UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE TO
TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR 13(E)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 3)
NETSUITE INC.
(Name of Subject Company (Issuer))
NAPA ACQUISITION CORPORATION
(Offeror)
a subsidiary of
OC ACQUISITION LLC
(Parent of Offeror)
a subsidiary of
ORACLE CORPORATION
(Parent of Offeror)
(Names of Filing Persons)
Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
64118Q107
(CUSIP Number of Class of Securities)
Brian S. Higgins
Vice President and Associate General Counsel
Oracle Corporation
500 Oracle Parkway
Redwood City, California 94065
Telephone: (650) 506-7000
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Filing Persons)
Copies to:
Keith A. Flaum
James R. Griffin
Weil, Gotshal & Manges LLP
201 Redwood Shores Parkway
Redwood Shores, California 94065
Telephone: (650) 802-3000
CALCULATION OF FILING FEE
Transaction Valuation* | Amount of Filing Fee** | |
$9,473,545,994.00 | $953,968.08 |
* | Estimated solely for purposes of calculating the filing fee. This calculation is based on the offer to purchase all of the issued and outstanding shares of common stock, par value $0.01 per share, of NetSuite Inc. (NetSuite), at a purchase price of $109.00 per share, net to the seller in cash, without interest thereon and subject to any required tax withholding. Such shares consist of: (i) 81,007,997 shares of common stock of NetSuite that were issued and outstanding as of August 8, 2016; (ii) 1,035,657 shares of common stock of NetSuite potentially issuable upon exercise of outstanding exercisable in-the-money stock options as of August 8, 2016; (iii) 3,480,715 shares of common stock of NetSuite issuable upon the settlement of outstanding restricted stock units as of August 8, 2016; and (iv) 1,388,897 shares of common stock of NetSuite issuable upon the settlement of outstanding performance share units as of August 8, 2016. The foregoing figures have been provided by the issuer to the offeror and are as of August 8, 2016, the most recent practicable date. |
** | The filing fee was calculated in accordance with Rule 0-11 under the Securities Exchange Act of 1934, as amended, and Fee Rate Advisory No. 1 for Fiscal Year 2016, issued August 27, 2015, by multiplying the transaction value by 0.00010070. |
x | Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
Amount Previously Paid: $953,968.08 | Filing Party: Napa Acquisition Corporation, OC Acquisition LLC and Oracle Corporation | |
Form or Registration No.: Schedule TO | Date Filed: August 18, 2016 |
¨ | Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
Check the appropriate boxes below to designate any transactions to which the statement relates:
x | thirdparty tender offer subject to Rule 14d-1. |
¨ | issuer tender offer subject to Rule 13e-4. |
x | goingprivate transaction subject to Rule 13e-3 |
¨ | amendment to Schedule 13D under Rule 13d-2. |
Check the following box if the filing is a final amendment reporting the results of the tender offer ¨
If applicable, check the appropriate box(es) below to designate the appropriate rule provision(s) relied upon:
¨ | Rule 13e-4(i) (Cross-Border Issuer Tender Offer) |
¨ | Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) |
This Amendment No. 3 (this Amendment) amends and supplements the Tender Offer Statement on Schedule TO (together with any subsequent amendments and supplements thereto, the Schedule TO), filed with the Securities and Exchange Commission on August 18, 2016 by Napa Acquisition Corporation, a Delaware corporation (Purchaser), a subsidiary of OC Acquisition LLC, a Delaware limited liability company (Parent), which is a subsidiary of Oracle Corporation, a Delaware corporation (Oracle). The Schedule TO relates to the offer by Purchaser to purchase all of the issued and outstanding shares of common stock, par value, $0.01 per share (the Shares), of NetSuite Inc., a Delaware corporation (NetSuite), at a purchase price of $109.00 per Share net to the seller in cash, without interest thereon and subject to any required tax withholding, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 18, 2016 (the Offer to Purchase) and in the related Letter of Transmittal (which, together with the Offer to Purchase, as they may be amended or supplemented from time to time, collectively constitute the Offer), copies of which are attached to the Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B), respectively.
This Amendment is being filed solely to (a) report that the United States Department of Justice and has granted early termination of the waiting period applicable to the Offer under the Hart-Scott-Rodino Antitrust Improvement Act and (b) include additional disclosure in response to comments received by Oracle from the staff of the Securities and Exchange Commission.
Except as otherwise set forth in this Amendment, the information set forth in the Schedule TO remains unchanged and is incorporated herein by reference to the extent relevant to the items in this Amendment. Capitalized terms used but not defined herein have the meanings ascribed to them in the Schedule TO.
Schedule TO.
The Schedule TO is hereby amended as follows:
Amending and restating the introductory paragraphs on page 2 of the Schedule TO in their entirety as follows:
This combined Tender Offer Statement and Rule 13e-3 Transaction Statement filed under cover of Schedule TO (together with any amendments and supplements hereto, this Schedule TO) is filed by Napa Acquisition Corporation, a Delaware corporation (Purchaser), a subsidiary of OC Acquisition LLC, a Delaware limited liability company (Parent), which is a subsidiary of Oracle Corporation, a Delaware corporation (Oracle). This Schedule TO relates to the offer by Purchaser to purchase all of the issued and outstanding shares of common stock, par value, $0.01 per share (the Shares), of NetSuite Inc., a Delaware corporation (NetSuite), at a purchase price of $109.00 per Share (the Offer Price) net to the seller in cash, without interest thereon and subject to any required tax withholding, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1)(A) and (a)(1)(B), respectively.
All information contained in the Offer to Purchase (including Schedule I to the Offer to Purchase) and the accompanying Letter of Transmittal is hereby expressly incorporated herein by reference in response to Items 1 through 9 and Items 11 and 13 of this Schedule TO.
The Agreement and Plan of Merger, dated as of July 28, 2016 (as it may be amended from time to time, the Merger Agreement), by and among NetSuite, Parent, Purchaser and (solely with respect to performance of its obligations set forth in certain specified sections thereof) Oracle, a copy of which is attached as Exhibit (d)(1) hereto, and the Tender and Support Agreements, dated as of July 28, 2016 (as they may be amended from time to time, the Tender and Support Agreements) with Zachary Nelson, Evan Goldberg, James McGeever and Ronald Gill, a copy of the form of which is attached as Exhibit (d)(2) hereto, and NetSuite Restricted Holdings LLC, a limited liability company whose membership interests are beneficially owned by a trust controlled by Lawrence J. Ellison, a copy of which is attached as Exhibit (d)(3) hereto, are incorporated herein by reference with respect to Items 4, 5, 6, 11 and 13 of this Schedule TO.
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Items 1 through 9 and Item 11.
The Offer to Purchase and Items 1 through 9 and Item 11 of the Schedule TO, to the extent such Items incorporate by reference the information contained in the Offer to Purchase, are hereby amended as follows:
Supplementing page 2 of the Offer to Purchase to add immediately before the section THE TENDER OFFER the following:
SPECIAL FACTORS
1. | Background of the Offer; Past Contacts or Negotiations with NetSuite |
The information set forth in The Tender Offer Section 10 Background of the Offer; Past Contacts or Negotiations with NetSuite is incorporated herein by reference.
2. | Purpose of the Offer; Plans for the NetSuite |
The information set forth in The Tender Offer Section 12 Purpose of the Offer; Plans for NetSuite is incorporated herein by reference.
Oracle is undertaking the Offer and the Merger at this time to capitalize on the rapid growth of cloud-based enterprise resource planning (ERP). The acquisition of NetSuite will assist Oracle in expanding its cloud software as a service offerings with a complementary set of cloud ERP and related cloud software applications for customers.
3. | Position of NetSuite Regarding Fairness of the Offer and the Merger |
The full text of the recommendations, and reasons therefor, of the NetSuite Board, and the full text of the written opinion of Qatalyst, which describes the assumptions made and qualifications and limitations on the review undertaken, are included in or as an annex to NetSuites Schedule 14D-9. Holders of Shares are urged to read the Schedule 14D-9, including the full text of the recommendation of the NetSuite Board and reasons therefor and the written opinion of Qatalyst carefully.
The NetSuite Board unanimously (upon the unanimous recommendation of the Transactions Committee): (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are fair to and in the best interests of NetSuites stockholders; (ii) approved and adopted the Merger Agreement, declared the advisability of the Merger Agreement and approved the transactions contemplated thereby, including the Offer and the Merger, in accordance with the requirements of the DGCL; (iii) resolved to recommend that the stockholders of NetSuite accept the Offer and tender their Shares to Purchaser pursuant to the Offer; and (iv) elected that the Merger Agreement and the transactions contemplated thereby be expressly governed by Section 251(h) of the DGCL.
4. | Position of Oracle, Parent and Purchaser Regarding Fairness of the Offer and the Merger |
Position of Oracle, Parent and Purchaser Regarding Fairness of the Offer and the Merger
The rules of the SEC require Oracle, Parent and Purchaser to express their belief as to the fairness of the Offer and the Merger to the unaffiliated stockholders of NetSuite. Oracle, Parent and Purchaser are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of Oracle, Parent and Purchaser should not be construed as a recommendation to any NetSuite stockholder regarding whether to tender Shares into the Offer.
Oracle, Parent and Purchaser (through the Special Committee) attempted to negotiate the terms of a transaction that would be most favorable to Oracle, Parent and Purchaser and, accordingly, did not negotiate the
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Merger Agreement with the goal of obtaining terms that were fair to the stockholders of NetSuite. None of Oracle, Parent or Purchaser believes that it has or had any fiduciary duty to NetSuite or its stockholders, including with respect to the Offer and the Merger and their terms. None of Oracle, Parent or Purchaser participated in the deliberation process of the Transactions Committee and none of Oracle, Parent or Purchaser participated in the unanimous conclusion of the NetSuite Board (upon the unanimous recommendation of the Transactions Committee) that the Offer and the Merger were fair to and in the best interest of NetSuites stockholders. None of Oracle, Parent or Purchaser received advice from the NetSuite Board or its legal or financial advisors as to the substantive or procedural fairness of the Offer or the Merger.
Oracle, Parent and Purchaser believe that the Offer Price to be received by NetSuites unaffiliated stockholders pursuant to the Offer and the Merger is fair to such stockholders. Oracle, Parent and Purchaser base their belief on, among other things, the following material factors, each of which, in their judgment, supports their views:
| The Offer Price represents a 62% premium to the trading price at which the Shares closed on June 27, 2016, the last trading day before public speculation and market rumors that NetSuite was potentially the subject of an acquisition transaction involving Oracle, and a 38% premium to the price at which the Shares closed on June 15, 2016, 30 trading days before the execution by Oracle and NetSuite of the Merger Agreement. |
| The Offer will provide holders with the option to choose immediate liquidity at a premium, without the brokerage and other costs typically associated with market sales. |
| The Offer Price will be paid in cash, which provides certainty of value and immediate liquidity to NetSuites stockholders while avoiding long-term business risk. |
| NetSuites stockholders will not be obligated to tender Shares in the Offer, and if they so desire, will be able to exercise appraisal rights with respect to the Merger. |
| The Offer and the Merger are not subject to any financing conditions. |
| The other factors considered by, and the findings of, the NetSuite Board with respect to the substantive fairness of the Offer and the Merger to NetSuites stockholders (other than the LJE Parties, Oracle or their respective affiliates), as described in the Schedule 14D-9 under the heading Item 4. The Solicitation Or Recommendation Background of the Transactions; Reasons for the Recommendation of the NetSuite Board Reasons for the Recommendation of the NetSuite Board, which are expressly adopted by Oracle, Parent and Purchaser. |
In addition, Oracle, Parent and Purchaser believe that the Offer is procedurally fair to NetSuites unaffiliated stockholders, based on the following factors:
| The Special Committee, comprised of independent and disinterested directors and advised by independent counsel and an independent financial adviser, after having been delegated the full and exclusive power and authority to determine whether or not to enter into a transaction with NetSuite, exercised that power and authority completely independently. |
| The Transactions Committee, comprised of independent and disinterested directors and advised by independent counsel and an independent financial adviser, after having been delegated broad power and authority, advised and directed NetSuite with respect to the exploration, consideration and negotiation of strategic alternative transactions, including the Offer and the Merger. |
| The NetSuite Board unanimously (upon the unanimous recommendation of the Transactions Committee) (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are fair to and in the best interests of NetSuites stockholders; (ii) approved and adopted the Merger Agreement, declared the advisability of the Merger Agreement and approved the transactions contemplated thereby, including the Offer and the Merger, in accordance |
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with the requirements of the DGCL; (iii) resolved to recommend that the stockholders of NetSuite accept the Offer and tender their Shares to Purchaser pursuant to the Offer; and (iv) elected that the Merger Agreement and the transactions contemplated thereby be expressly governed by Section 251(h) of the DGCL. |
| The NetSuite Board and the Transactions Committee received a fairness opinion of Qatalyst that, as of July 27, 2016, and based upon and subject to the various limitations, qualifications, assumptions and other matters set forth in its opinion, the $109 per Share in cash to be received by holders of Shares (other than the LJE Parties, Oracle or any of their respective affiliates), pursuant to the Merger Agreement, was fair, from a financial point of view, to such holders. |
| The Merger Agreement permits NetSuite under certain circumstances to entertain unsolicited proposals for an acquisition that would reasonably be expected to lead to an offer that is superior to the Offer and the Merger. |
| The Merger Agreement permits the NetSuite Board under certain circumstances to (i) withdraw or modify its recommendation that the holders of Shares accept the Offer and tender their Shares, including in connection with a Superior Offer, and (ii) terminate the Merger Agreement in order to accept a Superior Offer and enter into a definitive agreement with respect to such Superior Offer. |
| The Offer is conditioned upon there being validly tendered and not withdrawn a number of Shares that satisfies the Unaffiliated Tender Condition. |
| The Offer structure allows NetSuites stockholders to decide voluntarily whether to tender Shares in the Offer, and unaffiliated stockholders will have sufficient time to make a decision whether to tender in the Offer. |
| If the Offer is consummated, the Merger will be effected in which all remaining stockholders will receive the same price per Share as was paid in the Offer, without interest and less any applicable withholding tax. |
| In the Tender and Support Agreement entered into by NRH, NRH has agreed that, if the NetSuite Board (upon the recommendation of the Transactions Committee) terminates the Merger Agreement to accept a Superior Proposal (or, if thereafter (in one or more iterations) the NetSuite Board terminates the Merger Agreement for such Superior Proposal and accepts an alternative Superior Proposal), it will support the then applicable Superior Proposal if it is supported by the holders of a majority of the Shares not beneficially owned by: (i) the executive officers or directors of NetSuite or their affiliates; (ii) the LJE Parties; or (iii) the ultimate parent entity of the purchaser in such Superior Proposal. |
| The other factors considered by, and the findings of, the NetSuite Board with respect to the procedural fairness of the Offer and the Merger to NetSuites unaffiliated stockholders, as described in the Schedule 14D-9 under the heading Item 4. The Solicitation Or Recommendation Background of the Transactions; Reasons for the Recommendation of the NetSuite Board Reasons for the Recommendation of the NetSuite Board, which are expressly adopted by Oracle, Parent and Purchaser. |
Oracle, Parent and Purchaser also considered the following factors, each of which it considered negative in their considerations concerning the fairness of the terms of the transactions contemplated by the Merger Agreement:
| Tendering of Shares in the Offer and the consummation of the Merger would eliminate the opportunity for stockholders to participate in any possible future growth and profits of NetSuite. |
| As to the Offer Price, the financial interests of Oracle, Parent and Purchaser are different than the financial interests of NetSuites unaffiliated stockholders. |
| The risks and costs to NetSuite if the Offer does not close, including the potential effect on business and customer relationships. |
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| The sale of the Shares in the Offer or the Merger will be taxable for United States federal income tax purposes to tendering stockholders that are U.S. Holders. |
| The other potentially negative factors considered by the NetSuite Board, and findings of the NetSuite Board with respect to potentially negative factors, as described in the Schedule 14D-9 under the heading Item 4. The Solicitation Or Recommendation Background of the Transactions; Reasons for the Recommendation of the NetSuite Board Reasons for the Recommendation of the NetSuite Board. |
Oracle, Parent and Purchaser did not find it practicable to assign, nor did they assign, relative weights to the individual factors considered in reaching their conclusion as to fairness.
Oracle, Parent and Purchasers consideration of the factors described above reflects their assessment of the fairness of the Offer Price to NetSuites unaffiliated stockholders in relation to the going-concern value of NetSuite on a stand-alone basis. In reaching the conclusion as to fairness, Oracle, Parent and Purchaser did not consider the liquidation value or net book value of NetSuite. The liquidation value was not considered because NetSuite is a viable going concern and each of Purchaser and NetSuite has no plans to liquidate NetSuite. Therefore, Oracle, Parent and Purchaser believe that the liquidation value of NetSuite is irrelevant to a determination as to whether the Offer or the Merger is fair to unaffiliated stockholders. Oracle, Parent and Purchaser did not consider net book value, which is an accounting concept, as a factor because NetSuites business is not of a nature whose value is traditionally measured as a multiple of book value, as NetSuites value is derived from cash flows generated by continuing operations. Oracle, Parent and Purchaser believe that net book value is not a material indicator of the value of NetSuite as a going concern but rather is indicative of historical costs.
Opinion of Moelis & Company LLC
Moelis & Company LLC (Moelis) delivered to the Special Committee a written opinion, dated July 28, 2016, to the effect that, as of the date of the opinion and based upon and subject to the assumptions, conditions and limitations set forth in the opinion, the consideration of $109.00 per Share in cash to be paid by Oracle in the Offer and the Merger, was fair from a financial point of view to Oracle.
The full text of Moeliss written opinion dated July 28, 2016, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Exhibit (c)(7) to the Schedule TO and is incorporated herein by reference. Moeliss opinion was provided for the use and benefit of the Special Committee (in its capacity as such) in its evaluation of the Offer and the Merger. Moeliss opinion is limited solely to the fairness, from a financial point of view, of the consideration of $109.00 per Share in cash to be paid by Oracle in the Offer and the Merger, and does not address Oracles underlying business decision to effect the Offer and the Merger or the relative merits of the Offer and the Merger as compared to any alternative business strategies or transactions that might be available with respect to Oracle. Moeliss opinion does not constitute a recommendation to any stockholder of NetSuite as to whether such stockholder should tender its Shares in the Offer. Moeliss opinion was approved by a Moelis fairness opinion committee.
In arriving at its opinion, Moelis, among other things:
| reviewed certain publicly available business and financial information related to NetSuite, including publicly available research analysts financial forecasts; |
| reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities and prospects of NetSuite furnished to Moelis by NetSuite, including financial forecasts provided to or discussed with Moelis by the management of NetSuite; |
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| reviewed certain internal information relating to cost savings and synergies expected to result from the Offer and the Merger (the Expected Synergies) and certain other pro forma financial effects of the Offer and the Merger furnished to Moelis by Oracle; |
| conducted discussions with members of the senior managements and representatives of Oracle (other than Mr. Ellison) and NetSuite concerning the information described in the first two bullet points of this section, as well as the business and prospects of NetSuite generally, and conducted discussions with members of the senior management and representatives of Oracle (other than Mr. Ellison) concerning the information described in the third bullet point of this section; |
| reviewed publicly available financial and stock market data of certain other companies in lines of business that Moelis deemed relevant; |
| reviewed the financial terms of certain other transactions that Moelis deemed relevant; |
| reviewed the Merger Agreement and reviewed the Tender and Support Agreements entered into by Oracle, Purchaser and the Supporting Stockholders; |
| participated in certain discussions and negotiations among representatives of Oracle and NetSuite and their advisors; and |
| conducted such other financial studies and analyses and took into account such other information as Moelis deemed appropriate. |
A summary of the pro forma financial effects that Moelis reviewed is set forth below under Certain Prospective Financial Information about NetSuite. A summary of certain other financial forecasts reviewed by Moelis is set forth in NetSuites Schedule 14D-9 under Item 4 The Solicitation or Recommendation Certain Prospective Financial Information about NetSuite.
In connection with its review, Moelis did not assume any responsibility for independent verification of any of the information supplied to, discussed with or reviewed by Moelis for the purpose of its opinion and has, with the consent of the Special Committee, relied on such information being complete and accurate in all material respects. In addition, with the consent of the Special Committee, Moelis did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet, or otherwise) of NetSuite, nor was Moelis furnished with any such evaluation or appraisal. Moelis was furnished with a financial analysis of NetSuite provided by Oracles management which, at the direction of the Special Committee, Moelis did not rely on in its financial analysis or opinion. With respect to the financial forecasts and other information relating to NetSuite, Expected Synergies and other pro forma financial effects referred to above, Moelis assumed, at the direction of the Special Committee, that such information was reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of NetSuite or Oracle, as the case may be, as to the future performance of NetSuite, such Expected Synergies (including the amount, timing and achievability thereof) and such other pro forma financial effects. Moelis also assumed, at the direction of the Special Committee, that the future financial results (including Expected Synergies) reflected in such forecasts and other information will be achieved at the times and in the amounts projected. In addition, at the direction of the Special Committee, Moelis relied on the assessments of the management of Oracle as to (i) the existing technology, products and services of NetSuite and the validity of, and risks associated with, the future technology, products and services of NetSuite; and (ii) Oracles ability to integrate the businesses of NetSuite and Oracle. Moelis has assumed, with the consent of the Special Committee, that there will be no developments with respect to any of the foregoing that would affect Moeliss analyses or opinion.
Moeliss opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Moelis as of, the date of the opinion. Moeliss opinion did not address the fairness of the Offer and the Merger or any implications thereof to the holders of any class of securities, creditors or other constituencies of Oracle or NetSuite. In addition, Moelis did not express any opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to
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the Offer or the Merger or of Oracle, or any class of such persons, relative to the consideration of $109.00 per Share in cash or otherwise. At the direction of the Special Committee, Moelis was not asked to, nor did it, offer any opinion as to any terms of the Merger Agreement or any Tender and Support Agreement or any aspect or implication of the Offer or the Merger, except for the consideration of $109.00 per Share in cash to the extent expressly specified in Moeliss opinion. Moelis is not a tax, legal, regulatory or accounting expert, and assumed and relied upon, without independent verification, the assessments of Oracle and its other advisors with respect to all tax, legal, regulatory and accounting matters. In rendering its opinion, Moelis assumed, with the consent of the Special Committee, that the Offer and the Merger would be consummated in accordance with their terms and that the parties to the Merger Agreement and Tender and Support Agreements would comply with all the material terms of the Merger Agreement and Tender and Support Agreements, as applicable. Moelis also has assumed, with the consent of the Special Committee, that all governmental, regulatory or other consents and approvals necessary for the consummation of the Offer and the Merger will be obtained without the imposition of any delay, limitation, restriction, divestiture or condition that would have an adverse effect on NetSuite or Oracle or on the expected benefits to Oracle of the Offer and the Merger. Except as described in this summary, Oracle and the Special Committee imposed no other instructions or limitations on Moelis with respect to the investigations made or procedures followed by Moelis in rendering its opinion.
The following is a summary of the material financial analyses reviewed by Moelis with the Special Committee at its meeting held on July 25, 2016, and reaffirmed to the Special Committee at its meeting held on July 27, 2016, and is qualified in its entirety by reference to Moeliss written opinion, dated July 28, 2016, and the complete written presentation reviewed with the Special Committee, which we refer to as the fairness presentation. A copy of the fairness presentation has been filed as an exhibit to this Schedule TO, will be made available for inspection and copying at the principal executive offices of Oracle during its regular business hours by any interested holder of Shares, and may be obtained by requesting it in writing from Oracle at the address set forth in Section 8 entitled Certain Information Concerning Oracle, Parent and Purchaser. Moelis provided these materials for the use and benefit of the Special Committee (in its capacity as such) in its evaluation of the Offer and the Merger.
Some of the summaries of financial analyses below include information presented in tabular format. In order to fully understand Moeliss analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Moeliss analyses.
Financial Analyses of NetSuite
Selected Publicly Traded Companies Analysis.
Moelis reviewed and compared financial and stock market information of the selected publicly traded software as a service (SaaS) companies listed below. Although not directly comparable to NetSuite, these companies share certain business characteristics similar to NetSuite and were selected by Moelis based on Moeliss professional judgment. Moelis reviewed, among other things, enterprise values of the selected companies (calculated as market value of the relevant companys diluted common equity based on its closing stock price on July 22, 2016, plus preferred stock, plus, as of the relevant companys most recently reported quarter end, short-term and long-term debt, less cash and cash equivalents, plus book value of non-controlling interests) as a multiple, to the extent information was publicly available, of estimated revenue for calendar years 2016 (CY 2016) and 2017 (CY 2017). Financial data for the selected companies was based on certain publicly available consensus research analysts estimates, public filings and other publicly available information.
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The estimated revenue multiples for the selected companies are summarized in the table below:
Company |
EV / CY 2016 Revenue | EV / CY 2017 Revenue | ||||||
salesforce.com, inc. |
7.1x | 5.8x | ||||||
Workday, Inc. |
10.4x | 8.0x | ||||||
ServiceNow, Inc. |
9.5x | 7.3x | ||||||
Palo Alto Networks, Inc. |
7.8x | 5.9x | ||||||
Splunk, Inc. |
8.8x | 6.9x | ||||||
The Ultimate Software Group, Inc. |
8.3x | 6.8x | ||||||
Cornerstone OnDemand, Inc. |
5.9x | 4.8x |
The mean and median estimated revenue multiples for the selected companies were each 8.3x in the case of CY 2016, and 6.5x and 6.8x, respectively, in the case of CY 2017.
Moelis then applied ranges of selected multiples derived from the selected companies of 7.0x to 9.0x to the estimated revenue of NetSuite for CY 2016 and 6.0x to 7.5x to the estimated revenue of NetSuite for CY 2017. Revenue for NetSuite was based on data provided by NetSuites management, which represented managements best estimate of NetSuites future performance. This analysis indicated the following implied per share reference ranges for NetSuite, as compared to the $109.00 per Share in cash consideration:
Implied Per Share Reference Ranges Based On: |
||||
CY 2016 Revenue |
CY 2017 Revenue | Consideration | ||
$79 - $101 |
$86 - $107 | $109 |
Selected Precedent Transactions Analysis. Moelis reviewed certain financial information of selected transactions announced between October 2011 and June 2016. Although these selected transactions were used for comparison purposes, none of the selected transactions or the companies involved in them was either identical or directly comparable to the Offer or the Merger or NetSuite. Moelis reviewed, among other things, announced transaction enterprise values of the selected transactions as a multiple, to the extent information was publicly available, of revenue in the four fiscal quarters prior to the applicable transaction (LTM Revenue), and of estimated revenue for the four fiscal quarters following the applicable transaction (NTM Revenue). Financial data for the relevant transaction was based on publicly available information at the time of announcement of the relevant transaction.
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The list of selected transactions and related LTM Revenue and NTM Revenue multiples are set forth below:
Date Announced |
Target |
Acquirer |
Implied TEV(1) |
EV/LTM Revenue |
EV/NTM Revenue |
LTM to NTM Revenue Growth |
||||||||||||||
June 1, 2016 |
Demandware, Inc. | salesforce.com, inc. | $ | 2,788 | 11.0x | 8.7x | 26.0% | |||||||||||||
October 21, 2015 |
SolarWinds, Inc. | Silver Lake; Thoma Bravo, LLC | $ | 4,446 | 9.2x | 8.0x | 14.0% | |||||||||||||
December 22, 2014 |
DataLogix Holdings, Inc. (2) | Oracle Corporation | $ | 1,189 | 11.6x | 8.3x | 39.4% | |||||||||||||
September 18, 2014 |
Concur Technologies, Inc. | SAP America, Inc. | $ | 8,592 | 12.9x | 10.6x | 21.2% | |||||||||||||
June 13, 2014 |
OpenTable, Inc. | The Priceline Group, Inc. | $ | 2,570 | 13.0x | 10.9x | 19.0% | |||||||||||||
December 20, 2013 |
Responsys, Inc. | Oracle Corporation | $ | 1,457 | 7.5x | 6.4x | 17.5% | |||||||||||||
June 4, 2013 |
ExactTarget, Inc. | salesforce.com, inc. | $ | 2,539 | 8.0x | 6.5x | 23.9% | |||||||||||||
December 20, 2012 |
Eloqua, Inc. | Oracle Corporation | $ | 872 | 9.7x | 8.1x | 19.4% | |||||||||||||
August 27, 2012 |
Kenexa Corp. | IBM | $ | 1,298 | 4.1x | 3.3x | 25.0% | |||||||||||||
May 22, 2012 |
Ariba Inc. | SAP America, Inc. | $ | 4,411 | 8.8x | 7.8x | 13.3% | |||||||||||||
February 9, 2012 |
Taleo Corp. | Oracle Corporation | $ | 1,942 | 6.3x | 5.3x | 18.3% | |||||||||||||
December 3, 2011 |
SuccessFactors, Inc. | SAP America, Inc. | $ | 3,571 | 12.2x | 8.9x | 37.9% | |||||||||||||
October 24, 2011 |
Rightnow Technologies, Inc. | Oracle Corporation | $ | 1,606 | 7.4x | 6.5x | 14.1% |
(1) | Dollars in millions. |
(2) | DataLogix Holdings, Inc. financial information provided by management of Oracle, as DataLogix Holdings, Inc. was private at the time of the transaction. |
The mean and median LTM Revenue multiples for the selected transactions were 9.3x and 9.2x, respectively, and the mean and median NTM Revenue multiples for the selected transactions were 7.6x and 8.0x, respectively.
Moelis then applied a range of selected multiples derived from the selected transactions of 9.0x to 13.0x to NetSuites revenue for the 12-month period ended June 30, 2016 and of 8.0x to 11.0x to NetSuites projected revenue for the 12-month period ended June 30, 2017, as provided by NetSuites management. In selecting its precedent transaction multiples for its financial analysis, Moelis considered (i) that recent transactions have typically occurred at higher implied transaction revenue multiples than in the earlier years of the sample and (ii) that NetSuite operates on a larger scale than the targets in the selected transactions and at greater LTM to NTM Revenue growth (28.1%, based on NetSuite managements preliminary results and forecasts as of June 30, 2016 and June 30, 2017, respectively) than the mean and median LTM to NTM Revenue growths for the targets in the selected transactions (which were 22.3% and 19.4%, respectively). This analysis indicated the following implied per share reference range for NetSuite, as compared to the $109.00 per Share in cash consideration:
Implied Per Share Reference Ranges Based on: |
||||
Implied EV / LTM Revenue |
Implied EV / NTM Revenue |
Consideration | ||
$89 - $127 |
$101 - $138 | $109 |
Discounted Cash Flow Analysis.
Moelis performed a discounted cash flow (DCF) analysis of NetSuite using financial forecasts and other information and data provided by Oracles management to calculate the present value of the estimated future unlevered free cash flows projected to be generated by NetSuite. The DCF analysis performed was not a standalone DCF of NetSuite, but instead illustrates the DCF value of the incremental impact of the acquisition of NetSuite to Oracles revenue and cash flows and includes the impact of synergies and other benefits that would
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be available only to Oracle pro forma for the Offer and the Merger. Moelis performed this DCF analysis using estimated future unlevered cash flows under three cases: and Upside Case, Base Case and Conservative Case, in each case as described below in the section titled Certain Prospective Financial Information about NetSuite. In performing the DCF analysis, Moelis utilized a range of discount rates of 9.0% to 12.0% derived from NetSuites weighted average cost of capital.
The resulting range of discount rates was used to calculate estimated present values as of November 30, 2016 of (a) the incremental impact of the acquisition of NetSuite to Oracles revenue and cash flows (including the impact of synergies and other benefits that are available only to Oracle pro forma for the acquisition of NetSuite) for the fiscal quarter ended February 28, 2017 through the fiscal year ended May 30, 2021, and (b) an estimated terminal value derived by applying a multiple range to the terminal projection of the incremental impact of the acquisition of NetSuite to Oracles revenue and cash flows (including the impact of synergies and other benefits that are available only to Oracle pro forma for the acquisition of NetSuite) of 8.0x to 9.0x, with respect to the Upside Case, 7.5x to 8.5x, with respect to the Base Case, and 7.0x to 8.0x, with respect to the Conservative Case.
This analysis indicated the following implied per share reference range for the incremental impact of the acquisition of NetSuite to Oracles revenue and cash flows (including the impact of synergies and other benefits that are available only to Oracle pro forma for the acquisition of NetSuite), as compared to the $109.00 per Share in cash consideration:
Implied Per Share Reference Range Based on: |
||||||
Upside Case |
Base Case |
Conservative Case |
Consideration | |||
$168 - $211 |
$141 - $178 | $117 - $148 | $109 |
The implied per share reference ranges above (a) do not include any incremental value associated with NetSuites $889 million of federal and state net operating losses, per Oracle management, and (b) reflect an implied terminal unlevered free cash flow growth rate of 6.3% to 9.5% with respect to the Upside Case, 6.1% to 9.4% with respect to the Base Case, and 6.1% to 9.4% with respect to the Conservative Case.
Other Information
Moelis also noted for the Special Committee certain additional factors that were not considered part of Moeliss financial analysis with respect to its opinion but were referenced for informational purposes, including, among other things:
| the historical closing trading prices for the Shares during the one-year and three-year period ended July 22, 2016, which reflected low and high stock prices during such periods ranging from $52 to $120 per Share; and |
| stock price targets for the Common Stock in Wall Street research analysts reports reviewed by Moelis, which indicated low and high stock price targets ranging from $60.00 to $130.00 per share. |
Miscellaneous
This summary of the analyses is not a complete description of Moeliss opinion or the analyses underlying, and factors considered in connection with, Moeliss opinion. The preparation of a fairness opinion is a complex analytical process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Moeliss opinion. In arriving at its fairness determination, Moelis considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Rather, Moelis made its fairness determination on the basis of its experience and professional judgment after considering the results of all of its analyses.
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No company or transaction used in the analyses described above is identical to NetSuite or the Offer or the Merger. In addition, such analyses do not purport to be appraisals, nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because the analyses described above are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Oracle, Parent, Purchaser, NetSuite or Moelis or any other person assumes responsibility if future results are materially different from those forecast.
The consideration to be paid pursuant to the Merger Agreement was determined through arms-length negotiations between the Transactions Committee and the Special Committee, respectively, and was approved by the Special Committee. Moelis did not recommend any specific consideration to Oracle or the Special Committee, or that any specific amount or type of consideration constituted the only appropriate consideration for the Offer and the Merger.
Moelis acted as financial advisor to the Special Committee in connection with the Offer and the Merger pursuant to the engagement letter between Moelis and the Special Committee, dated May 10, 2016 (the Engagement Letter), and for its services will receive:(a) an evaluation phase fee of $1.0 million, which became payable upon execution of the Engagement Letter, to be credited against the transaction fee; (b) a transaction fee of $17.0 million if the Merger is consummated (the Transaction Fee); (c) an opinion fee of $2.0 million, which became payable in connection with the delivery of its opinion, regardless of the conclusion reached therein and regardless of whether the merger is consummated, to be credited against the transaction fee; and (d) if the merger is not consummated, but Oracle receives compensation (not including reimbursement of expenses) pursuant to the termination provisions of the merger agreement, a termination fee equal to the lesser of $17.0 million and 10% of the total of such compensation. Oracle has also agreed in the engagement letter to reimburse Moelis for reasonable expenses Moelis has incurred in performing services arising out of its engagement, including the reasonable costs of Moeliss legal counsel, provided that such costs and expenses do not exceed $75,000 without the prior written consent of the Special Committee, and to indemnify Moelis for certain liabilities, including liabilities under the federal securities laws, arising out of its engagement.
Moeliss affiliates, employees, officers and partners may at any time own securities (long or short) of NetSuite, Oracle and their respective affiliates. Moelis may provide investment banking and other services to Oracle (or its affiliates) in the future and may receive compensation for such services. In the past two years prior to the date of the opinion, Moelis has not provided any investment banking or other services for NetSuite or Oracle.
The Special Committee selected Moelis as its financial advisor in connection with the Offer and the Merger based on, among other things, Moeliss experience with similar transactions, its industry expertise and an assessment of its independence, including the fact that Moelis had not provided investment banking services to Oracle or NetSuite in the preceding five years and otherwise had no material relationships (personal or financial) with Oracle or NetSuite or their respective executive officers or directors. Moelis is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, strategic transactions, corporate restructurings, and valuations for corporate and other purposes. Moelis has provided its written consent to the reproduction of its opinion in this Offer to Purchase.
Other Presentations by Moelis
In addition to the fairness presentation described above, Moelis had discussions with the Special Committee at meetings held July 8, 2016, June 30, 2016, June 14, 2016, June 8, 2016, May 27, 2016, May 20, 2016 and April 19, 2016 at which written presentations were given. Copies of such presentations have been filed as exhibits to the Schedule TO, will be made available for inspection and copying at the principal executive offices of Oracle during its regular business hours by any interested holder of Shares, and may be obtained by requesting
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it in writing from Oracle at the address described in the Section 8 entitled Certain Information Concerning Oracle, Parent and Purchaser. Moelis provided these materials for the use and benefit of the Special Committee (in its capacity as such) in connection with the Offer and the Merger.
These presentations do not constitute, or form the basis of, an opinion of Moelis with respect to the Offer or the Merger or any other matter. These presentations were given to the Special Committee to assist in the negotiations with NetSuite and contained, among other things, the strategic rationale of a transaction between Oracle and NetSuite, an outline of the terms of Oracles bid as of such date, the status of negotiations with NetSuite, and, in the case of the May 27, 2016 presentation, Moeliss preliminary financial analysis (including a selected publicly traded companies analysis, selected precedent transactions analysis and discounted cash flow analysis), in each case subject to further updates reflected in the fairness presentation.
Certain Prospective Financial Information About NetSuite
In connection with the Special Committees evaluation of the Offer and the Merger, Oracle management prepared an incremental model demonstrating the illustrative incremental impact of the acquisition of NetSuite to Oracles revenue and cash flows and including the impact of synergies and other benefits that are available only to Oracle pro forma for the acquisition of NetSuite (the Oracle Incremental Model). The Oracle Incremental Model reflects calendarization to a May 31 fiscal year end to align with Oracles fiscal year. The Oracle Incremental Model includes three scenarios, a conservative case, a base case, and an upside case, representing different levels of projected subscription and support revenue, professional services revenue, and research and development expense. The conservative case reflects conservative assumptions regarding cost synergies and standalone revenue performance, the base case reflects anticipated revenue synergies and cost synergies, and the upside case reflects anticipated cost synergies and a higher level of revenue synergies. The base case reflects slightly higher direct subscription and support revenue than contemplated by NetSuites standalone projections, given Oracles increased scale and global coverage, slightly lower indirect new subscription and support revenue, as Oracle may be less reliant NetSuites indirect channel, and lower professional services revenue given Oracles de-emphasis of professional services and focus on recurring revenue growth. Consistent with Oracles practice in other acquisitions, it did not prepare projections for NetSuite on a standalone basis. The Oracle Incremental Model was not prepared with a view toward public disclosure and, accordingly, does not necessarily comply with published guidelines of the SEC or established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information or GAAP. Oracle and NetSuites respective independent registered public accounting firms have not compiled, examined, audited or performed any procedures with respect to the Oracle Incremental Model, and have not expressed any opinion or any other form of assurance on this information or its achievability.
