Capstone Headwaters SaaS & Cloud Coverage Report - Q3 2019 FINAL

ENTERPRISE SAAS AND CLOUD
Q3 2019
CONTRIBUTORS HIGHLIGHTS
David Michaels  Strong M&A activity with 1,991 deals totaling nearly $220 billion during the last twelve
Managing Director months (LTM)
(858) 926-5950
dmichaels@capstoneheadwaters.com  IPO activity was strong in Q3 with six deals all performing well out of the gates but only one
company closing out the quarter above their IPO open
 Private M&A targets were valued at a median revenue multiple of 4.0x LTM, in line with
Teak Murphy
Director historic norms but below the 5.0x we saw in 2018
(310) 746-5006  Stock prices were down 6.3% in Q3 as market unease driven by global trade concerns pushed
tmurphy@capstoneheadwaters.com prices down and interest rate adjustments have yet to positively impact valuations
 M&A activity remains very strong with Q3’19 representing a big jump after the pullback in
Q2’19 with no near term signs of a reduction in buyer appetite
 There is risk that a market correction in the next 12-24 months would put downward pressure
on M&A activity levels and valuations as public multiples have pulled back a bit already
www.capstoneheadwaters.com
KEY TAKEAWAYS
M&A ACTIVITY & MULTIPLES
PUBLIC COMPANY VALUATION & OPERATING METRICS
CAPSTONE HEADWATERS SOFTWARE TEAM

ENTERPRISE SAAS AND CLOUD: M&A AND VALUATION UPDATE | Q3 2019
KEY TAKEAWAYS
TRANSACTION ACTIVITY MEDIAN VALUATION MULTIPLES MEDIAN PUBLIC COMPANY METRICS
 Strong LTM M&A activity with 1,991 deals  M&A revenue multiple of 4.0x for private  Stock prices fell 6.3%, underperforming
totaling nearly $220 billion and public targets is in line with historical levels but the NASDAQ’s 0.1% drop as market
softness persists
transaction dollars at record level down from the 2018 high, though the
public target median of 4.7x represents a  Median revenue growth of 21.1%
 IPO activity was strong with six deals in represents a slight uptick from Q2 with
new high growth expected to slow slightly to 19.5%
the quarter all performing well out of the
gates but only one company closing out  Public company median multiples of 6.3x over the next twelve months
the quarter above their IPO open revenue and 26.1x EBITDA are above  Median EBITDA margin of 12.9% is up
historic levels but below Q1 and Q2 levels from 2018 levels, possibly indicating a
renewed focus on profitability
NOTABLE Q3’19 M&A TRANSACTIONS MOST ACTIVE BUYERS M&A OUTLOOK
Buyer Target Segment EV  M&A activity rose to 513 deals in Q3’19,

the third highest quarterly deal count as
Vertical Market $28.3 B
buyer appetite remains very strong
Cloud & IT
Infrastructure
$10.7 B
 M&A dollar volume of $68.3B bounced
Vertical Market $6.3 B
back considerably, just below the record
of $75.4B
Cloud & IT $3.3 B
Infrastructure  Our discussions with strategic and private
Vertical Market $2.7 B equity acquirers have not indicated a
reduction in deal appetite
Cloud & IT $2.2 B
Infrastructure
 With multiples near historic highs and a
Vertical Market $1.6 B highly competitive deal environment, it is
a great time to be a seller although it
Human Resources $1.4 B
remains to be seen how long the window
Cloud & IT $1.1 B
will remain open
Infrastructure
Content Creation & $1.0 B
Management
2
KEY TAKEAWAYS

LTM M&A DOLLAR VOLUME

 LTM M&A dollar volume hit a new high at just under $220B driven by strong deal activity and numerous megadeals
» Megadeals tend to drive dollar volume with nine deals north of $5 billion in the past twelve months led by IBM’s acquisition of Red Hat ($34B in Oct’18);
London Stock Exchange’s acquisition of Refinitiv ($28B in Aug’19); Salesforce’s acquisition of Tableau ($17B in Jun’19); the Hellman & Friedman led take private
of Ultimate Software ($11B in Feb’19); and Broadcom’s acquisition of Symantec’s enterprise security business ($11B in Aug’19)
» Lower dollar volume in 2017 was driven by a lack of megadeals
 Q3 M&A dollar volume of $68 billion marks the second highest quarter in history, falling just short of the Q4’18 record of $75 billion
» $1B+ deal count of 11 for the quarter has only been topped once in Q2’18 which saw 15 deals
$250,000
$200,000
Total Transaction Value
$102,428
$89,306
$150,000
$86,014
$100,000
$29,744 $23,194
$26,438 $111,869 $116,126
$50,000
$82,672
$65,730 $66,708
$46,315
$0
2014 2015 2016 2017 2018 LTM
Total Private $ Total Public $

LTM = Last Twelve Months
4
LTM M&A TRANSACTION VOLUME BY SEGMENT

 Transaction volume reached 1,991 deals in the past twelve months, topping historical levels
» The 510 deals completed in Q3’19 represents the third highest deal volume for a quarter, rebounding from a dip in deal volume in Q2’19
 The Vertical Market is by far the largest segment by deal count, representing roughly 40% of LTM transaction volume
 Cloud & IT infrastructure also posted very strong deal volume with the continued transition to the cloud driving M&A activity
 Human Resources and Analytics/AI/BI are both seeing strong increases in deal volume over the past two years
2,000
1,800
1,600 741 774

731
731 675
1,400
585
1,200
Transactions
123 139
155 137 105
1,000 151 125
151 75 82 132
57 80 71 114
800 76 56
52 133 135 165 160
131
119 69 75 76
62 73
600 56 101 37 68 93
93
104 83 84 69 50
86 79 46
400 82 81 65
57
77
225
268 244 277 260
200 172
128 137 192

