1Q13 software industry financial report

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Q1 2013 The Software Industry Financial Report

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Transcript of 1Q13 software industry financial report

Page 1: 1Q13 software industry financial report

Q1

20

13

The Software Industry

Financial Report

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SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTSAbout Software Equity Group

Leaders in Software M&A 4Extensive Global Reach 5

Software Industry MacroeconomicsGlobal GDP 8Global GDP 8U.S. GDP and Unemployment 9Global IT Spending 10E-Commerce and Digital Advertising Spend 11SEG Indices vs. Benchmark Indices 12

Public Software Financial and Valuation PerformancePublic Software Financial and Valuation PerformanceThe SEG Software Index 14The SEG Software Index: Financial Performance 15-17The SEG Software Index: Market Valuations 18-19The SEG Software Index by Product Category 20The SEG Software Index by Product Category: Financial Performance 21The SEG Software Index by Product Category: Financial Performance 21The SEG Software Index by Product Category: Market Valuations 22

Public SaaS Company Financial and Valuation PerformanceThe SEG SaaS Index 24The SEG SaaS Index Detail 25The SEG SaaS Index: Financial Performance 26-28The SEG SaaS Index: Financial Performance 26 28The SEG SaaS Index: Market Valuation 29-30The SEG SaaS Index by Product Category 31The SEG SaaS Index by Product Category: Financial Performance 32The SEG SaaS Index by Product Category: Market Valuations 33

Public Internet Company Financial and Valuation PerformancePublic Internet Company Financial and Valuation PerformanceThe SEG Internet Index 35The SEG Internet Index: Financial Performance 36-38The SEG Internet Index: Market Valuations 39-40The SEG Internet Index by Product Category 41The SEG Internet Index by Product Category: Financial Performance 42

1 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

The SEG Internet Index by Product Category: Financial Performance 42The SEG Internet Index by Product Category: Market Valuations 43

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SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTSSoftware Industry M&A Market Update

Software/SaaS M&A Deal Volume and Spending 45Software M&A Exit Multiples 46Software M&A by Ownership Structure and Size 47Software M&A by Vertical and Horizontal Markets 48Software M&A by Vertical and Horizontal Markets 48Software M&A by Product Category 49-50SaaS M&A Deal Volume and Exit Multiples 51SaaS M&A by Product Category 52SaaS M&A: 1Q13 Transactions 53-55Internet M&A: Deal Volume and Exit Multiples 56-57Internet M&A: Deal Volume and Exit Multiples 56 57

AppendixThe SEG Software Index Companies 59-63The SEG SaaS Index Companies 64The SEG Internet Index Companies 65-67The SEG Software Index Metrics by Product Category 68-69The SEG Software Index Metrics by Product Category 68 69The SEG SaaS Index Metrics by Product Category 70The SEG Internet Index Metrics by Product Category 711Q13 Public Sellers 721Q13 Software Mega Deals (>$500M) 731Q13 Most Active Buyers 741Q13 Most Active Buyers 74

2 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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ABOUT SOFTWARE EQUITY GROUP

33 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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• Industry leading boutique investment bank founded in

LEADERS IN SOFTWARE M&AIndustry leading boutique investment bank, founded in 1992, representing public and private software and internet companies seeking:

• Strategic exit• Growth capital

We Do Deals.

Growth capital• Buyout • Inorganic growth via acquisition• Buy and sell-side mentoring• Fairness opinions and valuationsFairness opinions and valuations

• Sell-side client revenue range: $5 - 75 million• Buy-side clients include private equity firms and

NASDAQ, NYSE and foreign exchange listed companies• Clients span virtually every software technology, product

category, delivery model and vertical market• Global presence providing advice and guidance to more

th 2 000 i t d bli i th h t USthan 2,000 private and public companies throughout US, Canada, Europe, Asia-Pacific, Africa and Israel

• Strong cross-functional team leveraging transaction, operating, legal and engineering experience

• Unparalleled software industry reputation and track record.

• Highly referenceable base of past clients

4 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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EXTENSIVE GLOBAL REACH

Current Sell-side Representation

• SEG currently represents software companies in the United States, Canada, France,

Recent Sell-side Representation

Germany, Australia & Saudi Arabia

• In addition to the countries listed above, SEG has recently represented software companies in the United Kingdom, France, Netherlands, Israel, and South Africa

SEG Research Distribution

• SEG’s Quarterly and Annual Software Industry Equity Reports and Monthly Flash Reports are q y p y pdistributed to an opt-in list of 50,000 public software company CEOs, software entrepreneurs, private equity managing directors, VCs, high tech corporate lawyers, public accountants, etc. in 76 countries.

5 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

p ,

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Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. Founded in 1992, our firm has guided and

ABOUT SOFTWARE EQUITY GROUPq y p y g gy , g

advised companies on five continents, including privately-held software and technology companies in the United States, Canada, Europe, Asia Pacific, Africa and Israel. We have represented public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges. Software Equity Group also advises several of the world's leading private equity firms. We are ranked among the top ten investment banks worldwide for application software mergers and acquisitions.

Our value proposition is unique and compelling We are skilled and accomplished investment bankers with extraordinary software internet and technologyOur value proposition is unique and compelling. We are skilled and accomplished investment bankers with extraordinary software, internet and technology domain expertise. Our industry knowledge and experience span virtually every software product category, technology, market and delivery model, including Software-as-a-Service (Saas), software on-demand and perpetual license. We have profound understanding of software company finances, operations and valuation. We monitor and analyze every publicly disclosed software M&A transaction, as well as the market, economy and technology trends that impact these deals. We're formidable negotiators and savvy dealmakers who facilitate strategic combinations that enhance shareholder value.

P h t i t t th l ti hi ' b ilt d th i d t t ti j S ft E it G i k d t d b bli lPerhaps most important are the relationships we've built and the industry reputation we enjoy. Software Equity Group is known and respected by publicly traded and privately owned software and technology companies worldwide, and we speak with them often. Our Quarterly and Annual Software Industry Equity Reports are read and relied upon by more than thousands of industry executives, entrepreneurs and equity investors in sixty-one countries, and we have been quoted widely in such leading publications as The Wall Street Journal, Barrons, Information Week, The Daily Deal, The Street.com, U.S. News & World Report, Reuters, Mergers & Acquisitions, USA Today, Arizona Republic, Detroit Free Press, Entrepreneur Magazine, Softletter, Software Success, Software CEO Online and Software Business Magazine. g

To keep your finger on the pulse of the software equity markets, subscribe to our Annual and Quarterly Research Reports.

Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. For a confidential consultation without obligation, [email protected] , 2800-509) 858Beible, Director, Business Development (Kris please contact

CONTACT INFORMATION:

Software Equity Group, L.L.C.12220 El Camino Real, Suite 320San Diego, CA 92130www softwareequity comwww.softwareequity.comp: (858) 509-2800

The information contained in this Report is obtained from sources we believe to be reliable, but no representation or guarantee is made about the accuracy or completeness of such information, or the opinions expressed herein. Nothing in this Report is intended to be a recommendation of a specific security or company or intended to constitute an offer to buy or sell, or the solicitation of an offer to buy or sell, any security. Software Equity Group LLC may have an interest in one or more of the securities or companies discussed herein. Financial data provided by Capital IQ.

6 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C.Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights.

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SOFTWARE INDUSTRY MACROECONOMICS

77 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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GLOBAL GDP

• Global GDP growth continued its steady decline through most of 2012 but leveled off in Q4 due to growth in developing countries• Global GDP growth continued its steady decline through most of 2012, but leveled off in Q4 due to growth in developing countries(chart on left).

• In general, global GDP growth continues to reflect the disparity between developed and emerging economies (chart on right)

• Emerging economies are forecast to grow GDP 5.9% and 6.0% in 2013 and 2014, respectively

D l d i f t t GDP 1 9% d 2 3% i 2013 d 2014 ti l• Developed economies are forecast to grow GDP 1.9% and 2.3% in 2013 and 2014, respectively

• Globally, GDP is expected to grow between 2.0% - 3.0% in 2013, according to forecasts from Worldbank and PIMCO. In 2014, Worldbank forecasts global GDP to accelerate further, achieving 3.3% YoY growth.

8 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Sources: Worldbank, The Economist and PIMCO

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U.S. GDP AND UNEMPLOYMENT

5.0%6%

8%

10%

GDP % Growth Unemployment Rate

1.2%

3.2% 3.6%

2.1% 1.5%2.2%

3.7%

1.7%

2.6%3.1%

0.4%

2.5%

1.3%

4.1%

2.0%1.3%

3.1%

0.4%

2.5%

0%

2%

4%

-0.7%

-2.7%

-5.4%

-0.7%

-6%

-4%

-2%

-6.4%-8%

1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13

• The Bureau of Economic Analysis’ (BEA) first estimate of 1Q13 GDP reported growth of 2 5% up slightly from 1Q12’s 2 0%• The Bureau of Economic Analysis (BEA) first estimate of 1Q13 GDP reported growth of 2.5%, up slightly from 1Q12 s 2.0%.

• PIMCO forecasts 1.5% - 2.0% growth for the U.S. economy in 2013, driven in large part by contributions from the housing recovery.

• The U.S. unemployment rate dropped to 7.5% in April, in part due to a decline in the number of job seekers.

A t bl ti t th t bb l hi h l t t th IT t hi h l t 5 1% Y Y di t• A notable exception to the stubbornly high unemployment rate was the IT sector, which grew employment 5.1% YoY, according to TechServe Alliance.

9 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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GLOBAL IT SPENDING9.0%

6.0%

8.0%

6.0%

3.1%3.9%5.0%

10.0%

ing

‐5.0%

0.0%2007 2008 2009 2010 2011 2012 2013

Y Change in IT 

Spen

d

-10.0%

‐15.0%

‐10.0%

YoY

• Global IT spending is forecast to grow 3 9% in 2013 up from 3 1% in 2012 according to averages derived from Goldman Sachs• Global IT spending is forecast to grow 3.9% in 2013, up from 3.1% in 2012, according to averages derived from Goldman Sachs, Gartner and IDC .

• Cloud and mobile computing continue to garner an increasing share of the total worldwide IT spend.

• Gartner forecasts device sales (PCs, tablets, smartphones and printers) will grow 7.9% YoY, followed by enterprise software, which is projected to grow at 6.4%.which is projected to grow at 6.4%.

• IDC forecasts mobile and tablet spending will increase 17% and 32% respectively in 2013, offsetting declines in PC sales.

• IDC forecasts spending on cloud services will approach $100 billion in 2016, a four year CAGR of 26.4%, or six times the growth of IT spending as a whole.

10 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Sources: IT spending numbers shown in charts are an average of Goldman Sachs, IDC and Gartner GDP forecasts

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E-COMMERCE AND DIGITAL ADVERTISING SPEND

20%

25%

50,000

60,000

illion

s)

25%

30%

10 000

12,000

llions

)

Digital Advertising RevenueE-Commerce Spending

5%

10%

15%

20%

20 000

30,000

40,000

50,000

oY %

Cha

nge

rce

Spen

ding

($ M

5%

10%

15%

20%

6,000

8,000

10,000

oY %

Cha

nge

ng R

even

ue ($

Mi l

‐5%

0%

5%

0

10,000

20,000

Yo

E-C

omm

er

‐10%

‐5%

0%

5%

0

2,000

4,000 Yo

Inte

rnet

Adv

ertis

i

• U S retail e-commerce sales totaled $56 8B in 4Q12 (the • U S digital advertising revenues totaled $10 3M in 4Q12• U.S. retail e-commerce sales totaled $56.8B in 4Q12 (the latest data available), marking the first ever $50B+ quarter.

• 4Q12’s 14% YoY growth in online sales was spurred by a 6% increase in buyers and an 8% increase in spending per buyer.

U.S. digital advertising revenues totaled $10.3M in 4Q12 (the latest quarter data was available), marking the first ever $10M+ quarter and a 15% YoY improvement over 4Q11.

• 2012 annual digital advertising spend was $36.6B, up 15% f 2011’ $31 7B• Total U.S. retail e-commerce sales were $186.2B for all of

2012, up 15% from 2011, and the strongest YoY growth rate since the recession.

15% from 2011’s $31.7B.

• The increase in 2012’s digital advertising spend was spurred by the rapid increase in mobile advertising spend which reached $3.4B in 2012, up 111% from 2011’s $1.6B.

11 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Sources: comScore, IAB, IBD

$ 6

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SEG INDICES VS. BENCHMARK INDICES

• An improving macro economic climate and continued support from the Federal Reserve helped drive the U S stock markets• An improving macro economic climate and continued support from the Federal Reserve helped drive the U.S. stock markets higher in 1Q13.

• The Dow surged 11.3%, its best first quarter since 1998, achieving a record high in 1Q13.

• The S&P advanced 10.0% in 1Q13, while the NASDAQ grew 8.2%, as both achieved 52 week highs.

SEG S ft I d t d 8 7% t i 1Q13 t f i th SEG S S d SEG I t t i di hi h l d 1Q13• SEG Software Index posted a 8.7% return in 1Q13, outperforming the SEG SaaS and SEG Internet indices which closed 1Q13 with returns of 5.3% and 7.8%, respectively.

• The relative underperformance of the SEG SaaS Index and the NASDAQ illustrates that investors were not yet ready to jump into riskier companies, preferring to place their bets with larger, more stable companies.

12 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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PUBLIC SOFTWARE COMPANY FINANCIAL ANDPUBLIC SOFTWARE COMPANY FINANCIAL AND VALUATION PERFORMANCE:

THE SEG SOFTWARE INDEX

1313 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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THE SEG SOFTWARE INDEXSEG - Software: Median Metrics

• The SEG Software Index tracks public software companies that primarily offer on-premise software under a perpetual

Measure 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 2.7x 2.7x 2.6x 2.5x 2.8xEV/EBITDA 12.5x 10.6x 11.1x 11.7x 12.8xEV/Earnings 22.5x 22.2x 21.4x 21.8x 23.8xGross Profit Margin 68.8% 68.5% 68.3% 68.6% 68.8%EBITDA M i 19 4% 19 4% 19 8% 19 7% 19 7% license with annual M&S

• The SEG Software Index is currently comprised of 132 public software

i *

EBITDA Margin 19.4% 19.4% 19.8% 19.7% 19.7%Net Income Margin 10.8% 10.7% 10.4% 10.4% 9.1%TTM Revenue Growth 14.2% 14.5% 13.3% 12.1% 11.1%TTM Total Revenue ($M) $417.9 $448.4 $447.7 $456.2 $471.6TTM EBITDA Growth 21.7% 17.5% 14.8% 8.8% 4.4%TTM Total EBITDA ($M) $71.5 $84.2 $78.2 $82.7 $85.7

companies*($ ) $ $ $ $ $

Cash & Eq ($M) $157.8 $182.6 $159.8 $163.4 $169.4Current Ratio 1.9 1.9 1.9 2.0 1.9Debt / Equity Ratio 22.5% 21.5% 23.3% 23.0% 26.6%

14 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

* See appendix for a complete list of companies in The SEG Software Index

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THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE

35%40%

48% of public on-premise software companies had TTM revenue growth rates of 10% or less

Of the 18% of companies with TTM revenue

TTM Revenue Growth Rate DistributionRevenue Performance

16%$480

TTM Total Revenue ($M) TTM Revenue Growth

20%20%

25%

30%

35%

ompanies

Of the 18% of companies with TTM revenue growth rates of 30% or more, a disproportionate number are focused on mobility and cloud computing

8%

10%

12%

14%

$430

$440

$450

$460

$470

enue

 Growth

al Reven

ue

13% 13%9% 9%

0%

5%

10%

15%

% of C

o

0%

2%

4%

6%

$390

$400

$410

$420

$430

TTM Reve

TTM Tota

0%<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

TTM Revenue Growth• On-premise software companies lost market share to SaaS

and Internet providers and struggled with macro economic

0%$3901Q12 2Q12 3Q12 4Q12 1Q13

p ggheadwinds, as their 1Q13 median TTM revenue growth rate declined to 11.1%, the lowest since 4Q10.

• Despite slowing growth, the median TTM revenue of the SEG Software Index reached $471.6M, the highest in its history and the highest among our three tracking indiceshistory and the highest among our three tracking indices.

• We expect TTM revenue growth for most on-premise public software companies to remain modest, which portends increased M&A and R&D spending to spur top line growth.

15 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE

32%35%

TTM EBITDA Margin DistributionEBITDA Margin Performance

Almost one in three on-premise software companies posted EBITDA margins of 20% - 30%

25%22%

EBITDA Margin TTM EBITDA Growth

17%

25%

20%

25%

30%

ompanies

20% - 30%

15%

20%

10%12%14%16%18%20%

TDA Grow

th

A Margin

Those exceeding 30% EBITDA margins included the software industry’s behemoths, as well as those leveraging online sales to reduce selling expenses

8%11%

7%

0%

5%

10%

15%

% of C

o

0%

5%

10%

0%2%4%6%8%

10%

TTM EBIT

EBITDA

0%<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

TTM EBITDA Margin• EBITDA margins have held relatively constant over the past

year and remain at historic levels, closing 1Q13 at 19.7%.

0%0%1Q12 2Q12 3Q12 4Q12 1Q13

y , g Q

• Median TTM EBITDA growth has plunged from 22% YoY in 1Q12 to a 4.4% YoY increase in 1Q13,suggesting many public software companies are spending more to grow revenue after paring expenses to the bone.

• In a dramatic reversal from 1Q12, when median TTM EBITDA growth outpaced TTM revenue growth by 7.5%, TTM EBITDA growth in 1Q13 lagged TTM revenue growth by 6.9% (4.4% vs. 11.3%).

16 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCEMargin PerformanceOperating Ratios

80%

Gross Profit Margin EBITDA Margin Net Income Margin

25%

S&M (% of Revenue) R&D (% of Revenue) G&A (% of Revenue)

40%

50%

60%

70%

Margin15%

20%

Revenu

e

0%

10%

20%

30%% M

0%

5%

10%

% of R

• Median spending on sales & marketing (S&M), research & development (R&D) and general & administrative(G&A), as a

• In 1Q13, median gross profit, EBITDA and net income margins were 68.8%, 19.7% and 9.1%, respectively.

