Q1-2012 Software Valuations

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

The Software Industry Financial Report

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Sell-Side Advisory Services – leveraging our extensive industry contacts, skilled professionals and proven methodology, our practice is focused, primarily on guiding our client s wisely toward the achievement of their exit objectives.Buy-Side Advisory Services – utilizing a proven buy-side methodology, we help our clients acquire strategically, assess insightfully, value intelligently and structure transactions to better assure their desired outcome.Management Buyouts & Recapitalization – assisting founders and owners of software and technology companies to gain full or partial liquidity by facilitating capital investments by private equity

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Q1 2012 Software Industry Financial Report Contents

U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS ........................................................................ 2 IT SPENDING ............................................................................................................................................................ 2 INTERNET RETAIL SPENDING AND ADVERTISING ............................................................................................ 3 UPDATED SEG INDICES ......................................................................................................................................... 3 PUBLIC SOFTWARE/SAAS/INTERNET COMPANY STOCK PERFORMANCE ................................................... 3 PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE .......................................................................... 4 PUBLIC SOFTWARE COMPANY MARKET VALUATIONS ................................................................................... 5 PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY .......................... 6 PUBLIC SOFTWARE COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY ................................... 7 PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE ...................................................... 8 PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS ........................................... 9 PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY .... 10 PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY ............................................................................................................................................................ 10 PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE ........................................................................... 10 PUBLIC INTERNET COMPANY MARKET VALUATIONS .................................................................................... 11 PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY ........................... 12 PUBLIC INTERNET COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY .................................... 13 INITIAL PUBLIC OFFERINGS ................................................................................................................................ 14 SOFTWARE/SAAS M&A DEAL VOLUME AND SPENDING ............................................................................... 15 IMPORTANT CHANGE IN SOFTWARE AND SAAS M&A DATA ACCOUNTING............................................... 16 SOFTWARE M&A VALUATIONS .......................................................................................................................... 16 SOFTWARE M&A VALUATIONS BY EQUITY STRUCTURE............................................................................... 17 SOFTWARE M&A VALUATIONS BY SIZE ........................................................................................................... 17 SOFTWARE M&A BY VERTICAL AND HORIZONTAL MARKETS ..................................................................... 18 M&A VALUATIONS BY SOFTWARE PRODUCT CATEGORY ............................................................................ 19 SOFTWARE AS A SERVICE (SAAS) M&A DEAL VOLUME AND VALUATIONS .............................................. 20 INTERNET M&A DEAL VOLUME AND VALUATIONS ......................................................................................... 22

Software Equity Group, L.L.C.



APPENDIX A: 1Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ............................................................................................................................................................ 24 APPENDIX B: 1Q12 PUBLIC SAAS MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY 26 APPENDIX C: 1Q12 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ............................................................................................................................................................ 27 APPENDIX D: 1Q12 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS .................. 28 APPENDIX E: 1Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS .............................................. 29 APPENDIX F: 1Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE INDUSTRY MEGA-DEALS ...... 31 APPENDIX G: 1Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS ..... 32

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



U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS

We begin with a brief synopsis of U.S. Gross Domestic Product (GDP) performance based upon the most recent data available. GDP is best defined as the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. The Bureau of Economic Analysis (BEA) issued its first estimate of U.S. GDP for the first quarter of 2012, confirming the U.S. economy has now grown, albeit modestly, for eleven consecutive Quarters (Figure 1). 1Q12’s growth rate of 2.2% was primarily driven by personal consumption, exports, private inventory investment and residential fixed investment. While the first quarter’s 2.2% growth was a significant YoY improvement from 1Q11’s 0.4% growth, it marked the first QoQ deceleration in three quarters. The slowdown was largely attributable to a decline in private inventory investment and a downturn in nonresidential fixed investment. Looking forward, Goldman Sachs and other analysts are now forecasting full year GDP growth in the range of 2.5% - 3.5%, which suggests GDP growth will improve over the next three quarters.

An April employment report released by the U.S. Bureau of Labor Statistics provides more reason for optimism. The U.S. unemployment rate dropped to 8.2%, marking the third consecutive quarter of improvement. IT SPENDING SEG carefully monitors enterprise IT spending each quarter as a means of forecasting downstream public software company financial performance and software M&A deal volume. Simply put, we long ago determined that healthy IT spending drives public software companies to buy, not build, in response to growing market demand. To provide some perspective, we estimate every percentage increase/decrease in IT spending equates to approximately $5 billion. Our readers will recall large enterprises cut back sharply on spending for software, hardware and IT services in 2009 during the economic downturn, when IT capital spending declined by more than 10%. The spending cut had an almost immediate and traumatic impact on public software company revenue and software M&A activity and valuations declined. In 2010 and 2011, enterprise customers loosened their purse strings and domestic IT capital spending grew 8% and 6% respectively.

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Reflecting the uncertainty in the global economy, analysts are somewhat divided on worldwide IT spending forecasts for 2012. Goldman is forecasting worldwide IT spending of 7%, down from 8% in 2011, given the expectation of modest deceleration in emerging economies. Less optimistic, Gartner is forecasting worldwide IT spending growth of 5.2%, believing that IT budgets and spending in Europe will be weaker than anticipated. Domestically, forecasts are better aligned. Goldman forecasts domestic IT spending will grow 4.0%, while Gartner is projecting a 4.2% increase (Figure 2).

INTERNET RETAIL SPENDING AND ADVERTISING In the Internet sector, we believe online retail spending and Internet advertising spending each quarter presage the financial performance and M&A activity of many public Internet companies. Buoyed by a continually growing number of shoppers, online retail sales reached nearly $49.7 billion in 4Q11 (the latest quarter for which data is available) according to comScore, up 14% from 4Q10. It was the ninth consecutive quarter of growth for online retail. Among online retail’s most popular categories in 4Q11 were digital content and subscriptions, jewelry and watches, consumer electronics, toys and hobbies, and computer software, each growing by at least 18% year-over-year. The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) reported Internet advertising revenues soared to record levels in 4Q11, reaching $9 billion, a 20% year-over-year

increase. Mobile was the fastest growing Internet ad category, soaring 149% over 2010’s $1 billion tally to reach $1.8 billion for the year. While not quite as jaw dropping, digital media ad revenues reached $1.8 billion in 2011, a 29% YoY increase from 2010’s compared to $1.4 billion. UPDATED SEG INDICES SEG publishes three software industry indices – SEG Software, SEG SaaS, and SEG Internet – and tracks dozens of product categories comprising these indices. Each year, SEG reviews each company comprising each index and category to ensure they have been appropriately categorized, especially in light of their prior acquisitions and adoption of new technologies and delivery models. This year’s examination was especially thorough - and challenging - given the growing adoption of hybrid delivery models and the increasing number of large software companies spanning multiple indexes and product categories. While admittedly both art and science, we are confident our updated indices and categories provide an exceptionally accurate portrait of today’s software, SaaS and Internet environments. PUBLIC SOFTWARE/SAAS/INTERNET COMPANY STOCK PERFORMANCE In the first quarter, the major U.S. stock market indices turned in one of the best first quarter performances in more than a decade. The technology laden NASDAQ index finished Q1 up a stellar 18.7%, as investors were heartened by the strong financial performance of several high flyers such as Apple and Google. The S&P 500 and DOW also performed admirably, ending Q1 up 12.0% and 8.1%, respectively (Figure 3). Across all three SEG tracking indices, 217 of the 258 (84%) public companies we track reported higher year-to-date (YTD) stock prices. The SEG Software Index, consisting of 145 public on-premise software companies, closed the first quarter with a median stock price return of 18.6%. Close behind was the SEG SaaS Index, conisting of 28 public pure-play SaaS companies, which closed Q1 with a median stock return of 18.4%.

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Figure 2: Domestic IT Spending




A number of SaaS companies far outperformed their peers in terms of median stock return, with five superstars posting YTD stock returns exceeding 50%: Elli Mae (97.5%), Demandware (86.3%), Bazaarvoice (65.6%), Salesforce (52.3%) and Athenahealth (50.9%). Demandware and Bazaarvoice went public in the first quarter of 2012. The SEG Internet Index, comprised of 87 publicly traded Internet companies, closed the first quarter with a 19.3% gain in median stock price, slightly outpacing SEG’s Software and SaaS Indexes and the NASDAQ. The median year-end stock return of the SEG Internet Index was buoyed, in part, by investor enthusiasm for newly public companies amid a wave of IPOs in 2011 and the first quarter of 2012 (see this issue’s IPO section for more detail). Four of Q1’s top ten stock performances were turned in by companies that went public in the last twelve months: Brightcove (73.4%), Jive Software (69.8%), LinkedIn (61.9%) and Zillow (58.3%).

PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE The 145 public companies comprising the SEG Software Index grew TTM revenue a median 14.2% in the first quarter of 2012, down sharply from 4Q11’s 17.0% and the lowest in the past five quarters (Figure 4). The 1Q12 drop marks two consecutive quarters of slowing revenue growth after the 17.3% peak reached in 3Q11. Although down sharply, 1Q12’s 14.2% is a relatively solid performance historically by public software companies and marks the ninth consecutive quarter of positive TTM revenue growth. The modest decline in growth rate was entirely predictable, given the modest decline in IT spending.

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

Measure 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.9x 2.8x 2.4x 2.4x 2.6xEV/EBITDA 14.5x 13.5x 11.6x 12.2x 12.2xEV/Earnings 27.8x 24.8x 21.0x 20.9x 22.0xCurrent Ratio 2.2 2.1 2.1 2.0 2.0Cash & Eq ($M) $137.4 $145.4 $157.5 $132.0 $146.5Gross Profit Margin 68.8% 68.9% 67.8% 66.9% 66.4%EBITDA Margin 19.9% 19.6% 20.4% 20.5% 20.6%Net Income Margin 9.5% 10.4% 10.9% 10.9% 10.6%TTM Revenue Growth 15.9% 16.1% 17.3% 17.0% 14.2%TTM Total Revenue ($M) $324.7 $339.7 $350.5 $361.2 $370.8TTM Total EBITDA ($M) $63.2 $58.1 $63.4 $66.0 $62.5Debt / Equity Ratio 28.2% 22.8% 22.5% 21.6% 22.5%

SEG - Software: Median Metrics

Figure 4: SEG Software Index Median Metrics




Providers of mobile solutions proved to be an exception. Of the top ten software companies with the largest TTM revenue growth in 1Q12, five derive all or a substantial part of their revenue from mobile software solutions. The list includes Qihoo (191% TTM revenue growth), Gree (133%), Millennial Media (117%), Zynga (91%) and Velti (63%). Besides mobile, other SEG Software Index high flyers reporting exceptional revenue growth in 1Q12 included Merge Healthcare (66%), Allscripts Healthcare (56%), VASCO Data Security (56%) and Majesco (51%). The first quarter’s growth rate helped drive the median TTM revenue of the SEG Software Index above $370 million for the first time ever (Figure 5). Indeed, Q1’s median TTM revenue is more than twice the median TTM revenue of the SEG Software Index in 1Q08. Over this same time period, the number of public software companies has declined from 221 to 145 - further evidence that consolidation in the software sector is resulting in not only fewer, but considerably larger, publicly traded software companies.

Public software companies were especially adept at improving their already healthy EBITDA margins. In 1Q12, the median EBITDA margin of the on-premise public software companies in our Software Index was 20.6%, up slightly from 4Q11’s 20.5% and 3Q11’s 20.4% (Figure 4). Although revenue growth rates have returned to historical norms, the steadily increasing EBITDA margins indicate a continuing emphasis on profitability brought on by plummeting growth rates during the Great Recession.

Many of the most profitable companies are large software behemoths that have the scale to drive high margins, including Oracle (42% EBITDA margin), Microsoft (42%) and SAP (37%). However, a few smaller software companies also demonstrated they could drive the bottom line. Example: SolarWinds, a small cap shooting star focused on IT management software, leveraged its unique and highly cost effective sales model to post EBITDA margins (48%) even the behemoths would envy. Public software companies continued to grow cash and equivalents on their balance sheets, which is undoubtedly a by-product of their much improved EBITDA margins. Consider that in 1Q08, the median cash and equivalents of the SEG Software Index was $79.5 million and the median EBITDA margin was only 13.0%. In 1Q12, median cash and equivalents had grown to $146.5 million, an 85% increase over four years, and the median EBITDA margin, as noted above, was 20.6% (Figure 6). The significant cash reserves and strong balance sheets of most public software companies, particularly the industry’s largest players, bode well for many small and mid-cap software company M&A targets.

PUBLIC SOFTWARE COMPANY MARKET VALUATIONS At the close of 1Q12, the median EV/Revenue multiple of public companies in our SEG Software Index had grown to 2.6x from 2.4x in both 4Q11 and 3Q11.

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Although the first quarter’s median multiple was slightly lower than 1Q11’s 2.9x, it was 117% higher than the Great Recession low of 1.2x. The median EV/Revenue multiple of the SEG Software Index has now been at or above 2.0x for ten consecutive quarters (Figure 7).

As the economic concerns that plagued the second half of 2011 abated in 1Q12, investors increased their risk appetite and bid up valuations of smaller public software companies (Figure 8). As testament, in 1Q12, the median EV/Revenue multiple of SEG Software Index companies with TTM revenues between $100 million and $200 million skyrocketed to 2.7x, a 69% increase from 4Q11’s 1.6x. However, investors continued to eschew smaller public companies. Those with revenues under $100 million saw their median EV/Revenue decline from 1.8x in 4Q11 to 1.5x in 1Q12.

Size (i.e., annual revenue) wasn’t the only important determinant of public software company market valuation. EBITDA margins clearly had a major factor in public software company EV/Revenue multiples, which explains the aforementioned profitability focus. Public software companies with 40% or higher EBITDA margins were awarded with a median EV/Revenue multiple of 4.6x, whereas those with EBITDA margins below 10% were punished with a 1.5x (Figure 9).

PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY Median TTM revenue in six of our SEG Software Index product categories grew 20% or more in 1Q12 (Figure 10). Security posted an impressive 26% TTM revenue growth rate, the highest among the seventeen product categories we track. The category was led by VASCO (55.7% TTM revenue growth), Imperva (41.4%) and Fortinet (33.5%). Business Intelligence, driven by demand for analytics in the era of Big Data, achieved a 24% TTM revenue growth rate. Other hot product categories with TTM revenue growth above 20% included Healthcare (23%), Networking & Network Performance Management (21%), Vertically Focused software providers (20%), Billing & Service Management (20%) and Systems Management (20%).

