Software Equity Group's 2013 M&A Survey

The SftSoftware I Idndust ry Financial Report

Software Equity Group, L.L.C. 12220 El Camino Real Suite 320 San Diego, CA 92130 [email protected] (858) 509-2800 Unmatched Expertise. Extraordinary Results

Overview Deal Team

Software Equity Group is an investment bank and M&A advisory firm serving the software and technology sectors. Founded in 1992, our firm has guided and advised companies on five continents, including Ken Bender privately-held software and technology companies in the United States, Canada, Europe, Asia Pacific, Managing Director Africa and Israel. We have represented public companies listed on the NASDAQ, NYSE, American, (858) 509-2800 ext. 222 Toronto, London and Euronext exchanges. Software Equity Group also advises several of the world's [email protected] leading private equity firms. We are ranked among the top ten investment banks worldwide for application software mergers and acquisitions. R. Allen Cinzori Managing Director Services (858) 509-2800 ext. 226 [email protected] Our 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. We Dennis Clerke have profound understanding of software company finances, operations and valuation. We monitor and Executive Vice President analyze every publicly disclosed software M&A transaction, as well as the market, economy and (858) 509-2800 ext. 233 technology trends that impact these deals. We offer a full complement of M&A execution to our clients [email protected] worldwide. Our capabilities include:. Brad Weekes Sell-Side Advisory Services – leveraging our extensive industry contacts, skilled professionals and Vice President proven methodology, our practice is focused, primarily on guiding our client s wisely toward the (858) 509-2800 ext. 239 achievement of their exit objectives. [email protected] Buy-Side Advisory Services – utilizing a proven buy-side methodology, we help our clients acquire strategically, assess insightfully, value intelligently and structure transactions to better assure their desired outcome. Kris Beible Director, Business Development Management Buyouts & Recapitalization – assisting founders and owners of software and (858) 509-2800 ext. 227 technology com panies to gain full or ppqyygpartial liquidity by facilitating capital investments b ypqyy private equity [email protected] firms and other financial institutions. Private Equity & Debt Placement – facilitating private companies with leading institutional investors for financings that range from $5 million to $500 million. 12220 El Camino Real, Suite 320 Mentoring Program – providing guidance to software companies contemplating an exit to ensure San Diego, CA 92130 (858) 509-2800 (P) they’re doing everything now to better their odds and enhance their future exit valuation ahead. (858) 509-2818 (F) www.softwareequity.com

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2013 Software Industry Financial Report Contents

GLOBAL AND U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS ...... 2 IT SPENDING ...... 3 INTERNET RETAIL SPENDING AND ADVERTISING ...... 4 PUBLIC SOFTWARE/SAAS/INTERNET COMPANY STOCK PERFORMANCE ...... 4 PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE ...... 5 PUBLIC SOFTWARE COMPANY MARKET VALUATIONS: OVERALL ...... 7 PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY ...... 8 PUBLIC SOFTWARE COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY ...... 9 PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE ...... 10 PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS ...... 11 PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY .... 12 PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY ...... 13 PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE ...... 13 PUBLIC INTERNET COMPANY MARKET VALUATIONS ...... 15 PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY ...... 16 PUBLIC INTERNET COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY ...... 16 INITIAL PUBLIC OFFERINGS ...... 17 VENTURE CAPITAL INVESTMENT ...... 18 THE BUYERS SPEAK: SOFTWARE EQUITY GROUP’S 2013 M&A SURVEY ...... 20 SOFTWARE/SAAS M&A DEAL VOLUME AND SPENDING ...... 24 IMPORTANT CHANGE IN SOFTWARE AND SAAS M&A DATA ACCOUNTING...... 25 SOFTWARE M&A VALUATIONS ...... 26 SOFTWARE M&A VALUATIONS BY TARGET’S EQUITY STRUCTURE ...... 27 SOFTWARE M&A VALUATIONS BY VERTICAL AND HORIZONTAL MARKETS ...... 27 M&A VALUATIONS BY SOFTWARE PRODUCT CATEGORY ...... 28 SOFTWARE AS A SERVICE (SAAS) M&A DEAL VOLUME AND VALUATIONS ...... 30 INTERNET M&A DEAL VOLUME AND VALUATIONS ...... 32

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APPENDIX A: 2012 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ...... 34 APPENDIX B: 2012 SAAS PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY 36 APPENDIX C: 2012 INTERNET PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ...... 37 APPENDIX D: 2012 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS...... 38 APPENDIX E: 2012 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS...... 39 APPENDIX F: 2012 MERGERS AND ACQUISITIONS, SELECT SOFTWARE INDUSTRY MEGA-DEALS ...... 46 APPENDIX G: 2012 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS ...... 47

2013 Annual Software Industry Financial Report Index of Figures

Figure 1: U.S. Gross Domestic Product and Unemployment Rate Figure 2: Worldwide IT Spending Figure 3: Major Market Indices Compared to the SEG Software, SaaS and Internet Indices Figures 4 and 5: SEG Software Index Key Statistics – Annually and Quarterly Figure 6: SEG Software Index Historical TTM Revenue Growth and EBITDA Margins Figure 7: SEG Software Index Companies with over $1 billion Cash & Cash Equivalents Figure 8: SEG Software Index Median EV/Revenue Multiple by Year Figure 9: SEG Software Index Median EV/Revenue Multiples by Size (TTM Revenue) Figure 10: EV/Revenue Multiple vs. TTM Revenue Growth Rate Figure 11: EV/Revenue Multiple vs. EBITDA Margin Figure 12: SEG Software Index Median Metrics by Product Category Figure 13 and 14: SEG SaaS Index Key Statistics – Annually and Quarterly Figure 15: SEG SaaS Index Median Operating Metrics Figure 16: Public SaaS Companies Figure 17: EV/Revenue Multiple vs. TTM Revenue Growth Rate Figure 18: EV/Revenue Multiple vs. EBITDA Margin Figure 19: Public SaaS Companies by Product Category Figures 20 and 21: SEG Internet Index Key Statistics – Annually and Quarterly Figure 22: SEG Internet Index Historical Profitability Figure 23: SEG Internet Index Median Operating Metrics Figure 24: SEG Internet Valuation and Financial Performance by Size (TTM Revenue) Figure 25: EV/Revenue Multiple vs. TTM Revenue Growth Rate Figure 26: EV/Revenue Multiple vs. EBITDA Margin Figure 27: SEG Internet Index Median Metrics By Product Category Figure 28: Historical Number of Software IPOs Figure 29: Software, SaaS and Internet IPOs in 2012 Figure 30: U.S. Venture Capital Investments and Total Dollars Invested Across Industries Figure 31: U.S. Venture Capital Investments and Total Dollars Invested in the Software Industry Figures 32 and 33: Annual U.S. Software Sector M&A Activity and Dollars Spent Figure 34: U.S. Software Mergers & Acquisitions Activity Figure 35: TTM Average M&A Deal Size Figure 36: Annual Software EV/Revenue Exit Multiple Figure 37: Quarterly Software EV/Revenue and EV/EBITDA Exit Multiples Figure 38: Median Software M&A EV/Revenue Exit Multiple Distribution Figure 39: 2012 Median Software EV/Revenue Exit Multiple By Ownership Structure Figure 40: 2012 Horizontal vs. Vertical Sellers Figures 41 and 42: 2012 Horizontal & Vertical M&A Volume Segmentation (top) and Median EV/Revenue Exit Multiples (bottom) Figure 43: 2012 Software Median EV/Revenue Exit Multiple by Product Category Figure 44: 2012 Software M&A by Product Category Figure 45: SaaS M&A Volume as a % of Total Software M&A Volume Figures 46 and 47: Annual (top) and Quarterly (bottom) Median SaaS EV/Revenue Exit Multiple Figure 48: 2012 SaaS M&A by Product Category

2013 Software Industry Financial Report www.softwareequity.com

Figure 49: Internet M&A Volume Figure 50: Internet Median EV/Revenue Exit Multiple Figure 51: Internet Median EV/Revenue Exit Multiple Distribution Figure 52: Internet Deal Volume by Category

2013 Software Industry Financial Report www.softwareequity.com

Complimentary Executive Webcast Software Industry Dollars, Deals and Drivers

How Public Software/SaaS and Internet Companies Performed in 2012 M&A Deals, Drivers and Trends Knowing When to Leave: Intelligent Exit Timing

Please join us Thursday, February 21st at 10am Pacific/1:00pm Eastern for an extraordinary one hour executive webcast.

Software Equity Group’s 2013 Software Industry Buyers Survey, an exclusive survey of corporate development executives from the 200 largest software companies about their M&A plans, priorities, budgets and thinking for the year ahead. Learn what we learned. We’ll also recap the software industry’s financial performance in 2012 and look deeply and insightfully at 2012’s Software, SaaS and Internet M&A exit valuations, deal volumes and trends. We’ll forecast the year ahead. And we’ll share some provocative thinking and convincing data about what really drives exit valuations and how to intelligently prepare for and time an optimum software exit.

• Our 2013 Buyer Survey – We polled over 200 corporate development executives at the largest software companies about their M&A plan, budgets and thinking for the year ahead. What do they want? How much will they pay? How do you make the cut? • Mergers & Acquisitions: Software, SaaS and Internet (2012 Explained, 2013 Forecasted). • Software/SaaS/Internet Public Company Performance: The Current Financial State of the Software Industry, and how that will drive M&A in 2013. • Optimum Exit Timing: We’ve spent four years studying, documenting and analyzing software M&A transactions, exit valuations and trends and we have insights to share. • Lions and Tigers and Bears: Due Diligence and Software M&A Contract Terms in 2013. It ain’t easy, and it’s getting harder.

Join us on Thursday, February 21st at 10am Pacific/1:00pm Eastern as featured speaker Ken Bender, Founder and Managing Director of Software Equity Group, joined by Sandy Shippey, Partner of Procopio, Cory, Hargreaves & Savitch, provide an in-depth look at the software industry’s financial performance and deals in 2012 and discuss what lies ahead in 2013. For additional information, please call 858-509-2800 or e-mail: [email protected].

About Software Equity Group Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. Founded in 1992, our firm has counseled, represented and guided some 2,200 public private software companies on five continents and has been ranked the #1 boutique investment bank in application software mergers and acquisitions. SEG has advised public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges, and several of the world’s largest private equity firms. SEG’s research reports are distributed to an opt-in list of some50,000 software entrepreneurs, C level execs, private equity investors and venture capital partners in 76 countries.

About Procopio, Cory, Hargreaves & Savitch With more than 130 attorneys in San Diego, Carlsbad, Del Mar Heights, and Silicon Valley, Procopio, is one of the largest business law firms in California. We are a regional law firm with a global network that gives us the ability to serve clients’ interests throughout the world. Procopio’s Emerging Growth and Technology practice group assists start-ups and emerging growth companies at every stage, from formation, to development and funding, to exit and liquidity. Our team-oriented approach offers clients access to attorneys who are familiar with and understand their products, technology and business models, as well as the unique business needs of start-ups and emerging growth companies.

2013 Software Industry Financial Report www.softwareequity.com

Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitions

Figure 1: U.S. Gross Domestic Product and Unemployment Rate

10%

GDP % Growth Unemployment Rate 8%

6% 5.0%

3.7% 4% 3.6% 3.2% 3.0% 2.6% 3.1% 3.1% 2.1% 2.2% 1.7% 2.2% 2.1% 1.5% 2% 1.5% 1.8% 1.2% 1.3% 1.3% 0.4% 0%

-0.7% -0.7% -2%

-2.7% -4%

-6% -5.4% -6.4%

-8% 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 (F)

GLOBAL AND U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS

We begin with a brief synopsis of Gross Domestic of that notion when 1Q12’s GDP growth on an Product (GDP) performance in 2012 based upon annualized basis declined to 2.2%. Any the most recent data available. GDP is best remaining optimism faded in the second quarter defined as the total market value of all final goods when the economy registered 1.3% growth. By and services produced in a country in a given that time, some economic pundits began warning year, equal to total consumer, investment and of a double dip recession, citing stubbornly high government spending, plus the value of exports, unemployment, continuing housing woes, minus the value of imports. uncertainty from the looming fiscal cliff, and a distinct lack of consumer confidence. Surprising Globally, The Conference Board estimates GDP many, the third quarter saw consumer spending growth for all of 2012 was 3.0%, a decline of 50 surge. That, alongside heightened government basis points from 2010 and 2011’s 3.5% growth spending, boosted third quarter GDP to 3.1%. rate. The slowdown was attributed to sluggish Unfortunately, Q3’s growth proved unsustainable. growth in mature economies and modest A majority of economists are now forecasting deceleration in emerging countries. The GDP growth to have declined to less than 2.0% in Conference Board expects 2013 will closely mirror 4Q12. Even that may be too optimistic. In 2012’s tepid growth for reasons including a November 2012, the Federal Reserve Bank of slowdown in China’s growth and continuing Philadelphia revised their GDP forecast to 1.8%, worries about Europe’s debt and bank down from 2.2% three months earlier. JP Morgan capitalization. was even more pessimistic, cutting their 4Q12 GDP growth estimate to 1.5% from 2.0%. Domestically, GDP growth in 2012 was even more disappointing. When we published our The economy proved especially peevish in final Annual Report one year ago, the Bureau of months of 2012. The Conference Board’s index Economic Analysis (BEA) was forecasting a of U.S. Leading Economic Indicators (LEI) modest 2.8% rise in 4Q11 GDP. The later - and advanced 0.4% increase in September and final - tally of 3.0% growth for the final quarter of another 0.3% in October, then declined 0.2% in 2011 encouraged many to believe GDP growth of November. The reasons were many, and varied. 3% or better would be sustainable throughout Five of the Board’s ten LEI indicators were 2012 (Figure 1). They were promptly disabused positive contributors, beginning with the largest positive contributor: interest rate spread, building

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permits, the Leading Credit Index, average weekly valuations declined. In 2010 and 2011, enterprise manufacturing hours, and manufacturers’ new customers loosened their purse strings and IT orders for consumer goods and materials. The capital spending grew 8% and 7%, respectively. negative contributors, beginning with the largest The spending spree was short lived. negative contributor: weekly average initial claims for unemployment insurance, stock prices, the In 2012, worldwide IT spending growth declined ISM new orders index, manufacturers’ new orders precipitously. Gartner, Forrester and Goldman all for nondefense capital goods excluding aircraft, estimate 2012 IT spending worldwide will have and average consumer expectations for business grown YoY by only 2% or less (Figure 2). IDC, conditions the outlier, has forecast 4% global IT spending growth in 2012, but even their more optimistic The latest employment report, released by the forecast was revised downward from an earlier U.S. Bureau of Labor Statistics in January 2013, projection of 6% spending growth. suggests the economy continues to recover, albeit at a stubbornly slow pace. The U.S. economy Figure 2: Worldwide IT Spending added 155,000 jobs in December, fueled by 10.0% 9.0% robust gains in manufacturing and construction. 8.0% 7.0% Construction added 30,000 jobs, the most in 15 6.0% 5.0% months. No doubt some of the hiring was to 3.0% rebuild in the aftermath of Hurricane Sandy but 2.0%

Spending 0.0% solid gains in new housing construction IT

2007 2008 2009 2010 2011 2012 2013 in contributed, as well. The 155,000 jobs added in December roughly equaled the monthly average ‐5.0% Change for all of 2012 which was 153,000. The YoY unemployment rate remained at 7.8%, unchanged ‐10.0% -10.0% from November but down from 8.5% one year ago. Undoubtedly, the worldwide macroeconomic ‐15.0% climate remains a constraint, but domestic economic uncertainties (e.g., fiscal cliff, debt ceiling, spending cuts, sequestration, etc.) are Analysts are mostly agreed that worldwide likely an even greater barrier to new job creation. enterprise IT spending will improve only modestly in 2013. Goldman, Gartner and Forrester all IT SPENDING project worldwide enterprise IT spending will advance 3% - 4% for the year. IDC is predictably For those who may be new to our reports, SEG a bit more bullish, projecting 5.7% growth. carefully monitors enterprise IT spending each Goldman’s 3% forecast is buoyed by projected quarter as a means of forecasting downstream growth of 7.4% in emerging market spending, public software company financial performance compared with estimated 6.3% uptick in 2012. By and software M&A deal volume. Simply put, we contrast, IT spending growth in developed long ago determined that healthy IT spending markets is anticipated to be only 2.5% in 2013. drives public software companies to buy, not It’s possible, and we believe likely, Goldman’s build, in response to growing market demand. forecast will prove to be overly conservative. In its November survey of CIOs, Goldman’s IT To provide some perspective, we estimate every spending index for 2013 soared from 59 a year percentage increase/decrease in IT spending earlier to 75 - the highest since 2007, when IT equates to approximately $5 billion. Our readers spending grew a whopping 7%. will recall large enterprises cut back sharply on spending for software, hardware and IT services But even if 2013’s lackluster projections for IT in 2009 during the economic downturn, when IT spending growth hold true, a few product capital spending declined by more than 10%. The categories will likely fare better than most. Gartner spending cut had an almost immediate and forecasts spending on enterprise software will traumatic impact on public software company grow 6.4% in 2013, outpacing the other four major revenue, and software M&A activity and IT spending subsectors they track (Devices, Data Center Systems, IT Services, Telecom Services).

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According to Gartner, enterprise software Buoyed by a greater number of shoppers, online spending will be led by security, storage retail sales reached $41.9 billion in 3Q12 management and CRM solutions in 2013, and in according to comScore, up 15% from 3Q11. It 2014, by big data solutions, including enterprise was the twelfth consecutive quarter of growth for content management, data integration tools and online retail, which now accounts for nearly $1 in data quality tools. every $10 of consumer discretionary spending. Online retail categories growing at least 16% YoY IDC predicts 2013 will be the year of the “3rd in 3Q12 included Digital Content & Subscriptions, platform” (mobile, cloud services, social Consumer Electronics, Event Tickets, Apparel & networking, and big data analytics) shifts into high Accessories and Computer Software. Forrester gear, as the industry transitions from an projects online retail sales will reach 15% of total exploratory phase to widespread adoption. "The retail sales by 2015. IT industry as a whole is moving toward the mobile/social/cloud/big data world of the 3rd The Interactive Advertising Bureau (IAB) and Platform much more quickly than many realize: PricewaterhouseCoopers (PwC) reported Internet from 2013 through 2020, these technologies will advertising soared to record levels in 3Q12, with drive around 90% of all the growth in the IT Internet ad revenues reaching $9.3 billion, an market," said Frank Gens, Senior Vice President 18% YoY increase. Search related advertising and Chief Analyst at IDC. "Companies that are not and display advertising continued to account for putting 80% or more of their competitive energy the lion’s share of total online ad spending. For into this new market will be trapped in the legacy 2012, eMarketer projects the search related ad portion of the market, growing even slower than spending and display ad spending will account for global GDP." 47.1% and 40.2%, respectively of all online advertising dollars. As such, IDC projects smart mobile devices will grow 20% in 2013, driving 57% of its overall IT Looking forward, eMarketer predicts display ad growth forecast. Gartner is forecasting tablet spending will overtake search as the largest spending will grow at a 52% CAGR from 2010 to recipient of online advertising dollars, as video 2015. Goldman Sachs estimates that revenues in and other formats grab a larger share of the pie. the mobile sector, including tablets, will increase In 2016, eMarketer projects display ad spending at a CAGR of 75% from 2010 to 2014. As will account for 45.6% of total ad spending, and important, IDC forecasts spending on public IT video display ads will grow from 7.9% to 14.5% of cloud services will exceed $40 billion in 2012 and all display as spending. Search ad spending is approach $100 billion in 2016, a CAGR of 26.4% projected to modestly decline to 44.2% of total. and five times that of the IT industry overall. Software as a service (SaaS) is expected to claim PUBLIC SOFTWARE/SAAS/INTERNET COMPANY the largest share of public IT cloud services over STOCK PERFORMANCE that time. Goldman Sachs is in agreement, forecasting SaaS spending will see a 20.9% The major U.S. stock market indices were highly CAGR from 2010 to 2014, driving the percent of volatile throughout most of 2012, as they have SaaS applications in the enterprise to 15% by been for the past four years. But unlike 2011, 2014. when the Nasdaq and S&P closed the year in the red, all three major U.S. stock market indices INTERNET RETAIL SPENDING AND ADVERTISING ended 2012 with positive returns of 7.3% or greater. The tech heavy Nasdaq led the pack, Just as we deem IT capital spending to be a climbing 15.9% in 2012. The S&P and Dow precursor of downstream M&A activity in the ended 2012 up 13.4% and 7.3%, respectively, software and SaaS world, we believe online retail from their January 2 opening (Figure 3). spending and Internet advertising spending each quarter presage the financial performance and M&A activity of many public Internet companies.

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Figure 3: Major Market Indices Compared to the SEG Software, Internet & SaaS Indices

DOW S&P NASDAQ SEG SaaS SEG SW Index SEG Internet Index 35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

(5.0%)

(10.0%) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

The SEG SaaS Index, comprised of 29 publicly achieving year end market returns at least 89% traded SaaS companies, finished 2012 with a greater than on their first trading day 2012. Ellie 11.1% gain in median stock price, outpacing SEG’s Mae, a SaaS company revolutionizing the Software and Internet Indexes. The year-end gain mortgage industry with a solution designed to was respectable, but anticlimatic, following on the address the litany of inefficiencies endemic to heels of 20%+ gains in median stock price for most mortgage origination, took top honors, returning of Q3 and early Q4. But following President 391% in 2012. Seven of the remaining nine were Obama’s reelection on November 7, the median public Internet companies, demonstrating pockets SEG SaaS Index stock price began to plunge, as of strength despite the lackluster performance of investors feared the impact of economic the SEG Internet Index as a whole. uncertainty on rapidly growing, marginally profitable public entities. PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE The stock price performance of public, on-premise software companies fared far worse than their Median revenue of the 142 public companies SaaS counterparts. By year end, the median stock comprising the SEG Software Index grew 14.0% return of the SEG Software Index, consisting of in 2012, a modest decline from 2011’s 15.5% 142 public, on-premise software companies, had median growth, but still higher than any year since declined 8.7% from the first day of trading. And 2007 (Figure 4). The 14% growth rate is despite impressive growth in some segments, the historically consistent with a healthy and growing median year-end stock return of the 93 publicly software industry, and is especially impressive traded Internet companies comprising the SEG given the economic and political uncertainties that Internet Index lagged far behind, barely managing prevailed for much of the year. to finish the year in positive territory, edging up a paltry 0.6%. Across all three SEG tracking indices, On a quarterly basis, however, the trend is far 155 of the 264 (59%) public software, SaaS and less encouraging (Figure 5). After accelerating for Internet companies we follow reported lower year- most of 2010 and 2011, median TTM revenue to-date (YTD) stock prices. growth slowed to 15.7% in 4Q11, and continued to decelerate throughout 2012. By the close of Some public software, SaaS and Internet 4Q12, median revenue growth of the SEG companies, however, managed to bring a smile to Software Index had plummeted to 12.5%. their investors’ faces, with ten such companies

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Figures 4 and 5: SEG Software Index Key If the IT capital spending projections of Gartner, Statistics – Annually and Quarterly Goldman Sachs and IDC prove accurate, we SEG - Software: Median Metrics expect SEG Software Index top line growth in the range of 15% - 16% in 2013, particularly if GDP Measure 2010 2011 2012 growth exceeds 3.5%. EV/Revenue 2.5x 2.6x 2.5x

EV/EBITDA 12.5x 12.7x 11.8x 2012’s growth rate helped drive the median TTM EV/Earnings 23.3x 23.3x 22.6x revenue of the SEG Software Index above $400 Current Ratio 2.0 2.0 2.1 million for the first time ever (Figure 5). That Cash & Eq ($M) $131.1 $154.0 $163.4 milestone was reached less than two years after Gross Profit Margin 68.0% 68.8% 67.5% the median TTM revenue of the SEG Software EBITDA Margin 19.0% 19.3% 19.4% Index surpassed $300 million in 2010. Over this Net Income Margin 8.9% 10.6% 10.4% same time period, the number of public software TTM Revenue Growth 12.7% 15.5% 14.0% companies in the SEG Software Index has TTM Total Revenue ($M) $301.8 $358.5 $382.2 declined from 161 to 142 – further evidence that TTM Total EBITDA ($M) $58.5 $68.6 $67.9 consolidation in the software sector is resulting in Debt / Equity Ratio 26.4% 22.5% 22.3% not only fewer, but considerably larger, publicly traded software companies.

