Sectorwatch: Enterprise Software€¦ · 4 Dashboard Operating Metrics Valuation Revenue Growth...
Transcript of Sectorwatch: Enterprise Software€¦ · 4 Dashboard Operating Metrics Valuation Revenue Growth...
Sectorwatch:Enterprise SoftwareJanuary 2019
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Enterprise SoftwareJanuary 2019
Sector Dashboard [4]
Public Basket Performance [5]
Operational Metrics [7]
Valuation Comparison [10]
Recent Deals [13]
Appendix [14]
7 Mile Advisors appreciates the opportunity to present this confidential information to the Company. This document is meant to bedelivered only in conjunction with a verbal presentation, and is not authorized for distribution. Please see the Confidentiality Notice &Disclaimer at the end of the document. All data cited in this document was believed to be accurate at the time of authorship and camefrom publicly available sources. Neither 7 Mile Advisors nor 7M Securities make warranties or representations as to the accuracy orcompleteness of third-party data contained herein. This document should be treated as confidential and for the use of the intendedrecipient only. Please notify 7 Mile Advisors if it was distributed in error.
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Overview
7MA provides Investment Banking & Advisory Services to the Business Services and TechnologyIndustries globally. We advise on M&A and private capital transactions, and provide market assessmentsand benchmarking. As a close knit team with a long history together and a laser focus on our targetmarkets, we help our clients sell their companies, raise capital, grow through acquisitions, and evaluatenew markets. We publish our sectorwatch, a review of M&A and operational trends in the industries wefocus.
Dashboard• Summary metrics on the sector• Commentary on market momentum by
comparing the most recent 12-month performance against the last 3-year averages.
Public Basket Performance• Summary valuation and operating metrics
for a basket of comparable public companies
Valuation Comparison• Graphical, detailed comparison of valuation
multiples for the public basket
Recent Deals• The most recently announced deals in the
sector
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Dashboard
Operating Metrics
Valuation
Revenue Growth
-0.07 1 - year revenue growth compared to revenue growth
average for last 3 years
Pricing / Gross Margin
-0.01% 1 - year gross profit % compared to gross profit %
average for last 3 years
Profitability Momentum
3.8% 1 - year EBITDA % compared to EBITDA % average for
last 3 years
Current revenue growth rate is less than the average of the last 3 years,
indicating that the market may be flattening or declining
Current gross profit margin is less than the average of the last 3 years gross
profit margins, indicating customer pricing power
Current EBITDA margin exceeds the average of the last 3 years EBITDA margin
by this amount, a condition that may attract new entrants
3.0%
25.9%
74.0%
0% 20% 40% 60% 80%
Median LTM Rev. Growth %
Median LTM EBITDA Margin %
Median LTM GP Margin %
6.1x
17.9x
21.2x
43.2x
0x 10x 20x 30x 40x 50x
Median TEV / LTM Revenue
Median TEV / LTM EBITDA
Median TEV / LTM EBIT
Median Price / LTM Earnings
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Public Basket
Company TEV $mLTM Rev
$m
Rev Growth
YoY GP %EBITDA
%TEV / Rev X
TEV / EBITDA
X # FTEsRev / FTE $k
