MINNEAPOLIS | BOSTON | CHICAGO | HOUSTON | LONDON | LOS ANGELES | NEW YORK | SAN FRANCISCO | ZÜRICH Piper Jaffray Software Activity Update Third Quarter 2017 Marc Steifman Co-Head of Technology Investment Banking Piper Jaffray & Co. Michael Kim Co-Head of Technology Investment Banking Piper Jaffray & Co.
29
Embed
Piper Jaffray Software Activity Update · LTM Revenue $222.9 $91.6 $117.0 $65.1 MRQ Revenue $56.5 $27.9 $35.7 $25.4 *Piper Jaffray estimate using EBITDA as proxy for FCF. TEAM 2018E
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
MINNEAPOLIS | BOSTON | CHICAGO | HOUSTON | LONDON | LOS ANGELES | NEW YORK | SAN FRANCISCO | ZÜRICH
Piper JaffraySoftware Activity Update Third Quarter 2017
Marc SteifmanCo-Head of Technology Investment BankingPiper Jaffray & Co.
Michael KimCo-Head of Technology Investment BankingPiper Jaffray & Co.
2PIPER JAFFRAY
Piper Jaffray Software Team Overview
Global Reach
Our firm consists of 1,300+ professionals in 59 offices globally including Minneapolis (HQ), San Francisco, Charlotte, New York,
Chicago, Seattle, Boston, Aberdeen, London, Hong Kong and Zürich
Technology Office Locations: San Francisco, CA Minneapolis, MNBoston, MA
25 investment bankers focused on Software, Financial Technology, Tech-Enabled
Services, BPO and Internet & Digital Media
Recent Transactions
Technology TeamMichael Kim
Co-Head of Technology Investment BankingApplication Software
30 senior representatives from leading software and internet companies, venture capital and private equity firms focused on the technology and business services sectors
Technology Ski SummitJanuary 9–11, 2018 | Aspen, CO
15 of the highest growth late-stage private technology companies had their own suite at the Rosewood Sand Hill as 15 of the top public and crossover investors visit for one-on-one’s
Silicon Valley Technology Crossover Investor SummitMay 18, 2017 | Menlo Park, CA
Technology SelectSeptember 5–6, 2017 | Laguna Niguel, CA
30+ of the most notable public technology companies will be paired with major institutional investors in one-on-one meetings providing direct insights and feedback
50+ leading privately held software and internet companies and 100+ leading technology growth equity and strategic investors meet for one-on-one meetings attended by CEO's/CFO's and investors
Technology Growth EquityOctober 4, 2017 | New York, NY
6/25/15 AppFolio Inc In Range $86 $388 22% $1,104 0% (8%) 23% 172%
Mean $161 $1,129 17% $1,993 1% 8% 36% 61%
Median $119 $788 14% $1,200 0% 14% 30% 47%
Source: Dealogic.Deals, current market cap, and offer to current data as of September 30, 2017.Includes all IPOs and FOs since 2015 greater than $20MM.
5PIPER JAFFRAY
SUB-SECTOR
SaaS High Growth
CRM / Marketing
Human Capital Management
BI / Data Analytics
Infrastructure / IT Management
Contact Center
Moderate Growth SaaS
Large-Cap Technology
Security Software
HR Outsourcing
Software Stock PerformancePerformance in LTM Period and YTD Period – By Sub-Sector
Source: Capital IQ.Note: LTM Date between 9/30/16 and 9/30/17. YTD data between 1/3/17 and 9/30/17.
SUB-SECTOR
CRM / Marketing
Moderate Growth SaaS
SaaS High Growth
Infrastructure / IT Management
HR Outsourcing
Contact Center
Large-Cap Technology
BI / Data Analytics
Security Software
Human Capital Management
LTM PerformanceYTD Performance
11.7%
16.6%
17.6%
19.6%
20.0%
26.5%
31.0%
33.6%
34.2%
35.5%
11.6%
12.7%
19.7%
9.9%
12.6%
16.5%
16.7%
17.0%
21.1%
21.4%
24.6%
24.7%
29.1%
16.2%
22.3%
22.4%
6PIPER JAFFRAY
IPO Valuation Breakpoint Analysis 2014 – 2017 YTD, At Pricing
Source: Capital IQ.