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Figure 8: SEG Software Valuation by Size of Buyer

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Figure 9: 1Q12 EV/Revenue Multiple vs. EBITDA Margin




Given the buzz around Mobile, it’s surprising to see the category finishing 1Q12 with a paltry 10.6% median TTM revenue growth rate. The lackluster growth rate is largely attributable to providers of legacy solutions to wireless carriers that have been adversely impacted by the likes of Apple, Google and others that are beginning to dominate the mobile ecosystem. These legacy mobile solution providers include Smith Micro (-55.7% TTM revenue growth), Access (-45.1%), Myriad Group (-35.3%), RealNetworks (-16.4%), Motricity (-8.8%), and Openwave (-1.6%). Growth was particularly strong among the new wave of mobile gaming and mobile advertising providers, including Gree (133.0% TTM revenue growth), Millennial Media (116.8%), and Velti (62.7%). Five software product categories posted TTM revenue growth rates below 10%: IT Conglomerates (8.0%), Storage, Data Management & Integration (7.8%), Development Platforms (7.7%), Gaming (5.6%) and Financial & Accounting (4.7%). The IT Conglomerate category led all other product categories with a median EBITDA margin of 40.1%. As the name implies, the category consists of the largest software providers in the world such as the aforementioned Oracle (42% EBITDA margin), Microsoft (42%) and SAP (37%). Software providers vertically focused on the finance industry (Vertical – Finance) also posted

stellar EBITDA margins of 36.6%, demonstrating strength from top to bottom, with every company generating EBITDA margins above 31.5%. The product category with the lowest EBITDA margin was Mobile, closing 1Q12 at 5.2%. Reflecting the wide ranging prospects of companies within this category, EBITDA margins vary drastically from one company to another. Gree, an emerging provider of mobile social games, finished 1Q12 with EBITDA margins of 53.0%. By contrast, Smith Micro, a legacy provider of phone tools to mobile OEMs and wireless carriers, finished 1Q12 with EBITDA margins of -68.2%. PUBLIC SOFTWARE COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY Public software companies in eight of our software product categories achieved a median EV/Revenue multiple of 3.0x or higher in 1Q12. The Systems Management category posted a whopping EV/Revenue multiple of 5.9x, led by companies who are spearheading the cloud revolution, namely: SolarWinds (12.9x EV/Revenue), VMWare (9.9x), RedHat (7.6x) and Citrix Systems (5.9x). Over the past four quarters, EV/Revenue multiples in the Systems Management category have ranged from 5.2x to 7.3x.

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Billing & Service Management 2.0x 2.2x 1.3x 1.0x 1.3x 10.1x 8.9x 4.7x 4.2x 5.9x 19.8% 12.1% 21.8% 2.9%

Business Intelligence 3.3x 3.2x 2.9x 2.4x 2.3x 37.8x 43.0x 40.3x 36.5x 39.2x 23.7% (5.3%) 8.9% 27.5% Development Platforms 2.9x 2.6x 1.8x 1.9x 2.3x 11.3x 10.7x 8.0x 9.0x 10.1x 7.7% 2.4% 22.2% 13.7% Engineering & PLM 2.5x 2.3x 1.9x 2.0x 2.6x 19.2x 16.4x 12.8x 13.4x 14.2x 13.5% 43.8% 18.5% 20.1% Enterprise Resource Planning 2.8x 2.7x 2.4x 2.8x 3.0x 11.4x 11.1x 8.7x 9.6x 10.0x 12.4% 17.0% 29.5% 13.7% Financial & Accounting 2.8x 2.7x 2.2x 2.5x 2.8x 9.6x 9.7x 8.5x 9.0x 9.7x 4.7% 14.1% 25.4% 18.6% Gaming 0.9x 1.0x 1.1x 1.2x 1.1x 8.9x 10.7x 8.3x 7.4x 6.4x 5.6% 41.0% 6.2% (1.9%)Healthcare 4.0x 3.9x 3.3x 2.9x 3.2x 18.7x 19.6x 17.7x 16.2x 15.2x 22.9% 41.5% 22.1% 18.5% IT Conglomerates 3.2x 3.0x 2.6x 2.5x 3.1x 8.6x 8.7x 8.7x 9.0x 8.2x 8.0% 15.4% 40.1% 13.7% Mobile Solutions/Content 3.4x 3.1x 1.9x 2.0x 2.5x 25.2x 23.2x 17.8x 23.3x 18.1x 10.6% (13.9%) 5.2% 22.2% Netw orking & Netw ork Performance 4.4x 4.2x 3.1x 2.7x 3.1x 25.2x 21.6x 16.1x 15.7x 16.4x 20.7% 49.6% 18.7% 18.2% Security 3.4x 3.1x 2.6x 2.8x 3.2x 16.7x 16.4x 13.3x 14.5x 13.5x 26.1% 19.0% 20.8% 21.5% Storage, Data Management & Integration 3.0x 2.6x 2.1x 2.2x 2.5x 10.7x 12.6x 9.9x 9.8x 10.3x 7.8% 15.4% 22.8% 23.4% Supply Chain Management & Logistics 2.0x 2.1x 1.8x 1.9x 1.9x 11.6x 11.6x 11.0x 11.4x 12.1x 14.9% 26.5% 20.1% 17.9% Systems Management 6.4x 7.3x 5.2x 5.5x 5.9x 19.6x 21.7x 18.7x 20.9x 22.2x 17.7% 26.2% 26.4% 35.1% Vertical - Finance 4.9x 4.6x 3.9x 3.8x 3.8x 15.3x 15.3x 13.6x 12.7x 11.6x 15.1% 16.7% 36.6% 8.4% Vertical - Other 2.4x 3.1x 2.7x 2.8x 3.2x 13.4x 15.1x 14.2x 15.7x 18.5x 20.4% 30.5% 18.4% 19.3%

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SEG Software Index

Figure 10: SEG Software Index Median Metrics by Product Category




Coming in a distant second, the Vertical – Finance category closed 1Q12 with a median EV/Revenue multiple of 3.8x, no doubt bolstered by the category’s strong EBITDA margins. The Healthcare category finished 1Q12 with a 3.2x median EV/Revenue multiple, down from 4.0x in 1Q11 as a consequence of legislative and regulatory uncertainty. Interestingly, TTM revenue growth appeared to have little impact on the median EV/Revenue multiple of the software product category (Figure 11). The product category with the highest TTM revenue growth rate (Security), finished 1Q12 with a median EV/Revenue multiple of 3.2x, while the category with the lowest TTM revenue growth rate (Financial & Accounting), closed 1Q12 with a modestly lower median EV/Revenue multiple of 2.8x. Overall, comparative market valuations among different software product categories did not vary widely: three out of four categories were within 25% of the median EV/Revenue multiple of the SEG Software Index.

Only four product categories improved their median EV/Revenue in 1Q12 from a year earlier: Engineering & PLM, ERP, Gaming and Vertical (Miscellaneous). The Vertical (Miscellaneous) product category had the highest YoY jump in median EV/Revenue, finishing 33% above 1Q11, led by insurance industry focused Guidewire Software (5.5x EV/Revenue), and public sector focused Tyler Technologies (3.7x EV/Revenue). The Billing & Service Management product category experienced the largest YoY decline in market valuation. The category has been a

perennial laggard and the majority of companies in the category are struggling to reinvent themselves. A lone standout is Synchronoss Technologies, which posted an EV/Revenue multiple of 4.9x, nearly four times the product category median. With a TTM revenue growth rate of 38%, two times higher than the category median, Synchronoss’ provides best of class solutions to service providers struggling to manage and synchronize the barrage of mobile devices connecting to their networks. PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE The median TTM revenue growth rate of public SaaS companies in 1Q12 was 27.8%, a 10% increase over the prior quarter (Figure 12). The median TTM revenue growth rate of our SaaS Index constituents has now remained above 20% for five consecutive quarters. With SaaS adoption growing once again, we anticipate the median SaaS TTM revenue growth rate will surpass 30% by year end. Indeed, as of the close of 1Q12, more than 40% of the public companies in the SEG SaaS index boasted TTM revenue growth above 30% and not one public SaaS company reported TTM revenue growth below 10% (Figure 13).

Unsurprisingly, the growth of these SaaS companies has been driven in large part by their enhanced investment in sales and marketing, which has grown from 22% of total revenue in 1Q11, to 31% in 1Q12 (Figure 14). In fact, all 28 public SaaS companies in the SEG SaaS Index increased S&M spend as a percent of total revenue.

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


SEG - SaaS: Median Metrics

Figure 12: SEG SaaS Index Median Metrics




In 1Q12, four SaaS providers spent more than 50% of their revenues on S&M: Vocus (50.1%), Netsuite (50.9%), Salesforce (51.6%) and Cornerstone OnDemand (62.7%). These sizable investments in S&M to drive growth had a predictable impact on profitability. Of the four SaaS providers spending 50% or more of their revenues on S&M, each posted EBITDA margins of 4.6% or less. By contrast, most public SaaS companies continued to balance revenue growth and profitability. In 1Q12, the median EBITDA margin of the SEG SaaS Index was 10.1%, up slightly from 4Q11. Six outperformers reported EBITDA margins above 20%: Medidata (20%), LivePerson (21%), Archipelago Learning (30%), OpenTable (30%), Zix Corporation (31%) and EBIX (43%).

The steadily improving TTM revenue growth rates and EBITDA margins of public SaaS providers are creating a force to be reckoned with, a sizable and growing group of companies with scale, a strong financial model, and strong balance sheets. The median TTM revenue for the SEG SaaS Index is now $154M, up 27% YoY; median Cash & Equivalents ended 1Q12 at $71M, up 43% YoY. PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS In 1Q12, the median EV/Revenue multiple of the 28 pure-play public SaaS providers comprising our SEG SaaS Index rose markedly to 5.1x from 4.2x in 1Q11 (Figure 12). Four public SaaS companies had EV/Revenue multiples above 10x at the close of 1Q12: BazaarVoice (11.0x), Cornerstone OnDemand (11.3x), Demandware (14.6x) and NetSuite (12.8x). All but NetSuite went public within the last year. Investors are clearly favoring growth over profitability in the current market, as three of the four SaaS providers with the highest market valuations had negative EBITDA margins; the fourth, Demandware, reported a paltry 3.8% EBITDA. Indeed, there was a clear, causal relationship in 1Q12 between SaaS company market valuations and TTM revenue growth rates (Figure 15). Public SaaS companies with TTM revenue growth rates between 10%-20% registered a median EV/Revenue of 2.8x, while those generating TTM revenue growth rates above 40% boasted a

1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12Archipelago Learning, Inc. (ARCL) Vertically Focused 5.4x 4.3x 4.1x 4.2x 4.0x 18.4x 16.1x 13.1x 14.1x 13.4x 37.1% 39.7% 39.8% 32.3% 24.9% 29.4% 26.9% 31.3% 29.6% 29.9%Ariba, Inc. (ARBA) ERP & Supply Chain 7.3x 7.5x 6.2x 6.1x 5.6x 81.0x 102.9x 86.9x 85.0x 76.1x 2.3% 14.5% 26.9% 38.5% 42.7% 9.0% 7.3% 7.1% 7.2% 7.4%Athenahealth, Inc. (ATHN) Vertically Focused 5.9x 5.5x 6.7x 6.2x 6.8x 42.3x 37.3x 39.9x 36.2x 45.4x 30.2% 29.2% 30.5% 30.5% 32.0% 13.8% 14.9% 16.9% 17.1% 15.0%Bazaarvoice, Inc. (BV) Other SaaS - - - - 11.0x - - - - - 72.0% 66.8% - - - -17.8% -27.9% -24.1% -20.8% -20.4%Callidus Software Inc. (CALD) Workforce Mgmt 2.4x 2.6x 1.9x 2.2x 2.8x - - - - - -12.6% 4.5% 17.6% 19.6% 18.2% -8.5% -3.1% -3.1% -4.3% -7.0%Concur (CNQR) Other SaaS 7.9x 7.4x 5.7x 6.4x 7.8x 37.7x 44.2x 38.5x 48.4x 68.6x 19.0% 18.6% 18.4% 19.3% 21.0% 21.0% 16.8% 14.8% 13.1% 11.4%Constant Contact (CTCT) Other SaaS 4.2x 3.6x 2.2x 2.5x 3.4x 58.9x 54.5x 28.2x 27.9x 33.5x 35.0% 31.6% 28.2% 25.2% 23.1% 7.2% 6.6% 7.8% 9.0% 10.2%Convio (CNVO) CRM & Marketing 1.8x 2.2x 1.6x 1.8x 3.0x 18.2x 25.6x 18.3x 20.2x 31.5x 10.6% 9.5% 10.2% 12.2% 15.2% 10.0% 8.6% 8.7% 8.7% 9.6%Cornerstone OnDemand (CSOD) Workforce Mgmt 21.5x 17.4x 12.3x 10.6x 11.3x - - - - - 49.1% - - 51.9% 67.0% -26.1% -27.1% -33.7% -30.9% -24.0%DealerTrack (TRAK) Vertically Focused 2.7x 3.0x 2.4x 2.9x 3.2x 22.9x 23.2x 15.7x 17.7x 21.0x 8.1% 16.6% 26.3% 37.9% 44.9% 11.6% 13.1% 15.2% 16.3% 15.3%Demandware, Inc (DWRE) Other SaaS - - - - 14.6x - - - - 386.9x 71.5% - - - 54.1% 7.5% 4.8% 2.9% 1.5% 3.8%Ebix Inc. (EBIX) Vertically Focused 7.1x 5.8x 4.3x 4.1x 5.2x 16.5x 13.0x 9.7x 9.3x 12.0x 35.3% 29.5% 27.3% 24.6% 27.8% 43.2% 44.2% 44.1% 43.9% 43.5%Ellie Mae (ELLI) Other SaaS 7.1x 5.8x 4.3x 4.1x 5.2x 16.5x 13.0x 9.7x 9.3x 12.0x 35.3% 29.5% 27.3% 24.6% 27.8% 43.2% 44.2% 44.1% 43.9% 43.5%ExactTarget, Inc. (ET) CRM & Marketing - - - - 7.9x - - - - - 40.7% 40.7% 40.7% - 54.5% -5.1% -5.1% -5.1% -6.0% -3.3%IntraLinks Holdings (IL) Other SaaS 7.3x 6.0x 2.6x 1.7x 1.7x 41.3x 37.3x 18.3x 15.5x 12.5x 31.0% 34.8% 30.6% 23.7% 15.5% 17.6% 16.1% 13.9% 11.2% 13.9%Kenexa (KNXA) Workforce Mgmt 2.8x 3.2x 2.2x 2.3x 2.4x 43.6x 40.4x 29.9x 29.4x 28.2x 24.5% 36.7% 46.9% 52.4% 44.1% 6.3% 7.9% 7.3% 7.8% 8.5%LivePerson (LPSN) CRM & Marketing 4.7x 4.8x 4.5x 4.6x 5.3x 23.7x 23.3x 21.9x 22.7x 25.8x 25.6% 23.7% 21.9% 20.8% 21.1% 19.7% 20.6% 20.5% 20.4% 20.5%Medidata Solutions (MDSO) Other SaaS 3.1x 2.8x 1.8x 2.0x 2.3x 16.1x 14.9x 8.4x 9.2x 11.1x 18.5% 17.4% 19.0% 17.9% 10.8% 19.5% 19.1% 21.4% 21.7% 20.4%Netsuite (N) ERP & Supply Chain 9.0x 10.7x 10.0x 11.5x 12.8x - - - - - 16.0% 19.6% 21.1% 21.9% 22.4% -6.9% -7.1% -7.9% -7.3% -7.4%OpenTable, Inc. (OPEN) Other SaaS 19.6x 18.7x 11.7x 6.7x 7.2x 80.7x 74.0x 41.5x 23.7x 24.0x 44.3% 50.9% 54.3% 52.3% 40.9% 24.3% 25.2% 28.2% 28.1% 30.2%RealPage (RP) Vertically Focused 9.7x 9.3x 7.2x 7.5x 6.9x 70.3x 69.6x 54.5x 62.4x 60.9x 33.6% 36.6% 38.3% 39.8% 37.0% 13.8% 13.3% 13.1% 12.0% 11.3%Responsys (MKTG) CRM & Marketing - 7.3x 5.3x 2.7x 3.4x - 40.6x 28.9x 14.1x 21.6x 41.2% - - 54.1% 43.4% 19.9% 18.0% 18.5% 19.0% 15.7%Salesforce.com (CRM) CRM & Marketing 10.5x 10.3x 9.2x 8.0x 7.7x 108.4x 132.1x 154.6x 183.3x 165.1x 26.9% 29.6% 33.0% 34.6% 36.8% 9.7% 7.8% 5.9% 4.3% 4.7%SciQuest (SQI) ERP & Supply Chain 5.6x 6.2x 5.9x 5.3x 5.0x 28.7x 34.2x 38.7x 38.1x 37.1x 17.4% 19.0% 19.7% 22.0% 25.8% 19.7% 18.2% 15.3% 14.0% 13.5%SPS Commerce (SPSC) ERP & Supply Chain 3.2x 3.3x 3.6x 4.2x 4.7x 31.4x 37.2x 47.2x 62.7x 68.5x 18.2% 19.1% 22.5% 26.7% 30.0% 10.2% 8.7% 7.6% 6.7% 6.9%The Ultimate Software Group, Inc. (ULTI) Workforce Mgmt 5.6x 5.7x 5.1x 6.2x 6.5x 67.6x 71.0x 59.5x 67.8x 65.9x 16.1% 16.5% 16.8% 17.0% 18.2% 8.3% 8.1% 8.6% 9.2% 9.9%Vocus (VOCS) CRM & Marketing 4.2x 4.3x 3.3x 2.7x 2.6x 241.2x 19818.5x 464.8x 156.4x 130.8x 14.4% 17.4% 19.1% 18.9% 18.7% 1.8% 0.0% 0.7% 1.7% 2.0%Zix Corporation (ZIXI) Other SaaS 7.4x 6.0x 5.5x 4.2x 4.6x 38.3x 24.1x 20.2x 14.5x 14.6x 25.2% 30.9% 31.5% 31.7% 15.4% 19.4% 24.7% 27.2% 29.3% 31.3%

