1. CSU Sacramento
Student Research
[Custom Computer Programming Services]
This report is published for educational purposes only by students
competing in the CFA Institute Research Challenge. RESPONSYS INC.
Date: 2/24/2012 Ticker: MKTG Recommendation: Sell
Price: $12.21 Price Target: $8.08
Earnings/Share
Mar. Jun. Sept. Dec. Year P/E Ratio
2011A* 0.02 0.05 0.03 0.03* 0.20* 59.95*
2012E 0.05 0.06 0.06 0.08 0.25 47.96
2013E 0.06 0.07 0.07 0.09 0.29 41.34
2014E 0.07 0.08 0.08 0.11 0.33 36.33
Highlights
• Responsys named leader in email marketing for 4th time: Forrester Research, an independent
research firm, reports Responsys Inc. (MKTG), or “the Company”, as a leader in email marketing
for the fourth time. The Company was the only vendor to have received perfect scores in all four
subcategories of Forrester’s measurement categories, these include: Executive Vision,
Development Strategy, Global Strategy, and Strength of Management Team.
• Economic Sensitivity and Volatility: The Q4 revenue guidance for 2011 was substantially lower
than analysts estimated, causing a sell-off of company stock. It is important to note that in the past
the company has exceeded their own guidance reports and seem to be taking a strategy of under
promising and over delivering. Market reaction to the lower than expected forecast plunged MKTG
shares more than 23% to a 52-week low of $7.37; Responsys anticipates earnings of $34 to $35
million (3 to 4 cents a share) versus estimates of analysts polled by Thomas Reuters’ of $36 million
(5 cents a share).
• New Product Release: Responsys announces a new fall product release - Responsys Interactive
Display (RID). RID will be another product in the Company’s portfolio that will help marketers
more effectively target their customer base, coordinate ads with other channel communications, and
also increase reach and frequency of communications.
• Growth in Email Marketing Volume: Promotional email marketing volume rises 16% from
2010, an all-time high in 2011. With email as the primary channel of marketing for customers,
Responsys’ position as a leader in the industry gives it its competitive advantage.
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MKTG Daily Stock Price

2. Business Description
Responsys (Ticker: MKTG) is a software-as-a-service (SaaS) company based in San Bruno, CA.
The principal markets that it operates in are North America, Asia Pacific, and Europe. SaaS
companies such as Responsys develop and host decision making software that executes after
associated data is inputted by a user. Of the many uses for SaaS, Responsys develops its product to
engage primarily in customer relationship management (CRM). The company produces on-
demand marketing software and professional services to help corporate clients reach their target
customer bases more easily and effectively. The mission of the company is to create, execute,
optimize and automate marketing campaigns through interactive channels such as: email, mobile,
social, and web.
Responsys’ core offering is “Responsys Interact Suite” (RIS), which includes applications for
visually designing, managing and automating complex marketing programs with multiple stages
across multiple channels. In April 2010, mobile and social functionality was added to RIS to
coordinate the creation, scheduling, automation, and tracking of text message marketing campaigns
and promotions.
Key Revenue Drivers
The company receives its revenues from subscription services (which are agreed to in blocks of
$/1000 emails sent), overages (charges for messages sent above the contracted amount), and
professional services. Clients of Responsys are large to mid-sized enterprises including retail and
consumer, travel, financial services, and technology. The Responsys structures its revenue mix in
the following proportions:
Subscription Service
This revenue stream has the highest margin line and comprises roughly 70% of total revenue. Most
recently, this business line logged a Q2 year-over-year (YOY) growth of 43.5%. Historically, the
company states that 20% of all subscription revenue is derived from overages (messages sent above
contracted levels). (APPENDIX: Valuation: 3.1)
Professional Services
This low margin income driver accounts for 30% of total revenue, logging in a YOY Q2 growth of
72.3%. The YOY growth for Professional Services shows that the lower margin revenue stream is
expanding at a faster rate than Subscription Services. (APPENDIX: Valuation: 3.1)
Subscription Dollar Retention Rate
Responsys uses a metric called Subscription Dollar Retention Rate (SDRR) to measure revenue
base and the long-term value of customer relationships. It is calculated by dividing Retained
Subscription Revenue (RSR) by Retention Base Revenue (RBR). RSR is defined as subscription
revenue from all customers in the prior period, and RBR is defined as subscription revenue from
that same group of customers in the current period. The company states that it has averaged an
SDRR above 100% over four quarters in each of the last there years and through the nine months
ended September 30, 2011. This implies that customers that stay with the firm are adding more
services.
Key Cost Drivers:
Cost of subscription revenue and cost of professional services revenue account for almost 50% of
all costs in Q3 2011, rising up 4% and 10% respectively this same time last year. Other costs have
remained static as a percentage of total costs.

