SEG Q2 12 Software Industry Equity Report

Th S ft I d tTh S ft I d tThe Software Industry Financial Report

The Software Industry Financial Report

Software Equity Group, L.L.C.12220 El Camino RealSuite 320San Diego, CA [email protected](858) 509-2800

Unmatched Expertise. Extraordinary Results

OverviewSoftware 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 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.

Ken BenderManaging Director

(858) 509-2800 ext. [email protected]

Deal Team

ServicesOur 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 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 offer a full complement of M&A execution to our clients worldwide Our capabilities include:

R. Allen CinzoriManaging Director


Dennis ClerkeExecutive Vice President(858) 509-2800 ext. 233

[email protected]

worldwide. Our capabilities include:.

Sell-Side Advisory Services – leveraging our extensive industry contacts, skilled professionals and proven methodology, our practice is focused, primarily on guiding our client s wisely toward the achievement of their exit objectives.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.Management Buyouts & Recapitalization – assisting founders and owners of software and technology companies to gain full or partial liquidity by facilitating capital investments by private equity

Brad WeekesVice President


Kris BeibleDirector, Business Development

(858) 509-2800 ext. 227kbeible@softwareequity comgy p g p q y y g p y p q y

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.Mentoring Program – providing guidance to software companies contemplating an exit to ensure they’re doing everything now to better their odds and enhance their future exit valuation ahead.

[email protected]

12220 El Camino Real, Suite 320San Diego, CA 92130

(858) 509-2800 (P)(858) 509-2818 (F)

www.softwareequity.com

Transactions

We’ve enjoyed serving our software clients for 20 years and have highlighted a small subset of companies we’ve assisted:

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Software Equity Group, L.L.C.

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.

Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved

Q2 2012 Software Industry Financial Report Contents

U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS ........................................................................ 2 IT SPENDING ............................................................................................................................................................ 2 INTERNET RETAIL SPENDING AND ADVERTISING ............................................................................................ 3 PUBLIC SOFTWARE/SAAS/INTERNET COMPANY STOCK PERFORMANCE ................................................... 3 PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE .......................................................................... 4 PUBLIC SOFTWARE COMPANY MARKET VALUATIONS ................................................................................... 5 PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY .......................... 6 PUBLIC SOFTWARE COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY ................................... 7 PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE ...................................................... 8 PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS ........................................... 9 PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY .... 10 PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY ............................................................................................................................................................ 10 PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE ........................................................................... 10 PUBLIC INTERNET COMPANY MARKET VALUATIONS .................................................................................... 12 PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY ........................... 12 PUBLIC INTERNET COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY .................................... 13 INITIAL PUBLIC OFFERINGS ................................................................................................................................ 14 SOFTWARE/SAAS M&A DEAL VOLUME AND SPENDING ............................................................................... 16 IMPORTANT CHANGE IN SOFTWARE AND SAAS M&A DATA ACCOUNTING............................................... 17 SOFTWARE M&A VALUATIONS .......................................................................................................................... 17 SOFTWARE M&A VALUATIONS BY EQUITY STRUCTURE............................................................................... 18 SOFTWARE M&A VALUATIONS BY SIZE ........................................................................................................... 18 SOFTWARE M&A BY VERTICAL AND HORIZONTAL MARKETS ..................................................................... 19 SOFTWARE M&A BY PRODUCT CATEGORY .................................................................................................... 20 SOFTWARE AS A SERVICE (SAAS) M&A DEAL VOLUME AND VALUATIONS .............................................. 21 INTERNET M&A DEAL VOLUME AND VALUATIONS ......................................................................................... 23 APPENDIX A: 2Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ............................................................................................................................................................ 25

Software Equity Group, L.L.C.

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.

Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved

APPENDIX A: 2Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ............................................................................................................................................................ 26 APPENDIX B: 2Q12 PUBLIC SAAS MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY 27 APPENDIX C: 2Q12 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ............................................................................................................................................................ 28 APPENDIX D: 2Q12 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS .................. 29 APPENDIX E: 2Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS .............................................. 30 APPENDIX F: 2Q12 MERGERS AND ACQUISITIONS, SELECT INDUSTRY MEGA-DEALS ............................ 32 APPENDIX G: 2Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS ..... 33

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

2| 2Q12 SOFTWARE INDUSTRY FINANCIAL REPORT www.softwareequity.com

U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS We begin with a brief synopsis of U.S. Gross Domestic Product (GDP) performance based upon the most recent data available. GDP is best defined as the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. The Bureau of Economic Analysis (BEA) issued its first estimate of U.S. GDP for the second quarter of 2012, indicating the U.S. economy continues to decelerate. After four consecutive quarters of accelerating growth in 2011, this year has been marred by sequential deceleration in Q1 and Q2 (Figure 1). The second quarter’s lackluster growth rate of 1.5% reflected a sharp decline in consumer spending, which fell from 2.4% in Q1 to 1.5% in Q2, as well as the fragile state of the U.S. and global economies. There was some good news for the software industry, as equipment and software purchases increased 7.2%, compared to Q1’s 5.4%. A June employment report released by the U.S. Bureau of Labor Statistics confirmed the job market remains weak. After three consecutive quarters of slow but steady improvement, the U.S. unemployment rate remained unchanged at 8.2%.

IT SPENDING SEG carefully monitors enterprise IT spending each quarter as a means of forecasting downstream public software company financial performance and software M&A deal volume. Simply put, we long ago determined that healthy IT spending drives public software companies to buy, not build, in response to growing market demand. To provide some perspective, we estimate every percentage increase/decrease in IT spending equates to approximately $5 billion. Our readers will recall large enterprises cut back sharply on spending for software, hardware and IT services in 2009 during the economic downturn, when IT capital spending declined by more than 10%. The spending cut had an almost immediate and traumatic impact on public software company revenue and software M&A activity and valuations declined. In 2010 and 2011, enterprise customers loosened their purse strings and domestic IT capital spending grew 8% and 6%, respectively. Reflecting the increased uncertainty in the global economy, analysts continue to forecast tepid worldwide IT spending forecasts for 2012. Goldman recently lowered its 2012 forecast of worldwide IT spending from 4% in January to 3%. Goldman attributed the reduction to lower GDP growth in advanced economies. Gartner also forecasts 3% growth in worldwide IT spending, up from their previous estimate of 2.5% in 1Q12.

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

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When increasing its IT forecast, Gartner pointed to a stabilized outlook despite the Eurozone’s debt and banking crisis, a weak US recovery, and China’s GDP slowdown. Among Goldman, Gartner and IDC the consensus for domestic IT spending in 2012 is 3% (Figure 2). Though IT spending will grow only modestly, some will fare better than most. Gartner forecasts enterprise spending on public cloud services will reach $109 billion in 2012, and grow to $207 billion by 2016.

INTERNET RETAIL SPENDING AND ADVERTISING In the Internet sector, we believe online retail spending and Internet advertising spending each quarter presage the financial performance and M&A activity of many public Internet companies. Buoyed by a continually growing number of shoppers, online retail sales continued to rise 17% in 1Q12 (the latest quarter for which data is available) according to comScore, achieving the highest growth rate since 2007. It was the tenth consecutive quarter of growth for online retail. Among online retail’s most popular categories in 1Q12 were digital content and subscriptions, computer software, consumer electronics, jewelry and watches and events tickets, each growing by at least 17% year-over-year. The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) reported Internet advertising revenues soared to record levels in

1Q12, reaching $8.4 billion, a 15% year-over-year increase from 1Q11’s $7.3 billion. The appropriate benchmarks in this arena, according to marketers and agencies, is the percentage of time digitally connected consumers spend on the Internet relative to their overall media consumption, and the spending on Internet advertising relative to total advertising spending. In May 2012, Mary Meeker of Kleiner Perkins showed the gap has closed dramatically: Internet consumption was 26% of total media consumption, and Internet advertisers grabbed a record 22% of all advertising dollars. PUBLIC SOFTWARE/SAAS/INTERNET COMPANY STOCK PERFORMANCE Following strong growth and solid returns in the first quarter, each of the major stock indices retreated sharply by the close of the second quarter, but managed to hold onto positive year-to-date returns. The tech heavy NASDAQ index finished Q2 with a total YTD return of 12.7%, 5.9% lower than at the close of Q1. The S&P 500 and DOW lagged behind, ending Q2 with YTD returns of 8.3% and 5.4%, respectively (Figure 3). Among SEG’s three tracking indices, the market performance of public companies comprising our SaaS Index far outshone their perpetual software and Internet counterparts. Thanks to accelerating growth, heightened M&A activity and stellar exit multiples (see M&A section for details), the stock prices of public SaaS companies posted a median 28.2% year-to-date return by the close of Q2, after surging 22.0% in June. Five superstars posted YTD stock returns in excess of 50%: Ellie Mae (218.6%), Athenahealth (61.2%), Ariba (59.4%), LivePerson (51.9%) and Bazaarvoice (51.7%). Ariba’s return was driven by the 19.6% premium paid by SAP when acquiring the Company in May 2012. After posting a 22.4% median stock return in the first quarter, the highest among our three tracking indices, the SEG Internet Index closed Q2 with the lowest YTD stock return, 4.3%. The sharp drop was primarily attributable to renewed economic fears, faltering on-line consumer spending, and Facebook’s IPO debacle which adversely impacted an array of high risk, highly valued Internet stocks.

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Figure 2: Domestic IT Spending



PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE The 144 public companies comprising the SEG Software Index grew TTM revenue a median 15.5% in 2Q12, barely surpassing the first quarter’s 14.9% (Figure 4). Still, the modestly improved revenue growth rate was impressive, given Q2’s macro-economic headwinds and lowered IT spending forecasts. Q2’s improved median growth rate follows on the heels of two consecutive quarters of declining growth. Of the top ten software companies posting the highest TTM revenue growth in Q2, five derived all or a substantial part of their revenue from mobile software solutions. The list includes Qihoo (202% TTM revenue growth), Gree (158%), Millennial Media (117%), Zynga (65%) and Velti (63%). But mobile proved to be a double-edged sword. Six of the ten software companies with the lowest TTM revenue growth were also mobile solution providers: Smith Micro Software (-58% TTM revenue growth), Myriad Group (-40%), Access (-32%), RealNetworks (-13%), BSQUARE (-9%) and Motricity (-7%). Unlike their top performing peers, these mobile companies are struggling to adapt legacy business models to a rapidly evolving market.

Healthcare providers were also well represented among the ten companies achieving the highest TTM revenue growth, led by Greenway Medical Technologies (45%), MedAssets (40%) and Merge Healthcare (39%). Other software providers in the top ten were recently public Splunk (83%) and Sapiens International (54%). The second quarter’s growth rate helped drive the median TTM revenue of the SEG Software Index above $365 million (Figure 4). Indeed, Q2’s median TTM revenue is more than twice the median TTM revenue of the SEG Software Index in 2Q08.

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

Measure 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 2.9x 2.4x 2.5x 2.7x 2.5xEV/EBITDA 14.1x 11.6x 12.3x 12.9x 11.5xEV/Earnings 24.8x 21.6x 21.5x 23.0x 22.3xCurrent Ratio 2.1 2.0 2.0 2.0 2.0Cash & Eq ($M) $145.4 $150.0 $132.0 $143.3 $171.2Gross Profit Margin 68.9% 68.2% 67.4% 66.4% 66.2%EBITDA Margin 19.0% 19.0% 18.9% 18.9% 18.5%Net Income Margin 9.6% 10.5% 10.4% 10.0% 10.4%TTM Revenue Growth 15.2% 17.0% 16.9% 14.9% 15.5%TTM Total Revenue ($M) $325.9 $344.8 $355.6 $352.4 $365.1TTM Total EBITDA ($M) $52.3 $58.9 $60.8 $53.2 $58.5Debt / Equity Ratio 24.7% 21.8% 21.6% 23.6% 21.7%

SEG - Software: Median Metrics

Figure 4: SEG Software Index Median Metrics



Over this same time period, the number of public software companies has declined from 218 to 144 - further evidence that consolidation in the software sector is resulting in not only fewer, but considerably larger, publicly traded software companies (Figure 5). Public software companies proved especially adept at maintaining their healthy EBITDA margins in the second quarter. The median EBITDA margin of the on-premise public software companies comprising our Software Index was 18.5% in Q2, down slightly from 1Q12’s 18.9% (Figure 4). Many of the most profitable on-premise software companies are industry behemoths that have the size and market leverage to drive high margins, including Oracle (43% EBITDA margin), Microsoft (42%) and SAP (37%). But an array of smaller, mid-cap public software companies also had a keen eye on the bottom line in 2Q12, led by CheckPoint Software (56% EBITDA margin), Gree (53%) and ANSYS (48%). Among our top ten most profitable software companies was a considerably smaller player, SolarWinds, with TTM revenue of $215 million. Benefitting from a highly unique and cost effective revenue and sales strategy, SolarWinds drove Q2 EBITDA margins to 48%.

Public software companies continued to increase cash and equivalents on their balance sheets, undoubtedly a reflection of their notable EBITDA margins. In 2Q08, the median cash and equivalents of the SEG Software Index was $72.7 million and the median EBITDA margin was only 12.8%. In 2Q12, median cash and equivalents had grown 136% to $171.2 million, and the median EBITDA margin had increased 31% over the four year period (Figure 6). The significant cash reserves and strong balance sheets of most public software companies, particularly the industry’s largest players, bode well for many small and mid-cap software company M&A targets.

PUBLIC SOFTWARE COMPANY MARKET VALUATIONS At the close of 2Q12, the median EV/Revenue multiple of public companies in our SEG Software Index was 2.5x, slightly lower than 1Q12’s 2.7x. The median EV/Revenue multiple of the SEG Software Index has now been at or above 2.0x for eleven consecutive quarters (Figure 7).

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The second quarter’s market downturn had an especially adverse impact on smaller public software company valuations (Figure 8). As testament, in 2Q12, the median EV/Revenue multiple of SEG Software Index companies with TTM revenues between $100 million and $200 million plunged to 2.1x from 2.7x the prior quarter. Only one year ago, this group achieved a median EV/Revenue of 3.8x.

Size (i.e., annual revenue) wasn’t the only important determinant of a public software company’s EV/Revenue multiple. EBITDA margins clearly played a part in Q2’s public software company market valuations. Public software companies with 40% or higher EBITDA margins were awarded with a median EV/Revenue multiple of 3.9x, nearly two times the 2.0x multiple of those with EBITDA margins below 10% (Figure 9).

PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY In the second quarter, median TTM revenue grew 20% or more in four of our SEG Software Index product categories (Figure 10). Vertically focused software providers led the pack, posting a median 24.2% TTM revenue growth rate. The category was led by Sapiens International (54.0%), PROS Holdings (36.1%), and EPIQ Systems (30.2%). Networking & Network Performance Management finished close behind, closing 2Q12 with a 22.9% TTM revenue growth rate. Companies benefitting from strong demand to optimize performance of cloud infrastructure and mobile networks include Allot Communications (37.5%), Aruba Networks (36.4%), and Keynote Systems (32.7%). Healthcare providers (22.6%) continue to benefit from massive regulatory changes which attempt to deal with the skyrocketing costs of healthcare by incentivizing healthcare providers to adopt healthcare technology to streamline operations and improve care. The category was led by Greenway Medical Technologies (45.3%), MedAssets (39.5%), Merge Healthcare (39.1%), Accelrys (29.9%) and Simulations Plus (28.4%). The other hot product category with TTM revenue growth above 20% was Billing & Service Management (22.3%). Five software product categories posted TTM revenue growth rates below 10%: Storage, Data Management & Integration (7.7%), Financial & Accounting (7.1%), Development Platforms (6.4%) and IT Conglomerates (5.3%). As for the most profitable software product categories, companies in the IT Conglomerate and Vertical - Finance categories posted the highest median EBITDA margins in the second quarter, 36.9%. Among the most profitable of the industry’s behemoths were Oracle (43% EBITDA margin), Microsoft (42%) and SAP (37%). The Vertical – Finance category, consisting of software providers vertically focused on the finance industry, demonstrated strength from top to bottom, with four out of five generating EBITDA margins above 31%. This category was led by MSCI (45.3% EBITDA margins) and FX Alliance (38.3 EBITDA margins).

Figure 8: SEG Software Valuation by Size of Buyer (TTM Revenue)

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The Mobile solutions product category had the lowest median EBITDA margin in 2Q12, at 6.6%. Typical of any product category undergoing rapid market adoption and consolidation, EBITDA margins varied drastically from one mobile solutions provider to the next. Gree, an emerging provider of mobile social games, finished 2Q12 with an EBITDA margin of 53.0%. By contrast, Smith Micro, a legacy provider of phone tools to mobile OEMs and wireless carriers, finished 2Q12 with EBITDA margins of -74.4%. PUBLIC SOFTWARE COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY Sixteen of the seventeen product categories comprising the SEG Software Index saw their median EV/Revenue multiples decline YoY as a result of the deteriorating economic climate and market perturbation. The lone exception was the IT Conglomerates category, which managed to improve its median EV/Revenue multiple YoY, as investors sought safer investments in the face of increasing uncertainty. But it’s all relative. Five of our software product categories achieved a median EV/Revenue multiple of 3.0x or higher in 2Q12. The Systems Management category posted a whopping EV/Revenue multiple of 5.9x, led by companies who are spearheading the cloud revolution, namely: SolarWinds (14.4x EV/Revenue), VMWare (9.7x), RedHat (8.5x) and Citrix Systems (5.9x). The Systems Management group has been strong for well over a year with

EV/Revenue multiples ranging from 5.0x to 7.3x over the past four quarters. A distant second was the Vertical – Finance category, which closed 2Q12 with a median EV/Revenue multiple of 3.7x, no doubt bolstered by the category’s strong EBITDA margins. The Healthcare category finished 2Q12 with a median EV/Revenue multiple of 3.3x. Interestingly, the median EV/Revenue multiples of most software product categories were barely impacted by their TTM revenue growth rates (Figure 11). Vertical-Other, the product category with the highest TTM revenue growth rate in 2Q12 posted a median EV/Revenue multiple of 3.0x, while IT Conglomerates, the category with the lowest TTM revenue growth rate, closed 2Q12 with a median EV/Revenue multiple of 2.9x. The Billing & Service Management product category experienced the largest YoY decline in market valuation. The category has been a perennial laggard and the majority of companies in the category are struggling to reinvent themselves. Even Synchronoss Technologies, which has been a category stand out over the past year, returned to earth and finished 2Q12 with median EV/Revenue multiple of 2.7x, down from 4.9x in 1Q12. Nevertheless, Synchronoss remains the category standout, providing best of class solutions to service providers struggling to manage and synchronize the barrage of mobile devices connecting to their networks.

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Billing & Service Management 2.8x 1.3x 1.3x 1.3x 1.3x 7.4x 5.2x 5.6x 6.6x 6.9x 22.3% 0.3% 18.5% (1.1%)

Business Intelligence 3.2x 2.8x 2.4x 2.3x 2.5x 43.1x 39.6x 36.5x 39.3x 38.1x 19.0% 6.0% 8.7% 12.6% Development Platforms 2.6x 1.8x 1.9x 2.3x 1.9x 10.5x 8.0x 9.0x 10.1x 9.1x 6.4% 2.9% 22.1% 14.5% Engineering & PLM 2.4x 1.9x 2.0x 2.6x 2.3x 17.4x 12.8x 13.5x 14.3x 11.5x 13.5% 43.1% 19.9% 15.4% Enterprise Resource Planning 3.2x 2.8x 2.8x 3.0x 2.4x 11.1x 9.1x 9.6x 10.2x 8.3x 10.1% 10.4% 29.0% 11.7% Financial & Accounting 2.8x 2.3x 2.6x 2.8x 2.7x 10.1x 8.9x 9.2x 9.8x 9.8x 7.1% 9.5% 25.6% 15.4% Gaming 1.0x 1.4x 1.2x 1.2x 0.9x 10.9x 9.1x 7.8x 7.1x 7.6x 14.1% 7.3% 9.2% (18.4%)Healthcare 3.9x 3.5x 3.1x 3.6x 3.3x 19.6x 19.0x 15.5x 18.4x 15.3x 22.6% 45.7% 22.3% 2.8% IT Conglomerates 2.6x 2.6x 2.5x 3.1x 2.9x 8.8x 8.5x 9.0x 8.2x 7.7x 5.3% 6.6% 36.9% 11.7% Mobile Solutions/Content 3.3x 2.1x 2.2x 2.9x 2.5x 25.7x 18.2x 25.4x 19.9x 15.4x 16.2% (15.5%) 6.6% (4.9%)Networking & Network Performance Management 4.3x 3.0x 2.9x 3.4x 2.9x 24.8x 16.9x 19.7x 20.0x 19.1x 22.9% 29.7% 17.5% (6.2%)Security 3.1x 2.6x 2.9x 3.2x 2.9x 16.5x 13.1x 14.5x 13.0x 10.2x 19.4% 15.7% 19.7% 0.0% Storage, Data Management & Integration 2.6x 2.1x 2.2x 2.5x 2.4x 12.7x 9.8x 9.8x 10.3x 9.4x 7.7% 10.6% 22.6% 15.8% Supply Chain Management & Logistics 2.2x 1.9x 2.2x 2.3x 2.1x 12.0x 11.2x 11.9x 12.9x 11.3x 17.3% 36.9% 19.6% 12.9% Systems Management 7.3x 5.0x 5.5x 5.9x 5.9x 21.7x 18.5x 20.9x 22.2x 23.0x 18.1% 21.1% 26.2% 34.0% Vertical - Finance 4.7x 3.8x 3.9x 3.8x 3.7x 15.4x 13.3x 12.7x 11.6x 11.6x 13.1% 15.9% 36.9% 7.3% Vertical - Other 3.1x 2.7x 2.8x 3.3x 3.0x 15.1x 14.1x 16.4x 18.5x 16.6x 24.2% 13.1% 18.0% 11.5%

Median 2.9x 2.4x 2.5x 2.7x 2.5x 14.2x 11.4x 12.3x 12.9x 11.5x 15.6% 13.4% 18.5% 9.9%

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Figure 10: SEG Software Index Median Metrics by Product Category



PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE As SEG forecasted in our Q1 report, the median TTM revenue growth rate of public SaaS companies in 2Q12 exceeded 30%. The final tally of 30.3% is the highest in three years (Figure 12). The median TTM revenue growth rate of our SaaS Index constituents has now remained above 20% for six consecutive quarters. With SaaS adoption growing once again, we anticipate the median SaaS TTM revenue growth rate will remain above 30% throughout the year.

Four outperformers achieved TTM revenue growth of 46% or more in 2Q12: Bazaarvoice (64.6%), Cornerstone OnDemand (63.2%), Demandware (48.7%) and Ellie Mae (46.4%). By contrast, IntraLinks Holdings was the sole public SaaS provider who didn’t achieve double digit TTM revenue growth, registering a relatively paltry 7.3% (Figure 13). Unsurprisingly, the growth of these SaaS companies has been driven in large part by their enhanced investment in sales and marketing, which has grown from 23% of total revenue in 2Q10, to 32% in 2Q12 (Figure 14). What is surprising is the return (measured in TTM revenue growth) of their sales and marketing investments. Since 2Q10, public SaaS company sales and marketing spends as a percent of total revenue has grown nearly 50%. Impressively, over this same time period, TTM revenue growth has grown 150%. In 2Q12, four SaaS providers spent more than 50% of their revenues on S&M: Cornerstone OnDemand (64.2%), Salesforce (52.3%), Vocus (52.1%) and Netsuite (50.9%). Interestingly, despite spending 50% more on sales & marketing as a percent of total revenue, Netsuite and Vocus both finished 2Q12 with median TTM revenue growth below the median (24.6% and 21.0% respectively). Along with the stellar revenue growth, public SaaS companies remain mindful of the bottom line as well. In 2Q12, the median EBITDA margin of the SEG SaaS Index was 9.9%, up 24% from 2Q11’s 8.0%. Three outperformers reported EBITDA margins above 20%: EBIX (43.6%), OpenTable (29.8%) and Medidata (20.8%). By contrast six public SaaS companies finished 2Q12 with negative EBITDA margins: Cornerstone OnDemand (-25.5%), Bazaarvoice (-19.4%), Callidus Software (-10.3%), Netsuite (-6.8%), ServiceNow (-6.7%) and ExactTarget (-2.1%). It’s clear these five companies are prioritizing revenue growth as all but Callidus, finished 2Q12 with TTM revenue growth above 43%.

Measure 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 5.7x 5.1x 4.4x 5.3x 5.0xEV/EBITDA 40.7x 33.8x 29.7x 33.6x 30.1xEV/Earnings 92.0x 72.0x 82.2x 34.1x 38.1xCurrent Ratio 1.7 1.9 1.8 1.7 2.2Cash & Eq ($M) $55.4 $74.4 $68.1 $78.8 $95.5Gross Profit Margin 68.9% 69.8% 70.0% 70.9% 71.0%EBITDA Margin 8.0% 10.5% 9.2% 9.9% 9.9%Net Income Margin 0.9% 1.5% 1.8% -0.5% 0.4%TTM Revenue Growth 29.2% 27.3% 26.1% 28.4% 30.3%TTM Total Revenue ($M) $134.3 $134.3 $160.0 $169.0 $172.7TTM Total EBITDA ($M) $12.7 $17.6 $20.7 $21.9 $23.7Debt / Equity Ratio 3.9% 4.7% 3.5% 2.5% 7.1%

SEG - SaaS: Median Metrics

Figure 12: SEG SaaS Index Median Metrics

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Figure 11: SEG Software Median EV/Revenue vs. TTM Revenue Growth



The steadily improving TTM revenue growth rates and EBITDA margins of public SaaS providers are creating a force to be reckoned with, a sizable and growing group of companies with scale, a strong financial model, and strong balance sheets. The median TTM revenue for the SEG SaaS Index is now $173M, up 29% YoY; median Cash & Equivalents ended 2Q12 at $96M, up 72% YoY. PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS In 2Q12, the median EV/Revenue multiple of the 27 pure-play public SaaS providers comprising our SEG SaaS Index fell to 5.0x, from 5.3x in 1Q12 (Figure 12). However, it wasn’t all bad news, as over 50% of public SaaS providers actually maintained or increased their EV/Revenue QoQ. Leading the pack was Ellie Mae, closing 2Q12 with a 109% QoQ jump in EV/Revenue. Ellie Mae is revolutionizing the mortgage industry with a SaaS based solution designed to address the litany of inefficiencies within the mortgage origination process. Even in the face of declining mortgage volumes, the Company has managed to accelerate revenue growth (12.3% to 46.4%) and expand EBITDA margins (6.6% to 15.4%) over the past three years. Four public SaaS companies had EV/Revenue multiples above 10x at the close of 2Q12:

ServiceNow (17.4x), Demandware (12.5x), Netsuite (12.5x) and Cornerstone OnDemand (11.7x). Investors are clearly favoring growth over profitability in the current market, as three of the four SaaS providers with the highest market valuations had negative EBITDA margins; the fourth, Demandware, reported a paltry 2.3% EBITDA. Indeed, there was a clear, causal relationship in 2Q12 between SaaS company market valuations and TTM revenue growth rates (Figure 15). Public SaaS companies with TTM revenue growth rates between 10%-20% registered a median EV/Revenue of 3.5x, while those generating TTM revenue growth rates above 40% boasted a median EV/Revenue multiple of 9.4x. By contrast, there was very little relationship between EBITDA margins and public SaaS company

2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12

Ariba, Inc. (ARBA) ERP & Supply Chain 7.5x 6.1x 6.1x 5.6x 7.1x 103.2x 85.5x 84.9x 76.5x 87.0x 14.5% 26.9% 38.5% 42.7% 36.7% 7.3% 7.1% 7.2% 7.4% 8.1%