5.6x 5.7x 4.5x 4.2x 5.1x 39.8x 38.9x 29.4x 25.8x 31.5x 25.4% 23.7% 26.9% 25.5% 27.8% 10.1% 8.7% 9.6% 9.1% 10.1%

SEG SaaS Index

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Figure 13: Public SaaS Companies

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median EV/Revenue multiple of 7.2x. By contrast, there was very little relationship between EBITDA margins and public SaaS company market valuations (Figure 16). As testament, SaaS providers with negative EBITDA margins were awarded with a median EV/Revenue multiple of 11.0x, no doubt boosted by their median TTM revenue growth rate of 54.5%.

PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY The SEG SaaS Index, consisting of 28 pure play SaaS providers, now has sufficient critical mass to establish and track four distinct subcategories: CRM & Marketing; ERP & Supply Chain; Workforce Management; and Vertically Focused providers (Figure 17). Each category posted a TTM revenue growth rate above the median 27.8% growth rate for the overall Index. ERP & Supply Chain had the most improved TTM revenue growth rate in 1Q12 measured YoY, the fifth consecutive quarter growth rates have

increased. SaaS companies in this category are benefitting from growing enterprise and SMB acceptance of cloud-based, remotely hosted applications. Vertically focused SaaS providers achieved EBITDA margins of 15.3% in 1Q12, 52% higher than the SaaS sector median of 10.1%. The strong EBITDA margins reflect the pricing power associated with highly specialized applications for a particular vertical. PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY ERP & Supply Chain finished 1Q12 with the highest median EV/Revenue multiple: 5.3x. The category was bolstered by strong performance from NetSuite (12.8x) and Ariba (5.6x). Workforce Management was the only product category of the four with a higher YoY market valuation in 1Q12, benefitting from strong performances by Callidus and Ultimate Software, which grew their YoY median EV/Revenue multiples 16.8% and 16.9%, respectively. CRM & Marketing, posted the lowest median EV/Revenue multiple in 1Q12, as declines in the market valuations of Salesforce.com, Vocus and Responsys were not offset by newly listed ExactTarget, which closed 1Q12 with a 7.9x EV/Revenue multiple. PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE Public companies comprising the SEG Internet Index posted a stellar median TTM revenue growth of 29.3% in 1Q12, the highest of our three tracking Indices (Figure 18). 1Q12’s revenue growth compares quite favorably to 1Q11’s 23.4% revenue growth rate, and is even more impressive considering the SEG Internet Index has the highest median TTM Revenue ($393.6 million) of the three SEG indices. By comparison, public software companies had median TTM revenue of $370.8 million in 1Q12, but a considerably lower TTM revenue growth rate of 14.2%. Of the 15 public Internet companies with TTM revenue of $1 billion or more, nearly three out of four generated TTM revenue growth rates of more than 20% in 1Q12. The high performing Internet companies span an array of Internet categories, including eCommerce (Amazon, eBay), Search (Google, Baidu), Gaming (Tencent, Zynga) and Travel (Priceline, Expedia).

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In 1Q12 there were significant disparities in revenue growth rates among consumer focused public Internet companies, thanks to the virtually unlimited number of prospects and the demonstrated ability of some to grow exponentially by “going viral”. Indeed, the SEG Internet index has the widest distribution of revenue growth rates among our three tracking indices (Figure 19). Nearly ten percent of public Internet companies achieved TTM revenue growth at or above 100% in 1Q12, including Groupon (415%), Qihoo (191%), Youku (131%), Zillow (117%), LinkedIn (115%), KIT Digital (102%), and Pandora (100%). At the other end of the spectrum, over 10% of SEG Internet providers posted negative revenue growth, including Tree.com (-71%), Yahoo (-21%), and AOL (-9%). Yahoo and AOL are great examples on how quickly leading consumer Internet companies can go out of favor, something, Groupon, and other high flyers, should monitor closely.

The median EBITDA margin of public Internet companies declined to 13.7% in 1Q12, down sharply from 16.8% in 1Q11. The drop can be largely attributed to higher sales and marketing expenses to drive market adoption and a number of newly public Internet providers that had eye-popping revenue growth but weak profitability.

Jive Software is a good example, listing in 2011 and posting a 67% TTM revenue growth rate and -49% EBITDA margins in 1Q12. Nevertheless, an extended period of consistent profitability has bolstered the balance sheets of Internet providers. For most Internet providers, however, revenue growth appeared to compensate for lower margins. By the close of the first quarter, the median Cash & Equivalents of companies comprising the SEG Internet Index was $161.8M, up 32.2% from 1Q10 (Figure 18).

PUBLIC INTERNET COMPANY MARKET VALUATIONS The median EV/Revenue multiple for the 87 public companies comprising the SEG Internet Index was 2.5x in 1Q12, the same as the prior quarter, but down 16.7% from 3.0x in 1Q11 (Figure 18). The exception was Internet companies with revenues under $100 million which experienced strong YoY growth in market valuation – quite a contrast from their sub-$100 million software counterparts who couldn’t stimulate nearly as much investor enthusiasm (Figure 20).

1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12CRM & Marketing 4.4x 4.8x 4.5x 2.7x 4.3x 66.0x 40.6x 28.9x 22.7x 31.5x 26.2% 23.7% 21.9% 20.8% 29.0% 9.8% 8.2% 7.3% 6.5% 7.2%ERP & Supply Chain 6.5x 6.8x 6.0x 5.7x 5.3x 31.4x 37.2x 47.2x 62.7x 68.5x 16.7% 19.1% 21.8% 24.3% 27.9% 9.6% 8.0% 7.4% 6.9% 7.1%Vertically Focused 5.9x 5.5x 4.3x 4.2x 5.2x 22.9x 23.2x 15.7x 17.7x 21.0x 33.6% 29.5% 30.5% 32.3% 32.0% 13.8% 14.9% 16.9% 17.1% 15.3%Workforce 4.2x 4.5x 3.7x 4.3x 4.7x 55.6x 55.7x 44.7x 48.6x 47.1x 20.3% 16.5% 17.6% 35.7% 31.1% -1.1% 2.4% 2.1% 1.7% 0.7%

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Figure 17: SEG SaaS Index Median Metrics by Product Category


SEG - Internet: Median Metrics

Figure 18: SEG Internet Index Median Metrics

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Investors were clearly focused on Internet category winners, awarding premium valuations to those that exceeded their high TTM revenue hurdle rate, but largely ignoring the rest. As testament, public Internet providers with TTM revenue growth rates between 30% and 40% had a relatively modest median EV/Revenue multiple of 2.6x, while those above 40% were awarded a whopping 6.7x multiple (Figure 21). As in the case of SaaS, investors had no problem betting on unprofitable Internet investors that reported rapid growth and appeared to have extraordinary upside. In 1Q12, Internet providers with negative EBITDA margins had a median TTM revenue growth rate of 67.4% and a whopping median EV/Revenue multiple of 6.6x (Figure 22). The list of companies in this group include new IPOs Jive Software (-49.2% EBITDA margins, 13.3x EV/Revenue), Angie’s List (-47.3%, 8.2x), Zynga (-27.5%, 6.6x), Groupon (-13.7%, 7.0x) and Yelp (-9.3%, 16.3x). But unlike SaaS investors who showed complete indifference to ranges of profitability (Figure 16), Internet investors rewarded profitable Internet providers as well. Public Internet companies that were able to achieve EBITDA margins in excess of 40% in 1Q12 received a premium median market valuation of 5.8x, in contrast to those with 0% - 10% EBITDA margins that had a median 1.4x EV/Revenue multiple (Figure 22).

PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY Driven by the need to first scale rapidly then monetize, the Social product category earned the highest TTM revenue growth (70.8%) and lowest EBITDA margins (1.8%) among our eight Internet product categories (Figure 23). Four of the six companies within this category posted TTM revenue growth two times higher than the Internet sector median of 29.3%: LinkedIn (115.1%), Mail.ru Group (95.6%), Yelp (75.7%) and Jive (67.3%). Four other product categories finished 1Q12 with TTM revenue growth above the Internet sector median: Ad Tech & Lead Gen (32.2%), Gaming (35.7%), Services (42.7%) and Travel (31.5%). The Services product category, the best performer of the four, was boosted by strong TTM revenue growth from Qihoo (191.2%), Bankrate (92.3%), Shutterfly (54.0%), and Angie’s List (53.1%). Companies within the Ad Tech & Lead Gen category continue to benefit from the dramatic growth in advertising dollars migrating from offline to online, as well as from increased spending on lead generation services. Notable examples in this category include Groupon (414.6% TTM revenue growth), LinkedIn (114.8%) and Baidu (83.2%).

Revenue Growth EBITDA Margin1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q12 (TTM) 1Q12 (TTM)

Revenue Greater Than $1 billion 3.4x 3.6x 2.8x 3.6x 3.4x 14.2x 13.1x 17.5x 16.8x 18.5x 29.3% 16.3%Revenue Between $200 million and $1 billion 2.8x 3.4x 2.4x 2.2x 2.2x 14.3x 14.5x 10.7x 9.6x 11.2x 28.4% 17.7%Revenue Between $100 million and $200 million 3.2x 2.9x 2.6x 2.1x 2.5x 9.5x 15.1x 8.8x 8.5x 9.8x 44.4% 11.6%Revenue Less Than $100 million 2.0x 1.8x 2.2x 3.4x 3.1x 19.4x 21.2x 20.2x 16.0x 16.3x 16.2% -3.0%

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

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




Gaming turned in arguably the best overall financial performance among all Internet categories, posting a stellar median EBITDA margin of 44.2% and an impressive 35.7% median revenue growth rate. The category continues to benefit from lower customer acquisition costs and a viral distribution channel. As a result, Gaming was the most profitable Internet category, far surpassing the 1Q12 median EBITDA margins of Commerce (8.6%), Content & Media (13.4%), Infrastructure (11.2%), Services (13.3%) and Social (1.8%). Companies within the Commerce and Content & Media categories have historically had low EBITDA margins due to significant revenue sharing inherent in their advertising and/or content distribution business models. As testament, Amazon, included in the Commerce product category, posted an EBITDA margin of 3.6% in 1Q12. From the Content & Median category, Pandora - a largely advertising funded business model - posted an EBITDA margin of -2.4%. PUBLIC INTERNET COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY The public market valuations of companies comprising the SEG Internet Index varied widely by Internet category in 1Q12 (Figure 23). Yet, there appears to be a strong relationship between the revenue growth of the product category and its median EV/Revenue multiple (Figure 24). The outlier, on both TTM revenue growth and median EV/Revenue multiple, is Social Media which racked up a median EV/Revenue multiple of 14.3x - nearly six times higher than the overall Internet median of 2.5x. Companies with market valuations exceeding the median Internet

EV/Revenue multiple included Mail.ru Group (17.7x), Yelp (16.3x), and LinkedIn (15.2x). Besides a median growth rate in 1Q12 exceeding 70%, investor enthusiasm for Social plays was bolstered by the success of Facebook and other high flying, yet still private, social media companies that are generating tremendous buzz. While less spectacular than Social, the Travel product category also had an impressive market valuation in 1Q12, posting a median 4.7x EV/Revenue multiple. Key market performers in the Travel category included HomeAway (8.9x EV/Revenue), TripAdvisor (7.1x) and Priceline (6.2x).

