3Q13 Software Industry Financial Report

The Software Industry
Financial Report

SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTS
About Software Equity Group
Leaders in Software M&A
Extensive Global Reach
Software Industry Macroeconomics
Global GDP
U.S. GDP and Unemployment
Global IT Spending
E-Commerce and Digital Advertising Spend
SEG Indices vs. Benchmark Indices
Public Software Financial and Valuation Performance
The SEG Software Index
The SEG Software Index: Financial Performance
The SEG Software Index: Market Multiples
The SEG Software Index by Product Category
The SEG Software Index by Product Category: Financial Performance
The SEG Software Index by Product Category: Market Multiples
Public SaaS Company Financial and Valuation Performance
The SEG SaaS Index
The SEG SaaS Index Detail
The SEG SaaS Index: Financial Performance
The SEG SaaS Index: Market Multiples
The SEG SaaS Index by Product Category
The SEG SaaS Index by Product Category: Financial Performance
The SEG SaaS Index by Product Category: Market Multiples
Public Internet Company Financial and Valuation Performance
The SEG Internet Index
The SEG Internet Index: Financial Performance
The SEG Internet Index: Market Multiples
The SEG Internet Index by Product Category
The SEG Internet Index by Product Category: Financial Performance
The SEG Internet Index by Product Category: Market Multiples

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8
9
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14
15-17
18-19
20
21
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24
25
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26-28
29-30
31
32
33
35
36-38
39-40
41
42
43

Q3 2013 Software Industry Financial Report
Copyright © 2013 by Software Equity Group, LLC
All Rights Reserved

SOFTWARE INDUSTRY FINANCIAL REPORT CONTENTS
Software Industry M&A Market Update
Software/SaaS M&A Deal Volume and Spending
Software M&A Exit Multiples
Software M&A by Ownership Structure and Size
Software M&A by Vertical and Horizontal Markets
Software M&A by Product Category
SaaS M&A Deal Volume and Exit Multiples
SaaS M&A by Product Category
SaaS M&A: 3Q13 Transactions
Internet M&A: Deal Volume and Exit Multiples
Appendix
The SEG Software Index Companies
The SEG SaaS Index Companies
The SEG Internet Index Companies
The SEG Software Index by Key Metrics
The SEG SaaS Index by Key Metrics
The SEG Internet Index by Key Metrics
The SEG Software Index Metrics by Product Category
The SEG SaaS Index Metrics by Product Category
The SEG Internet Index Metrics by Product Category
3Q13 Public Sellers
3Q13 Software Mega Deals (>$500M)
3Q13 Most Active Buyers

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45
46
47
48
49-50
51
52
53-55
56 57
56-57
58-61
62
63-65
66 69
66-69
70
71-73
74-75
76
77
78
79
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All Rights Reserved

ABOUT SOFTWARE EQUITY GROUP

3

All Rights Reserved

LEADERS IN SOFTWARE M&A
•

Industry leading boutique investment bank founded in
bank,
1992, representing public and private software and
internet companies seeking:
• Strategic exit
• Growth capital
• Buyout
• Inorganic growth via acquisition
• Buy and sell-side mentoring
• Fairness opinions and valuations

•

Sell-side client revenue range: $5 - 75 million

•

Buy-side clients include private equity firms and
NASDAQ, NYSE and foreign exchange listed companies

•

Clients span virtually every software technology, product
category, delivery model and vertical market

•

Global presence providing advice and guidance to more
than 2 000 i t
th 2,000 private and public companies th
d bli
i throughout US
h t US,
Canada, Europe, Asia-Pacific, Africa and Israel

•

Strong cross-functional team leveraging transaction,
operating, legal and engineering experience

•

Unparalleled software industry reputation and track
record.

•

Highly referenceable base of past clients

4

All Rights Reserved

We Do Deals.

EXTENSIVE GLOBAL REACH
Current Sell-side Representation

• SEG currently represents software companies
in the United States, Canada, France,
Germany, Australia & Saudi Arabia

Recent Sell-side Representation

• In addition to the countries listed above, SEG
has recently represented software companies
in the United Kingdom, France, Netherlands,
Israel, and South Africa

SEG Research Distribution

• SEG’s Quarterly and Annual Software Industry
Equity Reports and Monthly Flash Reports are
q y
p
y
p
distributed to an opt-in list of 50,000 public
software company CEOs, software
entrepreneurs, private equity managing
directors, VCs, high tech corporate lawyers,
p
public accountants, etc. in 76 countries.
,

5

All Rights Reserved

ABOUT SOFTWARE EQUITY GROUP
Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. Founded in 1992, our firm has guided and
q y
p
y
g
gy
,
g
advised companies on five continents, including privately-held software and technology companies in the United States, Canada, Europe, Asia Pacific, Africa
and Israel. We have represented public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges. Software Equity
Group also advises several of the world's leading private equity firms. We are ranked among the top ten investment banks worldwide for application software
mergers and acquisitions.
Our value proposition is unique and compelling. We are skilled and accomplished investment bankers with extraordinary software internet and technology
compelling
software,
domain expertise. Our industry knowledge and experience span virtually every software product category, technology, market and delivery model, including
Software-as-a-Service (Saas), software on-demand and perpetual license. We have profound understanding of software company finances, operations and
valuation. We monitor and analyze every publicly disclosed software M&A transaction, as well as the market, economy and technology trends that impact these
deals. We're formidable negotiators and savvy dealmakers who facilitate strategic combinations that enhance shareholder value.
Perhaps most important are the relationships we've built and th i d t reputation we enjoy. S ft
P h
ti
t t
th
l ti
hi
' b ilt d the industry
t ti
j
Software E it Group is known and respected by publicly
Equity G
i k
d
t db
bli l
traded and privately owned software and technology companies worldwide, and we speak with them often. Our Quarterly and Annual Software Industry Equity
Reports are read and relied upon by more than thousands of industry executives, entrepreneurs and equity investors in sixty-one countries, and we have been
quoted widely in such leading publications as The Wall Street Journal, Barrons, Information Week, The Daily Deal, The Street.com, U.S. News & World Report,
Reuters, Mergers & Acquisitions, USA Today, Arizona Republic, Detroit Free Press, Entrepreneur Magazine, Softletter, Software Success, Software CEO
g
Online and Software Business Magazine.
To keep your finger on the pulse of the software equity markets, subscribe to our Annual and Quarterly Research Reports.
Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. For a confidential consultation without obligation,
please contact Kris Beible, Director, Business Development (858) 509-2800, kbeible@softwareequity.com .
CONTACT INFORMATION:
Software Equity Group, L.L.C.
12220 El Camino Real, Suite 320
San Diego, CA 92130
www.softwareequity.com
www softwareequity com
p: (858) 509-2800
The information contained in this Report is obtained from sources we believe to be reliable, but no representation or guarantee is made about the accuracy or completeness of such information, or the opinions expressed herein. Nothing in
this Report is intended to be a recommendation of a specific security or company or intended to constitute an offer to buy or sell, or the solicitation of an offer to buy or sell, any security. Software Equity Group LLC may have an interest in
one or more of the securities or companies discussed herein.
Financial data provided by Capital IQ.
This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C.
Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights.

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SOFTWARE INDUSTRY MACROECONOMICS

7

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GLOBAL GDP

•
•

The global economy was constrained by the Europe’s continuing recession and slowing GDP growth in China, which is where a
major experiment is underway to shift its economy from rural to urban based and consumer driven.

•

Other key emerging markets struggle with social unrest from high unemployment and lackluster growth.

•

8

According to the Economist Global GDP growth slowed in 2Q13 (the latest data available) retreating to 2 1% from 3 1% in
Economist,
available),
2.1%
3.1%
2Q12.

For the year, PIMCO forecasts Global GDP to grow 2.0% - 2.5%, up slightly from previous forecasts due to strengthened
economies in the U.S. and Japan, which are hoped to offset Europe’s economic malaise and slowed growth among the larger
emerging nations.

Sources: Worldbank, The Economist
and PIMCO

All Rights Reserved

U.S. GDP AND UNEMPLOYMENT
10%
GDP % Growth

Unemployment Rate

8%
6%

5.0%
3.6%
3 6%

4.1%
4 1%

3.7%

4%
2.2%

2.1%
1.5%

2%

3.1%
1.7%

3.1%

2.5%

2.6%

1.3%
0.4%

2.2%

2.5%

2.0%

1.8%

1.3%
0.4%

0%
-0.7%
0 7%

-0.7%

-2%
-2.7%
-4%
-6%

-5.4%
-6.4%
6 4%

-8%

3Q07

3Q08

3Q09

3Q10

3Q11

3Q12

3Q13

•
•

9

According to August’s Federal Reserve survey of 42 economists GDP growth in 3Q13 is predicted to be 2 2% For the year
August s
economists,
2.2%.
year,
expectations are the U.S. economy will grow 2.0%.
PIMCO, however, is a bit more conservative. In its 3Q13 market perspectives, PIMCO forecast U.S. GDP growth of 1.5% - 2.0%
for the year, citing continuing strength in the housing market.

All Rights Reserved

GLOBAL IT SPENDING
10.0%

9.0%
8.0%
6.0%

6.0%

YoY Change in IT Spending

5.0%

4.1%
2.0%

2.0%

2012

2013

0.0%
2007

2008

2009

2010

2011

2014 (F)

‐5.0%

‐10.0%
-10 0%
10.0%

‐15.0%

•

In July analysts lowered their earlier forecast of 3 9% increase in Global IT spending to a mere 2% increase
July,
3.9%
increase.

•

Estimates for 2014 are more promising, with an array of economists forecasting 4.1% growth in Global IT spending.

•

According to Forrester, software is garnering the largest share of Global IT dollars, $542M in 2013. Software spending is expected
to grow 3.3% in 2013, and 6.2% in 2014.

•

SaaS ft
S S software spending i projected t i
di is
j t d to increase 25% i 2013
in 2013.

•

Especially hot IT Software spending priorities include: collaboration (13% YoY growth), business intelligence (11%), ePurchasing
(10%), HR management (9%), and healthcare systems (8%).

10

Sources: IT spending numbers shown in charts are
a blended average of Goldman Sachs, IDC,
Forrester, Gartner forecasts

All Rights Reserved

E-COMMERCE AND DIGITAL ADVERTISING SPEND

20%

50,000

15%

40,000

10%

30,000
20,000
20 000
10,000
0

5%
0%
‐5%

•

U.S. e-commerce retail sales totaled $49.8B in 2Q13 (the latest
data available), just shy of a third consecutive $50B+ quarter.

•

The
Th Q2 total for online retail spending accounted for 9 6% of all
t t lf
li
t il
di
t d f 9.6% f ll
discretionary retail dollars spent, the highest on record.

•
•

11

12,000
10,000

30%
25%
20%

8,000
6,000
4,000

15%
10%
5%
0%

2,000
0

‐5%
‐10%

•

U.S. digital advertising revenues totaled $10.3B in 2Q13
(the latest quarter data was available), which equates to an
18% YoY growth increase For the first-half of 2013 Internet
increase.
first half 2013,
ad revenues surged to a landmark $20.1 billion.

2Q13’s 16% YoY growth in online sales marks the eleventh
consecutive quarter of double-digit growth.

•

2Q13’s strong first quarter follows on the heels of a strong
2012, when digital advertising soared 15% to $36.6B.

Other e commerce categories with at least 19% YoY growth
e-commerce
included: Digital Content & Subscriptions, Apparel &
Accessories, Sport & Fitness, Consumer Electronics, and
Consumer Packaged Goods.

•

For the first time growth in mobile advertising revenue
time,
reached $3 billion for the first half of 2013, up 145% YoY.

Sources: comScore, IAB, IBD

All Rights Reserved

Yo % Change
oY

60,000

Internet Advertising Revenue ($ Mil
llions)

Digital Advertising Revenue

Yo % Change
oY

E-Commer Spending ($ Millions)
rce

E-Commerce Spending

SEG INDICES VS. BENCHMARK INDICES
DOW

60.0%

S&P

NASDAQ

SEG SaaS

SEG SW Index

SEG Internet Index

50.0%
40.0%
40 0%
30.0%
20.0%
10.0%
0.0%
(10.0%)
Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

•

Optimism continued to prevail on Wall Street despite repeated warnings by the Federal Reserve in Q3 that it would retreat from its
$85 billion monthly bond buying program – which it subsequently reversed in 3Q13.

•

The NASDAQ posted the best stock return of the three major stock indices in Q3, finishing up 11.2%. Through three quarters, the
NASDAQ is up a whopping 24.9%.

•

The S&P, which returned 12.8% in the first half of the year, tacked on an additional 4.7% in 3Q.

•

After leading all major indices through the first half of the year with a return of 14 6% the DOW only gained an additional 1 2% in
14.6%,
1.2%
Q3. YTD, the DOW’s 15.8% return is still highly respectable.

•

Both the SEG SaaS and the SEG Internet Index benefited from investors with greater risk tolerance, posting 28.2% (SaaS) and
23.7% (Internet) returns, respectively, by close of Q3. By contrast, the SEG Software lagged well behind, returning 13.3% in 3Q.

•

By close of Q3 the SEG SaaS and SEG Internet indexes have gained 50 7% (SaaS) and 48 5% (Internet) respectively
Q3,
50.7%
48.5% (Internet), respectively.