113 114 107
0
2014 2015 2016 2017 2018 LTM
Analytics / AI / BI Cloud & IT Infrastructure Cloud Computing, Storage & Delivery Communication & Collaboration
Content Creation & Management CRM & Customer Service ERP, Supply Chain & Commerce Finance & Administration
Human Resources Marketing & Advertising Vertical Market LTM = Last Twelve Months
5
LTM M&A TRANSACTION VOLUME BY DEAL SIZE – PRIVATE TARGETS

 Private company M&A activity remains at historic record levels with 1,961 deals in the past twelve months
» Megadeal volume remains high with 20 deals over $1 billion for the past twelve months
 Median transaction size of $37 million for deals with announced values is at the higher end of historical levels but well below recent highs
 Deals under $25 million represent roughly 40% of deal volume for transactions that reported values
100% 6 8 15 13 28 20
20 23
26 23
90% 22 35 25 27
27 34
54 33 30
80% 64
56 49
59 49
70% 49
49
45 52
60% 46
55 50
62
50% 54 60 43 41
40% 93
102 60 54
73 69
30%
20%
126 128 115 104
10% 88 100
0%
2014 2015 2016 2017 2018 LTM
Total Deals 1,582 1,837 1,775 1,761 1,932 1,961
Deals w/ Value 425 471 398 392 407 371
Median ($M) $24 $28 $33 $35 $43 $37
$0-10M $10-25M $25-50M $50-100M $100-250M $250-500M $500M-1B $1B+ LTM = Last Twelve Months
6
LTM M&A TRANSACTION VOLUME BY DEAL SIZE – PUBLIC TARGETS

 Public transaction volume of 30 deals LTM is close to the near term record of 33, with deals over $1 billion also near its highest levels
» Median deal size was $488 million driven by the high volume of deals north of $1 billion
» Q3’19 saw eight deals closed, just below the record nine in Q4’18 but above historic average level
100%
90% 6 7
7
80% 13
14
4 13
70%
7
1
60% 5
1
2
50% 1
5
40% 6 8 2
1 11 6
30%
4 4
2
20% 4
3
2 3
5 2
10% 3
1 4 1 3
1 1 1 1
0%
2014 2015 2016 2017 2018 LTM
Total Deals 20 29 30 33 23 30
Median ($M) $200 $448 $949 $242 $1,739 $488
$0-10M $10-25M $25-50M $50-100M $100-250M $250-500M $500M-1B $1B+ LTM = Last Twelve Months
7
MEDIAN LTM REVENUE MULTIPLES – PRIVATE TARGETS

 Median LTM revenue multiple of 4.0x is in line with historical levels but below the peak of 5.0x in 2018
» The 25th-75th percentile spread remains quite broad, driven by a larger volume of higher multiple transactions
 Q3’19 median private target revenue multiple of 4.5x is above historic norms and a big step up from Q1’19’s 3.5x mark and a bump from Q2’19’s 4.3x
6.0x
5.0x
5.0x
Median Revenue Multiple
4.1x
4.0x
4.0x 3.8x 3.8x
3.7x
3.0x
2.0x
1.0x
0.0x
2014 2015 2016 2017 2018 LTM
25th % 2.2x 2.1x 2.3x 2.2x 2.9x 2.1x
75th % 5.8x 6.1x 6.2x 6.7x 9.9x 6.7x LTM = Last Twelve Months
8
MEDIAN LTM REVENUE MULTIPLES – PUBLIC TARGETS

 The median LTM revenue multiple paid for public companies fell slightly to 4.7x for all deals and 6.5x for $100M+ deals, though both remain above historic norms
 Q3’19 deals median revenue multiple of 4.2x is at the lower end of quarterly median over the past 2 years
 Private equity aggressively acquired public SaaS & cloud companies, accounting for 5 of the 15 deals over $500 million at a median revenue multiple of 8.1x
9.0x
8.1x
8.0x
7.0x 6.5x
6.0x
5.0x 4.7x
4.4x
3.8x 3.7x 3.8x
4.0x
3.4x
2.9x 2.9x
3.0x 2.5x
2.3x
2.0x
1.0x
0.0x
2014 2015 2016 2017 2018 LTM
25th % 1.9x 1.6x 2.5x 1.1x 3.4x 3.2x
75th % 3.6x 4.8x 6.3x 3.9x 8.4x 7.9x
All Deals $100M+ Deals LTM = Last Twelve Months
9
MEDIAN REVENUE MULTIPLES BY SEGMENT – LAST 5 YEARS

 Median revenue multiples across SaaS segments for deals in the past five years ranged from 2.2x to 6.2x, with a median of 3.9x
» Cloud & IT Infrastructure achieved the highest median multiple of 6.2x
» Finance & Administration median multiple of 4.9x is buoyed by its more recent transition to the cloud while segments such as Marketing & Advertising and CRM
& Customer Service that made the transition earlier have seen multiples compress as those segments have experienced consolidation and commoditization
» Analytics/AI/BI is hot as new technologies seek to leverage the wealth of enterprise data to drive business optimization
7.0x
6.2x
6.0x
4.9x 4.7x
5.0x
4.0x 3.9x 3.8x
4.0x 3.6x
3.2x
3.0x 2.8x
2.5x 2.4x 2.2x
2.0x
1.0x
0.0x
10
HIGHEST REVENUE MULTIPLE TRANSACTIONS FOR LTM