The table below presents a summary of the Oracle Incremental Model, including historical information for NetSuite for the 12-month period ended June 30, 2016 on a stand alone basis (the LTM Financial Information), and prospective information for NetSuite for the six months ended May 31, 2017 and fiscal year 2018 through fiscal year 2021 on a pro forma basis demonstrating the illustrative incremental impact of the acquisition of NetSuite to Oracles revenue and cash flows and including the impact of synergies and other benefits that are available only to Oracle pro forma for the acquisition of NetSuite. The Oracle Incremental Model, including the LTM Financial Information, were provided to the Special Committee in connection with its evaluation of the Offer and the Merger, and were approved by the Special Committee for Moeliss use and reliance in connection with its financial analyses and opinion to the Special Committee, as described under the caption Opinion of Moelis & Company LLC. This summary of the Oracle Incremental Model is included solely to give NetSuite stockholders access to certain financial projections that were made available to the Special Committee and Moelis, and is not included in this Schedule TO/A to influence a NetSuite stockholders decision whether to tender Shares in the Offer or for any other purpose.
The Oracle Incremental Model, while presented with numerical specificity, was based on numerous variables and assumptions that necessarily involve judgments with respect to, among other things, future
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economic, competitive and regulatory conditions and financial market conditions, all of which are difficult or impossible to predict and many of which are beyond Oracle or NetSuites control. The Oracle Incremental Model also reflects assumptions as to certain business decisions that are subject to change. The Oracle Incremental Model was prepared in the process of the Special Committees consideration of the Offer and the Merger and have not been updated. Given that the Oracle Incremental Model covers multiple years, by its nature, it becomes subject to greater uncertainty with each successive year. Important factors that may affect actual results and the achievability of the Oracle Incremental Model include, but are not limited to: (a) the timing of client renewals, upgrades and expansions and introduction of new products; (b) market acceptance of new products; (c) impact of competitive products and pricing; (d) the effect of regulatory actions; (e) the effect of global economic conditions; (f) fluctuations in foreign currency exchange rates; (g) the cost and effect of changes in tax and other legislation; and (h) other risk factors described in NetSuites annual report on Form 10-K for the fiscal year ended December 31, 2015, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K, and in Oracles annual report on Form 10-K for the fiscal year ended May 31, 2016, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, the Oracle Incremental Model may be affected by Oracles or NetSuites ability to achieve strategic goals, objectives and targets over the applicable period.
The Oracle Incremental Model also reflects assumptions that are subject to change and are susceptible to multiple interpretations and periodic revisions based on: (a) actual results; (b) revised prospects for Oracles or NetSuites business; (c) changes in general business or economic conditions; or (d) any other transaction or event that has occurred or that may occur and that was not anticipated when the NetSuite Projections were prepared. In addition, the Oracle Incremental Model does not take into account any circumstances, transactions or events occurring after the dates on which the Net Suite Projections or the Oracle Incremental Model were prepared. Accordingly, actual results will differ, and may differ materially, from those contained in the Oracle Incremental Model. There can be no assurance that the financial results in the Oracle Incremental Model will be realized, or that future actual financial results will not materially vary from those in the Oracle Incremental Model.
The inclusion of the Oracle Incremental Model should not be regarded as an indication that Oracle, NetSuite or any of their respective affiliates, officers, directors, advisors or other representatives consider the Oracle Incremental Model to be predictive of actual future events, and the Oracle Incremental Model should not be relied upon as such. None of Oracle, NetSuite or any of their respective affiliates, officers, directors, advisors or other representatives gives any Oracle or NetSuite stockholder or any other person any assurance that actual results will not differ materially from the Oracle Incremental Model. Except as otherwise required by law, Oracle, NetSuite and their respective affiliates, officers, directors, advisors or other representatives undertake no obligation to update or otherwise revise or reconcile the Oracle Incremental Model to reflect circumstances existing after the dates on which the NetSuite Projections or the Oracle Incremental Model were prepared or to reflect the occurrence of future events, even in the event that any or all of the assumptions and estimates underlying the NetSuite Projections or the Oracle Incremental Model are shown to be in error.
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In light of the foregoing factors and the uncertainties inherent in the Oracle Incremental Model, NetSuite stockholders and others are cautioned not to place undue, if any, reliance on the Oracle Incremental Model.
(in millions)(1) | ||||||||||||||||||||||||
LTM 6/30/2016 ($)(2) |
H217E (3) | FY2018E ($) | FY2019E ($) | FY2020E ($) | FY2021E ($) | |||||||||||||||||||
Conservative Case |
||||||||||||||||||||||||
Revenue |
846.4 | 524.0 | 1,284.2 | 1,557.5 | 1,864.2 | 2,208.0 | ||||||||||||||||||
Non-GAAP Gross Profit(4) |
585.8 | 368.5 | 921.4 | 1,144.8 | 1,401.2 | 1,697.0 | ||||||||||||||||||
Non-GAAP Operating Expenses(5) |
558.2 | 252.7 | 569.5 | 600.6 | 651.0 | 711.2 | ||||||||||||||||||
Non-GAAP EBIT(6) |
27.6 | 115.8 | 351.9 | 544.2 | 750.2 | 985.8 | ||||||||||||||||||
Base Case |
||||||||||||||||||||||||
Revenue |
846.4 | 524.5 | 1,341.5 | 1,686.6 | 2,080.9 | 2,526.7 | ||||||||||||||||||
Non-GAAP Gross Profit(4) |
585.8 | 370.5 | 968.6 | 1,246.0 | 1,572.7 | 1,950.1 | ||||||||||||||||||
Non-GAAP Operating Expenses(5) |
558.2 | 258.3 | 594.5 | 643.4 | 711.9 | 784.9 | ||||||||||||||||||
Non-GAAP EBIT(6) |
27.6 | 112.2 | 374.1 | 602.6 | 860.9 | 1,165.2 | ||||||||||||||||||
Upside Case |
||||||||||||||||||||||||
Revenue |
846.4 | 524.0 | 1,383.7 | 1,805.1 | 2,299.5 | 2,852.8 | ||||||||||||||||||
Non-GAAP Gross Profit(4) |
585.8 | 371.7 | 1,003.0 | 1,337.8 | 1,745.2 | 2,207.1 | ||||||||||||||||||
Non-GAAP Operating Expenses(5) |
558.2 | 262.0 | 614.3 | 683.0 | 778.3 | 880.4 | ||||||||||||||||||
Non-GAAP EBIT(6) |
27.6 | 109.7 | 388.7 | 654.8 | 967.0 | 1,326.7 |
(1) | The projected financial data provided in this table has not been updated to reflect Oracle or NetSuites current views of Oracle or NetSuites future financial performance, and should not be treated as guidance with respect to projected results for 2016 or any other period. |
(2) | Last 12-month financial information represents data as provided by Oracle management, which may differ from NetSuites presentation of historical results. |
(3) | Represents the Oracle Incremental Model during the second half of Oracles fiscal year ended May 31, 2017, including certain anticipated synergies. |
(4) | Non-GAAP Gross Profit, as used in the Oracle Incremental Model, excludes expenses related to stock-based compensation and amortization of intangible assets. |
(5) | Non-GAAP Operating Expenses, as used in the Oracle Incremental Model, excludes expenses related to stock-based compensation, amortization of intangible assets, transaction costs and employee termination costs related to business combinations, non-cash interest on convertible debt and income tax benefit associated with business combinations, and reflects adjustments by Oracle management for capitalization of certain development costs incurred in connection with its internal use software and website. |
(6) | Non-GAAP EBIT, as used in the Oracle Incremental Model, excludes expenses related to stock-based compensation, amortization of intangible assets, transaction and employee termination costs related to business combinations, non-cash interest on convertible debt and income tax benefit associated with business combinations and includes dilutive shares where applicable. |
The foregoing discussion of the information and factors considered and given weight by Oracle, Parent and Purchaser is not intended to be exhaustive, but is believed to include the material factors considered by Oracle, Parent and Purchaser. Oracle, Parent and Purchasers views as to the fairness of the Offer and the Merger to NetSuite stockholders should not be construed as a recommendation to any stockholder regarding whether to tender Shares into the Offer.
5. | Certain Effects of the Offer |
The information set forth in The Tender Offer Section 13 Certain Effects of the Offer is incorporated herein by reference.
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6. | The Merger Agreement; Other Agreements |
The information set forth in The Tender Offer Section 11 The Merger Agreement; Other Agreements is incorporated herein by reference.
7. | Appraisal Rights |
The information set forth in The Tender Offer Section 17 Appraisal Rights and in the Schedule 14D-9 under the heading Item 8. Additional Information Appraisal Rights is incorporated herein by reference.
8. | Transactions and Arrangements Concerning the Shares |
The information set forth in The Tender Offer Section 8 Certain Information Concerning Oracle, Parent and Purchaser is incorporated herein by reference.
9. | Certain Relationships between Oracle, Parent and Purchaser and NetSuite |
There are no relationships between Oracle, Parent and Purchaser or any of their respective affiliates, on the one hand, and NetSuite, on the other hand, that would require disclosure under the rules and regulations of the SEC applicable to this Offer to Purchase other than in respect of the Merger Agreement and those arrangements described in The Tender Offer Section 8 Certain Information Concerning Oracle, Parent and Purchaser, The Tender Offer Section 10 Background of the Offer; Past Contracts or Negotiations with NetSuite and The Tender Offer Section 11 The Merger Agreement; Other Agreements.
10. | Interests of Directors and Executive Officers in the Offer and the Merger |
In considering the fairness of the consideration to be received in the Offer and the Merger, the stockholders of NetSuite should be aware that certain directors and executive officers of NetSuite have interests in the Offer and the Merger that may present them with certain actual or potential conflicts of interest. A description of these interests, including the information required to be disclosed pursuant to Item 402(t) of Regulation S-K, is included in the Schedule 14D-9 under the headings Item 3. Past Contacts, Transactions, Negotiations and Agreements, Item 4. The Solicitation or Recommendation and Item 8. Additional Information, which description and information is incorporated herein by reference.
Amending and supplementing the second to last paragraph in The Tender Offer Section 8 Certain Information Concerning Oracle, Parent and Purchaser on page 13 of the Offer to Purchase to add at the end of such paragraph the following:
None of Oracle, Parent or Purchaser has made any arrangements in connection with the Offer to provide unaffiliated NetSuite stockholders access to their corporate files or to obtain counsel or appraisal services at their expense.
In light of Lawrence J. Ellisons indirect beneficial ownership of approximately 39.5% of the outstanding shares of common stock of NetSuite, Mr. Ellison and Oracle may be construed to be affiliates of NetSuite within the meaning of Rule 13e-3; however, nothing herein shall constitute an admission that either Mr. Ellison or Oracle controls (or is an affiliate of) NetSuite.
Amending and supplementing the first paragraph in Section 16 Certain Legal Matters; Regulatory Approvals Antitrust Compliance on page 47 of the Offer to Purchase to add at the end of such paragraph the following:
On September 26, 2016, the FTC granted early termination of the waiting period applicable to the Offer under the HSR Act. As a result, the Antitrust Condition has been satisfied inasmuch as the waiting period applicable to the Offer under the HSR Act has terminated.
16
Amending and supplementing The Tender Offer Section 18 Fees and Expenses on page 50 of the Offer to Purchase to add as a new last paragraph the following:
The following table is an estimate of fees and expenses we will incur in connection with the Offer and the Merger:
Filing Fees |
$ | 953,968 | ||
Depositary and Paying Agent Fees |
$ | 1,000 | ||
Information Agent |
$ | 25,000 | ||
Legal, Printing and Mailing and Other Miscellaneous Fees and Expenses |
$ | 2,550,000 | ||
Other Professional Fees and Expenses |
$ | 17,000,000 | ||
|
|
|||
Total |
$ | 20,529,968 |
In addition, NetSuite will incur its own fees and expenses in connection with the Offer and the Merger.
Amending and supplementing the Schedule TO to add the following as new Item 13 of the Schedule TO:
Item 13. | Information Required by Schedule 13E-3. |
The following sets forth information required by Schedule 13E-3 that has not already been set forth in Items 1 through 12 above. The information set forth in the Offer to Purchase, as amended above, is incorporated herein by reference to the items required by Schedule 13E-3.
Item 2. | Subject Company Information. |
(d) Dividends. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| The Tender Offer Section 6 Price Range of Shares; Dividends |
(e) Prior Public Offerings. Not applicable.
(f) Prior Stock Purchases. Not applicable.
Item 4. | Terms of the Transaction. |
(c) Different Terms. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| the Summary Term Sheet |
| Special Factors Section 6 The Merger Agreement; Other Agreements |
The information set forth in the following section of the Schedule 14D-9 is incorporated herein by reference:
| Item 3. Past Contacts, Transactions, Negotiations and Agreements Agreements between NetSuite, Parent, Purchaser and Oracle Tender and Support Agreements |
(d) Appraisal Rights. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| Special Factors Section 7 Appraisal Rights |
17
The information set forth in the following section of the Schedule 14D-9 is incorporated herein by reference:
| Item 8. Additional Information Appraisal Rights |
| Annex B Section 262 of the Delaware General Corporation Law |
(e) Provisions for Unaffiliated Security Holders. None.
(f) Eligibility for Listing or Trading. Not applicable.
Item 5. | Past Contacts, Transactions, Negotiations and Agreements. |
(c), (e) Negotiations or Contacts; Agreements Involving the Subject Companys Securities. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| the Introduction |
| the Summary Term Sheet |
| Special Factors Section 1 Background of the Offer; Past Contacts or Negotiations with NetSuite |
| Special Factors Section 6 The Merger Agreement; Other Agreements |
| Special Factors Section 8 Transactions and Arrangements Concerning the Shares |
| Schedule I |
The information set forth in the following section of the Schedule 14D-9 is incorporated herein by reference:
| Item 3. Past Contacts, Transactions, Negotiations and Agreements |
| Item 4. The Solicitation or Recommendation |
The information set forth in Exhibit 4.4 to NetSuites Amendment No. 4 to its Registration Statement on Form S-1 is incorporated herein by reference.
Item 6. | Purposes of the Transaction and Plans or Proposals. |
(b), (c)(8) Use of Securities Acquired; Plans. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| the Summary Term Sheet |
| Special Factors Section 1 Background of the Offer; Past Contacts or Negotiations with NetSuite |
| Special Factors Section 2 - Purpose of the Offer; Plans for NetSuite |
| Special Factors Section 5 Certain Effects of the Offer |
Item 7. | Purposes, Alternatives, Reasons and Effects. |
(a) Purposes. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| the Introduction |
| the Summary Term Sheet |
| Special Factors Section 1 Background of the Offer; Past Contacts or Negotiations with NetSuite |
18
| Special Factors Section 2 Purpose of the Offer; Plans for NetSuite |
| Special Factors Section 5 Certain Effects of the Offer |
| Special Factors Section 6 The Merger Agreement; Other Agreements |
| Schedule I |
The information set forth in the following section of the Schedule 14D-9 is incorporated herein by reference:
| Item 4. The Solicitation or Recommendation Background of the Transactions; Reasons for the Recommendation of the NetSuite Board |
(b) Alternatives. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| the Introduction |
| the Summary Term Sheet |
| Special Factors Section 1 Background of the Offer; Past Contacts or Negotiations with NetSuite |
The information set forth in the following section of the Schedule 14D-9 is incorporated herein by reference:
| Item 4. The Solicitation or Recommendation Background of the Transactions; Reasons for the Recommendation of the NetSuite Board |
(c) Reasons. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| the Introduction |
| the Summary Term Sheet |
| Special Factors Section 1 Background of the Offer; Past Contacts or Negotiations with NetSuite |
| Special Factors Section 2 Purpose of the Offer; Plans for NetSuite |
| Special Factors Section 5 Certain Effects of the Offer |
| Special Factors Section 6 The Merger Agreement; Other Agreements |
| Schedule I |
The information set forth in the following section of the Schedule 14D-9 is incorporated herein by reference:
| Item 4. The Solicitation or Recommendation Background of the Transactions; Reasons for the Recommendation of the NetSuite Board |
(d) Effects. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| the Introduction |
| the Summary Term Sheet |
| Special Factors Section 1 Background of the Offer; Past Contacts or Negotiations with NetSuite |
| Special Factors Section 2 Purpose of the Offer; Plans for NetSuite |
19
| Special Factors Section 5 Certain Effects of the Offer |
| Special Factors Section 6 The Merger Agreement; Other Agreements |
| The Tender Offer Section 5 Certain U.S. Federal Income Tax Consequences of the Offer |
| Schedule I |
The information set forth in the following sections of the Schedule 14D-9 is incorporated herein by reference:
| Item 3. Past Contacts, Transactions, Negotiations and Agreements |
| Item 4. The Solicitation or Recommendation |
Item 8. | Fairness of the Transaction. |
(a)-(d) Fairness; Factors Considered in Determining Fairness; Approval of Security Holders; Unaffiliated Representative. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| the Summary Term Sheet |
| Special Factors Section 1 Background of the Offer; Past Contacts or Negotiations with NetSuite |
| Special Factors Section 3 Position of NetSuite Regarding Fairness of the Offer and the Merger |
| Special Factors Section 4 Position of Oracle, Parent and Purchaser Regarding Fairness of the Offer and Merger |
The information set forth in the following section of the Schedule 14D-9 is incorporated herein by reference:
| Item 4. The Solicitation or Recommendation Background of the Transactions; Reasons for the Recommendation of the NetSuite Board |
(f) Other Offers. Not applicable.
Item 9. | Reports, Opinions, Appraisals and Negotiations. |
(a) and (b) Report, Opinion or Appraisal; Preparer and Summary of the Report. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| Special Factors Section 1 Background of the Offer; Past Contacts or Negotiations with NetSuite |
| Special Factors Section 4 Position of Oracle, Parent and Purchaser Regarding Fairness of the Offer and Merger |
| Special Factors Section 6 The Merger Agreement; Other Agreements |
The information set forth in the following section of the Schedule 14D-9 is incorporated herein by reference:
| Item 4. The Solicitation or Recommendation |
(c) Availability of Documents. The reports, opinion or appraisals referenced in this Item 9 will be made available for inspection and copying at the principal executive offices of Oracle during its regular business hours by any interested holder of Shares or representative of any such interested holder who has been so designated in writing.
20
Item 10. | Source and Amounts of Funds or Other Consideration. |
(c) Expenses. The information set forth in the following section of the Offer to Purchase is incorporated herein by reference:
| The Tender Offer Section 18 Fees and Expenses |
Item 12. | The Solicitation or Recommendation. |
(d) Intent to Tender or Vote in a Going-Private Transaction. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| the Summary Term Sheet |
| Special Factors Section 1 Background of the Offer; Past Contacts or Negotiations with NetSuite |
| Special Factors Section 6 The Merger Agreement; Other Agreements |
| Special Factors Section 8 Transactions and Arrangements Concerning Shares |
The information set forth in the following sections of the Schedule 14D-9 is incorporated herein by reference:
| Item 3. Past Contacts, Transactions, Negotiations and Agreements |
| Item 4. The Solicitation or Recommendation |
(e) Recommendations of Others. The information set forth in the following sections of the Offer to Purchase is incorporated herein by reference:
| the Summary Term Sheet |
| Special Factors Section 1 Background of the Offer; Past Contacts or Negotiations with NetSuite |
| Special Factors Section 6 The Merger Agreement; Other Agreements |
| Special Factors Section 8 Transactions and Arrangements Concerning Shares |
The information set forth in the following sections of the Schedule 14D-9 is incorporated herein by reference:
| Item 3. Past Contacts, Transactions, Negotiations and Agreements |
| Item 4. The Solicitation or Recommendation |
Item 13. | Financial Statements. |
(a) Financial Information.
(1) NetSuites Consolidated Financial Statements on pages 40 through 77 of NetSuites Annual Report on Form 10-K for the fiscal year ended December 31, 2015, including any notes thereto, are incorporated herein by reference.
(2) NetSuites unaudited interim Consolidated Financial Statements on pages 2 through 19 of NetSuites Quarterly Report on Form 10-Q for the period ended June 30, 2016, including any notes thereto, are incorporated herein by reference.
21
(3) Ratio of Earnings to Fixed Charges
Year Ended December 31, |
Six months ended June 30, |
Three months ended June 30, |
||||||||||||||
2014 | 2015 | 2016 | 2016 | |||||||||||||
Pre-tax income from continuing operations |
$ | (97,871,539 | ) | $ | (130,361,510 | ) | $ | (65,302,852 | ) | $ | (36,750,642 | ) | ||||
Add: |
||||||||||||||||
Fixed charges |
14,971,333 | 15,554,184 | 8,102,284 | 4,083,360 | ||||||||||||
Earnings (losses) |
$ | (82,900,205 | ) | $ | (114,807,327 | ) | $ | (57,200,568 | ) | $ | (32,667,282 | ) | ||||
|
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|
|
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|||||||||
Fixed charges: |
||||||||||||||||
Interest expensed and capitalized |
$ | 1,399,549 | $ | 1,135,282 | $ | 583,143 | $ | 287,355 | ||||||||
Amortized premiums, discounts and capitalized expenses related to indebtedness |
12,909,910 | 13,538,799 | 6,964,112 | 3,509,414 | ||||||||||||
Estimate of interest within rental expense |
661,874 | 880,103 | 555,029 | 286,591 | ||||||||||||
Total fixed charges |
$ | 14,971,333 | $ | 15,554,184 | $ | 8,102,284 | $ | 4,083,360 | ||||||||
|
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|
|
|
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|||||||||
Ratio of earnings to fixed charges(1) |
-5.54 | -7.38 | -7.06 | -8.00 | ||||||||||||
|
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|
|
|
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|
(1) | Ratio of earnings to fixed charges is computed by dividing Earnings (losses) by Total fixed charges. |
(4) The book value per share as of the date of the most recent balance sheet presented is $3.88.
(b) Pro Forma Information. Not applicable.
Item 14. | Persons/Assets, Retained, Employed, Compensated or Used. |
(b) Employees and Corporate Assets. None.
Item 15. | Additional Information. |
(b) Other Material Information. The information set forth in the following section of the Schedule 14D-9 is incorporated herein by reference:
| Item 8 Additional Information |
Item 16. | Exhibits. |
Reference is made to Item 12 Exhibits of this Schedule TO.
Exhibit No. |
Description | |
(a)(5)(E) | Press Release issued by Oracle Corporation on September 26, 2016, announcing final antitrust clearance approval. | |
(c)(1) | Opinion of Qatalyst Partners LP, dated July 27, 2016, to the Transactions Committee and the Board of Directors of NetSuite Inc. (incorporated herein by reference to Annex A to the Schedule 14D-9 filed by NetSuite Inc. on August 18, 2016). | |
(c)(2) | Discussion materials prepared by Qatalyst Partners LP for discussion with the Board of Directors of NetSuite Inc., dated February 22, 2016 (incorporated by reference to Exhibit (c)(1) to the Schedule 13E-3 filed by NetSuite Inc. on September 27, 2016). |
22
Exhibit No. |
Description | |
(c)(3) | Discussion materials prepared by Qatalyst Partners LP for discussion with the Board of Directors of NetSuite Inc., dated June 6, 2016 (incorporated by reference to Exhibit (c)(2) to the Schedule 13E-3 filed by NetSuite Inc. on September 27, 2016). | |
(c)(4) | Discussion materials prepared by Qatalyst Partners LP for discussion with the Board of Directors of NetSuite Inc., dated June 10, 2016 (incorporated by reference to Exhibit (c)(3) to the Schedule 13E-3 filed by NetSuite Inc. on September 27, 2016). | |
(c)(5) | Discussion materials prepared by Qatalyst Partners LP for discussion with the Board of Directors of NetSuite Inc., dated July 13, 2016 (incorporated by reference to Exhibit (c)(4) to the Schedule 13E-3 filed by NetSuite Inc. on September 27, 2016). | |
(c)(6) | Discussion materials prepared by Qatalyst Partners LP for discussion with the Board of Directors of NetSuite Inc., dated July 27, 2016 (incorporated by reference to Exhibit (c)(5) to the Schedule 13E-3 filed by NetSuite Inc. on September 27, 2016). | |
(c)(7) | Opinion of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated July 28, 2016. | |
(c)(8) | Presentation of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated April 19, 2016. | |
(c)(9) | Presentation of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated May 20, 2016. | |
(c)(10) | Presentation of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated May 27, 2016. | |
(c)(11) | Update Material of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated June 8, 2016. | |
(c)(12) | Update Material of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated June 14, 2016. | |
(c)(13) | Update Material of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated June 30, 2016. | |
(c)(14) | Update Material of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated July 8, 2016. | |
(c)(15) | Presentation of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated July 25, 2016. |
23
SIGNATURES
After due inquiry and to the best knowledge and belief of the undersigned, each of the undersigned certify that the information set forth in this statement is true, complete and correct.
Date: September 27, 2016
Napa Acquisition Corporation | ||
By: | /s/ Brian S. Higgins | |
Name: | Brian S. Higgins | |
Title: | Vice President | |
OC Acquisition LLC | ||
By: | /s/ Brian S. Higgins | |
Name: | Brian S. Higgins | |
Title: | Secretary | |
Oracle Corporation | ||
By: | /s/ Brian S. Higgins | |
Name: | Brian S. Higgins | |
Title: | Vice President |
24
EXHIBIT INDEX
Exhibit No. |
Description | |
(a)(1)(A) | Offer to Purchase, dated August 18, 2016.* | |
(a)(1)(B) | Letter of Transmittal (including Guidelines for Certification of Taxpayer Identification Number on IRS Form W-9).* | |
(a)(1)(C) | Notice of Guaranteed Delivery.* | |
(a)(1)(D) | Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.* | |
(a)(1)(E) | Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.* | |
(a)(1)(F) | Summary Advertisement dated August 18, 2016.* | |
(a)(5)(A) | Press Release issued by Oracle Corporation on July 28, 2016 (incorporated by reference to the Schedule TO filed by Oracle Corporation on August 1, 2016).* | |
(a)(5)(B) | FAQ issued by Oracle Corporation on July 28, 2016 (incorporated by reference to the Schedule TO filed by Oracle Corporation on August 1, 2016).* | |
(a)(5)(C) | Press Release issued by Oracle Corporation on September 9, 2016, announcing the extension of the Offer.* | |
(a)(5)(D) | Complaint captioned Dennis Palkon, on Behalf of Himself and All Others Similarly Situated v. NetSuite Inc., et al., filed on August 30, 2016, in the United States District Court for the Northern District of California.* | |
(a)(5)(E) | Press Release issued by Oracle Corporation on September 26, 2016, announcing final antitrust clearance approval. | |
(b) | Not applicable. | |
(c)(1) | Opinion of Qatalyst Partners LP, dated July 27, 2016, to the Transactions Committee and the Board of Directors of NetSuite Inc. (incorporated herein by reference to Annex A to the Schedule 14D-9 filed by NetSuite Inc. on August 18, 2016).* | |
(c)(2) | Discussion materials prepared by Qatalyst Partners LP for discussion with the Board of Directors of NetSuite Inc., dated February 22, 2016 (incorporated by reference to Exhibit (c)(1) to the Schedule 13E-3 filed by NetSuite Inc. on September 27, 2016). | |
(c)(3) | Discussion materials prepared by Qatalyst Partners LP for discussion with the Board of Directors of NetSuite Inc., dated June 6, 2016 (incorporated by reference to Exhibit (c)(2) to the Schedule 13E-3 filed by NetSuite Inc. on September 27, 2016). | |
(c)(4) | Discussion materials prepared by Qatalyst Partners LP for discussion with the Board of Directors of NetSuite Inc., dated June 10, 2016 (incorporated by reference to Exhibit (c)(3) to the Schedule 13E-3 filed by NetSuite Inc. on September 27, 2016). | |
(c)(5) | Discussion materials prepared by Qatalyst Partners LP for discussion with the Board of Directors of NetSuite Inc., dated July 13, 2016 (incorporated by reference to Exhibit (c)(4) to the Schedule 13E-3 filed by NetSuite Inc. on September 27, 2016). | |
(c)(6) | Discussion materials prepared by Qatalyst Partners LP for discussion with the Board of Directors of NetSuite Inc., dated July 27, 2016 (incorporated by reference to Exhibit (c)(5) to the Schedule 13E-3 filed by NetSuite Inc. on September 27, 2016). | |
(c)(7) | Opinion of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated July 28, 2016. |
25
Exhibit No. |
Description | |
(c)(8) | Presentation of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated April 19, 2016. | |
(c)(9) | Presentation of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated May 20, 2016. | |
(c)(10) | Presentation of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated May 27, 2016. | |
(c)(11) | Update Material of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated June 8, 2016. | |
(c)(12) | Update Material of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated June 14, 2016. | |
(c)(13) | Update Material of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated June 30, 2016. | |
(c)(14) | Update Material of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated July 8, 2016. | |
(c)(15) | Presentation of Moelis & Company LLC to the Special Committee of the Board of Directors of Oracle Corporation, dated July 25, 2016. | |
(d)(1) | Agreement and Plan of Merger, dated as of July 28, 2016, by and among NetSuite Inc., OC Acquisition LLC, Napa Acquisition Corporation and (solely with respect to performance of its obligations set forth in certain specified sections thereof) Oracle Corporation (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by Oracle Corporation with the SEC on August 1, 2016). | |
(d)(2) | Form of Tender and Support Agreement among OC Acquisition LLC, Napa Acquisition Corporation and the stockholder party thereto (incorporated by reference to Exhibit (e)(4) to the Schedule 14D-9 filed by NetSuite Inc. on August 18, 2016). | |
(d)(3) | Tender and Support Agreement, dated as of July 28, 2016, among OC Acquisition LLC, Napa Acquisition Corporation and NetSuite Restricted Holdings LLC (incorporated by reference to Exhibit (e)(5) to the Schedule 14D-9 filed by NetSuite Inc. on August 18, 2016). | |
(d)(4) | Confidentiality Agreement, dated as of May 5, 2016, between Oracle Corporation and NetSuite Inc. (incorporated by reference to Exhibit (e)(2) to the Schedule 14D-9 filed by NetSuite Inc. on August 18, 2016). | |
(d)(5) | Exclusivity Agreement, dated as of July 15, 2016, between NetSuite Inc. and Oracle Corporation (incorporated by reference to Exhibit (e)(3) to the Schedule 14D-9 filed by NetSuite Inc. on August 18, 2016). | |
(f) | The information set forth in Item 8 - Additional Information - Appraisal Rights and Annex B to the Schedule 14D-9 filed by NetSuite Inc. on August 18, 2016 is incorporated herein by reference. | |
(g) | Not applicable. | |
(h) | Not applicable. |
* | Filed previously |
26
Exhibit (a)(5)(E)
Press Release
Oracle Receives Department of Justice Clearance to Buy NetSuite
Redwood Shores, CALIF, September 26, 2016 Oracle (NYSE: ORCL) today announced that it has received the final antitrust clearance approval necessary for the acquisition of NetSuite, Inc. (NYSE: N) from the U.S. Department of Justice. The all-cash tender offer for NetSuite at $109.00 per share, set to expire on October 6, 2016, will proceed as planned assuming the minimum required number of shares are tendered.
About Oracle
Oracle offers a comprehensive and fully integrated stack of cloud applications and platform services. For more information about Oracle (NYSE:ORCL), visit oracle.com.
Trademarks
Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners.
Additional Information
This communication does not constitute an offer to buy or solicitation of an offer to sell any securities. This communication is for informational purposes only. The tender offer is not being made to, nor will tenders be accepted from, or on behalf of, holders of shares in any jurisdiction in which the making of the tender offer or the acceptance thereof would not comply with the laws of that jurisdiction. The tender offer is being made pursuant to a tender offer statement on Schedule TO (including the Offer to Purchase, a related Letter of Transmittal and other offer materials) filed by Napa Acquisition Corporation with the U.S. Securities and Exchange Commission (SEC) on August 18, 2016, as amended from time to time. In addition, on August 18, 2016, NetSuite Inc. filed a Solicitation/Recommendation statement on Schedule 14D-9 with the SEC related to the tender offer. Stockholders of NetSuite Inc. are urged to read these documents, all amendments thereto and other documents filed with the SEC carefully in their entirety because they contain important information about the tender offer. The tender offer statement and certain other offer documents, along with the Solicitation/Recommendation statement, will be made available to all stockholders of NetSuite Inc. at no expense to them. These documents are available at no charge through the web site maintained by the SEC at http://www.sec.gov. The Offer to Purchase, related Letter of Transmittal, the Solicitation/Recommendation statement and other offering documents may also be obtained for free by contacting the Information Agent for the tender offer, Innisfree, M&A Incorporated, toll-free at 888-750-5834.
Cautionary Statement Regarding Forward-Looking Statements
This document contains certain forward-looking statements about Oracle and NetSuite Inc., including statements that involve risks and uncertainties concerning Oracles proposed acquisition of NetSuite Inc., anticipated customer benefits and general business outlook. When used in this document, the words anticipates, can, will, look forward to, expected and similar expressions and any other statements that are not historical facts are intended to identify those assertions as forward-looking statements. Any such statement may be influenced by a variety of factors, many of which are beyond the control of Oracle or NetSuite Inc., that could cause actual outcomes and results to be materially different from those projected, described, expressed or implied in this document due to a number of risks and uncertainties. Potential risks and uncertainties include, among others, the possibility that the transaction will not close or that the closing may be delayed, the anticipated synergies of the combined companies may not be achieved after closing, the combined operations may not be successfully integrated in a timely manner, if at all, general economic conditions in regions in which either company does business, and the possibility that Oracle or NetSuite Inc. may be adversely affected by other
economic, business, and/or competitive factors. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of Oracle or NetSuite Inc. You are cautioned to not place undue reliance on forward-looking statements, which speak only as of the date of this document. Neither Oracle nor NetSuite Inc. is under any duty to update any of the information in this document.
In addition, please refer to the documents that Oracle and NetSuite Inc., respectively, file with the SEC on Forms 10-K, 10-Q and 8-K. These filings identify and address other important factors that could cause Oracles and NetSuite Inc.s respective operational and other results to differ materially from those contained in the forward-looking statements set forth in this document. You are cautioned to not place undue reliance on forward-looking statements, which speak only as of the date of this document. Neither Oracle nor NetSuite Inc. is under any duty to update any of the information in this document.
Safe Harbor
The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracles products remains at the sole discretion of Oracle Corporation.
# # #
Contact:
Deborah Hellinger
Oracle
+1.212.508.7935
deborah.hellinger@oracle.com
Ken Bond
Oracle Investor Relations
+1.650.607.0349
Ken.bond@oracle.com
Exhibit (c)(7)
1999 AVENUE OF THE STARS 19th FLOOR LOS ANGELES, CALIFORNIA 90067 | ||||
|
T 310.443.2300 F 310.443.8700 |
July 28, 2016
Special Committee of the Board of Directors
c/o Oracle Corporation
500 Oracle Parkway
Redwood City, CA 94065
The Special Committee of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, to Oracle Corporation (the Company) of the Consideration (as defined below) to be paid by Napa Acquisition Corporation (Acquisition Sub), a wholly-owned subsidiary of OC Acquisition LLC (Parent), a wholly-owned subsidiary of the Company, and Parent pursuant to the Agreement and Plan of Merger (the Agreement) entered into by NetSuite Inc. (the Target), Acquisition Sub, Parent and the Company (which is a party to the Agreement solely with respect to certain provisions as specified in the Agreement). As more fully described in the Agreement: (i) Acquisition Sub will commence a tender offer to acquire all outstanding shares of common stock of the Target, par value $0.01 per share (Target Common Stock), for $109.00 per share in cash (the Consideration) and (ii) following the consummation of such tender offer, Acquisition Sub will merge with and into the Target (together with such tender offer, the Transaction) and each issued and outstanding share of Target Common Stock not previously acquired by Acquisition Sub (except as otherwise described in the Agreement) will be converted into the right to receive the Consideration.
We have acted as your financial advisor in connection with the Transaction and will receive a fee for our services, the principal portion of which is contingent upon the consummation of the Transaction. We will also receive a fee upon delivery of this opinion. Our affiliates, employees, officers and partners may at any time own securities (long or short) of the Company and the Target. We may in the future provide investment banking and other services to the Company and the Target and may receive compensation for such services.
Our opinion does not address the Companys underlying business decision to effect the Transaction or the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available to the Company. At your direction, we have not been asked to, nor do we, offer any opinion as to any terms of the Agreement or any Tender and Support Agreement (as defined below) or any aspect or implication of the Transaction, except for the Consideration to the extent expressly specified herein. We are not tax, legal, regulatory or accounting experts and have assumed and relied upon, without independent verification, the assessments of the Company and its other advisors with respect to tax, legal, regulatory and accounting matters. In rendering this opinion, we have assumed, with your consent, that the Transaction will be consummated in accordance with its terms and that the parties to the Agreement and to any Tender and Support Agreement will comply with all the material terms of the Agreement and the Tender and Support Agreement, as applicable. We also have assumed, with your consent, that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without the imposition of any delay, limitation, restriction, divestiture or condition that would have an adverse effect on the Target or the Company or on the expected benefits to the Company of the Transaction.
LOS ANGELES | NEW YORK | BOSTON | CHICAGO
In arriving at our opinion, we have, among other things: (i) reviewed certain publicly available business and financial information relating to the Target, including publicly available research analysts financial forecasts; (ii) reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities and prospects of the Target furnished to us by the Target, including financial forecasts provided to or discussed with us by the management of the Target; (iii) reviewed certain internal information relating to cost savings and synergies expected to result from the Transaction (the Expected Synergies) and certain other pro forma financial effects of the Transaction furnished to us by the Company; (iv) conducted discussions with members of the senior managements and representatives of the Company and the Target concerning the information described in clauses (i) and (ii) of this paragraph, as well as the business and prospects of the Target generally, and conducted discussions with members of the senior management and representatives of the Company concerning the information described in clause (iii) of this paragraph; (v) reviewed publicly available financial and stock market data of certain other companies in lines of business that we deemed relevant; (vi) reviewed the financial terms of certain other transactions that we deemed relevant; (vii) reviewed the Agreement and reviewed the Tender and Support Agreements entered into by Parent, Acquisition Sub and certain stockholders of the Target (each, a Tender and Support Agreement); (viii) participated in certain discussions and negotiations among representatives of the Company and the Target and their advisors; and (ix) conducted such other financial studies and analyses and took into account such other information as we deemed appropriate.
