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January 2022 Public Market Valuations – Return to Fundamentals Jon Guido and Doug Hurst C-Suite SaaS Solutions Report 1 AGC Partners PUBLIC VALUATION RECONCILIATION Through early Q4, the 3 C-Suite Indices and the BVP SaaS Index outperformed the S&P Index as much as 5x (see page 4) as public investors rewarded revenue growth compared to the private markets which emphasized SaaS fundamentals At the same time, the public trading multiples (20x+ ARR) towered over the private market multiples Private market valuations have been and continue to be primarily driven off of SaaS fundamentals - revenue growth, Rule of 40, and Cash Flow Margin While the S&P Index has remained flat over the last two months, SaaS stock prices have been hammered (see page 4) Workforce Management (-22%), SaaS Index (-28%), Workflow Management (-29%), CFO Suite (-33%) As such, the revenue multiples of public SaaS stock have taken a significant hit (see page 9) Workforce Management (26x to 17x), CFO Suite (24x to 14x), Workflow Management (25x to 16x), SaaS Index (19x to 13x) Public stocks exhibiting slowing revenue growth, weak efficiency (below or near 40 on the Rule of 40) and negative cash flow margins have substantially underperformed comparable SaaS companies and the general SaaS index When C-Suite SaaS companies are grouped by revenue multiple ranges, those that are trading over 20x ARR have significantly better SaaS fundamentals (see page 6, right) >20x 13x - 20x <13x 62% Rule of 40 59% Revenue Growth 80% Gross Margin 46% 39% 73% 40% 26% 74% Fundamentals by Revenue Multiple 2 AGC Partners RETURN TO FUNDAMENTALS Over the last ten weeks (see page 7, right), the stock price performance of the companies with weaker fundamentals have substantially underperformed those with the stronger fundamentals We believe the bifurcation in the valuation multiples between the “haves” and “have-nots” in the public and private markets will continue to expand While the headline stock price declines are alarming, they will have a muted impact on the private markets for true “A” companies The top performing private companies will continue to be able to receive premium valuations given the supply / demand imbalance of the abundance of available capital compared the scarcity of high quality companies Over the last 18 months, some good (not great) companies received great valuations - we expect those valuation multiples to fall The bar will be raised for companies deemed to be a “have” – those below will not be able to transact at a compelling valuation Additional economic factors also seem to be affecting all SaaS stocks, notably the increase in inflation and interest rates and the underperformance of the US economy versus forecasts 0% – S&P 500 -40% -30% -20% -10% 0% (22%) – Stronger Fundamentals Index (29%) – SaaS Index (37%) – Weaker Fundamentals Index Performance Since 11/9/2021 11/9/21 12/9/21 1/10/22 AGC Partners 3 THREE C-SUITE CORE PILLARS – MASSIVE TAM AND GROWING NUMBER OF PUBLIC COS Spend management, financial controls, budgeting, audit/reporting, tax preparation, T&E management, procurement, revenue tracking and planning, compliance reporting Arrange, track, control and coordinate business process, reducing redundant tasks with automation HR comp, legal and compliance training, payroll, benefits, staffing $225B TAM $170B TAM $95B TAM $80B Business Spend Management $30B AR/AP Software $25B eSignature $20B Financial Close $35B Agile Listing $13B Budgeting Management $10.5B Financial Systems $12B Tax Management $60B IT Operations Management Applications $30B Cloud Content Management $24B Self-Service Analytics $36B Collaboration Software $21B Cloud Based Planning $29B Workforce Finance $26B Workforce Analytics $26B HCM & Payroll $10B Workforce Product & Planning CFO Suite Workflow Management Workforce Management Note: TAMs utilize representative public companies’ published TAMs, segmented and by sub-industry. 