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PUBLIC SOFTWARE COMPANY FINANCIAL AND
VALUATION PERFORMANCE:
THE SEG SOFTWARE INDEX

13

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THE SEG SOFTWARE INDEX
SEG - Software: Median Metrics
Measure
EV/Revenue
EV/EBITDA
EV/Earnings
Gross Profit Margin
EBITDA Margin
M i
Net Income Margin
TTM Revenue Growth
TTM Total Revenue ($M)
TTM EBITDA Growth
TTM Total EBITDA ($M)
Cash & Eq ($M)
Current Ratio
Debt / Equity Ratio

3Q12
2.7x
11.5x
22.6x
65.8%
19.2%
19 2%
9.4%
14.7%
$427.0
15.9%
$71.2
$157.3
2.0
21.3%

4Q12
2.6x
11.8x
22.1x
65.9%
19.6%
19 6%
9.9%
14.0%
$452.3
9.4%
$75.1
$159.7
2.0
22.5%

1Q13
2.8x
13.3x
24.0x
66.1%
19.3%
19 3%
8.7%
12.8%
$461.7
7.2%
$76.0
$169.3
1.9
25.1%

2Q13
2.7x
12.6x
24.4x
66.5%
18.6%
18 6%
8.2%
11.7%
$471.9
5.4%
$82.7
$180.9
1.9
26.6%

3Q13
3.0x
13.5x
28.0x
67.1%
18.7%
18 7%
8.2%
10.0%
$483.6
6.1%
$86.0
$175.9
2.0
23.1%

• The SEG Software Index tracks public
software companies that primarily offer onpremise software under a perpetual
license with annual M&S
• The SEG Software Index is currently
comprised of 133 public software
companies*
i *

* See appendix for a complete list of companies in The SEG Software Index

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THE SEG SOFTWARE INDEX: FINANCIAL PERFORMANCE
Revenue Performance

TTM Revenue Growth Rate Distribution

14%

$470

12%

$460
$450

10%

$440

8%

$430

6%

$420

4%

$410

31%

30%
% of Co
ompanies

$480

35%

16%

TTM Reven
nue Growth

$
$490

TTM Total Revenue

70% of public on-premise software companies
had TTM revenue growth rates of 20% or below

TTM Revenue Growth

24%

25%
20%
15%

14%

15%

10%
10%

$400

2%
0%

6%

5%

$390

0%

3Q12

4Q12

1Q13

2Q13

3Q13

•

•

Perhaps as testament to how much consolidation has occurred
among on-premise providers, the median TTM revenue of the
SEG Software Index reached $483.6M, the highest in history,
and the highest among our three tracking indices.

•

<= 0%

On-premise software companies lost market share to SaaS
providers, and continued to be buffeted by tightly constrained
IT capital budgets and macro economic headwinds The
headwinds.
median TTM revenue growth rate of the SEG Software Index
dropped to 10.0%, the fourth consecutive quarterly of decline.

We expect TTM revenue growth for most on-premise public
software companies to remain modest for the balance of the
year,
year which portends more acquisitions and R&D spending to
spur top line growth.

15

Of the 16% of companies with TTM revenue
growth rates of 30% or more, a disproportionate
number are focused on mobility and cloud
computing

All Rights Reserved

> 0%
<= 10%

> 10%
<= 20%

> 20%
<= 30%

TTM Revenue Growth

> 30%
<= 40%

> 40%

EBITDA Margin Performance
TTM EBITDA Growth

22%
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%

30%

18%
16%
12%
10%
8%
6%
4%

Almost one in three on-premise software
companies posted EBITDA margins of
20% - 30%

26%

18%

20%
15%
10%

11%

10%

6%
5%

2%
0%
3Q12

4Q12

1Q13

2Q13

3Q13

•

•

0%
<= 0%

The median EBITDA margin of public on-premise software
companies remained at historic levels, closing 3Q13 at
p
,
g Q
18.7%.
In the current scenario, it’s unlikely members of the SEG
Software Index will be able to push much more to the bottom
line. Their median TTM EBITDA growth plunged from 15.9%
YoY in 3Q12 to only 5 4% YoY growth in 3Q13
5.4%
3Q13.

16

27%

25%
% of Co
ompanies

14%

TTM EBITD
DA Growth

EBITDA Margin

EBITDA Margin

TTM EBITDA Margin Distribution

All Rights Reserved

> 0%
<= 10%

> 10%
<= 20%

> 20%
<= 30%

TTM EBITDA Margin

> 30%
<= 40%

> 40%

Operating Ratios
S&M (% of Revenue)

R&D (% of Revenue)

Margin Performance
G&A (% of Revenue)

Gross Prof it Margin

EBITDA Margin

Net Income Margin

80%

25%

70%
60%

% Margin
M

% of R
Revenue

20%
15%
10%

50%
40%
30%
20%

5%

10%

0%

0%

3Q12

•

•
•

17

4Q12

1Q13

2Q13

3Q13

Among public on-premise software compnaies, median
spending in Q was consistant with historical norms: 14.9%
p
g Q3
for Research & Development, 23.2% for Sales & Marketing,
and 10.8% for General & Administrative.
Over the past year, S&M, R&D and G&A expenses as a
percent of revenue have remained flat.
Median S&M spending among on-premise public software
companies lagged far behind their SaaS counterparts, which
continued to invest heavily in new customer acquisition
(39.3% for SaaS and 23.2% for on-premise).

3Q12

4Q12

1Q13

2Q13

3Q13

•

In 3Q13, median gross profit, EBITDA and net income
margins were 67.1%, 18.7% and 8.2%, respectively.
g
,
,
p
y

•

Several on-premise providers achieved gross profit margins
of 89% or greater, including: Sage Group (93.9%), Unit 4
(92.8%), SolarWinds (92.7%), Splunk (89.0%).

•

We anticipate EBITDA margins and net income margins will
likely decline over the next several quarters, as on-premise
software companies increase their investments in R&D to
improve products/delivery models, and in sales & marketing
to accelerate TTM revenue growth.

All Rights Reserved

THE SEG SOFTWARE INDEX: MARKET MULTIPLES
EV/Revenue and EV/EBITDA Multiples

EV/Revenue Multiples by Size (TTM Revenue)
Revenue Greater Than $1 billion

4.0x

11.5x

11.8x

12.6x

13.5x

10.0x
8.0x
8 0x
6.0x
2.7x

2.6x

2.8x

3.0x

2.7x

3.5x
Median EV
V/Revenue

13.3x

14.0x

4.0x

Revenue Less Than $100 million

EV/EBITDA

16.0x
16 0x

12.0x

Revenue Between $500 million and $1 billion

Revenue Between $100 million and $500 million

EV/Revenue

3.0x
2.5x
2.0x
2 0x
1.5x
1.0x

2.0x

0.5x

0.0x
00

0.0x
0 0x

3Q12

4Q12

1Q13

2Q13

3Q12

3Q13

4Q12

1Q13

2Q13

3Q13

•

Despite slowing growth and EBITDA erosion, the median EV/Revenue
multiple of public on-premise software companies ticked up 30 basis
p
points 3Q13, closing the q
,
g
quarter at 3.0x.

•

Investors in 3Q13 continued to place higher value on larger public
software companies with revenues >$100 million.

•

•

This marks only the second time since 1Q06 that the SEG Software
Index median EV/Revenue multiple reached 3.0x or higher. The other
quarter was 2Q11 when the multiple 3.1x.

Throughout 2012 and into 3Q13 the EV/Revenue multiples of
2012,
3Q13,
on-premise software companies with revenues <$100 million
remained markedly lower than their larger counterparts.

•

SEG Software Index companies with TTM revenue between
$100M and $1B successfully balanced TTM revenue growth
(median 16.6%) and profitability (median EBITDA of 15 3%) and
16 6%)
15.3%),
were rewarded with the highest median EV/Revenue multiples.

•

The higher EV/Revenue median multiples are most likely attributed to a
higher percentage of recurring revenue as many on premise software
revenue,
on-premise
providers transition to subscription pricing and periodic license models.

•

Adobe is a great example. As the company converts to a SaaS model,
its revenue growth rate has rapidly decelerated (11.0%, 4.4%, (5.3%) in
2010, 2011, 2012, respectively) yet its EV/Revenue multiple has grown
from 2 9x to 5 8x over the same period due to a growing percentage of
2.9x 5.8x
recurring revenue.

18

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THE SEG SOFTWARE INDEX: MARKET MULTIPLES
EV/Revenue Multiples vs. TTM Revenue Growth Rates

5.7x

6.0x

EV/Revenue Multiples vs. TTM EBITDA Margins

7.0x

5.6x

6
6.1x
6.0x

4.0x

Median EV/Revenue
E

Median EV/Revenue
E

5.0x

3.3x
2.8x

3.0x

3.0x

2.0x
1.2x

5.0x
4.0x
3.0x
30

3.2x

3.3x

> 20%
<= 30%

> 30%
<= 40%

2.6x
2 6x

2.4x

2.0x
2.0x

1.0x

1.0x

0.0x

0.0x

<= 0%

> 0%
<= 10%

> 10%
<= 20%

> 20%
<= 30%

> 30%
<= 40%

> 40%

<= 0%

> 0%
<= 10%

TTM Revenue Growth

> 10%
<= 20%

> 40%

TTM EBITDA Margin

•

Investors awarded markedly higher market multiples to
public on premise software companies with revenue growth
on-premise
exceeding 20%.

•

Premium market multiples were awarded to the select few onpremise software providers generating EBITDA margins north
of 40%.

•

Indeed, public on-premise software companies with revenue
growth rates of 20%-30% and greater than 40% closed 3Q13
with median EV/Revenue multiples of 5.7x and 5.6x,
respectively

•

Surprisingly, the EV/Revenue multiple range for most onpremise software companies was relatively narrow, suggesting
investors were seemingly indifferent to sub 40% profitability, a
stark reversal from prior quarters.

19

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THE SEG SOFTWARE INDEX: BY PRODUCT CATEGORY
SEG Software Index
EV/Revenue

Category

EV/EBITDA

TTM Revenue Growth

EBITDA Margin

3Q12

Billing & Service Management

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13

1.3x

1.5x

1.9x

1.9x

2.3x

8.0x

8.2x

8.4x

8.3x

8.7x

9.5%

10.4%

10.4%

8.9%

16.9%

18.8%

19.8%

20.7%

18.7%

18.4%
13.3%

Business Intelligence

3.7x

3.2x

3.4x

3.0x

3.3x

25.6x

17.5x

15.8x

16.5x

17.1x

13.8%

13.2%

11.8%

13.1%

14.2%

16.5%

14.7%

14.0%

13.6%

Development Platforms

2.5x

2.5x

2.5x

2.6x

2.6x

8.2x

9.6x

9.1x

10.1x

14.2x

3.5%

1.6%

3.0%

0.6%

-0.3%

24.7%

23.5%

21.1%

20.3%

20.4%

Engineering & PLM

2.6x

2.5x

2.7x

2.7x

2.8x

12.1x

11.8x

13.4x

12.4x

13.8x

13.2%

14.0%

13.1%

11.7%

8.4%

20.5%

20.6%

20.7%

20.5%

20.3%

Enterprise Resource Planning

2.1x

2.2x

2.3x

2.5x

2.5x

9.2x

9.1x

10.1x

12.1x

12.2x

4.7%

3.4%

2.6%

1.5%

2.2%

23.2%

23.1%

22.8%

22.4%

22.2%

Financial & Accounting

2.9x

2.9x

3.1x

3.3x

3.3x

9.8x

9.8x

10.5x

11.3x

12.0x

17.2%

13.8%

8.6%

10.7%

9.5%

29.0%

28.8%

27.5%

26.6%

26.1%

Gaming

1.0x

1.0x

1.1x

1.3x

1.7x

9.1x

8.0x

7.1x

9.4x

11.3x

2.2%

0.1%

7.4%

15.1%

14.9%

14.9%

15.7%

14.9%

15.4%

14.6%

Healthcare

2.2x

2.1x

2.1x

2.1x

2.5x

12.8x

11.3x

14.8x

17.6x

16.1x

24.2%

19.6%

10.7%

11.0%

9.4%

20.6%

18.5%

13.4%

14.1%

14.3%

IT Conglomerates

2.8x

2.5x

2.5x

2.9x

2.7x

8.4x

8.0x

9.0x

8.7x

8.3x

1.5%

1.4%

0.5%

0.2%

1.2%

36.1%

34.6%

33.8%

33.8%

34.3%

Mobile Solutions/Content

3.2x
3 2x

2.5x
2 5x

2.7x
2 7x

2.8x
2 8x

3.0x
3 0x

13.8x
13 8x

11.9x
11 9x

20.6x
20 6x

13.2x
13 2x

13.5x
13 5x

44.9%
44 9%

48.1%
48 1%

44.5%
44 5%

24.6%
24 6%

13.2%
13 2%

7.8%
7 8%

6.4%
6 4%

4.5%
4 5%

7.9%
7 9%

8.0%
8 0%

Networking & Network Performance
Management

3.0x

3.0x

2.8x

2.7x

2.8x

16.4x

14.9x

15.3x

17.0x

17.0x

17.3%

14.6%

15.2%

11.0%

6.5%

16.3%

16.0%

16.1%

15.0%

14.3%

Security

4.2x

3.1x

3.5x

4.5x

4.9x

11.5x

11.9x

20.7x

16.7x

12.7x

22.8%

23.9%

23.8%

21.8%

21.2%

18.4%

17.1%

8.1%

7.3%

7.5%

2.5x

2.3x

2.4x

2.4x

2.7x

9.2x

8.4x

9.2x

8.8x

8.9x

6.3%

6.5%

4.8%

4.1%

3.3%

23.9%

23.8%

22.2%

21.9%

22.2%

2.5x

2.9x

3.3x

3.4x

4.1x

10.5x

12.7x

14.5x

15.0x

17.1x

15.9%

11.2%

11.3%

9.3%

10.2%

17.1%

16.6%

16.0%

15.3%

19.2%

Storage, Data Management &
Integration
Supply Chain Management &
Logistics
Systems Management

6.9x

5.7x

5.6x

5.0x

5.4x

26.6x

24.6x

23.0x

20.9x

19.7x

18.7%

17.4%

17.2%

16.1%

16.4%

25.9%

25.0%

24.4%

23.8%

24.2%

Vertical - Finance

3.2x

3.0x

3.4x

3.8x

3.7x

10.6x

9.4x

10.7x

11.4x

12.6x

6.3%

7.1%

6.7%

7.6%

7.4%

26.2%

26.3%

26.5%

27.3%

26.0%

Vertical - Other

2.9x
Median

2.9x

3.0x

3.2x

3.6x

21.2x

21.3x

22.0x

22.1x

20.8x

28.0%

19.8%

21.3%

21.0%

22.2%

14.3%

14.0%

14.1%

14.4%

15.5%

2.7x

2.6x

2.8x

2.7x

3.0x

11.5x

11.8x

13.3x

12.6x

13.5x

14.7%

14.0%

12.8%

11.7%

10.0%

19.2%

19.6%

19.3%

18.6%

18.7%

• The SEG Software Index is segmented into 17 product categories
• See Appendix for the complete list of companies within each product category