In connection with our review, we have not assumed any responsibility for independent verification of any of the information supplied to, discussed with or reviewed by us for the purpose of this opinion and have, with your consent, relied on such information being complete and accurate in all material respects. In addition, with your consent, we have not made any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet, or otherwise) of the Target, nor have we been furnished with any such evaluation or appraisal. We have been furnished with a financial analysis of the Target provided by the Companys management which, at your direction, we did not rely on in our financial analysis or opinion. With respect to the financial forecasts and other information relating to the Target, Expected Synergies and other pro forma financial effects referred to above, we have assumed, at your direction, that they have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Target or the Company, as the case may be, as to the future performance of the Target, such Expected Synergies (including the amount, timing and achievability thereof) and such other pro forma financial effects. We also have assumed, at your direction, that the future financial results (including Expected Synergies) reflected in such forecasts and other information will be achieved at the times and in the amounts projected. In addition, at your direction, we have relied on the assessments of the management of the Company as to (i) the existing technology, products and services of the Target and the validity of, and risks associated with, the future technology, products and services of the Target; and (ii) the Companys ability to integrate the businesses of the Target and the Company. We have assumed, with your consent, that there will be no developments with respect to any of the foregoing that would affect our analyses or opinion.
Our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof.
This opinion is solely for the use and benefit of the Special Committee of the Board of Directors of the Company (in its capacity as such) in its evaluation of the Transaction and may not be disclosed to or relied upon by any stockholders or any other person. This opinion does not address the fairness of the Transaction or any implications of the Transaction to the holders of any class of securities, creditors or other constituencies of the Company or the Target.
In addition, we do not express any opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the Transaction or of the Company, or any class of such persons, relative to the Consideration or otherwise. This opinion was approved by a Moelis & Company LLC fairness opinion committee.
2 | LOS ANGELES | NEW YORK | BOSTON | CHICAGO |
Based upon and subject to the foregoing, it is our opinion that, as the date hereof, the Consideration to be paid by the Company in the Transaction is fair from a financial point of view to the Company.
Very truly yours,
/s/ Moelis & Company LLC
MOELIS & COMPANY LLC
3 | LOS ANGELES | NEW YORK | BOSTON | CHICAGO |
Exhibit (c)(8)
|
STRICTLY CONFIDENTIAL
Presentation to the Special Committee of the Board of Directors
April 19, 2016
|
The Moelis & Company Team Dedicated to the Special Committee
SENIOR SPONSORSHIP M&A SPECIAL COMMITTEE ADVISORYLEGAL / FAIRNESS OPINION
JEFF RAICH
KEN MOELIS DAN LEEOSAMU WATANABE
Founder, Co-President,
Founder, Chairman, CEO Managing DirectorGeneral Counsel
Head of M&A
Over 30 years of investment banking experience
Current Moelis Board member
Former President of UBS Investment Bank
Previously Joint Global Head of
Investment Banking at UBS and Head of Corporate Finance at DLJ
27 years of investment banking experience during which he established and led leading sell-side M&A practices at UBS
Investment Bank and DLJ
Current Moelis Board member
Former Joint Global Head of M&A at UBS
17 years of investment banking experience
Chairs Moelis Fairness Committee
Former MD in M&A at Macquarie Capital and Head of Fairness Opinion Committee
Previously Head of West Coast M&A at UBS
General Counsel at Moelis & Company
Previously General Counsel and CCO of Sagent Advisors and prior to that held senior positions at UBS, CSFB and Donaldson, Lufkin & Jenrette
TECHNOLOGY M&A / TECHNOLOGY TEAM
STUART GOLDSTEIN CHRISTOPHER FOSS ABHINAV GATTANIJAMIE HOWARD
Managing Director Senior Vice President Senior Vice PresidentAssociate
20 years of investment banking experience
Prior Chair of Moelis Fairness Committee
Previously Head of West Coast Tech Investment Banking Group at Citigroup
10 years of investment banking experience 10 years of investment banking experience 2 years of investment banking experience
Former Associate, Distressed and Corporate Former Associate in Global Technology Former Sr. Consultant in Deloittes
Investing at The Carlyle Group; former Investment Banking at Citigroup and TMT Financial Advisory Services Practice
Analyst in Technology and Services Goldman Sachs
Investment Banking at UBS Investment
Bank
MOELIS & COMPANY OVERVIEW
Founded in July 2007 650 Employees
Completed IPO in April 2014 (NYSE: MC) 104 Managing Directors
Market Cap of Approximately $1.5bn 20 Average Years of Experience per Managing Director 17 Global Offices 66 Former Sector and Product Heads
[ 1 ]
|
The Role of the Special Committee is to Protect the Public Shareholders Moelis & Companys Role Will Be to Protect You
A well designed process will allow the Special Committee to proactively address the unique set of circumstances that exist in a potential transaction with Napa
Public company Boards face ever-increasing scrutiny in the context of M&A transactions, with an estimated 97% of public M&A transactions over $100 million facing litigation
While most M&A transactions involve litigation, it is important to understand the factors that receive the greatest scrutiny by the courts
The basic fiduciary duties required of any director related to an M&A transaction should be evaluated in the context of the Business Judgment Rule: Duty of Care and Duty of Loyalty
Duty of Care Must act on an informed basis after due consideration of all relevant materials and appropriate deliberation
Duty of Loyalty Must act in good faith and in the honest belief that the action taken is in the best interests of the
Company and its shareowners, and not in the Boards self-interest
The circumstances specific to Project Napa may face a heightened level of scrutiny
Moelis & Company believes it is uniquely qualified to design the right process and provide the right advice to protect the Special Committee
[ 2 ]
|
Moelis & Company Will Add Value To The Special Committee By Proactively Navigating Considerations Around Napa
Moelis would design a well-planned process around the evaluation, timing, structure, negotiations, and approval practices in a potential transaction with Napa
Given the considerations specific to Napa and Orlando, heightened scrutiny may apply
Cross Ownership: Es own ~46% of Napa and ~27% of Orlando
Current Operating Relationships: While limited, Orlando provides services and has financed Napas operations
Respective Valuations: Companies trade off of different valuation metrics and have different financial profiles
In any Napa change of control transaction, Napas directors will be subject to greater scrutiny of adherence to their fiduciary duties
Potential shareholder litigation claiming breaches of fiduciary duties by Napas directors may result in liabilities directly or indirectly borne by an acquirer, including potential accusations of aiding and abetting by that acquirer
Just as important in getting to the right answer is how you get there
[ 3 ]
|
Moelis & Company Has The Right Experience To Advise the Special Committee
Moelis possesses a differentiated set of credentials with significant experience advising public company Boards and Special Committees in high-profile assignments
Leading independent advisor ideally suited for the Special Committee
Since its founding, Moelis has advised on over $1.8 trillion of transactions, with over 450 public company situations
Day-to-day team for the Special Committee will be led by Ken Moelis and a senior team with extensive experience advising Special Committees
Senior team average Wall Street tenure of over 25 years
All previously chaired or have been members of the fairness committees of a major investment bank
Possesses deep execution, process, and industry expertise
Moelis has extensive experience in the technology sector with deep software expertise
Strong understanding of the software landscape with the ability to assist the Special Committee in a review of a potential transaction in the context of overall corporate strategy
MACANDREWS & FORBES CASE STUDY
$2.5bn
Acquisition of M & F Worldwide Corp. Exclusive Financial Advisor
M&F acquired the 57% interest in of MFW it did not own for and implied transaction value of $2.5 billion
Moelis & Skadden designed the framework for the transaction, since adopted as the approach courts embrace for the protection of minority shareholders in transactions
SELECT BOARD & SPECIAL COMMITTEE ASSIGNMENTS
[ 4 ]
|
Select Recent Public Company Mandates
Extensive experience advising public companies on how to manage through complex transactions, optimize
shareholder outcomes and provide valuations and fairness opinions
Indicates transactions where Moelis has or is expected to render a Fairness Opinion
Ongoing Ongoing OngoingPendingPendingPendingPending
$3.3bn $67.0bn$586mm$10.4bn$1.5bn
Ongoing Advisory Sale to Zoomlion Defense advisor to theAcquisition ofAcquisition of NTELOSSale to Emera Inc.Acquisition of Vistana
Services company against activistEMC CorporationHoldings Corp. andSignature Experiences,
investorsamendment of itsStarwoods vacation
affiliate relationship withownership business
Sprint Corporation
ExclusiveExclusive
Financial Advisor Financial Advisor Financial AdvisorFinancial AdvisorFinancial AdvisorFinancial AdvisorFinancial Advisor
2016 Abandoned 20162016201620162016
$2.4bn $160bn $551mmBoard Recommendation$459mm$1.9bn$13.3bn
Sale to Algonquin Combination with Sale to Rizvi Traverseon Dual ClassSale of five non-coreSale to Harrison StreetMerger with Sirona
Power & Utilities Corp. Allergan plc Management, LLCRecapitalizationoutdoor markets toReal Estate Capital, LLCDental Systems Inc.
Stockholder ProposalLamar Advertising
Company
Exclusive ExclusiveExclusiveExclusiveExclusive
Financial Advisor Financial Advisor Financial AdvisorFinancial AdvisorFinancial AdvisorFinancial AdvisorFinancial Advisor
2016 2015 20152015201520152015
$7.7bn Spin-off of select real $365mmJPY33.0bn$189mm$2.0bn$1.6bn
Merger with Colony estate and restaurant Sale to Sequential BrandsAcquisition ofAcquisition ofAcquisition of EnvisionAcquisition of Alkali
American Homes, Inc. assets into, and the Group, Inc.R-Tech Ueno, Ltd.Magnetek Inc.Pharmaceutical ServicesChemicals Group from
formation of, FMC Corporation
Four Corners Property
Trust, Inc.
ExclusiveExclusiveExclusive
Financial AdvisorFinancial AdvisorFinancial AdvisorFinancial Advisor
[ 5 ]
|
Select Software Sector Expertise
Moelis has been involved in a number of marquee software transactions across the applications, infrastructure,
information management and security sectors
APPLICATIONS SOFTWARE INFRASTRUCTURE SOFTWARE
$391mm $976mm$67bn$120mm$105mm$112mm
Sale to Acquisition of Sale toSale toAcquisition ofSale toAcquisition ofSale of Remaining
Interest in
$2bn $210mm $1.8bn$10.3bn & $1.3bn$635mm$210mm & $220mm$730mm$8.1bn
Sale to Acquisition of Acquisition ofSales toAcquisition ofAcquisitions ofSale toAcquisition of
BIG DATA / INFORMATION MANAGEMENT SOFTWARE SECURITY SOFTWARE
Project A2
Global Leader in Strategic $2.4bn$163mm$400mm$233mm$695mm
Document Mgmt. Investment Acquisition ofAcquisition ofAcquisition ofSale toAcquisition ofSale to
Software from
Exclusive Financial
Advisor
$4.6bn $1.6bn $151mm$200mm$413mm$441mm$350mm & $86mm$296mm & $31mm
Acquisition of Acquisition of Sale toSale toSale toSale toSales toAcquisitions of
[ 6 ]
|
Why Moelis & Company Is The Right Advisor For The Special Committee
[Graphic Appears Here]
Moelis believes it is the right advisor for the Special Committee of Orlando, having no real or perceived conflicts and having a team with the most relevant experience for Project Napa
MAJORBULGE BRACKET
MOELIS &BOUTIQUEINVESTMENT
CRITERIA COMPANY FIRMSBANKS
Leading Technology and Enterprise Software Franchise
Relevant Industry Experience
No Real or Perceived Conflicts
No Sales & Trading
No Equity Research
No Wealth Management
No Asset Management
No Direct Banker Economic Interest in the Outcome
No Prior Orlando Engagements
No Prior Napa Engagements
No Direct Vendor Relationships
Financial Strength
Highly Relevant Deal Team Credentials and Expertise
Dedicated Senior Team
Special Committee Experience
Dedicated Special Committee / Fairness Professionals
?
[ 7 ]
|
Our Approach To Working With the Orlando Special Committee
Moelis would work with the Special Committee and Skadden to design the right process as we evaluate key issues, including is this the right time and is this the right target
KEY OBJECTIVESMOELIS & COMPANY QUALIFICATIONS
Evaluate Opportunity Evaluate alternatives available to Orlando Highly relevant experience
in the Context of No conflict position
Overall Corporate Strategy Availability of key seasoned resources
If the Special Committee decides to move forward:
Understand Understand ultimate objectives Leading Special Committee advisory franchise
Situation and Derive Evaluate tactics and potential alternatives Recent experience in multiple analogous
Optimal Approach Determine approach (who makes the call)situations
Perform detailed review of Napa and Orlando including Deep industry knowledge through active
financial and strategic due diligence (in conjunction withcoverage and extensive transaction experience
Skadden)
Perform Due Diligence Ability to receive MNPI, including Napa internal
financial projections, may be difficult without providing
initial perspectives on valuation
Refine initial valuation perspectives based on available Extensive industry, public company, and
Conduct Valuation Analysis information, including the potential synergy opportunityfairness / valuation perspectives
Ensure ultimate consideration is supported by valuation Significant public company buy side experience
Negotiate / analysis Unique understanding of key deal points and
Execute Transaction Structure deal terms to protect Orlando in connectionthe interplay between deal terms and value
with Skadden
Fairness opinion procedures and documentation Moelis has a robust committee process
Fairness Opinion rigorously prepared Team has extensive Special Committee and
Fairness Committee experience
[ 8 ]
|
Potential Next Steps
Moelis is prepared to work expeditiously to evaluate the opportunity in the context of Orlandos overall corporate strategy, and if determined appropriate, assist in a potential transaction with Napa
1
Discuss and agree upon terms of engagement
2
Review a potential transaction with Napa in the context of overall corporate strategy
3
Perform due diligence and preliminary valuation analysis
4
Reconvene with the Special Committee to discuss the appropriate next steps
[ 9 ]
|
Moelis Fee Proposal
EVALUATION PHASE FEE
OPINION FEE
TRANSACTION FEE
$1,000,000 to evaluate the opportunity in the context of overall corporate strategy
If the Special Committee decides to move forward:
$2,000,000
100% creditable against any Transaction Fee
$20,000,000 payable at the closing of a transaction
Moelis & Company is flexible in refining this structure upon further understanding of the
Special Committees objectives and scope of the assignment
[ 10 ]
|
Appendix
|
A. Moelis & Company Overview
|
Moelis & Company Overview
Global independent investment bank that provides world-class uncompromised advice
Leading Global Founded in July 2007
Independent Completed IPO in April 2014 (NYSE: MC)
Investment Bank Market cap of approximately $1.5bn
Global Network Extensive global network with 650 employees across 17 offices in
North & South America, Europe, the Middle East, Asia and Australia
Advised on over $340 billion of M&A in 2015
Broke into top 10 M&A league tables in first year of operations
Premier M&A
Franchise Demonstrated track record of creating value through process and
negotiation techniques
Industry-specific execution expertise
Direct Relevant Leading Special Committee Advisory franchise
Special Committee Recently completed multiple high profile Fairness Opinion & Special
Experience Committee assignments
Unbiased, Focused on providing high-quality, unbiased advice that we believe
Unconflicted, clients are no longer receiving from larger firms
Uncompromised Moelis will work solely in the best interests of the Special Committee
Advice and the Companys public shareholders
World-class M&A and Technology franchises with substantial
Leading Technology advisory experience in the SaaS Applications and ERP sectors
Franchise
Strong relationships & dialogue with leading industry players
Bankers have extensive Special Committee experience and will be
Senior Level actively involved day-to-day on the transaction
Commitment and We have executed some of the largest and most complex Special
Attention Committee advisory assignments in the past five years
Experienced bulge bracket M&A professionals with boutique focus
Global Offices
Employees
Investment
Bankers
Managing
Directors
Average Years of
Experience Per
MD
Former Sector & Product Heads
[ 13 ]
|
Recent Moelis & Company Technology Team Transactions
Ongoing Pending PendingPendingMarch 2016March 2016December 2015December 2015October 2015August 2015
Project A2 $551mm
Sale to Rizvi TraverseŁ159mmSale toStrategic Investment
€155mm Sale to$67.0bn$400mm$220mmSale of Sophos Group
Merger with leading Acquisition of Management, LLCAcquisition ofSale of Caller ID Assetsplc in acceleratedfrom
global hardware and Acquisition of
software company EMC Corporationtobookbuild offering
Exclusive Financial Exclusive FinancialExclusiveExclusiveExclusive Financial
Advisor Financial Advisor AdvisorFinancial AdvisorFinancial AdvisorFinancial AdvisorFinancial AdvisorFinancial AdvisorAdvisorFinancial Advisor
June 2015 June 2015 June 2015April 2015March 2015December 2014December 2014December 2014December 2014December 2014
$76mm
Strategic & IPO Sale to$3.6bn$233mmStrategic investment
$600mm Acquisition of Advisor Recapitalization bySale toSale of PaymentSale tofrom SantanderSale to$430mm
to the Board of Francisco PartnersGateway ServicesGroup, TelefónicaAcquisition of
Directors business toGroup and
$500mm IPO MasterCard
Exclusive Lead Financial ExclusiveExclusive FinancialFinancial Advisor toExclusiveExclusiveSale of CAP to
Financial Advisor Advisor Financial AdvisorAdvisorElliott ManagementFinancial AdvisorFinancial AdvisorFinancial AdvisorFinancial AdvisorFinancial Advisor
October 2014 October 2014 May 2014May 2014March 2014March 2014February 2014December 2013December 2013November 2013
$2.5bn Sale toSale to$586mm$381mmSale of Voice Peering$180mm
Sale of cars.com to Sale of 50% stake to Sale toSale toSale toAcquisition ofbusiness toSale of Enterasys
Networks to
ExclusiveExclusiveExclusiveExclusiveExclusive
M&A Advisor Financial Advisor Financial AdvisorFinancial AdvisorFinancial AdvisorFinancial AdvisorFinancial AdvisorFinancial AdvisorM&A AdvisorM&A Advisor
November 2013 August 2013 January 2013January 2013December 2012October 2012October 2012September 2012June 2012June 2012
$2bn
Equity capital raise for$74mmInvestment by$718mm
Sale toSale to
Spin-off of Acquisition of Daisy LLC, an affiliatedSale toSale toAcquisition ofSale to
digital music service
provider of
Beats ElectronicsPrivate Placement
ExclusiveAgent & M&A
Strategic Advisor M&A Advisor Financial AdvisorM&A AdvisorM&A AdvisorM&A AdvisorM&A AdvisorM&A AdvisorAdvisorM&A Advisor
April 2012 March 2012 March 2012September 2011June 2011May 2011March 2011October 2010November 20092008
$300mm $600mm $391mm$120mm$976mm$163mm$173mm$127mm
Sale of equity interest
Sale to Acquisition of Majority SaleAcquisition ofSale toSale toAcquisition ofin Packet VideoSale toUnsolicited
toCorporation toChurchill Downsproposal from
Incorporated
Restructuring & Exclusive FinancialExclusive Financial
M&A Advisor M&A Advisor M&A AdvisorM&A AdvisorM&A AdvisorM&A AdvisorM&A AdvisorAdvisorAdvisor
[ 14 ]
|
B. Moelis & Company Detailed Biographies
|
Moelis & Companys Fully Committed Orlando Team
Moelis & Companys seasoned and dedicated team is committed to providing unique insight and relevant sector expertise to the Special Committee of the Board of Directors of Orlando
Ken Moelis
Founder, Chairman, CEO Over 30 years of investment banking experience.
E: ken.moelis@moelis.com Prior to founding Moelis & Company, he worked at UBS from 2001 to 2007, where he was most recently President of UBS Investment
T: +1 (310) 443-2333 / Bank and previously Joint Global Head of Investment Banking
Before joining UBS, Mr. Moelis was Head of Corporate Finance at Donaldson, Lufkin & Jenrette, where he worked from 1990 through
T: +1 (212) 883-3888 2000
M: +1 (310) 991-1191
Jeff Raich 27 years of investment banking experience during which he established and led leading sell-side M&A practices at UBS Investment Bank
and Donaldson, Lufkin & Jenrette
Founder, Co-President, Former Joint Global Head of M&A at UBS Investment Bank
Head of M&A Selected transactions include Anheuser Buschs sale to InBev; Harrahs sale to Apollo and TPG; Invitrogens acquisition of Applied
E: jeff.raich@moelis.com Biosystems; Nalcos sale to Blackstone and Apollo; Petcos sale to Leonard Green & Partners; Univars sale to Clayton, Dublier & Rice;
T: +1 (310) 443-2345 Univision Communications sale to a private equity consortium; Dermalogicas sale to Unilever; California Pizza Kitchens sale to
Golden Gate Capital; Air Medical Groups sale to Bain; Aspen Dentals sale to Leonard Green & Partners; GenTeks sale to American
M: +1 (310) 780-2855 Securities; Primedias sale to TPG; Smile Brands sale to Welsh, Carson, Anderson & Stowe; Van Houttes sale to Green Mountain Coffee
Roasters; and Waggin Trains sale to Nestlé
Dan Lee 17 years of investment banking experience
Managing Director Previously a Managing Director in the M&A Group at Macquarie Capital and Co-Head of the Fairness Opinion Committee
E: dan.lee@moelis.com Former Head of UBS Investment Banks West Coast M&A Group
T: +1 (310) 443-2375 Selected transactions include Bally Technologies sale to Scientific Games; MModals take-private by One Equity Partners; merger of
Lakes Entertainment with Golden Gaming; MIF take-private of WCA Waste; MTR Gaming merger with Eldorado Resorts; sale of WMS
M: +1 (310) 443-2334 Industries to Scientific Games; Napsters sale to Best Buy; Rent.coms sale to eBay; SHFL Entertainments sale to Bally Technologies;
acquisition of Citadel Broadcasting by Cumulus Media; Southwires take-private of Coleman Cable; and Restoration Hardwares sale to
Catterton Partners
Osamu Watanabe
General Counsel Over 28 years of industry experience
Provides legal advice on transactions requiring fairness opinions in his current role
E: osamu.watanabe@moelis.com Previously held senior positions at Sagent Advisors, UBS, Credit Suisse and Donaldson, Lufkin & Jenrette, including General Counsel to
T: +1 (212) 883-3835 GRP Partners, a venture capital fund affiliated with Donaldson, Lufkin & Jenrette
M: +1 (310) 892-7454 Previously Special Counsel at Sullivan & Cromwell 1986-1996
Judicial ClerkshipHonorable Morey L. Sear, Federal District Court
SENIOR SPONSORSHIP TECHNOLOGY / TECHNOLOGY M&A TEAM M&A / SPECIAL COMMITTEE ADVISORYLEGAL / FAIRNESS OPINION
[ 16 ]
|
Moelis & Companys Fully Committed Orlando Team (Contd)
Moelis & Companys seasoned and dedicated team is committed to providing unique insight and relevant sector expertise to the Special Committee of the Board of Directors of Orlando
Stu Goldstein
Managing Director
stu.goldstein@moelis.com
+1 (310) 443-2380
+1 (650) 793-1229
Christopher Foss
Senior Vice President
christopher.foss@moelis.com
+1 (310) 443-2321
+1 (818) 653-3677
Abhinav Gattani
Senior Vice President
abhinav.gattani@moelis.com
+44 (0) 207 634 3560
+44 (0) 7587 181 921
Jamie Howard
Associate
jamie.howard@moelis.com
+1 (310) 443-2372
+1 (310) 251-0692
20 years of investment banking experience
Previously Head of West Coast Tech Investment Banking Group at Citigroup
Selected transactions include PeopleSofts sale to Orlando; CDC Corporations carve out of CDC Software; Epicor Softwares sale to Apax Partners; SilverSkys sale to BAE Systems; Compaqs sale to HP; Enterasys Networks carve out sale to Extreme Networks; Nokias joint venture with Siemens; Motorolas sale of wireless broadband businesses to Vector Capital Corporation; Flextronics acquisition of Solectron; JDA Softwares acquisition of Manugistics; MessageLabs sale to Symantec; M-Systems sale to SanDisk; PlaceWares sale to Microsoft; and the sale of Brio Software to Hyperion
10 years of investment banking experience
Focus areas include Technology M&A and Software
Former Associate, Distressed and Corporate Investing at The Carlyle Group; former Analyst in Technology and Services Investment Banking at UBS Investment Bank
Selected transactions include Dells pending acquisition of EMC; Life Technologies sale to Thermo Fisher Scientific; AECOMs acquisition of URS Corporation; Imperials sale of its structured settlements business to Blackstone; and F+W Medias acquisition of New Track Media and its carve out of World Tea
10 years of investment banking experience
Former Associate in Global Technology Investment Banking at Citigroup and TMT Goldman Sachs
Selected transactions include BMC Softwares sale to an investment consortium; SilverSkys sale to BAE Systems; AppSense Holdings sale to LANDESK; Dells pending acquisition of EMC; MessageLabs sale to Symantec; Catalysts sale of majority interest to FTV Capital; Enterasys Networks carve out sale to Extreme Networks; Thales SAs acquisition of Vormetric, Inc.; NTTs acquisition of Solutionary; Secure Computings sale to McAfee; Riverbeds sale to a PE consortium; EMCs acquisition of VMW; and The Abraaj Groups sale of a 49% stake in Network International
2 years of investment banking experience
Specializes in M&A advisory across a broad range of industries, including Technology
Senior Consultant at Deloitte in its Financial Advisory Services practice prior to joining Moelis & Company
Selected transactions include Dells pending acquisition of EMC; Dermalogicas Sale to Unilever; and Great Western Building Materials
Sale to Foundation Building Materials
SENIOR SPONSORSHIP TECHNOLOGY / TECHNOLOGY M&A TEAM M&A / SPECIAL COMMITTEE ADVISORY LEGAL / FAIRNESS OPINION
[ 17 ]
|
C. Napa Situation Overview
|
Napa Observations
Napas attractive offering and growth profile is well positioned to benefit from Orlandos global infrastructure, business scale, deep verticalized domain expertise and partner ecosystem
Napa is the worlds leading pure-play SaaS provider of cloud-based ERP software tools
Positioned to benefit from highly attractive market dynamics
Cloud ERP system provides SMBs a compelling value proposition vs. traditional delivery methods
Successful track record of integrating tuck-in acquisitions
Demonstrated decade of sustained revenue growth
A transaction between Orlando and Napa could bring several attractive elements together
[ 19 ]
|
Preliminary Observations Regarding a Potential Transaction
A transaction between Orlando and Napa could bring several attractive elements together
Offers the ability for the combined business to be a strong participant in both on-premise and SaaS applications
Potential to Expand
Leadership Position Orlando maintains a strong position within on-premise IT environments
in On-Premise to Orlando Fusion ERP Cloud has nearly 2,000 customers worldwide
Cloud Applications
Napa has over 10,000 customers running more than 30,000 subsidiaries on its Cloud ERP platform
Napa Brings Napa was born-in-the-cloud and has a 10 year head start over new competition with trust from leading brands across a variety of
Complementary industries globally
Business ERP Brings comprehensive and integrated system for running business in the cloud: ERP, SRP, financial management, and eCommerce
Capabilities to among other areas
Orlandos Public
Cloud Offerings Orlandos business intelligence, middleware and database offerings can bring additional value to Napa customers
A business combination would comprehensively address the needs of both large and mid-sized businesses and expand Orlandos
Offers Orlando the TAM into the SME
Ability to Provide a
Two-tier ERP Target Orlando Fusion on-premise and Cloud ERP for large enterprises and HQ operations
Solution Leverage Napa Cloud ERP suite for midsized businesses and divisions or subsidiary operations
Orlando can drive accelerated penetration of Napa One World into its large base using this two-tier structure
Significant greenfield opportunity in SMB market for ERP systems, with an estimated 50% untapped market opportunity
Well-positioned to take advantage of a broad target market spanning U.S. Enterprise & Mid-Market SMBs, as well as the shift
Unites Dynamic towards the cloud (growing multiples faster than the worldwide IT market)
Industry and
Financial Profiles Each standalone platform possesses attractive financial attributes
Napas recurring revenue grew 33% YoY in 2015, with the gross margin on that revenue exceeding 85%
Orlandos cloud and on-premise software revenues are ~$29bn over the last twelve months
Napa would benefit from Orlandos global infrastructure, business scale, deep verticalized domain expertise and partner ecosystem
[ 20 ]
Sources: Gartner, IDC, Wall Street Research, company press releases
|
Napa At A Glance
BUSINESS OVERVIEW
Worlds leading pure-play Software-as-a-Service (SaaS) provider of cloud- based financials / enterprise resource planning (ERP) software suites
Used by 10,000+ companies across 100+ countries
Suite of applications meets financial management, CRM, eCommerce and retail management, commerce marketing automation, Professional Services Automation (PSA), and Human Capital Management needs
Offerings cover a broad group of industries including wholesale / distribution, consulting, computer and IT services, e-commerce and retail, financial services, healthcare services, and education
Became publicly listed in 2007
Founded in 1998 and headquartered in San Mateo, CA, Napa employs 4,600+ people and has offices in 12 countries
NAPA OFFERING ONE SYSTEM FOR THE ENTERPRISE
ERP SRP
Warehouse Project
Management Management
CORE BUSINESS
Customer Management
Order Management
Inventory Resource
Management Global Financial Management Management
Billing Management
Revenue Management
Manufacturing Time & Expense
Supply Chain Project
Management Accounting
Sources: Capital IQ, Company Filings, Company Website
Note: All information on Napa based solely on publicly available information; data as of 4/15/16
Non-GAAP measures
Per Wall Street Research
SUMMARY FINANCIALS
Fiscal Year Ending December 31,
($ in millions) 2013A 2014A2015A2016E ²2017E ²
Revenue $414.5 $556.3$741.1$966.6$1,216.9
% Growth 34.2% 34.2%33.2%30.4%25.9%
Gross Profit ¹ $294.3 $398.1$520.6$681.7$871.0
% Gross Margin 71.0% 71.6%70.2%70.5%71.6%
EBITDA ¹ $39.3 $48.9$52.1$70.3$88.5
% EBITDA Margin 9.5% 8.8%7.0%7.3%7.3%
Net Income ¹ $19.9 $25.0$17.7$33.8$48.0
% Margin 4.8% 4.5%2.4%3.5%3.9%
VALUATION SUMMARY
($ in millions, except per share data)
Current Share Price (04/15/16) $71.75
Discount to 52-Week High (30.0%)
Premium to 52-Week Low 38.6%
Shares Outstanding 83.239
Market Capitalization $5,972.4
Plus: Debt $283.9
Less: Cash (364.7)
Plus: Minority Interest
Enterprise Value $5,891.6
StatisticMultiple
TEV / FY2016E Revenue $966.66.1x
TEV / FY2017E Revenue $1,216.94.8x
TEV / FY2016E EBITDA $70.3N/M
TEV / FY2017E EBITDA $88.5N/M
FY2016E P/E $0.41N/M
FY2017E P/E $0.57N/M
[ 21 ]
|
Summary of Current Cloud ERP Market Dynamics
Cloud delivery of ERP systems meaningfully expands the addressable market for ERP systems historically
served by traditional, on-premise models
ESTIMATED ERP MARKET TRENDS ILLUSTRATIVE ERP TOTAL ADDRESSABLE MARKET
($ in billions)
$66.1
EnterpriseOn-Premise
$53.5 >1,000 employeesERP
2% 16E 19E On- ~9,000 firmsAddressable
Premise ERP CAGR Market
Mid-MarketCloud ERP
1001,000 employeesAddressable
~116,000 firmsMarket
16% 2016E2019E Small
Cloud ERP CAGR <100 employees
~6,00,000 firms
2016E 2019E
Cloud ERP On-Premise
Overall Cloud ERP growth is expected to be driven by:
The products ability to expand the addressable market for ERP systems (greenfield opportunities)
Displacements of historical on-premise solutions
The introduction of two-tier deployments
[ 22 ]
Sources: Company Filings, Company Website, Wall Street Research, IDC
|
Unique Customer Value Proposition
Napas products offer a number of attractive benefits to customers
NAPA SOLUTION ONE SYSTEM FOR THE ENTERPRISE PERSPECTIVES
Holistic delivery with visible billing model lowers total cost of
ownership relative to historical delivery models
CRM ERP Eliminates the upgrade cycle associated with on-premise systems
One Faster time to deployment vs. on-premise (months, not years)
Database
Consolidates what was historically served by a fragmented vendor
landscape
eCommerce
19+ Languages, 190+ Countries
Napa Customer Base (Total # of Companies, Subs and Organizations)
30,000+
24,000
20,000
16,000
10,000 12,000
2010A 2011A2012A2013A2014A2015A
The value proposition associated with the Companys offering has helped
drive rapid adoption by companies of all sizes and across a range of industries
[ 23 ]
Sources: Company Filings, Company Website
|
Acquisition History
Napa has expanded its product offering through a number of recent acquisitions
Since 2008, Napa has successfully acquired 11 businesses for aggregate consideration of over $400mm in implied enterprise value
Napas strategy has been to focus on targets that may expand its suite of offerings, geographic reach, or that can be leveraged across its customer base
A number of the Companys acquisitions were consummated with its solution providers and partners
TRANSACTION VALUE
TARGET ANNOUNCE DATEVERTICAL / SOLUTION
($MM)
March 2016ManufacturingN/A
August 2015Billing / Payment Automation$35
April 2015Commerce Marketing Automation$200
July 2014Europe$50
October 2013HCM$25
May 2013OMS$28
March 2013CMSN/A
January 2013POS / Retail$6
July 2009PSA$19
May 2008PSA$33
[ 24 ]
Sources: Capital IQ, Company filings
|
Selected Historical Financial Metrics
($ in millions)
$1,216.9
$966.6
$741.1
$556.3
$414.5
$308.8
$236.3
$166.5 $193.1
69.5% 71.9% 73.3%72.5%71.0%71.6%70.2%70.5%71.6%
5.4% 5.3%7.2%5.7%5.2%
1.9% 2.9%3.6%4.0%
2009A 2010A 2011A2012A2013A2014A2015A2016E ²2017E ²
Revenue% Gross Margin ¹% EBIT Margin ¹
Napa has demonstrated a decade of sustained revenue growth
Sources: Capital IQ, Company Filings, Company Website
1. Non-GAAP measures [ 25 ]
2. Per Wall Street Research
|
Annotated LTM Share Price Performance
LTM STOCK PRICE PERFORMANCE
$110 5.0
$100 1 3
456
$90 24.0
$80 TRADING PERFORMANCE
Napa
$70 73.0
Price Current $71.758(mm)
$60
c k 30-Day Average $68.71
Sto 90-Day Average 64.31
$50 2.0 Volume
1-Year Average 83.62
$40 52-Week High 102.46
52-Week Low 51.75
$30 1.0
$20
$10 0.0
4/17/15 5/17/15 6/17/157/17/158/17/159/17/1510/17/1511/17/1512/17/151/17/162/17/163/17/164/15/16
VolumeStock Price
April 23, 2015: Announces First Quarter 2015 Financial Results (beat analyst expectations); Signs Definitive Agreement to Acquire Bronto Software
April 30, 2015: Shares Rise as Salesforce.com Reportedly Hires Bankers to Evaluate Takeover Offers
May 6, 2015: Announces Worlds First End- to-End Cloud Business Management Mobile App for Android Smartphones
June 9, 2015: Completes Acquisition of Bronto Software
July 23, 2015: Announces Second Quarter 2015 Financial Results (missed analyst expectations); Appoints Jim McGeever as President
October 22, 2015: Announces Third Quarter 2015 Financial Results (beat analyst expectations)
January 28, 2016: Announces Fourth Quarter and Fiscal 2015 Financial Results (beat analyst expectations)
February 5, 2016: Cloud-Based Shares Drop Following Tableaus Forecasted Industry Softness
Source: Company Website, Capital IQ [ 26 ]
Note: All information on Napa based solely on publicly available information; data as of 4/15/16
|
Disclaimer
This presentation has been prepared by Moelis & Company LLC (Moelis) for exclusive use of the Special Committee of the Board of
Directors of Orlando Corporation (Orlando or the Company) in considering the transaction described herein based on publicly available information. Moelis has not assumed any responsibility for independently verifying the information herein, Moelis makes no representation or warranty as to the accuracy, completeness or reasonableness of the information herein and Moelis disclaims any liability with respect to the information herein. In this presentation, Moelis has used certain projections, forecasts or other forward-looking statements with respect to the Company and/or other parties involved in the transaction which were prepared based on publicly available information. This presentation speaks only as of its date and Moelis assumes no obligation to update it or to advise any person that its conclusions or advice has changed.
This presentation is solely for informational purposes. This presentation is not intended to provide any basis for any decision on any transaction and is not a recommendation with respect to any transaction. The recipient should make its own independent business decision based on all other information, advice and the recipients own judgment. This presentation is not an offer to sell or a solicitation of an indication of interest to purchase any security, option, commodity, future, loan or currency. It is not a commitment to underwrite any security, to loan any funds or to make any investment. Moelis does not offer tax, accounting or legal advice.
Moelis provides mergers and acquisitions, restructuring and other advisory services to clients and its affiliates manage private investment partnerships. Its personnel may make statements or provide advice that is contrary to information contained in this material. Our proprietary interests may conflict with your interests. Moelis may from time to time have positions in or effect transactions in securities described in this presentation. Moelis may have advised, may seek to advise and may in the future advise or invest in companies mentioned in this presentation.
This presentation is confidential and may not be disclosed to any other person or relied upon without the prior written consent of Moelis.
[ 27 ]
|
Contact Information
Moelis & Company LLC is a U.S.-registered broker dealer and a member of FINRA & SIPC.
Moelis & Company LLC
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Tel: (310) 443-2300
399 Park Avenue, 5th Floor
New York, NY 10022
Tel: (212) 883-3800
[ 28 ]
Exhibit (c)(9)
|
STRICTLY CONFIDENTIAL
Project Napa
Presentation to the Special Committee of the Board of Directors
Overview of Cloud ERP Opportunity Strategic Rationale for Napa Transaction
May 20, 2016
|
Disclaimer
This presentation has been prepared by Moelis & Company LLC (Moelis) for exclusive use of the Special Committee of the Board of
Directors of Orlando Corporation (Orlando or the Company) in considering the transaction described herein based on publicly available information. Moelis has not assumed any responsibility for independently verifying the information herein, Moelis makes no representation or warranty as to the accuracy, completeness or reasonableness of the information herein and Moelis disclaims any liability with respect to the information herein. In this presentation, Moelis has used certain projections, forecasts or other forward-looking statements with respect to the Company and/or other parties involved in the transaction which were prepared based on publicly available information. This presentation speaks only as of its date and Moelis assumes no obligation to update it or to advise any person that its conclusions or advice has changed.
This presentation is solely for informational purposes. This presentation is not intended to provide any basis for any decision on any transaction and is not a recommendation with respect to any transaction. The recipient should make its own independent business decision based on all other information, advice and the recipients own judgment. This presentation is not an offer to sell or a solicitation of an indication of interest to purchase any security, option, commodity, future, loan or currency. It is not a commitment to underwrite any security, to loan any funds or to make any investment. Moelis does not offer tax, accounting or legal advice.
Moelis provides mergers and acquisitions, restructuring and other advisory services to clients and its affiliates manage private investment partnerships. Its personnel may make statements or provide advice that is contrary to information contained in this material. Our proprietary interests may conflict with your interests. Moelis may from time to time have positions in or effect transactions in securities described in this presentation. Moelis may have advised, may seek to advise and may in the future advise or invest in companies mentioned in this presentation.