4 AGC Partners SAAS COMPANIES – OUTPERFORMING THE S&P 500 DESPITE MASSIVE DROP FROM NOVEMBER 9TH The CFO Suite Index is up 118% over the last two years, which is the best performing C-Suite index, and continues to outperform the BVP SaaS index and S&P 500 The Workflow Management and Workforce Management indices are trading slightly below the level of the SaaS index but still ahead of the S&P 500 51% – Workforce MGT. Index 56% – Workflow MGT. Index 118% – CFO Suite Index 43% – S&P 500 66% – SaaS Index -50% 0% 50% 100% 150% 200% 250% Since 1/1/2020 Source: PitchBook, BVP Emerging Cloud Index. Last updated January 10, 2022. 237% 132% 112% 94% 44% 11/9/2021 High 5 AGC Partners ALL SAAS COMPANIES ARE BEING REPRICED IN THE PUBLIC MARKETS The last two months of 2021 saw a massive sell- off across C-Suite, with the composite Index losing more than a third of its total value. The S&P 500 has been flat throughout this period. The drastic declines in CFO Suite, Workflow Management, and Workforce Management indices have been driven largely by stocks with weak fundamental financials. -35% -30% -25% -20% -15% -10% -5% 0% 5% Since 11/9/2021 0% – S&P 500 (22%) – Workforce MGT. Index (29%) – Workflow MGT. Index (33%) – CFO Suite Index (28%) – SaaS Index Source: PitchBook, BVP Emerging Cloud Index. Last updated January 10, 2022. 6 AGC Partners SAAS VALUATIONS FOR C-SUITE – PUBLIC MARKET REWARDING FUNDAMENTALS Companies EV/LTM Revenue Multiple Average Efficiency Forward Revenue Growth Rate Gross Margin FCF Margin >20x 62% 59% 80% 3% 13-20x 46% 39% 73% 7% <13x 40% 26% 74% 12% C-Suite Companies: Bucketed by EV/LTM Revenue Source: PitchBook, BVP Emerging Cloud Index. Buckets based on EV/LTM revenue multiples on January 7, 2022. Despite the selloff, the markets are rewarding fundamentally-strong companies. Higher efficiency is correlated with higher multiples. When Rule of 40 is achieved, the market tends to give more weight to Revenue Growth vs. FCF Margin. Companies trading at greater than 20x EV/LTM Revenue have an average forward growth rate that is more than double that of companies trading at less than 13x. 7 AGC Partners STOCK INDICES PERFORMANCE – COS WITH WEAKER FUNDAMENTALS ARE AFFECTED THE MOST Since 11/9/2021 0% -40% -30% -20% -10% 0% (22%) (29%) (37%) 11/9/21 12/9/21 1/10/22 The SaaS Index’s recent correction off its all-time high has left some companies reeling more than others There are 11 C-Suite companies that satisfy all three of the following criteria: The public market is starting to put more weight on fundamentals when valuing these hot tech companies ✓Efficiency >35% ✓Accelerating Rev. Growth ✓Positive FCF Margin Those 11 companies are down 22% compared to those with weaker fundamentals, which are down 37% S&P 500 SaaS Index Stronger Fundamentals Index Weaker Fundamentals Index Source: PitchBook, BVP Emerging Cloud Index. Last updated January 10, 2022. 