q3 2012 software / saas / internet valuations

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

The Software Industry Financial Report

Software Equity Group, L.L.C.12220 El Camino RealSuite 320San Diego, CA [email protected](858) 509-2800

Unmatched Expertise. Extraordinary Results

OverviewSoftware Equity Group is an investment bank and M&A advisory firm serving the software and technology sectors. Founded in 1992, our firm has guided and advised companies on five continents, including privately-held software and technology companies in the United States, Canada, Europe, Asia Pacific, Africa and Israel. We have represented public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges. Software Equity Group also advises several of the world's leading private equity firms. We are ranked among the top ten investment banks worldwide for application software mergers and acquisitions.

Ken BenderManaging Director

(858) 509-2800 ext. [email protected]

Deal Team

ServicesOur value proposition is unique and compelling. We are skilled and accomplished investment bankers with extraordinary software, internet and technology domain expertise. Our industry knowledge and experience span virtually every software product category, technology, market and delivery model. We have profound understanding of software company finances, operations and valuation. We monitor and analyze every publicly disclosed software M&A transaction, as well as the market, economy and technology trends that impact these deals. We offer a full complement of M&A execution to our clients worldwide Our capabilities include:

R. Allen CinzoriManaging Director


Dennis ClerkeExecutive Vice President(858) 509-2800 ext. 233

[email protected]

worldwide. Our capabilities include:.

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

Brad WeekesVice President


Kris BeibleDirector, Business Development

(858) 509-2800 ext. 227kbeible@softwareequity comgy p g p q y y g p y p q y

firms and other financial institutions.Private Equity & Debt Placement – facilitating private companies with leading institutional investors for financings that range from $5 million to $500 million.Mentoring Program – providing guidance to software companies contemplating an exit to ensure they’re doing everything now to better their odds and enhance their future exit valuation ahead.

[email protected]

12220 El Camino Real, Suite 320San Diego, CA 92130

(858) 509-2800 (P)(858) 509-2818 (F)

www.softwareequity.com

Transactions

We’ve enjoyed serving our software clients for 20 years and have highlighted a small subset of companies we’ve assisted:

mailto:[email protected]





www.softwareequity.com

Software Equity Group, L.L.C.

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.

Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved

Q3 2012 Software Industry Financial Report Contents

U.S. ECONOMY: SOFTWARE INDUSTRYMACROECONOMICS ......................................................................... 2 IT SPENDING ............................................................................................................................................................ 2 INTERNET RETAIL SPENDING AND ADVERTISING ............................................................................................ 3 PUBLIC SOFTWARE/SAAS/INTERNET COMPANY STOCK PERFORMANCE ................................................... 3 PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE .......................................................................... 4 PUBLIC SOFTWARE COMPANY MARKET VALUATIONS ................................................................................... 6 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 ............................................................................................................................................................ 11 PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE ........................................................................... 11 PUBLIC INTERNET COMPANY MARKET VALUATIONS .................................................................................... 12 PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY ........................... 13 PUBLIC INTERNET COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY .................................... 13 INITIAL PUBLIC OFFERINGS ................................................................................................................................ 14 SOFTWARE/SAAS M&A DEAL VOLUME AND SPENDING ............................................................................... 16 IMPORTANT CHANGE IN SOFTWARE AND SAAS M&A DATA ACCOUNTING............................................... 17 SOFTWARE M&A VALUATIONS .......................................................................................................................... 17 SOFTWARE M&A VALUATIONS BY EQUITY STRUCTURE............................................................................... 18 SOFTWARE M&A VALUATIONS BY SIZE ........................................................................................................... 18 SOFTWARE M&A BY VERTICAL AND HORIZONTAL MARKETS ..................................................................... 19 M&A VALUATIONS BY SOFTWARE PRODUCT CATEGORY ............................................................................ 20 SOFTWARE AS A SERVICE (SAAS) M&A DEAL VOLUME AND VALUATIONS .............................................. 21 INTERNET M&A DEAL VOLUME AND VALUATIONS ......................................................................................... 23 APPENDIX A: 3Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ............................................................................................................................................................ 25

Software Equity Group, L.L.C.

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.

Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved

APPENDIX B: 3Q12 PUBLIC SAAS MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY 27 APPENDIX C: 3Q12 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ............................................................................................................................................................ 28 APPENDIX D: 3Q12 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS .................. 29 APPENDIX E: 3Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS .............................................. 30 APPENDIX F: 3Q12 MERGERS AND ACQUISITIONS, SELECT INDUSTRY MEGA-DEALS ............................ 32 APPENDIX G: 3Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS ..... 33

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

2| 3Q12 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

U.S. ECONOMY: SOFTWARE INDUSTRYMACROECONOMICS 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. In September, the Bureau of Economic Analysis (BEA) lowered its estimate of GDP growth in the second quarter to 1.3% from its initial estimate of 1.7%. After four consecutive quarters of accelerating growth in 2011, economic expansion in 2012 has not materialized, and the BEA has repeatedly issued downward revisions to previously released GDP growth numbers that were already anemic (Figure 1). The BEA’s initial estimate of 2.0 growth in the third quarter confirms that meaningful and sustained economic growth remains elusive. An early October employment report released by the U.S. Bureau of Labor Statistics indicated the unemployment rate unexpectedly fell below 8% for the first time in nearly four years. However the surprisingly good news was called into doubt by a separate survey of employers, watched closely by Wall Street, showed businesses added 114,000 jobs in September, marking a slowdown in hiring,

after July and August were revised significantly higher. 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. 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%. To provide some perspective, we estimate every percentage increase/decrease in IT spending equates to approximately $5 billion. 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. Reflecting the increased uncertainty in the global economy, analysts continue to forecast tepid worldwide IT spending forecasts for 2012. In Q2, Goldman recently lowered its 2012 forecast of worldwide IT spending from 4% in January to 3%. Goldman attributed the reduction to lower GDP

Figure 1: U.S. Gross Domestic Product and Unemployment Rate

1.1%2.1%

1.2%

3.2%3.6%

2.1%

-0.7%

1.5%

-2.7%

-5.4%

-6.4%

-0.7%

2.2%

5.0%3.7%

1.7%2.6%

3.1%

0.4%

1.3%1.8%

3.0%2.2%

1.3%2.0%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

3Q06 3Q07 3Q08 3Q09 3Q10 3Q11 3Q12

GDP % Growth Unemployment Rate



growth in advanced economies. In July, Gartner also forecasted 3% growth in worldwide IT spending, up from their previous estimate of 2.5% in 1Q12. In September, IDC updated its IT spending forecast to 2.5% growth. Among Goldman, Gartner and IDC the consensus for increased domestic IT spending in 2012 is 3% (Figure 2).

Though IT spending will grow only modestly, some will fare better than most. Gartner forecasts enterprise spending on public cloud services will reach $109 billion in 2012, and grow to $207 billion by 2016. Similarly, IDC forecasts IT Cloud Services spend will account for 10% of all IT spending in 2013. Furthermore, IDC and JPMorgan both cited strong IT spending for mobile devices, software and enterprise network products. INTERNET RETAIL SPENDING AND ADVERTISING In the Internet sector, online consumer spending and Internet advertising spending usually presage the financial performance and M&A activity of many public Internet companies. Buoyed by steady growth in the number of online shoppers, online retail sales rose 15% in 2Q12 (the latest quarter for which data is available) according to comScore. It was the eleventh consecutive quarter of growth in online sales, but fell slightly short of the first quarter’s record growth rate of 17%. Among the categories most favored by

online shoppers in 2Q12 were digital content and subscriptions, consumer electronics, flowers, greetings and gifts, computer hardware and apparel, and accessories - each growing by at least 16% year-over-year. The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) reported Internet advertising revenues soared to record levels in 2Q12, reaching $8.7 billion, a 14% year-over-year increase from 2Q11’s $7.7 billion. PUBLIC SOFTWARE/SAAS/INTERNET COMPANY STOCK PERFORMANCE Following sharp declines in the second quarter, each of the major stock indices advanced by the end of the third quarter and chalked up positive year-to-date returns. The tech heavy NASDAQ index closed the quarter up 19.6% YTD, 7.0% higher than at the close of Q2, while the S&P 500 and DOW posted less impressive YTD gains of 14.6% and 10.0%, respectively, in 3Q12 (Figure 3). Among SEG’s three tracking indices, the market performance of public companies comprising our SaaS Index far outshone their perpetual software and Internet counterparts. Investors resonated with the accelerating growth and growing enterprise adoption of SaaS, pushing the stock prices of public SaaS providers up by a median 27.5% YTD by the close of Q3. Five SaaS superstars posted YTD stock returns in excess of 70%: Ellie Mae (381.9%), Demandware (98.4%), Medidata Solutions (90.8%), Athenahealth (86.8%) and Kenexa (71.6%). The stock performance of SEG’s Internet Index, which racked up the highest median increase (19.3%) of our three tracking indices in 1Q12 before plummeting to 4.3% in Q2, grew only 7.3% in Q3, the lowest third quarter stock return among our tracking indices. Chalk much of that up to continuing erosion of investor confidence in Interent stocks, thanks to disappointing financial results and forecasts by such high flyers as Facebook, Groupon, Zynga, Google and others.

9.0%

6.0%

-10.0%

8.0%

6.0%

3.0%

‐15.0%

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

2007 2008 2009 2010 2011 2012

YoY Ch

ange

in IT

Spe

nding

Figure 2: Domestic IT Spending



The SEG Software Index median stock performance finished Q3 up 14.6%, lower than the SEG SaaS Index (27.5%) and higher than the SEG Internet Index (7.3%). The relative underperformance compared to the SEG SaaS Index is a clear sign of investor preference for SaaS based companies in the current market. The surprisingly outperformance relative to the SEG Internet Index illustrates how far investor confidence has fallen for public Internet companies relative to other software sectors. PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE The 146 public companies comprising the SEG Software Index grew revenue by only a median 13.2% in 3Q12, after posting median growth rates of 14.9% for Q1 and 15.5% for Q2 (Figure 4). The deceleration in revenue growth was not entirely unexpected, given the forecast cutbacks in enterprise IT spending and the macroeconomic headwinds most public software companies have been facing. Indeed, given that growth in enterprise IT spending for all of 2012 is unlikely to exceed 4% or 5%, public software companies have done well to achieve the revenue growth they’ve reported for the first three quarters.

Despite the overall slowdown in TTM revenue growth rates, a number of public software companies read the tea leaves well and pushed their top line well above the median. Of the ten software companies posting the highest TTM revenue growth in Q3, six derived all or a substantial part of their revenue from mobile software solutions. The list includes Unwired Planet (274.5% TTM revenue growth), Qihoo (169.9%), Gree (146.6%), NQ Mobile (113.4%), Velti (66.0%) and Zynga (43.1%).

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Jan Feb Mar Apr May Jun Jul Aug Sep

DOW S&P NASDAQ SEG SaaS SEG SW Index SEG Internet Index

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

Measure 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.4x 2.4x 2.6x 2.5x 2.4xEV/EBITDA 11.2x 11.9x 12.5x 11.4x 11.5xEV/Earnings 20.9x 20.8x 21.8x 22.5x 22.3xCurrent Ratio 2.0 2.0 2.0 2.0 2.1Cash & Eq ($M) $153.7 $130.6 $144.9 $169.1 $158.5Gross Profit Margin 68.3% 68.3% 66.4% 66.9% 66.8%EBITDA Margin 19.6% 18.9% 19.0% 18.5% 19.1%Net Income Margin 10.4% 10.6% 10.6% 10.3% 9.3%TTM Revenue Growth 16.9% 16.2% 14.9% 15.5% 13.2%TTM Total Revenue ($M) $350.0 $359.5 $367.5 $370.3 $388.5TTM Total EBITDA ($M) $64.1 $63.0 $59.8 $62.0 $62.0Debt / Equity Ratio 22.5% 22.8% 23.6% 21.7% 23.5%

SEG - Software: Median Metrics

Figure 4: SEG Software Index Median Metrics



However, mobile continues to be a double-edged sword. Five of the ten software companies with the lowest TTM revenue growth were also mobile solution providers: Smith Micro Software (-57% TTM revenue growth), Myriad Group (-35%), Access (-28%), RealNetworks (-16%) and Trunkbow (-9%). Unlike their top performing peers, these mobile companies are struggling to adapt legacy business models to a rapidly evolving market. Two of the top ten companies achieving the best TTM revenue growth were security software providers Palo Alto Networks (115%) and Sourcefire (38%). Rounding out the top ten software overachievers were Sapiens International (72%) and Allot Communications (39%). The third quarter’s growth rate helped drive median TTM revenue of the SEG Software Index above $389 million (Figure 4). Indeed, Q3’s median TTM revenue was more than twice the median TTM revenue of the SEG Software Index in 3Q08. Over this same time period, the number of public software companies has declined from 201 to 146 - further evidence that consolidation in the software sector is resulting in not only fewer, but considerably larger, publicly traded software companies (Figure 5).

Despite the marked decline in TTM revenue growth, public software companies proved especially adept at maintaining their healthy EBITDA margins in the third quarter. The median EBITDA margin of the on-premise public software companies comprising our Software Index was 19.1% in Q3, a modest improvement over 2Q12’s 18.5% (Figure 4).

Many of the most profitable on-premise software companies are industry behemoths that have the size and market leverage to drive high margins, including Oracle (43.5% EBITDA margin), Microsoft (41.7%) and SAP (36.1%). But an array of smaller, mid-cap public software companies also had a keen eye on the bottom line in 3Q12, led by CheckPoint Software (56.6% EBITDA margin), Gree (53.4%), ANSYS (47.3%), MSCI (45.0%) and NeuStar (42.0%).

The smallest player among our top ten most profitable software companies was SolarWinds, with TTM revenue of $233 million. Benefitting from a highly unique and cost effective revenue and sales strategy, SolarWinds drove its Q3 EBITDA margins to 46.5%. Public software companies continued to maintain historically high levels of cash and equivalents on their balance sheets, undoubtedly a reflection of their elevated EBITDA margins. In 3Q08, the median cash and equivalents of the SEG Software Index was $72.9 million and the median EBITDA margin was only 12.8%. In 3Q12, median cash and equivalents had grown 117% to $158.5 million, and the median EBITDA margin had increased 49% over the four year period (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.

0%

5%

10%

15%

20%

25%

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

Med

ian EBITDA M

argin

Med

ian Cash Balance

($ millions)

Cash & Eq ($M) EBITDA Margin

Figure 6: SEG Software Historical Median Cash and Median EBITDA Margins

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

0

50

100

150

200

250

3Q07

3Q08

3Q09

3Q10

3Q11

Med

ian TTM Reven

ue($ millions)

# of Pub

lic Softw

are Co

mpanies

in SEG

Softw

are Inde

x

Number of Companies TTM Total Revenue ($M)

Figure 5: SEG Software Index TTM Revenue vs. Company Count



PUBLIC SOFTWARE COMPANY MARKET VALUATIONS At the close of 3Q12, the median market valuation of our SEG Software Index, expressed as a multiple of EV/Revenue, was 2.4x. The median EV/Revenue multiple of the SEG Software Index has now been at or above 2.0x for twelve consecutive quarters, but was unchanged in Q3 year-over-year (Figure 7).

Surprisingly, the third quarter’s strong stock market performance did not have the same impact on smaller public software company valuations as it did in the first quarter (Figure 8). As testament, in 3Q12, the median EV/Revenue multiple of SEG Software Index companies with TTM revenues between $100 million and $200 million was 2.0x, unchanged from the prior quarter, but notably lower than the first quarter’s median market valuation of 2.5x.

Size (i.e. annual revenue) wasn’t the only important determinant of a public software company’s EV/Revenue multiple. EBITDA margins clearly played a part in Q3’s public software company market valuations. Public software companies with 40% or higher EBITDA margins were awarded with a median EV/Revenue multiple of 4.4x, four times higher than the 1.1x multiple of unprofitable companies (Figure 9). But EBITDA percentage did not always translate into higher market valuations: the median EV/Revenue multiples awarded to companies with EBITDA margins between 20-30% and those above 40% were nearly identical (4.3x vs. 4.4x).

PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY Median TTM revenue in 3Q12 grew 20% or more in three of our SEG Software Index product categories (Figure 10). Vertically focused software providers (other than healthcare) posted a median 24.6% TTM revenue growth rate, led by Sapiens International (72.4%), Guidewire (34.5%), and EPIQ Systems (32.2%). Healthcare software providers finished close behind, closing 3Q12 with a 21.8% TTM revenue growth rate. Benefiting from substantial shifts in healthcare IT spending were Greenway Medical Technologies (38.0% TTM revenue growth), Simulations Plus (28.4%) and MedAssets (27.6%).