20

All Rights Reserved

40%
35%
30%
25%
20%
15%
10%
5%
0%

21
(100%)


All Rights Reserved
Vertical - Oth
her

nce
Vertical - Finan

Systems …

Supply Cha …
ain

Storage, Da …
ata

Secur
rity

Networking & …
g

Mob …
bile

IT Conglomerat
tes

Healthca
are

ing
Gami

Financial & …

3Q13 TTM EBITDA Margin

Enterpr …
rise

Develop
pment …

Vertical - Other
O

Vertical - Fin
nance

Sys
stems …

C
Supply Chain …

Storage, Data…

Sec
curity

Network
king & …

M
Mobile…

IT Conglome
erates

Health
hcare

Ga
aming

Financ & …
cial

Enter
rprise…

Engineering & PLM

5%

Engineering & PL
LM

10%

Business Intellig
gence

15%

Billing & Se
ervice …

3Q13 TTM Revenue Growth

Developme …
ent

20%

100%
80%
60%
40%
20%
0%
(20%)
(40%)
(60%)
(80%)
(100%)

Bu
usiness Intelligen
nce

Vertical - Other

Vertical - Fin
nance

stems …
Sys

Supply Chain …

Storage, Data…

Se
ecurity

Network
king & …

M
Mobile…

erates
IT Conglome

Healt hcare

aming
Ga

Financial & …

Ente
erprise…

Engineering & PLM

Develop
pment …

Business Intellig
gence

25%

Billing & Servi …
ice

Vertical - Othe
er

Vertical - Financ e

System …
ms

Supply Chain …

Storage, Dat …
ta

Securit
ty

Networking & …

Mobil …
le

IT Conglomerate
es

Healthcare
re

Gaming
g

Financial & …

Enterpris e…

Engineering & PLM
M

Developmen …
nt

Bus
siness Intelligenc e

(5%)
Billing & Se
ervice …

0%

Billing & Servic e …

THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY:
FINANCIAL PERFORMANCE
3Q13 YoY Change in Revenue Growth

20%

3Q13 YoY Change EBITDA Margin

0%

(20%)
(40%)

(60%)

(80%)

THE SEG SOFTWARE INDEX BY PRODUCT CATEGORY:
MARKET MULTIPLES
3Q13 Median EV/Revenue Multiples

3Q13 YoY Change in Median EV/Revenue Multiples
100%

6.0x

80%

5.0x
5 0x

60%
4.0x

40%

Vertical - Other

Vertical - Finance
F

Systems Manag
gement

Sup ply Chain Manage
ement &…

Stora
age, Data Management &…

S
Security

Networking & Network…
N

M
Mobile Solutions/C
Content

IT Conglom
merates

Hea
althcare

G
Gaming

Financial & Acco
ounting

rprise Resource Pl anning
Enter

Engineering & PLM

Development Pla
atforms

Business Intel ligence

Billing & Service Manag
gement

Vertical - Other

Vertical - Fin
nance

(40%)
Systems Manage
ement

Sup
pply Chain Manage
ement…

Stor
rage, Data Manage
ement…

Se
ecurity

Networking & Ne
etwork…

M
Mobile Solutions/Co
ontent

IT Conglome
erates

Healt
thcare

Ga
aming

0.0x

Financial & Accou
unting

(20%)

Enterp
prise Resource Pla
anning

1.0x

Engineering & PLM

0%

Development Plat
tforms

2.0x

Business Intellig
gence

20%

Billing & Se
ervice…

3.0x

•

In 3Q13, seven product categories achieved median EV/Revenue multiples above the SEG Software Index median of 3.0x, including
Systems Management (5.4x), Security (4.9x), Supply Chain Mgmt & Logistics (4.1x), Vertical - Finance (3.7x), Vertical - Other (3.6x),
Financial & Accounting (3.3x), Business Intelligence (3.3x).

•

For some categories, TTM revenue growth translated to an impressive EV/Rev market valuation (Security, Systems Mgmt), while other
categories demonstrated a curious disconnect between market valuation and top line growth (Billing & Service Mgmt, Vertical - Other).

•

The Systems Management product category, benefitting from the rapid shift to cloud computing and growing demand for cloud
infrastructure, achieved the highest median EV/Revenue multiple (5.4x) in 3Q13, driven by strong TTM revenue growth (16.4%) and
EBITDA margins (24.2%) – b th above th median f th i d
i (24 2%) both b
the
di for the index.

22

All Rights Reserved

PUBLIC SaaS COMPANY FINANCIAL AND
THE SEG SaaS INDEX

23

All Rights Reserved

THE SEG SaaS INDEX
SEG - SaaS: Median Metrics
Measure
EV/Revenue
EV/EBITDA
EV/Earnings
Gross Profit Margin
EBITDA Margin
Net Income Margin
TTM Revenue Growth
TTM EBITDA Growth
Cash & Eq ($M)
Current Ratio
Debt / Equity Ratio

3Q12
5.5x
41.5x
40.9x
70.5%
6.9%
-0.9%
28.7%
$108.1
26.0%
$6.0
$6 0
$67.0
1.5
6.9%

4Q12
4.8x
41.7x
40.2x
70.9%
6.9%
-0.3%
26.8%
$117.5
20.6%
$6.0
$6 0
$66.1
1.6
5.7%

1Q13
5.3x
35.4x
63.8x
70.8%
5.7%
-1.8%
25.3%
$127.7
7.9%
$6.8
$6 8
$68.0
1.8
6.5%

2Q13
5.7x
31.5x
106.1x
70.8%
2.3%
-4.0%
25.0%
$143.1
3.0%
$5.1
$5 1
$74.7
1.5
6.4%

3Q13
6.5x
40.6x
125.4x
70.3%
2.1%
-4.5%
30.6%
$163.8
7.2%
$2.7
$2 7
$89.1
2.2
8.3%

• The SEG SaaS Index tracks public
companies that primarily offer hosted, ondemand software under a subscription
and/or transaction based pricing model
• The SEG SaaS Index is currently
comprised of 41 public pure-play SaaS
companies*
i *

* See appendix for a complete list of companies in The SEG SaaS Index

24

All Rights Reserved

THE SEG SaaS INDEX: FINANCIAL PERFORMANCE
Revenue Performance


TTM Revenue Growth

$180
$160

25.0%

$120
$100

20.0%

$80

15.0%

$60

10.0%

$40

% of Co
ompanies

30.0%

$140

29%

30%

TTM Reven
nue Growth

TTM Total
l Revenue

35%

35.0%

25%
20%
15%

revenue growth of
40% or more

26%

24%

Only 3% of public
SaaS companies
generated TTM
revenue growth of
10% or l
less

10%

$20

5.0%
0.0%
0 0%

6%

5%

$0

0%

3%
0%

3Q12

4Q12

1Q13

2Q13

3Q13

•

•

> 0%
<= 10%

Public SaaS companies continued to grow, mature and gain
market share; Q3’s median TTM revenue exceeded $160M, up
sharply from 3Q12’s $108M.

•

<= 0%

After declining for four consecutive quarters, the median TTM
revenue growth rate for the SEG SaaS Index edged up to 30.6%
in 3Q13.

The sharp uptick in median revenue growth is largely attributed
to a host of new market grabbing SaaS IPOs in 3Q13. Select
examples include: FireEye (109% TTM Revenue Growth;),
Tableau Software (71%), Textura (65%), Marketo (62.0%), and
Cvent (36%).

25

29% 30% achieved TTM

All Rights Reserved

> 10%
<= 20%

> 20%
<= 30%

> 30%
<= 40%

TTM Revenue Growth

> 40%
<= 50%

> 50%

EBITDA Margin

85% with EBITDA margins of 20% or lower

TTM EBITDA Growth

8%

40%

30%

35%
35%
30%

4%

15%
10%

2%
5%
0%

0%
3Q12

4Q12

1Q13

2Q13

3Q13

•

25%
18%

20%

13%

15%
10%

5%
5%
0%
<= 0%

After peaking in 2010, the median EBITDA margin of public
SaaS companies has declined every quarter since.

•

30%

% of Co
ompanies

EBITDA Margin

20%

TTM EBITD
DA Growth

25%
6%

Ther trend continued in 3Q13 as the median EBITDA margin
was 2.1%, down from 3.0% in 2Q13.

26

All Rights Reserved

> 0%
<= 10%

> 10%
<= 20%
TTM EBITDA Margin

> 20%
<= 30%

> 30%

Median Operating Ratios
S&M (% of Revenue)

R&D (% of Revenue)

Median Margin Performance
Gross Profit Margin

G&A (% of Revenue)

70%

35%

Net Income Margin

80%

40%

60%

30%

% Ma
argin

% of Re
evenue

45%

EBITDA Margin

25%
20%
15%

50%
40%
30%

10%

20%

5%

10%

0%

0%
3Q12

4Q12

1Q13

2Q13

3Q12

3Q13

4Q12

1Q13

2Q13

3Q13

•

Increased spending on sales and marketing by public SaaS
companies accounted for much of the decline in median
EBITDA margin.

•

Median gross profit margins for public SaaS companies in
3Q13 were 70.3%, and have remained steady over the past
,
y
p
five quarters.

•

In 3Q13, 39.3% of total revenue was spent on sales &
marketing, relatively unchanged from the 39.7% spent in
3Q12.

•

Stable gross profit margins demonstrate the ability of public
SaaS companies to grow without disproportionally scaling
infrastructure and increasing application delivery costs.

•

R&D spending as a percent of revenue increased to 18.1% in
3Q13, compared to 16.9% in 3Q12.

•

With growth as their primary objective, public SaaS
companies are running close to break even, with net income
in 3Q13 of -4.5%.

27

All Rights Reserved

THE SEG SaaS INDEX: MARKET MULTIPLES
EV/Revenue and EV/EBITDA Multiples
EV/Revenue
41.5x

EV/EBITDA
45%

41.7x

40.0x

40.6x
35.4x

35.0x

35%

31.5x

30.0x
25.0x
20.0x
20 0x
15.0x
10.0x

5.5x

5.0x

4.8x

5.3x

30%
25%
20%
15%
10%

6.5x

5.7x

41%

40%

% of C
Companies

45.0x

EV/Revenue Multiple Distribution

5%

0.0x

5%

8%

11%

11%
5%

0%

11%
5%

3%

0%

3Q12

4Q12

1Q13

2Q13

3Q13

<= 1.0x > 1.0x > 2.0x > 3.0x > 4.0x > 5.0x > 6.0x > 7.0x > 8.0x > 9.0x
<= 2.0x <= 3.0x <= 4.0x <= 5.0x <= 6.0x <= 7.0x <= 8.0x <= 9.0x
EV/Revenue

•

Median EV/Revenue multiples for public SaaS providers
reached a breathtaking 6.5x at the close of 3Q13.
g
Q

•

This marks the first time since 4Q07 that the median
EV/Revenue multiples for public SaaS providers exceeded
6x.

28

Public SaaS providers in 3Q13 continued to trade at a
significant premium relative to their on-premise peers (6.5x
vs. 3.0x).

A class of Tier 1 SaaS providers is emerging within the SaaS
Index, earning premium EV/Revenue multiples from
,
gp
p
investors

•

As testament, a whopping 41% of the companies in the SEG
SaaS Index are trading for 9x TTM revenue or greater

•

These leaders demonstrate high growth and a dominant
position in large markets with proven ability to replace
incumbent on premise providers. Examples include
Salesforce, Workday, NetSuite, etc.

•

•

•

30% of public SaaS providers had median EV/Revenue
multiples between 5x and 9x
9x.

All Rights Reserved

THE SEG SaaS INDEX: MARKET MULTIPLES


16.0x

25.0x

12.0x

Median EV/Revenue

Median EV/Revenue

20.0x

14.2x

14.0x

19.9x

10.0x

15.0x
10.0x

8.0x

6.8x

5.7x
4.0x

5.0x

2.1x

7.3x

8.0x
5.1x

6.0x
4.0x
2.0x

0.0x
0.0x

0.0x

<= 0%

> 0%
<= 10%

> 10%
<= 20%

> 20%
<= 30%

> 30%
<= 40%

> 40%
<= 50%

<= 0%

> 50%

TTM Revenue Growth

> 0%
<= 10%

> 10%
<= 20%

> 20%
<= 30%

> 30%

TTM EBITDA Margin

•

There is a very strong correlation between the median TTM
revenue growth rate and median EV/Revenue multiple of
public SaaS companies.

•

Public SaaS companies growing TTM revenue in excess of
50% achieved a stellar median EV/Revenue multiple of
19.9x.

•

Select companies with TTM growth rates of 50% or higher
include: FireEye (109% TTM revenue growth rate, 38.6x
EV/Revenue); Service-now (84.5%, 17.6x); Workday (77.4%,
33.7x); Tableau Software (71.0%, 22.1x); Textura Corp.
(
(65.0%, 23.2x); Marketo (62.0%, 15.1x), Cornerstone
,
);
(
,
),
OnDemand (60.2%, 17.1x); Ellie Mae (57.2%, 5.7x).

29

4.8x

3.8x

•

There is an inverse correlation between EBITDA margins
and median EV/Revenue multiples
multiples.

•

In the current market, SaaS profitability is penalized, as
investors perceive profitability to be at the expense of
growth, which they deem all important.

•

As proof, public SaaS companies with no profitability
boasted a remarkable 14.2x median EV/Revenue multiple in
3Q13.

