2013 Pacific Crest Private SaaS Company Survey Results

Pacific Crest 2013 Private SaaS Company Survey: Summary of Results

This presentation provides a summary and analysis of the results of a survey which Pacific Crests investment banking software team conducted in June-July 2013
Represents the fourth such survey Pacific Crest has done The survey included executives from 155 private SaaS companies, twice as many as participated in 2012 and 2011 Much of the increase in participants came from smaller / younger companies, which we welcome but which we also needed to be cognizant of when analyzing results

Broad diversity of SaaS companies participated:

$0-$60MM+ in revenues ($5MM median) 25-250+ employees ( 50 median) 10-2,000+ customers ( 190 median) $100s to $MMs median annual contract value ( $20K median) Participants from around the world, although primarily U.S.

Our goal is to provide useful operational and financial benchmarking data to managers and investors in SaaS companies

Survey Participant Revenue Distribution

Median $5MM
While we had almost twice as many participants in 2013, most of the increase came from companies with less than $2MM in revenues.

60 55 50 45 40

58

Number of Companies

35 30 25 20 15 10 5 0 Less than $2MM $2MM$5MM $5MM$10MM $10MM$15MM $15MM$25MM $25MM$40MM $40MM$60MM

10 18 20 15 11 11 5 4

Comparison with Previous Surveys Companies with <$2MM in revenues accounted for 38% of the group, vs. 15% and 10% in each of the 2012 and 2011 survey groups, respectively

$60MM- Greater than $100MM $100MM

2012 Revenue

152 respondents

Survey Participant Geography (HQ)

For the first time, we asked participants to provide information on where their companies are headquartered.

US Regions 119 16 2
North California Silicon Valley Southern California Boston / New England Pacific Northwest 33 8 18 5 11 3 9 12 7 5 8 119

1 2 4

New York Metropolitan Area Washington DC Southeast U.S. Midwest / Chicago Colorado / Utah Texas Other U.S. TOTAL:

Other Regions
Asia Europe Middle East / Africa Latin America Australia / New Zealand 1 16 2 2 4

144 respondents

Growth Rates

How Fast Did / Will You Grow GAAP Revenues?

Median 2012 GAAP Rev Growth 41%
Historical revenue growth rates for the group are centered just over 40%, while the median projected growth is 47% for 2013.

Median 2013E GAAP Rev Growth 47%

45 41 40 35 35 30 27 24 21 20 16 15 11 10 5 0 < 0% 0%-15% 15%-30% 30%-45% 45%-60% 60%-100% > 100% 19 16 17 26

Number of Companies
Comparison with Previous Surveys Very similar historical growth rates as 2012 survey, but more optimistic about forecast.

30 25

5 0

147 and 141 respondents, respectively

2012 Revenue Growth

2013E Revenue Growth

How Fast Did / Will You Grow GAAP Revenues?

(Excluding Companies <$2MM in Revenue)
We suspected that the high concentration of participants with >100% growth comes from the large number of small companies. Excluding companies with <$2MM in revenues, we found growth rates showing a more traditional bell curve centered in the mid 30%s.

45 40 35

Median 2012 GAAP Rev Growth 32% Median 2013E GAAP Rev Growth 36%

Number of Companies

30 26 25 20 15 10 5 0 14 12 12 7 2 0 < 0% 0%-15% 15%-30% 30%-45% 45%-60% 60%-100% > 100% 13 9 10 24 21

12 10

2012 Revenue Growth

82 and 90 respondents, respectively

2013E Revenue Growth

Median Growth Rate as a Function of Size of Company

Looked at more directly, it's clear that the smallest companies experienced the highest growth rates.

100%
89%

75%

2012 Revenue Growth Rate

50%
38% 34% 34% 21% 23% 38% 41%

Median 41%

25%

0% Less than $2MM $2MM-$5MM $5MM$10MM $10MM$15MM $15MM$25MM $25MM$40MM $40MM$60MM Greater than $60MM

2012 GAAP Revenue

Respondents: <$2MM: 54, $2MM-$5MM: 18, $5MM-$10MM: 20, $10MM-$15MM: 10, $15MM-25MM: 15, $25MM-$40MM: 11, $40MM-$60MM: 11, >$60MM: 8 8

Median Growth Rate as a Function of Contract Size

(Excluding Companies <$2MM in Revenue)
40%
Looking at the impact of median contract size on growth, we excluded the smallest companies (<$2MM in revenues), since most of them sell small deals. The resulting analysis, reveals marginal correlation between contract size and growth, with the fastest growers having median contract sizes between $1K and $25K.

