Piper Jaffray Cybersecurity Earnings Update First Quarter 2018 Greg Klancher Principal, Technology Investment Banking Piper Jaffray & Co. MINNEAPOLIS | BOSTON | CHICAGO | HOUSTON | LONDON | LOS ANGELES | NEW YORK | SAN FRANCISCO | ZÜRICH Piper Jaffray Companies (NYSE: PJC) is an investment bank and asset management firm headquartered in Minneapolis with offices across the U.S. and in London, Zurich and Hong Kong. Securities brokerage and investment banking services are offered in the United States through Piper Jaffray & Co., member NYSE and SIPC, in Europe through Piper Jaffray Ltd., authorized and regulated by the Financial Conduct Authority, and in Hong Kong through Piper Jaffray Hong Kong, authorized and regulated by the Securities and Futures Commission. Asset management products and services are offered through three separate investment advisory affiliates registered with the U.S. Securities and Exchange Commission: Advisory Research Inc., Piper Jaffray Investment Management LLC and PJC Capital Partners LLC. Piper Jaffray & Co., Member SIPC and FINRA 11/17 Q1 Revenue Performance and Q2 Revenue Guidance Largely Exceeded Expectations Despite strong execution, stock price performance was relatively weak Year-over-Year Revenue Growth – Post Q1 2018 Earnings Quarter-over-Quarter Revenue Growth – Post Q1 2018 Earnings 25.0% 12.0% 21.7% 22.1% 21.0% 9.4% 20.1% 20.5% 10.0% 8.3% 20.0% 18.8% 16.7% 8.0% 6.8% 6.2% 14.5% 5.3% 15.0% 6.0% 4.0% 3.3% 10.0% 2.0% 0.0% 5.0% (2.0%) 0.0% (4.0%) (2.6%) (2.9%) C3Q16A / C4Q16A / C1Q17A / C2Q17A / C3Q17A / C4Q17A / C1Q18A / Q2 18 C3Q16A / C4Q16A / C1Q17A / C2Q17A / C3Q17A / C4Q17A / C1Q18A / Q2 18 C3Q15A C4Q15A C1Q16A C2Q16A C3Q16A C4Q16A C1Q17A Guidance C2Q16A C3Q16A C4Q16A C1Q17A C2Q17A C3Q17A C4Q17A Guidance vs. Q2 17 vs. Q1 18 Actual Actual Quarterly Revenue vs. Street T+1 Share Price Reaction Post Q1 2018 Announcement 3.0% 2.8% 1.0% 2.5% 0.0% 2.0% 1.5% (1.0%) 1.1% 1.0% (2.0%) (1.8%) 0.5% (2.2%) 0.0% (3.0%) Q1 18 Actual vs Q1 18 Street Q2 18 Guidance vs Q2 18 Street Mean Median Source: Company filings, S&P Capital IQ and FactSet; median of companies listed on page 2 PIPER JAFFRAY 1 Stock Price Performance was Generally Weak Despite Strong Execution and Guidance • Six companies (PFPT, SAIL, FSCT, MIME, ZS, OKTA) reported YoY revenue growth in excess of 40% in Q1 T+1 Percent 1Q18 Q/Q Revenue 1Q18 