2017 Software Outlook - Credit Suisse

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

9 January 2017 Americas/United States

Equity Research Software & Services

2017 Software Outlook Research Analysts

Michael Nemeroff

212 325 2052

[email protected]

Alexander Hu

212 325 2785

[email protected]

Christopher Rochester

212 538 0744

[email protected]

SECTOR FORECAST

Uncertain 1H, Stronger 2H; New CS SaaS Unit

Economics Analysis; Top Picks & Predictions

■ We currently think that in early 2017 shares in software vendors could

trade in line with, or possibly down versus, the broader indices as

market fund flows could continue to shift more towards economically

(and rate) sensitive verticals (financials, industrial / manufacturing,

etc.) rather than to riskier and/or high multiple technology assets,

namely software stocks. Given the software industry's high risk/reward

profile, on average, software stocks have likely benefited disproportionately

in recent years from investors chasing above market returns during a

period of slow economic growth. Interest rates, as well as GDP growth

expectations have already risen since the election, and we believe many

seasoned investors will continue to dust off their economic growth cycle

investment playbooks, rotating software to the back burners in the near-

term. However, we expect software fundamentals to remain strong in 2017

so their shares could look even more attractive in Q2-Q3, when 2018

comes in focus, potentially leading to a stronger 2H performance.

■ New, proprietary Credit Suisse SaaS Unit Economics Index. Our new,

proprietary subscription software unit economics (customer lifetime value /

customer acquisition cost, or CLTV / CAC) benchmark analysis (see

Figures 1 – 3) evaluates the different yields of investments, potential

operating leverage at scale, and overall financial stability of 37 SaaS

vendors and suggests those that show superior unit economics (e.g.,

stronger retention rate, greater recurring revenue mix, higher recurring

revenue gross margin, and more efficient sales & marketing spend for each

incremental dollar of recurring revenue) should typically warrant a premium

valuation to the peer group average. Based on this new fundamental

analysis, we believe that there are several SaaS names in our coverage

that are currently trading at a discounted valuation, particularly ULTI.

■ Large cap software lagged small and mid-cap in 2016 (and the S&P

500), and we expect 2017 to be the same. After underperforming large-

cap software stocks in 2015 for the first time in five years, our 'Dogs of the

Dow' strategy for SMID software worked in 2016, as small-cap software

stocks far outperformed large-caps (+18% vs. large cap of +6%, Figure 4).

In 2017, we expect investors to continue to covet small and mid-size

software names with high organic growth / strong cash flows (Figures 6 –

13), attractive end-markets, defensible business models, and a very high

likelihood to deliver organic upside versus current consensus estimates.

■ Our predictions & themes for software in 2017 are highlighted on pages

5 to 15, and our top SMID picks are ULTI and TWOU (see page 16).

9 January 2017

2017 Software Outlook 2

New Credit Suisse SaaS Unit Economics Benchmark Analysis

Figure 1: Credit Suisse SaaS Unit Economics Index

Source: Company data, Thomson Reuters, Credit Suisse estimates. *Assumes 10% discount rate, see Appendix for our methodology and a full review of our assumptions.

In this note, we introduce and highlight a new, proprietary subscription software unit

economics (customer lifetime value / customer acquisition cost, or CLTV / CAC)

benchmark analysis with a unique formula for calculating CLTV / CAC, which evaluates

potential operating leverage at scale, expected returns on investments, and overall

financial stability of software-as-a-service (SaaS) companies. We conclude that shares

of software companies with better unit economics (e.g., stronger retention rates,

greater recurring revenue mix, higher recurring revenue gross margin, and more

efficient sales & marketing spend for each incremental dollar of recurring revenue)

should typically warrant a premium valuation to the peer group average.

When assessing investment opportunities in the subscription software universe of stocks,

we believe a key distinction for investors is not whether the current EV/Sales multiple,

EV/EBITDA, EV/FCF, and P/E ratios (or lack thereof) are too high/low versus historic

measures and to each other (i.e., relative valuation), but whether the investments that

SaaS companies are making today (which mathematically depress near-term earnings

and cash flow given the timing misalignment of revenue and expense recognition) are

being made at an attractive ROI that would result in sustainable free cash flow generation

over time. Therefore, in addition to our conventional valuation framework (e.g., revenue

growth, operating margin, and cash flow; see pages 6-8), we believe subscription

companies should also be evaluated and benchmarked on unit economics, which takes

into consideration:

1. Inherent stickiness of SaaS products, i.e. recurring revenue retention rate, and

2. Efficiency of the SaaS business model and potential leverage / free cash flow

generation at scale, which includes the level of sales & marketing investments

assumed for each incremental dollar of recurring revenue / gross profit.

Based on our unique methodology, which normalizes for many of the nuances and

differences among SaaS companies (see Appendix on page 17 for more details) by not

using gross customer adds as typical unit economics analyses do, the chart above ranks (in

descending order) applicable subscription software companies from our proprietary unit

economics framework (CLTV/CAC ratio). Within our current coverage universe, we note that

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

TE

AM

VE

EV

ULTI

MD

SO

SH

OP

WD

AY

NO

W

ALR

M

PC

TY

PA

YC

AP

PF

RP

BL

MB

NE

WR

ZE

N

EV

BG

TLN

D

RN

G

PFP

T

BO

X

CR

M

OO

MA

FIV

N

HU

BS

AM

BR

CA

LD

WK

MO

DN

CS

OD

SP

SC

BLK

B

XTLY IL

CA

RB

LP

SN

JIV

E

CLTV

/ C

AC

Average = 2.0x

SaaS companies that demonstrate superior

unit economics typically warrant a

premium valuation.

9 January 2017


ULTI, SHOP, ALRM, APPF, PAYC, and MB are above the normalized peer group average

of 2.3x. (Figure 1)

Figure 2: Valuation (EV/Sales) versus Unit Economics (CLTV/CAC)

Source: Company data, Thomson Reuters, Credit Suisse estimates

Further, if we exclude two outliers in our coverage universe (CSOD & OOMA) due to

extraneous circumstances (CSOD trading at a higher multiple recently due to takeout

speculation, and OOMA trading <2x EV/Sales despite +25% yr/yr subscription revenue

growth), the strength of the correlation increases to 62.5% across the 35 relevant

subscription software vendors (Figure 3). This implies that from a statistical perspective,

nearly two-thirds of the variation in a company's valuation (2017 EV/Revenue multiple in

this instance) could be explained by its expected unit economics (CLTV/CAC ratio) over

the same period, assuming a linear relationship, which we note is higher than any of the

other valuation-related regressions we highlight later in this note (Figures 6 – 13).

Clearly, there are numerous other important factors to consider when evaluating

investment opportunities, including total addressable market, barriers to entry / defensible

business models, competitive advantages, industry intensity, impending takeover

speculation, quality of the management team, execution risk, customer concentration, and

other company-specific headwinds / tailwinds, which all contribute to determining a

company's intrinsic value.

ALRM

AMBR

APPF

TEAM

BLKB

BL

BOXCALD

CARB

CSODEVBG

FIVN

HUBS

IL

JIVE

LPSN

MDSO

MB

MODN

NEWR

OOMA

PAYC

PCTY

PFPT

RP

RNG

CRM

NOW

SHOP

SPSCTLND

ULTI

VEEV

WDAY

WKXTLY

ZEN

y = 1.3113x + 1.7638

R² = 57.2%

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

0.0x 1.0x 2.0x 3.0x 4.0x 5.0x

2017 E

V /

Re

venu

e M

ult

iple

Customer Lifetime Value / Customer Acquisition Cost

Names below the line suggest that they're

currently trading at a discounted valuation,

such as ULTI.

9 January 2017


Figure 3: Refined Valuation (EV/Sales) versus Unit Economics (CLTV/CAC)


What does this new analysis mean, and why is it important?

Naturally, we expect software companies with more favorable unit economics (e.g., higher

contribution margins, lower churn rates, greater recurring revenue mix) to warrant a higher

valuation (all else equal), and vice versa. To be sure, when we peg our unit economics

index to our valuation framework (2017 EV/Revenue multiple), the strength of the

correlation (R2) is fairly strong at 57.2% (Figure 2). We believe this exercise is important

and useful as it could (1) provide a glimpse on the current state of SaaS companies and

overall financial stability among subscription vendors both large and small, (2) identify

vendors with superior unit economics / SaaS models currently, and (3) help determine

potential compelling investments opportunities for investors who have a longer-term

investment horizon. Based on this new fundamental analysis, we believe that there are

several SaaS names in our coverage that are currently trading at a discounted valuation,

particularly ULTI, which is one of our top picks for 2017.

How is this different / unique versus other valuation frameworks?

Unit economics (customer life time value / customer acquisition cost, or CLTV/CAC) is not

new, but is instrumental when determining the overall health of any business, especially

subscription software companies. CLTV/CAC is most useful when investors know

specifically the number of gross additions the software vendor has as well as other

discrete costs solely attributed to new customer acquisition. By definition:

CLTV = discounted net profits / cash flows attributed to the customer over the entire

expected lifetime with the company

CAC = associated costs incurred by the company to acquire the customer

Key financial metrics (e.g., revenue growth rates, operating margins, cash flows) and

relative multiples (e.g., EV/Revenue, EV/FCF, EV/EBITDA, P/E) are all useful, but they

share one common shortfall: they only tell us the current/near-term state of the business

and are poor indicators on how well the company will do in the years ahead. Clearly, this

ALRM

AMBR

APPF

TEAM

BLKB

BL

BOXCALD

CARB

EVBG

FIVN

HUBS

IL

JIVE

LPSN

MDSO

MB

MODN

NEWR

PAYC

PCTY

PFPT

RP

RNG

CRM

NOW

SHOP

SPSCTLND

ULTI

VEEV

WDAY

WKXTLY

ZEN

y = 1.312x + 1.802

R² = 62.5%

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

0.0x 1.0x 2.0x 3.0x 4.0x 5.0x

201

7 E

V /

Re

ve

nu

e M

ultip

le

Customer Lifetime Value / Customer Acquisition Cost

Nearly two-thirds of the variation in valuation

can be explained by the company's expected

unit economics.

9 January 2017


prediction model can have varying levels of accuracy and precision depending on the input

variables, of which we attempt to simplify and normalize for with our unique methodology

detailed below.

What is the methodology?

Striking the proper balance between simplicity and complexity is crucial given asymmetric

information. While it would be optimal to fully allocate only applicable expenses in

determining discrete customer acquisition cost (e.g., sales and marketing expense related

solely to new customers, costs of onboarding, allocated overhead and support costs), this

complexity adds too much uncertainty and too many variables into the mix, in our view,

and ultimately limits the usefulness of, and the ability to reproduce this exercise. Our

simplified methodology assumes the following inputs:

𝐶𝐿𝑇𝑉

𝐶𝐴𝐶=

(Δ Recurring Revenue x Recurring Gross Margin) × r

1 − r + 𝑖Sales & Marketing Expense

where r = recurring revenue retention rate, and 𝑖 = discount rate

By applying the formula above we eliminate the need to know gross unit additions, which

most companies do not provide regularly, and normalize the output to compare the

majority of public subscriptions software companies (37 out of the 53 publicly traded

subscription software vendors that we currently track).

For further explanation of this methodology, see the Appendix in the back of this note.

Top Predictions & Themes for 2017 1. 'Dogs of the Dow' strategy for SMID software worked in 2016, and we think both

small and mid-caps will outperform large cap again in 2017. For an equal

weighted basket of our subscription software companies under coverage, we expect

an average 12-month price return of +23% based on our current target prices. Our

software 'Dogs of the Dow' strategy worked in 2016, as small-cap stocks

outperformed large-caps (+18% vs. large cap of +6%) following 2015's

underperformance (down -8% vs. large cap of +11%); small caps software stocks

have now outperformed large-caps in six of the previous seven years boasting an

average annual return of +25% for small-cap / +30% for mid-cap vs. +17% for large-

cap during that period. (Figure 4). Mid-cap software stocks continue to be the best

performers among software, and we think that trend continues in 2017, particularly as

we expect the strong M&A cycle in software to continue.