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

3Q11 4Q11 1Q12 2Q12 3Q12

Med

ian EV

/Reven

ue

Revenue Greater Than $1 billion Revenue Between $200 million and $1 billion

Revenue Between $100 million and $200 million Revenue Less Than $100 million

Figure 8: SEG Software Median EV/Revenue by Size (TTM Revenue)

1.1x

1.8x

2.6x

4.3x4.5x 4.4x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

5.0x

<= 0% > 0%<= 10%

> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

Med

ian EV

/Reven

ue

Figure 9: 3Q12 EV/Revenue Multiples vs. EBITDA Margin

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

Med

ian EV

/Reven

ue M

ultiple

Figure 7: SEG Software Median EV/Revenue Multiples



And security software companies grew revenue a median 20.1% in the third quarter, cashing in on concerns accompanying the shift to cloud computing. Revenue growth in the Security category was led by Palo Alto Networks (115.1%), Sourcefire (38.2%), Imperva (35.3%), Fortinet (29.0%) and VASCO Data (22.8%). On the flip side, seven software product categories posted disappointing TTM revenue growth rates below 10%: Billing & Service Management (9.8%), Enterprise Resource Planning (8.8%), Financial & Accounting (7.3%), Storage, Data Management & Integration (6.0%), Gaming (5.9%), Development Platforms (5.4%) and IT Conglomerates (1.5%). As for the most profitable software product categories, the highest median EBITDA margins in the third quarter were reported by public software companies in the IT Conglomerate and Vertical - Finance categories, 36.1% and 34.8%, respectively. Among the software industry’s largest public companies, most profitable were Oracle (43.5% EBITDA margin), Microsoft (41.7%) and SAP (36.1%). The Vertical – Finance category, consisting of software providers vertically focused on the finance industry, demonstrated strength from top to bottom, with three out of four generating EBITDA margins above 31%. This category was led by MSCI (45.0% EBITDA margins) and SS&C Corporation (37.4%).

The Gaming solutions product category had the lowest median EBITDA margin in 3Q12, at 6.7%. EBITDA margins varied drastically from one provider to the next, as the industry undergoes significant disruption brought upon by consumers rapidly shifting gaming consumption to mobile and Internet channels and away from boxed retail. Activision Blizzard finished 3Q12 with an EBITDA margin of 24.6%, while TakeTwo Interactive closed 3Q12 with an EBITDA margin of -23.2%. PUBLIC SOFTWARE COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY Investors in the third quarter pushed median EV/Revenue multiples up YoY in eleven of seventeen product categories that make up the SEG Software Index (Figure 10), with three product categories achieving a median EV/Revenue multiple of 3.0x or higher. The Systems Management category posted a whopping EV/Revenue median multiple of 5.5x, led by companies that are leaders in the transition to cloud computing, SolarWinds (16.7x EV/Revenue), VMWare (8.3x), RedHat (8.3x) and Citrix Systems (5.6x). The Systems Management group has been highly valued for well over a year, boasting EV/Revenue multiples that have ranged from 5.1x to 5.9x over the past four quarters. Investors also placed premium valuations on public software companies in our Vertical – Finance category, which closed 3Q12 with a median EV/Revenue multiple of 4.3x, no doubt

Revenue Growth

EBITDA Growth

EBITDA Margin

YTD Stock Return

3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12 3Q12 (TTM) 3Q12 (TTM) 3Q12 (TTM) 2012

Billing & Service Management 1.3x 1.3x 1.3x 1.3x 1.4x 5.2x 5.6x 6.6x 6.9x 7.9x 9.8% 14.9% 19.2% 15.6%

Business Intelligence 2.8x 2.4x 2.3x 2.5x 2.1x 39.7x 36.4x 39.3x 38.1x 33.0x 12.7% (4.7%) 8.5% 15.3% Development Platforms 1.8x 1.9x 2.3x 1.9x 2.0x 7.9x 9.0x 10.1x 9.2x 9.1x 5.4% 3.4% 21.3% 14.6% Engineering & PLM 1.9x 2.0x 2.6x 2.3x 2.6x 12.9x 13.5x 14.3x 11.5x 12.1x 13.2% 31.0% 20.7% 21.3% Enterprise Resource Planning 2.8x 2.8x 3.0x 2.4x 2.6x 9.1x 9.6x 10.2x 8.3x 9.1x 8.8% 4.9% 29.0% 22.7% Financial & Accounting 2.3x 2.6x 2.8x 2.7x 2.9x 9.0x 9.2x 9.8x 9.3x 9.7x 7.3% 4.6% 29.0% 23.9% Gaming 1.3x 1.2x 1.2x 0.9x 0.9x 8.9x 7.8x 7.1x 7.6x 9.1x 5.9% (31.9%) 6.7% (24.0%)Healthcare 3.3x 3.0x 3.4x 3.0x 2.6x 17.5x 16.4x 16.8x 14.3x 14.3x 21.8% 19.0% 21.1% 8.7% IT Conglomerates 2.6x 2.5x 3.1x 2.9x 2.8x 8.7x 9.0x 8.2x 7.7x 8.7x 1.5% 3.4% 36.1% 14.6% Mobile Solutions/Content 2.9x 2.5x 3.3x 2.6x 1.7x 16.2x 20.4x 25.1x 15.6x 14.5x 18.5% (24.4%) 8.1% 10.9% Networking & Network Performance Management 3.0x 2.7x 3.1x 2.4x 2.5x 15.9x 15.6x 16.4x 14.9x 13.9x 17.3% 22.4% 16.8% 9.8% Security 2.6x 2.9x 3.2x 2.9x 3.2x 13.2x 14.5x 13.0x 10.2x 10.6x 20.1% 19.8% 19.2% 10.6% Storage, Data Management & Integration 2.1x 2.2x 2.5x 2.4x 2.4x 9.8x 9.8x 10.3x 9.4x 9.2x 6.0% 4.6% 22.7% 14.6% Supply Chain Management & Logistics 1.9x 2.3x 2.3x 2.1x 2.2x 11.2x 11.8x 12.8x 11.3x 11.1x 16.1% 33.5% 19.6% 21.4% Systems Management 5.1x 5.5x 5.9x 5.9x 5.5x 18.6x 20.9x 22.2x 23.0x 22.3x 18.1% 15.1% 25.8% 27.5% Vertical - Finance 3.8x 3.9x 4.0x 4.3x 4.3x 13.4x 12.7x 11.8x 12.5x 13.8x 14.7% 15.6% 34.8% 10.7% Vertical - Other 2.7x 2.8x 3.3x 3.0x 2.9x 14.1x 15.8x 18.5x 16.5x 21.0x 24.6% 14.8% 16.0% 8.6%

Median 2.4x 2.4x 2.6x 2.5x 2.4x 11.2x 11.9x 12.5x 11.4x 11.5x 13.2% 10.1% 19.1% 14.6%

CategoryEV/Revenue EV/EBITDA

SEG Software Index

Figure 10: SEG Software Index Median Metrics by Product Category



bolstered by the category’s strong EBITDA margins. Those public companies comprising the Security software category ended 3Q12 with a median EV/Revenue multiple of 3.2x. For most software product categories, there seemed to be no correlation in 3Q12 between market valuation and TTM revenue growth rates (Figure 11). Vertical - Other, the product category with the highest TTM revenue growth rate in 3Q12, posted a median EV/Revenue multiple of 2.9x, while IT Conglomerates, the category with the lowest TTM revenue growth rate, closed 3Q12 with a median EV/Revenue multiple of 2.8x.

The Mobile Solutions/Content product category experienced the largest YoY decline in median EV/Revenue multiples. The companies in this category with the largest YoY decline were RealNetworks (-90.0% YoY EV/Rev decline), Qihoo (-82.2%), Gree (-77.7%), TeleNav (-77.0%) and Motricity (-72.8%). The specific reasons for decline vary. Motricity, after some significant setbacks, announced in January 2012 it was refocusing on the mobile advertising and enterprise space. By contrast, Gree’s business is booming, with TTM revenue growth of 146.6% and EBITDA margins of 53.4%. However, Gree’s stock has been under pressure since Japanese regulators ruled certain gaming mechanics illegal and investors took note of the challenges currently confronting Zynga and others.

PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE Public SaaS companies grew TTM revenue by a median 27.2% growth rate in 3Q12, modestly lower than the prior quarter’s three year high of 30.3% (Figure 12). The third quarter slowdown broke a streak of two consecutive quarters of accelerating QoQ TTM revenue growth, but it’s likely just a blip. The median TTM revenue growth rate of our SaaS index has remained above 25% for five consecutive quarters, and we project it will surpass 30% by 2Q13.

Five SaaS superstars achieved TTM revenue growth of 42% or more in 3Q12: Cornerstone OnDemand (72.2%), Ellie Mae (67.0%), Bazaarvoice (62.5%), Demandware (45.0%) and Eloqua (42.3%). The SaaS underachiever award for 3Q12 goes to IntraLinks, the only public SaaS provider that didn’t register double digit growth, advancing only 2.9% on a TTM basis (Figure 13). Two years ago (3Q10), public SaaS providers spent a median 25% of total revenue on sales and marketing and achieved a median TTM revenue growth rate of 13%. One year ago, SaaS providers upped their sales and marketing investment to 33% of total revenue and realized a median ROI of almost 25% TTM growth. The median sales and marketing investment, as a percent of revenue, has held steady for three of the last four quarters, as has the TTM revenue growth rate (Figure 14). Makes you wonder if SaaS providers ramped their sales and marketing expense another 8 points to 41%, would they once again double their revenue growth rates, this time to better than 50%? Possibly.

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

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

Med

ian EV

/Reven

ue

TTM Revenue Growth

1

1. IT Conglomerates2. Development Platforms3. Gaming4. Storage, Data Management & Integration 5. Financial & Accounting 6. Enterprise Resource Planning

7. Billing & Service Management8. Business Intelligence9. Engineering & PLM10. Vertical - Finance11. Supply Chain Management & Logistics

3

2

4

56

7

9

8

11

12

13

14

15

10

TTM Revenue has virtually no impact on the median EV/Revenue multiple of software product categories

1617

12. Networking & Network Performance13. Systems Management14. Mobile Solutions/Content15. Security16. Healthcare17. Vertical - Other

Figure 11: SEG Software Median EV/Revenue vs. TTM Revenue Growth Measure 3Q11 4Q11 1Q12 2Q12 3Q12

EV/Revenue 3.9x 3.5x 4.5x 4.9x 5.8xEV/EBITDA 27.1x 28.9x 33.3x 30.0x 37.8xEV/Earnings 125.8x 87.4x 31.6x 38.0x 41.3xCurrent Ratio 1.7 1.7 1.5 1.8 1.5Cash & Eq ($M) $69.1 $59.9 $60.7 $83.0 $72.1Gross Profit Margin 69.8% 70.0% 70.9% 71.0% 71.1%EBITDA Margin 10.5% 9.2% 9.9% 9.7% 8.4%Net Income Margin 1.5% 1.5% -0.4% 0.4% -0.7%TTM Revenue Growth 26.8% 25.4% 27.8% 30.3% 27.2%TTM Total Revenue ($M) $120.4 $128.4 $139.5 $145.2 $150.4TTM Total EBITDA ($M) $12.7 $12.7 $12.0 $12.2 $12.3Debt / Equity Ratio 4.7% 3.5% 2.5% 7.1% 7.5%

SEG - SaaS: Median Metrics

Figure 12: SEG SaaS Index Median Metrics



In 3Q12, four SaaS providers spent more than 50% of their revenues on S&M: Cornerstone OnDemand (63.1% S&M spend as % of total revenue; 72% TTM revenue growth), Vocus (53.3%; 29.9%), Salesforce.com (52.3%; 36.5%), and Netsuite (50.3%; 26.3%). Although three of the four achieved TTM revenue growth above the median for public SaaS companies, the return on these additional sales and marketing dollars invested seems questionable, at least over the short term.

As for profitability, the median EBITDA margin of the SEG SaaS Index in 3Q12 was 8.4%, down from 10.5% in 3Q11. The decline was mostly attributable to increased investment in all major functional departments. The median spend on R&D, S&M and G&A by public SaaS providers, as a percent of total revenue, aggregated 63.2% of

total revenue in 3Q12, markedly greater than 45.3% in 3Q11 (Figure 15).

Four SaaS companies demonstrated impressive devotion to the bottom line in 3Q12: Ebix (42.9% EBITDA margin), Zix Corporation (30.7%), OpenTable (28.5%) and Ellie Mae (20.6%). By contrast, seven public SaaS companies finished 3Q12 with negative EBITDA margins: Cornerstone OnDemand (-21.3%), Bazaarvoice (-17.8%), Callidus Software (-13.6%), Service-now.com (-10.4%), Netsuite (-5.6%), Demandware (-3.5%) and ExactTarget (-0.1%). PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS The median market valuation (EV/Revenue multiple) of the 29 pure-play public SaaS providers comprising our SEG SaaS Index rose sharply in 3Q12, advancing to 5.8x from 4.9x in Q2 (Figure 12). Leading the pack was Ellie Mae,

