SOFTWARE M&A EXIT MULTIPLESMedian Exit Multiples Median EV/Revenue Exit Multiple Distribution12.2x 12.1x11 211.8x12.712 014.0xEV/Revenue EV/EBITDA29.4%30.0%35.0%11.2x6 08.0x10.0x12.0x24.4%21.8%14.3%15.0%20.0%25.0%oftwareSellers1.9x 1.7x2.3x1.8x 1.6x0 0x2.0x4.0x6.0x10.1%0 0%5.0%10.0%15.0%%ofSo• Since reaching a median TTM exit multiple of 2.3x in 3Q12,the median exit multiple of on-premise software providers• On a TTM basis, 75.6% of all on-premise software targetswere acquired for 3.0x TTM revenue or less.0.0x1Q12 2Q12 3Q12 4Q12 1Q130.0%<=1.0x >1.0x<=2.0x>2.0x<=3.0x>3.0x<=4.0x>4.0xEV/Revenue Exit Multiplethe median exit multiple of on premise software providershas dropped for two sequential quarters, ending 1Q13 at1.6x.• The median on-premise software exit multiple for all publicand private transactions with a quantifiable EV/Revenuel ti h l d th di i it lti l fe e acqu ed o 3 0 e e ue o ess• The remaining 24.4% of targets came from sectors growingmuch faster than the broader on-premise software marketsuch as cloud and network infrastructure.• Select transactions include: Kofax acquisition of BI providervaluation has lagged the median on-premise exit multiple ofpublic on-premise software companies by ~30% for the pastseveral years, as many targets were acquired primarily fortheir customer bases and M&S revenue streams.altosoft ($13.5M, 4.0x rev.), JDS Uniphase acquisition ofwireless network optimization provider Arieso ($85M, 4.0xrev.) and Juniper Networks acquisition of networkoptimization provider Webscreen ($9.9M, 7.0x rev.).46 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  48. 48. SOFTWARE M&A: BY OWNERSHIP STRUCTURE AND SIZE  Public Sellers1.6x Median Multiple30%  Buyer Less Than$200 million1.4x MedianMultipleBuyer GreaterThan $200 million2.7x MedianMultipleby Sizeby Ownership StructurePrivate Sellers2.0x Median Multiple70%30% MultipleMultiple56%44%Private Buyers1.4x Median Multiple69%31%Seller GreaterThan $20million: 1.5xSeller GreaterThan $20million: 0.8xSeller GreaterThan $20million: 1.4xSeller GreaterThan $20million: 2.6xPublic Buyers2.1x Median Multiple69%Seller LessThan $20million: 2.4xSeller LessThan $20million: 2.0xSeller LessThan $20million: 1.5xSeller LessThan $20million: 3.3x• Simply put when analyzing software M&A by ownership structure and size deals with the highest multiples occur when a large• Simply put, when analyzing software M&A by ownership structure and size, deals with the highest multiples occur when a largebuyer (greater than $200 million in revenue) buys a small target (less than $20 million). On a median basis, such a combinationproduced a 3.3x EV/Revenue exit multiple in 1Q13.• The big buyer/small target multiple, which is more than twice the median on-premise software exit multiple, is often driven by abuyer that deems a target’s technology and products to be very well executed and highly scalable.• Select example transactions include: Juniper Networks 1Q13 acquisition of network optimization provider Webscreen ($9.9M,7.0x rev.) , KEYW Holding’s 3Q12 acquisition of SIEM provider Sensage ($85.5M, 7.1x rev.), Spirent Communications’ 2Q12acquisition of network performance management provider MU Dynamics ($40M, 4.5x rev.).47 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  49. 49. Horizontal & Vertical M&A Median EV/Revenue ExitSOFTWARE M&A: BY VERTICAL AND HORIZONTALMARKETSHorizontal & Vertical M&A Median EV/Revenue ExitMultiplesHorizontal & Vertical M&A Volume68.0% 65.0% 63.0% 58.0% 67.0%60.0%80.0%100.0%2 3x3.0x2 2x32.0% 35.0% 37.0% 42.0% 33.0%0.0%20.0%40.0%60.0%1Q12 2Q12 3Q12 4Q12 1Q131.3x1.9x 2.0x1.4x 1.3x2.3x1.6x2.2x1.8x1Q12 2Q12 3Q12 4Q12 1Q131Q12 2Q12 3Q12 4Q12 1Q13Horizontal Vertical1Q12 2Q12 3Q12 4Q12 1Q13Vertical Horizontal• As they have for most of the past five quarters horizontal software providers garnered the lion’s share of M&A transactions in• As they have for most of the past five quarters, horizontal software providers garnered the lion s share of M&A transactions in1Q13, as well as a higher median exit valuation than their vertical peers.• A good number of vertical markets are still recovering from the economic downturn; others are being adversely impacted bysequestration; and big buyer demand for vertical domain expertise was sated during a spate of vertical acquisitions during 2006-2010.• Select horizontal M&A transactions included: Advanced Computer Software Group’s acquisition of ERP provider ComputerSoftware Holdings ($164.2M, 1.8x rev.), Juniper Networks 1Q13 acquisition of network optimization provider Webscreen ($9.9M,7.0x rev.).• Select vertical M&A transactions included: Enghouse Systems acquisition of public sector software provider Locus ($14M, 0.8x) T i ’ i iti f bli t t t ti ft id Sk Hi h ($5 8M 0 5 )48 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCrev.), Tracsis’ acquisition of public sector transportation software provider Sky High ($5.8M, 0.5x rev.).
