Q3 2014 Public SaaS Update

Update since last quarter:

• Multiples have compressed 10 - 20% across the board
• SaaS Stars like Palo Alto Networks and Zendesk look undervalued given growth and S&M efficiency
• Some SaaS and Steady stocks look potentially undervalued like Medidata, Paylocity and Opower
• 9/18/2014 - SAP acquired Concur for $8.3B representing 12.4x LTM Revenue; this is a good reminder that M&A provides a floor for SaaS stocks
• Emergence S&M Efficiency added as a new metric in the comps analysis. S&M efficiency is calculated as ((Current Quarter Revenue - Revenue from 2 Quarters Ago) * Gross Margin * 2 ) / Last 2 Quarters of S&M Expense