3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12Athenahealth, Inc. (ATHN) Vertically Focused 6.8x 6.2x 6.7x 7.2x 8.2x 40.4x 36.2x 44.7x 47.9x 62.7x 30.5% 30.5% 32.0% 34.4% 34.2% 16.9% 17.1% 15.0% 15.1% 13.1%Bazaarvoice, Inc. (BV) Other SaaS - - 10.3x 9.6x 7.2x - - - - - - - - 64.6% 62.6% -24.4% -20.8% -20.4% -19.4% -17.8%Callidus Software Inc. (CALD) Workforce Mgmt 1.9x 2.2x 2.8x 2.4x 2.0x - - - - - 17.6% 19.6% 18.2% 15.4% 15.0% -3.8% -5.8% -7.0% -10.3% -13.6%Concur (CNQR) Other SaaS 5.6x 6.4x 7.8x 8.0x 8.6x 39.5x 48.6x 68.4x 59.0x 68.0x 18.4% 19.3% 21.0% 24.0% 25.7% 14.1% 13.1% 11.4% 13.6% 12.6%Constant Contact (CTCT) CRM & Marketing 2.2x 2.5x 3.4x 2.4x 2.0x 27.5x 28.0x 33.3x 22.0x 19.7x 28.2% 25.2% 23.1% 21.4% 20.0% 7.9% 9.1% 10.2% 10.9% 10.4%Cornerstone OnDemand (CSOD) Workforce Mgmt 11.8x 10.7x 11.1x 11.7x 12.9x - - - - - 51.0% 51.9% 67.0% 63.2% 72.2% -34.1% -30.9% -24.0% -25.5% -21.3%DealerTrack (TRAK) Vertically Focused 2.4x 2.9x 3.2x 3.1x 2.9x 15.6x 17.8x 20.9x 20.1x 19.2x 26.3% 37.9% 44.9% 39.2% 28.7% 15.2% 16.3% 15.3% 15.4% 15.3%Demandware, Inc (DWRE) Other SaaS - - 14.2x 12.9x 9.7x - - 376.9x 571.0x - - - 54.1% 48.7% 45.0% 2.9% 1.5% 3.8% 2.3% -3.5%E2open, Inc. (EOPN) ERP & Supply Chain - - - - 4.6x - - - - 91.9x 25.1% - 7.5% - - 15.2% 9.8% 2.1% 1.6% 1.6%Ebix Inc. (EBIX) Vertically Focused 4.2x 4.1x 5.2x 4.1x 5.2x 9.8x 9.5x 12.1x 9.3x 12.1x 27.3% 24.6% 27.8% 22.8% 18.2% 42.9% 42.8% 43.5% 43.6% 42.9%Ellie Mae (ELLI) Other SaaS 1.6x 1.8x 2.1x 4.6x 7.8x 15.7x 21.5x 23.7x 29.7x 37.8x - 25.5% 28.4% 46.4% 67.0% 10.5% 8.6% 9.0% 15.4% 20.6%Eloqua Limited (ELOQ) CRM & Marketing - - - - 7.5x - - - - 702.2x - - 40.5% 44.1% 42.3% -6.1% -6.2% -0.7% 3.1% 1.1%ExactTarget, Inc. (ET) CRM & Marketing - - 8.0x 6.4x 5.0x - - - - - 40.7% - 54.5% - - -5.1% -6.0% -3.3% -2.1% -0.1%IntraLinks Holdings (IL) Other SaaS 2.5x 1.7x 1.7x 1.3x 1.4x 14.5x 12.0x 12.5x 14.0x 35.7x 30.6% 23.8% 15.5% 7.3% 2.9% 17.2% 14.4% 13.9% 9.0% 3.8%Kenexa (KNXA) Workforce Mgmt 2.1x 2.3x 2.4x 2.5x 2.6x 35.0x 34.4x 28.2x 29.8x 31.1x 46.9% 52.4% 44.1% 38.8% 32.1% 6.1% 6.7% 8.5% 8.5% 8.4%LivePerson (LPSN) CRM & Marketing 4.4x 4.6x 4.6x 5.8x 6.0x 21.6x 22.8x 22.3x 30.1x 37.2x 21.9% 20.8% 21.1% 21.3% 21.4% 20.5% 20.4% 20.5% 19.2% 16.2%Medidata Solutions (MDSO) Other SaaS 1.8x 2.0x 2.3x 3.0x 4.0x 8.3x 9.2x 11.1x 14.5x 22.5x 19.0% 17.9% 10.8% 14.5% 10.0% 21.4% 21.7% 20.4% 20.8% 17.9%Netsuite (N) ERP & Supply Chain 9.7x 11.7x 12.7x 12.5x 14.1x - - - - - 21.1% 21.9% 22.4% 24.6% 26.3% -7.9% -7.3% -7.4% -6.8% -5.6%OpenTable, Inc. (OPEN) Other SaaS 11.3x 6.6x 7.2x 5.9x 5.9x 40.1x 23.5x 24.0x 19.8x 20.9x 54.3% 52.3% 40.9% 30.3% 22.0% 28.2% 28.1% 30.2% 29.8% 28.5%Qualys, Inc. (QLYS) Other SaaS - - - - - - - - - - 13.9% 13.9% 16.5% - - 8.8% 8.8% 10.8% 9.7% 8.3%RealPage (RP) Vertically Focused 6.7x 7.5x 7.1x 4.9x 6.2x 50.6x 62.5x 62.7x 39.8x 47.0x 38.3% 39.8% 37.0% 34.4% 32.0% 13.1% 12.0% 11.3% 12.2% 13.1%Responsys (MKTG) CRM & Marketing 5.2x 2.7x 3.4x 3.3x 2.7x 28.3x 14.0x 21.5x 20.2x 20.4x - 54.1% 43.4% 36.3% 27.2% 18.5% 19.0% 15.7% 16.6% 13.1%Salesforce.com (CRM) CRM & Marketing 9.1x 8.0x 7.6x 8.3x 7.4x 152.6x 183.9x 162.7x 191.9x 167.6x 33.0% 34.6% 36.8% 37.7% 36.5% 5.9% 4.3% 4.7% 4.3% 4.4%SciQuest (SQI) ERP & Supply Chain 5.9x 5.3x 4.9x 5.0x 5.4x 38.3x 38.1x 36.7x 41.3x 47.0x 19.7% 22.0% 25.8% 23.3% 22.0% 15.3% 14.0% 13.5% 12.1% 11.6%Service-now.com (NOW) Other SaaS - - - - 18.3x - - - - - 113.8% 113.8% - - - 13.7% 13.7% -2.9% -6.7% -10.4%SPS Commerce (SPSC) ERP & Supply Chain 3.6x 4.3x 4.7x 4.8x 5.6x 50.2x 68.4x 68.5x 68.1x 67.0x 22.5% 26.7% 30.0% 31.6% 31.5% 7.2% 6.3% 6.9% 7.1% 8.4%The Ultimate Software Group, Inc. (ULTI) Workforce Mgmt 5.1x 6.3x 6.5x 7.0x 8.3x 61.3x 68.3x 65.5x 70.8x 80.0x 16.8% 17.0% 18.2% 19.6% 21.0% 8.3% 9.2% 9.9% 9.9% 10.4%Vocus (VOCS) CRM & Marketing 3.1x 2.8x 2.8x 3.0x 3.3x - 315.9x 137.5x 282.3x 407.6x 19.1% 18.9% 18.7% 21.0% 29.9% -0.2% 0.9% 2.0% 1.1% 0.8%Zix Corporation (ZIXI) Other SaaS 5.4x 4.2x 4.6x 3.9x 3.4x 20.4x 14.5x 14.6x 12.6x 11.2x 31.5% 31.7% 15.4% 12.4% 11.1% 26.5% 29.3% 31.3% 31.2% 30.7%

4.8x 4.3x 4.9x 4.9x 5.8x 31.7x 28.0x 30.8x 30.0x 37.8x 26.8% 25.4% 27.8% 30.3% 27.2% 10.5% 9.2% 9.9% 9.7% 8.4%

SEG SaaS Index

Median:

TTM Revenue Growth EBITDA Margin Company Category

EV/Revenue EV/EBITDA

Figure 13: Public SaaS Companies

13.0%16.8%

19.6%23.3% 24.9% 25.4% 27.8% 30.3%

27.2%

25% 25%28% 28%

33% 33%

29%

33% 33%

0%

5%

10%

15%

20%

25%

30%

35%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

S&M as % of Total Reven

ue

TTM Reven

ue Growth

Figure 14: Public SaaS Company S&M Spend as % of Total Revenue

Measure 3Q11 4Q11 1Q12 2Q12 3Q12R&D $15.8 $16.4 $18.6 $18.9 $24.7S&M $34.1 $34.3 $38.9 $41.1 $44.8G&A $18.5 $21.1 $21.9 $23.9 $27.5R&D (% of Revenue) 11.0% 12.3% 13.0% 14.0% 14.4%S&M (% of Revenue) 22.6% 25.0% 29.1% 32.5% 32.9%G&A (% of Revenue) 11.7% 12.7% 14.4% 15.2% 15.9%

SEG - SaaS: Operating Metrics

Figure 15: SEG SaaS Index Median Operating Statistics



closing 3Q12 with a median EV/Revenue multiple of 7.8x, up from 4.6x in 2Q12. Ellie Mae is revolutionizing the mortgage industry with a SaaS based solution designed to address the litany of inefficiencies endemic to mortgage origination. Despite declining mortgage applications, over the past three years Ellie Mae has ramped its TTM revenue growth from 12.3% to 67.0%, while pumping up its EBITDA margin to 20.6% from 12.6%. Other public SaaS players whose median EV/Revenue multiples markedly improved in 3Q12 included Medidata (33.8%), Ebix (27.4%), RealPage (26.7%) and Ultimate Software Group (19.1%). Three public SaaS companies had EV/Revenue multiples above 10x at the close of 3Q12: Service-now.com (18.3x), Netsuite (14.1x) and Cornerstone OnDemand (12.9x). Investors are clearly favoring growth over profitability in the current market, as all three had negative EBITDA margins.

Indeed, there was a clear, causal relationship in 3Q12 between SaaS company market valuations and TTM revenue growth rates (Figure 16). Public SaaS companies with TTM revenue growth rates between 0%-10% registered a median EV/Revenue of 2.7x, while those generating TTM revenue growth rates above 40% boasted a median EV/Revenue multiple of 7.6x. By contrast, there was very little relationship between EBITDA margins and public SaaS company market valuations (Figure 17). As testament, SaaS providers with negative EBITDA margins were awarded with a median EV/Revenue multiple of 9.7x, compared to a median EV/Revenue of 5.2x for those with EBITDA margins above 30%. PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY With 29 public companies, the SEG SaaS Index now has sufficient critical mass for us to track financial performance trends in four distinct SaaS product categories: CRM & Marketing, ERP & Supply Chain, Workforce Management and Vertically Focused providers (Figure 18). Vertically Focused SaaS providers posted a median 30.3% TTM revenue growth at the close of 3Q12, the highest among all categories. Athenahealth, a provider of services to medical group practices primarily in the United States, led the pack with TTM revenue growth of 34.2%. Vertically Focused SaaS providers achieved EBITDA margins of 14.2% in 3Q12, significantly higher than the SaaS sector median of 8.4%. Ebix, a provider of e-commerce solutions to the insurance industry, earned top honors within the category with EBITDA margins of 42.9%. Public SaaS companies in the Workforce Management product category generally struggled to enter the black with a negative median EBITDA margin. SaaS companies comprising the ERP & Supply Chain product category of our SaaS Index achieved the largest YoY jump in median TTM revenue growth, driven by a six consecutive quarters of accelerating growth. SaaS companies in this category are benefitting from growing enterprise and SMB acceptance of cloud-based, remotely hosted applications.

2.7x

3.6x

5.7x6.2x

7.6x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

<= 0% > 0%<= 10%

> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

Med

ian EV

/Reven

ue

TTM Revenue Growth

No companies with TTM Revenue Growth < =0%

Figure 16: SEG SaaS Median EV/Revenue vs. TTM Revenue Growth

9.7x

5.0x5.7x

6.9x

5.2x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

<= 0% > 0%<= 10%

> 10%<= 20%

> 20%<= 30%

> 30%

Med

ian EV

/Reven

ue

EBITDA Margins

Figure 17: SEG SaaS Median EV/Revenue vs. EBITDA Margins



PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY SaaS providers in the Vertically Focused category finished 3Q12 with the highest median EV/Revenue multiple, 5.7x (Figure 18). The category was bolstered by strong performances from Athenahealth (8.2x) and RealPage (6.2x). Public SaaS companies in the Workforce Management category improved their median EV/Revenue multiple in 3Q12 to 5.5x, up from 3.6x in 3Q11. The Ultimate Software Group led the pack, boosting its median EV/Revenue multiple to 8.3x in 3Q12, up from 5.1x in 3Q11. The category’s relative strength was driven, at least in part, by investor hopes of capitalizing on the wave of consolidation in the SaaS WFM arena. PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE SEG Internet Index companies grew median TTM revenue an impressive 24.0% in 3Q12, up from 20.8% 3Q11 (Figure 19). Among SEG’s three tracking indices, companies comprising our Internet Index have the highest median TTM revenue ($407.6 million), making their median revenue growth in 3Q12 all the more impressive. By comparison, public software companies had median TTM revenue of $388.5 million in 3Q12,

but a lower TTM revenue growth rate of 13.2%. Of the 19 public Internet companies with TTM revenue of $1 billion or more, nearly two-thirds grew TTM revenue by more than 20% in 3Q12. Q3’s top Internet performers spanned an array of Internet categories, including eCommerce (Amazon, eBay), Ad Tech & Lead Gen (Groupon, Baidu), Travel (Priceline), Content & Media (Netflix), and Services (VistaPrint). Nevertheless, growth disparities among public Internet providers abounded in Q3; the SEG Internet index has the widest variance of revenue growth rates among our three tracking indices. Four public Internet companies grew TTM revenue by greater than 100% in 3Q12, including Qihoo (169.9%), Groupon (117.6%), Youku (107.3%) and LinkedIn (101.9%). But thirteen SEG Internet providers posted negative revenue growth, led by Mecox (-17.3%), WebMD (-12.4%), Yahoo! (-10.6%) and NCSoft (-9.8%). As for profitability, the median EBITDA margin of public Internet companies continued to decline in 3Q12, closing the quarter at 13.2%, after reaching a historic high in 1Q11 of 16.8%. The declining profitability is primarily attributable to higher sales and marketing expenses to drive market adoption. It was a strategy that worked, for some: Angie’s List, which publicly listed in 2011, posted 69.7% TTM revenue growth, but a -45.3% EBITDA margin in 3Q12. Nevertheless, the SEG Internet Index included a fair number of companies that are highly profitable in 3Q12. One out of nine public Internet companies achieved EBITDA margins of 40% or greater, including Giant Interactive (65.2%), ChangYou.com (64.7%), Baidu (57.3%), VeriSign (54.6%) and Netease (49.6%).

Measure 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.8x 2.6x 2.4x 2.3x 2.0xEV/EBITDA 13.5x 12.2x 13.3x 12.5x 13.2xEV/Earnings 28.4x 22.1x 25.3x 23.3x 27.9xCurrent Ratio 2.7 2.5 2.4 2.6 2.6Cash & Eq ($M) $133.5 $140.8 $143.4 $151.3 $140.9Gross Profit Margin 66.8% 67.0% 67.6% 67.7% 68.1%EBITDA Margin 15.1% 14.8% 13.8% 13.7% 13.2%Net Income Margin 4.1% 3.7% 4.4% 4.9% 4.3%TTM Revenue Growth 20.8% 24.1% 30.7% 27.9% 24.0%TTM Total Revenue ($M) $344.2 $365.9 $384.4 $394.7 $407.6TTM Total EBITDA ($M) $47.9 $53.6 $56.8 $48.1 $51.6Debt / Equity Ratio 14.9% 18.2% 15.0% 13.4% 13.5%

SEG - Internet: Median Metrics

Figure 19: SEG Internet Index Median Metrics

3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12CRM & Marketing 4.4x 2.8x 4.0x 4.6x 5.0x 28.0x 28.1x 33.6x 30.1x 102.4x 28.2% 25.2% 36.8% 28.8% 28.5% 5.9% 4.3% 4.7% 4.3% 4.4%ERP & Supply Chain 5.9x 5.3x 4.9x 4.9x 5.5x 44.4x 52.8x 52.6x 54.5x 67.0x 21.8% 22.0% 24.1% 24.6% 26.3% 11.2% 8.0% 4.5% 4.4% 5.0%Vertically Focused 5.5x 5.1x 5.9x 4.5x 5.7x 28.0x 27.0x 32.5x 30.0x 33.1x 28.9% 34.2% 34.5% 34.4% 30.3% 16.1% 16.7% 15.2% 15.3% 14.2%Workforce Management 3.6x 4.3x 4.6x 4.8x 5.5x 48.4x 51.1x 46.8x 50.3x 55.6x 32.3% 35.7% 31.1% 29.2% 26.6% 1.2% 0.4% 0.7% -0.9% -2.6%

Median: 4.8x 4.3x 4.9x 4.9x 5.8x 31.7x 28.0x 30.8x 30.0x 37.8x 26.8% 25.4% 27.8% 30.3% 27.2% 10.5% 9.2% 9.9% 9.7% 8.4%

SEG SaaS Index

CategoryEV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin

Figure 18: SEG SaaS Index Median Metrics by Product Category



Q3’s YoY increase in TTM revenue growth appeared to offset the relatively modest decline in EBITDA margins, enabling many Internet companies to boost their cash reserves. By the close of the third quarter, the median Cash & Equivalents of companies comprising the SEG Internet Index was $140.9M, up from $133.5M in 3Q11 (Figure 19). PUBLIC INTERNET COMPANY MARKET VALUATIONS The median market valuation of the 90 public companies comprising the SEG Internet Index was 2.0x EV/Revenue in 3Q12, down sharply from 3Q11’s 2.8x and the lowest in seven quarters (Figure 19). The decline in median EV/Revenue adversely impacted Internet providers of every size, but those with revenues between $100 million and $200 million were hardest hit by a median EV/Revenue multiples that plummeted from 2.7x in 3Q11 to 1.6x in 3Q12 (Figure 20). Investors clearly favored public Internet companies with above average TTM revenue growth. As testament, companies in the SEG Internet Index with TTM revenue growth rates above 40% were rewarded with a median 4.2x EV/Revenue multiple whereas those with lower TTM revenue growth rates had a 2.9x median EV/Revenue multiple or lower (Figure 21).

Yet in a sharp reversal from prior quarters, investors shunned unprofitable and marginally profitable but rapidly growing public Internet companies. Groupon is the most notable example as its median EV/Revenue multiple plunged from 6.9x at the close of Q1 to 0.9x at the close of Q3. There’s no question investors have become increasingly circumspect about Internet business models that prioritize user/subscriber growth with no clear path to monetization and profitability. As a result, Internet providers with negative EBITDA margins at the close of 3Q12 had a median EV/Revenue multiple of 1.7x, well below the median for the index as a whole (Figure 22).

Unlike SaaS investors who seemed indifferent to profitability, Internet investors paid great attention to the bottom line in 3Q12. Public Internet companies with EBITDA margins greater than 40% in 3Q12 were rewarded with a premium median market valuation of 8.0x (Figure 22). Leading the pack were Baidu (57.3% EBITDA Margins, 13.3x EV/Revenue), Tencent Holdings (43.9%, 10.6x), VeriSign (54.6%, 8.4x) and Mail.ru Group (44.7%, 9.9x).