Workday, Inc. 37,374 2,616 31% 70% -9% 14.3 0.0 8,200 319
VMware, Inc. 52,516 8,669 0% 86% 27% 6.1 22.3 20,615 421
salesforce.com, inc. 115,500 12,484 25% 74% 9% 9.3 98.2 29,000 430
Adobe Inc. 120,557 9,030 24% 87% 35% 13.4 38.2 - NA
SAP SE 127,522 27,983 3% 70% 26% 4.6 17.9 88,543 316
International Business Machines Corporation 154,719 79,591 1% 46% 22% 1.9 8.7 - NA
Oracle Corporation 186,103 39,893 3% 80% 40% 4.7 11.7 137,000 291
Average 113,470 25,752 12% 73% 22% 7.7 28.1 40,480 355
Median 120,557 12,484 3% 74% 26% 6.1 17.9 20,615 319
share price as of 24Jan19
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Public Basket Valuation Trends
Public EBITDA Multiples over Time
Public Revenue Multiples over Time
0x
2x
4x
6x
8x
Apr-
14
Jul-
14
Oct-
14
Jan-1
5
Apr-
15
Jul-
15
Oct-
15
Jan-1
6
Apr-
16
Jul-
16
Oct-
16
Jan-1
7
Apr-
17
Jul-
17
Oct-
17
Jan-1
8
Apr-
18
Jul-
18
Oct-
18
Jan-1
9
TEV/Revenue - Median TEV/Revenue - Average
0x
10x
20x
30x
Apr-
14
Jul-
14
Oct-
14
Jan-1
5
Apr-
15
Jul-
15
Oct-
15
Jan-1
6
Apr-
16
Jul-
16
Oct-
16
Jan-1
7
Apr-
17
Jul-
17
Oct-
17
Jan-1
8
Apr-
18
Jul-
18
Oct-
18
Jan-1
9
TEV/EBITDA - Median TEV/EBITDA - Average
16.2x
5.4x
0x
5x
10x
15x
20x
25x
Apr-
14
Jul-
14
Oct-
14
Jan-1
5
Apr-
15
Jul-
15
Oct-
15
Jan-1
6
Apr-
16
Jul-
16
Oct-
16
Jan-1
7
Apr-
17
Jul-
17
Oct-
17
Jan-1
8
Apr-
18
Jul-
18
Oct-
18
Jan-1
9
TEV/EBITDA - Median TEV/Revenue - Median
TEV/EBITDA - Average TEV/Revenue - Average
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Operational Metrics
LTM Gross Profit Margin % LTM EBITDA %
(10%) - 10% 20% 30% 40%
Median
Workday, Inc.
salesforce.com, inc.
International BusinessMachines Corporation
SAP SE
VMware, Inc.
Adobe Inc.
Oracle Corporation
- 20% 40% 60% 80% 100%
Median
International BusinessMachines Corporation
SAP SE
Workday, Inc.
salesforce.com, inc.
Oracle Corporation
VMware, Inc.
Adobe Inc.
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Operational Metrics
LTM Revenue Growth %LTM Revenue per
Full Time Employee x 000’s
- 10% 20% 30% 40%
Median
International BusinessMachines Corporation
Oracle Corporation
SAP SE
Adobe Inc.
salesforce.com, inc.
Workday, Inc.
$- $100 $200 $300 $400 $500
Median
Oracle Corporation
SAP SE
Workday, Inc.
VMware, Inc.
salesforce.com, inc.
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Operational Metrics
Accounts Receivable TurnoverAverage Days
Sales Outstanding
0x 2x 4x 6x 8x 10x 12x
Median
SAP SE
Workday, Inc.
salesforce.com, inc.
Adobe Inc.
International BusinessMachines Corporation
Oracle Corporation
0 20 40 60 80
Median
Oracle Corporation
InternationalBusiness Machines
Corporation
Adobe Inc.
salesforce.com, inc.
Workday, Inc.
SAP SE
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Valuation
TEV / LTM Revenue TEV / LTM EBITDA
0x 4x 8x 12x 16x 20x
Median
InternationalBusiness Machines
Corporation
SAP SE
Oracle Corporation
VMware, Inc.
salesforce.com, inc.
Adobe Inc.
Workday, Inc.
0x 30x 60x 90x 120x
Median
International BusinessMachines Corporation
Oracle Corporation
SAP SE
VMware, Inc.
Adobe Inc.
salesforce.com, inc.
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Valuation
TEV / LTM EBIT Price / LTM Earnings
0x 100x 200x 300x
Median
International BusinessMachines Corporation
Oracle Corporation
SAP SE
VMware, Inc.
Adobe Inc.
salesforce.com, inc.
0x 50x 100x 150x 200x
Median
International BusinessMachines Corporation
SAP SE
VMware, Inc.
Adobe Inc.
Oracle Corporation
salesforce.com, inc.
