A Deeper Look at Software Valuations Amidst Rotation, in Ation, and Rates

19 December 2021 | 10:42PM PST
Americas Technology: Software
A deeper look at software valuations amidst rotation,

inflation, and rates
The recent software correction of 27% of EV/ Sales (NTM) in a short time span is Kash Rangan
+1(415)249-7318 | kash.rangan@gs.com
consistent with prior corrections, which have historically averaged a peak/trough Goldman Sachs & Co. LLC
drawdown of 29%, and implies that the group is oversold in the near term. This Brian Essex, CFA
+1(212)357-2692 | brian.essex@gs.com
recent correction is particularly relevant going into the seasonally strongest quarter, Goldman Sachs & Co. LLC
where we expect strong software results. Moreover, companies like Workday, Gabriela Borges, CFA
+1(212)902-7839 |
Salesforce.com, and Adobe have already provided positive 2022 guidance with gabriela.borges@gs.com
Goldman Sachs & Co. LLC
upward bias to street expectations, thereby affirming strong software fundamentals.
Nikolay Beliov
Following up on our March report (link), investors remain worried about a confluence +1(415)249-7072 |
nikolay.beliov@gs.com
For the exclusive use of Goldman Sachs Clients

of factors that we have not yet seen, yet, the uniqueness of the group is that it is
less subject to these vagaries. As our interest rate sensitivity shows, a ~100bps Dan Church, CFA
+1(212)902-0695 | dan.church@gs.com
increase in the cost of equity, has a ~14% impact to the average software
company’s DCF valuation component, implying this sell off already contemplates a Kevin Kumar, CFA
+1(415)249-7452 | kevin.kumar@gs.com
200-250bps rise in rates. Interestingly, on inflation, we point out that software
companies have contractual rights to pass along price increases related to CPI and Andrew Eisenson
+1(212)357-9111 |
andrew.eisenson@gs.com
other inflationary measures, which they have not exercised thus far, but represents Goldman Sachs & Co. LLC
an additional avenue in years to come. We highlight names with balanced growth Charlotte Bedick
+1(212)934-4591 |
and margin profiles at a reasonable price such as RNG, COUP, PING, OKTA, CRM, charlotte.bedick@gs.com
ADBE, WDAY, NOW and XM.
Hannah Velasquez
+1(212)357-6107 |
With the recent correction, software valuations come down to 4-year avg. With hannah.velasquez@gs.com
37d8825a338041d9af856c7eea795cd9
a ~27% multiple compression since the November peak (on 11/9/21) (Exhibit 1),
Jake Titleman
valuations at 12.5x EV/ NTM Sales, land only slightly above our software coverage’s +1(212)934-0047 |
jake.titleman@gs.com
4-year avg of 11.0x EV/ NTM Sales. Since the recent peak ~1.3 months ago, the Goldman Sachs & Co. LLC
average SaaS company in our coverage universe has seen its EV/NTM Sales multiple Carolyn Valenti
+1(212)357-2790 |
compress 27% to ~12.5x vs ~17.2x. Investors remain concerned about a rotation carolyn.valenti@gs.com
into value and pro cyclical recovery stocks (though we see this as largely having
Anisha Narayan
played out with the recent sell off), future upticks in interest rates and the +1(212)934-1992 |
anisha.narayan@gs.com
corresponding impact on software assets. We see this as a buying opportunity for Goldman Sachs India SPL
many of our high quality SaaS names (more below) as Software vendors continue to Nishtha Poddar
+1(212)934-1305 |
see a robust demand environment (with the average company in our coverage nishtha.x.poddar@gs.com
Goldman Sachs India SPL
beating 3Q revenue expectations by ~5%), despite a ~134bps increase in 10-year
treasury yields since August 2020’s trough. Highlighting the largely unwavering
demand environment, we highlight that CY22 revenue estimates have seen very
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.
Goldman Sachs Americas Technology: Software
little, to no revisions, with consensus estimate changes ranging from +7% to -2% from
their previous estimates. (Exhibit 4) This is much more nuanced vs the +40% to -30%
adjustments made to CY21 estimates during the pandemic. We see the current set-up
within software as strong, with the average name in our coverage down ~18% since
11/9 (+9% YTD), vs the NASDAQ down ~5% (+18% YTD).
Since our March 2021 report, we have expanded the software peer group to 120
companies vs 70 previously, expanded our coverage universe, and shifted our analysis to
NTM sales multiples vs TTM previously.
Exhibit 1: Across the broader coverage group, multiples have on average compressed ~-29% in 21 years
Pre- Correction EV/ NTM Sales
Trough
Peak Date Correction Trough Duration Multiple
Date
Peak (Months) Compression
7/17/2001 4.7x 9/27/2001 2.6x 2.4 -44%
1/9/2002 4.0x 10/7/2002 2.0x 9.0 -49%
1/14/2003 3.0x 3/11/2003 2.5x 1.9 -18%
1/20/2004 4.1x 8/12/2004 3.0x 6.8 -27%
1/3/2005 4.1x 4/28/2005 3.0x 3.8 -27%
4/27/2006 3.9x 7/13/2006 3.0x 2.6 -24%

2/21/2007 3.7x 3/13/2007 3.4x 0.7 -10%
6/5/2008 3.2x 11/20/2008 1.4x 5.6 -57%
1/6/2009 1.8x 3/9/2009 1.4x 2.1 -20%
4/26/2010 3.5x 6/30/2010 2.8x 2.2 -20%
7/7/2011 3.9x 8/19/2011 2.8x 1.4 -28%
3/5/2014 9.3x 4/11/2014 6.7x 1.2 -28%
1/4/2016 5.7x 2/9/2016 3.9x 1.2 -32%
1/26/2018 7.3x 2/8/2018 6.6x 0.4 -9%
2/19/2020 11.5x 3/16/2020 7.4x 0.9 -36%
2/12/2021 20.3x 3/8/2021 14.5x 0.8 -28%
11/9/2021 17.2x 12/17/2021 12.5x 1.3 -27%
37d8825a338041d9af856c7eea795cd9
Average 6.6x 4.8x -29%
Analysis is based on a list of ~120 covered companies across GS software teams.
Source: FactSet, Goldman Sachs Global Investment Research
19 December 2021 2
Exhibit 2: Although software multiples are above pre-pandemic levels, they have corrected 27% while growth expectations remain steady
Average SaaS EV/NTM sales multiple
20.0x February peak Recent market 35%

peak
18.0x
30%
16.0x
14.0x 25%
12.0x
20%
10.0x Recent
sell-off 15%
8.0x
6.0x 10%
4.0x Covid trough
5%
2.0x
0.0x 0%
Avg EV/Sales NTM Avg NTM Sales Growth
Pricing as of 12/17/2021
Source: Company data, FactSet, Goldman Sachs Global Investment Research