  50. 50. SOFTWARE M&A BY PRODUCT CATEGORYContent & Document MgmtData Mgmt & Integration1.5%Asset & Facilities MgmtBilling & Service Provisioning1.1%• The Mobile product category accounted for22.2% of all software M&A transactions inthe first quarter, making it the most active4.6%CRM, Marketing & Sales2.7%Dev. Tools & IT Asset Mgmt1.5%Engineering, PLM & CAD4.6%MiddlewareRetailTelecommunications0.8%Utility1.1%Other Verticals7.3%Accounting & Finance0.4%2.3% BI, Risk & Compliance2.3%among all product categories• Other active M&A categories in the firstquarter included: Healthcare (7.3%),Financial Services (6.5%), Multimedia,Graphics & Communications (5 0%)Middleware0.4%ERP0.4%Entertainment3.4%HR & Workforce Mgmt4.2%Legal0.8%Manufacturing0.8%Non‐Profit0.4%Real Estate0.4%0.4%Graphics & Communications (5.0%),Supply Chain Mgmt & Logistics (4.6%) andEngineering, PLM & CAD (4.6%).• The number of software product categoriesreporting significant transaction volumes in1Q13 i t t t t th ib f thMessaging, Conferencing & Communications1.9%Multimedia, Graphics & Communications5.0%Network Performance Financial ServicesHealthcare7.3%Insurance1.9%Verticals1Q13 is testament to the vibrancy of thecurrent software M&A market.Mgmt1.5%Security1.9%Systems Mgmt1.9%Supply Chain Mgmt & LogisticsAutomotive1.1%Construction0.8%Education1.9%6.5%4.6%Mobile22.2%49 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  51. 51. SOFTWARE M&A BY PRODUCT CATEGORY3.1xMedian EV/Revenue Exit Multiples by Software Product Category2.0x 2.0x 1.9x1.7x 1.6x 1.6x1.4x 1.4x0.8xSystemsManagementHealthcareMobileEDAnufacturing&ssetMgmtDataMgmt&IntegrationherVerticalsA&D,Telco,Retail,etc.)pplyChain&LogisticscialServicesSoftwarent,DocumentBusinesscessMgmtMManAsDOt(ARSupFinancSContenandProc• Among the 32 on-premise software product companies we track ten had both sufficient deal activity and deal data to ascertain a• Among the 32 on-premise software product companies we track, ten had both sufficient deal activity and deal data to ascertain aTTM revenue multiple in 1Q13.• Software company sellers focused on Systems Management garnered the highest median TTM revenue multiple (3.1x) amongthose ten product categories. Buyers in this product category are paying healthy multiples to targets that will enhance their cloudand mobile computing strategies.• Healthcare also posted a strong median EV/Revenue exit multiple in 1Q13. Although health care has traditionally been atechnology laggard, adoption of solutions that speed and smooth the transition from fee for service to fee for value care isramping sharply.• Content and Document management multiples continued to lag the broader market in 1Q13 with a median exit multiple of 0.8x.50 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  52. 52. SaaS M&A: DEAL VOLUME AND EXIT MULTIPLES4.1x94 94 25%100SaaS M&A Deals   SaaS as % of SoftwareMedian SaaS EV/Revenue Exit MultiplesSaaS M&A Volume3.9x4.0x3.9x4.0x39 3945 4868 655994 948615%20%5060708090als as a % of Total e M&A DealsS M&A Deals1Q12 2Q12 3Q12 4Q12 1Q1310303926390%5%10%010203040SaaS M&A DeaSoftware# of SaaS• There were 86 SaaS M&A transactions in 1Q13 We project a total of 344 SaaS deals in 2013 which would surpass 2012’s• There were 86 SaaS M&A transactions in 1Q13. We project a total of 344 SaaS deals in 2013, which would surpass 2012 srecord breaking total of 311.• After a steady rise from 2009 – 2012, the median TTM EV/Revenue exit multiple of SaaS transactions has held relatively steadyover the past five quarters, closing 1Q13 at 4.0x.