All Rights Reserved

THE SEG SaaS INDEX BY PRODUCT CATEGORY
SEG SaaS Index
EV/Revenue

Category

Forward EV/Revenue

TTM Revenue Growth

EBITDA Margin

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

CRM & Marketing

4.7x

3.4x

2.7x

2.7x

4.0x

3.8x

2.4x

2.0x

2.8x

3.4x

33.2%

36.1%

37.2%

26.7%

27.3%

4.4%

3.1%

2.8%

2.2%

3Q13
2.1%

ERP & Supply Chain

5.5x

7.0x

6.6x

7.1x

9.3x

5.3x

5.7x

5.7x

6.7x

7.6x

26.3%

25.3%

31.8%

33.9%

37.7%

6.7%

7.2%

3.2%

0.2%

-0.6%

16.4%

16.0%

15.8%

Vertically Focused

5.7x

4.7x

5.0x

5.0x

5.7x

4.6x

3.9x

4.2x

3.8x

5.2x

32.0%

27.7%

21.6%

21.5%

22.6%

15.3%

14.6%

Workforce Management

8.3x

10.5x

10.7x

8.5x

10.4x

7.3x

7.6x

8.0x

7.4x

8.8x

28.7%

29.1%

23.4%

43.1%

42.2%

-15.0%

-16.2% -17.8% -16.1% -14.4%

5.5x

4.8x

5.3x

5.7x

6.5x

4.9x

4.5x

5.3x

5.3x

6.4x

28.7%

26.8%

25.3%

25.0%

30.0%

6.9%

Median:

6.9%

5.7%

2.3%

2.1%

Currently comprised of 41 public companies, The SEG SaaS Index has critical mass in four distinct
SaaS product categories sufficient to analyze and compare financial performance trends Select
trends.
companies within each SaaS category are included below. See the appendix to this report for the
complete list.
CRM Marketing
& Marketing
ti
CRM & MM kk ti

30

ERP S
Supply Ch
ERP && S l Ch i i
l Chain
Supply Chain

F
d
Vertically Focusedd
Vertically Focused
V Vti ti llll F

All Rights Reserved

M
t
WorkforceM
Management t
W Wkfkf

THE SEG SaaS INDEX BY PRODUCT CATEGORY:

45%
40%
35%
30%
25%
20%
15%
10%
5%
0%


Workf orce
Management

Vertically
Focused


All Rights Reserved

Workf orce
t
Management

Vertically Focused
d

ERP & Supply Chain
P
n

Workf orce
Management

Vertically
Focused

ERP &
Supply Chain

CRM &
Marketing

C
CRM & Marketing
g

20%
0%
(20%)
(
)
(40%)
(60%)
(80%)
(100%)
(120%)

20%
15%
10%
10%
5%
0%
(5%)
(10%)
(15%)
(20%)

31

ERP &
Supply Chain

CRM &
Marketing

Workf orce
M
Management

Vertically
Focused

ERP &
S
Supply Chain

CRM &
Marketing

60%
50%
40%
30%
30%
20%
10%
0%
(10%)
(20%)
(30%)
(40%)

THE SEG SaaS INDEX BY PRODUCT CATEGORY:
MARKET MULTIPLES


4.0x
2.0x

Workforce
t
Management

Vertically
y
Focused
d

ERP &
n
Supply Chain

CRM &
g
Marketing

0.0x

Workf orce
Managemen
nt

6.0x

Vertically
y
Focused
d

8.0x

ERP &
Supply Chain
n

10.0x

CRM &
Marketing
g

80%
70%
60%
50%
40%
30%
20%
10%
0%
(10%)
(20%)

12.0x
12 0

•

Public SaaS companies comprising the Workforce Management category achieved a 10.4x median EV/Revenue multiple, followed
g
g
g y
closely by ERP & Supply Chain (9.3x).

•

The stellar market valuations of these SaaS Workforce Management providers can be attributed to their breakneck TTM revenue
growth (42.2%), albeit, with little or no profitability.

•

Workforce management SaaS providers continued to benefit from a continuing migration from legacy, on-premise solutions to hosted
SaaS solutions.

•

Although ERP & Supply Chain TTM revenue growth was only slightly above the SaaS median, companies within this product
category received premium market multiples because of the massive market potential of hosted ERP & Supply Chain solutions.

32

All Rights Reserved

PUBLIC INTERNET COMPANY FINANCIAL AND
THE SEG INTERNET INDEX

33

All Rights Reserved

PublicSEG INTERNET INDEX Valuations by Product Category
THE Internet Company Market
SEG - Internet: Median Metrics
Measure
3Q12
4Q12
1Q13
EV/Revenue
2.0x
2.2x
2.1x
EV/EBITDA
13.5x
13.3x
13.6x
EV/Earnings
25.1x
22.0x
21.9x
Gross Profit Margin
64.8%
64.9%
65.6%
EBITDA Margin
12.5%
12.7%
12.9%
Net Income Margin
3.9%
5.3%
4.2%
TTM Revenue Growth
24.4%
21.0%
20.1%
$374.2
$387.3
$393.3
TTM EBITDA Growth
21.8%
12.3%
17.8%
($ )
$
$39.5
$
$39.8
$
$37.5
Cash & Eq ($M)
$122.3
$130.4
$142.9
Current Ratio
2.7
2.5
2.3
Debt / Equity Ratio
13.8%
21.0%
19.7%

2Q13
2.3x
15.1x
27.5x
65.4%
12.4%
2.6%
19.3%
$405.8
10.7%
$
$38.2
$154.9
2.4
20.7%

3Q13
2.7x
18.4x
32.5x
65.1%
11.8%
2.3%
16.8%
$427.5
15.6%
$
$43.4
$165.6
2.2
20.6%

• The SEG Internet Index tracks public
companies that primarily offer B2C
solutions over the Internet using a wide
array of pricing models
• The SEG Internet Index is currently
comprised of 92 public Internet
companies*
i *

* See appendix for a complete list of companies in The SEG Internet Index

34

All Rights Reserved

Initial SEG INTERNET INDEX: FINANCIAL PERFORMANCE
THE Public Offerings
Revenue Performance

TTM Revenue Growth
25%

30.0%
30 0%
25.0%
20.0%
15.0%
15 0%
10.0%
5.0%

4Q12

1Q13

2Q13

19%

20%

0.0%
0 0%
3Q12

23%

22%

% of Co
ompanies

$440
$430
$420
$410
$400
$390
$380
$370
$360
$350
$340

TTM Reven
nue Growth

TTM Total
l Revenue



3Q13

•

9%

10%
5%
0%
<= 0%

> 0%
<= 10%

The SEG Internet Index had an impressive number of star
performers, 19% of companies in the index reported TTM revenue
growth greater than 40% in 3Q13.

•

13%

While lower, Q3’s median Internet growth rate remains healthy,
especially considering the median TTM revenue of the SEG Internet
Index is $427.5M, compared to only $163.8M for the SEG SaaS
Index.
Index

•

15%

In 3Q13, the median YoY TTM revenue growth rate of public
companies comprising the SEG Internet Index declined from 19.3%
to 16.8%.

•

16%

Conversely, 22% of companies in the SEG Internet Index posted
negative TTM revenue growth, depressing the median as a whole.

35

All Rights Reserved

> 10%
<= 20%

> 20%
<= 30%

TTM Revenue Growth

> 30%
<= 40%

> 40%

THE SEG INTERNET INDEX: FINANCIAL PERFORMANCE

EBITDA Margin

TTM EBITDA Growth

14%

30%

25%

26%
23%

8%

15%

6%

10%

4%
5%

2%
0%

0%
3Q12

4Q12

1Q13

2Q13

3Q13

•

11%

> 20%
<= 30%

> 30%
<= 40%

10%

5%
0%
<= 0%

> 0%
<= 10%

46% of all public Internet companies posted EBITDA
margins of 10% or lower
lower.

36

11%

10%

The median EBITDA margin decline was partly due to a
greater number of Internet IPOs with stellar revenue growth,
but little, if any, profitability.

•

15%

The median ~12% Internet Index EBITDA margin for 3Q13
is markedly lower than the 18.1% median EBITDA achieved
in 1Q11.

•

20%
20%

Over the past five quarters, public Internet companies
managed to maintain respectable EBITDA margins (
g
p
g
(11.8%),
),
despite their declining revenue growth rates.

•

% of Co
ompanies

20%

10%

TTM EBITD
DA Growth

25%

12%
EBITDA Margin


All Rights Reserved

> 10%
<= 20%

TTM EBITDA Margin

> 40%

THE SEG INTERNET INDEX: FINANCIAL PERFORMANCE
Median Operating Ratios

S&M (% of Revenue)

R&D (% of Revenue)

Median Margin Performance

Gross Profit Margin

G&A (% of Revenue)

Net Income Margin

70%

25%

60%

20%

50%
15%

% Ma
argin

% of Re
evenue

EBITDA Margin

10%

40%
30%
20%

5%

10%
0%

0%
3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13

•

In 3Q13, companies comprising the SEG Internet Index spent 23.2% of total revenue on sales and marketing (S&M), 11.5% on
research development (
p
(R&D), and 11.3% on g
),
general and administrative.

•

The median R&D spend as a percent of total revenue was the lowest among our three tracking indices.

•

Despite TTM revenue growth declines, public Internet companies kept their cost structures in line, resulting in a median TTM
EBITDA margin of 11.8% in 3Q13.

37

All Rights Reserved

THE SEG INTERNET INDEX: MARKET MULTIPLES
Median EV/Revenue and EV/EBITDA Multiples
EV/Revenue

EV/EBITDA
25%

23%

18.4x
18 4x
20%

15.1x
13.5x

2.0x

13.3x

2.2x

13.6x

2.1x

% of Co
ompanies

20.0x
18.0x
16.0x
14.0x
12.0x
10.0x
10 0x
8.0x
6.0x
4.0x
2.0x
0.0x
0 0x

EV/Revenue Multiple Distribution

2.7x

2.3x

17%
15%

14%

15%
10%

7%
5%

8%
5%
3%

3%

4%

0%

3Q12

4Q12

1Q13

2Q13

3Q13

<= 1.0x > 1.0x > 2.0x > 3.0x > 4.0x > 5.0x > 6.0x > 7.0x > 8.0x >= 9.0x
<= 2.0x <= 3.0x <= 4.0x <= 5.0x <= 6.0x <= 7.0x <= 8.0x <= 9.0x
EV/Revenue

•

In 3Q13, the median EV/Revenue multiple of the SEG Internet Index ticked up slightly to 2.7x.

•

The EV/Revenue market multiples of public internet providers vary dramatically with the largest concentration at 2 0x or below (40%
dramatically,
2.0x
of our Internet Index).

•

However, a significant minority – mostly the headline grabbers – are valued highly by the public markets. 27% of public Internet
companies closed 3Q13 with EV/Revenue multiples of 6.0x or higher.

•

Among the Internet companies boosting the highest EV/Revenue market multiples were a large number of relatively recent IPO’s that
IPO s
are capturing a significant share of online advertising dollars; Examples include LinkedIn (20.3x), Zillow (19.5x), Qihoo (18.3x), and
Yelp (18.2x).

38

All Rights Reserved

THE SEG INTERNET INDEX: MARKET MULTIPLES

10.0x


8.0x

9.1x

7.0x

8.0x

Median E
EV/Revenue

Median E
EV/Revenue

9.0x
7.0x
5.3x

6.0x
5.0x
4.0x

3.3x

3.0x
2.0x

7.5x

1.2x

1.7x

2.0x

6.0x
4.6x

5.0x

4.9x

4.0x
3.0x

2.7x
1.6x

2.0x

1.0x

> 0%
<= 10%

> 10%
<= 20%

1.0x

0.0x
0 0x

1.7x

0.0x
0 0x

<= 0%

> 0%
<= 10%

> 10%
<= 20%

> 20%
<= 30%

> 30%
<= 40%

<= 0%

> 40%

> 30%
<= 40%

> 40%

TTM EBITDA Margin

TTM Revenue Growth

•

Public Internet company valuations are being driven by TTM
p y
g
y
revenue growth, with dramatic differences between new,
rapidly growing social and ad-tech providers and their slower
growing incumbent counterparts (e.g., Facebook vs. Yahoo).

•

Public Internet companies with TTM revenue growth of 40%
or higher were rewarded with median EV/Revenue multiples
markedly greater than their slower growing peers.

39

> 20%
<= 30%

•

With few exceptions, and in stark contrast to SaaS
companies, many of the most profitable public Internet
companies also reported stellar TTM revenue growth. Among
them were YY, Inc., Tree.com, Trulia, Youku, LinkedIn and
Zillow.

•

Unlike The SEG SaaS Index where TTM EBITDA margins
Index,
bore little relationship to median EV/Revenue multiples,
investors in public Internet companies kept a keen eye on
margins, and rewarded strong performers with significantly
higher market multiples.