Figure 4: Credit Suisse Software Universe Return by Market Cap

Source: Thomson Reuters, Credit Suisse estimates

In light of the relative outperformance of small and mid-cap in 2016, we believe that

current valuation levels are still compelling as the average EV/NTM revenue multiple

for subscription vendors (SaaS group) contracted to 4.2x (from 4.5x on Dec 31, 2015),

while the NTM revenue growth expectations remain nearly unchanged (current

2010 2011 2012 2013 2014 2015 2016 2017 YTD2010-2016

Avg

All Software 41.5% 6.6% 30.6% 50.3% 14.6% 1.1% 12.1% 3.0% 22.4%

Small Cap (<$2B) 47.4% 5.7% 32.7% 63.2% 13.0% -7.8% 18.4% 2.3% 24.6%

Mid Cap ($2-10B) 37.4% 20.5% 48.1% 50.0% 14.1% 17.5% 19.2% 3.3% 29.5%

Large Cap (>$10B) 32.1% -1.9% 28.0% 31.1% 11.4% 10.5% 5.7% 4.5% 16.7%

SaaS Software 53.3% 10.1% 37.3% 75.5% 7.9% 5.3% 19.6% 3.0% 29.8%

S&P 500 12.8% 0.0% 13.4% 29.6% 11.4% -0.7% 9.5% 1.7% 10.9%

Our CLTV/CAC methodology

eliminates the need for gross customer

additions metric.

9 January 2017


consensus NTM revenue growth est. of +21.1% versus +21.6% yr/yr in the prior year).

Further, we note that the SaaS group is trading below its long-term historical average

EV/Sales multiple of 4.6x, which in the past has been a buy signal when fundamentals

are stable, as we think they are, and potentially leading to a reversion back up to the

valuation mean. (Figure 5)

Figure 5: Credit Suisse Subscription Software Index: EV/NTM Sales Multiple


2. In 2017, investors will continue to have a bias towards organic high-growth

SaaS vendors with strong cash flow generation prospects and favorable unit

economics. Although the relationship between revenue growth and valuation has

moderated slightly entering 2017 (the R2 decreased yr/yr to 0.45 from 0.49, (Figures 6

and 7), the correlation is still the strongest among all the accounting financial metrics

we track and monitor (e.g., operating profits, cash flows), which indicates to us that

software companies that demonstrate strong revenue growth should continue to

command a premium valuation to the peer group. In addition, this year we introduce

a new Gross Profit growth versus EV/Gross Profit multiple regression analysis

(Figures 8 and 9), which provides another valuation framework for SaaS based on

gross profit dollars (rather than total revenue); the R2 of this relationship is currently

0.45, which, interestingly, is nearly on par with the relationship between revenue

growth and EV/Sales multiple.

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

Dec-

09

Mar-

10

Jun-1

0

Sep-

10

Dec-

10

Mar-

11

Jun-1

1

Sep-

11

Dec-

11

Mar-

12

Jun-1

2

Sep-

12

Dec-

12

Mar-

13

Jun-1

3

Sep-

13

Dec-

13

Mar-

14

Jun-1

4

Sep-

14

Dec-

14

Mar-

15

Jun-1

5

Sep-

15

Dec-

15

Mar-

16

Jun-1

6

Sep-

16

Dec-

16

EV / NTM Sales

+1 Sigma

-1 Sigma

12/31/15: 4.5x

12/31/16: 4.2x

Average = 4.6x

Companies include: ADBE, ALRM, AMBR, APPF, APTI, ATHN, BL, BLKB, BOX, BV, CALD, CARB, COUP, CRM, CSOD, CSLT,

ECOM, EVBG, ELLI, FIVN, HDP, HUBS, IL, INST, JIVE, LOCK, LOGM, LPSN, MB, MDSO, MODN, MRIN, NEWR, NOW, PAYC, PCTY, PFPT, QLYS, RNG, RP, SHOP, SNCR, SPSC, TEAM, TLND, TWLO, TWOU, ULTI, VEEV, WAGE, WDAY, WK, XTLY, ZEN

Current SaaS group valuation is trading

below its LT historical average of 4.6x

9 January 2017


Figure 6: Revenue Growth vs. EV/Sales Multiple… Figure 7: … Moderated Slightly Entering 2017

January 2016 January 2017

Source: Thomson Reuters, Credit Suisse estimates Source: Thomson Reuters, Credit Suisse estimates

Figure 8: Gross Profit Growth vs. EV/GP Multiple… Figure 9: … Also Moderated Slightly Yr/Yr



Cash flow generation is becoming increasingly much more significant to

valuation. We believe that investors' preference for SaaS vendors that can generate

positive operating cash flows is significantly more pronounced heading into 2017, as

evidenced by Figures 12 and 13, which reveal that the relationship between cash flow

/ burn (i.e., operating cash flow margin) and valuation has strengthened significantly

over the last year (the R2 increased yr/yr to 0.30 from 0.16). Meanwhile, profitability

(non-GAAP operating margin) versus valuation nearly tripled from the prior year (the

R2 increased yr/yr to 0.14 from 0.05, Figures 10 and 11) as investors continue to

gravitate towards profitable software vendors. Additionally, we note that the

regression's slope nearly doubled yr/yr (to 0.0248x from 0.0136x); this represents a

stark contrast to the negative correlation of these metrics back in 2014, which we

believe indicated investors' previous appetite for 'grow-at-any-cost' SaaS business

models.

ADBEALRM

AMBR

APPF

ATHN

BLKB

BOX

BV

CALD

CARB

CRM

CSOD

ECOM

ELLI

FIVN

HUBS

JIVE

LOCK

LOGM

LPSN

MB

MDSO

MODN

MRIN

NEWRNOW

PAYCPCTY

PFPT

OOMA QLYSRNG

RP

SHOP

SNCR

SPSC

TWOU

ULTI

WDAY

WK

ULTI

y = 0.03x + 0.11

R² = 49%

0%

10%

20%

30%

40%

50%

0.0x 2.0x 4.0x 6.0x 8.0x 10.0x

2016E

Revenu

e G

row

th

2016 EV/Revenue Multiple

ADBE

ALRMAMBR

APPF

ATHN

BLKB

BOX

BV

CALD

CARB

CRM

CSODECOM

ELLI

FIVN

HUBS

JIVE

LOCK

LOGM

LPSN

MB

MDSO

MODN

MRIN

NEWR NOWPAYC

PCTY

PFPT

OOMA QLYS

RNG

RP

SHOP

SNCR

SPSC

TWOU

ULTI

WDAY

WK

ULTI

y = 0.04x + 0.05

R² = 45%-10%

0%

10%

20%

30%

40%

50%

0.0x 2.0x 4.0x 6.0x 8.0x

2017E

Revenu

e G

row

th


ADBEALRMAMBR

APPF

ATHN

BLKB

BOX

BV

CALD

CARB

CRM

CSOD

ECOM

ELLI

FIVN

HUBS

JIVE

LOCK

LOGM

LPSN

MB

MDSO

MODNMRIN

NEWR NOW

PAYC

PCTY

PFPTOOMA

QLYSRNG

RP

SHOP

SPSC

ULTI

WDAY

WK

ULTI

y = 0.02x + 0.11

R² = 48%

0%

10%

20%

30%

40%

50%

0.0x 3.0x 6.0x 9.0x 12.0x 15.0x

2016E

Gro

ss P

rofi

t G

row

th

2016 EV/Gross Profit Multiple

ADBEALRMAMBR

APPF

ATHN

BLKB

BOX

BV

CALD

CARB

CRM

CSODECOM

ELLI

FIVN

HUBS

JIVE

LOCKLOGM

LPSN

MB

MDSOMODN

MRIN

NEWR

NOW

PAYCPCTYPFPT

OOMA

QLYS

RNG

RP

SHOP

SPSC

ULTI

WDAY

WK

ULTI

y = 0.03x + 0.06

R² = 45%-10%

0%

10%

20%

30%

40%

50%

0.0x 3.0x 6.0x 9.0x 12.0x 15.0x

2017E

Gro

ss P

rofi

t G

row

th

2017 EV/Gross Profit Multiple

9 January 2017


Figure 10: Operating Margin vs. EV/Sales Multiple… Figure 11: …Strengthened Entering 2017



Figure 12: While Operating Cash Flow Margin vs.

EV/Sales Multiple… Figure 13: … Increased Significantly Yr/Yr



3. Implications of a new political administration will be meaningful. With the

Republicans taking over the government this month, we expect several policy

changes that could have significant implications on our coverage as they relate to

(i) tax reform, (ii) interest rate hikes, (iii) continued USD currency strength, and

(iv) small business formation and growth.

I. Tax reform: The Trump Administration has proposed to cut the corporate tax

rate from 35% to 15%. While we note that our software coverage, on

average, pays well below the 35% corporate tax rate as many are not yet

profitable and/or utilize NOLs to offset taxable income, there are several

companies in our coverage that would realize a significant benefit to earnings

under a lower tax regime, including ULTI, ALRM, PAYC, INTU, SNCR, CA

and ADBE. (Figures 14 and 15). However, it is important to highlight that the

ADBE

ALRM

AMBR

APPF

ATHN

BLKB

BOX

BV

CALD

CARB

CRM

CSOD

ECOM

ELLI

FIVN

HUBS

JIVE

LOCK

LOGM

LPSN

MB

MDSO

MODN

MRIN

NEWR

NOW

PAYC

PCTYPFPT

OOMA

QLYS

RNG

RP

SHOP

SNCR

SPSC

TWOU

ULTI

WDAY

WK

ULTI

y = 0.01x - 0.03

R² = 5%-30%

-20%

-10%

0%

10%

20%

30%

40%

0.0x 2.0x 4.0x 6.0x 8.0x 10.0x

2016E

Op

era

ting

Marg

in


ADBE

ALRM

AMBR

APPF

ATHN

BLKB

BOX

BV

CALDCARB

CRM

CSOD

ECOM

ELLI

FIVN

HUBS

JIVE

LOCK

LOGM

LPSN

MB

MDSO

MODN

MRINNEWR

NOW

PAYC

PCTYPFPT

OOMA

QLYS

RNG

RP

SHOP

SNCR

SPSC

TWOU

ULTI

WDAY

WK

ULTI

y = 0.02x - 0.03

R² = 14%-20%

-10%

0%

10%

20%

30%

40%

0.0x 2.0x 4.0x 6.0x 8.0x

2017E

Op

era

ting

Marg

in


ADBE

ALRM

AMBR

APPF

ATHNBLKB

BOX

BV

CALDCARB

CRM

CSOD

ECOM

ELLI

FIVN

HUBSJIVE

LOCK

LOGM

LPSN

MB

MDSO

MODN

MRIN

NEWR

NOW

PAYC

PCTY

PFPT

OOMA

QLYS

RNG

RP

SHOP

SNCR

SPSC

TWOU

ULTIWDAY

WK

ULTI

y = 0.02x + 0.02

R² = 16%-20%

-10%

0%

10%

20%

30%

40%

0.0x 2.0x 4.0x 6.0x 8.0x 10.0x

2016E

Op

era

ting

Cash

Flo

w M

arg

in


ADBE

ALRM

AMBRAPPF

ATHN

BLKB

BOXBV

CALDCARB

CRM

CSOD

ECOM

ELLI

FIVN

HUBS

JIVE

LOCK

LOGM

LPSN

MB

MDSO

MODN

MRINNEWR

NOW

PAYC

PCTY

PFPT

OOMA

QLYS

RNG

RP

SHOP

SNCR

SPSC

TWOU

ULTI

WDAY

WK

ULTI

y = 0.03x + 0.01

R² = 30%

-10%

0%

10%

20%

30%

40%

0.0x 2.0x 4.0x 6.0x 8.0x

2017E

Op

era

ting

Cash

Flo

w M

arg

in


9 January 2017


potential impact to cash flow could be only modest as the mix of deferred tax

assets / deferred tax liabilities will determine the magnitude of the change

(e.g., we calculate ULTI's cash tax rate to be <10%).

