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- 1. Q12014 Software Equity Group, L.L.C. 12220 El Camino Real Suite 320 San Diego, CA 92130 info@softwareequity.com (858) 509-2800 The Software Industry Financial Report
- 2. 2 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTS About Software Equity Group Leaders in Software M&A 4 Extensive Global Reach 5 Software Industry Macroeconomics Global GDP 7 U.S. GDP and Unemployment 8 Global IT Spending 9 E-Commerce and Digital Advertising Spend 10 Stock Market Performance 11 Public Software Financial and Valuation Performance The SEG Software Index 13 The SEG Software Index: Financial Performance 14-15 The SEG Software Index: Market Multiples 16-17 The SEG Software Index by Product Category 18 The SEG Software Index by Product Category: Financial Performance 19 The SEG Software Index by Product Category: Market Multiples 20 Public SaaS Company Financial and Valuation Performance The SEG SaaS Index 22 The SEG SaaS Index: Financial Performance 23-24 The SEG SaaS Index: Market Multiples 25-29 The SEG SaaS Index by Product Category 30-31 The SEG SaaS Index by Product Category: Financial Performance 32 The SEG SaaS Index by Product Category: Market Multiples 33 Public Internet Company Financial and Valuation Performance The SEG Internet Index 35 The SEG Internet Index: Financial Performance 36-37 The SEG Internet Index: Market Multiples 38-39 The SEG Internet Index by Product Category 40 The SEG Internet Index by Product Category: Financial Performance 41 The SEG Internet Index by Product Category: Market Multiples 42
- 3. 3 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTS Software Industry M&A Market Update Software/SaaS M&A Deal Volume and Spending 44 Software M&A Exit Multiples 45 Software M&A by Ownership Structure and Size 46 Software M&A by Vertical and Horizontal Markets 47 Software M&A Deal Volume by Product Category 48 Software M&A Exit Valuations by Product Category 49 SaaS M&A Deal Volume and Exit Multiples 50 SaaS M&A by Product Category 51 SaaS M&A 1Q14 Transactions 52-54 Internet M&A: Deal Volume and Exit Multiples 55 Internet M&A: By Product Category 56 Appendix SEG Software Index Key Metrics 58-61 SEG Software Index Key Metrics by Product Category 62-63 SEG SaaS Index Key Metrics 64 SEG SaaS Index Key Metrics by Product Category 65 SEG Internet Index Key Metrics 66-68 SEG Internet Index Key Metrics by Product Category 69 1Q14 Select Public Sellers 70 1Q14 Mega Deals 71 1Q14 Most Active Buyers 72 About Software Equity Group 73
- 4. 4 ABOUT SOFTWARE EQUITY GROUP
- 5. 5 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • Industry leading boutique investment bank, founded in 1992, representing public and private software and internet companies seeking: • Strategic exit • Growth capital • Buyout • Inorganic growth via acquisition • Buy and sell-side mentoring • Fairness opinions and valuations • Sell-side client revenue range: $5 - 75 million • Buy-side clients include private equity firms and NASDAQ, NYSE and foreign exchange listed companies • Clients span virtually every software technology, product category, delivery model and vertical market • Global presence providing advice and guidance to more than 2,000 private and public companies throughout US, Canada, Europe, Asia-Pacific, Africa and Israel • Strong cross-functional team leveraging transaction, operating, legal and engineering experience • Unparalleled software industry reputation and track record. • Highly referenceable base of past clients LEADERS IN SOFTWARE M&A We Do Deals.
- 6. 6 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved EXTENSIVE GLOBAL REACH SEG Research Distribution Current Sell-side Representation Recent Sell-side Representation • SEG currently represents software companies in the United States, Canada, France, Germany, Australia & Saudi Arabia • In addition to the countries listed above, SEG has recently represented software companies in the United Kingdom, France, Netherlands, Israel, and South Africa • SEG’s Quarterly and Annual Software Industry Equity Reports and Monthly Flash Reports are distributed to an opt-in list of 70,000 public software company CEOs, software entrepreneurs, private equity managing directors, VCs, high tech corporate lawyers, public accountants, etc. in 76 countries.
- 7. 7 SOFTWARE INDUSTRY MACROECONOMICS
- 8. 8 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved GLOBAL GDP Sources: Worldbank, The Economist and PIMCO • The latest IMF forecast paints a picture of a steadily improving, but tentative, global economy. • The IMF’s most recent forecast predicted GDP would grow 3.6% in 2014, a modest improvement over 2013’s 3.0% growth rate. In 2015, global GDP is expected to improve further, growing to 3.9%. • According to the IMF, median GDP growth in developed nations is expected to reach 2.3% in 2014, an improvement of 1.0% over 2013. Key growth drivers include more government spending and highly favorable monetary policies. In emerging markets, GDP growth is expected to advance from 4.7% in 2013, to 5.0% in 2014, and 5.3% in 2015. • The IMF acknowledged its forecasts could be imperiled by recent geopolitical events and a growing risk of deflation, particularly in advanced economies. GDP SizeGlobal GDP (% YoY Change)
- 9. 9 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved U.S. GDP AND UNEMPLOYMENT • According to February’s Federal Reserve survey of 45 economists, GDP growth in 1Q14 is forecast to be 2.0%. For the year, expectations are the U.S. economy will grow 2.8%, boosted by much stronger growth in the second, third, and fourth quarters. • Over 40% of the economists surveyed by the Fed predicted the U.S. economy will grow 3.0% or greater. Only three months earlier, only 30% of economists were that optimistic. • The Labor Department reported the unemployment rate at the end of 1Q14 was 6.7%, unchanged from 4Q13. The unemployment rate remains at its lowest levels since 2008. The labor participation rate showed modest improvement, edging up slightly to 63.2% in March after reaching a 35 year low in December 2013. -0.7% 1.5% -2.7% -5.4% -6.4% -0.7% 2.2% 5.0% 3.7% 1.7% 2.6% 3.1% 0.4% 2.5% 1.3% 4.1% 2.0% 1.3% 3.1% 0.4% 2.5% 1.8% 4.1% 2.6% 2.0% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 GDP % Growth Unemployment Rate
- 10. 10 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved GLOBAL IT SPENDING Sources: IT spending numbers shown in charts are a blended average of Goldman Sachs, IDC, Forrester, Gartner forecasts. IT Spending by Category from Forrester. • On average, analysts were more bullish in their forecasts for Global IT spending in 2014, predicting IT budget increases will more than double each of the prior two years. • The average global IT spending increase, as forecast by the several analysts we track, is 4.8% in 2014. That’s a noteworthy increase from their average estimate of 4.0% made at the end of 2013. • Analysts who raised their earlier forecasts, cited an improving economy and growing demand for mobility, cloud computing solutions and infrastructure. IDC, however, cut its forecast slightly, from 5.0% to 4.6%, citing spending slowdowns in emerging markets and deceleration in the massive growth of smartphones and tablets. • Forrester forecasts software will account for 26% of all tech spending, leading all other categories. According to Forrester, “Software’s leading position is not a surprise, because it is the focal point for tech innovation today, whether that innovation takes the form of cloud computing and adoption of SaaS, PaaS, smart computing and big data, real-time predictive analytics and smart process apps, or mobile computing and mobile apps and enterprise app stores.” Global IT Spending by CategoryGlobal IT Spending (% YoY Change) 9.0% 6.0% -10.0% 8.0% 6.0% 2.0% 2.0% 4.8% 2007 2008 2009 2010 2011 2012 2013 2014 (F)
- 11. 11 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved E-COMMERCE AND DIGITAL ADVERTISING SPEND Sources: comScore, IAB, IBD Digital Advertising SpendE-Commerce Spend • E-commerce retail sales in the U.S. totaled $63.6 billion in 4Q13 (the latest data available), up 13% YoY. The increase marks the seventeenth consecutive quarter of YoY growth, and the thirteenth consecutive quarter of double digit growth. • The Q4 total for E-Commerce spending accounted for 13% of all discretionary retail dollars spent. • Mobile commerce accounted for $6.6B, or 10.5% of the 2013 E-Commerce total, according to comScore. In addition, YoY growth in mobile commerce grew 23% in 2013. • Internet ad revenues surged in 4Q13 (the latest data available) to $12.1 billion, up 17% YoY. For the year, 2013 ad revenues soared to $42.8 billion, a landmark high, and the first time Internet advertising surpassed broadcast television in total ad spend. • According to eMarketer, mobile ad spending was $18.0 billion in 2013, with Facebook and Google grabbing the majority of mobile ad market growth. Facebook’s advance was especially noteworthy. In 2012, the company accounted for just 5.4% of global ad spending, but its share rocketed to 17.5% in 2013. -10% -5% 0% 5% 10% 15% 20% 25% 30% $0 $2 $4 $6 $8 $10 $12 $14 YoYChange DigitalAdvertisingRevenue($B) Digital Advertising Spend ($B) YoY Percent Change -5% 0% 5% 10% 15% 20% $0 $10 $20 $30 $40 $50 $60 $70 YoYChange E-CommerceSpending($B) E-Commerce Spend ($B) YoY Percent Change
- 12. 12 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved STOCK MARKET PERFORMANCE • After a five year run up that included stellar returns in 2013, the bull market is showing signs of fatigue. After a very slow start in January, 1Q14 stock market performance across all exchanges and indices was choppy for the remainder of the quarter. • Q1’s bumpy ride for investors was largely attributable to the Fed’s announced plans for quantitative easing, skyrocketing market multiples, and geopolitical unrest, particularly in Ukraine. • The S&P posted the best return of the three major stock indices in 1Q14, finishing up 1.3%. The Nasdaq finished close behind, up 0.5%. Surprisingly, in an environment where investors flocked to value stocks, the DOW performed the worst of the three major U.S. stock market indices, closing 1Q14 down 0.72%. • The most dramatic swing in median stock returns in the first quarter was exhibited in the SEG SaaS Index. In early March, the index peaked with a 9.2% return, only to plunge dramatically the rest of the month, closing 1Q14 down 4.6%. In addition to macro economic concerns, many expressed concerns that SaaS valuations had become too rich. More on the impact to median EV/Revenue multiples later in the report. • The SEG Software Index, consisting largely of large, mature, and profitable companies held its own in a tough stock market environment, finishing the quarter flat. (10.0%) (8.0%) (6.0%) (4.0%) (2.0%) 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Jan 2014 Feb 2014 Mar 2014 DOW S&P NASDAQ SEG SW Index SEG SaaS SEG Internet Index
- 13. 13 THE SEG SOFTWARE INDEX PUBLIC SOFTWARE COMPANY FINANCIAL AND VALUATION PERFORMANCE
