2. Topics for Today
@tylersloat#CFOsummit
• Current Market Trends and Multiples
• Sales Modeling and Efficiency
• Business Intelligence & Analytics --- tools,
team, best practices
• Budget Process
• Headcount – churn and hiring
4. Lower
development,
support and
maintenance
costs
Predictability
allows longer-
term thinking
No quarter-end
pricing games
Oh yeah,
investors give
you a higher
valuation
Downside: longer
ramp to scale
from lack of up
front license fee
At scale,
subscription models
are superior in every
aspect
“Ultimate Software
will never make
money.”
- Competitor CEO in 2002 … just as ULTI stock price
was on the cusp of a 12 year, 14-fold advance
#CFOsummit
6. INTROSubscription goes mainstream…
• 30-50 subscription software IPO’s over
the next two years seems reasonable.
• Hottest areas:
• Vertical SaaS
• Security/Systems Software
• Analytics
• Next Generation Marketing
• Caution:
• High valuations allow features to
think they’re companies.
0
10
20
30
40
50
60
2005 2010 Today
Number of Public Saas Companies
@tylersloat#CFOsummit
7. • Bookings / New ARR
• Gross Customer Churn
• Mix of S&M spend that is growth oriented
• New ARR = forward year increase in subscription
revenue + gross dollars churned in current year
• Assume all S&M spend is driving new ARR
• S&M Efficiency = $ S&M Spend / $ New ARR
• Range of Public SaaS Companies: $0.67 - $2.30
DATA WE DON’T GET HOW WE THINK ABOUT IT
SLIDE HEADERS&M Efficiency: a challenge for public investors
Conclusion: the trend line is up
2012 2013 2014 2015E 2016E
Average S&M / $ARR $0.99 $1.02 $1.18 $1.27 $1.40
Based on Canaccord Genuity analysis of the 30 largest SaaS companies; leverages SEC filings, Capital IQ estimates, and Canaccord Genuity estimates
@tylersloat#CFOsummit
8. • Bookings / New ARR
• Gross Customer Churn
• Mix of S&M spend that is growth oriented
• New ARR = forward year increase in subscription
revenue + gross dollars churned in current year
• Assume all S&M spend is driving new ARR
• S&M Efficiency = $ S&M Spend / $ New ARR
• Range of Public SaaS Companies: $0.67 - $2.30
DATA WE DON’T GET HOW WE THINK ABOUT IT
SLIDE HEADERS&M Efficiency: CAC Data points
Conclusion: the trend line is up
2012 2013 2014 2015E 2016E
Average S&M / $ARR $0.99 $1.02 $1.18 $1.27 $1.40
Based on Canaccord Genuity analysis of the 30 largest SaaS companies; leverages SEC filings, Capital IQ estimates, and Canaccord Genuity estimates
@tylersloat#CFOsummit
9. S&M
Efficiency
Best in Class 2015E
Veeva $0.67
Descartes $0.76
Q2 Holdings $0.80
Ultimate Software $0.94
Constant Contact $0.95
Analysis based on SEC filings, Capital IQ estimates, and Canaccord Genuity estimates
Best in class
@tylersloat#CFOsummit
10. The level to which operating
margins asymptotically approach if
you were to cull all growth spend
2014A 2015E 2016E
Subscription Services Revenue $5,014 $6,055 $7,295
Growth 31% 21% 20%
Subscription Gross Margin 83.4% 83.7% 84.5%
Subscription Gross Proft $4,182 $5,068 $6,164
R&D Expense (672) (819) (997)
G&A Expense (577) (672) (780)
Recurring Gross Profit $2,933 $3,577 $4,388
Recurring Profit Margin 58.5% 59.1% 60.1%
* Based on Canaccord Genuity projections
Salesforce.com: Top of the Pack and Improving
C2015E
Sub Rev
Recurring
Profit Margin
1 CRM 6,055 3,577 59.1%
2 N 599 347 57.9%
3 PAYC 201 113 56.2%
4 CSOD 306 165 54.1%
5 NOW 830 428 51.5%
6 VEEV 308 158 51.2%
7 LOCK 560 279 49.8%
8 SPSC 142 69 48.3%
9 MKTO 182 87 48.1%
10 OPWR 133 64 48.0%
11 CVT 173 83 47.7%
12 ULTI 515 242 47.0%
13 CTCT 374 169 45.3%
14 HUBS 155 70 45.2%
15 SQI 102 45 43.8%
Recurring Proft Margin
Analysis based on SEC filings, Capital IQ consensus,
and Canaccord Genuity estimates
Recurring Profit Margin
@tylersloat#CFOsummit
11. Starts with Gross
Margin
Analysis based on SEC filings, Capital IQ estimates, and Canaccord Genuity estimates
Best in class
@tylersloat#CFOsummit
13. It’s no wonder that investors
value net dollar retention.