Figure 14: Software Tax Rate Exposure Figure 15: EPS Impact to 15% Corporate Tax Rate


II. Rising rate environment: At the December meeting, the FOMC

unanimously voted to increase the target range for the federal funds rate to

50-75bps (from 25-50bps) and provided new projections for 2017 that imply

three rate hikes during the year, which indicates that the federal funds rate

would end 2017 at 138bps (median of 17 participants), compared to 113bps

during the September vote. (Figure 16) In our view, PAYC and ULTI should

benefit in a rising rate environment, as both companies earn interest on funds

held for clients (i.e. payments collected in advance of applicable due date for

payroll tax submissions). Assuming a +50-100bps increase in average annual

interest rates for 2017 and an average daily float balance of ~$850M for

PAYC and ~$850M for ULTI, we estimate a potential +70-130bps and +30-

50bps of incremental recurring revenue growth yr/yr for 2017, respectively

(versus CS current estimates of +29.8% and +25.4% yr/yr, respectively).

Figure 16: FOMC Members' Assessment of Appropriate Monetary Policy

Source: Federal Reserve, FOMC Projection Materials, December 2016

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

ULTI

ALR

M

PA

YC

INTU

SN

CR

CA

EV

BG

OO

MA

AD

BE

OTE

X

VR

NT

CA

LD

CS

OD

AP

PF

MB

SH

OP

TW

OU

WK

Tax Rate Average

Average Tax

Rate = 17%

40%

35%

31%

27%

21%19%

8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

ULTI ALRM PAYC INTU SNCR CA ADBE

% Increase to 2017 EPS

9 January 2017


III. Stronger USD currency: If near term rates rise throughout the year, we

believe that the U.S. dollar could continue to gain strength against other

currencies, extending the FX headwinds for U.S. based companies that

generate international revenue. This could increase investor appetite for

software companies with less international exposure; we note that small/mid-

caps tend to have much less international revenue exposure, on average,

than large caps (Figures 17 and Figure 18).

Figure 17: Large Cap Int'l Revenue Exposure Figure 18: Small/Mid Cap Int'l Revenue Exposure


IV. Small Business Formation: Mr. Trump has laid out several policies that

could impact the formation of new small-to-medium sized businesses (SMBs)

in the United States, including:

a) Healthcare reform: A repeal of the Affordable Care Act (ACA) could alleviate

some of the incremental costs associated with managing a small business.

b) Tax reform: Lower tax rates would have obvious positive implications for the

profitability of small businesses.

c) Immigration reform: Trump's proposed immigration reform, which includes the

potential deportation of millions of undocumented immigrants could have a

negative impact on the labor market.

d) Trade agreements: Potential tariffs imposed on China and Mexico and a

renegotiation of the North American Free Trade Agreement (NAFTA) could

have mixed implications for small businesses as tariffs could positively impact

the market position for domestic goods while a pullback of NAFTA could

inhibit international trade.

In total, we expect that the policies laid out by President Elect Trump will be a net

benefit for new business formation, particularly SMBs, which could have positive

implications for SHOP and MB, which focus on small business.

4. A recent Credit Suisse IT Survey suggests software spending to continue in

2017, which is why we believe software fundamentals will remain strong. We

recently conducted a survey of enterprise executives (CIOs, CTOs, IT Directors) to

determine their IT spending intentions in 2017 and, specifically, how much and on

what types of software they plan to buy and/or begin implementing next year. The CS

IT survey focuses on larger enterprises (>2,500 employees with varied revenue

distribution above $2B; Figures 19 and 20) from all geographies (Figure 21) and

across all verticals (Figure 22).

0%

10%

20%

30%

40%

50%

60%

70%

AD

SK

SA

P

OR

CL

MS

FT

CH

KP

OTE

X

VM

W

SY

MC

AD

BE

CTX

S

VR

SN

PA

NW

NO

W

AK

AM

CR

M

CA

SP

LK

INTU

% of International Revenue Average

Avg Int'l Revenue Exposure = 41%

0%

10%

20%

30%

40%

50%

60%

70%

VR

NT

ZE

N

LP

SN

CS

OD

QLY

S

SH

OP

JIV

E

DA

TA

BO

X

CA

LD

PFP

T

MB

EV

BG

SN

CR

OO

MA

HD

P

WK

AP

PF

ULTI

RP

ALR

M

TW

OU

% of International Revenue Average

Avg Int'l Revenue Exposure = 18%

9 January 2017


Figure 19: Credit Suisse IT Survey Focuses on

Larger Enterprises…

Figure 20: … With Varied Revenue Distribution

Above $2 Billion…

Source: Credit Suisse estimates, GLG Source: Credit Suisse estimates, GLG

Figure 21: … From Around the World… Figure 22: … and Across All Verticals


Overall software spending, on average, is expected to be up >+4% in 2017, with 93%

of respondents expecting their software spending will be flat or up over 2016 (62%

indicated up, 31% flat), with only 5% expecting their spending on software will be

down in 2017. Of the 62% that responded their software spending would be up in

2017, 24% indicated that it would be flat to up +5%, 61% indicated up +5-10%, and

16% indicated up +10-20%. (Figures 23 and 24)

<5K

11%

5K-10K

18%

10K-20K

23%20K-30K

8%

30K-40K

5%

40K-50K

13%

>50K

Employees

21%

$2B to $4B

16%

$4B to $6B

25%

$6B to

$10B

21%

$10B to

$14B

15%

>$14B

Revenue

23%

Europe

16%

Asia

15%North

America

69%

Healthcare

Financials

Media

ManufacturingRetail

IT Services

Other

Automotive

Natural

ResourcesInsurance

Education

Government Transportation Utilities

9 January 2017


Figure 23: Do You Expect Your Software Spending

to be Up, Down or Flat in 2017?

Figure 24: If You Expect Your Software Spending to

Increase in 2017: By What Percent?


5. Spending will remain strong for security software, finance-related products, and

sales-focused software, but we believe sales-focused products could gain

importance throughout the year if GDP growth accelerates. Specifically, the types

of software which executives indicated they would spend the most on in 2017 (in order

of spend) include: (1) security (firewall, cyber, end-point), (2) ERP (finance,

accounting, G/L, supply chain), (3) CRM (sales-focused products), and (4) HR (core

HR, payroll, LMS, recruiting) (Figure 25).

Figure 25: What Enterprise Software Do You Look to

Replace/Upgrade/Purchase in the Next 12 Months?

Source: Credit Suisse estimates, GLG

6. M&A momentum could continue in 2017 as legacy large cap software vendors

play 'catch-up' in the cloud via acquisition, and rising rates drive down asset

prices, potentially attracting more private equity capital. 2016 marked a

significant rebound in M&A activity in software as various suiters took advantage of

depressed valuation multiples versus the historical average. On-premise software

vendors (ORCL, SAP, IBM, NICE, CA) were active in 2016, and so were existing large

cloud vendor (CRM), new entrants (GOOGL, VZ) along with several financial buyers

(Accel-KKR and Vista Equity). (Figures 26 and 27.) Further, SaaS assets growing

NTM revenue >+20% yr/yr (APIC, CVT, FLTX, TXTR, MKTO, N, and DWRE) were

acquired for an average EV/NTM Sales multiple of 6.7x (see Figure 28), a healthy

premium to the overall subscription software universe of 4.3x, which we believe

2%

5%

31%

62%

0% 10% 20% 30% 40% 50% 60% 70%

Cannot discuss

Down

Flat

Up

% Response

24%

61%

16%

0%

0% 10% 20% 30% 40% 50% 60% 70%

Flat to up 5%

Up 5-10%

Up 10-20%

Up more than20%

% Response

28%

11%

28%

30%

34%

44%

0% 10% 20% 30% 40% 50%

Cannot discuss

Other

HR (Core HR, payroll, LMS,recruiting)

CRM (or other Sales-focusedproduct)

ERP (Finance, Accounting, G/L,Supply Chain)

Security (firewall, cyber, end-point, etc.)

% Response

9 January 2017


indicates the continued appetite and need for premium growth assets. We believe that

this M&A trend will continue into 2017 as SaaS valuations continue to be reasonable

(peer group currently trading at an EV/NTM Revenue multiple of 4.3x, below its long-

term historical average of 4.6x; Figure 38) and on-premise software vendors look for

opportunities to boost growth. Stocks under coverage that we think could be attractive

acquisition targets include MB, PAYC, CALD, CSOD, WK and ULTI.

Figure 26: Pre-2016 SaaS Transactions: EV/Sales Figure 27: 2016 SaaS Transactions: EV/Sales

Source: Company data, Thomson Reuters, Credit Suisse estimates Source: Company data, Thomson Reuters, Credit Suisse estimates

Figure 28: 2016 SaaS Transactions: EV/Sales (>+20% yr/yr Revenue Growth)


3.7x

3.1x

6.3x

5.3x

5.9x

4.8x

8.7x

7.7x

10.7x

7.7x

3.8x

3.1x

9.7x

8.1x

7.6x

6.1x

7.7x

6.6x

12.4x

10.2x

9.1x

7.7x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

EV/LTM Sales EV/NTM Sales

BBBB RNOW TLEO ARBA SFSF KNXA ELOQ ET MKTG CNQR SWI

Avg. 7.8x

Avg. 6.4x

8.0x

6.5x

7.2x

5.7x

3.6x3.3x

4.0x

3.4x3.5x3.3x

7.5x

5.9x

11.0x

8.8x

11.7x

8.9x

7.6x

6.2x

3.3x3.0x

6.7x

5.0x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x


CVT TXTR OPWR SAAS SQI MKTO DWRE N FLTX ININ APIC

Avg. 6.7x

Avg. 5.5x

8.0x

6.5x

7.2x

5.7x

7.5x

5.9x

11.0x

8.8x

11.7x

8.9x

7.6x

6.2x6.7x

5.0x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x


CVT TXTR MKTO DWRE N FLTX APIC

Avg. 8.5x

Avg. 6.7x

9 January 2017


7. ASC 606, the new accounting standard for revenue recognition, will create a lot

of discussion (and confusion) for software vendors, which may make LT

valuation methodologies, such as our new unit economic benchmark analysis,

even more important. Revenue recognition among software vendors will change

beginning in 2018 but investors' exposure to the new treatments could come sooner

as companies that want to do an IPO in 2017 could adopt the new standard early.

Based on our interpretation of the new rules, along with discussions we've had with

people working closely on the issue is that revenue could be recognized sooner than it

has been in the past, even for software vendors that sold multi-year agreements that

are recognized ratably and linearly in the past. For instance, a $3 million, 3-year

contract might not be recognized as $1M each year for three years. More revenue

might need to be recognized in year 1, with less over years 2 and 3 based on several

variables, which we will likely cover in detail in another issue-specific report later in

2017. Suffice to say, this issue will grow in importance as existing public company

guide to its impact throughout 2017.

8. The IPO market was abysmal in 2016, but share price outperformance by those

that did come to market in 2016 could indicate strong potential demand for

more new issues in 2017. Similar to the broader IPO market in 2016, technology-

related IPO activity was also weak as tech IPO registrations were down -34% yr/yr to

37 (from 56 in 2015) while tech IPO pricings also declined -24% yr/yr to 19 (from 25 in

the prior year). Specifically in the software market, IPO registrations and pricings were

also quite lackluster with only 19 registrations (down -30% yr/yr from 27) and only 7

pricings (down -42% yr/yr from 12). We would note, however, that some software

companies may have opted to wait until 2017 due to market conditions and potential

uncertainty following the U.S. presidential election. (Figures 29 and 30.)

Figure 29: # of Tech and Software IPO Registrations Figure 30: # of Tech and Software IPO Pricings


More important, we believe the relative outperformance of software IPOs that priced in

2016 could be a precursor to a strong software IPO market in 2017. Specifically,

software IPOs that priced in 2016 boasted an average stock price performance of

+37% last year, which far exceeds the overall average software return of +12%, as

well as the small-cap / mid-cap software return of +18% / +19%, respectively. (Figures

31 and 40.) We view the stock performance of recent IPOs (and their implied

valuations) as a potential positive catalyst for overall technology IPO volumes in 2017,

and could entice more private companies to pursue an IPO as the benefits of being a

public company (e.g., increased brand awareness, quicker access to capital, public

currency) outweigh staying private. This combined with a relatively healthy tech

registration backlog (IPO registrations less pricings) lead us to believe that 2017 could

54

17

80

36

56

27

37

19

0

10

20

30

40

50

60

70

80

90

Tech IPO Registrations Software IPO Registrations

Nu

mb

er

of

IPO

Re

gis

trati

on

s

2013 2014 2015 2016

-30%

yr/yr

-34%

yr/yr

+48%

yr/yr

+112%

yr/yr-25%

yr/yr-30%

yr/yr

26

11

33

17

25

12

19

7

0

5

10

15

20

25

30

35

40

Tech IPOs Software IPOs

Nu

mb

er

of

IPO

s P

riced

2013 2014 2015 2016

+27%

yr/yr

-24%

yr/yr

-24%

yr/yr +55%

yr/yr

-29%

yr/yr

-42%

yr/yr

9 January 2017


be setting up for a very busy year for software IPOs, contingent on favorable market

conditions, of course.