- 14. 14 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved THE SEG SOFTWARE INDEX • The SEG Software Index tracks public software companies which primarily offer on-premise software under a perpetual license with annual M&S. • The SEG Software Index is currently comprised of 152 public software companies*. Measure 1Q13 2Q13 3Q13 4Q13 1Q14 EV/Revenue 2.9x 2.8x 3.0x 3.2x 3.2x EV/EBITDA 12.4x 12.0x 13.8x 14.6x 15.0x EV/Earnings 23.7x 23.2x 25.9x 26.3x 27.0x Gross Profit Margin 66.7% 67.7% 67.9% 68.2% 67.6% EBITDA Margin 18.6% 18.6% 18.6% 18.1% 18.5% Net Income Margin 9.0% 9.2% 8.6% 8.6% 9.1% TTM Revenue Growth 12.8% 10.9% 9.9% 9.2% 8.7% TTM Total Revenue ($M) $452.9 $466.8 $479.0 $499.4 $509.0 TTM EBITDA Growth 7.6% 5.6% 6.2% 5.8% 6.1% TTM Total EBITDA ($M) $77.7 $81.9 $91.1 $93.4 $91.8 Cash & Eq ($M) $153.9 $169.6 $161.0 $186.6 $191.6 Current Ratio 1.9 1.9 2.0 2.0 2.1 Debt / Equity Ratio 27.3% 27.0% 24.8% 25.6% 33.4% SEG - Software: Median Metrics * A number of on-premise software companies are transitioning to subscription based delivery and pricing models; however their SaaS revenue contribution is insufficient for them to be deemed primarily SaaS. ** See appendix for a complete list of companies in The SEG Software Index and detailed financial and trading metrics
- 15. 15 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE • On a quarterly basis, median TTM revenue growth in 1Q14 declined for the sixth consecutive quarter, to 8.7%. • Despite the tepid growth rate, the median TTM revenue of the SEG Software Index reached $509M, the highest in history, and the highest among our three tracking indices. • More than half of public on-premise software companies reported TTM revenue growth rates of 10% or below in 1Q14. • Of the 15% of on-premise software providers with TTM revenue growth rates of 30% or more, most were focused on three of the hottest product categories, mobility (NQ Mobile – 114%), security (Palo Alto Networks – 49.2%), and Big Data (Splunk – 52.1%). • Forecasts for moderately increased IT spending portend well for these on premise providers. We expect median TTM revenue growth to steadily, albeit modestly, improve for the balance of 2014. Median Revenue Performance - Quarterly TTM Revenue Growth Rate Distribution – 1Q14 0% 2% 4% 6% 8% 10% 12% 14% $0 $100 $200 $300 $400 $500 $600 1Q13 2Q13 3Q13 4Q13 1Q14 TTMRevenueGrowth TTMTotalRevenue TTM Total Revenue ($M) TTM Revenue Growth 25% 29% 20% 11% 5% 10% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% %ofCompanies TTM Revenue Growth
- 16. 16 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved TTM EBITDA Margin Distribution – 1Q14Median EBITDA Margin Performance - Quarterly • The median EBITDA margin of public on-premise software companies remained relatively steady over the past five quarters, closing 1Q14 at 18.5%. • Only 5% of on-premise software companies achieved EBITDA margins of 40%+. • Check Point Software, a security provider, led the pack with an EBITDA margin of 55.4%. Check Point’s extraordinary profitability can be attributed to a strong, well-performing channel that reduces Check Point’s cost of sales. Curiously, for a company in the rapidly evolving security space, Check Point also spends much less on R&D (8% of total revenue) vs. their industry peers (15% of total revenue). • We anticipate EBITDA margins will experience modest decline in 2014, as on-premise providers increase spending on sales and marketing and invest more in R&D to update legacy products and expand their SaaS offerings. THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE 17% 12% 29% 24% 14% 5% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% %ofCompanies TTM EBITDA Margin 18.6% 18.6% 18.6% 18.1% 18.5% 1Q13 2Q13 3Q13 4Q13 1Q14 EBITDAMargin
- 17. 17 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved EV/Revenue Multiples by Size (TTM Revenue) - QuarterlyMedian EV/Revenue and EV/EBITDA Multiples - Quarterly • The median EV/Revenue multiple for on-premise software providers was 3.2x in 1Q14, up 10% YoY. • Despite their unimpressive financial performance, public on-premise software providers closed 1Q14 with trading multiples at or near their seven year peak. • The higher median EV/Revenue valuations are a reflection of investor’s enthusiasm for technology stocks, which is likely to wane over time, unless revenue growth improves and recurring revenue from subscriptions accelerates. • The 3.2x median EV/Revenue multiple in 1Q14 marks only the third time since 1Q06 that EV/Revenue multiples surpassed 3.0x. • 1Q14’s median EV/EBITDA multiple of 15.0x was the highest of any quarter since 4Q07. • Investors continued to be comforted by size. The EV/Revenue multiples of on-premise software companies with revenues <$100 million remained markedly lower than their larger counterparts. • SEG Software Index companies with TTM revenue between $100M and $1B successfully balanced TTM revenue growth (median 16.0%) and profitability (median EBITDA of 15.3%), and were rewarded with the highest median EV/Revenue multiples. THE SEG SOFTWARE INDEX: MARKET MULTIPLES 2.9x 2.8x 3.0x 3.2x 3.2x 12.4x 12.0x 13.8x 14.6x 15.0x 1Q13 2Q13 3Q13 4Q13 1Q14 EV/Revenue EV/EBITDA 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 1Q13 2Q13 3Q13 4Q13 1Q14 MedianEV/Revenue Revenue GreaterThan $1 billion Revenue Between $500 millionand $1 billion Revenue Between $100 millionand $500 million Revenue Less Than $100 million
- 18. 18 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved EV/Revenue Multiples vs. TTM EBITDA Margins – 1Q14EV/Revenue Multiples vs. TTM Revenue Growth – 1Q14 • The correlation between the public market EV/Revenue multiples and TTM revenue growth rates in 1Q14 was the highest since the recovery began in 2009. • On-premise software providers with TTM revenue growth rates of 10%+ were rewarded with median EV/Revenue multiples well above the median. On-premise software providers achieving 40%+ revenue growth rates boasted a median 10.9x EV/Revenue multiple, 240% higher than the index median. • Members of Q1’s 40%+ growth club mostly came from the highest growth sectors of the software ecosystem – business intelligence and security. Select companies included: Tableau Software (82.0% TTM Revenue Growth, 19.8x EV/Revenue); Palo Alto Networks (49.2%, 9.6x); and Splunk (52.1%, 24.9x). • In a departure from the past several years, the market multiples of on-premise software providers in 1Q14 correlated poorly with their profitability. • In 1Q14, on-premise software companies with no profits achieved a median EV/Revenue multiple of 3.6x, higher than their peers with EBITDA margins of break even to 40%. • Investors in 1Q14 did take special note of on-premise providers with EBITDA margins greater than 40%, conferring a median EV/Revenue multiple of 7.7x, or 140% higher than the index median. Select companies included: Verisk (46.1% EBITDA margin, 7.7x EV/Revenue multiple); Ansys (46.8%, 7.4x); Checkpoint Software (55.4%, 8.5x); and Solar Winds (41.7%, 9.1x). THE SEG SOFTWARE INDEX: MARKET MULTIPLES 2.1x 3.1x 3.5x 4.8x 5.1x 10.9x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% MedianEV/Revenue TTM Revenue Growth 3.6x 2.5x 2.4x 3.5x 3.0x 7.7x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% MedianEV/Revenue TTM EBITDA Margin
- 19. 19 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • The SEG Software Index is segmented into 17 product categories. • See Appendix for the complete list of companies within each product category. THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 Billing & Service Management 2.4x 2.3x 3.1x 3.5x 2.7x 9.3x 8.3x 9.9x 9.0x 9.3x 6.9% 2.2% 17.7% 4.4% 3.6% 22.2% 18.8% 18.7% 18.6% 18.5% Business Intelligence 3.5x 3.0x 3.3x 3.1x 3.1x 16.0x 16.5x 17.2x 18.4x 17.3x 12.8% 13.1% 14.2% 9.7% 10.2% 10.8% 12.2% 12.6% 11.5% 10.2% Development Platforms 2.5x 2.6x 2.6x 2.7x 2.7x 9.6x 10.2x 14.4x 11.9x 11.1x 3.0% 0.6% -0.3% 0.1% -0.3% 23.9% 20.3% 20.0% 20.0% 19.6% Engineering & PLM 2.7x 2.7x 2.8x 2.9x 3.3x 14.8x 14.2x 14.6x 14.2x 14.9x 13.1% 11.7% 8.4% 4.4% 6.2% 20.7% 19.8% 19.9% 20.1% 20.7% Enterprise Resource Planning 2.9x 3.0x 3.0x 2.9x 3.7x 10.1x 11.4x 12.1x 12.4x 12.7x 2.0% 0.2% 1.6% 2.7% 2.7% 28.5% 28.5% 28.7% 29.0% 29.0% Financial & Accounting 3.1x 3.3x 3.3x 3.7x 3.7x 10.8x 11.1x 12.2x 13.5x 15.8x 8.6% 6.4% 9.5% 10.7% 8.5% 27.5% 26.6% 26.1% 26.7% 25.9% Gaming 1.1x 1.3x 1.6x 1.6x 1.7x 7.1x 10.0x 12.1x 14.2x 11.3x 7.4% 15.1% 15.2% 10.7% 3.9% 14.9% 14.8% 14.0% 13.4% 19.0% Healthcare 2.0x 2.1x 2.4x 2.5x 2.4x 12.5x 12.0x 13.1x 14.4x 15.0x 8.8% 7.6% 7.5% 3.1% 3.0% 18.4% 18.0% 17.9% 16.9% 15.2% IT Conglomerates 2.5x 2.9x 2.7x 3.0x 3.0x 9.3x 9.0x 8.4x 8.5x 9.0x 0.5% 0.2% 1.2% 0.9% 2.0% 32.1% 33.8% 34.3% 35.0% 34.2% Mobile Solutions/Content 3.0x 2.8x 3.4x 3.4x 3.6x 18.4x 13.2x 13.6x 19.7x 30.7x 47.2% 26.4% 20.3% 23.7% 24.9% 7.3% 10.2% 8.5% 8.4% 7.2% Networking & Network Performance Management 2.8x 2.7x 2.8x 2.8x 3.3x 16.6x 17.0x 17.0x 14.9x 16.8x 20.3% 12.9% 7.2% 6.1% 7.2% 12.6% 12.7% 12.7% 7.9% 7.5% Security 3.3x 3.6x 4.0x 3.5x 5.0x 11.6x 10.8x 13.0x 13.7x 12.7x 23.8% 21.8% 21.2% 18.3% 15.3% 11.5% 11.5% 11.1% 0.5% -3.0% Storage, Data Management & Integration 2.4x 2.4x 2.7x 3.0x 3.0x 9.3x 9.0x 8.9x 8.6x 9.0x 4.8% 4.1% 3.3% 4.4% 2.0% 21.8% 21.9% 22.2% 23.3% 24.2% Supply Chain Management & Logistics 3.8x 4.1x 4.5x 5.2x 5.8x 14.7x 15.6x 17.3x 19.4x 21.5x 12.8% 10.7% 13.6% 14.2% 14.7% 19.3% 19.1% 21.4% 24.1% 26.8% Systems Management 5.6x 5.0x 5.4x 4.4x 5.0x 23.1x 20.9x 19.7x 16.5x 18.9x 17.2% 16.1% 16.4% 15.3% 13.0% 24.3% 23.8% 24.2% 24.2% 25.8% Vertical - Finance 3.4x 3.8x 3.7x 4.7x 4.5x 10.7x 11.4x 12.6x 12.8x 13.4x 6.7% 7.6% 7.4% 8.1% 8.2% 25.9% 26.3% 26.0% 26.1% 27.0% Vertical - Other 3.1x 3.4x 3.7x 3.6x 3.2x 21.2x 24.6x 26.0x 30.2x 16.2x 20.6% 21.7% 22.3% 24.6% 21.2% 13.9% 13.5% 13.3% 12.3% 14.6% Median 2.9x 2.8x 3.0x 3.2x 3.2x 12.4x 12.0x 13.8x 14.6x 15.0x 12.8% 10.9% 9.9% 9.2% 8.7% 18.6% 18.6% 18.6% 18.1% 18.5% SEG Software Index Category EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin
- 20. 20 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved 1Q14 Median YoY Change in Revenue Growth1Q14 Median TTM Revenue Growth 1Q14 Median YoY Change EBITDA Margin1Q14 Median TTM EBITDA Margin THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE (131%) 3.6% 10.2% (0.5%) 6.2% 2.7% 8.5% 3.9% 3.0% 2.0% 24.9% 7.2% 15.3% 2.0% 14.7% 13.0% 8.2% 21.2% Billing &Service Management BusinessIntelligence Development Platforms Engineering & PLM Enterprise Resource Planning Financial &Accounting Gaming Healthcare IT Conglomerates Mobile Solutions/Content Networking & Network Performance… Security Storage, Data Management &Integration Supply Chain Management &Logistics Systems Management Vertical - Finance Vertical - Other (47.6%) (20.2%) (52.6%) 34.8% (0.3%) (47.1%) (65.3%) (47.3%) (64.6%) (35.6%) (57.7%) 15.0% (24.8%) 21.8% 2.6% Billing &Service Management BusinessIntelligence Development Platforms Engineering & PLM Enterprise Resource Planning Financial &Accounting Gaming Healthcare IT Conglomerates Mobile Solutions/Content Networking & Network Performance… Security Storage, Data Management &Integration Supply Chain Management &Logistics Systems Management Vertical - Finance Vertical - Other (16.4%) (5.9%) (18.1%) 0.1% 1.9% (5.9%) 27.5% (17.8%) 6.7% (2.1%) (40.2%) 11.0% 38.4% 6.1% 4.3% 5.1% Billing &Service Management BusinessIntelligence Development Platforms Engineering & PLM Enterprise Resource Planning Financial &Accounting Gaming Healthcare IT Conglomerates Mobile Solutions/Content Networking & Network Performance… Security Storage, Data Management &Integration Supply Chain Management &Logistics Systems Management Vertical - Finance Vertical - Other 343.5% 18.5% 10.2% 19.6% 20.7% 29.0% 25.9% 19.0% 15.2% 34.2% 7.2% 7.5% (3.0%) 24.2% 26.8% 25.8% 27.0% 14.6% Billing & Service Management BusinessIntelligence Development Platforms Engineering &PLM Enterprise Resource Planning Financial &Accounting Gaming Healthcare IT Conglomerates Mobile Solutions/Content Networking &Network Performance… Security Storage, Data Management &Integration Supply Chain Management &Logistics Systems Management Vertical - Finance Vertical - Other
