Enterprise Software. Samad Samana. Senior Research Analyst August 2016

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1 Enterprise Software Samad Samana Senior Research Analyst August 2016 The analyst primarily responsible for the preparation of the content of this presentation certifies that (i) all views expressed in this presentation accurately reflect the analyst s personal views about the subject company and securities, and (ii) no part of the analyst s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the analyst in this presentation. See important disclosures and analyst certification on page 30 of this presentation. This presentation constitutes a compendium report (covers six or more subject companies). As such, Stephens Inc. chooses to provide specific disclosures for the companies mentioned by reference. To access current disclosures for the companies in this presentation, clients should refer to or contact your Stephens Inc. representative for additional information Stephens Inc. 111 Center Street Little Rock, AR stephens.com Member NYSE, SIPC 1

2 Biography Samad is a senior research analyst covering the enterprise software sector, with a particular focus on software-as-a-service (SaaS) companies. Prior to joining Stephens in May 2016, Samad covered the enterprise software sector at FBR Capital Markets for five years with a focus on SaaS companies. Prior to FBR, Samad worked as an associate analyst at Morgan Keegan for three years with a focus on the infrastructure and security software sectors. Samad received a B.A. in International Studies from Rhodes College and is a Level III CFA Candidate. 2

3 Coverage Universe and Comp Table Rating Company Ticker Market Cap (M) Price PT OW/V Adobe Systems ADBE $50,634 $ $125 OW/V salesforce.com CRM $53,213 $77.48 $108 OW/V Synchronoss Technologies SNCR $1,961 $40.74 $50 EW/V Ultimate Software ULTI $6,190 $ $230 EW/V Workday WDAY $17,472 $82.08 $80 OW/V Wix.com WIX $1,589 $38.61 $50 52 week Revenue YoY Growth EV/Rev Free Cash Flow EV/FCF Performance Company Ticker Rating Price High Low SI % Mkt Cap EV 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E QTD YTD YoY Adobe Systems Incorporated ADBE OW/ V $ $ $ % $50,634 $48,453 $5,845 $7,216 22% 23% 8.3x 6.7x $1,922 $2,486 25x 19x 4.7% 6.8% 17.4% athenahealth, Inc. ATHN $ $ $ % $4,804 $4,955 $1,104 $1,319 19% 20% 4.5x 3.8x $48 $ x 49x (11.5%) (24.1%) (12.1%) Benefitfocus, Inc. BNFT $39.92 $44.98 $ % $1,184 $1,183 $235 $293 27% 25% 5.0x 4.0x ($36) ($8) NM NM 4.7% 9.7% 3.7% Box, Inc. Class A BOX $12.89 $15.00 $ % $1,634 $1,483 $394 $494 30% 25% 3.8x 3.0x ($42) $14 NM 107x 24.7% (7.7%) (12.6%) Cornerstone Ondemand, Inc. CSOD $43.87 $46.54 $ % $2,454 $2,392 $426 $521 26% 22% 5.6x 4.6x $27 $51 89x 47x 15.3% 27.0% 15.1% Descartes Systems Group Inc. DSGX $21.01 $21.09 $ % $1,592 $1,556 $205 $226 11% 11% 7.6x 6.9x $59 $68 27x 23x 10.1% 4.6% 24.1% Hortonworks, Inc. HDP $8.48 $26.59 $ % $501 $377 $178 $234 46% 32% 2.1x 1.6x ($88) ($42) NM NM (20.7%) (61.3%) (67.9%) HubSpot, Inc. HUBS $56.30 $60.11 $ % $1,990 $1,855 $265 $344 45% 30% 7.0x 5.4x ($7) $7 NM NM 29.7% (0.0%) 21.0% Interactive Intelligence Group, Inc. ININ $58.13 $59.58 $ % $1,293 $1,237 $430 $478 10% 11% 2.9x 2.6x $8 $19 146x 67x 41.8% 85.0% 45.6% LifeLock, Inc. LOCK $16.73 $17.21 $ % $1,549 $1,390 $667 $750 13% 12% 2.1x 1.9x $86 $120 16x 12x 5.8% 16.6% 117.6% Medidata Solutions, Inc. MDSO $53.10 $55.25 $ % $3,053 $2,944 $462 $550 18% 19% 6.4x 5.4x $72 $100 41x 30x 13.3% 7.7% 1.7% MINDBODY, Inc. Class A MB $17.58 $19.32 $ % $698 $626 $138 $176 36% 28% 4.5x 3.5x ($16) ($4) NM NM 8.9% 16.2% 32.4% New Relic, Inc. NEWR $35.43 $40.13 $ % $1,801 $1,583 $254 $322 40% 27% 6.2x 4.9x ($21) $12 NM 127x 20.6% (2.7%) 4.0% Paylocity Holding Corp. PCTY $42.72 $49.65 $ % $2,185 $2,089 $231 $297 51% 29% 9.1x 7.0x $11 $16 197x 132x (1.1%) 5.4% 33.5% RingCentral, Inc. Class A RNG $23.09 $25.67 $ % $1,688 $1,547 $374 $463 26% 24% 4.1x 3.3x $10 $17 151x 91x 17.1% (2.1%) 11.5% salesforce.com, inc. CRM OW/ V $77.48 $84.48 $ % $53,213 $50,791 $8,372 $10,366 26% 24% 6.1x 4.9x $1,752 $2,400 29x 21x (2.4%) (1.2%) 7.6% ServiceNow, Inc. NOW $73.69 $91.28 $ % $12,122 $11,757 $1,377 $1,786 37% 30% 8.5x 6.6x $325 $432 36x 27x 11.0% (14.9%) (2.6%) Shopify, Inc. Class A SHOP $42.41 $42.79 $ % $3,510 $3,270 $367 $524 79% 43% 8.9x 6.2x ($3) $11 NM NM 37.9% 64.4% 36.4% SPS Commerce, Inc. SPSC $65.75 $78.29 $ % $1,116 $997 $193 $230 22% 19% 5.2x 4.3x $12 $17 80x 59x 8.5% (6.4%) (6.0%) Synchronoss Technologies, Inc. SNCR OW/ V $40.74 $46.85 $ % $1,961 $2,060 $680 $806 18% 19% 3.0x 2.6x $78 $121 26x 17x 27.9% 15.6% (11.6%) Tyler Technologies, Inc. TYL $ $ $ % $5,972 $6,349 $764 $867 29% 14% 8.3x 7.3x $148 $183 43x 35x (1.4%) (5.7%) 16.5% Ultimate Software Group, Inc. ULTI EW/ V $ $ $ % $6,190 $6,085 $782 $960 27% 23% 7.8x 6.3x $59 $89 103x 69x (1.5%) 5.9% 9.0% Veeva Systems Inc Class A VEEV $39.65 $39.88 $ % $5,343 $5,320 $519 $630 27% 21% 10.3x 8.4x $119 $114 45x 47x 16.2% 37.4% 56.7% WageWorks, Inc. WAGE $60.53 $62.82 $ % $2,215 $1,761 $361 $402 8% 11% 4.9x 4.4x 1.2% 33.4% 26.8% Wix.com Ltd. WIX OW/ V $38.61 $39.33 $ % $1,589 $1,474 $280 $361 38% 29% 5.3x 4.1x $42 $97 35x 15x 27.2% 69.7% 72.3% Workday, Inc. Class A WDAY EW/ V $82.08 $85.67 $ % $17,472 $15,906 $1,558 $2,058 34% 32% 10.2x 7.7x $179 $294 89x 54x 9.9% 3.0% (0.4%) Workiva, Inc. Class A WK $17.37 $18.80 $ % $718 $676 $181 $220 25% 21% 3.7x 3.1x ($21) ($12) NM NM 27.2% (1.1%) 26.1% Zendesk, Inc. ZEN $30.54 $31.39 $ % $2,865 $2,591 $310 $413 48% 33% 8.4x 6.3x ($1) $17 NM 149x 15.8% 15.5% 44.7% AVERAGE 30% 23% 6.1x 4.9x 71x 57x 12.2% 10.6% 18.2% HIGH 79% 43% 10.3x 8.4x 197x 149x 41.8% 85.0% 117.6% LOW 8% 11% 2.1x 1.6x 16x 12x (20.7%) (61.3%) (67.9%) MEDIAN 27% 24% 5.8x 4.7x 44x 47x 10.5% 5.6% 15.8% *Stephens non-gaap estimates for covered companies; all others courtesy of FactSet Research Systems Inc. **NM reflects a valuation over 200x or negative FCF Source: FactSet Research Systems and Stephens. 3