Figure 31: Relative Outperformance of Software IPOs in 2016 Could Lead to a

Strong Software IPO Market in 2017


9. Public cloud momentum will remain strong as enterprises look to reduce

expenses and gain access to newer technology, while putting most new

workloads and migrating some existing ones to the cloud (IT Survey). Spending

on public cloud will remain strong as 41% of respondents are looking to reduce

operating expenses (Figure 32); 48% indicated they would put mostly new workloads

in the cloud, rather than migrating existing workloads (Figure 33).

Figure 32: If You Are Transitioning to the Cloud,

What is the Rationale?

Figure 33: What Types of Workloads Are You

Transitioning to the Cloud, if Any?


10. The Windows 10 upgrade cycle for enterprises will accelerate in 2017 and

potentially drive new unit growth as many older versions of software are not

compatible with the newest OS, and could require the purchase of a new

version. 36% of enterprise respondents in our survey plan to upgrade their

organization to Windows 10 within the next 12 months, 30% will upgrade in >12

months, but within 24 months, with only 15% responding that they have already

upgraded; 11% noted that upgrading to Windows 10 was a priority but haven't yet set

a date, while only 8% indicated that they had no plans, and that it wasn't a priority

(Figure 34). Companies that claim to have large installed bases of customers on older

-24%

+92%

+23%

+54%

+16%

+39%

+63%

-40%

-20%

0%

20%

40%

60%

80%

100%

SC

WX

TW

LO

TLN

D

EV

BG

AP

TI

CO

UP

BL

2016 Year Price Return (%) Mean Price Return (%)

Average = +37%

2%

5%

15%

33%

34%

34%

41%

0% 10% 20% 30% 40% 50%

Other

Not transitioning to Cloud

Transition Capex to Opex

Scale to larger systems

Incremental capacity

Access to new technology

Reduce Opex

% Response

3%

10%

11%

13%

15%

48%

0% 10% 20% 30% 40% 50%

Other

Only brand new workloadsare going to the cloud

Mostly existing workloads,but some new ones, too

Not transitioning to the cloud

Only moving existing, on-premise workloads

Mostly new workloads, butsome existing ones, too

% Response

9 January 2017


versions of software (INTU, ADBE, ADSK) could see a pick-up in unit sales in 2017 if

the version of software the customer is using is not compatible with Windows 10, if

they upgrade. We believe this partially explains the strength in Desktop units at INTU

and strong conversion revenue at ADBE recently, as many of those vendors'

customer bases are SMB (and consumer), and could have made up a larger portion of

the 15% of respondents in our survey that indicated that they already upgraded.

Figure 34: When do You Plan to Upgrade Your Organization to Microsoft

Windows 10?

Source: Credit Suisse estimates, GLG

Top Stock Picks for 2017

■ Ultimate Software (ULTI) – Outperform, TP$260 (~38% Potential Upside): We view

ULTI's consistent execution over many years and the high degree of visibility into

future operating results to be highly valued by investors, warranting its premium

valuation to its peer group. We believe the recent noise surrounding the company is

unfounded, and we view this as a unique buying opportunity for investors (currently

trading at 5.5x EV/NTM sales, below its historical average of 7.0x; Figures 35 and 36).

Our recent meeting with the CFO noted that: (1) ORCL's acquisition of NetSuite has

not had any impact on ULTI/NetSuite relationship; (2) potential regulatory changes

(including ACA) should have little to no impact on hitting future sales goals; and

(3) there are numerous opportunities to fill the sales funnel, particularly given the

recent acquisition of Kanjoya. We remain highly confident in ULTI's ability to execute

against its preliminary recurring growth guide of >+25% yr/yr for 2017 (management

has ~93% visibility), due to its: (1) strong competitive position with best-of-breed payroll

/ HCM products and a customer retention rate of >97%, (2) unique corporate culture

and rigorous hiring practices, (3) significant cross-sell opportunities as evidenced by

high attach rates for its non-payroll products, and (4) highly disciplined approach to

expanding sales capacity across all business segments.

8%

11%

15%

30%

36%

0% 10% 20% 30% 40%

No plans yet - Not a priority inthe NT

To Be Determind, but on thepriority to-do list

Already have

>12 months, but within 24months

<12 months

% Response

9 January 2017


Figure 35: ULTI: Unique Buying Opportunity, In Our View


Figure 36: ULTI Shares Trading Below Its EV/NTM Sales Historical Average


■ 2U (TWOU) – Outperform, TP$43 (~34% Potential Upside): We continue to believe

that the traditional higher education market is poised for disruption, as evidenced by

the recent strong uptick in demand from both new and existing university partners,

which prompted management to raise their 2017 launch target to ten new programs

(up from previously-stated nine and represents a significant increase from six in 2016).

0%

20%

40%

60%

80%

100%

De

c-1

2

Mar

-13

Jun

-13

Sep

-13

De

c-1

3

Mar

-14

Jun

-14

Sep

-14

De

c-1

4

Mar

-15

Jun

-15

Sep

-15

De

c-1

5

Mar

-16

Jun

-16

Sep

-16

De

c-1

6

ULTI % Premium vs. Peer Group (based on EV / NTM Sales) Historical Average % Premium

Average = 39.0%

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

De

c-1

2

Mar

-13

Jun

-13

Sep

-13

De

c-1

3

Mar

-14

Jun

-14

Sep

-14

De

c-1

4

Mar

-15

Jun

-15

Sep

-15

De

c-1

5

Mar

-16

Jun

-16

Sep

-16

De

c-1

6

EV / NTM Sales Multiple Historical Average (ULTI) EV / NTM Sales (ULTI)

Average = 7.0x

9 January 2017


Our recent discussion with the CEO included: (1) an update to the status of the Yale

PA program, which is still in the accreditation process but is now accepting student

applications, which we believe demonstrate Yale’s commitment to the TWOU-enabled

program; (2) recent program cohorts continue to perform well; and (3) that its new

program pipeline is very robust. In our view, TWOU has the vision, market opportunity,

and leadership to execute against its near-term / long-term financial goals (recently

introduced a three-year financial outlook calling for >+30% yr/yr annual revenue growth

and low single-digit % adj. EBITDA margin expansion each year), especially given the

high strategic value that TWOU provides to university partners, including its deep-

domain industry expertise, strong marketing / recruiting capabilities, and best-of-breed

technology platform and services.

Figure 37: TWOU Shares Trading Below its EV/NTM Sales Historical Average


2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

Ap

r-1

4

Jun

-14

Au

g-1

4

Oct

-14

De

c-1

4

Feb

-15

Ap

r-1

5

Jun

-15

Au

g-1

5

Oct

-15

De

c-1

5

Feb

-16

Ap

r-1

6

Jun

-16

Au

g-1

6

Oct

-16

De

c-1

6

EV / NTM Sales (TWOU) Historical Average EV / NTM Sales (TWOU)

Average = 5.3x

9 January 2017


Appendix

Credit Suisse SaaS Customer Unit Economics Index

Why is this important?

Intuitively, we expect software companies that can demonstrate superior unit economics

prospects to warrant higher valuations (all else equal), and vice versa. We believe this

exercise is important as it could (1) provide a glimpse on the current state of SaaS

companies and overall financial stability in the universe, (2) identify vendors with superior

unit economics / SaaS models currently, and (3) help determine potential compelling

investments opportunities for investors who have a longer investment horizon appetite. As

well, this analysis could help SaaS companies identify areas where they could potentially

accelerate investments to fuel even stronger, more profitable growth.

How is this different / unique versus other valuation frameworks?

The study of unit economics (customer life time value / customer acquisition cost, or

CLTV/CAC) is nothing new and is instrumental when determining the overall health of any

business, especially subscription software companies. By definition:

CLTV = discounted net profits / cash flows attributed to the customer over the entire

expected lifetime with the company

CAC = associated costs incurred by the company to acquire the customer

Key financial metrics (e.g., revenue growth rates, operating margins, cash flows) and

relative multiples (e.g., EV/Revenue, EV/FCF, EV/EBITDA, P/E) are all useful, but they

share one common shortfall: they only tell us the current/near-term state of the business

and are poor indicators on how well the company will do in the years ahead. Clearly, this

prediction model can have varying levels of accuracy and precision depending on the input

variables, of which we attempt to simplify and normalize for with our unique methodology

detailed below.

What is the methodology?

Striking the proper balance between simplicity and complexity is crucial given asymmetric

information. While it would be optimal to fully allocate applicable costs when determining

customer acquisition cost (e.g., sales and marketing expense related to new customers,

costs of onboarding, allocated overhead and support costs), this complexity adds too

much uncertainty and too many variables into the mix, in our view, and ultimately limits the

usefulness of, and the ability to reproduce, this exercise. Our simplified methodology

assumes the following inputs:

𝐶𝐿𝑇𝑉

𝐶𝐴𝐶=

(Δ Recurring Revenue x Recurring Gross Margin) × r

1 − r + 𝑖Sales & Marketing Expense

where r = recurring revenue retention rate, and 𝑖 = discount rate

What happened to gross customer additions? What's your "unit"?

Our methodology is an improvisation on the traditional customer unit economics model,

given that less than a handful of subscription software companies openly disclose gross

customer additions. Essentially, we removed the "unit" (i.e. customer) in both the

numerator and denominator from the standard formula, and evaluated it using a total net

change in recurring gross profit dollar versus sales and marketing expense framework.

Why use recurring revenue retention and not customer retention?

Both recurring revenue retention and customer retention rates are important as each

reveals something different on the overall health of the business. However, for our

analysis, we believe recurring revenue retention is a superior metric as it looks at revenue

churn (which encompasses the percentage of recurring revenue lost due to churned

9 January 2017


customers). Customer churn alone could be misleading as some companies could see a

high recurring revenue retention rate, but a lower customer retention rate simply due to the

nature of their business (e.g., lower-lifetime value subscribers churning off due to failure to

launch). Ultimately, we believe SaaS vendors that demonstrate stronger recurring revenue

growth should warrant a premium valuation to the peer group average, rather than

software companies that might have strong customer growth but lack potential for further

monetization.

Why include the entire allocation of sales and marketing – what about "land and

expand" sales strategies?

We account for all sales and marketing expenses because we evaluate the total

incremental change in recurring revenue, which could include revenue from (1) new

customers, and/or (2) existing customers from cross-sells / upsells. We believe this is a

fair assumption as it would properly reward SaaS companies that either (1) focus

exclusively on landing new accounts (i.e. hunters), (2) emphasize upsell opportunities (i.e.

farmers), or (3) a combination of both.

What discount rate did you use?

We assumed a discount rate of 10%. More importantly, we note that the discount rate isn't

as essential and wouldn't alter our final conclusion (no material impact to the correlation

analysis and R2 using a discount rate of 15% versus 10%), given the inherent nature of our

unit economics analysis (relative framework, which benchmarks subscription software

companies to other SaaS peers in the universe, rather than on an absolute basis).

Company X has cited a much higher CLTV/CAC ratio – why is yours different?

There could be numerous reasons, including the methodology (there are many viable

alternative models) Company X used to derive its CLTV/CAC ratio and the different

assumptions (e.g., on-boarding costs, allocated overhead / support costs, adding new

customers vs. up-selling), which could be vastly different versus our model. Additionally,

some companies do not incorporate a discount rate into their customer unit economics

analysis, of which we assume to be 10%.

Why is Company Y missing from your analysis?

We tried to include and account for every SaaS name in the universe (see Figure 49).

Clearly, some SaaS models may not be fit for this unit economics analysis while others

have limited information available. We will continue to perfect our SaaS unit economics

index over the coming years and will add companies as more data (particularly on

recurring revenue retention rates) becomes publicly available.