Y/Y Revenue 1Q18 Actual vs. CQ2E QoQ CQ2E YoY Growth CQ2E Guidance CY18 YoY Growth CY18 Guidance Reaction 1Q18 Ticker Company 1Q18 Earnings Date growth growth Street Growth (Guidance) (Guidance) vs. Street (Guidance) vs. Street Announcement Security CHKP Check Point Software Technologies Ltd. 04/25/18 (10.6%) 3.9% 0.0% 1.7% 0.3% (3.5%) 1.9% (3.1%) 1.2% PFPT Proofpoint, Inc. 04/26/18 11.7% 40.5% 6.7% 4.0% 38.2% 3.6% 36.6% 2.7% (5.2%) IMPV Imperva, Inc. 04/26/18 (7.5%) 16.5% 0.6% 3.3% 16.9% 0.1% 15.3% (0.1%) (7.5%) MOBL MobileIron, Inc. 04/26/18 (10.5%) 3.8% (0.2%) 1.9% 4.3% (3.9%) 10.5% 1.0% (7.1%) AKAM Akamai Technologies, Inc. 04/30/18 0.8% 11.4% 2.2% (0.7%) 9.0% 1.1% 8.1% 0.2% (1.1%) VRNS Varonis Systems, Inc. 04/30/18 (26.9%) 35.2% 7.7% 15.8% 23.6% 1.1% 22.5% 1.3% 3.0% QLYS Qualys, Inc. 05/01/18 3.1% 22.1% 1.6% 3.3% 21.2% 0.5% 20.3% 0.2% (2.9%) RDWR Radware Ltd. 05/02/18 (6.7%) 11.5% 0.8% 4.1% 11.4% 1.3% 9.0% (0.7%) 0.0% FEYE FireEye, Inc. 05/02/18 (1.6%) 7.7% 2.6% 1.0% 8.4% 0.3% 9.8% 0.7% (9.7%) ZIXI Zix Corporation 05/02/18 (0.9%) 4.8% (0.5%) 4.5% 6.2% 3.0% 6.2% 2.4% (7.7%) FTNT Fortinet, Inc. 05/03/18 (4.2%) 17.1% 2.2% 6.5% 16.9% 2.4% 15.4% 0.9% (2.4%) CYBR CyberArk Software Ltd. 05/03/18 (10.7%) 21.6% 3.6% 1.3% 26.6% 1.0% 21.1% 0.7% 4.5% TSX:ABT Absolute Software Corporation 05/07/18 0.5% 1.1% (1.5%) 5.0% 5.7% (1.2%) NA NA (3.4%) RPD Rapid7, Inc. 05/08/18 (5.6%) 20.5% 4.4% 6.9% 22.9% NA 22.8% NA 2.3% OSPN OneSpan Inc. 05/08/18 (16.6%) 8.3% 4.9% NA NA NA 4.5% (0.7%) 17.0% SAIL SailPoint Technologies Holdings, Inc. 05/09/18 (26.6%) 40.2% 11.5% 0.6% 27.4% 1.8% 22.0% 2.0% (10.6%) SYMC Symantec Corporation 05/10/18 1.1% 9.6% 2.6% (5.9%) 3.1% (2.5%) 1.9% (2.0%) (33.1%) FSCT ForeScout Technologies, Inc. 05/10/18 (9.5%) 41.5% 6.8% 4.7% 35.3% 5.2% 24.7% 2.3% 0.8% MIME Mimecast Limited 05/14/18 9.1% 40.1% 2.4% 4.5% 31.9% 3.9% NA NA 0.5% LSE:SOPH Sophos Group plc 05/17/18 5.9% 27.7% 8.0% NA NA NA NA NA (0.4%) SPLK Splunk Inc. 05/24/18 (25.8%) 28.5% 4.7% 14.6% 27.5% 0.8% 29.4% 0.9% (5.2%) PANW Palo Alto Networks, Inc. 06/04/18 4.6% 31.3% 3.9% 11.1% 23.7% 1.8% NA NA (2.0%) SCWX SecureWorks Corp. 06/06/18 4.6% 11.0% 3.0% 1.1% 9.8% 0.7% 10.4% 0.5% 6.5% ZS Zscaler, Inc. 06/06/18 9.3% 49.1% 6.8% 2.7% 38.2% 4.3% NA NA 23.3% OKTA Okta, Inc. 06/06/18 7.6% 57.8% 6.1% 1.1% 38.5% 2.4% 36.5% 2.3% (6.0%) CBLK Carbon Black, Inc. 06/07/18 8.0% 