LTM
Enterprise Premium to
Ann. Date Buyer Target Segment Target Description Revenue
Value 1 Mo Prior
Multiple
Provides security orchestration, automation, and response (SOAR) SaaS and software for businesses
02/19/19 Cloud & IT Infrastructure $560M 46.7x NA
providing security orchestration and event management, incident management, and incident analysis.
Provides AI-enabled cloud security analytics. Software provides features for protecting Amazon Web
10/03/18 Analytics / AI / BI Services (AWS), Microsoft Azure, and Google Cloud computing accounts by monitoring network traffic, $173M 34.6x NA
user activities, DevSecOps risk assessment, and compliance.
Provides enterprise container and cloud native cybersecurity management PaaS that enables businesses to
Cloud Computing,
05/29/19 deploy and protect applications, firewalls, and test vulnerabilities. Software has capabilities for use on the $410M 27.3x NA
Storage & Delivery
AWS, Docker, IBM Cloud, Rancher, Azure, Google Cloud Platform, Kubernetes, and Pivotal platforms.
Provides open source application delivery SaaS and services for developers and network operation teams
03/11/19 Cloud & IT Infrastructure featuring API gateway traffic, load balancers and service mesh deployments management, website $670M 25.8x NA
performance monitoring in real-time, and application firewall.
Provides customer experience-focused software that collects customer and employee feedback via online
11/11/18 CRM & Customer Service $8.0B 21.5x NA
surveys.
Provides SaaS for real-time cloud performance monitoring and observability for infrastructure,
08/21/19 Cloud & IT Infrastructure $1,050M 21.0x NA
microservices, and applications.
01/28/19 Finance & Administration Provides e-signature automation, e-fax, and document workflow management SaaS to businesses. $230M 19.2x NA
Provides IT asset and help desk management SaaS for businesses. Software also provides features for AI-
04/11/19 CRM & Customer Service based ticket routing, workflow automation, reporting, license compliance management, and risk $350M 17.5x NA
management.
Provides AI-based IoT device and threat identification management SaaS for automated device discovery,
09/04/19 Cloud & IT Infrastructure recognition and classification, behavioral analysis and risk assessment, network segmentation, analytics, $75M 15.0x NA
and reporting.
Provides mobile-based project management SaaS for businesses in the Building and Construction industry.
11/20/18 Vertical Market Software includes team collaboration features that allow users to share and mark up building plans, $875M 14.6x NA
sharing of specs and requests for information, and reporting.
Excludes deals with Target company revenue less than $5M
11
NOTABLE M&A TRANSACTIONS FOR Q3’19

LTM
Enterprise Premium to
Ann. Date Buyer Target Segment Target Description Strategic Rationale Revenue
Value 1 Mo Prior
Multiple
Develops data, analytics, trading, and risk assessment tools to The deal will expand LSE’s business into currencies,
08/01/19 Vertical Market provide information, insights, and technology for the global enhance ability to trade across regions and currencies, $28.3B NA NA
financial markets. and springboard into a leading provider of market data.
The enterprise security assets of Symantec provide security The addition of Symantec’s enterprise assets further
Cloud & IT $10.7B
08/09/19 software, SaaS and services for web, cloud and endpoint expands Broadcom’s push into infrastructure software 4.5x NA
Infrastructure
(Enterprise Assets) security, and data loss prevention. following it’s acquisition of CA last year.
The tie-up will create a food delivery group that had a

07/29/19 Vertical Market Operates a hybrid marketplace for online food delivery. combined 360 million orders worth EUR 7.3 billion in $6.3B 5.6x NA
2018, with a strong presence across the UK and Europe.
Provides a cloud-native application platform to accelerate and Pivotal rejoins VMware as it increases its efforts on
Cloud & IT $3.3B
08/22/19 streamline software development by reducing the complexity Kubernetes and the combination enables both companies 4.3x 51.5%
Infrastructure
of building, deploying, and operating cloud applications. to extend market reach for their products.
The EQT and CPPIB investment enables Waystar to

Provides integrated cloud-based healthcare revenue cycle $2.7B
07/29/19 Vertical Market continue innovation and explore transformative M&A NA NA
management solutions.
opportunties.
Provides security solutions to predict, prevent, detect, respond Provides Vmware, a highly differentiated, intrinsic security
Cloud & IT $2.2B
08/22/19 to, and remediate cyber-attacks before they cause a damaging cloud to better protect enterprise workloads and clients 9.0x 42.1%
Infrastructure
incident or data breach. through big data, behavioral analytics, and AI.
iPipeline provides cloud-based marketing, selling, and iPipeline provides an opportunity for Roper to expand its
08/08/19 Vertical Market processing software solutions for the Insurance and Financial product and customer footprint with a deal that is $1.6B NA NA
Services industry. immediately cash accretive.
Provides field service management SaaS focusing on workforce Salesforce leveraged ClickSoftware to develop its Field
08/07/19 Human Resources management, mobile workforce management, and service Service Lightning offering and looks to bring the expertise $1.4B NA NA
optimization. in-house to better service field management needs.
The combination of Splunk and SignalFx will give IT and
Cloud & IT Provides SaaS for real-time cloud performance monitoring and developers a data platform that allows them to monitor $1.1B
08/21/19 21.0x NA
Infrastructure observability for infrastructure, microservices, and applications. and observe data in real time, no matter the infrastructure
or data volume.
KKR looks to support Corel’s continued growth across its
Content Creation & Provides graphic design, image and video editing, and word current platforms and increase M&A activity to further $1.0B
07/03/19 3.1x NA
Management processing software for consumers and businesses globally. expand, building on the company’s established track
record of successful acquisitions.
Includes largest transactions based on Enterprise Value
Parenthesis indicate a negative #
12
MOST ACTIVE SAAS & CLOUD BUYERS – LAST 2 YEARS

