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<p>DISCUSSION MATERIALS CONFIDENTIAL DISCLAIMER: THE INFORMATION IN THIS PRESENTATION IS MADE AVAILABLE FOR INFORMATIONAL PURPOSES ONLY. NONE OF THE INFORMATION CONTAINED IN THIS PRESENTATION CONSTITUTES A SOLICITATION OR OFFER BY ARROWROOT ADVISORS OR ITS AFFILIATES TO BUY OR SELL ANY SECURITIES OR OTHER FINANCIAL INSTRUMENTS OR PROVIDE ANY INVESTMENT ADVICE. THE INFORMATION IN THIS PRESENTATION IS LIMITED TO THE DISSEMINATION OF GENERAL INFORMATION REGARDING PRODUCTS AND SERVICES. THE INFORMATION AND SERVICES PROVIDED IN THIS PRESENTATION ARE NOT PROVIDED TO AND MAY NOT BE USED BY ANY PERSON OR ENTITY IN ANY JURISDICTION WHERE THE PROVISION OR USE THEREOF WOULD BE CONTRARY TO APPLICABLE LAWS, RULES OR REGULATIONS OF ANY GOVERNMENTAL AUTHORITY OR REGULATORY OR SELF-REGULATORY ORGANIZATION OR CLEARING ORGANIZATION OR WHERE ARROWROOT ADVISORS IS NOT AUTHORIZED TO PROVIDE SUCH INFORMATION OR SERVICES. SOME PRODUCTS AND SERVICES DESCRIBED IN THIS PRESENTATION MAY NOT BE AVAILABLE IN ALL JURISDICTIONS OR TO ALL CLIENTS. . Table of contents I. Arrowroot M&A Process 3 II. Software M&A Trends & Activity 13 III. Arrowroot Team Bios 17 ARROWROOT M&A PROCESS Top reasons for selling and buying 60% To provide liquidity to owners Maximize value / take advantage of market values Alleviate owner fatigue 70% Increase revenues Improve operational efficiencies Better meet market expectations 45% To provide liquidity to owners Maximize value / take advantage of market value Take advantage of current capital gains rates 44% 60% Increase revenues Put cash to work Expand geographic reach within U.S. 38% 36% 35% 28% 41% 33% 33% Lower Mid-Market ($5mm -<$25mm)Upper Mid-Market ($25mm -<$2bn)Top 3 Reasons to Sell Top 3 Reasons to Buy Source: Citizens Why now is the time for SaaS companies to sell Company ARR < $10M $10-$20M Rationale for a Sale Current SaaS market trends and observations indicate that now is an opportune time to sell sub-$20M ARR SaaS companies • Difficulty in raising growth equity without strong history of demonstrable traction / execution • Investors question product-market fit for “lifestyle” growth vs. accelerated growth companies • Companies with extended history (5+ years) judged harshly by growth investors • Tired capital base • Rapidly evolving technology creates risk of making certain SaaS solutions obsolete • Companies increasingly forced to pivot quickly or forge partnerships in order to stay market relevant • Uncertainty around how long elevated multiples will remain • Increasingly crowded market putting pressure on growth • Investors can afford to be choosier • Companies outside of growth equity hubs ignored by hands-on and operational focused investors Strongly impacted Partially impacted Sell-side process strategies Arrowroot will help develop an optimal sale strategy by carefully assessing client- specific and market factors Preemptive Targeted Solicitation Controlled Auction Public Auction Description • Screen and identify most likely buyer • High-level approach to selected potential buyers • Limited range of logical potential buyers contacted • Requires formal guidelines (i.e. process letter) • Public disclosure made • Preliminary materials distributed to wide range of potential buyers # of Buyers 1 2-10 10-25 25+ Advantages • Efforts focused on one buyer • Maximum confidentiality • Sense of competition enabled • Avoids perception that property is being “shopped” • High degree of control over process • Creates strong sense of competition • Most likely to obtain highest offer • Finds “hidden” buyers Disadvantages • Unlikely to maximize value • Tied to result of one negotiation • High Risk with low probability of close • Requires substantial top- level management time commitment • May not maximize value • Limited confidentiality • Potential for disruption due to rumors • Highest risk of business disruption Considerations • Have very clear sense of most logical buyer • High risk of damage from business disruption • Have limited group of logical buyers • Have key objectives of confidentiality and limiting any business disruption • Seek good balance between confidentiality and value • Believe business is unlikely to be damaged by public process and focus on maximizing shareholder value Strong access to relevant sponsor buyers Arrowroot maintains strong relationships with financial sponsors actively acquiring across the software sector Platform Acquirors Platform / Bolt-On Acquirors Bolt-On Acquirors DescriptionIllustrative Buyers• Seeking stand-alone investment • Strategy more open ended, more focus on developing strategic plan • More flexibility in identifying avenues of growth • Complement existing investments • Addresses a specific strategy or growth avenue: geographic expansion, new offerings, new customers, scalability, etc. • Focus on synergy opportunities Lower MM PE MM PE / VC (Series B+) Mega PE / VC (Series C+) Broad access to strategic buyers Arrowroot runs parallel outreach programs with