34% 30%

34%

Median 32%
2012 Growth Rate
27% 25% 25% 27%

20%

10%

0% <$1K $1K-$5K $5K-$25K $25K-$100K $100K-$250K >$250K Median Contract Size (ACV)(1)
(1): Annual Contract Value (ACV) is defined as annualized monthly run rate in recurring SaaS revenues, excluding professional services, perpetual licenses and related maintenance Respondents: <$1K: 5, $1K-$5K: 9, $5K-$25K: 15, $25K-$100K: 16, $100K-$250K: 11, >$250K: 10

Median Growth Rate as a Function of Sales Strategy

Across the entire group, companies which mainly use internet distribution are realizing the highest growth rates.

100% 90% 80%

90% 80%

2012 Growth Rate

70% 60% 50% 40% 30% 20% 10% 0% Field Sales Inside Sales Internet Sales Channel Sales Mixed Primary Mode of Distribution(1) 26% 44% 50%
Median 41%

(1): Primary Mode of Distribution At least 50% of new ACV bookings from new customers in 2013E come from designated distribution channel Respondents: Field 47, Inside 39, Internet 21, Channel 4, Mixed 15

10

Median Growth Rate as a Function of Sales Strategy

(Excluding Companies <$2MM in Revenue)

2012 Growth Rate

However, eliminating the smallest companies again, we found growth rates for companies using mainly internet distribution actually lagged. Meanwhile, those using primarily inside sales experienced growth rates 10 points higher than field sales.

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Field Sales Inside Sales Internet Sales Channel Sales Primary Mode of Distribution(1) Mixed 27% 23% 8% 37% 40%
Median 31%

(1): Primary Mode of Distribution At least 50% of new ACV bookings from new customers in 2013E come from designated distribution channel Respondents: Field 42, Inside 25, Internet 5, Channel 2, Mixed 9

11

Median Growth Rate as a Function of Target Customer(1)

Growth rates among companies selling to very small businesses (VSB) are higher than those selling to SMB, which in turn are higher than those selling to Enterprise. The trend holds even after removing the smallest companies.

Median Revenue Growth 41% Median Revenue Growth (excl. <$2MM Revenue) 32%

100% 80% 60% 40% 20% 0% VSB All Companies SMB Enterprise Mixed Excluding Companies <$2M in Revenue

2012 Growth Rate

70% 60%

40% 28%

38% 28% 34% 28%

(1): Target Customer At least 50% of revenues come from designated customer base VSB customers defined as <20 employees, SMB as ~100-1,000 employees, and enterprise as >1,000 144 and 90 respondents, respectively 12

Go-to-Market

13

Primary Mode of Distribution

Field sales remains the most popular way to sell, with 37% of participants employing it as their primary mode of distribution (51% if we exclude companies with <$2MM in revenues). Inside sales is not far behind, however, at 31%.

All Companies
Channel Sales 2%

Excluding Companies <$2MM in Revenue

Channel Sales 2% Internet Sales 7% Mixed 10%

Mixed 12% Field Sales 37%

Internet Sales 18%

Field Sales 51%

Inside Sales 30%

Inside Sales 31%

Comparison with Previous Surveys We saw a strong increase in the use of inside sales. For the 2012 survey, inside sales was the primary mode for just 20% of participants.

Primary Mode of Distribution At least 50% of new ACV bookings from new customers in 2013E come from designated distribution channel 137 and 87 respondents, respectively 14

Primary Mode of Distribution as a Function of Median Initial Contract Size

As expected, companies with larger median contract sizes tend to rely more heavily on field sales.

Channel

Field

Inside

Internet

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 14% 4% < $5k $5K-$25K 38% 29% 54% 48% 13%

5% 25%

92%

100%

70%

Comparison with Previous Surveys We found much heavier use of inside sales among companies in the mid-tier in this survey, 54% of respondents in the $5-25k group used inside sales vs. only 33% in 2012.

0%

8% $25K-$100K $100K-$250K >$250K

Median Contract Size (ACV)

Note: Initial ACV of a contract Respondents: <$5K: 29, $5K-$25K: 24, $25K-$100K: 20, $100K-$250K: 12, >$250K: 8 15

CAC(1): How Much Do You Spend for $1 of New ACV from a New Customer?
(Excluding Companies <$2MM in Revenue)
Respondents (excluding the smallest companies) spent a median of $0.92 for each dollar of new ACV from a new customer. The result drops to $0.85 if we include companies with <$2MM in revenues.