3. The rise in cost of revenue for Professional Services suggests that consumer preference or demand
is trending towards the more cost laden product; this could be a concern for overall margins and
future growth of the company. (APPENDIX: Table 2.1)
Industry Overview and Competitive Positioning
The North-American Industry Classification System (NAICS) classifies Responsys under code
541511, the Custom Computer Programming Services (CCPS) industry. Companies classified
under the CCPS industry are described as “establishments primarily engaged in writing, modifying,
testing, and supporting software to meet the needs of a particular customer.” 1
All companies in the CCPS industry are not direct competitors of the Company. Other companies
in the industry include niche companies that provide:
 manufacturing process improvement
 website development
 architecture & technology consulting
 and informational technology development and maintenance services
Responsys and its competitors focus on the niche market of multi-channel interactive marketing
services.
Sustained Growth
According to Forrester Research, Inc. (“Forrester”), U.S. marketers plan to increase spending on
interactive channels (defined as display, search, email, mobile and social media) as a percentage of
total advertising spending from 16% in 2011 to 26% in 2016, creating a projected $77 billion
market in the United States by 2016, of which email, mobile and social media marketing spending
is expected to grow from approximately $4.8 billion in 2011 to nearly $15.7 billion by 2016. 2
Competitors
There are a number of competitors in the industry that compete in two primary categories. One
group is the technology providers and the other group includes the marketing service providers.
Companies entering the market are quite common, but the ability to become a leader in the industry
requires having a solid business plan with a product with a marketing edge. These new entrants that
can successfully implement a new niche will typically grow very quickly.
With Responsys at a market capitalization of $551.76 million, it is relatively close to DemandTec
and Digital River with a market capitalization of 445.63M and 633.07M respectively. Similar
service providers typically range around 1B in capitalization with the exception of Salesforce.com
and Teradata Corp. with 17.9B and 9.69B respectively. (APPENDIX 2.2)
These companies have different business plans and therefore derive revenues from different
segments. Subscription services and professional services are the two revenue streams typically
used by the companies in the arena. It is also common to see income from owned & operated
websites, IT infrastructure management, and other services.
ExactTarget is a private company that has filed their S-1 and is waiting to go public. They are a
direct competitor with Responsys with proportionate revenues in subscription services and
professional services with similar market capitalization. They are not a publicly traded company so
we did not include them in our analysis, but should be considered a direct competitor in the CCPS
industry.
Acquisition Trends
Vertical marketing firms that provide targeted interactive campaigns for larger companies find
themselves targets for acquisition, mergers, or some form of strategic partnership. Aprimo, Inc, a

4. company that specializes in integrated marketing software has recently been acquired by Teradata
Corporation (TDC); Bluehornet, an email service provider (ESP) is now a subsidiary of Digital
River, Inc. (DRIV) after an acquisition in 2004; and Yesmail, acquired by InfoGroup. Most
recently, IBM acquired DemandTec on February 15, 2012. Through these acquisitions, the trend
for smaller firms to become buyout targets for larger technology companies.
Competitive Position
Market Share
Responsys holds a very small share of the market when compared to its direct competitors – only
2% of sales as of Q3 2011 (ttm). There are only 2 main companies that hold a significant share of
the market, Teredata Corp with 34%, and Salesforce.com with 31%. (APPENDIX 1.8)
Investment Summary
We have concluded our analysis of Responsys stock with a sell rating, with a price target of $8.08.
We base our rating while considering such factors as:
 Customer preferences trending towards the lower margin revenue stream of professional
services. With a target revenue mix of 75% subscription and 25% professional, deviation
from this mix could spell a lack of the company’s ability to market or sell its higher
margin service.
 Big enterprises buying out competition – consequently creating even bigger competition
with more resources, not having to go through the initial start-up cost curve, and also
taking away themselves as potential clients by going in-house. Responsys states that the
Ebay acquisition of GSI commerce was “unusual”, but we remain concerned that
although unusual, such transactions could still have a high potential of occurring if big
enterprises find it to be more cost effective to invest their own capital to acquire a
competitor of Responsys, or even create their own multi-channel marketing platform.
 Management’s vague guidance for idle cash, stating use of cash could be for acquisitions
to extend our geographic presence – which can be risky and costly, or for a technology or
capability that would be complementary to Responsys’ current product suite. An
unfocused priority for cash is a concern.
 Although growing, the small portion of Responsys’ niche channel of email losing ground
to channels in which they are not leaders.
 Subscription services make up 70% of total revenue, 20% of which is overages – this
weighs in as 14% of all historical revenue being uncertain. We consider this to be
material and unreliable to model into forecasting for company growth. Clients may
become more prudent with usage of their subscription services, and if this occurs, the
only way Responsys can make up the lost sales is by raising revenue by at least the same
14%, which could deter customers from the already declining rate of its higher margin
subscription service users. Moreover, with Responsys charging an average 25%
premium over its competitors, the Responsys platform offerings may not be enough to
justify another price increase. (APPENDIX: Valuation: 3.1)
Because of these factors, we do not see the company being profitable in the future.
Our price target is derived from an optimistic scenario within our 5-year discounted cash flow
model. (APPENDIX: Valuation: 3.4)