Athenahealth, Inc. (ATHN) Vertically Focused 5.5x 6.8x 6.2x 6.9x 7.2x 37.3x 40.3x 36.2x 45.7x 48.1x 29.2% 30.5% 30.5% 32.0% 34.4% 14.8% 16.9% 17.1% 15.0% 15.1%Bazaarvoice, Inc. (BV) Other SaaS - - - 11.0x 9.4x - - - - - 66.8% - - - 64.6% -27.9% -24.1% -20.8% -20.4% -19.4%Callidus Software Inc. (CALD) Workforce Mgmt 2.4x 1.9x 2.2x 2.9x 2.4x - - - - - 4.5% 17.6% 19.6% 18.2% 15.4% -3.4% -3.6% -5.6% -7.0% -10.3%Concur (CNQR) Other SaaS 7.4x 5.6x 6.4x 7.9x 8.0x 46.1x 39.5x 49.0x 68.9x 59.2x 18.6% 18.4% 19.3% 21.0% 24.0% 16.1% 14.1% 13.1% 11.4% 13.6%Constant Contact (CTCT) Other SaaS 3.5x 2.1x 2.6x 3.4x 2.3x 53.6x 27.6x 29.1x 33.6x 21.3x 31.6% 28.2% 25.2% 23.1% 21.4% 6.6% 7.8% 9.0% 10.2% 10.9%Cornerstone OnDemand (CSOD) Workforce Mgmt 17.1x 11.8x 11.0x 11.5x 11.7x - - - - - 55.2% 51.0% 51.9% 67.0% 63.2% -27.1% -33.7% -30.9% -24.0% -25.5%DealerTrack (TRAK) Vertically Focused 3.1x 2.3x 3.0x 3.2x 3.1x 23.4x 15.4x 18.3x 21.1x 20.1x 16.6% 26.3% 37.9% 44.9% 39.2% 13.1% 15.2% 16.3% 15.3% 15.4%Demandware, Inc (DWRE) Other SaaS - - - 14.6x 12.5x - - - 386.9x 553.5x - - - 54.1% 48.7% 4.8% 2.9% 1.5% 3.8% 2.3%Ebix Inc. (EBIX) Vertically Focused 5.7x 4.2x 4.2x 5.3x 4.1x 13.4x 9.7x 9.9x 12.1x 9.3x 29.5% 27.3% 24.6% 27.8% 22.8% 42.9% 42.9% 42.8% 43.5% 43.6%Ellie Mae (ELLI) Other SaaS 4.2x 1.6x 1.8x 2.2x 4.6x 52.3x 15.6x 21.6x 24.8x 29.8x 23.3% - 25.5% 28.4% 46.4% 8.0% 10.5% 8.6% 9.0% 15.4%ExactTarget, Inc. (ET) CRM & Marketing - - - 7.9x 6.0x - - - - - 40.7% 40.7% - 54.5% - -5.1% -5.1% -6.0% -3.3% -2.1%IntraLinks Holdings (IL) Other SaaS 5.9x 2.4x 1.7x 1.7x 1.3x 33.1x 15.7x 13.4x 12.5x 13.9x 34.8% 30.6% 23.8% 15.5% 7.3% 17.8% 15.6% 12.8% 13.9% 9.0%Kenexa (KNXA) Workforce Mgmt 3.2x 2.1x 2.4x 2.4x 2.5x 54.3x 29.2x 30.2x 28.3x 29.8x 36.7% 46.9% 52.4% 44.1% 38.8% 5.9% 7.3% 7.8% 8.5% 8.5%LivePerson (LPSN) CRM & Marketing 4.9x 4.4x 4.6x 5.3x 5.8x 23.7x 21.6x 22.8x 25.8x 30.1x 23.7% 21.9% 20.8% 21.1% 21.3% 20.6% 20.5% 20.4% 20.5% 19.2%Medidata Solutions (MDSO) Other SaaS 2.9x 1.8x 2.0x 2.3x 3.0x 15.1x 8.2x 9.3x 11.0x 14.6x 17.4% 19.0% 17.9% 10.8% 14.5% 19.1% 21.4% 21.7% 20.4% 20.8%Netsuite (N) ERP & Supply Chain 10.9x 9.7x 11.7x 12.9x 12.5x - - - - - 19.6% 21.1% 21.9% 22.4% 24.6% -7.1% -7.9% -7.3% -7.4% -6.8%OpenTable, Inc. (OPEN) Other SaaS 18.5x 11.3x 6.5x 7.3x 5.9x 73.2x 39.9x 23.0x 24.1x 19.8x 50.9% 54.3% 52.3% 40.9% 30.3% 25.2% 28.2% 28.1% 30.2% 29.8%RealPage (RP) Vertically Focused 9.2x 6.6x 7.5x 6.2x 4.9x 70.1x 50.8x 63.4x 54.5x 39.8x 36.6% 38.3% 39.8% 37.0% 34.4% 13.1% 13.0% 11.8% 11.3% 12.2%Responsys (MKTG) CRM & Marketing 7.3x 5.2x 2.7x 3.4x 3.4x 40.7x 28.1x 14.0x 21.8x 20.3x - - 54.1% 43.4% 36.3% 18.0% 18.5% 19.0% 15.7% 16.6%Salesforce.com (CRM) CRM & Marketing 10.3x 9.0x 7.9x 7.8x 8.2x 133.0x 152.2x 182.8x 166.2x 189.6x 29.6% 33.0% 34.6% 36.8% 37.7% 7.8% 5.9% 4.3% 4.7% 4.3%SciQuest (SQI) ERP & Supply Chain 6.3x 5.9x 5.3x 5.0x 5.0x 34.6x 38.3x 38.0x 37.3x 41.5x 19.0% 19.7% 22.0% 25.8% 23.3% 18.2% 15.3% 14.0% 13.5% 12.1%ServiceNow, Inc. (NOW) Other SaaS - - - - 17.4x - - - - - 124.3% 113.8% 113.8% - - -64.2% 13.7% 13.7% -2.9% -6.7%SPS Commerce (SPSC) ERP & Supply Chain 3.3x 3.6x 4.4x 4.8x 4.9x 37.6x 47.2x 65.3x 68.7x 68.5x 19.1% 22.5% 26.7% 30.0% 31.6% 8.7% 7.6% 6.7% 6.9% 7.1%The Ultimate Software Group, Inc. (ULTI) Workforce Mgmt 5.7x 5.1x 6.3x 6.6x 7.0x 72.2x 59.0x 68.7x 66.2x 71.3x 16.5% 16.8% 17.0% 18.2% 19.6% 7.9% 8.6% 9.2% 9.9% 9.9%Vocus (VOCS) CRM & Marketing 4.3x 3.1x 2.8x 2.6x 3.0x - 956.7x 206.5x 130.0x 285.2x 17.4% 19.1% 18.9% 18.7% 21.0% -0.4% 0.3% 1.4% 2.0% 1.1%Zix Corporation (ZIXI) Other SaaS 6.0x 5.4x 4.3x 4.6x 3.9x 25.0x 19.8x 14.6x 14.6x 12.5x 30.9% 31.5% 31.7% 15.4% 12.4% 24.0% 27.2% 29.3% 31.3% 31.2%

5.7x 5.1x 4.4x 5.3x 5.0x 40.7x 33.8x 29.7x 33.6x 30.1x 29.2% 27.3% 26.1% 28.4% 30.3% 8.0% 10.5% 9.2% 9.9% 9.9%

SEG SaaS Index

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Figure 13: Public SaaS Companies

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market valuations (Figure 16). As testament, SaaS providers with negative EBITDA margins were awarded with a median EV/Revenue multiple of 6.0x, compared to a median EV/Revenue of 4.0x for those with EBITDA margins above 20%.

PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY The SEG SaaS Index, consisting of 27 pure play SaaS providers, now has sufficient critical mass for us to track four distinct subcategories: CRM & Marketing, ERP & Supply Chain, Workforce Management and Vertically Focused providers (Figure 17).

Vertically Focused SaaS providers posted a 34.4% TTM revenue growth at the close of 2Q12, the highest among all categories. DealerTrack, a provider of solutions to the automotive industry, led the pack with a TTM revenue growth rate of 39.2%. Vertically Focused SaaS providers achieved EBITDA margins of 15.3% in 2Q12, 55% higher than the SaaS sector median of 9.9%. Ebix, a provider of e-commerce solutions to the insurance industry, earned top honors within the category with EBITDA margins of 43.6%. SaaS companies comprising the ERP & Supply Chain product category of our SaaS Index achieved the largest YoY jump in median TTM revenue growth, driven by a five consecutive quarters of accelerating growth. SaaS companies in this category are benefitting from growing enterprise and SMB acceptance of cloud-based, remotely hosted applications. PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY SaaS providers in the ERP & Supply Chain category finished 2Q12 with the highest median EV/Revenue multiple, 6.0x. The category was bolstered by strong performances from Netsuite (12.5x) and Ariba (7.1x). Public SaaS companies in the Workforce Management category improved their median EV/Revenue multiple in 2Q12, to 4.8x. Ultimate Software Group led the pack, boosting its YoY EV/Rev an impressive 22.8%. The category’s relative strength was driven, at least in part, by investor hopes of capitalizing on the wave of consolidation in the SaaS WFM arena. PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE The median TTM revenue of SEG Internet Index companies grew an impressive 27.4% in 2Q12, 41% higher than 2Q11 (Figure 18). Among SEG’s three tracking indices, companies comprising our Internet Index have the highest median TTM revenue ($394.7 million), making their median revenue growth in 2Q12 all the more impressive.

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By comparison, public software companies had median TTM revenue of $365.1 million in 2Q12, but a considerably lower TTM revenue growth rate of 15.5%. Of the 19 public Internet companies with TTM revenue of $1 billion or more, nearly two-thirds grew TTM revenue by more than 20% in 2Q12. Q2’s top Internet performers spanned an array of Internet categories, including eCommerce (Amazon, eBay), Search (Google, Baidu), Gaming (Tencent, Zynga), Travel (Priceline, Expedia) Social Networks (Facebook) and Lead Gen (Groupon). Nevertheless, growth disparities among public Internet providers abounded in Q2; the SEG Internet index has the widest variance of revenue growth rates among our three tracking indices (Figure 19). Five public Internet companies achieved TTM revenue growth at or above 100% in 2Q12, including Groupon (232.2%), Qihoo (201.7%), Youku (123%), Zillow (113.3%), and LinkedIn (111.1%). At the other end of the spectrum, ten SEG Internet providers posted negative revenue growth, led by Yahoo (-16.4%), Mecox (-9.0%), eHealth (-7.3%) and AOL (-5.2).

As for profitability, the median EBITDA margin of public Internet companies continued to decline in 2Q12, closing the quarter at 13.5%, after reaching a historic high in 1Q11 of 16.8%. The declining profitability is primarily attributable to higher sales and marketing expenses to drive market adoption. It was a strategy that worked, for some: Jive Software is a good example, which publicly listed in 2011, posted 64% TTM revenue growth, but a -45% EBITDA margin in 2Q12.

Nevertheless, the SEG Internet Index includes a good number of companies that are highly profitable. One out of eight public Internet companies achieved EBITDA margins of 40% or greater, including ChangYou.com (65.7%), Baidu (58.5%), Facebook (53.4%), Netease (50.2%) and TripAdvisor (45.6%). Though EBITDA margins may have declined, the surge in revenue enabled many Internet companies to boost their cash reserves. By the close of the second quarter, the median Cash & Equivalents of companies comprising the SEG Internet Index was $155.4M, up 36% from 2Q11 (Figure 18).

2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12CRM & Marketing 4.9x 4.4x 2.8x 4.4x 4.6x 47.1x 28.1x 29.1x 33.6x 30.1x 29.6% 28.2% 25.2% 29.9% 21.4% 7.2% 6.9% 6.7% 7.5% 7.6%ERP & Supply Chain 6.9x 6.0x 5.7x 5.3x 6.0x 37.6x 47.2x 65.3x 68.7x 68.5x 19.1% 21.8% 24.3% 27.9% 28.1% 8.0% 7.4% 6.9% 7.1% 7.6%Vertically Focused 5.6x 5.4x 5.2x 5.7x 4.5x 30.3x 27.8x 27.3x 33.4x 29.9x 29.3% 28.9% 34.2% 34.5% 34.4% 14.0% 16.1% 16.7% 15.2% 15.3%Workforce Management 4.5x 3.6x 4.3x 4.7x 4.8x 63.3x 44.1x 49.4x 47.2x 50.6x 26.6% 32.3% 35.7% 31.1% 29.2% 1.2% 1.9% 1.1% 0.7% -0.9%

Median: 5.7x 5.1x 4.4x 5.3x 5.0x 40.7x 33.8x 29.7x 33.6x 30.1x 29.2% 27.3% 26.1% 28.4% 30.3% 8.0% 10.5% 9.2% 9.9% 9.9%

SEG SaaS Index

CategoryEV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin

Figure 17: SEG SaaS Index Median Metrics by Product Category

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Measure 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 3.2x 2.7x 2.5x 2.3x 2.3xEV/EBITDA 18.7x 13.8x 12.3x 13.1x 12.5xEV/Earnings 34.0x 28.1x 22.2x 26.5x 24.0xCurrent Ratio 2.5 2.7 2.6 2.4 2.5Cash & Eq ($M) $114.2 $135.9 $152.1 $152.1 $155.4Gross Profit Margin 67.0% 66.3% 66.9% 67.5% 67.5%EBITDA Margin 15.1% 14.7% 14.8% 13.7% 13.5%Net Income Margin 4.4% 4.4% 3.8% 4.5% 4.9%TTM Revenue Growth 19.5% 21.2% 26.0% 29.8% 27.4%TTM Total Revenue ($M) $319.2 $345.4 $375.7 $393.6 $394.7TTM Total EBITDA ($M) $43.7 $51.7 $54.3 $56.9 $52.8Debt / Equity Ratio 10.6% 11.8% 18.2% 13.7% 13.4%

SEG - Internet: Median Metrics

Figure 18: SEG Internet Index Median Metrics



PUBLIC INTERNET COMPANY MARKET VALUATIONS The median EV/Revenue multiple for the 87 public companies comprising the SEG Internet Index was 2.3x in 2Q12, the same as in Q1, but down 30% YoY from 2Q11’s 3.2x (Figure 18). In contrast to the YoY decline in the broader index, Internet companies with revenue under $100 million saw their median EV/Revenue multiples climb 121% over the past year (Figure 20). Investors clearly favored public Internet companies with above average TTM revenue growth. As testament, companies in the SEG Internet Index with TTM revenue growth rates above 40% were rewarded with a median 5.3x EV/Revenue multiple, while those with negative TTM revenue growth rates had a median market valuation of 1.0x (Figure 21).

Investors found unprofitable but rapidly growing public Internet companies to be as appealing as their SaaS brethren. Internet providers with negative EBITDA margins at the close of 2Q12 had a whopping median EV/Revenue multiple of 4.4x, thanks to a stellar median TTM revenue growth rate of 67.4% (Figure 22).

But unlike SaaS investors who seemed indifferent to profitability (Figure 16), Internet investors paid great attention to the bottom line in 2Q12. Public Internet companies with EBITDA margins greater than 40% in 2Q12 were rewarded with a premium median market valuation of 8.7x, while those with 0% - 10% EBITDA margins were punished with a median 1.0x EV/Revenue multiple (Figure 22).

PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY Compelled by market forces to scale rapidly, then monetize, the Social product category racked up the highest median TTM revenue growth rate (64.2%) among all Internet companies in Q2 (Figure 23). All six companies within this category grew TTM revenue at a rate that was at least twice that of the median growth rate for all Internet companies in the second quarter: LinkedIn (111.1% TTM revenue growth), Facebook (88.3%), Mail.ru Group (84.0%), Yelp (75.4%), Jive (64.3%) and Renren (56.4%). Four other product categories finished 2Q12 with TTM revenue growth rates above the Internet sector median: Services (57.8%), Ad Tech & Lead Gen (37.5%), Gaming (33.5%) and Travel (26.7%).

Revenue Growth EBITDA Margin2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 2Q12 (TTM) 2Q12 (TTM)

Revenue Greater Than $1 billion 3.6x 2.7x 3.4x 3.4x 3.3x 13.1x 17.5x 16.7x 18.5x 21.1x 30.3% 18.9%Revenue Between $200 million and $1 billion 3.5x 2.6x 2.4x 2.2x 1.8x 14.5x 12.2x 10.9x 11.6x 10.2x 26.4% 17.7%Revenue Between $100 million and $200 million 3.2x 2.6x 2.1x 2.5x 2.2x 12.7x 8.7x 7.9x 9.2x 7.1x 30.4% 8.1%Revenue Less Than $100 million 1.4x 2.2x 2.3x 2.3x 3.1x 19.6x 18.9x 16.0x 16.3x 18.5x 16.1% -6.6%

SEG Internet Index CompaniesEV/Revenue EV/EBITDA

Figure 20: SEG Internet Valuation by Size (TTM Revenue)

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Figure 22: SEG Internet Median EV/Revenue vs. EBITDA Margin



The Services product category, the best performer of the four, was boosted by strong TTM revenue growth from Qihoo (202.1%), Angie’s List (64.5%), Shutterfly (58.9%) and Bankrate (57.8%). Companies within the Ad Tech & Lead Gen category continued to benefit from the dramatic growth in advertising dollars migrating from offline to online, as well as from increased spending on lead generation services. Notable examples in this category include Groupon (232.2% TTM revenue growth), LinkedIn (111.1%) and Baidu (80.3%). Gaming arguably turned in the best overall financial performance among all Internet categories in Q2, posting an impressive 33.5% median revenue growth rate and a noteworthy median EBITDA margin of 44.5%. All but Zynga posted EBITDA margins above 38%, aided by lower customer acquisition costs and the viral nature of online gaming. The product category’s median EBITDA margin was more than twice that of the runner up, Travel (21.7%). Commerce category posted a median EBITDA margin of 8.3% in 2Q12, the lowest of all Internet product categories. The profitability of Internet eCommerce providers has historically lagged other categories due to the significant revenue sharing inherent in their business model. As testament, Amazon posted an EBITDA margin of 3.6% in 2Q12. By contrast, eCommerce providers with business models that eschew inventory management, logistics and distribution expenses were able to achieve considerably higher levels of profitability. As example, eBay generated EBITDA margins of 28.2% in the second quarter.