This presentation is confidential and may not be disclosed to any other person or relied upon without the prior written consent of Moelis.
[ 1 ]
|
Executive Summary
Moelis is pleased to meet with the Special Committee of the Board of Directors of Orlando to discuss Project Napa
Database, middleware and application software are key products / markets for Orlando
The market for these services is rapidly evolving, with cloud disrupting traditional on-premise delivery models
Orlando has successfully transitioned its middleware, database, and applications (CRM, HCM) capabilities, but lacks a broad Cloud ERP offering
Maintaining a leading position in ERP application software is a strategic imperative for Orlando
Napa could directly address the Orlando shortcomings in Cloud ERP
Competitors are likely to look to strengthen their Cloud ERP positions, making timing a key consideration
Addressing Orlandos shortcomings in Cloud ERP should be viewed as a strategic imperative
[ 2 ]
|
Why is Cloud ERP a Strategic Opportunity for Orlando?
Building a leading presence in Cloud ERP can help Orlando in holistically serving the broader ERP market and in further strengthening its IaaS and PaaS business capabilities
ERP is the largest and one of the stickiest application software types, with favorable secular tailwinds
Cloud ERP strength would position Orlando to more broadly serve the larger ERP market
Strong SaaS presence in ERP creates strategic cross-selling opportunities for complementary products such as PaaS and IaaS
Gives Orlando a better seat at the table as customers make decisions on long-term ERP strategy
Longer-term product pipeline dependent on penetrating broader market once meaningfully scaled
A comprehensive suite of ERP offerings both on-premise and SaaS gives Orlando the potential to become an end-to-end winner for all customer ERP needs
[ 3 ]
|
Why Now?
Corporate IT spending is rapidly moving towards the Cloud [***] [***]
Corporate IT environments continue to rapidly move towards the Cloud, across applications, infrastructure, and platform offerings
[***]
Customer decision making increasingly focused on vendor consolidation, posing a risk for Orlando
Competitors are currently building upon and are likely to aggressively pursue Cloud ERP offerings
Significant investment and time required by Orlando to further refine and develop its Cloud ERP offering may necessitate an acquisition given the importance of sector and competitive dynamics
[***] indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. This information has been filed separately with the Securities and Exchange Commission. [ 4 ]
|
Why Napa?
Napa would complement Orlandos ERP offering and provide a number of benefits
Napa is a leading pure-play SaaS provider of cloud-based ERP software applications
Significant investment to date, with an established brand and attractive presence in key verticals
Offering ideally suited to allow Orlando to provide a two-tier ERP solution
Established sales force with capabilities in serving customers with specialized requirements
Potential to attach Orlando PaaS (database and middleware) and IaaS offerings to Napa sales
Opportunity for cost savings and reduced integration costs given platform is built on Java and
Orlando database technology
[ 5 ]
|
Select Potential Napa / Transaction Risks
Moelis believes the following considerations should be evaluated in the context of a potential Napa transaction
Napa has historically not been profitable on a GAAP basis
New account growth is expected to be heavily dependent on the ability to scale the Companys sales force and channel partners
Potential competitive pressures, from other SaaS providers and other on-premise providers, may impact the ability to win new accounts and pricing
While analysts project that the market for Cloud ERP will grow meaningfully, a potential for slower adoption levels exists
Napa is believed to be pursuing a number of new offerings, which may require significant investment
A transaction may expose the Company to potential integration risks, including brand confusion, employee turnover, and customer account turnover
[ 6 ]
|
I. Why Now?
|
Orlando Overview
Orlandos products and services address all aspects of the corporate IT environment with a heavy emphasis on on-premise database and applications software
BUSINESS OVERVIEW
Leading provider of database, middleware and application software
Offerings also include cloud infrastructure software and hardware systems
Recognized as an innovator in on-premise software 1
Building business beyond on-premise software
400,000 customers in 145 countries
Includes all Fortune 100 companies
Sources: Orlando Filings, Wall Street Research
Per Wall Street Research
Orlando November 2015 Annual Stockholders Meeting Presentation
Macquarie Research as of 3/3/16
FY 2015 REVENUE BY BUSINESS DISTRIBUTION 2
9% On-Premise Software
14%
Cloud
5% Hardware Systems
(Products & Support)
72% Services
Cloud represents ~5% of Orlandos current business
FY 2015 ESTIMATED SOFTWARE REVENUE BREAKDOWN 3
Estimated On-Premise Database
Revenues
7%
12% Estimated On-Premise Application
Software Revenues
46%Estimated On-Premise Middleware
Revenues
34% Reported Cloud Revenues (SaaS,
PaaS & IaaS)
Software business is heavily focused on on-premise database and application software (~80% in FY 2015)
[ 8 ]
|
[***] indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. This information has been filed separately with the Securities and Exchange Commission. Orlandos ERP Profile [***] ORLANDO ERP OVERVIEW 3-YEAR ON-PREMISE ERP LICENSE SOFTWARE PERFORMANCE ($ in millions) ERP heavily focused around on-premise offerings FY 2013: [***] of ERP revenue FY 2014: [***] of ERP revenue [***] FY 2015: [***] of ERP revenue [***] ¹ Maintenance continues to be an attractive business FY2013A FY2014A FY2015A Cloud-based ERP accounted for [***] on 3-YEAR CLOUD ERP ARR ² an annualized revenue basis as of FY 2015 ($ in millions) Offering viewed as well-suited for complex environments [***] FY2013A FY2014A FY2015A Source: Orlando Management [ 9 ] 1. [***] based on FY 2013 FY 2015 data 2. ARR is Annual Renewable Revenue, which is the booking value of the first year of a subscription contract
|
Orlando Market Share (On-Premise vs. Cloud)
While Orlando has earned and maintained its #1 or #2 market position in on-premise applications and middleware / databases, it maintains a much smaller presence in the new cloud ecosystem
On-Premise
ON-PREMISE ENTERPRISE APPLICATION RELATIONAL DATABASE MGMT. SYSTEM
MARKET SHARE (CY H1 2015) ¹ MARKET SHARE (CY 2014) ²
SAP, 10% Teradata,All Other,
4%8%
Orlando,
8% SAP, 6%
Orlando,
Microsoft, 46%
IBM, 16%
3%
All Other, Intuit, 3%
76% Microsoft,
20%
Cloud
SAAS-BASED ENTERPRISE APPLICATION STRUCTURED DATA MGMT.
MARKET SHARE (CY H1 2015) ¹ PAAS MARKET SHARE (CY H1 2015) ¹
Salesforce, Microsoft,
14% 28%
Intuit, 10% All Other,
41%
SAP, 7%
All Other, Orlando, Orlando,
65% 5% 1%Amazon,
23%
Informatica,
3%Google, 4%
Sources: Orlando Filings, Gartner, IDC, Wall Street Research
Credit Suisse Research as of 4/14/16, via IDC and Credit Suisse
Macquarie Research as of 3/3/16, via IDC
BMO Research as of 1/7/16, via IDC
MIDDLEWARE MARKET SHARE (CY 2014) ³
IBM, 29%
All Other,
43%
SAP, 2% Orlando,
TIBCO, 2% 14%
Software Salesforce, Microsoft,
AG, 2% 3%5%
IAAS MARKET SHARE (CY H1 2015) ¹
All Other,
37%
Amazon,
42%
Orlando,
<2%
Google, 2% Microsoft,
5%
Aliyun, 2% Rackspace, IBM, 5%
5%
[ 10 ]
|
Illustrative Customer Approaches to Software and Infrastructure
Elements of the cloud are playing a greater role in IT environments
Shifting Dynamics in Customer IT Environments
TRADITIONAL
(Servers)(Systems) (Databases)
Customer acquires and provisions hardware and software which is maintained in-house
IaaS
(Servers)
Customer acquires applications, middleware and databases, however outsources infrastructure
IaaS + PaaS
(Servers) (Databases)
Customer supports applications, but outsources databases and middleware
IaaS + PaaS + SaaS
No in-house development or management
Early adopters have often had streamlined needs
ApplicationsApplicationsApplicationsApplications
MiddlewareMiddlewareMiddlewareMiddleware
Offering DatabaseDatabaseDatabaseDatabase
Operating SystemOperating SystemOperating SystemOperating System
Applicable Virtual MachinesVirtual MachinesVirtual MachinesVirtual Machines
ServersServersServersServers
StorageStorageStorageStorage
In-House Third Party
[ 11 ]
Sources: Orlando Filings, Wall Street Research
|
Spending is Projected to Grow Across the Cloud Landscape
SaaS, PaaS, and IaaS are all expected to grow rapidly
Companies are moving towards cloud-based solutions for a number of reasons:
Greater flexibility from reduced up-front infrastructure One-stop IT offerings that provide backup / storage,
costs (OpEx preferred to CapEx) security, IT infrastructure, in customizable formats
Faster go-to-market and seamless update capabilities Greater coverage of off-premise connected devices like
mobile and tablet
PROJECTED GLOBAL PUBLIC CLOUD MARKET SIZE 1 CLOUD ADOPTION TRENDS 2
($ in billions)
$121.1
88% 89%93% 95%
77%
$78.671%
63%
58%
$57.5
$42.9 $17.9
$5.9 $24.6
$8.7
2014 2018Public Cloud ³Private CloudHybrid CloudAny Cloud
IaaS PaaS SaaS20152016
As in the on-premise world, SaaS is the biggest portion
(apps) of spend
Sources: The 451 Group, Gartner, IDC, RightScale, Wall Street Research
1. BMO Research as of 1/7/16, via IDC
2. RightScale 2016 State of the Cloud Report
3. Defined by RightScale as a similar set of resources that can be shared by multiple companies, is multi-tenant, and is provided by a cloud vendor with access via an Application Programming Interface
(API) endpoin
4. Defined by RightScale as A collection of compute, storage, and network resources for a single tenant that are accessed programmatically via an API endpoint [ 12 ]
5. Defined by RightScale as An environment that spans one or more public clouds as well as one or more private clouds
|
Cloud IT Spending is Expected to Continue Increasing Across All Major Applications
The market is expected to continue shifting towards cloud offerings during the next several years
15% CAGR for public cloud offerings that span ERP, CRM, and HCM 1
2% CAGR for the same on-premise offerings 1
Public Cloud Penetration Over Time 2
2014 3 2016 3 2018 3
35%
41%
46%
54%
59%
65%
Cloud Cloud Cloud
Total On-Premise / Other Total On-Premise / Other Total On-Premise / Other
Existing on-premise leaders risk losing market share if they do not adapt to the shift in IT preferences
Sources: IDC, Wall Street Research
1. CAGRs represent growth rates from 2014 to 2018
2. Represents on-premise vs. public cloud total spend across ERP, CRM and HCM [ 13 ]
3. Macquarie Research as of 3/2/16, via IDC market estimates
|
Cloud Landscape Overview
SaaS CLOUD COMPETITIVE LANDSCAPE AND OBSERVATIONS
No one party has a dominant stack offering in the cloud
Cloud providers may look to expand into adjacent offerings
SaaS is projected to be the largest slice of the cloud market
PaaS
Vertical and functional expertise will likely drive adoption
Includes on-premise providers rewriting their code, or entrants such as
Salesforce, Workday, Napa, etc.
PaaS leaders are well-capitalized and could enter adjacencies
IaaS Includes: IBM, Orlando, SAP, Microsoft, and Salesforce
IaaS leaders are expected to put pressure on pricing
Includes: Amazon, Google and Microsoft Azure
A market-leading position in SaaS is expected to be necessary in order to drive cloud leadership
[ 14 ]
|
Sources: Orlando and Napa Filings, Wall Street Research
ERP Market Observations
Cloud delivery expands the addressable market for ERP systems historically served by on-premise models
March 3, 2016
[ERP] is probably the stickiest application category this matters because customer lifetimes are long and the value that can be extracted is high
It seems likely that as the cloud trend accelerates a more competitive [ERP] response will be necessary as rapidly growing alternatives emerge
ESTIMATED ERP MARKET SIZE & GROWTH ¹
NAPAS VIEW OF ITS ADDRESSABLE MARKET ²
($ in billions)
$66.1
Enterprise
$53.5 >1,000 employees
~9,000 firms
56.7% 2%
On-Premise ERP CAGR
Napas proclaimed
65.8% Mid-Markettarget market
1001,000 employees Microsoft possesses a
~116,000 firmsstrong presence here
(15%) within a highly
16%fragmented market
43.3% Cloud ERP CAGR
34.2% Small
<100 employees
~6,000,000 firms
2016E 2019E
Public Cloud ERP On-Premise
ERP application is a critical product category for Orlando, necessitating a strong offering in both on-premise and cloud delivery opportunities
Sources: Napa and Orlando Filings, Napa Website, Wall Street Research, IDC
1. Macquarie Research as of 3/2/16, via IDC [ 15 ]
2. Napa Q1 2016 Investor Presentation
|
Cloud ERP Competitive Perspectives
[Graphic Appears Here]
Industry participants continue to increasingly focus on Cloud ERP, given the attractive market trends and the ability to deliver additional solutions into the customer base
Leading companies with strong financial positions are actively pursuing Cloud ERP strategies
Early Cloud ERP Leaders
Other Cloud Application Leaders
Cloud False Starts
The Cloud ERP market is currently a clear strategic focus for many well-capitalized competitors, making timing a real consideration
[ 16 ]
Sources: Napa Filings, Napa Website, Wall Street Research, IDC
Orlandos Current Cloud ERP Capabilities
|
Orlandos Current Cloud ERP Capabilities
[***]
Broad Cloud ERP suite Offering built out of JDE acquisition that occurred over 10 years ago and has been continuously refined since
Built on Java framework
Viewed in the market as best suited for customers that require diverse functionality
Vertical presence in healthcare, education, and food & beverage, among other areas
Deep range of application and product complements to cross-sell to its expanding customer base
ORLANDO FUSION APPLICATIONS PRODUCT FAMILIES
[***]
Sources: Orlando Management
[***] indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. This information has been filed separately with the Securities and Exchange Commission. [ 17 ]
|
Selected Wall Street Commentary on Orlandos Cloud / SaaS Offerings
Research analysts have highlighted the shift in IT preferences, as well as Orlandos current cloud capabilities
Broker Select Commentary
Decelerating SaaS/PaaS billings and lower cloud-related capex suggests Orlandos Cloud transition is slowing a
shallower Cloud transition may leave Orlando as a mainly legacy IT vendor in the new Cloud world
While a slower Cloud transition should ease pressure on near-term margins, we believe this could raise ongoing
Keith Weiss et al. investor concerns on the companys secular positioning
March 24, 2016
Orlandos strength in database and middleware is countered by long-term uncertainty in applications and hardware
as IT consumption preference shifts from traditional, on-premise solutions to public cloud models. This transition is
still in its early stages but has already proven disruptive to certain legacy IT providers
Orlando has attempted to navigate this changing landscape via acquisitions and other architectural enhancements to
Mark R Murphy et al. its offerings, but competitors such as salesforce.com and Workday have taken mindshare and market share
March 16, 2016
Orlandos three main businesses (database, apps and middleware) have been pressured by agile competitors and
Brent Thill et al. Orlandos late transition to the cloud
March 15, 2016
Weakness has been tied to concerns around rising competition in the core database business, as well as Orlandos
overall dependency on legacy software (applications, database and middleware) in a world where cloud computing
Sarah Hindlian et al. has disrupted the traditional computing paradigm
March 3, 2016
Orlandos weaker showing among the top 4 [enterprise software] vendors this year is not surprising, given the
companys tardiness to the cloud and the significant number of large and small competitors targeting its large, on-
premise installed base
Troy Jensen Orlando has an uphill battle in 2016 to maintain its leading [enterprise software] role
January 11, 2016
[ 18 ]
Source: Wall Street Research
|
Merits of Pursuing Cloud ERP
Building a leading presence in Cloud ERP can help Orlando in holistically serving the broader ERP market and in further leveraging its IaaS and PaaS business capabilities
ERP is the largest and one of the stickiest application software types, with favorable secular tailwinds
Cloud ERP strength would position Orlando to more broadly serve the larger ERP market
Strong SaaS presence in ERP creates strategic cross-selling opportunities for complementary products such as PaaS and IaaS
Gives Orlando a better seat at the table as customers make decisions on long-term ERP strategy
Longer-term product pipeline dependent on penetrating broader market once meaningfully scaled
A comprehensive suite of ERP offerings both on-premise and SaaS gives Orlando the potential to become an end-to-end winner for all customer ERP needs
[ 19 ]
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II. Why Napa?
|
Napa at a Glance
Napa is a leading pure-play SaaS provider of cloud-based financials / ERP software suites
BUSINESS OVERVIEW
Applications aim to address a defined set of customer requirements
Offerings cover a broad group of industries, with attractive positions in:
Software E-commerce and retail
Wholesale / distribution Financial services
Consulting Healthcare services
Computer and IT services Education
Founded in 1998, Napa employs over 4,600 people in 12 countries
NAPA OFFERS A CENTRALIZED BUSINESS SOLUTION
ERP SRP
Napa Helps Warehouse Project
Businesses Mgmt. Mgmt.
CORE BUSINESS
Customer Management
Order Management
Inventory Resource
Mgmt. Global Financial Management Mgmt.
Billing Management
Address their Revenue Management
Applications Manufacturing Time & Expense
Issues via a
Singular Supply Chain Project
Suite Mgmt. Accounting
Offering
[ 21 ]
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Sources: Napa Filings, Wall Street Research
Napa Historical Build
Napas strong cloud market position is evidenced by its steady revenue growth and increasing customer base
NAPA FISCAL YEAR ANNUAL REVENUE 1
($ in millions)
$965
$741
Napa IPO
$556
$415
$309
$152$167$193$236
$67 $109
2006A 2007A 2008A2009A2010A2011A2012A2013A2014A2015A2016E
CUSTOMERS TOTAL # OF COMPANIES, SUBS AND ORGANIZATIONS 2
30,000+
24,000
20,000
16,000
12,000
10,000
~7,700
<5,300 ³ 5,600 6,600
2006 2007 20082009201020112012201320142015
Sources: Napa Filings, Wall Street Research
1. Napa Q1 2016 Investor Presentation
2. Based on Napa Q1 2016 Investor Presentation for 2010 2015 totals and Napa filings and earnings calls prior to that
3. Approximately 5,300 active Napa customers as of 3/31/07 per S1 filed 7/2/07, therefore assumed that Napa had less customers in 2006 [ 22 ]
4. Total based on Napas stated new customers added per quarter in 2009 (per Napa earnings calls) and its year-end 2008 active customers (per Napas 12/31/2008 10-K)
|
Napas Investment in the Cloud
[Graphic Appears Here]
Over the past 18 years Napa has spent over $2.1bn to develop its product, establish its brand, and build its current customer base of over 30,000 companies / subsidiaries in over 160 countries
NAPA PRODUCT DEVELOPMENT AND SALES & MARKETING SPEND SINCE 2004 1
($ in millions)
$2,157
Note that Napas publicly available information $1,633
dates back to 2004 (as it IPOd in 2007), therefore
these figures do not encompass the first six years
of operations $1,235
$947
$740
$576
$448
$344
$245
$164
$99$524
$35 $288$398
$35 $64$65$82$98$105$128$164$207
2004 20052006200720082009201020112012201320142015
Annual Product Development + Sales & Marketing SpendCumulative Product Development + Sales & Marketing Spend
Annual Spend (mm):
Product Development $8 $25$21$24$22$29$35$44$53$78$107$136
Sales and Marketing 27 394458777693120154210291389
Total $35 $64$65$82$98$105$128$164$207$288$398$524
Employees:
Product Development NA NANA76 ²1181351652393935928351,058
Sales and Marketing NA NANA226 ²3142743473845187169851,394
Total NA NANA302 ²4324095126239111,3081,8202,452
Source: Napa Filings
1. Includes stock-based compensation, amortization of acquisition-related intangibles, transaction costs for business combinations, costs associated with a patent dispute settlement, non-cash
interest expense on convertible debt and income tax benefits as allocated to the Product Development and Sales & Marketing expense categories over time [ 23 ]
2. As of 9/30/07 per 424B4 filed 12/20/07
|
Selected Wall Street Commentary on Napas Cloud / SaaS Offerings
Analysts have highlighted Napas competitive advantage in its cloud-based ERP solution
Broker Select Commentary
We believe fundamentals remain positive, and that Napas core ERP has carved out a competitively differentiated,
sustainably growing segment of the market
Ross MacMillan et al.
May 17, 2016
We continue to view Napa as a unique asset that holds significant competitive advantages and believe two-tier ERP
systems and modern Commerce-as-a-Service platforms will increasingly gain popularity among businesses worldwide,
Philip Winslow et al. which should benefit OneWorld and SuiteCommerce, respectively
April 29, 2016
We believe Napa is facing increased pressure at both the upper and lower ends of the market [via increased
competition with Orlando] we clearly view Napa as having a superior product and value proposition
Alex Zukin et al.
April 1, 2016
Because Napa provides a very complex product the core central system for running a business and has fortified
the product with a robust ecosystem, we believe it is advantaged by a significant competitive moat that will drive
Mark Murphy et al. sustainable multi-year growth
January 29, 2016
Organizations are looking to adopt a two-tier ERP strategy by using a SaaS solution to complement a core ERP
installation. We believe this has been a sweet spot for Napa and a major area of the companys growth. We think this
Joel Fishbein et al. can continue based on Napas early mover advantage and differentiated product offering
September 10, 2015
[ 24 ]
Source: Wall Street Research
|
Select SaaS Landscape
Napa maintains an attractive market position in Cloud ERP, possesses meaningful scale and is a potentially actionable opportunity for Orlando
Orlando Napa
Attractive Broader Attractive Attractive Attractive Legacy on- Legacy on- Cloud ERP
position in Cloud ERPposition inposition inposition inpremise ERPpremise ERPcapabilities
legacy on- capabilitiesCloud CRMCloud HRMlower-endcapabilitiescapabilitiesfocused on
premise financialmfg.
delivery Viewed as Participates in Viewed asapplications Broadly Broadly
Description innovatorCloud ERP viadevelopingexpandingexpanding Lacks scale
Building with strongFinancialCloud ERP Lacks broadercloudcloud
cloud brandForcecapabilitiescapabilitiesapplicationapplication
capabilities partnershipcapabilitiescapabilities
Key Market Cap: Market Cap:Market Cap:Market Cap:Market Cap:Market Cap:Market Cap:Market Cap:
Financial ~$168.4bn ~$6.5bn~$54.5bn~$15.7bn~$9.3bnPrivatePrivatePrivate
Statistics TEV / CY16E Rev: TEV / CY16E Rev:TEV / CY16E Rev:TEV / CY16E Rev:TEV / CY16E Rev:TEV / CY16E Rev:TEV / CY16E Rev:TEV / CY16E Rev:
4.2x 6.7x6.8x9.2x4.3xn/an/an/a
Software,Non-profit,
Healthcare, Consumer,education, govt.,Food & beverage,Distribution,
wholesale/
Priority education, food healthcare,services,Manufacturing,healthcare,retail,
distribution,
Vertical & beverage, financial,financial,distribution, andhospitality,manufacturing,Manufacturing
manufacturing,
Presence communication, manufacturing,hospitality,servicesmanufacturing,and lumber /
services, retail,
etc. media, retail, etc.healthcare,etc.building
non-profittechnology
Sources: Wall Street Research, Company Websites, Gartner [ 25 ]
Note: Market data as of 5/18/16
|
Select SaaS Landscape (Contd)
Napa maintains an attractive market position in Cloud ERP, possesses meaningful scale and is a potentially actionable opportunity for Orlando
Orlando Napa
Fusion ERP is 14+ year CRM SaaS HCM SaaS Strategically Rewrote Offerings SaaS platform
viewed as head-startleaderleaderfocused on aapplicationsfocused onis composed
developing / gives it a Developed a HCMsales andto better serveentities withentirely of
working to strong Cloudproductmidsize ERPnarrow focusmfg. offerings
number ofdeployed
enhance its ERP positionapplicationsacross a rangestrategy thatmarket Actively
offerings to expandof industries,caters to Recent HCMpromoting
parties with
Observations Viewed as a beyond legacyfinancialsnarrow focusdeals, drivenmigration
solution for CRM within HCM viewedby integrationfrom on-
companies customer base Informallyof acquisitionspremise to
as a second-
with complex Financialtier solution toreleased(e.g., GTCloud ERP
needs cloud-basedNexus) and
Force viewedlegacy ERPERP optionsselling into its
as competitive(e.g., Sage X3,ERP base
to ERPSage One, etc.)
Cloud ERP Pure-play Size / Actionability Legacy Primarily an Primarily an Vertical focus
market SaaS ERPactionability Significantsellingon-premiseon-premisemay limit
growth and provider with Orlandogrowth withinapplicationsERP vendorERP vendorability to
competitive scalewith limitedbuilding outbuilding outleverage
competitor inERP would
dynamics Attractivesales, service,likely requirecomplexity /its cloudits cloudplatform
make timing a offering& marketingan acquisition,broad ERPofferingoffering Limited size
factor in how across abut not ERP,given HCMfunctionality Broad suite of Limited sizeand scale
to build / number ofmaking afocus Financialproducts for aand scale in
Assessment defend market verticalsCloud ERPfocus limitswide range ofCloud ERP
position entry abreadth ofindustries but
Continuing to Limited
potentialofferingslacks deep
expandindustry focus
customer basethreat Lacks scalefunctionality
& addressableacross a Seeing growth
marketnumber of keyacross cloud
verticalsapps, but not
purely in ERP
[ 26 ]
Sources: Wall Street Research, Company Websites, Gartner, Orlando Management
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Select Napa Transaction Observations
Napas attractive offering and market position is suited to further benefit from Orlandos global infrastructure, business scale, deep verticalized domain expertise and partner ecosystem
The market for business applications and related services is rapidly evolving
CONSIDERATIONS Players are quickly establishing themselves as leaders in Cloud ERP
Further establishing Cloud ERP presence could bring a number of cross-selling opportunities as well as
significant defensive benefits (e.g., prevent future disintermediation)
Would likely expand on-premise leadership position into Cloud ERP
Accelerates ability to move beyond the on-premise ERP offering and truly complement the Fusion offerings
In effect creates a two-tier ERP solution
Brings large customer install base (over 10,000 companies running more than 30,000 subsidiaries and
other entities) and recurring revenue
SELECT More than 20 of the Fortune 100 companies are Napa customers, adopting a two-tier approach, with only
TRANSACTION ~5% of revenue coming from two-tier install bases today
MERITS
Established brand with customers seeking a narrow functionality set, with expansive reseller relationships
Napa is built on Orlandos technology and is therefore complementary with Orlandos existing offerings
Allows Orlando to target Napas current customer base with an expanded suite of services (e.g., business intelligence, middleware, and database offerings) and global geographic reach (only 25% of Napas business currently resides outside the U.S.)
Potential for workflow optimization and employee consolidation across overlapping business areas
[ 27 ]
Source: Napa Filings
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Select Potential Napa / Transaction Risks
Moelis believes the following considerations should be evaluated in the context of a potential Napa transaction
Napa has historically not been profitable on a GAAP basis
New account growth is expected to be heavily dependent on the ability to scale the Companys sales force and channel partners
Potential competitive pressures, from other SaaS providers and other on-premise providers, may impact the ability to win new accounts and pricing
While analysts project that the market for Cloud ERP will grow meaningfully, a potential for slower adoption levels exists
Napa is believed to be pursuing a number of new offerings, which may require significant investment
A transaction may expose the Company to potential integration risks, including brand confusion, employee turnover, and customer account turnover
[ 28 ]
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Summary Conclusions
Database, middleware and application software are key products / markets for Orlando
Cloud services continue to emerge as alternatives to traditional on-premise offerings
Transitioning these services to the cloud is a critical strategic imperative for Orlando, and while it has the cloud middleware and database capabilities to do so, [***]
[***] :
Napa is a leading Cloud ERP provider [***]
Competitors are likely to look to strengthen their Cloud ERP positions, making timing a key consideration
[***]
[***]
[***]
[***]
[***]
[***]
We believe the strategic rationale for a Napa acquisition justifies further exploration of a possible transaction
[***] indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. This information has been filed separately with the Securities and Exchange Commission. [ 29 ]
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Contact Information
Moelis & Company LLC is a U.S.-registered broker dealer and a member of FINRA & SIPC.
Moelis & Company LLC
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Tel: (310) 443-2300
399 Park Avenue, 5th Floor
New York, NY 10022
Tel: (212) 883-3800
[ 30 ]
Exhibit (c)(10)
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STRICTLY CONFIDENTIAL Project Napa Presentation to the Special Committee of the Board of Directors Preliminary Financial Analysis May 27, 2016
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Disclaimer This presentation has been prepared by Moelis & Company LLC (Moelis) for exclusive use of the Special Committee of the Board of Directors of Orlando Corporation (Orlando or the Company) in considering the transaction described herein based on information provided by the Company and upon information from third party sources. Moelis has not assumed any responsibility for independently verifying the accuracy of such information, and disclaims any liability with respect to the information herein. In this presentation, Moelis, at the Companys direction, has used certain projections, forecasts or other forward-looking statements with respect to the Company and/or other parties involved in the transaction which were provided to Moelis by the Company and/or such other parties and which Moelis has assumed, at the Companys direction, were prepared based on the best available estimates and judgments of the management of the Company and/or such other parties as to the future performance of the Company and/or such other parties. This presentation is provided as of the date hereof and Moelis assumes no obligation to update it or correct any information herein. This presentation is solely for informational purposes. This presentation is not intended to provide the sole basis for any decision on any transaction and is not a recommendation with respect to any transaction. The recipient should make its own independent business decision based on all other information, advice and the recipients own judgment. This presentation is not an offer to sell or a solicitation of an offer to buy any business, security, option, commodity, future, loan or currency. It is not a commitment to underwrite any security, to loan any funds or to make any investment. Moelis does not offer tax, accounting, actuarial or legal advice. Absent Moelis prior written consent, this material, whether in whole or in part, may not be copied, photocopied, or duplicated in any form by any means, or redistributed. Moelis and its related investment banking entities provide mergers and acquisitions, recapitalization, restructuring, corporate finance and other financial advisory services to clients and affiliates of Moelis provide investment management services to clients. Personnel of Moelis or such affiliates may make statements or provide advice that is contrary to information included in this material. The proprietary interests of Moelis or its affiliates may conflict with your interests. In addition, Moelis and its affiliates and their personnel may from time to time have positions in or effect transactions in securities referred to in this material (or derivatives of such securities), or serve as a director of companies referred to in this presentation. Moelis and its affiliates may have advised, may seek to advise and may in the future advise or invest in companies referred to in this presentation. This presentation is confidential and may not be disclosed to any other person or relied upon without the prior written consent of Moelis. [ 1 ]
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Executive Summary Moelis is pleased to meet with the Special Committee (the Committee) of the Board of Directors of Orlando to discuss its preliminary financial analysis and potential next steps for Project Napa § Moelis has performed an initial review of both public and private information sources to form its preliminary perspectives § Moelis would like to discuss the following areas with the Committee: 3/4 Preliminary review of public market perspectives on Napa 3/4 Preliminary Napa financial analysis 3/4 Potential next steps and tactics around a potential transaction [ 2 ]
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Background Moelis has held preliminary discussions with Orlando, Napa and its advisors, and has also reviewed a number of public and private information sources in forming its initial perspectives § On May 5, 2016 Moelis, Orlando, Skadden and a representative from the Committee attended a management presentation with members of Napa and Qatalyst. The session covered a number of topics, including an overview of Napas business highlights, a review of Napas go-to-market approach, and a review of Napas financials § On May 11, 2016 Moelis and Orlando held a telephonic discussion with Napas CFO to review a number of topics around Napas financials and related business considerations § On May 23, 2016 Moelis and Orlando held a telephonic discussion to review Orlandos preliminary financial model for Napa and assumptions underlying the projection set § Moelis held subsequent conference calls with members of Orlando and Qatalyst to discuss due diligence findings and the potential acquisition § In addition to the management presentation, due diligence sessions and conference calls with the Napa and Orlando teams, Moelis reviewed: 3/4 Publicly available business and financial information relating to Napa and Orlando 3/4 Information relating to the business, earnings, cash flow, assets, liabilities and prospects of Napa, including financial forecasts prepared by Orlando 3/4 Certain Orlando internal information relating to cost savings, synergies and related expenses expected to result from the transaction [ 3 ]
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I. Preliminary Public Market Perspectives
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Napa Annotated 3-Year Share Price Performance $120 5.0 2 3 7 $110 1 8 $100 10 4.0 6 $90 5 9 13 $80 TRADING STATISTICS 3.0 11 e $70 Napa 4 (mm ) k Pric Volum e c Current $77.49 St o $60 12 10-Day Average $77.80 2.0 $50 30-Day Average 77.84 90-Day Average 70.45 $40 1-Year Average 81.63 2-Year Average 87.82 1.0 $30 52-Week High (07/24/15) 102.46 $20 All-Time High (02/27/14) 119.63 $10 0.0 5/23/13 8/23/13 11/23/13 2/23/14 5/23/14 8/23/14 11/23/14 2/23/15 5/23/15 8/23/15 11/23/15 2/23/16 5/23/16 Volume Stock Price 1§ July 25, 2013: Announces Second Quarter 2013 5§ July 24, 2014: Announces Second Quarter 2014 9§ July 23, 2015: Announces Second Quarter 2015 Financial Results (beat analyst revenue Financial Results (beat analyst revenue Financial Results (beat analyst revenue expectations) expectations) expectations); Appoints Jim McGeever as President 2§ October 24, 2013: Announces Third Quarter 2013 6§ October 23, 2014: Announces Third Quarter 2014 10§ October 22, 2015: Announces Third Quarter 2015 Financial Results (beat analyst revenue Financial Results (beat analyst revenue Financial Results (missed analyst revenue expectations) expectations) expectations) 11§ January 28, 2016: Announces Fourth Quarter and 3§ January 30, 2014: Announces Fourth Quarter and 7§ January 29, 2015: Announces Fourth Quarter and Fiscal 2015 Financial Results (beat analyst Fiscal 2013 Financial Results (beat analyst Fiscal 2014 Financial Results (beat analyst revenue expectations) revenue expectations) revenue expectations) February 5, 2016: Cloud-Based Shares Drop 12§ Following Tableaus Forecasted Industry Softness 4§ April 28, 2014: Announces First Quarter 2014 8§ April 23, 2015: Announces First Quarter 2015 Financial Results (beat analyst revenue Financial Results (beat analyst revenue April 28, : Announces expectations) expectations); Signs Definitive Agreement to 13§ 2016 First Quarter 2016 Acquire Bronto Software Financial Results (beat analyst revenue expectations) Source: Napa Website, Capital IQ [ 5 ] Note: All information on Napa based solely on publicly available information; data as of 5/23/16
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3-Year Relative Share Price Trading TRADING GAIN / LOSS Selected Public SaaS Napa NASDAQ Companies 1-Month 0.1% (2.9%) 1.9% 3-Month 38.5% 5.8% 26.4% 6-Month (9.0%) (6.6%) (6.0%) 1-Year (21.2%) (6.4%) (1.8%) 200% 2-Year (3.2%) 13.9% 46.8% 3-Year (13.6%) 37.8% 74.6% 150% 100% 50% 5/23/13 11/21/13 5/23/14 11/22/14 5/23/15 11/22/15 5/23/16 Napa NASDAQ Composite Index Selected Public SaaS Companies ¹ Source: Capital IQ Note: All information on Napa based solely on publicly available information; data as of 5/23/16 [ 6 ] 1. Weighted by market capitalization; selected companies consist of Cornerstone OnDemand, Palo Alto Networks, Salesforce.com, ServiceNow, Splunk, Ultimate Software, and Workday, Inc.
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Summary of Selected Wall Street Research on Napa Revenue Estimate Broker Date Rating Target Methodology 2016E 2017E Pacific Crest SecuritiesKBCM 5/18/2016 Neutral n/a n/a $965.1 $1,223.5 Societe Generale Cross Asset Research 5/2/2016 Underweight $76.00 5.5x EV / CY 2017 Revenue 967.2 1,222.3 FBN Securities 5/2/2016 Buy 100.00 DCF 965.0 1,231.0 William Blair 4/29/2016 Buy n/a n/a 965.0 1,212.0 Piper Jaffray 4/29/2016 Neutral 81.00 5.2x EV / CY 2017 Revenue 965.1 1,223.9 Macquarie 4/29/2016 Neutral 76.00 DCF 966.2 1,228.3 JMP Securities 4/29/2016 Buy 100.00 6.3x EV / CY 2017 Revenue 970.0 1,268.1 Barclays 4/29/2016 Neutral 74.00 5.0x EV / CY 2017 Revenue 965.9 1,209.2 JP Morgan 4/29/2016 Buy 94.00 6.5x EV / CY 2017 Revenue 957.5 1,170.8 Deutsche Bank 4/29/2016 Buy 95.00 6.0x EV / CY 2017 Revenue 974.4 1,248.5 Credit Suisse 4/29/2016 Buy 90.00 5.6x EV / CY 2017 Revenue 972.7 1,281.4 Morgan Stanley 4/29/2016 Underweight 60.00 DCF 970.0 1,220.0 BTIG 4/29/2016 Neutral n/a DCF 964.6 1,220.0 Canaccord Genuity 4/29/2016 Buy 100.00 6.6x EV / CY 2017 Revenue 970.0 1,227.5 Mitsubishi UFJ Securities (USA) 4/29/2016 Buy 87.00 n/a 969.9 1,246.3 Mizuho Securities 4/29/2016 Neutral 70.00 n/a 959.8 1,195.2 MKM Partners LLC 4/29/2016 Buy 92.00 7.0x EV / Projected 4-quarter Billings 966.2 1,217.7 Raymond James 4/29/2016 Underweight n/a n/a 971.5 1,239.4 SunTrust 4/29/2016 Buy 93.00 Avg. of DCF and 7.0x EV / CY 2016 Revenue 965.3 1,242.0 RBC 4/28/2016 Buy 93.00 6.0x EV / CY 2017 Revenue 968.3 1,235.8 Benchmark Company 2/1/2016 Neutral 65.00 n/a 963.2 1,221.0 Needham & Company 1/29/2016 Neutral n/a n/a 955.3 n/a High Target $100.00 $974.4 $1,281.4 Median Target 90.00 966.1 1,223.9 Average Target 85.06 966.3 1,227.8 Low Target 60.00 955.3 1,170.8 Current Share Price (05/23/16) $77.49 Sources: Capital IQ, ThomsonOne and Wall Street Research [ 7 ] Note: n/a denotes information not available to Moelis
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3-Year Relative EV / Forward Revenue Multiple Trading SUMMARY AVERAGE STATISTICS Selected Public SaaS Napa Companies 1-Month Avg. 6.1x 6.9x 3-Month Avg. 5.7x 6.8x 6-Month Avg. 6.0x 7.0x 1-Year Avg. 7.2x 7.8x 2-Year Avg. 8.9x 8.3x 3-Year Avg. 10.7x 8.9x 18.0x 15.0x 12.0x 9.0x 6.0x 3.0x 5/23/13 11/21/13 5/23/14 11/22/14 5/23/15 11/22/15 5/23/16 Napa Selected Public SaaS Companies ¹ Source: Capital IQ Note: All information on Napa based solely on publicly available information; data as of 5/23/16 [ 8 ] 1. Weighted by market capitalization; selected companies consist of Cornerstone OnDemand, Palo Alto Networks, Salesforce.com, ServiceNow, Splunk, Ultimate Software, and Workday, Inc.