5. Figure 1 above shows Responsys stock price movement along with the SPY index ETF. Responsys
stock shows to be relatively flat compared to the movement of the market.
Valuation
Value-at-Risk (VaR) Analysis
Given daily return standard deviations of 1.56%, and 3.63%, and an average return of .02% and -
.06% for the S&P500 and Responsys respectively, we derived a 50% probability that Responsys
stock would deliver a less than 0% return, and a 60% probability that the S&P will outperform the
stock. (APPENDIX 1.9)
Using weekly data, given standard deviations of 3.23% and 9.13%, with average returns of .09%
and -0.19% for the S&P and Responsys respectively, we derived a 50.8% probability that
Responsys would deliver less than a 0% return, and a 57% chance that the S&P will outperform the
stock. (APPENDIX 1.10)
Our VaR Analysis demonstrates that stock performance of Responsys to date has not been
favorable to investors; and that investing in the market even in these tough economic times have a
higher probability of delivering favorable results. The amount of data available for weekly and
monthly returns are very small due to the short amount of time the company has been trading
publicly. Therefore any conclusion reached should be cautioned due to the lack of statistical data
currently available.
Discounted Cash Flow Model
For our valuation method we used the Discounted Cash Flow (DCF) Model. This allowed our team
to input our projections based on the historical trends of their financial statements, earnings calls,
company and industry specific expectations and all other relevant data that we found valid to
Responsys. Our CAPM was based off of the historical daily returns of MKTG’s adjusted closed
price and used the S&P 500 index; both from April 2011 to February 2012 with a beta of 1.08. Our
discount rate is based off of CAGR’s ranging from 5% to 10%, though we ultimately selected the
historical average of 7%. This sensitivity analysis is used for the discount rate and long-term
growth rate which presents a better representation of what is possible because of the current
economic market volatility. (APPENDIX: Valuation: 3.1-3.4)
We assume that Responsys's two revenue streams will maintain a constant level of growth, but each
0
20
40
60
80
100
120
140
160
Apr-11 Jul-11 Oct-11 Jan-12
Source: finance.yahoo.com
Figure 1: SPY vs MKTG Performance
Figure 1 displays the stock performance of Responsys versus SPY
SPY
MKTG
11/9/2011: Stock
price plunges 23%
from missed Quarterly
revenue estimates
8/8/2011: Q2
Profit beat
estimates on
higher
subscription
revenue
9/14/2011:
ExactTarget said
to attempt IPO
for second time

6. having differing directions, currently their subscription stream has a customer base of 338, up 7.3%
from last quarter and their subscription profit margin for this stream averages about 35%. But this
stream is shrinking and we believe this will continue to happen gradually. As the 338 customers
they currently have are paying higher prices for subscription services which will eventually be a
tipping point due to customer dissatisfaction or competitive pricing.
The other source of revenue for the company is professional services which is steadily growing but
maintaining a low profit margin of an averaging 15%. over the last year due to overhead from labor
costs. We believe this trend will continue for the next 5 years. Their growth of steady revenue is
being met with operating expenses that are growing faster than their revenue stream. This is due to
the heavy competition within the internet market industry and a lack of buyers for a product that
utilizes large to mid-sized companies to fuel their revenue streams.
Key Ratio Comparison:
Price to Earnings
A comparison of trailing twelve-month P/E ratios tells us that currently, there are cheaper per-
dollar earning investment alternatives than Responsys. It ranks 2nd highest out of its six closest
direct competitors, trading at a multiple of 49.57, compared to a median of 27.41 (Teradata Corp.),
and behind only Salesforce.com at 72.56. (APPENDIX 1.5)
Price to Sales
Responsys ranked third lowest in P/S ratios when compared to its seven closest competitors. Our
target scored a value of 2.8; the industry average is 3.87. A company with a lower than average P/S
ratio relative to the industry is viewed favorably. However, the P/S ratio does not take into account
company expenses or debt. We look to the P/CF ratio to tell us a deeper story (APPENDIX 1.2).
Price to Cash Flows
The P/CF ratio measures a company’s trading price compared to its cash flows. The industry
average is 26.2. At 15.8 Responsys holds the 4th lowest ratio among its 7 closest competitors. A
lower P/CF ratio indicates undervaluation. With the Company holding a median position with
respect to this ratio, this implies that Responsys is fairly valued. (APPENDIX 1.3)
Enterprise Value / EBITDA
Nevertheless, we look to another common ratio used to measure valuation – the EV/EBITDA ratio,
which views the firm as a potential acquisition target. Like the P/CF ratio, the EV/EBITDA ratio
takes debt into account. A low ratio would indicate that a company might be undervalued. At
18.87, Responsys ranks as the 3rd highest with respect to this ratio, behind only outliers of the
industry Salesforce.com (177.34) and ConstantContact (30.4), and ahead of an industry average of
14.65. Responsys’ relatively high ratio implies overvaluation for this metric. (APPENDIX 1.4)
Financial Analysis
Weak Company Margins
The company’s guidance for their upcoming quarter is expected to be between $34-35M. As we
mentioned earlier, their historical pattern has been to set a low guidance then beating it, but usually
not meeting analysts’ projections. We expect this to continue for the next 5 years with their revenue
guidance. We also expect their cost of revenues and operating expense to grow faster. This is
mainly due to the cost of highly skilled Labor performing Professional Services, and the leasing of
a new building for their headquarters along with the improvements to that facility. Similarly we
expect increases in their advertising efforts to keep up with the industry’s growth and capture
additional market share. Unless Responsys can reduce costs in these key areas, investors may
consider this company too risky compared to the rate of return offered. (APPENDIX: Valuation:
3.1-3.4)