Revenue Growth EBITDA Margin3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12 3Q12 (TTM) 3Q12 (TTM)

Revenue Greater Than $1 billion 2.8x 3.5x 3.4x 3.4x 1.9x 17.6x 16.8x 17.5x 21.2x 19.4x 29.5% 20.6%Revenue Between $200 million and $1 billion 2.9x 2.4x 2.2x 1.8x 2.2x 12.1x 11.0x 11.5x 10.3x 10.2x 23.2% 16.5%Revenue Between $100 million and $200 million 2.7x 2.1x 2.5x 2.2x 1.6x 8.7x 8.6x 9.8x 7.6x 9.3x 16.9% 7.5%Revenue Less Than $100 million 2.9x 3.6x 3.5x 3.3x 2.9x 18.5x 19.2x 17.0x 18.5x 17.4x 37.8% -13.7%

SEG Internet Index CompaniesEV/Revenue EV/EBITDA

Figure 20: SEG Internet Metrics by Size (TTM Revenue)

1.1x0.7x

2.5x2.9x

2.1x

4.2x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

<= 0% > 0%<= 10%

> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

Med

ian EV

/Reven

ue

TTM Revenue Growth

Figure 21: SEG Internet Median EV/Revenue vs. TTM Revenue Growth

1.7x

0.9x1.5x

3.9x

2.9x

8.0x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

<= 0% > 0%<= 10%

> 10%<= 20%

> 20%<= 30%

> 30%<= 40%

> 40%

Med

ian EV

/Reven

ue

EBITDA Margins

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



PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY Compelled by market forces to scale rapidly, then monetize, the Social product category racked up the highest median TTM revenue growth rate (66.1%) among all Internet companies in Q3 (Figure 23). Six out of seven companies in the category grew TTM revenue growth rates that were at least twice that of the median Internet growth rate in the third quarter: LinkedIn (101.9% TTM revenue growth), Facebook (88.0%), Mail.ru Group (75.4%), Yelp (74.5%), Jive (56.8%) and Renren (54.1%). Three other product categories finished 3Q12 with TTM revenue growth rates above the Internet sector median: Services (41.9%), Ad Tech & Lead Gen (34.5%) and Gaming (32.0%). Revenue growth in the Services category was boosted by strong TTM revenue growth from Qihoo (169.9%), Zillow (99.4%), Angie’s List (69.7%) and Shutterfly (52.4%). Companies within the Ad Tech & Lead Gen category continued 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 (117.6% TTM revenue growth), LinkedIn (101.9%) and Baidu (74.0%). Gaming, as it has for most of 2012, achieved what was arguably the best overall financial performance among all Internet categories in Q3, posting an impressive 32.0% median revenue growth rate and a stellar median EBITDA margin of 43.9%. Gaming companies posting strong TTM revenue growth and EBITDA margins

included Tencent Holdings (49.4%TTM revenue growth, 43.9% EBITDA margins) and ChangYou.com (47.2%, 54.7%). Infrastructure and Commerce categories posted a median EBITDA margin of 8.3% in 3Q12, the lowest of all Internet product categories. The profitability of Internet eCommerce providers has historically lagged other categories due to the significant revenue sharing inherent in their business model, as well as sometimes significant infrastructure related expenses. As testament, Amazon posted an EBITDA margin of 3.6% in 3Q12. By contrast, eCommerce providers with business models that eschew inventory management, logistics and distribution expenses were able to achieve considerably higher levels of profitability. As example, eBay generated EBITDA margins of 28.0% in the third quarter. 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 3Q12 (Figure 23). Social Media led the pack, closing 3Q12 with a median EV/Revenue multiple of 8.8x, down sharply from 19.4x in 3Q11. Companies with market valuations exceeding the median Internet EV/Revenue multiple included LinkedIn (14.5x), Yelp (12.1x) and Mail.ru Group (10.9x). Notably absent from this list is Facebook, whose median EV/Revenue multiple nosedived from 16.0x to 7.9x.

Revenue Growth (TTM)

EBITDAGrowth(TTM)

EBTIDA Margin (TTM)

YTD Stock Return

3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12 3Q12 3Q12 3Q12 2012Ad Tech & Lead Gen 2.6x 2.6x 3.0x 2.4x 1.8x 11.1x 11.9x 14.3x 11.4x 13.3x 34.5% 28.7% 14.4% 5.3%Commerce 1.4x 1.1x 0.8x 0.8x 0.7x 13.5x 13.1x 15.9x 18.9x 14.8x 7.3% 8.5% 8.3% 9.1%Content & Media 2.4x 1.6x 1.8x 1.6x 1.3x 11.1x 10.2x 10.4x 10.2x 10.8x 12.3% -8.9% 13.0% 4.8%Gaming 4.6x 3.2x 3.1x 3.5x 2.1x 7.4x 6.1x 4.0x 4.0x 3.4x 32.0% 29.4% 43.9% 13.8%Infrastructure 2.8x 1.8x 1.9x 1.9x 0.9x 12.1x 11.2x 14.2x 14.3x 13.3x 13.5% 8.8% 8.3% -9.9%Services 5.0x 3.9x 2.8x 2.2x 2.9x 16.2x 16.6x 16.8x 15.5x 13.3x 41.9% 22.9% 10.9% 21.3%Social 19.4x 12.3x 13.0x 13.0x 8.8x 110.8x 49.3x 32.9x 30.4x 29.5x 66.1% -29.9% 12.6% 14.7%Travel 5.9x 5.5x 4.7x 3.3x 2.5x 25.3x 18.3x 16.6x 16.4x 17.4x 27.2% 30.2% 18.8% -13.5%

Median: 2.8x 2.6x 2.4x 2.3x 2.0x 13.5x 12.2x 13.3x 12.5x 13.2x 24.0% 17.3% 13.2% 10.2%

SEG - Internet Index

CategoryEV/Revenue EV/EBITDA

Figure 23: SEG Internet Index Median Metrics by Product Category



Investors seemed wholly disinterested in Internet Commerce providers in the third quarter. The group closed 3Q12 with a median 0.7x EV/Revenue multiple, by far the lowest of our Internet categories. Lackluster revenue growth and EBITDA margins, well below the Internet median, is surely to blame here. The notable exception was Mercadolibre, which posted a median EV/Revenue multiple of 10.0x, over fourteen times the Commerce category median for 3Q12. Mercadolibre, Latin America’s eBay, was boosted by investors enamored with emerging markets and the company’s 37% TTM revenue growth rate in 3Q12. TTM revenue growth and EV/Revenue market multiples exhibited strong correlation in Q3 (Figure 24). The three categories (Commerce, Content & Media, Infrastructure) with the lowest three TTM revenue growth rates posted the lowest median EV/Revenue multiples. By contrast, the two product categories (Social, Services) with the highest TTM revenue growth, posted the two highest median EV/Revenue multiples.

INITIAL PUBLIC OFFERINGS Starting the year out with a bang, the IPO market launched eleven new software/SaaS/Internet entrants in the first quarter, then fizzled in Q2 before recovering in Q3 with six new public listings (Figure 25). Nevertheless, the 3Q12 YTD

total of 22 IPOs is an improvement upon 2011’s YTD total of 17 and 2010’s YTD tally of 19 IPOs. The six new entrants in Q3 consisted of three SaaS companies, two Internet companies and one on-premise software company. Five of the six had strong first day performances, indicating investors found them to be appropriately priced with good upside. Trulia, which operates and maintains searchable databases of U.S. homes for sale and rent, saw its initial offering price soar 41.2% by the close of trading. Qualys, a provider of vulnerability management solutions, shot up 18.0% in its first trading day, no doubt bolstered by its lofty 113.0% TTM revenue growth rate. Other stocks posting positive first day returns in the third quarter included Kayak Software (27.6%), Palo Alto Networks (26.5%) and Eloqua (12.1%). The lone negative first day return was posted by E2open, the only company in Q3 that went public with TTM revenue growth below the industry median. By the last day of trading in Q3, Eloqua, a provider of on-demand revenue performance management software solutions, posted the highest stock return of 71.7%. By contrast, E2open, a provider of integrated cloud-based platform for supply chain management, dropped 9.5% since its IPO. Although the 22 YTD software/SaaS/Internet IPOs had different financial profiles, growth was the common denominator. Collectively, this year’s 22 newly listed software/SaaS/Internet companies boasted a median TTM revenue growth rate of 54.3%, and a median TTM EBITDA margin of 2.6%. In aggregate, they raised over $8.7 billion, ranging individually from $25.2 million to $6.7 billion. Collectively, 2012’s new public entrants rewarded investors with a median YTD stock gain of 29.1% by the close of Q3, although some fared better than others. The best YTD performer was the first new issue of the year, Guidewire Software, returning 138.8% as of the third quarter’s last day of trading. Two other new listings posted YTD returns above 100%: Splunk (116.0%) and Service-now (114.9%). Envivio posted the worst performance YTD, dropping 75.7% from its IPO price. As a portent of things to come, Envivio’s stock dropped 5.7% on its first day trading, one of

1. Commerce2. Content & Media3. Infrastructure4. Travel5. Gaming

6. Ad Tech & Lead Gen 7. Services8. Social

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

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

Med

ian EV

/Reven

ue

TTM Revenue Growth

1

23

4

65

7

8

Figure 24: SEG Internet Index Product Category Median EV/Revenue vs. TTM Revenue Growth



only three newly listed software/SaaS/Internet companies to do so in 2012. Throughout most of the third quarter, Facebook continued to struggle with the aftermath of a botched IPO and criticism about its mobile

strategy. At the close of Q3, Facebook’s stock was down 43.3%, but the company was still trading at a rather lofty EV/Revenue multiple of 8.4x, suggesting investors had not entirely lost faith.

Company (Ticker) Category IPO Date Net Proceeds Enterprise Value EV / RevEV /

EBITDA RevenueRevenue Growth

EBITDA Margin

First Day Return YTD Return

Qualys, Inc.(NASDAQ:QLYS)

SaaS - Other SaaS 9/27/12 $74,772,000 $382,200,000 4.6x 55.0x $83,408,000 113.0% 8.3% 18.0% 18.0%

Trulia, Inc.(NYSE:TRLA) Internet - Services 9/19/12 $79,050,000 $611,700,000 11.9x n/a $51,257,000 88.0% (14.0%) 41.2% 26.0%

Eloqua, Inc.(NASDAQ:ELOQ) SaaS - CRM & Marketing 8/1/12 $74,865,000 $832,600,000 9.8x 925.1x $84,669,000 42.3% 1.1% 12.1% 71.7%

E2open, Inc.(NASDAQ:EOPN)

SaaS - ERP & Supply Chain

7/26/12 $52,312,500 $341,222,400 5.3x 324.7x $63,913,000 26.3% 1.6% (9.3%) (9.5%)

Kayak Software Corporation(NASDAQ:KYAK) Internet - Travel 7/20/12 $84,630,000 $1,207,198,770 4.5x 23.4x $265,383,000 32.9% 19.4% 27.6% 35.9%

Palo Alto Networks, Inc.(NYSE:PANW) Security 7/20/12 $183,084,340 $3,448,228,130 15.7x 430.8x $219,722,000 115.1% 3.6% 26.5% 46.6%

ServiceNow, Inc.(NYSE:NOW)

Systems Management 6/28/12 $150,660,000 $2,859,000,000 16.9x n/a $168,969,000 113.0% (6.7%) 36.7% 114.9%

Facebook, Inc.(NASDAQ:FB) Internet - Social 5/18/12 $6,764,760,000 $78,538,839,520 19.4x 36.9x $4,038,000,000 88.0% 52.8% 0.6% (43.0%)

Envivio, Inc.(NASDAQ:ENVI) Internet - Infrastructure 4/25/12 $54,405,000 $199,919,110 3.9x 90.3x $50,646,000 68.8% 4.4% (5.7%) (75.7%)

Proofpoint, Inc.(NASDAQ:PFPT) Security 4/20/12 $62,021,700 $409,851,640 4.7x n/a $87,676,000 26.3% (12.5%) 8.3% 14.2%

Splunk, Inc.(NASDAQ:SPLK)

Storage, Data Management & Integration

4/19/12 $197,740,070 $3,296,700,400 27.3x n/a $120,960,000 82.6% (5.4%) 108.7% 116.0%

Millennial Media Inc(NYSE: MM)

Mobile Solutions/Content 3/29/12 $111,228,000 $1,855,543,000 17.9x n/a $103,678,000 116.8% 0.1% 92.3% 10.4%

ExactTarget, Inc.(NYSE: ET) SaaS - CRM & Marketing 3/22/12 $161,500,000 $1,571,645,470 7.6x n/a $207,493,000 54.5% (3.3%) 32.2% 27.5%

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% 98.4%

Yelp, Inc.(NYSE:YELP)

Internet - Social 3/2/12 $99,045,000 $1,449,946,790 17.4x n/a $83,285,000 74.5% (8.5%) 63.9% 80.3%

Bazaarvoice, Inc(NASDAQ:BV) SaaS - Other 2/24/12 $100,440,000 $950,055,560 10.1x n/a $93,986,000 62.6% (20.4%) 37.6% 26.3%

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% 6.2%

Synacor, Inc(NASDAQ:SYNC) Infrastructure 2/13/12 $25,200,000 $127,286,620 1.4x 19.0x $91,060,000 37.5% 7.4% 2.8% 51.6%

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% 14.5% 30.7%

AVG Technologies N.V.(NYSE: AVG)

Security 2/3/12 $59,520,000 $1,055,689,120 3.9x 12.6x $272,392,000 25.4% 30.7% (18.2%) (40.0%)

Greenway Medical Technologies, Inc(NYSE: GWAY) Healthcare 2/2/12 $50,116,150 $348,719,740 3.3x 63.4x $105,784,180 38.0% 5.2% 30.0% 71.0%

Guidewire Software, Inc.(NYSE: GWRE) Vertical - Other 1/25/12 $106,996,500 $842,377,160 4.4x 32.5x $190,182,000 34.5% 13.6% 31.7% 138.8%

$80,445,000 $837,488,580 6.7x 55.0x $98,832,000 54.3% 2.6% 28.8% 29.1% 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, 405 software industry M&A transactions were reported in the third quarter (Figure 26). We expect the final tally for 3Q12 to reach 420, since M&A announcements and related data for the quarter are often released well into the following quarter. As testament, our initial total of 422 deals for Q2, as referenced in our second quarter report, was revised upward to a final count of 449 software/SaaS transactions. Quarterly software/SaaS M&A deal volume has now surpassed 400 - the historical benchmark for healthy software M&A volume - for nine straight quarters. Software/SaaS mega deals (>$500 million) in the third quarter included Verint Systems’ acquisition of Comverse Technology ($1.5 billion EV, 0.7x TTM revenue); IBM’s acquisition of Kenexa ($1.4 billion, 4.1x); Roper Industries’ acquisition of Sunquest Information ($1.4 billion); VMWare’s acquisition of Nicira Networks ($1.3 billion); Thoma Bravo’s acquisition of Deltek ($1.1 billion, 3.0x); Publicis Groupe’s acquisition of LBi International ($581.2 million, 1.9x); and HiSoft Technology’s acquisition of VanceInfo Technologies ($506.4 million, 1.3x).

Thoma Bravo’s acquisition of Deltek marks the third consecutive quarter mega-deal buyers included a private equity firm, suggesting PE firms have improved deal financing capabilities and a healthier appetite. As important, Deltek’s 3.4x TTM revenue exit multiple suggests some PE firms are willing to pay a strategic value for the right asset. Q3 also marked the fourth consecutive quarter there was at least one $500 million+ SaaS transaction, evidence the software industry’s largest public companies are now convinced of the viability and potential of SaaS in the enterprise market. Having drawn that conclusion, these industry behemoths are now aggressively targeting the largest and most successful SaaS companies, which have now achieved critical mass to warrant the attention. As for the third quarter’s total spend, the aggregate purchase price of 3Q12’s software/SaaS transactions with announced price tags was $12.2 billion, 45% lower than 2Q12’s $22.3 billion, and the lowest quarterly spend we’ve seen since 1Q10. On a TTM basis, as of

330

372

431

383407

421 426 430454 456

427449

405

$13.5

$7.6

$4.6

$17.3$17.9

$12.7

$13.1

$21.3

$23.4

$12.6

$16.0

$22.3

$12.2

$0

$5

$10

$15

$20

$25

0

50

100

150

200

250

300

350

400

450

500

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

Value (BIllions)

Num

ber o

f Deals

Deals Value

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



the close of the third quarter $63.1 billion was expended on software/SaaS transactions, down from $70.4 billion YoY. The average deal size, after a period of rapid growth, began to level off in 4Q11 at $42 million, and declined to $36 million in 3Q12, a 14.3% YoY decrease (Figure 27).

While one could conclude the declining aggregate deal spend and average deal size have suffered because of continuing buyer uncertainty about the broader economy, the steady number of software/SaaS M&A transactions, and the much improved median exit multiple (see below) suggests the declines may be attributable to a greater number of smaller software companies being acquired. 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. We noted, though, 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 median exit multiple was 2.3x TTM revenue in 3Q12, up sharply from 1.7x in 2Q12 (Figure 28). The 2.3x benchmark is the highest since 2Q11’s 2.5x median exit multiple. It’s worth noting that in Q3, one-third of all software/SaaS M&A transactions with ascertainable exit multiples had an EV/Revenue multiple of 3.0x or greater (Figure 29), and 8.0% of these deals boasted exit valuations of 5.0x TTM revenue or greater.

Among Q3’s transactions with the highest exit multiples were Salesforce.com’s acquisition of GoInstant ($70 million EV, 15.0x TTM revenue estimate); KEYW Holding Corporation’s acquisition of Sensage ($84.8, 7.0x); and SeaEnergy’s acquisition of Return to Scene ($16 million, 5.1x).