SEG - Software: Median Metrics Throughout the global financial crisis, public Measure 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 2.2x 2.7x 2.5x 2.5x 2.5x software companies focused on profitability as a EV/EBITDA 11.7x 12.9x 11.3x 11.6x 11.9x way of maintaining investor confidence in the EV/Earnings 21.1x 22.0x 22.3x 22.4x 22.2x absence of meaningful revenue growth (Figure 6). Current Ratio 2.0 2.0 2.0 2.1 2.1 Cash & Eq ($M) $135.3 $150.7 $175.7 $165.2 $163.4 Much to their credit, as revenue growth has Gross Profit Margin 69.0% 67.3% 68.4% 67.7% 67.3% improved, they’ve managed to remain focused on EBITDA Margin 19.1% 19.3% 18.5% 19.2% 19.4% the bottom line, achieving a median EBITDA Net Income Margin 10.8% 10.6% 10.5% 9.4% 10.4% margin of 19.4% in 2012, very much in line with TTM Revenue Growth 15.7% 14.2% 14.6% 13.3% 12.5% 2011’s 19.3% and 2010’s 19.0% (Figure 4). TTM Total Revenue ($M) $361.2 $370.8 $375.5 $395.4 $401.3 TTM Total EBITDA ($M) $66.0 $63.1 $68.3 $68.1 $69.6 Indeed, quarter-by quarter throughout 2012, the Debt / Equity Ratio 22.5% 22.5% 21.5% 23.3% 22.5% median EBITDA margin of the SEG Software Index remained within a range of one percent (Figure 5) As always, a number of on-premise superstars far outshone their peers. Unsurprisingly, the ten Figure 6: SEG Software Index Historical TTM software companies posting the highest TTM Revenue Growth and EBITDA Margins revenue growth in Q4 were focused on 2012’s

hottest IT categories, Mobile, Security, Storage & TTM Revenue Growth EBITDA Margin

Data Management, and Networking. Three of 25.0% these overachievers – all focused on mobile software – grew their TTM revenue growth by 20.0% more than 100%: Qihoo (130.1%), NQ Mobile (118.6%) and Gree (101.6%). Other mobile 15.0%

software companies in the top 10 included mobile 10.0% advertising leaders, Velti (62.9%) and Millennial Media (75.6%). Rounding out the top ten were: 5.0% Palo Alto Networks (86.7% TTM revenue growth, Security software category), Sapiens International 0.0% 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 (+78.6%, Vertical – Other), Splunk (+76.0%, ‐5.0% Storage, Data Management & Integration), Allot Communications (+39.6%, Networking & Network Performance Mgmt) and Sourcefire (+38.9%, Many of 2012’s most profitable on-premise Security). software companies are industry behemoths that have the size and market leverage to drive high margins. Among these 800 pound gorillas are

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Oracle (46.5% EBITDA margin), Microsoft PUBLIC SOFTWARE COMPANY MARKET (40.4%) and SAP (34.6%). But an array of VALUATIONS: OVERALL smaller, mid-cap public software companies also had a keen eye on their bottom lines in 4Q12, The median enterprise value to revenue including CheckPoint Software (56.6% EBITDA (EV/Revenue) multiple for all public companies margin), Gree (53.4%) and SolarWinds (50.0%). comprising the SEG Software Index was 2.5x in Gree, a Japanese based provider of mobile 2012, the same as in 2010 and down a tick from games making a push into the U.S. market, 2011’s median 2.6x. After declining drastically to deserves special recognition for being among 1.8x in 2008 and to 1.7x in 2009, the relatively quick 2012 leaders in both TTM revenue growth and sustained return to a 2.5x median market (101.6%) and EBITDA margin (53.4%). valuation demonstrates the resiliency of the software industry and the relative confidence it The continuing focus on operating profit enabled engenders among many investors (Figure 8). On a most on-premise public software companies to quarterly basis, median EV/Revenue multiples rose further strengthen their balance sheets in 2012. to 2.7x in the first quarter, and ended the year with a Median cash & cash equivalents for the SEG median at 2.5x (Figures 5). Software Index reached a new record of $163.4 million in 2012, up from $154.0 million in 2011 Figure 8: SEG Software Index Median and $131.1 million in 2010 (Figure 4). Cash EV/Revenue Multiple by Year reserves among public software companies have 3.0x been steadily climbing since the final quarter of 2.6 2.6 2.5 2.5 2007 when they were only a median $68.3 million. 2.5x There are now 23 public software companies with

Multiple 2.0x over $1 billion in cash on their balance sheets, led 1.8 1.7 by Microsoft with more than $55 billion (Figure 7). The significant cash reserves and strong balance 1.5x sheets of most public software companies, EV/Revenue particularly the industry’s largest players, bode 1.0x well for many small and mid-cap software company targets. Median 0.5x

Figure 7: SEG Software Index Companies with 0.0x 2007 2008 2009 2010 2011 2012 over $1 billion Cash & Cash Equivalents

Microsoft Corporation Cisco Systems, Inc. Google Inc Investors, however, remained circumspect, and Oracle Corporation continued to favor larger software companies they IBM Hewlett Packard deemed less risky. As testament, the median SAP EMC EV/Revenue multiple of SEG Software Index NetApp, Inc. VMWare, Inc. companies with TTM revenues less than $100 Juniper Networks, Inc. million was only 1.8x in 4Q12, compared to 2.6x Adobe Systems Incorporated Activision Blizzard for those with revenues greater than $1 billion CA Symantec Corporation (Figure 9). Investor sentiment was largely Dassault Systèmes unchanged YoY, when the same market valuation Electronic Arts Inc. BMC Software Inc. differential prevailed. Trend Micro Autodesk, Inc. Check Point Software Tech Ltd. Intuit Inc Size (i.e., annual revenue) wasn’t the only Synopsys Inc important determinant of public software company $0 $10 $20 $30 $40 $50 $60 Cash & Equivalents ($ billions) market valuation. We analyzed the median EV/Revenue multiples of SEG Software Index companies based upon their 2012 TTM revenue growth rates and EBITDA margins.

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Figure 9: SEG Software Index Median Figure 11: EV/Revenue Multiple vs. EV/Revenue Multiples by Size (TTM Revenue) EBITDA Margin

4.5x 2.9x 3.9x 4.0x 4.0x 2.7x 3.5x 2.5x

2.3x 3.0x 2.7x Median: 2.5x 2.1x 2.5x 2.1x EV/Revenue

1.9x 2.0x 1.7x 1.7x 1.7x 1.5x Median

1.5x 1.0x 4Q11 1Q12 2Q12 3Q12 4Q12

Revenue Greater Than $1 billion Revenue Between $200 million and $1 billion 0.5x Revenue Between $100 million and $200 million Revenue Less Than $100 million 0.0x <= 0% > 0% > 10% > 20% > 30% > 40% <= 10% <= 20% <= 30% <= 40% There was a direct linear relationship between the TTM revenue growth rate and median EV/Revenue multiples of public software PUBLIC SOFTWARE COMPANY FINANCIAL companies. Companies that grew TTM revenue PERFORMANCE: BY PRODUCT CATEGORY more than 40%, were awarded a median EV/Revenue multiple of 4.1x – significantly higher While median financial performance metrics are than the median 2.5x multiple of the SEG useful for assessing the overall health of the Software Index overall (Figure 10). Among the software industry and for comparisons to other star performers with TTM revenue growth above economic sectors, a deeper analysis of these key 40% and high public market valuations: Qihoo metrics by software product category provides (130.1% TTM revenue growth, 8.4x median greater insight about the software ecosystem. By EV/Revenue), Palo Alto Networks (86.7%, 12.0x), analyzing how public software companies in Splunk (76.0%, 14.3x) and Millennial Media discrete product categories are performing, we (75.6%, 6.2x). enhance our understanding of market trends, sector health, product lifecycles, IT spending Figure 10: EV/Revenue Multiple vs. TTM priorities and stock market biases. Perhaps most Revenue Growth Rate important, we track this data because the current median valuation of companies comprising a

4.5x particular software category can weigh heavily 4.1x 3.9x 4.0x when buyers value acquisition targets. 3.5x 3.5x

3.0x 2.8x Eight of the seventeen product categories in the Median: 2.5x 2.5x SEG Software Index posted TTM revenue growth

EV/Revenue 1.9x 2.0x in 4Q12 above the Index median of 12.5% (Figure 1.5x 12). Taking top honors was Security, closing 1.5x Median 4Q12 with TTM median revenue growth of 23.1%. 1.0x Leaders within this category are companies 0.5x focused on provisioning and protecting the 0.0x <= 0% > 0% > 10% > 20% > 30% > 40% burgeoning number of networks associated with <= 10% <= 20% <= 30% <= 40% cloud computing. Specific examples include: Palo Similarly, highly profitable public software Alto Networks (86.7% TTM revenue growth), companies with EBITDA margins greater than Sourcefire (38.9%) and Imperva (33.0%). 40% were awarded median EV/Revenue market valuations of 3.9x and 4.0x, respectively (Figure Other product categories outpacing the SEG 11). Notable examples included: CheckPoint Software Index median growth rate in 2012 Software (56.6% EBITDA margins, 6.0x EV/Rev), included Mobile Solutions/Content (22.0%), SolarWinds (50.0%, 15.1x) and ANSYS (47.5%, Vertical – Other (17.5%), Systems Management 7.5x). (16.5%) and Healthcare (16.0%).

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Figure 12: SEG Software Index Median Metrics by Product Category

SEG Softw are Index Re ve nue EBIT DA EBIT DA YTD Stock EV/Revenue EV/EBITDA Category Grow th Grow th Margin Re tur n 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 4Q12 (TTM) 4Q12 (TTM) 4Q12 (TTM) 2012 Billing & Service Management 1.3x 1.3x 1.3x 1.4x 1.4x 5.6x 6.6x 6.9x 7.9x 8.2x 10.5% 2.8% 21.4% 18.5% Business Intelligence 2.4x 2.3x 2.5x 2.1x 2.2x 36.2x 39.3x 38.1x 33.2x 24.9x 10.0% 12.7% 8.4% (8.4%) Development Platforms 1.9x 2.3x 1.9x 2.0x 2.5x 8.5x 10.1x 9.2x 8.8x 9.5x 1.7% 0.3% 20.4% 6.9% Engineering & PLM 2.0x 2.6x 2.3x 2.6x 2.5x 13.5x 14.3x 11.5x 12.1x 11.8x 14.0% 21.4% 20.6% 24.4% Enterprise Resource Planning 2.8x 3.0x 2.4x 2.6x 2.7x 9.6x 10.2x 8.3x 9.1x 9.0x 2.9% 3.6% 29.5% 29.7% Financial & Accounting 2.6x 2.8x 2.7x 2.9x 2.9x 9.2x 9.8x 9.3x 9.7x 9.7x 9.9% 6.0% 29.2% 24.4% Gaming 1.4x 1.3x 1.0x 1.0x 1.0x 7.8x 7.1x 7.6x 9.1x 8.0x (5.9%) (7.1%) 12.2% (22.9%) Healthcare 3.0x 3.4x 3.0x 2.6x 2.6x 17.2x 16.8x 14.3x 14.1x 12.8x 16.0% 9.5% 20.7% (1.9%) IT Conglomerates 2.5x 3.1x 2.9x 2.8x 2.5x 8.6x 7.7x 7.3x 8.2x 7.8x 1.4% 0.3% 34.6% 4.8% Mobile Solutions/Content 2.9x 3.3x 3.1x 1.7x 1.7x 12.5x 30.9x 16.1x 14.5x 12.0x 22.0% (29.2%) 3.6% 0.0% Netw orking & Netw ork Performance 2.7x 3.1x 2.4x 2.5x 2.5x 15.6x 16.4x 14.9x 14.0x 14.0x 15.5% 17.7% 16.2% 4.6% Security 2.9x 3.2x 2.9x 3.2x 2.7x 14.2x 13.0x 10.2x 10.5x 11.2x 23.1% 13.3% 17.8% (4.6%) Storage, Data Management & Integration 2.2x 2.5x 2.4x 2.4x 2.3x 9.7x 10.3x 9.4x 9.2x 8.7x 5.4% 2.0% 21.0% 4.8% Supply Chain Management & Logistics 2.5x 2.6x 2.5x 2.5x 2.9x 12.0x 13.1x 12.6x 12.6x 14.5x 14.9% 29.7% 16.6% 38.4% Systems Management 5.5x 5.9x 5.9x 5.5x 4.5x 20.9x 22.2x 23.0x 22.3x 18.9x 16.5% 7.8% 25.4% 21.7% Vertical - Finance 3.9x 4.0x 4.3x 4.3x 3.6x 12.7x 11.8x 12.5x 14.3x 12.0x 11.9% 23.5% 35.1% 5.1% Vertical - Other 2.9x 3.2x 2.8x 2.7x 2.8x 15.1x 15.2x 15.6x 14.4x 15.6x 17.5% 8.3% 14.9% 2.8% Median 2.2x 2.7x 2.5x 2.5x 2.5x 11.7x 12.9x 11.3x 11.6x 11.9x 12.5% 7.1% 19.4% 8.5%

By contrast, nine product categories posted TTM decline of 29.2%. Yet the median tells only part of revenue growth in 4Q12 below the Index median the story. In times of rapid growth (remember of 12.5%. Most disappointing was Gaming, which Mobile Solutions was the fastest growing product posted a 5.9% decline in TTM revenue growth. category in 2012) companies react very The gaming industry is in the midst of significant differently. Gree has managed to grow in excess disruption brought upon by consumers rapidly of 100% and still generate a 50.7% EBITDA shifting from desktop to mobile and online margin, while Millennial Media ramped up gaming. The bleeding is widespread, with all but spending (-4% EBITDA) to achieve impressive one company in the category posting single digit growth of 75%. And others seemed to struggle or negative TTM revenue growth. Electronic Arts mightily with legacy business models (Smith was the lone bright spot, as it moved aggressively Micro, -64.0% EBITDA). – largely through acquisitions - to transform its business. EA posted 21.1% growth in 4Q12, PUBLIC SOFTWARE COMPANY MARKET nearly double its growth rate iin 4Q11. Other VALUATIONS: BY PRODUCT CATEGORY struggling product categories included: IT Conglomerates (1.4%), Development Platforms As we’ve noted in past reports, the median (1.7%) and Enterprise Resource Planning (2.9%). EV/Revenue multiples for a particular software category can be stagnant, or can fluctuate wildly Among all product categories in the SEG each quarter. As a result, software category Software Index, the highest median EBITDA rankings, measured by relative median valuations, margin (35.1%) was posted by providers of on- can also be consistent or volatile each quarter. premise Finance software which benefited from That axiom held true, once again, in 2012 YoY median EBITDA margin growth of 23.5%. (Figure 12). Companies in the IT Conglomerate category were close behind with 34.6% margins. The ability of Eight product categories achieved median Finance software companies to outpace their EV/Revenue multiples in 4Q12 above the median much larger IT Conglomerate peers in profitability SEG Software EV/Revenue of 2.5x. As it has for speaks to the pricing power and operational all of 2012, the Systems Management category efficiencies that can be achieved in vertical led the pack, closing 4Q12 with a median markets. EV/Revenue multiple of 4.5x. The group is led by companies at the forefront of virtualization and On the other end of the spectrum, Mobile cloud computing infrastructure and performance. Solutions/Content providers finished 4Q12 with Notable examples include SolarWinds the lowest EBITDA margins at 3.6%, a YoY

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(15.1x median EV/Revenue multiple) and Figure 13 and 14: SEG SaaS Index Key VMWare (7.9x). Statistics – Annually and Quarterly

SEG - SaaS: Median Metrics A distant second, and the only other category above 3.0x, was Vertical – Finance, closing 4Q12 Measure 2010 2011 2012 with a median EV/Revenue multiple of 3.6x which EV/Revenue 4.6x 5.1x 5.5x was no doubt bolstered by their leading EV/EBITDA 33.3x 36.3x 48.2x profitability. EV/Earnings 89.9x 69.6x 50.4x Current Ratio 1.5 2.0 2.0 Only six (35%) categories were able to increase Cash & Eq ($M) $38.0 $69.9 $88.2 their median EV/Revenue multiples YoY. Gross Profit Margin 68.3% 70.6% 70.9% Companies comprising the Development EBITDA Margin 10.2% 11.1% 9.4% Platforms category enjoyed the largest YoY uptick Net Income Margin 0.9% 2.0% 1.8% in median market valuation, closing 2012 at a TTM Revenue Growth 24.2% 25.7% 25.7% median 2.6x EV/Rev, a market improvement from TTM Total Revenue ($M) $104.7 $155.4 $169.0 1.9x in 4Q11. RedHat, the leading open source TTM Total EBITDA ($M) $12.2 $21.4 $18.8 platform provider, continues to lead the group with Debt / Equity Ratio 5.9% 3.7% 4.7% an EV/Revenue multiple of 7.0x.

Gaming posted the lowest median EV/Revenue SEG - SaaS: Median Metrics Measure 4Q11 1Q12 2Q12 3Q12 4Q12 multiple in 4Q12 among all product categories. EV/Revenue 4.6x 5.3x 5.0x 5.5x 4.8x The median 1.0x EV/Revenue investors ascribed EV/EBITDA 25.8x 33.6x 30.1x 46.9x 49.7x to the category was primarily due to YoY revenue EV/Earnings 81.0x 33.7x 38.0x 43.7x 36.8x and EBITDA margin declines noted above. Current Ratio 1.7 1.5 2.0 1.5 1.9 Cash & Eq ($M) $59.7 $60.7 $87.2 $72.1 $88.2 Gross Profit Margin 70.0% 70.9% 71.0% 71.1% 70.9% PUBLIC SOFTWARE AS A SERVICE (SAAS) EBITDA Margin 9.1% 9.9% 9.7% 8.4% 9.3% FINANCIAL PERFORMANCE Net Income Margin 1.5% -0.4% 0.4% -0.5% 0.6% TTM Revenue Growth 25.2% 27.8% 27.5% 26.7% 24.0% TTM Total Revenue ($M) $126.5 $134.9 $145.2 $150.4 $155.8 The median TTM revenue growth rate of the 29 TTM Total EBITDA ($M) $10.6 $8.3 $10.1 $8.1 $8.3 public companies comprising the SEG SaaS Debt / Equity Ratio 3.2% 2.4% 4.2% 5.3% 3.9% Index was 25.7% in 2012, identical to 2011, and slightly better than 2010’s annual growth rate of 24.2% (Figure 13). SaaS providers have Indeed, the TTM revenue growth rates of most struggled to recapture the heady days of 2008 public SaaS companies declined in 2012 YoY. when the annualized median growth rate was IntraLinks, which grew TTM revenue by 23.7% in 37.8% at year end and 2012 proved no exception. 4Q11 but by a scant 0.1% in 4Q12, had the After advancing to a median TTM revenue growth dubious distinction of experiencing the largest rate of 27.8% in 1Q12, median SaaS company TTM revenue growth rate deceleration among growth declined each successive quarter, SEG SaaS Index companies. Other SEG SaaS finishing 4Q12 at 24.0% (Figure 14). Index companies whiplashed by plunging YOY revenue growth rates included DealerTrack (- It wasn’t for lack of trying. The median TTM sales 55.7%), OpenTable (-67.3%), Zix (-62.1%), and marketing expense as a percent of revenue Responsys (-61.0%) and Constant Contact (- was 39.1% of total revenue as of the close of 24.2%) (Figure 16). 2012, a 72.2% YoY, jump (Figure 15). By contrast, the median TTM sales and marketing Figure 15: SEG SaaS Index Median Operating spend for on-premise public software companies Metrics was 22.9% of revenue in 4Q12. All but one of the SEG - SaaS: Operating Metrics SaaS 29 increased its sales and marketing YoY Measure 4Q11 1Q12 2Q12 3Q12 4Q12 budget, yet less than one third of these R&D $16.4 $18.6 $18.9 $24.7 $26.1 S&M $34.3 $38.9 $41.1 $44.8 $47.6 companies accelerated TTM revenue year-over- G&A $20.0 $21.0 $23.2 $27.2 $28.6 year. R&D (% of Revenue) 12.1% 13.0% 13.7% 14.1% 15.1% S&M (% of Revenue) 22.7% 27.7% 30.2% 36.9% 39.1% G&A (% of Revenue) 11.5% 12.2% 12.8% 15.1% 16.5%

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Figure 16: Public SaaS Companies

SEG SaaS Index EV/Revenue EV/EBITDA TTM Revenue Grow th EBITDA Margin Company Category 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 Athenahealth, Inc Vertically Focused 6.2x 6.8x 7.2x 8.2x 6.1x 36.8x 45.4x 48.0x 62.9x 49.0x 30.5% 32.0% 34.4% 34.2% 32.4% 16.9% 15.0% 15.1% 13.1% 12.5% Bazaarvoice, Inc Other SaaS - 11.0x 9.4x 7.2x 4.3x ------64.6% 62.6% 59.3% -20.9% -20.4% -19.4% -17.8% -17.9% Callidus Softw are Inc. Workforce Management 2.2x 2.9x 2.4x 2.0x 2.0x - - - - - 19.6% 18.2% 15.4% 15.0% 14.9% -7.3% -7.0% -10.3% -13.6% -14.8% Concur Other SaaS 6.4x 7.8x 8.0x 8.7x 7.8x 48.7x 68.7x 59.2x 69.2x 67.5x 19.3% 21.0% 24.0% 25.7% 25.8% 13.1% 11.4% 13.6% 12.6% 11.5% Constant Contact CRM & Marketing 2.6x 3.4x 2.3x 2.0x 1.3x 28.1x 33.6x 21.5x 19.5x 14.1x 25.2% 23.1% 21.4% 20.0% 19.1% 9.1% 10.2% 10.9% 10.4% 9.3% Cornerstone OnDemand Workforce Management 10.7x 11.3x 11.7x 12.9x 13.1x - - - - - 51.9% 67.0% 63.2% 72.2% 68.1% -30.9% -24.0% -25.5% -21.5% -24.1% DealerTrack Vertically Focused 2.9x 3.2x 3.1x 2.9x 2.9x 21.6x 21.1x 20.1x 19.5x 20.3x 37.9% 44.9% 39.2% 28.7% 16.8% 13.5% 15.3% 15.4% 15.1% 14.2% Demandw are, Inc. Other SaaS - 14.6x 12.5x 9.8x 10.0x - 386.9x 553.5x - - - 54.1% 48.7% 45.0% 42.3% 1.5% 3.8% 2.3% -3.5% -5.9% E2open, Inc ERP & Supply Chain - - - 4.6x 4.5x - - - 92.6x 76.6x - 7.5% - - 22.2% 9.8% 2.1% 1.6% 5.0% 5.9% Ebix Inc. Vertically Focused 4.1x 5.2x 4.1x 5.2x 3.7x 9.1x 11.6x 9.3x 12.2x 8.9x 24.6% 27.8% 22.8% 18.2% 18.4% 44.7% 45.1% 43.6% 42.9% 41.2% Ellie Mae Other SaaS 1.8x 2.2x 4.6x 7.8x 6.0x 21.5x 24.5x 29.8x 37.9x 24.6x 25.5% 28.4% 46.4% 67.0% 83.5% 8.6% 9.0% 15.4% 20.6% 24.4% Eloqua Limited CRM & Marketing - - - 5.3x 6.9x - - - 501.8x 5202.1x - 40.5% 44.1% 42.3% 39.1% -6.2% -0.7% 3.1% 1.1% 0.1% ExactTarget, Inc. CRM & Marketing - 7.9x 6.0x 5.0x 4.4x - - - - 158.4x - 54.5% - - 43.1% -6.1% -3.3% -2.1% -0.1% 2.8% IntraLinks Holdings Other SaaS 1.7x 1.7x 1.3x 1.4x 1.6x 10.9x 12.5x 13.8x 36.7x 467.2x 23.7% 15.5% 7.3% 2.9% 0.1% 15.9% 13.9% 9.0% 3.8% 0.4% LivePerson CRM & Marketing 4.6x 5.3x 5.8x 6.0x 4.3x 22.8x 25.8x 30.1x 37.2x 30.3x 20.8% 21.1% 21.3% 21.4% 19.7% 20.4% 20.5% 19.2% 16.2% 14.1% Medidata Solutions Other SaaS 2.0x 2.3x 3.0x 4.0x 4.4x 9.3x 11.2x 14.6x 22.6x 25.9x 17.9% 10.8% 14.5% 10.0% 12.1% 21.5% 20.4% 20.8% 17.9% 16.9% Netsuite ERP & Supply Chain 11.7x 12.8x 12.5x 14.2x 14.6x - - - - - 21.9% 22.4% 24.6% 26.3% 28.4% -7.3% -7.4% -6.8% -5.6% -5.2% OpenTable, Inc. Other SaaS 6.6x 7.2x 5.9x 5.9x 6.1x 23.5x 24.0x 19.8x 20.7x 20.3x 52.3% 40.9% 30.3% 22.0% 17.1% 28.1% 30.2% 29.8% 28.5% 29.8% Qualys, Inc. Other SaaS - - - 4.8x 4.8x - - - 57.6x 50.5x 13.9% 16.5% - - - 8.8% 10.8% 9.7% 8.3% 9.5% RealPage Vertically Focused 7.5x 6.7x 4.9x 6.1x 5.1x 64.4x 59.5x 39.8x 46.7x 45.8x 39.8% 37.0% 34.4% 32.0% 27.7% 11.6% 11.3% 12.2% 13.1% 11.1% Responsys CRM & Marketing 2.7x 3.4x 3.4x 2.7x 1.4x 14.0x 21.7x 20.3x 20.3x 11.4x 54.1% 43.4% 36.3% 27.2% 21.1% 19.0% 15.7% 16.6% 13.1% 12.1% Salesforce.com CRM & Marketing 7.9x 7.8x 8.2x 7.4x 7.3x 182.8x 166.0x 189.2x 167.9x 235.8x 34.6% 36.8% 37.7% 36.5% 36.1% 4.3% 4.7% 4.3% 4.4% 3.1% SciQuest ERP & Supply Chain 5.3x 5.0x 5.0x 5.4x 4.7x 38.0x 37.1x 41.4x 47.1x 50.7x 22.0% 25.8% 23.3% 22.0% 21.4% 14.0% 13.5% 12.1% 11.6% 9.4% Service-now .com Other SaaS - - 17.4x 18.4x 16.3x - - - - - 113.8% - - - - 13.0% -2.9% -6.7% -10.4% -12.7% SPS Commerce ERP & Supply Chain 4.3x 4.7x 4.9x 5.6x 6.6x 68.4x 68.5x 68.5x 67.2x 78.0x 26.7% 30.0% 31.6% 31.5% 30.4% 6.3% 6.9% 7.1% 8.4% 8.5% The Ultimate Softw are Group, Inc. Workforce Management 6.3x 6.5x 7.0x 8.3x 8.0x 71.3x 66.0x 71.3x 80.2x 69.6x 17.0% 18.2% 19.6% 21.0% 21.8% 8.8% 9.9% 9.9% 10.4% 11.5% Vocus CRM & Marketing 2.8x 2.6x 3.0x 3.3x 2.6x 672.6x 131.1x 284.2x 407.4x 233.1x 18.9% 18.7% 21.0% 29.9% 39.7% 0.4% 2.0% 1.1% 0.8% 1.1% Workday, Inc. Workforce Management - - - - 33.2x ------53.8% - - - -67.3% -51.4% -43.4% -38.1% -35.7% Zix Corporation Other SaaS 4.2x 4.6x 3.9x 3.5x 3.6x 14.8x 14.6x 12.5x 11.3x 12.7x 31.7% 15.4% 12.4% 11.1% 12.0% 28.6% 31.3% 31.2% 30.7% 28.1% Median: 4.3x 5.3x 5.0x 5.5x 4.8x 25.8x 33.6x 30.1x 46.7x 49.8x 25.2% 27.8% 27.5% 26.7% 24.0% 9.1% 9.9% 9.7% 8.4% 9.3%

There were, of course, some standouts that (41.2%), Ellie Mae (24.4%), OpenTable (29.8%) managed to achieve TTM revenue growth greater and Zix Corporation (28.1%). than 50% in 4Q12, including Ellie Mae (83.5%), Cornerstone OnDemand (68.1%), Bazaarvoice PUBLIC SOFTWARE AS A SERVICE (SAAS) (59.3%). Cornerstone and Bazaarvoice spurred COMPANY MARKET VALUATIONS growth by investing 63.8% and 43.8% of revenue, respectively, in sales and marketing. Ellie Mae, The median market valuation ( EV/Revenue) of with significantly greater revenue growth than the SEG SaaS Index advanced to 5.5x in 2012 either Cornerstone or Bazzarvoice, accomplished from 5.1x in 2011, and 4.6x in 2010 (Figure 13). the feat despite spending only 18.4% of its The 5.5x median multiple was the highest since revenue on sales and marketing. On a YOY the heady, pre-Recession days of 2007, when basis, Ellie Mae’s TTM revenue growth public SaaS companies boasted a median 6.4x skyrocketed to 227.5% in 4Q12 from 25.5% in EV/Revenue multiple. 4Q11. The quarterly trend was less encouraging. After As for profitability, 2012 was a mixed bag. The peaking at 5.5x EV/Rev in 3Q12, the median good news: Gross profit margins of public SaaS market valuation of the SEG Software Index fell to companies continued to improve in 2012, 4.8x by year end, as fiscal cliff-weary investors increasing to 70.9% in 2011’s 70.6% and 68.3% opted for slower growing but less risky in 2010. As public SaaS companies have grown alternatives (Figure 14). As example, the median in size (median TTM revenue was $169.0M vs. market valuation of larger, more profitable, slower $104.7M in 2010), they have begun to price growing on-premise software companies held subscriptions more astutely, and acquire and steady at 2.5x EV/Rev throughout 2012. deploy infrastructure and resources more cost- effectively. But the concomitant growth in sales Still, a good number of public SaaS companies and marketing expense took its toll on EBITDA. managed to retain investor confidence and were rewarded with market valuations that exceeded In 2012, the median public SaaS company 2007’s lofty median valuation of median 7.5x EBITDA margin declined to 9.3% from 11.1% in EV/Revenue. Workday led the pack, posting an 2011 and 10.2% in 2010. Four SaaS companies, astounding EV/Rev multiple of 33.2x in 4Q12. however, were able to achieve TTM EBITDA Clearly, investors are resonating with Workday’s margins by the close of Q4 which were twice TTM revenue growth (53.7%) despite their greater than the SEG SaaS Index median: Ebix negative -35.7% year end EBITDA margin.

