LEONIS CREDENTIALS & SERVICES
▪ Leonis solely focuses on providing M&A and Growth Capital advisory services to both high-growth and well- established software and technology companies
▪ Leonis core areas of focus include:
▪ Sell-side M&A: represent companies looking to be acquired by a strategic or go through a fulsome liquidity event with a financial sponsor
▪ Capital Raises:
• Majority Equity Raises: Recapitalizations from private equity & growth equity firms who understand the sector and will be able to partner with management to inject capital and provide expertise to maximize the company’s growth
• Minority Equity Raises: Equity investments from private equity and strategic partners who bring capital and market expertise to bear
▪ Retained Advisory Services: strategic guidance to assist management in maximizing firm value ahead of a potential liquidity event, as well as manage inbound offers and solicitations
FIRM OVERVIEW
▪ Bankers with over 50 years of combined experience in bulge bracket Wall Street firms and Middle Market
▪ Team has executed over 105 M&A, restructuring and capital raising deals with cumulative transaction values over $170 billion
▪ Team executed eight deals in the last twelve months with an 85% close rate
▪ Deep knowledge of strategic and financial buyers with a proprietary database of more than 4,200 private equity investors and 1,800 strategic acquirers
▪ Team with experience advising, operating and investing in businesses within the firm’s core areas provides an unbiased view of how “the other side” will look at a deal
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Robert Koven Leonis Partners 1st Quarter 2018 SAAS Analysis
1. LEONIS PARTNERS: 1ST QUARTER 2018 SAAS ANALYSIS
ANALY SIS OF SAAS VALUATIO NS & KEY DRIVERS IN PUBLIC AND PRIVATE MARKETS
2. LEONIS PARTNERS
EXPERIENCED SAAS ADVISORS
▪ Leonis provides M&A and Growth Capital advisory
services to both high-growth and well-established
software and technology companies
▪ Leonis core areas of focus:
▪ Sell-side M&A: Represent companies looking to be
acquired by a strategic or go through a fulsome liquidity
event with a financial sponsor
▪ Capital Raises:
• Majority Equity Raises: Recapitalizations from private
equity & growth equity firms who understand the
sector and will be able to partner with management to
inject capital and provide expertise to maximize the
company’s growth
• Minority Equity Raises: Equity investments from
growth equity and strategic partners who bring capital
and market expertise to bear
▪ Retained Advisory Services: Strategic guidance to assist
management in maximizing firm value ahead of a
potential liquidity event, as well as manage inbound
offers and solicitations
For more information or inquiries, please contact us at
info@leonispartners.com
2
SAAS TOMBSTONES
FIRM OVERVIEW
▪ Bankers with over 50 years of combined experience in bulge bracket
Wall Street firms and Middle Market
▪ Team has executed over 115 M&A, restructuring and capital raising deals
with cumulative transaction values over $180 billion
▪ Deep knowledge of strategic and financial buyers with a proprietary
database of more than 4,200 private equity investors and 1,800 domestic
and international strategic acquirers
▪ Team with experience advising, operating and investing in businesses
within the firm’s core areas provides an unbiased view of how “the other
side” will look at a deal
Has Acquired
$100,000,000
Equity Capital Raise
$20,000,000
LEONIS CREDENTIALS & SERVICES
Has Been Acquired By
Has Been Recapitalized
Debt Capital Raise Has Acquired
Has Merged With Has Been Acquired By
3. LEONIS SAAS INDEX
1Q 2018 INDEX SUMMARY
▪ Leonis’s proprietary SaaS Index is comprised of 70
publicly-traded software companies that offer their
services through a subscription-based pricing model
▪ The Leonis SaaS Index is an equally-weighted index
▪ In 1Q18, EV / Revenue valuations increased to all-time-
highs on an average valuation multiple basis
▪ Interestingly, this increase was in the face of a slight
deterioration in top-line growth rates. This is a trend
Leonis will be monitoring as we move through 2Q and 3Q
2018
▪ Multiple expansion amongst a backdrop of a volatile
trading environment in 1Q 2018
▪ Despite a steep sell-off in early 2016, SaaS companies
have significantly and consistently outperformed the
broader tech market over the past two years
▪ Industry multiples continue to be driven by a combination
of growth and profitability rather than “growth at any cost”
▪ 15 of the 70 companies in the index have gone public
within the last 24 months; to avoid overstating
performance, the index excludes a stock’s performance on
the day of its IPO. Additionally, major tech market movers
like Facebook, Google and Amazon do not qualify for the
index due to business model differentiation
3
SAAS INDEX PERFORMANCE – LAST 24 MONTHS
MULTIPLES & GROWTH RATES OVER TIMETHE LEONIS SAAS INDEX
Source: Pitchbook, Leonis Proprietary Transaction Database, Federal Reserve Economic Data.