8 AGC Partners Weaker Fundamentals Index Company Efficiency FCF Margin Forward Revenue Growth Rate Change in Revenue Growth (1) 39% (31%) 70% NM 40% (21%) 61% (37%) 36% (13%) 50% 56% NM (7%) NM NM 146% (6%) 152% NM 54% (4%) 58% (31%) 42% (4%) 46% 2% 75% 40% 35% (82%) 20% 4% 16% (67%) 67% 33% 34% (7%) 62% 19% 42% (4%) 55% 15% 40% (2%) 22% 7% 15% (1%) STRONGER FUNDAMENTALS COMPARED TO WEAKER FUNDAMENTALS Stronger Fundamentals Index Company Efficiency FCF Margin Forward Revenue Growth Rate Change in Revenue Growth (1) 58% 27% 31% 4% 49% 15% 34% 117% 47% 17% 30% 88% 47% 11% 36% 512% 46% 5% 42% 34% 46% 0% 46% 10% 45% 25% 20% 1% 44% 12% 32% 17% 39% 11% 28% 40% 36% 15% 21% 2% 36% 0% 35% 12% (1) Percentage change between 2020/19 and 2021/20 YOY revenue growth rates Source: PitchBook, BVP Emerging Cloud Index 9 AGC Partners SAAS VALUATIONS FOR C-SUITE C-Suite: Public Median EV/LTM Revenue 13x 26x 20x 19x 17x 20x 25x 18x 16x 15x 24x 16x 14x 12x 19x 19x 14x 13x 8x 26x Q2 ’20 Q4 ’19 Q1 ’20 Q3 ’20 Q4 ’20 Q1 ’21 Q2 ’21 Q3 ’21 Oct ’21 Nov ’21 Dec ’21 Jan ’22 Quarterly Monthly Workforce Management Index Workflow Management Index CFO Suite Index SaaS Index Source: PitchBook While fundamental impact difference are much more visible within the C-Suite index’s decline, the contrast amongst sub- sectors is much less visible. Workforce Management, trading at 17x, outperformed Workflow Management (16x) and CFO Suite (14x). Despite the major sell off across technology markets in the last three months of 2021, C-Suite revenue multiples are still higher than the broader SaaS index. 10 AGC Partners Source: PitchBook, BVP Emerging Cloud Index SELECTED PUBLIC PLAYERS: CFO SUITE CFO SUITE ($ in millions) Rev Growth Revenue Company EV / Rev Multiple Market Cap(a) Enterprise Value(a)(b) Forward EBITDA Margin Gross Margin 2021E 13x $26,897 $26,981 42% 24% 79% $2,088 51x 20,709 19,731 152% (17%) 74% 385 9x 11,907 12,146 32% 10% 80% 1,333 30x 11,413 11,325 70% (43%) 90% 372 16x 10,277 11,244 40% 12% 58% 718 13x 9,493 8,977 42% 1% 71% 688 13x 5,831 5,641 28% 5% 77% 440 13x 5,643 5,594 21% 14% 78% 424 19x 2,621 2,669 36% 42% 51% 142 14x 2,592 3,470 28% (12%) 60% 245 6x 2,349 2,332 15% 18% 60% 423 6x 1,380 1,325 NM (0%) 64% 233 MEDIAN 13x $7,662 $7,309 36% 8% 73% $423 Notes (a) Based on closing stock prices on January 10, 2022 (b) Calculated as Equity Value plus total debt, minority interest (at book value unless otherwise noted) and preferred stock, less cash & equivalents 2021E Margins 11 AGC Partners SELECTED PUBLIC PLAYERS: WORKFLOW / COLLABORATION MANAGEMENT WORKFLOW MANAGEMENT ($ in millions) Rev Growth Revenue Company EV / Rev Multiple Market Cap(a) Enterprise Value(a)(b) Forward EBITDA Margin Gross Margin 2021E The Trade Desk 19x $112,712 $111,908 31% 33% 77% $5,884 33x 76,763 76,416 34% 27% 84% 2,343 11x 51,136 45,815 35% 43% 74% 4,081 Rubicon Project 21x 20,589 18,765 58% 7% 80% 885 42x 12,839 12,989 61% (64%) NA 310 14x 7,980 7,620 46% (5%) 80% 545 11x 6,534 6,267 35% (4%) 73% 584 13x 5,999 4,673 46% (1%) 77% 366 8x 3,923 4,165 16% 0% 87% 528 15x 1,846 1,589 50% (19%) 74% 109 MEDIAN 14x $10,410 $10,305 41% (0%) 77% $565 Notes (a) Based on closing stock prices on January 10, 2022 (b) Calculated as Equity Value plus total debt, minority interest (at book value unless otherwise noted) and preferred stock, less cash & equivalents 2021E Margins Source: PitchBook, BVP Emerging Cloud Index 12 AGC Partners SELECTED PUBLIC PLAYERS: WORKFORCE MANAGEMENT WORKFORCE MANAGEMENT ($ in millions) Rev Growth Revenue Company EV / Rev Multiple Market Cap(a) Enterprise Value(a)(b) Forward EBITDA Margin Gross Margin 2021E 12x $62,560 $61,140 20% 29% 73% $5,125 20x $21,357 $21,156 30% 40% 83% $1,046 16x $11,357 $11,362 34% 26% 65% $723 MEDIAN 16x $21,357 $21,156 30% 29% 73% $1,046 Notes (a) Based on closing stock prices on January 10, 2022 (b) Calculated as Equity Value plus total debt, minority interest (at book value unless otherwise noted) and preferred stock, less cash & equivalents 2021E Margins Source: PitchBook, BVP Emerging Cloud Index
