2023 M&A Report | SaaS

2023 MARKET REPORT: SAAS

TABLE OF CONTENTS M&A Overview: 01 Current State of the Market FE SaaS Deals 2022 03 SaaS Valuations: 04 Public vs. Private Comps Value of Private Equity Dry Powder 06 VC and PE fundraising for SaaS 07 Notable Transactions 09 Where Will Valuations Go in 2023? 10 The Rule of 40 11 Key Takeaways 13 FE International: Who We Are 14 Meet The SaaS M&A Team 15

M&A OVERVIEW: CURRENT STATE OF THE MARKET 2023 is set to be a busy year for SaaS M&A, with many investors viewing the past 12 months as nothing more than a cooling-off period after a decade of strong growth. The expected return to normalization in the labor market following a period of cost optimizations, coupled with the prospect of lower interest rates towards year-end all point to an uptick trend in growth and in turn, M&A activity. Challenging that timeline is the continued pressure applied by the Fed, signaling in December 2022 that interest rates may have to rise above 5% to start to tame inflation back to the 2% target level, which is impacted by factors both in and outside of the U.S. Namely, the Great Resignation, the invasion of Ukraine and the impact on commodities have all played a role in keeping inflation higher than anticipated and elevated for longer than expected. Privately held SaaS businesses have weathered the storm well, with most able to absorb increased labor and software costs through their typically high margins and operational flexibility. This cannot necessarily be said for public SaaS companies and in some cases, VC-backed companies, as their financials often run at low (or negative) margins to fuel growth, meaning an increase in interest rates impacts their ability to invest to scale. This has created a correction for many high-growth, low-profit tech companies. Whereas SaaS businesses with high net dollar retention (or low or net negative churn) and strong free cash flows (FCF) have outperformed and are increasingly being targeted by suitors seeking both strategic value and bottom-line growth. All signs point to a high volume of M&A activity in 2023. Capital earmarked for M&A remains near record highs and investors are increasingly active in their pursuit of value-oriented acquisitions. FE INTERNATIONAL PAGE 01

To forecast, we first need to look back to 2021 which saw record deal flow for SaaS businesses in the lower mid-market ($5-100m revenue). $7.9 billion in deals were completed in 2021 across 299 acquisitions (Pitchbook). Compare that to 2022, and only 151 SaaS deals were announced via the same source, accounting for just $3.7 billion in deals from the lower mid-market. While this headline figure seems troublesome, 2022 did actually outperform 2020, leading many to believe that 2021 was an anomaly and that the longer-term trends have remained intact. As such, investors now believe that 2023 will see M&A activity resume this more normalized upward trend in deal-making activity. Wall Street and other banks have seen retractions in deal-making activity (some citing -38% YoY) while FE has continued to see YoY growth in the total value of SaaS M&A completed. The main reason for the divergence with bulge bracket banks is that FE’s typical SaaS client has a focus on high net dollar retention metrics (or low or net negative churn) and strong FCFs, where applicable. In addition, as FE continued to represent more businesses towards the top end of the lower mid- market and into the mid-market range, our median acquisition size has increased by 86% YoY. Relative Enterprise Value Completed +51% -38% Wall Street '21 Wall Street '22 FE '21 FE '22 2023 is also expected to yield more cross-border M&A activity with strategics and U.S. PE funds taking a more global view to deal-making given the relative strength of the U.S. dollar. In addition, the ample opportunities for SaaS acquisitions in markets that have seen little VC funding comparatively over time (thus forced to focus on net dollar retention metrics and FCFs). Having represented sell-side opportunities in 57 countries since 2010, FE has seen firsthand the rise in interest in international acquisitions. To date, c.50% of our sell-side mandates have originated from outside of the U.S. FE INTERNATIONAL PAGE 02