The Commerce category was widely eschewed by investors, closing 1Q12 with a highly disappointing 0.9x EV/Revenue multiple, by far the lowest of our Internet categories. Lackluster revenue growth, well below the Internet median, is surely to blame here. The notable exception was Mercardolibre, which posted a median EV/Revenue multiple of 13.7x, over fifteen times

Revenue Growth (TTM)

EBITDAGrowth(TTM)

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YTD Stock Return

1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q12 1Q12 1Q12 2012Ad Tech & Lead Gen 3.0x 3.6x 3.0x 3.5x 3.6x 14.2x 16.7x 13.8x 11.9x 16.7x 32.2% 27.0% 15.6% 15.2%Commerce 1.9x 1.9x 1.4x 1.1x 0.9x 22.7x 19.3x 13.6x 13.1x 16.6x 14.3% -0.3% 8.6% 21.4%Content & Media 2.5x 3.4x 2.7x 2.2x 2.0x 13.5x 18.1x 11.0x 10.6x 10.5x 25.8% 11.2% 13.4% 15.2%Gaming 4.1x 4.8x 4.7x 3.1x 3.2x 9.8x 9.8x 8.1x 6.1x 4.2x 35.7% 34.7% 44.2% 29.5%Infrastructure 2.9x 2.8x 2.6x 1.7x 1.9x 20.5x 19.7x 17.3x 12.8x 14.1x 22.8% 21.5% 11.2% 17.0%Services 3.0x 4.9x 5.0x 4.2x 4.2x 19.7x 22.0x 23.4x 16.5x 18.1x 42.7% 22.9% 13.3% 24.6%Social 20.6x 22.5x 20.2x 12.4x 14.3x 86.1x 137.9x 116.6x 58.5x 63.9x 70.8% -14.5% 1.8% 61.9%Travel 6.5x 7.1x 5.1x 5.4x 4.7x 26.2x 29.6x 23.4x 16.8x 15.3x 31.5% 25.9% 22.1% 2.2%

Median: 3.0x 3.2x 2.7x 2.5x 2.5x 18.9x 19.6x 13.8x 12.5x 13.1x 29.3% 15.7% 13.7% 19.3%

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Figure 23: SEG Internet Index Median Metrics by Product Category

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the Commerce category median for 1Q12. Mercardolibre, Latin America’s eBay, was favorably looked upon by investors enamored with emerging markets, particularly in light of its 38% TTM revenue growth rate. INITIAL PUBLIC OFFERINGS The software IPO market began the year with a bang, as eleven software/SaaS and Internet companies went public in 1Q12, compared to only four in the first quarter of 2011 (Figure 25). Collectively, these eleven newly listed companies touted a median TTM revenue growth rate of 49.8% and a median TTM EBITDA margin of 3.8%. In aggregate, they raised nearly $1 billion, ranging individually from $22.7 million to $147 million. The two biggest IPOs of the quarter were Millennial Media (NYSE:MM), an online mobile advertising solution that raised over $123 million and ExactTarget (NYSE:ET), an email marketing provider for Fortune 500 companies that raised $147 million. Of the 11 newly trading companies in 1Q12, all are headquartered in the US except

for AVG technologies (NYSE:AVG), which is based in Norway. The stock prices of these 11 newly listed companies performed exceptionally well in Q1, increasing a median 65.6% by the close of the quarter. Five of the new public market entrants advanced 80% or more by March 31, led by Brightcove which rewarded investors with a 125.5% return. The median revenue growth rate of the eleven was a noteworthy 49.8%. Four of the eleven companies grew revenue by more than 50%, led by Millennial Media (116.8%) and Yelp, Inc. (74.5%). The vast majority of IPOs had strong first day performances, as investors bid up prices in contemplation of substantial future growth. Millennial Media debuted at $13 and closed the first day of trading at $25, up 92.3%. Yelp, initially priced at $15 per share, closed its first day at $24.58, up 69.3%. Other strong first day performances were turned in by Demandware (47.4%) and ExactTarget (32.2%). All but one of the first quarter’s IPOs (Millennial Media) were able to achieve 1Q12 stock returns above their first day return.

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

GrowthEBITDA Margin

First Day Return YTD Return

Millennial Media Inc(NYSE: MM)

Mobile Solutions/Content 3/29/12 $123,318,000 $1,855,543,000 17.9x n/a $103,678,000 116.8% (0.1%) 92.3% 80.8%

ExactTarget, Inc.(NYSE: ET)

SaaS - CRM & Marketing 3/22/12 $147,000,000 $1,571,645,470 7.6x n/a $207,493,000 54.5% (3.3%) 32.2% 36.8%

Demandware, Inc.(NYSE:DWRE)

SaaS - Other 3/15/12 $81,840,000 $737,949,470 13.1x 346.8x $56,547,000 54.1% 3.8% 47.4% 86.3%

Yelp, Inc.(NYSE:YELP)

Internet - Social 3/2/12 $99,742,500 $1,449,946,790 17.4x n/a $83,285,000 74.5% (8.5%) 63.9% 79.3%

Bazaarvoice, Inc(NASDAQ:BV)

SaaS - Other 2/24/12 $105,844,740 $950,055,560 10.1x n/a $93,986,000 n/a (20.4%) 37.6% 65.6%

Brightcove Inc.(NASDAQ:BCOV)

Infrastructure 2/17/12 $51,150,000 $368,043,500 5.8x n/a $63,563,000 45.4% (22.1%) 30.0% 125.5%

Synacor, Inc(NASDAQ:SYNC)

Infrastructure 2/13/12 $22,700,000 $127,286,620 1.4x 19.0x $91,060,000 37.5% 7.4% (4.5%) 40.5%

FX Alliance(NYSE: FX)

Vertical - Finance 2/9/12 $58,032,000 $270,796,960 2.3x 5.9x $118,265,000 19.4% 39.0% 1.0% 15.3%

AVG Technologies N.V.(NYSE: AVG)

Security 2/3/12 $119,040,000 $1,055,689,120 3.9x 13.1x $272,392,000 25.4% 29.5% (2.5%) 11.3%

Greenway Medical Technologies, Inc Healthcare 2/2/12 $62,000,000 $348,719,740 3.3x 63.4x $105,784,180 n/a 5.2% 28.7% 51.3%

Guidewire Software, Inc.(NYSE: GWRE)

Vertical - Other 1/25/12 $106,996,500 $842,377,160 4.4x 32.5x $190,182,000 n/a 13.6% 2.2% 83.8%

$99,742,500.00 $842,377,160 5.8x 25.8x $103,678,000 49.8% 3.8% 30.0% 65.6% MedianFinancial data is the latest available from CapIQ on offering date.First day return compares listed offering price to first day close.

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




SOFTWARE/SAAS M&A DEAL VOLUME AND SPENDING As we went to press, there were 401 software industry M&A transactions reported in the first quarter (Figure 26). We expect the final tally for Q1 to reach 420, since M&A data for the quarter is often revised and released well into the following quarter. Indeed, the updated tally for 4Q11 is 440 software/SaaS transactions, significantly greater than the 400 deals referenced in our last report. If our projection holds true, 1Q12 deal volume will be in line with 4Q12’s 440 deals and 1Q11’s 426 deals. The quarterly software/SaaS M&A tally has now exceeded the historically healthy benchmark of 400 for seven straight quarters. A total of $17.7 billion was spent in Q1 on those software/SaaS transactions with announced price tags, 49% higher than 4Q11’s $11.9 billion, and the third highest quarterly software M&A spend since 1Q09. Software and SaaS mega deals are in large part responsible, as nearly 60% of the aggregate M&A price tag in 1Q12 came from transactions greater than $500 million.

Software/SaaS mega deals in the first quarter included Cisco’s acquisition of NDS Group ($4.9 billion EV, 5.0x TTM Revenue); Vista Equity Partners’ acquisition of Misys ($2.0 billion EV, 3.2x TTM Revenue); Insight Venture Partners’ acquisition of Quest Software ($1.9 billion EV, 2.3x TTM Revenue); and Oracle Corporation’s acquisition of Taleo Corp ($1.8 billion EV, 5.7x TTM Revenue). It is noteworthy that two of the four mega-deals for the quarter involved private equity firms, reflecting the large cash stockpile many private equity firms currently have at their disposal. Also noteworthy, 1Q12 marks the second consecutive quarter in which the list of mega-deals included a SaaS target, further evidence that SaaS market adoption is growing and more SaaS providers are achieving critical mass to attract the largest public software companies. Since aggregate M&A spending fluctuates widely each quarter, we rely upon TTM data to provide a more reliable measure of M&A spending trends. And on a TTM basis, the steady increase in total M&A dollars paid is encouraging.

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




Total software transaction dollars were $74.6 billion as of the close of the first quarter, 22% higher than the $60.9 billion spent on software M&A deals at the close of 1Q11. Similarly, on a TTM basis, the average deal size increased to $43.3 million, a 16% YoY increase (Figure 27).

IMPORTANT CHANGE IN SOFTWARE AND SAAS M&A DATA ACCOUNTING Historically, we aggregated M&A data for both on-premise and SaaS software company transactions because of the relative dearth of pure-play SaaS deals. However, the considerably higher median multiple of these SaaS deals tended to skew the median M&A multiple higher. Since SaaS is no longer a nascent part of the overall software M&A ecosystem, and SaaS transactions now constitute a meaningful percentage of total software M&A, we began in 3Q11 to analyze and separately report M&A data for SaaS and on-premise software deals. To ensure our historical and current comparisons are consistent, all historical M&A data referenced in our charts this issue has been recalculated to exclude SaaS M&A transactions. SOFTWARE M&A VALUATIONS The software industry’s benchmark median exit multiple inched up to 1.9x TTM revenue in 1Q12 from 1.8x in 4Q11 (Figure 28). While the exit multiple is virtually the same as the software industry’s ten year average of 2.0x TTM revenue, it does suggest that buyers are reticent to overpay for a target, most likely because of lingering concerns about IT spending and the economy.

Lest every software entrepreneur who reads this report multiply his/her company’s TTM revenue by 1.9 to determine current fair market value, we must emphasize that the 1Q12 median exit multiple for software and SaaS deals is simply that - a median – the midpoint of a very broad range of exit valuations. Perhaps more useful is our calculation that in 1Q12, 71.9% of M&A deals with reported EV/Revenue exit multiples had a 3.0x EV/Revenue multiple or less (Figure 29).

Nevertheless, buyers continued to ascribe very significant exit valuations to targets they deemed highly strategic. In the first quarter, 9.4% of M&A deals with ascertainable exit multiples had a 5.0x or greater EV/Revenue multiple.

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Figure 27: TTM Average M&A Deal Size

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

Figure 29: 1Q12 Median Software M&A EV/Revenue Multiple Distribution




Among these transactions were Cisco’s acquisition of NDS Group ($4.9 billion EV, 5.0x TTM revenue); Playtech Limited’s purchase of Geneity Limited ($23.4 million EV, 6.5x TTM revenue); Monitise’s acquisition of Clairmail ($174.3 million EV, 10.0x TTM revenue); and IBM’s purchase of WorkLight (estimated $70 million EV, 20x TTM revenue). Cisco’s acquisition of NDS strengthens its position in the global video market, while bolstering its software and services revenue, both vital to Cisco’s future. The Monitise and IBM acquisitions, both for breathtaking multiples, reflect the strategic value of certain mobile solutions to larger public software companies that are anxious to acquire enabling technology and quickly fill product gaps in the face of an exploding mobile market. Since very few software transactions publicly identify a private software seller’s TTM EBITDA, we lacked sufficient data to ascertain the median EBITDA exit multiple paid in 1Q12 for private software company sellers. We did, however, determine 1Q12’s median exit multiple for public software company sellers was 12.2x TTM EBITDA, a moderate decline from 3Q11’s and 4Q11’s 13.4x TTM EBITDA exit multiples (Figure 28). SOFTWARE M&A VALUATIONS BY EQUITY STRUCTURE While a variety of factors impact exit valuation, one important driver is the seller’s equity structure. We separated public and private software company buyers to ascertain any difference in median purchase price paid in 1Q12. Historically, public buyers have paid higher exit multiples than private buyers: 2.5x vs. 2.0x TTM revenue in 2007; 2.0x vs.1.7x in 2008; 1.9x vs.1.2x in 2009; 2.4x vs.1.8x in 2010, and 2.4x vs. 2.0x in 2011. That trend continued in 1Q12 as public buyers paid a median 2.5x TTM revenue, while private buyers paid only 1.3 x TTM revenue (Figure 30). The significant premium paid by public buyers can be attributed, at least in part, to the sizable amounts of cash on their balance sheets, and their preference for larger targets that typically yield a higher multiple and higher price tag.

SOFTWARE M&A VALUATIONS BY SIZE Another key driver of exit multiples is size – of both buyer and seller. As testament, in 1Q12, buyers with TTM revenue greater than $200 million paid a median EV/Revenue multiple of 3.0x, while buyers with TTM revenue less than $200 million paid only 1.3x TTM revenue (Figure 31). Equally noteworthy - sellers with less than $20 million TTM revenue received a median EV/Revenue multiple of 4.6x from buyers with $200 million of revenue or more, while sellers with greater than $20 million TTM revenue were paid a median exit valuation of 2.9x. Why?

Public Buyers 2.5x Median Multiple

Private Buyers 1.3x Median Multiple

66%34%

Figure 30: 1Q12 Median EV/Revenue ExitMultiple by Ownership Structure

Buyer Less Than $200 million 1.3x Median Multiple

Buyer Greater Than $200 million 3.0x Median Multiple

Seller Less Than $20 million: 2.4x


Seller Greater Than $20 million: 1.5x






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Figure 31: 1Q12 Median EV/Revenue Exit Multiples by Size




A number of sellers with sub $20 million in TTM revenue were offering a best of breed solution to a rapidly adopting market deemed by larger public buyers to be highly strategic. Case in point: Worklight, a small but respected provider of mobile enterprise application platforms based in Israel, was deemed vital to IBM’s mobile solution strategy and was gobbled up for an estimated 20x TTM revenue. SOFTWARE M&A BY VERTICAL AND HORIZONTAL MARKETS Another important determinant of exit valuation is the seller’s target market focus and related domain expertise. We analyzed 1Q12’s median software M&A multiple horizontally and vertically, segregating software company sellers with vertical market solutions (e.g. retail, financial services, telecom, manufacturing, etc.) from sellers with horizontal software solutions (infrastructure, enterprise applications, etc.). In 1Q12, providers of vertical software accounted for 32% of all software M&A, confirming vertical providers remain attractive acquisition targets primarily because of their predictable recurring revenue, deep domain expertise, and highly defensible market positions. The most active verticals in 1Q12 were Healthcare and Financial Services, each garnering 18% of total vertical M&A volume (Figure 32).

Both verticals continued to see heightened deal activity, mostly due to regulatory changes, growing scrutiny and evolving market conditions. The Education vertical accounted for 8% of Q1’s deal total, driven by high demand for software solutions that address demands for greater accountability and leverage more cost-effective learning. While vertical software companies remain in demand, horizontal solution providers (i.e., non-industry specific) have comprised a growing percentage of software/SaaS transactions over the past year (Figure 33). The number of horizontal targets accounted for 57% of total M&A transactions in 1Q11, jumped to 63% in 2Q11 and 3Q11, and reached 70% in 4Q11. In 1Q12, horizontal transactions accounted for 68% of all software/SaaS acquisitions.