SaaS/Cloud Transactions
Company Date Company Value Date Company Value Date Company Value
08/19/19 SmartZip Analytics Inc. (assets) NA 01/31/19 Haystack Informatics, Inc. NA 02/01/18 Real Estate Digital LLC NA
08/15/19 Point of Sale Enterprise, LLC. NA 01/25/19 Distillery Solutions, Inc. NA 01/15/18 Sicap Schweiz AG NA
08/01/19 Akuiteo SAS NA 12/19/18 Financial Risk Solutions Ltd. NA 01/12/18 Blayhall Marine Limited NA
08/01/19 Salvia Développement SAS NA 10/12/18 Greycon Ltd. NA 01/09/18 Pike13 Inc. NA
07/17/19 MDS Global NA 10/01/18 Coreworx Inc. NA 01/08/18 Infian LLC NA
06/24/19 CORVID PayGate Ltd. NA 09/20/18 Helm Operations NA 01/03/18 Forsikringens Datacenter A/S NA
05/31/19 Aurum NA 09/13/18 Nokia Corporation (IP video business) NA 12/13/17 Automatic Netware Ltd. NA
Abak Software Inc. NA Aleyant Systems, LLC NA Financial Aid Management For Education NA
41 deals 05/21/19
05/20/19 Accelerize (Cake Marketing & other assets) $20M
08/02/18
08/01/18 Ez-Runner Systems Ltd NA
11/28/17
11/14/17 Hospitality 101 (assets) NA
04/25/19 Triple E Technologies, LLC NA 07/10/18 Dispatching Solutions, Inc NA 11/14/17 Professional Software Services LLC NA
04/23/19 TORCHx NA 06/28/18 Pace Software Inc. NA 10/26/17 Syscon Justice Systems NA
04/16/19 BEC Legal Systems NA 06/05/18 Customer Insight Inc. NA 10/25/17 MCR Enterprise Solutions Ltd. NA
04/01/19 Mortgage Builder Inc. (assets) NA 05/31/18 Orion Wine Software, Inc. NA 10/03/17 Clinical Computing PLC NA
03/11/19 Green 4 Solutions Ltd. NA 03/30/18 XLerant, Inc. NA
09/04/19 Movere, Inc NA 02/04/19 BrightBytes Inc. (DataSense assets) NA 06/04/18 GitHub, Inc. $7,500M
08/19/19 jClarity Ltd NA 01/24/19 Citus Data Inc. NA 05/20/18 Semantic Machines Inc. NA
08/05/19 PromoteIQ $60M 11/19/18 FSLogix Inc. NA 04/02/18 Forerunner Software (BI reporting assets) NA
08/05/19 SpotFront, Inc. NA 10/08/18 Glint Inc. $400M 02/13/18 Chalkup Corp. NA
07/29/19 BlueTalon, Inc. NA 09/13/18 Lobe Artificial Intelligence, Inc. NA PlayFab Inc. NA
19 deals 06/17/19 Good Software LLC NA 06/20/18 Bonsai AI, Inc. NA
01/29/18
01/03/18 Avere Systems, Inc. NA
05/28/19 Drawbridge Inc. NA
08/01/19 Rockend Pty Ltd NA 01/09/19 Rental History Reports NA 03/08/18 HAPPY Software Inc. NA
07/31/19 ProLease $75M 12/05/18 Thesaurus Technology NA 12/14/17 MDA Property Systems NA
07/31/19 LEVERTON Corporation $10M 12/05/18 John Stephen Consultancy Limited NA 10/17/17 eCondoSystems, LLC NA
07/31/19 Link Systems, Inc. NA 10/10/18 IPM Software Inc. NA 10/16/17 HAB Inc. NA
18 deals 06/20/19 Dynamic Lead Solutions LLC NA 07/12/18 CML Software Limited NA 10/10/17 Tenmast Software NA
02/07/19 CTM Software Corp. NA 07/04/18 PropSys Solutions NA 10/04/17 Qube Global Software Ltd. NA
09/24/19 Acquia Inc. $1,000M 12/24/18 MINDBODY Inc. $1,750M 08/07/18 Alegeus Technologies LLC $750M
09/11/19 Vertice Technologies, LLC $500M 12/11/18 7Park Data, Inc. NA 06/04/18 Integral Ad Science Inc. $800M
05/29/19 Black Mountain Systems, LLC NA 11/29/18 Wrike Inc. $800M 04/23/18 Allocate Software plc $450M
03/22/19 PlanSource Benefits Administration, Inc. NA 11/11/18 Apptio Inc. $1,940M 10/26/17 Datto Inc. NA
02/07/19 in4mo Oy NA 10/02/18 Starhome BV NA 10/11/17 JAMF Software, LLC NA
17 deals 01/14/19 QuickBase Inc. $1,000M 08/15/18 iCIMS Inc. NA
13
MOST ACTIVE SAAS & CLOUD BUYERS – LAST 2 YEARS (CONTINUED)