sponsors and strategic buyers to identify and maximize strategic premium for clients Illustrative Strategic Relationships How Arrowroot adds value • Thorough internal diligence on company • Efficient identification of buyers • Create compelling marketing materials that clearly articulate the value prop and growth roadmap • Optimize transaction structure • Evaluate strategic initiatives • Market sizing analysis and industry research • Development of high-confidence financial projections We spend time learning about your company and growth strategy in order to effectively communicate the value proposition to buyers Arrowroot’s value-add approach helps position clients for premium pricing • IP, expertise and development Future enhancements, developments in progress • Scalability Scalable offering to propel high potential growth • Scarcity Premium Attractive standalone asset? Competitive advantage? • Based on financial information of the business to date and forecasts • EBITDA growth • Organic revenue generation and prospects • Obligations with customers/suppliers/partners • Lack of unique approach • Difficulty of integration • Lack of vendor alignment • Lack of forecast visibility Arrowroot’s Core Competencies Positioning Value to Buyers Strategic PremiumBase ValuationValue Destroying Factors Process roles and responsibilities Market Size Market Opportunity Responsibility Arrowroot's Responsibilities AA C LC Summary AA Value-Add Financial Model • Help develop and stress test projections and work with management to identify and communicate appropriate add-backs and other adjustments • Work with the management team to develop current year budget and long-term strategic forecasts supported by hard data • Significant experience with similar companies Teaser • Create executive level teaser to introduce opportunity to market • Targeted data points investors look for Confidentiality Agreement (“CA”) • Create and negotiate CA’s with prospective buyers • Manage CA distribution and execution Confidential Information Memorandum (“CIM”) • Prepare CIM that effectively communicates the investment thesis, growth roadmap and strategic opportunity to buyers • Summary level presentation of the Company’s operations and financials • Redacted document can be used with any sensitive buyers • Already understand value drivers and able to mitigate buyer concerns Management Presentations • Intensely rehearse with management and prepare them for each counterparty’s likely questions • Coordinate management presentations and work with potential buyers to formulate final-round proposals • Process experience makes AA an excellent coach Data Room / Diligence • Facilitate the due diligence process along with the management team and legal counsel • Access to data room provided only to buyers that attend a management presentation and continue with due diligence • Familiar with key areas of buyer focus • Conduit for data flow to buyers Purchase Agreement • Provide impactful input on market terms for definitive documentation • Negotiate with selected buyer upon signing a letter of intent • Lead business negotiations until deal is signed and closed • AA knows what is representative of current market conditions Lead responsibility Heavy involvement Moderate involvement Minimal involvement AA = Arrowroot Advisors C = Client LC = Legal Counsel Illustrative process timeline Prepare Marketing Materials Whisper Campaign Begin Buyer Outreach Management Meetings Solicit Initial Indications of Interest Open Data Room Additional Management Meetings (If Needed) Submit Final Bids Sign Purchase Agreement Holidays • Speed of process depends on company’s preparedness and commitment • Arrowroot’s aim would be to get investors excited to accelerate a process and pre-empt an auction; if this is the case, management should be prepared for Management Presentations within 3 weeks • Arrowroot would initiate a “whisper campaign” with highly qualified financial sponsors and strategics in advance of process launch • Marketing materials provided upon execution of NDA, with Arrowroot fielding follow-up calls to address diligence questions • Management presentations would be set up for a limited number of interested parties • Parties submitted qualified bids would be granted access to the data room • Follow-up management presentations as necessary • Arrowroot to field follow up calls on outstanding diligence items ahead of final bid deadline • Selection of winning party to move forward with signing S M T W T F S S M T W T F S S M T W T F S S M T W T F S 1 2 3 4 5 6 7 1 2 3 4 1 2 1 2 3 4 5 6 8 9 10 11 12 13 14 5 6 7 8 9 10 11 3 4 5 6 7 8 9 7 8 9 10 11 12 13 15 16 17 18 19 20 21 12 13 14 15 26 17 18 10 11 12 13 14 15 26 14 15 16 17 18 19 20 22 23 24 25 26 27 28 19 20 21 22 23 24 25 17 18 19 20 21 22 23 21 22 23 24 25 26 27 29 30 31 26 27 28 29 30 24 25 26 27 28 29 30 28 29 30 31 31 December 2017 October 2017 November 2017 January 2018 Client case studies Uni + Company A + Company B = NewCo Potential Equity Allocations • Pro