FE SAAS DEALS 2022 Deals Complete Shopify/Atlassian App In 2022, we completed a large number 33.3% of SaaS deals across multiple sectors. SaaS/Software Overall, traditional SaaS / Software 50% 50.0% businesses accounted for c.50% of our deal flow, with marketplace SaaS apps (i.e., Shopify and Atlassian Apps) making up c.33% and the remaining iOS/Android App c.17% from iOS and Android Apps. 16.7% Shopify/Atlassian App 9.1% Enterprise Value iOS/Android App 13.4% In terms of enterprise value, SaaS / Software dominated the other two at 78%. Shopify / Atlassian Apps and iOS / Android Apps made up 9% and 13%, respectively. SaaS/Software 77.6% Other 6.7% Real Estate 6.7% Enterprise Value Legal Marketing Software Niche Breakdown 6.7% 33.3% Artificial Intelligence Breaking down the SaaS / Software 6.7% figures a bit further, FE completed deals in a wide range of different Logistics 6.7% niches. Healthcare No-Code and Web Solutions 13.3% 20% 20.0% The majority of the deals that FE has completed this year have been in the marketing software and no-code and web solutions niches. We have done deals across many other niches throughout 2022 including software for healthcare providers, logistics software for e-commerce stores, artificial intelligence, software for legal and real estate and much more. FE INTERNATIONAL PAGE 03

SAAS VALUATIONS: PUBLIC VS. PRIVATE COMPS 2021 was a breakout year for publicly listed SaaS valuations, with low-interest rates fueling high growth at nearly any cost. The FED’s balance sheet peaked in April 2022 at a touch under $9 trillion before announcing that in May 2022 they would seek to start to unwind their position and take a harder line on raising interest rates. This increase in interest rates is one of the main reasons for the unwinding of public SaaS valuations, leading to forward revenue multiples (the main valuation method for public SaaS companies) to decline rapidly. Notably, companies like Stripe, Klarna and Checkout.com all went on to raise “down rounds” in 2022, with them and many others later announcing layoffs. Furthermore, given the inflation and other macroeconomic and geopolitical risks in the global economy, there is now a reasonable risk of recession, with many Wall Street banks forecasting a recession to occur at some point in the U.S. economy in 2023. As a result, valuations for public SaaS companies have come down as there is a tendency to move to safer investments, rather than growth assets. FE INTERNATIONAL PAGE 04

As a result, SaaS stocks have fallen heavily since the start of 2022. The Dow has performed comparatively well, down just 9.2% from the start of 2022, whereas the tech-heavy NASDAQ is down close to 33.8% over the same period. Further segmenting the stock market to focus on SaaS businesses specifically, looking at the BVP Cloud Index, this is down by more than half at 51.3%. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1/3/22 2/3/22 3/3/22 4/3/22 5/3/22 6/3/22 7/3/22 8/3/22 9/3/22 10/3/22 11/3/22 12/3/22 BVP Nasdaq Emerging Cloud Index Nasdaq Index Percent Change Dow Jones Percent Change S&P Index Percent Change Percent Change Through analysis of each of these 75 constituents over the last year, taking the businesses which are generating negative FCF (calculated as cash from operations, less CAPEX) these have a median Enterprise Value / Forward Revenue multiple of 3.3x whereas, for those generating positive FCF, their median multiple is 5.5x, or a 64% increase. This highlights that there has been a change in investor sentiment to shift from businesses that are high growth to those that are generating positive FCF and have high net dollar retention rates. Analysis of net dollar retention rates for public companies proves challenging as it is a non-GAAP measure, and so is not required to be reported to investors. When growth is ample, it is likely something that management teams will draw investor attention to, and when growth stagnates, is a metric that may not be reported on. Private SaaS ARR Multiples - FE International Proprietary Data R G Q C % 4 . 2 . c Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q4 '22 FE INTERNATIONAL PAGE 05

VALUE OF PRIVATE EQUITY DRY POWDER 2022 saw PEs deploy vast sums of capital into acquisitions. Whilst these positive M&A actions have reduced the overall “dry powder” available, there is still $400 billion more capital available than seen in 2017 and more than double available compared to 2012. Total Value of Dry Powder with PE ($B)* $4,000 Total 2022 $3,000 2021 2020 2019 $2,000 Overhang by Vintage 2018 2017 $1,000 2016 2015 Cumulative Overhang 2014 $0 ** 7 7 1 1 2 2 3 5 8 8 4 9 9 6 0 0 1 1 1 2 2 1 1 1 1 1 1 0 1 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 PEs, keen to deploy capital are looking further downstream for portfolio-strategic and value-oriented opportunities. This is a marked difference to the Financial Crisis, where PEs were later criticized for not deploying quickly enough. As such, the target acquisition range of PEs remains firmly in favor of sub-$250MM acquisitions, an M&A segment where FE holds a leading position for SaaS businesses. Distribution of Enterprise Values for PE Funds* 100% 75% 50% 25% 0% 2008 2010 2012 2013 2017 2019 2020 2021 2022** 2009 2011 2014 2015 2016 2018 $5B+ $1B-$5B $500M-$1B $250M-$500M $100M-$250M

