1. 1 2013 Ask, Share, Learn www.proformative.com #CFOD13 Agile Leadership: Effectively Managing the New Role of the CFO Dan Miller NetSuite

2. 2 2013 Ask, Share, Learn www.proformative.com #CFOD13 Abstract Today, the CFOs role is more complex and challenging than ever, as he or she is expected to be involved in every aspect of the business, from providing strategic business advice and analysis to the CEO and executive team to improving the companys productivity and efficiency. CFOs are also often tasked with implementing organizational controls for compliance, ensuring cost controls, and overseeing operations, IT, and core back-office functions. In this session, we will discuss how the CFO managing high-growth can effectively manage these diverse responsibilities by achieving executive alignment: making the business planning process transparent increasing real-time visibility into company performance across departments improving core business processes across the organization 3. 3 2013 Ask, Share, Learn www.proformative.com #CFOD13 Audience Check and Heads-Up CFOs in the crowd? High-growth? (top line >20%) Public, Private Global? Employees: 1000? 4. 4 2013 Ask, Share, Learn www.proformative.com #CFOD13 Agenda Background The Operational Challenges CFOs Face An Approach To Meeting the Challenge Q&A and Discussion 5. 5 2013 Ask, Share, Learn www.proformative.com #CFOD13 My Background 25+ years corporate finance experience in multiple industries Currently: Software/Mfg/WD Vertical GM, NetSuite Product, Services, Marketing Sales Previously: 3X CFO, most recently as CFO of Nexant (1,000 EE SW and Service) Life Sciences, Hardware, Software, SaaS, Media IPO: VP Controller, Extreme Networks Assistant Treasurer, Genentech Deloitte CPA, MBA 6. 6 2013 Ask, Share, Learn www.proformative.com #CFOD13 What I See Every Day at NetSuite Hyper-growth Strategic view, but short-tem focus Big and Small From Qualcomm , etc. to 20 person start-ups Business Model Diversity Internet, SaaS, Ecommerce, Services, Hardware-enabled, etc. Process Little or none Stale (sometimes as soon as the process is built) Either way no one has the time Starving For Information Stale, inaccurate, siloed, disconnected from the PUE 7. 7 2013 Ask, Share, Learn www.proformative.com #CFOD13 Company Overview Top 10 Cloud Companies to Watch #1 Cloud ERP Suite Industry Recognition Fastest Growing Top 10 FMS Vendor 3rd Year Running Worlds most deployed cloud ERP Used by 16,000+ organizations Fastest growing top 10 ERP Used across 100+ countries Founded 1998 Publicly traded on NYSE: N Offices in 14 countries 2,000+ employees 2012 revenue: $309M Background Performance Best Cloud Infrastructure Best Financial Management 8. 8 2013 Ask, Share, Learn www.proformative.com #CFOD13 Record Quarterly Revenue: 32% YoY Growth $0M $10M $20M $30M $40M $50M $60M $70M $80M $90M $100M $110M Q2'04 Q2'05 Q2'06 Q2'07 Q2'08 Q2'09 Q2'10 Q2'11 Q2'12 Q2'13 $4.0 $8.0 $15.5 $25.5 $36.6 $40.3 $47.1 $57.8 $74.7 $101.0 9. 9 2013 Ask, Share, Learn www.proformative.com #CFOD13 One of the unique things about the human brain is that it can do only what it thinks it can dothe first rule of super brain is that your brain is always eavesdropping on your thoughts as it listens, it learns. Deepak Chopra, Rudolph Tanzi, Super Brain Co-Authors LEADERSHIP 10. 10 2013 Ask, Share, Learn www.proformative.com #CFOD13 The Challenges 11. 11 2013 Ask, Share, Learn www.proformative.com #CFOD13Does Finance Really Understand the Business? 12. 12 2013 Ask, Share, Learn www.proformative.com #CFOD13 CEO 13. 13 2013 Ask, Share, Learn www.proformative.com #CFOD13 Accenture High Performance Finance Study How Do Others Think Finance Is Doing? 14. 14 2013 Ask, Share, Learn www.proformative.com #CFOD13 Accenture High Performance Finance Study What We Think About Our Challenges Top 5 Responses 15. 15 2013 Ask, Share, Learn www.proformative.com #CFOD13 Accenture, High Performance Finance The Critical Role of the Finance Workforce CFOs: Time Allocation 16. 16 2013 Ask, Share, Learn www.proformative.com #CFOD13 Finance Challenges In A Global Businesses Inability to customize systems and processes as the company grows Error-prone, inefficient, time-consuming manual processes Lack of confidence in financial data Significant resources, effort and attention just to keep current system running Siloed data; no 360o view of corporate performance Lengthy cycle to roll up financial results from subsidiaries Lack of current visibility into subsidiaries financials Challenge of scaling processes across geographies Lack of IT resources in distributed locations 17. 