- 21. 21 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • In 1Q14, nine product categories achieved median EV/Revenue multiples above the SEG Software Index median of 3.2x, led by Supply Chain Mgmt (5.8x), Systems Management (5.0x) and Security (5.0x). • The Supply Chain Management product category is attracting renewed investor interest as manufacturers, distributors and large ecommerce retailers seek to address shrinking margins, operational inefficiencies and demanding customers with a new wave of IT solutions. • The Systems Management and Security categories are benefitting from the rapid shift to cloud and mobile computing, which require new approaches to scaling, managing and securing these new environments. • The Gaming category closed 1Q14 with a median EV/Revenue multiple of 1.7x, the lowest of our 17 product categories, despite its 52% YoY median EV/Revenue growth. Expect gaming multiples to grow further, as gaming providers - caught flat footed by the explosion of mobile and Internet gaming - reposition with online and mobile games suitable for a multi-device world. • TTM revenue growth rates slowed in 12 of 17 product categories saw in 1Q14. The five categories that proved to be the exceptions with higher YoY growth rates included: ERP, IT Conglomerates, Supply Chain, Vertical – Finance (i.e. software providers providing solutions to the financial services industry exclusively) and Vertical – Other (i.e. software providers focused on a vertical). THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY: MARKET MULTIPLES Median 1Q14 YoY Change in EV/Revenue Multiples1Q14 Median EV/Revenue Multiples 2.7x 3.1x 2.7x 3.3x 3.7x 3.7x 1.7x 2.4x 3.0x 3.6x 3.3x 5.0x 3.0x 5.8x 5.0x 4.5x 3.2x Billing & Service Management Business Intelligence DevelopmentPlatforms Engineering & PLM Enterprise Resource Planning Financial & Accounting Gaming Healthcare IT Conglomerates Mobile Solutions/Content Networking & Network Performance… Security Storage,Data Management& Integration Supply Chain Management& Logistics Systems Management Vertical - Finance Vertical - Other 10.1% (9.1%) 7.3% 21.6% 28.4% 17.0% 52.3% 20.5% 22.6% 18.6% 15.8% 51.2% 23.5% 52.0% (10.6%) 29.6% 3.0% Billing & Service Management Business Intelligence DevelopmentPlatforms Engineering & PLM Enterprise Resource Planning Financial & Accounting Gaming Healthcare IT Conglomerates Mobile Solutions/Content Networking & Network Performance… Security Storage,Data Management& Integration Supply Chain Management& Logistics Systems Management Vertical - Finance Vertical - Other
- 22. 22 THE SEG SaaS INDEX PUBLIC SaaS COMPANY FINANCIAL AND VALUATION PERFORMANCE
- 23. 23 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • The SEG SaaS Index tracks public companies which primarily offer hosted, on-demand software under a subscription and/or transaction based pricing model. • The SEG SaaS Index is currently comprised of 49 public pure-play SaaS companies*. * See appendix for a complete list of companies in the SEG SaaS Index THE SEG SaaS INDEX Measure 1Q13 2Q13 3Q13 4Q13 1Q14 EV/Revenue 5.4x 5.7x 6.6x 7.6x 8.0x EV/EBITDA 33.6x 30.2x 39.9x 46.8x 55.7x EV/Earnings 84.8x 112.3x 136.1x 81.9x 134.9x Gross Profit Margin 69.2% 68.6% 67.7% 67.7% 68.5% EBITDA Margin 0.4% 0.5% -0.6% -1.2% -1.5% Net Income Margin -6.5% -8.6% -9.2% -9.3% -9.3% TTM Revenue Growth 33.0% 31.4% 32.1% 28.5% 28.2% TTM Total Revenue ($M) $112.0 $119.3 $126.5 $137.5 $153.1 TTM EBITDA Growth 17.2% 13.1% 15.0% 17.4% 5.4% TTM Total EBITDA ($M) $1.1 -$0.2 -$1.8 -$2.6 -$2.7 Cash & Eq ($M) $55.2 $59.9 $73.0 $82.7 $90.2 Current Ratio 1.7 1.4 1.7 2.2 2.2 Debt / Equity Ratio 7.0% 7.1% 10.3% 12.4% 23.7% SEG - SaaS: Median Metrics
- 24. 24 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • The median TTM revenue growth rate for Public SaaS companies in 1Q14 was 28.2%, down from 33.0% in 1Q13. We expect improvement in 2014, thanks to accelerating enterprise adoption of SaaS solutions, suites and platforms, and increased adoption of SaaS among the SMB segment. • The median TTM revenue of public SaaS companies was $153.3M in 1Q14, a significant increase from just four years ago, when the median was $114.6M. Despite their increased size, TTM revenue growth rates remained in the mid-twenties or higher. • From the standpoint of size, Salesforce continued to dominate the SaaS Sector 1Q14 with TTM revenue of $4.1B, nearly 7x greater than the next largest Public SaaS company. However, a good number of public SaaS Companies reached critical mass (>$350 million) from a revenue standpoint in 1Q14, a feat made more difficult by a revenue model that typically requires deferring a large percentage of the revenue booking. These $350M+ SaaS providers can now be counted among a wide variety of product categories and industry sectors. Examples include Concur (expense management product category, $586M TTM revenue); Athenahealth (healthcare, $595M); DealerTrack (automotive, $482M); Workday (HCM/Financial, $469M); NetSuite (ERP, $415M); Service-Now (IT automation, $425M); and RealPage (real estate, $377M). • Medians alone do not capture the standout performances of the most successful SaaS companies. Nearly one in five public SaaS companies grew TTM revenue growth by 50% or more. As yet further testament to the widespread adoption of SaaS, these outperformers come from a variety of categories including HCM, Security, Marketing, and Construction. Select companies include: Workday (71.4%); FireEye (94.0%); Marketo (64.0%); Cornerstone OnDemand (57.0%); and Textura (70.1%). TTM Revenue Growth Rate Distribution – 1Q14Revenue Performance - Quarterly THE SEG SaaS INDEX: FINANCIAL PERFORMANCE 2% 6% 17% 28% 19% 9% 19% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% <= 50% > 50% %ofCompanies TTM Revenue Growth 25.0% 26.0% 27.0% 28.0% 29.0% 30.0% 31.0% 32.0% 33.0% 34.0% $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 1Q13 2Q13 3Q13 4Q13 1Q14 TTMRevenueGrowth TTMTotalRevenue TTM Total Revenue ($M) TTM Revenue Growth
- 25. 25 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • After peaking in 2010, the median EBITDA margin of public SaaS companies has steadily declined, closing 1Q14 at -1.5%. • Over half (54%) of public SaaS companies are unprofitable, and roughly nine out of ten have EBITDA margins below the 20% median of their on-premise software peers. • And for the time being, that’s just what investors expect if the strong correlation between their EV/Revenue multiples and TTM revenue growth rates (see slide 26) is any indication. • Investors should be circumspect about the GAAP P&L statements of many public SaaS companies which seem to imply they’re suffering significant losses and hemorrhaging cash. In truth, many are not only cash flow positive, but flush with revenue from prepaid subscription fees. But since GAAP requires deferred recognition of most of this revenue, many SaaS providers reported negative operating margins. As example, in its most recent earnings report, Workday reported $56M in net income, yet generated $35M of cash from operations. TTM EBITDA Margin Distribution – 1Q14Median EBITDA Margin Performance - Quarterly THE SEG SaaS INDEX: FINANCIAL PERFORMANCE 54% 21% 15% 4% 6% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% %ofCompanies TTM EBITDA Margin 0.4% 0.5% -0.6% -1.2% -1.5% 1Q13 2Q13 3Q13 4Q13 1Q14 EBITDAMargin
- 26. 26 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved EV/Revenue Multiple Distribution – 1Q14Median EV/Revenue and EV/EBITDA Multiples - Quarterly • At the close of 1Q14, the median EV/Revenue multiple for public SaaS companies was 8.0x, up 48% YoY. Although the 48% YoY multiple increase was the highest on record, we expect the decline in the SaaS median TTM revenue growth rate portends a correction to more rational market multiples later this year. • Public SaaS companies continued to trade at a significant premiums to their on-premise peers (8.0x vs. 3.2x). While public SaaS companies have historically enjoyed trading multiples twice that of their on-premise peers, 1Q14’s differential was exceptional. • A premium multiple can be largely justified by comparing the relative lifetime value of a SaaS customer vs. an on-premise licensee. A SaaS company’s strong customer retention and gross margins will garner significantly greater cash over time from its average customer than will its on- premise counterpart. On the expense side of the equation, the jury is still out as to whether SaaS companies can achieve levels of profitability on par with their on-premise counterparts, once SaaS demand tapers and current levels of sales & marketing spending become unsustainable. • In the meantime, investors are placing their bets on the next wave of SaaS category leaders who are positioned to displace incumbent on-premise providers across multiple product categories - just as Salesforce did to Siebel in the CRM category. A whopping 49% of the companies in the SEG SaaS Index achieved a median EV/Revenue multiple of 9x or higher in 1Q14. THE SEG SaaS INDEX: MARKET MULTIPLES 5.4x 5.7x 6.6x 7.6x 8.0x 33.6x 30.2x 39.9x 46.8x 55.7x 1Q13 2Q13 3Q13 4Q13 1Q14 EV/Revenue EV/EBITDA 0% 2% 9% 12% 2% 7% 2% 12% 5% 49% <= 1.0x > 1.0x <= 2.0x > 2.0x <= 3.0x > 3.0x <= 4.0x > 4.0x <= 5.0x > 5.0x <= 6.0x > 6.0x <= 7.0x > 7.0x <= 8.0x > 8.0x <= 9.0x > 9.0x %ofCompanies EV/Revenue
- 27. 27 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved EV/Revenue Multiples vs. TTM EBITDA Margins – 1Q14EV/Revenue Multiples vs. TTM Revenue Growth Rates – 1Q14 • In 1Q14, profitable SaaS companies continued to be penalized with lower market multiples, as investors deemed profitability to be an unacceptable tradeoff for accelerated growth. • As proof, note the very strong correlation between the median TTM revenue growth rate and median market multiple of public SaaS companies. Public SaaS companies that grew TTM revenue in excess of 50% were rewarded with an eye-popping median EV/Revenue multiple of 19.1x in 1Q14. • Conversely, there was an inverse correlation between EBITDA margins and median EV/Revenue multiples. Unprofitable public SaaS companies boasted a rather remarkable median EV/Revenue multiple of 9.6x in 1Q14, while those with EBITDA margins above 30% had a far more modest median market multiple in 1Q14 of 4.3x EV/Revenue. THE SEG SaaS INDEX: MARKET MULTIPLES 0.0x 2.5x 4.7x 5.4x 9.2x 7.0x 19.1x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% <= 50% > 50% MedianEV/Revenue TTM Revenue Growth 9.6x 6.3x 7.2x 6.3x 4.3x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% MedianEV/Revenue TTM EBITDA Margin