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Napas Quarterly Revenue History vs. Wall Street Consensus FY2013 FY2014 FY2015 FY2016 ($ in millions) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Reported: RevenueActual $91.6 $101.0 $106.9 $115.0 $123.0 $131.8 $143.7 $157.9 $164.8 $177.3 $192.8 $206.2 $216.6 % YoY Growth 32.2% 35.2% 33.9% 35.3% 34.2% 30.5% 34.4% 37.3% 34.0% 34.5% 34.2% 30.6% 31.4% Wall Street: ¹ RevenueConsensus Mean $91.0 $100.6 $105.7 $111.4 $120.9 $131.7 $141.0 $155.3 $161.5 $172.0 $193.5 $204.4 $213.4 % YoY Growth 31.3% 34.6% 32.5% 31.1% 32.0% 30.4% 32.0% 35.1% 31.3% 30.5% 34.7% 29.5% 29.5% Difference: Revenue Over / (Under) Consensus$ $0.6 $0.4 $1.2 $3.6 $2.0 $0.1 $2.6 $2.5 $3.3 $5.3 ($0.7) $1.8 $3.2 Revenue YoY Growth Over / (Under) Consensus% 0.9% 0.6% 1.5% 4.2% 2.2% 0.1% 2.5% 2.2% 2.7% 4.0% (0.5%) 1.2% 1.9% Source: Capital IQ, Napa Filings, Wall Street Research Note: Wall Street year-over-year growth based on Wall Street consensus mean compared to Napas actual revenue results in the applicable prior year-over-year period [ 9 ] 1. Represents average of Wall Street estimates as compiled by Capital IQ on the most recent date prior to Napas applicable earnings announcement
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II. Preliminary Napa Financial Analysis
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Napa Historical and Projected Financial Summary (Orlando Management Incremental Case) Napa Standalone FYE December Napa as part of Orlando FYE May FY13A FY14A FY15A LTM FY17E FY18E FY19E FY20E FY21E ($ in millions, unless indicated) Year Year Year Mar-16 Year ¹ Year Year Year Year Subscription and support $333.6 $447.8 $593.1 $633.5 $829.8 $1,070.5 $1,359.5 $1,699.4 $2,073.2 YoY Growth 31.9% 34.2% 32.5% 31.6% 31.0% 29.0% 27.0% 25.0% 22.0% Professional services and other 81.0 108.5 148.1 159.5 204.1 253.1 303.7 358.4 415.7 YoY Growth 44.8% 34.0% 36.5% 36.5% 28.0% 24.0% 20.0% 18.0% 16.0% Total Revenue $414.5 $556.3 $741.1 $792.9 $1,033.9 $1,323.6 $1,663.2 $2,057.8 $2,489.0 YoY Growth 34.2% 34.2% 33.2% 32.6% 30.4% 28.0% 25.7% 23.7% 21.0% Subscription and support Gross Profit 284.4 384.1 508.3 541.1 713.6 931.3 1,196.4 1,512.4 1,865.9 Subscription and Support Margin 85.3% 85.8% 85.7% 85.4% 86.0% 87.0% 88.0% 89.0% 90.0% Professional services and other Gross Profit 9.9 14.0 12.3 12.9 20.4 29.1 38.0 50.2 62.4 Professional Services and Other Margin 12.2% 12.9% 8.3% 8.1% 10.0% 11.5% 12.5% 14.0% 15.0% Gross Profit $294.3 $398.1 $520.6 $554.0 $734.1 $960.4 $1,234.3 $1,562.6 $1,928.3 Total Gross Margin 71.0% 71.6% 70.2% 69.9% 71.0% 72.6% 74.2% 75.9% 77.5% R&D ? $56.8 $80.7 $105.8 $112.6 $100.0 $125.0 $150.0 $175.0 $200.0 % of Revenue 13.7% 14.5% 14.3% 14.2% 9.7% 9.4% 9.0% 8.5% 8.0% S&M 183.3 252.1 343.0 367.2 387.7 430.2 469.9 514.4 560.0 % of Revenue 44.2% 45.3% 46.3% 46.3% 37.5% 32.5% 28.3% 25.0% 22.5% G&A 32.6 39.2 53.1 55.1 25.8 33.1 16.6 16.5 16.2 % of Revenue 7.9% 7.0% 7.2% 7.0% 2.5% 2.5% 1.0% 0.8% 0.7% Total Operating Expenses $272.7 $371.9 $501.9 $535.0 $513.6 $588.2 $636.5 $705.9 $776.2 % of Revenue 65.8% 66.9% 67.7% 67.5% 49.7% 44.4% 38.3% 34.3% 31.2% EBIT $21.6 $26.2 $18.7 $19.0 $220.5 $372.2 $597.8 $856.7 $1,152.1 EBIT Margin 5.2% 4.7% 2.5% 2.4% 21.3% 28.1% 35.9% 41.6% 46.3% Source: Wall Street Research, Orlando Management 1. Napa year-over-year growth rate based on LTM financials ending 3/31/16 compared to FY 2017E May 31 year-end financials [ 11 ] 2. Adjusted for capitalization of certain development costs incurred in connection with its internal use software and website
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Napa Revenue Orlando Management Incremental Case vs. Wall Street Consensus Mean Forecast ($ in millions) $2,600.0 $2,578.0 $2,489.0 $2,178.0 $2,200.0 $2,057.8 $1,763.0 $1,800.0 $1,663.2 $1,428.9 $1,400.0 $1,323.6 $1,093.3 $1,033.9 $1,000.0 FY2017 FY2018 FY2019 FY2020 FY2021 Orlando Management Incremental Case ¹ Wall Street Consensus Mean ² Source: Capital IQ, Napa Filings, Wall Street Research, Orlando Management 1. Orlando Management Incremental Case for Napa based on Orlando Estimates, assuming a May 31 FYE [ 12 ] 2. Wall Street Consensus Mean based on available Wall Street Research, calendarized to a June 30 FYE for comparability purposes
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Orlando Management Incremental Forecast Assumptions and Considerations § Orlando Management Incremental Forecast for Napa Assumptions: 3/4 Model viewed as incremental to Orlando (i.e., under Orlando ownership) 3/4 Revenue growth based on assumed booking trends that are expected to remain inline and decline modestly relative to historical performance 3/4 Assumes a gross margin that approaches 90% in out years 3/4 Orlando combination with Napa creates significant OpEx savings due to increased scale and leverage as well as cost synergies 3/4 Assumes a 35% tax rate § Considerations: 3/4 Projection set lacks Orlando perspectives on the standalone business prospects for Napa 3/4 Does not include a longer-term financial projection set 3/4 No one-time costs have been incorporated to achieve assumed cost savings 3/4 Assumes no year-over-year change in working capital 3/4 Annual depreciation & amortization equals annual capital expenditures 3/4 Stock based compensation expense in projection period to be refined 3/4 Does not take into account the ability to utilize existing Napa NOLs 3/4 Projection set measured on a non-GAAP basis 3/4 Projections subject to change based on continued diligence Source: Orlando Management [ 13 ]
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Illustrative Analysis at Various Napa Share Prices Certain of Napas operating statistics fall on the higher end of the range of those statistics for companies used in the Selected Public SaaS Companies and the Selected Precedent Transactions, and may justify utilizing materially higher multiples than the median multiples illustrated below Selected Public Selected SaaS Precedent Napa Illustrative Share Price Companies Transactions ¹ Current ($ in millions, except per share data) $77.49 $90.00 $100.00 $110.00 $120.00 $130.00 Median Median Premiums Date Statistic % Current 5/23/16 $77.49 16.1% 29.0% 42.0% 54.9% 67.8% 31.1% % 1-Month Prior Average 4/23/16 77.84 (0.5%) 15.6% 28.5% 41.3% 54.2% 67.0% 44.1% % 1-Year Prior Average 5/23/15 81.63 (5.1%) 10.3% 22.5% 34.8% 47.0% 59.3% 39.9% Discount to 52-Week High 7/24/15 102.46 (24.4%) (12.2%) (2.4%) 7.4% 17.1% 26.9% 11.2% Premium to 52-Week Low 2/16/16 51.75 49.7% 73.9% 93.2% 112.6% 131.9% 151.2% 105.5% Fully Diluted Shares Outstanding 83.723 86.688 86.166 85.760 88.104 87.920 Implied Equity Value $6,487.7 $7,801.9 $8,616.6 $9,433.6 $10,572.5 $11,429.6 Plus: Debt ? $315.2 $315.2 $315.2 $315.2 $5.2 $5.2 Less: Cash (387.3) (387.3) (387.3) (387.3) (387.3) (387.3) Implied Enterprise Value $6,415.6 $7,729.9 $8,544.5 $9,361.5 $10,190.4 $11,047.5 Financial Multiples: Statistic Reported TEV / RevenueLTM (3/31/16) $792.9 8.1x 9.7x 10.8x 11.8x 12.9x 13.9x 9.0x Wall Street Consensus TEV / RevenueCY2016E $966.9 6.6x 8.0x 8.8x 9.7x 10.5x 11.4x 8.0x TEV / RevenueNTM (3/31/17) ³ 1,028.4 6.2x 7.5x 8.3x 9.1x 9.9x 10.7x 8.0x 7.9x TEV / RevenueCY2017E 1,226.3 5.2x 6.3x 7.0x 7.6x 8.3x 9.0x 6.2x Source: Capital IQ, Napa and Selected Public SaaS Companies Filings, Wall Street Research 1. Selected Precedent Transactions premiums represent premiums to 1-day prior, 1-month, 1-year average stock price, 1-year high, and 1-year low stock prices prior to deal announcement, respectively 2. Assumes conversion of $310mm of convertible debt at prices above $116.10/share. Assumes additional make whole shares related to convertible debt at CIC [ 14 ] 3. NTM represents fiscal quarter ending March 31 for Napa, and Wall Street projections for next four fiscal quarters ended for Selected Public SaaS Companies
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Selected Public SaaS Companies As of May 23, 2016 Revenue Gross EBITDA LT Enterprise Value / Enterprise Value / Enterprise Revenue Growth Margin Margin Growth Revenue EBITDA ¹ ($ in millions) Value CY16E 15A-16E 16E-17E CY16E CY16E Rate LTM CY16E CY17E CY16E CY17E Selected Public SaaS Companies salesforce.com, inc. $58,058 $8,190 22.8% 19.8% 76.9% 20.5% 29.9% 8.2x 7.1x 5.9x 34.6x 28.4x Workday, Inc. 14,906 1,549 33.2% 31.0% 72.3% 8.2% 50.0% 12.8x 9.6x 7.3x n/m n/m Palo Alto Networks, Inc. 13,945 1,571 36.6% 32.0% 77.2% 22.0% 43.6% 12.1x 8.9x 6.7x 40.4x 28.0x ServiceNow, Inc. 12,506 1,370 36.3% 30.2% 75.0% 17.9% 45.9% 11.4x 9.1x 7.0x n/m 32.5x Splunk, Inc. 7,075 882 32.0% 28.7% 87.1% 9.1% 49.5% 10.6x 8.0x 6.2x n/m n/m The Ultimate Software Group, Inc. 5,731 779 26.0% 22.0% 63.4% 24.9% 23.3% 8.7x 7.4x 6.0x 29.6x 23.9x Cornerstone OnDemand, Inc. 2,191 432 27.2% 24.0% 72.2% 7.7% 20.0% 6.0x 5.1x 4.1x n/m 40.8x Overall Mean $2,110 30.6% 26.8% 74.9% 15.8% 37.4% 10.0x 7.9x 6.2x 34.8x 30.7x Overall Median 1,370 32.0% 28.7% 75.0% 17.9% 43.6% 10.6x 8.0x 6.2x 34.6x 28.4x Napa (Wall Street) $6,416 $967 30.4% 26.8% 69.8% 8.0% 44.4% 8.1x 6.6x 5.2x n/m n/m Source: Capital IQ, Napa and Selected Public SaaS Company Filings Note: All years represent calendar years [ 15 ] 1. EBITDA multiples above 50x are shown as n/m
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Selected Precedent Transactions Date Form of LTM LTM to NTM Implied TEV to Announced Target Acquiror Consideration Revenue ¹ Revenue Growth ² Implied TEV LTM Revenue NTM Revenue 10/21/15 SolarWinds, Inc. Silver Lake; Thoma Bravo, LLC Cash $486 14.0% $4,446 9.2x 8.0x 12/22/14 DataLogix Holdings, Inc. ³ Oracle Corporation Cash 103 39.4% 1,189 11.6x 8.3x 09/18/14 Concur Technologies, Inc. SAP America, Inc. Cash 668 21.2% 8,592 12.9x 10.6x 06/13/14 OpenTable, Inc. The Priceline Group Inc. Cash 198 19.0% 2,570 13.0x 10.9x 12/20/13 Responsys, Inc. Oracle Corporation Cash 194 17.5% 1,457 7.5x 6.4x 06/04/13 ExactTarget, Inc. salesforce.com, inc. Cash 317 23.9% 2,539 8.0x 6.5x 12/20/12 Eloqua, Inc. Oracle Corporation Cash 90 19.4% 872 9.7x 8.1x 08/27/12 Kenexa Corp. IBM Cash 318 25.0% 1,298 4.1x 3.3x 05/22/12 Ariba Inc. SAP America, Inc. Cash 502 13.3% 4,411 8.8x 7.8x 02/09/12 Taleo Corp. Oracle Corporation Cash 309 18.3% 1,942 6.3x 5.3x 12/03/11 SuccessFactors, Inc. SAP America, Inc. Cash 292 37.9% 3,571 12.2x 8.9x 10/24/11 Rightnow Technologies, Inc. Oracle Corporation Cash 216 14.1% 1,606 7.4x 6.5x Average 21.9% 9.2x 7.5x Median 19.2% 9.0x 7.9x $793 29.7% $6,416 8.1x 6.2x Sources: Capital IQ, Target and Acquiror Filings, Wall Street Research 1. LTM revenue for precedent transactions represents the revenue in the four fiscal quarters prior to the transaction 2. NTM revenue for precedent transactions represents forecasted revenue for the four fiscal quarters following the transaction 3. DataLogix Holdings, Inc. financial information was provided by Orlando Management, as DataLogix Holdings, Inc. was private at the time of transaction [ 16 ] 4. LTM revenue as of 3/31/16, NTM revenue as of 3/31/17 per Wall Street Research
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Napa Discounted Cash Flow Analysis (Orlando Incremental Model) The analysis below is not a standalone DCF of Napa, and instead illustrates the DCF value of the incremental impact of Napa to Orlandos revenue and cash flows and includes the impact of synergies and other benefits that are not available to Napa shareholders on a standalone basis For the Fiscal Year Ended May 31, Terminal ($ in millions) 2017E 2018E 2019E 2020E 2021E Value Total Revenue $1,034 $1,324 $1,663 $2,058 $2,489 % Growth 28.0% 25.7% 23.7% 21.0% Non-GAAP EBIT 220 372 598 857 1,152 % Margin 21.3% 28.1% 35.9% 41.6% 46.3% Less: Cash Taxes ¹ (77) (130) (209) (300) (403) Plus: Depreciation & Amortization ² 41 53 67 82 100 Less: Stock-based Compensation ³ (155) (155) (155) (155) (155) (41) (53) (67) (82) (100) -- Unlevered Free Cash Flow ($12) $87 $234 $402 $594 $19,912 % Growth NM 168.9% 72.1% 47.8% DISCOUNTED CASH FLOW ANALYSIS: SENSITIVITY TABLES Implied Share Price Implied Perpetuity Growth Rate Discount LTM Revenue Exit Multiple Discount LTM Revenue Exit Multiple Rate 7.0x 7.5x 8.0x 8.5x 9.0x Rate 7.0x 7.5x 8.0x 8.5x 9.0x 9.0% $144.30 $153.66 $162.96 $172.28 $181.56 9.0% 5.4% 5.6% 5.8% 6.0% 6.2% 10.0% 138.08 147.05 155.96 164.85 173.76 10.0% 6.4% 6.6% 6.8% 7.0% 7.2% 11.0% 132.17 140.75 149.33 157.82 166.33 11.0% 7.3% 7.6% 7.8% 8.0% 8.1% 12.0% 126.53 134.80 142.98 151.17 159.29 12.0% 8.3% 8.5% 8.8% 8.9% 9.1% 13.0% 121.21 129.09 136.98 144.81 152.62 13.0% 9.3% 9.5% 9.7% 9.9% 10.1% Source: Orlando Management, Napa Filings Note: Analysis reflects Napa under Orlando ownership. Assumed date of 5/31/16. sumes 35% tax rate, per Orlando Management sumed to be 4% of annual revenue, in-line with Macquarie research estimates for the period d to be 15% of annual revenue in FY2017E (constant thereafter) 4. Assumed to equal annual depreciation & amortization expense, per Orlando Management [ 17 ] 5. Assumed to be zero, per Orlando Management
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II. Next Steps & Additional Considerations
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Next Steps & Additional Considerations Moelis believes Orlando should engage in exploratory next steps with Napa and that several alternatives exist to approach Napa § Initial bid value / form of consideration § The Committee has a number of approach alternatives to Napa including the form and channel of communication § Potential channels of communication 3/4 Financial Advisor (Moelis) to Financial Advisor (Qatalyst) 3/4 Committee Member to Committee Member 3/4 Orlando Management to Napa Management or Financial Advisor (Qatalyst) § Potential form of communication 3/4 Verbal communication of interest 3/4 Written offer and appropriate level of detail Moelis believes that any non-binding indication of interest should include the price and terms under which Orlando would evaluate a potential transaction [ 19 ]
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Appendix
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Weighted Average Cost of Capital Analysis As of 05/23/16 Levered Beta ¹ Total MV Debt/ Asset Beta ² Int. Expense / ($ in millions) 2-Year 5-Year Debt Equity Total Cap 2-Year 5-Year Total Debt Selected Public SaaS Companies salesforce.com, inc. 1.289 1.277 $2,120 $57,704 3.5% 1.255 1.243 3.7% Workday, Inc. 1.612 1.531 600 16,275 3.6% 1.575 1.495 5.3% Palo Alto Networks, Inc. 1.158 1.185 575 14,159 3.9% 1.130 1.156 4.0% ServiceNow, Inc. 1.337 1.371 575 12,832 4.3% 1.299 1.331 5.5% Splunk, Inc. 1.841 1.777 8,084 1.841 1.777 NA The Ultimate Software Group, Inc. 1.178 1.130 10 5,817 0.2% 1.177 1.129 5.4% Cornerstone OnDemand, Inc. 0.981 0.992 253 2,212 10.3% 0.914 0.924 5.0% Overall Mean 1.342 1.323 3.7% 1.313 1.294 4.8% Overall Median 1.289 1.277 3.6% 1.255 1.243 5.2% Napa 1.202 1.286 $315 $6,488 4.6% 1.146 1.227 4.7% KEY ASSUMPTIONS WACC SENSITIVITY Debt / Unlevered Beta § Long-horizon expected equity risk premium (supply-side) of 6.03% (Source: Duff & Phelps 2016) Total Cap 1.100 1.200 1.300 1.400 1.500§ Yield on 20-year U.S. Treasury (5/23/2016) of 2.23% 9.7% 10.3% 10.9% 11.5% 12.1%§ Size premium of 0.86% using the 3rd decile tier provided by 1.0% 9.7% 10.3% 10.9% 11.5% 12.1% Duff and Phelps 2016, based on companies with an equity 2.0% 9.7% 10.3% 10.9% 11.5% 12.1% value between $5.2 billion and $9.6 billion 3.0% 9.7% 10.3% 10.9% 11.5% 12.0% § Stated tax rate of 35.0% per Orlando Management guidance 4.0% 9.6% 10.2% 10.8% 11.4% 12.0% § 5.2% pre-tax cost of debt 5.0% 9.6% 10.2% 10.8% 11.4% 12.0% Source: Bloomberg, Capital IQ, Selected Public SaaS Company Filings, Duff & Phelps 2016 Valuation Handbook, U.S. Department of the Treasury Note: Values as of 5/23/16 1 Bloomberg adjusted beta [ 21 ] 2 Unlevered adjusted beta of selected companies used to calculate relevered beta using the formula B = Bu(1+(1-t)(D/E))
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Regression Analysis LONG-TERM EPS GROWTH VS. 16E REVENUE MULTIPLE Workday 50% Splunk § Regression analysis summary: 45% ServiceNow Napa 3/4 Comparing long-term EPS growth vs. 2016E revenue 40% Palo Alto multiples provides an R2 of 56% Networks 35% 30% Salesforce 3/4 Comparing 2016E 2017E revenue growth vs. 2016E Growth Rate revenue multiples provides an R2 of 49% LT 25% Ultimate 20% Software Cornerstone 3/4 Comparing 2016E EBITDA margins vs. 2016E revenue multiples provides an R2 of 5% 15% R²: 56% 10% 4.0x 5.0x 6.0x 7.0x 8.0x 9.0x 10.0x TEV / CY16E Revenue 16E17E REVENUE GROWTH VS. 16E REVENUE MULTIPLE 16E EBITDA MARGIN VS. 16E REVENUE MULTIPLE 35% 30% Palo Alto Networks 25% Ultimate Palo Alto 30% Splunk Workday Software Networks Growth ServiceNow 20% Salesforce ServiceNow Napa 25% Cornerstone 15% Ultimate Software Workday 10% Splunk 20% 16E EBITDA Margin 16E / 17E Revenue Cornerstone Napa Salesforce R²: 49% 5% R²: 5% 15% 4.0x 5.0x 6.0x 7.0x 8.0x 9.0x 10.0x 0% 4.0x 5.0x 6.0x 7.0x 8.0x 9.0x 10.0x TEV / CY16E Revenue TEV / CY16E Revenue Source: Selected Public SaaS Company Filings, Wall Street Research [ 22 ] Note: Financial data as of 05/23/16
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Contact Information Moelis & Company LLC is a U.S.-registered broker dealer and a member of FINRA & SIPC. Moelis & Company LLC 1999 Avenue of the Stars, Suite 1900 Los Angeles, CA 90067 Tel: (310) 443-2300 399 Park Avenue, 5th Floor New York, NY 10022 Tel: (212) 883-3800 [ 23 ]
Exhibit (c)(11)
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STRICTLY CONFIDENTIAL Project Napa Update Materials for the Special Committee of the Board of Directors June 8, 2016
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Update Selected Public Selected SaaS Precedent Orlando Napa Illustrative Share Price Napa Companies Transactions ¹ Current Proposal Response (6/7/2016) (6/1/2016) (6/6/2016) ($ in millions, except per share data) $84.79 $100.00 $105.00 $110.00 $115.00 $120.00 $125.00 Median Median Premiums Date Statistic % Current 6/7/16 $84.79 17.9% 23.8% 29.7% 35.6% 41.5% 47.4% 34.7% % 1-Month Prior Average 5/7/16 79.24 7.0% 26.2% 32.5% 38.8% 45.1% 51.4% 57.7% 45.4% % 1-Year Prior Average 6/7/15 81.18 4.5% 23.2% 29.3% 35.5% 41.7% 47.8% 54.0% 42.1% Discount to 52-Week High 7/24/15 102.46 (17.2%) (2.4%) 2.5% 7.4% 12.2% 17.1% 22.0% 10.1% Premium to 52-Week Low 2/16/16 51.75 63.8% 93.2% 102.9% 112.6% 122.2% 131.9% 141.5% 105.5% Fully Diluted Shares Outstanding 83.869 86.166 85.916 85.760 85.599 88.104 88.014 Implied Equity Value $7,111.2 $8,616.6 $9,021.1 $9,433.6 $9,843.9 $10,572.5 $11,001.7 Plus: Debt ? $315.2 $315.2 $315.2 $315.2 $315.2 $5.2 $5.2 Less: Cash (387.3) (387.3) (387.3) (387.3) (387.3) (387.3) (387.3) Implied Enterprise Value $7,039.1 $8,544.5 $8,949.0 $9,361.5 $9,771.8 $10,190.4 $10,619.7 Financial Multiples: Statistic Reported TEV / RevenueLTM (3/31/16) $792.9 8.9x 10.8x 11.3x 11.8x 12.3x 12.9x 13.4x 9.2x Wall Street Consensus TEV / RevenueCY2016E $966.8 7.3x 8.8x 9.3x 9.7x 10.1x 10.5x 11.0x 8.3x TEV / RevenueNTM (3/31/17) ³ 1,028.2 6.8x 8.3x 8.7x 9.1x 9.5x 9.9x 10.3x 7.7x 8.0x TEV / RevenueCY2017E 1,226.3 5.7x 7.0x 7.3x 7.6x 8.0x 8.3x 8.7x 6.5x Source: Capital IQ, Napa and Selected Public SaaS Companies Filings, Wall Street Research 1. Selected Precedent Transactions premiums represent premiums to 1-day prior, 1-month, 1-year average stock price, 1-year high, and 1-year low stock prices prior to deal announcement, respectively 2. Assumes conversion of $310mm of convertible debt at prices above $116.10/share. Assumes additional make whole shares related to convertible debt at CIC [ 1 ] 3. NTM represents fiscal quarter ending March 31 for Napa, and Wall Street projections for next four fiscal quarters ended for Selected Public SaaS Companies
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Selected Public SaaS Companies As of June 7, 2016 Revenue Gross EBITDA LT Enterprise Value / Enterprise Value / Enterprise Revenue Growth Margin Margin Growth Revenue EBITDA ¹ ($ in millions) Value CY16E 15A-16E 16E-17E CY16E CY16E Rate LTM CY16E CY17E CY16E CY17E Selected Public SaaS Companies salesforce.com, inc. $59,103 $8,279 24.2% 20.1% 76.9% 19.6% 29.9% 8.4x 7.1x 5.9x 36.5x 29.0x Workday, Inc. 16,491 1,554 33.7% 30.7% 71.9% 8.5% 38.3% 13.1x 10.6x 8.1x n/m n/m ServiceNow, Inc. 13,592 1,370 36.3% 30.2% 75.0% 17.9% 45.9% 12.4x 9.9x 7.6x n/m 35.4x Palo Alto Networks, Inc. 13,172 1,583 25.5% 31.5% 77.4% 21.7% 43.7% 10.4x 8.3x 6.3x 38.4x 26.1x Splunk, Inc. 7,964 897 34.2% 28.4% 85.8% 8.2% 50.0% 11.9x 8.9x 6.9x n/m n/m The Ultimate Software Group, Inc. 6,126 779 26.1% 21.9% 63.3% 24.9% 23.3% 9.3x 7.9x 6.5x 31.6x 25.5x Cornerstone OnDemand, Inc. 2,547 432 27.3% 23.9% 72.2% 7.7% 20.0% 7.0x 5.9x 4.8x n/m 47.3x Overall Mean $2,128 29.6% 26.7% 74.6% 15.5% 35.9% 10.4x 8.4x 6.6x 35.5x 32.7x Overall Median 1,370 27.3% 28.4% 75.0% 17.9% 38.3% 10.4x 8.3x 6.5x 36.5x 29.0x Napa (Wall Street) $7,039 $967 30.4% 26.8% 69.8% 8.0% 44.4% 8.9x 7.3x 5.7x n/m n/m Source: Capital IQ, Napa and Selected Public SaaS Company Filings Note: All years represent calendar years [ 2 ] 1. EBITDA multiples above 50x are shown as n/m
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Selected Precedent Transactions Date Form of LTM LTM to NTM Implied TEV to Announced Target Acquiror Consideration Revenue ¹ Revenue Growth ² Implied TEV LTM Revenue NTM Revenue 06/01/16 Demandware, Inc. salesforce.com, inc. Cash $254 26.0% $2,788 11.0x 8.7x 10/21/15 SolarWinds, Inc. Silver Lake; Thoma Bravo, LLC Cash 486 14.0% 4,446 9.2x 8.0x 12/22/14 DataLogix Holdings, Inc. ³ Oracle Corporation Cash 103 39.4% 1,189 11.6x 8.3x 09/18/14 Concur Technologies, Inc. SAP America, Inc. Cash 668 21.2% 8,592 12.9x 10.6x 06/13/14 OpenTable, Inc. The Priceline Group Inc. Cash 198 19.0% 2,570 13.0x 10.9x 12/20/13 Responsys, Inc. Oracle Corporation Cash 194 17.5% 1,457 7.5x 6.4x 06/04/13 ExactTarget, Inc. salesforce.com, inc. Cash 317 23.9% 2,539 8.0x 6.5x 12/20/12 Eloqua, Inc. Oracle Corporation Cash 90 19.4% 872 9.7x 8.1x 08/27/12 Kenexa Corp. IBM Cash 318 25.0% 1,298 4.1x 3.3x 05/22/12 Ariba Inc. SAP America, Inc. Cash 502 13.3% 4,411 8.8x 7.8x 02/09/12 Taleo Corp. Oracle Corporation Cash 309 18.3% 1,942 6.3x 5.3x 12/03/11 SuccessFactors, Inc. SAP America, Inc. Cash 292 37.9% 3,571 12.2x 8.9x 10/24/11 Rightnow Technologies, Inc. Oracle Corporation Cash 216 14.1% 1,606 7.4x 6.5x Average 22.3% 9.3x 7.6x Median 19.4% 9.2x 8.0x Napa $793 29.7% $7,039 8.9x 6.8x Sources: Capital IQ, Target and Acquiror Filings, Wall Street Research 1. LTM revenue for precedent transactions represents the revenue in the four fiscal quarters prior to the transaction 2. NTM revenue for precedent transactions represents forecasted revenue for the four fiscal quarters following the transaction 3. DataLogix Holdings, Inc. financial information was provided by Orlando Management, as DataLogix Holdings, Inc. was private at the time of transaction [ 3 ] 4. LTM revenue as of 3/31/16, NTM revenue as of 3/31/17 per Wall Street Research
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Napa Annotated 3-Year Share Price Performance $120 3 5.0 2 $110 7 1 8 $100 10 4.0 6 $90 5 9 13 $80 3.0 TRADING STATISTICS $70 (mm) Price Napa 4 11 e k Stoc $60 Current $84.79 12 lum 10-Day Average $82.13 2.0 Vo $50 30-Day Average 79.24 $40 90-Day Average 73.77 1-Year Average 81.18 2-Year Average 87.83 1.0 $30 52-Week High (07/24/15) 102.46 All-Time High (02/27/14) 119.63 $20 $10 0.0 6/7/13 9/7/13 12/7/13 3/7/14 6/7/14 9/7/14 12/7/14 3/7/15 6/7/15 9/7/15 12/7/15 3/7/16 6/7/16 Volume Stock Price 1? July 25, 2013: Announces Second Quarter 2013 5? July 24, 2014: Announces Second Quarter 2014 9? July 23, 2015: Announces Second Quarter 2015 Financial Results (beat analyst revenue Financial Results (beat analyst revenue Financial Results (beat analyst revenue expectations) expectations) expectations); Appoints Jim McGeever as President 2? October 24, 2013: Announces Third Quarter 2013 6? October 23, 2014: Announces Third Quarter 2014 10? October 22, 2015: Announces Third Quarter 2015 Financial Results (beat analyst revenue Financial Results (beat analyst revenue Financial Results (missed analyst revenue expectations) expectations) expectations) 11? January 28, 2016: Announces Fourth Quarter and 3? January 30, 2014: Announces Fourth Quarter and 7? January 29, 2015: Announces Fourth Quarter and Fiscal 2015 Financial Results (beat analyst Fiscal 2013 Financial Results (beat analyst Fiscal 2014 Financial Results (beat analyst revenue expectations) revenue expectations) revenue expectations) February 5, 2016: Cloud-Based Shares Drop 12? Following Tableaus Forecasted Industry Softness 4? April 28, 2014: Announces First Quarter 2014 8? April 23, 2015: Announces First Quarter 2015 Financial Results (beat analyst revenue Financial Results (beat analyst revenue April 28, : Announces expectations) expectations); Signs Definitive Agreement to 13? 2016 First Quarter 2016 Acquire Bronto Software Financial Results (beat analyst revenue expectations) Source: Napa Website, Capital IQ [ 4 ] Note: All information on Napa based solely on publicly available information; data as of 6/7/16
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3-Year Relative Share Price Trading TRADING GAIN / LOSS Selected Public SaaS Napa NASDAQ Companies 1-Month 11.7% 4.5% 10.1% 3-Month 32.9% 6.7% 13.9% 6-Month 2.8% (2.7%) (5.8%) 1-Year (6.9%) (1.2%) 5.1% 2-Year 6.8% 14.4% 47.9% 3-Year (3.5%) 43.0% 91.4% 220% 190% 160% 130% 100% 70% 40% 6/7/13 12/6/13 6/7/14 12/7/14 6/7/15 12/7/15 6/7/16 Napa NASDAQ Composite Index Selected Public SaaS Companies ¹ Source: Capital IQ Note: All information on Napa based solely on publicly available information; data as of 6/7/16 [ 5 ] 1. Weighted by market capitalization; selected companies consist of Cornerstone OnDemand, Palo Alto Networks, Salesforce.com, ServiceNow, Splunk, Ultimate Software, and Workday, Inc.
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3-Year Relative EV / Forward Revenue Multiple Trading SUMMARY AVERAGE STATISTICS Selected Public SaaS Napa Companies 1-Month Avg. 6.1x 6.9x 3-Month Avg. 5.9x 6.9x 6-Month Avg. 5.9x 6.9x 1-Year Avg. 7.1x 7.7x 2-Year Avg. 8.8x 8.3x 3-Year Avg. 10.6x 9.0x 18.0x 15.0x 12.0x 9.0x 6.0x 3.0x 6/7/13 12/6/13 6/7/14 12/7/14 6/7/15 12/7/15 Napa Selected Public SaaS Companies ¹ Source: Capital IQ Note: All information on Napa based solely on publicly available information; data as of 6/7/16 1. Weighted by market capitalization; selected companies consist of Cornerstone OnDemand, Palo Alto Networks, Salesforce.com, ServiceNow, Splunk, Ultimate Software, and Workday, Inc.
