DRAFT AND CONFIDENTIAL

M&A Target Review

May 2016

Potential Acquisition Targets Public Companies

ADBE

LNKD

WDAY

NOW

DATA

PEGA

Employees

13,893

9,732

4,900

3,991

4,603

3,168

3,400

CEO Rating
(Glassdoor)

96%

98%

93%

84%

91%

98%

Would
Recommend
(Glassdoor)

88%

90%

72%

65%

80%

Customers

6,167K
subscribers

39,726
(Corporate
Solution
Customers)

1,100

3,098

FY17E
Revenue1

$5,826M

$3,726M

$1,549M
(PS is 20% of
Revenue)

FY17E
Growth Rate1

21%

25%

FY17E Gross
Margin1

87%

FY17E
Operating
Profit (Loss)1

DRAFT AND CONFIDENTIAL

VEEV

BOX

DWRE

ZEN

MKTO

HUB

2,599

1,474

1,370

1,024

1,429

983

1,312

93%

90%

87%

94%

95%

96%

69%

95%

81%

79%

82%

65%

68%

95%

92%

62%

91%

30,000+

42,600

N/A

39,000

375+

57,000

349

75,000 (paid
customer
accounts)

4,615

19,322

$1,367M

$967M

$850M

$799M
(PS is 30% of
Revenue)

$710M

$512M

$393M

$311M

$303M

$273M

$259M

33%

36%

30%

30%

17%

16%

25%

30%

31%

45%

30%

42%

87%

74%

75%

70%

90%

71%

87%

70%

74%

74%

73%

70%

76%

$1,876M

$564M

$8M

$165M

$42M

$63M

$115M

$60M

$126M

$(106M)

$18M

$(27M)

$(21M)

$(22M)

Market Cap

$49,085

$18,076

$15,690

$12,757

$6,483

$4,060

$2,027

$2,926

$4,238

$1,645

$1,759

$2,381

$1,342

$1,770

Enterprise
Value

$46,904

$16,082

$14,228

$12,339

$6,383

$3,252

$1,833

$2,556

$3,892

$1,504

$1,563

$2,127

$1,254

$1,664

EV / FY17E
Revenue1

8.1x

4.3x

9.2x

9.0x

6.6x

3.8x

2.3x

3.6x

7.6x

3.8x

5.0x

7.0x

4.6x

6.4x

In Exclusivity

Less
Interested

Meeting Late
May

Larry Ellison
owns 47%

In Play

Meeting in
June

In Play

CEO has no
interest

In Play

CEO has no
interest

In Play

Status:

Burgundy

Note: As of May 17, 2016

1. Refers to FY17E or the corresponding calendar year
>90% On-premise software.

Sonoma

Tuscany

Champagne

DRAFT AND CONFIDENTIAL

Potential Acquisition Targets Interlopers

ADBE

Facebook

Amazon

Google

HP Enterprise

IBM

MSFT

Oracle

SAP

Employees

13,893

36,450

230,800

110,000

41,467

13,598

64,115

240,000

377,757

118,000

132,000

78,230

30,641

CEO Rating
(Glassdoor)

96%

95%

81%

94%

95%

98%

98%

67%

56%

93%

72%

94%

97%

Would
Recommend
(Glassdoor)

87%

95%

64%

82%

87%

92%

91%

59%

58%

84%

66%

84%

89%

$5,826

$19,895

$134,143

$213,651

$12,226

$26,123

$87,214

$50,767

$79,314

$92,664

$37,324

$24,895

$20,678

FY17E
Growth
Rate1

21%

37%

25%

(9%)

20%

46%

16%

(4%)

(3%)

(1%)

(2%)

5%

31%

FY17E Gross
Margin1

87%

64%

35%

39%

55%

85%

63%

29%

50%

64%

80%

71%

59%

FY17E
Operating
Profit (Loss)1

$1,872

$5,593

$4,569

$58,778

$2,321

$14,360

$29,222

$4,637

$15,306

$27,623

$16,228

$7,561

$7,690

Enterprise
Value

$45,804

$192,063

$329,801

$536,152

$54,221

$315,036

$423,589

$35,175

$172,909

$338,461

$154,139

$95,798

$191,971

EV / FY17E
1
Revenue

7.9x

9.7x

2.5x

2.5x

4.4x

12.1x

4.9x

0.7x

2.2x

3.7x

4.1x

3.8x

9.3x

$4,098

$18,552

$15,859

$55,840

$11,054

$20,621

$73,450

$8,505

$14,869

$105,338

$50,767

$6,951

$14,138

15%

N/A

26%

11% 4

99%

90%

41%

N/A

N/A

2%

21%

N/A

86%

$1,917

$8,951

$17,612

$79,908

$5,417

$0

$7,379

$16,139

$45,557

$46,767

$40,106

$9,840

$11,145

1.4x

1.8x

1.9x

1.0x

2.0x

0.0x

0.3x

2.1x

2.4x

1.6x

2.7x

1.5x

1.5x

FY17E
Revenue1

Cash and Cash

Equivalents

Onshore Cash
Debt

Debt / EBITDA

Amazon

Note: As of May 17, 2016

1. Refers to FY17E or the corresponding calendar year
2. Total debt includes capitalized leases
3. Onshore refers to the location of each companys primary operations
4. Includes long-term marketable securities of $177B (total cash, cash equivalents and all marketable securities of $232B).

DRAFT AND CONFIDENTIAL

Share Price Dislocation Over the Last Twelve Months

Last Twelve Months Stock Performance
2015

2016

40%

20%

Salesforce (+6%)
0%

Sonoma (-10%)
-20%

Champagne (-34%)
-40%

Tuscany (-58%)

-60%

-80%
May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

DRAFT AND CONFIDENTIAL

Champagne Briefing

DRAFT AND CONFIDENTIAL

Champagne Overview

Founded in 2004

HQ: Burlington, MA

2015 Revenue: $237M (48% Y-o-Y growth including Tomax

acquisition); $216M (34% Y-o-Y organic growth excluding
Tomax)

Q116 Employee Breakdown

2016E Revenue: $311M (31% Y-o-Y growth)

2016E Margins & Cash Flow: 6% Operating Margin ($18M);

$24M OCF

Current Enterprise Value: $1,563M (5.0x CY2016E revenue)

Pricing: 1%-4% of Gross Merchandise Value (GMV)

Customers: 349 live customers and 1,590 sites as of Q116

Key Capabilities: eCommerce, lightweight CMS, POS, OMS,

Personalization

CY15 Revenue by Geography

Other
15%

Sales
21%
Other
37%

219 FTEs(1)

345 FTEs
81
FTEs

R&D
34%

CY15 Revenue by Segment

Overage
19%

UK
10%
Germany
11%

Pro. Serv.
15%
Base Sub.
66%

US
64%

Marketing
8%

1,024 employees as of 3/31/2016

Q415 Earnings Report on

2/9. Shares fell 9% due to 2
deals pushing into Q1 and
macro softness in Europe
Q215 Earnings Report on
8/4. Shares fell 12%
due to poor revenue
guidance and higher than
expected losses

6
(1) Includes 128 FTEs in Sales, 81 FTEs in Customer Success and 9 FTEs in Alliances.