Note: Market Data as of 3/31/2018.
5.52x
6.45x
5.24x
6.10x
6.73x 6.82x 6.62x
7.61x
33%
30% 30%
32%
34% 35%
32%
29%
20%
30%
40%
50%
60%
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Avg. EV/Rev Multiple Avg. YoY Growth Rate
(25.0%)
(5.0%)
15.0%
35.0%
55.0%
75.0%
95.0%
115.0%
135.0%
Leonis SaaS Index Nasdaq Index
5. VALUATION
RULE OF 40 & THE IMPACT ON VALUATION
5
SAAS INDEX VALUATIONS COMPARED TO RULE OF 40RULE OF 40 EXPLAINED
CFO MARGINS + GROWTH RATE DISTRIBUTIONS
▪ The Rule of 40 states that if a company’s revenue growth (%) plus its
cash flow from operations (CFO) (%) is > 40, then the company is
operating efficiently and deserves a premium valuation multiple
▪ As shown on the following page, growth is the key driver of SaaS
multiples, but typically growth comes at a high cost and must be
weighed relative to profitability
▪ The Rule of 40 serves as a rule of thumb to identify which
companies are overpaying for top-line growth at the cost of excessive
bottom-line damage, and which are growing ‘efficiently’
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
(40%) (30%) (20%) (10%) 0% 10% 20% 30% 40%
RevenueGrowth(%)
CFO Margin (%)
5.12x 4.92x
6.02x
8.24x
9.01x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
<10% 10-20% 20-30% 30-40% >40%
EV/Revenue
CFO Margin + Revenue Growth Rate
7x
11x
3x
Scale(EV/Rev.):
6. ▪ As shown below, valuations are highly correlated to
growth rates
▪ The distribution of EV/Rev multiples is relatively
normal and centered at 6-8x EV/ Rev with an average
growth rate of 30% at this multiple range
▪ Regression of bucketed average growth rates exhibits
direct correlation, with an R-squared of .87(1), which is
high for financial statistics
6
KEY SAAS REVENUE KPIS
THE IMPORTANCE OF GROWTH IN SAAS VALUATIONS
VALUATION
EV / REVENUE VALUATIONS AS A FUNCTION OF GROWTH
▪ SaaS Valuations are driven by the following key characteristics
• Revenue Retention Rate
• Customer Retention Rates
• Recurring (ARR or MRR) Growth Rates
• Gross Margin
• Total Addressable Market
• Customer Acquisition Cost (CAC) relative to the Long-term
value (LTV) of a customer
▪ SaaS companies receive high valuations due to their combination of
high gross profit margins and the recurring aspect of their existing
revenue base
▪ Large number of SaaS companies operate at negative margins for
extensive periods to fund sales growth
▪ Given the recurring, high retention-rate nature of the business, each
customer acquired is often a multi-year customer
▪ Investors look past current year’s cash burn, and instead focus on
how the company’s future will benefit from current growth initiatives
as they scale past their fixed costs
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
(1) Using a logarithmic regression in order to standardize the distribution of growth rates relative to EV/Rev multiples.