PUBLIC INTERNET COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY The public market valuations of companies comprising the SEG Internet Index varied widely by Internet category in 2Q12 (Figure 23). Social Media led the pack, closing 2Q12 with a median EV/Revenue multiple of 12.9x, while Commerce brought up the rear with a paltry 0.7x. In a sharp contrast with last quarter, revenue growth and EV/Revenue market valuations were not as linked in Q2 (Figure 24). Companies in the Internet Services category grew TTM revenue 57.8%, yet finished 2Q12 with a relatively modest EV/Revenue multiple of 2.4x. By contrast, companies in the Internet Travel category grew TTM revenue 26.7% - less than half the Service category’s growth rate - but posted a median EV/Revenue multiple of 3.1x.

Revenue Growth (TTM)

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YTD Stock Return

2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 2Q12 2Q12 2Q12 2012Ad Tech & Lead Gen 3.3x 2.6x 2.6x 3.0x 2.3x 10.9x 11.1x 11.9x 14.1x 11.4x 37.5% 36.9% 14.0% -1.1%Commerce 1.9x 1.4x 1.1x 0.9x 0.7x 19.2x 13.7x 13.0x 16.6x 18.8x 17.5% 6.5% 8.3% 10.7%Content & Media 3.4x 2.7x 2.2x 2.0x 1.7x 18.2x 11.0x 10.6x 10.5x 10.1x 18.9% -6.9% 13.3% 7.0%Gaming 4.4x 4.7x 3.1x 3.2x 3.1x 9.8x 8.0x 6.0x 4.2x 4.0x 33.5% 28.7% 45.5% -4.3%Infrastructure 3.0x 2.6x 1.7x 1.9x 1.8x 19.2x 17.0x 12.9x 14.1x 16.2x 18.1% 21.8% 10.9% -1.6%Services 4.9x 4.5x 3.2x 2.6x 2.4x 21.8x 16.3x 16.7x 17.0x 15.2x 57.8% 44.5% 11.9% 10.2%Social 22.6x 19.9x 12.4x 13.5x 12.9x 136.9x 114.3x 47.7x 33.5x 33.0x 64.2% -33.8% 12.9% 30.7%Travel 7.3x 5.0x 5.4x 4.7x 3.1x 32.6x 23.4x 14.1x 15.0x 15.5x 26.7% 16.5% 21.7% -4.7%

Median: 3.3x 2.7x 2.5x 2.3x 2.3x 18.7x 13.7x 12.2x 13.1x 12.4x 27.4% 21.4% 13.5% 4.3%

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Figure 23: SEG Internet Index Median Metrics by Product Category

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The highest Internet category market valuations in Q2, however, were reserved for companies comprising the Social Media category, which racked up a median EV/Revenue multiple of 12.9x - nearly six times higher than the overall Internet median of 2.3x. Companies with market valuations exceeding the median Internet EV/Revenue multiple included Facebook (15.7x), Mail.ru Group (14.8x), Yelp (12.4x) and Renren (8.3x). The Social Media category’s stellar 12.9x median EV/Revenue multiple, however, represents a 43% YoY decline drop from the breathtaking median 22.9x EV/Revenue multiple these companies enjoyed in 2Q11. The Facebook IPO debacle and doubts about the future growth prospects of Facebook and others have unquestionably dampened investor enthusiasm for Social Media providers. Investors seemed wholly disinterested in Internet Commerce providers in the second quarter. The group closed 2Q12 with a median 0.7x EV/Revenue multiple, by far the lowest of our Internet categories. Lackluster revenue growth, well below the Internet median, is surely to blame here. The notable exception was Mercardolibre, which posted a median EV/Revenue multiple of 10.0x, over fourteen times the Commerce category median for 2Q12. Mercardolibre, Latin

America’s eBay, was boosted by investors enamored with emerging markets and the company’s 36% TTM revenue growth rate in 2Q12. INITIAL PUBLIC OFFERINGS After an impressive start in the first quarter when eleven software/SaaS/Internet companies went public, the software IPO market slowed markedly Q2 with only five newly listed companies (Figure 25). Still, 2H12’s tally of sixteen IPOs exceeds last year’s first half count of thirteen, and is notably higher than 2010’s first half count of five. Collectively, the sixteen newly listed companies touted a median TTM revenue growth rate of 54.3% and a median TTM EBITDA margin of 1.8%. In aggregate, they raised over $8.2 billion, ranging individually from $25.2 million to $6.7 billion. Q2’s new public entrants rewarded investors with median YTD stock gain of 37.9% by close of quarter, although some fared better than others. The best YTD performer was Synacor, a provider of digital video delivery solutions, which posted a 174.0% gain. By contrast, Envivio, a provider of video processing solutions, dropped 28.8% since its IPO.

Company (Ticker) Category IPO Date Net Proceeds Enterprise Value EV / Rev EV / EBITDA Revenue Revenue

GrowthEBITDA Margin

First Day Return YTD Return

ServiceNow, Inc.(NYSE:NOW)

Systems Management 6/28/12 $195,021,000 $2,859,000,000 16.9x n/a $168,969,000 113.0% (6.7%) 32.2% 36.7%

Facebook, Inc.(NASDAQ:FB)

Internet - Social 5/18/12 $6,700,000,000 $78,538,839,520 19.4x 36.9x $4,038,000,000 88.0% 52.8% 0.6% (18.2%)

Envivio Inc.(NASDAQ:ENVI)

Internet - Infrastructure 4/25/12 $64,909,350 $199,919,110 3.9x 90.3x $50,646,000 68.8% 4.4% (5.7%) (28.8%)

Proofpoint, Inc.(NASDAQ:PFPT)

Security 4/20/12 $59,800,000 $409,851,640 4.7x n/a $87,676,000 26.3% (12.5%) 8.3% 30.4%

Splunk, Inc.(NASDAQ:SPLK)

Storage, Data Management & Integration

4/19/12 $213,435,000 $3,296,700,400 27.3x n/a $120,960,000 82.6% (5.2%) 108.7% 65.3%

Millennial Media, Inc.(NYSE:MM) Mobile Solutions/Content 3/29/12 $123,318,000 $1,855,543,000 17.9x n/a $103,678,000 116.8% (0.1%) 92.3% 1.5%

ExactTarget, Inc.(NYSE:ET) SaaS - CRM & Marketing 3/22/12 $161,500,000 $1,571,645,470 7.6x n/a $207,493,000 54.5% (3.3%) 32.2% 15.1%

Demandware, Inc.(NYSE:DWRE) SaaS - Other 3/15/12 $81,840,000 $737,949,470 13.1x 346.8x $56,547,000 54.1% 3.8% 47.4% 48.1%

Yelp, Inc.(NYSE:YELP) Internet - Social 3/2/12 $99,742,500 $1,449,946,790 17.4x n/a $83,285,000 74.5% (8.5%) 63.9% 51.5%

Bazaarvoice, Inc.(NASDAQ:BV) SaaS - Other 2/24/12 $105,844,740 $950,055,560 10.1x n/a $93,986,000 64.6% (20.4%) 37.6% 51.7%

Brightcove, Inc.(NASDAQ:BCOV) Internet - Infrastructure 2/17/12 $51,150,000 $368,043,500 5.8x n/a $63,563,000 45.4% (22.1%) 30.0% 39.2%

Synacor, Inc.(NASDAQ:SYNC) Internet - Infrastructure 2/13/12 $25,200,000 $127,286,620 1.4x 19.0x $91,060,000 37.5% 7.4% 2.8% 174.0%

FX Alliance, Inc.(NYSE:FX)

Vertical - Finance 2/9/12 $58,032,000 $270,796,960 2.3x 5.9x $118,265,000 19.4% 39.0% 14.5% 30.9%

AVG Technologies, Inc.(NYSE:AVG) Security 2/3/12 $119,040,000 $1,055,689,120 3.9x 12.6x $272,392,000 25.4% 30.7% (18.2%) (18.7%)

Greenway Medical Technologies, Inc.

Healthcare 2/2/12 $62,000,000 $348,719,740 3.3x 63.4x $105,784,180 45.3% 5.2% 30.0% 63.1%

Guidewire Software, Inc.(NASDAQ:GWRE) Vertical - Other 1/25/12 $106,996,500 $842,377,160 4.4x 32.5x $190,182,000 28.8% 13.6% 31.7% 116.3%

$102,793,620 $896,216,360 6.7x 34.7x $104,731,090 54.3% 1.8% 30.8% 37.9% MedianFinancial data is the latest available from CapIQ on offering date.First day return compares listed offering price to first day close.

Figure 25: U.S. Software, SaaS and Internet IPOs in 2012



Why such disparate shareholder returns among two companies in the same niche product category? As the market reacted to global economic concerns in Q2, investors opted for the larger, albeit slower growing, more value priced Synacor over the smaller, faster growing, more volatile - and considerably more expensive (EV/Revenue) - Envivio. Many of 2H12’s IPOs had strong first day performances, indicating investors found them to be appropriately priced with good upside. Splunk, a provider of IT infrastructure intelligence, saw its initial offering price soar 108.7% by the close of trading. Other stocks which posted stellar first day returns in the first half of the year included Millennial Media (92.3%), Yelp (63.9%), Demandware (47.4%), Bazaarvoice (37.6%), ServiceNow (32.2%) and ExactTarget (32.2%). The much anticipated Facebook IPO proved to be a disaster, marred by last minute overpricing, NASDAQ trading delays, and warnings from analysts of some Facebook underwriters that may have been communicated to select clients prior to the first day of trading. In the aftermath, disgruntled investors have filed lawsuits, and investors are questioning the lofty valuations and future prospects of not only Facebook, but much of the Internet sector. At the close of Q2, Facebook’s stock was down 18.2%, but the company was still trading at a rather lofty EV/Revenue multiple of 15.7x, which is likely unsustainable if earnings falter or Facebook is unable to quickly improve and monetize its mobile offerings. The aftershock from Facebook’s botched IPO ruined investor appetite for newly public tech companies and shut down the software IPO market down for nearly five weeks. Near the close of Q2, however, ServiceNow, a SaaS provider of enterprise IT management software, joined the ranks of public companies and closed up 32.2% its first day. It seems sidelined investors just couldn’t resist ServiceNow’s 113% TTM revenue growth rate and ~85% recurring revenue.



SOFTWARE/SAAS M&A DEAL VOLUME AND SPENDING As we went to press, 422 software industry M&A transactions were reported in the second quarter (Figure 26). We expect the final tally for 2Q12 to reach 430, since M&A data for the quarter is often revised and released well into the following quarter. Indeed, the updated tally for 1Q12 was 423 software/SaaS transactions, significantly greater than the 401 deals initially referenced in our first quarter report. If our projection holds true, 2Q12 deal volume will likely equal or exceed 2Q11’s 430 deals. The quarterly software/SaaS M&A tally has now surpassed 400 - the historical benchmark for healthy software M&A volume - for eight straight quarters. For those 2Q12 software/SaaS transactions with announced price tags, the aggregate purchase price was $21.3 billion, 32% higher than 1Q12’s $16.1 billion, and the second highest quarterly software M&A spend since 1Q09. Software and SaaS mega deals (i.e., > $500 million) were mostly responsible for the sharp increase. Software/SaaS mega deals in the second quarter included SAP’s acquisition of Ariba ($4.4 billion

EV, 8.8x TTM revenue); Dell’s acquisition of Quest Software ($2.2 billion EV, 2.6x TTM revenue); Microsoft’s acquisition of Yammer ($1.2 billion EV); and Apax Partners’ acquisition of Paradigm ($1 billion EV). It remains to be seen whether the second quarter’s private equity-backed mega deal signals a broader return by PE firms to large buyouts. And it’s worth noting 2Q12 marked the third consecutive quarter of at least one SaaS mega deal, evidence that SaaS market adoption continues to grow and SaaS companies are achieving sufficient critical mass to attract the software industry’s largest public companies. On a TTM basis, which presents a more reliable trend line of software M&A spending, the aggregate software/SaaS M&A price tag is holding steady, despite the ongoing uncertainty about the broader economy. As of the close of the second quarter, $73.9 billion was expended on software/SaaS transaction dollars during the prior twelve months, the identical amount spent during the twelve month period ending 1Q11.

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Figure 26: U.S. Software Mergers & Acquisition Activity



The average deal size, after a period of rapid growth, began to level off in 4Q11, and continued to grow only modestly through the 2Q12 when the TTM average deal size was $42.2 million, a modest 5.5% YoY increase (Figure 27).

IMPORTANT CHANGE IN SOFTWARE AND SAAS M&A DATA ACCOUNTING Historically, we aggregated M&A data for both on-premise and SaaS software company transactions because of the relative dearth of pure-play SaaS deals. We noted, though, the considerably higher median multiple of these SaaS deals tended to skew the median M&A multiple higher. Since SaaS is no longer a nascent part of the overall software M&A ecosystem, and SaaS transactions now constitute a meaningful percentage of total software M&A, we began in 3Q11 to analyze and separately report M&A data for SaaS and on-premise software deals. To ensure our historical and current comparisons are consistent, all historical M&A data referenced in our charts this issue has been recalculated to exclude SaaS M&A transactions. SOFTWARE M&A VALUATIONS The software industry’s benchmark median exit multiple inched down to 1.7x TTM revenue in 2Q12 from 1.9x in 1Q12 (Figure 28). While the exit multiple is somewhat below the software industry’s ten year average of 2.0x TTM revenue, quarterly exit multiples tend to fluctuate considerably quarter-to-quarter.

Despite Q2’s relatively unimpressive median TTM exit multiple, it’s important to note that 29.2% of software/SaaS M&A transactions in the past twelve months with ascertainable exit multiples had an EV/Revenue multiple of 3.0 or greater (Figure 29). Indeed, in the second quarter, 8.3% of M&A deals with ascertainable exit multiples had an exit multiple of 5.0x or greater, suggesting that in the current deal environment, software/SaaS M&A is increasingly comprised of two seller types, the “haves” (i.e., those deemed by buyers to be highly strategic) and the “have nots.”