SaaS/Cloud Transactions
Company Date Company Value Date Company Value Date Company Value
05/28/19 Cority NA 09/04/18 Apttus Corporation NA 05/31/18 LogRhythm Inc. $525M
02/25/19 ConnectWise, Inc. NA 08/13/18 Quorum Business Solutions, Inc. NA 02/09/18 Nintex Group Pty Ltd. NA
02/12/19 Ellie Mae, Inc. (NYSE:ELLI) $3,683M 07/10/18 Centrify Corporation NA 01/17/18 Motus LLC NA
02/07/19 Aucerna NA 06/13/18 CRIF (ACTion, Synergy, Achieve divisions) NA 11/27/17 Barracuda Networks, Inc. (NYSE:CUDA) $1,612M
16 deals 11/30/18 PEC Safety Operations LLC $225M 06/12/18 MeridianLink, Inc. NA 11/08/17 ABC Financial Services, Inc. NA
11/05/18 CA Veracode Inc. $950M
08/26/19 Customer Analytics Technologies Inc. NA 01/30/19 Singularity Networks, Inc. NA 01/24/18 Skyport Systems Inc. NA
08/12/19 42hertz Software India Private Limited NA 11/21/18 Ensoft Ltd. NA 12/07/17 47Line Technologies Inc. NA
08/06/19 Rizio Inc. NA 08/02/18 Duo Security, Inc. $2,350M 10/23/17 BroadSoft, Inc. (NasdaqGS:BSFT) $2,284M
08/06/19 Voicea NA 06/19/18 July Systems Inc. NA 10/19/17 Perspica NA
14 deals 06/06/19 Sentryo SAS NA 05/01/18 Accompani Inc. $270M
08/18/19 Depot Systems Inc. $5M 06/21/18 Pierbridge, Inc. $59M 03/14/18 LSP Solutions B.V. $6M
02/26/19 Container Chain Pty Ltd $66M 06/08/18 Fenix Data Systems Inc $3M 12/20/17 CustomsMatters $1M
01/31/19 SYSTEMA AS $4M 05/28/18 SaaS Transportation, Inc. $3M 12/20/17 ABM Data Systems Ltd $13M
13 deals 10/17/18
08/16/18
IFS Global Holdings
Trinium Technologies, LLC
$14M
$50M
04/23/18 PB & Asoc. S.A. and Softcargo and EasyLog $19M 12/13/17 Microlistics Pty Ltd $30M
07/10/19 Fourth Ltd. NA 02/25/19 Worksoft Inc. NA 02/12/18 Inkling Systems, Inc. NA
07/10/19 Red Book Connect LLC NA 10/11/18 Total Defense Inc. NA 01/11/18 Talkwalker NA
05/05/19 Puzzel AS NA 09/05/18 CEB Inc. (Challenger Business) NA 11/27/17 Bazaarvoice, Inc. (NasdaqGS:BV) $524M
12 deals 04/16/19 Skuid Inc. NA 05/30/18 FrontStream Holdings LLC NA 10/26/17 Logi Analytics, Inc. NA
08/21/19 Intrinsic NA 06/13/19 Avi Networks NA 03/28/18 E8 Security Inc. NA

08/14/19 Veriflow Systems NA 05/15/19 BirRock Inc. NA 02/14/18 CloudCoreo Inc. NA
07/25/19 Uhana Inc. NA 02/05/19 AetherPal Inc. NA 11/02/17 VeloCloud Networks Inc. $525M
11 deals 07/18/19 Bitfusion.io NA 11/06/18 Heptio Inc. NA
07/11/19 Speak Ai NA 09/25/18 Iridize NA 04/24/18 Grapeshot Limited $454M

11/15/18 Talari Networks NA 05/16/18 DataScience, Inc. NA 02/15/18 Zenedge LLC NA
10/22/18 DataFox Inc. NA 04/30/18 Vocado NA 12/18/17 Aconex Limited $1,259M
10 deals 10/17/18 goBalto Inc. NA
08/15/19 Socratic, Inc. NA 02/19/19 Alooma Ltd. NA 05/14/18 Cask Data, Inc. NA
07/09/19 Elastifile Ltd. NA 11/27/18 cwist Inc. NA 05/09/18 Velostrata Ltd. NA
Looker Data Sciences, Inc. $2,600M Terraform Labs Inc. NA Xively $50M
9 deals 06/06/19 10/02/18 02/15/18
14
KEY TAKEAWAYS

ENTERPRISE SAAS & CLOUD 165 PUBLIC COMPANY UNIVERSE – PART 1
Analytics / AI / BI
Cloud &
IT Infrastructure
Cloud Computing,
Storage & Delivery
Communication &
Collaboration
Content Creation &

Management
CRM &
Customer Service
16
ENTERPRISE SAAS & CLOUD 165 PUBLIC COMPANY UNIVERSE – PART 2
ERP, Supply Chain &

Commerce
Finance &
Administration
Human Resources
Marketing &
Advertising
Vertical Markets
Software
Conglomerates
17
Q3 2019 ENTERPRISE SAAS & CLOUD IPOS
IPO Date Company Segment Description IPO Details

Offering Amount 525.0 Mkt Cap at 9/30 5,447.4 LTM Revenue 234.7
Cloud & IT Provides an integrated cloud-based security solution to secure public cloud,
Offer to Open + 24.0% EV/Rev Mult 22.7x LTM EBITDA (72.1)
09/13/19 private cloud, on-premise, SaaS applications, and IoT devices as well as
Infrastructure Open to Close + 0.2% EV/EBITDA Mult NA Gross Margin 77.3%
performance management solutions.
NYSE:NET Open to 9/30 - 0.2% EBITDA Margin (30.7)%
Provides a SaaS monitoring and analytics platform which integrates and Offering Amount 648.0 Mkt Cap at 9/30 9,950.4 LTM Revenue 266.0
Cloud & IT automates infrastructure monitoring, application performance monitoring, and Offer to Open + 49.4% EV/Rev Mult 37.4x LTM EBITDA (16.7)
09/18/19
Infrastructure log management to provide real-time observability of customers technology Open to Close - 6.9% EV/EBITDA Mult NA Gross Margin 74.5%
NasdaqGS:DDOG stack. Open to 9/30 - 16.0% EBITDA Margin (6.3)%
Offering Amount 569.8 Mkt Cap at 9/30 5,236.1 LTM Revenue 455.3
Cloud & IT Provides a software intelligence platform for enterprise cloud applications. Its
Offer to Open + 59.4% EV/Rev Mult 14.6x LTM EBITDA (33.1)
07/31/19 platform allows its customers to modernize and automate IT operations,
Infrastructure Open to Close - 6.5% EV/EBITDA Mult NA Gross Margin 79.5%
develop and release software, and enhance user experiences.
NYSE:DT Open to 9/30 - 26.8% EBITDA Margin (7.3)%
Delivers a SaaS system to the Life, Accident, and Health Insurance industry. The Offering Amount 143.0 Mkt Cap at 9/30 558.1 LTM Revenue 71.5
platform supports an insurer’s administrative processes (claims, payments, Offer to Open + 12.1% EV/Rev Mult 8.0x LTM EBITDA 1.6
08/15/19 Vertical Market
absence, policy administration, billing) while providing data analytics Open to Close - 3.6% EV/EBITDA Mult 362.4x Gross Margin 66.4%
ASX:FCL capabilities and helping insurers to connect digitally with customers. Open to 9/30 + 11.2% EBITDA Margin 2.2%
Provides an enterprise SaaS platform utilizing deep learning-based AI Offering Amount 325.5 Mkt Cap at 9/30 3,499.9 LTM Revenue 356.8
technology to analyze structured and unstructured data from signal fields Offer to Open + 61.9% EV/Rev Mult 8.6x LTM EBITDA (52.4)
07/18/19 Analytics / AI / BI
in human, digital, and IoT interactions to deliver improved user experiences. Open to Close + 9.0% EV/EBITDA Mult NA Gross Margin 64.6%
NYSE:MDLA Open to 9/30 - 19.3% EBITDA Margin (14.7)%
Operates an Intelligent Identity platform, which offers secure access to any Offering Amount 187.5 Mkt Cap at 9/30 1,339.3 LTM Revenue 215.0
Cloud & IT service, application, or API utilizing secure single sign-on, adaptive multi-factor Offer to Open + 34.5% EV/Rev Mult 7.0x LTM EBITDA 43.5
09/19/19
Infrastructure authentication, security control, personalized and unified profile directories, Open to Close - 4.3% EV/EBITDA Mult 34.4x Gross Margin 84.2%
NYSE:PING data governance, and AI/ML powered API security. Open to 9/30 - 14.5% EBITDA Margin 20.2%
18
MEDIAN STOCK PERFORMANCE – SAAS & CLOUD 165

