Public Company Metrics
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2012 AWARD WINNER: Capstone Partners GLOBAL INVESTMENT BANKING Investment Banking Advisors BOUTIQUE FIRM OF THE YEAR SaaS & Cloud M&A and Valuation Update Q1 2013 BOSTON CHICAGO LONDON LOS ANGELES PHILADELPHIA SAN DIEGO SILICON VALLEY Capstone Partners 1 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors WORLD CLASS WALL STREET EXPERTISE.1 BUILT FOR THE MIDDLE MARKET.TM Table of Contents Section Page Introduction Research Coverage: SaaS & Cloud 4 Key Takeaways 5-6 M&A Activity & Multiples M&A Dollar Volume 8 M&A Transaction Volume 9-11 LTM Revenue Multiples 12-13 Notable M&A Transactions 14 Most Active Buyers 15-16 Public Company Valuation & Operating Metrics SaaS & Cloud 85 Public Company Universe 18-19 Recent IPOs 20 Stock Price Performance 21 LTM Revenue, EBITDA & P/E Multiples 22-24 Revenue, EBITDA and EPS Growth 25-27 Margin Analysis 28-29 Best / Worst Performers 30-31 Notable Transaction Profiles 32-44 Public Company Trading & Operating Metrics 45-49 Technology & Telecom Team 50-52 Capstone Partners 2 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors 2 Capstone Partners Investment Banking Advisors Observations and Introduction Recommendations Capstone Partners 3 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors WORLD CLASS WALL STREET EXPERTISE.3 BUILT FOR THE MIDDLE MARKET.TM Research Coverage: SaaS & Cloud Capstone’s Technology & Telecom Group focuses its research efforts on the following market segments: Enterprise SaaS & Mobile & Wireless Consumer Internet Cloud Analytics / Business Intelligence Cloud & IT Infrastructure Cloud Computing / Storage Communication & Collaboration Content Creation & Management Content Delivery Services E-Commerce Consumer, IT & CRM & Customer Service Telecom Hardware ERP, Supply Chain & Commerce Finance & Administration Human Resources Licensed Software Leaders Marketing & Advertising Vertical Markets Capstone Partners 4 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors 4 Key Takeaways – M&A Activity & Multiples M&A Dollar Volume in the Enterprise SaaS & Cloud market has surged from $8.6B in 2008 to $33.7B LTM M&A Dollar Volume weakened LTM vs. 2012 as fewer large deals were closed in Q1 2013 than the prior year quarter M&A Transaction Volume has increased from 273 transactions in 2008 to 565 transactions LTM Transaction Volume weakened slightly for LTM versus 2012 due to a slow down in Q1 2013 Cloud & IT Management and Vertical Market segments accounted for nearly half of the deal volume The Q1 drop off in M&A Activity was expected following the push to close deals in 2012 for tax considerations The Median LTM Revenue Multiple paid for private company targets has come down from the 2010 high of 4.0x but remains healthy at 3.5x Hot companies and sectors can see double digit multiple exits but those are the exception with most companies being acquired at much more reasonable multiples The Median LTM Revenue Multiple paid for public company targets above $100M fell to 2.7x from a 2010 high of 4.4x Fewer high growth, pure-play public SaaS companies were acquired in the last twelve months than in 2010 and 2011 Notable M&A transactions in Q1 Fiserv / Open Solutions ($1.0B) AthenaHealth / Epocrates ($294M) ACI Worldwide / Online Resources ($272M) Allscripts / dbMotion ($235M) VMware / Virsto ($200M) Opera / Skyfire ($155M) Pattington / FFastFill ($126M) Tripwire / nCircle ($125M) Google / Channel Intelligence ($125M) FIS / mFoundry ($120M) Genesys / Angel.com ($110M) Twitter / Bluefin ($90M) The most active buyers include Oracle, Google, IBM, VMware, Cisco, Citrix, Salesforce & Dell Capstone expects M&A activity to remain robust in the Enterprise SaaS & Cloud market for the remainder of 2013 with revenue multiples remaining relatively stable Capstone Partners 5 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors 5 Key Takeaways – Public Company Metrics Marin Software went public in Q1 and has been added to the SaaS & Cloud 85 Universe The stock finished Q1 17% above its IPO price resulting in a solid LTM revenue multiple of approximately 8x Median SaaS & Cloud 85 stock appreciation has consistently outperformed NASDAQ and was up 10.1% in Q1 The ERP, Supply Chain & Commerce segment led the way with a median gain of 27.7% in Q1while Licensed Software Leaders gained only 3.6% Median LTM Revenue Multiple of 4.3x marks a return to 5 year highs as the stock market continues to recover Medians range from a high of 7.4x for ERP, Supply Chain & Commerce to a low of 2.5 for Cloud Computing / Storage The two fastest growing companies, Workday and ServiceNow, trade at 34.6x and 18.3x