SOFTWARE SECTOR REPORT Q2 2020 EXECUTIVE SUMMARY Software Q2 2020 » Global software sector trading performance remained stable, but the impact of COVID-19 has tempered M&A activity » Q2 ’20 saw ~$16Bn in financing deal value and ~$5Bn in M&A deal value - 234 financings, 6.6% higher than Q2 ‘19 - 315 M&A transactions, 12.3% lower than Q2 ’19 » Many companies have not yet reported Q2 earnings, the first full quarter of COVID-19, so we expect some realignment to occur in Q3 » Significant M&A activity in Q2 includes acquisitions in the Infrastructure sector: Verizon’s $400MM acquisition of BlueJeans, KeySight Technologies’ $330MM acquisition of Eggplant, and NetApp’s $325MM acquisition of Spot » Financial Software had some of the largest financing deals in Q2 ‘20 led by the $850MM financing of Stripe and $251MM financing of Paidy; the Infrastructure sector also saw high financing volume » Software sector performed well in Q2 with the IGV tech-software index outperforming the S&P 500 by 23.6% LTM as of Q2 2020 – Infrastructure software index grew 84.8% LTM as of Q2 2020, outperforming all other software sub segments » Technical Application software companies traded at 10.4x and 30.5x for 2020E Revenue and EBITDA, respectively, among the highest in software » Overall outlook in software growth remains healthy despite continued uncertainty, with most sectors seeing notable growth Select Q2 Active Investors Select Q2 Active Acquirers Notes: Sources: Pitchbook, 451 Research, Capital IQ. 2 GCA OVERVIEW The GCA Software Team Sector Coverage GCA US Team VERTICAL SOFTWARE Automotive E-commerce & Retail Josh Wepman Chris Gough Education Food & Agriculture Managing Director Managing Director [email protected] [email protected] Industrial Insurance Media & Communications Real Estate Transportation & Logistics Travel & Hospitality HORIZONTAL SOFTWARE BI & Analytics Collaboration Software Kevin Walsh Glen Kruger Managing Director Managing Director CRM Enterprise Resource Planning [email protected] [email protected] Governance, Risk & Compliance Human Capital Management Marketing Supply Chain Management INFRASTRUCTURE SOFTWARE Cybersecurity Data Management & Analytics Rupert Sadler Saif Malik SaaS / Cloud-Enablement Workflow Automation Managing Director Director [email protected] [email protected] Key GCA Stats GCA Executive Team 25 Offices Globally Software Transactions in 105+ the Last Three Years Senior Bankers Todd Carter Geoff Baldwin 35 Covering Software Co-CEO, Co-CEO, Technology-Related Managing Director Managing Director 245+ Deals in the Last 3 Years [email protected] Head of M&A Senior Bankers [email protected] 70 Covering Technology 3 GCA OVERVIEW Deep Software Sector Expertise with Demonstrated Success Advising Large-cap Public and Private Companies on Complex Assignments Notes: The above transactions represent a compilation of past and current deals that GCA entities, including GCA Advisors, LLC, GCA Corporation and GCA Altium, have advised on. Generally, GCA Corporation advises Asian-based transactions, while GCA Advisors, LLC advises U.S.-based transactions and GCA Altium advises UK/European-based transactions. At times, multiple GCA 4 entities may be retained to advise on the same transaction. DEAL DASHBOARD Software Q2 2020 $30.2 Billion 445 704 $33.6 Billion 2020 YTD Financing Deal Value (1)(2) 2020 YTD Financing Transactions (1)(2) 2020 YTD M&A Transactions 2020 YTD M&A Deal Value Select Financing Transactions Quarterly Financing Deal Value (1)(2) Quarterly M&A Deal Value Select M&A Transactions (3) Company Amount ($MM) $Bn $Bn $82 Acquirer Target EV ($MM) $850 $57 $985(5) $39 $32 $500 $30 $28 $400 $23 $22 $19 $14 $17 $14 $15 $17 $18 $14 $16 $5 $251 $365 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 $250 $330 Quarterly Financing Deal Count (1)(2) Quarterly M&A Deal Count 363 375 384 389 $250 343 361 359 349 $325 315 234 $241 225 222 227 211 $250 187 201 198 (Digital Assets) 167 $230 $225 $210 $165 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 LTM as of Q2 2020 Software Price Performance vs. S&P 500 (4) 40% SPX IGV 30% 28.1% 20% 10% Financing Activity by Quarter 4.6% 0% (10%) (20%) (30%) Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Notes: Sources: Capital IQ, PitchBook, 451 Research and Dow Jones VentureSource. Market Data as of 06/30/2020. 