Over $3.00 $2.00-$3.00 $1.50-$2.00 $1.25-$1.50 $1.00-$1.25 $0.75-$1.00 $0.50-$0.75 Less than $0.50 0

2 6 7 4 13 14 11 16 5 10 15 20

Median $0.92

Comparison with Previous Surveys The result is consistent with the $0.90 and $0.93 we derived in the 2012 and 2011 surveys, respectively.

(1): Includes the fully-loaded amount spent on sales & marketing for the win, over multiple periods, if necessary. 73 respondents 16

CAC on New Customers vs. Upsells vs. Renewals

(Excluding Companies <$2MM in Revenues)
The median CAC for upsells is $0.17, or 19% of the CAC to acquire new customer dollars. The CAC for renewals is $0.14, or 15% of the CAC to acquire new customer dollars.

$1.40 $1.20 $1.00 $0.80 $0.60

$1.30

75th percentile

$0.92

Median

25th percentile
$0.55 $0.37 $0.26 $0.17 $0.09 New ACV from New Customer Upsell to Existing Customer

$0.40 $0.20 $0.00

$0.14 $0.07 Renewals

Comparison with Previous Surveys Similar result for upsells (was 20% in 2012); however, the renewal CAC is markedly higher this year (was just 10% in 2012).

Respondents: New ACV from New Customer 73, Upsell to Existing Customer 76, Renewals 74 17

Median CAC on New Customers vs. Upsells vs. Renewals

(Companies <$2MM in Revenues Only)
The median CAC for smaller companies is $0.69, 25% lower than for the median for larger companies. The CAC for upsells and renewals are 14% and 12% respectively, both lower than for larger companies.

$1.60 $1.40 $1.20 $1.00 $0.80

$1.52

75th percentile

$0.69 $0.60 $0.40 $0.55 $0.20 $0.00 New ACV from New Customer

Median 25th percentile

$0.16 $0.10 $0.09 Upsell to Existing Customer $0.15 $0.08 $0.07 Renewals

Respondents: New ACV from New Customer 43, Upsell to Existing Customer 39, Renewals 41 18

CAC Spend by Primary Mode of Distribution

The data suggest that field sales has the most expensive CAC at $0.96, with inside sales 10% lower at $0.86 and online distribution 43% lower at $0.55.

Less than $0.50 $1.25-$1.50

$0.50-$0.75 $1.50-$2.00

$0.75-$1.00 $2.00-$3.00

$1.00-$1.25 Over $3.00

100% 90% 80% 70% 60% 50% 40%

Median $0.96

Median $0.86

Median $0.55

Comparison with Previous Surveys These trends were consistent with what we saw in our 2011 survey results, but not with our 2012 results, which showed less differentiation between field and inside, and surprisingly more cost for online distribution.

30% 20% 10% 0% Field Sales Inside Sales Internet Sales

Respondents: Field sales 37, Inside sales 41, Internet sales - 21 19

What Percentage of New ACV is from Upsells to Existing Customers?

The median respondent gets 13% of new ACV sales from upsells; the largest companies rely more heavily on this "land and expand" phenomenon.

35% 30%

32%

% New ACV from Upsells

25% 20% 15% 10% 5% 0% Less than $2MM $2MM$5MM $5MM$10MM 5% 15% 16%

25% 22%

24%

15%

Median 13%

$10MM$15MM

$15MM$25MM

$25MM$40MM

$40MM$60MM

Comparison with Previous Surveys Consistent with our 2012 survey results.

Greater than $60MM

2012 GAAP Revenue

Respondents: <$2MM: 34, $2MM-$5MM: 12, $5MM-$10MM: 15, $10MM-$15MM: 5, $15MM-25MM: 12, $25MM-$40M: 8, $40MM-$60MM: 9, >$60MM: 6 20

Are the Fastest Growing Companies Relying More on Upsells?

When we divide our respondent pool by growth rate, we find that the top growers in each size class generally upsell more than the slower growers.

What Percentage on New ACV are from Upsells to Existing Customers?