Forward Year Revenue Growth vs. Revenue Multiple
$ in millions
Summary Statistics - Software IPOs 2014-2017 YTD
Metric Median Median Median Median
Growth Profile: Less than 20% 20.0% - 30.0% 30.0% - 40.0% Greater than 40.0%
Number of Deals 4 17 17 11
Operating Metrics:
LTM Revenue $222.9 $91.6 $117.0 $65.1
MRQ Revenue $56.5 $27.9 $35.7 $25.4
LTM Gross Margin 65.5% 65.3% 72.7% 62.4%
LTM EBITDA $67.2 ($24.2) ($23.6) ($42.6)
LTM EBITDA Margin 18.7% (17.8%) (24.9%) (38.9%)
MRQ EBITDA $14.9 ($6.8) ($6.2) ($9.5)
CAC Ratio 0.78 0.48 0.70 0.51
Pricing Statistics:
Forward Year Rev. Multiple 4.3x 3.7x 5.8x 5.6x
% Change from Offer to:
One Day 15.7% 30.6% 22.4% 49.2%
One Month 12.8% 28.9% 29.4% 43.8%
Current (09/30/2017) (38.9%) 33.1% 76.3% 39.9%
4.3x3.7x
5.8x 5.6x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x6.0x
7.0x
Less than 20% 20.0% - 30.0% 30.0% - 40.0% Greater than 40.0%
Forw
ard
Year
Rev
enue
M
ultip
le
Forward Year Revenue Growth
7PIPER JAFFRAY
Historical Public Software Company IPO Statistics 2014–2017 YTD
Source: Capital IQ.(1) EV / EBITDA multiples less than 0.0x or greater than 50.0x deemed not meaningful.
($ in Millions) 2014 Median 2015 Median 2016 Median 2017 Median
Number of Deals 20 12 11 6Deal StatisticsDeal Size $115.0 $101.7 $108.7 $166.0
Post-Deal Market Cap $664.2 $620.3 $771.3 $1,555.6
Deal Size / Post-Deal Market Cap 17.3% 16.4% 14.1% 10.7%
Financial Metrics at IPO
LTM Revenue $84.6 $107.6 $112.3 $146.5
Current Year Revenue $99.0 $117.3 $122.6 $195.8
Forward Year Revenue $132.0 $144.5 $165.6 $268.0
Forward Year Revenue Growth 29.7% 30.2% 35.1% 34.0%
MRQ Revenue $24.9 $30.1 $47.2 $42.2
LTM EBITDA ($15.0) ($18.9) ($29.3) ($63.4)
LTM EBITDA Margin (23.5%) (18.1%) (17.8%) (40.8%)
MRQ EBITDA ($4.7) ($4.7) ($6.8) ($15.2)
MRQ EBITDA Margin (22.0%) (16.4%) (13.3%) (36.2%)
Valuation Metrics at IPO
Current Year Revenue Multiple 5.2x 5.4x 4.2x 7.1x
Current Year EBITDA Multiple(1) 23.0x 35.6x 14.1x N/A
Forward Year Revenue Multiple 4.0x 4.1x 3.0x 5.2x
Forward Year EBITDA Multiple 24.6x 34.9x 20.4x N/A
8PIPER JAFFRAY
6.2% 6.7%
9.9% 10.9% 10.9%
12.1% 21.4%
23.8% 24.1%
28.5%
0.0% 10.0% 20.0% 30.0%
HR Outsourcing
Large-Cap Technology
Security
Business Intellgience / Data…
Contact Center
Moderate Growth SaaS
Infrastructure / IT Management
SaaS High Growth
Human Capital Management
CRM / Marketing
Comparable Public Software Comps (Valuation Metrics)
2017E EV/REV 2018E EV/REV
2017E Rev Growth 2018E Rev Growth
5.9% 7.1% 7.6%
9.3% 9.5%
10.9% 18.1% 19.1%
20.2% 22.4%
0.0% 10.0% 20.0% 30.0%
Large-Cap Technology
HR Outsourcing
Contact Center
Security
Moderate Growth SaaS
Business Intellgience / Data…
Infrastructure / IT Management
Human Capital Management
SaaS High Growth
CRM / Marketing
3.5x3.5x3.7x3.8x
4.4x4.9x5.1x
6.1x6.1x6.1x
0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x
HR Outsourcing
Contact Center
Moderate Growth SaaS
Security
Business Intellgience / Data…
Infrastructure / IT Management
Large-Cap Technology
CRM / Marketing
Human Capital Management
SaaS High Growth
3.2x3.2x3.4x
3.6x4.0x
4.4x4.8x4.9x
5.1x5.1x
0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x
Contact Center
HR Outsourcing
Moderate Growth SaaS
Security
Business Intellgience / Data…
Infrastructure / IT Management
Large-Cap Technology
CRM / Marketing
SaaS High Growth
Human Capital Management
Source: Capital IQ.Note: Figures represent the median of each comparable group.