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Contact Information Moelis & Company LLC is a U.S.-registered broker dealer and a member of FINRA & SIPC. Moelis & Company LLC 1999 Avenue of the Stars, Suite 1900 Los Angeles, CA 90067 Tel: (310) 443-2300 399 Park Avenue, 5th Floor New York, NY 10022 Tel: (212) 883-3800 [ 7 ]
Exhibit (c)(12)
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STRICTLY CONFIDENTIAL
Project Napa
[Graphic Appears Here]
Update Materials for the Special Committee of the Board of Directors
June 14, 2016
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Update
[Graphic Appears Here]
Certain of Napa s operating statistics fall on the higher end of the range of those statistics for companies used in the Selected Public SaaS Companies and the Selected Precedent Transactions, and may justify utilizing materially higher multiples than the median multiples illustrated below
Selected
PublicSelected
SaaSPrecedent
OrlandoOrlandoNapa Illustrative Share PriceNapaNapaCompanies Transactions ¹
Current Proposal ResponseResponse Response
(6/13/16)(6/1/16)(6/8/16)(6/11/16)(6/6/16)
($ in millions, except per share data) $78.83$100.00$106.00$108.00$110.00$112.00$114.00$116.00$118.00$120.00$125.00MedianMedian
Premiums Date Statistic
% Current 6/13/16 $78.8326.9%34.5%37.0%39.5%42.1%44.6%47.2%49.7%52.2%58.6%34.7%
% 1-Month Prior Average 5/13/16 80.22(1.7%)24.7%32.1%34.6%37.1%39.6%42.1%44.6%47.1%49.6%55.8%45.4%
% 1-Year Prior Average 6/13/15 80.99(2.7%)23.5%30.9%33.4%35.8%38.3%40.8%43.2%45.7%48.2%54.3%42.1%
Discount to 52-Week High 7/24/15 102.46(23.1%)(2.4%)3.5%5.4%7.4%9.3%11.3%13.2%15.2%17.1%22.0%10.1%
Premium to 52-Week Low 2/16/16 51.7552.3%93.2%104.8%108.7%112.6%116.4%120.3%124.2%128.0%131.9%141.5%105.5%
Fully Diluted Shares Outstanding 83.75286.16685.88585.82385.76085.69685.63285.56788.17188.10488.014
Implied Equity Value $6,602$8,617$9,104$9,269$9,434$9,598$9,762$9,926$10,404$10,573$11,002
Plus: Debt ² $315$315$315$315$315$315$315$315$5$5$5
Less: Cash ($387)($387)($387)($387)($387)($387)($387)($387)($387)($387)($387)
Implied Enterprise Value $6,530$8,544$9,032$9,197$9,361$9,526$9,690$9,854$10,022$10,190$10,620
Financial Multiples: Statistic
Reported
TEV / RevenueLTM (3/31/16) $792.9 8.2x10.8x11.4x11.6x11.8x12.0x12.2x12.4x12.6x12.9x13.4x9.2x
Wall Street Consensus
TEV / RevenueCY2016E $966.86.8x8.8x9.3x9.5x9.7x9.9x10.0x10.2x10.4x10.5x11.0x8.0x
TEV / RevenueNTM (3/31/17) ³ 1,028.2 6.4x8.3x8.8x8.9x9.1x9.3x9.4x9.6x9.7x9.9x10.3x7.4x8.0x
TEV / RevenueCY2017E 1,226.35.3x7.0x7.4x7.5x7.6x7.8x7.9x8.0x8.2x8.3x8.7x6.3x
Source: Capital IQ, Napa and Selected Public SaaS Companies Filings, Wall Street Research
1. Selected Precedent Transactions premiums represent premiums to 1-day prior, 1-month, 1-year average stock price, 1-year high, and 1-year low stock prices prior to deal announcement, respectively
2. Assumes conversion of $310mm of convertible debt at prices above $116.10/share. Assumes additional make whole shares related to convertible debt at CIC
3. NTM represents fiscal quarter ending March 31 for Napa, and Wall Street projections for next four fiscal quarters ended for Selected Public SaaS Companies
[ 1 ]
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Selected Public SaaS Companies
[Graphic Appears Here]
As of June 13, 2016 RevenueGrossEBITDALTEnterprise Value /Enterprise Value /
Enterprise Revenue GrowthMargin Margin GrowthRevenueEBITDA ¹
($ in millions) Value CY16E15A-16E 16E-17E CY16ECY16ERateLTMCY16ECY17ECY16ECY17E
Selected Public SaaS Companies
salesforce.com, inc. $57,880 $8,11521.7%21.5%76.9%19.8%29.2%8.2x7.1x5.9x36.1x27.7x
Workday, Inc. 15,953 1,55533.7%30.7%71.9%8.5%38.3%12.7x10.3x7.9xn/mn/m
ServiceNow, Inc. 12,964 1,37036.3%30.2%75.0%17.9%45.9%11.8x9.5x7.3xn/m33.7x
Palo Alto Networks, Inc. 12,595 1,58325.5%31.5%77.4%21.7%43.7%10.0x8.0x6.1x36.7x24.9x
Splunk, Inc. 7,462 89734.2%28.4%85.8%8.2%50.0%10.2x8.3x6.5xn/mn/m
The Ultimate Software Group, Inc. 5,938 77926.1%21.9%63.3%24.9%23.3%9.0x7.6x6.3x30.6x24.7x
Cornerstone OnDemand, Inc. 2,521 43227.3%23.9%72.2%7.7%20.0%6.9x5.8x4.7xn/m46.8x
Overall Mean $2,10429.2%26.9%74.6%15.5%35.8%9.8x8.1x6.4x34.5x31.6x
Overall Median 1,37027.3%28.4%75.0%17.9%38.3%10.0x8.0x6.3x36.1x27.7x
Napa (Wall Street) $6,530 $96730.4%26.8%69.8%8.0%44.4%8.2x6.8x5.3xn/mn/m
Source: Capital IQ, Napa and Selected Public SaaS Company Filings
Note: All years represent calendar years [ 2 ]
1. EBITDA multiples above 50x are shown as n/m
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Selected Precedent Transactions
[Graphic Appears Here]
Date Form ofLTMLTM to NTMImplied TEV to
Announced Target AcquirorConsideration Revenue ¹Revenue Growth ² Implied TEVLTM RevenueNTM Revenue
06/01/16 Demandware, Inc. salesforce.com, inc.Cash$25426.0%$2,78811.0x8.7x
10/21/15 SolarWinds, Inc. Silver Lake; Thoma Bravo, LLCCash48614.0%4,4469.2x8.0x
12/22/14 DataLogix Holdings, Inc. ³ Oracle CorporationCash10339.4%1,18911.6x8.3x
09/18/14 Concur Technologies, Inc. SAP America, Inc.Cash66821.2%8,59212.9x10.6x
06/13/14 OpenTable, Inc. The Priceline Group Inc.Cash19819.0%2,57013.0x10.9x
12/20/13 Responsys, Inc. Oracle CorporationCash19417.5%1,4577.5x6.4x
06/04/13 ExactTarget, Inc. salesforce.com, inc.Cash31723.9%2,5398.0x6.5x
12/20/12 Eloqua, Inc. Oracle CorporationCash9019.4%8729.7x8.1x
08/27/12 Kenexa Corp. IBMCash31825.0%1,2984.1x3.3x
05/22/12 Ariba Inc. SAP America, Inc.Cash50213.3%4,4118.8x7.8x
02/09/12 Taleo Corp. Oracle CorporationCash30918.3%1,9426.3x5.3x
12/03/11 SuccessFactors, Inc. SAP America, Inc.Cash29237.9%3,57112.2x8.9x
10/24/11 Rightnow Technologies, Inc. Oracle CorporationCash21614.1%1,6067.4x6.5x
Average 22.3%9.3x7.6x
Median 19.4%9.2x8.0x
Napa $79329.7%$6,5308.2x6.4x
Sources: Capital IQ, Target and Acquiror Filings, Wall Street Research
1. LTM revenue for precedent transactions represents the revenue in the four fiscal quarters prior to the transaction
2. NTM revenue for precedent transactions represents forecasted revenue for the four fiscal quarters following the transaction
3. DataLogix Holdings, Inc. financial information was provided by Orlando Management, as DataLogix Holdings, Inc. was private at the time of transaction [ 3 ]
4. LTM revenue as of 3/31/16, NTM revenue as of 3/31/17 per Wall Street Research
|
Napa Discounted Cash Flow Analysis (Orlando Incremental Model)
[Graphic Appears Here]
The analysis below is not a standalone DCF of Napa, and instead illustrates the DCF value of the incremental impact of Napa to Orlando s revenue and cash flows and includes the impact of synergies and other benefits that are not available to Napa shareholders on a standalone basis
For the Fiscal Year Ended May 31,Terminal
($ in millions) 2017E2018E2019E2020E2021EValue
Total Revenue $1,034$1,324$1,663$2,058$2,489
% Growth 28.0%25.7%23.7%21.0%
Non-GAAP EBIT 2203725988571,152
% Margin 21.3%28.1%35.9%41.6%46.3%
Less: Cash Taxes ¹ (77)(130)(209)(300)(403)
Plus: Depreciation & Amortization ² 41536782100
Less: Stock-based Compensation ³ (155)(155)(155)(155)(155)
(41)(53)(67)(82)(100)
Unlevered Free Cash Flow ($12)$87$234$402$594$19,912
% Growth NM168.9%72.1%47.8%
DISCOUNTED CASH FLOW ANALYSIS: SENSITIVITY TABLES
Implied Share PriceImplied Perpetuity Growth Rate
Discount LTM Revenue Exit MultipleDiscountLTM Revenue Exit Multiple
Rate 7.0x 7.5x8.0x8.5x9.0xRate7.0x7.5x8.0x8.5x9.0x
9.0% $144.30 $153.66$162.96$172.28$181.569.0%5.4%5.6%5.8%6.0%6.2%
10.0% 138.08 147.05155.96164.85173.7610.0%6.4%6.6%6.8%7.0%7.2%
11.0% 132.17 140.75149.33157.82166.3311.0%7.3%7.6%7.8%8.0%8.1%
12.0% 126.53 134.80142.98151.17159.2912.0%8.3%8.5%8.8%8.9%9.1%
13.0% 121.21 129.09136.98144.81152.6213.0%9.3%9.5%9.7%9.9%10.1%
Source: Orlando Management, Napa Filings
Note: Analysis reflects Napa under Orlando ownership. Assumed date of 5/31/16.
sumes 35% tax rate, per Orlando Management
sumed to be 4% of annual revenue, in-line with Macquarie research estimates for the period
d to be 15% of annual revenue in FY2017E (constant thereafter)
4. Assumed to equal annual depreciation & amortization expense, per Orlando Management [ 4 ]
5. Assumed to be zero, per Orlando Management
|
[Graphic Appears Here]
6/13/13 9/13/13 12/13/133/13/146/13/149/13/1412/13/143/13/156/13/159/13/1512/13/153/13/166/13/16
VolumeStock Price
1 July 25, 2013: Announces Second Quarter 2013 5 July 24, 2014: Announces Second Quarter 20149 July 23, 2015: Announces Second Quarter 2015
Financial Results (beat analyst revenue Financial Results (beat analyst revenueFinancial Results (beat analyst revenue
expectations) expectations)expectations); Appoints Jim McGeever as
President
2 October 24, 2013: Announces Third Quarter 2013 6 October 23, 2014: Announces Third Quarter 201410 October 22, 2015: Announces Third Quarter 2015
Financial Results (beat analyst revenue Financial Results (beat analyst revenueFinancial Results (missed analyst revenue
expectations) expectations)expectations)
11 January 28, 2016: Announces Fourth Quarter and
3 January 30, 2014: Announces Fourth Quarter and 7 January 29, 2015: Announces Fourth Quarter andFiscal 2015 Financial Results (beat analyst
Fiscal 2013 Financial Results (beat analyst Fiscal 2014 Financial Results (beat analystrevenue expectations)
revenue expectations) revenue expectations)
12 February 5, 2016: Cloud-Based Shares Drop
Following Tableaus Forecasted Industry Softness
4 April 28, 2014: Announces First Quarter 2014 8 April 23, 2015: Announces First Quarter 2015
Financial Results (beat analyst revenue Financial Results (beat analyst revenue
expectations) expectations); Signs Definitive Agreement to13 April 28, 2016: Announces First Quarter 2016
Acquire Bronto SoftwareFinancial Results (beat analyst revenue
expectations)
Source: Napa Website, Capital IQ [ 5 ]
Note: All information on Napa based solely on publicly available information; data as of 6/13/16
|
3-Year Relative Share Price Trading
[Graphic Appears Here]
TRADING GAIN / LOSS
Selected
Public SaaS
Napa NASDAQCompanies
1-Month 2.6% 3.7%6.8%
3-Month 22.0% 3.0%7.5%
6-Month (0.6%) (1.2%)(3.8%)
1-Year (15.7%) (3.1%)1.0%
2-Year (4.9%) 13.5%37.7%
3-Year (8.7%) 42.1%92.7%
[Graphic Appears Here]
|
3-Year Relative EV / Forward Revenue Multiple Trading
[Graphic Appears Here]
SUMMARY AVERAGE STATISTICS
Selected
Public SaaS
Napa Companies
1-Month Avg. 6.2x 7.0x
3-Month Avg. 5.9x 6.9x
6-Month Avg. 5.9x 6.9x
1-Year Avg. 7.1x 7.7x
2-Year Avg. 8.8x 8.3x
3-Year Avg. 10.6x 9.0x
[Graphic Appears Here]
|
Contact Information
[Graphic Appears Here]
Moelis & Company LLC is a U.S.-registered broker dealer and a member of FINRA & SIPC.
Moelis & Company LLC
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Tel: (310) 443-2300
399 Park Avenue, 5th Floor
New York, NY 10022
Tel: (212) 883-3800
[ 8 ]
Exhibit (c)(13)
|
STRICTLY CONFIDENTIAL
Project Napa
[Graphic Appears Here]
Update Materials for the Special Committee of the Board of Directors
June 30, 2016
|
Update
[Graphic Appears Here]
Certain of Napa s operating statistics fall on the higher end of the range of those statistics for companies used in the Selected Public SaaS Companies and the Selected Precedent Transactions, and may justify utilizing materially higher multiples than the median multiples illustrated below
Selected
PublicSelected
SaaSPrecedent
OrlandoOrlandoNapa Illustrative Share PriceNapaNapaCompanies Transactions ¹
Current Proposal ResponseResponse Response
(6/29/16)(6/1/16)(6/8/16)(6/11/16)(6/6/16)
($ in millions, except per share data) $72.19$100.00$106.00$108.00$110.00$112.00$114.00$116.00$118.00$120.00$125.00MedianMedian
Premiums Date Statistic
% Current 6/29/16 $72.1938.5%46.8%49.6%52.4%55.1%57.9%60.7%63.5%66.2%73.2%34.7%
% 1-Month Prior Average 5/29/16 78.93(8.5%)26.7%34.3%36.8%39.4%41.9%44.4%47.0%49.5%52.0%58.4%45.4%
% 1-Year Prior Average 6/29/15 80.20(10.0%)24.7%32.2%34.7%37.2%39.7%42.2%44.6%47.1%49.6%55.9%42.1%
Discount to 52-Week High 7/24/15 102.46(29.5%)(2.4%)3.5%5.4%7.4%9.3%11.3%13.2%15.2%17.1%22.0%10.1%
Premium to 52-Week Low 2/16/16 51.7539.5%93.2%104.8%108.7%112.6%116.4%120.3%124.2%128.0%131.9%141.5%105.5%
Fully Diluted Shares Outstanding 83.59986.16685.88585.82385.76085.69685.63285.56788.17188.10488.014
Implied Equity Value $6,035$8,617$9,104$9,269$9,434$9,598$9,762$9,926$10,404$10,573$11,002
Plus: Debt ² $315$315$315$315$315$315$315$315$5$5$5
Less: Cash ($387)($387)($387)($387)($387)($387)($387)($387)($387)($387)($387)
Implied Enterprise Value $5,963$8,544$9,032$9,197$9,361$9,526$9,690$9,854$10,022$10,190$10,620
Financial Multiples: Statistic
Reported
TEV / RevenueLTM (3/31/16) $792.9 7.5x10.8x11.4x11.6x11.8x12.0x12.2x12.4x12.6x12.9x13.4x9.2x
Wall Street Consensus
TEV / RevenueCY2016E $966.86.2x8.8x9.3x9.5x9.7x9.9x10.0x10.2x10.4x10.5x11.0x7.8x
TEV / RevenueNTM (3/31/17) ³ 1,028.3 5.8x8.3x8.8x8.9x9.1x9.3x9.4x9.6x9.7x9.9x10.3x7.4x8.0x
TEV / RevenueCY2017E 1,226.34.9x7.0x7.4x7.5x7.6x7.8x7.9x8.0x8.2x8.3x8.7x6.3x
Source: Capital IQ, Napa and Selected Public SaaS Companies Filings, Wall Street Research
1. Selected Precedent Transactions premiums represent premiums to 1-day prior, 1-month, 1-year average stock price, 1-year high, and 1-year low stock prices prior to deal announcement, respectively
2. Assumes conversion of $310mm of convertible debt at prices above $116.10/share. Assumes additional make whole shares related to convertible debt at CIC [ 1 ]
3. NTM represents fiscal quarter ending March 31 for Napa, and Wall Street projections for next four fiscal quarters ended for Selected Public SaaS Companies
|
Selected Public SaaS Companies
[Graphic Appears Here]
As of June 29, 2016 RevenueGrossEBITDALTEnterprise Value /Enterprise Value /
Enterprise Revenue GrowthMargin Margin GrowthRevenueEBITDA ¹
($ in millions) Value CY16E15A-16E 16E-17E CY16ECY16ERateLTMCY16ECY17ECY16ECY17E
Selected Public SaaS Companies
salesforce.com, inc. $56,045 $8,31424.7%21.6%76.9%19.5%30.6%7.9x6.7x5.5x34.6x26.4x
Workday, Inc. 14,844 1,55533.7%30.7%71.9%8.5%38.3%11.8x9.5x7.3xn/mn/m
ServiceNow, Inc. 11,806 1,37036.3%30.2%75.0%17.9%43.9%10.7x8.6x6.6x48.0x30.7x
Palo Alto Networks, Inc. 11,708 1,58325.5%31.5%77.4%21.6%43.7%9.3x7.4x5.6x34.2x23.2x
Splunk, Inc. 7,311 89734.2%28.4%85.8%8.2%50.0%10.0x8.2x6.3xn/mn/m
The Ultimate Software Group, Inc. 6,078 77926.1%21.9%63.3%24.9%23.3%9.2x7.8x6.4x31.4x25.3x
Cornerstone OnDemand, Inc. 2,230 43227.3%24.0%72.2%7.7%20.0%6.1x5.2x4.2xn/m41.2x
Overall Mean $2,13329.7%26.9%74.6%15.5%35.7%9.3x7.6x6.0x37.0x29.3x
Overall Median 1,37027.3%28.4%75.0%17.9%38.3%9.3x7.8x6.3x34.4x26.4x
Napa (Wall Street) $5,963 $96730.4%26.8%69.8%8.0%44.4%7.5x6.2x4.9xn/mn/m
Source: Capital IQ, Napa and Selected Public SaaS Company Filings
Note: All years represent calendar years [ 2 ]
1. EBITDA multiples above 50x are shown as n/m
|
Selected Precedent Transactions
[Graphic Appears Here]
Date Form ofLTMLTM to NTMImplied TEV to
Announced Target AcquirorConsideration Revenue ¹Revenue Growth ² Implied TEVLTM RevenueNTM Revenue
06/01/16 Demandware, Inc. salesforce.com, inc.Cash$25426.0%$2,78811.0x8.7x
10/21/15 SolarWinds, Inc. Silver Lake; Thoma Bravo, LLCCash48614.0%4,4469.2x8.0x
12/22/14 DataLogix Holdings, Inc. ³ Oracle CorporationCash10339.4%1,18911.6x8.3x
09/18/14 Concur Technologies, Inc. SAP America, Inc.Cash66821.2%8,59212.9x10.6x
06/13/14 OpenTable, Inc. The Priceline Group Inc.Cash19819.0%2,57013.0x10.9x
12/20/13 Responsys, Inc. Oracle CorporationCash19417.5%1,4577.5x6.4x
06/04/13 ExactTarget, Inc. salesforce.com, inc.Cash31723.9%2,5398.0x6.5x
12/20/12 Eloqua, Inc. Oracle CorporationCash9019.4%8729.7x8.1x
08/27/12 Kenexa Corp. IBMCash31825.0%1,2984.1x3.3x
05/22/12 Ariba Inc. SAP America, Inc.Cash50213.3%4,4118.8x7.8x
02/09/12 Taleo Corp. Oracle CorporationCash30918.3%1,9426.3x5.3x
12/03/11 SuccessFactors, Inc. SAP America, Inc.Cash29237.9%3,57112.2x8.9x
10/24/11 Rightnow Technologies, Inc. Oracle CorporationCash21614.1%1,6067.4x6.5x
Average 22.3%9.3x7.6x
Median 19.4%9.2x8.0x
Napa $79329.7%$5,9637.5x5.8x
Sources: Capital IQ, Target and Acquiror Filings, Wall Street Research
1. LTM revenue for precedent transactions represents the revenue in the four fiscal quarters prior to the transaction
2. NTM revenue for precedent transactions represents forecasted revenue for the four fiscal quarters following the transaction
3. DataLogix Holdings, Inc. financial information was provided by Orlando Management, as DataLogix Holdings, Inc. was private at the time of transaction [ 3 ]
4. LTM revenue as of 3/31/16, NTM revenue as of 3/31/17 per Wall Street Research
|
Napa Discounted Cash Flow Analysis (Orlando Incremental Model)
[Graphic Appears Here]
The analysis below is not a standalone DCF of Napa, and instead illustrates the DCF value of the incremental impact of Napa to Orlando s revenue and cash flows and includes the impact of synergies and other benefits that are not available to Napa shareholders on a standalone basis
For the Fiscal Year Ended May 31,Terminal
($ in millions) 2017E2018E2019E2020E2021EValue
Total Revenue $1,034$1,324$1,663$2,058$2,489
% Growth 28.0%25.7%23.7%21.0%
Non-GAAP EBIT 2203725988571,152
% Margin 21.3%28.1%35.9%41.6%46.3%
Less: Cash Taxes ¹ (77)(130)(209)(300)(403)
Plus: Depreciation & Amortization ² 41536782100
Less: Stock-based Compensation ³ (155)(155)(155)(155)(155)
(41)(53)(67)(82)(100)
Unlevered Free Cash Flow ($12)$87$234$402$594$19,912
% Growth NM168.9%72.1%47.8%
DISCOUNTED CASH FLOW ANALYSIS: SENSITIVITY TABLES
Implied Share PriceImplied Perpetuity Growth Rate
Discount LTM Revenue Exit MultipleDiscountLTM Revenue Exit Multiple
Rate 7.0x 7.5x8.0x8.5x9.0xRate7.0x7.5x8.0x8.5x9.0x
9.0% $144.30 $153.66$162.96$172.28$181.569.0%5.4%5.6%5.8%6.0%6.2%
10.0% 138.08 147.05155.96164.85173.7610.0%6.4%6.6%6.8%7.0%7.2%
11.0% 132.17 140.75149.33157.82166.3311.0%7.3%7.6%7.8%8.0%8.1%
12.0% 126.53 134.80142.98151.17159.2912.0%8.3%8.5%8.8%8.9%9.1%
13.0% 121.21 129.09136.98144.81152.6213.0%9.3%9.5%9.7%9.9%10.1%
Source: Orlando Management, Napa Filings
Note: Analysis reflects Napa under Orlando ownership. Assumed date of 5/31/16.
sumes 35% tax rate, per Orlando Management
sumed to be 4% of annual revenue, in-line with Macquarie research estimates for the period
d to be 15% of annual revenue in FY2017E (constant thereafter)
4. Assumed to equal annual depreciation & amortization expense, per Orlando Management [ 4 ]
5. Assumed to be zero, per Orlando Management
|
[Graphic Appears Here]
6/29/13 9/29/13 12/29/133/29/146/29/149/29/1412/29/143/29/156/29/159/29/1512/29/153/29/166/29/16
VolumeStock Price
1 July 25, 2013: Announces Second Quarter 2013 5 July 24, 2014: Announces Second Quarter 20149 July 23, 2015: Announces Second Quarter 2015
Financial Results (beat analyst revenue Financial Results (beat analyst revenueFinancial Results (beat analyst revenue
expectations) expectations)expectations); Appoints Jim McGeever as
President
2 October 24, 2013: Announces Third Quarter 2013 6 October 23, 2014: Announces Third Quarter 201410 October 22, 2015: Announces Third Quarter 2015
Financial Results (beat analyst revenue Financial Results (beat analyst revenueFinancial Results (missed analyst revenue
expectations) expectations)expectations)
11 January 28, 2016: Announces Fourth Quarter and
3 January 30, 2014: Announces Fourth Quarter and 7 January 29, 2015: Announces Fourth Quarter andFiscal 2015 Financial Results (beat analyst
Fiscal 2013 Financial Results (beat analyst Fiscal 2014 Financial Results (beat analystrevenue expectations)
revenue expectations) revenue expectations)
12 February 5, 2016: Cloud-Based Shares Drop
Following Tableaus Forecasted Industry Softness
4 April 28, 2014: Announces First Quarter 2014 8 April 23, 2015: Announces First Quarter 2015
Financial Results (beat analyst revenue Financial Results (beat analyst revenue
expectations) expectations); Signs Definitive Agreement to13 April 28, 2016: Announces First Quarter 2016
Acquire Bronto SoftwareFinancial Results (beat analyst revenue
expectations)
Source: Napa Website, Capital IQ [ 5 ]
Note: All information on Napa based solely on publicly available information; data as of 6/29/16
|
3-Year Relative Share Price Trading
[Graphic Appears Here]
TRADING GAIN / LOSS
Selected
Public SaaS
Napa NASDAQCompanies
1-Month (9.0%) (3.4%)(4.4%)
3-Month 7.0% (1.4%)2.0%
6-Month (15.8%) (6.4%)(9.0%)
1-Year (20.4%) (3.6%)(0.0%)
2-Year (16.9%) 8.4%24.0%
3-Year (21.7%) 39.2%81.5%
[Graphic Appears Here]
|
3-Year Relative EV / Forward Revenue Multiple Trading
[Graphic Appears Here]
SUMMARY AVERAGE STATISTICS
Selected
Public SaaS
Napa Companies
1-Month Avg. 6.1x 6.8x
3-Month Avg. 6.0x 6.9x
6-Month Avg. 5.8x 6.8x
1-Year Avg. 6.9x 7.6x
2-Year Avg. 8.7x 8.2x
3-Year Avg. 10.4x 8.9x
[Graphic Appears Here]
|
Contact Information
[Graphic Appears Here]
Moelis & Company LLC is a U.S.-registered broker dealer and a member of FINRA & SIPC.
Moelis & Company LLC
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Tel: (310) 443-2300
399 Park Avenue, 5th Floor
New York, NY 10022
Tel: (212) 883-3800
[ 8 ]
Exhibit (c)(14)
|
STRICTLY CONFIDENTIAL
Project Napa
[Graphic Appears Here]
Update Materials for the Special Committee of the Board of Directors
July 8, 2016
|
Update
[Graphic Appears Here]
Certain of Napa s operating statistics fall on the higher end of the range of those statistics for companies used in the Selected Public SaaS Companies and the Selected Precedent Transactions, and may justify utilizing materially higher multiples than the median multiples illustrated below
Selected
PublicSelected
SaaSPrecedent
OrlandoOrlandoNapa Illustrative Share PriceNapaNapaCompanies Transactions ¹
Current Proposal ResponseResponse Response
(7/7/16)(6/1/16)(6/9/16)(6/11/16)(6/6/16)
($ in millions, except per share data) $73.02$100.00$106.00$108.00$110.00$112.00$114.00$116.00$118.00$120.00$125.00MedianMedian
Premiums Date Statistic
% Current 7/7/16 $73.0236.9%45.2%47.9%50.6%53.4%56.1%58.9%61.6%64.3%71.2%34.7%
% 1-Month Prior Average 6/7/16 76.72(4.8%)30.3%38.2%40.8%43.4%46.0%48.6%51.2%53.8%56.4%62.9%45.4%
% 1-Year Prior Average 7/7/15 79.84(8.5%)25.2%32.8%35.3%37.8%40.3%42.8%45.3%47.8%50.3%56.6%42.1%
Discount to 52-Week High 7/24/15 102.46(28.7%)(2.4%)3.5%5.4%7.4%9.3%11.3%13.2%15.2%17.1%22.0%10.1%
Premium to 52-Week Low 2/16/16 51.7541.1%93.2%104.8%108.7%112.6%116.4%120.3%124.2%128.0%131.9%141.5%105.5%
Fully Diluted Shares Outstanding 83.62086.16685.88585.82385.76085.69685.63285.56788.17188.10488.014
Implied Equity Value $6,106$8,617$9,104$9,269$9,434$9,598$9,762$9,926$10,404$10,573$11,002
Plus: Debt ² $315$315$315$315$315$315$315$315$5$5$5
Less: Cash ($387)($387)($387)($387)($387)($387)($387)($387)($387)($387)($387)
Implied Enterprise Value $6,034$8,544$9,032$9,197$9,361$9,526$9,690$9,854$10,022$10,190$10,620
Financial Multiples: Statistic
Reported
TEV / RevenueLTM (3/31/16) $792.9 7.6x10.8x11.4x11.6x11.8x12.0x12.2x12.4x12.6x12.9x13.4x9.2x
Wall Street Consensus
TEV / RevenueCY2016E $966.66.2x8.8x9.3x9.5x9.7x9.9x10.0x10.2x10.4x10.5x11.0x8.1x
TEV / RevenueNTM (3/31/17) ³ 1,028.3 5.9x8.3x8.8x8.9x9.1x9.3x9.4x9.6x9.7x9.9x10.3x7.6x8.0x
TEV / RevenueCY2017E 1,226.34.9x7.0x7.4x7.5x7.6x7.8x7.9x8.0x8.2x8.3x8.7x6.3x
Source: Capital IQ, Napa and Selected Public SaaS Companies Filings, Wall Street Research
1. Selected Precedent Transactions premiums represent premiums to 1-day prior, 1-month, 1-year average stock price, 1-year high, and 1-year low stock prices prior to deal announcement, respectively
2. Assumes conversion of $310mm of convertible debt at prices above $116.10/share. Assumes additional make whole shares related to convertible debt at CIC [ 1 ]
3. NTM represents fiscal quarter ending March 31 for Napa, and Wall Street projections for next four fiscal quarters ended for Selected Public SaaS Companies
|
Selected Public SaaS Companies
[Graphic Appears Here]
As of July 7, 2016 RevenueGrossEBITDALTEnterprise Value /Enterprise Value /
Enterprise Revenue GrowthMargin Margin GrowthRevenueEBITDA ¹
($ in millions) Value CY16E15A-16E 16E-17E CY16ECY16ERateLTMCY16ECY17ECY16ECY17E
Selected Public SaaS Companies
salesforce.com, inc. $55,869 $8,31424.7%21.7%76.9%20.1%30.6%7.9x6.7x5.5x33.4x25.1x
Workday, Inc. 14,822 1,55433.7%30.7%71.9%8.5%38.3%11.8x9.5x7.3xn/mn/m
Palo Alto Networks, Inc. 11,545 1,58325.5%31.5%77.4%21.6%43.7%9.2x7.3x5.5x33.7x22.9x
ServiceNow, Inc. 11,542 1,37036.2%30.2%75.0%17.9%43.9%10.5x8.4x6.5x47.0x30.0x
Splunk, Inc. 7,245 89734.2%28.4%85.8%8.4%50.0%9.9x8.1x6.3xn/mn/m
The Ultimate Software Group, Inc. 6,308 77926.1%21.9%63.3%24.9%23.3%9.6x8.1x6.6x32.5x26.2x
Cornerstone OnDemand, Inc. 2,247 43227.2%24.1%72.2%7.9%20.0%6.2x5.2x4.2xn/m40.2x
Overall Mean $2,13329.7%26.9%74.6%15.6%35.7%9.3x7.6x6.0x36.6x28.9x
Overall Median 1,37027.2%28.4%75.0%17.9%38.3%9.6x8.1x6.3x33.5x26.2x
Napa (Wall Street) $6,034 $96730.4%26.9%69.8%8.0%44.4%7.6x6.2x4.9xn/mn/m
Source: Capital IQ, Napa and Selected Public SaaS Company Filings
Note: All years represent calendar years [ 2 ]
1. EBITDA multiples above 50x are shown as n/m
|
Selected Precedent Transactions
[Graphic Appears Here]
Date Form ofLTMLTM to NTMImplied TEV to
Announced Target AcquirorConsideration Revenue ¹Revenue Growth ² Implied TEVLTM RevenueNTM Revenue
06/01/16 Demandware, Inc. salesforce.com, inc.Cash$25426.0%$2,78811.0x8.7x
10/21/15 SolarWinds, Inc. Silver Lake; Thoma Bravo, LLCCash48614.0%4,4469.2x8.0x
12/22/14 DataLogix Holdings, Inc. ³ Oracle CorporationCash10339.4%1,18911.6x8.3x
09/18/14 Concur Technologies, Inc. SAP America, Inc.Cash66821.2%8,59212.9x10.6x
06/13/14 OpenTable, Inc. The Priceline Group Inc.Cash19819.0%2,57013.0x10.9x
12/20/13 Responsys, Inc. Oracle CorporationCash19417.5%1,4577.5x6.4x
06/04/13 ExactTarget, Inc. salesforce.com, inc.Cash31723.9%2,5398.0x6.5x
12/20/12 Eloqua, Inc. Oracle CorporationCash9019.4%8729.7x8.1x
08/27/12 Kenexa Corp. IBMCash31825.0%1,2984.1x3.3x
05/22/12 Ariba Inc. SAP America, Inc.Cash50213.3%4,4118.8x7.8x
02/09/12 Taleo Corp. Oracle CorporationCash30918.3%1,9426.3x5.3x
12/03/11 SuccessFactors, Inc. SAP America, Inc.Cash29237.9%3,57112.2x8.9x
10/24/11 Rightnow Technologies, Inc. Oracle CorporationCash21614.1%1,6067.4x6.5x
Average 22.3%9.3x7.6x
Median 19.4%9.2x8.0x
Napa $79329.7%$6,0347.6x5.9x
Sources: Capital IQ, Target and Acquiror Filings, Wall Street Research
1. LTM revenue for precedent transactions represents the revenue in the four fiscal quarters prior to the transaction
2. NTM revenue for precedent transactions represents forecasted revenue for the four fiscal quarters following the transaction
3. DataLogix Holdings, Inc. financial information was provided by Orlando Management, as DataLogix Holdings, Inc. was private at the time of transaction [ 3 ]
4. LTM revenue as of 3/31/16, NTM revenue as of 3/31/17 per Wall Street Research
|
Napa Discounted Cash Flow Analysis (Orlando Incremental Model)
[Graphic Appears Here]
The analysis below is not a standalone DCF of Napa, and instead illustrates the DCF value of the incremental impact of Napa to Orlando s revenue and cash flows and includes the impact of synergies and other benefits that are not available to Napa shareholders on a standalone basis
For the Fiscal Year Ended May 31,Terminal
($ in millions) 2017E2018E2019E2020E2021EValue
Total Revenue $1,034$1,324$1,663$2,058$2,489
% Growth 28.0%25.7%23.7%21.0%
Non-GAAP EBIT 2203725988571,152
% Margin 21.3%28.1%35.9%41.6%46.3%
Less: Cash Taxes ¹ (77)(130)(209)(300)(403)
Plus: Depreciation & Amortization ² 41536782100
Less: Stock-based Compensation ³ (155)(155)(155)(155)(155)
(41)(53)(67)(82)(100)
Unlevered Free Cash Flow ($12)$87$234$402$594$19,912
% Growth NM168.9%72.1%47.8%
DISCOUNTED CASH FLOW ANALYSIS: SENSITIVITY TABLES
Implied Share PriceImplied Perpetuity Growth Rate
Discount LTM Revenue Exit MultipleDiscountLTM Revenue Exit Multiple
Rate 7.0x 7.5x8.0x8.5x9.0xRate7.0x7.5x8.0x8.5x9.0x
9.0% $144.30 $153.66$162.96$172.28$181.569.0%5.4%5.6%5.8%6.0%6.2%
10.0% 138.08 147.05155.96164.85173.7610.0%6.4%6.6%6.8%7.0%7.2%
11.0% 132.17 140.75149.33157.82166.3311.0%7.3%7.6%7.8%8.0%8.1%
12.0% 126.53 134.80142.98151.17159.2912.0%8.3%8.5%8.8%8.9%9.1%
13.0% 121.21 129.09136.98144.81152.6213.0%9.3%9.5%9.7%9.9%10.1%
Source: Orlando Management, Napa Filings
Note: Analysis reflects Napa under Orlando ownership. Assumed date of 5/31/16.
sumes 35% tax rate, per Orlando Management
sumed to be 4% of annual revenue, in-line with Macquarie research estimates for the period
d to be 15% of annual revenue in FY2017E (constant thereafter)
4. Assumed to equal annual depreciation & amortization expense, per Orlando Management [ 4 ]
5. Assumed to be zero, per Orlando Management
|
Summary of Selected Wall Street Research on Napa
($ in millions except per share data)
Revenue Estimate
Broker DateRatingTargetQ2 2016E2016E2017E
Cowen 06/23/16 Underweight$70.00$230.5$964.9$1,212.7
BMO Capital Markets 06/14/16 Neutral90.00231.9968.51,242.0
William Blair 05/23/16 OverweightN/A230.1965.01,212.0
Macquarie 05/20/16 Neutral76.00229.8966.21,228.3
Morgan Stanley 05/19/16 Underweight60.00230.0970.01,220.0
JMP Securities 05/18/16 Overweight100.00230.7970.01,268.1
Mizuho Securities USA, Inc. 05/18/16 Neutral70.00230.6959.81,195.2
Pacific Coast SecuritiesKBCM 05/18/16 NeutralN/A230.0965.11,223.5
Deutsche Bank 05/18/16 Overweight95.00230.4974.41,248.5
RBC 05/17/16Overweight93.00230.0968.31,235.8
MKM Partners 05/05/16 Overweight92.00231.0966.21,217.7
FBN Securities 05/02/16 Overweight100.00231.0965.11,231.1
Societe Generale Cross Asset Research 05/02/16 Underweight76.00N/A967.21,222.3
Raymond James 04/29/16 UnderweightN/A230.7971.51,239.0
SunTrust Robinson Humphrey 04/29/16 Overweight93.00230.3965.31,242.0
BTIG 04/29/16NeutralN/A230.0964.61,220.0
Piper Jaffray 04/29/16 Neutral81.00229.9965.11,223.9
MUFG Securities Americas Inc. 04/29/16 Overweight87.00229.5969.91,246.3
Barclays 04/29/16 Neutral74.00231.0965.91,209.2
JP Morgan 04/29/16 Overweight94.00230.2957.51,170.8
Credit Suisse 04/29/16 Overweight90.00230.8972.71,281.4
Canaccord Genuity 04/28/16 Overweight100.00231.0970.01,227.5
Benchmark Company 02/01/16 Neutral65.00230.0963.21,221.0
High Target $100.00$231.9$974.4$1,281.4
Median Target 90.00230.4966.21,223.9
Average Target 84.53230.4966.81,227.8
Low Target 60.00229.5957.51,170.8
Current Share Price (As of 07/07/16) $73.02
Napa Q216 Preliminary Results (As of 07/06/16) N/A~$231.0~$965.0 ąN/A
Sources: Capital IQ, ThomsonOne and available Wall Street Research [ 5 ]
Note: N/A denotes information not available to Moelis
1. Napa did not provide additional guidance but noted that it expected to fall near the middle of its previously stated 2016 revenue guidance of $955mm $975mm
|
[Graphic Appears Here]
7/7/13 10/7/13 1/7/144/7/147/7/1410/7/141/7/154/7/157/7/1510/7/151/7/164/7/167/7/16
VolumeStock Price
1 July 25, 2013: Announces Second Quarter 2013 5 July 24, 2014: Announces Second Quarter 20149 July 23, 2015: Announces Second Quarter 2015
Financial Results (beat analyst revenue Financial Results (beat analyst revenueFinancial Results (beat analyst revenue
expectations) expectations)expectations); Appoints Jim McGeever as
President
2 October 24, 2013: Announces Third Quarter 2013 6 October 23, 2014: Announces Third Quarter 201410 October 22, 2015: Announces Third Quarter 2015
Financial Results (beat analyst revenue Financial Results (beat analyst revenueFinancial Results (missed analyst revenue
expectations) expectations)expectations)
11 January 28, 2016: Announces Fourth Quarter and
3 January 30, 2014: Announces Fourth Quarter and 7 January 29, 2015: Announces Fourth Quarter andFiscal 2015 Financial Results (beat analyst
Fiscal 2013 Financial Results (beat analyst Fiscal 2014 Financial Results (beat analystrevenue expectations)
revenue expectations) revenue expectations)
12 February 5, 2016: Cloud-Based Shares Drop
Following Tableaus Forecasted Industry Softness
4 April 28, 2014: Announces First Quarter 2014 8 April 23, 2015: Announces First Quarter 2015
Financial Results (beat analyst revenue Financial Results (beat analyst revenue
expectations) expectations); Signs Definitive Agreement to13 April 28, 2016: Announces First Quarter 2016
Acquire Bronto SoftwareFinancial Results (beat analyst revenue
expectations)
Source: Napa Website, Capital IQ [ 6 ]
Note: All information on Napa based solely on publicly available information; data as of 7/7/16
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3-Year Relative Share Price Trading
[Graphic Appears Here]
TRADING GAIN / LOSS
Selected
Public SaaS
Napa NASDAQCompanies
1-Month (13.9%) (2.1%)(6.5%)
3-Month 3.8% 0.2%0.2%
6-Month (8.3%) 3.6%(0.9%)
1-Year (18.4%) (2.8%)(0.6%)
2-Year (15.1%) 9.2%27.2%
3-Year (22.7%) 39.4%77.6%
[Graphic Appears Here]
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3-Year Relative EV / Forward Revenue Multiple Trading
[Graphic Appears Here]
SUMMARY AVERAGE STATISTICS
Selected
Public SaaS
Napa Companies
1-Month Avg. 5.9x 6.7x
3-Month Avg. 6.0x 6.9x
6-Month Avg. 5.7x 6.7x
1-Year Avg. 6.8x 7.5x
2-Year Avg. 8.6x 8.2x
3-Year Avg. 10.4x 8.9x
[Graphic Appears Here]
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Contact Information
[Graphic Appears Here]
Moelis & Company LLC is a U.S.-registered broker dealer and a member of FINRA & SIPC.