 SaaS & Cloud 165 was down 6.3% for Q3, a very rare down quarter in recent years, underperforming the NASDAQ which had a slight drop
» Cloud Computing/Storage and Software Conglomerates were the only segments to post gains
» The majority of segments fell over 5% with Marketing & Advertising and Human Resources down double digits
 SaaS & Cloud 165 are slightly up over LTM, outperforming the NASDAQ which is in the red for LTM
 Continued uncertainty in global trade has hampered stock performance while fed rate cuts late in Q3 have yet to provide an impact
Stock Performance Stock Performance - 6/30 - 9/30
100%
Cloud Computing / Storage 3.8%
87.4%
Software Conglomerates 0.2%
80% 78.0%
Finance & Administration (0.0)%
61.6% CRM & Customer Service (1.9)%
60%
50.6% ERP, Supply Chain & Commerce (5.9)%
Content Creation & Management (6.1)%
40%
SaaS & Cloud 165 (6.3)%
Analytics / AI / Business Intelligence (6.3)%
20% Vertical Market (6.5)%
1.4% Cloud & IT Infrastructure (6.5)%

0% Communication & Collaboration (9.7)%
(0.6)% (0.1)%
(6.3)% Marketing & Advertising (11.1)%
(20)% Human Resources (11.2)%
Last 5 Years Last 3 Years LTM 6/30 - 9/30
(15)% (10)% (5)% 0% 5%
SaaS & Cloud 165 NASDAQ

19
MEDIAN LTM REVENUE MULTIPLES – SAAS & CLOUD 165

 The median LTM revenue multiple of 6.3x is well above recent years, though down from the 6.7x we saw at the end of Q2
» Finance & Administration and Analytics/AI/Business Intelligence industries command the highest multiples at 10.6x and 8.7x, respectively, though both are down
from last quarter
» Cloud Computing/Storage lags on multiples as the space has matured with pricing commoditized
» Content Creation & Management represents the weakest segment multiple despite Adobe (Nasdaq:ADBE) and Wix (Nasdaq:WIX) trading at lofty multiples
LTM Enterprise Value / Revenue LTM Enterprise Value / Revenue
7.0x
Finance & Administration 10.6 x
6.3x
5.9x 5.9x Analytics / AI / Business Intelligence 8.7 x
6.0x
CRM & Customer Service 8.6 x
5.0x 4.9x 4.9x Communication & Collaboration 8.3 x
5.0x
Cloud & IT Infrastructure 6.9 x
4.0x SaaS & Cloud 165 6.3 x
Vertical Market 6.3 x

3.0x Human Resources 6.2 x
Marketing & Advertising 5.7 x
2.0x
ERP, Supply Chain & Commerce 5.7 x
Cloud Computing / Storage 5.1 x
1.0x
Software Conglomerates 4.9 x
Content Creation & Management 4.3 x

0.0x
2014 2015 2016 2017 2018 9/30/19 0x 2x 4x 6x 8x 10x 12x
Based on data available as of 9/30/19 Based on data available as of 9/30/19

20
MEDIAN LTM EBITDA MULTIPLES – SAAS & CLOUD 165

 The median EBITDA multiple of 26.1x remains well above historic norms and in line with Q2, though slightly below Q1’s record setting level of 27.7x
 Human Resources tops the chart, commanding a strong multiple with a new generation of solutions causing disruption and capturing significant share while
enterprises increasingly focus on improving hiring processes and retention
 Analytics/AI/Business Intelligence achieve strong EBITDA multiples, though most companies in that category are not yet profitable or recently turned profitable.
The category continues to quickly expand as AI and analytics are increasingly leveraged across the enterprise
LTM Enterprise Value / EBITDA LTM Enterprise Value / EBITDA
30x Human Resources 42.3 x

26.1x Analytics / AI / Business Intelligence 38.2 x
25x 24.2x
23.2x CRM & Customer Service 33.8 x
Finance & Administration 26.9 x
20x 18.2x Vertical Market 26.5 x
16.6x 17.2x
SaaS & Cloud 165 26.1 x
15x Cloud & IT Infrastructure 24.5 x
ERP, Supply Chain & Commerce 23.9 x
10x Marketing & Advertising 23.4 x