Among Q2’s transactions with the highest exit multiples were Equinix’s acquisition of ancotel ($ 140 million, 6.5x TTM Revenue); Bazaarvoice’s acquisition of PowerReviews ($127.8 million EV, 11.1x TTM revenue); Intuit’s acquisition of Demandforce ($423.5 million EV, estimated 11.3x

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Figure 28: Median Software M&A Valuation as a Multiple of Revenue (top) and EBITDA (bottom)

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Figure 29: 2Q12 Median Software M&A EV/Revenue Multiple Distribution



TTM revenue); and Zillow’s purchase of RentJuice Corporation ($37.4 million EV, 102.4x TTM revenue). The largest SaaS deal of the quarter was SAP’s acquisition of Ariba ($4.4B EV, 8.8x TTM Revenue), a leading provider of collaborative business solutions for buying and selling goods and services. The acquisition follows on the heels of SAP’s blockbuster acquisition of SuccessFactors in 4Q11 ($3.5B EV, 12.0x TTM Revenue). All told, SAP has spent over $8 billion on SaaS mega deals in the past six months. Since very few software transactions publicly disclose a private software seller’s TTM EBITDA, we lacked sufficient data to ascertain the median EBITDA exit multiple paid in 2Q12 for private software company sellers (Figure 28). We did, however, determine 2Q12’s median exit multiple for public software company sellers was 12.1x TTM EBITDA, a tick down from 1Q12’s 12.2x TTM EBITDA exit multiple.

SOFTWARE M&A VALUATIONS BY EQUITY STRUCTURE While a variety of factors impact exit valuation, one important driver is the seller’s equity structure. We separated public and private software company buyers to ascertain any difference in median purchase price paid in 2Q12. Historically, public buyers have paid higher exit multiples than private buyers: 2.5x vs. 2.0x TTM revenue in 2007; 2.0x vs.1.7x in 2008; 1.9x vs.1.2x in 2009; 2.4x vs.1.8x in 2010, and 2.4x vs. 2.0x in 2011. That trend continued in 2Q12 as public buyers paid a median 2.5x TTM revenue, while private buyers paid only 1.3x TTM revenue (Figure 30). The significant premium paid by public buyers can be attributed, at least in part, to the sizable amounts of cash on their balance sheets; their preference for larger targets that typically yield a higher multiple; and the greater inclination of public buyers to pursue strategic transactions, while private buyers are often more inclined toward financial transactions. SOFTWARE M&A VALUATIONS BY SIZE Another key driver of exit multiples is size – of both buyer and seller. As testament, in 2Q12, buyers with TTM revenue greater than $200 million paid a median EV/Revenue multiple of 2.8x, while buyers with TTM revenue less than $200 million paid only 1.4x TTM revenue (Figure 31).

Public Sellers 1.4x Median Multiple

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Figure 30: 2Q12 Median EV/Revenue Exit Multiple by Ownership Structure

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Buyer Greater Than $200 million 2.8x Median Multiple

Seller Less Than $20 million: 2.4x


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56%44%

Figure 31: 2Q12 Median EV/Revenue Exit Multiple by Size



Equally noteworthy - sellers with less than $20 million TTM revenue received a median EV/Revenue multiple of 4.5x from buyers with $200 million of revenue or more, while sellers with greater than $20 million TTM revenue were paid a median exit valuation of 2.7x. Why? A rapidly growing smaller company will often deem an exit premature and spurn advances by a strategic acquirer, prompting the larger suitor to raise the bid. Case in point: PowerReviews, a small but highly respected social commerce network which enables brands and retailers to organize and manage consumer insights to drive sales, was highly complementary with Bazaarvoice’s existing business and was gobbled up for 11.1x TTM revenue. SOFTWARE M&A BY VERTICAL AND HORIZONTAL MARKETS Another important determinant of exit valuation is the seller’s market focus and related domain expertise. We analyzed 2Q12’s median software M&A multiple horizontally and vertically, segregating software company sellers with vertical market solutions (e.g. retail, financial services, telecom, manufacturing, etc.) from sellers with horizontal software solutions (infrastructure, enterprise applications, etc.).

In 2Q12, providers of vertical software accounted for 35% of all software M&A, confirming vertical providers remain attractive acquisition targets primarily because of their predictable recurring

revenue, deep domain expertise, and highly defensible market positions. The most active verticals in 2Q12 were Healthcare and Financial Services, garnering 25.5% and 23.6%, respectively (Figure 32). Both verticals continued to see heightened deal activity, mostly due to regulatory changes, growing governmental scrutiny, and evolving market conditions. The Education vertical accounted for 10.9% of 2Q12’s deal total, driven by high demand for software solutions that address demands for greater accountability and leverage more cost-effective learning. Vertical software companies have been in growing demand since 4Q11 (Figure 33). Vertical targets accounted for 30% of total M&A transactions in 4Q11, 32% in 1Q12 and, as noted, 35% in 2Q12. The median EV/Revenue exit multiple of these vertical targets has nearly doubled over the same time period, growing from 1.0x in 4Q11 to 1.9x in 2Q12 (Figure 34).

Automotive0.9%

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Figure 32: 2Q12 M&A Volume by Vertical

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Figure 34: Horizontal & Vertical M&A Median EV/Revenue Exit Multiples



SOFTWARE M&A BY PRODUCT CATEGORY We begin this section with two fundamental truths: First, while such factors as revenue growth, equity structure and delivery model can demonstrably impact a software company’s exit valuation, the nature of it product offering – its software product category – is the single most important M&A valuation driver. Second, product category median exit valuations are highly volatile, often highly dependent on market adoption, and fluctuate greatly from year to year. Each premise continued to hold true in 2Q12. For most software product categories, there is often an insufficient number of transactions each quarter that publicly report both seller TTM revenue and buyer purchase price, essential in determining the median exit value for the category. Consequently, we aggregate the data each quarter for each category on a TTM basis. As a result, it may take several quarters to detect changing product category valuation trends, as certain outlier transactions consummated nine or twelve months ago may have a residual impact on their product category multiples. Among the 32 product categories we tracked in 2Q12, eleven had both sufficient deal activity and deal data to ascertain a TTM revenue multiple (Figure 35). Software company sellers that were focused on Network Performance Management garnered the highest median TTM revenue multiple, 7.5x, nearly 3x higher than the second highest category. Sellers within this product category are benefitting from the accelerating shift to cloud and mobile computing, which are transforming the IT infrastructures of both large enterprises and SMBs.

Other software product categories with median EV/Revenue multiples significantly above the general software median of 2.5x in 2Q12 were Mobile (2.8x), Multimedia, Graphics and Digital Media (2.5x), CRM (2.4x), Healthcare (2.4x) and BI, Risk and Compliance (2.4x). Software product categories lagging the general software median include Supply Chain Mgmt (1.2x) and Other Verticals (1.4x). From the standpoint of deal activity, the Mobile product category led all others by far, accounting for 22.5% of 2Q12’s transactions (Figure 36). Other active M&A categories this quarter included: Multimedia, Graphics and Digital Media (4.5%), Engineering, PLM and CAD/CAM (3.2%) Development Tools & Application Testing (3.2%) and Networking & Network Performance Mgmt (2.6%). The breadth of M&A product categories with transactions in the second quarter speaks to the current vibrancy of the software M&A market. The second quarter marks the first time the mobile category has not only led in M&A volume, but also in median EV/Revenue exit multiple. With the exception of a few headline grabbing deals, the mobile category has been historically characterized by a large number of transactions involving small, private companies that were unable to command a significant exit premium. While 2Q12’s results suggest the fortunes of mobile targets may be changing, it’s important to note mobile deal structures frequently include stock, earnouts and other contingencies that put reported transaction values at high risk. For a detailed overview on mobile M&A, see our blog: http://softwareequitygroup.wordpress.com/2012/07/19/what-you-need-to-know-about-mobile-q2-update-ma-snapshot-hot-companies-and-product-categories-deal-structures-and-more/

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http://softwareequitygroup.wordpress.com/2012/07/19/what-you-need-to-know-about-mobile-q2-update-ma-snapshot-hot-companies-and-product-categories-deal-structures-and-more/



SOFTWARE AS A SERVICE (SAAS) M&A DEAL VOLUME AND VALUATIONS The number of SaaS M&A transactions continues to soar. In 2Q12, 59 SaaS companies were acquired, a 31% increase from 45 transactions in 2Q11. SaaS targets accounted for 14.0% of all software industry acquisitions in 2Q12, compared to only 7.8% of all software M&A deals just two years ago (Figure 37).

SaaS exit valuations are also ramping, and have begun to approach pre-Recession highs. The median EV/Revenue exit multiple for SaaS providers in the second quarter was 4.0x, up 2.6% QoQ, and 14.3% YoY (Figure 38). 2Q12’s median exit valuation is more than double the median 1.7x TTM EV/Revenue exit multiple of on-premise software companies in 2Q12.

CRM & Marketing2.6%

Data Mgmt & Integration1.6%

Development Tools & Application Testing3.2%

EDA1.6%

Engineering, PLM & CAD/CAM3.2%

EDI/ Middleware0.6%

ERP 1.0%

Gaming0.6%

Messaging, Conferencing & Communications

2.3%

Mobile22.5%

Multimedia, Graphics & Digital Media4.5%

Networking & Network Performance Mgmt2.6%

Security2.9%

Storage & Systems Mgmt2.3%

Supply Chain & Logistics2.3%

Talent & Workforce Mgmt2.3%

Web Analytics0.6%

Automotive0.3%

Education3.9%

Financial Services8.4%

Healthcare9.0%

Hospitality0.3%

Legal0.3%

Manufacturing0.3%

Oil & Gas2.3%

Other Verticals6.1%

Public Sector1.6%

Real Estate1.3%

Retail 0.3%

Utilities1.3%

Accounting & Finance1.0%

Asset & Facilities Mgmt1.3%

Billing & Service Mgmt1.0% Business Intelligence

1.3%

Content & Document Mgmt3.5%

Vertical Deals

Figure 36: Software M&A by Product Category

813

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39

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3945 48

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8%

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12%

14%

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SaaS M

&A Deals as a

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otal

Software M&A Deals

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SaaS M&A Deals SaaS as % of Software

Figure 37: SaaS M&A Deals as % of Total Software M&A Deals

3.5x

3.7x 3.7x

3.9x4.0x

2Q11 3Q11 4Q11 1Q12 2Q12

Figure 38: Median SaaS M&A Valuation Multiple as a Multiple of TTM Revenue



SAP’s acquisition of Ariba wasn’t the only blockbuster SaaS deal in the second quarter. Microsoft acquired Yammer ($1 billion EV), often referred to as the Facebook of the workplace. Yammer’s social elements, which can demonstrably enhance workplace productivity, were deemed by Microsoft to be a vital extension for its tired, but industry leading Office Suite. The $1 billion price tag follows shortly after the target raised venture capital at a significantly lower pre-money valuation, reminiscent of the now maligned Facebook/Instagram deal. Another notable second quarter SaaS deal was Intuit’s acquisition of Demandforce ($423.5 million, estimated 11.3x TTM revenue), a provider of SaaS applications that automate digital marketing and communications. Demandforce’s horizontal customer base of SMB businesses and complementary products provide Intuit with significant cross sell opportunities and a direct path to higher revenue per customer. There were a number of other notable SaaS deals in the quarter (for a full list of SaaS acquisitions, see Appendix G). Clearly, the industry’s largest on-premise software companies now view SaaS as a viable deployment model and strategic imperative. Second quarter SaaS company acquirers included: Oracle, Salesforce.com, EMC, Autodesk, Experian, VMWare and LivePerson.

The broad based appeal of SaaS is evidenced by the fact that 2Q12’s transactions included SaaS targets in ten different product categories and twelve vertical markets. The CRM & Marketing product category accounted for a whopping 25% of all SaaS M&A transactions in 2Q12. We believe this signals the last flurry of consolidation in this product category, with larger vendors bulking up in response to increased market adoption of SaaS deployed CRM apps among enterprises and SMBs (Figure 39). Notable Q2 transactions in this category include: Salesforce.com’s acquisitions of Thinkfuse and ChoicePass; Oracle’s acquisitions of Collective Intellect and Vitrue; Experian’s acquisition of Conversen; LivePerson’s acquisition of Amadesa; and as noted above, Intuit’s acquisition of Demandware. The Talent & Workforce Management product category of our SaaS Index accounted for approximately 14% of the Q2 SaaS M&A tally. Talent/Workforce Management was one of the earliest SaaS deployed application suites to gain a significant foothold among enterprises, and they continue to appeal to larger on-premise software providers that are under pressure to add SaaS to their product mix.

CRM & Marketing25%

Development Tools & Application Testing

2%

Facilities & Asset Mgmt2%

Messaging, Conferencing & Communications

12%

Storage, Data Mgmt & Integration

2%Supply Chain & Logistics

3%

Talent & Workforce Mgmt14%

Web Analytics3%

Automotive2%

Education3%

Financial Services2%

Healthcare2%

Hospitality3%

Insurance2%

Legal2%

Manufacturing2%

Other Verticals5%

Real Estate7%

Retail 2%

Utilities2%

Billing & Service Mgmt2%

Business Intelligence3%

Vertical Deals

Figure 39: SaaS M&A by Product Category



Collectively, vertical solution providers (pure-play SaaS and hybrid) accounted for 35% of all SaaS M&A transactions. SaaS sellers targeting real estate accounted for 7% of all SaaS deals. The remaining deals were spread nearly evenly across the eleven other vertical product categories. INTERNET M&A DEAL VOLUME AND VALUATIONS Internet M&A activity in the second quarter was robust, finishing the quarter with 273 transactions, up 37% YoY (Figure 40). The second quarter’s 273 Internet transactions was 65% of the final tally for traditional on-premise software M&A, up markedly from 3Q10 when Internet M&A was only 30% of the on-premise software deal total.

The most active Internet M&A category in 2Q12 was Ad Tech & Lead Gen, which accounted for 70 transactions in Q2 (Figure 41). A good number of the sellers in this category were daily deal sites that hoped to emulate Groupon and Living Social, but were unsuccessful due to their inability to scale quickly and massively, making them ripe for consolidation. Other Ad Tech & Lead Gen deals in Q2 included a new breed of online marketing companies leveraging social media and easy to use software to help local businesses, a highly sought after target market in the Internet space.

Historically, Groupon has been highly acquisitive in this category, but not so in the second quarter. However, a broad array of buyers in an array of industries took up the slack, including: Deluxe Corporation’s acquisition of OrangeSoda ($27.7 million EV); Twitter’s acquisition of RestEngine; Facebook’s acquisition of Tagtile; IHS’ acquisition of GlobalSpec ($135 million EV); and Cox Target Media’s acquisition of Savings.com ($100 million EV). Content & Media was also among the most active Internet categories from an M&A perspective, with 62 transactions in the second quarter. By far the most notable 2Q12 transaction in this product category was Facebook’s acquisition of Instagram. Hammered out over a weekend session between the CEO’s of both companies, the $1 billion price tag caused many to scratch their heads since Instagram had zero revenue and no discernible business model. While it certainly made strategic sense to marry the leading mobile image sharing application with the world’s largest social network, it seems highly doubtful the deal will ever yield sufficient return to justify the price tag. Social Media M&A volume was relatively low in Q2 compared to prior quarters, somewhat surprising given the high market valuations and visibility of public Social Media players. Still, there were some noteworthy acquisitions in the second quarter, including Twitter’s purchase of Hotspots.io; LinkedIn’s acquisition of SlideShare ($72 million EV); Salesforce.com’s acquisition of BuddyMedia ($745 million EV); and Facebook’s purchase of Face.com ($60 million EV). The TTM Internet M&A median exit multiple was 2.1x in 2Q12 (Figure 42). However, that median

199

216203

220

273

2Q11 3Q11 4Q11 1Q12 2Q12

Figure 40: Internet M&A Volume

Category Q2 2011 Q3 2011 Q4 2011 1Q 2012 2Q 2012Ad-Tech & Lead Gen 42 67 60 65 70Commerce 56 36 38 36 57Content & Media 36 45 48 51 62Gaming 15 6 14 13 25Infrastructure 25 27 27 31 30Social Tech 25 35 16 24 29Total 199 216 203 220 273

Figure 41: Internet M&A Volume by Product Category 2.0x

2.6x2.8x

2.1x 2.1x

2Q11 3Q11 4Q11 1Q12 2Q12

Figure 42: Median Internet M&A Valuations as Multiple of Revenue



is derived by aggregating median multiples over the prior twelve months, and doesn’t reflect the recent surge in Internet M&A volume and exit values. The median exit multiple for the second quarter, only, was 2.5x, markedly higher than the trailing twelve months figure. Given an expanded and dynamic group of public Internet companies that are trading at lofty valuations, a vibrant and growing addressable market, and rapidly evolving Internet deployed technologies, we expect Internet valuations will continue to grow robustly for the remainder of 2012.