Automotive3%

Education8%

Financial Services18%

Healthcare18%

Insurance4%

Manufacturing4%

Other Verticals19%

Public Sector8%

Real Estate6%

Retail 8%

Utilities4%

Figure 32: 1Q12 M&A Volume by Vertical

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Figure 33: Horizontal & Vertical M&A Volume

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




During the first quarter, vertical market sellers were paid a median 1.3x TTM revenue, while their horizontal counterparts received a median exit multiple of 2.3x (Figure 34). In 4Q11, the median EV/Revenue multiple paid to horizontal targets was three times that of vertical targets. It appears that after surpassing horizontal providers in median TTM EV/Rev exit multiples in 4Q10, and the first three quarters of 2011, vertical market solution providers are out of vogue with larger public software companies that acquired a good many in 2010 and 2011 in an effort to more effectively penetrate key vertical markets. M&A VALUATIONS BY SOFTWARE PRODUCT CATEGORY When a software company’s target market, revenue, equity structure and delivery model can demonstrably impact its exit valuation, the nature of it product offering – its software product category - continued to be the single most important M&A valuation driver in 1Q12. For most software product categories, there is often an insufficient number of transactions each quarter that publicly report both seller TTM revenue and buyer purchase price, essential in determining the median exit value for the category. Consequently, we aggregate the data each quarter for each category on a TTM basis. As a result, it may take several quarters to detect changing product category valuation trends, as certain outlier transactions consummated nine or twelve months ago may have a residual impact on their product category multiples. Among the 32 product categories we tracked in 1Q12, ten had both sufficient deal activity and deal data to ascertain a TTM revenue multiple (Figure 35). Software company sellers that were focused on System Management garnered the highest median TTM revenue multiple, 3.0x.

Sellers within this product category are benefitting from the accelerating shift to cloud and mobile computing which are transforming the IT infrastructures of both large enterprises and SMBs. The growing market adoption of System Management solutions is attracting savvy private equity investors such as Insight Venture Partners which acquired Quest Software ($1.9B EV, 2.3x TTM Revenue). Strategic acquirers continue to pay up for System Management companies, as well. In 1Q12, BMC acquired Numara Software ($300M EV, 3.8x TTM Revenue) to enhance its reach into the SMB segment of the market. Other software product categories with median EV/Revenue multiples above the general software median of 1.9x in 1Q12 were Manufacturing & Asset Mgmt (2.5x); Healthcare (2.5x); BI, Risk and Compliance (2.4x); and Security (2.2x). Software product categories lagging the general software median include ERP (1.2x); Other Verticals (1.6x); Mobile (1.6x); and Digital Media (1.8x). From the standpoint of deal activity, the Mobile product category led all others, accounting for 19.8% of 1Q12’s transactions, up markedly from 1Q11’s 8.4% (Figure 36). While mobile M&A volume is relatively high and growing rapidly, the majority of mobile transactions involve smaller private companies with interesting products and technology platforms that are relatively unproven in the marketplace and garner low median EV/Revenue exit multiples (median 1.6x EV/Revenue in 1Q12). That said, the category also produces shocking exit multiples, as evidenced by the IBM/Worklight and Monitise/Clairmail transactions. For a more detailed discussion of Mobile M&A, visit our blog at: http://softwareequitygroup.wordpress.com/2012/02/28/what-you-need-to-know-about-mobile-ma-trends-hot-sectors-deal-structures-and-more/.

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Figure 35: Median EV/Revenue Multiple by Software Product Category

http://softwareequitygroup.wordpress.com/2012/02/28/what-you-need-to-know-about-mobile-ma-trends-hot-sectors-deal-structures-and-more/




Of the remaining 31 product categories we tracked, no other product category garnered more than 6.1% of total M&A transactions, which serves to affirm both the breadth and vibrancy of the software M&A market. The most active M&A product categories in Q1 included Engineering, PLM & CAD/CAM (6.1%); Security (6.1%), Healthcare (5.8%), and Financial Services (5.8%). Security, Healthcare and Financial Services consistently make our most active product categories list. Engineering, rarely a most active category, is experiencing a resurgence, mostly due to an improved manufacturing sector, and the semiconductor industry’s rapid shift to smaller chipsets which require sophisticated software for designing, testing, and optimizing. SOFTWARE AS A SERVICE (SAAS) M&A DEAL VOLUME AND VALUATIONS The number of SaaS M&A transactions continues to soar. In 1Q12, 64 SaaS companies were acquired, a 61% increase from 39 transactions in 1Q11 (See Appendix G for a complete list of SaaS M&A transactions). A good number of these 1Q12 SaaS acquisitions involved some of the industry’s largest on-premise software companies that finally began to view SaaS as a

viable deployment model and strategic imperative. SaaS company acquisitions accounted for 16.2% of all software industry acquisitions in 1Q12, compared to only 2.3% of all software M&A deals just two years ago (Figure 37). The results of our 2012 Annual Buyer Survey, available on our blog, portend the number of SaaS acquisitions will accelerate further in 2012: http://softwareequitygroup.wordpress.com/2012/03/30/segs-2012-software-buyer-survey-results/.

SaaS exit valuations are also ramping. The median EV/Revenue exit multiple for SaaS providers in the first quarter was 3.9x, up 54%

CRM & Marketing1.4%

Development Tools & Application Testing

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Automotive1.0%

Education2.4%

Financial Services5.8%

Healthcare5.8%

Insurance1.4%

Manufacturing1.4%

Other Verticals6.8%

Public Sector2.4%

Real Estate1.7%

Retail 2.4%

Utilities1.4%

Accounting & Finance1.4%

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Figure 36: Software M&A by Product Category

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

http://softwareequitygroup.wordpress.com/2012/03/30/segs-2012-software-buyer-survey-results/




QoQ, and 15% YoY (Figure 38). 1Q12’s median exit valuation is more than double the median 1.9x TTM EV/Revenue exit multiple of on-premise software companies in Q1.

And size is beginning to matter. An analysis of SaaS M&A transactions over the prior two years reveals that the revenue of SaaS targets seemed to dramatically impact their exit valuations. SaaS sellers with TTM revenue below $10 million received a median EV/Revenue multiple of 2.5x, while those with TTM revenue greater than $50 million were awarded a median EV/Revenue multiple of 5.6x (Figure 39). The premium paid to larger SaaS targets is testament to the emergence of SaaS leaders with sufficient bulk and market presence to pose a legitimate threat to large, incumbent, on-premise software providers.

Speaking of SaaS leaders, the largest SaaS deal of the quarter was Oracle’s acquisition of Taleo ($1.8B EV, 5.7x TTM Revenue), a leading provider of talent management software. Oracle’s acquisition follows on the heels of SAP’s

blockbuster acquisition of SuccessFactors in 4Q11 ($3.5B EV, 12x TTM Revenue). The Taleo and SuccessFactors acquisitions are evidence the HR management (HRM) market, a superset of talent management, has become sizable enough to regain the attention of the largest ERP providers that are losing sales to emerging SaaS providers. Oracle’s acquisition of Taleo will not only enhance Oracle’s legacy HR product suite with state-of-the-art talent management capabilities, but also provide a proven SaaS platform that can host other Oracle offerings. A full recap of the transaction can be found on the SEG blog: http://softwareequitygroup.wordpress.com/2012/02/09/oracle-acquires-taleo/ Another notable SaaS transaction was Blackbaud’s controversial acquisition of Convio ($274M EV, 3.4x TTM revenue). The acquisition would create a major force in the online fundraising sector but was initially challenged by the DOJ. The merger has now been approved, enabling Blackbaud to expand its product suite by adding Convio’s market leading online and social fundraising platform – and a substantial amount of recurring revenue. The broad based adoption of SaaS is evident in the number of product categories with transactions in 1Q12. All told, a total of fifteen product categories and eight verticals had at least one SaaS M&A transaction. The talent/workforce management product category accounted for a whopping 20% of all SaaS M&A transactions in 1Q12. We believe this flurry of M&A activity signals the last notable round of consolidation in this product category, with larger vendors seeking to bulk up after taking careful note of the rapid market adoption of SaaS deployed talent/workforce management apps among enterprises and SMBs (Figure 40). Notable Q1 transactions in this category include: Saba Software’s acquisition of Humanconcepts ($23.5M EV) for workforce planning/analytics; Cornerstone’s acquisition of Sonar ($33.8M EV) to provide SMBs with performance management; Kenexa’s acquisition of Outstart ($38.9M EV) for LMS & LCMS; and PeopleFluent’s acquisition of Strategia for LMS.

3.4x3.5x

3.7x 3.7x3.9x

1Q11 2Q11 3Q11 4Q11 1Q12

Figure 38: Median SaaS M&A Valuation as aMultiple of Revenue

2.5x

3.5x4.2x

5.6x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

Revenue <$10M

$10M <Revenue<$20M

$21M <Revenue<$49M

Revenue >$50M

Figure 39: Median SaaS M&A EV/RevenueMultiples by TTM Revenue

http://softwareequitygroup.wordpress.com/2012/02/09/oracle-acquires-taleo/




There was also significant M&A activity in the CRM & Marketing product category of our SaaS Index which accounted for approximately 13% of the Q1 SaaS M&A tally. CRM and Talent/Workforce Management were the earliest SaaS deployed applications to gain a significant foothold among enterprises, and they are in demand by larger on-premise software providers under pressure to add SaaS to their product mix. Other SaaS categories with relatively robust deal activity in Q 1 included Business Intelligence (6% of all SaaS M&A), and Messaging, Conferencing and Collaboration (6%). Collectively, vertical solution providers (pure-play SaaS and hybrid) accounted for 27% of all SaaS M&A transactions. SaaS sellers targeting Healthcare and Financial Services finished 1Q12 with 6% and 5%, respectively, of all SaaS M&A transactions respectively. The activity is noteworthy as both verticals are subject to

significant government and industry regulation and oversight where security and privacy are mandated. Given the rapid growth of SaaS providers in these verticals, and the level of M&A activity, it appears customers and buyers alike are becoming more comfortable with the security of third-party hosted applications. INTERNET M&A DEAL VOLUME AND VALUATIONS Internet M&A activity in the first quarter was robust. Q1’s 220 Internet transactions represented a 25% YoY increase (Figure 41). In 3Q10, there were only a third as many Internet M&A sellers as on-premise software company sellers; today, they’re half as many as the on-premise software deal total. By far, the most active Internet M&A category in 1Q12 was Ad Tech & Lead Gen, which accounted for 65 transactions in Q1 (Figure 42). A good

Content & Document Mgmt2%

CRM & Marketing13%

eCommerce5%

Engineering, PLM & CAD/CAM

5%Messaging, Conferencing

& Collaboration6%

Mobile2%

MultiMedia, Graphics & Digital Media

2%

Security3%

Storage, Data Mgmt & Integration

2%

Supply Chain Mgmt & Logistics

2%Systems Mgmt

3%

Talent & Workforce Mgmt20%

Web Analytics2%

Education3%

Financial Services5%

Healthcare6%

Insurance2%

Legal2%

Non‐Profit2%

Other Verticals5%

Retail2%

Billing & Service Mgmt5%

Business Intelligence6%

Vertical Deals

Figure 40: SaaS M&A by Product Category




number of the sellers in this category were daily deal sites that hoped to emulate Groupon and Living Social but were unsuccessful due to their inability to scale quickly and massively, making them ripe for consolidation. Groupon was a particularly active acquirer in Q1, seeking to expand its product offering and geographical footprint by purchasing Kima Labs, Adku and Six Times Seven. Other notable Q1 acquisitions in the Ad Tech and Lead Gen category included Home Depot’s acquisition of Red Beacon and Constant Contact’s acquisition of MobManager.

Content & Media was also among the most active Internet categories from an M&A perspective, closing Q1 with 51 transactions, including the largest acquisition of the quarter, Youku’s acquisition of Tudou Holdings ($1.0 billion EV, 12.4x TTM Revenue). That merger combined two of China’s largest publicly traded online video companies, hoping to drive down content acquisition costs by offering a substantially larger subscriber base. As Netflix and others in the U.S. have discovered, content licensees/distributors, under pressure to generate profits, can be severely compromised by content licensors/owners seeking higher returns. Other notable Internet deals in the Content category include Shutterfly’s acquisition of Eastman

Kodak’s assets ($23M EV) and Scripps Networks’ acquisition of RealGravity. It is surprising to see Social Media M&A volume relatively low given the valuations and dynamic activity among public Social Media companies. Facebook was noticeably quiet in 1Q12, acquiring only one company (Caffeinated Mind). Google made no acquisitions in 1Q12, noteworthy in light of its one-a month acquisition pace in 2011. After merely five acquisitions in all of 2011, Twitter acquired three companies in 1Q12 (Posterous, Dasient, Context Media).

And so, consolidation in AdTech & Lead Gen, sensitivity to overpaying in Content & Media, and a dearth of Social Media acquisitions by the category’s high flying, deep pocket leaders resulted in an overall Internet M&A median exit multiple of 2.1x in 1Q12, a sharp drop from 4Q11’s 2.8x (Figure 43). Given a new and dynamic group of public Internet companies trading at lofty valuations, a vibrant and growing addressable market, and rapidly evolving technologies, we expect Internet valuations will recover nicely during the remainder of 2012.

