The Software Industry Financial Report 2015 Annual 2015 Software Equity Group, L.L.C. 12220 El Camino Real Suite 320 San Diego, CA 92130 [email protected] (858) 509-2800 SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTS About Software Equity Group Leaders in Software M&A 5 Extensive Global Reach 6 About Software Equity Group 7 Software Industry Macroeconomics U.S and Global GDP 9 U.S. GDP and Unemployment 10 Global IT Spending 11 E-Commerce and Digital Advertising Spend 12 Stock Market Performance 13 Public Software Financial and Valuation Performance The SEG Software Index 15 The SEG Software Index: Financial Performance 16-20 The SEG Software Index: Public Market Multiples 21-23 The SEG Software Index by Product Category 24 The SEG Software Index by Product Category: Financial Performance 25 The SEG Software Index by Product Category: Public Market Multiples 26 Public SaaS Company Financial and Valuation Performance The SEG SaaS Index 28 The SEG SaaS Index: Financial Performance 29-33 The SEG SaaS Index: Public Market Multiples 34-37 The SEG SaaS Index by Product Category: Financial Performance 38 The SEG SaaS Index by Product Category: Public Market Multiples 39 Public Internet Company Financial and Valuation Performance The SEG Internet Index 41 The SEG Internet Index: Financial Performance 42-46 The SEG Internet Index: Public Market Multiples 47-49 The SEG Internet Index by Product Category 50 The SEG Internet Index by Product Category: Financial Performance 51 The SEG Internet Index by Product Category: Public Market Multiples 52 SOFTWARE EQUITY GROUP | 2015 ANNUAL SOFTWARE INDUSTRY FINANCIAL REPORT Copyright © Software Equity Group, LLC, All Rights Reserved 2 SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTS Software/SaaS/Internet IPO Annual Software IPO Trends 54 2014 Software IPO Data 55 Venture Capital Activity: All Industry Sectors 56 Venture Capital Activity: Software 57 The Buyers Speak: Software Equity Group’s 2015 Annual M&A Survey Results Summary 59-61 Results 62-64 Software Industry M&A Market Update Software/SaaS M&A Deal Volume and Spending 66 Software M&A Exit Multiples 67-68 Software M&A by Ownership Structure and Size 69 Software M&A by Vertical and Horizontal Markets 70 Software M&A Deal Volume by Product Category 71 Software M&A Exit Valuations by Product Category 72 SaaS M&A Deal Volume and Exit Multiples 73-74 SaaS M&A by Product Category 75 Internet M&A: Deal Volume and Exit Multiples 76 Internet M&A: By Product Category 77 Appendix SEG Software Index Key Metrics 79-82 SEG Software Index Key Metrics by Product Category 83-84 SEG SaaS Index Key Metrics 85-86 SEG SaaS Index Key Metrics by Product Category 87 SEG Internet Index Key Metrics 88-90 SEG Internet Index Key Metrics by Product Category 91 2014 Select Public Sellers 92 2014 Mega Deals 93-94 2014 Most Active Buyers 95-102 Select SaaS Transactions 103-114 About Software Equity Group 115 SOFTWARE EQUITY GROUP | 2015 ANNUAL SOFTWARE INDUSTRY FINANCIAL REPORT Copyright © Software Equity Group, LLC, All Rights Reserved 3 ABOUT SOFTWARE EQUITY GROUP SOFTWARE EQUITY GROUP | 2015 ANNUAL SOFTWARE INDUSTRY FINANCIAL REPORT Copyright © Software Equity Group, LLC, All Rights Reserved LEADERS IN SOFTWARE M&A We Do Deals. • Industry leading boutique investment bank, founded in 1992, representing public and private software and internet companies seeking: • Strategic exit • Growth capital • Buyout • Inorganic growth via acquisition • Buy and sell-side mentoring • Fairness opinions and valuations • Sell-side client revenue range: $5 - 75 million • Buy-side clients include private equity firms and NASDAQ, NYSE and foreign exchange listed companies • Clients span virtually every software technology, product category, delivery model and vertical market • Global presence providing advice and guidance to more than 2,000 private and public companies throughout US, Canada, Europe, Asia-Pacific, Africa and Israel • Strong cross-functional team leveraging transaction, operating, legal and engineering experience • Unparalleled software industry reputation and track record. • Highly referenceable base of past clients SOFTWARE EQUITY GROUP | 2015 ANNUAL SOFTWARE INDUSTRY FINANCIAL REPORT Copyright © Software Equity Group, LLC, All Rights Reserved 5 EXTENSIVE GLOBAL REACH Current Sell-side Representation • SEG currently represents software companies in the United States, Canada, France, Germany, Australia & Saudi Arabia Recent Sell-side Representation • In addition to the countries listed above, SEG has recently represented software companies in the United Kingdom, France, Netherlands, Israel, and South Africa SEG Research Distribution • SEG’s Quarterly and Annual Software Industry Equity Reports and Monthly Flash Reports are distributed to an opt-in