Q315 Earnings Report on

11/2. Shares fell 18% due to
reduced revenue guidance
from lower than expected
volumes among a small group
of specialty apparel customers

Marketing
(8%)

Digital Commerce Remains a Significant Gap

in the Salesforce Portfolio
CRM

$24.7B $41.9B
(14%)

$14.7B $18.3B (6%)

ERP

$27B $35.3B (7%)

Sales

Service

Marketing

BI Platforms

Analytics Apps

HCM

FMS Components

$6.3B $9.6B

$8.7B

$5.4B

$8.6B $9.5B

$2.1B $3.3B

$9.3B

$10.6B $13.7B

11%

$13.5B 12%

$11.2B 20%

2%

11%

$12.6B 8%

7%

$XXB (FY16) $YYB (FY20)

(% CAGR FY16-20)
Salesforce TAM

IT Ops

White Space

$20.6B $27.6B (8%)

Automation
Tools

Availability
& Performance

$6.6B $10B

$3.7B $4.9B

11%

8%

Digital
Commerce

CPM
Suites

Advanced
Analytics

Mfg.
& Operations

Enterprise
Asset Mgmt.

IT Services
& Support

Other IT
Operation**

$4.3 $7.6B

$2.6 $3.3B

$1.4 $2.2B

$5.6 $7.2B

$1.5 $1.9B

$1.8B $2.4B

$8.5 $10.3B

15%

6%

13%

6%

7%

7%

5%

Communities

BI

DRAFT AND CONFIDENTIAL

$5.5B $7.8B (9%)

Collaboration
& Social SW

Portals
& UI Tools

$1.5B $2.4B
13%

App Cloud

$22.2B $29.8B (8%)

IT Services*

App Infra.
& Middleware

Security

Consulting

$0.7B $0.9B

$5.7B $6.6B

$9.7B $13.7B

$2.4B $3.2B

$37.8B $49.4B

7%

4%

9%

7%

7%

Portals/Empl.
Self Service

App
Development

$1.7B $2.1B

4%

Web Content
Management

Data Integ.
& Quality

$1.5 $2.4B

$4.5B $6.2B

12%

9%

Note: Totals include white space categories

$147.9B $179B (5%)

Implementation

$96B $112.1B

Software
Support

4%

$14.1B $17.5B
6%

*IT Services is not included in core Salesforce TAM

DRAFT AND CONFIDENTIAL

Commerce Fills Key Cloud Gap, Particularly for Marketing

CRM

Comprehensive Marketing Cloud Platforms

Email and
Mobile
Channels

Social

Ads

Web &
Analytics

CMS

Commerce

Sales

Service

DRAFT AND CONFIDENTIAL

Champagne is a Scarce Asset and the Only Scaled Cloud

Player in Commerce
Forrester Wave B2C

Gartner MQ for Digital

eCommerce
Key Commentary

Champagne is the only

independent leader, with
significant improvement since
2014

Increasing number of recognized

vendors, but few that have
demonstrated enterprise track
record

Oracle and IBM investing in

cloud solutions

POS will be a key differentiator

over the next 3-5 years

Champagne

Champagne

Source: Forrester Wave B2C, Gartner Digital Commerce Magic Quadrant.

SaaS Solution

DRAFT AND CONFIDENTIAL

Our Competitors Have Made Substantive Bets in the

Space
eCommerce Market Share:
IBM
4%

Key Observations:

Highly fragmented market; no participant has substantial

share of the eCommerce segment

Oracle
5%

SAP /
Hybris
16%

High barriers to market entry

Our competitors continue to invest in eCommerce
Leading technology vendors include Champagne and Hybris

Other
66%

Key Acquisitions:

10

Source: Gartner Enterprise Software Market Share

IBM / Oracle: marked by legacy technologies

Digital
River
6%
DWRE
Champagne
3%

Small vendors lack growth and enterprise capabilities

No independent vendor (outside of Champagne) has
demonstrated an ability to drive substantial scale

Strategic Rationale and Key Considerations

Strategic Rationale

Gap in Core CRM Offering

Champagne is the only independent Enterprise SaaS

vendor that has demonstrated the ability to scale
Target already in play likely with an offer from a
competitor

Synergies

11

Substantial TAM opportunity of $4.3B growing to $7.6B by

2020, with SaaS solutions growing 22% through 2018
POS has potential to increase TAM by $5B

Competitive Differentiation

Strong interest from Salesforce customers to have a tight

integration between eCommerce and CRM
Enable a Complete CRM experience; enhance B2C
capabilities
Outstanding B2C retail customer list

TAM Expansion

Key Considerations

Relevant to Sales, Communities, Marketing, and Service

Increases up-sell potential among installed base
Provides lightweight CMS capabilities

Customer Focus

Opportunity to leverage cross cloud integrations,

particularly with Service Cloud, Marketing Cloud, and
Communities
Ability to streamline opex and invest in GTM

DRAFT AND CONFIDENTIAL

Synergy Challenges

Ongoing Market Competition

Highly fragmented market

Homebuilt solutions are difficult to penetrate
Large incumbents now offering cloud solution (IBM,
Oracle)

Market Focus

Limited ability to leverage our core AEs to sell this;

requires a specialist sale
Long sales and implementation cycle

Only focused on retail

Continued share gains by Amazon; does Amazon limit
opportunity to specialty retail?

Pricing Model

Focus on GMV based business (they charge a % of online

business through their platform) is likely to be pressured
over time
100 person retail services team help customer GMV

DRAFT AND CONFIDENTIAL

Champagne Focused on Unifying Customer Experience

Key Benefits of Unified Experience

12

Single view of the customer

Enables consistent experiences

across all touch-points

Integrations with fulfillment

vendors

Personalized across the customer

journey

Leverages architecture to enable

seamless integrations through
APIs

Simple customization allowing for

a branded experience

Ecosystem focused on both SI

partners and ISVs

Consistent scalability, reliability

and security

DRAFT AND CONFIDENTIAL

Prior Acquisitions Play a Key Role in Future Growth

Store / POS

13

Predictive Intelligence

Order Management

Acquired Tomax in January 2015

for $53M in cash

Acquired CQuotient in October

2014 for $22M in cash

Acquired Mainstreet Commerce in

January 2014 for $19M in cash

Office in Salt Lake City, Utah

Office in Cambridge, MA

Office in Deerfield Beach, FL

170 employees, including 100

engineers

Provides mobile point-of-sale

technology that accelerates the
delivery of digital in the store

Some capabilities included as part

of Champagne commerce platform
for no additional charge

Provides mission-critical order

management functionality that
supports all stages of an order

Delivers Personalization to enhance

customer engagement

Positions Champagne at the center

of every major trend in retail

Transform data into actionable

intelligence for customers

Enable retailers to deliver a buy

anywhere, fulfill anywhere
consumer experience

Primary driver of acquisition is to

accelerate omni-channel consumer
experience

DRAFT AND CONFIDENTIAL

Champagne Revenue Growth Driven By New Customers

and Comparable Customer GMV Growth
Targeting 30%+ Subscription Revenue Growth Over Next 3 years

14

Note: Company no longer reports overages as of Q116; organic growth estimates from Oppenheimer