Content Creation & Management 23.2 x
5x Communication & Collaboration 18.5 x

Cloud Computing / Storage 13.6 x
Software Conglomerates 12.8 x
0x
2014 2015 2016 2017 2018 9/30/19 0x 10x 20x 30x 40x 50x
Companies with EBITDA Margin <7.5% and EBITDA multiple above 20x deemed NA Companies with EBITDA Margin <7.5% and EBITDA multiple above 20x deemed NA

21
MEDIAN REVENUE GROWTH – SAAS & CLOUD 165

 Median revenue growth accelerated to 21.1% for Q3 compared to 19.4% in Q2
 Growth is projected to slow over the next twelve months at 19.5%, though that is above the 18.1% growth projected last quarter
 Investors seem less optimistic than analysts as valuations have pulled back despite analysts seeing improved growth prospects
» Six segments are expected to deliver more than 20% growth over the next twelve months
Revenue Growth vs Prior 12 Mos NTM / LTM Revenue Growth Projection
30%
27.3% ERP, Supply Chain & Commerce 30.0%
Marketing & Advertising 28.2%
25%
23.1% Human Resources 23.2%
22.1%
20.7% 21.1%
Communication & Collaboration 23.1%
19.5% 19.5%
20%
Analytics / AI / Business Intelligence 23.1%
Finance & Administration 20.5%
15%
CRM & Customer Service 19.7%
SaaS & Cloud 165 19.5%
10%
Vertical Market 17.8%
Cloud & IT Infrastructure 16.0%
5%
Content Creation & Management 12.3%
0%
2014 2015 2016 2017 2018 LTM NTM
9/30/19 9/30/19 0% 5% 10% 15% 20% 25% 30% 35%

22
MEDIAN EBITDA GROWTH – SAAS & CLOUD 165

 Median EBITDA growth improved to 20.6% in Q3, compared to 18.7% in Q2
 EBITDA growth is projected to remain in line with current growth levels with 20.1% expected over the next twelve months
» Five segments project greater than 20% EBITDA growth with CRM & Customer Service surpassing 25% projected growth
EBITDA Growth vs Prior 12 Mos NTM / LTM EBITDA Growth Projection
30%
24.7% Vertical Market 24.7%

25%
Content Creation & Management 24.0%
20.8% 20.6%
20.0% 20.1% Marketing & Advertising 23.3%
20%
Finance & Administration 21.2%
15%
ERP, Supply Chain & Commerce 19.5%
10.1% Human Resources 19.4%

10%
5.7% Cloud & IT Infrastructure 13.5%
5% Cloud Computing / Storage 12.0%
0% Software Conglomerates 6.2%
2014 2015 2016 2017 2018 LTM NTM
9/30/19 9/30/19 0% 5% 10% 15% 20% 25% 30%
Companies with EBITDA Margin between -5.0% and 5.0% deemed NA Companies with EBITDA Margin between -5.0% and 5.0% deemed NA

23
MEDIAN GROSS MARGIN TRENDS – SAAS & CLOUD 165

 Median gross margins of 70.6% is above historic norms but slightly below the 70.7% we saw in Q2
 Gross margins vary by a fairly wide range across segments
» Five segments generate above 70% gross margins
» Cloud Computing/Storage trails as the only segment with median gross margins below 60%
Gross Margins Gross Margins by Segment
80%
Cloud & IT Infrastructure 76.7%
69.6% 70.5% 70.6%
70% 68.0% 67.7% 68.3% Marketing & Advertising 74.8%
60%
50% Finance & Administration 70.6%

Human Resources 70.2%
40%
30% Content Creation & Management 68.0%

20%
10% CRM & Customer Service 66.4%

0%
2014 2015 2016 2017 2018 LTM
9/30/19 0% 25% 50% 75% 100%

24
MEDIAN EBITDA MARGIN TRENDS – SAAS & CLOUD 165

 Median EBITDA margins have been rising in recent years following four straight years of declines, possibly indicating that companies have pulled back on
reinvestment for higher growth and are shifting into harvest mode which would line up with lower revenue growth rates
» Software Conglomerates and Cloud Computing/Storage generate strong EBITDA margins from their mature business models and large scale
» Marketing & Advertising EBITDA margins are strong for larger players while smaller players are typically losing money as they try to add scale
» The Vertical Market segment achieves high EBITDA margins despite the relatively low gross margins, often focusing on developing mature business models
sooner than horizontal players who are more willing to trade near term profitability for increased growth
EBITDA Margins EBITDA Margins by Segment
18%
16% 15.5%
Marketing & Advertising 26.5%
14.0%
14% Cloud Computing / Storage 26.5%
12.9%
12% 11.2%
10.3% Content Creation & Management 19.0%
10.1%
10% SaaS & Cloud 165 12.9%
8% Cloud & IT Infrastructure 12.8%

6%
4% Finance & Administration 7.1%
2% Human Resources 6.0%

0%
2014 2015 2016 2017 2018 LTM Analytics / AI / Business Intelligence 0.9%
9/30/19
0% 10% 20% 30% 40% 50%