0%1Q12 2Q12 3Q12 4Q12 1Q13

0%1Q12 2Q12 3Q12 4Q12 1Q13

p ( ) g ( ),percentage of total revenue was 23.7%, 15.1% and 10.6%, respectively, in 1Q13 – consistent with historical norms.

• Over the past year, S&M and G&A expenses as a percent of revenue have remained flat while R&D ticked up from 14.2% to 15 1% in Q1

g , , p y

• Several on-premise providers achieved gross profit margins of 89% and greater, including Qlik Technologies (89%), Splunk (89%), Autodesk (90%), Glu Mobile (90%), Unit 4 (92%) and SolarWinds (93%).

to 15.1% in Q1.

• Median S&M spending among on-premise public software companies lagged far behind their SaaS counterparts which are investing heavily in customer acquisition.

• We anticipate EBITDA margins and Net Income margins will likely decline over the next several quarters, as on-premise software companies increase their investments in R&D to improve products/delivery models and sales & marketing to accelerate TTM revenue growth.

17 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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THE SEG SOFTWARE INDEX: MARKET VALUATIONSEV/Revenue Multiples by Size (TTM Revenue)EV/Revenue and EV/EBITDA Multiples

12.5x 12.8x14.0x

EV/Revenue EV/EBITDA

4.0x

Revenue Greater Than $1 billion Revenue Between $500 million and $1 billion

Revenue Between $100 million and $500 million Revenue Less Than $100 million

10.6x11.1x 11.7x

8.0x

10.0x

12.0x

2 0x

2.5x

3.0x

3.5x

V/Re

venu

e

2.7x 2.7x 2.6x 2.5x 2.8x

0 0x

2.0x

4.0x

6.0x

0 0x

0.5x

1.0x

1.5x

2.0x

Med

ian EV

• Despite slowing growth and EBITDA erosion, the median EV/Revenue multiple in 1Q13 was 2.8x, the highest in nine

• Investors in 1Q13 continued to place higher value on larger public software companies with revenues >$100 million.

0.0x1Q12 2Q12 3Q12 4Q12 1Q13

0.0x1Q12 2Q12 3Q12 4Q12 1Q13

p , gyears.

• By contrast, the median EV/EBITDA multiple in 1Q13 was 12.8x, well below the mid-to-high-teen EBITDA multiples achieved in 2007 and before.

p p $

• Throughout 2012, and in 1Q13, the EV/Revenue multiples of on-premise software companies with revenues <$100 million remained markedly lower than their larger counterparts.

• SEG Software Index companies with TTM revenue between • Although median EBITDA margins of on-premise software

companies are at record levels, soaring stock prices have constrained EV/EBITDA market valuations.

$100M and $1B Successfully balanced TTM revenue growth (median 17.3%) and EBITDA margins (median 17.7%), and were boosted by the highest EV/Revenue multiples.

18 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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THE SEG SOFTWARE INDEX: MARKET VALUATIONSEV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates

4 4x5.0x 6.0x

2.1x

3.5x4.0x 4.1x

4.4x

2.5x

3.0x

3.5x

4.0x

4.5x

EV/Reven

ue

3.0x3.3x

4.8x

3.0x

4.0x

5.0x

EV/Reven

ue

1.3x

2.1x

0 0x

0.5x

1.0x

1.5x

2.0x

Med

ian E

1.3x1.9x 1.7x

0 0x

1.0x

2.0x

Med

ian E

• Noting the decline in the median revenue growth of on-premise software providers investors awarded valuation

• Except for a chosen few with EBITDA margins north of 40%, there was little market premium ascribed to on-premise

0.0x<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

TTM Revenue Growth

0.0x<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

TTM EBITDA Margin

premise software providers, investors awarded valuation premiums to those with revenue growth above the median (11.3%).

• Indeed, revenue growth rates 20% or higher were rewarded with median EV/Revenue multiples of 4.0x or higher.

there was little market premium ascribed to on premise software providers that exceeded the median EBITDA margin (19.7%).

• However, those on-premise software providers with EBITDA margins of 20% or lower were punished with a median

k t l ti f 1 9 EV/Rmarket valuation of 1.9x EV/Revenue.

19 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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THE SEG SOFTWARE INDEX: BY PRODUCT CATEGORY

1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13Billing & Service Management 1.3x 1.2x 1.2x 1.7x 2.4x 8.1x 9.1x 8.7x 8.6x 8.7x 16.6% 13.6% 9.5% 10.4% 10.4% 20.2% 18.5% 18.8% 19.9% 21.1%Business Intelligence 3.8x 2.7x 2.3x 2.8x 3.0x 35.5x 33.8x 32.8x 19.7x 16.1x 23.7% 16.9% 14.6% 10.9% 10.8% 10.7% 10.9% 10.5% 9.4% 10.8%Development Platforms 2.7x 1.9x 2.1x 2.5x 2.5x 9.4x 8.4x 8.2x 9.4x 9.1x 7.2% 5.3% 3.5% 1.6% 3.0% 24.7% 22.3% 21.8% 23.7% 21.8%E i i & PLM 2 6 2 3 2 6 2 5 2 7 14 2 11 5 12 1 11 8 13 4 13 5% 13 5% 13 2% 14 0% 13 1% 18 5% 19 9% 20 7% 20 6% 20 7%

SEG Software Index

CategoryEV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin

Engineering & PLM 2.6x 2.3x 2.6x 2.5x 2.7x 14.2x 11.5x 12.1x 11.8x 13.4x 13.5% 13.5% 13.2% 14.0% 13.1% 18.5% 19.9% 20.7% 20.6% 20.7%Enterprise Resource Planning 2.5x 2.0x 2.1x 2.2x 2.4x 10.3x 8.9x 9.1x 9.1x 10.2x 10.0% 9.4% 4.7% 3.4% 2.6% 23.2% 23.3% 23.3% 23.1% 22.8%Financial & Accounting 2.8x 2.7x 2.9x 2.9x 3.1x 9.9x 9.4x 9.7x 9.7x 10.5x 6.5% 6.3% 13.6% 10.7% 8.8% 29.1% 28.3% 29.0% 28.8% 27.5%Gaming 1.3x 1.0x 1.0x 1.0x 1.1x 7.1x 7.6x 9.1x 8.0x 7.1x 5.6% 2.6% 2.2% 0.1% 4.4% 16.4% 16.3% 15.5% 15.5% 15.5%Healthcare 3.2x 2.7x 2.2x 2.1x 2.1x 15.1x 13.0x 12.8x 11.3x 14.8x 24.8% 30.1% 22.5% 17.7% 10.1% 20.4% 19.6% 17.8% 16.8% 12.9%IT Conglomerates 3.1x 2.9x 2.8x 2.5x 2.5x 7.7x 7.3x 8.2x 7.8x 8.8x 7.7% 5.3% 1.5% 1.4% 0.5% 37.4% 36.9% 36.1% 34.6% 33.8%Mobile Solutions/Content 4 7x 3 6x 3 3x 2 4x 2 3x 31 5x 16 1x 14 4x 11 9x 20 6x 62 7% 47 1% 34 4% 30 7% 35 2% 12 8% 10 8% 11 9% 5 9% 4 5%Mobile Solutions/Content 4.7x 3.6x 3.3x 2.4x 2.3x 31.5x 16.1x 14.4x 11.9x 20.6x 62.7% 47.1% 34.4% 30.7% 35.2% 12.8% 10.8% 11.9% 5.9% 4.5%Netw orking & Netw ork Performance Management

3.1x 2.4x 2.5x 2.5x 2.7x 16.4x 14.9x 14.0x 14.0x 15.1x 20.7% 19.4% 17.3% 15.5% 12.9% 18.0% 18.0% 16.8% 16.2% 16.4%

Security 3.2x 2.9x 3.2x 2.7x 3.3x 13.0x 10.2x 10.5x 11.2x 11.5x 26.3% 19.4% 20.1% 23.1% 23.4% 18.2% 18.0% 19.2% 17.8% 13.9%Storage, Data Management & Integration

2.6x 2.5x 2.5x 2.3x 2.4x 9.2x 9.3x 9.2x 8.4x 9.2x 9.4% 7.7% 6.0% 5.4% 4.2% 22.1% 22.5% 22.7% 22.4% 22.0%

Supply Chain Management & Logistics

2.6x 2.5x 2.5x 2.9x 3.3x 12.1x 10.7x 10.9x 12.7x 14.5x 14.9% 18.4% 15.9% 11.2% 11.3% 17.1% 17.5% 17.2% 16.6% 16.0%og s cs

Systems Management 5.9x 5.9x 5.5x 4.5x 4.8x 22.2x 23.0x 22.3x 18.9x 20.5x 17.7% 18.1% 18.1% 16.5% 17.2% 26.4% 26.2% 25.8% 25.4% 25.2%Vertical - Finance 3.4x 3.3x 3.2x 3.0x 3.4x 10.7x 10.3x 10.6x 9.4x 10.7x 10.3% 6.8% 6.3% 7.1% 6.7% 26.3% 26.4% 26.3% 26.4% 26.5%Vertical - Other 3.2x 3.0x 2.9x 2.9x 3.0x 18.5x 16.5x 21.0x 20.3x 22.0x 20.7% 26.5% 28.0% 19.8% 21.3% 15.7% 15.7% 14.7% 14.4% 14.1%

Median 2.7x 2.7x 2.6x 2.5x 2.8x 12.5x 10.6x 11.1x 11.7x 12.8x 14.2% 14.5% 13.3% 12.1% 11.1% 19.4% 19.4% 19.8% 19.7% 19.7%

• The SEG Software Index is segmented into 17 product categories• See the appendix for the complete list of companies within each product category

20 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 22: 1Q13 software industry financial report

THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE

1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth

15%20% 25% 30% 35% 40%

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21 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Bu E

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Page 23: 1Q13 software industry financial report

THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY: MARKET VALUATIONS

1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV/Revenue Multiples

5.0x

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• In 1Q13, seven product categories achieved median EV/Revenue multiples above the SEG Software Index median (2.8x), including Business Intelligence (3.0x), Financial & Accounting (3.1x), Security (3.3x), Supply Chain Mgmt (3.3x), Systems Mgmt (4.8x), Vertical –Finance (3.4x), and Vertical – Other (3.0x).

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• Five of the seven leading categories reported double digit revenue growth and EBITDA margins.

• The Systems Management product category, benefitting from the rapid shift to cloud computing and the market requirement for cloud infrastructure, achieved the highest median EV/Revenue multiple (4.8x) in 1Q13, driven by strong TTM revenue growth (17.2%) andEBITDA margins (25.2%).

22 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

• The Billing & Service Mgmt category ‘s median EV/Revenue spiked 82%, closing 1Q13 at 2.4x, despite declining revenue growth.

Page 24: 1Q13 software industry financial report

PUBLIC SaaS COMPANY FINANCIAL ANDPUBLIC SaaS COMPANY FINANCIAL AND VALUATION PERFORMANCE:

THE SEG SaaS INDEX

2323 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 25: 1Q13 software industry financial report

SEG - SaaS: Median Metrics

THE SEG SaaS INDEX

• The SEG SaaS Index tracks public companies that primarily offer hosted, on-demand software under a subscription

Measure 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 5.2x 5.4x 5.5x 4.8x 5.3xEV/EBITDA 33.6x 30.1x 42.4x 43.1x 35.4xEV/Earnings 32.3x 37.5x 40.9x 40.2x 63.8xGross Profit Margin 70.0% 70.0% 69.9% 70.9% 69.5%

and/or transaction based pricing model• The SEG SaaS Index is currently

comprised of 32 public pure-play SaaS i *

EBITDA Margin 9.0% 9.0% 8.3% 8.5% 7.8%Net Income Margin -0.5% -0.7% -0.5% 0.6% -0.9%TTM Revenue Growth 28.4% 30.3% 27.2% 24.0% 25.6%TTM Total Revenue ($M) $128.1 $139.5 $146.1 $154.2 $161.6TTM EBITDA Growth 27.2% 24.9% 23.2% 10.4% 7.9%TTM Total EBITDA ($M) $8.3 $9.5 $8.7 $8.3 $10.3 companies*TTM Total EBITDA ($M) $8.3 $9.5 $8.7 $8.3 $10.3Cash & Eq ($M) $59.6 $78.0 $72.1 $86.1 $100.1Current Ratio 1.5 1.8 1.5 1.7 1.9Debt / Equity Ratio 8.6% 6.5% 6.2% 4.6% 4.2%

24 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

* See appendix for a complete list of companies in The SEG SaaS Index

Page 26: 1Q13 software industry financial report

THE SEG SaaS INDEX DETAILSSEG SaaS Index

Company1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13

Athenahealth, Inc 6.8x 7.2x 8.2x 6.1x 7.2x 45.3x 50.0x 62.9x 48.9x 59.9x 32.0% 34.4% 34.2% 32.4% 30.3% 15.0% 14.5% 13.1% 12.5% 12.1%Bazaarvoice, Inc 11.0x 9.4x 7.2x 4.3x 2.7x - - - - - - 64.6% 62.6% 59.3% 57.9% -20.7% -19.4% -17.8% -17.9% -18.2%Callidus Softw are Inc. 2.8x 2.4x 2.0x 2.0x 2.1x - - - - - 18.2% 15.4% 15.0% 14.9% 13.3% -10.6% -10.3% -13.6% -14.8% -17.1%Concur 7.8x 8.0x 8.7x 7.8x 7.9x 68.6x 59.2x 69.2x 67.5x 81.7x 21.0% 24.0% 25.7% 25.8% 25.1% 11.4% 13.6% 12.6% 11.5% 9.7%Constant Contact 3.4x 2.3x 2.0x 1.3x 1.4x 33.6x 21.7x 19.8x 14.3x 17.9x 23.1% 21.4% 20.0% 19.1% 17.6% 10.2% 10.7% 10.3% 9.2% 7.8%

EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin SEG SaaS Index

Constant Contact 3.4x 2.3x 2.0x 1.3x 1.4x 33.6x 21.7x 19.8x 14.3x 17.9x 23.1% 21.4% 20.0% 19.1% 17.6% 10.2% 10.7% 10.3% 9.2% 7.8%Cornerstone OnDemand 11.3x 11.7x 12.9x 13.1x 13.4x - - - - - 67.0% 63.2% 72.2% 68.1% 61.5% -24.0% -25.5% -21.5% -24.1% -23.4%DealerTrack 3.2x 3.1x 2.9x 2.9x 3.3x 21.0x 20.1x 19.5x 20.3x 23.9x 44.9% 39.2% 28.7% 16.8% 10.1% 15.3% 15.4% 15.1% 14.2% 13.8%Demandw are, Inc. 14.6x 12.5x 9.8x 10.0x 8.9x 386.9x 553.5x - - - 54.1% 48.7% 45.0% 42.3% 40.5% 3.8% 2.3% -3.5% -5.9% -4.8%E2open, Inc - - 4.6x 4.5x 5.9x - - 92.6x 76.6x 272.9x 7.5% - - 22.2% 25.6% 2.1% 1.6% 5.0% 5.9% 2.1%Ebix Inc. 5.2x 4.1x 5.2x 3.7x 3.4x 12.0x 9.3x 12.2x 8.9x 7.9x 27.8% 22.8% 18.2% 18.4% 18.0% 43.4% 43.5% 42.9% 41.2% 42.4%Ellie Mae 2.2x 4.6x 7.8x 6.0x 5.0x 24.4x 29.8x 37.9x 24.6x 19.5x 28.4% 46.4% 67.0% 83.5% 83.5% 9.0% 15.4% 20.6% 24.4% 25.5%ExactTarget, Inc. 7.9x 6.0x 5.0x 4.4x 4.7x - - - 158.4x 339.9x 54.5% - - 43.1% 40.9% -3.3% -2.1% -0.1% 2.8% 1.4%Fleetmatics - - - 7.5x 6.9x - - - 44.6x 37.0x 42.7% - - - 38.1% 17.9% 17.4% 17.0% 16.8% 18.6%IntraLinks Holdings 1.7x 1.3x 1.4x 1.6x 1.6x 12.5x 13.8x 34.2x 467.2x 51.1x 15.5% 7.3% 2.9% 0.1% 1.8% 13.9% 9.0% 4.1% 0.4% 3.2%Jive Softw are, Inc 13.3x 13.0x 8.7x 6.9x 7.6x - - - - - 67.0% 64.2% 56.8% 49.3% 47.1% -47.8% -44.7% -39.3% -34.9% -32.2%LivePerson 5.3x 5.8x 6.0x 4.3x 4.3x 25.7x 30.1x 37.2x 30.3x 35.4x 21.1% 21.3% 21.4% 19.7% 18.3% 20.5% 19.2% 16.2% 14.1% 12.1%Marin Softw are - - - - 8.2x - - - - - 90.1% 90.1% 90.1% - 64.9% -42.4% -42.4% -42.4% -37.2% -38.0%Medidata Solutions 2.3x 3.0x 4.0x 4.4x 5.3x 11.4x 14.8x 22.9x 26.3x 31.8x 10.8% 14.5% 10.0% 12.1% 18.4% 20.0% 20.5% 17.7% 16.6% 16.6%Netsuite 12.8x 12.5x 14.2x 14.6x 15.4x - - - - - 22.4% 24.6% 26.3% 28.4% 30.7% -7.4% -6.8% -5.6% -5.2% -5.2%O T bl I 7 2 5 9 5 9 6 1 7 1 24 0 19 8 20 7 20 3 25 0 40 9% 30 3% 22 0% 17 1% 15 9% 30 2% 29 8% 28 5% 29 8% 28 5%OpenTable, Inc. 7.2x 5.9x 5.9x 6.1x 7.1x 24.0x 19.8x 20.7x 20.3x 25.0x 40.9% 30.3% 22.0% 17.1% 15.9% 30.2% 29.8% 28.5% 29.8% 28.5%Qualys, Inc. - - 4.8x 4.8x 3.1x - - 57.6x 50.5x 27.7x 16.5% - - - 20.0% 10.9% 9.7% 8.3% 9.5% 11.3%RealPage 6.9x 4.9x 6.1x 5.1x 5.0x 58.3x 39.8x 46.9x 36.0x 30.6x 37.0% 34.4% 32.0% 27.7% 24.9% 11.8% 12.2% 13.1% 14.1% 16.4%Responsys 3.4x 3.4x 2.7x 1.4x 1.7x 21.6x 20.3x 20.3x 11.4x 14.0x 43.4% 36.3% 27.2% 21.1% 20.7% 15.7% 16.6% 13.1% 12.1% 11.8%Salesforce.com 7.7x 8.2x 7.4x 7.4x 8.2x 165.1x 189.2x 167.9x 235.9x 298.6x 36.8% 37.7% 36.5% 36.1% 34.6% 4.7% 4.3% 4.4% 3.1% 2.8%SciQuest 5.0x 5.0x 5.4x 4.7x 5.5x 37.1x 41.4x 47.1x 50.7x 96.2x 25.8% 23.3% 22.0% 21.4% 24.4% 13.5% 12.1% 11.6% 9.4% 5.7%Service-now .com - 17.4x 18.4x 16.3x 14.9x - - - - - - - - - 90.3% 4.2% -6.7% -10.4% -12.7% -8.9%SPS Commerce 4.7x 4.9x 5.6x 6.6x 6.4x 68.5x 68.5x 67.2x 78.0x 73.9x 30.0% 31.6% 31.5% 30.4% 33.0% 6.9% 7.1% 8.4% 8.5% 8.7%SPS Commerce 4.7x 4.9x 5.6x 6.6x 6.4x 68.5x 68.5x 67.2x 78.0x 73.9x 30.0% 31.6% 31.5% 30.4% 33.0% 6.9% 7.1% 8.4% 8.5% 8.7%Tangoe 5.2x 6.3x 5.5x 3.2x 3.3x 61.7x 77.9x 70.3x 41.7x 38.9x 53.3% 56.0% 50.8% 48.1% 47.2% 8.4% 8.1% 7.8% 7.6% 8.5%The Ultimate Softw are Group, Inc. 6.5x 7.0x 8.3x 8.0x 7.9x 65.7x 71.1x 80.0x 69.4x 63.7x 18.2% 19.6% 21.0% 21.8% 23.4% 9.9% 9.9% 10.4% 11.6% 12.5%Vocus 2.6x 3.0x 3.3x 2.6x 2.1x 132.5x 284.2x 407.4x 233.1x - 18.7% 21.0% 29.9% 39.7% 48.7% 2.0% 1.1% 0.8% 1.1% -0.2%Workday, Inc. - - - 33.2x 29.9x - - - - - 53.8% - - - 103.6% -51.4% -43.4% -38.1% -35.7% -32.5%Zix Corporation 4.6x 3.9x 3.5x 3.6x 4.2x 14.6x 12.5x 11.3x 12.7x 15.3x 15.4% 12.4% 11.1% 12.0% 13.7% 31.3% 31.2% 30.7% 28.1% 27.6%