Exhibit 3: Average multiples have contracted while rates are still relatively consistent with levels seen during the recent peak
20.0x 3.5%
18.0x
3.0%
16.0x
14.0x 2.5%
12.0x
2.0%
10.0x
1.5%
8.0x
6.0x 1.0%
4.0x
0.5%
37d8825a338041d9af856c7eea795cd9
2.0x
0.0x 0.0%
Avg EV/NTM Sales 10-yr Treasury Rates
Source: Company data, FactSet
19 December 2021 3
Exhibit 4: CY22 consensus sales estimates relative to 11/9/21
8%
7%
6%
5%
4%
3%
2%
1%
0%
(1%)
(2%)
NOW
MDB
FTNT
ZM
COUP
ORCL
VMW
PCOR
SNOW
ZS
PYCR
DDOG
SHOP
TENB
SPNS
SWI
MNDT
TEAM
ESTC
ZM
XM
MIME
ZI
ADSK
SPLK
MNDY
INTU
S
OKTA
U
CRWD
PLAN
PWSC
KLTR
VRNT
CRM
ADBE
TENB
CYBR
ALTR
SCWX
RPD
AVLR
PING
KNBE
DT
CHKP
RNG
YOU
SAIL
EVBG
WDAY
BASE
PANW
JAMF
AVPT
VEEV
QLYS
BSY
HUBS
BIGC
MCFE
MSFT
Change in Consensus CY22 Sales Estimates
As multiples compressed ~27% since early November, we see RNG, COUP, PING,
OKTA, CRM, ADBE, WDAY, NOW valuations attractive. While we note that valuations
remain above their pre-COVID peak, given the recent pullback, we highlight names
where valuations remain below our broader coverage, are trading below or relatively
in-line with their pre-pandemic levels, and where the near-term outlook for growth can
be accelerated by pronounced digital transformation spending. Notably, we point to
names whose valuation has lagged the wider peer groups’ expansion when comparing
multiples from pre-pandemic peaks in February 2020 to December 2021. While
37d8825a338041d9af856c7eea795cd9
companies within the peer group averaged a ~20% multiple expansion from Feb 2020
to December 2021, RNG (-50%), COUP (-34%), PING (-25%), OKTA (-10%), CRM (0%),
ADBE (+7%), WDAY (+9%), and NOW (+12%) have all paced below the wider group’s
average of +17%. We also highlight Qualtrics, which is trading at ~12x CY23 sales and
screens inexpensive vs peers growing in the 30% range. (See the Stocks in Focus
section for more detail on our high conviction ideas).
While demand has remained resilient, rising interest rates have the potential to
drive continued volatility across software. We see the recent 27% sell-off baking in
more than just a 100-200 bps increase in interest rates as our analysis attributes a
roughly 14-24% decline in valuations in such scenarios. To assess the potential impact
from such an event, for illustrative purposes, we analyze the impact of a potential
100bps and 200bps rise in the cost of equity on the DCF component of our valuation
across our US Software coverage universe. On average, these increases in the cost of
equity imply a 14% and 24% decline, respectively, in the DCF components of our
valuation analysis (Exhibit 5). While lower interest rates over the course of 2020 and
2021 helped sustain higher multiples across our software coverage (Exhibit 3), we note
19 December 2021 4
that further increases in rates have the potential to drive near-term volatility and could
present a headwind to valuations across the sector alongside investor rotations to value
and pro-cyclical recovery stocks.
However, rising rates and stronger macro are supportive of software growth
prospects. That said, higher rates resulting from a more robust macroeconomic
environment may coincide with continued improvements in the overall demand
environment and therefore more robust growth across software. We believe the
fundamental outlook for software and digital transformations remains attractive and that
the durability and sustainability of secular growth of software assets is difficult to
capture and often underappreciated, with sustainable long-term growth having the
potential to partially offset near-term headwinds; we believe long-term fundamentals will
ultimately drive performance.
Exhibit 5: Our illustrative analysis suggests, a potential 1% and 2% increase in the cost of equity could have a 14% and 24% average decline
in our DCF analyses
0%
(5%)
(10%)
(15%)
(20%)
(25%)
(30%)
(35%)
(40%)
(45%)
(50%)
NOW
FTNT
SNOW
SPLK
MDB
SHOP
ORCL
DDOG
PWSC
KLTR
TENB
ALTR
CWAN
PCOR
WEAV
TEAM
PLAN
ZI
CTXS
VMW
SWI
BRZE
GTLB
CFLT
MNDY
BASE
ZM
XM
OKTA
U
INTU
COUP
AVLR
PING
SAIL
CRWD
ENFN
PYCR
BIGC
BSY
RPD
LVOX
DT
PANW
AVPT
VRNT
QLYS
DH
INFA
ESTC
WDAY
CRM
ADBE
DBX
EVBG
ADSK
RNG
HUBS
CYBR
CHKP
TWLO
MSFT
Δ +100bps Δ +200bps Average Δ +100bps Average Δ +200bps
JAMF, MNDT, MIME, MCFE, SCWX, YOU, ZS not shown as price target methodology does not contain a DCF component
37d8825a338041d9af856c7eea795cd9
Durable secular tailwinds propelling growth are often underappreciated and can
help offset near-term headwinds. While software has been propelled by strong
secular growth drivers, we believe the pandemic has accelerated digital transformation
efforts across verticals with behavioral and structural changes catalyzed by COVID-19
likely to sustain growth in software for the foreseeable future. Strong secular tailwinds
alongside durable recurring revenue business models common across software should
drive long-term sustainable growth, which is often underestimated by investors.
Compounding revenue outperformance over time alongside strong operating leverage
often leads to software companies becoming profitable earlier than expected; with cash
flows realized earlier than expected by consensus, DCFs may overstate potential
sensitivity to rising discount rates. Similarly, with the Cloud’s ~25bps share of global
GDP (see our initiation for more detail) we see the potential for a few decades of growth
ahead within the $1tn+ cloud TAM. This has the potential to drive elevated levels of
growth beyond many DCF forecast horizons. To illustrate, we assess the impact to our
DCFs across our software coverage by extending each forecast horizon by 2 years. On
average, this corresponded with a ~12% increase in the DCF component of our
19 December 2021 5
valuation (Exhibit 6).
Exhibit 6: Extending our DCFs by 2 years resulted in a ~12% higher present value on average
60%
50%
40%
30%
20%
10%
0%
(10%)
Δ Average
JAMF, MNDT, MIME, MCFE, SCWX, YOU, ZS not included in calculation
As highlighted in our initiation report, significant market corrections are often driven by
external macroeconomic shocks. These corrections offer opportunities to build long
positions, in retrospect investors realize that companies with large expanding TAMs,
strong sales execution and good management teams, outperform in the long run. A look
at the brief history of pullbacks in the technology sector reveal that corrections in tech
valuations today tend to be shorter in duration, albeit sharper. The average multiple
compression from prior peak to trough since 2001 has been -27% which is roughly in
line with the -29% peak to trough compression seen since November. In contrast, 2002
multiples compressed from peak to trough valuation by ~49% over ~9 months and the
37d8825a338041d9af856c7eea795cd9
Global Financial Crisis in 2008 triggered a sharp -57% multiple compression over ~6
months. SaaS momentum has supported high valuations in the recent years, as more
software companies pivot toward subscription-based recurring business models, along
with increased cloud penetration and secular trends including Digital Transformation. In
fact, in the years 2012, 2013, 2017 and 2019, multiples for GS covered Software
companies expanded despite external shocks such as the 2012 Sovereign Debt Crisis in
Europe, Greece currency instability in early 2014 and more recently the trade dispute
with China in 2018/2019. As we mentioned above, since our March 2021 report, we
have expanded the software peer group to 120 companies vs 70 and shifted our analysis
to NTM sales multiples vs TTM previously.
19 December 2021 6
Exhibit 7: Across the broader coverage group multiples have on average compressed ~-29% in 21 years
Trough
Date
7/17/2001 4.7x 9/27/2001 2.6x 2.4 -44%
1/9/2002 4.0x 10/7/2002 2.0x 9.0 -49%
1/14/2003 3.0x 3/11/2003 2.5x 1.9 -18%
1/20/2004 4.1x 8/12/2004 3.0x 6.8 -27%
1/3/2005 4.1x 4/28/2005 3.0x 3.8 -27%
4/27/2006 3.9x 7/13/2006 3.0x 2.6 -24%
2/21/2007 3.7x 3/13/2007 3.4x 0.7 -10%
6/5/2008 3.2x 11/20/2008 1.4x 5.6 -57%
1/6/2009 1.8x 3/9/2009 1.4x 2.1 -20%
4/26/2010 3.5x 6/30/2010 2.8x 2.2 -20%
7/7/2011 3.9x 8/19/2011 2.8x 1.4 -28%
3/5/2014 9.3x 4/11/2014 6.7x 1.2 -28%
1/4/2016 5.7x 2/9/2016 3.9x 1.2 -32%
1/26/2018 7.3x 2/8/2018 6.6x 0.4 -9%
2/19/2020 11.5x 3/16/2020 7.4x 0.9 -36%