list of 70,000 public software company CEOs, software entrepreneurs, private equity managing directors, VCs, high tech corporate lawyers, public accountants, etc. in 78 countries. SOFTWARE EQUITY GROUP | 2015 ANNUAL SOFTWARE INDUSTRY FINANCIAL REPORT Copyright © Software Equity Group, LLC, All Rights Reserved 6 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 guided and advised companies on five continents, including privately-held software and technology companies in the United States, Canada, Europe, Asia Pacific, Africa and Israel. We have represented public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges. Software Equity Group also advises several of the world's leading private equity firms. We are ranked among the top ten investment banks worldwide for application software mergers and acquisitions. 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, including Software-as-a-Service (Saas), software on-demand and perpetual license. We have profound understanding of software company finances, operations and valuation. We monitor and analyze every publicly disclosed software M&A transaction, as well as the market, economy and technology trends that impact these deals. We're formidable negotiators and savvy dealmakers who facilitate strategic combinations that enhance shareholder value. Perhaps most important are the relationships we've built and the industry reputation we enjoy. Software Equity Group is known and respected by publicly traded and privately owned software and technology companies worldwide, and we speak with them often. Our Quarterly and Annual Software Industry Equity Reports are read and relied upon by more than thousands of industry executives, entrepreneurs and equity investors in sixty-one countries, and we have been quoted widely in such leading publications as The Wall Street Journal, Barrons, Information Week, The Daily Deal, The Street.com, U.S. News & World Report, Reuters, Mergers & Acquisitions, USA Today, Arizona Republic, Detroit Free Press, Entrepreneur Magazine, Softletter, Software Success, Software CEO Online and Software Business Magazine. To keep your finger on the pulse of the software equity markets, subscribe to our Annual and Quarterly Research Reports. Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. For a confidential consultation without obligation, please contact Kris Beible, Director, Business Development (858) 509-2800, [email protected] . CONTACT INFORMATION: Software Equity Group, L.L.C. 12220 El Camino Real, Suite 320 San Diego, CA 92130 www.softwareequity.com p: (858) 509-2800 The information contained in this Report is obtained from sources we believe to be reliable, but no representation or guarantee is made about the accuracy or completeness of such information, or the opinions expressed herein. Nothing in this Report is intended to be a recommendation of a specific security or company or intended to constitute an offer to buy or sell, or the solicitation of an offer to buy or sell, any security. Software Equity Group LLC may have an interest in one or more of the securities or companies discussed herein. Financial data provided by Capital IQ. This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. SOFTWARE EQUITY GROUP | 2015 ANNUAL SOFTWARE INDUSTRY FINANCIAL REPORT Copyright © Software Equity Group, LLC, All Rights Reserved 7 SOFTWARE INDUSTRY MACROECONOMICS SOFTWARE EQUITY GROUP | 2015 ANNUAL SOFTWARE INDUSTRY FINANCIAL REPORT Copyright © Software Equity Group, LLC, All Rights Reserved U.S. AND GLOBAL GDP Global GDP (% YoY Change) U.S. GDP (% YoY Change) Growth of the global gross demestic product (GDP) from 2004 to 2014 Annual growth of the Real Gross Domestic Product (GDP) of the United (compared to the previous year) Stats from 2006 to 2014 7% 4% 3.40% 2.70% 6% 5.67% 3% 2.50% 2.40% 5.56% 5.43% 2.30% 2.20% 1.80% 4.88% 2% 1.60% 5% 4.14% 1% 4% 3.37% 3.28% 3.31% 3.04% 0% 3% -0.30% -1% 2% -2% 1% -3% -2.80% 0.10% 0% -4% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 • Worldwide GDP growth remained flat for the third consecutive year. • In an update to its "World Economic Outlook", the IMF predicted the global economy will have grown 3.7 percent in 2014, beating last October’s 3.6 percent growth forecast by just a hair. Global growth in 2015 and 2016 is projected at 3.5 and 3.7 percent, respectively, 0.3 percent lower than the IMF’s October 2014 WEO. • The latest IMF forecast for 2015 projects a gradually improving global economy that will remain vulnerable to a host of economic and geopolitical risks, including deflation in Europe and Japan, slower growth in China, a declining Euro and resurgent U.S. Dollar, lower oil prices, and continuing geopolitical upheavals and renewed fears of default by Greece stemming from recent election results.