4 Corporate Access and Event Calendar Stephens Corporate Access Date Event Additional Details June 2016 DWRE CFO/CIO Dinner Tim Adams CFO; Steve Morin CIO August 2016 WIX NDR Midwest Joe Pollaro VP, U.S. Operations and IR August 2016 SNCR NDR West Coast Daniel Ives SVP, Finance and Corp. Dev. September 2016 WIX NDR NYC Lior Shemesh CFO; Joe Pollaro VP, U.S. Operations and IR Enterprise Software / SaaS Event Calendar Date Event Additional Details 8/24 WDAY F2Q Earnings Revenue Stephens: $374.3; Cons: $ /31 CRM F2Q Earnings Revenue Stephens: $2,037; Cons: $2,020 9/13 CIO Summit CIO Conference in LA 9/19-9/21 ORCL OpenWorld Conference in San Francisco 9/26-9/29 WDAY Rising Conference in Chicago, Analyst Day on 9/27 Source: FactSet Research Systems and Stephens. 4

5 SaaS Coverage Rankings 2Q16 $2,500 Sales ($ Mil) 45% 41% Sales Growth (YoY%) $2,000 $2,037 40% 35% 32% $1,500 $1,000 $1,399 30% 25% 20% 15% 27% 25% 20% 17% $500 $374 10% $0 salesforce.com Adobe Systems Workday Ultimate Software $187 $161 Synchronoss Technologies $69 Wix.com 5% 0% Wix.com Workday Ultimate Software salesforce.com Adobe Systems Synchronoss Technologies $500 $450 $400 $350 $300 $250 $435 Free Cash Flow ($ Mil) 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 86.9% Gross Margin (% of Rev) 77.0% 70.8% 63.2% 60.0% 50.7% $ % $ % $100 $ % $50 $0 Adobe Systems salesforce.com $23 Synchronoss Technologies $10 $5 $4 Wix.com Workday Ultimate Software 10.0% 0.0% Adobe Systems salesforce.com Workday Ultimate Software Synchronoss Technologies* Wix.com *SNCR 's COGS exclude D&A which it breaks outs seperately. In addition, the company discloses SG&A rather than S&M ** CRM and WDAY have not yet reported and the above are Stephens estimates for F2Q Source: Company filings and Stephens. 5

6 SaaS Coverage Rankings 2Q % 30.0% 33.1% Operating Margin (% of Rev) 31.1% 60.0% 50.0% S&M (% of Rev) 50.7% 25.0% 20.0% 15.0% 10.0% 23.1% 20.0% 12.7% 40.0% 30.0% 20.0% 15.5% 21.2% 30.7% 31.5% 42.0% 5.0% 2.0% 10.0% 0.0% Adobe Systems Wix.com Synchronoss Technologies Ultimate Software salesforce.com Workday 0.0% Synchronoss Technologies* Ultimate Software Adobe Systems Workday salesforce.com Wix.com 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 12.5% 13.0% R&D (% of Rev) 14.5% 14.5% 30.3% 31.1% 12.0% 10.0% 8.0% 6.0% 4.0% 7.0% 7.2% G&A (% of Rev) 7.4% 8.6% 9.8% 5.0% 2.0% 0.0% salesforce.com Synchronoss Technologies Adobe Systems Ultimate Software Workday Wix.com 0.0% Workday Wix.com Ultimate Software Adobe Systems salesforce.com *SNCR 's COGS exclude D&A which it breaks outs seperately. In addition, the company discloses SG&A rather than S&M ** CRM and WDAY have not yet reported and the above are Stephens estimates for F2Q Source: Company filings and Stephens. 6

7 SaaS Indexed Performance 1,400 Stephens SaaS Index Index 50d MA 200d MA 1,300 $1, $1, ,200 $1, ,100 1, Max Min Average Index Price $1, $ $1, Date 8/11/16 2/8/16 Price is relative to weighted Market Cap of the following companies as of 12/31/2014; NOW, ATHN, VEEV, MDSO, SHOP, ZEN, WAGE, PCTY, LOCK, NEWR, DSGX, RNG, BOX, TYL, BNFT, SPSC, ININ, MB, HDP, WK, WDAY, ADBE, CSOD, CRM, WIX, ULTI, SNCR, HUBS Source: FactSet Research Systems and Stephens. 7

8 EV / 2017 Rev SaaS ERG Graph 9.0x 8.0x VEEV WDAY 7.0x DSGX TYL ADBE PCTY NOW 6.0x ULTI ZEN SHOP 5.0x 4.0x WAGE MDSO SPSC ATHN CRM CSOD BNFT NEWR HUBS WIX 3.0x SNCR WK RNG BOX MB 2.0x ININ LOCK HDP 1.0x Stephens SaaS coverage No SaaS coverage 0.0x 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2017E Revenue Growth Source: FactSet Research Systems and Stephens. 8

9 Industry Outlook Recent M&A Transactions Date Target Acquirer Equity Price (M) Imp. EV (M) EV/ 2017 Rev 8/1/16 Fleetmatics Verizon $2,350 $2, x 7/28/16 NetSuite Oracle $9,100 $8, x 6/13/16 LinkedIn Microsoft $26,400 $24, x 6/1/16 Demandware salesforce.com $2,900 $2, x 5/31/16 Marketo Vista Equity $1,600 $1, x 5/31/16 SciQuest Accel Partners & KKR $470 $ x 5/2/16 Opower Oracle $550 $ x 4/28/16 Textura Oracle $700 $ x 4/18/16 Cvent Vista Equity $1,520 $1, x Source: FactSet Research Systems and Stephens. 9

10 Company Highlights 10

11 Adobe Systems (ADBE) Overweight (Vol) $125 PT Current Market Valuation ADBE 8/15/2016 Price Chart Stock Price $ Price Target $ 125 % of 52-Week High 98.5% Target Date 8/9/16 52-Week High (5/31/16) $ Week Low (2/08/16) Market Cap $ 63,090,625 $125 $ 60,909,568 Diluted Shares Outstanding 504,725 Equity Value $ 49,987,964 Price Target Implied Multiples Plus: Total debt 1,916,831 Fiscal Enterprise Value / Less: Total cash and marketable securities 4,097,888 Year Revenue FCF P/E Enterprise Value $ 47,806, x 47.4x 60.2x 2016E 10.4x 31.7x 42.0x 2017E 8.4x 24.5x 31.8x Current Trading Multiples E 2017E Expectations EPS Margins FQ2 Stephens Consensus Guidance Mar Fiscal Year Gross Operating EBITDA Total Revenue $ 1,398.7 $ 1,404.1 $1,365 - $1,415 Jun % 21.8% 16.2% EPS - Non-GAAP Sep % 28.9% 22.0% Digital Media ARR 3,413.0 Dec E 87.1% 33.5% 25.7% FY E 87.4% 35.6% 27.6% FQ3E Stephens Consensus Guidance Growth -1% 57% 43% 32% Total Revenue $ 1,443.2 $ 1,450.1 $1,420 - $1,470 P/E 73.7x 74.7x 47.7x 33.3x 25.2x EPS - Non-GAAP Revenue 4, , , , ,216.4 Ratios Digital Media ARR 3,728.1 Growth 2% 16% 22% 23% Fiscal Year S&M R&D G&A EV/S 11.8x 11.5x 10.0x 8.2x 6.6x % 17.4% 11.3% FY16E Stephens Consensus Guidance % 15.5% 9.6% Total Revenue $ 5,845.3 $ 5,806.9 $5,800 FCF , , , , E 30.5% 14.4% 8.6% EPS - Non-GAAP Growth 18% 13% 50% 29% 2017E 29.3% 14.2% 8.1% Digital Media ARR EV/FCF 49.6x 42.0x 37.2x 24.9x 19.2x Investment Thesis: We believe Adobe's dominant Digital Media business and robust Marketing Cloud platform place it at the nexus of the digital disruption. In our opinion, strong end market demand for its products and a more attractive subscription-based business model should allow Adobe to deliver consistent, healthy growth for the next few years all while driving margin expansion at a faster rate than expected. We expect shares to reach new all-time highs as Adobe successfully achieves this rare growth/profitability combo, particularly for a company of its size. Price Target / Valuation: ADBE currently trades at a 19x EV/FCF multiple using our CY17 estimates. Our $125 price target uses a 25x EV/FCF valuation multiple, which we believe appropriately factors in ADBE's growth, profitability, market opportunity, customer base profile, and risk factors. Source: FactSet Research Systems, company filings and Stephens estimates. 11

