March 14, 2015

Buy Presentation

Blake Klasios

Siddhant Dilawari

Avneet Multani

Jeffery Lee

Adam Steinberg

Jerry Du

Table of Contents

I. Business Overview

II. Management Overview

III. Investment Thesis

IV. Valuation

V. Risks and Catalysts

VI. Conclusion

Business Overview

Business Description

• QAD provides on-premise and cloud-based Enterprise Resource Planning (ERP) software to the manufacturing sector

• QAD delivers solutions both in the cloud and on-premise, providing ongoing support to customers ensuring they have access to the latest features of the QAD software.

• Currently, the cloud-based service comprises 10% of QAD's business.

Business Overview

Revenue Breakdown by Geography

Key Financials

Ticker NASDAQ: QADA

Market Cap 385M

52 Week Range $17.05-23.07

Current Price $21.49

EPS 0.62

Dividend 1.12%

Market Performance

NA, 43%

EMEA, 34%

LA, 6%

AP, 17%

15

17

19

21

23

25

QAD’s Approach to ERP – The Effective Enterprise

• At the core of our solutions is our ERP suite called QAD Enterprise Applications and is also deployed in the cloud as QAD Cloud

ERP

Business Overview

Revenue Breakdown

Business Overview

CloudOn-Premise

13%

9%

29%

49%

Licenses

Subscription

Services

Maintenance

Licenses

• New customers/users

• New divisions

• New models

Services

• New implementations

• Upgrades

Maintenance

• High Retention

Subscriptions

• New customers/users

• New divisions

• New models

Industries Served

• Products and services support business

processes of global manufacturing companies

in our target industries.

• The ERP suite, QAD Enterprise Applications, are

available on-premise, in the cloud as QAD

Cloud ERP or under a blended deployment

model combining both of these deployment

offerings.

• QAD enables seamless integration between

QAD Enterprise Applications and common browser

applications and spreadsheets.

Business OverviewServices Provided

21%

16%

32%

31%

Consumer &Food/Beverage

Automotive

HighTech & Industrial

Life Sciences

QAD Solutions

• Implementation of QAD Solutions

• Migrations

• Upgrades

• Conversions

• Integration

• Systems Management

• Training and Education

• Application Management

• Business Process Improvement

• Pre-Defined Consulting Engagements

ERP (Enterprise Resource Planning)

• A process by which a company manages and integrates

the important parts of its business. An ERP system

integrates areas such as planning, purchasing, inventory,

sales, marketing, finance, human resources, etc.

• Think of ERP as the glue that binds the different computer

systems for a large organization.

• With ERP, each department still has their own system, but

they can communicate and share information easier with the

rest of the company.

Business Overview

Technology Adoption Cycle

The Cloud

• QAD delivers our core ERP offering and many other solutions

in the cloud, charging a subscription fee for access to these

software-as-a-service (“SaaS”) solutions. We refer to these

solutions collectively as components of the QAD Enterprise

Cloud. Within the QAD Enterprise Cloud we have QAD Cloud

Apps, QAD Cloud Services and the QAD Cloud Portal.

Cloud Benefits

• Full Strength & Global ERP

• Flexibility

• Accessible Anywhere

• Reduced Risk (Cost predictability)

Management & Shareholder Analysis

Most of the shares (11.6M out of 16.8M shares –

73%) are held by the CEO and President (Insiders)

• CEO recently sold 1M shares in January 2015 at a

price of $20 each, possibly to dilute his ownership

in the company and gain more external investor

interest

• Mixed buy/sell activity from the institution side

• High level of control held by the key officers

indicates a strong dedication towards the growth of

the company

77%

Class A

Class A80%

Class B20%

Class A and B Share Split

Institutions – 23%

83%

Class B

Institutions – 17%

Tikvah Management is the

largest institutional holder,

with 3.7% of Class A shares

• Invest in small to large

cap stocks, mainly

financials and technology.