Acquired Tomax (~$21M in CY15 revenue)

DRAFT AND CONFIDENTIAL

Champagne Focused on Land and Expand

Average Value of a Customer Over Time

15

Note: Cohort analysis includes 75 customers, all of which have been operating on Champagnes digital platform for minimum of 4 years

Total Customers Increasing Along with Average Revenue

Per Customer (ARPC)

DRAFT AND CONFIDENTIAL

Strong Enterprise Customer Growth Coupled With Substantial Increase in ARPC

Due to Land and Expand Strategy
2014 2015

3-year customer CAGR (12-15) of 30%

Customers with >$100M GMV: 22

30

Customers with >$200M GMV: 10

15

Customers with >$300M GMV:

16

Note: ARPC reported by company and includes professional services revenue

DRAFT AND CONFIDENTIAL

Champagne Monthly Billing Reduces OCF vs. Salesforce

Synergy Opportunity to Cash Flow via Billings Structure (Annual vs. Monthly)

3% of CY15 Revenue

Billing annually will drive incremental cash flow through upfront collections

15% of FY16 Revenue

17

Note: Change in DR not included in Change in NWC

DRAFT AND CONFIDENTIAL

Champagne Employee Detail

Champagne Remains Focused on Expanding Reach in EMEA
March 2016

December 2016(1)

Subscription Support

53

76

Subscription Platform Ops

47

63

Services

141

155

R&D

345

421

Sales

128

147

Marketing

81

Link (Alliances)
Customer Success
G&A
TOTAL

Customer Success team consists of

retail experts that help to drive upsell
potential to make these employees
billable in the future

Fully ramped QBRs have a $2M quota

Sales Org maintains ratio of ~2:1 for

SEs and 3:1 for BDRs

95

Nearly half of QBRs are based in EMEA

14

82

98

5 locations for R&D: Burlington (MA),

Salt Lake City (UT), Jena (Germany),
Deerfield Beach (FL), Cambridge (MA)

138

151

1,024

1,220

R&D investment is high relative to

public comparable SaaS vendors

Under investment in Sales and

Enablement represents a potential
opportunity

Regional Director: 11
QBR: 55
SE: 30

18

Source: Champagne Management presentation (May 2016)

(1) Management estimate.

Key Observations

BDR: 15
Ops and Enable: 17

DRAFT AND CONFIDENTIAL

Positive Glassdoor Ratings Show Strong CEO Approval

Key Concerns

19

Difficult and sometimes bureaucratic

decision-making processes

Internal communication / crossfunctional collaboration is difficult

Engineering spread across different

locations and time zones

Growth pains

DRAFT AND CONFIDENTIAL

Champagne Management
Thomas Ebling, President, CEO & Chairman

Wayne Whitcomb, CTO

CEO and board member since 2009

Chairman of the Board since July 2014
Previously served as CEO of Lattice Engines,

Chief Technology Officer since 2004 and co-founder

Tim Adams, CFO

Rama Ramakrishnan, Chief Data Scientist

of Daylight

Previously served as VP, Engineering at NaviSite and

CMGI-MyWay

ProfitLogic and Torrent Systems

CFO since June 2014

Previously served as CFO of athenahealth
Held various financial leadership positions at

Jeff Barnett, COO

Elana Anderson, SVP of Marketing

COO since January 2013

Joined Daylight in 2005 as EVP of Field Ops
Held sales and sales management positions at Siebel

Former VP of Strategy and Product Management at

Constitution Medical and Keystone Dental

Rohit Goyal, SVP of Engineering

Former Co-founder and VP Engineering of neoSaej

Former Director of Software at Enterasys
Co-inventor on six patents
20

Chief Data Scientist since October 2014

Founder of CQuotient (acquired by Daylight)
Former VP of Product Development at Oracle
Former Professor of Analytics at MIT Sloan

IBM

Joined IBM in 2010 via the acquisition of Unica

Served as VP and Research Director at Forrester

Kathleen Patton, General Counsel

Elected as General Counsel in June 2015

Associate General Counsel at Stream Global Services
from 2010 to 2012

DRAFT AND CONFIDENTIAL

Standalone P&L
(US $ in millions)

2013A

Actual
2014A

Subscription
Professional Services
Total Revenue
Consensus Estimates
Management Plan

95.7
10.9
$106.6

145.9
14.7
$160.6

Calendar Year Ending December, 31

CorpDev Estimates
2015A
2016E
2017E
2018E
201.0
36.3
$237.3

270.3
41.0
$311.3
$303.0
$313.0

354.2
42.2
$396.4
$383.0
$399.0

456.5
43.3
$499.8

2019E
580.3
44.5
$624.8

Cost of Sales
Subscription
Professional Services
Total COS

16.8
9.7
26.4

25.2
13.1
38.4

34.8
24.1
58.9

50.7
30.6
81.3

66.6
31.7
98.3

85.8
32.5
118.3

109.1
33.4
142.5

Subscription
Professional Services
Overall Gross Profit

79.0
1.2
80.2

120.7
1.5
122.2

166.1
12.2
178.3

219.6
10.4
230.0

287.6
10.4
298.1

370.7
10.8
381.5

471.2
11.1
482.3

Operating Expenses:
Research & Development
Sales & Marketing
General & Administrative
Total Operating Expenses

17.2
48.1
18.1
83.4

25.8
65.2
27.9
118.9

46.0
84.7
36.8
167.5

64.0
105.0
42.6
211.6

81.6
135.8
50.6
268.0

95.6
165.4
55.6
316.6

112.9
200.4
62.9
376.3

($3.2)

$3.2

$10.9

$18.4
$11.0
$19.3

$30.1
$19.0
$30.6

$64.9

$106.0

14.7
0.0
($17.9)

26.6
1.1
($24.5)

36.7
4.8
($30.7)

46.1
2.9
($30.5)

53.3
1.9
($25.1)

60.8
1.9
$2.2

68.1
1.9
$36.0

$9.0
8.5%

$3.6
2.3%

$14.9
6.3%

$24.4
7.8%

$46.4
11.7%

Revenue Mix
Subscription
Professional Services

90%
10%

91%
9%

85%
15%

87%
13%

89%
11%

91%
9%

93%
7%

Revenue Growth (Y-o-Y)

Subscription
Professional Services
Overall

41%
(6%)
34%

52%
35%
51%

38%
148%
48%

34%
13%
31%

31%
3%
27%

29%
3%
26%

27%
3%
25%

Gross Margin
Subscription
Professional Services
Overall

82%
11%
75%

83%
10%
76%

83%
34%
75%

81%
25%
74%

81%
25%
75%

81%
25%
76%

81%
25%
77%

Operating Expenses
R&D as % of revenue
S&M as % of revenue
G&A as % of revenue
SBC as % of revenue

16%
45%
17%
14%

16%
41%
17%
17%

19%
36%
16%
15%

21%
34%
14%
15%

21%
34%
13%
13%

19%
33%
11%
12%

18%
32%
10%
11%

(3%)
(17%)

2%
(15%)

5%
(13%)

6%
(10%)

8%
(6%)