12 Adobe Systems (ADBE) Key Points to Investment Thesis The subscription model has made Adobe's business much more attractive. Adobe spent the last several years transitioning from a perpetual license-based business to a subscription-based model. In 2015, ~67% of Adobe's business was from subscriptions vs. ~10% in In our opinion, Adobe's transformed business model should support better longterm revenue growth, increase customer lifetime value, and allow margins to reach new highs over time. We estimate revenue will grow 22% and 23% in FY16 and FY17, respectively. Creative Business positioned for years of healthy growth. We estimate Adobe's Creative Cloud revenue will grow 36% in 2016 and 29% in 2017, fueling the Digital Media segment. We believe Adobe can keep rapidly adding to its 7 million-plus Creative Cloud subscriber base by converting legacy Creative Suite users and attracting new subscribers to the Adobe ecosystem. This, combined with driving ARPU higher via more value-enhancing services and continuous innovation, should result in healthy growth through Marketing Cloud growth is poised to breakout. We estimate revenue will grow 20% in 2016 and then accelerate to 28% growth in Marketing Cloud bookings have grown at a 30% or better level for the last couple of years, but a transition from license to term-based contracts has hurt reported revenue growth. Despite the optics, Adobe is seeing solid adoption of its solutions, increases in average deal size, and healthy growth in the number of large customers (>$500k of ARR). We believe the transition largely being over and solid underlying demand should lead to growth breaking out later in 2016 and into Ramping profitability reflects the power of subscription business model. About ~67% of Adobe's revenue came from recurring subscriptions in 2015 versus ~10% in Now that the company's recurring revenue has scaled, we expect this and efficiencies to drive significant operating margin expansion and EPS growth from Longer term, we believe the more profitable subscription model plus more sales going through direct channels (vs. lower margin indirect channels) will also allow Adobe to reach higher peak operating margins than its prior high-water mark (~40% in 2008). We estimate operating margin will expand to ~35% in 2017 and EPS will approach $4/share. Source: Company presentations, filings and Stephens estimates. 12

13 Adobe Systems (ADBE) Earnings Model ADBE - Adobe Systems Incorporated Income Statement (Non-GAAP) FQ1 FQ2 FQ3 FQ4 FY15 FQ1 FQ2 FQ3E FQ4E FY16E FQ1E FQ2E FQ3E FQ4E FY17E (in thousands, except per share data) Feb-15 May-15 Aug-15 Nov-15 Year end Feb-16 May-16 Aug-16 Nov-16 Year end Feb-17 May-17 Aug-17 Nov-17 Year end Total Revenue 1,109,181 1,162,158 1,217,768 1,306,404 4,795,511 1,383,335 1,398,709 1,443,184 1,620,109 5,845,337 1,662,228 1,713,074 1,810,077 2,031,054 7,216,433 Total Cost of Revenue 142, , , , , , , , , , , , , , ,277 Total Gross Profit 966,902 1,003,984 1,054,178 1,129,671 4,154,735 1,208,133 1,215,509 1,255,570 1,409,495 5,088,706 1,449,463 1,495,513 1,582,008 1,777,172 6,304,156 Operating expenses: Sales and marketing 360, , , ,472 1,554, , , , ,033 1,785, , , , ,006 2,117,214 Research and development 184, , , , , , , , , , , , , ,379 1,027,740 General and administrative 126, , , , , , , , , , , , , , ,538 Other non-recurring items , , Total operating expenses 671, , , ,338 2,769, , , , ,937 3,132, , , ,519 1,037,869 3,732,492 Operating income 295, , , ,333 1,385, , , , ,558 1,955, , , , ,304 2,571,665 Other income (expense): Interest expense (14,545) (16,605) (16,519) (16,515) (64,184) (18,469) (17,174) (16,000) (16,000) (67,643) (15,500) (15,500) (15,500) (15,500) (62,000) Other income (expense) 4,768 3,962 3,119 23,021 34,870 3,018 2,765 3,000 3,000 11,783 3,000 3,000 3,000 3,000 12,000 Other gains/charges (1,430) (223) 1,314 (22,037) (22,376) 1,169 3, , Pre-tax income 283, , , ,802 1,333, , , , ,558 1,904, , , , ,804 2,521,665 Income taxes 59,632 64,310 73,205 82, ,056 88,403 95, , , , , , , , ,550 Pro Forma tax rate 21% 21% 21% 21% 21% 21% 21% 21% 21% 21% 21% 21% 21% 21% 21% Net income $ 224,332 $ 241,955 $ 275,418 $ 311,893 $ 1,053,598 $ 332,618 $ 357,433 $ 381,930 $ 432,571 $ 1,504,551 $ 436,599 $ 467,850 $ 513,491 $ 574,175 $ 1,992,115 EPS - GAAP $ 0.17 $ 0.29 $ 0.34 $ 0.44 $ 1.24 $ 0.50 $ 0.48 $ 0.53 $ 0.62 $ 2.13 $ 0.62 $ 0.69 $ 0.78 $ 0.88 $ 2.98 EPS - Non-GAAP $ 0.44 $ 0.48 $ 0.54 $ 0.62 $ 2.08 $ 0.66 $ 0.71 $ 0.76 $ 0.86 $ 2.98 $ 0.86 $ 0.92 $ 1.01 $ 1.13 $ 3.94 Diluted shares outstanding 507, , , , , , , , , , , , , , ,225 Business Segment Revenue: Digital Media 702, , , ,300 3,095, , , ,368 1,076,619 3,932,787 1,127,357 1,164,729 1,236,523 1,345,774 4,874,382 YoY% 10% 8% 24% 35% 19% 33% 26% 28% 23% 27% 21% 24% 26% 25% 24% QoQ% 8% 6% 3% 14% NM 6% 1% 4% 10% NM 5% 3% 6% 9% NM Digital Marketing 357, , , ,700 1,508, , , , ,510 1,734, , , , ,300 2,163,951 YoY% 14% 11% 20% 2% 11% 14% 12% 4% 30% 15% 21% 23% 27% 29% 25% QoQ% (4%) 3% 10% (5%) NM 6% 1% 2% 19% NM (2%) 3% 5% 21% NM Print & Publishing 49,200 48,200 45,600 48, ,400 45,400 43,400 43,320 45, ,100 45,400 43,400 43,320 45, ,100 YoY% 10% 4% (4%) (4%) 1% (8%) (10%) (5%) (5%) (7%) 0% 0% 0% 0% 0% QoQ% (2%) (2%) (5%) 6% NM (6%) (4%) (0%) 6% NM (1%) (4%) (0%) 6% NM Key Metrics Digital Media ARR 2,092,000 2,356,000 2,646,000 2,882,000 NM 3,128,000 3,413,000 3,728,130 4,029,905 NM 4,236,315 4,540,220 4,886,574 5,184,245 NM YoY% 82% 71% 63% 54% NM 50% 45% 41% 40% NM 35% 33% 31% 29% NM QoQ% 11% 13% 12% 9% NM 9% 9% 9% 8% NM 5% 7% 8% 6% NM Creative Cloud revenue 509, , , ,600 2,303, , , , ,677 3,128, , ,824 1,046,031 1,118,020 4,041,192 YoY% 14% 11% 39% 48% 27% 44% 37% 37% 28% 36% 24% 28% 33% 31% 29% QoQ% 13% 8% 5% 16% NM 10% 3% 4% 9% NM 6% 7% 8% 7% NM Marketing Cloud Revenue 311, , , ,200 1,358, , , , ,470 1,632, , , , ,866 2,088,766 YoY% 17% 15% 27% 7% 16% 21% 18% 7% 35% 20% 24% 26% 30% 31% 28% QoQ% (6%) 5% 13% (4%) NM 7% 2% 2% 21% NM (2%) 4% 6% 22% NM Margins Gross margin 87.2% 86.4% 86.6% 86.5% 86.6% 87.3% 86.9% 87.0% 87.0% 87.1% 87.2% 87.3% 87.4% 87.5% 87.4% Operating margin 26.6% 27.5% 29.6% 31.4% 28.9% 31.5% 33.1% 34.4% 34.6% 33.5% 34.0% 35.3% 36.6% 36.4% 35.6% Net margin 20.2% 20.8% 22.6% 23.9% 22.0% 24.0% 25.6% 26.5% 26.7% 25.7% 26.3% 27.3% 28.4% 28.3% 27.6% Ratios (% of revenue) Digital Media revenue 63.4% 64.3% 63.2% 67.0% 64.5% 67.4% 67.4% 68.0% 66.5% 67.3% 67.8% 68.0% 68.3% 66.3% 67.5% Digital Marketing revenue 32.2% 31.5% 33.0% 29.3% 31.5% 29.4% 29.5% 29.0% 30.7% 29.7% 29.4% 29.5% 29.3% 31.5% 30.0% Print & Publishing revenue 4.4% 4.1% 3.7% 3.7% 4.0% 3.3% 3.1% 3.0% 2.8% 3.0% 2.7% 2.5% 2.4% 2.3% 2.5% Sales and marketing 32.5% 33.9% 31.9% 31.5% 32.4% 31.9% 30.7% 29.7% 30.0% 30.5% 30.5% 29.5% 28.5% 29.0% 29.3% Research and development 16.6% 15.4% 15.6% 14.6% 15.5% 14.8% 14.5% 14.5% 14.0% 14.4% 14.4% 14.3% 14.2% 14.1% 14.2% General and administrative 11.4% 9.6% 8.6% 8.9% 9.6% 9.2% 8.6% 8.4% 8.4% 8.6% 8.3% 8.2% 8.1% 8.0% 8.1% Operating expenses 60.6% 58.9% 56.9% 55.1% 57.7% 55.9% 53.8% 52.6% 52.4% 53.6% 53.2% 52.0% 50.8% 51.1% 51.7% YoY change Total revenue 11% 9% 21% 22% 16% 25% 20% 19% 24% 22% 20% 22% 25% 25% 23% Operating expenses 0% (0%) 2% 6% 2% 15% 10% 9% 18% 13% 14% 18% 21% 22% 19% Operating income 44% 27% 90% 58% 53% 47% 45% 38% 37% 41% 30% 30% 33% 32% 31% Net income 48% 30% 96% 59% 56% 48% 48% 39% 39% 43% 31% 31% 34% 33% 32% EPS 49% 30% 97% 60% 57% 49% 48% 39% 39% 43% 31% 31% 34% 33% 32% QoQ change Total revenue 3% 5% 5% 7% NM 6% 1% 3% 12% NM 3% 3% 6% 12% NM Operating expenses (1%) 2% 1% 4% NM 7% (3%) 1% 12% NM 4% 1% 3% 13% NM Operating income 13% 8% 13% 14% NM 6% 6% 7% 13% NM 1% 7% 10% 12% NM Net income 15% 8% 14% 13% NM 7% 7% 7% 13% NM 1% 7% 10% 12% NM EPS 15% 8% 14% 13% NM 7% 8% 7% 13% NM 1% 7% 10% 12% NM Samad Samana samad.samana@stephens.com (212) Source: Company filings and Stephens 13