VC AND PE FUNDRAISING FOR SAAS Pitchbook data up to September 2022 indicates that $348 billion has been raised in PE funding in 2022. This would mean that the amount raised is likely to be in line with 2020, which was the third highest raising year on record. PE Funding Raised ($B) $538.5 $543.0 $462.7 $420.0 $385.3 $364.6 $354.3 $347.9 $336.7 $168.6 $315.8 $272.4 $112.4 $269.0 $177.6 $180.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022* FE International served as the exclusive M&A advisor on the sale of The Systems House, Inc to Aptean. The Systems House, Inc. was launched in 1979 as one of the largest IBM vendor partners to serve the Distribution Industry. Over the past 40+ years, the Company focused its attention on CASE the needs of the Medical Distribution Industry and successfully transformed its solution from on-premise to the cloud. The Company now offers a holistic ERP system that covers every phase of distribution management in the medical and healthcare supply chain. STUDY: The Seller had previously tried to sell the Company in 2021 and was in conversations with several North American vertical software acquirers. No deal was struck and the Seller engaged FE International in early 2022 to conduct a formal M&A process. As part of the M&A process, FE International reached out to institutional and strategic buyers, executed dozens of NDAs, and received 13 IOIs in the first round of bidding. FE International invited six bidders back for a second/final round of bidding and an LOI was executed with Aptean. The deal FE International secured represents a 122% price improvement when compared to the initial bids submitted by the buyers that the Seller brought to the table. FE INTERNATIONAL PAGE 07

Venture Capital raising tells a similar story to private equity, with $224 billion raised so far in 2022 (to September 2022) and is likely to be in line with 2018 by the end of 2022 which was the highest year on record ($298 billion). Venture Capital Raised ($B) $298.1 $265.0 $243.0 $227.1 $$223.6 $177.2 $179.2 $51.2 $55.3 $55.4 $49.5 $53.0 $140.7 $39.9 $31.3 $81.6 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022* In addition, there is still over $3 trillion in private capital waiting to be deployed and a firm imbalance between available capital and available acquisition targets, especially those reporting positive FCF generation, modest/high growth and good retention rates. Business owners should view this as an opportunity in 2023 to seek growth capital or M&A. FE International served as the exclusive growth capital advisor for ThriveCart. The new growth funding will help fuel the continued expansion of a profitable company as Thrivecart scales to meet further increased demand for higher conversions and checkout page software solutions. CASE ThriveCart was launched in 2016 and offers a simple but highly effective website builder, funnel creator, and checkout cart for digital creators. The software offers dozens of third-party STUDY: integrations to round out its functionality and has helped tens of thousands of entrepreneurs launch their online businesses. FE International formally went out to market with ThriveCart in July 2022 and ran a robust process consisting of discussions with a wide range of Private Equity and Venture Capitalists who expressed interest in GMV (gross merchandise value) based solutions. After many rounds of discussion, LTV Fund was agreed upon being the best partner and raised $35MM in growth capital. FE INTERNATIONAL PAGE 08

NOTABLE KKEEYY FFEE DDAATTAA TRANSACTIONS FE has had another record-breaking year in closed deals for SaaS. Below are a small selection of our completed deals from throughout 2022. acquired by acquired by acquired by acquired by acquired by acquired by acquired by Private Private Acquirer Acquirer ProMap ‑ Store Locator acquired by acquired by acquired by Private Acquirer FE INTERNATIONAL PAGE 09