2/12/2021 20.3x 3/8/2021 14.5x 0.8 -28%
11/9/2021 17.2x 12/17/2021 12.5x 1.3 -27%
Analysis is based on a list of ~120 covered companies across GS software teams.
Exhibit 8: In recent years, pullbacks tended to be shorter in duration with sharper EV/TTM Sales multiple compressions
25.0x
20.3x
37d8825a338041d9af856c7eea795cd9
20.0x
17.2x
14.5x
15.0x
12.5x
11.5x
9.3x
10.0x
7.3x 7.4x
6.7x 6.6x
5.7x
4.7x
5.0x 4.0x 4.1x 4.1x 3.9x 3.7x 3.9x 3.9x
3.0x 3.2x 3.5x
2.6x 3.0x 3.0x 3.0x 3.4x 2.8x 2.8x
2.5x 1.8x
2.0x 1.4x 1.4x
0.0x
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2014 2016 2018 2020 2021 Current
Pre-Correction Peak Trough
19 December 2021 7
Exhibit 9: Average correction in multiples of Large Cap stocks is -26% vs. Mid Cap at -31% and Small Cap at
-33%
Trough
Date
7/17/2001 4.8x 9/27/2001 3.4x 2.4 -29%
1/9/2002 5.1x 10/7/2002 3.0x 9.0 -40%
1/14/2003 4.1x 3/11/2003 3.5x 1.9 -14%
1/20/2004 4.8x 8/12/2004 4.2x 6.8 -12%
1/3/2005 5.7x 4/28/2005 4.6x 3.8 -19%
4/27/2006 5.2x 7/13/2006 3.7x 2.6 -29%
2/21/2007 4.8x 3/13/2007 4.2x 0.7 -11%
6/5/2008 4.3x 11/20/2008 1.9x 5.6 -56%
1/6/2009 2.5x 3/9/2009 1.9x 2.1 -21%
4/26/2010 4.1x 6/30/2010 3.2x 2.2 -21%
7/7/2011 4.2x 8/19/2011 3.0x 1.4 -28%
3/5/2014 11.7x 4/11/2014 8.4x 1.2 -29%
1/4/2016 6.9x 2/9/2016 4.8x 1.2 -30%
1/26/2018 8.4x 2/8/2018 7.6x 0.4 -10%