14 salesforce.com (CRM) Overweight (Vol) $108 PT Current Market Valuation CRM 8/15/2016 Price Chart Stock Price $ Price Target $ % of 52-Week High 96.8% Target Date 8/1/16 52-Week High (5/26/16) $ Week Low (2/08/16) Market Cap $ 74,174,292 $108 $ 71,752,010 Diluted Shares Outstanding 686,799 Equity Value $ 56,180,158 Price Target Implied Multiples Plus: Total debt 1,293,170 Fiscal Enterprise Value / Less: Total cash and marketable securities 3,715,452 Year Revenue FCF P/E Enterprise Value $ 53,757, x 54.0x NM 2017E 8.6x 40.9x NM 2018E 6.9x 29.9x 74.0x Current Trading Multiples E 2018E Expectations EPS Margins FQ1 Stephens Consensus Guidance Mar Fiscal Year Gross Operating Net Total Revenue $ 1,916.6 $ 1,893.0 $1,885 - $1,895 Jun % 10.7% 6.4% EPS - Non-GAAP Sep % 12.4% 7.6% Billings 1, , Dec E 77.0% 13.3% 8.3% FY E 77.3% 15.8% 10.1% FQ2E Stephens Consensus Guidance Growth 50% 43% 33% 46% Total Revenue $ 2,036.9 $ 2,018.3 $2,005 - $2,015 P/E NM NM NM 82.0x 56.1x EPS - Non-GAAP Revenue 4, , , , ,366.0 Ratios Billings 1, , Growth 32% 24% 26% 24% Fiscal Year S&M R&D G&A EV/S 13.2x 10.0x 8.1x 6.4x 5.2x % 12.5% 10.7% FY17E Stephens Consensus Guidance % 12.3% 9.6% Total Revenue $ 8,372.0 $ 8,285.7 $8,160 - $8,200 FCF , , , E 41.6% 12.3% 9.7% EPS - Non-GAAP Growth 53.2% 50.4% 31.9% 37.0% 2018E 40.3% 11.9% 9.3% Billings 9, , EV/FCF 93.3x 60.9x 40.5x 30.7x 22.4x Investment Thesis: We are initiating coverage of salesforce.com with an Overweight (Vol) rating and a $108 price target. We want to own shares of CRM as we believe the company can grow the top line faster than expected and pair it with accelerating margin expansion. In our opinion, the company s combination of a comprehensive front-office software suite, platform offering, large partner ecosystem, and massive organizational scale will allow it to take share across its multiple clouds and stay a step ahead of the competition. We expect a clear course to $10 billion-plus of revenue and an upward march in margins to drive shares higher. Price Target / Valuation: CRM currently trades at a 22x EV/FCF multiple using our CY17 estimates compared to a 44x average for the SaaS group. Our $108 price target uses a 30x EV/FCF valuation multiple, which we believe appropriately factors in CRM's growth, profitability, market opportunity, customer base profile, and risk factors. Source: FactSet Research Systems, company filings and Stephens estimates. 14

15 salesforce.com (CRM) Key Points to Investment Thesis The multi-cloud strategy provides a long runway for growth. CRM long ago established dominance in sales force automation (SFA). Over time, the company has diversified by adding multiple clouds-service, marketing, platform, and most recently, commerce. The company now has a massive $55 billion total addressable market that we believe can fuel revenue to the $10 billion level and beyond as the other clouds scale and follow SFA's trajectory. We estimate CRM will grow revenue 26% and 24% in FY17 (CY16) and FY18 (CY17). Large deal activity is thriving. CRM's playbook to conquer large enterprises is driven by a robust suite and platform, a solutions-based sales approach, and a vertical strategy. By almost all measures, the company is succeeding here, as the number of $1 million-plus accounts is growing rapidly, the spend by its top 100 customers is many multiples higher today, and a beachhead has been established in the all-important Fortune 500 (>80% are CRM customers). Gaining wallet share at the world's largest enterprises is critical for CRM to scale further, and it has shown it can do this, and we are confident more gains are on the horizon. Positive on the Demandware acquisition. CRM acquired Demandware in July, thrusting it fully into the ~$15 billion e- commerce software market. We expect the acquisition to provide a boost to CRM as it complements its existing suite and significantly expands its TAM. We believe CRM can successfully integrate Demandware and help it reach greater heights than it would have on a standalone basis, as it did with ExactTarget. We expect the biggest gains to begin to materialize in FY18. CRM is experiencing margin expansion at scale. CRM has delivered 750bps of operating margin expansion since F4Q14, far exceeding its forecasts and investor expectations over that time period. Even with growth investments continuing to dilute gross margins, we believe a large recurring revenue base, the benefits of scale and a greater focus on efficiencies across the organization point to further leaps in margins. We expect CRM to exceed margin expectations in FY17 and FY18 even as it absorbs its recent acquisition. Source: Company presentations, filings and Stephens estimates. 15