9PIPER JAFFRAY
SaaS Valuation FrameworkGiven the rapid maturity of the business model, free cash flow conversion combined with revenue growth provides a clearer understanding of valuation for SaaS companies
AVG EV/Rev7.9x
AVG Rev Growth + FCF Margin49.1%
AVG EV/Rev5.6x
AVG Rev Growth + FCF Margin30.2%
AVG EV/Rev2.6x
AVG Rev Growth + FCF Margin14.4%
Source: Capital IQ as of 9/30/2017, Thomson Reuters, Company Filings.*Piper Jaffray estimate using EBITDA as proxy for FCF.
AMBR APTI
BNFT
BV
DATA
ECOM
LPSN
MODN
SREV
CALD
CSOD
GWRE
HUBSTYL
ULTI ZENBLKB
BL
BOX
COUP
MB
NEWRPCTY
QTWO
TWLO
TWOU
ADBE
CRM
NOW
SPLK
WDAY
ELLI
PAYC
SHOP
TEAM
VEEV
HDP
y = 14.584x + 0.8819R² = 0.6597
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
0% 10% 20% 30% 40% 50% 60% 70%
2018
E E
V /
Rev
enue
2018E FCF Margin + Revenue Growth
10PIPER JAFFRAY
Best & Worst Performing Software Stocks Top and Bottom 20 LTM Performers
Bottom 20 Performers Top 20 Performers
45.2%
45.9%
46.9%
48.5%
48.6%
48.9%
49.5%
52.1%
52.4%
55.3%
55.4%
55.9%
56.5%
56.7%
61.1%
76.5%
95.5%
103.0%
110.6%
140.2%
CBIZ, Inc.
HubSpot, Inc.
Check Point…
ServiceNow, Inc.
Mimecast Limited
VMware, Inc.
Paycom Software, Inc.
Parkit Enterprise Inc.
Five9, Inc.
RealPage, Inc.
TriNet Group
Datawatch Corporation
Talend SA
Everbridge Inc
LivePerson Inc.
RingCentral, Inc.
Pegasystems Inc.
HortonWorks
Trade Desk Inc
Upland Software
(8.1%)
(8.7%)
(9.6%)
(9.9%)
(11.1%)
(11.6%)
(12.5%)
(12.6%)
(15.7%)
(16.2%)
(17.3%)
(19.2%)
(20.4%)
(22.7%)
(23.7%)
(29.1%)
(30.6%)
(31.6%)
(39.5%)
(53.6%)
Akamai Technologies, Inc.
IBM
Palo Alto Networks, Inc.
Citrix Systems, Inc.
ChannelAdvisor Corporation
Cornerstone OnDemand, Inc.
8x8 Inc.
eGain Corporation
Benefitfocus, Inc.
Bazaarvoice, Inc.
CyberArk Software, Ltd.
Imperva Inc.
Amber Road, Inc.
SPS Commerce, Inc.
MicroStrategy Inc.
ServiceSource International, Inc.
Marin Software Incorporated
VASCO Data Security International Inc.
Nutanix
Twilio, Inc.
Source: Capital IQ.Note: LTM Date between 9/30/16 and 9/30/17.
11PIPER JAFFRAY
Cloudera, a Palo Alto, Calif.-based analytics software company, has raised $221 million during a follow-on offering at a price of $16.45 per share.