40% 35% 35% 30% 25% 25% 18% 15% 13% 10% 5% 6% 10% 15% 15% 15% 35% 35%

% New ACV from Upsells

30% 25% 20% 15% 10% 5% 0% Less than $2MM

Median 13%

$2MM$5MM

$5MM$10MM

$10MM$15MM

$15MM$25MM

$25MM$40MM

$40MM$60MM

Greater than $60MM

2012 GAAP Revenue

= Bottom 50% Growers = Top 50% Growers

Respondents: <$2MM: 33, $2MM-$5MM: 12, $5MM-$10MM: 15, $10MM-$15MM: 5, $15MM-25MM: 12, $25MM-$40M: 8, $40MM-$60MM: 9, >$60MM: 6 21

Professional Services Impact on Go-to-Market

(Excluding Companies <$2MM in Revenue)
Professional Services
Professional services play a minor role for most of the 150-200% group, with the median company 100-150% booking P.S. revenues equivalent to 75-100% 11% of first year contract value. P.S. margins are 50-75% in the high 20s%. (Note that we excluded 25-50% companies with <$2MM in revenues, as 10-25% most do not have significant P.S. revenues). 0-10%
0
Comparison with Previous Surveys Very similar results to last year.

Professional Services Margin

> 50% 11 25 8 6 6 1 1 5 2 0 5 10 15 20 25 30

(as % of
2

1st

year ACV)

25-50%

3 2 4 14

15-25% 5-15% (5%)-5% (5%)-(15%) (15%)(25%)

Median 29%

18

Median 11%
41

(25%)(50%) < (50%)

10

20

30

40

50

84 and 65 respondents, respectively 22

Professional Services (% of 1st Year ACV) as a Function of Target Customer

(Excluding Companies <$2MM in Revenue)
As expected, companies which are focused mainly on enterprise sales have higher levels of P.S. However, at just 21% of first year ACV, we were surprised the number wasn't higher.

25% 21% 20% 15%

% of 1st Year ACV

15%

Median 12%
8% 6%

10%

5%

0% VSB SMB Enterprise Mixed Target Customer

Respondents: VSB 9, SMB 17, Enterprise 35, Mixed 22 23

Subscription Gross Margins

What is your gross profit margin on just subscription/SaaS revenues?
Median subscription gross margins are 79% for the group. Note that, while not depicted here, the result does not change materially when removing the small companies from the group.

> 90% 85-90% 80-85% 75-80% 70-75% 65-70% 60-65% 55-60% 50-55% < 50% 0 1 7 10 3 6 9

12 15 24 18 14
Median 79%

20

30
24

109 respondents

Freemium / Try Before You Buy

Approximately 25% of companies make use of freemium in some way, although very little new revenues are derived here. Try Before You Buy is much more commonly used: two-thirds of the companies use it and many of those derive significant revenues from it.

Freemium Expected New ACV in 2013 from Freemium Leads

> 25% 10-25% 6% 5% 0-10% 14%

Try Before You Buy Expected New ACV in 2013 from Try Before You Buy Leads

> 50% 31%

None 36%

Comparison with Previous Surveys Very consistent results with previous years.

None 75%

10-50% 19%

0-10% 14%

124 and 137 respondents, respectively 25

Sales Commissions
Median Commission Paid 9%
Median sales commission rate for the group is 9%.

30 25
Number of Respondents

28

22 20 16 15 10 5 5 3 10 8 13 10

Comparison with Previous Surveys Consistent with 2012 results.

0 0-1% 1-3% 3-5% 5-7% 7-9% 9-11% 11-13% 13-15% 15+% Sales Commission (As % of ACV)

115 Respondents 26

Sales Commissions by Sales Strategy

The survey results indicate that there is not a significant difference in sales commissions paid by go-tomarket strategy.

15

Field

Inside

Field Median Commission Paid 9% Inside Median Commission Paid 9%

13

Number of Respondents

10

6 5 2 5 4 3 2

6 5 4 2 2 1 5

6 4

0 0-1% 1-3% 3-5% 5-7% 7-9% 9-11% 11-13% 13-15% 15+% Sales Commission (As % of ACV)
Field 44 respondents; Inside 26 respondents, excludes companies with revenues <$2MM 27

Sales Commissions as a Function of Median Contract Size

We were surprised to see very little relationship between sales commission rates and average contract sizes (except at the very low end).

12% 11% 10% 9% 8% 6% 8%

Median Sales Commission

Median 9%
8%

4%

0%
Comparison with Previous Surveys In 2012, we saw the highest commission rates for the <$1k deal companies, and the lowest rates for the "elephant hunters" . That was not the case here.