7. Industry-Wide Consistent Margins
Our analysis has found that individual company margins are relatively consistent over time,
regardless of the market share. The varying distributions of market share versus gross profit show
that margins do not look to be correlated with market share. This could be an indicator that
Responsys’ margins will remain consistent, even as its position in the market may change.
Responsys margins relative to the largest competitors have done well since its IPO, (Appendix:
Margins vs. Largest Competitors.) but seems to lag behind its smaller cap companies. (Appendix:
Small-Cap Company Margins). These margins of the industry are relatively constant even through
the tough economic times of ’08-’09.
When speaking specifically about the profitability of Responsys, we can say further that if profit
margin is not dependent upon volume of sales, but rather the volume of type of sales, i.e.,
subscription services or professional services, the trending of decline of subscription services as a
percentage of total revenue versus professional services is a concern. (APPENDIX: Table 1)
Earnings
Responsys’s last reported EPS was 0.03. We expect them to remain close to their guidance of 0.04 -
0.05 as mentioned in their Q3 conference call. This may hold true due to their increase in net
income but also because of the total shares outstanding increase. We believe this trend will
continue. As the company grows so do the amount of shares slowly diluting the company’s value
and return on investment. This trend of a growing net income, EPS, and total share count will
eventually reach a threshold of 70M (diluted) shares by 2016. (APPENDIX: Valuation: 3.1-3.4)
Balance Sheet & Financing
High Level of Idle Cash
After their IPO in April of 2010, Responsys’s balance sheet added $80 Million to their C&CE. The
company already has two had quarters out from the IPO and having only utilized approximately
$10M for Short-Term Investments, still keeping a total of $70M in cash form. Without an outlined
idea of what the company will do or is planning to do with the cash. It is uncertain what
management intends for this cash. They have not provided more guidance other than a focus on
expected growth of labor cost and the building of infrastructure to support demand.
New Facility and Improvements to come
With the establishment of a new building as mentioned in their 8K, that will incur major cost
factors over time. In this 8K it expects their rent to start at $1.2M annually and reach $1.8M in the
final year of their lease. The company said it has allocated approximately $1.2M in allowance for
improvements made to this building. However, we find that their trend with leasehold
improvements averages $700K per quarter or 2.8M annually. This could be more costly than the
company’s current allocation allows. As they grow into the full building over time and do not
intend to occupy the whole facility at once.
Other Headings Relevant to Company
Recent Company Acquisitions
In 2004, Responsys acquired Inbox Marketing, Inc., a professional services firm that was used to
increase that size and breadth of the company. Another acquisition came in 2009 with the
acquisition of Smith-Harmon, Inc., similarly to increase the professional services of the
organization. On January 2011, MKTG purchased Eservices, and Australian based email and cross-
channel marketing service company. Accounts of Eservices were consolidated with Responsys as
of September 2011.
Seasonality of Revenues
The interactive marketing segment of the InfoTech industry makes a risky market for niche players,
strong performers or holders of large market share. Since it is a subsector of the larger of software
applications sector, which is also a sector of the InfoTech industry, we believe that only mature

8. firms have the possibility of making returns that can offset the volatility of the market and the
operating costs involved. Because mature companies such as Oracle, Teradata, IBM, and Microsoft
operate in more than one sector in the InfoTech industry, their revenues are not dependent on one
set of products or services. That said, they have the ability to overcome the seasonality of revenues
associated with the technology marketing segment industry. Since Responsys is a focused
interactive marketing firm offering on-demand marketing software and marketing solutions, most
of its revenues are dependent on seasonality when customers desire to increase their marketing
activities. Responsys conducted a study indicating how seasonality influences their returns.
Outcomes show the following:
 In 2011, growth of average number of email campaigns sent during November and December
was 20% for each month over 2010, outpacing the annual growth rate of 16% for 2011.1
 Responsys VP of Strategic Services stated that more flash and daily deal promotions, as well
as more retailers sending same-day reminder campaigns for large promotions, were key
contributors to the rise in volume, which increased by 16% between 2010 and 2011.
 Monthly volume of promotional emails sent to each subscriber is lowest in January, February,
June, July and August. Whereas monthly volumes are highest in November and December
with 20% increase in each month from last year’s numbers.
 Busiest days of 2011 were indicated to start with Thanksgiving and end with “Last Sleigh
Day,” with increases of 15% and 20% respectively over the previous year of 2010.
 55% of retailers send at least one email on a Friday, which popularity is driven more by the
announcement of weekend promotions than by increased response rate, according to VP
President of Strategic Services.
 In addition, the largest 20 customers accounted for 37% of revenue for nine months ended in
September 2011, a rate of 9% higher than the previous year.2
With such a seasonality of revenues, Responsys would most likely break-even since it will be
making higher profits in some time of the fiscal year, and generate losses in other times. The
requirement to innovate and expand through acquisitions into new geographical locations and new
market segments puts down a high percentage of revenues to finance these operating costs, which
will allow for partial growth but not dramatic or recognized growth in returns.
Investment Risks
Lack of Transparency
It is nearly impossible to assess management’s effectiveness caused by an inability to unitize the
company’s revenue streams including the amount spent per customer and the contracted
subscription amounts. Without knowing how much money each customer pays or the amount of
services they are using, it is very challenging to value the company’s earning potential.
Marketing Trends
In-house Competition.
Responsys reported the loss of PayPal as a client in the recent Q3 2011 earnings call due to parent-
company eBay acquiring a direct competitor, GSI Commerce. Paypal will now utilize its in-house
resources for email marketing. It is possible that other big enterprise companies will attempt to
handle marketing needs on their own by developing proprietary software or by purchasing
Responsys’ competitors with proven capabilities in place. A continuation of this trend inevitably
increases the amount of competitors in the SaaS space and simultaneously decreases the amount of
available customers.
1
Responsys: Retail email 2011 year-end trends. (Retrieved on 2012, February 15). Retrieved from – www.retailemailblog.com
2
Responsys Form 10-Q For the Quarterly Period Ended 2011, September 30. Retrieved on 2012, February 9 from –
www.sec.gov

