SOFTWARE SECTOR REPORT Q3 2020 EXECUTIVE SUMMARY Software Q3 2020 » In Q3 2020, the software sector continued to show its resiliency. M&A deal activity and overall M&A deal value witnessed a sharp rebound, and private financing activity continued at a healthy pace. Investors have shown a strong desire for software business models amidst greater cloud adoption and remote work environments, evidenced by favorable performances in public markets and heavy IPO activity with subsequent pops in share price value – Software sector performed well in Q3 with the IGV tech-software index outperforming the S&P 500 by 34.1% LTM as of Q3 2020 – Infrastructure software index grew 148.8% LTM as of Q3 2020, outperforming all other software subsegments » Q3 ’20 saw ~$18Bn in financing deal value and ~$56Bn in M&A deal value - 215 financings, 3.2% lower than Q3 ‘19 - 469 M&A transactions, 22.1% higher than Q3 ’19 » Significant M&A activity in Q3 includes acquisitions in the Security sector: Ivanti’s $930MM acquisition of MobileIron and Fastly’s $775MM acquisition of Signal Sciences » Financial software had some of the largest financing deals in Q3 ‘20 led by the $660MM financing of Robinhood and $650MM financing of Klarna; the Security sector also saw high financing volume » Overall outlook in software growth remains healthy, with most sectors seeing notable growth Select Q3 Active Investors Select Q3 Active Acquirers Notes: Sources: PitchBook, 451 Research, Capital IQ. 2 GCA OVERVIEW The GCA Software Team Sector Coverage US Team VERTICAL SOFTWARE Josh Wepman Chris Gough Automotive E-commerce & Retail Managing Director Managing Director Education Food & Agriculture [email protected] [email protected] Industrial Insurance Media & Communications Real Estate Kevin Walsh Glen Kruger Managing Director Managing Director Transportation & Logistics Travel & Hospitality [email protected] [email protected] HORIZONTAL SOFTWARE BI & Analytics Collaboration Software Rupert Sadler Saif Malik CRM Enterprise Resource Planning Managing Director Director [email protected] [email protected] Governance, Risk & Compliance Human Capital Management Marketing Supply Chain Management Europe Team INFRASTRUCTURE SOFTWARE Cybersecurity Data Management & Analytics Sascha Pfeiffer Raiko Stelten Managing Director Managing Director SaaS / Cloud-Enablement Workflow Automation [email protected] [email protected] Key GCA Stats Adrian Reed James Craven Offices Globally 25 Software Transactions in Managing Director Managing Director 110 the Last 3 Years [email protected] [email protected] Senior Bankers 30+ Covering Software Technology-Related Kristoffer Källeskog Raymond Fröjd 260+ Deals in the Last 3 Years Managing Director Managing Director Senior Bankers [email protected] [email protected] 65+ 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 Advisors Corporation and GCA Altium, have advised on. Generally, GCA Advisors Corporation advises Asian-based transactions, while GCA Advisors, LLC advises U.S.-based transactions and GCA Altium advises UK/European-based transactions. At 4 times, multiple GCA entities may be retained to advise on the same transaction. DEAL DASHBOARD Software Q3 2020 $48.5 Billion 660 1,173 $90.0 Billion 2020 YTD Financing Deal Value (1)(2) 2020 YTD Financing Transactions (1)(2) 2020 YTD M&A Transactions 2020 YTD M&A Deal Value Select Financing Transactions Quarterly Financing Deal Value (1)(2) Quarterly M&A Deal Value Select M&A Transactions (3) Company Amount ($MM) $Bn $Bn $82 Acquirer Target EV ($MM) $660 $57 $56 $11,000 $39 $650 $30 $28 $7,500 $23 $18 $22 $19 $17 $14 $15 $17 $18 $14 $16 $5 $580 $6,800 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 $550 $5,350 Quarterly Financing Deal Count (1)(2) Quarterly M&A Deal Count $500 469 $5,000 375 384 389 363 361 359 349 234 315 $500 225 222 227 211 215 $4,700 187 201 198 $450 $1,800 $300 $1,600 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 LTM as of Q3 2020 Software Price Performance vs. S&P 500 (4) 80% SPX IGV 60% 48.5% 40% Financing Activity by Quarter 20% 14.4% 0% (20%) (40%) Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Notes: Sources: Capital IQ, PitchBook, 451 Research and Dow Jones VentureSource. Market data as of 09/30/2020. 