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Others boasting impressive EV/Revenue market Netsuite (24.8%), Cornerstone OnDemand multiples include Service-now (16.3x), Netsuite (22.4%) and Concur (21.9%) (Figure 16). (14.6x), Cornerstone OnDemand (13.1x), DemandWare (10.0x), The Ultimate Software Figure 18: EV/Revenue Multiple vs. EBITDA Group (8.0x), Concur (7.8x), Salesforce.com Margin (7.3x), Eloqua (6.9x) and SPS Commerce (6.6x). All but two of these Street stars (The Ultimate 14.0x 13.1x

Software Group and Concur) reported TTM 12.0x revenue growth above the SaaS Index median of 24.0% and EBITDA margins below 9.3% median. 10.0x 8.0x 6.0x EV/Revenue Indeed, there was a clear, causal relationship in 6.0x 4.6x 4.4x 3.7x 4Q12 between SaaS company market valuations 4.0x and TTM revenue growth rates (Figure 17). Median Public SaaS companies with TTM revenue growth 2.0x rates between 0%-10% registered a median 0.0x <= 0% > 0% > 10% > 20% > 30% EV/Revenue of 1.6x, while those generating TTM <= 10% <= 20% <= 30% revenue growth rates above 40% boasted a EBITDA Margins median market valuation of 8.0x EV/Revenue. By contrast, there was very little relationship between EBITDA margins and public SaaS company PUBLIC SOFTWARE AS A SERVICE (SAAS) market valuations (Figure 18). As testament, FINANCIAL PERFORMANCE: BY PRODUCT SaaS providers with negative EBITDA margins CATEGORY boasted a median EV/Revenue multiple of 13.7x, compared to a median EV/Revenue of 3.7x for With 29 public companies by the close of 2012, those with EBITDA margins above 30%. the SEG SaaS Index now has sufficient critical mass to track financial performance trends in four Figure 17: EV/Revenue Multiple vs. TTM distinct SaaS product categories: CRM & Revenue Growth Rate Marketing, ERP & Supply Chain, Workforce Management and Vertically Focused providers 9.0x 8.0x (Figure 19). 8.0x 6.8x 7.0x CRM & Marketing SaaS providers posted a 6.0x 5.1x median 36.1% TTM revenue growth at the close 5.0x of 4Q12, the highest among all categories, and EV/Revenue 3.6x 4.0x roughly 50% higher than the SaaS median. 3.0x

Median ExactTarget, a 2012 IPO, led the pack with TTM 2.0x 1.6x revenue growth of 43.1%. 1.0x 0.0x <= 0% > 0% > 10% > 20% > 30% > 40% Vertically Focused SaaS providers grew TTM <= 10% <= 20% <= 30% <= 40% revenue by a median 23% in 4Q12, while TTM Revenue Growth achieving a median 14.2% EBITDA margin, The “Most Improved Market Valuation” award for considerably greater than any other SaaS 2012 went to SPS Commerce, which touted an category. Ebix, a provider of e-commerce EV/Revenue multiple of 6.6x in 4Q12, up 53.5% solutions to the insurance industry, was the most YoY. The stars aligned for supply-chain provider profitable (41.2% EBITDA margin), though it grew SPS, which reported accelerated TTM revenue 4Q TTM revenue only 18.4%, well below the growth (>30%) and a respectable EBITDA margin overall SaaS median. (7.7%) for 2012 and is no doubt attracting investor attention following SAP’s acquisition of SaaS rival Public SaaS companies in the Workforce Ariba in May 2012. Others that notably improved Management category spent heavily on sales and their YOY market valuations at the close of 2012 marketing to ramp customer acquisition, racked included The Ultimate Software Group (27.0%), up a median negative

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Figure 19: Public SaaS Companies by Category

SEG SaaS Index EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin Category 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 CRM & Marketing 3.7x 5.3x 5.8x 5.2x 4.3x 102.8x 78.4x 109.6x 167.9x 195.8x 25.2% 36.8% 28.8% 28.5% 36.1% 4.3% 4.7% 4.3% 4.4% 3.1% ERP & Supply Chain 5.3x 5.0x 5.0x 5.5x 5.7x 53.2x 52.8x 55.0x 67.2x 76.6x 22.0% 24.1% 24.6% 26.3% 25.3% 8.0% 4.5% 4.4% 6.7% 7.2% Vertically Focused 5.1x 6.0x 4.5x 5.7x 4.4x 29.2x 33.2x 29.9x 33.2x 33.0x 34.2% 34.5% 34.4% 30.3% 23.0% 13.5% 15.3% 15.4% 15.1% 14.2% Workf orce Management 6.3x 6.5x 7.0x 8.3x 10.5x 71.3x 66.0x 71.3x 80.2x 69.6x 19.6% 36.0% 19.6% 21.0% 21.8% -19.1% -15.5% -17.9% -17.6% -19.4% Median: 4.6x 5.3x 5.0x 5.5x 4.8x 25.8x 33.6x 30.1x 46.9x 49.7x 25.2% 27.8% 27.5% 26.7% 24.0% 9.1% 9.9% 9.7% 8.4% 9.3%

EBITDA of -19.4%, but managed to grow 4Q PUBLIC INTERNET COMPANY FINANCIAL median TTM revenue by only 21.8% the lowest PERFORMANCE growth rate among our four SaaS tracking categories. Public companies comprising the SEG Internet Index grew TTM revenue a median 22.2% in After six consecutive quarters of accelerating 2012, a decline from 2011’s median TTM growth revenue growth, the median TTM revenue growth of 25.9% but a vast improvement over 2010’s of public software companies in our ERP & 19.8% growth rate (Figure 20). On a quarterly Supply Chain product category declined slightly in basis, the SEG Internet Index reached a six year 4Q12 to 25.3% from 26.3% the prior quarter. high of 30% in 2Q12 before dropping to a median TTM growth rate of 22% in 4Q12 (Figure 21). PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS: BY PRODUCT Figures 20 and 21: SEG Internet Index Key CATEGORY Statistics – Annually and Quarterly

Despites their lackluster financial performance SEG - Internet: Median Metrics relative to other categories, SaaS providers in the Measure 2010 2011 2012 Workforce Management category finished 4Q12 EV/Revenue 2.3x 2.5x 2.1x with a whopping 10.5x median EV/Revenue EV/EBITDA 13.5x 14.9x 12.9x multiple (Figure 19). The category was bolstered EV/Earnings 24.3x 26.3x 25.0x by the stellar market valuations of Workday Current Ratio 2.4 2.5 2.4 (33.2x) and Cornerstone OnDemand (13.1x). Cash & Eq ($M) $115.8 $141.6 $141.5 Indeed, the median EV/Rev multiple of the SaaS Gross Profit Margin 65.5% 66.9% 67.2% Workforce Management category grew every quarter in 2012. It’s obvious investors have taken EBITDA Margin 13.7% 14.3% 12.7% note of the potential these public SaaS companies Net Income Margin 4.2% 4.4% 4.5% have to displace legacy on-premise HR solutions - TTM Revenue Growth 19.8% 25.9% 22.2% as well as the breathtaking M&A multiples other TTM Total Revenue ($M) $244.7 $348.2 $376.2 SaaS WFM providers have garnered. TTM Total EBITDA ($M) $31.5 $46.3 $39.8 Debt / Equity Ratio 9.6% 16.5% 15.9% Although public SaaS companies in the CRM & Marketing category managed to grow TTM SEG - Internet: Median Metrics Measure 4Q111Q122Q123Q124Q12 revenue by a median 36.1% in 2012, the product EV/Revenue 2.6x 2.2x 2.2x 1.9x 2.1x category ended 2012 with a median TTM market EV/EBITDA 12.5x 13.8x 12.6x 13.3x 13.3x valuation of 4.3x EV/Rev, the lowest among our EV/Earnings 22.3x 26.5x 23.9x 27.9x 26.1x four SaaS categories. Since CRM & Marketing Current Ratio 2.5 2.3 2.6 2.5 2.4 Cash & Eq ($M) $127.8 $140.2 $136.6 $122.6 $136.1 was the first real SaaS product category, Gross Profit Margin 66.7% 67.4% 67.6% 67.6% 66.4% investors may have wrongly concluded that EBITDA Margin 14.8% 13.4% 13.3% 12.9% 12.7% despite the year-end surge in revenue growth, Net Income Margin 3.0% 4.3% 4.8% 4.3% 3.8% there’s insufficient upside in CRM & Marketing TTM Revenue Growth 23.5% 30.0% 27.6% 24.0% 22.0% TTM Total Revenue ($M) $338.1 $348.0 $353.6 $370.5 $379.8 compared to “sexier” categories such as WFM TTM Total EBITDA ($M) $41.8 $40.6 $42.9 $47.0 $39.7 and Vertical SaaS. Debt / Equity Ratio 17.6% 15.3% 14.5% 13.5% 19.2%

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But even the Q4 growth rate was impressive Figure 22: SEG Internet Index Historical considering the median TTM revenue of the SEG Profitability Internet Index and the SEG Software Index in Q4 Gross Profit Margin EBITDA Margin were very similar ($379.8 million vs. $401.3 80.0% million), but public software companies managed 66.7% 67.4% 67.6% 67.6% 66.4% 70.0% 63.2% 65.2% to grow TTM median revenue by only 12.5%. Of 60.3% the twenty public Internet companies with TTM 60.0% revenue of $1 billion or more, more than one-half 50.0% increased their TTM revenue by more than 20% in 40.0% 4Q12. 30.0% 18.1% 16.4% 16.4% 20.0% 14.8% 13.4% 13.3% 12.9% 12.7% Though a good many faltered in the final two 10.0% quarters of 2012, 35 of 93 public Internet 0.0% companies reported median TTM revenue growth 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 of 30% or greater at year end. The fastest growing Internet companies included many recent public market entrants, as well a few more Still, one out of nine public Internet companies established players, including Qihoo (130.0% achieved TTM EBITDA margins of 40% or greater year-end TTM revenue growth), YY (108.2%), by year end, including ChangYou.com (65.8%), Youku (98.3%), LinkedIn (91.7%), Zillow (83.7%), Giant Interactive (64.6%), Baidu (57.7%), Facebook (73.8%), Groupon (69.6%), Trulia VeriSign (55.7%), Netease (47.9%), Mail.ru Group (54.0%), Brightcove (43.1%) and Carbonite (44.7%), Yandex (44.0%), Tencent Holdings (42.0%). (42.6%), TripAdvisor (42.1%) and Akamai Technologies (40.0%). Note, seven of the ten are Not every public Internet company fared well. based outside the U.S., and have both Sixteen companies comprising the SEG Internet extraordinary market opportunities and pricing Index posted negative TTM revenue growth in Q4, power. Five of the ten derive most of their led by Mecox (-24.0%), WebMD (-15.4%), revenue from online gaming, which is proving far QuinStreet (-13.1%), and TheStreet.com (- more lucrative than box games sold through 12.0%). traditional retail channels.

As for profitability, after rising steadily since 2009, All that said, we must end on a sobering note. the median EBITDA margin of public Internet For every highly profitable (40%+ EBITDA) companies declined every quarter of 2012, ending company in the SEG Internet Index, there are two 2012 at 12.7% margin (Figure 21). The steady with no profitability at all. The five least profitable decline in median EBITDA began in 2Q11 after public Internet companies in our Index were the Internet’s median EBITDA margin peaked at a Renren (-44.0%), Zynga (-37.0%), Bluefly (- record 18.1%. Yet during this seven quarter 23.8%), Envivio (-17.2%) and Carbonite (-15.0%). period of EBITDA margin decline, the median gross profit margin of public Internet companies Figure 23: SEG Internet Index Median Operating improved steadily, from 60.3% to 66.4% Metrics

(Figure 22). SEG - Internet: Operating Metrics Measure 4Q111Q122Q123Q124Q12 Why has the median Internet EBITDA margin R&D $33.5 $36.5 $39.9 $40.4 $41.5 shrunk 5.4%, while the median gross profit margin S&M $59.6 $65.0 $69.2 $73.4 $78.5 improved 6.1%? Our Internet company operating G&A $29.2 $32.9 $33.2 $34.0 $37.5 R&D (% of Revenue) 8.5% 9.4% 10.1% 10.6% 11.3% data, which we’ve collected since 4Q11, tells the S&M (% of Revenue) 17.1% 20.6% 23.5% 24.1% 24.7% story. Public Internet companies have increased G&A (% of Revenue) 9.4% 10.0% 10.6% 11.3% 11.7% spending on sales and marketing by a whopping 44% since 4Q11; by the close of 4Q12 sales and marketing spending was 24.7% of total revenue (Figure 23). Although not as drastically, public Internet companies also spent more on R&D and G&A functions during the same time period. 14| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

Figure 24: SEG Internet Valuation and Financial Performance by Size (TTM Revenue) SEG Internet Index Companies EV/Revenue EV/EBITDA Revenue Growth EBITDA Margin 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 4Q12 (TTM) 4Q12 (TTM) Revenue Greater Than $1 billion 3.5x 3.4x 3.3x 1.9x 1.8x 16.7x 18.6x 21.1x 19.4x 16.3x 23.6% 22.1% Revenue Between $200 million and $1 billion 2.4x 2.1x 1.9x 2.2x 2.1x 10.8x 11.7x 10.2x 10.1x 9.9x 22.2% 13.3% Revenue Between $100 million and $200 million 2.5x 2.5x 2.2x 1.7x 2.4x 9.7x 10.4x 8.3x 9.9x 9.7x 19.7% 7.6% Revenue Less Than $100 million 3.2x 3.2x 3.1x 1.8x 1.7x 19.3x 17.0x 18.5x 17.4x 17.7x 14.9% -14.7%

PUBLIC INTERNET COMPANY MARKET same linear relationship between revenue growth VALUATIONS and EV/Revenue market valuation.

The median EV/Revenue multiple for the 93 There was a much clearer, casual relationship public companies comprising the SEG Internet between an Internet providers’ median profitability Index declined to 2.1x in 2012 from 2.5x in 2011 and their median EV/Revenue multiple (Figure and 2.3x in 2010 (Figure 20). 26). Beginning with companies that had EBITDA margins between 0% - 10%, median EV/Revenue Analyzed quarterly, the median EV/Revenue multiples increased consistently with every Internet multiple peaked in 4Q11 before dropping additional 10% of EBITDA margin. Highly steeply in 1Q12 where it mostly remained for the profitable public Internet companies with 40%+ balance of the year (Figure 21). Internet EBITDA margins had a median EV/Revenue providers of every size suffered from declines in multiple of 6.5x in 4Q12, nearly 2x higher than market valuation, but the largest (revenue greater companies with EBITDA margins between 30% - than $1 billion) and smallest (revenues less than 40%. $100 million) public Internet companies were hardest hit (Figure 24). Figure 25: EV/Revenue Multiple vs. TTM Revenue Growth Rate Why did the stock of larger, seemingly less risky public Internet companies sell off so strongly from 6.0x 5.2x 4Q11 to 4Q12? A fair number of public Internet 5.0x companies with revenues greater than $1 billion continue to have revenue models of questionable 4.0x 3.1x sustainability in the minds of many investors and 3.0x EV/Revenue 2.3x analysts. Some have faltered badly, prompting 1.9x 2.0x

investors to flee and their market valuations to Median plummet. Examples include: Facebook ($4.6 1.0x 0.8x 0.7x billion TTM revenue), Netflix ($3.5 billion TTM 0.0x <= 0% > 0% > 10% > 20% > 30% > 40% revenue), Groupon ($2.2 billion TTM revenue) <= 10% <= 20% <= 30% <= 40% and Zynga ($1.3 billion TTM revenue). TTM Revenue Growth Collectively, the median EV/Revenue multiple of the four declined from 8.6x in 4Q11 to 0.8x in Figure 26: EV/Revenue Multiple vs. 4Q12. Excluding the four, the remaining 16 public EBITDA Margin Internet companies with $1 billion+ in revenue 7.0x finished 4Q12 with a median EV/Revenue of 2.9x. 6.5x

6.0x Clearly, it was growth rate not size that most 5.0x impressed Internet investors in 2012. Public 4.0x Internet companies with TTM revenue growth 3.3x EV/Revenue rates of 40%+were awarded a median 3.0x 2.7x

EV/Revenue multiple of 5.2x in 4Q12 (Figure 25). Median 2.0x 1.8x For those with less stunning growth, median 1.1x 1.1x EV/Revenue multiples were all over the map. 1.0x 0.0x <= 0% > 0% > 10% > 20% > 30% > 40% Unlike their SaaS and on-premise software peers, <= 10% <= 20% <= 30% <= 40% public Internet companies did not benefit from the EBITDA Margins

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PUBLIC INTERNET COMPANY FINANCIAL (Commerce and Services) product categories are PERFORMANCE: BY PRODUCT CATEGORY clearly focused on improving their profitability, posting YoY EBITDA margin growth of 19.3% and Among all public Internet companies, the Social 17.7%, respectively. category racked up the highest median TTM revenue growth rate (57.8%) in 4Q12 (Figure 27). Facebook’s plummeting EV/Revenue multiple All eight companies in the category grew TTM post-IPO has not universally motivated companies revenue at least twice the overall median Internet within the Social category to improve profitability. growth rate of 22% in 4Q12. Three of the Collectively, the median EBITDA margin growth remaining seven beat Q4’s median growth rate: was -10.1%. However, there are a number of Ad Tech & Lead Gen (32.9%), Services (32.7%) companies who have taken note, and radically and Gaming (25.1%). improved profitability: LinkedIn (82.2% YoY EBITDA margin growth) and Mail.ru (72.1% YoY Gaming achieved what was arguably the best EBITDA margin growth). overall financial performance among all Internet categories in 4Q12, posting an impressive 25.1% PUBLIC INTERNET COMPANY MARKET median revenue growth rate and a stellar median VALUATIONS: BY PRODUCT CATEGORY EBITDA margin of 42.6%. While traditional retail gaming has slowed markedly, consumer driven The public market valuations of companies social and mobile gaming has surged. Reflecting comprising the SEG Internet Index varied widely a far less costly and much more efficient by Internet category in 4Q12 (Figure 27). Social distribution model, the EBITDA of these online Media led the pack, closing 4Q12 with a median gaming companies made the 12.2% EBITDA of EV/Revenue multiple of 7.7x, down sharply from their retail focused counterparts pale by 12.4x in 4Q11. Companies with market comparison. Look for the disparity among retail valuations exceeding the median Internet vs. online gaming developers to grow, given the EV/Revenue multiple included LinkedIn (13.1x), burgeoning popularity of social, mobile and smart Mail.ru Group (9.5x), Yelp (9.0x) and Facebook phone gaming. (8.6x)

Infrastructure, Commerce and Service were the Despite strong financial performance, the Gaming only three categories to post median EBITDA product category posted a lackluster median margins below the SEG Internet Index median in EV/Revenue multiple of 2.0x in 4Q12, slightly 4Q12. The profitability of Internet eCommerce below the median of the Index. The drop can be providers has historically lagged other categories attributed in part to the drag Zynga has been on due to the significant revenue sharing inherent in other companies in the category as investors their business model, as well as sometimes rethink value in the context of rising competition. significant infrastructure related expenses. As testament, Amazon posted an EBITDA margin of 5.7% in 4Q12. Companies within two of the three

Figure 27: SEG Internet Index Median Metrics By Product Category

SEG - Internet Index Revenue EBITDA EBTIDA YTD EV/Revenue EV/EBITDA Gr ow th Gr ow th Margin Stock Category (TTM) (TTM) (TTM) Return 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 4Q12 4Q12 4Q12 2012 Ad Tech & Lead Gen 2.8x 3.0x 2.3x 1.8x 2.1x 11.9x 14.1x 11.4x 13.3x 12.0x 32.9% 17.9% 14.1% -9.0% Commerce 1.0x 0.9x 0.7x 0.8x 1.2x 13.0x 16.6x 18.8x 15.1x 15.1x 11.8% 19.3% 8.4% 1.5% Content & Media 1.6x 1.8x 1.6x 1.3x 1.4x 10.5x 10.4x 10.1x 10.8x 10.9x 10.5% 6.0% 14.1% 12.0% Gaming 3.1x 3.2x 3.4x 2.1x 2.0x 6.1x 4.1x 4.0x 3.4x 3.7x 25.1% 14.9% 42.6% 1.5% Infrastructure 1.8x 1.9x 1.8x 0.9x 1.0x 12.5x 14.2x 14.1x 11.9x 11.8x 12.5% -13.9% 7.5% -1.4% Services 3.9x 2.3x 1.9x 1.9x 2.4x 37.4x 18.1x 16.9x 16.4x 17.7x 32.7% 17.7% 8.7% -5.8% Social 12.4x 13.6x 13.0x 8.7x 7.7x 39.3x 33.6x 30.4x 29.3x 36.4x 57.8% -10.1% 12.9% -7.3% Travel 5.4x 4.7x 3.1x 2.5x 3.5x 15.8x 15.0x 15.5x 16.5x 16.0x 21.8% -0.2% 19.1% -6.6% Median: 2.6x 2.2x 2.2x 1.9x 2.1x 12.5x 13.8x 12.6x 13.3x 13.3x 22.0% 9.1% 12.7% -0.5%

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Three categories closed the fourth quarter with Figure 28: Historical Number of Software IPOs median EV/Revenue multiples significantly lower than the SEG Internet Index median: Commerce 30 (1.2x), Content & Median (1.4x) and Infrastructure 26 26 (1.0x). Lackluster revenue growth and EBITDA 25 22

margins, well below the Internet median, is surely IPOs 20 to blame here. 16 15 Software 13 13

of INITIAL PUBLIC OFFERINGS 10 10 8 6

Number 5 The software IPO market in 2012, following a 5 strong first half, slowed dramatically in the final six 2 months in response to extraordinary market 0

volatility. Despite the second half slowdown, 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012’s year-end tally of 26 software/SaaS/Internet IPOs still managed to beat 2011’s total of 22 and matched 2007’s pre-Recession high mark (Figure 28).