What are the shortcomings of this analysis?

While the simplified model is helpful to approximate and estimate the customer lifetime

value, the methodology assumes that the contribution margin, retention rates, and

discount rates are held constant in perpetuity. Any meaningful changes to these variables

will have a material impact on the CLTV / CAC ratio.

9 January 2017


Subscription Software Index: EV/NTM Sales

Figure 38: CS Subscription Software Index: EV/NTM Sales Multiple Index of Subscription Vendors

Source: Thomson Reuters, Credit Suisse Equity Research.

Figure 39: CS Subscription Software Index: EV/NTM Sales Multiple Index of Various Growth Bands


4.28x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

Dec-

09

Mar-

10

Jun-1

0

Sep-

10

Dec-

10

Mar-

11

Jun-1

1

Sep-

11

Dec-

11

Mar-

12

Jun-1

2

Sep-

12

Dec-

12

Mar-

13

Jun-1

3

Sep-

13

Dec-

13

Mar-

14

Jun-1

4

Sep-

14

Dec-

14

Mar-

15

Jun-1

5

Sep-

15

Dec-

15

Mar-

16

Jun-1

6

Sep-

16

Dec-

16

EV / NTM Sales

+1 Sigma

-1 Sigma

Companies include: ADBE, ALRM, AMBR, APPF, APTI, ATHN, BL, BLKB, BOX, BV, CALD, CARB, COUP, CRM, CSOD, CSLT, ECOM, EVBG,

ELLI, FIVN, HDP, HUBS, IL, INST, JIVE, LOCK, LOGM, LPSN, MB, MDSO, MODN, MRIN, NEWR, NOW, PAYC, PCTY, PFPT, QLYS, RNG, RP, SHOP, SNCR, SPSC, TEAM, TLND, TWLO, TWOU, ULTI, VEEV, WAGE, WDAY, WK, XTLY, ZEN

Average

As of January 06, 2017, the various NTM sales growth bands based on consensus included the following companies:

+<15%: AMBR, BLKB, BV, CARB, ECOM, IL, JIVE, LOCK, LOGM, LPSN, MODN, MRIN, RP+15-20%: ADBE, ALRM, ATHN, CALD, CSOD, FIVN, MDSO, QLYS, SPSC, WK, XTLY

+20-25%: APTI, CSLT, CRM, ELLI, RNG, ULTI, VEEV+25-30%: BOX, EVBG, MB, PAYC, PCTY, PFPT, SNCR, WDAY

+>30%: APPF, BL, COUP, HDP, HUBS, INST, NEWR, NOW, SHOP, TEAM, TLND, TWLO, TWOU, WAGE, ZEN

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

14.0x

15.0x

Dec-

11

Mar-

12

Jun-1

2

Sep-

12

Dec-

12

Mar-

13

Jun-1

3

Sep-

13

Dec-

13

Mar-

14

Jun-1

4

Sep-

14

Dec-

14

Mar-

15

Jun-1

5

Sep-

15

Dec-

15

Mar-

16

Jun-1

6

Sep-

16

Dec-

16

+<15% NTM Revenue Growth +15-20% +20-25% +25-30% +>30%

EV / NTM Sales For...

5.4x

4.8x4.9x

4.1x

2.6x

9 January 2017


Software Universe Return Performance

Figure 40: Credit Suisse Software Universe Return by Market Cap


Figure 41: Credit Suisse Software Universe Return by Market Cap (2010-2016 YTD, Annually)


Figure 42: Credit Suisse Software Universe Return by Market Cap (Quarterly)


2010 2011 2012 2013 2014 2015 1Q'16 2Q'16 3Q'16 4Q'16 2016 2017 YTD2010-2016

Avg

All Software 41.5% 6.6% 30.6% 50.3% 14.6% 1.1% -8.7% 12.2% 17.2% -2.7% 12.1% 3.0% 22.4%

Small Cap (<$2B) 47.4% 5.7% 32.7% 63.2% 13.0% -7.8% -12.3% 17.2% 16.0% -0.7% 18.4% 2.3% 24.6%

Mid Cap ($2-10B) 37.4% 20.5% 48.1% 50.0% 14.1% 17.5% -5.0% 9.7% 20.7% -5.2% 19.2% 3.3% 29.5%

Large Cap (>$10B) 32.1% -1.9% 28.0% 31.1% 11.4% 10.5% -3.0% 0.1% 13.0% -3.6% 5.7% 4.5% 16.7%

SaaS Software 53.3% 10.1% 37.3% 75.5% 7.9% 5.3% -12.7% 20.7% 24.6% -3.8% 19.6% 3.0% 29.8%

S&P 500 12.8% 0.0% 13.4% 29.6% 11.4% -0.7% 0.8% 1.9% 3.3% 3.3% 9.5% 1.7% 10.9%

12.8%

0.0%

13.4%

29.6%

11.4%

-0.7%

9.5%

1.7%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

2010 2011 2012 2013 2014 2015 2016 2017 YTD

All Software Small Cap Mid Cap Large Cap S&P 500

0.8%

1.9%3.3% 3.3%

1.7%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1Q16 2Q16 3Q16 4Q16 1Q17TD

All Software Small Cap Mid Cap Large Cap S&P 500

9 January 2017


Coverage Stock Return Performance

Figure 43: Prior Week Price Return Figure 44: December Month Price Return

Source: Thomson Reuters, Credit Suisse estimates. Source: Thomson Reuters, Credit Suisse estimates.

Figure 45: December Quarter Price Return Figure 46: 2016 Year Price Return

Source: Thomson Reuters, Credit Suisse estimates. Source: Thomson Reuters, Credit Suisse estimates.

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

MB

SH

OP

TW

OU

AD

BE

EV

BG

CA

PA

YC

ULTI

OO

MA

VR

NT

INTU

OTE

X

SN

CR

WK

CS

OD

AL

RM

CA

LD

AP

PF

Prior Week Price Return (%) Median Russell 2000

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

EV

BG

CS

OD

MB

SH

OP

PA

YC

AD

BE

CA

CA

LD

INTU

AP

PF

OO

MA

OTE

X

TW

OU

VR

NT

ULTI

ALR

M

WK

SN

CR

December Month Price Return (%) Median Russell 2000

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

MB

AP

PF

EV

BG

SH

OP

INTU

OO

MA

CA

AD

BE

VR

NT

OTE

X

PA

YC

ALR

M

SN

CR

ULTI

CS

OD

CA

LD

TW

OU

WK

December Quarter Price Return (%) Median Russell 2000

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

SH

OP

MB

ALR

M

EV

BG

AP

PF

OO

MA

OTE

X

PA

YC

CS

OD

INTU

CA

AD

BE

TW

OU

SN

CR

ULTI

VR

NT

CA

LD

WK

2016 Year Price Return (%) Median Russell 2000

9

Jan

ua

ry 2

01

7

20

17

So

ftwa

re O

utlo

ok

2

4

Figure 47: Quarterly Estimate Comparison with Consensus and Guidance

US$ in millions, unless otherwise stated

Source: Company data, Credit Suisse estimates, Thomson Reuters.

Software Quarterly Estimates Comparison w/ Consensus and Guidance

Current Quarter (in millions except per share data) Revenue EPS CFO Current Quarter Variance

Ticker Rating Target Price Period Quarter End CS Rev Cons Rev Guide Rev CS EPS Cons EPS Guide EPS CS CFO Cons CFO DCF (50% Wt) CS Target Multiple Valuation (50% Wt)

ADBE NEUTRAL $105 F1Q17 Feb $1,625.4 $1,628.8 ~$1,625 $0.87 $0.87 ~$0.87 $576.2 $603.7 $106 ~7.1x F2017E EV / Revenue Multiple = $105

ALRM OUTPERFORM $37 4Q16 Dec $63.9 $64.0 $0.13 $0.13 $7.5 $9.8 $37 ~5.7x 2017E EV / Revenue Multiple

APPF NEUTRAL $19 4Q16 Dec $27.2 $27.2 $26.4-$27.4 ($0.10) ($0.07) $1.3 $1.5 $19 ~4.4x 2017E EV / Revenue Multiple

CA NEUTRAL $34 F3Q17 Dec $1,013.4 $1,016.1 $0.60 $0.62 $327.6 $407.7 $34 ~13.6x C2017E P/E Multiple = $34

CALD OUTPERFORM $22 4Q16 Dec $54.5 $54.6 $54.0-$55.0 $0.07 $0.07 $0.06-$0.08 $7.1 $9.1 $23 ~5.2x 2017E EV / Revenue Multiple

CSOD NEUTRAL $35 4Q16 Dec $108.9 $108.5 $108.0-$110.0 ($0.07) ($0.04) $35.2 $38.6 $36 ~4.0x 2017E EV / Revenue Multiple = $35

EVBG OUTPERFORM $21 4Q16 Dec $20.6 $20.6 $20.5-$20.7 ($0.04) ($0.04) ($0.04)-($0.05) ($1.3) $0.2 $20 ~5.4x 2017E EV / Revenue Multiple

INTU NEUTRAL $109 F2Q17 Jan $1,054.6 $1,058.6 $1,045-$1,065 $0.35 $0.36 $0.33-$0.36 $279.5 $360.0 $114 ~23.0x Jan '18 P/E Multiple

MB OUTPERFORM $22 4Q16 Dec $38.2 $38.2 $37.7-$38.7 ($0.07) ($0.08) ($0.06)-($0.09) ($2.1) ($1.2) $22 ~4.7x 2017E EV / Revenue Multiple

OOMA OUTPERFORM $12 F4Q17 Jan $27.3 $27.2 $27.0-$27.5 ($0.03) ($0.03) ($0.02)-($0.04) $0.7 $1.1 $12 ~1.3x C2017 EV / Revenue Multiple

OTEX NEUTRAL $55 F2Q17 Dec $535.1 $532.9 $1.04 $1.04 $151.3 $104.3 $54 ~13.4x C2017E P/E Multiple = $55

PAYC OUTPERFORM $56 4Q16 Dec $86.5 $86.4 $85.0-$87.0 $0.12 $0.13 $10.6 $14.9 $56 ~7.6x 2017E EV / Revenue Multiple

SHOP OUTPERFORM $50 4Q16 Dec $121.8 $121.7 $120.0-$122.0 ($0.02) ($0.02) $0.7 $4.7 $50 ~8.5x 2017E EV / Revenue Multiple

SNCR OUTPERFORM $55 4Q16 Dec $148.6 $149.1 $145-$150 $0.26 $0.41 $0.23-$0.28 $45.4 $42.0 $55 ~3.1x 2017E EV / Revenue Multiple = $55

TWOU OUTPERFORM $43 4Q16 Dec $56.3 $56.4 $56.0-$56.4 $0.03 $0.03 $0.02-$0.03 $21.6 $26.4 $43 ~7.5x 2017E EV / Revenue Multiple

ULTI OUTPERFORM $260 4Q16 Dec $210.3 $210.0 ~$210 $0.95 $0.95 $44.4 $47.0 $260 ~8.0x 2017E EV / Revenue Multiple = $260

VRNT UNDERPERFORM $32 F4Q17 Jan $301.9 $294.2 ~$302 $0.88 $0.86 ~$0.88 $86.7 $61.6 $32 ~11.2x F2018E P/E Multiple

WK NEUTRAL $16 4Q16 Dec $45.5 $45.5 $45.2-$45.7 ($0.20) ($0.21) ($0.20)-($0.21) $1.9 $2.8 $16 ~3.0x 2017E EV / Revenue Multiple

Next Quarter (in millions except per share data) Revenue EPS CFO Next Quarter Variance

Ticker Rating Target Price Period Quarter End CS Rev Cons Rev Guide Rev CS EPS Cons EPS Guide EPS CS CFO Cons CFO DCF (50% Wt) CS Target Multiple Valuation (50% Wt)

ADBE NEUTRAL $105 F2Q17 May $1,678.5 $1,686.6 $0.90 $0.91 $574.8 $621.4 $106 ~7.1x F2017E EV / Revenue Multiple = $105

ALRM OUTPERFORM $37 1Q17 Mar $67.1 $67.6 $0.14 $0.14 $5.2 $8.3 $37 ~5.7x 2017E EV / Revenue Multiple