All Rights Reserved

THE SEG INTERNET INDEX BY PRODUCT CATEGORY
SEG Internet Index
EV/Revenue

Category

EV/EBITDA

TTM Revenue Growth

EBITDA Margin

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13

Ad Tech & Lead Generation

1.8x

2.2x

2.0x

2.5x

2.5x

13.3x

12.0x

14.9x

14.9x

22.1x

33.4%

31.9%

28.8%

26.8%

17.9%

12.5%

12.6%

12.9%

12.6%

11.3%

Commerce

0.9x

1.2x

0.9x

0.9x

1.1x

14.9x

13.6x

10.5x

15.1x

15.6x

14.2%

15.1%

17.5%

17.7%

15.4%

8.4%

8.4%

7.6%

7.5%

6.7%

Content & Media

1.3x

1.4x

1.6x

2.3x

2.7x

10.8x

10.9x

15.4x

13.8x

20.8x

12.3%

10.5%

12.6%

12.1%

14.1%

14.1%

14.1%

14.8%

15.5%

15.9%

Gaming

2.1x
2 1x

2.4x
2 4x

2.7x
2 7x

2.7x
2 7x

2.8x
2 8x

3.4x
3 4x

4.3x
4 3x

5.8x
5 8x

5.9x
5 9x

7.7x
7 7x

32.0%
32 0%

24.8%
24 8%

21.9%
21 9%

21.9%
21 9%

19.8%
19 8%

43.4%
43 4%

38.6%
38 6%

36.3%
36 3%

38.6%
38 6%

35.4%
35 4%

Infrastructure

1.1x

1.0x

1.7x

1.6x

1.4x

14.2x

10.4x

11.9x

13.6x

14.3x

11.8%

10.9%

9.2%

8.8%

1.7%

8.1%

7.5%

8.0%

7.2%

7.1%

Services

3.1x

3.3x

3.5x

3.4x

4.3x

13.3x

15.1x

14.2x

19.7x

23.9x

46.7%

32.7%

41.8%

40.4%

38.1%

9.6%

9.4%

9.6%

7.1%

5.6%

Social

12.1x

9.0x

9.3x

10.0x

14.0x

34.3x

39.6x

38.9x

37.1x

38.6x

57.3%

50.9%

49.3%

47.2%

41.4%

8.2%

12.9%

14.7%

16.8%

17.0%

Travel

2.4x
Median

2.7x

2.8x

3.4x

4.6x

13.5x

15.7x

16.2x

18.2x

21.2x

21.2%

20.2%

19.3%

20.0%

20.8%

21.9%

19.6%

18.1%

17.9%

16.8%

2.0x

2.2x

2.1x

2.3x

2.7x

13.5x

13.3x

13.6x

15.1x

18.4x

24.4%

21.0%

20.1%

19.3%

16.8%

12.5%

12.7%

12.9%

12.4%

11.8%

The SEG Internet Index is segmented into eight product categories. Select companies within each
Internet product category are included below. See the appendix for the complete list of companies
within each product category.
Ad Tech & Lead Gen
Ad Tech & Lead Gen

Infrastructure

40

Commerce
Commerce

Services

Content & Media
Content & Media

Gaming
Gaming

Social

Travel

All Rights Reserved

THE SEG INTERNET INDEX BY PRODUCT CATEGORY:

40%
20%
0%
45%
40%
40%
35%
30%
25%
20%
15%
10%
5%
0%

(20%)
(40%)
(60%)
(80%)


Trav
vel

cial
Soc

Servic es

Inf rastructu
ure

Gamin
ng


All Rights Reserved

Travel

Social

Services

Inf rastructure

Gaming

Co
ontent & Media

Commerce

Travel

Social

Services

I
Inf rastructure

Gaming

Content &
Media

Commerce

Ad Tech &
Lead
Generation

Ad Tech &
Le Generation
ead

120%
100%
80%
60%
60%
40%
20%
0%
(20%)
(40%)
(60%)

40%
35%
30%
25%
20%
15%
10%
5%
0%

41

Content & Med
dia

Commer
rce

Ad Tech &
Lead Generatio
on

Travel

Social
l

Services
s

Inf rastructure
e

Gaming

Content &
Media

Commerce

Ad Tech &
Lead
Generation

(100%)

THE SEG INTERNET INDEX BY PRODUCT CATEGORY:
MARKET MULTIPLES


16.0x
14.0x

Travel

Social

Services

0%

Inf rastructure

0.0x

Gaming

20%

Content & Media

2.0x

Commerce

40%

Ad Tech &
Lead Generation

4.0x

Travel

60%

Social

6.0x
60

Services

80%

Inf rastructure

8.0x

Gaming

100%

Content & Media

10.0x

Commerce

120%

Ad Tech &
Lead Generation

12.0x

•

Public Internet Companies comprising the social product category closed Q3 with the highest median EV/Revenue multiple among
the eight Internet categories we track. The 14.0x median market valuation was 204% higher than the next closest product category,
Travel (4.6x).

•

Social solutions Facebook, LinkedIn, Yelp, etc., continued to expand their online footprints, and investors rewarded them accordingly.
Social Market Multiples also reflected significant YoY EBITDA margin improvement, as category members demonstrated a greater
ability to monetize their large user bases with advertising, subscriptions, more mobile offerings and other value added services.

•

The Commerce product category lagged all other product categories, with a 1.1x EV/Revenue multiple, a tepid TTM revenue growth
of 15.4%, and a lackluster 6.7% EBITDA margin. Amazon, one of the most notable commerce companies, is aggressively trying to
diversify its content offerings and expand its hardware offerings as a way of differentiating from competitors and driving more spend
through its platform.

42

All Rights Reserved

SOFTWARE INDUSTRY M&A MARKET UPDATE

43

All Rights Reserved

SOFTWARE/SaaS M&A DEAL VOLUME AND SPENDING
U.S. Software Mergers & Acquisitions Activity

$45.0

$13.1

$15.8

250
$12.6

$12.3

200

$9.5

$10

150
100

$5

50
0

$0
3Q10

*3Q13 Projected

4Q10

1Q11

2Q11

3Q11

4Q11
Deals

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

$35.0

$37
$31

$36

$39

$33

$36 $34 $37

$30.0
$25.0
$20.0
$15.0
$10.0
$5.0
$0.0

3Q1
13

$15

$15.8

$40.0

2Q1
13

N
Number of Deals

$12.7

$16.3
Value (BIllions)

300

$20

1Q1
13

$18.7

350

402

4Q1
12

389

$42 $41 $41 $42

3Q1
12

$17.9

416

406

$21.3
$21 3

$40

2Q1
12

435

1Q1
12

$23.4

$23.1

4Q1
11

432

3Q1
11

400

430

2Q1
11

426

1Q1
11

407

421

454

4Q1
10

450

$25
456

3Q1
10

454

ge Deal Value (Millio
ons)
TTM Averag

500

Median On-Premise Software EV/Revenue Exit Multiples

Value

•

Software M&A deal volume in Q3 hovered, once again, at 400 transactions, a level that’s historically consistent with an active M&A
market.

•

Software M&A spending aggregated $16.3 billion in 3Q13, slightly lower than 2Q13’s $18.7 billion, but higher than the preceeding three
calendar quarters.

•

There were nine mega deals (EV > $500M) in 3Q13 across all delivery models (On-premise/SaaS/Internet), one more than in the prior
quarter, and a marked increase from 1Q13’s single large deal. Notable mega deals in the third quarter included: Vitera Healthcare
Solutions acquisition of Greenway Medical Technologies ($632M EV, 4.7x EV/Revenue multiple); Vista Equity Partner’s acquisition of
EV 4 7x
Partner s
The Active Network ($942M, 2.1x); Davis+Henderson’s acquisition of Harland Financial Solutions ($1.6B, 5.8x); Cisco’s acquisition of
Sourcefire ($2.2B, 8.9x); and KKR’s acquisition of Mitchell International.

•

The average software M&A purchase price rose slightly in 3Q13 to $37M, after retreating the prior three quarters.

44

All Rights Reserved

SOFTWARE M&A EXIT MULTIPLES
Median Exit Multiples
EV/Revenue

14.0x

EV/EBITDA

12.7x
11.2x

11.8x

30.0%
11.6x

8.0x
6.0x
4.0x
2.0x

23.9%

25.0%

10.0x

2.3x

28.3%

11.5x

% of Deals ‐ 3Q13 TTM

12.0x

Median EV/Revenue Exit Multiple Distribution

1.8x

1.6x

2.3x

1.8x

19.6%

20.0%

16.3%

15.0%

12.0%

10.0%
5.0%
0.0%
<= 1.0x

0.0x
3Q12

4Q12

1Q13

2Q13

> 1.0x      &
<= 2.0x
20

> 2.0x      &
<= 3.0x
30

> 3.0x      &
<= 4.0x
40

> 4.0x

TTM Revenue Exit Multiple Bins

3Q13

•

45

TTM revenue exit multiples closed 3Q13 at 2.3x, a marked
increase over Q2’s 1.8x multiple and the highest since
Q2 s
3Q12’s 2.3x multiple

•

On a TTM basis, 52% of all on-premise software targets
were acquired for less than 2.0x TTM revenues in 3Q13.
e e acqu ed o ess t a
0
e e ues 3Q 3

•

Targets with 3.0x or higher exit multiples, primarily focused
on high-growth software categories, such as big data,
network infrastructure and security.

•

•

Among the more noteworthy on-premise acquisitions in
g
y
3Q13: Cisco’s acquisition of Sourcefire ($2.2B, 8.9x rev.), a
provider of next generation cyber security applications

TTM EBITDA exit multiples remained relatively steady in
3Q13, closing at 11.5x.

All Rights Reserved

SOFTWARE M&A: BY OWNERSHIP STRUCTURE AND SIZE
by Ownership Structure

by Size

Public Sellers
1.8x Median Multiple

33%

67%

Private Sellers

Private Sellers

37%

63%

Public Sellers

•

In Q3, as in quarters past, large (greater than $200 million in
revenue), public buyers dug deeper.

•

Public buyers in 3Q13 paid a median 2.4x TTM revenue for
their targets in 3Q13, compared to a median of 1.2x paid by
private buyers.

46

•

Public buyers with revenue greater than $200 million paid a
median 2.7x TTM revenue for their targets in 3Q13,
compared to only 1.5x paid by smaller public buyers.

•

Whether public or private, buyers with revenue greater than
$200 million paid the highest multiples for a target with less
than $20 million revenue over the past twelve months.

All Rights Reserved

SOFTWARE M&A: BY VERTICAL AND HORIZONTAL
MARKETS
Horizontal & Vertical M&A Median EV/Revenue Exit
Multiples

Horizontal & Vertical M&A Volume
100%
80%
60%

63%

58%

67%

64%

2.7x
2.2x

2.0x

40%

1.4x
37%

42%

33%

36%

4Q12

1Q13

2Q13

3Q13

1.3x

1.8x

1.9x

1.6x

2.0x

33%

3Q12

20%

3.0x

67%

0%
Horizontal

3Q12

4Q12

Vertical

1Q13
Vertical

2Q13

3Q13

Horizontal

•

Horizontal software providers garnered the lion’s share of M&A transactions in 3Q13, as they have for the past five quarters.

•

TTM revenue exit multiples for horizontal software companies jumped from 1.6x in 2Q13 to 2.0x in 3Q13, after having fallen in
each of the previous three quarters
quarters.

•

Noteworthy horizontal deals in Q3 included Kofax’s acquisition of big data integration player Kapow Software for $47.5 million
(3.0x revenue), and Cisco’ acquisition of cyber security software provider Sourcefire for $2.2 billion (8.9x revenue).

•

The median TTM revenue exit multiple for vertical software providers improved significantly over the past two quarters, closing
3Q13 at 2 7x
2.7x.

•

Select Q3 vertical deals included IRESS Limited’s acquisition of financial services software provider Avelo for $320.4 million (3.8x
revenue); Sepura PLC’s acquisition of public systems command and control software provider Portalify for $9.3 million (7.0x
revenue); and Yotta Limited’s acquisition of public sector software provider Mayrise for $9.1 million (3.1x revenue)

47

All Rights Reserved

SOFTWARE M&A BY PRODUCT CATEGORY
Billing & Service
Provisioning
0.3%
Accounting & Finance
1.6%

Retail
1.3%

Utilities
0.9%

Vert
ticals

Real Estate
2.2%
Public Sector
1.9%
Other Verticals
6.3%

Content & Document CRM, Marketing & Sales Data Mgmt & Integration
2.5%
Mgmt
2.8%
BI, Risk & Compliance 2.5%
5.3%
Dev. Tools & IT Asset
eCommerce
Mgmt
0.3%
2.2%
Engineering, PLM & CAD
3.8%
Middleware
0.3%
ERP

The Mobile product category accounted for
20.7% of all software M&A transactions in
the third quarter, making it the most active
M&A product category.
p
g y

•

Other active M&A categories in the third
quarter included Healthcare (6.3%),
Financial Services (5.3%) and Security
(4.4%).

•

BI, Risk & Compliance accounted for 5.3%
of deals in 3Q13, up from 2.5% in 2Q13,
2.3% in 1Q13 and 2.5% for all of 2012

•

The heightened deal activity was largely
attributable to big data needs and continued
demand for advanced real time analytics
(ie: Software AG’s acquisition of Jackbe,
Adello Group’s acquisition of Hstreaming,
Nice Systems’ acquisition of Causata,
FoundationDB s
FoundationDB’s acquisition of Akiban
Technologies)

1.9%
Entertainment
3.1%
HR & Workforce Mgmt
1.9%
Messaging, Conferencing &
Communications
3.4%

Non‐Profit
0.9%
Manufacturing
4.4%
Insurance
0.6%

Multimedia, Graphics &
Communications
2.2%
Network Performance
Mgmt
1.6%
1 6%

Healthcare
6.3%
Financial Services
5.3%

Security
4.4%

Education
1.9%
Automotive
1.3%

48

•

Systems Mgmt
2.5%
Mobile
20.7%

Supply Chain Mgmt &
Logistics
3.4%

All Rights Reserved

SOFTWARE M&A BY PRODUCT CATEGORY
Median EV/Revenue Exit Multiples by Software Product Category
3.0x

2.7x
2.4x

2.3x
2 3x

2.2x
2 2x
1.8x

1.8x

1.5x

Financial Services

Education

Supply Chain
Mgm & Logistics
mt

M
Manufacturing

O
Other Verticals

BI, Risk &
Compliance

Healthcare

Security

Data Mgmt &
Integration

1.2x

•

Among the 32 on-premise software product categories we track, nine had both sufficient deal activity and deal data to ascertain a
TTM revenue multiple in 3Q13
3Q13.

•

Among the nine product categories, Data Mgmt. & Integration garnered the highest median TTM revenue multiple (3.0x) in Q3.
Buyers in this product category are paying up for best-of-breed solutions that can improve analysis and management of big data.
Examples include Informatica’s 4Q12 acquisition of Heiler Software ($85 million, 3.7x revenue), and Kofax’s 3Q13 acquisition of
Kapow Software ($48 million, 3.0x revenue)

•

The Security software category posted a strong 2.7x median EV/Revenue exit multiple in 3Q13. Select security deals included
Cisco’s acquisition of Sourcefire in Q3 ($2.2 billion, 8.9x revenue); Tyco’s 2Q13’s acquisition of Exacq Technologies ($150
million, 2.7x revenue); and McAfee’s acquisition of Stonesoft ($375 million, 7.0x revenue) in 2Q13.