< $1K

$1K-$5K

$5K-$25K

$25K-$100K

$100K-$250K

>$250K

Median Contract Size (ACV)

Respondents: <$1K: 6, $1K-$5K: 14, $5K-$25K: 23, $25K-$100K: 21, $100K-$250K: 11, >$250K: 10 28

Commissions for Renewals, Upsells and MultiYear Deals

Not surprisingly, commissions on renewals are typically deeply discounted, with a median rate of 2%. Upsells command a median rate of 6%, although roughly half of the companies pay full commissions on upsells.

Renewals Median Commission Rate

Upsells Median Commission Rate % of Respondents Paying Full (1) Commission

Additional Commission for Extra Years on Initial Contract

2%

6%

% of Respondents Paying: No Additional Commission 24% 12% 17%

% of Respondents Paying 0-1%

35%

55%

Nominal Kicker Full Commission

Comparison with Previous Surveys Very similar results to 2012. The biggest change is in the third column, analyzing commissions on multiyear deals. In the 2013 survey, only 24% of respondents paid no additional commissions on the additional years; in 2012 almost half of the participants paid no additional commissions.

(1) Same rate (or higher) than new sales commissions Respondents: Renewals: 106, Upsells: 105, Extra Years on Initial Contract: 98

29

Cost Structure

30

Cost Structure
(Excluding Companies <$2MM in Revenue)

The median numbers reflect the most operating leverage from improvements in gross margin, R&D and G&A, surprisingly more so than improvements in Sales & Marketing (Note that results from companies <$2MM in revenues have been excluded, and can be viewed in the breakout on the following page).

2013E Median Gross Margin Operating Expense Margins: Sales & Marketing R&D G&A EBITDA FCF YoY Growth Rate 26% 24% 16% 0% 1% 36% 74%

"At Scale"

(1)

Median

79%

24% 18% 12% 18% 18% 28%

Comparison with Previous Surveys Very similar results as in previous years.

(1): At Scale represents respondents expectations when reaching $50 million in revenues or higher 62 respondents 31

Median Cost Structure by Size

All Respondents Total Gross Margin

Professional Services Subscription

Size of Company (ACV) < $2M 83%

31% 78%

(1)

$2M-$5M 77%
36% 82%

$5M-$10M 76%
38% 76%

$10M-$15M 73%
10% 83%

$15M-$25M 78%
34% 79%

$25M-$40M 72%
42% 78%

$40M-$60M 78%
33% 86%

> $60M 72%

38% 78%

77%
45% 76%

Op. Expense Margins: Sales & Marketing R&D G&A 24% 26% 15% 23% 31% 14% 21% 28% 17% 28% 23% 16% 27% 24% 23% 28% 27% 13% 28% 23% 13% 48% 23% 16% 33% 31% 12%

EBITDA Margin

(4%)

(21%)

3%

3%

(10%)

1%

8%

1%

18%

Note that numbers do not add due to the fact that medians were calculated for each metric separately and independently (1): Annual Contract Value (ACV) is defined as total annualized recurring SaaS revenues, excluding professional services, perpetual licenses and related maintenance Respondents: <$2MM: 33, $2MM-$5MM: 16, $5MM-$10MM: 12, $10MM-$15MM: 8, $15MM-25MM: 11, $25MM-$40MM: 5, $40MM-$60MM: 6, >$60MM: 4

32

For Comparison: Historical Results of Selected Public SaaS Companies

Total Revenue Run-Rate ~$25MM ~$50MM Median Values ~$100MM

Gross Margin Sales & Marketing Research & Development G&A EBIT Margin FCF Margin

63% 48% 23% 17% (26%) (7%)

65% 45% 20% 14% (10%) (1%)

65% 45% 17% 13% (3%) 1%

YoY Revenue Growth Rate

(1)

105%

62%

38%

(1): YoY Revenue Growth compares against previous years revenue of the companies at the time Median includes ATHN, BCOV, BV, CNVO, CRM, CSOD, CTCT, DMAN, DWRE, ECOM, EOPN, ET, FLTX, LOGM, MKTG, MKTO, MRIN, N, NOW, PFPT, QLYS, RNOW, RP, SFSF, SPSC, SQI, TLEO, VOCS and WDAY ~$25M median excludes FLTX, QLYS, RP and WDAY ~$50M median excludes RP ~$100M median excludes BCOV, DMAN, DWRE, ECOM, EOPN, MKTO, MRIN, QLYS, SPSC and SQI 33

Sales & Marketing Spend vs. Projected Growth Rate

(Excluding Companies <$2MM in Revenue)
Surprisingly and interestingly, there is virtually no correlation in the survey results between sales & marketing spend (as a % of revenue) and growth rates. While this goes against conventional wisdom, it may simply reflect that CAC in some businesses is more efficient than in others. (Note that the smallest companies skew results due to more inflated growth and were thus removed from this analysis).