9. Email Marketing Threats
Responsys is the leader in email marketing, however reliance upon email could be problematic as it
matures and more desired channels are developed. While Responsys has one of the most advanced
cross-channel campaign marketing platform available studies by Gartner Research indicate that in
2010 over 70% of Responsys revenues came through email marketing alone.3
Estimates show that
email marketing will maintain a 10% compounded annual growth rate up to 20164
, however,
serious political road blocks or an exodus from the channel will devastate revenues and prove
potentially unrecoverable:
• Only 81% of all permissioned emails worldwide make it to the inbox, with the remainder
either routed to junk or undelivered. 5
• Between 2007 and 2009, SPAM has risen from 17% of network traffic to over 50% in an
18-month period, which created a major problem to business, network operators, and
individuals.6
• In 2016, less reliance on PC devices and traditional search engines, and moving to mobile
and social channels, would cause spending on email marketing to grow at no higher than
10% compounded annual growth rate from 2011, whereas spending on mobile marketing
would grow at a 38% compound annual growth rate (CAGR) from 2011.7
• Government restrictions through imposed laws and regulations on marketers and email
advertising, such as the Controlling the Assault of Non-solicited Pornography and
Marketing Act of 2003, the Australian law imposed through the Trade Practices Act, and
Australia’s new telemarketing do-not-call legislation which came into effect in May
2007.
These facts have strong potential in lowering Responsys’ main marketing channel: email
marketing. In addition, while email marketing is an effective marketing channel, less control can be
implemented on it when compared to other channels. Continuing to email disinterested individual
subscribers that do not open or click emails puts brand equity in serious jeopardy. The mounting
levels of inactivity lower engagement levels among subscribers, as well as increase the chances of
an inactive address being converted into a spamtrap.8
That could push marketing dollars to other
marketing channels which are less applied by Responsys, resulting in customers moving to vendors
who can offer channel expertise and a higher Return on Investment.
Market penetration obstacles and increasing marginal costs
Expensive infrastructure upgrades to keep ahead of rapidly changing technology along with the
threat of shrinking revenue from customer migration or price wars with competitors could
negatively impact profitability. Also, if Responsys is unable to attract new customers or sell
additional functionality and services to existing customers, revenue growth will be adversely
affected.
Industry Concentrated Customers Comprise Majority of Revenue
50% of Responsys’ revenue comes from a small number of retail and consumer firms. A downturn
in the economy could tighten U.S. consumption causing these customers to decrease marketing
spend and subsequently squeeze revenue from subscriptions.
3
Magic Quadrant CRM Multichannel Campaign Management, Gartner Research. May 2011
4
VanBoskirk, Shar. (2011 August 24). US Interactive Marketing Forecast, 2011 To 2016. Publisher: Forrester.
5
White, Chad. Email Engagement & Deliverability Study: Management, reengagement and re-permissioning of inactive
subscribers by major retailers. Publisher: Responsys, Inc.
6
Regulations and Laws on Marketing in Australia. Retrieved 2012, February 9 from -
http://www.marketingminds.com.au/links/regulation.html
7
VanBoskirk, Shar. (2011 August 24). US Interactive Marketing Forecast, 2011 To 2016. Publisher: Forrester.
8
White, Chad. Email Engagement & Deliverability Study: Management, reengagement and re-permissioning of inactive
subscribers by major retailers. Publisher: Responsys, Inc.

10. The Next Generation: Mobile
Compared with 10% and 12% CAGR in 2016 for email marketing and search engine optimization
respectively, mobile advertising will hit 38% CAGR to 8.2 billion dollars in 2016. Studies indicate
that mobile channels will overtake email and social channels.9
Better mobile analytics are creating
user-centric mobile ads, making buyers embrace mobile commerce and the advertising that drives
it. Mobile computing is becoming the dominant feature of the 21st
century, defined as the most
important element of the convergence age, and proliferating the world as user-generated content,
social networking media, a SaaS tool, and a cloud computing system.
 In 2010, 59% of Americans accessed internet via cell phone. In addition, today fully 232
million Americans ages six and older count themselves among the ranks of mobile
American, up from 178 thousand in 2007.10
 According to Experian Simmons, cell phone ownership among adults in this country
stands at 92%, up from 73% in 2007.
 The Segment of adults ages 65 and older is the fastest growing segment in cell phone
ownership having increased a relative 51% between 2007 and 2011.11
 Customers’ obsession for the innovative mobile industry estimate that by 2016,
smartphones adoption will grow 150% from 2011, and 82 million consumers will own
tablets. While today, phone makers bring lower-cost smartphones to the market and
operators offer less costly data.
 Tablets will become mainstream channel in 2016, while in 2011 they made 1.7% of all
paid search impressions.
 Estimates by Forrester indicate that 47% of tablet owners have shopped using their
tablets.
A growing number of consumers access email via their smartphones. Those consumers are not
willing to tolerate emails that do not display properly on mobile devices. Therefore designing
emails to specifically fit mobile phone and tablets could be a big challenge to Responsys.12
Even if
applied, the company’s growth margins will be offset by high operating costs to implement and
develop the analytics and applications required. In addition, major competitors such as Experian
and CheetahMail have targeted this segment earlier on in their operations. Teradata, acquiring both
Aster and Aprimo have been working closely with partners to optimize and integrate into mobile
advertising. Moreover, establishments in Japan will gain competitive advantage in mobile
marketing over others since Japan is leading internet access through mobiles.
Moreover, establishments in Japan will gain competitive advantage in mobile marketing over
others since Japan is leading internet access through mobiles. And while Responsys has access to
the Asia pacific region through its operations in India and Australia, expanding their use of mobile
marketing would give them competitive advantage in that region.
Foreign Exchange rates and Repatriation taxes
20% of total revenues are collected from foreign markets. Some of these market require high
corporate taxes. If profits are needed in the domestic market then it is possible that high repatriation
taxes, the possibility of unfavorable exchange rates, plus the corporate taxes from the country of
origin will greatly affect the amount of cash Responsys can utilize.
9
VanBoskirk, Shar. (2011 August 24). US Interactive Marketing Forecast, 2011 To 2016. Publisher: Forrester.
10
A mobil nation: Over 9-in-10 adults, 3-in-4 teens and 1-in-4 kids own a cell phone, by John Fetto – retrieved from
http://www.experian.com/blogs/marketing-forward
11
A mobil nation: Over 9-in-10 adults, 3-in-4 teens and 1-in-4 kids own a cell phone, by John Fetto – retrieved from
http://www.experian.com/blogs/marketing-forward
12
The MobileInternet Revolution…and Opportunities for Brands, by Geoff Wicken – retrieved from
http://www.experian.com/blogs/marketing-forward/