17 2013 Ask, Share, Learn www.proformative.com #CFOD13 Setting The Table For Operational Success Is Board Governance in good shape? Investor Expectations Politics/Baggage Culture of Say/Do Accountability Pay for Performance Focus on Outcomes 18. 18 2013 Ask, Share, Learn www.proformative.com #CFOD13 The Approach 19. 19 2013 Ask, Share, Learn www.proformative.com #CFOD13 Building a Business Plan That Gets Buy-In 20. 20 2013 Ask, Share, Learn www.proformative.com #CFOD13 Business partnering is a lot like dancing. Do it right, and it looks effortless graceful and smooth. Do it wrong, however, and you are likely to step on someones toes. Deloitte, How Finance Can Become a Better Business Partner 21. 21 2013 Ask, Share, Learn www.proformative.com #CFOD13 Build a Real LRP! Involve the whole team Identify key input and output metrics Clarify how decisions today effect future Removes mystery of budget targets Tied to Comp: Pay for Performance Keeps a periodic eye on the long-term Used To Drive Significant Strategic Shifts Example: Genentech 22. 22 2013 Ask, Share, Learn www.proformative.com #CFOD13 Benchmark When You Can: We compare our financial performance with other public SaaS companies Informs our short-term and long-term target operating models Removes subjectivity from business model assumptions 32.6% 0% 10% 20% 30% 40% 50% 60% 70% Revenue YoY Growth Peer group average = 28.3% 44.6% 0% 10% 20% 30% 40% 50% 60% 70% S&M as % of Revenue (TTM) Peer group average = 36.6% 23. 23 2013 Ask, Share, Learn www.proformative.com #CFOD13 Whats the Strategy/Vision? Significantly increase wallet share with existing customers Significantly accelerate new customers acquisition Dramatically improve effectiveness & efficiency of the work we do Increase revenue per customer (cross sell, upsell, sell more) on key accounts with new account management mindset and focus Define value proposition, pricing, and FY11 product/technology roadmap for Software Raise awareness and market the Customer Benefit of our differentiated solution Software and Services Develop and sell new services and products into existing and new accounts Enter new geographies with existing services Standardize critical repeatable work processes, build institutional knowledge through best practice sharing, and manage enterprise risk Enabled by high performance organization & technology 1 2 3 4 5 6 New customers: Existing customers: Efficiency savings: 2013 Growth Plan Critical Few Priorities Revenue Plan & Target Plan = $75M; Target = $90M Plan = $390M; Target = $425M Plan = $10.0M; Target = $15.0M 24. 24 2013 Ask, Share, Learn www.proformative.com #CFOD13 $8.8 $13.3 What Team Will Do With More Conservative Assumptions Likely the case we commit to outside investors Visibility of this plan is nearly 100% $1.7 $11.4$0.5 FY11 $140.0 Y-o-Y Growth = 19% $117.5 FY10 $117.5 $5.3 $12.4 $3.5 $150.0 Y-o-Y Growth = 28% FY10 FY11 Consulting MarketsSoftwareEE $11.4 Work Well Do, Wont Do Key Priorities Key Dependencies Stretch, but doable $117.5 $7.5 $14.1 $7.6 $160.0 FY10 FY11 Stretch Case Accelerated compensation if achieved Scenario Key Drivers Worst & Best Relative To Plan Revenue Projection Worst Case Plan (Most likely) Target (Best Case) Y-o-Y Growth = 36% Y/Y FY10 33% 21% 15% 40% 26% 3% 5% 37% 39% 46% 21% 46% Y/Y FY10 Y/Y FY10 FY09-10 $7.9 $14.5 $1.7 $14.8 What Scenarios Should I Consider? Consulting MarketsSoftwareEE Consulting MarketsSoftwareEE 25. 25 2013 Ask, Share, Learn www.proformative.com #CFOD13 Expense Build: Where Are We Investing? $513.5 Merit / Bonus $2.0 Expense Growth Driven By Revenue Growth and Special Investments $Millions Service Direct Labor $10.6 Markets COGS Incr. $11.2 Office Expansion $0.3 Base Growth: 22% YOY Service Business Efficiencies ($2.0) Corporate ($0.5) FY11 Savings: Growth-Based $22.1 S&M $1.5 Special Investments $0.9 Efficiencies ($2.0) $738.4 Corporate ($0.5) 2012 Merit & Bonus Growth-Based Marketing Corporate Special Investments Savings 2013 Corporate $0.9 Strategy Consulting $0.7 Executive Recruiting $0.2 FY11 Special Investments Corporate $0.4 CMO, CSO, CPO $0.5 Corporate 26. 