Median: 5.2x 5.4x 5.5x 4.8x 5.3x 33.6x 30.1x 42.4x 43.1x 35.4x 28.4% 30.3% 27.2% 24.0% 25.6% 9.0% 9.0% 8.3% 8.5% 7.8%

25 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 27: 1Q13 software industry financial report

THE SEG SaaS INDEX: FINANCIAL PERFORMANCE

35%

TTM Revenue Growth Rate DistributionRevenue Performance

35% achieved TTM35.0%$180

TTM Total Revenue ($M) TTM Revenue Growth

29%

19%16%

19%20%

25%

30%

ompanies

35% achieved TTM revenue growth of 40% or more

20.0%

25.0%

30.0%

$80

$100

$120

$140

$160

enue

 Growth

al Reven

ue Only 3% of generated TTM revenue growth of 10% or less

0%3%

13%

0%

5%

10%

15%

% of C

o

0 0%

5.0%

10.0%

15.0%

$0

$20

$40

$60

$80

TTM Reve

TTM Tota

0%<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%<= 50%

> 50%

TTM Revenue Growth• After declining for three consecutive quarters, the median TTM

revenue growth rate for The SEG SaaS Index was 25.6% in

0.0%$01Q12 2Q12 3Q12 4Q12 1Q13

g1Q13.

• Public SaaS companies continued to grow and mature, pushing the median TTM revenue of the SEG SaaS Index to $161.7M, up sharply from 1Q12’s $128.1M.

• Accelerating demand for SaaS solutions has bolstered the TTM revenue growth rates of public SaaS providers, but many are reaching a size that makes it difficult to recapture 2007’s median 42.5% growth rate in a slow growing economy.

• We expect median TTM revenue growth will remain at current

26 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

We expect median TTM revenue growth will remain at current levels for the remainder of 2013.

Page 28: 1Q13 software industry financial report

Public SaaS Company Financial PerformanceTHE SEG SaaS INDEX: FINANCIAL PERFORMANCETTM EBITDA Margin DistributionEBITDA Margin Performance

87% with EBITDA margins of 20% or lower30%10%

EBITDA Margin TTM EBITDA Growth

32%35%

15%

20%

25%

6%

8%

TDA Grow

th

A Margin

29%26%

20%

25%

30%

ompanies

0%

5%

10%

0%

2%

4%

TTM EBIT

EBITDA

10%

3%

0%

5%

10%

15%

% of C

o

• After peaking in 2010, the median EBITDA margins of public SaaS companies have declined each quarter.

0%0%1Q12 2Q12 3Q12 4Q12 1Q13

0%<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%

TTM EBITDA Margin

SaaS companies have declined each quarter.

• The trend continued in 1Q13, as EBITDA margins fell to 7.8% from 9.0% in 1Q12.

• The decline in EBITDA margins has not been accompanied by a concomitant increase in TTM revenue rates, suggesting y gg gpublic SaaS providers are working harder to make a sale.

27 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 29: 1Q13 software industry financial report

Public SaaS Company Market ValuationsTHE SEG SaaS INDEX: FINANCIAL PERFORMANCEMedian Margin PerformanceMedian Operating Ratios

45%

S&M (% of Revenue) R&D (% of Revenue) G&A (% of Revenue)

80%

Gross Profit Margin EBITDA Margin Net Income Margin

25%

30%

35%

40%

Revenu

e

40%

50%

60%

70%

Margin

0%

5%

10%

15%

20%

% of R

0%

10%

20%

30%% M

• Increased spending on sales and marketing by public SaaS companies accounts for much of the decline in median

• Median gross profit margins for public SaaS companies in 1Q13 were 69.5%, and have remained steady over the past

0%1Q12 2Q12 3Q12 4Q12 1Q13

0%1Q12 2Q12 3Q12 4Q12 1Q13

pEBITDA margin.

• In 1Q13, 39.0% of total revenue was spent on sales & marketing, up from 36.2% in 1Q12.

• R&D spending as a percent of revenue increased to 17.4% in

, y pfive quarters.

• Stable gross profit margins demonstrate the ability of public SaaS companies to grow without disproportionally increasing infrastructure and application delivery costs.

1Q13, compared to 15.1% of revenue invested in R&D by on-premise software companies.

• It is unclear whether the increased spending on product enhancements and sales by public SaaS companies will accelerate revenue growth in the absence of improved GDP

• With growth as their primary objective, public SaaS companies are running at break even, with net income in 1Q13 of 0.9%.

28 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

accelerate revenue growth in the absence of improved GDP growth and increased IT capital spending.

Page 30: 1Q13 software industry financial report

Public SaaS Company Financial Performance by Product CategoryTHE SEG SaaS INDEX: MARKET VALUATIONSEV/Revenue Multiple DistributionEV/Revenue and EV/EBITDA Multiples

42 4 43 1x50.0x

EV/Revenue EV/EBITDA

13% 13% 13% 13%14%

33.6x30.1x

42.4x 43.1x

35.4x

25.0x

30.0x

35.0x

40.0x

45.0x

10% 10% 10%

7%

10%

8%

10%

12%

ompanies

5.2x 5.4x 5.5x 4.8x 5.3x

0 0x

5.0x

10.0x

15.0x

20.0x

0%0%

2%

4%

6%

% of C

o

• Median EV/Revenue multiples remained strong for public SaaS providers, closing 1Q13 at 5.3x.

• The even distribution of EV/Revenue multiples across the public SaaS company universe is striking and shows that it

0.0x1Q12 2Q12 3Q12 4Q12 1Q13

0%<= 1.0x > 1.0x

<= 2.0x> 2.0x<= 3.0x

> 3.0x <= 4.0x

> 4.0x<= 5.0x

> 5.0x<= 6.0x

> 6.0x<= 7.0x

> 7.0x<= 8.0x

> 8.0x<= 9.0x

> 9.0x

EV/Revenue

p , g Q

• Public SaaS providers in 1Q13 continued to trade at a significant premium relative to their on-premise peers (5.3x vs. 2.8x).

• Public SaaS EV/Revenue multiples have exceeded 5x in four

p p y gtakes much more than carrying the SaaS moniker to achieve a premium EV/Revenue multiple.

• Typically we would expect to see a cluster of companies possessing multiples around the median (5.3x), however, there are as many companies in the 5 0x 6 0x EV/Revenueof the past five quarters, the best streak since 2007. there are as many companies in the 5.0x – 6.0x EV/Revenue range as the 9.0x range .

• What distinguishes companies with premium EV/Revenue multiples versus those that do not?

29 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 31: 1Q13 software industry financial report

Public SaaS Company Market Valuations by Product CategoryTHE SEG SaaS INDEX: MARKET VALUATIONSEV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates

10.8x12.0x 8.5x9.0x

5.7x

7.5x

4 7x6.0x

8.0x

10.0x

EV/Reven

ue

5.5x4.6x 5.0x

5.0x

6.0x

7.0x

8.0x

EV/Reven

ue

0.0x

1.6x

3.4x

4.7x

0 0x

2.0x

4.0x

Med

ian E 3.4x

0 0x

1.0x

2.0x

3.0x

4.0x

Med

ian E

• There is a clear and direct correlation between TTM revenue growth and median EV/Revenue multiples

• There is an inverse correlation between EBITDA margins and median EV/Revenue multiples

0.0x<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%<= 50%

> 50%

TTM Revenue Growth

0.0x<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%

TTM EBITDA Margin

growth and median EV/Revenue multiples.

• Public SaaS companies growing TTM revenue in excess of 50% achieved a median EV/Revenue multiple of 10.8x.

• The premium market valuations awarded rapidly growing public SaaS companies accounts, in large part, for their

and median EV/Revenue multiples.

• In the current universe, SaaS profitability is penalized, as investors fear profitability is at the expense of growth, which they deem all important.

• Public SaaS companies with no profitability achieved a public SaaS companies accounts, in large part, for their increased spending on sales & marketing.

p p yremarkable 8.5x median EV/Revenue multiple.

30 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 32: 1Q13 software industry financial report

THE SEG SaaS INDEX BY PRODUCT CATEGORY

1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13CRM & Marketing 6.5x 5.9x 5.5x 4.3x 4.3x 3.0x 4.1x 4.5x 2.8x 2.3x 36.8% 36.3% 29.9% 36.1% 37.7% 3.3% 2.7% 2.6% 2.9% 2.1%ERP & Supply Chain 5.0x 5.0x 5.5x 6.6x 6.4x 4.4x 5.0x 5.3x 5.0x 5.6x 25.8% 24.6% 26.3% 25.3% 30.7% 6.9% 7.1% 8.4% 8.5% 5.7%Vertically Focused 4.2x 4.3x 5.7x 4.7x 5.0x 3.7x 4.1x 4.6x 3.9x 4.2x 30.2% 34.4% 30.3% 23.0% 21.6% 15.2% 15.4% 16.4% 15.4% 16.5%

SEG SaaS Index

CategoryEV/Revenue Forward EV/Revenue TTM Revenue Growth EBITDA Margin

Workforce Management 6.5x 7.0x 8.3x 10.5x 10.7x 5.7x 6.5x 7.3x 7.6x 8.0x 36.0% 19.6% 21.0% 21.8% 42.5% -17.3% -17.9% -17.6% -19.4% -20.2%

Median: 5.2x 5.4x 5.5x 4.8x 5.3x 4.4x 4.8x 4.9x 4.3x 4.7x 29.2% 30.9% 28.0% 25.8% 27.9% 9.4% 9.4% 8.4% 8.8% 8.2%

With 32 companies, The SEG SaaS Index now has sufficient critical mass for us to track trends across four distinct SaaS product categories Select companies within each SaaS Product

CRM & M k ti ERP & S l Ch i V ti ll F d W kf M t

across four distinct SaaS product categories. Select companies within each SaaS Product category are included below. See the appendix for the complete list of companies within each product category.

CRM & M k ti ERP & S l Ch i V ti ll F d W kf M tCRM & Marketing ERP & Supply Chain Vertically Focused Workforce ManagementCRM & Marketing ERP & Supply Chain Vertically Focused Workforce Management

31 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 33: 1Q13 software industry financial report

THE SEG SaaS INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE

1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth

25%30% 35% 40% 45%

0% 

10% 

20% 

30% 

0%5%

10% 15% 20% 25%

(40%)

(30%)

(20%)

(10%)

0%

CR

M &

Mar

ketin

g

ER

P &

Sup

ply

Cha

in

Ver

tical

lyFo

cuse

d

Wor

kfor

ceM

anag

emen

t

(40%)

CR

M &

Mar

ketin

g

ER

P &

Sup

ply

Cha

in

Ver

tical

lyFo

cuse

d

Wor

kfor

ceM

anag

emen

t

1Q13 YoY Change EBITDA Margin1Q13 TTM EBITDA Margin

10% 15% 20% 

0% 

10% 

20% 

(15%)(10%)(5%)0% 5% 

(40%)

(30%)

(20%)

(10%)

g in ed e nt

(25%)(20%)( )

CR

M &

Mar

ketin

g

ER

P &

ply

Cha

in

Ver

tical

lyFo

cuse

d

orkf

orce

nage

men

t

CR

M &

Mar

ketin

RP

& S

uppl

y C

hai

Ver

tical

ly F

ocus

e

Wor

kfor

ceM

anag

emen

32 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

M ES

upp V

Wo

Man ER V

Page 34: 1Q13 software industry financial report

THE SEG SaaS INDEX BY PRODUCT CATEGORY: MARKET VALUATIONS

1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV/Revenue Multiples

10.0x

12.0x

60%

80%

6.0x

8.0x

0%

20%

40%

0.0x

2.0x

4.0x

g n y d nt

(40%)

(20%)

0%

g n ly d nt

• Workforce Management category achieved a 10.3x median EV/Revenue multiple, 66% higher than the next closest product category,

CR

M &

Mar

ketin

g

ER

P &

Sup

ply

Cha

i

Ver

tical

lFo

cuse

d

Wor

kfor

ceM

anag

eme n

CR

M &

Mar

ketin

ER

P &

Sup

ply

Cha

i

Ver

tical

lFo

cuse

d

Wor

kfor

ceM

anag

eme n

g g y g g yERP & Supply Chain.

• The stellar performance of SaaS providers comprising the Workforce Management category can be attributed to their breakneckTTM revenue growth, with no profits.

• Workforce management SaaS providers continued to benefit from a product refresh cycle that is replacing legacy, on-premise solutions with hosted SaaS solutions.

• ERP & Supply chain, one of the last product categories to adopt SaaS solutions due to concerns over security and integration,achieved the second highest median EV/Revenue multiple (6.2x).

• Although ERP & Supply Chain TTM revenue growth was only slightly above the SaaS median, companies within this product t i d i k t l ti b f th i k t t ti l f h t d ERP & S l Ch i l ti

33 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

category received premium market valuations because of the massive market potential of hosted ERP & Supply Chain solutions.

Page 35: 1Q13 software industry financial report

PUBLIC INTERNET COMPANY FINANCIAL ANDPUBLIC INTERNET COMPANY FINANCIAL AND VALUATION PERFORMANCE:

THE SEG INTERNET INDEX

3434 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 36: 1Q13 software industry financial report

Public Internet Company Market Valuations by Product CategoryTHE SEG INTERNET INDEXSEG - Internet: Median Metrics

• The SEG Internet Index tracks public companies that primarily offer B2C solutions over the Internet using a wide

Measure 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 2.2x 2.1x 1.9x 2.0x 2.0xEV/EBITDA 13.4x 12.6x 13.3x 12.8x 13.6xEV/Earnings 26.2x 23.3x 27.9x 23.6x 22.5xGross Profit Margin 66.2% 67.5% 67.4% 65.5% 65.7%

array of pricing models• The SEG Internet Index is currently

comprised of 97 public Internet i *

EBITDA Margin 13.6% 13.3% 13.0% 12.9% 13.0%Net Income Margin 4.3% 4.8% 4.3% 5.3% 3.9%TTM Revenue Growth 29.8% 27.6% 24.9% 22.2% 19.8%TTM Total Revenue ($M) $358.0 $378.9 $382.1 $387.3 $400.0TTM EBITDA Growth 26.7% 20.3% 20.9% 14.2% 15.9%TTM Total EBITDA ($M) $40.6 $42.9 $48.6 $46.3 $42.7

companies*( )

Cash & Eq ($M) $136.2 $130.7 $122.1 $130.4 $148.2Current Ratio 2.4 2.6 2.6 2.5 2.2Debt / Equity Ratio 15.5% 14.5% 13.5% 19.3% 19.3%

35 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

* See appendix for a complete list of companies in The SEG Internet Index

Page 37: 1Q13 software industry financial report

Initial Public OfferingsTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCE

23%25%

TTM Revenue Growth Rate DistributionRevenue Performance

35.0%$410

TTM Total Revenue ($M) TTM Revenue Growth

21%

12%

18%16%

10%

15%

20%

ompanies

20.0%

25.0%

30.0%

$370

$380

$390

$400

nue Grow

th

al Reven

ue

10%

0%

5%

10%

% of C

o

0 0%

5.0%

10.0%

15.0%

$330

$340

$350

$360

TTM Reve

TTM Tota

0%<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

TTM Revenue Growth• Over the past year, The median TTM revenue growth rate of public

companies comprising The SEG Internet Index declined 10%

0.0%$3301Q12 2Q12 3Q12 4Q12 1Q13

co pa es co p s g e S G te et de dec ed 0%(29.8% to 19.8%) in 1Q13.