EV / REV MULTIPLE VS. TOP- LINE GROWTH
1
10
13
19
8
10
9
8% 14%
32%
30%
32%
30%
40%
y = 0.1556ln(x) + 0.0754
R² = 0.8705
0%
10%
20%
30%
40%
50%
60%
0
5
10
15
20
25
<2x 2-4x 4-6x 6-8x 8-10x 10-12x >12x
# of Companies YoY Growth Log. (YoY Growth)
7. VALUATIONS AROUND BREAKEVEN
▪ Of the 70 companies in the Leonis SaaS Index, 53
produced positive CFO (cash from operations) in 1Q18
▪ The median EV / Rev multiple of companies with
positive CFO is 6.95x vs. the those with negative CFO,
which trade at a median multiple of 6.07x EV/REV
• Despite significantly outpacing the growth rates of their
positive CFO peers, negative CFO companies still trade
at a discount due to concerns over their ability to
produce adequate cash flow
7
KEY PROFITABILITY KPIS
CFO VS. EBITDA
VALUATION
EV / REVENUE VALUATIONS DEPENDENT ON CASH FLOW
▪ In tracking profitability of rapidly growing younger SaaS businesses,
CFO (cash from operations) is often a preferable indication of where
profitability stands relative to EBITDA
• Primary functional difference is its inclusion of deferred
revenue, which a GAAP based EBITDA will not take into
account
• CFO is more akin to a “cash” EBITDA figure and will turn
positive ahead of GAAP EBITDA
▪ CFO – often turns positive ahead of EBITDA
• Preferred measure of bottom line cash profitability
▪ Gross Margin – Key indicator of how scalable the SaaS platform will
ultimately be (provides a notion of a high watermark and of the
quality of the revenue base).
▪ EBITDA – For earlier stage SaaS platforms, EBITDA is often highly
negative and irrelevant if growth is exceedingly fast at the top-line
level
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
6.95x
6.07x
25.7%
36.1%
0%
10%
20%
30%
40%
0.00x
2.00x
4.00x
6.00x
8.00x
+ CFO + CFO (-) CFO (-) CFO
Median EV/Rev Multiple Median Growth Rate
9. 9
KEY OBSERVATIONS
RELEVANT TRANSACTIONS
BACK-OFFICE
TRADING & PRECEDENT MULTIPLES
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
Back-Office SaaS includes the following company tickers: WK, WIX, NTNX, BL, OKTA, WDAY, MODN.
▪ Currently, the Back-Office SaaS companies in the index are trading at
8.4x EV/Revenue, growing at an average of 39% YoY (year-over-
year) and averaging a gross margin of 69%
▪ Workday continues to be one of the best performing SaaS companies
and continues to trade at a market-leading level
▪ Despite a slight decrease from 3Q 2017 to 4Q 2017, trading
multiples returned to all-time highs in 1Q 2018
▪ The ability to easily grow back-office software companies organically
through increased customer acquisition investment, as well as
inorganically through add-on acquisitions, makes high-growth
achievable and sustainable even at scale
BACK-OFFICE SAAS
5.4x
6.3x
5.9x
6.5x
7.6x 7.6x
7.0x
8.4x
67% 67% 68% 69% 68% 68% 69% 69%
32%
30%
33%
36%
50%
48%
42%
39%
20%
30%
40%
50%
60%
70%
80%
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
EV/Rev Gross Margin YoY Growth
Date
Announced Target Acquirer Deal Size
EV / Rev
Multiple
02/26/18 Intermedix R1 RCM $459.8 2.38x
12/05/17 TSheets.com Intuit $340.0 8.50x
11/17/17 Qvidian Upland Software $50.0 2.56x
08/03/17 Intacct Sage Group $850.0 12.69x
Average EV/Rev Multiple over last five years: 6.00x
10. 10
RELEVANT TRANSACTIONS
COMMUNICATION & COLLABORATION
TRADING & PRECEDENT MULTIPLES
▪ Currently, the Communication & Collaboration SaaS businesses in
the index are trading at 8.6x EV/Revenue, growing revenue at an
average of 45% YoY and averaging a gross margin of 68%
▪ Following its IPO, Dropbox’s share price nearly 10% within its first
week of trading as a public company, displaying investor appetite for
SaaS companies
− Dropbox was one of the biggest SaaS IPOs in the past year and
its performance is being closely monitored given its potential
implications in public and private SaaS valuations
▪ Groups like LogMeIn continue to show extreme 100+% YoY
growth but are correspondingly trading below market at 4.90x
revenue as a result of decreased revenue expectations in 2019
COMMUNICATION & COLLABORATION SAAS
KEY OBSERVATIONS
5.6x
6.6x
6.1x
7.3x 7.5x
7.7x 7.8x
8.6x66% 65% 65% 66% 66% 67% 67%
68%
33%
32% 33%
36%
41%
48%
51%
45%
20%
30%
40%
50%
60%
70%
80%
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
EV/Rev Gross Margin YoY Growth
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
Communications & Collaboration SaaS include the following company tickers: JCOM, RNG, EVBG, TWLO, BOX, APPN, TEAM, DBX.