176

199

216

203

220

1Q11 2Q11 3Q11 4Q11 1Q12

Figure 41: Internet M&A Volume Category Q1 2011 Q2 2011 Q3 2011 Q4 2011 1Q 2012Ad-Tech & Lead Gen 39 42 67 60 65Commerce 32 56 36 38 36Content & Media 45 36 45 48 51Gaming 7 15 6 14 13Infrastructure 17 25 27 27 31Social Tech 36 25 35 16 24Total 176 199 216 203 220

Figure 42: Internet M&A Volume by Product Category

1.8x2.0x

2.6x2.8x

2.1x

1Q11 2Q11 3Q11 4Q11 1Q12

Figure 43: Median Internet M&A Valuations as Multiple of Revenue




APPENDIX A: 1Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORYBilling & Service Management 1Q11 2Q11 3Q11 4Q11 1Q12

EV/Revenue 2.0x 2.2x 1.3x 1.0x 1.3xEV/EBITDA 10.1x 8.9x 4.7x 4.2x 5.9xEV/Earnings 22.1x 20.2x 11.3x 10.4x 8.2xGross Profit Margin 50.2% 45.6% 41.8% 39.0% 51.9%EBITDA Margin 22.8% 22.4% 20.4% 19.7% 20.2%Net Income Margin 12.4% 12.3% 11.4% 11.2% 13.5%TTM Revenue Grow th (YoY) 11.4% 13.1% 16.8% 36.5% 19.8%TTM EBITDA Grow th (YoY) 11.8% 18.1% 18.7% 0.0% 6.5%TTM Earnings Grow th (YoY) 0.9% -0.5% -10.3% -35.8% -18.4%Current Ratio 2.4 2.4 2.8 3.4 2.3Cash as Percent of Market Cap 21.8% 21.2% 27.8% 39.0% 33.3%Enterprise Value Grow th (YoY) 15.1% 22.0% 9.6% -5.6% -29.1%

Business Intelligence 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 3.3x 3.2x 2.9x 2.4x 2.3xEV/EBITDA 37.8x 43.0x 40.3x 36.5x 39.2xEV/Earnings 23.1x 25.4x 23.8x 23.5x 65.5xGross Profit Margin 80.0% 76.8% 71.6% 66.6% 78.9%EBITDA Margin 12.8% 10.0% 7.3% 8.0% 8.9%Net Income Margin 7.0% 6.7% 6.4% 6.3% 4.9%TTM Revenue Grow th (YoY) 15.2% 18.2% 21.6% 25.2% 23.7%TTM EBITDA Grow th (YoY) -18.2% -31.2% -6.8% -4.9% -5.3%TTM Earnings Grow th (YoY) 38.2% 76.4% -6.2% -14.3% -5.0%Current Ratio 2.0 2.1 1.9 1.8 1.8Cash as Percent of Market Cap 18.3% 14.0% 14.8% 15.9% 14.6%Enterprise Value Grow th (YoY) 16.4% 32.1% 53.5% 14.9% 17.1%

Development Platforms 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.9x 2.6x 1.8x 1.9x 2.3xEV/EBITDA 11.3x 10.7x 8.0x 9.0x 10.1xEV/Earnings 20.1x 20.1x 14.6x 15.5x 18.7xGross Profit Margin 75.4% 72.7% 71.0% 70.2% 76.4%EBITDA Margin 21.7% 21.6% 22.0% 22.4% 22.2%Net Income Margin 12.1% 11.8% 11.5% 11.1% 12.9%TTM Revenue Grow th (YoY) 31.5% 23.2% 15.0% 11.0% 7.7%TTM EBITDA Grow th (YoY) 32.4% 38.9% 21.8% 10.8% 2.4%TTM Earnings Grow th (YoY) -31.3% -33.8% -26.5% -17.3% -10.2%Current Ratio 2.2 2.3 2.4 2.0 2.2Cash as Percent of Market Cap 17.8% 16.2% 20.8% 19.9% 19.8%Enterprise Value Grow th (YoY) 44.8% 34.7% 15.0% -10.0% -17.1%

Engineering & PLM 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.5x 2.3x 1.9x 2.0x 2.6xEV/EBITDA 19.2x 16.4x 12.8x 13.4x 14.2xEV/Earnings 34.4x 35.0x 27.9x 30.7x 25.1xGross Profit Margin 83.3% 78.7% 75.2% 75.3% 83.0%EBITDA Margin 12.8% 15.5% 16.3% 16.5% 18.5%Net Income Margin 7.6% 7.3% 6.9% 6.4% 8.3%TTM Revenue Grow th (YoY) 13.9% 12.9% 14.2% 15.5% 13.5%TTM EBITDA Grow th (YoY) 13.9% 32.9% 36.9% 38.4% 43.8%TTM Earnings Grow th (YoY) -55.2% -64.4% -22.3% -54.6% -33.6%Current Ratio 2.0 2.1 2.1 1.7 1.7Cash as Percent of Market Cap 17.9% 18.1% 18.6% 19.3% 18.2%Enterprise Value Grow th (YoY) 60.2% 40.8% 18.6% 3.9% 4.2%

Enterprise Resource Planning 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.8x 2.7x 2.4x 2.8x 3.0xEV/EBITDA 11.4x 11.1x 8.7x 9.6x 10.0xEV/Earnings 22.8x 25.6x 26.2x 28.1x 16.6xGross Profit Margin 70.4% 63.9% 60.6% 63.5% 71.5%EBITDA Margin 27.6% 27.7% 27.7% 29.5% 29.5%Net Income Margin 14.5% 13.2% 12.5% 13.1% 14.2%TTM Revenue Grow th (YoY) 5.3% 13.7% 17.9% 16.3% 12.4%TTM EBITDA Grow th (YoY) 28.3% 39.1% 36.2% 36.0% 17.0%TTM Earnings Grow th (YoY) -11.4% -16.6% -24.4% -28.2% -42.0%Current Ratio 1.4 1.3 1.4 1.8 1.5Cash as Percent of Market Cap 14.5% 18.0% 18.6% 18.7% 20.6%Enterprise Value Grow th (YoY) 28.1% 37.0% 18.6% 0.6% 4.4%

Financial & Accounting 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.8x 2.7x 2.2x 2.5x 2.8xEV/EBITDA 9.6x 9.7x 8.5x 9.0x 9.7xEV/Earnings 22.5x 23.3x 21.0x 23.4x 25.0xGross Profit Margin 69.4% 67.5% 66.3% 65.0% 66.0%EBITDA Margin 27.3% 27.4% 26.3% 26.6% 25.4%Net Income Margin 13.3% 12.9% 12.8% 12.6% 12.2%TTM Revenue Grow th (YoY) 7.4% 9.9% 7.3% 7.9% 4.7%TTM EBITDA Grow th (YoY) 5.9% 12.5% 14.5% 10.1% 14.1%TTM Earnings Grow th (YoY) -20.7% -15.0% -14.3% -9.7% -6.7%Current Ratio 1.5 1.4 1.3 1.4 1.3Cash as Percent of Market Cap 12.6% 15.1% 15.7% 14.7% 13.7%Enterprise Value Grow th (YoY) 26.6% 32.7% 9.3% 3.5% 9.1%

Gaming 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 0.9x 1.0x 1.1x 1.2x 1.1xEV/EBITDA 8.9x 10.7x 8.3x 7.4x 6.4xEV/Earnings 18.0x 17.8x 23.6x 24.1x 11.3xGross Profit Margin 47.4% 48.9% 48.6% 51.1% 47.5%EBITDA Margin 7.8% 9.3% 8.7% 7.3% 6.2%Net Income Margin 3.4% 3.3% 3.2% 3.0% 0.5%TTM Revenue Grow th (YoY) -1.6% -1.0% 0.1% 4.4% 5.6%TTM EBITDA Grow th (YoY) 149.7% 173.7% 80.0% 53.9% 41.0%TTM Earnings Grow th (YoY) -253.6% -231.0% -81.3% -36.8% -50.2%Current Ratio 2.3 2.3 2.6 2.1 2.2Cash as Percent of Market Cap 24.9% 22.2% 23.9% 23.7% 27.9%Enterprise Value Grow th (YoY) 15.5% 25.6% 47.8% 47.4% 11.8%

Healthcare 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 4.0x 3.9x 3.3x 2.9x 3.2xEV/EBITDA 18.7x 19.6x 17.7x 16.2x 15.2xEV/Earnings 35.8x 41.0x 43.8x 34.7x 30.5xGross Profit Margin 63.4% 60.0% 57.2% 53.4% 65.9%EBITDA Margin 20.2% 20.1% 22.6% 22.8% 22.1%Net Income Margin 3.7% 3.5% 3.2% 2.9% 5.1%TTM Revenue Grow th (YoY) 16.4% 18.6% 20.4% 19.5% 22.9%TTM EBITDA Grow th (YoY) 12.9% 20.7% 29.2% 39.2% 41.5%TTM Earnings Grow th (YoY) 17.6% -18.1% -25.8% -52.9% -46.3%Current Ratio 2.2 2.1 1.9 2.0 2.0Cash as Percent of Market Cap 9.6% 8.8% 8.4% 9.2% 8.8%Enterprise Value Grow th (YoY) 33.7% 42.2% 36.6% 16.4% 11.8%

IT Conglomerates 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 3.2x 3.0x 2.6x 2.5x 3.1xEV/EBITDA 8.6x 8.7x 8.7x 9.0x 8.2xEV/Earnings 20.2x 21.0x 17.2x 18.3x 13.7xGross Profit Margin 70.4% 63.9% 60.6% 63.5% 71.5%EBITDA Margin 37.9% 38.3% 38.9% 39.5% 40.1%Net Income Margin 14.9% 14.6% 14.2% 13.9% 24.2%TTM Revenue Grow th (YoY) 16.8% 20.4% 20.6% 14.7% 8.0%TTM EBITDA Grow th (YoY) 23.0% 34.3% 30.4% 16.3% 15.4%TTM Earnings Grow th (YoY) -9.0% -13.9% -22.3% -28.2% -34.7%Current Ratio 2.5 2.8 2.6 2.3 2.3Cash as Percent of Market Cap 9.3% 8.0% 9.1% 10.3% 9.2%Enterprise Value Grow th (YoY) 29.7% 34.7% 22.1% 10.8% 4.4%

Mobile Solutions/Content 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 3.4x 3.1x 1.9x 2.0x 2.5xEV/EBITDA 25.2x 23.2x 17.8x 23.3x 18.1xEV/Earnings 39.1x 25.0x 17.5x 24.9x 16.0xGross Profit Margin 66.9% 65.4% 62.7% 59.0% 65.8%EBITDA Margin 18.1% 9.3% 6.4% 5.8% 5.2%Net Income Margin 2.5% 2.5% 2.4% 2.5% -3.4%TTM Revenue Grow th (YoY) 17.3% 16.7% 20.3% 10.6% 10.6%TTM EBITDA Grow th (YoY) 15.1% 0.9% 13.9% -7.5% -13.9%TTM Earnings Grow th (YoY) -15.5% -26.7% -13.5% -2.7% 12.2%Current Ratio 3.0 3.0 3.0 2.6 2.7Cash as Percent of Market Cap 15.3% 17.3% 22.9% 25.0% 21.5%Enterprise Value Grow th (YoY) 26.1% 13.8% 19.3% -2.8% -22.4%




APPENDIX A: 1Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY Networking & Network Perf Mgmt 1Q11 2Q11 3Q11 4Q11 1Q12

EV/Revenue 4.4x 4.2x 3.1x 2.7x 3.1xEV/EBITDA 25.2x 21.6x 16.1x 15.7x 16.4xEV/Earnings 41.4x 40.9x 30.4x 36.3x 31.1xGross Profit Margin 69.2% 65.2% 61.8% 60.6% 67.8%EBITDA Margin 15.6% 17.0% 18.9% 19.3% 18.7%Net Income Margin 6.4% 6.1% 5.7% 5.5% 12.1%TTM Revenue Grow th (YoY) 27.9% 23.4% 21.2% 23.3% 20.7%TTM EBITDA Grow th (YoY) 15.1% 22.5% 34.0% 41.1% 49.6%TTM Earnings Grow th (YoY) -47.7% -49.4% -50.5% -41.9% -28.7%Current Ratio 2.4 2.9 3.1 2.8 2.7Cash as Percent of Market Cap 12.7% 14.9% 18.5% 19.3% 14.2%Enterprise Value Grow th (YoY) 107.8% 72.5% 11.1% -16.1% -10.7%

Security 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 3.4x 3.1x 2.6x 2.8x 3.2xEV/EBITDA 16.7x 16.4x 13.3x 14.5x 13.5xEV/Earnings 22.8x 28.6x 23.3x 22.6x 18.0xGross Profit Margin 81.7% 77.2% 72.7% 68.4% 80.8%EBITDA Margin 19.7% 20.5% 20.6% 20.0% 20.8%Net Income Margin 11.4% 10.9% 10.3% 9.7% 11.2%TTM Revenue Grow th (YoY) 19.5% 19.4% 18.8% 16.8% 26.1%TTM EBITDA Grow th (YoY) 19.7% 24.8% 9.9% 10.6% 19.0%TTM Earnings Grow th (YoY) -37.2% -14.4% -13.6% -25.5% -16.0%Current Ratio 1.6 1.4 1.5 1.6 2.1Cash as Percent of Market Cap 15.2% 15.2% 15.7% 15.9% 12.0%Enterprise Value Grow th (YoY) 7.9% 46.3% 37.3% -3.4% 15.9%

Storage, Data Management & Integration 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 3.0x 2.6x 2.1x 2.2x 2.5xEV/EBITDA 10.7x 12.6x 9.9x 9.8x 10.3xEV/Earnings 22.6x 23.7x 20.9x 19.7x 19.8xGross Profit Margin 73.5% 71.3% 71.0% 70.6% 72.9%EBITDA Margin 21.3% 21.8% 22.4% 21.5% 22.8%Net Income Margin 13.3% 12.6% 12.0% 11.4% 12.3%TTM Revenue Grow th (YoY) 17.7% 15.2% 11.9% 8.5% 7.8%TTM EBITDA Grow th (YoY) 19.4% 23.7% 19.0% 10.8% 15.4%TTM Earnings Grow th (YoY) -27.7% -19.9% -26.2% -19.0% -14.7%Current Ratio 2.3 2.1 1.9 2.2 2.3Cash as Percent of Market Cap 14.9% 15.8% 21.1% 18.7% 19.8%Enterprise Value Grow th (YoY) 25.7% 46.5% 18.9% 0.0% 4.2%

Supply Chain Management & Logistics 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.0x 2.1x 1.8x 1.9x 1.9xEV/EBITDA 11.6x 11.6x 11.0x 11.4x 12.1xEV/Earnings 22.1x 24.3x 24.8x 28.4x 18.9xGross Profit Margin 60.1% 57.1% 55.1% 53.1% 60.4%EBITDA Margin 17.6% 15.9% 17.3% 18.8% 20.1%Net Income Margin 7.5% 6.9% 6.6% 6.3% 10.6%TTM Revenue Grow th (YoY) 20.5% 13.7% 19.1% 20.4% 14.9%TTM EBITDA Grow th (YoY) 23.0% 29.7% 29.0% 54.8% 26.5%TTM Earnings Grow th (YoY) -37.2% -25.7% -32.7% -30.8% -37.6%Current Ratio 2.2 2.2 2.2 2.4 2.6Cash as Percent of Market Cap 17.5% 21.4% 18.5% 20.4% 14.7%Enterprise Value Grow th (YoY) 25.4% 21.4% 29.1% 35.3% 31.2%

Systems Management 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 6.4x 7.3x 5.2x 5.5x 5.9xEV/EBITDA 19.6x 21.7x 18.7x 20.9x 22.2xEV/Earnings 30.4x 35.9x 33.5x 41.7x 36.3xGross Profit Margin 83.5% 78.7% 78.0% 77.1% 84.2%EBITDA Margin 24.6% 25.2% 25.5% 26.1% 26.4%Net Income Margin 14.8% 14.2% 13.7% 13.1% 19.2%TTM Revenue Grow th (YoY) 16.1% 17.6% 17.3% 17.9% 17.7%TTM EBITDA Grow th (YoY) 16.1% 23.8% 20.6% 19.6% 26.2%TTM Earnings Grow th (YoY) -23.3% -24.3% -20.8% -22.2% -14.9%Current Ratio 1.7 1.8 1.8 1.6 1.5Cash as Percent of Market Cap 10.2% 10.3% 10.9% 11.5% 11.0%Enterprise Value Grow th (YoY) 57.7% 52.2% 13.6% 2.3% 8.3%