• While lower, the 19.8% median Internet growth rate is still healthy, especially considering the median TTM revenue of The SEG Internet Index is $400M, compared to only $162M for The SEG SaaS IndexSaaS Index.

• The SEG Internet Index had an impressive number of star performers, 23% of companies in the Index reported TTM revenue growth of 40% or higher.

• Conversely 21% of companies in The SEG Internet Index posted

36 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

• Conversely, 21% of companies in The SEG Internet Index posted negative TTM revenue growth, depressing the median as a whole.

Page 38: 1Q13 software industry financial report

Public SaaS Company Financial PerformanceTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCE

30%

TTM EBITDA Margin DistributionEBITDA Margin Performance

30%16%

EBITDA Margin TTM EBITDA Growth

21%23% 24%

14%15%

20%

25%

ompanies

15%

20%

25%

8%

10%

12%

14%

TDA Grow

th

A Margin

9% 9%

0%

5%

10%% of C

o

0%

5%

10%

0%

2%

4%

6%

TTM EBIT

EBITDA

0%<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

TTM EBITDA Margin• Over the past five quarters, public Internet companies

managed to maintain respectable margins despite the

0%0%1Q12 2Q12 3Q12 4Q12 1Q13

g p g pdeclining revenue growth rates.

• The median ~13% EBITDA margins were consistent with 2006 and 2007 performance, but were dramatically lower than the 18.1% median EBITDA achieved in 1Q11.

• The EBITDA margin decline was partly due to a larger number of Internet IPOs featuring Internet providers with stellar revenue growth, but little, if any, profitability.

• 45% of all public Internet companies posted EBITDA margins of 10% or lower

37 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

margins of 10% or lower.

Page 39: 1Q13 software industry financial report

Public SaaS Company Market ValuationsTHE SEG INTERNET INDEX: FINANCIAL PERFORMANCEMedian Margin PerformanceMedian Operating Ratios

25%

S&M (% of Revenue) R&D (% of Revenue) G&A (% of Revenue)

80%

Gross Profit Margin EBITDA Margin Net Income Margin

15%

20%

Revenu

e

40%

50%

60%

70%

Margin

0%

5%

10%

% of R

0%

10%

20%

30%% M

• In 1Q13, companies comprising the SEG Internet Index spent 23.7% of total revenue on sales and marketing (S&M), 15.2% on research development (R&D), and 10.6% on general and administrative.

0%1Q12 2Q12 3Q12 4Q12 1Q13

0%1Q12 2Q12 3Q12 4Q12 1Q13

p ( ), g

• The median R&D spend as a percent of total revenue was the lowest among our three tracking indices.

• Despite TTM revenue growth declines, public Internet companies kept their cost structures in line, resulting in a median TTM EBITDA margin of 13% in 1Q13.

38 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 40: 1Q13 software industry financial report

THE SEG INTERNET INDEX: MARKET VALUATIONSEV/Revenue Multiple DistributionMedian EV/Revenue and EV/EBITDA Multiples

13 616.0x

EV/Revenue EV/EBITDA

27%30%13.4x

12.6x13.3x 12.8x

13.6x

8.0x

10.0x

12.0x

14.0x 24%

15%

20%

25%

ompanies

2.2x 2.1x 1.9x 2.0x 2.0x

0 0x

2.0x

4.0x

6.0x 9% 9% 9%

4%2% 1%

7% 8%

0%

5%

10%% of C

o

• In 1Q13, the median EV/Revenue multiple of The SEG Internet Index was 2.0x, a modest decline from 1Q12’s 2.2x.

• As the median EV/Revenue multiple distribution shows public Internet companies garner a strikingly wide range of market

0.0x1Q12 2Q12 3Q12 4Q12 1Q13

0%<= 1.0x > 1.0x

<= 2.0x> 2.0x<= 3.0x

> 3.0x <= 4.0x

> 4.0x<= 5.0x

> 5.0x<= 6.0x

> 6.0x<= 7.0x

> 7.0x<= 8.0x

> 8.0x<= 9.0x

>= 9.0x

EV/Revenue

• As the median EV/Revenue multiple distribution shows, public Internet companies garner a strikingly wide range of market valuations; 51% had EV/Revenue of 2.0x or less, while 15% boasted an EV/Revenue multiple of 8.0x or greater.

• Those Internet companies with the highest EV/Revenue multiples were mostly new IPOs that were positioned to capitalize upon the shift to online advertising, and several benefited also from having originated in high growth economies such as China andBrazil. Examples include: LinkedIn (16.8x), Facebook (11.3x), Qihoo (10.3x), Mercadolibre (9.8x), Zillow (9.8x), Youku (9.6x), Yelp (9.4x) and Trulia (8.9x).

39 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 41: 1Q13 software industry financial report

THE SEG INTERNET INDEX: MARKET VALUATIONSEV/Revenue Multiples vs. TTM EBITDA MarginsEV/Revenue Multiples vs. TTM Revenue Growth Rates

8.0x9.0x 7.5x8.0x

8.0x

5.0x

6.0x

7.0x

8.0x

EV/Reven

ue

4.4x

4.0x

5.0x

6.0x

7.0x

EV/Reven

ue

0.8x

1.8x

2.9x 3.0x

2.1x

0 0x

1.0x

2.0x

3.0x

4.0x

Med

ian E

1.7x1.0x

2.0x

2.9x

0 0x

1.0x

2.0x

3.0x

Med

ian E

• Public Internet company valuation performance is dramatically split between new, rapidly growing social and • Unlike The SEG SaaS Index where TTM EBITDA margins

have little bearing on the median EV/Revenue multiple

0.0x<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

TTM Revenue Growth

0.0x<= 0% > 0%

<= 10%> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

TTM EBITDA Margin

y p , p y g gad-tech providers and other, slower growing incumbent providers, e.g. Facebook vs. Yahoo.

• Public Internet companies with TTM revenue growth of 40% or higher were rewarded with median EV/Revenue multiples markedly higher than their slower growing peers

have little bearing on the median EV/Revenue multiple applied to a company, public Internet company investors kept a keen eye on margins and rewarded strong performers with significantly higher market valuations.

• With few exceptions, and in stark contrast to SaaS markedly higher than their slower growing peers.

• The relative market valuations of public Internet companies with TTM revenue growth greater than 0% and less than 40%, was nominal (1.8x to 3.0x), especially in light of the major differences among public SaaS companies across this

pcompanies, many of the most profitable public Internet companies also reported stellar TTM revenue growth. Among them were ChangYou, Baidu, Yandex, Mail.ru, TripAdvisor and Tencent Holdings.

40 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

revenue distribution spread.

Page 42: 1Q13 software industry financial report

THE SEG INTERNET INDEX BY PRODUCT CATEGORYSEG Internet Index

1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13 1Q12 2Q12 3Q12 4Q12 1Q13Ad Tech & Lead Generation 2.7x 2.1x 1.7x 1.9x 1.8x 14.1x 11.4x 13.3x 12.0x 14.9x 34.4% 37.5% 35.3% 32.9% 25.2% 13.9% 14.0% 14.4% 14.1% 13.0%Commerce 0.8x 0.7x 0.7x 0.9x 0.9x 16.6x 20.8x 15.4x 15.2x 10.6x 18.8% 22.0% 17.1% 16.2% 14.9% 5.3% 5.1% 5.4% 5.5% 5.6%Content & Media 1.8x 1.6x 1.3x 1.4x 1.6x 10.4x 10.1x 10.8x 10.9x 15.4x 25.8% 15.5% 12.3% 10.5% 12.6% 13.9% 14.0% 14.1% 14.1% 14.8%Gaming 3 2x 3 4x 2 1x 2 0x 2 7x 4 2x 4 0x 3 4x 3 7x 5 8x 35 7% 33 1% 32 0% 25 1% 21 9% 43 9% 45 5% 43 9% 42 6% 36 3%

CategoryEV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin

Gaming 3.2x 3.4x 2.1x 2.0x 2.7x 4.2x 4.0x 3.4x 3.7x 5.8x 35.7% 33.1% 32.0% 25.1% 21.9% 43.9% 45.5% 43.9% 42.6% 36.3%Infrastructure 1.8x 1.5x 0.9x 0.9x 1.3x 13.6x 13.7x 11.4x 11.7x 11.9x 25.3% 18.8% 13.6% 13.0% 13.2% 11.9% 10.7% 8.3% 7.3% 7.9%Services 3.0x 2.2x 2.9x 2.7x 3.2x 18.1x 16.9x 16.4x 17.7x 15.3x 53.2% 55.1% 49.5% 42.0% 42.2% 6.6% 6.7% 7.5% 8.7% 8.5%Social 15.1x 13.0x 9.6x 8.6x 8.9x 36.8x 30.4x 29.3x 36.4x 29.9x 74.5% 64.0% 64.6% 50.9% 49.3% 12.2% 12.9% 12.6% 13.3% 16.1%Travel 4.7x 3.1x 2.5x 3.5x 3.6x 15.2x 15.5x 16.5x 16.0x 18.1x 31.5% 29.1% 24.0% 21.8% 19.8% 17.6% 18.1% 19.4% 19.1% 18.1%

Median 2.2x 2.1x 1.9x 2.0x 2.0x 13.4x 12.6x 13.3x 12.8x 13.6x 29.8% 27.6% 24.9% 22.2% 19.8% 13.6% 13.3% 13.0% 12.9% 13.0%

The SEG Internet Index is segmented into eight product categories. Select companies within each Internet product category are included below. See the appendix for the complete list of companies within each product category.

Ad Tech & Lead Gen Commerce Content & Media GamingAd Tech & Lead Gen Commerce Content & Media Gaming

Infrastructure Services Social Travel

41 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 43: 1Q13 software industry financial report

THE SEG INTERNET INDEX BY PRODUCT CATEGORY: FINANCIAL PERFORMANCE

1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth 1Q13 YoY Change in Revenue Growth1Q13 TTM Revenue Growth

30%

40%

50%

60%

(30%)

(20%)

(10%)

0% 

0%

10%

20%

30%

on ce ia ng re es ial el

(60%)

(50%)

(40%)

(30%)

on ce ia ng re es ial

vel

Ad

Tech

&Le

ad G

ener

atio

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mer

c

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ed

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atio

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c

Con

tent

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Gam

in

Infr

astru

ctu

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vice

Soc Trav

1Q13 YoY Change EBITDA Margin1Q13 TTM EBITDA Margin

2 %30% 35% 40% 

10%20% 30% 40% 

5% 10% 15% 20% 25% 

(30%)(20%)(10%)0% 

10% 

0% 

Ad

Tech

&ad

Gen

erat

ion

Com

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ce

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t & M

edia

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(40%)A

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t & M

edia

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el

42 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Lea

Co Lea

Co

Page 44: 1Q13 software industry financial report

THE SEG INTERNET INDEX BY PRODUCT CATEGORY: MARKET VALUATIONS

1Q13 YoY Change in Median EV/Revenue Multiples1Q13 Median EV/Revenue Multiples

8.0x

9.0x

10.0x

10%

20%

4.0x

5.0x

6.0x

7.0x

(20%)

(10%)

0%

0 0x

1.0x

2.0x

3.0x

4.0x

(40%)

(30%)

(20%)

0.0x

Ad

Tech

&ea

d G

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Com

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ce

onte

nt &

Med

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• The Social product category closed Q1 with the highest median EV/Revenue multiple among the eight Internet product categories wetrack, the 10.3x median market valuation was 147% higher than the next closest product category, Travel (3.6x).

• Social solutions Facebook, LinkedIn, Yelp, etc continued to expand their online footprints and investors rewarded them accordingly. S i l M k t l ti l fl t d i ifi t Y Y EBITDA i i t t b d t t d t

Le Co A

Lea

Con

Social Market valuations also reflected significant YoY EBITDA margin improvement, as category members demonstrated a greaterability to monetize their large user bases with advertising, subscriptions, more mobile offerings and other value added services.

• The Commerce product category lagged all other product categories, with a 0.9x EV/Revenue multiple, a tepid TTM revenue growth of 14.9%, and a lackluster 5.6% EBITDA margin. Amazon, one of the most notable commerce companies, is aggressively trying to diversify its content offerings and expand its hardware offerings as a way of differentiating from competitors and driving more spend

43 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

y g p g y g p g pthrough its platform.

Page 45: 1Q13 software industry financial report

SOFTWARE INDUSTRY M&A MARKET UPDATE

4444 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 46: 1Q13 software industry financial report

SOFTWARE/SaaS M&A DEAL VOLUME AND SPENDINGTTM Average M&A Deal SizeU.S. Software Mergers & Acquisitions Activity

431407

421 426 430454 456

432454

435406

$23.4$23 1

$25

450

500

$37$40

$42 $41 $41 $42

$36$39

$36$40.0

$45.0

ons)

383

407 406

362$17.3 $17.9

$12.7 $13.1

$21.3

$12.6

$15.8

$23.1

$12.3

$15.8 $15

$20

250

300

350

400

Value (BIllionmbe

r of D

eals

$20

$28$31

$33$36 $36

$20.0

$25.0

$30.0

$35.0

Deal V

alue

 (Millio

$4.6$8.4

$0

$5

$10

0

50

100

150

200

ns)

Num

$0 0

$5.0

$10.0

$15.0

$

TTM  A

verage

 

• M&A deal volume declined markedly in 1Q13 likely a result of heightened concern about the economic impact of the

• The software M&A average deals size remained in the mid to high $30M range, after surging and peaking in 2011.

$001Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13

Deals Value

$0.0

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

g pU.S. sequestration*.

• Total M&A spending dropped sharply to $8.4 billion, mostly due to scarcity of software mega deals.

• The sole mega deal (> $500 million) in 1Q13 was Fiserv’s

high $30M range, after surging and peaking in 2011.

• Software buyers have remained true to their word. Of the large software buyers who responded to our Annual Buyer Survey over the last two years, 72% on average said they would focus on deals ranging in size from $10M - $99M.

acquisition of Open Solutions ($1 billion) .

• Based upon our 2013 Software Company Buyers Survey and more recent conversations with a wide array of buyers, we expect M&A transaction will surpass 400 in each of the remaining quarters in 2013

45 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

remaining quarters in 2013.

* We expect the finally tally will be about 5% higher, since prior quarter M&A announcements and data are often released well into the following quarter

Page 47: 1Q13 software industry financial report

SOFTWARE M&A EXIT MULTIPLESMedian Exit Multiples Median EV/Revenue Exit Multiple Distribution

12.2x 12.1x11 2

11.8x12.7

12 0

14.0x

EV/Revenue EV/EBITDA

29.4%30.0%

35.0%

11.2x

6 0

8.0x

10.0x

12.0x24.4%

21.8%

14.3%15.0%

20.0%

25.0%

oftw

are

Sel

lers

1.9x 1.7x2.3x

1.8x 1.6x

0 0x

2.0x

4.0x

6.0x10.1%

0 0%

5.0%

10.0%

15.0%

% o

f So

• Since reaching a median TTM exit multiple of 2.3x in 3Q12, the median exit multiple of on-premise software providers

• On a TTM basis, 75.6% of all on-premise software targets were acquired for 3.0x TTM revenue or less.

0.0x1Q12 2Q12 3Q12 4Q12 1Q13

0.0%<= 1.0x > 1.0x

<= 2.0x> 2.0x <= 3.0x

> 3.0x <= 4.0x

> 4.0x

EV/Revenue Exit Multiple

the median exit multiple of on premise software providers has dropped for two sequential quarters, ending 1Q13 at 1.6x.

• The median on-premise software exit multiple for all public and private transactions with a quantifiable EV/Revenue

l ti h l d th di i it lti l f

e e acqu ed o 3 0 e e ue o ess

• The remaining 24.4% of targets came from sectors growing much faster than the broader on-premise software market such as cloud and network infrastructure.

• Select transactions include: Kofax acquisition of BI provider valuation has lagged the median on-premise exit multiple of public on-premise software companies by ~30% for the past several years, as many targets were acquired primarily for their customer bases and M&S revenue streams.

altosoft ($13.5M, 4.0x rev.), JDS Uniphase acquisition of wireless network optimization provider Arieso ($85M, 4.0x rev.) and Juniper Networks acquisition of network optimization provider Webscreen ($9.9M, 7.0x rev.).

46 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 48: 1Q13 software industry financial report

SOFTWARE M&A: BY OWNERSHIP STRUCTURE AND SIZE

  Public Sellers 1.6x Median Multiple

30%

  Buyer Less Than $200 million 1.4x Median Multiple

Buyer Greater Than $200 million 2.7x Median Multiple

by Sizeby Ownership Structure

Private Sellers 2.0x Median Multiple

70%30% MultipleMultiple

56%44%

Private Buyers 1.4x Median Multiple

69%

31%

Seller Greater Than $20 million: 1.5x

Seller Greater Than $20 million: 0.8x

Seller Greater Than $20 million: 1.4x

Seller Greater Than $20 million: 2.6x

Public Buyers 2.1x Median Multiple

69%Seller Less Than $20 million: 2.4x

Seller Less Than $20 million: 2.0x

Seller Less Than $20 million: 1.5x

Seller Less Than $20 million: 3.3x

• Simply put when analyzing software M&A by ownership structure and size deals with the highest multiples occur when a large• Simply put, when analyzing software M&A by ownership structure and size, deals with the highest multiples occur when a large buyer (greater than $200 million in revenue) buys a small target (less than $20 million). On a median basis, such a combination produced a 3.3x EV/Revenue exit multiple in 1Q13.