11. (PAGE LEFT BLANK)

12. APPENDIX
1……………….....…………………………………………………………………….GRAPHS (RATIOS)
1.1 Liquidity vs. Industry
1.2 P/S Ratio
1.3 P/CF Ratio
1.4 EV/EBITDA Ratio
1.5 P/E Ratio
1.6 Industry Gross Margin
1.7 Small-Cap Industry Gross Margin
1.8 Direct Competition Annual Sales (Market Share)
1.9 Daily Probability Distribution Function (VaR Analysis)
1.10 Weekly Probability Distribution Function (VaR Analysis)
2…………………………………………………………………………………………………….TABLES
2.1 Company Cost Information
2.2 Industry Market Cap Information
3…………………………………………………………………………..……………………VALUATION
3.1 Current Income Statement Data Consolidation
3.2 Pro Forma Summary for 8 Quarters
3.3 Pro Forma Summary for 5 Years
3.4 Discounted Cash Flow Model
3.5 Key Financial Ratios

13. APPENDIX 1: GRAPHS
Graph 1.1 Financial Health Ratios:
Graph 1.1 (above) shows Responsys’ financial health via its Current Ratio and Quick Ratio versus its industry’s more dominant
positions with respect to market share and the CCPS Industry as a whole.
Graph 1.1 exhibits Responsys’ strong financial position. With a 7.31 Current Ratio and 6.65 Quick Ratio, this company shows to
not have any liquidity concerns, as it is well over the CCPS industry average and largest market share holder’s current and quick
ratios of 1.4 and 1.88 (current), and 1.3, and 1.69 (quick) respectively.
Also, with cash and cash equivalents of more than 6 times its liabilities, again, we see that its enterprise value could be a very
attractive acquisition factor, as an acquirer can use MKTG’s cash to instantly fund its outstanding debt.
7.31 6.65
0.63 0.52
1.88 1.691.64 1.341.4 1.3
0
2
4
6
8
Current Quick
MKTG CRM TDC ACXM CCPS Industry
Liquidity Ratios vs. Comparable Companies & CCPS Industry

14. Graphs 1.2, 1.3, 1.4 ; (starting at P/S ratio, clockwise): Valuation Ratio Comparisons
P/S P/CF EV/EBITDA
EV/EBITDA
Outlier
MKTG 2.8 15.8 18.87
TDC 4.7 19.8 17.29
VCLK 3.1 15.8 10.55
DRIV 1.8 10.9 5.58
ACXM 0.9 5.1 5.26
DMAN 4.8 80 -49.51
CRM 8.5 34.5 177.34
CTCT 4.4 27.5 30.4
Source: Yahoo
0
2
4
6
8
10
P/S RATIO
CRM DMAN TDC CTCT
VCLK MKTG DRIV ACXM
0
20
40
60
80
100
P/CF
DMAN CRM CTCT TDC
MKTG VCLK DRIV ACXM
0
10
20
30
40
EV/EBITDA
MKTG TDC VCLK DRIV
ACXM DMAN CRM CTCT

15. Graph 1.5: P/E Ratio
Missing above is the P/E Ratio for DemandTec (DMAN). The company was acquired by IBM on February 15, 2011, and
information about its financial position was not available at the time this information was gathered.
Graph 1.6: Industry Gross Margins
Graph 6 (above) shows a comparison for Responsys Inc’s (MKTG) Gross Margin versus its industry’s largest individual share
holders through the years. Years before MKTG’s IPO are shown to demonstrate margin of more mature companies through
time.
Graph 1.7: Small-Cap Industry Gross Margins
72.56
49.57
37.92
27.41
18.09 16.02 13.83
0
10
20
30
40
50
60
70
80
P/E Ratio (ttm)
Salesforce.com Responsys ConstantContact Teradata
Acxiom Digital ValueClick Digitial River
0 20 40 60 80 100
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
TTM
Margins vs. Largest Competitors
ACXM
TDC
CRM
MKTG