16 salesforce.com (CRM) Earnings Model CRM - salesforce.com, inc Income Statement (Non-GAAP) FQ1 FQ2 FQ3 FQ4 FY16 FQ1 FQ2E FQ3E FQ4E FY17E FQ1E FQ2E FQ3E FQ4E FY18E (in thousands, except per share data) Apr-15 Jul-15 Oct-15 Jan-16 Year end Apr-16 Jul-16 Oct-16 Jan-17 Year end Apr-17 Jul-17 Oct-17 Jan-18 Year end Revenues: Subscriptions and support $ 1,405,287 $ 1,521,319 $ 1,596,333 $ 1,682,660 $ 6,205,599 $ 1,775,493 $ 1,894,042 $ 1,995,416 $ 2,120,152 $ 7,785,103 $ 2,219,366 $ 2,358,082 $ 2,454,362 $ 2,607,786 $ 9,639,597 Professional services 105, , , , , , , , , , , , , , ,363 Total Revenue 1,511,167 1,634,684 1,711,967 1,809,398 6,667,216 1,916,603 2,036,882 2,139,959 2,278,574 8,372,018 2,392,932 2,535,204 2,633,595 2,804,230 10,365,961 Cost of Revenue: Subscriptions and support 254, , , ,851 $ 1,108, , , , ,027 1,369, , , , ,539 1,667,262 Professional services 92,180 96, , , , , , , , , , , , , ,045 Total Cost of Revenue 346, , , ,380 1,504, , , , ,528 1,927, , , , ,161 2,357,307 Total Gross Profit 1,164,436 1,266,479 1,326,096 1,406,018 5,163,029 1,468,471 1,567,833 1,651,450 1,757,046 6,444,800 1,841,875 1,958,990 2,038,719 2,169,069 8,008,653 Operating expenses: Sales and marketing 646, , , ,885 2,873, , , , ,608 3,484, ,173 1,026,758 1,053,438 1,135,713 4,173,081 Research and development 190, , , , , , , , ,265 1,028, , , , ,095 1,230,093 General and administrative 150, , , , , , , , , , , , , , ,750 Total operating expenses 987,671 1,059,035 1,099,083 1,187,236 4,333,025 1,189,965 1,309,715 1,373,854 1,453,730 5,327,264 1,476,439 1,564,221 1,603,859 1,727,406 6,371,925 Operating income 176, , , , , , , , ,316 1,117, , , , ,663 1,636,729 Other income (expense): Interest income, net (6,055) (8,703) (8,594) (9,287) (32,639) (7,663) (7,500) (7,500) (7,500) (30,163) (8,000) (8,000) (8,000) (8,000) (32,000) Other income, net (918) 1,947 14,699 (9,228) 6,500 (942) (1,000) (1,000) (1,000) (3,942) (1,000) (1,000) (1,000) (1,000) (4,000) Non-GAAP adjusments 815 1,301 (21,031) 759 (18,156) (12,158) (10,208) ,150 Pre-tax income 170, , , , , , , , ,416 1,073, , , , ,163 1,602,879 Income taxes 62,272 73,726 71,564 71, ,926 90,210 87,611 94, , , , , , , ,008 Pro forma tax rate 37% 37% 34% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% Net income $ 108,335 $ 128,263 $ 140,523 $ 129,662 $ 506,783 $ 167,533 $ 162,706 $ 175,335 $ 192,020 $ 697,595 $ 232,073 $ 251,108 $ 277,134 $ 281,556 $ 1,041,871 EPS - GAAP $ 0.01 $ (0.00) $ (0.04) $ (0.04) $ (0.07) $ 0.06 $ 0.04 $ 0.05 $ 0.05 $ 0.19 $ 0.10 $ 0.12 $ 0.15 $ 0.14 $ 0.50 EPS - Non-GAAP $ 0.16 $ 0.19 $ 0.21 $ 0.19 $ 0.75 $ 0.24 $ 0.23 $ 0.25 $ 0.27 $ 1.00 $ 0.33 $ 0.35 $ 0.39 $ 0.39 $ 1.46 Diluted shares outstanding 664, , , , , , , , , , , , , , ,000 Key Metrics Deferred Revenue 3,056,820 3,034,991 2,846,510 4,291,553 4,291,553 4,006,914 3,884,788 3,586,603 5,450,272 5,450,272 5,048,712 4,855,986 4,411,521 6,785,589 6,785,589 YoY% 31% 29% 28% 29% 29% 31% 28% 26% 27% 27% 26% 25% 23% 25% 25% QoQ% -8% -1% -6% 51% NM -7% -3% -8% 52% NM -7% -4% -9% 54% NM Billings 1,246,538 1,612,855 1,523,486 3,254,441 7,637,320 1,631,964 1,914,757 1,841,773 4,142,244 9,530,737 1,991,371 2,342,478 2,189,130 5,178,298 11,701,277 YoY% 21% 20% 21% 28% 31% 19% 21% 27% 25% 22% 22% 19% 25% 23% QoQ% -51% 29% -6% 114% NM -50% 17% -4% 125% NM -52% 18% -7% 137% NM Unbilled Deferred Reveues ($M) 6,000 6,200 6,700 7,100 7,100 7,600 YoY% 25% 24% 24% 25% 25% 27% QoQ% 5% 3% 8% 6% NM 7% Margins Gross margin, subscriptions 81.9% 82.1% 82.3% 82.2% 82.1% 82.3% 82.4% 82.4% 82.5% 82.4% 82.6% 82.7% 82.7% 82.8% 82.7% Gross margin, prof services 12.9% 15.0% 10.8% 17.5% 14.2% 4.7% 5.0% 5.0% 5.0% 4.9% 5.0% 5.0% 5.0% 5.0% 5.0% Gross margin 77.1% 77.5% 77.5% 77.7% 77.4% 76.6% 77.0% 77.2% 77.1% 77.0% 77.0% 77.3% 77.4% 77.3% 77.3% Operating margin 11.7% 12.7% 13.3% 12.1% 12.4% 14.5% 12.7% 13.0% 13.3% 13.3% 15.3% 15.6% 16.5% 15.7% 15.8% Net margin 7.2% 7.8% 8.2% 7.2% 7.6% 8.7% 8.0% 8.2% 8.4% 8.3% 9.7% 9.9% 10.5% 10.0% 10.1% Ratios (% of revenue) Subscriptions revenue 93.0% 93.1% 93.2% 93.0% 93.1% 92.6% 93.0% 93.2% 93.0% 93.0% 92.7% 93.0% 93.2% 93.0% 93.0% Prof services revenue 7.0% 6.9% 6.8% 7.0% 6.9% 7.4% 7.0% 6.8% 7.0% 7.0% 7.3% 7.0% 6.8% 7.0% 7.0% Sales and marketing 42.8% 43.0% 42.7% 43.9% 43.1% 41.0% 42.0% 42.0% 41.5% 41.6% 40.0% 40.5% 40.0% 40.5% 40.3% Research and development 12.6% 12.3% 12.1% 12.0% 12.3% 11.8% 12.5% 12.5% 12.3% 12.3% 12.1% 11.9% 11.8% 11.7% 11.9% General and administrative 10.0% 9.5% 9.4% 9.7% 9.6% 9.3% 9.8% 9.7% 10.0% 9.7% 9.6% 9.3% 9.1% 9.4% 9.3% Operating expenses 65.4% 64.8% 64.2% 65.6% 65.0% 62.1% 64.3% 64.2% 63.8% 63.6% 61.7% 61.7% 60.9% 61.6% 61.5% YoY change Subscriptions revenue 22% 23% 24% 25% 24% 26% 25% 25% 26% 25% 25% 25% 23% 23% 24% Prof services revenue 33% 32% 22% 28% 28% 33% 26% 25% 25% 27% 23% 24% 24% 24% 24% Total revenue 23% 24% 24% 25% 24% 27% 25% 25% 26% 26% 25% 24% 23% 23% 24% Operating expenses 15% 18% 18% 23% 19% 20% 24% 25% 22% 23% 24% 19% 17% 19% 20% Operating income 48% 43% 49% 39% 45% 58% 24% 22% 39% 35% 31% 53% 57% 46% 46% Net income 56% 50% 50% 40% 48% 55% 27% 25% 48% 38% 39% 54% 58% 47% 49% EPS - Non-GAAP 52% 44% 46% 32% 43% 50% 22% 20% 43% 33% 34% 51% 56% 45% 46% QoQ change Subscriptions revenue 4% 8% 5% 5% NM 6% 7% 5% 6% NM 5% 6% 4% 6% NM Prof services revenue 7% 7% 2% 10% NM 11% 1% 1% 10% NM 10% 2% 1% 10% NM Total revenue 5% 8% 5% 6% NM 6% 6% 5% 6% NM 5% 6% 4% 6% NM Operating expenses 2% 7% 4% 8% NM 0% 10% 5% 6% NM 2% 6% 3% 8% NM Operating income 13% 17% 9% (4%) NM 27% (7%) 8% 9% NM 20% 8% 10% 2% NM Net income 17% 18% 10% (8%) NM 29% (3%) 8% 10% NM 21% 8% 10% 2% NM EPS - Non-GAAP 14% 17% 9% (8%) NM 28% (5%) 7% 9% NM 21% 8% 10% 1% NM Samad Samana samad.samana@stephens.com (212) Source: Company filings and Stephens 16