49

All Rights Reserved

SaaS M&A: DEAL VOLUME AND EXIT MULTIPLES
SaaS M&A Volume
SaaS as % of Software

# of SaaS M
M&A Deals

120

30%
94 94

100
80

68 65

60
40

39

39
26

45 48

104
86

97

25%
20%

59

15%
10%

20

5%

0

SaaS M&A Deal
ls as a % of Total
Software M
M&A Deals

SaaS M&A Deals

Median SaaS EV/Revenue Exit Multiples

4.6x
4.1x
3.9x

3Q12

4Q12

4.0x

4.0x

1Q13

2Q13

3Q13

0%

•

There were 97 SaaS M&A transactions in 3Q13 Year to date there have been 287 SaaS M&A transactions, suggesting 2013’s
3Q13.
date,
transactions
2013 s
year end tally should far outpace 2012’s record breaking total of 311 and SEG’s 2013 projection of 344 by some 40 deals.

•

The median TTM EV/Revenue exit multiple of SaaS transactions rose sharply in 3Q13 after holding steady over the past year.
The surge was partly due to a number of lower multiple transactions in 3Q12 falling out of the TTM analysis.

•

The median SaaS exit multiple was 100% greater than the median on-premise exit multiple in 3Q13 (4.6x vs 2.3x).
on premise

50

All Rights Reserved

SaaS M&A BY PRODUCT CATEGORY
Accounting & Finance
4%

Billing & Service
Provisioning
1%

BI, Risk & Compliance
3%

Content & Document
Mgmt
4%
CRM, Marketing & Sales
13%

•

CRM, Marketing & Sales was the most
active SaaS product category,
accounting for 13.0% of all M&A
transactions in the third quarter
quarter.

•

Buyers are seeking targets that can help
garner a greater share of IT capital in
spending on online marketing
technology. According to Gartner, by
2017 the CMO will purchase more IT
than the CIO.

•

After two years of comprising almost
20% of all SaaS transactions, the HR &
Workforce Mgmt product category had
its third consecutive lackluster quarter,
claiming only 2% of SaaS transactions
in 3Q13. After a three-year period of
consolidation by the large HR software
providers,
providers the M&A window for many
smaller HR SaaS providers is rapidly
closing.

•

The Systems Management (7%) and
Supply Chain (6%) product categories
also showed strength in 3Q13. Both
categories are benefiting from wider
adoption of SaaS deployed solutions,
which should persist a while longer, as
large public legacy vendors continue to
play catch-up.

Retail
4%
Real Estate
4%

Data Mgmt & Integration
1%

Other Verticals
5%

Dev. Tools & IT Asset
Mgmt
1%

V
Verticals

Manufacturing
M
f t i
2%

eCommerce
3%

Insurance
1%

Engineering, PLM & CAD
3%

Healthcare
7%

ERP
4%

Financial Services
2%

HR & Workforce Mgmt
2%

Education
Ed ti
3%

Messaging, Conferencing &
Communications
3%
Multimedia, Graphics &
Communications
6%

Automotive
7%
Supply Chain Mgmt &
S
l Ch i M t &
Logistics
6%

51

Systems Mgmt
S
7%
Security
1%

Network Performance
Mgmt
1%

All Rights Reserved

3Q13 SaaS M&A TRANSACTIONS
Date
09/27/2013
09/24/2013
09/23/2013
09/20/2013
09/20/2013
09/20/2013
09/20/2013
09/19/2013
09/18/2013
09/17/2013
09/17/2013
09/16/2013
09/16/2013
09/16/2013
09/16/2013
09/16/2013
09/12/2013
09/10/2013
09/10/2013
09/09/2013
09/09/2013
09/09/2013
09/09/2013
09/06/2013
09/05/2013
09/05/2013
09/05/2013
09/05/2013
09/04/2013
09/03/2013
09/03/2013
09/03/2013
09/03/2013
08/30/2013
08/30/2013

Buyer

Seller

Columbus A/S (CPSE:COLUM)
Softw are Paradigms International, Inc.
Vitera Healthcare Solutions, LLC
AmeriCommerce, L.P.
Sucuri Inc
Inc.
Xchanging Inc.
Blue-Grace Logistics LLC
Mindshare Technologies, Inc.
Amber Road, Inc.
BasWare Oyj (HLSE:BAS1V)
Solera Holdings Inc (NYSE:SLH)
Inc.
Stratatel Ltd. (ASX:STE)
Scivantage, Inc.
Wow zaTV LLC
eFolder, Inc.
PCSYS A/S
Plan.Net
Plan Net Campaign Hamburg GmbH & Co KG
Co.
PTC Inc. (NasdaqGS:PMTC)
Origo Netw orks, Inc.
Wolters Kluw er Corporate Legal Services
Desire2Learn Incorporated
ERP Guru, Inc.
Confluence Technologies Inc
Technologies, Inc.
Enghouse Systems Limited (TSX:ESL)
Summit Garnishee Solutions (Pty) Limited
Charles Taylor plc (LSE:CTR)
JAK, Ltd.
FactSet Research Systems Inc. (NYSE:FDS)
Answ ers Corporation
To The New
Eventbrite, Inc.
Arbor Netw orks, Inc.
Cultura Technologies Inc.
Digium, Inc.
SciQuest, Inc
SciQuest Inc. (NasdaqGS:SQI)

Columbus Norw ay AS
Shiloh Technologies, LLC
Greenw ay Medical Technologies, Inc.
Americart LLC
Unmask Parasites
MarketMaker4*
U.S. Transportation Consultants, Inc.
Empathica, Inc.
EasyCargo Inc.
BravoSolution SpA
Servicios Informaticos Serinfo S.A
SA
JCurve Solutions Pty Ltd
Portfolio Director, Inc.
Camfoo GmbH
Anchor Box LLC
IBS Systems A/S
Webfact GmbH
NetIDEAS, Inc.
Standing Cloud, Inc.
CitizenHaw k, Inc.
Know illage, Inc.
EnabledSuccess Inc.
Data Agent LLC
Safeharbor Know ledge Solutions
Business Connexion Group, Q LINK
Charles Taylor Know ledgeCenter
LabMentors Corp.
Revere Data LLC
Easy2 Technologies Inc
Technologies, Inc.
ThoughtBuzz Pte Ltd
South Interactive S.A.
Packetloop Pty Limited
E-Markets, Inc.
Digium Cloud Services, LLC
CombineNet, Inc
CombineNet Inc.

*Revenue estimate

52

All Rights Reserved

Enterprise
Value (m m )

TTM Rev.
Rev
(m m )

EV/Rev

$632.4
$22.0
$4.4
$18.4
$11.1
$0.2
$15.4
$3.9
$43.1
$43 1

$134.8
$5.5
$4.2
$12.0
$12 0

4.7x
4.0x
2.6x
3.6x
3 6x

3Q13 SaaS M&A TRANSACTIONS (CON’T)
Date
08/28/2013
08/28/2013
08/27/2013
08/26/2013
08/23/2013
08/19/2013
08/19/2013
08/19/2013
08/18/2013
08/16/2013
08/16/2013
08/15/2013
08/15/2013
08/12/2013
08/10/2013
08/08/2013
08/08/2013
08/07/2013
08/07/2013
08/07/2013
08/06/2013
08/06/2013
08/06/2013
08/06/2013
08/02/2013
08/01/2013
07/31/2013
07/31/2013
07/31/2013
07/31/2013
07/31/2013
07/28/2013
07/24/2013
07/24/2013
07/24/2013

53

Buyer

Seller

McKinsey & Company, Inc.
Fax87.com
Authenticom, Inc.
Vista Equity Partners
Verisae, Inc.
The Reynolds and Reynolds Company
Altisource Portfolio Solutions S.A. (NasdaqGS:ASPS)
Darw in Strategic Limited, Investment Arm
Open Text Corporation (NasdaqGS:OTEX)
Welsh, Carson,
Welsh Carson Anderson & Stow e
LookSmart, Ltd. (NasdaqCM:LOOK)
International Business Machines Corporation (NYSE:IBM)
Xtari, LLC
Transport I.T. Solutions Private Limited
McGregor BFA (Pty) Ltd.
Proofpoint, Inc
Proofpoint Inc. (NasdaqGM:PFPT)
LexisNexis Risk Solutions, Inc.
ALL-STATE International, Inc.
MicroD, Inc.
Intuit Inc. (NasdaqGS:INTU)
Market Track, LLC
3D Systems Corp (NYSE:DDD)
Corp.
Interactive Leisure Systems, Inc. (OTCPK:IALS)
Angie's List, Inc. (NasdaqGM:ANGI)
HgCapital; HgCapital Trust plc (LSE:HGT)
Kaplan, Inc.
HealthTech Solutions Group LLC
Group,
Guar Global Limited (OTCPK:GGBL)
Virtual Atmosphere Ltd.
Cloud Bees, Inc.
HotelPlanner.com
LightSpeed Retail Inc
Inc.

Lixto Softw are GmbH
eQtickets (Pty) Ltd
Wired Fax, Inc.
RyanTech, Inc., Auto.Tech. Portfolio
Omnitracs, Inc
Omnitracs Inc.
FM Solutions LLC
iMakeNew s, Inc.
Equator, LLC
FTG Finance Services Limited
Cordys B.V.
Alert Logic Inc
Logic, Inc.
Syncapse Corp., Key Assets
Trusteer, Inc.
RhinoSEO
Four Soft USA, Inc.
I-Net Bridge (Pty) Ltd.
Armorize Technologies Inc.
Inc
WorldCompliance, Inc.
Vizibility Inc.
Internet Databases Corporation
GoodApril, Inc.
Dynamite Data LLC
VisPow er Technology Inc
Technology, Inc.
Travel Time Technologies, Inc.
SmartHabitat, Inc.
Tracer Management Systems Ltd.
e-conomic international a/s
Grockit Inc., Test Prep Assets
Gaffey and Associates, Inc.
Associates Inc
Primal Parking Ltd
Guar Global Ltd.
YCD Atmosphere
FoxWeave
Meetings.com
MerchantOS

All Rights Reserved

Enterprise
Value (m m )

TTM Rev.
Rev
(m m )

EV/Rev

$0.5
$800.0
$800 0
$150.0
$33.0
$3.0
$0.3
$12.7
$25.0
$25 0
$20.0
$2.7
$120.6
$2.8
-

-

-

3Q13 SaaS M&A TRANSACTIONS (CON’T)
Date
07/23/2013
07/23/2013
07/19/2013
07/18/2013
07/17/2013
07/16/2013
07/15/2013
07/15/2013
07/12/2013
07/11/2013
07/11/2013
07/10/2013
07/10/2013
07/10/2013
07/09/2013
07/09/2013
07/08/2013
07/07/2013
07/04/2013
07/03/2013
07/03/2013
07/02/2013
07/02/2013
07/01/2013
07/01/2013
07/01/2013
07/01/2013

54

Buyer

Seller

To The New
Aimia Inc. (TSX:AIM)
Proofpoint, Inc. (NasdaqGM:PFPT)
Ipreo Holdings LLC
Cineplex Inc. (TSX:CGX)
Concur Technologies, Inc. (NasdaqGS:CNQR)
Intuit Singapore Pte. Limited
Pin Payments
Panasonic Europe Ltd.
Imprezzio Inc
Inc.
EMC Corporation (NYSE:EMC)
Boost Holding AG
Garantia Data Ltd.
Tom's Planner N.V.
Idera, Inc.
Idera Inc
Bandzoogle Inc.
PropertyIQ NZ Ltd
All for One Steeb AG (XTRA:A1OS)
Scottish Equity Partners LLP; Investec plc (LSE:INVP)
Yardi Systems, Inc.
ABS Capital Partners; Persimmon Capital Partners
Thistle Insurance Services Limited
ServiceNow , Inc. (NYSE:NOW)
ClearSlide, Inc.
Thoma Bravo, LLC
Mentorix ApS

Techsailor Group Pte Ltd.
Smart Button Associates, Inc.
Abaca Technology Corporation
Discovery Data
Cineplex Digital Netw orks
GDSX, Ltd.
Fifo Pty Ltd
Spreedly, Inc., US Tech. Assets
Cameramanager B.V.
Racing Snail Inc
Snail, Inc.
Scaleio, Inc.
Xsmart AG
MyRedis
SaaSMAX Corp.
Gantto Inc.
CopperEgg Corporation
Onesheet, LLC
Terralink International Limited
WEBMAXX GmbH
Purepromoter Limited
Pierce-Eislen, Inc.
IgnitionOne, Inc.
IgnitionOne Inc
Risk Management Support Ltd.
Mirror42 B.V.
Crunched
Digital Insight Corporation
Scoll Methods Ltd., Training Division

All Rights Reserved

Enterprise
Value (m m )

TTM Rev.
(m m )

$18.0
$2.5
$112.3
$0.0
$1,025.0
-

$24.9
-

EV/Rev
4.5x
3.4x
-

INTERNET M&A: DEAL VOLUME AND EXIT MULTIPLES
Internet M&A Volume

Median Internet EV/Revenue Exit Multiples

263
231

222

Numbe of Deals
er

185

204

1.9x

3Q12

4Q12

1Q13

2Q13

3Q13

1.9x

1.9x

1.9x

3Q12

4Q12

1Q13

2Q13

1.9x

3Q13

•

In 3Q13, there were 231 Internet M&A transactions, the second consecutive quarter of marked improvement over 1Q13, but still
well below 2012 deal levels.

•

Internet M&A remained highly volatile, in large part due to shifting marketing strategies, evolving business models, and constant
changes in the competitive landscape.

•

In early 2012, a large number of Internet targets exited amidst the hype of the pending Facebook IPO (5/2012), creating a spike
in
i M&A volume. Aft th F
l
After the Facebook IPO d b l I t
b k
debacle, Internet i
t investors and b
t
d buyers alike b
lik became more cautious and circumspect,
ti
d i
t
and M&A volume declined markedly, plunging to 185 transactions in 1Q13, down from 273 transactions in 2Q12.