• The big buyer/small target multiple, which is more than twice the median on-premise software exit multiple, is often driven by abuyer that deems a target’s technology and products to be very well executed and highly scalable.

• Select example transactions include: Juniper Networks 1Q13 acquisition of network optimization provider Webscreen ($9.9M, 7.0x rev.) , KEYW Holding’s 3Q12 acquisition of SIEM provider Sensage ($85.5M, 7.1x rev.), Spirent Communications’ 2Q12 acquisition of network performance management provider MU Dynamics ($40M, 4.5x rev.).

47 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 49: 1Q13 software industry financial report

Horizontal & Vertical M&A Median EV/Revenue Exit

SOFTWARE M&A: BY VERTICAL AND HORIZONTAL MARKETS

Horizontal & Vertical M&A Median EV/Revenue Exit MultiplesHorizontal & Vertical M&A Volume

68.0% 65.0% 63.0% 58.0% 67.0%60.0%

80.0%

100.0%

2 3x3.0x

2 2x

32.0% 35.0% 37.0% 42.0% 33.0%

0.0%

20.0%

40.0%

60.0%

1Q12 2Q12 3Q12 4Q12 1Q13

1.3x1.9x 2.0x

1.4x 1.3x

2.3x1.6x

2.2x1.8x

1Q12 2Q12 3Q12 4Q12 1Q131Q12 2Q12 3Q12 4Q12 1Q13

Horizontal Vertical

1Q12 2Q12 3Q12 4Q12 1Q13

Vertical Horizontal

• As they have for most of the past five quarters horizontal software providers garnered the lion’s share of M&A transactions in• As they have for most of the past five quarters, horizontal software providers garnered the lion s share of M&A transactions in 1Q13, as well as a higher median exit valuation than their vertical peers.

• A good number of vertical markets are still recovering from the economic downturn; others are being adversely impacted by sequestration; and big buyer demand for vertical domain expertise was sated during a spate of vertical acquisitions during 2006-2010.

• Select horizontal M&A transactions included: Advanced Computer Software Group’s acquisition of ERP provider Computer Software Holdings ($164.2M, 1.8x rev.), Juniper Networks 1Q13 acquisition of network optimization provider Webscreen ($9.9M, 7.0x rev.).

• Select vertical M&A transactions included: Enghouse Systems acquisition of public sector software provider Locus ($14M, 0.8x ) T i ’ i iti f bli t t t ti ft id Sk Hi h ($5 8M 0 5 )

48 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

rev.), Tracsis’ acquisition of public sector transportation software provider Sky High ($5.8M, 0.5x rev.).

Page 50: 1Q13 software industry financial report

SOFTWARE M&A BY PRODUCT CATEGORY

Content & Document Mgmt

Data Mgmt & Integration1.5%

Asset & Facilities Mgmt

Billing & Service Provisioning

1.1%

• The Mobile product category accounted for 22.2% of all software M&A transactions in the first quarter, making it the most active

4.6%

CRM, Marketing & Sales2.7%

Dev. Tools & IT Asset Mgmt1.5%

Engineering, PLM & CAD4.6%

MiddlewareRetail

Telecommunications0.8%

Utility1.1%

Other Verticals7.3%

Accounting & Finance0.4%

2.3% BI, Risk & Compliance

2.3%

among all product categories

• Other active M&A categories in the first quarter included: Healthcare (7.3%), Financial Services (6.5%), Multimedia, Graphics & Communications (5 0%)

Middleware0.4%

ERP0.4%

Entertainment3.4%

HR & Workforce Mgmt4.2%

Legal0.8%

Manufacturing0.8%

Non‐Profit0.4%

Real Estate0.4%

0.4%

Graphics & Communications (5.0%), Supply Chain Mgmt & Logistics (4.6%) and Engineering, PLM & CAD (4.6%).

• The number of software product categories reporting significant transaction volumes in 1Q13 i t t t t th ib f th

Messaging, Conferencing & Communications

1.9%

Multimedia, Graphics & Communications

5.0%Network Performance Financial Services

Healthcare7.3%

Insurance1.9%

Verticals

1Q13 is testament to the vibrancy of the current software M&A market.

Mgmt1.5%Security

1.9%

Systems Mgmt1.9%

Supply Chain Mgmt & Logistics

Automotive1.1%

Construction0.8%

Education1.9%

6.5%

4.6%Mobile22.2%

49 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 51: 1Q13 software industry financial report

SOFTWARE M&A BY PRODUCT CATEGORY

3.1x

Median EV/Revenue Exit Multiples by Software Product Category

2.0x 2.0x 1.9x 1.7x 1.6x 1.6x 1.4x 1.4x0.8x

Syst

ems

Man

agem

ent

Hea

lthca

re

Mob

ile

EDA

nufa

ctur

ing

&ss

et M

gmt

Dat

a M

gmt &

Inte

grat

ion

her V

ertic

als

A&D

, Tel

co,

Ret

ail,

etc.

)

pply

Cha

in &

Logi

stic

s

cial

Ser

vice

sSo

ftwar

e

nt, D

ocum

ent

Busi

ness

cess

Mgm

t

M

Man As D

Ot (A R

Sup

Fina

nc S

Con

ten

and

Pro c

• Among the 32 on-premise software product companies we track ten had both sufficient deal activity and deal data to ascertain a• Among the 32 on-premise software product companies we track, ten had both sufficient deal activity and deal data to ascertain a TTM revenue multiple in 1Q13.

• Software company sellers focused on Systems Management garnered the highest median TTM revenue multiple (3.1x) among those ten product categories. Buyers in this product category are paying healthy multiples to targets that will enhance their cloud and mobile computing strategies.

• Healthcare also posted a strong median EV/Revenue exit multiple in 1Q13. Although health care has traditionally been a technology laggard, adoption of solutions that speed and smooth the transition from fee for service to fee for value care is ramping sharply.

• Content and Document management multiples continued to lag the broader market in 1Q13 with a median exit multiple of 0.8x.

50 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 52: 1Q13 software industry financial report

SaaS M&A: DEAL VOLUME AND EXIT MULTIPLES

4.1x94 94 25%100

SaaS M&A Deals   SaaS as % of Software

Median SaaS EV/Revenue Exit MultiplesSaaS M&A Volume

3.9x

4.0x

3.9x

4.0x

39 3945 48

68 6559

94 9486

15%

20%

5060708090

als as a % of T

otal 

e M&A Deals

S M&A Deals

1Q12 2Q12 3Q12 4Q12 1Q13

10

3039

26

39

0%

5%

10%

010203040

SaaS M

&A Dea

Software

# of SaaS

• There were 86 SaaS M&A transactions in 1Q13 We project a total of 344 SaaS deals in 2013 which would surpass 2012’s• There were 86 SaaS M&A transactions in 1Q13. We project a total of 344 SaaS deals in 2013, which would surpass 2012 s record breaking total of 311.

• After a steady rise from 2009 – 2012, the median TTM EV/Revenue exit multiple of SaaS transactions has held relatively steady over the past five quarters, closing 1Q13 at 4.0x.

• The median SaaS exit multiple premium was 150% on-premise greater than the median exit multiple reached in 1Q13 (4.0x vs.The median SaaS exit multiple premium was 150% on premise greater than the median exit multiple reached in 1Q13 (4.0x vs. 1.6x), the greatest valuation disparity on record.

51 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 53: 1Q13 software industry financial report

SaaS M&A BY PRODUCT CATEGORY

Content & Document Mgmt4 7%

Billing & Service Provisioning

BI, Risk & Compliance8.1%

• CRM, Marketing & Sales was by far the most active SaaS product category, garnering 17.4% of all M&A transactions in the first quarter.

• Buyers are seeking out targets who can

4.7%

CRM, Marketing & Sales17.4%

Retail

Vertical ‐ Other7.0%

Provisioning2.3%

• Buyers are seeking out targets who can best position them to take advantage of the rapid growth in marketing spend expected over the next five years. According to Gartner, by 2017 the CMO will purchase more IT than the CIO

Data Mgmt & Integration2.3%

Ecommerce

Public Sector2.3%

Real Estate1.2%

Retail4.7%

will purchase more IT than the CIO.

• Other product categories with relatively high number of M&A transactions include: HR & Workforce Management (8.1%), BI, Risk & Compliance (8.1%)

3.5%

Engineering, PLM & CAD1.2%

HR & Workforce Mgmt8 1%Fi i l S i

Healthcare3.5%

Insurance3.5%

Legal1.2%

Non‐Profit3.5%

Verticals

and Messaging, Conferencing and Communications (5.8%).

8.1%

Messaging, Conferencing & Communications

5.8%Multimedia, Graphics &

Systems Mgmt

Supply Chain Mgmt & Logistics

Construction1.2%

Education4.7%

Financial Services1.2%

Graphics & Communications

3.5%Security3.5%

Mgmt3.5%

& Logistics2.3%

52 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 54: 1Q13 software industry financial report

1Q13 SaaS M&A TRANSACTIONS

Date Buyer SellerEnterprise

ValueTTM

Revenue EV/Rev03/28/13 HubSpot, Inc. Chime Inc. and PrepWork Inc. - - -03/26/13 The Lords Group of Companies eBuildingSupplies Ltd. - - -03/25/13 Quindell Portfolio Plc (AIM:QPP) iSaaS Technology Limited $8,890,000 - -03/21/13 EQT Partners AB it's learning AS - - -03/21/13 EQT Partners AB it s learning AS03/21/13 j2 Global, Inc. (NasdaqGS:JCOM) Data Lock Limited $499,000 - -03/20/13 Yahoo! Inc. (NasdaqGS:YHOO) Jybe, Inc. - - -03/20/13 Rumblefish, Inc. Catalogik, Inc. - - -03/19/13 Echo Global Logistics, Inc. (NasdaqGS:ECHO) Open Mile, Inc. - - -03/19/13 PeopleMatter, Inc. PeopleClues, Inc. - - -03/19/13 Blackbaud Inc. (NasdaqGS:BLKB) MyCharity Limited - - -03/19/13 Blackbaud Inc. (NasdaqGS:BLKB) MyCharity Limited03/18/13 Ebix Health Benefit Softw are, Inc. - - -03/15/13 Noodle Education, Inc. Lore, Inc. - - -03/13/13 Oracle Corporation (NasdaqGS:ORCL) Nimbula, Inc. - - -03/12/13 Corporation Service Company, Inc. CSC Digital Brand Services $157,260,000 $57,000,000 2.8x03/11/13 Concur Technologies, Inc. (NasdaqGS:CNQR) conTgo limited - - -03/11/13 Tripw ire, Inc. nCircle Netw ork Security, Inc. - - -03/11/13 Tripw ire, Inc. nCircle Netw ork Security, Inc.03/08/13 Desire2Learn Incorporated Wiggio Inc. - - -03/05/13 Issuu, Inc. Magma Aps - - -03/05/13 ePrize, LLC Bulbstorm, Inc. - - -03/05/13 Perceptive Softw are, Inc. Tw istage, Inc. - - -03/04/13 BlueSky ETO e-Integrity, Inc. - - -03/04/13 Silverlake Axis Ltd. (SGX:5CP) Merimen Ventures Sdn. Bhd. $16,860,000 - -03/04/13 Silverlake Axis Ltd. (SGX:5CP) Merimen Ventures Sdn. Bhd. $16,860,00003/04/13 Addnode Group AB (publ) (OM:ANOD B) Abou AB - - -03/01/13 KV Asia Capital CBS Bizhub Sdn. Bhd. and PT. $38,770,000 - -03/01/13 ClearSlide, Inc. SlideRocket, Inc. - - -03/01/13 Perceptive Softw are, Inc. AccessVia, Inc. - - -02/27/13 Rackspace Hosting, Inc. (NYSE:RAX) ObjectRocket, Inc. - - -02/27/13 Open GI Limited Pow erplace Insurance Services - - -02/27/13 Open GI Limited Pow erplace Insurance Services 02/26/13 Cymetrix Corporation CareClarity, Inc. - - -02/25/13 Genesys Telecommunications Laboratories, Inc. Angel.com Incorporated $110,000,000 $28,800,000 3.8x02/22/13 Paperless Receipts Limited ExpenseMagic Ltd. - - -

53 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Page 55: 1Q13 software industry financial report

1Q13 SaaS M&A TRANSACTIONS (CON’T)

Date Buyer SellerEnterprise

ValueTTM

Revenue EV/Rev02/22/13 Access UK Limited Sazneo Limited - - -02/21/13 Master Lock Canada, Inc. N4 Systems Incorporated - - -02/20/13 CPA Global Limited First To File, Inc. - - -02/19/13 [x+1], Inc. UberTags LLC - - -02/19/13 [x 1], Inc. UberTags LLC02/17/13 ironSource Ltd AfterDow nload Ltd. $28,000,000 - -02/15/13 New Net Communication Technologies, LLC Interact Incorporated - - -02/14/13 DiliTrust SAS SQLi, Dataroom.com - - -02/14/13 LX Ventures Inc. (TSXV:LXV) Weeve Ventures Inc. - - -02/14/13 Capsilon Corporation Paperless Off ice Solutions Inc. - - -02/11/13 International Insurance Company of Hannover Limited London & European Title Insurance - - -02/11/13 International Insurance Company of Hannover Limited London & European Title Insurance 02/07/13 PeopleBrow sr Inc. Sw aylo Inc. - - -02/07/13 Avanade, Inc. Opstera, Inc. - - -02/06/13 View point Construction Softw are, Inc. 4Projects Ltd. - - -02/06/13 liveBooks, Inc. Fotomoto, Inc. - - -02/06/13 Haiku Learning Systems, Inc. ActiveGrade, LLC - - -02/05/13 Tatango, Inc. Regal Digital LLC - - -02/05/13 Tatango, Inc. Regal Digital LLC02/05/13 Tw itter, Inc. Bluefin Labs, Inc. - - -02/05/13 SellPoint, Inc. Show Uhow , Inc. - - -02/05/13 SPINS, Inc. Third Solutions, LLC - - -02/05/13 Ease Entertainment Services, LLC Scenechronize - - -02/01/13 JMI Equity; HGGC, LLC Innovative Interfaces, Inc. - - -01/31/13 Aggregate Know ledge, Inc. Quantivo Corporation - - -gg g g , Q p01/31/13 Autodesk, Inc. (NasdaqGS:ADSK) Allpoint Systems, Inc. - - -01/29/13 Genesys Telecommunications Laboratories, Inc. UTOPY, Inc. - - -01/29/13 Reputation.com, Inc. Reputation.com (UK) Limited - - -01/25/13 Peterson Partners LP Angoss Softw are Corp. (TSXV:ANC) $8,470,000 $7,400,000 1.2x01/24/13 Automattic, Inc. Simperium, Inc. - - -01/24/13 LittleLives Inc Pte. Ltd. Illume Technology - - -gy01/24/13 Cubic Transportation Systems, Inc. NextBus Inc. $20,690,000 - -01/22/13 Vision Critical Communications, Inc. Texifter, LLC - - -01/22/13 Infusionsoft, Inc. GroSocial, Inc. - - -01/22/13 Unif ied Media, Inc. PageLever, Inc. - - -01/22/13 Claritas Capital StudioNow , Inc. - - -01/17/13 First Advantage Corporation LexisNexis Risk Solutions, Inc., - - -

54 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

g p , ,

Page 56: 1Q13 software industry financial report

1Q13 SaaS M&A TRANSACTIONS (CON’T)

Date Buyer SellerEnterprise

ValueTTM

Revenue EV/Rev01/10/13 Nuance Communications, Inc. (NasdaqGS:NUAN) VirtuOz SA - - -01/10/13 Fresh Juice Global, LLC VIDERO Inc. - - -01/10/13 NetSuite Inc. (NYSE:N) Retail Anyw here Inc. - - -01/09/13 Elephant Talk Communications Corp. (AMEX:ETAK) Telnicity, LLC $990,000 - -01/09/13 Elephant Talk Communications Corp. (AMEX:ETAK) Telnicity, LLC $990,00001/08/13 Total Merchant Services, Inc. Fanminder, Inc. - - -01/08/13 Nearstream, Inc. LoopFuse, Inc. - - -01/08/13 reInvention, LLC Authentic Response, Inc. - - -01/08/13 InComm, Inc. Giftango Corporation - - -01/08/13 Haufe-Lexw are GmbH & Co. KG Semigator AG - - -01/07/13 Athenahealth, Inc. (NasdaqGS:ATHN) Epocrates, Inc. $294,490,000 $151,000,000 2.0x01/07/13 Athenahealth, Inc. (NasdaqGS:ATHN) Epocrates, Inc. $294,490,000 $151,000,000 2.0x01/07/13 GT Nexus, Inc. TradeCard, Inc. - - -01/04/13 Euronet Worldw ide Inc. (NasdaqGS:EEFT) Pure Commerce Pty Ltd. - - -01/04/13 Farmtrader, LLC XSAg.com - - -01/03/13 PeopleStrategy, Inc. ERC Dataplus, Inc. - - -01/03/13 PennWell Corporation CyberTech, Inc., TransmissionHub, - - -01/03/13 Metrostudy Inc. Metrostudy Inc. - - -01/03/13 Metrostudy Inc. Metrostudy Inc.01/02/13 Elsevier B.V. Knovel Corporation - - -01/02/13 Click & Pledge, Inc. Donor Tow n Square, Inc. - - -

55 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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INTERNET M&A: DEAL VOLUME AND EXIT MULTIPLES

273263 2.1x 2.1x

Median Internet EV/Revenue Exit MultiplesInternet M&A Volume

220 222

1851.9x 1.9x 1.9x

185

1Q12 2Q12 3Q12 4Q12 1Q131Q12 2Q12 3Q12 4Q12 1Q13

• Internet M&A remained highly volatile in large part due to shifting marketing strategies evolving business models and constant• Internet M&A remained highly volatile, in large part due to shifting marketing strategies, evolving business models, and constant changes in the competitive landscape.