• The median SaaS exit multiple premium was 150% on-premise greater than the median exit multiple reached in 1Q13 (4.0x vs.The median SaaS exit multiple premium was 150% on premise greater than the median exit multiple reached in 1Q13 (4.0x vs.1.6x), the greatest valuation disparity on record.51 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  53. 53. SaaS M&A BY PRODUCT CATEGORYContent & Document Mgmt4 7%Billing & Service ProvisioningBI, Risk & Compliance8.1%• CRM, Marketing & Sales was by far themost active SaaS product category,garnering 17.4% of all M&A transactionsin the first quarter.• Buyers are seeking out targets who can4.7%CRM, Marketing & Sales17.4%RetailVertical ‐ Other7.0%Provisioning2.3%• Buyers are seeking out targets who canbest position them to take advantage ofthe rapid growth in marketing spendexpected over the next five years.According to Gartner, by 2017 the CMOwill purchase more IT than the CIOData Mgmt & Integration2.3%EcommercePublic Sector2.3%Real Estate1.2%Retail4.7%will purchase more IT than the CIO.• Other product categories with relativelyhigh number of M&A transactionsinclude: HR & Workforce Management(8.1%), BI, Risk & Compliance (8.1%)3.5%Engineering, PLM & CAD1.2%HR & Workforce Mgmt8 1%Fi i l S iHealthcare3.5%Insurance3.5%Legal1.2%Non‐Profit3.5%Verticalsand Messaging, Conferencing andCommunications (5.8%).8.1%Messaging, Conferencing & Communications5.8%Multimedia, Graphics &Systems MgmtSupply Chain Mgmt & LogisticsConstruction1.2%Education4.7%Financial Services1.2%Graphics & Communications3.5%Security3.5%Mgmt3.5%& Logistics2.3%52 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  54. 54. 1Q13 SaaS M&A TRANSACTIONSDate Buyer SellerEnterpriseValueTTMRevenue EV/Rev03/28/13 HubSpot, Inc. Chime Inc. and PrepWork Inc. - - -03/26/13 The Lords Group of Companies eBuildingSupplies Ltd. - - -03/25/13 Quindell Portfolio Plc (AIM:QPP) iSaaS Technology Limited $8,890,000 - -03/21/13 EQT Partners AB its learning AS - - -03/21/13 EQT Partners AB it s learning AS03/21/13 j2 Global, Inc. (NasdaqGS:JCOM) Data Lock Limited $499,000 - -03/20/13 Yahoo! Inc. (NasdaqGS:YHOO) Jybe, Inc. - - -03/20/13 Rumblefish, Inc. Catalogik, Inc. - - -03/19/13 Echo Global Logistics, Inc. (NasdaqGS:ECHO) Open Mile, Inc. - - -03/19/13 PeopleMatter, Inc. PeopleClues, Inc. - - -03/19/13 Blackbaud Inc. (NasdaqGS:BLKB) MyCharity Limited - - -03/19/13 Blackbaud Inc. (NasdaqGS:BLKB) MyCharity Limited03/18/13 Ebix Health Benefit Softw are, Inc. - - -03/15/13 Noodle Education, Inc. Lore, Inc. - - -03/13/13 Oracle Corporation (NasdaqGS:ORCL) Nimbula, Inc. - - -03/12/13 Corporation Service Company, Inc. CSC Digital Brand Services $157,260,000 $57,000,000 2.8x03/11/13 Concur Technologies, Inc. (NasdaqGS:CNQR) conTgo limited - - -03/11/13 Tripw ire, Inc. nCircle Netw ork Security, Inc. - - -03/11/13 Tripw ire, Inc. nCircle Netw ork Security, Inc.03/08/13 Desire2Learn Incorporated Wiggio Inc. - - -03/05/13 Issuu, Inc. Magma Aps - - -03/05/13 ePrize, LLC Bulbstorm, Inc. - - -03/05/13 Perceptive Softw are, Inc. Tw istage, Inc. - - -03/04/13 BlueSky ETO e-Integrity, Inc. - - -03/04/13 Silverlake Axis Ltd. (SGX:5CP) Merimen Ventures Sdn. Bhd. $16,860,000 - -03/04/13 Silverlake Axis Ltd. (SGX:5CP) Merimen Ventures Sdn. Bhd. $16,860,00003/04/13 Addnode Group AB (publ) (OM:ANOD B) Abou AB - - -03/01/13 KV Asia Capital CBS Bizhub Sdn. Bhd. and PT. $38,770,000 - -03/01/13 ClearSlide, Inc. SlideRocket, Inc. - - -03/01/13 Perceptive Softw are, Inc. AccessVia, Inc. - - -02/27/13 Rackspace Hosting, Inc. (NYSE:RAX) ObjectRocket, Inc. - - -02/27/13 Open GI Limited Pow erplace Insurance Services - - -02/27/13 Open GI Limited Pow erplace Insurance Services02/26/13 Cymetrix Corporation CareClarity, Inc. - - -02/25/13 Genesys Telecommunications Laboratories, Inc. Angel.com Incorporated $110,000,000 $28,800,000 3.8x02/22/13 Paperless Receipts Limited ExpenseMagic Ltd. - - -53 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  55. 