13%
0%

17%
6%

Non-GAAP Operating Profit

Consensus Estimates
Management Plan
SBC
Amort of Intangibles
GAAP Operating Profit
OCF
OCF Yield
Growth & Margin Analysis

21

Non-GAAP Operating Margin

GAAP Operating Margin

Note: Uses analyst estimates for Amort of Intangibles forecast; assumes no M&A in CY2016 and CY2017

Key Commentary

Revenue numbers informed by Management Plan

Customers sign a minimum commitment to pay 1% 4% of Gross Merchandise Value (GMV); average of
1.5%

Processed throughout the life of a non-cancellable

contract (average contract is 3.0 - 3.5 years)

Subscription contracts are billed on a monthly basis

Focus on larger enterprise accounts has resulted in

longer sales cycles

Significant increase in PS revenue in CY15 resulting

from Tomax acquisition (January 2015)

Organic revenue growth rate of 34% Y/Y in CY15

PS as % of revenue is trending downward due to focus

on building out partner ecosystem (SI Partners up ~50%
Y/Y)

SBC currently ~15% of revenue, although expected to

trend downwards

Synergy Overview (SUBJECT TO FURTHER REVIEW)

Impact

Reduce Rate of Headcount Growth

Post-close, Salesforce will slow the rate of hiring in R&D and G&A relative to Champagne standalone;
there will be no direct headcount reductions
Reduce G&A by 10% to ~135 employees and slowing growth of R&D headcount down to 14% of
standalone revenue

$33M of cost savings in FY20

Bill Retail Services Resources

Champagne has a team of ~100 specialty retail experts working closely with customers that they
currently do not bill
Salesforce would likely bill for this work, and we assume we recoup 50% of their costs in FY18 / FY19
/ FY20

$18M of revenue in FY20

Sales Expansion

Champagne only has 55 quota-bearing sales reps, which reflects an underinvestment in sales
Salesforce will grow QBR ranks to 130 in FY20

$43M of revenue in FY20

Cross-Sell ET

Based on a subset of Champagne customers, estimated that ET currently has 27% penetration of the
Champagne customer base (average AOV of ~$300K)
Assumes ET penetration ramps to 55% in FY20

$46M of revenue in FY20

Cross-Sell Service Cloud

Based on a subset of Champagne customers, estimated that Service Cloud has 22% penetration of the
Champagne customer base (average AOV of ~$700K)
Assumes that Service Cloud penetration ramps to 35% in FY20

$54M of revenue in FY20

Cross-Sell Champagne into Salesforce Retail Customers

Salesforce will be able to sell Champagne into its existing retail base
Assumes sales into 20/50/100/175 new customers in FY17/FY18/FY19/FY20

22

$187M of revenue in FY20

DRAFT AND CONFIDENTIAL

DRAFT AND CONFIDENTIAL

Pro Forma P&L

(US$ in millions)
Champagne Standalone Revenue
Subscription
Professional Services
Total Standalone Revenue
YoY Growth 1
Plus: Increased Services Revenue
Plus: Increased Subscription Revenue
Total Pro Forma Adjusted Revenue
YoY Growth 1
Standalone Gross Profit
Subscription Gross Profit
Pro Serv Gross Profit
Total Standalone Gross Profit

Q4E

71.1
9.9
$81.1

79.5
10.5
$90.0

Salesforce Fiscal Year Ending January 31,

FY17E STUB
FY18E
FY19E
FY20E
150.6
20.5
$171.1

362.8
42.4
$405.1

465.3
43.2
$508.5

591.5
44.5
$636.0

30%

26%

25%

0.0
0.8

0.0
2.6

0.0
3.3

12.2
40.1

16.2
134.6

21.2
327.4

$81.8

$92.6

$174.4

$457.8

$659.6

$984.9

47%

44%

Key Commentary

Assumes transaction close of August 1

49%

Pro-Forma Non-GAAP losses driven by one-time

M&A and integration related costs

~Breakeven excluding one-time expenses

Synergies require upfront investment to drive longer

term growth

57.8
2.2
59.9

64.6
2.3
66.9

122.3
4.5
126.8

294.6
10.6
305.2

377.8
10.8
388.6

480.3
11.1
491.4

Synergy Gross Profit

Subscription Gross Profit
Pro Serv Gross Profit
Total Synergy Gross Profit

0.6
0.0
0.6

2.2
0.0
2.2

2.8
0.0
2.8

34.1
0.0
34.1

114.0
0.3
114.3

276.8
0.8
277.5

Total Adjusted Gross Profit

60.6

69.1

129.7

339.2

502.9

769.0

Research & Development

Sales & Marketing
General & Administrative
Champagne Standalone Operating Expenses

16.6
27.2
10.9
54.8

18.5
30.3
12.2
60.9

35.1
57.5
23.1
115.7

83.5
139.0
51.5
273.9

96.6
167.8
55.9
320.4

114.5
203.5
63.6
381.6

Synergy revenue subject to internal review; current

synergies lead to nearly $1B in FY20 revenue

Adjusted OpEx
Plus: Incremental Synergy R&D
Plus: Incremental Synergy S&M
Plus: Incremental Synergy G&A
Less: Headcount Cost Synergies
Adjusted Operating Expenses
Adjusted Operating Profit

0.0
4.8
0.0
(0.2)
59.5
1.1

0.1
6.6
0.1
(0.9)
66.8
2.3

0.1
11.5
0.1
(1.1)
126.2
3.4

1.6
54.7
0.8
(10.7)
320.2
19.0

5.4
126.1
2.7
(21.4)
433.2
69.7

13.2
239.7
6.6
(32.9)
608.2
160.8

Assumes headcount expenses equal 70% of

operating expenses; preliminary harmonization of
10% starting in FY18

Unbilled backlog writedown assumes 27 month

period

(5.0)
(25.0)
1.3
0.0
($27.6)
(3.0)
(35.7)
($66.3)

(5.0)
0.0
1.3
0.0
($1.4)
(4.4)
(35.7)
($41.6)

(10.0)
(25.0)
2.5
0.0
($29.1)
(7.4)
(71.4)
($107.8)

(55.0)

5.0
(22.4)
$52.3
0.0
(26.8)
$25.5

5.0
(26.7)
$139.0

Integration and transaction expenses comparable to

Exact Target

$2.4

$3.6

$52.3

$139.0

Less: Integration Costs

Less: Transaction Fees
Plus: Public Company Cost Savings
Less: Headcount Harmonization
PF Non-GAAP Operating Profit (excl. Write-downs)
Less: Deferred Revenue Writedown
Less: Unbilled Backlog Writedown
PF Non-GAAP Operating Profit (incl. Write-downs)

23

Q3E

PF Non-GAAP Operating Profit (excl. Write-downs / M&A Costs)

(1) FY18 Revenue growth calculated off of CY16 standalone revenue

$5.9

5.0
(19.2)
($50.1)
(7.4)
(98.1)
($155.6)
$4.9

$139.0

DRAFT AND CONFIDENTIAL

AVP
Current
Offer Price (per share $)
Implied Premium to Current Price
Implied Premium to:
30-day average trading price
60-day average trading price
90-day average trading price
180-day average trading price
52 week high
52 week low