APPF NEUTRAL $19 1Q17 Mar $30.6 $30.5 ($0.06) ($0.05) $1.3 $0.9 $19 ~4.4x 2017E EV / Revenue Multiple

CA NEUTRAL $34 F4Q17 Mar $1,039.4 $1,015.7 $0.56 $0.59 $578.4 $504.9 $34 ~13.6x C2017E P/E Multiple = $34

CALD OUTPERFORM $22 1Q17 Mar $57.0 $56.6 $0.07 $0.07 $5.9 $7.4 $23 ~5.2x 2017E EV / Revenue Multiple

CSOD NEUTRAL $35 1Q17 Mar $113.7 $113.5 $0.02 $0.03 ($31.7) $0.9 $36 ~4.0x 2017E EV / Revenue Multiple = $35

EVBG OUTPERFORM $21 1Q17 Mar $21.3 $21.5 ($0.08) ($0.08) $2.0 $0.5 $20 ~5.4x 2017E EV / Revenue Multiple

INTU NEUTRAL $109 F3Q17 Apr $2,412.2 $2,413.3 $3.83 $3.81 $1,547.4 $1,362.8 $114 ~23.0x Jan '18 P/E Multiple

MB OUTPERFORM $22 1Q17 Mar $41.0 $41.9 ($0.06) ($0.06) ($1.9) $0.5 $22 ~4.7x 2017E EV / Revenue Multiple

OOMA OUTPERFORM $12 F1Q17 Apr $28.0 $28.1 ($0.01) $0.00 ($0.4) $0.8 $12 ~1.3x C2017 EV / Revenue Multiple

OTEX NEUTRAL $55 F3Q17 Mar $526.1 $521.4 $1.01 $0.97 $153.2 $214.2 $54 ~13.4x C2017E P/E Multiple = $55

PAYC OUTPERFORM $56 1Q17 Mar $110.0 $113.2 $0.36 $0.39 $29.4 $39.1 $56 ~7.6x 2017E EV / Revenue Multiple

SHOP OUTPERFORM $50 1Q17 Mar $114.1 $117.0 ($0.05) ($0.05) $0.1 $0.9 $50 ~8.5x 2017E EV / Revenue Multiple

SNCR OUTPERFORM $55 1Q17 Mar $145.4 $154.9 $0.37 $0.49 $44.5 $5.7 $55 ~3.1x 2017E EV / Revenue Multiple = $55

TWOU OUTPERFORM $43 1Q17 Mar $61.7 $61.8 $0.00 $0.01 $11.1 $4.4 $43 ~7.5x 2017E EV / Revenue Multiple

ULTI OUTPERFORM $260 1Q17 Mar $229.0 $229.1 $0.76 $0.81 $40.6 $41.1 $260 ~8.0x 2017E EV / Revenue Multiple = $260

VRNT UNDERPERFORM $32 F1Q18 Apr $272.8 $263.8 $0.59 $0.49 $63.2 $56.7 $32 ~11.2x F2018E P/E Multiple

WK NEUTRAL $16 1Q17 Mar $51.1 $50.7 ($0.18) ($0.14) ($6.2) ($5.7) $16 ~3.0x 2017E EV / Revenue Multiple

Note: EPS excludes stock option compensation and amortization of intangibles unless otherw ise noted

Current Quarter

Next Quarter

9

Jan

ua

ry 2

01

7

20

17

So

ftwa

re O

utlo

ok

2

5

Figure 48: Annual Estimate Comparison with Consensus and Guidance

US$ in millions, unless otherwise stated

Source: Company data, Credit Suisse estimates, Thomson Reuters.

Software Annual Estimates Comparison w/ Consensus and Guidance

Current Year (in millions except per share data) Revenue EPS CFO Current Year Variance

Ticker Rating Target Price Period Year End CS Rev Cons Rev Guide Rev CS EPS Cons EPS Guide EPS CS CFO Cons CFO DCF (50% Wt) CS Target Multiple Valuation (50% Wt)

ADBE NEUTRAL $105 F2017 Nov $6,961.3 $6,991.1 ~$6,950 $3.75 $3.83 ~$3.75 $2,568.5 $2,645.2 $106 ~7.1x F2017E EV / Revenue Multiple = $105

ALRM OUTPERFORM $37 2016 Dec $255.2 $255.3 $254.0-$256.3 $0.59 $0.59 $0.58-$0.59 $16.3 $18.7 $37 ~5.7x 2017E EV / Revenue Multiple

APPF NEUTRAL $19 2016 Dec $104.8 $104.8 $104.0-$105.0 ($0.22) ($0.19) $6.0 $6.2 $19 ~4.4x 2017E EV / Revenue Multiple

CA NEUTRAL $34 F2017 Mar $4,069.7 $4,046.2 $4,030-$4,070 $2.49 $2.52 $2.49-$2.54 $1,008.9 $972.9 $34 ~13.6x C2017E P/E Multiple = $34

CALD OUTPERFORM $22 2016 Dec $205.1 $205.3 $204.6-$205.6 $0.26 $0.27 $0.25-$0.27 $27.9 $29.9 $23 ~5.2x 2017E EV / Revenue Multiple

CSOD NEUTRAL $35 2016 Dec $423.0 $423.4 $422.0-$424.0 $0.04 $0.06 $0.04 $36.9 $36.4 $36 ~4.0x 2017E EV / Revenue Multiple = $35

EVBG OUTPERFORM $21 2016 Dec $76.2 $76.2 $76.1-$76.3 ($0.31) ($0.34) ($0.31)-($0.32) $5.3 $2.9 $20 ~5.4x 2017E EV / Revenue Multiple

INTU NEUTRAL $109 F2017 Jul $5,074.9 $5,064.6 $5,000-$5,100 $4.35 $4.35 $4.30-$4.40 $1,601.1 $1,586.8 $114 ~23.0x Jan '18 P/E Multiple

MB OUTPERFORM $22 2016 Dec $139.0 $139.0 $138.5-$139.5 ($0.39) ($0.39) ($0.37)-($0.40) ($6.2) ($5.4) $22 ~4.7x 2017E EV / Revenue Multiple

OOMA OUTPERFORM $12 F2017 Jan $104.3 $104.2 $104.0-$104.5 ($0.17) ($0.18) ($0.16)-($0.19) $0.5 $0.2 $12 ~1.3x C2017 EV / Revenue Multiple

OTEX NEUTRAL $55 F2017 Jun $2,103.7 $2,100.5 $4.00 $3.95 $557.7 $493.5 $54 ~13.4x C2017E P/E Multiple = $55

PAYC OUTPERFORM $56 2016 Dec $327.9 $327.7 $326.5-$328.5 $0.82 $0.82 $85.1 $86.6 $56 ~7.6x 2017E EV / Revenue Multiple

SHOP OUTPERFORM $50 2016 Dec $380.7 $380.8 $379-$381 ($0.14) ($0.14) $8.0 $11.0 $50 ~8.5x 2017E EV / Revenue Multiple

SNCR OUTPERFORM $55 2016 Dec $636.7 $637.3 $2.00 $2.00 $101.9 $137.1 $55 ~3.1x 2017E EV / Revenue Multiple = $55

TWOU OUTPERFORM $43 2016 Dec $204.8 $204.9 $204.5-$204.9 ($0.12) ($0.12) ($0.12)-($0.13) $7.2 $9.1 $43 ~7.5x 2017E EV / Revenue Multiple

ULTI OUTPERFORM $260 2016 Dec $781.0 $780.8 implied $780.7 $3.24 $3.23 $159.7 $159.7 $260 ~8.0x 2017E EV / Revenue Multiple = $260

VRNT UNDERPERFORM $32 F2017 Jan $1,075.0 $1,066.8 ~$1,075 $2.50 $2.48 ~$2.50 $158.4 $164.0 $32 ~11.2x F2018E P/E Multiple

WK NEUTRAL $16 2016 Dec $177.8 $177.7 $177.5-$178.0 ($0.84) ($0.84) ($0.84)-($0.85) ($18.5) ($16.1) $16 ~3.0x 2017E EV / Revenue Multiple

Next Year (in millions except per share data) Revenue EPS CFO Next Year Variance

Ticker Rating Target Price Period Year End CS Rev Cons Rev Guide Rev CS EPS Cons EPS Guide EPS CS CFO Cons CFO DCF (50% Wt) CS Target Multiple Valuation (50% Wt)

ADBE NEUTRAL $105 F2018 Nov $8,256.5 $8,323.6 $4.70 $4.80 $2,990.4 $3,138.8 $106 ~7.1x F2017E EV / Revenue Multiple = $105

ALRM OUTPERFORM $37 2017 Dec $291.4 $295.0 $0.63 $0.63 $33.5 $37.3 $37 ~5.7x 2017E EV / Revenue Multiple

APPF NEUTRAL $19 2017 Dec $137.5 $136.4 ($0.14) ($0.11) $10.3 $8.0 $19 ~4.4x 2017E EV / Revenue Multiple

CA NEUTRAL $34 F2018 Mar $4,139.5 $4,087.9 $2.60 $2.61 $1,050.4 $1,109.9 $34 ~13.6x C2017E P/E Multiple = $34

CALD OUTPERFORM $22 2017 Dec $243.0 $243.1 $0.35 $0.35 $38.0 $38.5 $23 ~5.2x 2017E EV / Revenue Multiple

CSOD NEUTRAL $35 2017 Dec $474.0 $488.4 $0.18 $0.24 $48.3 $65.3 $36 ~4.0x 2017E EV / Revenue Multiple = $35

EVBG OUTPERFORM $21 2017 Dec $95.8 $95.8 ($0.25) ($0.27) $12.4 $8.9 $20 ~5.4x 2017E EV / Revenue Multiple

INTU NEUTRAL $109 F2018 Jul $5,490.0 $5,487.9 $5.03 $4.96 $1,760.1 $1,724.6 $114 ~23.0x Jan '18 P/E Multiple

MB OUTPERFORM $22 2017 Dec $179.3 $179.8 ($0.15) ($0.13) $3.0 $3.6 $22 ~4.7x 2017E EV / Revenue Multiple

OOMA OUTPERFORM $12 F2018 Jan $122.5 $121.5 $0.13 $0.08 $2.0 $6.0 $12 ~1.3x C2017 EV / Revenue Multiple

OTEX NEUTRAL $55 F2018 Jun $2,172.3 $2,168.4 $4.11 $4.25 $625.0 $606.0 $54 ~13.4x C2017E P/E Multiple = $55

PAYC OUTPERFORM $56 2017 Dec $425.5 $422.1 $1.05 $1.04 $100.5 $102.4 $56 ~7.6x 2017E EV / Revenue Multiple

SHOP OUTPERFORM $50 2017 Dec $548.6 $562.5 ($0.01) ($0.05) $30.9 $29.2 $50 ~8.5x 2017E EV / Revenue Multiple

SNCR OUTPERFORM $55 2017 Dec $815.9 $815.2 $810.0-$820.0 $2.53 $2.52 $2.45-$2.60 $166.5 $151.5 $55 ~3.1x 2017E EV / Revenue Multiple = $55

TWOU OUTPERFORM $43 2017 Dec $267.7 $267.9 $265.9-$268.4 ($0.10) ($0.11) $9.3 $9.6 $43 ~7.5x 2017E EV / Revenue Multiple

ULTI OUTPERFORM $260 2017 Dec $971.3 $968.2 implied $968.1 $3.95 $4.00 $188.4 $196.2 $260 ~8.0x 2017E EV / Revenue Multiple = $260

VRNT UNDERPERFORM $32 F2018 Jan $1,141.3 $1,129.4 $2.85 $2.78 $199.7 $189.4 $32 ~11.2x F2018E P/E Multiple

WK NEUTRAL $16 2017 Dec $206.1 $208.9 ($0.76) ($0.67) ($9.4) $0.1 $16 ~3.0x 2017E EV / Revenue Multiple

Note: EPS excludes stock option compensation and amortization of intangibles unless otherw ise noted

Current Year

Next Year

9

Jan

ua

ry 2

01

7

20

17

So

ftwa

re O

utlo

ok

2

6

Figure 49: Subscription Software Comparables

Source: Company data, Credit Suisse estimates

Current Market Enterprise 2016E 2017E 2016E Rev. 2017E Rev.