50%
Median Sales & Marketing Spend as % of Revenue

45% 40% 35% 31% 30% 25% 20% 15% 10% 5% 0% 0%-15% 15%-30% 30%-45% 45%-60% 60%-100% > 100% 2013E Growth Rate 23% 28% 28% 28% 28%

Median 26%

Comparison with Previous Surveys In the 2012 and 2011 surveys we saw the conventionally expected correlation, with higher S&M spend leading to higher growth rates.

Respondents: 0 -15%: 11, 15-30% : 20, 30-45%: 16, 45-60%: 10, 60-100%: 5, >100%: 5 34

Contracting & Pricing

35

Median Annual Contract Size (ACV) per Customer

The median annual contract size (subscription component only) for the group was $20k per year.

> $1M $250K-$1M $100K$250K $25K-$100K $5K-$25K $1K-$5K < $1K 0

1 10 11 22

Median $20K
26 17 14 5 10 15 20 25 30

Comparison with Previous Surveys As expected, with the increase in smaller-sized participants, this was lower, with the 2012 survey at $24k and the 2011 survey at $37.5k.

101 respondents 36

Median / Typical Contracts for the Group

The median average contract length is 1.5 years; and the average billing terms are quarterly (three months in advance).

Average Contract Length Median 1.5 years

3 years or more 11% Month to month 19%

Average Billing Period Median 3 months

1-2+ Years, 3%

2 to 3 years 15% Less than 1 year 6%

1 Year, 35%

Monthly, 38%

Comparison with Previous Surveys Virtually the same median contract length as in the 2012 survey; however the median billing in the 2012 survey results was much longer at just under a year.

1 to 2 years 49%

Qtrly to <1 Year, 10%

Qtrly, 15%

109 respondents 37

Contract Length as a Function of Contract Size

The phenomenon of longer contract terms for larger contracts is pretty clear.

Month to month 100% 90% Average Contract Length 80% 70% 60% 50% 40% 30% 20% 10% 0% <$1K

Less than 1 year

1 to 2 years

2 to 3 years

3 years or more

Comparison with Previous Surveys We did see more use of shorter contract lengths than in previous surveys e.g., roughly 30% of companies in the $5-$25k group used month-tomonth or less than one year contracts (vs. none in 2012). Even some companies in the "elephant hunter" groups had shorter contracts.

$1K-$5K

$5K-$25K

$25K-$100K

$100K-$250K

>$250K

Median Contract Value (ACV)

Respondents: <$1K: 14, $1K-$5K: 17, $5K-$25K: 26, $25K-$100K: 22, $100K-$250K: 11, >$250K: 11

38

What is Your Primary Pricing Metric?

Other, 17.5% Seats, 37.7%

Usage or transactions, 28.1%

Sites, 7.9% Database size, 3.5% Total employees, 5.3%

Comparison with Previous Surveys These results are virtually identical to 2012 and 2011.

Other includes: Data usage, number of apps being tested, email volume, customer devices and amount of content 110 respondents 39

Annual Gross Dollar Churn

(Excludes Companies <$2MM in Revenue)
What percentage of total ACV on a dollar basis churns in a given year?(1)
Annual gross dollar churn (without the benefit of upsells) is 9%. Note that although we excluded companies <$2MM in revenues, the result was similar when including these companies.

>20%

11

15-20%

10-15%

11

Median 9%
5-10%
Comparison with Previous Surveys This result is a lot higher (and more conventionally sized) compared with results from 2012 and 2011, which both had very low median gross dollar churn rates of 5%.

11

<5%

26

10

15

20

25

30

(1): Excluding the benefit of upsells 66 respondents 40

Annual Unit Churn(1)

(Excludes Companies <$2MM in Revenue)
We introduced unit churn (by customer count) for the first time in this survey, and derived a median annual unit churn of 9% the same as gross dollar churn. (This is somewhat surprising as conventional wisdom is that unit churn is generally higher than gross dollar churn, as smaller customers tend to churn more often).

> 15%

17

10-15%

15

Median 8%
7-9% 6

4-6%

15

1-3%

14

10

15

20

(1): Percentage churn of # of paid customers at year-end 2011 that were still customers at year-end 2012 67 respondents 41

Annual Gross Dollar Churn as a Function of Contract Length

(Excludes Companies <$2MM in Revenue)
Not surprisingly, companies with very long-term contracts (2+ years) have the lowest churn. It is surprising, however, that month to month contractors do not churn higher than the median.