$43.00
5/18/2016

43.24
39.99
39.77
46.22
75.56
28.04

Implied equity value ($M)

Net debt ($M)
Implied enterprise value
Implied Multiples:
EV / Revenue
CY16E
CY17E

24

(1%)
8%
8%
(7%)
(43%)
53%
$1,759
(196)
$ 1,563

Rev. ($M)
$311
$396

Potential Indicative Offer Range

$

58.05
35%

34%
45%
46%
26%
(23%)
107%
$2,385 $
(196)
$ 2,189 $

60.20
40%

62.35
45%

64.50
50%

66.65
55%

68.80
60%

39%
51%
51%
30%
(20%)
115%

44%
56%
57%
35%
(17%)
122%

49%
61%
62%
40%
(15%)
130%

54%
67%
68%
44%
(12%)
138%

59%
72%
73%
49%
(9%)
145%

2,475 $
(196)
2,279 $

2,565 $
(196)
2,369 $

2,655 $
(196)
2,459 $

2,745 $
(196)
2,549 $

2,835
(196)
2,639

5.0x
3.9x

7.0x
5.5x

7.3x
5.8x

7.6x
6.0x

7.9x
6.2x

8.2x
6.4x

8.5x
6.7x

PF BS Cash Used in Deal

Debt Issued
Total Sources

$1,759
$0
$1,759

$2,000
$385
$2,385

$2,000
$475
$2,475

$2,000
$565
$2,565

$2,000
$655
$2,655

$2,000
$745
$2,745

$2,000
$835
$2,835

Champagne Equity Value

Total Uses

$1,759
$1,759

$2,385
$2,385

$2,475
$2,475

$2,565
$2,565

$2,655
$2,655

$2,745
$2,745

$2,835
$2,835

CONFIDENTIAL

Project Champagne
Preliminary Reference Range Summary
May 18, 2016

CONFIDENTIAL

Preliminary Reference Range Summary

$90.00

$85.20

For Reference Only

$81.35

$75.90

Value of Synergies Per

CRM Management

$73.05

$75.00

$67.60

$66.05

$67.60

$69.75

$57.30

$60.00
$53.10

$57.55

$57.55

$48.65

$47.35

$45.00

$48.35

$50.15

Current (1):
$42.51

$38.05
$30.00

$31.50

$26.47

$15.00

$0.00
12-Month Trading
CY2013
Range

PV of
Analyst Price
CY2013
Targets (2)

Street CY'16

Street CY'17

(4)

Revenue

UMC Transactions

CY2013

CY2013

Revenue

26

Precedent

Selected Public Companies

CY2013
(3)
Tech Premiums

(4)

Management CY'16
Revenue

(4)

Management CY'17
Revenue

(4)

NTM Revenue

(4)

DCF
Perpetuity Growth

Range:

Range:

Range:

Multiple Range:

Multiple Range:

Multiple Range:

Multiple Range:

Range:

$26.47 - $75.90

$43.00 - $60.00

30% - 65%

5.5x - 8.0x

4.5x - 6.5x

5.5x - 8.0x

4.5x - 6.5x

6.5x - 9.5x

3.0% - 5.0%

Equity Discount Rate:

Statistic:

Statistic:

Statistic:

Statistic:

Statistic:

Statistic:

WACC Range:

$320.6

11.5% - 14.5%

13.0%
$44.27
$303.8
$383.0
$311.3
$396.4
____________________
Note: Dollars in millions, except per share data. Per share prices rounded to nearest $0.05. Diluted shares outstanding calculated based on treasury stock method.
Source: Wall Street research, First Call estimates and CRM management projections.
(1) As of May 18, 2016.
(2) Discounted by one year at indicative Champagne equity discount rate of 13.0%.
(3) Based on trailing 30-day average share price.
(4) Excludes the impact of amortization of intangibles, one-time charges and the impact of SFAS 123(R) stock-based compensation expense. NTM statistic based on four quarters ending March 2017.

Growth Rate Range:

Preliminary - Subject to
Change

CONFIDENTIAL

Notice to Recipient
Confidential

Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of
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These materials have been prepared by one or more subsidiaries of Bank of America Corporation for the client or potential client to whom such materials are directly addressed and delivered (the Company) in connection with an actual or potential mandate or
engagement and may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with us. These materials are based on information provided by or on behalf of the Company and/or other potential transaction
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27

DRAFT AND CONFIDENTIAL

Tuscany Overview

DRAFT AND CONFIDENTIAL

Tuscany Overview

Founded in 2003

HQ: Seattle, WA

1Q16 Employee Breakdown

Employees: 3,168 FTEs (AEs: 309 AMER, 106 EMEA, 26

LatAm, 77 APAC)

2015 Revenue: $654M (58% Y-o-Y growth)

2016E Revenue: $850M (30% Y-o-Y growth)

2016E Margins: 7% Operating Margin

Current Enterprise Value: $3,250M (3.8x CY2016E revenue)

Customers: 42,600 customers

G&A
16%

81
FTEs

Top Customers: Deloitte, J&J, Wal-Mart, GE, Verizon,

CapitalOne, Cisco, Wells Fargo, PWC, ExxonMobil

CY15 Revenue by Segment

Subscription
1%

Professional
Services
7%

219 FTEs

Sales
39%

R&D
27%

CY15 Revenue by Geography

345 FTEs

COGS
13%

International
25%
North America
75%

Maintenance
29%
License
63%

Marketing
5%

3,168 employees as of 3/31/2016

Tuscany Share Price

Trading Volume (MMs)

$130

25.0

20.0

$100

15.0
$70
10.0
$40

29

$10
1/02/15

5.0

0.0

4/02/15

7/02/15

10/02/15

1/02/16

4/02/16

DRAFT AND CONFIDENTIAL

Strategic Rationale & Key Considerations

Strategic Rationale

Bolster Analytics Cloud

Represents a beach head analytics asset

Paves way for $1B Analytics Cloud business
Provides missing data prep and semantic layer for
Analytics Cloud
Tuscany has best in class visualization capabilities and
self service BI
Would help enhance presence with developer /
business analyst communities

TAM Expansion

Analytics market moving toward self-service oriented

analytics offerings like Tuscanys
BI Platform TAM opportunity of $8.6B growing to
$9.5B by FY2020

Synergies

Opportunity to leverage cross selling Tuscanys

analytics product into Salesforces install base
Lack of sales orientation provides upside opportunity

Transition to Subscription Model

Industry Leader

Key Considerations

Cloud Offering

Lack Head of Sales; rep productivity declining

Pace of international is hurting sales productivity

Technology

30

Too many R&D projects and personnel

Minimizing losses would require significant headcount
reduction (~700 employees out of ~3,200 to
breakeven); requires further study

Distribution

IT departments with on-prem systems makes it

challenging to move BI completely to cloud; most
vendors believe hybrid model is focus for near-term

Headcount Reduction

Company has perpetual license model with annual

maintenance revenue
Disruption likely to cause significant churn
Challenges in pricing new subscriptions
Significant on-going losses associated with transition
to subscription and SaaS

Technology stack is built on OEM relationships (e.g.