2/19/2020 15.4x 3/16/2020 10.1x 0.9 -34%
2/12/2021 26.9x 3/8/2021 19.5x 0.8 -28%
11/9/2021 25.3x 12/17/2021 19.1x 1.3 -25%
Exhibit 10: Peak to trough EV/Sales compression of Large Cap software stocks
30.0x
26.9x
25.3x
25.0x
37d8825a338041d9af856c7eea795cd9
19.5x 19.1x
20.0x
15.4x
15.0x
11.7x
10.1x
10.0x 8.4x 8.4x
6.9x 7.6x
5.7x 5.2x
4.8x 5.1x 4.8x 4.8x 4.8x
4.1x 4.2x 4.6x 4.3x 4.1x 4.2x
5.0x 3.4x 3.5x 3.7x 4.2x 3.2x
3.0x 2.5x 3.0x
1.9x 1.9x
0.0x
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2014 2016 2018 2020 2021 Current
19 December 2021 8
Exhibit 11: Average historic correction in multiples of Mid Cap stocks is ~-31%
Trough
Date
7/17/2001 4.5x 9/27/2001 1.7x 2.4 -63%
1/9/2002 3.4x 10/7/2002 0.8x 9.0 -77%
1/14/2003 1.7x 3/11/2003 1.2x 1.9 -30%
1/20/2004 2.3x 8/12/2004 1.2x 6.8 -48%
1/3/2005 1.7x 4/28/2005 1.2x 3.8 -29%
4/27/2006 1.9x 7/13/2006 1.6x 2.6 -12%
2/21/2007 2.4x 3/13/2007 2.1x 0.7 -12%
6/5/2008 2.2x 11/20/2008 1.0x 5.6 -53%
1/6/2009 1.3x 3/9/2009 1.1x 2.1 -16%
4/26/2010 3.0x 6/30/2010 2.6x 2.2 -14%
7/7/2011 3.3x 8/19/2011 2.5x 1.4 -23%
3/5/2014 6.5x 4/11/2014 5.2x 1.2 -21%
1/4/2016 5.6x 2/9/2016 3.7x 1.2 -34%
1/26/2018 6.7x 2/8/2018 6.2x 0.4 -7%
2/19/2020 9.9x 3/16/2020 6.2x 0.9 -38%

2/12/2021 16.2x 3/8/2021 12.4x 0.8 -24%
11/9/2021 17.2x 12/17/2021 12.6x 1.3 -26%
Exhibit 12: Peak to trough EV/Sales compression of Mid Cap software stocks
30.0x
25.0x
20.0x
17.2x
37d8825a338041d9af856c7eea795cd9
16.2x
15.0x
12.4x 12.6x
9.9x
10.0x
6.5x 6.7x
5.6x 6.2x 6.2x
4.5x 5.2x
5.0x 3.4x 3.0x 3.3x 3.7x
2.3x 2.4x 2.5x
1.7x 1.7x
1.2x 1.2x
1.7x 1.9x 2.1x 2.2x
1.0x 1.3x 2.6x
0.8x 1.2x 1.6x 1.1x
0.0x
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2014 2016 2018 2020 2021 Current
19 December 2021 9
Exhibit 13: Average historic correction in multiples of Small Cap stocks is ~-33%
Trough
Date
1/20/2004 9.3x 8/12/2004 3.6x 6.8 -62%
1/3/2005 4.6x 4/28/2005 1.9x 3.8 -58%
4/27/2006 4.1x 7/13/2006 3.9x 2.6 -5%
2/21/2007 2.9x 3/13/2007 3.0x 0.7 4%
6/5/2008 1.2x 11/20/2008 0.3x 5.6 -70%
1/6/2009 0.5x 3/9/2009 0.4x 2.1 -21%
7/7/2011 4.3x 8/19/2011 2.8x 1.4 -36%
3/5/2014 6.6x 4/11/2014 4.3x 1.2 -35%
1/4/2016 3.7x 2/9/2016 2.6x 1.2 -30%
1/26/2018 6.3x 2/8/2018 5.6x 0.4 -11%
2/19/2020 7.6x 3/16/2020 4.7x 0.9 -37%
2/12/2021 16.3x 3/8/2021 10.6x 0.8 -35%
11/9/2021 9.2x 12/17/2021 7.3x 1.3 -20%
Exhibit 14: Peak to trough EV/Sales compression of Small Cap software stocks
30.0x
25.0x
20.0x
16.3x
15.0x
10.6x
9.3x 9.2x
10.0x 7.6x
6.6x 7.3x
6.3x
5.6x
4.6x 4.1x3.9x 4.3x 4.3x 4.7x
5.0x 3.6x 2.9x 3.0x 2.8x
3.7x
1.9x 2.6x
1.2x 0.5x 0.4x
37d8825a338041d9af856c7eea795cd9
0.3x
0.0x
2004 2005 2006 2007 2008 2009 2011 2014 2016 2018 2020 2021 Current
With strong secular tailwinds and a large $1tn+ cloud TAM we see a multi-decade
runway for continued growth across software. A fundamental reason the software
sector is an attractive investment opportunity is the large and expanding TAM, with our
bottom-up TAM analysis (Exhibit 15) pointing to a $1tn+ cloud TAM. For software
companies that are well positioned and can consistently execute, this can result in
compelling multi-year high-growth highly-profitable business models. To that end, in our
recent initiation, we outline an 8-factor framework for investing in Software consisting of
a blend of both quantitative and qualitative factors. While, based on our experience,
every software company is unique, with its own DNA and tendencies, in the GS
Framework for Investing in Software, we have identified what we believe are 8 key
factors, highlighted in Exhibit 16 below.
19 December 2021 10
Exhibit 15: GS bottom-up software TAM build