Management & Shareholder Analysis

Management tenure has been very long

compared to the industry

• CEO and President both served for 34+

years

• All key officers have 10+ years of

service at QAD

• Indicates a high level of attachment to

the company and dedication to drive

good results in the future

QAD Vision: The Effective Enterprise

Consists of businesses (clients)

operating at peak efficiency through

QAD’s system software solutions

Management & Shareholder Analysis

I. Transition from on-premise software to cloud-based

II. Improving margins from conversion

III. Undervalued compared peers (Valuation)

Investment Thesis

Transition to Cloud-based Software

Cloud-based software will drive revenue growth

• In past three years, QAD has grown its cloud business at 40%+ due to strong investment and

focus

• Forecasted to continue growing subscription-based cloud business for the nest three years at

40-50%

• Companies in the automotive, consumer, food and beverage, technology, and life sciences

industries are interested in paying a subscription fee instead of maintaining IT infrastructure

Conversion to cloud Revenue Breakdown

On premise

customers

Convert to cloud

Realize 3-4x the annual

revenue

Grow cloud

revenues

10%

90%

Cloud

On Premise

Improving Margins from Conversion

Strong margins from cloud

• Currently operates at a 40% gross margin; however, this is projected to improve to 60-70% in

the next five years

• Can cut R&D expense and realize leverage across its hardware and storage, software, and IT

administrative personnel costs

• As revenue increases, gross margins will trend toward the 65% level

I. Discounted Cash Flow

II. Comparable Companies

Valuation

Valuation: Comparable Companies

Ticker Name Mkt Cap (USD $M) P/E EV/EBITDA T12M EV/Sales T12M

GSB US Equity GLOBALSCAPE INC 66.5 21.1x 8.9x 1.6x

RKN CN Equity REDKNEE SOLUTIONS INC 329.7 N/A 17.4x 1.1x

IL US Equity INTRALINKS HOLDINGS INC 585.4 N/A 18.8x 2.x

VDSI US Equity VASCO DATA SECURITY INTL 868.3 26.8x 22.2x 4.9x

PRGS US Equity PROGRESS SOFTWARE CORP 1,352.8 24.4x 10.5x 3.x

PEGA US Equity PEGASYSTEMS INC 1,513.5 46.6x 17.9x 2.3x

MSTR US Equity MICROSTRATEGY INC-CL A 1,845.3 123.8x 49.1x 2.6x

CVLT US Equity COMMVAULT SYSTEMS INC 2,033.4 56.6x 29.2x 3.2x

SWI US Equity SOLARWINDS INC 3,652.4 41.9x 25.4x 8.2x

MEDIAN 41.9x 18.8x 2.6x

AVG 48.7x 22.2x 3.2x

MIN 21.1x 8.9x 1.1x

25TH 25.6x 17.4x 2.0x

75TH 51.6x 25.4x 3.2x

MAX 123.8x 49.1x 8.2x

QADA US Equity QAD INC-A 385.5 37.4x 12.1x 0.8x

Valuation: DCF

$26.16

Implied Share Price:

Valuation: DCF

Risks & Catalysts

Risks

QAD has a unique dual share structure,

which makes it difficult for shareholders to

replace the management group

• This could depress future value if the

management team is inefficient and

performs poorly

QAD faces substantial currency risk, as 55%

of its revenues are generated overseas

• The business does not hedge against

currency fluctuations

The business’s cloud business has margins

of 40%, below its overall gross margins

• There must be a focus on improving

margins in the cloud business

Risks & Catalysts

Catalysts

In the past, QAD has had limited analyst

coverage

• Limited coverage has depressed share

value

QAD’s cloud business is poised to grow

substantially in the future

• Analysts are projecting annual growth rates

of over 40% in the industry of the new few

years

• This will provide additional subscription-

based revenue

QAD is transitioning its products to cloud-

based software

• This will grow the business’s top-line

revenue and bolster margins

There are a number of discernible catalysts that will positively affect QAD’s share value

in the near future

Thank You.