•

Internet median TTM EV/Revenue exit multiples have held steady, finishing 3Q13 at 1.9x. This is an M&A world of haves and
have nots, with wide disparities in exit multiples.

55

All Rights Reserved

INTERNET M&A: BY PRODUCT CATEGORY
TTM M&A Volume by Product Category

M&A Volume by Quarter

8.2%

Ad‐Tech & Lead Gen

16.9%
36.8%

Commerce
Content & Media
Gaming

3.5%

Category
Ad-Tech & Lead Gen
Commerce
Content & Media
Gaming
Infrastructure
I f
t t
Social Tech
Total

3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013
85
57
58
60
85
40
41
34
39
44
52
55
42
34
36
13
12
7
11
8
41
27
24
41
39
32
30
20
19
19
263
222
185
204
231

Infrastructure
Social Tech

15.6%
19.0%

•

Internet ad-tech continued to remain to most active internet M&A category in 3Q13 accounting for over 1/3 of all sector
3Q13,
transactions

•

Following a wave of social technology deals in 2011/2012, social tech acquisition activity has significantly tapered off, closing
each of the last two quarters at 19 acquisitions.

•

After a respectable 2Q12 showing with 25 M&A transactions, the Internet Gaming M&A has been largely dormant over the past
four quarters, averaging less than ten transactions per quarter. The product category has been decimated by the emergence of
mobile gaming, (ie. Zynga’s recent public stock market performance).

56

All Rights Reserved

THE SEG SOFTWARE INDEX COMPANIES
Company
C

Ticker
Ti k

Amdocs Limited
AsiaInfo Holdings, Inc.
CSG Systems International, Inc.
Evolving Systems, Inc.
MIND C T I Ltd
C.T.I. Ltd.
NeuStar, Inc
Redknee Solutions
Synchronoss Technologies, Inc.
Actuate Corporation
MicroStrategy Incorporated
Pegasystems Inc
Inc.
Progress Software Corporation
PROS Holdings
Qlik Technologies
Teradata
Verisk
Actuate Corporation
p
Adobe Systems Incorporated
BSQUARE Corporation
Compuware Corporation
Magic Software Enterprises Ltd.
Microsoft Corporation
Oracle Corporation
Progress Software Corporation
Red Hat, Inc.
Software AG
ANSYS, Inc.
Autodesk, Inc.
Cadence Design Systems, Inc
Cimatron Ltd
Ltd.
Dassault Systèmes
GSE Systems Inc.
Mentor Graphics Corp
Parametric Technology Corporation
PDF Solutions Inc
Stratasys, Inc.
Stratasys Inc
Synopsys Inc

58

DOX
ASIA
CSGS
EVOL
MNDO
NSR
TSX:RKN
SNCR
BIRT
MSTR
PEGA
PRGS
PRO
QLIK
NYSE:TDC
VRSK
BIRT
ADBE
BSQR
CPWR
MGIC
MSFT
ORCL
PRGS
RHT
XTRA:SOW
ANSS
ADSK
CDNS
CIMT
DSY
GVP
MENT
PMTC
PDFS
SSYS
SNPS

Product Category
P d tC t
p
Engineering & PLM
Engineering & PLM
Engineering & PLM
Engineering & PLM
Engineering & PLM
Engineering & PLM
Engineering & PLM
Engineering & PLM
Engineering & PLM
Engineering & PLM
Engineering & PLM

All Rights Reserved

THE SEG SOFTWARE INDEX COMPANIES (CON’T)
Company
C

Ticker
Ti k

American Software, Inc.
Oracle Corporation
QAD Inc.
Sage Group plc
SAP AG
Unit 4
ACI Worldwide, Inc.
Bottomline Technologies
DST Systems, Inc.
Evertec
Fair Isaac Corporation
Fiserv
Intuit Inc
Model N, Inc
NetSol Technologies Inc.
Sage Group plc
Qiwi plc
Activision Blizzard
Electronic Arts Inc.
GameLoft SA
Konami Corporation
Take-Two Interactive
Ubisoft Entertainment
Accretive Health
Allscripts Healthcare Solutions Inc.
Cerner Corporation
Computer Programs and Sys, Inc.
Greenway Medical Technologies, Inc
MedAssets
Merge Healthcare
Omnicell, Inc.
Quality Systems, Inc.
Hewlett Packard
IBM
Oracle Corporation
SAP AG

59

AMSW.A
ORCL
QADA
LSE:SGE
SAP
ENXTAM:U
ACIW
EPAY
DST
EVTC
FICO
FISV
INTU
MODN
KASE:NET
LSE:SGE
QIWI
ATVI
EA
ENXTPA:G
TSE: 9766
TTWO
ENXTPA:U
AH
MDRX
CERN
CPSI
GWAY
MDAS
MRGE
OMCL
QSII
HPQ
IBM
MSFT
ORCL
SAP

Product Category
P d tC t
E t
i
R
Pl
i
Gaming
Gaming
Gaming
Gaming
Gaming
g
Gaming
Healthcare
Healthcare
Healthcare
Healthcare
Healthcare
Healthcare
Healthcare
Healthcare
Healthcare
IT Conglomerates
IT Conglomerates
IT Conglomerates
IT Conglomerates
IT Conglomerates

All Rights Reserved

Company
C

Ticker
Ti k

Bango PLC
Glu Mobile, Inc.
Gree
Millennial Media Inc
Myriad Group AG
M i dG
NQ Mobile Inc.
Opera
Qihoo 360 Technology Co. Ltd
Pandora Media
Synchronoss Technologies, Inc.
Tangoe, Inc.
TeleCommunication Systems
TeleNav
Velti Plc
Zynga, Inc
Allot Communications Ltd.
Aruba Networks, Inc.
Brocade Communications Systems,
Cisco Systems, Inc.
Cyan, Inc.
F5 Networks, Inc.
Gigamon, LLC
Juniper Networks, Inc
Networks Inc.
Radware Ltd.
Riverbed Technology, Inc.
AVG Technologies N.V.
Check Point Software Tech Ltd.
Commtouch Software Ltd.
Fortinet Inc.
Guidance Software, Inc.
Imperva
Palo Alto Networks, Inc
Proofpoint, Inc.
Sourcefire, Inc.
Symantec Corporation
Trend Micro
VASCO Data Security International

60

BGO
GLUU
TSE:3632
MM
MYRN
NQ
OB:OPERA
QIHU
P
SNCR
TNGO
TSYS
TNAV
VELT
ZNGA
ALLT
ARUN
BRCD
CSCO
CPWR
CYNI
FFIV
GIMO
JNPR
RDWR
RVBD
AVG
CHKP
CTCH
FTNT
GUID
IMPV
PANW
PFPT
FIRE
SYMC
TSE:4704
VDSI

Product Category
P d tC t
M bil S l ti
/C t t
Security
Security
Security
Security
Security
Security
Security
Security
Security
Security
Secuity
Security

All Rights Reserved

Company
C

Ticker
Ti k

Brocade Communications Systems,
CA, Inc.
Cisco Systems, Inc.
CommVault Systems, Inc.
EMC
FalconStor Software, Inc.
IBM
Informatica Corporation
NetApp, Inc.
Oracle Corporation
Splunk, Inc.
Splunk Inc
TIBCO Software Inc.
Aspen Technology, Inc.
Manhattan Associates, Inc.
The Descartes Systems Group Inc.
Unit 4
CA T h
Technologies
l
i
Citrix Systems, Inc.
Netscout Systems, Inc.
Red Hat, Inc.
SolarWinds, Inc.
VMWare, Inc.
Advent Software, Inc.
Broadridge Financial
Fidessa
Jack Henry & Associates, Inc.
MSCI, Inc.
SS&C Corporation
Blackbaud, Inc.
Constellation
EPIQ Systems, Inc.
Guidewire Software, Inc.
Micros Systems
PROS Holdings
Sapiens International
Silver Spring Networks, Inc.
The Active Network Inc
Network, Inc.
Tyler Technologies, Inc.

61

BRCD
CA
CSCO
CVLT
EMC
FALC
IBM
INFA
MSFT
NTAP
ORCL
SPLK
TIBX
AMSW.A
AZPN
MANH
TSX:DSG
ENXTAM:U
CA
CTXS
NTCT
RHT
SWI
VMW
ADVS
BR
LSE:FDSA
JKHY
MSCI
SSNC
BLKB
TSX:CSU
EPIQ
GWRE
MCRS
PRO
SPNS
SSNI
ACTV
TYL

Product Category
P d tC t
Storage, Data Management & Integration
Storage,
Storage Data Management & Integration
Supply Chain Management & Logistics
Systems Management
S t
M
t
Systems Management
Systems Management
Systems Management
Systems Management
Systems Management
Vertical - Finance
Vertical - Finance
Vertical - Finance
Vertical - Finance
Vertical - Finance
Vertical - Finance
Vertical - Other
Vertical - Other
Vertical - Other
Vertical - Other
Vertical - Other
Vertical - Other
Vertical - Other
Vertical - Other
Vertical - Other
Vertical - Other

All Rights Reserved

THE SEG SaaS INDEX COMPANIES
Company
C

Ticker
Ti k

Bazaarvoice, Inc
Constant Contact
Cvent
LivePerson
Marketo
Marin Software
Responsys
Salesforce.com
Vocus
E2open, Inc
Fleetmatics
Netsuite
SciQuest
SPS Commerce
Workday, Inc.
Athenahealth, Inc
DealerTrack
Ebix Inc.
Ellie Mae
Medidata Solutions
RealPage
Textura Corp.
Callidus Software Inc.
Cornerstone OnDemand
Halogen Software, Inc.
The Ultimate Software Group, Inc.
Workday, Inc.
Benefitfocus, Inc.
ChannelAdvisors
Concur
Demandware, Inc.
FireEye, Inc.
inContact, Inc.
IntraLinks Holdings
I t Li k H ldi
J2 Global
Jive Software, Inc
OpenTable, Inc.
Qualys, Inc.
Service-now.com
Tableau Software
Tangoe
T
Zix Corporation

62

BV
CTCT
NYSE:CVT
LPSN
MKTO
MRIN
MKTG
CRM
VOCS
EOPN
FLTX
N
SQI
SPSC
WDAY
ATHN
TRAK
EBIX
ELLI
MDSO
RP
TXTR
CALD
CSOD
TSX:HGN
ULTI
WDAY
BNFT
ECOM
CNQR
DWRE
FEYE
SAAS
IL
JCOM
JIVE
OPEN
QLYS
NOW
DATA
TNGO
ZIXI

Product Category
P d tC t
CRM & Marketing
CRM & Marketing
CRM & Marketing
CRM & Marketing
g
CRM & Marketing
CRM & Marketing
CRM & Marketing
CRM & Marketing
CRM & Marketing
ERP & Supply Chain
ERP & Supply Chain
ERP & Supply Chain
ERP & Supply Chain
ERP & Supply Chain
ERP & Supply Chain
Vertically Focused
Vertically Focused
Vertically Focused
Vertically Focused
Vertically Focused
Vertically Focused
Vertically Focused
Other SaaS
Other SaaS
Other SaaS
Other SaaS
Other SaaS
Other SaaS
Other SaaS
Oth
S
S
Other SaaS
Other SaaS
Other SaaS
Other SaaS
Other SaaS
Other SaaS
Other SaaS
Oth
S
S
Other SaaS

All Rights Reserved

THE SEG INTERNET INDEX COMPANIES
Company
C

Ticker
Ti k

Angie's List, Inc.
Baidu.com, Inc.
Bankrate, Inc.
Digital Generation, Inc.
eHealth, Inc.
Google Inc.
Groupon
InterActiveCorp
LinkedIn
Marchex Inc.
QuinStreet
ReachLocal, Inc.
Rocket Fuel
SINA Corporation
Sohu.com Inc.
Tree.Com, Inc.
Tree Com Inc
Tremor Video, Inc.
ValueClick, Inc.
Yandex
YuMe, Inc.
1-800-FLOWERS.COM, Inc.
Amazon.com, Inc.
A
I
Bitauto Holdings Limited
BlueNile
DangDang
Digital River Inc.
eBay Inc.
y
GeekNet
Liquidity Services, Inc.
Mecox Lane Limited
Mercadolibre, Inc.
Overstock.com, Inc.
PetMed Express Inc
Express, Inc.
Stamps.com

63

ANGI
BIDU
RATE
DGIT
EHTH
GOOG
GRPN
IACI
LNKD
MCHX
QNST
RLOC
FUEL
SINA
SOHU
TREE
TRMR
VCLK
YNDX
YUME
FLWS
AMZN
BITA
NILE
DANG
DRIV
EBAY
GKNT
LQDT
MCOX
MELI
OSTK
PETS
STMP

Product Category
P d tC t
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Ad Tech & Lead
Commerce
Commerce
C
Commerce
Commerce
Commerce
Commerce
Commerce
Commerce
Commerce
Commerce
Commerce
Commerce
Commerce
Commerce

All Rights Reserved

Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation
Generation

THE SEG INTERNET INDEX COMPANIES (CON’T)
Company
C

Ticker
Ti k

AOL, Inc.
DemandMedia
InterActiveCorp
Netflix
Pandora
P d
Shutterstock, Inc.
TheStreet.com, Inc.
WebMD Health Corp.
XO Group
Yahoo! Inc.
Youku
ChangYou.com
Giant Interactive
Netease
NCSoft
Perfect World
Sohu.com Inc.
Tencent Holdings
Zynga, Inc.
8x8, Inc.
Akamai Technologies, Inc.
Brightcove Inc.
BroadSoft, Inc.
Digital River Inc.
Envivio, Inc.
Harmonic Inc
Interactive Intelligence, Inc.
Limelight Networks, Inc.
Mitel Networks Corp.
Polycom, I
P l
Inc.
Rovi Corporation
SeaChange International Inc.
ShoreTel, Inc.
Sonus Networks, Inc
Synacor, Inc
Tucows Inc
Inc.
VeriSign