55. 1Q13 SaaS M&A TRANSACTIONS (CON’T)Date Buyer SellerEnterpriseValueTTMRevenue EV/Rev02/22/13 Access UK Limited Sazneo Limited - - -02/21/13 Master Lock Canada, Inc. N4 Systems Incorporated - - -02/20/13 CPA Global Limited First To File, Inc. - - -02/19/13 [x+1], Inc. UberTags LLC - - -02/19/13 [x 1], Inc. UberTags LLC02/17/13 ironSource Ltd AfterDow nload Ltd. $28,000,000 - -02/15/13 New Net Communication Technologies, LLC Interact Incorporated - - -02/14/13 DiliTrust SAS SQLi, Dataroom.com - - -02/14/13 LX Ventures Inc. (TSXV:LXV) Weeve Ventures Inc. - - -02/14/13 Capsilon Corporation Paperless Office Solutions Inc. - - -02/11/13 International Insurance Company of Hannover Limited London & European Title Insurance - - -02/11/13 International Insurance Company of Hannover Limited London & European Title Insurance02/07/13 PeopleBrow sr Inc. Sw aylo Inc. - - -02/07/13 Avanade, Inc. Opstera, Inc. - - -02/06/13 View point Construction Softw are, Inc. 4Projects Ltd. - - -02/06/13 liveBooks, Inc. Fotomoto, Inc. - - -02/06/13 Haiku Learning Systems, Inc. ActiveGrade, LLC - - -02/05/13 Tatango, Inc. Regal Digital LLC - - -02/05/13 Tatango, Inc. Regal Digital LLC02/05/13 Tw itter, Inc. Bluefin Labs, Inc. - - -02/05/13 SellPoint, Inc. Show Uhow , Inc. - - -02/05/13 SPINS, Inc. Third Solutions, LLC - - -02/05/13 Ease Entertainment Services, LLC Scenechronize - - -02/01/13 JMI Equity; HGGC, LLC Innovative Interfaces, Inc. - - -01/31/13 Aggregate Know ledge, Inc. Quantivo Corporation - - -gg g g , Q p01/31/13 Autodesk, Inc. (NasdaqGS:ADSK) Allpoint Systems, Inc. - - -01/29/13 Genesys Telecommunications Laboratories, Inc. UTOPY, Inc. - - -01/29/13 Reputation.com, Inc. Reputation.com (UK) Limited - - -01/25/13 Peterson Partners LP Angoss Softw are Corp. (TSXV:ANC) $8,470,000 $7,400,000 1.2x01/24/13 Automattic, Inc. Simperium, Inc. - - -01/24/13 LittleLives Inc Pte. Ltd. Illume Technology - - -gy01/24/13 Cubic Transportation Systems, Inc. NextBus Inc. $20,690,000 - -01/22/13 Vision Critical Communications, Inc. Texifter, LLC - - -01/22/13 Infusionsoft, Inc. GroSocial, Inc. - - -01/22/13 Unified Media, Inc. PageLever, Inc. - - -01/22/13 Claritas Capital StudioNow , Inc. - - -01/17/13 First Advantage Corporation LexisNexis Risk Solutions, Inc., - - -54 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCg p , ,
  56. 56. 1Q13 SaaS M&A TRANSACTIONS (CON’T)Date Buyer SellerEnterpriseValueTTMRevenue EV/Rev01/10/13 Nuance Communications, Inc. (NasdaqGS:NUAN) VirtuOz SA - - -01/10/13 Fresh Juice Global, LLC VIDERO Inc. - - -01/10/13 NetSuite Inc. (NYSE:N) Retail Anyw here Inc. - - -01/09/13 Elephant Talk Communications Corp. (AMEX:ETAK) Telnicity, LLC $990,000 - -01/09/13 Elephant Talk Communications Corp. (AMEX:ETAK) Telnicity, LLC $990,00001/08/13 Total Merchant Services, Inc. Fanminder, Inc. - - -01/08/13 Nearstream, Inc. LoopFuse, Inc. - - -01/08/13 reInvention, LLC Authentic Response, Inc. - - -01/08/13 InComm, Inc. Giftango Corporation - - -01/08/13 Haufe-Lexw are GmbH & Co. KG Semigator AG - - -01/07/13 Athenahealth, Inc. (NasdaqGS:ATHN) Epocrates, Inc. $294,490,000 $151,000,000 2.0x01/07/13 Athenahealth, Inc. (NasdaqGS:ATHN) Epocrates, Inc. $294,490,000 $151,000,000 2.0x01/07/13 GT Nexus, Inc. TradeCard, Inc. - - -01/04/13 Euronet Worldw ide Inc. (NasdaqGS:EEFT) Pure Commerce Pty Ltd. - - -01/04/13 Farmtrader, LLC XSAg.com - - -01/03/13 PeopleStrategy, Inc. ERC Dataplus, Inc. - - -01/03/13 PennWell Corporation CyberTech, Inc., TransmissionHub, - - -01/03/13 Metrostudy Inc. Metrostudy Inc. - - -01/03/13 Metrostudy Inc. Metrostudy Inc.01/02/13 Elsevier B.V. Knovel Corporation - - -01/02/13 Click & Pledge, Inc. Donor Tow n Square, Inc. - - -55 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  57. 