16. Graph 7 (above)narrows down our perspective to compare Responsys’ margins with its closest competitors by market cap.
We can gather this information from Graph 6 and 7:
• Teradata Corp. (TDC, graph 6, green) controls 1st highest market share, but has median gross margin.
• Salesforce.com (CRM in graph 6, red) has 2nd highest market share, and holds highest margins.
• Acxiom Corp. (ACXM. graph 6, purple) has 3rd largest market share, but the lowest margin.
• MKTG margin is closely matched to #1 market share holder, TDC, a mature company with an established presence in the
industry.
Graph 1.8: Direct Competition Annual Sales as of Q3 2011 (TTM)
($ millions)
MKTG 128367 2%
DMAN 89110 1%
ACXM 1186874 18%
TDC 2237000 34%
DRIV 383797 6%
CRM 2091493 32%
VCLK 506308 8%
Total Sales 6622949
Source: Company Statements
0% 20% 40% 60% 80% 100%
2006-12
2007-12
2008-12
2009-12
2010-12
TTM
Small-Cap Company Margins
Responsys
Digital River
DemandTec
2% 1%
18%
34%
6%
31%
8%
Direct Competition Annual Sales
MKTG
DMAN
ACXM
TDC
DRIV
CRM
VCLK

17. Graph 1.9: Probability Distribution Function
Daily Responsys stock returns (Value-at-Risk Analysis)
Graph 1.10: Probability Distribution Function
Weekly Responsys stock returns (Value-at-Risk Analysis)
END GRAPHS
0
2
4
6
8
10
12
-15.0%
-13.5%
-12.0%
-10.5%
-9.0%
-7.5%
-6.0%
-4.5%
-3.0%
-1.5%
0.0%
1.5%
3.0%
4.5%
6.0%
7.5%
9.0%
10.5%
12.0%
13.5%
15.0%
Probability
Return
PDF for R (MKTG) daily
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
-30.0%
-27.5%
-25.0%
-22.5%
-20.0%
-17.5%
-15.0%
-12.5%
-10.0%
-7.5%
-5.0%
-2.5%
0.0%
2.5%
5.0%
7.5%
10.0%
12.5%
15.0%
17.5%
20.0%
22.5%
25.0%
27.5%
30.0%
Probability
Return
PDF for R (MKTG) weekly

18. APPENDIX 2: TABLES
Table 2.1: Company Cost Information
3 months ended September 30, % of cost
2011 2010
Cost of subscription revenue 21.3 17.2
Cost of professional services
revenue
27 17
Research and Development 10.4 12
Sales and Marketing 23 23.9
General and Administrative 9.5 12.5
Infrastructure improvement Expected to grow
Source: MKTG Q3 Report
The highlighted portion of the table above signals the area of cost that grew the most from the previous year, cost of professional
services.
Table 2.2: Industry Market Cap Information
Closest Competition by Market Cap:
Market Cap: in USD ($)
DemandTec, Inc. (DMAN) 445.63M
Digital River (DRIV) 633.07M
M = $ in millions
Same service providers (Ticker):
ValueClick (VCLK) 1.48B B = $ in billions
Acxiom Digital (ACXM) 1.06B
Teradata Corp. (TDC) 9.69B
Salesforce.com (CRM) 17.9B
Constant Contact, Inc. (CTCT) 913.6M
The table above divides Responsys’ competitors by market cap. We felt this list to be useful to view so we could better relate the
company’s performance compared to same-sized companies operating in the same industry, and then with all companies in the
same industry.
END TABLES