Figure 29: Software, SaaS and Internet IPOs in 2012

EV / YTD Company (Ticker) Category IPO Date Net Proceeds Enterprise Value EV / Rev First Day Return EBITDA Return Software Category Palo Alto Networks, Inc. Security 7/20/12 $183,084,340 $3,448,228,130 15.7x 430.8x 26.5% 27.4% (NYSE:PANW) ServiceNow, Inc. Systems Management 6/28/12 $150,660,000 $2,859,000,000 16.9x n/a 36.7% 66.8% (NYSE:NOW) Proofpoint, Inc. Security 4/20/12 $62,021,700 $409,851,640 4.7x n/a 8.3% (5.3%) ( NA SDA Q:PFPT) Splunk, Inc. Storage, Data 4/19/12 $197,740,070 $3,296,700,400 27.3x n/a 108.7% 70.7% (NASDAQ:SPLK) Management & Integration Millennial Media Inc Mobile Solutions/Content 3/29/12 $111,228,000 $1,855,543,000 17.9x n/a 92.3% (3.6%) (NYSE: MM) Brightcove Inc. Infrastructure 2/17/12 $51,150,000 $368,043,500 5.8x n/a 30.0% (17.8%) (NASDAQ:BCOV) Synacor, Inc Infrastructure 2/13/12 $25,200,000 $127,286,620 1.4x 19.0x 2.8% 9.4% (NA SDA Q:SY NC) FX Alliance Vertical - Finance 2/9/12 $58,032,000 $270,796,960 2.3x 5.9x 11.1% 83.3% (NYSE: FX) AVG Technologies N.V. Security 2/3/12 $59,520,000 $1,055,689,120 3.9x 12.6x (18.2%) (1.1%) (NYSE: AVG) Greenway Medical Technologies, Inc Healthcare 2/2/12 $50,116,150 $348,719,740 3.3x 64.1x 30.0% 53.6% (NYSE: GWAY) Guidewire Software, Inc. Vertical - Other 1/25/12 $106,996,500 $842,377,160 4.4x 32.5x 31.7% 128.6% (NYSE: GWRE) Software Category Median: $62,021,700 $842,377,160 4.7x 25.8x 30.0% 27.4% SaaS Category Workday Workforce Management 10/12/12 $598,780,000 $1,991,185,340 10.0x n/a 73.9% 94.6% (NYSE: WDAY) Eloqua, Inc. CRM & Marketing 8/1/12 $74,865,000 $832,600,000 9.8x 925.1x 12.1% 105.1% (NASDAQ:ELOQ) Qualys, Inc. Other SaaS 9/27/12 $74,772,000 $382,200,000 4.6x 55.0x 18.0% 23.3% (NASDAQ:QLYS) E2open, Inc. ERP & Supply Chain 7/26/12 $52,312,500 $341,222,400 5.3x 324.7x (9.3%) (5.6%) ( NA SDA Q:EOPN) ExactTarget, Inc. CRM & Marketing 3/22/12 $161,500,000 $1,576,190,470 7.6x n/a 32.2% 5.3% ( NY SE: ET) Demandware, Inc. Other SaaS 3/15/12 $81,840,000 $737,949,470 13.1x 346.8x 47.4% 70.8% (NYSE:DWRE) Bazaarvoice, Inc Other SaaS 2/24/12 $100,440,000 $950,055,560 10.1x n/a 37.6% (22.1%) (NASDAQ:BV) SaaS Category Median: $81,840,000 $832,600,000 9.8x 335.7x 32.2% 23.3% Internet Category YY Social 11/21/12 $76,167,000 $478,000,020 4.5x 34.0x 7.7% 35.8% (Nasdaq: YY) Shutterstock Content & Media 10/11/12 $71,145,000 $696,229,080 4.5x 25.4x 27.4% 52.9% (NYSE:SSTK) Lifelock Services 10/6/12 $129,735,000 $1,064,000,000 4.2x 53.2x (11.1%) (9.7%) (NYSE:LOCK) Trulia, Inc. Services 9/19/12 $79,050,000 $611,700,000 11.9x n/a (51.8%) (4.5%) (NYSE:TRLA) Kayak Software Corporation Travel 7/20/12 $84,630,000 $1,207,198,770 4.5x 23.4x 27.6% 52.8% (NASDAQ:KYAK) Facebook, Inc. Social 5/18/12 $6,764,760,000 $78,538,839,520 19.4x 36.9x 0.6% (29.9%) (NASDAQ:FB) E nvi vio, Inc . Infrastructure 4/25/12 $54,405,000 $199,919,110 3.9x 90.3x (5.7%) (81.1%) (NASDAQ:ENVI) Yelp, Inc. Social 3/2/12 $99,045,000 $1,449,946,790 17.4x n/a 63.9% 25.7% (NYSE:YELP) Internet Category Median: $81,840,000 $880,114,540 4.5x 35.4x 4.2% 10.6%

Total Median: $77,608,500 $785,274,735 5.0x 36.9x 22.7% 16.3%

Financial data is the latest available from CapIQ on offering date. ha First day return compares listed offering price to first day close. O2 su for

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The breakdown of these 26 new entrants: Eleven VENTURE CAPITAL INVESTMENT on-premise software, seven SaaS, and eight Internet companies (Figure 29). Collectively, Venture capital investments across all U.S. these 26 IPOs raised over $9.5 billion, ranging industry sectors in 2012 declined YoY in both individually from $25.2 million (Synacor) to $6.76 volume and total dollars invested. According to billion Facebook. Their median EV/Revenue the PricewaterhouseCoopers / Thompson Venture multiple on the first day of trading was a whopping Economics / National Venture Capital Association 5.0x. MoneyTree™ Survey, there were 3,698 VC equity financings in the U.S. during 2012, a 6% decrease Three of the newly public eleven on-premise from 2011 (Figure 30). The aggregate investment software companies were Security software fell 10% to $26.5 billion from $29.5 billion a year providers (Palo Alto Networks, Proofpoint and earlier, while the average investment increased AVG Technologies); three served vertical markets 17.3% to $7.7 million from $6.6 million in 2010. (Guidewire, FX Alliance and Greenway Medical Technologies); and the balance provided Figure 30: U.S. Venture Capital Investments and solutions for a host of other categories, including Total Dollars Invested Across Industries Infrastructure, Storage and Data Management, Systems Management and Mobile. The seven Total VC Investment Dollars Number of VC Investments

new SaaS entrants spanned the usual Workforce 4,500 $35 Management, CRM and ERP SaaS categories, 4,000 $30

but also included SaaS providers of marketing billions) 3,500

$25 ($ feedback/analytics (Bazaarvoice) and on-demand 3,000 $20 ecommerce applications (Demandware). Investments 2,500

VC Invested

2,000 $15 of 1,500 How did investors in these 26 newly listed $10 Dollars Software, SaaS and Internet companies fare by 1,000 VC Number

$5 the last day of trading in 2012? The median stock 500 price of the sixteen that debuted in the first half 0 $0 Total

increased by only 7.3% by year end. The ten that 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 listed in the second half fared better, posting a 31.6% median return. On-premise software IPOs finished Q4 with the highest median return, 27.4%, boosted by five stocks that were up 50% Dollars invested dropped across all lifecycle or more. The newly minted public SaaS stages in 2012. The biggest decline in both companies were a close second, finishing the dollars invested and companies funded was in year with a median stock return of 23.3%, boosted seed stage investments, where $725 million by Eloqua’s 105.1%, Workday’s 94.6% and (down 38% YoY) was invested in 274 companies DemandWare’s 70.8%. Internet companies were (down 31% YoY). not nearly as successful, finishing with a median YTD stock return of 10.6%, far below the 24.5% Figure 31: U.S. Venture Capital Investments and median of the 26 new entrants. Total Dollars Invested in the Software Industry

Total VC Investment Dollars Number of VC Investments Across all categories, Guidewire, a software 1,400 $12 provider focused on the property and casualty insurance vertical, posted the highest YTD stock 1,200 $10 billions)

1,000 ($ price performance, advancing 128.6%. The worst $8 of the group was Envivio, a provider of IP video 800 Investments $6 VC Invested

processing and distribution solutions, closing with 600 of YTD stock return of -81.1%. $4 400 Dollars

$2 VC Number 200

0 $0 Total 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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Later stage deals also saw a fairly significant YoY falloff in funding (-12%) and number of recipients (-9%), closing 2012 with an aggregate investment of $8.6 billion spread among 830 companies. Only early stage companies received more funding in 2012 compared to a year earlier (+5%), but total dollars invested declined markedly by 11%.

Despite 2012’s gloomy VC picture, the software industry fared far better than most other sectors, grabbing 31.3% of the total. The aggregate investment of $8.3 billion in software was 10% higher YoY, and the highest since 2001 (Figure 31). The number of software industry companies funded grew 8% YoY, to 1,266. Signaling an improved investment climate in 2013, Q4 software industry fundings ranked first among all sectors.

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THE BUYERS SPEAK: SOFTWARE EQUITY GROUP’S 2013 M&A SURVEY

In early January 2013, Software Equity Group conducted its sixth annual Survey of Software Company Buyers to provide our readers a better understanding of 2013’s software M&A ecosystem and buyer thinking. We polled over 200 of the largest software companies in the world, both public and private. Collectively, the buyers surveyed spent tens of billions on software acquisitions in 2012, and their plans and playbook will heavily influence the software M&A ecosystem in the year ahead.

In 2012, 86% of our respondents bought at least one software company. Reflecting a tougher deal climate than last year, 21% of our respondents stated their deal mortality rate (failure to close a transaction following LOI) increased in 2012. Reasons given varied widely, but included deficiencies in the targets’ products and technology, post-LOI financial performance, and changed buyer mandates.

Looking ahead, 96% of our survey respondents plan on acquiring at least one software company in 2013. Even more encouraging, 14% plan on acquiring six or more companies in 2013, up from only 7% in 2012. Our Survey results also portend well for small, privately held software companies considering an exit in 2013. A whopping 82% of respondents indicated they’d focus on transactions with price tags in the $10M - $99M range. Exit valuations in 2013 should be mostly unchanged from 2012, with 82% of respondents expecting to pay the same this year for a company that was very similar to one they acquired in 2012.

What’s driving these buyers to acquire? Enhancing/deepening a buyer’s offering with synergistic technologies and products was cited by 54% of our respondents as their primary acquisition motive. A distant second and third were consolidating a buyer’s current market (25% of respondents), and expanding/diversifying into new product categories (21%), respectively. Surprisingly, 50% of our respondents stated that their least important motive was acquiring in order to improve top line growth or profitability. In a nutshell, buyers in 2013 will to continue to focus on tuck-ins and logical extensions and enhancements to their current offerings.

And what’s most important to these buyers when sizing up a prospect and deciding how much to pay? Buyers are laser focused on the target’s products and technology, seeking to ensure they’re best of breed, highly synergistic, and can provide the desired strategic and market leverage. Fully 71% of our respondents stated products and technology were the most important aspect when evaluating a potential acquisition target in 2013. The target’s consistent revenue growth was deemed second most important by 43% of our respondents. Buyers deemed a target’s management and operations as the least important (43%) acquisition criteria.

What concerns buyers most when evaluating a particular acquisition candidate? The two top concerns for a second year in a row were revenue fluctuation (slowdown or decline), and mature technology requiring significant future investment. Each of these negative attributes garnered a first place thumbs down from 25% of our Survey respondents. Targets with solutions written in an incompatible language or not easily interfaced with the buyer’s offering came in close behind, with 21% of buyers identifying that as their biggest concern. Given the current focus on highly synergistic products and solutions, it was no surprise buyers were least concerned with a target’s revenue concentration and low profitability.

(Continued)

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THE BUYERS SPEAK: SOFTWARE EQUITY GROUP’S 2013 M&A SURVEY (CONTINUED) In light of the current buzz around Mobile and Big Data, we asked buyers to what degree they’ll consider each to be a “must have” when evaluating targets in 2013. Their responses portend another big year for both Mobile and Big Data M&A. This year, 35% of our respondents deemed it “very important” or “absolutely essential” their targets have a well-executed mobile strategy. And 39% of buyers deemed it “very important” or absolutely essential” that a target have the ability to capture and leverage big data in the markets they serve. Our readers may recall that in 2011 when 30% of respondents to our buyer survey indicated it was “very important” or “absolutely essential” that targets be SaaS based, the number of SaaS M&A deals soared 91%. And speaking of SaaS, it remains an important buyer consideration for most buyers. In 2010, only 13% of respondents indicated it was “very important” a target be all or substantially SaaS/subscription based. That grew to 30% of respondents in 2011, and then took off in 2012, when 46% of responding buyers indicated it was “very important” or “absolutely essential” their targets all be or substantially SaaS/subscription based. Surprisingly, that percentage was the same in this year. In large part, that’s because buyers today have greater understanding and experience with SaaS and the migration path from on-premise to hosted offerings. Nevertheless, only 11% of respondents to this year’s Software Company Buyers Survey deemed it “unimportant” that a target be all or substantially SaaS/subscription based.

What’s the bottom line for software M&A in 2013? It’s clear from the results of our latest Survey buyers will be more acquisitive this year, will pay roughly the same as last year, and will be primarily targeting transactions in the $10M - $99M range. Above all else, most will be seeking synergistic, leverageable products and technology in response to ramping market or customer demand, and big data and mobile capabilities will be highly valued. Thus far, as we go to press, that’s all holding true. We’ll detail that more in our 1Q13 Quarterly Report, scheduled for release April 2013.

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Software Equity Group's 2013 Software M&A Outlook Survey

Approximately how many software companies did you acquire in 2012? Response % 0 14% 1-2 43% 3-5 36% 6-10 0% More than 10 7%

Did your deal mortality rate (failure to close a transaction following LOI) increase in Response % 2012? Yes 21% No 79%

In 2013, how many software companies do you anticipate acquiring? Response %

0 4% 1-2 54% 3-5 29% 6-10 7% More than 10 7%

In 2013, what size trnsactions do you anticipate focusing on? (Choose all that Response % apply) Under $10M 36% $10M - $99M 82% $100M - $499M 21% Greater than $500M 4%

What's your current view of valuations? How much would you expect to pay in Response % 2013 for a company very similar to the one you acquired in 2012? The same 82% Less 0% 10% to 20% more 14% 21% to 30% more 4% 31% to 40% more 0% Greater than 40% more 0%

What are your primary acquisition motives in 2013? (Rank 1-5 in order of priority, Ranking 1=most important, 5=least important) 1 2 3 4 5 Consolidating your current market: customer acquisition and market share 25% 21% 11% 29% 14% Enhancing/deepening your offering incrementally with synergistic technologies and products 54% 36% 7% 4% 0% Expanding/diversifying into new product categories, technologies, verticals, and/or territories 21% 29% 29% 11% 11% Improving your near term financial performance metrics 0% 4% 21% 25% 50% Competitive differentiation 0% 11% 32% 32% 25%

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When selecting and valuing a particular acquisition target in 2013, what's Ranking most/least important? (Rank 1-5 in order of importance; 1=most important, 5=least important) 1 2 3 4 5 Products and technology: The target’s products/technology are well executed, a great fit with us, 71% 11% 7% 7% 4% and provide the strategic leverage/competitive differentiation we seek Growth: The target is growing at a rate far greater than average, demonstrating strong market 7% 43% 25% 21% 4% demand, and we want to catch that wave Profitability: The target is highly profitable, the deal will be accretive, the financial risk is lower 7% 14% 14% 29% 36% Customer Focus: We can really capitalize upon the target's geography/market niche/customer 11% 18% 36% 21% 14% base Management and Operations: The target has deep domain expertise we need to acquire, a great 4% 14% 18% 21% 43% team, proven performers

What concerns your company most when evaluating a potential acquisition Ranking target? (Rank 1-5 in order of importance, 1=most important, 5=least important) 1 2 3 4 5 Revenue concentration 14% 0% 11% 32% 43% Revenue fluctuation, slowdown or decline 25% 32% 21% 21% 0% Mature technology requiring significant update 25% 43% 18% 14% 0% Solution written in an incompatible language (Java vs. C#) or not easily interfaced/integrated with 21% 21% 25% 18% 14% your offering Little or no EBITDA 14% 4% 25% 14% 43%

How important is it for you in 2013 that the target have a well executed mobile offering Response % as part of its overall product offering? Unimportant 21% Somewhat 43% Very 21% Absolutely essential 14%

How important is it for you in 2013 that the target has the ability to capture and Response % leverage big data in the markets they serve? Unimportant 14% Somewhat 46% Very 25% Absolutely essential 14%

How important is it for you in 2013 that the target be all or substantially Response % SaaS/subscription based? Unimportant 11% Somewhat 43% Very 32% Absolutely essential 14% * In some instances, the percentages listed in the responses for a particular question exceed 100% in aggregate due to rounding.

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SOFTWARE/SAAS M&A DEAL VOLUME AND Figures 32 and 33: Annual U.S. Software SPENDING Sector M&A Activity and Dollars Spent

The U.S. software sector reported 1,711 mergers 2500 and acquisitions in 2012, a modest 3% decline 2000 from 2011’s three year high of 1,766 transactions 1,766 1,711 (Figures 32 and 33). Software M&A deal volume 1500 held strong through the first three quarters, 1,642 1,329 averaging 440 transactions per quarter, before 1000 slowing in Q4. To date, 390 software company Deals of # exits have been reported for 4Q12, but we expect 500 pending deal announcements will push the fourth 0 quarter’s total to 420 (Figure 34). 2009 2010 2011 2012

Aggregate consideration paid in 2011 was $67.0 billion, 4.8% lower than 2011’s total U.S. software $100.0 M&A spend of $71.4 billion, but a whopping 144% $70.4 improvement over from 2009’s Recession total. $80.0 As in most prior years, 2012’a total spend was $67.0 buoyed by a number of mega deals, enumerated $60.0 in Appendix G. 4Q12 marked the 5th consecutive $52.5 quarter there was at least one mega deal $40.0 ($ billions) ($ $27.4 involving a SaaS target. Expect to see more, as a $20.0 growing number of public SaaS providers are reaching critical revenue mass thanks to sharply $0.0 ramping adoption in the enterprise market (See 2009 2010 2011 2012 Appendix G for a complete list of SaaS transactions).

Figure 34: U.S. Software Mergers & Acquisitions Activity

500 $25 456 454 454 450 431 426 430 $23.4 432 435 421 $23.1 407 390 400 383 $21.3 $20 372 $17.9 $17.3 350

300 $15 Value $15.8 Deals

$12.7 $15.8

(BIllions) of 250 $13.1 $12.6 $12.3 200 $10 Number $7.6 150 $4.6 100 $5

0 $0 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

Deals Value

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Since the presence, or absence, of mega deals in companies this year; 29% said they’d likely buy any given quarter drastically affects that quarter’s three to five companies; and 14% indicated six or total software M&A spend, we analyze and report more (see Buyers Survey Results insert). As for quarterly software M&A spending on a TTM basis an uptick in mega deals – that’s unlikely. 82% of in order to present a more reliable trend line. As our respondents indicated their target deal size for important, a TTM analysis of M&A spending and 2013 is in the $10M - $99M range. average deal size provides a barometer of buyers’ confidence in the economy and their target Based upon our 2013 Buyer Survey results, and markets, (i.e., bigger deals = more risk, more our conversations with a broad array of public upside). software company corporate development heads and private equity managing directors, we Average TTM software industry deal value, after a anticipate software M&A transaction volume in period of rapid growth, ebbed to $39 million in 2013 will be mostly flat. 2Q12 from $41 million in 4Q11, declined sharply to $36 million in Q3, then grew to $39 million in IMPORTANT CHANGE IN SOFTWARE AND SAAS the fourth quarter (Figure 35). Until GDP exceeds M&A DATA ACCOUNTING 4%, we do not anticipate marked improvement in annual software industry transaction volume or Historically, we have aggregated M&A data for total deal spend. both on-premise and SaaS software company transactions because of the relative dearth of Figure 35: TTM Average M&A Deal Size pure-play SaaS deals. However, the considerably higher median multiple of these SaaS deals, though fewer in number, tended to skew the $45.0 $42 $41 $41 $42 $40 $39 median M&A multiple higher. Since SaaS is no $40.0 $37 $36 longer a nascent part of the overall software M&A $35.0 $33 $31

(Millions) ecosystem, and SaaS transactions now constitute $28 $30.0 a meaningful percentage of total software M&A, in Value

$25.0 $20 $20 3Q11 we began to analyze and separately report

Deal $20.0 data for SaaS and on-premise software M&A $15.0 deals. To ensure our historical and current

Average $10.0 comparisons are consistent, all historical M&A $5.0 TTM data referenced in our charts this issue has been $0.0 recalculated to exclude SaaS M&A transactions.

4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

Asked how many software companies they anticipate acquiring in 2013, 54% of the public software company corporate development heads responding to our 2013 Buyers Survey stated they planned to acquire one to two software

Figure 36: Annual Software EV/Revenue Exit Multiple

3.0x

2.1x 2.1x 2.0x 2.0x 2.0x 2.0x 1.9x 2.0x 1.7x 1.8x 1.4x 1.3x

1.0x

0.0x 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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SOFTWARE M&A VALUATIONS Lest every software entrepreneur who reads this The median software industry exit valuation for all report multiply his/her company’s TTM revenue by of 2012, measured as a multiple of trailing twelve 2.0 to determine current fair market value, we months revenue, was 2.0x - just slightly below must emphasize that the 2012 median exit 2011’s median exit multiple of 2.1x (Figure 36). multiple is simply that - a median – the midpoint of Quarterly, the median exit multiple held fairly a very broad range of exit valuations. Perhaps steady in 2012, with the exception of the third more useful is our calculation that in 2012, 23.4% quarter when it climbed to 2.3x before retreating of software M&A deals with an ascertainable exit to 1.8x in the final quarter – precisely where it multiple were valued at a 1.0x EV/Revenue or finished 4Q11 (Figure 37). less, while only 4.7% had a EV/Revenue multiple of 6.0x or greater (Figure 38). Figure 37: Quarterly Software EV/Revenue and EV/EBITDA Exit Multiples A few of 2012’s more lofty EV/Revenue exit multiples included IBM’s acquisition of WorkLight 2.3x (20.0x TTM Revenue); Monitise’s acquisition of 1.9x 1.8x 1.7x 1.8x ClairMail (10.0x TTM Revenue); KEYW Holding’s acquisition of Sensage (7.0x TTM Revenue); and Playtech’s acquisition of Geneity (6.5x TTM Revenue). Two of these headline deals featured 4Q11 1Q12 2Q12 3Q12 4Q12 targets in the mobile sector (IBM/Worklight and Monitise/ClairMail), but as we’ve cautioned in the past, breathtaking multiples don’t always hold up 13.4x 12.2x 12.1x 11.2x 11.8x under closer scrutiny. Monitise’s acquisition of ClairMail featured all stock and no cash, a risky proposition considering the buyer’s stock was already highly valued (11.0x TTM Revenue) when the deal was announced. 4Q11 1Q12 2Q12 3Q12 4Q12

Figure 38: Median Software M&A EV/Revenue Exit Multiple Distribution 35.0% 29.9% 30.0%

25.0% 23.4% 21.5% 20.0% 14.0% 15.0%

10.0% % of Deals in 2012 4.7% 5.0% 3.7% 2.8%

0.0% <= 1.0x > 1.0x > 2.0x > 3.0x > 4.0x > 5.0x > 6.0x & & & & & <= 2.0x <= 3.0x <= 4.0x <= 5.0x <= 6.0x

TTM Revenue Exit Multiple Bins

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SOFTWARE M&A VALUATIONS BY TARGET’S historical database, as public buyers paid a EQUITY STRUCTURE median 2.3x TTM revenue exit multiple vs. private buyers who paid 1.4x. While a variety of factors impact exit valuation, one important driver is the seller’s ownership For historical context, in 2006 and 2007 public structure. As a result, we analyzed all 2012 year- buyers shelled out a median 2.7x and 2.5x TTM to-date (YTD) M&A transactions with seller revenue, respectively, for their software ascertainable revenue multiples to determine how M&A deals, while private buyers paid a median exit valuations varied by type of equity ownership 1.9x and 2.0x TTM revenue, respectively. In 2008, (private vs. public company). we saw the historical variance narrow considerably, with public buyers paying a median Public company sellers received a median 1.6x 2.0x TTM revenue vs. private buyers paying a TTM revenue exit multiple, while privately held median 1.7x TTM revenue. In 2009, the software company sellers commanded a median differential among public and private buyers of 2.0 x TTM revenue multiple (Figure 39). The increased dramatically, with public buyers paying higher exit multiples paid to private sellers a median1.9x TTM revenue and private buyers, continued a trend that began about four years ago paying a miserly 1.2x. In 2010 and 2011, public when larger software companies and private buyers ponied up a median of 2.4x TTM revenue, equity firms virtually exhausted the supply of while private buyers paid a median 1.8x and 2.0x highly leveragable public software company TTM revenue, respectively. targets that had lots of cash and recurring revenue, and focused, instead, on private targets SOFTWARE M&A VALUATIONS BY VERTICAL AND that were often venture-backed, rapidly growing HORIZONTAL MARKETS and, consequently, expensive. Figure 39: 2012 Median EV/Revenue Exit Multiple Another important determinant of exit valuation is By Ownership Structure the seller’s target market focus and domain expertise. We analyzed 2012’s median software Public Sellers M&A multiple horizontally and vertically, 1.6x Median Multiple segregating software company sellers with vertical market solutions (e.g. retail, financial 32% services, telecom, manufacturing, etc.) from 68% sellers with horizontal software solutions (infrastructure, enterprise applications, etc.).