Quintiles IMS Holdings, a Durham, NC-based provider of technology-enabled healthcare services, has raised $476 million, during a follow-on offering at a price of $95.25 per share.
Alteryx, an Irvine, Calif.-based self-service data analytics software provider, has raised $170 million during a follow-on offering at a price of $21.25 per share.
Recent ReviewHighlighted Transaction Activity
Source: Public news releases, Pitchbook and CapitalIQ.
Mergers and Acquisitions
IPOs and Follow-Ons Private Placements
Ingersoll-Rand acquires GPSi Holdings from Falconhead Capital for an undisclosed amountThe transaction strengthens Ingersoll-Rand's telematics portfolio, an important component of its connected technologies strategy that measures critical performance characteristics such as temperature and air quality protecting the value of transported food, pharmaceuticals, and other cargo.
The Sage Group Acquires Intacct for $850 MMAs customer demand moves to the cloud and away from traditional monolithic ERP suites, the acquisition strengthens Sage’s position as providing a comprehensive Financial Management Solution from start-up to global enterprise, whilst integrating seamlessly with their other enterprise applications.
Via Transportation, an online platform that connects users with vehicle-sharing transportation providers in the United States, has raised $250 million in funding from moovel GmbH. The round values the company at $750 million and brings the total amount of funding to $386 million.
BlueteamGlobal, a provider of advanced cyber threat monitoring services, has raised $125 million in financing from institutional and individual investors.
Appboy, a provider of mobile marketing CRM and automation software solutions for marketers, has raised $50 million in Series D funding led by ICONIQ Capital.
JAMF Software receives majority investment from Vista Equity Partners for an undisclosed amountVista Equity Partners has invested in JAMF, which develops IT management software for Apple devices running macOS and iOS. The transaction will allow JAMF to accelerate its growth and innovation through focused investment and strategic acquisitions that drive its mission to help organizations manage Apple devices.
Waud Capital Acquires Anovia PaymentsAnovia Payments has formed a strategic partnership with Waud Capital Partners. The partnership will provide Anovia with additional capital accelerating the growth of the company further to extend its product verticals, expand its relationships with strategic partners, and provide additional technology solutions to customers.
12PIPER JAFFRAY
$11,957 $12,062
$23,829
$9,861$11,740
$13,482
$22,438
$15,304$18,421
$53,011
$33,046
$11,545 $11,374$8,709
$10,991
4.2x
7.0x
5.2x
10.5x
5.6x
4.5x5.0x
7.3x
4.7x 5.9x 6.1x
6.0x
7.8x
3.5x
3.5x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2014 2015 2016 2017
Total Deal Value Average EV / REV Multiple
Software M&A ActivityQ1 2014 – Q3 2017
Source: S&P Capital IQ.Note: Software transactions greater than 10 million USD in enterprise value.
Source: S&P Capital IQ, Thomson Reuter’s Consensus, and Renaissance Capital.
EV/Revenue > 20x Not Meaningful (NM).
EV/EBITDA > 60x Not Meaningful (NM).
Piper Jaffray Companies (NYSE: PJC) is a leading investment bank and asset management firm. Securities brokerage and investment banking services are offered in the U.S. through Piper Jaffray & Co., member SIPC and FINRA; in Europe through Piper Jaffray Ltd., authorized and regulated by the U.K. Financial Conduct Authority; and in Hong Kong through Piper Jaffray Hong Kong Limited, authorized and regulated by the Securities and Futures Commission. Asset management products and services are offered through five separate investment advisory affiliates―U.S. Securities and Exchange Commission (SEC) registered Advisory Research, Inc., Piper Jaffray Investment Management LLC, PJC Capital Partners LLC and Piper Jaffray & Co., and Guernsey-based Parallel General Partners Limited, authorized and regulated by the Guernsey Financial Services Commission.
Information contained in this publication is based on data obtained from sources we deem to be reliable; however, it is not guaranteed as to accuracy and does not purport to be complete. Nothing contained in this publication is intended to be a recommendation of a specific security or company nor is any of the information contained herein intended to constitute an analysis of any company or security reasonably sufficient to form the basis for any investment decision.