TAM
available Cloud TAM TAM CAGR
($bn) 2020E ($bn) % cloud 2025 ($bn) % cloud (20-25) Metric ASP/mo
TOTAL SAAS 823 149 18% 412 50% 23%
Front Office 230 49 21% 145 63% 24%
Enterprise content management 48 17 35% 38 80% 18% 80 # of creative employees (mn) 50
Sales 39 10 26% 23 60% 18% 34 # of employees (mn) 96
Marketing 48 7 15% 26 55% 30% 2 # of companies 10+ workers (m 2,000
eCommerce 30 4 13% 24 80% 43% 1,500 GMV $ bn 2%
Go-to-market intelligence 36 2 6% 11 30% 40% 18 # of employees (mn) 171
Service 29 9 31% 22 75% 19% 20 # of employees (mn) 121
Back Office 95 21 22% 52 55% 20%
HCM incl payroll 33 11 33% 21 65% 14% 550 # of employees (mn) 5
Finance 35 4 11% 16 45% 32% 12 # of employees (mn) 245
Travel and Expense 7 3 45% 5 70% 9% 220 # of travelling employees (mn) 2.5
Supply chain/manufacturing 20 3 15% 10 50% 27% 5 # of employees (mn) 328
Business Intelligence 22 3 14% 13 60% 35% 55 # of employees (mn) 34
Communications/collaboration 376 58 15% 134 36% 18%
Unified Communications (UCaaS) 96 7 7% 29 30% 33% 400 # of PBX employees (mn) 20
Call center (CCaaS) 27 3 11% 11 40% 29% 15 # of PBX employees (mn) 150
Communications platforms (CPaaS) 72 4 6% 18 25% 35% 2 # of companies 10+ workers (m 3,000
Office productivity 53 30 57% 42 80% 7% 550 # of employees (mn) 8
Online storage 19 6 31% 12 60% 14% 550 # of employees (mn) 3
Project management 40 3 8% 14 35% 36% 550 # of employees (mn) 6
Desktop as a Service 69 5 7% 8 12% 11% 550 # of employees (mn) 11
IT Operations/Management & DevOps 100 18 17% 69 69% 31%
Apps performance (APM)/infrastructure 20 4 17% 16 80% 36% 60 # of servers (mn) 28
IT Service Management (ITSM) 34 7 21% 24 70% 27% 40 # of non-devs IT employees (m 70
Security Info Event Management (SIEM) 23 3 13% 12 55% 33% 236 # of large companies ('000) 8,000
DevOps 24 4 17% 17 70% 33% 236 # of large companies ('000) 8,333
TOTAL PAAS 138 27 20% 82 60% 25%
Database as a Service (DBaaS) 42 10 24% 23 55% 18% 6 # of database servers (mn) 584
Integration Platform as a Service (iPaaS) 40 5 13% 14 35% 23% 236 # of large companies ('000) 14,000
Application Platform as a Service (aPaaS) 57 12 21% 45 80% 30% 236 # of large companies ('000) 20,000
TOTAL IAAS 211 58 28% 133 63% 18%
Compute 124 32 26% 81 65% 20% 60 # of servers (mn) 173
Storage 86 26 30% 52 60% 15% 60 # of servers (mn) 120
GRAND TOTAL 1,172 234 20% 627 54% 22%
% SaaS mix 70% 64% 66%
% PaaS 12% 12% 13%
% IaaS 18% 25% 21%
Source: Company data, US Census Bureau, IDC, Gartner, Goldman Sachs Global Investment Research
Exhibit 16: GS Framework for Investing in Software

GS FRAMEWORK FOR INVESTING IN SOFTWARE
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8 KEY FACTORS TANGIBLE INTANGIBLE
TAM Top-down sizing Is pricing sustainable?

Bottom-up sizing Is it a feature or a real market?
SECULAR Customers spending more on DX, UCaaS, CPaaS, CCaaS Is it a pull-forward of demand or a permanent shift?
THEMES AI and IoT initial use cases Is it a feature or a real secular trend?
ENTRY/EXIT Technical analysis When to buy? Rotation or short-term mis-execution?

POINTS Sector historical valuation parameters When to sell? Valuation ahead of fundamentals?
LT FRAMEWORK Long-term revenue/margins scenarios Which scenario is more likely?

RETURN Compounded return outcomes based on long-term scenarios What are possible risk-reward scenarios?
UNIT Lifetime value (LTV) calculation How does competition impact customer lifetime?
ECONOMICS Customer acquisition cost (CAC) calculation; LTV/CAC How does upsell and cross-sell impact CAC and cost to serve?
PLATFORM/ Diversified revenue mix Are there actual synergies between the revenue streams?
BEST OF BREED Best of breed gaining market share Can the best of breed "cross the chasm"?
COMPETITIVE Revenue per R&D dollar Are there disruptive technologies?

MOAT Size of install base Why is the install base demanding bigger price discounts?
ESG Carbon neutral = data center usage + carbon offsets What are the social impacts of AI products?
Company becoming a large platform What are the regulatory or security breach risks?
Source: Goldman Sachs Global Investment Research
19 December 2021 11
Stocks in Focus
As noted above, we believe accelerated digitization across industries alongside