In 2012, providers of vertical software accounted Private Sellers 2.0x Median Multiple for 36.9% of all software M&A transactions; horizontal solution providers represented the Private Buyers remaining 63.1% (Figure 40). Vertical sellers 1.4x Median Multiple received a median TTM revenue exit multiple of 1.5x, while their horizontal counterparts achieved a median 2.3x. 31% 69% Figure 40: 2012 Horizontal vs. Vertical Sellers

Public Buyers 2.3x Median Multiple 36.9%

As a next step, we separated public and private 63.1% software company buyers to ascertain any differential in median purchase price paid by each group in 2012. In 2012, the spread between private and public buyers was the largest in our Vertical Horizontal

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On a quarterly basis, vertical transactions steadily software company sellers plunged to 1.4x in increased their share of total M&A transactions 4Q12. Horizontal exit multiples were just as throughout the year (Figures 41 and 42). In erratic, fluctuating greatly each quarter from a low 1Q12, vertical transactions accounted for 32% of of 1.6x TTM revenue in Q2 to a high of 3x the total transactions, growing to 42% in 4Q12. In the following quarter. second and third quarters, vertical software companies began to see their median TTM M&A VALUATIONS BY SOFTWARE PRODUCT revenue exit multiples improve, reaching a high of CATEGORY 2.0X in 3Q12. However, the strength was short- lived as the median exit multiple for vertical While a software company’s target market, revenue, equity structure and delivery model can Figures 41 and 42: 2012 Horizontal & Vertical demonstrably impact its exit valuation, the nature M&A Volume Segmentation (top) and Median of it product offering – its software product EV/Revenue Exit Multiples (bottom) category - continued to be the single most important M&A valuation driver in 2012. For most 100% 90% software product categories, there is often an 32% 80% 35% 37% 42% insufficient number of transactions each quarter 70% 60% that publicly report both seller TTM revenue and 50% buyer purchase price, essential in determining the 40% 68% median exit value for the category. Consequently, 30% 65% 63% 58% 20% we aggregate the data each quarter for each 10% category on a TTM basis. As a result, it may take 0% 1Q12 2Q12 3Q12 4Q12 several quarters to detect changing product

Vertical Horizontal category valuation trends, as certain outlier transactions consummated nine or twelve months 3.5x 3.0x ago may continue to have a residual impact on 3.0x their product category multiples. 2.5x 2.3x 2.2x 1.9x 2.0x 2.0x 1.6x Among the 27 product categories we tracked in 1.4x 1.5x 1.3x 2012, eleven had both sufficient deal activity and 1.0x deal data to ascertain a TTM revenue multiple 0.5x (Figure 43). Software company sellers focused 0.0x on Systems Management garnered a median 3.1x 1Q12 2Q12 3Q12 4Q12 TTM revenue exit multiple in 2012, the highest of Vertical Horizontal any category. Particularly noteworthy were KEYW Holding’s acquisition of Sensage (7.0x TTM revenue); BMC’s acquisition of Numara

Figure 43: 2012 Software Median EV/Revenue Exit Multiple by Product Category

3.1x 2.5x 2.1x 2.1x 2.0x 2.0x 1.9x 1.6x 1.5x 1.3x 1.2x EDA ERP Mobile Healthcare Systems Media Integration Logistics Management Data MgmtData & etc.) Retail, Software (A&D, Telco, (A&D, Multimedia, Asset Mgmt Asset Other Verticals Supply Chain & Chain Supply Manufacturing & Graphics, Digital Graphics, Financial Services

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Figure 44: 2012 Software M&A by Product Category

Accounting & Finance Asset & Facilities Mgmt BI, Risk & Compliance 1.8% 1.4% 2.5% Billing & Service Content & Document Mgmt Utilities Provisioning 1.1% 2.6% 0.7% Telecommunications CRM, Marketing & Sales 0.4% 2.0% Retail Data Mgmt & Integration Real Estate 1.7% 1.8% 1.0% Public Sector Dev. Tools & IT Asset Mgmt 2.2% 3.9% Other Verticals Ecommerce EDA 6.0% 0.2% 0.8% Oil&Gas 1.0% Engineering, PLM & CAD 4.7% Non-Profit 0.4% Middleware Manufacturing 0.6% 1.6% ERP Legal 1.0% 0.7% Gaming Insurance 1.2% 0.8% HR & Workforce Mgmt Hospitality 2.6% 0.5% Messaging, Conferencing &

Vertical Deals Communications Healthcare 1.9% 8.3% Multimedia, Graphics & Communications 3.5%

Financial Services Network Performance Mgmt 7.1% 1.8%

Education Security 2.0% 4.3%

Systems Mgmt Construction 3.2% 0.3% Auto 0.6% Supply Chain Mgmt & Logistics Mobile Web Analytics 2.2% 19.2% 0.4%

Software (3.8x TTM revenue); and EQT Partners software sellers that lacked the capital to keep acquisition of UC4 Software (3.6x TTM revenue). pace with constantly changing industry and The category continues to benefit from the rapid government regulations. shift to hosted systems and cloud infrastructures, necessitating new solutions to scale, manage and Exit valuations in the on-premise ERP product monitor systems. category continued their long, steady decline, plummeting to a median 1.2x EV/Revenue Multimedia was another strong M&A product multiple in 2012 from a median 1.8x in 2011. The category in 2012, finishing the year with a median on-premise ERP sector consolidated long ago, EV/Revenue exit multiple of 2.5x. Select and remaining targets typically serve small niche Multimedia deals included Cisco’s acquisition of markets with limited growth opportunities. NDS Group (5.0x TTM revenue), and DTS’ purchase of SRS Labs (3.4x TTM revenue). Regular readers of our reports will note 2012’s M&A results by product category are dramatically Exit multiples in the Healthcare software category different from prior years. CRM and HR & cooled a bit in 2012, finishing Q4 with a TTM Workforce management have been historical median EV/Revenue exit multiple of 2.0x, down mainstays of our on-premise software company from 2.4x in 2011. Don’t be misled, though. category rankings but are absent this year. Both Healthcare continued to boast strong deal volume product categories were favorites of early SaaS and a good number of notable, high value adapters and hosted ERP and CRM apps are now transactions. Dragging down the median were a considered mainstream by enterprise and SMB number of smaller, undercapitalized healthcare customers alike. As a result, there was an 29| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

insufficient number of on-premise HR and CRM development (10%), and entertainment (9%). software deals to produce a statistically credible Given the rapid growth of the mobile market and EV/Revenue multiple for 2012. the complexity of the ecosystem, many public Figures 46 and 47: Annual (top) and Quarterly software companies are buying into the space to (bottom) Median SaaS EV/Revenue Exit Multiple gain technology and domain competency.

4.1x On-premise software providers focused on 3.7x 3.2x Healthcare and Financial Services comprised 8% 2.7x and 7%, respectively, of 2012’s M&A transactions. These three most active software M&A categories, Mobile, Financial Services and Healthcare, were also the most active in 2011 as 2009 2010 2011 2012 well.

4.1x SOFTWARE AS A SERVICE (SAAS) M&A DEAL 4.0x 3.9x 3.9x VOLUME AND VALUATIONS

3.7x In our January, 2012 survey of public software, SaaS and Internet company corporate development heads about their acquisition 4Q11 1Q12 2Q12 3Q12 4Q12 objectives for the coming year, we reported 46% stated it was “very important” or “absolutely As for the most active M&A product category in essential” their 2012 targets be all or substantially 2012, Mobile software led all others, accounting SaaS/subscription based, while only 19% of for 19% of 2012’s transactions (Figure 44). buyers deemed SaaS targets unimportant. They Mobile computing and mobile applications were true to their word. 311 SaaS companies comprise a somewhat complex and evolving were acquired in 2012, up 55% from the 200 ecosystem, which SEG tracks under seventeen SaaS providers that exited in 2011. By discrete sub-categories. Of the seventeen, five comparison, on-premise software M&A volume categories accounted for 59% of the mobile M&A decreased 3% YoY in 2012. transactions: marketing (16%), enterprise (14%), infrastructure (10%), apps (which don’t fall into a particular product category) and customer app

Figure 45: SaaS M&A Volume as a % of Total Software M&A Volume SaaS M&A Deals SaaS as % of Software

100 30% 94 94 90

25% Total 80 of 68 65

70 %

Deals Deals 20%

59 a 60 as 45 48 M&A M&A 50 15%

39 39

40 Deals

30 SaaS 30 26 10% of

20 # Software M&A 20 10 5% 10 SaaS 0 0%

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The sharp year-over-year gain in SaaS M&A Notable SaaS transactions with high exit multiples transactions is even more impressive considering in 2012 included Cisco’s acquisition of Meraki 2012’s slow start (Figure 45). After finishing 4Q11 ($1.2 billion EV, 12.0x TTM revenue); with its biggest quarterly tally (68), SaaS M&A ExactTarget’s acquisition of Pardot ($95.2 million, volume declined to 65 transactions in 1Q12 and 10.0x TTM revenue); Oracle’s acquisition of 59 in the second quarter. Then SaaS M&A Eloqua ($871 million, 9.7x TTM revenue); volume surged to 94 transactions in each of the DealerTrack’s acquisition of ClickMotive ($56.6 third and fourth quarters. In aggregate, the 188 million, 7.8x TTM revenue); and Electronic Funds SaaS transactions in 2H12 nearly matched the Source’s acquisition of T-Check Systems ($302.5 deal total for all of 2011 (200). SaaS acquisitions million, 6.1x TTM revenue). accounted for 18.1% of all software industry acquisitions in 4Q12, compared to only 6.2% of all Among the discrete SaaS categories we track, software deals just two years ago. CRM earned top honors in 2012, accounting for 17% of all SaaS M&A transactions (Figure 48). SaaS exit valuations also improved YoY. The There were a number of buyers who were median EV/Revenue exit multiple for SaaS sellers extremely active in this space in 2012. Oracle in 2012 was 4.1x, a noteworthy advance from made three acquisitions: Eloqua ($871 million, 3.7x in 2011, and 3.2x in 2010 (Figures 46 and 9.7x TTM revenue), Collective Intellect, and 47). And once again, the median SaaS exit Virtue. Google, ExactTarget and LivePerson multiple in 2012 was more than double the each closed two CRM deals. Google bought median on-premise exit multiple. Incentive Targeting and Wildfire; ExactTarget’s wooed and won Pardot ($95.2 million, 10.0x TTM revenue) and iGoDigital ($20.7 million EV); and LivePerson’s bought ENGAGE and Amadesa.

Figure 48: 2012 SaaS M&A by Product Category

Content & Document Mgmt BI, Risk & Compliance 3% 5% Billing & Service Provisioning CRM, Marketing & Sales 3% 17% Accounting & Finance 3%

Vertical - Other Data Mgmt & Integration 5% 1% Retail 1% Dev. Tools & IT Asset Mgmt Real Estate 1% 2% Non-Profit Ecommerce 1% 3% Manufacturing & Asset Mgmt 2% Engineering, PLM & CAD Legal 2% 1%

Insurance Middleware 1% 1% Hospitality 1% HR & Workforce Mgmt Vertical Deals Healthcare 12% 3%

Financial Services 5%

Education 4% Messaging, Conferencing & Communications Construction 7% 1% Automotive 3% Multimedia, Graphics & Communications 2% Web Analytics 1% Network Performance Mgmt Systems Mgmt Security 0% 4% Supply Chain Mgmt & Logistics 2% 4%

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Other notable acquisitions in this product category After peaking at 2.8x in 4Q11, the Internet’s include Intuit’s acquisition of Demandforce median TTM exit multiple declined to 2.1x in ($423.5 million EV, 11.3x TTM revenue) and 1Q12, held steady in Q2, then fell to 1.9x TTM Salesforce.com’s purchase of Thinkfuse. EV/Revenue in Q3 where it remained at year end (Figure 50). The median Internet exit multiple can HR & Workforce Management was the second be deceiving since the spread of Internet exit most active category, accounting for 12% of all valuations each quarter is considerably wider than SaaS M&A transactions in 2012. Notable deals SaaS and on-premise software exit valuations. here included Oracle’s acquisition of SelectMinds; IBM’s purchase of Kenexa ($1.4 billion EV, 4.1x Figure 50: Internet Median EV/Revenue Exit TTM revenue); Salesforce.com’s purchase of Multiple ChoicePass; Saba’s acquisition of HumanConcepts; Oracle’s acquisition of Taleo 2.8x ($1.9 billion EV, 5.7x TTM revenue); Ceridian’s purchase of Dayforce; and Cornerstone’s 2.1x 2.1x 1.9x acquisition of Makana. 1.9x

With 46% of respondents to our 2013 Software Company Buyers Survey indicating that it was “very important” or “essential” their targets be “all or substantially SaaS/subscription based” we anticipate SaaS deal volumes and median exit 4Q11 1Q12 2Q12 3Q12 4Q12 multiples will continue to grow in 2013, most likely 10% to 25%, depending upon the economic As testament, 33.8% of all Internet M&A climate and the level of enterprise IT spending on transactions with ascertainable multiples had an hosted solutions. exit valuation of 1.0x TTM revenue or less in 2012 (Figure 51). Conversely, in 16.9% of 2012’s INTERNET M&A DEAL VOLUME AND VALUATIONS Internet M&A transactions, the seller achieved a whopping exit valuation of 6.0x TTM revenue or Following a record breaking 2011, Internet exits higher. Examples include: Select jumped 23% in 2012, to 978 M&A transactions. Salesforce.com’s acquisition of BuddyMedia On a quarterly basis, Internet deals reached a ($745 million EV, 7.5x TTM revenue); record high of 273 in 2Q12, but slowed to 222 BazzarVoice’s acquision of PowerReviews transactions in the final quarter (Figure 49). The ($127.7 million EV, 11.1x TTM revenue); Youku’s total number of Internet M&A transactions was acquision of Tudou ($1 billion EV, 12.4x TTM nearly half the total of on-premise software M&A revenue); and Facebook’s acquisition of deals in 2012, compared to only one-third as Instagram ($1 billion EV with no revenues). many only two years ago.

Figure 49: Internet M&A Volume Figure 51: Median Internet EV/Revenue Exit Multiple Distribution 273 263 40.0% 33.8% 35.0% 30.0% 220 222 2012 25.0%

in 20.0%

203 20.0% 16.9% 15.4% Deals 15.0% of

% 10.0% 6.2% 4.6% 5.0% 3.1% 0.0% <= 1.0x > 1.0x > 2.0x > 3.0x > 4.0x > 5.0x > 6.0x 4Q11 1Q12 2Q12 3Q12 4Q12 & & & & & <= 2.0x <= 3.0x <= 4.0x <= 5.0x <= 6.0x

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There were seven Internet mega deals in 2012, Ad Tech & Services transactions were up 50% including Dentsu’s acquisition of Aegis ($4.8 from 2011’s total, thanks to the rapid billion EV, 2.6x TTM revenue); Permira’s advancement of highly personalized advertising acquisition of Ancestry.com ($1.5 billion EV, 3.4x and marketing deployed across new formats and TTM revenue); Madison Dearborn Partner’s platforms. Notable transactions in this Internet acquisition of Q9 Networks ($1.1 billion EV); category included MDC Partners’ acquisition of Youku’s acquisition of Tudou ($1.0 billion, 12.4x dotbox; Groupon’s acquisitions of Kima Labs, TTM revenue); Facebook’s acquisition of Adku, Six Times Seven and VillageVines; Home Instagram ($1 billion E V), Expedia’s acquisition Depot’s acquisition of Red Beacon; Constant of trivago ($942.6 million EV); Salesforce.com’s Contact’s acquisition of MobManager; Deluxe’s acquisition of BuddyMedia ($745 million, 7.5x acquisition of OrangeSoda ($27.7 million EV); TTM revenue) and Publicis Groupe’s acquisition Facebook’s purchase of Tagtile; Merkle’s of LBi International ($533.8 million EV, 1.9x TTM acquisition of 5th Finger; OpenTable’s purchase revenue). of Treat Technologies; Zillow’s acquisition of Hotpads; and Publicis Groupe’s acquisition of Two of these mega deals featured private equity Rokkan. buyers that were no doubt spurred on by target EV/Rev valuations and operating margins that The Content & Media category also boasted more enabled them to pay a reasonable premium, yet than 200 M&A transactions in 2012, driven by still have significant post-closing upside. As continued consumer migration to new forms of example, Ancestry.com had top line growth of digital media and content. Notable transactions in 21.7% and EBITDA margins of 33.6%, but an this Internet category included Twitter’s average EV/Revenue multiple of only 2.9x in the acquisition of Posterous; Youku’s acquisition of month prior to its acquisition announcement. Also Tudou ($1 billion EV, 12.4x TTM revenue); notable: two of these Internet mega acquisitions Tencent’s acquisition of ZAM; Scripps Networks’ were consummated by the two largest ad tech acquisition of RealGravity; Facebook’s acquisition agencies in the world (Publicis and Dentsu). Look of Instagram ($1 billion EV); Shutterfly’s for more such mega deals by leading ad tech acquisition of Photoccino; R.R. Donnelley’s firms in the coming months. acquisition of EDGAR Online ($71.2 million EV, 2.6 TTM revenue); Ancestory.com’s acquisition of Of the six Internet product categories we track, Inflection ($100 million EV); Shutterfly’s five were extremely active, tallying more than 100 acquisition of Penguin Digital; Dropbox’s M&A transactions each in 2012 (Figure 52): Ad acquisition of AG Entertainment; and Tech & Services (277), eCommerce (174), Ancestory.com’s acquisition of 1000 Memories. Content & Media (230), Infrastructure (129) and Social Technologies (115).

Figure 52: Internet Deal Volume by Category Category 1Q 2012 2Q 2012 3Q 2012 4Q 2012 2012 Ad-Tech & Lead Gen 65 70 85 57 277 Commerce 36 57 40 41 174 Content & Media 51 62 52 55 220 Gaming 13 25 13 12 63 Infrastructure 31 30 41 27 129 Social Tech 24 29 32 30 115 Total 220 273 263 222 978

33| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX A: 2012 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Billing & Service Management 4Q11 1Q12 2Q12 3Q12 4Q12 Financial & Accounting 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 1.3x 1.3x 1.3x 1.4x 1.4x EV/Revenue 2.6x 2.8x 2.7x 2.9x 2.9x EV/EBITDA 5.6x 6.6x 6.9x 7.9x 8.2x EV/EBITDA 9.2x 9.8x 9.3x 9.7x 9.7x EV/Earnings 12.0x 11.8x 11.1x 16.2x 15.9x EV/Earnings 19.5x 22.4x 18.0x 20.1x 20.3x Gross Profit Margin 52.9% 53.5% 54.1% 56.0% 57.1% Gross Profit Margin 63.0% 62.5% 62.4% 63.2% 62.0% EBITDA Margin 23.4% 21.8% 18.5% 19.2% 21.4% EBITDA Margin 28.0% 29.2% 29.3% 29.1% 29.2% Net Income Margin 17.1% 15.5% 12.9% 11.8% 12.1% Net Income Margin 12.9% 14.9% 15.2% 13.7% 13.2% TTM Revenue Grow th (YoY) 34.1% 19.1% 22.3% 9.8% 10.5% TTM Revenue Grow th (YoY) 3.9% 5.7% 6.1% 10.0% 9.9% TTM EBITDA Grow th (YoY) 2.4% 0.8% 6.9% 0.9% 2.8% TTM EBITDA Grow th (YoY) 11.1% 10.3% 10.4% 4.9% 6.0% TTM Earnings Grow th (YoY) -34.0% -10.1% -5.2% 16.8% 2.7% TTM Earnings Grow th (YoY) -2.2% -5.8% -13.4% -22.6% -20.1% Current Ratio 4.3 2.3 2.4 2.6 2.8 Current Ratio 1.4 1.3 1.4 1.2 1.2 Cash as Percent of Market Cap 34.1% 17.3% 17.4% 18.1% 20.5% Cash as Percent of Market Cap 14.7% 12.3% 11.4% 9.4% 5.8% Enterprise Value Grow th (YoY) -3.0% -10.3% -20.5% -1.4% 10.0% Enterprise Value Grow th (YoY) 3.5% 8.5% 5.1% 13.7% 18.9%

Bus ine s s Inte llige nce 4Q11 1Q12 2Q12 3Q12 4Q12 Gaming 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 2.4x 2.3x 2.5x 2.1x 2.2x EV/Revenue 1.4x 1.3x 1.0x 1.0x 1.0x EV/EBITDA 36.2x 39.3x 38.1x 33.2x 24.9x EV/EBITDA 7.8x 7.1x 7.6x 9.1x 8.0x EV/Earnings 56.7x 65.6x 65.9x 57.6x 40.0x EV/Earnings 15.3x 12.3x 10.5x 12.1x 12.3x Gross Profit Margin 78.7% 78.9% 78.6% 78.6% 79.2% Gross Profit Margin 58.9% 56.9% 57.4% 57.8% 58.5% EBITDA Margin 8.0% 8.9% 8.7% 8.5% 8.4% EBITDA Margin 12.8% 11.6% 9.2% 6.7% 6.6% Net Income Margin 5.2% 4.9% 4.0% 4.2% 4.3% Net Income Margin 5.5% 5.5% 6.0% 2.6% 3.5% TTM Revenue Grow th (YoY) 25.2% 23.7% 19.0% 12.7% 10.0% TTM Revenue Grow th (YoY) 4.8% 6.9% 15.4% 5.9% -5.9% TTM EBITDA Grow th (YoY) -5.8% 4.6% 3.7% 14.0% 12.7% TTM EBITDA Grow th (YoY) 35.2% 41.4% 3.3% -24.7% -20.4% TTM Earnings Grow th (YoY) -14.3% 2.9% -13.2% 5.9% 18.0% TTM Earnings Grow th (YoY) -23.2% -32.0% -15.6% 19.9% 6.5% Current Ratio 1.8 1.8 1.9 2.1 2.2 Current Ratio 2.1 2.3 2.6 2.8 2.4 Cash as Percent of Market Cap 15.9% 14.8% 14.3% 16.1% 16.9% Cash as Percent of Market Cap 22.8% 24.2% 28.3% 41.6% 30.9% Enterprise Value Grow th (YoY) 14.9% 16.2% -6.8% -9.2% -20.6% Enterprise Value Grow th (YoY) 30.6% 15.0% -15.6% -34.5% -23.8%

De ve lopm e nt Platform s 4Q11 1Q12 2Q12 3Q12 4Q12 He althcare 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 1.9x 2.3x 1.9x 2.0x 2.5x EV/Revenue 3.0x 3.4x 3.0x 2.6x 2.6x EV/EBITDA 8.5x 10.1x 9.2x 8.8x 9.5x EV/EBITDA 17.2x 16.8x 14.3x 14.1x 12.8x EV/Earnings 14.9x 18.7x 18.3x 16.0x 14.9x EV/Earnings 34.8x 30.7x 35.8x 35.2x 31.5x Gross Profit Margin 77.2% 76.4% 76.6% 76.2% 75.2% Gross Profit Margin 66.0% 65.9% 65.2% 63.1% 62.1% EBITDA Margin 22.4% 22.2% 22.1% 21.3% 20.6% EBITDA Margin 21.5% 22.0% 22.3% 21.1% 20.7% Net Income Margin 12.8% 12.9% 12.8% 13.7% 13.5% Net Income Margin 3.9% 4.7% 4.0% 4.8% 6.4% TTM Revenue Grow th (YoY) 11.0% 7.7% 6.4% 5.4% 1.7% TTM Revenue Grow th (YoY) 17.9% 20.9% 25.7% 20.3% 16.0% TTM EBITDA Grow th (YoY) 1.7% 2.4% 2.9% 6.1% 0.3% TTM EBITDA Grow th (YoY) 26.3% 40.9% 19.4% 22.9% 9.5% TTM Earnings Grow th (YoY) -17.3% -12.3% -12.4% -6.6% -7.7% TTM Earnings Grow th (YoY) -61.2% -62.0% -31.5% -24.4% -7.1% Current Ratio 2.0 2.2 2.0 2.2 2.2 Current Ratio 1.9 1.9 2.2 2.1 2.1 Cash as Percent of Market Cap 19.9% 19.8% 20.1% 22.4% 23.2% Cash as Percent of Market Cap 7.6% 7.5% 9.4% 9.5% 11.4% Enterprise Value Grow th (YoY) -10.0% -17.1% -12.3% 3.9% -4.5% Enterprise Value Grow th (YoY) 18.8% 8.3% -7.6% 12.6% 25.1%

Engineering & PLM 4Q11 1Q12 2Q12 3Q12 4Q12 IT Conglom e rate s 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 2.0x 2.6x 2.3x 2.6x 2.5x EV/Revenue 2.5x 3.1x 2.9x 2.8x 2.5x EV/EBITDA 13.5x 14.3x 11.5x 12.1x 11.8x EV/EBITDA 8.6x 7.7x 7.3x 8.2x 7.8x EV/Earnings 24.6x 25.1x 24.3x 23.3x 23.2x EV/Earnings 15.1x 13.2x 12.9x 14.4x 13.7x Gross Profit Margin 83.0% 83.0% 83.6% 84.1% 83.4% Gross Profit Margin 70.9% 71.5% 71.5% 71.6% 71.4% EBITDA Margin 16.3% 18.5% 19.9% 20.7% 20.6% EBITDA Margin 37.0% 37.4% 36.9% 36.1% 34.6% Net Income Margin 7.7% 8.3% 10.4% 11.4% 10.6% Net Income Margin 19.4% 24.2% 23.9% 23.0% 18.6% TTM Revenue Grow th (YoY) 15.5% 13.5% 13.5% 13.2% 14.0% TTM Revenue Grow th (YoY) 8.5% 7.7% 5.3% 1.5% 1.4% TTM EBITDA Grow th (YoY) 23.4% 37.5% 45.7% 34.9% 21.4% TTM EBITDA Grow th (YoY) 4.9% 5.8% 3.6% 1.4% 0.3% TTM Earnings Grow th (YoY) -54.6% -35.8% -19.7% -38.8% -9.6% TTM Earnings Grow th (YoY) -19.0% -12.3% -12.4% -4.1% 19.1% Current Ratio 1.7 1.7 1.8 1.8 1.8 Current Ratio 1.8 1.5 1.3 1.2 1.2 Cash as Percent of Market Cap 19.4% 18.6% 18.6% 16.3% 14.5% Cash as Percent of Market Cap 15.4% 15.9% 18.6% 19.6% 22.2% Enterprise Value Grow th (YoY) 3.5% 3.0% 13.0% 29.0% 32.9% Enterprise Value Grow th (YoY) -1.4% 6.0% -2.1% 9.4% 1.0%