• In early 2012, a large number of Internet targets exited amidst the hype of the pending Facebook IPO (5/2012), creating a spike in M&A volume.

• After the Facebook IPO debacle, internet investors and buyers alike became more cautious and circumspect, and M&A volumeAfter the Facebook IPO debacle, internet investors and buyers alike became more cautious and circumspect, and M&A volume declined markedly, plunging to 185 transactions in 1Q13, down from 273 transactions in 2Q12 .

• Internet EV/Revenue exit multiples have held relatively steady, finishing 1Q13 at 1.9x. However, high flying Internet companiescontinue to achieve breathtaking exit multiples. Select examples include: Yahoo’s acquisition of Summly (~30x rev.), Evanea’s acquisition of Internet communications provider Apogea ($5.0M, 12.3x rev.).

56 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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INTERNET M&A: DEAL VOLUME AND EXIT MULTIPLES

31 4%

10.8%

Ad‐Tech & Lead Gen Category 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013

Median Internet EV/Revenue Exit MultiplesInternet M&A Volume

31.4%

3.8%

13.0%Commerce

Content & Media

Gaming

Ad-Tech & Lead Gen 65 70 85 57 58Commerce 36 57 40 41 34Content & Media 51 62 52 55 42Gaming 13 25 13 12 7Infrastructure 31 30 41 27 24Social Tech 24 29 32 30 20

18 4%

Infrastructure

Social Tech

Social Tech 24 29 32 30 20Total 220 273 263 222 185

18.4%22.7%

• Driven by a dearth of ad-tech players in the Internet landscape a much needed consolidation continued to shape the Internet• Driven by a dearth of ad-tech players in the Internet landscape, a much needed consolidation continued to shape the Internet ad-tech landscape in 1Q13, making it the most active Internet M&A product category over the past twelve months.

• After years of consolidation, Internet ad-tech leaders have now emerged, and the sharply lower number of ad tech M&A deals over the past two quarters suggests that buyers and advertisers have placed their bets. Mobile ad-tech is the next frontier.

• Select transactions in the Ad-tech product category include: Facebook’s acquisition of Atlas DMT, Experian’s acquisition ofSelect transactions in the Ad tech product category include: Facebook s acquisition of Atlas DMT, Experian s acquisition of Pacific Micromarketing, Half Off Depot’s acquisition of Crowdsavings.com.

• Content & Media finished 1Q13 as the second most active product category. Select transactions in Content & Media included: Autotrader’s acquisition of Automotive Information, Dentsu’s acquisition of EhonNavi.

57 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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APPENDIX

5858 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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C Ti k P d t C t

THE SEG SOFTWARE INDEX COMPANIES

Amdocs Limited DOX Billing & Service ManagementAsiaInfo Holdings, Inc. ASIA Billing & Service ManagementCSG Systems International, Inc. CSGS Billing & Service ManagementEvolving Systems, Inc. EVOL Billing & Service Management

Company Ticker Product Category

MIND C.T.I. Ltd. MNDO Billing & Service ManagementNeuStar, Inc NSR Billing & Service ManagementRedknee Solutions TSX:RKN Billing & Service ManagementSynchronoss Technologies, Inc. SNCR Billing & Service ManagementActuate Corporation BIRT Business IntelligenceMicroStrategy Incorporated MSTR Business IntelligenceP I PEGA B i I lliPegasystems Inc. PEGA Business IntelligenceProgress Software Corporation PRGS Business IntelligencePROS Holdings PRO Business IntelligenceQlik Technologies QLIK Business IntelligenceVerisk VRSK Business IntelligenceActuate Corporation BIRT Development PlatformsAd b S t I t d ADBE D l t Pl tfAdobe Systems Incorporated ADBE Development PlatformsBSQUARE Corporation BSQR Development PlatformsCompuware Corporation CPWR Development PlatformsMagic Software Enterprises Ltd. MGIC Development PlatformsMicrosoft Corporation MSFT Development PlatformsOracle Corporation ORCL Development PlatformsProgress Soft are Corporation PRGS De elopment PlatformsProgress Software Corporation PRGS Development PlatformsRed Hat, Inc. RHT Development PlatformsSoftware AG XTRA:SOW Development PlatformsANSYS, Inc. ANSS Engineering & PLMAutodesk, Inc. ADSK Engineering & PLMCadence Design Systems, Inc CDNS Engineering & PLMCimatron Ltd CIMT Engineering & PLMCimatron Ltd. CIMT Engineering & PLMDassault Systèmes DSY Engineering & PLMGSE Systems Inc. GVP Engineering & PLMMentor Graphics Corp MENT Engineering & PLMParametric Technology Corporation PMTC Engineering & PLMPDF Solutions Inc PDFS Engineering & PLMStratasys Inc SSYS Engineering & PLM

59 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Stratasys, Inc. SSYS Engineering & PLMSynopsys Inc SNPS Engineering & PLM

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THE SEG SOFTWARE INDEX COMPANIES (CON’T)

American Software, Inc. AMSW.A Enterprise Resource PlanningOracle Corporation ORCL Enterprise Resource PlanningQAD Inc. QADA Enterprise Resource PlanningSage Group plc LSE:SGE Enterprise Resource Planning

Company Ticker Product Category

SAP SAP Enterprise Resource PlanningUnit 4 ENXTAM:UNIT4 Enterprise Resource PlanningACI Worldwide, Inc. ACIW Financial & AccountingBottomline Technologies EPAY Financial & AccountingDST Systems, Inc. DST Financial & AccountingFair Isaac Corporation FICO Financial & AccountingFiserv FISV Financial & AccountingIntuit Inc INTU Financial & AccountingModel N, Inc MODN Financial & AccountingNetSol Technologies Inc. KASE:NETSOL Financial & AccountingSage Group plc LSE:SGE Financial & AccountingActivision Blizzard ATVI Gaming

GElectronic Arts Inc. EA GamingGameLoft SA ENXTPA:GFT GamingKonami Corporation TSE: 9766 GamingTake-Two Interactive TTWO GamingUbisoft Entertainment ENXTPA:UBI GamingAccretive Health AH HealthcareAll i t H lth S l ti I MDRX H lthAllscripts Healthcare Solutions Inc. MDRX HealthcareCerner Corporation CERN HealthcareComputer Programs and Sys, Inc. CPSI HealthcareEpocrates EPOC HealthcareGreenway Medical Technologies, Inc GWAY HealthcareMedAssets MDAS HealthcareM H lth MRGE H lthMerge Healthcare MRGE HealthcareOmnicell, Inc. OMCL HealthcareQuality Systems, Inc. QSII HealthcareHewlett Packard HPQ IT ConglomeratesIBM IBM IT ConglomeratesMicrosoft Corporation MSFT IT ConglomeratesOracle Corporation ORCL IT Conglomerates

60 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Oracle Corporation ORCL IT ConglomeratesSAP AG SAP IT Conglomerates

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THE SEG SOFTWARE INDEX COMPANIES (CON’T)

Epocrates EPOC Mobile Solutions/ContentGlu Mobile, Inc. GLUU Mobile Solutions/ContentGree TSE:3632 Mobile Solutions/ContentMillennial Media Inc MM Mobile Solutions/Content

Company Ticker Product Category

Myriad Group AG MYRN Mobile Solutions/ContentNQ Mobile Inc. NQ Mobile Solutions/ContentOpera OB:OPERA Mobile Solutions/ContentQihoo 360 Technology Co. Ltd QIHU Mobile Solutions/ContentPandora Media P Mobile Solutions/ContentSynchronoss Technologies, Inc. SNCR Mobile Solutions/ContentTeleNav TNAV Mobile Solutions/ContentVelti Plc VELT Mobile Solutions/ContentZynga, Inc ZNGA Mobile Solutions/ContentAllot Communications Ltd. ALLT Networking & Network Performance ManagementAruba Networks, Inc. ARUN Networking & Network Performance ManagementBrocade Communications Systems, Inc. BRCD Networking & Network Performance ManagementC S CSCO & fCisco Systems, Inc. CSCO Networking & Network Performance ManagementCompuware Corporation CPWR Networking & Network Performance ManagementF5 Networks, Inc. FFIV Networking & Network Performance ManagementJuniper Networks, Inc. JNPR Networking & Network Performance ManagementKeynote Systems, Inc. KEYN Networking & Network Performance ManagementRadware Ltd. RDWR Networking & Network Performance ManagementRi b d T h l I RVBD N t ki & N t k P f M tRiverbed Technology, Inc. RVBD Networking & Network Performance ManagementAVG Technologies N.V. AVG SecurityCheck Point Software Tech Ltd. CHKP SecurityCommtouch Software Ltd. CTCH SecurityFortinet Inc. FTNT SecurityGuidance Software, Inc. GUID SecurityI IMPV S itImperva IMPV SecurityPalo Alto Networks, Inc PANW SecurityProofpoint, Inc. PFPT SecuritySourcefire, Inc. FIRE SecuritySymantec Corporation SYMC SecurityTrend Micro TSE:4704 SecuityVASCO Data Security International VDSI Security

61 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

VASCO Data Security International VDSI SecurityWebsense, Inc. WBSN Security

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C Ti k P d t C t

THE SEG SOFTWARE INDEX COMPANIES (CON’T)

Brocade Communications Systems, Inc. BRCD Storage, Data Management & IntegrationCA, Inc. CA Storage, Data Management & IntegrationCisco Systems, Inc. CSCO Storage, Data Management & IntegrationCommVault Systems, Inc. CVLT Storage, Data Management & Integration

Company Ticker Product Category

EMC EMC Storage, Data Management & IntegrationFalconStor Software, Inc. FALC Storage, Data Management & IntegrationIBM IBM Storage, Data Management & IntegrationInformatica Corporation INFA Storage, Data Management & IntegrationMicrosoft Corporation MSFT Storage, Data Management & IntegrationNetApp, Inc. NTAP Storage, Data Management & IntegrationO l C i ORCL S D M & I iOracle Corporation ORCL Storage, Data Management & IntegrationPervasive Software Inc. PVSW Storage, Data Management & IntegrationSplunk, Inc. SPLK Storage, Data Management & IntegrationTIBCO Software Inc. TIBX Storage, Data Management & IntegrationAmerican Software, Inc. AMSW.A Supply Chain Management & LogisticsAspen Technology, Inc. AZPN Supply Chain Management & LogisticsM h tt A i t I MANH S l Ch i M t & L i tiManhattan Associates, Inc. MANH Supply Chain Management & LogisticsThe Descartes Systems Group Inc. TSX:DSG Supply Chain Management & LogisticsUnit 4 ENXTAM:UNIT4 Supply Chain Management & LogisticsBMC Software Inc. BMC Systems ManagementCA Technologies CA Systems ManagementCitrix Systems, Inc. CTXS Systems ManagementNetsco t S stems Inc NTCT S stems ManagementNetscout Systems, Inc. NTCT Systems ManagementRed Hat, Inc. RHT Systems ManagementSolarWinds, Inc. SWI Systems ManagementVMWare, Inc. VMW Systems ManagementAdvent Software, Inc. ADVS Vertical - FinanceBroadridge Financial BR Vertical - FinanceFidessa LSE:FDSA Vertical FinanceFidessa LSE:FDSA Vertical - FinanceJack Henry & Associates, Inc. JKHY Vertical - FinanceMSCI, Inc. MSCI Vertical - FinanceSS&C Corporation SSNC Vertical - FinanceBlackbaud, Inc. BLKB Vertical - OtherConstellation TSX:CSU Vertical - OtherEPIQ Systems Inc EPIQ Vertical Other

62 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

EPIQ Systems, Inc. EPIQ Vertical - OtherGuidewire Software, Inc. GWRE Vertical - Other

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THE SEG SOFTWARE INDEX COMPANIES (CON’T)

Micros Systems MCRS Vertical - OtherPROS Holdings PRO Vertical - OtherSapiens International SPNS Vertical - OtherSilver Spring Networks, Inc. SSNI Vertical - Other

Company Ticker Product Category

p g ,The Active Network, Inc. ACTV Vertical - OtherTyler Technologies, Inc. TYL Vertical - Other

63 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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THE SEG SaaS INDEX COMPANIESCompany Ticker Product Category

Constant Contact CTCT CRM & MarketingExactTarget, Inc. ET CRM & MarketingLivePerson LPSN CRM & MarketingMarin Software MRIN CRM & MarketingResponsys MKTG CRM & MarketingBazaarvoice, Inc BV CRM & MarketingSalesforce.com CRM CRM & MarketingVocus VOCS CRM & MarketingE2open, Inc EOPN ERP & Supply ChainFleetmatics FLTX ERP & Supply ChainNetsuite N ERP & Supply ChainSciQuest SQI ERP & Supply ChainSPS Commerce SPSC ERP & Supply ChainWorkday, Inc. WDAY ERP & Supply ChainAthenahealth, Inc ATHN Vertically FocusedDealerTrack TRAK Vertically Focusedea e ac e t ca y ocusedEbix Inc. EBIX Vertically FocusedEllie Mae ELLI Vertically FocusedMedidata Solutions MDSO Vertically FocusedRealPage RP Vertically FocusedCallidus Software Inc. CALD Workforce ManagementCornerstone OnDemand CSOD Workforce ManagementCornerstone OnDemand CSOD Workforce ManagementThe Ultimate Software Group, Inc. ULTI Workforce ManagementWorkday, Inc. WDAY Workforce ManagementConcur CNQR Other SaaSDemandware, Inc. DWRE Other SaaSIntraLinks Holdings IL Other SaaSJive Software Inc JIVE Other SaaSJive Software, Inc JIVE Other SaaSOpenTable, Inc. OPEN Other SaaSQualys, Inc. QLYS Other SaaSService-now.com NOW Other SaaSTangoe TNGO Other SaaSZix Corporation ZIXI Other SaaS

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C Ti k P d t C t

THE SEG INTERNET INDEX COMPANIESCompany Ticker Product Category

Angie's List, Inc. ANGI Ad Tech & Lead GenerationBaidu.com, Inc. BIDU Ad Tech & Lead GenerationBankrate, Inc. RATE Ad Tech & Lead GenerationDigital Generation, Inc. DGIT Ad Tech & Lead GenerationeHealth, Inc. EHTH Ad Tech & Lead GenerationGoogle Inc. GOOG Ad Tech & Lead GenerationGroupon GRPN Ad Tech & Lead GenerationInterActiveCorp IACI Ad Tech & Lead GenerationLinkedIn LNKD Ad Tech & Lead GenerationMarchex Inc. MCHX Ad Tech & Lead GenerationQ i St t QNST Ad T h & L d G tiQuinStreet QNST Ad Tech & Lead GenerationReachLocal, Inc. RLOC Ad Tech & Lead GenerationSINA Corporation SINA Ad Tech & Lead GenerationSohu.com Inc. SOHU Ad Tech & Lead GenerationTree.Com, Inc. TREE Ad Tech & Lead GenerationValueClick, Inc. VCLK Ad Tech & Lead GenerationY d YNDX Ad T h & L d G tiYandex YNDX Ad Tech & Lead Generation1-800-FLOWERS.COM, Inc. FLWS CommerceAmazon.com, Inc. AMZN CommerceBitauto Holdings Limited BITA CommerceBluefly, Inc. BFLY CommerceBlueNile NILE CommerceDangDang DANG CommerceDangDang DANG CommerceDigital River Inc. DRIV CommerceeBay Inc. EBAY CommerceGeekNet GKNT CommerceLiquidity Services, Inc. LQDT CommerceMecox Lane Limited MCOX CommerceMercadolibre Inc MELI CommerceMercadolibre, Inc. MELI CommerceOverstock.com, Inc. OSTK CommercePetMed Express, Inc. PETS CommerceStamps.com STMP CommerceAOL, Inc. AOL Content & MediaDemandMedia DMD Content & MediaInterActiveCorp IACI Content & Media

65 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

InterActiveCorp IACI Content & MediaNetflix NFLX Content & Media

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C Ti k P d t C t

THE SEG INTERNET INDEX COMPANIES (CON’T)Company Ticker Product Category

Pandora P Content & MediaShutterstock, Inc. SSTK Content & MediaTheStreet.com, Inc. TST Content & MediaWebMD Health Corp. WBMD Content & MediaXO Group XOXO Content & MediaYahoo! Inc. YHOO Content & MediaYouku YOKU Content & MediaChangYou.com CYOU GamingGiant Interactive GA GamingNetease NTES GamingNCS ft KOSE A036570 G iNCSoft KOSE:A036570 GamingPerfect World PWRD GamingSohu.com Inc. SOHU GamingTencent Holdings SEHK:700 GamingZynga, Inc. ZNGA Gaming8x8, Inc. EGHT InfrastructureAk i T h l i I AKAM I f t tAkamai Technologies, Inc. AKAM InfrastructureBrightcove Inc. BCOV InfrastructureBroadSoft, Inc. BSFT InfrastructureDigital River Inc. DRIV InfrastructureEnvivio, Inc. ENVI InfrastructureHarmonic Inc HLIT InfrastructureInteractive Intelligence Inc ININ InfrastructureInteractive Intelligence, Inc. ININ InfrastructureKIT digital, Inc. KITD InfrastructureLimelight Networks, Inc. LLNW InfrastructureMitel Networks Corp. MITL InfrastructurePolycom, Inc. PLCM InfrastructureRovi Corporation ROVI InfrastructureSeaChange International Inc SEAC InfrastructureSeaChange International Inc. SEAC InfrastructureShoreTel, Inc. SHOR InfrastructureSonus Networks, Inc SONS InfrastructureSynacor, Inc SYNC InfrastructureTucows Inc. TCX InfrastructureVeriSign VRSN InfrastructureAngie's List Inc ANGI Services