structural and behavioral changes catalyzed by the COVID-19 pandemic will drive
sustainable growth in software for the foreseeable future. With a large and expanding
$1tn+ Cloud TAM, we see ample runway for growth over the next several decades.
While elevated valuations and the potential for rising further increases in interest rates
may drive near-term volatility in software assets, we believe long-term fundamentals will
ultimately drive performance. We highlight our high conviction names below:
n RNG (Buy, PT $240): In our view, RingCentral offers investors high visibility into
multi-year durable high revenue growth in a large market with a much improved
competitive position and a complete multi-modal communications and collaborations
platform whose value proposition has been elevated with COVID-19. We believe that
RingCentral has a unique combination of potential revenue re-acceleration in 4Q21
and CY22, potential steady expansion above the Rule of 40, a strong go-to-market
moat via its multiple partnerships providing it with access to over half of the
addressable market, and in our view, the most complete and integrated product
offering in unified communications. ~60% of accounts engage with multiple modes
of RNG’s platform with 45% using Messaging and Phone and 42% using Video and
Phone. In our view, RingCentral offers the most complete and integrated solution in
the market today, a view validated by the half a dozen major partners that have
chosen RingCentral as their “go-to” unified communication offering. Beyond the
partnerships aiding RNG’s market access, they also set the stage for potential
expansion beyond the Rule of 40 as the mix of mid-market/enterprise steadily
increases over time. The partnerships bring customers to RNG at a lower cost to
book vs its traditional direct sales or channel model, which should aid the company’s
margin expansion and allow it to more strategically allocate S&M dollars.
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Our 12-month price target of $240 is based on an equal blend of DCF and EV/Sales.
Our DCF assumes a perpetuity growth rate of ~2.0%, ~8.0% WACC, our Q5-Q8
EV/Sales analysis assumes 10x EV/Sales, which is roughly in-line with high quality
Rule of 40 comps. Key risks to our thesis include an inability to execute on the
strategic partnerships, significant and sustained increase in competition, revenue
deceleration, macroeconomic slowdown, slower than expected operating margin
expansion or higher than expected expense growth, and adverse changes in the IT
spending environment.
n COUP (Buy, PT $251): We view Coupa as a category leader still early in penetrating
its business spend management TAM. We see several levers to growth over the
next 3 years, and highlight the ML capabilities embedded in Coupa Community as
an illustration of Coupa’s ability to drive value for its customers over the long term.
More broadly, we believe sales cycles slowed through COVID (given Coupa selling
into large enterprises and tied to the ERP refresh cycle), and we see the potential
for momentum to rebuild and organic growth to accelerate in 2022. Lastly, we
believe investor expectations for Coupa Pay have been reset, and as such,
incremental adoption would drive upside to base case investor expectations.
19 December 2021 12
Our 12-month price target of $251 is based on 19x EV/sales applied to our Q5-Q8
estimates. Key risks include: slower enterprise spend, material M&A, and a
changing competitive environment.
n Ping Identity Holding (Buy, PT $36): Performance for PING was depressed last
year as customers shifted to shorter term contracts. However, Identity remains a
top CIO priority as Identity is increasingly becoming a primary control point for
distributed hybrid networks. Heading into FY22, we see PING well positioned for
revenue acceleration and margin expansion as the company continues to benefit
from healthy large deal activity, customer buying patterns returning to normal levels,
an improving macro environment. Additionally, we anticipate that traction with
PingOne, and success cross selling CIAM and Workforce platforms will support
better customer and revenue growth. PING realized another quarter of strong
multi-year term license growth over easy comps last year and SaaS growth
continued to accelerate, driving better penetration. With the stock currently trading
at 5.9x EV/NTM Sales, a substantial discount to our coverage universe, we see
potential for meaningful multiple expansion as fundamentals continue to improve.
Our 12-month price target of $36 is derived from a blended target of a 10-year DCF
and EV/Sales multiple. Our EV/Sales driven valuation of $34 is based on an

unchanged 7.5x EV/Sales multiple on our Q5-Q8 sales. DCF driven valuation of $38 is
based on a 3.0% terminal growth rate and a 9.4% WACC. We use the average beta
of our Security Software coverage with growth in the teens to approximate PING’s
beta. Key risks: Greater than anticipated competition and enterprise IT spending.
n Okta (Buy, PT $280): Okta has established itself as a cloud native Identity and
Access Management leader with the potential for meaningful penetration into
adjacent Customer Identity and Access Management (CIAM), Identity Governance
(IGA), and Privileged Access Management (PAM) markets as it develops its Primary
Cloud platform. We see several levers for growth ahead following the closing of
Auth0 in 2Q and deeper entry into IGA and PAM markets early next year. Okta
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delivered accelerating revenue growth across its platform in 3Q. Customer growth
accelerated with notable progress with large deals and the company highlighted
good initial success cross selling between Okta and Auth0 platforms. Investors have
been critical of organic growth following the company’s acquisition of Auth0 earlier
this year. However, Okta indicated that it has confidence in a long-term outlook of
$4bn in revenue with 20% FCF margins for FY26. The stock currently trades at 23.6x
EV/NTM Sales, a discount to our high growth Security software coverage. However,
we view OKTA well-positioned to re-rate higher as the company laps the Auth0 deal
and investors begin to evaluate growth on a consolidated basis next year.
Our 12-month price target of $280 is derived from an equal-weighted blend of DCF
analysis and EV/Sales multiple based valuation. The 10-year DCF driven valuation of
$285 is driven by an unchanged 7.6% WACC and terminal growth rate of 4.0%. Our
multiple based valuation of $275 reflects an unchanged EV/Sales/Growth multiple of
0.6x, which implies an EV/Sales multiple of 21.0x applied to our Q5-Q8 sales
estimates. Our growth adjusted multiple of 0.6x is in line with the average for high
growth security peers. Key risks: Competition from emerging and established
Identity vendors; decelerating organic growth; pressure from Microsoft’s Azure AD
19 December 2021 13
platform; execution risk when expanding into adjacent markets (PAM and IGA).
n Salesforce (Buy (on CL), PT $370): Salesforce remains poised to be one of the
most strategic application software companies in the $1tn+ TAM cloud industry, in
our view. With a broad and expanding platform that spans sales, service,
ecommerce, marketing, BI/analytics, artificial intelligence, custom applications,
integration, and collaboration, we view Salesforce as well positioned to capitalize on
accelerated digital transformation spending, as enterprises across verticals grapple
to form a holistic view of their customers across an increasingly complex customer
journey involving multiple touchpoints and channels. We believe the core business
can sustain growth in the high-teens organically, while its completed acquisitions
continue to augment the core. We see runway for organic margin expansion and
believe many investors, apprehensive about a $20bn+ business operating at sub
20% operating margins, do not fully appreciate the earnings’ capacity of the
business at maturity. With the stock trading at a sizeable discount to the group at
~8.1x EV/NTM Sales, we continue to see risk/reward as attractive at current levels.
Our 12-month price target of $370 is based on an equal blend of DCF, EV/FCF, and
EV/sales. Our DCF assumes a perpetuity growth rate of ~1%, our Q5-Q8 EV/FCF
assumes 50x, and our Q5-Q8 EV/sales analysis assumes 11x Q5-Q8 sales. Key risks
to our thesis include: sales execution, macroeconomic slowdown, unsustainable
pace of acquisitions, slower than expected operating margin expansion or higher
than expected expense growth, and adverse changes in the IT spending
environment.
n ADBE (Buy, PT $710): Our thesis is that Adobe remains firmly a growth company.
Adobe is a market leading franchise with a dominant position and pricing power in
its core Creative market, which is poised to grow its subscribers mid-teens driven by
Digital Transformation initiatives. This leaves us with potentially several years of
durable double-digit revenue, earnings, and cash flow growth. Adobe is on a path to
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grow revenues by 2x to 3x from current levels over the next few years, potentially
entering the top ranks of software companies with $40bn+ of revenues. Adobe’s
franchise stands out as one with a loyal and growing customer base, which consider
the brand to be the default tool of their profession despite several attempts by large
and small competitors to change the game. Our F26 model has Adobe at ~54mn
creative subscribers and generating ~$27/share in FCF. Adobe is not standing still
despite forging a strong position as the industry standard in Creative and Document
clouds but continues to innovate aggressively. While growth in the Digital
Experience cloud (Digital Marketing) has been challenging of late, there are signs
that a turnaround is well underway, which could accelerate overall top-line growth
rate. Despite Adobe‘s high operating margin of 43% in FY20A, we believe the
longer-term margins can approach mid-to-high 40s.
Our 12-month price target of $710 is based on a three-pronged valuation framework
based on equal weights to a DCF, EV/Sales multiple, and a P/E multiple. Our DCF
assumes a 4% perpetual growth rate (unchanged) and 8% WACC (unchanged). We
use a 16x Q5-Q8 EV/Sales (unchanged) and a 43x Q5-Q8 P/E multiple (unchanged).
Key risks: 1) prolonged and worse-than-expected COVID-19 impact causing slower
19 December 2021 14
net new business, deal delays, and longer sales cycles, 2) slower and more volatile
Digital Experience growth, 3) slower net new subscriber additions, 4) higher
expense growth limiting margin expansion, and 5) increased competition.
n WDAY (Buy, PT: $345): Workday is a uniquely positioned software application
company addressing massive cloud replacement cycles in a $105bn+ TAM spanning
HCM, financials, analytics, planning, and procurement. The pandemic is driving
customers to accelerate their digital transformation efforts so that they can operate
their businesses virtually in the cloud, where we believe Workday remains well
positioned to capitalize on rising cloud adoption particularly within Financials. Within
HCM, we continue to view Workday as best in class with the ability to innovate and
deliver new feature functionality in response to customer demand, like People
Analytics, People Experience and the Talent Marketplace. Similarly, we believe the
company is well positioned within cloud based financials, with an expanding
portfolio of products, including procurement and planning, offering multiple paths to
establishing presence within the large enterprise. Alongside best in class customer
retention and continued traction with upsell and cross-sell into the installed base,
we see the opportunity for continued improvement in unit economics, which should
translate to higher levels of profitability at scale.