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Valuation
Historical Valuation Multiples versus Gross Profit
Historical Valuation Multiples versus Revenue Growth Rate
9x 12x 18x 22x 38x 98x
46.4%
79.6%
69.6%
85.9% 86.8%
74.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0x
20x
40x
60x
80x
100x
120x
LTM
GP%
EBIT
DA(x
)
EBITDA(x) LTM GP%
9x 12x 18x 22x 38x 98x
0.6%
2.8% 3.0%
-
23.7%
25.2%
0%
5%
10%
15%
20%
25%
30%
0x
20x
40x
60x
80x
100x
120x
LTM
RG
R%
EBIT
DA(x
)
EBITDA(x) LTM RGR%
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Recent TransactionsDate Target Buyer / Investor
Total Transaction
Value Target
Revenue TEV /
Revenue TEV /
EBITDA
13Dec18 ServiceMax, Inc. Silver Lake - - - -
19Nov18 Frustum, Inc. PTC Inc. 70.00 - - -
20Nov18 PlanGrid, Inc. Autodesk, Inc. 875.00 - - -
30Oct18 See-out Pty Ltd Clarivate Analytics (US) LLC - - - -
28Oct18 Red Hat, Inc. International Business Machines Corporation 35,690.94 3,156.59 10.7x 54.4x
11Oct18 Tour de Force, Inc. Compass Sales Solutions - - - -
8Oct18 Rocket Software, Inc. Bain Capital Private Equity, LP - 450.00 4.4x -
20Sep18 Allure Global Solutions, Inc. Creative Realities, Inc. 13.60 9.45 1.4x NM
20Aug18 Strategic BCP, Inc. SAI Global Limited - - - -
15Aug18 IMImobile PLC - 12.22 150.71 1.4x 15.2x
13Aug18 Quorum Business Solutions, Inc. Thoma Bravo, LLC - - - -
2Aug18 Duo Security, Inc. Cisco Systems, Inc. 2,350.00 - - -
26Jul18 RedKix Facebook, Inc. - - - -
24Jul18 Arrow Digital LLC Softvision, LLC - - - -
11Jul18 Cosential Inc. JMI Management, Inc. 34.00 - - -
11Jul18 CA, Inc. Broadcom Inc. 21,776.02 4,148.00 4.4x 16.4x
26Jun18 TC Technology SSP Innovations, LLC - - - -
8Jun18 Objectiva Software Solutions, Inc. Allgeier SE - 24.00 - -
4Jun18 GitHub, Inc. Microsoft Corporation 7,500.00 - - -
4Jun18 EMS Software, LLC Accruent, LLC - - - -
18May18 Info Sys Management, Inc. SWK Technologies, Inc. 1.30 - - -
16May18 J2 Innovations, Inc. Siemens Industry Inc. - - - -
20Mar18 MuleSoft, Inc. salesforce.com, inc. 6,811.58 296.46 22.3x NM
15Feb18 WebDAM, Inc. Bynder LLC 49.10 16.20 3.0x -
15Feb18 Zenedge LLC Oracle Corporation - - - -
13Feb18 Chalkup, LLC Microsoft Corporation - - - -
2Feb18 Aljex Software Inc. MacroPoint, LLC 32.58 - - -
29Jan18 Callidus Software Inc. SAP America, Inc. 2,576.42 253.09 9.6x NM
29Jan18 PlayFab, Inc. Microsoft Corporation - - - -
16Jan18 N2W Software Inc. Veeam Software AG 42.50 - - -
11Jan18 DST Systems, Inc. SS&C Technologies Holdings, Inc. 5,751.57 2,218.20 2.6x 11.5x
1Jan18 A&B Groep B.V. Calero Software, LLC - - - -
11Jan18 Addedo AG TALENTIA SOFTWARE FRANCE SAS - 13.25 - -
11Jan18 RepPro LLC RetireUp, LLC - - - -
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APPENDIX:
Public Basket
Constituents
7 Mile Advisors appreciates the opportunity to present this confidential information to the Company. This document is meant to bedelivered only in conjunction with a verbal presentation, and is not authorized for distribution. Please see the Confidentiality Notice &Disclaimer at the end of the document. All data cited in this document was believed to be accurate at the time of authorship and camefrom publicly available sources. Neither 7 Mile Advisors nor 7M Securities make warranties or representations as to the accuracy orcompleteness of third-party data contained herein. This document should be treated as confidential and for the use of the intendedrecipient only. Please notify 7 Mile Advisors if it was distributed in error.