revenue, respectively Median LTM EBITDA multiples have been expanding gradually and currently stand at 13.5x Most segments trade above 12x EBITDA with ERP, Supply Chain & Commerce, CRM & Customer Service and Finance & Administration trading at over 30x Median LTM P/E multiples continue to climb, reaching 25.1x and approaching 5 year highs Nearly all segments trade at a median P/E above 20x SaaS & Cloud 85 posted median revenue growth of 19.1% for LTM which is expected to slow to 17.4% for NTM Human Resources segment is expected to grow the fastest at a median rate of 37.1% while the Licensed Software Leaders are expected to grow at a median rate of only 6.2% SaaS & Cloud 85 posted median EBITDA growth of 15.5% for LTM with similar growth projected for NTM Median gross margins have remained steady at 69% since the economic recovery began Cloud & IT Infrastructure segment leads with 85% gross margins while Cloud Computing / Storage lags at 61% Median EBITDA margins have slipped slightly to 21.4% as companies are reinvesting in growth EBITDA margins vary widely from 40+% for mature companies to -30% for emerging companies focused on growth Capstone Partners 6 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors 6 Capstone Partners Investment Banking Advisors M&AObservations Activity & and MultiplesRecommendations Capstone Partners 7 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors WORLD CLASS WALL STREET EXPERTISE.7 BUILT FOR THE MIDDLE MARKET.TM LTM M&A Dollar Volume M&A dollar volume has recovered from 2008 - 2009 lows, reaching $39B in ‘12 and $33.7B LTM Weaker LTM numbers reflect a drop in large transactions with just $2B in dollar volume from deals over $200M for Q1’13 compared to $7.9B for Q1’12 However, dollar volume for deals under $200M has improved nearly 50% in Q1 ‘13 versus the prior year quarter, jumping to $1.8B from $1.25B Capstone Partners 8 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors 8 LTM M&A Transaction Volume by Segment Transaction volume has also risen steadily, more than doubling from 273 deals in 2008 to 565 deals LTM The slight drop for LTM vs. 2012 is not surprising given the push to get deals done in 2012 for tax considerations Vertical Market solutions and Cloud & IT Infrastructure constitute nearly half of all transactions Capstone Partners 9 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors 9 LTM M&A Transaction Volume by Deal Size – Private Targets Private company deal volume jumped significantly in 2012 and remains strong in Q1’13, though down slightly from prior year numbers As previously stated, the Q1 slowdown is not surprising following the 2012 year end rush Capstone Partners 10 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors 10 LTM M&A Transaction Volume by Deal Size – Public Targets Public transaction volume for 2011 to current is 50% higher than it was in 2008 with deals skewing towards larger dollar values $1B+ transaction activity has been strong for 2010 to current Deals over $250M represent half of the public deal volume since the start of 2011 with nearly 25% of deals over $1B Capstone Partners 11 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors 11 Median LTM Revenue Multiples – Private Targets The Median LTM Revenue Multiple paid for private company targets has come down from the 2010 high of 4.0x but remains healthy at 3.5x Hot companies and sectors can see double digit multiple exits but those are the exception with most companies being acquired at much more reasonable multiples Capstone Partners 12 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors 12 Median LTM Revenue Multiples – Public Targets The Median LTM Revenue Multiple paid for public company targets above $100M fell to 2.7x from a 2010 high of 4.4x Fewer high growth, pure-play public SaaS companies were acquired in the last twelve months than in 2010 and 2011 With less than 25 public company target data points in a given year, the median multiple tends to be quite volatile and is not necessarily indicative of M&A valuations in the broader market Capstone Partners 13 CapstoneInvestment BankingPartners Advisors Investment Banking Advisors 13 Notable M&A Transactions Announce LTM Rev Mult on $ Premium to Date Buyer Target Segment Target Description Deal Value Multiple Invested 1 Mo Prior Vertical Market - Offers financial institution management software globally 1/14/13 Financial Services & providing CRM, BI, accounting, document management and $1,015M 2.5x 0.8x N/A Insurance payment processing. Provides a mobile medical reference content application for use Vertical Market - by physicians on iPhone, iPad, Android, BlackBerry, Windows 1/7/13 Healthcare $294M 2.6x