10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 8% 8%

9%

Median 9%

4%

2%

Comparison with Previous Surveys Fairly consistent with previous years.

0% Month to Month < 1 yr 1-2 yrs

Contract Length

2-3 yrs

3+ yrs

Note: median line indicates median gross churn across all respondents as comparison Respondents: Month to Month: 6, <1yr: 4, 1-2yrs: 35, 2-3yrs: 12, >3yrs: 9 42

Annual Gross Dollar Churn as a Function of Contract Size

(Excludes Companies <$2MM in Revenue)
Companies with the largest deal sizes (>$250K) have the lowest churn, and those with the smallest deal sizes have the highest churn. However, churn rates in the broad middle range, for companies with average deal sizes between $1k and $250k, dont show much of an explainable pattern.

20% 18% 16% 14%

Gross Churn

18%

13%

13%

12% 10% 8% 6% 4% 2% 2% 8% 9%

Median 9%

Comparison with Previous Surveys Lack of correlation in the broad middle ranges was not the case in 2012 or 2011.

0% <$1K $1K-$5K $5K-$25K $25K-$100K $100K-250K >$250K Median Contract Size (ACV)

Note: median line indicates median gross churn across all respondents as comparison Respondents: <$1K: 5, $1K-$5K: 9, $5K-$25K: 14, $25K-$100K: 15, $100K-$250K: 11, >$250K: 9 43

Annual Gross Dollar Churn as a Function of Primary Distribution Mode

(Excludes Companies <$2MM in Revenue)
Those companies employing primarily field sales have lower churn rates than those employing primarily inside sales or online distribution.

10%

9%

9%

Median 9%

8%

6%

6%

4%

2%

Comparison with Previous Surveys Consistent with 2012 and 2011 survey results.

0% Field Sales Inside Sales Internet Sales

Note: median line indicates median gross churn across all respondents as comparison Field Sales: 36, Inside Sales: 17, Internet Sales: 5 44

Annual Net Dollar Retention From Existing Customers

100%+ Net Retention (Upsells greater than churn)
The median annual net retention rates, including churn but also including the benefit of upsells, is 101%.

How much do you expect your ACV from existing customers to change, including the effect of both churn and upsells?(1)
> 110% 105%-110% 100%-105% ~100% 95-100% 90-95% < 90% 0 5 10 6 6 15 15 20 25 14 16 23

Median 101%
21

Comparison with Previous Surveys Median was five percentage points lower than 2012 and 2011 survey results (which were both 106%)

Net Churn (Churn greater than upsells)

Number of Companies

(1): We define this as the net retention rate 101 respondents 45

Capital Requirements

46

Capital Raised So Far

Companies in the survey group have raised a median of roughly $9MM in capital so far.

Greater than $50MM

15

$25MM to $50MM

16

$15MM to $25MM

$5MM to $15MM

25

Median $9MM
Less than $5MM
Comparison with Previous Surveys Well below the $23MM and $22MM in capital raised by participants in the 2012 and 2011 surveys, respectively.

45

10

20

30

40

50

109 respondents 47

Analysis of Companies by Capital Raised

Median Amount Raised to Date <$5MM $5MM-$15MM $15MM-$25MM $25MM-$50MM
Comparison with Previous Surveys The 2013 group has generally received more investment relative to their size than the 2012 or 2011 groups (e.g., those receiving $5-$15M in revenues so far had median revenues of $4MM, versus the same group in the 2012 survey having $8MM in revenues).

No. of Respondents 45 25 8 15 15

2012 GAAP Revenue $2MM $4MM $20MM $17MM $35MM

2013E Growth 48% 51% 22% 53% 38%

>$50MM

108 respondents 48

Capital Efficiency Expectations Median Levels for the Group

Actual/expected time and investment required to reach:
Target All Participants Years Required $1MM ACV $5MM ACV $15MM ACV $40MM ACV 2 3 5 7 Investment Required $4MM $7MM $7MM $16MM Excluding Companies <$2MM in Revenue Years Required 2 4 6 8 Investment Required $4MM $9MM $14MM $21MM

ACV at which you expect to be FCF+: ~$9MM

Comparison with Previous Surveys Identical median historical growth vs. last year (40%). More conservative outlook (38% vs. 44% last year).