Date
Announced Target Acquirer Deal Size
EV / Rev
Multiple
02/08/18 Escher Group Hanover Investors $49.4 4.72x
06/12/17 Jive Software Aurea Software $462.2 1.72x
04/17/17 Eliza Hms Holdings $172.1 2.87x
01/19/17 IntraLinks Synchronoss Technologies $773.1 2.66x
Average EV/Rev Multiple over last five years: 5.85x
11. 11
RELEVANT TRANSACTIONS
CUSTOMER RELATIONS
TRADING & PRECEDENT MULTIPLES
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
Customer Relations SaaS include the following company tickers: CRM, ZEN, LPSN, HUBS, FIVN, BLKB, YEXT, MB, VEEV.
▪ Currently, the Customer Relations SaaS businesses in the index are
trading at 8.8x EV/Revenue, growing revenue at an average of 27%
YoY and averaging a gross margin of 71%
▪ In 1Q 2018, Customer Relations SaaS saw a large increase in revenue
multiples from 4Q 2017, an echo of changes in revenue multiples 4Q
2016 to 1Q 2017
- This seasonal fluctuation is most likely a change in market
sentiment following major 4Q 2017 earnings beats by Salesforce,
Zendesk and HubSpot
▪ Within the vertical, top-line growth continues to remain important
and many of the smaller players are expanding rapidly to try to
compete with the entrenched players like Salesforce
CUSTOMER RELATIONS SAAS
KEY OBSERVATIONS
6.0x
6.8x
5.6x
6.7x
7.3x 7.4x 7.4x
8.8x67% 68% 69% 70% 70% 70% 71% 71%
32% 31% 29% 29% 28% 29%
26% 27%
20%
30%
40%
50%
60%
70%
80%
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
EV/Rev Gross Margin YoY Growth
Date
Announced Target Acquirer Deal Size
EV / Rev
Multiple
02/05/18 LiquidHub Capgemini $494.4 1.83x
10/02/17 Velocify Accesso Technology $81.0 6.38x
07/12/17 The Experience Engine BICS $230.0 2.30x
04/25/17 TeleSign Dun & Bradstreet $150.0 2.50x
Average EV/Rev Multiple over last five years: 6.82x
12. 12
RELEVANT TRANSACTIONS
DATA & ANALYTICS
TRADING & PRECEDENT MULTIPLES
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
Data & Analytics SaaS include the following company tickers: NEWR, CLDR, TLND, SPLK, AYX, DATA, MDSO, RP, TTD, MDB.
▪ Currently, the Data & Analytics SaaS businesses in the index are
trading at 9.4x EV/Revenue, growing revenue at an average of 28%
YoY and averaging a gross margin of 75%
▪ Data & Analytics was one of the most active SaaS verticals in 1Q
2018, mostly notably Marlin Equity Partner’s public-to-private
acquisition of BazaarVoice
▪ Over the last couple years, this vertical has been highly volatile:
- Key drivers include Tableau substantially missing top-line growth
numbers in early 2016, leading market analysts to question the
value of non-recurring revenue with players successfully
transitioning to the SaaS model
- Erased 50-60% of value in a week
- Two years later, shares have returned to 1Q pre-crash levels
DATA & ANALYTICS SAAS
KEY OBSERVATIONS
5.0x
5.9x
4.8x
5.8x
6.5x
6.9x
7.2x
9.4x73% 73% 73% 74% 74% 74% 74% 75%
37%
34%
38%
43%
42%
44%
37%
28%
20%
30%
40%
50%
60%
70%
80%
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
EV/Rev Gross Margin YoY Growth
Date
Announced Target Acquirer Deal Size
EV / Rev
Multiple
03/22/18 Cynosure Zensar Technologies $33.3 1.65x
02/27/18 Openwave Mobility Enea $89.9 3.33x
02/26/18 Intermedix R1 RCM $459.8 2.38x
02/14/18 Utopus Insights Vestas Wind Systems $100.2 10.00x
Average EV/Rev Multiple over last five years: 6.83x
13. 13
RELEVANT TRANSACTIONS
FINTECH, E-COMMERCE & MARKETPLACE
TRADING & PRECEDENT MULTIPLES
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
FinTech, E-Commerce & Marketplace SaaS include the following company tickers: ECOM, SHOP, TRUE, EBIX, QTWO, COUP, ELLI.