APPENDIX A: 2Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Billing & Service Management 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 2.8x 1.3x 1.3x 1.3x 1.3xEV/EBITDA 7.4x 5.2x 5.6x 6.6x 6.9xEV/Earnings 12.4x 9.3x 12.0x 11.8x 11.1xGross Profit Margin 52.0% 51.8% 52.9% 53.5% 54.1%EBITDA Margin 25.5% 21.9% 23.3% 21.8% 18.5%Net Income Margin 16.0% 18.2% 17.1% 15.5% 12.9%TTM Revenue Growth (YoY) 9.3% 10.7% 34.1% 19.1% 22.3%TTM EBITDA Growth (YoY) 9.4% 13.8% 5.6% 0.8% 0.3%TTM Earnings Growth (YoY) -7.4% -15.1% -34.0% -10.1% -5.2%Current Ratio 2.6 3.1 4.3 2.3 2.4Cash as Percent of Market Cap 20.8% 32.1% 34.1% 22.8% 20.9%Enterprise Value Growth (YoY) 19.2% 8.4% -3.0% -10.3% -22.4%

Business Intelligence 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 3.2x 2.8x 2.4x 2.3x 2.5xEV/EBITDA 43.1x 39.6x 36.5x 39.3x 38.1xEV/Earnings 27.8x 142.0x 56.9x 66.4x 66.0xGross Profit Margin 79.3% 79.2% 78.7% 78.9% 78.5%EBITDA Margin 10.0% 7.3% 8.0% 8.9% 8.7%Net Income Margin 5.7% 3.6% 5.2% 4.9% 4.0%TTM Revenue Growth (YoY) 18.2% 21.6% 25.2% 23.7% 19.0%TTM EBITDA Growth (YoY) -8.9% -6.8% -4.9% 4.6% 6.0%TTM Earnings Growth (YoY) 76.4% -6.2% -14.3% 2.9% -29.0%Current Ratio 2.1 1.9 1.8 1.8 1.9Cash as Percent of Market Cap 14.0% 15.5% 15.9% 15.3% 14.8%Enterprise Value Growth (YoY) 32.1% 53.5% 14.9% 16.2% -5.8%

Development Platforms 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 2.6x 1.8x 1.9x 2.3x 1.9xEV/EBITDA 10.5x 8.0x 9.0x 10.1x 9.1xEV/Earnings 19.0x 14.0x 14.9x 18.7x 18.3xGross Profit Margin 76.4% 77.2% 77.2% 76.4% 76.6%EBITDA Margin 21.3% 22.0% 22.4% 22.2% 22.1%Net Income Margin 12.0% 12.6% 12.8% 12.9% 12.8%TTM Revenue Growth (YoY) 23.2% 15.0% 11.0% 7.7% 6.4%TTM EBITDA Growth (YoY) 20.0% 21.8% 10.8% 2.4% 2.9%TTM Earnings Growth (YoY) -33.8% -26.5% -17.3% -12.3% -11.9%Current Ratio 2.3 2.4 2.0 2.2 2.0Cash as Percent of Market Cap 15.6% 19.5% 19.9% 21.8% 20.6%Enterprise Value Growth (YoY) 34.7% 15.0% -10.0% -17.1% -16.6%

Engineering & PLM 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 2.4x 1.9x 2.0x 2.6x 2.3xEV/EBITDA 17.4x 12.8x 13.5x 14.3x 11.5xEV/Earnings 28.4x 20.8x 24.6x 25.1x 24.3xGross Profit Margin 83.4% 83.1% 83.0% 83.0% 83.6%EBITDA Margin 15.1% 15.8% 16.2% 18.5% 19.9%Net Income Margin 11.4% 11.9% 7.7% 8.3% 10.4%TTM Revenue Growth (YoY) 12.9% 14.2% 15.5% 13.5% 13.5%TTM EBITDA Growth (YoY) 13.0% 25.9% 38.4% 37.5% 43.1%TTM Earnings Growth (YoY) -64.4% -22.3% -54.6% -35.8% -18.3%Current Ratio 2.1 2.1 1.7 1.7 1.8Cash as Percent of Market Cap 18.4% 19.3% 19.4% 20.5% 18.3%Enterprise Value Growth (YoY) 40.8% 18.6% 3.5% 3.0% 11.5%

Enterprise Resource Planning 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 3.2x 2.8x 2.8x 3.0x 2.4xEV/EBITDA 11.1x 9.1x 9.6x 10.2x 8.3xEV/Earnings 20.8x 14.9x 17.9x 16.7x 13.1xGross Profit Margin 70.2% 70.2% 70.9% 71.5% 71.5%EBITDA Margin 30.0% 30.0% 29.5% 29.3% 29.0%Net Income Margin 14.1% 14.4% 14.2% 16.3% 18.4%TTM Revenue Growth (YoY) 13.7% 17.9% 16.3% 12.4% 10.1%TTM EBITDA Growth (YoY) 22.0% 36.2% 36.0% 33.5% 10.4%TTM Earnings Growth (YoY) -16.6% -24.4% -28.2% -29.6% -39.8%Current Ratio 1.3 1.4 1.8 1.5 1.2Cash as Percent of Market Cap 14.6% 19.5% 18.7% 17.6% 22.2%Enterprise Value Growth (YoY) 37.0% 18.6% 0.6% 6.0% -2.1%

Financial & Accounting 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 2.8x 2.3x 2.6x 2.8x 2.7xEV/EBITDA 10.1x 8.9x 9.2x 9.8x 9.8xEV/Earnings 24.6x 18.8x 19.6x 25.0x 18.1xGross Profit Margin 69.7% 69.0% 67.0% 66.0% 64.4%EBITDA Margin 27.0% 27.5% 26.6% 25.4% 25.6%Net Income Margin 12.1% 13.4% 11.0% 12.2% 13.2%TTM Revenue Growth (YoY) 6.6% 7.2% 7.9% 5.7% 7.1%TTM EBITDA Growth (YoY) 4.8% 9.6% 10.1% 10.3% 9.5%TTM Earnings Growth (YoY) -15.0% -14.3% -9.7% -5.8% -6.9%Current Ratio 1.4 1.3 1.4 1.3 1.4Cash as Percent of Market Cap 11.9% 12.1% 14.7% 11.4% 13.0%Enterprise Value Growth (YoY) 32.5% 9.3% 3.5% 8.4% 4.1%

Gaming 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 1.0x 1.4x 1.2x 1.2x 0.9xEV/EBITDA 10.9x 9.1x 7.8x 7.1x 7.6xEV/Earnings 19.8x 20.2x 15.1x 12.3x 10.5xGross Profit Margin 55.5% 57.7% 58.9% 56.9% 57.4%EBITDA Margin 10.4% 12.1% 12.8% 11.6% 9.2%Net Income Margin 4.9% 6.0% 5.5% 5.5% 6.0%TTM Revenue Growth (YoY) -0.4% 2.6% 4.8% 6.9% 14.1%TTM EBITDA Growth (YoY) 82.8% 29.3% 44.5% 41.4% 7.3%TTM Earnings Growth (YoY) -162.0% -74.0% -23.2% -44.1% -32.4%Current Ratio 2.4 2.7 2.3 2.3 2.6Cash as Percent of Market Cap 20.8% 24.5% 22.8% 22.9% 35.7%Enterprise Value Growth (YoY) 34.2% 39.4% 30.6% 15.0% -16.7%

Healthcare 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 3.9x 3.5x 3.1x 3.6x 3.3xEV/EBITDA 19.6x 19.0x 15.5x 18.4x 15.3xEV/Earnings 38.7x 37.5x 31.1x 30.3x 38.1xGross Profit Margin 65.3% 65.7% 66.0% 65.9% 65.2%EBITDA Margin 18.9% 21.8% 21.5% 22.1% 22.3%Net Income Margin 2.2% 4.2% 3.9% 3.8% 3.4%TTM Revenue Growth (YoY) 16.3% 17.6% 16.6% 18.7% 22.6%TTM EBITDA Growth (YoY) 6.3% 23.3% 40.1% 45.3% 45.7%TTM Earnings Growth (YoY) -19.9% -31.0% -72.1% -62.0% -31.6%Current Ratio 2.0 1.9 1.9 1.9 2.2Cash as Percent of Market Cap 10.4% 8.8% 9.2% 7.6% 13.0%Enterprise Value Growth (YoY) 42.2% 56.2% 21.1% 11.6% -8.8%

IT Conglomerates 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 2.6x 2.6x 2.5x 3.1x 2.9xEV/EBITDA 8.8x 8.5x 9.0x 8.2x 7.7xEV/Earnings 14.6x 14.4x 15.0x 13.3x 12.9xGross Profit Margin 70.2% 70.2% 70.9% 71.5% 71.5%EBITDA Margin 35.2% 35.7% 37.1% 37.4% 36.9%Net Income Margin 14.9% 14.7% 19.4% 24.2% 23.9%TTM Revenue Growth (YoY) 15.2% 11.9% 8.5% 7.7% 5.3%TTM EBITDA Growth (YoY) 21.8% 21.3% 10.8% 6.1% 6.6%TTM Earnings Growth (YoY) -11.9% -20.7% -19.0% -12.3% -11.9%Current Ratio 1.3 1.4 1.8 1.5 1.3Cash as Percent of Market Cap 14.6% 13.3% 15.4% 15.5% 18.6%Enterprise Value Growth (YoY) 24.1% 15.0% -1.4% 6.0% -2.1%

Mobile Solutions/Content 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 3.3x 2.1x 2.5x 3.3x 2.6xEV/EBITDA 23.4x 17.2x 13.5x 22.6x 15.0xEV/Earnings 31.9x 21.7x 22.2x 16.0x 19.9xGross Profit Margin 66.7% 66.8% 65.8% 64.2% 63.5%EBITDA Margin 10.5% 11.3% 7.0% 7.5% 10.9%Net Income Margin 0.4% 1.6% 2.1% 1.6% 1.3%TTM Revenue Growth (YoY) 20.2% 17.6% 12.7% 10.6% 12.3%TTM EBITDA Growth (YoY) 12.8% 19.5% 6.5% -14.9% 3.1%TTM Earnings Growth (YoY) -38.2% -13.5% -31.3% -9.8% -16.8%Current Ratio 3.3 3.5 3.5 3.6 3.6Cash as Percent of Market Cap 14.3% 14.2% 19.9% 19.8% 19.5%Enterprise Value Growth (YoY) 10.9% 15.5% -2.2% -26.7% -35.7%



APPENDIX A: 2Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Networking & Network Perf Mgmt 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 4.3x 3.0x 2.9x 3.4x 2.9xEV/EBITDA 24.8x 16.9x 19.7x 20.0x 19.1xEV/Earnings 37.5x 27.8x 30.8x 35.4x 22.8xGross Profit Margin 68.9% 69.1% 69.0% 69.4% 70.0%EBITDA Margin 16.4% 17.9% 18.5% 17.8% 17.5%Net Income Margin 8.8% 12.8% 11.6% 12.8% 12.7%TTM Revenue Growth (YoY) 23.6% 21.5% 29.0% 25.6% 22.9%TTM EBITDA Growth (YoY) 48.1% 60.5% 46.4% 35.5% 29.7%TTM Earnings Growth (YoY) -55.6% -60.0% -46.5% -29.6% -24.6%Current Ratio 2.8 3.1 3.0 3.0 2.7Cash as Percent of Market Cap 12.4% 18.5% 17.6% 11.7% 16.8%Enterprise Value Growth (YoY) 91.2% 20.1% -15.8% -12.3% -16.6%

Security 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 3.8x 3.7x 5.1x 4.8x 5.6xEV/EBITDA 16.5x 15.8x 25.2x 15.5x 13.6xEV/Earnings 23.9x 20.3x 19.6x 18.0x 13.6xGross Profit Margin 79.2% 78.9% 79.1% 79.3% 79.0%EBITDA Margin 20.6% 21.4% 21.0% 22.2% 21.4%Net Income Margin 14.5% 9.8% 10.2% 11.6% 13.8%TTM Revenue Growth (YoY) 23.5% 19.1% 16.8% 26.3% 19.4%TTM EBITDA Growth (YoY) 9.2% 4.6% 9.3% 13.2% 15.7%TTM Earnings Growth (YoY) -0.4% 1.2% -16.8% -15.3% -11.2%Current Ratio 1.1 1.2 1.2 2.0 2.0Cash as Percent of Market Cap 14.9% 18.6% 15.9% 13.2% 12.1%Enterprise Value Growth (YoY) 46.3% 43.3% 11.9% 25.0% -2.0%

Storage, Data Management & Integration 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 2.6x 2.1x 2.2x 2.5x 2.4xEV/EBITDA 12.7x 9.8x 9.8x 10.3x 9.4xEV/Earnings 24.5x 18.8x 18.1x 19.9x 17.7xGross Profit Margin 75.1% 75.3% 75.4% 74.6% 74.8%EBITDA Margin 22.0% 22.3% 22.1% 22.7% 22.6%Net Income Margin 12.2% 11.8% 12.0% 12.2% 12.5%TTM Revenue Growth (YoY) 15.7% 15.7% 8.5% 9.4% 7.7%TTM EBITDA Growth (YoY) 16.0% 19.0% 9.8% 14.2% 10.6%TTM Earnings Growth (YoY) -19.9% -26.2% -20.9% -20.7% -13.8%Current Ratio 2.0 1.9 2.0 2.0 2.3Cash as Percent of Market Cap 15.5% 19.5% 18.7% 21.8% 21.9%Enterprise Value Growth (YoY) 46.5% 18.9% 0.0% 0.3% -7.5%