Redshift) without substantial owned IP / technology

DRAFT AND CONFIDENTIAL

Tuscany a Leader in BI and Analytics Platforms

BI Customer Survey Rankings1
(5 = Highest, 1 = Lowest)

Tuscany

31

(1) BMO Capital Markets based on Gartner Survey Data (December 2015)

Tuscany

Qlik

TIBCO

MicroStrategy

Microsoft

Ease of Use

5.0

4.0

3.0

2.0

1.0

Analysis Complexity

5.0

4.0

3.0

1.0

2.0

Customer Experience

5.0

2.0

1.0

3.0

4.0

Business Benefits

5.0

4.0

4.0

2.0

1.0

Product Quality

5.0

2.0

3.0

1.0

4.0

User Enablement

5.0

4.0

1.0

3.0

2.0

Enterprise Standardization

1.0

3.0

2.0

5.0

4.0

Sales Experience

5.0

2.0

3.0

4.0

1.0

Support

5.0

1.0

3.0

4.0

3.0

Average

4.6

2.9

2.6

2.7

2.4

DRAFT AND CONFIDENTIAL

The BI Market is Expected to Grow; Tuscany is WellPositioned in Data Discovery in Competitive BI Industry
BI & Analytics Addressable Market
$25,000

Revenue

Data Discovery Market Share

BI Market Share

12%

YoY % Change

Qlik
22%
10%

$20,000

SAP
20%

Other
25%

8%
$15,000
6%
$10,000

Tuscany
3%

Other Vendors
53%
Tuscany
18%

4%
$5,000

2%

$0

0%

2013

2014

2015

2016

2017

2018

The BI & Analytics market is

expected to grow in a tough
competitive environment

32 Source: Gartner and Nomura Research (Aug 24, 2015)

Spotfire
7%

2019

Tuscany commands a key player in

the data discovery market, but the
space is fragmented and there is
room to gain share

Oracle
13%

Qlik
3%
MicroStrategy
3%
Microsoft
10%
IBM
11%

SAS
12%

Tuscany has substantial runway

to gain share against larger
competitors by offering better
user experience and richer
feature functionality

DRAFT AND CONFIDENTIAL

License Revenue Growth Has Decelerated Recently; Cloud

Nascent
$250

License Revenue

Maintenance & Services Revenue

Online
$203
$3

$200

$143

$150
$105

$100

$50

$81

$40
$14

$0

$50
$16

$61

$23

$19

$75

$95

$130
$96

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

65%
35%

67%
33%

67%
33%

71%
29%

64%
35%
1%

64%
35%
1%

63%
36%
1%

65%
34%
1%

55%
44%
2%

83%
92%

80%
85%

66%
81%

75%
77%

74%
75%

60%
75%

57%
77%

31%
68%

14%
65%

71%
29%

67%
33%

$83

$107

1Q14

69%
31%

2Q13

$101
$60

4Q13

1Q13

$73

$53

$70

3Q13

$26

$61

$35

$26

$48

$42

$30

$70

$172
$4

$46

$91

$58

$34

$42

$130
$2

$150
$2

$171
$2

Revenue Mix
License
Maint. & Svcs
Online (SaaS)

66%
34%

YoY Growth
License
Maint. & Svcs

33

Sharp deceleration in License Revenue growth

DRAFT AND CONFIDENTIAL

Comparison of Tuscany and Qlik

34

Tuscany

Qlik

Headquarters

Seattle, WA

Radnor, PA (Founded in Sweden)

Employees

3,168 (1,397 S&M; 857 R&D; 212 G&A)

2,511 (452 R&D)

CEO Rating (Glassdoor)

98%

92%

Would Recommend (Glassdoor)

81%

83%

Customers

42,600

38,000

FY16A Deferred Revenue

$196M

$168M

FY16A Indirect / Direct Sales %

25% Indirect / 75% Direct1

50% Indirect / 50% Direct

FY17E Revenue

$850M

$710M

FY17E Growth Rate

30%

16%

FY17E Gross Margin

90%

87%

FY17E Operating Profit

$63M

$59M

Enterprise Value

$3,252M

$2,552M

EV / FY17E Revenue

3.8x

3.6x

Commentary

Stock has fallen 40% since announcing 4Q earnings

Mostly US revenue (~75% of revenue); but growing intl presence
Cloud product recently launched; minimal % of total revenue

Company retained Morgan Stanley to assess strategic alternatives

Activist investor Elliott Management owns 8.8%
Stock has risen 25% since Elliott Management disclosed its stake
Heavy Europe / APAC exposure (65% ex-US)
Cloud product recently launched; minimal % of total revenues

DRAFT AND CONFIDENTIAL

Tuscany Standalone Non-GAAP P&L

($ in millions)

Revenue
License
Maintenance
Professional Services
Maintenance & Services
Subscription
Total Revenue

2014

Calendar Year Ending December 31,

2015
2016
2017
2018

2019

'15-'19E
CAGR

280
--133
-$413

415
187
43
230
9
$654

491
283
55
337
22
$850

580
393
70
463
59
$1,102

668
521
80
601
115
$1,384

762
666
91
757
183
$1,702

16%
37%
21%
35%
115%
27%

279
99
--378
91.6%

415
154
9
9
587
89.8%

486
246
12
17
762
89.6%

574
342
15
49
980
89.0%

661
453
18
98
1,230
88.9%

754
579
20
156
1,509
88.7%

16%
39%
21%
106%
27%

Sales & Marketing

Research & Development
General & Administrative
Total Operating Expenses
Operating Profit
% Margin

198
90
36
325
$53
12.9%

312
149
59
520
$67
10.3%

416
209
74
700
$63
7.4%

507
242
88
837
$143
13.0%

609
277
97
983
$247
17.9%

749
340
111
1,200
$309
18.2%

25%
23%
17%
23%
46%

Growth & Margin Analysis

Y/Y Revenue Growth
License
Maintenance
Professional Services
Maintenance & Services
Subscription
Overall

-------

48%
--73%
-58%

18%
51%
28%
47%
153%
30%

18%
39%
27%
37%
172%
30%

15%
33%
15%
30%
95%
26%

14%
28%
14%
26%
59%
23%

OpEx as % of Revenue
Sales & Marketing
Research & Development
General & Administrative

48%
22%
9%

48%
23%
9%

49%
25%
9%

46%
22%
8%

44%
20%
7%

44%
20%
7%

Operating Margin

13%

6%

7%

13%

18%

18%

Gross Profit
License
Maintenance
Professional Services
Subscription
Total Gross Profit
% Margin
Operating Expenses:

35

Key Commentary

Revenue growth triangulated from WS consensus

estimates and managements forecast

Gross profit margins according to managements

guidance and historical trends

Opex margins triangulated from WS consensus estimates

and managements forecast

Professional Services is 50/50 training and hourly project

work; ProServ ~10% margin, training ~30% margin

Tuscany Online SaaS offering of Tuscany Server

925 new customers in 1Q16

ARPC: $5,000
Average Number of Seats: 10
Pricing: $500 Annually Per Seat

S&M and R&D as % of revenue is trending downward as

company has taken a more conservative stance on
spending, abandoning growth-at-any-cost approach;
focus on rep productivity