rata equity roll + financial partner • Potential partial liquidity event for management/cap table • Based: Phoenix • Revenue: $2M • YoY growth: 20% • Based: Southeast • ARR: $5M • YoY growth: 5% • Based: Midwest • ARR: $1M • YoY growth: (5%) Finance Partner • Software focused PE • Capital for liquidity & growth • Governance & dev support Company B Company A Financial Partner Co. A Rolled Equity Co. B Rolled Equity Uni Roll-Up: Project Uni PE-backed M&A Dual Track w/ Strategic M&A Project Stratus Child Care SaaS • Based: San Francisco • Revenue: $1.5M • YoY growth: 100% PE Sponsor Portfolio Company • Revenue: $60M • Seeking cloud-based offering as customers migrate towards SaaS + • Targeted introduction that led to an LOI • Client opted to re-engage following execution of key customer contract to support increased valuation Project Estate Facility Mgmt Software • Based: Hong Kong • MRR: $300K • Prior Funding: $10M • Arrowroot planning to take client to market for U.S. investment ($5M) • Early indications of strategic interest given client’s strong positioning in rapidly growing sector • Arrowroot to structure a dual capital raise / strategic M&A process Strategics U.S. Investors Project Uni EdTech Software SOFTWARE M&A TRENDS & ACTIVITY Update on SaaS deal activity Deal flow in the SaaS and Cloud industries has increased throughout the first half of 2017; however, valuations have remained steady. M&A activity continues to present an attractive alternative as demand for new technologies increases, especially in sectors of cyber-security and artificial intelligence. Key trends in SaaS & Cloud: Private equity firms increase spending up 7% from 2H2016 and comprise ~50% of the industry's top ten highest valued deals High demand for security-related data analytics companies as concern and complexity of cyber threats increase Digital workplaces prioritize demand for collaboration tools SaaS investment volume declines while deal sizes increase 2,428 Total transaction volume since 1H2015 3.8x Trailing 30-Month Median EV/Sales 14.5x Trailing 30-Month Median EV/EBITDA Number of active acquirers during the past 30 months Number of acquirers that made >1 acquisition Median disclosed transaction value in past 30 months 1,765 361 $41M Source: Capital IQ, press releases U.S. private equity activity Private Equity M&A Software Assets Coming into Favor with PE Market conditions favor greater PE involvement in tech as buyers, facing stiff competition and expensive assets, purchase software companies for two significant reasons: 1. The SaaS business model is attractive because revenues are structured as recurring subscription agreements, allowing PE firms to better forecast expected revenues and manage risk following acquisitions. 2. Software companies are not capital intensive and growth strategies are not subject to capacity constraints, but rather focused on revenue expansion. 71% 21% 8% North America Europe Other Regions Headquarters of SaaS & Cloud Targets Most Active Software / Strategic Acquirers from 2007 - 2017 107 107 95 82 80 47 44 42 40 39 29 28 27 26 52 19 41 31 43 9 4 6 29 40 3 2 69 12 Number of Deals Deal Value (Billions of Dollars) ► Strategic firms are targeting software investments to seize market share from competitors. ► Microsoft and IBM have been the most acquisitive with 107 acquisitions, followed by Oracle, Cisco, and Intel with 95, 82, and 80 acquisitions respectively. Source: Shea & Company, Company websites Selected YTD software M&A transactions Date Deal Type Target Buyer Deal Size ($M) EV/Revenue LTM Revenue ($M) 8/1/2017 M&A Viptela Cisco 610 6.1x 100 7/31/2017 Buyout Xactly Vista Equity Partners 564 5.5x 95 7/19/2017 M&A Sajan Amplexor 25 0.8x 30 6/29/2017 Buyout Idera HGGC & TA Associates 1130 na na 6/26/2017 M&A Global Capacity Global Telecom & Technology 163 0.8x 200 6/23/2017 Buyout Synchronoss Siris Capital Group 835 na 476 5/26/2017 M&A Evolution HCM Asure Software 55 3.9x 14 5/11/2017 M&A MindMeld Cisco 125 na na 5/1/2017 Buyout Jive ESW Capital 462 1.7x 204 4/28/2017 Buyout Tangoe Marlin Equity Partners 243 na na 4/25/2017 M&A TeleSign BICS 230 2.3x 100 4/8/2017 M&A Moat Oracle 850 na na 3/22/2017 M&A AppDynamics Cisco 3700 na 211 3/4/2017 M&A Veracode CA Tech 614 na na 2/17/2017 M&A SimpliVity HP Enterprise 650 na na 2/10/2017 Buyout ServicePower Diversis Capital 17 na na 1/27/2017 Buyout Planview Thoma Bravo 800 5.3x 150 1/23/2017 Buyout Landesk Clearlake Capital 1100 na na 1/9/2017 M&A Avention Dun & Bradstreet 150 2.5x 60 Mean 649 3.2x 149 Median 564 2.5x 100 Source: Capital IQ, press releases Arrowroot Overview Arrowroot Advisors team bios ROBERT SANTOS has over 15 years of financial experience working with institutions, companies and entrepreneurs. Robert also serves at the CEO & CCO for Arrowroot Partners, a FINRA/SIPC member broker dealer. Robert is currently the founder of Vitreous Partners, LLC, a boutique wealth management firm working with a wide range of international and domestic clients to provide customized and specialized