▪ Currently, the FinTech, E-Commerce & Marketplace SaaS businesses
in the index are trading at 7.8x EV/Revenue, growing revenue at an
average of 27% YoY and averaging a gross margin of 67%
▪ Despite volatility in growth rates over the LTM, public FinTech
companies experienced valuation expansion as a result of recent
FinTech acquisitions occurring at high multiples
▪ SaaS FinTech companies have a different look than the broader
ecosystem; the SaaS model works best for E-Commerce, marketplace
and financial enterprise software companies and not for the
payments, P2P loans, wealth-advisor and neobank applications that
tend to dominate FinTech discussions and private raises
FINTECH, E-COMMERCE & MARKETPLACE SAAS
KEY OBSERVATIONS
5.4x
6.0x
5.7x
6.6x
7.1x 7.3x
6.5x
7.8x66% 66% 66% 67% 67% 67% 66%
67%
37% 34%
30%
32% 33%
27%
25%
27%
20%
30%
40%
50%
60%
70%
80%
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
EV/Rev Gross Margin YoY Growth
Date
Announced Target Acquirer Deal Size
EV / Rev
Multiple
03/06/18 CommerceHub GTCR, Sycamore Partners $1,075.7 9.72x
02/14/18 Dealer Inspire Cars.com $165.0 4.02x
02/01/18 BazaarVoice Marlin Equity Partners $521.0 2.14x
12/21/17 Ensenta Jack Henry and Associates $130.0 4.81x
Average EV/Rev Multiple over last five years: 7.97x
14. 14
RELEVANT TRANSACTIONS
HCM
TRADING & PRECEDENT MULTIPLES
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
HCM SaaS include the following company tickers: WDAY, ULTI, PAYC, CSOD, INST, PCTY, NOW.
▪ Currently, the HCM SaaS businesses in the index are trading at 8.9x
EV/Revenue, growing revenue at an average of 29% YoY and
averaging a gross margin of 70%
▪ HCM continues to be one of the highest valued verticals in SaaS,
with large players like SerivceNow continuing to hit all-time high
valuations
▪ Valuation premiums reflect strong value proposition offered by
HCM as a cloud service
- Provide interface similar to social-media and supplies the data
storage and processing power capacity needed for advanced HR
ML and AI to run effectively
- Immense strategic and private equity interest adds a premium to
multiples by providing an apparent price floor
HUMAN CAPITAL MANAGEMENT SAAS
KEY OBSERVATIONS
7.7x
8.2x
6.1x
7.2x
7.9x 8.1x
7.7x
8.9x68% 68% 68% 68% 68% 69% 69% 70%
41%
39%
35%
32%
30% 29% 28% 29%
20%
30%
40%
50%
60%
70%
80%
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
EV/Rev Gross Margin YoY Growth
Date
Announced Target Acquirer Deal Size
EV / Rev
Multiple
01/30/18 CallidusCloud SAP $2,400.0 8.89x
07/31/17 CareerBuilder Apollo $500.0 3.09x
07/31/17 Xactly Vista Equity Partners $522.5 5.47x
05/26/17 Evolution HCM Asure Software $55.0 3.93x
Average EV/Rev Multiple over last five years: 6.20x
15. 15
RELEVANT TRANSACTIONS
HEALTHTECH
TRADING & PRECEDENT MULTIPLES
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
HealthTech SaaS include the following company tickers: BNFT, VEEV, HSTM, ATHN, MDSO, TRHC, WAGE, CSLT.