DRAFT AND CONFIDENTIAL

Tuscany Pro Forma Non-GAAP P&L

($ in millions)

Q3

Q4

Salesforce Fiscal Year Ending January 31,

FY2017PF
FY2018
FY2019

FY2020

Total Standalone Revenue

$235

$249

$484

$1,124

$1,408

$1,732

Pro Forma Adjustments:

Less: License Revenue Attrition from Disruption
Less: License Revenue Transitioning to Subscription
Less: Reduced New Maintenance Revenue
Plus: New Subscription Revenue (From Transition)
Plus: Revenue Synergies from Cross Sell
Pro Forma Adjusted Revenue
Total Subscription Revenue

(7)
(7)
(0)
1
0
$222
$7

(7)
(24)
(1)
3
1
$220
$12

(14)
(31)
(1)
3
1
$442
$19

(6)
(283)
(25)
92
38
$939
$193

0
(623)
(166)
437
155
$1,211
$713

0
(769)
(382)
948
354
$1,884
$1,493

Standalone Gross Profit

$211

$223

$433

$999

$1,251

$1,535

Pro Forma Adjustments:

Less: License Revenue Attrition GP
Less: Reduced New Maintenance Revenue GP
Plus: New Subscription Revenue (From Transition) GP
Plus: Revenue Synergies GP
Pro Forma Adjusted Gross Profit

(12)
(0)
0
0
$199

(31)
(1)
2
0
$194

(43)
(1)
3
1
$393

(286)
(22)
76
31
$798

(617)
(145)
372
132
$993

(761)
(332)
806
301
$1,549

Operating Expenses
Sales & Marketing
Research & Development
General & Administrative
Standalone Operating Expenses

$113
55
20
188

$118
57
21
196

$231
113
42
385

$515
245
89
849

$620
282
98
999

$762
346
113
1,221

(3)
1
0
187
$12

(4)
1
0
193
$1

(7)
2
0
380
$13

(26)
53
57
933
($135)

(40)
127
64
1,151
($158)

(49)
191
74
1,437
$112

8
65
($61)

8
0
($7)

15
65
($67)

35
0
($170)
480
680

10
0
($168)

0
0
$112

$153
($129)

$169
($58)

$322
($187)

$888
($221)

$1,211
($168)

$1,884
$112

Less: Cost Synergies

Plus: Incremental S&M Spend
Plus: Headcount Harmonization
Adjusted Operating Expenses
Adjusted Operating Profit
Less: Integration Costs
Less: Transaction Fees
PF Non-GAAP Operating Profit
Headcount Reduction for $50M OP Loss
Headcount Reduction for Break Even
Pro Forma Adjusted Revenue with DR Writedown
Pro Forma Adjusted Op Profit with DR Writedown

36

Key Commentary
Business Model Transition to Subscription

Convert license revenue into recurring subscription business;

100% conversion by FY2020

TCV = Upfront License + 3 Yrs Maintenance

ACV = TCV / Assume Contract Length (3 Yrs)

Convert maintenance revenue into recurring subscription

business starting 2 years after transaction close
Revenue Synergies

Revenue synergies from cross selling Tuscany offering into

Salesforce install base
Cost Synergies

Decelerate headcount growth in G&A and R&D

G&A Non-HC savings associated with no longer being a

public company
Cost Dis-Synergies

Incremental S&M to generate cross sell synergies

HC Harmonization of 10% of total employee compensation

Other Adjustments

Deferred revenue write down

$387M DR Balance; 44% write down over 4 quarters

Standard integration expenses & transaction fees

DRAFT AND CONFIDENTIAL

AVP
Offer Price (per share $)
Implied Premium to Current Price
Implied Premium to:
30-day average trading price
60-day average trading price
90-day average trading price
180-day average trading price
52 week high
52 week low

Current

Implied equity value ($M)

Net debt ($M)
Implied enterprise value
Implied Multiples:
EV / Revenue
CY16E
CY17E

37

$47.38

$ 60.00
27%

$ 65.00
37%

$ 70.00
48%

$ 75.00
58%

(1%)
3%
(6%)
(23%)
(64%)
29%

25%
31%
19%
(2%)
(54%)
64%

35%
42%
28%
6%
(51%)
78%

46%
52%
38%
14%
(47%)
91%

56%
63%
48%
22%
(43%)
105%

5/17/2016

$48.00
45.90
50.62
61.38
131.34
36.60

$4,060
(808)
$ 3,252

Rev. ($M)
$850
$1,102

Potential Indicative Offer Range

3.8x
3.0x

$5,155 $ 5,588 $ 6,022 $ 6,456

(808)
(808)
(808)
(808)
$ 4,347 $ 4,780 $ 5,214 $ 5,648

5.1x
3.9x

5.6x
4.3x

6.1x
4.7x

6.6x
5.1x

PF BS Cash Used in Deal

Debt Issued
Total Sources

$2,808
$2,347
$5,155

$2,808
$2,780
$5,588

$2,808
$3,214
$6,022

$2,808
$3,648
$6,456

Tuscany Equity Value

Total Uses

$5,155
$5,155

$5,588
$5,588

$6,022
$6,022

$6,456
$6,456

Very preliminary
cash/debt
assumptions

DRAFT AND CONFIDENTIAL

Strong Employee Approval Rating of CEO

38

DRAFT AND CONFIDENTIAL

Sonoma Overview

DRAFT AND CONFIDENTIAL

Company Overview
Founded: 2004

Company
Overview

Employees: 3,991
Headquarters: Santa Clara, CA with 5 data centers in the U.S. and 10 internationally (Canada, Brazil, UK, Netherlands, Switzerland,
Australia, Singapore, and Hong Kong)
Operates a single-tenant architecture to provide SaaS based IT Service Management solutions
Sonoma is used by over 30% of the Global 2000, with a total of 3,098 enterprise customers
In process of transitioning to multi-product platform while building out broader solutions portfolio

Business
Highlights

Retained 97% of ACV up for renewal in Q1 2016

Stable levels of sales productivity with sales headcount growing ~30% annually

Expects to generate revenue of ~$1.37B in CY2016, up 36% from CY2015

Current enterprise value of $12.3B and market cap of $12.8B; implies CY16 revenue multiple of 9.0x

40

Sonoma Provides Material Opportunity to Penetrate

Enterprise and Drive Substantial Scale

DRAFT AND CONFIDENTIAL

Strong Enterprise Customer

Base
IT as a Channel

Enables visibility into ~33% of G2K currently with opportunity for growth
across all products

Demonstrated ability to penetrate IT as a mechanism to go crossenterprise

Service Management is an entre to broad operations

Aligned Mission

Allows Salesforce to penetrate the line of business for service across all
aspects of the internal and external enterprise

~$40B of incremental TAM

Substantial Scale
41

$1.4B of revenue and growth of 36%

DRAFT AND CONFIDENTIAL

Sonoma is a Leader in the Gartner MQ for ITSM

Gartner MQ for ITSM

Market Share

Sonoma
Sonoma

2013 to 2015
movement

42

DRAFT AND CONFIDENTIAL

Sonoma is a Digital Disruptor on Par with Salesforce

43

DRAFT AND CONFIDENTIAL

Sonoma Addresses an Estimated $60B Market Opportunity

1.