1) Criteria based on software series A and subsequent rounds of global financings greater than or equal to $20MM. 2) Financings include Software Venture and Private Equity Growth / Expansion activity. 3) Software M&A transactions reflect select transactions in Q2 2020. M&A metrics are based on closed and announced transactions. 5 4) iShares North American Tech-Software ETF (IGV), used as proxy for software landscape. Top holdings in the ETF include ADBE, MSFT, ORCL, CRM, and INTU. 5) Includes potential $160MM earn-out. RECENT STOCK PERFORMANCE Index Performance Last 12 Months 100.0% 84.8% 80.0% 60.0% 47.9% 38.6% 40.0% 38.1% 31.0% 25.1% 24.7% 20.0% 24.3% 23.9% 23.3% 20.4% 0.0% 18.7% 8.9% 4.6% (20.0%) (40.0%) Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Infrastructure SaaS(1) Content S&M ERP Platform Security Technical Development BI & Analytics Financial Vertical Nasdaq S&P 500 Low (5.0%) (17.4%) (11.1%) (32.3%) (24.2%) (13.6%) (24.4%) (20.5%) (29.5%) (29.7%) (21.2%) (25.8%) (15.2%) (24.5%) Uptick from 89.8% 65.3% 49.7% 70.4% 55.2% 38.7% 49.1% 44.3% 52.8% 50.2% 39.9% 34.7% 39.5% 29.1% Low Performance 84.8% 47.9% 38.6% 38.1% 31.0% 25.1% 24.7% 23.9% 23.3% 20.4% 18.7% 8.9% 24.3% 4.6% since Jul-19 Notes: Sources: Capital IQ. Market Data as of 06/30/20. List of companies in each sector can be found in the public comparable tables. 6 1) SaaS bucket is a subset of the other buckets and includes companies that operate a software-as-a-service platform. SOFTWARE PUBLIC COMPANY LANDSCAPE Sub Sector Top Players and Key Operating Stats Platform Infrastructure Security Combined Market Cap: $2,249Bn Combined Market Cap: $178Bn Combined Market Cap: $271Bn 20E/19A Rev. Growth: (1.3%) 20E/19A Rev. Growth: 21.5% 20E/19A Rev. Growth: 9.5% 20E EBITDA Margin: 29.8% 20E EBITDA Margin: 17.2% 20E EBITDA Margin: 16.6% Content & Storage Management BI & Analytics Financial Applications Combined Market Cap: $291Bn Combined Market Cap: $46Bn Combined Market Cap: $378Bn 20E/19A Rev. Growth: 8.0% 20E/19A Rev. Growth: 9.3% 20E/19A Rev. Growth: 10.3% 20E EBITDA Margin: 16.4% 20E EBITDA Margin: 12.6% 20E EBITDA Margin: 20.2% Notes: Sources: Capital IQ. Market Data as of 06/30/20. 7 Logos shown represent largest players in each sub sector by enterprise value. Operating statistics for each sector represent full list of companies shown in public comparable tables. SOFTWARE PUBLIC COMPANY LANDSCAPE Sub Sector Top Players and Key Operating Stats Technical Applications Vertical ERP & General Business Combined Market Cap: $198Bn Combined Market Cap: $297Bn Combined Market Cap: $469Bn 20E/19A Rev. Growth: 8.4% 20E/19A Rev. Growth: (1.3%) 20E/19A Rev. Growth: 11.3% 20E EBITDA Margin: 32.6% 20E EBITDA Margin: 16.1% 20E EBITDA Margin: 16.3% Development & Operations Sales & Marketing SaaS Combined Market Cap: $294Bn Combined Market Cap: $37Bn Combined Market Cap: $1,199Bn 20E/19A Rev. Growth: 15.4% 20E/19A Rev. Growth: 17.8% 20E/19A Rev. Growth: 22.1% 20E EBITDA Margin: 14.5% 20E EBITDA Margin: 6.0% 20E EBITDA Margin: 13.9% Notes: Sources: Capital IQ. Market Data as of 06/30/20. 8 Logos shown represent largest players in each sub sector by enterprise value. Operating statistics for each sector represent full list of companies shown in public comparable tables. SOFTWARE STOCKS WINNERS & LOSERS Top and Bottom 20 Stock Price Performers in Q2 2020 Top 20 Performers 383.4% 248.5% 184.1% 158.4% 143.0% 146.8% 149.3% 115.5% 117.0% 122.7% 99.7% 100.9% 104.6% 107.7% 110.5% 85.5% 87.0% 90.3% 94.5% 97.9% Bottom 20 Performers 13.8% 13.5% 12.9% 12.1% 11.9% 10.9% 10.9% 10.2% 9.3% 9.1% 9.1% 7.3% 6.3% 5.7% 5.4% 4.3% 2.8% 0.9% (3.3%) (7.1%) Notes: Sources: Capital IQ as of 06/30/20. 9 TRADING COMPARABLES Valuation and Operational Metrics EV / 2019A Revenue EV / 2020E Revenue 15.2x 13.8x 11.7x Median: 10.9x 11.5x 11.3x 11.1x 11.4x 11.1x 10.9x 10.9x 10.7x 10.4x Median: 9.2x 9.2x 9.4x 9.1x 8.3x 7.9x 7.5x 8.0x 7.2x 7.0x 6.8x 4.2x 4.1x 2019A / 2018A Revenue Growth 2020E / 2019A Revenue Growth 22.1% 21.5% 34.0% 32.8% 30.5% 17.8% 25.4% 25.3% Median: 22.0% 15.4% 22.6% 21.4% Median: 9.9% 11.3% 10.3% 15.9% 9.5% 9.3% 12.8% 11.6% 10.6% 8.4% 8.0% 3.3% (1.3%) (1.3%) Notes: Sources: Capital IQ.