57. INTERNET M&A: DEAL VOLUME AND EXIT MULTIPLES273263 2.1x 2.1xMedian Internet EV/Revenue Exit MultiplesInternet M&A Volume220 2221851.9x 1.9x 1.9x1851Q12 2Q12 3Q12 4Q12 1Q131Q12 2Q12 3Q12 4Q12 1Q13• Internet M&A remained highly volatile in large part due to shifting marketing strategies evolving business models and constant• Internet M&A remained highly volatile, in large part due to shifting marketing strategies, evolving business models, and constantchanges 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 spikein M&A volume.• After the Facebook IPO debacle, internet investors and buyers alike became more cautious and circumspect, and M&A volumeAfter the Facebook IPO debacle, internet investors and buyers alike became more cautious and circumspect, and M&A volumedeclined markedly, plunging to 185 transactions in 1Q13, down from 273 transactions in 2Q12 .• Internet EV/Revenue exit multiples have held relatively steady, finishing 1Q13 at 1.9x. However, high flying Internet companiescontinue to achieve breathtaking exit multiples. Select examples include: Yahoo’s acquisition of Summly (~30x rev.), Evanea’sacquisition of Internet communications provider Apogea ($5.0M, 12.3x rev.).56 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  58. 58. INTERNET M&A: DEAL VOLUME AND EXIT MULTIPLES31 4%10.8%Ad‐Tech & Lead Gen Category 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013Median Internet EV/Revenue Exit MultiplesInternet M&A Volume31.4%3.8%13.0%CommerceContent & MediaGamingAd-Tech & Lead Gen 65 70 85 57 58Commerce 36 57 40 41 34Content & Media 51 62 52 55 42Gaming 13 25 13 12 7Infrastructure 31 30 41 27 24Social Tech 24 29 32 30 2018 4%InfrastructureSocial TechSocial Tech 24 29 32 30 20Total 220 273 263 222 18518.4%22.7%• Driven by a dearth of ad-tech players in the Internet landscape a much needed consolidation continued to shape the Internet• Driven by a dearth of ad-tech players in the Internet landscape, a much needed consolidation continued to shape the Internetad-tech landscape in 1Q13, making it the most active Internet M&A product category over the past twelve months.• After years of consolidation, Internet ad-tech leaders have now emerged, and the sharply lower number of ad tech M&A dealsover the past two quarters suggests that buyers and advertisers have placed their bets. Mobile ad-tech is the next frontier.• Select transactions in the Ad-tech product category include: Facebook’s acquisition of Atlas DMT, Experian’s acquisition ofSelect transactions in the Ad tech product category include: Facebook s acquisition of Atlas DMT, Experian s acquisition ofPacific Micromarketing, Half Off Depot’s acquisition of Crowdsavings.com.• Content & Media finished 1Q13 as the second most active product category. Select transactions in Content & Media included:Autotrader’s acquisition of Automotive Information, Dentsu’s acquisition of EhonNavi.57 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  59. 59. APPENDIX5858 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  60. 