$20 $20 $20

$28$31

$33$37

$40$42

$41 $42 $42

$36

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

$45.0

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

TTM A

verage

Deal V

alue

(Millions)

Figure 27: TTM Average M&A Deal Size

2.2x1.8x 1.9x 1.7x

2.3x

3Q11 4Q11 1Q12 2Q12 3Q12

13.4x 13.4x 12.2x 12.1x 11.2x

3Q11 4Q11 1Q12 2Q12 3Q12

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

24.0%20.0%

24.0% 24.0%

0.0%

8.0%

0.0%5.0%10.0%15.0%20.0%25.0%30.0%

<=1.0x >1.0x &<=2.0x

>2.0x &<=3.0x

>3.0x &<=4.0x

>4.0x &<=5.0x

>5.0x

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



The largest SaaS deal of the quarter was IBM’s acquisition of Kenexa, a leading provider of talent management solutions ($1.3B EV, 4.1x TTM Revenue). The deal follows on the heels of acquisitions by SAP and Oracle of Kenexa rivals SuccessFactors and Taleo. Since very few software transactions publicly disclose a private software seller’s TTM EBITDA, we lacked sufficient data to ascertain the median EBITDA exit multiple paid in 3Q12 for private software company sellers (Figure 28). We did, however, determine 3Q12’s median exit multiple for public software company sellers was 11.2x TTM EBITDA, a modest decline from 2Q12’s 12.1x TTM EBITDA exit multiple.

SOFTWARE M&A VALUATIONS BY EQUITY STRUCTURE While a variety of factors impact a seller’s exit valuation, one important variable is the seller’s equity structure. We separated public and private software company buyers to ascertain any difference in median purchase price paid in 3Q12. 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 3Q12 as public buyers paid a median 2.4x TTM revenue, while private buyers paid only 1.4x 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; their preference for larger targets that typically yield a higher multiple; and the greater inclination of public buyers to pursue strategic transactions, while private buyers are often more inclined toward financial transactions. SOFTWARE M&A VALUATIONS BY SIZE Another key driver of exit multiples is size – of both buyer and seller. As testament, buyers with TTM revenue greater than $200 million paid a median EV/Revenue multiple of 2.8x in 3Q12, while buyers with TTM revenue less than $200 million paid only 1.6x TTM revenue (Figure 31). Equally noteworthy: Sellers with less than $20 million TTM revenue received a median EV/Revenue multiple in Q3 of 3.9x 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 2.7x.

Public Sellers 1.4x Median Multiple

Private Sellers 2.4x Median Multiple

68%32%

Public Buyers 2.4x Median Multiple

Private Buyers 1.4x Median Multiple

67%33%

Figure 30: 3Q12 Median EV/Revenue Exit Multiple by Ownership Structure

Buyer Less Than $200 million 1.6x Median Multiple

Buyer Greater Than $200 million 2.8x Median Multiple

Seller Less Than $20 million: 2.4x

Seller LessThan $20 million: 2.0x

Seller Greater Than $20 million: 1.5x


Seller Less Than $20 million: 1.6x

Seller LessThan $20 million: 3.9x



56%44%

Figure 31: 3Q12 Median EV/Revenue Exit Multiple by Size



Why? A rapidly growing smaller company will often deem an exit premature and spurn advances by a strategic acquirer, prompting the larger suitor to raise the bid. Case in point: GoInstant, a small but highly respected provider of enterprise social web browsing and collaboration solutions which allow customers, business partners, and colleagues to easily meet in online sessions, browse the web, and interact in real-time, as if seated side-by-side and was gobbled up for an estimated 15.0x TTM revenue by Salesforce.com. SOFTWARE M&A BY VERTICAL AND HORIZONTAL MARKETS Another important determinant of exit valuation is the seller’s market focus and related domain expertise. We analyzed 3Q12’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 3Q12, providers of vertical software accounted for 37% of all software M&A, confirming vertical providers remain attractive acquisition targets primarily because of their deep domain expertise and highly defensible market positions (Figure 32). The median EV/Revenue exit multiple of these vertical targets has doubled over the same time period, growing from 1.0x in 4Q11 to 2.0x in 2Q12 (Figure 33).

The most active verticals in 3Q12 were Healthcare and Financial Services, accounting for 23% and 20% of total vertical software transactions, respectively (Figure 34). Both verticals continued to see heightened deal activity, mostly due to regulatory changes, growing governmental scrutiny, and evolving market conditions. Notable deals in the healthcare sector included Thoma Bravo’s acquisition of Mediware ($156M EV, 2.4x TTM revenue); Nuance Communications acquisition of Quadramed’s HIM Business ($230M EV); Merge Healthcare’s acquisition of Advanced Clinical Software; and McKesson’s acquisition of MedVentive. Notable transactions in financial services included: ACI Worldwide’s acquisition of Distra ($49M EV); S&P Capital’s acquisition of Credit Market Analysis; and Global Payments acquisition of Accelerated Payment Technologies($413M EV).

Automotive2% Construction

2%

Financial Services20%

Healthcare23%

Hospitality2%

Insurance1%

Legal3%

Manufacturing4%

Mining, Oil & Gas4%

Non‐Profit3%

Other Verticals18%

Public Sector6%

Real Estate3%

Retail4%

Telcom3%

Utilities2%

Figure 32: 3Q12 M&A Volume by Vertical

63% 70% 68% 65% 63%

37% 30% 32% 35% 37%

0%10%20%30%40%50%60%70%80%90%

100%

3Q11 4Q11 1Q12 2Q12 3Q12

Vertical Horizontal

Figure 33: Horizontal & Vertical M&A Volume

1.0x1.3x

1.9x 2.0x

3.0x

2.3x

1.6x

3.0x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4Q11 1Q12 2Q12 3Q12

Vertical Horizontal

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



M&A VALUATIONS BY SOFTWARE PRODUCT CATEGORY We begin this section with two fundamental truths: First, while such factors as revenue growth, equity structure and delivery model can demonstrably impact a software company’s exit valuation, the nature of its product offering – its software product category – is the single most important M&A valuation driver. Second, product category median exit valuations frequently reflect the category’s rate of market adoption (revenue growth) and often fluctuate greatly from year to year. Each premise continued to hold true in 3Q12. 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 3Q12, eleven had both sufficient deal activity and deal data to ascertain a TTM revenue multiple (Figure 35). Software company sellers that were focused on Storage & Systems Mgmt garnered the highest median TTM revenue multiple, 3.6x.

Sellers in 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. Other software product categories with median EV/Revenue multiples greater than the overall Q3 median exit multiple of 2.3x included Mobile (2.6x) and Multimedia, Graphics and Digital Media (2.5x). Conversely, software product categories lagging well behind the general software median included Supply Chain Mgmt (1.3x), ERP (1.2x), Data Mgmt & Integration (1.2x), Other Verticals (1.1x) and Content & Document Mgmt (0.8x). The Mobile product category accounted for 16.7% of all software M&A transactions in the third quarter, making it the most active of our eleven categories in terms of deal volume (Figure 36). The third quarter marks the second consecutive quarter the Mobile category led all others in both M&A deal volume and median EV/Revenue exit multiple. With the exception of a few headline grabbing deals, the mobile category has been characterized historically by a large number of transactions involving small, private companies that did not command significant exit premiums. While 3Q12’s results suggest the prospects for mobile targets may be improving, it’s important to note mobile deal structures frequently include stock, earnouts and other contingencies that can place reported transaction values at considerable risk.

3.6x

2.6x 2.5x2.2x

1.9x 1.8x1.3x 1.2x 1.2x 1.1x 0.8x

Sto

rage

& S

yste

ms

Mgm

t Mob

ile

Mul

timed

ia,

Gra

phic

s &

Dig

ital

Med

ia

Hea

lthca

re

Eng

inee

ring,

PLM

& C

AD

/CA

M

Fina

ncia

l Ser

vice

s

Sup

ply

Cha

in &

Logi

stic

s ER

P

Dat

a M

gmt &

Inte

grat

ion

Oth

er V

ertic

als

Con

tent

&D

ocum

ent M

gmt

Figure 35: Median EV/Revenue by Software Product Category



Other active M&A categories this quarter included Healthcare (8.5% of total); Financial Services (7.5%); Engineering, PLM & CAD/CAM (6.4%); Storage & Systems Mgmt (4.3%); and Security (3.9%). The number of software product categories reporting significant transaction volumes in 3Q12 is testament to the vibrancy of the current software M&A market. SOFTWARE AS A SERVICE (SAAS) M&A DEAL VOLUME AND VALUATIONS The number of SaaS M&A transactions continues to soar. In 3Q12, 94 SaaS companies were acquired, a stunning 96% increase from 48 transactions in 3Q11. SaaS targets accounted for 23.2% of all software industry acquisitions in 3Q12, compared to only 9.6% of all software M&A deals just two years ago (Figure 37).

CRM & Marketing3.2%

Data Mgmt & Integration1.4%

Development Tools & Application Testing3.9%

EDA1.4%

Engineering, PLM & CAD/CAM6.4%EDI/ Middleware

0.7%

ERP 1.4%

Gaming1.4%

Messaging, Conferencing & Communications

2.1%

Mobile16.7%

Multimedia, Graphics & Digital Media3.6%

Networking & Network Performance Mgmt0.7%

Security3.9%

Storage & Systems Mgmt4.3%Supply Chain & Logistics

2.1%Talent & Workforce Mgmt

1.4%

Automotive0.7%

Construction0.7%

Financial Services7.5%

Healthcare8.5%

Hospitality0.7%

Insurance0.4%

Legal1.1%

Manufacturing1.4%

Mining, Oil & Gas1.4%

Non‐Profit1.1%

Other Verticals6.8%

Public Sector2.1%

Real Estate1.1%

Retail1.4%

Telcom1.1%

Utilities0.7%

Accounting & Finance3.2%

Asset & Facilities Mgmt1.4% Billing & Service

Mgmt0.4%

BI, Risk & Compliance1.4%

Content & Document Mgmt2.1%

Vertical Deals

Figure 36: Software M&A by Product Category

1320

10

3039

26

3945 48

68 6559

94

0%

5%

10%

15%

20%

25%

0102030405060708090

100

SaaS M

&A Deals as a % of To

tal

Software M&A Deals

# of SaaS M

&A Deals

SaaS M&A Deals SaaS as % of Software

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



The median EV/Revenue exit multiple for SaaS providers in Q3 was 3.9x, slightly below its pre-recession high of 4.0x in 2Q12 (Figure 38), but roughly 70% higher than the third quarter’s median exit multiple for on-premise software company sellers of 2.3x TTM revenue.

The most notable SaaS transaction of the quarter was IBM’s acquisition of Kenexa ($1.3 billion EV, 4.1x TTM revenue), to bolster IBM’s social business initiatives. Social business, inspired by consumer Internet companies such as Facebook,

Twitter and LinkedIn, and pioneered by the likes of Jive and Yammer (acquired by Microsoft for $1 billion in 2Q12), is revolutionizing the way enterprises get work done. Enterprises, plagued by employee disengagement and legacy enterprise applications that have not kept pace with current technology, are clamoring for social business solutions, and the likes of Salesforce.com, Microsoft, IBM and others are moving quickly to fill the void. The third quarter featured a good number of other noteworthy SaaS M&A transactions (for a comprehensive list of SaaS acquisitions, see Appendix G). Clearly, the industry’s largest on-premise software companies now view SaaS as both mainstream and a strategic imperative. Third quarter SaaS company acquirers included Autodesk, Mastercard, Rackspace, Citrix, Athenahealth, Google, Oracle, and IBM. The broad based appeal of SaaS is evidenced by the fact that 3Q12’s transactions included SaaS targets in seventeen different product categories and ten vertical markets.

3.7x 3.7x

3.9x4.0x

3.9x

3Q11 4Q11 1Q12 2Q12 3Q12

Figure 38: Median SaaS M&A Valuation as a Multiple of TTM Revenue

BI, Risk & Compliance6%

Content & Document Mgmt1%

CRM & Marketing12%

Development Tools & Application Testing

2%eCommerce

3%

Engineering, PLM & CAD/CAM1% EDI/ Middleware

1%Messaging, Conferencing &

Communications5%

Multimedia, Graphics & Digital Media3%Security

3%Storage & Systems Mgmt

4%Supply Chain & Logistics

4%

Talent & Workforce Mgmt10%

Web Analytics1%

Automotive3%

Construction2%

Education4%

Financial Services7%

Healthcare2%

Manufacturing1%

Non‐Profit3%

Other Verticals5%

Public Sector1%

Real Estate1%

Retail 1%

Accounting & Finance6%

Asset & Facilities Mgmt2%

Billing & Service Mgmt2%

Vertical Deals

Figure 39: SaaS M&A by Product Category



The most active SaaS product categories were CRM & Marketing, accounting for 12% of all SaaS M&A transactions in 3Q12, and Talent and Workforce Management, which accounted for 10% of SaaS M&A transactions in the quarter (Figure 39). Historically CRM & Marketing, and Talent & Workforce Management, have together accounted for the lion’s share of SaaS M&A volume. However, as SaaS providers in an array of other categories begin to achieve more widespread acceptance and success, the two more traditional SaaS categories no longer dominate. Indeed, CRM & Marketing and Talent & Workforce Mgmt accounted for 30% of total SaaS M&A transactions in 3Q11, but only 22% in 3Q12. M&A transactions now abound in a host of SaaS product categories, including BI, Risk & Compliance, Development Tools, Multimedia, Graphics & Digital Media, Storage & Systems Mgmt and Supply Chain & Logistics. We believe 3Q12 represents an inflection point in the SaaS Talent Management arena, and believe that deal volumes and median exit multiples will continue to decline. By now most larger public software companies have built or bought SaaS providers offering compensation, learning, recruitment and performance management solutions (e.g. IBM’s acquisition of Kenexa and SkillSoft’s acquisition of ThirdForce in 3Q12). We see buyer attention in the SaaS Talent Management category pivoting to new extensions, such as social talent management (e.g. Oracle’s acquisition of SelectMinds, and iCIMS acquisition of Jobmagic in 3Q12). Collectively, SaaS providers serving vertical markets (both pure-play and hybrid) accounted for 30% of all SaaS M&A transactions. Examples include DealerTrack’s acquisition of 1st Auto Transport Directory (for an Enterprise Value of $74.0 million), Autodesk acquiring Inforbix, and Pearson acquiring Psychological Software Solutions. SaaS sellers targeting financial services accounted for 7% of all SaaS deals. Other vertical markets where SaaS providers were in demand in 3Q12 included Education, Automotive and Non-Profit.

INTERNET M&A DEAL VOLUME AND VALUATIONS Internet M&A activity in 3Q12 was robust, with 263 transactions announced by close of quarter, a marked YoY increase over 3Q11’s 216 Internet deals (Figure 40). The third quarter’s 263 Internet transactions was 65% of the final tally for traditional on-premise software M&A, up markedly from 3Q10 when Internet M&A was only 30% of the on-premise software deal total.

The most active Internet M&A category in 3Q12 was Ad Tech & Lead Gen, which accounted for 85 transactions, or one-third of all Internet deals during the quarter (Figure 41).

In 1H12, many of these Ad Tech & Lead Gen sellers were daily deal sites unable to emulate the success of Groupon and Living Social by scaling quickly and massively, making them ripe for consolidation. In Q3, however, the Internet M&A focus shifted to a new breed of online marketing companies that had leveraged social media to help SMB customers generate leads more cost-efficiently, deemed critical in this tough economic climate. Representative third quarter transactions

216

203

220

273263

3Q11 4Q11 1Q12 2Q12 3Q12

Figure 40: Internet M&A Volume

Category Q3 2011 Q4 2011 1Q 2012 2Q 2012 3Q 2012Ad-Tech & Lead Gen 67 60 65 70 85Commerce 36 38 36 57 40Content & Media 45 48 51 62 52Gaming 6 14 13 25 13Infrastructure 27 27 31 30 41Social Tech 35 16 24 29 32Total 216 203 220 273 263

Figure 41: Internet M&A Volume by Product Category



in this arena included Merkle’s acquisition of 5th Finger; WPP’s purchase of Acceleration eMarketing; Gannett’s acquisition of BLiNQ Media; Publicis Groupe’s successful bid for LBi International ($533.8 million); and RealPage’s purchase of Rent Mine Online ($15.5 million EV, 10.3x TTM revenue). The largest transaction in this category was Dentsu’s acquisition of Aegis Group ($4.8 billion EV) which was a global expansion play for Dentsu. Content & Media was also among the most active Internet categories from an M&A perspective, with 52 transactions in the third quarter. Notable transactions in this category included Shutterfly’s acquisition of Penguin Digital; News.me’s acquisition of Digg ($0.5M EV); Google’s acquisition of John Wiley & Sons Travel Assets; and IAC Search & Media’s acquisition of About.com. The sale of Digg to News.me is another reminder of how far and how quickly, Internet high flyers can fall. It was only four years ago that Google was rumored to be interested in buying the high flying startup for $200M. Four short years later, the Company needed a $5M Series D round to keep from running out of cash before ultimately selling the business for what is widely believed - albeit hotly debated - $0.5M total transaction price. The TTM Internet M&A median exit multiple was 1.9x in 3Q12 (Figure 42), down sharply YoY from 2.6x in 3Q11. The drop mirrors the steep Q3 decline in the median market valuation of public Internet companies, and reinforces investor concerns about the viability and sustainability of Internet revenue models primarily dependent upon advertising. Compounding the problem is growing competition for these web advertising dollars from mobile deployed apps. But if Facebook and Google are able to prove mobile web advertising is substantial, sustainable and incremental to desktop web advertising, Internet exit multiples for Ad Tech & Lead Gen providers will undoubtedly rise sharply in the not too distant future.