Moelis & Company LLC
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Tel: (310) 443-2300
399 Park Avenue, 5th Floor
New York, NY 10022
Tel: (212) 883-3800
[ 9 ]
Exhibit (c)(15)
|
STRICTLY CONFIDENTIAL
Project Napa
Presentation to the Special Committee of the Board of Directors
July 25, 2016
|
Table of Contents
I. Overview 3 II. Napa Public Market Perspectives 9 III. Napa Financial Analysis 16
Appendix
A. Additional Valuation Detail 31 B. Napa Overview 39
[ 1 ]
|
Disclaimer
This presentation has been prepared by Moelis & Company LLC (Moelis) for exclusive use of the Special Committee of the Board of Directors of Orlando Corporation (Orlando or the Company) in considering the transaction described herein based on information provided by the Company and upon information from Napa Inc., and from third party sources. Moelis has not assumed any responsibility for independently verifying the accuracy of such information, and disclaims any liability with respect to the information herein. In this presentation, Moelis, at the direction of the Special Committee of the Board of Directors of Orlando, has used certain projections, forecasts or other forward-looking statements with respect to the Company and/or other parties involved in the transaction which were provided to Moelis by the Company and/or such other parties and which Moelis has assumed, at the direction of the Special Committee of the Board of Directors of Orlando, were prepared based on the best available estimates and judgments of the management of the Company and/or such other parties as to the future performance of the Company and/or such other parties. This presentation is provided as of the date hereof and Moelis assumes no obligation to update it or correct any information herein.
This presentation is solely for informational purposes. This presentation is not intended to provide the sole basis for any decision on any transaction and is not a recommendation with respect to any transaction. The recipient should make its own independent business decision based on all other information, advice and the recipients own judgment. This presentation is not an offer to sell or a solicitation of an offer to buy any business, security, option, commodity, future, loan or currency. It is not a commitment to underwrite any security, to loan any funds or to make any investment. Moelis does not offer tax, accounting, actuarial or legal advice. Absent Moelis prior written consent, this material, whether in whole or in part, may not be copied, photocopied, or duplicated in any form by any means, or redistributed.
Moelis and its related investment banking entities provide mergers and acquisitions, recapitalization, restructuring, corporate finance and other financial advisory services to clients and affiliates of Moelis provide investment management services to clients. Personnel of Moelis or such affiliates may make statements or provide advice that is contrary to information included in this material. The proprietary interests of Moelis or its affiliates may conflict with your interests. In addition, Moelis and its affiliates and their personnel may from time to time have positions in or effect transactions in securities referred to in this material (or derivatives of such securities), or serve as a director of companies referred to in this presentation. Moelis and its affiliates may have advised, may seek to advise and may in the future advise or invest in companies referred to in this presentation.
This presentation is confidential and may not be disclosed to any other person or relied upon without the prior written consent of Moelis.
[ 2 ]
|
I. Overview
|
Background
Moelis has held discussions with the Special Committee (the Special Committee or the Committee) of the Board of Directors of Orlando, Orlandos management, Napas management and its advisors, and has also reviewed a number of public and private information sources in forming its perspectives
Moelis has been retained by the Special Committee to act as financial advisor to the Committee in connection with the Committees consideration of a potential transaction involving Napa and alternatives thereto, following an initial meeting with the Committee on April 19, 2016
Orlandos Committee was assembled in part because of common ownership between Napa and Orlando, with E and family owning ~46% of Napa and ~27% of Orlando common shares outstanding
On May 20, 2016, the Committee held a meeting with Orlando management, Moelis, and Skadden to discuss the merits of a potential transaction with Napa, with Moelis and Orlando management discussing their preliminary perspectives based on due diligence that included: On May 5, 2016, Moelis, Orlando, Skadden, and a representative from the Committee attended a management presentation with members of Napa management and Napas advisors to discuss a number of topics, including an overview of Napas business, a review of Napas go-to-market approach, and a review of Napas financials
On May 11, 2016, Moelis and Orlando held a telephonic discussion with Napas CFO to review a number of topics around Napas financials and related business considerations At the May 20, 2016 meeting, the Committee determined it was appropriate to explore a potential transaction with Napa. Following the Committees approval, Moelis and Orlando held a telephonic discussion on May 23, 2016 to review Orlandos preliminary financial model for Napa and assumptions underlying the projections.
On May 27, 2016, the Committee held a meeting with Orlando, Moelis, and Skadden to discuss Moelis and Orlandos further findings and preliminary financial analysis. At this meeting, the Committee authorized Moelis to communicate a proposal to Napas advisors that Orlando would be prepared to enter into a transaction at $100 / share for Napa.
On June 1, 2016, at the direction of the Committee, Moelis communicated Orlandos initial offer of $100 / share for Napa to Napas financial advisors, with additional price negotiations between Orlando, Napa, and its advisors continuing through July 15, 2016 and multiple additional Committee meetings during this period
During this period, on July 6, 2016, Moelis and Orlando held a telephonic discussion with Napas CFO to review Napas Q2 preliminary financial results and related business considerations, with follow-up financial information provided by Napa to Orlando through its advisors on July 10 and July 11, 2016
[4]
|
Background (contd)
On July 13, 2016, following a Committee meeting, the Committee authorized Moelis to offer to enter into a transaction at $109 / share, which Moelis communicated to Napas financial advisors and Napa accepted through its advisors
Beginning on July 15, 2016, Orlando and Napa entered into an exclusivity agreement at a potential transaction price of $109 / share, commencing a two-week diligence period during which multiple telephonic and in-person diligence sessions occurred between Orlando, Napa, and their respective advisors to cover business areas that included: Inbound Licensing Finance & Accounting Business Outlook Tax Products & Technology Human Resources Pricing Sales & Marketing
In addition to due diligence sessions and conference calls with Orlando, Skadden, the Committee, and Napa and its advisors, Moelis reviewed:
Orlando managements financial projections for Napa under Orlando ownership, demonstrating the incremental impact of Napa to Orlandos revenue and cash flows and including the impact of synergies and other benefits that are available only to Orlando pro forma for the acquisition Publicly available business and financial information relating to Orlando and Napa Information relating to the business, earnings, cash flow, balance sheet and prospects of Napa, including financial forecasts prepared by Napa Assumptions that were provided to Moelis by Orlando around Napas financial forecasts, relating to certain projection set components (e.g., working capital, capital expenditures, and depreciation and amortization assumptions) not received as part of
Napas standalone forecast
During the course of its engagement, Moelis held several conference calls with members of Orlando and the Committee to discuss due diligence findings and the potential acquisition:
April 19, 2016 May 27, 2016June 14, 2016July 8, 2016July 13, 2016 May 20, 2016June 8, 2016 June 30, 2016 July 12, 2016
Throughout the course of the engagement, Moelis operated as instructed by the Special Committee, and is not aware of any communications between Orlando management, the Committee, and E regarding a potential Napa transaction
[5]
|
Summary of Key Napa Process Events
$87.50 June 6, 2016: Qatalyst June 9, 2016: Moelis
communicates Napas communicates Orlandos
7
counter at $125/share 6 proposal of $106/share 16
$85.00 to Moelis to Qatalyst
8
$82.50 July 12, 2016: Moelis
communicates Orlandos
4 5 offer of $106/share to 18
$80.00 9 11 Qatalyst; Qatalyst
3 17
Price 2 communicates Napas
$77.50 counter at $111/share to
k
c Moelis
o 10
St $75.00
Napa 13 14 15
June 1, 2016: Moelis June 11, 2016: Qatalyst
$72.50 communicates Orlandos communicates Napas
1 July 13, 2016: Moelis
initial proposal of counter at $120/share communicates Orlandos
$70.00 $100/share to Qatalyst to Moelis offer of $109/share to
12 Qatalyst, and Qatalyst
$67.50 communicates Napas
acceptance to Moelis
Orlando Offer Napa Offer Special Committee Meeting Other Key Events
$65.00
1 April 19, 2016: Special Committee Meeting; Moelis 7 June 8, 2016: Special Committee Meeting; Committee June 30, 2016: Special Committee Meeting; Committee
meets with the Committee to evaluate the merits of a approves submission of proposal of $106 / share to approves reviewing Napas preliminary Q2 financials
potential transaction with Napa, and if determined Napas advisors
appropriate, assist in a potential transaction 14 July 6, 2016: Napa provides preliminary Q2 financials
8 June 9, 2016: Moelis communicates Orlandos
2 May 13, 2016: Special Committee Meeting 1 proposal of $106/share to Qatalyst 15 July 8, 2016: Special Committee Meeting
9 June 11, 2016: Qatalyst communicates Napas counter
3 May 20, 2016: Special Committee Meeting; at $120/share to Moelis 16 July 12, 2016: Napa stock price increases ~11% on rumors of an
Committee determines it is appropriate to explore a Orlando acquisition; Special Committee Meeting; Committee
potential transaction with Napa 10 June 14, 2016: Special Committee Meeting; Committee approves submission of proposal of $106 / share to Napas
4 May 27, 2016: Special Committee Meeting; determines not to submit a counterproposal and to advisors; Moelis communicates Orlandos offer of $106/share
Committee approves submission of initial proposal cease price negotiations to Qatalyst; Qatalyst communicates Napas counter at
$111/share to Moelis
of $100 / share to Napas advisors 11 June 23, 2016: Brexit occurs after market close
5 June 1, 2016: Moelis communicates Orlandos initial 17 July 13, 2016: Special Committee Meeting; Committee approves
proposal of $100/share to Qatalyst 12 June 28, 2016: Qatalyst contacts Moelis to submission of proposal of $109 / share to Napas advisors;
communicate Napas interest in re-engaging in Moelis communicates offer to Qatalyst and Napa accepts
6 June 6, 2016: Qatalyst communicates Napas counter discussions at improved terms; re-open price through its advisors
at $125/share to Moelis negotiation 18 July 15, 2016: Orlando and Napa sign 2-week exclusivity
Source: Orlando Management, Capital IQ agreement, with targeted transaction announcement of 7/28/16
Note: Data as of 7/22/16
1. Moelis did not attend the May 13, 2016 Special Committee meeting
[ 6 ]
|
Orlando Offer Summary
ORLANDO OFFER IMPLIED VALUATION IMPLIED TRANSACTION MULTIPLES
($ in millions, except per share amounts)
TEV
Offer Price $109.00
Reported Statistic Multiple
Basic Shares Outstanding ¹ 80.922 RevenueLTM (6/30/16) ? 846.4 11.1x
Dilutive Securities and Make-Whole Shares ² 5.944
Fully Diluted Shares Outstanding 86.866 TEV
Implied Equity Value $9,468.4 Wall Street Consensus Statistic Multiple
RevenueCY2016E $966.1 9.7x
Plus: Debt (as of 06/30/16) ³ $295.5 RevenueNTM (6/30/17) 1,090.5 8.6x
Less: Cash (as of 06/30/16)(410.7) RevenueCY2017E 1,222.8 7.6x
Total Enterprise Value $9,353.2
EBITDACY2016E $81.7 NM
EBITDACY2017E 109.8 NM
Per Share Price Premium Price Premium
TEV
% Unaffected (as of 07/11/16) $75.85 43.7% Napa Management ? Statistic Multiple
% Current (as of 07/22/16) 84.72 28.7%
RevenueCY2016E $960.2 9.7x
% 1-Month Prior Avg. (beginning 06/22/16) 76.13 43.2%
RevenueNTM (6/30/17) 1,084.1 8.6x
% 1-Year Prior Avg. (beginning 07/22/15) 79.30 37.5%
RevenueCY2017E 1,218.3 7.7x
Premium to 52-Week High (as of 07/24/15) 102.46 6.4%
Premium to 52-Week Low (as of 02/16/16) 51.75 110.6% EBITDACY2016E NA NA
EBITDACY2017E NA NA
EBITDACY2017E NA
Source: Capital IQ as of 7/22/16, Napa Filings, Napa Management
1. As of 6/30/16 per capitalization table provided by Napa management and approved for Moelis use by Orlando
2. Calculated based on securities outstanding as of 6/30/16 per capitalization table provided by Napa management and approved for Moelis use by Orlando; uses treasury stock method and includes the effect of additional make-whole shares related to convertible debt at change in control per Orlando, with 7/22/16 make-whole date assumed to reflect conservatism. The fully diluted share count on this page is referred to as the Approved Napa Share Count in this presentation.
3. Includes notes payable and the value of convertible debt at offer price of $109 / share; excludes the effect of additional make-whole shares related to convertible debt at change in control per Orlando
4. Unaffected date as of 7/11/16; one day prior to rumors of an Orlando acquisition
5. All numbers reflects Wall Street Consensus as of 7/22/16 per ThomsonOne and may contain individual estimates not available to Moelis
6. Based on preliminary results and projections provided by Napa management
[7]
|
Orlando Offer Summary (contd)
PRICE
FINANCING
VOTING AGREEMENT
TERMINATION FEES
EXPENSE REIMBURSEMENT
UNAFFILIATED TENDER CONDITION
REPRESENTATIONS AND WARRANTIES
OTHER
Per Share Price: $109.00
Implied Market Cap 1, 2: $9,468 million Implied TEV 1: $9,353 million LTM 06/30/16 Revenue Multiple: 11.1x
Premium to unaffected stock price on 7/11/16: 43.7% Premium to current stock price on 7/22/16: 28.7%
No financing condition
Cash on hand used to fund the transaction
[To be determined]
[2.25%4.00%] of the aggregate equity value paid by Company to the Purchaser within two business days of the termination
Out-of-pocket fees and expenses incurred are [not] reimbursed; if reimbursed, the expense amount is [up to 1% of the aggregate equity value, creditable against the termination fee]
Requires the tender of a majority of the companys shares outstanding prior to the acceptance time, excluding shares owned by E Parties, Orlando or Officers and Directors of Napa
Representations and Warranties shall not survive the effective time of the merger
No Solicitation: Company will not directly or indirectly solicit, initiate or knowingly take action to facilitate or encourage the submission of any offer or proposal Unsolicited Proposal: Notification and information rights around the timing and status of a competing proposal Matching right: 5 days and 3 days upon further revisions
Source: Based on draft merger agreements dated 7/20/16 and 7/23/16, Napa filings, and 6/30/16 capitalization table provided by Napa management and approved for Moelis use by Orlando
1. Assumes transaction date of 7/22/16
2. Using Approved Napa Share Count, with market cap calculated based on securities outstanding as of 6/30/16 per capitalization table provided by Napa management and approved for Moelis use by Orlando
[8]
|
II. Napa Public Market Perspectives
|
Napa Annotated 3-Year Share Price Performance
$120 3 5.0
2
7
$110
8
$100 10 4.0
$90 5 6 15
1 4 13
9
$80 )
e m
3.0
Pric $70 14(m
k TRADING STATISTICS ume
Stoc 11 l
$60 Napa Vo
Napa Current $ 84.72 12 2.0 pa
$50 10-Day Average $ 81.14 Na
30-Day Average 76.13
$40
90-Day Average 78.21
$30 1-Year Average 79.30 1.0
2-Year Average 87.44
$20 52-Week High (07/24/15) 102.46
All-Time High (02/27/14) 119.63
$10 0.0
7/22/13 10/22/13 1/22/14 4/22/14 7/22/14 10/22/14 1/22/15 4/22/15 7/22/15 10/22/15 1/22/16 4/22/16 7/22/16
Volume Stock Price
1 July 25, 2013: Announces Second Quarter 2013 Financial 6 October 23, 2014: Announces Third Quarter 2014 11 January 28, 2016: Announces Fourth Quarter and Fiscal
Results (beat analyst revenue expectations) Financial Results (beat analyst revenue expectations) 2015 Financial Results (beat analyst revenue
expectations)
2 October 24, 2013: Announces Third Quarter 2013 7 January 29, 2015: Announces Fourth Quarter and Fiscal 12 February 5, 2016: Cloud-Based Shares Drop Following
Financial Results (beat analyst revenue expectations) 2014 Financial Results (beat analyst revenue Tableaus Forecasted Industry Softness
expectations)
3 January 30, 2014: Announces Fourth Quarter and Fiscal 8 April 23, 2015: Announces First Quarter 2015 Financial 13 April 28, 2016: Announces First Quarter 2016 Financial
2013 Financial Results (beat analyst revenue Results (beat analyst revenue expectations); Signs Results (beat analyst revenue expectations)
expectations) Definitive Agreement to Acquire Bronto Software
4 April 28, 2014: Announces First Quarter 2014 Financial 9 July 23, 2015: Announces Second Quarter 2015 Financial 14 June 23, 2016: Brexit Occurs After 6/23/16 Market
Results (beat analyst revenue expectations) Results (beat analyst revenue expectations); Appoints Jim Close
McGeever as President
5 July 24, 2014: Announces Second Quarter 2014 Financial 10 October 22, 2015: Announces Third Quarter 2015 15 July 12, 2016: Increases 11% on Rumors of an Orlando
Results (beat analyst revenue expectations) Financial Results (missed analyst revenue expectations) Acquisition
Source: Napa Website, Napa Management, Capital IQ
Note: All information on Napa based on publicly available information and Napa management guidance; data as of 7/22/16
[ 10 ]
|
Napas Quarterly Revenue History vs. Wall Street Consensus
FY2013 FY2014 FY2015 FY2016
($ in millions) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Reported:
RevenueActual $91.6 $101.0 $106.9 $115.0 $123.0 $131.8 $143.7 $157.9 $164.8 $177.3 $192.8 $206.2 $216.6 $230.8
% YoY Growth 32.2% 35.2% 33.9% 35.3% 34.2% 30.5% 34.4% 37.3% 34.0% 34.5% 34.2% 30.6% 31.4% 30.2%
Wall Street: ¹
RevenueConsensus Mean $91.0 $100.6 $105.7 $111.4 $120.9 $131.7 $141.0 $155.3 $161.5 $172.0 $193.5 $204.4 $213.4 $230.5
% YoY Growth 31.3% 34.6% 32.5% 31.1% 32.0% 30.4% 32.0% 35.1% 31.3% 30.5% 34.7% 29.5% 29.5% 30.0%
Difference:
Revenue Over / (Under) Consensus$ $0.6 $0.4 $1.2 $3.6 $2.0 $0.1 $2.6 $2.5 $3.3 $5.3($0.7) $1.8 $3.2 $0.3
Revenue YoY Growth Over / (Under) Consensus0.9% 0.6% 1.5% 4.2% 2.2% 0.1% 2.5% 2.2% 2.7% 4.0%(0.5%) 1.2% 1.9% 0.2%
Sources: Capital IQ, Napa Filings, Wall Street Research
Note: Wall Street year-over-year growth based on Wall Street consensus mean compared to Napas actual revenue results in the applicable prior year-over-year period
1. Represents average of Wall Street estimates as compiled by Capital IQ on the most recent date prior to Napas applicable earnings announcement; FY2016 Q2 consensus mean as of 7/22/16
[11]
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3-Year Relative Share Price Trading
TRADING GAIN / LOSS
Selected
Public SaaS
Napa NASDAQ Companies
1-Month 9.5% 5.0% 2.9%
3-Month 9.5% 3.4% 4.1%
6-Month 18.2% 10.5% 9.3%
1-Year(8.2%)(1.9%)(1.6%)
2-Year 3.3% 13.9% 42.0%
3-Year(8.7%) 40.9% 75.2%
220%
190%
160%
130%
100%
70%
40%
7/22/13 1/20/14 7/22/14 1/21/15 7/22/15 1/21/16 7/22/16
Napa NASDAQ Composite Index Selected Public SaaS Companies ¹
Source: Capital IQ
Note: All information on Napa based solely on publicly available information; data as of 7/22/16
1. Weighted by market capitalization; selected companies consist of Cornerstone OnDemand, Palo Alto Networks, salesforce.com, ServiceNow, Splunk, Ultimate Software, and Workday
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3-Year Relative EV / Forward Revenue Multiple Trading
SUMMARY AVERAGE STATISTICS
Selected
Public SaaS
Napa Companies
1-Month Avg. 5.9x 6.7x
3-Month Avg. 6.0x 6.9x
6-Month Avg. 5.7x 6.7x
1-Year Avg. 6.7x 7.4x
2-Year Avg. 8.5x 8.2x
3-Year Avg. 10.2x 8.9x
18.0x
15.0x
12.0x
9.0x
6.0x
3.0x
7/22/13 1/20/14 7/22/14 1/21/15 7/22/15 1/21/16 7/22/16
Napa Selected Public SaaS Companies ¹
Source: Capital IQ
Note: All information on Napa based solely on publicly available information; data as of 7/22/16
1. Weighted by market capitalization; selected companies consist of Cornerstone OnDemand, Palo Alto Networks, salesforce.com, ServiceNow, Splunk, Ultimate Software, and Workday
[13]
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Napa Historical Wall Street Analyst Recommendations
FY 2013 FY 2014 FY 2015 FY 2016
2 3
4 5
1 1 2 4
1 5
1 1 1 1
$115.42 14 14
11
14 $102.89 12 12 13 11
15 11 11 $110.20 $109.65 9
14 $107.94
15 $103.56 $102.96 $103.49
$95.96
$89.53 $88.15
$86.57
$78.97
13 13 13 12 12
$67.46 10 11 11 11 11 11
9 8
7
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
# of Buy # of Neutral # of Underweight Target Price
Target Price $67.46 $78.97 $89.53 $102.89 $115.42 $103.56 $95.96 $102.96 $110.20 $109.65 $107.94 $103.49 $86.57 $88.15 1
# of Analysts 23 25 25 23 23 23 24 26 29 30 27 28 28 26 1
Source: Capital IQ, Wall Street Research
Note: Reflects all available analyst recommendations with an opinion
1. FY2016 Q2 target price and number of analysts reflect available Napa Wall Street research to Moelis, incorporating all opinions from 4/28/16 (Napas FY2016 Q1 earnings date)
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Summary of Selected Wall Street Research on Napa
As the below pricing methodologies demonstrate, Napa is commonly valued on a revenue multiple basis by
Wall Street research analysts
($ in millions except per share data)
Revenue Estimate
Broker Date Rating Target Pricing Valuation Methodology 2016E 2017E
RBC 07/13/16 Buy $90.00 6.0x EV / CY 2017 Revenue $ 962.5 $1,195.6
Goldman Sachs 06/29/16 Underweight N/A N/A N/A N/A
Cowen 06/23/16 Underweight 70.00 4.6x EV / CY 2017 Revenue and 47x EV / FCF 964.9 1,212.7
BMO Capital Markets 06/14/16 Neutral 90.00 DCF 968.5 1,240.3
William Blair 05/23/16 Buy N/A N/A 965.0 1,212.0
Macquarie 05/20/16 Neutral 76.00 DCF 966.2 1,228.3
D.A. Davidson 05/20/16 Buy 130.00 N/A N/A N/A
Morgan Stanley 05/19/16 Underweight 60.00 DCF 970.0 1,220.0
JMP Securities 05/18/16 Buy 100.00 6.3x EV / CY 2017 Revenue 970.0 1,268.1
Mizuho Securities USA, Inc. 05/18/16 Neutral 70.00 N/A 959.8 1,195.2
Pacific Coast SecuritiesKBCM 05/18/16 Neutral N/A N/A 965.1 1,223.5
Deutsche Bank 05/18/16 Buy 95.00 6.0x EV / CY 2017 Revenue 974.4 1,248.5
MKM Partners 05/05/16 Buy 92.00 7x EV / Projected 4-quarter Billings 966.2 1,217.7
FBN Securities 05/02/16 Buy 100.00 DCF 965.1 1,231.1
Societe Generale Cross Asset Research 05/02/16 Underweight 76.00 5.5x EV / CY 2017 Revenue 967.2 1,222.3
Raymond James 04/29/16 Underweight N/A N/A 971.5 1,239.0
SunTrust Robinson Humphrey 04/29/16 Buy 93.00 Avg. of DCF and 7.0x EV / CY 2016 Revenue 965.3 1,242.0
BTIG 04/29/16 Neutral N/A DCF 964.6 1,220.0
Piper Jaffray 04/29/16 Neutral 81.00 5.2x EV / CY 2017 Revenue 965.1 1,223.9
MUFG Securities Americas Inc. 04/29/16 Buy 87.00 N/A 969.9 1,246.3
Barclays 04/29/16 Neutral 74.00 5.0x EV / CY 2017 Revenue 965.9 1,209.2
JP Morgan 04/29/16 Buy 94.00 6.5x EV / CY 2017 Revenue 957.5 1,170.8
Credit Suisse 04/29/16 Buy 90.00 5.6x EV / CY 2017 Revenue 972.7 1,281.4
Nomura 04/29/16 Neutral 95.00 N/A N/A N/A
Canaccord Genuity 04/28/16 Buy 100.00 6.6x EV / CY 2017 Revenue 970.0 1,227.5
Stifel 04/28/16 Neutral N/A N/A 963.6 1,232.9
High Target $130.00 $ 974.4 $1,281.4
Median Target 90.00 965.9 1,223.9
Average Target 88.15 966.6 1,226.4
Low Target 60.00 957.5 1,170.8
Current Share Price (As of 07/22/16) $84.72
Sources: Capital IQ, ThomsonOne, Wall Street Research
Note: Reflects all Wall Street research available to Moelis from Napas FY2016 Q1 earnings release date of 4/28/16; N/A denotes information not available to Moelis
[15]
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III. Napa Financial Analysis
|
Review of Financial Projections
Moelis reviewed projection sets and adjustments thereto provided by Orlando, Napa and publicly available Wall Street estimates in connection with its financial analysis:
Orlando Case: 5-year projections / 3 cases (Conservative, Base, Upside)
Orlando created its projections on an incremental basis, demonstrating the illustrative value of Napa to Orlandos revenue and cash flows and including the impact of synergies and other benefits that are available only to Orlando pro forma for the acquisition. During diligence Orlandos model was revised to incorporate its findings, please see page 29 for description of changes.
Orlando did not prepare projections for Napa on a standalone basis separating out synergies, that is consistent with Orlandos practice in other acquisitions
Napa Case: 5-year projections on a standalone basis
Wall Street estimates of Napa on a standalone basis
For purposes of its discounted cash flow analyses, Moelis used the most recent projection set available from Orlando, approved for
Moelis use by the Special Committee
For comparative purposes, the Orlando projection set was set forth alongside Wall Street consensus estimates, which were calendarized to a May 31 fiscal-year end to align with Orlandos fiscal calendar
For purposes of the Selected Public SaaS Companies and Selected Precedent Transactions analyses, Moelis used the most recent financial projections available from Napa management and the most recent preliminary 6/30/16 results from Napa management, in each case approved for Moelis use by the Special Committee
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Napa Projections Summary Comparison
REVENUE COMPARISON
($ in millions)
H2 2017E 2018E 2019E 2020E 2021E
Napa Standalone Mgmt. ¹ Orlando PF Incremental Conservative Orlando PF Incremental Base
Orlando PF Incremental Upside Wall Street Standalone Consensus Mean ¹
Napa Standalone Mgmt. ¹ $534 $1,349 $1,698 $2,136 $2,674
Orlando PF Incremental Conservative 524 1,284 1,557 1,864 2,208
Orlando PF Incremental Base 525 1,341 1,687 2,081 2,527
Orlando PF Incremental Upside 524 1,384 1,805 2,300 2,853
Wall Street Standalone Consensus Mean ¹ 537 1,340 1,624 1,920 2,235
# of Wall Street Observations 27 6 1 1 1
NON-GAAP EBIT COMPARISON
($ in millions)
H2 2017E 2018E 2019E 2020E 2021E
Napa Standalone Mgmt. ¹ Orlando PF Incremental Conservative Orlando PF Incremental Base
Orlando PF Incremental Upside Wall Street Standalone Consensus Mean ¹
Napa Standalone Mgmt. ¹ $26 $82 $142 $227 $339
Orlando PF Incremental Conservative 116 352 544 750 986
Orlando PF Incremental Base 112 374 603 861 1,165
Orlando PF Incremental Upside 110 389 655 967 1,327
Wall Street Standalone Consensus Mean ¹ 12 60 146 244 355
# of Wall Street Observations 26 7 1 1 1
Source: Capital IQ, ThomsonOne, Orlando Management, Napa Management
1. Calendarized to a May 31 fiscal-year end to align with Orlandos fiscal calendar; consensus per ThomsonOne and Capital IQ and may contain individual estimates not available to Moelis
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Napa Projections Summary Comparison
WALL ORLANDO MGMT. (7/24/16) NAPA
FY18FY21 ASSUMPTIONS STREET ¹ CONSERVATIVE BASE UPSIDE MGMT. ¹
Revenue Growth 25%16% 23%18% 28%21% 32%24% 26%25%
FY 2021 Revenue Scale ($ in millions) $2,235 $2,208 $2,527 $2,853 $2,674
Gross Margin 70% (FY18) 72%77% 72%77% 73%77% 69%73%
EBIT Margin 4%16% 27%45% 28%46% 28%47% 6%13%
Subscription & Support Growth 2 N/A 23%19% 29%23% 33%25% N/A
Professional Services & Other Growth 2 N/A 20%14% 24%16% 28%18% N/A
Subscription & Support Margin 2 N/A Consistent across scenarios; 87%90% N/A
Professional Services & Other Margin 2 N/A 10%15% 12%15% 13%15% N/A
$120mm$125mm$130mm -
Research & Development Spend 2 N/A N/A
$200mm $200mm $220mm
Sales & Marketing Margin 2 N/A Consistent across scenarios; 32.5%22.5% N/A
General & Administrative Margin 2 N/A Consistent across scenarios; 2.5%0.7% N/A
Source: Capital IQ, Thomson One, Napa Management, Orlando Management
1. Calendarized to a May 31 fiscal-year end to align with Orlandos fiscal calendar; Wall Street consensus per ThomsonOne and Capital IQ and may contain individual estimates not available to Moelis
2. Orlando provided these assumptions as part of its incremental model; Wall Street consensus for these items does not exist for the period, and Napa management did not provide these items as part of its standalone projections
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Napa Historical and Projected Financial Summary
(Orlando Management Incremental Conservative Case)
Napa Standalone FYE December Napa As Part of Orlando FYE May
FY13A FY14A FY15A LTM H217E FY18E FY19E FY20E FY21E
($ in millions, unless indicated) Year Year Year Jun-16 Year ¹ Year Year Year Year
Subscription and support $333.6 $447.8 $593.1 $672.7 $418.0 $1,029.8 $1,262.3 $1,524.8 $1,821.1
YoY Growth 31.9% 34.2% 32.5% 30.3% 24.3% 23.2% 22.6% 20.8% 19.4%
Professional services and other 81.0 108.5 148.1 173.7 106.0 254.4 295.2 339.4 386.9
YoY Growth 44.8% 34.0% 36.5% 36.5% 22.1% 20.0% 16.0% 15.0% 14.0%
Total Revenue $414.5 $556.3 $741.1 $846.4 $524.0 $1,284.2 $1,557.5 $1,864.2 $2,208.0
YoY Growth 34.2% 34.2% 33.2% 31.5% 23.8% 22.5% 21.3% 19.7% 18.4%
Cost of Subscription and support 49.1 63.7 84.8 100.6 58.5 133.9 151.5 167.7 182.1
Cost of Professional services and other 71.1 94.5 135.7 160.0 97.0 229.0 261.3 295.3 328.9
Total Cost of Revenue 120.2 158.1 220.6 260.6 155.5 362.8 412.7 463.0 511.0
Subscription and support Gross Profit 284.4 384.1 508.3 572.1 359.5 895.9 1,110.8 1,357.1 1,639.0
Subscription and Support Margin 85.3% 85.8% 85.7% 85.0% 86.0% 87.0% 88.0% 89.0% 90.0%
Professional services and other Gross Profi 9.9 14.0 12.3 13.7 9.0 25.4 33.9 44.1 58.0
Professional Services and Other Margin 12.2% 12.9% 8.3% 7.9% 8.5% 10.0% 11.5% 13.0% 15.0%
Gross Profit $294.3 $398.1 $520.6 $585.8 $368.5 $921.4 $1,144.8 $1,401.2 $1,697.0
Total Gross Margin 71.0% 71.6% 70.2% 69.2% 70.3% 71.7% 73.5% 75.2% 76.9%
R&D ² $55.2 $78.0 $102.3 $114.5 $50.0 $120.0 $145.0 $170.0 $200.0
% of Revenue 13.3% 14.0% 13.8% 13.5% 9.5% 9.3% 9.3% 9.1% 9.1%
S&M 183.3 252.1 343.0 385.9 189.6 417.4 440.0 466.1 496.8
% of Revenue 44.2% 45.3% 46.3% 45.6% 36.2% 32.5% 28.3% 25.0% 22.5%
G&A 32.6 39.2 53.1 57.7 13.1 32.1 15.6 14.9 14.4
% of Revenue 7.9% 7.0% 7.2% 6.8% 2.5% 2.5% 1.0% 0.8% 0.7%
Total Operating Expenses $271.1 $369.2 $498.4 $558.2 $252.7 $569.5 $600.6 $651.0 $711.2
% of Revenue 65.4% 66.4% 67.2% 66.0% 48.2% 44.3% 38.6% 34.9% 32.2%
EBIT $23.2 $28.9 $22.2 $27.6 $115.8 $351.9 $544.2 $750.2 $985.8
EBIT Margin 5.6% 5.2% 3.0% 3.3% 22.1% 27.4% 34.9% 40.2% 44.6%
Source: Wall Street Research, Orlando Management
Note: Historical and LTM financial information represents data as provided by Orlando, which may differ from Napas presentation of historical results
1. Represents Orlandos projections for Napa during the second half of Orlandos fiscal year, including synergies
2. Adjusted for capitalization of certain development costs incurred in connection with its internal use software and website, per Orlando
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Napa Historical and Projected Financial Summary
(Orlando Management Incremental Base Case)
Napa Standalone FYE December Napa As Part of Orlando FYE May
FY13A FY14A FY15A LTM H217E FY18E FY19E FY20E FY21E
($ in millions, unless indicated) Year Year Year Jun-16 Year ¹ Year Year Year Year
Subscription and support $333.6 $447.8 $593.1 $672.7 $418.5 $1,078.6 $1,371.1 $1,708.6 $2,094.8
YoY Growth 31.9% 34.2% 32.5% 30.3% 24.4% 28.9% 27.1% 24.6% 22.6%
Professional services and other 81.0 108.5 148.1 173.7 106.0 262.9 315.5 372.3 431.9
YoY Growth 44.8% 34.0% 36.5% 36.5% 22.1% 24.0% 20.0% 18.0% 16.0%
Total Revenue $414.5 $556.3 $741.1 $846.4 $524.5 $1,341.5 $1,686.6 $2,080.9 $2,526.7
YoY Growth 34.2% 34.2% 33.2% 31.5% 23.9% 27.9% 25.7% 23.4% 21.4%
Cost of Subscription and support 49.1 63.7 84.8 100.6 58.6 140.2 164.5 187.9 209.5
Cost of Professional services and other 71.1 94.5 135.7 160.0 95.4 232.7 276.1 320.2 367.1
Total Cost of Revenue 120.2 158.1 220.6 260.6 154.0 372.9 440.6 508.2 576.6
Subscription and support Gross Profit 284.4 384.1 508.3 572.1 359.9 938.4 1,206.6 1,520.7 1,885.3
Subscription and Support Margin 85.3% 85.8% 85.7% 85.0% 86.0% 87.0% 88.0% 89.0% 90.0%
Professional services and other Gross Profi 9.9 14.0 12.3 13.7 10.6 30.2 39.4 52.1 64.8
Professional Services and Other Margin 12.2% 12.9% 8.3% 7.9% 10.0% 11.5% 12.5% 14.0% 15.0%
Gross Profit $294.3 $398.1 $520.6 $585.8 $370.5 $968.6 $1,246.0 $1,572.7 $1,950.1
Total Gross Margin 71.0% 71.6% 70.2% 69.2% 70.6% 72.2% 73.9% 75.6% 77.2%
R&D ² $55.2 $78.0 $102.3 $114.5 $50.0 $125.0 $150.0 $175.0 $200.0
% of Revenue 13.3% 14.0% 13.8% 13.5% 9.5% 9.3% 8.9% 8.4% 7.9%
S&M 183.3 252.1 343.0 385.9 195.2 436.0 476.5 520.2 568.5
% of Revenue 44.2% 45.3% 46.3% 45.6% 37.2% 32.5% 28.3% 25.0% 22.5%
G&A 32.6 39.2 53.1 57.7 13.1 33.5 16.9 16.6 16.4
% of Revenue 7.9% 7.0% 7.2% 6.8% 2.5% 2.5% 1.0% 0.8% 0.7%
Total Operating Expenses $271.1 $369.2 $498.4 $558.2 $258.3 $594.5 $643.4 $711.9 $784.9
% of Revenue 65.4% 66.4% 67.2% 66.0% 49.2% 44.3% 38.1% 34.2% 31.1%
EBIT $23.2 $28.9 $22.2 $27.6 $112.2 $374.1 $602.6 $860.9 $1,165.2
EBIT Margin 5.6% 5.2% 3.0% 3.3% 21.4% 27.9% 35.7% 41.4% 46.1%
Source: Wall Street Research, Orlando Management
Note: Historical and LTM financial information represents data as provided by Orlando, which may differ from Napas presentation of historical results
1. Represents Orlandos projections for Napa during the second half of Orlandos fiscal year, including synergies
2. Adjusted for capitalization of certain development costs incurred in connection with its internal use software and website, per Orlando
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Napa Historical and Projected Financial Summary
(Orlando Management Incremental Upside Case)
Napa Standalone FYE December Napa As Part of Orlando FYE May
FY13A FY14A FY15A LTM H217E FY18E FY19E FY20E FY21E
($ in millions, unless indicated) Year Year Year Jun-16 Year ¹ Year Year Year Year
Subscription and support $333.6 $447.8 $593.1 $672.7 $418.0 $1,112.3 $1,468.6 $1,892.3 $2,372.3
YoY Growth 31.9% 34.2% 32.5% 30.3% 24.3% 33.0% 32.0% 28.9% 25.4%
Professional services and other 81.0 108.5 148.1 173.7 106.0 271.4 336.5 407.2 480.5
YoY Growth 44.8% 34.0% 36.5% 36.5% 22.1% 28.0% 24.0% 21.0% 18.0%
Total Revenue $414.5 $556.3 $741.1 $846.4 $524.0 $1,383.7 $1,805.1 $2,299.5 $2,852.8
YoY Growth 34.2% 34.2% 33.2% 31.5% 23.8% 32.0% 30.5% 27.4% 24.1%
Cost of Subscription and support 49.1 63.7 84.8 100.6 58.5 144.6 176.2 208.2 237.2
Cost of Professional services and other 71.1 94.5 135.7 160.0 93.8 236.1 291.1 346.1 408.4
Total Cost of Revenue 120.2 158.1 220.6 260.6 152.3 380.7 467.3 554.3 645.7
Subscription and support Gross Profit 284.4 384.1 508.3 572.1 359.5 967.7 1,292.4 1,684.1 2,135.1
Subscription and Support Margin 85.3% 85.8% 85.7% 85.0% 86.0% 87.0% 88.0% 89.0% 90.0%