Vertical - Finance 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 4.9x 4.6x 3.9x 3.8x 3.8xEV/EBITDA 15.3x 15.3x 13.6x 12.7x 11.6xEV/Earnings 52.6x 52.1x 45.5x 45.1x 28.4xGross Profit Margin 69.8% 69.8% 69.8% 69.8% 69.2%EBITDA Margin 36.7% 36.7% 36.6% 36.8% 36.6%Net Income Margin 13.9% 13.7% 13.4% 13.2% 14.6%TTM Revenue Grow th (YoY) 20.3% 18.1% 15.6% 15.0% 15.1%TTM EBITDA Grow th (YoY) 32.0% 17.7% 15.3% 10.3% 16.7%TTM Earnings Grow th (YoY) -13.4% -15.9% -11.6% -19.9% -16.7%Current Ratio 1.2 1.2 1.2 1.2 1.1Cash as Percent of Market Cap 4.9% 4.0% 4.7% 6.6% 9.4%Enterprise Value Grow th (YoY) 44.0% 24.4% 11.2% -7.2% -5.5%

Vertical - Other 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.4x 3.1x 2.7x 2.8x 3.2xEV/EBITDA 13.4x 15.1x 14.2x 15.7x 18.5xEV/Earnings 31.3x 35.7x 34.4x 39.0x 35.0xGross Profit Margin 54.8% 53.4% 51.7% 46.9% 56.2%EBITDA Margin 18.0% 18.4% 17.9% 17.8% 18.4%Net Income Margin 8.7% 8.6% 8.3% 8.0% 8.9%TTM Revenue Grow th (YoY) 12.0% 10.5% 15.5% 20.1% 20.4%TTM EBITDA Grow th (YoY) 7.9% 7.9% 23.3% 24.7% 30.5%TTM Earnings Grow th (YoY) -7.0% -9.1% -20.2% -20.6% -13.9%Current Ratio 0.9 1.2 1.2 1.2 1.2Cash as Percent of Market Cap 5.1% 9.5% 10.2% 9.5% 12.4%Enterprise Value Grow th (YoY) 38.6% 47.3% 34.3% 37.8% 62.1%




APPENDIX B: 1Q12 PUBLIC SAAS MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

CRM & Marketing 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 4.4x 4.8x 4.5x 2.7x 4.3xEV/EBITDA 66.0x 40.6x 28.9x 22.7x 31.5xEV/Earnings 55.3x 74.5x 65.5x 51.6x 57.3xGross Profit Margin 70.2% 68.6% 67.0% 60.4% 70.6%EBITDA Margin 9.8% 8.2% 7.3% 6.5% 7.2%Net Income Margin 4.4% 4.2% 4.0% 3.8% 2.7%TTM Revenue Grow th (YoY) 26.2% 23.7% 21.9% 20.8% 29.0%TTM EBITDA Grow th (YoY) 14.6% 4.9% 5.3% 4.7% 11.7%TTM Earnings Grow th (YoY) -25.7% -15.2% -25.1% 16.5% 20.3%Current Ratio 2.2 2.0 2.5 2.3 2.3Cash as Percent of Market Cap 15.8% 12.8% 13.3% 21.4% 15.0%Enterprise Value Grow th (YoY) 88.6% 75.3% 56.2% 14.4% -52.3%

ERP & Supply Chain 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 6.5x 6.8x 6.0x 5.7x 5.3xEV/EBITDA 31.4x 37.2x 47.2x 62.7x 68.5xEV/Earnings 49.7x 53.0x 62.4x 78.6x 57.2xGross Profit Margin 69.9% 66.5% 62.8% 58.9% 71.8%EBITDA Margin 9.6% 8.0% 7.4% 6.9% 7.1%Net Income Margin 5.3% 5.0% 4.7% 4.4% 1.7%TTM Revenue Grow th (YoY) 16.7% 19.1% 21.8% 24.3% 27.9%TTM EBITDA Grow th (YoY) 1.4% -4.9% -18.6% -18.5% -13.1%TTM Earnings Grow th (YoY) -3.1% 15.5% 88.0% -44.6% -35.3%Current Ratio 1.5 1.4 1.6 1.6 1.6Cash as Percent of Market Cap 10.2% 11.8% 11.3% 10.0% 8.1%Enterprise Value Grow th (YoY) 135.4% 148.6% 76.7% 74.5% 500.5%

Vertically Focused 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 5.9x 5.5x 4.3x 4.2x 5.2xEV/EBITDA 22.9x 23.2x 15.7x 17.7x 21.0xEV/Earnings 102.6x 96.7x 114.9x 116.4x 21.0xGross Profit Margin 60.7% 57.1% 53.1% 49.5% 62.1%EBITDA Margin 13.8% 14.9% 16.9% 17.1% 15.3%Net Income Margin 5.2% 4.9% 4.5% 4.2% 16.3%TTM Revenue Grow th (YoY) 33.6% 29.5% 30.5% 32.3% 32.0%TTM EBITDA Grow th (YoY) 16.7% 23.0% 31.3% 23.2% 28.8%TTM Earnings Grow th (YoY) -30.6% -31.7% -53.7% -33.3% -17.7%Current Ratio 1.8 1.9 1.6 1.1 1.3Cash as Percent of Market Cap 6.9% 7.2% 6.1% 6.1% 5.2%Enterprise Value Grow th (YoY) 22.2% 50.4% 32.3% 1.9% 88.5%

Workforce Management 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 4.2x 4.5x 3.7x 4.3x 4.7xEV/EBITDA 55.6x 55.7x 44.7x 48.6x 47.1xEV/Earnings 589.9x 626.8x 584.5x 742.3x 410.2xGross Profit Margin 60.8% 56.7% 52.7% 47.9% 58.6%EBITDA Margin -1.1% 2.4% 2.1% 1.7% 0.7%Net Income Margin -10.5% -9.9% -9.4% -9.0% -10.9%TTM Revenue Grow th (YoY) 20.3% 16.5% 17.6% 35.7% 31.1%TTM EBITDA Grow th (YoY) 52.2% 54.0% 30.6% 33.8% 22.2%TTM Earnings Grow th (YoY) -121.3% -110.7% 15.1% 20.7% -33.4%Current Ratio 1.1 1.2 1.9 1.6 1.5Cash as Percent of Market Cap 7.4% 10.4% 12.4% 14.9% 12.5%Enterprise Value Grow th (YoY) 141.5% 162.1% 83.7% 44.7% -35.3%

Other SaaS 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 7.4x 6.0x 2.6x 2.5x 4.6xEV/EBITDA 39.8x 44.2x 20.2x 21.2x 24.2xEV/Earnings 137.9x 141.7x 100.6x 89.2x 31.0xGross Profit Margin 71.1% 67.3% 63.6% 61.8% 71.6%EBITDA Margin 17.6% 16.1% 13.9% 11.2% 11.4%Net Income Margin 1.8% 1.7% 1.7% 1.6% 6.5%TTM Revenue Grow th (YoY) 31.0% 31.2% 29.4% 25.2% 22.0%TTM EBITDA Grow th (YoY) 31.0% 41.3% 46.3% 23.2% 16.0%TTM Earnings Grow th (YoY) -105.1% -85.6% -91.8% -34.7% -32.9%Current Ratio 1.8 2.1 2.0 2.2 2.2Cash as Percent of Market Cap 11.0% 15.4% 18.5% 22.1% 15.4%Enterprise Value Grow th (YoY) 87.6% 52.5% 22.7% -22.1% -38.6%




APPENDIX C: 1Q12 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY Ad Tech & Lead Generation 1Q11 2Q11 3Q11 4Q11 1Q12

EV/Revenue 3.0x 3.6x 3.0x 3.5x 3.6xEV/EBITDA 14.2x 16.7x 13.8x 11.9x 16.7xEV/Earnings 17.0x 20.2x 19.5x 18.8x 28.8xGross Profit Margin 68.2% 63.8% 57.2% 51.9% 69.7%EBITDA Margin 25.3% 23.8% 21.1% 18.2% 15.6%Net Income Margin 6.6% 6.2% 6.0% 5.9% 3.5%TTM Revenue Grow th (YoY) 24.0% 23.9% 26.1% 30.6% 32.2%TTM EBITDA Grow th (YoY) 23.5% 26.1% 26.4% 22.0% 27.0%TTM Earnings Grow th (YoY) -13.3% -20.1% -8.3% -10.0% -8.1%Current Ratio 3.2 3.2 3.2 3.0 3.0Cash as Percent of Market Cap 16.7% 14.6% 13.7% 14.8% 18.4%Enterprise Value Grow th (YoY) 49.6% 58.1% 46.2% 1.4% -6.9%

Commerce 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 1.9x 1.9x 1.4x 1.1x 0.9xEV/EBITDA 22.7x 19.3x 13.6x 13.1x 16.6xEV/Earnings 51.7x 44.4x 35.8x 35.3x 15.4xGross Profit Margin 41.3% 41.1% 39.3% 38.1% 36.9%EBITDA Margin 7.9% 8.0% 9.7% 9.3% 8.6%Net Income Margin 3.5% 3.3% 3.1% 2.9% 3.8%TTM Revenue Grow th (YoY) 12.7% 9.2% 9.3% 13.2% 14.3%TTM EBITDA Grow th (YoY) 3.7% 3.1% 5.9% 7.3% -0.3%TTM Earnings Grow th (YoY) 7.1% 4.5% 28.6% 24.6% 8.4%Current Ratio 2.2 2.3 2.3 2.2 1.8Cash as Percent of Market Cap 12.3% 16.8% 14.0% 15.6% 17.0%Enterprise Value Grow th (YoY) 33.2% 39.5% 24.4% -14.6% -26.5%

Content & Media 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.5x 3.4x 2.7x 2.2x 2.0xEV/EBITDA 13.5x 18.1x 11.0x 10.6x 10.5xEV/Earnings 51.5x 47.7x 31.1x 26.5x 21.7xGross Profit Margin 48.1% 43.8% 44.7% 45.4% 52.0%EBITDA Margin 10.5% 12.0% 12.8% 12.6% 13.4%Net Income Margin -1.3% -1.1% -0.9% -0.7% 0.6%TTM Revenue Grow th (YoY) 21.9% 12.4% 12.6% 25.6% 25.8%TTM EBITDA Grow th (YoY) 14.5% 24.5% 24.7% 17.2% 11.2%TTM Earnings Grow th (YoY) -32.2% -68.9% -13.0% -27.5% -14.3%Current Ratio 2.2 2.3 2.6 2.6 2.6Cash as Percent of Market Cap 29.2% 16.4% 25.9% 27.3% 23.4%Enterprise Value Grow th (YoY) 37.2% 16.5% -7.9% -44.3% -22.7%

Gaming 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 4.1x 4.8x 4.7x 3.1x 3.2xEV/EBITDA 9.8x 9.8x 8.1x 6.1x 4.2xEV/Earnings 12.6x 13.2x 13.5x 11.1x 8.8xGross Profit Margin 76.1% 73.4% 68.0% 63.1% 74.6%EBITDA Margin 46.2% 41.6% 45.4% 44.9% 44.2%Net Income Margin 37.3% 34.6% 31.6% 29.1% 34.4%TTM Revenue Grow th (YoY) 20.9% 24.3% 29.7% 34.2% 35.7%TTM EBITDA Grow th (YoY) 14.1% 23.4% 24.8% 25.8% 34.7%TTM Earnings Grow th (YoY) -19.0% -20.8% -22.0% -15.1% -8.3%Current Ratio 3.8 4.1 3.2 2.7 2.7Cash as Percent of Market Cap 26.8% 23.3% 23.1% 30.0% 27.3%Enterprise Value Grow th (YoY) 9.3% 41.6% 28.8% -26.2% -11.1%

Infrastructure 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.9x 2.8x 2.6x 1.7x 1.9xEV/EBITDA 20.5x 19.7x 17.3x 12.8x 14.1xEV/Earnings 32.8x 32.3x 30.6x 22.9x 29.4xGross Profit Margin 66.1% 62.4% 59.8% 54.0% 67.2%EBITDA Margin 12.2% 10.8% 11.7% 11.0% 11.2%Net Income Margin 5.6% 5.3% 5.0% 4.8% 4.3%TTM Revenue Grow th (YoY) 14.9% 17.1% 20.1% 24.6% 22.8%TTM EBITDA Grow th (YoY) 17.5% 13.3% 19.3% 19.1% 21.5%TTM Earnings Grow th (YoY) -48.5% -20.4% -17.9% -14.8% -8.1%Current Ratio 2.8 3.1 2.9 2.8 2.7Cash as Percent of Market Cap 14.0% 15.4% 19.1% 19.5% 17.4%Enterprise Value Grow th (YoY) 95.9% 55.5% 32.0% -14.5% -23.3%

Services 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 3.0x 4.9x 5.0x 4.2x 4.2xEV/EBITDA 19.7x 22.0x 23.4x 16.5x 18.1xEV/Earnings 39.4x 43.7x 39.3x 38.8x 56.5xGross Profit Margin 70.8% 69.5% 57.4% 50.6% 77.5%EBITDA Margin 16.0% 10.9% 10.3% 10.8% 13.3%Net Income Margin 1.0% 1.0% 0.9% 0.8% 2.7%TTM Revenue Grow th (YoY) 24.9% 22.6% 35.1% 35.9% 42.7%TTM EBITDA Grow th (YoY) 34.5% 32.2% 15.7% 4.4% 22.9%TTM Earnings Grow th (YoY) -16.5% -15.8% -10.8% -29.5% -13.1%Current Ratio 2.3 2.2 2.3 2.5 2.4Cash as Percent of Market Cap 8.7% 10.2% 12.7% 15.0% 13.1%Enterprise Value Grow th (YoY) 44.9% 40.0% 34.2% -23.6% -29.6%

Social 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 20.6x 22.5x 20.2x 12.4x 14.3xEV/EBITDA 86.1x 137.9x 116.6x 58.5x 63.9xEV/Earnings 43.6x 256.0x 284.2x 244.0x 42.5xGross Profit Margin 77.2% 70.4% 66.7% 62.6% 76.7%EBITDA Margin 16.9% 13.2% 13.4% 12.8% 1.8%Net Income Margin -16.3% -16.3% -16.3% -12.9% -3.6%TTM Revenue Grow th (YoY) 84.9% 84.9% 84.9% 94.5% 70.8%TTM EBITDA Grow th (YoY) 67.7% 70.6% 81.0% 4.2% -14.5%TTM Earnings Grow th (YoY) -29.7% -29.7% 8.6% 29.2% -3.4%Current Ratio 1.9 1.8 2.6 2.4 2.6Cash as Percent of Market Cap 3.0% 9.1% 10.8% 36.8% 11.0%Enterprise Value Grow th (YoY) #NUM! #NUM! #NUM! -15.8% 0.9%