2.6x2.8x

2.1x 2.1x1.9x

3Q11 4Q11 1Q12 2Q12 3Q12

Figure 42: Median Internet M&A Valuation as a Multiple of TTM Revenue



APPENDIX A: 3Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Billing & Service Management 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 1.3x 1.3x 1.3x 1.3x 1.4xEV/EBITDA 5.2x 5.6x 6.6x 6.9x 7.9xEV/Earnings 9.3x 12.0x 11.8x 11.1x 16.1xGross Profit Margin 51.8% 52.9% 53.5% 54.1% 56.0%EBITDA Margin 23.7% 23.3% 21.8% 18.5% 19.2%Net Income Margin 18.2% 17.1% 15.5% 12.9% 11.8%TTM Revenue Grow th (YoY) 10.7% 34.1% 19.1% 22.3% 9.8%TTM EBITDA Grow th (YoY) 3.4% 5.6% 0.8% 6.9% 6.6%TTM Earnings Grow th (YoY) -15.1% -34.0% -10.1% -5.2% 27.5%Current Ratio 3.1 4.3 2.3 2.4 2.6Cash as Percent of Market Cap 27.7% 18.0% 22.8% 17.4% 17.0%Enterprise Value Grow th (YoY) 8.4% -3.0% -10.3% -20.5% 3.2%

Business Intelligence 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.8x 2.4x 2.3x 2.5x 2.1xEV/EBITDA 39.7x 36.2x 39.3x 38.1x 33.0xEV/Earnings 142.6x 56.7x 65.6x 65.9x 57.2xGross Profit Margin 79.2% 78.7% 78.9% 78.6% 78.6%EBITDA Margin 7.3% 8.0% 8.9% 8.7% 8.5%Net Income Margin 3.6% 5.2% 4.9% 4.0% 4.2%TTM Revenue Grow th (YoY) 21.6% 25.2% 23.7% 19.0% 12.7%TTM EBITDA Grow th (YoY) 6.6% -4.9% 4.6% 3.7% -4.7%TTM Earnings Grow th (YoY) -6.2% -14.3% 2.9% -13.2% 1.5%Current Ratio 1.9 1.8 1.8 1.9 2.1Cash as Percent of Market Cap 14.8% 16.6% 15.3% 14.3% 15.2%Enterprise Value Grow th (YoY) 53.5% 14.9% 16.2% -6.8% 0.0%

Development Platforms 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 1.8x 1.9x 2.3x 1.9x 2.0xEV/EBITDA 7.9x 9.0x 10.3x 9.4x 9.5xEV/Earnings 14.4x 15.8x 19.2x 18.3x 17.6xGross Profit Margin 77.2% 77.2% 76.4% 76.6% 76.2%EBITDA Margin 22.2% 22.4% 22.2% 22.1% 21.3%Net Income Margin 12.9% 12.8% 12.9% 12.8% 13.7%TTM Revenue Grow th (YoY) 15.0% 11.0% 7.7% 6.4% 5.4%TTM EBITDA Grow th (YoY) 11.6% 12.1% 2.4% 2.9% 3.4%TTM Earnings Grow th (YoY) -26.5% -17.3% -12.3% -12.4% 10.7%Current Ratio 2.4 2.0 2.2 2.0 2.2Cash as Percent of Market Cap 20.8% 21.9% 21.8% 20.1% 24.4%Enterprise Value Grow th (YoY) 15.0% -10.0% -17.1% -12.3% 8.2%

Engineering & PLM 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 1.9x 2.0x 2.6x 2.3x 2.6xEV/EBITDA 13.5x 15.0x 15.0x 11.5x 12.1xEV/Earnings 20.9x 27.5x 30.2x 28.3x 22.6xGross Profit Margin 83.1% 83.0% 83.0% 83.6% 84.1%EBITDA Margin 15.9% 16.2% 18.5% 19.9% 20.7%Net Income Margin 11.9% 7.7% 8.3% 10.4% 11.4%TTM Revenue Grow th (YoY) 14.2% 15.5% 13.5% 13.5% 13.2%TTM EBITDA Grow th (YoY) 17.3% 38.4% 37.5% 45.7% 31.0%TTM Earnings Grow th (YoY) -22.8% -54.6% -35.8% -19.7% -30.5%Current Ratio 2.1 1.7 1.7 1.8 1.8Cash as Percent of Market Cap 19.6% 22.0% 20.2% 18.6% 17.0%Enterprise Value Grow th (YoY) 17.7% 3.9% 3.0% 15.2% 30.5%

Enterprise Resource Planning 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.8x 2.8x 3.0x 2.4x 2.6xEV/EBITDA 12.3x 11.1x 11.3x 9.4x 9.1xEV/Earnings 19.3x 17.6x 18.1x 14.9x 16.0xGross Profit Margin 70.2% 70.9% 71.5% 71.5% 71.6%EBITDA Margin 30.0% 29.5% 29.3% 29.0% 29.0%Net Income Margin 14.4% 14.2% 16.3% 18.4% 18.4%TTM Revenue Grow th (YoY) 17.9% 16.3% 12.4% 10.1% 8.8%TTM EBITDA Grow th (YoY) 33.5% 34.8% 32.2% 24.8% 5.3%TTM Earnings Grow th (YoY) -24.8% -28.2% -29.6% -38.5% -36.5%Current Ratio 1.4 1.8 1.5 1.2 1.2Cash as Percent of Market Cap 18.6% 19.4% 17.6% 20.3% 20.8%Enterprise Value Grow th (YoY) 13.4% 0.6% 10.7% 9.8% 5.8%

Financial & Accounting 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.3x 2.6x 2.8x 2.7x 2.9xEV/EBITDA 9.0x 9.2x 10.8x 10.5x 10.7xEV/Earnings 20.8x 20.2x 25.0x 19.5x 21.8xGross Profit Margin 64.8% 62.8% 62.5% 62.4% 63.2%EBITDA Margin 27.5% 28.0% 29.2% 29.3% 29.0%Net Income Margin 13.9% 12.9% 14.9% 15.2% 13.7%TTM Revenue Grow th (YoY) 2.6% 3.9% 5.7% 7.1% 9.4%TTM EBITDA Grow th (YoY) 3.3% 10.4% 10.5% 10.6% 6.9%TTM Earnings Grow th (YoY) -14.3% -2.2% -5.8% -13.4% -13.7%Current Ratio 1.3 1.4 1.3 1.4 1.2Cash as Percent of Market Cap 15.7% 13.2% 11.7% 11.3% 9.4%Enterprise Value Grow th (YoY) 4.4% 3.5% 8.4% 5.1% 15.9%

Gaming 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 1.3x 1.2x 1.2x 0.9x 0.9xEV/EBITDA 7.6x 7.8x 7.1x 7.6x 9.1xEV/Earnings 15.6x 14.5x 10.7x 10.5x 12.1xGross Profit Margin 57.6% 58.9% 56.9% 57.4% 57.8%EBITDA Margin 12.2% 12.8% 11.6% 9.2% 6.7%Net Income Margin 6.0% 5.5% 5.5% 6.0% 2.6%TTM Revenue Grow th (YoY) 2.6% 4.8% 6.9% 15.4% 5.9%TTM EBITDA Grow th (YoY) 34.6% 35.6% 31.3% 3.3% -22.0%TTM Earnings Grow th (YoY) -70.2% -25.6% -34.1% -21.2% -7.7%Current Ratio 2.7 2.1 2.3 2.6 2.8Cash as Percent of Market Cap 21.8% 20.3% 20.9% 28.3% 35.6%Enterprise Value Grow th (YoY) 39.4% 30.6% 15.0% -15.6% -19.8%

Healthcare 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 3.3x 3.0x 3.4x 3.0x 2.6xEV/EBITDA 17.5x 16.4x 16.8x 14.3x 14.3xEV/Earnings 38.4x 34.8x 30.7x 35.8x 35.1xGross Profit Margin 65.7% 66.0% 65.9% 65.2% 63.1%EBITDA Margin 21.8% 21.5% 22.0% 22.3% 21.1%Net Income Margin 4.2% 3.9% 4.7% 4.0% 4.8%TTM Revenue Grow th (YoY) 19.0% 17.9% 20.9% 25.7% 21.8%TTM EBITDA Grow th (YoY) 30.1% 40.1% 40.9% 19.4% 19.0%TTM Earnings Grow th (YoY) -20.6% -61.2% -62.0% -31.5% -21.0%Current Ratio 1.8 1.9 1.9 2.2 2.1Cash as Percent of Market Cap 8.3% 8.4% 7.5% 9.4% 9.6%Enterprise Value Grow th (YoY) 46.4% 18.8% 8.3% -7.6% 14.6%

IT Conglomerates 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.6x 2.5x 3.1x 2.9x 2.8xEV/EBITDA 8.1x 8.6x 7.7x 7.3x 8.2xEV/Earnings 14.6x 15.1x 13.2x 12.9x 14.4xGross Profit Margin 70.2% 70.9% 71.5% 71.5% 71.6%EBITDA Margin 35.7% 37.0% 37.4% 36.9% 36.1%Net Income Margin 14.7% 19.4% 24.2% 23.9% 23.0%TTM Revenue Grow th (YoY) 11.9% 8.5% 7.7% 5.3% 1.5%TTM EBITDA Grow th (YoY) 8.3% 12.1% 5.8% 4.8% 3.7%TTM Earnings Grow th (YoY) -20.7% -19.0% -12.3% -12.4% -4.0%Current Ratio 1.4 1.8 1.5 1.3 1.2Cash as Percent of Market Cap 16.5% 15.5% 15.5% 18.6% 20.8%Enterprise Value Grow th (YoY) 11.7% -1.4% 9.9% 9.8% 9.4%

Mobile Solutions/Content 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.9x 2.5x 3.3x 2.6x 1.7xEV/EBITDA 13.0x 19.9x 30.3x 15.6x 14.5xEV/Earnings 12.3x 16.7x 4.3x 19.6x 16.5xGross Profit Margin 65.9% 65.8% 64.2% 63.5% 62.0%EBITDA Margin 12.5% 6.1% 7.5% 8.7% 8.1%Net Income Margin 0.0% 0.0% -1.7% -2.1% 4.2%TTM Revenue Grow th (YoY) 20.3% 12.7% 18.9% 20.0% 18.5%TTM EBITDA Grow th (YoY) 5.5% -13.9% -14.9% -31.2% -25.1%TTM Earnings Grow th (YoY) -5.3% -16.4% -16.3% -18.9% -3.5%Current Ratio 3.4 3.3 2.9 2.4 3.7Cash as Percent of Market Cap 20.9% 16.1% 16.2% 21.2% 29.7%Enterprise Value Grow th (YoY) 23.2% -2.2% -20.3% -15.6% -17.7%



APPENDIX A: 3Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Networking & Network Perf Mgmt 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 3.0x 2.7x 3.1x 2.4x 2.5xEV/EBITDA 15.9x 15.6x 16.4x 14.9x 13.9xEV/Earnings 28.0x 27.8x 31.1x 24.6x 24.7xGross Profit Margin 68.6% 68.1% 67.8% 68.1% 68.5%EBITDA Margin 18.5% 18.9% 18.2% 18.0% 16.8%Net Income Margin 12.3% 11.5% 12.1% 12.5% 10.4%TTM Revenue Grow th (YoY) 21.2% 23.3% 20.7% 19.4% 17.3%TTM EBITDA Grow th (YoY) 30.7% 41.1% 33.5% 23.7% 21.5%TTM Earnings Grow th (YoY) -50.5% -41.9% -24.8% -22.9% -16.1%Current Ratio 3.1 2.8 2.7 2.7 2.7Cash as Percent of Market Cap 18.5% 16.5% 15.1% 16.2% 18.5%Enterprise Value Grow th (YoY) 11.1% -16.1% -12.0% -9.1% 3.7%

Security 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.6x 2.9x 3.2x 2.9x 3.2xEV/EBITDA 13.2x 14.5x 13.0x 10.2x 10.6xEV/Earnings 20.4x 19.6x 18.0x 14.1x 21.9xGross Profit Margin 78.8% 78.6% 78.4% 78.1% 77.9%EBITDA Margin 17.9% 18.3% 18.2% 18.0% 19.2%Net Income Margin 8.8% 8.7% 9.6% 8.2% 8.1%TTM Revenue Grow th (YoY) 19.4% 16.8% 26.3% 19.4% 20.1%TTM EBITDA Grow th (YoY) 1.3% 10.6% 13.2% 20.5% 19.8%TTM Earnings Grow th (YoY) -13.6% -25.5% -15.3% -6.9% -11.2%Current Ratio 1.2 1.2 1.6 1.7 2.0Cash as Percent of Market Cap 15.7% 16.5% 13.2% 13.4% 14.0%Enterprise Value Grow th (YoY) 37.3% -3.4% 9.6% -12.7% 9.2%

Storage, Data Management & Integration 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.1x 2.2x 2.5x 2.4x 2.4xEV/EBITDA 9.8x 9.7x 10.3x 9.4x 9.2xEV/Earnings 19.0x 18.1x 19.8x 17.6x 16.8xGross Profit Margin 75.5% 75.6% 74.6% 74.8% 74.5%EBITDA Margin 22.3% 23.0% 22.7% 23.0% 22.7%Net Income Margin 11.8% 12.0% 12.2% 12.5% 12.5%TTM Revenue Grow th (YoY) 15.7% 8.5% 9.4% 7.7% 6.0%TTM EBITDA Grow th (YoY) 13.7% 12.5% 14.2% 16.7% 4.2%TTM Earnings Grow th (YoY) -26.2% -20.9% -20.7% -11.2% -10.5%Current Ratio 1.9 2.0 2.0 2.3 2.2Cash as Percent of Market Cap 21.1% 20.6% 21.8% 19.8% 20.9%Enterprise Value Grow th (YoY) 18.9% 0.0% 0.3% -4.8% 9.4%

Supply Chain Management & Logistics 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 1.9x 2.3x 2.3x 2.1x 2.2xEV/EBITDA 11.2x 11.8x 12.8x 11.3x 11.1xEV/Earnings 19.5x 19.0x 20.5x 27.3x 23.9xGross Profit Margin 57.9% 59.1% 60.8% 61.1% 61.1%EBITDA Margin 16.0% 17.8% 18.6% 19.6% 19.6%Net Income Margin 9.4% 10.7% 11.5% 10.9% 8.3%TTM Revenue Grow th (YoY) 18.5% 18.5% 15.7% 17.3% 16.1%TTM EBITDA Grow th (YoY) 23.8% 36.1% 53.6% 53.9% 33.5%TTM Earnings Grow th (YoY) -19.7% -30.0% -26.7% -29.1% -18.1%Current Ratio 2.3 2.4 2.5 2.4 2.6Cash as Percent of Market Cap 14.6% 14.2% 12.8% 11.9% 8.8%Enterprise Value Grow th (YoY) 17.1% 25.1% 34.0% 34.0% 38.7%

Systems Management 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 5.1x 5.5x 5.9x 5.9x 5.5xEV/EBITDA 18.8x 20.9x 22.2x 23.0x 22.3xEV/Earnings 28.3x 31.9x 36.3x 39.0x 36.7xGross Profit Margin 83.4% 83.7% 84.2% 84.6% 85.0%EBITDA Margin 25.6% 26.1% 26.4% 26.2% 25.8%Net Income Margin 16.7% 18.2% 19.2% 18.5% 16.5%TTM Revenue Grow th (YoY) 17.3% 17.9% 17.7% 18.1% 18.1%TTM EBITDA Grow th (YoY) 12.2% 19.8% 18.4% 20.5% 15.1%TTM Earnings Grow th (YoY) -20.8% -22.2% -13.6% -7.9% -15.5%Current Ratio 1.8 1.6 1.5 1.5 1.7Cash as Percent of Market Cap 10.9% 13.4% 12.7% 12.4% 13.5%Enterprise Value Grow th (YoY) 13.6% 2.3% 5.4% 8.0% 29.0%