- 28. 28 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved Company Ticker EV (Median) TTM Revenue TTM Revenue Growth EV/ Revenue TTM EBITDA EBITDA Margin EV/ EBITDA Castlight Health, Inc. CSLT $2,386 $13 212% 183.9x -$62 -475.6% - FireEye, Inc. FEYE $8,974 $162 94% 55.6x -$143 -88.4% - Workday, Inc. WDAY $15,928 $469 71% 34.0x -$119 -25.3% - Demandware, Inc. DWRE $2,247 $104 31% 21.7x -$16 -15.6% - Service-now.com NOW $8,644 $425 74% 20.4x -$43 -10.1% - Netsuite N $7,723 $415 34% 18.6x -$37 -8.9% - Veeva Systems Inc. VEEV $3,754 $210 62% 17.9x $41 19.4% 92.3x Cornerstone OnDemand CSOD $2,892 $185 57% 15.6x -$30 -16.1% - Marketo MKTO $1,457 $96 64% 15.2x -$41 -42.4% - Textura Corp. TXTR $610 $41 70% 15.0x -$33 -81.5% - Benefitfocus, Inc. BNFT $1,507 $105 28% 14.4x -$23 -21.7% - ChannelAdvisors ECOM $913 $68 27% 13.4x -$11 -15.8% - OPOWER, Inc. OPWR n/a $89 71% 13.2x -$12 -13.1% - Paylocity Holding Corp. PCTY $1,175 $91 - 13.0x $2 2.2% 602.0x Cvent NYSE:CVT $1,374 $111 33% 12.4x $2 1.9% 663.9x Medidata Solutions MDSO $3,156 $277 27% 11.4x $32 11.5% 99.0x Athenahealth, Inc ATHN $6,322 $595 41% 10.6x $55 9.2% 115.3x The Ultimate Software Group, Inc.ULTI $4,298 $410 24% 10.5x $59 14.3% 73.1x Concur CNQR $6,091 $586 27% 10.4x $37 6.2% 166.9x E2open, Inc EOPN $682 $69 -7% 9.8x -$18 -25.4% - Salesforce.com CRM $38,016 $4,071 33% 9.3x -$61 -1.5% - OpenTable, Inc. OPEN $1,743 $190 18% 9.2x $58 30.6% 30.0x SPS Commerce SPSC $936 $104 35% 9.0x $10 9.4% 95.3x Q2 Holdings, Inc. QTWO $479 $57 38% 8.4x -$13 -22.9% - RingCentral, Inc. RNG $1,213 $161 40% 7.6x -$32 -20.0% - Fleetmatics FLTX $1,299 $177 39% 7.3x $45 25.3% 29.0x Amber Road, Inc. AMBR $380 $53 21% 7.2x -$12 -22.3% - Qualys, Inc. QLYS $778 $108 18% 7.2x $12 11.0% 65.3x SciQuest SQI $650 $90 36% 7.2x $0 -0.2% - 2U, Inc. TWOU $534 $83 49% 6.4x -$27 -32.8% - Ellie Mae ELLI $689 $128 26% 5.4x $25 19.5% 27.5x Zix Corporation ZIXI $252 $48 11% 5.2x $11 22.4% 23.3x Callidus Software Inc. CALD $584 $112 18% 5.2x -$5 -4.0% - DealerTrack TRAK $2,166 $482 24% 4.5x $58 12.0% 37.4x Halogen Software, Inc. TSX:HGN $212 $48 26% 4.4x -$4 -7.4% - J2 Global JCOM $2,255 $521 40% 4.3x $215 41.3% 10.5x Five9, Inc. FIVN n/a $84 32% 4.2x -$23 -27.8% - RealPage RP $1,571 $377 17% 4.2x $54 14.4% 29.0x LivePerson LPSN $633 $178 13% 3.6x $6 3.5% 101.2x Tangoe TNGO $670 $189 22% 3.5x $16 8.7% 40.8x inContact, Inc. SAAS $460 $130 18% 3.5x -$2 -1.4% - Jive Software, Inc JIVE $515 $146 28% 3.5x -$61 -41.7% - Marin Software MRIN $239 $77 30% 3.1x -$30 -38.3% - Ebix Inc. EBIX $590 $205 3% 2.9x $76 37.1% 7.8x Bazaarvoice, Inc BV $482 $181 22% 2.7x -$31 -16.8% - Constant Contact CTCT $735 $285 13% 2.6x $27 9.4% 27.5x IntraLinks Holdings IL $596 $234 8% 2.5x $13 5.5% 46.1x Vocus VOCS $313 $187 9% 1.7x $0 0.1% 1582.5x Top 25% Bottom 25% • When the SEG SaaS Index is segmented by relative EV/Revenue multiples, the top 25% of public SaaS companies had a median EV/Revenue of 16.8x in 1Q14. • These SaaS high flyers are market leaders in a wide array of SaaS categories including security (FireEye); HCM/Finance (Workday); ERP (NetSuite); eCommerce (Demandware); and Marketing (Marketo). • The median TTM revenue growth rate of those in the Top 25% percentile was 64.2%. All but two companies (Paylocity and Veeva) in the top 25% had negative EBITDA margins as of 1Q14. • In contrast, public SaaS companies comprising the bottom 25% of EV/Revenue multiples posted a median EV/Revenue of only 3.5x. For this group, the median TTM revenue growth rate was 17.9%, and all but four were profitable. THE SEG SaaS INDEX: MARKET MULTIPLES
- 29. 29 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • While Q1’s median market multiple for public SaaS companies was impressive, trading multiples throughout the quarter were especially volatile. • During the first two months of the quarter, public SaaS EV/Revenue multiples jumped 17.7%, reaching a peak at the end of February. • During the run-up, fears of another tech bubble gained momentum, and investors scurried during the quarter’s closing month. • Consequently, public SaaS EV/Revenue multiples plunged 17.1% in March, giving up all gains from the prior two months, as investors flocked to less risky value stocks. THE SEG SaaS INDEX: MARKET MULTIPLES Up 17.7% 8.7x EV/Rev Down 17.1% 7.2x EV/Rev Daily EV/Revenue Multiples for 1Q14 Start of 1Q14 7.4x EV/Rev End of 1Q14
- 30. 30 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • However, the March decline in median market multiples of public SaaS companies should be viewed from a broader historical perspective. • Since November 2008, the median EV/Revenue multiple for public SaaS companies has expanded by 248%. THE SEG SaaS INDEX: MARKET MULTIPLES 7.3x EV/Revenue Multiple, 1Q14 EV/Revenue Multiples Since 2004 2.1x EV/Revenue Multiple, 4Q08
- 31. 31 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • The SEG SaaS Index is currently comprised of 49 publicly listed SaaS companies. Four distinct SaaS product categories had a sufficient number for us to analyze trends and compare results. • Representative companies for each SaaS categories are referenced below. The complete list of companies, as well as detailed financial data about each, can be found in the Appendix. CRM & Marketing ERP & Supply Chain Vertically Focused Workforce ManagementCRM & Marketing ERP & Supply Chain Vertically Focused Workforce Management THE SEG SaaS INDEX BY PRODUCT CATEGORY
- 32. 32 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • In addition to these four SaaS product categories, there are a number of emerging SaaS product categories that currently lack sufficient number to yield reliable trend data, but nevertheless demonstrate continued adoption of SaaS across vertical markets and traditionally on-premise product categories. eCommerce Healthcare THE SEG SaaS INDEX BY PRODUCT CATEGORY Real Estate SecurityLife Sciences
- 33. 33 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved THE SEG SaaS INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE 1Q14 Median YoY Change in Revenue Growth1Q14 Median TTM Revenue Growth 1Q14 Median YoY Change EBITDA Margin1Q14 Median TTM EBITDA Margin 26.0% 35.4% 39.6% 26.3% CRM & Marketing ERP & Supply Chain Vertically Focused Workforce Management (39.3%) 15.3% (24.2%) (16.6%) CRM & Marketing ERP & Supply Chain Vertically Focused Workforce Management -0.7% (4.0%) 10.4% (13.5%) CRM & Marketing ERP & Supply Chain Vertically Focused Workforce Management 1183.4% (515.5%) (23.4%) 0.0% CRM & Marketing ERP & Supply Chain Vertically Focused Workforce Management
- 34. 34 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • As in past quarters, public SaaS companies comprising the Workforce Management category boasted the highest median market valuation (11.7x EV/Revenue) among our four SaaS product categories at the close of 1Q14. The category is led by Workday (34.0x EV/Revenue multiple) and Cornerstone On Demand (15.6x). Valuation drivers included the continued displacement of on-premise incumbents, as well as a growing performance among enterprises to facilitate and empower employers at all levels. • Vertically focused SaaS companies achieved the highest TTM revenue growth rate in 1Q14, 39.6%. This group, which consists of long- standing companies such as RealPage (real estate) and AthenaHealth (healthcare), was given a boost by Veeva Systems (life sciences) and Textura (construction), both of whom IPO’ed in the past year. Veeva’s TTM revenue growth rate was 62.2% and Textura closed 1Q14 at 70.1%. • The strong revenue performance of vertically focused SaaS companies led to a 68.5% YoY expansion in the median EV/Revenue multiple, the best among our four tracking indices. • In the CRM & Marketing category, SaaS providers that focused on leading edge marketing (marketing automation, business social marketing, etc.), such as Marketo (15.2x) and Salesforce (9.3x), enjoyed market multiples considerably higher than those focused on more established offerings in the category (e.g. email marketing campaign management) such as Constant Contact (2.6x). THE SEG SaaS INDEX BY PRODUCT CATEGORY: MARKET MULTIPLES 1Q14 Median YoY Change in EV/Revenue Multiples1Q14 Median EV/Revenue Multiples 3.3x 9.0x 8.4x 11.7x CRM & Marketing ERP & Supply Chain Vertically Focused Workforce Management (2.6%) 34.8% 68.5% 9.6% CRM & Marketing ERP & Supply Chain Vertically Focused Workforce Management
- 35. 35 THE SEG INTERNET INDEX PUBLIC INTERNET COMPANY FINANCIAL AND VALUATION PERFORMANCE
- 36. 36 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved THE SEG INTERNET INDEX • The SEG Internet Index tracks public companies which primarily offer B2C solutions over the Internet using a wide array of pricing models. • The SEG Internet Index is currently comprised of 92 public Internet companies*. * See appendix for a complete list of companies in The SEG Internet Index Measure 1Q13 2Q13 3Q13 4Q13 1Q14 EV/Revenue 2.0x 2.2x 2.6x 2.6x 3.3x EV/EBITDA 13.3x 14.9x 18.4x 19.0x 23.3x EV/Earnings 21.4x 26.6x 31.1x 38.2x 33.7x Gross Profit Margin 66.1% 65.6% 65.5% 66.0% 66.5% EBITDA Margin 10.1% 9.0% 9.4% 10.0% 9.1% Net Income Margin 2.3% 2.2% 2.1% 1.8% 2.2% TTM Revenue Growth 21.8% 20.3% 19.3% 16.5% 18.4% TTM Total Revenue ($M) $351.8 $384.8 $409.5 $435.1 $453.7 TTM EBITDA Growth 16.0% 10.3% 16.6% 16.1% 14.6% TTM Total EBITDA ($M) $26.8 $30.5 $30.4 $31.2 $34.6 Cash & Eq ($M) $132.2 $133.3 $140.0 $164.3 $207.3 Current Ratio 2.2 2.3 2.1 2.3 2.6 Debt / Equity Ratio 19.7% 20.1% 19.7% 22.2% 24.8% SEG - Internet: Median Metrics
- 37. 37 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • Approximately 62% of the companies comprising the SEG Internet Index offer online services and solutions that are consumer targeted; their revenue growth closely parallels the performance of the U.S. economy. • After a sequential drop in each of the last six quarters, median TTM revenue growth of the SEG Internet Index improved in 1Q14, edging up to 18.4% from 16.5% in 4Q13. • Once again demonstrating the Internet is an ecosystem of unequals, one in four public Internet providers far outpaced the pack, touting TTM revenue growth greater than 40% in 1Q14. • Many of these high flyers were recent IPOs whose innovative products services and business models allowed them to scale quickly. Select examples included: Trulia (111%), Facebook (55%), and Yelp (69%) • Conversely, 31% of public Internet companies struggled to advance, reporting TTM revenue growth of 10% or less. TTM Revenue Growth Rate Distribution – 1Q14Median Revenue Performance - Quarterly THE SEG INTERNET INDEX: FINANCIAL PERFORMANCE 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 1Q13 2Q13 3Q13 4Q13 1Q14 TTMRevenueGrowth TTMTotalRevenue TTM Total Revenue ($M) TTM Revenue Growth 11% 20% 21% 15% 9% 23% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% %ofCompanies TTM Revenue Growth
- 38. 38 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • The median EBITDA margin of the SEG internet Index declined slightly in 1Q14. Over the past five quarters, EBITDA margins of public Internet companies have been stable, ranging from 9% to 10%. • As testament to the revenue growth focus, 19% of SEG Internet Index Companies were unprofitable in 1Q14. • By contrast 9% of public Internet companies, mostly those with significant transaction or advertising revenue, achieved EBITDA margins above 40%, led by Giant Interactive (65.7%), VeriSign (61.0%), Facebook (49.9%), Baidu.com (43.4%). • Facebook, much maligned after its botched IPO and spotty mobile performance when it first went public, has set an example for others in the Internet sector by successfully monetizing its massive user base. • Facebook has added credibility to the notion that its better to scale the user base first, then monetize it. The question remains, will other public Internet companies such as Yelp and Twitter fare as well? TTM EBITDA Margin Distribution – 1Q14Median EBITDA Margin Performance – Quarterly THE SEG INTERNET INDEX: FINANCIAL PERFORMANCE 19% 33% 21% 9% 9% 9% <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% %ofCompanies TTM EBITDA Margin 10.1% 9.3% 9.4% 10.0% 9.1% 1Q13 2Q13 3Q13 4Q13 1Q14 EBITDAMargin