80 and 59 respondents, respectively 49

Disclosures
Important Disclosures: This document has been prepared by Pacific Crest Securities. Information contained herein has been obtained from sources believed to be reliable, but the accuracy and completeness of the information, and that of the opinions based thereon, are not guaranteed. This document is for information purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. Pacific Crest Securities and entities and persons associated with it, including its analysts, may have long or short positions or effect transactions in the securities of companies mentioned in this report, and may increase or decrease such holdings without notice. Pacific Crest Securities may make a market in the shares of any such company. These markets may be changed at anytime without notice. Pacific Crest Securities may have acted as lead or co-managing underwriter in ore or more of such companys U.S. equity offerings, and it may perform or seek to perform other investment banking services for any company referenced in this document. Pacific Crests specific disclosures can be seen here: http://www.pacific-crest.com/disclosures/ Pacific Crests privacy policy can be seen here: http://www.pacific-crest.com/privacy-policy/ Survey respondents participated anonymously and confidentially. Responses were received through online surveys taken in June-July 2013. Pacific Crest cannot verify accuracy of responses. Observations and commentary contained herein relate solely to the survey results and cannot necessarily be applied elsewhere. About Pacific Crest: Pacific Crest is the premier investment bank for technology, operating at the leading edge, where global connectivity is fueling an unprecedented expansion cycle. We apply our knowledge of the drivers of value creation and global network of relationships to technologys high-growth sectors, such as global internet, mobility, SaaS, cloud and big data, next gen infrastructure and alternative energy. As a result, our clientstechnologys foremost institutional investors and market leading companiesrely on us to achieve superior returns and gain competitive advantage from the seismic shifts occurring in technology. Our sector bankers and transactional specialists collaborate to help clients identify and implement the right course of action, whether a financing, M&A or alternative event. Our clients include Cvent, Fleetmatics, Model N, Progress Software, Proofpoint, ServiceNow, SevOne, Splunk, and Workday, among others. We have 200 employees and are headquartered in the United States, with offices in Boston, New York, Portland, San Francisco, Stamford, along with our Representative Office in Beijing as well our Pacific Epoch office in Shanghai. We were founded in 1990.

If you have questions or comments, please contact David Spitz, Managing Director: dspitz@pacific-crest.com; Twitter @dspitz

50

PCS Leadership in Software Selected Recent Transaction Experience

Corporate Finance
`
$300,035,000
$73,600,000
$135,240,000

Advisory
2011-2013 YTD Software IPOs Rank
has been acquired by has divested the Progress Apama Solution to has divested three product lines to

Firm Pacific Crest Securities Morgan Stanley Deutsche Bank Goldman Sachs J.P. Morgan JMP Securities Credit Suisse Stifel Nicolaus Weisel UBS William Blair & Co Raymond James Cannaccord Needham & Co Wells Fargo Piper Jaffray & Co RBC Capital Markets Barclays Citi Bank of America BMO

Deals 21 15 14 13 12 12 11 10 9 9 7 6 6 5 5 5 4 4 4 4

Value ($MM) $3,407.7 3,464.8 1,941.9 2,783.2 2,590.7 1,913.9 1,769.1 1,293.6 1,941.7 857.8 952.6 634.0 546.4 1,429.7 629.3 551.0 1,046.6 834.2 755.1 678.1

1 2 3 4

Veeva Systems (VEEV) Initial Public Offering

Covisint (COVS) Initial Public Offering

Cvent (CVT) Initial Public Offering

$360,525,000

$92,575,000

$120,140,500
has divested has been recapitalized by has been acquired by to

5 6 7 8 9

FleetMatics (FLTX) Follow -on Offering

ChannelAdvisor (ECOM) Initial Public Offering

Model N (MODN) Initial Public Offering

$732,550,000

$104,535,000

$105,800,000

10 11
has been acquired by has acquired has been recapitalized by

12
Workday (WDAY) Initial Public Offering Qualys (QLYS) Initial Public Offering Eloqua (ELOQ) Initial Public Offering

13 14

$70,312,500

$241,155,000

$93,982,473

15 16
has been acquired by has been acquired by has been acquired by

17 18 19

E2open (EOPN) Initial Public Offering

ServiceNow (NOW) Initial Public Offering

Proof point (PFPT) Initial Public Offering

$263,925,000

$185,725,000

$132,307,500

20

has been acquired by

has been acquired by

has been acquired by

Splunk (SPLK) Initial Public Offering

ExactTarget (ET) Initial Public Offering

Guidew ire (GWRE) Initial Public Offering

51