Supply Chain Management & Logistics 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 2.2x 1.9x 2.2x 2.3x 2.1xEV/EBITDA 12.0x 11.2x 11.9x 12.9x 11.3xEV/Earnings 20.8x 19.1x 18.5x 20.5x 21.1xGross Profit Margin 57.7% 57.4% 58.4% 59.1% 59.5%EBITDA Margin 14.8% 15.8% 17.6% 18.6% 19.6%Net Income Margin 9.1% 9.9% 11.0% 10.6% 10.9%TTM Revenue Growth (YoY) 13.6% 18.5% 20.2% 14.4% 17.3%TTM EBITDA Growth (YoY) 23.9% 27.7% 34.3% 53.6% 36.9%TTM Earnings Growth (YoY) -12.8% -19.7% -30.0% -28.8% -25.1%Current Ratio 2.2 2.3 2.4 2.6 2.6Cash as Percent of Market Cap 16.9% 19.5% 18.3% 15.4% 18.5%Enterprise Value Growth (YoY) 20.4% 20.2% 23.4% 31.0% 34.7%

Systems Management 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 5.6x 3.9x 3.9x 4.2x 4.3xEV/EBITDA 17.0x 13.6x 15.1x 16.8x 16.3xEV/Earnings 28.5x 20.8x 25.3x 30.9x 30.4xGross Profit Margin 85.2% 85.1% 85.2% 85.5% 85.7%EBITDA Margin 28.3% 28.9% 29.3% 30.0% 28.5%Net Income Margin 17.1% 17.7% 17.4% 17.8% 16.8%TTM Revenue Growth (YoY) 14.6% 13.5% 14.0% 14.2% 13.4%TTM EBITDA Growth (YoY) 14.7% 16.6% 16.7% 17.9% 16.8%TTM Earnings Growth (YoY) -20.3% -19.5% -20.5% -11.5% -10.3%Current Ratio 1.7 1.7 1.5 1.5 1.5Cash as Percent of Market Cap 13.6% 16.5% 18.5% 15.6% 14.5%Enterprise Value Growth (YoY) 46.6% 13.2% -6.2% 2.9% 3.6%

Vertical - Finance 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 4.7x 3.8x 3.9x 3.8x 3.7xEV/EBITDA 15.4x 13.3x 12.7x 11.6x 11.6xEV/Earnings 46.7x 33.9x 33.5x 28.4x 25.9xGross Profit Margin 69.8% 69.8% 69.6% 68.8% 68.5%EBITDA Margin 36.7% 36.6% 36.8% 36.6% 36.9%Net Income Margin 13.8% 13.9% 13.9% 14.6% 15.7%TTM Revenue Growth (YoY) 18.1% 15.6% 15.0% 15.1% 13.1%TTM EBITDA Growth (YoY) 20.8% 23.6% 13.8% 13.9% 15.9%TTM Earnings Growth (YoY) -15.9% -11.6% -19.9% -16.2% -14.7%Current Ratio 1.2 1.2 1.2 1.1 1.3Cash as Percent of Market Cap 5.5% 6.3% 6.6% 10.8% 10.7%Enterprise Value Growth (YoY) 24.4% 11.2% -7.2% -3.8% -0.2%

Vertical - Other 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 3.4x 2.6x 2.6x 2.8x 2.6xEV/EBITDA 15.3x 13.0x 16.0x 16.7x 15.6xEV/Earnings 24.3x 26.1x 27.3x 30.3x 39.5xGross Profit Margin 57.5% 57.5% 57.1% 56.9% 56.6%EBITDA Margin 17.0% 16.6% 16.5% 16.6% 15.7%Net Income Margin 10.4% 10.5% 10.1% 8.7% 7.1%TTM Revenue Growth (YoY) 10.4% 15.4% 21.6% 20.7% 26.5%TTM EBITDA Growth (YoY) 13.6% 31.9% 29.3% 28.6% 15.5%TTM Earnings Growth (YoY) -13.0% -24.2% -38.5% -4.7% 13.9%Current Ratio 1.3 1.3 1.2 1.7 1.6Cash as Percent of Market Cap 15.0% 12.3% 14.6% 7.3% 12.5%Enterprise Value Growth (YoY) 53.5% 39.3% 45.3% 37.1% 8.0%



APPENDIX B: 2Q12 PUBLIC SAAS MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

CRM & Marketing 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 6.1x 4.8x 3.6x 5.3x 4.6xEV/EBITDA 47.1x 27.8x 25.9x 29.7x 30.1xEV/Earnings 216.7x 80.9x 68.3x 57.7x 60.6xGross Profit Margin 71.9% 72.0% 72.3% 73.2% 73.8%EBITDA Margin 7.2% 6.9% 6.7% 7.5% 7.6%Net Income Margin 1.8% 1.8% 1.7% 2.7% 2.1%TTM Revenue Growth (YoY) 29.6% 28.2% 25.2% 29.9% 21.4%TTM EBITDA Growth (YoY) 11.8% 16.5% 3.6% 14.9% 27.6%TTM Earnings Growth (YoY) -15.2% -27.2% 16.5% 20.7% 31.5%Current Ratio 2.0 2.4 2.4 2.4 3.3Cash as Percent of Market Cap 11.7% 14.9% 21.4% 13.3% 12.8%Enterprise Value Growth (YoY) 75.3% 56.2% -6.6% -2.9% -5.8%

ERP & Supply Chain 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 6.9x 6.0x 5.7x 5.3x 6.0xEV/EBITDA 37.6x 47.2x 65.3x 68.7x 68.5xEV/Earnings 62.9x 88.6x 96.6x 57.5x 65.2xGross Profit Margin 70.8% 71.3% 71.6% 71.8% 71.7%EBITDA Margin 8.0% 7.4% 6.9% 7.1% 7.6%Net Income Margin 2.9% 1.2% 3.7% 1.7% 1.7%TTM Revenue Growth (YoY) 19.1% 21.8% 24.3% 27.9% 28.1%TTM EBITDA Growth (YoY) -13.4% -18.6% -18.5% -7.1% -5.7%TTM Earnings Growth (YoY) 15.5% 88.0% -44.6% -35.1% -41.8%Current Ratio 1.4 1.6 1.6 1.6 1.6Cash as Percent of Market Cap 11.1% 11.7% 10.0% 8.2% 7.6%Enterprise Value Growth (YoY) 148.6% 76.7% 74.5% 42.6% 35.8%

Vertically Focused 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 5.6x 5.4x 5.2x 5.7x 4.5xEV/EBITDA 30.3x 27.8x 27.3x 33.4x 29.9xEV/Earnings 52.5x 97.6x 88.8x 17.5x 79.6xGross Profit Margin 59.8% 60.2% 60.5% 60.6% 60.5%EBITDA Margin 14.0% 16.1% 16.7% 15.2% 15.3%Net Income Margin 2.9% 3.8% 4.4% 12.2% 10.4%TTM Revenue Growth (YoY) 29.3% 28.9% 34.2% 34.5% 34.4%TTM EBITDA Growth (YoY) 19.8% 38.2% 35.9% 23.5% 30.8%TTM Earnings Growth (YoY) -47.8% -37.4% -25.3% -57.6% -49.8%Current Ratio 2.1 2.1 1.6 1.8 2.8Cash as Percent of Market Cap 6.3% 5.0% 4.9% 4.7% 4.8%Enterprise Value Growth (YoY) 56.6% 45.0% 25.5% 23.8% 13.9%

Workforce Management 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 4.5x 3.6x 4.3x 4.7x 4.8xEV/EBITDA 63.3x 44.1x 49.4x 47.2x 50.6xEV/Earnings 607.5x 336.2x 432.1x 412.1x 399.7xGross Profit Margin 60.2% 59.6% 59.0% 58.6% 58.1%EBITDA Margin 1.2% 1.9% 1.1% 0.7% -0.9%Net Income Margin -8.2% -8.9% -11.0% -10.9% -13.1%TTM Revenue Growth (YoY) 26.6% 32.3% 35.7% 31.1% 29.2%TTM EBITDA Growth (YoY) 5.8% 30.6% 25.3% 6.3% -2.4%TTM Earnings Growth (YoY) -13.1% 15.1% 20.7% -45.6% -50.2%Current Ratio 1.2 1.9 1.6 1.5 1.3Cash as Percent of Market Cap 10.8% 16.0% 14.9% 10.2% 9.3%Enterprise Value Growth (YoY) 162.1% 83.7% 44.7% 33.7% 12.3%

Other SaaS 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 5.9x 2.4x 2.0x 7.3x 5.2xEV/EBITDA 46.1x 15.7x 21.6x 24.5x 19.8xEV/Earnings 124.9x 49.0x 43.8x 34.1x 26.1xGross Profit Margin 71.7% 71.8% 71.5% 71.6% 72.2%EBITDA Margin 17.0% 14.8% 13.0% 12.6% 14.5%Net Income Margin 3.0% 4.0% 2.6% 3.0% 4.4%TTM Revenue Growth (YoY) 30.9% 30.6% 24.7% 21.0% 27.1%TTM EBITDA Growth (YoY) 24.8% 51.3% 3.4% 16.1% 14.2%TTM Earnings Growth (YoY) -74.0% -79.4% 12.8% 11.4% 65.5%Current Ratio 1.9 2.0 2.1 2.1 2.5Cash as Percent of Market Cap 11.8% 18.3% 22.5% 14.9% 12.9%Enterprise Value Growth (YoY) 67.0% 30.0% -29.1% -27.3% 20.4%



APPENDIX C: 2Q12 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Ad Tech & Lead Generation 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 3.3x 2.6x 2.6x 3.0x 2.3xEV/EBITDA 10.9x 11.1x 12.0x 14.1x 11.4xEV/Earnings 17.4x 15.8x 16.8x 28.3x 28.8xGross Profit Margin 68.4% 67.3% 66.7% 67.7% 67.6%EBITDA Margin 21.7% 20.9% 17.8% 13.9% 14.0%Net Income Margin 6.8% 6.8% 6.3% 4.4% 3.6%TTM Revenue Growth (YoY) 24.3% 25.1% 29.8% 34.4% 37.5%TTM EBITDA Growth (YoY) 16.1% 31.5% 24.3% 26.3% 36.9%TTM Earnings Growth (YoY) -21.3% -8.5% -10.5% -22.9% -13.9%Current Ratio 3.2 3.1 3.0 2.9 2.8Cash as Percent of Market Cap 11.7% 12.9% 14.3% 18.2% 20.3%Enterprise Value Growth (YoY) 47.6% 35.4% -0.1% -12.8% -21.5%

Commerce 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 1.9x 1.4x 1.1x 0.9x 0.7xEV/EBITDA 19.4x 13.8x 12.9x 16.7x 18.8xEV/Earnings 51.2x 33.3x 27.5x 15.4x 14.7xGross Profit Margin 40.7% 39.3% 37.5% 36.9% 37.0%EBITDA Margin 8.0% 9.7% 9.3% 8.6% 8.3%Net Income Margin 3.4% 2.6% 2.3% 3.8% 3.1%TTM Revenue Growth (YoY) 9.2% 9.3% 13.2% 14.3% 17.5%TTM EBITDA Growth (YoY) 1.4% 5.9% 8.4% 2.0% 6.5%TTM Earnings Growth (YoY) 4.5% 28.6% 24.6% 21.1% 43.3%Current Ratio 2.3 2.3 2.2 1.8 1.8Cash as Percent of Market Cap 12.7% 20.0% 15.6% 12.7% 13.5%Enterprise Value Growth (YoY) 39.5% 24.4% -14.6% -28.3% -25.8%

Content & Media 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 3.4x 2.7x 2.2x 2.0x 1.7xEV/EBITDA 18.1x 10.9x 10.7x 10.6x 10.1xEV/Earnings 32.8x 16.6x 17.0x 17.5x 20.8xGross Profit Margin 50.2% 51.3% 51.7% 52.0% 51.9%EBITDA Margin 11.3% 12.8% 12.6% 13.4% 13.3%Net Income Margin -2.4% 4.1% 2.5% 0.6% 1.4%TTM Revenue Growth (YoY) 12.4% 12.6% 25.6% 25.8% 18.9%TTM EBITDA Growth (YoY) 12.2% 24.7% 17.2% 14.5% -6.9%TTM Earnings Growth (YoY) -68.9% -13.0% -27.5% 10.0% 32.4%Current Ratio 2.3 2.6 2.6 2.6 2.1Cash as Percent of Market Cap 21.6% 22.1% 27.3% 20.9% 18.3%Enterprise Value Growth (YoY) 16.5% -7.9% -44.3% -24.0% -37.4%

Gaming 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 4.4x 4.5x 3.1x 3.2x 3.1xEV/EBITDA 9.7x 7.9x 6.0x 4.2x 4.0xEV/Earnings 11.6x 10.4x 8.4x 8.8x 7.3xGross Profit Margin 75.9% 75.8% 75.8% 74.6% 71.1%EBITDA Margin 42.5% 45.9% 45.3% 44.2% 45.5%Net Income Margin 37.1% 36.8% 33.6% 34.4% 32.3%TTM Revenue Growth (YoY) 24.3% 29.7% 34.2% 35.7% 33.5%TTM EBITDA Growth (YoY) 16.1% 24.8% 27.0% 23.9% 28.7%TTM Earnings Growth (YoY) -20.8% -22.0% -15.1% -14.5% -9.3%Current Ratio 4.1 3.2 2.7 2.7 2.2Cash as Percent of Market Cap 25.0% 18.9% 30.0% 29.5% 28.5%Enterprise Value Growth (YoY) 41.6% 28.8% -26.2% -5.9% -8.2%

Infrastructure 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 3.0x 2.6x 1.7x 2.0x 1.8xEV/EBITDA 19.4x 16.8x 12.6x 14.3x 16.2xEV/Earnings 33.6x 28.0x 22.7x 29.6x 24.0xGross Profit Margin 65.7% 63.0% 65.8% 66.7% 66.6%EBITDA Margin 12.0% 12.0% 11.8% 11.2% 10.9%Net Income Margin 4.5% 4.5% 3.5% 3.0% 4.6%TTM Revenue Growth (YoY) 15.9% 19.3% 24.6% 24.4% 18.1%TTM EBITDA Growth (YoY) 25.1% 18.9% 18.7% 23.8% 21.8%TTM Earnings Growth (YoY) -20.4% -17.9% -22.4% -6.0% 1.9%Current Ratio 3.1 2.8 2.8 2.6 2.9Cash as Percent of Market Cap 14.7% 21.7% 19.5% 22.6% 24.2%Enterprise Value Growth (YoY) 55.5% 31.1% -14.5% -24.8% -31.9%

Services 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 4.9x 4.4x 3.0x 2.6x 2.4xEV/EBITDA 21.4x 16.0x 16.8x 17.0x 15.2xEV/Earnings 38.9x 66.0x 20.6x 38.1x 34.1xGross Profit Margin 68.7% 69.4% 70.8% 71.7% 71.8%EBITDA Margin 8.7% 9.5% 7.8% 13.3% 11.9%Net Income Margin -3.9% -2.7% 3.0% 3.0% 4.7%TTM Revenue Growth (YoY) 24.6% 31.8% 29.7% 52.5% 57.8%TTM EBITDA Growth (YoY) 14.8% 6.2% 17.0% 30.0% 44.5%TTM Earnings Growth (YoY) -24.4% -16.4% -41.4% -38.0% -89.8%Current Ratio 2.2 1.8 2.0 2.2 1.7Cash as Percent of Market Cap 7.5% 9.8% 12.0% 11.5% 10.3%Enterprise Value Growth (YoY) 14.9% -5.8% -35.5% -37.4% -43.7%