17 Synchronoss Technologies (SNCR) Overweight (Vol) $50 PT Current Market Valuation SNCR 8/15/2016 Price Chart Stock Price $ Price Target $ 50 % of 52-Week High 82.9% Target Date - 52-Week High (8/05/15) $ Week Low (2/04/16) Market Cap $ 2,406,600 $50 $ 2,505,557 Diluted Shares Outstanding 48,132 Equity Value $ 1,976,781 Price Target Implied Multiples Plus: Total debt 286,208 Fiscal Enterprise Value / Less: Total cash and marketable securities 187,251 Year Revenue FCF P/E Enterprise Value $ 2,075, x 43.5x 22.4x 2016E 3.7x 32.2x 19.9x 2017E 3.1x 20.7x 16.0x Current Trading Multiples E 2017E Expectations EPS Margins Q2 Stephens Consensus Guidance Mar Fiscal Year Gross Operating Net Net revenue $ $ $ $160.0 Jun % 25.3% 16.9% EPS - Non-GAAP Sep % 28.0% 18.3% Dec E 60.6% 25.2% 17.8% FY E 61.2% 27.3% 18.9% Q3E Stephens Consensus Guidance Growth 35% 24% 13% 24% Net revenue $ $ $ $180.0 P/E 30.9x 22.9x 18.4x 16.3x 13.1x EPS - Non-GAAP Revenue Ratios Growth 30% 26% 17% 19% Fiscal Year R&D SG&A D&A EV/S 5.9x 4.5x 3.6x 3.1x 2.6x % 14.7% 8.5% FY16E Stephens Consensus Guidance % 13.2% 7.8% Net revenue $ $ $ $685.0 FCF 7.7 (2.9) E 14.8% 12.3% 8.3% EPS - Non-GAAP Growth (138%) NM 35% 56% 2017E 13.8% 12.1% 8.0% P/FCF NM NM 36.0x 26.7x 17.1x Investment Thesis: We believe Synchronoss Technologies will deliver solid overall growth due to its steady activation services business and its high-growth cloud services business. In addition, we expect the company's investments in launching an enterprise business and expanding internationally will begin paying dividends later in 2016 and more meaningfully in In our opinion, the combination of a healthy core business plus success in its growth initiatives will better position SNCR to achieve its $1 billion revenue goal by 2020, and this new trajectory should lead to share price appreciation. Price Target / Valuation: In our opinion, the uniqueness of SNCR's business makes it difficult to compare to a single peer group. As such, we determined our price target by applying the average P/E multiple for a group of traditional telcos (16x) to our 2017 EPS estimate for SNCR and the average EV/revenue multiple for a group of SaaS companies (3.0x) to our 2017 revenue estimate. Both imply a fair value of $50 per share. Source: FactSet Research Systems, company filings and Stephens estimates. 17

18 Synchronoss Technologies (SNCR) Key Points to Investment Thesis Activation services is a Steady-Eddie business. We project SNCR's activation services revenue to post stable, singledigit growth for the next few years, generally mirroring the growth of mobile proliferation and demand for smartphones globally. We believe SNCR's flagship customer AT&T should keep seeing modest growth and serve as a key reference for landing other large communication service providers (CSPs). We expect new CSPs, particularly international ones, to help sustain steady growth even as activations slow at AT&T over time. Personal Cloud adoption should fuel Cloud Services growth. We estimate Cloud Services revenue will increase 29% in 2016 and 26% in We expect this healthy growth to be driven by more carriers providing SNCR's Personal Cloud to their subscribers. In our opinion, SNCR can replicate its success with the Personal Cloud at Verizon with other customers such as América Móvil, AT&T, BT, and Softbank. SNCR's contracted customer base represents ~3.5 billion subscribers, and with only ~1% penetration for the Personal Cloud, there is ample room to drive adoption and growth. Revenue diversification efforts have yet to take hold. Despite signing several customers with others in the pipeline, AT&T and Verizon still represent the biggest sources of revenue for SNCR s activation services and cloud services segments, respectively (75% of total revenue combined in 2015). The loss of either would be a meaningful negative for both revenue/profitability and SNCR s reputation. However, the near-term risk of this is low, as both companies extended their contracts with SNCR into 2018 in the last 12 months. We believe diversifying revenue with other customers or with new products (ex: mobile security initiative) is critical to de-risking and as this happens, the stock should command a higher valuation multiple. Bet on mobile security could be a game-changer. Through separate partnerships with Goldman Sachs and Verizon and its own technology, SNCR jumped head-first into the enterprise mobility management (EMM) market. While this is a field crowded with incumbents, we believe it is ripe for next-gen innovation and the TAM (~$5 billion by 2020) is significant enough to justify entry into the space. Although success is very much to-be-determined, the initiative has started off on the right track and we think mobile security could become SNCR's next pillar of growth. Source: Company presentations, filings and Stephens estimates. 18