- 39. 39 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved EV/Revenue Multiple Distribution - QuarterlyMedian EV/Revenue and EV/EBITDA Multiples – Quarterly • The median market multiple of public Internet providers closed 1Q14 at 3.3x, a marked improvement over 1Q13’s 2.0x. • Considering approximately 60% of the public Internet companies are highly levered to consumer spending (Travel, Games, Advertising, etc), we see the improvement in median EV/Revenue as a reflection of growing investor confidence in rapidly ramping online consumer spending and digital advertising. • The widely disparate financial performance of the 92 companies comprising the SEG Internet Index reveals an Internet ecosystem clearly bifurcated into “haves” and “have nots.” Virile market adoptions, consumer fickleness, switching ease, unlimited choice and fierce competition handsomely reward a select few and punish others. Many investors have apparently taken careful note. • 1Q14 only served to further reinforce this reality, 35% of companies closed the quarter with an EV/Revenue multiple of 2.0x or less, while 28% closed the quarter with a market multiple of 7.0x EV/Revenue or higher. • Among the Internet companies boosting the highest EV/Revenue market multiples were a large number of relatively recent IPO’s that are capturing a significant share of online advertising dollars. Examples include Twitter (44.3x); Yelp (24.1x); Qihoo (17.3x); and LinkedIn (14.7x). THE SEG INTERNET INDEX: MARKET MULTIPLES 2.0x 2.2x 2.6x 2.6x 3.3x 13.3x 14.9x 18.4x 19.0x 23.3x 1Q13 2Q13 3Q13 4Q13 1Q14 EV/Revenue EV/EBITDA 13% 22% 12% 6% 9% 5% 4% 3% 4% 21% <= 1.0x > 1.0x <= 2.0x > 2.0x <= 3.0x > 3.0x <= 4.0x > 4.0x <= 5.0x > 5.0x <= 6.0x > 6.0x <= 7.0x > 7.0x <= 8.0x > 8.0x <= 9.0x >= 9.0x %ofCompanies EV/Revenue
- 40. 40 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved EV/Revenue Multiples vs. TTM EBITDA Margins – 1Q14EV/Revenue Multiples vs. TTM Revenue Growth Rates – 1Q14 • Public Internet companies with TTM revenue growth of 40% or higher were rewarded with median EV/Revenue multiples (11.2x) markedly greater than their slower growing peers. Among those growing 40%+ were: Trulia (93.3%); Zillow (69.5%); Yelp (67.7%); LinkedIn (65.6%). • Unlike the SEG SaaS Index, where TTM EBITDA margins were inversely related to median EV/Revenue multiples, investors in public Internet companies kept a keen eye on margins, and rewarded more profitable performers with significantly higher market multiples. • Public Internet companies with EBITDA margins above 40% posted a median EV/Revenue multiple of 6.8x in 1Q14, 113% higher than the overall Index median. By comparison, public SaaS companies with EBITDA margins above 30% (not enough companies with 40%+) posted a median EV/Revenue multiple of 4.5x, 44% below the SaaS median market valuation. • Investors have clearly taken into consideration, when valuing Internet vs SaaS stocks, such factors as sustainability of the customer relationship, and the associated recurring revenue, and the nature and extent of switching costs. By those measures the long term promise of SaaS seems to far out weight the attractiveness of many public Internet companies. • With few exceptions, many of the most profitable public Internet companies also reported stellar TTM revenue growth. Among them were SouFun Holdings (43.2% revenue growth, 53.6% EBITDA margin), Facebook (48.2% revenue growth, 47.5% EBITDA margin), Baidu.com (40.7% revenue growth, 45.0% EBITDA margin), and Mail.ru Group (32.2% revenue growth, 44.3% EBITDA margin). THE SEG INTERNET INDEX: MARKET MULTIPLES 1.1x 1.8x 2.1x 5.4x 5.7x 11.2x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% MedianEV/Revenue TTM Revenue Growth 3.2x 2.1x 2.0x 4.9x 7.3x 6.8x <= 0% > 0% <= 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% MedianEV/Revenue TTM EBITDA Margin
- 41. 41 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • The SEG Internet Index is segmented into eight product categories. • Representative companies in each Internet category are referenced below. • See the appendix for the complete list of companies within each product category. Ad Tech & Lead Gen Commerce Content & Media GamingAd Tech & Lead Gen Commerce Content & Media Gaming Infrastructure Services Social Travel THE SEG INTERNET INDEX BY PRODUCT CATEGORY
- 42. 42 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved THE SEG INTERNET INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE 1Q14 Median YoY Change in Revenue Growth1Q14 Median TTM Revenue Growth 1Q14 Median YoY Change EBITDA Margin1Q14 Median TTM EBITDA Margin 27.6% 15.2% 7.9% 11.2% 8.9% 52.7% 57.2% 21.0% Ad Tech & Lead Generation Commerce Content& Media Gaming Infrastructure Services Social Travel (22.2%) (25.7%) (37.2%) (49.1%) (3.3%) 26.2% (12.2%) 8.5% Ad Tech & Lead Generation Commerce Content& Media Gaming Infrastructure Services Social Travel 6.8% 7.3% 13.2% 32.9% 6.1% 7.4% 10.9% 17.2% Ad Tech & Lead Generation Commerce Content& Media Gaming Infrastructure Services Social Travel (9.0%) 45.5% (3.8%) (8.1%) (16.4%) (0.5%) (15.5%) (5.0%) Ad Tech & Lead Generation Commerce Content& Media Gaming Infrastructure Services Social Travel
- 43. 43 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved 1Q14 YoY Change in Median EV/Revenue Multiples1Q14 Median EV/Revenue Multiples • Public Internet companies comprising the Services and Social product categories closed Q1 with revenue growth rates more than twice the median (52.7%, 57.2%, respectively). • Public Internet companies comprising the social category closed 1Q14 with the highest median EV/Revenue multiple, 14.7x, 206% higher than the second highest category . Facebook and LinkedIn led the ascent, after proving social networking could be extremely profitable. • The success social media Internet providers have had monetizing their services, largely through advertising, is taking share away from many in the Ad Tech & Lead Generation space, with marketers clearly attracted to the scalability and ROI of advertising in Facebook and LinkedIn. As a result of these shifting advertising budgets, the median TTM revenue growth of the Ad Tech & Lead Generation product category plunged 22.2% YoY in 1Q14. • Companies within the Gaming product category continue to be very profitable. At the close of 1Q14, the Gaming product category closed with a median EBITDA margin of 32.9%, 3x higher than the median of public Internet companies. However, the category continues to be extremely hits driven leading to low visibility of future performance, which keeps trading multiples somewhat muted. • Despite poor financial performance, the Content & Media product category median EV/Revenue spiked 128% YoY to 3.5x in 1Q14. The category was largely driven by outperformance of Netflix and Pandora, two companies who are demonstrating incredible staying power in the face of stiff competition from companies with deep pockets. THE SEG INTERNET INDEX BY PRODUCT CATEGORY: MARKET MULTIPLES 3.2x 1.2x 3.5x 3.8x 1.9x 4.2x 14.7x 4.8x Ad Tech & Lead Generation Commerce Content& Media Gaming Infrastructure Services Social Travel 39.6% 30.7% 128.2% 40.6% 11.2% 18.6% 61.0% 69.6% Ad Tech & Lead Generation Commerce Content& Media Gaming Infrastructure Services Social Travel
- 44. 44 SOFTWARE INDUSTRY M&A MARKET UPDATE
- 45. 45 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved Median On-Premise Software EV/Revenue Exit MultiplesU.S. Software Mergers & Acquisitions Activity • There were 444 software M&A transactions in 1Q14. Deal activity over the past three years has remained consistently robust. • Software M&A spending soared to $31.4 billion in 1Q14, the highest quarterly deal spend since 2Q07. Facebook’s $16.4 billion acquisition of WhatsApp accounted for roughly half of the quarter’s tally. • In addition to WhatsApp, Q1 featured seven other On-premise/SaaS/Internet mega deals (EV > $500M), including Thoma Bravo’s acquisition of TravelClick ($930M EV, 3.5x EV/Revenue multiple estimate); Verint’s purchase of Kana Software ($514M, 4.0x estimate); Rakuten’s acquisition of Viber Media ($900 million); VMWare’s acquisition of AirWatch ($1.5 billion, 10.0x estimate); and Dassault Systemes’ acquisition of Accelrys ($683 million, 4.1x). • The average software M&A purchase price has increased each of the past three quarters, reaching $54M in 1Q14. • Megadeals aside, most buyers have focused on small and mid-sized acquisitions, in line with out 2013 and 2014 Buyers Survey in response to which 72% of buyers indicated they would focus on deals ranging in size from $10M - $99M. SOFTWARE/SaaS M&A DEAL VOLUME AND SPENDING 426 430 454 456 432 454 435 406 394 431 444 455 444 $13.1 $21.3 $23.4 $12.6 $15.8 $23.1 $12.3 $15.8 $9.9 $20.8 $20.2 $22.8 $31.4 $0 $5 $10 $15 $20 $25 $30 $35 0 50 100 150 200 250 300 350 400 450 500 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Value(BIllions) NumberofDeals Deals Value $37 $40 $42 $41 $41 $42 $36 $39 $36 $35 $40 $43 $54 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 TTMAverageDealValue(Millions)
- 46. 46 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved Median Exit Multiples • The median on-premise software exit multiple in 1Q14 was 2.3x, precisely the same as the past two quarters. • Historically, a 2.3x revenue exit multiple is at the upper end of the valuation range for on-premise software companies. That quarterly median multiple was beaten only twice since 2007, in 3Q10 and 2Q11, when it climbed to 2.5x before receding the following quarter. • On a TTM basis, 43% of all on-premise software targets in 1Q14 were acquired for 2.0x TTM revenue or less, and 69% for 3.0x or less. • Targets receiving an exit multiple of 3.0x or higher belonged to currently “hot” software product categories experiencing rapid market adoption and growth, including big data integration, network infrastructure and security. • Noteworthy smaller on-premise acquisitions in 1Q14 included AeroFlex Holdings’ acquisition of network performance management vendor Shenick Network Systems ($28.5 million, 3.0x TTM revenue), and Medina Capital’s acquisition of encryption software provider Cryptzone ($13.4 million, 3.6x TTM revenue). SOFTWARE M&A EXIT MULTIPLES Median EV/Revenue Exit Multiple Distribution 25.0% 17.9% 26.2% 14.3% 16.7% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% <= 1.0x > 1.0x & <= 2.0x > 2.0x & <= 3.0x > 3.0x & <= 4.0x > 4.0x TTM Revenue Exit Multiple Bins %ofDeals-2013TTM%ofDeals-2013TTM 1.6x 1.8x 2.3x 2.3x 2.3x 12.7x 11.6x 11.5x 12.9x 13.3x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 1Q13 2Q13 3Q13 4Q13 1Q14 EV/Revenue EV/EBITDA
- 47. 47 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved by Sizeby Ownership Structure SOFTWARE M&A: BY OWNERSHIP STRUCTURE AND SIZE • Almost three out of four software M&A transactions in 1Q14 featured privately-held targets. • Privately-held software companies in the first quarter were paid a marginally higher multiple than their public counterparts (2.3x TTM revenue vs. 2.1x) • Public buyers in 1Q14 paid a median 2.7x TTM revenue for their targets in 1Q14, compared to a median of 1.7x paid by private buyers. • Buyers with revenue greater than $200 million paid a median 3.1x TTM revenue for their targets, compared to a median 1.6x TTM revenue purchase price paid by smaller buyers. • On a TTM basis, software M&A transactions with the highest exit multiples featured a large public or private buyer (greater than $200 million in revenue) acquiring a small target (less than $20 million). In Q1, this match-up produced a median 3.7x EV/Revenue exit multiple. Public Sellers 2.1x Median Multiple Private Sellers 2.3x Median Multiple 72% 28% Public Buyers 2.7x Median Multiple Private Buyers 1.7x Median Multiple 60%40% 66% 34% Buyer Less Than $200 million 1.6x Median Multiple Buyer Greater Than $200 million 3.1x Median Multiple Seller Less Than $20 million: 2.4x Seller Less Than $20 million: 3.7x Seller Greater Than $20 million: 1.5x Seller Greater Than $20 million: 0.8x Seller Less Than $20 million: 1.8x Seller Less Than $20 million Seller Greater Greater Than $20 million: 1.6x Seller Greater Than $20 million: 2.9x