Our 12-month price target of $345 is derived from an equal weighting of a DCF
(~4.5% perpetuity growth rate, unchanged), and 13x Q5-Q8 EV/Sales (unchanged).
Key risks: financials traction remains in early innings; changes in the competitive
landscape; slowing SaaS adoption in HCM.
n ServiceNow (Buy (on CL), PT $800): ServiceNow’s low-code workflow platform
built using a common data model on unified architecture with out of the box APIs
that facilitate integration with critical applications, allows for rapid application
development. We see the sentiment around the near-term guide underappreciating a
business that is potentially entering C22 with 5 straight quarters of net new ACV
momentum, broad-based demand across the product portfolio, a significantly
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healthier renewal base with improving renewal rates, and a much larger and more
productive salesforce that will likely begin to travel in 1H22. ServiceNow’s is a net
beneficiary of the pandemic as its workflow applications can replace
human-intensive processes in areas where packaged applications either don’t exist
or are cumbersome. Its quick implementation capabilities with traditional relational
database-oriented applications such as CRM, HCM and ERP makes for complete
coverage of business processes end to end and leave us positive on its ability to
execute on its goal to enter several white space opportunities in the CRM and HCM
markets. Finally, a network of strong SI partnerships should help scale NOW’s global
footprint longer-term as it works its way towards $15 billion in revenues.
Our 12-month price target of $800 is derived from an equal weighting of a DCF
(~3% perpetuity growth rate), 62x Q5-Q8 EV/FCF, and 19x Q5-Q8 EV/Sales. Key
risks include COVID-19 related negative impacts on delayed sales cycles, slower
new deal flow from impacted verticals and higher expense growth limiting margin
expansion.
n Qualtrics (Buy (on CL), PT $53): We view Qualtrics as the market leader in
19 December 2021 15
Customer Experience, a segment of the CRM TAM that is growing in importance as