• Most public companies don’t provide gross
customer retention
• Instead, they give net dollar retention, which is
inclusive of upsell
Ticker
Dollar-Based
Retention
1 VEEV 138%
2 BOX 126%
3 NOW 125%
4 HDP 125%
5 QTWO 122%
6 ZEN 120%
7 NEWR 120%
8 ULTI 110%
9 PAYC 110%
10 MKTO 109%
VEEV
BOX
NOWHDP
QTWO
ZEN NEWR
ULTI PAYC
MKTO
WK
CSLT
AMBR DWRE
OPWR
ECOM
FIVN
RNG
CVTMRIN
SQI
BNFT
CSOD SPSC HUBS
IL
CRM
LOCK
CARB
LOGM
CTCT
70%
80%
90%
100%
110%
120%
130%
140%
1.0x 3.0x 5.0x 7.0x 9.0x 11.0x
DollarBasedRetention
EV/C2015E Revenues
DBR is based on most recently available
publicly stated information
Valuation based on Capital IQ consensus and Canaccord Genuity estimates
@tylersloat#CFOsummit
15. • In March 2014, investors transitioned
from GAAP to GARP
– That means from “Growth at any Price” to
“Growth at a Reasonable Price”
• A quick trick we like to use: Revenue
Growth + FCF Margin
– Gold, Silver, Bronze: 50%, 40%, 30%
– Change in G+M is an important indicator as
well
Many trending down as growth rates decelerate
faster than margins ramp
An Easy Screen:
growth +
margin
@tylersloat#CFOsummit
17. Acquire
• How do you model
• How do you compensate
• How do you drive efficiency in
your sales org
• Accelerate, digest or pull back
18. 77%of respondents sell
primarily through a
direct sales approach 52%use a self
service model
65%offer their prospects a
free trial period
20%However, only 47% said less than
20% convert from free trial to
customer
Acquire: Selling Approach
@tylersloat#CFOsummit
19. Acquire: Marketing Vs. Sales Costs
Industry
Verticals31%
Customer
Rev26%
#
Employees21%
@tylersloat#CFOsummit
24. Acquire
What percentage of your total sales opportunities close?
1-2% 3-5% 6-10% >10%
5%
37%
21%
36%
@tylersloat#CFOsummit
25. Acquire: How to model ramp?
30 days 60 days 90 days > 4 mos
21%
24%
41%
14%
@tylersloat#CFOsummit
26. Acquire: How to model sales cycle
10 days4%
30 days16%
60 days32%
120
days
29%
19%
@tylersloat#CFOsummit
27. Acquire: How to model quota attainment
> 40 %
12% 10%
40 – 60%
39%
60 – 80%
31%
80 – 100%
7%
> 100%
@tylersloat#CFOsummit
28. Acquire: What’s your over-assign
100M
in quota on the
street
35% >$90MEXPECT
36% $80-90MEXPECT
25% $70-80MEXPECT
2% $50-70MEXPECT
2% < $50MEXPECT
@tylersloat#CFOsummit
29. ACQUIRE: What is OTE to quota?
16% < 150k
26% < 200k
35% < 250k
13% < 300k
10% > 300k
$1
M
@tylersloat#CFOsummit
30. Acquire: What’s your quota based on?
19%
18%
48%
15%
MRR
TCV
ACV
Other
@tylersloat#CFOsummit
31. Acquire: What are your commission rates?
9% 5%
35% 6- 10%
37% 11 - 15%
12% 20%
CHEAPSKATES
THE NORM
THE NORM
BREAKING THE BANK
@tylersloat#CFOsummit