- 48. 48 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved Horizontal & Vertical M&A Median EV/Revenue Exit Multiples Horizontal & Vertical M&A Volume SOFTWARE M&A: BY VERTICAL AND HORIZONTAL MARKETS • As in the past five quarters, horizontal software providers garnered almost two-thirds of all software M&A transactions in 1Q14. • The median exit multiple for horizontal software companies has risen steadily during the past three quarters, reaching 2.5x TTM revenue in 1Q14. First quarter horizontal transactions included Alibaba Group’s acquisition of digital map content provider AutoNavi Holdings for $1.2 billion (8.3x revenue); Barco’s acquisition of digital media content management provider X2O Median for $19 million (4.2x revenue); Medina Capital’s acquisition of encryption software provider Cryptzone for $13.4 million (3.6x revenue); and Aeroflex Holding’s acquisition of network performance management software vendor Shenick Network Systems for $28.5 million (3.0x revenue). • The median exit valuation of vertical software companies has fluctuated widely over the past five quarters, advancing from 1.7x TTM revenue in 4Q13 to a more historically normal 2.1x TTM in the first quarter. • Q1’s vertical software deals included Equifax’s acquisition of debt collection software provider TDX Group for $326.8 million (3.7x revenue); Dassault Systemes’ acquisition of scientific informatics provider Accelrys for $682.9 million (4.1x revenue); and Advanced Software Group’s acquisition of higher education software provider Compass Computer for $19.4 million (2.1x revenue). 33% 36% 33% 39% 35% 67% 64% 67% 61% 65% 0% 20% 40% 60% 80% 100% 1Q13 2Q13 3Q13 4Q13 1Q14 Horizontal Vertical 1.3x 1.9x 2.7x 1.7x 2.1x 1.8x 1.6x 2.0x 2.4x 2.5x 1Q13 2Q13 3Q13 4Q13 1Q14 Vertical Horizontal
- 49. 49 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved SOFTWARE M&A ACTIVITY BY PRODUCT CATEGORY • The Mobile product category accounted for 25.4% of all software M&A transactions in the first quarter, making it the most active category. Distant runner-ups were Healthcare (7.1%), Financial Services (6.5%), Security (5.0%), and BI, Risk & Compliance (4.6%) • Historically, deal activity in any given product category typically varies widely from year to year, based upon evolving market adoption, changing technology platforms, economic cycles, etc. Examples include: • BI, Risk & Compliance transactions accounted for 4.6% of all software M&A activity in 1Q14, but only 2.3% in 1Q13. • Engineering, PLM & CAD deals accounted for 2.2% of software M&A activity in 1Q14 compared with 4.6% in 1Q13. • Supply Chain Management transactions accounted for 2.8% of software M&A activity in 1Q14 versus 4.6% in 1Q13. CRM, Marketing & Sales 4.3% Data Mgmt & Integration 0.3% Dev. Tools & IT Asset Mgmt 2.2% eCommerce 1.9% EDA 2.2% Engineering, PLM & CAD 2.2% Middleware 0.3%ERP 0.6% Entertainment 0.9% HR & Workforce Mgmt 2.5% Messaging, Conferencing & Communications 1.5% Multimedia, Graphics & Communications 2.8% Network Performance Mgmt 0.9% Security 5.0% Systems Mgmt 1.2% Supply Chain Mgmt & Logistics 2.8% Mobile 25.4% Automotive 0.9% Construction 0.9% Education 3.4% Energy & Utilities 1.2% Financial Services 6.5% Healthcare 7.1% Insurance 1.2% Legal 0.3% Manufacturing 0.6% Other Verticals 8.0% Public Sector 0.3% Real Estate 1.2% Retail 2.5% Telcom 0.3% Accounting & Finance 0.6% Billing & Service Provisioning 0.3% BI, Risk & Compliance 4.6% Content & Document Mgmt 2.8% Verticals
- 50. 50 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved Median EV/Revenue Exit Multiples by Software Product Category • Among the 32 on-premise software product categories we track, ten had both sufficient deal activity and deal data to ascertain a TTM revenue multiple in 1Q14. • On a TTM basis, Systems Management software M&A transactions garnered the highest median exit multiple (3.1x) among these ten categories in the first quarter, led by Insight Venture Partners’ 2Q13 acquisition of BMC Software and Solarwinds’ 4Q13 purchase of Confio Software. • Healthcare Software was a close second, posting a solid 3.0x median EV/Revenue exit multiple in 1Q14. Notable Healthcare Software deals included 2Q13’s acquisition of Ingenuity by Qiagen (5.5x revenue); 3Q13’s acquisition of MSS Management by Ideagen (4.3x revenue); and 3Q13’s acquisition of Qline Solutions by Biosign Technologies (3.0x revenue). 3.1x 3.0x 2.7x 2.3x 2.2x 1.8x 1.8x 1.5x 1.1x 1.1x Systems Management Healthcare Security Engineeringand PLM OtherVerticals (A&D,Telco, Retail,etc.) Education BI,Risk& Compliance Mobile FinancialServices Software SupplyChain SOFTWARE M&A EXIT VALUATIONS BY PRODUCT CATEGORY
- 51. 51 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved SaaS M&A: DEAL VOLUME AND EXIT MULTIPLES • There were 104 SaaS M&A transactions in 1Q14, essentially the same deal volume level as in three of the past four quarters. • The median TTM EV/Revenue exit multiple of SaaS transactions rose sharply to 4.6x in 1Q14, after holding mostly steady the past year. • SaaS transactions in the first quarter with especially lofty exit multiples included Infor’s acquisition of PeopleAnswers ($200 million, 7.0x TTM revenue estimate); ServiceSource’s acquisition of Scout Analytics ($32.5 million, 6.0x revenue); Wolters Kluwer’s acquisition of Third Coast ($290 million, 5.8x revenue); and Microsoft’s acquisition of Parature ($100 million, 5.0x revenue). • The median SaaS exit multiple was 100% greater than the median on-premise exit multiple in 1Q14 (4.6x vs 2.3x). Median SaaS EV/Revenue Exit MultiplesSaaS M&A Volume 4.0x 4.0x 4.3x 4.1x 4.6x 1Q13 2Q13 3Q13 4Q13 1Q14 39 45 48 68 65 59 94 94 86 104 97 103 104 0% 5% 10% 15% 20% 25% 30% 0 20 40 60 80 100 120 SaaSM&ADealsasa%ofTotal SoftwareM&ADeals #ofSaaSM&ADeals SaaS M&A Deals SaaS as % of Software
- 52. 52 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved SaaS M&A BY PRODUCT CATEGORY • CRM, Marketing & Sales, and HR & Workforce Management were the most active SaaS product categories, each accounting for 13.6% of all SaaS M&A transactions in the first quarter. • After three quarters of lackluster deal volume, SaaS transactions in the HR & Workforce Mgmt product category comprised 13.6% of Q1’s total SaaS M&A activity, compared to only 6.4% for all of 2013. The resurgence in the category’s quarterly deal volume is largely attributable to strong customer demand for HR big data and HR analytics, as well as mobile workforce and social recruiting solutions. • Messaging, Conferencing & Communications and Systems Management product categories also exhibited strength in 1Q14, with each accounting for 10.7% of total quarterly deal volume. Both categories benefited from rapidly ramping enterprise adoption of SaaS deployed solutions, which is placing increasing pressure on large, on- premise legacy vendors to catch up. CRM, Marketing & Sales 13.6% Data Mgmt & Integration 1.0% eCommerce 1.9% Engineering, PLM & CAD 1.9% ERP 1.9% HR & Workforce Mgmt 13.6% Messaging, Conferencing & Communications 10.7% Multimedia, Graphics & Communications 1.0% Network Performance Mgmt 1.9% Security 3.9% Systems Mgmt 10.7% Supply Chain Mgmt & Logistics 3.9% Automotive 1.0% Construction 1.9% Education 3.9% Financial Services 2.9% Healthcare 1.9% Insurance 1.0% Legal 2.9% Manufacturing 1.0% Non-profit 1.0% Other Verticals 3.9% Real Estate 1.0% Accounting & Finance 1.9% Billing & Service Provisioning 1.0% BI, Risk & Compliance 5.8% Content & Document Mgmt 2.9% Verticals
- 53. 53 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved 1Q14 SaaS M&A TRANSACTIONS Date Buyer Seller Enterprise Value (mm) TTM Rev. (mm) EV/Rev 03/26/2014 SAPAG (DB:SAP) Fieldglass, Inc. - - - 03/25/2014 Golden Gate Capital LiveVox, Inc. - - - 03/21/2014 ALSO Holding AG (SWX:ALSN) Nervogrid Oy - - - 03/20/2014 Dromana Estate Ltd. (ASX:DMY) CloudCentral Pty Ltd $2.4 - - 03/19/2014 InterCloud Systems, Inc. (NasdaqCM:ICLD) VaultLogix, LLC $44.0 $12.0 3.7x 03/19/2014 IgnitionOne, Inc. Knotice, Ltd. - - - 03/19/2014 BigHand Ltd. Esquire Innovations, Inc. - - - 03/18/2014 Thoma Bravo, LLC TravelCLICK, Inc.* $930.0 $265.7 3.5x 03/18/2014 Dropbox, Inc. Zulip, Inc. - - - 03/18/2014 TrustWave Holdings, Inc. Cenzic, Inc. - - - 03/17/2014 Everbridge, Inc. Vocal Ltd. - - - 03/14/2014 Charterhouse Capital Partners LLP SkillSoft Limited - - - 03/13/2014 Clear Payment Solutions LLC eKiosk Solutions LLC - - - 03/12/2014 eBet Limited (ASX:EBT) Industry Data Online Pty Ltd $0.6 - - 03/12/2014 Xumanii International Holdings Corp (OTCPK:XUII) Amonshare.com $1.5 - - 03/11/2014 Sysxnet Limited SaaS Markets, LLC - - - 03/11/2014 Ian Martin Limited Fitzii, Inc. - - - 03/10/2014 Chinasoft International Ltd. (SEHK:354) Deem, Inc. - - - 03/07/2014 DocuSign, Inc. Comprova.com Informatica S.A. - - - 03/06/2014 Axium XTS Corporation ArchitTrek, LLC - - - 03/05/2014 Raine Ventures LLC The Immediate Edge $1.4 $0.5 2.7x 03/05/2014 Tribal Group plc (LSE:TRB) Sky Softw are Pty Limited $19.1 - - 03/05/2014 L-3 Communications Holdings Inc. (NYSE:LLL) L-3 Data Tactics - - - 03/04/2014 TalentSoft SA PeopleXS Holding BV - - - 03/03/2014 Shutterstock, Inc. (NYSE:SSTK) WebDAM, Inc. - - - 03/03/2014 Securus Technologies, Inc. Telerus, Inc. - - - 02/28/2014 Corporate Executive Board Co. (NYSE:CEB) Know ledgeAdvisors, Inc. $52.0 - - 02/28/2014 FrontStream Payments, Inc. Truist, Inc. - - - 02/26/2014 Wolters Kluw er Corporate Legal Services Third Coast Holdings Inc $290.3 $50.1 5.8x 02/26/2014 Workday, Inc. (NYSE:WDAY) Identified, Inc. - - - 02/26/2014 Square, Inc. BookFresh - - - 02/26/2014 DEKRA International GmbH TTL Automotive Ltd. - - - 02/25/2014 AmbiCom Holdings, Inc. (OTCPK:ABHI) Veloxum Corporation - - - 02/24/2014 Oracle Corporation (NYSE:ORCL) Blue Kai, Inc. - - -
- 54. 54 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved 1Q14 SaaS M&A TRANSACTIONS (CON’T) Date Buyer Seller Enterprise Value (mm) TTM Rev. (mm) EV/Rev 02/24/2014 Monster Worldw ide, Inc. (NYSE:MWW) Gozaik LLC - - - 02/24/2014 CloudFlare, Inc. Jaal, LLC - - - 02/24/2014 International Business Machines Corporation (NYSE:IBM) Cloudant, Inc. - - - 02/24/2014 QSC AG (XTRA:QSC) FTAPI Softw are GmbH - - - 02/20/2014 - codeMantra, LLC - - - 02/20/2014 OTOY, Inc. AppSlingr, Inc. - - - 02/19/2014 Sprinklr Inc. Dachis Corporation, Inc. - - - 02/19/2014 FSX Interlinked, Inc. Interlinked, Inc. - - - 02/19/2014 Ocuco Limited EMRlogic Systems Inc. - - - 02/19/2014 Clearsw ift Limited Microdasys Europe GmbH - - - 02/18/2014 ClickSoftw are Technologies Ltd. (NasdaqGS:CKSW) Xora, Inc. $14.7 - - 02/18/2014 Remark Media, Inc. (NasdaqCM:MARK) BH Enterprises of FL, Inc., - - - 02/18/2014 Wyless Inc. ASPIDER Solutions B.V. - - - 02/18/2014 Court Square Capital Partners AFS Technologies, Inc. - - - 02/14/2014 Equifax Inc. (NYSE:EFX) Forseva, LLC - - - 02/13/2014 Yahoo! Inc. (NasdaqGS:YHOO) Distill, Inc. - - - 02/11/2014 SearchDex, Inc. Altruik, Inc. - - - 02/11/2014 j2 Global, Inc. (NasdaqGS:JCOM) Betteroff Netw orks Pty Ltd. and - - - 02/11/2014 RealPage, Inc. (NasdaqGS:RP) Bookt LLC - - - 02/10/2014 Visma AS Logium Oy - - - 02/06/2014 Ericsson (OM:ERIC B) Azuki Systems, Inc. - - - 02/06/2014 Arqiva Broadcast Holdings Limited Capablue Ltd - - - 02/05/2014 Persistent Systems Limited (BSE:533179) Cloudsquads, Inc. - - - 02/05/2014 PointAcross, Inc. GoldMail, Inc. - - - 02/04/2014 Callidus Softw are Inc. (NasdaqGM:CALD) LeadRocket, Inc. $3.0 - - 02/04/2014 Service Scout, Inc. Betterfly, Inc. - - - 02/03/2014 - RentVM, Inc. $5.9 - - 01/31/2014 Physio-Control, Inc. Sansio, Inc. - - - 01/31/2014 Altiux Innovations Pvt Ltd. P-Device Systems Pvt Ltd - - - 01/31/2014 Vector Capital CollabNet, Inc. - - - 01/31/2014 Explorer Softw are Inc. Computer Guidance Corporation - - - 01/30/2014 SalesFUSION Inc. LoopFuse, Inc. - - - 01/29/2014 Bottomline Technologies (de), Inc. (NasdaqGS:EPAY) Rationalw ave, Inc. $8.0 - - 01/29/2014 - Theta Research, LLC - - -