Enterprise Resource Planning 4Q11 1Q12 2Q12 3Q12 4Q12 Mobile Solutions/Content 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 2.8x 3.0x 2.4x 2.7x 2.7x EV/Revenue 2.9x 3.3x 3.1x 1.7x 1.7x EV/EBITDA 9.6x 10.2x 8.3x 9.1x 9.0x EV/EBITDA 12.5x 30.9x 16.1x 14.5x 12.0x EV/Earnings 17.6x 16.6x 13.1x 14.3x 14.0x EV/Earnings 23.9x 18.8x 24.9x 18.4x 21.2x Gross Profit Margin 70.9% 71.5% 71.5% 71.6% 71.4% Gross Profit Margin 65.8% 64.2% 63.5% 62.0% 61.0% EBITDA Margin 29.5% 29.2% 29.0% 29.3% 29.6% EBITDA Margin 8.5% 7.5% 8.7% 8.1% 3.6% Net Income Margin 14.2% 16.3% 18.4% 20.3% 18.6% Net Income Margin 0.0% -1.7% -2.1% 1.3% -1.7% TTM Revenue Grow th (YoY) 16.3% 12.4% 10.1% 9.0% 2.9% TTM Revenue Grow th (YoY) 12.7% 15.4% 12.3% 18.5% 22.0% TTM EBITDA Grow th (YoY) 29.0% 32.2% 24.8% 45.7% 4.0% TTM EBITDA Grow th (YoY) 12.2% -21.6% -31.2% -21.1% -29.2% TTM Earnings Grow th (YoY) -28.2% -29.6% -38.0% -32.5% -34.6% TTM Earnings Grow th (YoY) -27.6% -39.3% -41.7% -18.7% 18.4% Current Ratio 1.8 1.5 1.2 1.2 1.2 Current Ratio 3.3 2.9 2.4 3.7 3.7 Cash as Percent of Market Cap 18.7% 18.7% 20.3% 19.6% 22.2% Cash as Percent of Market Cap 22.5% 17.6% 21.2% 36.7% 26.1% Enterprise Value Grow th (YoY) 0.6% 6.0% -2.1% 4.4% -0.4% Enterprise Value Grow th (YoY) -2.8% -20.3% -15.6% -13.5% -21.9%

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APPENDIX A: 2012 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Netw orking & Netw ork Perf Mgmt 4Q11 1Q12 2Q12 3Q12 4Q12 Ve rtical - Finance 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 2.7x 3.1x 2.4x 2.5x 2.5x EV/Revenue 3.9x 4.0x 4.3x 4.3x 3.6x EV/EBITDA 15.6x 16.4x 14.9x 14.0x 14.0x EV/EBITDA 12.7x 11.8x 12.5x 14.3x 12.0x EV/Earnings 27.8x 31.1x 24.6x 25.0x 28.8x EV/Earnings 33.5x 29.6x 28.7x 34.2x 28.5x Gross Profit Margin 68.1% 67.8% 68.1% 68.5% 68.1% Gross Profit Margin 59.9% 59.5% 59.4% 58.9% 57.7% EBITDA Margin 18.7% 18.0% 18.0% 16.8% 16.2% EBITDA Margin 34.4% 34.4% 34.6% 34.8% 35.1% Net Income Margin 11.5% 12.1% 12.5% 10.4% 8.7% Net Income Margin 13.5% 14.2% 15.2% 12.5% 12.2% TTM Revenue Grow th (YoY) 23.3% 20.7% 19.4% 17.3% 15.5% TTM Revenue Grow th (YoY) 15.0% 13.9% 10.5% 14.7% 11.9% TTM EBITDA Grow th (YoY) 20.8% 33.5% 23.7% 21.5% 17.7% TTM EBITDA Grow th (YoY) 10.8% 12.6% 13.4% 10.7% 23.5% TTM Earnings Grow th (YoY) -41.9% -24.8% -22.9% -27.9% -10.5% TTM Earnings Grow th (YoY) -28.2% -13.2% 4.0% 9.2% 1.7% Current Ratio 2.8 2.7 2.7 2.7 2.6 Current Ratio 1.1 1.1 1.3 1.2 1.3 Cash as Percent of Market Cap 19.3% 16.1% 16.2% 17.9% 18.8% Cash as Percent of Market Cap 6.6% 8.6% 8.0% 7.2% 9.7% Enterprise Value Grow th (YoY) -16.1% -12.0% -9.1% 2.8% -8.5% Enterprise Value Grow th (YoY) -7.2% -3.8% -0.4% 12.0% -3.0%

Security 4Q11 1Q12 2Q12 3Q12 4Q12 Ve rtical - Othe r 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 2.9x 3.2x 2.9x 3.2x 2.7x EV/Revenue 2.9x 3.2x 2.8x 2.7x 2.8x EV/EBITDA 14.2x 13.0x 10.2x 10.5x 11.2x EV/EBITDA 15.1x 15.2x 15.6x 14.4x 15.6x EV/Earnings 19.6x 18.0x 14.1x 21.8x 15.8x EV/Earnings 26.5x 30.3x 37.5x 33.8x 34.4x Gross Profit Margin 78.6% 78.4% 78.1% 77.9% 77.9% Gross Profit Margin 59.8% 59.5% 58.8% 58.1% 57.2% EBITDA Margin 18.3% 18.2% 18.0% 19.2% 17.8% EBITDA Margin 18.4% 18.9% 17.8% 15.7% 14.9% Net Income Margin 8.7% 9.6% 8.2% 8.1% 9.6% Net Income Margin 10.3% 8.9% 7.8% 7.2% 6.5% TTM Revenue Grow th (YoY) 16.8% 26.3% 19.4% 20.1% 23.1% TTM Revenue Grow th (YoY) 18.1% 20.1% 20.8% 17.3% 17.5% TTM EBITDA Grow th (YoY) 6.2% 13.2% 20.5% 11.2% 13.3% TTM EBITDA Grow th (YoY) 16.4% 22.6% 10.9% 6.1% 8.3% TTM Earnings Grow th (YoY) -25.5% -15.3% -6.9% -1.1% -3.1% TTM Earnings Grow th (YoY) -19.8% -10.5% 0.8% 1.5% 12.2% Current Ratio 1.2 1.6 1.7 2.0 2.0 Current Ratio 1.3 1.7 1.3 1.4 1.6 Cash as Percent of Market Cap 15.9% 14.1% 13.4% 14.5% 13.2% Cash as Percent of Market Cap 14.6% 13.1% 12.1% 11.9% 12.2% Enterprise Value Grow th (YoY) -3.4% 9.6% -12.7% -3.6% -3.8% Enterprise Value Grow th (YoY) 37.0% 33.3% 7.0% 11.0% 2.3%

Storage , Data Mgm & Inte gration 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 2.2x 2.5x 2.4x 2.4x 2.3x EV/EBITDA 9.7x 10.3x 9.4x 9.2x 8.7x EV/Earnings 18.1x 19.8x 17.6x 16.9x 14.6x Gross Profit Margin 75.7% 74.6% 74.8% 74.5% 73.8% EBITDA Margin 22.3% 21.9% 22.2% 21.4% 21.0% Net Income Margin 12.0% 12.2% 12.5% 12.5% 12.3% TTM Revenue Grow th (YoY) 8.5% 9.4% 7.7% 6.0% 5.4% TTM EBITDA Grow th (YoY) 11.0% 14.2% 16.7% 12.4% 2.0% TTM Earnings Grow th (YoY) -20.9% -20.7% -11.2% -6.6% -8.3% Current Ratio 2.0 2.0 2.3 2.2 2.3 Cash as Percent of Market Cap 18.7% 19.8% 19.8% 19.9% 21.7% Enterprise Value Grow th (YoY) 0.0% 0.3% -4.8% 8.6% -1.7%

Supply Chain Management & Logistics 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 2.5x 2.6x 2.5x 2.5x 2.9x EV/EBITDA 12.0x 13.1x 12.6x 12.6x 14.5x EV/Earnings 19.2x 22.0x 24.7x 20.5x 27.7x Gross Profit Margin 57.0% 57.8% 58.6% 58.2% 57.9% EBITDA Margin 16.4% 17.1% 17.5% 17.2% 16.6% Net Income Margin 10.3% 10.6% 11.1% 10.4% 10.4% TTM Revenue Grow th (YoY) 20.4% 14.9% 18.4% 16.2% 14.9% TTM EBITDA Grow th (YoY) 52.8% 69.2% 67.5% 65.4% 29.7% TTM Earnings Grow th (YoY) -22.5% -28.8% -36.9% -18.2% -9.3% Current Ratio 2.5 2.6 2.6 2.7 2.9 Cash as Percent of Market Cap 16.2% 14.3% 13.4% 14.2% 9.2% Enterprise Value Grow th (YoY) 35.3% 34.4% 34.5% 41.9% 37.9%

Systems Management 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 5.5x 5.9x 5.9x 5.5x 4.5x EV/EBITDA 20.9x 22.2x 23.0x 22.3x 18.9x EV/Earnings 31.9x 36.3x 39.0x 36.6x 31.9x Gross Profit Margin 83.7% 84.2% 84.6% 85.0% 85.0% EBITDA Margin 26.1% 26.4% 26.2% 25.8% 25.4% Net Income Margin 18.2% 19.2% 18.5% 16.5% 15.8% TTM Revenue Grow th (YoY) 17.9% 17.7% 18.1% 18.1% 16.5% TTM EBITDA Grow th (YoY) 12.3% 18.4% 20.5% 22.1% 8.9% TTM Earnings Grow th (YoY) -22.2% -13.6% -7.9% -13.1% -2.2% Current Ratio 1.6 1.5 1.5 1.7 1.5 Cash as Percent of Market Cap 11.5% 13.0% 12.4% 11.1% 11.4% Enterprise Value Grow th (YoY) 2.3% 5.4% 8.0% 21.6% 8.4%

35| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX B: 2012 SAAS PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

CRM & M ark e ting 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 3.7x 5.3x 5.8x 5.2x 4.3x EV/EBITDA 102.8x 78.4x 109.6x 167.9x 195.8x EV/Earnings 53.8x 58.0x 64.0x 80.7x 51.2x Gross Profit Margin 71.0% 71.3% 71.3% 71.1% 71.4% EBITDA Margin 4.3% 4.7% 4.3% 4.4% 3.1% Net Income Margin 0.2% -0.5% -1.3% -1.4% -5.3% TTM Revenue Grow th (YoY) 25.2% 36.8% 28.8% 28.5% 36.1% TTM EBITDA Grow th (YoY) 23.0% 47.5% 34.0% 30.9% 21.9% TTM Earnings Grow th (YoY) 25.2% 40.7% 85.5% 52.5% 31.4% Current Ratio 1.8 1.7 2.9 1.5 2.6 Cash as Percent of Market Cap 21.4% 11.1% 11.3% 14.4% 12.9% Enterprise Value Grow th (YoY) -6.6% -2.9% -20.3% 7.4% 17.9%

ERP & Supply Chain 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 5.3x 5.0x 5.0x 5.5x 5.7x EV/EBITDA 53.2x 52.8x 55.0x 67.2x 76.6x EV/Earnings 163.9x 57.2x 65.1x 131.3x 113.5x Gross Profit Margin 71.6% 71.8% 71.7% 71.1% 70.2% EBITDA Margin 8.3% 4.5% 4.4% 6.7% 7.2% Net Income Margin 3.7% 2.5% 2.0% 3.5% 3.9% TTM Revenue Grow th (YoY) 22.0% 24.1% 24.6% 26.3% 25.3% TTM EBITDA Grow th (YoY) -14.1% -11.8% -1.7% 7.6% -4.6% TTM Earnings Grow th (YoY) -58.7% -81.8% -87.8% 7.2% 12.4% Current Ratio 1.6 1.6 1.6 1.6 1.4 Cash as Percent of Market Cap 12.2% 11.5% 10.9% 8.5% 10.9% Enterprise Value Grow th (YoY) 82.3% 71.6% 48.0% 76.3% 60.5%

Vertically Focused 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 5.1x 6.0x 4.5x 5.7x 4.4x EV/EBITDA 29.2x 33.2x 29.9x 33.2x 33.0x EV/Earnings 88.8x 17.5x 79.6x 18.0x 77.7x Gross Profit Margin 60.5% 60.6% 60.5% 60.4% 60.4% EBITDA Margin 15.2% 15.2% 15.3% 14.1% 13.4% Net Income Margin 4.4% 12.2% 10.4% 10.4% 9.3% TTM Revenue Grow th (YoY) 34.2% 34.5% 34.4% 30.3% 23.0% TTM EBITDA Grow th (YoY) 22.4% 25.9% 16.1% 18.3% 15.5% TTM Earnings Grow th (YoY) -25.3% -57.6% 8.8% -43.9% 4.2% Current Ratio 1.6 1.8 2.8 2.7 2.5 Cash as Percent of Market Cap 4.9% 4.9% 4.8% 4.6% 5.6% Enterprise Value Grow th (YoY) 25.4% 23.7% 15.0% 42.6% 11.0%

Workforce Management 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 6.3x 6.5x 7.0x 8.3x 10.5x EV/EBITDA 71.3x 66.0x 71.3x 80.2x 69.6x EV/Earnings 429.6x 410.8x 399.4x 368.3x 243.2x Gross Profit Margin 51.3% 54.1% 54.7% 55.3% 56.2% EBITDA Margin -19.1% -15.5% -17.9% -17.6% -19.4% Net Income Margin -45.6% -39.2% -27.0% -25.7% -26.4% TTM Revenue Grow th (YoY) 19.6% 36.0% 19.6% 21.0% 21.8% TTM EBITDA Grow th (YoY) -41.6% -29.6% -12.5% -4.7% -36.9% TTM Earnings Grow th (YoY) 10.4% -55.2% -44.8% -63.6% -14.2% Current Ratio 1.9 1.4 1.3 1.2 1.3 Cash as Percent of Market Cap 11.2% 7.1% 6.5% 5.0% 7.1% Enterprise Value Grow th (YoY) 42.6% 36.3% 23.0% 87.1% 55.6%

Other SaaS 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 2.0x 7.2x 5.9x 6.5x 5.4x EV/EBITDA 21.5x 24.3x 24.8x 37.3x 38.2x EV/Earnings 34.4x 33.7x 37.5x 40.9x 35.8x Gross Profit Margin 71.5% 71.6% 72.2% 71.6% 71.8% EBITDA Margin 11.0% 11.1% 11.6% 10.5% 10.5% Net Income Margin 1.2% 1.0% -1.3% -2.0% -0.5% TTM Revenue Grow th (YoY) 21.5% 21.0% 30.3% 25.7% 25.8% TTM EBITDA Grow th (YoY) 6.8% 11.9% 4.8% 0.6% -0.8% TTM Earnings Grow th (YoY) -38.4% -8.8% 38.7% 42.2% 41.8% Current Ratio 2.1 2.1 2.5 2.7 2.4 Cash as Percent of Market Cap 22.8% 15.6% 13.8% 13.1% 13.3% Enterprise Value Grow th (YoY) -22.5% -32.0% 18.7% 85.7% 53.0%

36| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX C: 2012 INTERNET PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Ad Tech & Lead Generation 4Q11 1Q12 2Q12 3Q12 4Q12 Infrastructure 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 2.6x 2.6x 2.1x 1.7x 1.9x EV/Revenue 1.8x 1.9x 1.8x 0.9x 1.0x EV/EBITDA 11.9x 14.1x 11.4x 13.3x 12.0x EV/EBITDA 12.5x 14.2x 14.1x 11.9x 11.8x EV/Earnings 16.8x 28.1x 28.8x 29.6x 28.0x EV/Earnings 23.8x 29.4x 23.9x 19.4x 21.2x Gross Profit Margin 66.7% 67.7% 67.6% 68.7% 67.6% Gross Profit Margin 65.8% 66.7% 66.6% 65.8% 65.2% EBITDA Margin 17.8% 13.9% 14.0% 14.4% 14.1% EBITDA Margin 12.6% 11.6% 10.9% 8.3% 7.5% Net Income Margin 6.3% 4.4% 3.6% 4.3% 6.4% Net Income Margin 3.5% 3.0% 4.6% 3.4% 1.7% TTM Revenue Grow th (YoY) 29.8% 34.4% 37.5% 35.3% 32.9% TTM Revenue Grow th (YoY) 16.2% 24.4% 19.7% 13.5% 12.5% TTM EBITDA Grow th (YoY) 15.5% 26.3% 26.8% 16.4% 17.9% TTM EBITDA Grow th (YoY) 13.2% 23.8% 15.6% -1.9% -13.9% TTM Earnings Grow th (YoY) -10.5% -22.9% -16.6% -9.3% -7.7% TTM Earnings Grow th (YoY) -22.4% -6.0% 22.2% 41.5% 67.3% Current Ratio 3.0 2.9 2.8 2.7 2.6 Current Ratio 2.8 2.6 2.9 3.3 3.1 Cash as Percent of Market Cap 14.3% 17.3% 20.6% 20.8% 20.1% Cash as Percent of Market Cap 19.5% 23.9% 22.3% 27.7% 29.0% Enterprise Value Grow th (YoY) -0.1% -12.8% -18.6% -3.6% -0.8% Enterprise Value Grow th (YoY) -14.5% -24.8% -33.3% -17.8% 0.6%

Com m e rce 4Q11 1Q12 2Q12 3Q12 4Q12 Services 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 1.0x 0.9x 0.7x 0.8x 1.2x EV/Revenue 3.9x 2.3x 1.9x 1.9x 2.4x EV/EBITDA 13.0x 16.6x 18.8x 15.1x 15.1x EV/EBITDA 37.4x 18.1x 16.9x 16.4x 17.7x EV/Earnings 27.5x 15.4x 14.6x 14.8x 22.6x EV/Earnings 64.5x 56.5x 41.8x 37.2x 44.0x Gross Profit Margin 37.8% 36.9% 37.0% 37.3% 38.6% Gross Profit Margin 66.5% 66.9% 67.6% 69.2% 69.8% EBITDA Margin 9.3% 8.6% 8.3% 8.3% 8.4% EBITDA Margin 0.2% 6.8% 6.7% 7.5% 8.7% Net Income Margin 2.3% 3.8% 3.1% 3.1% 2.1% Net Income Margin -8.9% -2.7% 0.2% 4.1% 2.1% TTM Revenue Grow th (YoY) 14.0% 14.3% 17.5% 12.2% 11.8% TTM Revenue Grow th (YoY) 23.5% 53.2% 54.5% 41.9% 32.7% TTM EBITDA Grow th (YoY) 1.5% 2.0% 5.2% 8.9% 19.3% TTM EBITDA Grow th (YoY) 17.6% 22.6% 22.3% 4.6% 17.7% TTM Earnings Grow th (YoY) 24.6% 21.1% 31.2% 0.4% -16.5% TTM Earnings Grow th (YoY) -13.5% -25.8% -47.3% 7.0% -14.3% Current Ratio 2.2 1.8 1.8 1.9 1.6 Current Ratio 1.4 1.3 1.1 1.2 1.7 Cash as Percent of Market Cap 15.6% 14.8% 14.0% 13.0% 11.9% Cash as Percent of Market Cap 13.3% 11.8% 12.7% 15.1% 11.8% Enterprise Value Grow th (YoY) -14.6% -28.3% -26.9% -17.4% 6.4% Enterprise Value Grow th (YoY) -35.5% -37.4% -43.2% -16.0% -21.9%

Conte nt & M e dia 4Q11 1Q12 2Q12 3Q12 4Q12 Social 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 1.6x 1.8x 1.6x 1.3x 1.4x EV/Revenue 12.4x 13.6x 13.0x 8.7x 7.7x EV/EBITDA 10.5x 10.4x 10.1x 10.8x 10.9x EV/EBITDA 39.3x 33.6x 30.4x 29.3x 36.4x EV/Earnings 17.0x 17.4x 20.8x 19.2x 22.0x EV/Earnings 365.6x 231.7x 50.6x 98.0x 99.7x Gross Profit Margin 54.2% 54.1% 54.0% 53.9% 52.5% Gross Profit Margin 75.1% 76.0% 74.3% 71.1% 69.1% EBITDA Margin 14.8% 13.9% 14.0% 13.2% 14.1% EBITDA Margin 6.5% 1.8% 2.6% 8.2% 12.9% Net Income Margin 4.1% 4.9% 4.8% 4.0% 1.3% Net Income Margin -12.5% -3.6% -3.3% 1.5% -2.0% TTM Revenue Grow th (YoY) 25.6% 25.8% 15.5% 12.3% 10.5% TTM Revenue Grow th (YoY) 117.3% 79.1% 64.2% 56.8% 57.8% TTM EBITDA Grow th (YoY) 13.3% 17.6% -7.8% -4.5% 6.0% TTM EBITDA Grow th (YoY) -8.6% -22.5% -33.8% -26.5% -10.1% TTM Earnings Grow th (YoY) -27.5% 17.1% 22.8% 34.3% 4.1% TTM Earnings Grow th (YoY) -4.7% 5.6% -10.1% -0.8% 6.5% Current Ratio 2.5 2.3 2.0 2.1 1.6 Current Ratio 2.2 2.9 4.4 5.5 5.3 Cash as Percent of Market Cap 26.4% 23.3% 22.7% 26.9% 20.1% Cash as Percent of Market Cap 19.7% 13.7% 13.3% 17.2% 17.2% Enterprise Value Grow th (YoY) -44.3% -24.0% -28.6% -21.9% -6.1% Enterprise Value Grow th (YoY) n/a n/a n/a -8.0% -7.7%

Gaming 4Q11 1Q12 2Q12 3Q12 4Q12 Travel 4Q11 1Q12 2Q12 3Q12 4Q12 EV/Revenue 3.1x 3.2x 3.4x 2.1x 2.0x EV/Revenue 5.4x 4.7x 3.1x 2.5x 3.5x EV/EBITDA 6.1x 4.1x 4.0x 3.4x 3.7x EV/EBITDA 15.8x 15.0x 15.5x 16.5x 16.0x EV/Earnings 8.4x 8.8x 8.2x 8.4x 6.0x EV/Earnings 23.2x 25.5x 27.8x 25.9x 24.1x Gross Profit Margin 75.8% 74.6% 73.2% 71.9% 70.4% Gross Profit Margin 81.6% 81.8% 82.0% 82.0% 81.6% EBITDA Margin 44.8% 44.2% 45.5% 43.9% 42.6% EBITDA Margin 16.4% 19.0% 18.9% 19.4% 19.1% Net Income Margin 34.1% 34.4% 31.8% 28.9% 29.8% Net Income Margin 3.8% 4.3% 11.8% 10.4% 8.9% TTM Revenue Grow th (YoY) 34.2% 35.7% 33.1% 32.0% 25.1% TTM Revenue Grow th (YoY) 31.0% 31.5% 29.1% 24.0% 21.8% TTM EBITDA Grow th (YoY) 15.2% 25.0% 24.9% 17.1% 14.9% TTM EBITDA Grow th (YoY) 14.8% 22.4% 26.5% 25.5% -0.2% TTM Earnings Grow th (YoY) -15.1% -10.3% 1.2% -14.9% -8.6% TTM Earnings Grow th (YoY) -17.2% -49.0% -41.5% -52.7% -10.9% Current Ratio 2.7 2.7 2.4 2.4 2.3 Current Ratio 2.1 2.1 2.3 2.1 2.3 Cash as Percent of Market Cap 30.0% 32.3% 27.6% 34.1% 37.8% Cash as Percent of Market Cap 9.8% 13.4% 13.0% 15.3% 17.4% Enterprise Value Grow th (YoY) -26.2% -5.9% -8.6% -31.0% 14.6% Enterprise Value Grow th (YoY) -20.6% -25.6% -35.6% -30.5% -27.3%

37| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX D: 2012 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS

TTM Rev Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDA Grow th

SAP Ariba Inc. (NasdaqGS:ARBA) $4,607,750,000 $4,411,350,000 8.8x 108.0x 27.3% Elliott Management Corporation Compuw are Corporation (NasdaqGS:CPWR) $2,257,000,000 $2,341,000,000 2.4x 15.1x -2.3% Dell Quest Softw are Inc. (NasdaqGS:QSFT) $2,507,250,000 $2,244,050,000 2.6x 14.0x 12.4% Vista Equity Partners Misys plc (LSE:MSY) $2,141,030,000 $2,042,200,000 3.2x 16.1x 17.9% Oracle Corporation Taleo Corp. (NasdaqGS:TLEO) $1,921,440,000 $1,805,470,000 5.7 60.9x 32.9% RedPrairie Corporation JDA Softw are Group Inc. (NasdaqGS:JDAS) $2,213,000,000 $1,804,000,000 2.7x 10.7x 4.7% IBM Kenexa Corp. (NYSE:KNXA) $1,396,790,000 $1,307,100,000 4.1x 49.0x 32.1% Verint Systems Inc. Comverse Technology Inc. (NasdaqGS:CMVT) $1,539,990,000 $1,124,830,000 0.7x 7.4x 1.4% Thoma Bravo, LLC Deltek, Inc (NasdaqGS:PROJ) $1,070,590,000 $1,030,500,000 3.0x 18.1x 6.9% Riverbed Technology OPNET Technologies Inc. (NasdaqGS:OPNT) $993,760,000 $899,160,000 5.0x 26.7x 11.5% Oracle Corporation Eloqua, Inc. (NasdaqGM:ELOQ) $956,470,000 $871,000,000 9.7x - 34.2% NCR Corp. Retalix Ltd. (TASE:RTLX) $746,370,000 $605,100,000 2.4x 28.4x 17.4% Synopsys Inc. Springsoft Inc. (TSEC:2473) $392,220,000 $284,380,000 3.6x 10.2x 6.9% Blackbaud Inc. Convio, Inc. (NasdaqGS:CNVO) $326,320,000 $247,420,000 3.4 35.5x 15.2% Thoma Bravo, LLC Mediw are Information Systems, Inc. (NasdaqCM:MEDW) $196,270,000 $156,120,000 2.4x 11.5x 16.3% Emulex Corporation Endace Limited (AIM:EDA) $122,260,000 $117,920,000 2.8x 48.4x -3.6% DTS Inc. SRS Labs, Inc. (NasdaqGM:SRSL) $148,100,000 $113,240,000 3.4x 50.7x 8.5% Actian Corporation Pervasive Softw are Inc. (NasdaqGM:PVSW) $153,100,000 $110,380,000 2.3x 30.6x 2.0% Canon Inc. Image Recognition Integrated Systems Group S.A. (ENXTBR:IRIS) $88,370,000 $106,600,000 0.8x 12.2x -24.6% Lagardere Active SAS LeGuide.com S.A. (ENXTPA:ALGUI) $80,170,000 $91,960,000 2.6x 7.4x 13.0% Informatica Heiler Softw are AG (XTRA:HLR) $107,890,000 $88,030,000 3.7x - 13.1% CreaFund CVBA; Uniholding SA Transics International NV (ENXTBR:TRAN) $64,310,000 $79,780,000 1.3x 7.7x 19.9% R.R. Donnelley & Sons EDGAR Online Inc. (NasdaqCM:EDGR) $74,670,000 $71,200,000 2.3x - 49.3% Vector Capital 20-20 Technologies Inc. (TSX:TWT) $76,180,000 $69,710,000 1.0x 9.2x 7.9% Myriad Group AG Synchronica PLC (AIM:SYNC) $50,520,000 $49,230,000 2.7x - 98.7% Prow ebClub Prow ebCE (ENXTPA:ALPRW) $34,250,000 $44,480,000 0.8x 14.9x 20.3% Siemens IBS AG (XTRA:IBB) $28,910,000 $43,890,000 1.3x 11.5x 16.9% Clausal Computing Oy Tectia Oyj (HLSE:TEC1V) $11,290,000 $17,210,000 1.6x - 11.4% Actian Corporation Versant Corp. (NasdaqCM:VSNT) $37,280,000 $15,700,000 1.0x - -5.0%

38| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX E: 2012 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS

Purchase Price Enterprise Value TTM Revenue EV / Buyer Seller (mm) (mm) (mm) Revenue 3D Systems Corp. INUS Technology, Inc. $35.0 $35.0 - - Kodama Studios, LLC $2.8 $2.8 - - Viztu Technologies, Inc. $1.0 $1.0 - - Access UK Ltd. Access Delta $8.4 $8.4 - - dhc Ltd. - - - - Prelytis S.A. $5.0 $5.0 - - thankQ Limited - - - - Advanced Solutions International GoLightly, Inc. - - - - Income Manager, Inc. - - - - SpaceMaster, Inc. - - - - Airbnb, Inc. DailyBooth, Inc. - - - - getSpotOn, Inc. - - - - Localmind, Corp. - - - - Apigee Corp. InstaOps Inc. - - - - Usergrid - - - - WAC Application Services Ltd, Technology Assets - - - - Autodesk, Inc. HSMWorks Aps - - - - Inf or bix , LLC - - - - Qontext Inc. - - - - Socialcam Inc. $60.0 $60.0 - - Vela Systems, Inc. - - - - Bentley Systems, Incorporated Hannappel SOFTWARE GmbH - - - - InspectTech Systems, Inc. - - - - IVARA Corporation - - - - Brady plc Navita Systems AS $27.3 $27.3 - - syseca AG $2.0 $2.0 $3.0 0.7x Systems Alternatives International LLC $9.9 $9.9 $8.1 1.2x Cisco Systems, Inc. BroadHop, Inc. - - - - (N d GS CSCO) Cariden Technologies, Inc. $141.0 $141.0 - - Cloupia, Inc. $125.0 $125.0 - - Meraki, Inc. $1,200.0 $1,200.0 $100.0 12.0x Thinksmart Technologies Limited - - - - Truviso, Inc. - - - - Virtuata, Inc. - - - - Citrix Systems, Inc. Beetil Service Management Ltd. - - - - Bytemobile, Inc. - - - - Podio ApS - - - - The Citrix XenClient Enterprise Group - - - - Zenprise, Inc. - - - - Constant Contact, Inc. CardStar, Inc. $5.8 $5.0 - - MobManager - - - - SinglePlatform, Corp. $95.0 $95.0 - -

39| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX E: 2012 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONTINUED)

Purchase Price Enterprise Value TTM Revenue EV / Buyer Seller (mm) (mm) (mm) Revenue Constellation Softw are Inc. Aptitude Solutions, Inc. and True Automation, Inc. - - - - Capital Computer Associates, Inc. - - - - Cognera Corp. - - - - Computer Softw are Innovations, Inc. (OTCBB:CSWI) $16.3 $16.3 $55.1 0.3x Conecture Technologies, LLC, MediaBox - - - - Ibcos Computers Ltd. - - - - Kestral Computing Pty Ltd. - - - - Salar, Inc. - - - - Smyth Systems Inc. - - - - Tucasi Ltd - - - - Crow dSavings.com, LLC BargainBee.com, Inc. - - - - Deal Garden - - - - Faveroo LLC - - - - UrbanDealight LLC - - - - DealerTrack, Inc. 1st Auto Transport Directory, Inc. $74.0 $74.0 - - ClickMotive LP $56.6 $56.6 $7.3 7.8x Ford Motor Company of Canada, iCONNECT DMS - - - - Dell Inc. AppAssure Softw are, Inc. - - - - Clerity Solutions, Inc. - - - - CREDANT Technologies, Inc. - - - - Gale Technologies, Inc. - - - - MAKE Technologies Inc. - - - - Quest Softw are Inc. (NasdaqGS:QSFT) $2,507.3 $2,244.1 $880.0 2.6x SonicWALL, Inc. - - - - Dropbox, Inc. AG Entertainment Inc. - - - - Snapjoy, Inc. - - - - TapEngage - - - - Ebix Inc. Fintechnix Pty Limited $5.1 $5.1 - - PlanetSoft, Inc. $40.0 $40.0 - - TriSystems Ltd. - - - - Electronics for Imaging, Inc. Metrics Sistemas de Informação Ltda. - - - - Online Print Solutions, Inc. - - - - Technique Business Systems Limited - - - - EMC Corporation Pivotal Labs, Inc. - - - - Silver Tail Systems, Inc. - - - - Syncplicity, Inc. - - - - Watch4Net Solutions Inc. - - - - Enghouse Systems Ltd. CustomCall Data Systems, Inc. $7.3 $7.3 - - Visionutveckling AB $10.9 $10.9 - - Zeacom Limited $30.6 $30.6 $28.9 1.1x ESRI GeoIQ, Inc . - - - - Geoloqi LLC - - - - Maptel Pty.Ltd - - - -

40| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX E: 2012 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONTINUED)

Purchase Price Enterprise Value TTM Revenue EV / Buyer Seller (mm) (mm) (mm) Revenue Facebook, Inc. Acrylic Softw are - - - - Caffeinated Mind, Inc. - - - - Face.com $60.0 $60.0 - - Glancee, Inc. - - - - Instagram, Inc. $1,000.0 $1,000.0 - - Karma Science, Inc. - - - - Spool - - - - Tagtile - - - - Threadsy, Inc. - - - - Google Inc. Incentive Targeting, Inc. - - - - John Wiley & Sons Inc., Travel Assets - - - - Meebo, Inc. - - - - Nik Sof tw are, Inc . - - - - Quickoffice, Inc. - - - - Sparrow SAS - - - - VirusTotal - - - - Wildfire Interactive, Inc. - - - - Groupon, Inc. Adku, Inc. $10.0 $10.0 - - CommerceInterface, Inc. - - - - DITTO.ME, INC. - - - - Hyperpublic - - - - Kima Labs, Inc. - - - - Pospitality LLC - - - - Six Times Seven Inc. - - - - Transparent Financial Services Inc - - - - UpTake Netw orks, Inc. - - - - VillageVines Inc. - - - - Grupo Linx Bitix Servicos de Tecnologia da Informacao Ltda. - - - - Compacta Tecnologia - - - - Microvix Softw are Matriz - - - - Hexagon AB GTA Geoinformatik GmbH - - - - MicroSurvey Softw are Inc. - - - - my V R Sof tw ar e A S - - - - IHS Inc. BDW Automotive GmbH $8.0 $8.0 - - Citation Technologies Inc., CyberRegs Business $11.0 $11.0 - - GlobalSpec, Inc. $135.0 $135.0 - - Invention Machine Corporation $40.0 $40.0 - - PartMiner WorldWide Inc., Computer Assisted Product - - - - Xedar Corporation (OTCPK:XDRC) $28.0 $28.0 - -

41| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX E: 2012 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONTINUED)

Purchase Price Enterprise Value TTM Revenue EV / Buyer Seller (mm) (mm) (mm) Revenue IBM Butterfly Softw are Ltd. - - - - Green Hat Softw are Limited - - - - Kenexa Corp. (NYSE:KNXA) $1,396.8 $1,307.1 $318.0 4.1x StoredIQ, Inc. - - - - TeaLeaf Technology, Inc. - - - - Varicent Softw are Inc. - - - - Vivisimo, Inc. - - - - WorkLight Ltd. - $70.0 $3.5 20.0x Internet Marketing Ninjas, Inc. Cre8asiteforums - - - - DevShed, LLC - - - - WebmasterWorld, Inc. - - - - Kabam, Inc. Fearless Studios - - - - Gravity Bear LLC - - - - Wild Shadow Studios, Inc. - - - - Kronos Incorporated OptiLink Inc. - - - - Smart Computer Holdings Ltd. - - - - WebApps, Inc. - - - - LivePerson Inc. Amadesa, Inc. - - - - ENGAGE Pty Ltd. - - - - Look IO Inc - - - - Madison Dearborn Partners Aderant Holdings, Inc. - - - - QuickPlay Media, Inc. - - - - Q9 Netw orks Inc. $1,058.2 $1,058.2 - - Manheim Auctions Ltd. Dealer Auction Ltd. - - - - Motors.co.uk Ltd. - - - - Motors.co.uk Ltd. - - - - McKesson Corporation Emendo Limited - - - - MED3000, Inc. - - - - MedVentive, Inc. - - - - peerVue, Inc. - - - - Proventys, Inc., CDS Oncology Assets - - - - Mediw are Information Systems Cobbler ICT Services BV, Cyto Management System $2.2 $2.2 - - MediServe Information Systems, Inc. - - - - Strategic Healthcare Group LLC $8.0 $8.0 - - Merkle, Inc. 5th Finger Pty Ltd. - - - - Brilig LLC - - - - Social Amp Inc. - - - - Microsoft Corporation MarketingPilot Softw are, LLC - - - - PhoneFactor, Inc. - - - - Yammer, Inc. (revenue estimate) $1,200.0 $1,200.0 $30.0 40.0x NCR Corp. Retalix Ltd. (TA SE:RTLX) $746.4 $605.1 $257.5 2.4x Transoft International, Inc. - - - - Wyse Sistemas de Informática Ltda. - - - -

42| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX E: 2012 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONTINUED)

Purchase Price Enterprise Value TTM Revenue EV / Buyer Seller (mm) (mm) (mm) Revenue Noble Systems Corporation ALI Solutions, Inc. - - - - Stratasoft, Inc. - - - - TelStar Hosted Services, Inc. - - - - Oracle Corporation ClearTrial, LLC - - - - Collective Intellect, Inc. - - - - DataRaker Inc. - - - - Eloqua, Inc. (NasdaqGM:ELOQ) $956.5 $871.0 $90.1 9.7x Instantis, Inc. - - - - Inv olv er Inc . - - - - SelectMinds, Inc. - - - - Skire, Inc. - - - - Taleo Corp. (NasdaqGS:TLEO) $1,921.4 $1,805.5 $315.6 5.7x Vitrue, Inc. - - - - Persistent Systems Limited Doyenz, Inc. - - - - Doyenz, Inc., rCloud - - - - Openw ave Systems Inc., Location Business $6.0 $6.0 - - RedPrairie Corporation JDA Softw are Group Inc. (NasdaqGS:JDAS) $2,212.6 $1,804.3 $658.5 2.7x Planora Inc. - - - - Vortex Connect Inc. - - - - Rocket Softw are, Inc. International Business Machines., iCluster Business - - - - OpenTech Systems, Inc. - - - - Progress Softw are Corp., Shadow Business - - - - Sirius Softw are Inc. - - - - Zephyr Development Corporation - - - - S&P Capital IQ Credit Market Analysis Limited - - - - QuantHouse - - - - R2 Financial Technologies Inc. - - - - salesforce.com, inc Buddy Media, Inc. $745.0 $745.0 - - ChoicePass Inc. - - - - GoInstant Inc. $70.0 $70.0 $4.7 15.0x Stypi - - - - Thinkf use - - - - SAP AG Ariba Inc. (NasdaqGS:ARBA) $4,607.8 $4,411.4 $501.9 8.8x datango AG - - - - Syclo LLC - - - - Shutterfly, Inc. Eastman Kodak Co., Certain Assets $23.8 $23.8 - - Penguin Digital, Inc. - - - - Photoccino Ltd. - - - -

43| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX E: 2012 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONTINUED)

Purchase Price Enterprise Value TTM Revenue EV / Buyer Seller (mm) (mm) (mm) Revenue Siemens AG IBS AG (XTRA:IBB) $28.9 $43.9 $33.0 1.3x Invensys Rail Pty Ltd $2,787.0 $2,787.0 $1,238.7 2.3x Kineo CAM Corporation - - - - LMS International NV $867.0 $867.0 $149.5 5.8x Perfect Costing Solutions GmbH - - - - Senergy Sistemas de Medicao S.A. - - - - VRcontext International s.a. - - - - Six Degrees Technology Group Firstserv and Serverstream Ltd. - - - - The Cloud Computing Centre Ltd. - - - - Ultraspeed UK Ltd. - - - - Solera Holdings Inc. Actual Systems of America Inc. - - - - Apu Solutions, Inc. - - - - Carw eB Limited - - - - License Monitor, Inc. - - - - MENSA ELECT S.A . - - - - Title Technologies Inc. - - - - Symantec Corporation LiveOffice LLC (revenue estimate) $115.0 $115.0 $39.7 2.9x Nukona, Inc. - - - - Nukona, Inc. - - - - Odyssey Softw are, Inc. - - - - Synchronoss Technologies, Inc. Miyow a Inc. $59.0 $59.0 $12.9 4.6x New Bay Softw are Limited $55.5 $55.5 - - SpeechCycle, Inc. $38.0 $38.0 - - Synopsys Inc. Ciranova, Inc. - - - - RSoft Design Group, Inc. - - - - Springsoft Inc. (TSEC:2473) $392.2 $284.4 $79.7 3.6x The Descartes Systems Group Exentra Transport Solutions Limited $17.0 $17.0 - - GeoMicro, Inc. - - - - Infodis B.V. $3.3 $3.3 - - Integrated Export Systems, Ltd. $34.2 $34.2 - - Thoma Bravo, LLC Crossbeam Systems, Inc. - - - - Deltek, Inc $1,070.6 $1,030.5 $341.2 3.0x Mediw are Information Systems, Inc. (NasdaqCM:MEDW) $196.3 $156.1 $64.5 2.4x Thomson Reuters Corporation Apsmart Limited - - - - Avanon AG - - - - Dr Tax Softw are Inc. - - - - Fast Facts Computer Systems Ltd. - - - - FISCOSoft Editora Ltda - - - - Know ledge Platform Pte. Ltd., E-Learning Business - - - - MarkMonitor, Inc. - - - - Novaprolink Tecnologia Ltda. - - - - RedEgg Solutions, Inc. - - - - Zaw ya Limited - - - -

44| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX E: 2012 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONTINUED)

Purchase Price Enterprise Value TTM Revenue EV / Buyer Seller (mm) (mm) (mm) Revenue Trimble Navigation Limited GEOTrac Systems Inc. - - - - Logicw ay BV - - - - Plancal Holding AG - - - - SketchUp - - - - TMW Systems, Inc. $335.0 $335.0 $96.0 3.5x Vico Softw are, Inc. - - - - Tw itter, Inc. Cabana - - - - Context Media Technologies, Inc. - - - - Dasient, Inc. - - - - Hotspots.io - - - - Posterous, Inc. - - - - RestEngine - - - - Vine - - - - Vista Equity Partners Bullhorn, Inc. - - - - CDC Sof tw are Corporation (OTCPK:CDCS.Y ) $250.5 $264.8 $218.8 1.2x Consona Corporation - - - - Misys plc (LSE:MSY) $2,141.0 $2,042.2 $644.2 3.2x Taxw are, LP - - - - VMw are, Inc. Cetas Softw are, Inc. - - - - DynamicOps, Inc. - - - - Nicira Netw orks, Inc. $1,260.0 $1,260.0 - - Pattern Insight Inc., Log Insight Platform - - - - Wanova, Inc. $100.0 $100.0 - - Volaris Group Inc. Digital Arts and Sciences Corporation - - - - Lender Processing Services, Inc., Assets - - - - SpecTec Group Holdings Limited - - - - Travis Softw are Corp. - - - - Wolters Kluw er NV E.D.S Informática, S.A. - - - - Financial Architects nv - - - - Health Language, Inc. - - - - S&C Legal Know ledge Management B.V. - - - - Yahoo! Inc. Community Factory, Inc. $12.8 $12.8 - - CyberAgent FX Inc. $252.9 $252.9 $102.4 2.5x OnTheAir Inc. - - - - Stamped, Inc. - - - - Zillow , Inc. Buyf olio, Inc. - - - - HotPads, Inc. $16.0 $16.0 - - Mortech Inc. $17.4 $17.4 - - RentJuice Corporation $40.0 $37.4 $0.4 102.4x Zynga, Inc. A Bit Lucky, Inc. - - - - November Softw are, LLC - - - - Wild Needle, Inc. - - - - Zynga Eugene - - - -

45| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX F: 2012 MERGERS AND ACQUISITIONS, SELECT SOFTWARE INDUSTRY MEGA-DEALS

TTM Rev Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDA Grow th

Scientific-Atlanta, LLC NDS Group Ltd. $5,022,330,000 $4,964,760,000 5.0x 17.5x 7.7% SAP (DB:SAP) Ariba Inc. (NasdaqGS:ARBA) $4,607,750,000 $4,411,350,000 8.8x 108.0x 27.3% Siemens AG (DB:SIE) Invensys Rail Pty Ltd $2,786,980,000 $2,786,980,000 2.3x - - Elliott Management Corporation Compuw are Corporation (NasdaqGS:CPWR) $2,257,000,000 $2,341,000,000 2.4x 15.1x -2.3% Dell Inc. (NasdaqGS:DELL) Quest Softw are Inc. (NasdaqGS:QSFT) $2,507,250,000 $2,244,050,000 2.6x 14.0x 12.4% Vista Equity Partners Misys plc (LSE:MSY) $2,141,030,000 $2,042,200,000 3.2x 16.1x 17.9% Oracle Corporation Taleo Corp. (NasdaqGS:TLEO) $1,921,440,000 $1,805,470,000 5.7 60.9x 32.9% RedPrairie Corporation JDA Softw are Group Inc. (NasdaqGS:JDAS) $2,213,000,000 $1,804,000,000 2.7x 10.7x 4.7% Private Equity Consortium Ancestry.com Inc. (NasdaqGS:ACOM) $1,609,060,000 $1,544,440,000 3.4x 10.0x 21.7% Roper Industries Inc. (NYSE:ROP) Sunquest Information Systems, Inc. $1,390,000,000 $1,390,000,000 - - - IBM (NYSE:IBM) Kenexa Corp. (NYSE:KNXA) $1,396,790,000 $1,307,100,000 4.1x 49.0x 16.4% VMw are, Inc. (NYSE:VMW) Nicira Netw orks, Inc. $1,260,000,000 $1,260,000,000 - - - Microsoft Corporation (NasdaqGS:MSFT) Yammer, Inc.* $1,200,000,000 $1,200,000,000 40.0x - - Cisco Systems, Inc. (NasdaqGS:CSCO) Meraki, Inc.* $1,200,000,000 $1,200,000,000 12.0x - - Verint Systems Inc. (NasdaqGS:VRNT) Comverse Technology Inc. (NasdaqGS:CMVT) $1,539,990,000 $1,124,830,000 0.7x 7.4x 1.4% Thoma Bravo, LLC Deltek, Inc (NasdaqGS:PROJ) $1,070,590,000 $1,030,500,000 3.0x 18.3x 6.9% Facebook, Inc. (NasdaqGS:FB) Instagram, Inc. $1,000,000,000 $1,000,000,000 - - - Apax Partners Worldw ide LLP; JMI Equity Paradigm B.V. $1,000,000,000 $1,000,000,000 - - - Expedia Inc. (NasdaqGS:EXPE) trivago GmbH $627,610,000 $942,610,000 - - - Riverbed Technology, Inc. OPNET Technologies Inc. (NasdaqGS:OPNT) $993,760,000 $899,160,000 5.0x 26.7x 11.5% (GS)Oracle Corporation Eloqua, Inc. (NasdaqGM:ELOQ) $956,470,000 $871,000,000 9.7x - 34.2% Siemens AG (DB:SIE) LMS International NV* $866,960,000 $866,960,000 5.8x - - salesforce.com, inc (NYSE:CRM) Buddy Media, Inc. $745,000,000 $745,000,000 - - - NCR Corp. (NYSE:NCR) Retalix Ltd. (TASE:RTLX) $746,370,000 $605,100,000 2.4x 28.4x 17.4%

46| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX G: 2012 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS

Enterprise TTM Date Buyer Seller Value Re ve nue EV /Re v 12/31/12 Volaris Group Inc. Travis Softw are Corp. - - - 12/21/12 Kantar Media North America AdGooroo, LLC - - - 12/21/12 Groupon, Inc. (NasdaqGS:GRPN) CommerceInterface, Inc. - - - 12/21/12 Intelligrated, Inc. Knighted, Inc. - - - 12/20/12 Leger Marketing Inc. Leger Metrics - - - 12/19/12 Oracle Corporation (NasdaqGS:ORCL) Eloqua, Inc. (NasdaqGM:ELOQ) $871,000,000 $90,000,000 9.7x 12/18/12 One97 Communications Limited Srishti TechNet Pvt. Ltd. $500,000 - - 12/18/12 reInvention, LLC Critical Mix, Inc. - - - 12/17/12 The Home Depot, Inc. (NYSE:HD) Black Locus - - - 12/12/12 Perfect Sense Digital, LLC KickApps Corporation - - - 12/12/12 Kuepa SA 110k.com Ltda. - - - 12/12/12 Consumers, Contractors & Carriers Netw ork, LLC Millhouse 1889, LLC - - - 12/12/12 ALSO-Actebis Holding AG (SWX:ALSN) Atomblock B.V. - - - 12/11/12 Outbrain Inc. Scribit LLC - - - 12/11/12 WatchDox, Inc. InstallFree, Inc. - - - 12/10/12 Advanced Computer Softw are Group plc (AIM:ASW) Advanced Learning $10,040,000 $21,700,000 0.5x 12/10/12 GoConcierge Gold Key Solutions, Inc. - - - 12/07/12 Solera Holdings Inc. (NYSE:SLH) Carw eB Limited - - - 12/07/12 Accruent, LLC Evoco Inc. - - - 12/05/12 Lo-Q Plc (AIM:LOQ) Accesso LLC $22,280,000 $5,700,000 3.9x 12/05/12 Brazos Higher Education Service Corporation, Inc. Interview Stream, LLC - - - 12/04/12 Ness Technologies Inc. Imano plc - - - 12/04/12 YourMembership.com, Inc. Affiniscape, Inc. - - - 12/03/12 Infor Global Solutions, Inc. Orbis Global Inc. - - - 12/03/12 Paychex, Inc. (NasdaqGS:PAYX) Expensew ire, LLC - - - 11/30/12 SAS Institute Inc. rPath, Inc. - - - 11/28/12 Google Inc. (NasdaqGS:GOOG) Incentive Targeting, Inc. - - - 11/28/12 Bullhorn, Inc. MaxHire Solutions Inc. - - - 11/26/12 Lionbridge Technologies Inc. (NasdaqGM:LIOX) Virtual Solutions, Inc. $7,600,000 - - 11/26/12 Precision Dialogue Hub Marketing Solutions, LLC - - - 11/26/12 Bright House Netw orks, LLC Telovations, Inc. - - - 11/19/12 Pri-Med USA Amazing Charts, Inc. - - - 11/18/12 Cisco Systems, Inc. (NasdaqGS:CSCO) Meraki, Inc.* $1,200,000,000 $100,000,000 12.0x 11/18/12 Pow erSteering Softw are, Inc. EPM Live, LLC - - - 11/16/12 Artilium plc (AIM:ARTA) Smart Concepts B.V. - - - 11/15/12 Cisco Systems, Inc. (NasdaqGS:CSCO) Cloupia, Inc. $125,000,000 - - 11/14/12 The Descartes Systems Group Inc (TSX:DSG) Exentra Transport Solutions Limited $16,960,000 - - 11/14/12 Rio SEO, Inc. Meteor Solutions Inc. - - - 11/14/12 Baudville, Inc. hi5 Recognition, LLC - - - 11/13/12 eVestment Alliance, LLC Fundspire Inc. - - - 11/09/12 NetWorth Services, Inc. Quality Attributes Softw are, Inc. - - - 11/08/12 StoneRiver RegEd, Inc. Compliance Assurance Corporation - - - 11/08/12 Oracle Corporation (NasdaqGS:ORCL) Instantis, Inc. - - - 11/07/12 Echo360, Inc. LectureTools, Inc. - - - 11/07/12 Appcelerator, Inc. Nodeable, Inc. - - - 11/06/12 LivePerson Inc. (NasdaqGM:LPSN) ENGAGE Pty Ltd. - - - 11/06/12 Akcelerant Softw are LLC CorePROFIT Solutions, Inc. - - - 11/05/12 Zillow , Inc. (NasdaqGS:Z) Mortech Inc. $17,400,000 - - 11/05/12 Jive Softw are, Inc. (NasdaqGS:JIVE) Bitplay, Inc. - - - 11/05/12 Jive Softw are, Inc. (NasdaqGS:JIVE) Producteev, LLC - - - *revenue estimate

47| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX G: 2012 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS (CONT…)

Enterprise TTM Date Buyer Seller Value Re ve nue EV /Re v 11/01/12 Digi International Inc. (NasdaqGS:DGII) Etherios, Inc. $20,500,000 - - 11/01/12 File & ServeXpress Holdings, LLC CaseFileXpress, L.P. - - - 11/01/12 ConnectEdu, Inc. Epsilen, LLC - - - 10/31/12 M.A.O.M. Holdings and Investments (2012) Ltd. DSNR Ltd. $25,740,000 - - 10/30/12 Fiore Communications, Inc. Trusteria Services, Inc. - - - 10/30/12 EMC Corporation (NYSE:EMC) Silver Tail Systems, Inc. - - - 10/30/12 AppFolio, Inc. MyCase Inc. - - - 10/29/12 iQor, Inc. HardMetrics, Inc. - - - 10/28/12 eBaoTech Corporation TekInsure Pty Ltd - - - 10/24/12 IBS Softw are Services Private Limited Hotel Booking Solutions Incorporated - - - 10/23/12 AFS Technologies, Inc. MEI Computer Technology Group, Inc. - - - 10/22/12 Gary Jonas Computing, Ltd. Conecture Technologies, LLC, - - - 10/19/12 FoodLink Online, LLC TRUETRAC, LLC - - - 10/17/12 Microsoft Dynamics MarketingPilot Softw are, LLC - - - 10/17/12 Nubera eBusiness S.L. tarpipe, S.A. - - - 10/16/12 Electronic Funds Source, LLC T-Chek Systems, Inc. $302,500,000 $49,000,000 6.1x 10/16/12 Origo Netw orks, Inc. Enterprise jBilling Softw are Ltd. - - - 10/16/12 - Oogw ave Inc. - - - 10/12/12 Persistent Systems Limited (BSE:533179) Doyenz, Inc., rCloud - - - 10/12/12 Persistent Systems Limited (BSE:533179) Doyenz, Inc. - - - 10/12/12 Portus Holdings Inc. SureQuest Systems Inc. - - - 10/11/12 Demand Bridge, LLC Flozio, Inc. - - - 10/11/12 Noble Systems Corporation TelStar Hosted Services, Inc. - - - 10/10/12 TransFirst, LLC CurveNorth Incorporated - - - 10/10/12 TELUS Health Solutions Inc. Kinlogix Medical Inc. - - - 10/10/12 Thomson Reuters Corporation (TSX:TRI) Know ledge Platform Pte. Ltd., E- - - - 10/09/12 ExactTarget, Inc. (NYSE:ET) Pardot LLC* $95,190,000 $10,000,000 10.0x 10/09/12 ExactTarget, Inc. (NYSE:ET) iGoDigital, Inc. $20,730,000 - - 10/09/12 Lithium Technologies, Inc. Social Dynamx Inc. - - - 10/09/12 Artemis International Solutions Corp. Accept Softw are Corporation - - - 10/08/12 Solium Capital Inc. (TSX:SUM) OptionEase, Inc. - - - 10/07/12 Ancoris Limited Cloud Skills Limited - - - 10/05/12 NCS Fulfillment, Inc. NCS/Starr Fulfillment, Inc. - - - 10/05/12 WoodWing Softw are BV Dutchsoftw are BV - - - 10/05/12 CREALOGIX Holding AG (SWX:CLXN) C1 Fincon GmbH, AdviceManager - - - 10/04/12 Autodesk, Inc. (NasdaqGS:ADSK) Qontext Inc. - - - 10/03/12 First Marblehead Education Loan Services LLC Cology, Inc. $4,700,000 - - 10/03/12 Parchment Inc. Avow Systems, Inc. - - - 10/02/12 Informa Investment Solutions, Inc. Zephyr Associates, Inc. $62,000,000 - - 10/02/12 John Wiley & Sons Inc. (NYSE:JW.A) Deltak edu, Inc. $220,000,000 - - 10/02/12 Softability Group Oy Sopima Oy - - - 10/02/12 Novation Companies, Inc. (OTCPK:NOVC) CorvisaCloud LLC - - - 10/01/12 DealerTrack, Inc. ClickMotive LP $56,550,000 $7,300,000 7.8x 10/01/12 The Advisory Board Company (NasdaqGS:ABCO) ActiveStrategy, Inc. $15,200,000 - - 09/30/12 Healthcare Holdings Group, Inc. Access My Records, Inc. - - - 09/28/12 RIB Softw are AG (DB:RSTA) CADX Pty Ltd. - - - 09/27/12 SciQuest, Inc. (NasdaqGS:SQI) Spend Radar LLC $17,600,000 - - 09/26/12 Cisco Systems, Inc. (NasdaqGS:CSCO) Thinksmart Technologies Limited - - - 09/25/12 Netcall plc (AIM:NET) Serengeti Systems Ltd $4,710,000 $2,600,000 1.8x 09/19/12 MD On-Line, Inc. Intivia, Inc. - - - *revenue estimate

48| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX G: 2012 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS (CONT…)

Enterprise TTM Date Buyer Seller Value Re ve nue EV /Re v 09/19/12 TecCom GmbH AuDaCon AG - - - 09/18/12 Spigit, Inc. Crow dcast, Inc. - - - 09/18/12 Praemium Limited (ASX:PPS) WealthCraft Systems Limited $789,000 - - 09/18/12 2DIALOG, Ltd. Mercury Communications Group, LLC - - - 09/17/12 Revspring BestBill, Inc. - - - 09/17/12 StoneRiver RegEd, Inc. BMRW & Associates, Inc. - - - 09/17/12 Oracle Corporation (NasdaqGS:ORCL) SelectMinds, Inc. - - - 09/13/12 athenahealth, Inc. (NasdaqGS:ATHN) Healthcare Data Services LLC - - - 09/12/12 Specialist Softw are Services Ltd. e-Warehouse Ltd., Certain Assets - - - 09/11/12 Vendini, Inc. Dataflow Enterprises, Inc. - - - 09/11/12 CareerBuilder, Inc. Economic Modeling Specialists Inc. - - - 09/10/12 Adaptive Planning, Inc. myDIALS, Inc. - - - 09/10/12 SkillSoft Ireland Limited ThirdForce Limited - - - 09/10/12 Citrix Online, Inc. Beetil Service Management Ltd. - - - 09/07/12 NCR Corp. (NYSE:NCR) Transoft International, Inc. - - - 09/07/12 Google Inc. (NasdaqGS:GOOG) VirusTotal - - - 09/06/12 Performance Marketing Brands, Inc. OneReceipt Inc. - - - 09/06/12 Mastercard Incorporated (NYSE:MA) Truaxis, Inc. - - - 09/06/12 Mediapost SA Cabestan SAS - - - 09/05/12 DataLogix, Inc. Connection Engine, Inc. - - - 09/05/12 Emailvision Holdings Ltd. PredictiveIntent Ltd. - - - 09/04/12 Access UK Ltd. Prelytis S.A. $5,030,000 - - 09/04/12 Novarica Facilitas, Inc. - - - 09/04/12 Zenergy Pow er PLC (AIM:SNTY) SYNETY Ltd. $239,000 - - 08/31/12 iCIMS, Inc. Jobmagic, Inc. - - - 08/31/12 Walter Investment Management Corp. (AMEX:WAC) Reverse Mortgage Solutions, Inc. $120,000,000 - - 08/30/12 Chicago Grow th Partners Marathon Data Systems, LLC - - - 08/28/12 Autodesk, Inc. (NasdaqGS:ADSK) Inforbix, LLC - - - 08/28/12 AppFog, Inc. Nodester, Inc. - - - 08/27/12 GTCR, LLC; Cannondale Investments OneSource Information Services, Inc. - - - 08/25/12 International Business Machines Corporation (NYSE:IBM) Kenexa Corp. (NYSE:KNXA) $1,307,000,000 $318,000,000 4.1x 08/24/12 Forgetmenot Softw are Ltd. ForgetMeNot Africa (BVI) Limited $490,000 - - 08/23/12 Armanino McKenna LLP, Investment Arm AccessTek Inc. - - - 08/22/12 Confirmit ASA CustomerSat, Inc. - - - 08/22/12 Rackspace Hosting, Inc. (NYSE:RAX) Mailgun, Inc. - - - 08/22/12 Liaison Technologies, LLC Hubspan, Inc. - - - 08/21/12 Trade ME Group Ltd. (NZSE:TME) Tradevine Limited $1,620,000 - - 08/21/12 Wave Accounting, Inc. Vuru Inc. - - - 08/21/12 MarketMaker4 Category One, LLC, eSourcing - - - 08/18/12 Compagnie Generale DES Etablissements (ENXTPA:ML) Async Technologies Ltd. - - - 08/17/12 ARI Netw ork Services Inc. (OTCBB:ARIS) Ready2Ride Inc. $2,770,000 - - 08/16/12 ruNet Holdings Limited RichRelevance, Inc. - - - 08/15/12 Hanlon Financial Group LLC Interactive Advisory Softw are, Inc. - - - 08/14/12 PostNL N.V. (ENXTAM:PNL) Marvia B.V. - - - 08/14/12 Acquia, Inc. Mollom BVBA - - - 08/13/12 Friedman Corporation CORESense, Inc. - - - 08/13/12 RedPrairie Corporation Vortex Connect Inc. - - - 08/13/12 Colt Technology Services Group Limited ThinkGrid Limited - - - 08/10/12 - Quinsam Capital Corp., Online - - - 08/09/12 New forma, Inc. Attolist, LLC - - - *revenue estimate

49| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX G: 2012 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS (CONT…)

Enterprise TTM Date Buyer Seller Value Re ve nue EV /Re v 08/09/12 RideCharge, Inc. Aleph, Inc. - - - 08/08/12 Parta Dialogue Inc. (TSXV:PAD) MThirty Communications Inc. $6,760,000 - - 08/07/12 Shareholder Value Beteiligungen AG (XTRA:SVE) Update Softw are AG (XTRA:UP2) - - - 08/07/12 Higher One Holdings, Inc. (NYSE:ONE) Campus Labs, LLC $38,400,000 $10,000,000 3.8x 08/07/12 ALTA Equity Partners LLC Truist, Inc. - - - 08/06/12 aurionPro Solutions Limited (BSE:532668) SEEinfobiz Pvt. Ltd. - - - 08/06/12 Jobscience, Inc. AtomKeep - - - 08/06/12 BroadSoft, Inc. (NasdaqGS:BSFT) Adaption Technologies Ventures Ltd. $22,000,000 - - 08/06/12 SPS Commerce, Inc. (NasdaqGM:SPSC) Edifice Information Management $37,350,000 $11,200,000 3.3x 08/06/12 FrontStream Payments, Inc. FirstGiving, Inc. - - - 08/01/12 ResMed Inc. (NYSE:RMD) Umbian Inc. - - - 08/01/12 Altametrics Xformity, LLC Xformity, Inc $1,300,000 - - 08/01/12 HireVue, Inc. CodeEval, Inc. - - - 07/31/12 InMobi Metaflow Solutions Limited - - - 07/31/12 Google Inc. (NasdaqGS:GOOG) Wildf ire Interactive, Inc. - - - 07/27/12 Weather Investments II S.à.r.l. intY Limited - - - 07/26/12 Brightcove, Inc. (NasdaqGM:BCOV) Zencoder, Inc. $30,000,000 - - 07/24/12 Assessment & Qualifications Alliance Alfiesoft Limited - - - 07/24/12 Business & Decision SA (ENXTPA:BND) Hub'Sales S.A.S. - - - 07/24/12 Gehry Technologies, Inc. Perfect Blue B.V. - - - 07/23/12 3D Systems Corp. (NYSE:DDD) Viztu Technologies, Inc. $1,000,000 - - 07/20/12 Xero Limited. (NZSE:XRO) Spotlight Workpapers Limited $640,000 - - 07/19/12 ABB Ltd. (SWX:ABBN) Amarcon B.V. - - - 07/18/12 The Go Daddy Group, Inc. Outright, Inc - - - 07/17/12 Seaport Capital FTJ FundChoice, LLC - - - 07/15/12 DealerTrack, Inc. 1st Auto Transport Directory, Inc. $74,000,000 - - 07/12/12 CCH Australia Limited Acclipse Limited - - - 07/11/12 Solera Holdings Inc. (NYSE:SLH) Apu Solutions, Inc. - - - 07/11/12 Online Bridal Directory Limited Mrs2Be.com - - - 07/10/12 Horizontal Softw are SAS LPDR Ingénierie SARL - - - 07/09/12 500px Inc. Algo Anyw here $2,000,000 - - 07/09/12 BridgePay Netw ork Solutions, Inc. TGate, LLC - - - 07/09/12 salesforce.com, inc (NYSE:CRM) GoInstant Inc.* $70,000,000 $5,000,000 15.0x 07/07/12 Gripsell Technologies Pvt Ltd onlycart.com - - - 07/05/12 Avant Invest B.V. ABC der deutschen Wirtschaft GmbH - - - 07/04/12 Sportingpulse (ANZ) Pty Ltd BellvueIT - - - 07/02/12 Pearson plc (LSE:PSON) Psychological Softw are Solutions, Inc. - - - 07/01/12 Asure Softw are, Inc. (NasdaqCM:ASUR) PeopleCube, Inc. $15,530,000 $9,500,000 1.6x 06/27/12 Rafter, Inc. HubEdu, Inc. - - - 06/27/12 Trader Media Group Limited DELTAPOINT ASSOCIATES LIMITED - - - 06/26/12 Accufund, Inc. AccuFund CRM - - - 06/26/12 Spectrum Equity Investors Active Internet Technologies, LLC $55,000,000 - - 06/25/12 salesforce.com, inc (NYSE:CRM) Thinkfuse - - - 06/18/12 salesforce.com, inc (NYSE:CRM) ChoicePass Inc. - - - 06/15/12 Forum Trading Solutions Ltd PLUS Trading Solutions Ltd. $440,000 - - 06/15/12 Microsoft Corporation (NasdaqGS:MSFT) Yammer, Inc.* $1,200,000,000 - 40.0x 06/14/12 Syncapse Corp. Clickable, Inc. - - - 06/14/12 Vista Equity Partners Bullhorn, Inc. - - - 06/13/12 The Descartes Systems Group Inc (TSX:DSG) Integrated Export Systems, Ltd. $34,200,000 - - 06/13/12 New market International, Inc. MeetingMatrix International, Inc. - - - *revenue estimate

50| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX G: 2012 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS (CONT…)

Enterprise TTM Date Buyer Seller Value Re ve nue EV /Re v 06/13/12 Infor Global Solutions, Inc. Easy (Ez) Revenue Management - - - 06/12/12 Revionics, Inc. Retail Optimization, Inc. - - - 06/08/12 Autodesk, Inc. (NasdaqGS:ADSK) Vela Systems, Inc. - - - 06/06/12 Francisco Partners Management LLC Plex Systems, Inc. - - - 06/05/12 Oracle Corporation (NasdaqGS:ORCL) Collective Intellect, Inc. - - - 06/05/12 ON24, Inc. Imaste-ips S.L. - - - 06/01/12 WineDirect, Inc. Vin65 Corp. - - - 05/31/12 Sales Engine International LLC Manticore Technology, Inc. - - - 05/30/12 Econocom Telecom Services SAS Tactem SAS $1,240,000 $1,240,000 1.0x 05/24/12 Quindell Portfolio Plc (AIM:QPP) Quindell Enterprise Technology $9,890,000 $4,700,000 2.1x 05/23/12 Oracle Corporation (NasdaqGS:ORCL) Vitrue, Inc. - - - 05/23/12 Barclaycard Analog Analytics Inc. - - - 05/22/12 SAP America, Inc. Ariba Inc. (NasdaqGS:ARBA) $4,411,350,000 $501,900,000 8.8x 05/21/12 Experian plc (LSE:EXPN) Conversen, Inc. - - - 05/21/12 EMC Corporation (NYSE:EMC) Syncplicity, Inc. - - - 05/16/12 LivePerson Inc. (NasdaqGM:LPSN) Amadesa, Inc. - - - 05/15/12 Quandrant4 Systems Corp. (OTCPK:QFOR) empow HR, Inc. - - - 05/14/12 Logic Solutions, Inc. Quantum Compliance, Inc - - - 05/14/12 Documotive Limited Fusion Information Systems Ltd - - - 05/11/12 Gatew ay EDI, Inc. National Healthcare Exchange $8,210,000 - - 05/11/12 Heritage Acquisitions Limited Agentplus Pty Ltd. - - - 05/10/12 Xceligent, Inc. ePropertyData.com LLC - - - 05/09/12 TriNet Group, Inc. App7, Inc. - - - 05/08/12 Fair Isaac Corp. (NYSE:FICO) Entiera, Inc. - - - 05/08/12 EPiServer AB 200OK AB - - - 05/07/12 Synchronoss Technologies, Inc. (NasdaqGS:SNCR) SpeechCycle, Inc. $38,000,000 - - 05/02/12 Aprimo, Incorporated eCircle AG - - - 05/02/12 Zillow , Inc. (NasdaqGS:Z) RentJuice Corporation $37,420,000 $365,000 102.4x 05/01/12 C3, LLC Efficiency 2.0, LLC - - - 05/01/12 salesforce.com, inc (NYSE:CRM) Stypi - - - 05/01/12 Peoplefluent, Inc. Socialtext, Inc. - - - 04/30/12 Reputation Rhino LLC ReputationManagements.com - - - 04/30/12 Arts et Biens Prenax Global AB - - - 04/27/12 Intuit Inc. (NasdaqGS:INTU) Demandforce, Inc.* $423,500,000 $38,000,000 11.3x 04/24/12 VMw are, Inc. (NYSE:VMW) Cetas Softw are, Inc. - - - 04/23/12 KANA Softw are, Inc. Trinicom - - - 04/23/12 Mangrove Employer Services, Inc. CanopyHR Solutions, LLC - - - 04/18/12 Marketo, Inc. Crow d Factory, Inc. - - - 04/17/12 ADERANT Holdings, Inc. Omega Legal Systems, Inc. - - - 04/13/12 International Business Machines Corporation (NYSE:IBM) Varicent Softw are Inc. - - - 04/11/12 Boathouse Capital; Renovus Capital Partners Atomic Learning, Inc. - - - 04/11/12 Atos S.A. (ENXTPA:ATO) blueKiw i Softw are SA $26,220,000 $6,500,000 4.0x 04/11/12 Citrix Systems, Inc. (NasdaqGS:CTXS) Podio ApS - - - 04/09/12 Underw riters Laboratories Inc. UL EduNeering, Inc. - - - 04/05/12 QL2 Softw are, LLC RivalWatch, Inc. - - - 04/05/12 Harris Computer Systems, Inc. Cognera Corp. - - - 04/04/12 Allen Systems Group, Inc. Net Transmit & Receive, S.L. - - - 03/29/12 OMERS Ventures HootSuite Media, Inc. - - - 03/29/12 Oracle Corporation (NasdaqGS:ORCL) ClearTrial, LLC - - - 03/28/12 Kronos Incorporated WebApps, Inc. - - - *revenue estimate

51| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX G: 2012 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS (CONT…)

Enterprise TTM Date Buyer Seller Value Re ve nue EV /Re v 03/27/12 ICG Group, Inc. (NasdaqGS:ICGE) MSDSonline Inc. - - - 03/26/12 Blackboard Inc. Moodlerooms, Inc. - - - 03/22/12 Trackn Inc.; PFS, LLC Spireon Inc. - - - 03/20/12 MD On-Line, Inc. MD Technologies Inc. (OTCPK:MDTO) - - - 03/19/12 Saba Softw are, Inc. (NasdaqGM:SABA) HumanConcepts, LLC $23,500,000 - - 03/13/12 SalesCrunch, Inc. WebEx Communications, Inc. - - - 03/09/12 Cybertow ers Bhd (KLSE:CYBERT) King Arts Limited - - - 03/08/12 Cornerstone OnDemand, Inc. (NasdaqGS:CSOD) Sonar Limited $33,800,000 - - 03/07/12 PrimePay, Inc. Ready Set Work, LLC - - - 03/06/12 AccuData Holdings, Inc. DaVinci Marketing Technologies - - - 03/04/12 JEDFam Group LLC Broadsign International, Inc. $5,500,000 - - 03/02/12 Sargas Capital Kontexto Inc. $20,600,000 - - 03/02/12 Youbill, Inc. Volo Innovations Inc - - - 02/29/12 TeamSystem S.p.A. Digita s.r.l. - - - 02/29/12 AULtec, Inc. e-autobusiness, LLC - - - 02/28/12 Haufe-Lexw are GmbH & Co. KG umantis AG - - - 02/27/12 Talent Technology Corporation HR Integrations LLC - - - 02/24/12 Vocus Inc. (NasdaqGS:VOCS) iContact Corporation* $178,700,000 $48,000,000 3.8x 02/22/12 LinkedIn Corporation (NYSE:LNKD) Rapportive, Inc. - - - 02/21/12 Ivrnet, Inc. (TSXV:IVI) NeatWorx Web Solutions Inc. - - - 02/21/12 ebay motors WHI Solutions, Inc. - - - 02/17/12 Pender Grow th Fund Monexa Solutions Inc.* $4,150,000 $4,000,000 1.0x 02/16/12 Envestnet, Inc. (NYSE:ENV) Tamarac, Inc. $54,000,000 $12,000,000 4.5x 02/15/12 Quest Softw are Inc. (NasdaqGS:QSFT) BlueFolder, Inc. - - - 02/14/12 Silverback Enterprise Group Inc. Pow erSteering Softw are, Inc. - - - 02/14/12 Pow erSteering Softw are, Inc. Tenrox, Inc. - - - 02/13/12 Juniper Netw orks, Inc. (NYSE:JNPR) Mykonos Softw are, Inc.* $80,000,000 $1,000,000 80.0x 02/12/12 Ingenico SA (ENXTPA:ING) ROAM Data, Inc. - - - 02/09/12 S&P Capital IQ R2 Financial Technologies Inc. - - - 02/08/12 Oracle Corporation (NasdaqGS:ORCL) Taleo Corp. (NasdaqGS:TLEO) $1,805,500,000 $315,000,000 5.7x 02/08/12 General Atlantic LLC FNZ (UK) Ltd. - - - 02/08/12 API Healthcare Corporation Concerro, Incorporated - - - 02/07/12 Ceridian Corporation Dayforce, Inc. - - - 02/07/12 Akamai Technologies, Inc. (NasdaqGS:AKAM) Blaze Softw are Inc. - - - 02/07/12 Guidance Softw are, Inc. (NasdaqGM:GUID) CaseCentral, Inc. $54,000,000 - - 02/06/12 j2 Global, Inc. (NasdaqGS:JCOM) Landslide Technologies, Inc. - - - 02/03/12 Sequoia Capital Evernote Corporation - - - 02/02/12 Emergis Inc. Wolf Medical Systems Corporation - - - 02/02/12 Xero Limited. (NZSE:XRO) Max Solutions Limited $6,000,000 - - 01/31/12 Kenexa Corp. (NYSE:KNXA) OutStart, Inc. $38,900,000 - - 01/31/12 Morneau Shepell Ltd. SBC Systems, Inc. - - - 01/31/12 Peoplefluent, Inc. Strategia Communications Inc. - - - 01/24/12 Reliance Communications, Inc. AnComm, Inc. - - - 01/23/12 BearingPoint, Inc. Effiscience, Inc. - - - 01/23/12 - Foederis SA - - - 01/23/12 Cornerstone Softw are, Inc. Makana Solutions, Inc. - - - 01/23/12 Tw itter, Inc. Dasient, Inc. - - - 01/18/12 Dimension Data Holdings plc Xigo, LLC - - - 01/17/12 Project X Labs Ltd. BigDataLabs Inc. - - - 01/16/12 Blackbaud Inc. (NasdaqGS:BLKB) Convio, Inc. (NasdaqGS:CNVO) $274,400,000 $80,000,000 3.4x *revenue estimate

52| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

APPENDIX G: 2012 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS (CONT…)

Enterprise TTM Date Buyer Seller Value Re ve nue EV /Re v 01/16/12 PivotLink Corp. Acteea, Inc. - - - 01/13/12 Evisions, Inc. Cayuse, Inc. - - - 01/12/12 SAI Global Limited (ASX:SAI) Compliance 360, Inc. $42,300,000 - - 01/11/12 Grupo Linx Microvix Softw are Matriz - - - 01/10/12 Tangoe, Inc. (NasdaqGS:TNGO) Anomalous Netw orks, Inc. $8,900,000 - - 01/09/12 Symantec Corporation (NasdaqGS:SYMC) LiveOffice LLC* $115,000,000 $40,000,000 2.9x 01/06/12 LogMeIn, Inc. (NasdaqGS:LOGM) Bold Softw are, LLC $16,500,000 - - 01/05/12 OpenSpan, Inc. Triangle BPA, LLC - - - 01/04/12 Tengelmann E-Commerce Beteiligungs GmbH MAC IT-Solutions GmbH - - - 01/03/12 Callidus Softw are Inc. (NasdaqGM:CALD) LeadFormix Inc. $9,000,000 - - 01/01/12 TeleTech Holdings Inc. (NasdaqGS:TTEC) OnState Communications, Inc. $3,300,000 - - *revenue estimate

53| 2013 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

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