19 Synchronoss Technologies (SNCR) Earnings Model SNCR - Synchronoss Technologies, Inc Income Statement (Non-GAAP) Q1 Q2 Q3 Q4 FY15 Q1 Q2 Q3E Q4E FY16E Q1E Q2E Q3E Q4E FY17E (in thousands, except per share data) Mar-15 Jun-15 Sep-15 Dec-15 Year end Mar-16 Jun-16 Sep-16 Dec-16 Year end Mar-17 Jun-17 Sep-17 Dec-17 Year end Revenues: Cloud $ 71,300 $ 71,900 $ 76,100 $ 90,900 $ 310,200 $ 84,300 $ 95,200 $ 103,496 $ 116,352 $ 399,348 $ 118,863 $ 121,856 $ 127,300 $ 133,805 $ 501,824 Activation 61,800 66,000 75,200 66, ,900 61,300 66,300 74,448 78, ,990 71,721 76,245 75,937 80, ,424 Net revenue 133, , , , , , , , , , , , , , ,248 Cost of services 52,173 52,419 59,250 59, ,326 60,359 64,590 69,932 72, ,726 75,281 77,854 79,262 80, ,769 Gross Profit 80,932 85,439 92,099 98, ,765 85,218 96, , , , , , , , ,479 Operating expenses: Research and development 19,407 19,309 19,711 18,209 76,636 18,692 21,031 21,353 22,459 83,535 23,823 24,168 24,388 24,862 97,242 Selling, general and administrative 16,974 15,436 16,592 23,031 72,033 20,096 25,005 26,692 29, ,891 26,682 27,734 28,250 28, ,600 Depreciation and amortization 9,660 10,482 12,570 12,781 45,493 13,247 13,561 14,236 15,624 56,667 15,247 15,848 16,259 17,146 64,500 Other operating expenses Total operating expenses 46,041 45,227 48,873 54, ,162 52,035 59,597 62,280 67, ,094 65,751 67,751 68,897 70, ,341 Operating income 34,891 40,212 43,226 44, ,603 33,183 37,303 45,732 55, ,486 49,552 52,497 55,077 63, ,138 Other income (expense): Interest and other expense (876) (947) (902) (939) (3,664) (946) (1,243) (1,000) (1,000) (4,189) (1,000) (1,000) (1,000) (1,000) (4,000) Other income, net (1,030) (884) (19) Pre-tax income 34,029 39,680 41,294 44, ,311 31,353 36,925 44,732 54, ,278 48,552 51,497 54,077 62, ,138 Income taxes 11,705 13,652 14,205 9,548 49,110 11,453 12,931 13,569 16,430 54,384 14,716 15,599 16,373 18,754 65,441 Pro Forma tax rate 33% 33% 33% 34% 33% 25% 26% 30% 30% 28% 30% 30% 30% 30% 29% Noncontrolling interest ,052 6,052 (3,129) (2,864) (5,993) - After tax interest on debt , , ,000 Net income $ 22,838 $ 26,542 $ 27,605 $ 29,299 $ 106,284 $ 23,578 $ 27,407 $ 31,662 $ 38,338 $ 120,985 $ 34,336 $ 36,398 $ 38,204 $ 43,758 $ 152,696 EPS - GAAP $ 0.23 $ 0.33 $ 0.21 $ 0.12 $ 0.89 $ (0.17) $ (0.10) $ 0.25 $ 0.37 $ 0.34 $ 0.35 $ 0.38 $ 0.40 $ 0.50 $ 1.62 EPS - Non-GAAP $ 0.49 $ 0.56 $ 0.58 $ 0.61 $ 2.23 $ 0.49 $ 0.57 $ 0.66 $ 0.80 $ 2.51 $ 0.71 $ 0.75 $ 0.78 $ 0.89 $ 3.13 Diluted shares outstanding 47,080 47,271 47,692 47,862 47,653 48,147 48,132 48,050 48,150 48,120 48,400 48,650 48,900 49,150 48,775 Margins Gross margin 60.8% 62.0% 60.9% 62.3% 61.5% 58.5% 60.0% 60.7% 62.7% 60.6% 60.5% 60.7% 61.0% 62.5% 61.2% Operating margin 26.2% 29.2% 28.6% 28.1% 28.0% 22.8% 23.1% 25.7% 28.3% 25.2% 26.0% 26.5% 27.1% 29.4% 27.3% Net margin 17.2% 19.3% 18.2% 18.6% 18.3% 16.2% 17.0% 17.8% 19.6% 17.8% 18.0% 18.4% 18.8% 20.4% 18.9% Ratios (% of revenue) Cloud 53.6% 52.2% 50.3% 57.6% 53.5% 57.9% 59.0% 58.2% 59.6% 58.7% 62.4% 61.5% 62.6% 62.4% 62.2% Activation 46.4% 47.9% 49.7% 42.4% 46.5% 42.1% 41.1% 41.8% 40.4% 41.3% 37.6% 38.5% 37.4% 37.6% 37.8% Research and development 14.6% 14.0% 13.0% 11.5% 13.2% 12.8% 13.0% 12.0% 11.5% 12.3% 12.5% 12.2% 12.0% 11.6% 12.1% Selling, general and administrative 12.8% 11.2% 11.0% 14.6% 12.4% 13.8% 15.5% 15.0% 14.9% 14.8% 14.0% 14.0% 13.9% 13.5% 13.8% Depreciation and amortization 7.3% 7.6% 8.3% 8.1% 7.8% 9.1% 8.4% 8.0% 8.0% 8.3% 8.0% 8.0% 8.0% 8.0% 8.0% Operating expenses 34.6% 32.8% 32.3% 34.2% 33.5% 35.7% 36.9% 35.0% 34.4% 35.4% 34.5% 34.2% 33.9% 33.1% 33.9% YoY change Cloud 63% 54% 31% 43% 47% 18% 32% 36% 28% 29% 41% 28% 23% 15% 26% Activation 12% 16% 11% (1%) 9% (1%) 0% (1%) 18% 4% 17% 15% 2% 2% 8% Net revenue 35% 33% 21% 21% 26% 9% 17% 18% 24% 17% 31% 23% 14% 10% 19% Operating expenses 29% 20% 5% 24% 18% 13% 32% 27% 24% 24% 26% 14% 11% 6% 13% Operating income 44% 55% 45% 22% 40% (5%) (7%) 6% 25% 5% 49% 41% 20% 14% 28% Net income 44% 58% 36% 19% 37% 3% 3% 15% 31% 14% 46% 33% 21% 14% 26% EPS - Non-GAAP 24% 37% 27% 16% 24% 1% 1% 14% 30% 13% 45% 31% 19% 12% 24% QoQ change Cloud 12% 1% 6% 19% NM (7%) 13% 9% 12% NM 2% 3% 4% 5% NM Activation (8%) 7% 14% (11%) NM (8%) 8% 12% 6% NM (9%) 6% (0%) 6% NM Net revenue 2% 4% 10% 4% NM (8%) 11% 10% 10% NM (2%) 4% 3% 5% NM Operating expenses 5% (2%) 8% 11% NM (4%) 15% 5% 8% NM (2%) 3% 2% 3% NM Operating income (4%) 15% 7% 2% NM (25%) 12% 23% 21% NM (10%) 6% 5% 14% NM Net income (8%) 16% 4% 6% NM (20%) 16% 16% 21% NM (10%) 6% 5% 15% NM EPS - Non-GAAP (8%) 16% 3% 6% NM (20%) 16% 16% 21% NM (11%) 5% 4% 14% NM Samad Samana samad.samana@stephens.com (212) Source: Company filings and Stephens 19

20 Ultimate Software (ULTI) Equal-Weight (Vol) $230 PT Current Market Valuation ULTI 8/15/2016 Price Chart Stock Price $ Price Target $ 230 % of 52-Week High 93.3% Target Date 8/1/16 52-Week High (7/26/16) $ Week Low (2/11/16) Market Cap $ 6,875,390 $230 $ 6,770,481 Diluted Shares Outstanding 29,893 Equity Value $ 6,250,626 Price Target Implied Multiples Plus: 0 Fiscal Enterprise Value / Less: 104,909 Year Revenue FCF P/E Enterprise Value $ 6,145, x NM 86.7x 2016E 8.7x NM 69.0x 2017E 7.1x 76.5x 52.3x Current Trading Multiples E 2017E Expectations EPS Margins Jun-16 Stephens Consensus Guidance Mar Fiscal Year Gross Operating EBITDA Total Revenue $ $ $187.0 Jun % 20.1% 12.2% EPS - Non-GAAP Sep % 20.5% 12.8% Dec E 63.9% 21.0% 12.8% FY E 64.6% 22.7% 13.8% Sep-16 Stephens Consensus Guidance Growth 31% 26% 26% 32% Total Revenue $ $ $ P/E NM 99.2x 78.8x 62.8x 47.6x EPS - Non-GAAP Revenue Ratios Growth 23% 22% 27% 23% Fiscal Year S&M R&D G&A EV/S 15.0x 12.1x 9.9x 7.9x 6.4x % 15.6% 7.0% FY16E Stephens Consensus Guidance % 14.2% 7.8% Total Revenue $ $ $ FCF E 21.5% 14.2% 7.3% EPS - Non-GAAP Growth (3.0%) 41.7% (1.8%) 49.8% 2017E 21.0% 13.9% 7.0% EV/FCF NM NM NM NM 69.4x Investment Thesis: We believe Ultimate can drive 20%+ revenue growth by gaining market share in the HR/payroll software market, pushing downstream to smaller customers, driving revenue per user higher, and capitalizing on its unique culture. The fact that it can do this all while also expanding its already high margins (>20% op. margin, much higher than its SaaS peers) makes Ultimate unique. With that said, we believe shares already reflect the deserved premium at current levels and we see limited near-term appreciation. Given our positive view on the company and its growth prospects, we would be constructive on the stock at a better entry point. Price Target / Valuation: ULTI currently trades at 6.4x EV/revenue multiple (based on 2017 estimate) compared to a 5.5x EV/revenue average for SaaS. Our $230 price target uses a 7.0x multiple, which we believe appropriately factors in ULTI's growth, profitability, market opportunity, customer base profile, and risk factors. Source: FactSet Research Systems, company filings and Stephens estimates. 20

21 Ultimate Software (ULTI) Key Points to Investment Thesis ULTI is gaining share in the HR/payroll software market. ULTI targets companies across the spectrum, with the smallest around 300 employees and the largest above 100,000 employees. ULTI has seen its penetration rate (measured in customer terms) increase in each category from early 2014 to early We expect ULTI to keep taking share in its target markets, particularly at the expense of ADP and the other service bureaus. We estimate ULTI will grow revenue 27% and 23% in 2016 and The push downstream is opening up a large revenue opportunity. Since 2014, ULTI has charted a more aggressive course in growing its customer base of smaller, "strategic" enterprises ( employees). We estimate this market represents $3 billion of annual revenue and ULTI has already seen its market share grow to 3% in just two years. Investments in sales capacity have driven solid early gains and we expect the strategic market to play a key role in ULTI's march to $1 billion of revenue by ULTI is driving revenue per user higher. Better monetizing its large installed base will be another key factor for revenue growth. We expect a combination of price increases supported by enhancements to the existing offerings and the development of new applications to drive the per employee per month (PPM) opportunity from ~$30 today to ~$40 around We see assessments, learning management, and workforce planning as the offerings ULTI is most likely to add to its product portfolio. Source: Company presentations, filings and Stephens estimates. 21