WHERE WILL VALUATIONS GO IN 2023? We are continuing to see more institutional investors entering the sector, providing healthy competition to strategics. These types of investors include mid- market private equity funds backing operators, lower mid-market private equity funds, strategics and ultra-high net worth investors— typically deploying $10-100 million per acquisition. These investors are highly data-driven and long-term in their analysis, so most business owners find success in exit planning through FE ahead of time (3 – 12 months in most cases). Data indicated that companies that go through exit planning sell for c.14% higher multiples than those that do not. For businesses with over $2M EBITDA, you can expect a 7.0x to 10.0x multiple: Whether these business valuations are forward-looking, and revenue or EBITDA based depends on a number of variables, best explored in our valuation guide. While the general valuation drivers above are a key consideration, it’s important to note that every SaaS business is unique, and each has its own priorities in terms of metrics. As the valuation process goes deeper, more business model-specific factors come into play when determining a final multiple. For those considering an exit, FE provides extensive guidance on how SaaS entrepreneurs should best prepare to sell their businesses. FE INTERNATIONAL PAGE 10

THE RULE OF 40 The rule of 40 is a principle that states a SaaS or software company's combined revenue growth rate and profit margin (in this case we have taken the FCF margin since this takes into account any necessary CAPEX required to maintain ongoing business operations) should equal or exceed 40%. SaaS companies above 40% are generating profit at a sustainable rate, whereas companies below 40% may face cash flow or liquidity issues. From the first graph below, typically those that are above the line of 40% (light blue dots) translate to a much higher EV / Forward Multiple than those below (black dots). Rule of 40% Yext Free Cash Flow Margin Revenue Growth Rate What does this tell us? Simply, at this moment in time, investors are favoring businesses with sustainable cash flow and high revenue growth prospects. Digging deeper into this, churn and retention play a a hugely important part. Snowflake, Datadog and bill.com all have net revenue retention rates of 165%, 130% and 131%, respectively and, unsurprisingly, BigCommerce, 2U and CS Disco do not disclose their retention rates in the quarterly filings. Yext however does, and with a mere 96% net retention rate, unsurprisingly, they possess only a 1.8x EV / Forward Revenue multiple. FE INTERNATIONAL PAGE 11

EV / Forward Revenue Yext Rule of 40% The rule of 40 is not something that should be followed to the letter, however, if you are the owner of a private SaaS business and exceed the rule of 40 with healthy margins, it may be worth considering what other growth opportunities are available to your business and investing further into those channels since it is likely that investors will value your business highly if these metrics are met. FE International served as the exclusive M&A advisor in the cross border transaction of Answer The Public to NP Digital. CASE Answer The Public launched back in 2014 and produced highly relevant and demanded content to drive traffic, monitor trends, and discover underserved niches. Through this capability, it quickly became many marketers dream companion in keyword analytics and STUDY: has seen action in many Heads of Marketing presentations in boardrooms across the world. FE expected a significant amount of interest given how well known the business was and it did not disappoint. Within two weeks of marketing the business, we received a full ask offer with an all-cash structure that was too good for the sellers to turn down. FE INTERNATIONAL PAGE 12

KEY TAKEAWAYS Investors are likely to keep shifting their attention to the private markets for a SaaS acquisition, even if there is a resurgence in the value of public and VC-backed comps. Private equity firms are sitting on close to record sums of capital and have become more efficient in deploying vast amounts across 2021 and 2022. We are also in the midst of one of the largest NASDAQ drawdowns in history. For SaaS businesses, growth at all costs is no longer being rewarded. This will continue to favor companies with high net dollar retention (or low or net negative churn) and strong FCFs. Planning is more important than ever, as those that can get a handle on their metrics, and where to optimize, typically see multiples c.14% higher than others. FE actively encourages valuation and exit planning exercises, and the sooner the analysis begins on the business the higher the likelihood of an above-market exit when the time comes. FE has consistently outperformed SaaS-focused M&A firms in the lower mid-market for over a decade, with the enterprise value of completed deals for SaaS increasing consistently year on year. Between 2021 and 2022, the value of completed deals increased by 51%. For an initial consultation, get in touch with our team of experts in exit planning, valuation, accounting, legal and more. FE International served as the exclusive M&A advisor on the sale of Upright Labs to Cordance. Upright Labs was launched four years ago and offered solutions in the multichannel inventory CASE management software and e-commerce advisory niche. The company supports over 3,000 second-hand retails keep track of their inventory and streamlines their clients supply chain processes. STUDY: Given the businesses many strengths and enterprise B2B solution, FE received a lot of upfront interest in the business with 11 IOI received in the first round of bidding. Four of these were then invited back for second and then final rounds of bidding with an LOI signed by Cordance. Overall, the deal secured represented a 17% uplift on the seller's initial valuation expectations. FE INTERNATIONAL PAGE 13