▪ Currently, the HealthTech SaaS businesses in the index are trading at
5.2x EV/Revenue, growing revenue at an average of 20% YoY and
averaging a gross margin of 58%
▪ Lower growth rates, pricing pressure and slim gross margins have left
HealthTech as one of the lowest-valued sectors in SaaS
▪ Low growth rates are a result of a complex combination of factors
including longer sales cycles, heavy regulation and slow adoption
▪ Public markets have attributed the highest valuations to HealthTech
companies that deal with the collection and consolidation of
information/data
▪ However, the highest transaction multiples have been seen in
emerging HealthTech trends, including diagnostics, patient
monitoring and telehealth
HEALTHCARE TECHNOLOGY SAAS
KEY OBSERVATIONS
5.4x 5.4x
4.9x 5.0x
5.8x
5.4x
4.8x
5.2x
56% 56% 58% 58% 58% 58% 58% 58%
24% 23% 23% 23% 24% 24% 22% 20%
10%
20%
30%
40%
50%
60%
70%
80%
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
EV/Rev Gross Margin YoY Growth
Date
Announced Target Acquirer Deal Size
EV / Rev
Multiple
04/17/17 Eliza Hms Holdings $172.1 2.87x
04/14/17 Entrada NextGen Healthcare $34.0 2.83x
01/24/17 CoverMyMeds McKesson $1,400.3 13.97x
08/08/16 Morrisey Associates Echo $48.0 3.75x
Average EV/Rev Multiple over last five years: 6.00x
16. 16
RELEVANT TRANSACTIONS
IT
TRADING & PRECEDENT MULTIPLES
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
IT SaaS include the following company tickers: HDP, APTI, SPLK.
(1) 2Q16 and 3Q16 YoY Growth rates are outliers and are not shown.
▪ IT SaaS encompasses companies with SaaS products for connecting
and monitoring applications, data and devices
▪ The number of public IT SaaS companies has been increasing in the
public and private markets, as legacy IT companies spin-off in-house
software solutions into standalone products
▪ This trend has been increasingly popular as IT consulting companies
look to separate the one-time, project-based revenue lines and higher
value recurring revenue lines in order to take advantage of embedded
value/multiple arbitrage
▪ Salesforce’s acquisition of Mulesoft in March 2018 represented one
of the largest SaaS transactions in the last 12 months
− Salesforce paid a 36% premium relative to Mulesoft’s trading
value prior to the announcement of the transaction
INFORMATION TECHNOLOGY SAAS
KEY OBSERVATIONS
5.9x
5.3x
4.4x
6.5x 6.6x 6.3x
7.1x 7.0x
69% 69% 70% 71% 71% 72% 72% 73%
40%
51%
53% 57%
36%
30%
20%
30%
40%
50%
60%
70%
80%
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
EV/Rev Gross Margin YoY Growth(1)
Date
Announced Target Acquirer Deal Size
EV / Rev
Multiple
03/22/18 Cynosure Zensar Technologies $33.3 1.65x
03/20/18 MuleSoft Salesforce $6,500.0 21.24x
12/12/17 Black Duck Synopsys $547.1 7.29x
11/27/16 Appirio Wipro $499.9 2.50x
Average EV/Rev Multiple over last five years: 5.49x
17. 17
RELEVANT TRANSACTIONS
SCM / ERP
TRADING & PRECEDENT MULTIPLES
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
SCM / ERP SaaS include the following company tickers: KXS, AMBR, SPSC, APPN, UPLD, MODN.
▪ Currently, the SCM/ERP SaaS businesses in the index are trading at
5.9x EV/Revenue, growing revenue at an average of 22% YoY and
averaging a gross margin of 62%
▪ The SCM / ERP space has been particularly active for private
transactions within the past few quarters
▪ Workforce management solutions have been acquired by larger
strategics who are able to leverage the product offering to cross-sell
existing e-commerce, BI and CRM solutions
▪ Vertically-focused SCM and ERP companies have gained the most
traction, as legacy industries like manufacturing and transportation
have begun to aggressively incorporate software
▪ As one of the most mature sub-vertical in SaaS, the level of
profitability has become more important as average top-line growth
rates have fallen into the mid teens
SCM & ENTERPRISE RESOURCE PLANNING SAAS
KEY OBSERVATIONS
4.3x
5.0x
4.4x
4.9x
5.8x
6.1x 6.0x 5.9x
59% 59% 60% 61% 61% 62% 62% 62%
16% 15% 16% 17%
19%
21% 20%
22%
10%
20%
30%
40%
50%
60%
70%
80%
3.0x
3.5x
4.0x
4.5x
5.0x
5.5x
6.0x
6.5x
7.0x
7.5x
8.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
EV/Rev Gross Margin YoY Growth
Date
Announced Target Acquirer Deal Size
EV / Rev
Multiple
03/06/18 CommerceHub GTCR, Sycamore Partners $1,075.7 9.72x
12/28/17 BravoSolution Jaggaer, Accel-KKR $217.8 2.75x
11/30/17 Power Advocate Verisk Analytics $280.0 7.78x
11/17/17 Exa Dassault Systemes $347.5 4.79x
Average EV/Rev Multiple over last five years: 5.69x
18. 18
RELEVANT TRANSACTIONS
SECURITY
TRADING & PRECEDENT MULTIPLES
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
Security SaaS include the following company tickers: ALRM, VRNS, ZIXI, PFPT, FEYE, QLYS, MIME, MOBL.