- 55. 55 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved 1Q14 SaaS M&A TRANSACTIONS (CON’T) Date Buyer Seller Enterprise Value (mm) TTM Rev. (mm) EV/Rev 01/29/2014 ThinkHR Corporation HR That Works, Inc. - - - 01/27/2014 LiveOps, Inc. UserEvents, Inc. - - - 01/27/2014 Navico Holding AS Contour Innovations, LLC - - - 01/27/2014 Berkshire Hathaw ay Specialty Insurance MyAssist Inc. and Insure America LLC - - - 01/26/2014 Dealer Authority eReputationBuilder - - - 01/24/2014 Budget Center Inc. (OTCPK:BDGN) Vericard Inc. $0.9 - - 01/23/2014 AdRoll, Inc. Userfox - - - 01/23/2014 The Gores Group LLC Zmags, Corp. - - - 01/22/2014 ServiceSource International, Inc. (NasdaqGS:SREV) Scout Analytics, Inc. $32.5 $5.4 6.0x 01/20/2014 Callcredit Information Group Limited Coactiva Aspiren Ltd - - - 01/20/2014 Ellucian, Inc. CampusIT Limited - - - 01/20/2014 Genesys Telecommunications Laboratories, Inc. Ventriloquist Customer - - - 01/18/2014 Allied Wallet, Ltd. Cloudasia Limited - - - 01/16/2014 4CAD Group Plate-forme d’Ingénierie Collaborative - - - 01/16/2014 Electronics for Imaging, Inc. (NasdaqGS:EFII) SmartLinc, Inc. - - - 01/16/2014 HUBHEAD CORP. NRX Global Inc. - - - 01/15/2014 Trusted Team LLC 22Touch Systems, Inc. - - - 01/15/2014 Google Inc. (NasdaqGS:GOOG) Impermium Corporation - - - 01/15/2014 Hamilton-Ryker IT Solutions, LLC WMS iSymphony, Inc. - - - 01/14/2014 PROACTIS Holdings PLC (AIM:PHD) EGS Group Limited $3.6 - - 01/14/2014 RuffaloCODY, LLC ScaleFunder, Inc. - - - 01/13/2014 Project Management Institute, Inc., Endow ment Arm ProjectManagement.com And - - - 01/13/2014 NGB Markets, Inc. Local Food Systems, Inc. - - - 01/10/2014 Deutsche Boerse AG (XTRA:DB1) Impendium Systems Ltd. - - - 01/10/2014 Qualcomm Connected Experiences, Inc. kooaba AG - - - 01/10/2014 AFS Technologies, Inc. Visicom Inc. - - - 01/09/2014 HireVue, Inc. Reschedge - - - 01/08/2014 IQNavigator, Inc. ProcureStaff Technologies, Ltd. - - - 01/07/2014 INFOR, INC. PeopleAnsw ers, LLC* $200.0 $28.6 7.0x 01/07/2014 Oracle Corporation (NYSE:ORCL) Corente, Inc. - - - 01/06/2014 Verint Systems Inc. (NasdaqGS:VRNT) KANA Softw are, Inc.* $514.0 $128.5 4.0x 01/06/2014 Microsoft Dynamics Inc Parature, Inc.* $100.0 $20.0 5.0x 01/06/2014 Pinterest, Inc. VisualGraph Inc. - - - 01/06/2014 ABRY Partners, LLC Inmar, Inc. - - - 01/02/2014 Firespring, Inc. Cost Effective Technologies, Inc. - - -
- 56. 56 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved • Internet M&A deal volume remained highly volatile, in large part due to shifting marketing strategies, evolving business models, and constant changes in the competitive landscape. • In early 2012, a large number of Internet targets exited amidst the hype of the pending Facebook IPO (5/2012), creating a spike in M&A volume. After the Facebook IPO debacle, Internet investors and buyers alike became more cautious and circumspect, and M&A volume declined markedly, plunging to 185 transactions in 1Q13, down from 273 transactions in 2Q12. • There were 195 Internet M&A transactions in the first quarter, a 23% decline from 4Q13’s 256 deals. We believe the retreat signals a return to more typical quarterly deal activity in the Internet sector, following three consecutive quarters of frothy deal activity. A similar normalization was witnessed in 1Q13. • The median EV/Revenue exit multiple for Internet sellers in 1Q14 was 1.8x, virtually unchanged from the prior four quarters. Internet M&A Volume 185 204 231 256 195 1Q13 2Q13 3Q13 4Q13 1Q14 1.9x 1.9x 1.9x 1.9x 1.8x 1Q13 2Q13 3Q13 4Q13 1Q14 INTERNET M&A: DEAL VOLUME AND EXIT MULTIPLES Median Internet EV/Revenue Exit Multiples
- 57. 57 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved INTERNET M&A: BY PRODUCT CATEGORY • Internet ad-tech remained the most active Internet M&A category, with 57 transactions in 1Q14. The first quarter’s tally was down sharply from 4Q13’s 94 ad-tech transactions, but in line with quarterly transaction volume during the first half of 2013. We do not anticipate a resurgence in Ad-tech and Lead gen deal activity for the remainder of the year. • Internet Infrastructure and Internet Commerce transaction activity declined significantly in 1Q14 from the prior quarter. Here too, the category’s quarterly deal volume represented a retreat to normalcy following high deal volumes in recent quarters. • Content and Media were the only Internet categories to post increases in deal activity over the prior quarter. M&A Volume by QuarterTTM M&A Volume by Product Category 29.4% 19.6% 25.8% 5.2% 10.8% 9.3% Ad-Tech & Lead Gen Commerce Content & Media Gaming Infrastructure Social Tech Category 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 Ad-Tech & Lead Gen 58 60 85 94 57 Commerce 34 39 44 49 38 Content & Media 42 34 36 42 50 Gaming 7 11 8 10 10 Infrastructure 24 41 39 39 21 Social Tech 20 19 19 22 18 Total 185 204 231 256 194
- 58. 58 APPENDIX
- 59. 59 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved THE SEG SOFTWARE INDEX COMPANIES – KEY METRICS Company 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 A10 Networks, Inc. - - - - 7.1x - - - - - 31.5% 31.5% 31.5% - 18.1% 11.5% 11.5% 11.5% 0.5% -3.0% Accretive Health 0.4x 0.4x 0.4x 0.4x 0.4x 5.8x 6.4x 5.5x 5.7x 5.6x 8.0% 8.2% 5.6% -0.2% -0.2% 6.9% 6.4% 6.4% 6.5% 6.5% ACI Worldwide, Inc. 3.2x 3.4x 3.3x 3.7x 3.4x 16.5x 19.5x 17.6x 17.4x 15.8x 43.3% 38.7% 39.7% 39.5% 29.8% 19.7% 17.4% 19.0% 21.2% 21.6% Activision Blizzard 2.3x 2.4x 2.9x 2.0x 3.0x 7.1x 7.1x 7.7x 5.7x 9.3x 2.1% 11.8% 13.1% 7.5% -5.6% 32.4% 33.3% 37.6% 35.4% 32.3% Actuate Corporation 1.6x 1.7x 2.0x 2.2x 1.5x 9.7x 11.5x 16.0x 18.9x 14.9x 2.9% 0.9% -1.9% -0.6% -3.1% 16.4% 14.9% 12.6% 11.5% 10.2% Adobe Systems Incorporated 3.9x 4.7x 5.1x 6.4x 7.6x 13.3x 17.7x 22.1x 33.8x 40.7x 3.1% -1.9% -5.3% -7.9% -7.3% 29.7% 26.6% 23.3% 19.0% 18.6% Advent Software, Inc. 3.5x 4.1x 3.7x 5.4x 4.9x 18.1x 19.7x 21.2x 29.9x 26.2x 10.0% 7.9% 6.7% 6.9% 6.7% 19.1% 20.6% 17.3% 18.1% 18.6% Allot Communications Ltd. 2.8x 2.4x 2.9x 3.3x 4.2x 24.7x 37.0x 156.9x - - 34.7% 23.4% 7.2% -4.8% -7.8% 11.4% 6.6% 1.9% -5.1% -0.8% Allscripts Healthcare Solutions Inc. 1.6x 1.9x 2.2x 2.3x 2.5x 19.0x 26.3x 50.2x 108.3x 352.0x 0.2% -3.0% -5.6% -7.4% -5.1% 8.3% 7.4% 4.4% 2.1% 0.7% Amdocs Limited 1.5x 1.5x 1.5x 1.6x 1.7x 8.0x 7.8x 8.1x 8.6x 9.3x 1.8% 1.9% 2.6% 3.0% 3.6% 18.5% 18.6% 18.7% 18.6% 18.5% American Software, Inc. 1.7x 1.7x 1.7x 1.9x 2.1x 10.7x 11.4x 12.1x 12.5x 12.9x 3.3% -2.1% -6.6% -6.6% -3.2% 15.9% 15.3% 14.3% 15.4% 16.5% ANSYS, Inc. 8.2x 7.9x 8.7x 8.6x 8.0x 17.2x 16.8x 18.7x 18.4x 17.1x 15.4% 12.8% 10.5% 9.1% 7.9% 47.6% 47.1% 46.7% 46.6% 46.8% Aruba Networks, Inc. 4.0x 2.7x 2.6x 2.6x 2.9x 55.8x 43.8x 60.8x 88.1x 168.9x 22.8% 19.3% 16.1% 13.8% 11.6% 7.1% 6.1% 4.3% 3.0% 1.7% Aspen Technology, Inc. 9.7x 9.1x 9.4x 10.2x 11.2x 138.6x 65.7x 49.1x 44.2x 40.6x 22.9% 26.1% 28.1% 24.3% 27.3% 7.0% 13.8% 19.2% 23.0% 27.7% Autodesk, Inc. 3.2x 3.1x 3.0x 3.7x 4.5x 15.7x 15.1x 14.8x 18.3x 24.2x 4.4% 0.8% -0.5% -0.2% -1.7% 20.7% 20.5% 20.3% 20.1% 18.8% AVG Technologies N.V. 2.3x 2.5x 3.0x 2.3x 2.3x 7.6x 8.1x 8.8x 7.1x 6.5x 30.7% 28.2% 27.2% 19.5% 14.4% 29.8% 31.4% 34.1% 33.0% 35.0% Bango PLC 8.8x 9.8x 9.4x 6.9x 7.6x - - - - - - - - - -13.7% -28.6% -36.2% -40.5% -40.5% -51.5% Barracuda Networks, Inc. - - - 4.9x 7.4x - - - - - 23.6% - - - 17.5% 2.9% 2.1% 1.1% -0.1% -0.1% Blackbaud, Inc. 3.1x 3.4x 3.7x 3.7x 3.2x 21.7x 22.3x 20.8x 19.3x 16.2x 20.6% 23.6% 22.3% 15.8% 12.6% 14.5% 15.3% 17.8% 19.1% 20.0% Bottomline Technologies 3.7x 3.3x 3.4x 4.5x 4.6x 38.9x 36.4x 35.0x 45.5x 42.4x 14.9% 15.7% 13.6% 11.5% 11.6% 9.6% 9.1% 9.8% 9.8% 10.8% Broadridge Financial 1.4x 1.5x 1.6x 1.9x 1.9x 7.8x 8.4x 8.5x 9.6x 9.5x 3.4% 3.8% 5.5% 6.8% 7.3% 17.3% 17.7% 18.6% 19.7% 19.9% Brocade Communications Systems, Inc. 1.2x 1.1x 1.4x 1.5x 1.7x 5.6x 5.2x 6.2x 6.6x 7.1x 4.8% 4.8% 1.5% -0.7% -3.0% 21.8% 21.9% 22.2% 23.3% 24.4% BSQUARE Corporation 0.2x 0.1x 0.1x 0.2x 0.2x 7.9x 8.8x 12.9x - - 4.7% 0.3% -3.5% -6.9% -9.2% 2.1% 1.5% 1.0% -1.8% -2.0% CA, Inc. 2.2x 2.4x 2.7x 3.0x 3.0x 6.6x 7.0x 8.0x 8.6x 8.6x -1.6% -3.6% -3.5% -2.8% -2.1% 33.4% 33.7% 34.0% 34.5% 34.2% Cadence Design Systems, Inc 2.7x 2.6x 2.8x 2.5x 2.7x 11.9x 11.3x 12.3x 11.9x 13.0x 15.4% 13.8% 12.7% 10.1% 10.1% 22.7% 23.0% 22.4% 20.9% 20.9% Cerner Corporation 5.5x 5.9x 5.9x 6.5x 6.6x 20.0x 21.0x 20.4x 24.9x 25.3x 20.9% 14.7% 12.3% 8.8% 8.8% 27.3% 28.2% 28.8% 26.2% 26.2% Check Point Software Tech Ltd. 6.5x 6.0x 7.2x 7.7x 8.3x 11.6x 10.8x 13.0x 13.8x 15.0x 7.7% 5.7% 4.4% 3.4% 3.8% 56.4% 56.1% 55.8% 55.8% 55.4% Cimatron Ltd. 1.3x 1.3x 1.3x 1.4x 1.8x 8.8x 8.5x 8.9x 9.0x 12.1x 3.9% 2.1% 1.6% 4.0% 4.6% 15.2% 14.7% 14.4% 15.1% 14.7% Cisco Systems, Inc. 1.7x 1.8x 2.0x 1.8x 1.8x 6.1x 6.3x 7.1x 6.1x 6.6x 5.4% 5.1% 5.5% 4.6% 1.3% 28.3% 28.1% 28.5% 28.8% 27.1% Citrix Systems, Inc. 4.8x 4.3x 4.6x 3.6x 3.6x 20.6x 19.0x 20.8x 16.4x 16.0x 17.2% 15.8% 16.5% 15.8% 12.8% 23.6% 22.5% 21.9% 21.9% 22.2% CommVault Systems, Inc. 6.6x 6.0x 6.7x 5.8x 4.9x 39.9x 34.7x 38.4x 32.8x 26.9x 23.4% 21.9% 21.7% 21.4% 20.4% 16.5% 17.3% 17.6% 17.6% 18.2% Computer Programs and Sys, Inc. 3.0x 2.9x 3.1x 3.4x 3.5x 12.4x 12.0x 12.5x 13.2x 13.0x 5.7% 6.1% 12.3% 11.2% 9.6% 24.2% 24.2% 24.9% 25.3% 26.7% Compuware Corporation 2.6x 2.5x 2.4x 2.4x 2.3x 16.6x 18.3x 17.4x 17.1x 17.6x -2.3% -6.5% -6.0% -1.3% -2.5% 15.5% 13.9% 13.9% 14.2% 13.3% Constellation 2.9x 3.1x 3.5x 3.6x 3.9x 20.6x 27.0x 33.9x 42.1x 30.2x 15.2% 20.4% 29.4% 36.6% 35.9% 13.9% 11.4% 10.2% 8.5% 12.8% CSG Systems International, Inc. 1.0x 1.1x 1.2x 1.4x 1.4x 5.1x 6.0x 6.8x 8.0x 8.0x 3.0% 2.2% 2.1% 0.6% -1.2% 19.8% 18.3% 17.6% 17.1% 16.8% Cyan, Inc. - 6.0x 3.3x 1.1x 0.9x - - - - - 137.2% - - 58.4% 21.6% -9.8% -11.9% -17.1% -20.7% -29.9% Cyren 3.0x 2.7x 2.4x 2.3x 2.9x 37.8x 182.2x - - - 3.9% 10.9% 21.2% 33.4% 34.9% 8.1% 1.5% -2.3% -2.1% -5.8% SEG Software Index EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin
- 60. 60 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved THE SEG SOFTWARE INDEX COMPANIES – KEY METRICS Company 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 Dassault Systèmes 4.6x 5.0x 5.3x 4.6x 4.4x 14.8x 16.0x 17.2x 14.8x 13.9x 13.8% 11.7% 8.4% 4.4% 1.9% 31.3% 31.0% 31.0% 30.9% 31.5% DST Systems, Inc. 1.4x 1.4x 1.4x 1.6x 1.6x 9.7x 9.4x 9.2x 10.1x 9.9x 7.9% 6.4% 5.2% 4.3% 3.2% 14.5% 14.7% 14.9% 15.5% 16.2% Electronic Arts Inc. 1.1x 1.4x 1.9x 1.7x 1.9x 10.9x 16.6x 21.2x 14.9x 31.6x 2.4% -8.4% -7.5% -7.8% -7.5% 9.9% 8.6% 9.1% 11.7% 6.1% EMC 2.2x 2.1x 2.3x 2.1x 2.2x 9.3x 8.8x 9.7x 8.8x 9.0x 8.5% 7.4% 6.4% 6.2% 6.9% 23.9% 23.8% 23.9% 23.8% 24.2% EPIQ Systems, Inc. 2.0x 1.9x 1.9x 2.0x 1.8x 8.7x 9.2x 9.9x 11.2x 10.6x 32.0% 25.9% 22.2% 24.9% 27.2% 22.6% 20.5% 19.1% 17.9% 16.6% Evertec - 6.7x 7.6x 7.0x 7.4x - 14.9x 20.7x 17.9x 19.0x 6.4% 6.2% 5.4% 5.5% 4.6% 37.2% 44.9% 36.7% 39.2% 39.0% Evolving Systems, Inc. 2.4x 2.3x 3.1x 4.0x 3.6x 10.1x 8.3x 11.6x 15.0x 15.3x 38.0% 38.2% 20.2% 4.4% -4.4% 23.8% 27.5% 27.0% 26.5% 23.8% F5 Networks, Inc. 5.0x 3.8x 4.3x 4.1x 4.9x 15.1x 11.9x 13.8x 12.9x 16.0x 17.8% 12.9% 9.0% 7.6% 7.2% 33.1% 32.0% 31.2% 31.6% 30.8% Fair Isaac Corporation 2.9x 2.9x 3.0x 3.2x 3.1x 10.5x 10.7x 11.4x 12.1x 11.9x 9.8% 11.7% 13.6% 9.9% 6.0% 27.5% 26.6% 26.1% 26.7% 25.9% FalconStor Software, Inc. 1.3x 0.6x 0.4x 0.7x 0.9x - - - - - -9.0% -14.4% -14.1% -15.2% -22.2% -13.5% -15.1% -14.5% -11.5% -12.4% Fidessa 2.1x 2.3x 2.7x 2.6x 3.1x 10.3x 11.5x 13.5x 13.4x 15.9x 0.1% -1.0% -2.1% -1.0% 0.1% 20.0% 19.9% 19.8% 19.6% 19.4% Fiserv 3.1x 3.4x 3.5x 3.7x 3.8x 10.8x 11.6x 12.2x 12.7x 13.1x 3.4% 3.4% 5.4% 6.5% 8.5% 29.1% 29.0% 29.0% 29.0% 28.9% Fortinet Inc. 6.3x 4.5x 4.9x 4.6x 5.0x 30.3x 23.0x 27.5x 28.3x 35.6x 23.1% 20.7% 18.0% 17.0% 15.3% 20.6% 19.6% 17.9% 16.2% 14.1% GameLoft SA 1.8x 1.8x 2.1x 2.6x 2.5x 11.6x 11.6x 13.8x 17.3x 15.0x 26.7% 24.1% 21.8% 16.6% 12.0% 15.3% 15.2% 15.2% 15.0% 16.5% Gigamon, LLC - 7.1x 8.2x 5.7x 6.0x - 85.5x - - - 42.0% 41.6% 41.8% 45.1% 45.1% 9.3% 8.3% -22.3% -19.5% -19.5% Glu Mobile, Inc. 1.2x 1.5x 1.5x 2.5x 3.3x - - - - - 46.1% 26.4% 6.0% -7.4% -2.4% -7.7% -10.8% -13.7% -17.3% -13.2% Gree 1.5x 1.5x 1.1x 1.1x 1.6x 3.1x 3.7x 3.1x 3.4x 5.0x 49.5% 11.5% -3.8% -9.7% -12.7% 47.1% 40.4% 36.1% 33.5% 31.6% GSE Systems Inc. 0.4x 0.2x 0.2x 0.2x 0.3x 5.8x 6.6x - - - 2.2% -1.8% -9.3% -12.1% -9.0% 6.2% 3.3% -0.4% -5.2% -6.8% Guidance Software, Inc. 1.9x 1.8x 1.8x 2.0x 2.6x 34.2x 108.0x - - - 23.8% 21.8% 10.9% -3.5% -14.6% 5.5% 1.6% -2.3% -7.9% -12.3% Guidewire Software, Inc. 6.3x 7.9x 8.0x 9.0x 9.0x 88.1x 241.2x 110.7x 739.8x - 28.2% 25.9% 29.6% 25.1% 21.2% 7.2% 3.3% 7.2% 1.2% -1.1% Hewlett Packard 0.4x 0.5x 0.6x 0.5x 0.6x 3.5x 4.2x 4.6x 4.7x 5.0x -5.0% -6.8% -7.7% -6.7% -5.6% 12.1% 12.1% 12.0% 11.6% 11.8% IBM 2.4x 2.4x 2.3x 2.2x 2.3x 9.3x 9.4x 8.9x 8.5x 9.0x -2.3% -3.5% -3.5% -3.2% -4.6% 25.7% 25.6% 25.6% 25.6% 25.1% Imperva 7.2x 7.6x 9.0x 7.3x 9.7x - - - - - 33.1% 33.5% 32.5% 32.5% 32.2% -5.0% -7.1% -10.1% -10.9% -16.5% Informatica Corporation 4.1x 3.8x 4.1x 4.0x 3.9x 21.1x 18.8x 21.0x 21.2x 22.6x 3.5% 2.2% 6.5% 12.8% 16.8% 19.5% 20.4% 19.4% 18.7% 17.3% Intuit Inc 5.1x 4.4x 4.2x 4.6x 5.1x 14.7x 11.9x 12.2x 13.6x 16.3x -6.5% -2.0% 9.5% 11.5% 12.2% 34.7% 37.2% 34.7% 34.0% 31.4% Jack Henry & Associates, Inc. 3.4x 3.6x 3.7x 4.0x 4.1x 10.8x 11.3x 11.6x 12.4x 11.9x 7.9% 8.7% 10.0% 9.9% 9.8% 31.7% 31.9% 32.2% 32.5% 34.0% Juniper Networks, Inc. 2.0x 1.7x 1.9x 1.9x 2.4x 14.6x 11.1x 12.2x 11.5x 14.3x -1.9% 0.3% 3.1% 4.4% 7.0% 13.7% 15.0% 15.9% 16.2% 17.0% King Digital Entertainment - - - - 3.0x - - - - 7.7x 157.3% - - - 1046.1% 7.6% 23.3% 31.1% 36.2% 38.2% Konami Corporation 0.9x 1.2x 1.3x 1.5x 1.5x 6.5x 8.3x 10.3x 13.5x 13.3x -12.4% -15.0% -14.4% -12.9% -4.1% 14.4% 14.3% 12.8% 11.0% 11.3% Magic Software Enterprises Ltd. 1.2x 1.2x 1.5x 1.5x 2.0x 6.1x 6.5x 7.9x 7.5x 10.2x 11.5% 10.1% 15.1% 15.2% 14.7% 18.9% 19.2% 18.4% 19.5% 19.1% Manhattan Associates, Inc. 3.3x 3.4x 4.1x 5.0x 6.0x 14.5x 15.0x 17.4x 20.0x 23.1x 14.3% 9.3% 10.2% 10.4% 10.2% 22.8% 23.0% 23.7% 25.3% 25.8% Mavenir Systems, Inc. - - - 3.4x 4.0x - - - - - 49.2% - - 12.0% 37.2% -14.2% -12.1% -10.3% -7.3% -3.7% MedAssets 3.2x 3.0x 3.3x 3.2x 3.2x 10.4x 9.3x 10.5x 10.4x 10.4x 10.7% 11.0% 9.4% 6.4% 6.3% 30.5% 31.7% 31.6% 30.8% 30.6% Mentor Graphics Corp 1.8x 1.9x 2.2x 2.4x 2.2x 9.4x 11.4x 12.6x 13.6x 10.4x 7.3% 3.4% 1.9% 0.8% 6.2% 19.3% 17.0% 17.7% 17.4% 20.7% Merge Healthcare 1.8x 2.0x 2.0x 1.9x 1.9x 17.5x 21.1x 25.0x 27.5x 17.2x 7.1% 4.5% -0.9% -2.3% -6.9% 10.5% 9.7% 8.1% 6.7% 11.1% Micros Systems 2.5x 2.2x 2.5x 2.7x 2.7x 11.3x 10.4x 12.6x 13.6x 13.9x 14.3% 15.1% 14.5% 11.5% 8.2% 21.8% 21.4% 19.9% 19.8% 19.7% Microsoft Corporation 2.5x 2.9x 2.7x 3.0x 3.0x 6.2x 7.3x 7.1x 7.8x 7.9x 1.2% 4.1% 5.6% 11.1% 14.4% 39.6% 40.0% 38.7% 39.0% 38.1% SEG Software Index EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin
- 61. 61 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved THE SEG SOFTWARE INDEX COMPANIES – KEY METRICS Company 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 MicroStrategy Incorporated 1.6x 1.2x 1.3x 1.8x 1.8x 18.1x 17.4x 26.2x 30.8x 26.1x 5.3% 1.4% 2.3% 4.4% 1.8% 9.0% 6.9% 5.0% 5.8% 7.0% Millennial Media Inc 4.4x 2.4x 2.4x 2.0x 2.5x - - - - 564.7x 71.4% 68.7% 60.3% 42.9% 45.9% -1.0% -0.9% -0.6% -0.9% 0.4% MIND C.T.I. Ltd. 1.1x 0.7x 0.8x 0.9x 1.2x 4.9x 4.0x 4.4x 6.1x 9.0x 6.9% -1.6% -9.4% -10.6% -8.6% 23.0% 18.8% 18.2% 15.3% 13.0% Model N, Inc 4.7x 4.2x 3.0x 1.0x 1.7x 275.9x - 127.2x 27.0x 67.4x - - - 20.9% 14.2% 1.7% -0.5% 2.4% 3.9% 2.5% MSCI, Inc. 4.8x 4.8x 5.0x 5.5x 5.4x 10.6x 10.6x 11.1x 12.2x 12.5x 5.5% 7.3% 8.0% 9.2% 9.0% 45.1% 45.0% 45.0% 44.9% 43.6% Myriad Group AG 2.7x 2.9x 3.0x 3.6x 3.9x - - - - - -7.8% -2.9% 3.0% -10.8% -23.3% -20.1% -19.0% -17.8% -17.0% -16.0% NetApp, Inc. 1.2x 1.3x 1.6x 1.5x 1.5x 9.2x 10.4x 11.4x 10.2x 9.8x 6.0% 1.6% 3.0% 2.5% 1.2% 13.6% 13.0% 13.9% 14.6% 15.2% Netscout Systems, Inc. 2.8x 2.4x 2.6x 2.9x 3.5x 12.2x 10.3x 11.2x 13.3x 15.0x 15.1% 13.6% 10.6% 9.0% 11.8% 22.7% 22.9% 23.1% 22.1% 23.5% NetSol Technologies Inc. 0.6x 0.8x 1.2x 1.2x 1.3x 1.3x 1.5x 2.8x 2.6x 3.6x 40.8% 61.5% 19.9% 22.6% 2.3% 51.5% 52.6% 44.4% 46.4% 35.8% NeuStar, Inc 3.9x 3.9x 4.2x 3.8x 2.9x 9.3x 9.4x 9.9x 9.0x 7.2x 34.0% 25.9% 17.7% 11.0% 8.5% 41.6% 41.7% 42.0% 42.0% 39.9% NQ Mobile Inc. 1.9x 2.8x 5.8x 3.4x 4.1x 47.3x 52.9x 129.9x 115.2x 553.4x 125.6% 122.4% 117.0% 113.0% 114.3% 4.0% 5.3% 4.5% 3.0% 0.7% Omnicell, Inc. 1.7x 1.7x 2.0x 2.0x 2.3x 12.5x 12.0x 13.8x 14.6x 16.5x 27.9% 33.5% 33.1% 27.3% 21.2% 13.4% 14.1% 14.3% 13.9% 13.8% Opera 3.2x 3.6x 3.8x 5.5x 5.4x 11.7x 13.2x 13.6x 19.6x 19.7x 35.2% 35.9% 38.0% 36.5% 38.9% 27.8% 27.2% 27.8% 27.9% 27.5% Oracle Corporation 4.1x 3.9x 3.7x 3.8x 4.2x 9.5x 9.0x 8.4x 8.7x 9.6x 0.5% 0.2% 1.2% 0.9% 2.0% 43.1% 43.2% 43.5% 43.4% 43.5% Palo Alto Networks, Inc 10.7x 9.1x 7.6x 6.5x 9.6x - - - - - 74.8% 63.6% 55.3% 54.4% 49.2% -0.1% -1.6% -1.3% -1.5% -3.7% Pandora Media 4.5x 5.4x 6.3x 8.5x 10.9x - - - - - 55.7% 55.2% 56.0% 53.5% 53.5% -7.2% -8.2% -7.5% -7.1% -7.1% Parametric Technology Corporation 2.3x 2.3x 2.5x 2.9x 3.3x 13.0x 12.3x 12.7x 13.0x 14.8x 3.2% 1.5% 0.3% 3.3% 3.3% 17.9% 18.8% 19.9% 22.3% 22.3% PDF Solutions Inc 4.5x 5.1x 5.7x 6.2x 5.8x 18.7x 19.5x 20.6x 20.9x 17.7x 34.2% 28.6% 22.6% 17.8% 13.3% 24.2% 26.0% 27.4% 29.5% 32.6% Pegasystems Inc. 1.8x 2.1x 2.6x 3.2x 3.0x 16.2x 16.9x 18.3x 19.9x 18.6x 10.8% 9.7% 12.2% 15.3% 10.2% 10.8% 12.2% 14.0% 16.2% 15.9% Progress Software Corporation 3.2x 2.7x 3.2x 3.3x 3.1x 10.8x 13.5x 16.0x 11.9x 11.1x 3.2% 34.7% 69.1% 5.2% 1.9% 29.1% 20.4% 19.9% 28.0% 28.3% Proofpoint, Inc. 3.6x 4.8x 7.9x 8.1x 9.7x - - - - - 29.9% 28.2% 26.2% 25.3% 29.8% -11.4% -12.4% -12.1% -12.9% -12.2% PROS Holdings 5.3x 5.6x 6.3x 6.6x 6.7x 60.4x 74.0x 96.1x 100.0x 101.6x 21.9% 21.7% 23.6% 24.6% 23.0% 8.8% 7.6% 6.5% 6.7% 6.6% QAD Inc. 0.6x 0.5x 0.5x 0.7x 0.9x 9.4x 12.7x 12.8x 16.5x 14.8x 2.0% -0.5% 1.6% 2.8% 5.6% 6.4% 4.3% 4.2% 4.2% 5.8% Qihoo 360 Technology Co. Ltd 10.3x 12.2x 18.3x 17.8x 17.3x 51.0x 68.2x 82.1x 67.3x 78.3x 96.0% 72.6% 78.1% 91.5% 104.0% 20.3% 17.9% 22.3% 26.4% 22.1% Qiwi plc - 1.7x 4.3x 6.1x 5.1x - 8.2x 19.7x 27.2x 22.0x 9.2% - - - 30.9% 18.8% 20.2% 21.9% 22.4% 23.1% Qlik Technologies 5.0x 5.5x 6.1x 4.6x 4.8x 97.8x 192.7x 475.8x 478.2x 193.4x 21.2% 20.5% 22.8% 24.2% 21.1% 5.1% 2.8% 1.3% 1.0% 2.5% Quality Systems, Inc. 2.1x 2.1x 2.5x 2.8x 2.2x 9.1x 9.6x 11.6x 14.1x 13.5x 9.6% 7.1% 0.8% -2.1% -3.7% 23.5% 21.9% 21.6% 19.9% 16.5% Radware Ltd. 3.8x 3.2x 3.2x 3.4x 3.4x 17.5x 15.6x 17.0x 21.0x 21.8x 13.3% 9.1% 5.7% 2.9% 2.0% 21.6% 20.4% 18.6% 16.1% 15.4% Red Hat, Inc. 7.2x 6.1x 6.2x 5.3x 6.5x 35.2x 30.2x 30.5x 26.0x 32.4x 17.3% 16.4% 16.7% 16.0% 15.5% 20.4% 20.1% 20.2% 20.4% 20.1% Redknee Solutions 3.5x 3.9x 3.3x 3.6x 2.7x 36.2x 93.0x 46.6x 195.9x 74.2x -0.6% -1.4% 74.4% 149.8% 226.0% 9.6% 4.2% 7.1% 1.8% 3.6% Riverbed Technology, Inc. 3.2x 2.9x 2.8x 2.8x 3.2x 19.7x 19.5x 20.2x 22.4x 22.2x 15.2% 20.8% 23.1% 24.0% 24.4% 16.1% 15.0% 14.0% 12.7% 14.2% Sage Group plc 2.9x 3.0x 3.0x 2.9x 3.7x 10.1x 10.7x 10.6x 10.0x 12.7x 1.7% 2.9% 2.8% 2.7% 2.7% 28.5% 28.5% 28.7% 29.0% 29.0% SAP AG 4.6x 4.5x 4.2x 4.4x 4.2x 14.4x 13.2x 12.2x 12.5x 12.2x 14.0% 13.2% 9.8% 6.6% 3.6% 32.1% 33.8% 34.3% 35.0% 34.2% Sapiens International 1.4x 1.5x 1.6x 2.0x 2.2x 9.9x 11.4x 12.1x 16.0x 15.1x 62.9% 44.6% 31.2% 21.5% 18.8% 13.8% 13.5% 13.3% 12.3% 14.6% Silver Spring Networks, Inc. 4.5x 4.0x 3.7x 2.8x 2.1x - - - - - -17.0% -20.7% 8.0% 34.5% 66.1% -41.5% -51.1% -27.3% -19.8% -10.8% Software AG 2.5x 2.2x 2.1x 2.4x 2.4x 8.9x 8.3x 8.2x 9.4x 9.6x -4.6% -5.8% -7.9% -8.1% -7.1% 27.5% 26.2% 26.0% 25.6% 25.0% SolarWinds, Inc. 14.7x 11.2x 9.1x 7.9x 9.1x 31.6x 22.9x 18.6x 16.6x 21.9x 35.6% 31.2% 26.8% 24.2% 24.7% 46.5% 49.0% 49.0% 47.8% 41.7% SEG Software Index EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin
- 62. 62 Q1 2014 Software Industry Financial Report Copyright © 2014 by Software Equity Group, LLC All Rights Reserved THE SEG SOFTWARE INDEX COMPANIES – KEY METRICS Company 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 Splunk, Inc. 15.8x 19.0x 20.7x 23.6x 28.3x - - - - - 64.5% 59.2% 54.7% 51.4% 52.1% -8.8% -12.1% -14.5% -16.4% -23.3% SS&C Corporation 5.2x 5.6x 5.6x 5.8x 5.7x 13.4x 14.6x 14.4x 14.7x 14.4x 48.8% 68.1% 70.1% 47.5% 29.1% 38.6% 38.5% 38.8% 39.5% 39.5% Stratasys, Inc. 8.1x 11.3x 11.7x 12.9x 10.9x 33.5x 57.2x 58.9x 72.2x 65.5x 38.1% 60.9% 82.4% 113.4% 125.0% 24.2% 19.8% 19.9% 17.9% 16.6% Sungy Mobile Limited - - - 10.6x 12.2x - - - 35.4x 41.1x 91.7% - - - 77.5% 7.1% 17.2% 24.6% 29.8% 29.6% Symantec Corporation 2.1x 2.2x 2.3x 2.1x 1.9x 7.9x 8.0x 8.4x 7.3x 6.5x 1.7% 2.6% 1.8% -0.6% -0.6% 26.5% 27.3% 27.6% 28.8% 28.8% Synchronoss Technologies, Inc. 4.1x 4.0x 4.4x 4.0x 3.6x 18.4x 18.4x 21.1x 19.8x 16.0x 19.5% 19.4% 20.3% 23.7% 27.5% 22.2% 21.8% 20.7% 20.2% 22.2% Synopsys Inc 2.6x 2.7x 2.6x 2.5x 2.7x 16.4x 14.2x 14.3x 13.5x 14.9x 13.1% 14.5% 13.0% 11.7% 8.9% 15.9% 18.8% 18.4% 18.4% 18.3% Take-Two Interactive 1.2x 1.1x 1.4x 1.5x 0.6x - 58.4x 15.5x 1215.9x 2.8x 23.6% 47.1% 57.6% 13.9% 130.9% -6.4% 1.9% 8.8% 0.1% 21.4% Tangoe, Inc. 3.3x 2.8x 3.8x 3.5x 3.5x 39.0x 32.9x 42.3x 38.9x 40.8x 47.2% 41.5% 38.1% 30.8% 22.3% 8.5% 8.7% 8.9% 9.0% 8.7% TeleCommunication Systems 0.5x 0.5x 0.5x 0.6x 0.6x 6.5x 6.2x 6.7x 7.0x 10.2x 14.6% 10.8% 2.5% -12.6% -25.7% 7.9% 7.9% 8.0% 7.9% 5.9% TeleNav 0.5x 0.1x 0.2x 0.4x 0.3x 2.8x 0.7x 2.4x 6.3x 22.7x -7.2% -5.8% -6.7% -0.9% -6.2% 16.8% 13.2% 8.1% 6.5% 1.5% Teradata 3.8x 3.2x 3.4x 2.5x 2.5x 15.3x 13.7x 15.0x 11.3x 11.0x 12.8% 6.9% 3.6% 2.5% 1.0% 24.7% 23.2% 22.8% 22.3% 23.1% The Descartes Systems Group Inc. 4.3x 4.7x 4.9x 5.4x 5.6x 14.9x 16.2x 17.2x 19.1x 19.9x 11.3% 12.2% 17.1% 18.0% 19.2% 28.9% 29.1% 28.4% 28.2% 28.1% TIBCO Software Inc. 3.3x 3.0x 3.4x 3.4x 3.0x 16.4x 16.1x 18.5x 18.7x 16.4x 7.9% 4.4% 3.3% 4.4% 4.7% 20.2% 18.6% 18.6% 18.1% 18.5% Trend Micro 2.3x 2.7x 3.3x 3.5x 2.9x 7.3x 8.2x 9.9x 10.3x 8.6x -2.6% 2.1% 7.7% 11.3% 15.4% 31.9% 32.8% 33.0% 33.7% 33.9% Tyler Technologies, Inc. 4.7x 5.5x 6.2x 7.8x 7.3x 25.3x 28.0x 31.2x 41.3x 38.5x 17.4% 18.1% 16.4% 14.6% 14.7% 18.6% 19.6% 19.8% 19.0% 18.9% Ubisoft Entertainment 0.8x 0.7x 0.8x 0.8x 1.2x 2.2x 2.0x 2.2x 2.2x 3.1x 12.5% 18.4% 17.3% 16.3% 16.3% 34.4% 36.8% 37.3% 37.7% 37.7% Varonis Systems, Inc. - - - - 13.8x - - - - - 34.3% - - - 39.7% -2.0% -3.0% -3.8% -6.5% -6.8% VASCO Data Security International 1.4x 1.4x 1.5x 1.4x 1.3x 9.3x 9.4x 14.0x 15.0x 12.7x -8.4% -4.3% -12.5% -8.0% 0.7% 14.8% 14.8% 11.1% 9.1% 10.6% Verisk 7.6x 7.1x 7.2x 7.2x 7.4x 15.9x 16.0x 16.1x 16.3x 16.0x 18.2% 16.5% 16.1% 14.2% 13.3% 47.5% 44.5% 44.5% 44.6% 46.1% VMWare, Inc. 6.4x 5.7x 6.4x 5.9x 6.9x 25.6x 22.9x 25.2x 22.5x 24.4x 22.2% 19.2% 16.3% 14.7% 13.1% 25.1% 24.7% 25.3% 26.4% 28.1% Zynga, Inc 1.0x 1.1x 1.2x 2.0x 3.3x 24.5x 9.5x 7.8x 14.0x 38.7x 12.4% 0.5% -11.8% -21.3% -31.8% 4.2% 11.7% 15.0% 14.2% 8.4% EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin SEG Software Index

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