60. C Ti k P d t C tTHE SEG SOFTWARE INDEX COMPANIESAmdocs Limited DOX Billing & Service ManagementAsiaInfo Holdings, Inc. ASIA Billing & Service ManagementCSG Systems International, Inc. CSGS Billing & Service ManagementEvolving Systems, Inc. EVOL Billing & Service ManagementCompany Ticker Product CategoryMIND C.T.I. Ltd. MNDO Billing & Service ManagementNeuStar, Inc NSR Billing & Service ManagementRedknee Solutions TSX:RKN Billing & Service ManagementSynchronoss Technologies, Inc. SNCR Billing & Service ManagementActuate Corporation BIRT Business IntelligenceMicroStrategy Incorporated MSTR Business IntelligenceP I PEGA B i I lliPegasystems Inc. PEGA Business IntelligenceProgress Software Corporation PRGS Business IntelligencePROS Holdings PRO Business IntelligenceQlik Technologies QLIK Business IntelligenceVerisk VRSK Business IntelligenceActuate Corporation BIRT Development PlatformsAd b S t I t d ADBE D l t Pl tfAdobe Systems Incorporated ADBE Development PlatformsBSQUARE Corporation BSQR Development PlatformsCompuware Corporation CPWR Development PlatformsMagic Software Enterprises Ltd. MGIC Development PlatformsMicrosoft Corporation MSFT Development PlatformsOracle Corporation ORCL Development PlatformsProgress Soft are Corporation PRGS De elopment PlatformsProgress Software Corporation PRGS Development PlatformsRed Hat, Inc. RHT Development PlatformsSoftware AG XTRA:SOW Development PlatformsANSYS, Inc. ANSS Engineering & PLMAutodesk, Inc. ADSK Engineering & PLMCadence Design Systems, Inc CDNS Engineering & PLMCimatron Ltd CIMT Engineering & PLMCimatron Ltd. CIMT Engineering & PLMDassault Systèmes DSY Engineering & PLMGSE Systems Inc. GVP Engineering & PLMMentor Graphics Corp MENT Engineering & PLMParametric Technology Corporation PMTC Engineering & PLMPDF Solutions Inc PDFS Engineering & PLMStratasys Inc SSYS Engineering & PLM59 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCStratasys, Inc. SSYS Engineering & PLMSynopsys Inc SNPS Engineering & PLM
  61. 61. C Ti k P d t C tTHE SEG SOFTWARE INDEX COMPANIES (CON’T)American Software, Inc. AMSW.A Enterprise Resource PlanningOracle Corporation ORCL Enterprise Resource PlanningQAD Inc. QADA Enterprise Resource PlanningSage Group plc LSE:SGE Enterprise Resource PlanningCompany Ticker Product CategorySAP SAP Enterprise Resource PlanningUnit 4 ENXTAM:UNIT4 Enterprise Resource PlanningACI Worldwide, Inc. ACIW Financial & AccountingBottomline Technologies EPAY Financial & AccountingDST Systems, Inc. DST Financial & AccountingFair Isaac Corporation FICO Financial & AccountingFiserv FISV Financial & AccountingIntuit Inc INTU Financial & AccountingModel N, Inc MODN Financial & AccountingNetSol Technologies Inc. KASE:NETSOL Financial & AccountingSage Group plc LSE:SGE Financial & AccountingActivision Blizzard ATVI GamingGElectronic Arts Inc. EA GamingGameLoft SA ENXTPA:GFT GamingKonami Corporation TSE: 9766 GamingTake-Two Interactive TTWO GamingUbisoft Entertainment ENXTPA:UBI GamingAccretive Health AH HealthcareAll i t H lth S l ti I MDRX H lthAllscripts Healthcare Solutions Inc. MDRX HealthcareCerner Corporation CERN HealthcareComputer Programs and Sys, Inc. CPSI HealthcareEpocrates EPOC HealthcareGreenway Medical Technologies, Inc GWAY HealthcareMedAssets MDAS HealthcareM H lth MRGE H lthMerge Healthcare MRGE HealthcareOmnicell, Inc. OMCL HealthcareQuality Systems, Inc. QSII HealthcareHewlett Packard HPQ IT ConglomeratesIBM IBM IT ConglomeratesMicrosoft Corporation MSFT IT ConglomeratesOracle Corporation ORCL IT Conglomerates60 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCOracle Corporation ORCL IT ConglomeratesSAP AG SAP IT Conglomerates