Enterprise SoftwareJanuary 2019
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Public Basket
Workday, Inc.
Workday, Inc. provides enterprise cloud applications for financeand human resources worldwide. It provides applications forcustomers to manage critical business functions to optimizetheir financial and human capital resources. The company offersWorkday Financial Management application that providesfunctions of general ledger, accounting, accounts payable andreceivable, cash and asset management, employee expenseand revenue management, projects, procurement, inventory,and grants management. It also provides Workday HumanCapital Management application, which includes humanresources management, such as workforce lifecycle andorganization management, compensation, absence, andemployee benefits administration; and global talentmanagement comprising goal and performance management,succession planning, and career and development planning. Inaddition, the company offers Workday Financial PerformanceManagement application; Workday Learning application;Workday Payroll application for enterprise payroll; WorkdayPlanning application to create, collaborate, and take action onfinancial and workforce plans. Workday, Inc. was founded in2005 and is headquartered in Pleasanton, California.
Date Key Development Headline7/31/18 Workday, Inc. (NasdaqGS:WDAY) completed the acquisition of
Adaptive Insights, Inc. (NYSE:ADIN) from a group of sellers.
0x
10x
20x
30x
40x
Revenue Multiples - Workday, Inc.
TEV/Revenue Average
16
Public Basket
VMware, Inc.
VMware, Inc. provides compute, cloud, mobility, networking,and security infrastructure software to businesses in the UnitedStates and internationally. The company offers computeproducts, including VMware vSphere, a data center platform,which enables users to deploy hypervisor, a layer of softwarethat resides between the operating system and systemhardware to enable compute virtualization; storage andavailability products that provide data storage and protectionoptions; network and security products; and cloud managementand automation products to manage and automateoverarching IT processes involved in provisioning IT servicesand resources to users from initial infrastructure deployment toretirement. VMware, Inc. is a subsidiary of Dell TechnologiesInc.
Date Key Development Headline11/5/18 VMware, Inc. (NYSE:VMW) agreed to acquire Heptio Inc.
10/17/18 VMware To Seek Acquisitions
10/3/18 VMware, Inc. (NYSE:VMW) completed the acquisition of CloudHealth Technologies, Inc. from Kleiner Perkins Caufield & Byers, MeriTech Capital Partners, Sapphire Ventures LLC, Scale Venture Partners, .406 Ventures, LLC, Sigma Prime Ventures and others.
0x
2x
4x
6x
8x
10xRevenue Multiples - VMware, Inc.
TEV/Revenue Average
0x
10x
20x
30x
40xEBITDA Multiples - VMware, Inc.
TEV/EBITDA Average
0x
30x
60x
90x
120xP/E Multiples - VMware, Inc.
P/E Average
17
Public Basket
salesforce.com, inc.
salesforce.com, inc. develops enterprise cloud computingsolutions with a focus on customer relationship management.The company offers Sales Cloud to store data, monitor leadsand progress, forecast opportunities, and gain insights throughanalytics and relationship intelligence, as well as deliver quotes,contracts, and invoices. It also provides Service Cloud, whichenables companies to deliver personalized customer serviceand support, as well as a field service solution that enablescompanies to connect agents, dispatchers, and mobileemployees through a centralized platform, which helps toschedule and dispatch work, and track and manage jobs inreal-time. The company was founded in 1999 and isheadquartered in San Francisco, California.
Date Key Development Headline10/30/18 Vonage Holdings Corp. (NYSE:VG) completed the acquisition of
NewVoiceMedia Limited from a consortium of sellers.