34.7% 0.9% 0.7% 24.8% 1.1% 25.8% 0.9% (2.4%) Mean (3.7%) 23.0% 3.5% 3.9% 19.7% 1.1% 16.9% 0.6% (1.8%) Median (1.2%) 21.0% 2.8% 3.3% 22.1% 1.1% 15.4% 0.8% (2.2%) Source: Company filings, S&P Capital IQ and FactSet PIPER JAFFRAY 2 Top Performing Security Stocks in 2018 Year to Date Stock Price Change % of 52-Week High OKTA 111.4% RDWR 99.9% ZS 91.6% CYBR 99.8% SAIL 87.4% FTNT 99.6% RPD 78.5% SPLK 99.0% VRNS 60.8% RPD 98.8% OSPN 57.2% MIME 98.7% CYBR 55.4% SAIL 98.6% MIME 55.4% CBLK 98.6% FTNT 44.9% AKAM 98.2% SPLK 42.2% PFPT 95.5% CBLK 42.1% VRNS 95.2% PFPT 40.1% QLYS 94.9% PANW 40.0% IMPV 94.7% QLYS 35.9% PANW 94.5% IMPV 24.9% OKTA 92.5% RDWR 24.0% FEYE 90.1% FEYE 22.8% ZS 88.0% ZIXI 22.1% OSPN 85.9% SCWX 21.9% SOPH 85.8% AKAM 19.9% FSCT 84.8% MOBL 10.3% SCWX 83.2% SOPH 1.8% CHKP 82.9% FSCT 0.6% ZIXI 80.2% ABT 0.1% ABT 78.1% CHKP (4.6%) MOBL 63.5% SYMC (23.2%) SYMC 63.0% (50.0%) 0.0% 50.0% 100.0% 150.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% YTD % Change % of 52-week high Source: S&P Capital IQ, as of 06/06/2018 Note: ZS and CBLK YTD Price Change represents price change since IPO PIPER JAFFRAY 3 YoY Revenue Growth by Quarter Post IPO for Recent Cybersecurity IPOs Recent cybersecurity IPOs have grown, on average, 30-40% on a YoY basis in the first 10-12 quarters post-IPO 100.0% 90.0% 80.0% 70.0% 1st to 3rd Quartile 60.6% 59.2% Median 60.0% 57.8% 55.5% High 54.1% Low 50.3% 49.9% 48.9% 50.0% 47.7% 47.2% 45.3% 45.6% 43.5% 40.3% 41.3% 39.4% 39.1% 39.5% 38.7% 40.0% 36.0% 36.1% 34.3% 30.8% 35.0% 29.0% 30.0% 31.0% 31.9% 29.7% 30.1% 28.1% 25.3% 24.5% 23.9% 24.0% 24.0% 24.1% 24.1% 20.0% 22.6% 20.5% 18.9% 18.0% 18.7% 16.6% 16.4% 17.3% 10.0% 11.0% 11.5% 7.1% 0.0% (10.0%) IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO +1 +2 +3 +4 +5 +6 +7 +8 +9 +10 +11 +12 +13 +14 +15 +16 +17 +18 +19 +20 +21 +22 +23 +24 Includes: OKTA, ZS, PANW, SPLK, CYBR, MIME, RPD, QLYS, FEYE, IMPV, MOBL, PFPT, FSCT, SAIL Note: High exceeds 100% if no marker is displayed on the chart Source: S&P Capital IQ PIPER JAFFRAY 4 2018 “Rule of 40” – 2018E Revenue Growth + 2018E FCF Margin 12.0x MEDIAN EV/Rev: 2.8x 11.0x MEDIAN Rev Growth + FCF Margin: 13.2% 10.0x QLYS SAIL SPLK y = 10.983x + 2.5693 PFPT R² = 0.2458 9.0x MIME 8.0x VRNS CHKP PANW 7.0x CYBR RPD 6.0x LSE:SOPH FTNT 5.0x AKAM 2018ERevenue EV / 4.0x FEYE FSCT RDWR ZIXI IMPV OSPN 3.0x SYMC TSX:ABT 2.0x