  62. 62. C Ti k P d t C tTHE SEG SOFTWARE INDEX COMPANIES (CON’T)Epocrates EPOC Mobile Solutions/ContentGlu Mobile, Inc. GLUU Mobile Solutions/ContentGree TSE:3632 Mobile Solutions/ContentMillennial Media Inc MM Mobile Solutions/ContentCompany Ticker Product CategoryMyriad Group AG MYRN Mobile Solutions/ContentNQ Mobile Inc. NQ Mobile Solutions/ContentOpera OB:OPERA Mobile Solutions/ContentQihoo 360 Technology Co. Ltd QIHU Mobile Solutions/ContentPandora Media P Mobile Solutions/ContentSynchronoss Technologies, Inc. SNCR Mobile Solutions/ContentTeleNav TNAV Mobile Solutions/ContentVelti Plc VELT Mobile Solutions/ContentZynga, Inc ZNGA Mobile Solutions/ContentAllot Communications Ltd. ALLT Networking & Network Performance ManagementAruba Networks, Inc. ARUN Networking & Network Performance ManagementBrocade Communications Systems, Inc. BRCD Networking & Network Performance ManagementC S CSCO & fCisco Systems, Inc. CSCO Networking & Network Performance ManagementCompuware Corporation CPWR Networking & Network Performance ManagementF5 Networks, Inc. FFIV Networking & Network Performance ManagementJuniper Networks, Inc. JNPR Networking & Network Performance ManagementKeynote Systems, Inc. KEYN Networking & Network Performance ManagementRadware Ltd. RDWR Networking & Network Performance ManagementRi b d T h l I RVBD N t ki & N t k P f M tRiverbed Technology, Inc. RVBD Networking & Network Performance ManagementAVG Technologies N.V. AVG SecurityCheck Point Software Tech Ltd. CHKP SecurityCommtouch Software Ltd. CTCH SecurityFortinet Inc. FTNT SecurityGuidance Software, Inc. GUID SecurityI IMPV S itImperva IMPV SecurityPalo Alto Networks, Inc PANW SecurityProofpoint, Inc. PFPT SecuritySourcefire, Inc. FIRE SecuritySymantec Corporation SYMC SecurityTrend Micro TSE:4704 SecuityVASCO Data Security International VDSI Security61 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCVASCO Data Security International VDSI SecurityWebsense, Inc. WBSN Security
  63. 63. C Ti k P d t C tTHE SEG SOFTWARE INDEX COMPANIES (CON’T)Brocade Communications Systems, Inc. BRCD Storage, Data Management & IntegrationCA, Inc. CA Storage, Data Management & IntegrationCisco Systems, Inc. CSCO Storage, Data Management & IntegrationCommVault Systems, Inc. CVLT Storage, Data Management & IntegrationCompany Ticker Product CategoryEMC EMC Storage, Data Management & IntegrationFalconStor Software, Inc. FALC Storage, Data Management & IntegrationIBM IBM Storage, Data Management & IntegrationInformatica Corporation INFA Storage, Data Management & IntegrationMicrosoft Corporation MSFT Storage, Data Management & IntegrationNetApp, Inc. NTAP Storage, Data Management & IntegrationO l C i ORCL S D M & I iOracle Corporation ORCL Storage, Data Management & IntegrationPervasive Software Inc. PVSW Storage, Data Management & IntegrationSplunk, Inc. SPLK Storage, Data Management & IntegrationTIBCO Software Inc. TIBX Storage, Data Management & IntegrationAmerican Software, Inc. AMSW.A Supply Chain Management & LogisticsAspen Technology, Inc. AZPN Supply Chain Management & LogisticsM h tt A i t I MANH S l Ch i M t & L i tiManhattan Associates, Inc. MANH Supply Chain Management & LogisticsThe Descartes Systems Group Inc. TSX:DSG Supply Chain Management & LogisticsUnit 4 ENXTAM:UNIT4 Supply Chain Management & LogisticsBMC Software Inc. BMC Systems ManagementCA Technologies CA Systems ManagementCitrix Systems, Inc. CTXS Systems ManagementNetsco t S stems Inc NTCT S stems ManagementNetscout Systems, Inc. NTCT Systems ManagementRed Hat, Inc. RHT Systems ManagementSolarWinds, Inc. SWI Systems ManagementVMWare, Inc. VMW Systems ManagementAdvent Software, Inc. ADVS Vertical - FinanceBroadridge Financial BR Vertical - FinanceFidessa LSE:FDSA Vertical FinanceFidessa LSE:FDSA Vertical - FinanceJack Henry & Associates, Inc. JKHY Vertical - FinanceMSCI, Inc. MSCI Vertical - FinanceSS&C Corporation SSNC Vertical - FinanceBlackbaud, Inc. BLKB Vertical - OtherConstellation TSX:CSU Vertical - OtherEPIQ Systems Inc EPIQ Vertical Other62 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCEPIQ Systems, Inc. EPIQ Vertical - OtherGuidewire Software, Inc. GWRE Vertical - Other