26 2013 Ask, Share, Learn www.proformative.com #CFOD13 Whats the Financial Outcome? 3 2 1 1 2 28% Revenue growth Drivers of $32.5M in growth: BU1($11M) BU2 ($12M) BU3 ($3M) BU4 ($3.5M) Contribution Margin Growth 46% CM expansion of $9.2M : Higher revenue ($7.2M) CM expansion from standardizing critical processes for EE and Consulting service offerings ($2.0M) Overall, CM growth offset by higher S&M for customer awareness and TrakSmart sales team (-$1.5M) EBITDA Increase 183% EBITDA driven by higher revenue and contribution offset by: Strategy Work ($0.7) CPO/CSO/CMO ($0.5M) 3 28 % Preliminary 2013 Plan vs. Target Consolidated $M 2013 2012 Actual Worst Case Most Likely Best Case Most Likely vs. 2012 Revenue BU1 $34.2 $43.0 $45.6 $47.5 BU2 $36.3 $38.1 $41.6 $43.8 BU3 $30.6 $42.0 $43.0 $44.7 BU4 $16.4 $16.9 $19.9 $23.9 Total Revenue $117.5 $140.0 $150.0 $160.0 Y-oY Growth % 29% 19% 36% Total Contribution Margin $20.0 $23.4 $29.2 $33.1 Y-oY Growth % 12% 17% 46% 65% Total CM% 17% 17% 19% 21% BU1 30% 30% 31% 32% BU2 25% 27% 29% 28% BU3 9% 9% 10% 10% BU4 -15% -24% -6% 4% Corporate (incl corp srvc ctr) $11.9 $12.5 $13.0 $13.0 Bonus $4.1 $4.1 $4.6 $4.6 EBITDA $4.1 $6.7 $11.6 $15.5 3% 5% 8% 10% Y-oY Growth % % of revenue -50% 63% 183% 278% 2013 vs. 2012: * 27. 27 2013 Ask, Share, Learn www.proformative.com #CFOD13 Optimizing Critical Processes and ID Critical Metrics For Success 28. 28 2013 Ask, Share, Learn www.proformative.com #CFOD13 Key ERP Suite Business Processes: CFO Partnership Opportunities Abound Brand to Demand Marketing & demand creation Idea to Market Developing new products and services Prospect to Cash Sales and order creation Fulfillment Procure to Pay Bill of Materials to Finished Goods Storage to Shipment Inventory & warehouse management Sales Planning to MRP Customer Need to Resolution Record to Report Finance and accounting Hire to Retire Human capital management Project Conception to Completion Find to Fix Asset management 29. 29 2013 Ask, Share, Learn www.proformative.com #CFOD13 Key Steps In Critical Business Processes Lead Oppty Quote Order Order Fulfill Invoice Revenue Collect CRM System: Lead to Order ERP: Order to Cash Professional Services: Bid to Bill Oppty Bid Resource Manage Bill Request Approve Procure Match Pay Procurement: Procure to Pay Human Capital: Recruit to Reward Recruit Hire Payroll Develop Promote 30. 30 2013 Ask, Share, Learn www.proformative.com #CFOD13 Sales Function: Order to Cash Improvements Craft a Thorough Process Map Standardize Process Steps Create Improvement Culture Build Business Case for Automation Set Credit Limits 31. 31 2013 Ask, Share, Learn www.proformative.com #CFOD13 Manufacturing: Procure to Pay Improvements Controls, Controls, Controls Segregation of Duties Buy-in from Audit Process Standardization Continuous Improvement Purchase Order Utilization Maintain High Quality Automate Key Process Steps Implement Right Technology Determine Cost/Benefit for P- Cards, Thresholds, Etc. 32. 32 2013 Ask, Share, Learn www.proformative.com #CFOD13 Systems Play A Key Role Flexibility: Ability to support processes accommodating new and/or multiple sales offerings for your customers Data: Get on one system across as many processes and as much of each process as possible Cloud: Keep the system current even as technology evolves, new features become available and regulations change Complexity: Stay on one system even as new subsidiaries are opened, companies are acquired and business evolves Performance: Scale to meet the increasing volumes coming from expected and unexpected growth 33. 33 2013 Ask, Share, Learn www.proformative.com #CFOD13 One Suite to Streamline Core Processes Siloed information Disparate processes Time-consuming data management effort One version of truth Streamlined, integrated processes Nimble decision-making turnaround time 34. 34 2013 Ask, Share, Learn www.proformative.com #CFOD13 Whats On My Dashboard To Stay Aligned? Real-time Global Bookings Pipeline Revenue Segment/Vertical KPIs 35. 35 2013 Ask, Share, Learn www.proformative.com #CFOD13 SaaS: Churn & Downsell We measure a combined gross churn/ downsell number on a revenue $ basis defined as the ARR Lost/ annualized run rate of recurring revenue for the period (in a business with fast-rising ASP, customer count churn is a less useful metric) We measure the metric on a gross (i.e. before upsell) basis, because the focus on this number and the effort to drive it down is a separate exercise from the effort to expand in existing accounts Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Lost Customers Downsell 36. 