Vertical - Finance 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 3.8x 3.9x 4.0x 4.3x 4.3xEV/EBITDA 13.4x 12.7x 11.8x 12.5x 13.8xEV/Earnings 34.2x 33.5x 29.6x 28.7x 34.0xGross Profit Margin 59.8% 60.0% 59.5% 59.4% 59.3%EBITDA Margin 34.2% 34.4% 34.4% 34.6% 34.8%Net Income Margin 13.0% 13.5% 14.2% 15.2% 12.5%TTM Revenue Grow th (YoY) 15.6% 15.0% 13.9% 10.5% 14.7%TTM EBITDA Grow th (YoY) 12.6% 15.9% 12.6% 8.3% 15.6%TTM Earnings Grow th (YoY) -11.6% -28.2% -13.2% 4.0% 16.4%Current Ratio 1.1 1.1 1.1 1.3 1.2Cash as Percent of Market Cap 4.7% 7.4% 7.2% 8.0% 7.8%Enterprise Value Grow th (YoY) 11.2% -7.2% -3.8% -0.4% 12.7%

Vertical - Other 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.7x 2.8x 3.3x 3.0x 2.9xEV/EBITDA 13.0x 15.1x 16.7x 15.6x 16.8xEV/Earnings 26.0x 27.0x 30.3x 39.4x 50.3xGross Profit Margin 57.5% 57.1% 56.9% 56.6% 55.8%EBITDA Margin 16.7% 16.6% 16.6% 15.7% 14.7%Net Income Margin 10.6% 10.2% 8.7% 7.1% 6.2%TTM Revenue Grow th (YoY) 15.4% 21.6% 20.7% 26.5% 28.0%TTM EBITDA Grow th (YoY) 14.6% 29.3% 28.6% 18.6% 18.7%TTM Earnings Grow th (YoY) -24.2% -38.5% -4.7% 0.8% 25.0%Current Ratio 1.3 1.2 1.7 1.6 1.7Cash as Percent of Market Cap 15.7% 12.7% 7.3% 12.1% 14.1%Enterprise Value Grow th (YoY) 39.3% 46.0% 37.1% 7.0% 9.5%



APPENDIX B: 3Q12 PUBLIC SAAS MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

CRM & Marketing 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 4.4x 2.8x 4.0x 4.6x 5.0xEV/EBITDA 28.0x 28.1x 33.6x 30.1x 102.4xEV/Earnings 82.1x 67.3x 50.4x 60.1x 40.2xGross Profit Margin 71.1% 71.0% 71.3% 71.3% 71.1%EBITDA Margin 5.9% 4.3% 4.7% 4.3% 4.4%Net Income Margin 1.5% 0.2% -0.5% -1.3% -1.4%TTM Revenue Grow th (YoY) 28.2% 25.2% 36.8% 28.8% 28.5%TTM EBITDA Grow th (YoY) 14.3% 9.8% 47.5% 34.0% 57.8%TTM Earnings Grow th (YoY) -27.2% 25.2% 40.7% 85.5% 78.3%Current Ratio 1.9 1.8 1.7 2.9 1.5Cash as Percent of Market Cap 13.3% 16.7% 13.3% 11.3% 10.4%Enterprise Value Grow th (YoY) 56.2% -6.6% -2.9% -20.3% 21.8%

ERP & Supply Chain 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 5.9x 5.3x 4.9x 4.9x 5.5xEV/EBITDA 44.4x 52.8x 52.6x 54.5x 67.0xEV/Earnings 105.3x 162.6x 56.7x 64.5x 220.7xGross Profit Margin 71.3% 71.6% 71.8% 71.7% 71.1%EBITDA Margin 11.2% 8.0% 4.5% 4.4% 5.0%Net Income Margin 1.2% 3.7% 2.5% 2.0% 3.5%TTM Revenue Grow th (YoY) 21.8% 22.0% 24.1% 24.6% 26.3%TTM EBITDA Grow th (YoY) -17.7% -19.2% -11.8% -1.7% 0.9%TTM Earnings Grow th (YoY) 165.3% -58.7% -81.8% -87.8% 4.1%Current Ratio 1.6 1.6 1.6 1.6 1.6Cash as Percent of Market Cap 14.9% 12.6% 10.7% 10.9% 10.2%Enterprise Value Grow th (YoY) 56.3% 82.3% 71.6% 48.0% 71.7%

Vertically Focused 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 5.5x 5.1x 5.9x 4.5x 5.7xEV/EBITDA 28.0x 27.0x 32.5x 30.0x 33.1xEV/Earnings 97.8x 88.9x 17.3x 79.4x 26.6xGross Profit Margin 60.2% 60.5% 60.6% 60.5% 60.4%EBITDA Margin 16.1% 16.6% 15.2% 15.3% 14.2%Net Income Margin 3.8% 4.4% 12.2% 10.4% 10.4%TTM Revenue Grow th (YoY) 28.9% 34.2% 34.5% 34.4% 30.3%TTM EBITDA Grow th (YoY) 26.4% 34.7% 23.5% 16.1% 24.0%TTM Earnings Grow th (YoY) -37.4% -25.3% -57.6% 8.8% -2.9%Current Ratio 2.1 1.6 1.8 2.8 2.7Cash as Percent of Market Cap 4.5% 5.7% 4.7% 4.8% 4.0%Enterprise Value Grow th (YoY) 44.9% 25.4% 23.7% 15.0% 33.9%

Workforce Management 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 3.6x 4.3x 4.6x 4.8x 5.5xEV/EBITDA 48.4x 51.1x 46.8x 50.3x 55.6xEV/Earnings 338.5x 428.0x 408.0x 396.8x 127.2xGross Profit Margin 59.6% 59.1% 58.6% 58.1% 58.2%EBITDA Margin 1.2% 0.4% 0.7% -0.9% -2.6%Net Income Margin -8.9% -11.0% -10.9% -13.1% -13.0%TTM Revenue Grow th (YoY) 32.3% 35.7% 31.1% 29.2% 26.6%TTM EBITDA Grow th (YoY) 13.5% 23.9% 6.3% 11.9% 21.8%TTM Earnings Grow th (YoY) 15.1% 20.7% -45.6% -58.2% -82.4%Current Ratio 1.9 1.6 1.5 1.3 1.2Cash as Percent of Market Cap 12.4% 12.2% 10.2% 8.7% 7.3%Enterprise Value Grow th (YoY) 83.7% 44.7% 33.7% 15.4% 84.3%

Other SaaS 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 4.0x 3.1x 5.9x 5.2x 4.1xEV/EBITDA 18.1x 17.0x 23.1x 19.8x 21.6xEV/Earnings 27.1x 43.5x 21.1x 26.0x 24.4xGross Profit Margin 71.8% 71.5% 71.6% 72.2% 71.6%EBITDA Margin 13.9% 13.4% 11.1% 11.6% 10.5%Net Income Margin 4.0% 2.7% 1.0% -1.3% -2.0%TTM Revenue Grow th (YoY) 30.6% 24.7% 18.7% 27.1% 23.9%TTM EBITDA Grow th (YoY) 13.6% 11.6% 16.1% 4.9% 2.0%TTM Earnings Grow th (YoY) -79.4% -38.4% 11.4% 84.6% 66.5%Current Ratio 1.6 1.6 1.7 2.4 2.4Cash as Percent of Market Cap 14.9% 20.1% 14.9% 11.2% 12.2%Enterprise Value Grow th (YoY) 30.0% -29.1% -27.3% -5.3% 92.4%



APPENDIX C: 3Q12 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Ad Tech & Lead Generation 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.6x 2.6x 3.0x 2.4x 1.8xEV/EBITDA 11.1x 11.9x 14.3x 11.4x 13.3xEV/Earnings 15.8x 16.8x 28.0x 28.8x 29.5xGross Profit Margin 67.3% 66.7% 67.7% 67.6% 68.7%EBITDA Margin 20.9% 17.8% 13.9% 14.0% 14.4%Net Income Margin 6.8% 6.3% 4.4% 3.6% 4.3%TTM Revenue Growth (YoY) 25.1% 29.8% 34.4% 37.5% 34.5%TTM EBITDA Growth (YoY) 19.3% 24.3% 26.3% 24.0% 28.7%TTM Earnings Growth (YoY) -8.5% -10.5% -22.9% -16.6% -15.0%Current Ratio 3.1 3.0 2.9 2.8 2.7Cash as Percent of Market Cap 11.3% 14.1% 18.2% 20.6% 19.8%Enterprise Value Growth (YoY) 35.4% -0.1% -12.8% -18.6% 4.7%

Commerce 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 1.4x 1.1x 0.8x 0.8x 0.7xEV/EBITDA 13.5x 13.1x 15.9x 18.9x 14.8xEV/Earnings 34.0x 27.4x 15.2x 14.7x 17.0xGross Profit Margin 39.6% 37.5% 36.9% 37.0% 37.3%EBITDA Margin 9.7% 9.3% 8.6% 8.3% 8.3%Net Income Margin 2.6% 2.3% 3.8% 3.1% 3.1%TTM Revenue Growth (YoY) 9.3% 13.2% 14.3% 17.5% 7.3%TTM EBITDA Growth (YoY) 3.1% 7.3% 2.0% -0.7% 8.5%TTM Earnings Growth (YoY) 28.6% 24.6% 21.1% 36.9% 41.8%Current Ratio 2.3 2.2 1.8 1.8 1.9Cash as Percent of Market Cap 14.0% 13.7% 12.7% 14.0% 13.4%Enterprise Value Growth (YoY) 24.4% -14.6% -28.3% -26.9% -15.8%

Content & Media 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.4x 1.6x 1.8x 1.6x 1.3xEV/EBITDA 11.1x 10.2x 10.4x 10.2x 10.8xEV/Earnings 16.7x 17.2x 17.3x 21.1x 19.2xGross Profit Margin 52.6% 53.0% 53.1% 53.0% 52.9%EBITDA Margin 13.9% 13.9% 13.6% 13.7% 13.0%Net Income Margin 6.1% 3.3% 2.7% 3.1% 3.4%TTM Revenue Growth (YoY) 12.6% 20.0% 17.9% 15.5% 12.3%TTM EBITDA Growth (YoY) 16.7% 17.8% 17.6% -7.8% -8.9%TTM Earnings Growth (YoY) -26.7% -28.2% 17.1% 22.8% 18.5%Current Ratio 2.7 2.5 2.4 2.0 2.6Cash as Percent of Market Cap 22.6% 24.0% 21.3% 22.7% 24.5%Enterprise Value Growth (YoY) -7.9% -44.3% -24.0% -34.2% -19.8%

Gaming 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 4.6x 3.2x 3.1x 3.5x 2.1xEV/EBITDA 7.4x 6.1x 4.0x 4.0x 3.4xEV/Earnings 10.6x 8.7x 8.7x 8.3x 8.4xGross Profit Margin 75.7% 75.8% 74.6% 73.2% 71.9%EBITDA Margin 49.7% 45.8% 44.2% 45.5% 43.9%Net Income Margin 36.8% 33.6% 34.4% 31.8% 28.9%TTM Revenue Growth (YoY) 29.7% 34.2% 35.7% 33.1% 32.0%TTM EBITDA Growth (YoY) 17.4% 28.5% 25.0% 24.4% 29.4%TTM Earnings Growth (YoY) -22.0% -15.1% -10.3% 1.2% -0.7%Current Ratio 3.2 2.7 2.7 2.4 2.4Cash as Percent of Market Cap 23.1% 30.7% 28.7% 27.6% 35.8%Enterprise Value Growth (YoY) 28.8% -26.2% -5.9% -8.6% -30.6%

Infrastructure 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 2.8x 1.8x 1.9x 1.9x 0.9xEV/EBITDA 12.1x 11.2x 14.2x 14.3x 13.3xEV/Earnings 28.3x 23.9x 29.1x 23.6x 22.9xGross Profit Margin 65.5% 65.8% 66.7% 66.6% 65.8%EBITDA Margin 12.9% 12.3% 11.2% 10.9% 8.3%Net Income Margin 4.5% 3.5% 3.0% 4.6% 3.4%TTM Revenue Growth (YoY) 17.9% 16.2% 24.4% 19.7% 13.5%TTM EBITDA Growth (YoY) 10.5% 19.5% 23.8% 15.5% 8.8%TTM Earnings Growth (YoY) -17.9% -22.4% -6.0% 22.2% 25.7%Current Ratio 2.8 2.8 2.6 2.9 3.3Cash as Percent of Market Cap 19.1% 23.5% 22.6% 22.3% 26.6%Enterprise Value Growth (YoY) 31.1% -14.5% -24.8% -33.3% -10.8%

Services 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 5.0x 3.9x 2.8x 2.2x 2.9xEV/EBITDA 16.2x 16.6x 16.8x 15.5x 13.3xEV/Earnings 66.9x 20.4x 37.6x 36.3x 33.9xGross Profit Margin 69.4% 70.8% 71.7% 71.8% 71.4%EBITDA Margin 2.4% 5.6% 9.9% 11.8% 10.9%Net Income Margin -2.8% -0.6% 1.7% 2.3% 4.3%TTM Revenue Growth (YoY) 35.1% 35.9% 53.8% 54.5% 41.9%TTM EBITDA Growth (YoY) 20.6% 19.6% 29.1% 25.9% 22.9%TTM Earnings Growth (YoY) -16.4% -17.5% -36.0% -59.1% -17.4%Current Ratio 1.1 1.5 1.4 1.1 1.4Cash as Percent of Market Cap 11.6% 12.2% 11.6% 10.6% 10.5%Enterprise Value Growth (YoY) -5.8% -35.5% -37.4% -43.2% -10.0%

Social 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 19.4x 12.3x 13.0x 13.0x 8.8xEV/EBITDA 110.8x 49.3x 32.9x 30.4x 29.5xEV/Earnings 275.1x 366.9x 227.2x 49.5x 98.3xGross Profit Margin 75.0% 75.2% 76.8% 75.4% 74.0%EBITDA Margin 13.4% 13.4% 12.2% 12.9% 12.6%Net Income Margin -13.3% -11.9% 2.3% 2.4% 1.8%TTM Revenue Growth (YoY) 91.1% 102.8% 74.5% 64.2% 66.1%TTM EBITDA Growth (YoY) 0.0% 0.0% -22.5% 16.3% -29.9%TTM Earnings Growth (YoY) -8.1% 29.2% 5.6% -2.8% -10.0%Current Ratio 4.2 2.7 2.7 4.8 7.2Cash as Percent of Market Cap 4.6% 18.1% 14.8% 13.3% 14.9%Enterprise Value Growth (YoY) n/a n/a n/a -4.4% -8.4%

Travel 3Q11 4Q11 1Q12 2Q12 3Q12EV/Revenue 5.0x 5.5x 4.3x 2.9x 2.4xEV/EBITDA 23.4x 16.8x 15.7x 12.2x 13.5xEV/Earnings 34.5x 83.8x 68.0x 21.9x 23.8xGross Profit Margin 79.8% 78.6% 79.9% 79.9% 79.8%EBITDA Margin 16.7% 16.7% 18.3% 18.5% 19.1%Net Income Margin 3.1% 3.2% 3.5% 10.1% 9.8%TTM Revenue Growth (YoY) 25.7% 31.0% 31.5% 27.9% 22.8%TTM EBITDA Growth (YoY) 14.4% 26.8% 22.4% 29.1% 26.2%TTM Earnings Growth (YoY) -12.6% -14.0% -49.0% -57.7% -57.2%Current Ratio 2.1 2.1 2.2 2.3 2.1Cash as Percent of Market Cap 9.4% 14.9% 12.4% 14.3% 16.0%Enterprise Value Growth (YoY) 6.2% -20.6% -25.6% -35.6% -32.8%



APPENDIX D: 3Q12 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS

Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDATTM Rev Growth

IBM (NYSE:IBM) Kenexa Corp. (NYSE:KNXA) $1,396,790,000 $1,307,100,000 4.1x 49.0x 32.1%Verint Systems Inc. (NasdaqGS:VRNT) Comverse Technology Inc. (NasdaqGS:CMVT) $1,539,990,000 $1,124,830,000 0.7x 7.4x 1.4%Thoma Bravo, LLC Deltek, Inc (NasdaqGS:PROJ) $1,070,590,000 $1,030,500,000 3.0x 18.1x 6.9%Synopsys Inc. (NasdaqGS:SNPS) Springsoft Inc. (TSEC:2473) $392,220,000 $284,380,000 3.6x 10.2x 6.9%Thoma Bravo, LLC Mediw are Information Systems, Inc. (NasdaqCM:MEDW) $196,270,000 $156,120,000 2.4x 11.5x 16.3%Actian Corporation Pervasive Softw are Inc. (NasdaqGM:PVSW) $153,100,000 $110,380,000 2.3x 30.6x 2.0%Canon Inc. (TSE:7751) Image Recognition Integrated Systems Group S.A. (ENXTBR:IRIS) $88,370,000 $106,600,000 0.8x 12.2x -24.6%Vector Capital 20-20 Technologies Inc. (TSX:TWT) $76,180,000 $69,710,000 1.0x 9.2x 7.9%