Company Price Cap (M) Value (M) Rev. (M) Rev. (M) Gr. (yr/yr) Gr. (yr/yr) 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E

Subscription Software

2U TWOU $32.18 $1,616 $1,459 $205 $268 36.4% 30.7% 7.1x 5.5x Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf (2.8%) (1.9%)Adobe ADBE $108.30 $54,277 $51,418 $5,854 $6,961 22.1% 18.9% 8.8x 7.4x 22.2x 18.5x 23.4x 20.0x 25.8x 22.1x 3.7% 4.3% 36.0x 28.9x 33.8% 34.9%

Alarm.com ALRM $27.18 $1,313 $1,185 $255 $291 22.2% 14.2% 4.6x 4.1x 25.9x 21.3x 72.6x 35.3x Nmf 55.0x 0.5% 1.6% 46.4x 43.5x 16.1% 17.2%Amber Road AMBR $8.99 $241 $247 $73 $83 5.9% 14.6% 3.4x 3.0x Nmf Nmf Nmf 47.9x Nmf Nmf Nmf 0.7% Nmf Nmf (14.6%) (9.6%)

AppFolio APPF $22.35 $772 $722 $105 $137 39.8% 31.2% 6.9x 5.3x Nmf 107.2x 120.6x 70.4x Nmf Nmf Nmf Nmf Nmf Nmf (7.3%) (3.5%)Apptio APTI $17.88 $697 $575 $158 $190 22.5% 19.9% 3.6x 3.0x Nmf Nmf Nmf 67.0x Nmf Nmf Nmf Nmf Nmf Nmf (15.1%) (8.8%)

athenahealth ATHN $115.86 $4,634 $4,795 $1,098 $1,306 18.8% 18.9% 4.4x 3.7x 19.8x 15.6x 24.5x 18.3x Nmf 58.5x 0.7% 1.8% 64.4x 47.6x 11.2% 12.6%Atlassian TEAM $24.72 $5,401 $4,647 $532 $690 37.3% 29.7% 8.7x 6.7x 42.6x 31.5x 30.9x 23.5x 36.6x 25.0x 2.3% 3.4% 67.8x 62.5x 16.4% 16.8%

Bazaarvoice BV $4.95 $411 $361 $202 $213 2.6% 5.5% 1.8x 1.7x 32.7x 19.1x 32.9x 20.4x Nmf 0.8x Nmf 105.1% Nmf Nmf (1.6%) 0.3%Blackbaud BLKB $66.17 $3,136 $3,495 $731 $795 13.0% 8.7% 4.8x 4.4x 20.6x 18.8x 23.4x 47.4x 35.1x 32.9x 3.2% 3.4% 34.8x 30.2x 19.4% 20.4%Blackline BL $27.17 $1,109 $1,155 $122 $161 46.0% 31.7% 9.5x 7.2x Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf (11.9%) (13.5%)

Box BOX $15.05 $1,931 $1,828 $389 $492 31.8% 26.4% 4.7x 3.7x Nmf Nmf Nmf 58.4x Nmf Nmf Nmf 0.8% Nmf Nmf (21.2%) (11.6%)Callidus Software CALD $16.30 $1,077 $891 $205 $243 18.5% 18.5% 4.3x 3.7x 35.2x 25.6x 32.0x 23.4x 50.1x 34.4x 1.7% 2.4% 61.6x 47.2x 8.5% 10.3%

Carbonite CARB $15.55 $428 $379 $204 $219 13.0% 7.0% 1.9x 1.7x 12.9x 12.1x 40.0x 11.3x 107.0x 14.6x 0.8% 6.1% 27.5x 23.0x 8.2% 9.6%ChannelAdvisor ECOM $14.75 $379 $316 $113 $129 12.7% 14.1% 2.8x 2.4x 61.3x 45.3x Nmf 117.3x Nmf Nmf Nmf 0.1% Nmf Nmf (2.2%) (2.0%)

Cornerstone Ondemand CSOD $42.25 $2,577 $2,340 $423 $474 24.5% 12.0% 5.5x 4.9x 71.0x 53.2x 63.4x 48.5x Nmf Nmf 0.4% 0.7% Nmf Nmf 0.7% 3.1%Ellie Mae ELLI $84.09 $2,816 $2,429 $354 $433 39.2% 22.4% 6.9x 5.6x 21.8x 17.1x 23.3x 18.6x 47.3x 31.4x 1.8% 2.7% 38.4x 35.9x 23.9% 23.8%

Everbridge EVBG $19.31 $534 $472 $76 $96 29.7% 25.8% 6.2x 4.9x Nmf Nmf 89.3x 38.2x Nmf Nmf Nmf 0.2% Nmf Nmf (6.4%) (7.5%)Five9 FIVN $14.78 $779 $766 $160 $187 24.0% 16.7% 4.8x 4.1x 106.1x 88.7x Nmf Nmf Nmf 108.6x 0.6% 0.9% Nmf Nmf (2.0%) 0.3%

Hortonworks HDP $9.00 $531 $448 $181 $236 48.0% 30.6% 2.5x 1.9x Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf (84.4%) (53.1%)HubSpot HUBS $52.60 $1,862 $1,749 $269 $350 47.8% 30.3% 6.5x 5.0x Nmf Nmf 114.1x 63.6x Nmf Nmf Nmf 0.5% Nmf Nmf (5.4%) (2.9%)Instructure INST $20.65 $580 $497 $110 $149 50.4% 35.6% 4.5x 3.3x Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf (42.1%) (26.6%)Intralinks IL $13.31 $758 $790 $299 $325 8.1% 9.0% 2.6x 2.4x 14.5x 11.3x 18.6x 11.8x 85.4x 31.9x 1.2% 3.3% 52.0x 34.5x 9.5% 12.9%

Jive Software JIVE $4.45 $347 $247 $202 $204 3.3% 0.8% 1.2x 1.2x 14.6x 12.2x Nmf 49.4x Nmf Nmf Nmf Nmf 68.5x 40.5x 2.8% 5.4%LifeLock LOCK $23.93 $2,329 $2,163 $667 $747 13.6% 12.0% 3.2x 2.9x 24.6x 20.1x 23.1x 17.1x 29.3x 19.4x 3.2% 4.8% 31.3x 25.5x 11.1% 13.0%

LivePerson LPSN $7.50 $420 $365 $223 $229 (6.8%) 2.8% 1.6x 1.6x 19.3x 16.0x 15.1x 13.5x Nmf Nmf 0.3% 0.3% Nmf 67.0x 1.7% 4.7%LogMeIn LOGM $98.35 $2,498 $2,318 $335 $385 23.5% 14.9% 6.9x 6.0x 26.2x 21.6x 22.6x 19.4x 24.5x 23.2x 3.8% 4.0% 49.3x 42.2x 22.9% 23.5%

Marin Software MRIN $2.65 $102 $69 $99 $96 (8.8%) (3.5%) 0.7x 0.7x Nmf 25.8x 11.4x 9.8x Nmf 17.5x Nmf 3.8% Nmf Nmf (5.5%) (3.0%)Medidata Solutions MDSO $52.76 $3,046 $2,976 $464 $553 18.1% 19.2% 6.4x 5.4x 28.6x 22.9x 30.9x 22.9x Nmf Nmf Nmf Nmf 51.7x 43.0x 20.7% 21.5%

Mindbody MB $24.70 $1,024 $954 $139 $179 37.2% 29.0% 6.9x 5.3x Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf (9.9%) (2.8%)Model N MODN $8.75 $244 $178 $111 $128 14.6% 14.8% 1.6x 1.4x Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf (15.6%) (11.0%)

New Relic NEWR $30.55 $1,568 $1,371 $239 $310 45.9% 30.0% 5.7x 4.4x Nmf Nmf Nmf 51.5x Nmf Nmf Nmf 0.2% Nmf Nmf (16.7%) (5.0%)Ooma OOMA $9.33 $168 $114 $104 $123 17.5% 17.5% 1.1x 0.9x Nmf 26.7x Nmf 58.1x Nmf Nmf Nmf 0.1% Nmf 73.9x (3.1%) 1.9%

Paycom Software PAYC $47.49 $2,798 $2,753 $328 $425 45.9% 29.8% 8.4x 6.5x 30.9x 23.4x 32.4x 27.4x 61.0x 39.8x 1.6% 2.5% 58.2x 45.0x 23.1% 23.4%Paylocity PCTY $31.34 $1,606 $1,528 $264 $334 37.6% 26.6% 5.8x 4.6x 45.7x 34.3x 42.9x 33.1x 101.0x 81.7x 0.9% 1.2% 91.6x 69.8x 7.2% 7.8%Proofpoint PFPT $79.18 $3,334 $3,283 $373 $484 40.6% 29.8% 8.8x 6.8x 95.5x 66.9x 43.9x 24.9x 85.0x 40.1x 1.2% 2.5% Nmf Nmf 5.1% 6.0%

Qualys QLYS $33.05 $1,279 $1,069 $198 $234 20.7% 18.1% 5.4x 4.6x 16.5x 13.9x 14.4x 13.0x 21.6x 18.5x 3.9% 4.5% 41.0x 36.1x 24.2% 23.6%RealPage RP $29.20 $2,281 $2,217 $568 $650 21.3% 14.4% 3.9x 3.4x 17.7x 14.5x 15.7x 15.8x 38.6x 19.8x 2.5% 4.9% 39.4x 32.3x 17.6% 18.7%

RingCentral RNG $21.80 $1,598 $1,461 $377 $469 27.2% 24.4% 3.9x 3.1x 66.1x 46.3x 54.2x 38.5x Nmf Nmf 0.1% 0.1% Nmf Nmf 1.9% 3.0%Salesforce.com CRM $73.80 $50,957 $52,271 $8,230 $10,006 25.5% 21.6% 6.4x 5.2x 31.1x 24.3x 26.7x 21.5x 39.0x 26.4x 2.6% 3.9% 76.9x 58.6x 13.1% 14.5%

ServiceNow NOW $82.10 $13,578 $13,270 $1,385 $1,802 37.7% 30.2% 9.6x 7.4x 50.9x 34.1x 74.8x 22.4x 61.1x 30.0x 1.6% 3.3% 118.2x 78.1x 12.9% 15.9%Shopify SHOP $46.90 $4,750 $4,350 $381 $549 85.5% 44.1% 11.4x 7.9x Nmf Nmf Nmf Nmf Nmf Nmf Nmf 0.2% Nmf Nmf (3.4%) (0.1%)

SPS Commerce SPSC $71.20 $1,235 $1,109 $193 $227 21.8% 17.7% 5.7x 4.9x 42.2x 33.8x 63.6x 49.2x 117.0x 76.2x 0.8% 1.2% 72.3x 60.2x 10.2% 11.0%Synchronoss SNCR $38.62 $1,877 $1,770 $637 $816 9.8% 28.2% 2.8x 2.2x 9.8x 6.9x 17.4x 10.6x 42.5x 16.5x 2.2% 5.7% 19.3x 15.3x 21.3% 26.3%

Talend TLND $22.70 $624 $627 $105 $137 38.3% 29.9% 6.0x 4.6x Nmf Nmf Nmf 89.3x Nmf Nmf Nmf 0.7% Nmf Nmf (21.4%) (11.3%)Twilio TWLO $27.63 $2,271 $2,019 $269 $352 61.4% 30.5% 7.5x 5.7x Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf (6.3%) (2.5%)

Ultimate Software ULTI $189.08 $5,762 $5,651 $781 $971 26.4% 24.4% 7.2x 5.8x 30.2x 23.7x 35.4x 30.0x 67.3x 55.0x 1.5% 1.8% 58.4x 47.8x 20.6% 21.2%Veeva VEEV $42.25 $6,229 $5,718 $529 $641 31.8% 21.2% 10.8x 8.9x 34.5x 28.2x 46.8x 37.1x 46.6x 37.6x 2.0% 2.4% 63.1x 53.8x 28.9% 29.1%