Social 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 22.7x 18.9x 12.4x 13.7x 13.0xEV/EBITDA 137.6x 107.2x 41.5x 33.7x 32.8xEV/Earnings 254.5x 269.8x 361.0x 232.0x 156.5xGross Profit Margin 76.1% 75.7% 75.2% 76.8% 75.2%EBITDA Margin 13.4% 13.6% 13.4% 12.2% 12.9%Net Income Margin -11.2% -13.3% -11.9% 2.3% 2.4%TTM Revenue Growth (YoY) 87.9% 89.7% 102.8% 74.5% 64.2%TTM EBITDA Growth (YoY) 45.0% 84.8% 0.0% -22.5% -33.8%TTM Earnings Growth (YoY) -29.7% -8.1% 29.2% 13.4% 7.1%Current Ratio 3.7 3.1 2.7 2.7 3.0Cash as Percent of Market Cap 5.0% 15.4% 19.7% 13.8% 10.1%Enterprise Value Growth (YoY) n/a n/a n/a 0.9% -5.6%

Travel 2Q11 3Q11 4Q11 1Q12 2Q12EV/Revenue 7.3x 5.0x 5.5x 4.7x 3.1xEV/EBITDA 32.5x 23.4x 14.1x 15.1x 15.4xEV/Earnings 41.9x 34.5x 23.2x 25.8x 27.8xGross Profit Margin 80.0% 78.8% 78.7% 79.9% 79.9%EBITDA Margin 22.1% 21.9% 22.2% 22.1% 21.7%Net Income Margin 12.0% 8.4% 8.9% 8.2% 12.9%TTM Revenue Growth (YoY) 28.2% 25.7% 28.7% 31.5% 26.7%TTM EBITDA Growth (YoY) 19.3% 24.0% 19.8% 17.1% 16.5%TTM Earnings Growth (YoY) -10.8% -4.4% -16.3% -16.7% -22.7%Current Ratio 1.6 1.9 1.9 2.0 2.1Cash as Percent of Market Cap 8.5% 10.4% 9.8% 12.2% 13.2%Enterprise Value Growth (YoY) 14.6% 6.2% -20.6% -25.6% -35.4%



APPENDIX D: 2Q12 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS

Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDATTM Rev Growth

SAP (DB:SAP) Ariba Inc. (NasdaqGS:ARBA) $4,607,750,000 $4,411,350,000 8.8x 108.0x 27.3%Dell Inc. (NasdaqGS:DELL) Quest Softw are Inc. (NasdaqGS:QSFT) $2,507,250,000 $2,244,050,000 2.6x 14.0x 12.4%DTS Inc. (NasdaqGS:DTSI) SRS Labs, Inc. (NasdaqGM:SRSL) $148,100,000 $113,240,000 3.4x 50.7x 8.5%Lagardere Active SAS LeGuide.com S.A. (ENXTPA:ALGUI) $80,170,000 $91,960,000 2.6x 7.4x 13.0%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 (NasdaqGS:RRD) EDGAR Online Inc. (NasdaqCM:EDGR) $74,670,000 $71,200,000 2.3x - 49.3%Prow ebClub Prow ebCE (ENXTPA:ALPRW) $34,250,000 $44,480,000 0.8x 14.9x 20.3%



APPENDIX E: 2Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS

Buyer SellerPurchase

Price (mm)Enterprise Value (mm)

TTM Rev (mm) EV/Rev

Bitzio, Inc. (OTCBB:BTZO) actsmartw are GmbH - - - -Knuckle Face, Inc. - - - -

Chaotic Moon, L.P. DollarApp - - - -Symbiot, Inc. - - - -

Citrix Systems, Inc. (NasdaqGS:CTXS) Bytemobile, Inc. - - - -Podio ApS - - - -The Citrix XenClient Enterprise Group - - - -

Cologix, Inc. Carrier Connex Inc. - - - -The Minnesota Gatew ay - - - -

Constellation Softw are Inc. (TSX:CSU) Smyth Systems Inc. - - - -Cognera Corp. - - - -Lender Processing Services, Inc., Certain Assets - - - -Aptitude Solutions, Inc. and True Automation, Inc. - - - -New Century Softw are Inc. - - - -

Dell Inc. (NasdaqGS:DELL) Clerity Solutions, Inc. - - - -MAKE Technologies Inc. - - - -Quest Softw are Inc. (NasdaqGS:QSFT) $2,507.3 $2,244.1 $880.0 2.6x

Ebix Inc. (NasdaqGS:EBIX) Fintechnix Pty Limited $5.1 $5.1 - -PlanetSoft, Inc. $40.0 $40.0 - -

EMC Corporation (NYSE:EMC) Syncplicity, Inc. - - - -Watch4Net Solutions Inc. - - - -

Expedite 5, Inc. (AIM:ZATT) Hattrick Holdings Limited $29.5 $29.5 - -Sneaky Games, Inc. $6.1 $5.9 - -

Facebook, Inc. (NasdaqGS:FB) Face.com $60.0 $60.0 - -Glancee, Inc. - - - -Instagram, Inc. $1,000.0 $1,000.0 - -Karma Science, Inc. - - - -Tagtile - - - -

Google Inc. (NasdaqGS:GOOG) Meebo, Inc. - - - -Quickoff ice, Inc. - - - -

Groupon, Inc. (NasdaqGS:GRPN) DITTO.ME, INC. - - - -Pospitality LLC - - - -

IHS Inc. (NYSE:IHS) GlobalSpec, Inc. $135.0 $135.0 - -Xedar Corporation (OTCPK:XDRC) $28.0 $28.0 - -

IBM (NYSE:IBM) TeaLeaf Technology, Inc. - - - -Varicent Softw are Inc. - - - -Vivisimo, Inc. - - - -

Intuit Inc. (NasdaqGS:INTU) AisleBuyer LLC - - - -Demandforce, Inc.* $423.5 $423.5 $37.0 11.3x

LANDesk Softw are, Inc. Managed Planet Softw are, Inc. - - - -Wavelink Corporation $82.0 $82.0 - -

LivePerson Inc. (NasdaqGM:LPSN) Amadesa, Inc. - - - -Look IO Inc - - - -

Oracle Corporation (NasdaqGS:ORCL) Collective Intellect, Inc. - - - -Vitrue, Inc. - - - -

Possible Worldw ide Inc. Carnation Internet Tanácsadó Zrt - - - -Grape LLC - - - -

*Revevenue Estimate



APPENDIX E: 2Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONT…)

Buyer SellerPurchase

Price (mm)Enterprise Value (mm)

TTM Rev (mm) EV/Rev

Priority One Netw ork Group Ltd. Opus Media Plc $1.0 $1.0 - -Tw o Way Limited (ASX:TTV) - - - -

Sailthru, Inc. Frame - - - -Seamless Receipts, Inc. - - - -

salesforce.com, inc (NYSE:CRM) Buddy Media, Inc. $745.0 $745.0 - -ChoicePass Inc. - - - -Stypi - - - -Thinkfuse - - - -

SAP AG (DB:SAP) Ariba Inc. (NasdaqGS:ARBA) $4,607.8 $4,411.4 $502.0 8.8xSyclo LLC - - - -

Descartes Systems (TSX:DSG) Infodis B.V. $3.3 $3.3 - -Integrated Export Systems, Ltd. $34.2 $34.2 - -

Thomson Reuters(TSX:TRI) Apsmart Limited - - - -Fast Facts Computer Systems Ltd. - - - -Zaw ya Limited - - - -

Trimble Navigation (NasdaqGS:TRMB) GEOTrac Systems Inc. - - - -SketchUp - - - -

Tw itter, Inc. Hotspots.io - - - -RestEngine - - - -

u-blox Holding AG (SWX:UBXN) 4m Wireless Ltd. $9.0 $9.0 - -Cognovo Limited $16.5 $16.5 - -

ValueFirst Messaging Pvt. Ltd. Gingersoft Media Pvt. Ltd. - - - -Way2Online Interactive India Pvt. Ltd. $35.7 $35.7 - -

VMw are, Inc. (NYSE:VMW) Cetas Softw are, Inc. - - - -DynamicOps, Inc. - - - -Wanova, Inc. $100.0 $100.0 - -

WMS Industries Inc. (NYSE:WMS) Genesis Communications Inc. - - - -Jadestone Group AB - - - -

YTL Pow er Investments Limited FrogAsia Sdn Bhd - - - -FrogTrade Ltd $11.8 $20.6 - -

Zhejiang Daily Media (SHSE:600633) Hangzhou Bianfeng Netw ork Tech. Co. $498.1 $498.1 $63.0 7.9xShanghai Haofang Online Info. Tech. Co. $55.8 $55.8 - -

Zynga, Inc. (NasdaqGS:ZNGA) Wild Needle, Inc. - - - -Zynga Eugene - - - -

*Revenue Estimate



APPENDIX F: 2Q12 MERGERS AND ACQUISITIONS, SELECT INDUSTRY MEGA-DEALS

Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDATTM Rev Growth

SAP (DB:SAP) Ariba Inc. (NasdaqGS:ARBA) $4,607,750,000 $4,411,350,000 8.8x 108.0x 27.3%Dell Inc. (NasdaqGS:DELL) Quest Softw are Inc. (NasdaqGS:QSFT) $2,507,250,000 $2,244,050,000 2.6x 14.0x 12.4%Microsoft Corporation (NasdaqGS:MSFT) Yammer, Inc.* $1,200,000,000 $1,200,000,000 40.0x - -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 - - -salesforce.com, inc (NYSE:CRM) Buddy Media, Inc. $745,000,000 $745,000,000 - - -*Revenue Estimate



APPENDIX G: 2Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS

Date Buyer SellerEnterprise

ValueTTM

Revenue EV/Rev06/27/2012 Rafter, Inc. HubEdu, Inc. - - -06/27/2012 Trader Media Group Limited DELTAPOINT ASSOCIATES LIMITED - - -06/26/2012 Accufund, Inc. AccuFund CRM - - -06/26/2012 Spectrum Equity Investors Active Internet Technologies, LLC $55,000,000 - -06/25/2012 salesforce.com, inc (NYSE:CRM) Thinkfuse - - -06/18/2012 salesforce.com, inc (NYSE:CRM) ChoicePass Inc. - - -06/15/2012 Forum Trading Solutions Ltd PLUS Trading Solutions Ltd. $440,000 - -06/15/2012 Microsoft Corporation (NasdaqGS:MSFT) Yammer, Inc.* $1,200,000,000 - 40.0x06/14/2012 Syncapse Corp. Clickable, Inc. - - -06/14/2012 Vista Equity Partners Bullhorn, Inc. - - -06/13/2012 The Descartes Systems Group Inc (TSX:DSG) Integrated Export Systems, Ltd. $34,200,000 - -06/13/2012 New market International, Inc. MeetingMatrix International, Inc. - - -06/13/2012 Infor Global Solutions, Inc. Easy (Ez) Revenue Management - - -06/12/2012 Revionics, Inc. Retail Optimization, Inc. - - -06/08/2012 Autodesk, Inc. (NasdaqGS:ADSK) Vela Systems, Inc. - - -06/06/2012 Francisco Partners Management LLC Plex Systems, Inc. - - -06/05/2012 Oracle Corporation (NasdaqGS:ORCL) Collective Intellect, Inc. - - -06/05/2012 ON24, Inc. Imaste-ips S.L. - - -06/01/2012 WineDirect, Inc. Vin65 Corp. - - -05/31/2012 Sales Engine International LLC Manticore Technology, Inc. - - -05/30/2012 Econocom Telecom Services SAS Tactem SAS $1,240,000 $1,240,000 1.0x05/24/2012 Quindell Portfolio Plc (AIM:QPP) Quindell Enterprise Technology $9,890,000 $4,700,000 2.1x05/23/2012 Oracle Corporation (NasdaqGS:ORCL) Vitrue, Inc. - - -05/23/2012 Barclaycard Analog Analytics Inc. - - -05/22/2012 SAP America, Inc. Ariba Inc. (NasdaqGS:ARBA) $4,411,350,000 $501,900,000 8.8x05/21/2012 Experian plc (LSE:EXPN) Conversen, Inc. - - -05/21/2012 EMC Corporation (NYSE:EMC) Syncplicity, Inc. - - -05/16/2012 LivePerson Inc. (NasdaqGM:LPSN) Amadesa, Inc. - - -05/15/2012 Quandrant4 Systems Corp. (OTCPK:QFOR) empow HR, Inc. - - -05/14/2012 Logic Solutions, Inc. Quantum Compliance, Inc - - -05/14/2012 Documotive Limited Fusion Information Systems Ltd - - -05/11/2012 Gatew ay EDI, Inc. National Healthcare Exchange $8,210,000 - -05/11/2012 Heritage Acquisitions Limited Agentplus Pty Ltd. - - -05/10/2012 Xceligent, Inc. ePropertyData.com LLC - - -05/09/2012 TriNet Group, Inc. App7, Inc. - - -05/08/2012 Fair Isaac Corp. (NYSE:FICO) Entiera, Inc. - - -05/08/2012 EPiServer AB 200OK AB - - -05/07/2012 Synchronoss Technologies, Inc. (NasdaqGS:SNCR) SpeechCycle, Inc. $38,000,000 - -05/02/2012 Aprimo, Incorporated eCircle AG - - -05/02/2012 Zillow , Inc. (NasdaqGS:Z) RentJuice Corporation $37,420,000 $365,000 102.4x05/01/2012 C3, LLC Efficiency 2.0, LLC - - -05/01/2012 salesforce.com, inc (NYSE:CRM) Stypi - - -05/01/2012 Peoplefluent, Inc. Socialtext, Inc. - - -04/30/2012 Reputation Rhino LLC ReputationManagements.com - - -04/30/2012 Arts et Biens Prenax Global AB - - -04/27/2012 Intuit Inc. (NasdaqGS:INTU) Demandforce, Inc.* $423,500,000 $38,000,000 11.3x04/24/2012 VMw are, Inc. (NYSE:VMW) Cetas Softw are, Inc. - - -*Revenue Estimate



APPENDIX G: 2Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS (CONT…)

Date Buyer SellerEnterprise

ValueTTM

Revenue EV/Rev04/23/2012 KANA Softw are, Inc. Trinicom - - -04/23/2012 Mangrove Employer Services, Inc. CanopyHR Solutions, LLC - - -04/18/2012 Marketo, Inc. Crow d Factory, Inc. - - -04/17/2012 ADERANT Holdings, Inc. Omega Legal Systems, Inc. - - -04/13/2012 International Business Machines Corporation (NYSE:IBM) Varicent Softw are Inc. - - -04/11/2012 Boathouse Capital; Renovus Capital Partners Atomic Learning, Inc. - - -04/11/2012 Atos S.A. (ENXTPA:ATO) blueKiw i Softw are SA $26,220,000 $6,500,000 4.0x04/11/2012 Citrix Systems, Inc. (NasdaqGS:CTXS) Podio ApS - - -04/09/2012 Underw riters Laboratories Inc. UL EduNeering, Inc. - - -04/05/2012 QL2 Softw are, LLC RivalWatch, Inc. - - -04/05/2012 Harris Computer Systems, Inc. Cognera Corp. - - -04/04/2012 Allen Systems Group, Inc. Net Transmit & Receive, S.L. - - -* Revenue Estimate

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SEG Q2 12 Software Industry Equity Report

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