36 2013 Ask, Share, Learn www.proformative.com #CFOD13 Sales and Marketing Efficiency Because the SaaS company spends such a large portion of the P&L on S&M, it is critical to ensure the spend is delivering what it is supposed to: bookings and then revenue. We focus on two simple metrics: Gross S&M Efficiency: Ratio of S&M expense to current period bookings answers how much S&M expense do we spend on each $ of bookings? S&M Revenue Efficiency: Ratio of S&M expense to following periods increase in revenue answers how much S&M expense does each $ of incremental revenue cost? 2004 2005 2006 2007 2008 2009 2010 2011 S&MRevenue Efficiency GrossS&MEfficiency 2004 2005 2006 2007 2008 2009 2010 2011 S&MRevenue Efficiency GrossS&MEfficiency 37. 37 2013 Ask, Share, Learn www.proformative.com #CFOD13 Measuring and Managing 38. 38 2013 Ask, Share, Learn www.proformative.com #CFOD13 I cant stand predictions. What I have to do is try to visualize the world, and I have to be agile enough to live with it and win in it. Jack Welch 39. 39 2013 Ask, Share, Learn www.proformative.com #CFOD13 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 LTV Recurring/COCA LTV Recurring + Upsell/COCA LTV/COCA: The Meta-Metric for SaaS 40. 40 2013 Ask, Share, Learn www.proformative.com #CFOD13 LTV/COCA The Meta-Metric for SaaS Lifetime Value / CoCA Cost of Customer Acquisition Lifetime Value The Ultimate Measure of SaaS Effectiveness Is Calculated By Which are Functions Of ARR Breadth of solution Pricing & Competition Ability to upsell Avg. Customer Life Churn rate Recurring Gross Margin Data center operations Architectural efficiency Support costs Total Sales and Mktg. Expense Efficiency of sales cycle Cost of lead generation Addressability of mkt. # of Customers Acquired Conversion rates Effectiveness of lead gen. 41. 41 2013 Ask, Share, Learn www.proformative.com #CFOD13 Actual data Integrated ERP and CRM Operational analytics Continuous planning Strong accountability: actual vs. budget Collaborative forecasting Integrated Business Planning Process Actuals / ERP Financial Planning Integration Strategy, planning and execution linkage Integration between actual and plan Able to continuously monitor performance 42. 42 2013 Ask, Share, Learn www.proformative.com #CFOD13 Forecasting Philosophy Multi-Year Strategy Drives Tops- down approach Fund top line growth while maintaining profitability and generating cash We are focused and valued externally on revenue growth Forecast used to manage the business Robust feedback loop between finance, executive team, and business owners 43. 43 2013 Ask, Share, Learn www.proformative.com #CFOD13 Forecasting Summary What do we forecast? Revenue, Expenses, Deferred Revenue, Operating Cash Flow Rolling eight quarter view updated monthly P&L forecasts saved as different versions in Financial Planning module Forecasts that are unique to SaaS companies Deferred Revenue Customer-level revenue forecast by month Churn Headcount expense lever 44. 44 2013 Ask, Share, Learn www.proformative.com #CFOD13 Execution: Discipline & Flexibility Discipline: FOCUS on key priorities and their impact on revenue Establish routine of updating forecasts at regular intervals Develop a set of relevant metrics to measure success, review manically Use dashboards to monitor real-time results and KPIs on a regular basis Flexibility: Update forecast models for proposed changes in the business Ensure you have the right team and tools to facilitate fast answers Make sure mindset is in synch with business environment Be ready to switch from cost control mode to investment mode and back again Be open to new ideas and approaches 45. 45 2013 Ask, Share, Learn www.proformative.com #CFOD13 Wrap-up and Your Thoughts Does an LRP planning process really have value? Do you have access to real-time financial information? Are your input and output metrics clear? What is the quality of your revenue visibility? Where does your forecast break down or excel? Anything else? 46. 46 2013 Ask, Share, Learn www.proformative.com #CFOD13 47. 47 2013 Ask, Share, Learn www.proformative.com #CFOD13 Thank You Sponsors! PLATINUM GOLD SILVER DIAMOND