  64. 64. C Ti k P d t C tTHE SEG SOFTWARE INDEX COMPANIES (CON’T)Micros Systems MCRS Vertical - OtherPROS Holdings PRO Vertical - OtherSapiens International SPNS Vertical - OtherSilver Spring Networks, Inc. SSNI Vertical - OtherCompany Ticker Product Categoryp g ,The Active Network, Inc. ACTV Vertical - OtherTyler Technologies, Inc. TYL Vertical - Other63 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  65. 65. C Ti k P d t C tTHE SEG SaaS INDEX COMPANIESCompany Ticker Product CategoryConstant Contact CTCT CRM & MarketingExactTarget, Inc. ET CRM & MarketingLivePerson LPSN CRM & MarketingMarin Software MRIN CRM & MarketingResponsys MKTG CRM & MarketingBazaarvoice, Inc BV CRM & MarketingSalesforce.com CRM CRM & MarketingVocus VOCS CRM & MarketingE2open, Inc EOPN ERP & Supply ChainFleetmatics FLTX ERP & Supply ChainNetsuite N ERP & Supply ChainSciQuest SQI ERP & Supply ChainSPS Commerce SPSC ERP & Supply ChainWorkday, Inc. WDAY ERP & Supply ChainAthenahealth, Inc ATHN Vertically FocusedDealerTrack TRAK Vertically Focusedea e ac e t ca y ocusedEbix Inc. EBIX Vertically FocusedEllie Mae ELLI Vertically FocusedMedidata Solutions MDSO Vertically FocusedRealPage RP Vertically FocusedCallidus Software Inc. CALD Workforce ManagementCornerstone OnDemand CSOD Workforce ManagementCornerstone OnDemand CSOD Workforce ManagementThe Ultimate Software Group, Inc. ULTI Workforce ManagementWorkday, Inc. WDAY Workforce ManagementConcur CNQR Other SaaSDemandware, Inc. DWRE Other SaaSIntraLinks Holdings IL Other SaaSJive Software Inc JIVE Other SaaSJive Software, Inc JIVE Other SaaSOpenTable, Inc. OPEN Other SaaSQualys, Inc. QLYS Other SaaSService-now.com NOW Other SaaSTangoe TNGO Other SaaSZix Corporation ZIXI Other SaaS64 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC
  66. 66. C Ti k P d t C tTHE SEG INTERNET INDEX COMPANIESCompany Ticker Product CategoryAngies List, Inc. ANGI Ad Tech & Lead GenerationBaidu.com, Inc. BIDU Ad Tech & Lead GenerationBankrate, Inc. RATE Ad Tech & Lead GenerationDigital Generation, Inc. DGIT Ad Tech & Lead GenerationeHealth, Inc. EHTH Ad Tech & Lead GenerationGoogle Inc. GOOG Ad Tech & Lead GenerationGroupon GRPN Ad Tech & Lead GenerationInterActiveCorp IACI Ad Tech & Lead GenerationLinkedIn LNKD Ad Tech & Lead GenerationMarchex Inc. MCHX Ad Tech & Lead GenerationQ i St t QNST Ad T h & L d G tiQuinStreet QNST Ad Tech & Lead GenerationReachLocal, Inc. RLOC Ad Tech & Lead GenerationSINA Corporation SINA Ad Tech & Lead GenerationSohu.com Inc. SOHU Ad Tech & Lead GenerationTree.Com, Inc. TREE Ad Tech & Lead GenerationValueClick, Inc. VCLK Ad Tech & Lead GenerationY d YNDX Ad T h & L d G tiYandex YNDX Ad Tech & Lead Generation1-800-FLOWERS.COM, Inc. FLWS CommerceAmazon.com, Inc. AMZN CommerceBitauto Holdings Limited BITA CommerceBluefly, Inc. BFLY CommerceBlueNile NILE CommerceDangDang DANG CommerceDangDang DANG CommerceDigital River Inc. DRIV CommerceeBay Inc. EBAY CommerceGeekNet GKNT CommerceLiquidity Services, Inc. LQDT CommerceMecox Lane Limited MCOX CommerceMercadolibre Inc MELI CommerceMercadolibre, Inc. MELI CommerceOverstock.com, Inc. OSTK CommercePetMed Express, Inc. PETS CommerceStamps.com STMP CommerceAOL, Inc. AOL Content & MediaDemandMedia DMD Content & MediaInterActiveCorp IACI Content & Media65 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLCInterActiveCorp IACI Content & MediaNetflix NFLX Content & Media

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