64

AOL
DMD
IACI
NFLX
P
SSTK
TST
WBMD
XOXO
YHOO
YOKU
CYOU
GA
NTES
KOSE:A036
PWRD
SOHU
SEHK:700
ZNGA
EGHT
AKAM
BCOV
BSFT
DRIV
ENVI
HLIT
ININ
LLNW
MITL
PLCM
ROVI
SEAC
SHOR
SONS
SYNC
TCX
VRSN

Product Category
P d tC t
Content & Media
Content & Media
Content & Media
Content & Media
Content
C t t & Media
M di
Content & Media
Content & Media
Content & Media
Content & Media
Content & Media
Content & Media
Gaming
Gaming
Gaming
Gaming
Gaming
g
Gaming
Gaming
Gaming
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
I f
t
t
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure

All Rights Reserved

THE SEG INTERNET INDEX COMPANIES (CON’T)
Company
C
Angie's List, Inc.
Bankrate, Inc.
Carbonite, Inc.
LifeLock, Inc.
Monster Worldwide, Inc.
Qihoo
Shutterfly
SouFun Holdings Ltd.
Tree.Com, Inc.
Trulia, Inc.
VistaPrint
Xoom
Zillow
Facebook
LinkedIn
Mail.ru
Mail ru Group
Renren Inc
Yelp, Inc.
YY, Inc.
Ctrip
Expedia
HomeAway
H
A
MakeMyTrip
Orbitz
Priceline
Travelzoo
TripAdvisor Inc

65

Ticker
Ti k
ANGI
RATE
CARB
LOCK
MWW
QIHU
SFLY
SFUN
TREE
TRLA
VPRT
XOOM
Z
FB
LNKD
LSE:MAIL
RENN
YELP
YY
CTRP
EXPE
AWAY
MMYT
OWW
PCLN
TZOO
TRIP

Product Category
P d tC t
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Social
Social
Social
Social
Social
Social
Travel
Travel
Travel
T
l
Travel
Travel
Travel
Travel
Travel

All Rights Reserved

THE SEG SOFTWARE INDEX COMPANIES – KEY METRICS
SEG Software Index
Company

EV/Revenue

EV/EBITDA

TTM Revenue Growth

EBITDA Margin

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

3Q13

3Q12

4Q12

1Q13

2Q13

Accretive Health

0.9x

1.0x

1.0x

0.9x

0.8x

19.9x

32.8x

33.3x

29.5x

26.5x

43.5%

32.2%

32.2%

32.2%

32.2%

4.6%

2.9%

2.9%

2.9%

3Q13
2.9%

ACI Worldwide, Inc.

3.7x

3.4x

3.2x

3.4x

3.3x

18.0x

17.2x

13.8x

16.1x

15.2x

17.2%

22.5%

43.3%

38.7%

39.7%

20.4%

19.7%

23.6%

21.1%

21.9%

Activision Blizzard

2.2x

2.0x

2.3x

2.4x

2.9x

9.1x

8.0x

7.1x

7.1x

7.7x

-7.6%

-5.9%

2.1%

11.8%

13.1%

24.6%

25.5%

32.4%

33.3%

37.6%

Actuate Corporation

1.8x

1.4x

1.6x

1.7x

2.0x

8.2x

7.0x

9.2x

11.5x

16.0x

1.6%

5.0%

2.9%

0.9%

-1.9%

22.4%

19.7%

17.2%

14.9%

12.6%

Adobe Systems Incorporated

3.3x

3.4x

3.9x

4.7x

5.1x

9.5x

10.0x

13.3x

17.7x

22.1x

8.1%

4.4%

3.1%

-1.9%

-5.3%

34.2%

33.5%

29.7%

26.6%

23.3%

Advent Software, Inc.
Software Inc

3.3x
3 3x

2.9x
2 9x

3.5x
3 5x

4.1x
4 1x

3.7x
3 7x

17.0x
17 0x

14.5x
14 5x

16.3x
16 3x

17.9x
17 9x

19.0x
19 0x

14.7%
14 7%

11.9%
11 9%

10.0%
10 0%

7.9%
7 9%

6.7%
6 7%

19.6%
19 6%

19.9%
19 9%

21.2%
21 2%

22.7%
22 7%

19.3%
19 3%

Allot Communications Ltd.

7.1x

5.4x

2.8x

2.4x

2.9x

44.2x

35.1x

22.8x

32.3x

336.0x

39.4%

39.6%

34.7%

23.4%

7.2%

16.2%

15.5%

12.3%

7.5%

0.9%

Allscripts Healthcare
Solutions Inc.

1.5x

1.7x

1.6x

1.9x

2.2x

9.3x

10.9x

18.4x

26.3x

40.2x

19.9%

9.0%

0.2%

-3.0%

-5.6%

15.9%

15.3%

8.6%

7.4%

5.6%
18.7%

Amdocs Limited

1.4x

1.4x

1.5x

1.5x

1.5x

7.4x

7.5x

8.0x

7.8x

8.1x

3.5%

2.2%

1.8%

1.9%

2.6%

18.4%

18.5%

18.5%

18.6%


1.6x

1.5x

1.7x

1.7x

1.7x

9.2x

9.0x

10.6x

11.4x

12.2x

16.2%

11.2%

3.3%

-2.1%

-6.6%

17.1%

16.6%

16.0%

15.3%

14.3%

ANSYS, Inc.

7.6x

7.5x

8.2x

7.9x

8.7x

16.1x

15.8x

17.2x

16.8x

18.6x

19.9%

17.5%

15.4%

12.8%

10.5%

47.3%

47.5%

47.6%

47.1%

46.7%

Aruba Networks, Inc.

3.0x

3.5x

4.0x

2.7x

2.6x

52.3x

55.4x

55.6x

43.8x

61.0x

30.3%

25.2%

22.8%

19.3%

16.1%

5.8%

6.3%

7.1%

6.1%

4.3%

AsiaInfo Holdings Inc
Holdings, Inc.

1.2x
1 2x

1.0x
1 0x

1.0x
1 0x

1.0x
1 0x

0.9x
0 9x

7.5x
7 5x

7.7x
7 7x

7.9x
7 9x

8.2x
8 2x

8.1x
8 1x

9.8%
9 8%

10.5%
10 5%

13.9%
13 9%

15.7%
15 7%

16.2%
16 2%

16.0%
16 0%

13.0%
13 0%

12.2%
12 2%

11.7%
11 7%

11.5%
11 5%
19.2%

Aspen Technology, Inc.

8.4x

8.6x

9.7x

9.1x

9.4x

-

173.7x

127.2x

65.7x

49.1x

22.7%

27.7%

22.9%

26.1%

28.1%

-5.5%

4.9%

7.6%

13.8%

Autodesk, Inc.

2.7x

2.6x

3.2x

3.1x

3.0x

12.6x

12.7x

15.7x

15.1x

14.8x

10.5%

6.8%

4.4%

0.8%

-0.5%

21.2%

20.6%

20.7%

20.5%

20.3%

AVG Technologies N.V.

2.1x

2.2x

2.3x

2.5x

3.0x

7.7x

7.4x

7.5x

8.1x

8.8x

-

31.1%

30.7%

28.2%

27.2%

26.8%

29.3%

30.1%

31.4%

34.1%

Bango PLC

4.6x

5.3x

8.2x

8.8x

8.5x

-

-

-

-

-

-19.3%

-19.3%

-

-

-

-6.1%

-6.1%

-26.0%

-29.0%

-32.4%

Blackbaud, Inc.

3.4x

2.9x

3.2x

3.4x

3.7x

22.1x

21.3x

22.0x

22.1x

20.8x

12.9%

16.6%

20.6%

23.6%

22.3%

15.2%

13.8%

14.5%

15.3%

17.8%

Bottomline Technologies

3.2x

3.4x

3.7x

3.3x

3.4x

22.7x

27.2x

40.9x

38.3x

35.0x

18.4%

16.9%

14.9%

15.7%

13.6%

14.0%

12.5%

9.1%

8.7%

9.8%

Broadridge Financial

1.3x

1.3x

1.4x

1.5x

1.6x

7.9x

7.9x

7.9x

8.5x

8.5x

6.3%

4.5%

3.4%

3.8%

5.5%

16.8%

16.9%

17.1%

17.4%

18.6%

Brocade Communications
Systems, Inc.

1.2x

1.1x

1.2x

1.1x

1.4x

5.4x

5.3x

5.5x

5.2x

6.2x

3.0%

4.2%

4.8%

4.8%

1.5%

21.2%

21.0%

21.8%

21.9%

22.2%

BSQUARE Corporation

0.1x

0.1x

0.2x

0.1x

0.1x

-

9.4x

7.8x

8.8x

12.9x

-4.8%

-2.1%

4.7%

0.3%

-3.5%

-0.3%

1.4%

2.1%

1.5%

1.0%

CA Technologies

2.3x

2.0x

2.2x

2.4x

2.7x

6.5x

5.9x

6.5x

6.6x

7.4x

6.0%

2.4%

-1.6%

-3.6%

-3.5%

35.4%

33.6%

33.9%

36.1%

36.4%

Cadence Design Systems,
Inc

2.6x

2.5x

2.7x

2.6x

2.8x

12.1x

11.3x

11.9x

11.3x

12.3x

19.9%

18.2%

15.4%

13.8%

12.7%

21.1%

22.6%

22.7%

23.0%

22.4%

Cerner Corporation

4.9x

4.9x

5.4x

5.9x

5.9x

17.9x

18.1x

20.0x

21.0x

20.4x

24.5%

23.1%

20.9%

14.7%

12.3%

27.2%

27.3%

27.3%

28.2%

28.8%

Check Point Software Tech
Ltd.

6.5x

6.0x

6.5x

6.0x

7.2x

11.5x

10.5x

11.5x

10.7x

12.9x

11.4%

10.1%

7.7%

5.7%

4.4%

56.6%

56.6%

56.7%

56.4%

56.1%

Cimatron Ltd.

0.5x

0.7x

1.3x

1.3x

1.3x

3.1x

4.5x

8.7x

8.5x

8.9x

9.6%

6.8%

3.9%

2.1%

1.6%

16.0%

14.9%

15.2%

14.7%

14.4%

Cisco Systems, Inc.

1.4x

1.5x

1.7x

1.8x

2.0x

4.9x

5.1x

6.0x

6.3x

7.2x

6.6%

6.8%

5.4%

5.1%

5.5%

27.6%

28.8%

28.7%

28.1%

28.2%

Citrix Systems, Inc.

5.5x

4.5x

4.8x

4.3x

4.6x

22.3x

18.9x

20.5x

19.0x

20.8x

18.1%

16.5%

17.2%

15.8%

16.5%

24.9%

23.7%

23.6%

22.5%

21.9%

Commtouch Software Ltd.

2.0x

2.0x

3.0x

2.7x

2.4x

9.5x

11.9x

37.6x

182.2x

-

10.3%

2.8%

3.9%

10.9%

21.2%

21.3%

17.1%

8.1%

1.5%

-2.3%

CommVault Systems, Inc.

4.7x

5.6x

6.6x

6.0x

6.7x

32.9x

36.3x

39.9x

34.7x

38.3x

25.4%

23.4%

23.4%

21.9%

21.7%

14.1%

15.6%

16.5%

17.3%

17.6%

Computer Programs and Sys,
Inc.

3.1x

3.1x

3.0x

2.9x

3.1x

12.8x

12.8x

12.5x

12.0x

12.5x

0.7%

1.9%

5.7%

6.1%

12.3%

24.1%

23.9%

24.2%

24.2%

24.9%


2.0x

2.1x

2.6x

2.5x

2.4x

12.5x

13.0x

15.3x

18.3x

17.4x

5.6%

-2.2%

-2.3%

-6.5%

-6.0%

16.3%

16.0%

16.8%

13.9%

13.9%

Constellation

2.5x

3.0x

2.9x

3.1x

3.5x

11.9x

14.4x

13.9x

15.6x

17.5x

13.6%

10.9%

15.2%

20.4%

29.4%

20.7%

20.7%

20.7%

19.7%

19.7%

CSG Systems International,
Inc.

1.0x

0.9x

1.0x

1.0x

1.1x

4.6x

4.5x

4.9x

5.8x

6.6x

13.3%

6.4%

3.0%

2.2%

2.1%

21.5%

21.0%

19.3%

17.8%

17.1%

-

-

-

6.0x

3.3x

-

-

-

-

-

72.1%

-

137.2%

-

-

-35.7%

-10.9%

-9.8%

-11.9%

-17.1%

Dassault Systèmes

4.3x

4.6x

4.6x

5.0x

5.3x

13.6x

14.7x

14.8x

16.0x

17.2x

12.1%

14.0%

13.8%

11.7%

8.4%

31.3%

31.1%

31.3%

31.0%

31.0%

DST Systems, Inc.

1.3x

1.3x

1.4x

1.4x

1.4x

9.2x

9.4x

9.7x

9.4x

9.2x

7.7%

8.3%

7.9%

6.4%

5.2%

14.4%

14.2%

14.5%

14.7%

14.9%

Electronic Arts Inc.

0.8x

0.8x

1.1x

1.4x

1.9x

11.8x

12.4x

10.5x

16.6x

20.2x

8.6%

6.2%

2.4%

-8.4%

-7.5%

6.6%

6.8%

10.2%

8.6%

9.5%

EMC

2.5x

2.3x

2.2x

2.1x

2.3x

10.5x

9.9x

9.3x

8.8x

9.7x

13.0%

10.0%

8.5%

7.4%

6.4%

23.9%

23.8%

23.9%

23.8%

23.9%

EPIQ Systems, Inc.

2.2x

2.1x

2.0x

1.9x

1.9x

9.6x

9.0x

9.1x

9.2x

9.9x

32.2%

28.5%

32.0%

25.9%

22.2%

22.9%

23.1%

21.6%

20.5%

19.1%

Cyan, Inc.

66

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3Q13 Software Industry Financial Report

3Q13 Software Industry Financial Report

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