25
KEY TAKEAWAYS

2 SENIOR SOFTWARE COVERAGE TEAM

7
Capstone Headwaters has organized a highly skilled transaction team with deep industry
expertise, close relationships with market leaders, and extensive execution experience
David Michaels John Snead David Francione Teak Murphy Amit Mujumdar David DeSimone
Head of TMT Head of International TMT Head of Fintech Director Director Director
 David brings 28 years of  John Snead is responsible for  David has over 17 years of  Teak has over 15 years of  Amit has 15 years of experience  David has over 15 years of
investment banking experience managing Capstone’s Central experience as an investment experience assisting technology providing strategic advice to experience in equity, debt and
in technology M&A and European investment banking banker and leads the firm’s companies on mergers, boards and management teams M&A transactions
financing activities Fintech practice acquisitions, IPOs, and capital of technology businesses  Previously, David served as a
 Previously, he founded  Previously, he founded  Previously, David served as raises  Previous experience with Principal at Bowen Advisors,
SagePoint Advisors and was a Grenport Limited, was Senior Vice President at  Prior experience includes Stephens, Lazard, GCA; Corp was a Vice President at
Co-Founder, Partner, and Managing Director in Kroll’s Silverwood Partners, was head SagePoint Advisors, Dev @ Dex / Business.com Boenning & Scattergood and
Managing Director at corporate finance group, was a of corporate development for Montgomery & Co., Cowen, and  BCom, Finance, from McGill held positions at Needham &
Montgomery & Co. Director in Arthur Andersen’s Elcom International and held Enterprise Partners Venture University Company, RobertsonStephens
BS, Engineering, from University Corporate Finance Practice and positions at SS&C Technologies Capital and J.P. Morgan
  MBA, Finance, from University
of Michigan held positions at KPMG and and Advest, Inc. BS, Finance, from University of BA, Government, from
 of Toronto (Rotman) 
Morgan Grenfell BS, Finance, from Central Southern California Harvard University
 MBA, Finance, from UCLA 
 BS, Accounting, from University Connecticut State University
of Wolverhampton  MBA, Finance, from University
 MBA, from University of of Connecticut
Birmingham
27

Capstone Headwaters SaaS &amp; Cloud Coverage Report - Q3 2019 FINAL

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ENTERPRISE SAAS AND CLOUD

M&A ACTIVITY & MULTIPLES

PUBLIC COMPANY VALUATION & OPERATING METRICS

CAPSTONE HEADWATERS SOFTWARE TEAM

NOTABLE Q3’19 M&A TRANSACTIONS MOST ACTIVE BUYERS M&A OUTLOOK

Buyer Target Segment EV  M&A activity rose to 513 deals in Q3’19,

M&A ACTIVITY & MULTIPLES

PUBLIC COMPANY VALUATION & OPERATING METRICS

CAPSTONE HEADWATERS SOFTWARE TEAM

LTM M&A DOLLAR VOLUME

Total Private $ Total Public $

LTM M&A TRANSACTION VOLUME BY SEGMENT

1,600 741 774

128 137 192

LTM M&A TRANSACTION VOLUME BY DEAL SIZE – PRIVATE TARGETS

LTM M&A TRANSACTION VOLUME BY DEAL SIZE – PUBLIC TARGETS

MEDIAN LTM REVENUE MULTIPLES – PRIVATE TARGETS

MEDIAN LTM REVENUE MULTIPLES – PUBLIC TARGETS

MEDIAN REVENUE MULTIPLES BY SEGMENT – LAST 5 YEARS

HIGHEST REVENUE MULTIPLE TRANSACTIONS FOR LTM

Excludes deals with Target company revenue less than $5M

NOTABLE M&A TRANSACTIONS FOR Q3’19

The tie-up will create a food delivery group that had a

The EQT and CPPIB investment enables Waystar to

MOST ACTIVE SAAS & CLOUD BUYERS – LAST 2 YEARS

MOST ACTIVE SAAS & CLOUD BUYERS – LAST 2 YEARS (CONTINUED)

08/21/19 Intrinsic NA 06/13/19 Avi Networks NA 03/28/18 E8 Security Inc. NA

07/11/19 Speak Ai NA 09/25/18 Iridize NA 04/24/18 Grapeshot Limited $454M

M&A ACTIVITY & MULTIPLES

PUBLIC COMPANY VALUATION & OPERATING METRICS

CAPSTONE HEADWATERS SOFTWARE TEAM

ENTERPRISE SAAS & CLOUD 165 PUBLIC COMPANY UNIVERSE – PART 1

Content Creation &

ENTERPRISE SAAS & CLOUD 165 PUBLIC COMPANY UNIVERSE – PART 2

ERP, Supply Chain &

Q3 2019 ENTERPRISE SAAS & CLOUD IPOS

IPO Date Company Segment Description IPO Details

MEDIAN STOCK PERFORMANCE – SAAS & CLOUD 165

Stock Performance Stock Performance - 6/30 - 9/30

1.4% Cloud & IT Infrastructure (6.5)%

LTM = Last Twelve Months

MEDIAN LTM REVENUE MULTIPLES – SAAS & CLOUD 165

LTM Enterprise Value / Revenue LTM Enterprise Value / Revenue

4.0x SaaS & Cloud 165 6.3 x

Vertical Market 6.3 x

Content Creation & Management 4.3 x

LTM = Last Twelve Months

MEDIAN LTM EBITDA MULTIPLES – SAAS & CLOUD 165

LTM Enterprise Value / EBITDA LTM Enterprise Value / EBITDA

30x Human Resources 42.3 x

10x Marketing & Advertising 23.4 x

5x Communication & Collaboration 18.5 x

LTM = Last Twelve Months

MEDIAN REVENUE GROWTH – SAAS & CLOUD 165

Revenue Growth vs Prior 12 Mos NTM / LTM Revenue Growth Projection

LTM = Last Twelve Months

MEDIAN EBITDA GROWTH – SAAS & CLOUD 165

EBITDA Growth vs Prior 12 Mos NTM / LTM EBITDA Growth Projection

24.7% Vertical Market 24.7%

10.1% Human Resources 19.4%

LTM = Last Twelve Months

MEDIAN GROSS MARGIN TRENDS – SAAS & CLOUD 165

Gross Margins Gross Margins by Segment

Capstone Headwaters SaaS & Cloud Coverage Report - Q3 2019 FINAL

Capstone Headwaters SaaS & Cloud Coverage Report - Q3 2019 FINAL