APPENDIX E: 3Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS

Buyer SellerPurchase

Price (mm)Enterprise Value (mm)

TTM Rev (mm) EV/Rev

Access UK Ltd. Access Delta $8.4 $8.4 - -Prelytis S.A. $5.0 $5.0 - -

Advanced Solutions International, Inc. GoLightly, Inc. - - - -Income Manager, Inc. - - - -

Apigee Corp. InstaOps Inc. - - - -WAC Application Services Ltd, Technology Assets - - - -

Autodesk, Inc. (NasdaqGS:ADSK) Inforbix, LLC - - - -Socialcam Inc. $60.0 $60.0 - -

Cisco Systems, Inc. (NasdaqGS:CSCO) Thinksmart Technologies Limited - - - -Virtuata, Inc. - - - -

Clearlake Capital Group, LLC Mformation Softw are Technologies Inc. - - - -NetMotion Wireless, Inc. - - - -

Constellation Softw are Inc. (TSX:CSU) CORESense, Inc. - - - -Ibcos Computers Ltd. - - - -SpecTec Group Holdings Limited - - - -

Crow dSavings.com, LLC BargainBee.com, Inc. - - - -Deal Garden - - - -Faveroo LLC - - - -

ekaabo GmbH Mister Wong GmbH - - - -YiGG GmbH - - - -

Environmental Systems Research Institute, Inc. GeoIQ, Inc. - - - -Maptel Pty.Ltd - - - -

Facebook, Inc. (NasdaqGS:FB) Acrylic Softw are - - - -Spool - - - -Threadsy, Inc. - - - -

Folhamatic Tecnologia em Sistemas Ltda Cenize Informática Ltda $6.3 $6.3 - -Empresa Brasileira de Sistemas Ltda. $17.2 $17.2 - -

Gannett Digital Marketing Services BLiNQ Media, LLC $40.0 $40.0 - -Mobestream Media Inc. - - - -

GFI Informatique S.A. (ENXTPA:GFI) Inservio, Activities of Project Management Assistance - - - -JVS-Adix S.A.S. and Géosphère SAS - - - -

Google Inc. (NasdaqGS:GOOG) John Wiley & Sons Inc., Travel Assets - - - -Nik Softw are, Inc. - - - -Sparrow SAS - - - -VirusTotal - - - -Wildfire Interactive, Inc. - - - -

IAC Search & Media, Inc. About.com, Inc. $300.0 $300.0 $110.0 2.7xnrelate Source, Inc. - - - -



APPENDIX E: 3Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONT…)

Buyer SellerPurchase

Price (mm)Enterprise Value (mm)

TTM Rev (mm) EV/Rev

IHS Inc. (NYSE:IHS) Citation Technologies Inc., CyberRegs Business $11.0 $11.0 - -Invention Machine Corporation $40.0 $40.0 - -

IBM (NYSE:IBM) Butterf ly Softw are Ltd. - - - -Kenexa Corp. (NYSE:KNXA) $1,396.8 $1,307.1 $318.0 4.1x

Merkle, Inc. 5th Finger Pty Ltd. - - - -Brilig LLC - - - -

Noble Systems Corporation ALI Solutions, Inc. - - - -Stratasoft, Inc. - - - -

Oracle Corporation (NasdaqGS:ORCL) Involver Inc. - - - -SelectMinds, Inc. - - - -Skire, Inc. - - - -

RedPrairie Corporation Planora Inc. - - - -Vortex Connect Inc. - - - -

RIB Softw are AG (DB:RSTA) CADX Pty Ltd. - - - -Management Computer Controls, Inc. - - - -

Saban Brands LLC The Playforge, LLC - - - -Zui.com, Inc. - - - -

SciQuest, Inc. (NasdaqGS:SQI) Spend Radar LLC $10.0 $17.6 - -Upside Softw are, Inc. $28.0 $28.0 - -

Solera Holdings Inc. (NYSE:SLH) Apu Solutions, Inc. - - - -License Monitor, Inc. - - - -Title Technologies Inc. - - - -

Synopsys Inc. (NasdaqGS:SNPS) Ciranova, Inc. - - - -Springsoft Inc. (TSEC:2473) $392.2 $284.4 $80.0 3.6x

Thoma Bravo, LLC Deltek, Inc $1,070.6 $1,030.5 $341.0 3.0xMediw are Information Systems, Inc. (NasdaqCM:MEDW) $196.3 $156.1 $65.0 2.4x

Thomson Reuters Corporation (TSX:TRI) MarkMonitor, Inc. - - - -Novaprolink Tecnologia Ltda. - - - -

Trimble Navigation Limited (NasdaqGS:TRMB) Logicw ay BV - - - -TMW Systems, Inc. $335.0 $335.0 $96.0 3.5x

UNICOM Systems, Inc. DETEC Softw are GmbH - - - -Versant Corp. (NasdaqCM:VSNT) $31.6 $10.0 $15.0 0.7x

VMw are, Inc. (NYSE:VMW) Nicira Netw orks, Inc. $1,260.0 $1,260.0 - -Pattern Insight Inc., Log Insight Platform - - - -

Wolters Kluw er NV (ENXTAM:WKL) E.D.S Informática, S.A. - - - -Financial Architects nv - - - -S&C Legal Know ledge Management B.V. - - - -

Xerox Corp. (NYSE:XRX) Lateral Data, LP $30.0 $30.0 - -Wireless Data Services, Ltd. - - - -



APPENDIX F: 3Q12 MERGERS AND ACQUISITIONS, SELECT INDUSTRY MEGA-DEALS

Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDATTM Rev Growth

Roper Industries Inc. (NYSE:ROP) Sunquest Information Systems, Inc. $1,390,000,000 $1,390,000,000 - - -IBM (NYSE:IBM) Kenexa Corp. (NYSE:KNXA) $1,396,790,000 $1,307,100,000 4.1x 49.0x 16.4%VMw are, Inc. (NYSE:VMW) Nicira Netw orks, Inc. $1,260,000,000 $1,260,000,000 - - -Verint Systems Inc. (NasdaqGS:VRNT) Comverse Technology Inc. (NasdaqGS:CMVT) $1,539,990,000 $1,124,830,000 0.7x 7.4x 1.4%Thoma Bravo, LLC Deltek, Inc (NasdaqGS:PROJ) $1,070,590,000 $1,030,500,000 3.0x 18.3x 6.9%



APPENDIX G:3Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS

Date Buyer SellerEnterprise

ValueTTM

Revenue EV/Rev09/30/2012 Healthcare Holdings Group, Inc. Access My Records, Inc. - - -09/28/2012 RIB Softw are AG (DB:RSTA) CADX Pty Ltd. - - -09/27/2012 SciQuest, Inc. (NasdaqGS:SQI) Spend Radar LLC $17,600,000 - -09/26/2012 Cisco Systems, Inc. (NasdaqGS:CSCO) Thinksmart Technologies Limited - - -09/25/2012 Netcall plc (AIM:NET) Serengeti Systems Ltd $4,710,000 $2,600,000 1.8x09/19/2012 MD On-Line, Inc. Intivia, Inc. - - -09/19/2012 TecCom GmbH AuDaCon AG - - -09/18/2012 Spigit, Inc. Crow dcast, Inc. - - -09/18/2012 Praemium Limited (ASX:PPS) WealthCraft Systems Limited $789,000 - -09/18/2012 2DIALOG, Ltd. Mercury Communications Group, LLC - - -09/17/2012 Revspring BestBill, Inc. - - -09/17/2012 StoneRiver RegEd, Inc. BMRW & Associates, Inc. - - -09/17/2012 Oracle Corporation (NasdaqGS:ORCL) SelectMinds, Inc. - - -09/13/2012 athenahealth, Inc. (NasdaqGS:ATHN) Healthcare Data Services LLC - - -09/12/2012 Specialist Softw are Services Ltd. e-Warehouse Ltd., Certain Assets - - -09/11/2012 Vendini, Inc. Dataflow Enterprises, Inc. - - -09/11/2012 CareerBuilder, Inc. Economic Modeling Specialists Inc. - - -09/10/2012 Adaptive Planning, Inc. myDIALS, Inc. - - -09/10/2012 SkillSoft Ireland Limited ThirdForce Limited - - -09/10/2012 Citrix Online, Inc. Beetil Service Management Ltd. - - -09/07/2012 NCR Corp. (NYSE:NCR) Transoft International, Inc. - - -09/07/2012 Google Inc. (NasdaqGS:GOOG) VirusTotal - - -09/06/2012 Performance Marketing Brands, Inc. OneReceipt Inc. - - -09/06/2012 Mastercard Incorporated (NYSE:MA) Truaxis, Inc. - - -09/06/2012 Mediapost SA Cabestan SAS - - -09/05/2012 DataLogix, Inc. Connection Engine, Inc. - - -09/05/2012 Emailvision Holdings Ltd. PredictiveIntent Ltd. - - -09/04/2012 Access UK Ltd. Prelytis S.A. $5,030,000 - -09/04/2012 Novarica Facilitas, Inc. - - -09/04/2012 Zenergy Pow er PLC (AIM:SNTY) SYNETY Ltd. $239,000 - -08/31/2012 iCIMS, Inc. Jobmagic, Inc. - - -08/31/2012 Walter Investment Management Corp. (AMEX:WAC) Reverse Mortgage Solutions, Inc. $120,000,000 - -08/30/2012 Chicago Grow th Partners Marathon Data Systems, LLC - - -08/28/2012 Autodesk, Inc. (NasdaqGS:ADSK) Inforbix, LLC - - -08/28/2012 AppFog, Inc. Nodester, Inc. - - -08/27/2012 GTCR, LLC; Cannondale Investments OneSource Information Services, Inc. - - -08/25/2012 International Business Machines Corporation (NYSE:IBM) Kenexa Corp. (NYSE:KNXA) $1,307,000,000 $318,000,000 4.1x08/24/2012 Forgetmenot Softw are Ltd. ForgetMeNot Africa (BVI) Limited $490,000 - -08/23/2012 Armanino McKenna LLP, Investment Arm AccessTek Inc. - - -08/22/2012 Confirmit ASA CustomerSat, Inc. - - -08/22/2012 Rackspace Hosting, Inc. (NYSE:RAX) Mailgun, Inc. - - -08/22/2012 Liaison Technologies, LLC Hubspan, Inc. - - -08/21/2012 Trade ME Group Ltd. (NZSE:TME) Tradevine Limited $1,620,000 - -08/21/2012 Wave Accounting, Inc. Vuru Inc. - - -08/21/2012 MarketMaker4 Category One, LLC, eSourcing - - -08/18/2012 Compagnie Generale DES Etablissements (ENXTPA:ML) Async Technologies Ltd. - - -08/17/2012 ARI Netw ork Services Inc. (OTCBB:ARIS) Ready2Ride Inc. $2,770,000 - -



APPENDIX G: 3Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS (CONT…)

Date Buyer SellerEnterprise

ValueTTM

Revenue EV / Rev08/16/12 ruNet Holdings Limited RichRelevance, Inc. - - -08/15/12 Hanlon Financial Group LLC Interactive Advisory Softw are, Inc. - - -08/14/12 PostNL N.V. (ENXTAM:PNL) Marvia B.V. - - -08/14/12 Acquia, Inc. Mollom BVBA - - -08/13/12 Friedman Corporation CORESense, Inc. - - -08/13/12 RedPrairie Corporation Vortex Connect Inc. - - -08/13/12 Colt Technology Services Group Limited ThinkGrid Limited - - -08/10/12 - Quinsam Capital Corp., Online - - -08/09/12 New forma, Inc. Attolist, LLC - - -08/09/12 RideCharge, Inc. Aleph, Inc. - - -08/08/12 Parta Dialogue Inc. (TSXV:PAD) MThirty Communications Inc. $6,760,000 - -08/07/12 Shareholder Value Beteiligungen AG (XTRA:SVE) Update Softw are AG (XTRA:UP2) - - -08/07/12 Higher One Holdings, Inc. (NYSE:ONE) Campus Labs, LLC $38,400,000 $10,000,000 3.8x08/07/12 ALTA Equity Partners LLC Truist, Inc. - - -08/06/12 aurionPro Solutions Limited (BSE:532668) SEEinfobiz Pvt. Ltd. - - -08/06/12 Jobscience, Inc. AtomKeep - - -08/06/12 BroadSoft, Inc. (NasdaqGS:BSFT) Adaption Technologies Ventures Ltd. $22,000,000 - -08/06/12 SPS Commerce, Inc. (NasdaqGM:SPSC) Edif ice Information Management $37,350,000 $11,200,000 3.3x08/06/12 FrontStream Payments, Inc. FirstGiving, Inc. - - -08/01/12 ResMed Inc. (NYSE:RMD) Umbian Inc. - - -08/01/12 Altametrics Xformity, LLC Xformity, Inc $1,300,000 - -08/01/12 HireVue, Inc. CodeEval, Inc. - - -07/31/12 InMobi Metaflow Solutions Limited - - -07/31/12 Google Inc. (NasdaqGS:GOOG) Wildf ire Interactive, Inc. - - -07/27/12 Weather Investments II S.à.r.l. intY Limited - - -07/26/12 Brightcove, Inc. (NasdaqGM:BCOV) Zencoder, Inc. $30,000,000 - -07/24/12 Assessment & Qualif ications Alliance Alf iesoft Limited - - -07/24/12 Business & Decision SA (ENXTPA:BND) Hub'Sales S.A.S. - - -07/24/12 Gehry Technologies, Inc. Perfect Blue B.V. - - -07/23/12 3D Systems Corp. (NYSE:DDD) Viztu Technologies, Inc. $1,000,000 - -07/20/12 Xero Limited. (NZSE:XRO) Spotlight Workpapers Limited $640,000 - -07/19/12 ABB Ltd. (SWX:ABBN) Amarcon B.V. - - -07/18/12 The Go Daddy Group, Inc. Outright, Inc - - -07/17/12 Seaport Capital FTJ FundChoice, LLC - - -07/15/12 DealerTrack, Inc. 1st Auto Transport Directory, Inc. $74,000,000 - -07/12/12 CCH Australia Limited Acclipse Limited - - -07/11/12 Solera Holdings Inc. (NYSE:SLH) Apu Solutions, Inc. - - -07/11/12 Online Bridal Directory Limited Mrs2Be.com - - -07/10/12 Horizontal Softw are SAS LPDR Ingénierie SARL - - -07/09/12 500px Inc. Algo Anyw here $2,000,000 - -07/09/12 BridgePay Netw ork Solutions, Inc. TGate, LLC - - -07/09/12 salesforce.com, inc (NYSE:CRM) GoInstant Inc.* $70,000,000 $5,000,000 15.0x07/07/12 Gripsell Technologies Pvt Ltd onlycart.com - - -07/05/12 Avant Invest B.V. ABC der deutschen Wirtschaft GmbH - - -07/04/12 Sportingpulse (ANZ) Pty Ltd BellvueIT - - -07/02/12 Pearson plc (LSE:PSON) Psychological Softw are Solutions, Inc. - - -07/01/12 Asure Softw are, Inc. (NasdaqCM:ASUR) PeopleCube, Inc. $15,530,000 $9,500,000 1.6x

*Revenue estimate

To keep your finger on the pulse of the software equity markets, subscribe to our Monthly and Quarterly Reports at http://www.softwareequity.com/research_reports.aspx. Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. Since 1992, our firm has represented and guided private companies throughout the United States and Canada, as well as Europe, Asia Pacific, Africa and Israel. We have advised public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges. Software Equity Group also represents several of the world's leading private equity firms. For a confidential consultation without obligation, please contact Kris Beible, Director, Business Development (858 509-2800, [email protected]). CONTACT INFORMATION: Software Equity Group, L.L.C. 12220 El Camino Real, Suite 320 San Diego, CA 92130 www.softwareequity.com p: (858) 509-2800 f: (858) 509-2818

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.

Copyright © 2012 by Software Equity Group, L.L.C., All Rights Reserved

http://www.softwareequity.com/

http://www.softwareequity.com/research_reports.aspx

mailto: [email protected]

http://www.softwareequity.com/

q3 2012 software / saas / internet valuations

Documents