19. APPENDIX 3: VALUATION
Current Income Statement Data Consolidated 3.1

20. Current Income Statement Data Consolidated 3.1 (Continued)

21. Pro Forma Summary for 8 Quarters: 3.2
Responsys Inc Income Statement 2012-03 2012-06 2012-09 2012-12 2013-03 2013-06 2013-09 2013-12
Total Revenue 36,170 40,396 40,668 43,200 43,404 48,475 48,802 51,840
% growth quaterly 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00%
Total Cost of revenue 17,723 19,794 19,927 21,168 21,268 23,753 23,913 25,402
as % of total revenues 49% 49% 49% 49% 49% 49% 49% 49%
Total Gross profit 18,447 20,602 20,741 22,032 22,136 24,722 24,889 26,438
Total operating expenses 13,050 14,575 14,673 15,587 15,660 17,490 17,608 18,704
as % of total revenues 36% 36% 36% 36% 36% 36% 36% 36%
Operating income 5,397 6,027 6,068 6,445 6,476 7,232 7,281 7,735
Interest Expense 25 25 25 25 25 25 25 25
Income before taxes 5,372 6,002 6,043 6,420 6,451 7,207 7,256 7,710
Provision for income taxes 2,256 2,521 2,538 2,697 2,709 3,027 3,048 3,238
Tax rate 42% 42% 42% 42% 42% 42% 42% 42%
Net income 3,116 3,481 3,505 3,724 3,742 4,180 4,209 4,472
EBIT 7,678 8,573 8,631 9,167 9,210 10,285 10,354 10,998
EBITDA 9,877 11,029 11,103 11,794 11,849 13,232 13,321 14,149
Earnings per share
Basic 0.05 0.06 0.06 0.06 0.06 0.07 0.07 0.07
Diluted 0.05 0.05 0.05 0.06 0.06 0.06 0.06 0.06
Weighted average shares outstanding
Basic 57,000 58,000 59,000 60,000 60,500 61,000 61,500 62,000
Diluted 65,250 65,500 65,750 66,000 67,000 68,000 69,000 70,000
Responsys Inc Balance Sheet 2012-03 2012-06 2012-09 2012-12 2013-03 2013-06 2013-09 2013-12
Net of Cash 11,936 13,331 13,420 14,256 14,323 15,997 16,105 17,107
as % of total revenues 33% 33% 33% 33% 33% 33% 33% 33%
Property, plant and equipment 11,575 12,927 13,014 13,824 13,889 15,512 15,617 16,589
as % of Total Revenue 32% 32% 32% 32% 32% 32% 32% 32%
Total current liabilities 6,872 7,675 7,727 8,208 8,247 9,210 9,272 9,850
as % of total revenues 19% 19% 19% 19% 19% 19% 19% 19%
Responsys Inc Cash Flow Statement 2012-03 2012-06 2012-09 2012-12 2013-03 2013-06 2013-09 2013-12
Cash Flows From Operating Activities
Net income 3,116 3,481 3,505 3,724 3,742 4,180 4,209 4,472
Depreciation & amortization 2,199 2,456 2,473 2,627 2,639 2,947 2,967 3,152
as % of PPE 19% 19% 19% 19% 19% 19% 19% 19%
Stock based compensation 904 1,010 1,017 1,080 1,085 1,212 1,220 1,296
as % of Total Revenue 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
Investments in prop, plant, & equip -1,917 -2,141 -2,562 -2,722 -2,734 -3,054 -3,075 -3,266
as % of Total Revenue -5.3% -5.3% -6.3% -6.3% -6.3% -6.3% -6.3% -6.3%
Cash Flows From Financing Activities 0 0 0 0 0 0 0 0
Working Capital (CA - CL) 5,064 5,655 5,694 6,048 6,077 6,786 6,832 7,258
change in Working Capital -64 -592 -38 -354 -29 -710 -46 -425
FCFE 2,430 2,195 2,360 2,194 2,532 2,152 2,835 2,636

22. Pro Forma Summary for 5 Years: 3.3
Responsys Inc (MKTG) Income Statement 2012 2013 2014 2015 2016
Total Revenue 172,816 207,379 248,855 298,626 358,351
% growth over year 20% 20% 20% 20% 20%
Total Cost of revenue 84,680 101,616 121,939 146,327 175,592
as % of total revenues 49% 49% 49% 49% 49%
Total Gross profit 88,136 105,763 126,916 152,299 182,759
Gross Profit Margin 51% 51% 51% 51% 51%
% growth over year 15% 20% 20% 20% 20%
Operating Expences 51,845 62,214 74,656 89,588 107,505
as % of total revenues 30% 30% 30% 30% 30%
Depreciation 10,507 12,609 15,130 18,156 21,788
as % of PPE 19% 19% 19% 19% 19%
Total operating expenses 62,352 74,822 89,787 107,744 129,293
as % of total revenues 36% 36% 36% 36% 36%
Interest Expense 100 100 100 100 100
Provision for income taxes 10,787 12,953 15,552 18,671 22,414
Tax rate 42% 42% 42% 42% 42%
Net income 14,897 17,888 21,477 25,784 30,952
EBIT 73,239 87,876 105,439 126,515 151,807
EBITDA 83,747 100,484 120,569 144,672 173,595
Earnings per share
Basic 0.25 0.29 0.33 0.38 0.38
Diluted 0.23 0.26 0.30 0.33 0.34
Weighted average shares outstanding
Basic 60,000 62,000 65,000 68,000 82,000
Diluted 66,000 70,000 72,000 78,000 90,000
Responsys Inc (MKTG) Balance Sheet 2012 2013 2014 2015 2016
Net of Cash 58,757 70,509 84,611 101,533 121,839
as % of total revenues 34% 34% 34% 34% 34%
Gross property, plant and equipment 55,301 66,361 79,634 95,560 114,672
as % of Total Revenue 32% 32% 32% 32% 32%
Total current liabilities 32,835 39,402 47,282 56,739 68,087
as % of total revenues 19% 19% 19% 19% 19%

23. Discounted Cash Flow Model 3.4
Responsys Inc (MKTG) Statement of Cash Flow 2012 2013 2014 2015 2016
Net income 14,897 17,888 21,477 25,784 30,952
Depreciation & amortization 10,507 12,609 15,130 18,156 21,788
as % of PPE 19% 19% 19% 19% 19%
Stock based compensation 4,320 5,184 6,221 7,466 8,959
as % of Total Revenue 2.5% 2.5% 2.5% 2.5% 2.5%
Investments in prop, plant, and equip (9,217) (11,060) (13,272) (15,927) (19,112)
Debt repayment 0 0 0 0 0
Working Capital (CA - CL) 25,922 31,107 37,328 44,794 53,753
change in Working Capital (4,320) (5,184) (6,221) (7,466) (8,959)
FCFE 7,546 9,067 10,892 13,082 15,710

24. Key Financial Ratios: 3.5
END VALUATION MODELS