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. 5 3) Software M&A transactions reflect select transactions in Q3 2020. M&A metrics are based on closed and announced transactions. 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. RECENT STOCK PERFORMANCE Index Performance Last 12 Months 200.0% 150.0% 148.8% 100.0% 92.2% 69.6% 69.3% 66.9% 53.5% 48.6% 43.8% 50.0% 41.2% 33.2% 27.9% 27.1% 21.5% 14.4% 0.0% (50.0%) Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Infrastructure SaaS(1) S&M Content ERP Development Technical Security Platform BI & Analytics Vertical Financial Nasdaq S&P 500 Low (1.6%) (8.2%) (28.4%) (2.7%) (16.8%) (18.7%) (12.0%) (17.9%) (10.7%) (28.8%) (22.4%) (21.4%) (13.3%) (23.9%) Uptick from 150.4% 100.4% 98.0% 72.0% 83.7% 72.1% 60.6% 61.8% 43.9% 56.7% 49.5% 42.9% 54.5% 38.3% Low Performance 148.8% 92.2% 69.6% 69.3% 66.9% 53.5% 48.6% 43.8% 33.2% 27.9% 27.1% 21.5% 41.2% 14.4% since Oct-19 Notes: Sources: Capital IQ. Market data as of 09/30/20. 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 Subsector Top Players and Key Operating Stats Platform Infrastructure Security Combined Market Cap: $2,309Bn Combined Market Cap: $319Bn Combined Market Cap: $291Bn 20E/19A Rev. Growth: 0.1% 20E/19A Rev. Growth: 33.1% 20E/19A Rev. Growth: 13.1% 20E EBITDA Margin: 30.2% 20E EBITDA Margin: 19.3% 20E EBITDA Margin: 18.9% Content & Storage Management BI & Analytics Financial Applications Combined Market Cap: $322Bn Combined Market Cap: $65Bn Combined Market Cap: $414Bn 20E/19A Rev. Growth: 8.7% 20E/19A Rev. Growth: 13.0% 20E/19A Rev. Growth: 14.2% 20E EBITDA Margin: 19.3% 20E EBITDA Margin: 9.9% 20E EBITDA Margin: 20.8% Notes: Sources: Capital IQ. Market data as of 09/30/20. 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 Subsector Top Players and Key Operating Stats Technical Applications Vertical ERP & General Business Combined Market Cap: $243Bn Combined Market Cap: $342Bn Combined Market Cap: $554Bn 20E/19A Rev. Growth: 14.3% 20E/19A Rev. Growth: 1.9% 20E/19A Rev. Growth: 12.5% 20E EBITDA Margin: 29.1% 20E EBITDA Margin: 15.1% 20E EBITDA Margin: 16.9% Development & Operations Sales & Marketing SaaS Combined Market Cap: $331Bn Combined Market Cap: $42Bn Combined Market Cap: $1,566Bn 20E/19A Rev. Growth: 20.7% 20E/19A Rev. Growth: 19.5% 20E/19A Rev. Growth: 28.4% 20E EBITDA Margin: 14.8% 20E EBITDA Margin: 8.0% 20E EBITDA Margin: 14.4% Notes: Sources: Capital IQ. Market data as of 09/30/20. 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 Q3 2020 Top 20 Performers 247.1% 157.0% 109.2% 92.4% 81.4% 84.0% 67.8% 68.3% 71.4% 42.7% 42.9% 43.4% 44.7% 33.2% 33.4% 35.9% 37.1% 39.2% 39.3% 42.2% Bottom 20 Performers (13.5%) (14.0%) (14.5%) (14.9%) (15.0%) (15.3%) (15.4%) (15.7%) (16.8%) (18.2%) (19.9%) (21.5%) (21.5%) (22.5%) (22.7%) (27.1%) (28.6%) (35.2%) (41.7%) (44.3%) Notes: Sources: Capital IQ as of 09/30/20. 9 TRADING COMPARABLES Valuation and Operational Metrics EV / 2019A Revenue EV / 2020E Revenue 17.2x 15.3x 15.2x 13.2x 13.8x 12.2x 13.0x 12.6x Median: 10.1x Median: 10.9x 10.9x 10.7x 11.4x 10.3x 10.0x 10.5x 9.9x 9.3x 8.9x 9.7x 9.2x 9.2x 7.7x 7.6x 4.1x 4.3x 2019A / 2018A Revenue Growth 2020E / 2019A Revenue Growth 37.0% 33.1% 32.1% 28.4% 30.5% 30.4% Median: 23.2% 25.0% 23.7% 20.7% 22.7% 22.4% 19.5% 20.5% Median: 13.7% 14.3% 14.2% 15.1% 13.1% 13.0% 12.5% 10.3% 8.7% 3.3% 1.9% 0.1% Notes: Sources: Capital IQ.