66 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

Angie s List, Inc. ANGI ServicesBankrate RATE Services

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C Ti k P d t C t

THE SEG INTERNET INDEX COMPANIES (CON’T)Company Ticker Product Category

Carbonite, Inc. CARB ServicesLifeLock, Inc. LOCK ServicesMonster Worldwide, Inc. MWW ServicesQihoo QIHU ServicesQihoo QIHU ServicesShutterfly SFLY ServicesTree.Com, Inc. TREE ServicesTrulia, Inc. TRLA ServicesVistaPrint VPRT ServicesXoom XOOM ServicesZillow Z ServicesZillow Z ServicesFacebook FB SocialFriendFinder Networks Inc FFN SocialLinkedIn LNKD SocialMail.ru Group LSE:MAIL SocialRenren Inc RENN SocialYelp, Inc. YELP SocialYY, Inc. YY SocialCtrip CTRP TravelExpedia EXPE TravelHomeAway AWAY TravelKayak Software Corp KYAK TravelKayak Software Corp KYAK TravelMakeMyTrip MMYT TravelOrbitz OWW TravelPriceline PCLN TravelTravelzoo TZOO TravelTripAdvisor Inc TRIP Travel

67 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC

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THE SEG SOFTWARE INDEX METRICS BY PRODUCT CATEGORY

Enterprise Resource Planning 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 2.5x 2.0x 2.1x 2.2x 2.4xEV/EBITDA 10.3x 8.9x 9.1x 9.1x 10.2xEV/Earnings 17.4x 14.0x 15.2x 15.7x 19.5xGross Profit Margin 74.9% 75.2% 75.4% 75.6% 75.8%EBITDA Margin 23.2% 23.3% 23.3% 23.1% 22.8%Net Income Margin 13.5% 14.7% 15.6% 14.6% 13.9%TTM Revenue Growth (YoY) 10.0% 9.4% 4.7% 3.4% 2.6%TTM EBITDA Growth (YoY) 12.8% 14.9% 15.8% 7.7% 1.9%TTM E i G th (Y Y) 29 2% 32 8% 20 9% 24 7% 19 0%

IT Conglomerates 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 3.1x 2.9x 2.8x 2.5x 2.5xEV/EBITDA 7.7x 7.3x 8.2x 7.8x 8.8xEV/Earnings 13.2x 12.9x 14.4x 13.7x 14.7xGross Profit Margin 71.5% 71.5% 71.6% 71.4% 71.2%EBITDA Margin 37.4% 36.9% 36.1% 34.6% 33.8%Net Income Margin 24.2% 23.9% 23.0% 18.6% 17.4%TTM Revenue Growth (YoY) 7.7% 5.3% 1.5% 1.4% 0.5%TTM EBITDA Growth (YoY) 2.0% 3.6% 1.4% 0.6% 1.9%TTM E i G th (Y Y) 12 3% 12 4% 4 1% 20 0% 24 6%

Billing & Service Management 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 1.3x 1.2x 1.2x 1.7x 2.4xEV/EBITDA 8.1x 9.1x 8.7x 8.6x 8.7xEV/Earnings 12.0x 15.1x 16.2x 18.2x 16.1xGross Profit Margin 57.2% 57.4% 58.0% 58.3% 59.4%EBITDA Margin 20.2% 18.5% 18.8% 19.9% 21.1%Net Income Margin 13.5% 12.2% 11.7% 12.1% 11.0%TTM Revenue Growth (YoY) 16.6% 13.6% 9.5% 10.4% 10.4%TTM EBITDA Growth (YoY) -3.3% 3.6% 9.9% 15.7% 21.9%TTM E i G th (Y Y) 4 6% 19 1% 4 9% 5 6% 10 4% TTM Earnings Growth (YoY) -29.2% -32.8% -20.9% -24.7% -19.0%

Current Ratio 1.4 1.2 1.1 1.1 1.1Cash as Percent of Market Cap 13.1% 14.2% 13.1% 12.9% 12.5%Enterprise Value Growth (YoY) 2.7% -9.0% 3.2% 2.7% 10.1%

Financial & Accounting 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 2.8x 2.7x 2.9x 2.9x 3.1xEV/EBITDA 9.9x 9.4x 9.7x 9.7x 10.5xEV/Earnings 22.4x 18.0x 20.1x 20.3x 22.8xGross Profit Margin 58 7% 58 7% 58 7% 57 7% 59 3%

TTM Earnings Growth (YoY) -12.3% -12.4% -4.1% 20.0% 24.6%Current Ratio 1.5 1.3 1.2 1.2 1.1Cash as Percent of Market Cap 15.5% 21.3% 19.6% 20.3% 20.3%Enterprise Value Growth (YoY) 6.0% -2.1% 9.4% 2.4% 2.5%

Mobile Solutions/Content 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 4.7x 3.6x 3.3x 2.4x 2.3xEV/EBITDA 31.5x 16.1x 14.4x 11.9x 20.6xEV/Earnings 22.5x 25.1x 22.2x 21.2x 29.2xGross Profit Margin 64 5% 61 9% 60 4% 59 8% 60 7%

TTM Earnings Growth (YoY) -4.6% -19.1% 4.9% -5.6% -10.4%Current Ratio 2.3 2.3 2.4 2.7 3.3Cash as Percent of Market Cap 22.8% 21.9% 21.6% 17.2% 15.7%Enterprise Value Growth (YoY) -14.9% -20.2% -5.0% 13.9% 7.8%

Business Intelligence 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 3.8x 2.7x 2.3x 2.8x 3.0xEV/EBITDA 35.5x 33.8x 32.8x 19.7x 16.1xEV/Earnings 64.8x 56.6x 55.0x 35.4x 36.8xGross Profit Margin 74 7% 74 7% 74 5% 74 5% 74 3% Gross Profit Margin 58.7% 58.7% 58.7% 57.7% 59.3%

EBITDA Margin 29.1% 28.3% 29.0% 28.8% 27.5%Net Income Margin 13.5% 15.2% 12.7% 12.8% 12.6%TTM Revenue Growth (YoY) 6.5% 6.3% 13.6% 10.7% 8.8%TTM EBITDA Growth (YoY) 4.5% 10.4% 4.0% 5.9% 3.9%TTM Earnings Growth (YoY) -5.8% -13.4% -22.6% -19.9% -19.2%Current Ratio 1.1 1.4 1.2 1.2 1.3Cash as Percent of Market Cap 11.9% 9.7% 9.4% 5.5% 4.1%Enterprise Value Growth (YoY) 9.0% 5.1% 13.7% 19.8% 13.2%

Gross Profit Margin 64.5% 61.9% 60.4% 59.8% 60.7%EBITDA Margin 12.8% 10.8% 11.9% 5.9% 4.5%Net Income Margin -0.3% -3.5% -0.4% -5.1% -3.1%TTM Revenue Growth (YoY) 62.7% 47.1% 34.4% 30.7% 35.2%TTM EBITDA Growth (YoY) 31.9% 39.4% -35.6% -28.3% -36.5%TTM Earnings Growth (YoY) -49.7% -41.7% 27.0% 8.7% 13.7%Current Ratio 2.4 2.0 2.1 2.2 2.1Cash as Percent of Market Cap 10.0% 11.6% 13.9% 12.2% 14.0%Enterprise Value Growth (YoY) 2.9% -12.7% -22.9% -22.7% -22.6%

Gross Profit Margin 74.7% 74.7% 74.5% 74.5% 74.3%EBITDA Margin 10.7% 10.9% 10.5% 9.4% 10.8%Net Income Margin 6.6% 5.2% 4.7% 5.1% 4.7%TTM Revenue Growth (YoY) 23.7% 16.9% 14.6% 10.9% 10.8%TTM EBITDA Growth (YoY) 9.3% 10.0% 13.1% -1.8% -0.2%TTM Earnings Growth (YoY) -13.2% -13.0% -13.8% 16.3% -11.4%Current Ratio 1.8 1.9 2.0 2.2 1.9Cash as Percent of Market Cap 14.9% 14.8% 15.9% 16.9% 12.9%Enterprise Value Growth (YoY) 17.4% -3.4% -6.1% -14.2% -14.8%

Gaming 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 1.3x 1.0x 1.0x 1.0x 1.1xEV/EBITDA 7.1x 7.6x 9.1x 8.0x 7.1xEV/Earnings 16.4x 11.3x 12.1x 20.2x 21.8xGross Profit Margin 61.3% 62.4% 62.0% 62.2% 64.7%EBITDA Margin 16.4% 16.3% 15.5% 15.5% 15.5%Net Income Margin 4.8% 6.1% 6.0% 5.2% 4.4%TTM Revenue Growth (YoY) 5.6% 2.6% 2.2% 0.1% 4.4%TTM EBITDA Growth (YoY) -15.5% -0.7% -23.3% -8.6% -5.3%

Networking & Network Perf Mgmt 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 3.1x 2.4x 2.5x 2.5x 2.7xEV/EBITDA 16.4x 14.9x 14.0x 14.0x 15.1xEV/Earnings 31.1x 24.6x 25.0x 28.8x 34.0xGross Profit Margin 67.8% 68.1% 68.5% 68.1% 68.2%EBITDA Margin 18.0% 18.0% 16.8% 16.2% 16.4%Net Income Margin 12.1% 12.5% 10.4% 8.7% 5.8%TTM Revenue Growth (YoY) 20.7% 19.4% 17.3% 15.5% 12.9%TTM EBITDA Growth (YoY) 19.6% 23.7% 21.5% 18.1% 9.4%

Development Platforms 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 2.7x 1.9x 2.1x 2.5x 2.5xEV/EBITDA 9.4x 8.4x 8.2x 9.4x 9.1xEV/Earnings 18.7x 18.3x 13.6x 16.6x 17.1xGross Profit Margin 77.3% 77.7% 77.8% 77.6% 77.9%EBITDA Margin 24.7% 22.3% 21.8% 23.7% 21.8%Net Income Margin 14.1% 13.3% 13.7% 13.8% 14.3%TTM Revenue Growth (YoY) 7.2% 5.3% 3.5% 1.6% 3.0%TTM EBITDA Growth (YoY) 0.4% 2.8% 4.9% -0.6% -2.3%

TTM Earnings Growth (YoY) -44.1% -19.6% -29.2% -24.8% -1.0%Current Ratio 2.3 2.5 2.8 2.4 2.5Cash as Percent of Market Cap 21.5% 31.6% 31.4% 32.0% 27.0%Enterprise Value Growth (YoY) 9.4% -14.8% -10.5% -12.3% 2.0%

Healthcare 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 3.2x 2.7x 2.2x 2.1x 2.1xEV/EBITDA 15.1x 13.0x 12.8x 11.3x 14.8xEV/Earnings 30.8x 31.7x 37.9x 41.8x 34.2x

TTM Earnings Growth (YoY) -24.8% -22.9% -27.9% 19.2% 28.9%Current Ratio 2.5 2.7 2.7 2.6 2.2Cash as Percent of Market Cap 15.1% 17.2% 17.9% 17.8% 17.4%Enterprise Value Growth (YoY) -12.0% -9.1% 2.8% -8.1% -4.8%

Security 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 3.2x 2.9x 3.2x 2.7x 3.3xEV/EBITDA 13.0x 10.2x 10.5x 11.2x 11.5xEV/Earnings 18.0x 14.1x 21.8x 15.8x 23.9x

TTM Earnings Growth (YoY) -10.3% -9.9% 3.9% 3.0% 2.9%Current Ratio 2.0 2.0 2.1 2.2 2.3Cash as Percent of Market Cap 19.6% 20.9% 21.5% 22.1% 20.6%Enterprise Value Growth (YoY) -13.3% -9.2% 6.5% -1.7% -2.7%

Engineering & PLM 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 2.6x 2.3x 2.6x 2.5x 2.7xEV/EBITDA 14.2x 11.5x 12.1x 11.8x 13.4xEV/Earnings 25.1x 24.3x 23.3x 23.2x 20.0x

Gross Profit Margin 59.9% 58.6% 57.8% 57.6% 57.9%EBITDA Margin 20.4% 19.6% 17.8% 16.8% 12.9%Net Income Margin 4.7% 3.9% 3.2% 2.9% 1.8%TTM Revenue Growth (YoY) 24.8% 30.1% 22.5% 17.7% 10.1%TTM EBITDA Growth (YoY) 21.8% 19.4% 11.9% 5.4% -7.8%TTM Earnings Growth (YoY) -59.1% -24.8% -14.7% -13.8% 45.3%Current Ratio 2.2 2.3 2.1 2.2 2.2Cash as Percent of Market Cap 5.1% 7.8% 8.1% 7.3% 7.0%Enterprise Value Growth (YoY) 13.2% -16.8% -25.5% -17.3% -11.6%

Gross Profit Margin 78.4% 78.1% 77.9% 77.9% 77.8%EBITDA Margin 18.2% 18.0% 19.2% 17.8% 13.9%Net Income Margin 9.6% 8.2% 8.1% 9.6% 5.6%TTM Revenue Growth (YoY) 26.3% 19.4% 20.1% 23.1% 23.4%TTM EBITDA Growth (YoY) 22.1% 20.5% 11.2% 9.1% 4.8%TTM Earnings Growth (YoY) -15.3% -6.9% -1.1% 8.7% 7.6%Current Ratio 1.6 1.7 2.0 2.0 1.6Cash as Percent of Market Cap 13.2% 12.6% 14.5% 13.0% 11.8%Enterprise Value Growth (YoY) 9.6% -12.7% -3.6% -2.9% -1.3%

Gross Profit Margin 83.0% 83.6% 84.1% 83.4% 83.3%EBITDA Margin 18.5% 19.9% 20.7% 20.6% 20.7%Net Income Margin 8.3% 10.4% 11.4% 10.6% 10.8%TTM Revenue Growth (YoY) 13.5% 13.5% 13.2% 14.0% 13.1%TTM EBITDA Growth (YoY) 26.0% 45.7% 34.9% 15.5% 16.6%TTM Earnings Growth (YoY) -35.8% -19.7% -38.8% -14.9% -9.6%Current Ratio 1.7 1.8 1.8 1.8 1.9Cash as Percent of Market Cap 20.5% 16.7% 16.3% 15.4% 12.4%Enterprise Value Growth (YoY) 3.0% 13.0% 29.0% 31.1% 18.7%

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THE SEG SOFTWARE INDEX METRICS BY PRODUCT CATEGORY

Storage, Data Mgmt & Integration 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 2.6x 2.5x 2.5x 2.3x 2.4xEV/EBITDA 9.2x 9.3x 9.2x 8.4x 9.2xEV/Earnings 19.2x 15.5x 15.2x 14.5x 15.4xGross Profit Margin 75.2% 74.8% 74.5% 73.8% 74.0%EBITDA Margin 22.1% 22.5% 22.7% 22.4% 22.0%Net Income Margin 12.2% 12.5% 12.5% 12.3% 11.1%TTM Revenue Growth (YoY) 9.4% 7.7% 6.0% 5.4% 4.2%TTM EBITDA Growth (YoY) 11.5% 17.1% 12.4% 4.6% 1.6%TTM E i G th (Y Y) 20 7% 11 2% 6 6% 8 9% 5 9%

Vertical - Other 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 3.2x 3.0x 2.9x 2.9x 3.0xEV/EBITDA 18.5x 16.5x 21.0x 20.3x 22.0xEV/Earnings 35.0x 41.9x 47.5x 39.8x 40.9xGross Profit Margin 55.8% 55.2% 54.6% 54.2% 53.8%EBITDA Margin 15.7% 15.7% 14.7% 14.4% 14.1%Net Income Margin 8.7% 7.1% 6.2% 5.7% 5.7%TTM Revenue Growth (YoY) 20.7% 26.5% 28.0% 19.8% 21.3%TTM EBITDA Growth (YoY) 11.0% 18.6% 13.4% 9.4% 7.5%TTM Earnings Gro th (YoY) 5 8% 12 8% 14 5% 12 5% 15 5%TTM Earnings Growth (YoY) -20.7% -11.2% -6.6% -8.9% -5.9%

Current Ratio 2.0 2.3 2.2 2.3 2.4Cash as Percent of Market Cap 20.2% 17.9% 19.6% 20.3% 22.2%Enterprise Value Growth (YoY) 1.2% -2.1% 7.8% -1.1% -7.7%

Supply Chain Mgmt & Logistics 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 2.6x 2.5x 2.5x 2.9x 3.3xEV/EBITDA 12.1x 10.7x 10.9x 12.7x 14.5xEV/Earnings 30.2x 26.7x 22.6x 33.1x 34.1xGross Profit Margin 66 4% 65 8% 65 6% 66 0% 66 6%

TTM Earnings Growth (YoY) -5.8% -12.8% -14.5% 12.5% 15.5%Current Ratio 1.1 1.2 1.3 1.4 1.4Cash as Percent of Market Cap 3.8% 8.8% 10.3% 12.4% 8.3%Enterprise Value Growth (YoY) 53.5% 9.6% 15.6% 7.5% 9.6%

Gross Profit Margin 66.4% 65.8% 65.6% 66.0% 66.6%EBITDA Margin 17.1% 17.5% 17.2% 16.6% 16.0%Net Income Margin 10.6% 11.1% 10.4% 10.4% 10.5%TTM Revenue Growth (YoY) 14.9% 18.4% 15.9% 11.2% 11.3%TTM EBITDA Growth (YoY) 61.7% 67.5% 65.4% 36.0% 15.2%TTM Earnings Growth (YoY) -28.8% -36.9% -18.2% -4.0% -5.2%Current Ratio 2.0 2.0 2.0 2.0 2.0Cash as Percent of Market Cap 10.3% 11.2% 10.8% 8.9% 6.4%Enterprise Value Growth (YoY) 34.4% 33.6% 40.9% 38.4% 28.2%

Systems Management 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 5.9x 5.9x 5.5x 4.5x 4.8xEV/EBITDA 22.2x 23.0x 22.3x 18.9x 20.5xEV/Earnings 36.3x 39.0x 36.6x 31.9x 35.5xGross Profit Margin 84.2% 84.6% 85.0% 85.0% 84.9%EBITDA Margin 26.4% 26.2% 25.8% 25.4% 25.2%Net Income Margin 19.2% 18.5% 16.5% 15.8% 15.0%TTM Revenue Growth (YoY) 17.7% 18.1% 18.1% 16.5% 17.2%TTM EBITDA Growth (YoY) 17.8% 20.5% 22.1% 13.7% 7.6%TTM Earnings Growth (YoY) -13.6% -7.9% -13.1% -2.9% -7.9%Current Ratio 1.5 1.5 1.7 1.5 1.4Cash as Percent of Market Cap 12.7% 10.2% 11.1% 12.0% 11.7%Enterprise Value Growth (YoY) 5.4% 8.0% 21.6% 10.8% 10.8%