WageWorks WAGE $69.80 $2,614 $2,027 $367 $488 9.9% 32.9% 5.5x 4.2x 18.7x 14.3x Nmf Nmf Nmf Nmf Nmf Nmf 50.8x 40.5x 23.4% 22.9%Workday WDAY $73.85 $18,034 $16,647 $1,530 $1,958 35.2% 28.0% 10.9x 8.5x Nmf 78.5x 49.7x 38.4x Nmf 88.0x 0.4% 1.0% Nmf Nmf 1.1% 3.3%Workiva WK $13.65 $556 $524 $178 $206 22.4% 16.0% 2.9x 2.5x Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf Nmf (19.0%) (14.6%)

Xactly XTLY $11.10 $344 $316 $94 $112 23.3% 19.9% 3.4x 2.8x Nmf Nmf Nmf Nmf Nmf Nmf Nmf 0.0% Nmf Nmf (11.1%) (8.2%)Zendesk ZEN $22.47 $2,114 $1,903 $311 $411 48.8% 32.3% 6.1x 4.6x Nmf Nmf 95.3x 40.5x Nmf Nmf Nmf 0.4% Nmf Nmf (7.1%) (3.7%)

Simple Average $4,216 $4,042 $600 $729 27.2% 21.3% 5.4x 4.3x 35.2x 30.7x 43.2x 36.0x 56.1x 38.7x 1.7% 4.7% 55.0x 45.5x 1.5% 4.8%Market Cap Weighted Average 28.8% 22.8% 7.6x 6.1x 25.5x 26.5x 31.5x 24.1x 29.5x 29.5x 2.1% 3.1% 46.3x 36.0x 15.5% 17.2%Median $1,598 $1,459 $264 $325 24.0% 21.2% 5.5x 4.4x 28.6x 23.4x 32.4x 30.0x 46.9x 31.7x 1.6% 1.8% 51.8x 43.2x 1.7% 3.3%

EV / Revenue EV / EBITDA EV / Op. CF EV / Free CF FCF Yield P / E Operating Margin

9 January 2017


Companies Mentioned (Price as of 06-Jan-2017) 2U, Inc (TWOU.OQ, $32.18) Adobe Systems Inc. (ADBE.OQ, $108.3) Alarm.com Holdings Inc. (ALRM.OQ, $27.18) Amber Road (AMBR.N, $8.99) AppFolio Inc. (APPF.OQ, $22.35) Atlassian Corp (TEAM.OQ, $24.72) Bazaarvoice Inc. (BV.OQ, $4.95) Blackbaud (BLKB.OQ, $66.17) Blackline (BL.OQ, $27.17) CA Inc. (CA.OQ, $33.19) Callidus Software Inc. (CALD.OQ, $16.3) Carbonite (CARB.OQ, $15.55) Castlight Health (CSLT.N, $4.3) ChannelAdvisor (ECOM.N, $14.75) Cornerstone OnDemand, Inc. (CSOD.OQ, $42.25) Coupa (COUP.OQ, $24.13) Ellie Mae (ELLI.N, $84.09) Everbridge, Inc. (EVBG.OQ, $19.31) Five9 (FIVN.OQ, $7.64) Hortonworks, Inc. (HDP.OQ, $9.0) HubSpot (HUBS.N, $52.6) Instructure (INST.N, $20.65) International Business Machines Corp. (IBM.N, $169.53) Intralinks Holdings (IL.N, $13.31) Intuit Inc. (INTU.OQ, $116.86) Jive Software, Inc. (JIVE.OQ, $4.45) LifeLock (LOCK.N, $23.93) LivePerson (LPSN.OQ, $7.5) LogMeIn (LOGM.OQ, $98.35) Marin Software (MRIN.N, $2.65) Medidata Solutions Inc. (MDSO.OQ, $52.76) MicroStrategy (MSTR.OQ, $199.17) Microsoft Corporation (MSFT.OQ, $62.84) Mindbody Inc. (MB.OQ, $24.7) Model N (MODN.N, $8.75) New Relic (NEWR.N, $30.55) Nice (NICE.OQ, $69.15) Ooma Inc. (OOMA.N, $9.3) Open Text Corporation (OTEX.OQ, $62.59) Oracle Corporation (ORCL.N, $38.45) Paycom Software, Inc. (PAYC.N, $47.49) Paylocity Hldg (PCTY.OQ, $31.34) Proofpoint (PFPT.OQ, $79.18) Qualys (QLYS.OQ, $33.05) RealPage, Inc. (RP.OQ, $29.2) RingCentral (RNG.N, $21.8) SAP (SAPG.F, €84.0) SPS Commerce (SPSC.OQ, $71.2) Salesforce.com Inc. (CRM.N, $73.8) ServiceNow (NOW.N, $82.1) Shopify Inc. (SHOP.N, $46.9) Synchronoss Technologies, Inc. (SNCR.OQ, $38.62) Talend (TLND.OQ, $22.7) Tangoe (TNGO.OQ, $8.13) Teradata Corp (TDC.N, $28.75) The Ultimate Software Group, Inc. (ULTI.OQ, $189.08) Twilio (TWLO.N, $27.63) Veeva Systems (VEEV.N, $42.25) Verint Systems Inc. (VRNT.OQ, $36.5) WageWorks (WAGE.N, $69.8) Workday (WDAY.N, $73.85) Workiva, Inc. (WK.N, $13.65) Xactly (XTLY.N, $11.1) Zendesk (ZEN.N, $22.47) athenahealth (ATHN.OQ, $115.86)

Disclosure Appendix

Analyst Certification I, Michael Nemeroff, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and

9 January 2017


Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the releva nt country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiv eness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12 -month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an E TR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time. Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cov er multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 45% (64% banking clients) Neutral/Hold* 38% (59% banking clients) Underperform/Sell* 15% (53% banking clients) Restricted 3% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.

Important Global Disclosures Credit Suisse’s research reports are made available to clients through our proprietary research portal on CS PLUS. Credit Suisse research products may also be made available through third-party vendors or alternate electronic means as a convenience. Certain research products are only made available through CS PLUS. The services provided by Credit Suisse’s analysts to clients may depend on a specific client’s preferences regarding the frequency and manner of receiving communications, the client’s risk profile and investment, the size and scope of the overall client relationship with the Firm, as well as legal and regulatory constraints. To access all of Credit Suisse’s research that you are entitled to receive in the most timely manner, please contact your sales representative or go to https://plus.credit-suisse.com . Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html . Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: See the Companies Mentioned section for full company names

The subject company (OOMA.N, OTEX.OQ, ALRM.OQ, WK.N, PAYC.N, CSOD.OQ, TWOU.OQ, MB.OQ, CA.OQ, ADBE.OQ, EVBG.OQ, VRNT.OQ, INTU.OQ, CALD.OQ, SNCR.OQ, MDSO.OQ, BV.OQ, SAPG.F, IBM.N, SHOP.N) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (OOMA.N, PAYC.N, TWOU.OQ, MB.OQ, ADBE.OQ, EVBG.OQ, CALD.OQ, SNCR.OQ, IBM.N, SHOP.N) within the past 12 months. Credit Suisse provided non-investment banking services to the subject company (IBM.N) within the past 12 months Credit Suisse has managed or co-managed a public offering of securities for the subject company (EVBG.OQ, CALD.OQ, SHOP.N) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (OOMA.N, PAYC.N, TWOU.OQ, MB.OQ, ADBE.OQ, EVBG.OQ, CALD.OQ, SNCR.OQ, IBM.N, SHOP.N) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (OOMA.N, OTEX.OQ, ALRM.OQ, APPF.OQ, WK.N, PAYC.N, CSOD.OQ, TWOU.OQ, MB.OQ, CA.OQ, ADBE.OQ, EVBG.OQ, VRNT.OQ, INTU.OQ, CALD.OQ, SNCR.OQ, MDSO.OQ, BV.OQ, VEEV.N, SAPG.F, IBM.N, SHOP.N) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (IBM.N) within the past 12 months

https://plus.credit-suisse.com/

http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

9 January 2017


As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (CSOD.OQ).

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683. For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=274988&v=6kom67ffgy1i03820qql2rjmf .

Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html. The following disclosed European company/ies have estimates that comply with IFRS: (SAPG.F). Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (OOMA.N, ALRM.OQ, APPF.OQ, WK.N, PAYC.N, TWOU.OQ, MB.OQ, EVBG.OQ, VRNT.OQ, CALD.OQ, SNCR.OQ, IBM.N, SHOP.N) within the past 3 years. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. This research report is authored by: Credit Suisse Securities (USA) LLC .............................................................................. Michael Nemeroff ; Alexander Hu ; Christopher Rochester

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

https://rave.credit-suisse.com/disclosures/view/report?i=274988&v=6kom67ffgy1i03820qql2rjmf

9 January 2017


This report is produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who-we-are This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates.The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk.

This report is issued and distributed in European Union (except Switzerland): by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Germany: Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). United States and Canada: Credit Suisse Securities (USA) LLC; Switzerland: Credit Suisse AG; Brazil: Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; Mexico: Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); Japan: by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau ( Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; Hong Kong: Credit Suisse (Hong Kong) Limited; Australia: Credit Suisse Equities (Australia) Limited; Thailand: Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok10500, Thailand, Tel. +66 2614 6000; Malaysia: Credit Suisse Securities (Malaysia) Sdn Bhd; Singapore: Credit Suisse AG, Singapore Branch; India: Credit Suisse Securities (India) Private Limited (CIN no.U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India as Research Analyst (registration no. INH 000001030) and as Stock Broker (registration no. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777; South Korea: Credit Suisse Securities (Europe) Limited,

Seoul Branch; Taiwan: Credit Suisse AG Taipei Securities Branch; Indonesia: PT Credit Suisse Securities Indonesia; Philippines:Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Additional Regional Disclaimers Hong Kong: Credit Suisse (Hong Kong) Limited ("CSHK") is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. CSHKL does not hold an Australian financial services licence (AFSL) and is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (the Act) under Class Order 03/1103 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Act). Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Australia (to the extent services are offered in Australia): Credit Suisse Securities (Europe) Limited (“CSSEL”) and Credit Suisse International (“CSI”) are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority (“FCA”) and the Prudential Regulation Authority under UK laws, which differ from Australian Laws. CSSEL and CSI do not hold an Australian Financial Services Licence (“AFSL”) and are exempt from the requirement to hold an AFSL under the Corporations Act (Cth) 2001 (“Corporations Act”) under Class Order 03/1099 published by the Australian Securities and Investments Commission (“ASIC”), in respect of the financial services provided to Australian wholesale clients (within the meaning of section 761G of the Corporations Act). This material is not for distribution to retail clients and is directed exclusively at Credit Suisse's professional clients and eligible counterparties as defined by the FCA, and wholesale clients as defined under section 761G of the Corporations Act. Credit Suisse (Hong Kong) Limited (“CSHK”) is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. CSHKL does not hold an AFSL and is exempt from the requirement to hold an AFSL under the Corporations Act under Class Order 03/1103 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Corporations Act). Credit Suisse Securities (USA) LLC (CSSU) and Credit Suisse Asset Management LLC (CSAM LLC) are licensed and regulated by the Securities Exchange Commission of the United States under the laws of the United States, which differ from Australian laws. CSSU and CSAM LLC do not hold an AFSL and is exempt from the requirement to hold an AFSL under the Corporations Act under Class Order 03/1100 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Corporations Act). Malaysia: Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. Singapore: This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore Branch to overseas investors (as defined under the Financial Advisers Regulations). Credit Suisse AG, Singapore Branch may distribute reports produced by its foreign entities or affiliates pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact Credit Suisse AG, Singapore Branch at +65-6212-2000 for matters arising from, or in connection with, this report. By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore Branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the “FAA”), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore Branch may provide to you. UAE: This information is being distributed by Credit Suisse AG (DIFC Branch), duly licensed and regulated by the Dubai Financial Services Authority (“DFSA”). Related financial services or products are only made available to Professional Clients or Market Counterparties, as defined by the DFSA, and are not intended for any other persons. Credit Suisse AG (DIFC Branch) is located on Level 9 East, The Gate Building, DIFC, Dubai, United Arab Emirates. EU: This report has been produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-US customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. US customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the US. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials,management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Copyright © 2017 CREDIT SUISSE AG and/or its affiliates. All rights reserved.

Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

https://www.credit-suisse.com/who-we-are

Date post:	16-Oct-2021
Category:	Documents
Upload:	others
View:	7 times
Download:	0 times

2017 Software Outlook - Credit Suisse

Documents