22 Ultimate Software (ULTI) Earnings Model ULTI - Ultimate Software Group, Inc Income Statement (Non-GAAP) Q1 Q2 Q3 Q4 FY15 Q1 Q2 Q3E Q4E FY16E Q1E Q2E Q3E Q4E FY17E (in thousands, except per share data) Mar-15 Jun-15 Sep-15 Dec-15 Year end Mar-16 Jun-16 Sep-16 Dec-16 Year end Mar-17 Jun-17 Sep-17 Dec-17 Year end Revenues: Recurring $ 118,886 $ 124,407 $ 131,768 $ 141,116 $ 516,177 $ 152,751 $ 158,479 $ 166,028 $ 176,395 $ 653,653 $ 188,647 $ 196,514 $ 205,874 $ 217,848 $ 808,884 Services 25,768 22,823 23,556 29, ,681 34,463 28,058 30,858 34, ,229 40,322 33,108 36,413 41, ,966 License Total Revenue 144, , , , , , , , , , , , , , ,850 Cost of Revenue: Recurring 31,313 32,842 33,201 34, ,235 37,527 40,783 40,677 43, ,204 47,162 48,146 50,439 53, ,120 Services 23,036 22,435 23,785 25,675 94,931 31,259 27,866 30,858 30, ,129 36,290 32,446 36,413 35, ,720 License Total Cost of Revenue 54,398 55,277 56,986 60, ,215 68,786 68,649 71,535 73, ,332 83,451 80,592 86,852 88, ,840 Recurring Gross Profit 87,573 91,565 98, , , , , , , , , , , , ,764 Services Gross Profit 2, (229) 3,859 6,750 3, ,705 8,101 4, ,552 10,246 License Gross Profit Total Gross Profit 90,479 91,953 98, , , , , , , , , , , , ,010 Operating expenses: Sales and marketing 32,980 28,444 30,687 36, ,605 42,914 39,533 41,346 43, ,732 49,228 48,221 50,153 53, ,210 Research and development 20,150 22,064 21,538 23,739 87,491 25,668 27,133 28,155 29, ,741 32,056 31,918 33,678 35, ,389 General and administrative 11,251 11,772 12,342 12,637 48,002 13,858 13,859 14,570 14,787 57,074 16,028 16,074 16,960 18,128 67,189 Total operating expenses 64,381 62,280 64,567 72, ,098 82,440 80,525 84,070 88, ,547 97,312 96, , , ,788 Operating income 26,098 29,673 33,771 37, ,768 35,988 37,363 41,281 49, ,003 48,206 52,818 54,644 62, ,222 Other income (expense): Interest and other expense (115) (135) (118) (123) (491) (184) (180) (190) (190) (744) (200) (200) (200) (200) (800) Other income, net Pre-tax income 26,040 29,584 33,715 37, ,533 35,907 37,285 41,211 49, ,704 48,131 52,743 54,569 62, ,922 Pro Forma Taxes 10,806 11,222 13,188 12,510 47,726 14,003 14,542 16,072 19,228 63,845 18,771 20,570 21,282 24,367 84,989 Pro Forma Tax Rate 41% 38% 39% 34% 38% 39% 39% 39% 39% 39% 39% 39% 39% 39% 39% Net income $ 15,234 $ 18,362 $ 20,527 $ 24,684 $ 78,807 $ 21,904 $ 22,743 $ 25,138 $ 30,074 $ 99,859 $ 29,360 $ 32,173 $ 33,287 $ 38,112 $ 132,932 EPS - GAAP $ 0.14 $ 0.12 $ 0.20 $ 0.30 $ 0.76 $ 0.08 $ 0.06 $ 0.10 $ 0.23 $ 0.47 $ 0.14 $ 0.19 $ 0.18 $ 0.29 $ 0.81 EPS - Non- GAAP $ 0.52 $ 0.62 $ 0.69 $ 0.83 $ 2.65 $ 0.73 $ 0.76 $ 0.84 $ 1.00 $ 3.33 $ 0.97 $ 1.07 $ 1.10 $ 1.26 $ 4.40 Diluted shares outstanding 29,567 29,591 29,715 29,873 29,721 29,833 29,893 30,000 30,100 29,957 30,150 30,200 30,250 30,300 30,225 Margins Gross margin, recurring 73.7% 73.6% 74.8% 75.3% 74.4% 75.4% 74.3% 75.5% 75.5% 75.2% 75.0% 75.5% 75.5% 75.5% 75.4% Gross margin, services 10.6% 1.7% (1.0%) 13.1% 6.6% 9.3% 0.7% 0.0% 13.5% 6.3% 10.0% 2.0% 0.0% 13.5% 6.8% Gross margin 62.5% 62.5% 63.3% 64.5% 63.2% 63.3% 63.2% 63.7% 65.3% 63.9% 63.6% 64.9% 64.2% 65.7% 64.6% Operating margin 18.0% 20.2% 21.7% 21.8% 20.5% 19.2% 20.0% 21.0% 23.4% 21.0% 21.1% 23.0% 22.6% 24.2% 22.7% Net margin 10.5% 12.5% 13.2% 14.5% 12.8% 11.7% 12.2% 12.8% 14.2% 12.8% 12.8% 14.0% 13.7% 14.7% 13.8% Ratios (% of revenue) Recurring revenues 82.1% 84.5% 84.8% 82.7% 83.5% 81.6% 85.0% 84.3% 83.5% 83.6% 82.4% 85.6% 85.0% 84.1% 84.3% Service revenues 17.8% 15.5% 15.2% 17.3% 16.5% 18.4% 15.0% 15.7% 16.5% 16.4% 17.6% 14.4% 15.0% 15.9% 15.7% S&M 22.8% 19.3% 19.8% 21.4% 20.8% 22.9% 21.2% 21.0% 20.8% 21.5% 21.5% 21.0% 20.7% 20.7% 21.0% R&D 13.9% 15.0% 13.9% 13.9% 14.2% 13.7% 14.5% 14.3% 14.1% 14.2% 14.0% 13.9% 13.9% 13.8% 13.9% G&A 7.8% 8.0% 7.9% 7.4% 7.8% 7.4% 7.4% 7.4% 7.0% 7.3% 7.0% 7.0% 7.0% 7.0% 7.0% Operating expenses 44.4% 42.3% 41.6% 42.7% 42.7% 44.0% 43.2% 42.7% 41.9% 42.9% 42.5% 41.9% 41.6% 41.5% 41.9% YoY change Recurring revenue 22% 22% 23% 26% 23% 28% 27% 26% 25% 27% 24% 24% 24% 24% 24% Service revenue 11% 15% 18% 28% 18% 34% 23% 31% 18% 26% 17% 18% 18% 18% 18% Total revenue 20% 21% 22% 26% 22% 29% 27% 27% 24% 27% 22% 23% 23% 23% 23% Operating expenses 27% 19% 23% 32% 25% 28% 29% 30% 21% 27% 18% 19% 20% 21% 20% Operating income 11% 30% 34% 24% 25% 38% 26% 22% 33% 29% 34% 41% 32% 27% 33% Net income 11% 37% 39% 24% 28% 44% 24% 22% 22% 27% 34% 41% 32% 27% 33% EPS - Non- GAAP 10% 36% 37% 22% 26% 43% 23% 21% 21% 26% 33% 40% 31% 26% 32% QoQ change Recurring revenue 6% 5% 6% 7% NM 8% 4% 5% 6% NM 7% 4% 5% 6% NM Service revenue 12% (11%) 3% 25% NM 17% (19%) 10% 13% NM 16% (18%) 10% 13% NM Total revenue 7% 2% 5% 10% NM 10% (0%) 6% 7% NM 8% 0% 6% 7% NM Operating expenses 17% (3%) 4% 13% NM 13% (2%) 4% 5% NM 10% (1%) 5% 7% NM Operating income (13%) 14% 14% 10% NM (3%) 4% 10% 20% NM (2%) 10% 3% 14% NM Net income (24%) 21% 12% 20% NM (11%) 4% 11% 20% NM (2%) 10% 3% 14% NM EPS - Non- GAAP (24%) 20% 11% 20% NM (11%) 4% 10% 19% NM (3%) 9% 3% 14% NM Samad Samana samad.samana@stephens.com (212) Source: Company filings and Stephens 22