customers look to understand areas for improvement across digital engagement
with the goal of optimizing LTV:CAC. We expect Qualtrics to benefit from net new
budget as well as consolidation of spend from a long tail of fragmented vendors as a
function of its technology breadth and depth, with key differentiators being its ability
to process unstructured data and its integration with other action-oriented workflow
tools. Lastly, we also expect to see an inflection in FCF over the next 3 years as
Qualtrics realizes productivity improvements from its 2018-2021 investment cycle
into large enterprise and international.
Our 12-month price target of $53 is based on 20x our Q5-8 sales estimate. Qualtrics
is on the America’s Conviction List. Key risks include increased competition,
additional primary equity issuance, and the integration of the Clarabridge acquisition.
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19 December 2021 16
Disclosure Appendix
Reg AC
We, Kash Rangan, Brian Essex, CFA, Gabriela Borges, CFA, Nikolay Beliov, Dan Church, CFA, Kevin Kumar, CFA, Andrew Eisenson, Charlotte Bedick,
Hannah Velasquez, Jake Titleman, Carolyn Valenti, Anisha Narayan and Nishtha Poddar, hereby certify that all of the views expressed in this report
accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our
compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.
GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its
sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial
Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The
normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may
vary depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a
higher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial
stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,
price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile
indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns
percentile and (100% - Multiple percentile).
Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs
for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).
For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.
M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary
across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring
companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2
representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not
factor into our price target, and may or may not be discussed in research.
Quantum
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in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.
Disclosures
Rating and pricing information
Adobe Systems Inc. (Buy, $556.64), Coupa Software Inc. (Buy, $158.07), Okta Inc. (Buy, $217.91), Ping Identity Holding (Buy, $22.54), Qualtrics
International Inc. (Buy, $33.31), RingCentral (Buy, $185.21), Salesforce.com Inc. (Buy, $252.93), ServiceNow Inc. (Buy, $615.63) and Workday Inc. (Buy,
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$273.88)
The rating(s) for Adobe Systems Inc., Microsoft Corp., Salesforce.com Inc., ServiceNow Inc., Splunk Inc. and Workday Inc. is/are relative to the
other companies in its/their coverage universe: Adobe Systems Inc., Altair Engineering Inc., Anaplan Inc., Atlassian Corp., Autodesk Inc., Bentley
Systems Inc., Citrix Systems Inc., Confluent Inc., Couchbase Inc., Datadog Inc., Definitive Healthcare Corp., Dropbox Inc., Dynatrace Inc., Elastic NV,
EverBridge Inc., GitLab Inc., Informatica Inc., Intuit Inc., LiveVox Holdings, Microsoft Corp., Monday.Com Ltd., MongoDB Inc., Oracle Corp., Procore
Technologies Inc., RingCentral, Salesforce.com Inc., ServiceNow Inc., Snowflake Inc., SolarWinds Corp., Splunk Inc., Twilio, Unity Software Inc.,
VMware Inc., Weave Communications Inc., Workday Inc., Zoom Video Communications Inc., ZoomInfo Technologies Inc.
The rating(s) for CrowdStrike Holdings, Okta Inc. and Ping Identity Holding is/are relative to the other companies in its/their coverage
universe: Avepoint Inc., Check Point Software Tech., Clear Secure Inc., CrowdStrike Holdings, CyberArk, Fortinet Inc., Jamf Holding, KnowBe4 Inc.,
Mandiant Inc., McAfee Corp, Mimecast Ltd., Okta Inc., Palo Alto Networks Inc., Ping Identity Holding, Qualys Inc., Rapid7 Inc., SailPoint Technologies
Holdings, SecureWorks Corp., SentinelOne Inc., Tenable Holdings, Thoughtworks Holding, Verint Systems Inc., Zscaler Inc.
The rating(s) for Coupa Software Inc. is/are relative to the other companies in its/their coverage universe: Avalara Inc., BigCommerce Holdings,
Braze Inc., Clearwater Analytics Holdings, Coupa Software Inc., Enfusion Inc., HubSpot Inc., Kaltura Inc., Paycor HCM Inc., PowerSchool Holdings, Inc.,
Qualtrics International Inc., Shopify Inc.
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Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe
Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell
Global 50% 35% 15% 65% 58% 47%
19 December 2021 17
As of October 1, 2021, Goldman Sachs Global Investment Research had investment ratings on 3,017 equity securities. Goldman Sachs assigns stocks
as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for
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Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided
investment banking services within the previous twelve months.
Price target and rating history chart(s)

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A Deeper Look at Software Valuations Amidst Rotation, in Ation, and Rates

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A Deeper Look at Software Valuations Amidst Rotation, in Ation, and Rates

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19 December 2021 | 10:42PM PST

Americas Technology: Software

A deeper look at software valuations amidst rotation,

Goldman Sachs & Co. LLC

4/27/2006 3.9x 7/13/2006 3.0x 2.6 -24%

Source: FactSet, Goldman Sachs Global Investment Research

20.0x February peak Recent market 35%

Avg EV/Sales NTM Avg NTM Sales Growth

Source: Company data, FactSet, Goldman Sachs Global Investment Research

Avg EV/NTM Sales 10-yr Treasury Rates

Source: Company data, FactSet

Exhibit 4: CY22 consensus sales estimates relative to 11/9/21

Change in Consensus CY22 Sales Estimates

Source: FactSet, Goldman Sachs Global Investment Research

valuation (Exhibit 6).

JAMF, MNDT, MIME, MCFE, SCWX, YOU, ZS not included in calculation

Source: Company data, FactSet, Goldman Sachs Global Investment Research

2/19/2020 11.5x 3/16/2020 7.4x 0.9 -36%

Source: FactSet, Goldman Sachs Global Investment Research

Pre-Correction Peak Trough

Source: FactSet, Goldman Sachs Global Investment Research

1/26/2018 8.4x 2/8/2018 7.6x 0.4 -10%

Source: FactSet, Goldman Sachs Global Investment Research

Pre-Correction Peak Trough

Source: FactSet, Goldman Sachs Global Investment Research

2/19/2020 9.9x 3/16/2020 6.2x 0.9 -38%

Source: FactSet, Goldman Sachs Global Investment Research

Pre-Correction Peak Trough

Source: FactSet, Goldman Sachs Global Investment Research

Source: FactSet, Goldman Sachs Global Investment Research

Pre-Correction Peak Trough

Source: FactSet, Goldman Sachs Global Investment Research

Exhibit 15: GS bottom-up software TAM build

Exhibit 16: GS Framework for Investing in Software

TAM Top-down sizing Is pricing sustainable?

ENTRY/EXIT Technical analysis When to buy? Rotation or short-term mis-execution?

LT FRAMEWORK Long-term revenue/margins scenarios Which scenario is more likely?

COMPETITIVE Revenue per R&D dollar Are there disruptive technologies?

Source: Goldman Sachs Global Investment Research

As noted above, we believe accelerated digitization across industries alongside

and EV/Sales multiple. Our EV/Sales driven valuation of $34 is based on an

translate to higher levels of proﬁtability at scale.

Customer Experience, a segment of the CRM TAM that is growing in importance as

Company-speciﬁc regulatory disclosures

Distribution of ratings/investment banking relationships

Rating Distribution Investment Banking Relationships

Price target and rating history chart(s)

Ratings, coverage universe and related deﬁnitions

Global product; distributing entities

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