▪ Currently, the Security SaaS businesses in the index are trading at 6.1x
EV/Revenue, growing revenue at an average of 21% YoY and
averaging a gross margin of 76%
▪ Security software companies are often divided into companies with
legacy products and companies with disruptive solutions
▪ Legacy products have lower growth rates and significantly lower
valuations than companies with disruptive solutions
▪ This trend holds for acquisitions; companies with legacy products like
Sotera, which provides SaaS-based security solutions for law-
enforcement, transact at low single-digit multiple, while companies like
Cloudlock transact at double-digit multiples as legacy players like Cisco
seek to acquire disruptive technologies that expand and enhance their
product offerings
SECURITY SAAS
KEY OBSERVATIONS
4.0x
4.8x
4.2x
4.8x
5.4x 5.5x 5.3x
6.1x
75% 75% 75% 75% 76% 76% 76% 76%
24% 24% 22% 22% 22% 21% 21% 21%
10%
20%
30%
40%
50%
60%
70%
80%
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
EV/Rev Gross Margin YoY Growth
Date
Announced Target Acquirer Deal Size
EV / Rev
Multiple
02/26/18 Cofense BlackRock, Pamplona $400.0 4.00x
02/12/18 Barracuda Networks Thoma Bravo $1,600.0 3.97x
12/27/17 Gigamon Elliott Management $1,456.4 4.81x
12/12/17 Black Duck Synopsys $547.1 7.29x
Average EV/Rev Multiple over last five years: 7.20x
19. 19
RELEVANT TRANSACTIONS
VERTICALLY-FOCUSED
TRADING & PRECEDENT MULTIPLES
▪ Currently, the vertically-focused SaaS businesses in the index are
trading at 7.4x EV/Revenue, growing revenue at an average of 25%
YoY and averaging a gross margin of 63%
▪ Vertically-focused SaaS companies trade at a wide range of multiples,
usually based on the size of their total addressable market (TAM),
sales cycle, customer acquisition costs and ACV
▪ Growth rates for vertically-focused SaaS are usually lower given a
limited TAM, but high retention rates lift multiples to in-line with
SaaS Index averages
▪ Of the transactions analyzed by Leonis, vertically-focused
marketplace and reservation companies transacted at the highest
multiples of all vertically-focused SaaS sub-sectors in 2017
VERTICALLY-FOCUSED SAAS
KEY OBSERVATIONS
6.0x
6.4x
5.9x
6.5x
7.1x 7.0x
6.8x
7.4x
62% 62% 63% 63% 63% 63% 63% 63%
28% 27% 27% 27% 27% 26%
25% 25%
20%
25%
30%
35%
40%
45%
50%
55%
60%
65%
70%
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
EV/Rev Gross Margin YoY Growth
Source: Pitchbook and Leonis Proprietary Transaction Database.
Note: Market Data as of 3/31/2018.
Vertically-Focused SaaS include the following company tickers: VEEV, MDSO, ATHN, TWOU, APPF, RP, ELLI, WAGE, HSTM, CSLT, EBIX, MB.
Date
Announced Target Acquirer Deal Size
EV / Rev
Multiple
03/06/18 CommerceHub GTCR, Sycamore Partners $1,075.7 9.72x
02/14/18 Dealer Inspire Cars.com $165.0 4.02x
02/14/18 Utopus Insights Vestas Wind Systems $100.2 10.00x
02/02/18 e-Builder Trimble $500.0 8.00x
Average EV/Rev Multiple over last five years: 5.20x