44

2.
3.

Gartner Market Share: All Software Markets,

Worldwide
GRC 2020: State of the GRC Market, 2015
CapIQ; Global companies with 100 to 1,000
employees and $50 to $500M in LTM revenue

4. Sonoma Estimate
5. CapIQ; Global companies with >1,000 employees
and >$500M in LTM revenue
6. ~3,000 Sonoma customers divided by 22,500
addressable enterprise customers

Sonoma Key Strengths & Concerns

Strengths

Concerns

Scale and Growth:

With revenue of $1.4B in CY16, Sonoma trails only
LinkedIn and Workday in the Enterprise SaaS ecosystem
Expected CY16 growth of 36% leads all enterprise SaaS
companies over $500M in revenue

Ability to retain management

Valuation: CY16 revenue multiple of 9.0x

Valuation requires conviction that Sonoma will extend
beyond core ITSM and into Platform and new horizontal
offerings

Enterprise Presence and TAM:

Extends Salesforce into the CIO / CTO with 3K enterprise
customers and 653 of G2K globally
Increases Salesforces TAM by $10B immediately with
potential exposure to an incremental $50B+

GTM:
CIO / CTO sale
Very enterprise focused (avg. revenue / customer of
$394K) with questioned capability to penetrate mid
market or SMB

Attractive Metrics:
Low attrition of ~5% - 10% annually
36% upsell, strong land and expand
32 month average contract length for new customers
12% operating margin and $331M of FCF in CY16

Margin Structure: Single tenant database and high PS revenue

(13%) could challenge LT margins

Signs of Deceleration: 2H15 billings growth of 42% vs. 66% in

2H14; billings growth guidance of 33% for CY16

Single Tenant Architecture

45

DRAFT AND CONFIDENTIAL

DRAFT AND CONFIDENTIAL

Revenue and Customers Metrics

($ in Millions)

Customers

Revenue
$350

$300

Customers

($ in 000s)

Avg Sub Rev/Customer

Subscription

$276

Professional Services

$39

$245

3,000

$284

$31
$150

$34

2,000

$28

1,914

$100
$117

$133

$150

$167

$180

$201

$223

3,098

$245

2,046

2,176

2,347

2,461

2,628

$200
$150

$267
$100

1,000

$50

$0

0
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
16%

20%

$250

2,804

$32

$22

$350
$300

2,978

$38

$200

16%

16%

15%

19%

15%

14%

High mix of Professional Services revenue

results in lower overall gross margin

46

$318

$329

$259

$46

% PS

$292

$305

$41

$250

$50

$345

4,000

13%

$0
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

Q/Q Growth

7%

6%

8%

5%

7%

7%

6%

4%

Sonoma has demonstrated substantial land and expand

capabilities; customer growth (26% Y/Y in Q1 2016) due
to increased investment in the sales organization

DRAFT AND CONFIDENTIAL

Continued Focus on Global 2K Opportunities

47

Note: Sonoma definition of ACV aligns with Salesforce AOV definition

Currently
penetrated
into 33% of
G2K

DRAFT AND CONFIDENTIAL

Headcount by Department

48

DRAFT AND CONFIDENTIAL

Standalone P&L
(US $ in millions)

Subscription
Professional Services
Total Revenue

2012A

Fiscal Year Ending December 31,

Actual
Morgan Stanley Estimates
2013A
2014A
2015A
2016E
2017E
2018E

205
39
244

350
75
425

567
115
683

848
157
1,006

1,202
165
1,367

1,588
173
1,761

2,028
182
2,210

Cost of Sales
Subscription
Professional Services
Total COS

59
39
99

79
63
142

128
93
221

149
123
272

202
132
334

270
142
412

345
149
494

Subscription
Professional Services
Overall Gross Profit

145
0
145

270
12
283

440
22
462

699
35
734

1,000
33
1,033

1,303
36
1,338

1,664
37
1,701

Operating Expenses:
Research & Development
Sales & Marketing
General & Administrative
Total Operating Expenses

33
94
28
155

62
174
47
283

106
287
67
459

147
396
88
631

196
553
120
869

233
684
146
1,063

($10)

($1)

$2

$103

$165

84%
16%

82%
18%

83%
17%

84%
16%

84%
131%
90%

71%
91%
74%

62%
54%
61%

Gross Margin
Subscription
Professional Services
Overall

71%
0%
60%

77%
16%
67%

Operating Expenses
R&D as % of revenue
S&M as % of revenue
G&A as % of revenue

13%
38%
12%

Operating Margin

(4%)

Operating Profit

Key Commentary

Top-line deceleration (61% in 2014 to 29% in 2017),

although business has achieved substantial scale (>$1B in
revenue in 2015)

270
826
172
1,268

Mix of subscription revenue expected to trend upwards

in coming years, bringing gross margin upwards as well

$275

$433

88%
12%

90%
10%

92%
8%

Significant operating margin expansion in recent years

mainly driven by gross margin expansion and leverage in
G&A

50%
36%
47%

42%
5%
36%

32%
5%
29%

28%
5%
25%

R&D & G&A as % of revenue in-line with other SaaS

companies and trending downwards

77%
19%
68%

82%
22%
73%

83%
20%
76%

82%
21%
76%

82%
21%
77%

High CapEx (relative to Salesforce) of 8-9% in 2014 /

2015

15%
41%
11%

15%
42%
10%

15%
39%
9%

14%
40%
9%

13%
39%
8%

12%
37%
8%

(0%)

0%

10%

12%

16%

20%

Growth & Margin Analysis

Revenue Mix
Subscription
Professional Services
Revenue Growth (Y-o-Y)
Subscription
Professional Services
Overall

49

DRAFT AND CONFIDENTIAL

Pro-Serve has Challenged Sonomas Gross Margin

Salesforce had a greater mix of subscription revenue, and therefore better overall margins

50

FY05

FY06

FY07

FY08

FY09

FY05

FY06

FY07

FY08

FY09

FY11

FY12

FY13

FY14

FY15

FY11

FY12

FY13

FY14

FY15

Sonoma Management Team

51

DRAFT AND CONFIDENTIAL

Frank Slootman
President and CEO
EMC, Data Domain, Borland Software
Netherlands School of Economics

Fred Luddy
Chief Product Officer, Founder
Peregrine Systems, Enterprise Software Associates

Chris Bedi
CIO
JDSU, VeriSign, KPMG Consulting
University of Michigan

Dave Wright
Chief Strategy Officer
Vmware, Mercury Interactive, Peregrine Systems

Dan McGee
COO
EMC, Data Domain, Aventail, Pinnacle Systems
Oregon State University, Stanford (M.S.)

Michael Scarpelli
CFO
EMC, Data Domain, Lexar Media, HPL, PWC
University of Western Ontario

David Schneider
Chief Revenue Officer
EMC, Data Domain, Borland Software
University of California Irvine

Beth White
CMO
EMC, Data Domain, Aarohi, Borland Software
University of Northern Arizona

Below Average Glassdoor Rankings

52

DRAFT AND CONFIDENTIAL

Project Sonoma
Goldman, Sachs & Co.
May 18, 2016

54

55

56

57

58

59

60