MOBL MEDIAN EV/Rev: 4.3x 1.0x SCWX MEDIAN EV/Rev: 7.5x MEDIAN Rev Growth + FCF Margin: 27.3% MEDIAN Rev Growth + FCF Margin: 55.0% 0.0x 0% 10% 20% 30% 40% 50% 60% 70% 2018E Rev Growth + FCF Margin Source: S&P CapitalIQ as of 06/06/2018 Note: Excludes companies below 0% 2018E Revenue Growth + FCF Margin (CBLK) and above 12.0x 2018E EV / Revenue (OKTA, ZS) PIPER JAFFRAY 5 2019 “Rule of 40” – 2019E Revenue Growth + 2019E FCF Margin 11.0x MEDIAN EV/Rev: 1.8x 10.0x MEDIAN Rev Growth + FCF Margin: 13.1% 9.0x QLYS CBLK SAIL 8.0x y = 8.4505x + 2.802 SPLK CHKP R² = 0.1743 PFPT 7.0x MIME VRNS 6.0x PANW CYBR RPD FTNT 5.0x AKAM LSE:SOPH 2019ERevenue EV / 4.0x FEYE RDWR ZIXI FSCT 3.0x IMPV OSPN SYMC 2.0x TSX:ABT MOBL 1.0x SCWX MEDIAN EV/Rev: 4.0x MEDIAN EV/Rev: 6.6x MEDIAN Rev Growth + FCF Margin: 27.5% MEDIAN Rev Growth + FCF Margin: 46.8% 0.0x 0% 10% 20% 30% 40% 50% 60% 70% 2019E Rev Growth + FCF Margin Source: S&P CapitalIQ as of 06/06/2018 Note: Excludes companies above 11.0x 2019E EV / Revenue (OKTA, ZS) PIPER JAFFRAY 6 Companies with High Quality Financial Models Continue to Trade at Premium Valuations Enterprise Value / LTM Revenue Multiple Stock Price Index LTM 10.0x 40.0% 9.0x 30.0% 8.0x 7.0x 20.0% 6.0x 5.0x 10.0% 4.0x 0.0% 3.0x 2.0x -10.0% 1.0x 0.0x -20.0% Revenue Growth + FCF Revenue Growth + FCF NASDAQ Revenue Growth + FCF HACK – Security ETF Margin > 40% Margin 20% to 40% Margin < 20% Security Company Median Valuation Multiples & Operating Metrics Revenue Growth + FCF Revenue Growth + FCF Revenue Growth + FCF Revenue Growth + FCF Revenue Growth + FCF Revenue Growth + FCF Margin > 40% Margin 20% to 40% Margin < 20% Margin > 40% Margin 20% to 40% Margin < 20% 7.1x 6.1x 21.4% 18.0% 4.6x 4.3x 15.4% 16.5% 2.8x 2.6x 9.9% 10.3% 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 23.6% 25.3% 28.0x 30.2x 23.9x 25.5x 13.1% 19.2x 10.9% 11.5x 2.8% (2.0%) 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 Source(s): S&P CapitalIQ and Wall Street Research as of 06/06/2018 PIPER JAFFRAY 7 Public Company Valuations (in millions) Price Equity Enterprise Revenue Revenue Growth EBITDA M ar gin FCF M ar gin TEV / Revenue T EV / EBIT DA T EV / FCF P/E Company 6/6/2018 Value Cash De bt Value CY18 CY19 CY18 CY19 CY18 CY19 CY18 CY19 CY18 CY19 CY18 CY19 CY18 CY19 CY18 CY19 Revenue Growth + FCF Margin > 40% Check Point Softw are Technologies Ltd.