investment and family office services. Robert is also the portfolio manager for Vitreous Partners' fund of funds, Ladrillo, LLC, which invests in a diversified portfolio of alternative investments, including hedge funds, private equity funds, and real estate. Previously, Robert was a Director for Salem Partners, a multi-family office and investment bank in Los Angeles where he served on the investment committee. Prior to Salem Partners, Robert worked at JP Morgan Securities and Bear Stearns, servicing clients in the financial services industry. Robert received his BA from the University of California at Los Angeles (UCLA). KUNAL PATEL has over 10 years of professional experience, primarily in consulting and investment banking roles. Kunal has worked on a variety of client advisory assignments, ranging from debt and equity capital raises, M&A, merger integration strategy and change management. At Arrowroot Advisors, Kunal has responsibility over the deal execution process for capital raises and M&A mandates for emerging and middle market technology businesses. Prior to joining Arrowroot, Kunal founded Sixthman Services Pty, a provider of data analytics and execution support services for small and mid-sized financial services firms. Prior to Sixthman, Kunal was an Associate Director for UBS Investment Bank where he covered Industrial and Business Services clients. Kunal holds a BBA from the University of Wisconsin – Madison and an MBA from Georgetown University. TAYLOR DOUGHERTY is responsible for various parts of the deal process including sourcing new clients, advisory services throughout the capital raise and M&A process, and deal execution. Taylor has extensive experience in multiple SaaS verticals including healthcare technology, advertising technology, GRC technology, and clean technology. Prior to joining Arrowroot Advisors, Taylor worked in Geneva, Switzerland with the Human Rights Council at the United Nations, where she advised diplomats on key areas of child healthcare including nutrition and safety in conflict. Taylor attended Pepperdine University in Malibu, CA where she graduated magna cum laude in Economics, French and International Studies. JOSH ALBERT has been a key-player in a number of deals in the software/technology space. He has worked on projects in capital raising, sell-side M&A, and other advisory services. At Arrowroot Advisors, Josh's responsibilities range across the deal process, from sourcing, to execution, to closing. Previously, Josh has gained experience in valuation services, buy-side advisory to private equity, and corporate finance. Josh graduated early earning his B.S. from the University of Southern California. JAMES POLLARD has acted as an adviser, financier, or principal investor in transactions totaling over $40 billion in value. Most recently, James was Managing Director & Head of Investment Banking at Nomad Financial, where he focused on M&A and capital raising activities for high-growth companies. Previously, James was a Vice President in the Entertainment Industries Group at J.P. Morgan, where he structured financings and provide advisory services globally for media entertainment companies, such as Legendary Entertainment and DreamWorks Animation. Prior to J.P. Morgan, James was an investor at Colony Capital, a private equity firm with approximately $58 billion in assets under management, where he was responsible for the identification, evaluation, and consummation of new investments in the media and real estate sectors. James previously held investment banking positions in the Mergers & Acquisitions and Generalist groups at Bear Stearns, J.P. Morgan, and Deutsche Bank. He graduated with honors from the Marshall School of Business at the University of Southern California with a B.S. in Business Administration. Our experience Select Closed Transactions Recapitalization Bridge Financing Capital Raise Sell-Side Advisory Sell-Side Advisory Online community offering local information-sharing services Digital publishing SaaS platform Select Deals In the Market Sell-Side Advisory Sell-Side Advisory / Special Situation Buy-Side Advisory Sell-Side Advisory / Capital Raise Sell-Side Advisory $5,000,000 Series B growth Equity Investment by 4 Smart headphones with intuitive software Has Been Acquired by $50,000,000 Sale of company Has been acquired by Programmatic marketing platform for mobile advertising Comprehensive SaaS-based solution for childcare centers Project Stratus Dual-track sell side / $4mm capital raise for provider of governance, risk and compliance SaaS solution Project Falcon Business process outsourcing company initiating roll-up strategy Project BPO Sell-side / recap advisory for cognitive computing and data analytics SaaS platform Project Apollo SaaS-based diagnostic healthcare image viewing platform Project Panther Relevant industry experience with growing momentum and traction… Rob Santos, Managing Director rob.santos@arrowrootadvisors.com For more information, please contact: Ph: 310.566.5865 </p>