FE INTERNATIONAL: WHO WE ARE FE International is an award-winning global It complements this formal experience with M&A advisor of SaaS, e-commerce and unique and innovative approaches to content businesses. It has completed valuation, deal marketing and structuring. acquisitions for thousands of founders, owners and acquirers and is the preeminent Additionally, it prides itself on exceptional valuation thought leader in the industry. quality of service and the ability to consistently deliver safe, secure and Founded in 2010, FE is known for its successful deal-making for entrepreneurs extensive network of pre-qualified and investors alike. international investors. With headquarters in New York and regional offices in Miami, San FE has served over 1,200 clients and Francisco and London, FE is an international businesses in SaaS, e-commerce and content company serving clients worldwide. acquisitions and boasts a 94.1% success rate. With an investor network of over 80,000 high It was named one of The Americas’ Fastest net worth individuals, private equity firms, Growing Companies in 2022, 2021 and 2020 funds and strategics, FE continues to lead the by The Financial Times and is also a three- way in midmarket online and technology time Inc. 5000 company. business sales. The FE team includes experts in exit Over the past decade, FE has achieved planning, valuation, accounting, legal and industry-wide recognition, winning multiple more. awards from accredited sources and advising on several notable acquisitions. acquired by acquired by acquired by acquired by acquired by acquired by acquired by FE INTERNATIONAL PAGE 14

MEET THE SAAS M&A TEAM Our team of creative and strategic thinkers blends together formal experience with innovative approaches to valuation, deal marketing and structuring. Here are just a few leaders of our award-winning team: THOMAS SMALE - CEO Thomas originally founded FE in 2010, with the aim of helping entrepreneurs running self-funded and profitable businesses exit. Since then, Thomas has built FE into the industry-leading M&A advisor for $1-100M technology businesses. With experience dating back to the early 2000s, Smale offers invaluable technical, diligence and negotiation advice to early-stage and seasoned business owners alike, which has resulted in over 1,200 successful exits. KEVIN HE - VICE PRESIDENT OF SAAS M&A Kevin is a Vice President in the Mergers and Acquisitions team. Kevin brings over a decade of experience in Investment Banking and management consulting to FE’s top-ranked SaaS M&A team. With a passion for entrepreneurship, Kevin has served as CFO for numerous technology start-ups. ASHLEY BOHN - SAAS M&A ASSOCIATE Ashley is an Associate on the M&A team at FE. She provides crucial advisory services across SaaS, Content, and e-Commerce, and is also the in-house expert on Shopify apps. Prior to joining the FE team, Ashley worked in public accounting servicing companies with gross revenues ranging from six- to ten- figures within the technology industry. Ashley is a Certified Public Accountant in New York State. JONATHAN ROBERTS - SENIOR VALUATIONS ASSOCIATE Jonathan manages FE's thought leading Valuation team, responsible for analyzing hundreds of thousands of evolving data sets, financial models and comps to provide the most accurate valuations for FE's valued clients. By front-loading the valuation analysis, FE boasts a high valuation accuracy with final acquisition prices within 5.8% of target prices on average lifetime. KISHAN PATEL - SENIOR AUDIT ASSOCIATE Kishan joined FE International in September 2019, having qualified as a Chartered Accountant (CA), a Tax Professional (ITP) and graduating from Cass Business School, City University of London with a Bachelor of Science (BSc) in Banking and International Finance. Prior to joining FE, Kishan spent three and a half years at KPMG in their Deal Advisory, M&A Tax team as an associate working on pre/post deal structuring, buy-side and sell-side due diligence and IPOs. DANIEL CHAMBERLAIN - SENIOR AUDIT ASSOCIATE Daniel is a Senior Associate in FE’s Audit Team and joined FE International in October 2019, having previously worked in EY’s Assurance Practice. Daniel is a chartered accountant and acquired his ACA with Ernst & Young in December 2018 having gained valuable M&A experience within their Forensics team working in the retail sector. At FE, Daniel leads the end-to-end pre-listing due diligence process alongside Kishan Patel. Whether you are an individual selling your online business, or an investor looking to build on an established portfolio, FE International has the expertise to help. Click here to Click here to ACQUIRE DIVEST FE INTERNATIONAL PAGE 15