Professional services and other Gross Profi 9.9 14.0 12.3 13.7 12.2 35.3 45.4 61.1 72.1
Professional Services and Other Margin 12.2% 12.9% 8.3% 7.9% 11.5% 13.0% 13.5% 15.0% 15.0%
Gross Profit $294.3 $398.1 $520.6 $585.8 $371.7 $1,003.0 $1,337.8 $1,745.2 $2,207.1
Total Gross Margin 71.0% 71.6% 70.2% 69.2% 70.9% 72.5% 74.1% 75.9% 77.4%
R&D ² $55.2 $78.0 $102.3 $114.5 $50.0 $130.0 $155.0 $185.0 $220.0
% of Revenue 13.3% 14.0% 13.8% 13.5% 9.5% 9.4% 8.6% 8.0% 7.7%
S&M 183.3 252.1 343.0 385.9 198.9 449.7 509.9 574.9 641.9
% of Revenue 44.2% 45.3% 46.3% 45.6% 38.0% 32.5% 28.3% 25.0% 22.5%
G&A 32.6 39.2 53.1 57.7 13.1 34.6 18.1 18.4 18.5
% of Revenue 7.9% 7.0% 7.2% 6.8% 2.5% 2.5% 1.0% 0.8% 0.7%
Total Operating Expenses $271.1 $369.2 $498.4 $558.2 $262.0 $614.3 $683.0 $778.3 $880.4
% of Revenue 65.4% 66.4% 67.2% 66.0% 50.0% 44.4% 37.8% 33.8% 30.9%
EBIT $23.2 $28.9 $22.2 $27.6 $109.7 $388.7 $654.8 $967.0 $1,326.7
EBIT Margin 5.6% 5.2% 3.0% 3.3% 20.9% 28.1% 36.3% 42.1% 46.5%
Source: Wall Street Research, Orlando Management
Note: Historical and LTM financial information represents data as provided by Orlando, which may differ from Napas presentation of historical results
1. Represents Orlandos projections for Napa during the second half of Orlandos fiscal year, including synergies
2. Adjusted for capitalization of certain development costs incurred in connection with its internal use software and website, per Orlando
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Financial Analysis
Methodology Metric Range Current Price : $84.72
Unaffected Price : $75.85 Offer Price : $109.00
Selected Public SaaS Companies:
TEV / 2016E (12/31/16) Revenue ¹ $960 7.0x 9.0x $79 $101
TEV / 2017E (12/31/17) Revenue ¹ $1,218 6.0x 7.5x $86 $107
Selected Precedent Transactions:
ysis
l TEV / LTM (6/30/16) Revenue ² $846 9.0x 13.0x $89 $127
na
A
Financial TEV / NTM (6/30/17) Revenue ¹ $1,084 8.0x 11.0x $101 $138
Revenue
Includes Terminal
DCF Analysis: ³ Synergies? Multiple WACC
Orlando IncrementalUpside Yes 8.0x 9.0x 9.0% 12.0% $168 $211
Orlando IncrementalBase Yes 7.5x 8.5x 9.0% 12.0% $141 $178
Orlando IncrementalConservative Yes 7.0x 8.0x 9.0% 12.0% $117 $148
ve y) Trading Range:
cti Onl 3-Year Low-High $52 $120
spe ce
Per re n
e
e t f 1-Year Low-High $52 $102
k Re
r
Ma (For
Analyst Price Target Low-High $60 $130
$50 $100 $150 $200 $250
Sources: Napa Management, Orlando Management, Wall Street Research
1. Projections per Napa management, using Approved Napa Share Count to calculate illustrative per share Napa price
2. Preliminary results from Napa management, using Approved Napa Share Count to calculate illustrative per share Napa price
3. Per Orlando management, DCF does not include incremental value associated with Napas $889mm federal and state NOLs; assumes transaction date of 11/30/16 using Approved Napa Share
Count
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Selected Public SaaS Companies
Consistent with Napa, the Selected Public SaaS Companies below are commonly valued on a revenue multiple basis
Given Napas operating performance is consistent with the Selected Public SaaS Companies below, for valuation purposes, the revenue multiple means and medians were taken into consideration by Moelis
As of July 22, 2016 Revenue Gross EBITDA LT Enterprise Value / Enterprise Value /
Enterprise Revenue Growth Margin Margin Growth Revenue EBITDA ¹
($ in millions) Value CY16E 15A-16E 16E-17E CY16E CY16E Rate LTM CY16E CY17E CY16E CY17E
Selected Public SaaS Companies
salesforce.com, inc. $58,666 $8,308 24.6% 21.6% 76.9% 20.1% 29.2% 8.3x 7.1x 5.8x 35.1x 26.9x
Workday, Inc. 16,192 1,554 33.7% 30.7% 71.9% 8.5% 38.3% 12.9x 10.4x 8.0x n/m n/m
ServiceNow, Inc. 12,957 1,369 36.1% 30.1% 75.0% 17.9% 43.9% 11.8x 9.5x 7.3x n/m 33.9x
Palo Alto Networks, Inc. 12,363 1,583 25.5% 31.4% 77.4% 21.3% 40.9% 9.8x 7.8x 5.9x 36.6x 25.8x
Splunk, Inc. 7,928 897 34.2% 28.2% 85.6% 8.5% 43.8% 10.9x 8.8x 6.9x n/m n/m
The Ultimate Software Group, Inc. 6,493 779 26.1% 21.9% 63.3% 24.9% 23.3% 9.8x 8.3x 6.8x 33.5x 27.0x
Cornerstone OnDemand, Inc. 2,563 432 27.1% 23.9% 72.3% 7.9% 20.0% 7.0x 5.9x 4.8x n/m 45.9x
Overall Mean $2,132 29.6% 26.8% 74.6% 15.6% 34.2% 10.1x 8.3x 6.5x 35.1x 31.9x
Overall Median 1,369 27.1% 28.2% 75.0% 17.9% 38.3% 9.8x 8.3x 6.8x 35.1x 27.0x
Napa (Wall Streetat Market) $7,203 $966 30.4% 26.6% 69.7% 8.5% 36.8% 8.5x 7.5x 5.9x n/m n/m
Napa (Napa Mgmt.at Market) $7,203 $960 29.6% 26.9% 67.5% n/a n/a 8.5x 7.5x 5.9x n/a n/a
Source: Capital IQ, Napa and Selected Public SaaS Company Filings Note: All years represent calendar years
1. EBITDA multiples above 50x are shown as n/m
[24]
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Selected Precedent Transactions
As the Selected Precedent Transactions below demonstrate, recent transactions have typically occurred at higher implied transaction revenue multiples than in earlier years (2011 2012), which Moelis took into consideration In selecting its precedent transaction multiples for its financial analysis, Moelis also considered that Napa operates on a larger scale than the transaction targets below and at greater LTM and NTM revenue growth than the means and medians listed below
Date Form of LTM LTM to NTM Implied TEV to
Announced Target Acquiror Consideration Revenue ¹ Revenue Growth ² Implied TEV LTM Revenue NTM Revenue
06/01/16 Demandware, Inc. salesforce.com, inc. Cash $ 254 26.0% $2,788 11.0x 8.7x
10/21/15 SolarWinds, Inc. Silver Lake; Thoma Bravo, LLC Cash 486 14.0% 4,446 9.2x 8.0x
12/22/14 DataLogix Holdings, Inc. ³ Oracle Corporation Cash 103 39.4% 1,189 11.6x 8.3x
09/18/14 Concur Technologies, Inc. SAP America, Inc. Cash 668 21.2% 8,592 12.9x 10.6x
06/13/14 OpenTable, Inc. The Priceline Group Inc. Cash 198 19.0% 2,570 13.0x 10.9x
12/20/13 Responsys, Inc. Oracle Corporation Cash 194 17.5% 1,457 7.5x 6.4x
06/04/13 ExactTarget, Inc. salesforce.com, inc. Cash 317 23.9% 2,539 8.0x 6.5x
12/20/12 Eloqua, Inc. Oracle Corporation Cash 90 19.4% 872 9.7x 8.1x
08/27/12 Kenexa Corp. IBM Cash 318 25.0% 1,298 4.1x 3.3x
05/22/12 Ariba Inc. SAP America, Inc. Cash 502 13.3% 4,411 8.8x 7.8x
02/09/12 Taleo Corp. Oracle Corporation Cash 309 18.3% 1,942 6.3x 5.3x
12/03/11 SuccessFactors, Inc. SAP America, Inc. Cash 292 37.9% 3,571 12.2x 8.9x
10/24/11 Rightnow Technologies, Inc. Oracle Corporation Cash 216 14.1% 1,606 7.4x 6.5x
Mean $ 304 22.3% 9.3x 7.6x
Median $ 292 19.4% 9.2x 8.0x
Napa (at transaction) $ 846 28.1% $9,353 11.1x 8.6x
Sources: Capital IQ, Target and Acquiror Filings, Wall Street Research
1. LTM revenue for precedent transactions represents the revenue in the four fiscal quarters prior to the transaction
2. NTM revenue for precedent transactions represents forecasted revenue for the four fiscal quarters following the transaction
3. DataLogix Holdings, Inc. financial information was provided by Orlando Management, as DataLogix Holdings, Inc. was private at the time of transaction
4. LTM revenue as of 6/30/16, NTM revenue as of 6/30/17 per Napa management preliminary results and projections; uses Approved Share Count to calculate enterprise value as of 7/22/16
[25]
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Napa Discounted Cash Flow Analysis
(Orlando Incremental Model Conservative Case)
The analysis below is not a standalone DCF of Napa, and instead illustrates the DCF value of the incremental
impact of Napa to Orlandos revenue and cash flows and includes the impact of synergies and other benefits
that are available only to Orlando pro forma for the acquisition; this does not reflect any value upside
associated with Napas NOL balance per Orlando management
For the Fiscal Year Ended May 31, Terminal
($ in millions) H2 2017E 2018E 2019E 2020E 2021E Value
Total Revenue $524 $1,284 $1,557 $1,864 $2,208
% Growth 145.1% 21.3% 19.7% 18.4%
Non-GAAP EBIT 116 352 544 750 986
% Margin 22.1% 27.4% 34.9% 40.2% 44.6%
Less: Stock-based Compensation ¹(79)(193)(234)(280)(331)
Less: Cash Taxes ²(13)(56)(109)(165)(229)
Plus: Depreciation & Amortization ³ 26 64 78 93 110
Less: Capital Expenditures(26)(64)(78)(93)(110)
Plus: Working Capital & Other
Unlevered Free Cash Flow $24 $104 $202 $306 $425 $17,664
% Growth 328.1% 95.0% 51.5% 39.1%
DISCOUNTED CASH FLOW ANALYSIS: SENSITIVITY TABLES
Implied Share Price Implied Perpetuity Growth Rate
Discount LTM Revenue Terminal Multiple Discount LTM Revenue Terminal Multiple
Rate 7.00x 7.25x 7.50x 7.75x 8.00x Rate 7.00x 7.25x 7.50x 7.75x 8.00x
9.0% |
|
$131.16 $135.31 $139.44 $143.58 $147.72 9.0% 6.1% 6.2% 6.3% 6.4% 6.4% |
10.0% |
|
125.98 129.95 134.21 138.18 142.15 10.0% 7.1% 7.2% 7.2% 7.3% 7.4% |
11.0% |
|
121.31 125.13 129.23 133.04 136.85 11.0% 8.0% 8.1% 8.2% 8.3% 8.4% |
12.0% |
|
116.87 120.54 124.49 128.15 131.81 12.0% 9.0% 9.1% 9.2% 9.3% 9.4% |
Source: Orlando Management, Napa Filings
Note: Analysis reflects Napa under Orlando ownership. Assumed date of 11/30/16
1. Assumed to be 15% of annual revenue for the forecasting period and is tax-deductible per Orlando Management
2. sumes 35% tax rate, per Orlando Management
3. Per O ando 5/27/16 Financial Presentation; assumes H2 2017E is half of full-year projection provided at the time
4. Assumed to equal annual depreciation & amortization expense, per Orlando Management
5. Assumed to be zero, per Orlando Management
[26]
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Napa Discounted Cash Flow Analysis
(Orlando Incremental Model Base Case)
The analysis below is not a standalone DCF of Napa, and instead illustrates the DCF value of the incremental
impact of Napa to Orlandos revenue and cash flows and includes the impact of synergies and other benefits
that are available only to Orlando pro forma for the acquisition; this does not reflect any value upside
associated with Napas NOL balance per Orlando management
For the Fiscal Year Ended May 31, Terminal
($ in millions) H2 2017E 2018E 2019E 2020E 2021E Value
Total Revenue $525 $1,341 $1,687 $2,081 $2,527
% Growth 155.8% 25.7% 23.4% 21.4%
Non-GAAP EBIT 112 374 603 861 1,165
% Margin 21.4% 27.9% 35.7% 41.4% 46.1%
Less: Stock-based Compensation ¹(79)(201)(253)(312)(379)
Less: Cash Taxes ²(12)(61)(122)(192)(275)
Plus: Depreciation & Amortization ³ 26 67 84 104 126
(26)(67)(84)(104)(126)
Unlevered Free Cash Flow $22 $112 $227 $357 $511 $20,214
% Growth 415.7% 102.2% 57.0% 43.3%
DISCOUNTED CASH FLOW ANALYSIS: SENSITIVITY TABLES
Implied Share Price Implied Perpetuity Growth Rate
Discount LTM Revenue Terminal Multiple Discount LTM Revenue Terminal Multiple
Rate 7.50x 7.75x 8.00x 8.25x 8.50x Rate 7.50x 7.75x 8.00x 8.25x 8.50x
9.0% $158.58 $163.31 $168.04 $172.78 $177.51 9.0% 6.1% 6.2% 6.3% 6.4% 6.5%
10.0% 152.58 157.13 161.67 166.21 170.76 10.0% 7.1% 7.2% 7.3% 7.4% 7.4%
11.0% 146.88 151.24 155.60 159.97 164.33 11.0% 8.1% 8.2% 8.3% 8.3% 8.4%
12.0% 141.45 145.64 149.83 154.02 158.21 12.0% 9.1% 9.2% 9.2% 9.3% 9.4%
Analysis reflects Napa under Orlando ownership. Assumed date of 11/30/16
1. Assumed to be 15% of annual revenue for the forecasting period and is tax-deductible per Orlando Management
2. Assumes 35% tax rate, per Orlando Management
3. Per Orlando 5/27/16 Financial Presentation; assumes H2 2017E is half of full-year projection provided at the time
4. Assumed to equal annual depreciation & amortization expense, per Orlando Management
5. Assumed to be zero, per Orlando Management
[27]
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Napa Discounted Cash Flow Analysis
(Orlando Incremental Model Upside Case)
The analysis below is not a standalone DCF of Napa, and instead illustrates the DCF value of the incremental
impact of Napa to Orlandos revenue and cash flows and includes the impact of synergies and other benefits
that are available only to Orlando pro forma for the acquisition; this does not reflect any value upside
associated with Napas NOL balance per Orlando management
For the Fiscal Year Ended May 31, Terminal
($ in millions) H2 2017E 2018E 2019E 2020E 2021E Value
Total Revenue $524 $1,384 $1,805 $2,300 $2,853
% Growth 164.1% 30.5% 27.4% 24.1%
Non-GAAP EBIT 110 389 655 967 1,327
% Margin 20.9% 28.1% 36.3% 42.1% 46.5%
Less: Stock-based Compensation ¹(79)(208)(271)(345)(428)
Less: Cash Taxes ²(11)(63)(134)(218)(315)
Plus: Depreciation & Amortization ³ 26 69 90 115 143
Less: Capital Expenditures(26)(69)(90)(115)(143)
Plus: Working Capital & Other
Unlevered Free Cash Flow $20 $118 $250 $404 $584 $22,822
% Growth 482.5% 112.0% 62.0% 44.5%
DISCOUNTED CASH FLOW ANALYSIS: SENSITIVITY TABLES
Implied Share Price Implied Perpetuity Growth Rate
Discount LTM Revenue Terminal Multiple Discount LTM Revenue Terminal Multiple
Rate 8.00x 8.25x 8.50x 8.75x 9.00x Rate 8.00x 8.25x 8.50x 8.75x 9.00x
9.0% $189.16 $194.52 $199.87 $205.23 $210.58 9.0% 6.3% 6.4% 6.4% 6.5% 6.6%
10.0% 181.95 187.09 192.23 197.37 202.51 10.0% 7.3% 7.3% 7.4% 7.5% 7.6%
11.0% 174.88 179.85 185.05 189.98 194.91 11.0% 8.2% 8.3% 8.4% 8.5% 8.5%
12.0% 168.38 173.12 178.12 182.86 187.59 12.0% 9.2% 9.3% 9.4% 9.4% 9.5%
Source: Orlando Management, Napa Filings Note: Analysis reflects Napa under Orlando ownership. Assumed date of 11/30/16
1. Assumed to be 15% of annual revenue for the forecasting period and is tax-deductible per Orlando Management
2. Assumes 35% tax rate, per Orlando Management
3. Per Orlando 5/27/16 Financial Presentation; assumes H2 2017E is half of full-year projection provided at the time
4. Assumed to equal annual depreciation & amortization expense, per Orlando Management
5. Assumed to be zero, per Orlando Management
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Napa Projections Orlando Incremental Case Comparison Over Time
Orlando constructed three cases to reflect the following:
Conservative case reflects worst case implications from preliminary Q216 results (cost synergies, standalone revenue performance)
Base case reflects incremental revenue synergies and cost synergies
Upside case reflects both cost & greater revenue synergies associated with the transaction
(5/20/16)(7/12/16)(7/13/16)(7/24/16)
FY18FY21 ASSUMPTIONS ORIGINAL REVISED CONSERVATIVE BASE UPSIDE CONSERVATIVE BASE UPSIDE
Subscription & Support Growth 29%22% 23%20% 23%20% 29%22% 33%24% 23%19% 29%23% 33%25%
Prof. Services & Other Growth 24%16% 20%14% 20%14% 24%16% 28%18% 20%14% 24%16% 28%18%
Subscription & Support Margin Consistent across scenarios; 87%90%
Prof. Services & Other Margin 11.5%15% 10%15% 10%15% 11.5%15% 13%15% 10%15% 12%15% 13%15%
$125mm $120mm $120mm $125mm $130mm $120mm$125mm$130mm -
Research & Development Spend $200mm $200mm $200mm $200mm $220mm $200mm $200mm $220mm
Sales & Marketing Margin Consistent across scenarios; 32.5%22.5%
General & Admin. Margin Consistent across scenarios; 2.5%0.7%
REVENUE COMPARISON NON-GAAP EBIT COMPARISON
Orlando Original Incremental (5/20/16)
Orlando Revised Incremental (7/12/16)
Orlando Incremental Conservative (7/13/16)
Orlando Incremental Base (7/13/16)
Orlando Incremental Upside (7/13/16)
Orlando Incremental Updated Conservative (7/2416)
Orlando Incremental Updated Base (7/24/16)
Orlando Incremental Updated Upside (7/24/16)
H2 2017E 2018E 2019E 2020E 2021E H2 2017E 2018E 2019E 2020E 2021E
Source: Orlando Management
[29]
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Appendix
|
A. Additional Valuation Detail
|
Weighted Average Cost of Capital Analysis
As of 07/22/16 Levered Beta ¹ Total MV Debt/ Asset Beta ² Int. Expense /
($ in millions) 2-Year 5-Year Debt Equity Total Cap 2-Year 5-Year Total Debt
Selected Public SaaS Companies
salesforce.com, inc. 1.271 1.291 $2,120 $58,298 3.5% 1.238 1.257 3.7%
Workday, Inc. 1.578 1.507 600 17,672 3.3% 1.544 1.474 5.3%
ServiceNow, Inc. 1.267 1.329 575 13,283 4.1% 1.232 1.292 5.5%
Palo Alto Networks, Inc. 1.063 1.147 575 12,776 4.3% 1.035 1.116 4.0%
Splunk, Inc. 1.823 1.755 8,951 1.823 1.755 NA
The Ultimate Software Group, Inc. 1.187 1.147 10 6,579 0.2% 1.186 1.146 5.4%
Cornerstone OnDemand, Inc. 0.994 1.018 253 2,584 8.9% 0.935 0.958 5.0%
Overall Mean 1.312 1.313 3.5% 1.285 1.285 4.8%
Overall Median 1.267 1.291 3.5% 1.232 1.257 5.2%
Napa 1.210 1.308 $314 $7,299 4.1% 1.160 1.254 4.7%
KEY ASSUMPTIONS WACC SENSITIVITY
Long-horizon expected equity risk premium (supply-side) of
6.03% (Source: Duff & Phelps 2016) Debt / Unlevered Beta
Yield on 20-year U.S. Treasury (7/22/2016) of 1.90% Total Cap 1.100 1.200 1.300 1.400 1.500
Size premium of 0.86% using the 3rd decile tier provided by 9.4% 10.0% 10.6% 11.2% 11.8%
Duff and Phelps 2016, based on companies with an equity 5.0% 9.3% 9.9% 10.5% 11.1% 11.7%
value between $5.2 billion and $9.6 billion
Stated tax rate of 35.0% per Orlando Management guidance
5.2% pre-tax cost of debt, based on the median of the Selected
Public SaaS Companies
Source: Bloomberg, Capital IQ, Selected Public SaaS Company Filings, Duff & Phelps 2016 Valuation Handbook, U.S. Department of the Treasury Note: Values as of 7/22/16
1 Bloomberg adjusted beta
2 Unlevered adjusted beta of selected companies used to calculate relevered beta using the formula B = Bu(1+(1-t)(D/E))
[32]
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Changes and Modifications Since May 27, 2016 Special Committee Presentation
Incorporation of Napa Due Diligence Results
Moelis has incorporated Napa information obtained from the due diligence process into its analysis, as well as due diligence information that
Orlando used as part of its Napa financial analysis
Revised Orlando Management Incremental Model
Moelis received Orlandos original incremental model on May 20, 2016, a revised incremental model on July 12, 2016, and a 3 case model on July
13, 2016
On July 13, 2016, Orlando created three distinct cases for Napa to detail its conservative, baseline, and upside financial projections
Each case details 6-month illustrative financial projections for Napa as part of Orlando for the fiscal year ending May 31, 2017, differing from
Orlandos previous 12-month projections for the same fiscal year end
As with its May 27, 2016 financial presentation to the Committee, Orlando created its projections on an incremental basis, demonstrating the
illustrative value of Napa to Orlandos revenue and cash flows and including the impact of synergies and other benefits that are not available to
Napa shareholders on a standalone basis
On July 24, 2016 Moelis received revised conservative, baseline, and upside financial projections from Orlando
The differences in revenue, non-GAAP EBIT, and related financial assumptions across the Orlando cases over time can be seen on page 29
In its discounted cash flow analyses of the Orlando cases, Moelis used a discount rate range of 9%12% in all cases to reflect market conditions as
of July 22, 2016
Projection and Treatment of Stock-Based Compensation
Moelis previously assumed that stock-based compensation would be 15% of Napa revenue for the Orlando fiscal year ending May 31, 2017 and
held constant thereafter; stock-based compensation is now assumed to be 15% of Napas annual revenue during each year of the projection period,
in-line with current Napa stock-based compensation expense as a percentage of revenue
Stock-based compensation was not previously treated as tax-deductible, which Moelis has modified in accordance with U.S. GAAP
Financial and Price Updates
Napa FY2016 Q2 preliminary revenue results have been incorporated into all Napa LTM revenue multiples
Napa NTM financial projections are therefore now based on the four quarters ending June 30, 2017, per projections by Napa management
Napa common shares outstanding, options, and RSUs have been updated to reflect information as of June 30, 2016
All financial market data is now as of July 22, 2016, updated from data as of May 23, 2016
[ 33 ]
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Changes and Modifications Since May 27, 2016 Special Committee Presentation (contd)
Total Enterprise Value Calculation
Updated calculation of Napa make-whole shares to reflect additional clarification received from Napa as part of its July 20, 2016 accounting
diligence session as well as Napas memo on the topic received on the same date
Selected Precedent Transactions
Updated to include the acquisition of Demandware Inc., by Salesforce.com, Inc., as announced after the May 27, 2016 presentation on June 1, 2016
Additional Illustrative Analyses
Moelis has included the standalone financial model provided by Napa on July 20, 2016 to demonstrate an illustrative standalone forecast for Napa
Projections were prepared by Napa Management for its Board of Directors, covering the period from 2016 2021
These projections were not relied upon by Orlando management in preparing its Orlando Management Incremental Model for Napa
Napas projections as presented do not include any adjustments by Orlando management to the financials provided by Napa management (see
page 38 for further detail); Orlandos management has not prepared projections based on Napas standalone prospects
Moelis has presented an illustrative analysis of the potential benefit associated with Napas net operating losses (see page 36 for further detail)
Wall Street Research
Updated to include the most recent financial projections and recommendations available to Moelis, including recently initiated coverage by
Cowen and Company and BMO Capital Markets, and ratings from Goldman Sachs, D.A. Davidson, Nomura, and Stifel
Ratings and price targets from Benchmark Company and Needham & Company have subsequently been removed because of the length of time
since their most recent release (February 1 and January 29, 2016 respectively)
[ 34 ]
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Comparison of Moelis and Orlando Materials
Selected Publicly Traded SaaS Companies Analysis
Moelis and Orlando each independently selected a series of public companies to incorporate into their respective materials, which differ in certain instances
Orlando presented its selected public companies on an Enterprise Value to LTM Revenue and LTM EBIT multiple basis respectively, also presenting the
corresponding LTM Revenue and EBIT margins
Moelis presented its selected public companies on an Enterprise Value to LTM, calendar year 2016, NTM, and calendar year 2017 revenue multiple basis, as well as on
an Enterprise Value to calendar year 2016 and calendar 2017 EBITDA multiple basis, also detailing annual revenue growth rates, and gross / EBITDA margins
Selected Precedent Transaction Analysis
Moelis and Orlando each independently selected a series of precedent mergers and acquisitions to incorporate into their respective materials, which differ in certain
instances
Orlando presented its selected acquired companies on an Enterprise Value to LTM Revenue and LTM EBIT multiple basis respectively, also detailing the
corresponding LTM Revenue and EBIT margins
Moelis presented its selected acquired companies on an Enterprise Value to LTM and independently projected NTM Revenue basis respectively, also detailing the
projected LTM to NTM Revenue growth at the time of acquisition 1
Moelis and Orlando differed in their approach to treating convertible debt hedges as part of their analyses, thereby affecting their calculated enterprise values and
corresponding revenue multiples
Discounted Cash Flow Analysis
Moelis performed a discounted cash flow analysis to derive a range of illustrative Napa share price values based on projection sets provided by Orlando. Orlando
also performed a discounted cash flow analysis using internal investment hurdle assumptions.
Moelis calculated its illustrative Napa share prices using a range of revenue terminal multiples, which varied across the projection sets to reflect each individual
case (collectively covering a revenue terminal multiple range of 7 9x) as well as a discount rate range of 9 12% across all cases
Orlando calculated its illustrative Napa share prices using a range of assumptions including terminal multiples, a discount hurdle rate range, and a perpetuity
growth rate range
Stock-based Compensation Expense
As part of its incremental financial projections, Orlando does not include stock-based compensation in its DCF analysis
In incorporating Orlandos incremental financial projections, Moelis added stock-based compensation expense equal to 15% of Orlandos revenue projections for
Napa in the second half of its fiscal year ending May 31, 2017, and equal to 15% of Orlandos revenue projections for Napa in the each of the following fiscal years, in-
line with current Napa stock-based compensation expense as a percentage of revenue
Calculation of Napa Total Enterprise Value
As part of Napas issuance of $310 million in convertible notes, a provision exists allowing noteholders to receive additional convertible shares in the event of a
fundamental change in the business, including an acquisition
The number of additional shares is calculated based on both the share price and date of the fundamental change, which impacts the calculation of Napas total
enterprise value
For purposes of its analysis, Moelis calculated Napas enterprise value as of July 22, 2016, while Orlando assumed a date of November 30, 2016, creating differing
enterprise values for the transaction
1. Projections per Capital IQ
[35]
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Illustrative NOL Benefit Summary
The illustrative analysis below represents a range of potential values for Napas federal NOLs within
a potential pro forma combination with Orlando. The below calculation is illustrative and does not
incorporate numerous complexities in calculating Section 382 limitations.
Does not include the benefit of state NOLs
NOL SCHEDULE
Illustrative Purchase Price as of 11/30/16 ¹ $9,350.0
IRS Long-Term Tax-Exempt Rate 2.24%
Annual Sec. 382 NOL Deduction Limit $209.4
For the Fiscal Year Ended May 31,
($ in millions) H2 2017E 2018E 2019E 2020E 2021E
Pro Forma EBT ² $7,610.5 $16,141.6 $17,256.6 $19,232.8 $20,560.2
NOL Utilization(209.4)(209.4)(209.4)(209.4)(51.7)
Post-NOL Taxable Income 7,401.1 15,932.2 17,047.1 19,023.3 20,508.5
Tax Rate 35% 35% 35% 35% 35%
Cash Taxes Payable $2,590.4 $5,576.3 $5,966.5 $6,658.2 $7,178.0
Tax Savings $73.3 $73.3 $73.3 $73.3 $18.1
SENSITIVITY ANALYSIS
($ in millions except per share amounts)
Discount Rate Napa Discount Rate
Value of 9% 10.0% 11.0% 12.0% Per Share 9% 10.0% 11.0% 12.0%
NOL $270.1 $266.2 $262.5 $258.8 Impact ³ $3.11 $3.07 $3.02 $2.98
Source: Napa Management, U.S. IRS, Capital IQ
Note: Moelis does not offer tax or accounting advice
1. Approved Napa Share Count, with market cap calculated based on securities outstanding as of 6/30/16 per capitalization table provided by Napa management and approved for Moelis use
by Orlando
2. Combines Orlandos incremental financial projections (Base Case) as provided on July 24, 2016 with Wall Street consensus Orlando EBT projections 3. Calculated based on Approved Napa Share Count
[36]
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Napa Historical and Projected Financial Summary
(Napa Management Model)
Napa Standalone FYE December Napa Standalone FYE December
FY13A FY14A FY15A LTM FY16E FY17E FY18E FY19E FY20E FY21E
($ in millions, unless indicated) Year Year Year Jun-16 Year Year Year Year Year Year
Subscription and support $333.6 $447.8 $593.1 $672.7 $744.8 $935.6
YoY Growth 31.9% 34.2% 32.5% 30.3% 25.6% 25.6%
Professional services and other 81.0 108.5 148.1 173.7 215.4 282.7
YoY Growth 44.8% 34.0% 36.5% 36.5% 45.5% 31.2%
Total Revenue $414.5 $556.3 $741.1 $846.4 $960.2 $1,218.3 $1,533.0 $1,929.0 $2,425.0 $3,023.0
YoY Growth 34.2% 34.2% 33.2% 31.5% 29.6% 26.9% 25.8% 25.8% 25.7% 24.7%
Cost of Subscription and support 49.1 63.7 84.8 100.6 113.4
Cost of Professional services and other 71.1 94.5 135.7 160.0 198.7
Total Cost of Revenue 120.2 158.1 220.6 260.6 312.1 388.3 471.0 560.0 671.0 818.0
Subscription and support Gross Profit 284.4 384.1 508.3 572.1 631.4
Subscription and Support Margin 85.3% 85.8% 85.7% 85.0% 84.8%
Professional services and other Gross Profi 9.9 14.0 12.3 13.7 16.7
Professional Services and Other Margin 12.2% 12.9% 8.3% 7.9% 7.7%
Gross Profit $294.3 $398.1 $520.6 $585.8 $648.1 $830.0 $1,062.0 $1,369.0 $1,754.0 $2,205.0
Total Gross Margin 71.0% 71.6% 70.2% 69.2% 67.5% 68.1% 69.3% 71.0% 72.3% 72.9%
R&D $54.8 $78.1 $102.8 $114.8 $124.2
% of Revenue 13.2% 14.0% 13.9% 13.6% 12.9%
S&M 183.3 252.1 343.0 385.9 416.7
% of Revenue 44.2% 45.3% 46.3% 45.6% 43.4%
G&A 32.6 39.2 53.1 57.7 62.7
% of Revenue 7.9% 7.0% 7.2% 6.8% 6.5%
Total Operating Expenses $270.7 $369.3 $498.9 $558.5 $603.6 $769.0 $951.0 $1,184.0 $1,469.0 $1,791.0
% of Revenue 65.3% 66.4% 67.3% 66.0% 62.9% 63.1% 62.0% 61.4% 60.6% 59.2%
EBIT $23.6 $28.8 $21.7 $27.3 $44.5 $61.0 $111.0 $185.0 $285.0 $414.0
EBIT Margin 5.7% 5.2% 2.9% 3.2% 4.6% 5.0% 7.2% 9.6% 11.8% 13.7%
Source: Public Filings, Napa Management
Note: Historical and projected results reflect non-GAAP measures (excluding revenue); historical results are as presented by Napa management and therefore may differ from Orlandos historical presentation of Napas financial results
[37]
|
Illustrative Napa Discounted Cash Flow Analysis
(Napa Management Model)
Moelis conducted the illustrative analysis below as part of its due diligence. This illustrative analysis is shown
to provide context of Napa on a standalone basis, as the Orlando management projections reflect the
incremental impact of Napa to Orlandos revenue and cash flows and includes the impact of synergies and
other benefits that are available only to Orlando pro forma for the acquisition. Orlando management did not
rely on these projections in creating its incremental model. Moelis did not rely on this illustrative analysis as
part of its financial analysis.
The illustrative analysis below is based on the Napa management model. Asterisked (*) items indicate information that Moelis and
Orlando requested from Napa, but Moelis and Orlando did not receive such information. When information was not received from
Napa management, Moelis used information received from Orlando, with the input received in part from its own knowledge and
diligence of the business.
For the Fiscal Year Ended December 31, Terminal
($ in millions) Dec. 2016E 2017E 2018E 2019E 2020E 2021E Value
Total Revenue $88 $1,218 $1,533 $1,929 $2,425 $3,023
% Growth 25.9% 25.8% 25.7% 24.7%
Non-GAAP EBIT 5 61 111 185 285 414
% Margin 5.5% 5.0% 7.2% 9.6% 11.8% 13.7%
Less: Stock-based Compensation *(13)(183)(230)(289)(364)(453)
Less: Cash Taxes *
Plus: Depreciation & Amortization * 4 61 77 96 121 151
Less: Capital Expenditures *(4)(61)(77)(96)(121)(151)
Plus: Working Capital & Other *
Unlevered Free Cash Flow($8)($122)($119)($104)($79)($39) $24,184
DISCOUNTED CASH FLOW ANALYSIS: SENSITIVITY TABLE
Implied Share Price
Due to negative projected unlevered free
Discount LTM Revenue Terminal Multiple cash flow in the final year, the prices to
Rate 8.00x 8.25x 8.50x 8.75x 9.00x the left cannot imply a meaningful
9.0% |
|
$174.31 $179.71 $185.13 $190.52 $195.95 perpetuity growth rate; the terminal |
value represents more than 100% of the
10.0% |
|
166.60 171.70 176.85 182.03 187.18 implied enterprise value in the |
11.0% |
|
159.16 164.07 169.04 173.95 178.91 illustrative analysis. |
12.0% |
|
152.29 156.90 161.60 166.34 171.04 |
Source: Napa Management, Napa Filings
Note: Assumed date of 11/30/16. Excludes NOLs per Orlando Management, however there are no cash taxes after tax-deducting the projected stock-based compensation expense
[ 38 ]
|
B. Napa Overview
|
Napa at a Glance
Napa is a leading pure-play SaaS provider of cloud-based financials / ERP software suites
BUSINESS OVERVIEW
Applications aim to address a defined set of customer requirements
Offerings cover a broad group of industries, with attractive positions in:
Software E-commerce and retail
Wholesale / distribution Financial services
Consulting Healthcare services
Computer and IT services Education
Founded in 1998, Napa employs over 4,600 people in 12 countries
NAPA OFFERS A CENTRALIZED BUSINESS SOLUTION
ERP SRP
Napa Helps
Warehouse Project
Businesses Mgmt. Mgmt.
CORE BUSINESS
Customer Management
Order Management
Inventory Resource
Mgmt. Global Financial Management Mgmt.
Billing Management
Address their Revenue Management
Applications Manufacturing Time & Expense
Issues via a
Singular Supply Chain Project
Suite Mgmt. Accounting
Offering
Sources: Napa Filings, Wall Street Research
[40]
|
Napa Historical Build
Napas strong cloud market position is evidenced by its steady revenue growth and increasing customer base
NAPA FISCAL YEAR ANNUAL REVENUE 1
($ in millions)
$960
$741
Napa IPO
$556
$415
$309
$236
$152 $167 $193
$67 $109
2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016E
CUSTOMERS TOTAL # OF COMPANIES, SUBS AND ORGANIZATIONS 2
30,000+
24,000
20,000
16,000
12,000
10,000
~7,700
<5,300 ³ 5,600 6,600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Sources: Napa Filings, Wall Street Research
1. |
|
Napa Q1 2016 Investor Presentation and 2016 annual revenue guidance per Napa management as of 7/22/16 |
2. Based on Napa Q1 2016 Investor Presentation for 2010 2015 totals and Napa filings and earnings calls prior to that
3. Approximately 5,300 active Napa customers as of 3/31/07 per S1 filed 7/2/07, therefore assumed that Napa had less customers in 2006
4. Total based on Napas stated new customers added per quarter in 2009 (per Napa earnings calls) and its year-end 2008 active customers (per Napas 12/31/2008 10-K)
[ 41 ]
|
Napas Investment in the Cloud
Over the past 18 years Napa has spent over $2.1bn to develop its product, establish its brand, and build its
current customer base of over 30,000 companies / subsidiaries in over 160 countries
NAPA PRODUCT DEVELOPMENT AND SALES & MARKETING SPEND SINCE 2004 1
($ in millions)
$2,157
Note that Napas publicly available information $1,633
dates back to 2004 (as it IPOd in 2007), therefore
these figures do not encompass the first six years
of operations $1,235
$947
$740
$576
$448
$344
$245
$164
$99 $524
$35 $288 $398
$35 $64 $65 $82 $98 $105 $128 $164 $207
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Annual Product Development + Sales & Marketing Spend Cumulative Product Development + Sales & Marketing Spend
Annual Spend (mm):
Product Development $8 $25 $21 $24 $22 $29 $35 $44 $53 $78 $107 $136
Sales and Marketing 27 39 44 58 77 76 93 120 154 210 291 389
Total $35 $64 $65 $82 $98 $105 $128 $164 $207 $288 $398 $524
Employees:
Product Development NA NA NA 76 ² 118 135 165 239 393 592 835 1,058
Sales and Marketing NA NA NA 226 ² 314 274 347 384 518 716 985 1,394
Total NA NA NA 302 ² 432 409 512 623 911 1,308 1,820 2,452
Source: Napa Filings
1. Includes stock-based compensation, amortization of acquisition-related intangibles, transaction costs for business combinations, costs associated with a patent dispute settlement, non-cash
interest expense on convertible debt and income tax benefits as allocated to the Product Development and Sales & Marketing expense categories over time
2. |
|
As of 9/30/07 per 424B4 filed 12/20/07 |
[ 42 ]
|
Contact Information
Moelis & Company LLC is a U.S.-registered broker dealer and a member of FINRA & SIPC.
Moelis & Company LLC
1999 Avenue of the Stars, Suite 1900 Los Angeles, CA 90067
Tel: (310) 443-2300
399 Park Avenue, 5th Floor New York, NY 10022 Tel: (212) 883-3800
[43]
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