Travel 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 6.5x 7.1x 5.1x 5.4x 4.7xEV/EBITDA 26.2x 29.6x 23.4x 16.8x 15.3xEV/Earnings 36.5x 41.6x 47.1x 31.1x 25.4xGross Profit Margin 80.0% 77.6% 73.3% 68.3% 79.9%EBITDA Margin 22.0% 24.5% 24.2% 24.4% 22.1%Net Income Margin 12.8% 11.5% 10.8% 10.2% 8.2%TTM Revenue Grow th (YoY) 26.0% 28.2% 25.7% 28.7% 31.5%TTM EBITDA Grow th (YoY) 28.1% 37.1% 24.0% 30.2% 25.9%TTM Earnings Grow th (YoY) -10.4% -10.8% -4.4% -16.3% -16.3%Current Ratio 1.8 1.6 1.9 1.9 2.0Cash as Percent of Market Cap 8.8% 9.5% 9.4% 10.9% 9.3%Enterprise Value Grow th (YoY) 12.5% 14.6% 6.2% -20.6% -21.8%




APPENDIX D: 1Q12 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS Buyer Seller Purchase Price Enterprise Value Ev/Rev EV/EBITDA

TTM Rev Growth

Insight Venture Partners Quest Softw are Inc. (NasdaqGS:QSFT) $2,176,260 $1,947,330 2.3x 12.7x 11.8%

Vista Equity Partners Misys plc (LSE:MSY) $2,141,030 $2,042,200 3.2x 16.1x 17.9%

Oracle Corporation (NasdaqGS:ORCL) Taleo Corp. (NasdaqGS:TLEO) $1,921,440 $1,805,470 5.7x 60.9x 32.9%

Blackbaud Inc. (NasdaqGS:BLKB) Convio, Inc. (NasdaqGS:CNVO) $326,320 $274,420 3.4x 35.5x 15.2%

Myriad Group AG (SWX:MYRN) Synchronica PLC (AIM:SYNC) $50,520 $49,230 2.7x - 98.7%

Siemens Beteiligungen Inland GmbH IBS AG (XTRA:IBB) $28,910 $43,890 1.3x 11.5x 16.9%

Clausal Computing Oy Tectia Oyj (HLSE:TEC1V) $11,290 $17,210 1.6x - 11.4%




APPENDIX E: 1Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS Buyer Seller

Purchase Price (mm)

Enterprise Value (mm) TTM Rev EV/Rev

Blackboard Inc. Moodlerooms, Inc. - - - -

NetSpot Pty. Ltd. - - - -

Brady plc (AIM:BRY) Navita Systems AS $27.3 $27.3 - -

syseca AG $2.0 $2.0 $3.0 0.7x

ClarkHuot/Cocoon Cocoon Branding Inc. - - - -

Spacecadet Design Inc. - - - -

Constant Contact, Inc. (NasdaqGS:CTCT) CardStar, Inc. $5.8 $5.0 - -

MobManager - - - -

Constellation Softw are Inc. (TSX:CSU) AMI Education Solutions Ltd. $1.0 $1.0 - -

Capital Computer Aossicates - -

Computer Softw are Innovations Inc. - - - -

Kestral Computing Pty Ltd. - - - -

Volo Innovations - - - -

Dell Inc. (NasdaqGS:DELL) AppAssure Softw are, Inc. - - - -

SonicWALL, Inc. - - $260.0 -

Expansion VC, LLC Pricing Engine, Inc. - - - -

Tailored Inc. - - - -

Fab.com, Inc. Fab.de - $10.0 - -

FashionStake, Inc. - - - -

Fortunate Bear, LLC Creastoric - - - -

Pagehand.com, Pagehand Word Processor - - - -

Green Dot Corporation (NYSE:GDOT) eCommLink, Inc. $2.5 $2.5 - -

Loopt, Inc. $43.4 $43.4 - -

Groupon, Inc. (NasdaqGS:GRPN) Adku, Inc. $10.0 $10.0 - -

Hyperpublic - - - -

Kima Labs, Inc. - - - -

Six Times Seven Inc. - - - -

Transparent Financial Services Inc - - - -

UpTake Netw orks, Inc. - - - -

IHS Inc. (NYSE:IHS) BDW Automotive GmbH $8.0 $8.0 - -

PartMiner WorldWide Inc., Computer Assisted Product S l ti

- - - -

International Business Machines Corp. (NYSE:IBM) Green Hat Softw are Limited - - - -

WorkLight Ltd. - $70.0 - 20.0x

International Game Technology (NYSE:IGT) Double Dow n Interactive, LLC $415.0 $415.0 - -

Law rence Gaming, LLC - - - -

j2 Global, Inc. (NasdaqGS:JCOM) Landslide Technologies, Inc. - - - -

Offsite Backup Solutions, LLC - - - -

Kabam, Inc. Fearless Studios - - - -

Gravity Bear LLC - - - -

Kronos Incorporated OptiLink Inc. - - $6.4 -

WebApps, Inc. - - - -

Manheim Auctions Ltd. Motors.co.uk Ltd. - - - -

Motors.co.uk Ltd. - - - -

McKesson Corporation (NYSE:MCK) peerVue, Inc. - - - -

Proventys, Inc., CDS Oncology Assets - - - -

MenschDanke GmbH Mein-Deal - - - -

Schnäppchenfuchs - - - -

Opera Softw are ASA (OB:OPERA) 4th Screen Advertising Ltd. $14.5 $14.5 - -

Mobile Theory, Inc. $50.0 $50.0 - -

Oracle Corporation (NasdaqGS:ORCL) ClearTrial, LLC - - - -




APPENDIX E: 1Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONT…) Buyer Seller

Purchase Price (mm)

Enterprise Value (mm) TTM Rev EV/Rev

Taleo Corp. (NasdaqGS:TLEO) $1,921.4 $1,805.5 $315.4 5.7x

Ringier Axel Springer d o.o Media Sw iss d.o.o. - - - -

Mojauto.rs - - - -

Rocket Softw are, Inc. International Business Machines Corp., iCluster B i

- - - -

Zephyr Development Corporation - - - -

Symantec Corporation (NasdaqGS:SYMC) LiveOff ice LLC $115.0 $115.0 - -

Nukona, Inc. - - - -

Nukona, Inc. - - - -

Odyssey Softw are, Inc. - - - -

Tangoe, Inc. (NasdaqGS:TNGO) Anomalous Netw orks, Inc. $8.9 $8.9 - -

ttMobiles Limited $8.7 $8.7 - -

Thomson Reuters Corporation (TSX:TRI) FISCOSoft Editora Ltda - - - -

RedEgg Solutions, Inc. - - - -

Dr Tax Softw are Inc. - - - -

Tw itter, Inc. Context Media Technologies, Inc. - - - -

Dasient, Inc. - - - -

Posterous, Inc. - - - -

Vista Equity Partners CDC Softw are Corporation (OTCPK:CDCS.Y) $250.5 $264.8 $219.0 1.2x

Misys plc (LSE:MSY) $2,141.0 $2,042.2 $638.6 3.2x

Vivox, Inc. Droplets, Inc. - - - -

Droplets, Inc. - - - -

Warrior Girl Corp. (OTCPK:WRGL) ChooseCreditCards.com - - - -

HostWire.com LLC - - - -




APPENDIX F: 1Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE INDUSTRY MEGA-DEALS Date Buyer Seller Purchase Price Enterprise Value Ev/Rev EV/EBITDA

TTM Rev Growth

03/15/12 Scientif ic-Atlanta, LLC NDS Group Ltd. $5,022,330 $4,964,760 5.0x 17.5x 7.7%

03/09/12 Insight Venture Partners Quest Softw are Inc. (NasdaqGS:QSFT) $2,176,260 $1,947,330 2.3x 12.7x 11.8%

02/20/12 Vista Equity Partners Misys plc (LSE:MSY) $2,141,030 $2,042,200 3.2x 16.1x 17.9%

02/09/12 Oracle Corporation (NasdaqGS:ORCL) Taleo Corp. (NasdaqGS:TLEO) $1,921,440 $1,805,470 5.7x 60.9x 32.9%




APPENDIX G: 1Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS

Date Buyer SellerEnterprise

ValueTTM

Revenue EV/Rev03/29/12 OMERS Ventures HootSuite Media, Inc. - - -03/29/12 Oracle Corporation (NasdaqGS:ORCL) ClearTrial, LLC - - -03/28/12 Kronos Incorporated WebApps, Inc. - - -03/27/12 ICG Group, Inc. (NasdaqGS:ICGE) MSDSonline Inc. - - -03/26/12 Blackboard Inc. Moodlerooms, Inc. - - -03/22/12 Trackn Inc.; PFS, LLC Spireon Inc. - - -03/20/12 MD On-Line, Inc. MD Technologies Inc. (OTCPK:MDTO) - - -03/19/12 Saba Softw are, Inc. (NasdaqGM:SABA) HumanConcepts, LLC $23,500,000 - -03/13/12 SalesCrunch, Inc. WebEx Communications, Inc. - - -03/09/12 Cybertow ers Bhd (KLSE:CYBERT) King Arts Limited - - -03/08/12 Cornerstone OnDemand, Inc. Sonar Limited $33,800,000 - -03/07/12 PrimePay, Inc. Ready Set Work, LLC - - -03/06/12 AccuData Holdings, Inc. DaVinci Marketing Technologies - - -03/04/12 JEDFam Group LLC Broadsign International, Inc. $5,500,000 - -03/02/12 Sargas Capital Kontexto Inc. $20,600,000 - -03/02/12 Youbill, Inc. Volo Innovations Inc - - -02/29/12 TeamSystem S.p.A. Digita s.r.l. - - -02/29/12 AULtec, Inc. e-autobusiness, LLC - - -02/28/12 Haufe-Lexw are GmbH & Co. KG umantis AG - - -02/27/12 Talent Technology Corporation HR Integrations LLC - - -02/24/12 Vocus Inc. (NasdaqGS:VOCS) iContact Corporation* $178,700,000 $48,000,000 3.8x02/22/12 LinkedIn Corporation (NYSE:LNKD) Rapportive, Inc. - - -02/21/12 Ivrnet, Inc. (TSXV:IVI) NeatWorx Web Solutions Inc. - - -02/21/12 ebay motors WHI Solutions, Inc. - - -02/17/12 Pender Grow th Fund Monexa Solutions Inc.* $4,150,000 $4,000,000 1.0x02/16/12 Envestnet, Inc. (NYSE:ENV) Tamarac, Inc. $54,000,000 $12,000,000 4.5x02/15/12 Quest Softw are Inc. (NasdaqGS:QSFT) BlueFolder, Inc. - - -02/14/12 Silverback Enterprise Group Inc. Pow erSteering Softw are, Inc. - - -02/14/12 Pow erSteering Softw are, Inc. Tenrox, Inc. - - -02/13/12 Juniper Netw orks, Inc. (NYSE:JNPR) Mykonos Softw are, Inc.* $80,000,000 $1,000,000 80.0x02/12/12 Ingenico SA (ENXTPA:ING) ROAM Data, Inc. - - -02/09/12 S&P Capital IQ R2 Financial Technologies Inc. - - -02/08/12 Oracle Corporation (NasdaqGS:ORCL) Taleo Corp. (NasdaqGS:TLEO) $1,805,500,000 $315,000,000 5.7x02/08/12 General Atlantic LLC FNZ (UK) Ltd. - - -02/08/12 API Healthcare Corporation Concerro, Incorporated - - -02/07/12 Ceridian Corporation Dayforce, Inc. - - -02/07/12 Akamai Technologies, Inc. Blaze Softw are Inc. - - -02/07/12 Guidance Softw are, Inc. CaseCentral, Inc. $54,000,000 - -02/06/12 j2 Global, Inc. (NasdaqGS:JCOM) Landslide Technologies, Inc. - - -02/03/12 Sequoia Capital Evernote Corporation - - -02/02/12 Emergis Inc. Wolf Medical Systems Corporation - - -02/02/12 Xero Limited. (NZSE:XRO) Max Solutions Limited $6,000,000 - -01/31/12 Kenexa Corp. (NYSE:KNXA) OutStart, Inc. $38,900,000 - -01/31/12 Morneau Shepell Ltd. SBC Systems, Inc. - - -01/31/12 Peoplefluent, Inc. Strategia Communications Inc. - - -01/24/12 Reliance Communications, Inc. AnComm, Inc. - - -01/23/12 BearingPoint, Inc. Eff iscience, Inc. - - -01/23/12 - Foederis SA - - -




APPENDIX G: 1Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS (CONT…)

Date Buyer SellerEnterprise

ValueTTM

Revenue EV/Rev01/23/12 Cornerstone Softw are, Inc. Makana Solutions, Inc. - - -01/23/12 Tw itter, Inc. Dasient, Inc. - - -01/18/12 Dimension Data Holdings plc Xigo, LLC - - -01/17/12 Project X Labs Ltd. BigDataLabs Inc. - - -01/16/12 Blackbaud Inc. (NasdaqGS:BLKB) Convio, Inc. (NasdaqGS:CNVO) $274,400,000 $80,000,000 3.4x01/16/12 PivotLink Corp. Acteea, Inc. - - -01/13/12 Evisions, Inc. Cayuse, Inc. - - -01/12/12 SAI Global Limited (ASX:SAI) Compliance 360, Inc. $42,300,000 - -01/11/12 Grupo Linx Microvix Softw are Matriz - - -01/10/12 Tangoe, Inc. (NasdaqGS:TNGO) Anomalous Netw orks, Inc. $8,900,000 - -01/09/12 Symantec Corporation LiveOffice LLC* $115,000,000 $40,000,000 2.9x01/06/12 LogMeIn, Inc. (NasdaqGS:LOGM) Bold Softw are, LLC $16,500,000 - -01/05/12 OpenSpan, Inc. Triangle BPA, LLC - - -01/04/12 Tengelmann E-Commerce Beteiligungs MAC IT-Solutions GmbH - - -01/03/12 Callidus Softw are Inc. (NasdaqGM:CALD) LeadFormix Inc. $9,000,000 - -01/01/12 TeleTech Holdings Inc. (NasdaqGS:TTEC) OnState Communications, Inc. $3,300,000 - -

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The information contained in this Report is obtained from sources we believe to be reliable, but no representation or guarantee is made about the accuracy or completeness of such information, or the opinions expressed herein. Nothing in this Report is intended to be a recommendation of a specific security or company or intended to constitute an offer to buy or sell, or the solicitation of an offer to buy or sell, any security. Software Equity Group LLC may have an interest in one or more of the securities or companies discussed herein. Financial data provided by Capital IQ. This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights.

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Q1-2012 Software Valuations

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