10/8/18 salesforce.com, inc. (NYSE:CRM) completed the acquisition of Rebel.
0x
3x
6x
9x
12x
15xRevenue Multiples - salesforce.com, inc.
TEV/Revenue Average
0x
100x
200x
300xEBITDA Multiples - salesforce.com, inc.
TEV/EBITDA Average
0x
100x
200x
300x
P/E Multiples - salesforce.com, inc.
P/E Average
18
Public Basket
Adobe Inc.
Adobe Inc. operates as a diversified software companyworldwide. Its Digital Media segment provides tools andsolutions that enable individuals, small and medium businesses,and enterprises to create, publish, promote, and monetize theirdigital content. Its flagship product is Creative Cloud, asubscription service that allows customers to download andinstall the latest versions of its creative products. This segmentserves traditional content creators, Web application developers,and digital media professionals, as well as their management inmarketing departments and agencies, companies, andpublishers. The company’s Digital Marketing segment offerssolutions for how digital advertising and marketing are created,managed, executed, measured, and optimized. The companywas founded in 1982 and is headquartered in San Jose,California.
Date Key Development Headline1/22/19 Adobe Inc. (NasdaqGS:ADBE) acquired Allegorithmic SAS.
1/8/19 Adobe Inc. (NasdaqGS:ADBE) acquired unknown minority stake in Marketo KK from SunBridge Partners, Inc.
10/30/18 Adobe Inc. (NasdaqGS:ADBE) completed the acquisition of Marketo, Inc. from Vista Equity Partners LLC.
10/9/18 Adobe Accelerates Experience-Driven Commerce with Major Advancements to Magento Commerce Cloud
9/20/18 Adobe Systems Incorporated, Marketo, Inc. - M&A Call
0x
5x
10x
15x
20xRevenue Multiples - Adobe Inc.
TEV/Revenue Average
0x
20x
40x
60xEBITDA Multiples - Adobe Inc.
TEV/EBITDA Average
0x
50x
100x
150x
200xP/E Multiples - Adobe Inc.
P/E Average
19
Public Basket
SAP SE
SAP SE operates as an enterprise application software, andanalytics and business intelligence company worldwide. It offersSAP HANA, which enables businesses to process and analyzelive data; SAP Data Hub, a solution that enables businesses tomanage data from various sources; SAP Cloud Platform, whichenables businesses to connect and integrate applications; SAPBW/4HANA, a data warehouse solution; SAP Leonardo, asystem that enables customers to make business sense andopportunity of disruptive technologies; and SAP AnalyticsCloud, which leverages the intersection of business intelligence,planning, and predictive analytics. SAP SE was founded in 1972and is headquartered in Walldorf, Germany.
Date Key Development Headline12/17/18 SAP and Software AG Launch Joint Platform for Smart Cities
12/17/18 Lition Signs a Co-Innovation Agreement with SAP SE
11/20/18 Tata Consultancy Services Partners with SAP to Build Intelligent Rail Digital Maintenance
11/18/18 SAP SE (DB:SAP) acquired Contextor SAS from K Partners and others.
11/16/18 SAP To Seek Acquisitions
0x
2x
4x
6x
8xRevenue Multiples - SAP SE
TEV/Revenue Average
0x
10x
20x
30xEBITDA Multiples - SAP SE
TEV/EBITDA Average
0x
10x
20x
30x
40xP/E Multiples - SAP SE
P/E Average
20
Public Basket
International Business Machines Corporation
International Business Machines Corporation operates as anintegrated technology and services company worldwide. ItsCognitive Solutions segment offers Watson, a computingplatform that interacts in language, processes big data, andlearns from interactions with people and computers. Thissegment also offers data and analytics solutions, includinganalytics and data management platforms, cloud data services,enterprise social software, talent management solutions, andtailored industry solutions; and transaction processing softwarethat runs mission-critical systems in banking, airlines, and retailindustries. The company was founded in 1911 and isheadquartered in Armonk, New York.
