SaaS Business Metrics Panel Discussion

March 4, 2015

SaaS Business Metrics Panel

2

Therese Tucker, CEO

Ron Kasner, CFO

Nick Mehta, CEO

Glenn Solomon, General Partner

Moderator

David Spitz, Managing Director

Traditional Perpetual License vs. SaaS

3

Traditional Perpetual

License Software SaaS

o “One and Done”

o Revenues minus costs

essentially tell the story

o LTV and CAC

o Dollar Retention

o Land and Expand

VS. John

Huge Impact to Sustained Differences in Churn

4

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

1 4 7 10 13 16 19 22 25 28 31 34 37 40

Month

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

1 4 7 10 13 16 19 22 25 28 31 34 37 40

Month

Cohort Performance with

+3% Monthly Churn

Cohort Performance with

-3% Monthly Churn

Source: www.forentrepreneurs.com “SaaS Metrics 2.0”

COMPANY METRIC METRIC FORMULA

Recurring

revenue

retention

rate

Retention

rate

(net dollar

retention

rate)

Annual

dollar

retention

rate

Recurring

dollar

retention

rate

Net churn

Note: Includes only customers with >$5k ACV and annual / multi-year contracts

$ implied ACVcustomers t-1 end

t end

$ implied ACVcustomers t-1 end

t-1 end

Selected Public SaaS Company Churn Reporting Methodologies

5

Source: Company filings

COMPANY METRIC METRIC FORMULA

Subscription

revenue

retention

rate

Revenue

retention

rate

Renewal

rate

Annual

subscription

revenue

retention

rate

Dollar-based

net

expansion

rate

Note: Excludes commissions owed and customers with sidekick-only subscriptions

$ sub revenuecustomers q-4

q

$ sub revenuecustomers q-4

q-4( )Trailing 4

Qtr. Avg.

$ implied MRRcustomers t-1 end

t end

$ implied MRRcustomers t-1 end

t-1 end

$ recurring revenuecustomers t-1

t

$ recurring revenuecustomers t-1

t-1

# vehicles addedcustomers t beg

t

-

# vehiclescustomers t begt beg

# vehicles lostcustomers t beg

t)(

$ recurring revcustomers t-1 end

t

$ recurring revcustomers t-1 end

t-1

$ ACV non-renewing

$ ACV expiring100% -

t

t

$ annualized sub revenuecustomers t-1 end

t end

$ annualized sub revenuet-1 end

customers t-1 end

$ agg. MRRcustomers t-1 end

t end

$ agg. MRRcustomers t-1 end

t-1 end

$ contracted MRR customers m beg

m end( )WtdAvg. $ contracted MRR

customers m beg

m beg

* 12

Note: Excludes MRR of customers on starter plan

LTV vs. CAC

6

LTV CAC ?

ARR Gross Margin

Churn

$ Cost to Acquire

a Customer

CAC on New Customers vs. Upsells vs. Renewals

7

“How much do you spend on a fully-loaded sales & marketing cost basis

to acquire $1 of ACV from a customer?”

Source: 2014 Pacific Crest Private SaaS Company Survey

Note: Survey responses as of June / July 2014

Respondents: New ACV from New Customer: 159, Upsell to Existing Customer: 151, Renewals: 153

$0.60

$0.10 $0.06

$1.44

$0.46

$0.26

$1.07

$0.18

$0.12

$0.00

$0.25

$0.50

$0.75

$1.00

$1.25

$1.50

New ACV from NewCustomer

Upsell to ExistingCustomer

Renewals

75th percentile

25th percentile

Median

Cohort Analysis Example – SuccessFactors IPO Roadshow Slide

8

Source: SuccessFactors Roadshow Presentation

WDAY

NOW

DWRE

VEEV

N

ZEN

PFPT

PCTY

TXTR

MKTOCSOD

ULTI

BNFTATHN

CVT

CRM

QLYS

OPWR

SPSC

AMBR

QTWO

ECOM

EOPN

TWOU

PAYC

FLTXLOGM

RNG

TRAK

FIVN

CTCT

SQI

MRINRALY

>34% Mean

24-34% Mean

18-24% Mean

<18% Mean

YDLE

HUBS

NEWR

BOX

WK

0.0x

4.0x

8.0x

12.0x

0% 10% 20% 30% 40% 50% 60%

EV

/ C

Y2

01

6E

Re

ve

nu

e M

ult

iple

Projected CY2015E Revenue Growth

Public SaaS Company Revenue Multiples as a Function of Growth

9

>34% 24-34% 18-24% <18%

’14-’15E Revenue Growth

Source: Capital IQ and company filings

Note: Pricing as of February 27, 2015

Sales & Marketing Spend vs. Projected Growth Rate

10

Source: 2014 Pacific Crest Private SaaS Company Survey

Note: Survey responses as of June / July 2014

Respondents: <10%: 13, 10-15%: 13, 15-20% : 21, 20-25%: 19, 25-30%: 11, 30-35%: 15, 35-40%: 8,

40-50%: 16, 50-60%: 9, 60-80%: 12, 80-100%: 6, >100%: 12

23% 23%

27%

22%24%

29%

48%46% 47%

41%

50%

41%

0%

10%

20%

30%

40%

50%

60%

<10% 10-15% 15-20% 20-25% 25-30% 30-35% 35-40% 40-50% 50-60% 60-80% 80-100% >100%

Med

ian

Sale

s &

Mark

eti

ng

Sp

en

d a

s %

of

Reven

ue

2014E Growth Rate

Median ≈ 28%

50+%

SaaS Business Metrics Panel

11

Therese Tucker, CEO

Ron Kasner, CFO

Nick Mehta, CEO

Glenn Solomon, General Partner

Moderator

David Spitz, Managing Director

Case Study: XYZ Corp.

12

Year 1 Year 2

Attractive Subscription

Revenue Growth $54M

$72M

(+33% growth)

Excellent Gross

Margins 76% 80%

Reasonable Monthly

Churn 1.3% 1.4%

Positive Trends in

Customer Count and

Average ACV

1,000

$50K 1,450

$55K

Sales & Marketing

Expense Ratios

Mirroring Many High

Growth Companies

63%

of revenues 83%

of revenues

Question: How attractive is this?

Year 1 Year 2

LTV $50K x 76%

= $253K $55K x 80%

= $254K 15% 17%

CAC $34M

= $113K $59M

= $118K 300 500

LTV / CAC 2.25x 2.15x

Case Study: XYZ Corp. (cont’d)

13

Customer Detail

Customers (Beginning) 1,000 1,150

New Customers 300 500

Churn (150) (200)

Customers (End) 1,150 1,450

Annual Churn 15% 17%

ACV $50K $55K