Vertical - Finance 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 3.4x 3.3x 3.2x 3.0x 3.4xEV/EBITDA 10.7x 10.3x 10.6x 9.4x 10.7xEV/Earnings 24.5x 22.9x 26.0x 23.3x 24.1xGross Profit Margin 45.8% 45.9% 45.4% 44.3% 43.8%EBITDA Margin 26.3% 26.4% 26.3% 26.4% 26.5%Net Income Margin 12.3% 12.8% 10.4% 10.0% 9.7%TTM Revenue Growth (YoY) 10.3% 6.8% 6.3% 7.1% 6.7%TTM EBITDA Growth (YoY) 11.2% 13.4% 9.6% 8.1% 5.6%TTM Earnings Growth (YoY) -6.7% -4.6% 1.3% -3.3% -1.0%Current Ratio 1.3 1.3 1.3 1.4 1.3Cash as Percent of Market Cap 8.5% 9.3% 9.0% 9.4% 7.7%Enterprise Value Growth (YoY) -0.3% -2.8% 2.7% -4.4% 4.3%

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THE SEG SaaS INDEX METRICS BY PRODUCT CATEGORYCRM & Marketing 1Q12 2Q12 3Q12 4Q12 1Q13

EV/Revenue 6.5x 5.9x 5.5x 4.3x 4.3xEV/EBITDA 79.1x 109.6x 102.5x 158.4x 167.0xEV/Earnings 57.8x 64.0x 80.7x 51.2x 70.6xGross Profit Margin 68.7% 68.5% 68.3% 68.1% 68.1%EBITDA Margin 3.3% 2.7% 2.6% 2.9% 2.1%Net Income Margin -6.6% -8.7% -7.9% -7.1% -8.0%TTM Revenue Growth (YoY) 36.8% 36.3% 29.9% 36.1% 37.7%TTM EBITDA Growth (YoY) 10.5% 9.7% 12.0% -23.0% -25.8%TTM E i G th (Y Y) 20 7% 86 6% 38 6% 36 2% 57 5%

Other SaaS 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 7.2x 7.2x 5.9x 6.1x 7.1xEV/EBITDA 42.8x 39.5x 45.9x 46.1x 33.3xEV/Earnings 27.3x 22.7x 23.5x 130.5x 86.9xGross Profit Margin 71.6% 71.6% 71.5% 71.2% 71.2%EBITDA Margin 10.9% 9.0% 7.8% 7.6% 8.5%Net Income Margin -1.3% -3.5% -3.1% -1.6% -3.9%TTM Revenue Growth (YoY) 31.0% 30.3% 25.7% 25.8% 25.1%TTM EBITDA Growth (YoY) 21.0% 4.9% 12.1% 0.3% 0.9%TTM E i G th (Y Y) 30 7% 84 6% 71 8% 7 1% 16 0%TTM Earnings Growth (YoY) 20.7% 86.6% 38.6% 36.2% 57.5%

Current Ratio 1.6 2.7 2.1 2.1 1.8Cash as Percent of Market Cap 12.5% 11.2% 10.6% 12.9% 11.9%Enterprise Value Growth (YoY) -2.9% -20.3% 7.5% 23.3% -10.2%

ERP & Supply Chain 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 5.0x 5.0x 5.5x 6.6x 6.4xEV/EBITDA 52.8x 55.0x 67.2x 63.6x 85.0xEV/Earnings 57.2x 65.1x 131.3x 118.6x 283.7xGross Profit Margin 70 0% 70 0% 69 9% 70 9% 69 5%

TTM Earnings Growth (YoY) 30.7% 84.6% 71.8% -7.1% 16.0%Current Ratio 2.2 2.2 2.2 1.9 2.0Cash as Percent of Market Cap 13.8% 13.6% 12.5% 13.4% 12.5%Enterprise Value Growth (YoY) -38.3% -44.4% -31.5% -4.4% -5.2%

Gross Profit Margin 70.0% 70.0% 69.9% 70.9% 69.5%EBITDA Margin 6.9% 7.1% 8.4% 8.5% 5.7%Net Income Margin 3.1% 1.9% 2.8% 3.8% -0.9%TTM Revenue Growth (YoY) 25.8% 24.6% 26.3% 25.3% 30.7%TTM EBITDA Growth (YoY) -0.1% -1.7% 7.6% 15.3% 25.4%TTM Earnings Growth (YoY) -81.8% -87.8% 7.2% 341.0% 163.5%Current Ratio 1.5 1.5 1.5 1.2 1.4Cash as Percent of Market Cap 10.7% 13.7% 8.5% 12.3% 11.0%Enterprise Value Growth (YoY) 71.6% 48.0% 76.3% 66.7% 57.5%

Vertically Focused 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 4.2x 4.3x 5.7x 4.7x 5.0xEV/EBITDA 22.7x 24.9x 30.4x 25.4x 27.3xEV/Earnings 17.5x 28.7x 23.7x 30.7x 63.2xGross Profit Margin 66.7% 66.8% 66.2% 66.1% 65.9%EBITDA Margin 15.2% 15.4% 16.4% 15.4% 16.5%Net Income Margin 12.5% 13.9% 16.6% 14.3% 6.8%TTM Revenue Growth (YoY) 30.2% 34.4% 30.3% 23.0% 21.6%TTM EBITDA Growth (YoY) 3.7% 16.1% 18.3% 4.5% 10.1%TTM Earnings Growth (YoY) -60.0% -1.7% -38.6% 1.4% -0.4%Current Ratio 2.2 2.6 2.5 3.0 2.7Cash as Percent of Market Cap 11.9% 11.9% 9.7% 8.5% 7.8%Enterprise Value Growth (YoY) -5.6% 30.8% 58.5% 25.7% 25.7%

Workforce Management 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 6.5x 7.0x 8.3x 10.5x 10.7xEV/EBITDA 65.7x 71.1x 80.0x 69.4x 63.7xEV/Earnings 410.2x 399.4x 368.3x 243.2x 180.5xGross Profit Margin 54.1% 54.7% 55.3% 56.2% 57.0%EBITDA Margin -17.3% -17.9% -17.6% -19.4% -20.2%Net Income Margin -39.1% -27.0% -25.7% -26.4% -27.9%TTM Revenue Growth (YoY) 36.0% 19.6% 21.0% 21.8% 42.5%TTM EBITDA Growth (YoY) 5.1% -12.5% -4.7% -43.0% -43.0%TTM Earnings Growth (YoY) -55.2% -44.8% -63.6% -26.4% 22.2%Current Ratio 1.4 1.3 1.2 1.3 1.2Cash as Percent of Market Cap 9.2% 6.3% 5.0% 4.0% 6.6%Enterprise Value Growth (YoY) 36.3% 23.0% 87.1% 62.3% 50.3%

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THE SEG INTERNET INDEX METRICS BY PRODUCT CATEGORY

Ad Tech & Lead Generation 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 2.7x 2.1x 1.7x 1.9x 1.8xEV/EBITDA 14.1x 11.4x 13.3x 12.0x 14.9xEV/Earnings 28.1x 28.8x 29.6x 28.0x 21.9xGross Profit Margin 67.2% 67.6% 68.7% 67.6% 66.8%EBITDA Margin 13.9% 14.0% 14.4% 14.1% 13.0%Net Income Margin 4.4% 3.6% 4.3% 6.4% 5.7%TTM Revenue Growth (YoY) 34.4% 37.5% 35.3% 32.9% 25.2%TTM EBITDA Growth (YoY) 15.4% 26.8% 16.4% 12.5% 15.5%TTM Earnings Gro th (YoY) 22 9% 16 6% 9 3% 9 3% 3 0%

Infrastructure 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 1.8x 1.5x 0.9x 0.9x 1.3xEV/EBITDA 13.6x 13.7x 11.4x 11.7x 11.9xEV/Earnings 27.7x 23.3x 18.2x 20.5x 27.6xGross Profit Margin 66.2% 65.8% 64.3% 63.2% 61.7%EBITDA Margin 11.9% 10.7% 8.3% 7.3% 7.9%Net Income Margin 1.6% 3.7% 3.2% 1.4% -2.1%TTM Revenue Growth (YoY) 25.3% 18.8% 13.6% 13.0% 13.2%TTM EBITDA Growth (YoY) 14.9% 20.1% 0.9% -13.7% -22.6%TTM Earnings Growth (YoY) 6 5% 18 9% 23 1% 59 7% 76 9%TTM Earnings Growth (YoY) -22.9% -16.6% -9.3% -9.3% -3.0%

Current Ratio 2.9 2.8 2.7 2.6 2.4Cash as Percent of Market Cap 18.2% 18.8% 20.8% 20.6% 20.5%Enterprise Value Growth (YoY) -12.8% -18.6% -3.6% 2.7% 3.1%

Commerce 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 0.8x 0.7x 0.7x 0.9x 0.9xEV/EBITDA 16.6x 20.8x 15.4x 15.2x 10.6xEV/Earnings 15.4x 14.6x 17.1x 18.8x 18.1xGross Profit Margin 33 7% 33 8% 33 5% 35 9% 35 8%

TTM Earnings Growth (YoY) -6.5% 18.9% 23.1% 59.7% 76.9%Current Ratio 2.5 2.9 3.3 3.1 3.0Cash as Percent of Market Cap 23.1% 25.9% 24.8% 28.2% 31.7%Enterprise Value Growth (YoY) -23.5% -30.7% -15.2% 0.7% 0.9%

Services 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 3.0x 2.2x 2.9x 2.7x 3.2xEV/EBITDA 18.1x 16.9x 16.4x 17.7x 15.3xEV/Earnings 56.5x 41.8x 37.2x 44.0x 54.6xGross Profit Margin 66 9% 67 6% 69 2% 69 8% 69 5%Gross Profit Margin 33.7% 33.8% 33.5% 35.9% 35.8%

EBITDA Margin 5.3% 5.1% 5.4% 5.5% 5.6%Net Income Margin 3.3% 2.6% 2.5% 2.2% 2.1%TTM Revenue Growth (YoY) 18.8% 22.0% 17.1% 16.2% 14.9%TTM EBITDA Growth (YoY) 0.1% 11.0% 10.9% 19.5% 29.5%TTM Earnings Growth (YoY) 6.1% 25.4% -23.3% -24.2% 3.6%Current Ratio 1.9 1.9 2.0 1.8 1.6Cash as Percent of Market Cap 13.3% 17.8% 15.6% 18.1% 18.5%Enterprise Value Growth (YoY) -32.8% -35.0% -16.7% 2.9% -9.9%

Gross Profit Margin 66.9% 67.6% 69.2% 69.8% 69.5%EBITDA Margin 6.6% 6.7% 7.5% 8.7% 8.5%Net Income Margin -2.7% 0.2% 4.1% 2.1% 2.9%TTM Revenue Growth (YoY) 53.2% 55.1% 49.5% 42.0% 42.2%TTM EBITDA Growth (YoY) 35.3% 22.8% 16.4% 8.2% 38.6%TTM Earnings Growth (YoY) -34.0% -88.6% 2.0% -31.6% -27.4%Current Ratio 1.8 1.7 1.7 2.3 2.1Cash as Percent of Market Cap 11.8% 13.0% 16.5% 19.5% 13.9%Enterprise Value Growth (YoY) -45.7% -43.5% -15.4% -17.8% 20.5%

Content & Media 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 1.8x 1.6x 1.3x 1.4x 1.6xEV/EBITDA 10.4x 10.1x 10.8x 10.9x 15.4xEV/Earnings 17.4x 20.8x 19.2x 22.0x 18.9xGross Profit Margin 54.1% 54.0% 53.9% 52.5% 52.4%EBITDA Margin 13.9% 14.0% 14.1% 14.1% 14.8%Net Income Margin 4.9% 4.8% 4.0% 1.3% 1.6%TTM Revenue Growth (YoY) 25.8% 15.5% 12.3% 10.5% 12.6%TTM EBITDA Growth (YoY) 6.3% -7.8% -4.5% 10.5% 19.5%

Social 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 15.1x 13.0x 9.6x 8.6x 8.9xEV/EBITDA 36.8x 30.4x 29.3x 36.4x 29.9xEV/Earnings 228.6x 50.4x 98.0x 99.7x 400.2xGross Profit Margin 76.8% 75.4% 73.9% 64.3% 65.3%EBITDA Margin 12.2% 12.9% 12.6% 13.3% 16.1%Net Income Margin 2.3% 2.4% 1.8% 2.0% 1.0%TTM Revenue Growth (YoY) 74.5% 64.0% 64.6% 50.9% 49.3%TTM EBITDA Growth (YoY) 5.6% 15.6% -35.2% -21.3% -17.0%

TTM Earnings Growth (YoY) 17.1% 22.8% 34.3% 9.4% 19.7%Current Ratio 2.3 2.0 2.1 1.6 1.8Cash as Percent of Market Cap 21.3% 27.0% 26.9% 18.4% 17.2%Enterprise Value Growth (YoY) -24.0% -28.6% -21.9% -11.8% 16.9%

Gaming 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 3.2x 3.4x 2.1x 2.0x 2.7xEV/EBITDA 4.2x 4.0x 3.4x 3.7x 5.8xEV/Earnings 8.8x 8.2x 8.4x 6.0x 7.1x

TTM Earnings Growth (YoY) -29.1% -37.1% -39.4% 12.8% -24.3%Current Ratio 3.2 4.8 7.2 5.4 5.2Cash as Percent of Market Cap 15.8% 14.1% 17.1% 19.0% 14.8%Enterprise Value Growth (YoY) n/a n/a n/a -2.7% -5.1%

Travel 1Q12 2Q12 3Q12 4Q12 1Q13EV/Revenue 4.7x 3.1x 2.5x 3.5x 3.6xEV/EBITDA 15.2x 15.5x 16.5x 16.0x 18.1xEV/Earnings 25.4x 27.8x 25.9x 24.1x 28.5x

Gross Profit Margin 74.4% 73.2% 71.9% 71.7% 71.2%EBITDA Margin 43.9% 45.5% 43.9% 42.6% 36.3%Net Income Margin 34.4% 31.8% 28.9% 29.8% 24.8%TTM Revenue Growth (YoY) 35.7% 33.1% 32.0% 25.1% 21.9%TTM EBITDA Growth (YoY) 16.6% 24.9% 17.1% 7.6% 22.9%TTM Earnings Growth (YoY) -10.3% 1.2% -14.9% -12.8% -10.0%Current Ratio 2.7 2.4 2.4 2.3 2.5Cash as Percent of Market Cap 28.7% 30.6% 34.1% 37.6% 34.2%Enterprise Value Growth (YoY) -5.9% -8.6% -31.0% 9.0% -1.9%

Gross Profit Margin 81.8% 82.0% 82.0% 81.6% 81.0%EBITDA Margin 17.6% 18.1% 19.4% 19.1% 18.1%Net Income Margin 4.3% 11.8% 10.4% 8.9% 7.0%TTM Revenue Growth (YoY) 31.5% 29.1% 24.0% 21.8% 19.8%TTM EBITDA Growth (YoY) 23.3% 29.6% 25.5% 5.1% 5.6%TTM Earnings Growth (YoY) -49.0% -41.5% -52.7% -25.6% 15.5%Current Ratio 2.2 2.3 2.1 2.3 2.0Cash as Percent of Market Cap 12.2% 14.4% 15.3% 16.8% 15.1%Enterprise Value Growth (YoY) -25.6% -35.6% -30.5% -23.5% -6.1%

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1Q13 PUBLIC SELLERS

Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDATTM Rev Growth

Athenahealth, Inc. (NasdaqGS:ATHN) Epocrates, Inc. $294,490,000 $216,240,000 2.0x 38.2x -1.9%LaunchEquity Partners LLC MakeMusic Inc. (NasdaqCM:MMUS) $17,310,000 $18,190,000 1.0x - 4.4%Peterson Partners LP Angoss Softw are Corp. (TSXV:ANC) $8,470,000 $8,010,000 1.2x - 9.3%

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1Q13 SOFTWARE MEGA DEALS (> $500M)

Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDATTM Rev Growth

Fiserv, Inc. (NasdaqGS:FISV) Open Solutions, Inc. $1,015,000,000 $1,015,000,000 - - -

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1Q13 MOST ACTIVE BUYERS

Buyer SellerPurchase Price

(mm)Enterprise Value

(mm)TTM Revenue

(mm)EV /

RevenueAutodesk, Inc. Allpoint Systems, Inc. - - - -

Firehole Composites - - - -PI-VR GmbH - - - -

Constellation Softw are Inc. Fiserv, Inc., Club Solutions Assets - - - -

Groupe PCMS - - - -

Information Distribution & Marketing, Inc. - - - -

LRS Health Pty Ltd - - - -Facebook, Inc. Atlas DMT, LLC - - - -

Mixtent, Inc. - - - -osmeta Inc. - - - -

SAP AG Camilion Solutions, Inc. - - - -SmartOps Corporation - - - -Ticket-Web GmbH Co. KG - - - -

SearchCore Inc ManufacturedHomes com - - - -SearchCore, Inc. ManufacturedHomes.com - - - -Modular Housing - - - -ToyHaulers.com $30,000 $30,000 - -TravelTrailer.com $50,000 $50,000 - -

Yahoo! Inc. Dreampass - - - -Jybe, Inc. - - - -Mynet Japan Inc., CRM Business for Mobile Devices $3,910,000 $3,910,000 - -Propeld, Inc. - - - -Snip.it - - - -Summly Limited $30,000,000 $30,000,000 - -

74 Q1 2013 Software Industry Financial ReportCopyright © 2013 by Software Equity Group, LLC