Date Key Development Headline1/12/19 International Business Machines Corporation (NYSE:IBM) agreed
to acquire mainframe service business from T-Systems International GmbH.
1/2/19 Mr. Cooper Group Inc. (NasdaqCM:COOP) entered into a definitive agreement to acquire Seterus, Inc. from International Business Machines Corporation (NYSE:IBM).
12/20/18 IBM Expands Strategic Partnership with Samsung to Include 7nm Chip Manufacturing
12/6/18 HCL Technologies Limited (NSEI:HCLTECH) entered into a definitive agreement to acquire Software Portfolio from International Business Machines Corporation (NYSE:IBM) for $1.8 billion.
11/26/18 IBM Partners with IVADO to Combine Research and Industry Expertise in Artificial Intelligence
0x
1x
2x
3x
4x
5xRevenue Multiples - International Business
Machines Corporation
TEV/Revenue Average
0x
5x
10x
15x
20xEBITDA Multiples - International Business
Machines Corporation
TEV/EBITDA Average
0x
10x
20x
30x
40xP/E Multiples - International Business
Machines Corporation
P/E Average
21
Public Basket
Oracle Corporation
Oracle Corporation develops, manufactures, markets, sells,hosts, and supports application, platform, and infrastructuresolutions for information technology (IT) environmentsworldwide. It offers human capital and talent management,enterprise resource planning, customer experience andrelationship management, procurement, supply chainmanagement, project portfolio management, business analyticsand enterprise performance management, and industry-specificapplication software, as well as financial management andgovernance, and risk and compliance applications. OracleCorporation was founded in 1977 and is headquartered inRedwood City, California.
Date Key Development Headline1/10/19 The San Francisco Giants and Oracle Announces 20-Year
Partnership
11/14/18 Oracle Corporation (NYSE:ORCL) entered into an agreement to acquire Talari Networks, Inc.
11/14/18 Tele2 Russia, Oracle Expand Cooperation on Cloud Services
11/8/18 Oracle Corporation (NYSE:ORCL) completed the acquisition of goBalto, Inc.
10/30/18 Oracle Corporation (NYSE:ORCL) completed the acquisition of DataFox Intelligence, Inc.
0x
2x
4x
6x
8xRevenue Multiples - Oracle Corporation
TEV/Revenue Average
0x
5x
10x
15x
20xEBITDA Multiples - Oracle Corporation
TEV/EBITDA Average
0x
20x
40x
60x
80xP/E Multiples - Oracle Corporation
P/E Average
22
7MA provides Investment Banking & Advisory Services to the Business Services and Technology Industries globally. We advise on M&Aand private capital transactions and provide market assessments and benchmarking. As a close-knit team with a long history togetherand a laser focus on our target markets, we help our clients sell their companies, raise capital, grow through acquisitions, and evaluatenew markets. Securities offered through 7M Securities LLC.
CONTACT INFO
Leroy Davis, Partner 704.899.5962 [email protected]
Tripp Davis, Partner 704.899.5762 [email protected]
Andy Johnston, Partner 704.899.5961 [email protected]
Ben Lunka, Managing Director 704.496.2995 [email protected]
Jeff Stoecklein, Managing Director 312.796.9330 [email protected]
Mark Landry, Managing Director 561.972.0609 [email protected]
Kristina Sergueeva, Director 704.899.5149 [email protected]
Neil Churman, Director 281.742.9340 [email protected]
John Cooper, Director 704.973.3996 [email protected]
Tim Frye, Director 704.973.3994 [email protected]
Nicholas Prendergast, Financial Analyst 704.973.3995 [email protected]
Ariail Siggins, Marketing Director 704.981.2908 [email protected]
Sydney Larese, Associate 704.973.3998 [email protected]
Marty Johnson, Associate 704.973.3999 [email protected]
Rory Julyan, Associate 704.981.2520 [email protected]
Garth Martin, Associate 704.973.3997 [email protected]
Dennis Fox, Associate 704.706.9168 x 119 [email protected]
Steve Buffington, Associate 704.960.1828 [email protected]